Anadarko Announces First-Quarter 2013 Results

Increases Full-Year 2013 Sales-Volumes Guidance

Marketwired

HOUSTON, TX--(Marketwired - May 6, 2013) - Anadarko Petroleum Corporation (NYSE: APC) today announced first-quarter 2013 net income attributable to common stockholders of $460 million, or $0.91 per share (diluted). These results include certain items typically excluded by the investment community in published estimates. In total, these items decreased net income by approximately $87 million, or $0.17 per share (diluted), on an after-tax basis.(1) Cash flow from operating activities in the first quarter of 2013 was approximately $2.503 billion, and discretionary cash flow totaled $2.056 billion.(2)

First-Quarter 2013 Highlights

  • Achieved record daily sales volumes of 793,000 barrels of oil equivalent (BOE)
  • Monetized assets totaling more than $1.2 billion
  • Initiated oil production at the El Merk project in Algeria
  • Delivered outstanding deepwater success in the Gulf of Mexico's Shenandoah Basin

"The record first-quarter 2013 results reflect our commitment to accelerate value by increasing production in our core operating areas, selectively monetizing assets and delivering large-scale projects on budget," said Anadarko President and CEO Al Walker. "We achieved a 16-percent year-over-year increase in oil sales volumes, primarily driven by 25,000 barrels-per-day growth from our U.S. onshore assets, plus the benefit of an accelerated tanker lifting at Jubilee. In addition, we monetized more than $1.2 billion of assets, including the $860 million carried-interest agreement at Heidelberg, and achieved first oil at our El Merk development in Algeria. I'm also very proud of our very active global deepwater exploration program that continues to deliver industry-leading success and differentiating value."

Operations Summary
Anadarko reported total sales volumes of 71 million BOE, or 793,000 BOE per day, during the first quarter. Liquids sales volumes averaged 345,000 BOE per day, which includes 257,000 barrels of oil per day. Natural gas volumes averaged approximately 2.7 billion cubic feet per day. As a result of this performance, Anadarko has increased its full-year 2013 sales-volumes guidance to a range of 279 to 287 million BOE from a previous range of 279 to 285 million BOE.

Anadarko's Wattenberg field achieved record quarterly sales volumes, averaging more than 113,000 BOE per day, which included a 45-percent increase in liquids sales volumes over the first quarter of 2012. The Eagleford Shale also delivered record performance and surpassed a production milestone of 50 million BOE during the quarter, with total liquids sales volumes averaging approximately 28,000 barrels per day, representing a 60-percent increase over the first quarter of 2012. Anadarko also achieved record sales volumes during the quarter in the Marcellus Shale, the East Texas Horizontal play and in its Permian oil assets.

During the quarter, Anadarko and its partners achieved first oil at the El Merk project in Algeria. Production from El Merk is expected to steadily increase throughout 2013 to a net 30,000 barrels of oil per day as additional production facilities and fields are brought on line.

Exploration Summary
Anadarko and its partners announced two new successful deepwater wells in the Gulf of Mexico's emerging Shenandoah Basin. Anadarko's Shenandoah-2 well, located in Walker Ridge block 51, encountered more than 1,000 net feet of oil pay, establishing Shenandoah as one of the company's largest Gulf of Mexico oil discoveries to date. In addition, the Coronado well, located in Walker Ridge block 98, encountered more than 400 net feet of oil pay, while drilling activity at the nearby Yucatan well in Walker Ridge block 95 is ongoing. Subsequent to quarter end, Anadarko announced the Phobos discovery, located in Sigsbee Escarpment block 39. The well encountered approximately 250 net feet of oil pay in the Wilcox formation, and future appraisal activity is now being evaluated.

Offshore Mozambique, Anadarko discovered a new, distinct natural gas reservoir in its Offshore Area 1 block. The Orca-1 discovery well, announced in April, encountered more than 190 net feet of natural gas pay and provides additional options and flexibility for future development.

The company is continuing its active worldwide deepwater exploration program with six deepwater wells currently drilling.

Financial Summary
Anadarko ended the quarter with approximately $3.7 billion of cash on hand and also improved its net-debt-to-adjusted-capitalization ratio(2) to 32 percent at the end of the first quarter compared to 34 percent at the end of 2012. In addition to the $1.2 billion of monetizations, Anadarko also completed the sale of its Liberty and Rome natural gas gathering systems in the Marcellus Shale to its subsidiary, Western Gas Partners, LP (NYSE: WES), for total consideration of $490 million.

