Q3 2016 Anadarko Petroleum Corp Earnings Call

THE WOODLANDS Nov 1, 2016 (Thomson StreetEvents) -- Edited Transcript of Anadarko Petroleum Corp earnings conference call or presentation Tuesday, November 1, 2016 at 1:00:00pm GMT

TEXT version of Transcript

Corporate Participants

   * John Colglazier

      Anadarko Petroleum Corporation - VP of IR and Communications

   * Al Walker

      Anadarko Petroleum Corporation - Chairman, President and CEO

   * Darrell Hollek

      Anadarko Petroleum Corporation - EVP, Operations

   * Mitch Ingram

      Anadarko Petroleum Corporation - EVP, Global LNG

   * Ernie Leyendecker

      Anadarko Petroleum Corporation - EVP, Internation Deepwater Exploration

Conference Call Participants

   * Arun Jayaram

      JPMorgan - Analyst

   * Evan Calio

      Morgan Stanley - Analyst

   * Doug Leggate

      BofA Merrill Lynch - Analyst

   * Scott Hanold

      RBC Capital Markets - Analyst

   * Brian Singer

      Goldman Sachs - Analyst

   * Charles Meade

      Johnson Rice & Company - Analyst

   * David Heikkinen

      Heikkinen Energy Advisors - Analyst

   * Bob Brackett

      Bernstein - Analyst

   * David Tameron

      Wells Fargo Securities, LLC - Analyst

   * Ryan Todd

      Deutsche Bank - Analyst

   * Paul Sankey

      Wolfe Research - Analyst

   * John Herrlin

      Societe Generale - Analyst

   * Pearce Hammond

      Simmons, Piper, Jaffray - Analyst

   * Jeffrey Campbell

      Tuohy Brothers - Analyst

Presentation

Operator [1]

 Good morning, and welcome to the Anadarko Petroleum Corporation third-quarter 2016 earnings conference call. All participants will be in listen-only mode.

 ( Operator Instructions )

 After today's presentation got there will be an opportunity to ask questions.

 ( Operator Instructions )

 Please also note today's event is being recorded. I would now like to turn the call over to John Colglazier. Please go ahead, sir.

 John Colglazier, Anadarko Petroleum Corporation - VP of IR and Communications [2]

 Thank you, Rocco, and good morning, everyone. We are glad you could join us today for our third-quarter conference call.

 I would like to remind you that today's presentation includes forward-looking statements and certain non-GAAP financial measures, and a number of factors could cause actual results to differ materially from what we discuss today. So I encourage you to read our full disclosure on forward-looking statements and the GAAP reconciliations located on our website and attached to yesterday's earnings release.

 In just a moment, I will turn the call over to Al Walker for some brief opening remarks. And as most of you know, after 41 quarterly calls, 10 investor conferences or updates, I am retiring from Anadarko, and today is my last day in investor relations. I have had a great time working with the company over the years, and especially working with you guys over the course of my 10 years here in investor relations.

 I am very confident in passing the baton to Robin Fielder, who -- along with Pete Zagrzecki and the newest member of the IR team, Jim Grant, a geoscientist who is replacing Shandell Szabo, who was recently promoted to vice president in our onshore group. These folks are more than capable of continuing to provide the level of service that you have come to expect from us.

 And with that, I'll turn the call over to Al.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [3]

 Well thanks, John. It is a bittersweet morning, but we have achieved a lot in the first three quarters of 2016 and positioned the company well. And we have also positioned the portfolio for the future, with our assets from the Delaware, DJ, and the Deepwater Gulf of Mexico serving as the primary sources for our growth.

 As a result, we are increasing our anticipated divestiture-adjusted sales volumes for the year by 8 million BOE from the midpoint of our initial expectations. Continuing to make significant reductions in our cost structure, expecting to now close more than $4 billion of monetizations this year, and projecting to finish the year with more than $2.5 billion of cash on hand.

 Operationally, we have accelerated activity by adding two rigs in the Delaware Basin of West Texas. The company has made great strides to enhance the economics of our premier position in this world-class oil play. This has been achieved by further cost reductions while incorporating an enhanced completion design that has increased our EURs to more than 1 million BOE per well, which enjoys a very high oil cut.

 With our increased rig activity, we will continue to rapidly evaluate the stacked pay potential across our almost 600,000 gross acres in this position, and as we move to start a development program for next year, we are quite excited.

 In Colorado, the DJ Basin also added two rigs, and that has been done during the quarter. Our organization has done a fantastic job of driving savings and efficiencies here as well, enabling us to deliver more for less. As a result of these savings, we will reinvest this capital and drill 90 more wells, complete 50 additional wells, and when combined with our base optimization, we will provide more than 5 million BOE of additional production, well above our expectations.

 In the gulf of Mexico, Lucius continues to outperform, achieving a daily record of over 100,000 plus barrels of oil per day. This along with new production from our development wells at K2 and Caesar Tonga increased our year-over-year oil volume in the Gulf of Mexico by 10,000 barrels per day to 65,000 barrels per day. And as we announced last month, upon closing the acquisition of Freeport-McMoRan's Gulf of Mexico assets, we expect to double production in the Gulf of Mexico to about 160,000 BOE per day, 85% of which is comprised of oil.

 We will plan to use a portion of the $4 billion of cash that we will have at quarter end to fund our acquisition and redeem the remaining $750 million of senior notes due September of 2017. As noted in last night's news release, we also expect to receive in excess of $1 billion of proceeds from the pending divestiture of our Carthage assets in East Texas.

 Our monetization program has significantly exceeded expectations as we streamlined our portfolio and materially strengthened the financial position of our company. We are increasingly more focused and competitive as a result, and as mentioned, our expectations continue to accelerate our activities in the Delaware, the DJ, as well as growing the Gulf of Mexico in an effort to improve the production and the investment of our company. This should result in delivering oil production with a combined compounded annual rate of return over the next five years that will show very strong double-digit growth.

 Our employees have done an outstanding job in ensuring that we enhanced value in the near term and now well into the future. I want to thank each of them for the long hours and hard work that have resulted in having Anadarko be very favorably positioned, given the operating environment of the last two years.

 And before I turn it to Q&A, I also want to express my appreciation from the board, from management, and all of the Anadarko employees for the years of tireless effort John has provided to us and to our shareholders. John, you have done a lot of things that few can, and you will be greatly missed. These calls will not quite be the same, but we will always remember those things that you did to make everything in Anadarko go so well on mornings when sometimes it just did not seem to go as easily as it could have.

