VH DSFfilecache.investorroom.com/mr5ir_anadarko/721/download/1...Anadarko delivered an excellent 1st quarter, with record sales volumes, lower operating costs and successful international

OPERATIONS REPORT

w INVESTOR RELATIONS CONTACTS: John Colglazier Dean Hennings Wayne RodrigsVice President 832/636-2306 Manager 832/636-2462 Manager 832/636-2305

www.anadarko.com nyse:apcAnadarko Petroleum Corporation

First-Quarter 2011May 02, 2011

Cautionary Note ..................................... 2

Overview................................................. 2

Rockies ................................................... 4

Southern & Appalachia .......................... 7

Gulf of Mexico ...................................... 10

International / Frontier .......................... 12

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ANADARKO PETROLEUM CORPORATION | F irst-Quarter 2011

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Anadarko delivered an excellent 1st quarter, with record sales volumes, lower operating costs and successful international deepwater discoveries and appraisals. The company also entered into a $1.6 billion joint-venture agreement in the Eagleford Shale and continued to expand its midstream capacity and infrastructure in several core operating areas. In addition, the company announced the acquisition of the Wattenberg Processing Plant.

Sales volumes for the 1st quarter were a record 62 million barrels of oil equivalent (BOE), with liquids volumes comprising 42% of the total.

Highlighting these record volumes was the continued acceleration of growth in the Eagleford and Marcellus shales where sales volumes increased by about 30% and 80%, respectively, over the 4th quarter of 2010.

Production also continued to ramp up at the Jubilee mega project offshore Ghana, which at the end of the 1st quarter, was producing almost 70,000 barrels of oil per day (BOPD) gross from five wells.

At the Caesar/Tonga development in the Gulf of Mexico, Anadarko successfully completed and tested two wells at more than 15,000 BOPD and initiated completion

activities on the third well. In addition, the development team is simultaneously progressing two riser solutions with first oil expected in 2012.

In Algeria, the El Merk mega project is progressing and is approximately 75% complete and remains on schedule for full facility completion around year-end 2012.

The company continued its international deepwater exploration and appraisal success during the quarter with three discoveries and three successful appraisal wells. In Mozambique, Anadarko announced its fourth major natural gas discovery at the Tubarão prospect. In Ghana, Anadarko announced two discoveries during the quarter at the Teak-1 and Teak-2 exploration wells. Three successful appraisal wells were also drilled offshore Ghana in the Tweneboa/Enyenra complex, and a fourth successful appraisal well was drilled in the complex subsequent to quarter’s end.

Additional information about these accomplishments and other global operating and exploration activities are included in the following pages of this Operations Report.

OVERVIEW

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. While Anadarko believes that its expectations are based on reasonable assumptions as and when made, no assurance can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this report, including the following: the outcome of events in the Gulf of Mexico relating to the Deepwater Horizon event and the Company’s ability to successfully defend its stated position under the corresponding operating agreement; the impact of the recently lifted deepwater drilling moratorium and resulting legislative and regulatory changes on the Company’s Gulf of Mexico and International offshore operations; the Company’s ability to achieve its production and budget expectation on its mega projects; Anadarko’s ability to achieve its production targets, successfully manage its capital expenditures and to complete, test and produce the wells and prospects identified in this report. Other factors that could impact the forward-looking statements are described in “Risk Factors” in the company’s 2010 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.



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Capital expenditures during the first quarter were $1.27 billion, excluding $317 million of capital expenditures by our MLP, Western Gas Partners, LP (WES). As a result of the $576 million purchase of the Wattenberg Plant, full-year 2011 capital expenditure guidance has been increased to a range of $6.2 to $6.6 billion, excluding WES capital spending.

VOLUMES

The company achieved record sales volumes, with average daily sales of 690,000 BOE/d for a total of 62 million BOE for the quarter. This record was highlighted by Anadarko’s first lifting of oil from the Jubilee field offshore Ghana and the rapid growth of the company’s shales and liquids-rich growth plays.

