Goldman Thinks The Street's Concerns Over Anadarko Petroleum Are Overdone

Anadarko Petroleum Corporation APC reported its EPS and EBITDA for 2Q ahead of the estimates and the consensus.

Goldman Sachs’ Brian Singer maintains a Buy rating on the company, while raising the price target from $67 to $68.

Street Concerns Overdone

Singer believes that “Street concerns regarding consolidation, weak balance sheet, ability to sell assets, production mix, Permian impact, exploration potential and timing of development growth are overdone.”

Positive Well Updates

The Permian and GOM update provided by Anadarko Petroleum was positive, with the company raising its 2016 production guidance by 1 percent, driven by higher than expected production growth in the two regions.

Related Link: Barclay's Q2 Predictions For Big Oil

“We see potential for greater credit to Permian assets from tighter spacing and delineating multiple zones. We also see potential for stronger GOM production growth from tie-backs and superior well performance,” the analyst mentioned.

On the other hand, although the Shenandoah startup is still years away, the fifth appraisal well revealed positive results.

Asset Sales

Anadarko Petroleum also indicated that it had sold assets worth $2.5 billion through 1H16, with potential for further sale of over $1 billion.

According to the Goldman Sachs report, “Confidence in more manageable leverage can open door for APC shares to trade at greater multiple as well as receive greater credit if management increases activity as it seems interested in doing modestly later in 2016.”

The EPS estimates for 2016, 2017 and 2018 have been raised to reflect production and costs.

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Posted In: Analyst ColorEarningsLong IdeasGuidancePrice TargetCommoditiesReiterationMarketsAnalyst RatingsTrading IdeasBrian SingerGoldman Sachs
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