Has Anadarko Entered the Death Spiral?
If you want to see how the oil apocalypse is affecting American energy companies, just take a look at Anadarko Petroleum (NYSE: APC). This formerly high-flying exploration and production company has been brought to its knees by the collapse in oil prices.
Chart watchers know that Anadarko’s share price is now less than half what it was in November 2015. As recently as November 6, Anadarko was trading at $68.50 a share, but on January 21, 2016, it closed at $33.55 a share. What’s truly frightening is that is just the tip of the iceberg.
Since November Anadarko has lost more than half of its market capitalization. On November 3, 2015, Anadarko had a market cap of $32.34 billion by January 21, 2016, that number had fallen to $17.05 billion. That means Anadarko lost $18.95 billion in share value in a little over two months.
Nor is it just share price that Anadarko has lost; the company lost almost half of its revenue in just nine months in 2015. In December 2014 Anadarko reported a TTM revenue of $18.47 billion; by September 30, 2015, that number had fallen to $9.822 billion.
Anadarko Lost Nearly $6 Billion in Third Quarter 2015
Not surprisingly, the revenue collapse led to some serious losses at Anadarko. The company reported a net income of -$5.837 billion and a free cash flow of -$233 million for Third Quarter 2015. That generated a profit margin of -132.4% for that period.
What is truly astounding at Anadarko is that its losses seem to be mounting as its production actually grows. The company started production at its new Heidelberg offshore field in the Gulf of Mexico on January 14, 2016, Rigzone reported. Heidelberg could produce up to 80,000 barrels of oil and 80 million cubic feet of natural gas a day if it goes into full production.
The situation at Heidelberg shows us why there is an oil apocalypse under way. Oil prices are so low that Anadarko can no longer make money with the wells it has, yet it seems to be ramping up production.
Something is going to have to give here if the company is to stay in business. Anadarko will either have to start shutting down fields or selling off assets, provided it can find anybody to buy them.
Will Anadarko Collapse or Get Acquired?
Anadarko could collapse or end up in bankruptcy court if the present losses continue. Another strong possibility is that Anadarko will become an acquisition target for a company like Exxon-Mobil (NYSE: XOM) or possibly Saudi Arabia’s Aramco, which is planning to go public in the near future.
The financial numbers show us that companies like Anadarko may no longer be able to survive as independent entities. They also demonstrate that average investors should stay far away from smaller energy companies if they want to keep their money.