 With that, let's open it up for questions.

Questions and Answers

Operator [1]

 Thank you. We will now begin the question-and-answer session.

 (Operator Instructions)

 Arun Jayaram, JPMorgan.

 Arun Jayaram, JPMorgan - Analyst [2]

 Good morning. Al, I wanted to start a little bit in the Delaware. We saw a pretty punchy evaluation for the Silver Hill asset package in Loving and Winkler with the transaction, I think, fetching more than $40,000 per acre.

 I was wondering first if you could remind us of your acreage position in Loving, and if you could discuss your broader delineation efforts beyond the Wolfcamp A because clearly the industry is pretty excited about the stacked pay potential in the Delaware.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [3]

 Well Arun, thank you. I might have Darrell help me a little bit with some of the questions you ask. But let me just say, as we looked at Silver Hill -- and obviously you know the geography quite well, you know they're quite right next door to us in terms of how their acreage is very close -- as I've looked at how these acreage values have increasingly gone to places I would never have imagined -- I mean, we are paying -- or seeing people, rather, pay price per acre today that exceeded acreage values when oil was over 100. And so consequently I think we have a little bit of pause around just the valuations and how certain of these have escalated in places.

 As we have talked to you about more than once the rock that we have and the tier 1 acreage position that we are fortunate enough to be able to enjoy, have given us a lot to be proud of. Now it's not just the Wolfcamp, as you've heard us talk about on a lot of occasions. It is in addition to the Wolfcamp. It's the Avalon, it's the Bone Springs, and as a result, we have a lot here. And so maybe rather than having me explain things in detail, I will have Darrell do so.

 But I will make this comment last as it relates to just M&A in the Delaware portion. I do not think we're done. I mean, I think I saw something from one of your competitors that said that we might see $100,000 values per acre out here pretty soon. I am not sure I can imagine that, but I also cannot believe that we are double where we were in 2014 on a per acre basis, either. So Darrell?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [4]

 Yes. Let me just start with saying most of the acreage we have we do feel is tier 1, and when you look at Loving County -- and we probably have half our acreage sitting in Loving, and we actually think that is the best of the best, so we are very content on what we have.

 When you think about what else is there outside the Wolfcamp -- and we recognize those things, and we keep quoting numbers on the Wolfcamp, and that is because we think that is the largest prize, not that the other ones won't contribute to our bottom line over time. But if you go back to the ops report, you can see on page 6, some of the -- because of our acreage position being as large as it is, we are continuing to spend time to make sure we understand the Wolfcamp, particularly the Wolfcamp A. It's by far the best zone because it has a number of benches in it.

 We are not discounting the Avalon and Bone Springs. We think they have a lot of potential. But at this point, we're going to some of the deeper depths and testing that first. So we will get to that eventually, but right now we are really focused on exploiting the Wolfcamp and understanding exactly what we have in our position, and we have been pretty pleased as to what we have found to date.

 Arun Jayaram, JPMorgan - Analyst [5]

 Great. And just my follow-up. Al, if some of the media reports are true, you may be shopping your Eagle Ford position. You talked about maybe exceeding your divestiture target this year. I guess my question is what you plan to do with potential proceeds from all of these asset sales that you have either closed or are pending.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [6]

 Well, fair question. As we continue to talk more about the fact that we see the Delaware, the DJ, and the deepwater Gulf of Mexico being our growth engines, I think in that cascading order that I just gave you, that's where we would put incremental dollars to work. It would be Delaware, DJ, deepwater Gulf of Mexico.

 Our ability to redeploy some of the capital and cash that I talked about in my prepared remarks, if we additionally have cash beyond that, I do not think that would change the queuing.

 Arun Jayaram, JPMorgan - Analyst [7]

 Great. John, congrats, and I will miss our colorful exchanges over the years. And good luck in retirement.

 John Colglazier, Anadarko Petroleum Corporation - VP of IR and Communications [8]

 Thanks.

Operator [9]

 Evan Calio, Morgan Stanley.

 Evan Calio, Morgan Stanley - Analyst [10]

 Good morning, guys, and congratulations, John. You will be missed, and congratulations to Robin in the new role.

 My first question is really a follow-up to the last one. Is there a limit on how much you will sell? I mean, there seems to be large portions of your portfolio that might not compete for capital versus the three Ds here, and maybe if you could just explore what are your limits for redeployment in the core areas, and is there -- if asset sales exceed that amount, is there a buyback scenario beyond the investment potential?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [11]

 I think today as we project what we are going to be trying to do over the coming years, the ability to invest in the Delaware, the DJ, and the deepwater Gulf of Mexico gives us exceptional rates of return, assuming oil prices are about where they are if not a little bit higher. Obviously if we pull back to $25 a share -- or $25 per barrel, rather, that will have an impact upon our investing. How we would deploy capital at that point, I think we would reconsider. I would not tell you today that we have an answer for that per se other than we would spend less.

 I think we have been very diligent about trying to stay within cash inflows with the way in which we invest and not put our balance sheet at risk, but I'm not really sure today that we see that there is a finite concern associated with investing in the Delaware, the DJ, in particular with respect to having an abundance of cash, as long as we are in a $50 to $60 per barrel oil price world. Assuming that for a moment, I think that you can continue to expect that we will reposition our portfolio more towards oil and away from natural gas, particularly dry gas, and that we believe there is an inability and within our portfolio for dry gas to compete for capital, given what we have in the Delaware, the DJ, and the deepwater Gulf of Mexico.

 And it's really not that we are naysayers on natural gas. It's just we are the beneficiaries of an extremely attractive position in both the Delaware and the DJ onshore, and as we like to remind people -- and I am sure you are well aware of this -- if we happen to be a little wrong and natural prices go up higher than we anticipate, it just makes the Delaware and DJ investments worth even more than what we had originally expected it to be with a more modest outlook for natural gas.

 Evan Calio, Morgan Stanley - Analyst [12]

 Okay. I think I understand that. And secondly, you substantially raised the Q4 production guidance on an apples-to-apples basis: 32,000 barrels a day. Is the lift there in enhanced completions and how much is activity? Maybe you could just walk us through the color and why the US gas volumes are up -- a little more color to the [four guidance] I think would be helpful.

 John Colglazier, Anadarko Petroleum Corporation - VP of IR and Communications [13]

 Sure thing. This is Colglazier. We took the midpoint of guidance from divestiture-adjusted from the second to the third quarter for the fourth quarter guidance, up about 3 million BOE to your point. A lot of that is in the US activity for the oil driven by the performance you have seen at Lucius as well the ongoing impact that we have from our Delaware Basin activities that Darrell talked about.

