Anadarko (APC) Acquires Freeport's Gulf Of Mexico Assets

Anadarko Petroleum Corporation (NYSE:APC) has inked a deal to acquire Freeport McMoRan Oil & Gas’ deepwater Gulf of Mexico (GOM) assets for a consideration of $2 billion in a bid to expand its operation in the region and gain additional scope for exploration. The transaction is anticipated to close by 2016 end.

Benefits of the Acquisition

The acquisition will double Anadarko’s ownership in the Lucius development to 49% from 23.8%, thereby enabling the company to leverage future value addition at Lucius and achieve over 400 million barrels of oil equivalent (BOE) in estimated recovery from the development.

The acquisition is expected to generate an addition $3 billion free cash flow over the next five years.

The transaction is also expected to add nearly 80,000 BOE per day to Anadarko’s production volume out of which 80% will be crude.

Looking Ahead

In lieu of the latest acquisition and its plans, the company expects net sales volume from the GOM to average around 155,000 BOE per day, with oil constituting approximately 85%.

Anadarko also intends to raise its 2016 capital expenditure guidance from $2.6–$2.8 billion to $2.8–$3 billion primarily on account of increased investment in the Delaware DJ Basins.

Funding the Acquisition

In order to fund the acquisition, Anadarko declared the pricing of a public offering of 35.25 million shares for gross proceeds of $1,921 million, excluding estimated fees and expenses. The offering is expected to close on Sep 16.

Anadarko has also granted underwriters a 30-day option to buy an additional 5,287,500 common In case the acquisition is not successfully closed, Anadarko intends to use the proceeds for general corporate purpose.

Zacks Rank & Key Picks

Anadarko presently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Carrizo Oil & Gas Inc. (NASDAQ:CRZO) , Evolution Petroleum Corp. (NYSE:EPM) and Matador Resources Company (NYSE:MTDR) , each sporting a Zacks Rank #1(Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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