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Anadarko Petroleum Corporation. (NYSE:APC)

Q4 2013 Earnings Conference Call

February 4, 2014 10:00 AM ET

Executives

John M. Colglazier – Vice President of Investor Relations & Communications

R. A. Walker – Chairman, President and Chief Executive Officer

Robert G. Gwin – Senior Vice President, Finance and Chief Financial Officer

Robert K. Reeves – Senior Vice President, General Counsel, Chief Administrative Officer and Chief Compliance Officer

Charles A. Meloy – Senior Vice President, U.S. Onshore Exploration and Production

James J. Kleckner – Executive Vice President, International and Deepwater Operations

A. Scott Moore – Vice President of Marketing

Robert P. Daniels – Senior Vice President, International and Deepwater Exploration

Analysts

David R. Tameron – Wells Fargo Securities LLC

Douglas George Blyth Leggate – Bank of America Merrill Lynch

Arun Jayaram – Credit Suisse Securities, LLC

David Martin Heikkinen – Heikkinen Energy Advisors, LLC

Charles A. Meade – Johnson Rice & Co. LLC

John P. Herrlin – SG Americas Securities LLC

John T. Malone – Mizuho Securities USA, Inc.

Brian Singer – Goldman Sachs Group Inc.

Pearce W. Hammond – Simmons & Co.

Bob Alan Brackett – Sanford C. Bernstein & Co. LLC

Scott Hanold – RBC Capital Markets LLC

Harry Mateer – Barclays Capital, Inc.

Joseph Magner – Macquarie Capital, Inc.

Peter Kissel – Howard Weil

Jason A. Gilbert – Goldman Sachs & Co.

Ross Payne – Wells Fargo Securities LLC

Jeffrey Campbell – Tuohy Brothers Investment Research

Operator

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter Anadarko Petroleum Corporation Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session (Operator Instructions) thank you.

I would now like to turn the conference over to your host for today, John Colglazier, Vice President, Investor Relations and Communications. Please go ahead sir.

John M. Colglazier

Well, thanks Rob. Good morning, everyone. We're glad you could join us today for Anadarko's year-end 2013 Conference Call.

I’d like to remind you that today's presentation includes forward-looking statements and certain non-GAAP financial measures, and a number of factors could cause results to differ materially from what we discuss today. We encourage you to read our full disclosure on forward-looking statements and the GAAP reconciliations located on our website and included in last night’s earnings release.

At this time, I'll turn the call over to Al Walker and following his remarks, we will open it up for questions with Al and our executive management. Al?

R. A. Walker

Good morning. And I’m proud to have the opportunity to recap with you this morning another strong year of operating results for Anadarko. 2013 represented another year of delivering exceptional year-over-year growth and unmatched optionality.

Our values based culture of safety and continuous improvement is the foundation of our success and I’m pleased to announce our safety performance during the year was the best in our history.

Our capital efficient U.S. onshore assets delivered 25% oil volume growth over the previous year, driving double-digit production growth per net debt adjusted share. Our high margin deepwater and international oil projects also reached major milestones, highlighted by first oil at El Merk in Algeria.

We continued to be an industry leader in deepwater exploration with a 67% exploration and appraisal success rate in 2013, including incredible results in the Shenandoah Basin which are highlighted in our operations report and in the earnings release, and we continue to be active portfolio managers in order to accelerate returns and value by demonstrating and announcing monetizations totaling almost $4.5 billion during the year.

Our U.S. onshore growth plays were major contributors to our strong 2013 results as we increased sales volumes by about 64,000 barrel equivalents per day year-over-year, representing a 12% increase. Leading this impressive liquids-rich growth was the Wattenberg Horizontal program.

In addition to the field’s full year results detailed in last night’s news release and operations report, I’d like to highlight the 30% sequential growth in oil sales volumes achieved during the fourth quarter.

We’ve also begun to realize the benefits of the acreage exchange that was announced in October and we’ve been able to accelerate the restoration of volumes impacted by the extreme September flooding.

By adding new facilities, we are solving the line pressure challenges that previously constrained production growth in the field over the last year. A new 100 million per day refrigeration facility was recently put in service and we expect to commission the 300 million a day Lancaster cryogenic plant and the 150,000 barrel per day Front Range NGL pipeline during the first quarter of this year.

We also achieved new production records in the liquids-rich Eagle Ford Shale, the East Texas/North Louisiana Horizontal programs as well as other areas of focus for us. Here sales volumes in particular for the Eagle Ford and the East Texas area were up 46% and 78% respectively year-over-year. We look forward to sharing more details about our Wolfcamp shale evaluation in the Delaware Basin at our March Investor Conference.

The early results here though from this very liquids-rich play with good reservoir energy continue to look strong and it calls us to increase our operator rig count to seven in order to accelerate the delineation of over 600,000 gross acres. In 2013, we again improved our efficiencies, drilling 180 more wells than we originally anticipated in the U.S. onshore. We did this while staying within our original drilling budget and completions activities. These gains reinforce our status as an industry leader in low cost operations and capital efficiency.

Taken together, our ability to fund, develop, and produce onshore resources led Wood Mack to announce a December in a study to Anadarko, was the top company in our industry for creating value from U.S. onshore resources. We are very proud of this recognition and believe it’s reflected the achievements we have made in every segment of our onshore business.

Turning to international and deepwater activity; in Algeria, all three El Merk facilities are now up and running with a total net production now increasing to 30,000 barrels per day. Later this year, we anticipate initiating oil production from the 80,000 barrel a day Lucius facility in the deepwater Gulf of Mexico. This project remains on-time and on-budget and again demonstrates our industry-leading success in project management.

In Mozambique, we remain on-track for first cargos in 2018 and we’ve reached multiple non-binding Heads of Agreement for long-term LNG sales for about two-thirds of our first 5-million-tonne-per-annum train.

Our 67% deepwater exploration and appraisal success in 2013 continued to lead the industry. We are and continued to believe this will be a differentiating factor for Anadarko and gives us portfolio optionality very few can match.

In 2013, we added more than a 0.5 billion barrels of proved reserves before the effects of price revisions at a cost of about $7.5 billion, resulting in a very competitive funding and development costs of below $15 per BOE.

Even more significantly, over the last five years, our F&D averaged less than $15 per BOE with a reserve replacement ratio of better than 150%. Also during the last five years, we had increased the sales volume liquids mix by a full 13%, which makes these F&D results even more impressive, given the implicitly higher activation costs for this oilier and more liquids-rich product mix.

Our sales growth and sales volumes in reserve replacement were accomplished while also achieving exceptional free cash flow in 2013, which contributed to ending the year with $3.7 billion of cash on hand.

Additionally, we expect the first quarter to also add to our cash position through the closing of the $2.64 billion sell down in Mozambique and the recently closed $580 million divestiture of our non-operated Pinedale/Jonah position.

In regards to Tronox, we’ve made it clear that we strongly disagree with the court’s Memorandum of Opinion and reserve all of our objections and rights to appeal. However, in accordance with accounting guidelines, we’ve recorded a contingent liability of $850 million.

There is still a wide range of possible and ultimate outcomes and this accrual is based on the information known to us at this time. So it could change materially as events unfold. It also does not include any amounts for possible attorney’s fees, interest and other costs.

We will provide additional information in our 10-K which we expect to file later this month. I am confident in our ability to manage through the current uncertainty by delivering excellent operating results again in 2014 while working aggressively to protect our stakeholders’ interest for the challenges this lawsuit presents.

I believe no other company of our size has consistently delivered the achievements, Anadarko has over the last five years. And I’m convinced our best days are ahead of us as we continue to deliver sustained growth from identified projects for the foreseeable future with an ongoing focus on portfolio management.

