

		Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2018~~2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-8968

ANADARKO PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		76-0146568
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



1201 Lake Robbins Drive, The Woodlands, Texas		77380-1046
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (832) 636-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. þ

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

~~The~~Securities ~~number~~registered ofpursuant ~~shares~~to ~~outstanding~~Section 12(b) of the ~~Company’s common stock at October 18, 2018, is shown below~~Act:

Title of Class		Number of Shares Outstanding
Title of each class	Trading symbol	Name of each exchangeon which registered	Number of shares outstanding of the Company’s common stock at May 3, 2019
Common Stock, par value $0.10 per share	APC	~~504,280,902~~New York Stock Exchange	502,118,789

~~TABLE~~Table OFof ~~CONTENTS~~Contents

PART I		Page
TABLE OF CONTENTS		Page
PART I
Item 1.	Financial Statements
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2018 and 2017	4
	Consolidated Statements of Income for the Three Months Ended March 31, 2019 and 2018	6
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017	5
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018	7
	Consolidated Balance Sheets at September 30, 2018, and December 31, 2017	6
	Consolidated Balance Sheets at March 31, 2019, and December 31, 2018	8
	Consolidated Statement of Equity for the Nine Months Ended September 30, 2018	7
	Consolidated Statements of Equity for the Three Months Ended March 31, 2019 and 2018	9
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	8
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018	10
	Notes to Consolidated Financial Statements	911
	Note 1—Summary of Significant Accounting Policies	911
	Note 2—Revenue from Contracts with Customers	1213
	Note 3—Commodity Inventories	1614
	Note 4—Divestitures	1615
	Note 5—Impairments	17
	Note 5—Suspended Exploratory Well Costs	15
	Note 6—Suspended Exploratory Well Costs	17
	Note 6—Current Liabilities	15
	Note 7—Current Liabilities	18
	Note 7—Derivative Instruments	16
	Note 8—Derivative Instruments	18
	Note 8—Debt	21
	Note 9—Tangible Equity Units	24
	Note 9—Leases	23
	Note 10—Debt	24
	Note 10—Income Taxes	26
	Note 11—Income Taxes	27
	Note 11—Contingencies	27
	Note 12—Contingencies	28
	Note 12—Pension Plans and Other Postretirement Benefits	27
	Note 13—Pension Plans and Other Postretirement Benefits	29
	Note 13—Stockholders’ Equity	28
	Note 14—Stockholders’ Equity	30
	Note 14—Noncontrolling Interests	29
	Note 15—Noncontrolling Interests	32
	Note 15—Variable Interest Entities	30
	Note 16—Variable Interest Entities	33
	Note 16—Supplemental Cash Flow Information	31
	Note 17—Supplemental Cash Flow Information	35
	Note 17—Segment Information	32
	Note 18—Segment Information	36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
	Management Overview	36
	Cautionary Statement About Forward-Looking Statements	39
	Financial Results	38
	Management Overview	41
	Liquidity and Capital Resources	49
	Financial Results	43
	Recent Accounting Developments	52
	Liquidity and Capital Resources	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
	Recent Accounting Developments	57
Item 4.	Controls and Procedures	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	59
PART II
Item 1.	Legal Proceedings	6055
Item 1A.	Risk Factors	6156
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6258
Item 6.	Exhibits	6359



		Table of Contents

COMMONLY USED TERMS AND DEFINITIONS

Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. In addition, the following company or industry-specific terms and abbreviations are used throughout this report:

364-Day Facility - Anadarko’s $2.0 billion 364-day senior unsecured RCF that expired in January 2019

APC RCF - Anadarko’s $3.0 billion senior unsecured RCF

ASR Agreement - An accelerated share-repurchase agreement with an investment bank to repurchase the Company’s common stock

ASU - Accounting Standards Update

Bcf - Billion cubic feet

Board - The Board of Directors of Anadarko

BOE - Barrels of oil equivalent

~~CBM~~Chevron - ~~Coalbed~~Chevron ~~methane~~Corporation

~~DBJV~~Chevron Merger - ~~Delaware~~Chevron’s ~~Basin~~acquisition JVby ~~Gathering~~merger ~~LLC~~of Anadarko pursuant to, and subject to the conditions of, the Chevron Merger Agreement

~~DBJV~~Chevron ~~System~~Merger Agreement - AAgreement ~~gathering system~~ and ~~related~~Plan ~~facilities~~of ~~located~~Merger, indated ~~the~~as ~~Delaware~~of ~~basin~~April in11, ~~Loving~~2019, ~~Ward~~by and among Chevron Corporation, ~~Winkler~~Justify Merger Sub 1 Inc., ~~and~~Justify ~~Reeves~~Merger ~~Counties~~Sub in2 ~~West~~Inc. ~~Texas~~and Anadarko

DBM Complex - The processing plants, gas gathering system, and related facilities and equipment in West Texas that serve production from Reeves, Loving, and Culberson Counties, Texas and Eddy and Lea Counties, New Mexico

DD&A - Depreciation, depletion, and amortization

DJ ~~Basin Complex~~ - ~~The Platte Valley system, Wattenberg system, and Lancaster plant, which were combined into a single complex in Colorado in the first quarter of 2014 to serve production in the DJ basin~~Denver-Julesberg

DJ Basin Complex - The Platte Valley system, Wattenberg system, Lancaster plant, and Wattenberg processing plant

FID - Final investment decision

Fitch - Fitch Ratings

FPSO - Floating production, storage, and offloading unit

G&A - General and administrative expenses

IRS - Internal Revenue Service

IPO - Initial public offering

IRS - U.S. Internal Revenue Service

LIBOR - London Interbank Offered Rate

LNG - Liquefied natural gas

LPG - Liquefied petroleum gas

MBbls/d - Thousand barrels per day

MBOE/d - Thousand barrels of oil equivalent per day

Mcf - Thousand cubic feet

MMBbls - Million barrels

MMBOE - Million barrels of oil equivalent

MMBtu - Million British thermal units

MMBtu/d - Million British thermal units per day

MMcf/d - Million cubic feet per day

Moody’s - Moody’s Investors Service

~~N/A~~MTPA - ~~Not~~Million ~~applicable~~tonnes per annum

NGL or NGLs - Natural -gas liquids

NM - Not meaningful

NTSB - National Transportation Safety Board

NYMEX - New York Mercantile Exchange

NYSE - New York Stock Exchange

Oil - Includes crude oil and condensate

Occidental - Occidental Petroleum Corporation

Occidental Proposal - On April 24, 2019, Occidental announced a proposal to acquire Anadarko and further revised its proposal on May 5, 2019. All references herein to the Occidental Proposal refer to the Occidental Proposal as revised and received by Anadarko on May 5, 2019.

RCF - Revolving credit facility

~~ROTF~~ROU - ~~Regional oil treating facility~~Right-of-use

APC 2019 FORM 10-Q | 2



		Table of Contents

S&P - Standard and Poor’s

Share-Repurchase Program - A program authorizing the repurchase of Anadarko’s common stock

Tax Reform Legislation - The U.S. Tax Cuts and Jobs Act signed into law on December 22, 2017

TEN - Tweneboa/Enyenra/Ntomme

TEU or TEUs - Tangible equity units

Tronox - Tronox Incorporated

VIE or VIEs - Variable interest entity

WES - Western ~~Gas~~Midstream Partners, LP, a publicly traded limited partnership, ~~which~~ is a consolidated subsidiary of Anadarko, with its common units traded on the NYSE under ticker symbol “WES”. WES consolidates Western Midstream Operating, LP. Prior to February 28, 2019, WES was known as Western Gas Equity Partners, LP, and its common units traded on the NYSE under ticker symbol “WGP”.

WES ~~RCF~~364-Day Facility - WES Operating’s $12.50 billion 364-day senior unsecured ~~RCF~~credit facility

~~WGP~~WES Merger - ~~Western~~A ~~Gas Equity Partners~~merger, ~~LP,~~which awas ~~publicly~~completed ~~traded~~on ~~limited~~February ~~partnership~~28, ~~which~~2019, iswhereby a ~~consolidated~~wholly owned subsidiary of ~~Anadarko~~WES merged with and into WES Operating.

~~WGP~~WES ~~RCF~~Operating - ~~WGP~~Western Midstream Operating, LP, a Delaware limited partnership in which WES holds (a) a 98% limited partner interest and (b) the entire non-economic general partner interest through its ownership of WES Operating’s ~~$35~~sole ~~million~~general ~~senior~~partner. ~~secured~~Prior ~~RCF~~to February 28, 2019, WES Operating was known as Western Gas Partners, LP, and its common units traded on the NYSE under ticker symbol “WES”. Upon completion of the WES Merger, WES Operating’s common units ceased trading on the NYSE.

WES RCF - WES Operating’s $2.0 billion senior unsecured RCF

West Texas Complex - The DBM Complex and DBJV and Haley systems, all of which were combined into a single complex effective January 1, 2018.

WGP - Western Gas Equity Partners, LP, which changed its name to Western Midstream Partners, LP and began trading on the NYSE using the ticker symbol “WES” following the WES Merger.

WGP RCF - WGP’s $35 million senior secured RCF that matured in March 2019

WTI - West Texas Intermediate

Zero Coupons - Anadarko’s Zero-Coupon Senior Notes due 2036

3 | APC 2019 FORM 10-Q



		Table of Contents

~~PART~~CAUTIONARY I.STATEMENT ~~FINANCIAL~~ABOUT ~~INFORMATION~~FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. The Company has made in this Form 10-Q, and may from time to time make in other public filings, press releases, and management discussions, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning the Company’s operations, economic performance, and financial condition. These forward-looking statements include, among other things, information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and gas properties, marketing and midstream activities, matters related to the Chevron Merger Agreement and the Occidental Proposal, and also include those statements preceded by, followed by, or that otherwise include the words “may,” “could,” “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” “would,” “will,” “potential,” “continue,” “forecast,” “future,” “likely,” “outlook,” or similar expressions or variations on such expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will be realized. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

These forward-looking statements involve risk and uncertainties. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the following risks and uncertainties:


–	the Company’s assumptions about energy markets


–	production and sales volume levels


–	levels of oil, natural-gas, and NGL reserves


–	operating results


–	competitive conditions


–	technology


–	availability of capital resources, levels of capital expenditures, and other contractual obligations


–	supply and demand for, the price of, and the commercialization and transporting of oil, natural gas, NGLs, and other products or services


–	volatility in the commodity-futures market


–	weather


–	inflation


–	availability of goods and services, including unexpected changes in costs


–	drilling and other operational risks


–	processing volume, pipeline throughput, and produced water disposal


–	general economic conditions, nationally, internationally, or in the jurisdictions in which the Company is, or in the future may be, doing business


–	the Company’s inability to timely obtain or maintain permits or other governmental approvals, including those necessary for drilling and/or development projects

–

legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural-gas operations; retroactive royalty or production tax regimes; deepwater and onshore drilling and permitting regulations; derivatives reform; changes in state, federal, and foreign income taxes; environmental regulation, including regulations related to climate change; environmental risks; and liability under international, provincial, federal, regional, state, tribal, local, and foreign environmental laws and regulations


–	civil or political unrest or acts of terrorism in a region or country


–	the creditworthiness and performance of the Company’s counterparties, including financial institutions, operating partners, and other parties


–	volatility in the securities, capital, or credit markets and related risks such as general credit, liquidity, and interest-rate risk


–	the impact of changes in the Company’s credit ratings

APC 2019 FORM 10-Q | 4



		Table of Contents


–	the Company’s ability to successfully plan, secure additional government and partner approvals, enter into additional long-term sales contracts, make a final investment decision and the timing thereof, finance, build, and operate the necessary infrastructure and LNG park in Mozambique


–	uncertainties and liabilities associated with acquired and divested properties and businesses


–	disruptions in international oil and NGL cargo shipping activities


–	physical, digital, internal, and external security breaches


–	supply and demand, technological, political, governmental, and commercial conditions associated with long-term development and production projects in domestic and international locations

–

the outcome of pending and future regulatory, legislative, or other proceedings or investigations, including the investigation by the National Transportation Safety Board related to the Company’s operations in Colorado, and continued or additional disruptions in operations that may occur as the Company complies with regulatory orders or other state or local changes in laws or regulations in Colorado


–	the completion of a proposed merger transaction with Chevron or Occidental

–

other factors discussed below and elsewhere in “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, this Form 10-Q, and in the Company’s other public filings, press releases, and discussions with Company management

5 | APC 2019 FORM 10-Q



	FINANCIAL STATEMENTS	Table of Contents

PART I

Item 1. Financial Statements

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended	~~Three Months Ended~~						~~Nine Months Ended~~
		September 30,						September 30,
	March 31,
millions except per-share amounts	2019	~~2018~~		2018	~~2017~~			~~2018~~		~~2017~~
Revenues and Other
Oil sales	$	$2,096	~~2,572~~	$	$2,127	~~1,567~~		$	~~6,964~~	$	~~4,652~~
Natural-gas sales	320	~~232~~		247	~~269~~			~~682~~		~~1,090~~
Natural-gas liquids sales	240	~~382~~		292	~~265~~			~~992~~		~~768~~
Gathering, processing, and marketing sales	470	~~421~~		360	~~509~~			~~1,163~~		~~1,417~~
Gains (losses) on divestitures and other, net	92	90		19	~~(114~~		)	~~232~~		~~1,052~~
Total	3,218	~~3,697~~		3,045	~~2,496~~			~~10,033~~		~~8,979~~
Costs and Expenses
Oil and gas operating	289	~~294~~		276	~~253~~			~~845~~		~~738~~
Oil and gas transportation	222	~~228~~		196	~~220~~			~~633~~		~~698~~
Exploration	49	~~118~~		168	~~750~~			~~380~~		~~2,366~~
Gathering, processing, and marketing	256	~~256~~		237	~~396~~			~~745~~		~~1,101~~
General and administrative	267	~~248~~		278	~~261~~			~~814~~		~~768~~
Depreciation, depletion, and amortization	1,081	~~1,130~~		990	~~1,083~~			~~3,123~~		~~3,235~~
Production, property, and other taxes	199	~~246~~		190	~~159~~			~~637~~		~~449~~
Impairments	—	~~172~~		19	—			~~319~~		~~383~~
Other operating expense	21	26		140	~~123~~			~~188~~		~~157~~
Total	2,384	~~2,718~~		2,494	~~3,245~~			~~7,684~~		~~9,895~~
Operating Income (Loss)	834	~~979~~		551	~~(749~~		)	~~2,349~~		~~(916~~		)
Other (Income) Expense
Interest expense	253	~~240~~		228	~~230~~			~~705~~		~~682~~
(Gains) losses on derivatives, net	313	32		35	82			~~503~~		~~(33~~		)
Other (income) expense, net	6	24		(12	5	)		16		51
Total	572	~~296~~		251	~~317~~			~~1,224~~		~~700~~
Income (Loss) Before Income Taxes	262	~~683~~		300	~~(1,066~~		)	~~1,125~~		~~(1,616~~		)
Income tax expense (benefit)	166	~~256~~		126	~~(425~~		)	~~507~~		~~(366~~		)
Net Income (Loss)	96	~~427~~		174	~~(641~~		)	~~618~~		~~(1,250~~		)
Net income (loss) attributable to noncontrolling interests	111	64		53	58			~~105~~		~~182~~
Net Income (Loss) Attributable to Common Stockholders	$	$(15	~~363~~)	$	$121	~~(699~~	)	$	~~513~~	$	~~(1,432~~	)
Per Common Share
Net income (loss) attributable to common stockholders—basic	$	$(0.03	~~0.72~~)	$	$0.23	~~(1.27~~	)	$	~~0.99~~	$	~~(2.60~~	)
Net income (loss) attributable to common stockholders—diluted	$	$(0.03	~~0.72~~)	$	$0.22	~~(1.27~~	)	$	~~0.99~~	$	~~(2.61~~	)
Average Number of Common Shares Outstanding—Basic	490	~~499~~		518	~~553~~			~~507~~		~~552~~
Average Number of Common Shares Outstanding—Diluted	490	~~500~~		519	~~553~~			~~508~~		~~552~~
Dividends (per common share)		$	0.25		$	0.05		$	0.75	$	0.15

See accompanying Notes to Consolidated Financial Statements.

4APC 2019 FORM 10-Q | 6

FINANCIAL STATEMENTS Table of Contents

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended	~~Three Months Ended~~							~~Nine Months Ended~~
		September 30,							September 30,
	March 31,
millions	2019	~~2018~~			2018	~~2017~~			~~2018~~			~~2017~~
Net Income (Loss)	$	$96	~~427~~		$	$174	~~(641~~	)	$	~~618~~		$	~~(1,250~~	)
Other Comprehensive Income (Loss)
Adjustments for derivative instruments
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net	1	1			1	1			2			3
Income taxes on reclassification of previously deferred derivative losses		—				—			—			(1		)
Total adjustments for derivative instruments, net of taxes	1				1
Total adjustments for derivative instruments, net of taxes		1				1			2			2
Adjustments for pension and other postretirement plans
Adjustments for pension and other postretirement plans
Amortization of net actuarial (gain) loss to other (income) expense, net	8				7
Net gain (loss) incurred during period		25				(14		)	25			1
Income taxes on amortization of net actuarial (gain) loss	(2		)		(2		)
Income taxes on net gain (loss) incurred during period		(6		)		5			(6		)	—
Amortization of net prior service (credit) cost to other (income) expense, net	(1		)		(6		)
Amortization of net actuarial (gain) loss to other (income) expense, net		15				29			28			100
Income taxes on amortization of net prior service (credit) cost	—				1
Income taxes on amortization of net actuarial (gain) loss		(4		)		(11		)	(7		)	(37		)
Total adjustments for pension and other postretirement plans, net of taxes	5				—
Amortization of net prior service (credit) cost to other (income) expense, net		(6		)		(7		)	(18		)	(19		)
Total	6				1
Income taxes on amortization of net prior service (credit) cost		2				3			4			7
Comprehensive Income (Loss)	102				175
Total adjustments for pension and other postretirement plans, net of taxes		26				5			26			52
Comprehensive income (loss) attributable to noncontrolling interests	111				53
Total		27				6			28			54
Comprehensive Income (Loss) Attributable to Common Stockholders	$	(9	)		$	122
Comprehensive Income (Loss)		454				(635		)	646			(1,196		)
Comprehensive income (loss) attributable to noncontrolling interests		64				58			105			182
Comprehensive Income (Loss) Attributable to Common Stockholders		$	390			$	(693	)	$	541		$	(1,378	)

See accompanying Notes to Consolidated Financial Statements.

57 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTS Table of Contents

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

		September 30,				December 31,
	March 31,				December 31,
millions except per-share amounts	2019	~~2018~~			2018	~~2017~~
ASSETS
Current Assets
Cash and cash equivalents ($133 and $80 related to VIEs)		$	1,883			$	4,553
Cash and cash equivalents ($100 and $92 related to VIEs)	$	2,026			$	1,295
Accounts receivable (net of allowance of $11 and $14)
Accounts receivable (net of allowance of $11 and $13)
Customers ($159 and $106 related to VIEs)		1,644				1,222
Customers ($138 and $138 related to VIEs)	1,553				1,491
Others ($15 and $19 related to VIEs)		547				607
Others	512				535
Other current assets	338	~~397~~			474	~~380~~
Total	4,429	~~4,471~~			3,795	~~6,762~~
Net Properties and Equipment (net of accumulated depreciation, depletion, and amortization of $36,375 and $34,107) ($6,419 and $5,731 related to VIEs)		28,744				27,451
Net Properties and Equipment (net of accumulated depreciation, depletion, and amortization of $38,903 and $37,905) ($8,630 and $6,612 related to VIEs)	28,936				28,615
Other Assets ($801 and $579 related to VIEs)		2,292				2,211
Other Assets ($1,246 and $868 related to VIEs)	3,006				2,336
Goodwill and Other Intangible Assets ($1,170 and $1,191 related to VIEs)		5,638				5,662
Goodwill and Other Intangible Assets ($1,279 and $1,163 related to VIEs)	5,622				5,630
Total Assets	$	$41,993	~~41,145~~		$	$40,376	~~42,086~~
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Trade ($337 and $305 related to VIEs)		$	2,144			$	1,894
Trade ($196 and $263 related to VIEs)	$	1,946			$	2,003
Other ($16 and $1 related to VIEs)		201				266
Other ($6 and $15 related to VIEs)	165				161
Short-term debt - Anadarko (1)	21	~~910~~			919	~~142~~
Short-term debt - WGP/WES		28				—
Short-term debt - WES	2,000				28
Current asset retirement obligations		332				294
Current asset retirement obligations ($23 and $26 related to VIEs)	277				252
Other current liabilities		1,502				1,310
Other current liabilities ($107 and $54 related to VIEs)	1,340				1,295
Total	5,749	~~5,117~~			4,658	~~3,906~~
Long-term Debt
Long-term debt - Anadarko (1)	10,695	~~11,189~~			10,683	~~12,054~~
Long-term debt - WGP/WES		4,566				3,493
Long-term debt - WES	5,208				4,787
Total	15,903	~~15,755~~			15,470	~~15,547~~
Other Long-term Liabilities
Deferred income taxes	2,624	~~2,455~~			2,437	~~2,234~~
Asset retirement obligations ($158 and $143 related to VIEs)		2,538				2,500
Asset retirement obligations ($312 and $260 related to VIEs)	2,876				2,847
Other	4,308	~~4,043~~			4,021	~~4,109~~
Total	9,808	~~9,036~~			9,305	~~8,843~~
Equity
Stockholders’ equity
Common stock, par value $0.10 per share (1.0 billion shares authorized, 576.2 million and 574.2 million shares issued)		57				57
Common stock, par value $0.10 per share (1.0 billion shares authorized, 577.8 million and 576.6 million shares issued)	57				57
Paid-in capital	13,057	~~12,344~~			12,393	~~12,000~~
Retained earnings	1,024	~~1,291~~			1,245	~~1,109~~
Treasury stock (82.3 million and 43.4 million shares)		(4,608		)		(2,132		)
Treasury stock (87.5 million and 87.2 million shares)	(4,881		)		(4,864		)
Accumulated other comprehensive income (loss)	(329	~~(383~~	)	)	(335	~~(338~~	)	)
Total Stockholders’ Equity	8,928	~~8,701~~			8,496	~~10,696~~
Noncontrolling interests	1,605	~~2,536~~			2,447	~~3,094~~
Total Equity	10,533	~~11,237~~			10,943	~~13,790~~
Total Liabilities and Equity	$	$41,993	~~41,145~~		$	$40,376	~~42,086~~

~~__________________________________________________________________~~Parenthetical references reflect amounts as of March 31, 2019, and December 31, 2018.

~~Parenthetical~~VIE ~~references reflect~~ amounts asrelate ofto ~~September 30,~~WES. ~~2018,~~See ~~and December~~Note ~~31,~~15—Variable ~~2017~~Interest Entities.

~~VIE~~(1) ~~amounts~~Excludes ~~relate to WGP and~~ WES. ~~See Note 16—Variable Interest Entities.~~

(1) Excludes WES and WGP.

See accompanying Notes to Consolidated Financial Statements.

6APC 2019 FORM 10-Q | 8

FINANCIAL STATEMENTS Table of Contents

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF EQUITY

(Unaudited)

	Total Stockholders’ Equity	~~Total Stockholders’ Equity~~
millions	CommonStock	~~CommonStock~~		Paid-inCapital		~~Paid-inCapital~~	RetainedEarnings			~~RetainedEarnings~~TreasuryStock			Accumulated OtherComprehensiveIncome (Loss)	~~TreasuryStock~~			Non-controllingInterests	~~Accumulated OtherComprehensiveIncome (Loss)~~			TotalEquity	~~Non-controllingInterests~~			~~TotalEquity~~
Balance at December 31, 2017		$	57			$	12,000			$	1,109			$	(2,132	)		$	(338	)		$	3,094		$	13,790
Balance at December 31, 2018	$	57		$	12,393		$	1,245		$	(4,864	)		$	(335	)		$	2,447		$	10,943
Net income (loss)	—	—		—		—	(15		)	~~513~~—				—				—111			96	~~105~~			~~618~~
Common stock issued		—				6				—				—				—				—			6
Share-based compensation expense	—			38			—			—				—				—			38
Share-based compensation expense		—				125				—				—				—				—			125
Dividends—common stock	—			—			(150		)	—				—				—			(150		)
Dividends—common stock		—				—				(380		)		—				—				—			(380		)
Repurchases of common stock	—			—			—			(17		)		—				—			(17		)
Repurchases of common stock		—				—				—				(2,476		)		—				—			(2,476		)
Subsidiary equity transactions	—			626			(1		)	—				—				(823		)	(198		)
Subsidiary equity transactions		—				(17		)		—				—				—				25			8
Distributions to noncontrolling interest owners	—			—			—			—				—				(130		)	(130		)
Settlement of tangible equity units		—				230				—				—				—				(300		)	(70		)
Adjustments for pension and other postretirement plans	—			—			—			—				5				—			5
Distributions to noncontrolling interest owners		—				—				—				—				—				(365		)	(365		)
Cumulative effect of accounting change (1)	—			—			(55		)	—				—				—			(55		)
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net		—				—				—				—				2				—			2
Other	—			—			—			—				1				—			1
Adjustments for pension and other postretirement plans		—				—				—				—				26				—			26
Balance at March 31, 2019	$	57		$	13,057		$	1,024		$	(4,881	)		$	(329	)		$	1,605		$	10,533
Cumulative effect of accounting change (1)		—				—				49				—				(73		)		(23		)	(47		)
Balance at September 30, 2018		$	57			$	12,344			$	1,291			$	(4,608	)		$	(383	)		$	2,536		$	11,237

~~__________________________________________________________________~~(1) Beginning January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for further information.

