Anadarko shifts spending to buy more company stock

Ray Tyson

Big exploration and production independent Anadarko Petroleum says it plans to use about $150 million to $200 million previously earmarked for drilling and related activities in 2005 to repurchase additional shares of Anadarko common stock.

Consequently, the company said it reduced its 2005 capital spending budget to a new range of $2.7 billion to $3 billion.

“We expect to continue an active buy-back program in 2005, first utilizing the monies from the reduced capital program,” Jim Hackett, Anadarko’s chief executive officer, said Jan. 7.

In addition, he said Anadarko plans to use about half of free cash flow available from operations in 2005 to buy additional company stock.

As part of an on-going restructuring of the company, Anadarko repurchased about $1.3 billion of its stock in 2004 in an effort to help strengthen the company’s financial position. It also sold $3.3 billion last year in non-core properties, $1.2 billion of which was used to reduce company debt.

“From time to time, we will re-evaluate our capital allocation, make changes and refine expectations,” Hackett said. “That is one of the key attributes to our financial and operating strategy.

Because of the reduced drilling budget, Anadarko’s original production target for 2005 has been lowered by 1 million barrels of oil equivalent to a range of 159 million to 164 million barrels for the year.

“However, planned stock repurchases should more than offset that reduction on a per share basis,” Hackett said, adding that even with the reduced drilling budget Anadarko expects to meet its growth target of 7 to 11 percent in 2005.

He noted that since Anadarko announced its 2005 capital budget in November, oil and natural gas prices have fallen, while drilling and other service costs have continued to rise.

“As a result, indicated excess cash flow is lower, our stock price has retrenched a bit, and we now believe investing in our own proved reserves through share buy-backs is more compelling than our previously planned acceleration of development drilling,” Hackett said.