Rockies rush boosts Anadarko’s earnings

A rush of oil from the Rockies helped to boost profits for Anadarko Petroleum Corp., a shift that captured the attention of analysts as executives detailed the company’s earnings on Tuesday.

Anadarko, based in The Woodlands, grew its production in Colorado’s Wattenberg field by 22 percent in the fourth quarter of 2012, compared with the previous quarter.

The jump gave Anadarko daily production of 45,000 barrels of oil equivalent from the play, with the growth coming from horizontal drilling in the Niobrara and Codell rock formations, according to the company’s operations reports.

Anadarko’s horizontal well count in the play grew from 100 in the third quarter to 172 in the fourth quarter and the company has added an additional rig in the play, where it now has 11 active rigs aiming to boost its output.

The rapid increase in Anadarko’s production from the Rockies has led the company to arrange for added transportation of oil by rail, said Chuck Meloy, Anadarko’s senior vice president of U.S. onshore exploration and production.

“The rationale is to get us broader exposure, not just to Cushing, but even to other potentially waterborne markets,” Meloy said during a conference call with analysts, referring to the oil hub of Cushing, Okla.

Transporting oil by rail could lead to higher sales prices for the company, which is already enjoying high returns from its operations in Colorado. It owns much of the land for its operations there, rather than leasing drilling rights from landowners and paying them royalties for production, said Andrew Coleman, an analyst for Raymond James.

“It’s a huge competitive advantage to them,” Coleman said.

Meloy said Anadarko had also slashed its drilling costs in Wattenberg by 15 percent and cut the time it takes to drill a well by 38 percent.

Anadarko also reduced its costs to fracture and complete a well by $250,000 in that play because it has attempted to cut out water trucking and instead send water to its wells using a pipeline, Meloy said. The change has also reduced its environmental footprint there and will be implemented in wells moving forward.

“We’re thrilled with the results in Wattenberg,” Meloy said. “The production continues to climb.”

The Wattenberg results helped boost Anadarko’s earnings to $203 million in the fourth quarter, after a loss of $358 million in the same period a year earlier.

The growth in the Rockies was also part of an overall jump in annual production of oil and other liquids of about 25,000 barrels per day.

Anadarko reported its earnings Monday.