The stars aligned for Anadarko Petroleum Corp. in 2009, despite tough global economic conditions and volatile oil and gas prices. Under the leadership of chairman and chief executive officer James T. Hackett, the Houston mega-independent balanced rising onshore shale-gas potential, mega-projects being developed offshore and nine deepwater discoveries.

Last year, the Houston company generated total shareholder returns of more than 68%—and did so while reducing lease operating expenses by 32%. It cut overall spend on near-term projects by more than $1 billion versus 2008. Even so, it generated 7% sales-volume growth year-over-year.

Anadarko’s deepwater exploration run has been outstanding, adding 360 million barrels of oil equivalent (BOE) in net unrisked resources. All told, it added 314 million BOE of proved reserves, before price revisions. The company anticipates a compound annual growth rate of 7% to 9% over the next five years.

This year it is targeting as many as 30 high-impact exploration and appraisal wells in the Gulf of Mexico, and offshore Africa, Southeast Asia and Brazil. Development of three multibillion-dollar projects continues, including the world-class Jubilee Field off Ghana, where first oil is expected in late 2010. The Caesar/Tonga complex in the Gulf of Mexico is expected online in the first half of 2011, and in Algeria, El-Merk production is expected by year-end 2011. These projects will add about 60,000 BOE per day net, by 2012.

Morgan Stanley analyst Stephen I. Richardson likes what he sees. After the company’s March analyst’s day, he wrote, “APC plans to spend $5.3- to $5.6 billion, while delivering 3% to 5% production growth in 2010 (following the results of first-quarter 2010, the company raised its production guidance range for the full year to 4%-6% relative to 2009). With a strong balance sheet ($3.7 billion of cash on hand and $1.3 billion of committed revolver) and strong operating position (about 70% of 2010 production hedged), we see little risk to this guidance.”

In February, Anadarko inked a joint-venture agreement in the Marcellus shale with Mitsui E&P USA LLC. Mitsui will be a 32.5% partner, primarily in north-central Pennsylvania. For approximately $1.5 billion, Mitsui will earn 100,000 net acres in exchange for funding 100% of Anadarko’s share of development costs in 2010, and 90% of those costs thereafter, with an estimated completion of all obligations by 2013.

Also last year, the Environmental Protection Agency recognized Anadar­ko as the Natural Gas STAR Processing Partner of the Year and gave it the Continuing Excellence Award. Anadarko’s headquarters was the first office complex in The Woodlands, Texas, to earn LEED® certification for energy efficiency.

Oil and Gas Investor spoke with Hackett recently about how Anadarko could be affected by the Deepwater Horizon oil-spill tragedy (it owns a 25% working interest in BP’s ill-fated Macondo well), and how the company continues to create success around the globe.

Investor: You are the largest holder of offshore acreage of any independent. How does the Gulf tragedy affect Anadarko’s drilling plans offshore, or your pace?

Hackett: We want answers as much as anyone as to the root cause of the accident, and I continue to pray for the families of the 11 men who were lost, as well as for the affected communities along the Gulf Coast.

While no one can say with any certainty how this may affect the permitting process or regulatory environment in the long term, new permits have been restricted in the short term and, of course, that impacts everyone in the Gulf. As an industry, we must operate safely and take action to protect the environment.

As a nation, we will continue to need these resources. They are crucial to national security and to our domestic energy supply for American consumers. Recognition of that, and the part industry plays in job creation, is something we must remember, as we pursue balanced solutions.

Based on what we know today, we are not currently making any major changes or interruptions to our capital-spending programs or strategic objectives. However, we will not hesitate to take appropriate steps to protect the company and its financial health.

Investor: Are your employees working in BP’s “war room”?

Hackett: Yes, some of our technical and subsea experts are. BP, as operator, has asked a number of offshore players, such as ExxonMobil, Chevron and ourselves, to help with the mechanics around shutting in the leaks and dealing with the spill response. We are obviously very willing to do that, and we are all under the direction of BP and the Unified Command Center.

Investor: Does the BP incident void any legislation on Capitol Hill that could advance natural gas as the preferred fuel?

Hackett: I’m not sure what the outcome of this will be. If you look at natural gas, my gut instinct is none of the basic theses about it have been called into question in the bill. If anything, our country should be more interested in onshore natural gas resources. They provide answers for our energy needs for transportation and power. Legislation is always a timing issue, but natural gas is every bit as central to the answer as it’s ever been.

Investor: How did the JV with Mitsui in the Marcellus come about?

Hackett: We have had some dealings with Mit­usi in Mozambique, so in that process, we’ve gotten to know them pretty well, and we knew they were interested in natural gas onshore. We started the discussions with them, and they liked our environmental track record. They will depend on us as being the operator technically, but they will be involved, and they are lending people to us on the natural gas marketing side.

Investor: How did you manage to deliver such great results in 2009, when commodity prices were down, and while you cut LOE (lease operating expense) by 32%?

Hackett: Once a decision is made, we focus on execution. We are really focused on process improvement. For example, we benchmark ourselves by taking lessons from the best wells we’ve drilled and using it as a type well for all the others: we look at the drill bits used, the fluids design, downhole tool design, and the way we do horizontal drilling. We create best-in-class methods for every step and procedure. It forces us to innovate.

Investor: How would you describe your management style?

Hackett: In the past, I have worked in everything from very large companies to very small ones. It has led me to try to run the company like a partnership. On big decisions, we like to get a number of people in the room with different points of view. Our executive team is six people, and then we have around 30 officers. They and their direct reports really run the company. Communication is important and we are constantly e-mailing or communicating with each other.

I communicate with our employees as both teammates as well as shareowners. While never achieving perfection in this regard, everyone is encouraged to give their opinions or to professionally dissent. We also emphasize our values: What is it that you hold dear, that won’t be compromised?

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