Bloomberg News

Anadarko Loss Widens to $3.1 Billion on Spill Settlement

November 02, 2011

(Updates with comments from chief executive officer starting in seventh paragraph.)

Nov. 1 (Bloomberg) -- Anadarko Petroleum Corp., the Texas company that had a stake in the well that caused a record Gulf of Mexico oil spill last year, said it lost $3.1 billion in the third quarter after agreeing to a settlement with BP Plc.

The net loss was $6.12 a share, The Woodlands, Texas-based company said in a statement yesterday. A year earlier, Anadarko reported a net loss of $26 million, or 5 cents a share, citing contracts to lock in interest rates.

Anadarko said Oct. 17 it agreed to pay BP $4 billion to settle claims related to an explosion and oil spill at the Macondo well in the Gulf in April 2010. Excluding such items as the settlement, profit was about 66 cents a share, equal to the average of 29 analysts’ estimates compiled by Bloomberg.

“It’s right in line with what folks were expecting,” said Curtis Trimble, an analyst at MKM Partners in Houston who has a “neutral” rating on Anadarko shares and owns none. Still, it’s “shocking” to see a loss in the billions of dollars even if it’s expected, he said.

Anadarko said third-quarter sales volumes were at the high end of its forecast, climbing to the equivalent of 61 million barrels of oil from 58 million barrels a year earlier. The company said output for the year will be 245 million to 248 million barrels of oil equivalent. An earlier forecast was for 244 million to 248 million barrels.

Revenue Rises

Revenue in the third quarter rose 25 percent from a year earlier to about $3.2 billion. Anadarko lowered its capital spending forecast for this year to a range of $6.1 billion to $6.4 billion, compared with as much as $6.6 billion previously.

Capital spending may rise next year even as the company looks to stay within cash flow, Anadarko Chairman and Chief Executive Officer Jim Hackett said on a conference call with analysts and investors today.

Brent crude futures, a benchmark global oil price, jumped 46 percent from a year earlier to average $112.09 a barrel in the third quarter. Natural-gas futures traded in New York averaged $4.06 per million British thermal units in the quarter, a decline of 4.3 percent.

Anadarko had a 25 percent stake in Macondo, which created the largest offshore oil spill in U.S. history. The company previously blamed BP, the operator, for the spill and withheld paying an estimated $6.1 billion in invoices from BP.

African Drilling

The settlement is equivalent to about $5 a share on an after-tax basis, Hackett said in a statement on Oct. 17. He said the agreement “eliminates all significant exposure to historical and future claims,” though it doesn’t provide protection against items such as fines, penalties or punitive damages.

Anadarko agreed to transfer its interest in Macondo to BP as part of the settlement.

Anadarko is focused on developing projects in areas such as Africa, the onshore U.S. and the Gulf of Mexico to boost output in future years.

The company said it has acquired interests in about 300,000 gross acres, or about 200,000 net acres, in Ohio’s Utica Shale as it seeks to increase petroleum liquids output. Anadarko said it has started a first well and plans an active program in the area.

One production disappointment is the Jubilee project off Ghana, which Anadarko said has encountered mechanical issues related to completion techniques.

Jubilee Estimate

Gross production at the project is more than 85,000 barrels a day, and the company said partners will seek to increase output once there’s a resolution. Anadarko said in December that Jubilee was heading for output of 120,000 barrels a day. The company has a 23.5 percent stake in the project, which is operated by Tullow Oil Plc.

Anadarko has said Jubilee may hold 1.5 billion gross barrels of oil equivalent. The company said yesterday the operator’s resource estimate for Jubilee hasn’t changed.

Anadarko continues to tout offshore Mozambique, where the company said it’s confident a complex holds more than 10 trillion cubic feet of recoverable gas. The estimate for Mozambique may rise further, Anadarko said.

The company has opened a data room for a possible sale of its Brazilian assets. Anadarko has seen “strong interest” in those properties and a sale may happen in 2012 if pricing meets the company’s goal, Hackett said.

Anadarko also may consider a joint venture related to its Niobrara assets in the Rocky Mountain region of the U.S., though probably not in an area known as the Greater Wattenberg field, President Al Walker said today.

Takeover Candidate?

Removing the uncertainty about oil-spill liability may revive interest among investors who believe the company may be a takeover candidate, said Bob Brackett, a senior analyst at Sanford C. Bernstein in New York who has a “market perform” rating on Anadarko shares and owns none.

“So now people no longer focus on that, and they can focus on what’s Anadarko worth on the market and what could it be worth to an acquirer,” he said.

Anadarko fell 2 percent to $76.91 at 12:35 p.m. in New York.

--Editors: Charles Siler, Susan Warren

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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