UPDATE 1-Anadarko down on 2003 output forecast cut

Fri June 6, 2003 11:21 AM ET (Adds analyst comment, detail)

NEW YORK, June 6 (<a href=reuters.com>Reuters) - Shares of Anadarko Petroleum Corp. APC.N fell as much as 7 percent in early Friday trade after the independent oil and gas producer reduced its 2003 output forecast for the second time this year, indicating no growth in output from last year.

Anadarko, the second-largest U.S. independent following Devon Energy Corp. DVN.A , late Thursday announced it was lowering its 2003 production targets by 5 percent to 190 million barrels of oil equivalent (boe) from 200 million boe. That is essentially flat with 2002 volumes.

The Houston-based company blamed the shortfall on "production problems" in the Gulf of Mexico, Algeria and Qatar. Anadarko shares were down $2.08, or 4.4 percent, to $45.28 in morning trade.

Equity analysts reduced their ratings on Anadarko and expressed concern that Anadarko now has twice revised its forecasts this year, losing credibility with investors.

At an April 30 investor conference, Anadarko Chairman and Chief Executive Robert Allison reaffirmed the company would meet production goals. The company on January 31 reduced its output goal by 3 million to 200 million boe, citing the impact of higher prices and the oil-worker strike in Venezuela

Merrill Lynch analyst John Herrlin, who downgraded Anadarko to "neutral" to "buy" today, told clients most of the shortfall was due to temporary glitches. However problems in the Gulf of Mexico could set the company back next year as well.

Banc of America Securities analyst Robert Morris concurred, telling investors, "While the problems in Algeria and Qatar can be resolved, the offshore Gulf is still being evaluated but will most likely impact 2004 volumes."

In response Herrlin reduced his 2003 earnings estimate to $5.07 a share from $5.65 a share and cut his 2004 forecast to $4.12 a share from $4.85.

Morris, who rates the company "buy," though he cut his earnings forecast to $4.75 a share from $5.45 and next year's forecast to $3.90 a share from $4.40. Morris reduced his price target for Anadarko shares by $4 to $50.

Anadarko was expected to earn $5.22 and $4.43, according to the average analyst estimate compiled by Reuters Research.

In a statement yesterday, Anadarko emphasized that earnings would be stronger than expected thanks to high energy prices. The company also touted a gas discovery at its third eastern Gulf of Mexico deepwater prospect, Atlas, and that it expected to soon announce a $200 million acquisition.