Tuesday, January 29, 2013

Why Anadarko Keeps Drilling

It's not really a mystery.  Over the past half year, Anadarko has maintained the largest Haynesville-targeted rig count while most other producers have cut back significantly.  The secret, as many people know, is that the company is able to target liquids with these wells.  I'm a bit delinquent in posting the slide below (from a December presentation), but it neatly summarizes the attraction of these Haynesville wells:  36% oil and liquids and a type curve that is nearly flat for six months.  Even at a gas price of $3.25/Mcf, the wells are estimated to produce a 95% pre-tax return.

Look for the Anadarko rig count to stay about the same for the rest of the year.


Anonymous said...

Beware of the hype!! I distrust any EUR that uses MBOE for any well that is 65% NG. Also this summer the price of NGLs were around $25/bbl and I doubt that the 7% oil was even getting $100. This presentation makes it look like that will find 350 wells that all average EURs of 1100 MBOE, even in the very hottest spot of the EagleFord they are finding very few EURs above 1000 MBOE. One reason the ROR is so good is that the royality is only 15%


Robert Hutchinson said...

Indeed. Also, the price assumption for NGLs is notably absent.

Robert Hutchinson said...

Just for the record, here is the comment from the Anadarko Feb. 5 year end/Q4 conference call on the E. Texas production. Disappointing in terms of specifics. The company's investor day coming up in a couple of weeks, so I'll look for more specifics then, but given that they have much bigger fish to fry I wouldn't expect too much detail.

Here is the brief exchange from yesterday's call:

Scott Hanold - RBC Capital Markets

Okay, So, combination of a bunch of factors. Okay. Then in the Haynesville or I guess, I would call the East Texas area, production jumped pretty nicely there as well and that continues to be an area. It looks like you are adding 35 million to 40 million equivalent per quarter and that stuff is still, call it, 70-ish percent the dry gas there. It looks like based on your ops report, is that something as you look forward into 2013 that the liquid still carries economics strong enough?

Al Walker - President, Chief Executive Officer

If you look at the ops report, I think the thing to focus on is our oil volumes essentially doubled and as been our NGL volume, so the play is delivering good economics and we continue to invest on it. There is no dry gas. All the gas production comes along with on some really solid liquids production and we just happened to be in a really nice spot and our team has done a great job of monetizing that asset, delivering a lot of value to Anadarko shareholders.