(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 Notes to Consolidated Financial Statements for further information.



	Total Stockholders’ Equity
millions	Common Stock		Paid-in Capital			Retained Earnings			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)	—		—			121			—				—				53			174
Share-based compensation expense	—		39			—			—				—				—			39
Dividends—common stock	—		—			(127		)	—				—				—			(127		)
Repurchases of common stock	—		(332		)	—			(1,627		)		—				—			(1,959		)
Subsidiary equity transactions	—		(6		)	—			—				—				9			3
Distributions to noncontrolling interest owners	—		—			—			—				—				(118		)	(118		)
Cumulative effect of accounting change ⁽¹⁾	—		—			49			—				(73		)		(23		)	(47		)
Other	—		—			—			—				1				—			1
Balance at March 31, 2018	$	57	$	11,701		$	1,152		$	(3,759	)		$	(410	)		$	3,015		$	11,756

⁽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.

79 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTS Table of Contents

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine Months Ended
	Three Months Ended
		September 30,
	March 31,
millions	2019	~~2018~~			2018	~~2017~~
Cash Flows from Operating Activities
Net income (loss)	$	$96	~~618~~		$	$174	~~(1,250~~	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation, depletion, and amortization	1,081	~~3,123~~			990	~~3,235~~
Deferred income taxes	1	~~141~~			42	~~(1,026~~		)
Dry hole expense and impairments of unproved properties	—	~~212~~			106	~~2,144~~
Impairments	—	~~319~~			19	~~383~~
(Gains) losses on divestitures, net	5	~~(31~~		)	24	~~(815~~		)
Total (gains) losses on derivatives, net	315	~~506~~			36	~~(33~~		)
Operating portion of net cash received (paid) in settlement of derivative instruments	1	~~(433~~		)	(63	21	)
Other	42	~~224~~			74	~~227~~
Changes in assets and liabilities
(Increase) decrease in accounts receivable	(39	~~(344~~	)	)	23	~~(32~~		)
Increase (decrease) in accounts payable and other current liabilities	(294	~~230~~	)		45	~~(95~~		)
Other items, net	(79	~~(263~~	)	)	(40	~~(140~~	)	)
Net cash provided by (used in) operating activities	1,129	~~4,302~~			1,430	~~2,619~~
Cash Flows from Investing Activities
Additions to properties and equipment	(1,389	~~(4,891~~	)	)	(1,547	~~(3,538~~	)	)
Divestitures of properties and equipment and other assets	7	~~393~~			371	~~3,480~~
Other, net	(146	~~(161~~	)	)	63	30
Net cash provided by (used in) investing activities	(1,528	~~(4,659~~	)	)	(1,113	~~(28~~	)	)
Cash Flows from Financing Activities
Borrowings, net of issuance costs	2,420	~~2,131~~			1,333	~~249~~
Repayments of debt	(935	~~(1,176~~	)	)	(639	~~(42~~	)	)
Financing portion of net cash received (paid) for derivative instruments	(98	19	)		54	~~(160~~		)
Increase (decrease) in outstanding checks	68	~~(13~~		)	(26	~~(58~~	)	)
Dividends paid	(150	~~(380~~	)	)	(127	~~(84~~	)	)
Repurchases of common stock	(17	~~(2,476~~	)	)	(1,959	~~(37~~	)	)
Issuances of common stock		6				—
Distributions to noncontrolling interest owners	(130		)		(118		)
Distributions to noncontrolling interest owners		(365		)		(327		)
Payments of future hard-minerals royalty revenues conveyed	(24		)		(25		)
Payments of future hard-minerals royalty revenues conveyed		(50		)		(50		)
Other	(5		)		—
Other financing activities		(2		)		(18		)
Net cash provided by (used in) financing activities	1,129				(1,507		)
Net cash provided by (used in) financing activities		(2,306		)		(527		)
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents	1				—
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents		(18		)		4
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	731				(1,190		)
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents		(2,681		)		2,068
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 Beginning of Period		4,674				3,308
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents at End of Period	$	2,160			$	3,484
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents at End of Period		$	1,993			$	5,376

See accompanying Notes to Consolidated Financial Statements.

8APC 2019 FORM 10-Q | 10

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 inis ~~advancing~~continuing to advance its Mozambique LNG project toward FID. 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 ~~accordance~~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, ~~2017~~2018.

~~The~~Chevron ~~consolidated~~Merger On ~~financial~~April ~~statements~~11, ~~include~~2019, the ~~accounts~~Company entered into the Chevron Merger Agreement pursuant to which, and subject to the conditions of the agreement, all outstanding shares of Anadarko ~~and~~will ~~subsidiaries~~be acquired by Chevron in ~~which~~a ~~Anadarko~~stock ~~holds,~~and ~~directly~~cash transaction valued at $33 billion, or ~~indirectly~~$65.00 per share, ~~more~~as ~~than~~of ~~50%~~the announcement date. Under the terms of the ~~voting~~Chevron ~~rights~~Merger Agreement, Anadarko stockholders will receive 0.3869 of a share of Chevron common stock and ~~VIEs~~$16.25 in cash for ~~which~~each Anadarko isshare. The transaction was approved by the ~~primary~~Boards ~~beneficiary~~of Directors of both companies. ~~The~~On ~~Company~~May ~~has~~6, 2019, Anadarko announced that the Board unanimously determined that ~~WGP~~the ~~and~~Occidental ~~WES~~Proposal ~~are~~constituted ~~VIEs~~a “Superior Proposal” as defined in the Chevron Merger Agreement. ~~Anadarko~~Under isthe ~~considered~~terms of the ~~primary~~Occidental ~~beneficiary~~Proposal, ~~and~~Occidental ~~consolidates~~would ~~WGP~~acquire ~~and~~Anadarko ~~WES~~for consideration consisting of $59.00 ~~WGP~~in cash and ~~WES~~0.2934 ~~function~~of ~~with~~a ~~capital~~share ~~structures~~of ~~that~~Occidental ~~are~~common ~~separate~~stock ~~from~~per share of Anadarko, ~~consisting~~common ofstock. ~~their~~Anadarko ~~own~~has ~~debt~~notified ~~instruments~~Chevron ~~and~~that ~~publicly~~(i) ~~traded~~the ~~common~~Board ~~units.~~has ~~All~~unanimously ~~intercompany~~determined ~~transactions~~that ~~have~~the ~~been~~Occidental ~~eliminated.~~Proposal ~~Undivided~~constitutes ~~interests~~a in"Superior ~~oil~~Proposal" and ~~natural-gas~~(ii) ~~exploration~~after ~~and~~complying ~~production~~with ~~joint~~its ~~ventures~~obligations ~~are~~to ~~consolidated~~Chevron onunder athe ~~proportionate~~Chevron ~~basis.~~Merger ~~Investments~~Agreement, Anadarko intends to terminate the Chevron Merger Agreement in ~~noncontrolled~~order ~~entities~~to ~~that~~enter ~~Anadarko~~into ~~has~~a definitive merger agreement with Occidental in connection with the ~~ability~~Occidental Proposal. Pursuant to ~~exercise~~the ~~significant~~Chevron ~~influence~~Merger ~~over~~Agreement, ~~operating~~Chevron ~~and~~has ~~financial~~the ~~policies~~right, ~~and~~during ~~VIEs~~the ~~for~~four business day period ending on May 10, 2019, which ~~Anadarko~~may isbe ~~not~~extended in accordance with the ~~primary~~terms ~~beneficiary~~of ~~are~~the ~~accounted~~Chevron ~~for~~Merger ~~using~~Agreement, to propose revisions to the ~~equity~~terms ~~method~~of the Chevron Merger Agreement, or to make another proposal. InIf ~~applying~~Anadarko terminates the ~~equity~~Chevron ~~method~~Merger ofAgreement ~~accounting~~in order to enter into a definitive agreement with respect to the Occidental Proposal, Anadarko will pay Chevron a $1.0 billion termination fee as required by the ~~investments~~Chevron ~~are~~Merger ~~initially~~Agreement. ~~recognized~~The atChevron ~~cost~~Merger Agreement remains in effect unless and ~~subsequently~~until ~~adjusted~~terminated, ~~for~~and accordingly, the ~~Company’s~~Board ~~proportionate~~reaffirms ~~share~~its existing recommendation of ~~earnings,~~the ~~losses,~~transaction ~~and~~with ~~distributions~~Chevron at this time. ~~Investments~~Either ~~are~~transaction ~~included~~would inbe subject to Anadarko stockholder approval, regulatory approvals, and other ~~assets~~customary closing conditions.

~~Recently~~Midstream ~~Adopted~~Asset ~~Accounting~~Sale ~~Standards ASU~~and ~~2017-07,~~WES ~~Compensation—Retirement~~Merger On ~~Benefits~~February ~~(Topic~~28, ~~715):~~2019, ~~Improving~~Anadarko completed the ~~Presentation~~previously ofannounced ~~Net~~contribution ~~Periodic~~and ~~Pension~~sale ~~Cost~~of ~~and~~substantially ~~Net~~all ~~Periodic~~of ~~Postretirement~~its ~~Benefit~~midstream ~~Cost~~assets, ~~requires~~which ~~presentation~~consisted of ~~service~~oil ~~cost~~infrastructure assets in the ~~same~~DJ ~~line~~basin ~~item(s)~~and asoil ~~other compensation costs arising from services rendered by employees during the period~~ and ~~presentation~~water ofinfrastructure ~~the~~assets ~~remaining components of net benefit cost~~ in athe ~~separate~~Delaware ~~line item outside operating items. Additionally~~basin, ~~only~~to ~~the~~WES ~~service~~Operating ~~cost component of net benefit cost will be eligible~~ for ~~capitalization~~$4. ~~The Company adopted this ASU on January 1~~0 billion, ~~2018,~~ with ~~retrospective~~$2.0 billion ~~presentation~~ of ~~the~~cash ~~service~~proceeds ~~cost component~~ and ~~the~~$2.0 billion ~~other components of net benefit cost~~ in ~~the~~WES ~~income~~Operating ~~statement~~common ~~and~~units. ~~prospective~~As ~~presentation~~a ~~for~~result, the ~~capitalization~~Company ofwill ~~the~~no ~~service~~longer ~~cost~~report ~~component~~an ofOther ~~net~~Midstream ~~benefit~~segment ~~cost~~and inwill ~~assets.~~now ~~Upon~~have ~~adoption,~~two ~~non-service~~reporting ~~cost~~segments: ~~components~~Exploration ofand ~~net~~Production ~~periodic~~and ~~benefit~~WES ~~costs~~Midstream. ofPrior ~~$107 million~~period ~~for~~amounts ~~2017,~~have ~~including~~been ~~$94 million for the nine months ended September 30, 2017, were~~ reclassified to ~~other~~conform ~~(income)~~to ~~expense,~~the ~~net,~~current ~~from~~period’s ~~G&A;~~presentation. ~~oil~~See ~~and~~Note ~~gas~~17—Segment ~~operating;~~Information ~~gathering,~~for ~~processing,~~information ~~and~~on ~~marketing;~~the ~~and~~Company’s ~~exploration~~reporting ~~expense~~segments.

~~ASU~~Immediately ~~2016-18~~after the asset contribution and sale, ~~Statement~~a wholly owned subsidiary of ~~Cash~~WES ~~Flows~~merged ~~(Topic~~with ~~230):~~and ~~Restricted~~into ~~Cash~~WES Operating, ~~requires~~with anWES ~~entity~~Operating tocontinuing ~~explain~~as the ~~changes~~surviving inentity ~~the~~and ~~total~~a subsidiary of ~~cash~~WES, ~~cash~~resulting ~~equivalents,~~in ~~restricted~~a ~~cash,~~simplified ~~and~~midstream ~~restricted~~structure. ~~cash~~Under ~~equivalents~~the onterms of the ~~statement~~WES ofMerger, ~~cash~~WES ~~flows~~acquired ~~and~~all toof ~~provide~~the aoutstanding ~~reconciliation~~publicly held common units of ~~the~~WES ~~totals~~Operating inand ~~that~~substantially ~~statement~~all toof the ~~related~~WES ~~captions~~Operating incommon ~~the~~units ~~balance~~owned ~~sheet~~by ~~when~~Anadarko ~~the~~and ~~cash,~~its ~~cash~~affiliates. ~~equivalents,~~WES ~~restricted~~Operating ~~cash,~~survived ~~and~~as ~~restricted~~a ~~cash~~partnership ~~equivalents~~with ~~are~~no ~~presented~~publicly intraded ~~more~~equity, ~~than~~owned ~~one~~98% ~~line~~by ~~item~~WES onand ~~the~~2% ~~balance~~by ~~sheet~~Anadarko. ~~The~~WES ~~Company~~Operating ~~adopted~~owns ~~this~~all ~~ASU~~the ~~using~~operating aassets ~~retrospective~~and ~~approach~~equity oninvestments ~~January~~of 1WES, ~~2018.~~is ~~Adoption~~the ~~did~~borrower ~~not~~for ~~have~~all aexisting ~~material~~WES ~~impact~~debt onand is expected to be the ~~Company’s~~borrower ~~consolidated~~for ~~financial~~all ~~statements~~future debt. ~~See~~Anadarko ~~Consolidated~~maintains ~~Statements~~operating control of ~~Cash~~WES, ~~Flows~~with ~~and~~approximately ~~Note 17—Supplemental~~55.5% ~~Cash~~ownership ~~Flow~~of ~~Information~~the ~~for~~combined ~~additional information~~entity.

911 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

~~ASU~~The ~~2014-09,~~consolidated ~~Revenue~~financial ~~from~~statements ~~Contracts~~include ~~with Customers (Topic 606), supersedes~~ the ~~revenue~~accounts ~~recognition~~of ~~requirements~~Anadarko and ~~industry-specific~~subsidiaries ~~guidance~~in ~~under~~which ~~Revenue~~Anadarko ~~Recognition~~holds, ~~(Topic~~directly ~~605).~~or ~~Topic~~indirectly, ~~606~~more ~~requires~~than an50% ~~entity~~of tothe ~~recognize~~voting ~~revenue~~rights ~~when~~and itVIEs ~~transfers~~for ~~promised~~which ~~goods~~Anadarko oris ~~services~~the toprimary ~~customers~~beneficiary. inThe anCompany ~~amount~~has determined that ~~reflects~~WES ~~the~~is ~~consideration~~a ~~the~~VIE. ~~entity~~Anadarko ~~expects~~is toconsidered bethe ~~entitled~~primary tobeneficiary inand ~~exchange~~consolidates ~~for~~WES. ~~those~~WES ~~goods~~functions orwith ~~services.~~a ~~The~~capital ~~Company~~structure ~~adopted~~that ~~Topic~~is ~~606~~separate onfrom ~~January 1~~Anadarko, ~~2018,~~ ~~using~~consisting ~~the~~of ~~modified~~its ~~retrospective~~own ~~method~~debt ~~applied~~instruments toand ~~contracts~~publicly ~~that~~traded ~~were~~common ~~not~~units. ~~completed~~All asintercompany oftransactions ~~January 1, 2018~~have been eliminated. ~~Under~~Undivided ~~the~~interests ~~modified~~in ~~retrospective~~oil ~~method,~~and ~~prior~~natural-~~period~~gas ~~financial~~exploration ~~positions~~ and ~~results~~production ~~will~~joint ~~not~~ventures beare ~~adjusted.~~consolidated ~~The~~on ~~cumulative~~a ~~effect~~proportionate ~~adjustment~~basis. ~~recognized~~Investments in ~~the~~noncontrolled ~~opening~~entities ~~balances~~that ~~included~~Anadarko ahas ~~reduction~~the ability to ~~total~~exercise ~~equity~~significant ofinfluence ~~$47 million.~~over ~~While~~operating ~~the~~and ~~Company~~financial ~~does~~policies ~~not~~and ~~expect~~VIEs ~~2018~~for ~~net~~which ~~earnings~~Anadarko tois benot ~~materially~~the ~~impacted~~primary bybeneficiary ~~revenue~~are ~~recognition~~accounted ~~timing~~for ~~changes,~~using ~~Topic~~the ~~606~~equity ~~requires~~method. ~~certain~~In ~~changes~~applying to the ~~presentation~~equity method of ~~revenues~~accounting, ~~and~~the ~~related~~investments ~~expenses~~are ~~beginning~~initially ~~January 1, 2018.~~recognized ~~See~~at ~~Note~~cost ~~2—Revenue~~and ~~from~~subsequently ~~Contracts~~adjusted ~~with~~for ~~Customers~~the ~~for~~Company’s ~~additional~~proportionate ~~information~~share of earnings, losses, and distributions. ~~The~~Investments ~~Company’s~~are ~~revenue~~included ~~recognition~~in ~~accounting~~other ~~policy~~assets ~~effective~~on ~~January 1, 2018,~~the isCompany’s ~~detailed~~Consolidated ~~below~~Balance Sheets.

•Recently ~~Exploration~~Adopted ~~and~~Accounting Production—The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.Standards

~~Contracts~~ASU ~~with~~2016-02, ~~customers~~Leases ~~have~~(Topic ~~varying~~842) This ~~terms,~~ASU ~~including~~requires ~~spot~~lessees ~~sales or month-~~to~~-month~~ ~~contracts,~~recognize ~~contracts with~~ a ~~finite~~lease ~~term,~~liability and ~~life-of-field~~an ~~contracts~~ROU ~~where~~asset ~~all~~on ~~production~~the ~~from~~balance asheet ~~well~~for orall ~~group~~leases, ofincluding ~~wells~~operating isleases. ~~sold~~This toASU ~~one~~modifies orthe ~~more~~definition ~~customers.~~of ~~The~~a ~~Company~~lease ~~recognizes~~and ~~sales~~outlines ~~revenues~~the ~~for~~recognition, ~~oil~~measurement, ~~natural gas~~presentation, and ~~NGLs~~disclosure ~~based~~of onleasing ~~the~~arrangements ~~amount~~by ofboth ~~each~~lessees ~~product~~and ~~sold~~lessors. toThe aCompany ~~customer~~adopted ~~when~~Topic ~~control~~842 ~~transfers~~on toJanuary ~~the~~1, ~~customer. Generally~~2019, ~~control~~using ~~transfers at~~ the ~~time~~modified ofretrospective ~~delivery~~method applied to ~~the~~all ~~customer~~leases atthat aexisted ~~pipeline~~on ~~interconnect~~January 1, ~~the~~2019, ~~tailgate~~and ofprior-period afinancial ~~processing~~statements ~~facility,~~were ornot asadjusted. aAnadarko ~~tanker~~elected ~~lifting~~not isto ~~completed.~~reassess ~~Revenue~~contracts isthat ~~measured~~commenced ~~based~~prior onto ~~the~~adoption, ~~contract~~to ~~price,~~continue ~~which~~applying ~~may~~its becurrent ~~index-based~~accounting policy for existing or ~~fixed~~expired land easements, and ~~may~~not ~~include~~to ~~adjustments~~recognize ~~for~~ROU ~~market~~assets ~~differentials~~or ~~and~~lease ~~downstream~~liabilities ~~costs~~for ~~incurred~~short-term byleases. ~~the~~Upon ~~customer~~adoption, ~~including~~the ~~gathering,~~Company ~~transportation,~~recognized ~~and~~approximately ~~fuel~~$600 ~~costs.~~million ~~For~~of ~~natural~~ROU ~~gas~~assets and ~~NGLs~~lease ~~sold~~liabilities onrelated ~~our~~to ~~behalf~~leases byexisting aat ~~processor~~January 1, ~~revenue~~2019. isThe ~~typically~~difference ~~measured~~between ~~based~~ROU onassets ~~the~~and ~~price~~operating ~~the~~lease ~~processor~~liabilities, ~~receives~~net ~~for~~of the ~~sale~~deferred tax impact, ~~less~~was ~~certain~~recognized ~~costs~~as ~~withheld~~a by$55 million reduction in the ~~processor~~opening balance of retained earnings as a cumulative effect adjustment. See Note 9—Leases for additional information.

~~Revenues~~Accounting ~~are recognized for the sale of Anadarko’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues.~~Policy

~~The~~Leases Anadarko ~~Company~~determines ~~enters~~if ~~into~~an ~~buy/sell~~arrangement ~~arrangements~~is ~~related~~a tolease ~~the~~based ~~transportation~~on ofrights aand ~~portion~~obligations ofconveyed ~~its~~at ~~oil~~inception ~~production~~of a contract. ~~Under~~At ~~these~~the ~~arrangements~~commencement date, ~~barrels~~a ~~are~~lease ~~sold~~is toclassified aas ~~third~~either ~~party~~operating ator afinance, ~~location-based~~and ~~contract~~an ROU ~~price~~asset and ~~subsequently~~lease ~~repurchased~~liability byis recognized based on the ~~Company~~present atvalue aof ~~downstream~~future ~~location~~lease payments over the lease term. ~~The~~As ~~difference~~the rate implicit in ~~value~~Anadarko’s ~~between~~leases generally is not readily determinable, the ~~sale~~Company ~~and~~discounts ~~purchase~~lease ~~price~~liabilities ~~represents~~using the ~~transportation~~Company’s ~~fee~~incremental toborrowing ~~move~~rate ~~oil~~at ~~from~~ the commencement date. Non-lease components associated with leases that begin in 2019 or ~~certain~~later ~~gathering~~are ~~locations~~accounted tofor ~~more~~as ~~liquid~~part ~~markets.~~of ~~These~~the ~~arrangements~~lease component, and prepaid lease payments are ~~often~~included ~~required~~in bythe ~~private~~ROU ~~transporters~~asset. ~~These~~Options ~~buy/sell~~to ~~transactions~~extend ~~are~~or ~~recorded~~terminate ~~net~~a lease are included in ~~oil~~the ~~and~~lease ~~gas~~term ~~transportation~~when ~~expense~~it inis reasonably certain that Anadarko will exercise that option. Leases of 12 months or less are not recognized on the Company’s Consolidated ~~Statements~~Balance ~~of Income~~Sheet.

10Lease 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.

~~Table~~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 ~~Contents~~each contract determined to be a lease, although a portion of lease payments is generally recovered from partners. Lease payments associated with the drilling of exploratory wells and development wells net of amounts billed to partners will initially be capitalized as a component of oil and gas properties and either depreciated, impaired, or written off as exploration expense in future periods.

~~ANADARKO~~APC 2019 ~~PETROLEUM~~FORM ~~CORPORATION~~10-Q | 12

~~NOTES~~FINANCIAL TOSTATEMENTSFOOTNOTES ~~CONSOLIDATED~~Table ~~FINANCIAL~~of ~~STATEMENTS~~Contents

(Unaudited)

1. Summary of Significant Accounting Policies (Continued)

• WES Midstream and Other Midstream—Anadarko provides gathering, compressing, treating, processing, stabilizing, transporting, and disposal services pursuant to a variety of contracts. Under these arrangements, the Company receives fees and/or retains a percentage of products or a percentage of the proceeds from the sale of the customer’s products. These revenues are included in gathering, processing, and marketing sales in the Company’s Consolidated Statements of Income. Payment is generally received from the customer in the month of service or the month following the service. Contracts with customers generally have initial terms ranging from 5 to 10 years.

Revenue is recognized for fee-based gathering and processing services in the month of service based on the volumes delivered by the customer. Revenues are valued based on the rate in effect for the month of service when the fee is either the same rate per unit over the contract term or when the fee escalates and the escalation factor approximates inflation. The Company may charge additional service fees to customers for a portion of the contract term (i.e., for the first year of a contract or until reaching a volume threshold) due to the significant upfront capital investment. These fees are recognized as revenue over the expected period of customer benefit, generally the life of the related properties. Deficiency fees, which are charged to the customer if they do not meet minimum delivery requirements, are recognized over the performance period based on an estimate of the deficiency fees that will be billed upon completion of the performance period.

The Company’s midstream business also purchases natural-gas volumes from producers at the wellhead or production facility, typically at an index price, and charges the producer fees associated with the downstream gathering and processing services. These fees are treated as a reduction of the purchase cost when the fees relate to services performed after control of the product has transferred to Anadarko. Revenue is recognized, along with cost of product expense related to the sale, when the purchased product is sold to a third party.

Revenue from percentage of proceeds gathering and processing contracts is recognized net of the cost of product for purchases from service customers when the Company is acting as their agent in the product sale, and any fees charged on these percentage of proceeds contracts are recognized in service revenues.

ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides entities the option to reclassify stranded tax effects resulting from the Tax Reform Legislation from accumulated other comprehensive income (AOCI) to retained earnings. In accordance with its accounting policy, the Company releases stranded income tax effects from AOCI in the period the underlying portfolio is liquidated. This ASU allows for the reclassification of stranded tax effects as a result of the change in tax rates from Tax Reform Legislation to be recorded upon adoption of the ASU, rather than at the actual portfolio liquidation date. The Company adopted this ASU on January 1, 2018, electing to reclassify $73 million from AOCI to retained earnings, including a $2 million federal benefit of state tax impact related to the Tax Reform Legislation.