OVERVIEW

CapitalSpending

1Q11 4Q10

$ MM $ MM

Rockies 364 392 Southern & Appalachia 443 333 Lower48 807 725 Alaska 14 11 Gulf of Mexico 37 62 TotalU.S. 858 798 International 271 316 Midstream 419 103 Capitalized Items / Other 39 60

TotalCompany 1,587 1,277

CAPITAL SPENDING

AverageOperatedRigActivity* 1Q11 4Q10

Rockies 20 21 Southern & Appalachia 29 23 Lower48 49 44 Alaska 0 0 Gulf of Mexico 2 2 TotalU.S. 51 46 International 4 6 TotalCompany 55 52

NetSalesVolumes* 1Q11 1Q10 MMBOE MMBOE

Rockies 26 25 Southern & Appalachia 14 12 Lower48 40 37 Alaska 1 2 Gulf of Mexico 14 16 TotalU.S. 55 54 International 7 8

TotalCompany 62 62

*Data may not add to totals due to rounding.




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During the 1st quarter, sales volumes in the Rockies increased by 5% relative to the 1st quarter 2010 with volumes averaging approximately 293,000 BOE/d. These volumes were achieved while overcoming inclement weather and associated facilities downtime.

ROCKIES NetSalesVolumes

1Q11 1Q11 1Q11 1Q10 1Q10 1Q10 Gas NGLs Oil Gas NGLs Oil

MMcf/d MBbl/d MBbl/d MMcf/d MBbl/d MBbl/d

TightGas Natural Buttes 339 9 2 271 12 2 Wattenberg 207 10 20 198 8 20 Pinedale / Jonah 93 4 1 103 3 1 Wamsutter 107 10 2 107 10 2 Other 109 10 2 104 6 1 CBM 415 0 0 426 0 0 EOR 1 0 11 1 0 11 Total 1,271 43 38 1,210 39 37

Capital RigActivity*

1Q11 1Q11 4Q10

$ MM Oper Oper

107 7 8 132 7 6 34 0 0 25 1 1 34 5 1 10 0 6 22 0 0 364 20 21

TightGas Greater Natural Buttes Wattenberg Pinedale / Jonah Wamsutter Other CBM EOR Total

UTAH COLORADO

WYOMING Salt Creek

Monell

Wattenberg

Wamsutter

Powder River

Moxa

Pinedale

GreaterNatural Buttes

EOR TightGas CBM

Niobrara

Greater


Average



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ROCKIES

TIGHT GAS/OIL DEVELOPMENTWattenberg:

• Anadarko set a weekly net production record during the quarter of more than 66,000 BOE/d in the Wattenberg field, where Anadarko has been the largest producer since 2010. Anadarko drilled 118 wells during the quarter with seven operated drilling rigs. The company performed 485 stimulation treatments during the quarter in this very active area.

• Anadarko acquired full ownership in the Wattenberg Processing Plant by agreeing to purchase the remaining 93% interest in the plant, which has the capacity to process 195 MMcf/d of natural gas and 15,000 barrels of NGLs and gas condensate per day. The company expects to extract additional value from this plant through minor modifications that we believe will immediately improve run times and a planned future expansion is expected to improve ethane recoveries from about 35% to about 75% and improve propane cuts from about 78% to greater than 95%. These plant improvements will enable Anadarko to optimize its fields

by improving margins, increasing EURs and field efficiencies. This acquisition, along with Anadarko’s ownership in the Fort Lupton Plant and WES’s ownership in the Platte Valley Plant, provides Anadarko with approximately 60% of the processing capacity in the greater DJ Basin.

Horizontal Niobrara:• Anadarko ended the 1st quarter with three horizontal rigs

targeting the Niobrara as it continues to evaluate the opportunity across its industry leading 900,000 net acreage position in the DJ Basin.

