Anadarko Sets 2006 Budget at $4 Billion

Anadarko Petroleum Corporation (NYSE: APC) announced a 2006 capital budget of approximately $4 billion.

The program is expected to deliver 4 to 8 percent production volume growth in 2006, or 165 million to 171 million barrels of oil equivalent (BOE), over 2005 volumes of 158 million BOE. It also includes substantial investments in exploration and development activities expected to sustain volume growth beyond 2006. Anadarko expects to more than replace annual production for the 25th consecutive year.

"Anadarko's exploration-oriented program is designed to deliver differentiating volume growth over time," said Jim Hackett, Anadarko Chairman, President and CEO. "We will continue to invest substantial capital in 2006 to gradually bring major existing discoveries on line through 2008, while also investing about a fifth of our budget in exploration programs. Although project delays experienced due to unusual weather patterns and mechanical issues in the Gulf of Mexico have deferred a small portion of the full-year volume growth targeted for 2006, daily production volumes are expected to increase 15 to 20 percent from January through December 2006. As a result, we will be positioned to grow more than 9 percent in 2007."

Approximately 70 percent of the total budget is planned for development activities, 20 percent will go to exploration and the remainder is set aside for capitalized interest, overhead and other items.

                    2006 CAPITAL BUDGET BY AREA

                    U.S. Onshore                 51%
                    Deepwater GOM                23%
                    Canada                       11%
                    International                 7%
                    Capitalized Items and Other   8%

The largest single portion of the 2006 budget will focus on Anadarko's continued success in unconventional tight gas plays onshore North America, primarily in North Louisiana, West Texas, East Texas and Alberta, Canada.

In the Gulf of Mexico, two focus areas will combine to represent about one-fifth of total spending. Eastern Gulf of Mexico activity will require more than 10 percent of the budget to install facilities that will link seven Anadarko-operated natural gas discoveries with the Independence Hub development project, which is expected to start up in the second half of 2007. Another 10 percent of the budget is dedicated to the foldbelt area, where Anadarko expects to bring six incremental high-volume wells on line at the K2, K2 North and Genghis Khan discoveries through the Marco Polo hub facility, in addition to participation in 7 to 9 exploration and delineation wells targeting similar Miocene objectives.

Outside North America, the largest area of budgeted expenditures is Algeria, where the company expects to make significant progress on the development of Block 208 discoveries, with new production facilities scheduled to come on-line in 2008.

The international program also includes exploration activity in Algeria, Qatar, Indonesia, Tunisia and West Africa, as well as activities within other potential new venture areas.

"Nearly 60 percent of the 2006 budget is targeting projects that are expected to provide little or no volume growth this year but should contribute to strong growth in 2007 and beyond," Hackett said. "Much of the spending is on major development projects where production is gradually escalating through 2008, and on long-term exploration efforts that, again, target future reserves and production growth. We are confident that shareholders will recognize the value as we execute on the strategy."

Anadarko Petroleum Corporation's mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world's health and welfare. As of year-end 2005, the company had 2.45 billion barrels-equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. Anadarko's operational focus in North America extends from the deepwater Gulf of Mexico, up through the western U.S. and Canadian regions and onto the North Slope of Alaska. Anadarko's international activities are focused on its major positions in North Africa, the Middle East, Indonesia and exploration or production operations in several other countries.