Apparently in a move to prepare for expected downturns through the remainder of the year, Houston-based Anadarko Petroleum Corp.’s CEO said Thursday that the independent would shift some of its spending from onshore natural gas projects in the Lower 48 to “more profitable opportunities in the Gulf of Mexico and Canada.” Second quarter earnings, however, jumped on higher natural gas prices and increased production, mostly from acquisitions. Across town, rival independent Apache Corp. also had a stellar quarter, with earnings up 73%, also related to strategic acquisitions.

Although the company is preparing to shift some of its spending in North America, Anadarko’s capital budget will remain unchanged, CEO Robert J. Allison Jr. said. The company, he said, will remain the most active driller in North America, with 93 company-operated rigs and working interests in 22 others. Net income rose to $401 million, or $1.50 a share, up from $64 million, or 48 cents a share, in the same period of 2000. Cash flow totaled $1.05 billion, or $4.18 per share, compared with $167 million, or $1.30 per share, for second quarter 2000. Average prices for natural gas were up 40% to $4.49/Mcf, but average crude oil prices fell 20% to $21.38/bbl.

“We continue to show excellent volume growth, both quarter-to-quarter and year-over-year, putting us ahead of our forecasts,” Allison said. Total production volumes were up more than 10% over the first quarter of 2001, and they increased 271% from a year earlier. However, during a second quarter earnings conference call with investors, Allison revised the independent producer’s earnings per share for the remainder of the year to about $5.40. Analysts had expected Anadarko’s full-year earnings to fall between $4.69 and $7.68, with an average of $5.79.

Allison said the earnings projection was based on full-year 2001 production of 204 MMboe. Production, he said, would dip to 51 MMboe in the third quarter, down about 1 MMboe in the second quarter, and would rise again to 54 MMboe by the fourth quarter.

Combined production of natural gas, crude oil and natural gas liquids, boosted by acquisitions, rose to 52 MMboe, up from 14 MMboe/d for second quarter 2000. Anadarko acquired Union Pacific Resources (UPR) in July 2000 (see Daily GPI, July 17, 2000) and acquired Canada’s Berkley Petroleum Corp. earlier this year (see Daily GPI, Feb. 13). It also announced plans in June to acquire Gulfstream Resources Canada Ltd. (see Daily GPI, June 26). Along with the increased production from the UPR deal, Anadarko attributed its production growth to new output from two subsalt oil fields in the Gulf of Mexico, increased natural gas volumes in East and Central Texas, and new volumes from Berkley.

Apache’s earnings climbed in the second quarter also because of a mix of higher natural gas prices and more production, which was helped by its acquisitions in the past year. Second quarter earnings before a one-time charge were up 73%, reporting a profit of $241 million, or $1.85 a share, compared with $139 million, or $1.18 a share in the second quarter of 2000. First Call/Thomson Financial had predicted earnings to fall between $1.28 to $1.94, with an average of $1.72.

Apache took the one-time, $41 million charge against its earnings for the second quarter in Poland and China where the company has operations but is not yet producing oil or natural gas. Second quarter net income including the one-time charge was $201 million, or $1.55 per share. Revenue stood at $800 million, up from $486 million a year ago.

Apache said it has grown its business by buying up underutilized assets and working them more than the previous owners. In the first quarter, Apache closed on deals to purchase assets in Egypt from Repsol YPF of Spain, as well as Canadian assets bought in a deal with Shell Canada that were previously owned by New Zealand’s Fletcher Challenge Energy (see Daily GPI, March 7).

First Call analysts, which noted that the companies had surpassed second quarter forecasts, said they expect both of the Houston-based independents to post lower earnings through the rest of 2001 because of declining prices and a pullback in production activities.

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