ANADARKO Poised to be a Player.

Things are changing in Alaska's oil patch. And as change occurs, it offers increased opportunities for independent oil companies to get involved in the exploration, development and production of Alaska oil. In fact, one of the world's largest and most successful independent oil companies is already here, and is involved to the tune of more than $200 million.

The people at Anadarko Petroleum Corp. think there is a lot of oil yet to be discovered in Alaska's North Slope represents one of the two best remaining exploration frontiers in the U.S., in regards to discovering giant new oil fields.

Last year, Anadarko put up $16 million to participate in a federal lease sale for the right to explore for oil in the National Petroleum Reserve-Alaska west of Prudhoe Bay. Together, with partner Arco Alaska Inc. (and some on its own), they were high bidders on 99 blocks of land encompassing about 628,405 acres.

"Our participation in the NPR-A lease sale, along with our continuing involvement in the Alpine project, reflects Anadarko's strong commitment to Alaska as one of our core areas," says John N. Seitz, president and COO of Anadarko. "We've been gathering information on Alaska since the 1980s, and have aggressively expanded our oil and gas interest in the state since the early 1990s. We consider Alaska to be among the most attractive areas in the world to add significant reserves."

Impressive Credentials 

Anadarko's credentials for voicing such optimism are impressive. In the company's 40-year history, it has come to be known as one of the most successful, independent finders and producers of both oil and natural gas in the world.

From its beginnings on the wind-swept prairies of Southwest Kansas in 1959, Anadarko has been an aggressive, can-do outfit. The new company soon expanded into both Oklahoma and Texas, and in 1965 it acquired the assets of Ambassador Oil for $12 million. That acquisition included the exploration and development rights to 600,000 acres in 19 states and Canada.

Anadarko continued to grow during the 1970s when it joined five other companies in acquiring the drilling rights to nine blocks in the Gulf of Mexico. During that same time, the company also beefed up its domestic and foreign exploration staff, and began applying new thinking and new technology to the finding of oil and gas. In 1978, Anadarko sur-passed $100 million in gross revenues for the first time in its history, primarily from oil and gas production.

Anadarko Drills Deep

The 1980s were also busy years for Anadarko as it continued exploration in the Gulf of Mexico. In places where other companies had explored then abandoned due to lack of results, Anadarko re-examined the areas and decided to drill deeper than conventional wisdom indicated. As a result, it began finding significant new sources of oil and gas.

In 1986, the company took a carefully calculated risk and started infill drilling in the shallow Hugoton Embayment, a natural gas-rich region that stretches across Southwest Kansas and the Oklahoma panhandle.

Anadarko believed there was good chance that even more oil and gas lay in deeper formations there. Infill drilling provided an economical way to find out if company leaders were right; because even if unsuccessful at the lower depths, the wells could still be completed in the already proven and productive shallow zones. Again, the company found what it was looking for, which dramatically increased the company's gas production over the next few years.

In 1986 and '87, just as oil prices were collapsing, Anadarko also made significant discoveries in both Wyoming and Canada. However, in spite of the industry-wide doom and gloom, Anadarko executives broke with many of its peers in the oil industry and decided to not lay off staff That decision proved wise when oil prices made a rebound. It allowed Anadarko to maintain its momentum in a highly competitive business.

Anadarko achieved something else rather remarkable in 1987. It achieved a 50 percent success rate as 24 out of 48 exploration wells resulted in discoveries. And that, in an industry where the average success rate was less than 10 percent. Anadarko's commitment to its people and the latest technology was paying off.

Anadarko and 3-D

Over the next two years, Anadarko successfully expanded the limits of its giant Matagorda Island Block 622/623 Field in the Gulf of Mexico. It also landed its first major overseas exploration deal by signing a production sharing agreement with SONATRACH, the national oil and gas enterprise of Algeria.

In the early 1990s, Anadarko firmly established its reputation as a technology-driven company. It did so by becoming one of the first in the industry to have 3-D seismic work stations in-house. In so doing, company geologists and petroleum engineers, using existing and new information from public and private sources, were able to more clearly see what lay below the earth's surface in those areas where they were exploring.

This ability continued to pay off for Anadarko. In 1992, it expanded its oil and gas operations in Kansas, Oklahoma and Texas, and made new discoveries in the Gulf of Mexico.

In 1993, using this new technology, Anadarko and its partners ushered in the era of sub-salt exploration with the discovery of the Phillips-operated Mahogany Field in the Gulf of Mexico. In that same year, the company also announced its first discovery in Algeria with the El Merk No. 1 well, and started drilling its first well on Alaska's North Slope in a partnership with ARCO.

Anadarko, Alpine and the Arabs

In 1994, Anadarko and Arco Alaska announced the discovery of the Alpine Field near the Colville River on the North Slope. In addition, the company made its second sub-salt discovery in the Gulf of Mexico, and spent $72 million to acquire 26 more offshore Gulf of Mexico blocks, all but two of which were part of the sub-salt play.

That same year, Anadarko also announced the discovery of two new fields in Algeria that represented the company's second and third finds in the Sahara Desert.

