Business in Ghana

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Anadarko’s Jubilee party caps tough year

Posted by Business in Ghana on December 15, 2010

By Sheila McNulty in Houston, Financial Times, with permission

When the Jubilee field in Ghana produces its first oil on Wednesday it will represent more than a boost in production for Anadarko Petroleum.

It will also validate the US independent oil group’s strategy to pursue international exploration even as its peers pulled back. Oil groups globally are facing barriers to new markets dominated by state oil companies but Anadarko is among a handful seeking organic growth abroad.

The strategy is paying off. Anadarko says it expects production to rise by 7-9 per cent over the next five years, much of it from the string of oil discoveries off the west Africa coast.

“For Anadarko, Jubilee serves as a foothold in the highly prospective West Africa Cretaceous Trend, where the company holds about 7m gross acres, spanning Ghana, Côte d’Ivoire, Liberia and Sierra Leone,’’ says Jim Hackett, Anadarko’s chief executive.

The opportunity is a bright spot for a company that is putting the wraps on a difficult year. As a 25 per cent partner in BP’s Macondo well, Anadarko faces billions of dollars in potential liabilities from the April 20 explosion and subsequent oil spill in the Gulf of Mexico.

Analysts estimate $5bn-$10bn in potential liabilities for Anadarko.

Anadarko shares have climbed from their post-Macondo spill lows, when they touched $34.54.

On Tuesday, they stood at $69.56, not too far from the 52-week high of $75.05 reached on April 15, just five days before the explosion.

Analysts are overlooking the potential liabilities related to the spill, focusing instead on the growth opportunities in Anadarko’s international portfolio.

Credit Suisse says in a recent report: “We continue to believe Anadarko holds the deepest and most scalable asset portfolio amongst the independents.”

Barclays Capital says: “The strong onshore port­folio has delivered consistent growth and has been supplemented with high-impact, deepwater discoveries.’’

Among recent announcements are three significant natural gas finds off the coast of Mozambique. There has also been a substantial discovery off the coast of Brazil and promising results from drilling off the coast of Sierra Leone. Another big oil discovery has been made at the Owo field off Ghanaian coast and there has been a large offshore gas find in Indonesia.

Anadarko also has key positions in the Marcellus, Eagle Ford and Niobrara shale fields in the US.

Next year it will focus on ramping up production from the Jubilee field, Caesar/Tonga in the Gulf of Mexico and its El Merk find in Algeria to add 60,000 barrels of oil equivalent per day, or 9 per cent, to production by the end of 2012.

“Anadarko is one of the few independents out there trying to grow through international exploration,’’ says Raoul LeBlanc, senior director at PFC Energy, the consultancy.

“It’s a counter-trend strategy. People might doubt it but now Anadarko has the barrels on stream to prove it.’’

Anadarko declared “force majeure” on four of its contracted deepwater rigs in the gulf following the Obama administration’s moratorium on drilling – two of which are being contested in court.

To enhance liquidity, Anadarko entered into a five-year $5bn undrawn secured facility and completed an offering of $2bn 6.375 per cent senior notes in the third quarter. Cash on hand at the end of the third quarter was $4.2bn. Net debt was $9.3bn.

But it is not setting aside any money to cover potential liabilities from the BP spill.

“Publicly available evidence indicates that the blow-out of the well, the explosion on the Deepwater Horizon drilling rig and the subsequent release of hydrocarbons were preventable and the direct result of BP’s decisions, omissions and actions, and likely constitute gross negligence or wilful misconduct by BP,’’ says Anadarko.

BP rejects that claim, and the matter might well have to be resolved in court.

Anadarko maintains that it is not going to be distracted by the issue.

Mr Hackett says it has established, with Jubilee, a new benchmark in project management.

First oil was produced just three-and-a-half years after the initial discovery – about half the usual time span.

If it can maintain that momentum on other discoveries, Anadarko could well be strong enough to survive any fallout from the BP accident.

Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.


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