Ladenburg Sets A New Buy Rating, $85 Target On Anadarko

Ladenburg Thalmann launched coverage of Anadarko Petroleum Corporation APC with a Buy rating and $85 price target, which implies potential upside of 20 percent and represents 175 percent proven reserve LV multiple.

“We believe the premium valuation is warranted given its potential significant upside in the Delaware and DJ basins, combined with its option value in its exploration program in the deepwater Gulf of Mexico and internationally,” analyst Michael Schmitz wrote in a note.

Schmitz’s bullish thesis on Anadarko is based on the following positives:

• Anadarko's balance sheet is solid with $4.0 billion of asset monetizations in 2016. The analyst estimates the company will have $2.5 billion of cash at year-end 2016.
• Anadarko believes it can increase its current 27 MBbls/d of oil production in Delaware basin to 130+ MBbls/d by 2021 and can increase its 248 MBOE/d of production in DJ Basin to 400+ MBOE/d by 2021.
• The company's midstream assets offers competitive advantages as it rapidly accelerates production growth in the Delaware and DJ basins.

Anadarko expects to raise its company-wide oil production at a 12-14 percent CAGR over the next five years.

“We also believe APC provides investors option value by allocating ~10-15% of its annual budget to exploration endeavors in the deepwater Gulf of Mexico and internationally,” Schmitz continued.

In the deepwater Gulf of Mexico, Anadarko recently found 210 feet of oil pay at its Warrior prospect and is preparing to spud its Shenandoah-6 well.