Anadarko announced a second-quarter 2010 net loss attributable to common stockholders of $40 million, or $0.08 per share (diluted). These results include certain items typically excluded by the investment community in published estimates. In total, these items decreased net income by approximately $284 million, or $0.57 per share (diluted) on an after-tax basis. Cash flow from operating activities in the second quarter of 2010 was $1.566 billion, and discretionary cash flow totaled $1.278 billion.
SECOND-QUARTER 2010 HIGHLIGHTS
"During the second quarter, Anadarko's diverse portfolio continued to deliver upon our operating and strategic objectives with increased sales volumes, improved cost management and margins, continued drilling success onshore and offshore, and significant gains in drilling efficiencies," Anadarko Chairman and CEO Jim Hackett said. "Because of the company's strong and consistent portfolio performance, we are increasing full-year production guidance for the second time this year, while maintaining initial capital guidance. We now expect sales volumes to be in the range of 232 million to 236 million BOE (barrels of oil equivalent), representing an increase of 5 to 7 percent over 2009."
During the second quarter of 2010, Anadarko increased sales volumes by approximately 6 percent over the second quarter of 2009. This performance was primarily driven by the company's Marcellus, Eagleford and Haynesville shale plays, which are achieving critical mass, along with significant production increases from the liquids-rich areas of the company's Rockies position.
Second-quarter 2010 sales volumes of natural gas, crude oil and natural gas liquids totaled 59 million BOE, or 651,000 BOE per day. Second-quarter 2010 natural gas sales volumes averaged approximately 2.3 billion cubic feet per day. Oil sales volumes in the second quarter averaged 198,000 barrels per day and natural gas liquids sales volumes averaged 66,000 barrels per day.
Prior to the federally mandated deepwater drilling moratorium in the Gulf of Mexico, the company continued to achieve positive drilling results, with successful appraisal wells in the Lucius and Vito fields. As previously announced, the second Lucius appraisal well encountered more than 650 net feet of oil pay in three zones, with one additional target yet to be tested. Anadarko operates Lucius with a 50-percent working interest. Also during the quarter, the second Vito appraisal well was drilled approximately one mile to the southwest of the original discovery. Drilling was halted due to the moratorium, prior to reaching the main objectives; however, the well encountered approximately 250 net feet of pay in a shallower Miocene reservoir. Anadarko holds a 20-percent working interest in Vito, which is operated by Shell Offshore Inc.
In West Africa, the Mahogany #5 appraisal well encountered 75 net feet of pay in Jubilee-equivalent sands. This was the final well in the East Jubilee appraisal area in the West Cape Three Points Block, where Anadarko holds a 30.9-percent working interest. Subsequent to the end of the second quarter, Anadarko and partners announced another significant discovery in the Deepwater Tano Block at the Owo prospect. The Owo-1 well encountered approximately 174 net feet of high-quality oil pay. The discovery continues to enhance the gross resource potential of the West African Cretaceous trend, where Anadarko holds an interest in more than 8 million gross acres spanning four countries' offshore waters. The company plans to continue its active exploration and appraisal program of this trend through 2010 and 2011.
MEGA PROJECTS UPDATE
The company's three sanctioned mega projects remain on schedule and on budget. The Kwame Nkrumah floating production, storage and offloading (FPSO) vessel arrived in Ghana at the Jubilee field in June and is now moored on location. The well completion program is under way, and Jubilee Phase I remains on track to deliver first production toward the end of this year. The Caesar/Tonga development program in the Gulf of Mexico also is on schedule for first production during the first half of 2011. Subsea facilities installation is under way, and all major topsides lifts were completed during the second quarter. Well completion activities are expected to begin, subject to regulatory approvals. The El Merk project in Algeria is approximately 50 percent complete, with startup expected to occur in late 2011.
DEEPWATER HORIZON EVENT UPDATE
During the second quarter, the Macondo well in the Gulf of Mexico, in which Anadarko holds a 25-percent non-operating interest, discovered hydrocarbon accumulations. During suspension operations, the well blew out, an explosion occurred on the Deepwater Horizon drilling rig and the rig sank, resulting in the deaths of 11 crew members and the release of hydrocarbons into the Gulf. As previously stated, Anadarko believes that, based on the publicly available information, testimonies and investigations to date, this tragedy was preventable and likely the result of the operator's gross negligence and/or willful misconduct. A more detailed description of the potential liabilities related to this event are included in the company's second-quarter 2010 report on Form 10-Q that will be filed with the U.S. Securities and Exchange Commission.
Anadarko's producing assets continued to generate significant cash flow, and the company ended the quarter with approximately $3.4 billion of cash on hand. In addition, the company today announced it has received new bank commitments from a group of lenders led by J.P. Morgan for an aggregate $6.5 billion. The new commitments include a $5.0 billion senior secured five-year credit facility, which will replace the company's existing $1.3 billion credit facility, and a $1.5 billion senior secured six-year term loan, which will be used to refinance approximately $1.3 billion of debt currently scheduled to mature in 2012.
"Our financial position is very strong," said Hackett. "We generated discretionary cash flow of approximately $1.3 billion during the second quarter, and today's announcement of new bank facilities further enhances our liquidity position. We believe this action is prudent in order to extend the maturity date of our credit facilities, replace near-term maturing debt, provide the ability to finance our ongoing business needs, and protect the interests of all of our stakeholders by providing ample access to additional capital, should the need arise."
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