Anadarko Petroleum Corp.

1
Anadarko Petroleum Corp.

• Buy Recommendation
• Presented by Mark Burroughs, Jr.
• 1/30/02

2
APC Background

• APC is an independent oil and gas exploration and
  production company
• Operates in U.S., Canada, Algeria, Tunisia, West
  Africa, Venezuela, Oman, Quatar and the North
  Atlantic
• Merged with Union Pacific in July 2000 to create
  largest U.S. independent with 2.1 billion BOE.

3
Financial Snapshot

• 1/30 stock price - 46.89
• 52-week Range - 73-43
• Mkt cap. - 11.8 bil.
• TTM P/E - 10.3
• Price/Book 1.64

• TTM Revenues - 11.2 bil.
• TTM EPS - 4.60
• 2002 EPS - 2.15
• LT Debt - 4.7 bil.
• Debt/Equity - 64
• LT Debt/Capitalization - 39

4
Stock Performance
5
Comparable Analysis

• 10.3 P/E (01) vs. 17.5 for comparables
• 3.8 P/CF (01) vs. 5.4 for comparables
• Diversified portfolio of oil and gas properties
• Many energy stock are getting hammered

6
Risks

• Stock price somewhat correlated to energy prices
• Depressed oil and gas prices reduce cash flow,
  production and reserve growth.
• Flat production growth
• Stock price could fall in shoulder months (April
  and May)

7
Investment Rationale

• Trading near 52-week low of 43.00
• Strong management team
• Share buyback program
• Ramp up in Algerian production rate after 2002
• Exploration portfolio (California and GOM)
• Supply weakness will catch up to bloated gas
  inventories.
• Long-term earnings capacity
• Take-over candidate from integrated major

8
Valuation / Recommendation

• DCF value - 61.95
• Valuepro - 10 revenue growth rate
• Long-term investment (over one year)
• Target price - 65 / Stop price - 35
• Buy 300 shares of APC at current market price