Anadarko 3Q Results Show Net Loss of $3B
Anadarko Petroleum Corporation announced Monday its 2011 third-quarter results, reporting a net loss attributable to common stockholders of $3.051 billion, or $6.12 per share (diluted).
These results include certain items typically excluded by the investment community in published estimates. In total, these items, which include the effects of the recently announced $4 billion settlement agreement with BP, decreased net income by approximately $3.374 billion, or $6.78 per share (diluted) on an after-tax basis.
Cash flow from operating activities in the third quarter of 2011 was $1.466 billion, and discretionary cash flow totaled $1.879 billion.
THIRD-QUARTER 2011 AND RECENT HIGHLIGHTS
- Removed the significant uncertainty regarding future liabilities associated with the Deepwater Horizon event
- Generated $576 million of free cash flow
- Increased year-over-year sales volumes by 5 percent, with 10-percent liquids growth
- Expanded deepwater exploration and appraisal drilling success
- Assembled 300,000-gross-acre position in Ohio’s Utica Shale
"Our third-quarter operating activities generated very strong free cash flow, reflecting our focus on increasing higher-margin liquids sales volumes," Anadarko Chairman and CEO Jim Hackett said. "Overall, liquids sales volumes grew by approximately 10 percent compared to the third quarter of last year, with onshore U.S. oil sales volumes increasing by about 30 percent over the same time period. The growth in liquids sales volumes was complemented by strong netback pricing, as about 70 percent of our total liquids sales volumes are based on Brent-equivalent indices, achieving a $10 per-barrel premium over WTI pricing. Moreover, price realizations for our NGL (natural gas liquids) sales volumes were 62 percent of WTI oil pricing, compared to 50 percent in the third quarter of last year."
During the third quarter of 2011, sales volumes totaled 61 MMboe. This total represents 660,000 BOE per day, averaging approximately 2.3 billion cubic feet of natural gas, 207,000 barrels of oil, and 74,000 barrels of NGLs, per day.
The company's U.S. onshore resource and growth plays continued to demonstrate rapid expansion of total production and liquid-volume yields during the quarter. The Wattenberg field delivered record sales that included a 36-percent increase in liquids volumes year over year, largely a result of the company’s expanded horizontal drilling programs. Oil volumes were particularly strong in both the Permian Basin and Eagleford Shale, with each area achieving year-over-year increases of approximately 150 percent. In the Marcellus Shale, gross natural gas sales volumes surpassed 600 million cubic feet per day (MMcf/d) at the end of the quarter, compared to approximately 460 MMcf/d at the end of the second-quarter 2011.
The company also continues to expand its midstream infrastructure in these areas to support further growth into the future.
In the Gulf of Mexico, the company continued to advance its Caesar/Tonga mega project, selecting a riser solution that is expected to enable the project to achieve first production by mid-year 2012. Additionally, Anadarko finalized a unitization agreement to develop the Lucius field and, as operator, is on track to sanction the project prior to year-end 2011.
During the quarter, Anadarko and its partners in offshore Ghana announced a light oil discovery at the Akasa-1 exploration well, as well as a successful appraisal well at Enyenra-3A, and two successful drillstem tests in the Tweneboa field. The company also announced its first successful appraisal well offshore Mozambique at the Barquentine-2 well.
"We continued to achieve excellent results in our deepwater exploration and appraisal programs in Ghana and Mozambique, with an overall success rate of 75 percent in the third quarter," said Hackett. "Subsequent to quarter end, we announced the Camarão exploration discovery offshore Mozambique that also included a successful appraisal objective. Based upon the five successful penetrations in the complex to date, the confirmed static pressure connectivity and the numerous cores that have been collected and analyzed, we have a high level of confidence that the complex holds in excess of 10 trillion cubic feet of recoverable natural gas. With an identified recoverable resource base of this scale, validated by multiple penetrations, we expanded our initial LNG (liquefied natural gas) development plans to include a minimum of two 5-million-tonne-per-annum trains. We anticipate this development will expand with additional appraisal and exploration success on our 2.6-million-acre block. We are continuing to work with the government of Mozambique and our partners to safely and efficiently commercialize these world-class natural gas resources."
"Additionally, in the U.S. onshore, we’ve been assembling a position in Ohio’s Utica Shale, and over time, we have acquired interests in approximately 300,000 gross acres in the prospective liquids-rich window at attractive entry costs. We’ve recently spud our first well in the play and look forward to an active drilling program in this emerging area."
Anadarko generated discretionary cash flow of $1.879 billion and had capital expenditures of $1.303 billion during the quarter, resulting in free cash flow of approximately $576 million.
During the quarter, Anadarko recorded an $18 million gain on sale as a result of contingent consideration related to its 2008 divestiture of the Peregrino heavy oil field offshore Brazil. At strip pricing, Anadarko expects to receive aggregate contingent consideration in excess of $400 million over the next several years associated with this divestiture.
Anadarko ended the quarter with approximately $3.5 billion of cash on hand, and as previously announced, the company will use a portion of this cash, plus a draw on a portion of its $5.0 billion credit facility to satisfy its obligations under the settlement agreement with BP.
Anadarko recorded a $4.0 billion expense in the quarter related to the settlement agreement.
On Oct. 17, 2011, Hackett stated, "This settlement agreement with BP is the right action for our stakeholders, as it removes significant uncertainty regarding future liabilities and associated risks. With this issue resolved, we believe focus will return to the tremendous value embedded in our asset base and the company’s operational and exploration success that have been under-valued during the last 18 months."
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