Item 1. Financial Statements
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions except per-share amounts
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Revenues and Other
|
|
|
|
|
|
|
|
|
Oil sales
|
$
|
2,470
|
|
|
$
|
2,265
|
|
|
$
|
4,566
|
|
|
$
|
4,392
|
|
|
Natural-gas sales
|
205
|
|
|
203
|
|
|
525
|
|
|
450
|
|
|
Natural-gas liquids sales
|
216
|
|
|
318
|
|
|
456
|
|
|
610
|
|
|
Gathering, processing, and marketing sales
|
465
|
|
|
382
|
|
|
935
|
|
|
742
|
|
|
Gains (losses) on divestitures and other, net
|
86
|
|
|
123
|
|
|
178
|
|
|
142
|
|
|
Total
|
3,442
|
|
|
3,291
|
|
|
6,660
|
|
|
6,336
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
Oil and gas operating
|
310
|
|
|
275
|
|
|
599
|
|
|
551
|
|
|
Oil and gas transportation
|
222
|
|
|
209
|
|
|
444
|
|
|
405
|
|
|
Exploration
|
90
|
|
|
94
|
|
|
139
|
|
|
262
|
|
|
Gathering, processing, and marketing
|
274
|
|
|
252
|
|
|
530
|
|
|
489
|
|
|
General and administrative
|
368
|
|
|
288
|
|
|
635
|
|
|
566
|
|
|
Merger transaction costs
|
1,042
|
|
|
—
|
|
|
1,042
|
|
|
—
|
|
|
Depreciation, depletion, and amortization
|
1,161
|
|
|
1,003
|
|
|
2,242
|
|
|
1,993
|
|
|
Production, property, and other taxes
|
182
|
|
|
201
|
|
|
381
|
|
|
391
|
|
|
Impairments
|
—
|
|
|
128
|
|
|
—
|
|
|
147
|
|
|
Other operating expense
|
8
|
|
|
22
|
|
|
29
|
|
|
162
|
|
|
Total
|
3,657
|
|
|
2,472
|
|
|
6,041
|
|
|
4,966
|
|
|
Operating Income (Loss)
|
(215
|
)
|
|
819
|
|
|
619
|
|
|
1,370
|
|
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
Interest expense
|
249
|
|
|
237
|
|
|
502
|
|
|
465
|
|
|
(Gains) losses on derivatives, net
|
254
|
|
|
436
|
|
|
567
|
|
|
471
|
|
|
Other (income) expense, net
|
18
|
|
|
4
|
|
|
24
|
|
|
(8
|
)
|
|
Total
|
521
|
|
|
677
|
|
|
1,093
|
|
|
928
|
|
|
Income (Loss) Before Income Taxes
|
(736
|
)
|
|
142
|
|
|
(474
|
)
|
|
442
|
|
|
Income tax expense (benefit)
|
209
|
|
|
125
|
|
|
375
|
|
|
251
|
|
|
Net Income (Loss)
|
(945
|
)
|
|
17
|
|
|
(849
|
)
|
|
191
|
|
|
Net income (loss) attributable to noncontrolling interests
|
80
|
|
|
(12
|
)
|
|
191
|
|
|
41
|
|
|
Net Income (Loss) Attributable to Common Stockholders
|
$
|
(1,025
|
)
|
|
$
|
29
|
|
|
$
|
(1,040
|
)
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders—basic
|
$
|
(2.09
|
)
|
|
$
|
0.05
|
|
|
$
|
(2.13
|
)
|
|
$
|
0.28
|
|
|
Net income (loss) attributable to common stockholders—diluted
|
$
|
(2.09
|
)
|
|
$
|
0.05
|
|
|
$
|
(2.13
|
)
|
|
$
|
0.28
|
|
|
Average Number of Common Shares Outstanding—Basic
|
491
|
|
|
504
|
|
|
491
|
|
|
511
|
|
|
Average Number of Common Shares Outstanding—Diluted
|
491
|
|
|
505
|
|
|
491
|
|
|
512
|
|
See accompanying Notes to Consolidated Financial Statements.
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Net Income (Loss)
|
$
|
(945
|
)
|
|
$
|
17
|
|
|
$
|
(849
|
)
|
|
$
|
191
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
Adjustments for derivative instruments
|
|
|
|
|
|
|
|
|
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Total adjustments for derivative instruments, net of taxes
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Adjustments for pension and other postretirement plans
|
|
|
|
|
|
|
|
|
Net gain (loss) incurred during period
|
(80
|
)
|
|
—
|
|
|
(80
|
)
|
|
—
|
|
|
Income taxes on net gain (loss) incurred during period
|
18
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
Amortization of net actuarial (gain) loss to other (income) expense, net
|
16
|
|
|
6
|
|
|
24
|
|
|
13
|
|
|
Income taxes on amortization of net actuarial (gain) loss
|
(4
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
(3
|
)
|
|
Amortization of net prior service (credit) cost to other (income) expense, net
|
—
|
|
|
(6
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|
Income taxes on amortization of net prior service (credit) cost
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
Total adjustments for pension and other postretirement plans, net of taxes
|
(50
|
)
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
Total
|
(50
|
)
|
|
—
|
|
|
(44
|
)
|
|
1
|
|
|
Comprehensive Income (Loss)
|
(995
|
)
|
|
17
|
|
|
(893
|
)
|
|
192
|
|
|
Comprehensive income (loss) attributable to noncontrolling interests
|
80
|
|
|
(12
|
)
|
|
191
|
|
|
41
|
|
|
Comprehensive Income (Loss) Attributable to Common Stockholders
|
$
|
(1,075
|
)
|
|
$
|
29
|
|
|
$
|
(1,084
|
)
|
|
$
|
151
|
|
See accompanying Notes to Consolidated Financial Statements.
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
millions except per-share amounts
|
2019
|
|
|
2018
|
|
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and cash equivalents ($96 and $92 related to VIEs)
|
$
|
1,394
|
|
|
$
|
1,295
|
|
|
Accounts receivable (net of allowance of $11 and $13)
|
|
|
|
|
Customers ($118 and $138 related to VIEs)
|
1,195
|
|
|
1,491
|
|
|
Others
|
584
|
|
|
535
|
|
|
Other current assets
|
298
|
|
|
474
|
|
|
Total
|
3,471
|
|
|
3,795
|
|
|
Net Properties and Equipment
(net of accumulated depreciation, depletion, and amortization of $39,998 and $37,905) ($8,785 and $6,612 related to VIEs)
|
29,091
|
|
|
28,615
|
|
|
Other Assets
($1,273 and $868 related to VIEs)
|
2,953
|
|
|
2,336
|
|
|
Goodwill and Other Intangible Assets
($1,271 and $1,163 related to VIEs)
|
5,614
|
|
|
5,630
|
|
|
Total Assets
|
$
|
41,129
|
|
|
$
|
40,376
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Accounts payable
|
|
|
|
|
Trade ($155 and $263 related to VIEs)
|
$
|
1,729
|
|
|
$
|
2,003
|
|
|
Other ($9 and $15 related to VIEs)
|
167
|
|
|
161
|
|
|
Short-term debt - Anadarko
(1)
|
31
|
|
|
919
|
|
|
Short-term debt - WES
|
—
|
|
|
28
|
|
|
Current asset retirement obligations ($25 and $26 related to VIEs)
|
303
|
|
|
252
|
|
|
Other current liabilities ($146 and $54 related to VIEs)
|
1,562
|
|
|
1,295
|
|
|
Total
|
3,792
|
|
|
4,658
|
|
|
Long-term Debt
|
|
|
|
|
Long-term debt - Anadarko
(1)
|
10,709
|
|
|
10,683
|
|
|
Long-term debt - WES
|
7,489
|
|
|
4,787
|
|
|
Total
|
18,198
|
|
|
15,470
|
|
|
Other Long-term Liabilities
|
|
|
|
|
Deferred income taxes
|
2,555
|
|
|
2,437
|
|
|
Asset retirement obligations ($320 and $260 related to VIEs)
|
2,879
|
|
|
2,847
|
|
|
Other
|
4,374
|
|
|
4,021
|
|
|
Total
|
9,808
|
|
|
9,305
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
Common stock, par value $0.10 per share (1.0 billion shares authorized, 579.1 million and 576.6 million shares issued)
|
58
|
|
|
57
|
|
|
Paid-in capital
|
13,135
|
|
|
12,393
|
|
|
Retained earnings (accumulated deficit)
|
(149
|
)
|
|
1,245
|
|
|
Treasury stock (87.7 million and 87.2 million shares)
|
(4,892
|
)
|
|
(4,864
|
)
|
|
Accumulated other comprehensive income (loss)
|
(379
|
)
|
|
(335
|
)
|
|
Total Stockholders’ Equity
|
7,773
|
|
|
8,496
|
|
|
Noncontrolling interests
|
1,558
|
|
|
2,447
|
|
|
Total Equity
|
9,331
|
|
|
10,943
|
|
|
Total Liabilities and Equity
|
$
|
41,129
|
|
|
$
|
40,376
|
|
Parenthetical references reflect amounts as of
June 30, 2019
, and
December 31, 2018
.
See accompanying Notes to Consolidated Financial Statements.
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
|
millions
|
Common
Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Treasury
Stock
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Non-
controlling
Interests
|
|
Total
Equity
|
|
|
Balance at March 31, 2019
|
$
|
57
|
|
$
|
13,057
|
|
$
|
1,024
|
|
$
|
(4,881
|
)
|
|
$
|
(329
|
)
|
|
$
|
1,605
|
|
$
|
10,533
|
|
|
Net income (loss)
|
—
|
|
—
|
|
(1,025
|
)
|
—
|
|
|
—
|
|
|
80
|
|
(945
|
)
|
|
Common stock issued
|
1
|
|
40
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
41
|
|
|
Share-based compensation expense
|
—
|
|
40
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
40
|
|
|
Dividends—common stock
|
—
|
|
—
|
|
(149
|
)
|
—
|
|
|
—
|
|
|
—
|
|
(149
|
)
|
|
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
(11
|
)
|
|
Subsidiary equity transactions
|
—
|
|
(2
|
)
|
1
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
(2
|
)
|
|
Distributions to noncontrolling interest owners
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
(126
|
)
|
(126
|
)
|
|
Adjustments for pension and other postretirement plans
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
(50
|
)
|
|
Balance at June 30, 2019
|
$
|
58
|
|
$
|
13,135
|
|
$
|
(149
|
)
|
$
|
(4,892
|
)
|
|
$
|
(379
|
)
|
|
$
|
1,558
|
|
$
|
9,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
|
millions
|
Common
Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Treasury
Stock
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Non-
controlling
Interests
|
|
Total
Equity
|
|
|
Balance at March 31, 2018
|
$
|
57
|
|
$
|
11,701
|
|
$
|
1,152
|
|
$
|
(3,759
|
)
|
|
$
|
(410
|
)
|
|
$
|
3,015
|
|
$
|
11,756
|
|
|
Net income (loss)
|
—
|
|
—
|
|
29
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
17
|
|
|
Common stock issued
|
—
|
|
6
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6
|
|
|
Share-based compensation expense
|
—
|
|
45
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
45
|
|
|
Dividends—common stock
|
—
|
|
—
|
|
(127
|
)
|
—
|
|
|
—
|
|
|
—
|
|
(127
|
)
|
|
Repurchases of common stock
|
—
|
|
332
|
|
—
|
|
(346
|
)
|
|
—
|
|
|
—
|
|
(14
|
)
|
|
Subsidiary equity transactions
|
—
|
|
(8
|
)
|
—
|
|
—
|
|
|
—
|
|
|
10
|
|
2
|
|
|
Settlement of tangible equity units
|
—
|
|
230
|
|
—
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
(70
|
)
|
|
Distributions to noncontrolling interest owners
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
(120
|
)
|
(120
|
)
|
|
Balance at June 30, 2018
|
$
|
57
|
|
$
|
12,306
|
|
$
|
1,054
|
|
$
|
(4,105
|
)
|
|
$
|
(410
|
)
|
|
$
|
2,593
|
|
$
|
11,495
|
|
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
|
millions
|
Common
Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Treasury
Stock
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Non-
controlling
Interests
|
|
Total
Equity
|
|
|
Balance at December 31, 2018
|
$
|
57
|
|
$
|
12,393
|
|
$
|
1,245
|
|
$
|
(4,864
|
)
|
|
$
|
(335
|
)
|
|
$
|
2,447
|
|
$
|
10,943
|
|
|
Net income (loss)
|
—
|
|
—
|
|
(1,040
|
)
|
—
|
|
|
—
|
|
|
191
|
|
(849
|
)
|
|
Common stock issued
|
1
|
|
40
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
41
|
|
|
Share-based compensation expense
|
—
|
|
78
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
78
|
|
|
Dividends—common stock
|
—
|
|
—
|
|
(299
|
)
|
—
|
|
|
—
|
|
|
—
|
|
(299
|
)
|
|
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
(28
|
)
|
|
Subsidiary equity transactions
|
—
|
|
624
|
|
—
|
|
—
|
|
|
—
|
|
|
(824
|
)
|
(200
|
)
|
|
Distributions to noncontrolling interest owners
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
(256
|
)
|
(256
|
)
|
|
Adjustments for pension and other postretirement plans
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
(45
|
)
|
|
Cumulative effect of accounting change
(1)
|
—
|
|
—
|
|
(55
|
)
|
—
|
|
|
—
|
|
|
—
|
|
(55
|
)
|
|
Other
|
—
|
|
—
|
|
—
|
|
—
|
|
|
1
|
|
|
—
|
|
1
|
|
|
Balance at June 30, 2019
|
$
|
58
|
|
$
|
13,135
|
|
$
|
(149
|
)
|
$
|
(4,892
|
)
|
|
$
|
(379
|
)
|
|
$
|
1,558
|
|
$
|
9,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
|
millions
|
Common
Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Treasury
Stock
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Non-
controlling
Interests
|
|
Total
Equity
|
|
|
Balance at December 31, 2017
|
$
|
57
|
|
$
|
12,000
|
|
$
|
1,109
|
|
$
|
(2,132
|
)
|
|
$
|
(338
|
)
|
|
$
|
3,094
|
|
$
|
13,790
|
|
|
Net income (loss)
|
—
|
|
—
|
|
150
|
|
—
|
|
|
—
|
|
|
41
|
|
191
|
|
|
Common stock issued
|
—
|
|
6
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6
|
|
|
Share-based compensation expense
|
—
|
|
84
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
84
|
|
|
Dividends—common stock
|
—
|
|
—
|
|
(254
|
)
|
—
|
|
|
—
|
|
|
—
|
|
(254
|
)
|
|
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(1,973
|
)
|
|
—
|
|
|
—
|
|
(1,973
|
)
|
|
Subsidiary equity transactions
|
—
|
|
(14
|
)
|
—
|
|
—
|
|
|
—
|
|
|
19
|
|
5
|
|
|
Settlement of tangible equity units
|
—
|
|
230
|
|
—
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
(70
|
)
|
|
Distributions to noncontrolling interest owners
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
(238
|
)
|
|
Cumulative effect of accounting change
(1)
|
—
|
|
—
|
|
49
|
|
—
|
|
|
(73
|
)
|
|
(23
|
)
|
(47
|
)
|
|
Other
|
—
|
|
—
|
|
—
|
|
—
|
|
|
1
|
|
|
—
|
|
1
|
|
|
Balance at June 30, 2018
|
$
|
57
|
|
$
|
12,306
|
|
$
|
1,054
|
|
$
|
(4,105
|
)
|
|
$
|
(410
|
)
|
|
$
|
2,593
|
|
$
|
11,495
|
|
|
|
|
|
(1)
|
Beginning January 1, 2018, the Company adopted ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
, and ASU 2018-02,
Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
See
Note 1—Summary of Significant Accounting Policies
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
|
See accompanying Notes to Consolidated Financial Statements.
