Anadarko Increases Capital Budget for 2002
Anadarko Petroleum Corporation announced that its Board of Directors has approved a plan to increase capital expenditures by 10 percent, from $2 billion to $2.2 billion, for 2002. This capital budget will be funded from cash flow, along with anticipated proceeds from a $320 million asset divestiture program also planned for 2002.
"The higher capital program will allow us to take advantage of additional delineation and development opportunities resulting from our exploration successes this year in Canada and the U.S., as well as to restart our exploration program in Algeria," said John Seitz, Anadarko president and chief executive officer.
"The asset sales are part of an ongoing program to high-grade our portfolio by selling low-margin, and/or moderate- to low-growth assets and reinvesting the proceeds in higher-margin, higher-growth opportunities," Seitz added.
As part of the divestiture plan, Anadarko closed on the sales of selected non-core producing assets in South Texas and South Louisiana for $60 million during the second quarter.
In addition, a wholly owned subsidiary, Anadarko Canada Corporation, has agreed to sell its heavy oil assets in eastern Alberta in several separate transactions for a total of about C$250 million (about U.S.$160 million).
The sales are subject to completion of definitive sales agreements, waivers of preferential rights of purchase and other normal adjustments at closing. Actual U.S. dollar proceeds will depend on the exchange rate at closing. The sales of these properties, which include approximately 27.5 million barrels of net proved oil reserves at mid-year, are expected to close in the fourth quarter.
The company also has identified another $100 million of properties it plans to put up for sale in the near future. "Although the Canadian properties are producing about 19,000 barrels a day net to Anadarko, the cash operating margin on those barrels is only about half of Anadarko's company-wide average," Seitz said. "So we can reinvest the proceeds in other opportunities that should benefit our shareholders both financially and operationally in 2003 and beyond."
As a result of the announced asset sales and of recent decisions not to process gas for natural gas liquids recovery in the East Texas Carthage plant and part of the Rockies due to current processing economics, Anadarko is reducing its volume guidance for 2002 from 199 million barrels of oil equivalent (MMBOE) to 196 MMBOE.
"This 1.5 percent reduction in estimated volumes will have very little impact on our financial results for 2002 -- about 1 cent per share of earnings, and about 7 cents per share of cash flow -- compared to our recent third-quarter guidance," Seitz said.
"These are strong production levels, especially given the fact that higher oil prices have reduced the reported production in Venezuela by about 2.4 million barrels from our original expectation," Seitz said. "This drop in Venezuelan production has no effect on revenue, however, since we adjust the reported barrels to reflect the value at the current market price. We replaced the volume shortfall with onshore U.S. production that has very attractive margins.
"Our volume growth outlook also is very strong for next year," Seitz said. "The announced and planned property sales represent about 10 million barrels of 2003 production. We are confident we can increase production by about 6 percent from the new base of 188 MMBOE, which excludes the full-year effect of the announced and planned property sales."