Greater Natural Buttes:

• Anadarko grew sales volumes by 15% over the 1st quarter of 2010 in the Greater Natural Buttes area, where Anadarko is long established as the largest producer in the play. During the 1st quarter, the company set a single-day record of 456 MMcf/d gross production.

• During the 1st quarter, Anadarko operated seven rigs and drilled 69 wells.

• The company drilled and completed 11 of the new Mesaverde development wells to the deeper Blackhawk interval during the quarter. Results are encouraging with incremental EURs of approximately 700 MMcf per well, and estimated incremental development costs of around $0.42 per thousand cubic feet equivalent (Mcfe) for this program.



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ENHANCED OIL RECOVERYMonell CO2 Flood:

• The company is starting to see the benefits of the recently completed Phase 3 development program with an additional 1,500 BOPD response, increasing gross production to 4,500 BOPD. Production is expected to continue increasing during the coming months.

GREATER GREEN RIVER BASINWamsutter:

• During the 1st quarter, the company set a weekly gross operated production record of approximately 13,000 BOE/d.

• Drilling activity continued in Wamsutter with one operated rig and four non-operated rigs. During the 1st quarter, Anadarko and its partners spud 39 wells and completed 40 wells.

ROCKIES



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NetSalesVolumes

1Q11 1Q11 1Q11 1Q10 1Q10 1Q10 Gas NGLs Oil Gas NGLs Oil

MMcf/d MBbl/d MBbl/d MMcf/d MBbl/d MBbl/d

Permian 52 1 4 86 0 1 Marcellus 99 0 0 17 0 0 Haynesville 36 0 0 15 0 0 Eagleford 31 4 8 6 0 1 Bossier 105 0 0 119 0 0 Carthage 85 5 2 90 6 1 Hugoton 49 2 0 52 2 0 Ozona 30 3 0 31 3 0 Chalk 49 5 7 47 6 6 Other 80 4 0 117 3 3 Total 616 24 21 580 20 12

During the 1st quarter 2011, the Southern & Appalachia Region averaged sales volumes of more than 148,000 BOE/d, an increase of 16% over the 1st quarter 2010. Anadarko continues to focus on liquids-rich opportunities in the region as demonstrated by the 44% increase in liquids sales volumes during the 1st quarter 2011 compared to the 1st quarter 2010.

Capital RigActivity*

1Q11 1Q11 4Q10

$ MM Oper Oper

71 6 4 36 8 7 11 0 0 215 8 7 11 1 1 19 1 1 2 0 0 0 0 0 41 4 4 37 0 0 443 29 23

Permian Marcellus Haynesville Eagleford Bossier Carthage Hugoton Ozona Chalk Other Total

HugotonMarcellus

Permian Bossier Carthage

Haynesville

Chalk

South Texas

Ozona

Eagleford

Tight Gas

Fractured Reservoirs

Shales

Other

SOUTHERN & APPALACHIA

Average




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SHALE DEVELOPMENTMarcellus:

• During the 1st quarter, Anadarko established a weekly high production rate of 400 MMcf/d gross production (104 MMcf/d net) from 95 producing wells.

• The company drilled 35 operated wells during the quarter with eight operated rigs and participated in additional drilling with about 15 non-operated rigs.

Eagleford:• Anadarko recently closed its $1.6 billion Eagleford joint-venture

agreement with a subsidiary of KNOC. Under the terms of the agreement, KNOC will fund approximately 100 percent of capital costs in the play for the remainder of this year and up to 90 percent of costs thereafter until the carry is exhausted, which is expected to occur prior to the end of 2013. KNOC also exercised its option to acquire an approximate 25% interest in associated midstream assets for reimbursement of an additional $38 million.

• Already the largest producer in the Eagleford, the company increased average weekly net production from 14,400 BOE/d at year-end 2010 to approximately 20,000 BOE/d at the end of the 1st quarter of 2011.

• Anadarko ended the 1st quarter with ten rigs and spud 45 wells during the quarter. The company set a drilling record of 8.4 days and has now drilled 10 Eagleford wells in less than 10 days.

