Anadarko Expands NGL Portfolio - Analyst Blog


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Independent oil and gas producer Anadarko Petroleum Corporation ( APC ) has inked a contract with Enterprise Products Partners L.P. ( EPD ) and DCP Midstream, LLC for designing and building a natural gas liquids ("NGL") pipeline, stretching from Denver-Julesburg Basin ("DJ Basin") in Weld County, Colorado to Skellytown, in Carson County, Texas. The new Front Range Pipeline will span 435 miles.

The deal will enable the companies to generate roughly 150,000 barrels per day ("bpd") of natural gas initially and subsequently scale up the production to almost 230,000 bpd.

Per the agreement, all the parties will enjoy a one-third interest in the total production. Enterprise Products Partners will take care of building and operating the pipeline processes. It is expected to start its development activities from the fourth quarter of 2013. This transaction will help the company to ensure smooth NGL supply to end consumers.

Anadarko's 2012 capital expenditure is focused on active exploration and production activities. The company's Capital Expenditure Program of $6.6 - $6.9 billion allocates 20% of the funds for this purpose, compared with $6.55 billion spent in 2011.

In the fourth quarter of 2011, Anadarko generated 75,000 bpd of NGL. Now the company expects NGL production in the range of 74,000 - 77,000 bpd for the first quarter of 2012.

We view this deal as a positive catalyst for Anadarko's future growth in its NGL portfolio. As a result of this contract, the company will be able to provide uninterrupted NGL to the high growth territories in the U.S. including the Gulf Coast, with the help of a well-equipped pipeline network provider, Enterprise Products Partners.

At the same time, Anadarko will also enjoy strong logistics support from the Mid-America Pipeline system and the Texas Express Pipeline. We believe this capital-intensive drilling program will enable the company to strengthen and enhance its NGL portfolio.

The company currently has a Zacks #2 Rank, which translates into a short-term Buy rating.

Based in The Woodlands, Texas, Anadarko Petroleum Corporation is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids.

ANADARKO PETROL ( APC ): Free Stock Analysis Report
ENTERPRISE PROD ( EPD ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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