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Anadarko Petroleum Corp  (NYSE:APC)
Q3 2018 Earnings Conference Call
Oct. 31, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Anadarko Petroleum Corporation Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, today's event is being recorded.

I would now like to turn the conference over to Robin Fielder, Vice President of Investor Relations. Please go ahead, Ma'am.

Robin Fielder -- Vice President of Investor Relations

Good morning, everyone. We're glad you could join us today for Anadarko's third quarter 2018 conference call. I'd like to remind you that today's presentation includes forward-looking statements and certain non-GAAP financial measures. We believe our expectations are based on reasonable assumptions. However, a number of factors could cause results to differ materially from what we discuss.

We encourage you to read our full disclosure on forward-looking statements in our SEC filings and the GAAP reconciliations located on our website and attached to yesterday's earnings release. Additionally, we have provided detail in the third quarter operations report on our website.

At this time, I will turn the call over to Al Walker for some opening remarks.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Thanks, Robin, and good morning. Happy Halloween and no, we are not in costumes, but we did consider it.

Last year at this time, we discussed with you, our intent to be increasingly capital efficient and a market that was and will likely continue to be volatile for oil price discovery. We expressed our focus on allocating capital to deliver healthy growth on a per-debt-adjusted-share basis with the expectation of generating significant free cash flow as the commodity outlook improved.

We also believed, our material scalable asset footprint could deliver attractive returns from our oil weighted opportunities. Taken together, this growth per-debt-adjusted-share producing attractive cash flow return characteristics, which form the basis for our capital allocation and capital return strategy for years to come.

During the third quarter, we generated almost $550 million of adjusted free cash flow as our margins increase their highest level in more than 4 years at almost $34 per barrel. Meanwhile, we delivered $625 million of cash returns to shareholders, we're just 38% of our third quarter cash flow from operations including $500 million of additional share repurchases and a dividend payout of $125 million.

The improving margins continue to be supported by our commitment to increasing our liquids mix, aided by our ability to access Gulf Coast markets for our domestic crude oil production. Currently, approximately 55% of our total oil volumes benefit from waterborne pricing. And by the end of next year with the start-up of the Plains Cactus II line, we expect that to increase toward 70%.

Over the last 12 months, we have repurchased more than 10% of our shares outstanding, increased our dividend by 400%, and announced plans to reduce debt by $1.5 billion. At the current strip, we expect to generate strong free cash flow during the fourth quarter and into 2019. Given our continued commitment to invest in our capital in a $50 oil price environment that provides healthy oil growth within this lower price cash flow assumption. We plan to use our cash and expected free cash flow to complete the remaining $500 million of our share repurchase program at the first half of 2019, while retiring an additional $1.4 billion of debt.

We updated our full year 2018 production guidance to tighten our previous range to account for the limited days left in the year, as well as acknowledging we did not need to seek significantly more oil growth over the balance of this year to achieve our annual objectives. These changes also reflect the exact impact of the hurricane-related downtime and previous capital allocation adjustment. We expect this time to deliver in 2018, more than 13% oil growth or 15% or more on a per debt adjusted share basis and a greater than 19% return for our cash flow on invested capital. These performance metrics were central to our investment strategy for the year.

As we look ahead to 2019, we will continue to use the $50 oil price environment assumption to produce healthy multi-year double-digit oil growth, remain committed to returning capital to shareholders above this breakeven threshold and demonstrate the durability of this investment strategy due to the strength and capital efficiency of our asset portfolio. Later this quarter, we will be announcing our 2019 investment plan. The timing of which will file the November stakes mid-term election and in particular the voting result in Colorado.

Regardless of what happened, we feel confident, we can continue to deliver our expected 2019 result given the flexibility of our portfolio. Multi-well pad in campaign-style development is beginning in the Delaware Basin, thanks to the tremendous work our teams have done to build out the necessary infrastructure and secure takeaway to facilitate future growth. Beyond time and safe start-up of both the Reeves and Loving ROTFs were significant achievement. And we are nearing the completion of the first train and starting up the Mentone gas processing plant during this quarter. We are also very pleased with the progress our Mozambique LNG project has enjoyed along with the support we received from our co-ventures, and the government.

