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Anadarko Breaks Production Records in Wattenberg, Eagle Ford

Anadarko Petroleum Corp. achieved record U.S. onshore sales volumes in the final three months of 2013, delivering 609,000 boe/d, including better-than-expected oil output from Colorado's Wattenberg field and Eagle Ford Shale, and from higher natural gas growth in the Haynesville and Marcellus shales.

Before the effects of price revisions, Anadarko achieved a 194% reserve replacement ratio in 2013 from 2012, CEO Al Walker said.

"In 2013, Anadarko built upon its multi-year track record of delivering consistent results, with an approximate 7% year-over-year increase in daily sales volumes...I'm extraordinarily proud of the ability and focus demonstrated by our employees and the resiliency of our portfolio in meeting or exceeding our 2013 goals. I'm confident we'll continue to deliver differentiating results in 2014 and longer term through our focus on value acceleration, margin expansion and investment returns."

Full-year sales volumes of natural gas, crude oil and natural gas liquids (NGL) totaled a record 285 million boe, or an average of 781,000 boe/d, representing an increase of about 7% from 2012. However, on softer commodity prices, 4Q2013 sales volumes slipped to $3.34 billion from $3.41 billion. Production for 4Q2013 totaled 74 million boe, or an average of 806,000 boe/d.

Estimated proved reserves at the end of 2013 totaled 2.79 billion boe, with 72% proved developed. Proved reserves are 55% weighted to natural gas and 45% to liquids.

The Lower 48 operations were a standout, particularly in the Rockies during the final quarter. Sales volumes rose to 56 million boe, which included 109,000 b/d of oil, 94,000 b/d of natural gas liquids (NGL) and 2,435 MMcf/d of gas. In 4Q2012, volumes included 90,000 b/d of oil, 77,000 b/d of NGL and 2,273 MMcf/d of gas.

Anadarko has a lot of capital riding in the Wattenberg field, and its contribution was evident. Including the Wattenberg, the entire Rockies division's sales volumes rose 3% in 4Q2013 to 336,200 boe/d, with oil volumes jumping 26% from a year earlier. On average, there were 25 rigs running over the three-month period, with 198 wells drilled.

Digging deeper, the Wattenberg alone averaged 116,000 boe/d in net sales for the period, up 15% sequentially. Thirteen horizontal rigs drilled a total of 93 wells. Oil output soared to 51,000 b/d, compared with 40,000 b/d in 4Q2012, while NGL production climbed to 19,000 b/d from 16,000 b/d. Only gas production fell to 278 MMcf/d from 287 MMcf/d.

Anadarko management has no plans to slow the company’s Wattenberg contributions. About 50,000 net acres were added in 4Q2013 to the core of the play, which increased output by about 6,500 boe/d.

Expansions also are under way in the field, with construction at the Lancaster cryogenic plant and Front Range pipeline scheduled to be online before the end of March. In addition, crude oil export capacity is being expanded with the Plains Rail Terminal, which began operating in November. As well, the looping of the White Cliffs pipe is set for completion by mid-year.

The gains across the Rockies came despite cold weather in December, which resulted in freeze-offs, management said. Cold weather impacts also may cut into output in 1Q2014.

The Southern and Appalachian regions, which extend across the Midcontinent, into Texas and Louisiana, and within the Appalachian Basin, also delivered record sales volumes in 4Q2013. Production came in about 24% higher year/year at 274,000 boe/d, with 31 rigs on averaging running and 158 wells spud.

Interestingly, gas volumes carried the weight for the Southern/Appalachia operations, climbing to 1,126 MMcf/d from 906 MMcf/d in 4Q2012. Appalachian volumes rose to 565 MMcf/d from 388 MMcf/d, while in the East Texas/North Louisiana unit -- Haynesville Shale -- volumes increased to 233 MMcf/d from 205 MMcf/d.

Six rigs were running in the Haynesville during the period, and first sales were achieved from 10 wells. In the Marcellus Shale, two operated rigs ran in the final period and 13 wells were spud. However, to focus capital on the "highest-return projects," that is, oil, one Marcellus rig is scheduled to be released before the end of March.

Oil remains the top priority. In addition to gains in the Wattenberg, the Eagle Ford saw 88 wells spud with 10 rigs running. The Delaware Basin's Wolfcamp Shale, within the Permian Basin averaged five rigs in 4Q2013. To date, Anadarko has drilled 29 wells in the Wolfcamp, and it now is running seven rigs in the play.

U.S. onshore sales volumes at Anadarko now have risen every year since 2010, when it produced on average 391,000 boe/d. Management credited some of the gains to capital efficiencies, which in the final quarter from a year earlier reduced spud-to-release times in the Eagle Ford to 8.5 days from 10.5, and in the Wattenberg to 9.4 days from 12.4.

Total U.S. sales volumes, including the Gulf of Mexico and overseas, were 65 million boe, versus 61 million boe a year earlier.

Partly on litigation costs for the period, Anadarko reported a net loss of $770 million (minus $1.53/share) in 4Q2013, compared with earnings of $203 million (40 cents) in 4Q2012. Adjusted net income for the quarter was $375 million (74 cents/share), down from $457 million (91 cents) a year ago. A Tronox-related loss accrual related to its merger with Kerr-McGee Corp. in 2006 decreased net income in 4Q2013 by about $1.145 billion (minus $2.27/share). For the year, net income was $941 million ($1.58/share), compared with $2.24 billion in 2012.

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