Anadarko reports losses, cuts spending by $300 million | MyWindsorNow.com

Anadarko reports losses, cuts spending by $300 million

Sharon Dunn
sdunn@greeleytribune.com

Only the second quarter into the year, Anadarko Petroleum Corp., already is trimming planned expenses by $300 million.

The cut has more to do with commodity prices — which have spent the last month below the $50 per barrel profitability mark — but an April explosion that killed two people hasn't helped.

"The current market conditions require lower capital intensity given the volatility of margins realized in this operating environment," said company Chairman, CEO and President Al Walker in a news release. "As such, we are reducing our level of investments by $300 million for the full year and adjusting full-year sales-volume guidance to reflect recent (asset sales) and the deferred production associated with the Colorado response. We feel this is a prudent move, while still expecting to average approximately 130,000 barrels of oil per day in the deepwater Gulf of Mexico and exit the year at around 150,000 barrels of oil per day from the Delaware and DJ basins combined."

The company saw an adjusted net loss of $423 million for the quarter, or 77 cents per share to common stockholders. At the same time last year, the company reported a loss of $304 million.

The company must contend with the aftermath of the house explosion and complying with state orders to inspect equipment, as well as a voluntary program to inspect and repair every vertical well in its asset base in the Denver-Julesburg Basin.

The company took 3,000 vertical wells off line in the DJ as a result of the explosion, which was found to be the result of an abandoned but severed gas line that led to an Anadarko well that recently had been turned back on for production. Gas flooded the French drains surrounding the house, and the home exploded, killing two people and severely injuring a third person inside.

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The state Oil and Gas Conservation Commission required all companies in the state to inspect all vertical wells within 1,000 feet of a building that had similar gas lines, but Anadarko took that a step further by vowing to inspect its entire fleet of vertical wells, which still is ongoing.

In its second quarter operations report, the company reported sales volumes decreased from the first quarter by 6 percent, which largely was driven by shutting in those 3,000 vertical wells. The company estimates a loss of 2 million barrels of oil equivalent for the year due to those shut-ins.

"The plan is to bring them back on line at some point," said company spokesman John Christiansen.

Overall, the company reported it spent $227 million in the DJ Basin this quarter and operated with six drilling rigs. That's up from the $183 million reported in the first quarter.

In the DJ, the company operated an average of six rigs, started drilling 90 wells and put 46 wells into production. Total sales volumes averaged 226,000 barrels of oil equivalent, with oil averaging 76,000 barrels per day, "reflecting the temporary impacts associated with the state's (inspection order) and additional response efforts," according to the company's operations report.

While the company considers the DJ one of its three strongest assets in the United States, along with Texas and the Gulf of Mexico, its Texas basin is starting to fetch more money. The Delaware Basin in east Texas saw $234 million of the company's capital allocation this quarter and $200 million in the first quarter. The company ran 16 drilling rigs there. The Delaware, however, produced an average of 33,000 barrels of oil per day in the quarter, less than half of what the DJ produced.

Christiansen said the company is in the process of building infrastructure in Texas, as it did in Colorado.

"There's a significant amount of money being invested in the Delaware for midstream and infrastructure build-out. That infrastructure already exists in the DJ," Christiansen said.

The company reported it is using its experience in the DJ as a guidebook for Texas.

"Anadarko is leveraging lessons learned from the development of the DJ Basin in the planning and development of the Delaware Basin," the company's operations report stated. "Anadarko expects to be in a position to deliver significant volume growth in 2018 and beyond."

Anadarko’s second quarter in the DJ

» Operated 6 rigs.

» Drilled 90 wells and put 46 wells into production.

» Reached total sales volumes of 226,000 barrels of oil equivalent per day.

» Reached oil volume of 76,000 barrels of oil per day.

» Reduced drilling times for mid- and long-lateral wells of 4.1 and 4.7 days respectively.

» Achieved 35 percent production gains with new completion designs.

Source: Anadarko Petroleum Corp., operations report.