SOURCE: Anadarko Petroleum Corporation

Anadarko Petroleum Corporation

May 05, 2014 16:05 ET

Anadarko Announces First-Quarter 2014 Results

Increases Midpoint of 2014 Sales-Volume Guidance by 3.5 Million BOE

HOUSTON, TX--(Marketwired - May 5, 2014) -  Anadarko Petroleum Corporation (NYSE: APC) today announced its financial and operating results for the first quarter of 2014, including a first-quarter net loss attributable to common stockholders of $2.669 billion, or $5.30 per share (diluted). The net loss includes certain items typically excluded by the investment community in published estimates, which in aggregate decreased net income by $3.308 billion or $6.56 per share (diluted) on an after-tax basis,(1) including both a contingent loss of $4.018 billion associated with the Tronox Adversary Proceeding settlement agreement and a $946 million gain associated with the sale of a portion of Anadarko's interest in Offshore Area 1 in Mozambique. Cash flow from operating activities in the first quarter of 2014 was $1.729 billion, and discretionary cash flow totaled $2.523 billion.(2)

FIRST-QUARTER 2014 HIGHLIGHTS

  • Delivered record daily sales volumes of 819,000 barrels of oil equivalent (BOE) per day, highlighted by a same-store-sales increase of approximately 69,000 BOE per day (12 percent) from the U.S. onshore relative to the first quarter of 2013(3)
  • Achieved startup of the Lancaster cryogenic plant and Front Range pipeline, facilitating continued growth of Anadarko's Wattenberg field in Colorado
  • Announced a $1.075 billion China divestiture and closed both the $2.64 billion sale of a portion of its interest in Mozambique's Offshore Area 1 and the $581 million Pinedale/Jonah divestiture
  • Installed the topsides, umbilicals and export pipelines at the Lucius spar in the Gulf of Mexico

"Our operating performance during the first quarter was outstanding, delivering record sales volumes that were above the high end of the guidance," said Al Walker, Anadarko Chairman, President and CEO. "Our people and portfolio continue to demonstrate the ability to deliver sustained growth and, with the uncertainty associated with the Tronox litigation largely behind us, we have the confidence and flexibility to further accelerate growth. We are raising the midpoint of our full-year sales-volume guidance by 3.5 million BOE, with only a modest increase in our capital program. We also continue to actively manage our portfolio and evaluate other means to drive shareholder value."

OPERATIONS SUMMARY
During the first quarter, Anadarko's U.S. oil sales volumes were approximately 10,000 barrels per day above the midpoint of guidance, primarily driven by growth in the Wattenberg field, Eagleford Shale and Delaware Basin. Anadarko's first-quarter 2014 sales volumes of natural gas, crude oil and natural gas liquids (NGLs) totaled 74 million BOE, or an average of 819,000 BOE per day, including 17,000 BOE per day associated with the announced or closed divestitures of the company's interests in China's Bohai Bay and Wyoming's Pinedale/Jonah area.

The Wattenberg field achieved a 19,000-barrels-per-day increase in liquids volumes over the first quarter of 2013, representing a 30-percent year-over-year increase. The Eagleford Shale also contributed to the first-quarter growth with a 46-percent year-over-year increase in liquids sales volumes, more than half of which was oil. The Delaware Basin, which includes the company's increased activity in the Wolfcamp Shale, provided a 6,000-barrels-per-day increase in liquids sales volumes.

Anadarko also continued to advance its deepwater mega projects in the Gulf of Mexico, as it successfully installed the topsides at the Lucius spar and has nearly completed construction on the hull of the Heidelberg spar. Both projects remain on schedule and on budget with first oil anticipated in the second half of 2014 and in 2016, respectively.

In Mozambique, successful appraisal drilling activities in the Orca field increased the total estimated recoverable resources in Anadarko's Offshore Area 1 to a range of 50 to 70-plus trillion cubic feet of natural gas. In addition, Anadarko continued to advance the Mozambique LNG project by adding incremental non-binding LNG off-take agreements. 

OPERATIONS REPORT
For details on Anadarko's operations and exploration program, including detailed tables illustrating same-store sales information, please refer to the comprehensive report on first-quarter 2014 activity. The report is available at www.anadarko.com.

