Exhibit 99.1
Anadarko Announces Fourth-Quarter and 2003 Financial and Operating Results
HOUSTON--(BUSINESS WIRE)--Jan. 30, 2004--Anadarko Petroleum
Corporation (NYSE:APC)
-- RECORD EARNINGS OF $1.3 BILLION FOR 2003
-- EXCELLENT F&D COSTS OF $6.95 PER BOE
-- RESERVE REPLACEMENT RATE OF NEARLY 200%
-- RESERVE GROWTH OF 8%
Anadarko Petroleum Corporation (NYSE:APC) today announced
fourth-quarter and full-year 2003 financial results, as well as
operating results from oil and natural gas activities worldwide.
"Anadarko had a good year," said Jim Hackett, Anadarko president
and CEO. "We intensified our focus on the basics of finding high-value
oil and natural gas reserves and we accomplished that with excellent
finding and development costs of $6.95 per BOE. Plus, we achieved
record earnings and more than replaced annual production with new
reserves for the 22nd consecutive year."
FOURTH QUARTER 2003 FINANCIAL RESULTS
For the fourth quarter of 2003, Anadarko reported net income
available to common shareholders of $294 million, or $1.17 per share
(diluted), on revenues of $1.28 billion. Earnings for the fourth
quarter of 2002 were $309 million, or $1.21 per share (diluted), on
revenues of $1.12 billion.
Cash flow from operating activities totaled $744 million in the
fourth quarter, compared with $691 million for the fourth quarter
2002. Cash flow from operations before changes in assets and
liabilities for the fourth quarter of 2003 totaled $728 million,
compared with $713 million for the fourth quarter in 2002.(1)
Sales volumes for the fourth quarter totaled 49 million barrels of
oil equivalent (BOE), flat compared to the same quarter of 2002.
FULL YEAR 2003 FINANCIAL RESULTS
Anadarko reported full-year 2003 net income available to common
shareholders of $1.29 billion, or $5.09 per share (diluted), on
revenues of $5.12 billion. This compares to 2002 net income of $825
million, or $3.21 per share (diluted), on revenues of $3.85 billion.
Cash flow from operating activities totaled $3.04 billion in 2003,
up 39 percent from $2.20 billion in 2002. Cash flow from 2003
operations before changes in assets and liabilities totaled $3.16
billion, compared with $2.21 billion in 2002.(1)
"Anadarko delivered on its promise to maintain capital discipline
throughout 2003," Hackett added. "We committed to pay down $300
million in debt and actually reduced debt by over $400 million last
year. At the same time, we increased reserves by 8 percent at a very
competitive cost, translating directly into increased value for
shareholders."
Sales volumes of natural gas, crude oil and natural gas liquids
for 2003 totaled 192 million BOE, meeting the company's guidance.
Volumes for 2002 were 197 million BOE, which included seven million
BOE related to properties that were sold in 2002.
FINDING & DEVELOPMENT COSTS
Anadarko's 2003 total worldwide finding and development costs
(F&D) for proved reserves averaged $6.95 per BOE, reflecting costs of
additions from drilling, property acquisitions and the effect of
reserve revisions.(2)
"Anadarko delivered excellent finding costs -- particularly in the
U.S.," Hackett said. "Our land position and exploitation expertise
delivered F&D costs in the onshore Lower 48 of just $4.37 per BOE in
2003."
RESERVE REPLACEMENT
Anadarko's worldwide reserve replacement rate from all sources was
nearly 200 percent of annual production, with 377 million BOE of net
reserves added. This is the 22nd consecutive year that Anadarko has
more than replaced annual production with new proved reserves. The net
reserve adds include the effect of changes from all sources --
drilling, producing property acquisitions and divestitures, and
revisions to earlier estimates.
"I am confident about Anadarko's proved reserve numbers," stated
Hackett. "Every year, we review every well on every property in every
field, and we believe our internal reviews of those reserves are
solid. As an added measure of discipline, early in 2003 we hired an
outside reserve engineering consultant -- Netherland, Sewell &
Associates, Inc. -- to serve as a member of our internal reserve
review team. We charged them with reviewing the processes, procedures
and resulting estimates of our 2003 bookings. As a result, they
reviewed 70 percent of our 2003 reserve additions and approximately 50
percent of existing proved reserves. We have received their letter of
confidence in both our process and the reasonableness of our numbers."
