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Key Update: Anadarko Petroleum’s DJ Basin Operations


Jun. 27 2018, Updated 3:59 p.m. ET

APC’s DJ Basin operations

Anadarko Petroleum’s (APC) DJ Basin upstream operations are to receive $1 billion–$1.5 billion in capex this year. Per Anadarko Petroleum management, free cash flow from the region is expected to surpass $1 billion. Free cash flow in the first quarter was $230 million. This calculation is based on APC’s definition of “free cash flow”—discretionary cash flow, minus capital expenditures. APC defines “discretionary cash flow” as operating cash flows before accounting for working capital changes, other items, non-operating, and other excluded items.

APC’s competitors in the DJ Basin include Noble Energy (NBL), which had ~47% if its first-quarter production come in from the DJ Basin.

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In the fourth-quarter earnings conference, Daniel Brown, executive vice-president of US Onshore Operations, commented, “You can easily see why we continue to allocate significant investment toward this asset. In fact, our DJ Basin asset has generated free cash flow every year since we transitioned to a horizontal drilling program in 2011.”

In the fourth-quarter earnings call, Brown also noted that current rates of return in the core region within the DJ Basin is 100% at $50 oil prices and $3 natural gas prices. Crude oil (DBO) and natural prices (UGAZ) are currently trading at $2.945 per MMBtu (million British thermal units), respectively. These high rates of returns were accredited to the company’s mineral interest ownership in the region. Plus, APC considers its midstream infrastructure in the region to be “unrivaled.” Western Gas Partners (WES), APC’s MLP that operates gas gathering and processing system in the DJ Basin, achieved record throughput of more than 1,130 MMcf/d during the quarter.

Q1 2018 operational updates

In the first quarter, Anadarko delivered production of 260 Mboe/d (thousand barrels of oil equivalent per day) from its DJ Basin operations, up 8% compared to the first quarter of 2017. The company averaged six operated drilling rigs and four completion crews during the first quarter.

Next in this series, we’ll look at APC’s Delaware Basin operations.


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