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
Net income (loss)
|
$
|
(849
|
)
|
|
$
|
191
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
|
|
|
|
|
Depreciation, depletion, and amortization
|
2,242
|
|
|
1,993
|
|
|
Deferred income taxes
|
(54
|
)
|
|
27
|
|
|
Dry hole expense and impairments of unproved properties
|
41
|
|
|
149
|
|
|
Impairments
|
—
|
|
|
147
|
|
|
(Gains) losses on divestitures, net
|
(1
|
)
|
|
(28
|
)
|
|
Total (gains) losses on derivatives, net
|
569
|
|
|
473
|
|
|
Operating portion of net cash received (paid) in settlement of derivative instruments
|
2
|
|
|
(234
|
)
|
|
Other
|
112
|
|
|
139
|
|
|
Changes in assets and liabilities
|
|
|
|
|
(Increase) decrease in accounts receivable
|
228
|
|
|
(91
|
)
|
|
Increase (decrease) in accounts payable and other current liabilities
|
(271
|
)
|
|
91
|
|
|
Other items, net
|
(114
|
)
|
|
(202
|
)
|
|
Net cash provided by (used in) operating activities
|
1,905
|
|
|
2,655
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
Additions to properties and equipment
|
(2,691
|
)
|
|
(3,277
|
)
|
|
Divestitures of properties and equipment and other assets
|
31
|
|
|
384
|
|
|
Other, net
|
(125
|
)
|
|
(163
|
)
|
|
Net cash provided by (used in) investing activities
|
(2,785
|
)
|
|
(3,056
|
)
|
|
Cash Flows from Financing Activities
|
|
|
|
|
Borrowings, net of issuance costs
|
2,700
|
|
|
1,333
|
|
|
Repayments of debt
|
(940
|
)
|
|
(764
|
)
|
|
Financing portion of net cash received (paid) for derivative instruments
|
(228
|
)
|
|
55
|
|
|
Increase (decrease) in outstanding checks
|
26
|
|
|
34
|
|
|
Dividends paid
|
(299
|
)
|
|
(254
|
)
|
|
Repurchases of common stock
|
(28
|
)
|
|
(1,973
|
)
|
|
Issuances of common stock
|
41
|
|
|
6
|
|
|
Distributions to noncontrolling interest owners
|
(256
|
)
|
|
(238
|
)
|
|
Payments of future hard-minerals royalty revenues conveyed
|
(24
|
)
|
|
(25
|
)
|
|
Other
|
(12
|
)
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
980
|
|
|
(1,826
|
)
|
|
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents
|
2
|
|
|
(15
|
)
|
|
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents
|
102
|
|
|
(2,242
|
)
|
|
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents at Beginning of Period
|
1,429
|
|
|
4,674
|
|
|
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents at End of Period
|
$
|
1,531
|
|
|
$
|
2,432
|
|
See accompanying Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
1. Summary of Significant Accounting Policies
|
General
Anadarko Petroleum Corporation is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and is advancing its Mozambique LNG project to the construction phase after announcing FID on June 18, 2019. In addition, the Company engages in gathering, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water. The Company also participates in the hard-minerals business through royalty arrangements.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain notes and other information have been condensed or omitted. The accompanying interim financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the Company’s consolidated financial statements. Certain prior-period amounts have been reclassified to conform to the current-period presentation. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
, as well as the Form 8-K filed on May 15, 2019 to recast the segment information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, following a change in reportable segments during the quarter ended March 31, 2019.
Merger
On April 11, 2019, the Company entered into the Chevron Merger Agreement. On April 24, 2019, Occidental announced a proposal to acquire Anadarko and further revised its proposal on May 5, 2019. On May 6, 2019, Anadarko announced that the Board had unanimously determined that the Occidental proposal was a “Superior Proposal” as defined in the Chevron Merger Agreement and, on May 9, 2019, provided Chevron a notice terminating the Chevron Merger Agreement. Pursuant to the terms of the Chevron Merger Agreement, the Company paid the Chevron Merger Termination Fee of
$1.0 billion
. Also, on May 9, 2019, the Company entered into the Occidental Merger Agreement, which provides that, among other things, and subject to the terms and conditions of the Occidental Merger Agreement, a wholly owned subsidiary of Occidental will be merged with and into Anadarko, with Anadarko continuing as the surviving corporation and a wholly owned subsidiary of Occidental. Pursuant to the Occidental Merger Agreement, at the effective time of the Occidental Merger and subject to potential further adjustments as specified in the Occidental Merger Agreement, Anadarko stockholders will receive
$59.00
in cash and
0.2934
of a share of Occidental common stock for each share of Anadarko common stock, plus cash in lieu of any fractional Occidental shares that otherwise would have been issued. The transaction was approved by the Boards of Directors of both companies. The Occidental Merger is subject to Anadarko stockholder approval and other customary closing conditions. Anadarko is holding a special meeting of its stockholders on August 8, 2019, for holders of record as of July 11, 2019, to vote on the proposal necessary to complete the Occidental Merger. Assuming all closing conditions are satisfied, including obtaining the requisite approval from Anadarko stockholders, Occidental and Anadarko expect the Occidental Merger to close shortly after the special meeting of Anadarko stockholders.
In addition to the Chevron Merger Termination Fee, Anadarko has incurred merger transaction costs of
$42 million
as of
June 30, 2019
.
Midstream Asset Sale and WES Merger
On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its midstream assets, which consisted of oil infrastructure assets in the DJ basin and oil and water infrastructure assets in the Delaware basin, to WES Operating for
$4.0 billion
, with
$2.0 billion
of cash proceeds and
$2.0 billion
in WES Operating common units. As a result, the Company no longer reports an Other Midstream segment and now has
two
reporting segments: Exploration and Production and WES Midstream. Prior period amounts have been reclassified to conform to the current-period presentation. See
Note 19—Segment Information
for information on the Company’s reporting segments.
Immediately after the asset contribution and sale, a wholly owned subsidiary of WES merged with and into WES Operating, with WES Operating continuing as the surviving entity and a subsidiary of WES, resulting in a simplified midstream structure. Under the terms of the WES Merger, WES acquired all of the outstanding publicly held common units of WES Operating and substantially all of the WES Operating common units owned by Anadarko and its affiliates. WES Operating survived as a partnership with no publicly traded equity, owned
98%
by WES and
2%
by Anadarko. WES Operating owns all the operating assets and equity investments of WES, is the borrower for all existing WES debt and is expected to be the borrower for all future debt. Anadarko maintains operating control of WES, with approximately
55.5%
ownership of the combined entity.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
1. Summary of Significant Accounting Policies (Continued)
|
The consolidated financial statements include the accounts of Anadarko and subsidiaries in which Anadarko holds, directly or indirectly, more than 50% of the voting rights and VIEs for which Anadarko is the primary beneficiary. The Company has determined that WES is a VIE. Anadarko is considered the primary beneficiary and consolidates WES. WES functions with a capital structure that is separate from Anadarko, consisting of its own debt instruments and publicly traded common units. All intercompany transactions have been eliminated. Undivided interests in oil and natural-gas exploration and production joint ventures are consolidated on a proportionate basis. Investments in noncontrolled entities that Anadarko has the ability to exercise significant influence over operating and financial policies and VIEs for which Anadarko is not the primary beneficiary are accounted for using the equity method. In applying the equity method of accounting, the investments are initially recognized at cost and subsequently adjusted for the Company’s proportionate share of earnings, losses, and distributions. Investments are included in other assets on the Company’s Consolidated Balance Sheets.
Recently Adopted Accounting Standards
ASU 2016-02, Leases (Topic 842)
This ASU requires lessees to recognize a lease liability and an ROU asset on the balance sheet for all leases, including operating leases. This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors. The Company adopted Topic 842 on January 1, 2019, using the modified retrospective method applied to all leases that existed on January 1, 2019, and prior-period financial statements were not adjusted. Anadarko elected not to reassess contracts that commenced prior to adoption, to continue applying its current accounting policy for existing or expired land easements, and not to recognize ROU assets or lease liabilities for short-term leases. Upon adoption, the Company recognized approximately
$600 million
of ROU assets and lease liabilities related to leases existing at January 1, 2019. The difference between ROU assets and operating lease liabilities, net of the deferred tax impact, was recognized as a
$55 million
reduction in the opening balance of retained earnings as a cumulative effect adjustment. See
Note 10—Leases
for additional information.
Accounting Policy
Leases
Anadarko determines if an arrangement is a lease based on rights and obligations conveyed at inception of a contract. At the commencement date, a lease is classified as either operating or finance, and an ROU asset and lease liability is recognized based on the present value of future lease payments over the lease term. As the rate implicit in Anadarko’s leases generally is not readily determinable, the Company discounts lease liabilities using the Company’s incremental borrowing rate at the commencement date. Non-lease components associated with leases that begin in 2019 or later are accounted for as part of the lease component, and prepaid lease payments are included in the ROU asset. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that Anadarko will exercise that option. Leases of 12 months or less are not recognized on the Company’s Consolidated Balance Sheets.
Lease cost is recognized over the lease term, unless the end of the useful life of the underlying asset in a finance lease is before the end of the lease term. Lease cost is recognized on a straight-line basis unless another method better represents the pattern that benefit is expected to be derived from the right to use the underlying asset. For finance leases, interest expense is recognized over the lease term using the effective interest method. Variable lease payments are recognized when the obligation for those payments is incurred.
Generally, a contract in a joint arrangement is evaluated as a lease if Anadarko is the operator. Anadarko recognizes an ROU asset and lease liability for the full amount of each contract determined to be a lease, although a portion of lease payments generally is recovered from partners. Lease payments associated with the drilling of exploratory wells and development wells net of amounts billed to partners initially will be capitalized as a component of oil and gas properties and either depreciated, impaired, or written off as exploration expense in future periods.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
2. Revenue from Contracts with Customers
|
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates revenue by significant product type and segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Exploration
& Production
|
|
WES Midstream
|
|
Other and
Intersegment
Eliminations
|
|
Total
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
2,470
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,470
|
|
|
Natural-gas sales
|
|
205
|
|
|
—
|
|
|
—
|
|
|
205
|
|
|
Natural-gas liquids sales
|
|
216
|
|
|
—
|
|
|
—
|
|
|
216
|
|
|
Gathering, processing, and marketing sales
(1)
|
|
1
|
|
|
685
|
|
|
(82
|
)
|
|
604
|
|
|
Other, net
|
|
12
|
|
|
—
|
|
|
21
|
|
|
33
|
|
|
Total Revenue from Customers
|
|
$
|
2,904
|
|
|
$
|
685
|
|
|
$
|
(61
|
)
|
|
$
|
3,528
|
|
|
Gathering, processing, and marketing sales
(2)
|
|
—
|
|
|
—
|
|
|
(139
|
)
|
|
(139
|
)
|
|
Gains (losses) on divestitures, net
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
Other, net
|
|
(16
|
)
|
|
70
|
|
|
(7
|
)
|
|
47
|
|
|
Total Revenue from Other than Customers
|
|
$
|
(10
|
)
|
|
$
|
70
|
|
|
$
|
(146
|
)
|
|
$
|
(86
|
)
|
|
Total Revenue and Other
|
|
$
|
2,894
|
|
|
$
|
755
|
|
|
$
|
(207
|
)
|
|
$
|
3,442
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
2,265
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,265
|
|
|
Natural-gas sales
|
|
203
|
|
|
—
|
|
|
—
|
|
|
203
|
|
|
Natural-gas liquids sales
|
|
318
|
|
|
—
|
|
|
—
|
|
|
318
|
|
|
Gathering, processing, and marketing sales
(1)
|
|
—
|
|
|
519
|
|
|
84
|
|
|
603
|
|
|
Other, net
|
|
4
|
|
|
—
|
|
|
21
|
|
|
25
|
|
|
Total Revenue from Customers
|
|
$
|
2,790
|
|
|
$
|
519
|
|
|
$
|
105
|
|
|
$
|
3,414
|
|
|
Gathering, processing, and marketing sales
(2)
|
|
—
|
|
|
(1
|
)
|
|
(220
|
)
|
|
(221
|
)
|
|
Gains (losses) on divestitures, net
|
|
52
|
|
|
1
|
|
|
(1
|
)
|
|
52
|
|
|
Other, net
|
|
(1
|
)
|
|
39
|
|
|
8
|
|
|
46
|
|
|
Total Revenue from Other than Customers
|
|
$
|
51
|
|
|
$
|
39
|
|
|
$
|
(213
|
)
|
|
$
|
(123
|
)
|
|
Total Revenue and Other
|
|
$
|
2,841
|
|
|
$
|
558
|
|
|
$
|
(108
|
)
|
|
$
|
3,291
|
|
|
|
|
|
(1)
|
The amount in Other and Intersegment Eliminations primarily represents sales of third-party natural gas and NGLs of
$176 million
and intersegment eliminations of
$(233) million
for the
three months ended June 30, 2019,
and sales of third-party natural gas and NGLs of
$261 million
and intersegment eliminations of
$(174) million
for the
three months ended June 30, 2018
.
|
|
|
|
|
(2)
|
The amount in Other and Intersegment Eliminations represents purchases of third-party natural gas and NGLs. Although these purchases are reported net in gathering, processing, and marketing sales in the Company’s Consolidated Statements of Income, they are shown separately on this table as the purchases are not considered revenue from customers.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
2. Revenue from Contracts with Customers (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Exploration
& Production
|
|
WES Midstream
|
|
Other and
Intersegment
Eliminations
|
|
Total
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
4,566
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,566
|
|
|
Natural-gas sales
|
|
525
|
|
|
—
|
|
|
—
|
|
|
525
|
|
|
Natural-gas liquids sales
|
|
456
|
|
|
—
|
|
|
—
|
|
|
456
|
|
|
Gathering, processing, and marketing sales
(1)
|
|
2
|
|
|
1,357
|
|
|
(107
|
)
|
|
1,252
|
|
|
Other, net
|
|
21
|
|
|
—
|
|
|
46
|
|
|
67
|
|
|
Total Revenue from Customers
|
|
$
|
5,570
|
|
|
$
|
1,357
|
|
|
$
|
(61
|
)
|
|
$
|
6,866
|
|
|
Gathering, processing, and marketing sales
(2)
|
|
—
|
|
|
—
|
|
|
(317
|
)
|
|
(317
|
)
|
|
Gains (losses) on divestitures, net
|
|
6
|
|
|
—
|
|
|
(5
|
)
|
|
1
|
|
|
Other, net
|
|
(17
|
)
|
|
132
|
|
|
(5
|
)
|
|
110
|
|
|
Total Revenue from Other than Customers
|
|
$
|
(11
|
)
|
|
$
|
132
|
|
|
$
|
(327
|
)
|
|
$
|
(206
|
)
|
|
Total Revenue and Other
|
|
$
|
5,559
|
|
|
$
|
1,489
|
|
|
$
|
(388
|
)
|
|
$
|
6,660
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
4,392
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,392
|
|
|
Natural-gas sales
|
|
450
|
|
|
—
|
|
|
—
|
|
|
450
|
|
|
Natural-gas liquids sales
|
|
610
|
|
|
—
|
|
|
—
|
|
|
610
|
|
|
Gathering, processing, and marketing sales
(1)
|
|
—
|
|
|
1,021
|
|
|
130
|
|
|
1,151
|
|
|
Other, net
|
|
7
|
|
|
—
|
|
|
40
|
|
|
47
|
|
|
Total Revenue from Customers
|
|
$
|
5,459
|
|
|
$
|
1,021
|
|
|
$
|
170
|
|
|
$
|
6,650
|
|
|
Gathering, processing, and marketing sales
(2)
|
|
—
|
|
|
(2
|
)
|
|
(407
|
)
|
|
(409
|
)
|
|
Gains (losses) on divestitures, net
|
|
19
|
|
|
1
|
|
|
8
|
|
|
28
|
|
|
Other, net
|
|
(13
|
)
|
|
80
|
|
|
—
|
|
|
67
|
|
|
Total Revenue from Other than Customers
|
|
$
|
6
|
|
|
$
|
79
|
|
|
$
|
(399
|
)
|
|
$
|
(314
|
)
|
|
Total Revenue and Other
|
|
$
|
5,465
|
|
|
$
|
1,100
|
|
|
$
|
(229
|
)
|
|
$
|
6,336
|
|
|
|
|
|
(1)
|
The amount in Other and Intersegment Eliminations primarily represents sales of third-party natural gas and NGLs of
$381 million
and intersegment eliminations of
$(456) million
for the
six months ended June 30, 2019
, and sales of third-party natural gas and NGLs of
$485 million
and intersegment eliminations of
$(337) million
for the
six months ended June 30, 2018
.
