Anadarko Petroleum (NYSE:APC) advanced the development of its extensive portfolio of oil and gas properties in the onshore United States during the third quarter of 2011. The company also reported a large net loss in the quarter due to a settlement payment related to the Macondo oil spill.
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Anadarko Petroleum reported a GAAP loss of $3.05 billion, or $6.12 per share in the third quarter of 2011. This loss was caused by five items, with the largest being a $4.04 billion pretax charge related to the settlement that Anadarko Petroleum reached with BP (NYSE:BP) over the Gulf of Mexico oil spill.
Anadarko Petroleum has become more efficient at drilling, and reduced the upper end of the company's guidance range on capital expenditures for 2011. The company now expects to spend from $6.1 billion to $6.4 billion during the year. This is unusual as many operators have suffered from service cost inflation, and were forced to increase budgets. (For related reading, see Oil: A Big Investment With Big Tax Breaks.)
Anadarko Petroleum reported average daily volume of 660,000 barrels of oil equivalent (BOE) per day during the quarter, with approximately 57% of this production composed of natural gas. Another 31% of third quarter production was crude oil and the balance was natural gas liquids. This was 5% growth over the same quarter of 2010.
Like many exploration and production companies, Anadarko Petroleum is partial to oil and liquids development, and is intent on growing that part of the production base at a higher rate.
Anadarko Petroleum also tweaked its 2011 production guidance slightly higher, and raised the lower end of the range by one million BOE. The company is guiding to full year daily production to be in a range from 671,000 to 679,000 BOE.
One of Anadarko Petroleum's fastest growing operations is in the Rocky Mountains, where the company has properties in the Denver Julesburg basin. The company is developing a number of formations here, and drilled 106 wells here during the quarter.
Anadarko Petroleum is targeting is the Niobrara formation here, and drilled 12 horizontal wells in the third quarter of 2011. The company disclosed that one of these wells had a 24 hour production rate of 1,100 barrels of oil along with 2.5 million cubic feet of natural gas.
Anadarko Petroleum has recently started development of the Utica Shale after building up a position of 300,000 gross acres, in what the company believes is the liquids portion of this play.
Anadarko Petroleum is operating one rig to explore the Utica Shale, and just started drilling its first well. The company has obtained drilling permits in Noble, Guernsey, Coshocton and Muskingum Counties in Ohio, according to the Ohio Department of Natural Resources.
Although Anadarko Petroleum's position in the Utica Shale is impressive and will pay off in the future for the company, it pales in comparison to Chesapeake Energy (NYSE:CHK), which leads the industry in this emerging play. The company has 1.25 million acres under lease, and has received the vast majority of all drilling permits to drill into the Utica. (For related reading on oil, see What Determines Oil Prices?)
Despite an emphasis on oil and liquids, Anadarko Petroleum is still involved with many natural gas plays, including the Marcellus Shale. The company exited the quarter with gross production from this play of 600 million cubic feet per day of natural gas, about a 30% sequential growth rate.
Another major player in the Marcellus Shale is Cabot Oil and Gas (NYSE:COG), which recently reported record production of 517 million cubic feet of natural gas per day from this play.
The Bottom Line
Anadarko Petroleum's payment to BP, to settle its liability from the Macondo accident, removes a major concern that investors had on the company. These skittish investors can now focus on other issues, including the company's plan to use the onshore United States to grow crude oil and liquids production.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.