 And then we also have the corresponding gas and NGLs up as well, so it's really spread throughout the onshore portfolio. And then as you noticed, we also took out a partial lifting out of Algeria as well, just from a timing to tanker liftings out there.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [14]

 I think from a high-level perspective, if you think about it, we actually set production records not only in Delaware but in DJ and the Gulf of Mexico this last quarter.

 Evan Calio, Morgan Stanley - Analyst [15]

 Okay. Thank you, guys.

Operator [16]

 Doug Leggate, Bank of America Merrill Lynch.

 Doug Leggate, BofA Merrill Lynch - Analyst [17]

 Thanks, good morning, everybody. John, there's a lot of scared animals out there, so congratulations. Good luck.

 Guys, I wonder if I just could hit the disposal question again. So one of John's parting comments to us is if it doesn't have a D, it's probably not in the portfolio long-term, meaning Delaware, DJ, and deepwater. I'm wondering if you could just give us a broader kind of view as whether that's a reasonable characterization of how we should think about the future simplification of Anadarko. And I would also ask you to elaborate on what that means for some of the non-core international assets. And I've got a follow-up, please.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [18]

 Well, I think we keep trying to focus investors on the idea that in the near-term, growth and the deployment of capital are focused on those three areas you made reference to. It's not that we think that is the only place we are going to make investments and take consideration in the future, simply because a lot of our exploration -- as you know better than most, Doug -- it's there for option value. So it's very important that we continue to take opportunities where we think it is a good risk rate of return opportunity to simply look for places where we may be able to have option value in the future.

 Colombia could be just that. Mozambique could continue to be just that. It's not requiring much capital. Neither one are that capital intensive at this point, but it gives us option value for the future.

 But I think the point we're trying to make is that we are and have been for most of the last year and a half consistently explaining that we are moving away from natural gas as a focus for investing. We are moving into oil- and liquids-concentrated opportunities, and that we are trying to simplify the way in which we think about, particularly our onshore business. And that means that our focus is going to go into two particular plays, the Delaware and the DJ basins simply because they provide us the best rates of return within our portfolio. They compete for capital better than anything else that we have, and we believe if -- maybe we are just a little bit biased in this -- but we believe it creates the best rates of return in our industry for onshore assets.

 So we have industry-leading assets, we believe, within our portfolio. We also think that for the allocation of capital, the return associated with that, the focus on those three areas is particularly important in order to show growth, and that growth will largely be oil growth in the coming years through the balance of the decade.

 Doug Leggate, BofA Merrill Lynch - Analyst [19]

 I appreciate the clarification. I guess I will now point my follow-up is an exploration question, and it's we have now had a couple of well results in Cote d'Ivoire. You have not really elaborated much on your plans for an asset that you still carry a very large working interest in, and so I just wondered if you could give us an update as to your thoughts on how that potential project moves forward.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [20]

 Well, I think you've seen through the ops report and some of the commentary we have provided, we have had good exploration success there. I think the reason that we have not gone beyond that is we're still trying to understand what we believe to be the commercial solution for the discoveries we have had, in particular for the natural gas associated with the Paon potential development.

 I think once we have an understanding of the commerciality of that play, we'll talk more about the development. But at this juncture, I would describe the success we have had as quite good. But that does not correlate yet into a commercial discussion until we have a gas contract that we believe, in fact, gives us that development opportunity. So that may be the missing link, Doug, that you are seeing as a part of the narrative from us.

 Doug Leggate, BofA Merrill Lynch - Analyst [21]

 All right. Thank you, guys.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [22]

 You bet.

Operator [23]

 Scott Hanold, RBC

 Scott Hanold, RBC Capital Markets - Analyst [24]

 Good morning, thanks. And John, congrats as well. You had a pretty good run here. And thanks for all your help.

 If I could dig into your activity here going forward, one thing that was certainly different about this quarter versus the last several quarters is that there is not a lot of conversation on DUCs and specifically IDUCs. Can you give us your general sense on how you view that -- what was formally known as IDUCs with respect to how you deploy capital here going forward?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [25]

 First off it is DUC season. That was intended to be a joke. I think as we move into the balance of the year, I made reference to the fact that we are going to use some of the capital that particularly in the DJ basin -- we have talked about increasing there another 50 completions just based upon the capital we have saved by being more efficient.

 So as we move through this, we are moving into a higher price environment. We think fundamentally it all should continue to see improvement in the quarters ahead. As a result, you will see us continue to work more to, I will call it a working inventory level of drilled but uncompleteds -- not an abnormal level of that, because I think as each of the people on this call know quite well, if we have an ongoing sort of working capital position with respect to drilled, uncompleted locations -- so it's not like it will be completely eliminated, but I think, given the price environment that we see ourselves in today and projected in the coming quarters, we will convert more, as appropriate, of that current inventory into completions.

 But it's not a marked change. I think it's just what we have been trying to say through the course of the year that we will at the appropriate time start to convert our drilled, uncompleted locations into opportunities for production. And Darrell, please add to that.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [26]

 Yes, and Scott, to some extent we've done that at Wattenburg where we have actually -- we were down to one rig here in both the second and third quarters, yet we had 1.5 completion crews out there. So we have gone through some of the, at one time what we would have considered IDUCs, but I would tell you it probably makes sense today, as our activities pick up and our number of rigs, is that we get away from IDUCs, and it's really an inventory.

 When you look at Delaware, we were at six rigs for the summer, and we picked up a seventh rig here in the third quarter, and we picked up an eighth already in October, and we would like to go pick up a ninth. So as we look at our inventory, it's all becoming one, and we just look at it as wells to be completed. So I would sort of get away from the IDUCs. You had the same issue going on in Wattenberg where we had, like I said, the one rig. We now picked up two here in October, and it's very likely we'll pick up another rig, if not two, here before the end of the year as we go into 2017 and move our program forward.

 So again I would just caution you to maybe get away from IDUCs and look at it as just our inventory in front of our rigs.

 Scott Hanold, RBC Capital Markets - Analyst [27]

 Okay. That is great. And just to clarify, you mentioned -- it sounded like a little bit more price-related, but was there a little bit of, post the acquisition of the offshore stuff, was there a little bit of balance sheet in there, or is it totally a price related decision when you decided to kind of work through those IDUCs?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [28]

 No, it has been more price-oriented. If you think back to where we were early in the first quarter and the things that the industry in general is dealing with, I think we, along with others, just did not feel a need or weren't compelled to bring these into completion until we believed it was appropriate from the standpoint of where prices are now.