|
|
|
|
|
(2)
|
The amount in Other and Intersegment Eliminations represents purchases of third-party natural gas and NGLs. Although these purchases are reported net in gathering, processing, and marketing sales in the Company’s Consolidated Statements of Income, they are shown separately on this table as the purchases are not considered revenue from customers.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
2. Revenue from Contracts with Customers (Continued)
|
Contract Liabilities
Contract liabilities primarily relate to midstream fees and capital reimbursements that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of benefit, fixed and variable fees that are received from customers but revenue recognition is deferred under midstream cost of service contracts, and hard-minerals bonus payments received from customers that must be recognized as revenue over the expected period of benefit. The following table summarizes the current period activity related to contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
millions
|
|
|
Balance at December 31, 2018
|
$
|
150
|
|
|
Increase due to cash received, excluding revenues recognized in the period
(1)
|
20
|
|
|
Decrease due to revenue recognized
(2)
|
(23
|
)
|
|
Balance at June 30, 2019
|
$
|
147
|
|
|
|
|
|
Contract liabilities at June 30, 2019
|
|
|
Other current liabilities
|
$
|
19
|
|
|
Other long-term liabilities - other
|
128
|
|
|
Total contract liabilities from contracts with customers
|
$
|
147
|
|
|
|
|
|
(1)
|
Includes
$(26) million
for the three months ended June 30, 2019.
|
|
|
|
|
(2)
|
Includes
$7 million
for the three months ended June 30, 2019.
|
Transaction Price Allocated to Remaining Performance Obligations
Revenue expected to be recognized from certain performance obligations that are unsatisfied as of
June 30, 2019
, is reflected in the table below. The Company applies the optional exemptions in Topic 606 and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied performance obligations. Therefore, the following table represents only a small portion of Anadarko’s expected future consolidated revenues as future revenue from the sale of most products and services is dependent on future production or variable customer volume and variable commodity prices for that volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Exploration
& Production
|
|
WES Midstream
|
|
Other and
Intersegment
Eliminations
|
|
Total
|
|
|
Remainder of 2019
|
|
$
|
52
|
|
|
$
|
380
|
|
|
$
|
(250
|
)
|
|
$
|
182
|
|
|
2020
|
|
103
|
|
|
873
|
|
|
(620
|
)
|
|
356
|
|
|
2021
|
|
103
|
|
|
912
|
|
|
(681
|
)
|
|
334
|
|
|
2022
|
|
7
|
|
|
963
|
|
|
(739
|
)
|
|
231
|
|
|
2023
|
|
7
|
|
|
918
|
|
|
(729
|
)
|
|
196
|
|
|
Thereafter
|
|
60
|
|
|
4,341
|
|
|
(3,830
|
)
|
|
571
|
|
|
Total
|
|
$
|
332
|
|
|
$
|
8,387
|
|
|
$
|
(6,849
|
)
|
|
$
|
1,870
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
The following summarizes the major classes of commodity inventories included in other current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Oil
|
|
$
|
159
|
|
|
$
|
139
|
|
|
Natural gas
|
|
7
|
|
|
18
|
|
|
NGLs
|
|
58
|
|
|
78
|
|
|
Total commodity inventories
|
|
$
|
224
|
|
|
$
|
235
|
|
The following summarizes the proceeds received and gains (losses) recognized on divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
Proceeds received, net of closing adjustments
|
$
|
31
|
|
|
$
|
384
|
|
|
Gains (losses) on divestitures, net
|
1
|
|
|
28
|
|
2018
During the
six months ended June 30, 2018,
the Company divested of the following U.S. onshore and Gulf of Mexico assets:
|
|
|
|
–
|
Alaska nonoperated assets, included primarily in the Exploration and Production reporting segment, for net proceeds of
$383 million
and net losses of
$37 million
in 2018 and
$154 million
in the fourth quarter of 2017.
|
|
|
|
|
–
|
Ram Powell nonoperated assets in the Gulf of Mexico, included in the Exploration and Production reporting segment, resulting in a net gain of
$67 million
.
|
Impairments of Long-Lived Assets
2018
During the
three months ended June 30, 2018
, the Company expensed
$128 million
primarily related to a gathering system in the DJ basin, included in the WES Midstream reporting segment that was permanently taken out of service in the second quarter of 2018.
Fair values were measured as of the impairment date using the income approach and Level 3 inputs. The primary assumptions used to estimate undiscounted future net cash flows include anticipated future production, commodity prices, and capital and operating costs.
Impairments of Unproved Properties
Impairments of unproved properties are included in exploration expense in the Company’s Consolidated Statements of Income. The Company recognized impairments of unproved Gulf of Mexico properties of
$35 million
during the
six months ended June 30, 2019
, and
$94 million
during the
six months ended June 30, 2018,
primarily related to blocks where the Company determined it would no longer pursue activities.
It is reasonably possible that significant declines in commodity prices, further changes to the Company’s drilling plans in response to lower prices, reduction of proved and probable reserve estimates, or increases in drilling or operating costs could result in additional impairments.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
6. Suspended Exploratory Well Costs
|
The Company’s suspended exploratory well costs were
$413 million
at
June 30, 2019,
and
$444 million
at
December 31, 2018
. For exploratory wells, drilling costs are capitalized, or “suspended,” on the balance sheet when the well has found a sufficient quantity of reserves to justify its completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operating viability of the project. If additional information becomes available that raises substantial doubt as to the economic or operational viability of any of these projects, the associated costs will be expensed at that time. During the
six months ended June 30, 2019,
there was
no
exploration expense recorded for suspended exploratory well costs previously capitalized for greater than one year at
December 31, 2018
.
Accounts Payable
Accounts payable, trade included liabilities of
$206 million
at
June 30, 2019
, and
$180 million
at
December 31, 2018
, representing the amount by which checks issued but not presented to the Company’s banks for collection exceeded balances in applicable bank accounts. Changes in these liabilities are classified as cash flows from financing activities.
Other Current Liabilities
The following summarizes the Company’s other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Accrued income taxes
|
|
$
|
135
|
|
|
$
|
167
|
|
|
Interest payable
|
|
252
|
|
|
267
|
|
|
Production, property, and other taxes payable
|
|
334
|
|
|
309
|
|
|
Accrued employee benefits
|
|
229
|
|
|
319
|
|
|
Derivatives
|
|
175
|
|
|
89
|
|
|
Operating lease liabilities
|
|
249
|
|
|
—
|
|
|
Other
|
|
188
|
|
|
144
|
|
|
Total other current liabilities
|
|
$
|
1,562
|
|
|
$
|
1,295
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
8. Derivative Instruments
|
Objective and Strategy
The Company uses derivative instruments to manage its exposure to cash-flow variability from commodity-price and interest-rate risks. Futures, swaps, and options are used to manage exposure to commodity-price risk inherent in the Company’s oil and natural-gas production and natural-gas processing operations (Oil and Natural-Gas Production/Processing Derivative Activities). Futures contracts and commodity-price swap agreements are used to fix the price of expected future oil and natural-gas sales at major industry trading locations, such as Cushing, Oklahoma or Sullom Voe, Scotland for oil and Henry Hub, Louisiana for natural gas. Basis swaps are periodically used to fix or float the price differential between product prices at one market location versus another. Options are used to establish a floor price, a ceiling price, or a floor and a ceiling price (collar) for expected future oil and natural-gas sales. Derivative instruments are also used to manage commodity-price risk inherent in customer price requirements and to fix margins on the future sale of natural gas and NGLs from the Company’s leased storage facilities.
Interest-rate swaps are used to fix or float interest rates on existing or anticipated indebtedness. The purpose of these instruments is to manage the Company’s existing or anticipated exposure to interest-rate changes. The fair value of the Company’s current interest-rate swap portfolio is subject to changes in interest rates.
The Company does not apply hedge accounting to any of its currently outstanding derivative instruments. As a result, gains and losses associated with derivative instruments are recognized currently in earnings. Net derivative losses attributable to derivatives previously subject to hedge accounting reside in accumulated other comprehensive income (loss) and are reclassified to earnings as the transactions to which the derivatives relate are recognized in earnings.
Oil and Natural-Gas Production/Processing Derivative Activities
The oil prices listed below are a combination of NYMEX WTI and Intercontinental Exchange, Inc. (ICE) Brent Blend prices. The Company had no natural-gas production/processing derivatives at
June 30, 2019
. The following is a summary of the Company’s oil derivative instruments at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
2019 Settlement
|
|
|
Oil
|
|
|
Three-Way Collars (MBbls/d)
|
87
|
|
|
Average price per barrel
|
|
|
Ceiling sold price (call)
|
$
|
72.98
|
|
|
Floor purchased price (put)
|
$
|
56.72
|
|
|
Floor sold price (put)
|
$
|
46.72
|
|
A three-way collar is a combination of three options: a sold call, a purchased put, and a sold put. The sold call establishes the maximum price that the Company will receive for the contracted commodity volume. The purchased put establishes the minimum price that the Company will receive for the contracted volume unless the market price for the commodity falls below the sold put strike price, at which point the minimum price equals the reference price (e.g., NYMEX) plus the excess of the purchased put strike price over the sold put strike price.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
8. Derivative Instruments (Continued)
|
Anadarko Interest-Rate Derivatives (Excluding WES)
Anadarko has outstanding interest-rate swap contracts to manage interest-rate risk associated with anticipated debt issuances. The Company has locked in a fixed interest rate in exchange for a floating interest rate indexed to the three-month LIBOR.
At
June 30, 2019
, the Company had outstanding interest-rate swaps with a notional amount of
$1.6 billion
due prior to or in September 2023 that manage interest-rate risk associated with potential future debt issuances. Depending on market conditions, liability-management actions, or other factors, the Company may enter into offsetting interest-rate swap positions or settle or amend certain or all of the currently outstanding interest-rate swaps. The Company had the following outstanding interest-rate swaps at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
millions except percentages
|
|
Mandatory
|
Weighted-Average
|
|
|
Notional Principal Amount
|
Reference Period
|
Termination Date
|
Interest Rate
|
|
|
$
|
550
|
|
|
September 2016 - 2046
|
September 2020
|
6.418
|
%
|
|
$
|
250
|
|
|
September 2016 - 2046
|
September 2022
|
6.809
|
%
|
|
$
|
100
|
|
|
September 2017 - 2047
|
September 2020
|
6.891
|
%
|
|
$
|
250
|
|
|
September 2017 - 2047
|
September 2021
|
6.570
|
%
|
|
$
|
450
|
|
|
September 2017 - 2047
|
September 2023
|
6.445
|
%
|
Derivative settlements and collateralization are classified as cash flows from operating activities unless the derivatives contain an other-than-insignificant financing element, in which case the settlements and collateralization are classified as cash flows from financing activities. As a result of prior extensions of reference-period start dates without settlement of the related interest-rate derivative obligations, the interest-rate derivatives in Anadarko’s portfolio contain an other-than-insignificant financing element, and therefore, any settlements, collateralization, or cash payments for amendments related to these extended interest-rate derivatives are classified as cash flows from financing activities. Net cash payments related to settlements and amendments of interest-rate swap agreements were
$30 million
during the
six months ended June 30, 2019,
and
$48 million
during the
six months ended June 30, 2018
.
WES Interest-Rate Derivatives
WES entered into interest-rate swap agreements with an aggregate notional amount of
$750 million
in December 2018 and
$375 million
in March 2019 to manage interest-rate risk associated with anticipated 2019 debt issuances. WES exchanged a floating interest rate indexed to the three-month LIBOR for a fixed interest rate. Depending on market conditions, liability management actions, or other factors, WES may settle or amend certain or all of the currently outstanding interest-rate swaps. The following interest-rate swaps were outstanding at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
millions except percentages
|
|
Mandatory
|
Weighted-Average
|
|
|
Notional Principal Amount
|
Reference Period
|
Termination Date
|
Interest Rate
|
|
|
$
|
375
|
|
|
December 2019 - 2024
|
December 2019
|
2.662
|
%
|
|
$
|
375
|
|
|
December 2019 - 2029
|
December 2019
|
2.802
|
%
|
|
$
|
375
|
|
|
December 2019 - 2049
|
December 2019
|
2.885
|
%
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
8. Derivative Instruments (Continued)
|
Effect of Derivative Instruments
—
Balance Sheet
The following summarizes the fair value of the Company’s derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Derivative Assets
|
|
Gross Derivative Liabilities
|
|
millions
|
June 30,
|
|
December 31,
|
|
|
June 30,
|
|
December 31,
|
|
|
Balance Sheet Classification
|
|
2019
|
|
|
2018
|
|
|
|
2019
|
|
|
2018
|
|
|
Commodity derivatives - Anadarko
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
37
|
|
|
$
|
300
|
|
|
|
$
|
(14
|
)
|
|
$
|
(126
|
)
|
|
Other current liabilities
|
|
—
|
|
|
1
|
|
|
|
(1
|
)
|
|
(6
|
)
|
|
|
|
37
|
|
|
301
|
|
|
|
(15
|
)
|
|
(132
|
)
|
|
Interest-rate derivatives - Anadarko
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
15
|
|
|
22
|
|
|
|
—
|
|
|
—
|
|
|
Other assets
|
|
16
|
|
|
34
|
|
|
|
—
|
|
|
—
|
|
|
Other current liabilities
|
|
—
|
|
|
—
|
|
|
|
(86
|
)
|
|
(82
|
)
|
|
Other liabilities
|
|
—
|
|
|
—
|
|
|
|
(1,426
|
)
|
|
(1,156
|
)
|
|
|
|
31
|
|
|
56
|
|
|
|
(1,512
|
)
|
|
(1,238
|
)
|
|
Interest-rate derivatives - WES
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
—
|
|
|
—
|
|
|
|
(103
|
)
|
|
(8
|
)
|
|
Total derivatives
|
|
$
|
68
|
|
|
$
|
357
|
|
|
|
$
|
(1,630
|
)
|
|
$
|
(1,378
|
)
|
|
|
|
|
(1)
|
Excludes amounts related to WES interest-rate swap agreements.
|
Effect of Derivative Instruments
—
Statement of Income
The following summarizes gains and losses related to derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
millions
|
June 30,
|
|
June 30,
|
|
Classification of (Gain) Loss Recognized
|
|
2019
|
|
|
2018
|
|
|
|
2019
|
|
|
2018
|
|
|
Commodity derivatives - Anadarko
|
|
|
|
|
|
|
|
|
|
|
Gathering, processing, and marketing sales
|
|
$
|
—
|
|
|
$
|
1
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
(Gains) losses on derivatives, net
|
|
(5
|
)
|
|
468
|
|
|
|
144
|
|
|
630
|
|
|
Interest-rate derivatives - Anadarko
(1)
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on derivatives, net
|
|
200
|
|
|
(32
|
)
|
|
|
328
|
|
|
(159
|
)
|
|
Interest-rate derivatives - WES
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on derivatives, net
|
|
59
|
|
|
—
|
|
|
|
95
|
|
|
—
|
|
|
Total (gains) losses on derivatives, net
|
|
$
|
254
|
|
|
$
|
437
|
|
|
|
$
|
569
|
|
|
$
|
473
|
|
|
|
|
|
(1)
|
Excludes amounts related to WES interest-rate swap agreements.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
8. Derivative Instruments (Continued)
|
Credit-Risk Considerations
The financial integrity of exchange-traded contracts, which are subject to nominal credit risk, is assured by NYMEX or ICE through systems of financial safeguards and transaction guarantees. Over-the-counter traded swaps, options, and futures contracts expose the Company to counterparty credit risk. The Company monitors the creditworthiness of its counterparties, establishes credit limits according to the Company’s credit policies and guidelines, and assesses the impact on the fair value of its counterparties’ creditworthiness. The Company has the ability to require cash collateral or letters of credit to mitigate its credit-risk exposure.
The Company has netting agreements with financial institutions that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities and routinely exercises its contractual right to offset gains and losses when settling with derivative counterparties. In addition, the Company has setoff agreements with certain financial institutions that may be exercised in the event of default and provide for contract termination and net settlement across derivative types.
