Oil & gas

Anadarko Petroleum

Last edited by Phil Mattera on June 3, 2010 - 10:34pm
Profile editor: 
Phil Mattera
Company Snapshot: 

Anadarko Petroleum has used internal expansion and bold acquisitions to become one of the largest independent oil and gas exploration and production companies in the world. In 2010 it found itself caught up in controversies stemming from an oil disaster in the Gulf of Mexico, both because it is a minority (25%) owner of the BP well involved and because its own deepwater drilling operations are among those now viewed as being very risky.

Ownership status: 
Publicly traded
Number of employees worldwide: 
4,300
Chief executive officer: 
James T. Hackett
Website: 
www.anadarko.com
Tel: 
(832) 636-1000
Total revenue: 
US$9 billion
Corporate accountability
Labor: 

None of Anadarko’s 4,300 workers are currently represented by labor unions.

During the 1970s, Kerr-McGee, which was acquired by Anadarko in 2006, was embroiled in a scandal over accusations of serious safety violations and falsification of records at its nuclear fuel plant in Oklahoma. The controversy escalated after the whistleblower in the case, technician and union activist Karen Silkwood, died under suspicious circumstances in 1974. Silkwood’s family sued the company for causing her to be contaminated with plutonium. In 1986 Kerr-McGee paid $1.38 million to settle the case after a jury award of $10.5 million had been overturned on appeal.

Environment and product safety: 

In 2009 Anadarko and two related companies paid $1.05 million in civil penalties and agreed to spend $8 million in remedial actions to resolve charges that they violated the Clean Water Act by discharging harmful quantities of oil from a production facility in Wyoming. Two years earlier the company agreed to spend $18 million on new pollution controls at Kerr-McGee natural gas facilities in Utah and Colorado to resolve Environmental Protection Agency allegations of air-quality violations, and it was fined $157,500 by the EPA for destroying wetlands in southwest Wyoming.

Anadarko has been caught up in litigation stemming from Kerr-McGee’s 2006 spinoff of its Tronox chemical business. Tronox, which declared bankruptcy in 2009, is suing Andarko and Kerr-McGee over the environmental liabilities it assumed as part of the spinoff. The federal government intervened in the case, charging that those obligations were fraudulently transferred to Tronox. The cases are pending.

Anadarko is heavily involved in natural gas drilling in the Marcellus Shale in the northeastern United States, which is viewed as a serious threat to drinking water supplies.

In 2010 Anadarko’s stock price was battered and the company was threatened with major litigation because of its role as a non-operating minority owner of the BP underwater well involved in the largest accidental oil release in U.S. history. Anadarko’s other wells in the Gulf of Mexico were temporarily shut down as part of a drilling moratorium imposed by the Obama Administration. Anadarko described its potential liability in the accident as a risk factor in a quarterly report submitted to the Securities and Exchange Commission

Royalties

Just before it was acquired by Anadarko, Kerr-McGee mounted a court battle to prevent the federal government’s Minerals Management Service from restoring royalty rates paid by offshore drillers to reasonable rates after they had been reduced by Congress when energy prices were low in the mid-1990s. The case will cost U.S. taxpayers an amount the Government Accountability Office has estimated at more than $50 billion.

While Kerr-McGee was pursuing its case it was also defending itself against a whistleblower suit charging that the company had cheated the federal government out of millions of dollars in offshore drilling royalties by underreporting its output. In January 2007 a federal jury found the company guilty, but the judge in the case later overturned the verdict on a technicality.

History

Anadarko was formed in 1959 as a subsidiary of Panhandle Eastern Pipe Line Company, which used the entity to get around Federal Power Commission limitations on the price it could charge on natural gas produced from properties it owned in the Anadarko Basin in Texas, Oklahoma and Kansas. Within a few years it was a leading gas producer in the region.

In 1965 Anadarko expanded the scope of its operations by acquiring Fort Worth-based Ambassador Oil Corporation, which had assets and operations in 19 states and Canada. In 1970 it began offshore exploration by acquiring drilling rights in the Gulf of Mexico.

By the mid-1980s Anadarko outgrew Panhandle Eastern and was spun off as an independent company in 1985. Four years later, Anadarko began exploration activities in Algeria, and in 1993 it became the first foreign-owned firm to discover oil in the country. That same year, its partnership with Amoco and Phillips Petroleum discovered a huge shallow-water oil field in the Gulf of Mexico. After that, Anadarko acquired numerous other leases in the gulf, mostly in locations under salt formations. The company also pursued other exploration opportunities in places such as Eritrea and Peru.

Anadarko also grew by acquisition. In 2000 it spent more than $4 billion to buy Union Pacific Resources Group, and the following year it expanded its presence in Canada with the purchase of Berkley Petroleum and Gulfstream Resources Canada. In 2002 it bought two large oil fields in Wyoming.

In 2003 Anadarko was the subject of takeover speculation, prompting the company to embark on a major restructuring that included the sale of various assets in North America. Then, in 2006, Anadarko went back on the offensive by carrying out two major acquisitions: Western Gas Resources for about $5 billion and Kerr-McGee for $16 billion. To help pay for the purchases, Anadarko sold its Canadian subsidiary as well as two of its properties in the Gulf of Mexico.

In 2007 Anadarko struck oil off the coast of Ghana, and later that year it made a major new discovery in the Gulf of Mexico. In February 2010 announced a large natural gas strike off the coast of Mozambique. The following month it made a major purchase of new leases in the Gulf of Mexico and then found itself facing lawsuits for its role as a minority owner of the BP-operated well in the gulf that was the site of a massive accident and oil release.

Financial information
Fiscal year: 
2009
Major lines of business/segments: 
Oil and gas exploration and production – This segment explores for and produces natural gas, crude oil, condensate and natural gas liquids (NGLs). The Company’s operations are located onshore United States and in the deepwater Gulf of Mexico, as well as in Algeria, Brazil, China, Cote d’Ivoire, Ghana, Indonesia, Mozambique, Sierra Leone and other countries.

Midstream – This segment provides gathering, processing, treating and transportation services to Anadarko and third-party oil and gas producers. The Company owns and operates natural-gas gathering, processing, treating and transportation systems in the United States.

Marketing – This segment sells much of Anadarko’s production, as well as hydrocarbons purchased from third parties. The Company actively markets oil, natural gas and NGLs in the United States, and actively markets oil from Algeria and China.

Sources
Watchdogs and related campaigns: 
Oil Change International
Oilwatch
Related reading: 
The Killing of Karen Silkwood: The Story Behind the Kerr-McGee Plutonium Case by Richard Rashke (2nd edition, 2000)