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Kerr-McGee, Anadarko to focus on development in ’05 Anadarko’s 2005 capital budget will range between $2.9 billion and $3.1 billion, roughly the same level as this year; Kerr-McGee budgets $1.7B Ray Tyson Petroleum News Houston Correspondent
Big exploration and production independents Anadarko Petroleum and Kerr-McGee, taking advantage of the strong commodity price environment, will be focusing substantial chunks of next year’s capital spending on development projects designed to generate quick returns in the way of increased production.
Kerr-McGee, adjusting for its acquisition of Westport Resources, is planning to spend about $1.7 billion on oil and gas operations in 2005, a 20 percent increase over 2004 capital spending. That effort should yield a 15 to 19 percent increase in production, company officials said.
Anadarko’s 2005 capital budget will range between $2.9 billion and $3.1 billion, roughly the same level as this year. However, 64 percent of spending is earmarked for development — an effort the company said would increase production 7 to 11 percent over 2004 volumes.
James Hackett, Anadarko’s chief executive officer, said in a Nov. 19 conference call that Anadarko chose “to exercise the strategic option” of accelerating low-risk drilling on some of its unconventional “tight gas plays” in the Vernon field in North Louisiana and Wild River in Alberta, Canada, and on delineating new plays in Texas and Louisiana.
He said production also will continue to ramp up at the company’s enhanced oil recovery operations at the Salt Creek and Monell fields in Wyoming.
In the Gulf of Mexico, he said, Anadarko will concentrate on delineation drilling and facilities installation in the deepwater at K2, K2 North and Eastern Gulf, “which are expected to be significant contributors to the company’s volume growth through 2008.” Alaska investment in Alpine, NPR-A In Alaska, Anadarko plans to invest about $80 million, largely to pay its share of expanding the Alpine oil facility to increase capacity.
Although Anadarko spent $746,362 in the Oct. 27 state oil and gas lease sale for acreage near its Jacobs Ladder prospect on the eastern North Slope, Hackett did not mention any long terms exploration plans for Alaska. Anadarko has said it will not operate any exploration wells in the state this winter, but it is a partner in the two wildcats ConocoPhillips plans to drill in the National Petroleum Reserve-Alaska and in the Iapetus appraisal well being drilled this winter as part of a Colville River unit expansion. (See related story on page 11 of this issue.)
“Anadarko expects to achieve sustainable, profitable growth by leveraging our skill assets on the things we do well,” Hackett said.
Anadarko’s capital program is expected to deliver 160 million to 165 million barrels of oil equivalent production in 2005, up from 148 million to 151 million barrels expected by the end of this year.
About 25 percent of Anadarko’s 2005 capital budget will go to exploration and the remaining 11 percent to capitalized interest, overhead and other items, the company said.
Exploration will focus on key areas in deepwater Gulf of Mexico, including prospects such as Genghis Khan, Knotty Head and Mondo Northwest, Anadarko said. In addition, the company plans to explore for deep gas in Canada and onshore United States.
International exploration will focus on Algeria, Tunisia and Indonesia, as well as on activities in unspecified new venture areas, the company said. Kerr-McGee to capitalize on Westport Luke Corbett, Kerr-McGee’s chief executive officer, said his company’s 2005 capital budget was designed “to capitalize on the potential” of its Westport acquisition earlier this year, including “thousands of identified exploitation opportunities.”
“We plan to continue to ramp up exploitation drilling on these properties, while continuing our successful development and exploration programs,” he added.
In fact, Kerr-McGee plans to drill about 800 exploitation and development wells next year, “achieving very attractive returns,” Corbett said.
More than half of the exploitation wells would be drilled in the Rocky Mountains, the company said.
Kerr-McGee plans specifically to expand activity by more than 40 percent in the Greater Natural Buttes area of Utah’s Uinta basin, by drilling more than 200 wells. That effort, along with facility and pipeline improvements, should increase average daily production in the area by near 50 percent above 2004 levels, the company said.
The company also has earmarked an unspecified amount of cash for appraisal drilling on Alaska North Slope discoveries.
Kerr-McGee is on track with its Alaska drilling plans, having announced in July it would drill as many as six North Slope wells in the winter of 2004-2005 to evaluate its Nikaitchuq discovery, including one well into the Tuvaaq unit to the east.
“We either make a decision to move forward (with development) after this year’s drilling season or not,” Kerr-McGee Alaska Operations Manager Todd Durkee told Petroleum News July 14. “We intend to fully evaluate the Sag River formation discovery the company made last winter season.”
In the Gulf of Mexico, capital expenditures will finance continued development of Kerr-McGee’s deepwater Constitution and Ticonderoga fields, as well as new developments at the Merganser, Vortex and San Jacinto fields in the Eastern Gulf.
Of next year’s $1.7 billion capital budget, $660 million will go to the U.S. onshore, $645 million to the Gulf of Mexico, $270 million to the North Sea, and $160 million to new ventures and other international projects, the company said.
Kerr-McGee’s average daily production for 2005 is projected in the range of 155,500 to 165,500 barrels of liquids and 1.167 million to 1.257 million cubic feet of gas. About 48 percent of liquids production and about 95 percent of gas volumes are expected to come from the United States.
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