Replies to post #209 on The Rising Influence of Rising Affluence

[DewDiligence]

APC Reports 2Q09 Results

[This PR was issued in early August. I’ve omitted the detailed financial tables because they are available in the actual PR and on APC’s website.

As with most natural-resources companies, APC’s GAAP earnings give a distorted indication of profitability because of large non-cash expenses for DD&A (depreciation, depletion and amortization) and dry-hole write-offs. 2Q09 EPS was a loss of 0.47 (a loss of 0.56 excluding hedging operations and non-recurring items), but free cash flow after cap-ex was $631M.

APC is often thought of as a gas company and the 2Q09 BOE production numbers—63% NG, 29% oil, and 7% NG liquids—bear this out. However, the breakdown of hydrocarbon dollar sales in 2Q09 gives a very different picture: 50% oil, 43% NG, and 7% NG liquids. NG production is 100% from the US, while oil production is 23/ from the US and 1/3 from Algeria.

APC’s exploration program, which encompasses most of the world’s promising regions, is focused on high-impact oil projects and is the main reason to own the stock, IMO.]

http://finance.yahoo.com/news/Anadarko-Announces-bw-2891068236.html?x=0&.v=1

›Monday August 3, 2009, 4:09 pm EDT

HOUSTON--(BUSINESS WIRE)--Anadarko Petroleum Corporation (NYSE: APC ) today announced a second-quarter 2009 net loss from continuing operations attributable to common stockholders of $224 million, or $0.47 per share (diluted). These results include certain items typically excluded by the investment community in published estimates. In total, these items decreased the net loss by approximately $39 million, or $0.09 per share (diluted) on an after-tax basis. Cash flow from continuing operations in the second quarter of 2009 was $1.228 billion, and discretionary cash flow totaled $1.545 billion. [These figures exclude 2Q09 cap-ex of $914M; the “discretionary” cash-flow figure above differs from the regular cash-flow figure due to the timing tax-related items.]

SECOND-QUARTER 2009 HIGHLIGHTS

* Achieved 4-percent sequential volume growth over first-quarter 2009

* Reduced lease operating expense per barrel of oil equivalent (BOE) by 12 percent from first-quarter 2009

* Announced a deepwater discovery in the Gulf of Mexico

* Strengthened liquidity by effectively accessing the capital markets

“The strength of Anadarko’s portfolio was clearly demonstrated during the quarter, as we delivered record sales volumes (from retained properties) and improved lease operating expenses relative to both the prior-year period and the first quarter of 2009,” Anadarko Chairman and CEO Jim Hackett said. “We are continuing to drive down costs to better align them with the current commodity-price environment. I am also very pleased with the excellent performance of our exploration teams, which have announced six deepwater discoveries so far this year. Additionally, during the quarter we continued to prudently manage our balance sheet by accessing the capital markets to substantially strengthen our liquidity position.”

Last week, Anadarko announced the Vito discovery in the Gulf of Mexico in Mississippi Canyon block 984. The well encountered more than 250 net feet of oil pay, and the partners are currently evaluating the data and timing of future appraisal activity. During the second quarter, Anadarko announced the Samurai discovery in the Gulf of Mexico in Green Canyon block 432, which is 12 miles north of the company’s Marco Polo facility. The discovery well encountered more than 120 feet of net oil pay. The company plans to drill an appraisal well within the next year. These discoveries add to the deepwater discoveries announced during the first quarter of this year at the Heidelberg and Shenandoah wells in the Gulf of Mexico and the Tweneboa and Mahogany Deep discoveries offshore Ghana. Anadarko plans to drill several significant appraisal wells and at least six high-impact exploration wells during the remainder of 2009, with each exploration well targeting resources of more than 100 million BOE.

“Anadarko’s exploration success,” continued Hackett, “coupled with our strong operational performance and the advancement of our three mega projects, including the recent approval of the Jubilee Phase I Plan of Development and Unitization Agreement by the Ghanaian government, continues to deliver excellent value today and positions the company to continue to do so in the future.”

Second-quarter 2009 sales volumes of natural gas, crude oil and natural gas liquids totaled 56 million BOE, or 617,000 BOE per day, comprised of natural gas sales volumes that averaged 2.336 billion cubic feet per day, oil sales volumes that averaged 182,000 barrels per day and natural gas liquids sales volumes that averaged 46,000 barrels per day. [I.e., the BOE breakdown of 2Q09 production was 63% NG, 29% oil, and 7% NG liquids.]

CONFERENCE CALL TOMORROW AT 9 A.M. CDT, 10 A.M. EDT

Anadarko will host a conference call on Tuesday Aug. 4, at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) to discuss second-quarter results and the company’s outlook for the remainder of 2009. The dial-in number is 888.713.4214 in the United States or 617.213.4866 internationally. The confirmation number is 22769023. For complete instructions on how to participate in the conference call, or to listen to the live audio webcast and slide presentation, please visit www.anadarko.com. A replay of the call will also be available on the Web site for approximately 30 days following the conference call.

ANADARKO OPERATIONS REPORT

For more details on Anadarko’s operations, please refer to the comprehensive report on second-quarter activity. The report will be available at www.anadarko.com on the Investor Relations page.

FINANCIAL DATA

Nine pages of summary financial data follow, including current hedge positions, financial guidance and supplemental production guidance. [I omitted these tables because they are available at APC’s website.]

