To borrow a phrase from current military lexicon, the abrupt resignation of Anadarko Petroleum Corp. (NYSE: APC) president and chief executive officer John Seitz was met with a mixture of "shock and awe" by analysts and investors. Shock, certainly, that Seitz would leave the company less than a week after leading an hours-long analyst meeting in which he touted Anadarko's growth plans for 2003. It was a meeting that left Wall Street number-crunchers quite impressed with the company's prospects, many of them told Petroleum Finance Week. And awe, also, as nervous investors voiced their dread that the quick exit may be a signal that things are amiss at Anadarko. "[Ken] Lay came back after [Jeff] Skilling resigned, and look what happened," noted one poster at the Yahoo! online message boards, citing the Enron Corp. leadership change that preceded that company's spiral into bankruptcy. To be sure, investor paranoia was not helped by the terse press release announcing the departure. The company initially gave no explanation, saying only that Seitz was being replaced by former Anadarko CEO Robert J. Allison Jr., who held that post from 1986 to 2001 and currently serves as chairman of the board. An Anadarko spokeswoman gave a brief follow-up statement, saying that the board has been disappointed with the company's stock price for some time, and that Seitz elected to resign. Fadel Gheit, who covers Anadarko for Fahnestock & Co., wondered why-if differences between Seitz and the board had been brewing for a while-the company did not change leadership sooner and use the analyst meeting to explain its strategy. "It looks like they were in disarray. It looks like this thing was unplanned," Gheit says. There is much truth to the assertion that Anadarko's stock has been underperforming, analysts say. Wayne Andrews of Raymond James & Associates says, "This is the first time Anadarko has traded at a discount to its peers. This is a company that once traded at twice the multiple of its peers in the large-cap E&P sector. We always found it hard to find a good entry point in the stock, and here we're seeing it trade at a discount." Raymond James upgraded Anadarko from Outperform to Strong Buy the day after Seitz's resignation. "We were pretty impressed with their analyst meeting, the opportunities for growth," Andrews says. "The company was an underperformer in 2002. I think the board wanted to see a change of pace and see this company return to some of the opportunities it had in the past. Bob Allison is very widely known by the institutions. He really guided the company and was responsible for its biggest growth phase. And I think it would be viewed positively by the Street to see him back at the helm, even though we would believe also that his time is limited there." The market might need more time to see the positive in this announcement. The stock closed down 69 cents the day after Seitz resigned, at $44. Stephen Smith of independent research firm Stephen Smith Energy Associates said it was tough to say why Anadarko has been underperforming its peers. "When you buy a large company such as Union Pacific Resources [in 2000], it takes a while to sort of digest everything. And of course, they have gotten so large, they do need sizable discoveries to add significant value. And I think they're still in the setting-up phase." He adds that the recent meeting with analysts was impressive. "They appear pretty well-poised. So I thought it quite strange to basically get analysts enthusiastic about the prospects with this meeting, and then to have John Seitz leave so suddenly, I thought was unusual. "Clearly what they're attempting to do is go back to the tried-and-true." Allison is known for leading Anadarko through an impressive growth period. He is also known as a promoter who can sell the company story to Wall Street. "Anadarko has always enjoyed tremendous love and affection by analysts and the Street and investors," Gheit says. "It was a growth company, it had a huge, very tremendous track record, and you give Allison all the credit for it." However, Anadarko is in the throes of a three-year "funk" in terms of production and finding, development and acquisition costs, notes Andrew Lees of RBC Capital Markets. In 2002, the company reported total sales volumes of 197 million BOE, compared with 199 million in 2001. Its total worldwide finding costs for proved reserves averaged $10.52 per BOE last year. Seitz was hoping to change that this year. At the recent analyst meeting, he said 2003 was going to be a "breakout year" as the company harvested the rewards of its large seismic and leasehold expenditures of 2001 and 2002. Excluding corporate acquisitions, Anadarko spent close to $250 million on seismic in 2001 and about $175 million on leases. In 2002, lease expenditures were close to $250 million and seismic expenditures were about $150 million. The 2003 capital program emphasizes drilling. Of the $2.3 billion to be spent this year, 41% was earmarked for development drilling and 17% for exploration, notes Bill Sullivan, executive vice president of E&P. Incidentally, Sullivan's name has been mentioned as a potential long-term replacement for Seitz. Allison, 64, is not expected to stay at the helm very long. Gheit speculated that with Anadarko's stock underperforming many of its peers, it could be a prime takeover target for a major oil company once commodity prices moderate a bit. "People say it's too big, it can't be done," Gheit says. "Mobil was bigger. Amoco was bigger. Arco was bigger. Texaco was bigger. Conoco was bigger. But where are all of these companies? They're gone." -Jodi Wetuski

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