Anadarko's Buyback Ambitions Go Massive (APC)

Anadarko Petroleum Corporation (NYSE: APC) has authorized a rather large stock buyback plan, and it appears to be onbe of the larger buybacks we have seen in the sector on a relative basis and nominal basis alike.  The company will spend up to $5 billion buying back stock out to August 2011 in a new plan that replaces existing plans.  To put this in perspective with current prices, this represents approximately 18% of its outstanding common shares.  The company said that it intends to repurchase approximately $600 million worth of shares prior to year-end 2008 and the share repurchases will be funded from free cash flow generated from operations.

The company also anticipates increasing its Cap-ex in 2009 and beyondto accelerate the value of its substantial unbooked resourcepotential.  The company targeting a debt-to-cap ratio of between 25%and 35% even after the buybacks are considered. Proceeds frompreviously announced property sales will continue to be directed todebt reduction.

The company is also approaching a milestone of 600,000 barrels of oilequivalent (BOE) per day of net production. Assuming no significantweather-related challenges, it also now expects third-quarterproduction to be above the mid-point of its guidance range of 51 to 54million BOE.   While certain aspects are subject to board approval,this seems like a lock considering the company’s plans versus peers.

Shares closed down about 1.4% today at $57.84, and its 52-week tradingrange is $47.09 to $81.36.  With a $27 Billion market cap, that is morethan a substantial share repurchase plan for an oil company.

Jon C. Ogg
August 25, 2008