Anadarko Petroleum Q3 2010 Earnings Call Transcript

Anadarko Petroleum (APC)

Q3 2010 Earnings Call

November 02, 2010 10:00 am ET

Executives

Robert Daniels - Senior Vice President of Worldwide Exploration

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

Robert Reeves - Chief Administrative Officer, Senior Vice President and General Counsel

R. Walker - President and Chief Operating Officer

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

John Colglazier - Vice President of Investor Relations & Communications

Charles Meloy - Senior Vice President of Worldwide Operations

Analysts

Brian Singer - Goldman Sachs Group Inc.

Joseph Magner - Macquarie Research

Mark Polak - Scotia Capital Inc.

David Tameron - Wells Fargo Securities, LLC

John Herrlin - Merrill Lynch

Douglas Leggate - BofA Merrill Lynch

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

Scott Hanold - RBC Capital Markets Corporation

Scott Wilmoth - Simmons

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Q3 2010 Anadarko Petroleum Corporation Earnings Conference Call. My name is Veronica, 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 call, Mr. John Colglazier. Please proceed.

John Colglazier

Thank you, Veronica. Good morning, everyone, and welcome to Anadarko's Third Quarter 2010 Conference Call. Joining me on the call today are Jim Hackett, our Chairman and CEO; and other executives

who will be available to answer questions later on in the call.

As we've done in the past, we have posted additional supplemental information in our operations report that's posted on our website. In addition, last night, we also filed our third quarter 10-Q that we would encourage you to review.

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 the time. However, a number of factors could cause actual results to differ materially from what we discussed today. You should read our full disclosure on forward-looking statements in our latest presentation, 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 review the reconciliation slides attached on our release as well as on our website. And we encourage you to read the cautionary notes 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. In the third quarter, the company delivered strong reported sales volumes of approximately 58 million barrels of oil equivalent, marking the 15th consecutive quarter in our portfolio met or surpassed the guidance that we provide to the investment community. This third quarter sales number was at the high end of our guidance and included the effects of tanker scheduling in Algeria and both planned and unplanned downtime in certain onshore and offshore facilities.

There are several other highlights in the quarter to mention. First, positive results from our ongoing shale development activities in the U.S. and onshore enabled us to enhance the net risk captured resources in our Marcellus and Eagleford shale plays. Second, our exploration programs continued to deliver additional world-class discoveries. And third, the portfolio generated considerable cash flow during the quarter, while we saw a success in significantly strengthening our balance sheet.

Now I'll walk through some of the more significant operational accomplishments during the quarter. Our U.S. onshore drilling activities remain focused on liquid-rich opportunities. As a result, liquids comprise about 41% of our total third quarter sales volumes. We also continue to drive down operating costs, with a 17% improvement in lease-operating expenses for BOE year-to-date relative to 2009.

In the Rockies, sales volumes for the quarter increased by about 10% over the third quarter 2009, primarily from liquids-focused production growth in Wattenberg and Greater Natural Buttes. The Wattenberg and Greater Natural Buttes teams set new production records during the quarter. In the liquids-rich Wattenberg field, we achieved record oil delivery of nearly 3,000 barrels in a 24-hour period. On the Greater Natural Buttes area, the teams set a daily gross production record of more than 412 million cubic feet equivalent per day during the quarter.

In Laramie County, Wyoming, we spud our first operated horizontal well in the oil-focused portion of the Niobrara play. The completion activity is expected to commence in the next couple of weeks. We've also drilled four vertical test wells in the play. We drilled about 500,000 gross acres, and enjoy very attractive economics due to our ownership of the minerals in perpetuity by virtue of our land grant position.

We also completed the acquisition of 160 square miles of 3D seismic here, and we expect to increase our activity in the play by adding additional rigs in 2011. In the Southern and Appalachia region, our teams increased third quarter sales volumes by about 9% over the third quarter of 2009, led by the Eagleford and Marcellus Shale plays. For EMP development in these two shale plays, we have better plans to substantial net risk capture resource potential for each asset.

We'll talk about the Marcellus first, where we've now identified estimated net risk captured resources of more than 6 trillion cubic feet. We're consistently seeing wells of IPs of better than 7 million cubic feet per day across our entire core position, encompassed within 750,000 gross acres in North-Central Pennsylvania.

During the last week of September, the Marcellus team also achieved an all-time weekly production high of 174 million cubic feet per day gross from 46 producing wells. We're expecting a significant increase in the number of producing wells and overall production as we continue to build infrastructure in the field.

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