Anadarko Petroleum Corporation (NYSE:APC) today announced second-quarter 2008 net income available to common stockholders totaled $23 million, or $0.05 per share (diluted). Income from continuing operations totaled $16 million, or $0.03 per share (diluted). The net income results include certain items affecting comparability that are typically excluded by the investment community in published estimates. In total, these items reduced net income by approximately $815 million, or $1.73 per share (diluted) on an after-tax basis.(1) Cash flow from continuing operations in the second quarter of 2008 was $438 million, and discretionary cash flow totaled $2.31 billion.(2) Capital expenditures for the quarter were approximately $1.23 billion.
"In addition to generating more than $1 billion in free cash flow, we are very pleased with our production volumes for the quarter," Anadarko Chairman and CEO Jim Hackett said. "We lost more than eight weeks of production from Independence Hub, and we still met our guidance for the quarter. Factoring in the additional four million BOE (barrels of oil equivalent) that would have been produced had the Hub been fully operational; we would have again shown solid sequential growth relative to the prior quarter's outstanding results. Our strong quarterly operational performance is a reflection of the depth of Anadarko's portfolio and our ability to grow organically. We are confident that we will achieve our full-year production guidance of 207 million to 212 million BOE."
SECOND-QUARTER 2008 OPERATIONAL HIGHLIGHTS
-- Achieved record daily production in the Greater Natural Buttes and the Powder River Basin
-- Expanded West Africa exploration program and increased estimated recoverable resource range of Jubilee
-- Moved Deepwater Millennium drillship to Brazil and spud first operated pre-salt test
-- Initiated testing of prospects in the Marcellus Shale play
"Our lower-risk U.S. onshore assets continue to perform very well," said Hackett. "In the Rocky Mountains, our operations in the Greater Natural Buttes area and the Powder River Basin set daily production records during the second quarter. As a reminder, we have actively managed our commodity price risk in the Rockies with firm transportation commitments and attractive basis hedges at a differential to NYMEX of approximately $1.50 in 2008 and $1.25 in 2009. Our Southern region assets also performed well during the quarter, and our Gulf of Mexico oil volumes were higher than anticipated. All together, these assets contributed nearly one million BOE above our projections, allowing us to meet our guidance for the quarter and largely offset the one-month incremental loss at Independence Hub, which was not accounted for in the guidance provided in the first-quarter earnings release," Hackett added.
Anadarko also announced a successful appraisal at the Mahogany-2 well in the Jubilee field offshore Ghana and successfully tested the upper and lower zones of the well, recovering light, sweet crude at significant flow rates. As a result, the partnership increased the field's estimated recoverable resources to a range of 500 million to 1.8 billion barrels of oil and is still targeting 2010 for initial production. During the quarter, Anadarko also expanded its acreage position within the under-explored Jubilee-type Cretaceous trend along the coast of West Africa.
The company moved the Deepwater Millennium drillship to Brazil and spud its first operated pre-salt test in deep water at the Wahoo prospect on BM-C-30 during the second quarter. Once drilling operations are completed at Wahoo, Anadarko plans to move the drillship back to the Espirito Santo Basin to re-enter and deepen the Serpa prospect in order to reach the primary objective. During previous drilling operations, an active petroleum system was proven in the pre-salt secondary objectives penetrated at Serpa.
In Pennsylvania, Anadarko and its partners commenced drilling operations on two wells in the Marcellus Shale play in the Appalachian Basin with encouraging results. The wells have been cored and further evaluation is under way. Anadarko has access to approximately 625,000 gross acres in the fairway of the Marcellus Shale play.
SECOND-QUARTER 2008 VOLUMES
Second-quarter 2008 sales volumes of natural gas, crude oil and natural gas liquids totaled 50 million BOE, or 548,000 BOE per day. Second-quarter 2008 natural gas sales volumes averaged 1.87 billion cubic feet per day. Oil sales volumes in the second quarter averaged 195,000 barrels per day, and natural gas liquids sales volumes averaged 41,000 barrels per day.
CONFERENCE CALL TOMORROW AT 9 A.M. CDT, 10 A.M. EDT
Anadarko will host a conference call on Tuesday, August 5, at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) to discuss second-quarter results and the company's outlook for the remainder of 2008. The dial-in number is 888.713.4205 in the United States or 617.213.4862 internationally. The confirmation number is 50038203. 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 also be available on the Web site for approximately 30 days following the conference call.
ANADARKO OPERATIONS REPORT
For more details on Anadarko's operations, please refer to the comprehensive report on second-quarter activity. The report will be available at www.anadarko.com on the Investor Relations page.
FINANCIAL DATA
Nine pages of summary financial data follow, including current hedge positions, financial guidance and supplemental production guidance. All prior-year information has been re-cast to reflect the successful efforts method of accounting.
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 2007, Anadarko had 2.4 billion barrels of oil equivalent of proved reserves, making it one of the world's largest independent oil and natural gas exploration and production companies. For more information about Anadarko, please visit www.anadarko.com.
(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 measures are useful information for investors.
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 Anadarko's ability to successfully meet its production guidance and the successful completion and commercial operation of the drilling prospects identified in this news release. See "Risk Factors" in the company's 2007 Annual Report on Form 10-K and other public filings and press releases. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.
Cautionary Note to U.S. Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Anadarko uses certain terms in this news release, such as "estimated recoverable resources," and similar terms that the SEC's guidelines strictly prohibit Anadarko from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in Anadarko's Form 10-K for the year ended December 31, 2007, 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. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
Anadarko Petroleum Corporation Certain Items Affecting Comparability Quarter Ended June 30, 2008 --------------------------- Before After Per Share millions Tax Tax (diluted) ---------------------------------------------------------------------- Unrealized gains (losses) on derivatives, net $(1,603) $(1,020) $ (2.17) Impairments (11) (7) (0.01) Gains (losses) on divestitures, net 335 212 0.45 ---------------------------------------------------------------------- $(1,279) $ (815) $ (1.73) ---------------------------------------------------------------------- Quarter Ended June 30, 2007 --------------------------- Before After Per Share millions Tax Tax (diluted) ---------------------------------------------------------------------- Unrealized gains (losses) on derivatives, net $ (54) $ (35) $ (0.08) Impairments (27) (27) $ (0.06) Gains (losses) on divestitures, net 1,494 951 $ 2.04 ---------------------------------------------------------------------- $ 1,413 $ 889 $ 1.90 ----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP Measures Below is a reconciliation of cash provided by operating activities (GAAP) to discretionary cash flow and free cash flow (non-GAAP) and net income from continuing operations (GAAP) to adjusted net income from continuing operations (non-GAAP) as required under Regulation G of the Securities Exchange Act of 1934. The company uses discretionary cash flow and free cash flow to demonstrate the company's ability to internally fund capital expenditures and to service or incur additional debt. It is useful in comparisons of oil and gas exploration and production companies because it excludes fluctuations in assets and liabilities. The company uses adjusted net income from continuing operations to evaluate the company's operational trends and performance.
