Page 5 - NorthAmOil Week 32

NorthAmOil COMMENTARY NorthAmOil
Reports also emerged in June that Occidental was seeking a buyer to take majority control of Anadarko’s Western Midstream Partners pipe- line unit. And there is speculation that some assets in the US Gulf of Mexico could also come up for sale.
In the medium term, Occidental has reduced its production guidance for Anadarko assets for the rest of this year. e company said produc- tion from the assets would be lower by at least a couple of percentage points than previously expected. is has been attributed to pipeline shortages and maintenance, as well as weath- er-related downtime in the Gulf and other regions.
According to Occidental, Anadarko is expe- riencing delays in bringing new wells online in the Permian Basin, as well as having some challenges in the Denver-Julesburg (DJ) Basin related to temporary shortages of oil and gas processing facilities. e company noted that all of these issues were considered to be temporary, pointing out that they were unrelated to any of Occidental’s own operations.
Anadarko’s US assets are anticipated to pro- duce 585,000-630,000 barrels of oil equivalent per day (boepd) in the third quarter of 2019. For the full year, the minimum average is 605,000 boepd, with the upper end of guidance also at 630,000 boepd.
e 2019 capital budget for the Anadarko assets will remain at $4.1bn, not including the African assets.
Permian push
Occidental’s main focus as far as its new assets go will be the Permian Basin, with the Anadarko acquisition predicted to enhance its position as the largest producer in the region, with estimated
output of 533,000 boepd. Anadarko’s Permian properties are valued at about $18bn according to research rm Drillinginfo.
Occidental has also recently formed a drill- ing partnership with Colombia’s state-owned Ecopetrol to develop part of its Permian acreage for up to $1.5bn, suggesting that a drilling push is coming in the basin. e partnership will cover 97,000 net acres (393 square km) of Occidental’s Midland sub-basin properties in the Permian. Occidental currently has minimal activity in the Midland.
The joint venture will enable Ecopetrol to book roughly 160mn boe of proven undevel- oped reserves at the closing of the transaction as Occidental accelerates its Midland Basin devel- opment. e partners will progressively raise output until 2027, at which point Ecopetrol’s share of production is projected to reach about 95,000 boepd.
The Permian has experienced its share of challenges lately, but both the partnership with Ecopetrol and the takeover of Anadarko show that drillers continue to view it as an attrac- tive region. But with limited enthusiasm in the market for mergers and acquisitions (M&As) currently, it appears that few others are likely to follow in Occidental’s footsteps and boost their Permian holdings through a takeover. Indeed, many shale producers are reining back spending and drilling, so even a push to grow output is fairly unusual in the current operating environment.
While Occidental is optimistic about bene- tting from Anadarko’s Permian holdings, the company remains under pressure from Icahn, and will be increasingly keen to strike new deals to sell non-core assets as it struggles with its increased debt load.™
Occidental has also recently formed a drilling partnership with Colombia’s state- owned Ecopetrol to develop part of its Permian acreage.
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