Later this month, we will make a recommendation to our Board for the 2014 Capital Program. It is likely this proposed capital plan will again be aligned with anticipated cash flows. We look forward to providing you an update on the capital plan for 2014 along with guidance for key performance metrics and longer term opportunities at our March 4 Investor Conference in Boston.

With that, we will open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Brad Carpenter from Wells Fargo. Your line is open.

David R. Tameron – Wells Fargo Securities LLC

It’s actually Dave Tameron. Couple of questions; Al, I don’t know if you want to go there, but you’ve talked about tax deductibility of Jonah, could you give us anymore detail on that and what would be tax deduct 401?

Robert G. Gwin

Dave, it’s Bob Gwin. As you’d expect, we’ve been working with our tax advisors to ensure that we receive any of the tax benefits towards we are entitled. The situation is fairly complex. And I think it’s fair to say we feel confident with what we’ve accrued in the quarter relative to the $850 million loss accrual for Tronox.

Going forward, we are going to have to re-analyze the appropriate treatment, if and when we make any future changes to the accrual but for now we feel confident in the treatment and believe that it’s certainly something that we are happy to put in the release.

And I think going forward, you are going to see us continue to modify that and in the 10-K we’ll have some additional disclosure providing the detail of how we get there.

David R. Tameron – Wells Fargo Securities LLC

Okay, fair enough and then I’ll ask one more, and I’ll let other people jump in, Al I’m trying to front run your conference here a little bit, can you give us any parameters around how we should think about 2014 and I know you’ve talked about liquids growth and the focus Permian, Niobrara and Eagle Ford but can you give us any more as far as any framework there?

R. A. Walker

David, I can try a little bit, I think you can anticipate as I mentioned in my prepared remarks that we will deliver a plan that looks like it’s fairly sinked up to what we believe cash flow would be. We are clearly like many people, a little more oil and liquids focused with the allocation of capital or where we have better well head margins. We also anticipate the type of reserve replacement and production growth per debt adjusted share that we’ve achieved historically can be achieved again in 2014 with this plan.

This plan probably will focus more of the capital towards things that increase EBITDAX in 2014 and 2015 and again it will be matched up to what we believe to be the anticipated cash flow that commodity markets give us.

David R. Tameron – Wells Fargo Securities LLC

Okay, and then are you going to give us any – are you going to give us a 2015, 2016 look at the Analyst Day?

R. A. Walker

We’ll give you – as you recall on prior years, we give you a pretty good roll forward. And that roll forward is, that probably is best described by many as a cartoon but we will give you a good idea as what we think the prior years, and we’ve given you forward-looking views how this particular plan will sink up with years that will follow. So it won’t be just a 2014 alone.

David R. Tameron – Wells Fargo Securities LLC

Okay, thanks. I’ll let somebody else jump in and thanks for the color.

R. A. Walker

Yes, thanks David.

Operator

Your next question comes from the line of Doug Leggate from Bank of America Merrill Lynch. Your line is open.

Douglas George Blyth Leggate – Bank of America Merrill Lynch

Thanks, good morning Al. How are you?

R. A. Walker

Just like I promise you one of these years, we are going to tell the operator, before we get on that your last name is not has beaten up as it is than it is now.

Douglas George Blyth Leggate – Bank of America Merrill Lynch

It’s way more exotic than it really is in real life, so it just terrific we know that. So a couple of questions Al if I may, you’ve obviously got this huge backlog of opportunities that you build up through exploration and amongst other things where is your head-on in terms of portfolio high-grading, I’m thinking really more about operational constraints how much, how many folks you’ve got to actually allocate or run projects and probably you’ve got more to see grades over than the share price you’ve given your credit for. So how should we think about monetizing assets and how would you redeploy the cash if you did and I got a follow up, please?

R. A. Walker

Okay, well I think, we’ll continue in 2014 like we have in prior years look for the right opportunities to monetize assets in our portfolio like we’ve historically done, and I think we’ve been pretty active as you know since 2006, when we put all three companies together, we are probably as active at managing our portfolio and getting the right mix of properties that can be optimized with anybody. As we think about it in the future, when we have better clarity around Tronox, we’ll be able to probably best address how we are going to use the cash that is currently been built. As I mentioned in my prepared remarks, it was $3.7 billion. We’ve closed the non-op sale in Jonah Pinedale and probably without any concerns at this point, we expect that during the quarter just sell down or close the sell down in Mozambique adding to that cash position.

Once we have that clarity in Tronox, I think you can anticipate we will at that time, be able to be in a position to provide greater clarity than I can this morning exactly how we would use that cash.

Douglas George Blyth Leggate – Bank of America Merrill Lynch

Okay, given the dry hole in China does that change how China fits in the portfolio?

R. A. Walker

From an exploration standpoint, it’s probably best for me to let Bob address that. I’d say from a macro perspective, I think you probably let many people know that we continue to look at whether or not that would fit from a 30,000 foot or global view but from an exploration standpoint, I’ll let Bob address that.

Robert G. Gwin

Yes, Doug you are aware of the block that we had there 4311 and the format that we did on that, that gave us a fully carried well. We had a very good looking prospect that we wanted to test. It’s about 60,000 acre four-way closure amplitude is A, B, well all that things that you would like. And yet we laid-off half of it to minimize our risk and to get our full carry on it, and it turned out that was the right thing to do. And that the reason, we had the great amplitudes and the compartmental structure everything else was because it had CO2 in it.

And that does put a damper on the assessment of the block, the petroleum system in the block. And so as we look forward, we did take a MPLH write-down on the block at the end of the year that was rolled through. Again that’s a non-cash item and we didn’t have any cash in the well. And we managed our risk and we got some really, really good information to tell, this was probably isn’t where we want to spend additional dollars on exploration.

So now let me turn it back to anybody else, Douglas okay, that’s it.

Douglas George Blyth Leggate – Bank of America Merrill Lynch

My follow-up, if I may real quick on Tronox. Is there any need to push the bond against potential liabilities, even though you – you booked 850, do you need to put a bond against, should we think of any interest charges and I leave with that, thanks?

R. A. Walker

Well, that was a fair question Doug. And I think one of those sort of coming attractions it’s hard for us to answer today. If we are required to we feel fairly confident that the work we’ve done in advance by Bob Gwin and his staff and most importantly Al Richey, have us well positioned there. But I think any further commentary on that I might ask Bobby Reeves to address.

Robert K. Reeves

Hi, good morning Doug. Just to reiterate what we have right now procedurally is simply a memorandum of opinion after trial, it’s not a judgment, it’s not a final decision by the judge. We are still going through a process of the calculation of damages. As Al said we disagree with the judge’s opinion on findings of liability and even his surmising as to the range of calculation of damages. But we have another couple of layers of briefing and then likely a hearing will be requested by one of the parties here and we would not see a judgment issued until some time after that. And again remember that the Supreme Court, the U.S. Supreme Court has a pending case called Executive Benefits which could determine whether or not this judge even has the power to issue a final judgment in this matter.

So, there is still some uncertainty as to when a final judgment would be entered as you can imagine, we disagree with the judge as to the possible level of a judgment. So to speculate if the bonding now is premature, but certainly there is no bonding necessary at this point.

Douglas George Blyth Leggate – Bank of America Merrill Lynch

Thanks, guys.

R. A. Walker

Thank you, Doug.

Operator

Your next question comes from the line of from Arun Jayaram from Crédit Suisse. Your line is open.

