Anadarko takes hefty write-down on Canadian reserves

Gary Park

Anadarko Petroleum Corp. has become the first major energy company in Canada to swallow the medicine and take a write-down against its Canadian oil and gas reserves because of low commodity prices.

The Houston-based company, one of the world's largest independent E&Ps, said it took a write-down of US$464 million in the third quarter, much stemming from its February takeover of Calgary-based Berkley Petroleum Corp. for $1.03 billion.

That deal gave Anadarko an estimated 95 million barrels of oil equivalent in proven reserves, of which gas accounted for about 855 billion cubic feet.

Anadarko also has other Canadian assets in Western Canada, the Mackenzie Delta and off the East Coast, including its June acquisition of Gulfstream Resources Canada Ltd. for $137 million.

“We continue to be enthusiastic about our business in Canada and this write-down will not have a significant affect on our operations there,” said Anadarko chairman and chief executive officer Robert J. Allison.

He said the current low gas prices do not represent what the market believes the assets are worth.

“This write-down effectively values our Canadian proved reserves at less than C$0.60 per thousand cubic feet of gas equivalent, which is about half what companies have recently paid for Canadian reserves,” said Allison.

Under Canadian regulations, write-downs are usually postponed until as close as possible to year-end and, following acquisitions, there is a grace period of up to two years.

Victor Vallance, a Toronto analyst with Dundee Securities Corp, said that with gas prices where they are, some companies which have made recent takeovers “may have to take some pretty severe write-downs on those acquisitions. So I think they may try and wait it out and hopefully the price of gas will increase down the road.”