In 1995, Anadarko and its partners discovered two fields in Indonesia, and yet another one in Algeria. The following year, the company added another discovery in Algeria and signed exploration pacts in Jordan and Peru. It also drilled its first successful wells in the Bossier Sand Play of Freestone County, Texas, which soon became one of Anadarko's largest onshore gas fields.

Natural gas was also the focus in 1996, when Anadarko and Arco again joined forces in Alaska's Cook Inlet. The alliance allowed Anadarko to acquire an interest in, and to operate the majority of, Arco Alaska's exploratory acreage in the region. The company soon announced the discovery of additional commercial gas reserves on the Moqawkie prospect at the Lone Creek No. 1 well.

In 1997, Anadarko nearly doubled its acreage position worldwide and expanded its deep exploration opportunities in the Hugoton Embayment through a strategic alliance with Mobil. It also added exploration acreage in Tunisia, and in the North Atlantic.

First production from the Hassi Berkine South Field in Algeria began in May of 1998. Anadarko's exploration program in the Sahara Desert continued to bear fruit in the discovery of the El Merk North Field. Eight out of 10 delineation wells, and nine out of 10 development wells, in that field were successful.

In 1998, Anadarko continued to make new sub-salt discoveries in the Gulf of Mexico, identifying 20 such prospects. The company also marked the 17th consecutive year that it more than replaced its annual production with new reserves, and achieved a finding cost of about $3 per barrel, 20 percent to 30 percent lower than industry averages.

Anadarko Heads for the Foothills

Also in 1998, in State Lease Sale 87, Anadarko put up nearly $8 million to acquire 26 tracts of land equaling 108,000 acres in the Foothills region south of Prudhoe Bay. The company also strengthened its position in Alaska by signing an exclusive agreement with the state's largest Native corporation, Arctic Slope Regional Corp., for the right to explore more than 2 million acres in the Foothills region owned by ASRC.

In 1999, Anadarko completed a common stock offering that netted the company more than $240 million, and allowed it to proceed with U.S. drilling plans that had been on hold due to low commodity prices. Much of that money has been and will continue to be spent in Alaska, according to company officials.

Cross Timbers Oil Co.

"To say that Anadarko believes in Alaska," says Mark Hanley, Anadarko's manager, public affairs/Alaska, "is a bit of an understatement. We're really pretty excited about it all. In fact, we now hold exploration rights to more than three million acres in Alaska, more than any

Another independent oil and gas company new to Alaska is Cross Timbers Oil Co.

Based in Fort Worth, Texas, and established in 1986, the company went public in 1993. Since then it has gone from a small independent, to a solid mid-sized independent with a market value of almost $1 billion.

The company's strategy is simple. They buy high-quality, high-margin, long-lived, already-producing oil and gas properties. Then, through application of the latest technologies, they increase recoverable reserves and reduce the operating cost of the properties.

The company, with more than 600 employees, has oil and gas holdings in Kansas, Oklahoma, Texas, New Mexico, Colorado, Wyoming and Alaska. While Cross Timbers is involved in the production of oil, nearly 80 percent of its Lower 48 operation is devoted to the production and distribution of natural gas.

Cross Timbers acquired its Alaska properties in September of 1998 from Shell Oil for nearly $50 million. The properties consist of a 100 percent working interest in two leases in the Middle Ground Shoal Field, located seven miles offshore in Cook Inlet. In the deal, Cross Timbers also picked up two operating platforms and a 50 percent interest in pipelines and onshore processing facilities. Production from the 29 producing wells and 11 injection wells runs to more than 4,000 barrels of high quality, low sulfur oil per day. The oil is sold to Tesoro's refinery in Nikiski.

According to Louis Baldwin, executive vice president and chief financial officer for Cross Timbers, "Cook Inlet's Middle Ground Shoal represents the kind opportunities we look for. We've spent the last 18 months studying, reprocessing and re-evaluating all the data and we're about ready to start work this summer. We will be doing some drilling from the platforms and getting ready to initiate an additional water-injection program. We anticipate the field will be good producer for another 20 years."

Cross Timbers currently employs between 15 and 20 people from the Kenai area, and expects that number to reach nearly 30 when production work gets underway later this year.

other company up here. During the next few years we will be looking closely at the acreage we acquired on our own, and in partnership with Arco, in National Petroleum Reserve-Alaska.

"Keep in mind," Hanley explains, "that oil exploration in the Foothills region was quite active in the 1950s and '60s. The area was intriguing to petroleum geologists of that day because of its structural similarity to the Zagros Belt in Iran. However, attention soon shifted north to the coastal plain following the discovery of the giant Prudhoe Bay field in 1968.

"The Foothills region has actually seen very little modem-day exploration activity since then," says Hanley. "In fact, the latest seismic acquisition and processing technology has never been applied to the area."

While Anadarko is not the only independent oil company hoping to find and produce oil in Alaska, it is clearly the front-runner. With its long and successful history of finding new oil and gas, as well as a history of working well with major oil companies, Anadarko is definitely poised to be a player in Alaska's oil patch.