Current APC Stock Info

Anadarko Petroleum Corporation (ticker: APC) has agreed to sell its operated and non-operated upstream assets and operated midstream assets in the Marcellus Shale of north-central Pennsylvania to Alta Marcellus Development, LLC, a wholly owned subsidiary of Alta Resources Development, LLC, for approximately $1.24 billion.

The midstream assets in the Marcellus owned by Western Gas Partners, LP (NYSE: WES), Anadarko’s sponsored master limited partnership, are excluded from the agreement, the company said in a press release.

“With this transaction, we have announced or closed monetizations totaling well in excess of $5 billion in 2016, while principally focusing Anadarko’s U.S. onshore activities on our world-class oil-levered assets in the Delaware and DJ basins,” said Al Walker, Anadarko chairman, president and CEO.

The Marcellus Shale divestiture includes approximately 195,000 net acres and, at the end of the third quarter of 2016, sales volumes from these properties totaled approximately 470 million cubic feet per day.

The transaction is expected to close during the first quarter of 2017.

Analyst Commentary

From Wells Fargo
APC announced the sale of its upstream and operated midstream assets in the Marcellus to Alta Marcellus Development, LLC for $1.24B bringing total divestitures (announced / closed) to more than $5B this year. The Marcellus comprised 10% of pro forma volumes in 3Q, but mix was entirely gas.

In 2016, APC has been among the most aggressive in selling noncore assets which will likely continue into 2017 as well with its Eagle Ford assets still in the queue. By high-grading the portfolio, management has positioned the company the drive crude-levered production growth (guided 12-14% CAGR over 5 years within cash flow) and what we view as upside potential to current Street expectations. The Company enters 2017 on solid financial footing given a strong liquidity position (almost $4B in cash at 3Q and $5B of revolving credit capacity) and a quickly de-levering balance sheet (about 2x net leverage by year-end 2017E in our model).

APC remains our top pick for outperformance with continued momentum driven by (1) the accretive Freeport deal officially closed, (2) plenty of cash for redeployment into its premier onshore (DJ and Delaware) and deepwater assets, and (3) another potential liquidity event associated with Eagle Ford on the horizon (could be $3B+). APC is regaining its leadership role within the large cap space and we think shares re-rate - currently lowest 2018E valuation multiple among large caps under coverage. Reiterate Outperform.
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From UBS:

APC agreed to sell its upstream & midstream assets in the Marcellus to Alta Marcellus for ~$1.24bn. We estimate APC sold the assets for >10x 2016 EBITDA, or ~6x EBITDA assuming a long-term gas price of ~$3.00/MMBtu (just below its current 2016-17 EV/EBITDA multiples of ~12.7x & ~7.5x, respectively). Given APC has not been allocating capital to the play, we do not ascribe any value to its unbooked resource potential in the play & the deal had little impact on our NAV. The upstream assets include ~195,000 net acres & production of ~470 MMcfd, down 14% from 1Q16 given negligible capex. APC has announced or closed >$5bn of divestitures in 2016.

Divestiture consistent with strategy of ramping activity in the DJ & Delaware

The deal is not surprising as APC had no plans to allocate rigs to the play in its 5-year plan to deliver 2016-20 oil growth of 12-14% per annum. We expect proceeds to go towards accelerated development in the Delaware and DJ Basins where APC recently disclosed plans to increase activity from 9 and 5 rigs currently to 14 and 6, respectively, by end of 1Q17. As APC does not plan to dedicate rigs to the Eagle Ford shale (73 MBoed worth ~$3bn) over 2017-20, we believe it is the other large US onshore asset management is willing to monetize in order to re-direct proceeds towards further accelerated development of the DJ and Delaware basins and boost its oil growth rate.  


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