Anadarko Petroleum Corp (NYSE:APC) posted its 2018 capital expectations and projection. In 2018, the firm anticipates to make capital investments in between $4.2 billion and $4.6 billion. The capital program is intended to improve shareholder value by offering attractive returns and margins, while developing the development of the firm’s core resources within discretionary cash flow.
Anadarko Petroleum will allocate around 80% of capital toward the DJ and Delaware basins, including the deepwater Gulf of Mexico and Anadarko midstream. It records material free cash flow at prevailing strip prices and breaks even in a $3 natural gas and $50 oil commodity-price environment. The company offers a cash return on invested capital of 20%. It results in around 14% oil growth YoY, which is 19% oil growth/debt-adjusted-share.
Al Walker, the CEO, President and Chairman of Anadarko, expressed that their 2018 investment plan will be led by financial discipline and capital efficiency, as it is done always. These major tenets have served them well for the preceding decade, as growth within cash flow is key to offering capital-efficient returns. Their repositioned asset footprint is established to succeed in an industry where oil prices show volatility in a $45-$60 environment. They project next year’s capital expenditures to come within discretionary cash flow, while recording free cash flow of over $700 million at the prevailing strip. In addition, they intend to return notable cash to stockholders by executing the remaining share-repurchase plan in 2018.
Walker added that they are also changing the metrics in their 2018 compensation plan to enhance the profile for the role of financial discipline and capital efficiency and refine the focus on their safety performance. Performance goals will now comprise cash return on invested capital, volume growth/debt-adjusted share, and get additions/debt-adjusted share. The CEO of Anadarko expressed that as he has highlighted recently, shifting to debt-adjusted performance factors in specific will align their compensation plans to the capital-allocation philosophy they have used over the preceding ten years.