Segment Information

6 Months Ended

Jun. 30, 2019

19. Segment Information

Anadarko’s business segments are separately managed due to distinct operational differences. On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its remaining midstream assets to WES. Due to this contribution and sale, the Company no longer reports an Other Midstream segment and now has two reporting segments: Exploration and Production and WES Midstream, which include their respective marketing results. Prior period amounts have been reclassified to conform to the current-period presentation.

The Exploration and Production reporting segment is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and is advancing its Mozambique LNG project to the construction phase after announcing FID on June 18, 2019. The WES Midstream reporting segment is engaged in gathering, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water.

To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. The Company defines Adjusted EBITDAX as income (loss) before income taxes; interest expense; DD&A; exploration expense; gains (losses) on divestitures, net; impairments; total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives; certain items not related to the Company’s normal operations; and less net income (loss) attributable to noncontrolling interests.

The Company’s definition of Adjusted EBITDAX excludes gains (losses) on divestitures, net and exploration expense as they are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from Adjusted EBITDAX as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred. Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives are excluded from Adjusted EBITDAX because these (gains) losses are not considered a measure of asset operating performance. Finally, net income (loss) attributable to noncontrolling interests is excluded from the Company’s measure of Adjusted EBITDAX because it represents earnings that are not attributable to the Company’s common stockholders.

Management believes Adjusted EBITDAX provides information useful in assessing the Company’s operating and financial performance across periods. Adjusted EBITDAX as defined by Anadarko may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) attributable to common stockholders and other performance measures, such as operating income. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
millions	2019			2018			2019			2018
Income (loss) before income taxes	$	(736	)	$	142		$	(474	)	$	442
Interest expense	249			237			502			465
DD&A	1,161			1,003			2,242			1,993
Exploration expense	90			94			139			262
(Gains) losses on divestitures, net	(6		)	(52		)	(1		)	(28		)
Impairments	—			128			—			147
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	255			267			571			240
Reorganization-related charges	15			—			33			—
Merger transaction costs	1,042			—			1,042			—
Less net income (loss) attributable to noncontrolling interests	80			(12		)	191			41
Consolidated Adjusted EBITDAX	$	1,990		$	1,831		$	3,863		$	3,480

19. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fee expenses, results from hard-minerals royalties, net cash from settlement of commodity derivatives, and net income (loss) attributable to noncontrolling interests. The following summarizes selected financial information for Anadarko’s reporting segments:



millions	Exploration & Production				WES Midstream				Other and Intersegment Eliminations				Total
Three Months Ended June 30, 2019
Sales revenues		$	2,852			$	492			$	12		$	3,356
Intersegment revenues		40				193				(233		)	—
Other		(4		)		70				14			80
Total revenues and other ⁽¹⁾		2,888				755				(207		)	3,436
Operating costs and expenses ⁽²⁾		987				381				(4		)	1,364
Net cash from settlement of commodity derivatives		—				—				—			—
Other (income) expense, net ⁽³⁾		—				(59		)		62			3
Net income (loss) attributable to noncontrolling interests		—				—				80			80
Total expenses and other		987				322				138			1,447
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement		—				—				1			1
Adjusted EBITDAX		$	1,901			$	433			$	(344	)	$	1,990

Three Months Ended June 30, 2018
Sales revenues		$	2,772			$	358			$	38		$	3,168
Intersegment revenues		14				160				(174		)	—
Other		3				39				29			71
Total revenues and other ⁽¹⁾		2,789				557				(107		)	3,239
Operating costs and expenses ⁽²⁾		900				246				101			1,247
Net cash from settlement of commodity derivatives		—				—				170			170
Other (income) expense, net ⁽³⁾		—				—				4			4
Net income (loss) attributable to noncontrolling interests		—				—				(12		)	(12		)
Total expenses and other		900				246				263			1,409
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement		—				—				1			1
Adjusted EBITDAX		$	1,889			$	311			$	(369	)	$	1,831


⁽¹⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽²⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.


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

19. Segment Information (Continued)



millions	Exploration & Production				WES Midstream				Other and Intersegment Eliminations				Total
Six Months Ended June 30, 2019
Sales revenues		$	5,458			$	992			$	32		$	6,482
Intersegment revenues		91				365				(456		)	—
Other		4				132				41			177
Total revenues and other ⁽¹⁾		5,553				1,489				(383		)	6,659
Operating costs and expenses ⁽²⁾		1,979				723				(98		)	2,604
Net cash from settlement of commodity derivatives		—				—				(6		)	(6		)
Other (income) expense, net ⁽³⁾		—				(95		)		100			5
Net income (loss) attributable to noncontrolling interests		—				—				191			191
Total expenses and other		1,979				628				187			2,794
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement		—				—				(2		)	(2		)
Adjusted EBITDAX		$	3,574			$	861			$	(572	)	$	3,863

Six Months Ended June 30, 2018
Sales revenues		$	5,428			$	706			$	60		$	6,194
Intersegment revenues		24				313				(337		)	—
Other		(6		)		80				40			114
Total revenues and other ⁽¹⁾		5,446				1,099				(237		)	6,308
Operating costs and expenses ⁽²⁾		1,770				476				318			2,564
Net cash from settlement of commodity derivatives		—				—				238			238
Other (income) expense, net		—				—				(8		)	(8		)
Net income (loss) attributable to noncontrolling interests		—				—				41			41
Total expenses and other		1,770				476				589			2,835
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement		—				—				7			7
Adjusted EBITDAX		$	3,676			$	623			$	(819	)	$	3,480


⁽¹⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽²⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.


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

19. Segment Information (Continued)

The following summarizes selected financial information for Anadarko’s reporting segments:



millions	Exploration & Production			WES Midstream			Other and Intersegment Eliminations			Total
June 30, 2019
Net properties and equipment		$	18,306		$	8,794		$	1,991		$	29,091
Capital expenditures ⁽¹⁾		$	1,879		$	571		$	103		$	2,553
Goodwill		$	4,343		$	446		$	—		$	4,789

December 31, 2018
Net properties and equipment		$	18,276		$	8,410		$	1,929		$	28,615
Capital expenditures ⁽¹⁾		$	4,103		$	1,912		$	170		$	6,185
Goodwill		$	4,343		$	446		$	—		$	4,789

⁽¹⁾

WES Midstream includes $49 million at June 30, 2019, and $734 million at December 31, 2018, of capitalized costs incurred by Anadarko prior to the contribution and sale of midstream assets to WES.

ANADARKO PETROLEUM CORP 10-Q