Jim (cont'd):     

That is why I want to take a look at Anadarko Petroleum (APC).. which you know if you watch the show even on a momentary basis is my favorite natural gas company… I have probably reiterated it 3 times last week… Anadarko hasn’t cut it’s capital expenditure position as nearly as much as it’s peers… it is looking to decrease cap x by 15% in 2009... 30% for the rest of the industry… it is not cutting back it’s drilling activity either… instead Anadarko is looking to increase rate efficiency and cut service cost by 15 to 20%… to maintain it’s drilling levels… that means gross levels could go up.

Now, thanks to it’s sell of its interest in an off shore field in Brazil, for $1.4 billion… Anadarko doesn’t have to worry about liquidity… remember that is what plagued Chesapeake Energy (CHK), which was one of our favorites at one time… this company Anadarko has about $1 billion in cash… with a $1.3 billion credit facility… no more debt maturities until 2011... that is the kind of company that is going to get thru this morass.  Plus, Anadarko is still exploring… how about this… working on a find in Ghana, called Jubilee… where the company just today announced a successful test well.. that is producing nearly 17,000 barrels of oil a day… this is the first new find I have heard in a long time from anybody… not just from Anadarko...

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Jubilee could have between .5 to 1.8 billion barrels of oil equivalent in reserves… right now they are drilling appraisal wells, followed by test wells… which should lead to a resource update sometime in the first quarter… Jubilee should be up and running by 2010... that is remarkably fast, remember its 2009... wake up… Anadarko has two more projects that should be up and running in 2011 and 2012... along with some prospects in the Rocky Mountains that are profitable at even $5 natural gas… and $30 oil… we are there at $5 but $30 is still a long time away.

So, is this a good time to buy… it is down 43% from its high… 43 points not percent… up just 14 points from its low… the last time we heard from Jim Hackett, Anadarko (APC)’s great CEO, is back on November 17th, he told us with that where the stock price, where it was, which is actually almost exactly where it closed today… Anadarko was effectively buying reserves in the ground at a cost of $10 a barrel.. whenever it bought back stock… and the company has a $5 billion repurchase authorization. I want to know if Hackett took advantage of these prices to buy more stocks since the last time we saw him. And I want to know what’s the prospects, what does it look like, and is it ever going to go back up?… natural gas that is… so let’s hear from Anadarko’s CEO, and a good friend of the show...Jim Hackett.

Jim Hackett, welcome back to Mad Money...

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Jim:     How are you?

Hackett:     Doing fine.

Hackett: Yes, it seems odd to us, because there is such good weather pattern for us. But the success we have had in on shore drilling, is basically overcome all of the other factors that we would normally think would drive toward higher natural gas prices. But we have seen, as you said, all these cut backs in capital, tremendous drop in rig rates, or utilization. And because of that you are going to see that growth rate slow. That will tend to start bringing prices back up, and that will tend to make all of these equities make a better buy over time.

Jim: What was natural gas doing at $13 a year ago?

Hackett:    Well, it’s , any market, as you or I both know, could be overbought or oversold. I think it was overbought, relative to the fundamentals for sure. What we are probably seeing today is an oversold market. But we do have, we have reasonably healthy inventories. We have got a lot of on shore production. People are trying to make their best guesses. And with the economy faltering, of course, we are all trying to see when does that bottom out. But I think given any kind of normalized economic environment, with the rig rates dropping, we are going to see natural gas recovery. And it is a great fuel for the future.

Jim:   Absolutely, now one of the things that I saw Chevron reported last week, it looks like they didn’t sell forward anything. They didn’t take advantage of these big spikes. $140 oil. $13 natural gas. Have you been able to use the futures markets to be able to really lock in a better price than what you can get in the actual market?

Hackett: We have. We have some hedges still in place, for a good portion of our production for the year 2009. That we set in motion actually in the year in 2007. Towards the end of that year. They were out of the money at $13, it looked bad at that time. We had big market to market losses. Now that is all reversed. In addition we hedged a bunch of production in the Rockies, which is, I think very forward thinking in the sense of where the basis risks have gone in the spreads. But, I think, those that were able to take advantage of the higher price environment are now enjoying it. And we are going to be in that position in 2009.

Jim: And you are one of them.

Hackett: Yes.