Arun Jayaram – Credit Suisse Securities, LLC

Al looks like you are making some good progress regarding a gas sales agreement in Mozambique. I was wondering Al, if you could walk us through some of the key milestones that you think APC needs to achieve in 2014 to ensure for sales of gasoline in 2018 and specifically, I just wanted to ask you on project financing how much of the volumes do you need to have committed before you think you could get the project financing?

R. A. Walker

Well, I think there is a several part question to your – a several part answer to your question rather let me – I’ll try address some of that to Scott Moore who runs Global Marketing for us well as well. And then I think on the project financing, it’s probably the best that Bob Gwin answer that part of it. We are pleased with the progress we are making on the off-take agreements.

We believe that the types of things we’ve entered into currently in the Heads of Agreements are actually going to lead to real attractive prices for us as well as for our partners. And the remaining amount of gas that we have left to put under an agreement is not that material, and we feel very comfortable of our ability to reach the types of volumes that are going to be required for our contribution of those first two trains.

But if I can, I’m going to have Scott give you just a little more color around that way in which we are approaching the mix of contract, the type of contract and the things that we are looking for in that process.

Arun Jayaram – Credit Suisse Securities, LLC

I think we are very pleased, as Al said with the interest we’ve seen by the buying community in the market they are well aware of the world class resource size, the geographic diversity, the potential benefits of having this supply source into their portfolio and the interest has been broad and deep across the premium Asian buyers, so very pleased with that. We’ve started out with a benchmark of working on traditional oil indexed station and we look at other structures that would deliver comparable value and then very pleased with what we’ve seen.

R. A. Walker

From a project financing standpoint you work on a parallel path. So as Scott and his team continue work with the premium buyers, we are obviously talking to the various export credit agencies and other lenders, obviously you need a substantial majority of your off-take contractually spoken for and the creditworthiness and the strength of those buyers as material, so you have to have portfolio contracts that are attractive to the project finance community.

We still believe that we will be looking around 60% to two-thirds project financing here and we believe that’s achievable as we add more of these HOAs overtime and I think the parallel path is working well for us, so these things are to come together essentially at the same time.

Arun Jayaram – Credit Suisse Securities LLC

Just real quickly, would you look for agreements for two-trains before starting construction or would you move forward if you had enough for one-train alone?

Charles A. Meloy

Arun, let me do this, I think that’s a very good question, I think you probably have known Jim Kleckner, who runs International Deepwater Development for us and he is the most senior person involved in the Mozambique development. So I’m going to ask if you would mind to address your question.

James J. Kleckner

Good morning, Arun. Yes, the anticipated development plan is a two-train, which would be a total of 10 tonne per annum volume and it would require full marketing of the LNG before the development of that train. We are currently working with the government for putting in place necessary decree law and enabling language to advance that, but everything we’ve done this year and then in the past year has moved towards getting first sales in 2018 including certification of reserves, securing the lands to construct the Afungi LNG Park, and everything else is advancing very well.

We’ve completed the environmental impact assessment and we are in the process of submitting that to the government for their approval.

Arun Jayaram – Credit Suisse Securities LLC

Okay, that’s helpful. Just one clarification Al on Tronox; in the January 2013 release, you guys talked about a range from 850 million to 1.8 billion in yesterday’s press release you’ve highlighted a wider range, can you just comment on that and also, the press release included some language on potential settlement, can you comment if you’ve engaged with the plaintiffs' on settlement, there are some color in the press release on settlement?

R. A. Walker

Sure, understandable questions, Arun. The settlement we made with our brief and claim are somewhat separate and apart from the way in which we reported what we did yesterday, which is really a function of accounting convention. While somewhat have similar issues, I would highlight for you that what we’ve reported in our press release really is driven by the accounting conviction that we have to report under whereas the other is a legal matter that were required by the court to respond to even though we may or may not agree with the Memorandum of Opinion, we were required to respond.

So I would highlight there is a little bit of a difference there and I think if you don’t mind them all, I will let Bobby Reeves give you some additional color around that as well.

Robert K. Reeves

Yes good morning, Arun. Well, the earnings release that was issued last night gives an accrual loss disclosure and I urge you to really go back and read the disclosure very well. Because of the accounting guidelines, we have to book to the low end of our range that we thought was the estimated probable loss and that was 850 million to 5.15 billion. That’s looking at the ultimate outcome of this case based on what we know today through all appeals process. What we’ve filed back in January was what we believe the judge would do given his findings on liability so far.

It was a piece that we believe is the appropriate measure of damages given what he found as to liability. We don’t agree with that. But we have to estimate a probable loss at this point. Again, we disagree with the court’s conclusions and we’re going to continue to advocate for what we believe are the appropriate positions.

As for settlement, we really don’t have anything to discuss around settlement. We’ve always stated that we’d be willing to seek resolution on this matter in order to reduce uncertainty for our stakeholders, but that simply hasn’t been achievable to this point.

Arun Jayaram – Credit Suisse Securities LLC

All right, thank you very much for these answers.

Operator

And your next question comes from the line of David Heikkinen from Heikkinen Energy Advisors. Your line is open.

R. A. Walker

David?

David Martin Heikkinen – Heikkinen Energy Advisors, LLC

I muted, sorry about that? Thanks, guys.

R. A. Walker

I hate it when that happens to me.

David Martin Heikkinen – Heikkinen Energy Advisors, LLC

No, I said some very, very smart things when all those muted to nobody will ever hear them. As you align your interest and cash flow and CapEx one of the questions that come up maybe with investors is how does your portfolio plan change given the Tronox potential future and what’s your operating plans would be for 2014 and 2015?

R. A. Walker

Well, David, I will say this that if we were not dealing with Tronox, I want to say Tronox certainly exist and we were able to close on the sell down on Mozambique and we have the cash positions as you know what today being added to.

Given the results chart we are seeing in the Wolfcamp Play and the Delaware Basin, I think we probably will be more encouraged than we are today that might take a hard look at exceeding our cash flow with our capital spend to accelerate value there as a good use of that cash.

That would be the only thing I can tell you that would be is materially different in a poster or non-existent Tronox. We do think what we are seeing in that particular play as you’ve seen us in yesterday’s ops report as well as in the press release, highlight for the fact that we’ve now got seven rigs very actively there appraising what we have seen.

And if we had the ability that not worry about needing to see clarity around Tronox before we decided what to do with that cash, my guess is that would be at the top of our hit rate before we put it and I’m going to ask Chuck just to take a minute and expand on that if he would.

Charles A. Meloy

Yes, David, we’re going to talk extensively about 2014/2015 program during the Investor Conference Day and we’re excited about a lot of things we are going on and I hope you can see in our operating results.

As you look to the operations report, you can see that, we’ve essentially doubled the whole volumes over the last four years and that’s indicative of where we’re putting our money, that’s what we plan to do, where opportunity rich in those areas and now as the company source through Tronox and what our available cash flows are, we will make some decisions, but I think it’s pretty clear that we’re going to put our money.

We are the highest low end margins or when we get to the most banks for a buck and right now that’s primarily in the oil place and we are lucky to have the tri-factor down in the Eagleford, West Texas, Delaware Basin, and Wattenberg.

David Martin Heikkinen – Heikkinen Energy Advisors, LLC

And Chuck, can you give a little bit of details around kind of the just the liquids split from your ops report, how much of that is oil and NGLs as the percentage I just wanted to.

Charles A. Meloy

Well, if you look at the total volumes, 365,000 barrels a day of liquids, about three quarters of which will…

David Martin Heikkinen – Heikkinen Energy Advisors, LLC

Sorry, just Delaware Basin, I should have been more specific. You had a 30-day rate on your Wolfcamp results, and yes like our team, but then you also had percent of liquid, I just wondered if you could split that percent of liquids into oil and NGLs?

Charles A. Meloy

Yeah, it’s about 70% oil and 20% NGLs, and 10% gas. So, they are heavy liquids.

R. A. Walker

And David, this is Al. As I pointed out, this is black oil, it’s not gas condensate, because sometime people, I know you don’t, but a lot of people will confuse it too, here we are dealing with a very rich NGL stream plus a good and attractive black oil as well.

David Martin Heikkinen – Heikkinen Energy Advisors, LLC

Yes, thanks guys.

R. A. Walker

Thank you.

Operator

Your next question comes from the line of Charles Meade from Johnson Rice. Your line is open.

Charles A. Meade – Johnson Rice & Co. LLC

Excuse me, I have the same thing, I’d started speaking before my line was open. Thanks for taking my question. I had two questions; first on NGLs in the quarter, you guys had a nice beat not only volumes relative to your guidance, but also on realizations and I know the overall picture is improving on the Midstream side there, but I’m wondering should we read into that to your fourth quarter results to say that things are going to get better sooner and I know you mentioned some of this with the refrigeration plant and the Lancaster Plant in the Front Range line, but we can start to see the same realization starting in Q1 of 2014 you think?

R. A. Walker

Yes, Charles, I think the best way for us to try to address your question is to give you sort of a higher 30,000 foot view of how we are looking at in marketing our hydrocarbon and may have Scott Moore do that and I think at the asset level Chuck’s best position to respond at that with a little more granularity there. So if I can Scott why don’t we address the way in which we’re trying to approach our hydrocarbon marketing?

A. Scott Moore

I’d say a couple things; first of all, we’ve had some relative strength in NGL pricing in the fourth quarter and in the first quarter, it’s a great demand, nothing like cold weather to really improve the product pricing relative to the highs you’re seeing that. We of course always try to make sure we have sufficient transportation and fractionation capacity related to our assets, so that we get Gulf Coast waterborne kind of pricing for NGL products and then it’s continued to be successful.

Charles A. Meloy

And Charles, this is Chuck. In other way, we’re looking at the NGLs, because of our investment in these oil plays and the associated gas that come along with them, we won’t produce them, it often times as very how BTU value and in those BTUs or a lot of propane or butanes and in even heavier that give us some really nice pricing relation to WTI.

And at the same time, we see a considerable amount of ethane rejection particularly in the Rockies and so we have that opportunity to accelerate our volumes that we record with if we do ethane recovery, but anticipation is that still going to be a top row in 2014 and maybe even into 2015.

So what you’ll see is an increasing levels of the heavier NGLs book to our account because that’s where our investments are going and with them and the markets that currently exists, we’re getting good value for them.

We continue to invest in plans that recover the maximum amount of those products, so we get that value and Scott and his team have done a great job of finding these markets and those particular products, they have a high demand in today’s world and we have the ability as Scott mentioned to take a sort of wellhead to pure product and that has given us a lot of advantage in some good realizations.

Charles A. Meade – Johnson Rice & Co. LLC

Got it.

R. A. Walker

Charles, if I can just add to that. One of the things I’ve been very, very happy with is the way in which I think doing exceptional job of merging [ph] midstream and upstream. So that we don’t drill wells and we don’t have and sitting captive way on a pipeline connection or we don’t have a market for the gas in order to produce the liquids.

So that takes tremendous effort of coordination between midstream marketing and upstream and I think if you look at the wells we drill and how quickly turn the cash flow for the top unless, we got to be pretty down close to the top of list of any company that’s able to do that, given particularly given the volumes that we move through.

Charles A. Meade – Johnson Rice & Co. LLC

Great, Al and then it looks like it’s going to be another strong pricing quarter, Q1, but Chuck this maybe appropriate for you and I’m not sure if you guys have already talk about it, but mostly you guys have done it East Texas and North Louisiana, drilling some – have some horizontal wells going to north or what would be considered kind of the traditional ancillaries.

So like Marion County and [indiscernible] county, is there anything you can offer about what you guys are doing up there or is that something we should wait for the Analyst Day?

Charles A. Meloy

Some of that points to the Analyst Day, but the thing that that we’re trying to do and with a lot of our exploration program part of which you are referring to is continued to look around the country and take ideas that we’ve seen with our current programs and see where else we can apply and that’s one area that we’re working around to just see if there is some good value in those wells.

We’ve build a few up there and we have other areas in the U.S., in the Rockies and West Texas and South Texas that we’re taking tracks and trying to find a next big oil play that make a difference to our company.

Charles A. Meade – Johnson Rice & Co. LLC

Okay, great. Thanks for your time.

R. A. Walker

Thank you.

Operator

Your next question comes from line of John Herrlin from Societe Generale. Your line is open.

John P. Herrlin – SG Americas Securities LLC

Thank you. Just couple of quick ones from me; what was your after tax PV on your reserves at year end?

John M. Colglazier

John, [indiscernible] pleasure, that’ll be coming out on our 10-K in a few weeks.

John P. Herrlin – SG Americas Securities LLC

Okay, that’s fine. What was the negative $40 million barrels non-price related revisions that you highlighted in the slides today?

John M. Colglazier

This is John again. John, there is not really one area to point to on that and I don’t really know worth more going down into and further than that.

John P. Herrlin – SG Americas Securities LLC

Okay. Wattenberg, you’ve been running about 93 horizontals less couple of quarters, is that going to be a good run rate going forward and are you also seeing anymore completion efficiencies, not drilling efficiencies, but completion efficiencies?

Charles A. Meloy

John, this is Chuck. 93 is a good number for right now, I hope we’re able to accelerate with time with additional efficiencies not only in our drilling, but in completions. The thing that we continued to do is there are so many wells to drill out there and it’s such an expansive opportunity.

We’re doing a lot experimentation making sure that we absolutely have a good handle on the well industry that we need in the completion time, so we need for the areas that we’re developing and they are very quite bit because Wattenberg as you know as a basin that has quite a bit of variability with regard to fluid types and GORs and all kind of things and we have great level of experimentation going on and I think once we get through with that you and we have the cash flow to do, you will see us accelerate now that’s next year the following year that we can really step-on the accelerator and get it done.

John P. Herrlin – SG Americas Securities LLC

Okay, thanks. Last one for me is on the Eagleford; third quarter or fourth quarter, you had a ramp in spending, was that the compression or what was it?

Charles A. Meloy

Well, most of the investments that we have out there associate with drilling and you see the two that they if you recall John, the carry that we had going into the Eagleford expired during the middle to late third quarter.

John P. Herrlin – SG Americas Securities LLC

That’s fine, got it. Okay, thanks that’s it.

Charles A. Meloy

Thanks John.

Operator

Your next question comes from line of John Malone from Mizuho Securities. Your line is open.

John T. Malone – Mizuho Securities USA, Inc.

Thanks. Good morning. Just digging a little bit deeper out on the Mozambique, I know you are going to get deal specific, can you talk a little bit more about how you view pricing and you sort of touched on that, but as oil linked processing to be the goal or do you see sort of can we have pricing playing a role in the calculation?

R. A. Walker

The good news there is John, this is Al is that because we’re not a traditional or historical producer of LNG and we don’t have contracts with traditional buyers. Our ability to kind of find the right mix of contracts here is not burdened by historical relationship.

So well, I know you know this and most people do for years, most challenging moved under oil linked contracts, but the contracts we’ve been looking at whether they are hybrid or oil linked, it get us to the same price essentially whether they are high-grade oil link, again it’s sort of same price essentially at the wellhead and so therefore that flexibility has really inured our benefit as we’ve been able to collect but we believe these are all very attractive off take agreements with third parties.

I will ask Scott more dig into that a little bit more with you just simply because I think in the hybrid market, because again we’re not a historical seller to foundational buyers under just strictly oiling contracts, this have a real benefit to us in the marketing process.

A. Scott Moore

I’d just add to what Al said that, we started out with a benchmark for traditional index values and if we look at alternative steps such as hybrid structures, we want to make sure that they delivers similar value to the project.

John T. Malone – Mizuho Securities USA, Inc.

Okay, thanks for that. Just building on the instruction earlier about the Wattenberg, if you look at your peers if you want lot more an extended reach laterals these days and since you blocked up so much anchors with the Noble Corp, is that something you will be looking at more and talked about experimentation, but as extended laterals are going to be a part of that?

A. Scott Moore

Yes, no doubt. The way we go about this is, we look at our land grid and the ability to execute on these programs and we do or we think will add the most value for the particular location and in some instance is going to be shorter laterals or in some instance will be very longer spring laterals and it’s a lot to do more with land grid.

We see comparable values for dollar invested whether they short or long. So, at this point in time, we’re comfortable with our program and we’re going apply anywhere from short to mid to long as they’re necessary.

John T. Malone – Mizuho Securities USA, Inc.

Okay, thanks and one last one from me; just I’ve got a question really about portfolio management, how you’re thinking about West Africa, I mean you’ve always had some success in [indiscernible] but you have always had some continuing headaches in Guyana, how do you see West Africa in general playing in portfolio going forward?

R. A. Walker

John, it’s Al. It still has a very important role in our company. We’re very pleased with the production capabilities in Guyana particularly with the Jubilee Field with 10 [ph] complex now having been approved for development by the government, we see it is a very big and important part of our future.

In addition [indiscernible] we have had some exploration success and I will let Bob Daniels to give you a little additional color on kind of what he sees there through our appraisal and exploration activities. So while we have not found that next Jubilee field, and if he is out of the benchmark for success, I do think we continue to have success in West Africa is a big important part of what we do everyday.

Robert P. Daniels

Yes, John. Well, I’ll say we haven’t found the next Jubilee field outside of Ghana, I think the ten has a potential to be very similar to the Jubilee field. So we’re pleased to see that moving towards development. And Cote D'Ivoire announced the Paon discovery a couple of years ago, we priced it this year. We price it a long ways – way down debt fab, because we want to touch some exploration concepts to. And while the zone of interest for the appraisal was whether this location that give us very good information about where the potential whole water contact would be, and that would lead us to another price of well, because that would give us significant volumes in the Paon accumulation, of course, we have to test that. We’re planning that would be a Paon-3 well, which we drilled this year.

And then we’re shooting seismic in the rest of reservoirs and plan few other wells for late in the year. And then in Liberia, if you remember, we have a Block 10, which sits to the East of where we had drilled our previous wells quite a ways away, it’s next to the D-heater discovery that was announced, which probably is non-commercial on that block that we plan to drill at least one probably two wells on Liberia Block 10 to one of them to try to extend the D-heater discovery down on to Block 10 and another pure exploration play.

So we’re going to be active there. We still think there is good potential out there. We found a lot of good indications. We’ve proven the petroleum systems, now we have to find the reservoirs and the trap configuration that has a significant accumulation in it. We may have that Paon, we’ll test it and we’ll be looking at some other exploration wells through the year.

John T. Malone – Mizuho Securities USA, Inc.

Okay, thank you.

Operator

Your next question comes from the line of Brian Singer from Goldman Sachs. Your line is open.

Brian Singer – Goldman Sachs Group Inc.

Thank you, good morning. Wanted to see if you could give us an update on the development plan for Shenandoah and the Shenandoah Basin, and to what degree the appraisal wells you’re drilling now would be the catalyst to finalize that development plan or just be a another helpful data point down the road to that development plan?

R. A. Walker

Brian, we’re most happy to address what’s going on in that mini basin. As you know, we haven’t moved to development yet, we see that some challenges there. On the appraisal side, we’re still pretty active, and I think probably the best way we can address your questions and I have Bob Daniels give you a quick update on where we are in the mini basin with exploration of appraisal activity. And then for Jim Kleckner to foreshadow for some of the things that we see is challenges on the development side.

Robert P. Daniels

Yes, on the – just on the activity how appraising this out in the Shenandoah mini-basin we have a well going at Coronado, this would be an appraisal well. It is really early in the drilling phase, but we’re excited to have that one down, because when it’s down, we’re going to become the operator of that block and increase our interest. We like what we found at Coronado, and we think this reservoir is very key to help improve that up. Yucatan, there is a rig on location there, it is spud, the first appraisal well at Yucatan.

At Shenandoah, we’re planning on second quarter coming back in and drilling another appraisal well there. Of course, the 2013 appraisal well found a 1,000 fee to pay and no or water contacts or we’re going to be trying to push the oil-water contact out, and look at the early extent of these reservoirs, which we do think are very early extensive based on the drilling we’ve done in here. So a lot of activity getting after it, all of the parties involved are very actively moving this forward. Of course, we’re the only company that has interest in all three of the discoveries. So we have probably the most information, the best understanding about it, now let Jim then talk how that understanding translates into development planning?

James J. Kleckner

Yes, I think from a development standpoint we demonstrated as we are a malicious and a Head of our project where the malicious from the time we sanctioned to first production in 2016 will be three years from sanctioned to the first production. So as we think about Shenandoah basin would be deeper with obviously some different pressure challenges, but we’ve got a very well established and demonstrated deepwater project team here in the Gulf of Mexico with ample experience to take on any challenges that Shenandoah basin they have.

Brian Singer – Goldman Sachs Group Inc.

Great, thank you. And then shifting focus to this balancing CapEx and cash flow given the higher natural gas prices that we have in 2014, should we expect either an increase in natural gas activity, an increase in oil activity, or greater debt pay down, and then how do you think about the – to degree and now looking at 2014 prices, and you’re thinking a little bit further out. How do you think about the oil futures curve, the cost for sharply lower prices than what we see in our screen today?

Robert G. Gwin

Yes, Brian, I think you probably have heard me say and others of our management team talk about the fact that we really need to see sustained prices above 450 before we start to believe that we need to allocate capital into dry gas plays, it’s just doesn’t in our portfolio compete well. That said I think Chuck probably can give you a little additional color around some of this that we are seeing with our onshore activities. But by and large I think unless we see a different market than we have today, we will continue to say oil and liquids focus with our capital spend onshore.

R. A. Walker

Brian, I guess the truth is really more in our actions, and what see is doing is continue to lower our rig count in the Marcellus, which is probably the best gas play in the U.S. perhaps sustained from merger, we’re in a really good spot in it. And so what we’re trying to do, but given our investment options that we have is forward into the oilfields and that’s what we are going to continue to do, Al mentioned that, we looked ahead and thought about what kind of prices we actually start considering, increasing our gas investments in its mid force that they start making an impact or outcomes. And so we’ll continue to watch the curve, we have the opportunities, we’re on a warm standby in the event that we can that we want to go do that investments and the first place would go is into the Marcellus.

Unidentified Company Representative

And Brian I think from, what do you do with the excess cash flow that $5 gas gives you in the short run. I think you’re going to anticipate until we have greater clarity around Tronox, we’ll just continue to build that cash relative to our expected CapEx plan.

Brian Singer – Goldman Sachs Group Inc.

Thank you very much.

Unidentified Company Representative

You bet.

Operator

Your next question comes from the line of Pearce Hammond from Simmons & Co. Your line is open.

Pearce W. Hammond – Simmons & Co.

Good morning.

R. A. Walker

Good morning.

Pearce W. Hammond – Simmons & Co.

Can you comment on service cost trends in key place and availability of service for 2014?

Unidentified Company Representative

Yes, can I ask if Chuck can address that onshore, and I’ll have Jim Kleckner address that offshore and the deepwater?

Charles A. Meloy

Yes, Pearce, I mean, I don’t think we have time on this call to go through play by play breakdown of cost. I think what you’re – but in general what you are seeing is that cost are reasonable, the rig count has dropped off its size a couple of years ago. And the frac fleet was built out in a fashion that as we get more and more efficient to utilizing it, it becomes more and more oversupply. And so my sense is that the prices in most basins are fairly stable and maybe a little downward pressure, there is probably some exception of that maybe one of those would be in the Permian where you are starting to continue to see the ramp up.

And so it’s incumbent upon us to manage that and take every opportunity we have to be more efficient with that equipment. I firstly, you sit here today, it’s hard to say what oil prices and gas prices are going to do, I think we have a lot of impact on services, but the things were to stay exactly as they are today, I would think that if you would see service costs, they’re very similar to slightly downward pressure.

James J. Kleckner

And then from a international deepwater standpoint, what we’re seeing in the Gulf is that, a lot of the operators have worked off the backlog of permits from the 2010, 2011 permitorium resulted from the spill. And so, we’re seeing the deepwater rig – ultra deepwater rig rates starting to soften a bit. And we may see some later on in the service sector, but I think you’re going to see good demand, but probably into the softening market.

Pearce W. Hammond – Simmons & Co.

Thank you. And then my follow-up is in the press release yesterday you highlighted some weather issues that impacted you in Q4 onshore U.S. and that carried on over into Q1. Any quantification on what you are seeing thus far in Q1 and this Q1 a little worse than Q4 as far as weather?

James J. Kleckner

Not really, the big freeze that came down through the Rockies and in the South Texas even impact that our position in Wattenberg and the Delaware Basin and the Maverick. And we work through those – we’ve been in – we have Maverick just cold every winter, and we fell within our guidance proud of that our guys worked extremely hard on the field to keep this stuff going.

I suspected in the first quarter we’ll have a little bumpiness in January, but we’re running really well right now. I’m excited about where our teams are. The program that we have executing right now seems to be doing exactly what we wanted to do. And I think we’re going to deliver really nice quarter volume wise, and Daniels despite all the staff that all the noise that goes on. Because we just have a lot of excess capacity sitting behind our systems. As we continue to build out our infrastructure. And so that’s an offset daily weather impact that we might have.

Unidentified Company Representative

Pearce that I might just quickly add to fact we’ve had really winner this year for the first time in 20 years or 30 years and the success we’re having in a field and the really diligent and hard work has been exhibited today has positioned us through the first month plus. Then I will just echo what Chuck said I feel very good about volumes for the quarter. And the weather impact for us today has been managed very well.

Pearce W. Hammond - Simmons & Co.

Thank you, gentlemen.

Operator

Your next question comes from the line of Bob Brackett from Bernstein. Your line is open.

Bob Alan Brackett – Sanford C. Bernstein & Co. LLC

Hi, good morning. I had a question on Green River Basin you bought Moxa Arch a quarter ago. You are selling Pinedale/Jonah now. What’s your long-term view of that basin and also kind of an accounting basis where do to the volumes for Moxa Arch show up on your ops report.

Unidentified Company Representative

Okay, we’re very active within the Green River Basin because of the Land Grant goes right to the middle of it. And so we have a big position out there. We’ve wanted to take a larger position where we can control the assets. We had a large non-op position in Moxa that we’ve been like, if we had the option can use our economies of scale when the field from our operated position that we could deliver a lot of incremental value and that process is underway. We didn’t feel the same thing about the Pinedale/Jonah asset we’re in a non-op position is primarily a linear gas position. And we felt like that trade out of it and into the Moxa position was a value accretion opportunity for Anadarko. And so that’s what we’re executing on.

As far as what our plans go as far as our forward plans in Moxa, what we plan to do is take down the operating expense quite substantially and go back into the wells and reinvigorate the production from them placed on artificial lift and all the kinds of things blocking and tackling that our forecast do everyday. And our expectation would be that it would shallow the decline and reduce the cost of lifting in the previously non-op position. So that’s the value proposition of that acquisition. The volume show-up in the – on the operating report and what’s generally referred to is the warm sutherland [ph] line which is the greater Green River Basin, warm suther is the biggest producing field. So that’s one step.

Bob Alan Brackett – Sanford C. Bernstein & Co. LLC

Gotcha. And then a quick follow-up at a higher level the dry hole expense for the quarter. What were the big moving parts in that?

Robert P. Daniels

Yes Bob, Bob Daniels again, dry hole expense was two big issues one was the non-producing lease hold and block 43 or 11 in China and again the non-cash we didn’t had anything off of the well, because we have no capital in the well we’re fully carried and the other was variation from guidance was with the Romney well, we drill faster than was forecast. And so we put into the quarter. So those are the two big issues.

Bob Alan Brackett – Sanford C. Bernstein & Co. LLC

Great, thanks.

Operator

Your next question comes from the line of Scott Hanold. Your line is open.

Scott Hanold – RBC Capital Markets LLC

Where we would respect to whatever you consider I guess normal in the Wattenberg field as obviously the floods that occurred last year. Are we pretty close to back to that level or else they can take a little bit more time?

Charles A. Meloy

Yes, thanks Scott. This is Chuck again. We’re moving in the right direction the Wattenberg field has suffered through the floods and the polar vortex and I am sure locals are coming. But we’ve been working really hard, our guys have done a great job and our production is coming back, I think the big enablers are in front of us which is the Lancaster plant and NGL takeaway positions that we have being build in the front range express. And with all that and the 13 rigs that we have run, and we’re building an enormous amount of capacity. It will come on in lumps, I could always does as you enable as these new infrastructure projects come on and you suffer some down time when you turn them on, because you have to cut lines and do all kinds of things. But in general what we’re seeing is very good performance from our wells.

Our program has been able to be expanded I’m hopeful that we always have more capacity than we have land. So I don’t think we’re going to actually solve the land pressure issue because I think the way we are drilling these wells and the quality of the wells, we’ll continue to have lot of volumes into the system, and we’re going to be working hard to expand that infrastructure, to keep moving those out curves down the land. What we’re seeing is taking the next step, we’re growing cash, but going forward, and I think it’s an exciting time for Anadarko and Wattenberg, it’s just one, one way open asset.

Unidentified Analyst

Yes, it did seem like bumps kind of ramped mostly into the fourth quarter, so I think more specifically, but my question is there any like major bridges or roads that got washed out that is still far more that pretty much minor stuff at this point.

A. Scott Moore

It’s pretty much minor at this point, everybody pull together a lot of folks jump in and help to do all the repair work that was necessary, in particular the key roads, bridges and that type of things. So there is still storm going on but by and large, we have some good work around.

Unidentified Company Representative

Scott, I would add just Governor, Hickenlooper really did a great job of marshalling resources there, in particularly Cedar and helping all these issues from the fall getting resolved very quickly so far, company and industries perspective we got wonderful support from the Governor to our entire difficult process.

Scott Hanold – RBC Capital Markets LLC

Okay and then another subject into the Wattenberg area, I mean what is your thoughts on obviously the question is around fracking in various corners in Colorado, what is sort of the key timelines there and obviously you all are mostly involved currently, which is probably going to be less of an issue but can you give us some color on that?

Charles A. Meloy

Yes, this is Chuck. Anyhow, the company is very engaged in that debate. It's part of the democratic system we have. Our employees, contractors, trade associations and all the industry, Chamber of Commerce and the Governor’s office as I mentioned earlier are all involved in this process and very supportive of what we are doing, I think it’s fair to say that what we are doing out there is very critical to the Colorado economy and Colorado’s future.

And there is a lot of folks working really hard to get all the facts down, because I think that’s what’s going to win the debate is that the fracking and the oil and gas development program that are in place are very safe. That they have a big role and the energy needs in Colorado, in the U.S. and that there is some really good information that's being now discussed and debated in this proper light.

Hope you take the opportunity to be able to create website, which I think is really good information and it’s – I do not know that there is a timeline involved. It’s going to be an ongoing debate for awhile and it’s a good process that we do regularly.

Scott Hanold – RBC Capital Markets LLC

Okay and one last one if I could, you all said it looks like drill another well around your IHUB facility, you had 10,000 feet, I mean obviously you talked about 450 is that needed a sustainable gas price to get more active onshore. IHUB probably made a difference from that, but can you give us a sense on how we get our arms around sort of this primarily would be gas mark that we’ve seen in the last few years and one that you are well up there.

James J. Kleckner

Yes. This is Jim and let me just color on the exploration step-up that we’ve got around the main structure of IHUB, we see the asset life coming through an end, a quick end, and this is an opportunity to advance some of the development opportunities we’ve seen around the structure. This well is relatively a shallower well targeting very high quality sands that are analogous to the fields that were connected to IHUB originally.

So these are some of the largest gas producing wells in the Gulf of Mexico. We think a combination of the de-risk few of this opportunity in the fourth block, high-quality sands and the proximity there is a quick connection and tieback of the central production hub, I have will make it for very economical and attractive investment.

R. A. Walker

You can appreciate, because I think you sort of alluded to, that our activation cost here is very low. So therefore, we get into an environment like we’re in right now, we can drill a lot or put it online and therefore, we’re going to largely defeat a lot of that reservoir during that period of time. We’re pricing to be little more certain, that vastly differentiates from the development where we would be drilling multiple wells in a shale play.

Unidentified Analyst

Okay. And what does that well going to cost for you?

Robert G. Gwin

It’s going to be around $65 million.

Scott Hanold – RBC Capital Markets LLC

Okay, fair enough. I’ll leave it there, thanks.

R. A. Walker

Thank you, Scott.

Operator

Your next question comes from the line of Harry Mateer from Barclays. Your line is open.

Harry Mateer – Barclays Capital, Inc.

Hi, good morning. This is my first question, you have a couple of bond maturities coming up, can you give us a sense for how you are going to address those? Do you prefer to maintain liquidity and refinance them or you plan to pay us down with the – with cash or your bank facility?

Robert G. Gwin

Yes, I think what you’re referring to is, we have one maturing later this year, I think it’s seven – $175 million there about. And we could pay it out of cash, we could decide to refinance if we were interested in doing so. And so our current expectation would be that we’d refinance or we tend to roll our bonds forward with the liquidity position we have dependent upon how we see the turnout situation resolve and how we look forward with the capital. For this year, we might choose to pay it down with cash. So flexible, overall is the answer.

Harry Mateer – Barclays Capital, Inc.

Okay, thanks. And then as we try to think about the company’s liquidity options in addition to your cash, the bank line and the asset sales you’ve already announced, can you talk about what’s your minimum hold is both the West GP and MLP?

Robert G. Gwin

Yes, we will certainly sell some WGP units during the course of this year. We own 91% of it, the motivation for selling some units is to increase the trading liquidity and the stock. And hope it’s a trade to help institutional investors and others, feel capable that they can purchase a larger amount without holding too much of average daily volume and ensuring their liquidity and the stock. Beyond that, we aren’t targeting a particular number that we’re looking at. We could sell a lot to still retain control of WGP and accordingly control of West and therefore continue to consolidate these on our financial statements.

And most importantly to drive the operations of these entities to best deliver the volumes to the market that we’ve talked about in places like the Wattenberg and the Eagleford et cetera, but we are not at a stage now where we want to talk about target levels. We’ll make the decisions as we go based on where the market is. And the beauty of this is that the cash flow to us given our leadership position is substantial. It was about $165 million or so I believe in 2013, it’s going to be over $200 million in 2014, it’s growing at 35% to 40% per year.

So between sell downs and cash flow coming from the distribution, the WGP is making, it’s a really nice liquidity source coming into Anadarko. And then we owned a very, very small amount of West directly, WGP owns about 45%, I think it is at the West LP units and we would expect that they will continue to do so.

Harry Mateer – Barclays Capital, Inc.

Thanks. And then last one from me, I just, as you think about potential ways that the turnout situation might resolve not but it’s entirely within your control, but how our investment grade ratings for the interior are priorities?

R. A. Walker

We value the investment grade ratings we have, we’ve worked hard to maintain them over the last five or six years to deal with that effectively coming out of the acquisitions of Kerr-McGee and Western Gas and then on through the Macondo situation. Al Richey, our Treasurer is obviously talking to the rating agencies regularly and the rating agencies have published the numbers that they see, it’s kind of threshold issues that give rise to further analysis or ratings changes. The nice thing is that asset Tronox they certainly saw what we’ve done in reducing leverage and continue to expand the balance sheet, the size of the balance sheet and the success in the operations. They saw just pointing toward positive credit migration and so we feel like we can manage.

We were going to have pro forma just as kind of a placeholder, pro forma the cash that comes in from the Pinedale/Jonah sale, which is closed and the after-tax monies that come in from those. And we clearly have round 24%, 25% debt-to-cap ratio, which is at the low end of the target 25% to 35% range that we’ve talked about for the course of the last few years. So the underlying strength is there, there is Tronox and obviously, we look at the various flexibility that we have kind of deal with something related to Tronox given what the rating agency is making sure they are well appraised and understand our views, is really important to us.

Unidentified Company Representative

Harry, I just one final comment to that, I think given our operating footprint and investment grade rating goes hand in hand with the way in which we think about operating our company.

Harry Mateer – Barclays Capital, Inc.

Thanks very much.

Operator

And your next question comes from the line of Joe Magner from Macquarie Capital. Your line is open.

Joseph Magner – Macquarie Capital, Inc.

Thanks all my questions have been answered. Thanks.

Unidentified Company Representative

Okay, thank you Joe. Operator do we have any additional people on the line for questions.

Operator

We do sir. The next question comes from the line of Peter Kissel from Howard Weil. Your line is open.

Peter Kissel – Howard Weil

Good morning guys. Quick question for Bob Daniels. I was wondering if you could walk us through what you learned at the Wyoming well in New Zealand and just are there any differences to Carrabelle that increase your confidence level?

Robert P. Daniels

Yes Peter. I will ask for a little bit of leeway on this and we just got the well information very recently, but what I could tell you is that we drilled a well, found some good reservoirs in our objective section. We had very good shows through that objective section and then we drilled it on down and we tested what we think is potentially the source rock, we have sidewall core information from the lowest most zone, which could be the potential source rock and from the reservoirs. We have not had the analysis done on those. We’ve just got them into the lab, and that is going to tell us a lot about what the petroleum system really is out there? How expensive it could to be and what the follow-on potential would be in the block? So it’s way too early to say that this has condemned anything or encouraged us other than we did get – give reservoirs good shores.

Now we have to learn from that and to what leads us. As to the Carrabelle well, it's a totally different prospect. The Wyoming is – got different source system, different basin, it was a different structural configuration, different sand system for the reservoirs and we had less information. When we go over to the Carrabelle area there is a well on the shelf that tested the objective section that we have at Carrabelle, tested about 10 million a day of gas and about 2000 barrels of condensate back in the 1980s.

We are just going off into the deepwater for instance kind of into the big four way structure. That’s very well defined by 3D seismic. So it’s a very different play style, very different petroleum system. We have evidence of the working petroleum system far better than we did over in the Deepwater Kerr-McGee. So we are looking forward to drilling Carrabelle and we are also looking forward to learning as we get more information in from the raw new wells to what it tells us about the Deepwater Kerr-McGee.

Peter Kissel – Howard Weil

Thanks Bob and then Al, one other quick one, you stressed on monetizations a lot on the call and I know that varied out, but I was wondering, if you had any update on Brazil.

R. A. Walker

No update actually, I think well, we made the comment on our last quarterly call that we are going to continue to try to progress operationally in Brazil. I think getting the unitization issues with the Itaipu understood in advance, this is probably going to critical to whatever we do with that asset. So I would tell you here, I would really would take Brazil off your screen until the ANP or the regulator there gives us clarity around that could have unitization between Jibarke [ph] and Itaipu would play-out.

Peter Kissel – Howard Weil

Gotcha, thanks for taking my questions.

R. A. Walker

You bet, thank you.

Operator

Your next question comes from the line of Jason Gilbert from Goldman Sachs. Your line is open.

Jason A. Gilbert – Goldman Sachs & Co.

Hi guys. Thanks for taking my question. I keep repeating this of course, but a couple more Tronox questions. I was just wondering what you are doing to prepare for worst case scenario and how would you manage or fund a 10 billion plus number if it came down to…

R. A. Walker

Well, I think it’s important to keep in mind as Bobby said earlier, we don’t have a judgment or ruling, we had the Memorandum of Opinion, and we are partially through the process of determining what the appropriate offset is, that would determine what that judgment might look like. And so what we are doing as you might expect a scenario modeling from very low numbers to very high numbers and looking at how we would address that. Fortunately, we’ve got a lot of liquidity. We have a lot of assets in the portfolio that we know have a tremendous amount of value even if they don’t have current reserves and production associated with them and what we really need to do is to wait for the ultimate outcome to be known in the timing of which we would need to provide any liquidity or any bonding and address it at that time that you can rest assure that we are doing a lot of scenario modeling on what the various outcomes could look like and we feel confident in our ability to deal with the situation that's in front of us.

Jason A. Gilbert – Goldman Sachs & Co.

Thanks, and maybe I missed this, I apologize if I did, but when do you think you will have clarity on the final outcome.

Robert K. Reeves

This is Bobby, I think I mentioned earlier that this is still a preliminary opinion, it’s a Memorandum of Opinion after trial. There is a briefing schedule over the next few months likely to be a hearing after that before the judge in the bankruptcy court. The issue is final decision whether that’s a judgment or a recommendation of Findings of Fact and Conclusions of Law will depend upon what the Supreme Court says in the Executive Benefits case. Then we will make a determination of whether bonding is necessary at that point or whether it would go on to the U.S. District Court for entry of a judgment and then a bonding scenario. So we are still some months away from that and then of course that would go up on appeal.

Jason A. Gilbert – Goldman Sachs & Co.

Okay, so it sounds like late 2014-ish, the way to think about it at that point?

Robert K. Reeves

I think that’s probably a little stretch. I would think it’s probably late spring early summer, but you never know what – this judge took a year to issue his Memorandum of Opinion after trial. So we just don’t know how long that might be, we do know he’s announced his retirement this fall. So it would be before that.

R. A. Walker

Yes, Jason I think it’s likely that we could say the outside limit here would be October.

Jason A. Gilbert – Goldman Sachs & Co.

Okay great thanks for taking my question.

R. A. Walker

You bet

Operator

Your next question comes from the line of Ross Payne from Wells Fargo. Your line is open

Ross Payne – Wells Fargo Securities LLC

How you are doing guys? Just quick question on the Tronox case, if it did go to appeal can you give us an idea of how much time that might take? How long it could be dragged off the timing, if you were down that avenue? Thanks.

Robert K. Reeves

Yes, this is Bobby again, I wish I had that crystal ball, I could tell you that depending upon the jukes and jives that it may take, it could take some time, it could take a couple of years to get through the appellate process and then would there be some things still remaining at that point that we would want to go to the U.S. Supreme Court and apply for writs of certiorari. We just don’t know at this point, but it will take quite a bit of time.

Ross Payne – Wells Fargo Securities LLC

Okay, thanks guys.

Operator

And we do have other questions in queue. Next question comes from the line of Jeffrey Campbell from Tuohy Brothers. Your line is open.

Jeffrey Campbell – Tuohy Brothers Investment Research

Thank you, good morning. I’m going to say pulmonary, that I apologize from asking anything that's already been asked because I got knocked off the line for a little bit, but I got back on. I have two questions, first one is kind of a 10,000 foot deal question and I appreciate it earlier remarks about how you had moved cash into Delaware accelerated if you could. I was just wondering to get your thinking with regard to the fact that right now looks like it’s an exploration phase, but with seven rigs running, when do you think this exploration portion is going to be consummated and you are going to start to progress to concentrated development in areas within your holdings.

Charles A. Meloy

Yes, Jeffery, this is Chuck. Great question. It’s exciting, by the region, there are seven rigs we have 600,000 acres out there to look at and it seems like particularly based on offshore activity and just the activities in general in the Delaware Basin, that most of it, if not all of it is perspective for the Wolfcamp and that's what got us most exciting. And so we are out there doing a lot of work delineating the play. About half of those rigs are actually doing some phasing test, concentrated development tests in the center of the field.

So we’re going to get some good information on that as well. And so you’ll see us work through that actually the course of 2014. And during the Investor Conference, we’ll give you an idea of what we’ve seen, what our neighbors are doing and do our best to size up the opportunity, with some pretty large bound because of the large acreage position that we do have.

Jeffrey Campbell – Tuohy Brothers Investment Research

Okay, all right.

Charles A. Meloy

I’m sorry, go ahead Jeff.

Jeffrey Campbell – Tuohy Brothers Investment Research

Yes, I was just going to say, I look forward to that. I just had one other quick question and again I apologize to repeat, I was just wondering, what was the importance to drill the Shadowcat exploration well the to feed into the independent hubs or gotten going to do with the hub itself or just put some color on that and I’m done. Thanks.

Charles A. Meloy

Yes, as mentioned earlier the prospect sizes around the hub are pretty significant. This one in particular is large structure as we looked at for a long time. We’re also approaching end of life and a hub here in the near future and this is an opportunity that if, it’s commercial that we tie it back and further expand the life of the hubs and push out the abandoned of it a several of years.

Jeffrey Campbell – Tuohy Brothers Investment Research

Thank you.

R. A. Walker

Thank you. Operator, I think we are well past the top of the hour, we tried to accommodate as many of the questions as we could today, but I really want to appreciate everyone that was on the call today, those of you that aren’t, can listen to it later, thank you. It has been a great quarter, great year for us and with that I will turn it back to John.

John M. Colglazier

Thank you everybody for your interest in Anadarko today, it was a very active Q&A session. If you didn’t get your questions answered on the phone please feel free to call Bill, Jeremy and myself later. And we look forward to seeing you at the Investor Conference on March 4. Thank you very much.

Operator

Ladies and gentlemen thank you for your participation. This concludes today’s conference call. And you may now disconnect.

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