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Greater Grand Buttes, Powder River Lift Anadarko's Quarterly Output

Anadarko Petroleum Corp.'s retained properties lifted oil and natural gas production by 8% in the first three months of 2008 from a year ago, boosted by record gas output from the Greater Grand Buttes and the Powder River Basin.

The Houston-based independent reported 1Q2008 net income of $286 million (61 cents/share), compared with $237 million (50 cents) in 1Q2007. Special items reduced net income by $440 million (94 cents) after taxes. Cash flow from continuing operations reached $2.01 billion, and discretionary cash flow totaled $1.87 billion.

"Our balanced portfolio of properties continues to deliver significant organic growth and positive financial results," said CEO Jim Hackett. The company's operating performance "again exceeded the high end of our production expectations. As a result of this performance, record production in several U.S. onshore fields and our confidence in our portfolio of assets, we are reaffirming our full-year production guidance of 207 million to 212 million boe."

Production volumes in 1Q2008 totaled 53 million boe, ahead of Anadarko's guidance of 50-52 million boe. Total net U.S. gas volumes reached 2,138 MMcf/d, up from 2,020 MMcf/d in 1Q2007. The Lower 48 net volumes accounted for 1,534 MMcf/d, up from 1,498 MMcf/d a year earlier. In the Gulf of Mexico (GOM) net gas volumes reached 604 MMcf/d, ahead of the 522 MMcf/d a year earlier.

Reaffirming the full-year guidance, said Hackett, "takes into account the anticipated four to six weeks of shut-in production at Independence Hub, where we are working with our partners to repair the third-party-owned export pipeline."

Operations at the deepwater hub, which Anadarko operates, and the associated Independence Trail pipeline were suspended in early April after a leak was discovered in a flex joint in 85 feet of water (see NGI, April 14). Enterprise Products Partners LLC and Helix Energy Solutions Group Inc. are joint owners of the hub; Enterprise owns the pipeline. Enterprise expects the leak to be repaired this month (see NGI, May 5).

"Enterprise has given a clear indication of when it expects to complete the process," said Hackett. However, he and his management team declined to offer a "moment by moment" review of the repair activities because of the "significant impact it could have on gas prices."

Sales volumes of natural gas, crude oil and natural gas liquids in the quarter totaled 53 million boe, or 585,000 boe/d. Natural gas sales volumes averaged 2.14 Bcf/d at an average price of $6.17/Mcf, which included a loss on derivatives of $1.41/Mcf. Oil sales volumes averaged 190,000 b/d at an average price of $78.21/bbl, including a loss on derivatives of $14.80/bbl. Natural gas liquids sales volumes averaged 39,000 b/d at an average price of $56.42/bbl.

Anadarko's capital spending in the first three months of the year totaled $1.056 billion, with 74% ($782 million) dedicated to ongoing U.S. exploration and production activity. Most of the U.S. spending was in the Lower 48 states,with $307 million directed at Anadarko's Rockies operations and $189 million for the Southern Region. Anadarko also spent $255 million for it offshore program in the GOM and another $31 million for Alaska development.

Energy analysts with SunTrust Robinson Humphrey/the Gerdes Group (STRH) said Anadarko's production in 1Q2008 was 1% higher than forecast and earnings per share were $1.30 more than they expected.

"Preliminarily, we expect our '08 production expectation to increase 1% to roughly 2% above the high end of company guidance," wrote the STRH analysts in a note to clients. "Near-term deepwater Gulf of Mexico and Rocky Mountain coalbed methane catalysts should collectively add 7% of incremental production. Long-dated catalysts include projects in the deepwater Gulf of Mexico, deepwater West Africa and Algeria, which should collectively add 7% of incremental production."

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