Haynesville:• During the 1st quarter Anadarko completed five previously drilled

wells with a new 20-stage completion design. These wells exceeded expectations and contributed to a gross operated production record of 56 MMcf/d which represents a 14% increase from production at year-end 2010.




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UNCONVENTIONAL PLAYSPermian:

• During the 1st quarter, Anadarko operated six rigs and participated in three non-operated rigs in the Bone Spring horizontal play. The company spud 18 wells and completed 14 wells.

• At the end of the quarter, gross production from the Bone Spring was 15,600 BOE/d, consisting of approximately 75% liquids.

• The company spud one exploration well as it continued to evaluate the Avalon Shale during the 1st quarter. The evaluation program is encouraging, with multiple wells testing at rates ranging from 800 to 1,000 BOE/d.

Carthage:• The Carthage area achieved 210 MMcf/d gross operated

volumes, the highest rate in 13 years.

• Anadarko had first production from three horizontal wells during the 1st quarter. A record well was drilled in 19.6 days, the first sub-20 day Cotton Valley horizontal well.

Chalk:• Anadarko operated four rigs and spud six wells during the

quarter.




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GULF OF MEXICO

During the 1st quarter, the Gulf of Mexico Region reported sales volumes of approximately 153,000 BOE/d, which included scheduled downtime for routine maintenance and well testing across all facilities.

The company’s project teams continued to advance the Caesar/Tonga development project. In addition, the company initiated an extensive program of workover activity and facility optimization which has kept its two contracted rigs fully utilized.

NetSalesVolumes

1Q11 1Q11 1Q11 1Q10 1Q10 1Q10 Gas NGLs Oil Gas NGLs Oil MMcf/d MBbl/d MBbl/d MMcf/d MBbl/d MBbl/d

Total 523 8 58 601 7 73

APC INTERESTAPC INTEREST

NANSENNANSEN

BOOMVANGBOOMVANG GUNNISONGUNNISON

CONGERCONGER

BALDPATEBALDPATE

RED HAWKRED HAWK

TAHITITAHITI

CONSTITUTIONCONSTITUTION

NEPTUNENEPTUNE

POMPANOPOMPANO

BLIND FAITHBLIND FAITH

INDEPENDENCE HUBINDEPENDENCE HUB

SHENANDOAHSHENANDOAHSHENANDOAHSHENANDOAHSHENANDOAHSHENANDOAH

CAESAR / TONGA DEVELOPMENT




HEIDELBERGHEIDELBERGHEIDELBERGHEIDELBERGHEIDELBERGHEIDELBERG

POWER PLAYPOWER PLAY

RECENT DISCOVERIYRECENT DISCOVERIY

SAMURAISAMURAISAMURAISAMURAISAMURAISAMURAI

K2 COMPLEXK2 COMPLEX

VITOVITOVITO

LUCIUSLUCIUSLUCIUSLUCIUSLUCIUSLUCIUS

CALLISTOCALLISTOCALLISTOCALLISTO



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Constitution: Green Canyon 679/680

• During the 1st quarter, the company successfully completed a zone behind-pipe providing incremental gross production of 2,000 BOE/d.

DEVELOPMENTCaesar / Tonga:Green Canyon 683/726/727/770 (APC 33.75% WI)

• The company completed and flow tested two wells, with each well flowing at more than 15,000 BOPD. Currently, the third well is being completed.

• With an expectation of first oil in 2012, the development team is progressing two riser solutions in parallel; one is a traditional steel riser and the other a flexible riser.

APPRAISAL• At Lucius (Keathley Canyon 875, 50% WI), Anadarko is on

location conducting completion operations and preparing to conduct an extended well test. Anadarko continues to advance development planning and preliminary front-end engineering studies.

• At Vito (Mississippi Canyon 984/940, 20% WI), the operator continues work to secure necessary permits to resume appraisal operations and evaluate development options.

• Anadarko intends to re-drill the Heidelberg appraisal well (Green Canyon 903, 44.25% WI) after the necessary federal permits and authorizations are granted.