New Accounting Standards Issued But Not Yet Adopted ASU 2016-02, Leases (Topic 842), requires lessees to recognize a lease liability and a right-of-use (ROU) asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. 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 plans to make certain elections allowing the Company 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. Anadarko continues to review contracts in its portfolio of leased assets to assess the impact of adopting this ASU. The Company expects the adoption of this ASU to primarily impact other assets and other long-term liabilities and does not expect a material impact on its consolidated results of operations. To facilitate compliance with this ASU, Anadarko expects to implement new accounting software and complete the evaluation of its systems, processes, and internal controls by the end of 2018. Anadarko will adopt this ASU on January 1, 2019, using a modified retrospective approach. As permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements, the Company does not expect to adjust comparative-period financial statements and will recognize a cumulative effect adjustment in the opening balance of retained earnings in the period of adoption.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Revenue from Contracts with Customers

Change in Accounting Policy The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. See Note 1—Summary of Significant Accounting Policies for additional information.

Impacts on Financial Statements

Exploration and Production There were no significant changes to the timing or valuation of revenue recognized for sales of production by the Exploration and Production segment.

WES Midstream and Other Midstream Gathering and processing revenues decreased for contracts where the Company is acting as an agent for its processing customer in the sale of processed volumes and increased for contracts with noncash consideration, with an offset to gathering and processing expense upon product sale. The magnitude of these presentation changes in subsequent periods is dependent on future customer volumes subject to the impacted contracts and commodity prices for those volumes. These presentation changes do not impact net earnings.

The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements:

CONSOLIDATED BALANCE SHEET	Impact of Change in Accounting Policy
millions	As Reported		Without Adoption of Topic 606		Effect of Change Increase/(Decrease)
September 30, 2018
Assets
Other current assets	$	397	$	395	$	2
Net properties and equipment	28,744		28,697		47
Other assets	2,292		2,282		10
Liabilities
Other current liabilities	1,502		1,494		8
Deferred income taxes	2,455		2,461		(6		)
Other	4,043		3,932		111
Equity
Total equity	11,237		11,291		(54		)

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Revenue from Contracts with Customers (Continued)

CONSOLIDATED STATEMENT OF INCOME	Impact of Change in Accounting Policy
millions	As Reported		Without Adoption of Topic 606		Effect of Change Increase/(Decrease)
Three Months Ended September 30, 2018
Revenues
Gathering, processing, and marketing sales	$	421	$	717	$	(296	)
Gains (losses) on divestitures and other, net	90		89		1
Expenses
Gathering, processing, and marketing	256		551		(295		)
Income tax expense (benefit)	256		254		2
Net income (loss) attributable to noncontrolling interests	64		71		(7		)
Net Income (Loss) Attributable to Common Stockholders	$	363	$	358	$	5
Nine Months Ended September 30, 2018
Revenues
Gathering, processing, and marketing sales	$	1,163	$	1,944	$	(781	)
Gains (losses) on divestitures and other, net	232		233		(1		)
Expenses
Gathering, processing, and marketing	745		1,520		(775		)
Income tax expense (benefit)	507		507		—
Net income (loss) attributable to noncontrolling interests	105		111		(6		)
Net Income (Loss) Attributable to Common Stockholders	$	513	$	514	$	(1	)

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Revenue from Contracts with Customers (Continued)

Disaggregation of Revenue from Contracts with Customers The following table disaggregates revenue by significant product type and segment:

millions	Exploration& Production				WES Midstream				Other ~~Midstream~~andIntersegmentEliminations				~~Other andIntersegmentEliminations~~Total				~~Total~~
Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Oil sales	$	~~2,572~~$	2,096		$	—$	—		$	—$	—		$	—$	2,096		$	~~2,572~~
Natural-gas sales	~~232~~	320			—	—			—	—			—	320			~~232~~
Natural-gas liquids sales	~~382~~	240			—	—			—	—			—	240			~~382~~
Gathering, processing, and marketing sales (1)	—	1			~~511~~	672			~~113~~	(25		)	1	648			~~625~~
Other, net	9	9			—	—			—	25			31	34			40
Total Revenue from Customers	$	~~3,195~~$	2,666		$	~~511~~$	672		$	~~113~~$	—		$	32$	3,338		$	~~3,851~~
Gathering, processing, and marketing sales (2)	—	—			(3	—	)		3	(178		)	~~(204~~	(178	)	)	~~(204~~		)
Gains (losses) on divestitures, net	5	—			—	—			1	(5		)	(3	(5	)	)	3
Other, net	(8	(1	)	)	52	57			12	7			(9	63	)		47
Total Revenue from Other than Customers	$	(3$	)(1	)	$	49$	57		$	16$	(176	)	$	~~(216~~$	)(120	)	$	~~(154~~	)
Total Revenue and Other	$	~~3,192~~$	2,665		$	~~560~~$	729		$	~~129~~$	(176	)	$	~~(184~~$	)3,218		$	~~3,697~~
Nine Months Ended September 30, 2018
Three Months Ended March 31, 2018
Oil sales	$	~~6,964~~$	2,127		$	—$	—		$	—$	—		$	—$	2,127		$	~~6,964~~
Natural-gas sales	~~682~~	247			—	—			—	—			—	247			~~682~~
Natural-gas liquids sales	~~992~~	292			—	—			—	—			—	292			~~992~~
Gathering, processing, and marketing sales (1)	—	—			~~1,438~~	502			~~255~~	46			83	548			~~1,776~~
Other, net	16	3			—	—			—	19			71	22			87
Total Revenue from Customers	$	~~8,654~~$	2,669		$	~~1,438~~$	502		$	~~255~~$	65		$	~~154~~$	3,236		$	~~10,501~~
Gathering, processing, and marketing sales (2)	—	—			(6	(1	)	)	6	(187		)	~~(613~~	(188	)	)	~~(613~~		)
Gains (losses) on divestitures, net	24	(33		)	—	—			10	9			(3	(24	)	)	31
Other, net	~~(21~~	(12	)	)	~~113~~	44			30	(11		)	(8	21	)		~~114~~
Total Revenue from Other than Customers	$	3$	(45	)	$	~~107~~$	43		$	46$	(189	)	$	~~(624~~$	)(191	)	$	~~(468~~	)
Total Revenue and Other	$	~~8,657~~$	2,624		$	~~1,545~~$	545		$	~~301~~$	(124	)	$	~~(470~~$	)3,045		$	~~10,033~~

~~__________________________________________________________________~~(1) The amount in Other and Intersegment Eliminations primarily represents sales of third-party natural gas and NGLs of $209 million and intersegment eliminations of $(223) million for the three months ended March 31, 2019, and sales of third-party natural gas and NGLs of $224 million and intersegment eliminations of $(163) million for the three months ended March 31, 2018.

(12) The amount in Other and Intersegment Eliminations ~~primarily~~ represents ~~sales~~purchases of third-party natural gas and NGLs. ofAlthough ~~$328~~these ~~million~~purchases ~~and~~are ~~intercompany~~reported ~~eliminations~~net ofin ~~$(312) million for the three months ended September 30~~gathering, ~~2018~~processing, and marketing sales ofin ~~third-party~~the ~~natural~~Company’s ~~gas~~Consolidated ~~and~~Statements ~~NGLs~~ of ~~$813~~Income, ~~million~~they ~~and~~are ~~intercompany~~shown ~~eliminations~~separately ofon ~~$(715)~~this ~~million~~table ~~for~~as the ~~nine~~purchases ~~months~~are ~~ended~~not ~~September~~considered ~~30,~~revenue ~~2018~~from customers.

~~(2)~~13 | APC 2019 ~~The~~FORM ~~amount in Other and Intersegment Eliminations represents purchases of third~~10-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.Q

14FINANCIAL STATEMENTSFOOTNOTES Table of Contents

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, 2017	$	37
Balance at December 31, 2018	$	150
Increase due to cumulative effect of adopting Topic 606	98
Increase due to cash received, excluding revenues recognized in the period	21
Increase due to cash received, excluding revenues recognized in the period (1)	46
Decrease due to revenue recognized	(18		)
Decrease due to revenue recognized (2)	(30		)
Balance at March 31, 2019	$	153
Balance at September 30, 2018	$	151
Contract liabilities at March 31, 2019
Contract liabilities at September 30, 2018
Other current liabilities	$	23
Other long-term liabilities - other	~~128~~130
Total contract liabilities from contracts with customers	$	~~151~~153

Transaction Price Allocated to Remaining Performance Obligations Revenue expected to be recognized from certain performance obligations that are unsatisfied as of March ~~__________________________________________________________________~~31, 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.

(1) Includes $(6) million for the three months ended September 30, 2018.



millions	Exploration & Production			WES Midstream			Other and Intersegment Eliminations				Total
Remainder of 2019		$	80		$	533		$	(352	)		$	261
2020		103			862			(622		)		343
2021		103			912			(698		)		317
2022		7			976			(770		)		213
2023		7			933			(770		)		170
Thereafter		58			4,500			(4,009		)		549
Total		$	358		$	8,716		$	(7,221	)		$	1,853

(2) Includes $(9) million for the three months ended September 30, 2018.

Transaction Price Allocated to Remaining Performance Obligations Revenue expected to be recognized from certain performance obligations that are unsatisfied as of September 30, 2018, 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 volumes and variable commodity prices for those volumes.

millions	Exploration& Production		WES Midstream		Other Midstream		Other andIntersegmentEliminations			Total
Remainder of 2018	$	27	$	124	$	31	$	(96	)	$	86
2019	104		480		204		(441		)	347
2020	103		545		293		(606		)	335
2021	103		525		361		(672		)	317
2022	7		529		417		(739		)	214
Thereafter	65		2,192		3,107		(4,662		)	702
Total	$	409	$	4,395	$	4,413	$	(7,216	)	$	2,001

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Commodity Inventories

The following summarizes the major classes of commodity inventories included in other current assets:

	September 30,			December 31,
millions	March 31, 2019			December 31, 2018
millions	2018			2017
Oil		$	169		$	139
Oil	$	168		$	165
Natural gas		1			18
Natural gas	19			29
NGLs		84			78
NGLs	131			122
Total commodity inventories		$	254		$	235
Total commodity inventories	$	318		$	316

APC 2019 FORM 10-Q | 14



	FINANCIAL STATEMENTS FOOTNOTES	Table of Contents

4. Divestitures

~~Divestitures~~ The following summarizes the proceeds received and gains (losses) recognized on divestitures:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
millions	~~2018~~2019			~~2017~~2018
Proceeds received, net of closing adjustments	$	~~393~~7		$	~~3,480~~371
Gains (losses) on divestitures, net (1)	31			815
Gains (losses) on divestitures, net	(5		)	(24		)

~~__________________________________________________________________~~2018 During the three months ended March 31, 2018, the Company divested of its Alaska nonoperated assets, included in the Exploration and Production reporting segment, for net proceeds of $383 million and net losses of $30 million in 2018 and $154 million in the fourth quarter of 2017.

~~(1)~~5. ~~Includes~~Suspended ~~the~~Exploratory ~~$126~~Well ~~million gain related to the 2017 property exchange discussed below.~~Costs

~~2018 During~~The ~~the~~Company’s ~~nine~~suspended ~~months~~exploratory ~~ended~~well ~~September~~costs 30were $460 million at March 31, 2019, and $444 million at December 31, 2018. For exploratory wells, drilling costs are capitalized, or “suspended,” on the ~~Company~~balance ~~divested~~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 ~~following~~reserves ~~U.S.~~and ~~onshore~~the economic and ~~Gulf~~operating viability of ~~Mexico~~the ~~assets:~~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 three months ended March 31, 2019, there was no exploration expense recorded for suspended exploratory well costs previously capitalized for greater than one year at December 31, 2018.

•6. ~~Alaska~~Current nonoperated assets, included in the Exploration and Production and Other Midstream reporting segments, for net proceeds of $370 million and net losses of $33 million in 2018 and $154 million in the fourth quarter of 2017.Liabilities

•Accounts ~~Ram~~Payable Accounts ~~Powell~~payable, ~~nonoperated~~trade ~~assets~~included inliabilities ~~the~~of ~~Gulf~~$248 million ofat ~~Mexico~~March 31, ~~included~~2019, inand $180 million at December 31, 2018, representing the ~~Exploration~~amount ~~and~~by ~~Production~~which ~~reporting~~checks ~~segment,~~issued ~~resulting~~but not presented to the Company’s banks for collection exceeded balances in aapplicable ~~net~~bank ~~gain~~accounts. ofChanges ~~$67~~in ~~million~~these liabilities are classified as cash flows from financing activities.

2017 During the nine months ended September 30, 2017, the Company divested of the following U.S. onshore assets:

• Eagleford assets in South Texas, included in the Exploration and Production reporting segment, for net proceeds of $2.1 billion and a net gain of $730 million

• Marcellus assets in Pennsylvania, included in the Exploration and Production and Other Midstream reporting segments, for net proceeds of $758 million and net losses of $56 million in 2017 and $129 million in the fourth quarter of 2016

• Eaglebine assets in Southeast Texas, included in the Exploration and Production reporting segment, for net proceeds of $533 million and a net gain of $282 million

• Utah CBM assets, included in the Exploration and Production and WES Midstream reporting segments, for net proceeds of $69 million and a net loss of $52 million

Property Exchange On March 17, 2017, WES acquired a third party’s 50% nonoperated interest in the DBJV System in exchange for WES’s 33.75% interest in nonoperated Marcellus midstream assets and $155 million in cash. WES recognized a gain of $126 million as a result of this transaction. Following the acquisition, the DBJV System is 100% owned by WES and consolidated by Anadarko.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Impairments

Impairments of Long-Lived Assets

2018 During the nine months ended September 30, 2018, the Company expensed $319 million primarily related to the following:

• $145 million in the third quarter of 2018 related to hard-minerals properties due to the Company’s primary consumer of coal stating its intent to retire its existing coal-fired power generation plant earlier than expected, coupled with the outlook for limited new markets for the Company’s coal in the Rockies region. These coal assets had a post-impairment fair value of $15 million.

• $126 million 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.

2017 During the nine months ended September 30, 2017, the Company expensed $383 million primarily related to the following:

• $211 million related to oil and gas properties in the Gulf of Mexico, included in the Exploration and Production reporting segment, due to lower forecasted commodity prices at that time. The assets had a post-impairment fair value of $231 million.

• $168 million related to U.S. onshore midstream properties, included in the WES Midstream reporting segment, primarily due to a reduced throughput fee as a result of a producer’s bankruptcy. The assets had a post-impairment fair value of $58 million.

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. During the nine months ended September 30, 2018, the Company recognized $158 million of impairments of unproved Gulf of Mexico properties primarily related to blocks where the Company determined it would no longer pursue activities. The Company recognized $586 million of impairments of unproved Gulf of Mexico properties during the nine months ended September 30, 2017, of which $463 million related to the Shenandoah project. The unproved property balance related to the Shenandoah project originated from the purchase price allocated to the Gulf of Mexico exploration projects from the acquisition of Kerr-McGee Corporation in 2006.

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 other additional impairments.

6. Suspended Exploratory Well Costs

The Company’s suspended exploratory well costs were $510 million at September 30, 2018, and $525 million at December 31, 2017. 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 nine months ended September 30, 2018, there was no exploration expense recorded for suspended exploratory well costs previously capitalized for greater than one year at December 31, 2017.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Current Liabilities

Accounts Payable Accounts payable, trade included liabilities of $205 million at September 30, 2018, and $219 million at December 31, 2017, 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:

	September 30,			December 31,
millions	March 31, 2019			December 31, 2018
millions	2018			2017
Accrued income taxes		$	211		$	167
Accrued income taxes	$	79		$	71
Interest payable		159			267
Interest payable	169			246
Production, property, and other taxes payable		314			309
Production, property, and other taxes payable	344			216
Accrued employee benefits		153			319
Accrued employee benefits	270			210
Derivatives		121			89
Derivatives	491			384
Operating lease liabilities		245			—
Other	~~149~~	137		~~183~~	144
Total other current liabilities	$	~~1,502~~$	1,340	$	~~1,310~~$	1,295

8.15 | ~~Derivative~~APC 2019 ~~Instruments~~FORM 10-Q



	FINANCIAL STATEMENTS FOOTNOTES	Table of Contents

7. 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.

18Oil 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 March 31, 2019. The following is a summary of the Company’s oil derivative instruments at March 31, 2019:

Table of Contents



	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

~~ANADARKO~~A ~~PETROLEUM~~three-way ~~CORPORATION~~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.

~~NOTES~~APC 2019 TOFORM ~~CONSOLIDATED FINANCIAL STATEMENTS~~10-Q | 16

~~(Unaudited)~~FINANCIAL STATEMENTSFOOTNOTES Table of Contents

87. Derivative Instruments (Continued)

~~Oil~~Anadarko ~~and Natural~~Interest-~~Gas~~Rate ~~Production/Processing~~Derivatives ~~Derivative~~(Excluding ~~Activities~~WES) ~~The~~Anadarko ~~oil~~has ~~prices~~outstanding ~~listed~~interest-rate ~~below~~swap ~~are~~contracts ato ~~combination~~manage ofinterest-rate ~~NYMEX~~risk ~~WTI~~associated ~~and~~with ~~Intercontinental~~anticipated ~~Exchange,~~debt ~~Inc~~issuances. ~~(ICE) Brent Blend prices.~~ The ~~natural-gas~~Company ~~prices~~has ~~listed~~locked ~~below~~in ~~are~~a ~~NYMEX~~fixed ~~Henry~~interest ~~Hub~~rate ~~prices.~~in ~~The~~exchange ~~following~~for is a ~~summary~~floating ofinterest ~~the~~rate ~~Company’s~~indexed ~~derivative instruments related~~ to ~~oil~~the ~~and natural~~three-~~gas~~month ~~production/processing~~LIBOR. ~~derivative activities at September 30, 2018:~~

	2018 Settlement		2019 Settlement
Oil
Two-Way Collars (MBbls/d)	108		—
Average price per barrel (WTI)
Ceiling sold price (call)	$	60.48	$	—
Floor purchased price (put)	$	50.00	$	—
Three-Way Collars (MBbls/d)	—		87
Average price per barrel (WTI and Brent)
Ceiling sold price (call)	$	—	$	72.98
Floor purchased price (put)	$	—	$	56.72
Floor sold price (put)	$	—	$	46.72
Fixed-Price Contracts (MBbls/d)	84		—
Average price per barrel (Brent)	$	61.45	$	—
Natural Gas
Three-Way Collars (thousand MMBtu/d)	250		—
Average price per MMBtu (Henry Hub)
Ceiling sold price (call)	$	3.54	$	—
Floor purchased price (put)	$	2.75	$	—
Floor sold price (put)	$	2.00	$	—
Fixed-Price Contracts (thousand MMBtu/d)	280		—
Average price per MMBtu (Henry Hub)	$	3.02	$	—

At March 31, 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 March 31, 2019:

A two-way collar is a combination of two options: a sold call and a purchased put. The sold call establishes the maximum price that the Company will receive for the contracted commodity volumes. The purchased put establishes the minimum price that the Company will receive for the contracted volumes.



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	%

ADerivative ~~three-way~~settlements ~~collar~~and iscollateralization aare ~~combination~~classified ofas ~~three~~cash ~~options:~~flows afrom ~~sold~~operating ~~call,~~activities aunless ~~purchased~~the ~~put,~~derivatives ~~and~~contain aan ~~sold~~other-than-insignificant ~~put.~~financing ~~The~~element, ~~sold~~in ~~call~~which ~~establishes~~case the ~~maximum~~settlements ~~price~~and ~~that~~collateralization ~~the~~are ~~Company~~classified ~~will~~as ~~receive~~cash ~~for~~flows ~~the~~from ~~contracted~~financing ~~commodity volumes~~activities. ~~The~~As ~~purchased~~a ~~put~~result ~~establishes~~of ~~the~~prior ~~minimum~~extensions ~~price~~of ~~that~~reference-period ~~the~~start ~~Company~~dates ~~will~~without ~~receive~~settlement ~~for~~of the ~~contracted~~related ~~volumes~~interest-rate ~~unless~~derivative obligations, the ~~market~~interest-rate ~~price~~derivatives ~~for~~in ~~the~~Anadarko’s ~~commodity~~portfolio ~~falls~~contain ~~below~~an ~~the~~other-than-insignificant ~~sold~~financing ~~put~~element, ~~strike~~and ~~price~~therefore, atany ~~which~~settlements, ~~point~~collateralization, ~~the~~or ~~minimum~~cash ~~price~~payments ~~equals~~for ~~the~~amendments ~~reference~~related ~~price~~to (ethese extended interest-rate derivatives are classified as cash flows from financing activities.~~g.,~~ ~~NYMEX)~~Net ~~plus~~cash ~~the~~payments ~~excess~~related to settlements and amendments of interest-rate swap agreements were $41 million during the ~~purchased~~three ~~put~~months ~~strike~~ended ~~price~~March ~~over~~31, 2019, and $46 million during the ~~sold~~three ~~put~~months ~~strike~~ended ~~price~~March 31, 2018.

19WES 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 March 31, 2019:

Table of Contents



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	%

~~ANADARKO~~17 | APC 2019 ~~PETROLEUM~~FORM ~~CORPORATION~~10-Q

~~NOTES~~FINANCIAL TOSTATEMENTSFOOTNOTES ~~CONSOLIDATED~~Table ~~FINANCIAL~~of ~~STATEMENTS~~Contents

7. Derivative Instruments (~~Unaudited~~Continued)

8. Derivative Instruments (Continued)

Interest-Rate Derivatives 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.

In August 2018, the Company amended an interest-rate swap with a notional principal amount of $200 million, extending the mandatory termination date from 2018 to 2023 in exchange for a cash payment of approximately $10 million.

At September 30, 2018, 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 September 30, 2018:

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 the Company’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 $101 million during the nine months ended September 30, 2018, and $118 million during the nine months ended September 30, 2017.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 Assets~~					Gross Derivative Liabilities
millions	March 31,	~~September 30,~~		December 31,	~~December 31,~~		~~September~~March 3031,				December 31,
Balance Sheet Classification		~~2018~~2019			~~2017~~2018		~~2018~~	2019			~~2017~~	2018
Commodity derivatives
Commodity derivatives - Anadarko
Other current assets		$	245		$	7300	$	—$	(27	)	$	(1$	)(126	)
Other assets		—			2		—				—
Other current liabilities		—			1			(2		)		(6		)
Other current liabilities		20			45		(440		)		(206		)
		45			301			(29		)		(132		)
Other liabilities		15			—		(56		)		(2		)
Interest-rate derivatives - Anadarko (1)
		37			54		(496		)		(209		)
Other current assets		21			22			—				—
Interest-rate derivatives
Other assets		30			34			—				—
Other current assets		21			14		—				—
Other current liabilities		—			—			(83		)		(82		)
Other assets		54			40		—				—
Other liabilities		—			—			(1,237		)		(1,156		)
Other current liabilities		—			—		(80		)		(236		)
		51			56			(1,320		)		(1,238		)
Other liabilities		—			—		(1,028		)		(1,183		)
Interest-rate derivatives - WES
		75			54		(1,108		)		(1,419		)
Other current liabilities		—			—			(44		)		(8		)
Total derivatives		$	~~112~~96		$	~~108~~357	$	~~(1,604~~$	)(1,393	)	$	~~(1,628~~$	)(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	~~Three Months Ended~~						~~Nine Months Ended~~
millions	March 31,	~~September 30,~~						~~September 30,~~
Classification of (Gain) Loss Recognized		~~2018~~2019			~~2017~~2018			~~2018~~			~~2017~~
Commodity derivatives
Commodity derivatives - Anadarko
Gathering, processing, and marketing sales		$	12		$	—1		$	3		$	—
(Gains) losses on derivatives, net		~~104~~149			43162			~~734~~			~~(164~~		)
Interest-rate derivatives
Interest-rate derivatives - Anadarko (1)
(Gains) losses on derivatives, net		~~(72~~128		)	39(127		)	~~(231~~		)	~~131~~
Total (gains) losses on derivatives, net		$	33		$	82		$	506		$	(33	)
Interest-rate derivatives - WES
(Gains) losses on derivatives, net		36			—
Total (gains) losses on derivatives, net		$	315		$	36

21(1) Excludes amounts related to WES interest-rate swap agreements.

~~Table~~APC 2019 ofFORM ~~Contents~~10-Q | 18

~~ANADARKO~~FINANCIAL ~~PETROLEUM~~STATEMENTSFOOTNOTES ~~CORPORATION~~Table of Contents

~~NOTES~~7. TODerivative ~~CONSOLIDATED~~Instruments ~~FINANCIAL STATEMENTS~~(Continued)

(Unaudited)

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 ~~September~~March 3031, ~~2018~~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 ~~substantially.~~above ~~For example, based on~~ the ~~derivative positions as of September 30, 2018, if Anadarko’s~~ credit ~~rating were to be downgraded one level by either S&P or Moody’s, the Company could be required to post additional collateral of up to approximately $124 million~~threshold. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed was $1.42 billion (net of $49123 million of collateral) at ~~September~~March 3031, ~~2018~~2019, and $1.41 billion (net of $~~170~~66 million of collateral) at December 31, ~~2017~~2018.

