Stronger-than-expected production last year out of the Wattenberg Field, northeast of Denver, cushioned the blow of falling oil prices for Anadarko Petroleum Corp.
“Our U.S. onshore operations were nothing short of incredible, led by the Wattenberg Field and the Eagleford shale,” Anadarko CEO and president Al Walker said in an earnings call Tuesday.
About two-thirds of the increased oil and gas production the company reported in 2014 came from just the Wattenberg, where Houston-based Anadarko is the largest producer.
“Wattenberg’s growth has surpassed even our expectations,” Walker said, adding the company will take its model of concentrated drilling and heavy infrastructure investment and deploy it in the Wolfencamp shale formation, in west Texas.
Oil prices are down by more than half since June, shrinking the profit margins and earnings of domestic producers such as Anadarko.
Anadarko lost $395 million in the fourth quarter, reflecting the write-down in the value of oil and gas properties because of lower prices. The company also reserved $4 billion last year related to a settlement with BP over the .
On an adjusted basis, the company earned $187 million in the quarter, down from $337 million in the fourth quarter of 2013.
Anadarko invested $9.3 billion across its various properties last year, but Walker warned that the company’s 2015 capital budget will be leaner. How much leaner and where the company plans to spend this year will be detailed in a March 3 call.
“We’re approaching 2015 with caution, given the uncertainties surrounding commodity prices and service calls,” Walker said.
The company plans to focus more on medium- and longer-term opportunities, Walker said.
But to the degree Anadarko does invest to boost production in the short-term, it probably will come in the Wattenberg, where the company owns mineral interests and doesn’t have the added cost of leasing.
“Our best asset in our portfolio to grow short-term or short-cycle investing is the Wattenberg,” he said.
While it won’t break existing contracts, Anadarko expects to negotiate lower prices from service providers who are finding less demand for what they have to offer.
“We think that $70 (a barrel) gives you the same economics that $90 with the 20 percent reduction in service costs,” Walker said. “That’s sort of the way that our industry is going to have to look at things.”
Shares of Anadarko ended the day up $2.83, or 3.42 percent, to close at $85.60, boosted in part by a jump in oil prices to their highest level since Dec. 31. Oil closed Tuesday at $53.05, up $3.48.
