This energy company’s shares just crossed above their 50-day moving average, a bullish sign.
Anadarko Petroleum Corp (APC)
From Energy & Income Advisor
Anadarko Petroleum Corp (APC) made headlines after reducing its 2017 capital expenditures by $300 million, with the bulk of this cut involving offshore exploration. The company’s spending plans in the Denver-Julesburg (DJ) Basin and Delaware Basin remain intact. Management reiterated its commitment to living within cash flow for upstream expenditures, but Anadarko Petroleum will dip into the $6 billion cash on its balance sheet to fund midstream projects in Delaware Basin.
Not only can Anadarko Petroleum recover these investments by dropping this infrastructure down to Western Gas Partners LP (WES), but the exploration and production company’s 75% ownership interest in Western Gas Equity Partners LP (WGP) provides a steady stream of cash flow.
Anadarko Petroleum continues to run 16 rigs in Delaware Basin as part of its push to capture operatorship. Management indicated that appraisal activity in this area will continue for a few more quarters before the company transitions to development mode, at which point longer laterals, pad drilling and a solid midstream backbone should improve economics significantly.
In the DJ basin, Anadarko Petroleum continues to enjoy break-evens around $30 per barrel, thanks to its mineral rights and retained cash flow from its midstream assets. Recent well results in region suggest that an upward revision to the company’s type curve could be in the future.
The stock has underperformed since a tragic home explosion in Colorado earlier this year. That said, we like Anadarko Petroleum’s balanced portfolio of high-quality assets, which includes franchise positions in DJ Basin and Delaware Basin as well as cash-generating assets in Gulf of Mexico and midstream infrastructure.
Anadarko Petroleum rates a buy up to $48 per share.
Elliott H. Gue, Energy & Income Advisor, www.energyandincomeadvisor.com, 888-960-2759, September 8, 2017