Anadarko Petroleum bounces back as rumors of sale persist

Anadarko Petroleum is back on the track but continues to battle speculation over its future as a major exploration and production independent, in particular whether the company is for sale as many industry analysts suspect.

“There’s a lot of rumors out there that keep muddying our message,” Robert Allison, Anadarko’s chief executive officer, told analysts in an Oct. 31 conference call on 2003 third-quarter earnings. Nevertheless, he asserted, “we’re regaining the momentum we lost briefly.”

On the financial front, the big Houston independent reported a third-quarter profit of $274 million or $1.09 per share on revenues of $1.3 billion, up considerably from the $189 million or 74 cents per share on revenues of $938 million the company earned in the 2002 third quarter. Excluding special items, Anadarko made $1.46 per share, stomping Wall Street’s $1.20 consensus for the recent quarter.

“Our solid performance the past several quarters puts Anadarko on track to achieve record earnings this year,” Allison said, adding that Anadarko also has made “significant progress” in reducing overhead. Earlier this year the company announced plans to cut $100 million in annual expenses through the laying off of 15 percent of its workforce and closing two offices in Texas.

Ironically, Anadarko also told analysts last week that it was increasing capital spending for this year by $100 million to $2.8 billion due to higher commodity prices that drove cash flow from operations to $884 million in the third quarter, up 63 percent from $544 million in the year-ago period.

Anadarko also said it expects to improve its worldwide finding and development costs, which last year averaged a steep $10.52 per barrel of oil equivalent. For 2003, the company now expects F&D costs to fall below $7.50 per barrel and below previous guidance of $7.50 to $8.50 per barrel.

Anadarko also exhibited improvement on the production front, reporting a daily average during the third quarter of 541,000 barrels of oil equivalent, up about 3 percent from 526,000 barrels in the year-ago quarter.

Still a cloud of takeover speculation

In the company’s third-quarter conference call, Allison said Anadarko had retained independent auditor Netherland, Sewell & Associates to examine company oil and gas reserves, in an obvious move to diffuse accusations that Anadarko has pumped up reserve numbers to increase the company’s value.

In fact, the reason the company hired an independent auditor was to prove “we’re not an aggressive booker of reserves,” Allison said, adding that the auditor is “looking over our shoulder” and is a permanent member of the reserve audit board.

“They think we’re pretty darn conservative on our reserves,” Allison said. He said Netherland, Sewell is concentrating “on the larger and more difficult fields,” which consist of roughly 40 percent of Anadarko’s reserve base. The auditor’s findings are expected to be released in January, Allison said.

Allison, 64, also disclosed that Anadarko is working on a succession plan that includes replacing himself as the company’s head. However, he was elusive on details of the plan or when it might be announced. Allison, who has suffered from heart problems, has said he plans to retire before age 70.

He was reappointed to the position of chief executive officer earlier this year when John Seitz resigned under pressure from the board because of Anadarko’s languishing stock price.