The FINANCIAL — Anadarko Petroleum Corporation on November 16 announced its 2018 capital expectations and guidance. In 2018, the company expects to make capital investments in the range of $4.2 to $4.6 billion.
The capital program is designed to enhance shareholder value by delivering attractive margins and returns, while advancing the development of the company’s core assets within discretionary cash flow.
2018 ANADARKO CAPITAL PROGRAM HIGHLIGHTS
Allocates approximately 80 percent of capital toward the Delaware and DJ basins, including Anadarko midstream, and the deepwater Gulf of Mexico
Generates material free cash flow at current strip prices and breaks even in a $50 oil and $3 natural gas commodity-price environment
Delivers a cash return on invested capital of 20 percent
Results in approximately 14-percent oil growth year-over-year, which is 19-percent oil growth per debt-adjusted-share
“Our 2018 investment plan will again be driven by capital efficiency and financial discipline,” said Anadarko Chairman, President and CEO Al Walker. “These key tenets have served us well for the last decade, as growth within cash flow is fundamental to delivering capital-efficient returns. Our repositioned asset footprint is built to succeed in a market where oil prices exhibit volatility in a $45-$60 environment, with gas averaging $3 per Mcf (thousand cubic feet). We expect next year’s capital expenditures to be inside of discretionary cash flow at $50 and $3, while generating free cash flow of more than $700 million at the current strip. Further, we plan to return substantial cash to shareholders by executing the remaining $1.5 billion of our $2.5 billion share-repurchase program during the coming year.”
“We are also modifying the metrics in our 2018 compensation program to increase the profile for the role of capital efficiency and financial discipline and refine the focus on our safety performance,” added Walker. “Performance objectives will now include cash return on invested capital, volume growth per debt-adjusted share, and reserve additions per debt-adjusted share. As I have highlighted recently, moving to debt-adjusted performance metrics in particular will align our compensation programs to the capital-allocation philosophy we have employed over the last ten years.”
U.S. FOCUS AREAS
In 2018, Anadarko plans to allocate approximately $900 million toward upstream activities in the Delaware Basin of West Texas, with an additional $500 million directed toward Anadarko midstream investments.This program supports the continuation of the company’s efforts to build out one of the most expansive and integrated infrastructure positions in the region. Anadarko has successfully delineated the majority of its Wolfcamp-A oil-weighted opportunity, which the company estimates to hold more than 3 billion barrels of oil equivalent (BOE) of net resources. The company also advanced its efforts to capture operatorship on 70 percent of its acreage position primarily in Reeves and Loving counties. Additionally, Anadarko continues to progress the construction of three Regional Oil Treating Facilities to support its more cost-effective and environmentally beneficial tankless battery design field-wide, while also securing necessary gathering, processing, and takeaway capacity. This comprehensive buildout plan and phased development approach in the basin is expected to deliver incremental oil sales volume during the second half of 2018, with total oil sales volume expected to increase more than 50 percent relative to 2017. During 2018, the company plans to average seven operated rigs and six completion crews.
In the DJ Basin of northeast Colorado, where the company has more than 2 billion BOE of net resources within its development area, Anadarko expects to invest approximately $950 million on upstream activities in 2018. It plans to average five operated rigs and three completions crews in the basin. The company expects to increase year-over-year oil sales volume from the DJ Basin by about 30 percent.
In 2018, Anadarko expects to allocate approximately $1.1 billion toward its deepwater Gulf of Mexico operations. The majority of these investments are expected to be directed toward high-return oil development opportunities near operated infrastructure at Lucius, Horn Mountain, Marlin, Holstein and Marco Polo. The company plans to operate two floating drillships and spud approximately five development wells in the Gulf during the year, according to Anadarko.
INTERNATIONAL OPERATIONS
Anadarko plans to allocate more than $150 million toward its international cash-generating operations in Algeria and Ghana in 2018. These investments will support further drilling in the TEN development area, which is expected to commence in early 2018, as well as additional drilling operations in the Jubilee field following the Ghanaian Government’s recent approval of the full-field plan of development.
EXPLORATION AND LNG
The company’s exploration investments in 2018 are expected to total about $200 million. Exploration spending will primarily be focused on the Gulf of Mexico, where the company plans to drill identified prospects near existing operated infrastructure. Additional exploration investment will be allocated to the U.S. onshore, as the company continues to identify future areas that can make a material and scalable addition to its portfolio.
Approximately $150 million is expected to be invested during 2018 as the company advances the Mozambique LNG project. This investment will primarily be used to fund Anadarko’s portion of the costs associated with preparing the site of the future LNG park.
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