Receives Near-term Debt Relief by Extending Credit Maturities
Anadarko Petroleum (ticker: APC) provided a fourth quarter update prior to the opening of the market on December 17, 2015, highlighting news from its drilling program and adjustments to its credit facilities.
The Woodlands-based company announced the renewal of its $2 billion, 364-day credit facility to a new maturity in January 2017, along with extending the maturity of its $3 billion unsecured revolving credit facility to January 2021. Both instances represent extensions of one calendar year compared to previous arrangements, and there were no changes in pricing or covenants to either extension.
Anadarko is one of the largest E&Ps based in North America, but its leverage has become more of a concern in the face of the commodity downturn. Management has not used the word “debt” in either its last two quarterly conference calls, even though the company maintains roughly $7 billion of liquidity (including $2 billion of cash) with no borrowings outstanding.
Oil Production Uptick
The company’s core U.S. assets in the Delaware and Wattenberg hold combined net resources of more than 2.5 billion BOE, and efficiencies are leading to faster run times and greater production volumes. As such, Anadarko is increasing its Q4’15 guidance by 15 MBOPD, resulting in a range of 314 to 319 MBOPD for the quarter. Capital investments are expected to be on the lower half of guidance estimates, slated at a midpoint of about $1.3 billion.
The Heidelberg asset in the Gulf of Mexico is also ahead of schedule, and first production from the initial three wells will commence in Q1’16. Anadarko holds a 31.5% working interest and $860 million of a carried-interest agreement. Total gross resources are slated at 200 to 400 MMBOE.
More Changes Incoming?
Despite the improvements in the field and on the balance sheet, analysts are forecasting APC to significantly outspend its cash flow for the near term. UBS Financial Services believes free cash flow will be ($1.8 billion) in 2016, assuming APC decreases its capital expenditures to $5 billion.
A note from Tom Driscoll, Managing Director of Barclays, says that 2016 outspend could exceed $2 billion, piggybacking on an equally difficult 2015 that is forecasted to be outspent by $2.3 billion (assuming the dividend).
Al Walker, Chairman, President and Chief Executive Officer, alluded to “asset monetizations” in his prepared statements on the press release. Management fielded several questions regarding asset sales in its Q3’15 conference call, but did not tip its hand on which assets could possibly be on the market. Robert Gwin, Chief Financial Officer of Anadarko, said the company is not “necessarily trying to achieve absolute top dollar” for certain assets, and everything is evaluated on their capital intensity and allocation. In the near-term, its position in the Denver-Julesburg and Delaware Basins are the focus of its 2016 operations.