Anadarko’s 2017 vision: develop the Delaware Basin
Anadarko Petroleum Corp. has made its 2017 plans clear: the Delaware Basin will receive the majority of its funding and attention. Calling the western portion of the greater Permian Basin “easily the most exciting asset,” the company currently has, Al Walker, APC CEO, said the Wolfcamp formation within the Delaware is an incredible rock with incredible opportunities.
The West Texas play will take precedence over APC’s work in the DJ Basin and in Deepwater offshore operations. In late 2016, the company began searching for office space to house roughly 200 workers in Midland, Texas. After divesting of operating assets in the Eagle Ford and Marcellus shale plays for a combined total of roughly $3.5 billion, APC exited 2016 with $3.2 billion of cash on hand.
According to Walker, the money will either be kept as dry powder in case oil prices dip, or, the money could be used to add bolt-on acquisitions in the Delaware. The opportunity to produce short cycle oil with good well head margins in the Delaware is too attractive to spend the money on stock buy backs or shareholder pay outs, Walker also said.
The exploration and production company is in the midst of a steady drilling rig ramp-up in the Permian. After operating roughly six rigs in 2016, the company is already running 11 rigs currently with an eye on adding three more rigs within the first quarter. Currently, three completion crews are deployed in the Delaware for APC.
Most horizontal wells drilled in the Wolfcamp by APC are reaching 8,500 feet, costing $110 per lateral foot—a 30 percent reduction from the previous year. The record for a spud-to-rig-release period was achieved near the end of the year and came in at 12.3 days.
In the DJ Basin, APC has pushed its rig count to six after running only one rig in Q3 2016. A completion crew was also added near the end of the year, bringing APC’s completion crew total to two.
APC’s push to ramp-up activity in the Permian is similar to many other operators. But, Walker believes the increased activity should not negatively impact the greater global oil demand and supply dynamic in 2017. “Even with the rigs that are all starting to stand up in the Permian, it is not like in 2017 you are going to see a tremendous supply response that will dwarf impending demand,” Walker said during the company’s Q4 update to investors. He added that APC is encouraged by the global pace for oil demand in 2017. For the year, Walker predicts West Texas Intermediate will average $60 per barrel. APC holds 580,000 gross acres in the Delaware. In the next two years, Walker expects his team to invest in midstream and infrastructure in order to meet the oil production takeaway capacities that will grow in the Delaware.
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