Will Anadarko's Megaprojects Pay Off?
As I discussed recently, Anadarko Petroleum is one of several U.S.-based energy producers that see much of their growth over the next several years coming from onshore U.S. shale plays. But in addition to its solid foothold in those assets, Anadarko also has a rich pipeline of international megaprojects that should provide an additional boost to the company's production growth.
Let's take a closer look at the company's megaprojects in three key regions: the Gulf of Mexico, Algeria, and Ghana.
Gulf of Mexico
Anadarko commands a dominant position in the Gulf of Mexico, with roughly 3 million gross acres in the region and three major projects -- Caesar/Tonga, Lucius, and Heidelberg -- already on stream or under development.
The Caesar/Tonga oil field is located roughly 200 miles from New Orleans and is operated by Anadarko, which has a 33.75% working interest in the project, as well as Statoil , Shell and Chevron , have respective working interests of 23.55%, 22.45% and 20.25%. Production from the project commenced in March 2012 and is expected to ramp up to about 45,000 barrels of oil equivalent per day.
Meanwhile, the Lucius and Heidelberg fields are being developed using massive truss spars, 23,000-ton floating production facilities that will be able to extract 80,000 barrels of oil per day from each field. First oil from Lucius, which is operated by Anadarko with a 35% working interest, as well as Plains Exploration & Production , which has a 23.3% interest, ExxonMobil (15%), Apache (11.7%), Petrobras (9.6%) and Eni Petroleum (5.4%), is expected in the second half of next year, while Heidelberg, which is also operated by Anadarko with a 31.5% working interest, as well as Marubeni Oil and Gas (12.75%), Eni (12.5%), Apache (12.5%), Statoil (12%), ExxonMobil (9.375%) and Cobalt Energy (9.375%), is expected to commence production in 2016.
Anadarko made a massive find back in 2007 when it discovered the offshore Jubilee field, which is estimated to hold recoverable reserves totaling more than 370 million barrels. After Anadarko and its partners achieved first oil from the field in December of 2010, production ramped up to an average of 88,000 barrels per day in the fourth quarter of last year and is expected to reach 120,000 barrels per day shortly.
In addition to Jubilee, Anadarko and its partners have announced major discoveries at adjacent fields Tweneboa, Enyenra and Ntomme, which are collectively referred to as the TEN complex, as well as in the Teak and Akasa fields north of Jubilee. To develop the complex, Anadarko will use an 80,000 barrel-per-day floating production storage and offloading facility.
In Algeria, Anadarko is involved in production and development activities in the nation's Sahara desert through a partnership called Groupement Berkine and is producing oil from three large-scale projects: Ourhoud, HBNS and El Merk.
The Ourhoud and HBNS facilities achieved a major milestone last year, producing 1.5 billion barrels of oil (gross), while El Merk achieved initial oil production from its second train during the third quarter, with the third train expected to commence production in the fourth quarter. By year-end, El Merk production is estimated to grow to a net rate of roughly 30,000 barrels of oil per day.
Megaprojects mean megasales
While Anadarko's onshore U.S. liquids-rich assets are still the company's biggest driver of growth, representing 60% of its capital budget and accounting for almost 90% of company-wide production last year, the company's global megaprojects deliver significant contributions to production and earnings.
By 2020, Anadarko estimates that its global megaprojects -- including Jubilee/MTA, Caesar/Tonga, El Merk, Lucius, Heidelberg, the TEN complex, and the first two trains in Mozambique -- will deliver combined sales volumes of 180,000 barrels of oil equivalent per day, while generating roughly $4 billion in EBITDAX with capital expenditure requirements of slightly less than $1.5 billion.
Though there are some obvious risks to these megaprojects being completed on time and under budget, including cost inflation, weather-related delays, and geopolitical risks in Algeria and Ghana, Anadarko's exceptional project management skills should prove a crucial advantage in surmounting them.
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The article Will Anadarko's Megaprojects Pay Off? originally appeared on Fool.com.Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Chevron, Petroleo Brasileiro S.A. (ADR), and Statoil (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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