2219 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

~~ANADARKO~~7. ~~PETROLEUM~~Derivative ~~CORPORATION~~Instruments (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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	~~Collateral~~			Total
September 30, 2018
March 31, 2019
Assets
Commodity derivatives	$	—		$	37		$	—	$	(35	)		$	—		$	2
Anadarko (2)
Interest-rate derivatives	—			75			—		—				—			75
Commodity derivatives	$	—		$	45		$	—	$	(27	)		$	—		$	18
Total derivative assets	$	—		$	112		$	—	$	(35	)		$	—		$	77
Interest-rate derivatives	—			51			—		—				—			51
Total derivative assets	$	—		$	96		$	—	$	(27	)		$	—		$	69
Liabilities
Commodity derivatives	$	—		$	(496	)	$	—	$	35			$	6		$	(455	)
Anadarko (2)
Interest-rate derivatives	—			(1,108		)	—		—				49			(1,059		)
Commodity derivatives	$	—		$	(29	)	$	—	$	27			$	—		$	(2	)
Total derivative liabilities	$	—		$	(1,604	)	$	—	$	35			$	55		$	(1,514	)
Interest-rate derivatives	—			(1,320		)	—		—				123			(1,197		)
December 31, 2017
WES
Interest-rate derivatives	—			(44		)	—		—				—			(44		)
Total derivative liabilities	$	—		$	(1,393	)	$	—	$	27			$	123		$	(1,243	)
December 31, 2018
Assets
Commodity derivatives	$	1		$	53		$	—	$	(46	)		$	(1	)	$	7
Anadarko (2)
Interest-rate derivatives	—			54			—		—				—			54
Commodity derivatives	$	1		$	300		$	—	$	(127	)		$	—		$	174
Total derivative assets	$	1		$	107		$	—	$	(46	)		$	(1	)	$	61
Interest-rate derivatives	—			56			—		—				—			56
Total derivative assets	$	1		$	356		$	—	$	(127	)		$	—		$	230
Liabilities
Commodity derivatives	$	(1	)	$	(208	)	$	—	$	46			$	3		$	(160	)
Anadarko (2)
Interest-rate derivatives	—			(1,419		)	—		—				170			(1,249		)
Commodity derivatives	$	(2	)	$	(130	)	$	—	$	127			$	2		$	(3	)
Total derivative liabilities	$	(1	)	$	(1,627	)	$	—	$	46			$	173		$	(1,409	)
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.

23(2) Excludes amounts related to WES interest-rate swap agreements.

~~Table~~APC 2019 ofFORM ~~Contents~~10-Q | 20

~~ANADARKO~~FINANCIAL ~~PETROLEUM~~STATEMENTSFOOTNOTES ~~CORPORATION~~Table of Contents

~~NOTES~~8. ~~TO CONSOLIDATED FINANCIAL STATEMENTS~~Debt

~~(Unaudited)~~Debt Activity The following summarizes the Company’s borrowing activity, after eliminating the effect of intercompany transactions, during the three months ended March 31, 2019:

9. Tangible Equity Units



		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 364-Day Facility
		—				420				420			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		12				1				13			Amortization of discounts, premiums, and debt issuance costs
Balance at March 31, 2019		$	10,466			$	7,208			$	17,674

In June 2015, the Company issued 9.2 million 7.50% TEUs at a stated amount of $50.00 per TEU and raised net proceeds of $445 million. Each TEU was comprised of a prepaid equity purchase contract for common units of WGP and a senior amortizing note. The prepaid equity purchase contract was considered a freestanding financial instrument, indexed to WGP common units, and met the conditions for equity classification.

Equity Component On June 7, 2018, the mandatory settlement date, Anadarko settled 9.2 million outstanding TEUs in exchange for approximately 8.2 million WGP common units based on the determined final settlement rate of 0.8921 WGP common units per outstanding TEU. See settlement of tangible equity units in the Company’s Consolidated Statement of Equity.

Debt Component Each senior amortizing note had an initial principal amount of $10.95 and bore interest at 1.50% per year. The final installment payment of $9 million was made on June 7, 2018. For activity related to the senior amortizing notes, see Note 10—Debt.

10. Debt

Debt Activity The following summarizes the Company’s borrowing activity, after eliminating the effect of intercompany transactions, during the nine months ended September 30, 2018:

	Carrying Value
millions	WES			WGP (1)		Anadarko (2)			Anadarko Consolidated			Description
Balance at December 31, 2017	$	3,465		$	28	$	11,965		$	15,458
Issuances
	394			—		—			394			WES 4.500% Senior Notes due 2028
	687			—		—			687			WES 5.300% Senior Notes due 2048
	396			—		—			396			WES 4.750% Senior Notes due 2028
	342			—		—			342			WES 5.500% Senior Notes due 2048
Borrowings
	320			—		—			320			WES RCF
Repayments
	(690		)	—		—			(690		)	WES RCF
	—			—		(114		)	(114		)	7.050% Debentures due 2018
	(350		)	—		—			(350		)	WES 2.600% Senior Notes due 2018
	—			—		(17		)	(17		)	TEUs - senior amortizing notes
Other, net	2			—		39			41			Amortization of discounts, premiums, and debt issuance costs
Balance at September 30, 2018	$	4,566		$	28	$	11,873		$	16,467

__________________________________________________________________


⁽¹⁾	Excludes WES.

~~(2)~~Debt The ~~Excludes~~following ~~WES~~summarizes ~~and~~the ~~WGP.~~Company’s outstanding debt, including finance lease liabilities, after eliminating the effect of intercompany transactions:



millions	Anadarko ⁽¹⁾				WES				Anadarko Consolidated
March 31, 2019
Total borrowings at face value		$	11,893			$	7,260			$	19,153
Net unamortized discounts, premiums, and debt issuance costs ⁽²⁾		(1,427		)		(52		)		(1,479		)
Total borrowings ⁽³⁾		10,466				7,208				17,674
Finance lease liabilities		250				—				250
Less short-term debt		21				2,000				2,021
Total long-term debt		$	10,695			$	5,208			$	15,903

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

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Debt (Continued)

Debt The following summarizes the Company’s outstanding debt, including capital lease obligations, after eliminating the effect of intercompany transactions:

millions	WES			WGP (1)		Anadarko (2)			Consolidated
September 30, 2018
Total borrowings at face value	$	4,620		$	28	$	13,383		$	18,031
Net unamortized discounts, premiums, and debt issuance costs (3)	(54		)	—		(1,510		)	(1,564		)
Total borrowings (4)	4,566			28		11,873			16,467
Capital lease obligations	—			—		226			226
Less short-term debt	—			28		910			938
Total long-term debt	$	4,566		$	—	$	11,189		$	15,755
December 31, 2017
Total borrowings at face value	$	3,490		$	28	$	13,514		$	17,032
Net unamortized discounts, premiums, and debt issuance costs (3)	(25		)	—		(1,549		)	(1,574		)
Total borrowings (4)	3,465			28		11,965			15,458
Capital lease obligations	—			—		231			231
Less short-term debt	—			—		142			142
Total long-term debt	$	3,465		$	28	$	12,054		$	15,547

__________________________________________________________________


⁽¹⁾	Excludes WES.

(2) ~~Excludes~~Unamortized ~~WES~~discounts, premiums, and ~~WGP~~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) ~~Unamortized~~The ~~discounts,~~Company’s ~~premiums~~outstanding borrowings, ~~and~~except ~~debt~~for ~~issuance~~borrowings ~~costs~~under ~~are amortized over~~ the ~~term~~WGP ofRCF, ~~the related debt. Debt issuance costs related to RCFs~~ are ~~included~~senior ~~in other current assets and other assets on the Company’s Consolidated Balance Sheets~~unsecured.

~~(4)~~21 | APC 2019 ~~The~~FORM ~~Company’s outstanding borrowings, except for borrowings under the WGP RCF, are senior unsecured.~~10-Q

~~Fair~~FINANCIAL ~~Value The~~STATEMENTSFOOTNOTES ~~Company~~Table ~~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 $17.8 billion at September 30, 2018, and $17.7 billion at December 31, 2017.Contents

258. Debt (Continued)

~~Table~~Fair Value The Company uses a market approach to determine the fair value of ~~Contents~~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 $19.3 billion at March 31, 2019, and $16.8 billion at December 31, 2018.

~~ANADARKO~~Anadarko ~~PETROLEUM~~Debt ~~CORPORATION~~(Excluding WES) In January 2019, the $2.0 billion 364-day senior unsecured RCF (364-Day Facility) expired. At March 31, 2019, the Company had a $3.0 billion senior unsecured RCF maturing in January 2023 (APC RCF). At March 31, 2019, Anadarko had no outstanding borrowings under the APC RCF and was in compliance with all covenants.

~~NOTES~~In TOMarch ~~CONSOLIDATED~~2019, ~~FINANCIAL~~Anadarko ~~STATEMENTS~~repaid $600 million of 8.700% Senior Notes at maturity and redeemed its $300 million of 6.950% Senior Notes due June 2019.

~~(Unaudited)~~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 March 31, 2019, as the Company has the ability and intent to refinance these obligations using long-term debt, should a put be exercised.

10The 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. ~~Debt~~ ~~(Continued)~~See Note 9—Equity-Method Investments in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

~~Anadarko~~WES ~~Borrowings In~~and ~~January~~WGP ~~2018~~Debt Effective on February 15, ~~the~~2019, ~~Company~~WES amended ~~its~~the ~~$3.0 billion~~maturity date of its senior unsecured RCF from February 2023 to ~~extend~~February ~~the~~2024, ~~maturity~~and ~~date~~upon tocompletion ~~January~~of ~~2022~~the ~~(APC~~WES ~~RCF)~~Merger, ~~and~~expanded ~~amended~~the ~~its~~borrowing capacity from $1.5 billion to $2.0 billion ~~364-day~~(WES ~~senior unsecured~~ RCF). toDuring ~~extend~~ the ~~maturity~~three ~~date~~months toended ~~January~~March 31, 2019, ~~(364-Day~~WES ~~Facility)~~borrowed $420 million under its RCF, which was used for general partnership purposes. At ~~September~~March 3031, ~~2018~~2019, ~~Anadarko~~WES had no outstanding borrowings under ~~the~~its ~~APC~~ RCF orof ~~the~~$640 million ~~364-Day~~at ~~Facility~~an interest rate of 3.79%, outstanding letters of credit of $5 million, available borrowing capacity of $1.4 billion, and was in compliance with all covenants.

AtIn ~~September~~February 302019, ~~2018,~~WES ~~Anadarko~~borrowed ~~had~~$2.0 ~~outstanding~~billion ~~borrowings~~under its 364-day senior unsecured credit facility (WES 364-Day Facility) to fund substantially all of ~~$600 million~~the cash portion of ~~8.700%~~the ~~Senior~~consideration ~~Notes~~under ~~due~~the ~~March~~WES ~~2019~~midstream asset contribution and ~~$300 million~~sale and the payment of 6related transaction costs.~~950%~~ ~~Senior~~The ~~Notes~~WES ~~due~~364-Day ~~June~~Facility ~~2019~~will ~~classified~~mature ason ~~short~~February 27, 2020, the day prior to the one-~~term~~year ~~debt~~anniversary onof the ~~Company’s~~completion ~~Consolidated~~of ~~Balance~~the ~~Sheet~~WES Merger. ~~Short-term~~Net cash proceeds received from future asset sales and debt ~~also~~or ~~included~~equity offerings by WES must be used to repay amounts outstanding under the ~~current~~WES ~~portion~~364-Day Facility. At March 31, 2019, WES had outstanding borrowings under its WES 364-Day Facility of ~~the~~$2.0 ~~Company’s~~billion ~~capital~~at ~~lease~~an ~~obligations~~interest rate of 3.87% and was in compliance with all covenants. WES intends to refinance the obligations under the 364-Day Facility prior to its maturity in February 2020.

~~Anadarko’s~~In ~~Zero~~March ~~Coupons~~2019, ~~can be put to~~ the ~~Company~~$35 million insenior ~~October~~secured ofRCF ~~each~~(WGP ~~year,~~RCF) inmatured ~~whole~~following ~~or in part, for~~ the ~~then-accreted~~completion ~~value~~ of the ~~outstanding~~WES ~~Zero Coupons~~Merger. ~~None~~During of the ~~Zero~~three ~~Coupons~~months ~~were~~ended ~~put~~March to31, ~~the Company in October 2018. The Zero Coupons can next be put to the Company in October~~ 2019, ~~which,~~WES ifmade ~~put~~repayments inof ~~whole, would be~~ $~~980~~28 million for the WGP RCF.

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 81—~~Equity-Method~~Summary ~~Investments~~of inSignificant ~~the~~Accounting ~~Company’s~~Policies ~~Annual~~for ~~Report~~additional oninformation ~~Form~~related ~~10-K~~to ~~for~~ the ~~year~~WES ~~ended December 31, 2017~~Merger.

~~WES~~APC 2019 ~~and~~FORM WGP Borrowings In February 2018, WES amended its RCF to extend the maturity date from February 2020 to February 2023 and expanded the borrowing capacity to $1.5 billion (WES RCF). As part of the amendment, the WES RCF is expandable to a maximum of $2.0 billion. During the nine months ended September 30, 2018, WES borrowed $320 million under its RCF, which was used for general partnership purposes, and made repayments of $690 million. At September 30, 2018, WES had no outstanding borrowings under its RCF, outstanding letters of credit of $5 million, available borrowing capacity of $1.495 billion, and was in compliance with all covenants. 10-Q | 22

InFINANCIAL ~~August~~STATEMENTSFOOTNOTES ~~2018,~~Table ~~WES completed a public offering~~ of $400 million aggregate principal amount of 4.750% Senior Notes due August 2028 and a public offering of $350 million aggregate principal amount of 5.500% Senior Notes due August 2048. The net proceeds from the public offerings were used to repay the maturing WES $350 million of 2.600% Senior Notes due August 2018, and amounts outstanding under the WES RCF. The remaining net proceeds were used for general partnership purposes, including to fund capital expenditures.Contents

~~In March 2018, WES completed a public offering of $400 million aggregate principal amount of 4~~9.~~500%~~ Senior Notes due March 2028 and a public offering of $700 million aggregate principal amount of 5.300% Senior Notes due March 2048. Net proceeds from the public offerings were used to repay amounts outstanding under the WES RCF and for general partnership purposes, including to fund capital expenditures. Leases

InOperating ~~February~~Leases At ~~2018~~March 31, ~~WGP~~2019, ~~voluntarily~~total ~~reduced~~lease ~~the~~liabilities ~~aggregate~~related ~~commitments of the lenders under its senior secured RCF maturing in March 2019 from $250 million~~ to ~~$35 million~~operating ~~(WGP~~leases ~~RCF).~~were Obligations under the WGP RCF are secured by a first priority lien on all of WGP’s assets (not including the consolidated assets of WES) as well as all equity interests owned by WGP. At September 30, 2018, WGP had outstanding borrowings of $28551 million atand anprimarily ~~interest~~related ~~rate~~to ofoffshore ~~4.25%,~~and ~~classified~~onshore asdrilling ~~short-term~~rigs ~~debt on the Company’s Consolidated Balance Sheet,~~ and ~~had~~real ~~available borrowing capacity of $7 million~~estate. ~~At September 30, 2018, WGP was in compliance with all covenants.~~

26The operating lease liabilities included $216 million for three 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.

~~Table~~Additionally, the Company has $193 million of ~~Contents~~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.

~~ANADARKO~~Finance ~~PETROLEUM~~Leases At ~~CORPORATION~~March 31, 2019, total lease liabilities related to finance leases were $250 million and primarily related to an FPSO for the Company’s TEN field in Ghana. The initial FPSO lease term ends in 2026 with annual renewal periods for an additional 10 years, annual purchase options that decrease over time, and no residual value guarantees.

~~NOTES~~The TOfollowing ~~CONSOLIDATED~~table ~~FINANCIAL~~summarizes ~~STATEMENTS~~information related to the Company’s leases at March 31, 2019:

(Unaudited)



millions except lease term and discount rate	Operating Leases				Finance Leases
Assets
Other assets		$	534			$	—
Net properties and equipment		—				186
Total lease assets ⁽¹⁾		$	534			$	186

Liabilities
Current liabilities
Other current liabilities		$	245			$	—
Short-term debt - Anadarko		—				21
Long-term liabilities
Other		306				—
Long-term debt - Anadarko		—				229
Total lease liabilities ⁽¹⁾		$	551			$	250

Weighted-average remaining lease term (years)		5				16
Weighted-average discount rate ⁽²⁾		4.3		%		15.4		%

~~11. Income~~(1) ~~Taxes~~Includes additions to ROU assets and lease liabilities of $60 million related to operating leases and $6 million related to finance leases for the three months ended March 31, 2019.

~~Upon~~(2) ~~enactment~~The ofFPSO ~~the~~finance ~~Tax~~lease ~~Reform~~commenced ~~Legislation~~prior ~~on December 22, 2017, the Company remeasured its U.S. deferred tax assets and liabilities based on the reduction of the U.S. corporate tax rate from 35%~~ to ~~21%. During~~ the ~~third quarter of 2018, the Company recognized an additional net tax benefit of $5 million related to the~~ adoption of ~~the~~ASU ~~Tax~~2016-02, ~~Reform~~Leases ~~Legislation~~(Topic ~~under Staff Accounting Bulletin 118~~842). ~~The~~In ~~Company~~accordance ~~expects~~with toprevious ~~complete the~~ accounting ~~for the income tax effects related to the adoption of the Tax Reform Legislation~~guidance, ~~including its accounting policy related to Global Intangible Low Taxed Income, and record any remaining adjustments to provisional tax amounts, which could be material to income tax expense, before~~ the ~~end~~implied ofrate ~~the~~is ~~measurement~~based ~~period~~ on ~~December 21, 2018. See Note 13—Income Taxes in~~ the ~~Company’s~~fair ~~Annual~~value ~~Report~~of ~~on Form 10-K for~~ the ~~year~~underlying ~~ended December 31, 2017~~asset.

23 | APC 2019 FORM 10-Q



	FINANCIAL STATEMENTS FOOTNOTES	Table of Contents

9. Leases (Continued)

The following table summarizes the Company’s lease cost before amounts recovered from partners:



	Three Months Ended
millions	March 31, 2019
Operating lease cost		$	78
Short-term lease cost		19
Variable lease cost		39
Finance lease cost
Amortization of ROU assets		10
Interest on lease liabilities		9
Total lease cost		$	155

The following table summarizes cash paid for amounts included in the measurement of lease liabilities:



	Three Months Ended
	March 31, 2019
millions	Operating Leases			Finance Leases
Operating cash flows		$	78		$	9
Investing cash flows		24			—
Financing cash flows		—			4

The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities recorded on the Company’s Consolidated Balance Sheet at March 31, 2019:



millions	Operating Leases ⁽¹⁾			Finance Leases
Remainder of 2019		$	185		$	46
2020		166			51
2021		60			50
2022		43			46
2023		30			43
Thereafter		142			324
Total lease payments		$	626		$	560
Less portion representing imputed interest		75			310
Total lease liabilities		$	551		$	250


⁽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.

APC 2019 FORM 10-Q | 24



	FINANCIAL STATEMENTS FOOTNOTES	Table of Contents

9. Leases (Continued)

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 Sheet. Refer to Note 1—Summary of Significant Accounting Policies for additional information.

25 | APC 2019 FORM 10-Q



	FINANCIAL STATEMENTS FOOTNOTES	Table of Contents

10. Income Taxes

The following summarizes income tax expense (benefit) and effective tax rates:

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
millions except percentages	~~2018~~2019			~~2017~~2018			~~2018~~			~~2017~~
Current income tax expense (benefit)	$	~~146~~168		$	~~430~~90		$	~~383~~		$	~~670~~
Deferred income tax expense (benefit)	~~110~~(2		)	~~(855~~36		)	~~124~~			~~(1,036~~		)
Total income tax expense (benefit)	$	~~256~~166		$	~~(425~~126	)	$	~~507~~		$	~~(366~~	)
Income (loss) before income taxes	~~683~~262			~~(1,066~~300		)	~~1,125~~			~~(1,616~~		)
Effective tax rate	3763		%	4042		%	45		%	23		%

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 nine~~ months ended ~~September~~March 3031, ~~2018~~2019, 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 reported a loss before~~ income taxes for the three and nine months ended September 30, 2017. As a result, items that ordinarily increase or decrease the Company’s tax rate will have the opposite effect. The variance from the U.S. federal statutory rate of 35% for the three and nine months ended September 30, 2017 was primarily attributable to ~~the~~noncontrolling ~~following items:~~interests

•The ~~tax~~variance ~~impact~~ from ~~foreign~~the ~~operations~~U.S. federal statutory rate of 21% for the three months ended March 31, 2018, was primarily attributable to the following items:

•– ~~non-deductible~~state ~~Algerian~~taxes, ~~exceptional~~net ~~profits~~of ~~tax~~federal ~~for Algerian income tax purposes~~benefits

•– ~~net~~tax ~~changes~~impact infrom ~~uncertain~~foreign ~~tax positions~~operations

•– ~~income~~non-deductible ~~attributable~~Algerian toexceptional ~~noncontrolling~~profits ~~interests~~tax for Algerian income tax purposes

27– net changes in uncertain tax positions

~~Table~~– ofincome ~~Contents~~attributable to noncontrolling interests.

~~ANADARKO~~The ~~PETROLEUM~~Company ~~CORPORATION~~recognized a tax benefit of $346 million as of March 31, 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 March 31, 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.

~~NOTES~~APC 2019 TOFORM ~~CONSOLIDATED FINANCIAL STATEMENTS~~10-Q | 26

~~(Unaudited)~~FINANCIAL STATEMENTSFOOTNOTES Table of Contents

11. ~~Income~~ ~~Taxes (Continued)~~Contingencies

~~The~~Litigation There ~~Company~~are ~~recognized~~no amaterial ~~net~~developments tax benefit of $346 million as of September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, due to uncertainty related to the deductibility of the settlement payment. Due to the deduction of the settlement payment, the Company had a net operating loss carryback for 2015, which resulted in apreviously ~~tentative~~reported ~~tax~~contingencies ~~refund~~nor ofare ~~$881 million~~there inany ~~2016.~~other ~~The~~material ~~IRS~~matters ~~has~~that ~~audited~~have ~~this~~arisen ~~position~~since ~~and, in April 2018, issued a final notice of proposed adjustment denying~~ the ~~deductibility~~filing 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~~Annual ~~claim.~~Report Ason aForm ~~result,~~10-K ~~the~~for ~~Company intends to file a petition with~~ the ~~U.S.~~year ~~Tax~~ended ~~Court to dispute the disallowances, and pursuant to standard U.S. Tax Court procedures, the Company is not required to repay the $881~~December ~~million refund to dispute the IRS’s position. Accordingly~~31, 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 potential 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~~2018. 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 anticipate a decision to be entered within the next three years.

12. ~~Contingencies~~ Pension Plans and Other Postretirement Benefits

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, 2017.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. 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~~	Other Benefits
millions	~~2018~~	2019			~~2017~~	2018			~~2018~~		2019		~~2017~~		2018
Three Months Ended September 30
Three Months Ended March 31
Service cost	$	23$	22		$	22$	23		$	—	$	—	$	—	$	—
Interest cost	19	20			21	19			3		3		3		3
Expected (return) loss on plan assets	~~(20~~	(21	)	)	~~(21~~	(21	)	)	—		—		—		—
Amortization of net actuarial loss (gain)	6	4			7	7			—		—		—		—
Amortization of net prior service cost (credit)	—	—			(1	—	)		(6		)(1		(6)		)(6		)
Settlement expense	9	4			22	—			—		—		—		—
Termination benefits expense	7				—				—				—
Net periodic benefit cost (1)		$	29			$	28				$	2			$	(3	)
Net periodic benefit cost (1)	$	44			$	50			$	(3	)		$	(3	)
Nine Months Ended September 30
Service cost	$	68			$	64			$	1			$	1
Interest cost	57				63				8				9
Expected (return) loss on plan assets	(61		)		(63		)		—				—
Amortization of net actuarial loss (gain)	19				20				—				—
Amortization of net prior service cost (credit)	—				(1		)		(18		)		(18		)
Settlement expense	9				80				—				—
Termination benefits expense	7				4				—				—
Net periodic benefit cost (1)	$	99			$	167			$	(9	)		$	(8	)

__________________________________________________________________


⁽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 $~~161~~65 million to funded pension plans and $3621 million to unfunded pension plans during the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019. The Company expects to contribute an additional $126 million to funded pension plans and $26 million to unfunded pension plans during ~~2018~~2019.

2927 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

~~ANADARKO~~13. ~~PETROLEUM~~Stockholders’ ~~CORPORATION~~Equity

~~NOTES~~Earnings TOPer ~~CONSOLIDATED~~Share The ~~FINANCIAL~~Company’s ~~STATEMENTS~~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.

(Unaudited)

14. Stockholders’ Equity

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. See Note 9—Tangible Equity Units for additional information.

