Its liquids sales volumes for the quarter jumped by 50% over the same period last year, boosted by production from onshore liquid plays in the U.S. 

The company also started production in its Caesar/Tonga project in the Gulf of Mexico which added 45,000 barrels /day (b/d) to its overall output. Increased liquids production helped the company overcome falling natural gas prices in North America, which have impacted the earnings of players like Exxon Mobil (XOM).

Liquids bet

Over the past year, Anadarko has begun to increasingly focus on its liquids portfolio. Low natural gas prices in the U.S. pushed Anadarko and other players to target liquids-rich plays in the U.S. Natural gas prices fell below $2/million British thermal units (MMBtu), putting pressure on onshore exploration companies' revenues and earnings. In the first quarter, Anadarko's revenues from natural gas sales fell by 33% over the same period last year.

Anadarko began to focus on liquid rich plays such as Wattenburg and Eagleford to prop up its onshore liquids production. Crude oil prices and the price of natural gas liquids have remained high over the past few quarters, helping companies offset the impact of natural gas prices. The company's production from its five major liquid rich plays stood at 301,000 b/d, increasing by over 50% over the same period last year.

Apart from focusing on liquids-rich plays, Anadarko has also increased production from some of its offshore resources. The company started producing around 45,000 b/d from its three wells in the Caesar/Tonga in March. The impact of production from the project will be more significant in future quarters. The company also plans to drill another well in the region in the second half of the year. Another well at the Independence Hub was brought online while the company's exploration projects in offshore Africa are also progressing smoothly and it has announced multiple discoveries over the past few months. We expect these discoveries to translate into a steady increase in output in future years.

We have a $90 price estimate for Anadarko Corp., which is at a 20% premium to its current market price.

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