Anadarko lays out aggressive plan

CEO Robert Allison vows to increase production, control costs, sell low-growth, low-margin properties to fund new acquisitions

Petroleum News Houston Staff

Anadarko Petroleum’s Robert Allison, in his first quarterly conference call since taking over the helm from deposed CEO John Seitz in late March, said April 24 he would work hard to “contain costs” at the big independent and to “better communicate” with Wall Street.

Still, it appears exceptionally strong commodity prices were the only things that rescued Anadarko in the 2003 first quarter, more than offsetting a hefty decline in production, attributed largely to property divestitures in Canada and facility problems abroad.

Overall, first-quarter output fell 10 percent to 488,000 barrels per day of oil equivalent compared to the same period last year. Specifically, oil production dropped 18 percent to 173,000 bpd, while natural gas production dipped 6 percent to 1.7 billion cubic feet a day, Anadarko said.

The divestiture of about 20,000 bpd of oil equivalent, primarily Canadian heavy crude, was the main contributor to Anadarko’s double-digit fall in oil volumes during the first quarter, the company said.

But on superior commodity prices, net income during the first quarter rose 35 percent to $418 million or $1.63 per share versus the prior quarter’s $309 million, the company added, and jumped 375 percent from $88 million in the year-ago when commodity prices were at a low point in the cycle.

Allison lays out aggressive plan

In the April 24 conference call, Allison acknowledged that Seitz resigned under heavy pressure from the board of directors. Allison was board chairman at the time, a title he still holds.

“Basically the board was very upset with our stock price over the previous 18 months,” Allison said. “A lot of pressure was put on John and he resigned.”

Allison laid out an aggressive plan for Anadarko, projecting that production volumes in the fourth quarter of this year would be 20 percent higher than in the first quarter.

“From our base of 190 million BOE (barrels of oil equivalent), we expect to grow this year's production by about 5 percent and next year's production by about 12 percent," Allison said.

“We expect production volumes to build each quarter throughout the year, as we bring on additional production in the Gulf of Mexico, Canada, Qatar and the Lower 48,” he said.

Anadarko also said it would pursue additional sales of low-margin, low-growth properties to help fund new acquisitions:

“You'll see us do more of that this year as we continue to high-grade our portfolio, reduce operating costs and improve margins.”

Increase in capital budget

In the relatively unexplored Eastern Gulf, where Anadarko recently announced a small natural gas discovery at its Jubilee prospect, a fourth exploration well could be drilled in the region this year, possibly on Anadarko’s Spiderman prospect, the company indicated.

Meanwhile, drilling results from Anadarko’s ultra-deepwater Hawkeye prospect, located east of Jubilee, should be available soon, the company said, adding that the rig that drilled Jubilee and Hawkeye likely would be moved next to nearby Atlas.

Anadarko disclosed that it had shopped for a partner for its 100 percent Eastern Gulf prospects, but dropped the idea when it could not find comparable prospects to trade interests.

“Frankly, we couldn’t find any of equal quality, so we’ll be drilling (the prospects) 100 percent,” a company official said.