New Discoveries to Lift Anadarko’s Gas Production

Anadarko Petroleum Corporation (NYSE:APC) plans to set up a natural gas processing unit in northern Mozambique. This new unit will allow the company to produce, liquefy and export the natural gas it extracts from the Rovuma basin deep waters – off Mozambique’s northern coast. Anadarko’s Operations Director John Peffer added that the unit will produce at least a billion cubic feet of natural gas per day. ^[1] Anadarko is among the largest independent oil and gas exploration and production companies in the world and competes with ExxonMobil (NYSE:XOM), BP (NYSE:BP), ConocoPhillips (NYSE:COP) and Chevron (NYSE:CVX).

We have a price estimate of $75.32 on Anadarko’s stock which is at a premium of about 5% to current market price.

Natural Gas Production

Anadarko drilled six wells off the northern coast of Mozambique in the last five years and found gas in four of them. One of the wells also showed traces of oil, although the discovered quantity is not commercially viable for production. Anadarko has already invested about $750 million in exploring the region, which may increase to $3 billion by 2013. The installation of this new natural gas factory is expected to further boost investments to $15 billion by 2018. ^[1]

According to our analysis, the company derives almost a third of its value from the production and sales of natural gas. This clearly highlights the company’s need to invest heavily in exploration and development of new natural gas units. Anadarko’s natural gas sales volume has grown over 10% annually from 558 billion cubic feet in 2006 to 829 billion cubic feet in 2010. We expect the annual natural gas sales figure to cross the 1 trillion cubic feet mark over the next 3 years.

See our full analysis of Anadarko

1. Anadarko to Set Up Natural Gas Factory in Mozambique – AIM Says, Bloomberg [↩] [↩]