Anadarko Withstands Major Costs in 2011, Begins to See Biggest Investments Pay Off

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Researched by Industrial Info Resources (Sugar Land, Texas)--Anadarko Petroleum (NYSE:APC) (The Woodlands, Texas) reported solid production gains for fourth-quarter and full-year 2011 as the company saw record sales volumes and kept capital spending at the low end of its guidance range, while achieving an 80% success rate in offshore exploration and appraisal drilling programs. The company reported a net loss of $358 million for the quarter, compared with $111 million in net income in fourth-quarter 2010, and a net loss of $2.65 billion for the year, compared with net income of $761 million for full-year 2010.

However, Anadarko executives were quick to point out that results were much different when excluding exceptional losses and gains incurred during the quarter, which included more than $1 billion in impairments; costs related to a settlement concerning the Deepwater Horizon disaster in April 2010; unrealized gains on derivatives; losses on interest rate swaps; gains on divestitures; and changes in uncertain tax positions. Factoring out these items, the company had $423 million in income for the quarter, compared with $189 million in fourth-quarter 2010.

Total revenues stood at $3.84 billion for the quarter, a 42.66% increase from the same period in 2010, and $13.97 billion for the year, a 27.16% increase from 2010. Anadarko added 392 million barrels of oil equivalent (BOE) during the year, with estimated proved reserves now at 2.54 billion BOE. The proved reserves consist of about 55% natural gas and 45% liquids. Total 2011 sales volumes of natural gas, crude oil and natural gas liquids were a record 248 million BOE, or 680,000 BOE per day. Onshore operations saw a sales volume increase of more than 11%, with record volumes reported in the Bone Springs, Greater Natural Buttes and Wattenberg areas.

Capital expenditures stayed at the low end of guidance for the year, at $6.55 billion, compared with $5.17 billion in 2010. A $4 billion payment to settle the dispute concerning BP plc's (NYSE:BP) (London, England) Deepwater Horizon disaster was included in the cash flow from operations for fourth-quarter 2011.

Industrial Info is tracking more than $4.75 billion in Anadarko projects, including the $500 million Wattenberg Field Lease drilling program in Nunn, Colorado. The project involves drilling up to 500 new wells on existing lease blocks to depths of 5,200 to 8,500 feet and connecting the successful wells to a production gathering system. In Aurora, Colorado, the company is set to perform a $2.5 million turnaround at the 200 million-standard-cubic-feet-per-day Wattenberg natural gas processing plant in September this year, involving normal inspections and repairs.

"The most significant highlight of our 2011 exploration program was tripling the recoverable resource estimate of offshore Mozambique to a range of 15 to 30-plus trillion cubic feet," said Jim Hackett, the chairman and chief executive officer of Anadarko, in a conference call. "Our 2011 activities included four successful wells and further confirmation of the connectivity and scope of this massive natural gas accumulation, which is shaping up to be one of the most significant natural gas discoveries in the last decade."

All four of the company's major segments reported gains in revenues when compared to the same period in 2010, and all but one reported gains for the year:

• The Natural Gas segment reported revenues of $736 million for the quarter, a 1.1% increase from fourth-quarter 2010, and $3.3 billion for the full year, a 3.51% decrease from 2010.
• The Oil and Condensate segment reported revenues of $2.12 billion for the quarter, a 46.08% increase from fourth-quarter 2010, and $8.07 billion for the full year, a 44.35% increase from 2010.
• The Natural-Gas Liquids segment reported revenues of $382 million for the quarter, a 46.36% increase from fourth-quarter 2010, and $1.46 billion for the full year, a 46.64% increase from 2010.
• The Gathering, Processing and Marketing segment reported revenues of $298 million for the quarter, a 56.84% increase from fourth-quarter 2010, and $1.05 billion for the full year, a 25.81% increase from 2010.

Anadarko is making rapid progress in the Gulf of Mexico, where it is back on track with an active deepwater exploration and appraisal program and is pushing forward with the Lucius project, which holds an estimated 300 million BOE and is anticipated to begin producing in 2014. The company also is close to tying its Cheyenne East prospect to its Independence Hub platform, which handles flow from several Gulf fields, with production expected before the end of first-quarter 2012. Internationally, Anadarko is nearing completion on the El Merk project in Algeria, which is expected to see significant oil volumes by the end of the year.

"We made significant progress on our mega-projects, all of which are oil-focused," Hackett said in the conference call. "In the Gulf of Mexico, we are currently installing the production risers at Caesar/Tonga, and we continue to expect first oil sales by mid-2012."

For more information, visit Industrial Info's North American Oil and Gas Production Project Database.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.