Anadarko Petroleum (APC), still the second-largest U.S. independent oil and natural-gas producer by market value, recently boosted its 2012 sales volume forecast and posted adjusted quarterly profit that exceeded most analysts' estimates. This is good news for investors because the company's sales volume climbed 8.3% from a year earlier to the equivalent of 742,000 barrels of oil a day. The increase in sales was driven by ramped-up production in Colorado and the Gulf of Mexico as well as higher volumes from Algeria. The company also increased mid-year sales forecast by 3 million barrels to a range of 261 million to 265 million barrels. With a market cap of just over $36 billion and an increase in both U.S. and international production, I believe Anadarko to be a company to hang onto if you own it and to buy now if you don't.
Running neck and neck with Anadarko is Apache (APA), with a market cap of $34 billion, of which $1.8 billion has been allocated for the company's Australian operations in 2012, up from $1 billion in 2011. Also giving Apache steam is a 13% ownership interest in the Chevron (CVX) operated Wheatstone Liquefied Natural Gas (LNG) project. Earlier this year, Chevron sold roughly 80% of its gas from the Wheatstone project to Tohoku Electric Power Company (TEPCF) in a 20-year agreement with the Japanese electricity supplier purchasing more than 1 million tons of liquefied natural gas per year. While Anadarko is looking to U.S. onshore formations, including in Colorado and Texas, to help boost output of liquids such as oil, the company is also exploring off the coast of Africa, and in the Gulf of Mexico. The company is considering other plays after announcing about $1 billion of joint ventures in Wyoming and the Gulf of Mexico.
According to President and CEO Al Walker, "A lot of people have approached the company about possibly buying a stake in its gas assets off the coast of Mozambique. Mozambique is on a list of transactions to consider. Once we find the right deal that we think makes sense for us and our shareholders, we'll be inclined to pursue something if we in fact can indeed find that." The company has already begun receiving bids on some of its assets including coal bed- methane properties in Wyoming and certain midstream holdings. The possible sale may include coal bed-methane holdings, a 50% stake in midstream gathering, compression and pipeline assets, and mineral rights in deep formations that may hold Niobrara oil.
In Colorado, where Anadarko estimates its Colorado reserves at the equivalent 1.5 billion barrels of oil, the company is set to spend about $1 billion this year on its Weld County operations. In this region of oil-shale development that stretches from south of Denver to the Wyoming, the company is one of the biggest operators in the Niobrara formation. The company set a record for its quarterly sales from the Wattenberg field during the first quarter of 2012, averaging 80,100 boe/d. In addition, sales volumes of liquids were up more than 40% compared with the same period last year. Anadarko drilled 60 vertical wells using three operated rigs in Wattenberg. At the end of the second quarter, the company had seven horizontal rigs active in the play and drilled 28 horizontal wells in the Niobrara and Codell formations.
Anadarko is succeeding in the region, but also has some strong competitors as neighbors. Also seeking riches in the same region, Noble Energy (NBL) is working in 880,000 net acres of leased land in the DJ basin where hoping to increase production from the Niobrara formation to 70,000 boe/d by year 2016. Noble also expects to end 2012 having production levels of 32,000 boe/d, 65% of which is oil and natural gas liquids. EOG Resources Inc. (EOG) also started its present horizontal Niobrara play with the Jake discovery well. Known as the Jake 2-01H, it had its first-month initial production rate of 645 b/d in late 2009. The well still was still producing more than 2,500 bbl of oil per month. EOG said its Niobrara wells show low initial production rates and flat declines with long-term stable production rates. Additionally, Continental Resources (CLR) is finding some success in its first nine Niobrara wells. Some recent finds include the company's completion of the Buchner 1-2H in Weld County, in which Continental holds 82% working interest in Buchner 1-2H in. Continental currently has 92,842 net acres in the Niobrara/DJ basin of which 25,000 net acres are in what is known as the play's "oil fairway."
Anadarko continues to flourish making headway emerging Utica shale play in eastern Ohio. The company has three wells there and the most recent one, in its first 20 days online, delivered more than 9,500 barrels of light-gravity crude oil. The company currently has 390,000 acres to explore and is in the process of completing its fifth exploration well. With continued exploration activities in various regions in both the U.S. and internationally, the company is making headway toward improved exploration and development successes. For the first half of 2012, oil and condensate sales are up 10%. Additionally, the company reported second quarter results with revenue of $3.22 billion and sold 742,000 barrels of oil equivalent per day which increased oil sales volumes by approximately 20,000 barrels per day over first-quarter 2012. Anadarko also generated more than $1.9 billion of discretionary cash flow from operating activities. Recently the Board of Directors of Anadarko recently declared a quarterly cash dividend on the company's common stock of .09 cents per share, payable September 26th, 2012 to stockholders of record at the close of business on September 12th, 2012.
With so much momentum behind this company's mission of "delivering a competitive and sustainable rate of return to shareholders by developing, acquiring and exploring for oil and natural gas resources vital to the world's health and welfare," it is bound to please. Based on my findings, I think Anadarko will maintain a level around $80 by early next year. This one is a keeper for the long haul.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.