HOUSTON — Anadarko Petroleum Corp. (NYSE: APC) vice president Brad Holly spilled a few secrets about his company’s unconventional shale play successes on Feb. 6 at Winter Nape.

In short, the company meticulously, methodically refines and optimizes every aspect of its business – continuously – from drilling to water sourcing. It also takes control of its supply chain wherever possible.

“We try to win at the whole life cycle,” said Holly, VP of the Southern & Appalachian Division. Anadarko reported 2012 net income attributable to common stockholders of nearly $2.4 billion

Since 2005, Anadarko has branched out in areas such as the Marcellus, Eagle Ford, West Texas, the liquids-rich Haynesville and the Niobrara.

In Pennsylvania, for instance, Holly said Anadarko operates in what it considers the lowest-cost gas play in North America, the Marcellus.

The company has relentlessly driven down costs there.

“We’ve reduced our cost structure significantly, from over $8 million per well down below $6.5 million,” he said. Even at lower commodity prices, the company can compete.

Production went from the starting line to 1.3 billion cubic feet per day (Bcf/d) in roughly three years. But to get there, the company toiled for years.

Anadarko’s history in unconventional plays stretches back to the 1980s, when it operated in four states in the tight stack sands.

“We’ve discovered there are hundreds of millions of dollars of revenue at stake and operating with a sharper paradigm is absolutely key to that,” Holly said. “Why a sharper paradigm? Why do we need that?”

Holly said the company’s success at drilling the most footage per day in all of its major plays comes from the company’s culture and strategy. Anadarko looks at value creation in terms of technology, operational efficiencies and commercial aspects of its business.

Advantage comes from “the right technology at the right time,” Holly said.

For instance, one roadblock to traditional exploration of a shale play is the collection of fluids and rocks that are analyzed at a lab. Such analysis can cost up to $100 million a month. Spending a $1 billion a year requires answers immediately, not long term.

“We came up with the idea of field demo concept where we systematically go out and change one variable and we’re testing these things on the fly,” Holly said. “We’re still doing the science work, but we’re…trying to get answers in months instead of years.”

Similarly, the company constantly strives to improve its operations.

In the Eagle Ford, for instance, the company optimized each phase of drilling, continuously improving it month after month.

In the first quarter of 2010, Anadarko’s best drilling time from spud to desired depth was 13.5 days. In the second quarter of 2010, the time fell to 10 days.

By the fourth quarter of 2011, Anadarko could go from spud to rig release in less than eight days. But the company all along had been pushing for better times.

At the end of 2012, the company drilled several wells in less than six days.

“Everybody asks us, what’s the ultimate target? Right now it's 4.25 days,” Holly said. “But we think we’ll continue to improve upon that.”

Resulting drilling costs fell. The company’s first cost $2.7 million.

“We’ve had some rig releases below $1 million today,” Holly said.

Multiplied over a project that includes 4,000 wells or more, that’s a lot of savings, he said.

Holly said Anadarko also looks to manage the supply chain “from land to the sales meter.”

“You don’t have to own the whole cycle, but you better be proactively managing the cycle,” he said.

Holly said long-term relationships with companies are vital, allowing for flexibility and renegotiation if necessary.

The company also takes control of what it can, such as making sure it can secure, transport and store water. After it is used to stimulate a well, the company tries to filtrate and recycle as much as possible.

For all shale plays efficiency is the key to making the money, Holly said.

Holly said most drillers are familiar with the conventional development process in which a discovery is made, appraised and if large enough exploited. Design, construction and development proceed with 10 wells for hundreds.

Unconventional shale plays are different.

Exploration leads to discover and then appraisal mode “and then you move directly from appraisal into development” Holly said. “We’re trying to get to that manufacturing mode or factory mode as soon as possible.”

The faster and better the process can be optimized, “the quicker and faster we can make the revenues that we’re looking for.”

Anadarko’s shale production growth at the end of 2012 was 400,000 barrels of oil equivalent per day (BOE/d) compared to essentially no production in 2010.

“This doesn’t happen by accident,” Holly said. “We think that organization, structure, culture, process and technology enable this type of result.”