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Anadarko Petroleum: What Could Impact Its Q4 Earnings?

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Anadarko Petroleum’s production

Anadarko Petroleum’s (APC) total production in the fourth quarter might fall by ~6,000 barrels per day on a sequential basis. A major part of the reduction could be due to a decline in the company’s oil production from Algeria. Anadarko Petroleum’s US oil output could increase by ~4,000 barrels per day based on the company’s guidance. Anadarko Petroleum’s production-mix in oil, natural gas liquids, and natural gas could stay at 58.5%, 16%, and 25.5%, respectively, in the fourth quarter—similar to the previous quarter.

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The fall in overall production and falling oil prices could drag Anadarko Petroleum’s adjusted net income by 25.6% based on analysts’ consensus estimates on a sequential basis in the last quarter. On February 5, Anadarko Petroleum is scheduled to report its fourth-quarter earnings results after the market close. ConocoPhillips (COP) and Hess (HES) beat analysts’ consensus estimates by ~13% and 16.2%, respectively, in the fourth quarter. Anadarko Petroleum, ConocoPhillips, and Hess are among the top ten holdings of the S&P 500 Index (SPY) in the upstream sector.

Operating cost

According to Anadarko Petroleum’s guidance midpoint, at the production level discussed above, the company’s oil and gas direct operating expenses might remain constant in the fourth quarter. However, Anadarko Petroleum’s oil and gas transportation costs might decline by ~1.1% or $5 million in the fourth quarter. The decline could be a positive development for the company’s earnings apart from a rise of 29.6% on average in natural gas prices in the fourth quarter.

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