FINANCIAL SUMMARY
Subsequent to quarter end, Anadarko announced a $5.15 billion settlement agreement in the Tronox Adversary Proceeding, representing a principal sum of approximately $3.98 billion plus interest. The settlement agreement is subject to recommendation by the Bankruptcy Court, approval by the District Court, and the issuance of an injunction barring similar claims from being asserted by third parties.

"During the quarter, we generated more than $2.5 billion of discretionary cash flow, closed the Mozambique and Pinedale/Jonah transactions and ended the quarter in a very strong financial position with approximately $6 billion of cash on hand, plus access to our $5 billion revolving credit facility," said Anadarko Executive Vice President, Finance and CFO, Bob Gwin. "The strength of our balance sheet, high-margin cash-generating capability and proceeds from asset monetizations provide the capability to fund the Tronox settlement, along with the flexibility to expand our robust 2014 capital program and support additional methods to enhance value."

CONFERENCE CALL TOMORROW AT 8 A.M. CDT, 9 A.M. EDT
Anadarko will host a conference call on Tuesday, May 6, 2014, at 8 a.m. Central Daylight Time (9 a.m. Eastern Daylight Time) to discuss first-quarter results, current operations and the company's outlook for the remainder of 2014. The dial-in number is 855.812.0464 in the United States or 970.300.2271 internationally. The confirmation number is 23315867. 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
Nine 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.

(3) See the accompanying table for a reconciliation of same-store sales. "Same-store" sales volumes are intended to present performance of Anadarko's continuing asset base, giving effect to recently announced or closed divestitures.

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 2013, the company had approximately 2.79 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 court approval of the settlement agreement related to the Tronox Adversary Proceeding, issuance of the injunction and dismissal with prejudice of the claims asserted in the Adversary Proceeding, Anadarko's ability to consummate the transaction described in this news release, achieve its production targets, successfully manage its capital expenditures, achieve production and budget expectations on its mega projects, and to successfully plan, secure necessary government approvals, finance, build and operate the necessary infrastructure and LNG park. See "Risk Factors" in the company's 2013 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.

Cautionary Note to Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms. Anadarko uses certain terms in this news release, such as "recoverable resources" and similar terms that the SEC's guidelines strictly prohibit Anadarko from including in filings with the SEC. Investors are urged to consider closely the disclosure in Anadarko's Form 10-K for the year ended Dec. 31, 2013, File No. 001-08968, available from Anadarko at www.anadarko.com or by writing Anadarko at: Anadarko Petroleum Corporation, 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attn: Investor Relations. This form may also be obtained by contacting the SEC at 1-800-SEC-0330.

   
Anadarko Petroleum Corporation  
Certain Items Affecting Comparability  
   
    Quarter Ended March 31, 2014  
    Before     After     Per Share  
millions except per-share amounts   Tax     Tax     (diluted)  
Total gains (losses) on derivatives, net, less net cash from settlements*   $ (363 )   $ (230 )   $ (0.46 )
Gains (losses) on divestitures, net     1,459       942       1.87  
Impairments     (3 )     (2 )     --  
Tronox-related contingent loss     (4,300 )     (4,018 )     (7.97 )
    $ (3,207 )   $ (3,308 )   $ (6.56 )
                         
* For the quarter ended March 31, 2014, this includes $(123) million related to commodity derivatives, $(238) million related to other derivatives, and $(2) million related to gathering, processing, and marketing sales.
   
   
   
    Quarter Ended March 31, 2013  
    Before     After     Per Share  
millions except per-share amounts   Tax     Tax     (diluted)  
Total gains (losses) on derivatives, net, less net cash from settlements*   $ (246 )   $ (156 )   $ (0.31 )
Gains (losses) on divestitures, net     144       90       0.18  
Impairments     (29 )     (19 )     (0.04 )
Algeria exceptional profits tax settlement     (33 )     --       --  
    $ (164 )   $ (85 )   $ (0.17 )
                         
* For the quarter ended March 31, 2013, this includes $(334) million related to commodity derivatives, $92 million related to other derivatives, and $(4) 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), 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 certain fluctuations in assets and liabilities and current taxes related to certain items affecting comparability. Management uses 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   2014     2013  
Net cash provided by operating activities   $ 1,729     $ 2,503  
Add back                
  Algeria exceptional profits tax settlement     --       (450 )
  Change in accounts receivable     266       (40 )
  Change in accounts payable and accrued expenses     63       158  
  Change in other items--net     (55 )     (118 )
  Current taxes related to Mozambique monetization     520       --  
Discretionary cash flow from operations   $ 2,523     $ 2,053  
                 
