Anadarko Posts Q1 Earnings

Anadarko Petroleum Corp. on Monday announced first-quarter 2011 net income attributable to common stockholders of $216 million, or $0.43 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 $147 million, or $0.29 per share (diluted) on an after-tax basis.(1) Cash flow from operating activities in the first quarter of 2011 was $1.289 billion, and discretionary cash flow totaled $1.674 billion.(2)

"Anadarko delivered record sales volumes in the first quarter, including a 15-percent quarter-over-quarter increase in daily liquids volumes, strong cash flow and improved margins," said Anadarko Chairman and CEO Jim Hackett. "This record performance was highlighted by the rapid growth of our shale plays and our first lifting from the Jubilee field offshore Ghana. Our deepwater exploration program also achieved excellent results in the quarter with three discoveries and three successful offshore appraisal wells. Early in the second quarter, we closed the previously announced $1.6 billion joint venture with KNOC (Korea National Oil Corporation) in the Eagleford Shale, validating the tremendous embedded value of this resource."

During the first quarter of 2011, sales volumes totaled 62 million barrels of oil equivalent (BOE), or 690,000 BOE per day, averaging approximately 2.4 billion cubic feet of natural gas per day, 212,000 barrels of oil per day (BOPD), and 76,000 barrels of natural gas liquids per day.

Operations Summary

Anadarko's record sales volumes benefited from the company's first oil lifting at the Jubilee field in Ghana, as well as continued production growth in the Eagleford and Marcellus shale plays. In Ghana, current gross production from the Jubilee field is more than 70,000 BOPD and continues to ramp up toward capacity of 120,000 BOPD, which is expected by the third quarter of 2011. In the company's shale plays, average sales volumes in the Eagleford and Marcellus areas increased by about 30 percent and 82 percent, respectively, over the fourth quarter of 2010.

The company recently closed the $1.6 billion Eagleford joint-venture agreement with a subsidiary of KNOC. Under the terms of the agreement, KNOC will fund approximately 100 percent of capital costs in the play for the remainder of this year and up to 90 percent of costs thereafter, until the carry is exhausted. The amount to be paid includes an approximate $48 million post-effective date reimbursement, and KNOC also exercised its option to acquire an approximate 25-percent interest in associated midstream assets for reimbursement of an additional $38 million.

In the Rockies, Anadarko announced the acquisition of the Wattenberg Processing Plant in northeastern Colorado. This acquisition is expected to improve field recoveries and allow for future expansion in the greater Denver-Julesburg Basin, where Anadarko continues an active program with seven rigs drilling directional wells in the Wattenberg field and three rigs drilling horizontal wells in the emerging Niobrara play.

Exploration Summary

Anadarko announced three deepwater discoveries during the first quarter of 2011. The Teak-1 and Teak-2 discoveries, located in the 30.875-percent-owned West Cape Three Points Block offshore Ghana, encountered high-quality oil, condensate and natural gas pay in Turonian-age reservoirs similar to those found in the adjacent Jubilee field, as well as Campanian-age reservoirs. In Mozambique, the company announced the Tubarao discovery, marking its fourth operated natural gas discovery in the 36.5 percent-owned Offshore Area 1 of the Rovuma Basin.

In the Deepwater Tano Block offshore Ghana, where Anadarko holds an 18-percent working interest, the company and its partners announced successful appraisal wells at Enyenra-2A, Tweneboa-3 and Tweneboa-3ST. Subsequent to quarter end, the operator also announced the successful Tweneboa-4 appraisal well. Additional appraisal activity is ongoing in the Tweneboa/Enyenra complex as the partnership continues to work toward a declaration of commerciality, which is expected later this year.

Financial Summary

Anadarko ended the first quarter of 2011 with approximately $3.5 billion of cash on hand, maintained access to its five-year, $5 billion undrawn credit facility and generated $87 million of free cash flow. The company's estimated 2011 capital expenditures were increased by approximately $600 million as a result of the Wattenberg Processing Plant acquisition, resulting in an estimated capital spending range of $6.2 to $6.6 billion, excluding capital expenditures related to Western Gas Partners, LP.