Anadarko Petroleum Corporation (APC): Should You Go Ahead And Buy?

Anadarko Petroleum Corporation (NYSE:APC), with a market cap of approximately $43.9 billion, is a company engaged in the exploration and production of oil and natural gas. It operates in three segments: oil and gas exploration and production, midstream and marketing.

For Q1 2013, Anadarko Petroleum Corporation (NYSE:APC) reported a solid quarter. Excluding one-time items, the company had a profit of $1.08 per share, beating analysts’ expectation of $0.94 per share. Revenue increased to about $3.9 billion, beating the average estimate of approximately $3.5 billion in revenue.

Oil and gas production increased 13% to a record 793,000 barrels of oil equivalent per day. Anadarko Petroleum Corporation (NYSE:APC) also raised the top end of its full-year production forecast to a range of 279 million to 287 million boe (up from 279 million to 285 million boe). Anadarko Petroleum Corporation (NYSE:APC) also improved its financial position and ended Q1 with about $3.7 billion in cash.

Anadarko Petroleum Corporation (NYSE:APC)’s solid Q1 results were achieved with management’s “commitment to accelerate value by increasing production in the company’s core operating areas, selectively monetizing assets and delivering large-scale projections on budget,” as stated by president and CEO Al Walker in a report.

Analysts’ calls and estimates

Analysts, on average, are estimating EPS of $4.13 with revenue of $15.2 billion for 2013, which is 13.4% higher than 2012. With another earnings beat, Anadarko Petroleum Corporation (NYSE:APC) had five consecutive positive earnings surprises in the last five quarters. Analysts have a mean target price of $107.17, suggesting 22.3% upside potential based on the closing price of $87.62 on May 6.

Fundamentally, Anadarko’s key stats will be compared to its peers in the industry of oil & gas exploration and production, including Apache Corporation (NYSE:APA and Devon Energy Corp (NYSE:DVN).

Anadarko Apache Devon Energy Industry Average
Market Cap $43.9billion $29.8 billion $23.7 billion N/A
P/E 18.3 15.3 -12.2 N/A
Revenue Growth (3 Year Average) 14.2 25.6 5.8 -2.8
Net Margin, %, ttm 17.8% 11.3% -21.6% 13.1%
ROE 12.4 6.7 -9.3 8.7
ROA 4.6 3.4 -4.6 3.9
Debt/Equity 0.6 0.4 0.4 0.5

Source: Morningstar

Apache Corporation (NYSE:APA), an independent energy company, has a balanced portfolio of onshore and offshore oil and gas properties globally. With a lower than expected Q1, 2013 report, Apache plans to divest $4 billion of assets to pay down debt and repurchase shares (30 million shares). However, Apache has the highest revenue growth (three year average) among these three companies.