Anadarko Profit Soars in 2006, but Shares Lag on Debt and Acquisition Concerns

Anadarko Profit Soars in 2006, but Shares Lag on Debt and Acquisition Concerns

Oil and gas explorer Anadarko Petroleum Corp. enjoyed sizable profits this year, bolstered by higher gasoline prices and blockbuster acquisitions, but its stock lagged because of higher debt.

The Woodlands, Texas-based company, with a market capitalization of $20.07 billion, goes up against larger competitors like BP PLC, ConocoPhillips, and Exxon Mobil Corp. in the exploration, development, production, and marketing of natural gas, crude oil, condensate, and natural gas liquids.

In the most recent quarter, Anadarko posted a profit of $1.46 billion, or double the $596 million its earned in the same period last year.

The third quarter also brought a number of major acquisitions and divestitures. In August, Anadarko closed a $16.4 billion buyout of Kerr-McGee, a deal first announced in June. Two weeks later, the company bought Western Gas Resources for $4.74 billion. With the added debt brought by the two acquisitions — the company borrowed over $22 billion for the deals — Anadarko decided to shed its Canadian subsidiary to Canadian Natural Resources Ltd. for $4.24 billion.

Anadarko then kicked off the fourth quarter by selling its interests in two deepwater Gulf of Mexico discoveries and one prospect to Norwegian oil company Statoil ASA for $901 million. Last week, the company agreed to sell two Louisiana oil fields to Exco Resources Inc. for $1.6 billion.

The company wants to bring its debt burden down to about $12 billion by the end of 2007.

Anadarko’s stock price has reflected a skittishness among investors over the company’s debt load and whether the bold acquisitions will succeed. Shares of Anadarko have shed more than 7 percent in the last 12 months, while its peers have gained about 6 percent.

Fadel Gheit, an analyst at Oppenheimer & Co., said Anadarko’s fortunes may not improve greatly in 2007, but once the restructuring is complete he expects the company to post solid results on production growth and reserve additions at a reasonable prices. Gheit, who rates Anadarko at “Neutral,” also thinks the company is under the right leadership in Chief Executive James T. Hackett. Hackett joined the company three years ago from Devon Energy Corp. and has a history of guiding successful mergers and acquisitions.

Gheit said in a research note Thursday that Hackett, “given his track record in creating shareholder value and vision for the company, has saved his best for last and is likely to boost APC’s value significantly in the next two years, including selling the company if that’s what it would take.”

Shares of Anadarko lost 42 cents to close at $43.52 on the New York Stock Exchange.

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