Jim: And you are one of them, which is one of the reasons why I am not worried about your balance sheet. Talk to me about your balance sheet. You have really made it pretty good, even though you are drilling all over the world.

Hackett: Great shape. We are, and we have big capital requirements, we’ve got, we needed a strong balance sheet for that. That is why we sold all those properties. Post the acquisition we did in 2006. So we are in great shape for this coming year. Challenges are in the cash flow. That is why a lot of people are cutting back capital. We want to make sure that we are prudent with our capital, but we also want to continue to exploit this tremendous inventory of exploration prospects. That we have really discovered over the last 3 or 4 years. And have been making preparations for in the last 5 years. One of them is Ghana. Another one is, stuff in the Gulf of Mexico deep water. We have had several discoveries. Down in Brazil we have had discoveries. So we are very eager to see where this heads for the company.

Jim: Using that $10 barrel equivalent that you mentioned on the show in November, and I read in the Wall Street Journal that Exxon is looking to make some acquisitions. I know that you have got great properties all over the world. Do you read an article like that journal article, and say, oh shoot man, Exxon is going to be knocking on our door?

Hackett: Well, you always worry about that when you know that you have a model that really works. That is somebody will take the value that is adhering that business, and only give you a portion of that, when your shareholders deserve a much bigger portion. But as a public company we have to be receptive to that. Without naming names on either side, whether it is Anadarko or Exxon, I think there will be consolidation activity. It certainly makes sense to me that that would occur in this environment. But that there is still a pretty big offer spread, and we will just have to see where that all ends up going.

Jim: The papers are filled with articles about how the auto companies are focused on electric batteries. Without exception all of these sounds pie in the sky. To me. To me as someone who is reading them and saying yeah, I would love to have a battery operated car. But Ford is making maybe 10,000, maybe in the out years. What happened to the movement to use our clean fuels that is abundance, natural gas in cars? It seems like it just disappeared.

Hackett: Well, I don’t think it is going, it may have disappeared, and I don’t disagree with you that people aren’t putting as much emphasis on it, especially with the economic downturn. But with the Obama administration, we are pretty confident that they are going to want natural gas, in a big way. Because they can’t see their way to nuclear with regard to disposal, even though I think nuclear ought to be pushed in this country. They don’t want big coal, whether that makes sense. They don’t. So the only bridging fuel that they have got is natural gas. Whether it is natural gas for our vehicles, which is something that we have a real long term technology play in. Or electric vehicles, in the sense, that all the incremental natural gas demand that is going to be created by electricity generation will be put towards electric cars. So either if you fuel the car directly with natural gas, or you fuel it thru the electric grid, you are still going to need natural gas.

Jim: Jim, one of the things that mystifies me is, we have seen tremendous declines in a lot of stocks in the group. You have got the right capital structure, you actually still have, your stock has not been crushed as much as others. Why aren’t you on the phone buying up some of these guys with the great prospects that can’t afford to fund them?

Hackett: Well, because our value inherent in our stock is actually a better buy. Buying back our own shares. Plus, the tremendous opportunities that we have got, internally in the company. It is hard to find anything that is equivalent, from the stand point of what we have got already. That doesn’t mean that some couldn’t exist out there. But we kind of want to save our balance sheet for either buying our own stock, or are own capital.

Jim: Are you in? Are you in the market buying?

Hackett: We were thru the course of 2008. But now because of the cash flow projections for this coming year, we are just being patient with regard to that. Because we want to fund fully the capital program. Once we get beyond that full funding the capital program, we will be right back in the market buying shares.

Jim: So, we do not see, we will not see an equity offering most likely in 2009, 2010. We don’t even see the bond offering, right?

Hackett: We do have some bonds coming due in 2009, but we have got a facility to keep rolling it, if we just decide to keep it that way. You and I both know, historic spreads, we do not like where they are at today.

Jim: Because I don’t want to see you like El Paso, having to borrow at 13%.

Hackett: Well we are not going to do that, cause we are investment grade. So it is not a high yield stock.

Jim: Very good. Thank you so much for being really the beacon in the group. And I am glad we stuck with you, because you are sticking with your shareholders. Jim Hackett, chairman, President, and CEO of Anadarko Petroleum (APC).

[verbatim recap]

[end of segment]