 You could argue one way or the other way if think that was a good strategy or bad. I think from our perspective we thought it was a much better strategy to bring these into completion when oil is around $50 versus $30.

 Scott Hanold, RBC Capital Markets - Analyst [29]

 Okay. That is great. And into the follow-up, Constellation, that acquisition in the offshore, that looks pretty interesting. Could you give a little color around that opportunity, what you all think you acquired in terms of what this thing can produce and the cost of doing something like that?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [30]

 Well, one of the attractive things about the Freeport-McMoRan oil and gas transaction beyond being able to increase, if not double, our position in Lucius was being able to look at the infrastructure that we were taking on for additional tie backs that were currently in inventory from Freeport or through being able to provide production handling agreements to third parties who need to come across the platform in order for something to be productive.

 We have gone from 7 operated facilities in the Gulf of Mexico to 10 now. Our ability to leverage those into opportunities like Constellation, I do not think that is going to be a one-and-done. I think we're going to see more of that, and maybe, Darrell, if you do not mind, elaborate just a little bit.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [31]

 In the case of Constellation, that is the old Hopkins discovery by BP. And where they stood, it's a [plies] thing, so it's not very expensive development, but it was hard to do a greenfield there, and with our Constitution platform just miles away, we are able to leverage our way in there for [one-third] working interest, and we gave them a PHA across our facility.

 And so you will see us drilling our first development well here next year in 2017, and we should see production in 2018. But again, if you are talking Pliocene, we would expect these wells to produce 15,000 barrels a day type wells. Exactly how many we will need to drill, we haven't worked through that. But it was a great opportunity for us, and like Al said, because of our infrastructure, it provided a great opportunity for us to leverage our way into this. And so we are the operator with BP being the other two thirds.

 Scott Hanold, RBC Capital Markets - Analyst [32]

 Thanks.

Operator [33]

 Brian Singer, Goldman Sachs

 Brian Singer, Goldman Sachs - Analyst [34]

 Thank you. Good morning. And John, congrats on your career and responsiveness to all of us.

 Al, your acreage position in the Delaware, in addition to the West ownership, puts Anadarko unique position to discuss the infrastructure needed to ramp up in the Delaware, and wondered if you could give us an update on the midstream CapEx that you see needed in the Delaware to meet Anadarko's needs, whether you see any pipeline or gathering constraints as Anadarko and others ramp up seemingly pretty aggressively? And how there may be differences or similarities for Anadarko's specific experiences versus industry's?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [35]

 Well, Brian, thanks for asking that question. I think what we did in the DJ Basin was, for us, a bit of a roadmap for what we are trying to do the Delaware Basin. The difference being the Delaware Basin, Don Sinclair is using a lot of third-party money. And by that I mean we're transmitting or processing volumes for third parties. As a result, it's not as capital intensive net to Anadarko as it was in the DJ Basin, where we were largely, if not in some cases exclusively, the equity behind system.

 So consequently here, we are a bit more of a third-party provider of processing and transmission services or gathering. And consequently the net capital requirement for Anadarko is a lot less as we take, what we believe, is the play-book in the DJ and put it to work in the Delaware. That is why you have seen us make acquisitions like we did just about two years ago. That is why you have seen us organically add to what we have as well as what we acquired, and that is why we have been fairly focused on these various Ramsey plants to increase our production and processing capabilities.

 Darrell has a fairly aggressive plan for drilling upstream stream dollars behind these plants, and he has, I would say, a more modest need on capital as it relates to midstream. Darrell?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [36]

 Yes, the only comment I would make, it's not without a challenge, whether it's being done by APC Midstream or West. We are investing in the infrastructure, and to where we can take advantage of third-party opportunities, we're doing it. But if you -- again, going back to the ops report, you can see the scattered fashion in which we are trying to delineate the field, it does create some challenges on the facility side.

 And so we will still be trucking some of our volumes, but the extent we can it's giving us the opportunity to really extend that footprint, I think, from a bigger picture standpoint. And as we look into 2017, your question on capacity constraints, we do not see it. We think we will have no issues getting out of the basin in 2017, even with the aggressive program we probably will come into the year with.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [37]

 And that is with all the yield streams Darrell's making references. It's not just gas, it's not just natural gas liquids, it's not just oil. We think we have good takeaway capacity with each of the principal yield streams.

 Brian Singer, Goldman Sachs - Analyst [38]

 Got it. Thanks. And then I guess just shifting more to the outlook for 2017, know that we're still some months away from when you would have your guidance, but can you just kind of talk about how you are thinking about how the capital program and ultimately your expectations for growth would differ if, let's say we're sitting here in three or four months at a similar oil price to the $46 to $47 we're at, versus if we are $5 or $10 higher?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [39]

 You know, Brian, I do not think it will really affect the principal investing strategy that we are talking about this morning. I do not mean to sound like a broken record, but it's going to be Delaware, DJ, and deepwater Gulf of Mexico that is going to take on the lion's share of our capital, and let's call it a fairly static or ceteris paribus environment for operating conditions.

 So consequently, our ability to put more capital to work, either through cash flow or through cash on hand, we have a lot of flexibility. I am real proud of what Bob Gwin and what our corporate development folks working with our asset teams have been able to accomplish with the monetizations we have achieved to date and things that we hope to do in the future. So whether it's cash flow or the use of cash at a point in time, we have the capacity today to do things that we have talked about wanting to be in a position to do going into 2017, believing that fundamentally we should see better price support for oil.

 And if that is the case, I think you'll see us cycle the cash faster. You'll see us likely increase the types of things we have been talking about in the Delaware Basin first. I think Darrell probably would stand up rigs in the Delaware ahead of DJ to some extent. There is a lot of opportunity we see in the near term in the Delaware before we go into full development mode. But Darrell, please add to that.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [40]

 No I think you're right, and that is my comment. We have picked up that eighth rig in Delaware and look to pick up a ninth here shortly, but it's not to take away from DJ. We've got the three rigs now. We will probably pick up a fourth or fifth rig potentially by the end of the year.

 We have gone out and said that we look to grow oil 10% to 12% in a $50 to $60 world. If it's a little bit less than that, I would guess it would just drop a little bit more. It just depends on how we're going to spend the cash on hand. But in either case, I think you can expect between the three Ds that we will see considerable oil growth over the next five years.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [41]

 I know you know this, but we have a very high oil cut in our position in the Delaware. This is not a lot of natural gas with a little bit of liquids. This is a big cut that's oil that gives us tremendous economics at the wellhead and, as a result, gives us really good cash flow to recycle.

