Anadarko’s key management objectives
In February 2016, Anadarko Petroleum (APC) reached agreements, or closed asset monetizations, worth ~$1.3 billion YTD (year-to-date). This included the forward sale of future royalty income from the company’s natural soda ash interest, as well as the divestiture of its East Chalk asset. This agreement also included the sale of its interest in the Maverick Basin gathering system.
Like many oil and gas companies (XOP), APC has resorted to the sale of its non-core assets to strengthen its financial position. Anadarko’s Chairman, President, and CEO Al Walker remarked that “We have identified other significant asset monetization opportunities that we will continue to actively pursue during the year.”
Walker added that the company’s “actions to date, which include significantly lowering our 2016 capital spending, improving our cost structure, sharply reducing the dividend and monetizing assets, continue to demonstrate our commitment to financial discipline and managing our portfolio in a prudent manner, while investing within cash inflows and reducing net debt, without the need to issue equity.”
Anadarko’s reduced spending
Like many upstream companies, Anadarko scaled back its 2016 capital expenditure or capex amid low energy prices (USO) (UNG). The company’s 2016 capital expenditure budget is now in the range of $2.6–$2.8 billion—a 50% reduction from the capex of $5.4 billion in 2015.
Many upstream companies have reduced their 2016 capex in response to lower energy prices. ConocoPhillips (COP) and Concho Resources (CXO) lowered their 2016 capex by 37% and 35%, respectively, from 2015, while Marathon Oil’s (MRO) 2016 capex is less than half of its 2015 capex. These companies make up ~5.4% of the SPDR S&P North American Natural Resources ETF (NANR).
Analyst targets for Anadarko Petroleum
The above graph notes high, low, average, and median analyst target prices for APC. The consensus target price of ~$57 indicates positive returns of about ~25.5% compared to current levels over the next 12 months.
Continue to the next part for a look at Anadarko’s production volumes.