                 
                 
Anadarko Petroleum Corporation
Reconciliation of GAAP to Non-GAAP Measures
 
    Quarter Ended
    March 31,
millions   2014     2013
Discretionary cash flow from operations   $ 2,523     $ 2,053
Less capital expenditures*     2,568       1,747
Free cash flow   $ (45 )   $ 306
               
* Includes Western Gas Partners, LP (WES) capital expenditures of $170 million for the three months ended March 31, 2014, and $299 million for the three months ended March 31, 2013.
   
   
   
    Quarter Ended     Quarter Ended  
    March 31, 2014     March 31, 2013  
millions except per-share amounts   After Tax     Per Share (diluted)     After Tax     Per Share (diluted)  
Net income (loss) attributable to common stockholders   $ (2,669 )   $ (5.30 )   $ 460     $ 0.91  
Certain items affecting comparability     (3,308 )     (6.56 )     (85 )     (0.17 )
Adjusted net income (loss)   $ 639     $ 1.26     $ 545     $ 1.08  
                                 
                                 

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.

    March 31,  
millions   2014  
Total debt   $ 13,569  
Less cash and cash equivalents     5,924  
Net debt   $ 7,645  
         
Net debt   $ 7,645  
Stockholders' equity     19,120  
Adjusted capitalization   $ 26,765  
         
Net debt to adjusted capitalization ratio     29 %
         
         
         
Anadarko Petroleum Corporation  
(Unaudited)  
   
    Quarter Ended  
Summary Financial Information   March 31,  
millions except per-share amounts   2014     2013  
Consolidated Statements of Income                
Revenues and Other                
Natural-gas sales   $ 1,217     $ 807  
Oil and condensate sales     2,424       2,377  
Natural-gas liquids sales     386       303  
Gathering, processing, and marketing sales     311       231  
Gains (losses) on divestitures and other, net     1,506       175  
Total     5,844       3,893  
Costs and Expenses                
Oil and gas operating     313       247  
Oil and gas transportation and other     266       255  
Exploration     299       264  
Gathering, processing, and marketing     252       199  
General and administrative     298       275  
Depreciation, depletion, and amortization     1,124       1,022  
Other taxes     314       280  
Impairments     3       29  
Algeria exceptional profits tax settlement     --       33  
Total     2,869       2,604  
Operating Income (Loss)     2,975       1,289  
Other (Income) Expense                
Interest expense     183       164  
(Gains) losses on derivatives, net     453       191  
Other (income) expense, net     1       (6 )
Tronox-related contingent loss     4,300       --  
Total     4,937       349  
Income (Loss) Before Income Taxes     (1,962 )     940  
Income tax expense (benefit)     664       456  
Net Income (Loss)     (2,626 )     484  
Net income (loss) attributable to noncontrolling interests     43       24  
Net Income (Loss) Attributable to Common Stockholders   $ (2,669 )   $ 460  
Per Common Share                
Net income (loss) attributable to common stockholders--basic   $ (5.30 )   $ 0.91  
Net income (loss) attributable to common stockholders--diluted   $ (5.30 )   $ 0.91  
Average Number of Common Shares Outstanding--Basic     504       501  
Average Number of Common Shares Outstanding--Diluted     504       503  
                 
Exploration Expense                
Dry hole expense   $ 121     $ 158  
Impairments of unproved properties     77       19  
Geological and geophysical expense     43       37  
Exploration overhead and other     58       50  
Total   $ 299     $ 264  
                 
                 
                 
Anadarko Petroleum Corporation  
(Unaudited)  
   
    Quarter Ended  
Summary Financial Information   March 31,  
millions   2014     2013  
Cash Flows from Operating Activities                
Net income (loss)   $ (2,626 )   $ 484  
Depreciation, depletion, and amortization     1,124       1,022  
Deferred income taxes     46       162  
Dry hole expense and impairments of unproved properties     198       177  
Impairments     3       29  
(Gains) losses on divestitures, net     (1,459 )     (144 )
Total (gains) losses on derivatives, net     461       199  
Net cash from settlement of derivative instruments     (98 )     47  
Tronox-related contingent loss     4,300       --  
Other     54       77  
Algeria exceptional profits tax settlement     --       450  
(Increase) decrease in accounts receivable     (266 )     40  
Increase (decrease) in accounts payable and accrued expenses     (63 )     (158 )
Other items--net     55       118  
Net Cash Provided by Operating Activities   $ 1,729     $ 2,503  
                 