The following provides a reconciliation between basic and diluted EPS attributable to common stockholders:

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
millions except per-share amounts	~~2018~~2019			~~2017~~2018			~~2018~~			~~2017~~
Net income (loss)
Net income (loss) attributable to common stockholders	$	~~363~~(15	)	$	~~(699~~121	)	$	~~513~~		$	~~(1,432~~	)
Income (loss) effect of TEUs	—			(23		)	(4		)	(6		)
Less distributions on participating securities	2			—1			4			—
Less undistributed income allocated to participating securities	2			—			1			—
Basic	$	(17	)	$	117
Basic	$	359		$	(701	)	$	504		$	(1,438	)
Income (loss) effect of TEUs	—			(1		)
Income (loss) effect of TEUs	—			—			—			(1		)
Diluted	$	(17	)	$	116
Diluted	$	359		$	(701	)	$	504		$	(1,439	)
Shares
Shares
Average number of common shares outstanding—basic	490			518
Average number of common shares outstanding—basic	499			553			507			552
Dilutive effect of stock options	—			1
Dilutive effect of stock options	1			—			1			—
Average number of common shares outstanding—diluted	490			519
Average number of common shares outstanding—diluted	500			553			508			552
Excluded due to anti-dilutive effect	12			10
Excluded due to anti-dilutive effect	8			11			9			11
Net income (loss) per common share
Net income (loss) per common share
Basic	$	(0.03	)	$	0.23
Basic	$	0.72		$	(1.27	)	$	0.99		$	(2.60	)
Diluted	$	(0.03	)	$	0.22
Diluted	$	0.72		$	(1.27	)	$	0.99		$	(2.61	)
Dividends per common share	$	0.30		$	0.25

30Common 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 three months ended March 31, 2019. No additional share repurchases under the Share-Repurchase Program are anticipated pursuant to the terms of the Chevron Merger Agreement. See Note 1—Summary of Significant Accounting Policies for additional information on the Chevron Merger Agreement.

~~Table~~APC 2019 ofFORM ~~Contents~~10-Q | 28

~~ANADARKO~~FINANCIAL ~~PETROLEUM~~STATEMENTSFOOTNOTES ~~CORPORATION~~Table of Contents

~~NOTES~~14. TONoncontrolling ~~CONSOLIDATED FINANCIAL STATEMENTS~~Interests

~~(Unaudited)~~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.

14WES 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. ~~Stockholders’~~ ~~Equity~~Prior ~~(Continued)~~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 three months ended March 31, 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.

~~Common~~At ~~Stock The~~March ~~Company announced a $2.5 billion Share-Repurchase Program in September 2017~~31, ~~which was expanded to $3.0 billion in February 2018. In July 2018~~2019, ~~the program was further expanded to $4.0 billion and extended through June 30, 2019. The Share-Repurchase Program authorizes the repurchase of the Company~~Anadarko’s ~~common~~ownership ~~stock~~interest in ~~the~~WES ~~open~~consisted ~~market or through private transactions. As~~ of ~~the~~a ~~end of the third quarter of 2018, the Company had completed $3~~55.5 ~~billion~~% oflimited ~~the~~partner ~~Share-Repurchase~~interest ~~Program through ASR Agreements~~ and ~~open-market repurchases. These transactions were accounted for as equity transactions, with all of~~ the ~~repurchased~~entire ~~shares~~non-economic ~~classified~~general aspartner ~~treasury stock~~interest. ~~Additionally,~~The ~~the~~remaining ~~receipt~~44.5% oflimited ~~these~~partner ~~shares~~interest ~~reduced~~in ~~the~~WES ~~average~~was ~~number~~owned ofby ~~shares~~the ~~of common stock outstanding used to compute both basic and diluted EPS~~public.

~~During~~At March ~~the nine months ended September 30~~31, ~~2018~~2019, ~~the~~Anadarko’s ~~Company~~ownership ~~entered~~interest ~~into~~in ~~and~~WES ~~completed~~Operating ~~two~~consisted ~~ASR~~of ~~Agreements~~a ~~and~~2% ~~open-market~~limited ~~repurchases~~partner ~~as presented below:~~interest.

millions except per-share amounts
Agreement Date	Settlement Date	Amount		Average Price per Share		Initial Shares Delivered	Additional Shares Delivered	Total Shares Delivered
ASR Agreements
January 2018	February 2018	$	500	$	58.82	7.0	1.5	8.5
March 2018	June 2018	1,441		65.28		19.1	3.0	22.1
Total ASR Agreements		1,941				26.1	4.5	30.6
Open-market repurchases
August 2018	August 2018	250		66.14		N/A	N/A	3.8
September 2018	September 2018	250		63.11		N/A	N/A	3.9
Total open-market repurchases		500						7.7
Total		$	2,441					38.3

29 | APC 2019 FORM 10-Q

~~Under~~FINANCIAL ~~each~~STATEMENTSFOOTNOTES ~~ASR~~Table ~~Agreement, the Company paid a specific amount in cash and received an initial delivery~~ of shares of the Company’s common stock. The initial delivery of shares represented the minimum number of shares to be repurchased under the agreement. The final number of shares delivered upon settlement of each ASR Agreement was determined with reference to the volume-weighted average price of the shares during the term of the agreement less a negotiated settlement price adjustment. Contents

3115. Variable Interest Entities

~~Table~~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 ~~Contents~~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 14—Noncontrolling Interests.

~~ANADARKO~~Assets ~~PETROLEUM~~and ~~CORPORATION~~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.

~~NOTES~~All TOoutstanding ~~CONSOLIDATED~~debt ~~FINANCIAL~~for ~~STATEMENTS~~WES at March 31, 2019, and December 31, 2018, including any borrowings under the WES RCF and WES 364-Day 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 8—Debt for additional information on WES short-term and long-term debt balances.

~~(Unaudited)~~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 8—Debt and Note 14—Noncontrolling Interests for additional information on WES financing activity.

~~15.~~VIE Distributions ~~Noncontrolling~~The ~~Interests~~following table presents WES distributions:

WES is a limited partnership formed by Anadarko to acquire, own, develop, and operate midstream assets. During 2016, WES issued 22 million Series A Preferred units to private investors. Pursuant to an agreement between WES and the holders of the Series A Preferred units, 50% of the Series A Preferred units converted into WES common units on a one-for-one basis on March 1, 2017, and all remaining Series A Preferred units were converted on May 2, 2017.



	Three Months Ended
	March 31,
millions	2019		2018
WES distributions to Anadarko ⁽¹⁾	$	105	$	100
WES distributions to third parties	130		118

~~WES~~(1) ~~Class C units issued to Anadarko will convert into~~ WES ~~common units on a one-for-one basis on the conversion date, which was extended in February 2017 from December 31, 2017, to March 1, 2020. The Class C units receive quarterly~~ distributions ~~in the form of additional Class C units until the March 1, 2020 conversion date, unless WES elects~~ to ~~convert the units to common units earlier or~~ Anadarko ~~elects~~are toeliminated ~~extend~~upon ~~the conversion date~~consolidation. ~~WES distributed 802 thousand Class C units to Anadarko during the nine months ended September 30, 2018, and 886 thousand Class C units to Anadarko during 2017.~~

~~WGP~~Financial isSupport aProvided ~~limited~~to ~~partnership~~VIEs Concurrent ~~formed~~with bythe ~~Anadarko~~closing toof ~~own~~its ~~interests~~May in2008 IPO, WES. InOperating ~~June~~loaned ~~2018,~~the ~~Anadarko~~Company ~~settled 9.2~~$260 million ~~outstanding TEUs, originally issued~~ in ~~2015, in~~ exchange for ~~approximately~~a ~~8.2 million~~30-year ~~WGP~~note ~~common~~bearing ~~units.~~interest ~~See~~at ~~Note~~a ~~9—Tangible~~fixed ~~Equity~~annual ~~Units~~rate ~~for~~of ~~additional information~~6. ~~At September 30~~50%, ~~2018,~~payable ~~Anadarko’s~~quarterly. ~~ownership~~The related interest inincome ~~WGP~~for ~~consisted~~WES ofOperating awas ~~77.8%~~$4 million ~~limited~~for ~~partner~~the ~~interest~~three ~~and~~months ~~the~~ended ~~entire~~March ~~non-economic~~31, ~~general~~2019 ~~partner~~and ~~interest~~2018. The ~~remaining~~note ~~22.2%~~receivable ~~limited~~and ~~partner~~related interest inincome ~~WGP~~are ~~was~~eliminated ~~owned~~in ~~by the public~~consolidation.

~~At September~~To ~~30,~~reduce ~~2018, WGP~~WES’s ~~ownership~~exposure ~~interest~~to a majority of the commodity-price risk inherent in certain of its contracts, Anadarko had commodity price swap agreements in place with WES ~~consisted~~Operating ofthat aexpired ~~29.6%~~without ~~limited~~renewal ~~partner~~on ~~interest~~December 31, 2018 and final settlement occurred in the ~~entire~~first 1quarter of 2019.5% ~~general~~WES ~~partner~~recorded ~~interest,~~a ~~and~~capital ~~all~~contribution from Anadarko in its Consolidated Statement of Equity and Partners’ Capital for an amount equal to (i) the ~~WES~~amount ~~incentive~~by ~~distribution~~which ~~rights.~~the Atswap ~~September~~price ~~30,~~for ~~2018~~product sales exceeds the applicable market price, ~~Anadarko~~minus ~~also~~(ii) ~~owned~~the aamount ~~9.5%~~by ~~limited~~which ~~partner~~the ~~interest~~swap inprice for product purchases exceeds the market price. WES ~~through~~recorded ~~other~~a ~~subsidiaries’~~capital ~~ownership~~contribution from Anadarko of ~~common~~$7 million ~~and~~for ~~Class~~the Cthree ~~units.~~months ~~The~~ended ~~remaining~~March ~~59.4%~~31, ~~limited~~2019, ~~partner~~and ~~interest~~$14 million infor ~~WES~~the ~~was~~three ~~owned~~months byended ~~the~~March ~~public.~~31, 2018.

32APC 2019 FORM 10-Q | 30

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

~~ANADARKO~~16. ~~PETROLEUM~~Supplemental ~~CORPORATION~~Cash Flow Information

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

16. Variable Interest Entities

Consolidated VIEs The Company determined that the partners in WGP and WES with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact WGP’s and WES’s economic performance; therefore, WGP and WES are considered VIEs. Anadarko, through its ownership of the general partner interest in WGP, 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 WGP and WES; therefore, Anadarko is considered the primary beneficiary and consolidates WGP, WES, and all of their consolidated subsidiaries. For additional information on WGP and WES, see Note 15—Noncontrolling Interests.

The following tables present selected financial data from the consolidated financial statements of WGP:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
millions	2018		2017		2018		2017
Statement of Operations Data
Total revenues and other	$	508	$	575	$	1,432	$	1,616
Operating income (loss)	200		179		461		523
Net income (loss)	155		147		340		424

	Nine Months Ended
	September 30,
millions	2018			2017
Statement of Cash Flows Data
Net cash provided by (used in) operating activities	$	749		$	642
Net cash provided by (used in) investing activities	(1,161		)	(515		)
Net cash provided by (used in) financing activities	465			(334		)

	September 30,		December 31,
millions	2018		2017
Balance Sheet Data
Cash and cash equivalents	$	133	$	80
Net property, plant, and equipment	6,419		5,731
Total assets	9,034		8,016
Long-term debt	4,566		3,493
Total liabilities	5,417		4,071
Total equity and partners’ capital	3,617		3,945

Assets and Liabilities of VIEs The assets of WGP, WES, and their 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 WGP, WES, and their subsidiaries for which the creditors do not have recourse to other assets of the Company are included in and disclosed parenthetically on the Company’s Consolidated Balance Sheets.

All outstanding debt for WES at September 30, 2018, and December 31, 2017, including any borrowings under the WES RCF, is recourse to WES’s general partner, which in turn has been indemnified in certain circumstances by certain wholly owned subsidiaries of the Company for such liabilities. All outstanding debt for WGP at September 30, 2018, and December 31, 2017, including any borrowings under the WGP RCF, is recourse to WGP’s general partner, which is a wholly owned subsidiary of the Company. See Note 10—Debt for additional information on WGP and WES short-term and long-term debt balances.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

16. Variable Interest Entities (Continued)

VIE Financing WGP’s sources of liquidity include borrowings under its RCF and distributions from WES. 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 its RCF, the issuance of additional partnership units, and debt offerings. See Note 10—Debt and Note 15—Noncontrolling Interests for additional information on WGP and WES financing activity.

Financial Support Provided to VIEs Concurrent with the closing of its May 2008 IPO, WES 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 was $13 million for the nine months ended September 30, 2018 and 2017. 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 has commodity price swap agreements in place with WES expiring on December 31, 2018. 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 $41 million for the nine months ended September 30, 2018, and $47 million for the nine months ended September 30, 2017.

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

17. 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:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
millions	~~2018~~2019			~~2017~~2018
Cash paid (received)
Interest, net of amounts capitalized	$	~~813~~371		$	~~764~~326
Income taxes, net of refunds	4818			~~169~~12
Non-cash investing activities
Fair value of properties and equipment acquired	$	8—		$	~~619~~2
Asset retirement cost additions	~~261~~71			~~228~~63
Accruals of property, plant, and equipment	~~886~~781			~~786~~965
Net liabilities assumed (divested) in acquisitions and divestitures	~~(97~~—		)	(~~115~~25		)
Non-cash investing and financing activities
Deferred drilling lease liability	$	—		$	14
Finance leases	$	6		$	—
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:

	September 30,			December 31,
millions	March 31, 2019			December 31, 2018
millions	2018			2017
Cash and cash equivalents		$	2,026		$	1,295
Cash and cash equivalents	$	1,883		$	4,553
Restricted cash and restricted cash equivalents included in Other Assets		134			134
Restricted cash and restricted cash equivalents included in Other Assets	110			121
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents		$	2,160		$	1,429
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	$	1,993		$	4,674

Included in cash and cash equivalents is restricted cash and restricted cash equivalents of $~~134~~100 million at ~~September~~March 3031, ~~2018~~2019, and $~~255~~139 million at December 31, ~~2017~~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 1718—Contingencies in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018.

3531 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

~~ANADARKO~~17. ~~PETROLEUM~~Segment ~~CORPORATION~~Information

~~NOTES~~Anadarko’s TObusiness ~~CONSOLIDATED~~segments ~~FINANCIAL~~are ~~STATEMENTS~~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 will no longer report an Other Midstream segment and will now have 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’s presentation.

~~(Unaudited)~~The Exploration and Production reporting segment is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and in advancing its Mozambique LNG project toward FID. 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.

18To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. ~~Segment~~ ~~Information~~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.

Anadarko’s business segments are separately managed due to distinct operational differences. Anadarko has three reporting segments: Exploration and Production, WES Midstream, and Other Midstream, which include their respective marketing results. The Company has reclassified prior-period amounts 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 in advancing its Mozambique LNG project toward FID. The WES Midstream and Other Midstream reporting segments engage 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 WES Midstream segment consists of WES midstream assets, and the Other Midstream segment consists of the Company’s other midstream assets.

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; restructuring charges; 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						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
millions	~~2018~~2019			~~2017~~2018			~~2018~~			~~2017~~
Income (loss) before income taxes	$	~~683~~262		$	~~(1,066~~300	)	$	~~1,125~~		$	~~(1,616~~	)
Interest expense	~~240~~253			~~230~~228			~~705~~			~~682~~
DD&A	1,~~130~~081			~~1,083~~990			~~3,123~~			~~3,235~~
Exploration expense (1)	118			750			380			2,366
Exploration expense	49			168
(Gains) losses on divestitures, net	(35		)	~~194~~24			~~(31~~		)	~~(815~~		)
Impairments	~~172~~—			—19			~~319~~			~~383~~
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	~~(167~~316		)	98(27		)	73			~~(12~~		)
Restructuring charges	13			3			13			20
Reorganization-related charges	18			—
Less net income (loss) attributable to noncontrolling interests	64111			5853			~~105~~			~~182~~
Consolidated Adjusted EBITDAX	$	21,~~122~~873		$	1,~~234~~649		$	~~5,602~~		$	~~4,061~~

~~__________________________________________________________________~~APC 2019 FORM 10-Q | 32

~~(1)~~FINANCIAL ~~Includes~~STATEMENTSFOOTNOTES ~~restructuring~~Table ~~charges~~ of ~~$20 million for the three and nine months ended September 30, 2018.~~Contents

3617. Segment Information (Continued)

Table of Contents

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

18. 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 ~~Midstream~~andIntersegmentEliminations				~~Other andIntersegmentEliminations~~	Total			~~Total~~
Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Sales revenues	$	~~3,161~~$	2,606		$	~~394~~$	499		$	39$	21		$	13$	3,126		$	~~3,607~~
Intersegment revenues	25	51			~~114~~	172			78	(223		)	~~(217~~	—	)		—
Other	1	8			52	58			11	31			23	97			87
Total revenues and other (1)	~~3,187~~	2,665			~~560~~	729			~~128~~	(171		)	~~(181~~	3,223	)		~~3,694~~
Operating costs and expenses (2)	~~1,059~~	992			~~245~~	337			55	(89		)	~~(67~~	1,240	)		~~1,292~~
Net cash from settlement of commodity derivatives	—	—			—	—			—	(6		)	~~199~~	(6		)	~~199~~
Other (income) expense, net (3)	—	—			—	(36		)	—	38			17	2			17
Net income (loss) attributable to noncontrolling interests	—	—			—	—			—	111			64	111			64
Total expenses and other	~~1,059~~	992			~~245~~	301			55	54			~~213~~	1,347			~~1,572~~
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—	—			—	—			—	(3		)	—	(3		)	—
Adjusted EBITDAX	$	~~2,128~~$	1,673		$	~~315~~$	428		$	73$	(228	)	$	~~(394~~$	)1,873		$	~~2,122~~
Three Months Ended September 30, 2017
Three Months Ended March 31, 2018
Sales revenues	$	~~2,097~~$	2,656		$	~~445~~$	355		$	53$	15		$	15$	3,026		$	~~2,610~~
Intersegment revenues	4	10			~~119~~	153			43	(163		)	~~(166~~	—	)		—
Other	6	(9		)	39	37			7	15			28	43			80
Total revenues and other (1)	~~2,107~~	2,657			~~603~~	545			~~103~~	(133		)	~~(123~~	3,069	)		~~2,690~~
Operating costs and expenses (2)	~~956~~	870			~~345~~	233			62	214			49	1,317			~~1,412~~
Net cash from settlement of commodity derivatives	—	—			—	—			—	68			~~(16~~	68	)		~~(16~~		)
Other (income) expense, net	—	—			—	—			—	(12		)	2	(12		)	2
Net income (loss) attributable to noncontrolling interests	—	—			—	—			—	53			58	53			58
Total expenses and other	~~956~~	870			~~345~~	233			62	323			93	1,426			~~1,456~~
Adjusted EBITDAX	$	1,151			$	258			$	41			$	(216	)		$	1,234
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement		—				—				6				6
Adjusted EBITDAX		$	1,787			$	312			$	(450	)		$	1,649

__________________________________________________________________


⁽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, ~~restructuring~~reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.

(3) Other (income) expense, net excludes ~~restructuring~~reorganization-related charges since these expenses are excluded from Adjusted EBITDAX.

3733 | APC 2019 FORM 10-Q

FINANCIAL STATEMENTSFOOTNOTES Table of Contents

~~ANADARKO~~17. ~~PETROLEUM~~Segment ~~CORPORATION~~Information (Continued)

~~NOTES~~The TOfollowing ~~CONSOLIDATED~~summarizes ~~FINANCIAL~~selected ~~STATEMENTS~~financial information for Anadarko’s reporting segments:

(Unaudited)



millions	Exploration & Production			WES Midstream			Other and Intersegment Eliminations			Total
March 31, 2019
Net properties and equipment		$	18,342		$	8,630		$	1,964		$	28,936
Capital expenditures ⁽¹⁾		$	922		$	315		$	59		$	1,296
Goodwill		$	4,343		$	446		$	—		$	4,789

December 31, 2018
Net properties and equipment		$	18,267		$	8,410		$	1,938		$	28,615
Capital expenditures ⁽¹⁾		$	4,103		$	1,912		$	170		$	6,185
Goodwill		$	4,343		$	446		$	—		$	4,789

~~18. Segment Information~~ (~~Continued~~1) WES Midstream includes $49 million at March 31, 2019, and $734 million at December 31, 2018, of capitalized costs incurred prior to the contribution and sale of midstream assets to WES.

millions	Exploration& Production			WES Midstream		Other Midstream		Other andIntersegmentEliminations			Total
Nine Months Ended September 30, 2018
Sales revenues	$	8,589		$	1,063	$	73	$	76		$	9,801
Intersegment revenues	49			369		188		(606		)	—
Other	(5		)	113		30		63			201
Total revenues and other (1)	8,633			1,545		291		(467		)	10,002
Operating costs and expenses (2)	2,840			687		134		195			3,856
Net cash from settlement of commodity derivatives	—			—		—		437			437
Other (income) expense, net (3)	—			—		—		9			9
Net income (loss) attributable to noncontrolling interests	—			—		—		105			105
Total expenses and other	2,840			687		134		746			4,407
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		7			7
Adjusted EBITDAX	$	5,793		$	858	$	157	$	(1,206	)	$	5,602
Nine Months Ended September 30, 2017
Sales revenues	$	6,500		$	1,213	$	134	$	80		$	7,927
Intersegment revenues	10			387		125		(522		)	—
Other	16			124		20		77			237
Total revenues and other (1)	6,526			1,724		279		(365		)	8,164
Operating costs and expenses (2)	2,679			936		168		135			3,918
Net cash from settlement of commodity derivatives	—			—		—		(23		)	(23		)
Other (income) expense, net	—			—		—		24			24
Net income (loss) attributable to noncontrolling interests	—			—		—		182			182
Total expenses and other	2,679			936		168		318			4,101
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		(2		)	(2		)
Adjusted EBITDAX	$	3,847		$	788	$	111	$	(685	)	$	4,061

APC 2019 FORM 10-Q | 34

~~__________________________________________________________________~~MANAGEMENT’S DISCUSSION AND ANALYSISINDEX Table of Contents

(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, restructuring charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.

(3) Other (income) expense, net excludes restructuring charges since these expenses are excluded from Adjusted EBITDAX.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~CAUTIONARY~~The ~~STATEMENT~~following ~~ABOUT~~discussion ~~FORWARD~~should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in this Form 10-~~LOOKING~~Q ~~STATEMENTS~~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.

Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. The Company has made in this Form 10-Q, and may from time to time make in other public filings, press releases, and management discussions, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning the Company’s operations, economic performance, and financial condition. These forward-looking statements include, among other things, information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and gas properties, marketing and midstream activities, and also include those statements preceded by, followed by, or that otherwise include the words “may,” “could,” “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” “would,” “will,” “potential,” “continue,” “forecast,” “future,” “likely,” “outlook,” or similar expressions or variations on such expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will be realized. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.



Index	Page
Management Overview	36
Financial Results	38
Liquidity and Capital Resources	49
Recent Accounting Developments	52

~~These~~35 | APC 2019 ~~forward-looking~~FORM statements involve risk and uncertainties. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the following risks and uncertainties:10-Q

•MANAGEMENT’S ~~the~~DISCUSSION ~~Company’s~~AND ~~assumptions~~ANALYSISMANAGEMENT ~~about~~OVERVIEW ~~energy~~Table ~~markets~~of Contents

• production and sales volume levels

• levels of oil, natural-gas, and NGLs reserves

• operating results

• competitive conditions

• technology

• availability of capital resources, levels of capital expenditures, and other contractual obligations

• supply and demand for, the price of, and the commercialization and transporting of oil, natural gas, NGLs, and other products or services

• volatility in the commodity-futures market

• weather

• inflation

• availability of goods and services, including unexpected changes in costs

• drilling and other operational risks

• processing volumes, pipeline throughput, and produced water disposal

• general economic conditions, nationally, internationally, or in the jurisdictions in which the Company is, or in the future may be, doing business

• the Company’s inability to timely obtain or maintain permits or other governmental approvals, including those necessary for drilling and/or development projects

• legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural-gas operations; retroactive royalty or production tax regimes; deepwater drilling and permitting regulations; derivatives reform; changes in state, federal, and foreign income taxes; environmental regulation, including regulations related to climate change; environmental risks; and liability under international, provincial, federal, regional, state, tribal, local, and foreign environmental laws and regulations

• civil or political unrest or acts of terrorism in a region or country

Table of Contents

• the creditworthiness and performance of the Company’s counterparties, including financial institutions, operating partners, and other parties

• volatility in the securities, capital, or credit markets and related risks such as general credit, liquidity, and interest-rate risk

• the Company’s ability to successfully monetize select assets, repay or refinance its debt, meet its debt-reduction expectations, and the impact of changes in the Company’s credit ratings

• the Company’s ability to successfully complete its Share-Repurchase Program

• the Company’s ability to successfully plan, secure additional government approvals, enter into additional long-term sales contracts, take FID and the timing thereof, finance, build, and operate the necessary infrastructure and LNG park in Mozambique

• uncertainties and liabilities associated with acquired and divested properties and businesses

• disruptions in international oil and NGLs cargo shipping activities

• physical, digital, internal, and external security breaches

• supply and demand, technological, political, governmental, and commercial conditions associated with long-term development and production projects in domestic and international locations

• the outcome of pending and future regulatory, legislative, or other proceedings or investigations, including the investigation by the NTSB related to the Company’s operations in Colorado, and continued or additional disruptions in operations that may occur as the Company complies with regulatory orders or other state or local changes in laws or regulations in Colorado

• other factors discussed below and elsewhere in “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, this Form 10-Q, and in the Company’s other public filings, press releases, and discussions with Company management

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, 2017; 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, 2017.

