Anadarko Corp. (NYSE:APC) released it capital program for 2012 earlier this week, projecting a possible 13% increase in its capital spending for the year. [1] About 55% of the projected $6.6 to 6.9 billion expenditure will be targeted at onshore U.S. opportunities such as the Wattenburg field and the Eagleford shale play. [2]
The company also plans to spend around 10% of its estimated budget in the U.S. Gulf of Mexico. Internationally, the independent explorer could spend around $1.65 to $1.75 billion in projects mainly located in Africa. The balance will be invested in midstream projects. Like other energy players such as ConocoPhillips (NYSE:COP), Anadarko is plans to focus more on liquid rich plays. We have a $90.30 price estimate for Anadarko, which is at a 5% premium to its current market price.
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Higher spending
Anadarko reported a 6% rise in its total output in 2011 on the back of a successful global exploration program. The company said that output levels may rise by 4.5% this year. [1] Low gas prices in the U.S. will force the company to direct new exploration towards liquids rich exploration. Anadarko will increase its efforts in the Wattenburg fields, Eagleford and parts in East Texas to target plays rich in liquids. [2]
The company will also reduce the number of rigs operating in the Marcellus shale where it is produces natural gas. It plans to reduce the number of rigs in Marcellus from 21 to 13 over 2012. Rigs deployed in the liquids rich plays are set to rise in the same period.
Anadarko will also spend significant resources on its exploration programs in Africa. The company plans to continue its reserve certification efforts in Mozambique where it has struck a significant gas find. A final investment decision about the project will be made towards the end of 2013. [2]
Anadarko’s El Merk mega project in Algeria will go into production towards the end of 2012. The company is also going ahead with its Ceaser/Tonga project in the U.S. Gulf of Mexico. It is also planning the development of the Lucius fields in the GoM. All of these projects will help the company deliver strong output growth over the short to medium term future.
Understand how a company’s projects impact its stock price on Trefis
- Anadarko’s Drill of Heidelberg-2 Well in GoM Successful (trefis.com)
- Anadarko May Look to Monetize Some Mozambique Assets (trefis.com)
- BP, Anadarko Plan New Offshore Gas Project in South China Sea (trefis.com)
