Anadarko Petroleum Corp. is prepared to implement “Plan B” if Colorado voters pass an anti-drilling measure next Tuesday, CEO Al Walker said during a conference call.

Walker with his management team on Wednesday weighed in on the implications of Proposition 112, which calls for expanding drilling site setbacks to 2,500 feet from 500 feet for residences and workplaces, as well as “vulnerable areas” that include playgrounds, permanent sports fields, amphitheaters, public parks, public open space, public drinking water sources, irrigation canals, reservoirs, lakes, rivers, streams and creeks.

Anadarko long has been one of Colorado’s biggest oil and gas producers, with most of its activity concentrated in the Denver-Julesburg (DJ) Basin. The polls appear to be tight, with no sure consensus about the outcome.

“We’ll see what the voters do between here and the next week,” Walker said. “There’s a lot of information floating around, and I’m not sure which is accurate and which is not. But we’ll know by this time next week where we are…

“The good news for us is, we’re not a one or two basin-centric company. Consequently, our ability to move capital around will still achieve the type of 10% to 14% compounded annual growth on oil volumes. It is not predicated on one asset. So we do have a lot of flexibility. We do have a plan that we will move to” if required.

Anadarko has drilled but uncompleted wells in the DJ, as well as approved permits in hand, said the CEO. “We have a pretty good path for what 2019 looks like,” but it could pivot more activity to an emerging Powder River Basin (PRB) position or pour more funds into the biggest prize today, the Permian Basin’s Delaware formation.

Any pivot still would allow Anadarko to hit its annual objective of 10-14% production growth in a $50/bbl oil price environment, Walker said.

“So we’ll see if we need to move to Plan B, or if the Plan A is really the one that will be imposed. I’m not sure that changes our capital per se year/year. It just might change where we allocate that capital on certain projects; we fully appreciate that. But as it relates to this company and what happens in particular with Proposition 112, it does not, from our estimation, affect the way in which we see ourselves next year being able to produce attractive growth in a $50 environment…”

As of Tuesday (Oct. 30), Colorado’s GOP voters had returned more mail-in ballots than Democrats by a tally of 57,695 to 55,450, according to Sanford C. Bernstein Ltd. “This is a flip from 2016 when Democrats outpaced Republicans by a significant margin (117,766 versus 94,499). That trend is supportive of the view that Prop 112 does not pass and Anadarko benefits on election eve,” analysts said.

Democrat Jared Polis is facing Republican Walker Stapleton to replace Democrat John Hickenlooper, who has been an energy industry supporter.

“In a ”no’ vote scenario for 112, I think we still have some work to do with whomever becomes governor-elect, along with the legislature and the regulatory process that the governor puts in place,” Walker said. “So you can understand fully today that we split out on the horizon even in a ”no’ scenario, where we and the governor elect and both respective parties have…some work to do.”

The Colorado ballot item has led to Anadarko delaying its 2019 investment plan, however. “Regardless of what happens, we feel confident we can continue to deliver our expected 2019 result given the flexibility of our portfolio.”

In the United States, Anadarko works in the DJ, Delaware and deepwater GOM, with a growing interest in the PRB. Overseas projects include a stake in a liquefied natural gas (LNG) export project on the drawing board in Mozambique.

However, most of Anadarko’s production and earnings are tied to the United States, where oil and gas volumes from the Lower 48 totaled 431,000 boe/d in 3Q2018, a sequential increase of 3% and up 22% year/year, adjusted for asset sales.

Onshore oil volumes, mostly from the Delaware and DJ, totaled 175,000 b/d, a 4% increase sequentially and 37% higher year/year. As more production was surging, margins/bbl improved by 58% year/year to $33.68/boe.

Cash flow was bolstered by the startup of another oil gathering and treating system in the Delaware, an integrated upstream and midstream approach that provides Anadarko with “a competitive advantage as we realize improved netback pricing for our product while also driving significant oil growth in the basin,” Walker said.

Across the Delaware and DJ, Anadarko ran on average 11 drilling rigs and seven completion crews between July and September. It also invested $76 million to build its PRB position.

The Delaware, where seven rigs were running, delivered record sales volumes at 120,000 boe/d, a 19% sequential increase, with oil production up 83% year/year. Twenty-four wells were spud and 50 were turned to sales. Volumes nearly doubled, averaging 70,000 b/d of oil, 24,000 b/d of natural gas liquids (NGL) and 152 MMcf/d of gas, versus a year ago, when volumes averaged 64,000 boe/d, with 38,000 b/d of oil, 10,000 b/d of NGLs and 93 MMcf/d of gas.

Although the Delaware is contributing copious production, the legacy DJ, where four rigs were in operation, still contributed the most quarterly volumes at an estimated 245,000 boe/d, including 96,000 b/d of oil, 56,000 b/d of NGLs and 606 MMcf/d of natural gas. In 3Q2017, DJ volumes totaled 232,000 boe/d, with 83,000 b/d of oil, 57,000 b/d of NGLs and 550 MMcf/d of gas. Anadarko spud 69 DJ wells in 3Q2018 and turned 78 to sales.

Where Anadarko is investing offers a guide of where it wants to expand. During 3Q2018, DJ upstream investments were $287 million, with $15 million dedicated to midstream operations. However, upstream investments in the Delaware totaled $359 million, with another $135 million kicked in for the midstream. And in the PRB, $134 million was invested into upstream operations, with $4 million dedicated for midstream.

Anadarko’s other top U.S. focus, GOM deepwater, averaged 144,000 boe/d total in 3Q2018, up 7% sequentially. It recorded a 6% sequential increase in oil at 121,000 b/d. The company achieved a monthly oil-rate record of more than 140,000 b/d in August, driven by minimal downtime and strong reservoir performance at Caesar Tonga, Marlin and Horn Mountain. GOM investments today are trained on development tiebacks to 10 operated floating facilities.

The international assets in Algeria and Ghana represent a relatively small portion of the portfolio, but the company also has a 26.5% working interest in an offshore LNG export project planned in Mozambique. During 3Q2018 the LNG marketing team progressed on converting nonbinding commitments to sale and purchase agreements for off-take volumes, which would support advancing to final investment decision, now scheduled by mid-2019.

Net income totaled $363 million (72 cents/share) in 3Q2018, reversing a year-ago loss of $699 million (minus $1.97). Net cash provided by operating activities was $1.65 billion, versus $639 million in 3Q2017. Total oil, natural gas liquids and natural gas revenue came in close to $3.7 billion from $2.5 billion a year ago. Operating income climbed to $979 million from a loss of $749 million.

Anadarko has updated its 2018 production guidance to a forecast of 13% oil growth and a 19% hike in return on cash flow to account for “limited days left in the year as well as acknowledging we did not need to seek significantly more oil growth over the balance of this year to achieve our annual objective,” Walker said. The changes also reflect the exact impact of recent hurricane-related downtime in the GOM and previous capital allocation adjustment.

Anadarko generated $1.65 billion of cash flow from operations during 3Q2018. Capital investments totaled about $1.075 billion, excluding Western Gas Partners LP and acquisitions in the PRB. The company ended the quarter with $1.9 billion of cash on hand after repurchasing an additional $500 million of outstanding shares.

Anadarko has now executed $3.5 billion of its expanded $4 billion share repurchase program begun a year ago, representing more than 10% of the shares outstanding. Using cash and anticipated free cash flow, the operator expects to complete the remaining $500 million of share repurchases by mid-2019 and to retire an additional $1.4 billion of debt.