In particular, the strong off take contractual book that we are developing along with the project finance market encouragement continues to have us on track to make a final investment decision during the first half of 2019.

In summary, the employees of Anadarko are very pleased with our operating and financial results for the quarter. And believe our durable investment strategy has us on the right path for continued success in the years ahead. We look forward in the coming weeks to discuss our 2019 plan in greater detail.

With that, let's go to questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And today's first question comes from Arun Jayaram of JP Morgan Chase. Please go ahead.

Arun Jayaram -- JPMorgan Chase -- Analyst

Good morning. Al, I wanted to ask you about 2019 CapEx. Just trying to think intelligently about your program next year. What it kind of requires to deliver, call it 10%-plus oil growth. Now, if we take your 4Q guidance range for APC Capital of -- call the upper-end of that $950 million and just multiply by four, you get to $3.8 billion or so. And the question I had is, you had quite a bit of APC level expenditures for midstream associated with the Delaware Basin. Do you have a sense of how much of that CapEx was kind of one-time in nature and what wouldn't repeat in 2019?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Arun, good morning. I appreciate the question. I think I'll try to answer you in a couple of different ways. One is, I'm sure you fully appreciate that in a couple of weeks, we'll be prepared to give you a lot of the detail, you're looking forward this morning. You like we are interested in what's going to happen next week in Colorado, that would have some impact in terms of where we would allocate capital. As it relates to the question on midstream build out, as we've said before, we've largely in this year accomplished a lot of the midstream spending that we need, we still have some to do next year, but we will become less capital intensive around the midstream requirements going into 2019 and 2020. So from a capital standpoint, I think you've heard us say and I'll just repeat it, we just so philosophically look to next year being fairly similar to what we announced a year ago at this time. And the $50 price environment, what we've kind of use is that breakeven from which the pivot our activities from and nothing on that particular scores changed. And I'd say, if you think about this year versus next year, a little less capital intensity around the midstream.

Arun Jayaram -- JPMorgan Chase -- Analyst

Great. And my follow-up Al is, the expiration of PSC contracts has gotten a little bit of attention, a post what happened with one of your peers in Qatar? I was wondering if you could remind us about when you reach expiration of your key PSCs in Algeria, thinking about the route field in El Merk. And what are some plans that APC has in terms of negotiations, in terms of extending these PSCs because there are significant driver of free cash flow for the Company?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Great question. Mitch and I'll tag team you on this one. We have for well over a year been pretty good conversations with Sonatrach and the Government of Algeria on license extensions and Mitch has been sort of at the forefront of that. So -- and with that intro, Mitch, why don't you give a little more detail in terms of where you currently are.

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

Okay. Thanks, Al. Arun, where we are at the moment is we're working closely with our partners and Sonatrach in the government and really looking at all the license expansions and the technical proposal is something we're working on closely. So are encouraged by all the discussions we've had with them to the point where we agree mutually, beneficial license extension will occur at some point in the future. So well, it's a good progress being made and we're continually discussing with Sonatrach and the government.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

And Arun, I'd just add quickly to that would be, I think we see from the Sonatrach perspective tremendous interest in having the license extended and as it relates to how you are comparing it to the situation with one of our peers, they're pretty apples and orange as it relates to how we're approaching it versus their license extension being up, these licensed don't extend -- I mean these license do not expire until onto the next decade. And most importantly, I think we and our partners along with Sonatrach were quite motivated to see an extension.

Arun Jayaram -- JPMorgan Chase -- Analyst

Great. Thanks a lot.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

You bet. Thanks for question.

Operator

And our next question today comes from Doug Leggate of Bank of America Merrill Lynch. Please go ahead.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Thanks. I have to say Al, the vision of you guys in costume is not why we're expecting to open the day with today. But that's one of our conversations.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

It would have been a ugly picture.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

