With plans to focus on Lower 48 exploration and production, Anadarko Petroleum Corp. said last week it has approved a 2004 capital spending budget of $2.6-2.9 billion compared to $2.8 billion in 2003.

The producer indicated a flexible spending strategy, “depending on cash flow,” akin to manufacturers’ “just in time” inventory. “Anadarko’s 2004 capital program offers us flexibility to pursue a wide range of opportunities based on actual cash flow, and we have a deep portfolio of projects in the event projected cash flows remain strong,” said CEO Jim Hackett.

The company said it has allocated $2.3-2.6 billion for worldwide exploration and development, of which 80% will be designated for development, leaving about 20% for exploration. The company expects to operate an average of about 70 drilling rigs in North America during 2004, compared with 57 during 2003.

“We’re directing capital to the areas that have shown the best performance and rate of return — primarily the Lower 48 onshore where we’ve achieved excellent results,” Hackett said. “Our objective is to add high-margin oil and gas reserves at better-than-average finding costs.

“Anadarko made a number of significant discoveries in 2003, and a top priority this year will be to delineate and develop those discoveries. Similarly, we plan to carry out a focused exploration program in North America, North Africa and the Middle East,” he added.

The company noted that it expects to spend about half of its exploration and development budget in the Lower 48 onshore to drill nearly 900 wells. The breakdown includes 80 wells in the Vernon field of North Louisiana, 125 wells in the Bossier play of East Texas, 75 wells in the Giddings and Brookeland fields of Central Texas, 80 wells in the Ozona field and the Haley tight gas play of West Texas, 125 wells in the Green River Basin of Wyoming, and 130 coalbed methane wells in the County Line, East Rock Springs and Atlantic Rim areas of Wyoming.

Anadarko added that it plans to spend about $600 million for projects in the Gulf of Mexico, including as many as six deepwater wells in the K2 and K2-North areas where first production is expected in 2005. Additionally, the company plans to begin installing sub-sea tie backs from these fields to the newly installed Marco Polo platform, which is expected to come online in mid-2004.

Anadarko said it expects to complete 2004 platform construction for the Tarantula discovery, which is expected to come online by early 2005 and eventually reach a peak net production of about 40 MMcf/d of gas and 8,000 b/d of oil.

In addition, nearly 20 conventional development wells are planned on the Outer Continental Shelf and an estimated seven exploration wells in the Gulf of Mexico.

In Canada, Anadarko said it expects to drill about 175 development and 40 exploration wells during 2004, with a spending plan that ranges from $375 million to nearly $425 million. The company expects to operate an average of about 10 drilling rigs for the year. In addition to its focus on the Fort Liard area of the southern Northwest Territories, the Adsett area of northeastern British Columbia, the British Columbia and Alberta foothills, and the Peace River Arch of northern Alberta, Anadarko said it anticipates drilling a significant exploration test in the Mackenzie Delta during the year.

The company estimates that production will increase 3-5% over 2003’s volumes of more than 30 mmboe. Growth is expected primarily from development projects in the Wild River deep-basin area and Northeast British Columbia.

The capital spending program includes about $300 million for capitalized interest and overhead. Based on the program, the company anticipates production volumes will be between 193-199 mmboe in 2004, an increase of 1-4% over 2003 production of 192 mmboe.

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