Anadarko Announces Third-Quarter 2014 Results

Anadarko Petroleum Corporation (NYSE: APC) today announced third-quarter 2014 net income attributable to common stockholders of $1.087 billion, or $2.12 per share (diluted). These results include certain items typically excluded by the investment community in published estimates. In total, these items increased net income by approximately $487 million, or $0.96 per share (diluted), on an after-tax basis.⁽¹⁾ Cash flow from operating activities in the third quarter of 2014 was approximately $2.323 billion. Discretionary cash flow totaled $1.776 billion,⁽²⁾ including the year-to-date impact of an adjustment to 2014 U.S. current taxes related to the deferral of the tax benefit and change in anticipated timing of the Tronox settlement payment to early 2015.

Third-Quarter 2014 Highlights

• Increased year-over-year liquids sales volumes by more than 110,000 barrels per day on a divestiture-adjusted basis⁽³⁾
• Closed approximately $1.2 billion of additional asset monetizations
• Doubled year-over-year oil sales volumes in the Wattenberg field
• Expanded the company’s “high-confidence” area in the Wolfcamp Shale oil opportunity

“Anadarko delivered another outstanding quarter with year-over-year liquids sales-volume growth of 35 percent on a divestiture-adjusted basis,⁽³⁾ approximately $1.2 billion of new asset monetizations and enhanced cash margins per barrel,” said Al Walker, Anadarko Chairman, President and CEO. “The impressive results from our operating activities enable us to increase our 2014 full-year sales-volume expectations for the third time this year, to a new range of 304 to 306 million BOE. The significant liquids sales-volume growth was primarily driven by the excellent results of our Wattenberg horizontal program, where oil volumes doubled relative to the third quarter of last year. We believe the depth and flexibility of our portfolio, along with our efficient allocation of capital and commitment to value acceleration will enable us to continue delivering differentiating value to our shareholders.”

Operations Summary
During the third quarter, Anadarko’s sales volumes of crude oil, natural gas and natural gas liquids (NGLs) totaled a record 78 million BOE, or an average of 849,000 BOE per day, representing an increase of almost 105,000 BOE per day on a divestiture-adjusted basis⁽³⁾ over the third quarter of 2013. The growth in higher-margin liquids sales volumes significantly improved the overall product mix to 51 percent liquids in the third quarter of 2014 versus 43 percent in the third quarter of 2013.

The strong growth was largely driven by performance in the Wattenberg field, which continued to benefit from the company’s significant commitment to midstream expansions and achieved year-over-year sales-volume growth of 88,000 BOE per day, averaging 189,000 BOE per day for the quarter. The company also demonstrated significant sales-volume growth in the Eagleford Shale, as well as the Wolfcamp Shale oil opportunity where Anadarko expanded its “high-confidence” area within its 600,000-gross-acre position.

Anadarko also continued to advance multiple mega projects during the quarter. In the Gulf of Mexico, the Lucius project is on schedule with first oil expected in the coming weeks. Construction on the Heidelberg spar hull was completed, and the project remains on schedule for first oil in 2016. In Mozambique, the Parliament passed enabling legislation during its last session of the year. This was an important first step toward the ratification of a Decree Law, which is a necessity in creating and facilitating the contractual and legal conditions to move this company-operated LNG project forward.

Financial Summary
Anadarko ended the quarter with approximately $8.3 billion of cash on hand, with the increase driven by asset monetizations. In addition to closing the previously announced $1.075 billion sale of its China subsidiary, the company signed and closed several additional monetizations during the quarter totaling approximately $1.2 billion. Among the new monetizations, Anadarko closed a carried-interest agreement in the emerging Eaglebine play of Central Texas and divested its non-operated interest in the Vito discovery. The company also closed the sale of its interest in a portion of the Utica Shale play in central Ohio, as well as several other transactions.

“Closing more than $2.2 billion of monetizations in the quarter, including our China subsidiary, demonstrates our ongoing commitment to accelerating and enhancing value,” added Walker. “We will continue to actively manage our deep portfolio of assets and evaluate opportunities to bring the embedded value forward for our stakeholders.”

Operations Report
For details on Anadarko’s operating areas and exploration program, including additional details on the newly announced asset monetizations, please refer to the comprehensive report on third-quarter 2014 activity. The report is available at www.anadarko.com.

Conference Call Tomorrow at 8 a.m. CDT, 9 a.m. EDT
Anadarko will host a conference call on Wednesday, Oct. 29, 2014, at 8 a.m. Central Daylight Time (9 a.m. Eastern Daylight Time) to discuss third-quarter results, current operations and the company’s outlook for the remainder of 2014. The dial-in number is 855.812.0464 in the United States or 970.300.2271 internationally. The confirmation number is 95221684. For complete instructions on how to participate in the conference call, or to listen to the live audio webcast and slide presentation, please visit www.anadarko.com. A replay of the call will be available on the website for approximately 30 days following the conference call.

Financial Data
Nine pages of summary financial data follow, including current hedge positions, a reconciliation of “divestiture-adjusted” or “same-store” sales, and updated financial and production guidance.

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

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

⁽³⁾ See the accompanying table for a reconciliation of “divestiture-adjusted” or “same-store” sales volumes, which are intended to present performance of Anadarko’s continuing asset base, giving effect to recent divestitures.

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

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

Reconciliation of GAAP to Non-GAAP Measures

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

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

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