So my question -- my first question is a little follow-up to -- on the CapEx, if I may. So if I'm not mistaken, you're dropping off a fair number of rigs -- deepwater rigs as you go into 2019. And this was pointed out in the previous question, the roll-off of the midstream capital just directionally up $50 with the underlying cash flow strength that you've had, is it possible that your CapEx year-over-year Is actually lower in 2019 than it was in 2018?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Well, I think, you have to still appreciate the fact that while we are benchmarking our activities and price assumptions on $50 oil, we actually live in a world of closer to $70 or $75. And, therefore, you do have service cost inflation that's probably as we understood and appreciated in a year-over-year comparison. And you've heard me say this, many, many times and I apologize for repeating it here, but we are not in the revenue business, we're in the margin business. And I think when you realize that we probably could have some costs go up from the $50 world that we're benchmarking the cash flows from the margin, and certainly this quarter approaching $34 per barrel is really attractive that -- that to us is what we are looking at. And so, therefore, if we see a little capital increase associated with cost going up. I think the offset to that is a much more improved margin at the well had, which gives us kind of cash flow characteristics we had this quarter.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

I appreciate the answer. My follow up is really more of a -- I guess is more of a hypothesis on Colorado. This is the last public opportunity. I guess you've got to comment on how you see the issues, the outcome evolving. I'm just wondering, if I could ask you to share your thoughts for everyone listening as to how you see the -- whichever way this goes. How you with managed through that as it relates to reallocation or indeed acceleration of capital if it went to a favorable outcome? And I'll leave it there. Thanks.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Okay. Well, I understand, appreciate where you're coming from, with the question. We like others -- see what the voters do between here and next week. A lot of information flowing around, not sure which of it's accurate, which of it's not. But we'll know by this time next week, where we are. I think the good news for us is we are not a one or two basins centric company and consequently, our ability to move capital around still achieved the type of 10% to 14% compounded annual growth in oil volumes is not predicated on one asset. So we do have a lot of flexibility. We do have a plan that we will move to if we find ourselves needing to, part of that has to do with the fact that we think between drilled and -- drilled and uncompleted -- non-completed wells in the DJ coupled with our permits that are approved there, we have a pretty good path for what 2019 looks like, which allows us then to pivot more of our activity toward the Powder and then additionally toward the Delaware in order to achieve the longer term or the annual objective of that 10% to 14% growth with our $50 cash flow environment. So, we'll see if we need to move to Plan B or if the Plan A is really the one that will be imposed, I'm not sure that changes our capital per se, year-over-year, it just might change where we allocate that capital and we fully appreciate that. But as it relates to this Company and what happens with particular Proposition 112 does not from our estimation affect the way in which we see ourselves next year being able to produce attractive growth in the $50 environment or having it be contrary to what we told you a year ago that we thought we could achieve over a 3-year basis.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Appreciate the answers, Al. Thank you.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

You bet. Thanks for the question.

Operator

And our next question today comes from Bob Morris of Citi. Please go ahead.

Robert Morris -- Citi -- Analyst

Thank you. Good morning, Al.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Good morning, Bob.

Robert Morris -- Citi -- Analyst

In the Delaware basin, I know, I appreciate you're basing your budget on $50 oil, next year, and you've hit some milestones on the midstream buildout in Delaware Basin, you're going to move to 100% firm transportation on your crude oil next year. And so if oil prices are much higher. My question is really, what is the limitation on ramping up activity in the Delaware Basin is it, the infrastructure and at what point do you hit that limitation or is it, did you just sort of slowdown or stop once you kind of get close to that 15% oil production growth number? I'm just trying to get a sense with some of the free cash flow of oil prices are much higher after share buybacks, after dividends. What is your ability to ramp up even further they went maybe a lot of people are modeling out there in the Delaware Basin and on Plan B too Proposition 112?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Bob, I think, the best way I could answer you, is not so much a ramp up or ramp down. Right now we're starting to understand for the first time it's Silvertip led a multi-pad situation looks like that's not facilities constrained. Once we understand recent production history, what we believe the rock properties will give us. We'll have a better idea kind of how we plan to develop more of the field. If you want to call it field, but certainly the basin. I probably would tell you though that we are still fairly confident and wanted to be committed to it 10% to 14% compound annual growth on oil. So even if we saw better performance, which we've continued to see year-over-year in the Delaware as we understand it better and develop it better with the right kit, we don't really see ourselves wanting to achieve more than at the upper end of that range of 14%. So as a Company, if we need a little more from the Delaware next year than we anticipated because of 112, I think I'm very confident we can go there. If we don't needed, I think you should expect that we probably will not look to try to accelerate it beyond achieving that in the 14% within a $50 cash flow environment.

