Anadarko Announces Second-Quarter 2014 Results

HOUSTON, TX--(Marketwired - Jul 29, 2014) - Anadarko Petroleum Corporation (NYSE: APC) today announced its financial and operating results for the second quarter of 2014, including net income attributable to common stockholders of $227 million, or $0.45 per share (diluted). These results include certain items typically excluded by the investment community in published estimates, which in the aggregate decreased net income by $442 million or $0.87 per share (diluted).⁽¹⁾ Cash flow from operating activities in the second quarter of 2014 was $2.462 billion, and discretionary cash flow totaled $2.434 billion.⁽²⁾

SECOND-QUARTER 2014 HIGHLIGHTS

• Delivered record average daily sales volumes of 848,000 barrels of oil equivalent (BOE) per day, including a 50,000-barrels-per-day increase in oil sales volumes over the second quarter of 2013 from the U.S. onshore
• Achieved oil production milestones in Algeria and Ghana, and advanced the Gulf of Mexico Lucius project on schedule
• Reached a settlement agreement on the Tronox Adversary Proceeding
• Announced a 50-percent increase in the company's quarterly dividend to 27 cents per share

"Anadarko delivered exceptional operating performance during the second quarter, with an increase of 65,000 barrels of oil per day over the second quarter of 2013 led by our U.S. onshore assets and the El Merk development in Algeria," said Al Walker, Anadarko Chairman, President and CEO. "We are increasing our full-year sales-volume guidance by 5 million BOE, reflecting our confidence in the portfolio's capability to continue delivering strong results. To further enhance performance, we will continue to be an active portfolio manager and pursue additional opportunities to accelerate value as appropriate."

OPERATIONS SUMMARY
During the second quarter, Anadarko's sales volumes of crude oil, natural gas and natural gas liquids (NGLs) totaled a record 77 million BOE, or an average of 848,000 BOE per day, representing an increase of almost 100,000 BOE per day over the second quarter of 2013.

Anadarko's U.S. onshore liquids sales volumes increased by more than 86,000 barrels per day over the second quarter of 2013, led by outstanding growth in the company's liquids-rich assets in the Wattenberg field, Eagleford Shale, Wolfcamp Shale and the East Texas/North Louisiana area. The Wattenberg field averaged a record 169,000 BOE per day in the second quarter, a 63,000-BOE-per-day increase over the second quarter of 2013. Wattenberg's growth was highlighted by an increase of 52,000 barrels per day of higher-margin liquids volumes relative to the second-quarter 2013, resulting from the continued strong performance of the company's horizontal program, higher NGL recoveries through the startup of the Lancaster cryogenic plant and lower line pressures in the field.

Anadarko achieved oil production milestones at the El Merk development in Algeria, which recently achieved a gross-daily production record of more than 150,000 barrels per day, and at the Jubilee field offshore Ghana, where cumulative gross oil production surpassed 100 million barrels during the quarter.

In the Gulf of Mexico, Anadarko completed all major construction and installation projects at its Lucius development. The 80,000-barrels-of-oil-per-day Lucius spar is expected to achieve first oil on schedule around the beginning of the fourth quarter of 2014. In addition, construction on the hull of the Heidelberg spar is nearly complete, and it remains on schedule to achieve first oil in 2016.

OPERATIONS REPORT
For details on Anadarko's operating areas and exploration program, including tables illustrating same-store sales information,⁽³⁾ please refer to the comprehensive report on second-quarter 2014 activity. The report is available at www.anadarko.com.

FINANCIAL SUMMARY
During the quarter, the company generated more than $2.4 billion of discretionary cash flow and ended the quarter with approximately $5.4 billion of cash on hand, while increasing the quarterly dividend by 50 percent. In addition, Anadarko entered into a settlement agreement with the plaintiffs in the Tronox Adversary Proceeding. The settlement agreement is subject to approval by the District Court, which the company expects to occur during the second half of 2014.

Anadarko also enhanced its liquidity position by issuing $1.25 billion of senior notes, and by entering into new unsecured credit facilities, which are available upon the satisfaction of certain conditions. Additionally, the company successfully completed a secondary sale of WGP common units, which resulted in cash proceeds of approximately $335 million to Anadarko.

