Mizuho Downgrades Anadarko Petroleum On Risks In Mozambique, Colorado

The potential for project delays at Anadarko Petroleum Corporation’s APC Mozambique site poses a risk to the company's 2022 free cash flow estimate, while additional risk is due to political uncertainty in Colorado, according to Mizuho Securities.

The Analyst

Mizuho’s Paul Sankey downgraded Anadarko Petroleum from Buy to Neutral and maintained a $51 price target. 

The Thesis

Mizuho estimates the 2022 free cash flow yield for Anadarko Petroleum at around 10 percent.

One-quarter of this estimate is dependent on a successful start and delivery at Mozambique Train 1, Sankey said in the Tuesday downgrade note. 

Although the upcoming final investment decision on the project may be considered a positive by the market, there are medium-term risks associated with Mozambique and the uncertainties caused by turmoil in the region “outweigh the longer-term benefit of the resource opportunity,” the analyst said. 

Political risk in Colorado could exert pressure on Andarko stock, Sankey said. In the event the political scenario begins significantly impacting the company's operations, Andarko is likely to “aggressively shift capital” to its new position in Converse County, he said. 

This could translate to substantial upfront infrastructure investment and put further pressure on the company’s future free cash flow yield, according to Mizuho. 

Price Action

Shares of Anadarko Petroleum were trading down slightly at $45.08 at the time of publication Tuesday.

Related Links:

Anadarko Petroleum's Q4 Earnings Outlook

Barclays Downgrades Targa, DCP Midstream On Decelerating Permian Volumes; Enable Midstream Upgraded 

Photo courtesy of Andarko.