Anadarko Petroleum (APC) Q4 2017 Earnings Conference Call Transcript

Anadarko Petroleum (NYSE: APC) Q4 2017 Earnings Conference CallFeb. 7, 2018 9:00 a.m. ET

Prepared Remarks:

Operator

Good morning and welcome to the Anadarko Petroleum Fourth-Quarter 2017 Earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the * key followed by 0. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press * then 1 on your telephone keypad. To withdraw your question, please press * then 2. Please note today's event is being recorded. I would now like to turn the conference over to Robin Fielder.

Please go ahead, ma'am.

Robin Fielder -- Vice President, Investor Relations

Good morning, everyone. We're glad you could join us today for an Anadarko's fourth-quarter earnings and investor 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 discussed.

We encourage you to read our full disclosure on forward-looking statements and the GAAP reconciliations located on our website and attached to this presentation. Before we begin this morning, I want to take a moment to thank Pete Zagrzecki, who many of you had a chance to work with over the past couple of years in his role with investor relations. Pete is now leading our corporate financial planning team, and we are pleased to welcome Kate Sloan, who has succeeded Pete. Kate has more than 13 years with Anadarko, including a broad accounting and financial planning background.

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She will be able to assist you with any questions you may have following today's call, along with Andy Taylor and myself. Here in just a moment, Al Walker will briefly highlight our strong fourth-quarter results and then focus discussion on the company's 2018 expectations and delivery. Next, Danny Brown will provide details about our world-class in infrastructure-advantaged U.S. onshore growth engines and the DJ and Delaware basins, followed by Mitch Ingram, who will discuss our high-margin and stable cash-generating deepwater and international assets, which also benefit from established infrastructure, as well as our premier LNG project in Mozambique.

Then, Bob Gwin will discuss the benefits and value created through our control and ownership of Western Gas Partners. After that, I will have a few closing comments and will then open up the call for your questions.

Al Walker -- Chairman, President, and Chief Executive Officer

Thank you, Robin. We appreciate the opportunity this morning to discuss our results, latest announcements, and plans for the future. I suspect most of you reviewed last evening's release of our year-end results and fourth-quarter report, and this morning's announcement for enhancing shareholder return with a substantial increase to the dividend and a $500 million increase to our share-repurchase program, bringing our board-authorized amount now to a total of $3 billion. We are very excited to discuss these items with you this morning, and as Robin mentioned, we want to provide you additional insight into our portfolio, give you our thoughts on Anadarko's cap allocation for 2018, and discuss the expected results this capital-efficient plan produces.

Before we turn to these topics I'd first like to express my sincere appreciation to our employees. The have transformed Anadarko into a company with materially higher operating margins by changing our production and reserve mix, and improving our efficiencies. They have worked together to meet our challenges, modify our processes, and enhance our safety and commercial focus. They have generously given of their time and money to help the communities in West Texas, the Rockies, and especially in Houston, where we helped each other overcome the horrific effects of Hurricane Harvey.

And they have collectively positioned our company to exit 2017 on a trajectory that is exciting for what it should produce in the years ahead. Let's start with the very strong results we produced in the fourth quarter from our U.S. onshore assets.The DJ and the Delaware organizations exceeded their year-end exit-rate targets with assets producing at record levels. This performance, when combined with our Gulf of Mexico and international assets, produced a higher overall liquids mix, largely oil-driven, which materially improved our cash margins.

In 2017, we achieved upstream capital investments inside of our discretionary cash flow and total Anadarko capital investing inside of guidance. This type of capital efficiency has us very well-positioned for 2018, and as you've heard me say before, investing within cash flow is nothing new for us. As this graphic shows, we have a proven track record of pacing our upstream investments with organic cash flows. We have been efficient with our investing capital, and with the exception of funding the 2016 acquisition of Freeport McMoRan's deepwater assets with a stock offering, we have not issued equity to meet cash uses.

For 2018, we constructed a total capital investment plan for both APC upstream and midstream that is projected to be inside of our expected discretionary cash flow at 15.3. Late in Q4 '17, we elected to take some of our 2018 cash flow risk off the table, as the forward calendar price strip for 2018 was well above our investment case and hedged some of the oil price volatility we anticipated on the horizon for oil. As we've said publicly this strip, price discovery seems particularly fragile in 1H '18, with improving outlook thereafter. Given the seasonal demand weakness, coupled with refinery turnarounds during the first half of the year, we felt locking in a portion of our expected cash was prudent.

And at today's strip, we will generate significant free cash flow, and as stated before, we do not expect to materially change our investment plans should we realize higher prices than our investment case. Our portfolio is poised to deliver an improving liquids mix, driven by high-margin oil growth. As we have repeated many times over the years, growth is an output of our capital allocation process and our portfolio offers compelling returns given this material, scalable assets and strategic infrastructure options. As we advance the deep inventory of opportunities we enjoy, we believe there will be additional efficiencies and improving margins even if oil prices remain static.

Over the last 10-plus years, active portfolio management has been a core tenet of Anadarko strategy. Market opportunities are dynamic and volatile, and so too are the demands we face to keep pace. I think it might be worth a recap of recent work to demonstrate this point and what it has produced. Since mid-2016, we have invested approximately $7 billion in gas-centric assets that did not compete for capital in our portfolio as we benefited from our oil-leveraged opportunities in the Delaware, DJ, and deepwater Gulf of Mexico.

Our realized asset sales were very strong, and proceeds improved our balance sheet and financial flexibility. Concurrent with this divestment plan to exit dry-gas properties, we purchased Freeport's deepwater Gulf of Mexico assets for what turned out to be less than one times the full year's cash flow, adding attractive assets that doubled our [Inaudible] production, improving our infrastructure and tieback inventory. This portfolio transformation has contributed to improving our margins by more than 30% and increasing our oil composition to almost 60%. I would like to take a few minutes to talk about what has changed since our November guidance.

As announced this morning, our board of directors authorized a quintuple increase in our dividend-payoff policy, now $0.25 per share to be paid quarterly. In addition, as I mentioned earlier, we have expanded our share-repurchase program to $3 billion, of which we have completed more than half to date. Also since November, we've benefited from the passage of tax reform and an improved commodity environment. We're very happy with what our program can deliver in our three principal areas of investing: Delaware, DJ, and deepwater Gulf of Mexico.

As most of you have likely noted, we sold our non-operating interest in Alaska, consistent with our stated focused on operating material scalable assets. We have adjusted our 2018 guidance for the expected prolonged downtime for the outside-operated enchilada platform in the Gulf of Mexico. Consequently, we're taking a conservative view on when the enchilada platform is back up later this year and adjusting volumes and CAPEX for Alaska, but largely living within the plan that was previewed this fall. I think it's reasonable to assume these minor updates to our prior guidance for 2018 speaks to the resiliency of our portfolio.

