Anadarko Petroleum (NYSE: APC) will release its first-quarter results after the market close on 1st May 2018 and conduct a conference call with analysts the following day. Consensus market estimates have a mean EPS (Non-GAAP) estimate of $0.39 per share, compared to $0.18 in the previous quarter (Q4 ’17). Mean consensus revenue is estimated at $2.99 billion, 2% higher sequentially. Higher production volume and higher commodity prices are expected to support the company’s results in the upcoming results.
Anadarko’s production volume is expected to expand to 238-248 million barrels of oil equivalent (MMBOE) in 2018, slightly lower than previous guidance of 245-255 MMBOE. However, despite the reduced guidance, Anadarko’s volume is expected to rise by 7% y-o-y in the current year. Furthermore, the company is particularly aiming to grow its oil production to 370-390 thousand barrels per day (BOPD) in order to alter its product mix to increase its liquids exposure to 57% oil by the end of the year. The company believes that its Delaware basin, the DJ basin, and the deepwater assets in the Gulf of Mexico (GOM) would primarily be driving this volume growth. A greater exposure to liquids in an environment of rising oil prices is expected to remain favorable for the company.
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Oil prices have displayed stellar performance in the first quarter of 2018 with the extension of the oil production cuts by the Organization of Petroleum Exporting Countries (OPEC) and Non-OPEC allies coupled with the recent geopolitical tension in the Middle East and a weaker dollar. Crude oil spot price (average spot price of Brent, Dubai and West Texas Intermediate, equally weighed) averaged $64.62 per barrel for the March ’18 quarter, in comparison to $58.68 per barrel in the previous quarter, depicting a 10% growth. However, Anadarko may not be able to fully realize this price rise until 1H 2018 as its management had confirmed, “locking in a portion of our expected cash” in its fourth-quarter earnings release, thus making “price discovery particularly fragile in 1H 2018.”
Additionally, Anadarko is expected to face some cost headwind in 2018 as it expects a double-digit increase in service costs in its Permian Basin, which is the largest U.S. oilfield. Its executive recently confirmed that it expects service costs in its Permian field to rise by 10% to 15% in 2018 with rising oil prices putting additional pressure on prices. Overall, we expect the company to have a moderate quarter. Our key estimates for the company’s 2018 results are outlined in our interactive dashboard. You can make changes to our assumptions to arrive at your own fair price estimate for the company.
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