GULF OF MEXICO

PRODUCING PROPERTIESIndependence Hub:

• Independence Hub averaged 512 MMcfe/d gross production (394 MMcfe/d net) in the 1st quarter.

• In January, the company initiated production from the Callisto tie-back at a rate of almost 30 MMcf/d.

• Anadarko’s deepwater development and exploration teams continue to mature multiple drilling opportunities for potential tieback to the Independence Hub.

K2:Green Canyon 518/562/606

• During the 1st quarter, the company completed the first phase of its Production Enhancement Program at K2 yielding an additional 3,800 BOE/d of gross production.



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NetSalesVolumes Capital 1Q11 1Q10 1Q11 Oil Oil MBbl/d MBbl/d $ MM

Alaska 14 17 14

Algeria* 56 69 92

Brazil 0 0 18

China* 15 14 13

Ghana/W.Africa* 11 0 95

Other 0 0 53 Total 96 100 285

INTERNATIONAL / FRONTIER

During the 1st quarter, Anadarko had its first oil lifting from the Jubilee field offshore Ghana. In Algeria, progress continues on the El Merk project which remains on schedule for first production in 2012. Also during the quarter, Anadarko’s deepwater exploration program achieved excellent results with three discoveries and three successful appraisal wells.

* Quarterly sales volumes are influenced by the timing and scheduling of tankers.



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DEVELOPMENT

Alaska:• Gross oil production from the Colville River Unit averaged 78,000

BOPD in the 1st quarter which was impacted by an unexpected shutdown on the TAPS export system where production was either down or constrained for about eight days.

• Development activities continued with four new wells drilled and completed during the quarter.

Algeria:• During the 1st quarter, gross production from the Hassi Berkine South

and the Ourhoud central processing facilities was approximately 353,000 BOPD, down from the 4th quarter of 2010 due to a planned statutory inspection of the Hassi Berkine South facility for 25 days.

• Construction of the El Merk central processing facilities and associated infrastructure for development in Block 208 is progressing, and the project is around 75% complete. The project remains on target for first production during 2012 with full facility completion expected to occur near year-end 2012.

China:• Gross production from Bohai Bay continued at record levels of

more than 51,000 BOPD in the 1st quarter.

• Development activities continued with four new wells placed on line during the 1st quarter. A total of 20 wells are planned for 2011.

Ghana:

• Anadarko had its first tanker lifting of oil from the Jubilee field during the quarter.

• Two additional producing wells and two injection wells were added this quarter, bringing gross production to almost 70,000 BOPD at quarter end. There are now five producers and three water injectors on line with production expected to ramp up to 120,000 BOPD by August of this year.

• The first gas injection well was completed and commissioning

of the gas injection system on the FPSO is under way. Four producing wells and one water injection well are slated to be completed during the 2nd quarter.

• There are ongoing discussions between the partners and the Ghanaian government regarding the Phase 1A drilling program which is expected to commence in the fourth quarter.



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EXPLORATIONMozambique:

• In the 1st quarter, Anadarko announced the Tubarão discovery in Offshore Area 1 (APC 36.5% WI, operator), which was drilled to a total depth of 13,900 feet, encountering more than 110 net feet of natural gas pay in a single Eocene sand. The discovery was drilled approximately 26 miles southwest of the Windjammer discovery. Tubarão is the fourth discovery of the initial six well exploration program.

• After drilling Tubarão, the company moved the rig to the Windjammer well and acquired cores from all reservoirs and is currently casing the well in preparation of future testing. The rig will then move to the Lagosta discovery well to cut by-pass cores. Following this operation, the company will commence appraisal drilling in the area.

• A 3D seismic acquisition program is currently under way to delineate exploration prospects on the block. The company intends to mobilize a second rig to Mozambique to drill additional exploration wells during the 4th quarter.