Robert Morris -- Citi -- Analyst

Okay, that's a good answer. Thanks. And just secondarily on the dividend as you look to increase that is your ultimate goal to pay more of an S&P type yield on the dividend?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

I'm -- let Bob and let him address the dividend question, I think that's an important question, given the way we think about it and so maybe Bob, if you don't mind.

Robert G. Gwin -- Executive Vice President, Finance and Chief Financial Officer

Sure. I'm happy to. Good morning, Bob. Bob, I think the dividend -- the answer to the dividend has to be taken in context with stock buybacks and debt retirement and the aggregate cash returns to shareholders. The dividend obviously what we expect, we talked about in the past that we would expect to increase it over time. Along with increases as we continue to drive oil production and have even more leverage to strong commodity prices that's sustainable cash flow level is going to be increasing. And we would expect to increase the dividend along with it. We want to be a -- we want to have a competitive yield relative to the peers. We want to look attractive to journalist in terms of your question relative to the S&P. But we think about it a little more holistically around the stock and the debt as well. And right now with the stock where it is relative to oil prices, the commodities -- I mean, the stock price not just ours are discounting in significantly lower prices and that creates a buying opportunity that's much more efficient. And obviously, then fewer shares going forward and those fewer shares being at any given level of total cash paid for dividends, that's more on a per share basis. And so I think you'll -- you should expect to see a sequence then over time.

Robert Morris -- Citi -- Analyst

Great. Okay, thank you.

Operator

And our next question comes from Brian Singer of Goldman Sachs. Please go ahead.

Brian Singer -- -Goldman Sachs & Co. LLC -- Analyst

Thank you. Good morning. I wanted to follow up on Bob question there, I have been more specifically on the share repurchase. But I think you mentioned that you plan to complete the authorization -- the authorized repurchase by mid-2019. Based on what you've done so far and the recent market volatility and what you just highlighted in that last response. Any reason why that wouldn't be completed earlier? And then how would you prioritize a potential expansion, it sounds like, based on your last response, it would be up there?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

I don't think, it's appropriate to speculate on the timing of when that last $500 million (ph) gets completed. I think -- if you think more broadly, we've tried to incrementally increase the size of the buyback program and then execute aggressively against that plan, rather than announcing a really big multi-year approach that is subject to a lot of future variability. And so. I don't want to leave the debt side out of the equation. We think that's very important. That's why we've increased the debt alongside the equity. However, the biggest portion of the remaining $1.4 billion of debt to be retired is $900 million of maturities in the first half of next year. And so, we'll apply the cash, kind of, in the most efficient manner as we go forward. I think, the buybacks we did this last quarter, were very opportunistic relative to a weak share price environment, perhaps driven by some of the Colorado dynamics. And so, we've tried not to be prescriptive, but rather opportunistic and we fully expect to execute within the timelines we establish.

Brian Singer -- -Goldman Sachs & Co. LLC -- Analyst

Great, thank you for the color. And then my follow-up is in the Delaware. Can you just talk about how the Silvertip results the timing of Mentone and the start-ups of the various protest and outside operated wells, all impact, how we should look toward the Delaware ramp and the quarterly trajectory there over the next year?

Daniel E. Brown -- Executive Vice President, U.S. Onshore Operations

Thanks for this question, Brian. This is Danny. I'll fill part of this and Mitch may chime in as well with the facilities space. Very, very pleased with what we're seeing from our early results from Silvertip, but they are early results. So we need to see some more production data flowing through these. For our first wells that are flowing through there, we're seeing some really significant IPs and the well seem to be holding in quite nicely. We're starting to get some information out into some of the state records. So I know people are starting to see that. So oil production on the first couple of wells is over 4,000 barrels a day, which clearly we're very happy with. We've got -- but we need to see these continue to produce over time. As a reminder, Silvertip is a 12-well pad and half a section in Loving County. And so we're looking for to increase our understanding on future spacing, on future productivity, how to design our facilities, how we optimize the surface build out with respect to subsurface delivery and how we optimize value through that whole chain. So it's an important test for us. We're pleased with the early results. Part of the Silvertip delivery will flow through the Mentone system. And so we've begun to bring wells online in Silvertip and based on the results we've seen, we'll continue to bring those on post-Mentone start-up. And so as Mentone starts up later this year, we'll continue to bring those Silvertip wells online. I'll ask Mitch to maybe talk about where we're at with it -- from that perspective.

