Anadarko announces 2018 capital program and sales-volume guidance
Friday, Nov 17, 2017
Anadarko Petroleum Corporation (NYSE: APC) today announced its 2018 capital expectations and guidance. In 2018, the company expects to make capital investments in the range of $4.2 to $4.6 billion.(1) The capital program is designed to enhance shareholder value by delivering attractive margins and returns, while advancing the development of the company's core assets within discretionary cash flow.

2018 ANADARKO CAPITAL PROGRAM HIGHLIGHTS

  • Allocates approximately 80 percent of capital toward the Delaware and DJ basins, including Anadarko midstream, and the deepwater Gulf of Mexico
  • Generates material free cash flow at current strip prices and breaks even in a $50 oil and $3 natural gas commodity-price environment
  • Delivers a cash return on invested capital of 20 percent
  • Results in approximately 14-percent oil growth year-over-year, which is 19-percent oil growth per debt-adjusted-share
"Our 2018 investment plan will again be driven by capital efficiency and financial discipline," said Anadarko Chairman, President and CEO Al Walker. "These key tenets have served us well for the last decade, as growth within cash flow is fundamental to delivering capital-efficient returns. Our repositioned asset footprint is built to succeed in a market where oil prices exhibit volatility in a $45-$60 environment, with gas averaging $3 per Mcf (thousand cubic feet). We expect next year's capital expenditures to be inside of discretionary cash flow at $50 and $3, while generating free cash flow of more than $700 million at the current strip.(2) Further, we plan to return substantial cash to shareholders by executing the remaining $1.5 billion of our $2.5 billion share-repurchase program during the coming year."

"We are also modifying the metrics in our 2018 compensation program to increase the profile for the role of capital efficiency and financial discipline and refine the focus on our safety performance," added Walker. "Performance objectives will now include cash return on invested capital,(3) volume growth per debt-adjusted share, and reserve additions per debt-adjusted share.(5) As I have highlighted recently, moving to debt-adjusted performance metrics in particular will align our compensation programs to the capital-allocation philosophy we have employed over the last ten years."

U.S. FOCUS AREAS

In 2018, Anadarko plans to allocate approximately $900 million toward upstream activities in the Delaware Basin of West Texas, with an additional $500 million directed toward Anadarko midstream investments.(1) This program supports the continuation of the company's efforts to build out one of the most expansive and integrated infrastructure positions in the region. Anadarko has successfully delineated the majority of its Wolfcamp-A oil-weighted opportunity, which the company estimates to hold more than 3 billion barrels of oil equivalent (BOE) of net resources. The company also advanced its efforts to capture operatorship on 70 percent of its acreage position primarily in Reeves and Loving counties. Additionally, Anadarko continues to progress the construction of three Regional Oil Treating Facilities to support its more cost-effective and environmentally beneficial tankless battery design field-wide, while also securing necessary gathering, processing, and takeaway capacity. This comprehensive buildout plan and phased development approach in the basin is expected to deliver incremental oil sales volume during the second half of 2018, with total oil sales volume expected to increase more than 50 percent relative to 2017. During 2018, the company plans to average seven operated rigs and six completion crews.

In the DJ Basin of northeast Colorado, where the company has more than 2 billion BOE of net resources within its development area, Anadarko expects to invest approximately $950 million on upstream activities in 2018. It plans to average five operated rigs and three completions crews in the basin. The company expects to increase year-over-year oil sales volume from the DJ Basin by about 30 percent.

In 2018, Anadarko expects to allocate approximately $1.1 billion toward its deepwater Gulf of Mexico operations. The majority of these investments are expected to be directed toward high-return oil development opportunities near operated infrastructure at Lucius, Horn Mountain, Marlin, Holstein and Marco Polo. The company plans to operate two floating drillships and spud approximately five development wells in the Gulf during the year.

INTERNATIONAL OPERATIONS

Anadarko plans to allocate more than $150 million toward its international cash-generating operations in Algeria and Ghana in 2018. These investments will support further drilling in the TEN development area, which is expected to commence in early 2018, as well as additional drilling operations in the Jubilee field following the Ghanaian Government's recent approval of the full-field plan of development.

EXPLORATION AND LNG

The company's exploration investments in 2018 are expected to total about $200 million. Exploration spending will primarily be focused on the Gulf of Mexico, where the company plans to drill identified prospects near existing operated infrastructure. Additional exploration investment will be allocated to the U.S. onshore, as the company continues to identify future areas that can make a material and scalable addition to its portfolio.

Approximately $150 million is expected to be invested during 2018 as the company advances the Mozambique LNG project. This investment will primarily be used to fund Anadarko's portion of the costs associated with preparing the site of the future LNG park.

PRESENTATION AND WEBCAST

Anadarko's Executive Vice President, Finance and Chief Financial Officer, Bob Gwin, will provide additional details and information regarding the 2018 capital program during his presentation at the Bank of America Merrill Lynch 2017 Global Energy Conference today at 10:30 a.m. EST. The link to the audio webcast presentation will be available in the Investor section at www.anadarko.com. The replay and slide presentation also will be available on the company's website for approximately 30 days following the event.

(1) Does not include capital investments made by Western Gas Partners, LP (NYSE: WES).

(2) See the accompanying Adjusted Free Cash Flow table for a reconciliation of the GAAP to the non-GAAP financial measure and a statement indicating why management believes the non-GAAP financial measure provides useful information for investors.

Anadarko Petroleum Corporation's mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world's health and welfare. As of year-end 2016, the company had approximately 1.72 billion barrels-equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. 

For more information, please visit: http://www.anadarko.com
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