HOUSTON – The CEO of Anadarko Petroleum Corp. says lower oil prices might actually fetch better prices for oil-boosting assets in coveted U.S. plays, like the $1.5 billion purchase Anadarko’s pipeline unit announced late Tuesday.
It’s unclear where oil prices will find a new equilibrium in coming months, and Anadarko plans to “watch the environment we’re in a little bit longer” before it decides how to spend capital next year, but a decline in oil prices may offer up discounts for key acquisitions in Colorado and elsewhere, Anadarko CEO Al Walker told investors in a conference call early Wednesday.
“We think the environment, where it is currently, may bring opportunities to acquire things in the basin that might be advantageous to us,” said Walker, who came to the oil industry more than a decade ago from the deal-making financial world.
Buyers and sellers typically can agree on a price for oil assets based on where crude prices have settled. If the price is lower, that can generate better deal terms for a buyer than a seller.
Walker’s comments came on the heels of a third-quarter earnings report that touted profit gains on higher oil production, especially from Colorado’s Wattenberg field and the Wolfcamp Shale in West Texas.
Acquisitions like Western Gas Partner’s purchase of Houston-based Nuevo Midstream, which has midstream assets including 275 miles of gathering pipelines in West Texas and New Mexico, help expedite production growth in Anadarko’s oil fields, Walker said. Western Gas Partners is Anadarko’s midstream master limited partnership.
“We’ve loaded the spring,” he said.
Related: Anadarko profits jump on U.S. oil production
Anadarko reported Tuesday its profits surged fivefold as oil production grew by 110,000 barrels of oil equivalent a day. It banked a profit of $1.09 billion, or $2.13 a share, in the July-September period, compared to $182 million, or 36 cents a share, in the same period last year. Revenues increased from $3.9 billion to $5 billion.
When asked how falling oil prices might affect production growth in 2015, Walker said the company will have to watch the oil markets for a few months before it releases its annual budget in March.
Even after next year’s payment of billions in settlement money to chemical maker Tronox, which had sued Anadarko in 2009 over environmental liabilities, “we’re in pretty good shape to kind of do things next year like we’ve been doing them in the past,” Walker said.
Walker said in any case, the majority of Anadarko’s 2015 capital would go toward its operations in the Permian Basin, the Wattenberg field and the Eagle Ford Shale.
Anadarko’s oil sales increased 10 percent to $2.6 billion and natural gas liquids revenues climbed 30 percent to $424 million in the third quarter. The company increased its annual sales expectations to between 304 million and 306 million barrels of oil equivalent.
Anadarko shares rose $1.70 in early trading Wednesday to $92.05 on the New York Stock Exchange.
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