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

Sure. Thanks, Danny. Obviously, in the third quarter, we started up the Loving road trip, and really the focus now is moved on to Train I from Mentone and construction activities got to stage there. We're now into commissioning -- precommissioning, commissioning activities and anticipate starting up in the next few weeks time.

Brian Singer -- -Goldman Sachs & Co. LLC -- Analyst

Great, thanks. That would I think, imply a step-up in production in 1Q -- in the first quarter of next year. Is that fair-based and all that? And maybe, also the timing of when some of these OBL (ph) wells are coming on?

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

I think, it's fair to say as we get all these Silvertip wells up and flowing and as we complete our program later this year, you should -- we should expect to see our production continues to rise from the basin. We'll be talking about our 2019 capital plans and expectations, obviously later this year. So I don't want to front run that too much. But we are anticipating at least for the next quarter or two, some nice growth out of Delaware.

Brian Singer -- -Goldman Sachs & Co. LLC -- Analyst

Thank you.

Operator

And our next question today comes from Welles Fitzpatrick of SunTrust. Please go ahead.

Welles Fitzpatrick -- SunTrust Robinson Humphrey, Inc -- Analyst

Hey. Good morning.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Good morning.

Welles Fitzpatrick -- SunTrust Robinson Humphrey, Inc -- Analyst

On 112, the polling seems to move to a pretty solid net -- at this point. If you'll indulge me and we assume a no 112 scenario. Can you talk to the strategy after the election to prevent this from coming back and presumably higher turnout Presidential year in 2020?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Well, that's a very astute question. One that we have been spending time on and are prepared come November 7, so exploring exactly how we can follow the question that you're posing. I don't have tremendous insight today, other than we had recognized the same problem that you do and that is in a no-vote scenario for 112, I think, we still have some work to do with whomever becomes the Governor Elect along with their legislature and the regulatory process that, that Governor puts in place. So you can understand fully today that we see that on the horizon even in a no scenario, where we and the Governor Elect and those respective parties, I just made reference to have some work to do.

Welles Fitzpatrick -- SunTrust Robinson Humphrey, Inc -- Analyst

Okay. Now That makes sense. And I appreciate all the details on 112. For my follow-up, could you give us any thoughts you might have on the Farm Bureau's Bill 74. The polling on that also looks surprisingly good. Is that still seen within the industry, as a net positive or have these permitting issues comes to the front?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

You're probably a little more well versed on 74, than I am. At this point, we got from when this election is called to a conclusion. Some of us, they mailed ballots from the 15th of this month and people have been voting since then. I'm, as much in the dark of where 74 is an ex-person. So to my knowledge, our industry does not talk to the Farm Bureau about it. And Farm Bureau has a view. I'm just not sure what that is.

Welles Fitzpatrick -- SunTrust Robinson Humphrey, Inc -- Analyst

Okay. Perfectly fair. Thank you so much.

Operator

And our next question comes from Jeffrey Campbell of Tuohy Roberts. Please go ahead.

Jeffrey Campbell -- Tuohy Brothers Investment Research, Inc -- Analyst

Good morning. Going back to Silvertip quickly. Can you just add some color on exactly what for Wolfcamp A targets means? And also, are we to take from this that APC sitters, the 3rd Bone Spring commercial target allowing (inaudible)?

Daniel E. Brown -- Executive Vice President, U.S. Onshore Operations

This is Danny, again. I appreciate the question. So as you can imagine, within the Wolfcamp zone itself we've got multiple different benches that we like to exploit. And so what Silvertip does is it -- and I think, we've got some graphics on this in some of our investor books that are available online. And so we do in a Chevron pattern -- the 12 wells go in a Chevron pattern across half a section through multiple different Wolfcamp A targets, and up into the Bone Spring 3. Bone Spring 3 and Avalon has historically been something that we have done. So we've got historic experience within that formation. We know it fairly well. We think in this area the field has got prospectivity. And so we want to understand the interaction between that formation and Wolfcamp in the ultimate deliverability of it. There is other targets in that area as well that we'll look to exploit over time. But this is what -- for this particular pad and test, this is what we've done. And so we'll see what those well results show. We have not turn that Bone Spring well on yet. It has been completed and so we'll be bringing that well on later this year and observing the results and that will help us formulate our future development plans.

