UBS Reiterates Buy on Anadarko Petroleum (APC) Following Acquisition Agreement
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UBS reiterated a Buy rating and $69.00 price target on Anadarko Petroleum (NYSE: APC) following the company's announcement that it has agreed to acquire FCX's deepwater GoM assets for $2 billion.
Analyst William Featherston commented, "APC agreed to acquire FCX's deepwater GoM assets for $2 billion, funding the deal by issuing 35.25MM shares (8% dilution including the over-allotment). The deal adds ~80 MBoed (>80% oil) of net production, ~150 MMBoe of proved reserves, and adds ~20 tieback opportunities & >15 identified exploration prospects. The acquisition price is particularly attractive: 1.5x 2017E EBITDX and a 26% discount to WoodMac's $2.7 billion valuation for its key assets (Figure 1). The majority of the value in the assets are in two fields where APC already has an interest: Lucius where it is increasing the resource size by 33% to 400 MMBoe and Heidelberg. But the greatest attribute of this deal is APC expects the assets to generate ~$3-4bn of FCF over 2017-21 assuming $50-60/Bbl oil, implying a 150-200% payback in 5 years. This free cash flow will enable an acceleration in drilling activity in Permian & DJ boosting APC's overall growth rate."
Shares of Anadarko Petroleum closed at $57.79 yesterday.
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