Anadarko Petroleum Corp.’s (NYSE: APC) average oil production in the Permian’s Delaware Basin jumped 88% during second-quarter 2018 as the company works to add more wells to pads and gain overall optionality by eyeing opportunities in Wyoming’s Powder River Basin.

“Results in the Delaware Basin are the engine driving much of our recent success, and we are just getting started as we pace our midstream takeaway with our upstream development,” Anadarko CEO Al Walker said on an earnings call Aug. 1. “Our infrastructure buildout achieved several key milestones during the quarter with the startup of our Reeves Regional Oil Treating Facility [ROTF]” and commissioning of the North Loving ROTF subsequent to quarter end.

The company reported a day earlier that revenue increased to $3.29 billion for the second quarter, up from about $2.7 billion a year ago. U.S. onshore oil volumes grew by 47%, adjusted for divestitures, to 169,000 barrels of oil per day (bbl/d). Accounting for most of the growth was the Delaware Basin, where sales volumes were 62,000 bbl/d, up from 33,000 bbl/d a year ago.

Anadarko plans to begin production from its first full-pad development at Silvertip-A in Loving County, Texas, in second-half 2018. Twelve extended-reach lateral wells over a half section across five target zones have been completed and are awaiting the Loving ROTF and associated infrastructure build, which are needed to bring the wells online, said Danny Brown, executive vice president of U.S. onshore operations. He noted the company installed additional sensor equipment to monitor downhole performance and get more data on production flow.

This comes as the company works to bring Delaware well costs down from $10 million to $8 million by increasing the number of wells per pad to between four and five, something Anadarko hopes to accomplish within the next two to three years.

In addition, “We have been working our Gen 2 completions, which are essentially like some others in the industry—higher water content, higher proppant, closer spacing,” Brown said. “We’ve been pleased with the performance we see there. I anticipate that will be our completions style as we move through the foreseeable future.” He later added that the company has been pleased with the performance of individual wells as it relates to downtime and field performance.

“That’s one of the reasons why you’ve seen us shift our capital over the course of this year,” Walker added. In all, Anadarko increased its full-year capital investment expectations by $250 million from previous guidance of between $4.5 billion and $4.8 billion.

But don’t expect to see a ramp-up in activity in the Denver-Julesburg (D-J) Basin, where oil production also grew—reaching 99,000 bbl/d in the second quarter, up from 76,000 bbl/d a year earlier. New wells are performing as previously communicated, Brown said, after noting longer laterals take longer to clean up which impact production levels.

“We’re actually going to flex down our activity in the D-J a bit,” dropping from three to two completion crews this month—a move that will impact the well count and production volumes. “We’re anticipating that our D-J production volumes will go from 30% year-over-year oil growth to about 20% year-over-year oil growth. But that is going to be balanced by Delaware.”

Powder River Basin

Meanwhile, Anadarko is eyeing other onshore opportunities in Wyoming’s Powder River Basin, where the company said it has made about $100 million worth of leasehold acquisitions and amassed more than 300,000 acres for less than $2,500 per acre.

The company is currently focused on the Turner Formation, having already drilled wells in the play with rates exceeding 2,000 boe/d and oil cuts above 80%, according to Walker.

“Once we’ve completed our appraisal work and finalized our plan of development and midstream evacuation, we expect this basin to eventually compete for capital within our portfolio, increasing our optionality,” Walker said. “During this time of transition, we will continue to look for ways to actively add to our footprint and where possible lock up the acreage.”

The position gives Anadarko flexibility in case the company wants to move quicker in the basin, Walker said. “Flexibility and having more than one option with capital deployment certainly plays to the benefit of most companies that have that optionality,” he said.

Anadarko also has assets in the U.S. Gulf of Mexico (GoM), where its vast network of facilities has enabled tiebacks to flourish. But the company’s GoM second-quarter production was impacted by routine maintenance and planned downtime to tie back future wells to platforms. GoM sales volumes averaged 114,000 bbl/d for the second quarter, down from 112,000 bbl/d.

A ramp-up is expected in the fourth-quarter when facilities are back online and flowing, according to Mitch Ingram, executive vice president of international deepwater and exploration for Anadarko. GoM production guidance remains at between 140,000 boe/d to and 150,000 boe/d for 2018.

First production from Anadarko’s second tieback to the Marlin facility in the Dorado Field along with the Holstein and Caesar/Tonga developments in the Green Canyon area are expected in the third quarter, the company said in its latest operations report. First production from the Constellation development is anticipated in late 2018 or early 2019, with Hadrian North in the Keathley Canyon area set to begin production in 2019.

Velda Addison can be reached at vaddison@hartenergy.com.

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