We continue to expect to invest more than 85% of our capital in the three U. S. development areas I referenced this morning, which we anticipate can deliver a three-year, 10%-to-14% compounded growth rate for oil. We expect stable conventional oil production from the Gulf of Mexico and our international assets and significant high-return oil growth from our Delaware and DJ.

With the exception of the Delaware, all of APCs, other assets generate material free cash flow at $50, and we expect the Delaware to achieve the same success within a couple of years as we finalize the infrastructure build-out and takeaway capacity to handle the pad development volumes. In November, we announced some changes to the construction of our compensation program, when we communicated our initial thoughts on the 2018 capital investment plan. Over the last 10 years, when discussing performance and market dynamics with investors in settings like today, we have consistently pointed to debt-adjusted per-share metrics for production, reserves, and cash flow as having the best correlation to share-price performance. When determining capital plans for investing, this framework has been used to help shape allocations for years.

Moving to this framework for compensation will hopefully better align the expectations of investors and those management teams using the structure for incentivizing value-added result. At 50 and 3, Anadarko should deliver attractive cash returns, and using the debt-adjusted per-share production framework can produce double-digit growth in 2018 and through the balance of the decade. We're attractively leveraged oil prices producing strong free cash flow above 50 for WTI and Brent, as each dollar above 50 produces an incremental $100 million of cash flow. So at 60 and 3, as an example, we anticipate more than $1 billion of incremental cash flow, some of which we have locked in with the hedging program I mentioned earlier.

As I mentioned in January at the Goldman conference, we do not plan to materially increase our investing in 2018 should prices be higher than 50 and 3, as we feel the plan provides for strong returns and attractive growth. Our position has not changed nor have our priorities for use of cash. If realized prices are greater than our investment case, we will continue to return value to shareholders, as demonstrated this morning with our announcement to increase our cash dividend pay out and expand the share-repurchase program. While our board authorization for the buyback is through year-end, we expect we can complete this plan before then, If market conditions permit.

As we shrink the balance sheet through additional share repurchases, we will continue to be mindful of needing to economically retire debt and intend to retire the 2018 and 2019 maturities at par. In addition to these actions, we will continue to evaluate options to improve the value proposition for investing in APC. I am pleased to now turn this over to Danny to discuss our U.S. onshore assets.

Danny Brown -- Executive Vice President, U.S. Onshore Operations

Thank you, Al. The transformation of our U.S. onshore footprint has simplified our portfolio on capital allocation. In 2018, we'll invest roughly $2 billion of upstream capital in two world-class assets, both of which are material, scalable, and infrastructure-advantaged.

We plan to run approximately 12 operated rigs and nine completion crews total between these two positions and deliver year-over-year oil growth of more than 30% in the DJ and more than 50% in the Delaware. The returns on these investments are extremely attractive and we have line of sight to more than 6 billion barrels of oil-equivalent of stacked net resource and decades of high-quality inventory. In addition to our upstream investments, Anadarko and our MLP, Western Gas Partners, are collectively investing more than $1.5 billion on oil, natural gas, and water infrastructure to ensure greater control over the pace of development and operational efficiency. As we've seen in the DJ Basin, where we have been in horizontal development mode for more than six years, this playbook has differentiated Anadarko and will be a catalyst to predictable and scalable growth from our Delaware basin assets as we look into the future.

Now let's dive a bit deeper in the DJ Basin, an asset within our portfolio that rivals many stand-alone companies in our sector. With net production levels more than 250,000 barrels of oil-equivalent per day, and 2018 free cash flow expected to surpass $1 billion, you can easily see why we continue to allocate significant investment toward this asset. In fact, our DJ Basin asset his generated free cash flow every year since we transitioned to a horizontal drilling program in 2011. Current rates of return in the core are about 100% at 50 and 3, far superior to other operators in the basin because of the mineral interest ownership that we enjoy in every other section across our land-grant acreage.

Our midstream and takeaway strategy also provides a significant advantage by enhancing returns at numerous links along the value chain, including equity ownership in crude and NGL pipelines, and NGL fractionation. These strategic benefits have served us well for the first 1,700 horizontal wells and will be differentiating factors as we develop remaining inventory well into the next decade. One of the key drivers for DJ success is the early adoption and continual advancement of technology. Our petroleum and data scientists are using data analytics and multivariate analysis to advance our understanding of the subsurface and adjusting completion parameters to optimize stimulated rock [Inaudible] and recovery.

In 2017, a new completion design was implemented on Niobrara short- and medium-link laterals, and results have been exceptional. Thus, we are increasing our continuous core-type curve by more than 20% and are planning to test similar designs and long laterals and heavier fluid types. With a steady development plan for 2018, we expect to drill, complete, and turn to sales roughly 300 wells for extremely attractive returns, quite possibly some of the best in the U.S. onshore today.

The playbook that we've assembled in the DJ Basin is unmatched. It starts with an acreage position that holds some of the best rock, pressures, and fluid properties in the basin. Building on that foundation, Anadarko offers distinct competitive advantages in our mineral ownership, expansive midstream infrastructure, and demonstrated operational efficiency. Collectively, these differentiating factors deliver single-well break-evens near an impressive $20 per barrel.

Specific to our minerals ownership, we realized a 40% NPV uplift on sections where we own the underlying minerals and do not have a royalty burden. Operationally, our drilling and completions activities are some of the most efficient in the basin. We continue to increase our average lateral link and have reduced our cost per foot and drilling cycle times by more than 50% since 2014. Finally, our midstream infrastructure is distinct and extremely valuable, both from a capacity and design perspective.

Today, the WES-owned gas gathering and processing system moves over a BCF a day and is scheduled to expand by 50% in 2019 with the addition of the recently announced Latham plant. This system delivers the lowest line pressure innovation, ensuring stable and consistent production of Anadarko's equity volumes today and into the future. Additionally, the Anadarko-owned oil gathering system is currently moving 125,000 barrels of oil per day and plans are in place for expansion to 150,000 barrels of oil per day in 2019. We're extremely proud of the mega asset we have built in the DJ Basin and are in the process of constructing another portfolio changer in the Delaware Basin, where we also benefit from acreage position, with top-tier reservoir properties and a midstream footprint, which enables decades of operational synergy and growth.

Now let's pivot to the Delaware Basin, a world-class resource expected to deliver decades of growth and high-margin returns within Anadarko's portfolio. Our Delaware position is nearly 600,000 gross acres, that's three times the size of our continuous-core DJ Basin footprint, and holds 8,500 feet of stacked oil potential with significant overpressure. We continue to be encouraged with appraisal work throughout the stratigraphic column but are most excited with the Wolfcamp A zone because of the expansive nature of the interval across our leasehold, high oil composition, and strong well performance.Results from an extended flow back half on 30 recent wells are very promising, delivering early time rates that are more than 25% higher than our current Wolfcamp A-type curve. These results demonstrate the deliverability of Anadarko's wells across the Delaware Basin, when produced through optimized facilities and infrastructure.