The Company’s derivative instruments are subject to individually negotiated credit provisions that may require collateral of cash or letters of credit depending on the derivative’s portfolio valuation versus negotiated credit thresholds. These credit thresholds generally require full or partial collateralization of the Company’s obligations depending on certain credit-risk-related provisions, such as the Company’s credit rating from S&P and Moody’s. As of
June 30, 2019
, the Company’s long-term debt was rated investment grade (BBB) by both S&P and Fitch and below investment grade (Ba1) by Moody’s. In January 2019, Moody’s changed its outlook with respect to its rating from stable to positive. The Company may be required to post additional collateral with respect to its derivative instruments if its credit ratings decline below current levels or if the liability associated with any such derivative instrument increases above the credit threshold. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed was
$1.4 billion
(net of
$264 million
of collateral) at
June 30, 2019
, and
$1.1 billion
(net of
$66 million
of collateral) at
December 31, 2018
.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
8. Derivative Instruments (Continued)
|
Fair Value
Fair value of futures contracts is based on unadjusted quoted prices in active markets for identical assets or liabilities, which represent Level 1 inputs. Valuations of physical-delivery purchase and sale agreements, over-the-counter financial swaps, and commodity option collars are based on similar transactions observable in active markets and industry-standard models that primarily rely on market-observable inputs. Inputs used to estimate fair value in industry-standard models are categorized as Level 2 inputs because substantially all assumptions and inputs are observable in active markets throughout the full term of the instruments. Inputs used to estimate the fair value of swaps and options include market-price curves; contract terms and prices; credit-risk adjustments; and, for Black-Scholes option valuations, discount factors and implied market volatility.
The following summarizes the fair value of the Company’s derivative assets and liabilities by input level within the fair-value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Netting
(1)
|
|
Collateral
|
|
|
Total
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Anadarko
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
23
|
|
|
Interest-rate derivatives
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
Total derivative assets
|
$
|
—
|
|
|
$
|
68
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
54
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Anadarko
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
—
|
|
|
$
|
(15
|
)
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
Interest-rate derivatives
|
—
|
|
|
(1,512
|
)
|
|
—
|
|
|
—
|
|
|
264
|
|
|
(1,248
|
)
|
|
WES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate derivatives
|
—
|
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|
Total derivative liabilities
|
$
|
—
|
|
|
$
|
(1,630
|
)
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
264
|
|
|
$
|
(1,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Anadarko
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
1
|
|
|
$
|
300
|
|
|
$
|
—
|
|
|
$
|
(127
|
)
|
|
$
|
—
|
|
|
$
|
174
|
|
|
Interest-rate derivatives
|
—
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56
|
|
|
Total derivative assets
|
$
|
1
|
|
|
$
|
356
|
|
|
$
|
—
|
|
|
$
|
(127
|
)
|
|
$
|
—
|
|
|
$
|
230
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Anadarko
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
(2
|
)
|
|
$
|
(130
|
)
|
|
$
|
—
|
|
|
$
|
127
|
|
|
$
|
2
|
|
|
$
|
(3
|
)
|
|
Interest-rate derivatives
|
—
|
|
|
(1,238
|
)
|
|
—
|
|
|
—
|
|
|
66
|
|
|
(1,172
|
)
|
|
WES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate derivatives
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
Total derivative liabilities
|
$
|
(2
|
)
|
|
$
|
(1,376
|
)
|
|
$
|
—
|
|
|
$
|
127
|
|
|
$
|
68
|
|
|
$
|
(1,183
|
)
|
|
|
|
|
(1)
|
Represents the impact of netting commodity derivative assets and liabilities with counterparties where the Company has the contractual right and intends to net settle.
|
|
|
|
|
(2)
|
Excludes amounts related to WES interest-rate swap agreements.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
Debt Activity
The following summarizes the Company’s borrowing activity, after eliminating the effect of intercompany transactions, during the
six months ended June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value
|
|
|
millions
|
Anadarko
(1)
|
|
WES
|
|
Anadarko Consolidated
|
|
Description
|
|
Balance at December 31, 2018
|
|
$
|
11,354
|
|
|
$
|
4,815
|
|
|
$
|
16,169
|
|
|
|
Borrowings
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
2,000
|
|
|
2,000
|
|
WES Term Loan Facility
|
|
|
|
—
|
|
|
700
|
|
|
700
|
|
WES RCF
|
|
Repayments
|
|
|
|
|
|
|
|
|
|
|
(600
|
)
|
|
—
|
|
|
(600
|
)
|
8.700 % Senior Notes due 2019
|
|
|
|
(300
|
)
|
|
—
|
|
|
(300
|
)
|
6.950 % Senior Notes due 2019
|
|
|
|
—
|
|
|
(28
|
)
|
|
(28
|
)
|
WGP RCF
|
|
Other, net
|
|
25
|
|
|
2
|
|
|
27
|
|
Amortization of discounts, premiums, and debt issuance costs
|
|
Balance at June 30, 2019
|
|
$
|
10,479
|
|
|
$
|
7,489
|
|
|
$
|
17,968
|
|
|
Debt
The following summarizes the Company’s outstanding debt, including finance lease liabilities, after eliminating the effect of intercompany transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Anadarko
(1)
|
|
WES
|
|
Anadarko Consolidated
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
Total borrowings at face value
|
|
$
|
11,893
|
|
|
$
|
7,540
|
|
|
$
|
19,433
|
|
|
Net unamortized discounts, premiums, and debt issuance costs
(2)
|
|
(1,414
|
)
|
|
(51
|
)
|
|
(1,465
|
)
|
|
Total borrowings
(3)
|
|
10,479
|
|
|
7,489
|
|
|
17,968
|
|
|
Finance lease liabilities
|
|
261
|
|
|
—
|
|
|
261
|
|
|
Less short-term debt
|
|
31
|
|
|
—
|
|
|
31
|
|
|
Total long-term debt
|
|
$
|
10,709
|
|
|
$
|
7,489
|
|
|
$
|
18,198
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Total borrowings at face value
|
|
$
|
12,793
|
|
|
$
|
4,868
|
|
|
$
|
17,661
|
|
|
Net unamortized discounts, premiums, and debt issuance costs
(2)
|
|
(1,439
|
)
|
|
(53
|
)
|
|
(1,492
|
)
|
|
Total borrowings
(3)
|
|
11,354
|
|
|
4,815
|
|
|
16,169
|
|
|
Finance lease liabilities
|
|
248
|
|
|
—
|
|
|
248
|
|
|
Less short-term debt
|
|
919
|
|
|
28
|
|
|
947
|
|
|
Total long-term debt
|
|
$
|
10,683
|
|
|
$
|
4,787
|
|
|
$
|
15,470
|
|
|
|
|
|
(2)
|
Unamortized discounts, premiums, and debt issuance costs are amortized over the term of the related debt. Debt issuance costs related to RCFs are included in other current assets and other assets on the Company’s Consolidated Balance Sheets.
|
|
|
|
|
(3)
|
The Company’s outstanding borrowings, except for borrowings under the WGP RCF, are senior unsecured.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
Fair Value
The Company uses a market approach to determine the fair value of its fixed-rate debt using observable market data, which results in a Level 2 fair-value measurement. The carrying amount of floating-rate debt approximates fair value as the interest rates are variable and reflective of market rates. The estimated fair value of the Company’s total borrowings was
$20.2 billion
at
June 30, 2019,
and
$16.8 billion
at
December 31, 2018
.
Anadarko Debt (Excluding WES)
In
January 2019
, the
$2.0 billion
364
-day senior unsecured RCF (
364
-Day Facility) expired. At
June 30, 2019,
the Company had a
$3.0 billion
senior unsecured RCF maturing in
January 2023
(APC RCF). At
June 30, 2019,
Anadarko had
no
outstanding borrowings under the APC RCF and was in compliance with all covenants.
In March 2019, Anadarko repaid
$600 million
of
8.700%
Senior Notes at maturity and redeemed its
$300 million
of
6.950%
Senior Notes due June 2019.
Anadarko’s Zero Coupons can be put to the Company in October of each year, in whole or in part, for the then-accreted value of the outstanding Zero Coupons, which, if put in whole, would be
$942 million
at the next put date in
October 2019
. Anadarko’s Zero Coupons were classified as long-term debt on the Company’s Consolidated Balance Sheet at
June 30, 2019,
as the Company has the ability and intent to refinance these obligations using long-term debt, should a put be exercised.
The Company also has notes payable related to its ownership of certain noncontrolling mandatorily redeemable interests that are not included in the Company’s reported debt balance and do not affect consolidated interest expense. See
Note 9—Equity-Method Investments
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
WES and WGP Debt
Effective on February 15, 2019, WES amended the maturity date of its senior unsecured RCF from
February 2023
to
February 2024
, and upon completion of the WES Merger, expanded the borrowing capacity from
$1.5 billion
to
$2.0 billion
(WES RCF). During the
six months ended June 30, 2019,
WES borrowed
$700 million
under its RCF, which was used for general partnership purposes, including to fund capital expenditures. At
June 30, 2019,
WES had outstanding borrowings under its RCF of
$920 million
at an interest rate of
3.71%
, outstanding letters of credit of
$5 million
, available borrowing capacity of
$1.1 billion
, and was in compliance with all covenants.
In February 2019, WES borrowed
$2.0 billion
under its senior unsecured credit facility (WES Term Loan Facility) to fund substantially all of the cash portion of the consideration under the WES midstream asset contribution and sale and the payment of related transaction costs. As of June 30, 2019, the WES Term Loan Facility was anticipated to mature on February 27, 2020, the day prior to the one-year anniversary of the completion of the WES Merger. As of June 30, 2019, net cash proceeds received from future asset sales and debt or equity offerings by WES were required to be used to repay amounts outstanding under the WES Term Loan Facility. At
June 30, 2019,
WES had outstanding borrowings under its WES Term Loan Facility of
$2.0 billion
at an interest rate of
3.78%
and was in compliance with all covenants.
On July 1, 2019, WES entered into an amendment to the WES Term Loan Facility to, among other things, (i) increase the commitments available under the WES Term Loan Facility from
$2.0 billion
to
$3.0 billion
, the incremental
$1.0 billion
of which may be drawn by WES on or before September 30, 2019, (ii) extend the maturity date from February 27, 2020 to December 31, 2020, and (iii) modify the provision requiring that all debt issuance proceeds be used to repay the WES Term Loan Facility to allow for a
$1.0 billion
carve out of debt offering proceeds.
In March 2019, the
$35 million
senior secured RCF (WGP RCF) matured following the completion of the WES Merger. During the
six months ended June 30, 2019,
WES made repayments of
$28 million
for the WGP RCF.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
Operating Leases
At
June 30, 2019
, total lease liabilities related to operating leases were
$557 million
and primarily related to offshore and onshore drilling rigs and real estate.
The operating lease liabilities included
$177 million
for offshore drilling vessels and certain contracts for onshore drilling rigs expiring at various dates through 2021. Lease payments commonly vary based on activities being performed by the rig. To the extent that lease payments vary from amounts recognized on the Company’s balance sheet, the amount is included in variable lease cost.
Additionally, the Company has
$187 million
of operating lease liabilities for real estate, primarily related to the Company’s Denver corporate office lease expiring in 2033, with options to terminate the lease early.
Finance Leases
At
June 30, 2019
, total lease liabilities related to finance leases were
$261 million
and primarily related to an FPSO for the Company’s TEN field in Ghana. The initial FPSO lease term ends in 2027 with annual renewal periods for an additional
10
years, annual purchase options that decrease over time, and
no
residual value guarantees.
The following table summarizes information related to the Company’s leases at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
millions except lease term and discount rate
|
Operating Leases
|
|
Finance Leases
|
|
|
Assets
|
|
|
|
|
|
Other assets
|
|
$
|
539
|
|
|
$
|
—
|
|
|
Net properties and equipment
|
|
—
|
|
|
193
|
|
|
Total lease assets
(1)
|
|
$
|
539
|
|
|
$
|
193
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Other current liabilities
|
|
$
|
249
|
|
|
$
|
—
|
|
|
Short-term debt - Anadarko
|
|
—
|
|
|
31
|
|
|
Long-term liabilities
|
|
|
|
|
|
Other
|
|
308
|
|
|
—
|
|
|
Long-term debt - Anadarko
|
|
—
|
|
|
230
|
|
|
Total lease liabilities
(1)
|
|
$
|
557
|
|
|
$
|
261
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term (years)
|
|
5
|
|
|
16
|
|
|
Weighted-average discount rate
(2)
|
|
4.3
|
%
|
|
15.1
|
%
|
|
|
|
|
(1)
|
Includes additions to ROU assets and lease liabilities of
$126 million
related to operating leases and
$22 million
related to finance leases for the six months ended
June 30, 2019
.
|
|
|
|
|
(2)
|
The FPSO finance lease commenced prior to the adoption of ASU 2016-02,
Leases (Topic 842)
. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying asset.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
The following table summarizes the Company’s lease cost before amounts recovered from partners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
millions
|
June 30, 2019
|
|
|
June 30, 2019
|
|
|
Operating lease cost
|
|
$
|
70
|
|
|
|
$
|
148
|
|
|
Short-term lease cost
|
|
42
|
|
|
|
61
|
|
|
Variable lease cost
|
|
37
|
|
|
|
76
|
|
|
Finance lease cost
|
|
|
|
|
|
|
Amortization of ROU assets
|
|
10
|
|
|
|
20
|
|
|
Interest on lease liabilities
|
|
9
|
|
|
|
18
|
|
|
Total lease cost
|
|
$
|
168
|
|
|
|
$
|
323
|
|
The following table summarizes cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
millions
|
Operating Leases
|
|
Finance Leases
|
|
|
Operating cash flows
|
|
$
|
133
|
|
|
$
|
18
|
|
|
Investing cash flows
|
|
37
|
|
|
—
|
|
|
Financing cash flows
|
|
—
|
|
|
9
|
|
The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities recorded on the Company’s Consolidated Balance Sheet at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Operating Leases
(1)
|
|
Finance Leases
|
|
|
Remainder of 2019
|
|
$
|
134
|
|
|
$
|
35
|
|
|
2020
|
|
191
|
|
|
62
|
|
|
2021
|
|
70
|
|
|
52
|
|
|
2022
|
|
49
|
|
|
48
|
|
|
2023
|
|
35
|
|
|
44
|
|
|
Thereafter
|
|
155
|
|
|
322
|
|
|
Total lease payments
|
|
$
|
634
|
|
|
$
|
563
|
|
|
Less portion representing imputed interest
|
|
77
|
|
|
302
|
|
|
Total lease liabilities
|
|
$
|
557
|
|
|
$
|
261
|
|
|
|
|
|
(1)
|
For leases commencing prior to 2019, lease payments exclude payments to lessors for drilling rig services and real estate services, taxes, and common area maintenance.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
The following table summarizes future minimum lease payments related to the Company’s operating and finance leases as of
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Operating Leases
|
|
Finance Leases
|
|
|
2019
|
|
$
|
264
|
|
|
$
|
58
|
|
|
2020
|
|
139
|
|
|
50
|
|
|
2021
|
|
57
|
|
|
48
|
|
|
2022
|
|
35
|
|
|
45
|
|
|
2023
|
|
24
|
|
|
43
|
|
|
Thereafter
|
|
135
|
|
|
323
|
|
|
Total lease payments
|
|
$
|
654
|
|
|
$
|
567
|
|
|
Less portion representing imputed interest
|
|
*
|
|
|
319
|
|
|
Total lease liabilities
|
|
*
|
|
|
$
|
248
|
|
|
|
|
|
*
|
Prior to the adoption of ASU 2016-02,
Leases (Topic 842)
on January 1, 2019, operating lease liabilities were not recognized on the Company’s Consolidated Balance Sheets. Refer to
Note 1—Summary of Significant Accounting Policies
for additional information.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
The following summarizes income tax expense (benefit) and effective tax rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions except percentages
|
|
2019
|
|
|
2018
|
|
|
|
2019
|
|
|
2018
|
|
|
Current income tax expense (benefit)
|
|
$
|
269
|
|
|
$
|
147
|
|
|
|
$
|
437
|
|
|
$
|
237
|
|
|
Deferred income tax expense (benefit)
|
|
(60
|
)
|
|
(22
|
)
|
|
|
(62
|
)
|
|
14
|
|
|
Total income tax expense (benefit)
|
|
$
|
209
|
|
|
$
|
125
|
|
|
|
$
|
375
|
|
|
$
|
251
|
|
|
Income (loss) before income taxes
|
|
(736
|
)
|
|
142
|
|
|
|
(474
|
)
|
|
442
|
|
|
Effective tax rate
|
|
(28
|
)%
|
|
88
|
%
|
|
|
(79
|
)%
|
|
57
|
%
|
The Company’s tax provision for interim periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Each quarter, the Company updates these rates and records a cumulative adjustment to current and deferred tax expense by applying the rates to the year-to-date pre-tax income excluding discrete items. The Company’s quarterly estimate of its annual current and deferred effective tax rates can vary significantly based on various forecasted items, including future commodity prices, capital expenditures, expenses for which tax benefits are not recognized, and the geographic mix of pre-tax income and losses.
