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Anadarko closes $2 billion Freeport-McMoRan Gulf of Mexico asset acquisition, ramps up Permian activity, announces GOM oil discoveries

Houston-based Anadarko Petroleum Corp. (ticker: APC) announced Thursday that the company has closed on its acquisition of Freeport-McMoRan’s (ticker: FCX) Gulf of Mexico (GOM) assets. The company announced in September that it would pay $2 billion for FCX’s offshore assets, a move Anadarko calculated could deliver $3 billion of incremental cash flow over the next five years, which APC wants to use to fund its onshore projects.

APC is now the largest operator of floating production in the deepwater Gulf

“As a result of closing this transaction, Anadarko now operates the largest number of floating production facilities in the deepwater Gulf of Mexico, which provides a competitive advantage to leverage this infrastructure into attractive new investment opportunities,” said Anadarko Chairman, President and CEO Al Walker. “This region continues to play a key role in our portfolio by contributing to our higher-margin oil growth profile, while generating substantial future free cash flow to accelerate the growth of our world-class U.S. onshore assets in the Delaware and DJ basins.”


APC reports large payzones offshore in three exploratory wells

As part of the company’s press release, Anadarko also announced that its GOM tieback and exploration program encountered oil in several locations. The company’s Warrior exploration well encountered more than 210 net feet of oil pay in multiple high-quality Miocene-aged reservoirs. The Warrior discovery is located approximately 3 miles from the Anadarko-operated K2 field and is expected to be tied back to its Marco Polo production facility. Anadarko is the operator at Warrior with a 65-percent working interest.

At the Phobos appraisal well, which is located approximately 12 miles south of the Anadarko-operated Lucius facility, the company has already encountered more than 90 net feet of high-quality oil pay in a Pliocene-aged reservoir similar to the nearby Lucius field. This secondary accumulation was present in the Phobos discovery well and will be evaluated for tieback to the Lucius facility. Meanwhile, drilling is ongoing toward the primary objective in the Wilcox formation. Anadarko has a 100-percent working interest at Phobos.

At the Heidelberg field, the fifth production well currently being drilled has encountered the reservoir sand with more than 150 net feet of oil pay to date. The well will be completed immediately following drilling operations and is expected to be brought on production early next year.

Success in the Gulf allows Anadarko to ramp-up onshore projects: going to 14 rigs in the Delaware and 6 in the DJ

The continued success of the company’s offshore program will allow Anadarko to ramp up its onshore projects even faster, Anadarko said in its press releases. Anadarko previously added two rigs in each of its Delaware and DJ basin positions early in the fourth quarter in anticipation of closing the FCX deal, and now plans to further increase its drilling activity by five rigs in the Delaware and three rigs in the DJ.

The new level of activity will bring Anadarko’s rig count to 14 operated rigs in the Delaware Basin and six in the DJ by the end of the first quarter of next year. That compares to seven operated rigs and one operated rig in each of those basins, respectively, at the end of the third quarter of this year. The company’s new investments in these basins generate rates of return of 35 percent to more than 60 percent at today’s prices, Anadarko said in its press release.

When APC announced the Freeport acquisition, the company expected to deliver an oil compound annual growth rate (CAGR) from 2016 to 2020 of 10%-12%. With the additional rigs the company now plans to put to work, Anadarko expects oil CAGR for that five-year period of 12%-14%. The company said that it expects to generate that CAGR while spending within cash flow.

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