In 2017, Anadarko advanced several foundational components at the Delaware Basin value chain, securing local-source sand, basin takeaway capacity, and making significant progress on the extensive infrastructure backbone. We continue to core up our acreage position for operational efficiency and have completed more than 35,000 acres of trades over the last couple of years. With operatorship capture drilling largely in the rearview mirror, our 2018 focus will be transitioning the rig fleet to multiwell pads, developing our [Inaudible] campaign area, and pacing these activities with the commissioning of several new gas processing plants and regional oil treating facilities, or ROTFs. By the end of this year, Anadarko midstream and Western Gas plan to place into service an additional 400 million cubic feet per day of gas processing and 120,000 barrels of oil per day of oil-treating capacity.

These enhancements, when combined with our tankless production facilities, are the catalysts for producing our wells in their optimal state and establishing the necessary foundation for significant future production growth from our Delaware asset. We view this infrastructure build-out as another mega project and have reallocated midstream, operations, and project management talent from the DJ Basin and conventional assets to leverage our in-house expertise to ensure that Anadarko delivers these projects on time, on budget, and with safety as an utmost priority. The Delaware Basin delivered a strong fourth quarter, surpassing its 2017 exit-rate target of 50,000 barrels of oil per day. This year, we expect to turn to sales more than 160 wells and deliver year-over-year oil growth of more than 50%.

We see this growth weighted more toward the back half of 2018, coinciding with the in-service dates of the Reeves and Loving ROTFs. Now, before I conclude, I think it's important to revisit Anadarko's tankless gathering philosophy in the Delaware Basin that I mentioned a few moments ago. This is a best practice from our DJ asset, one that delivers pressurized fluids directly from the well site to a regional treating facilities. This philosophy reduces our environmental footprint by limiting sourcing and associated equipment, lowers operating costs, and reduces truck traffic and associated emissions.

Frankly, it is the appropriate way to run the railroad as we think about the size and scale of our Delaware Basin asset in the decades of capital-efficient growth that is designed to deliver within Anadarko's portfolio. With that I'll turn the call over to Mitch, who will talk about our deepwater Gulf of Mexico, international, and Mozambique LNG projects.

Mitch Ingram -- Executive Vice President, International and Deepwater Operations

Thank you, Danny. As with the U.S. onshore assets, Anadarko's uniquely positioned in the deepwater Gulf of Mexico with an industry-leading 10 operated floating facilities, associated infrastructure, and extensive acreage position of more than 300 blocks. No other company can match our deepwater infrastructure position in the Gulf.

When you couple that with the numerous tieback opportunities already identified, we can deliver returns in very attractive cycle times that rival onshore unconventional development. In 2017, we quickly integrated our acquisition of Freeport's deepwater assets and began development activities in the Horn Mountain area. We brought to Horn Mountain tieback wells online, from spot to first production in approximately 100 days that combines sustained rate in excess of 25,000 barrels of oil per day. The Horn Mountain 2017 program is expected to pay out in less than one year, with rates of return of more than 100%.

In 2018, we expect to invest $1 billion in development capital, with two drill ships and one platform rig drilling approximately nine wells in and around existing infrastructure. These opportunities are low-risk, high-productivity wells in prolific fields that can deliver an annual rate of return of 85% or better, with very competitive finding and development costs. Our Gulf of Mexico program delivers consistent, stable oil production, and over the next three years, we expect production to be flat, with cumulative free cash-flow generation exceeding $4 billion at $60 oil. We'll apply the same hub-and-spoke approach to our exploration program in the Horn Mountain area, where we'll need to drill two to three exploration wells this year.

Our Algeria and Ghana operations continue to deliver strong free cash flow of more than $1 billion at $60 oil. Over the next three years, we expect to keep these stable, high-margin sales volumes at or near the current rates. Algeria requires minimal capital investment to optimize resource development and maintain the oil plateau of more than 55,000 barrels of oil per day.We're excited to get back to work in Ghana, with our partners, who announced that development in both TEN and Jubilee fields will resume early this year. The partnership has tendered a rig and will work across both fields to optimize output.

Next, I'd like to highlight the tremendous opportunity our Mozambique LNG project provides to strategically time the market and the global LNG demand is expected to exceed supply. Mozambique LNG is a world-class resource close to shore, centrally located to key markets in Asia, Europe, and South America, and extremely cost-competitive. Anadarko's Mozambique LNG is the LNG project for the coming decade. In 2017, we made significant advancements toward FID and started to build momentum.

First the foundational legal and contractual framework is in place. Second, the development plan was finalized with the government and it is now in the final stages of the governmental-approval process. Third, we and our partners began the onshore site prep work, which significantly derisks project execution ahead of FID. We'll continue to position the site this year for construction of the LNG facilities.

Fourth, agreed key terms, subject to final approval, including volume and price for approximately 5 million tons per annum of LNG offtake. This puts us more than halfway to our FID target of 8.5 million tons per annum. We're currently negotiating with multiple buyers to fill the remaining volume necessary for FID. With each milestone, we've seen our Mozambique LNG project gain credibility in the market and support from the international finance community.

This project provides Anadarko a new, material, scalable, and repeatable business line. Initial two-train development of 12.88 million tons per annum at Golfinho/Atum has the potential to generate decades worth of significant free cash flow. On-site preparation work, including resettlement, is under way, with the use of proven and experienced contractors. And the legal contractual framework is being finalized and approved.

These actions, combined with our assistance in helping the government of Mozambique prepare for such an undertaking, advances this project toward FID, and we anticipate the delivery of first cargoes approximately five years post-sanction, which is a typical time line to build a greenfield LNG development. Once the first two trains are online, the potential repeat delivery and scalability of Prosperidade is phenomenal. The long-term outlook for Area 1 is expected to deliver stable production volumes, more than 1 billion barrels of net recoverable resource and superior free cash flow. We're excited about the value a project of this scale brings to Anadarko's portfolio.

Now I'll turn the call over to Bob, who will discuss the distinct midstream advantage.

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

Thanks Mitch. We believe our midstream segment, which consists of both Anadarko midstream and Western gas, provides differentiating value for Anadarko and its shareholders. The benefits are numerous. By owning and operating the midstream, we can appropriately finance and time infrastructure scale, capacity, and operations with our multiyear upstream activity plans.

This enables us to maximize capital efficiency, minimize the number of wells waiting on pipe or facility, and optimize the integrated system across a very large acreage footprint, ensuring things like compression, takeaway capacity, system design, and engineering are appropriate to support our upstream needs. We're integrated from the reservoir, through the gathering and processing systems, all the way to the sales point. This means that among other benefits we can optimize system pressures, which enables reliable and consistent production delivery. As Danny discussed earlier, we're building the foundation for long-term, reliable growth in the Delaware Basin.

