Anadarko Petroleum Corporation (APC) announced second-quarter 2010 operating earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 35 cents. The company reported an operating net loss of 57 cents per share in the year-ago quarter.
GAAP net loss per share in second-quarter 2010 was 8 cents, versus 48 cents last year.
The difference between the GAAP net loss of 8 cents and operating earnings of 49 cents is the impacts of a few one-time items: loss of 39 cents on unrealized derivatives, a 15-cent impact from impairments and a charge of 3 cents owing to a change in uncertain tax position.
Total Revenue
Total revenue at Anadarko in the second-quarter 2010 was $2.6 billion, versus $1.9 billion in the year-ago quarter, reflecting a growth of 36.1%. The result fell short of the Zacks Consensus Estimate at $2.8 billion.
The year-over-year growth in revenue was primarily driven by an increase in contribution from Oil and Condensate sales. The contribution was 51.4%, versus 47.8% in the year-ago quarter. Revenue on the whole marginally suffered due to lower contribution from gathering, processing and marketing sales.
Sales and Realized Price
Second-quarter 2010 natural gas sales volumes averaged approximately 2.3 billion cubic feet per day, flat with the year-ago period. Oil sales volumes averaged 198,000 barrels per day versus 182, 000 barrels per day a year earlier. Natural gas liquids (NGL) sales volumes averaged 66,000 barrels per day versus 46,000 barrels per day a year ago.
The realized price for worldwide crude oil was $74.49 per barrel for the second quarter of 2010, compared with $55.44 in the year-ago period. Domestic realized gas prices increased to $3.79 MCF from $3.12 per MCF. Domestic realized NGL prices increased by $11.41 per barrel to $39.05 from $27.64 per barrel.
Operational Update
Total oil and gas, operating, transportation and exploration expenses in second-quarter 2010 were $590 million versus $690 million a year ago, reflecting a decline of 14.5%.
The decline in costs had a positive impact on the operating income of the company. Operating income in the second quarter was $377 million versus an operating loss of $322 million in the year-ago quarter.
Prior to the deepwater drilling moratorium imposed in the Gulf of Mexico, the company had posted positive drilling results in the Lucius and Vito fields. Anadarko has a working interest of 50% and 20%, respectively, in the Lucius and Vito fields.
Financial Update
Anadarko continues to focus on strengthening its balance sheet and enhancing its financial flexibility and liquidity position. Anadarko continues to generate significant cash flow, and the company ended the quarter with approximately $3.4 billion of cash on hand versus $3.5 billion at the end of 2009.
The company received new bank commitments for an aggregate $6.5 billion, which include a $5.0 billion senior secured five-year credit facility and a $1.5 billion senior secured six-year term loan. These will be used to refinance approximately $1.3 billion of debt currently scheduled to mature in 2012.
Long-term debt of the company at the end of the second quarter was $10.1 billion versus $11.2 billion at the end of 2009. The total debt- to-capital ratio declined by 2% to 37% at the end of second-quarter 2010, compared with 39% at the end of 2009.
Cash provided by operating activities in the reported quarter was $1.6 billion versus $1.3 billion in the year-earlier quarter. Capital expenditure in second-quarter 2010 was $1.4 billion versus $914 million a year ago.
Dividend
The Board of Directors of Anadarko announced a dividend of 9 cents per share. The dividend is payable on September 22, 2010 to shareholders of record on September 8, 2010.
Guidance
Anadarko expects total sales volume in the third quarter of 2010 to range from 55 MMBOE to 58 MMBOE (million barrels of oil equivalent). Sales volumes for 2010 are expected in the range of 232 MMBOE to 236 MMBOE, indicating an increase of 5% to 7% year over year.
Oil & Gas Direct Operating costs are expected in the range of $3.75/boe to $4.25/boe (barrels of oil equivalents) in the third quarter of 2009. Cost is expected to range from $3.75/boe to $4.00/boe in 2010.
Oil & Gas Transportation/Other are expected in the range of $3.25/boe to $3.50/boe in the third quarter of 2009. The cost is expected to range from $3.25/boe to $3.35/boe in 2010.
General and Administrative expenditure in the third-quarter 2010 is expected to range from $225 million to $235 million, while for 2010 it is expected to range from $910 million to $940 million.
Interest expenses in the following quarter and the full year 2010 are expected to range from $175 million to $185 million and $760 million to $785 million, respectively. Capital expenditure in the third-quarter 2010 is expected in a range of $1.27 billion to $1.46 billion, while for 2010 the company expects to spend $5.17 billion to $5.47 billion.
Our View
The big budget projects of the company are still on time given the uncertainty linked with the Macondo accident in the Gulf of Mexico; a commendable fact not to be taken lightly.
The performance of the company was significantly better than the comparable quarter of the previous year, fueled by higher sales volumes, largely from onshore properties.
We have a short-term Zacks #3 Rank (‘Hold’) and a long-term Neutral recommendation on the stock.
ANADARKO PETROL (APC): Free Stock Analysis Report
Zacks Investment Research
