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Anadarko 2018 capital program announcement

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LNG Industry,

Anadarko Petroleum Corporation has announced its 2018 capital expectations and guidance.

In 2018, the company expects to make capital investments in the range of US$4.2 – 4.6 billion. The capital program is designed to enhance shareholder value by delivering attractive margins and returns, while advancing the development of the company's core assets within discretionary cash flow.

2018 Anadarko capital program highlights

  • Allocates approximately 80% of capital toward the Delaware and DJ basins, including Anadarko midstream, and the deepwater Gulf of Mexico.
  • Generates material free cash flow at current strip prices and breaks even in a US$50 oil and US$3 natural gas commodity-price environment.
  • Delivers a cash return on invested capital of 20%.
  • Results in approximately 14% oil growth year-over-year, which is 19% oil growth per debt-adjusted-share.

"Our 2018 investment plan will again be driven by capital efficiency and financial discipline," said Anadarko Chairman, President and CEO Al Walker. "These key tenets have served us well for the last decade, as growth within cash flow is fundamental to delivering capital-efficient returns. Our repositioned asset footprint is built to succeed in a market where oil prices exhibit volatility in a US$45 – 60 environment, with gas averaging US$3 per thousand ft3. We expect next year's capital expenditures to be inside of discretionary cash flow at US$50 and US$3, while generating free cash flow of more than US$700 million at the current strip. Further, we plan to return substantial cash to shareholders by executing the remaining US$1.5 billion of our US$2.5 billion share repurchase program during the coming year."

"We are also modifying the metrics in our 2018 compensation program to increase the profile for the role of capital efficiency and financial discipline and refine the focus on our safety performance," added Walker. "Performance objectives will now include cash return on invested capital, volume growth per debt-adjusted share, and reserve additions per debt-adjusted share. As I have highlighted recently, moving to debt-adjusted performance metrics in particular will align our compensation programs to the capital-allocation philosophy we have employed over the last ten years."

Exploration and LNG

The company's exploration investments in 2018 are expected to total about US$200 million. Exploration spending will primarily be focused on the Gulf of Mexico, where the company plans to drill identified prospects near existing operated infrastructure. Additional exploration investment will be allocated to the US onshore, as the company continues to identify future areas that can make a material and scalable addition to its portfolio.

Approximately US$150 million is expected to be invested during 2018 as the company advances the Mozambique LNG project. This investment will primarily be used to fund Anadarko's portion of the costs associated with preparing the site of the future LNG park.

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