CONFERENCE CALL TOMORROW AT 8 A.M. CDT, 9 A.M. EDT
Anadarko will host a conference call on Wednesday, July 30, 2014, at 8 a.m. Central Daylight Time (9 a.m. Eastern Daylight Time) to discuss second-quarter results, current operations and the company's outlook for the remainder of 2014. The dial-in number is 855.812.0464 in the United States or 970.300.2271 internationally. The confirmation number is 53684166. For complete instructions on how to participate in the conference call, or to listen to the live audio webcast and slide presentation, please visit www.anadarko.com. A replay of the call will be available on the website for approximately 30 days following the conference call.

FINANCIAL DATA
Nine pages of summary financial data follow, including current hedge positions and updated financial and production guidance.

⁽¹⁾ See the accompanying table for details of certain items affecting comparability.

⁽²⁾ See the accompanying table for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measures provide useful information for investors.

⁽³⁾ See the accompanying table for a reconciliation of same-store sales. "Same-store" sales volumes are intended to present performance of Anadarko's continuing asset base, giving effect to recently announced or closed divestitures.

Anadarko Petroleum Corporation's mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world's health and welfare. As of year-end 2013, the company had approximately 2.79 billion barrels-equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. For more information about Anadarko and APC Flash Feed updates, please visit www.anadarko.com.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Anadarko believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this news release, including court approval of the settlement agreement related to the Tronox Adversary Proceeding, issuance of the injunction and dismissal with prejudice of the claims asserted in the Adversary Proceeding, Anadarko's ability to achieve its production targets, successfully manage its capital expenditures, and achieve production and budget expectations on its mega projects. See "Risk Factors" in the company's 2013 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.

Anadarko Petroleum Corporation
Certain Items Affecting Comparability
		Quarter Ended June 30, 2014
		Before				After				Per Share
millions except per-share amounts		Tax				Tax				(diluted)
Total gains (losses) on derivatives, net, less net cash from settlement of commodity derivatives*		$	(237	)		$	(151	)		$	(0.30	)
Gains (losses) on divestitures, net			9				8				0.02
Impairments			(117	)			(75	)			(0.15	)
Change in uncertain tax positions (FIN 48)			--				(115	)			(0.23	)
Contingent Clean Water Act penalty accrual			(90	)			(90	)			(0.17	)
Interest expense related to Tronox settlement			(19	)			(19	)			(0.04	)
		$	(454	)		$	(442	)		$	(0.87	)

* For the quarter ended June 30, 2014, this includes $(76) million related to commodity derivatives, $(159) million related to other derivatives, and $(2) million related to gathering, processing, and marketing sales.

		Quarter Ended June 30, 2013
		Before				After				Per Share
millions except per-share amounts		Tax				Tax				(diluted)
Total gains (losses) on derivatives, net, less net cash from settlement of commodity derivatives*		$	641			$	407			$	0.81
Gains (losses) on divestitures, net			13				9				0.02
Impairments			(10	)			(4	)			(0.01	)
Third-party well and platform decommissioning obligation			(141	)			(89	)			(0.18	)
Reversal of Canadian indemnification liability			56				35				0.07
Change in uncertain tax positions (FIN 48)			--				37				0.07
		$	559			$	395			$	0.78

* For the quarter ended June 30, 2013, this includes $373 million related to commodity derivatives, $262 million related to other derivatives, and $6 million related to gathering, processing, and marketing sales.

Reconciliation of GAAP to Non-GAAP Measures

Below are reconciliations of cash provided by operating activities (GAAP) to discretionary cash flow from operations (non-GAAP), free cash flow (non-GAAP), as well as net income (loss) attributable to common stockholders (GAAP) to adjusted net income (loss) (non-GAAP) as required under Regulation G of the Securities Exchange Act of 1934. Management uses discretionary cash flow from operations because it is useful in comparisons of oil and gas exploration and production companies as it excludes certain fluctuations in assets and liabilities and current taxes related to certain items affecting comparability. Management uses free cash flow to demonstrate the Company's ability to internally fund capital expenditures and to service or incur additional debt. Management uses adjusted net income (loss) to evaluate the Company's operational trends and performance.

