Posted on 11/19/2013 10:26:05 AM PST by ckilmer
Though Anadarko Petroleum (NYSE: APC ) is well known for its international asset portfolio, which includes sizable stakes in the Jubilee field off Ghana's shore, the El Merk project in Algeria's Sahara Desert, and exploratory prospects offshore various African countries, the company's onshore U.S. operations account for nearly 90% of its total production and 60% of this year's capital spending.
In fact, Anadarko is so optimistic about its growth runway in the U.S. that it recently sold some international assets to help fund its onshore U.S. drilling program. Let's take a closer look.
Mozambique sale to fund U.S. onshore growth
In late August, Anadarko sold its 10% interest in a gas field offshore Mozambique to India's ONGC Videsh for $2.64 billion in cash. The company will use the proceeds from the all-cash deal to further expand its operations in U.S. shale plays, especially the Wattenberg field in Colorado and the Eagle Ford shale in Texas, as well as in the deepwater Gulf of Mexico.
Anadarko is just one of many oil and gas producers shedding international assets in order to ramp up operations in onshore U.S. liquids-rich plays. Apache (NYSE: APA ) , for instance, recently sold a third of its Egyptian oil and gas assets to Chinese oil company Sinopec (NYSE: SHI ) in order to refocus on its "growth core" assets in Texas and Oklahoma, while Devon Energy (NYSE: DVN ) divested the vast majority of its international assets back in 2009 and 2010 in order to concentrate on its U.S. onshore operations, especially in the Permian Basin and the Mississippi-Woodford trend.
Similarly, ConocoPhillips (NYSE: COP ) recently divested interests in international assets in Kazakhstan, Algeria, and Nigeria in order to focus on North American shale opportunities, which are expected to account for 60% of the firm's production growth through 2017, while Occidental Petroleum (NYSE: OXY ) last month announced that it would sell a minority stake in its Middle East and north Africa business as it seeks to reduce geopolitical risk and focus on its North American operations.
Key onshore U.S. assets
One of Anadarko's most prized domestic assets is Colorado's Wattenberg field, where the company commands approximately 350,000 net acres in the core of the play. During the third quarter, Anadarko more than doubled its Wattenberg sales volume from 26,000 barrels of oil equivalent per day to 56,500 BOE per day.
Considering that it's generating rates of return in excess of 100% from the play, thanks to low development costs of roughly $13 per barrel of oil equivalent and high EURs of approximately 350 MBOE per well, this is a highly encouraging development for the company. And with plans to drill 350 wells in the play this year and roughly 4,000 horizontal drill sites remaining, Anadarko still has a huge runway for growth in the Wattenberg.
Anadarko also has a sizable position in the Eagle Ford shale, where it commands roughly 200,000 net acres. Like the Wattenberg, Anadarko's Eagle Ford assets also feature low development costs of approximately $13 per barrel of oil equivalent and high EURs of roughly 600 MBOE per well. The company also has a deep inventory of more than 2,500 drilling locations left in the play, which gives it plenty of room to grow production over the next several years.
The bottom line
In my view, Anadarko has a really nice balance of high-quality, liquids-rich domestic assets that offer predictable, repeatable growth and high-margin international megaprojects. If the company can continue to execute as well as it has in the Wattenberg and the Eagle Ford, it should be able to grow production at a 5%-7% CAGR through 2020 at current prices and at 7%-9% with gas prices at $4.50 per Mcf.
In addition, its various exploratory prospects off the coasts of various African countries provide plenty of additional upside, especially considering Anadarko's industry-leading 70% success rate in deepwater exploration and appraisal drilling so far this year
Considering that it's generating rates of return in excess of 100% from the play, thanks to low development costs of roughly $13 per barrel of oil equivalent and high EURs of approximately 350 MBOE per well, this is a highly encouraging development for the company. And with plans to drill 350 wells in the play this year and roughly 4,000 horizontal drill sites remaining, Anadarko still has a huge runway for growth in the Wattenberg.
During the third quarter, Anadarko more than doubled its Wattenberg sales volume from 26,000 barrels of oil equivalent per day to 56,500 BOE per day
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This suggests that the wattenberg formation in the Niobrara field may well ramp up to high volumes in the next couple of years
do you think I have overstated the implications of andarko more than doubling their production of oil/oil equivalents in the third quarter in the wattenberg field of the niobrara.
I expect you’d want to see confirmation of growing production from other players.
I’ve been reading reports of growing strikes in the wattenberg field but this is the first report I’ve seen on production there.
Have you seen any other companies reporting production in the wattenberg field.
Here’s another company: PDC energy that increased their oil production: But its year over year:
Production up 34% from Q2 2012 to 18,100 barrels of oil equivalent per day (”Boe/d”)
Wattenberg production and liquids increased 40% from Q2 2012
Here’s another one in Wattenberg formation with higher production rates—but also starting from low volumes.
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Bonanza Creek Energy Announces Third Quarter 2013 Financial Results and Provides an Operations Update; Sales Volumes Up 88% over Third Quarter 2012 and 32% over Previous Quarter
Increased Wattenberg horizontal production to an average of 11,128 Boe/d
During third quarter 2013, the Rocky Mountain region produced 11,802 Boe/d, or 67% of total company volumes, with 11,128 Boe/d coming from horizontal wells. Production increased 135% and the contribution from horizontal wells grew 271% over third quarter 2012. Compared to the previous quarter, Rocky Mountain volumes increased 41% and horizontal production volumes grew by 55%.
http://finance.yahoo.com/news/bonanza-creek-energy-announces-third-211701053.html
Noble Energy reports production increases,
October 24, 2013
For the third quarter of the year, Noble reports an increase in production to 97,000 barrels of oil equivalent per day out of the Wattenberg alone, which includes oil, natural gas and natural gas liquids. Of that, 61,000 came directly from horizontal drilling.
Production increased 90 percent from the second quarter and 31 percent from the same time last year, according to its earnings reports“The startup of our central processing facility in the third quarter is a significant milestone for Noble,” Stover said. The facility will be able to process 22,000 barrels of oil equivalent per day and 50 million cubic feet per day of natural gas.
“We have plans to double that capacity by next year,” Stover said.
Two other companies that drill in Weld County reported third quarter earnings this week:
» Whiting Petroleum reported a production increase of 12 percent from the same time last year.
http://www.mywindsornow.com/news/8625843-113/noble-quarter-company-reported
I would like to see the breakdown of the oil equivalents.
Is this mostly gas, dry gas, condensate or oil?
I see several companies trying to bump up their stock price by finding mostly dry gas and putting out news releases measured in oil equivalent.
Anadarko is a good company. I believe them to be well run.
I would like to see the breakdown of the oil equivalents.
Is this mostly gas, dry gas, condensate or oil?
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Yeah, I couldn’t figure that out either. Nor did their stats make it clear. It looked like they were puposely trying to smudge the numbers to make it look like there was more oil than their actually wuz.
the eia looks like they’re at least a couple quarters behind.
All that said, it does look there’s a significant increase in production of something in that section of the niobrara field.
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