Image source: Anadarko Petroleum.

Last year was a bounce-back one for Anadarko Petroleum (APC). The global oil and gas producer's stock rebounded 42%, which helped it start climbing back from an awful 2015 when the stock price nearly got cut in half. Igniting that rally was an end in the slide of crude prices, which roared back to life by year-end. While crude prices are still half what they were before starting on the downward spiral, Anadarko has gotten its costs down to the point where it can thrive at lower prices. In fact, the company is about to embark on a growth plan that will see its output expand by a double-digit compound annual rate over the next few years. Because of that, there should be plenty of growth left in Anadarko's tank.

A look back at 2016

Given the persistent slide in oil prices entering 2016, Anadarko took a cautious approach early in the year. The company slashed its dividend 81.5%, which would save it $450 million of annual cash flow. Further, it announced that its capex budget would be 50% lower than 2015's spending level, which would be just enough money to keep production roughly flat. Finally, the company announced plans to sell up to $3 billion of assets, which would strengthen its balance sheet. These moves would enable the company to live within cash flow at lower oil prices.

The company would go on to exceed most of those expectations. Production volumes came in ahead of expectations due to stronger well results. In fact, oil volumes exceeded the midpoint of the company's 308,000 to 313,000 barrel per day guidance range by 13,000 barrels per day. That helped push companywide production to an average of 800,000 barrels of oil equivalent per day (BOE/d) through the first nine months of the year, which was above expectations. Further, the company lined up $5 billion of asset sales by the end of the year.

Another of last year's highlights was Anadarko Petroleum's decision to take advantage of the opportunity to acquire Freeport-McMoRan's (FCX -0.45%) Gulf of Mexico assets. The company spent just $2 billion to buy the Freeport-McMoRan properties, which doubled its ownership interest in the Lucius facility to 49% and expanded its infrastructure in the region. Anadarko expects that the acquired Freeport-McMoRan assets will generate an incremental $3 billion of free cash flow over the next five years at current oil prices.

Image source: Anadarko Petroleum.

What lies ahead at Anadarko Petroleum?

As a result of the actions taken last year, Anadarko Petroleum initially estimated that it could deliver a compound annual oil production growth rate of 10% to 12% over the next five years. However, it increased that outlook to 12%-14% annually as a result of the Freeport-McMoRan transaction. This growth would come off an oil production base that averaged 309,000 barrels per day through the first nine months of last year.

That is a very comparable growth rate to similarly sized peers. For example, Occidental Petroleum (OXY -0.46%) sees companywide production increasing by 5% to 8% annually over the long-term. Though, that is off Occidental Petroleum's larger oil-equivalent base of 605,000 BOE/d as of the third quarter. Meanwhile, Devon Energy (DVN 0.13%) expects to deliver a double-digit U.S. oil growth rate this year, which comes off a base that averaged 143,000 barrels per day over the first nine months of 2016. Meanwhile, Devon Energy expects top-line production to increase by a low to mid-single digit rate from last year's average of 635,000 BOE/d. What's important to note is that Anadarko, like Devon, is focusing growth on higher-margin oil.

Anadarko Petroleum has the potential to increase its growth rate even further as a result of signing a deal to sell its Eagle Ford Shale assets for $2.3 billion earlier this year. That transaction will increase the company's financial flexibility, which it could use to accelerate investments in its higher return assets in the Delaware Basin, DJ Basin, and the Gulf of Mexico. Such an acceleration could be a catalyst that fuels the stock to another run.

Investor takeaway

Anadarko Petroleum got back up on its feet last year by repositioning its portfolio and balance sheet to thrive at lower oil prices. Because of those efforts, the company is now in the position to deliver double-digit compound annual oil growth over the next five years. That ramp up could drive the stock even higher this year, especially if the company's results continue running above expectations.