is hunting for more than oil and gas.
The Houston-based exploration and production company is searching for a new way to improve both its growth rate and its return for investors. It is banking on a major asset sales -- which will reduce its proved reserves by some 15% -- to achieve its goal.
"Since the beginning of the year, we've been conducting a thorough review of the entire company to determine the best path forward," CEO Jim Hackett announced late Wednesday. "The end result
will be a company positioned to deliver stronger, highly visible growth and improved cash margins through 2009 and beyond."
Anadarko plans to sell $2.5 billion worth of assets in less than a year and emerge as a company with an annual growth rate of between 5% to 9%. The company -- which previously expected to grow by 3% to 7% a year -- now believes that it can considerably ramp up growth by as early as next year.
Quite simply, Anadarko says it will shed its more difficult businesses and focus instead on its strongest performers.
"We are retaining our commitment to exploration and development," Hackett stressed. "We will strengthen our focus in those areas. However, we are changing which properties we choose to work and how we're going to manage them."
Anadarko plans to sell properties -- which hold up to 350 million barrels of oil equivalent -- located in the Gulf of Mexico, western Canada and the mid-continental United States. It will then focus entirely on two remaining types of assets. It will rely on its "foundation" assets, located primarily in onshore North America, to generate significant free cash flow to invest in its "growth platform" ventures in areas like Algeria, the Gulf of Mexico and Qatar.
It plans to use excess cash, including asset sale proceeds, to strengthen its balance sheet and purchase up to $2 billion worth of stock. It expects to close most of the transactions by the end of the year and the remainder in the first quarter of 2005.
Anadarko has adopted its new strategy at a time when it can capitalize on the current industry boom.
"The best time to fix your roof is when the sun is shining," Hackett explained. "And it's shining on our industry right now, with recent property sales going at record prices -- this strategy will move Anadarko to the next logical phase of its evolution: A company positioned to continue to generate sustainable net asset value growth at a competitive return on capital."
Investors clearly approved. Shares of Anadarko, down 29 cents to $56.08 at the close, jumped 1.5% to $56.94 in Wednesday's after-hours session.