 I do not think that we today have a better position to put capital to work as a company, and I would argue that I'm not sure in industry today at, call it $50, anyone has a better position onshore than what we've got in the Delaware Basin.

 Brian Singer, Goldman Sachs - Analyst [42]

 Got it. So I think what we're hearing here is that there would be some flexibility, be it a $55 versus $45 oil price, but maybe not a -- the fact that you'll have a lot of cash on hand, that may lead to a more stable CapEx program regardless of the oil price.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [43]

 I would say it's steady to up.

 Brian Singer, Goldman Sachs - Analyst [44]

 Great. Thank you.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [45]

 You bet.

Operator [46]

 Charles Meade, Johnson Rice

 Charles Meade, Johnson Rice & Company - Analyst [47]

 Good morning, Al, and to the rest of your team there. I wonder if you could lay out for us what you think for Mozambique success would look like in 2017. What milestones or progress you think we can look forward to for that?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [48]

 I appreciate you asking the question, and it is one of the things a lot of times that is not well understood because it's not that many moving parts that we are looking for, if you think about trying to be a fairly compartmentalized thinker.

 In 2016 into 2017, there are not that many moving parts that we're looking for in terms of trying to accomplish. And I might let Mitch, if he does not mind, elaborate on that. But it's not like we are trying to do everything at once. We have a very compartmentalized view on what needs to be done ahead of us

 Mitch Ingram, Anadarko Petroleum Corporation - EVP, Global LNG [49]

 Thanks, Al. Charles, with the support of the Mozambique government, we have made significant progress during this year really on important government agreements. The suite of agreements that we term legal and contractual framework have been socialized with the government, and we expect approval of those in the near term.

 We're also well advanced with our planning and preparation for resettlement. We submitted a resettlement plan to the government in June, and after a few months of discussion with the government, that plan is being affected, and we again await approval of the plan in the near future.

 When both of these elements are approved in terms of legal and contractual framework and resettlement plan, that will allow us to then progress further with our buyers, converting our heads of agreement to sales and purchasing agreements and it will also take forward all the arrangements for project finance. So our immediate priority just now is to gain approval of the suite of agreements and resettlement plan, and then it will progress the further work towards FID.

 Charles Meade, Johnson Rice & Company - Analyst [50]

 Got it. That is helpful detail, Mitch. And if I could ask you as a follow-up, going back to your theme of the three Ds, Al, I feel like a lot of the discussion has been around the DJ and the Delaware. I'm wondering if you could talk about the prospects to apply more investment to your international deepwater portfolio?

 My impression is that exploration projects such as what you have going on in Colombia do not necessarily yield to increased investment. But maybe you have a different point of view, or alternatively are there opportunities for you guys to replicate the kind of deal you did with FCX, either in the Gulf of Mexico or somewhere else in the world?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [51]

 Well, if I could just use the comment sort of in a broad sense, we do not look at exploration as sources in the near-term for production. Really our exploration activities are option value for the future, and as a result we really do see things that we are doing today in Colombia as having option value.

 Now once we determine whether or not we have a commercial opportunity, and we want to go to development, then we start to figure out where it is in the queue over our time horizon for production. But the reason for a lot of the answers today about where we would put incremental capital, when you have got the positions that we do onshore in the Delaware and the DJ, that provides us extremely attractive rates of return, and it also gives us the type of line-of-sight growth that we find very attractive from the standpoint of how we enhance shareholder value.

 Longer-term, we need to continue to find ways to look for new opportunities. What we see in Colombia excites us both in terms of what we are currently drilling as well as what we see ourselves drilling through the balance of the decade. So that option value is something that we'll continue to look for.

 There are other places, and certainly the Gulf of Mexico, as you made reference to the FCX deal -- I do not know there is another one around the corner. Bob Gwin and a lot of people did a really good job with that one. We're certainly in business if there are other people that find the Gulf of Mexico not as attractive as we do. We would be happy to try to buy some more assets for 1.5 times next year's cash flow.

 Charles Meade, Johnson Rice & Company - Analyst [52]

 Got it. Thank you, Al.

Operator [53]

 David Heikkinen, Heikkinen Energy

 David Heikkinen, Heikkinen Energy Advisors - Analyst [54]

 Good morning, you all. I was thinking about Mozambique and kind of the path forward. And I was considering, do you think that your realization and pull forward of value and the subsequent reduction of working interest to the 26.5% has actually impacted any potential buyer and moved Anadarko more towards a higher chance of developing the asset?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [55]

 You know, David, you've probably had more conversations with people in that than I have. I can honestly tell you no one's ever had that conversation with me, so it would be pure conjecture on my part. I do not know that I even could come close to telling you whether or not I have view on that.

 I know that when we executed the 10% working interest sale down, it was a part of the play-book that we did not want that much working interest if we were to take FID. Again, I sound like a broken record this morning, but Bob Gwin did a great job selling that down to ONGC.

 As a result today, we still -- even with all the capital we have spent in Mozambique, if you just think of it on a project-level basis -- we are still $300-plus million to the positive in terms of what we have invested there versus what we've taken in. So consequently, again on a project-level basis, we have done a pretty darn good job of managing our exposure from a cash or capital perspective and still give ourselves a lot of option value around whether or not we take FID.

 If someone decides that they like it better than we do, or they see more value than we do, we are not married to it any more than we are married to any other asset in our portfolio. But we do believe today that we have the skills, the capability, and we also believe the opportunity, if we take it to FID, for it to be a game-changer for our company. And so consequently Mitch looks at this every day with a very balanced view of what is best for Anadarko in the next decade.

 David Heikkinen, Heikkinen Energy Advisors - Analyst [56]

 Cool. On another consideration, the script in the DJ was asset swaps, and then drilling longer laterals has been important in developing all the oil plays. I look at your Delaware position and then the purchase price at what assets are transferring for and your comments about higher and higher values that you have some incongruity or juxtaposition of ability for Anadarko to assign that value.

 Can you talk about your ability to drill longer laterals as opposed to single section laterals given the crosshatched pattern on your assets and the likelihood of swaps?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [57]

 As you know, that play -- we'll call it that because it's not just one particular zone, as we talked about this morning. It's a stacked pay opportunity, and consequently there's lots of things that we're looking at today that will be a part of the future. But the one thing that we are working on most is the Wolfcamp.

