As it sells off some of its lower-margin properties to focus attention on plays with more profit potential, Anadarko Petroleum Corp. will spend more on finding and development (F&D) costs this year, executives said this week.

The Woodlands, TX-based producer has been under pressure for failing to meet its production targets for three straight years. In December, the company hired James Hackett, Devon Energy Corp.’s COO, to turn things around (see Daily GPI, Dec. 4, 2003). Hackett said Monday he would present investors with a new strategic plan for the independent in June.

During a presentation to analysts in New York City, Anadarko CFO James. R. Larson explained that 2004’s targeted F&D costs are $7 to $9/boe, which would be up to $2 higher than actual costs in 2003 of $6.95/boe. Operating expenses also are expected to increase to $4.45-4.75/boe from $4.32/boe in 2003.

Anadarko also is forecasting it will spend between $2.6-2.9 billion for capital expenditures, minus acquisitions, which would be approximately flat compared with its $2.6 billion spent in 2003. However, instead of spreading out its resources on exploration, the producer will concentrate on its current properties.

About 18% of the capital budget is set for exploration, down from 21% last year. Larson estimated that 60% of the amount will be required to keep production flat, 30% will be allocated to growth opportunities, and 10% will be used to maintain the current level of reserves.

This year, Anadarko plans to spend $1.6-1.7 billion on “maintenance” projects and another $0.7-0.9 billion on growth. Anadarko’s growth is expected to include the deepwater Gulf of Mexico, the deep basin and overthrust plays in the western United States, a variety of plays in Western Canada, and in both the North Slope and Foothills regions of Alaska. It also plans to continue exploring the tight-gas plays of East Texas and North Louisiana.

On average, Anadarko said it would operate about 70 drilling rigs in North America during 2004, compared with 57 during 2003.

Following the presentation, analysts at First Albany downgraded the company to “neutral” from “buy.” They also set the share price target to $54.

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