The variance from the U.S. federal statutory rate of
21%
for the
three and six months ended June 30, 2019,
was primarily attributable to the following items:
|
|
|
|
–
|
tax impact from foreign operations
|
|
|
|
|
–
|
non-deductible Algerian exceptional profits tax for Algerian income tax purposes
|
|
|
|
|
–
|
income attributable to noncontrolling interests
|
|
|
|
|
–
|
non-deductible Chevron Merger Termination Fee
|
The variance from the U.S. federal statutory rate of
21%
for the
three and six months ended June 30, 2018
, was primarily attributable to the following items:
|
|
|
|
–
|
tax impact from foreign operations
|
|
|
|
|
–
|
non-deductible Algerian exceptional profits tax for Algerian income tax purposes
|
The Company recognized a tax benefit of
$346 million
as of
June 30, 2019
and
December 31, 2018
, related to the deduction of its 2015 settlement payment for the Tronox Adversary Proceeding. This benefit is net of uncertain tax positions of
$1.2 billion
as of
June 30, 2019
and
December 31, 2018
, due to uncertainty related to the deductibility of the settlement payment. Due to the deduction of the settlement payment on the Company’s 2015 tax return, the Company had a net operating loss carryback, which resulted in a tentative tax refund of
$881 million
in 2016. The IRS has audited this position and, in April 2018, issued a final notice of proposed adjustment denying the deductibility of the settlement payment. In September 2018, the Company received a statutory notice of deficiency from the IRS disallowing the net operating loss carryback and rejecting the Company’s refund claim. As a result, the Company filed a petition with the U.S. Tax Court to dispute the disallowances in November 2018 and, pursuant to standard U.S. Tax Court procedures, the Company is not required to repay the
$881 million
refund to dispute the IRS’s position. Accordingly, the Company has not revised its estimate of the benefit that will ultimately be realized. After the case is tried and briefed in the Tax Court, the court will issue an opinion and then enter a decision. If the Company does not prevail on the issue, the earliest date the Company might be required to repay the refund received, plus interest, would be 91 days after entry of the decision. At such time, the Company would reverse the portion of the
$346 million
net benefit previously recognized in its consolidated financial statements to the extent necessary to reflect the result of the Tax Court decision. It is reasonably possible the amount of uncertain tax position and/or tax benefit could materially change as the Company asserts its position in the Tax Court proceedings. Although management cannot predict the timing of a final resolution of the Tax Court proceedings, the Company does not currently anticipate a decision to be entered before 2022.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
Anadarko has various long-term contractual commitments pertaining to oil and natural-gas activities, such as work-related commitments for drilling wells, obtaining and processing seismic data, and fulfilling rig commitments. Anadarko also enters into various processing, transportation, storage, and purchase agreements to access markets and provide flexibility to sell its oil, natural gas, and NGLs in certain areas.
On June 18, 2019, the Company and the co-venturers in Mozambique’s Offshore Area 1 announced FID on the Anadarko-led Area 1 Mozambique LNG project. This official declaration of FID confirms the Golfinho Atum Plan of Development is now effective with notice provided to the Government of Mozambique that all conditions precedent have been satisfied, and the project can now advance to the construction phase. Subsequent to FID, Anadarko began entering into various long-term contractual commitments pertaining primarily to offshore engineering, procurement, construction, and installation activities in Mozambique. These commitments as of
June 30, 2019
, have been included in the table below.
The Company’s various long-term contractual obligations expire at various dates through
2034
. The following summarizes the gross aggregate future payments under these contracts at
June 30, 2019
:
|
|
|
|
|
|
|
|
millions
|
|
|
2019
|
$
|
1,028
|
|
|
2020
|
1,627
|
|
|
2021
|
1,419
|
|
|
2022
|
1,306
|
|
|
2023
|
714
|
|
|
Thereafter
|
1,467
|
|
|
Total
(1)(2)
|
$
|
7,561
|
|
|
|
|
|
(1)
|
Excludes purchase commitments for jointly owned fields and facilities for which the Company is not the operator.
|
|
|
|
|
(2)
|
Includes gross commitments related to the Mozambique development activities of
$2.0 billion
(
$507 million
net to Anadarko).
|
On July 26, 2019, Anadarko issued a Notice-to-Proceed to the onshore engineering, procurement, and construction contractor for the Mozambique LNG project, resulting in additional obligations with gross aggregate future payments of approximately
$8.0 billion
, of which
$2.1 billion
is net to Anadarko.
Litigation
There are no material developments in previously reported contingencies nor are there any other material matters that have arisen since the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
14. Pension Plans and Other Postretirement Benefits
|
The Company has contributory and non-contributory defined-benefit pension plans, which include both qualified and supplemental plans. The Company also provides certain health care and life insurance benefits for certain retired employees. Retiree health care benefits are funded by contributions from the retiree and, in certain circumstances, contributions from the Company. The Company’s retiree life insurance plan is noncontributory. The following summarizes the Company’s pension and other postretirement benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
millions
|
|
2019
|
|
|
2018
|
|
|
|
2019
|
|
|
2018
|
|
|
Three Months Ended June 30
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
22
|
|
|
$
|
22
|
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Interest cost
|
|
20
|
|
|
19
|
|
|
|
3
|
|
|
2
|
|
|
Expected (return) loss on plan assets
|
|
(20
|
)
|
|
(20
|
)
|
|
|
—
|
|
|
—
|
|
|
Amortization of net actuarial loss (gain)
|
|
3
|
|
|
6
|
|
|
|
—
|
|
|
—
|
|
|
Amortization of net prior service cost (credit)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(6
|
)
|
|
Settlement expense
|
|
13
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Termination benefits expense
|
|
2
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Net periodic benefit cost
(1)
|
|
$
|
40
|
|
|
$
|
27
|
|
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
44
|
|
|
$
|
45
|
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Interest cost
|
|
40
|
|
|
38
|
|
|
|
6
|
|
|
5
|
|
|
Expected (return) loss on plan assets
|
|
(41
|
)
|
|
(41
|
)
|
|
|
—
|
|
|
—
|
|
|
Amortization of net actuarial loss (gain)
|
|
7
|
|
|
13
|
|
|
|
—
|
|
|
—
|
|
|
Amortization of net prior service cost (credit)
|
|
—
|
|
|
—
|
|
|
|
(1
|
)
|
|
(12
|
)
|
|
Settlement expense
|
|
17
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Termination benefits expense
|
|
2
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Net periodic benefit cost
(1)
|
|
$
|
69
|
|
|
$
|
55
|
|
|
|
$
|
5
|
|
|
$
|
(6
|
)
|
|
|
|
|
(1)
|
The service cost component of net periodic benefit cost is included in G&A; oil and gas operating expense; gathering, processing, and marketing expense; and exploration expense, and all other components of net periodic benefit cost are included in other (income) expense on the Company’s Consolidated Statements of Income.
|
The Company contributed
$91 million
to funded pension plans and
$25 million
to unfunded pension plans during the
six months ended June 30, 2019
.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
Earnings Per Share
The Company’s basic earnings per share (EPS) is computed based on the average number of shares of common stock outstanding for the period and includes the effect of any participating securities and TEUs as appropriate. Diluted EPS includes the effect of the Company’s outstanding stock options, restricted stock awards, restricted stock units, and TEUs, if the inclusion of these items is dilutive. All outstanding TEUs were settled in June 2018.
The following provides a reconciliation between basic and diluted EPS attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
millions except per-share amounts
|
|
2019
|
|
|
2018
|
|
|
|
2019
|
|
|
2018
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
(1,025
|
)
|
|
$
|
29
|
|
|
|
$
|
(1,040
|
)
|
|
$
|
150
|
|
|
Income (loss) effect of TEUs
|
|
—
|
|
|
(1
|
)
|
|
|
—
|
|
|
(4
|
)
|
|
Less distributions on participating securities
|
|
1
|
|
|
1
|
|
|
|
3
|
|
|
2
|
|
|
Basic
|
|
$
|
(1,026
|
)
|
|
$
|
27
|
|
|
|
$
|
(1,043
|
)
|
|
$
|
144
|
|
|
Income (loss) effect of TEUs
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(1
|
)
|
|
Diluted
|
|
$
|
(1,026
|
)
|
|
$
|
27
|
|
|
|
$
|
(1,043
|
)
|
|
$
|
143
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding—basic
|
|
491
|
|
|
504
|
|
|
|
491
|
|
|
511
|
|
|
Dilutive effect of stock options
|
|
—
|
|
|
1
|
|
|
|
—
|
|
|
1
|
|
|
Average number of common shares outstanding—diluted
|
|
491
|
|
|
505
|
|
|
|
491
|
|
|
512
|
|
|
Excluded due to anti-dilutive effect
|
|
12
|
|
|
9
|
|
|
|
12
|
|
|
9
|
|
|
Net income (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(2.09
|
)
|
|
$
|
0.05
|
|
|
|
$
|
(2.13
|
)
|
|
$
|
0.28
|
|
|
Diluted
|
|
$
|
(2.09
|
)
|
|
$
|
0.05
|
|
|
|
$
|
(2.13
|
)
|
|
$
|
0.28
|
|
|
Dividends per common share
|
|
$
|
0.30
|
|
|
$
|
0.25
|
|
|
|
$
|
0.60
|
|
|
$
|
0.50
|
|
Common Stock
The Share-Repurchase Program authorizes the repurchase of the Company’s common stock in the open market or through private transactions. During 2018, the Share-Repurchase Program was expanded to
$5.0 billion
and extended through mid-year 2020. As of
December 31, 2018
, the Company had completed
$3.75 billion
of the Share-Repurchase Program through ASR Agreements and open-market repurchases. These transactions were accounted for as equity transactions, with all of the repurchased shares classified as treasury stock. Additionally, the receipt of these shares reduced the average number of shares of common stock outstanding used to compute both basic and diluted EPS. There were
no
additional repurchases of common stock under the Share-Repurchase Program for the
six months ended June 30, 2019
. No additional share repurchases under the Share-Repurchase Program are anticipated pursuant to the terms of the Occidental Merger Agreement. See
Note 1—Summary of Significant Accounting Policies
for additional information on the Occidental Merger Agreement.
Dividends
Dividends declared are recorded as a reduction of retained earnings, to the extent that retained earnings were available at the beginning of the reporting period, with any excess recorded as a reduction of paid-in capital.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
16. Noncontrolling Interests
|
WES is a limited partnership formed by Anadarko in September 2012 and owns a
98%
limited partner interest in WES Operating, a Delaware limited partnership formed by Anadarko in 2007 to acquire, own, develop and operate midstream assets, and all of the outstanding equity interests of WES Operating’s general partner, which holds the entire non-economic general partner interest in WES Operating.
WES Operating Class C units issued to Anadarko converted into WES Operating common units in a unit-for-unit, tax-free exchange immediately prior to the closing of the WES Merger on February 28, 2019. Prior to the closing of the WES Merger, the Class C units received quarterly distributions in the form of additional Class C units. WES distributed
309 thousand
Class C units to Anadarko during the
six months ended June 30, 2019,
and
1.1 million
Class C units to Anadarko during
2018
. See
Note 1—Summary of Significant Accounting Policies
for additional information on the WES Merger.
At
June 30, 2019,
Anadarko’s ownership interest in WES consisted of a
55.5%
limited partner interest and the entire non-economic general partner interest. The remaining
44.5%
limited partner interest in WES was owned by the public.
At
June 30, 2019,
Anadarko’s ownership interest in WES Operating consisted of a
2%
limited partner interest.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
17. Variable Interest Entities
|
Consolidated VIEs
The Company determined that the partners in WES with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact WES’s economic performance; therefore, WES is considered a VIE. Anadarko, through its ownership of the general partner interest in WES, has the power to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to WES; therefore, Anadarko is considered the primary beneficiary and consolidates WES and all of its consolidated subsidiaries. For additional information on WES, see
Note 16—Noncontrolling Interests
.
Assets and Liabilities of VIEs
The assets of WES and its subsidiaries cannot be used by Anadarko for general corporate purposes and are included in and disclosed parenthetically on the Company’s Consolidated Balance Sheets. The carrying amounts of liabilities related to WES and its subsidiaries for which the creditors do not have recourse to other Anadarko assets are included in and disclosed parenthetically on the Company’s Consolidated Balance Sheets.
All outstanding debt for WES at
June 30, 2019
, and
December 31, 2018
, including any borrowings under the WES RCF and WES Term Loan Facility, is recourse to WES Operating’s general partner, which in turn has been indemnified in certain circumstances by certain wholly owned subsidiaries of the Company for such liabilities. See
Note 9—Debt
for additional information on WES short-term and long-term debt balances.
VIE Financing
WES’s sources of liquidity include cash and cash equivalents, cash flows generated from operations, interest income from a note receivable from Anadarko as discussed below, borrowings under the WES RCF, the issuance of additional partnership units, and debt offerings. See
Note 9—Debt
and
Note 16—Noncontrolling Interests
for additional information on WES financing activity.
VIE Distributions
The following table presents WES distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
WES distributions to Anadarko
(1)
|
$
|
264
|
|
|
$
|
203
|
|
|
WES distributions to third parties
|
255
|
|
|
238
|
|
|
|
|
|
(1)
|
WES distributions to Anadarko are eliminated upon consolidation.
|
Financial Support Provided to VIEs
Concurrent with the closing of its May 2008 IPO, WES Operating loaned the Company
$260 million
in exchange for a
30
-year note bearing interest at a fixed annual rate of
6.50%
, payable quarterly. The related interest income for WES Operating was
$8 million
for the
six months ended June 30, 2019
and
2018
. The note receivable and related interest income are eliminated in consolidation.
To reduce WES’s exposure to a majority of the commodity-price risk inherent in certain of its contracts, Anadarko had commodity price swap agreements in place with WES Operating that expired without renewal on December 31, 2018, with final settlement in the first quarter of 2019. WES recorded a capital contribution from Anadarko in its Consolidated Statement of Equity and Partners’ Capital for an amount equal to (i) the amount by which the swap price for product sales exceeds the applicable market price, minus (ii) the amount by which the swap price for product purchases exceeds the market price. WES recorded a capital contribution from Anadarko of
$7 million
for the
six months ended June 30, 2019
,
and
$28 million
for the
six months ended June 30, 2018
.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
18. Supplemental Cash Flow Information
|
Additions to properties and equipment as presented within Anadarko’s cash flows from investing activities include cash payments for cost of properties, equipment, and facilities. The cost of properties includes the initial capitalization of drilling costs associated with all exploratory wells, whether or not they were deemed to have a commercially sufficient quantity of proved reserves.
The following summarizes cash paid (received) for interest and income taxes, as well as non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
Cash paid (received)
|
|
|
|
|
Interest, net of amounts capitalized
|
$
|
536
|
|
|
$
|
471
|
|
|
Income taxes, net of refunds
|
29
|
|
|
53
|
|
|
Non-cash investing activities
|
|
|
|
|
Fair value of properties and equipment acquired
|
$
|
1
|
|
|
$
|
7
|
|
|
Asset retirement cost additions
|
117
|
|
|
162
|
|
|
Accruals of property, plant, and equipment
|
748
|
|
|
1,036
|
|
|
Net liabilities assumed (divested) in acquisitions and divestitures
|
—
|
|
|
(97
|
)
|
|
Non-cash investing and financing activities
|
|
|
|
|
Finance leases
|
$
|
22
|
|
|
$
|
—
|
|
|
Non-cash financing activities
|
|
|
|
|
Settlement of tangible equity units
|
$
|
—
|
|
|
$
|
300
|
|
The following table provides a reconciliation of Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents as reported in the Consolidated Statement of Cash Flows to the line items within the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Cash and cash equivalents
|
|
$
|
1,394
|
|
|
$
|
1,295
|
|
|
Restricted cash and restricted cash equivalents included in Other Assets
|
|
137
|
|
|
134
|
|
|
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents
|
|
$
|
1,531
|
|
|
$
|
1,429
|
|
Included in cash and cash equivalents is restricted cash and restricted cash equivalents of
$118 million
at
June 30, 2019,
and
$139 million
at
December 31, 2018
. Total restricted cash and restricted cash equivalents are primarily associated with certain international joint venture operations, payments of future hard-minerals royalty revenues conveyed, like-kind exchanges of property, and a judicially-controlled account related to a Brazilian tax dispute. See
Note 18—Contingencies
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
Anadarko’s business segments are separately managed due to distinct operational differences. On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its remaining midstream assets to WES. Due to this contribution and sale, the Company no longer reports an Other Midstream segment and now has
two
reporting segments: Exploration and Production and WES Midstream, which include their respective marketing results. Prior period amounts have been reclassified to conform to the current-period presentation.
