Anadarko Upside From Growth In Natural Gas Sales
Anadarko’s (NYSE:APC) natural gas sales volume increased from 558 billion cubic feet in 2006 to 809 billion cubic feet in 2009 at a compound annual growth rate of 13%. The company attributes this growth to increased production in the Rocky Mountains Region and higher production in Gulf of Mexico on account of favorable weather conditions and improved efficiencies. Anadarko competes with ExxonMobil (NYSE:XOM), BP (NYSE:BP) and ConocoPhillips (NYSE:COP) in the natural gas market.
While we expect Anadarko’s natural gas sales volumes to reach 892 billion cubic feet in 2011, Trefis members expect volumes of 1284 billion cubic feet – representing around 10% upside to Trefis price estimate for Anadarko’s stock.
We currently have a Trefis price estimate of $72.82 for Anadarko’s stock, about 6% above the current market price.
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Increasing Natural Gas Reserves Globally
Advances in technology and increases in commodity prices have lead to increased exploration both onshore and offshore. Countries like Brazil are becoming increasingly promising in terms of offshore activity. Similarly other countries such as Venezuela, Peru etc. are also seeing increased interest in offshore activity.
In addition, improvements in the efficiency of drilling techniques, most notably in the production of natural gas from shale formations has helped boost production.
Main Source for Power Generation
Natural gas remains one of the primary sources for power generation. International Energy Agency (IEA) anticipates that gas demand in the power sector will grow by a CAGR of 1.7% between 2007 and 2030 and will represent 41% of total gas demand in 2030. In countries such as Indonesia and Pakistan, the use of natural gas is being encouraged by governments in a bid to reduce oil consumption and reduce emissions.
Member Forecast
The Trefis community forecasts Anadarko’s natural gas sales volume to increase from 1,284 billion cubic feet in 2011 to 1,375 billion by 2017, compared to the baseline Trefis estimate of an increase from 892 billion to 1,195 billion cubic feet during the same period. The member estimates imply an upside of 10% to the Trefis price estimate for Anadarko’s stock.