Jeffrey Campbell -- Tuohy Brothers Investment Research, Inc -- Analyst

Thank you. Appreciate that color. And I was also wondering, if you could provide some high level thoughts about the PRB, I know that plays really being up is not a property (inaudible) serious about it. But aside from the well results that you mentioned at the ops report, kind of at this point, how would you contrast Wyoming as a state to operate and versus (inaudible) resting its neighbor Colorado?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Well, clearly with a -- clearly different -- a different operating environment in the two states, which I only think -- which I think is natural. We see that across multiple different state boundaries. We're really happy with the performance we're seeing in, not only from our own wells, but for across the industry within Powder River Basin. We've got lots of permits in that area. We've got a nice acreage position built up in the southern portion of the Powder River Basin and look forward to talking more about our plans in for appraisal in that area, as we talk about 2019 later this year.

Jeffrey Campbell -- Tuohy Brothers Investment Research, Inc -- Analyst

Thank you. If I could just sneak one quick one, and I noticed something in the report that I thought it sounded interesting. You mentioned that you're exporting one crude oil cargo for month from Houston and you're also going to have export capability in Corpus I. Cactus II comes online. And I was just wondering, are you marketing these exports yourself or do you sell these to a third-party at the force?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

No, we are doing these ourselves. And that's largely results the fact, we've been doing this now for multiple decades out of Algeria. So we actually have the capability in-house to do this without having to turn into a third party.

Jeffrey Campbell -- Tuohy Brothers Investment Research, Inc -- Analyst

Great, thanks. I appreciate that.

Operator

And our next question today comes from Michael Scialla of Stifel. Please go ahead.

Michael Stephen Scialla -- Stifel, Nicolaus & Co., Inc -- Analyst

Hi, good morning. Question on the DJ, assuming 112 fails. There's been some concerned about takeaway capacity there over the next couple of years. Any thoughts on that? Also some concerned about potential price weakness at Cushing, just wanted to hear your thoughts there as well?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

All right. Well. I'm going to Gennifer, she would pleased to weigh in on both of your questions.

Gennifer Kelly -- VP, Midstream and Marketing and COO

Hi. This is Gennifer Kelly. I think there is -- we have been hearing of some projected tightness coming out of DJ, fortunately, we have secured takeaway for all of our products out of the basin. Out of -- on your question about Cushing tightness. We are also seeing and predicting that Cushing is going to continue to get tighter. And we are actively working routes to the coast to get some of those oil volumes on the water and to help with that tightness.

Michael Stephen Scialla -- Stifel, Nicolaus & Co., Inc -- Analyst

Okay, thank you. And Al you mentioned given the increase in oil prices that you're anticipating some inflation, I think, we've already seen some this year. Can you say what you're baking into your 2019 plan for inflation at this point?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

I think you just have to wait a few week for us till now on, when we talk about our capital expectations for investment in 2019, we'll give you some more color on that. But you're right, we saw more of the inflation in the first half of the year than we have seen in the second half of this year. But you got to keep in mind, we're predicating our investment about $50 environment. So that implies both cost as well as the revenue side of that. So if we in fact live in a much higher price environment than $50, fairly natural to assume that costs are going to come up a little bit with it. But in turn our margin -- our margin per barrel should be much healthier regardless.

Michael Stephen Scialla -- Stifel, Nicolaus & Co., Inc -- Analyst

Understood. Thank you.

Operator

And the next question comes from David Heikkinen of Heikkinen Energy Resourcing -- Energy Advisors. Apologies, please go ahead.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

Sometimes, I wish we're a resource company.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Yes, David, I don't know about that.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

Thinking about along that line kind of the first principles of returns on investment as you take your cash and your balance debt reduction return to shareholders and reinvesting in the business. I'm just -- I'm kind of curious as you've gotten larger projects, Delaware and DJ, is the ability to flex them up and down less until when you set your budget at $50. Because we're just wondering where that free cash flow goes, because you really don't have as many big swings in spending it seems. How do you think about that balance of those three places?

Robert G. Gwin -- Executive Vice President, Finance and Chief Financial Officer

David, it's Bob. I think, I disagree really. I think one of the things that we've looked at as we put the 2019 plan together, as we look at a plan B scenario if 112 were to pass is that we actually in the Delaware in particular and in the Powder prospectively have the ability to be able to add rigs and crews and with infrastructure -- at least the base case infrastructure in place with some expandability for instance at the road of some cash. We can, I think that's easier to flex up and down then if we are in six or seven basins and had to ramp up efforts and with less centralized people. And so there is -- it actually -- it hasn't been a constraint in terms of our thinking going forward. I think, the more difficult thing to do is that when we have -- when you have a $50 oil environment, you have the desire from time to time, well you say, well let's accelerate in a particular area or not and the discipline has been one of the things that we've talked about. Our folks are very excited about their results. Danny was talking about what we're starting to see at Silvertip. And we've -- our's early comments really touch on where we're trying to go, which is that we know that we can deliver with discipline, better than a 10% rate of growth in oil on a multi-year basis. And that puts us in a position, subject to the inflation at a higher price environment might require you to spend a little bit more to achieve that objective. It puts us in a position, we've got lots of flexibility around free cash flow. And so it's -- I don't know that it's -- that it's necessarily worse. I actually -- when we start talking about this, we're talking more about how many rigs and how many crews than which field or which location and more focused operation is in many ways a simpler to dial up and down rather than more difficult.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

Cool. That's helpful. Thanks.

Operator

And our next question comes from Sameer Panjwani of Tudor Pickering & Holt. Please go ahead.

Sameer Panjwani -- Tudor Pickering & Holt -- Analyst

Hey, guys, good morning. In the PRB, looks like you spent another $76 million on acquisitions during the quarter. Can you just provide some color on your overall land strategy here, how we should think about land spending going forward and maybe an updated acreage count?

Daniel E. Brown -- Executive Vice President, U.S. Onshore Operations

This is Danny. Yes -- appreciate the question. We did invest in another -- around $75 million in the quarter with respect to land holdings, those are principally mineral and royalty interest that we picked up. And so our overall working interest position for us to develop against -- it doesn't really change, but the -- we will see overall improvement in the economics from picking up those -- for making that acquisition. Moving forward, as we look across the basin, a substantial amount of consolidation has already occurred across that basin. There may be one or two incremental opportunities for us moving forward to bolt under our position, certainly as those raise their hands will evaluate whether or not it makes sense for us to do those. And so from a land acquisition standpoint, my anticipation is, is that you may see the pace of that slowing somewhat force, but if those opportunities are there, we'll certainly look to capitalize on those.

Sameer Panjwani -- Tudor Pickering & Holt -- Analyst

Okay, that's helpful. And then turning to the DJ, it looks like volumes have been relatively flat year-to-date. But your previous 20% year-over-year oil growth guidance implies a nice step-up in Q4. But can you just frame your comfort level with the previous guidance and how things are shaping up so far during the quarter?

Daniel E. Brown -- Executive Vice President, U.S. Onshore Operations

Yes, sure. I appreciate the question. As we look at DJ, we anticipate as we move into the fourth quarter, a bit of an increase from where we are currently, I think if you look at us across the entire year, we'll be delivering over 15% versus our annual production that we saw in 2017. That's the sort of increase, we're expecting to see this year. As we think about DJ, as we alluded to last quarter, some of the performance we've seen within the Delaware Basin, both from the opportunity for us to participate in some non-consent wells, some non-op opportunities that came our way, as well as just incremental well performance that we've talked about so far has led to an opportunity for us to reallocate some capital away from DJ and over into Delaware. We felt really comfortable with where we were at from an overall portfolio standpoint from an oil delivery. And so as we've reallocated that capital, clearly our activity level has fallen within DJ, we're seeing fewer crews, we're down back, we're down to two completion crews in the DJ Basin currently. And so that's -- that obviously roll through volumes that in combination with downtime and we've been a little late bringing some of our wells online. And as you missed those targets and even if you're just missing by a few weeks that sort of slides the whole wedge delivery out to the right. So when you combine all those things together we're right at about 15 plus percent annual growth in DJ.

Sameer Panjwani -- Tudor Pickering & Holt -- Analyst

Okay, great. Thank you.

