Thursday, January 27, 2011

Anadarko Petroleum Corporation (NYSE: APC): Q4 Earnings Preview 2010

Anadarko Petroleum Corporation (NYSE: APC) is scheduled to release its fourth-quarter financial results after the closing bell on Monday, January 31, 2011. Analysts, on average, expect the company to report earnings of 22 cent per share on revenue of $2.75 billion. In the year ago quarter, the company reported earnings of 4 cents per share on revenue of $2.42 billion.

Anadarko Petroleum Corporation engages in the exploration and production of oil and gas properties primarily in the United States,the deepwater of the Gulf of Mexico, and Algeria. Te company has nearly 7.7 trillion cubic feet of proved natural gas reserves.

In the preceding third quarter, the The Woodlands, Texas-based company's net loss was $26 million, or 5 cents a share, compared to a profit of $200 million, or 40 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 40 cents a share in the latest quarter. Revenue dropped 11% to $2.55 billion from $2.87 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 28 cents per share on revenue of
$2.65 billion.

At its last earnings call in November, Anadarko raised its outlook for full-year sales volumes to a range of 233-236 MMBOE. For the fourth quarter of 2010, the company expects sales volumes in the 54-57 MMBOE range.

However, Anadarko lowered the midpoint of its anticipated capital expenditures for 2010. The company said that it now expectscapital expenditures in the range of $5.075-$5.270 billion for 2010 and $1.265-$1.460 billion for the fourth quarter.

Anadarko's valuation continues to suffer based on the after-effects of the oil spill incident at the Macondo (APC - 25% interest) exploration well in the Gulf of Mexico. The resultant suspension of deepwater drilling in the Gulf of Mexico has hurt production volumes in the region. Also, uncertainty on Anadarko's liability for the clean-up of the oil spill remains. Anadarko owns 25 percent of the ruptured Macondo well that BP operated.

On the bright side, discoveries from Mozambique to Brazil, along with takeover talk, have returned the explorer's shares to pre-accident levels. The company is known for its deep and diversified asset base, low-risk and predictable production profile, global business development approach and brilliant execution capability. Anadarko has a proven track record of identifying and executing high-impact projects. At its last earnings call in November, the company executives emphasized not only the growth in exploration in places such as Brazil who look to increase infrastructure and would need a great deal of energy to match its expansion rate, but they also noted that the drilling and other such activities have been a success in these areas. Anadarko is also focused on strengthening its balance sheet and enhancing its financial flexibility and liquidity.

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