Anadarko Petroleum Corp. Buy Recommendation Presented by Mark Burroughs, Jr. 1/30/02
APC Background • APC is an independent oil and gas exploration and production company Ø Operates in U. S. , Canada, Algeria, Tunisia, West Africa, Venezuela, Oman, Quatar and the North Atlantic • Merged with Union Pacific in July 2000 to create largest U. S. independent with 2. 1 billion BOE.
Financial Snapshot • • • 1/30 stock price - $46. 89 52 -week Range - $73 -43 Mkt cap. - $11. 8 bil. TTM P/E - $10. 3 Price/Book – 1. 64 • • • TTM Revenues - $11. 2 bil. TTM EPS - $4. 60 2002 EPS - $2. 15 LT Debt - $4. 7 bil. Debt/Equity - 64% LT Debt/Capitalization - 39%
Stock Performance
Comparable Analysis • • 10. 3 P/E (01) vs. 17. 5 for comparables 3. 8 P/CF (01) vs. 5. 4 for comparables Diversified portfolio of oil and gas properties Many energy stock are getting hammered
Risks • Stock price somewhat correlated to energy prices Ø Depressed oil and gas prices reduce cash flow, production and reserve growth. • Flat production growth • Stock price could fall in shoulder months (April and May)
Investment Rationale • • Trading near 52 -week low of $43. 00 Strong management team Share buyback program Ramp up in Algerian production rate after 2002 Ø Ø Exploration portfolio (California and GOM) Supply weakness will catch up to bloated gas inventories. • Long-term earnings capacity • Take-over candidate from integrated major
Valuation / Recommendation • DCF value - $61. 95 Ø Valuepro - 10% revenue growth rate • Long-term investment (over one year) • Target price - $65 / Stop price - $35 Buy 300 shares of APC at current market price
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