Anadarko Swings to Loss in 3Q
Anadarko announced a third-quarter 2010 net loss attributable to common stockholders of $26 million, or $0.05 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 $129 million, or $0.26 per share (diluted) on an after-tax basis.(1) Cash flow from operating activities in the third quarter of 2010 was $1.049 billion, and discretionary cash flow totaled $1.274 billion.(2)
THIRD-QUARTER 2010 HIGHLIGHTS
- Delivered sales volumes at the high end of guidance
- Enhanced net risked captured resources in the Eagleford and Marcellus shale plays
- Discovered another oil field offshore Ghana
- Strengthened balance sheet and enhanced liquidity
"The portfolio continues to perform at a high level, enhancing our confidence in delivering upon the five-year objectives we presented in March, which include increasing production at a 7 to 9 percent compounded annual growth rate," Anadarko Chairman and CEO Jim Hackett said. "Adjusting for items affecting comparability, the quarter showed positive earnings, and our cash flows remained strong. Our teams are meeting cost and completion targets for our three sanctioned mega projects, attaining critical mass and strong growth in our major shale plays, and carrying out a successful, high-impact exploration and appraisal program. As a result of this continuing strong performance, we are again increasing the midpoint of our 2010 full-year sales-volumes guidance, while lowering the midpoint of anticipated capital expenditures. Our employees have proven their ability to extract considerable value from our portfolio, while maintaining financial discipline."
Anadarko's third-quarter 2010 sales volumes benefited from significant growth in its major domestic onshore resource plays. Specifically, the Rocky Mountain region and the Southern and Appalachia region delivered sales volumes growth of 10 percent and 9 percent, respectively, over the third quarter of 2009.
Third-quarter 2010 sales volumes of natural gas, crude oil and natural gas liquids (NGLs) totaled 58 million barrels of oil equivalent (BOE), or 629,000 BOE per day, which was at the upper end of guidance. Third-quarter 2010 natural gas sales volumes averaged approximately 2.2 billion cubic feet per day. Oil sales volumes in the third quarter averaged 192,000 barrels per day and NGLs sales volumes averaged 65,000 barrels per day. In total, liquids (oil and NGLs) represented approximately 41 percent of total sales volumes for the quarter.
Through development activities to date in the Marcellus and Eagleford shale plays in the U.S. onshore, Anadarko now estimates its acreage positions in these two fields hold a total of approximately 1.5 billion BOE of net risked captured resources. The positive results to date provide additional assurance that the company can attain a 60 percent compounded annual production growth rate over the next five years from these shale assets.
Anadarko continued its successful deepwater exploration program during the quarter with another major oil discovery at the Owo field offshore Ghana. The Owo discovery well encountered more than 174 net feet of high-quality oil pay, and the subsequent sidetrack well encountered 115 net feet of pay. Anadarko and its partners plan to accelerate appraisal activities at the Owo and adjacent Tweneboa fields, with the expectation to sanction these projects in 2011.
In October, Anadarko announced that the Barquentine discovery encountered more than 416 net feet of natural gas pay approximately two miles northeast of its previously announced Windjammer discovery offshore Mozambique. Based on the positive results of these two wells, Anadarko has begun designing an appraisal program to better delineate this large accumulation and is evaluating potential natural gas commercialization options.
On Nov. 1, Anadarko announced the Badik discovery, located in the Tarakan Basin of Indonesia, encountered approximately 133 net feet of oil and natural gas pay. The well was drilled to a total depth of approximately 12,950 feet in approximately 230 feet of water. The company and its partners are currently evaluating an appraisal program and planning to obtain additional seismic on the block. Anadarko operates the block with a 35-percent working interest. Co-owners in the block include PT Medco E&P Nunukan (40-percent working interest), BPRL Ventures Indonesia B.V., a wholly owned subsidiary of BPRL (12.5-percent working interest), and Videocon Indonesia Nunukan Inc. (12.5-percent working interest).
MEGA PROJECTS UPDATE
The Jubilee Phase I project offshore Ghana remains on budget and on schedule to achieve first production by the end of this year. The FPSO (floating production, storage and offloading) vessel is in the process of being commissioned, and about 90 percent of the subsea equipment has been installed. Anadarko's Caesar/Tonga development in the Gulf of Mexico also remains on budget and on schedule with first production expected during the first half of 2011. During the third quarter, installations and topsides modifications continued, with additional subsea activity expected to commence in the fourth quarter. The well completions are expected to commence this quarter once permits are issued. The El Merk project in Algeria is approximately 55 percent complete, with startup still expected to occur around year-end 2011 and full production in 2012.
Anadarko ended the quarter with approximately $4.2 billion of cash on hand. During the quarter, the company entered into a five-year, $5 billion secured revolving credit facility that remains undrawn, replacing the company's previous $1.3 billion facility. The company also successfully completed the issuance of $2 billion of 6.375-percent Senior Notes due 2017, using the net proceeds to retire $422 million of indebtedness scheduled to mature in 2011 and $1.3 billion of outstanding indebtedness maturing in 2012. As a result of these activities, the company has significantly reduced its near-term debt maturities and has extended its average debt maturity to more than 14 years.
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