The management team of Anadarko Petroleum Corp. is becoming more optimistic that crude oil prices will increase to $60/bbl and remain “sustained” into 2017, allowing operations in the deepwater Gulf of Mexico (GOM), as well as the Permian and Denver-Julesburg (DJ) basins, to expand by later this year, CEO Al Walker said Wednesday.

“The more we feel comfortable about that sustained $60 price environment, the more likely you will see us increase capital,” Walker said during an hour-long conference call to discuss quarterly results.

In addition to its increased enthusiasm for higher oil prices, Anadarko has raised the midpoint of full-year volumes guidance (adjusted for sales) by 2 million boe, to 277-281 million boe. The higher output is coming even as capital expenditures (capex) fell by more than half from a year ago to $608 million. Asset sales by the end of this year now are forecast to hit $3.5 billion — the high end of the target.

“The cautious approach we outlined for oil price recovery in the beginning of 2015 has played out much as we anticipated,” Walker said. “It now appears U.S. oil supply peaked at around 9.6 million b/d, and we expect it to bottom out at around 8 million b/d, all the while with global demand now exceeding expectations.

“Given this dynamic, I am now encouraged that a sustained $60 oil price environment is likely to emerge as we move into 2017. This price level should provide the necessary cash margins and resulting cash cycle improvements to encourage us to accelerate activity and achieve strong returns. In this scenario, we would evaluate redeploying some of our incremental proceeds from asset sales toward our highest quality U.S. onshore assets later this year.”

Anadarko’s “unique positions in the DJ and Delaware basins, combined with the tie-back opportunities in the Gulf of Mexico, give us strong line of sight for attractive, capital efficient, short-cycle oil investments as crude prices recover.”

As prices improve, the first order of business is to be the drilled but uncompleted wells, Walker told analysts. Anadarko now has about 500 across the U.S. onshore in various stages of completion.

Meanwhile, U.S. oil and condensate sales during 2Q2016 fell to an average of 227,000 b/d from 318,000 b/d in 2Q2015, while natural gas sales declined to 2,188 MMcf/d from 2,354 MMcf/d and natural gas liquids sales declined to 126,000 b/d from 130,000 b/d.

The super independent, headquartered in The Woodlands north of Houston, operates around the world, but the conference call focused almost entirely on U.S. operations. Natural gas, oil and natural gas liquids volumes during 2Q2016 totaled 72 million boe, or an average of 792,000 boe/d.

In West Texas, the delineation program continued across the Delaware, with Anadarko running six rigs to further its understanding of both the vertical and areal potential across its 600,000-gross-acre position in the heart of the play. In northeastern Colorado’s DJ Basin, Anadarko continued to optimize the performance of its base production, achieving record net sales volumes of 243,000 boe/d.

In the Delaware, Anadarko exited June producing a record 45,000 boe/d net, with total liquid volumes averaging 29,000 b/d, almost one-quarter more than in the year-ago period and 11% higher sequentially. Well costs in the massive play improved by 26% to $5.6 million, while completions costs per foot fell by almost one-third year/year and 16% from 1Q2016, including a single-well record of $88/foot. Drilling cycle times improved by 13% sequentially, resulting in less than 21 days from spud to rig release. Eleven wells were bored into the Delaware’s Wolfcamp with lateral lengths of 10,000-plus feet. Overall facility costs improved 25% sequentially and 30% year/year.

In the DJ, even with a 70% reduction in capex from a year ago, Anadarko still achieved 1% sales volume growth from the first quarter and record sales volumes of 243,000 boe/d. Using one rig, down one from the first quarter, 69 wells were completed and 72 wells were turned inline. Rockies sales volumes averaged 356,000 boe/d, a 1% sequential increase (3,100 boe/d), carried mostly by the DJ’s Wattenberg field, where volumes rose year/year by 5%, or 11,000 boe/d. Total capex in the Rockies was $115 million, nearly all ($111 million) directed to the DJ.

Costs continued to improve, with drilling days reduced sequentially by 15% and lease operating expenses declining to $1.29/boe — a 15% savings. Drilling efficiencies again improved, as drilling costs/foot of $59 reflected a sequential reduction of 13% and a 30% reduction from a year ago. Anadarko has realized a 44% savings in capital efficiencies since 2014, with average gross drilling/completion costs declining to $2.4 million in 2Q2016 from an average $4.3 million during 2014 and from $3.3 million in 2015.

Anadarko’s Southern and Appalachia business unit, which includes regional operations in the Midcontinent, Texas, Louisiana and the Northeast, delivered sales volumes of 275,000 boe/d, a 2% increase from a year ago. Anadarko invested a total of $140 million across the operational unit, down 60% year/year, with nearly all of it ($124 million) directed to the Delaware. Only six rigs ran across the unit, and the Delaware took all of them.

Not only were records being broken onshore, but GOM operations also broke several records, with average sales volumes of 74,000 boe/d, including oil volumes of 56,000 b/d. Oil volumes from operated facilities increased 7% year/year, with Lucius exceeding nameplate capacity of 80,000 b/d — a 24-hour gross production record. In addition, the Constitution spar recently achieved a production record of 65,000 b/d, and its K2 complex achieved an eight-year-high production rate of 28,000 b/d. Anadarko also is continuing to advance its understanding of the Shenandoah discovery in the deepwater, as it encountered more than 1,040 net feet of oil pay in the Shenandoah-5 appraisal well, expanding the eastern extent of the field. Additionally, working interest in Shenandoah has been increased to 33%.

Including writedowns, net losses in 2Q2016 totaled $692 million (minus $1.36/share), versus year-ago income of $61 million (12 cents). Excluding the one-time items, Anadarko lost 60 cents/share, versus Wall Street’s expectations for a loss averaging 78 cent/share. Free cash flow in 2Q2016 was minus $59 million, compared with a loss of $28 million in the year-ago period, while operating losses totaled $332 million from year-ago income of $90 million. Revenue slumped to $1.9 billion from $2.6 billion.

For a full listing of 2Q 2016 industry earnings calls, including links to NGI‘s coverage of both the company and the call, see NGI2Q16 Earnings Call PDF.