Anadarko Increases Capital Budget, Announces $320 Million Divestiture Plan.Business/Energy Editors HOUSTON--(BUSINESS WIRE)--Aug. 8, 2002 Anadarko Petroleum Corporation Anadarko Petroleum Corporation (NYSE: APC) is one of the world’s largest independent oil and gas exploration and production companies, with 2.37 billion barrels of oil equivalent (BOE) of proved reserves and a production of 190 million BOE in 2004. Ranked No. (NYSE NYSE See: New York Stock Exchange :APC (1) (American Power Conversion Corporation, West Kingston, RI, www.apcc.com) The leading manufacturer of UPS systems and surge suppressors, founded in 1981 by Rodger Dowdell, Neil Rasmussen and Emanual Landsman, three electronic power engineers who had worked at MIT. ) today announced that its Board of Directors has approved a plan to increase capital expenditures by 10 percent, from $2 billion to $2.2 billion, for 2002. This capital budget will be funded from cash flow, along with anticipated proceeds from a $320 million asset divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). program also planned for 2002. "The higher capital program will allow us to take advantage of additional delineation and development opportunities resulting from our exploration successes this year in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and the U.S., as well as to restart To resume computer operation after a planned or unplanned termination. See boot, warm boot and checkpoint/restart. our exploration program in Algeria Algeria (ăljēr`ēə), Arab. Al Djazair, Fr. Algérie, officially People's Democratic Republic of Algeria, republic (2005 est. pop. ," said John Seitz Seitz may refer to:
"The asset sales are part of an ongoing program to high-grade High-grade Credit quality of AAA or AA. high-grade Of, relating to, or being a bond with little risk of default on the part of the issuer. High-grade is usually reserved for bonds rated AAA or AA by the rating services. our portfolio by selling low-margin, and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. moderate- to low-growth assets and reinvesting the proceeds in higher-margin, higher-growth opportunities," Seitz added. As part of the divestiture plan, Anadarko closed on the sales of selected non-core producing assets in South Texas and South Louisiana Louisiana (ləwē'zēăn`ə, l  ē'–), state in the S central United States. It is bounded by Mississippi, with the Mississippi R. for $60 million during the second quarter.In addition, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , Anadarko Canada Corporation, has agreed to sell its heavy oil assets in eastern Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. in several separate transactions for a total of about C$250 million (about U.S.$160 million). The sales are subject to completion of definitive sales agreements, waivers of preferential pref·er·en·tial adj. 1. Of, relating to, or giving advantage or preference: preferential treatment. 2. rights of purchase and other normal adjustments at closing. Actual U.S. dollar proceeds will depend on the exchange rate at closing. The sales of these properties, which include approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 27.5 million barrels of net proved oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally at mid-year, are expected to close in the fourth quarter. The company also has identified another $100 million of properties it plans to put up for sale in the near future. "Although the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. properties are producing about 19,000 barrels a day net to Anadarko, the cash operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: on those barrels is only about half of Anadarko's companywide average," Seitz said. "So we can reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. the proceeds in other opportunities that should benefit our shareholders both financially and operationally in 2003 and beyond." As a result of the announced asset sales and of recent decisions not to process gas for natural gas liquids recovery in the East Texas Carthage Carthage, ancient city, N Africa Carthage (kär`thĭj), ancient city, on the northern shore of Africa, on a peninsula in the Bay of Tunis and near modern Tunis. plant and part of the Rockies due to current processing economics, Anadarko is reducing its volume guidance for 2002 from 199 million barrels of oil equivalent (MMBOE MMBOE Million Barrels of Oil Equivalent (energy and petroleum industry) ) to 196 MMBOE. "This 1.5 percent reduction in estimated volumes will have very little impact on our financial results for 2002 -- about 1 cent per share of earnings, and about 7 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. of cash flow -- compared to our recent third-quarter guidance," Seitz said. (The attached guidance table details key assumptions behind Anadarko's revised volume, earnings and cash flow estimates.) "These are strong production levels, especially given the fact that higher oil prices have reduced the reported production in Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. by about 2.4 million barrels from our original expectation," Seitz said. "This drop in Venezuelan production has no effect on revenue, however, since we adjust the reported barrels to reflect the value at the current market price. We replaced the volume shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. with onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. U.S. production that has very attractive margins. "Our volume growth outlook also is very strong for next year," Seitz said. "The announced and planned property sales represent about 10 million barrels of 2003 production. We are confident we can increase production by about 6 percent from the new base of 188 MMBOE, which excludes the full-year effect of the announced and planned property sales." Anadarko Petroleum Corporation is one of the world's largest independent oil and gas exploration and production companies, with assets of $17 billion and reserves of 2.3 billion BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip . Houston-based Anadarko is active in the U.S., Canada, Algeria and Qatar Qatar or Katar (both: kŭ`tər, gŭ–, kətär`), officially State of Qatar, independent emirate (2005 est. pop. 863,000), c. and is executing a strategic exploration program in several other countries. More information is available at www.anadarko.com
Production Volume Comparisons
Annualized Effect Revised
Estimated 2002 on 2002 Volumes Portfolio
Volumes Including (Year-end 2002 2003 Volume
Adjustments Portfolio) Forecast
(in MMBOE)
Reported Guidance 199 199 209
Effect of Announced
Sales (2) (8) (8)
Effect of NGL
Processing Elections (1) -- --
Effect of Planned
Sales -- (3) (2)
Annual Total 196 188 199
This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Anadarko believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that its goals will be achieved. See Additional Factors Affecting Business in the Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial (MD&A) included in the company's 2001 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. .
