Anadarko Petroleum Downgraded At Oppenheimer; Stock Keeps Losing In Sub $70 Oil Environment

• Anadarko Petroleum Corporation APC shares have been trending lower in 2015 and are down 20 percent year-to-date.
• Oppenheimer’s Fadel Gheit downgraded the rating on the company from Outperform to Perform, while removing the price target.
• Low oil prices are expected to result in continued losses and cash flow deficit at Anadarko Petroleum, Gheit stated.

Analyst Fadel Gheit mentioned that low oil prices had resulted in continued losses and cash flow deficits at Anadarko Petroleum. The company reported 3Q15 adjusted earnings of ($0.72) per share, as compared to $1.16 per share recorded in 3Q14 and $0.01 in 2Q15.

The company’s sales volumes, at 787 mboed, were down 7 percent y/y but were up 1 percent y/y on a divestiture-adjusted basis. Anadarko Petroleum reduced the high-end of its full-year capex guidance by $100M to $5.4-$5.6 billion, excluding WES, while raising the midpoint of its 2015 divestiture-adjusted sales volume guidance by 2 mmboe to 290-292 mmboe.

Gheit believes that the company will continue to incur losses and cash flow deficits despite cost savings and efficiency improvements, if oil prices remain below $70 per barrel. He added that the company had intentionally deferred the completion of nearly 200 wells through 3Q15, while planning to exit 2015 with 175-225 intentionally drilled uncompleted wells.

The EPS estimates for F2015 and F2016 have been reduced from ($2.34) to ($2.39) and from ($2.30) to ($2.33), respectively.