Andarko 4Q: Andarko To See Improved Earnings But Cash Flow May Face Headwinds

Anadarko Petroleum (NYSE: APC) reports its earnings on the 5^th of February. With Hurricane Michael affecting volume, Anadarko has seen a number of its key platforms shut down for the quarter. With this shutdown daily volume is expected to be anywhere in the range of, 674,000 barrels oil equivalents per day (BOE/d) to 728,000 BOE/d. Anadarko’s premium assets are expected to deliver positive results, and are profitable even at WTI being $50 a barrel. Realized oil price per barrel for the quarter is expected to be anywhere from $54-55. The company produces 86% of its volume from its onshore in the U.S, and the rest of the 14% is split over production from assets situated in African nations.

We currently have a price estimate of $63 per share for Anadarko Petroleum, which is higher than its market price. View our interactive dashboard – Anadarko Q4 2018– and modify the key drivers to visualize the impact on its valuation.

Key Expectations for the Fourth Quarter:

*EPS is expected to come in at $.61, an increase of 238% yoy, with revenues expected to come in at $3.31 billion, which amounts to an increase of 13.4%.

*Anadarko during the quarter signed a long term contract with China’s Cnooc to supply liquefied natural gas, a contract that will supply 1.5 million metric tons/ year.

*Anadarko and Western Gas’s joint venture is expected to help increase profitability for the quarter, as the merger starts to become accretive for the company.

Overall, expect a stronger earnings but risks remain to both the company’s volumes and its midstream operation continues to face headwinds from lower oil prices. Anadarko may therefore show negative cash flow for the quarter, as lower oil prices eat into margins.

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