Ghana• During the 1st quarter, the Teak-1 exploration well was drilled

to a total depth of 10,400 feet in the West Cape Three Points block (APC 31% WI). The well encountered approximately 240 net feet of oil, condensate and natural gas pay in Cretaceous-age reservoirs. The well tested a large four-way structure updip and fault separated from the Jubilee field. Appraisal planning is underway to determine resource potential and evaluate development options.

• Also in the West Cape Three Points Block, the Teak-2 discovery was drilled to test a fault-separated area, downdip to the Teak-1 discovery and updip to the Jubilee field. The well encountered approximately 90 feet of high-quality oil, condensate and natural gas pay in stacked Campanian- and Turonian-age reservoirs. The well was drilled to a total depth of 11,185 feet and has been cased for future use.

• In the Deepwater Tano License (APC 18% WI), the Enyenra-2A appraisal well tested the downdip extent of the Owo Channel complex. The well encountered approximately 105 net feet of oil pay in high-quality sandstone reservoirs, with no water contact seen in the target reservoirs. Approximately 16 net feet of additional condensate pay was found in a deeper exploration objective in the well. Enyenra-2A was drilled over four miles south of the Owo discovery, and pressure data indicates the wells are connected. An updip appraisal is planned for the 3rd quarter, and an additional downdip appraisal well is currently being planned.




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EXPLORATION (Ghana continued)• The successful Tweneboa-3A and Tweneboa-3A sidetrack,

located in the Deepwater Tano License, were announced early in the quarter with details of the wells reported in the Fourth-Quarter 2010 Operations Report.

• Subsequent to quarter end, the operator announced that the Tweneboa-4 appraisal well, located in the Deepwater Tano License, encountered nearly 60 net feet of gas condensate pay in high-quality stacked sands. The well has been cased in preparation for the Tweneboa drillstem testing program.

• Upcoming Ghana activities include the continued appraisal drilling and testing of the Tweneboa and Enyenra (Owo) discoveries in the Deepwater Tano License as the partnership works toward a declaration of commerciality, which is expected by the end of 2011.

• In the West Cape Three Points Block, the Banda prospect is currently being drilled and will be followed by tests of the Makore and Dahoma Updip prospects.

Liberian Basin• The company is planning to initiate a three-well drilling campaign

in Liberia and Sierra Leone during the 2nd quarter, using a drillship that will be mobilized from the Gulf of Mexico. The first well in the planned program will test the Montserrado prospect offshore Liberia in Block LB-15 (APC 57.5% WI, operator). This well will be the first deepwater well in Liberia and will test a large Jubilee-

type Cretaceous fan play. Numerous follow up prospects have been identified and mapped on the three contiguous blocks in Liberia.

• Following the Montserrado well, the rig will move to Sierra Leone (SL Block 07-10, APC 65% WI, operator) to drill the Jupiter prospect, which will test an Enyenra-type Cretaceous channel system located 16 miles to the west of the Mercury discovery. The third well in the program will be an appraisal well to the Mercury discovery which will be located offshore Sierra Leone approximately eight miles to the northwest of the Mercury discovery well. A core and potential DST are also planned as part of the program.

• During the 1st quarter, the company completed the acquisition of a new 3D seismic survey in Block LB-10 offshore Liberia (APC 100% WI, operator) and expects to receive the final processed dataset during the 4th quarter.

Brazil • At the Itauna prospect in BM-C-29 (APC 50% WI, operator),

a core was acquired in the lower of the two post-salt reservoir zones encountered. Additional wireline logging was conducted and 31° API oil was recovered from the post-salt reservoirs. The partnership has committed to a rig to drill an appraisal well in the 3rd quarter this year.

• The planned Itaipu appraisal well in BM-C-32 (APC 33% WI) is scheduled to spud in the 2nd quarter to test the down-dip area of the large geologic feature encountered by the discovery well.


EXPLORATION

Documents

VH DSFfilecache.investorroom.com/mr5ir_anadarko/721/download/1...Anadarko delivered an excellent 1st quarter, with record sales volumes, lower operating costs and successful international