Anadarko: Well-positioned for the oil/natural gas boom

Posted Nov 24th 2009 11:30AM by Joseph Lazzaro
Filed under: Anadarko Petroleum (APC), Stocks to Buy

So much for oil plummeting to $30 per barrel on a supply glut. The price of oil, the world's most vital commodity, is currently largely divorced from supply/demand fundamentals, and that's one reason I'm reiterating my buy rating for oil/natural gas company Anadarko Petroleum Corp. (APC), first recommended on May 14, 2009. at a price of $43.55. If you bought APC in May, you're up about 45%.

Look for APC to post a 2% to 4% production increase in FY2009, followed by a 4% to 5% rise in FY2010. Further, institutional investors are looking past this year's likely bottom-line loss, and toward better quarters in FY2010 -- which is a major reason Anadarko's stock is up substantially since May.

Firming natural gas prices, and more than 10 new, deep-water exploration wells in 2009 add to the positive story. The First Call FY2009/FY2010 EPS estimates for APC are a loss of $1.07 and a profit of $1.55.

Technically, Anadarko's stock chart is strong: the stock recently gapped-up above psychological resistance at $60 and approached $70, before pulling back. View that pull-back as a buy opportunity. Also, there may be some end-of-the-year profit-taking with APC, but again, any decline will be temporary.

Stock Analysis: Anadarko Petroleum Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in APC now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your APC position before December 2009. Sell/stop loss if you were to buy shares in this company: $26.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Anadarko, APC, oil prices, oil stocks, OilPrices, OilStocks