Tuesday, May 7, 2013

Anadarko Earnings

Anadarko Petroleum Corporation released first quarter earnings on May 6th. Anadarko had surpassed the Street's earnings and production estimates. The company reported a profit of $1.08 per share vs. consensus estimates of 93 cents. This also represents 17.4 percent growth year over year. Anadarko's sales volumes rose 10.3 percent year over year this quarter to 71 million barrels of oil equivalent (MMBOE) or 793 thousand BOE per day (MBOE/d). This was primarily due to an expansion of crude oil and natural gas production in the U.S. and international operations.Additionally, liquid sales were up 14.6 percent year over year primarily due to onshore plays in the Wattenberg, Eagleford, Marcellus, East Texas HZ and Permian. Average realized prices for oil and condensate, natural gas, and NGL were $102.97 per barrel, $3.33 per thousand cubic feet, and $38.17 per barrel. 

Anadarko announced two new deepwater wells in the Gulf of Mexico's emerging Shenandoah Basin. Anadarko's Shenandoah-2 puts out more than 1000 net feet of oil pay, making it one of the largest Gulf of Mexico discoveries to date. Additionally, the Coronado well, located in Walker Ridge block 98, encountered more than 400 net feet of oil pay. The company continues to aggressively pursue deepwater plays around the world with six wells currently drilling. Anadarko continues to make discoveries in Mozambique, finding a distinct natural gas reservoir in Offshore Area 1 block.

Despite the positives, falling natural gas prices could curb future growth. Additionally, failure to manage costs could adversely affect future profitability.

Anadarko lowered its production estimates for the second quarter due to temporary shut-ins in Texas’ Eagle Ford, and other temporary setbacks. However, it slightly raised its 2013 production goals.

Going forward, I still believe Anadarko is an attractive investment opportunity. The company achieved record daily sales volumes of 793,000 barrels of oil equivalent (BOE) and it monetized assets totaling more than $1.2 billion showing its commitment to unlocking value for the shareholders. Furthermore, it's trading at a steep discount to its competitors. If it was trading in line with its competitors in terms of net asset value, shares would appreciate by at least 15 percent. 

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