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 2008, the company had approximately 2.3 billion barrels of oil equivalent of proved reserves, making it one of the world’s largest independent exploration and production companies. For more information about Anadarko, please visit www.anadarko.com.‹

[DewDiligence]

BP’s Big Find Cements Gulf's Deepwater Revival

[32,000 feet under the ocean floor, beneath 4,000 feet of water, BP’s new Tiber find in the Gulf of Mexico’s “lower tertiary” is the deepest oil find anywhere in history and is thought to hold as much as 500mln bbl of recoverable oil. BP owns 62% of the project, PBR 20%, and COP 18%.]

http://online.wsj.com/article/SB125189057895179241.html

›SEPTEMBER 3, 2009
By RUSSELL GOLD

BP PLC announced a major new oil find in the Gulf of Mexico, the latest in a string of discoveries there that cements the offshore waters of the southern U.S. as one of the oil world's most promising exploration regions.

BP said its Tiber prospect, about 200 miles due south of Lake Charles, La., is a "giant." The field is estimated to contain three billion barrels of oil, although only a fraction of that may ever be extracted, spokesman Daren Beaudo said.

BP is already the biggest producer in the Gulf, pumping the oil and natural gas equivalent of 400,000 barrels there a day. [The Tiber project could BP’s Gulf production to about 650K boe/d in the next 6-8 years and add about 5% to BP’s worldwide reserves.]

Just two decades ago, the Gulf of Mexico was called the "Dead Sea" by an industry that believed it had already offered up all its big discoveries. But now it is again front and center for petroleum explorers.

As new technologies have enabled exploration in the deepest recesses of the Gulf, nearly a dozen discoveries, including BP's Tiber, have been made beneath nearly two miles of water. Indeed, a BP spokesman said of Tiber: "We believe it's the deepest well ever drilled by the oil and gas industry." [This means the deepest well anywhere, not just in the Gulf.]

The deep-water successes have spurred new enthusiasm that oil production in the Gulf of Mexico will rise. The U.S. Minerals Management Service, which oversees offshore oil leases, predicts 1.88 million barrels of oil a day will be produced in 2013, up from a storm-battered 1.14 million barrels a day last year. [This 2013 figure could comprise as much as 10% of total US oil consumption.]

In 2010, about 14% of crude oil production in the Lower 48 states will come from four deepwater Gulf oil fields, two of which, Atlantis and Thunder Horse, are operated by BP, the U.S. Energy Information Administration said.

The technological wizardry required to suck oil from the ancient rocks, known as the Gulf's lower tertiary, underscores how extraordinarily expensive it is to develop these prospects. To drill each well costs about $200 million, industry executives said. And a prospect often requires several wells, plus expensive pipelines and floating facilities.

Still, the Gulf of Mexico has emerged as a major area of interest for the Western oil companies that have been locked out of many of the world's largest untapped resources in the Middle East and Russia.

"If you are looking for another opportunity of that scale that is oil and that is open to [Western oil companies], the Santos Basin of Brazil is the only other one in the world," said Andrew Latham, a vice president of global exploration services for consultant Wood Mackenzie.

Other recent finds in Uganda, Kurdistan and off the coast of Ghana are estimated to be several billion barrels of oil, while the Gulf of Mexico and Brazil contain "tens of billions of barrels," he said.

Making the site even more attractive, oil companies have to pay the U.S. less in taxes, royalties, oil payments and other levies for the privilege of drilling than they would have to pay other governments.

This combination of financial and geologic advantages has drawn the attention of many of the world's largest oil companies. Even Exxon Mobil Corp., which hadn't embraced lower tertiary exploration with the same vigor as its competitors, is increasing its activity. Last year, the Texas behemoth leased 142 offshore exploration sites, compared with 12 in the two previous years.

But it has been Exxon's peers that have led the way into the Gulf's lower tertiary. Royal Dutch Shell PLC and Chevron Corp. are expected to begin producing oil from Perdido -- a floating cork-shaped platform as tall as the Eiffel Tower -- in the next few months. That is expected to be the first oil produced from a lower tertiary discovery.

"If anyone was under the impression that the Gulf of Mexico was done, they should change that impression," said Marvin Odum, Shell's head of exploration and production from Brazil to Canada.

In mid-2010, a second lower tertiary discovery -- Petroleo Brasileiro SA's Chinook and Cascade prospects -- is expected to begin producing. Rather than build a 165-mile pipeline from the discoveries to the Louisiana coast, Petrobras is building a floating production, storage and offloading facility, called an FPSO.

While FPSOs, which resemble giant oil tankers, have become commonplace elsewhere, including off Angola, it is the first one in the Gulf of Mexico.

Gustavo Amaral, a Petrobras senior vice president in charge of Gulf of Mexico operations, cautioned against premature enthusiasm about the Gulf oil discoveries. Much remains unknown about how well the oil will flow from the prospects, and it can't be determined until they begin pumping oil.

"The statistics tell us there is a lot of oil left in the Gulf of Mexico, but there are challenges. The key for the success in the ultradeep lower tertiary plays is how the wells will behave," Mr. Amarall said.

Despite the uncertainty, Tiber and other lower tertiary finds are substantial enough to excite investors. BP's American depositary shares rose 4.08% today on the news. If one-third of the estimated three billion barrels of oil can be successfully retrieved, an optimistic figure according to analysts, it could fetch $70 billion at market prices [!].

But that would slake the globe's thirst for crude for only two weeks, and oil markets were unimpressed by the news. A barrel of crude oil on the New York Mercantile Exchange settled at $68.05, unchanged from a day earlier.‹