Anadarko Petroleum Corporation APC reported a second-quarter 2015 adjusted earnings of 1 cent per share. The Zacks Consensus Estimate was at a loss of 54 cents. This amounted to a positive earnings surprise of 101.9%. In the second quarter of 2014, the company had reported earnings of $1.32 per share.
 

On a GAAP basis, the company registered earnings per share of 12 cents per share compared with year-ago earnings of 45 cents per share.
 
Total Revenues

In the second quarter of 2015, Anadarko Petroleum’s total revenues of $2,636 million surpassed the Zacks Consensus Estimate of $2,573 million by 2.4%. Reported revenues however slumped 40.6% from $4,439 million a year ago.

Operational Highlights

In the quarter under review, Anadarko Petroleum's average daily sales volume dipped 0.2% year over year to 846,000 barrels of oil equivalent per day (BOE/d). The decline was primarily due to lower natural gas sales volume on account of third party curtailments as well as the company's storage program.

The quarterly sales volume for natural gas was 2,354 million cubic feet per day (MMcf/d), down 10.2% year over year. Crude oil and condensate and NGL sales volume was 318 thousand barrels per day (MBbls/d), up 9.3% year over year and 136 MBbls/d, up 13.3% year over year, respectively.

Realized prices for natural gas, crude oil and condensate and NGL averaged $2.28 per thousand cubic feet (down 45.2%), $55.78 per barrel (down 45.3%) and $18.50 per barrel (down 50.9%), respectively, in the reported quarter.

Anadarko Petroleum’s total costs and expenses declined 21.2% year over year to $2,546 million, primarily due to a 79.5% decline in exploration expense.

Interest expenses of $201 million increased 8.1% from $186 million in the prior-year quarter, primarily due to a rise in debt.

Financial Condition

Anadarko Petroleum had cash and cash equivalents of $2.2 billion as of Jun 30, 2015, significantly down from $7.4 billion as of Dec 31, 2014.

Long-term debt as of Jun 30, 2015, was $16 billion compared with $15.1 billion as of Dec 31, 2014.

Anadarko Petroleum's net cash from operating activities during the quarter was $1.2 billion compared with $2.5 billion in the prior-year period.

In the reported quarter, the company’s capital expenditure was $1.4 billion, down from $2.4 billion in the year-ago quarter.

Guidance

The company provided third-quarter total sales volume guidance in the range of 71–73 million BOE.

Anadarko expects 2015 sales volume in the range of 298–302 million BOE. The guidance excludes sales volumes associated with the divestitures of enhanced oil recovery and Bossier play.

Upcoming Peer Releases

Noble Energy, Inc. NBL is expected to release its second-quarter results on Aug 3, 2015. The Zacks Consensus Estimate is at 6 cents per share.

Occidental Petroleum Corporation OXY is slated to release second-quarter results on Jul 30, 2015. The Zacks Consensus Estimate is at 21 cents per share.

Devon Energy Corporation DVN is expected to release its second-quarter results on Aug 4, 2015. The Zacks Consensus Estimate is at 48 cents per share.

Our View

Despite oil price headwinds, Anadarko Petroleum came out with satisfactory second-quarter financial results. Revenues were however hit by plunging oil and natural gas prices.

On the positive, Anadarko is on track with its Heidelberg and Mozambique liquefied natural gas projects. The company is also striving to achieve operational excellence by reducing the per square foot cost of drilling.

During the second quarter, Anadarko commenced operations at the 300 MMcf/d Lancaster II cryogenic plant which is providing additional capacity for the Wattenberg field.

Year to date, Anadarko has monetized assets worth over $1.7 billion. An active management of its portfolio will enable the company to focus on core operations.

Though sinking oil prices continue to pose challenges, Anadarko’s strategy of expanding its oil reserves through large scale drilling projects along with operational improvement will prove to be a helpful tool.

Anadarko Petroleum currently has a Zacks Rank #2 (Buy).

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