Anadarko Petroleum Sustains Rally After Merger Report Surfaces

Anadarko Petroleum Corporation APC entered Monday's close nearly 2 percent higher than it began, on the back of a fresh merger rumor.

Sources told Benzinga China Petroleum & Chemical Corp (ADR) SNP was considering a takeover of Anadarko in a deal financed by HSBC. Stifel analyst Michael Scialla said a deal "would make sense," while Oppenheimer's Fadel Gheit was less certain.

Gheit said regulatory concerns keeps the probability of a deal going through at less than 50 percent.

Looking Back

Despite Monday's gains, Anadarko closed the day closer to its 52-week low than its 52-week high. The stock presently trades near $46.50 -- it was valued at nearly double that in March before sustained low oil prices deflated investor confidence.

Earlier in December, Moody's said it was reviewing Anadarko and more than two dozen other oil and gas E&P companies for potential debt downgrades in the face of a weak industry outlook. "E&P companies will be stressed for a longer period with much lower cash flows, difficulty selling assets and limited capital markets access," Moody’s VP Pete Speer told Bloomberg at the time.

Two months earlier, Oppenheimer and Gheit downgraded Anadarko from Outperform to Perform, removing his price target on shares. The analyst cited "continued losses and cash flow deficits in sub-$70/b oil price environment" as a key reason for the rating change, adding that below-expected gas prices beyond 2017 represent a key downside risk for investors.

Of note, Gheit noted two potential catalysts for Anadarko at the time, including better than expected operating results driven by efficiency, along with divestiture undertaken at favorable valuations.

The company is expected to report the current quarter's earnings at the beginning of February 2016. Anadarko is presently not scheduled to present at any upcoming analyst or expert conferences.