U.S. onshore and deepwater Gulf of Mexico (GOM) output helped Anadarko Petroleum Corp. post record sales volumes in the second quarter, but profits plunged following a $978 million write-down related to low natural gas prices on coalbed methane (CBM) properties.
Because of the write-downs, Anadarko recorded a net loss of $380 million (minus 76 cents/share) in 2Q2012 after earning $544 million ($1.08) a year earlier. Revenue fell 12% from a year ago to $3.2 billion.
Lifted by horizontal drilling gains in the Wattenberg field in northeast Colorado, as well as the Caesar/Tonga development in the deepwater GOM, total sales volumes jumped more than 8% year/year to 68 million boe, or 742,000 boe/d.
"We're experiencing what I would consider explosive growth at virtually every one of our significant U.S. onshore plays," CEO Al Walker said during a conference call. "That's a great spot to be in."
Oil sales volumes averaged 241,000 b/d in 2Q2012, which was 20,000 b/d higher than in 1Q2012. Natural gas liquids volumes averaged 77,000 b/d, while natural gas volumes averaged 2.54 Bcf/d.
Gas prices led Anadarko to cut its gas rig count in the Marcellus Shale and Greater Natural Buttes field. Gas drilling won't be a priority until prices "are between $4 and $5," said U.S. exploration chief Chuck Meloy.
The Wattenberg drilling program has the highest returns in the onshore portfolio today, he said. Nearly all of the drilling now is horizontal; by 2013 almost no vertical drilling is planned. Net sales volumes in Wattenberg averaged about 85,000 boe/d in 2Q2012. Current production is coming from about 75 horizontal wells. Seven rigs are operating, with three more slated to be added over the next few months.
Even though gas drilling has been curtailed, gas output in the Greater Natural Buttes and the Marcellus hit record sales volumes in 2Q2012, said Meloy. Anadarko also broke output records in the Eagle Ford Shale and East Texas horizontal programs.
"We're breaking records and seeing growth...and growing pains from that growth," said Meloy of the onshore program.
Anadarko also benefited in the latest quarter from the first full three months of production at Caesar/Tonga in the GOM deepwater, which averaged 40,000 boe/d gross from three wells. A fourth well is scheduled to be spud in the third quarter.
"Caesar/Tonga is doing phenomenal," said Meloy. "We expect the wells to stay on peak for quite some time."
Exploration-wise in the GOM, Anadarko announced a successful sidetrack appraisal well at the Heidelberg field in the Green Canyon area, "advancing the project closer to sanction, which is expected in early 2013." In the Mississippi Canyon area, the third successful appraisal well of the Vito discovery encountered 620 net feet of oil pay, leading the partnership to increase estimated recoverable resources by more than one-third to more than 300 million boe from a previous estimate of 200 million boe-plus.
The Woodlands, TX-based independent raised its sales volume guidance for 2012 to 261-265 million boe, up from an earlier forecast of 258-262 million boe.
"We are committed to operating within cash flow and selectively accelerating the value of longer-dated projects, as we did at the Gulf of Mexico Lucius development and the Salt Creek field in Wyoming during the quarter," said Walker. "The execution of our strategy is expected to continue to deliver industry-leading operating performance and exploration success, offering very competitive value-creation opportunities."
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