Anadarko Petroleum Corp. (APC): Updating estimates to reflect switch to successful efforts accounting - Goldman Sachs - 11/04/07
What's changed
Anadarko announced on October 25 its intention to switch to successful efforts accounting from full cost accounting, effective with 3Q 2007 results expected to be released after the close on November 5.
Implications
We are updating our estimates to reflect this and other minor company adjustments. Our 3Q2007, 4Q2007 and full-year 2007 estimates are now $0.40 ($0.69 previously), $0.68 ($0.92 previously) and $3.46 ($3.99 previously). Full year 2008, 2009, 2010, 2011 and 2012 (normalized) EPS estimates now are $5.45 ($6.34 previously), $7.45 ($8.61 previously), $5.88 ($7.07 previously), $4.75 ($5.88 previously) and $2.75 ($3.79 previously), respectively.
Valuation
Anadarko trades at 5.5x 2008 EV/debt-adjusted cash flow versus 5.5x for Apache (Conviction Buy), 5.3x for Devon Energy (Not Rated) and 5.6x for EOG Resources (Neutral). Anadarko has underperformed large cap peers in recent months, and the stock’s multiple is now closer to its peers than it has been in the past. We see 12% upside to a $64 12-month DCF-based target price versus 15% upside for other E&Ps. We rate Anadarko Sell relative to an Attractive coverage view.
Key risks
Commodity price volatility, drilling results, cost pressures and government pronouncements are key risks. |