The Netherland, Sewell & Associates, Inc. letter of confidence is
provided as an attachment to this document.
PROVED RESERVES
Anadarko increased proved reserves worldwide by 8 percent to 2.5
billion BOE at year-end 2003 from 2.3 billion BOE at year-end 2002.
In 2003, the company also cost-effectively converted a significant
number of proved undeveloped reserves into proved developed reserves,
which increased proved developed reserves from 67 percent to 69
percent of total worldwide reserves.
"Proved undeveloped reserves, or PUDs, represent the future of a
growing company. So we continue to pay close attention to booked PUD
reserves. We know the length of time each PUD remains on our books as
undeveloped and have an action plan for developing all of them,"
Hackett explained.
Domestic reserves rose 12 percent to 1.7 billion BOE, representing
68 percent of the company's worldwide reserves. The primary growth
areas are the Gulf of Mexico, North Louisiana Vernon field, the
Carthage and Austin Chalk fields in Texas, and the Wyoming Salt Creek
enhanced oil recovery project.
Canadian proved reserves increased 9 percent, totaling 314 million
BOE, representing over 12 percent of total worldwide reserves.
Anadarko's proved reserves remain nearly balanced between natural
gas (51 percent) and crude oil, condensate and liquids (49 percent).
Proved reserves of oil and liquids totaled 1.2 billion barrels at
year-end 2003, representing an 8 percent increase from the previous
year. Proved natural gas reserves at year-end 2003 totaled 7.7
trillion cubic feet, also up 8 percent from the previous year.
Ninety-eight percent of the company's proved natural gas reserves are
located in the U.S. and Canada.
Acquisitions of producing properties primarily in the Gulf of
Mexico and Wyoming added 54 million BOE of reserves in 2003.
Divestitures of non-core properties in the U.S. and Canada totaled 14
million BOE of reserves.
FOURTH QUARTER 2003 OPERATING HIGHLIGHTS
-- During the fourth quarter, Anadarko Canada achieved the
highest natural gas production levels in its history. Among
the factors contributing to this record is the completion of a
major expansion of the Wild River gas plant (APC 100%) that
lifted gas capacity to a total of 79 million cubic feet per
day (MMcf/d), which is already being utilized. An additional 4
MMcf/d of capacity is expected to be added in the first
quarter of 2004. Development drilling success continues to
drive plant capacity planning for the future.
-- The company drilled its first well on the Gulf of Mexico
properties acquired from Amerada Hess in June 2003. The South
Timbalier 166 E-4 well encountered 203 feet of net pay.
Anadarko holds a 60 percent working interest in the well.
-- Anadarko made a deepwater oil discovery in the Gulf of Mexico
at Green Canyon Block 518. The well, just north of Anadarko's
K2 discovery, significantly extends the boundaries of the K2
field northward. Production will be fast tracked through a
sub-sea tieback to the Marco Polo platform, which was
successfully installed in January.
-- Anadarko and its partners made a deepwater natural gas
discovery at the Spiderman prospect in the Eastern Gulf of
Mexico. Spiderman is Anadarko's third Eastern Gulf discovery
during 2003, and was followed by a modest satellite discovery
this month, Atlas Northwest.
-- In the Vernon field in North Louisiana, natural gas production
averaged 195 MMcf/d in the fourth quarter, up from about 117
MMcf/d in the first quarter of 2003.
-- Anadarko completed construction of a 16-inch, 125-mile
pipeline that recently began transporting carbon dioxide (CO2)
across Wyoming to the Salt Creek oil field north of Casper.
This enhanced oil recovery project is expected to increase net
production from 5,000 barrels per day to a peak rate of 32,000
barrels per day over the next several years.
FINANCIAL & SUPPLEMENTAL DATA ENCLOSED IN THIS REPORT
-- Reconciliation of GAAP to Non-GAAP Measures
-- Summary Financial Information
-- Volumes and Prices
-- Oil and Gas Reserves
-- Cost Incurred in Oil and Gas Producing Properties
-- Reserve letter of confidence from Netherland, Sewell &
Associates, Inc.
EARNINGS CONFERENCE CALL TODAY, JAN. 30, AT 9:30 A.M. CST (10:30
A.M. EST)
Anadarko will host a conference call today, Jan. 30, at 9:30 a.m.
