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Tickers in this Article: APC, UPL, COP, MRO, ME
Anadarko Petroleum (NYSE:APC), a solid large cap energy company with a core base of onshore properties, also boasts a large inventory of offshore prospects, including two new successful wells in the Gulf of Mexico. The exploration and production company has 85% of its reserves onshore in the U.S. and in the deepwater areas of the Gulf of Mexico. Internationally, its operations are located in Brazil, West Africa, Algeria and China.

Its bread and butter, Anadarko's onshore areas consist of both easy to reach development assets and a few new areas of high potential. The company's reserves here total 10.3 Tcfe (trillion cubic feet of equivalent). Looking for 9-12% compound annual growth in production of this area for 2008-2010, Anadarko plans to spend the next five years proving up the large amount of currently unproved reserves. (Learn more in The Industry Handbook: The Oil Services Industry.)

The main area of the onshore U.S. asset base lies in the Rocky Mountains, where Anadarko Petroleum has 70% of its proved onshore reserves. Basins include the Pinedale, the Powder River and the Wattenberg. The largest producer in Wyoming's Pinedale field is Ultra Petroleum (NYSE:UPL), which produced 36.3 Bcfe (billion cubic feet equivalent) of natural gas in the third quarter of 2008 - a record for the company.

One risk facing the Rocky Mountain area is takeaway capacity. Because the area has grown so quickly, the industry cannot build infrastructure quickly enough to bring oil and gas out of the area. Further, a shortage of pipeline can lead to price differentials between certain hubs in the U.S. While companies may try to hedge against this, methods are not always effective.

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Anadarko is also positioning itself in several emerging shale plays in North America, including the Haynesville in Louisiana, where it has 75,000 acres under lease, and the Marcellus Shale in Pennsylvania, where it has 325,000 net acres.

GOM Deepwater
Anadarko produced 126,000 MBOE/D (thousand barrels of equivalent per day) at the end of the third quarter from its properties in the Gulf of Mexico. In addition, the company has 150 leads to pursue in this area. Within the last week, Anadarko has made two discoveries in the Gulf of Mexico, one of which was an oil discovery at the Heidelberg prospect in the Green Canyon area. Anadarko has a 44.25% working interest in the well. The rest of the well is split between several other operators, including Mariner Energy (NYSE:ME). Although Mariner is a small cap energy company, it has 55 prospective sites to explore.

Anadarko's second discovery was the Shenandoah oil prospect in the Walker Ridge area. Anadarko operates this well with a 30% working interest. Other publicly traded companies with interest in the well are ConocoPhillips (NYSE:COP), with a 40% working interest, and Marathon Oil (NYSE:MRO), with a 10% working interest. Companies typically partner with other energy companies on large (and expensive) offshore projects to spread the cost as well as the risk. (Find out why changes in the price of oil affect more than what you pay at the pump in How Does Crude Oil Affect Gas Prices?)

Anadarko's international reserves are fairly small, but its overseas assets produce 97,000 MBOE/D. In the offshore West Africa area, Anadarko Petroleum has drilled several appraisal wells and plans first production in 2010. In offshore Brazil, the company has drilled three exploratory wells in the sub salt area.

Bottom Line
Investors who want large cap exposure to the energy sector should consider Anadarko Petroleum. Its large base of onshore producing properties, as well as promising offshore prospects, make it an attractive play.

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