Anadarko Updates: Announces Gulf of Mexico Discovery, Gassed Up for $88

Close to heels of its Mozambique reserves revision, Anadarko Corp. (NYSE:APC) announced that it has struck a gas field in the U.S. Gulf of Mexico in the Cheyenne East project. The independent explorer said that the discovery of the 50 feet of ‘gas bearing rock’ topped expectations. The announcement was made by senior vice president global operations, Chuck Meloy in the Jefferies & Co. conference at Houston. ^[1] The company plans to start an extensive exploration program in the region next year if it can win the required U.S. government permits to do so. This is the first major announcement from Anadarko since the Macondo spill incident that resulted in a government moratorium on drilling activity in the Gulf. Oil major BP (NYSE:BP) was the most affected by the ban on drilling in the region.

We have a $88 price estimate for Anadarko which is at a 10% premium over its current market price.

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Production Looks Good for Next Year

Anadarko revealed that it plans to complete the Cheyenne East project and tie its output to the Independence Hub in the GoM that handles output from several fields. ^[1] Production from the wells is expected to start next year around the time the company plans to embark on an extensive exploration program in the Gulf. Anadarko owns 100% stake in the Cheyenne East project. The company is also drilling in the Heidelberg and Nansen projects in parallel in the GoM. While onshore exploration in the U.S. is now focused on liquid rich plays, Anadarko has recently announced multiple offshore gas finds over the recent past including the massive find off the Mozambique cost in Africa.

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1. Anadarko Announces Cheyenne East Discovery in Gulf of Mexico, Bloomberg [↩] [↩]