Central Standard Time (10:30 a.m. Eastern Standard Time) to discuss
fourth-quarter and full-year 2003 results and the company's outlook
for 2004. To actively participate and ask questions during the
conference call, dial 913-981-4910 and use confirmation number 338273.
Those who wish to listen to the live audio webcast and view the
presentation material may do so via the Internet at www.anadarko.com.
For complete instructions on how to participate or to access the
replay after the call, visit our Web site at www.anadarko.com.
ANADARKO OPERATIONS REPORT
A comprehensive fourth-quarter 2003 operations report will be
posted today on the company's Web site: www.anadarko.com.
Anadarko Petroleum Corporation is one of the world's largest
independent oil and gas exploration and production companies.
Houston-based Anadarko is active in the U.S., Canada, Algeria and
Qatar and is executing strategic exploration programs in several other
countries. More information is available at www.anadarko.com.
(1) See accompanying table for a reconciliation of GAAP to
non-GAAP financial measures utilized in calculating cash flow from
operations before changes in assets and liabilities and statements
indicating why management believes the non-GAAP measure of cash flow
is useful information for investors.
(2) F&D costs per BOE exclude the effect of asset retirement costs
and include actual asset retirement expenditures which is consistent
with prior years' method of calculation.
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934. Anadarko believes that its
expectations are based on reasonable assumptions. No assurance,
however, can be given that its goals will be achieved. A number of
factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in
this release. While Anadarko makes these forward-looking statements in
good faith, neither Anadarko nor its management can guarantee that the
anticipated future results will be achieved. Anadarko discloses proved
reserves that comply with the Securities and Exchange Commission's
(SEC) definitions. Additionally, Anadarko may disclose estimated
reserves, which the SEC guidelines do not allow us to include in
filings with the SEC. See Additional Factors Affecting Business in the
Management's Discussion and Analysis included in the company's 2002
Annual Report on Form 10-K.
Anadarko Petroleum Corporation
Reconciliation of GAAP to Non-GAAP Measures
Below is a reconciliation of cash provided by operating activities
(GAAP) to cash flow from operations before changes in assets and
liabilities (non-GAAP) as required under Regulation G of the
Securities Exchange Act of 1934.
The company uses cash flow from operations before changes in assets
and liabilities to demonstrate the company's ability to internally
fund capital expenditures and to service or incur additional debt. It
is useful in comparisons of oil and gas exploration and production
companies because it excludes fluctuations in assets and liabilities.
Quarter Ended Year Ended
December 31 December 31
-------------------- -------------------
millions 2003 2002 2003 2002
- ----------------------------------------------------------------------
Cash Flow
- ----------------------------------------------------------------------
Net cash provided by operating
activities $744 $691 $3,043 $2,196
Add back:
Change in accounts receivable (17) 240 (46) 103
Change in accounts payable
and accrued expenses (24) (228) 68 (181)
Change in other items - net 25 10 99 94
- ----------------------------------------------------------------------
Cash flow from operations
before changes in assets and
liabilities $728 $713 $3,164 $2,212
- ----------------------------------------------------------------------
Anadarko Petroleum Corporation
Quarter Ended Year Ended
Summary Financial Information (a) December 31 December 31
-------------- ----------------
$ and shares in millions 2003 2002 2003 2002
- ----------------------------------------------------------------------
Revenues
- ----------------------------------------------------------------------
Gas sales $686 $538 $2,851 $1,828
Oil and condensate sales 450 485 1,787 1,682
Natural gas liquids sales 110 66 365 222
Other sales 32 26 119 113
- ----------------------------------------------------------------------
Total 1,278 1,115 5,122 3,845
- ----------------------------------------------------------------------
Costs and Expenses
- ----------------------------------------------------------------------
Operating expenses 241 192 828 747
Administrative and general 103 87 352 314
Depreciation, depletion and
amortization 343 292 1,297 1,121
Other taxes 78 46 294 214
Impairments related to oil and gas
properties 11 6 103 39
Restructuring costs 7 - 40 -
- ----------------------------------------------------------------------
Total 783 623 2,914 2,435
- ----------------------------------------------------------------------
Operating Income 495 492 2,208 1,410
- ----------------------------------------------------------------------
Other (Income) Expense
- ----------------------------------------------------------------------
Interest expense 66 57 253 203
Other (income) expense 6 2 (19) -
- ----------------------------------------------------------------------
