Anadarko Petroleum’s Capex Plans for 2018

Anadarko’s planned 2018 capital

Anadarko Petroleum’s (APC) 2018 capital expenditure (or capex) budget is $4.2 billion–$4.6 billion, compared to its forecast 2017 capex of $4.2 billion–$4.4 billion.

APC’s market capitalization is ~$38 billion. Its peer Pioneer Natural Resources (PXD), which has a similar market capitalization (~$32 billion), forecast E&P (exploration and production) capex of $2.9 billion in 2018 versus $2.7 billion in 2017. Occidental Petroleum (OXY), which has a higher market cap ($63 billion), has forecast a capex budget of $3.9 billion for 2018, compared to its 2017 spending of $3.6 billion. Devon Energy (DVN), which has a lower market cap (~$22.3 billion), has a forecast capex of $2.3 billion versus its 2017 capex of $2.75 billion.

Anadarko Petroleum’s Capex Plans for 2018

Anadarko’s capex allocation

Around $2.75 billion or ~62.5% of Anadarko Petroleum’s (APC) 2018 capex is allocated to the focus areas of its US onshore operations.

The next region to get the highest capex allocation in 2018 is the Deepwater Gulf of Mexico, which should receive $1 billion or 23% of the total capex.

In the fourth-quarter earnings conference, Daniel Brown, executive vice-president of US Onshore Operations, commented, “We will invest roughly $2 billion of upstream capital in two world-class assets, both of which are material, scalable and infrastructure-advantaged.” Over $1.5 billion of the planned spending is to be allocated to oil, natural gas, and water infrastructure by Anadarko and its MLP, Western Gas Partners (WES), “to ensure greater control over the pace of development and operational efficiency.”

Anadarko Petroleum’s other projects

Anadarko Petroleum’s (APC) exploration and global LNG projects are expected to receive ~8% of the total capex in 2018.

Providing an updated on its LNG project in Mozambique, APC management noted in the 3Q17 earnings release that it entered into a long-term LNG Sale and Purchase Agreement (SPA) for 1.2 million tons per year for 15 years with Électricité de France.

APC’s portfolio classification

APC management considers its US onshore assets (the DJ and Delaware basins) its “growth engines” and the DJ and Delaware basins and Gulf of Mexico and international operations as “high margin and stable cash generating.”

Over the next three years, APC expects cumulative free cash flow generation in the Gulf of Mexico to exceed $4 billion at $60 oil prices. The company’s Algeria and Ghana operations continue to deliver free cash flow of over $1 billion at $60 oil prices.

In the next parts of this series, we’ll take a closer look at APC’s DJ and Delaware basin operations.