Goldman Sachs Reviews Anadarko's Q1 Report

Anadarko Petroleum Corporation APC reported its 1Q results ahead of the consensus and the estimates.

Goldman Sachs’ Brian Singer maintained a Buy rating on the company, while raising the price target from $58 to $60.

Singer mentioned that Anadarko Petroleum reported its EPS and EBITDA at -$1.12 and $709 million, respectively, ahead of the estimates and the consensus expectations.

Permian Oil Production

The analyst also stated that growth in oil production at the Permian basin was progressing on track, with costs declining, while noting, “Continued execution in Permian is key for growth/resource expansion.”

Singer expects the company to be able to deleverage its balance sheet in 2Q, following additional asset sales and tax benefits.

Net Debt

According to the Goldman Sachs report, “1Q net debt was higher than expected due to one time charges associated with (1) higher credit collateral post Moody’s credit rating downgrade; and (2) workforce restructuring charges.”

However, Anadarko Petroleum’s net debt is expected to significantly decline in 2Q due to asset sales and a one-time tax credit.

Positives

Singer also pointed out that the company was witnessing narrower declines due to project startups, which was likely to lead to faster than peer production response when there is an improvement in oil prices.

The analyst believes that “favorable onshore assets led by the Permian Basin and Wattenberg can drive upward revisions to resource, augmented by offshore exploration upside.”

The 2017 and 2018 EPS estimates have been raised based on production and costs.