		Quarter Ended						Six Months Ended
		June 30,						June 30,
millions		2014			2013			2014			2013
Net cash provided by operating activities		$	2,462		$	2,502		$	4,191		$	5,005
Add back
	Algeria exceptional profits tax settlement		--			(248	)		--			(698	)
	Increase (decrease) in accounts receivable		(83	)		(217	)		183			(257	)
	(Increase) decrease in accounts payable and accrued expenses		(84	)		(346	)		(21	)		(221	)
	Other items--net		82			129			27			11
	Certain nonoperating and other excluded items		1			88			1			124
	Current taxes related to asset monetization		56			--			576			--
Discretionary cash flow from operations		$	2,434		$	1,908		$	4,957		$	3,964

Anadarko Petroleum Corporation
Reconciliation of GAAP to Non-GAAP Measures
		Quarter Ended						Six Months Ended
		June 30,						June 30,
millions		2014			2013			2014				2013
Discretionary cash flow from operations		$	2,434		$	1,908		$	4,957			$	3,964
Less capital expenditures*			2,402			1,866			4,970				3,613
Free cash flow		$	32		$	42		$	(13	)		$	351

* Includes Western Gas Partners, LP (WES) capital expenditures of $173 million for the quarter ended June 30, 2014, $138 million for the quarter ended June 30, 2013, $343 million for the six months ended June 30, 2014, and $437 million for the six months ended June 30, 2013.

		Quarter Ended								Quarter Ended
		June 30, 2014								June 30, 2013
		After				Per Share				After			Per Share
millions except per-share amounts		Tax				(diluted)				Tax			(diluted)
Net income (loss) attributable to common stockholders		$	227			$	0.45			$	929		$	1.83
Less certain items affecting comparability			(442	)			(0.87	)			395			0.78
Adjusted net income (loss)		$	669			$	1.32			$	534		$	1.05

Presented below is a reconciliation of total debt (GAAP) to net debt (non-GAAP). Management uses net debt as a measure of the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand.

	June 30,
millions	2014
Total debt	$	13,414
Less cash and cash equivalents		5,365
Net debt	$	8,049
Net debt	$	8,049
Stockholders' equity		19,331
Adjusted capitalization	$	27,380
Net debt to adjusted capitalization ratio		29	%

Anadarko Petroleum Corporation
(Unaudited)
		Quarter Ended								Six Months Ended
Summary Financial Information		June 30,								June 30,
millions except per-share amounts		2014				2013				2014				2013
Consolidated Statements of Income
Revenues and Other
Natural-gas sales		$	991			$	935			$	2,208			$	1,742
Oil and condensate sales			2,705				1,995				5,129				4,372
Natural-gas liquids sales			411				261				797				564
Gathering, processing, and marketing sales			278				249				589				480
Gains (losses) on divestitures and other, net			54				57				1,560				232
Total			4,439				3,497				10,283				7,390
Costs and Expenses
Oil and gas operating			273				245				586				492
Oil and gas transportation and other			281				253				547				508
Exploration			502				178				801				442
Gathering, processing, and marketing			250				222				502				421
General and administrative			305				260				603				532
Depreciation, depletion, and amortization			1,048				940				2,172				1,962
Other taxes			361				245				675				525
Impairments			117				10				120				39
Algeria exceptional profits tax settlement			--				--				--				33
Deepwater Horizon settlement and related costs			93				4				93				7
Total			3,230				2,357				6,099				4,961
Operating Income (Loss)			1,209				1,140				4,184				2,429
Other (Income) Expense
Interest expense			186				172				369				336
(Gains) losses on derivatives, net			323				(656	)			776				(465	)
Other (income) expense, net			(13	)			98				(12	)			92
Tronox-related contingent loss			19				--				4,319				--
Total			515				(386	)			5,452				(37	)
Income (Loss) Before Income Taxes			694				1,526				(1,268	)			2,466
Income tax expense (benefit)			428				567				1,092				1,023
Net Income (Loss)			266				959				(2,360	)			1,443
Net income (loss) attributable to noncontrolling interests			39				30				82				54
Net Income (Loss) Attributable to Common Stockholders		$	227			$	929			$	(2,442	)		$	1,389
Per Common Share
Net income (loss) attributable to common stockholders--basic		$	0.45			$	1.84			$	(4.84	)		$	2.75
Net income (loss) attributable to common stockholders--diluted		$	0.45			$	1.83			$	(4.84	)		$	2.74
Average Number of Common Shares Outstanding--Basic			505				502				505				501
Average Number of Common Shares Outstanding--Diluted			507				504				505				504
Exploration Expense
Dry hole expense		$	302			$	66			$	423			$	224
Impairments of unproved properties			109				20				186				39
Geological and geophysical expense			37				23				80				60
Exploration overhead and other			54				69				112				119
Total		$	502			$	178			$	801			$	442