Our system was designed to leverage the infrastructure across production from numerous zones over time with scale, economics, minimized emissions, and less truck traffic. Our approach worked exceptionally well in the Eagleford first and again at tremendous scale in the DJ Basin. In the early horizontal development in the DJ, operators were able to drill complete and bring wells online without any delays. However, as the basin matured, bottlenecks began to appear and those relying on third-party systems were at the mercy of other firms' schedules, capital budgets, and priorities.

Our operations experienced no such challenges, adding tremendous value to our upstream execution capability and the value of our assets. We believe the benefits will be even more significant in the Delaware as operators move into a development mode. That's why we remain focused on this upfront investment required to facilitate stable and predictable volumes for years to come. In addition to the operational benefits, there are numerous financial benefits to the sponsor, not the least of which is the almost $4 billion that WES has funded under its own capital structure in support of APC's development plans.

Before we talk about the future, a brief history lesson provides some important perspective. Since WES's inception, Anadarko has realized $6.5 billion of cash returns through a combination of three sources, which are shown in detail on this graph. No. 1, cash distributions on units owned by Anadarko, No.

2, midstream asset sales to WES, and No. 3, monetizations of our unit ownership primarily in WGP. We chose not to monetize units or assets in 2017 due to Anadarko's robust cash position and a challenging capital markets backdrop. However, in the future, you can expect us to continue to opportunistically seek to realize material cash from the enterprise and return it to Anadarko shareholders.Going forward, with regard to distributions, given the incremental activity in the DJ Basin and the tremendous growth expected in the Delaware Basin, the model continues to work today and into the future.

WES and WGP's distribution profiles reflect this, with 2018 guidance at 7% and 12% distribution growth, respectively. Thus cash distributions to Anadarko are expected to expand into the future, reflective of this growth. Anadarko midstream EBITDA, separate from Western Gas, also continues to grow and is expected to be more than $300 million in 2018, as the Delaware oil and water systems are built out and development drilling begins. This inventory represents potential additional asset sales to WES down the road, which will extend the MLP's growth profiles well into the future.

And we will continue to monetize our unit holdings responsibly over time to maximize the full-cycle economic benefit for Anadarko shareholders on an after-tax basis. To summarize, WES is unique. Despite its maturity and tremendous success to date, it has numerous organic and non-organic growth opportunities ahead of it, primarily via one of the most well-positioned systems in the Delaware Basin and a high-quality customer base with over half its volume coming from third parties, enabling it to continue to deliver meaningful, lower-risk, capital-efficient distribution growth well into the future without pressuring coverage ratios or leverage. Nonetheless, as a pioneer in this large-cap-sponsored MLP space, we recognize that there is a natural cycle to this structure which must eventually be addressed by every company, and we're proactively evaluating various options and the appropriate timing.

We've always taken a long-term view as a responsible sponsor and we will continue to act in a balanced manner in that role as we work closely with Western Gas leadership. Importantly, Anadarko shareholders appropriately want to better understand how this asset value gets conveyed to them and is better reflected in the share price. We want to make clear today, our intent is to return this cash to Anadarko shareholders consistent with our approach to free cash-flow deployment from the upstream business. This powerful, cash-generating line of business enables us to materially accelerate cash returns to Anadarko shareholders, as evidenced by this morning's announcement about the dividend increase, share repurchases, and debt retirement, which it helps to support.

It is simply a unique value-creation lever that no other company can match. I'll now turn the call back over to Al for some closing comments.

Al Walker -- Chairman, President, and Chief Executive Officer

Thanks, Bob. To recap our value proposition, we have materially increased our dividend yield. We have expanded and intend to complete our share-repurchase program well before year-end, and we will efficiently allocate capital inside of cash flow and deliver 13% oil growth in a 50 by 3 world. We will continue to apply this focus of capital efficiency and enhancing returns on a multiyear basis.

I'm extremely proud of the portfolio we have built and the value proposition we outlined today and hope you will take the time to consider this investment thesis. With that, we are happy to take your questions.

Operator

Thank you, we will now begin the question-and-answer session. If you would like to ask a question, please press * then 1 on a touchtone phone. If you're using a speakerphone, we ask that you pick up the handset before pressing the keys. To withdraw your question, please press * then 2.

At this time, we'll pause momentarily to assemble our roster. And today's first question comes from Arun Jayaram of JP Morgan. Please go ahead.

Arun Jayaram -- JP Morgan -- Analyst

Good morning. Al and Bob, I wanted to see if you could maybe elaborate on your comments around utilizing your ownership in WGP to enhance your ability to return cash to shareholders over a longer period of time. Bob, you mentioned 300 million of EBITDA at the Anadarko midstream level. I was wondering if you just talk about how this could play and the, you know, cash return beyond what you outlined this morning.

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

Sure. Good morning, Arun, happy to do so. When we look at the existing portfolio of -- the Anadarko midstream portfolio, $300 million, that also is growing. It's primarily Delaware Basin oil and water.

And so the growth profile is impressive, but it is not yet free-cash flowing and the MLP is a better buyer of assets once they've reached some capital maturity and the cash-flow profile is set to expand. And, obviously, midstream asset values in the Delaware Basin are very valuable. They've been trading --- private equity-owned midstream assets in the basin and been trading at very attractive prices. They changed hands recently, and so as part of the multiyear planning model, we're looking at when those assets have reached capital maturity and when Western Gas is in a position, based on the MLP capital markets, to be able to finance appropriately within its within its coverage and leverage guidelines that I mentioned, when it's able to buy the assets from Anadarko.

The nice thing from Anadarko's perspective is that we don't need that cash today in order to meet the cash-distribution model we've outlined to increase the share repurchases, to increase the dividend, to repay the debt. And so it gives -- we have flexibility around the timing on the drop-downs to Western Gas. And our goal here is to find the efficient time and be able to deliver kind of multiyear approach when it comes to both cash-yield returns to investors and the reduction of debt. So it's partly overall multiyear planning model, which is why we're not real specific about it, but the flexibility incredibly valuable, obviously, in managing in managing our cash-flow profile.

Arun Jayaram -- JP Morgan -- Analyst

Great. And just a follow-up. In the Delaware, you guys highlighted results from 30 optimized wells across your portfolio. I wanted to see if we could talk about, this year you'll have about 160 wells in the Delaware.

How many of those would be kind of optimized and what do you see as the growth opportunity for APC once the Reeves and Loving County systems are completed later this year?

Danny Brown -- Executive Vice President, U.S. Onshore Operations

Hi Arun, this is Danny, I'll take that. From 160 well standpoint recognized as we've mentioned on multiple occasions, our growth profile in the Delaware Basin is really going to be back-end-weighted. And so after we get the regional oil-treating facilities online, that's when we'll see most of our well delivery and most of our production growth. The point of building those regional oil-treating facilities is to do exactly what you're suggesting, which is optimize the facilities that the wells flow through to keep them in an unconstrained manner.

