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

Anadarko Petroleum Corporation APC reported its 2Q16 results, with the adjusted EPS slightly better than the estimate.

CLSA’s Asit Sen maintains an Underperform rating on the company, with a price target of $58.

2Q Beat

Sen explained that the beat earnings were driven primarily by the midstream segment, as well as lower than expected costs.

However, the cash flow for the quarter stood at $1.31/share, slightly below the estimate of $1.37/share.

Production was mostly in line with the estimate and the guidance, coming in at 792 MBOED, while oil/liquids realizations were ahead of expectations, although offset by natural gas.

Related Link: Goldman Thinks The Street's Concerns Over Anadarko Petroleum Are Overdone

According to the CLSA report, “APC expects a $60/b oil price environment to emerge in 2017. The company expects US oil supply to trough at 8 million b/d down from the peak of 9.6 million b/d.”

Positive Momentum

“Positive momentum continues in the deepwater GOM along with higher production and lower costs in the two key US onshore plays,” Sen mentioned.

Anadarko Petroleum now expects proceeds from asset sales at or above $3.5 billion during 2016.

Net sales for the Delaware basin averaged 41 kboed, exiting 2Q at 45 kboed. Sen noted that Anadarko Petroleum continues to lower costs and delineate its Delaware basin acreage. The analyst currently estimates eight wells per section in the Delaware Basin.

Net sales volume at the DJ basin grew to 243 kboed, while the Shenandoah 5 appraisal well in the GOM reported 1040 net feet of oil play.

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