Anadarko Sees Growth in Eagle Ford, Marcellus in First-Quarter 2015, Expects Up to $5.7 Billion in Capex for Year

Researched by Industrial Info Resources (Sugar Land, Texas)--Anadarko Petroleum Corporation (NYSE:APC) (Houston, Texas) became the latest oil giant to take a hit from plunging crude-oil prices and an oversupply in the market, as the company's sales were more than halved and net losses deepened in the first quarter of 2015. Still, Anadarko is optimistic about its current and near-term performance, as it delivered record quarter sales volumes, slashed costs, and reported better-than-expected well performances, particularly in the Wattenberg Field and Eagle Ford Shale. Net losses were reported to be $3.27 billion for the quarter, compared with $2.67 billion in first-quarter 2014.

Industrial Info is tracking more than $6 billion in active projects involving Anadarko, including the planned, $1.75 billion construction of an oil-shale mine and processing plant near Rock Springs, Wyoming. Anadarko is performing an economic evaluation for the 7.3 million-ton-per-year surface mine, with a 5.5 million-ton-per-year retorting processing plant. The facility is designed to produce 10,000 barrels per day of refinery-ready shale oil during the planned 10-year mine life. Schissler Engineering LLC (Littleton, Colorado) is serving as consultant.

Total revenues stood at $2.32 billion, a 60.28% decrease from the same period last year. In the U.S., Anadarko operated 29 rigs, on average, during the quarter, almost half of that in first-quarter 2014. Total sales volumes were up 23% and 11.4% in the Rockies and Southern & Appalachian regions, respectively, with liquids volumes in the latter up about 24% following an increase of nearly 20,000 barrels per day in the Eagle Ford Shale. In the Marcellus Shale, the company added more than 100 million cubic feet per day of additional compression.

Anadarko saw less success in its Gulf of Mexico and International & Frontier regions, where total sales volumes were down 9% and 15%, respectively.

Capital expenditures for the quarter totaled $1.82 billion, compared with $2.57 billion in first-quarter 2014, as the company continued to reduce operational costs for wells.

"Our drilling teams continue to improve efficiencies across the board, highlighted by the cycle time reductions in Wattenberg, which improved about 17% over the fourth quarter of last year," said Robert Walker, the chairman, president & chief executive officer of Anadarko, in a conference call. "And in the Eagle Ford Shale, we're drilling wells in less than seven days. In both fields, new horizontal well performance was outstanding, and the benefits we're getting from lower service costs, we're seeing significantly improved economics."

Capital expenditures are expected to total between $1.42 billion and $1.63 billion in the second quarter, and between $5.4 billion and $5.7 billion for full-year 2015, with executives indicated that the company plans to reduce capital spending on short-cycle activities amid collapsing commodity prices. Nonetheless, the company increased its full-year sales volume guidance to between 300 million and 306 million barrels of oil equivalent for the full year, following improved well performances and reduced downtime.

In the Rockies, Anadarko plans to begin operations at the 300 million-cubic-foot-per-day Phase II expansion of the Lancaster cryogenic gas plant by the middle of the year, and recently obtained a 20% interest in the 550-mile, 200,000-barrel-per-day Saddlehorn Pipeline, which is expected to begin transporting crude from the Denver-Jules Basin to Cushing, Oklahoma, in late 2016.

In the Gulf of Mexico, Anadarko brought its deepwater Lucius project online during the quarter and continues to ramp up production toward the planned 80,000 barrels per day by the end of the second quarter. The company also is planning a third appraisal well in the Shenandoah field, expected to spud in the second quarter.

In Alaska, drilling is expected to begin at the 15- to 20-well Alpine West satellite extension before the end of the quarter.

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