Anadarko’s 2Q’17 Earnings Come In Lower Than Expected; Capex Guidance Reduced Due To Weak Outlook

As expected by the market, Anadarko Petroleum (NYSE:APC), the independent exploration and production (E&P) company, posted weak June quarter performance on 24th July 2017((Anadarko Announces June Quarter Results, 24th July 2017, www.anadarko.com)) largely due to the softness in commodity prices during the quarter. While the US-based company managed to grow its revenue for the quarter despite the volatility in commodity markets, it missed the consensus estimate for earnings by a huge margin. That said, the major highlight of the second quarter earnings was the downward revision of the company’s capital expenditure plan for the year.

The company had previously increased its capital spending budget from $2.8 billion in 2016 to $4.5-$4.7 billion for the current fiscal year, due to the rally in the commodity prices in the first quarter. However, as US oil production and inventories piled up, the outlook for commodity markets turned uncertain yet again, forcing the company to reduce its capital spending budget by $300 million for the year. While the reduction is relatively small compared to the total proposed capital expenditure, it is indicative of the pinch that the persistently low commodity prices are having on companies like Anadarko.

See Our Complete Analysis For Anadarko Petroleum Here

Key Takeaways From 2Q’17 Results

• Anadarko’s 2Q’17 revenue stood at $2.72 billion, significantly higher than the market expectations of $2.41 billion. This growth was driven by higher price realizations compared to the same quarter of last year, which was partially offset by lower production volumes during the quarter.
• As targeted, the company managed to increase its overall product mix to 67% liquids compared to 54% liquids in the second quarter of 2016. The oil and gas company closed divestitures of more than $600 million during the quarter.
• The company posted an adjusted loss of 77 cents in the June quarter, which is notably lower compared to a loss of 60 cents reported in the last year. This is primarily because of higher depreciation and exploration charges booked during the quarter.

Going Forward

• Given the uncertainty in the recovery of commodity markets, Anadarko has reduced its capital spending budget for 2017 from $4.5-$4.7 billion to $4.2-$4.5 billion. The company has also adjusted its full-year production guidance to reflect the recent divestitures and the deferred production associated with the Colorado response.
• Anadarko still expects to average around 130,000 barrels of oil per day in the deepwater Gulf of Mexico and exit the year at around 150,000 barrels of oil per day from the Delaware and DJ basins combined.

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