 So just focusing on the Wolfcamp, yes, we would love, as things start to settle out in the Delaware Basin, thinking about blocking up with people and making it a little more attractive. Given the velocity of change in the basin, it makes it a little more difficult today. So I think sort of just in the evolution of the basin's development, it's unlikely we're going to see people doing what we did in the DJ with Noble and doing something that was a win-win for both of us.

 But I'm sure Darrell and his folks, Brad and others, have been trying. It's early in the evolution or the life cycle of the basin's development.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [58]

 Yes, David, this is Darrell. There is no doubt we have better economics as we get into the longer laterals. And I think if you look at the program this year, more than 60% of our wells were in excess of 7500-foot laterals. And so we have done trades to give us that ability, and we continue to work trades. And some of them are not big enough to come out and talk in the market, but those things are happening every day.

 To Al's point, they are not always easy because some of these leases can be burdened different ways, and so we have got to work through that. But I think it's in everyone's best interest to do that, and we are finding a lot of people cooperating. So we will continue to work it because, again, in an ideal world we are going to be drilling 10,000-foot laterals. It's better economics.

 David Heikkinen, Heikkinen Energy Advisors - Analyst [59]

 How much of your acreage now is single-section prone? I guess I'm trying to think about a split of single section (multiple speakers) longer lateral available.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [60]

 Yes, I do not know that I have that exact number. Like I said, more than 60% of our wells this year being drilled are in excess of 7500 feet. So I do not know that it is important where we are today as much as it will be where we are going and getting some of these trades consummated.

 David Heikkinen, Heikkinen Energy Advisors - Analyst [61]

 Okay. Thanks, guys.

Operator [62]

 Bob Brackett, Bernstein

 Bob Brackett, Bernstein - Analyst [63]

 Hello. Congrats, John. And quick question on the Delaware. You've got a JV partner out there. How does that partner's goals align with your goals? How does capital allocation work? Is that a relationship that is built to last, or are there ways around that relationship?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [64]

 Well, it's certainly an atypical relationship in the sense that our partner there stepped into the position by virtue of an acquisition they made from Chesapeake. Consequently, it was not like this was contemplated day one that we would be in a joint venture together.

 So far, I have nothing but compliments to pass on. I mean, Shell's been a good partner. We've talked to them on many occasions about things that we can do, improve efficiencies out here, and I think they have been very receptive. So I would not paint them with a brush that they are a major and consequently unable to understand how to harvest value from the Delaware Basin.

 Bob Brackett, Bernstein - Analyst [65]

 Okay. Great. Thanks. And then a follow-up on exploration. In a sense, you've got a fairly obvious runway of high returns in the DJ and in the Delaware and in tie backs in the deepwater GoM. When you're going out and doing pure exploration, are you incented to go high-risk, high-reward? So in other words, if you discover a fair to middling discovery, it might not compete for capital, but a big blockbuster would. Does that guide your exploration strategy?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [66]

 I think our exploration strategy has always been one where we want to make sure that we are taking opportunities statistically to give ourselves a chance at things that are needle-movers. I think that is what we have historically done. I think we will continue to do that.

 And we have 16 million acres offshore Colombia because we see a lot of prospectivity there and a lot of running room if we are correct. So I think philosophically the types of things that we will do with exploration, whether it's in the Gulf of Mexico or internationally, are fairly similar. In the Gulf of Mexico today, given the price environment that we are in, if we do not have tie back to existing infrastructure, we are not out trying to drill opportunities that require greenfield development as a result. So that may be where the two are little bit different because we're dealing with a much higher cost per well.

 Typically we are in a pre-salt environment with the exploration opportunities, whereas in many cases internationally, we're post-salt where the cost to drill a well is substantially less, and so therefore if we are successful, the development drilling associated with any development opportunity is a little more economically positive from the standpoint of the price environment.

 So I do not think from a standpoint of Anadarko's view of exploration or my hope for what we are able to deliver on exploration is any different today than it would have been in 2013 or 2014 in a different price environment.

 Bob Brackett, Bernstein - Analyst [67]

 Okay. Thank you.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [68]

 You bet.

Operator [69]

 David Tameron, Wells Fargo

 David Tameron, Wells Fargo Securities, LLC - Analyst [70]

 Good morning. And John, best of luck to you. There is a reason you won that IR award multiple years for best IR. You made all of our jobs easier, so we appreciate all the help you have given us over the years and the best of luck.

 John Colglazier, Anadarko Petroleum Corporation - VP of IR and Communications [71]

 I will miss you, David.

 David Tameron, Wells Fargo Securities, LLC - Analyst [72]

 Al, going to the DJ, or Darrell, whoever wants to talk about this. If I just look at your production over the -- just over the last year -- the oil has kind of stayed flattish, NGLs and gas have continued to grow, so I guess a two-part question. One, should we see that reverse as the rig counts start to climb again, or is that just a function of the slowdown in drilling and some of the gas GORs climbing in the out-years?

 And then second, I know some of the other operators may have potential issues next summer as [partially as it relates] to line pressures up more in that DCP, the middle to the upper part of the basin. How do you guys -- I assume you're okay with your infrastructure, given what you did a few years prior, but how would you answer those two questions?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [73]

 Yes, I think as you look in the next year, we do not see a problem. Again one of the advantages to West and going into Saddlehorn, we've got White Cliffs, we've got access out of the basin, we've got Lancaster plants. We are in pretty good shape. So we do not actually see any of those pressures that you're talking about.

 In terms of the well count and maybe the oil ratio, I do think you are seeing the impact of the lack of capital spend this year in Wattenberg. And so as the field continues to produce, it does go to a higher GOR. And generally we have been able to offset as we have brought in -- drilled more wells and put new wells on because they are a higher oil cut. And so if you just think about we went two quarters in a row with one rig, so we do not have a lot of new production coming on.

 I will have to say that the field guys did a fantastic job hitting the records they did. Yes, a lot of it was gas, but I can tell you that the peak we hit in the third quarter after such little activity was a fantastic accomplishment on their part. But as we stand up more rigs, and we bring more wells online, you're going to see that turn again. You should start seeing our oil production go up. It may not be by year end or even first quarter, but I think we would anticipate next year to reverse that trend, and you'll see the oil production start rising again.

 David Tameron, Wells Fargo Securities, LLC - Analyst [74]

 Okay. That is all I've got. Thanks.