Capital Expenditures   $ 2,568     $ 1,747  
                 
                 
    March 31,     December 31,  
millions   2014     2013  
Condensed Balance Sheets                
Cash and cash equivalents   $ 5,924     $ 3,698  
Accounts receivable, net of allowance     3,049       2,722  
Other current assets     691       688  
Net properties and equipment     40,564       40,929  
Other assets     2,278       2,082  
Goodwill and other intangible assets     5,597       5,662  
Total Assets   $ 58,103     $ 55,781  
Other current liabilities   $ 5,779     $ 5,703  
Tronox-related contingent liability     5,150       --  
Long-term debt     13,569       13,065  
Deferred income taxes     9,343       9,245  
Other long-term liabilities     3,345       4,118  
Stockholders' equity     19,120       21,857  
Noncontrolling interests     1,797       1,793  
Total Liabilities and Equity   $ 58,103     $ 55,781  
Capitalization                
Total debt   $ 13,569     $ 13,565  
Stockholders' equity     19,120       21,857  
Total   $ 32,689     $ 35,422  
                 
Capitalization Ratios                
Total debt     42 %     38 %
Stockholders' equity     58 %     62 %
                 
                 
                 
Anadarko Petroleum Corporation
(Unaudited)
 
Sales Volumes and Prices                                    
    Average Daily Sales 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, 2014                                          
United States   2,697   180   99   243   16   9   $ 5.01   $ 94.84   $ 43.35
Algeria   --   60   --   --   5   --     --     108.55     --
Other International   --   30   --   --   3   --     --     108.14     --
Total   2,697   270   99   243   24   9   $ 5.01   $ 99.37   $ 43.35
                                           
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
                                           
                                     
    Average Daily Volumes MBOE/d   Sales Volumes MMBOE
Quarter Ended March 31, 2014   819   74
Quarter Ended March 31, 2013   793   71
         
         
Sales Revenue and Commodity Derivatives
    Sales   Net Cash Received (Paid) from Settlement of Commodity Derivatives
millions   Natural Gas   Crude Oil & Condensate   NGLs   Natural Gas     Crude Oil & Condensate     NGLs
Quarter Ended March 31, 2014                                        
United States   $ 1,217   $ 1,540   $ 386   $ (81 )   $ (16 )   $ --
Algeria     --     582     --     --       5       --
Other International     --     302     --     --       --       --
Total   $ 1,217   $ 2,424   $ 386   $ (81 )   $ (11 )   $ --
                                         
Quarter Ended March 31, 2013                                        
United States   $ 807   $ 1,393   $ 303   $ 67     $ 1     $ 2
Algeria     --     537     --     --       (19 )     --
Other International     --     447     --     --       --       --
Total   $ 807   $ 2,377   $ 303   $ 67     $ (18 )   $ 2
                                         
                                         
                                         
Anadarko Petroleum Corporation  
Financial and Operating External Guidance  
As of May 5, 2014  
             
    2nd Qtr     Full Year  
    Guidance *     Guidance *  
                                 
    Units     Units  
                                 
Total Sales Volumes (MMBOE)   72     --   74     293     --   298  
Total Sales Volumes (MBOE/d)   791     --   813     803     --   816  
                                 
Crude Oil (MBbl/d)   276     --   280     275     --   281  
                                 
  United States   186     --   190     188     --   192  
  Algeria   67     --   68     67     --   69  
  Ghana   19     --   20     19     --   20  
                                 
Natural Gas (MMcf/d)                                
                                 
  United States   2,525     --   2,575     2,475     --   2,525  
                                 
Natural Gas Liquids (MBbl/d)                                
                                 
  United States   100     --   110     105     --   115  
  Algeria   --     --   --     1     --   2  
                                 
                                 
    $ / Unit     $ / Unit  
Price Differentials vs NYMEX (w/o hedges)                                
                                 
Crude Oil ($/Bbl)   (1.00 )   --   2.00     (1.00 )   --   2.00  
                                 
  United States   (5.00 )   --   --     (5.00 )   --   --  
  Algeria   5.00     --   10.00     5.00     --   10.00  
  Ghana   3.00     --   8.00     4.00     --   9.00  
                                 
Natural Gas ($/Mcf)                                
                                 
  United States   (0.50 )   --   (0.25 )   (0.30 )   --   (0.20 )
                                 
* All volumes exclude the impact from China and Pinedale/Jonah.  
   
