Should You Buy Into Anadarko's Rally?

NEW YORK (TheStreet) -- Shares of Anadarko Petroleum  (APC) have rallied about 16% since last Thursday when news broke that the energy company reached a record $5.15 billion settlement in an environmental case.

The question now is whether the stock has more upside.

The shares trade at about 63 trailing earnings, which is not extraordinary considering the stock was trading at a similar multiple about nine months ago. With 6% to 7% growth in production expected this year and with the absence of concern about more litigation, the company could see its shares continue to go higher.

Analysts are optimistic. According to data compiled by TheStreet, 20 analysts have a buy rating on the stock and three have a hold rating.

On Thursday, Anadarko confirmed that it had reached a settlement to resolve all environmental claims filed against Kerr-McGee, a company Anadarko bought in 2006. Anadarko is expecting to record a net tax benefit of $550 million related to the settlement.

The settlement was the biggest environmental fine ever by the Justice Department, surpassing the  2010 Gulf of Mexico oil disaster involving BP  (BP) which resulted in criminal fines worth $4 billion.

Despite its massive size, the Anadorko settlement was at the low end of estimates. A trust representing the U.S. government was initially targeting $25 billion from Anadarko to clean up more than 2,700 sites and to compensate claimants from Tronox (TROX), a chemical company that had been spun off by Kerr-McGee. The claimants argued that the spinoff unfairly burdened Tronox with the environmental claims.

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