Key Takeaways From Anadarko’s Second Quarter Results

Pipes that will reach a mile into the ground are laid out at an Anadarko Petroleum Corp. oil rig site in Fort Lupton, Colorado, U.S., on Tuesday, Aug. 12, 2014. (Photographer: Jamie Schwaberow/Bloomberg)

Anadarko Petroleum (NYSE: APC) reported its second-quarter results on 31st July and conducted a conference call with analysts the following day. The market penalized the company’s stock post the announcement of its earnings miss even though it was able to report a revenue beat. Altogether, Anadarko reported a significant improvement in its results for the quarter, with an EPS (Non-GAAP) of $0.54 per diluted share, in comparison to a net loss of $0.77 reported a year ago. Revenue also displayed a substantial growth rate of 19% and was reported at $3.29 billion. The company benefited from a significant increase in its U.S. onshore oil volumes, adjusted for asset sales and higher crude oil price realization.

Anadarko reported a consolidated sales volume of 637 thousand barrels of oil equivalent per day, on the higher range of its Q2 guidance and approximately 1% higher than the reported numbers a year ago. The company’s volume growth was broadly driven by higher volumes at its Delaware basin, the DJ Basin, and the deepwater assets in the Gulf of Mexico and we expect to see a sustained volume growth from these assets in the upcoming quarters.

Crude oil prices also remained strong through the second quarter, which further enabled the company to aid its top line growth. The company reported an average realized crude oil price of $68.43 per barrel, almost 45% higher than the realized price a year ago. Crude oil prices continued to sustain their strength through the second quarter as The Organization of the Petroleum Exporting Countries and non-OPEC allies maintain their production cuts and the uncertainty with respect to Iran’s oil operations loomed. Additionally, the company successfully increased its exposure to oil sales by increasing the proportionate share of the same. The company reported a 57% exposure of oil sales to its total sales volume mix, in comparison to an exposure of 52% realized a year ago. This has remained beneficial for the company in an environment of rising crude oil prices.

The company has kept its production guidance for the year intact, however, it has increased its capital expenditure guidance by $250 million (assuming mid-points), broadly to fund expansion projects as crude oil prices remained strong. This is expected to remain favorable for the company’s future performance. Thus, we believe that the company is well positioned to generate strong returns despite the current quarter earnings miss. Consequently, we have maintained the company’s full-year outlook in our interactive dashboard: Q2 ’18: What To Expect From Anadarko Petroleum In 2018. You can make changes to our assumed figures and arrive at your own fair price estimate for the company by using our interactive platform.

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