Anadarko Petroleum's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Anadarko Petroleum (APC)

Q4 2011 Earnings Call

February 07, 2012 9:00 am ET

Executives

John M. Colglazier - Vice President of Investor Relations & Communications

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

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

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

Charles A. Meloy - Senior Vice President of Worldwide Operations

R. A. Walker - President and Chief Operating Officer

A. Scott Moore - Vice President of Marketing

Robert P. Daniels - Senior Vice President of Worldwide Exploration

Analysts

Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division

Subash Chandra - Jefferies & Company, Inc., Research Division

Joseph D. Allman - JP Morgan Chase & Co, Research Division

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

David R. Tameron - Wells Fargo Securities, LLC, Research Division

Joseph Patrick Magner - Macquarie Research

Scott Hanold - RBC Capital Markets, LLC, Research Division

David W. Kistler - Simmons & Company International, Research Division

Brian Singer - Goldman Sachs Group Inc., Research Division

John Malone

Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division

Michael A. Hall - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Anadarko Petroleum Corporation Earnings Conference Call. My name is Larry, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. John Colglazier. Please proceed.

John M. Colglazier

Well, thank you, Larry. Good morning, everyone. We're glad you could join us today for Anadarko's Fourth Quarter and Year-end 2011 Conference Call. We also look forward to hosting to you at our investor conference here in The Woodlands on March 13, where we will provide a more in-depth look at the growth and value-creation opportunities our portfolio can deliver, as well as discuss our 2012 capital program and guidance.

I need to remind you that today's presentation will contain our best and most reasonable estimates and information. 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 we've included additional information in our quarterly operations report on our website.

In just a moment, I'll turn the call over to Jim Hackett, our Chairman and CEO, who will discuss our 2011 results. Jim is joined by other members of our executive team, who'll be available to answer questions later in the call. With that, let me turn it over to Jim.

James T. Hackett

Thanks, John, and good morning, everyone. Anadarko had a strong finish to an excellent operational year, leading to record volumes, strong cash flows and industry-leading exploration success. In 2011, we delivered sales volumes at the high end, while holding capital expenditures at the low end of guidance. We continue to drive improvements in drilling efficiencies across our U.S. onshore operating areas, and this contributed to record sales volumes of 248 million barrels of oil equivalent, while spending less than anticipated in -- cash capital and achieving the best safety performance in the company's history.

In addition, we are well on our way toward meeting our objective of 3 billion barrels of oil equivalent of proved reserves by year-end 2014. We replaced 159% of our produced reserves at competitive cost this past year and ended the year with approximately 2.54 billion barrels of oil equivalent of proved reserves, which is a 5% increase over year-end 2010 and was accomplished almost entirely through the drill bed.

Our record sales were driven by a 10% year-over-year increase in liquids volumes, which averaged more than 290,000 barrels per day. During the fourth quarter, approximately 70% of our crude oil volumes received waterborne pricing, resulting in an overall oil price realization of $11 per barrel above WTI. We also benefited from NGL volumes, receiving 59% of WTI pricing through our ability to access Mont Belvieu in the premium Gulf Coast markets.

These results demonstrate that our liquids-focused capital allocations are working. At year-end 2011, liquids comprised 43% of our total sales volumes, delivering an incremental 70,000 barrels per day or a 31% increase since 2008, when we began targeting liquids-rich areas of our portfolio. We plan to continue this capital allocation approach that will drive us toward higher liquids production in the years ahead.

Our fourth quarter results provide an excellent illustration of significant liquids-growth achieved in several of our core operating areas. For instance, in the Wattenberg field, which we'll talk more about momentarily, we achieved a 24% overall sales volume increase over the fourth quarter 2010, with the liquids from the field increasing at twice that rate, adding almost 13,000 barrels per day.

Comparing year-over-year gross exit rates in the Eagleford Shale, we achieved an increase of approximately 50,000 barrels per day from our TEN rig program, representing 185% growth. We remain one of the largest producers in this highly economic area with a gross production exit rate of approximately 77,000 barrels of oil equivalent per day and with liquids comprising approximately 65% of the production stream.

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