Anadarko Petroleum Q2 2010 Earnings Call Transcript

Anadarko Petroleum Q2 2010 Earnings Call Transcript
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Anadarko Petroleum (APC)

Q2 2010 Earnings Call

August 04, 2010 9:00 am ET

Executives

Robert Daniels - Senior Vice President of Worldwide Exploration

James Hackett - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee

Robert Gwin - Chief Financial Officer and Senior Vice President of Finance

R. Walker - President and Chief Operating Officer

John Colglazier - Vice President of Investor Relations & Communications

Charles Meloy - Senior Vice President of Worldwide Operations

Analysts

Philip Dodge - Stanford Group Company

Brian Singer - Goldman Sachs Group Inc.

Subash Chandra - Jefferies & Company, Inc.

David Tameron - Wells Fargo Securities, LLC

David Kistler - Simmons & Company

Diane Jaffee

Douglas Leggate - BofA Merrill Lynch

Joseph Allman - JP Morgan Chase & Co

David Heikkinen - Tudor, Pickering & Co. Securities, Inc.

Rehan Rashid - FBR Capital Markets & Co.

Presentation

Operator

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» Anadarko Petroleum Corp. Q2 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Anadarko Petroleum Corporation Earnings Conference Call. My name is Michael, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's conference, Mr. John Colglazier. You may proceed.

John Colglazier

Thanks, Michael. Good morning, everyone, and welcome to Anadarko's Second Quarter 2010 Conference Call. Joining me on the call today are Jim Hackett, our Chairman and CEO; and other executives who will be able to answer questions later in the call. As we've done in the past, we have posted supplemental information in our operations report that is available on our website.

Before I turn the call over to Jim, I need to remind you that this presentation contains our best and most reasonable estimates and information available at this time. However, a number of factors could cause actual results to differ materially from what we discuss. You should read our full disclosure on forward-looking statements in our presentation slides, our latest 10-K, other filings and press releases for the risk factors associated with our business. In addition, we'll reference certain non-GAAP measures, so be sure to see the reconciliations in our earnings release and on our website. We encourage you to read the Cautionary Note to U.S. Investors contained in the presentation slides for this call.

And with that, let me turn the call over to Jim Hackett.

James Hackett

Thanks, John. Good morning, everyone. I'm pleased to share with you the second quarter operational achievements. And then later in the call, we'll provide an overview of our financial results. I'll also express our thoughts regarding the tragic Deepwater Horizon events in the Gulf of Mexico.

Anadarko delivered strong results consistent with its business objectives during the second quarter. We increased quarterly sales volumes by about 6% year-over-year, continued to focus on our margins and achieved significantly lower lease operating expenses, expanded the success of our onshore shales and unconventional assets, set production records in many of our major asset areas while increasing capital efficiencies, achieved further drilling success in deepwater with positive appraisals at Lucius and Vito in the Gulf of Mexico and a Jubilee area in Ghana, and reached significant milestones with our sanctioned mega projects with all three remaining on schedule and on budget.

As reported in last night's earnings release, our producing assets delivered total sales volumes of 59 million barrels of oil equivalent for the quarter, including a 16% increase in liquid volumes year-over-year. This growth was driven by our shales and unconventional place both in the Rockies and in the Southern and Appalachia regions. The Rockies delivered sales growth of about 10% relative to the second quarter of 2009, with NGL sales increasing about 70% and crude sales about 20%. The Greater Natural Buttes area, Wattenberg, Salt Creek, Monell and the Wamsutter field all reported operating production records during the quarter.

With a focus we have in liquids-rich plays, Anadarko is taking steps to ensure its ability to fractionate and transport NGLs by entering into a six-year 62,000 barrel a day agreement. This provides firm capacity for NGL production from the Rockies in Texas, as well as access to the Gulf Coast markets.

Focusing upon the shale plays they experienced significant growth in average daily net sales volumes from 7,600 barrels of oil equivalent per day in the first quarter of this year to 13,300 barrels of oil equivalent per day in the second quarter.

We continue to effectively manage the cost structure across the company as well. Lease operating expenses of $3.32 per BOE was a 15% improvement over the second quarter of 2009. As I mentioned in our last conference call, these efforts to reduce LOE have made us one of the most efficient producers in our peer group. On to our efforts to safely improve spud-to-spud cycle times have led to many field setting new drilling time records, including seven different asset areas just in the Southern and Appalachia region.

I want to especially highlight the tremendous progress the E&P teams have made in our shale plays. Starting in the Maverick Basin in South Texas, we've transitioned the Eagle Ford play from an exploration effort to a full scale development project. Our wells have a high liquids content, comprising about 75% of the revenue stream and due to the high capital returns it delivers, this has become an area for increased capital deployment. The cost to drill these wells is about $4.5 million per well, with estimated ultimate recoveries of more than 300,000 barrels.

In addition, we're starting to see drilling and completion costs trending downward, as we move to multi-well pad drilling and optimizing our completion configuration. Based on these results, we've ramped up our development program to six rigs. There is significant running room in this preferred portion of the play with a potential to drill more than 2,000 Eagle Ford wells on the 400,000 gross acres that we control in the Maverick Basin.

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