Table of Contents

MANAGEMENT OVERVIEW

Anadarko’s ~~strategy~~strategic isobjectives are to explore for, develop, and commercialize resources globally; ensure health, safety, and environmental excellence; ~~and~~ focus on financial discipline, flexibility, and value creation; ~~while~~and ~~demonstrating~~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 ~~determine~~affect the value the Company receives from its sales of oil, natural gas, and NGLs.

~~The~~On April 11, 2019, the Company ~~continues~~entered tointo ~~leverage~~the ~~its~~Chevron ~~foundational~~Merger ~~principle~~Agreement ofpursuant ~~efficient~~to ~~capital~~which, ~~allocation~~and subject to ~~generate~~the ~~attractive~~conditions ~~returns~~of onthe agreement, ~~and~~all outstanding shares of, ~~capital~~Anadarko ~~while~~will ~~investing~~be ~~within~~acquired by Chevron in a stock and cash ~~flow~~transaction valued at $33 billion, or $65.00 per share, as of the announcement date. Under the terms of the Chevron Merger Agreement, Anadarko ~~also~~stockholders ~~continues~~will toreceive ~~focus~~0.3869 onof ~~cash-margin~~a ~~improvement~~share of Chevron common stock and ~~has~~$16.25 ~~actively~~in ~~managed~~cash ~~its~~for ~~portfolio~~each toAnadarko ~~focus~~share. onThe ~~higher-return,~~transaction ~~oil-levered~~was ~~opportunities~~approved inby ~~areas~~the ~~where~~Boards itof ~~possesses~~Directors of both ~~scale~~companies. ~~and~~On ~~competitive~~May ~~advantages~~6, ~~namely~~2019, inAnadarko announced that the ~~Delaware~~Board ~~and~~unanimously DJdetermined ~~basins~~that the Occidental Proposal constituted a “Superior Proposal” as defined in the UChevron Merger Agreement.S Under the terms of the Occidental Proposal, Occidental would acquire Anadarko for consideration consisting of $59.00 ~~onshore~~in cash and in0.2934 ~~the~~of ~~deepwater~~a ~~Gulf~~share of ~~Mexico~~Occidental common stock per share of Anadarko common stock. ~~The~~Anadarko ~~Company~~has ~~expects~~notified toChevron ~~use~~that ~~excess~~(i) ~~cash~~the ~~generated~~Board ~~from~~has unanimously determined that the Occidental Proposal constitutes a "Superior Proposal" and (ii) after complying with its ~~Gulf~~obligations ofto ~~Mexico~~Chevron under the Chevron Merger Agreement, ~~Algeria~~Anadarko intends to terminate the Chevron Merger Agreement in order to enter into a definitive merger agreement with Occidental in connection with the Occidental Proposal. Pursuant to the Chevron Merger Agreement, ~~Ghana~~Chevron has the right, ~~and~~during DJthe ~~basin~~four ~~assets~~business day period ending on May 10, 2019, which may be extended in accordance with the terms of the Chevron Merger Agreement, to ~~fund~~propose revisions to the ~~growth~~terms of ~~its~~the ~~other~~Chevron ~~unconventional~~Merger ~~assets~~Agreement, or to make another proposal. If Anadarko terminates the Chevron Merger Agreement in order to enter into a definitive agreement with respect to the UOccidental Proposal, Anadarko will pay Chevron a $1.S0 billion termination fee as required by the Chevron Merger Agreement. ~~onshore~~The Chevron Merger Agreement remains in effect unless and ~~improve~~until ~~returns~~terminated, and accordingly, the Board reaffirms its existing recommendation of the transaction with Chevron at this time. Either transaction would be subject to ~~shareholders~~Anadarko stockholder approval, regulatory approvals, and other customary closing conditions.

InOn February 28, 2019, Anadarko completed the ~~third~~previously ~~quarter~~announced contribution and sale of ~~2018~~substantially all of its midstream assets, which consisted of oil infrastructure assets in the ~~Company~~DJ ~~expanded~~basin and oil and water infrastructure assets in the ~~Share-Repurchase~~Delaware ~~Program~~basin, ~~from~~to WES Operating for $34.0 billion, towith $42.0 billion ~~and~~of ~~completed~~cash ~~the~~proceeds ~~repurchase~~and of $~~500 million~~2.0 ofbillion ~~the~~in ~~Company’s~~WES Operating common ~~stock,~~units. ~~bringing~~This ~~the~~transaction ~~total~~is ~~repurchases~~expected to ~~$3.5 billion.~~increase ~~The~~cash ~~Company~~distributions ~~also~~paid ~~announced~~by aWES ~~$500~~to ~~million~~Anadarko ~~increase~~in to2019 ~~its~~and ~~debt-reduction~~reduce ~~expectations,~~Anadarko’s ~~bringing~~future midstream capital funding requirements. Immediately after the ~~total~~asset ~~planned~~contribution ~~debt~~and ~~reduction~~sale, toa ~~$1.5~~wholly ~~billion.~~owned Assubsidiary of ~~September~~WES ~~30,~~merged ~~2018,~~with ~~the~~and ~~Company~~into ~~had~~WES ~~repaid~~Operating, ~~$114~~with ~~million~~WES ofOperating ~~debt~~continuing atas ~~maturity~~the surviving entity and ~~plans~~a tosubsidiary ~~retire~~of ~~$900~~WES. ~~million~~The ofmerger ~~fixed-rate~~is ~~debt~~expected ~~maturing~~to insimplify the ~~first~~midstream ~~half~~structure, lower the weighted-average cost of ~~2019.~~capital ~~These~~for ~~actions~~WES ~~demonstrate~~through the ~~strength~~elimination of ~~the~~incentive ~~Company’s~~distribution ~~portfolio~~rights, and ~~commitment~~increase tothe ~~capital~~overall ~~efficiency~~trading liquidity of WES.

InThe ~~the Delaware basin, located in Texas, the~~ Company ~~continues~~remains committed to ~~build~~investing ~~out~~within ~~one~~cash offlow ~~the most expansive and integrated infrastructure positions~~ in ~~the~~a ~~region~~$50 ~~and is transitioning to multi~~oil-~~well~~price ~~pad development, primarily in Reeves and Loving counties~~environment. ~~The~~Anadarko ~~first~~is ~~ROTF~~focused inon ~~Reeves~~capital ~~County~~efficiency ~~was completed~~ and ~~brought~~maximizing ~~online~~cash ~~during~~flow ~~the~~generation, ~~second~~and ~~quarter~~has ofactively ~~2018.~~managed ~~During~~its ~~the~~portfolio ~~third~~to ~~quarter~~focus ofon ~~2018~~higher-return, ~~final~~oil-levered ~~commissioning~~opportunities ~~activities~~in ~~were~~areas ~~completed~~where ~~for~~it ~~the~~possesses ~~second~~both ~~ROTF~~scale inand ~~Loving~~competitive ~~County.~~advantages, ~~New~~namely ~~wells~~ in the ~~area~~Delaware ~~were brought online~~ and ~~flowed~~DJ ~~into~~basins ~~these~~in ~~ROTFs during~~ the ~~third quarter of 2018~~U.S. ~~Additionally,~~onshore ~~the~~and ~~WES-operated Mentone I processing train at the DBM Complex is expected to commence operations~~ in the ~~fourth~~deepwater ~~quarter~~Gulf of ~~2018, which will facilitate incremental production growth of the asset~~Mexico. AsThe ofCompany ~~the~~plans ~~end~~to ofdeploy ~~the~~a ~~third~~portion ~~quarter~~ of ~~2018,~~its ~~Anadarko~~cash ~~had~~flow ~~secured~~generated ~~sufficient~~from ~~takeaway capacity with approximately 50% of~~ its ~~Delaware basin operated oil volumes being sold at~~ Gulf ~~Coast~~of ~~markets~~Mexico, ~~via~~Algeria, ~~the Enterprise pipeline to Houston. This capacity is expected to increase to approximately 100% in 2019~~Ghana, ~~when the Plains Cactus II pipeline to Corpus Christi is brought online. The Company ended the third quarter of 2018 with 7 operated drilling rigs~~ and 5DJ ~~completion crews in the Delaware~~ basin, ~~which~~assets ~~compares~~ to 13fund ~~operated~~investments ~~drilling~~in ~~rigs~~other ~~and~~assets 6that ~~completion~~generate ~~crews~~attractive atcash ~~the end of the third quarter of 2017~~returns.

In the DJDelaware basin, ~~located in Colorado,~~ the Company continues to ~~leverage~~build ~~its~~out ~~minerals-interest~~one ~~ownership and extensive infrastructure position to deliver development wells with attractive rates~~ of ~~return. The Company ended~~ the ~~third~~most ~~quarter~~expansive ~~of 2018 with four operated drilling rigs~~ and ~~two~~integrated ~~completion~~infrastructure ~~crews~~positions in the ~~DJ basin,~~region ~~which~~as ~~compares~~it totransitions ~~six operated~~toward drilling rigs and four completion crews at the end of the third quarter of 2017. The Colorado general election ballot in November 2018 will include Proposition 112, which, if passed, would amend the Colorado Revised Statutes to require that new oil and gas development on nonmulti-~~federal~~well ~~lands~~pad ~~take place a minimum distance of 2~~development,~~500~~ ~~feet~~primarily ~~from~~in ~~occupied~~Reeves ~~buildings such as homes, schools,~~ and ~~hospitals,~~Loving ~~and other areas designated as vulnerable~~counties. ~~Such~~The ~~setbacks~~Company ~~would~~also ~~effectively~~continues ~~ban~~to ~~new~~leverage ~~oil~~its ~~and gas drilling and hydraulic fracturing on a substantial portion of Colorado’s non~~minerals-~~federal~~interest ~~lands.~~ownership ~~If Proposition 112 passes,~~ and isextensive ~~not~~infrastructure ~~amended~~position orin ~~repealed by~~ the ~~state~~DJ ~~legislature,~~basin ~~resulting~~to indeliver ~~more stringent limitations on the production and~~ development ofwells ~~oil~~with ~~and~~attractive ~~natural~~rates ~~gas in Colorado, the Company will be limited or precluded in the drilling~~ of ~~wells or in the volumes that are ultimately able to be produced from assets in Colorado~~return. ~~Given~~In the ~~depth~~Gulf ~~and quality~~ of ~~the Company’s portfolio~~Mexico, ~~if this occurs,~~ the Company ~~would~~is ~~expect~~conducting tooperations ~~reallocate~~that ~~capital~~are infocused ~~order~~toward ~~to continue to focus on higher~~high-return, oil~~-levered~~ development opportunities innear ~~areas where it possesses both scale and competitive advantages, namely in~~ the ~~Delaware basin and in the deepwater Gulf of Mexico, and accelerate investments in the emerging oil play in Wyoming~~Company’s ~~Powder~~ ~~River basin~~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. In the ~~deepwater~~first ~~Gulf~~quarter of ~~Mexico~~2019, Anadarko ~~has~~repaid ~~two~~$600 ~~floating~~million ~~drillships~~of debt at maturity and ~~one~~redeemed ~~platform~~an ~~rig~~additional ~~available~~$300 million of debt prior to ~~conduct~~maturity, ~~operations~~bringing ~~that~~total ~~are~~repayments ~~focused~~under ~~toward~~the ~~high~~debt-~~return~~reduction ~~oil~~program ~~development~~to ~~opportunities~~$1.5 ~~near~~billion. ~~the~~No ~~Company’s~~additional ~~expansive~~share ~~infrastructure.~~repurchases ~~Internationally,~~under ~~drilling~~the ~~continues~~Share-Repurchase inProgram ~~offshore~~or ~~Ghana~~debt ~~with~~retirements ~~new~~are ~~development~~anticipated ~~activities~~pursuant atto the ~~TEN~~terms ~~and~~of ~~Jubilee~~the ~~fields~~Chevron Merger Agreement.

InAPC 2019 ~~order~~FORM to reduce commodity-price risk and increase the predictability of 2018 cash flows, the Company has strategic derivative positions covering approximately 50% of its anticipated oil sales volumes and approximately 55% of its anticipated natural-gas sales volumes for the remainder of 2018. See Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q. | 36

41MANAGEMENT’S DISCUSSION AND ANALYSISMANAGEMENT OVERVIEW Table of Contents

~~Table~~Significant ofFirst ~~Contents~~Quarter 2019 Operating and Financial Activities

Significant operating and financial activities for the third quarter of 2018 include the following:

Total Company

•– The Company’s ~~overall~~oil sales- volume ~~product~~averaged ~~mix~~412 ~~increased~~MBbls/d toin 58the first quarter of 2019, representing an 11% ~~oil~~increase infrom the ~~third~~first quarter of 2018, ~~compared~~primarily due to ~~56%~~increased insales volume from the ~~third~~Delaware ~~quarter~~basin and the Gulf of ~~2017~~Mexico.

•– The Company’s ~~third-quarter~~overall ~~oil~~ sales-volume ~~volumes~~product ~~averaged~~mix ~~397~~in ~~MBbls/d,~~the ~~representing~~first aquarter ~~13%~~of ~~increase~~2019 ~~over~~is ~~the~~58% ~~third~~oil ~~quarter~~and of73% ~~2017~~liquids.

U.S. Onshore

•– ~~U.S.~~Total ~~onshore~~sales volume averaged 465 MBOE/d in the first quarter of 2019, representing a 15% increase from the first quarter of 2018, and oil sales ~~volumes~~volume ~~increased~~averaged by195 35 MBbls/d in the first quarter of 2019, representing a 2622% increase from the ~~third~~first quarter of ~~2017~~2018, primarily due to continued drilling and completion activities and midstream infrastructure additions.

•– ~~Sales~~The ~~volumes~~second ~~for~~train at the ~~Delaware~~WES-owned ~~basin~~Mentone ~~increased~~natural-gas byprocessing 32plant ~~MBbls/d,~~in ~~representing~~the anDelaware ~~83%~~basin ~~increase~~was ~~from~~placed ~~the~~in ~~third quarter of 2017~~service, ~~primarily~~adding ~~due~~200 toMMcf/ ~~continued~~d ~~drilling~~of ~~and~~natural-gas ~~completion~~processing ~~activities~~capacity ~~and~~to ~~midstream~~the ~~infrastructure~~West ~~additions~~Texas ~~in 2018~~Complex.

•Gulf ~~In the Delaware basin, the second ROTF was completed in Loving County, with 47 wells flowing into the facility by the end~~ of ~~the third quarter. Additionally, 23 new wells were brought online at the Reeves County ROTF during the quarter.~~Mexico

~~International~~– Oil sales volume averaged 138 MBbls/d in the first quarter of 2019, representing a 9% increase from the first quarter of 2018, primarily due to new wells coming online at Horn Mountain and Holstein, planned downtime at various platforms in 2018, and lower-than-expected downtime at various platforms in 2019, partially offset by natural production declines.

Ghana

•– In the TEN ~~fields of Ghana~~field, ~~the operator resumed~~ drilling operations inconcluded ~~early~~on ~~2018,~~a ~~with~~production ~~one~~ well, ~~completed~~ and ~~brought~~a ~~online~~previously indrilled ~~the~~well ~~third~~was ~~quarter.~~completed ~~Subsequent~~and tobrought ~~quarter end, drilling began on a second well~~online.

•– In the Jubilee field ~~of Ghana~~, the operator drilled ~~two~~a ~~wells~~water ~~during~~injector ~~the~~well ~~second~~and ~~quarter~~drilling ofoperations ~~2018,~~are ~~with~~ongoing ~~the~~for ~~first~~an ofadditional ~~these~~production ~~wells completed and brought online in the third quarter~~well.

• At the end of the third quarter, a second drillship was mobilized for drilling operations in the TEN and Jubilee fields.

Mozambique

•– ~~The~~Anadarko ~~Company~~and ~~continues~~its toArea ~~make~~1 ~~progress~~co-venturers ~~converting~~executed ~~non~~two additional long-~~binding~~term ~~commitments~~sale toand ~~fully~~purchase ~~termed~~agreements ~~Sales~~with ~~and~~Bharat ~~Purchase~~Gas ~~Agreements~~Resources asLtd., ~~required~~a towholly ~~support~~owned ~~project~~subsidiary ~~financing~~of ~~arrangements~~Bharat Petroleum Corporation Ltd. of India, and ~~progress~~Pertamina, the state-owned oil and gas company of Indonesia, each for 1.0 MTPA, bringing total contracted volume to approximately 9.5 MTPA, which satisfies the contracted offtake volume required for FID.

•– ~~Recommendations~~Anadarko ~~for~~and ~~award~~its ofArea ~~the~~1 ~~offshore~~co-venturers ~~contractor~~were ~~and~~designated ~~equipment~~first ~~providers~~mover ~~are~~by ~~awaiting~~the Government of Mozambique ~~approval~~for the onshore LNG project. This enables Anadarko, as operator of Area 1, to construct the shared marine facilities, on behalf of the Area 1 and Area 4 projects.

•– ~~Site~~The ~~preparation~~Company ~~activities~~is ~~are~~working ~~fully~~to ~~underway~~finalize atproject finance arrangements and has received commitments from the ~~Afungi~~majority ~~onshore~~of ~~site~~lenders. Additionally, asfinal ~~major~~partner ~~infrastructure~~ and ~~resettlement~~government-related ~~projects~~approvals are ~~proceeding~~progressing as ~~planned,~~the ~~positioning~~Company ~~the~~expects ~~area~~to ~~for~~announce ~~construction~~a offinal ~~the~~investment ~~LNG~~decision ~~facilities~~on June 18, 2019.

• In the third quarter, Offshore Area 4, which is owned and operated by third parties, joined the Anadarko-led resettlement and airstrip projects as a 50% participant.

• The Company remains on track for FID consideration in the first half of 2019.

Financial

•– The Company generated $1.61 billion of cash ~~flows~~flow from operations and ended the ~~third~~first quarter of 2019 with $12.90 billion of cash.

•– InThe ~~the third quarter, the~~ Company ~~completed~~retired ~~the repurchase of an additional~~ $~~500~~900 million of ~~the~~debt ~~Company’s~~during ~~common~~the ~~stock~~first ~~under~~quarter ~~the~~of ~~Share-Repurchase Program~~2019.

4237 | APC 2019 FORM 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

FINANCIAL RESULTS

	Three Months Ended	~~Three Months Ended~~						~~Nine Months Ended~~
		September 30,						September 30,
	March 31,
millions except per-share amounts	2019	~~2018~~		2018	~~2017~~			~~2018~~		~~2017~~
Oil, natural-gas, and NGLs sales		$	3,186		$	2,101		$	8,638	$	6,510
Oil, natural-gas, and NGL sales	$	2,656		$	2,666
Gathering, processing, and marketing sales	470	~~421~~		360	~~509~~			~~1,163~~		~~1,417~~
Gains (losses) on divestitures and other, net	92	90		19	~~(114~~		)	~~232~~		~~1,052~~
Revenues and other	$	$3,218	~~3,697~~	$	$3,045	~~2,496~~		$	~~10,033~~	$	~~8,979~~
Costs and expenses	2,384	~~2,718~~		2,494	~~3,245~~			~~7,684~~		~~9,895~~
Other (income) expense	572	~~296~~		251	~~317~~			~~1,224~~		~~700~~
Income tax expense (benefit)	166	~~256~~		126	~~(425~~		)	~~507~~		~~(366~~		)
Net income (loss) attributable to common stockholders	$	$(15	~~363~~)	$	$121	~~(699~~	)	$	~~513~~	$	~~(1,432~~	)
Net income (loss) per common share attributable to common stockholders—diluted	$	$(0.03	~~0.72~~)	$	$0.22	~~(1.27~~	)	$	~~0.99~~	$	~~(2.61~~	)
Average number of common shares outstanding—diluted	490	~~500~~		519	~~553~~			~~508~~		~~552~~

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 ~~September~~March 3031, ~~2018~~2019,” refer to the comparison of the three months ended ~~September~~March 3031, ~~2018~~2019, to the three months ended ~~September~~March 3031, ~~2017, and any increases or decreases “for the nine months ended September 30,~~ 2018~~,” refer to the comparison of the nine months ended September 30, 2018, to the nine months ended September 30, 2017~~. The primary factors that affect the Company’s results of operations include commodity prices for oil, natural gas, and NGLs; sales ~~volumes~~volume; the cost of finding and developing such reserves; and operating costs.

43APC 2019 FORM 10-Q | 38

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

~~Revenues~~REVENUES ~~and~~AND ~~Sales~~SALES ~~Volumes~~VOLUME

	Three Months Ended
	September 30,
millions except percentages	Oil			Natural Gas			NGLs			Total
2017 sales revenues	$	1,567		$	269		$	265		$	2,101
Changes associated with prices	806			(33		)	78			851
Changes associated with sales volumes	199			(4		)	39			234
2018 sales revenues	$	2,572		$	232		$	382		$	3,186
Increase (decrease) vs. 2017	64		%	(14		)%	44		%	52		%
	Nine Months Ended
	September 30,
millions except percentages	Oil			Natural Gas			NGLs			Total
2017 sales revenues	$	4,652		$	1,090		$	768		$	6,510
Changes associated with prices	1,949			(143		)	227			2,033
Changes associated with sales volumes	363			(265		)	(3		)	95
2018 sales revenues	$	6,964		$	682		$	992		$	8,638
Increase (decrease) vs. 2017	50		%	(37		)%	29		%	33		%

E&P Sales Revenues by Product

The ~~above~~ table below illustrates the effects of changes in prices and sales ~~volumes~~volume. ~~The~~Price changes infor ~~sales~~the ~~volumes~~three ~~primarily~~months ~~include~~ended ~~increases~~March ~~associated~~31, 2019 ~~with~~were ~~continued~~due ~~drilling~~to lower oil and ~~completion~~NGL ~~activities~~prices in 2019. Sales volume changes for the ~~Delaware~~three ~~and~~months DJended ~~basins~~March ~~and~~31, 2019 ~~decreases~~primarily included increases associated with ~~U.S.~~continued ~~onshore~~drilling ~~asset~~and ~~divestitures~~completion activities in ~~2017~~the Delaware and ~~2018.~~DJ basins.

~~The~~Total ~~following~~E&P ~~provides~~Sales ~~Anadarko’s sales volumes for the three and nine months ended September 30:~~Revenues

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018	Inc (Dec) vs. 2017		2017	2018	Inc (Dec) vs. 2017		2017
Barrels of Oil Equivalent
(MMBOE except percentages)
United States	53	7	%	50	153	(5	)%	161
International	10	18		8	26	(3	)	26
Total barrels of oil equivalent	63	9		58	179	(4	)	187
Barrels of Oil Equivalent per Day
(MBOE/d except percentages)
United States	575	7	%	535	560	(5	)%	587
International	107	18		91	94	(3	)	96
Total barrels of oil equivalent per day	682	9		626	654	(4	)	683

The following provides Anadarko’s sales volume for the three months ended March 31:

Sales volumes represent actual production volumes adjusted for changes in commodity inventories as well as natural-gas production volumes 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.



	Barrels of Oil Equivalent (MMBOE)		Barrels of Oil Equivalent per Day (MBOE/d)
	2019	2018	2019	2018
United States	56	50	631	555
International	8	8	84	88
Total	64	58	715	643

44Sales 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 7—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.