Operator [75]

 Ryan Todd, Deutsche Bank

 Ryan Todd, Deutsche Bank - Analyst [76]

 Thanks. Good morning. Maybe a couple of details on the Permian. Can you talk a little bit -- we talked some about longer laterals. What are you seeing in terms of the productivity increases on the longer laterals? Should we expect kind of a constant EUR per lateral foot versus what you communicated on the singles?

 And then maybe for spacing in the Wolfcamp, what are you currently assuming in the base case on the Wolfcamp spacing, and then what are you currently testing? I know you're talking about going deeper into the lower Wolfcamp. I mean, where you think we may eventually go in terms of wells per unit in the Wolfcamp there?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [77]

 You know, I am to figure out where I want to start on there. With these laterals, I mean, again, we're going to be pushing to do those, but some of the things that are increasing our EUR has to do with the type of completions we are doing. At one time our standard completion was sort of 1400 pounds per foot. Today I would call that standard completion 2500 pounds for per foot. And I can tell you we are experimenting with sand and water rates double that.

 So we are not sure where that is going to go. We'll probably have more to deliver or more to talk about in March. But we are seeing the increasing EURs as we continue to pump more sand and water. And so we will see where that -- the no-return is on that, but we are seeing good things right now. And that is really the cause of our increase in EUR at this point is just the change of our completions. I forget your second question was --

 Ryan Todd, Deutsche Bank - Analyst [78]

 It was on spacing in the Wolfcamp, where you think we may eventually go in terms of how many wells you're able to put into a unit in the Wolfcamp. What are you testing right now?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [79]

 Well, we are doing number of tests. We've got a 20-well test going, and so a lot of that's going to be driven by economics to the extent you have interference. So I think it's just too early to tell right now, because again, if you look at Howard drilling these wells, we're not doing too many tests where there's big clusters. We do have the one 20-well test going on, and that should give us a lot of information, and again I would say by March hopefully we'll have more to tell you on that.

 Ryan Todd, Deutsche Bank - Analyst [80]

 Great. Thanks. Maybe kind of leave with one quick one on Shenandoah. I see you made a concept selection of a semi-sub. Any thoughts around the concept selection, maybe the passive potential an FID, and if you think -- can a standalone development like Shenandoah really compete with the tie back opportunities you have in the Gulf? And I will leave it there.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [81]

 Yes, this is Darrell. We had a couple of competing options there, and so we are really in the pre-FEED. We are not at a point to make an FID election at this point, but we felt that overall the semi-sub was going to garnish us a little more flexibility in what that answer looked like, so we decided just to go down to the one option as we continue our pre-FEED efforts.

 But we are far from making an FID decision today. We will be looking at drilling that sixth well here by the end of the year. We will be getting on it. So we look forward to seeing those results.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [82]

 I think it would be fair to say that as we contemplate sanctioning Shenandoah, we will be mindful of what we can do on the margin with the capital. And it will be an allocation like it would be for anything where we are looking at what the rate of return is as well as the cash-on-cash return.

 A lot of times our industry's very focused on rate of return and not cash-on-cash because, as everybody knows on this call, it's great to have an internal rate of return that's 50%, but if you get the cash back in a year, and you're pretty much done, that is a hard treadmill to continue. So we want a cocktail or a mix that gives us really good rates of return with really good cash-on-cash characteristics.

 So there could be a role that Shenandoah or another option like that plays in our portfolio. So I do not want to leave people with the view that allocation of capital is purely an IRR-driven derivative. Consequently, we have a portfolio to run, and we will consider whether or not at the time of sanctioning it makes sense to commercially develop Shenandoah along with our partners or not.

Operator [83]

 Paul Sankey, Wolfe Research

 Paul Sankey, Wolfe Research - Analyst [84]

 Hello. Good morning, everyone. John, congratulations.

 Could I just sort of repeat the question, how does Exxon's move change Mozambique? Thanks.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [85]

 Well, I know nothing more than what probably what you do and may not know as much as you do. All I know about Mozambique and Exxon Mobil is what I read in the paper.

 All I can say to that is simply if Exxon Mobil were to contemplate and conclude a transaction with ENI and the government, we would sit down and understand better what their plan of development is. Today it would be pure conjecture on my part, Paul, to weigh in on that, simply because all I know is what I read in the paper.

 Paul Sankey, Wolfe Research - Analyst [86]

 Understood. And again, this is something of a follow-on question, but the recent acquisition you made -- could you just give us the very latest on where you stand with that deal and how it has changed things for you? Thanks.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [87]

 Well, nothing has really changed. I think we've always projected a fourth-quarter close. We seem to be very much right on the timeline or track that we had anticipated. Consequently we see this as a December close. We have found nothing in the closing process that is concerning. The folks at Freeport-McMoRan have been exceptional to deal with, and as a result, we anticipate getting it closed and having a part of Anadarko as we move into 2017.

 Paul Sankey, Wolfe Research - Analyst [88]

 Great. So the noise that we heard around debt-holders on the Freeport side is not a concern to you?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [89]

 It's not our assessment that that's our issue. I think that is an issue between FCX and the fixed income investors and the conversation they are having. It's our assessment that frankly that does not create an impediment for us to close.

 Paul Sankey, Wolfe Research - Analyst [90]

 Understood. Thank you.

Operator [91]

 John Herrlin, Societe Generale

 John Herrlin, Societe Generale - Analyst [92]

 Thank you. Happy hunting, John.

 Regarding Colombia, how long will that well take to reach TD.

 Ernie Leyendecker, Anadarko Petroleum Corporation - EVP, Internation Deepwater Exploration [93]

 Hello John, this is Ernie Leyendecker. We're not there yet. We're just finishing up our program in West Africa right now, and we expect the rig will be demobilizing from that prospect over there and get to Colombia within the next month or so.

 We've got a two-well program set up there. We are making strides in reducing the time to drill the wells in Colombia after our initial campaign. So the next well we will get to will actually top set the first well and go over to drill the Purple Angel well. And that's probably going to be about a 45-day well, give or take a few days.

 And as we carry into the new year in 2017, we will move over and drill another prospect in a similar section there called [Gorgon]. So they are not long wells. We will continue to get up the learning curve on drilling wells in Colombia, and we look forward to seeing those results.

 But what I would remind you of a little bit is we are really looking forward to getting over to the coal area where we shot the 30,000 square kilometers of 3-D, and we have just got a fast-track volume in, looking for the final volume in by the end of next year. And our goal is really to accelerate drilling activity over in that big chunk of acreage in the ultra-deepwater offshore Colombia. Looking for oil of course there and very hopeful that we have got a thicker source rock and varied a little bit deeper, so we are anxious to get over there on that particular acreage.