Total 72 59 234 203
- ----------------------------------------------------------------------
Income Before Income Taxes 423 433 1,974 1,207
- ----------------------------------------------------------------------
Income Tax Expense 128 122 729 376
- ----------------------------------------------------------------------
Net Income Before Cumulative Effect of
Change in Accounting Principle $295 $311 $1,245 $831
- ----------------------------------------------------------------------
Preferred Stock Dividends 1 2 5 6
- ----------------------------------------------------------------------
Net Income Available to Common
Stockholders Before Cumulative Effect
of Change in Accounting Principle $294 $309 $1,240 $825
- ----------------------------------------------------------------------
Cumulative Effect of Change in
Accounting Principle - - 47 -
- ----------------------------------------------------------------------
Net Income Available to Common
Stockholders $294 $309 $1,287 $825
- ----------------------------------------------------------------------
Per Common Share
- ----------------------------------------------------------------------
Net income - before change in
accounting principle - basic $1.18 $1.25 $4.97 $3.32
Net income - before change in
accounting principle - diluted $1.17 $1.21 $4.91 $3.21
Change in accounting principle - basic $- $- $0.19 $-
Change in accounting principle -
diluted $- $- $0.18 $-
Net income - basic $1.18 $1.25 $5.16 $3.32
Net income - diluted $1.17 $1.21 $5.09 $3.21
- ----------------------------------------------------------------------
Average Number of Common Shares
Outstanding - Basic 250 249 250 248
- ----------------------------------------------------------------------
Average Number of Common Shares
Outstanding - Diluted 252 258 253 260
- ----------------------------------------------------------------------
(a) Unrealized gains and losses on derivative instruments that did not
meet the conditions to qualify for hedge accounting have been
reclassified to conform to the current presentation. The effect on
prior periods is insignificant.
Anadarko Petroleum Corporation
Quarter Ended Year Ended
Summary Financial Information (a) December 31 December 31
---------------- -----------------
$ in millions 2003 2002 2003 2002
- ---------------------------------------------------------------------
Cash Flow
- ---------------------------------------------------------------------
Net income before cumulative effect
of change in accounting principle $295 $311 $1,245 $831
Depreciation, depletion and
amortization 343 292 1,297 1,121
Interest expense - zero coupon
debentures - 3 4 13
Deferred income taxes 86 98 505 214
Impairments related to oil and gas
properties 11 6 103 39
Other non-cash items (7) 3 10 (6)
- ---------------------------------------------------------------------
Cash Flow from Operations 728 713 3,164 2,212
- ---------------------------------------------------------------------
(Increase) decrease in accounts
receivable 17 (240) 46 (103)
Increase (decrease) in accounts
payable and accrued expenses 24 228 (68) 181
Other items - net (25) (10) (99) (94)
- ---------------------------------------------------------------------
Net Cash Provided by Operating
Activities $744 $691 $3,043 $2,196
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Capital Expenditures
- ---------------------------------------------------------------------
Capital spending $555 $476 $2,484 $2,037
Capitalized interest 27 34 121 155
Capitalized overhead 45 48 187 196
- ---------------------------------------------------------------------
Total $627 $558 $2,792 $2,388
- ---------------------------------------------------------------------
December December
31, 31,
2003 2002
- ---------------------------------------------------------------------
Condensed Balance Sheet
- ---------------------------------------------------------------------
Current assets $1,324 $1,280
Net properties and equipment 17,396 15,098
Other assets 437 436
Goodwill 1,389 1,434
- ---------------------------------------------------------------------
Total Assets $20,546 $18,248
- ---------------------------------------------------------------------
Current liabilities $1,715 $1,861
Long-term debt 5,058 5,171
Other long-term liabilities 5,174 4,244
Stockholders' equity 8,599 6,972
- ---------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $20,546 $18,248
- ---------------------------------------------------------------------
Capitalization
- ---------------------------------------------------------------------
Total debt $5,058 $5,471
Stockholders' equity 8,599 6,972
- ---------------------------------------------------------------------
Total $13,657 $12,443
- ---------------------------------------------------------------------
Capitalization Ratios
- ---------------------------------------------------------------------
Total debt 37% 44%
Stockholders' equity 63% 56%
- ---------------------------------------------------------------------
(a) Unrealized gains and losses on derivative instruments that did not
meet the conditions to qualify for hedge accounting have been
reclassified to conform to the current presentation. The effect on
prior periods is insignificant.
