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3 Reasons Anadarko Petroleum Stock Could Rise

Anadarko Petroleum (NYSE: APC  ) is in high-growth mode. The oil and gas exploration and production company is putting up incredible performance in recent periods. Last quarter, average daily sales volumes hit a record. The company is seeing great results across its business, including in onshore U.S. oil fields, international operations, and in the Gulf of Mexico.

Not surprisingly, the stock has followed suit. Shares of Anadarko Petroleum are up 38% since the start of 2014.

Despite such an incredible rally on the back of strong fundamental performance, here are three reasons why Anadarko Petroleum may still have room to run.

Continued production growth in the U.S.
Last quarter, Anadarko delivered record average daily production, of 848,000 barrels of oil equivalent per day. Adjusted earnings per share rose to $1.32, representing 25% growth year over year.

Much of this was due to the company's concentration in the Wattenberg development, a large natural gas field in the Denver Basin. This field achieved a record 169,000 barrels of oil equivalent per day last quarter, which represented a nearly 60% increase in year-over-year production there.

Because of this, as well as continued growth elsewhere, management has high expectations for the rest of 2014. Along with its most recent quarterly release, management upped its forecast for the remainder of the year. Anadarko has increased its estimate for the midpoint of its 2014 sales volume guidance by 5 million barrels of oil equivalent.

Growth in international markets
Anadarko has made substantial investments in growth abroad. This is unique in the oil and gas exploration and production industry. Most others in the space are actually ditching operations abroad, because management teams across the industry view these endeavors as increasingly risky. This is especially true, since domestic oil and gas production is reaching levels not seen in decades. In light of supply disruptions and civil uprisings, companies like ConocoPhillips (NYSE: COP  ) have prioritized divesting risky international operations.

ConocoPhillips recently closed on the sale of its Nigerian unit for $1.5 billion. It's also sold interests in Kazakhstan and Algeria over the past year. Proceeds from Conoco's divestments are primarily being reinvested in U.S. oil fields.

Meanwhile, Anadarko maintained its own interests in Algeria, which now looks like a wise move because the company's international operations are contributing heavily to production growth. Anadarko's El Merk development in Algeria is producing 150,000 barrels per day.

Over the first six months of the year, Algeria's average daily volumes of crude oil and condensate production represented nearly one-quarter of the company's total. This will contribute significantly to the company meeting its goals this year.

Growth of shareholder returns
In a very positive sign, Anadarko management increased its dividend by 50% after releasing second-quarter results. This makes it very clear that the company takes its commitment to providing shareholders with cash returns very seriously. Over the past five years, Anadarko has increased its dividend by 24% compounded annually.

This kind of dividend growth can't be possible without the underlying financial strength of a growing company, and Anadarko is certainly that. At recent prices, the dividend yield is about 1%. While that isn't overly impressive right now, with such strong dividend growth, that yield will soar in a relatively short time.

The Foolish takeaway
The bottom line is that Anadarko is a high-growth company, taking advantage of booming domestic oil and gas production as well as its strong positions across the globe. Production and earnings are growing, and the company is sharing its success with its investors. Even though Anadarko's stock price has soared to begin 2014, there may still be room for the stock to continue rallying, because of strong domestic growth, promising international growth, and its exceptional dividend growth.

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Bob Ciura

Bob Ciura, MBA, has written for The Motley Fool since 2012. I focus on energy, consumer goods, and technology. I look for growth at a reasonable price, with a particular fondness for market-beating dividend yields.

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