Anadarko to use Mozambique proceeds for shale development

Anadarko Petroleum Corp. plans to ramp up investments in domestic shale plays, targeting the Eagle Ford and Wattenberg basins as particularly lucrative, company officials said Tuesday.

The company plans to fund significant investments in the two plays with funds generated from a recent $2.6 billion sale in Mozambique, as it consolidates its shale positions.

Anadarko sold its 10 percent interest in an offshore natural gas field in Mozambique to Indian company ONGC Videsh on Aug. 25 in an all-cash deal, and said that the proceeds from the sale will enable it to expand its positions onshore and in the Gulf of Mexico.

Anadarko has also built up its operations in the Permian-Delaware basin, having completed its first six Wolfcamp wells in Ward and Loving counties in West Texas.

“The idea is that this is going to be the next big area that attracts capital,” said James Sullivan, an analyst with Alembic, noting that Anadarko is moving capital away from the Marcellus Shale to the Texas side of the Wolfcamp play in the Delaware basin.

Some shale experts believe the Wolfcamp could become as prolific as the Eagle Ford, although the associated drilling costs are higher, Sullivan said, adding that Anadarko’s lack of specificity on its drilling activity for the six wells could be driven by its future plans for more land purchases.

“They didn’t want to give more information on Wolfcamp in the call,” Sullivan said. “They are just trying to keep information very general right now – they didn’t talk about where they drilled there, because they may want to do more leasing.”

Anadarko also stands to benefit from a  property swap with Noble Energy in the Wattenberg basin in Colorado. In the deal announced Oct. 23 , the parties will exchange 50,000 net acres each in different parts of the Wattenberg. The exchange will allow Anadarko to develop further  its core area there , and will increase its daily production by 8,000 barrels per day,  the company estimates.

Under the terms of the deal, expected to close early next year, Anadarko will retain mineral rights for  21,000 of the acres it trade to Noble Energy.

“This is a tremendous value pick up for Anadarko,” CEO Al Walker said in a call to discuss third-quarter results released after markets closed Monday.

Anadarko, based in The Woodlands, increased its onshore sales by 61,000 barrels of oil equivalent over the July-September period last year, including a 16 percent increase in liquids volumes.

Anadarko shares were down $3.01 at $92.92 in afternoon trading Tuesday on the New York Stock Exchange.