Anadarko Announces Second Quarter 2004 Earnings

  • QUARTERLY EARNINGS UP 35% OVER SECOND QUARTER '03
  • COMPANY SHOWS PROGRESS ON NEW STRATEGY WITH REPURCHASE OF 2.6 MILLION SHARES
  • Anadarko Petroleum Corporation (NYSE:APC) announced second quarter 2004 net income available to common shareholders of $405 million, or $1.59 per share (diluted), on revenues of $1.44 billion. For the same period in 2003, net income was $301 million, or $1.20 per share (diluted), on revenues of $1.25 billion. Net income available to common shareholders year to date is $797 million.

    Cash flow from operating activities totaled $880 million in the second quarter 2004, compared to $710 million for the second quarter 2003. Cash flow from operations before changes in assets and liabilities for the second quarter 2004 totaled $889 million, compared to $774 million for the second quarter 2003.(1) Year-to-date cash flow from operating activities totaled $1.77 billion.

    "Anadarko produced good second quarter results that were helped by strong commodity prices. In fact, our earnings are up 35 percent over second quarter '03. In addition, our production levels for the quarter met our expectations," said Jim Hackett, Anadarko President and CEO.

    "Last month, we announced a refocused corporate strategy to improve profitability, increase our competitiveness and generate more attractive returns for our shareholders. We are already making progress on that strategy by utilizing approximately $150 million of the proceeds from the sale of some of our hard mineral royalty revenue streams to initiate our share repurchase plan. Since we announced the strategy, Anadarko has repurchased 2.6 million outstanding common shares, and since year-end, cash has increased by nearly $250 million, furthering our commitment to strengthen the balance sheet," Hackett added.

    During the second quarter of 2004, sales volumes totaled 47 million barrels of oil equivalent (BOE), or 512,000 BOE per day, down slightly from 2003 second quarter sales volumes of 48 million BOE or 527,000 BOE per day.

    Oil sales volumes in the second quarter were 173,000 barrels per day (b/d), compared to 190,000 b/d in the same quarter of 2003. The decrease in volumes is attributed to declines in South Louisiana and the Gulf of Mexico shelf, plus the timing of cargo liftings in Algeria. The company's average realized oil prices were $31.71 per barrel, up significantly over 2003 second quarter prices of $25.11 per barrel.

    North American natural gas sales volumes of 1,786 million cubic feet per day (MMcf/d) rose slightly over second quarter 2003 volumes of 1,741 MMcf/d. The increase can be attributed primarily to Anadarko's successful drilling program in the North Louisiana Vernon field and in West Texas. Anadarko's average realized natural gas price in the second quarter of 2004 was $5.19 per thousand cubic feet (Mcf), compared with $4.40 per Mcf for the same period in 2003.

    RECENT HIGHLIGHTS

    -- Anadarko significantly expanded its Gulf of Mexico deepwater K2 North discovery when its No. 2 well encountered 165 feet of net oil pay. The field is expected to begin production through the Marco Polo platform in 2005. Anadarko holds a 100 percent working interest in the field, which is located on Green Canyon Block 518.

    -- On July 19, Anadarko announced it had commenced production from three wells at its Marco Polo field located on Green Canyon Block 608 in the Gulf of Mexico. Anadarko has a 100 percent working interest and expects the field to reach peak daily production of 50,000 BOE once all six wells are on line by early 2005.

    -- In June, the company unveiled a refocused corporate strategy to improve profitability by emphasizing exploration for new North American and international resources and focusing on unconventional oil and natural gas resource potential, particularly in North America. The strategy also lays out a more disciplined international new ventures program. This operational plan includes a financial strategy to fund capital expenditures within mid-cycle cash flows. Excess cash flow from higher priced commodity environments will be returned to shareholders through net debt reduction and share buy-backs, or compete for other strategic opportunities. One of the initial steps in the strategy includes a planned divestment or monetization of properties that do not fit with our future business model. The divestitures should generate estimated after-tax proceeds of at least $2.5 billion and are expected to occur primarily in the next six months. These proceeds will be targeted to reducing net debt and buying back shares.

    GUIDANCE

    The company expects to increase its capital spending to a range of between $2.8 billion to $3 billion, primarily to accelerate development of its K2 North field in the Gulf of Mexico. As a result of the effect of commodity price increases on Venezuela and Gulf of Mexico volumes, the company has narrowed its 2004 production growth guidance. The attached guidance reflects full-year results and excludes the future impact of any divestitures or monetizations.
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