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THE EXPLORERS 2004: Hanley: Alaska a growth area for Anadarko
Ray Tyson Petroleum News
Anadarko Petroleum says Alaska is a growth area for the big exploration and production independent, despite a companywide realignment of E&P activities that spawned rumors of a pull back on the North Slope.
The fact Anadarko Alaska was not included in a $2.5 billion property divestiture program in North America alone should demonstrate that the Houston-based company is not in an asset-cutting mode in Alaska, Anadarko Alaska spokesman Mark Hanley said in an October 2004 interview with Petroleum News.
“We’re not divesting of anything in Alaska and that should indicate to you that there is an interest in staying here,” Hanley asserted. “In fact, since that decision was made we participated in at least one lease sale, and I suspect you’ll see us participating in more lease sales.”
Fueling the rumor was an 80 percent reduction in Anadarko’s Anchorage staff, followed by a strong indication from the company that it would not be drilling a well of its own on the slope this winter.
“Because we were not drilling a well this winter, they weren’t going to let these guys just sit up here and not have anything to do,” Hanley explained. “I fully expect that if we get a program going that we will see some people up here again.”
However, as winter approached, Anadarko was still in the process of devising a multi-year drilling program and specifically looking for a partner to help shoulder the cost of exploring its Jacob’s Ladder oil prospect. Hanley said it was just too late in the year to plan for any well this winter.
Working on partners and strategies “We’re working right now on partners and strategies,” he added, “and I would say the hope is to be able to start the program the following winter, but we’ll see where that goes.”
Both Hanley and Jim Hackett, Anadarko’s chief executive officer, made it clear that the company intends to fulfill its drilling and operational obligations on acreage shared and operated by ConocoPhillips, Anadarko’s partner for more than a decade on the North Slope. However, the commitment comes with a slightly new twist.
“We decided not to double up on G&A (general and administrative) costs to help them,” Hackett told analysts at the Lehman Brothers energy conference in September 2004. “We’ve decided to let them do that. In Alaska, ConocoPhillips … has looked out for our interests. We’ve proved it over the years.”
That means Anadarko is doing “a little less double checking” or “looking over their shoulder,” particularly on drilling operations, Hanley explained.
“But we still have our technical people doing work alongside them (in Houston) on the exploration side, looking at prospects and evaluating them,” he added.
Waiting for gasline On the natural gas side, Anadarko’s decision to wait for regulatory and construction approvals for a major pipeline to carry North Slope gas to the U.S. Lower 48 before launching a drilling program on its North Slope Foothills acreage also has fueled speculation over the company’s future in Alaska.
“It’s more of a strategic hold and see position,” Hanley said. “We think we have some good potential. But obviously, until we see a gas line, it’s pretty hard to invest much more money in going out there and drilling prospects.”
The sudden departure of Anadarko’s former chief executive officer, John Seitz, in March 2003 brought the company’s troubles to a boil. Seitz reportedly was pressured by the board of directors to resign because of Anadarko’s sagging stock price, which had plummeted from a peak of $76 per share to the $40 per share range. The company’s stock has since rebounded into the $70 per share range.
Seitz was replaced temporarily by chairman and former CEO Robert Allison, who over the years played a leading role in transforming Anadarko into one of North America’s largest and most respected exploration and production companies.
However, analysts had come to be highly critical of Anadarko’s high cost structure and lagging production and even questioned the accuracy of the company’s reported oil and gas reserves.
While conceding that Anadarko had some “real issues to deal with,” Allison lashed out at the critics, saying the company’s strong balance sheet “flies in the face of recent reports” and the “unjustifiable negativity out there.”
Company under a cloud of takeover speculation Still, Anadarko was squirming beneath a cloud of takeover speculation, which began mushrooming when the company started cutting drilling rigs and laying off workers, in what appeared to be a financial dressing up of the company for a possible sale.
Market sources said the Houston-based independent had opened a data room in Houston to prospective buyers that included Shell, ConocoPhillips, ChevronTexaco, Eni’s Agip, Talisman Energy, EnCana and Apache.
But Anadarko has taken steps to improve the company’s performance and image. In a well publicized effort to save $100 million a year, Anadarko last year cut 15 percent of its workforce and closed two offices in Texas. The Alaska staff was reduced from 10 to two.
Allison conceded that the company was top heavy with employees who were not directly associated with finding hydrocarbons. He said “layers of management” were peeled back so exploration and production managers could report to him directly.
The company also began working on reducing its long-term debt and high finding and development costs, as well as cleaning up the company’s portfolio of high-cost and non-core oil and gas properties.
Rumors about the company’s future appeared to subside around the time Allison announced his retirement in December 2003 and Hackett was named the new president and chief executive officer of Anadarko.
Hackett brought a solid reputation and considerable experience to Anadarko. He came directly from the largest U.S.-based independent of them all, Devon Energy, where he served as president and chief operating officer, following the merger of Devon and Ocean Energy. Hackett also served as president and CEO of Ocean following its merger with Seagull Energy in 1999.
Hackett was at the forefront of two major developments this year designed to improve the company’s performance: ridding Anadarko of non-core properties and diversifying into territory unfamiliar to most exploration and production independents, the liquefied natural gas business.
LNG home in Canada In August, Anadarko announced that it was acquiring Canada’s Access Northeast Energy and its rights to build an LNG receiving terminal on the coast of Nova Scotia.
The deal will provide Anadarko with a home for its own future overseas natural gas production from Algeria and Qatar, while keeping the company on the leading edge of one of the fastest-growing segments in industry.
By the middle of September, Anadarko also had signed agreements to sell roughly $2.3 billion worth of unwanted oil and gas properties in the Gulf of Mexico, onshore Lower 48 and Canada, bringing the company close to its $2.5 billion divestiture goal. Anadarko said it would use the proceeds to reduce debt and to repurchase stock. The board of directors authorized the buy back of up to $2 billion of Anadarko common stock.
Anadarko’s new strategy largely entails using profits from proven “foundation assets” onshore U.S. and Canada to fuel “growth platforms” in deepwater Gulf of Mexico, Algeria and Qatar, the company said.
“The divestiture of non-strategic properties allows Anadarko to focus on areas that have consistently produced the best results for us, as well as new growth areas,” Hackett added.
Although Alaska was not included in Anadarko’s divestiture package, Hackett made no mention of the North Slope being a growth area for the company.
“Frankly, if we weren’t interested in Alaska we would have divested as part of the whole divestiture,” Hanley said. “So I think (this) should give you a signal that after having gone through a full review of all the company’s assets, we are considered a growth asset within the company. That alone should suggest to you that it’s something we want to develop.”
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