Anadarko Petroleum Corp., The Woodlands, Texas, (NYSE: APC) announced a major reshuffling of assets to enhance growth. It will sell some 15% of its year-end 2003 proved reserves and about 25% of current production for anticipated total after-tax proceeds of more than $2.5 billion. During a media conference call, Jim Hackett, Anadarko president and chief executive, who assumed the post in December, said, "We want to focus on what we do well, and right now we have properties that are scattered and not what we do well. They don't fit the model of the company going forward." He added, "There were no sacred cows in this examination. This restructuring process is the equivalent of pruning a strong tree; we will become a healthier, better company in the long term." Proved reserves for sale will total between 325- and 350 million BOE. Production is between 115,000 and 125,000 BOE per day. Most of the properties for sale are in the shallow Gulf of Mexico, Western Canadian Sedimentary Basin and the U.S. Midcontinent (Central Oklahoma enhanced oil-recovery fields; Southwest Kansas/Oklahoma Panhandle deep Hugoton Basin fields; and West Panhandle fields in Texas). Other assets are in the Wyoming/Utah Overthrust region, southeast Colorado, the Permian Basin; limited-term coal and trona royalty interests in Wyoming; and Oman. Most of the divestments will close by year-end. Proceeds will be used to reduce debt and repurchase stock-up to $2 billion worth, Hackett said. On the first full trading day following the announcement, shares of Anadarko closed at $57.48, up from the preannouncement close of $56.37. Deutsche Bank has been retained as lead advisor on the overall divestiture program. Randall & Dewey LLC will market the U.S. properties, except OGJE/Madison Energy Advisors will market the southeast Colorado assets. Waterous & Co. and Kobayashi Partners Ltd. will market the Canadian assets. In addition, Waterous will market the Oman assets. "Since the beginning of the year, we've been conducting a thorough review of the entire company to determine the best path forward," Hackett said in a press release. Hackett also stated that this strategy is "not changing what the company does, but rather where and how resources are allocated." He emphasized that the company would continue exploration and development, for which it is best known. The company hopes major development projects in this year and 2005 will result in growth above the high end of the new range of 5% to 9% per year and will lead to even faster cash flow growth. Prior to the announcement, the company's production-growth forecast was 3% to 7% a year. Lloyd Byrne, an E&P analyst with Morgan Stanley, said shortly after the announcement, "At first blush, we see the potential for this revised strategy to be accretive to value by a mid- to upper single-digit amount in percentage terms." Moody's Investors Service affirmed Anadarko's Baa1 long-term rating with a stable outlook. Moody's expects that Anadarko can successfully "execute the plans for asset sales and front-loaded debt reduction, then move forward with a rebalanced reserve and production profile and sustained lower financial leverage." Following an Anadarko meeting with analysts, Brad Beago, an E&P analyst with Calyon Securities (USA) Inc., cited several reasons why the strategy is a potentially positive move for the company, including that it sets clearer direction for the company and its investors, and it will result in good yields from property sales-providing the acquisition market is strong. "Although Anadarko has not disclosed the terms of its pending asset sales, the company is widely regarded as having one of the best asset portfolios in the industry and should realize good value from its divestitures," Beago said. Hackett said, "The best time to fix your roof is when the sun is shining, and it's shining on our industry right now, with recent property sales going at record prices," he said. "This is not an effort to raise capital or reduce debt; we are already producing significant free cash flow at current prices." The idea is to remove hard-to-grow properties and keep those with more potential. He added, "From a strategic perspective, the divestitures will enhance our ability to perform in the future. By removing properties that are difficult for Anadarko to grow and retaining those we can grow efficiently and that have more upside potential, we expect to be able to provide near-term growth and profitability while also generating enough cash flow to fund long-term growth." Hackett said that during the next five years, the company hopes that the combination of foundation and growth assets will result in annual reserve growth of about 4% to 6% at an estimated cost of $7 to $9 per BOE. Hackett also said the company expects to generate $1.5 billion of unallocated cash during that same time period. In looking to 2005, Beago commented on gauging the total impact of Anadarko's strategy. "It is anticipated that executing this strategy will extend into 2005 and many of the terms are still unknown," Beago said. "Consequently, at this time, it is difficult to forecast the impact on Anadarko's future earnings and cash flow with good accuracy."