So really a lot of that uplift we saw and those 30 extended flow-back tests that took place earlier were about optimizing those through those facilities and we -- the results were quite impressive. And so that's the idea, we'll get the regional oil-treating facilities put together, we'll flow these wells unconstrained and so most of the wells that we're delivering in 2018 should be in that manner as those ROTFs come online. It is very, very similar to the playbook we put in place in the DJ and you've seen the results and we expect to replicate that in the Delaware Basin.

Arun Jayaram -- JP Morgan -- Analyst

Thanks a lot.

Operator

And our next question today comes from Scott Hanold from RBC Capital Markets.

Scott Hanold -- RBC Capital Markets -- Analyst

Yeah, thanks. Appreciate taking the question. Just a follow-up on the ownership within Western Gas. Big-picture, obviously, you've had some other E&Ps obviously take a look at their structure and do a bit of a separation and when you kind of step back and think bigpicture of how you want to proceed in the short, medium, and long term with that ownership is the goal to look to, I guess, to extract cash to give it back to shareholders or are there other types of structures you're looking at?

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

Well, the issues are related. Obviously, our intent and our goal is to be able to extract cash returns to shareholders. I think I made that clear in the prepared comments. How we do that, though, is very closely related to the underlying value of the MLPs themselves and how those MLPs trade relative to market expectations, their ability to access the capital markets, which is fundamentally dependent upon the liquidity in the MLP market.

These are very salient facts in terms of our ability to -- first, we have to have the value, so the underlying securities have to trade well and be more valuable securities. And 2017 was a difficult year not just for the Western Gas entity but really the broader MLP sector. Going forward we've got to consider whether or not the existing structure makes sense. I think it's important to keep in mind that our MLPs, I tried to allude to this in the prior comments, but our MLPs are quite healthy with a lot of growth.

And these transactions that have been occurring in the market have largely been related to the fact that the costs of capital have begun to approach or exceed investment returns. That's not true for Western Gas. And so though the cost of capital is burdened with the IDRs that are in place, we still have really sound economics and growth profiles at the MLPs. Nonetheless, they trade in a market where their actual trading values are based on expectations and the underlying liquidity of that market.

And so these are all factors that determine the value of those MLPs. The value of those MLPs and how they trade and how those markets trade are really going to be determining factors in how much cash we're able to extract and return to Anadarko shareholders and so that's why I mention that we're looking at it. We obviously have been looking at that for a while, we've been watching the other transactions that occur in the market, talking to a number of advisors that are very familiar with the space. And I think we know that at a point in time the mathematics of the MLP structure with IDRs require some sort of resolution.

And that's been true for as long as MLPs with IDR structures have been around. So we're very conscious of it. Taxes are a significant consideration for the LP investors as well as for as for, for instance, C Corp distributions are taxable. We've got 75%ish interest ownership in WGP, and our belief is that we'll be able to extract a significant amount of value on an after-tax basis and be able to return it to Anadarko shareholders.

So we aren't specific as to the plans today, but we think all these things are interrelated, and we wanted to make clear this morning that we are working on it, we certainly won't foreshadow our timing or our direction, but it is something that's very tangible for us today and something we're paying a lot of attention to. The underlying theme here is that we know there's a lot of cash that we'll be able to float Anadarko through this kind of closed-loop structure with the MLPs, the growth in the Delaware, etc. And it gives us a lot of comfort that beyond the free cash flow from the upstream business we'll be able to enhance the cash returns to shareholders through the methods I've identified.

Scott Hanold -- RBC Capital Markets -- Analyst

I appreciate that answer. And is that what you were generally referring to, I guess, in Al's prepared comments? He made a comment to the effect of, you're going to continue to evaluate options to improve the APC value proposition. Was the midstream initiative what you were referring to or are there some other things you all are looking at?

Al Walker -- Chairman, President, and Chief Executive Officer

No, Scott, this is Al. I think you're, in part, correct. We're going to look at many opportunities. Bob talked about Western Gas, but I think even in addition to that, as we increase our dividend today and announced additional share buybacks, we recognize that there is growth that our efficiency will create and we will be looking for opportunities to return more cash to shareholders in the form of share repurchases, dividend increases.

We're also going to be pretty mindful that as we shrink the balance sheet that we also have to be mindful of the credit metrics and the ability to retire debt at the same time. So it's really those three taken together.

Scott Hanold -- RBC Capital Markets -- Analyst

Understood. I appreciate it. Thanks.

Operator

And our next question comes from Subash Chandra of Guggenheim. Please go ahead.

Subash Chandra -- Guggenheim -- Analyst

Thank you. Curious how you deliberated the choice between the dividend growth and the share buyback and if there were some sort of yield-targeting that you might have considered and that you might consider in the future?

Al Walker -- Chairman, President, and Chief Executive Officer

It was not yield-targeted. If you recall, I know you followed us a couple of years ago, we were at $0.27 a share, payable on a quarterly basis, when we reduced our share, our dividends at that point. I think taking it back up to the level we did this morning was really an effort to be back in what we feel like is a place relative to our peer group that the dividend yield would be competitive. And it was really trying to find a more competitive dividend yield relative to our peers and relative to the growth that our capital efficiency creates that drove that at the end of the day.

Bob, I don't know if you have anything else you'd like to add to that? You're certainly welcome to.

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

I think you should expect us to look at both dividends and share repurchases going forward. We certainly look at dividends relative to run-rate operations, expected cash flow, expected free cash flow. That is a repeatable cash flow stream that results in a repeatable payment to the shareholder. Whereas the buybacks are something that we can do somewhat opportunistically, either based on a larger cash position or asset sales like Alaska that we mentioned, or proceeds coming out of the MLP structure as we've been talking about, and I think you should expect, the market should expect, that we'll use both going forward.

I think you can look at a buy-back yield and cash yield and on a combined basis I think we have one of the better value propositions out there in terms of the aggregate capital being returned. And, quite frankly, I mean, focusing on the debt side is important as well. Obviously, the capital structure matters and buying back part the company from the debt-holders for the benefit of the shareholders is significantly value-add. So I think that's why we've tried articulate it in all three ways.

But we knew that one thing we needed to do, and it's a very material increase in the dividend today, was to, as Al said, step that dividend back up to the point that it is competitive and that it is something that is repeatable and predictable for our shareholders so that it can become more fairly reflected in the share price.

Subash Chandra -- Guggenheim -- Analyst

OK, understood. And my follow-up is in the Delaware and looks like the ratio of rigs to crews is fairly low or, flipped the other way, the ratio of completion crews to rigs is fairly high. Is this in anticipation of the facilities coming on the back half or do you expect to rationalize the number of crews out there?

Danny Brown -- Executive Vice President, U.S. Onshore Operations

This is Danny. I think what you're really seeing is the continuation of our operator-capture efforts that took place in 2017 and now extend into 2018. So if you'll recall in 2017, we ran quite a high rig count, as we drilled these opportunities, we built up some drilled uncompleted inventory and as we work through 2018, we expect to see that drilled uncompleted inventory work its way down as we pick up completion crews to work at work that operatorship program through the system. So a higher ratio this year of completion crews versus drill crews, and you'll see our DUC inventory come down.