Operations Report
For more details on Anadarko's operations and exploration program, please refer to the comprehensive report on first-quarter 2013 activity. The report is available at www.anadarko.com on the Investor Relations page.

Conference Call Tomorrow at 9 a.m. CDT, 10 a.m. EDT
Anadarko will host a conference call on Tuesday, May 7, 2013, at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) to discuss first-quarter results, current operations and the company's outlook for the remainder of 2013. The dial-in number is 855.812.0464 in the United States, or 970.300.2271 internationally. The confirmation number is 36701180. For complete instructions on how to participate in the conference call, or to listen to the live audio webcast and slide presentation, please visit www.anadarko.com. A replay of the call will be available on the website for approximately 30 days following the conference call.

Financial Data
Eight pages of summary financial data follow, including current hedge positions and updated financial and production guidance.

(1) See the accompanying table for details of certain items affecting comparability.

(2) See the accompanying table for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measures provide useful information for investors. 

Anadarko Petroleum Corporation's mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world's health and welfare. As of year-end 2012, the company had approximately 2.56 billion barrels-equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. For more information about Anadarko and APC Flash Feed updates, please visit www.anadarko.com.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Anadarko believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this news release, including Anadarko's ability to drill, develop and commercially operate the drilling prospects identified in this news release. See "Risk Factors" in the company's 2012 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.

   
   
Anadarko Petroleum Corporation
Certain Items Affecting Comparability
 
   
    Quarter Ended March 31, 2013  
    Before     After     Per Share  
millions except per-share amounts   Tax     Tax     (diluted)  
                         
Unrealized gains (losses) on derivatives, net*   $ (246 )   $ (156 )   $ (0.31 )
Gains (losses) on divestitures, net     144       90       0.18  
Impairments     (29 )     (19 )     (0.04 )
Algeria exceptional profits tax settlement     (33 )     -       -  
Deepwater Horizon settlement and related costs     (3 )     (2 )     -  
    $ (167 )   $ (87 )   $ (0.17 )
* For the quarter ended March 31, 2013, before-tax unrealized gains (losses) on derivatives, net includes $(334) million related to commodity derivatives, $92 million related to other derivatives, and $(4) million related to gathering, processing, and marketing sales.  
   
   
    Quarter Ended March 31, 2012  
    Before     After     Per Share  
millions except per-share amounts   Tax     Tax     (diluted)  
                         
Unrealized gains (losses) on derivatives, net*   $ 142     $ 90     $ 0.18  
Gains (losses) on divestitures, net     (17 )     (11 )     (0.02 )
Impairments, including unproved properties     (53 )     (34 )     (0.07 )
Change in uncertain tax positions (FIN 48)     -       12       0.03  
Algeria exceptional profits tax settlement     1,804       1,804       3.60  
Tronox damage claim settlement     (275 )     (175 )     (0.35 )
Deepwater Horizon settlement and related costs     (8 )     (5 )     (0.01 )
    $ 1,593     $ 1,681     $ 3.36  
                         
* For the quarter ended March 31, 2012, before-tax unrealized gains (losses) on derivatives, net includes $(89) million related to commodity derivatives, $236 million related to other derivatives, and $(5) million related to gathering, processing, and marketing sales.  
   
Reconciliation of GAAP to Non-GAAP Measures  
   
Below are reconciliations of cash provided by operating activities (GAAP) to discretionary cash flow from operations (non-GAAP), free cash flow (non-GAAP), and adjusted free cash flow (non-GAAP), as well as net income (loss) attributable to common stockholders (GAAP) to adjusted net income (loss) (non-GAAP) as required under Regulation G of the Securities Exchange Act of 1934. Management uses discretionary cash flow from operations because it is useful in comparisons of oil and gas exploration and production companies as it excludes fluctuations in assets and liabilities. Management uses free cash flow and adjusted free cash flow to demonstrate the Company's ability to internally fund capital expenditures and to service or incur additional debt. Management uses adjusted net income (loss) to evaluate the Company's operational trends and performance.  
    Quarter Ended  
    March 31,  
millions   2013     2012  
Net cash provided by operating activities   $ 2,503     $ 1,891  
Add back                
  Deepwater Horizon settlement and related costs     3       (22 )
  Algeria exceptional profits tax settlement     (450 )     -  
  Change in accounts receivable     (40 )     27  
  Change in accounts payable and accrued expenses     158       258  
  Change in other items-net     (118 )     (232 )
Discretionary cash flow from operations   $ 2,056     $ 1,922  
Anadarko Petroleum Corporation
Reconciliation of GAAP to Non-GAAP Measures
 
      Quarter Ended  
      March 31,  
millions     2013   2012  
Discretionary cash flow from operations     $ 2,056   $ 1,922  
Less capital expenditures*       1,747     1,790  
Free cash flow     $ 309   $ 132  
Collection of Algeria exceptional profits tax receivable       450     -  
Adjusted free cash flow     $ 759   $ 132  
                 
* Includes Western Gas Partners, LP (WES) capital expenditures of $299 million and $98 million for the three months ended March 31, 2013 and 2012, respectively.  
   