Anadarko Petroleum Corporation
Quarter Ended Year Ended
Volumes and Prices (a) December 31 December 31
--------------- ---------------
2003 2002 2003 2002
- ----------------------------------------------------------------------
Natural Gas
- ----------------------------------------------------------------------
United States
- ----------------------------------------------------------------------
Volumes, billion cubic feet 125 119 503 507
Average daily volumes, million cubic
feet per day 1,365 1,295 1,379 1,390
Price per thousand cubic feet $4.19 $3.46 $4.36 $2.83
- ----------------------------------------------------------------------
Canada
- ---------------------------------------------- ------- ------- -------
Volumes, billion cubic feet 37 36 140 135
Average daily volumes, million cubic
feet per day 397 387 383 370
Price per thousand cubic feet $4.37 $3.53 $4.71 $2.91
- ----------------------------------------------------------------------
Total
- ----------------------------------------------------------------------
Volumes, billion cubic feet 162 155 643 642
Average daily volumes, million cubic
feet per day 1,762 1,682 1,762 1,760
Price per thousand cubic feet $4.23 $3.48 $4.43 $2.85
- ----------------------------------------------------------------------
Crude Oil and Condensate
- ----------------------------------------------------------------------
United States
- ----------------------------------------------------------------------
Volumes, million barrels 8 8 34 31
Average daily volumes, thousand
barrels per day 89 84 93 85
Price per barrel $25.28 $24.79 $26.16 $22.90
- ----------------------------------------------------------------------
Canada
- ----------------------------------------------------------------------
Volumes, million barrels 1 2 6 12
Average daily volumes, thousand
barrels per day 16 19 17 33
Price per barrel $26.59 $22.20 $27.33 $19.09
- ----------------------------------------------------------------------
Algeria
- ----------------------------------------------------------------------
Volumes, million barrels 5 8 19 24
Average daily volumes, thousand
barrels per day 52 87 52 65
Price per barrel $29.53 $25.99 $28.43 $24.38
- ----------------------------------------------------------------------
Other International
- ----------------------------------------------------------------------
Volumes, million barrels 3 2 8 8
Average daily volumes, thousand
barrels per day 29 24 22 22
Price per barrel $23.58 $21.50 $23.15 $19.92
- ----------------------------------------------------------------------
Total
- ----------------------------------------------------------------------
Volumes, million barrels 17 20 67 75
Average daily volumes, thousand
barrels per day 186 214 184 205
Price per barrel $26.31 $24.69 $26.55 $22.44
- ----------------------------------------------------------------------
Natural Gas Liquids
- ----------------------------------------------------------------------
Total
- ----------------------------------------------------------------------
Volumes, million barrels 5 4 17 15
Average daily volumes, thousand
barrels per day 56 41 47 41
Price per barrel $21.36 $17.47 $21.18 $14.80
- ----------------------------------------------------------------------
Total Barrels of Oil Equivalent (BOE)
- ----------------------------------------------------------------------
Volumes, million BOE 49 49 192 197
Average daily volumes, thousand BOE
per day 535 535 525 539
- ----------------------------------------------------------------------
(a) Unrealized gains and losses on derivative instruments that did not
meet the conditions to qualify for hedge accounting have been
reclassified to conform to the current presentation. The effect on
prior periods is insignificant.
