By Cathy Proctor, Denver Business Journal |
Anadarko Petroleum Corp., one of Colorado’s biggest oil and gas companies, on Tuesday said it would pour about $840 million this year into its operations in the state’s Denver-Julesburg (DJ) Basin, which sprawls north and east of Denver to the state line.
The company (NYSE: APC), which has been working in the DJ basin for years, also boosted the amount of oil, natural gas and liquids it expects to pull from the basin by about 33 percent — to more than 2 billion barrels of oil equivalent, at least.
As part of its annual announcement about capital investment for the year, Anadarko, based in a Houston suburb, said it believes there is still “additional upside on its acreage in the greater DJ Basin.”
Oil and gas companies have been increasing their activity and spending in recent months as crude oil commodity prices have hovered around $50 per barrel and the number of drilling rigs working in the field has started to rise.
Some analysts say those are signs that the industry is starting to recover from the massive, two-year downturn in commodity prices that savaged the industry, as companies responded by slashing budgeting, idling drilling rigs and eliminating thousands of jobs across the country.
But while companies appear willing to raise their budgets, the numbers are not anywhere near the size of their investments a few years ago.
Anadarko said it expects to operate an average of “five to six” drilling rigs and drill about 290 new oil and gas wells in Colorado this year. That’s a major jump from one rig the company operated in Colorado during 2016.
Anadarko in 2016 budgeted approximately $500 million in the Colorado’s DJ Basin. That was down from its 2015 budget, when it budgeted $1.8 billion — about $1 billion more than the company plans to spend in the basin this year.
The company is bullish on what it can do in the basin, saying in its presentation slides that it has scouted 4,100 locations for new oil and gas wells in the DJ and expects to double its production levels in the state by 2021.
Al Walker, Anadarko’s chairman, president and CEO, said in a statement the company expects to hit a new production benchmark in Colorado of 100,000 barrels per day during 2017, a 30 percent jump over 2016.
Overall Anadarko said its 2017 capital program is expected to be $4.5 billion to $4.7 billion, of which about 80 percent will be spent in the U.S. or in the Gulf. About $1.9 billion is earmarked for U.S. onshore operations, such as those in Colorado and Texas.
The overall budget is up 61 percent from the $2.8 billion the company spent in 2016.
In the U.S., the money will be focused on areas that Walker has called “the three D’s,” the Delaware Basin in Texas, the DJ Basin in Colorado and the deepwater Gulf of Mexico.
“In 2017, we plan to allocate approximately 80 percent of our total capital program toward our U.S. onshore upstream and midstream activities, and our expanded position in the deepwater Gulf of Mexico,” Walker said in a statement.
The spending plan not only gives the company a base to grow over the next five years, but the budget can be adjusted upward in Texas and Colorado if markets improve, he said.
“These investments provide the foundation for our increased five-year oil growth expectations of more than 15 percent on a compounded annual basis at current prices, and we are prepared to be flexible throughout the year if we see the opportunity in the Delaware and DJ basins to accelerate activity to capture additional value,” Walker said.