   
   
Anadarko Petroleum Corporation  
Financial and Operating External Guidance  
As of May 5, 2014  
             
    2nd Qtr     Full Year  
    Guidance *     Guidance *  
                                 
    $ MM     $ MM  
Other Revenues                                
  Marketing and Gathering Margin   50     --   70     240     --   260  
  Minerals and Other   45     --   55     190     --   210  
                                 
                                 
    $ / BOE     $ / BOE  
Costs and Expenses                                
  Oil & Gas Direct Operating   3.80     --   4.00     3.90     --   4.10  
  Oil & Gas Transportation/Other   3.55     --   3.75     3.75     --   3.85  
  Depreciation, Depletion, and Amortization   14.00     --   14.50     14.25     --   14.75  
  Production Taxes (% of Product Revenue)   7.5 %   --   8.5 %   8.0 %   --   9.0 %
                                 
    $ MM     $ MM  
                                 
  General and Administrative   290     --   310     1,150     --   1,250  
  Exploration Expense                                
    Non-Cash   100     --   150     650     --   750  
    Cash   105     --   115     400     --   450  
  Interest Expense (net)   180     --   185     735     --   745  
  Other (Income) Expense   40     --   50     135     --   155  
                                 
Tax Rate                                
  Algeria (All current)   45 %   --   55 %   45 %   --   55 %
  Rest of Company (10% current for Q2 and FY)   50 %   --   60 %   40 %   --   50 %
                                 
                                 
Avg. Shares Outstanding (MM)                                
  Basic   504     --   505     504     --   505  
  Diluted   505     --   506     507     --   508  
                                 
                                 
Capital Investment (Excluding Western Gas Partners, LP)   $ MM     $ MM  
                                 
  APC Capital Expenditures   2,100     --   2,300     8,400     --   8,800  
                                 
* Excludes items affecting comparability  
   
 
 
Anadarko Petroleum Corporation
Commodity Hedge Positions (Excluding Natural Gas Basis)
As of May 5, 2014
                 
        Weighted Average Price per Barrel
    Volume
(MBbls/d)
  Floor Sold   Floor Purchased   Ceiling Sold
Crude Oil                      
  Fixed Price - Financial                      
  2014                      
    WTI   70   $ 96.03            
    Brent   37   $ 109.19            
    107   $ 100.58            
         
        Weighted Average Price per MMBtu
    Volume (thousand MMBtu/d)   Floor Sold   Floor Purchased   Ceiling Sold
Natural Gas                      
Three-Way Collars                      
  2014   600   $ 2.75   $ 3.75   $ 5.01
  2015   635   $ 2.75   $ 3.75   $ 4.76
                         
  Fixed Price - Financial                      
  2014   600   $ 4.26            
                       
Extendable                      
2014 (through June)      Fixed Price   400   $ 4.19            
2014 (July - December)   Swap   400               $ 4.19
                       
                       
                       
Interest-Rate Derivatives
As of May 5, 2014
                     
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
                     
                     
                     
Anadarko Petroleum Corporation
Reconciliation of Same-Store Sales
 
Average Daily Sales Volumes
    Quarter Ended March 31, 2014   Quarter Ended March 31, 2013
    Natural Gas   Crude Oil & Condensate   NGLs   Total   Natural Gas   Crude Oil & Condensate   NGLs   Total
    MMcf/d   MBbls/d   MBbls/d   MBOE/d   MMcf/d   MBbls/d   MBbls/d   MBOE/d
U.S. Onshore   2,397   125   92   617   2,244   97   77   548
Deepwater Gulf of Mexico   275   46   6   98   362   50   8   118
International and Alaska   --   87   --   87   --   95   --   95
Same-Store Sales   2,672   258   98   802   2,606   242   85   761
China and Pinedale/Jonah   25   12   1   17   83   15   3   32
Total   2,697   270   99   819   2,689   257   88   793