Anadarko Petroleum plans to reactivate the 3,000 vertical wells it shut down in mid-April in Colorado following a fatal home explosion in Firestone in the second half of the year.
“The horizontal shut-ins were all short-lived and they are producing again and as we evaluate the verticals, we’re bringing those back on through the back half of the year, and working on safely and efficiently restoring that production,” Brad Holly, executive vice president of U.S. Onshore Exploration & Production at Anadarko, told analysts during a call Tuesday morning.
Anadarko, based in The Woodlands, Texas, reported a 12 percent increase in oil sales in the second quarter versus the same period a year ago, driven in part by increased production in the Delaware Basin in southwest Texas.
But the company lost $415 million or 76 cents a share in the second quarter, which was much more than the 34 cents a share analysts had forecast. Lower oil prices during the quarter impacted the company’s financials, as did the extra costs and production losses the company incurred in Colorado following the Firestone blast.
Gas escaped from an Anadarko well through a severed flowline and saturated the ground around 6312 Twilight Ave., causing a blast that destroyed the home and killed two men and severely injured a woman. The governor responded with a state order requiring producers to inspect and test all oil and gas lines within 1,000 feet of occupied structures.
Anadarko on July 1 said it had tested more than 4,000 active oil and gas lines and plugged another 2,400 inactive ones per the state order. It asked for an additional month to wrap up the remaining work.
After the blast, the company said it would voluntarily shut down its older vertical wells out of “an abundance of caution,” a move it estimated would cost it 13,000 net barrels of oil a day in production.
That works out to about 2 percent of the company’s average production of 631,000 barrels a day.
“The safety incidents that happened and what is going on with regulations will weigh negatively, but not over the long term,” said Hassan Eltorie, associate director of equity research and IHS Markit, which is located near Houston.
Anadarko executives said Tuesday that Colorado crews continue to find way ways to improve results in the Denver-Julesburg Basin. They are drilling horizontal laterals in record time and new fracking designs have boosted production by 35 percent.
Lower oil prices have also made the company more cautious, reflected in a $300 million cut from the $4.5 billion to $4.7 billion in capital spending the company said it was aiming for in March. About $250 million of the reduced spending will come on the oil and gas production side.
Anadarko is the largest oil and gas producer active in Colorado. The company’s shares are down 34.4 percent this year, including a 25.3 percent decline since the Firestone blast. They rose 3.4 percent on Tuesday to close at $45.72.
