This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Time to Buy Anadarko

Moreover, the recent downward trend in oil prices may have an adverse impact on Anadarko's cash flow. That would seriously hurt investor confidence.

In the worst case scenario, Anadarko would be slapped with a fine of more than $10 billion. Then the business might have to tap its $5 billion line of credit, as well as sell some its less lucrative emerging-market assets in Mozambique and Brazil that are worth nearly $18 billion.

At this point, two things are fairly certain. First, although Anadarko's reserves and profits are under no immediate threat from the litigation, in the next several years the business will take a serious hit.

Second, we have learned from BP's (BP - Get Report) enormous environmental disaster and lengthy litigation that the oil company's shares will likely remain under pressure until the liabilities and claims are finalized.

This is the primary reason why Anadarko's shares have not fully recovered. Before the ruling, the company's shares were hovering around $84. Since then, the stock has remained below the $80 barrier.

Anadarko shares will likely remain under pressure. They could fall even lower on any negative news.

On the other hand, this could turn into a buying opportunity for a long-term position in Anadarko Petroleum.

Although these massive environmental costs will be a big setback for Anadarko, the lawsuit is a short-term, one-off event which will be over within three years. The business has ample resources that can cover the potential payout. The long term outlook of the company beyond the next three years is still positive. The business is the biggest player at Eagle Ford and has impressive international properties that could continue to fuel growth. Anadarko has not been known as a high-yield stock. Currently, the business gives a below-average yield of just 0.9%. Given that Anadarko is not short of resources, the company could work on rewarding shareholders by pumping up its dividend and buyback expenditure. This could go a long way toward restoring shareholder confidence. A similar move was also taken by BP, which continues to reward shareholders by offering a yield of more than 4.5%.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
APC $93.73 -0.20%
BP $43.42 0.44%
AAPL $128.73 -0.17%
FB $78.81 -0.23%
GOOG $540.66 0.51%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.46 +6.17 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs