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Executives

John Colglazier - IR

James T. Hackett - Chairman, President and CEO

Karl F. Kurz - COO

Charles A. Meloy - Sr. VP, Worldwide Operations

Robert P. Daniels - Sr. VP, Worldwide Exploration

R. A. Walker - Sr. VP, Finance and CFO

Clay Bretches - VP of Marketing and Minerals

Analysts

Thomas L. Gardner - Simmons & Company

Brian Singer - Goldman Sachs

David Tameron - Wachovia Capital Markets

Gil Yang - Citigroup

Robert Christensen - Buckingham Research

Joseph Allman - J. P. Morgan

David Heikkinen - Tudor Pickering & Co. Securities

Philip Dodge - Stanford Financial Group

Ross Payne - Wachovia Securities Fixed Inc.

Benjamin Dell - Sanford C. Bernstein

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Shannon Nome - Deutsche Bank Securities

Raymond Deacon - BMO Capital Markets

Anadarko Petroleum Corp. (APC) Q4 FY07 Earnings Call February 5, 2008 10:00 AM ET

Operator

Good day ladies and gentlemen and welcome to the Fourth Quarter 2007 Anadarko Petroleum Corporation's Earnings Conference Call. My name is Eric, I will be you coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating the question-and-answer session towards the end of the conference. [Operator Instructions].

I would now like to turn your presentation over to your host for today's call that is Mr. John Colglazier, Please proceed, sir.

John Colglazier - Investor Relations

Thanks Eric. Good morning and thank you for joining us today for our fourth quarter and year-end 2007 earnings conference call. Joining me on the call today are Jim Hackett, our Chairman and CEO and other executives, who will be available to answer your questions later in the call.

Consistent with previous reporting periods, we have included a lot of information in our operations report, which is posted on our website. Before I turn the call over to Jim, I need to remind you of certain aspects in our forward-looking-statements. This presentation contains our best and most reasonable estimates and information. However, a number of factors could cause actual results to differ materially. You should read our full disclosure on forward-looking-statements in our presentation slides, our latest 10-K and other filings and press releases for the risk factors associated with our business. In addition, we will reference a non-GAAP cash flow measure. So be sure to see the reconciliation in our earnings release. We also encourage you to read the cautionary note to U.S. investors contained in the presentation slides for the call.

With that, let me turn the call over to Jim Hackett.

James T. Hackett - Chairman, President and Chief Executive Officer

Thanks John, and good morning everyone. We delivered as you see a strong fourth quarter remarkable 2007. Today I want to highlight some of our more notable achievements and take a quick look at what to expect in 2008. We made a number of commitments to our stakeholders after the acquisitions of Kerr-McGee and Western Gas Resources. And through a solid and timely execution, we fulfilled and in many cases exceeded those commitments. I want to personally thank our employees, who have worked so hard to build value for all of us by executing Anadarko strategic plan.

Among our accomplishments since the acquisitions, first we transformed our portfolio and reduced the leverage. If you recall, we initially anticipated we would need to issue between $5 billion and $7.5 billion of equity in conjunction with the divestitures of approximately $7.5 billion to $10 billion of assets over an 18-month to 24-month period.

However, our asset monetization program exceeded expectations, and within 18 months we generated nearly $15 billion to reach our year-end 2007 long-term net debt target, resulting in the issuance of zero equity. We now have high graded asset base geared toward more consistent and predictable production growth and less capital intensity. And we will continue to reduce leverage in 2008 from free cash flow and other normal course activities.

Second, we increased production guidance from our retained properties on three separate occasions during 2007, and receded our most recent guidance by producing 13 million barrels of oil equivalent or 7% above of the midpoint of our original full year projection and our retained properties. Third, we improved our cost structure throughout the year and I will discuss this in more detail later in the call.

During 2007, we also completed the conversion of our accounting method from full cost to successful efforts. This is a monumental test never previously undertaken by a company of our size. But we believe it will enhance our decision-making ability and was clearly worth the effort.

Turning our attention to fourth quarter operations; as I mentioned, we exceeded the high end of the revised production guidance by 1 million barrels of oil equivalent. The reported volumes of 53 million barrels of oil equivalent represent a 13% sequential increase over the third quarter. This out performance was primarily driven by Independence Hub and other offshore properties.

Independence Hub was a significant milestone in the year with start up occurring on time and on budget. Further, we delivered on an aggressive ramp up schedule to our reach our targeted peak production rate of 1 billion cubic feet per day. Although our current run rate is in the range of 850 and 900 million cubic feet per day, we continue to advise you an 80% run time factor, adjusted for our working interest of 60%, and reduced by the applicable one-eighth royalties to estimate our net volumes at Independence Hub.

We also achieved record production from several of our onshore fields during the fourth quarter. Our Greater Natural Buttes area achieved a high daily gross operated production of approximately 245 million cubic feet per day. Also in the Greater Natural Buttes area, we brought the Chipita processing plant online in the fourth quarter, adding 250 million cubic feet a day of processing capacity to the area, which will help us to further increase our record production volumes in 2008.

We also achieved new gross production records at our coalbed methane properties in Wyoming's Powder River Basin of approximately 250 million cubic feet a day in late December. In addition, we have already added 200 million cubic feet a day of gathering capacity to the basin with the completion of the first phase of Fort Union Gathering system expansion. And we anticipate doubling the original line 650 million cubic feet a day of capacity by mid-year 2008.

Turning to our exploration program, it remains a key skill set and an important component of our portfolio. We announced a substantial fourth quarter discovery in the deepwater Gulf of Mexico West Tonga. The well encountered more than 350 feet of net oil pay and three high quality sub-salt Miocene sands. We have begun unitization discussions with the Caesar and Tonga Partners and are evaluating potential development program, where the discovery would be a sub-sea tieback to our 100% owned Constitution spar, approximately 8 miles to the west.

We are currently drilling the Green Bay prospect, which was spud in December and is targeting the lower tertiary with an anticipated total debt of 30,500 feet. We operate the well with a 25% working interest. We expect the spud the Sturgis North prospect this month in which we own a 25% working interest and which offsets the earlier Sturgis discovery.

Internationally, we had notable successes in 2007 with two large deepwater discoveries offshore Ghana, at the Mahogany-1 and Hyedua wells. We estimate the area has un-booked recoverable resources in the range of 200 million to more than 1 billion barrels of oil equivalent. To follow-up on this success, we are currently drilling the Odum Number-1 exploration well in the West Cape 3 points block with a total depth of 10,500 feet.

Offshore Brazil, we are currently drilling our first sub-salt test at Serpa prospect on block 24 in the Espirito Santos Basin. This well has a targeted total depth of 19,500 feet with a 30% working interest. Those are some of our operational highlights. And as John said, there is more detail available in the operations report that's posted on our website.

As we laid out in our earnings release, adjusting for certain items affecting comparability, we had an excellent quarter underpinned by solid production performance and improved crude oil price differentials. Earlier, I mentioned our improving cost structure and I want to highlight one area in particular. Oil and gas operating expense was $4.40 per BOE in the quarter, which represents almost a 20% reduction from the third quarter and was well below our current guidance. This result from increased volumes with minimal incremental cost and fewer work over activities during the quarter. We look at exploration expense in two categories. The first, which consisted dry hole expense and impairment of unproved properties totaled $178 million for the quarter. The dry hole expense of $99 million was primarily associated with the Atlas Deep and Terrebonne prospects.

The second category consisted G&G exploration overhead and delay rentals and totaled approximately $113 million. As a company, we met or exceeded most of our internal targets such as production volumes, reserve addition and share price performance relative to our peers. Accordingly, our employees were rewarded through our formula driven bonus plan. Other than this performance based compensation, our G&A costs were in line with guidance and vastly improved relative to 2006.

As mentioned our earnings release excluding the effects of divestitures, we added approximately 250 million barrels of oil equivalent of proved reserves during 2007, most of which are associated with low risks, in-field drilling opportunities onshore and the Peregrino development in Brazil. We ended the year with an estimated 2.43 billion barrels of oil equivalent of proved reserves, approximately 67% of which are proved developed.

One detail to note in the categories on our reserve table is the guidance from the SEC has changed. Only new field discoveries or field boundary extensions will be classified as discoveries or extensions. Reserve as representing new in-field drilling opportunities will now be classified as revisions. Therefore, our reserve bookings in our large onshore resource plays such as Greater Natural Buttes, Wattenberg and Pinedale/Jonah have been treated as positive revisions or as they would have been classified as extensions, discoveries and other additions in prior years.

While we did have some favorable price revisions excluding price provisions, we more than replaced production as we earlier committed to investors. We reported production of 212 million barrels of oil equivalent for the year, which includes about 15 million barrels of production associated with divested properties. Our costs incurred in exploration and development for the year, were a little more than $3.8 billion.

In addition to our earnings release, we also published details over 2008 capital program in a separate news release. We anticipate that 2008 capital expenditures including the expense exploration will be in the range of $4.5 billion to $4.7 billion. And our budgeted prices, which are significantly below strip pricing and equity analyst consensus estimates, we believe this is the appropriate expenditure level for Anadarko to continue monetizing to more than 7 billion barrels of net risks captured resources that we currently have in our portfolio. However, we will evaluate raising budget to CapEx levels in order to increase our exploration and appraisal programs if commodity pricing remains strong.

The budgeted capital program reflects our commitment to increase activity in the Rockies to expand deepwater exploration and to continue the expansion of our mid stream infrastructure. During 2008, we have guided to a production range of between 205 million barrels of oil equivalent and 210 million barrels of oil equivalent, an increase over the mid point of the prior guidance that we issued in November. We also expect to add at least 225 million barrels of oil equivalent of proved reserves during the year. And we currently anticipate E&P costs incurred to be in the range of $4 billion to $4.2 billion.

As I mentioned, the capital program also includes an expansion of our deepwater exploration program in 2008. In the Gulf of Mexico, we plan to drill between 6 and 8 prospects this year. Those include Green Bay and Sturgis, which I mentioned earlier on the call. We also have additional opportunities at the Heidelberg and Lyell prospects, which are located in the Miocene Fairway, where we have had success with Caesar Tonga and west Tonga discoveries.

To follow-up on our success offshore Ghana in an addition to the current Odum well, the partners have contracted for rigs, who will enable us to drill up to an additional 5 to 7 wells this year. Offshore Brazil, in addition to the current super prospect will be joined four more super salt and sub-salt test in the campus in Espirito Santo Basins. And we have one deepwater well plant in the South China Sea on Block 43/11, adjacent to the large Huskie gas discovery.

As part of our risk management strategies and similar to 2008, we see some potential volatility in 2009. In 2008, gas hedging position appears in our earnings release and gives us significant protection. To further protect ourselves against short-term down drafts in U.S. gas markets, we have hedged approximately 500 million cubic feet a day for 2009 using NYMEX costless three way collars with a floor of $7.50 per decatherm, with an upside of up to $11 per decatherm.

In addition, because of the potential impact, Rockies Express could have in the mid continent in Texas gas markets; we have increased our basis hedges for those areas as well for 2008 and 2009. Again, there is more detailed information attached to earnings release.

We are pleased with the results and achievements of 2007 and look forward to a strong 2008. We are also excited for the opportunity to share the Anadarko story at our upcoming Investor Conference in New York on March 25th and we'll provide additional details on our company's EMP and midstream operations at the conference.

With that Eric, let's open it up for questions.

Question And Answer

Operator

[Operator Instructions]. Your first question comes from the line of Tom Gardner with Simmons & Company, please proceed.

Thomas L. Gardner - Simmons & Company

Good morning Jim, John.

Unidentified Company Representative

Good morning.

Thomas L. Gardner - Simmons & Company

And I have question about Rex. You had a lot of success in the Rockies, your gas production now approaching 1 Bcf a day. How has Rockies Express moving into operation impacted your Rockies production? And how will it impact it going forward?

Karl F. Kurz - Chief Operating Officer

Hi Tom, this is Karl Kurz. And Chuck Meloy said he join in this too, but obviously with Rex coming online we've seen system pressures drop across the board in Rockies. We have seen some very strong performance from our coalbed methane assets in the area. We are hitting record levels of production up to 700 million cubic feet a day. So we expect that to continue to deload the area. Obviously with the CBM the water is the big issue. Getting that water off the reservoirs and as additional capacity is available, we'll be able to dewater and we expect to see continued strong performance.

Thomas L. Gardner - Simmons & Company

Great. Now I understand weather has been a factor with some with respect to making additional well connections. In short, if you didn't have weather to deal with or back up of system pressure. What would you be making in the Rockies? What does that look like?

Karl F. Kurz - Chief Operating Officer

I asked that to question to Chuck about every other day and it's a hard one to answer, because we are in the... you're dealing with the coalbed methane, which is an absorption process. So it's a matter of how quickly we can get the water off and we can tell you that the Big George reservoirs continues to perform better than we expected. So we are not going to give any predictions on what we think it will do. But we are optimistic that the Big George will still surprise us going forward.

Thomas L. Gardner - Simmons & Company

Great. Jumping down to Carthage; I understand you have that first horizontal probably have some production data there. Has that performed according to expectations? And do you anticipate dedicating a rig full time to the horizontal development?

James T. Hackett - Chairman, President and Chief Executive Officer

I am going to let Chuck talk about what's going on in Carthage, just an exciting story for us.

Thomas L. Gardner - Simmons & Company

Great. Thank you.

Charles A. Meloy - Senior Vice President, Worldwide Operations

And we have actually completed two horizontal wells in Carthage. Both of which are performing and are above of our expectations. We are now drilling our third well; and with the data that we have, we fully intent to run a complete rig line during 2008.

Thomas L. Gardner - Simmons & Company

Okay, great.

Karl F. Kurz - Chief Operating Officer

Let me add on the Carthage, a little bit to the G&G side; we have done some work G&G wise that we think gives us a way to identify some good fairways to place those horizontal wells. So we are excited about our ability to target good locations for horizontal wells in the Carthage.

Thomas L. Gardner - Simmons & Company

Great. I will let someone else hop in. I do have some questions; maybe I'll follow-up with John later.

Unidentified Company Representative

Thank you.

Operator

Your next question comes from the line of Brian Singer with Goldman Sachs. Please proceed.

Brian Singer - Goldman Sachs

Thank you. Good morning.

James T. Hackett - Chairman, President and Chief Executive Officer

Good morning.

Brian Singer - Goldman Sachs

Following up on previous question, looking at CBM with the Fort Union expansion now complete, do you see any constraints given at Rex as well to showing consistent growth from CBM? And can you put any numbers to where you see your net CBM production that you are at?

James T. Hackett - Chairman, President and Chief Executive Officer

Brian, we are now in the process of dewatering fields, again as we've come back out of the cold spell and the shutdown of Cheyenne Plains. And what we see is the constant steady growth throughout the course of the year as we get these well dewatered. We haven't put out guidance with respect to actual expectations of increases that we see it happening throughout the course, though very confident and how the wells have performed.

Karl F. Kurz - Chief Operating Officer

And it would be fair to say that we the CBM budgeted for increasing, like Chuck said throughout entire year.

Brian Singer - Goldman Sachs

Great. Can you put any color on the declines you are seeing from some of the wells that you had on for some period of time now from the Big George?

Karl F. Kurz - Chief Operating Officer

I mean...on some of the wells...we were seeing some declines, but the way it works that Brian you create a big pressure sink and we are really seeing...not a lot of wells have heavy decline here, bid increases and well. I mean...I mean I expect to see double-digit production growth of the CBM for 2008.

Charles A. Meloy - Senior Vice President, Worldwide Operations

Almost mature property up there at accounting line...accounting line units, which is still increasing and...

Brian Singer - Goldman Sachs

Okay, switching to the Gulf of Mexico; couple of unsuccessful wells in addition to the successful West Tonga well; what are the combination of the couple drag holes and the successes, tell you about high grading or about the Miocene program in general.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Hi, this is Bob Daniels, Brian. We had a real success with our Tango West, and we're real pleased with that. The Terrebonne and the Atlas Well...excuse me, were unsuccessful although we are going to take that information and tie back into our interpretation and see where it leads us. Overall, we have got a program out there and we are targeting the Miocene in the proven fairway. We think that if you look back in our track record there we had just a tremendous run of success. And we don't think that the two dry holes after the successful well will deter us at all. It's more where do we learn from them, how do we roll back into our understanding and where is the next well that we are going to drill that will pursue what we've learnt from those.

Brian Singer - Goldman Sachs

Great, and are you still contemplating potentially selling an interest and some of your low tertiary success?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

No, we've got a fantastic lower tertiary position out there; both acreage position and prospect, and we are constantly looking at what's best way to monetize that. Clearly the lower tertiary has advanced, but it's advancing slowly. And we would like to see more value created out of that portfolio. So, we are looking at all sorts of different ways of doing that. We will be drilling three lower tertiary tests this year and we will continue to evaluate what that means for us as the company going forward and what that position can yield and value to us.

Karl F. Kurz - Chief Operating Officer

Brian, I might add, you've seen us in the deepwater Gulf of Mexico on our assets, where we managed our portfolio is trying to maintain a 20% to 40% type working interest position and I would expect us to maintain that philosophy going into lower tertiary too. So in assets, where we have a high working interest, you'll see us sail down trade, work some deals for further opportunities.

Brian Singer - Goldman Sachs

Thank you very much.

Operator

Your next question comes from the line of David Tameron with Wachovia. Please proceed.

David Tameron - Wachovia Capital Markets

Hi, Good morning. Question is looking at 2008 CapEx; it looks like I think it's been about 30% or 35% dedicated to the Rockies. What percentage of cash flow comes from the Rockies, if you look at your 08 budget, operating cash flow?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

David, this is Al Walker. As you can imagine, we don't give that type of field level data or regional data on a cash flow basis, but we do believe we have good free cash flow coming out of the Rockies in general relative to the CapEx plan there as well as overall for the year. We feel get with us in March at our investor conference with that time we'll probably be giving you a little more of the field level data you are looking for, but at this time until we file the K, we are really not in a position to talk about on the detail you are looking for.

David Tameron - Wachovia Capital Markets

All right. Jim, can you clarify what you said about reserve booking? Does that in-field drilling is now going to be classified by the SEC and the revisions category? Is that the guesstimate?

James T. Hackett - Chairman, President and Chief Executive Officer

That is correct and it is a change that you would not have seen us do last year or earlier years that might have Al expand upon why we came to that conclusion.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Yeah, David we felt like from the common letter process, one of our peers went through in the SEC. The SEC was pretty clear in saying that in-field wells and proven reservoirs are not extensions or exploration wells. And therefore using the common letter process that they went through and the way the SEC chooses them to have the rest of this to understand how to acquire that. We thought it was pretty black and white on this issue and so it's not so much an interpretation on our part as it is by the SEC is asking us to be able to demonstrate in our data; the fact that in-fields wells and proven reservoirs are not extensions and exploration wells.

James T. Hackett - Chairman, President and Chief Executive Officer

And David, we felt strongly enough about making ourselves clear on this that we went back to our consulting engineers and asked them to go through their full staff and find out if there was any exception to that issue and their view was that the interpretation they had given us about revisions is right on for what they view across the firm.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

The only thing I would add further is that just we feel like we more than replaced our productions in a process by which the reserves that we booked for the year more than exceeded the production for the year; and for us, that's the takeaway.

David Tameron - Wachovia Capital Markets

All right, thanks. And then one final question Jim, looking back now year and a half later Kerr-McGee Western Gas; is there...what asset surprises you the most as far as on the upside or down side? If you don't want to give me the downside, so I'll go with the upside?

James T. Hackett - Chairman, President and Chief Executive Officer

Well, I think there are several, but certainly the CBM has worked out to be a home-run for us. And in general the assets that Western held were, when you look at some of the monetization work we have done and what we are planning to do with mid-stream business, I think you've got to say that that had a pretty...this is going to have a pretty quick payback. The thing we like about the Kerr-McGee as it's in addition to a lot of operational diversity is the long dated nature of what we are doing and areas like Greater Natural Buttes and the development potentially we have in some of the other areas we were looking up to keep and acquire. I think both of those transactions have turned out in retrospective even be better than any of us had imagined at the time.

Unidentified Company Representative

Jim, I would like to plug in for the Wattenberg asset, because with higher that expected oil prices, in fact that field generates 25% to 30% of its hydrocarbon from the liquid basis has really made the economics of Wattenberg much more attracted than we ever thought they would be.

David Tameron - Wachovia Capital Markets

All right, thanks and congrats on a nice quarter, and a good year end.

Unidentified Company Representative

Thanks.

Operator

Your next question comes from the line of Gil Yang with Citi. Please proceed.

Gil Yang - Citigroup

Good morning. Couple of questions; can you comment on why the tax rate was so high? And why the guidance is high going forward?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Yes Gil for the quarter, Algeria since the EPT portion that we record in production taxes is not deductible and Algeria, therefore it was not a deductible in the states. Our tax rate will be above the statutory rate as long as that's in effect; even taking that into account though the fourth quarter was a little bit higher than we had anticipated. And really that was really some true-ups. As you go through the year and you are working on your state and try to get everything cleaned up. But you'd have some incremental taxes come through on the quarter, which happen to raise that the tax rate. And looking into 2008, Gil that's solely attributable to the Algerian EPT.

Gil Yang - Citigroup

Okay. So the effect would be that the higher oil prices are, the higher your tax rate will be? Is that right?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Yes. That is correct.

Gil Yang - Citigroup

Second question, Jim, is that you made fair comments that your LOE was down because of the higher volumes was little incremental fixed costs. What's the source of the guidance upward then sequentially going from fourth quarter into 2008 in that LOE?

James T. Hackett - Chairman, President and Chief Executive Officer

It's a good question. I'll let Chuck do that.

Charles A. Meloy - Senior Vice President, Worldwide Operations

What we saw through the course of 2007 was continuous improvement, almost quarter-over-quarter. We give a lot of credit to our field teams and engineering teams to help this improvement happen. We were able to pull a lot of synergy through the combination of the three companies into our build operations, which gave us a great benefit that we did anticipate during the course of the acquisitions.

Looking into 2008, there is really three or four drivers that we see going forward. The first is as we mentioned earlier with regard to CBM, substantially expanding our operations out there, increasing the number of units under dewatering. And so, we see a considerable increase in our water production out there, which has an associated electrical cost associated with it. So that's one source. The second thing we have is some statutory maintenance requirements that are one-time events in both Algeria and in the Gulf of Mexico that we have coming in 2008 that won't be an ongoing operation.

And then finally, just across the board as we focus on our base production, we are seeing more and more workovers in 2008 compared to the fourth quarter of 2007. So the combination of those three will add incremental cost to our OpEx, all of which are substantial investments in our future.

Gil Yang - Citigroup

Okay, it's very helpful Chuck. Can you comment on the maintenance for Algeria and Gulf of Mexico? Are they only lumpy or fairly evenly distributed through the year?

Charles A. Meloy - Senior Vice President, Worldwide Operations

It's going to be mostly in the first half, but it's going to occur throughout the year. Essentially in Algeria, we have our major central producing facilities are going through their ten year tune up. And so we'll have that ongoing starting late in the first quarter and lasting for two or three months. And then in the offshore we are doing just general maintenance on our major platforms that have been out there for a while.

Gil Yang - Citigroup

Will there be an accompanying downtime because of those maintenance operations?

Charles A. Meloy - Senior Vice President, Worldwide Operations

It's already cooked into our guidance.

Gil Yang - Citigroup

Okay. And Chuck, last question for you is can you give an idea of what you expect from the three well program at Marco Polo. What's going on with that reservoir? And what's your evaluation of -- what's the productivity of that reservoir is?

Charles A. Meloy - Senior Vice President, Worldwide Operations

Well, what we did last year was we looked back onto the platform, drilled several in-field wells, made completions that gave us a lot of optimism with regard to the future performance of the field. And so what we'll see in 2008 is essentially a continuation of that program. We haven't released our expectations with regard to the production, but the work we did was last year was very profitable and we anticipate a continuation of that.

Gil Yang - Citigroup

Is that just driven by the fact that the oil prices are and so that you can target the compartments more economically?

Charles A. Meloy - Senior Vice President, Worldwide Operations

That certainly helps, but we have very great looking opportunities as we learn and produce and the field we've learned considerable amount from the field production and pressure and that type of thing, we have a lot of optimism with regard to its future.

Gil Yang - Citigroup

All right, thank you.

Operator

: Your next question comes from the line of Robert Christensen with Buckingham Research. Please proceed.

Robert Christensen - Buckingham Research

Yes, can you please give us an update on your deepwater drilling rig contracts, number of rigs, time remaining, and whether they are still in the money?

James T. Hackett - Chairman, President and Chief Executive Officer

We were trying to figure out, who the best person to answer that is for you.

Robert Christensen - Buckingham Research

Daniels, probably.

James T. Hackett - Chairman, President and Chief Executive Officer

Well, actually there is a combination between Dan and Meloy.

Charles A. Meloy - Senior Vice President, Worldwide Operations

Thenumber of contracts with regard to deepwater rigs, I don't think we have the time we go through individual contracts on this call.

John Colglazier - Investor Relations

Yes, Bob this is Colglazier. I will go ahead and get a schedule put up. We will put it on the website showing the nine rigs that we have on our contract and their expiry dates.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Bob, at a high level, we fee like the rigs are still going to be heavily utilized. Their strong demand, you can see that the utilization rate of deepwater semi-submersible rigs and drill ships. All these...many of the rigs are substantially in the money, and you've seen us extend some contracts and basically let some new contracts. So we expect to maintain our rig position going forward.

Robert Christensen - Buckingham Research

Yesterday, I read a story that of Algeria that they are soliciting foreign oil companies for participation in exploration bids, kind of amazed by that given their windfall profits tax surprise 18 months ago. What's your take on that and would you participate in another round?

Unidentified Company Representative

Yes, we were aware that it's...next pricing bid round that they have planned and they are asking for pre-qualification for that. Of course the fiscal terms are going to be onerous compared to previous bid rounds in Algeria. And it will be interesting to see what sort of competition there is for those blocks. We haven't seen actually what the blocks are. So really it's very early in the process. We just are aware that they are going through it.

Robert Christensen - Buckingham Research

Thank you very much.

Operator

Your next question comes from the line of Joe Allman with J. P. Morgan. Please proceed.

Joseph Allman - J. P. Morgan

Hey, good morning everybody.

Unidentified Company Representative

Good morning Joe.

Joseph Allman - J. P. Morgan

Hi, could you talk about the cost environment especially for drilling and completing wells and also talk about what kind of field level efficiencies you guys are seeing?

Karl F. Kurz - Chief Operating Officer

I will hit it real quick on the cost environment. Obviously, we see the deepwater cost markets still increasing competition for rigs and services. We are talking about this morning, we are seeing onshore probably a little bit of softening, but there are areas that it's kind of real estate, location, location, location. There is some areas that we see high demand for services and cost are quite competitive for us right now. I think we indicated we expect about 5% increase in cost on the service sector for 2008.

Joseph Allman - J. P. Morgan

Can you talk about any offsets, related to field level efficiencies?

Karl F. Kurz - Chief Operating Officer

Yes, I mean we've got a program going on. Chuck wants to talk about that.

Charles A. Meloy - Senior Vice President, Worldwide Operations

Well, what we see...as we put these companies together, we have had levels in opportunities such as Cardinal Zone [ph] and Kepler, where we have two different...two companies operate in the same field, we've be able to bind those, we've seen a lot of synergy offshore particularly with logistics and air services between the legacy Anadarko and Kerr-McGee properties. We have been able to substantially offset the increases has been evidenced by our operating performance in 2007.

Joseph Allman - J. P. Morgan

Okay, it's helpful. And fact of the issue with the positive reserve revision, could you talk...I mean that was a pretty big number 724 Bcfe. Can you just talk about how much of that was related to the re-categorization issue and then how much was other stuff, the price and performance...

Karl F. Kurz - Chief Operating Officer

I would...as we talked about, we are not going to talk about the breakout of price performance. But I will reemphasis what Jim said in his comments early that even in excluding price revisions, we more than replaced production for 2007. Now the majority of that revision is due to in-field wells.

Joseph Allman - J. P. Morgan

Got you. And how much...could you give us an estimate of how much would your production replacement have been higher if you didn't sell Genghis Khan and Knotty Head and Big Foot, any ballpark there?

Karl F. Kurz - Chief Operating Officer

That's a good question. Daniel keeps reminding me how much he would have added this year if we kept those, but we haven't gone back and review those Joe to see exactly how much reserves would booked that would have been required a full sanctioning program and assessing much more detail than we currently have done.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

In addition, Joe, we are not really sure we have good clarity as to exactly how the drilling that has occurred, since we've sold that has proven up additional reserves or not. So it really would be kind of difficult for us to asses exactly what those additional barrels would have looked like.

James T. Hackett - Chairman, President and Chief Executive Officer

But I think it's fair to say that this year we had not expected to have a significant adds in exploration side, because we have delayed a lot of our drilling and we didn't have those, those wells coming in and the reserves from those discoveries coming into the picture for 2007.

Karl F. Kurz - Chief Operating Officer

But Joe, appreciate you that you bring that up because obviously with those in our picture, they have been included, it would have been even more robust than we currently have delivered.

Joseph Allman - J. P. Morgan

Got you. And then in terms of like drilling in the Gulf of Mexico, if...are there any constraints? I mean are rigs the big constraint in terms of drilling more wells there, because it sounds like you are diversifying your international program. I think Jim, I think you said you are going to drill North Sea well, I knew that the Huskie discovery and you are obviously active in China. And so what are the constraints to drilling more wells in that deepwater gulf?

James T. Hackett - Chairman, President and Chief Executive Officer

We still see tightness in the rig market and mobilizing rigs to certain areas is still a critical planning issue for the industry. I think you referred to the Huskie thing, I think it's in South China Sea right. And then as you say, we're going to be active down in Brazil. And that's we are moving rigs in different places, which is what the magic of higher oil and gas prices is caused in our businesses. We don't have these regional rig markets anymore. It's a much different dynamic and in it therefore the control of those rigs is still a very valuable asset in our mind.

Joseph Allman - J. P. Morgan

Okay guys. Okay so that's okay that South China Sea Well, okay.

James T. Hackett - Chairman, President and Chief Executive Officer

Yes.

Joseph Allman - J. P. Morgan

Okay.And then lastly in one of your releases you talked about acceleration of the big resource base being a big focus in 2008. Is that anything...is there any different in what you experienced in 2007 or prior.

Karl F. Kurz - Chief Operating Officer

No, I mean it's all about converting the resources right now. And being very capital efficient and how we do it. So as you've seen in 2007, we are going to maintain a high level capital efficiency and continue to aggressively convert that resource base into proved developed reserves.

James T. Hackett - Chairman, President and Chief Executive Officer

And what you see in exploration is an attempt to...as one as we can sit our cost of capital on those projects is to still put even more on the books over time to give us even longer dated growth as well as additional opportunities that we think we can try to convert in a variety of different ways as Bob mentioned.

Joseph Allman - J. P. Morgan

Got you. All right, thank you.

James T. Hackett - Chairman, President and Chief Executive Officer

We're seeing a lot of value in this industry placed on discoveries and appraisals without ever bringing them into production. We like part of that aspect.

Joseph Allman - J. P. Morgan

Got you; very, very helpful. Thank you.

Operator

: Your next question comes from the line of David Heikkinen with Tudor Pickering. Please proceed.

David Heikkinen - Tudor Pickering & Co. Securities

Good morning. I had one bigger picture question. When I listened to the call and the question versus your peers, most peers have some shale gas exposure trying to into new plays; hear a lot about Appalachia, Fayetteville, Woodford, Barnett, West Texas. Do you guys feel like you missed that or are you trying to get into any new plays? And would it be a surprise in 08 to say you've started to get into shale gas resources?

Karl F. Kurz - Chief Operating Officer

Bob Daniels is shaler than you think. So let him handle that question.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

This is Bob Daniels. We've got an onshore exploration program that we think is very robust actually. We spent last year kind of focusing down on where we think we can have the best success. We are playing some tight gas, we are playing shale gas and we are playing some fractured reservoirs. We do have established positions in the Black Warrior Basin, the Maverick Basin and a very nice position in the Appalachian Basin. We are planning on drilling wells in the Appalachian Basin this year to test the shale play out there and we are very optimistic about what we are seeing from the industry activity and particularly where our acreage sits relative to the industry activity and our understanding of the shale play. So while we are not in the Barnett, we have been very actively pursuing and trying to understand the shale gas plays and where we may be able to get into those on a ground floor basis.

David Heikkinen - Tudor Pickering & Co. Securities

Where is you Appalachian acreage, just the state even would be helpful?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Pennsylvania.

David Heikkinen - Tudor Pickering & Co. Securities

Pennsylvania, that's north-south.

Unidentified Company Representative

Pennsylvania.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

We've got 225,000 acres in Pennsylvania and some of it is in very, very nice contiguous blocks.

David Heikkinen - Tudor Pickering & Co. Securities

Okay. That's helpful. Second question going to K-2 and K-2 areas, what's the feed moving forward this year? Would it be soon enough to have a sanction for going forward with enhanced oil project there? Or do you think that sanctioning would be more likely next year?

Charles A. Meloy - Senior Vice President, Worldwide Operations

David the feed is moving forward well. We are still evaluating two primary options, which are water injection down there for nitrogen injection up dip integrated project teams is formed, it's moving along nicely. My expectation for sanction would be next year.

David Heikkinen - Tudor Pickering & Co. Securities

Okay. And then the down dip well that you are drilling, testing the field extent to 30,000 feet; are you are expecting to try to find the water with that well or what's the overall good, bad or other evaluation once that wells at TD?

Charles A. Meloy - Senior Vice President, Worldwide Operations

Well, it's in one particular fault block. It's the 562 under one well...I'm sorry 561 under two wells. It's under test. We are attempting to extend the oil column even further than we previously had and it will move to an adjacent fault while we can drill another down depth well.

David Heikkinen - Tudor Pickering & Co. Securities

Okay.

Charles A. Meloy - Senior Vice President, Worldwide Operations

Both of which are field expansion type wells.

David Heikkinen - Tudor Pickering & Co. Securities

That's helpful. The reserve potential at Serpa, just a range?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

At Serpa, I think we are looking at the 100 to 250 million barrel target size.

David Heikkinen - Tudor Pickering & Co. Securities

Okay.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

And typically when we go into these deepwater plays, we start in the Gulf of Mexico, everything used to be bigger than 100 million barrel target and we've taken that internationally. Of course we have to look at the physical regimes to make sure that all works, but that they are significant targets we are looking for there.

David Heikkinen - Tudor Pickering & Co. Securities

And then coming up, Gulf of Mexico lease sales continue to be pretty hard this year, would it believe unusual to see similar bidding to what you guys had last year again this year?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

From our standpoint?

David Heikkinen - Tudor Pickering & Co. Securities

Yes, would you be leasing more, or do you think you farm in more?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

We'll be active in the lease sales like we always are, we don't really comment on how aggressive we are going to be.

David Heikkinen - Tudor Pickering & Co. Securities

Yes.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Certainly the industry has been aggressive, and we are going to have to take that in to account.

David Heikkinen - Tudor Pickering & Co. Securities

Okay.

James T. Hackett - Chairman, President and Chief Executive Officer

What we've done as Dave as you know is, as you say we've participated both in lease sales as well as there is...here is a dance is played out of lease sales, where people partner up and we participate in that as well.

David Heikkinen - Tudor Pickering & Co. Securities

Okay. Thanks a lot guys.

James T. Hackett - Chairman, President and Chief Executive Officer

Thanks.

Operator

Your next quarter you comes from the line Philip Dodge with Stanford Group. Please proceed.

Philip Dodge - Stanford Financial Group

Good morning, thank you. Two international questions, first offshore Ghana; how much would you expect to narrow the possible reserve range 200 to 1.1 billion with the squad you are currently drilling?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Well, this is Bob Daniels again, Philip. With this one, we are not going to narrow it down a whole lot, because this is really a satellite to the existing discovery at Jubilee with Mahogany and Hyedua. So we are going to test another concept in this one that with the additional drilling this year that we've already outlined up, we think that we'll be able to narrow that down quite significantly. The next well we'll drill directly after the Odum well will an appraisal well in Jubilee discovery area. So we'll start that process now, we'll bring another rig back into drill additional appraisal wells. And we think by the end of the year, we are going have very good handle on what that range really is.

Philip Dodge - Stanford Financial Group

Yes, okay. And then just curious how much reserves you booked at Peregrino?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Yeah, this is Al. At the field level, you probably can appreciate we don't talk about what we've booked, but we have booked barrels in the year there and we intend book to more in 08.

James T. Hackett - Chairman, President and Chief Executive Officer

But I think it's fair to say that we are going to be very paced in that regard. We will make sure that the investment dollars are going along with that. And I'm personally going to be terribly concerned about what we did there.

Philip Dodge - Stanford Financial Group

Yes, when would your pace allow you to report the whole thing?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

All of the reserves that we project there would be the pace for several years.

Philip Dodge - Stanford Financial Group

Around production start up?

Unidentified Company Representative

That will probably be appropriate.

Philip Dodge - Stanford Financial Group

Is that 2010?

Unidentified Company Representative

Yes, sir.

Philip Dodge - Stanford Financial Group

Okay. And then just a final question; can you give us a update on the timing of the MLP offering?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Yes, this is Al. As you probably fully appreciate, we are in the quite period right now with the SEC. So, we are sort of limited with our commentary around it. We are very committed through the MLP and believe that we will price that security issuance sometime during the course of the year. Market conditions currently are such that we are watching and monitoring that to see when an optical time for us to launch the IPO would occur. And really beyond that I am afraid today we just can't say much more than that.

Philip Dodge - Stanford Financial Group

Does the SEC have all the information that's requested or you are still gathering.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

No, the SEC has all the information that they need, and I think we couldn't use any process with the SEC as a hesitation rather I think its more market conditions are being favorable for successful IPO.

Philip Dodge - Stanford Financial Group

Okay, thanks very much.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

You bet.

Operator

Your next question comes from the line of Ross Payne with Wachovia Capital Markets. Please proceed.

Ross Payne - Wachovia Securities Fixed Inc.

First question on Independence Hub, obviously you hit 1 Bcf, it's coming a little bit lower than on...lower than that on average. Where do you see it kind of being for 08, second of all what's the average license as well and do you have any plan to add additional wells to those projects?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Well, as you know we did hit 1 Bcf dc up a day type rate. We exceeded our expectations there on that capacity and facility. On the facility we talked over and over about using around an 80% run time, is a good expectation for average run rates due to the link to the flow lines just a general facility operation. The...we expect to stay at a peak of around 800 million a day on average for 18 to 24 months and but in doing that we are also adding additional wells like for instance right now we are on our second Cheyenne well, and w are drilling it as we speak.

Ross Payne - Wachovia Securities Fixed Inc.

Okay, are there other plans for additional throughout the next two or three years?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

We have several wells lined up to be drilled to the course of next two to three years.

Ross Payne - Wachovia Securities Fixed Inc.

Okay and second question is on leverage. Do you have any targets for debt-to-EBITDA, or debt-to-BOE, anything like that?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

No, I think unlike last year, we are going through the restoration of the balance sheet and we sort of guided the market to expectation. I think as we go forward, we will continue to mention to reduce debt, but primarily through free cash flow and things we would otherwise be doing in the normal course, which could include modest property dispositions from time-to-time. But I would think from our perspective continuing to look at and de-leveraging is important, maintaining an investment grade rating relative to our business model is important, but I would think most of that will be both from the free cash flow and the modest divestitures that I may refer to do.

Ross Payne - Wachovia Securities Fixed Inc.

Okay. And one more, you might have touched on this earlier, but what are your expectations on price realizations on your productions on the Rockies in 08?

Clay Bretches - Vice President of Marketing and Minerals

Yes, this is Clay Bretches. And we feel real good about our position in the Rockies right now. As in 2008, we have 95% of our production, either transported or hedged through financial hedges. So when we take a look at that average realization relative to Henry Hub, we are looking at something on the order the $1.50 below.

Ross Payne - Wachovia Securities Fixed Inc.

How is that compared to last year design?

Clay Bretches - Vice President of Marketing and Minerals

Well, obviously we better we have more hedge this year than we did last year, and plus the regional sales of course in the Rockies were much worse last year. So, we are expecting better things with the oncoming of Rex transportation our of the Rockies, which will increase the ultimate realized price for regional sales.

Ross Payne - Wachovia Securities Fixed Inc.

Okay, do you happen to know what the differential was last year, between WTI and...

Clay Bretches - Vice President of Marketing and Minerals

It wasn't much up, $1.50. I think was $1.25 or something like that?

James T. Hackett - Chairman, President and Chief Executive Officer

He is talking about the market itself?

Clay Bretches - Vice President of Marketing and Minerals

The current differential process...

Unidentified Company Representative

The average was...

Clay Bretches - Vice President of Marketing and Minerals

It's over $3 on average. Right now it's about $1 under CIG versus Henry Hub, but it probably averaged over $3 lower.

Ross Payne - Wachovia Securities Fixed Inc.

Okay. All right, very good. Thanks guys.

Clay Bretches - Vice President of Marketing and Minerals

John will find the number for you.

John Colglazier - Investor Relations

It was $4.01, I just looked at it.

Ross Payne - Wachovia Securities Fixed Inc.

Okay.

John Colglazier - Investor Relations

Because lot of upside in terms of realizations there for this year.

Ross Payne - Wachovia Securities Fixed Inc.

Yes, All right. Thanks a lot.

Operator

Your next question comes from the line of Ben Dell with Bernstein. Please proceed.

Benjamin Dell - Sanford C. Bernstein

Good morning guys.

Unidentified Company Representative

Good morning Ben.

Benjamin Dell - Sanford C. Bernstein

I just have few quick questions; you made some commentary on the lower tax rate. Do you have a feeling for what flow rate you would need to see to make developments economic? Obviously, there been a lot of discussion about that over the last year or so.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Ben, we haven't speculated on that. There is a lot of moving parts what the development cost will look like, what type of flow regime you could have. So we haven't really speculated on what type of flow-rate you mean.

Benjamin Dell - Sanford C. Bernstein

Okay. And my second question was just around your return on capital. Obviously, it's relatively low versus the peer group given the acquisition. Do you have any particular plan to drive that off over the next two or three years and I guess my follow-on question with that is do you have feeling for commodity price you would be at risk of impairment testing some of that capital?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Ben, this is Al. As it relates to future F&D and we will get into this more detail in March at our Investor conference. I think for 08 you will see us continue to guide you to an 18 or less number just like we did this year, and we will give you a little more substance behind what that means for 08 and beyond at that time. From an impairment standpoint as you know every quarter we go through that process now particularly under successful efforts at the field level and it does vary by region and we aren't currently that price sensitive to either gas or oil in any area in which we currently produce.

Benjamin Dell - Sanford C. Bernstein

Okay. Great, thank you.

Operator

Your next question comes from the line Rehan Rashid with FBR. Please proceed.

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Real quick question on coalbed methane; the waters handling capacities, by when should we expect that to get to the 550 number?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

We'll be expanding the two facilities we have there through the course of the first two quarters of 2008, and that will push us up over 500.

Rehan Rashid - Friedman, Billings, Ramsey & Co.

And should we expect a proportionate increase in production as well or should that lag?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Not immediately. Of course what you see as a very long dewatering process in the order of one year plus with these Big George coals, and so you will see that impact coming in 2009 and 2010.

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Got it, this is a drilling activity essentially being planned accordingly meaning that you will be able to raise the water handling to 550.

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Yes

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Okay, thank you.

Operator

Next question comes in the line of Shannon Nome with Deutsche Bank. Please proceed.

Shannon Nome - Deutsche Bank Securities

Thanks. Good morning. Do you have a total proceeds number for the...what is it, 620 million barrels sold during the year?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Well, I think we have given you some indication of what we divested from the standpoint of reserves sold during the year. And I think we have guided each quarter kind of what we are to looking with the properties we have sold. So but we have never come up and communicated precisely that number, Shane. And I think you wouldn't take much to calculate it.

Shannon Nome - Deutsche Bank Securities

Right.Whatever you have previously disclosed, it wouldn't big change to that as of yearend.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

Right. Shannon, I think the way to look at that is since the acquisition time, we have monetized the $15 billion, and I think we have guided that that would entail about 900 million barrels of reserves including Canada and Venezuela on piece that went-off books in 2006. So you can kind of back into the aggregate number that way.

Shannon Nome - Deutsche Bank Securities

And then you disclosed 54 million barrels of contention, discoveries in the other international category, I know you said you don't want to break that Peregrino, but what other...then Brazil would be in that number.

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

That's correct Brazil would be in that number and would be a large contributor to that number.

Shannon Nome - Deutsche Bank Securities

I mean what other, what else is in that number?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

China and Algeria.

Shannon Nome - Deutsche Bank Securities

China, Algeria. And then can you tell me...I am guessing you, what future development cost not yet incurred would relate to that Brazil booking?

R. A. Walker - Senior Vice President, Finance and Chief Financial Officer

I don't have that number to disclose and...yes, Shannon, we are still out with some offerings on...tendering some offers on some of the major facility out there. So we'll give you a better update on that in March conferences we'll have in New York.

Shannon Nome - Deutsche Bank Securities

Thank you.

Unidentified Company Representative

Thank you.

Operator

Your next question comes from the line Ray Deacon with BMO Capital. Please proceed.

Raymond Deacon - BMO Capital Markets

Yes, I guess...Bob, I was wondering at Natural Buttes, are you going to be able to book 10-acre space assuming that 10-acre down space in work? Would you be able to book reserves in 2008? And also on Atlantic Rim maybe what kind of results have you seen so far. And what kind finding cost you think you will have in Atlantic Rim?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

Well, in Greater Natural Buttes, we are now in our second 10-acre pilot. It's...the early results look very good. We haven't had plans to book a large chunk of 10-acres in 2008. So we will watch those and that will be a good piece of upside force in our ongoing business. And in Atlantic Rim, it's really too early to tell. We are just now in the process of drilling wells, we began hook-ups and that type of things, so it's just really too early.

Raymond Deacon - BMO Capital Markets

Okay, got it. Is this... is the pilot and the second pilot, fairly close to each other in Natural Buttes or will you be able to prove that kind of larger area works, I guess?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

No, it's spread over pretty good area actually. I don't have the exact distances, but it's two different townships.

Raymond Deacon - BMO Capital Markets

Got it, great. Just one more question on the blocks that were acquired next to the Peregrino discovery, when will you be able to drill those?

Robert P. Daniels - Senior Vice President, Worldwide Exploration

That would likely be in a couple of years.

Raymond Deacon - BMO Capital Markets

Okay, got it. Great, thanks very much.

Operator

Your next question is a follow-up question form the line of Gil Yang with Citi. Please proceed.

Gil Yang - Citigroup

Hi, just a quick question on Independence Hub, the run rate is higher than your 80% or 800 million number. Is that because...did you exceed the volumes? Did you ever go over 1 Bcf per day, or did you just have higher run rate than you expected?

Karl F. Kurz - Chief Operating Officer

It's a combination of little bit of both. We did exceed over a billion a day for a short period of time. But right now, our run rates have been just slightly better than what we have been guiding you to.

Gil Yang - Citigroup

Okay. So you are now running just under 1 Bcf a day when it's operating and...but you are operating than 80% of the time?

Karl F. Kurz - Chief Operating Officer

Our run rate on average has been around 850 to 900 as we mentioned on the call. One way to look at Independence Hub at 1 Bcf a day is like running full throttle, and it's wide-open type capacity and we have just not been able to push that platform that hard on a sustained basis. And that's why we've got it to 80%.

Gil Yang - Citigroup

Got you. Okay, thanks.

Operator

Your next question is a follow-up question form the line of Rehan Rashid with FBR. Please proceed.

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Jim, a quick question on the un-risk 7 billion barrels that you talked about. If I just take a $4.2 billion CapEx for this year, take an $18 F&D, we're talking long time before we convert everything over; any particular thoughts on that front how can you maybe accelerate the conversion a littlie bit faster than that?

James T. Hackett - Chairman, President and Chief Executive Officer

I think the observation is correct. I may have misheard you, but I think it's...you meant to say risks net resources, it's not...

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Right.

James T. Hackett - Chairman, President and Chief Executive Officer

And it's still...even our risk basis it takes a long time. We still look at way...as we talked earlier that we have been...we continue to try to focus on seeing if additional capital can be put to accelerate the drilling over time at some of our resources basis as well as we look at opportunities over time to monetize things. I think what you saw during our divestiture program gave us some confidence that for the right reasons and the right places, we may decide to do something that creates more value upfront for our shareholders. And I think with additional cash flow from the production growth, we are going to have more opportunities to put money back into the ground to accelerate that. Every year we go if commodity prices don't reverse against us.

Rehan Rashid - Friedman, Billings, Ramsey & Co.

Got it, because I come up with a 30 year number, so definitely accelerating that will be good. Okay, thank you.

Operator

: We are currently showing no more questions in queue. I would like to turn the call over to management for closing remarks.

James T. Hackett - Chairman, President and Chief Executive Officer

We want to thank everybody for being on the call today. And we look forward to seeing those of you that can make it at our investor conference on March 25th in New York, and hope you've all had a good start to the year. We are excited about the where we are headed. Thank you.

Operator

: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect; and have a good day.

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Source: Anadarko Petroleum Corp. Q4 2007 Earnings Call Transcript
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