 John Herrlin, Societe Generale - Analyst [94]

 Thanks. One other one. Al, have you been surprised about the resiliency of the natural gas sales market?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [95]

 Well, you know I have been natural gas bear for quite a while. I think we always thought that gas would find its way up around $3, and it would find the ceiling there, and to a large extent, that has been correct. We have always believed around $3 that there was just an impediment from a demand standpoint for now.

 But I think it also was a reason a lot of people -- in January when we talked about selling our natural gas properties, and people kind of looked at me cross-eyed that we would actually have a market for it, there has been a lot of very successful private equity people that have taken a view on natural gas and have done quite well with it.

 I think for a company like ours that has the assets that we do and our access to oil and liquids that we do, consequently, it's not really in our best interest to pursue natural gas. It doesn't give us the same wellhead margin. It doesn't give us the same ability to have scalability. And the returns, coupled with the scalability, just always tilt in the favor of the DJ and the Delaware for us.

 John, I just have to say, I do not mind being wrong, but I think our view is that it would take natural gas to approach $6 before it would probably displace our interest investing in oil. I do not see that happening.

 John Herrlin, Societe Generale - Analyst [96]

 Thanks.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [97]

 Yes.

Operator [98]

 Pearce Hammond, Simmons Piper Jaffray

 Pearce Hammond, Simmons, Piper, Jaffray - Analyst [99]

 Hello, good morning. And congrats, John. You'll definitely be missed. And congrats, Robin and her team and their new role.

 My first question, are you currently experiencing any increase in service costs, and what are you anticipating for service cost inflation for next year?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [100]

 Yes, Pearce, this is Darrell. I would say not. To the contrary, I think as the year went on, we were pleasantly surprised that we were able to get some of the service costs down a little bit. Now I think that is leveling out, but as we have stood up more rigs and contracted more equipment, we are not really seeing that pressure today.

 So my guess is as oil continues to go up, if it gets up around $60, I think we may see some of that. But I think there's enough equipment still on the ground and crews willing to work and get part of the business that we are not going to see that pressure for a while.

 Pearce Hammond, Simmons, Piper, Jaffray - Analyst [101]

 Great. And then my quick follow-up, is Jubilee exceeding your expectations for the second half of the year? At Q2 earnings you stated that you thought that second half of the year, Jubilee would average about 85,000 barrels a day. Q3, it was about 91,000 barrels a day, and it looks like you took up your 2016 full-year production guidance in Ghana.

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [102]

 I would say that we are very pleased with what is happening there at Jubilee. We are continuing to work through the turret issue, but the shuttle-tanker system that they set up is working well. And we are on a way to try to get to a permanent fix. We're still trying to get the temporary fix done by the end of the year, but I would say all-in-all, the activities there are going as well as we would have expected.

 Pearce Hammond, Simmons, Piper, Jaffray - Analyst [103]

 Thank you.

Operator [104]

 Jeffrey Campbell, Tuohy Brothers

 Jeffrey Campbell, Tuohy Brothers - Analyst [105]

 Good morning, and first I want to say happy trails to John, and have a lot of fun.

 Al, you talked earlier about the importance of monetizing the nat gas [at Fawn], but I was surprised by the large oil cut and the drill stem test, and I was just wondering, is that typical of the play as a whole, or is there quite a of bit of mixed variability across the field?

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [106]

 Well, we are very fortunate to have liquids in the system, and so you're right for highlighting that. But I do think, though, that our commercial decision will likely hinge on just the type of gas contract we can enter into, because without that, the oil becomes a byproduct. You really need to be able to move the gas into a market at a price that is attractive in order to evacuate the liquids.

 Jeffrey Campbell, Tuohy Brothers - Analyst [107]

 Okay. Understood. And my quick follow-up is the ops report highlighted a Heidelberg well that appears to define the northern limits of the field. I was just wondering, how was this result relative to your pre-drill expectations?

 Darrell Hollek, Anadarko Petroleum Corporation - EVP, Operations [108]

 Yes, this is Darrell. I can tell you it was a disappointment, but probably more than that it was really a surprise. Based on the pre-process seismic that we had, we fully expected this to be good. So it sort of hurts the northern end of that field.

 I can tell you consequently, we are sidetracking that well now close to the discovery well. So we know it's good there, and so the thought there is we will complete this well. We'll have it on the first quarter. So we really see little impact in 2017 from a volume standpoint.

 But we've got to re-map this thing and try to better understand it. It may have reserve impact, and we will work through that before the end of the year. But I think as far as we are concerned, we do not see an impairment on our side based on our investment here. But it was truly a disappointment and a real surprise as to this being wet there, so is sort of takes away from the northern end of the field. We still are very high on the south end of the field and Heidelberg as well so there will be future wells.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [109]

 Darrell's right. Just to take one other comment. We have been surprised by it, but I will say that if we end up finding ourselves having to take a reserve right now, it will be very modest.

 The reason we have not impaired to date, if you recall, we promoted out the development drilling here, so our cost basis here is a lot different than our partner's. And therefore, in addition to the cost basis, we also have the advantage of the way it's carried from an impairment standpoint reserve adjustment, if one's needed. So in the scheme of things for us, it's a very small adjustment, if it turns out to be that is the case.

 Jeffrey Campbell, Tuohy Brothers - Analyst [110]

 Okay great. Thanks. I appreciate the color.

Operator [111]

 This concludes our question-and-answer session. I would like to turn the conference back over to the management team for any closing remarks.

 Al Walker, Anadarko Petroleum Corporation - Chairman, President and CEO [112]

 As I said to start, this is a bittersweet day. We had a great quarter. A lot of people did a wonderful amount of work this quarter and this year for what has been a very turbulent period in our industry's colorful history.

 But we are going to miss John. He's done, as I said earlier, a tremendous job. He has been a fault leader. He has been someone who, I think, has taken our industry in terms of how investor relations should be conveyed and conducted to a level that has not been, in my estimation, done previously. It's been a pleasure for the 10 years that he has been in the job to work with him, and we have every confidence that has got Robin ready to go. And as they say in East Texas, she is sitting on go and we are ready for her to step in a jobs that have been before her.

 So it's bittersweet today. We're all going to miss John, but I will promise you she is capable of stepping in as he has trained her quite well, and she is very capable in her own regard. So John, we're going to miss you. And Robin, look forward to working with you next quarter.

 And thank you, everybody, for today. We will talk to you soon. Good-bye.

Operator [113]

 Thank you, sir. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines.