Anadarko Petroleum (APC)

Until 2012, Anadarko has 10 rigs with 3-year contracts completely tied up, allowing the company to control its drilling schedule and focus on expansion elsewhere.

Since 1985 when APC began independent operations, it has grown into one of the largest independent oil and gas producers in the world, with 8 trillion cubic feet of the resource to its credit.

Though the company can claim status as one of the largest natural gas producers in the United States, with the majority of its reserves lying within US borders, Anadarko’s real shine comes from its findings elsewhere.

It started with the 2007 discovery of Africa’s largest deep-water field, Jubilee, off the coast of Ghana. Industry experts believe it holds up to 2 billion barrels of recoverable oil. All by itself, that discovery would turn Ghana into one of the world’s biggest oil producers after it begins pumping next year.

Then, Anadarko and its partners (Tullow Oil, Woodside Petroleum and Repsol) announced their combined efforts to search the coast of Sierra Leone in western Africa, an original effort they named Venus, after the elusive Greek goddess of beauty and love.

At the time they set out, few people thought much of the venture. In fact, even one company executive described it as nothing more than “a $40 million bet.”

But after the last few months, that project and subsequent discovery has become one of the most closely watched drilling operations in the industry, in large part because even its initial success greatly increases the chance that the area holds multiple billions of barrels of oil reserves.

All four companies involved now believe the entire region, which extends in the offshore waters from Sierra Leone to Liberia to the Ivory Coast all the way to Ghana, is rich in oil. And they expect to find more huge oil fields within it over the next five years.

Since Anadarko Petroleum owns 40% of the project, you’d better believe it will benefit from any further finds inside the Venus discovery.

Venus Ascends

I’m sure that if someone looked at the astrological chart for Anadarko, it would show that Venus is in the ascendant. I’m not an astrologer, but that sign reads well to me. I see the company coming into a whole lot of money in the future.

And at the very least, Lady Luck has been smiling on Anadarko as of late.

Just ask head of exploration Bob Daniels: “The Venus discovery confirms the existence of an active petroleum system in the basin and enhances the prospectivity of our vast West Africa acreage.”

But this basin could change the game for more than just Anadarko. It could revolutionize the entire oil industry. The Venus discovery has a chance of establishing a whole new, active hydrocarbon system that may span from western Africa all the way to the Latin American nation of Guyana.

If it can just live up to its potential, it will draw the attention of major oil companies all around the world.

Whether through dumb luck or shrewd analysis, Anadarko bet big on the region. And while everybody else remained ignorant about its true worth, the company – and Tullow Oil – snapped up exploration rights at ridiculously low prices.

At the time they began the project, most investors knew western Africa for its cocoa, not its oil. Now that people have learned the error of their limited imaginations, the value of those exploration rights have gone on to make impressive gains.

Why We Can’t Help But Love Anadarko

Of course both Anadarko and its partners know what to do with their findings. They plan on spending $3 billion in drilling wells in about half a dozen of their best prospects.

If the drilling goes well and they need to bring large, new fields into production, they’ll increase that investment possibly as high as $18 billion.

Bottom line: Anadarko Petroleum has an enviable advantage over its competitors in this new venture that Bob MacKnight from energy consultant PFC Energy calls “The first truly new deep water oil region to open up in more than a decade.”

And that isn’t even the best part…

While many investors still tend to think of Anadarko as only a US natural gas company, it now has a strong grasp on oil as well.

Whenever natural gas does rebound, Anadarko will benefit greatly. But in the meantime and for the future, it has grown into a much more versatile business that can not only cope with the trying times, but thrive in them as well.

References

"One Natural Gas Company Worth Looking Into… Now And Later" Article from InvestmentU

The 2004 restructuring of Anadarko allowed it to get rid of costly lands and focus on exploration and development of more promising reserves, cutting production costs.

Anadarko's acquisition of Kerr-McGee and Western Gas raises the company's production potential in North America, allowing it to boost profitability.