~~Table~~39 | APC 2019 ofFORM ~~Contents~~10-Q

~~Oil~~MANAGEMENT’S ~~Sales~~DISCUSSION ~~Revenues,~~AND ~~Average~~ANALYSISRESULTS ~~Prices,~~OF ~~and~~OPERATIONS ~~Volumes~~Table of Contents

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018		Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
Oil sales revenues (millions)	$	2,572	64	%	$	1,567	$	6,964	50	%	$	4,652
United States
Sales volumes—MMBbls	26		12	%	25		78		12	%	71
MBbls/d	296		12		266		288		12		259
Price per barrel	$	68.25	46		$	46.89	$	65.96	38		$	47.63
International
Sales volumes—MMBbls	10		16	%	8		25		(3	)%	25
MBbls/d	101		16		87		89		(3	)	91
Price per barrel	$	76.55	46		$	52.61	$	72.85	41		$	51.59
Total
Sales volumes—MMBbls	36		13	%	33		103		8	%	96
MBbls/d	397		13		353		377		8		350
Price per barrel	$	70.37	46		$	48.31	$	67.57	39		$	48.66

Oil Sales Revenues, Volume, and Average Prices

~~The~~Oil ~~following~~Sales ~~summarizes primary drivers for the change in oil sales revenues:~~Revenues

millions		Change inRevenues			Due to Changein Prices		Due to Changein Volumes
	Three Months Ended
Three months ended September 30, 2018 vs. 2017		$	1,005		$	806	$	199
	March 31,
Nine months ended September 30, 2018 vs. 2017		2,312			1,949		363
	2019			2018
Oil sales revenues (millions)	$	2,096		$	2,127
Average price per barrel
United States	$	55.14		$	62.58
International	62.33			67.39
Total	$	56.51		$	63.66
Sales volume (MMBbls)
United States	29			25
International	8			8
Total	37			33
Sales volume per day (MBbls/d)
United States	333			288
International	79			83
Total	412			371

Oil Prices

The average oil price received ~~increased~~decreased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, primarily due to concerns of aoil ~~supply~~demand ~~shortfall~~weakness asfrom a ~~result~~slowing ofglobal ~~reductions in output from Iran as the U~~economy.~~S. reimposes sanctions as well as decreased production from Venezuela.~~

45APC 2019 FORM 10-Q | 40

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

Oil Sales ~~Volumes~~Volume

~~2018~~2019 vs. ~~2017~~2018 The Company’s oil sales ~~volumes~~volume increased by 4441 MBbls/d for the three months ended ~~September~~March 3031, ~~2018~~2019, ~~and 27 MBbls/d for the nine months ended September 30, 2018,~~ primarily due to the following:

U.S. Onshore

•– Sales ~~volumes~~volume for the Delaware basin increased by 3230 MBbls/d for the three months ended ~~September~~March 3031, ~~2018~~2019, ~~and~~primarily ~~27 MBbls/d for the nine months ended September 30, 2018,~~ due to continued drilling and completion activities and midstream infrastructure additions in ~~2018~~2019.

• Sales volumes for the DJ basin increased by 13 MBbls/d for the three months ended September 30, 2018, and 19 MBbls/d for the nine months ended September 30, 2018, primarily due to continued drilling and completion activities in 2018.

• Divestitures resulted in decreased sales volumes of 12 MBbls/d for the three months ended September 30, 2018, and 18 MBbls/d for the nine months ended September 30, 2018, primarily related to the sale of the Alaska nonoperated assets in the first quarter of 2018 and the Eagleford and West Chalk assets in the first half of 2017.

Gulf of Mexico

•– Sales ~~volumes~~volume for the Gulf of Mexico ~~decreased~~increased by 510 MBbls/d for the three months ended ~~September~~March 3031, ~~2018~~2019, ~~and~~primarily ~~remained~~due ~~flat~~to ~~for~~new ~~the~~wells ~~nine~~coming ~~months~~online ~~ended~~at ~~September~~Horn ~~30,~~Mountain ~~2018~~and Holstein, ~~primarily~~planned ~~due~~downtime toat ~~natural~~various ~~production~~platforms ~~declines~~in 2018, and ~~planned~~lower-than-expected downtime at various platforms in 2019, partially offset by ~~continued~~natural ~~tie-back~~production ~~activity at Horn Mountain and Marlin~~declines.

International

•– Sales ~~volumes~~volume for Algeria increased by 6 MBbls/d for the three months ended ~~September~~March 3031, ~~2018~~2019, primarily due to the ~~timing~~size ofand ~~liftings. Sales volumes decreased by 5 MBbls/d for the nine months ended September 30, 2018, primarily due to the~~ timing of liftings ~~and a decrease in production driven by facility downtime for statutory maintenance in early 2018~~.

•– Sales ~~volumes~~volume for Ghana ~~increased~~decreased by 810 MBbls/d for the three months ended ~~September~~March 3031, ~~2018~~2019, ~~and 3 MBbls/d for the nine months ended September 30, 2018,~~ primarily due to ~~increased field performance at~~ the ~~TEN~~timing ~~field, which resulted in an additional lifting in the third quarter~~ of ~~2018~~liftings.

4641 | APC 2019 FORM 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

Natural-Gas Sales Revenues, ~~Average Prices~~Volume, and ~~Volumes~~Average Prices

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018		Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
Natural-gas sales revenues (millions)	$	232	(14	)%	$	269	$	682	(37	)%	$	1,090
United States
Sales volumes—Bcf	98		(1	)%	100		287		(24	)%	380
MMcf/d	1,071		(1	)	1,086		1,053		(24	)	1,392
Price per Mcf	$	2.35	(13	)	$	2.69	$	2.37	(17	)	$	2.87

Natural-Gas Sales Revenues

The following summarizes primary drivers for the change in natural-gas sales revenues:



	Three Months Ended
	March 31,
	2019		2018
Natural-gas sales revenues (millions)	$	320	$	247

Average price per Mcf	$	3.09	$	2.61

Sales volume (Bcf) ⁽¹⁾	104		95
Sales volume per day (MMcf/d) ⁽¹⁾	1,151		1,051

millions	Change inRevenues			Due to Changein Prices			Due to Changein Volumes
Three months ended September 30, 2018 vs. 2017	$	(37	)	$	(33	)	$	(4	)
Nine months ended September 30, 2018 vs. 2017	(408		)	(143		)	(265		)


⁽¹⁾	Natural-gas sales volume primarily originates in the United States.

Natural-Gas Prices

The average natural-gas price received ~~decreased~~increased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, primarily due to increased ~~U.S.~~residential ~~natural-gas~~and ~~production,~~commercial ~~partially~~demand ~~offset~~from bycolder ~~increased~~than ~~weather-driven~~normal ~~consumer~~temperatures ~~demand~~and ~~coupled~~improved ~~with~~price andifferentials ~~increase~~ in ~~natural-gas~~the ~~exports~~DJ ~~to Mexico and LNG exports~~basin.

Natural-Gas Sales ~~Volumes~~Volume

~~2018~~2019 vs. ~~2017~~2018 The Company’s natural-gas sales ~~volumes~~volume ~~remained~~increased ~~relatively flat for the three months ended September 30, 2018. Natural-gas sales volumes decreased~~ by ~~339~~100 MMcf/d for the three ~~nine~~ months ended ~~September~~March 3031, ~~2018~~2019, primarily due to ~~the~~continued ~~sale~~drilling ~~of the Marcellus, Eagleford,~~ and ~~Utah~~completion ~~CBM~~activities ~~assets~~ in the ~~first~~Delaware ~~half of 2017~~ and ~~the~~DJ ~~Moxa~~basins ~~assets~~ in ~~the second half of 2017~~2019.

47APC 2019 FORM 10-Q | 42

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

Natural-Gas Liquids Sales Revenues, ~~Average Prices~~Volume, and ~~Volumes~~Average Prices

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018		Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
Natural-gas liquids sales revenues (millions)	$	382	44	%	$	265	$	992	29	%	$	768
Total
Sales volumes—MMBbls (1)	10		15	%	9		28		—	%	28
MBbls/d (1)	106		15		92		101		—		101
Price per barrel	$	39.16	26		$	31.15	$	36.00	30		$	27.77

Natural-Gas Liquids Sales Revenues

_______________________________________________________________________________



	Three Months Ended
	March 31,
	2019		2018
Natural-gas liquids sales revenues (millions)	$	240	$	292

Average price per barrel	$	24.11	$	33.63

Sales volume (MMBbls) ⁽¹⁾	10		9
Sales volume (MBbls/d) ⁽¹⁾	111		97

(1) ~~The~~Approximately ~~percentage~~95% of ~~total~~NGL ~~and daily NGLs~~ sales ~~volumes~~volume was from the ~~U.S.~~United ~~was approximately 95% for three and nine months ended September 30, 2018, and 2017~~States.

~~NGLs~~NGL ~~sales represent revenues from the sale of product derived from the processing of Anadarko’s natural-gas production. The following summarizes primary drivers for the change in NGLs sales revenues:~~Prices

millions	Change inRevenues		Due to Changein Prices		Due to Changein Volumes
Three months ended September 30, 2018 vs. 2017	$	117	$	78	$	39
Nine months ended September 30, 2018 vs. 2017	224		227		(3		)

The average NGL price received decreased for the three months ended March 31, 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.

~~NGLs~~NGL ~~Prices~~Sales Volume

2019 vs. 2018 The ~~average~~Company’s ~~NGLs~~NGL ~~price~~sales ~~received~~volume increased by 14 MBbls/d for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~ 2019, primarily due to ~~increased~~continued ~~demand~~drilling ~~for~~and ~~ethane~~completion toactivities ~~supply~~and ~~newly-constructed~~midstream ~~ethane~~infrastructure ~~cracker~~additions ~~facilities~~in asthe ~~well~~Delaware asbasin ~~higher~~in ~~propane exports~~2019.

~~NGLs~~43 | APC 2019 ~~Sales~~FORM ~~Volumes~~10-Q

~~2018 vs. 2017 The Company~~MANAGEMENT’sS ~~NGLs~~DISCUSSION ~~sales~~AND ~~volumes~~ANALYSISRESULTS ~~increased~~OF byOPERATIONS 14Table ~~MBbls/d~~of ~~for the three months ended September 30, 2018, and remained flat for the nine months ended September 30, 2018, primarily due to the following:~~Contents

U.S. Onshore

• Sales volumes for the Delaware basin increased by 14 MBbls/d for the three months ended September 30, 2018, and 9 MBbls/d for the nine months ended September 30, 2018, primarily due to continued drilling and completion activities and midstream infrastructure additions in 2018.

• Sales volumes for other U.S. onshore assets decreased by 8 MBbls/d for the nine months ended September 30, 2018, primarily due to the sale of the Eagleford and West Chalk assets in the first half of 2017 and the Moxa assets in the second half of 2017.

Table of Contents

Gathering, Processing, and Marketing

	Three Months Ended	~~Three Months Ended~~							~~Nine Months Ended~~
		September 30,							September 30,
	March 31,
millions except percentages		2018			Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
millions	2019			2018
Gathering, processing, and marketing sales (1)		$	421		(17	)%	$	509	$	1,163	(18	)%	$	1,417
Gathering, processing, and marketing sales	$	470		$	360
Gathering, processing, and marketing expense (1)		256			(35	)	396		745		(32	)	1,101
Gathering, processing, and marketing expense	256			237
Gathering, processing, and marketing, net	$	$214	~~165~~	$	46123		$	~~113~~	$	~~418~~	32		$	~~316~~

~~__________________________________________________________________~~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.

(1) As a result of adopting ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as of January 1, 2018, gathering, processing, and marketing sales decreased by $296 million for the three months ended September 30, 2018, and $781 million for the nine months ended September 30, 2018, and gathering, processing, and marketing expenses decreased by $295 million for the three months ended September 30, 2018, and $775 million for the nine months ended September 30, 2018. Refer to Note 2—Revenue from Contracts with Customers in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for further information.

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 Anadarko. The net margin from the sale of NGLs and residue gas for service customers when Anadarko is acting as an agent is also included. Gathering and processing expense includes the cost of third-party natural gas purchased and processed by Anadarko as well as transportation and other operating expenses related to the Company’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 $5291 million for the three months ended ~~September~~March 3031, ~~2018~~2019, ~~and by $102 million for the nine months ended September 30, 2018,~~ primarily due to increased throughput ~~volumes~~volume at the ~~DBM~~West Texas Complex, ~~which~~and ~~were~~the ~~partially~~DJ ~~due~~Basin toComplex, ~~increased~~coupled ~~capacity~~with ~~from~~an ~~the~~increase ~~200~~in ~~MMcf/d~~oil ~~cryogenic~~marketing ~~train~~margins ~~that~~primarily ~~commenced~~due ~~service~~to inincreased ~~December~~third-party ~~2017,~~oil ~~and~~volume ~~increased~~purchased ~~throughput~~and ~~volumes~~transported atto the DJGulf ~~Basin Complex~~Coast.

Gains (Losses) on Divestitures and Other, net

	Three Months Ended	~~Three Months Ended~~								~~Nine Months Ended~~
		September 30,								September 30,
	March 31,
millions except percentages		2018			Inc (Dec) vs. 2017		2017			2018		Inc (Dec) vs. 2017		2017
millions	2019			2018
Gains (losses) on divestitures, net	$	$(5	3)	$	~~102~~(24	%)	$	~~(194~~	)	$	31	~~(96~~	)%	$	~~815~~
Other	97	87		43	9		80			~~201~~		~~(15~~	)	~~237~~
Gains (losses) on divestitures and other, net	$	$92	90	$	~~179~~19		$	~~(114~~	)	$	~~232~~	~~(78~~	)	$	~~1,052~~

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.

~~During~~Earnings (losses) from equity investments increased $43 million for the ~~nine~~three months ended ~~September~~March 3031, 2019, ~~2018~~primarily ~~and~~related ~~2017~~to the Company’s investments in midstream joint ventures. During the three months ended March 31, 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.

49APC 2019 FORM 10-Q | 44

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

~~Costs~~COSTS ~~and~~AND ~~Expenses~~EXPENSES

The following provides Anadarko’s total costs and expenses for the three ~~and nine~~ months ended ~~September~~March 3031:

Three Months Ended

~~Three Months Ended~~

~~Nine Months Ended~~

September 30,

March 31,

millions

2019

~~2018~~

2018

~~2017~~

~~2018~~

~~2017~~

Oil and gas operating

$289

~~294~~

$276

~~253~~

~~845~~

~~738~~

Oil and gas transportation

222

~~228~~

196

~~220~~

~~633~~

~~698~~

Exploration

~~118~~

168

~~750~~

~~380~~

~~2,366~~

Gathering, processing, and marketing (1)

256

~~256~~

237

~~396~~

~~745~~

~~1,101~~

G&A

267

~~248~~

278

~~261~~

~~814~~

~~768~~

DD&A

1,081

~~1,130~~

990

~~1,083~~

~~3,123~~

~~3,235~~

Production, property, and other taxes

199

~~246~~

190

~~159~~

~~637~~

~~449~~

Impairments

—

~~172~~

—

~~319~~

~~383~~

Other operating expense

140

~~123~~

~~188~~

~~157~~

Total

$2,384

~~2,718~~

$2,494

~~3,245~~

~~7,684~~

~~9,895~~

__________________________________________________________________


⁽¹⁾	See above explanation of gathering, processing, and marketing.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018		Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
Oil and gas operating (millions)	$	294	16	%	$	253	$	845	14	%	$	738
Oil and gas operating—per BOE	4.69		7		4.40		4.73		20		3.95
Oil and gas transportation (millions)	228		4		220		633		(9	)	698
Oil and gas transportation—per BOE	3.63		(5	)	3.82		3.54		(5	)	3.74

Oil and Gas Operating Expenses

Oil and Gas Operating Expense



	Three Months Ended
	March 31,
	2019		2018
Oil and gas operating (millions)	$	289	$	276
Oil and gas operating—per BOE	4.50		4.77

Oil and gas operating expense increased by $~~107~~13 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, primarily due to the following:

•– higher ~~operating~~U.S. onshore costs of $9734 million, primarily related to increased operated and nonoperated activity in the DJ and Delaware basins~~, partially offset by lower expenses of $63 million as a result of U.S. onshore asset divestitures~~

•– higher ~~non-operating~~operated costs of $5520 million ~~in Ghana~~, primarily ~~due~~related to ~~the~~increased ~~Jubilee~~workover ~~turret~~activity ~~repair~~ in ~~2018 and cost adjustment credits received from~~ the ~~operator~~Gulf inof ~~2017~~Mexico

~~The~~– ~~related~~lower nonoperated costs ~~per~~of ~~BOE increased by~~ $~~0.78~~36 ~~for~~million ~~the~~in ~~nine months ended September 30~~Ghana, ~~2018,~~ primarily due to ~~increased~~insurance ~~costs~~reimbursement ascredits areceived ~~result~~in of2019 ~~shifting~~related to aJubilee ~~higher-return,~~turret ~~oil-levered portfolio that includes the Gulf of Mexico and the DJ and Delaware basins, which operate at a higher cost compared to the divested lower-return, gas-levered assets.~~repair

~~Oil~~– lower costs of $11 million as a result of U.S. onshore and ~~Gas~~Gulf ~~Transportation~~of ~~Expense~~Mexico asset divestitures

~~Oil~~The ~~and~~related ~~gas~~costs ~~transportation expense decreased by $65 million for the nine months ended September 30, 2018, primarily due to U.S. onshore divestitures. Oil and gas transportation expense~~ per BOE decreased by $0.2027 for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, primarily due to ~~divestitures~~insurance ~~and~~reimbursement ~~lower~~credits ~~transportation~~received ~~expense per BOE~~ in ~~the~~2019 DJrelated ~~basin.~~to ~~After significant~~Jubilee ~~investment~~turret ~~in its midstream infrastructure~~repair, ~~the~~partially ~~Company~~offset ~~has~~by increased ~~the~~production ~~use~~in ofthe ~~its~~Delaware ~~midstream~~basin ~~facilities~~and ~~resulting~~higher inoperated ~~lower transportation~~ costs ~~for~~in ~~its~~the DJGulf ~~sales~~of ~~volumes.~~Mexico ~~These~~related ~~decreases~~to ~~are~~increased ~~partially~~workover ~~offset by higher third-party transportation costs in the Delaware basin~~activity.

5045 | APC 2019 FORM 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

Oil and Gas Transportation Expenses



	Three Months Ended
	March 31,
	2019		2018
Oil and gas transportation (millions)	$	222	$	196
Oil and gas transportation—per BOE	3.46		3.38

Oil and gas transportation expense increased by $26 million for the three months ended March 31, 2019, primarily due to increased sales volumes in the Delaware basin being transported and sold at Gulf Coast markets. Oil and gas transportation expense per BOE remained relatively flat.

Exploration Expense

	Three Months Ended	~~Three Months Ended~~					~~Nine Months Ended~~
		September 30,					September 30,
	March 31,
millions	2019	~~2018~~		2018	~~2017~~		~~2018~~		~~2017~~
Dry hole expense	$	$—	—	$	$53	~~565~~	$	55	$	~~1,408~~
Impairments of unproved properties	—	64		53	~~113~~		~~158~~		~~736~~
Geological and geophysical, exploration overhead, and other expense	49	54		62	72		~~167~~		~~222~~
Total		$	118		$	750	$	380	$	2,366
Total exploration expense	$	49		$	168

Dry Hole Expense

Dry hole expense for the ~~nine~~three months ended ~~September 30~~March 31, 2018, primarily related to the following:

•– $49 million related to unsuccessful drilling activities in the Gulf of Mexico ~~during the first quarter of 2018~~

Dry hole expense for the nine months ended September 30, 2017, primarily related to the following:

• $438 million related to the Shenandoah project, $221 million related to the Phobos project, and $110 million related to the Warrior project in the Gulf of Mexico due to insufficient quantities of oil pay to justify development

• $325 million related to certain wells in Côte d’Ivoire, where the Company relinquished its interest in its Côte d’Ivoire blocks

• $243 million related to certain wells in the Grand Fuerte area in Colombia due to insufficient progress on contractual and fiscal reforms needed for deepwater natural-gas development

Impairments of Unproved Properties

For discussion related to impairments of unproved properties, see Note 5—Impairments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

G&A

	Three Months Ended	~~Three Months Ended~~							~~Nine Months Ended~~
		September 30,							September 30,
	March 31,
millions except percentages		2018			Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
millions	2019			2018
G&A	$	$267	~~248~~	$	(5278	)%	$	~~261~~	$	~~814~~	6	%	$	~~768~~

G&A ~~increased~~decreased by $4611 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, primarily due to ana ~~increase~~decrease in the fair value of performance-based unit awards~~. The fair value of the performance-based unit awards is calculated using a Monte Carlo simulation that incorporates several variables~~, ~~including~~partially ~~Anadarko’s~~offset ~~historical~~by ~~share~~an ~~price~~increase ~~and~~in share prices of a predetermined group of peer companies to estimate the future total shareholder returns of each. Accordingly, future G&A could be higher or lower based on the outputs from the Monte Carlo simulation for the performancereorganization-~~based~~related ~~unit awards~~expenses.

51The 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 shareholder 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.

~~Table~~APC 2019 ofFORM ~~Contents~~10-Q | 46

~~Impairments~~MANAGEMENT’S DISCUSSION AND ANALYSISRESULTS OF OPERATIONS Table of Contents

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
millions	2018		2017		2018		2017
Impairments	$	172	$	—	$	319	$	383

DD&A

During the nine months ended September 30, 2018, the Company recorded asset impairments related to its hard-minerals properties and a gathering system in the DJ basin. During the nine months ended September 30, 2017, the Company recorded asset impairments related to various oil and gas properties in the Gulf of Mexico and a U.S. onshore midstream property. For additional information, see Note 5—Impairments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.



	Three Months Ended
	March 31,
millions	2019		2018
DD&A	$	1,081	$	990

DD&A expense increased by $91 million for the three months ended March 31, 2019, primarily due to the following:


–	$48 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


–	$33 million increase in straight line depreciation related to additional midstream infrastructure in the Delaware and DJ basins

Other Operating Expense

	Three Months Ended	~~Three Months Ended~~							~~Nine Months Ended~~
		September 30,							September 30,
	March 31,
millions except percentages		2018			Inc (Dec) vs. 2017		2017		2018		Inc (Dec) vs. 2017		2017
millions	2019			2018
Other operating expense	$	$21	26	$	~~(79~~140	)%	$	~~123~~	$	~~188~~	20	%	$	~~157~~

Other operating expense includes adjustments to contingency accruals, charges for drilling rig idle time, adjustments to drilling rig termination fees, and surface owner payments.

Other (Income) Expense

The following provides Anadarko’s other (income) expense for the three and nine months ended September 30:



	Three Months Ended
	March 31,
millions	2019		2018
Interest expense	$	253	$	228
(Gains) losses on derivatives, net ⁽¹⁾	313		35
Other (income) expense, net	6		(12		)
Total	$	572	$	251

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
millions	2018		2017		2018		2017
Interest expense	$	240	$	230	$	705	$	682
(Gains) losses on derivatives, net (1)	32		82		503		(33		)
Other (income) expense, net	24		5		16		51
Total	$	296	$	317	$	1,224	$	700


⁽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 7—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

~~__________________________________________________________________~~47 | APC 2019 FORM 10-Q

~~(1) (Gains) losses on derivatives, net represents the changes in fair value of the Company~~MANAGEMENT’sS ~~derivative~~DISCUSSION ~~instruments~~AND asANALYSISRESULTS aOF ~~result~~OPERATIONS ofTable ~~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.~~Contents

Table of Contents

Income Tax Expense (Benefit)

	Three Months Ended	~~Three Months Ended~~							~~Nine Months Ended~~
		September 30,							September 30,
	March 31,
millions except percentages	2019	~~2018~~			2018	~~2017~~			~~2018~~			~~2017~~
Income tax expense (benefit)	$	$166	~~256~~		$	$126	~~(425~~	)	$	~~507~~		$	~~(366~~	)
Income (loss) before income taxes	262	~~683~~			300	~~(1,066~~		)	~~1,125~~			~~(1,616~~		)
Effective tax rate	63	37	%	%	42	40	%	%	45		%	23		%

Upon enactment of the Tax Reform Legislation on December 22, 2017, the Company remeasured its U.S. deferred tax assets and liabilities based on the reduction of the U.S. corporate tax rate from 35% to 21%. During the third quarter of 2018, the Company recognized an additional net tax benefit of $5 million related to the adoption of the Tax Reform Legislation. The Company expects to complete the accounting for the income tax effects related to the adoption of the Tax Reform Legislation and record any remaining adjustments to provisional tax amounts, which could be material to income tax expense, before the end of the measurement period on December 21, 2018.

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.

The Company received an $881 million tentative refund in 2016 related to its $5.2 billion Tronox settlement payment in 2015. In April 2018, the IRS 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 ~~intends~~filed ~~to file~~ a petition with the U.S. Tax Court to dispute the disallowances in November 2018, and pursuant to standard U.S. Tax Court procedures, 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 ~~potential~~ 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 ~~within~~before ~~the next three years~~2022.

For additional information on income taxes, see Note 1110—Income Taxes in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

53APC 2019 FORM 10-Q | 48

MANAGEMENT’S DISCUSSION AND ANALYSISLIQUIDITY AND CAPITAL RESOURCES Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

		Nine Months Ended
	Three Months Ended
		September 30,
	March 31,
millions	2019	~~2018~~			2018	~~2017~~
Net cash provided by (used in) operating activities	$	$1,129	~~4,302~~		$	$1,430	~~2,619~~
Net cash provided by (used in) investing activities	(1,528	~~(4,659~~	)	)	(1,113	~~(28~~	)	)
Net cash provided by (used in) financing activities	1,129	~~(2,306~~		)	(1,507	~~(527~~	)	)

Overview The Company has a variety of funding sources available, including cash, an asset portfolio that provides ongoing cash-flow-generating capacity, opportunities for liquidity enhancement through divestitures and joint-venture arrangements that reduce future capital expenditures, the Company’s credit facilities, and access to both debt and equity capital markets. In addition, an effective registration statement is available to Anadarko covering the sale of WGP common units owned by the Company. WGP and WES function with capital structures that are separate from Anadarko, consisting of their own debt instruments and publicly traded common units.

