Anadarko Petroleum Earnings Call Nuggets: Jubilee Production and Gulf of Mexico

Anadarko Petroleum Corporation (NYSE:APC) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Jubilee Production

Brian Singer – Goldman Sachs: Can you expand a little on the comment with regards to Jubilee production that you expect the gas handling capacity to increase oil volumes into late 2013? Can you just kind of give us an update there on well performance at Jubilee, and then when you think about where oil volumes can go? Does it get to the 120,000 barrel a day capacity and stay there or should we expect something above or below?

R. A. Walker – President and CEO: Sure, you bet. Doug Lawler and I will sort of tag team you on this one. I think some of what we’re talking about there, you’ll hear more from the operator Tullow, but we are very encouraged for the things that we’ve talked about today that we can point to with respect to how well that field is progressing. And Doug, you might take just a few minutes and talk specifically about some of the things we’re seeing.

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Robert D. Lawler – SVP, International and Deepwater Operations: Sure. Brian, as you know, the facility is rated at 120,000 barrels a day. We’re currently producing about 110,000 on average. The work that you’re describing is to do some topside facility work that will result in giving us some additional gas injection capability. We see that being able to get us to around 120,000 barrels a day from the 110,000 at present. The current drilling activity; the Phase 1 program as well as the acid jobs that we’ve conducted have performed really well. At present the flow potential from the field is greater than what we can product through the FPSO right now. And so, we have some additional asset stimulation work as well a few other Phase 1A wells that will be drilled later this year and into 2014. But we’re hopeful that this additional injection capability will get us up to the 120 and in our forecast for the year we expect it to be in the 110 to 120 range as that gets implemented. And target time for that is targeting in the third quarter…

Brian Singer – Goldman Sachs: Then as a follow-up, your natural gas production has been perhaps surprisingly resilient certainly relative to your guidance and especially in the price environment. Obviously, this kind of question varies by area. But can you kind of talk to what extent this is being driven by backlog reduction in area such as the Marcellus and where that stands versus greater gas and the production mix in some of your associated gas areas or just better well performance overall?

R. A. Walker – President and CEO: You bet. Since most of this is an onshore issue for us, I’m going to ask Chuck Meloy if he would to address the question.

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Charles A. Meloy – SVP, Worldwide Operations: Brian, as you’ve seen, our gas production has been steady to slightly up. And there’s two or three good reasons for that. The first off is just the Marcellus performance. If you look year-over-year the growth has been phenomenal. Our sales are up about 71% from the prior year and that’s a combination of completing the wells we’re drilling and unloading the backlog that was in our non-op position and getting the infrastructure completed in that areas. And as all that has come together, you’ve seen some very cost-efficient low OpEx cost, really good margin for gas come online as some of the lowest cost gas in America. So, it’s been an exceptional performing asset for us. We’ve also seen just really strong performance from the IHUB area where we originally came in we would’ve – we’ve exceeded a Tcf of production from that field and the wells have outperformed our expectations and continue to deliver gas that quite frankly we didn’t see in our curve. So, those two and smaller other bits and pieces have added up to a really good story for us.

Brian Singer – Goldman Sachs: And is your Marcellus backlog now at a normal level or is it still at an abnormal backlog; where do you see that going?

Charles A. Meloy – SVP, Worldwide Operations: Well, I’m not sure what normal would be, Brian, but I think we’re in a position where we’ve got it worked down and Chesapeake in particular has worked us down quite considerably and the addition of infrastructure out there I think is as a big impact on as just completion. So, we’re starting to open up the pipes and give us some room to flow and that’s been a big help in our production numbers.

Gulf of Mexico

Scott Hanold – RBC Capital Markets: When you look at your success in the Gulf of Mexico, can you talk about how you’re looking at your shipping ground activity? I mean, you’re looking to appraise Shenandoah or Phobos in the near-term or by the end of the year, and what potential impact does Raptor have on maybe your thoughts of kind of what comes next?

R. A. Walker – President and CEO: Well, let me take that in part and have Bob Daniels take it in part. I think what you’ve seen is we’ve continued to have extraordinarily good success both with exploration and development drilling in the Gulf of Mexico. You’ve got Lucius and Heidelberg coming on as the next mega projects from the Gulf of Mexico with oil production starting next year for Lucius. As we look at our inventory, I think you can continue to expect that we will manage that pretty actively just like we have been. And frankly, additional exploration success there is not critical. We’re always happy when we have it obviously because it gives us more optionality. But I’m going to let Bob address the question of exactly what he sees from an exploration standpoint through this year next, because we do have a lot of things still to drill, and you made reference to one well that is drilling but we have a lot of other things still planned to drill through the course of this year.

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Robert P. Daniels – SVP, International and Deepwater Exploration: Yeah, Scott, Bob here. We’ve had really, really good success there and that’s a great problem to have with how we’re going to appraise these things. Shenandoah, obviously, needs an additional drilling. We plan to get a rig out there before the end of the year to drill the next well on it. We still are waiting on the Yucatan results, just south of us; about three to four miles south of us. That’s going to be really key for the overall Shenandoah Yucatan area. And then we are drilling an appraisal well over at Coronado where we’re the non-operator. Regarding Raptor, we’re not down on that well yet so we’ll have to see what we find, but we’re very hopeful we’ll need appraisal work there. Again, good problem to have and we’ll just have to roll it into our overall rig planning based on the results that we see, but we do have Shenandoah scheduled for right at the end of the year to get a rig back on and do another appraisal well there…

Scott Hanold – RBC Capital Markets: And is there any change to your guys had planned in terms of what you’ve done in the past with a fair amount of success to potentially monetize some of these successes prior to development? Is that continue to be something you look at in the Gulf?

Robert P. Daniels – SVP, International and Deepwater Exploration: Absolutely, you’ve seen what we did at Lucius and what we did at Heidelberg and the value that we’re able to realize for those opportunities. So, that’s a great model. It carries our forward capital and puts a marker as to what the value of these discoveries are.

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Scott Hanold – RBC Capital Markets: And one final question if I could. Permian volumes are down a bit in the quarter sequentially. It looks like you guys are still fairly active there yet, but was there a specific reason for that?

Charles A. Meloy – SVP, Worldwide Operations: Well, the Permian has been a great performer for us. The reason for the down is essentially the transformation of the operatorship on our non-operated position and those guys are just getting up to highway speed and doing a good job and they are starting to build up their program and I’ll look for that to reverse pretty quickly.

Scott Hanold – RBC Capital Markets: Is that sort of the Chesapeake sales to Chevron and Royal Dutch?

Charles A. Meloy – SVP, Worldwide Operations: Yes.

A Closer Look: Anadarko Petroleum Earnings Cheat Sheet>>