Anadarko Corp. (NYSE:APC) has seen its share price drop by more than 25% from a peak price of $88 in February 2012 on weak natural gas prices in the U.S. and lower oil prices. The fall masks the company’s considerable success in the offshore exploration program in the U.S. Gulf of Mexico and offshore Africa. Analysts suggest that the low share price could make the company an attractive takeover target for big energy majors.  Of considerable interest is Anadarko’s stake in a gigantic natural gas discovery in Mozambique, which could help it target the lucrative international LNG market.
The company’s growing oil and gas production is the major driver of our $90 price estimate, which is at a 35% premium to the current market price.
Like many other energy firms, Anadarko has been impacted by the drop in natural gas prices in the U.S., where it has significant onshore production. Last month, the company’s shares were dragged lower by falling oil prices as the deepening economic gloom in Europe raised concerns over future energy demand. Despite the impact to its immediate earnings, much of Anadarko’s value is concentrated in its recent finds and its unproven reserves.
The company holds a 36.5% working interest in the Mozambique offshore area 1 find, which could hold between 30 Trillion cubic feet (Tcf) 60 Tcf of gas. According to estimates, this find alone could account for 25-30% of Anadarko’s current market cap of around$32 billion.  In addition to the Mozambique find, the explorer owns stakes in finds in Ghana and in the Lucius fields and other discoveries in the U.S. GoM, where the company’s stake is estimated to be around $2 billion, according to a recently concluded deal. Anadarko has also made discoveries in offshore Brazil and in other regions in Africa.
Anadarko’s growing reserve base translates into strong output growth over the next several years. Much of the growth is expected in liquids production, which is considered more lucrative under the current pricing conditions in the natural gas market. One of the drags on the company’s share price is the ongoing litigation concerning its takeover of Kerr-McGee.  A favorable verdict in the case could spark a share price rally. Nonetheless, Anadarko’s impressive array of finds makes it a compelling investment in the energy sector.
- Anadarko Pumps To $90, Forms JV To Develop Gulf Of Mexico Asset (trefis.com)
- Anadarko Pumps To $90, Invests In Jubliee Field In Ghana (trefis.com)
- Anadarko Earnings Preview: Liquids Production Volumes Are Key (trefis.com)
- Anadarko Makes New Oil Discovery in West Africa; Adding to List of New Prospects (trefis.com)