    Quarter Ended     Quarter Ended  
    March 31, 2013     March 31, 2012  
millions except per-share amounts   After Tax     Per Share (diluted)     After Tax   Per Share (diluted)  
Net income (loss) attributable to common stockholders   $ 460     $ 0.91     $ 2,156   $ 4.28  
Certain items affecting comparability     (87 )     (0.17 )     1,681     3.36  
Adjusted net income (loss)   $ 547     $ 1.08     $ 475   $ 0.92  
                               
Presented below is a reconciliation of total debt (GAAP) to net debt (non-GAAP). Management uses net debt as a measure of the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand.  
   
millions   March 31, 2013  
Total debt   $ 13,663  
Less cash and cash equivalents     3,735  
Net debt   $ 9,928  
         
Net debt   $ 9,928  
Stockholders' equity     21,090  
Adjusted capitalization   $ 31,018  
         
Net debt to adjusted capitalization ratio     32 %
         
         
         
Anadarko Petroleum Corporation
 (Unaudited)
 
   
    Quarter Ended  
Summary Financial Information   March 31,  
millions except per-share amounts   2013     2012  
Consolidated Statements of Income                
Revenues and Other                
Natural-gas sales   $ 807     $ 573  
Oil and condensate sales     2,377       2,244  
Natural-gas liquids sales     303       342  
Gathering, processing, and marketing sales     231       253  
Gains (losses) on divestitures and other, net     175       35  
Total     3,893       3,447  
Costs and Expenses                
Oil and gas operating     247       242  
Oil and gas transportation and other     255       240  
Exploration     264       244  
Gathering, processing, and marketing     199       189  
General and administrative     272       269  
Depreciation, depletion, and amortization     1,022       930  
Other taxes     280       377  
Impairments     29       50  
Algeria exceptional profits tax settlement     33       (1,804 )
Deepwater Horizon settlement and related costs     3       8  
Total     2,604       745  
Operating Income (Loss)     1,289       2,702  
Other (Income) Expense                
Interest expense     164       186  
(Gains) losses on derivatives, net     191       (284 )
Other (income) expense, net     (6 )     265  
Total     349       167  
Income (Loss) Before Income Taxes     940       2,535  
Income Tax Expense (Benefit)     456       352  
Net Income (Loss)   $ 484     $ 2,183  
Net Income Attributable to Noncontrolling Interests     24       27  
Net Income (Loss) Attributable to Common Stockholders   $ 460     $ 2,156  
Per Common Share                
Net income (loss) attributable to common stockholders-basic   $ 0.91     $ 4.30  
Net income (loss) attributable to common stockholders-diluted   $ 0.91     $ 4.28  
Average Number of Common Shares Outstanding-Basic     501       499  
Average Number of Common Shares Outstanding-Diluted     503       501  
                 
Exploration Expense                
Dry hole expense   $ 158     $ 89  
Impairments of unproved properties     19       60  
Geological and geophysical expense     37       35  
Exploration overhead and other     50       60  
Total   $ 264     $ 244  
   
   
                 
Anadarko Petroleum Corporation
 (Unaudited)
 
    Quarter Ended  
Summary Financial Information   March 31,  
millions   2013     2012  
Cash Flows from Operating Activities                
Net income (loss)   $ 484     $ 2,183  
Depreciation, depletion, and amortization     1,022       930  
Deferred income taxes     162       210  
Dry hole expense and impairments of unproved properties     177       149  
Impairments     29       50  
(Gains) losses on divestitures, net     (144 )     17  
Unrealized (gains) losses on derivatives, net     246       (142 )
Deepwater Horizon settlement and related costs     3       8  
Algeria exceptional profits tax settlement     33       (1,804 )
Tronox-related contingent loss     -       275  
Other     44       46  
Discretionary Cash Flow from Operations     2,056       1,922  
Deepwater Horizon settlement and related costs     (3 )     22  
Algeria exceptional profits tax settlement     450       -  
(Increase) decrease in accounts receivable     40       (27 )
Increase (decrease) in accounts payable and accrued expenses     (158 )     (258 )
Other items-net     118       232  
Net Cash Provided by Operating Activities   $ 2,503     $ 1,891  
                 
