Don't Cry For Anadarko In Argentina

Give Anadarko Petroleum APC this much credit: The company is taking a rather unique view of growing its South American footprint. While many oil majors are champing at the bit to get into Brazil, Anadarko is actually looking to sell its Brazilian assets. That doesn't mean the Texas-based company is throwing in the towel on South America. Far from it. On Monday, Anadarko made a provisional $1.6 billion offer for U.K.-based oil explorer Rockhopper, a deal that could pave the way for Anadarko to be a dominant force on the Falkland Islands. Who says wars aren't fought over oil? The Falklands, which lie off the coast off Argentina, are a territory of the U.K., following the two-month long Falklands War in 1982. Estimates regarding how much oil can be extracted there vary wildly. In 2009, the British daily The Telegraph reported there might be 60 billion barrels of reserves in the Falklands. That might prove to be high, but a deal for Rockhopper, the only company to thus far make new, viable discoveries in the Falklands, would put Anadarko on the path to getting its hands on up to 700 million barrels of the U.K. company's Falklands oil. Doing business in the Falklands is actually tame by comparison to some of the other locales where Anadarko goes in search of new oil. Ghana, Mozambique and several others are found among the company's Africa lineup and Africa has proven time and again to be risky business for Western oil companies. That could be the case if Argentina, a country not known for being business-friendly, held the Falklands. It does not and that could mean things goes smoothly for Anadarko on the Falklands. By market value, Anadarko is the largest U.S. independent oil and natural gas producer, nudging past rival Apache APA by about $2 billion. More importantly, both stocks have a growth feel about them, something that's virtually impossible to find with traditional integrated oil names. The growth case for Apache is compelling. It is for Anadarko as well. The average analyst price target on the stock is almost $100. That's 25% upside from current levels. Or investors can bet on a more bullish scenario and side with Citigroup, which sees the stock going to $120. To be sure, things aren't entirely peaches and cream with Anadarko. The Justice Department has said it wants the company, along with BP BP and Transocean RIG to be held liable for federal pollution violations related to the 2010 Gulf of Mexico oil spill. Anadarko, which has already settled with BP, has argued it cannot held liable for Clean Water Act Penalties. Only time and a U.S. Federal Court will tell just how much Anadarko is on the hook for regarding the worst spill in U.S. history. Even with the controversy it has faced in the Gulf, Anadarko is still bolstering its presence there. Not to mention, the company's offshore and international activities are just part of the story. Anadarko is a major shale player as well. From Citigroup: “The company currently pegs next year's budget at $6.1-$6.5 bn. virtually unchanged vs. this year. However, larger proportion will be directed towards U.S. shales particularly Marcellus as drilling carry is expected to run out next year. Wattenberg Niobrara should also see a budget increase.” Onshore. Offshore. U.S. Global. No, there's no need to cry for Anadarko's growth story. A strong volume move above $85 will deliver plenty of smiles.