Morningstar | Anadarko Wraps Up Eventful 2018 and Braces for Lower Oil Prices in 2019
We're holding steady on our fair value estimate for Anadarko Petroleum at $58 per share following the release of the company's fourth-quarter and full-year results. We think shares look mildly undervalued. Our no-moat rating is also unchanged.The company wrapped up an eventful 2018, highlighted by $3.75 billion in share repurchases, announcing the sale of $4 billion in midstream assets, and avoiding a significant hit to the value of its Colorado operations with the failure of Proposition 112 at the ballot box. Moving into 2019, we expect the company will be cautious with its capital program given the recent drop in oil prices, look to return cash to investors, and position its portfolio for oil prices in the $50 per barrel range.
Fourth-quarter volumes were up 3% sequentially and 10% year over year to 701 mboe/d, hitting the midpoint of management's guidance. Production from Anadarko's Permian assets continued to grow at a fast clip, with Delaware oil volume up to 75bbl/d, an increase of 7% sequentially and 60% year over year. In 2019, we expect total production will grow to nearly 730 mboe/d in 2019, just above the midpoint of management's full-year guidance.
With oil prices dropping precipitously since beginning of October 2017, crude now trades near our midcycle price of $55/bbl for West Texas Intermediate. As such, we see more value across the energy space, including in Anadarko.
Anadarko Petroleum is an independent exploration and production company. The company also participates in the hard-minerals business through royalty arrangements. The company's reporting segments are as follows: Exploration and Production, which is engaged in the exploration, development, production, and sale of oil, natural gas, and natural-gas liquids (NGLs) and in advancing its Mozambique liquefied natural gas project toward final investment decision; and WES Midstream and Other Midstream, in which these two segments engage in gathering, processing, treating, and transporting the company and third-party oil, natural-gas, and NGL production as well as gathering and disposal of produced water.
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