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Anadarko Petroleum Earnings Analysis: A Turnaround?

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Anadarko Petroleum Corporation (NYSE:APC) Earnings Analysis


Anadarko Petroleum Corporation (NYSE:APC) discussed its Q2, 2013 results yesterday. Based on the  preliminary financial results for the quarter ended 2013-06-30 we analyze the company’s performance (over the last twelve months unless stated otherwise). Our analysis is peer relative and we used the following peer-set: Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), BP plc (NYSE:BP) (LON:BP), ConocoPhillips (NYSE:COP), Occidental Petroleum Corporation (NYSE:OXY), Devon Energy Corp (NYSE:DVN), Chesapeake Energy Corporation (NYSE:CHK), Murphy Oil Corporation (NYSE:MUR) and Newfield Exploration Co. (NYSE:NFX). The table below shows the preliminary results along with the recent trend charts for revenues and net margins.

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Quarterly (USD million) 2013-06-30 2013-03-31 2012-12-31 2012-09-30 2012-06-30
Revenues 3,440.0 3,710.0 3,412.0 3,285.0 3,207.0
Revenue Growth % (7.3) 8.7 3.9 2.4 (6.1)
Net Income 929.0 457.0 217.0 120.0 (89.0)
Net Income Growth % 103.3 110.6 80.8 N/A (104.2)
Net Margin % 27.0 12.3 6.4 3.7 (2.8)
ROE % (Annualized) 17.2 8.8 4.2 2.4 (1.8)
ROA % (Annualized) 6.8 3.4 1.6 0.9 (0.7)


Anadarko Petroleum Corp.’s current Price/Book of 2.0 is about median in its peer group. The market expects the company to grow faster than the median of its chosen peers (PE of 26.0 compared to peer median of 10.5) and to improve its current ROE of 8.1% which is below its peer median of 10.5%. Thus, the market seems to expect a turnaround in Anadarko’s current performance.

The company’s relatively high profit margins (currently 12.4% vs. peer median of 8.4%) are burdened by asset inefficiency with asset turns of 0.3x compared to the peer median of 0.4x. Overall, this suggests a margin driven operating model relative to its peers. APC’s net margin is greater than (but within one standard deviation of) its five-year average net margin of 5.2%.

Faster Growth

While Anadarko Petroleum Corp.’s revenues growth has been around the peer median in recent years (17.5% vs. 15.8% respectively for the past three years), the market gives its shares a higher than peer median PE ratio of 26.0. The market seems to see faster growth ahead.

Poor Investment Strategy

Anadarko’s annualized rate of change in capital of 1.2% over the past three years is less than its peer median of 7.7%. This below median investment level has also generated a less than peer median return on capital of 0.5% averaged over the same three years. This outcome suggests that the company has invested capital relatively poorly and now may be in maintenance mode.

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Trend Charts for Anadarko Petroleum Corp.

Quarterly Revenues Trend for Anadarko Petroleum Corp. (NYSE:APC)Annual Revenues Trend for Anadarko Petroleum Corp. (NYSE:APC)Quarterly Net Margin Trend for Anadarko Petroleum Corp. (NYSE:APC)Annual Net margin Trends for Anadarko Petroleum Corp. (NYSE:APC)

Anadarko Petroleum Corp. Profile

Anadarko Petroleum Corporation (NYSE:APC) is an independent exploration and production company. Its asset portfolio includes positions in onshore resource plays in the Rocky Mountains region, the southern United States, and the Appalachian basin.  Anadarko Petroleum was founded in 1959 and is headquartered in The Woodlands, TX.

This article was first published on capitalcube.com, full disclaimer.

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