Anadarko Doubles Rockies E&P, Grows Canadian Business

Anadarko Petroleum Corp. is doubling up its Rocky Mountain exploration and production presence this year, announcing it would budget more than $131 million toward an aggressive strategy to find and develop new natural gas and coalbed methane sources. The Houston-based company also plans to grow its Canadian natural gas business, announcing plans to invest $380 million in drilling and development.

In the Rockies, E&P will target some of the nearly eight million acres picked up in the Union Pacific Resources merger last year (see NGI, July 31, 2000; April 10, 2000). Anadarko Canada Corp., meanwhile, has plans to drill 600 wells in western Canada, and production is estimated to be 74,000 net boe/d in 2001.

Anadarko's Rockies plans include drilling on more than 20 new exploratory and 130 development wells in Wyoming, Colorado and Utah. The company also will participate in 275-plus wells operated by other companies and conduct 3D seismic studies of more than 500 square miles.

"Because of the large acreage position that we hold in the region, Anadarko has certain economic advantages that can't be matched by our competitors," said COO John N. Seitz. He said the company would "deploy more resources" in the region because it views the Rockies "as one of the richest areas capable of providing new natural gas supplies for the U.S."

In its claim as the most active driller in North America, the Houston-based producer said it would be a "significant player in future drilling in the Rockies," where the National Petroleum Council estimates there is 388 Tcf of remaining recoverable reserves.

Coalbed methane production is the target in Utah and Wyoming, with the Helper and Drunkard's Wash fields in Utah banked with more than $20 million alone for E&P. Anadarko drilled 52 wells in the area last year, ramping up average daily production from the two fields there to 20 MMcf/d from 10 MMcf/d. By the end of this year, an additional 37 wells are expected to raise production to more than 40 MMcf/d, with further peaks realized in 2002.

Wyoming's coalbed methane reserves are part of seven different projects by Anadarko. In the Powder River Basin, 35 net wells will be added to the two drilled there last year, and capital spending is expected to top $10 million.

"We consider gas production from coalbed methane an increasingly important core play," said Seitz, but because the projects are complex, he expects it would take two years before production begins.

Conventional natural gas plays are the focus of three projects in Utah and Wyoming: the Greater Green River Basin, the Paleozoic reservoirs and the Overthrust/Subthrust plays. Here, Anadarko will spend $11.5 million on drilling and new lease acquisitions.

"Big discoveries were made in these plays 20 years ago using 2D seismic," said Seitz. This year, he said, the better 3D technology will "yield another round of success in the region."

In Wyoming's Greater Wamsutter field, 60 net wells are scheduled this year, and capital spending will double to more than $35 million. Production is expected to increase to 84 MMcf/d. Last year, Anadarko drilled 32 conventional gas wells there that produced an average 75 MMcf/d.

The aggressive growth strategy announced for Canada is part of the company's goal to grow its North American gas business, said Jim Emme, president of Anadarko Canada Corp. "Our primary focus will be in our major operating areas in Alberta, British Columbia and Saskatchewan where we plan to apply new advances in exploration and drilling technologies. In addition to expanding our existing core areas, we will also increase activity in our frontier plays in the Foothills, Mackenzie Delta and the East Coast within the next three years."

Anadarko's core western Canadian programs include the Moose Hills/Kehewin heavy oil program in northeastern Alberta, the Jean Marie gas play in northeast British Columbia and the Hatton shallow gas play in southwestern Saskatchewan. About C$265 million ($180 million) of the capital budget will go toward drilling development and exploratory wells.

A winter drilling program is expected to begin this month in the Hatton shallow gas play and another shallow gas program will startup next summer. In the coming months, Anadarko's overall Canadian activity is expected to peak at 14 active rigs, 10 of which will be in northeast British Columbia. By next year, the activity will increase to 22 rigs.

"The strategic combination of expanding existing plays in core areas and significant entry into the frontier plays in the Mackenzie Delta and East Coast of Canada will position Anadarko well for future growth," said Emme. Year-end 2000 proved reserves for Canada were 200 MM boe.

Carolyn Davis, Houston

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