Boosted by its growing U.S. onshore business, Anadarko Petroleum Corp. reversed year-ago losses in the second quarter and reported production gains in most of its domestic plays.
The Woodlands, TX-based explorer earned $929 million net ($1.83/share) in 2Q2013, reversing year-ago losses of $89 million (minus 18 cents). Revenues climbed to $3.5 million from $3.2 billion, in part because of an 80.5% surge in natural gas sales, offset partially by a 10.2% decline in oil sales and a 7.4% loss in liquids.
Operating profits, considered a better measure of quarterly performance, hit $1.14 billion, well ahead of year-ago losses of $279 million. Cash flow from operations totaled $2.5 billion from $2 billion.
"We continued to drive significant improvements into our drilling and completions programs, and costs in each category were favorable to our expectations," CEO Al Walker said during a conference call Tuesday.
Improved drilling cycle times reigned across the portfolio, with the average spud-to-rig-release cut to 8.1 days from 9.5 days in the previous three months. Several wells were drilled in less than five days, management said.
Global oil sales actually fell y/y, but U.S. onshore volumes jumped by 25%, averaging about 97,000 b/d. U.S. output y/y was slightly higher at 61.8 million boe versus 59.8 million boe. Total sales volumes averaged more than 750,000 boe/d, with liquids at about 309,000 boe/d.
On higher natural gas prices, volumes averaged about 2.6 Bcf/d on sales of $935 million versus year-ago sales of $496 million. U.S. gas volumes jumped 4.8% on higher quarterly prices.
"As expected, the strong growth from the horizontal program led to increased line pressure, which temporarily shut in more than 1,300 low-rate gas wells during the quarter," management said. "Line pressure is expected to improve in the third quarter when 140 MMcf/d of additional processing capacity is expected to come online."
Anadarko invested a total of $1.87 billion in its worldwide operations, with the U.S. region taking the bulk at $1.19 billion. The company during the latest period spent $533 million in the Rockies and $383 million in the Southern & Appalachia unit.
In the Rockies and Appalachia, which claimed the bulk of quarterly volumes, ethane rejection impacted volumes; total output was 51.7 million boe from 46.4 million boe. Production included 2,367 MMcf/d of natural gas versus 2,187 MMcf/d; 97,000 b/d of crude oil from 36,000 b/d; and natural gas liquids (NGL) of 77,000 b/d from 68,000 b/d.
"Due to the price environment during the quarter, the company made the economic decision to reject ethane" in the two basins, said Walker. "This reduced NGL sales volumes by more than 18,000 boe/d, offset by 4,400 boe/d of increased natural gas sales volumes." Anadarko averaged 20 operated rigs in the unit during the quarter and drilled 167 wells total.
The Wattenberg, the biggest onshore producer from April through June, averaged spud-to-rig-release cycle times of 10 days, down from 10.8 in 1Q2013. The field delivered on average more than 60,000 boe/d, 37%-plus higher y/y, while liquids production rose 37% to 29,000 b/d. At the end of June, 11 rigs were drilling, along with four in the Greater Natural Buttes formation, and one each in Wamsutter and the Powder River Basin.
Most of the conference call was spent discussing the rebirth in the legacy Permian Basin, where average net sales were 16,000 boe/d -- lower than in other onshore plays -- but growing, said Walker. Five operated rigs were working at the end of June, and the company now plans to increase activity through September.
Total output from Anadarko's Southern & Appalachia unit came in at about 255,000 boe/d, 8% more sequentially and up by about one-third y/y. The unit includes the Permian, Marcellus, Haynesville and Eagle Ford shales, as well as the Hugoton play in Kansas, the Ozona formation in West Texas, and East Texas fields in the Bossier, Carthage and Chalk formations.
Anadarko spent capex totaling $383 million in the unit, with 27 total rigs drilling, two more than a year ago. More than one-third of the unit's spend ($114 million) was directed to the Permian, where the company had five operated rigs running, the same as a year ago.
Most encouraging in West Texas were results in the Permian's Delaware Basin, where the first two operated wells in the Wolfcamp formation recorded 24-hour initial production test rates of about 1,600 boe/d and 1,000 boe/d.
The primary target in Appalachia is the Marcellus, which delivered volumes averaging 511 MMcf/d, 63% higher y/y, with gross operated and nonoperated production exceeding 2 Bcf/d. Thirteen wells were spud in 2Q2013 using four operated rigs; Anadarko also participated in 11 nonoperated rigs. Average spud-to-rig-release days declined to 15.5 days from 16.5.
Anadarko has been using onsite water flowback filtration and recycling in the Marcellus to minimize water use and to reduce water hauling and disposal costs. It also has cut automation and pad-facility costs, saving up to $300,000 per pad site, management said.
The East Texas/Haynesville unit, with seven rigs running, captured $94 million of capex, while in the Marcellus, $91 million was spent. The operator also spent $38 million in the Chalk formation, with two operated rigs, one higher than a year ago, and $35 million was directed to the Eagle Ford, where nine rigs were drilling, one more than a year ago.
Eagle Ford liquids output jumped 62% to average 32,000 b/d, and the East Texas horizontal program nearly doubled year-ago volumes to about 40,000 boe/d.