Why Credit Suisse Is Lowering Its Price Target At Anadarko

In a report published Wednesday, Credit Suisse analyst A. Jayaram reiterated an Outperform rating on

, while reducing the price target from $97 to $94, after the company's 10-K filing. In the report, Credit Suisse noted, "Given excess spare capacity in oil and gas markets, we believe companies such as APC that are levered to the low end of the U.S. cost curve (Wattenberg) with strong balance sheets are best positioned to drive relative outperformance." Anadarko had another solid year with the drillbit, indicating that strong capital efficiency is one of the company's main competitive advantages. Key litigation overhangs are mostly behind Anadarko now. The only exception is the Clean Water Act, which the company has tried to settle for $90 MM. "The foundation for future growth appears strong, given its pipeline of projects both onshore (Delaware Basin, Laramie County) and offshore (Heidelberg, TEN, Shenandoah, and Mozambique)," Jayaram wrote. The EPS/CFPS estimates for 2015 and 2016 have been reduced from ($0.10)/$9.82 to ($2.11)/$7.48 and from $2.47/$14.46 to $1.47/$12.38, respectively. The estimates have been tweaked "to incorporate updated guidance provided in early March, asset sales, updated hedges, and lower NGL realizations," the report said. Jayaram explained, "As part of our 10-K review, we have adjusted our NAV to incorporate the company's updated reserve report, activity plans, and updated commodity price realization assumptions. We are lowering our 12-month target price to $94 from $97 to largely reflect lower NGL realizations going forward. Our 12-month target price of $94 is at parity with our revised NAV."