Saturday, April 30, 2011

Anadarko Petroleum Corp. (NYSE: APC): Q1 Earnings Preview 2011

Anadarko Petroleum Corporation (NYSE: APC) is scheduled to release its first-quarter earnings before the opening bell on Monday, May 2, 2011. Analysts, on average, expect the company to report earnings of 58 cents per share on revenue of $3.09 billion. In the year ago quarter, the company reported earnings of 83 cents per share on revenue of $3.14 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. Anadarko has focused largely on upstream activities like the exploration and production of oil & gas rather than the refining and marketing of end products like gasoline, distillates and fuel oil. The majority of the large oil companies in the world are vertically integrated, but Anadarko has kept focus on its core strengths of exploration and production which has yielded handsome returns for investors in recent years.

In the preceding fourth quarter, the Woodlands, Texas-based company's net income was $670 million, or $1.77 per share, compared to $582 million, or $1.72 per share,in the year-earlier quarter. On an adjusted basis, the company earned $2.19 a share in the fourth quarter. Revenue decreased to $3.43 billion from $2.56 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 22 cent per share on revenue of $2.75 billion.

Late in February, the company unveiled its 2011 capital program and guidance. The company expects total 2011 capital expenditures to be between $5.6 billion and $6.0 billion. This amount does not include expenditures by Western Gas Partners, LP, a separate publicly traded entity controlled by Anadarko and consolidated in its financial statements. Sales volumes for the first quarter are expected in a range of 60 - 62 million barrels of oil equivalent, or BOE. For the full year, the company sees sales volumes in a range of 244 - 248 million BOE.

Anadarko's valuation continues to suffer based on the after-effects of the oil spill incident at the Macondo 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.

The company has also benefited from  higher oil prices. The demand for fossil fuels continued to rebound in recent months on an increase in global economic activity. Crude-oil prices have also broken through $100-a-barrel on jitters tied to supply disruptions in Libya and political strife in the Middle East. Oil prices have advanced 23 percent in New York this year.

Full Disclosure: None.
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