Anadarko's (APC) Sierra Leone Find Is Changing Minds of Big Oil, Stock Looks Cheap - Barron's
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Anadarko Petroleum (NYSE: APC) and Tullow are changing the minds of Big Oil after a significant find off the coast of Sierra Leone, a Barron's article reported this weekend. Normally, bigger oil companies don't look beyond the coast of Nigeria and Angola.
Anadarko is up 73% this year, but remain below its 2008 highs. Tullow is also up over 100% and reaching their 2008 highs. Should the Leone find top billions of barrels, then the two companies shares could still be undervalued.
The Venus well, drilled off of the coast of Sierra Leone, hit more than 45 feet of hydrocarbons. This represents one end of a potentially 1,100 kilometer long, potentially hydrocarbon-filled coast that would stretch to the Jubilee field in Ghana, also on the West coast of Africa. "Venus shows there is a working petroleum system and opens up the potential for more discoveries [along the Sierra Leone-Ghana coast] to be full of oil," notes Christopher Brown, the lead analyst for sub-Saharan Africa for Wood MacKenzie.
Anadarko and Tullow, which own 24% and 36% of the Jubilee field, respectively, estimate that the field contains between 600 million and 1.8 billion barrels of oil.
Jubilee made news earlier this month when Exxon Mobil (NYSE: XOM) announced that it was looking to buy a 23.5% stake from Kosmos Energy. China National Offshore Oil Corp. (Cnooc) was the other company looking to purchase the stake.
Sreejith Banerji, a Vontobel portfolio manager and former oil and gas engineer, says, "It's more than speculation [now]....There is a very high chance of a significant resource." Banerji still calls Tullow's stock cheap. "It's doubled, but off very depressed levels."
Bernstein's Oswald Clint says that Anadarko's stock is cheaper than Tullow on price-to-cash-flow metrics and multiples based on reserves. Anadarko had 2.3 billion BOE on hand at the end of 2008, compared to 314 million for Tullow.
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