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Anadarko Raises Capex, Guidance as U.S. Onshore Output Jumps 12%

The Wattenberg field, in combination with the Eagle Ford Shale and Permian Basin, drove Anadarko Petroleum Corp. in the first quarter to record volumes of 819,000 boe/d, with domestic oil volumes 10,000 b/d above the midpoint of guidance. U.S. onshore output was 12% higher than year-ago levels.

The big three onshore ventures carried the day, with output increasing by almost 69,000 boe/d from a year ago, CEO Al Walker said during an earnings conference call Tuesday.

The key was infrastructure expansion, particularly in the Wattenberg, where natural gas was constrained, preventing the oil wells from performing as they should, Walker said. However, even after flooding in Colorado last September and winter-related shut-ins into March, the Wattenberg's oil-rich sales volumes still climbed 14% year/year.

Contributions from the Permian's Wolfcamp Shale, and from the South Texas Eagle Ford, were enough to convince Anadarko to raise its capital expenditures (capex) for 2014 by $300 million to further accelerate onshore activity. Anadarko now expects oil and gas sales volumes to be about 3.5 million boe at the midpoint, which would represent about 8% growth over 2013 on a same-store-sales basis.

All of the volumes and the increase in spending are "largely driven by the onshore portfolio," said Walker.

"The record is being largely driven by the onshore portfolio," Walker said. Between January and March, domestic onshore, crude oil/condensate volumes climbed year/year to 125,000 b/d from 97,000, while liquids volumes fell to 77,000 b/d from 92,000. Average onshore natural gas sales volumes increased to 2,397 MMcf/d from 2,244 MMcf/d.

Including the U.S. offshore, crude oil production rose to 180,000 b/d from 159,000 b/d, while liquids output increased to 99,000 b/d from 88,000. Gas output was flat at 2,697 MMcf/d, versus 2,689 MMcf/d.

In the Wattenberg, liquids volumes increased by almost one-third (30%), or 19,000 b/d from 1Q2013, while the Eagle Ford contributed a 46% increase in liquids sales, more than half of which were oil. The Permian's Delaware Basin, including increased activity in the Wolfcamp Shale, provided a 6,000 b/d boost liquids sales volumes.

Anadarko's ability to increase capex and forecast higher volumes in 2014 follows its decision to "put Tronox behind us," Walker told analysts. The operator in April agreed to pay $5.15 billion to plaintiffs involved in the Tronox Inc. legacy operations regarding alleged actions by Kerr McGee Corp. before it merged with Anadarko in 2007 (see Daily GPI, April 3).

With Tronox issues going away, The Woodlands, TX-based producer now is able to view "opportunities to drive value," said the CEO. Since 2009 Anadarko has marketed almost $10 billion of its portfolio to better concentrate on its U.S. onshore and offshore portfolio, a long-term solution that has paid off, he noted. More changes may be in the offing for the opportunity-rich company, but for now, the management is reveling in what it's been able to do by repatriating some of its global capital.

In part on the Tronox settlement, Anadarko reported a first quarter loss of  $2.69 billion (minus $5.30/share), versus year-ago earnings of $460 million (91 cents). Excluding Tronox, derivative impacts and other one-time items, adjusted earnings rose to $1.26/share from $1.08. Revenue jumped by half from a year ago to $5.84 billion, in part on natural gas sales of $1.2 billion from $807 million.

Realized gas prices averaged $5.01/Mcf, compared with $3.33 in the year-ago period. Domestic oil prices year/year fell to $94.84/bbl from $97.32, while liquids were higher at $43.35 from $38.17.

In the deepwater Gulf of Mexico (GOM), where Anadarko is one of the leading operators, the company said production from the Lucius project is on track to begin production in the second half of the year. Eight rigs now are running in the GOM, with "two more on the way," Walker said. BP plc is running 11 today, a record. In 1Q2014, GOM gas volumes declined to 275 MMcf/d from 362 MMcf/d in the year-ago quarter, while oil production fell to 46,000 b/d from 50,000 b/d.

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