Anadarko Petroleum Corporation
(Unaudited)
				Quarter Ended								Six Months Ended
Summary Financial Information				June 30,								June 30,
millions				2014				2013				2014				2013
Cash Flows from Operating Activities
Net income (loss)				$	266			$	959			$	(2,360	)		$	1,443
Adjustments to reconcile net income (loss) to net cash provided by operating activities
	Depreciation, depletion, and amortization				1,048				940				2,172				1,962
	Deferred income taxes				142				401				188				563
	Dry hole expense and impairments of unproved properties				411				86				609				263
	Impairments				117				10				120				39
	(Gains) losses on divestitures, net				(9	)			(13	)			(1,468	)			(157	)
	Total (gains) losses on derivatives, net				325				(659	)			786				(460	)
	Operating portion of net cash received (paid) in settlement of derivative instruments				(88	)			18				(186	)			65
	Other				54				77				108				121
	Changes in assets and liabilities
		Deepwater Horizon settlement and related costs			92				1				92				1
		Algeria exceptional profits tax settlement			--				248				--				698
		Tronox-related contingent loss			19				--				4,319				--
		(Increase) decrease in accounts receivable			83				217				(183	)			257
		Increase (decrease) in accounts payable and accrued expenses			84				346				21				221
		Other items--net			(82	)			(129	)			(27	)			(11	)
Net Cash Provided by Operating Activities				$	2,462			$	2,502			$	4,191			$	5,005
Capital Expenditures				$	2,402			$	1,866			$	4,970			$	3,613

		June 30,				December 31,
millions		2014				2013
Condensed Balance Sheets
Cash and cash equivalents		$	5,365			$	3,698
Accounts receivable, net of allowance			3,079				2,722
Other current assets			536				688
Net properties and equipment			41,487				40,929
Other assets			2,352				2,082
Goodwill and other intangible assets			5,595				5,662
Total Assets		$	58,414			$	55,781
Other current liabilities		$	5,499			$	5,703
Deepwater Horizon settlement and related costs			92				--
Tronox-related contingent liability			5,169				--
Long-term debt			13,414				13,065
Deferred income taxes			9,186				9,245
Other long-term liabilities			3,882				4,118
Stockholders' equity			19,331				21,857
Noncontrolling interests			1,841				1,793
Total Liabilities and Equity		$	58,414			$	55,781
Capitalization
Total debt		$	13,414			$	13,565
Stockholders' equity			19,331				21,857
Total		$	32,745			$	35,422
Capitalization Ratios
Total debt			41	%			38	%
Stockholders' equity			59	%			59	%

Anadarko Petroleum Corporation

(Unaudited)

