Anadarko Petroleum's New Basin Discovery Strengthens Confidence in Management

On the strength of favorable exploration results and in the context of a rising stock market, buy-recommended Anadarko Petroleum (APC) has appreciated beyond a McDep Ratio of 1.0 where stock price matched Net Present Value (NPV) of $59 a share. The potential for increasing NPV and the momentum of the market justify continued buy interest, in our opinion. Yet, investors overweight in APC might rebalance toward lower McDep Ratio recommendations.

Today the company announced that the Venus well drilled offshore Sierra Leone is an oil discovery. Though it is too soon to declare commerciality, Anadarko technologists are excited about the value of the information obtained. The well confirms the promise of the Liberian Basin where Anadarko has 6 large acreage blocks (see slide from management presentation below). Referring to the general area as a Cretaceous Fan Play last month, APC now refines its disclosures to map a separate Liberian Basin and Ivorian Basin. The latter has the billion barrel Jubilee field under development by APC and partners. In the two basins the company has about a 40% share in some 30 leads to potential discoveries.