~~During~~The ~~the~~Company ~~nine~~has ~~months~~a ~~ended~~variety ~~September 30, 2018, Anadarko paid $2.4 billion to repurchase shares under the Share-Repurchase Program and received net proceeds~~ of ~~$393 million~~funding ~~from~~sources ~~divestitures~~available, ~~primarily~~including ~~related to the sale of the Company’s nonoperated interest in Alaska. As of September 30~~cash, ~~2018,~~an ~~Anadarko~~asset ~~had~~portfolio ~~$1.9 billion of cash plus $5.0 billion of borrowing capacity under its APC RCF and 364-Day Facility. Anadarko believes~~ that ~~its~~provides ~~current~~ongoing ~~available~~ cash ~~and future operating cash flows will be sufficient to fund the Company’s projected long~~-~~term~~flow-generating ~~operational and capital programs~~capacity, ~~its quarterly dividends, the planned debt retirements,~~ and the ~~repurchase of $500 million of the~~ Company’s ~~common~~credit ~~stock remaining under the Share-Repurchase Program~~facility. ~~The Company continuously monitors its liquidity position and evaluates available funding alternatives in light of current and expected conditions.~~

During the three months ended March 31, 2019, Anadarko retired $900 million of debt. Anadarko had $2.0 billion of cash at March 31, 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.

Operating Activities

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 $41.31 billion for the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, $~~1.7~~301 ~~billion~~million ~~higher~~lower ~~than~~compared to the same period in ~~2017~~2018, primarily due to ~~higher~~lower oil and NGL sales revenues resulting from ~~higher~~lower ~~commodity~~ prices ~~and~~as awell as higher ~~oil~~operating ~~composition of sales volumes~~costs.

5449 | APC 2019 FORM 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSISLIQUIDITY AND CAPITAL RESOURCES Table of Contents

Investing Activities

Capital Expenditures The following presents the Company’s capital expenditures:

		Nine Months Ended
	Three Months Ended
		September 30,
	March 31,
millions	2019	~~2018~~			2018	~~2017~~
Cash Flows from Investing Activities
Additions to properties and equipment (1)	$	$1,389	~~4,891~~		$	$1,547	~~3,538~~
Adjustments for capital expenditures
Changes in capital accruals	(42	61	)		142	~~237~~
Other	(51	(7	)	)	15	21
Total capital expenditures	$	$1,296	~~4,945~~		$	$1,704	~~3,796~~
Exploration and Production and other capital expenditures	$	$981	~~3,367~~		$	$1,116	~~2,876~~
WES Midstream capital expenditures		920				662
WES Midstream capital expenditures (2)	315				588
Other Midstream capital expenditures		658				258

________________________________________________________________________________________


⁽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.

~~The~~(2) ~~Company’s~~WES ~~capital~~Midstream ~~expenditures~~includes ~~increased by~~ $~~1.1 billion~~49 ~~for~~million ~~the~~at ~~nine~~March ~~months~~31, ~~ended September 30~~2019, ~~2018. Exploration~~ and ~~Production capital expenditures increased primarily due to higher development costs of~~ $~~850~~ 260 million ~~driven~~at byMarch ~~increased~~31, ~~drilling~~2018, ~~and completion activities primarily in the DJ and Delaware basins and the Gulf~~ of ~~Mexico.~~capitalized ~~Exploration~~ costs ~~decreased~~incurred byprior ~~$396 million primarily related~~ to ~~decreased exploration drilling in~~ the ~~Gulf~~contribution ~~of Mexico, Côte d’Ivoire,~~ and ~~Colombia~~sale ~~partially~~of ~~offset~~midstream byassets ~~higher exploration drilling in the U.S. onshore. Other Midstream capital expenditures increased $400 million due~~ to ~~asset development primarily in the Delaware basin.~~ WES ~~Midstream capital expenditures increased $258 million primarily related to the development of assets in the Delaware and DJ basins~~.

~~Investments During~~The Company’s capital expenditures decreased by $408 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2018,~~2019. ~~the~~Exploration ~~Company~~and ~~made~~Production capital ~~contributions~~expenditures decreased primarily due to lower development costs of $~~235~~120 million ~~for~~driven ~~equity~~by ~~investments,~~decreased ~~which~~drilling ~~are~~activities ~~presented~~in asthe ~~cash~~Gulf ~~flows~~of ~~from~~Mexico. ~~investing~~WES ~~activities~~Midstream ascapital aexpenditures ~~component~~decreased ofby ~~Other,~~$273 million ~~net.~~primarily ~~These~~due ~~contributions~~to ~~were~~reduced ~~primarily~~development ~~associated~~activity ~~with~~in ~~joint~~the ~~ventures~~Delaware ~~for~~basin following the ~~Midland-to-Sealy~~completion ~~and~~of ~~Cactus~~significant IIinfrastructure ~~pipelines~~projects in ~~West Texas~~2018.

~~Divestitures~~Investments During the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, ~~Anadarko~~the ~~received~~Company ~~net~~made ~~proceeds~~capital contributions of $~~393~~130 million ~~from~~for ~~divestitures~~equity investments, ~~primarily~~which ~~related~~are topresented ~~the~~as ~~sale~~cash offlows ~~the~~from ~~Company’s~~investing ~~nonoperated~~activities ~~interest~~as ina ~~Alaska~~component of Other, net. ~~See Note 4—Divestitures~~These incontributions ~~the~~were ~~Notes~~primarily toassociated ~~Consolidated~~with ~~Financial~~joint ~~Statements~~ventures ~~under~~for ~~Part~~the I,Red ~~Item 1~~Bluff ofand ~~this~~Cactus ~~Form 10-Q~~II pipelines in West Texas.

55APC 2019 FORM 10-Q | 50

MANAGEMENT’S DISCUSSION AND ANALYSISLIQUIDITY AND CAPITAL RESOURCES Table of Contents

Financing Activities

	September 30,				December 31,
millions except percentages	March 31, 2019				December 31, 2018
millions except percentages	2018				2017
Anadarko		$	10,716			$	11,602
Anadarko	$	12,099			$	12,196
WES		7,208				4,815
WES	4,566				3,465
Total debt		$	17,924			$	16,417
WGP	28				28
Total equity		10,533				10,943
Total debt	$	16,693			$	15,689
Consolidated debt to total capitalization ratio		63.0		%		60.0		%
Total equity	11,237				13,790
Consolidated debt to total capitalization ratio	59.8		%		53.2		%

Debt-Reduction ~~Activity~~Program The Company commenced a $2.0 billion debt-reduction program in 2018. During the three months ended March 31, 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 Chevron Merger Agreement.

~~Anadarko~~Credit ~~Debentures The Company repaid $114 million of 7.050% Debentures at maturity in May 2018.~~ Facilities

~~Anadarko~~APC RCFs InThe ~~January 2018, the~~ Company ~~amended~~has ~~its~~a $3.0 billion senior unsecured RCF tothat ~~extend~~matures ~~the~~in ~~maturity date to~~ January ~~2022~~2023. ~~(APC~~The ~~RCF)~~Company’s ~~and amended its~~ $2.0 billion 364-day senior unsecured RCF toexpired ~~extend~~in ~~the maturity date to~~ January 2019 ~~(364-Day Facility)~~. At ~~September~~March 3031, ~~2018~~2019, Anadarko had no outstanding borrowings under the APC RCF ~~or the 364-Day Facility~~ and was in compliance with all covenants.

WES ~~Senior~~RCFs Effective ~~Notes In~~on ~~August~~February ~~2018~~15, 2019, WES ~~completed~~amended athe ~~public~~maturity ~~offering~~date of ~~$400 million~~its ~~aggregate~~senior ~~principal~~unsecured ~~amount~~RCF offrom ~~4.750%~~February ~~Senior~~2023 ~~Notes due~~to ~~August~~February ~~2028~~2024, and aupon ~~public~~completion ~~offering~~ of ~~$350 million~~the ~~aggregate~~WES ~~principal~~Merger, ~~amount~~expanded ofthe ~~5.500%~~borrowing ~~Senior~~capacity ~~Notes~~from ~~due~~$1.5 ~~August~~billion ~~2048~~to $2.0 billion ~~The~~(WES ~~net~~RCF). ~~proceeds~~At ~~from~~March ~~the~~31, ~~public~~2019, ~~offerings~~WES ~~were~~had ~~used~~outstanding toborrowings ~~repay~~under ~~the~~its ~~maturing~~RCF ~~$350 million~~ of ~~2.600%~~$640 ~~Senior~~million ~~Notes~~at ~~due~~an ~~August~~interest ~~2018~~rate ~~and~~of ~~amounts~~3.79%, outstanding ~~under~~letters ~~the~~of ~~WES~~credit ~~RCF.~~of ~~The~~$5 ~~remaining~~million, ~~net~~available ~~proceeds~~borrowing ~~were~~capacity ~~used~~of ~~for~~$1.4 ~~general~~billion, ~~partnership~~and ~~purposes,~~was ~~including~~in tocompliance ~~fund~~with ~~capital~~all ~~expenditures~~covenants.

In ~~March~~February ~~2018~~2019, WES ~~completed~~borrowed a$2.0 ~~public~~billion ~~offering~~under ofits ~~$400 million~~364-day ~~aggregate~~senior ~~principal~~unsecured ~~amount~~credit facility (WES 364-Day Facility) to fund substantially all of ~~4.500% Senior~~the ~~Notes~~cash ~~due~~portion ~~March~~of ~~2028~~the consideration under the WES midstream asset contribution and asale ~~public~~and ~~offering~~the payment of ~~$700 million~~related ~~aggregate~~transaction ~~principal~~costs. ~~amount~~The WES 364-Day Facility will mature on February 27, 2020, the day prior to the one-year anniversary of ~~5.300%~~the ~~Senior~~completion ~~Notes~~of ~~due~~the ~~March~~WES ~~2048~~Merger. Net cash proceeds received from ~~the~~future ~~public~~asset sales and debt or equity offerings ~~were~~by WES must be used to repay amounts outstanding under the WES ~~RCF~~ 364-Day Facility. ~~The~~At ~~remaining~~March ~~net~~31, ~~proceeds~~2019, ~~were~~WES ~~used~~had ~~for~~outstanding ~~general~~borrowings ~~partnership~~under ~~purposes~~its WES 364-Day Facility of $2.0 billion at an interest rate of 3.87% and was in compliance with all covenants. WES intends to refinance the obligations under the 364-Day Facility prior to its maturity in February 2020. See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, ~~including~~Item 1 of this Form 10-Q for additional information related to ~~fund~~the ~~capital~~WES ~~expenditures~~Merger.

~~WES and~~ WGP ~~RCFs~~RCF In ~~February~~March ~~2018~~2019, ~~WES amended its RCF to extend~~ the ~~maturity date from February 2020 to February 2023~~$35 ~~and~~million ~~expanded~~senior ~~the~~secured ~~borrowing~~RCF ~~capacity to $1.5 billion~~ (~~WES~~WGP RCF). Asmatured ~~part~~following of the ~~amendment,~~completion ~~the WES RCF is expandable to a maximum~~ of ~~$2.0 billion. During~~ the ~~nine months ended September 30, 2018,~~ WES ~~borrowed~~Merger. ~~$320~~See Note ~~million~~1—Summary ~~under its RCF, which was used for general partnership purposes, and made repayments~~ of ~~$690 million.~~Significant AtAccounting ~~September~~Policies ~~30,~~in ~~2018,~~the ~~WES~~Notes ~~had~~to noConsolidated ~~outstanding~~Financial ~~borrowings~~Statements under ~~its~~Part ~~RCF~~I, ~~outstanding~~Item 1 ~~letters~~ of ~~credit~~this ~~of $5~~Form ~~million,~~10-Q ~~available~~for ~~borrowing~~additional ~~capacity~~information ofrelated ~~$1.495 billion,~~to ~~and~~the ~~was~~WES ~~in compliance with all covenants~~Merger.

~~In February 2018, WGP voluntarily reduced the aggregate commitments of the lenders under its senior secured RCF maturing in March~~ 51 | APC 2019 ~~from~~FORM ~~$250 million to $35 million (WGP RCF). At September 30, 2018, WGP had outstanding borrowings of $28 million at an interest rate of 4.25% classified as short~~10-~~term debt on the Company’s Consolidated Balance Sheet, and had available borrowing capacity of $7 million.~~Q

~~For additional information on the Company~~MANAGEMENT’sS ~~debt~~DISCUSSION ~~instruments,~~AND ~~see Note 10—Debt~~ANALYSISLIQUIDITY inAND ~~the~~CAPITAL ~~Notes~~RESOURCES toTable ~~Consolidated Financial Statements under Part I, Item 1~~ of ~~this Form 10-Q.~~ Contents

Debt ~~Maturities~~Activity AtAmounts ~~September~~in ~~30,~~the ~~2018,~~table ~~Anadarko~~below ~~had~~do ~~outstanding~~not ~~borrowings~~include offinance ~~$600 million~~lease ofactivity ~~8.700% Senior Notes due March 2019~~ and ~~$300 million~~are ofpresented ~~6.950%~~at ~~Senior~~face ~~Notes due June 2019 classified as short-term debt on the Company’s Consolidated Balance Sheet~~value.

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. None of the Zero Coupons were put to the Company in October 2018. The Zero Coupons can next be put to the Company in October 2019, which, if put in whole, would be $980 million.



		Three Months Ended
millions	Company	March 31, 2019		Description
Borrowings	WES	2,000		WES 364-Day Facility ⁽¹⁾
	WES	420		WES RCF ⁽²⁾
Repayments	Anadarko	(600	)	8.700% Senior Notes due 2019
	Anadarko	(300	)	6.950% Senior Notes due 2019
	WES	(28	)	WGP RCF

~~For~~(1) ~~additional~~Borrowings ~~information~~were onused ~~the~~to ~~Company’s~~fund ~~debt~~substantially ~~instruments,~~all ~~see~~of ~~Note~~the ~~10—Debt~~cash inportion of the ~~Notes~~consideration tofor ~~Consolidated~~the ~~Financial~~WES ~~Statements~~midstream ~~under~~asset ~~Part~~contribution I,and ~~Item 1~~sale and the payment of ~~this~~related ~~Form 10-Q~~transaction costs.

56(2) Borrowings were used for general partnership purposes, including capital expenditures.

~~Table~~See Note 8—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of ~~Contents~~this Form 10-Q for additional information on the Company’s debt instruments.

~~Equity~~Debt ~~Transactions~~Maturities InAnadarko’s ~~February~~Zero ~~2018,~~Coupons ascan ~~part~~be ofput ~~the~~to ~~Share-Repurchase Program,~~ the Company ~~completed~~in ~~the~~October ~~repurchase~~ of ~~8.5~~each ~~million~~year, ~~shares~~in ofwhole ~~its~~or ~~common~~in ~~stock~~part, for ~~$500~~the ~~million~~then-accreted ~~(average~~value ~~price~~ of ~~$58.82 per share) under an ASR Agreement. In March 2018,~~ the ~~Company~~outstanding ~~entered~~Zero ~~into an additional ASR Agreement~~Coupons, which, ~~was~~if ~~completed~~put in ~~June~~whole, ~~2018~~will ~~and~~be ~~resulted~~$942 million inat the ~~repurchase~~next ofput ~~22.1~~date ~~million~~in ~~shares~~October ~~of its common stock for $1~~2019.~~4 billion~~ ~~(average~~Anadarko’s ~~price~~Zero ofCoupons ~~$65.28~~were ~~per~~classified ~~share).~~as Inlong-term ~~July~~debt ~~2018,~~on the ~~Share-Repurchase~~Company’s ~~Program~~Consolidated ~~was~~Balance ~~expanded~~Sheet toat ~~$4.0 billion~~March ~~and extended through June 30~~31, 2019., Inas the ~~third quarter of 2018, the~~ Company ~~completed~~has the ~~repurchase~~ability ofand ~~7.7 million~~intent ~~shares~~to ofrefinance ~~its~~these ~~common~~obligations ~~stock~~using ~~for $500 million through open~~long-~~market~~term ~~repurchases. For additional information~~debt, ~~see Note 14—Stockholders’~~ ~~Equity in~~should ~~the Notes~~a toput ~~Consolidated~~be ~~Financial Statements under Part I, Item 1 of this Form 10-Q~~exercised.

InFor ~~July~~additional ~~2017,~~information ~~WES~~on ~~filed~~the aCompany’s ~~registration~~debt ~~statement~~instruments, ~~with~~see ~~the~~Note ~~SEC~~8—Debt ~~for~~in the ~~issuance~~Notes ofto upConsolidated toFinancial anStatements ~~aggregate~~under ofPart ~~$500~~I, ~~million~~Item 1 of ~~WES~~this ~~common units pursuant to a continuous offering program that has not yet been initiated~~Form 10-Q.

Derivative Instruments For information on derivative instruments, including cash flow treatment, see Note 87—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 $~~380~~150 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, and $84127 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018. In February 2018, the Company ~~announced~~increased anthe ~~increase~~quarterly dividend to $0.25 per share. As part of the Company’s focus on increasing shareholder returns, the quarterly dividend increased again in November 2018 to $0.2530 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 $130 million for the ~~following:~~three months ended March 31, 2019, and $118 million for the three months ended March 31, 2018.

	Nine Months Ended
	September 30,
millions	2018		2017
WES distributions to unitholders (excluding Anadarko and WGP) (1)	$	282	$	235
WES distributions to Series A Preferred unitholders (2)	—		22
WGP distributions to unitholders (excluding Anadarko) (3)	73		60

__________________________________________________________________

(1) WES has made quarterly distributions to its unitholders since its IPO in the second quarter of 2008 and has increased its distribution from $0.30 per common unit for the third quarter of 2008 to $0.965 per common unit for the third quarter of 2018 (to be paid in November 2018).

(2) WES made quarterly distributions of $0.68 per unit, prorated based on issuance date, to its Series A Preferred unitholders since the unit issuances in March and April 2016. As of June 30, 2017, all Series A Preferred units had converted into WES common units; see Note 15—Noncontrolling Interests in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10‑Q.

(3) WGP has made quarterly distributions to its unitholders since its IPO in December 2012 and has increased its distribution from $0.17875 per common unit for the first quarter of 2013 to $0.59500 per unit for the third quarter of 2018 (to be paid in November 2018).

RECENT ACCOUNTING DEVELOPMENTS

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 discussion of recent accounting developments affecting the Company.

57APC 2019 FORM 10-Q | 52

MARKET RISKQUANTITATIVE AND QUALITATIVE DISCLOSURES Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary market risks are attributable to fluctuations in energy prices and interest rates. These risks can affect revenues and cash flows, and the Company’s risk-management policies provide for the use of derivative instruments to manage these risks. The types of commodity derivative instruments used by the Company include futures, swaps, options, and fixed-price physical-delivery contracts. The volume of commodity derivatives entered into by the Company is governed by risk-management policies and may vary from year to year. Both exchange and over-the-counter traded derivative instruments may be subject to margin-deposit requirements, and the Company may be required from time to time to deposit cash or provide letters of credit with exchange brokers or counterparties to satisfy these margin requirements. For additional information relating to the Company’s derivative and financial instruments, see Note 87—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

COMMODITY-PRICE RISK The Company’s most significant market risk relates to prices for oil, natural gas, and NGLs. Management expects energy prices to remain unpredictable and potentially volatile. As energy prices decline or rise significantly, revenues and cash flows are likewise affected. In addition, a non-cash write-down of the Company’s oil and gas properties or goodwill may be required if commodity prices experience a significant decline. Below is a sensitivity analysis for the Company’s commodity-price-related derivative instruments.

~~Derivative Instruments Held for Non-Trading Purposes~~ The Company’s ~~had~~most ~~derivative~~significant ~~instruments~~market inrisk ~~place~~relates to ~~reduce~~prices ~~the~~for ~~price risk associated with future production of 49 MMBbls of~~ oil, ~~and 49 Bcf of~~ natural gas ~~at September 30~~, ~~2018,~~and ~~with~~NGLs. aManagement ~~net~~expects ~~derivative~~energy ~~liability~~prices ~~position~~to ofremain ~~$458 million.~~unpredictable ~~Based~~and onpotentially ~~actual~~volatile. ~~derivative~~As ~~contractual volumes,~~energy aprices ~~10%~~decline ~~increase~~or inrise ~~underlying~~significantly, ~~commodity~~revenues ~~prices~~and ~~would~~cash ~~increase~~flows ~~the~~are ~~net~~likewise ~~derivative~~affected. ~~liability~~In ~~by $308 million~~addition, ~~while~~ a ~~10%~~non-cash ~~decrease~~write-down inof ~~underlying commodity prices would decrease~~ the ~~net~~Company’s ~~derivative~~oil ~~liability~~and bygas ~~$270 million.~~properties ~~However, any cash received~~ or ~~paid~~goodwill tomay ~~settle these derivatives would~~ be ~~substantially~~required ~~offset~~if bycommodity ~~the~~prices ~~sales~~experience ~~value~~a ofsignificant ~~production covered by the derivative instruments~~decline.

~~INTEREST-RATE~~Derivative ~~RISK Borrowings,~~Instruments ifHeld ~~any,~~for ~~under each of the 364~~Non-~~Day~~Trading ~~Facility,~~Purposes The ~~the~~Company ~~APC~~had ~~RCF,~~derivative ~~the~~instruments ~~WES~~in ~~RCF,~~place ~~and~~to reduce the ~~WGP~~price ~~RCF~~risk ~~are~~associated ~~subject~~with tofuture ~~variable~~production ~~interest~~of ~~rates.~~24 ~~The~~MMBbls ~~remaining balance~~ of ~~the~~oil ~~Company’s~~at ~~short-term~~March 31, ~~and~~2019, ~~long-term~~with ~~borrowings~~a ~~has~~net ~~fixed~~derivative ~~interest~~asset ~~rates.~~position ~~The~~of ~~Company has~~ $~~2.9~~16 ~~billion~~million. ofBased ~~LIBOR-based~~on ~~obligations~~actual ~~that~~derivative ~~are~~contractual volume, ~~presented~~a on10% ~~the~~increase ~~Company’s~~in ~~Consolidated~~underlying ~~Balance~~commodity ~~Sheets~~prices ~~net~~would ofreduce ~~preferred~~the ~~investments~~fair invalue ~~two~~of ~~noncontrolled~~these ~~entities.~~derivatives ~~These~~by ~~obligations~~$51 million, ~~give~~while ~~rise~~a to10% ~~minimal~~decrease ~~net~~in ~~interest-rate~~underlying ~~risk~~commodity ~~because~~prices ~~coupons~~would onincrease the ~~related~~fair ~~preferred~~value ~~investments~~of ~~are~~these ~~also~~derivatives ~~LIBOR-based.~~by ~~While a 10%~~$50 ~~change~~million. inHowever, ~~the~~any ~~applicable~~cash ~~benchmark~~received ~~interest~~or ~~rate~~paid ~~would~~to ~~not~~settle ~~materially~~these ~~impact~~derivatives ~~the~~would ~~Company’s~~be ~~interest~~substantially ~~cost,~~offset itby ~~would affect~~ the ~~fair~~sales value of ~~outstanding~~production ~~fixed-rate~~covered ~~debt~~by the derivative instruments.

~~At September 30, 2018, the Company had a net derivative liability position of $1.0 billion related to interest~~INTEREST-~~rate~~RATE swaps. A 10% increase (decrease) in the LIBOR interest-rate curve would decrease (increase) the aggregate fair value of outstanding interest-rate swap agreements by $103 million. However, any change in the interest-rate derivative gain or loss could be substantially offset by changes in actual borrowing costs associated with future debt issuances. For a summary of the Company’s outstanding interest-rate derivative positions, see Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.RISK

58Borrowings, if any, under each of the APC RCF, the WES RCF, and the WES 364-Day Facility are subject to variable interest rates. The remaining balance of the Anadarko’s short-term and long-term borrowings has fixed interest rates. The Company has $2.9 billion of LIBOR-based obligations that are presented on the Company’s Consolidated Balance Sheets net of preferred investments in two noncontrolled entities. These obligations give rise to minimal net interest-rate risk because coupons on the related preferred investments are also LIBOR-based. While a 10% change in the applicable benchmark interest rate would not materially impact the Company’s interest cost, it would affect the fair value of outstanding fixed-rate debt.

~~Table~~At March 31, 2019, the Company had a net derivative liability position of ~~Contents~~$1.3 billion related to interest-rate swaps. A 10% increase (decrease) in the LIBOR interest-rate curve would decrease (increase) the aggregate fair value of outstanding interest-rate swap agreements by $117 million. However, any change in the interest-rate derivative gain or loss could be substantially offset by changes in actual borrowing costs associated with future debt issuances. For a summary of the Company’s outstanding interest-rate derivative positions, see Note 7—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

53 | APC 2019 FORM 10-Q



	CONTROLS AND PROCEDURES	Table of Contents

Item 4. Controls and Procedures

~~Evaluation~~EVALUATION ofAND ~~Disclosure~~DISCLOSURE ~~Controls~~CONTROLS ~~and~~AND ~~Procedures~~PROCEDURES

Anadarko’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (Exchange Act). The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of ~~September~~March 3031, ~~2018~~2019.

~~Changes~~CHANGES inIN ~~Internal~~INTERNAL ~~Control~~CONTROL ~~over~~OVER ~~Financial~~FINANCIAL ~~Reporting~~REPORTING

There were no changes in Anadarko’s internal control over financial reporting during the ~~third~~first quarter of ~~2018~~2019 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

59APC 2019 FORM 10-Q | 54

Filing Compare · ANADARKO PETROLEUM CORP