Operator

And our next question today comes from Paul Sankey of Wolfe Research. Please go ahead.

Paul Sankey -- Wolfe Research -- Analyst

Al, I think it's shown that the actions you are taking are very shareholder-friendly as regards dividend and buyback. What we also see shareholders really appreciating is focus and I was wondering given, I know you sold Alaska over the course of the quarter, what else do you think you can do to make Anadarko a more focused player, insofar as it did take some time during your comments this morning just to get through the sheer list of assets you have, and as you get this improvement in performance which we're seeing in U.S. unconventional, I would have thought it becomes self-sustaining and therefore could be a stand-alone business, which presumably would be high multiple. I don't know what your response would be.

I'd be interested to hear. Thanks.

Al Walker -- Chairman, President, and Chief Executive Officer

Well, thank you. Paul. I think we believe today, like we have for a while, that material, scalable assets are the core part of what we're trying to do and feel like in our case the three D's certainly fit that and 85% of our capital this year is committed to it. I think the other comment I'd make is that we're really not looking to surf in anyone else's wake when it comes to delivering capital efficiency.

Think that's going to be a core tenet of how we think about investing our capital and the way in which it will be returned to shareholders.

Paul Sankey -- Wolfe Research -- Analyst

But the mix business [Inaudible] international, say, for example, Mozambique, Algeria, West Africa. Is there any way that you can separate that out and then have just a focus pure play U. S. unconventional, that can show that its results are absolutely stand-alone?

Al Walker -- Chairman, President, and Chief Executive Officer

Paul, I guess that could be debated. I think our view is that we as an integrated domestic and international company have a fairly attractive asset footprint that throws off, with the exceptions of the Delaware, free cash flow from all the other operated properties with Mozambique, as you well know, being something that's on the horizon in the next decade. So I think we do see a free cash flow coming from everywhere other than Delaware is quite attractive and therefore the assets collectively, with the emphasis that I placed on capital efficiency being pretty important, and I guess I don't see the advantage that maybe you do with splitting out domestic and nondomestic assets.

Paul Sankey -- Wolfe Research -- Analyst

Understood, and I apologize -- these are kind of short questions with very long answers. But if I could just change direction a bit. You did mention another positive, which was the pay changes that you're going to make. Could you just talk about a bit more about the extent to which you believe that you're taking leadership on that issue?

Al Walker -- Chairman, President, and Chief Executive Officer

Yeah, as was rolled out at the Bank of America conference in November by Bob, as authorized by our board, we felt like moving to three particular metrics, one being production growth per debt adjusted share, along with reserves on the same basis, correlated well to what we've seen over the last 10 years that the market rewarded. I think taking it a step further and trying to come up with something that further talked about capital efficiency was also included so that we have a return-of-cash calculation in there. As we finalize the calculation for and the scoring associated with that for compensation in the coming weeks with our board, we will then put that in our proxy statement. And at that time, I think we were certainly -- we would welcome comments, but we think that what we've done is trying to align ourselves with what we have heard over the last six months from investors that we spend a lot of time talking to.

I think part of the intent in rolling it out in November the way we did was to give ourselves a bit of a comment period so that we roll out philosophically what we were trying to do with those three, so that as we worked with our board to finalize it, we incorporated comments from our investors from that comment period. So whether others choose to do it or not, Paul, I don't know. I think, as we said earlier today, at least I have, we've allocated capital on a per-debt-adjusted-share basis for over 10 years. Bringing this down into a calculation that draws compensation, I think for those management teams that can align themselves with investors that see that as attractive should inure to the benefit for all of us to do it.

Because I do feel we have been doing it as it relates to cap allocation for over 10 years.

Operator

And today's next question comes from Ryan Todd of Deutsche Bank. Please go ahead.

Ryan Todd -- Deutsche Bank -- Analyst

Maybe a question on the DJ Basin. I mean, clearly, very strong performance in the fourth quarter. Maybe, as you look at 2018, of the 300 wells, how many of them abet the new completion design and is there anything from the sequential growth that we saw in fourth quarter that was anomalous? Not that we should expect 18,000 barrels a day of crude growth a quarter in 2018, but is there anything unique about that quarter or does it make the 30% growth rate in 2018 maybe look a little conservative?

Danny Brown -- Executive Vice President, U.S. Onshore Operations

So this is Danny. With respect to the Nio completions going forward, as we mentioned earlier, the completion changes happened on our shorts and mid-laterals, and so as we look at our mix moving forward, both for Codell and long lateral Nios, it means about 50% of the completions next year in DJ will benefit from this new completion design. We're looking at how we can apply this toward long laterals in the Nio and in that case that mix would move up to about 70%. But right now as it stands, we're thinking around 50% will benefit from the new design, which is something we're very pleased about.

With respect to our, what we saw in the fourth quarter versus going forward, we mentioned that we're expecting to see 30% year-over-year oil growth in the DJ. I say there's not a whole lot anomalous about the quarter. We're really pleased with the way things are going in the DJ Basin, and we anticipate delivering that growth, as we've talked about.

Ryan Todd -- Deutsche Bank -- Analyst

Thanks. And then I appreciate some of the incremental detail that you shared on Mozambique. Could you maybe talk through some of the next steps and potential timing? And then, Exxon on their call, was talking about upwards of 40 megatons of liquefaction capacity there. Could you maybe share what your thoughts would be on potential efficiencies of a joint development between Area 1 and Area 4?

Mitch Ingram -- Executive Vice President, International and Deepwater Operations

Hi, Ryan, this is Mitch. I'll just give an overview of where we. So obviously we heard enouraging news coming out of Mozambique, with regards to the development plan approval. We're looking forward to receiving formal approval of that from the government going forward.

As indicated in the prepared statement, we've progressed really well with regards to the volumes, and we've indicated that's going to be the key driver toward determining our FID date. In parallel to that, we are actively out with the market in terms of the refreshing our pricing for the onshore construction activity and also finalizing the offshore scope. So there's multiple things ongoing in addition to communicating with the export credit agencies to ensure we have project financing in place at the same time. As we're preparing all of this, we're looking at opportunities to coordinate with Area 4 operator, being Exxon, looking at where we can share facilities, common facilities on the LNG plants, so that's actively ongoing just now in terms of discussions with Exxon.

With regards to the volumes, as we've indicated in the slides, our first development, Golfinho/Atum, is 12.8 million tons. We'll proceed with that and then we'll carry on, proceed forward with the Prosperidade development going forward.

Operator

And our next question today comes from Bob Brackett of Bernstein Research. Please go ahead.

Bob Brackett -- Bernstein Research -- Analyst

Question on Algeria. I can't help but notice that $650 million to close to $1 billion of free cash flow coming out with very little capital. Is that anomalous for this year or is that something that will sustain for many years?