Capital Expenditures   $ 1,747     $ 1,790  
   
    March 31,     December 31,  
millions   2013     2012  
Condensed Balance Sheets                
Cash and cash equivalents   $ 3,735     $ 2,471  
Accounts receivable, net of allowance     2,760       2,747  
Algeria exceptional profits tax settlement     280       730  
Other current assets     535       847  
Net properties and equipment     38,970       38,398  
Other assets     1,630       1,716  
Goodwill and other intangible assets     5,678       5,680  
Total Assets   $ 53,588     $ 52,589  
Current asset retirement obligations     387       298  
Other current liabilities     3,685       3,696  
Long-term debt     13,663       13,269  
Deferred income taxes     8,964       8,759  
Other long-term liabilities     4,559       4,685  
Stockholders' equity     21,090       20,629  
Noncontrolling interests     1,240       1,253  
Total Liabilities and Equity   $ 53,588     $ 52,589  
Capitalization                
Total debt   $ 13,663     $ 13,269  
Stockholders' equity     21,090       20,629  
Total   $ 34,753     $ 33,898  
Capitalization Ratios                
Total debt     39 %     39 %
Stockholders' equity     61 %     61 %
                 
                 
                 
Anadarko Petroleum Corporation
 (Unaudited)
 
Sales Volumes and Prices                                    
                                     
    Average Daily Volumes   Sales Volumes   Average Sales Price
    Natural Gas   Crude Oil & Condensate   NGLs   Natural Gas   Crude Oil & Condensate   NGLs   Natural Gas   Crude Oil & Condensate   NGLs
    MMcf/d   MBbls/d   MBbls/d   Bcf   MMBbls   MMBbls   Per Mcf   Per Bbl   Per Bbl
Quarter Ended March 31, 2013                                          
United States   2,689   159   88   242   14   8   $ 3.33   $ 97.32   $ 38.17
Algeria   -   53   -   -   5   -     -     112.91     -
Other International   -   45   -   -   4   -     -     111.32     -
Total   2,689   257   88   242   23   8   $ 3.33   $ 102.97   $ 38.17
                                           
Quarter Ended March 31, 2012                                          
United States   2,416   138   80   220   12   7   $ 2.60   $ 105.75   $ 47.09
Algeria   -   50   -   -   5   -     -     119.57     -
Other International   -   33   -   -   3   -     -     120.64     -
Total   2,416   221   80   220   20   7   $ 2.60   $ 111.07   $ 47.09
                                           
         
         
    Average Daily Volumes MBOE/d   Sales Volumes
MMBOE
         
Quarter Ended March 31, 2013   793   71
Quarter Ended March 31, 2012   704   64
   
   
Sales Revenue and Commodity Derivatives  
                                               
    Sales     Commodity Derivatives Gain (Loss)  
        Crude Oil &         Natural Gas     Crude Oil & Condensate     NGLs  
millions   Natural Gas   Condensate   NGLs     Realized   Unrealized     Realized     Unrealized     Realized   Unrealized  
Quarter Ended March 31, 2013                                                                
United States   $ 807   $ 1,393   $ 303     $ 67   $ (269 )   $ 1     $ (60 )   $ 2   $ (5 )
Algeria     -     537     -       -     -       (19 )     -       -     -  
Other International     -     447     -       -     -       -       -       -     -  
Total   $ 807   $ 2,377   $ 303     $ 67   $ (269 )   $ (18 )   $ (60 )   $ 2   $ (5 )
                                                                 
Quarter Ended March 31, 2012                                                                
United States   $ 573   $ 1,339   $ 342     $ 170   $ 86     $ (5 )   $ (173 )   $ -   $ (2 )
Algeria     -     538     -       -     -       (28 )     -       -     -  
Other International     -     367     -       -     -       -       -       -     -  
Total   $ 573   $ 2,244   $ 342     $ 170   $ 86     $ (33 )   $ (173 )   $ -   $ (2 )
                                                                 
                                                                 
                                                                 
Anadarko Petroleum Corporation
Financial and Operating External Guidance
As of May 6, 2013
                 
