Anadarko Petroleum Can 'Ride Out' The Oil Cycle, Analyst Says

• Anadarko Petroleum Corporation APC shares have declined 51.96 percent over the past year, to a low of $30.54 on January 20.
• BMO Capital’s Phillip Jungwirth has maintained an Outperform rating on the company, with a price target of $70.
• Jungwirth believes that the reduction in the company’s capex guidance positions Anadarko Petroleum to “ride out” the oil cycle.

Analyst Phillip Jungwirth mentioned that the company reported its EPS and CFPS for 4Q15 meaningfully below expectations, although product was at the high end of Anadarko’s revised guidance and ahead of the consensus. Oil production for the quarter was also in line with the guidance.

“While APC won’t release full 2016 guidance until March 1, it will recommend to its BOD a budget of $2.8 billion, 50 percent lower than in 2015 and below our $4.6 billion and consensus $4.2 billion estimates,” Jungwirth stated.

The magnitude of the cut corresponds with recent announcements made by the company’s large-cap peers, although Juungwirth said that it was surprising given Anadarko’s international commitments.

The company also noted that it has 16 rigs at the end of 2015, which Jungwirth believes included five offshore rigs. “Preliminary plans call for running seven U.S. onshore rigs, primarily in the Delaware and Wattenberg, plus working through 230 iDUCs,” the BMO Capital report mentioned.

Jungwirth expects a 51 percent year-on-year reduction in Anadarko’s U.S. onshore capex, which would translate to an exit rate and 8 percent year-on-year decline in oil production, although total oil is expected to be resilient.