Anadarko to Fully Own BP's Plant

Anadarko Petroleum Corporation (APC - Analyst Report) said it is going to buy a 93% stake in the Wattenberg Processing Plant (Wattenberg Plant) from BP America Production Company, a subsidiary of BP Plc (BP - Analyst Report).

Anadarko will pay about $575.5 million for the interest in the BP plant. Anadarko expects the transaction to close by mid-year, pending regulatory approvals and other contractual conditions.

The Wattenberg Plant is a natural gas and liquids processing plant located in Adams County in northeast Colorado. The plant can process 195 million cubic feet per day (MMcf/d) of natural gas and 15,000 barrels per day of natural gas liquids and gas condensate.

By acquiring BP’s 93% stake in the Wattenberg plant, Anadarko said it will gain 100% ownership of the plant combined with its existing interest. Anadarko will also become the operator of the plant. Anadarko said its output currently accounts for nearly 70% of the natural gas processed in the plant.

Anadarko is the largest producer in the Wattenberg field and also is drilling in the emerging Niobrara Shale. Anadarko’s current sales volume in the Wattenberg field is roughly 63,000 BOE (barrels of oil equivalent) per day. Going forward, the company expects to further grow in the DJ Basin.

Anadarko expects the acquisition of BP’s DJ Basin plant (Wattenberg plant) will improve field recoveries, allow for future expansion and capture efficiencies, along with lowering operating costs.

Anadarko has about 900,000 net acres in the DJ basin in Colorado and expects to operate nine rigs, including three horizontal rigs, by the end of March.

Anadarko said Western Gas Partners L.P. (WES - Snapshot Report), an Anadarko spin-off also based in The Woodlands, has ownership stakes in two plants in the basin. The Wattenberg Plant together with Western Gas Partners’ Fort Lupton Plant and Platte Valley Plant gives Anadarko and other area producers exceptional midstream options for development within the Wattenberg field and growth in the greater DJ Basin.

With the flexibility to offer this asset to WES, Anadarko has the option to possibly recapture the initial and subsequent capital investments in the future, while continuing to benefit from operational improvements in the basin.

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

We maintain our Neutral recommendation on Anadarko shares. Also, the company retains a short-term Zacks #3 Rank (Hold).

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