The Exploration and Production reporting segment is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and is advancing its Mozambique LNG project to the construction phase after announcing FID on June 18, 2019. The WES Midstream reporting segment is engaged in gathering, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water.
To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. The Company defines Adjusted EBITDAX as income (loss) before income taxes; interest expense; DD&A; exploration expense; gains (losses) on divestitures, net; impairments; total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives; certain items not related to the Company’s normal operations; and less net income (loss) attributable to noncontrolling interests.
The Company’s definition of Adjusted EBITDAX excludes gains (losses) on divestitures, net and exploration expense as they are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from Adjusted EBITDAX as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred. Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives are excluded from Adjusted EBITDAX because these (gains) losses are not considered a measure of asset operating performance. Finally, net income (loss) attributable to noncontrolling interests is excluded from the Company’s measure of Adjusted EBITDAX because it represents earnings that are not attributable to the Company’s common stockholders.
Management believes Adjusted EBITDAX provides information useful in assessing the Company’s operating and financial performance across periods. Adjusted EBITDAX as defined by Anadarko may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) attributable to common stockholders and other performance measures, such as operating income. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Income (loss) before income taxes
|
$
|
(736
|
)
|
|
$
|
142
|
|
|
$
|
(474
|
)
|
|
$
|
442
|
|
|
Interest expense
|
249
|
|
|
237
|
|
|
502
|
|
|
465
|
|
|
DD&A
|
1,161
|
|
|
1,003
|
|
|
2,242
|
|
|
1,993
|
|
|
Exploration expense
|
90
|
|
|
94
|
|
|
139
|
|
|
262
|
|
|
(Gains) losses on divestitures, net
|
(6
|
)
|
|
(52
|
)
|
|
(1
|
)
|
|
(28
|
)
|
|
Impairments
|
—
|
|
|
128
|
|
|
—
|
|
|
147
|
|
|
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives
|
255
|
|
|
267
|
|
|
571
|
|
|
240
|
|
|
Reorganization-related charges
|
15
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
Merger transaction costs
|
1,042
|
|
|
—
|
|
|
1,042
|
|
|
—
|
|
|
Less net income (loss) attributable to noncontrolling interests
|
80
|
|
|
(12
|
)
|
|
191
|
|
|
41
|
|
|
Consolidated Adjusted EBITDAX
|
$
|
1,990
|
|
|
$
|
1,831
|
|
|
$
|
3,863
|
|
|
$
|
3,480
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
19. Segment Information (Continued)
|
Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fee expenses, results from hard-minerals royalties, net cash from settlement of commodity derivatives, and net income (loss) attributable to noncontrolling interests. The following summarizes selected financial information for Anadarko’s reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Exploration
& Production
|
|
WES Midstream
|
|
Other and
Intersegment
Eliminations
|
|
|
Total
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
Sales revenues
|
|
$
|
2,852
|
|
|
$
|
492
|
|
|
$
|
12
|
|
|
$
|
3,356
|
|
|
Intersegment revenues
|
|
40
|
|
|
193
|
|
|
(233
|
)
|
|
—
|
|
|
Other
|
|
(4
|
)
|
|
70
|
|
|
14
|
|
|
80
|
|
|
Total revenues and other
(1)
|
|
2,888
|
|
|
755
|
|
|
(207
|
)
|
|
3,436
|
|
|
Operating costs and expenses
(2)
|
|
987
|
|
|
381
|
|
|
(4
|
)
|
|
1,364
|
|
|
Net cash from settlement of commodity derivatives
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other (income) expense, net
(3)
|
|
—
|
|
|
(59
|
)
|
|
62
|
|
|
3
|
|
|
Net income (loss) attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
80
|
|
|
80
|
|
|
Total expenses and other
|
|
987
|
|
|
322
|
|
|
138
|
|
|
1,447
|
|
|
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Adjusted EBITDAX
|
|
$
|
1,901
|
|
|
$
|
433
|
|
|
$
|
(344
|
)
|
|
$
|
1,990
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
Sales revenues
|
|
$
|
2,772
|
|
|
$
|
358
|
|
|
$
|
38
|
|
|
$
|
3,168
|
|
|
Intersegment revenues
|
|
14
|
|
|
160
|
|
|
(174
|
)
|
|
—
|
|
|
Other
|
|
3
|
|
|
39
|
|
|
29
|
|
|
71
|
|
|
Total revenues and other
(1)
|
|
2,789
|
|
|
557
|
|
|
(107
|
)
|
|
3,239
|
|
|
Operating costs and expenses
(2)
|
|
900
|
|
|
246
|
|
|
101
|
|
|
1,247
|
|
|
Net cash from settlement of commodity derivatives
|
|
—
|
|
|
—
|
|
|
170
|
|
|
170
|
|
|
Other (income) expense, net
(3)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
Net income (loss) attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
|
Total expenses and other
|
|
900
|
|
|
246
|
|
|
263
|
|
|
1,409
|
|
|
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Adjusted EBITDAX
|
|
$
|
1,889
|
|
|
$
|
311
|
|
|
$
|
(369
|
)
|
|
$
|
1,831
|
|
|
|
|
|
(1)
|
Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.
|
|
|
|
|
(2)
|
Operating costs and expenses excludes exploration expense, DD&A, impairments, reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.
|
|
|
|
|
(3)
|
Other (income) expense, net excludes reorganization-related charges since these expenses are excluded from Adjusted EBITDAX.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
19. Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Exploration
& Production
|
|
WES Midstream
|
|
Other and
Intersegment
Eliminations
|
|
|
Total
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
Sales revenues
|
|
$
|
5,458
|
|
|
$
|
992
|
|
|
$
|
32
|
|
|
$
|
6,482
|
|
|
Intersegment revenues
|
|
91
|
|
|
365
|
|
|
(456
|
)
|
|
—
|
|
|
Other
|
|
4
|
|
|
132
|
|
|
41
|
|
|
177
|
|
|
Total revenues and other
(1)
|
|
5,553
|
|
|
1,489
|
|
|
(383
|
)
|
|
6,659
|
|
|
Operating costs and expenses
(2)
|
|
1,979
|
|
|
723
|
|
|
(98
|
)
|
|
2,604
|
|
|
Net cash from settlement of commodity derivatives
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
|
Other (income) expense, net
(3)
|
|
—
|
|
|
(95
|
)
|
|
100
|
|
|
5
|
|
|
Net income (loss) attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
191
|
|
|
191
|
|
|
Total expenses and other
|
|
1,979
|
|
|
628
|
|
|
187
|
|
|
2,794
|
|
|
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
Adjusted EBITDAX
|
|
$
|
3,574
|
|
|
$
|
861
|
|
|
$
|
(572
|
)
|
|
$
|
3,863
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
Sales revenues
|
|
$
|
5,428
|
|
|
$
|
706
|
|
|
$
|
60
|
|
|
$
|
6,194
|
|
|
Intersegment revenues
|
|
24
|
|
|
313
|
|
|
(337
|
)
|
|
—
|
|
|
Other
|
|
(6
|
)
|
|
80
|
|
|
40
|
|
|
114
|
|
|
Total revenues and other
(1)
|
|
5,446
|
|
|
1,099
|
|
|
(237
|
)
|
|
6,308
|
|
|
Operating costs and expenses
(2)
|
|
1,770
|
|
|
476
|
|
|
318
|
|
|
2,564
|
|
|
Net cash from settlement of commodity derivatives
|
|
—
|
|
|
—
|
|
|
238
|
|
|
238
|
|
|
Other (income) expense, net
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
(8
|
)
|
|
Net income (loss) attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
41
|
|
|
41
|
|
|
Total expenses and other
|
|
1,770
|
|
|
476
|
|
|
589
|
|
|
2,835
|
|
|
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
Adjusted EBITDAX
|
|
$
|
3,676
|
|
|
$
|
623
|
|
|
$
|
(819
|
)
|
|
$
|
3,480
|
|
|
|
|
|
(1)
|
Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.
|
|
|
|
|
(2)
|
Operating costs and expenses excludes exploration expense, DD&A, impairments, reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.
|
|
|
|
|
(3)
|
Other (income) expense, net excludes reorganization-related charges since these expenses are excluded from Adjusted EBITDAX.
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
FOOTNOTES
|
|
|
|
|
|
|
19. Segment Information (Continued)
|
The following summarizes selected financial information for Anadarko’s reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Exploration
& Production
|
|
WES Midstream
|
|
Other and
Intersegment
Eliminations
|
|
Total
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
Net properties and equipment
|
|
$
|
18,306
|
|
|
$
|
8,794
|
|
|
$
|
1,991
|
|
|
$
|
29,091
|
|
|
Capital expenditures
(1)
|
|
$
|
1,879
|
|
|
$
|
571
|
|
|
$
|
103
|
|
|
$
|
2,553
|
|
|
Goodwill
|
|
$
|
4,343
|
|
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
4,789
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Net properties and equipment
|
|
$
|
18,276
|
|
|
$
|
8,410
|
|
|
$
|
1,929
|
|
|
$
|
28,615
|
|
|
Capital expenditures
(1)
|
|
$
|
4,103
|
|
|
$
|
1,912
|
|
|
$
|
170
|
|
|
$
|
6,185
|
|
|
Goodwill
|
|
$
|
4,343
|
|
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
4,789
|
|
|
|
|
|
(1)
|
WES Midstream includes
$49 million
at
June 30, 2019
, and
$734 million
at
December 31, 2018
, of capitalized costs incurred by Anadarko prior to the contribution and sale of midstream assets to WES.
|
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
INDEX
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read together with the
Consolidated Financial Statements
and the
Notes to Consolidated Financial Statements
, which are included in this Form 10-Q in Part I, Item 1; the information set forth in the
Risk Factors
under Part II, Item 1A; the
Consolidated Financial Statements
and the
Notes to Consolidated Financial Statements,
which are included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31,
2018
; and the information set forth in the
Risk Factors
under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31,
2018
.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT OVERVIEW
|
|
Anadarko’s strategic objectives are to explore for, develop, and commercialize resources globally; ensure health, safety, and environmental excellence; focus on financial discipline, flexibility, and value creation; and demonstrate the Company’s core values in all its business activities. The Company’s revenues, operating results, cash flows from operations, capital spending, and future growth rates are highly dependent on commodity prices, which affect the value the Company receives from its sales of oil, natural gas, and NGLs.
The Company remains committed to investing within cash flow in a $50 oil-price environment. Anadarko is focused on capital efficiency and maximizing cash flow generation, and has actively managed its portfolio to focus on higher-return, oil-levered opportunities in areas where it possesses both scale and competitive advantages, namely in the Delaware and DJ basins in the U.S. onshore and in the deepwater Gulf of Mexico.
In the Delaware basin, the Company continues to build out one of the most expansive and integrated infrastructure positions in the region as it transitions toward multi-well pad development, primarily in Reeves and Loving counties. The Company also continues to leverage its minerals-interest ownership and extensive infrastructure position in the DJ basin to deliver development wells with attractive rates of return. In the Gulf of Mexico, the Company is conducting operations that are focused toward high-return oil development opportunities near the Company’s expansive infrastructure.
The Company has returned capital directly to its investors through its quarterly cash dividend, its authorized Share-Repurchase Program, and its debt-reduction program. Since the Share-Repurchase Program was announced in 2017, the Company has repurchased 65 million shares of its common stock for
$3.75 billion
. Additionally, since the announcement of the debt-reduction program in 2018, the Company has completed total repayments of $1.5 billion. No additional share repurchases under the Share-Repurchase Program or debt retirements are anticipated pursuant to the terms of the Occidental Merger Agreement.
Merger
On April 11, 2019, the Company entered into the Chevron Merger Agreement. On April 24, 2019, Occidental announced a proposal to acquire Anadarko and further revised its proposal on May 5, 2019. On May 6, 2019, Anadarko announced that its Board had unanimously determined that the Occidental proposal was a “Superior Proposal” as defined in the Chevron Merger Agreement and, on May 9, 2019, provided Chevron a notice terminating the Chevron Merger Agreement. Pursuant to the terms of the Chevron Merger Agreement, the Company paid the Chevron Merger Termination Fee of $1.0 billion. Also on May 9, 2019, the Company entered into the Occidental Merger Agreement, which provides that, among other things, and subject to the terms and conditions of the Occidental Merger Agreement, a wholly owned subsidiary of Occidental will be merged with and into Anadarko, with Anadarko continuing as the surviving corporation and a wholly owned subsidiary of Occidental. Pursuant to the Occidental Merger Agreement, at the effective time of the Occidental Merger and subject to potential further adjustments as specified in the Occidental Merger Agreement, Anadarko stockholders will receive $59.00 in cash and 0.2934 of a share of Occidental common stock for each share of Anadarko common stock, plus cash in lieu of any fractional Occidental shares that otherwise would have been issued. The transaction was approved by the Boards of Directors of both companies. The Occidental Merger is subject to Anadarko stockholder approval and other customary closing conditions. Anadarko is holding a special meeting of its stockholders on August 8, 2019, for holders of record as of July 11, 2019, to vote on the proposal necessary to complete the Occidental Merger. Assuming all closing conditions are satisfied, including obtaining the requisite approval from the Anadarko stockholders, Occidental and Anadarko expect the Occidental Merger to close shortly after the special meeting of Anadarko stockholders.
In addition to the Chevron Merger Termination Fee, Anadarko has incurred merger transaction costs of
$42 million
as of
June 30, 2019
.
