A Well-Balanced Oil Company You Shouldn't Ignore

It's been a difficult earnings season for a number of oil and gas producers, from ExxonMobil (NYSE: XOM  ) , the industry's Big Daddy, to Chesapeake Energy (NYSE: CHK  ) , the de facto leader of the industry's march from the initial excitement surrounding the Barnett Shale in North Texas to a bevy of other unconventional plays across the United States.

On that basis, I'm strongly inclined to recommend that investors with a taste for energy investments -- hopefully a characteristic that, to one degree or another, includes all Fools -- take a close look at Anadarko Petroleum (NYSE: APC  ) . The company, based in The Woodlands to the north of Houston, cranked out a set of impressive results for the January-March period. It successfully plies its trade in a number of U.S. and international locations where it is riding a string of operating successes without the political impediments that have become progressively more pervasive for the industry.

Can you hear the beat?
For the quarter, Anadarko chalked up earnings of $2.16 billion, a quantum leap from the $216 million in the year-ago quarter. Significantly, the quarter included an amicable settlement of a windfall profit tax dispute with Algeria's state-controlled Sonatrach. The settlement will yield to Anadarko about $4.4 billion during the next several years. In addition, and as if that weren't sufficient cause for celebration, the Texas company will also see its profits from the pair's joint venture operations increased to provide it with $2.6 billion in additional net value through the remaining years of the contract.

On a per-share basis, following the elimination of one-time items, Anadarko earned $0.92 for the quarter, a 26% year-over-year increase from $0.73 and $0.09 above consensus expectations. The improvement related largely to a 3.2% addition to the company's total production, along with a 17% increase in the average of oil and condensate realizations.  

Hot U.S. plays
Taking a quick gander at the company's key operating successes and events for the quarter, beginning with the U.S., Anadarko has recently highlighted success onshore in five major liquids-rich plays. Those plays include the Wattenberg, the Eagleford of South Texas, West Texas' Permian Basin, the East Texas Horizontal play, and the Greater Natural Buttes play of eastern Colorado.

As a somewhat interesting sidelight to this listing, the "Eagleford" is increasingly being used by industry types as pseudo-shorthand for what was once exclusively called the Eagle Ford. By whatever name, that prolific play yielded Anadarko a 55% increase in net liquids volumes via-a-vis the prevailing rate just a year ago.

In Ohio, the company joins leasehold leader Chesapeake in chalking up early success in the western portion of the giant Utica Shale. Concurrently doubling back to Texas, the company in March announced a joint venture agreement with Enbridge (NYSE: ENB  ) , a Calgary-based energy transportation company. The agreement will result in the development of a 20-inch pipeline that will originate in Skellytown, Texas, and carry natural gas liquids produced in West Texas, the Rocky Mountains, Oklahoma, and the Mid-Continent area to a storage facility in Mont Belvieu, Texas.

Before you become convinced that Anadarko does its best work onshore, the company is active offshore in both the U.S. Gulf of Mexico and a bevy of overseas locations. In the Gulf, where the company was a non-operating partner in BP's (NYSE: BP  ) 2010 tragedy, Anadarko has chalked up a number of advances. Included are its deepwater Caesar/Tonga project, which began production during the quarter; its Lucius project, which will likely begin production in 2014, and its Heidelberg field, where an appraisal well confirmed its likely size at no less than 200 million barrels.

A ring around Africa
Internationally, Anadarko's activities include a group of successes that effectively ring the continent of Africa. For instance, offshore Mozambique, in the continent's southeast, the company encountered several achievements that bode well for future production. In West Africa, Anadarko chalked up other successful drilling results offshore Ghana and Sierra Leone.  Beyond that, I've already told you about the company's positives in Algeria, at Africa's northern extremity.

Anadarko conducts operations is a variety of other venues, including China, Brazil, and New Zealand. But by now I trust you get the picture: While other companies in the industry are struggling, in part because of the depressed state of U.S. natural gas prices, Anadarko's balanced group of domestic assets (it also conducts operations in Alaska) and overseas operations are fostering significant growth. Indeed, its recent successes and oil output, which makes up 75% of its total liquids production, render the company a compelling investment opportunity.

Given its numerous positives, I urge Fools at the very least to add Anadarko to your individual version of My Watchlist. 

Fool contributor David Lee Smith doesn't own share in any of the companies named in the above article. Motley Fool newsletter services have recommended buying shares of Exxon Mobil and Chesapeake. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On May 03, 2012, at 8:01 PM, gcmagone wrote:

    I couldn't have said it better about Anadarko. I especially like it's "go anywhere" exploration vigor. I can't afford much, but did buy 100 shares not too long ago. That company has a bright future.

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