Mitch Ingram -- Executive Vice President, International and Deepwater Operations

This is Mitch, Bob. That will be sustained for a period of time. Obviously, our production profile, as I mentioned earlier, will be flat for the next few years. So we'll see that going forward -- there'll be minimal capital investment.

Al Walker -- Chairman, President, and Chief Executive Officer

And Bob, may I add to that, if I could, we still see there are opportunities for us to do additional investing in Algeria at some point in the future. So we're not really in a blow-down mode there. Actually, there's quite a few additional projects that we and Sonatrach are in the middle of discussing. So hopefully, if those come to fruition, we'll have that to talk to you about the coming quarters.

Bob Brackett -- Bernstein Research -- Analyst

And that free cash flow, you can get your hands on and you can get it back where you need to get it with minimal tax impact?

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

Bob, this is Bob Gwin. Yes, we can.

Bob Brackett -- Bernstein Research -- Analyst

Great. Thank you.

Operator

Our next question comes from Jeffrey Campbell of Tuohy Brothers. Please go ahead.

Jeffrey Campbell -- Tuohy Brothers -- Analyst

Good morning and congratulations on the various initiatives. I was very interested in the highlighted technology successes that you discussed, and I just wanted to ask a couple questions about them. First, are these breakthroughs entirely in-house or do they represent some partnership service providers and if they are in-house, this [Inaudible] shifts some spending from service providers into this in-house effort going forward?

Al Walker -- Chairman, President, and Chief Executive Officer

I think you've probably heard us on many occasions, talk about the role of technology, not just at Anadarko, but as it relates to the industry. I'm proud to say that what you're seeing in the information we provided last evening is in fact our own and, therefore, I think you should expect that we'll continue for quite some time at not only Gen 1 but Gen 2 development. Just to frame it for you, our A group looks at and is certainly at the forefront of Gen 2, whereas the other technology groups within Anadarko are working on advancing and improving on Gen 1. So what you are seeing is a combination of the two.

Jeffrey Campbell --- Tuohy Brothers -- Analyst

And the other question, this may seem a little esoteric, but I'll try to explain it. I was just wondering, are these results, that sounds like the Gen 2 ones, are they essentially black-box data analyses or are these processes that can be audited? And the reason why I ask is because it's more of the former, I think that would imply that having lots of in-house data might be a necessity for this kind of success.

Al Walker -- Chairman, President, and Chief Executive Officer

Well, I can't give you just a yes/no answer to that. Part of the problem is, as we collect data going forward, it needs to be on a different sort of frequency, if I can use that word and have you appreciate it. We have as an industry a lot of data. Unfortunately it's not data that we can use as we compress it into something we can then manipulate and evaluate with, so many of the things we're working on actually requires not only to collect the data but to transmit that data on a different frequency so that we can, in fact, move that into a different environment.

Many of the things we do in Gen 1 don't have the same constraint. But as we're looking to proprietarily develop Gen 2 technologies, that is something that we certainly see today as an opportunity that I think we've developed to date the right types of ways to collect the data, transmit the data, and then be able to impact, analyze the data differently than we would have historically with different types of algorithms being applied to that.

Jeffrey Campbell --- Tuohy Brothers -- Analyst

I appreciate that answer. Thanks very much for the color.

Operator

And today's next question comes from Brian Singer of Goldman Sachs. Please go ahead.

Brian Singer -- Goldman Sachs -- Analyst

Thank you. Good morning. Wanted to go back to this topic of some of the parts value this time on the upstream side. I don't make too much of one headline in your presentation, but on the DJ Basin, you highlighted, both in your presentation and your comments, that the production of cash flow equates to the level in large-cap E&Ps.

And I wonder if you could just talk about, whether in the DJ or elsewhere in the portfolio, we should expect initiatives to showcase values for individual assets or whether from an upstream perspective, the asset sales, including Alaska, have given the company now a suitable base and structure?

Al Walker -- Chairman, President, and Chief Executive Officer

Well in part I'd say, Brian, we believe that we have today an asset footprint that creates the framework for capital-efficient investing. And so, I think we've said from you know quite a few quarters now that material, scalable operated assets are quite important to us -- that's part of what we're trying to do -- and getting out of nonop in particular is something that was an objective. And I think as it relates to Alaska, that was a good example of a win-win for both ourselves and Conoco Phillips.

Brian Singer -- Goldman Sachs -- Analyst

Thanks. And then shifting more to the Permian, you talked about the 25% increase in well performance in the Delaware from recent wells. Can you just take us through and give us a little bit more color how you see the evolution of your Permian Basin well performance and well costs as we move through 2018, specifically as you shift more toward pads and then add some of the technology enhancements?

Danny Brown -- Executive Vice President, U.S. Onshore Operations

Sure, this is Danny. I'll start with well performance. From a well-performance perspective, as we've mentioned on multiple occasions, we've been a bit constraint to date for flowing these wells, which is why we did these extended flow-back tests, to sort of demonstrate for ourselves both from a sizing standpoint and externally that the subsurface capacity is here. And so, as we move through and bring the ROTFs online, starting mid this year, and move forward with a new infrastructure system.

We anticipate being able to flow these wells in a much more unconstrained manner, which should lead to much better well performance. In addition to that, similar to the DJ, we're taking some of the learnings from there and looking at our completions techniques that we're using in the Delaware Basin. So it's will be a multiple effect. We'll have more unconstrained infrastructure that we're flowing into, that should allow us to flow higher rates, and we should see the benefit of some Gen 2 completions techniques in the Delaware Basin as well.

And so more to come on the performance on the Gen 2 completion side, but that's the plan. So my anticipation is that the well performance should be improving in the Delaware Basin as a result of those two things. From well-cost perspective, as you know, we've been somewhat inefficient in how we've developed the field as we've gone through operator capture and we're looking to go more toward pad development. Clearly, with the activity that's going on in the basin currently, there is some pressure for competition for different services and so there's some inflationary pressure there.

But we've got the advantage that as we move to more pad-type development that we should see our cost come down as we're able to build fewer roads, able to build fewer locations, as we're able to keep crews on location to reduce mobilizations, etc. So we actually anticipate our own internal cost coming down, not going up. So for us, I think sort of good news on both counts. We should see improving well performance and improving well costs in Delaware.

Brian Singer -- Goldman Sachs -- Analyst

Are there any numbers you could put to it just as a guide in terms of how significant the [Garbled] well productivity could be and to what degree well costs could fall?

Danny Brown -- Executive Vice President, U.S. Onshore Operations

I think from a well-cost standpoint we've got out the, in the material we've released, we're anticipating well cost of about $8 million, from a well standpoint when we're in that development mode. From a productivity standpoint, I think it's a little early. We need the data. We've shared with you what we've seen from the extended flow-backs.