Anadarko Petroleum Corporation
Oil and Gas Reserves
Other
U.S. Canada Algeria Int'l Total
---------------------------------------------------------------------
Total (MMBOE)
---------------------------------------------------------------------
Proved Reserves
---------------------------------------------------------------------
December 31, 2002 1,526 288 372 142 2,328
Revisions of prior estimates (12) 11 3 - 2
Extensions, discoveries and other
additions 219 41 5 - 265
Improved recovery 68 2 - - 70
Purchases in place 46 8 - - 54
Sales in place (8) (6) - - (14)
Production (135) (30) (19) (8) (192)
---------------------------------------------------------------------
December 31, 2003 1,704 314 361 134 2,513
---------------------------------------------------------------------
Proved Developed Reserves
---------------------------------------------------------------------
December 31, 2002 1,093 212 191 72 1,568
December 31, 2003 1,238 242 182 65 1,727
---------------------------------------------------------------------
Natural Gas (Bcf)
---------------------------------------------------------------------
Proved Reserves
---------------------------------------------------------------------
December 31, 2002 5,693 1,343 - 144 7,180
Revisions of prior estimates (172) 57 - - (115)
Extensions, discoveries and other
additions 982 221 - - 1,203
Improved recovery (7) 2 - - (5)
Purchases in place 115 48 - - 163
Sales in place (21) (38) - - (59)
Production (503) (140) - - (643)
---------------------------------------------------------------------
December 31, 2003 6,087 1,493 - 144 7,724
---------------------------------------------------------------------
Proved Developed Reserves
---------------------------------------------------------------------
December 31, 2002 4,299 995 - - 5,294
December 31, 2003 4,725 1,164 - - 5,889
---------------------------------------------------------------------
Oil, Condensate and NGLs (MMBbls)
---------------------------------------------------------------------
Proved Reserves
---------------------------------------------------------------------
December 31, 2002 578 64 372 117 1,131
Revisions of prior estimates 16 2 3 - 21
Extensions, discoveries and other
additions 55 4 5 - 64
Improved recovery 70 2 - - 72
Purchases in place 27 - - - 27
Sales in place (4) - - - (4)
Production (51) (7) (19) (8) (85)
---------------------------------------------------------------------
December 31, 2003 691 65 361 109 1,226
---------------------------------------------------------------------
Proved Developed Reserves
---------------------------------------------------------------------
December 31, 2002 377 46 191 72 686
December 31, 2003 451 48 182 65 746
---------------------------------------------------------------------
Anadarko Petroleum Corporation
Costs Incurred in Oil and Gas Producing Activities
millions 2003
- ----------------------------------------------------------------------
United States - Capitalized
Property acquisition
Exploration $100
Development 203
Exploration 454
Development 1,251
- ----------------------------------------------------------------------
Total United States - Finding and Development Costs 2,008
- ----------------------------------------------------------------------
Plus: Asset retirement costs 164
Less: Actual retirement expenditures (15)
- ----------------------------------------------------------------------
Total United States - Costs Incurred 2,157
- ----------------------------------------------------------------------
Canada - Capitalized
Property acquisition
Exploration 24
Exploration 176
Development 297
- ----------------------------------------------------------------------
Total Canada - Finding and Development Costs 497
- ----------------------------------------------------------------------
Plus: Asset retirement costs 15
Less: Actual retirement expenditures (5)
- ----------------------------------------------------------------------
Total Canada - Costs Incurred 507
- ----------------------------------------------------------------------
Algeria - Capitalized
Exploration 17
Development 61
- ----------------------------------------------------------------------
Total Algeria - Finding and Development Costs 78
- ----------------------------------------------------------------------
Plus: Asset retirement costs 1
Less: Actual retirement expenditures -
- ----------------------------------------------------------------------
Total Algeria - Costs Incurred 79
- ----------------------------------------------------------------------
Other International - Capitalized
Exploration 66
Development 70
- ----------------------------------------------------------------------
Total Other International - Finding and Development
Costs 136
- ----------------------------------------------------------------------
Plus: Asset retirement costs 7
Less: Actual retirement expenditures -
- ----------------------------------------------------------------------
Total Other International - Costs Incurred 143
- ----------------------------------------------------------------------
Total - Capitalized
Property acquisition
Exploration 124
Development 203
Exploration 713
Development 1,679
- ----------------------------------------------------------------------
Total - Finding and Development Costs 2,719
- ----------------------------------------------------------------------
Plus: Asset retirement costs 187
Less: Actual retirement expenditures (20)
- ----------------------------------------------------------------------
Total - Costs Incurred $2,886
- ----------------------------------------------------------------------
The 2003 total costs incurred include asset retirement costs and
exclude actual retirement expenditures in accordance with the
Financial Accounting Standards Board staff memorandum issued January
21, 2004. The 2003 total costs incurred exclude the initial asset
retirement costs as of January 1, 2003. Finding and development costs
are consistent with prior years' costs incurred.
NSAI
Netherland, Sewell & Associates, Inc.
Worldwide Petroleum Consultants
4500 Thanksgiving Tower - 1601 Elm Street, Dallas, TX 75201-4754
1221 Lamar Street, Suite 1200, Houston, TX 77010-3072
January 21, 2004
Mr. Randall L. Couch
Anadarko Petroleum Corporation
1201 Lake Robbins Drive
The Woodlands, Texas 77380
Dear Mr. Couch:
In accordance with your request, we have completed a review of the
procedures and methods used by Anadarko Petroleum Corporation
(Anadarko) in preparing its estimates of proved reserves and future
revenue for certain oil and gas properties, as of December 31, 2003.
These reserve and future revenue estimates were prepared by Anadarko's
internal technical staff.
The opinions expressed herein are based on our involvement as a
member of Anadarko's Reserve Review Team and our exposure to
Anadarko's reserve estimating process. As a member of the Reserve
Review Team, we met with Anadarko personnel and reviewed the geologic
and engineering methodologies used as well as the resulting reserve
estimates prepared by Anadarko for certain fields identified by
designated screening criteria. In total, 10 separate reserve review
meetings were conducted in Anadarko's offices in The Woodlands, Texas;
Calgary, Alberta; and Uxbridge, England. The meetings ranged in
duration from 2 to 7 hours each. The United States properties reviewed
included the Vernon Field Area located in Louisiana; the Marco Polo/K2
Prospect and the major Hess Acquisition properties in the Gulf of
Mexico; the Carthage Field Area, the Haley Field, and the Austin Chalk
properties in Texas; and the Monell Unit and the Salt Creek Field in
Wyoming. In Canada, the top 10 field areas and other significant
properties were reviewed comprising approximately 80 percent of
Anadarko's reserves in Canada. For Algeria, we received an overview of
Anadarko's concession as well as a detailed technical review of the
HBNS Field, the largest of the producing fields in Algeria. We also
reviewed the key provisions of the services contract for the
Oritupano-Leona Block in Venezuela. It is our understanding that the
properties reviewed represent approximately 50 percent of the total
proved reserves of Anadarko; and, that in the course of these meetings
we reviewed approximately 70 percent of the 2003 projected reserve
additions.
The goal of this review was to verify that the reserve estimates
were prepared in accordance with the guidelines and definitions of the
Securities and Exchange Commission (SEC) using generally accepted
engineering and evaluation principles; and to determine, for the
properties reviewed, the reasonableness of Anadarko's methods,
procedures, and estimates. The reviews focused on the reserve
determination methodologies and the data used in preparing these
estimates. The available data reviewed included, but were not limited
to, seismic data, structure and isopach maps, well logs, production
tests, material balance calculations, reservoir simulation models,
reservoir pressures, individual well and field performance data,
individual well and field projections, offset performance data,
operating expenses, capital costs, and product prices.
The reviews were sufficient to determine that the general methods
and procedures used by Anadarko in the reserve estimation process are
reasonable. In our opinion, the estimates for those properties
reviewed appear reasonable and have been prepared in accordance with
SEC guidelines and definitions using generally accepted petroleum
engineering and evaluation principles.
It should be understood that this is a review of procedures,
methods, and certain internal estimates only and does not constitute a
complete review, study, or audit of Anadarko's estimated proved
reserves and future revenue. We did not consider Anadarko's probable
or possible estimates in this procedural review. We made no
verification of the accuracy and completeness of the information and
data provided by Anadarko with respect to ownership interest, oil and
gas production, well test data, reservoir pressures, oil and gas
prices, and operating and development costs.
Netherland, Sewell & Associates, Inc. is a firm of professionals
dedicated to providing superior consulting service to the
international petroleum industry. Our company has provided due
diligence, technical support, and economic evaluations for private and
government companies and financial institutions throughout the world.
We are independent petroleum engineers, geologists, geophysicists, and
petrophysicists with respect to Anadarko Petroleum Corporation as
provided in the Standards Pertaining to the Estimating and Auditing of
Oil and Gas Reserve Information promulgated by the Society of
Petroleum Engineers. We do not own an interest in these properties and
are not employed on a contingent basis.
Very truly yours,
//
Frederic D. Sewell
Chairman & CEO
Netherland, Sewell & Associates, Inc.
CONTACT: Anadarko Petroleum Corporation, Houston
Media Contacts:
Teresa Wong, 832-636-1203
teresa_wong@anadarko.com
or
Lee Warren, 832-636-3321
lee_warren@anadarko.com
or
Investor Contacts:
David Larson, 832-636-3265
david_larson@anadarko.com
or
Stewart Lawrence, 832-636-3326
stewart_lawrence@anadarko.com