         
    2nd Qtr   Total Year
    Guidance   Guidance
                 
    Units   Units
                 
Total Sales (MMBOE)   67 - 69   279 - 287
Total Sales (MBOE/d)   736 - 758   764 - 786
                 
Crude Oil (MBbl/d):   230 - 234   264 - 268
                 
  United States   154 - 158   169 - 171
  Algeria   47 - 48   59 - 61
  Other International   27 - 29   34 - 36
                 
Natural Gas (MMcf/d):          
                 
  United States   2,575 - 2,650   2,510 - 2,540
                 
Natural Gas Liquids (MBbl/d):        
                 
  United States   73 - 79   80 - 95
                 
                 
    $ / Unit   $ / Unit
Price Differentials vs NYMEX (w/o hedges)        
                 
Crude Oil ($/Bbl):   3.00 - 6.00   5.00 - 8.00
                 
  United States   1.00 - 3.00   1.00 - 3.00
  Algeria   10.00 - 12.00   12.00 - 15.00
  Other International   10.00 - 12.00   10.00 - 13.00
                 
Natural Gas ($/Mcf):          
                 
  United States   (0.05) - (0.15)   (0.05) - (0.15)
                 
                 
                 
Anadarko Petroleum Corporation
Financial and Operating External Guidance
As of May 6, 2013
                 
                 
    2nd Qtr   Total Year
    Guidance   Guidance *
                 
    $ MM   $ MM
Other Revenues:                
  Marketing and Gathering Margin   25 - 35   150 - 170
  Minerals and Other   25 - 35   120 - 140
                 
Costs and Expenses:                
    $ / BOE   $ / BOE
                 
  Oil & Gas Direct Operating   4.00 - 4.20   3.90 - 4.05
  Oil & Gas Transportation/Other   3.75 - 3.95   3.55 - 3.75
  Depreciation, Depletion and Amortization   14.25 - 14.50   14.50 - 14.75
  Production Taxes (% of Product Revenue)   7.5% - 8.5%   7.5% - 9.5%
                 
    $ MM   $ MM
                 
  General and Administrative   280 - 290   1,050 - 1,150
  Exploration Expense                
    Non-Cash   150 - 175   900 - 1,000
    Cash   105 - 115   475 - 525
  Interest Expense (net)   185 - 190   710 - 720
  Other (Income)/Expense   15 - 25   75 - 95
                 
Tax Rate:                
  Algeria (All current)   45% - 50%   45% - 50%
  Rest of Company (10% Current for 2Q and 20% for FY)   45% - 55%   45% - 55%
                 
                 
Avg. Shares Outstanding (MM):                
  Basic   501 - 502   502 - 503
  Diluted   504 - 505   504 - 505
                 
                 
Capital Investment (Excluding Western Gas Partners, LP):   $ MM   $ MM
                 
  APC Capital Expenditures   1,700 - 1,900   7,200 - 7,600
                 
* Excludes items affecting comparability                
                 
                 
                 
Anadarko Petroleum Corporation
Commodity Hedge Positions (Excluding Natural Gas Basis)
As of May 6, 2013
                 
                 
                 
        Weighted Average Price per Barrel
             
    Volume (MBbl/d)   Floor Sold   Floor Purchased   Ceiling Sold
Crude Oil                      
  Three-Way Collars                      
  2013                      
    Brent   26   $ 85.00   $ 105.00   $ 125.15
                       
  Fixed Price - Financial                      
  2013                      
    Brent   61   $ 108.72            
    WTI   47   $ 94.43            
    108   $ 102.50            
                       
                 
        Weighted Average Price per MMBtu
             
    Volume (thousand MMBtu/d)   Floor Sold   Floor Purchased   Ceiling Sold
Natural Gas                      
  Two-Way Collars                      
  2013 (April - October)   600     n/a   $ 3.18   $ 4.00
                       
  Three-Way Collars                      
  2014   600   $ 2.75   $ 3.75   $ 5.01
                       
  Fixed Price - Financial                      
  2013   1,185   $ 4.00            
  2014   600   $ 4.26            
                     
                     
Interest Rate Derivatives
As of May 6, 2013
                     
Instrument   Notional Amt.   Start Date   Maturity   Rate Paid   Rate Received
Swap   $750 Million   June 2014   June 2024   6.00%   3M LIBOR
Swap   $1,100 Million   June 2014   June 2044   5.57%   3M LIBOR
Swap   $50 Million   Sept. 2016   Sept. 2026   5.91%   3M LIBOR
Swap   $750 Million   Sept. 2016   Sept. 2046   5.86%   3M LIBOR
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