Sales Volumes and Prices
		Average Daily Sales Volumes						Sales Volumes						Average Sales Price
		Natural Gas MMcf/d		Crude Oil & Condensate MBbls/d		NGLs MBbls/d		Natural Gas Bcf		Crude Oil & Condensate MMBbls		NGLs MMBbls		Natural Gas Per Mcf			Crude Oil & Condensate Per Bbl			NGLs Per Bbl
Quarter Ended June 30, 2014
United States		2,620		196		119		238		18		11		$	4.16		$	98.69		$	37.39
Algeria		--		72		1		--		7		--			--			108.64			66.69
Other International		--		23		--		--		2		--			--			110.16			--
Total		2,620		291		120		238		27		11		$	4.16		$	102.04		$	37.66
Quarter Ended June 30, 2013
United States		2,647		155		83		241		14		7		$	3.88		$	94.99		$	34.33
Algeria		--		43		--		--		4		--			--			102.18			--
Other International		--		28		--		--		3		--			--			101.84			--
Total		2,647		226		83		241		21		7		$	3.88		$	97.21		$	34.33
Six Months Ended June 30, 2014
United States		2,658		189		109		481		34		20		$	4.59		$	96.86		$	40.08
Algeria		--		65		1		--		12		--			--			108.60			66.69
Other International		--		27		--		--		5		--			--			109.00			--
Total		2,658		281		110		481		51		20		$	4.59		$	100.76		$	40.22
Six Months Ended June 30, 2013
United States		2,668		157		85		483		28		15		$	3.61		$	96.17		$	36.29
Algeria		--		48		--		--		9		--			--			108.06			--
Other International		--		36		--		--		7		--			--			107.66			--
Total		2,668		241		85		483		44		15		$	3.61		$	100.26		$	36.29

		Average Daily Volumes MBOE/d		Sales Volumes MMBOE
Quarter Ended June 30, 2014		848		77
Quarter Ended June 30, 2013		750		69
Six Months Ended June 30, 2014		834		151
Six Months Ended June 30, 2013		771		140

Sales Revenue and Commodity Derivatives
		Sales									Net Cash Received (Paid) from Settlement of Commodity Derivatives
millions		Natural Gas			Crude Oil & Condensate			NGLs			Natural Gas				Crude Oil & Condensate				NGLs
Quarter Ended June 30, 2014
United States		$	991		$	1,768		$	404		$	(41	)		$	(44	)		$	2
Algeria			--			711			7			--				(5	)			--
Other International			--			226			--			--				--				--
Total		$	991		$	2,705		$	411		$	(41	)		$	(49	)		$	2
Quarter Ended June 30, 2013
United States		$	935		$	1,336		$	261		$	(16	)		$	1			$	3
Algeria			--			400			--			--				33				--
Other International			--			259			--			--				--				--
Total		$	935		$	1,995		$	261		$	(16	)		$	34			$	3
Six Months Ended June 30, 2014
United States		$	2,208		$	3,308		$	790		$	(122	)		$	(60	)		$	2
Algeria			--			1,293			7			--				--				--
Other International			--			528			--			--				--				--
Total		$	2,208		$	5,129		$	797		$	(122	)		$	(60	)		$	2
Six Months Ended June 30, 2013
United States		$	1,742		$	2,729		$	564		$	51			$	2			$	5
Algeria			--			937			--			--				14				--
Other International			--			706			--			--				--				--
Total		$	1,742		$	4,372		$	564		$	51			$	16			$	5

Anadarko Petroleum Corporation
Financial and Operating External Guidance
As of July 29, 2014
			3rd Qtr								Total Year
			Guidance *								Guidance *
			Units								Units
Total Sales Volumes (MMBOE)			76			--		78			299			--		302
Total Sales Volumes (MBOE/d)			826			--		848			819			--		827
Crude Oil (MBbl/d)			304			--		311			283			--		286
	United States		203			--		208			195			--		199
	Algeria		72			--		73			68			--		70
	Ghana		29			--		30			19			--		20
Natural Gas (MMcf/d)
	United States		2,425			--		2,475			2,530			--		2,560
Natural Gas Liquids (MBbl/d)
	United States		110			--		120			112			--		115
	Algeria		2			--		3			1			--		2
			$ / Unit								$ / Unit
Price Differentials vs NYMEX (w/o hedges)
Crude Oil ($/Bbl)			(2.00	)		--		2.00			(2.00	)		--		2.00
	United States		(6.00	)		--		(1.00	)		(6.00	)		--		(1.00	)
	Algeria		5.00			--		10.00			5.00			--		10.00
	Ghana		3.00			--		8.00			4.00			--		9.00
Natural Gas ($/Mcf)
	United States		(0.50	)		--		(0.25	)		(0.35	)		--		(0.25	)
* All volumes exclude the impact from China and Pinedale/Jonah.