Mozambique FID
On June 18, 2019, the Company and its co-venturers in Mozambique’s Offshore Area 1 announced FID on the Anadarko-led Area 1 Mozambique LNG project. This official declaration of FID confirms the Golfinho/Atum Plan of Development is now effective with notice provided to the Government of Mozambique that all conditions precedent have been satisfied, and the project can now advance to the construction phase. The Mozambique LNG project initially consists of two LNG trains with total nameplate capacity of 12.88 MTPA to support the development of the Golfinho/Atum fields located entirely within Offshore Area 1. Subsequent to FID, the Company began entering into various long-term contractual commitments pertaining to LNG activities in Mozambique. As of
June 30, 2019
, the gross aggregate future payments under these contracts was approximately
$2.0 billion
, of which
$507 million
is net to Anadarko. On July 26, 2019, Anadarko issued a Notice-to-Proceed to the onshore engineering, procurement, and construction contractor for the Mozambique LNG project, resulting in additional obligations with gross aggregate future payments of approximately
$8.0 billion
, of which
$2.1 billion
is net to Anadarko. See
Note 12—Commitments
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT OVERVIEW
|
|
Midstream Asset Sale and WES Merger
On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its midstream assets, which consisted mainly of oil infrastructure assets in the DJ basin and oil and water infrastructure assets in the Delaware basin, to WES Operating for $4.0 billion, with $2.0 billion of cash proceeds and $2.0 billion of WES Operating common units. Immediately after the asset contribution and sale, a wholly owned subsidiary of WES merged with and into WES Operating, with WES Operating continuing as the surviving entity and a subsidiary of WES.
|
|
|
|
|
Significant Second Quarter 2019 Operating and Financial Activities
|
Total Company
|
|
|
|
–
|
The Company’s oil sales volume averaged
434
MBbls/d in the second quarter of
2019
, representing a
19%
increase from the second quarter of
2018
, primarily due to increased sales volume from the Delaware and DJ basins, Algeria, Ghana, and the Gulf of Mexico.
|
|
|
|
|
–
|
The Company’s overall sales-volume product mix in the second quarter of
2019
is
59%
oil and
74%
liquids.
|
U.S. Onshore
|
|
|
|
–
|
Total sales volume averaged
484
MBOE/d in the second quarter of
2019
, representing a
16%
increase from the second quarter of
2018
, and oil sales volume averaged
207
MBbls/d in the second quarter of
2019
, representing a
23%
increase from the second quarter of
2018
, primarily due to continued drilling and completion activities and midstream infrastructure additions.
|
Gulf of Mexico
|
|
|
|
–
|
Oil sales volume averaged
130
MBbls/d in the second quarter of
2019
, representing a
14%
increase from the second quarter of
2018
, primarily due to new wells coming online at Holstein, increased well performance at Horn Mountain, and lower downtime at various platforms in 2019 compared to 2018, partially offset by natural production declines.
|
Ghana
|
|
|
|
–
|
In the TEN field, a previously drilled water injection well was completed and brought online, and another water injection well was drilled.
|
|
|
|
|
–
|
In the Jubilee field, drilling operations were concluded on a production well and a previously drilled water injection well was completed and brought online.
|
Mozambique
|
|
|
|
–
|
Anadarko and its Area 1 co-venturers announced FID on the Anadarko-led Area 1 Mozambique LNG project.
|
|
|
|
|
–
|
As of June 30, 2019, Anadarko and its Area 1 co-venturers have successfully secured 11.1 MTPA of long-term LNG sales with key buyers in Asia and Europe, including a 17-year sale and purchase agreement with JERA Co., Inc. and CPC Corporation, Taiwan for 1.6 MTPA announced in May 2019. All of the executed long-term SPAs are now effective, with total contracted volume representing 86% of the plant’s nameplate capacity.
|
|
|
|
|
–
|
The Company issued a Notice-to-Proceed to the offshore engineering, procurement, construction, and installation contractor shortly after FID and issued a Notice-to-Proceed to the onshore engineering, procurement, and construction contractor in July 2019.
|
|
|
|
|
–
|
The Company is working to finalize project finance arrangements and site preparation activities continue as crews progress the construction of the resettlement village, the camp expansion, the airstrip, and the Palma-Afungi Highway.
|
Financial
|
|
|
|
–
|
The Company generated
$776
million of cash flow from operations and ended the second quarter of
2019
with
$1.4 billion
of cash.
|
|
|
|
|
–
|
Pursuant to the terms of the Chevron Merger Agreement, the Company paid the Chevron Merger Termination Fee of $1.0 billion.
|
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions except per-share amounts
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Oil, natural-gas, and NGL sales
|
$
|
2,891
|
|
|
$
|
2,786
|
|
|
$
|
5,547
|
|
|
$
|
5,452
|
|
|
Gathering, processing, and marketing sales
|
465
|
|
|
382
|
|
|
935
|
|
|
742
|
|
|
Gains (losses) on divestitures and other, net
|
86
|
|
|
123
|
|
|
178
|
|
|
142
|
|
|
Revenues and other
|
$
|
3,442
|
|
|
$
|
3,291
|
|
|
$
|
6,660
|
|
|
$
|
6,336
|
|
|
Costs and expenses
(1)
|
3,657
|
|
|
2,472
|
|
|
6,041
|
|
|
4,966
|
|
|
Other (income) expense
|
521
|
|
|
677
|
|
|
1,093
|
|
|
928
|
|
|
Income tax expense (benefit)
|
209
|
|
|
125
|
|
|
375
|
|
|
251
|
|
|
Net income (loss) attributable to common stockholders
|
$
|
(1,025
|
)
|
|
$
|
29
|
|
|
$
|
(1,040
|
)
|
|
$
|
150
|
|
|
Net income (loss) per common share attributable to common stockholders—diluted
|
$
|
(2.09
|
)
|
|
$
|
0.05
|
|
|
$
|
(2.13
|
)
|
|
$
|
0.28
|
|
|
Average number of common shares outstanding—diluted
|
491
|
|
|
505
|
|
|
491
|
|
|
512
|
|
|
|
|
|
(1)
|
Includes the Chevron Merger Termination Fee of $1.0 billion. See
Note 1—Summary of Significant Accounting Policies
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information on the Occidental Merger.
|
The following discussion pertains to Anadarko’s results of operations, financial condition, and changes in financial condition. Any increases or decreases “for the
three months ended June 30, 2019
,” refer to the comparison of the
three months ended June 30, 2019
, to the
three months ended June 30, 2018
, and any increases or decreases “for the
six months ended June 30, 2019,
” refer to the comparison of the
six months ended June 30, 2019,
to the
six months ended June 30, 2018
. The primary factors that affect the Company’s results of operations include commodity prices for oil, natural gas, and NGLs; sales volume; the cost of finding and developing such reserves; and operating costs.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
REVENUES AND SALES VOLUME
E&P Sales Revenues by Product
The table below illustrates the effects of changes in prices and sales volume. Price changes for the
three and six months ended June 30, 2019
were primarily due to lower oil and NGL prices in 2019. Sales volume changes for the
three and six months ended June 30, 2019
primarily included increases associated with continued drilling and completion activities in the Delaware and DJ basins.
Total E&P Sales Revenues
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
The following provides Anadarko’s sales volume for the
three and six months ended June 30
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Barrels of Oil Equivalent (MMBOE)
|
|
|
|
|
|
|
|
|
United States
|
59
|
|
|
50
|
|
|
115
|
|
|
100
|
|
|
International
|
9
|
|
|
8
|
|
|
17
|
|
|
16
|
|
|
Total barrels of oil equivalent
|
68
|
|
|
58
|
|
|
132
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
Barrels of Oil Equivalent per Day (MBOE/d)
|
|
|
|
|
|
|
|
|
United States
|
642
|
|
|
552
|
|
|
636
|
|
|
553
|
|
|
International
|
102
|
|
|
85
|
|
|
93
|
|
|
87
|
|
|
Total barrels of oil equivalent per day
|
744
|
|
|
637
|
|
|
729
|
|
|
640
|
|
Sales volume represents actual production volume adjusted for changes in commodity inventories as well as natural-gas production volume provided to satisfy a commitment under the Jubilee development plan in Ghana. The Company has derivative instruments in place to reduce the price risk associated with future production. For additional information, see
Note 8—Derivative Instruments
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q. Production of oil, natural gas, and NGLs is usually not affected by seasonal swings in demand.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
Oil Sales Revenues, Volume, and Average Prices
|
Oil Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Oil sales revenues
(
millions
)
|
$
|
2,470
|
|
|
$
|
2,265
|
|
|
$
|
4,566
|
|
|
$
|
4,392
|
|
|
|
|
|
|
|
|
|
|
|
Average price per barrel
|
|
|
|
|
|
|
|
|
United States
|
$
|
60.60
|
|
|
$
|
66.94
|
|
|
$
|
57.90
|
|
|
$
|
64.75
|
|
|
International
|
68.88
|
|
|
73.70
|
|
|
65.96
|
|
|
70.51
|
|
|
Total
|
$
|
62.45
|
|
|
$
|
68.43
|
|
|
$
|
59.58
|
|
|
$
|
66.03
|
|
|
|
|
|
|
|
|
|
|
|
Sales volume (MMBbls)
|
|
|
|
|
|
|
|
|
United States
|
32
|
|
|
27
|
|
|
61
|
|
|
52
|
|
|
International
|
8
|
|
|
7
|
|
|
16
|
|
|
15
|
|
|
Total
|
40
|
|
|
34
|
|
|
77
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
Sales volume per day (MBbls/d)
|
|
|
|
|
|
|
|
|
United States
|
337
|
|
|
284
|
|
|
335
|
|
|
286
|
|
|
International
|
97
|
|
|
80
|
|
|
88
|
|
|
82
|
|
|
Total
|
434
|
|
|
364
|
|
|
423
|
|
|
368
|
|
Oil Prices
The average oil price received
decreased
for the
three and six months ended June 30, 2019
, primarily due to concerns of oil demand weakness from a slowing global economy.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
Oil Sales Volume
2019 vs. 2018
The Company’s oil sales volume
increased
by
70
MBbls/d for the
three months ended June 30, 2019
, and
55
MBbls/d for the
six months ended June 30, 2019
, primarily due to the following:
U.S. Onshore
|
|
|
|
–
|
Sales volume for the Delaware basin
increased
by
20
MBbls/d for the
three months ended June 30, 2019
, and
24
MBbls/d for the
six months ended June 30, 2019
, primarily due to continued drilling and completion activities and midstream infrastructure additions in 2019.
|
|
|
|
|
–
|
Sales volume for the DJ basin
increased
by
12
MBbls/d for the
three months ended June 30, 2019
, and
8
MBbls/
d for the
six months ended June 30, 2019
, primarily due to continued drilling and completion activities in 2019.
|
Gulf of Mexico
|
|
|
|
–
|
Sales volume for the Gulf of Mexico
increased
by
15
MBbls/d for the
three months ended June 30, 2019
, and
13
MBbls/d for the
six months ended June 30, 2019
, primarily due to new wells coming online at Holstein, increased well performance at Horn Mountain, and lower downtime at various platforms in 2019 compared to 2018, partially offset by natural production declines.
|
International
|
|
|
|
–
|
Sales volume for Algeria
increased
by
8
MBbls/d for the
three months ended June 30, 2019
, and
6
MBbls/d for the
six months ended June 30, 2019
, primarily due to the size and timing of liftings.
|
|
|
|
|
–
|
Sales volume for Ghana
increased
by
9
MBbls/d for the
three months ended June 30, 2019
, primarily due to the timing of liftings.
|
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
Natural-Gas Sales Revenues, Volume, and Average Prices
|
Natural-Gas Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Natural-gas sales revenues
(
millions
)
|
$
|
205
|
|
|
$
|
203
|
|
|
$
|
525
|
|
|
$
|
450
|
|
|
|
|
|
|
|
|
|
|
|
Average price per Mcf
|
$
|
1.93
|
|
|
$
|
2.15
|
|
|
$
|
2.50
|
|
|
$
|
2.38
|
|
|
|
|
|
|
|
|
|
|
|
Sales volume (Bcf)
(1)
|
106
|
|
|
94
|
|
|
210
|
|
|
189
|
|
|
Sales volume per day (MMcf/d)
(1)
|
1,167
|
|
|
1,037
|
|
|
1,159
|
|
|
1,044
|
|
|
|
|
|
(1)
|
Natural-gas sales volume primarily originates in the United States.
|
Natural-Gas Prices
The average natural-gas price received increased for the
six months ended June 30, 2019
, primarily due to increased residential and commercial demand from colder-than-normal temperatures in the western U.S. and improved price differentials in the DJ basin through April 2019. The average natural-gas price received decreased for the
three months ended June 30, 2019
, due to lower electric generation demand and wider DJ and Delaware basin differentials during the last two months of the second quarter.
Natural-Gas Sales Volume
2019 vs. 2018
The Company’s natural-gas sales volume
increased
by
130
MMcf/d for the
three months ended June 30, 2019
, and
115
MMcf/d for the
six months ended June 30, 2019
, primarily due to continued drilling and completion activities in the Delaware and DJ basins in 2019.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
Natural-Gas Liquids Sales Revenues, Volume, and Average Prices
|
Natural-Gas Liquids Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Natural-gas liquids sales revenues
(
millions
)
|
$
|
216
|
|
|
$
|
318
|
|
|
$
|
456
|
|
|
$
|
610
|
|
|
|
|
|
|
|
|
|
|
|
Average price per barrel
|
$
|
20.63
|
|
|
$
|
34.88
|
|
|
$
|
22.33
|
|
|
$
|
34.27
|
|
|
|
|
|
|
|
|
|
|
|
Sales volume (MMBbls)
(1)
|
10
|
|
|
9
|
|
|
20
|
|
|
18
|
|
|
Sales volume (MBbls/d)
(1)
|
115
|
|
|
100
|
|
|
113
|
|
|
98
|
|
|
|
|
|
(1)
|
Approximately 95% of NGL sales volume originates in the United States.
|
NGL Prices
The average NGL price received
decreased
for the
three and six months ended June 30, 2019
, primarily due to higher overall NGL production as a result of infrastructure additions and lower consumption stemming from both reduced chemical plant utilization and stagnant LPG exports.
NGL Sales Volume
2019 vs. 2018
The Company’s NGL sales volume
increased
by
15
MBbls/d for the
three and six months ended June 30, 2019,
primarily due to continued drilling and completion activities and midstream infrastructure additions in the Delaware basin in 2019.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
Gathering, Processing, and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Gathering, processing, and marketing sales
|
$
|
465
|
|
|
$
|
382
|
|
|
$
|
935
|
|
|
$
|
742
|
|
|
Gathering, processing, and marketing expense
|
274
|
|
|
252
|
|
|
530
|
|
|
489
|
|
|
Gathering, processing, and marketing, net
|
$
|
191
|
|
|
$
|
130
|
|
|
$
|
405
|
|
|
$
|
253
|
|
Gathering and processing sales include fee revenue earned by providing gathering, processing, compression, and treating services to third parties as well as revenue from the sale of NGLs and remaining residue gas extracted from natural gas purchased from third parties and processed by WES. The net margin from the sale of NGLs and residue gas for service customers when WES is acting as an agent is also included. Gathering and processing expense includes the cost of third-party natural gas purchased and processed by WES as well as transportation and other operating expenses related to WES’s costs to perform gathering and processing activities.
Marketing sales include the margin earned from purchasing and selling third-party oil and natural gas. Marketing expense includes transportation and other operating expenses related to the Company’s costs to perform third-party marketing activities.
Total gathering, processing, and marketing, net
increased
by
$61 million
for the
three months ended June 30, 2019
, and by
$152 million
for the
six months ended June 30, 2019,
primarily due to increased throughput volume at the West Texas Complex and the DJ Basin Complex as a result of increased drilling activities in the Delaware basin and increased third-party activity in the DJ basin.
|
|
|
|
|
Gains (Losses) on Divestitures and Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Gains (losses) on divestitures, net
|
$
|
6
|
|
|
$
|
52
|
|
|
$
|
1
|
|
|
$
|
28
|
|
|
Other
|
80
|
|
|
71
|
|
|
177
|
|
|
114
|
|
|
Gains (losses) on divestitures and other, net
|
$
|
86
|
|
|
$
|
123
|
|
|
$
|
178
|
|
|
$
|
142
|
|
Gains (losses) on divestitures and other, net includes gains (losses) on divestitures and other operating revenues, including earnings (losses) from equity investments, hard-minerals royalties, and other revenues.
