Anadarko Petroleum (NYSE:APC) plans to spend 50 % of the company's 2012 total capital budget to develop crude oil and liquids plays in the onshore United States. The company will focus mainly on formations in Utah, Colorado and Texas. To know more about oil and gas, read Oil And Gas Industry Primer.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

2012 Capital Budget
Anadarko has allocated between $6.6 billion and $6.9 billion in capital for its exploration and development program in 2012. The development budget will range from $5 billion to $5.4 billion, with 66% directed to the onshore U.S.

Eagle Ford Shale
The company has 200,000 net acres spread across several counties in South Texas that are prospective for the Eagle Ford Shale. It plans to operate 10 rigs and drill 250 wells here in 2012, focusing on the oil and condensate windows of the play.

Anadarko recently raised the estimate of the resource potential of its Eagle Ford Shale acreage to 600 million barrels of oil equivalent (BOE). These resources will have a crude oil and natural gas liquids content of 65%.

It estimates that the average well here will cost $5.8 million and generate a pretax internal rate of return in excess of 100%.

Other companies are also targeting the Eagle Ford Shale for development. EOG Resources (NYSE:EOG) has 647,000 net acres under lease, and recently increased the total resource potential from 900 million BOE to 1.6 billion BOE.

Marathon Oil (NYSE:MRO) has 305,000 net acres under lease and expects to invest $1.4 billion annually over the next five years. The company estimates that its Eagle Ford Shale production will reach above 100,000 BOE per day by 2016.

Permian Basin
Another major area of development for Anadarko in 2012 will be the Permian Basin, where it has budgeted for 130 wells during the year. The company is working on the Avalon Shale and Bone Spring plays and estimates that it has several hundred thousand acres prospective for these two plays.

Wells here will also produce mostly oil and liquids and it estimates that returns in the Avalon Shale and Bone Spring plays will range from 39 to 67%. The company expects to generate future growth from other formations in the Permian Basin.

East Texas
Anadarko has also disclosed a position in an emerging play in East Texas and has assembled a lease position of 116,000 net acres here. The company plans to operate six rigs here and drill 73 wells in 2012. It expects wells here to have an average liquids content of 36%.

Rocky Mountains
The company has a deep inventory of development areas in the Rocky Mountains, and will focus on the Wattenberg Field and the Greater Natural Buttes area in 2012. It plans to drill 570 wells in these two areas during the year.

The Wattenberg Field is in Colorado and has attracted many other operators. Bill Barrett Corporation (NYSE:BBG) has acreage here and plans to drill 40 horizontal wells in 2012.

The Bottom Line
Anadarko Petroleum is attractive to many investors due to its large portfolio of oil and gas assets that are diversified geographically. The company has been successful at exploring and developing this portfolio, and every indication is that this success will continue with its unconventional portfolio in 2012. For additional reading, check out A Guide To Investing In Oil Markets.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Economics

    4 Countries Pleading for Higher Commodity Prices

    Discover what countries are struggling the most from the price collapse in commodities and what these countries require to return to economic growth.
  2. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  3. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  4. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  5. Stock Analysis

    Glencore Vs. Noble Group

    Read about the differences between Glencore and Noble Group, two companies in the commodities business. Learn about accounting accusations facing Noble Group.
  6. Stock Analysis

    The Top 5 Platinum Penny Stocks for 2016 (PLG, XPL)

    Examine five penny stocks in the platinum mining business that investors may wish to consider adding to their investment portfolios for 2016.
  7. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  8. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  9. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  10. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
RELATED FAQS
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center