Most investors know that it's an energy-intensive world, and even though the U.S. and global recessions have led to real declines in aggregate energy usage, don't look for that trend to continue.
Further, the Obama administration's admirable goal to create a more self-reliant, energy-independent nation and the impact of efforts to first limit, then eliminate global warming from fossil fuels opens the door to alternative energy source development.
But, as Saudi Arabia reminds us and the world, barring a breakthrough technology, fossil fuels will remain a major energy source for at least the next thirty to fifty years. In other words, the reign of oil has merely paused, not ended, which is why it's prudent to review Anadarko Petroleum (NYSE: APC).
In general, analysts expect flat production from APC in F2009, but then a 5-7% increase in F2010, as oil demand recovers amid the U.S. and global economic expansions.
Further, onshore properties at Haynesville and Marcellus (shale) have boosted analysts' spirits as low-cost domestic natural gas sources; 12 new deepwater exploration wells in 2009 represent more possible good news. Further, a cash position of more than $2 billion, and debt below $11 billion buttresses APC against any delay in the global economic recovery. The First Call F2009/F2010 EPS estimates for APC are a loss of $1.69 and a profit of 60 cents.
Stock Analysis: Anadarko Petroleum is a moderate-risk stock. Consider buying a 25% position in APC now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your APC position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $26.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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