Gulf Of Mexico Acquisitions Strengthen Anadarko's Asset Base

Following the acquisition of the Gulf of Mexico (GOM) assets from Freeport-McMoRan Inc FCX, Barclays’ Thomas R. Driscoll believes that Anadarko Petroleum Corporation APC would use the free cash flow from these acquired assets to accelerate onshore activity.

Driscoll maintained an Equal-Weight rating on Anadarko Petroleum, while raising the price target from $50 to $60.

Growth Outlook

“Anadarko plans to redeploy capital to the DJ and Delaware Basins and now expects to grow companywide oil volumes by 10-12 percent CAGR on a proforma basis over the next five years while spending within cash flow at $50-60 oil,” the analyst mentioned.

Driscoll expects the five-year growth outlook to improve in the later years, with 5 percent and 8 percent pro forma growth for 2017 and 2018, respectively, in cash flow.

Asset Base Strengthened

The analyst believes that the GOM assets strengthens the company’s asset base in a crucial region, while the attractive price of the acquisition seems to have been the result of “a motivated seller encountering limited buyers with appetite for GOM assets.”

In fact, Driscoll noted that the acquisition doubles Anadarko Petroleum’s GOM volumes and brings high return tieback opportunities that are likely to allow the company to put its deepwater rig commitments to better use.

“In addition, the company deleveraged via a $1.9 billion equity deal, which will allow an acceleration of onshore drilling in two attractive basins,” the analyst stated.

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