Staying in balance is key to Anadarko model

Steve Bosworth, Anadarko vice president worldwide drilling, gave thanks to the drilling contractors that were willing to work with his company on contract renegotiations over the past year as commodity prices nosedived and access to capital went into deep freeze, during his keynote address at the 2009 IADC Annual General Meeting, 8-10 November in Miami, Fla.

“Thanks to a lot of you guys here in this room and your companies, we did something that I really didn’t think was possible… most of us are publicly held companies, and we have responsibilities to our shareholders. No matter how much we feel each other’s pain, nobody put a gun to our head to sign these contracts. So we absolutely, positively had to honor the contracts, no doubt about that,” he said. “What we did do was discover something innovative that would keep the contract whole and get us out of this bind we’re in.”

In most cases, this involved restructuring contracts to lower dayrates in exchange for a longer term.

Anadarko started 2009 with close to 60 operated rigs in the Lower 48 and 31 newbuilds working under term contracts. They’d also ordered more newbuilds to be delivered in 2009.

However, the market situation led the company to buy out 10 of those term contracts in the first quarter of 2009, which cost them $24 million. At that point, this was deemed to be the better option as drilling rigs are only 20% to 25% of an AFE well construction cost. Buying out the contracts would save them from having to spend the other 70% to 80% of drilling a well.

The company currently has 34 operated rigs in the US, with four of those in the Gulf of Mexico. The rest are land rigs split up between the Rockies and the Southern region. A total 73% of these 30 Lower 48 rigs are on long-term contracts – six each are set to expire in 2010 and 2011; 13 to expire in 2012 and two in 2013.

Mr Bosworth noted that the “fun” part of having all these rigs has been being able to significantly reduce Anadarko’s operational cycle times. “Being able to drill cheaper, deeper, safer, faster, better – that’s what makes the job fun, and that’s what I appreciate from all of you guys who provide the equipment.”

Thanks to technology advances on rigs and with directional drilling, plus better communication and better trained personnel, drilling efficiencies have been dramatically enhanced on many land drilling projects. As an example, he said, 8,000-ft directional wells in the Wattenberg near Denver, Colo., are being drilled in just over 50 hours. “That’s incredible – two days!”

Anadarko also continues to focus on deepwater, with 90% of exploration capital this year going to drilling. The company has already announced seven deepwater discoveries this year, with four in the Gulf of Mexico and three offshore West Africa.

“We also have six more high-impact exploration to drill this year… and we think we’ll have greater things to announce in the future,” he said.