Anadarko Petroleum Corporation Surprises On Estimates

Anadarko Petroleum is drilling with success in the deepwater around the world. The company has surprised on estimates 2 out of the last 4 quarters by 7.94%. Anadarko has a forward P/E of only 9.33.

Company Description

Anadarko Petroleum Corporation (APC) is a large independent oil and natural gas exploration and production with production and exploration in Alaska, Algeria, Brazil, Ghana, China, Indonesia and Mozambique.

The company, a Zacks #1 Rank (Strong Buy), had 2.4 billion barrels of oil equivalent of proved reserves at the end of 2007.

APC is a large natural gas producer with 10 U.S. onshore natural gas resource plays, as well as in the deepwater Gulf of Mexico at the Independence Hub.

Production Resumes at Independence Hub

On Apr 8, a leak was discovered in the Independence Trail export pipeline that delivers natural gas from the Independence Hub in the deepwater of the Gulf of Mexico.

The export pipeline was shutdown for repairs which took considerably longer than originally planned. As a result, Anadarko lost approximately 0.45 billion cubic feet per day of net gas production during the time it was shutdown.

After production resumed, it took the company some time to get back up to full operation. APC announced on June 16 that it had successfully resumed production at a gross rate of approximately 900 million cubic feet of natural gas per day.

Despite the shutdown, Anadarko confirmed its full-year 2008 production guidance of the range of 207 million to 212 million barrels of oil equivalent.

Anadarko reports second quarter earnings on Aug 4 and will likely further update production guidance at that time.

Anadarko Beat Wall Street Estimates for the First Quarter by 21.01%

On May 5, Anadarko reported first quarter earnings that easily beat Wall Street estimates by 21.01%, or 25 cents a share. Earnings per share were $1.44 compared to analysts’ estimates of $1.19 per share.

Production rose 8% over the year ago period and was on the higher end of the company’s guidance range due to record production in the onshore regions of the Greater Natural Buttes and the Powder River Basin.

The average natural gas price in the first quarter was $6.17 per thousand cubic feet. The average crude price was $78.21 per barrel. Natural gas liquids averaged a price of $56.42 per barrel.

The company also saw success in some of its deepwater wells in offshore Ghana.

Consensus Estimates Rising as Natural Gas Prices Surge

The jump in natural gas and oil prices during the second quarter has pushed brokerage analysts to continually raise estimates for the second quarter and the full year. In the last 30 days, second quarter consensus estimates are up 9% to $1.68 from $1.54 per share.

For the full year, estimates gained 12.35% to $6.73 from $5.99 per share. 90 days ago analysts called for $4.75 per share.

Value Fundamentals

Anadarko’s forward P/E is 9.33. Its price-to-book (P/B) is 1.66. The company’s five year average return on equity is 18.50%. APC also pays a dividend of 0.60%.

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