Anadarko buying Freeport McMoRan’s Gulf assets

15 September 2016, Week 36, Issue 425

Anadarko Petroleum has said it will acquire Freeport McMoRan’s deepwater US Gulf of Mexico assets for US$2 billion. Anadarko said that it would use the revenue from the offshore assets to develop onshore fields in the US, including the Permian’s Delaware Basin and the Denver-Julesburg (DJ) Basin. The purchase adds the equivalent of about 80,000 net barrels of oil equivalent per day, over 80% of which is oil, to Anadarko’s assets.

The deal will double Texas-based Anadarko’s stake in the deepwater Lucius development to about 49%, the company said in a statement on September 12. It will also double its total Gulf output to around 155,000 boepd, of which around 85% will consist of oil.

Anadarko said the transaction added to its “unmatched” inventory of low-cost, subsea tieback opportunities, and bolstered optionality with new exploration prospects. 

“It will be interesting to see” how Anadarko will “digest” the Gulf acquisition, a Piper Jaffray analyst, Pearce Hammond, said in a note cited by Bloomberg. He added that some investors may wonder about Anadarko’s larger deepwater Gulf exposure at the expense of onshore assets, which are cheaper to drill.

However, Anadarko has said that the Gulf purchase would generate an estimated US$3 billion of incremental free cash flow over the next five years at current strip prices.

The acquisition and development cost of the acquired properties, excluding a total of roughly US$300 million of materials inventory and seismic, is around US$13.50 per boe for the estimated proven reserves involved, Anadarko said.

The company is planning to add two rigs in the Delaware and DJ basins later this year, and to increase activity further after that, with the expectation of more than doubling its production to at least 600,000 boepd in total from the two basins over the next five years.

Anadarko is also continuing some Gulf exploration, and a final investment decision (FID) could be taken on its Shenandoah project after the results from a sixth appraisal well, due to be drilled this year, become known.

For Freeport-McMoRan, the sale essentially marks the end of an ill-fated diversification away from copper and gold mining. In a note, FBR & Co. said it believed the transaction beat expectations in terms of the likelihood of a sale as well as in terms of valuation.

 

Edited by

Anna Kachkova

Editor

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