Following Runup, Credit Suisse Steps To The Sidelines On Anadarko Petroleum

Anadarko Petroleum Corporation APC shares have gained 12 percent since April 5. Credit Suisse’s Edward Westlake downgraded the rating for the company from Outperform to Neutral, while maintaining the price target at $55. Although Anadarko Petroleum had managed its debt maturities well and has a large asset base, there was limited upside to the price target, the analyst said.

Anadarko Petroleum has a large asset base and can opt for disposals to rebuild its cash position. The company has significant assets in the Marcellus, Eagle Ford, East Texas, Louisiana and Mozambique. “We hear consistently bullish things about natural gas which could help secure buyers,” analyst Edward Westlake noted.

Anadarko Petroleum should likely be “more assertively” in building cash, being 7 years into a business cycle, Westlake said.

Progress Being Made

The company had continued to achieve lower costs in the core Wattenberg and Delaware. The analyst noted, however, “At some point as the Call on American Shale increases, costs may rise also.”

Anadarko Petroleum could boast of an inventory of about 30 tieback opportunities in the Gulf, and exploration potential in Cote D'Ivoire and Colombia, “which could exceed our carrying value as it is proved up over time,” Westlake commented.

Estimate Changes

The cash flow estimates for 2017 and 2018 have been reduced by 6 percent and 4 percent, respectively, to reflect tweaks in volumes and costs. The EPS estimates for 2016, 2017 and 2018 have been reduced from -$4.06 to -$4.08, from -$0.96 to -$0.98 and from $1.04 to $1.03, respectively.