The oil spill in the Gulf of Mexico has “complicated” the passage of an energy bill because one of its “central features” was to be offshore access, Anadarko Petroleum Corp. CEO Jim Hackett said Tuesday.
“I think in the current preliminary environment, people will be treading lightly,” Hackett told financial analysts during a conference call (see related story). However, he said offshore access “was not something that was going to be provided anyway.”
However, if energy legislation were to be enacted this year, “it wasn’t going to change our strong strategy or tactics for the next four or five years,” said the CEO.
The climate change legislation, he said, could help the natural gas industry. The legislation originally was put forth by Sens. John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman (I-CT), and is also known as the KGL bill.
“We still were trying to press for that [climate change bill] prior to Sen. Graham walking away from the bill,” Hackett said (see Daily GPI, April 27). “We now hear that Sen. [Harry] Reid may put it back up for consideration.”
The “politics of the re-election process and politics around the current environment” make the outcome of legislation tough to predict.
“A lot depends on how quickly we get this situation under control in the Gulf,” he said. “At some point it becomes more difficult to get KGL done…But I’m guessing, because it depends on whether you can get Graham back in there. If Sen. Graham comes back in, it changes the dynamic again.”
Hackett is convinced “that there are ways to get natural gas as the preferred fuel” for the United States, and the climate bill would have been a concrete start. “For the first time, we saw proposed legislation — at least our reading of it or understanding of it — that it was going to be very positive” for natural gas.
“We still need a good energy policy in this country. We don’t seem to be able to get it together.”
For now the Marcellus Shale is the only onshore area in the United States where Anadarko is “prudently” increasing its natural gas exploration and development this year, Hackett explained.
In February an affiliate of Mitsui & Co. Ltd. paid Anadarko $1.4 billion to acquire a 32.5% stake in its 300,000-plus shale acres (see Daily GPI, Feb. 17). Anadarko currently is producing about 120 MMcf/d gross from 30 wells in the Marcellus play.
“We’re proceeding [in the Marcellus] as if we were on our own but we have the benefit of the economics…in terms of the carry” in the joint venture with Mitsui, Hackett said. The reason is economics, he said. Anadarko’s “all-in” costs to drill and produce in the Marcellus play are about $3/Mcf.
“We would not necessarily be as aggressive on our own but that’s each company’s choice to do what they need to do, somewhat determined by lease exploration terms,” the CEO explained. “In our case, it’s very favorable leases, but we are not using the carry as a reason to go crazy, if you will.
“We think it’s things you need to do to get ready when gas prices recover.”
The U.S. gas storage inventory “is shaping up to be like last year, which caused us to hedge a fair portion of 2010 [gas],” said Hackett. “The difference is, we did that last year thinking there were going to be tremendous inflows of LNG [liquefied natural gas] into the U.S. We haven’t seen enough of that this year to date.
“At the end of the day, all of us need to make sure we’re putting the right pressure to the industry to say that, you know, ‘the next piece of growth is not as important as getting returns.’ There may be…plays like Marcellus that work really well at low prices…[but] that’s also part of what causes the issues.
Anadarko and its gas producing peers have to “show the discipline, and then it will correct itself. We’ll be in a good place.”
The Houston-based producer late Monday reported net profit of $716 million ($1.43/share) on operating cash flow of $1.3 billion and discretionary cash flow of $1.53 billion. In the year-ago period Anadarko lost $338 million (minus 73 cents/share) on operation cash flow of $533 million and discretionary cash flow of $732 million.
Sales volumes of natural gas, crude oil and natural gas liquids (NGL) in 1Q2010 totaled 62 million boe, 686,000 boe/d. Gas sales volumes, all from U.S. assets, averaged around 2.4 Bcf/d, slightly ahead of 2.3 Bcf/d in 1Q2009. U.S. oil sales volumes averaged 139,000 b/d versus 103,000 b/d, and NGL sales volumes averaged 65,000 b/d versus 40,000 b/d in 1Q2009.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |