Delaware Should Drive Anadarko's Upside Over Time; Credit Suisse Raises Target To $68

Positive Upside Ahead

The brokerage noted, "The 2 billion plus of current net resource in the Delaware feels low relative to the 5 percent recovery factor, multiple target zones within the Wolfcamp and other zones also [...] In the Delaware, stacked pay creates well density and low costs."

Further, the core of the company's investment profile moving forward is strategically situated atop its "competitively advantaged positions," including the Gulf of Mexico, Wattenberg and Delaware.

"[A]t some point, the market will need to take a bolder step in its E&P weighting given an ongoing Rebalance of oil markets. The Rebalance should allow APC to monetize non-core but still economic assets," analyst Edward Westlake wrote in a note.

Related Link: Despite Anadarko's Positive Momentum, CLSA Analysts Keep Their Rating At Underperform

Meanwhile, Westlake said investors should still continue to increase their exposure toward the broader Permian, as the diversified large caps exposed to the region should be able to capture some upside from the large and improving resource in the region.

Permian Exposure

The large caps exposed to Permian, besides Anadarko, include:

• Devon Energy Corp DVN
• Apache Corporation APA
• Occidental Petroleum Corporation OXY
• Chevron Corporation CVX

Westlake acknowledges that there are issues to navigate, meaning some pure Permian plays may outperform Anadarko shares.

Westlake remains Neutral rated on Anadarko, as he "still don't like the absolute level of debt at APC, despite longer dated maturities and good liquidity on the revolver."

At time of writing, Anadarko was flat on the day, trading near the $53.80 Thursday opening price.

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