Anadarko Petroleum Corp. has laid down around 30% of its U.S. onshore rigs since the end of 2008, the company said Tuesday.

Faced with sustained lower natural gas and oil prices, the Houston-based management team is working with its service companies to reduce fees, CEO Jim Hackett said. “Material reductions” should be evident in the next two to three months, he told financial analysts during a conference call to discuss quarterly results.

Hackett was joined in the call by other managers, including COO Karl Kurz, who explained that service costs were not in sync with the fall in commodity prices, so the company took matters into its own hands.

“We are living in a 2008 service cost world with 2004 commodity prices,” Kurz said.

U.S. exploration and production companies began to curtail capital expenditures (capex) last fall as commodity prices slumped. U.S. onshore drilling has taken a severe hit, and some energy analysts expect more rigs to be laid down (see Daily GPI, Feb. 3).

Anadarko executives were hesitant about providing specific capex plans for 2009; the company has scheduled another conference call for next Wednesday (Feb. 11) to detail its guidance for the year. However, there were enough indications that spending will be down.

Previously Anadarko had estimated that this year’s capex would match 2008 levels, Hackett reminded analysts. “We have obviously dialed that down meaningfully,” he said.

According to Anadarko’s 4Q2008 operations report, which was posted on its website, the company had 58 rigs running in the U.S. onshore in the last three months of 2008 — one less rig than in 3Q2008. Hackett said Tuesday Anadarko now has “about 40” rigs in operation in the U.S. onshore.

“We’ve dropped pretty significantly from the fourth quarter,” said Hackett. “There are several reasons. In particular, some of the rigs only work during the winter months…”

The Rockies region, which drives the company’s U.S. production growth, had 33 rigs in operation at the end of 2008. Anadarko’s southern operations, which include properties spread across Texas, Louisiana and the Midcontinent, ran 25 rigs in the period. Six additional rigs were operating in the Gulf of Mexico.

Besides laying down rigs, Anadarko also has delayed completion of some of its wells as it waits for service costs to come down, said Hackett. Asked in what regions the delays were taking place, he answered, “We’re looking at it across the board.”

There is good news, however. Asked whether obtaining drilling permits in some areas of the Rockies has been a concern, Kurz said it is not as difficult as some may imagine.

“Obviously it could change rapidly up there,” Kurz said of the Rockies drilling regulations. However, “for 2009 and 2010, we will keep the program as designed. We will be reducing capital spending in all areas…and in the Rockies, the ability to get permits approved is still a challenge, but not as big a challenge as it was before…In this political situation, it’s counterintuitive, but as natural gas becomes the preferred fuel, permitting gets better over time as opposed to worse…”

Even with fewer rigs in operation, Anadarko’s onshore U.S. gas projects still will achieve a 10% return on prices $5/MMBtu, the CEO said. Around 20% of Anadarko’s 2009 capex is to be dedicated to “major projects;” 20% will be spent on exploration.

Anadarko’s U.S. natural gas volumes in the last three months of 2008 totaled 202 Bcf, compared with 185 Bcf for the same period of 2007. On average the company produced 2.2 Bcf/d in 4Q2008, versus 2.01 Bcf/d in 4Q2007. The producer added 290 MMboe of proved reserves in the final period, before the effects of price revisions. It also spent around $4.78 billion on capex in the last quarter.

One-time hedging gains lifted Anadarko’s net profit in 4Q2008 to $824 million ($1.79/share), compared with $264 million (56 cents) in 4Q2007. Minus the one-time gains, Anadarko’s net profit was well below the same period a year ago, reaching $69 million (15 cents/share) versus $264 million (56 cents).

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