Anadarko 'for sale' sign awaits buyers

Potential buyers of company’s Canadian properties playing it coy

By Gary Park

For Petroleum News

It shapes up as the oil and gas auction of the year in Canada, though you’d be hard-pressed to determine the level of interest in production of 55,000 barrels of oil equivalent per day.

Despite the lack of assets on the block, potential buyers of Anadarko’s Canadian assets are playing it coy.

Canadian Natural Resources, EnCana, Devon Energy and Talisman Energy have shown little enthusiasm for entering the bidding.

Talisman Chief Executive Officer Jim Buckee conceded that the Anadarko package represents an “excellent asset fit … but at the same time it’s a very hot market.”

“We have no imperative to buy this. … We’re value conscious. It’s hard to see us buying and selling at the same time,” he said, referring to Talisman’s own plans to unload production of 15,000-20,000 boe per day in Western Canada and 10,000-20,000 boe per day around the world.

A better bet for Talisman is “buying back our own very cheap stock,” Buckee said.

Devon Chief Executive Officer Larry Nichols said his company is “very happy with the assets we have. It’s not like we need to do an acquisition to drive the growth of the company.”

Canadian Natural, while having the financial capacity to do a deal, has simply said a purchase would not be prudent given the opportunities currently on its plate.

Analysts said value C$5 billion

Of the Canadian production, 85 percent or 340 million cubic feet per day comes from strong gas operations in British Columbia, Alberta and Saskatchewan.

Land holdings total 5.54 million acres (2.89 million acres net) and proved reserves at the end of 2005 were 262 million boe, up 3.3 percent from 2004.

In 2005 Anadarko completed 40 exploratory wells with an 85 percent success rate and 108 development wells at a 98 percent success rate. Its 2006 capital budget was originally set at C$450 million.

Anadarko Chairman Jim Hackett has little doubt that the high demand for properties in Canada will see the assets attract valuations “significantly above those reflected in our stock price.”

The longer Anadarko waits to attract a single buyer through a share transaction the more analysts anticipate an asset sale, which would generate better returns for Anadarko, but also raise its tax bill.

Anadarko closes deal for Kerr-McGee

Houston-based Anadarko announced in June that it would buy Oklahoma City-based Kerr-McGee and pay $4.7 billion to buy Denver-based Western Gas Resources in a move to more than double its annual sales and gain a bigger footprint in the deepwater Gulf of Mexico and the Rockies.

“The Kerr-McGee transaction makes Anadarko one of the leading companies in the deepwater Gulf of Mexico and in the Rockies, two of the fastest-growing oil and natural gas producing regions in North America,” Anadarko Chairman Jim Hackett said in a statement.

Anadarko and Kerr-McGee have interests on Alaska’s North Slope. Anadarko is 22 percent owner of the Alpine field, the slope’s third-most-productive oil field today. With partner ConocoPhillips it is developing satellite fields near Alpine.

Anadarko also holds title to roughly 570,400 acres of state leases, plus federal leases in the National Petroleum Reserve-Alaska, and has exploration rights to Native lands in the gas-prone Brooks Range foothills area.

Kerr-McGee, a relative newcomer to Alaska with 29,093 state acres under lease, is operator of the offshore Nikaitchuq unit north of the Kuparuk River field, and appeared close to sanctioning the project for development before Anadarko’s June 23 merger announcement. The prospect is said to hold 100 million to 200 million barrels of oil that can be produced over about 30 years.

Western Gas has no Alaska property.

Anadarko’s spokesman in Alaska, Mark Hanley, told Petroleum News Aug. 16 it was still too early to know how the combined operations in Alaska will be handled.

Kerr-McGee stockholders will receive $70.50 per share in cash for each share of common stock. The deal calls for Kerr-McGee to be combined with Anadarko subsidiary APC Acquisitions Sub Inc. but for Kerr-McGee to be the surviving corporation under Anadarko. Shareholders of Western Gas will meet Aug. 23 in Denver to vote on that company’s proposed acquisition by Anadarko.