Anadarko’s Stock Squirts Higher on Strong Liquids Production Growth

February 7th, 2012 by Trefis Team
-14.52%
Downside
72.77
Market
62.20
Trefis
APC: Anadarko Petroleum logo
APC
Anadarko Petroleum

Independent explorer Anadarko Corp. (NYSE:APC) posted growing revenues on strong growth in liquids production that benefited from high oil prices. [1] The company posted a full year loss for 2011 because of losses worth $3.9 billion related to the settlement it reached with BP related to the Deepwater Horizon disaster. Operational results were encouraging, as the company increased liquids production from onshore resources in North America. Anadarko also announced that it expects  further growth in liquids output with its Algerian El Merk project nearing completion and development of its projects in the U.S. Gulf of Mexico. The company competes with vertically integrated players like Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP).

We have a $90 price estimate for Anadarko, which is about 5% ahead of its current market price.

Click here for our full analysis of Anadarko Corp.

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Liquids drive results

Anadarko has focused on increasing its liquids production volumes because of the supply glut in the U.S. [1] The company posted record volumes in the liquid-rich plays in the Wattenburg, Greater Natural Buttes and Bone Spring areas in North America. Output from shale plays in the U.S. contributed to 10% of the company’s sales volumes. Output from the Eagleford shale grew to 77,000 Barrels of Oil Equivalent per day (BOE/d) with 65% coming in the form of liquids. The company also increased its natural gas output, but price declines resulted in lower revenues in Q4.

Future growth

Anadarko also booked an impressive increase in its proven reserves, posting a 159% reserve replacement ratio. [1] The independent explorer led a major gas discovery off the Mozambique coast, which is counted as one of the more important finds of the past decade. Additionally, the company claimed that its El Merk project in Algeria was 88% complete and that output is expected by the end of this year. Anadarko is also going ahead with the Lucius development in the U.S. Gulf of Mexico, and made its first post-moratorium discovery in the GoM in the Cheyenne East prospect. Production from the field will begin in 2012.

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Notes:
  1. Anadarko Announces 2011 Fourth-Quarter and Full-Year Results, Anadarko [↩] [↩] [↩]