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Post-Gulf Blowout, Anadarko Touts U.S. Shales, African LNG

Saying it has put last year's Gulf of Mexico (GOM) deepwater well blowout with BP plc behind them, Anadarko Petroleum Corp. senior officials Tuesday tried to look past third quarter red ink to what they consider hot domestic shale and African liquefied natural gas (LNG) prospects.

"We've reduced the significant uncertainty for our shareholders by putting the Macondo GOM oil disaster with BP behind us, advancing several mega-projects [including U.S. shale plays] and aggressively advancing value in what might be the largest project in our company's history -- the Mozambique LNG project," said Hackett, who added that the company is also involved in is busiest-ever offshore E&P campaigns in the GOM, Africa and Brazil.

The emphasis domestically is on what Hackett called 'liquids-rich" areas, including the significant positions he characterized Anadarko taking in the newly emerging Utica shale in Ohio where it has control of some 300,000 acres, according to Bob Daniels, senior vice president for worldwide exploration at Anadarko.

"We're not done yet [in acquiring Utica acreage]," Daniels said. "We're continuing to pursue additional opportunities; we have one rig on location, and we have taken several horizontal cores this year to get our science done. Next year, we're planning on more exploration with one rig through the rest of this year, and two rigs early next year. We think we are in the liquids-rich window of Utica, and that's what we were targeting. We have been out there about a year-and-a-half putting this position together."

In response to questions about its intentions in the Niobrara play and the potential for joint ventures (JV), COO Al Walker said Anadarko is in the Wattenberg field in northeast Colorado and has no intention to pursue JVs there. "As we look outside the greater Wattenberg area, and we understand better the opportunity associated with the Niobrara as well as other opportunities, we may find ourselves at some point wanting to move forward with a joint venture there.

"As we keep being asked these types of questions, I keep reminding people that during the last five years we have monetized more than $25 billion in assets, and when this one [Niobrara] is right, we'll move forward and try to do it [monetize assets] there as well." However, for what he called "the greater Wattenberg area," Walker thinks it is "unlikely" Anadarko would try to monetize that play in a joint venture.

Anadarko reported a net loss of $3.051 billion, or a negative $6.12/diluted share, in the third quarter concluded Sept. 30, reflecting its $4 billion GOM settlement with BP, compared to a loss of $8 million, or a negative 5 cents/diluted share, in the same period last year. The GOM oil spill settlement wiped out about $3.37 billion, or $6.78/share, of 3Q net income for the independent oil/gas exploration/production company (E&P).

In mid-October, Anadarko, which was a 25% owner of the doomed Macondo well in the deepwater GOM, agreed to pay BP plc $4 billion to settle claims relating to last year's well blowout and oil spill, agreeing to no longer pursue claims of gross negligence against the oil major (see Daily GPI, Oct. 18). The settlement ended a dispute with Anadarko about how to divvy up responsibility to compensate those affected by the tragedy, which killed 11 men and caused extensive property damage in the Gulf Coast region.

Hidden behind the red ink was the fact that Anadarko had an overall 10% increase in natural gas liquids volumes in the 3Q, compared with that same period last year, and it had a 30% year-over-year increase in oil sales volumes from onshore properties. CEO Jim Hackett cited a number of volume milestones, production records and 30% increases in Rockies production driven largely by its expanded horizontal drilling efforts, particularly in the Niobrara shale play in Colorado.

Hackett said "strength in the balance sheet" from last year's results and what he called a "high liquidity position" allowed Anadarko to complete the settlement with BP that is highlighted in detail in the company's latest 10Q filing to the federal Securities and Exchange Commission. The deal will be paid for principally using about $3.5 billion of funds on hand and drawing down on some of a $5 billion credit facility, he said.

Any borrowing costs for the settlement eventually could be paid off next year by Anadarko's anticipated sale of some or all of its Brazilian assets. Hackett noted that the company has opened a data room for prospective buyers of Anadarko Brazilian assets.

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