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Anadarko Petroleum’s Net Debt Has Been on the Rise

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Jan. 12 2016, Updated 9:06 a.m. ET

Anadarko’s net debt-to-EBITDA

Anadarko Petroleum’s (APC) net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) was in the range of 1x–1.6x between 1Q13 and 4Q14.

Starting in 1Q15, however, its net debt-to-EBITDA multiple shot up, mostly because of a significant drop in its EBITDA due to lower commodity prices and a simultaneous increase in its net debt.

APC’s 3Q15 net debt-to-adjusted EBITDA multiple was 16x. A rising net debt since 4Q14 and a rapid fall in its EBITDA in the same period pushed the multiple higher.

APC’s 3Q15 net debt was ~$13.9 billion. Its trailing 12-month adjusted EBITDA as of 3Q15 was just $871 million. A year ago, in 3Q14, its net debt stood at ~$6.4 billion, nearly half of where it stands now, and its trailing-12-month EBITDA as of 3Q14 was much higher at $9.5 billion.

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Peer group comparison

Other upstream companies Devon Energy (DVN), Hess (HES), and ConocoPhillips (COP) have also seen lower EBITDA levels this year compared to 2014 due to lower crude oil prices. These companies’ respective 3Q15 EBITDAs for the trailing 12 months have fallen ~20%, ~60%, and ~67%, respectively, compared to 3Q14.

These companies combined make up ~9% of the Energy Select Sector SPDR ETF (XLE). For an in-depth analysis of Hess, read Outlook for Hess: Will Crucial Projects, Cost-Cuts Be Enough?

Anadarko’s liquidity

APC noted that it had $2.1 billion in cash on hand as of 3Q15. Year-to-date, it had asset monetizations amounting to approximately $2 billion.

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