NEW YORK (Trefis) -- Anadarko (APC) - Get Report is one of the largest independent oil and gas producers in the U.S., with 2.3 billion barrels of oil equivalent of proven reserves. It competes with other established oil producers like Exxon (XOM) - Get Report, ConocoPhillips (COP) - Get Report and Chevron (CVX) - Get Report. Anadarko has focused its operations on exploration and production of oil and gas, unlike some of its competitors who have integrated crude oil refining capabilities as well.
Anadarko recently announced its third major natural gas discovery this year in the Offshore Area 1 of Mozambique's Rovuma Basin at the Lagosta prospect. The discovery well encountered multiple high-quality Oligocene and Eocene sands for natural gas, which could help lift production. Natural gas production and sales accounts for 43% of the
Natural Gas Discovery to Lift Production
Anadarko's natural gas production has been increasing gradually from 558 billion cubic feet per year in 2006 to 809 billion cubic feet in 2009, but its proven reserves of natural gas have been depleting fast from 10.5 trillion cubic feet in 2006 to 7.7 trillion cubic feet in 2009. Going by the current rate of production, Anadarko's natural gas reserves will last for nearly 10 years compared to 14 years for ConocoPhillips and 20 years for Exxon.
The recent discoveries will help Anadarko to build back its reserves and increase production in the long term. We forecast Anadarko's natural gas production and sales volume to reach nearly 1,200 billion cubic feet per year by 2017.
There could be a potential 8% upside to the Trefis price estimate for Anadarko, if it successfully increases its natural gas production to about 1,400 billion cubic feet per year by 2017. This seems achievable, given the advances in horizontal drilling and improvements in technology, which has been key in increasing the size and productivity in recoverable resources.
Oil Discovery in Offshore Sierra Leone
In another discovery, Anadarko recently found oil in offshore Sierra Leone. Anadarko has nearly 1 billion barrels of crude oil reserves, which is only about a quarter of Exxon's oil reserves. This discovery will provide a much needed boost to Anadarko's oil assets. We forecast Anadarko's crude oil production and sales to reach nearly 86 million barrels a year in the coming years from its current level of about 70 million barrels a year.
There could be a potential 10% downside to the Trefis price estimate for Anadarko if it fails to capitalize on the discovery and its crude oil production and sales remained flat at 70 million barrels a year until 2017. The failure could be because of unfavorable weather conditions or due to a delay in the start of production from the newly discovered well.
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