Anadarko Plans Multibillion-Dollar Investment in Colorado Oil & Gas Field

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas) is planning a multi-year, multibillion-dollar grassroot investment in Colorado to increase production of oil and natural gas from the Wattenberg Field. This year, Anadarko will invest about $1 billion to produce oil and gas from the Wattenberg, and the company expects to continue that level of annual capital investment for several years, company spokesman Brian Cain told Industrial Info in an interview.

"The Wattenberg Field contains great quality resources," Cain said. "It is absolutely one of our flagship plays--not only in the U.S. onshore market, but in the world. We are getting fantastic results from the Niobrara and Codell plays in the Wattenberg. We expect to keep up this level of capital investment as long as our wells produce at the current level."

This year, Anadarko plans to drill about 170 wells in the Wattenberg Field, mainly in Weld County, north of Denver. The wells will cost an average of about $4.5 million each. In 2013, the company plans to drill about 270 wells in the Wattenberg, which represents a capital budget of about $1.2 billion. In 2014, Anadarko plans to spend about $1.35 billion to drill about 300 wells in the Wattenberg.

By planning to invest about $3.5 billion in Colorado between 2012 and 2014, Anadarko is more than doubling the $1.7 billion it invested between 2007 and 2011 to develop acreage and drill wells in that state. The Wattenberg Field lies in northeast Colorado, southwest Wyoming, and western Nebraska.

"This is an exciting time for us and for Colorado," Cain said. Anadarko's planned outlays to develop, drill and produce oil and gas from the Wattenberg Field do not include associated investments in midstream infrastructure, which typically averages 20% of the cost to drill a well, added Robin Hervig, another Anadarko spokesperson.

Anadarko estimated the Wattenberg Field contains between 1 billion and 1.5 billion barrels of oil equivalent. The company is producing more than 85,000 barrels of oil equivalent each day from the Wattenberg Field, said Al Walker, Anadarko's president and chief executive, at a Denver oil & gas conference on August 14, 2012. Anadarko has more than 2,000 well sites in that field, the infrastructure is in place, and the company's drilling program there is earning returns in excess of 100% at current oil and gas prices, he added.

Right now, West Texas Intermediate (WTI) crude oil sells for about $97 per barrel. Over the last 12 months, West Texas Intermediate prices have ranged between $76 and $110 per barrel, significantly above their historic average, pumping up profits for oil & gas companies and creating work for oilfield services companies.

On average, Walker said, each well in the Wattenberg contains 300,000 to 600,000 estimated, ultimately recoverable barrels of oil equivalent. Oil accounts for about 60% of Anadarko's production from the Wattenberg, while 30% is natural gas. Natural gas liquids account for about 10% of production volume from that field, Walker told the conference. In Anadarko's second-quarter earnings release, the company credits production from the Wattenberg as one factor behind record production volumes.

To accommodate its rapidly growing drilling program, Anadarko announced plans to move its midstream operations into a new 50,000-square-foot office building in Platteville, Colorado. Anadarko will become the anchor tenant of the 77-acre Platteville Energy Park. Currently, the company's Wattenberg midstream operations are housed in a 14,000-square-foot facility in Brighton, Colorado.

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