Anadarko Petroleum (NYSE:APC) recently reported less-than-stellar fourth-quarter results. While production was on target, earnings fell short of expectations because of falling commodity prices and higher costs. That earnings shortfall weighed on the stock, which slumped more than 7% on the heels of the report.

Because investors focused on the earnings shortfall, it caused them to miss the metric that's more important to Anadarko: cash flow. That's why CEO Al Walker took some time on the company's fourth-quarter conference call to re-emphasize "our philosophical view of Anadarko's business and how we think it is competitively positioned to support the goal of delivering cash returns to investors." Here are three reasons cash is king at the oil giant.

An offshore oil production platform at sunset.

Image source: Getty Images.

1. We remain committed to returning cash to shareholders

Walker started his review of the company's philosophy by stating that "we remain committed to returning cash to investors." He pointed out that "last year, we delivered peer-leading cash return results to investors, and we will continue this commitment going forward." Overall, Anadarko has returned $3.75 billion in cash to shareholders through its share-repurchase plan since launching it in late 2017, which has enabled it to retire 12% of its outstanding shares, while also boosting its dividend 500% last year up to $600 million annually and paying off $600 million in debt.

"There is more to come in 2019," according to Walker, with the company aiming to buy back another $1.25 billion in stock and retire $1.4 billion in debt as it matures through mid-2020.

2. We designed our portfolio to grow cash flow

Supporting Anadarko's ability to return cash to investors is its portfolio of low-cost oil and gas producing assets. Walker noted:

We have positioned our portfolio to support our durable strategy with a diversified mix of oil-levered high-margin assets that are capable of generating free cash flow and attractive returns in a $50 oil environment for both WTI [West Texas intermediate] and Brent. With the exception of the Delaware Basin, all of our major operating assets are significantly cash flow positive today at $50 oil. At that price, we expect the Delaware Basin to be free cash flow positive in 2020 as we are already seeing the benefits of operatorship captured and the establishment of our integrated midstream footprint.

Anadarko spent several years repositioning its portfolio, including selling off several properties that didn't generate the margins and investment returns it's seeking, so that it had the right assets for a low-oil-price environment. As a result, it's been able to focus on expanding its best assets, which has enabled the company to grow its cash flow so that it has more to return to investors.

3. We will remain disciplined in investment spending

Speaking of growth spending, Walker stated:

Our continued philosophy of investing within discretionary cash flow in a $50 oil environment and returning free cash flow above that level to investors is a durable long-term strategy. While Anadarko's portfolio is free cash flow neutral at $50 oil, we add approximately $140 million of free cash flow for every dollar oil prices increased above $50 per annum. This oil price leverage enables us to generate a similar free cash flow yield to the S&P 500 at a mid-$50 oil price, with higher oil prices generating free cash flow yields significantly in excess of the S&P benchmark.

As the CEO points out, Anadarko set its budget to the cash flows it can produce on $50 oil. That enables it to generate significant free cash when crude is above that level, the bulk of which it will return to shareholders. By remaining disciplined, the company can easily weather steep drops in oil prices, which was the case last quarter, when crude plunged 40%. Instead of having to slam on the brakes as some peers did, Anadarko has been able to stick to its disciplined spending plan.

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Cash flow is king at this oil giant

Anadarko Petroleum made a philosophical change a few years ago, shifting its focus from growing production to expanding cash flow. That led it to reposition its portfolio so that it could generate strong cash flow at $50 oil to support a disciplined investment program that can still produce healthy growth, which allows it to send increasing amounts of cash to shareholders. So while the company's fourth-quarter earnings might have missed the mark, Anadarko remains right on target with achieving the aims of its new cash-focused philosophy.