Anadarko Increases Presence in Rocky Mountain Region

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Researched by Industrial Info Resources (Sugar Land, Texas)--Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas) is one of the largest independent oil and natural gas exploration and production companies in the world. In recent acquisitions, Anadarko has strengthened its presence in core areas of the Rocky Mountains region.

Anadarko's most recent acquisition is the Wattenberg Processing Plant from BP America Production Company (Houston, Texas), a subsidiary of BP plc (NYSE:BP) (London, England). The facility is located in Adams County in northeastern Colorado. This $575 million transaction is projected to close by mid-year. Anadarko currently owns a stake in the Wattenberg Plant, accounting for 70% of the natural gas processed at the plant. Upon closing the deal with BP, Anadarko will acquire 100% ownership and operating rights for the facility. The Wattenberg plant has the capacity to process approximately 195 million standard cubic feet per day (mmscfd) of natural gas and 15,000 barrels per day (BBL/d) of natural gas liquids and gas condensate.

Anadarko subsidiary Western Gas Partners LP (NYSE:WES) (The Woodlands) recently acquired the Platte Valley plant and a 10% ownership in the White Cliffs pipeline, both located in the Rocky Mountains region. Ownership in the pipeline is also shared with SemGroup Corporation (NYSE:SEMG) (Tulsa, Oklahoma), which owns 51%, Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) (34%) and Noble Energy Incorporated (NYSE:NBL) (Houston) (5%). The White Cliffs pipeline consists of a 526-mile crude oil pipeline that originates in Platteville, Colorado, and terminates in Cushing, Oklahoma. The pipeline has an approximate capacity of 30,000 BBL/d, which can be expanded to 50,000 BBL/d. At the point of origin, it has a 100,000-barrel storage terminal and a truck-loading facility with an additional 20,000 barrels of storage.

The Platte Valley plant, located in the Denver-Julesburg Basin (DJ Basin) in northeastern Colorado, was purchased for $303.3 million from EnCana Corporation (NYSE:ECA) (Calgary, Alberta). This was a strategic acquisition asset for Western Gas, as it is in close proximity to the company's existing assets.

Under the ownership of Encana, the Platte Valley plant was known as the Fort Lupton plant. After Western Gas purchased the plant, the plant was renamed to Platte Valley to avoid confusion between assets, as the company already owns a "Fort Lupton" facility across the street from the Platte Valley plant. Currently, there are no plans to combine the plants into one facility or group them under one name. However, the company may exercise this option in the near future.

The recently acquired Platte Valley plant has two cryogenic processing trains with a total capacity of 84 mmscfd, which is currently being expanded to 100 mmscfd. The plant also has two fractionation trains, with a total capacity of 7,900 BBL/d and two gathering systems, which are directly connected to the plant. The acquisition of Platte Valley allows for excellent growth potential, as it will allow increased drilling in the liquids-rich DJ Basin and Western Gas access to the horizontal Niobrara play. Attributing to the growth of the facility, Western Gas will also enter into a fee-based agreement with Encana to expand the existing gathering systems and processing capacity.

The Platte Valley acquisition was funded through Western Gas Partner's $800 million revolving credit facility. The revolving credit facility provides Western Gas with the financial flexibility to pursue expansion and acquisition opportunities. The facility will be used to refinance certain existing debt, make capital expenditures, acquire assets and other general corporate purposes. Both the acquisition and approval from lenders of the credit facility not only indicates the positive financial status of Western Gas, but also gives a window into the company's capital structure as a whole. It is an indication of the company's strategies and plans for the future in terms of determining how much capital it needs immediately and what will be spent on future expansions and acquisitions.

Concerning overall spending, Anadarko plans to increase capital spending in 2011 from $5.6 billion to $6.0 billion, compared to $5.17 billion last year. Half of the total will be focused on the company's U.S. onshore operations. Specifically, Anadarko plans to use the majority of the budget on expansion and exploration projects. Anadarko will use 40% of the budget to expand the company's base, and 25% will be spent on exploration projects, focusing on worldwide offshore and deep-water programs. Anadarko also plans to spend 15% for large-scale offshore investment projects, pending approval. In addition, 10% will be spent on gas shale development--notably the Eagle Ford and Marcellus shale plays--and 10% for will be used for midstream activities and other initiatives.

With the attainment of the Platte Valley Plant and realization of the $800 million revolving credit facility through Western Gas, Anadarko expects further growth in the greater DJ Basin, along with excellent midstream options for development in the Wattenberg field.

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