Earnings (losses) from equity investments increased by
$15 million
for the
three months ended June 30, 2019
, and by
$58 million
for the
six months ended June 30, 2019,
primarily related to the Company’s investments in midstream joint ventures. During the
six months ended June 30, 2018
, Anadarko divested certain non-core U.S. onshore and Gulf of Mexico assets. See
Note 4—Divestitures
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
COSTS AND EXPENSES
The following provides Anadarko’s total costs and expenses for the
three and six months ended June 30
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Oil and gas operating
|
$
|
310
|
|
|
$
|
275
|
|
|
$
|
599
|
|
|
$
|
551
|
|
|
Oil and gas transportation
|
222
|
|
|
209
|
|
|
444
|
|
|
405
|
|
|
Exploration
|
90
|
|
|
94
|
|
|
139
|
|
|
262
|
|
|
Gathering, processing, and marketing
(1)
|
274
|
|
|
252
|
|
|
530
|
|
|
489
|
|
|
G&A
|
368
|
|
|
288
|
|
|
635
|
|
|
566
|
|
|
Merger transaction costs
(2)
|
1,042
|
|
|
—
|
|
|
1,042
|
|
|
—
|
|
|
DD&A
|
1,161
|
|
|
1,003
|
|
|
2,242
|
|
|
1,993
|
|
|
Production, property, and other taxes
|
182
|
|
|
201
|
|
|
381
|
|
|
391
|
|
|
Impairments
(3)
|
—
|
|
|
128
|
|
|
—
|
|
|
147
|
|
|
Other operating expense
(4)
|
8
|
|
|
22
|
|
|
29
|
|
|
162
|
|
|
Total
|
$
|
3,657
|
|
|
$
|
2,472
|
|
|
$
|
6,041
|
|
|
$
|
4,966
|
|
|
|
|
|
(1)
|
See above explanation of gathering, processing, and marketing.
|
|
|
|
|
(2)
|
Includes Chevron Merger Termination Fee of $1.0 billion, as well as $42 million of additional merger transaction costs. See
Note 1—Summary of Significant Accounting Policies
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information on the Occidental Merger.
|
|
|
|
|
(3)
|
See
Note 5—Impairments
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information on impairments.
|
|
|
|
|
(4)
|
Includes adjustments to contingency accruals, charges for drilling rig idle time, adjustments to drilling rig termination fees, and surface owner payments.
|
|
|
|
|
|
Oil and Gas Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Oil and gas operating
(millions)
|
$
|
310
|
|
|
$
|
275
|
|
|
$
|
599
|
|
|
$
|
551
|
|
|
Oil and gas operating—per BOE
|
4.57
|
|
|
4.75
|
|
|
4.54
|
|
|
4.76
|
|
Oil and gas operating expense
increased
by
$48 million
for the
six months ended June 30, 2019
, primarily due to the following:
|
|
|
|
–
|
higher U.S. onshore costs of $63 million, primarily related to increased operated and nonoperated activity in the DJ and Delaware basins
|
|
|
|
|
–
|
higher operated costs of $33 million in the Gulf of Mexico, primarily related to increased workover activity
|
|
|
|
|
–
|
lower nonoperated costs of $37 million in Ghana, primarily due to insurance reimbursement credits received in 2019 related to Jubilee turret repair
|
|
|
|
|
–
|
lower costs of $10 million as a result of U.S. onshore and Gulf of Mexico asset divestitures
|
The related costs per BOE
decreased
by
$0.22
for the
six months ended June 30, 2019
, primarily due to insurance reimbursement credits received in 2019 related to Jubilee turret repair, partially offset by an increased percentage of production in the Delaware basin and higher operated costs in the Gulf of Mexico related to increased workover activity.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
Oil and Gas Transportation Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Oil and gas transportation (millions)
|
$
|
222
|
|
|
$
|
209
|
|
|
$
|
444
|
|
|
$
|
405
|
|
|
Oil and gas transportation—per BOE
|
3.28
|
|
|
3.61
|
|
|
3.37
|
|
|
3.50
|
|
Oil and gas transportation expense
increased
by
$39 million
for the
six months ended June 30, 2019
, primarily due to increased sales volumes in the Delaware and DJ basins and the Gulf of Mexico, partially offset by lower average transportation rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Dry hole expense
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
55
|
|
|
Impairments of unproved properties
|
38
|
|
|
41
|
|
|
38
|
|
|
94
|
|
|
Geological and geophysical, exploration overhead, and other expense
|
49
|
|
|
51
|
|
|
98
|
|
|
113
|
|
|
Total exploration expense
|
$
|
90
|
|
|
$
|
94
|
|
|
$
|
139
|
|
|
$
|
262
|
|
Dry Hole Expense
Dry hole expense for the
six months ended June 30, 2018,
included $50 million related to unsuccessful drilling activities in the Gulf of Mexico.
Impairments of Unproved Properties
For discussion related to impairments of unproved properties, see
Note 5—Impairments
in the
Notes to the Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
G&A
|
$
|
368
|
|
|
$
|
288
|
|
|
$
|
635
|
|
|
$
|
566
|
|
G&A
increased
by
$80 million
for the
three months ended June 30, 2019,
and
$69 million
for the
six months ended June 30, 2019
, primarily due to increases in the fair value of performance-based unit awards, reorganization-related expenses, and legal and consulting fees.
The fair value of the performance-based unit awards is calculated using a Monte Carlo simulation that incorporates several variables, including Anadarko’s historical share price and share prices of a predetermined group of peer companies to estimate the future total stockholder returns of each. Accordingly, future G&A could be higher or lower based on the outputs from the Monte Carlo simulation for the performance-based unit awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
DD&A
|
$
|
1,161
|
|
|
$
|
1,003
|
|
|
$
|
2,242
|
|
|
$
|
1,993
|
|
DD&A expense
increased
by
$249 million
for the
six months ended June 30, 2019,
primarily due to the following:
|
|
|
|
–
|
$179 million increase, primarily due to increased production in the Delaware and DJ basins and the Gulf of Mexico, partially offset by a lower DD&A rate in 2019 primarily driven by increased proved developed reserves in Ghana
|
|
|
|
|
–
|
$71 million
increase in straight line depreciation related to additional midstream infrastructure in the Delaware and DJ basins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Interest expense
|
$
|
249
|
|
|
$
|
237
|
|
|
$
|
502
|
|
|
$
|
465
|
|
|
(Gains) losses on derivatives, net
(1)
|
254
|
|
|
436
|
|
|
567
|
|
|
471
|
|
|
Other (income) expense, net
|
18
|
|
|
4
|
|
|
24
|
|
|
(8
|
)
|
|
Total
|
$
|
521
|
|
|
$
|
677
|
|
|
$
|
1,093
|
|
|
$
|
928
|
|
|
|
|
|
(1)
|
(Gains) losses on derivatives, net represents the changes in fair value of the Company’s derivative instruments as a result of changes in commodity prices and interest rates, contract modifications, and settlements. See
Note 8—Derivative Instruments
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q.
|
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
Income Tax Expense (Benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
millions except percentages
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Income tax expense (benefit)
|
$
|
209
|
|
|
$
|
125
|
|
|
$
|
375
|
|
|
$
|
251
|
|
|
Income (loss) before income taxes
|
(736
|
)
|
|
142
|
|
|
(474
|
)
|
|
442
|
|
|
Effective tax rate
|
(28
|
)%
|
|
88
|
%
|
|
(79
|
)%
|
|
57
|
%
|
The Company’s effective tax rate is impacted each year by the relative pre-tax income (loss) earned by the Company’s operations in the U.S., Algeria, and the rest of the world. The Company is subject to statutory tax rates of 38% in Algeria and 35% in Ghana. These higher-taxed foreign operations as well as non-deductible Algerian exceptional profits tax for Algerian income tax purposes generally cause the Company’s effective tax rate to vary significantly from the U.S. corporate tax rate. Additionally, the Company’s effective tax rate is typically impacted by net changes in uncertain tax positions, income attributable to noncontrolling interests, state income taxes (net of federal benefit), and dispositions of non-deductible goodwill. For the
three and six months ended June 30, 2019,
the Company’s effective tax rate was also impacted by the non-deductible Chevron Merger Termination Fee.
In 2018, the Company filed a petition with the U.S. Tax Court to dispute IRS disallowances related to the Company’s 2015 settlement payment for the Tronox Advisory Proceeding. For additional information, see
Note 11—Income Taxes
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
|
|
|
|
|
|
|
LIQUIDITY AND CAPITAL RESOURCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
Net cash provided by (used in) operating activities
|
$
|
1,905
|
|
|
$
|
2,655
|
|
|
Net cash provided by (used in) investing activities
|
(2,785
|
)
|
|
(3,056
|
)
|
|
Net cash provided by (used in) financing activities
|
980
|
|
|
(1,826
|
)
|
The Company has a variety of funding sources available, including cash, an asset portfolio that provides ongoing cash-flow-generating capacity, and the Company’s credit facility.
During the
six months ended June 30, 2019
, Anadarko retired $900 million of debt. Anadarko had
$1.4 billion
of cash at
June 30, 2019
and following the expiration of the 364-Day facility in January 2019, the Company has
$3.0 billion
of borrowing capacity under the APC RCF. Anadarko believes that its current available cash and future operating cash flows will be sufficient to fund the Company’s operational and capital programs and its quarterly dividends. The Company continuously monitors its liquidity position and evaluates available funding alternatives in light of current and expected conditions.
One of the primary sources of variability in the Company’s cash flows from operating activities is the fluctuation in commodity prices, the impact of which Anadarko partially mitigates by periodically entering into commodity derivatives. Sales-volume changes also impact cash flow but historically have not been as volatile as commodity prices. Anadarko’s cash flows from operating activities are also impacted by the costs related to operations and interest payments related to the Company’s outstanding debt.
Cash flows from operating activities were
$1.9 billion
for the
six months ended June 30, 2019
,
$750 million
lower compared to the same period in
2018
, primarily due to the payment of the Chevron Merger Termination Fee of $1.0 billion in 2019. See
Note 1—Summary of Significant Accounting Policies
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information related to the Chevron Merger Termination Fee.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
|
|
Capital Expenditures
The following presents the Company’s capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
millions
|
2019
|
|
|
2018
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
Additions to properties and equipment
(1)
|
$
|
2,691
|
|
|
$
|
3,277
|
|
|
Adjustments for capital expenditures
|
|
|
|
|
Changes in capital accruals
|
(74
|
)
|
|
211
|
|
|
Other
|
(64
|
)
|
|
14
|
|
|
Total capital expenditures
|
$
|
2,553
|
|
|
$
|
3,502
|
|
|
|
|
|
|
|
Exploration and Production and other capital expenditures
|
$
|
1,982
|
|
|
$
|
2,374
|
|
|
WES Midstream capital expenditures
(2)
|
571
|
|
|
1,128
|
|
|
|
|
|
(1)
|
Additions to properties and equipment as presented within Anadarko’s cash flows from investing activities include cash payments for cost of properties, equipment, and facilities. The cost of properties includes the initial capitalization of drilling costs associated with all exploratory wells, whether or not they were deemed to have a commercially sufficient quantity of proved reserves.
|
|
|
|
|
(2)
|
WES Midstream includes $49 million at
June 30, 2019,
and $500 million at
June 30, 2018,
of capitalized costs incurred by Anadarko prior to the contribution and sale of midstream assets to WES.
|
The Company’s capital expenditures
decreased
by
$949 million
for the
six months ended June 30, 2019
. Exploration and Production capital expenditures
decreased
primarily due to lower development costs of
$279 million
driven by reduced drilling activity in the DJ and Delaware basins and the Gulf of Mexico. Exploration costs decreased by
$122 million
primarily related to
decreased
exploration activity in the U.S. onshore. WES Midstream capital expenditures
decreased
by
$557 million
primarily due to reduced development activity in the Delaware basin following the completion of significant infrastructure projects in 2018.
Investments
During the
six months ended June 30, 2019
, the Company made capital contributions of
$171 million
for equity investments, which are presented as cash flows from investing activities as a component of Other, net. These contributions were primarily associated with joint ventures for the Red Bluff and Cactus II pipelines in West Texas.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions except percentages
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Anadarko
|
|
$
|
10,740
|
|
|
$
|
11,602
|
|
|
WES
|
|
7,489
|
|
|
4,815
|
|
|
Total debt
|
|
$
|
18,229
|
|
|
$
|
16,417
|
|
|
Total equity
|
|
9,331
|
|
|
10,943
|
|
|
Consolidated debt to total capitalization ratio
|
|
66.1
|
%
|
|
60.0
|
%
|
Debt-Reduction Program
The Company commenced a $2.0 billion debt-reduction program in 2018. During the
six months ended June 30, 2019
, Anadarko retired $900 million of debt, bringing total repayments under the debt-reduction program to $1.5 billion. No additional debt retirements are anticipated pursuant to the terms of the Occidental Merger Agreement.
Credit Facilities
APC RCFs
The Company has a
$3.0 billion
senior unsecured RCF that matures in January 2023. The Company’s
$2.0 billion
364-day senior unsecured RCF expired in January 2019. At
June 30, 2019,
Anadarko had
no
outstanding borrowings under the APC RCF and was in compliance with all covenants.
WES RCFs
Effective on February 15, 2019, WES amended the maturity date of its senior unsecured RCF from February 2023 to February 2024, and upon completion of the WES Merger, expanded the borrowing capacity from $1.5 billion to
$2.0 billion
(WES RCF). At
June 30, 2019,
WES had outstanding borrowings under its RCF of
$920 million
at an interest rate of
3.71%
, outstanding letters of credit of
$5 million
, available borrowing capacity of
$1.1 billion
, and was in compliance with all covenants.
In February 2019, WES borrowed $2.0 billion under its senior unsecured credit facility (WES Term Loan Facility) to fund substantially all of the cash portion of the consideration under the WES midstream asset contribution and sale and the payment of related transaction costs. As of June 30, 2019, the WES Term Loan Facility was anticipated to mature on February 27, 2020, the day prior to the one-year anniversary of the completion of the WES Merger. As of June 30, 2019, net cash proceeds received from future asset sales and debt or equity offerings by WES were required to be used to repay amounts outstanding under the WES Term Loan Facility. At
June 30, 2019,
WES had outstanding borrowings under its WES Term Loan Facility of
$2.0 billion
at an interest rate of
3.78%
and was in compliance with all covenants.
On July 1, 2019, WES entered into an amendment to the WES Term Loan Facility to, among other things, (i) increase the commitments available under the WES Term Loan Facility from
$2.0 billion
to
$3.0 billion
, the incremental
$1.0 billion
of which may be drawn by WES on or before September 30, 2019, (ii) extend the maturity date from February 27, 2020 to December 31, 2020, and (iii) modify the provision requiring that all debt issuance proceeds be used to repay the WES Term Loan Facility to allow for a
$1.0 billion
carve out of debt offering proceeds.
WGP RCF
In March 2019, the
$35 million
senior secured RCF (WGP RCF) matured following the completion of the WES Merger. See
Note 1—Summary of Significant Accounting Policies
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information related to the WES Merger.
|
|
|
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
|
|
Debt Activity
Amounts in the table below do not include finance lease activity and are presented at face value.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
millions
|
Company
|
June 30, 2019
|
|
|
Description
|
|
Borrowings
|
WES
|
$
|
2,000
|
|
|
WES Term Loan Facility
(1)
|
|
|
WES
|
700
|
|
|
WES RCF
(2)
|
|
Repayments
|
Anadarko
|
(600
|
)
|
|
8.700% Senior Notes due 2019
|
|
|
Anadarko
|
(300
|
)
|
|
6.950% Senior Notes due 2019
|
|
|
WES
|
(28
|
)
|
|
WGP RCF
|
|
|
|
|
(1)
|
Borrowings were used to fund substantially all of the cash portion of the consideration for the WES midstream asset contribution and sale and the payment of related transaction costs.
|
|
|
|
|
(2)
|
Borrowings were used for general partnership purposes, including capital expenditures.
|
See
Note 9—Debt
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q for additional information on the Company’s debt instruments.
Debt Maturities
Anadarko’s Zero Coupons can be put to the Company in October of each year, in whole or in part, for the then-accreted value of the outstanding Zero Coupons, which, if put in whole, will be
$942 million
at the next put date in
October 2019
. Anadarko’s Zero Coupons were classified as long-term debt on the Company’s Consolidated Balance Sheet at
June 30, 2019,
as the Company has the ability and intent to refinance these obligations using long-term debt, should a put be exercised.
For additional information on the Company’s debt instruments, see
Note 9—Debt
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q.
Derivative Instruments
For information on derivative instruments, including cash flow treatment, see
Note 8—Derivative Instruments
in the
Notes to Consolidated Financial Statements
under Part I, Item 1 of this Form 10-Q.
Common Stock Dividends
Anadarko paid dividends to its common stockholders of
$299 million
during the
six months ended June 30, 2019,
and
$254 million
during the
six months ended June 30, 2018
. In February 2018, the Company increased the quarterly dividend to $0.25 per share. As part of the Company’s focus on increasing stockholder returns, the quarterly dividend increased again in November 2018 to $0.30 per share. Anadarko has paid a dividend to its common stockholders quarterly since becoming a public company in 1986.
The amount of future dividends paid to Anadarko common stockholders is determined by the Board on a quarterly basis and is based on the Company’s earnings, financial condition, capital requirements, the effect a dividend payment would have on the Company’s compliance with relevant financial covenants, and other factors deemed relevant by the Board.
Distributions to Noncontrolling Interest Owners
Distributions to noncontrolling interest owners primarily relate to WES distributions to third parties of
$255 million
for the
six months ended June 30, 2019,
and
$238 million
for the
six months ended June 30, 2018
.
|
|
|
|
|
RECENT ACCOUNTING DEVELOPMENTS
|
|
|
|
|
|
|
|
|
MARKET RISK
QUANTITATIVE AND QUALITATIVE DISCLOSURES
|
|