Anadarko Petroleum Corporation
Third Quarter 2002
Financial Model - Guidance
As of August 8, 2002
1st Quarter 2nd Quarter
Actual Actual
------------------ ------------------
$ MM $ / Share $ MM $ / Share
------- --------- ------- ---------
Net Income $88 $0.34 $239 $0.93
Cash Flow from Operations $399 $1.51 $561 $2.17
----------------------------------------------------------------------
Price Deck (NYMEX) ($/Unit) ($/Unit)
Crude Oil ($/Bbl) $21.67 $26.24
Natural Gas ($/Mcf) $2.32 $3.40
Natural Gas Liquids
(% of NYMEX Oil Price) 54% 55%
----------------------------------------------------------------------
Price Price
Differ- Differ-
ential ential
Volumes ($ / Unit) Volumes ($ / Unit)
------- -------- ------- --------
Total Sales (MMBoe) 50 50
Crude Oil (MBbl/d): 212 $(3.31) 205 $(3.86)
United States 91 $(2.67) 86 $(2.99)
Canada 38 $(5.74) 37 $(7.02)
Algeria 59 $(1.55) 61 $(2.75)
Other International 24 $(6.29) 22 $(5.03)
Natural Gas (MMcf/d): 1,805 $(0.15) 1,791 $(0.45)
United States 1,458 $(0.19) 1,435 $(0.48)
Canada 347 $0.02 356 $(0.36)
Natural Gas Liquids
(MBbl/d): 40 42
United States 38 40
Canada 3 2
----------------------------------------------------------------------
$ MM $ MM
------- -------
Other Revenues:
Marketing Margin
(Sales - Costs) $11 $18
Minerals and Other $21 $15
$ MM $ / Boe $ MM $ / Boe
------- ------- ------- -------
Costs and Expenses:
Operating Costs $170 $3.41 $184 $3.71
Administrative and
General $72 $77
Depreciation, Depletion
and Amortization $267 $5.36 $274 $5.51
Impairments of Oil and
Gas Assets $8 $25
Goodwill
Production and Other
Taxes (% of Rev) $57 7.7% $62 6.4%
----------------------------------------------------------------------
$ MM $ MM
------- -------
Other Items:
Interest Expense $49 $48
Other (Income) Expense $23 $(21)
----------------------------------------------------------------------
Federal Tax Rate 32% 29%
Deferred Taxes (% of
Total Taxes) 27% 46%
----------------------------------------------------------------------
Average Shares
Outstanding (MM)
Basic 248 248
Fully Diluted 264 259
----------------------------------------------------------------------
$ MM $ MM
------- -------
Capital Investment Program $813 $551
Capital Budget (Estimated) $732 $453
Capitalized Direct
Expenses $43 $57
Capitalized Interest $38 $41
3rd Quarter Total Year
Forecast Forecast
------------------ ------------------
$ MM $ / Share $ MM $ / Share
------- --------- ------- ---------
Net Income $152 $0.60 $737 $2.89
Cash Flow from Operations $481 $1.85 $2,044 $7.93
----------------------------------------------------------------------
Price Deck (NYMEX) ($/Unit) ($/Unit)
Crude Oil ($/Bbl) $26.50 $25.70
Natural Gas ($/Mcf) $3.05 $3.05
Natural Gas Liquids
(% of NYMEX Oil Price) 50% 53%
----------------------------------------------------------------------
Price Price
Differ- Differ-
ential ential
Volumes ($ / Unit) Volumes ($ / Unit)
------- -------- ------- --------
Total Sales (MMBoe) 49 196
Crude Oil (MBbl/d): 203 $(3.33) 203 $(3.37)
United States 79 $(3.00) 84 $(3.03)
Canada 37 $(6.15) 32 $(6.14)
Algeria 65 $(1.60) 65 $(1.74)
Other International 23 $(4.85) 22 $(5.44)
Natural Gas (MMcf/d): 1,727 $(0.55) 1,775 $(0.36)
United States 1,368 $(0.50) 1,414 $(0.35)
Canada 358 $(0.75) 361 $(0.40)
Natural Gas Liquids
(MBbl/d): 40 39
United States 38 37
Canada 2 2
----------------------------------------------------------------------
$ MM $ MM
------- -------
Other Revenues:
Marketing Margin (Sales
- Costs) $17 $70
Minerals and Other $17 $71
$ MM $ / Boe $ MM $ / Boe
------- ------- ------- -------
Costs and Expenses:
Operating Costs $181 $3.70 $712 $3.63
Administrative and
General $73 $295
Depreciation, Depletion
and Amortization $274 $5.60 $1,080 $5.51
Impairments of Oil and
Gas Assets $ -- $ --
Goodwill
Production and Other
Taxes (% of Rev) 7.6% 7.0%
----------------------------------------------------------------------
$ MM $ MM
------- -------
Other Items:
Interest Expense $49 $196
Other (Income) Expense $18 $34
----------------------------------------------------------------------
Federal Tax Rate 39% 34%
Deferred Taxes (% of
Total Taxes) 54% 49%
----------------------------------------------------------------------
Average Shares
Outstanding (MM)
Basic 249 249
Fully Diluted 259 259
----------------------------------------------------------------------
$ MM
-------
Capital Investment Program $2,200
Capital Budget (Estimated) $1,838
Capitalized Direct
Expenses $198
Capitalized Interest $164
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