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Anadarko Petroleum: Historical Valuation and Trends

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Anadarko’s historical valuation

Anadarko Petroleum’s (APC) EV-to-adjusted EBITDA[1.enterprise value to adjusted earnings before interest, tax, depreciation, and amortization] ratio was ~13x in 1Q17. EV comprises a company’s market capitalization and net debt.

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Breaking down Anadarko’s valuation

Anadarko’s 1Q17 EV-to-EBITDA multiple was lower than its historical multiple of ~21x. The market value of Anadarko’s equity fell~9% YoY (year-over-year). Its net debt fell from ~$15.8 billion in 1Q16 to ~$9.5 billion in 1Q17. The net result of this was a 10% increase in its EV between 1Q16 and 1Q17.

The company’s trailing 12-month adjusted EBITDA rose 134% between 1Q16 and 1Q17. While both its EV and EBITDA rose between these periods, Anadarko’s EBITDA rose more than its EV, explaining its lower EV-to-EBITDA multiple in 1Q17.

What does Anadarko’s forward EV-to-EBITDA multiple tell us?

A forward EV-to-EBITDA multiple uses the market’s expectations for a company’s EBITDA for the current year. Anadarko’s forward EV-to-EBITDA multiple is 6.2x, which means that it could continue to be valued lower than it has been in the past.

The lower forward multiple indicates that Wall Street expects the company’s EBITDA to be higher this year than over the last 12 months. In the next part of this series, we’ll see how Anadarko’s valuation compares.

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