With a wary eye on Colorado's Proposition 112, which could do significant damage to oil and gas production in the state, Anadarko Petroleum Corp. laid out a conservative approach for 2019 with greater emphasis on the Delaware Basin in its third-quarter earnings call Oct. 31.

During the call, Anadarko CEO Al Walker said the company would stick to its current course of investing its capital as if it were in a $50-per-barrel environment, allowing the company to buy back $500 million in stock and retire $1.4 billion in debt in 2019. Anadarko, Walker said, is benefiting from having 55% of its total oil volumes priced at waterborne levels, an amount that could reach 70% in 2019.

"As we look ahead to 2019, we will continue to use the $50 oil price environment assumption to produce healthy, multiyear, double-digit oil growth; remain committed to returning capital to shareholders above this break-even threshold; and demonstrate the durability of this investment strategy due to the strength and capital efficiency of our capital asset portfolio," Walker said.

However, the company did not announce its 2019 investment plan, preferring to wait until after the Nov. 6 election to see the results of Proposition 112. If passed, the measure would require setbacks of 2,500 feet for any new oil and gas production, a move that critics said would essentially cripple the industry. With Anadarko's significant holdings in the state, the passage could do major damage to the company's operations.

Walker downplayed this scenario in his comments, saying the company's increased activity in the Permian Basin's Delaware Basin would allow it to offset any production decreases in Colorado. Anadarko reported that its production in the Delaware was up 20% sequentially, to 119,000 barrels of oil equivalent per day, with seven rigs and five completion crews operating on average during the third quarter.

"The good news for us is we're not a one- or two-basin-centric company," he said. "We have a pretty good path for what '19 looks like, which allows us to pivot more of our activity toward the [Powder River Basin] and then, additionally, toward the Delaware, in order to achieve the longer-term or the annual objective of that 10% to 14% growth. If we need a little more from the Delaware than we anticipate because of 112, I think we're very confident we can go there."

Anadarko's approach met with approval from analysts, who gave it the thumbs-up in their comments after the earnings call. Sanford C. Bernstein & Co. LLC analyst Bob Brackett praised the company's "mature strategy" of returning cash to shareholders while exercising capital discipline with the $50/bbl approach. He also said he believes Proposition 112 will fail, citing a Republican advantage in the number of mail-in ballots already received in Colorado.

"This is a flip from 2016, when Democrats outpaced Republicans by a significant margin. That trend is supportive of the view that Proposition 112 does not pass and [Anadarko] benefits on election eve," he said.

For the quarter, Anadarko reported $411 million, or 82 cents per share, in adjusted net income, compared to a loss of $427 million, or 77 cents per share, in the third quarter a year ago. The S&P Global Market Intelligence consensus normalized earnings estimate for the third quarter was 86 cents per share. Anadarko's stock, which jumped sharply at the open, was down 1.3% in early afternoon ET trading on the New York Stock Exchange, at $55.73 per share.