Anadarko 3Q15 Earnings Call Notes

Reduced per well costs at Wolfcamp by 4m per well and could cut another 2m

“At our Wolfcamp oil play, this year alone we’ve reduced our per well costs by $4 million, to $7.5 million, with direct line of sight to another $1.5 million to as much as $2 million per well in expected savings at a time we choose to pursue growth and migrate towards pad drilling across the field.”

Planning for the worst hoping for the best. Maybe a little more pessimistic than the forward curve

“we don’t have any better crystal ball than anybody else on what prices are going to be in 2016 and 2017. And our approach is plan for the worst and hope for the best. Consequently, we have a fairly low expectation, not much different than the forward curve, maybe even a little more pessimistic than that in terms of how we might plan for capital.”

Trying to decide how to allocate capital

“like all of our companies in our sector right now are trying to decide how we want to allocate capital next year, looking into very, at best, fuzzy picture of what that’s going to look like.”

There’s $100B in capital that’s been raised to invest in the sector

“I think, like most people, we still see this extraordinarily large amount of private equity that’s been raised. And most people seem to gravitate around $100 billion as the number that’s been raised and prepared to be committed to the sector over the next couple of years for investment if the right opportunities present themselves.”

We’re getting outbid by private equity backed teams in purchasing properties

“unlike the public markets, where you have a little bit different dynamic at work, where we see ourselves today trying to bid on properties in markets where we have interest, we are being pretty consistently outbid. And most oftentimes, we’re being outbid by private equity-backed management teams. And so I’m not sure I’d call that a seller’s market quite like I did previously, but I would say it’s a healthy bid-ask in terms of exactly what’s happening with properties when they come into the market and the receptivity they’re getting.”

There may be 95 management teams out there with PE backing

“there are a number of management teams, the number that I’ve heard most recently is maybe as many as 95 of them out there that have private equity backing, that haven’t deployed capital yet in the market. And the types of assets that we’ve been selling, both earlier this year, the three EOR, East Texas and CBM that we’ve announced, we’re in a size range that’s a sweet spot for those types of buyers.”

The buyside has rewarded capital efficiency

“My early read on, say, the first nine or so months of this year is we’ve seen the buy side reward capital efficiency probably better than they historically have…those companies that have good wellhead margins that are being able to improve those margins through the cost efficiencies, like we’ve been talking about this morning, that are on top of that good allocators of capital, I do believe in the I’ll call it the intermediate term that we probably will see the market, the buy side reward companies that can achieve that.”

Growth doesn’t maximize value

“Onshore in the U.S. everybody’s going to drill their Tier 1. They’re going to focus on producing that Tier 1 and then they’re going to redeploy the capital into their next best assets. And frankly that’s not the way to maximize, in our opinion, that’s not the way to maximize value unless your shareholders are really telling you that growth matters more than value and what we’ve heard and what we continue to believe in is that value preservation on the onshore and value building in the other parts of our portfolio to be positioned for a more constructive commodity price environment is the right way to approach it today.”