Operator

And our next question comes from Paul Sankey of Mizuho. Please go ahead.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Hello, everyone. Can you hear me?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Yes.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Great. Could you just give us the latest on the status of Mozambique. I know there's been some headlines over the past weeks in terms of contracts and stuff?

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Yes, I couldn't be more (Technical Difficulty). in his organizations has enabled or accomplish, Paul. I think, a year ago, the market was quite different, 2 years ago it was drastically different over that period of time just a brag on it a little bit. We've definitely taken the opportunity to advance the project that was not quite where it is today. And he has -- our estimation done an exceptional job of getting this thing positioned for FID. So maybe with that introduction, Mitch will you just give more details because we could probably sitting the next hour talking about the accomplishments you and Ian and others have had with our LNG efforts.

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

Thanks, Al. And Paul, I'll just give you overview of where we are in project. During the quarter we made really good progress and we're converting the key terms and our volume getting those two binding SPAs. There was -- they are on track to be completed as per our schedule. In addition to that, where we've done is we've got our offshore contractor, there is at the final stage of approval, as well as all equipment that we're buying. Thus -- based on the waiting on government approval to get that done. That really gives us the confidence in terms of the capital spend we're going to have for the project. So we know that the onshore capital cost, which we're pleased about. We've mentioned the pass-through competitive frames $600 per ton and say, once we've got the approvals for the offshore scope, then we'll have certainty around capital spend with the conclusion of the SPAs as per schedule we'll then -- we've had good engagement from the export credit agencies with regards to financing takes us through the point where all of those key activities are on track to take us to the point where we will be ready to take the project for and taken to FID, in the first half of next year. And parallel to that as you've seen support we're progressing with the infrastructure projects and fungi at this moment. We're pleased to say that's gone really well. We're currently -- we've over fee size in Mozambique and just working on the project. Just now working reach settlement activities. We started the camp expansion and there also started the air strips. lots of good progress being made by the team in the field and it really does then give us some confidence around how we're going to execute the project over the next few years after we take FID.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Thank you. As regards, how much contracted volume you want before FID, where you are in terms of the SPAs and where you want to be in terms of the SPAs? Thanks.

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

So we're really pleased with where we are on SPAs and as we've mentioned in the past, we've exceeded our 8.5 million tons target in terms of key terms as those agreements are currently being closed out at this moment in time. So we will achieve that target to enable us to go at project financing.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Right. So, is actually that's the question of finalization of the contracts?

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

It is. These contracts are the key terms are really the things that are great in terms of price and volume. And the SPAs they are really lengthy documents in excess of 150 pages long. So they take a bit of time to actually conclude and let's say, we are in the final stages of concluding all those agreements in excess of 8.5 million tons to then allow us to close out in this project financing.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Great. Thank you.

Operator

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Not a lot here and I would say one more time thank you to the Anadarko employees for just an exceptionally strong quarter, as well as the outlook we see for the fourth quarter next year and in a few weeks, we'll look forward to providing investors a better view as to what 2019 looks like. So with that, I'll close, what I started with and say Happy Halloween. Thank you.

Operator

Thank you, sir. Today's conference is now concluded and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day

Duration: 42 minutes

Call participants:

Robin Fielder -- Vice President of Investor Relations

R. A. Walker -- Chairman of the Board, President, Chief Executive Officer

Arun Jayaram -- JPMorgan Chase -- Analyst

Mitchell W. Ingram -- Executive Vice President, International, Deepwater and Exploration

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Robert Morris -- Citi -- Analyst

Robert G. Gwin -- Executive Vice President, Finance and Chief Financial Officer

Brian Singer -- -Goldman Sachs & Co. LLC -- Analyst

Daniel E. Brown -- Executive Vice President, U.S. Onshore Operations

Welles Fitzpatrick -- SunTrust Robinson Humphrey, Inc -- Analyst

Jeffrey Campbell -- Tuohy Brothers Investment Research, Inc -- Analyst

Michael Stephen Scialla -- Stifel, Nicolaus & Co., Inc -- Analyst

Gennifer Kelly -- VP, Midstream and Marketing and COO

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

Sameer Panjwani -- Tudor Pickering & Holt -- Analyst

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

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