Anadarko Petroleum Corp. is gaining Gulf of Mexico sub-saltexploration rights through an agreement with Texaco Exploration andProduction Inc. Anadarko also just announced significantly improvedsecond quarter results and a nearly 60% boost to its currentcapital spending program.
Anadarko will acquire rights to future exploration in certaindepths on 82 lease blocks in which Texaco has interests. The tractsare located offshore Louisiana, where water depths range from 85 to2,400 feet. The 82 blocks make up about 400,000 gross acres.
“The agreement with Texaco represents an important addition toAnadarko’s sub-salt exploration portfolio,” said John N. Seitz,Anadarko president. “This relationship doubles our acreage in thesub-salt trend, which was one of our major objectives for 1999. Weare planning to move aggressively on these blocks with seismic anddrilling activities. With this agreement, we now have more runningroom in this very successful and economic play.”
Anadarko’s working interests in new prospects that it identifiesand drills will vary depending on current Texaco partners. As partof the agreement, Texaco has the option to retain a workinginterest in each exploratory prospect by participating in theinitial exploration well drilled by Anadarko. Texaco has an averageworking interest of 50% in the 82 blocks, which are subject to theagreement. Financial terms of the agreement were not disclosed. Thetransaction is expected to close by the end of July.
“This agreement allows Texaco to increase its explorationactivity in the Gulf of Mexico and leverage the assessment of thissub-salt acreage earlier than anticipated,” said Matt Cabell, vicepresident for exploration of Texaco’s Gulf unit.
Encouraged by improved commodity prices and cost-cuttinginitiatives, Anadarko upped its capital spending budget by nearly60% from $410 million to $650 million.
“We plan to accelerate activity in both exploration anddevelopment-primarily gas development projects,” said Robert J.Allison Jr., Anadarko CEO.
“We now expect that our production volumes in 1999 will be atleast level with 1998. However, today’s higher commodity pricesshould give us significantly better financial results thisyear-cash flow could be 20% higher than 1998. And we’re movingquickly to reinvest these dollars in projects that will begin tocontribute to Anadarko’s production volumes over the next severalmonths.”
Anadarko’s second quarter gas production averaged 461 MMcf/d,essentially level with the same period in 1998. The company’swellhead price for gas was $1.95/Mcf for the second quarter of1999, off slightly from $1.98/Mcf a year ago. Anadarko reported netincome of $8 million on $161.5 million of revenues in 2Q99,compared to net income of $2.7 million on $137.6 million ofrevenues in 2Q98.
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