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Focus List: Upgrades and Downgrades

By Peter Staas on May. 21, 2018

Anadarko Petroleum posted solid first-quarter results, headlined by record oil output and operating margins that rival the peak reached in 2014, when West Texas Intermediate (WTI) hovered around $90 per barrel.

Management warned that oil output would decline sequentially in the second quarter, citing maintenance-related outages in the Gulf of Mexico. However, the company increased the midpoint of its full-year guidance for overall hydrocarbon output by 1 percent and oil volumes by 1.6 percent, suggesting confidence in its outlook for a strong back half of the year.

Anadarko Petroleum continues to improve its operating efficiency in the Denver-Julesburg Basin, targeting the same number of wells as last year with two fewer rigs. Management estimates that about 50 percent of its significant inventory in the play can accommodate longer laterals and more intense completion designs. Meanwhile, Anadarko Petroleum’s mineral rights in the area give it some of the lowest break-evens in the US onshore market.

In the Delaware Basin, Anadarko Petroleum grew its crude output by about 10 percent sequentially; production will increase substantially in the second half of 2018, when the company will complete its oil header system. The upstream operator should deliver significant efficiency gains as it shifts to development mode, while tapping in-basin sources for 60 to 70 percent of its fracking-sand needs should also help to offset inflationary pressure in other service lines.

With WTI-Midland trading at a significant discount to Light Louisiana Sweet, securing takeaway capacity to the Gulf Coast has become increasingly critical to price realizations in the Delaware Basin.

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