Anadarko Is Considered A 'Top Pick' By Some

Macquarie's Paul Grigel maintained an Outperform rating on Anadarko Petroleum Corporation (NYSE: APC), with a price target of $60, while naming the stock as Macquarie's Top Pick in the U.S. E&P segment.

"Anadarko continues to maintain a defensive posture on the outlook for commodity prices into the back half of the year," with the company focused on managing the decline in total U.S. oil production. U.S. onshore production expected to fall 8–9 percent in 4Q16, from the 4Q15 level.

According to the Macquarie report, "The firm plans on exiting 2016 with 170 iDUCs and does not have any plans to accelerate capital spending in 2016, even if commodity prices improve. Anadarko will keep the cash on the balance sheet as they work through 2016, even under a slightly more favourable commodity price outlook."

Related Link: Investors Are Bullish On Anadarko Petroleum Following 2016 Capital Program

In addition, Grigel mentioned that Anadarko Petroleum intends to achieve asset sales worth $2–3 billion in 2016, especially gas assets. The company has already monetized $1.3 billion so far in 2016.

"However, we would note that if fixed income markets remain closed, thus preventing refinancing of debt, and asset sale proceeds are at the low end of expectations, the potential for equity could resurface in 2017 with US$2.0 billion in debt due in 2017 following US$1.75 billion in 2016," Grigel stated.

The analyst noted that the recent monetization, as well as the continued focus on managing declines, appear to have boosted investor confidence.

The EPS and CFPS estimates for 2016 and 2017 have been lowered.