Anadarko Petroleum Corporation
Financial and Operating External Guidance
As of July 29, 2014
				3rd Qtr								Total Year
				Guidance *								Guidance *
				$ MM								$ MM
Other Revenues
	Marketing and Gathering Margin			50			--		70			230			--		250
	Minerals and Other			45			--		55			190			--		210
				$ / BOE								$ / BOE
Costs and Expenses
	Oil & Gas Direct Operating			3.80			--		4.00			3.80			--		4.00
	Oil & Gas Transportation/Other			3.85			--		4.05			3.80			--		3.90
	Depreciation, Depletion, and Amortization			14.00			--		14.50			14.00			--		14.50
	Production Taxes (% of Product Revenue)			9.0	%		--		9.5	%		8.5	%		--		9.0	%
				$ MM								$ MM
	General and Administrative			350			--		370			1,200			--		1,300
	Exploration Expense
		Non-Cash		150			--		200			850			--		950
		Cash		105			--		115			400			--		450
	Interest Expense (net)			195			--		205			760			--		770
	Other (Income) Expense - Includes Noncontrolling Interests			60			--		70			175			--		195
Tax Rate
	Algeria (All current)			45	%		--		55	%		45	%		--		55	%
	Rest of Company (50% Current for Q3 and 10% for FY)			40	%		--		50	%		35	%		--		45	%
Avg. Shares Outstanding (MM)
	Basic			505			--		506			504			--		505
	Diluted			507			--		508			507			--		508
Capital Investment (Excluding Western Gas Partners, LP)				$ MM								$ MM
	APC Capital Expenditures			2,100			--		2,300			8,600			--		8,800
* Excludes items affecting comparability

Anadarko Petroleum Corporation
Commodity Hedge Positions (Excluding Natural Gas Basis)
As of July 29, 2014
						Weighted Average Price per Barrel
				Volume (MBbls/d)		Floor Sold			Floor Purchased			Ceiling Sold
Crude Oil
	Three-Way Collars
	2015
		Brent		25		$	85.00		$	100.00		$	117.55
Fixed Price - Financial
2014
		WTI		70		$	96.03
		Brent		70		$	109.55
				140		$	101.94
				Volume		Weighted Average Price per MMBtu
				(thousand MMBtu/d)		Floor Sold			Floor Purchased			Ceiling Sold
Natural Gas
	Three-Way Collars
	2014			600		$	2.75		$	3.75		$	5.01
	2015			635		$	2.75		$	3.75		$	4.76
Fixed Price - Financial
	2014			1,000		$	4.23

Interest-Rate Derivatives
As of July 29, 2014
Instrument		Notional Amt.		Start Date		Maturity		Rate Paid		Rate Received
Swap		$50 Million		Sept. 2016		Sept. 2026		5.91%		3M LIBOR
Swap		$1,850 Million		Sept. 2016		Sept. 2046		6.05%		3M LIBOR

Anadarko Petroleum Corporation

Reconciliation of Same-Store Sales

Average Daily Sales Volumes

		Quarter Ended June 30, 2014								Quarter Ended June 30, 2013
		Natural Gas MMcf/d		Crude Oil & Condensate MBbls/d		NGLs MBbls/d		Total MBOE/d		Natural Gas MMcf/d		Crude Oil & Condensate MBbls/d		NGLs MBbls/d		Total MBOE/d
U.S. Onshore		2,444		146		113		667		2,279		96		74		550
Deepwater Gulf of Mexico		176		41		6		76		280		46		6		98
International and Alaska		--		101		1		102		--		74		--		74
Same-Store Sales		2,620		288		120		845		2,559		216		80		722
China and Pinedale/Jonah		--		3		--		3		88		10		3		28
Total		2,620		291		120		848		2,647		226		83		750