Anadarko Petroleum Earnings Call Nuggets: Lucius, Phobos, and Huge Growers

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

Lucius and Phobos

Brian Singer – Goldman Sachs: Couple questions on Lucius. When we look at the 910 feet of oil pay there how is that divided between the Pliocene and Miocene sections and what does it suggest from a resource potential perspective both for Lucius and maybe on a risk basis for Phobos?

R. A. Walker – President and CEO: I think there’s no doubt that we couldn’t be anything more than just delighted with tickled with how that well has drilled out. I’m going to let – if you don’t mind I’m going to have Doug give you a little more color on that, but at the same time I’m not really sure there’s any takeaways for Phobos. I’ll probably let Bob Daniels answer that if you don’t mind. If I can, just leave you the impression, I think we’re all very excited. We think it means probably lots of good things for us, but it may be a little early to start trying to give additional estimates. So with that let me, if I can, let me turn it over to Doug on the Lucius and then turn it back to Bob Daniels for the Phobos question.

Your 1 Feature Stock Pick for February is hot off the press. Click here to discover it now!

Douglas P. Hazlett – Vice President, U.S. Onshore Exploration: Sure, thanks. Brian, you are right, we are very excited about Lucius, what we found in the Pliocene and Miocene sands there is very encouraging and exciting. The project is on schedule, on budget and at this point in time we have not broken out to split. What we can tell you though is just to reiterate the guidance that we see the field there’s 300 million barrel plus development and we’re extremely excited about the options that the Miocene could add to the development planning.

Robert P. Daniels – SVP Worldwide Exploration: Brian on the Phobos question, we never really had a big concern about sand content in the Pliocene and Miocene down at Phobos. We’ve got a lot of confidence. We’ll see a lot of sand down there. Its’ really the risk down there is whether it’s going to be charged coming out through the Hadrian complex into Phobos. So, we’ll just have to wait and see on that. But remember at Phobos 2, we got a deeper objective also the Lower Wilcox or the Lower Tertiary Wilcox that we’ve got to get down to.

Brian Singer – Goldman Sachs: Then separately when you think about your mix associated gas – Marcellus gas and other dry gas, and recognizing you haven’t put out guidance, but can you talk about your outlook for gas production trajectory. Does the associated gas in Marcellus win out or should we expect overall gas volume to fall going forward?

Robert G. Gwin – SVP, Finance and CFO: Brian, it’s Gwin. Our expectation is that our gas production be relatively flat. Time to time it will be up a little bit primarily driven by the outstanding results we’ve seen in the Marcellus. It’s all said by the decline we see in some of our mature fields like IHUB and our base fields onshore.

R. A. Walker – President and CEO: Brian, this is Al. We’ll give you more color in a couple of weeks, but our plans are just to maintain the four rigs we have operated there now. We’re not taking it down, we’re not taking it up, but I don’t think you should expect the industry likely in this price environment is going to do a lot with dry gas basin that does have economics in the Marcellus.

Huge Growers

Subash Chandra – Jefferies & Company Inc.: My first question on the domestic property, just curious some of these huge growers sequentially Wattenberg and wet Haynesville, sort of what can we see sustainably on a quarterly basis and what are sort of the limitations on growth here in the intermediate term if any?

Charles A. Meloy – SVP, Worldwide Operations: This is Chuck. Everywhere we are putting capital we are seeing outstanding growth. We are particularly focused on the liquids, the liquids activity in Wattenberg, Maverick, West Texas and East Texas. That’s where most of our capital is going and we continue to see growth. We’ll give you guidance in February where we are headed with regard to the company growth rate. But I think that the types of trajectories that you’ve seen in those assets in particular if you look back to the operating reports, the kind of trajectory you would envision in the future because that’s the kind of investment we are putting in there, the quality of the investments continue to be outstanding. And the growth rates particularly on the liquids side has just been remarkable. Our whole expectation here is to deliver very high returns on our drilling programs and I think that’s what we are doing.

R. A. Walker – President and CEO: I’d like to add to the fact that, in addition to the way we’re looking at it from upstream perspective we also have tried to marry that with the midstream and that’s why you’ve seen us do what we’ve done in the Rockies with both the Front Range Express and Texas Express and then the plan that we’re bringing on down in the Eagle Ford area midyear. So our belief is as we turn from ’13 into ’14 to reach that 3 billion barrels of proved reserves target we have out there in the ’14 that these midstream developments that we have been spending money on will actually feed a lot of growth both from a production and a reserve standpoint onshore which will always I think in the near-term be heavily dependent upon the success that we see both at Wattenberg and the Eagle Ford.

Subash Chandra – Jefferies & Company Inc.: And follow-up here on maybe a monetization this year maybe you’ll talk to this in your 2013 guidance but if you can comment on it now, other than Mozambique are there any other big projects for instance in – I think (Telo) talked about selling down TEN and is that in the cards for instance for you guys and if you can confirm whether TEN is somewhere around $5 billion project?

R. A. Walker – President and CEO: Well, it probably is best if I can. I’m going to give you my views here, but the better view is probably need to come from Bob Gwin, but I think – because we only have a small interest at TEN. It’s very different for us than it is for Cosmos and even though they have the same amount as well as the Telo. But as it relates to that particular development, I think we are encouraged by what we are seeing with the way the governments’ reaction to the plan of development and I don’t believe, Doug, we have any plans at all in terms of selling down there.

Douglas P. Hazlett – Vice President, U.S. Onshore Exploration: No, that’s correct. We’re very encouraged in working with the partnership and the Ghanaian government with the advancement of the TEN plan. At present we don’t see any direction that we would pursue that would involve selling down there. So, Brian, we really speculate on what total plants to do, but we are encouraged by it. We have targeted production in 2016 and so looking forward to move in that project forward and we see that that capital range rough estimate is approximate to what we see that development to cost.

R. A. Walker – President and CEO: I think beyond that Bob we have got some monetization.

Robert P. Daniels – SVP Worldwide Exploration: On monetization to the other assets to keep an eye on Brazil. As you know, early last year we had identified Brazil for divestiture. Soon thereafter, around the time we had our investor conference last year there was discussion of ANP proposing a potential unitization between the Type II block and the oil part complex to the Northwest. So we put our process on hold. Given that that unitization process has taken little while thus far and we want to go ahead and move forward, we’ve decided recently that we’ll get Brazil back on the market and see if we can work some kind of a structure such that any redetermination around the unitization might be able to be adjusted pro forma sale. The timing of that is difficult. We’re obviously targeting 2013, but there are regulatory approvals et cetera as we saw in TEN and BP transaction previously. That caused us to think that, that would probably be later in the year before it was actually closed.

R. A. Walker – President and CEO: I’m sure there are other companies that do a good job actively monetizing, bring forward value, but we got to be at the top of anyone’s list if you go back to ’06 on the way we’ve done that and just last year looking at what we did with the our OCI sale as well as what we did in this non-core area outside of Wattenberg. What we’ve done was promoting down Lucius and I guess as you’ll hear more about in a few weeks when we talk about Heidelberg. I think you continue to expect that we will be active in the management of our assets and trying wherever we can to accelerate value.

A Closer Look: Anadarko Petroleum Earnings Cheat Sheet>>