Anadarko Petroleum (APC) Should Benefit Long Term From Cleanup And "Un-Booked" Potential, JP Morgan Maintains Overweight

JP Morgan has maintained an overweight on Anadarko Petroleum APC. As reported on 05/17, the riser insertion tube seems to be working on the Gulf oil spill and the "top kill" and "jump shot" are the next attempts. Analyst Joseph Allman, CFA, has reiterated a buy and stated that Anadarko should outperform its peers both short and long term. He has calculate a NAV of $81.93/share. In his team's analysis, they valued the proved reserves alone (minus balance sheet, cash taxes, and G&A) at $35.90/share. "A lot of the value of the stock is the significant potential that is un-booked. We risked that potential and value it at $46.03/share after deducting corporate cash charges associated with that production, including cash taxes and G&A." The main components of APC's (un-booked) potential include: • Offshore West Africa. 31% or $22.22/share of the $72.17/share gross potential is for the unbooked potential associated with this play. We include the Jubilee and Tweneboa discoveries as well as APC’s risked undrilled inventory of prospects. • Gulf of Mexico operations. 25% or $18.33/share of the $72.17/share gross potential (before deducting cash taxes and G&A) is associated with this play. We are risking the potential (un-proved reserves) from K2 EOR, Caesar/Tonga, Shenandoah, Heidelberg, Lucius, and other projects in the deepwater GOM. We include APC's risked undrilled inventory of subsalt prospects in the Miocene and Lower Tertiary. • Rocky Mountain assets. 13% or $9.57/share of the $72.17/share gross potential is for the unbooked potential in this play. As such, the analyst believe APC is trading at a discount to the group and "the stock suffers from an overhang from the uncertainty regarding the Macondo oil spill costs. The stock has significant upside associated with West Africa and Gulf of Mexico exploration programs. Anadarko is catalyst rich, for the company is drilling up to 30 deepwater exploration and development wells this year and has emerging plays onshore U.S." JP Morgan maintains a December 2010 price target of $82.00. The stock closed Friday, 05/20 at $54.83 +$1.48 but traded at $53.13 -$1.70 after hours on short term profit taking and Gulf concerns.