Anadarko to Offload Brazilian Assets to Focus on Gulf of Mex. and Africa

Leading independent oil & gas exploration firm Anadarko Petroleum Corp (NYSE:APC) may be pursuing opportunities to offload assets worth as much as $5 billion in Brazil according to a Wall Street Journal report. ^[1] Anadarko’s move is being looked at as an effort to focus its efforts on offshore assets in the Gulf of Mexico and Western Africa. Anadarko competes with oil majors such as Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), BP (NYSE:BP), ConocoPhillips (NYSE:COP) and independent players such as Chesapeake Energy (NYSE:CHK).

We have a $85 price estimate for Anadarko, which represents a 20% premium to its current market price.

Anadarko’s Brazil offshore operations

Anadarko, which is expected to spend 25% of its $6.2 – $ 6.6 billion in capital spending in 2011 on exploration outside the U.S., has made 4 discoveries in Brazil to date. ^[2] In a recent snapshot, the company valued its assets in Brazil between $3 – 5 billion based on $90 /bbl and $4.5 /Mcf price estimates for oil and natural gas, respectively.

The exploration firm has reportedly hired several banks including Scotia Waterous to advise it on the potential sale of its assets in Brazil. ^[1] According to some sources, the move comes on the back of the company’s efforts to dedicate more resources to its offshore activities in the U.S. Gulf of Mexico and Africa. Anadarko’s assets in the GoM could be worth between $14 – 20 billion and its assets in Africa could add up to anywhere between $7 – 30+ billion according to the company.

Anadarko’s strong project pipeline is expected to result in a 150+% reserve replacement for the year 2011 which means that it can look to expand production overall over the next few years. ^[2]

Legal liabilities over Macondo another explanation

Some analysts have also taken the view that the sale of assets in Brazil could be in response to the risk of facing a large liability from the Deepwater Horizon blowout incident. ^[1] Anadarko owned a 25% stake in the Macondo well but insists that it is protected by the contract which limits its liability in the case of gross negligence on the part of the well operator (BP).

BP, however, is seeking $5 billion from Anadarko to cover the costs resulting from the mishap. ^[1] The U.S. government held Anadarko partially liable for the damages resulting from the oil spill under federal rules last July.

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1. Anadarko Shops Brazilian Assets, The Wall Street Journal [↩] [↩] [↩] [↩]
2. Company Presentation Sept 7th, Anadarko [↩] [↩]