SliderOnTheBlack / Article On Anadarko
Compliments of Kerms Korner
10/21 18:32 FOCUS-Anadarko stock hit after growth estimate
By Andrew Kelly
HOUSTON, Oct 21 (Reuters) - Anadarko Petroleum Corp. <APC.N> saw its stock price fall sharply on Wednesday after it lowered its forecasts for near-term production growth late on Tuesday.
On Wednesday, Anadarko's stock closed down 5-1/8 or 13 percent lower at 33-7/8 a share in composite New York Stock Exchange trading.
Analysts said, however, that the market's reaction was overblown, adding that Anadarko had one of the industry's best exploration records and was still on track for strong growth.
Anadarko, one of the world's largest independent oil and gas exploration and production companies, said late Tuesday it now expected production to rise to 55 million barrels of oil equivalent in 2000 from 48 million in 1998. Previously, the Houston-based company had forecast that production would grow to 76 million barrels of oil equivalent in 2000 from 53 million in 1998.
It also took its forecast forward, saying it expected to produce 92 million barrels of oil equivalent in 2002, which would amount to annual average growth of 18 percent from 1998 to 2002.
Anadarko has been one of only a few stocks in the oil and gas industry to rise in value this year despite weak oil prices. That record remained intact despite Wednesday's sharp slide, with the shares showing a gain of 10.7 percent for the year to date.
Anadarko's stock has been buoyed by a strong exploration performance -- including the discovery of the 140-million-barrel Tanzanite field in the Gulf of Mexico earlier this year -- which has laid the foundation for a rapid pace of production growth.
Analysts said it was understandable that the stock should take a tumble on the news that output would grow more slowly in the short term, but that such a big drop did not seem warranted.
"I think it's an overreaction, but it's quite a natural overreaction," said Dave Wheeler of BT Alex Brown.
Wheeler said Anadarko had not lost any reserves but was admitting it would take longer to bring them into production, largely because it had been too optimistic in its estimates of how quickly it could get new projects in Algeria on stream.
Wheeler said his discounted cash-flow analysis showed that the production delays would reduce the present value of Anadarko's shares by about $2.00. However, fears that the company might be losing its "Midas touch" had fueled a steeper decline.
"It's the one stock that's held up in this industry and now people are saying emotionally or psychologically: 'Oh, they're in with everybody else'," he said.
Dain Rauscher Wessels analyst Stephen Smith said he was not about to lose faith in Anadarko.
"It's hard to get discouraged with a company that keeps finding massive fields," Smith said. "They have a drilling success record that few people have even come close to."
However, the development of big fields, like Anadarko's 100 percent owned Tanzanite find, could force a company to cut back on some smaller projects that paid off more quickly.
"This is a business that demands instant gratification," Smith explained. "Unfortunately, if you find big oil fields, it takes several years to develop them. That means you have to forgo some of your short-term spending if the commodity's pinching you."
Both Wheeler and Smith said they were retaining "strong buy" ratings on Anadarko's stock.
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