Anadarko Petroleum Corp. reported a 38% hike in quarterly income Friday, with stronger-than-expected gains in oil and natural gas sales. Net income rose to $405 million ($1.64/share), up from $294 million ($1.17) in 4Q2003.

Without some one-time items, which included legal settlements and restructuring charges, Anadarko’s earnings would have been $2.04/share, well above the Thomson First Call forecast of $1.86/share.

“The groundwork has been laid,” said CEO Jim Hackett, who presided over a conference call with analysts. He said Anadarko had performed “exceptionally well in 2004 — a period in which we have reshaped the entire company and changed the way we think and work in order to focus on improving returns for shareholders and positioning ourselves for sustainable, profitable growth.”

Hackett noted the “outstanding” contributions from the Texas, Louisiana and other core onshore properties. “In addition, we made discoveries and advanced development projects in the deepwater Gulf of Mexico and made progress on our international growth strategy. I believe Anadarko is well prepared for the future.”

Revenue rose 25% to $1.6 billion from $1.28 billion a year ago, with a 23% growth in gas sales, and 28% rise in oil and condensate sales.

Quarterly sales volumes totaled 46 MMboe, compared with 49 MMboe in 4Q2003. Property divestitures prior to the end of the year reduced Anadarko’s 4Q2004 production by about 5 MMboe.

Sales volumes of natural gas, crude oil and natural gas liquids for 2004 totaled 190 MMboe, compared with volumes of 192 MMboe a year earlier. Assuming the divested properties were owned by Anadarko for the entire year, the company believes 2004 volumes would have been approximately 196 MMboe.

“This year, we made some tough decisions to implement a new strategy for Anadarko,” said Hackett. “We completed over $3 billion in pre-tax asset sales and refocused our efforts into areas where we have a competitive advantage: exploration and unconventional resource exploitation on a global basis. The divested assets represent about 11% of 2003 year-end reserves and about 20% of 2004 annual production.”

Hackett said proceeds from asset sales were used primarily to repurchase $1.3 billion, or 20.3 million shares, of outstanding common stock and to retire approximately $1.2 billion in debt. In addition, Anadarko ended the year with nearly $900 million of cash.

Proved reserves totaled 14.2 Tcfe at year-end 2004. Anadarko added 335 MMboe in proved reserves during 2004, the twenty-third consecutive year that it has more than replaced annual production with new proved reserves. Oil and gas capital expenditures totaled $2.99 billion in 2004.

Reserve additions in 2004 came primarily from fields in the North Louisiana Vernon, East Texas Bossier, West Texas Haley, Wyoming Salt Creek and Canadian Wild River areas, as well as the K2, K2 North, Spiderman and Jubilee deepwater discoveries in the Gulf of Mexico.

Anadarko’s proved reserves remain nearly balanced between natural gas (53%) and liquids (crude oil, condensate and natural gas liquids) (47%). Proved reserves of oil and other liquids totaled 1.11 billion bbl at year-end 2004. Proved natural gas reserves at year-end 2004 totaled 7.5 Tcf.

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