We think that should be, again, that is largely as a result of unconstrained infrastructure, which is what we're working toward. And so as we get more, more data over a longer time period we'll be able to revise our type curves and put that out as well.

Brian Singer -- Goldman Sachs -- Analyst

Thank you very much.

Al Walker -- Chairman, President, and Chief Executive Officer

Thank you, Brian, and we know there's a lot going on this morning and we want to get through everyone's questions, so we're committed to doing that. We know there's a lot going on in the media today, not the least of which, this is National Signing Day, which in the state of Texas is sort of important. And so we realize we'll probably not get the media attention on this, we would've otherwise. So with that, why don't we turn it to the next person?

Operator

Yes, sir. our next question is from Matt Portillo of TPH. Please go ahead.

Matt Portillo -- TPH -- Analyst

Good morning Al and team. One quick question for me. On an asset that appears to be gaining industry traction, but has yet to gain development dollars from APC, it's your legacy position in the PRB, just curious if you could talk about your thinking on this asset and could we potentially see development capital move toward it beyond 2018 or does this potentially fall into the divestment bucket as there's been fairly robust interest from an A&D perspective?

Al Walker -- Chairman, President, and Chief Executive Officer

Fair question. We do have a handsome position in the Powder River Basin. I think as you can see from our allocation issue of capital, it's not directed at that asset as of yet. At the point in time when it can compete for capital, we will evaluate its inclusion into the capital investment plan.

But I do think what we're seeing from industry's encouraging there and, again, we think we have a fairly handsome asset.

Operator

And our next question comes from David Heikkinen of Heikkinen Energy Advisors. Please go ahead.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

Morning, guys. Two quick ones. You gave an update on things that changed since November. Any update on your thoughts on service-cost inflation in '18?

Al Walker -- Chairman, President, and Chief Executive Officer

You know, David, that's an understandable question. I think that's gonna have a lot to do with what the price of oil does on a sustained basis throughout the year. As we've looked at it for this year, I think we've taken a view of what we think service costs are going to be, but I'd be the first to say that if we get into a higher sustained price environment for oil, that we should expect that the price for service costs, particularly in the Permian Basin, probably have some inflection upwards. Right now, that's hard to predict.

But I'm pretty comfortable with what we've assumed so far, but I think you would probably have to agree that if we got into a materially higher sustained oil-price environment as typically happens in other cycles, service costs will come up with it.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

That's our expectation. Just curious, as well -- you spent about $400 million in other U.S. onshore capital. Can you provide any details of what that spending was or what you'd expect other U.S.

onshore capital to be in 2018?

Al Walker -- Chairman, President, and Chief Executive Officer

Well, as I hope and expect you would want us to do, we're sort of in the R&D phase with some other areas geographically beyond the ones that we're putting most of our capital toward. And I think that would go into the category of R&D as it relates to things we might want to do in the future.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

Think about maybe 10% of capital in that exploration R&D year in, year out for Anadarko. Is that a fair way to think about it?

Al Walker -- Chairman, President, and Chief Executive Officer

Maybe, I wouldn't categorize it all as exploration. It may be acreage capture around some ideas that we're evaluating. It would be sort of in that broad bucket of things that we're trying to do for tomorrow and philosophically thinking about what we do in the future.

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

So 10% to add new stuff, maybe is the way to put it, or improve stuff you have.

Al Walker -- Chairman, President, and Chief Executive Officer

It would be hard to argue with you that 2018's arithmetically not that answer. I don't know if that would be the case in '19.

Operator

And our next question comes from John Herrlin of Societe Generale. Please go ahead.

John Herrlin -- Societe Generale -- Analyst

Again, following others, congratulations on shareholder-friendly plan. it's been a turbulent period for the industry, and you've been doing the right things.

Al Walker -- Chairman, President, and Chief Executive Officer

Thank you, John. Coming from you that means awful lot to all of us. Thank you very much.

John Herrlin -- Societe Generale -- Analyst

You know, I'm never one to do that, so, yeah, I think you've done a great job. Anyway, with the DJ, I got a question for Danny. In terms of the improvements, is it more the ability for you to characterize the reservoirs or is it a combination of your other analytics in terms of increased EURs?

Danny Brown -- Executive Vice President, U.S. Onshore Operations

I really think it is the application of the completion techniques versus what we know in the subsurface. And so we spent a lot of time understanding what's in the rock. It's the application of the completion against that rock to yield the best results. And so as we have gained higher amounts of data, we've learned what interacts better.

And that's really what you're seeing happen, is our ability to apply completions against the rock that's in our area.

John Herrlin -- Societe Generale -- Analyst

OK, great. And then the next one from me is somewhat transactional. Plains has given you a nice, or the Freeport properties have given you a nice stable cash-flow source in the Gulf of Mexico. One of your partners is in bankruptcy, Cobalt.

Would you look at their assets at all for another bolt-on?

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

John, it's Bob Gwin. I think we're comfortable with our existing positions in the Gulf. There's lots of things that come across our desk, as you might imagine, given that we bought an asset there in the fairly recent past. But that deal is unique.

It had operated infrastructure, for instance, that we've begun to leverage to a significant degree and it's a big part of the tieback story and lots of our existing prospect inventory to keep that production level flat for years to come. So the types of things that we've seen have not been attractive on that kind of a basis. Even though mathematically we're not really in the business of buying production or, quite frankly, with some companies who have the need to spend a decent amount of capital to get to meaningful production that obviously doesn't fit our profile either. So I think it's fair to say we will always look at stuff there and at other basins and look for opportunities to get better, but we're pretty comfortable with where we are based on the success of the Freeport deal.

John Herrlin -- Societe Generale -- Analyst

Great. Thanks.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Al Walker for any closing remarks.

Al Walker -- Chairman, President, and Chief Executive Officer

Thank you, appreciate everyone getting together today. We've really enjoyed being able to spend a little more time going into some detail about what we're doing for 2018.

Duration: 74 minutes

Call Participants:

Robin Fielder -- Vice President, Investor Relations

Al Walker -- Chairman, President, and Chief Executive Officer

Danny Brown -- Executive Vice President, U.S. Onshore Operations

Mitch Ingram -- Executive Vice President, International and Deepwater Operations

Bob Gwin -- Executive Vice President, Finance and Chief Financial Officer

Arun Jayaram -- JP Morgan -- Analyst

Scott Hanold -- RBC Capital Markets -- Analyst

Subash Chandra -- Guggenheim -- Analyst

Paul Sankey -- Wolfe Research -- Analyst

Ryan Todd -- Deutsche Bank -- Analyst

Bob Brackett -- Bernstein Research -- Analyst

Jeffrey Campbell --- Tuohy Brothers -- Analyst

Brian Singer -- Goldman Sachs -- Analyst

Matt Portillo -- TPH -- Analyst

David Heikkinen -- Heikkinen Energy Advisors -- Analyst

John Herrlin -- Societe Generale -- Analyst

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Contents:

Prepared Remarks:

Call Participants: