Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.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 30, 2017March 31, 2018
or
[    ]  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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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 number of shares outstanding of the Company’s common stock at October 20, 2017,April 30, 2018, is shown below:
Title of Class Number of Shares Outstanding
Common Stock, par value $0.10 per share 547,157,557515,088,252

TABLE OF CONTENTS
PART I
 Page
Item 1.
Financial Statements
 
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30,March 31, 2018 and 2017 and 2016
34
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30,March 31, 2018 and 2017 and 2016
45
 
Consolidated Balance Sheets at September 30, 2017,March 31, 2018, and December 31, 20162017
56
 
Consolidated Statement of Equity for the NineThree Months Ended September 30, 2017March 31, 2018
67
 
Consolidated Statements of Cash Flows for the NineThree Months Ended September 30,March 31, 2018 and 2017 and 2016
78
 
Notes to Consolidated Financial Statements
89
 
Note 1 - 1—Summary of Significant Accounting Policies
89
 
Note 2 - Inventories
10
Note 3 - Acquisitions, Divestitures, and Assets Held for Sale
11
Note 4 - Impairments2—Revenue from Contracts with Customers
12
 
Note 5 - Exploratory Well Costs
13
Note 6 - Current Liabilities3—Inventories
14
 
Note 7 - Derivative Instruments4—Divestitures
1415
 
Note 8 - Debt5—Impairments
2016
 
Note 9 - Income Taxes6—Suspended Exploratory Well Costs
2217
 
Note 10 - Contingencies7—Current Liabilities
17
Note 8—Derivative Instruments
17
Note 9—Tangible Equity Units
23
 
Note 11 - Restructuring Charges10—Debt
23
 
Note 12 - Pension Plans and Other Postretirement Benefits
24
Note 13 - Stockholders’ Equity
25
Note 14 - Noncontrolling Interests11—Income Taxes
26
 
Note 15 - Variable Interest Entities12—Contingencies
27
 
Note 16 - Supplemental Cash Flow Information13—Pension Plans and Other Postretirement Benefits
27
Note 14—Stockholders’ Equity
28
 
Note 17 - 15—Noncontrolling Interests
29
Note 16—Variable Interest Entities
30
Note 17—Supplemental Cash Flow Information
32
Note 18—Segment Information
2833
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3235
 
Cautionary Statement About Forward-Looking Statements
3235
 
Management Overview
3437
 
Financial Results
3539
 
Liquidity and Capital Resources
4649
 
Recent Accounting Developments
4952
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
5053
Item 4.
Controls and Procedures
5154
PART II
  
Item 1.
Legal Proceedings
5255
Item 1A.
Risk Factors
5255
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
5356
Item 6.
Exhibits
5457

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:

$3.0 Billion Share-Repurchase Program - A program approved by the Anadarko Board of Directors in September 2017 that extends through the end of 2018, authorizing the repurchase of $2.5 billion of Anadarko’s common stock, which was expanded to $3.0 billion in February 2018
364-Day Facility - Anadarko’s $2.0 billion 364-day senior unsecured RCF maturing in January 2018
APC RCF - Anadarko’s $3.0 billion senior unsecured RCF maturing in January 2021
ASR Agreement - Anadarko’sAn accelerated share-repurchase agreement with an investment bank to repurchase the Company’s common stock
ASU - Accounting Standards Update
Bcf - Billion cubic feet
BOE - Barrels of oil equivalent
CBM - Coalbed methane
DBJV - Delaware Basin JV Gathering LLC
DBJV systemSystem - A gathering system and related facilities located in the Delaware basin in Loving, Ward, Winkler, and Reeves Counties in West Texas
DBM complexComplex - 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
EPADJ 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
FID - U.S. Environmental Protection AgencyFinal investment decision
Fitch - Fitch Ratings
FPSO - Floating production, storage, and offloading unit
G&A - General and administrative expenses
GAAP - U.S. Generally Accepted Accounting Principles
GOM Acquisition - The acquisition of oil and natural-gas assets in the Gulf of Mexico that closed on December 15, 2016
IPO - Initial public offering
LIBOR - London Interbank Offered Rate
LNG - Liquefied natural 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
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

OPEC - Organization of the Petroleum Exporting Countries
RCF - Revolving credit facility
S&P - Standard and Poor’s
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
VIE or VIEs - Variable interest entity
WES - Western Gas Partners, LP, a publicly traded limited partnership, which is a consolidated subsidiary of Anadarko
WES RCF - WES’s $1.2$1.5 billion senior unsecured RCF maturing in February 2020
WGP - Western Gas Equity Partners, LP, a publicly traded limited partnership, which is a consolidated subsidiary of Anadarko
WGP RCF - WGP’s $250$35 million three-year senior secured RCF maturing in March 2019
WTI - West Texas Intermediate
Zero Coupons - Anadarko’s Zero-Coupon Senior Notes due 2036

PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
millions except per-share amounts 2017 2016 2017 2016
Revenues and Other        
Oil sales $1,567
 $1,239
 $4,652
 $3,214
Natural-gas sales 269
 435
 1,090
 1,121
Natural-gas liquids sales 265
 227
 768
 640
Gathering, processing, and marketing sales 509
 350
 1,417
 895
Gains (losses) on divestitures and other, net (114) (358) 1,052
 (388)
Total 2,496
 1,893
 8,979
 5,482
Costs and Expenses        
Oil and gas operating 257
 198
 748
 608
Oil and gas transportation 220
 256
 698
 744
Exploration 751
 304
 2,371
 506
Gathering, processing, and marketing 398
 291
 1,108
 758
General and administrative 280
 362
 840
 1,116
Depreciation, depletion, and amortization 1,083
 1,069
 3,235
 3,202
Production, property, and other taxes 159
 148
 449
 422
Impairments —
 27
 383
 61
Other operating expense 123
 31
 157
 54
Total 3,271
 2,686
 9,989
 7,471
Operating Income (Loss) (775) (793) (1,010) (1,989)
Other (Income) Expense        
Interest expense 230
 220
 680
 657
Loss on early extinguishment of debt —
 —
 2
 124
(Gains) losses on derivatives, net 82
 25
 (33) 629
Other (income) expense, net (21) (31) (43) (86)
Total 291
 214
 606
 1,324
Income (Loss) Before Income Taxes (1,066) (1,007) (1,616) (3,313)
Income tax expense (benefit) (425) (260) (366) (957)
Net Income (Loss) (641) (747) (1,250) (2,356)
Net income (loss) attributable to noncontrolling interests 58
 83
 182
 200
Net Income (Loss) Attributable to Common Stockholders $(699) $(830) $(1,432) $(2,556)
         
Per Common Share        
Net income (loss) attributable to common stockholders—basic $(1.27) $(1.61) $(2.60) $(5.00)
Net income (loss) attributable to common stockholders—diluted $(1.27) $(1.61) $(2.61) $(5.00)
Average Number of Common Shares Outstanding—Basic 553
 517
 552
 512
Average Number of Common Shares Outstanding—Diluted 553
 517
 552
 512
Dividends (per common share) $0.05
 $0.05
 $0.15
 $0.15

See accompanying Notes to Consolidated Financial Statements.

3

Table of Contents

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
millions 2017 2016 2017 2016
Net Income (Loss) $(641) $(747) $(1,250) $(2,356)
Other Comprehensive Income (Loss)        
Adjustments for derivative instruments        
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net 1
 2
 3
 7
Income taxes on reclassification of previously deferred derivative losses to (gains) losses on derivatives, net —
 (1) (1) (3)
Total adjustments for derivative instruments, net of taxes 1
 1
 2
 4
Adjustments for pension and other postretirement plans        
Net gain (loss) incurred during period (14) (157) 1
 (347)
Income taxes on net gain (loss) incurred during period 5
 58
 —
 128
Prior service credit (cost) incurred during period —
 —
 —
 (1)
Income taxes on prior service credit (cost) incurred during period —
 —
 —
 1
Amortization of net actuarial (gain) loss to general and administrative expense 29
 114
 100
 156
Income taxes on amortization of net actuarial (gain) loss to general and administrative expense (11) (43) (37) (59)
Amortization of net prior service (credit) cost to general and administrative expense (7) (6) (19) (27)
Income taxes on amortization of net prior service (credit) cost to general and administrative expense 3
 2
 7
 10
Total adjustments for pension and other postretirement plans, net of taxes 5
 (32) 52
 (139)
Total 6
 (31) 54
 (135)
Comprehensive Income (Loss) (635) (778) (1,196) (2,491)
Comprehensive income (loss) attributable to noncontrolling interests 58
 83
 182
 200
Comprehensive Income (Loss) Attributable to Common Stockholders $(693) $(861) $(1,378) $(2,691)

  Three Months Ended 
 March 31,
millions except per-share amounts 2018 2017
Revenues and Other    
Oil sales $2,127
 $1,663
Natural-gas sales 247
 502
Natural-gas liquids sales 292
 289
Gathering, processing, and marketing sales 360
 444
Gains (losses) on divestitures and other, net 19
 869
Total 3,045
 3,767
Costs and Expenses    
Oil and gas operating 276
 256
Oil and gas transportation 196
 249
Exploration 168
 1,084
Gathering, processing, and marketing 237
 350
General and administrative 278
 263
Depreciation, depletion, and amortization 990
 1,115
Production, property, and other taxes 190
 155
Impairments 19
 373
Other operating expense 140
 22
Total 2,494
 3,867
Operating Income (Loss) 551
 (100)
Other (Income) Expense    
Interest expense 228
 223
(Gains) losses on derivatives, net 35
 (147)
Other (income) expense, net (12) 2
Total 251
 78
Income (Loss) Before Income Taxes 300
 (178)
Income tax expense (benefit) 126
 97
Net Income (Loss) 174
 (275)
Net income (loss) attributable to noncontrolling interests 53
 43
Net Income (Loss) Attributable to Common Stockholders $121
 $(318)
     
Per Common Share    
Net income (loss) attributable to common stockholders—basic $0.23
 $(0.58)
Net income (loss) attributable to common stockholders—diluted $0.22
 $(0.58)
Average Number of Common Shares Outstanding—Basic 518
 551
Average Number of Common Shares Outstanding—Diluted 519
 551
Dividends (per common share) $0.25
 $0.05

See accompanying Notes to Consolidated Financial Statements.

4

Table of Contents

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
  Three Months Ended 
 March 31,
millions 2018 2017
Net Income (Loss) $174
 $(275)
Other Comprehensive Income (Loss)    
Adjustments for derivative instruments    
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net 1
 1
Total adjustments for derivative instruments, net of taxes 1
 1
Adjustments for pension and other postretirement plans    
Net gain (loss) incurred during period —
 (4)
Income taxes on net gain (loss) incurred during period —
 1
Amortization of net actuarial (gain) loss to other (income) expense, net 7
 9
Income taxes on amortization of net actuarial (gain) loss (2) (3)
Amortization of net prior service (credit) cost to other (income) expense, net (6) (6)
Income taxes on amortization of net prior service (credit) cost 1
 2
Total adjustments for pension and other postretirement plans, net of taxes —
 (1)
Total 1
 —
Comprehensive Income (Loss) 175
 (275)
Comprehensive income (loss) attributable to noncontrolling interests 53
 43
Comprehensive Income (Loss) Attributable to Common Stockholders $122
 $(318)


See accompanying Notes to Consolidated Financial Statements.

5

Table of Contents

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
millions September 30, 
 2017		 December 31, 
 2016
millions except per-share amounts
March 31, 
 2018
December 31, 
 2017
ASSETS        
Current Assets        
Cash and cash equivalents ($153 and $359 related to VIEs) $5,251
 $3,184
Accounts receivable (net of allowance of $16 and $14)    
Customers ($104 and $70 related to VIEs) 1,009
 1,007
Others ($12 and $80 related to VIEs) 873
 721
Cash and cash equivalents ($524 and $80 related to VIEs) $3,361
 $4,553
Accounts receivable (net of allowance of $14 and $14)    
Customers ($125 and $106 related to VIEs) 1,156
 1,222
Others ($13 and $19 related to VIEs) 639
 607
Other current assets 340
 354
 374
 380
Total 7,473
 5,266
 5,530
 6,762
Properties and Equipment    
Cost 64,855
 69,013
Less accumulated depreciation, depletion, and amortization 37,023
 36,845
Net properties and equipment ($5,508 and $5,050 related to VIEs) 27,832
 32,168
Other Assets ($589 and $609 related to VIEs)
 2,152
 2,226
Goodwill and Other Intangible Assets ($1,200 and $1,221 related to VIEs)
 5,671
 5,904
Net Properties and Equipment (net of accumulated depreciation, depletion, and amortization of $34,220 and $34,146) ($6,064 and $5,731 related to VIEs)
 27,758
 27,451
Other Assets ($572 and $579 related to VIEs)
 2,134
 2,211
Goodwill and Other Intangible Assets ($1,184 and $1,191 related to VIEs)
 5,654
 5,662
Total Assets $43,128
 $45,564
 $41,076
 $42,086
        
LIABILITIES AND EQUITY        
Current Liabilities        
Accounts payable        
Trade ($280 and $234 related to VIEs) $1,770
 $1,617
Trade ($331 and $305 related to VIEs) $2,059
 $1,894
Other 225
 303
 191
 266
Short-term debt - Anadarko (1)
 149
 42
 733
 142
Short-term debt - WGP/WES 28
 —
Current asset retirement obligations 336
 129
 286
 294
Other current liabilities 1,203
 1,237
 1,437
 1,310
Total 3,683
 3,328
 4,734
 3,906
Long-term Debt        
Long-term debt - Anadarko (1)
 12,052
 12,162
 11,467
 12,054
Long-term debt - WES and WGP 3,372
 3,119
Long-term debt - WGP/WES 4,176
 3,493
Total 15,424
 15,281
 15,643
 15,547
Other Long-term Liabilities        
Deferred income taxes 3,378
 4,324
 2,267
 2,234
Asset retirement obligations ($144 and $140 related to VIEs) 2,747
 2,802
Asset retirement obligations ($147 and $143 related to VIEs) 2,510
 2,500
Other 3,974
 4,332
 4,166
 4,109
Total 10,099
 11,458
 8,943
 8,843
        
Equity        
Stockholders’ equity        
Common stock, par value $0.10 per share
(1.0 billion shares authorized, 574.0 million and 572.0 million shares issued)		 57
 57
Common stock, par value $0.10 per share
(1.0 billion shares authorized, 575.2 million and 574.2 million shares issued)		 57
 57
Paid-in capital 11,972
 11,875
 11,701
 12,000
Retained earnings 160
 1,704
 1,152
 1,109
Treasury stock (21.4 million and 20.8 million shares) (1,070) (1,033)
Treasury stock (71.3 million and 43.4 million shares) (3,759) (2,132)
Accumulated other comprehensive income (loss) (337) (391) (410) (338)
Total Stockholders’ Equity 10,782
 12,212
 8,741
 10,696
Noncontrolling interests 3,140
 3,285
 3,015
 3,094
Total Equity 13,922
 15,497
 11,756
 13,790
Total Liabilities and Equity $43,128
 $45,564
 $41,076
 $42,086

Parenthetical references reflect amounts as of September 30, 2017,March 31, 2018, and December 31, 2016.2017.
VIE amounts relate to WGP and WES. See Note 15—16—Variable Interest Entities.
(1) 
Excludes WES and WGP.

See accompanying Notes to Consolidated Financial Statements.

56

Table of Contents

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
 Total Stockholders’ Equity     Total Stockholders’ Equity    
millions 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity
Balance at December 31, 2016 $57
 $11,875
 $1,704
 $(1,033) $(391) $3,285
 $15,497
Balance at December 31, 2017 $57
 $12,000
 $1,109
 $(2,132) $(338) $3,094
 $13,790
Net income (loss) —
 —
 (1,432) —
 —
 182
 (1,250) —
 —
 121
 —
 —
 53
 174
Common stock issued (1)
 —
 123
 —
 —
 —
 —
 123
Share-based compensation expense —
 39
 —
 —
 —
 —
 39
Dividends—common stock —
 —
 (84) —
 —
 —
 (84) —
 —
 (127) —
 —
 —
 (127)
Repurchase of common stock —
 —
 —
 (37) —
 —
 (37)
Repurchases of common stock —
 (332) —
 (1,627) —
 —
 (1,959)
Subsidiary equity transactions —
 (23) —
 —
 —
 —
 (23) —
 (6) —
 —
 —
 9
 3
Distributions to noncontrolling interest owners —
 —
 —
 —
 —
 (327) (327) —
 —
 —
 —
 —
 (118) (118)
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net —
 —
 —
 —
 2
 —
 2
 —
 —
 —
 —
 1
 —
 1
Adjustments for pension and other postretirement plans —
 —
 —
 —
 52
 —
 52
Cumulative effect of accounting change —
 (3) (28) —
 —
 —
 (31)
Balance at September 30, 2017 $57
 $11,972
 $160
 $(1,070) $(337) $3,140
 $13,922
Cumulative effect of accounting change (1)
 —
 —
 49
 —
 (73) (23) (47)
Balance at March 31, 2018 $57
 $11,701
 $1,152
 $(3,759) $(410) $3,015
 $11,756

 __________________________________________________________________
(1) 
Represents share-based compensation expense.
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, beginning January 1, 2018; see Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for further information.



See accompanying Notes to Consolidated Financial Statements.

67

Table of Contents

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions 2017 2016 2018 2017
Cash Flows from Operating Activities        
Net income (loss) $(1,250) $(2,356) $174
 $(275)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities        
Depreciation, depletion, and amortization 3,235
 3,202
 990
 1,115
Deferred income taxes (1,026) (1,121) 42
 (660)
Dry hole expense and impairments of unproved properties 2,144
 300
 106
 1,012
Impairments 383
 61
 19
 373
(Gains) losses on divestitures, net (815) 516
 24
 (804)
Loss on early extinguishment of debt 2
 124
Total (gains) losses on derivatives, net (33) 634
 36
 (147)
Operating portion of net cash received (paid) in settlement of derivative instruments 21
 229
 (63) (8)
Other 225
 256
 74
 83
Changes in assets and liabilities        
(Increase) decrease in accounts receivable (32) 810
 23
 68
Increase (decrease) in accounts payable and other current liabilities (95) (637) 45
 395
Other items, net (140) (141) (40) (29)
Net cash provided by (used in) operating activities 2,619
 1,877
 1,430
 1,123
Cash Flows from Investing Activities        
Additions to properties and equipment (3,538) (2,618) (1,547) (1,194)
Divestitures of properties and equipment and other assets 3,480
 1,281
 371
 2,851
Other, net 32
 81
 63
 66
Net cash provided by (used in) investing activities (26) (1,256) (1,113) 1,723
Cash Flows from Financing Activities        
Borrowings, net of issuance costs 249
 5,840
 1,333
 —
Repayments of debt (42) (6,023) (639) (10)
Financing portion of net cash received (paid) for derivative instruments (160) (639) 54
 (37)
Increase (decrease) in outstanding checks (58) (126) (26) 28
Dividends paid (84) (78) (127) (28)
Repurchase of common stock (37) (32)
Issuance of common stock —
 2,188
Sale of subsidiary units —
 1,163
Repurchases of common stock (1,959) (21)
Distributions to noncontrolling interest owners (327) (260) (118) (105)
Proceeds from conveyance of future hard minerals royalty revenues, net of transaction costs —
 413
Payments of future hard minerals royalty revenues conveyed (50) (25)
Other financing activities (18) —
Payments of future hard-minerals royalty revenues conveyed (25) (25)
Net cash provided by (used in) financing activities (527) 2,421
 (1,507) (198)
Effect of Exchange Rate Changes on Cash 1
 (1)
Net Increase (Decrease) in Cash and Cash Equivalents 2,067
 3,041
Cash and Cash Equivalents at Beginning of Period 3,184
 939
Cash and Cash Equivalents at End of Period $5,251
 $3,980
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents —
 3
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents (1,190) 2,651
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 $3,484
 $5,959

See accompanying Notes to Consolidated Financial Statements.

78

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 in advancing its Mozambique LNG project toward a final investment decision.FID. In addition, the Company engages in the gathering, compressing, treating, processing, treating,and transporting of natural gas; gathering, stabilizing, and transporting of oil natural gas, and NGLs as well asNGLs; and gathering and disposaldisposing 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 with GAAPU.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, 2016.
During the second quarter of 2017, the Company revised its reporting segments to reflect a change in how management reviews financial information and makes operating decisions. The Company has reclassified prior-period amounts to conform to the current period’s presentation. See Note 17—Segment Information for additional information on the change in reporting segments.2017.
The consolidated financial statements include the accounts of Anadarko and subsidiaries in which Anadarko holds, directly or indirectly, more than 50% of the voting rights and VIEs for which Anadarko is the primary beneficiary. The Company has determined that WGP and WES are VIEs. Anadarko is considered the primary beneficiary and consolidates WGP and WES. WGP and WES function with capital structures that are separate from Anadarko, consisting of their own debt instruments and publicly traded common units. All intercompany transactions have been eliminated. Undivided interests in oil and natural-gas exploration and production joint ventures are consolidated on a proportionate basis. Investments in noncontrolled entities that Anadarko has the ability to exercise significant influence over operating and financial policies and VIEs for which Anadarko is not the primary beneficiary are accounted for using the equity method. In applying the equity method of accounting, the investments are initially recognized at cost and subsequently adjusted for the Company’s proportionate share of earnings, losses, and distributions. Other investments are carried at original cost. Investments accounted for using the equity method and cost method are included in other assets.

Recently Adopted Accounting StandardsASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, assists in determining whether a transaction should be accounted for as an acquisition or disposal of assets or as a business. This ASU provides a screen that when substantially all of the fair value of the gross assets acquired, or disposed of, are concentrated in a single identifiable asset, or a group of similar identifiable assets, the assets will not be considered a business. If the screen is not met, the assets must include an input and a substantive process that together significantly contribute to the ability to create an output to be considered a business. The Company’s adoption of this ASU on January 1, 2017, using a prospective approach, could have a material impact on consolidated financial statements as goodwill will not be allocated to divestitures or recorded on acquisitions that are not considered businesses. See Note 3—Acquisitions, Divestitures, and Assets Held for Sale.
ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company adopted this ASU on January 1, 2017, using a modified retrospective approach, and recognized a cumulative adjustment to retained earnings of $31 million during the first quarter of 2017.

8
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. Summary of Significant Accounting Policies (Continued)

ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, simplifies the accounting for share-based payment transactions, including the income tax consequences, classification on the statement of cash flows, accounting for forfeitures, and classification of awards as either equity or liabilities. As a result of adopting this ASU on January 1, 2017, excess tax benefits and tax deficiencies related to share-based compensation are reflected on a prospective basis in the income statement as a component of the provision for income taxes rather than additional paid-in capital as previously recognized. For the nine months ended September 30, 2017, the Company recognized a $13 million tax deficiency as an increase to the provision for income taxes. Cash flows related to excess tax benefits are classified on a prospective basis as operating activities in the statement of cash flows rather than cash inflows from financing activities and cash outflows from operating activities as previously recognized. Prior periods of the statement of cash flows were not adjusted as there was no material impact. In addition, the Company elected to begin accounting for share-based compensation award forfeitures when they occur instead of estimating the number of forfeitures expected. This change in accounting policy for share-based compensation award forfeitures did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards Issued But Not Yet Adopted  ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, requires presentation of service cost in the same line item(s) as other compensation costs arising from services rendered by employees during the period and presentation of the remaining components of net benefit cost in a separate line item outside operating items. Additionally, only the service cost component of net benefit cost will be eligible for capitalization. The Company will adoptadopted this ASU on January 1, 2018, with retrospective presentation of the service cost component and the other components of net benefit cost in the income statement and prospective presentation for the capitalization of the service cost component of net benefit cost in assets. Upon adoption, non-service cost components of net periodic benefit costs of $225$107 million for 2017, including $10 million for the year ended 2016 and $94 million for the ninethree months ended September 30,March 31, 2017, will bewere reclassified to other (income) expense, net, from G&A; oil and gas operating; gathering, processing, and marketing; and exploration expense. The Company does not expect any other material changes upon adoption of this ASU.
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, requires an entity to explain the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents on the statement of cash flows and to provide a reconciliation of the totals in that statement to the related captions in the balance sheet when the cash, cash equivalents, restricted cash, and restricted cash equivalents are presented in more than one line item on the balance sheet. ThisThe Company adopted this ASU is effective for annual and interim periods beginning after December 15, 2017, and is required to be adopted using a retrospective approach with early adoption permitted. The Company will adopt this ASU on January 1, 2018, and does2018. Adoption did not expect the adoption to have a material impact on itsthe Company’s consolidated financial statements. See
ASU 2016-15, StatementConsolidated Statements of Cash Flows (Topic 230): Classification of Certain and Note 17—Supplemental Cash Receipts and Cash Payments,Flow Information provides clarification on how certain cash receipts and cash payments are presented and classified on the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2017, and is required to be adopted using a retrospective approach if practicable, with early adoption permitted. The Company will adopt this ASU on January 1, 2018, and does not expect the adoption to have a material impact on its Consolidated Statement of Cash Flows.additional information.


9
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. Summary of Significant Accounting Policies (Continued)

ASU 2014-09, Revenue from Contracts with Customers (Topic 606), supersedes currentthe revenue recognition requirements and industry-specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Additional disclosures will be required to describe the nature, amount, timing, and uncertainty of revenue and cash flows from contracts with customers. The Company has completed an initial review of contracts in each of its revenue streams and is developing accounting policies to address the provisions of the ASU. While the Company does not currently expect net earnings to be materially impacted, the Company has concluded that it is acting as an agent in the sale of certain volumes on behalf of its midstream service customers based on the requirements of the new ASU. This conclusion will result in the reduction of gathering and processing revenues and a corresponding reduction to gathering and processing expense related to its contracts with these customers. In addition, the Company expects to recognize revenue for commodities received as noncash consideration in exchange for services provided by our midstream business and revenue and associated cost of product for the subsequent sale of those same commodities. This recognition will result in an increase to revenues and expenses for gathering and processing activities with no impact on net earnings. The Company also expects changes in the timing of recognizing revenue for certain fees earned from its midstream business and hard minerals royalties due to the fee structure of certain contracts. Anadarko continues to evaluate the impact of these and other provisions of the ASU on its accounting policies, internal controls, and consolidated financial statements. Although the Company has not finalized the quantitative impact of the new standard, based on the assessment completed to date, the Company does not expect the adoption of this standard will have a material impact on its net earnings. The Company will complete its evaluation during the fourth quarter of 2017 and will adopt this new standardadopted Topic 606 on January 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Under the modified retrospective method, prior period financial positions and results will not be adjusted. The cumulative effect adjustment recognized in the opening balances included a reduction to total equity of $47 million. While the Company does not expect 2018 net earnings to be materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenues and related expenses beginning January 1, 2018. Refer to Note 2—Revenue from Contracts with Customers for additional information. The Company’s revenue recognition accounting policy effective January 1, 2018, is detailed below.
Exploration and 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.
Contracts with customers have varying terms, including spot sales or month-to-month contracts, contracts with a cumulative adjustmentfinite term, and life-of-field contracts where all production from a well or group of wells is sold to one or more customers. The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs. For natural gas and NGLs sold on our behalf by a processor, revenue is typically measured based on the price the processor receives for the sale, less certain costs withheld by the processor.
Revenues 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.
The Company enters into buy/sell arrangements related to the transportation of a portion of its oil production. Under these arrangements, barrels are sold to a third party at a location-based contract price and subsequently repurchased by the Company at a downstream location. The difference in value between the sale and purchase price represents the transportation fee to move oil from the lease or certain gathering locations to more liquid markets. These arrangements are often required by private transporters. These buy/sell transactions are recorded net in oil and gas transportation expense in the Company’s Consolidated Statements of Income.


10
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, and these fees are recognized to 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. The provisions ofThis ASU 2016-02 also modifymodifies the definition of a lease and outlineoutlines the requirements for recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors. AnadarkoThe Company plans to electmake certain practical expedients when implementing the new lease standard, which meanselections allowing the Company will not have to reassess the accounting for contracts that commenced prior to adoption.adoption, to continue applying its current accounting policy for land easements, and not to recognize ROU assets or lease liabilities for short-term leases. Anadarko has preliminarily determinedcontinues to review contracts in its portfolio of leased assets and is reviewing all related contracts to determineassess the impact thatof adopting this ASU. The Company expects the adoption will haveof this ASU to primarily impact other assets and other liabilities and does not expect a material impact on its consolidated financial statements. The Company is also evaluating the impactresults of operations. To facilitate compliance with this ASU, onAnadarko is implementing new accounting software and continuing to evaluate its systems, processes, and internal controls.controls during 2018. The Company will complete its evaluation in 2018 and adopt this new standardASU on January 1, 2019, using a modified retrospective approach for all comparative periods presented.

2. Inventories

The following summarizespresented according to the major classes of inventories included in other current assets:
millionsSeptember 30, 
 2017		 December 31, 
 2016
Oil$127
 $169
Natural gas29
 38
NGLs108
 106
Total inventories$264
 $313
ASU as it is currently written.


1011
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. Refer to Note 1—Summary of Significant Accounting Policies for additional information. The primary impacts of the Company’s change in accounting policy for revenue recognition effective January 1, 2018, are detailed below.

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 will decrease for contracts where the Company is acting as an agent for its processing customer in the sale of processed volumes and increase 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 will not impact net earnings.

Impacts on Financial Statements The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements for the three months ended March 31, 2018, as described in the Change in Accounting Policy section above:
CONSOLIDATED STATEMENT OF INCOMEImpact of Change in Accounting Policy
millionsAs Reported Without Adoption of Topic 606 
Effect of Change
Increase/(Decrease)
Three Months Ended March 31, 2018     
Revenues     
Gathering, processing, and marketing sales$360
 $577
 $(217)
Gains (losses) on divestitures and other, net19
 21
 (2)
Expenses     
Gathering, processing, and marketing237
 451
 (214)
Income tax expense (benefit)126
 127
 (1)
Net income (loss) attributable to noncontrolling interests53
 54
 (1)
Net Income (Loss) Attributable to Common Stockholders$121
 $124
 $(3)

CONSOLIDATED BALANCE SHEETImpact of Change in Accounting Policy
millionsAs Reported Without Adoption of Topic 606 
Effect of Change
Increase/(Decrease)
March 31, 2018     
Assets     
Net properties and equipment$27,758
 $27,715
 $43
Other assets2,134
 2,122
 12
Liabilities     
Other current liabilities1,437
 1,434
 3
Deferred income taxes2,267
 2,274
 (7)
Other4,166
 4,056
 110
Equity     
Total equity11,756
 11,807
 (51)

12
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3. Acquisitions, Divestitures, and Assets Held for Sale2. Revenue from Contracts with Customers(Continued)

AcquisitionDisaggregation of Revenue from Contracts with CustomersThe following table disaggregates revenue by significant product type and segment:
millionsExploration
& Production		 WES Midstream Other Midstream Other and
Intersegment
Eliminations		 Total
          
Three Months Ended March 31, 2018         
Product Type         
Oil sales$2,127
 $—
 $—
 $—
 $2,127
Natural-gas sales247
 —
 —
 —
 247
Natural-gas liquids sales292
 —
 —
 —
 292
Gathering, processing, and marketing sales (1)
—
 438
 86
 24
 548
Other, net3
 —
 —
 19
 22
Total Revenue from Customers$2,669
 $438
 $86
 $43
 $3,236
Gathering, processing, and marketing sales (2)
—
 (1) 2
 (189) (188)
Gains (losses) on divestitures, net(33) —
 9
 —
 (24)
Other, net(12) 29
 10
 (6) 21
Total Revenue from Other than Customers$(45) $28
 $21
 $(195) $(191)
Total Revenue and Other$2,624
 $466
 $107
 $(152) $3,045
 __________________________________________________________________
(1)
The amount in Other and Intersegment Eliminations primarily represents sales of third-party natural gas and NGLs of $224 million and intercompany eliminations of $(196) million.
(2)
The amount in Other and Intersegment Eliminations represents purchases of third-party natural gas and NGLs. Although these purchases are reported net in gathering, processing, and marketing sales in the Company’s Consolidated Statements of Income, they are shown separately on this table, as the purchases are not considered revenue from customers.

Contract Liabilities On December 15, 2016, the Company closed the GOM AcquisitionContract liabilities primarily relate to midstream fees and capital reimbursements that are charged to customers for $1.8 billion usingonly 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 to 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
Increase due to cumulative effect of adopting Topic 60698
Increase due to cash received, excluding revenues recognized in the period40
Decrease due to revenue recognized(12)
Balance at March 31, 2018$163
  
Contract liabilities at March 31, 2018 
Other current liabilities$39
Other long-term liabilities - other124
Total contract liabilities from contracts with customers$163


13
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. Revenue from Contracts with Customers(Continued)

Transaction Price Allocated to Remaining Performance Obligations Revenue expected to be recognized from certain performance obligations that are unsatisfied as of March 31, 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.
millionsExploration
& Production		 WES Midstream Other Midstream Other and
Intersegment
Eliminations		 Total
Remainder of 2018$74
 $268
 $38
 $(167) $213
2019102
 440
 74
 (327) 289
2020103
 496
 87
 (394) 292
2021103
 470
 94
 (395) 272
20227
 461
 98
 (394) 172
Thereafter62
 1,698
 194
 (1,321) 633
Total$451
 $3,833
 $585
 $(2,998) $1,871

3. Inventories

The following summarizes the major classes of inventories included in other current assets:
millionsMarch 31, 
 2018		 December 31, 
 2017
Oil$184
 $165
Natural gas8
 29
NGLs117
 122
Total inventories$309
 $316


14
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4. Divestitures

Divestitures  The following summarizes the proceeds received and gains (losses) recognized on divestitures for the three months ended March 31:
millions2018 2017
Proceeds received, net of closing adjustments$371
 $2,851
Gains (losses) on divestitures, net (1)
(24) 804

(1)
Includes the $126 million gain related to the property exchange discussed below.

2018 During the three months ended March 31, 2018, the Company divested of the following assets:
Alaska nonoperated assets, included in the Exploration and Production and Other Midstream reporting segments, for net proceeds of $383 million and net losses of $30 million in 2018 and $154 million in the fourth quarter of 2017. As this transaction is subject to regulatory approval, the Company recognized a contingent liability, which is presented net with the related assets, equal to the net proceeds received from the September 2016 issuance of 40.5 million shares of its common stock. The GOM Acquisition constituted a business combination and was accounted for usingbuyer.

2017 During the acquisition method of accounting. Fair-value measurementsthree months ended March 31, 2017, the Company divested of the following assets:
Eagleford assets acquiredin South Texas, included in the Exploration and liabilities assumed atProduction reporting segment, for net proceeds of $2.1 billion and a net gain of $726 million.
Marcellus assets in Pennsylvania, included in the acquisition date were finalized duringExploration and Production and Other Midstream reporting segments, for net proceeds of $763 million and net losses of $44 million in 2017 and $129 million in the fourth quarter ended June 30, 2017. There were no material changes to the fair value of the assets acquired and liabilities assumed from the amounts included on the Company’s Consolidated Balance Sheet at December 31, 2016.

Property Exchange On March 17, 2017, WES acquired a third party’s 50% nonoperated interest in the DBJV systemSystem 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. After the acquisition, the DBJV systemSystem is 100% owned by WES and consolidated by Anadarko.

Divestitures and Assets Held for Sale  The following summarizes the proceeds received and gains (losses) recognized on divestitures and assets held for sale for the nine months ended September 30:
millions2017 2016
Proceeds received, net of closing adjustments$3,480
 $1,281
Gains (losses) on divestitures, net (1)
815
 (516)

(1)
Includes the $126 million gain related to the property exchange discussed above.

2017 During the nine months ended September 30, 2017, the Company divested of the following 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
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 Midstream reporting segments, for net proceeds of $69 million and a net loss of $52 million
Marcellus assets in Pennsylvania, included in the Exploration and Production and Midstream reporting segments, for net proceeds of $758 million and net losses of $129 million in the fourth quarter of 2016 and $56 million for the nine months ended September 30, 2017
Certain Marcellus assets in Pennsylvania, included in the Exploration and Production and Midstream reporting segments, satisfied criteria to be considered held for sale during the fourth quarter of 2016, at which time the Company remeasured these assets to their current fair value using a market approach and Level 2 fair-value inputs and recognized the losses discussed above. Proceeds of $196 million associated with these assets were held in escrow by the purchaser and reflected as Accounts Receivable, Others on the Company’s Consolidated Balance Sheet as of September 30, 2017. In October 2017, proceeds of $193 million were released from escrow. The remaining $3 million is expected to be released by early 2018.
Certain Moxa Arch assets in Wyoming, included in the Exploration and Production reporting segment, satisfied criteria to be considered held for sale during the third quarter of 2017, at which time the Company remeasured these assets to their current fair value using a market approach and Level 2 fair-value inputs and recognized a loss of $197 million. At September 30, 2017, the Company’s Consolidated Balance Sheet included long-term assets of $557 million and long-term liabilities of $37 million associated with the Moxa Arch assets held for sale. Losses on assets held for sale are included in gains (losses) on divestitures and other, net in the Company’s Consolidated Statements of Income.

1115
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


3. Acquisitions, Divestitures, and Assets Held for Sale (Continued)

2016 During the nine months ended September 30, 2016, the Company divested of the following assets:
Wamsutter assets in Wyoming, included in the Exploration and Production reporting segment, for net proceeds of $588 million and a net loss of $59 million
Ozona and Steward assets in West Texas, included in the Exploration and Production and Midstream reporting segments, for net proceeds of $223 million and a net loss of $50 million
East Chalk assets in East Texas/Louisiana, included in the Exploration and Production reporting segment, for net proceeds of $99 million and a net gain of $13 million
Elm Grove assets in East Texas/Louisiana, included in the Exploration and Production reporting segment, for net proceeds of $100 million and a net loss of $54 million
The Carthage assets in East Texas, included in the Exploration and Production and Midstream reporting segments, satisfied criteria to be considered held for sale during the third quarter of 2016, at which time the Company remeasured these assets to their current fair value using a market approach and Level 2 fair-value measurement and recognized a loss of $355 million. The sale of these assets closed in the fourth quarter of 2016.

4.5. Impairments

Impairments of Long-Lived Assets Impairments of long-lived assets are included in impairment expense in the Company’s Consolidated Statements of Income. The following summarizes impairments of long-lived assets and the related post-impairment fair values by segment:
Nine Months EndedThree Months Ended
millionsImpairment 
Fair Value (1)
Impairment 
Fair Value (1)
September 30, 2017   
March 31, 2018   
Exploration and Production      
U.S. onshore properties$2
 $3
Gulf of Mexico properties211
 231
$19
 $—
Midstream169
 58
Other1
 —
Total$383
 $292
$19
 $—
   
March 31, 2017   
Exploration and Production   
Gulf of Mexico properties$204
 $231
WES Midstream168
 49
Other Midstream1
 —
Total$373
 $280

(1) 
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 during the ninethree months ended September 30,March 31, 2017, were primarily related to oil and gas properties in the Gulf of Mexico due to lower forecasted commodity prices and a U.S. onshore midstream property due to a reduced throughput fee as a result of a producer’s bankruptcy.

Impairments of Unproved PropertiesImpairments of unproved properties are included in exploration expense in the Company’s Consolidated Statements of Income. The Company recognized $586$532 million of impairments of unproved Gulf of Mexico properties during the ninethree months ended September 30,March 31, 2017, primarily due to an impairment of $463which $467 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. For additional details on the Shenandoah project, see Note 5—Exploratory Well Costs.

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.


1216
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


5.6. Suspended Exploratory Well Costs

During the nine months ended September 30, 2017, exploratory well costs were expensed for certain exploratory wells that did not encounter commercial quantities of hydrocarbons or that the Company determined were no longer making sufficient progress for continued capitalization of the exploratory well costs.

Gulf of Mexico The Company expensed exploratory well costs of $801 million during the nine months ended September 30, 2017, primarily related to the following projects:
Shenandoah The Company expensed $438 million related to the Shenandoah-6 appraisal well and subsequent sidetrack, which completed appraisal activities in April 2017 and did not encounter the oil-water contact in the eastern portion of the field. Given the results of this well and the commodity-price environment at that time, the Company suspended further appraisal activities.
Phobos The Company expensed $221 million in the third quarter of 2017 related to wells at the Phobos project. These wells found insufficient quantities of oil pay to justify development in the current price environment.
Warrior The Company expensed $110 million in the third quarter of 2017 related to the northern appraisal well and sidetrack at the Warrior project. These wells found insufficient quantities of oil pay to justify development of the northern portion of the field in the current price environment. Evaluation of the remaining appraisal well in the southern portion of the field is ongoing.

ColombiaDuring the nine months ended September 30, 2017, the Company expensed exploratory well costs of $243 million related to wells in the Grand Fuerte area in Colombia due to insufficient progress on contractual and fiscal reforms needed for deepwater gas development. All leases remain contractually in good standing.

Côte d’Ivoire During the second quarter of 2017, the Company expensed exploratory well costs of $119 million in Côte d’Ivoire due to unsuccessful drilling activities in the south channel of the Paon prospect and in Block CI-527. During the third quarter of 2017, after further evaluation of recent well results, Anadarko initiated relinquishment of the Company’s interests in its Côte d’Ivoire blocks and expensed the remaining $206 million of exploratory well and appraisal costs related to the Paon project.

Suspended Exploratory Well CostsThe Company’s suspended exploratory well costs were $530$539 million at September 30, 2017,March 31, 2018, and $1.2 billion$525 million at December 31, 2016.2017. 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 ninethree months ended September 30, 2017, $488 million ofMarch 31, 2018, no charges were booked to exploration expense for suspended exploratory well costs previously capitalized for greater than one year at December 31, 2016, were charged to exploration expense.2017.


13
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


6.7. Current Liabilities

Accounts Payable Accounts payable, trade included liabilities of $204$193 million at September 30, 2017,March 31, 2018, and $262$219 million atDecember 31, 2016,2017, 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:
millionsSeptember 30, 
 2017		 December 31, 
 2016		March 31, 
 2018		 December 31, 
 2017
Accrued income taxes$211
 $6
$54
 $71
Interest payable161
 244
167
 246
Production, property, and other taxes payable249
 239
276
 216
Accrued employee benefits207
 355
140
 210
Derivatives233
 175
460
 384
Other142
 218
340
 183
Total other current liabilities$1,203
 $1,237
$1,437
 $1,310

7.8. Derivative Instruments

Objective and Strategy  The Company uses derivative instruments to manage its exposure to cash-flow variability from commodity-price and interest-rate risks. Futures, swaps, and options are used to manage exposure to commodity-price risk inherent in the Company’s oil and natural-gas production and natural-gas processing operations (Oil and Natural-Gas Production/Processing Derivative Activities). Futures contracts and commodity-price swap agreements are used to fix the price of expected future oil and natural-gas sales at major industry trading locations, such as Cushing, Oklahoma or Sullom Voe, Scotland for oil and Henry Hub, Louisiana for natural gas. Basis swaps are periodically used to fix or float the price differential between product prices at one market location versus another. Options are used to establish a floor price, a ceiling price, or a floor and a ceiling price (collar) for expected future oil and natural-gas sales. Derivative instruments are also used to manage commodity-price risk inherent in customer price requirements and to fix margins on the future sale of natural gas and NGLs from the Company’s leased storage facilities (Marketing and Trading Derivative Activities).
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 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.


1417
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


7.8. Derivative Instruments (Continued)

Oil and Natural-Gas Production/Processing Derivative Activities  The oil prices listed below are a combination of NYMEX West Texas IntermediateWTI and Intercontinental Exchange, Inc. (ICE) Brent Blend prices. The natural-gas prices listed below are NYMEX Henry Hub prices. The NGLs prices listed below are Oil Price Information Services prices. The following is a summary of the Company’s derivative instruments related to oil and natural-gas production/processing derivative activities at September 30, 2017:March 31, 2018:
2017 Settlement 2018 Settlement2018 Settlement
Oil    
Three-Way Collars (MBbls/d)91
 —
Average price per barrel
  
Two-Way Collars (MBbls/d)108
Average price per barrel (WTI)
Ceiling sold price (call)$60.48
Floor purchased price (put)$50.00
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)$59.80
 $—
$3.54
Floor purchased price (put)$50.00
 $—
$2.75
Floor sold price (put)$40.00
 $—
$2.00
Natural Gas   
Three-Way Collars (thousand MMBtu/d)857
 250
Average price per MMBtu   
Ceiling sold price (call)$3.64
 $3.54
Floor purchased price (put)$2.85
 $2.75
Floor sold price (put)$2.10
 $2.00
Fixed-Price Contracts (thousand MMBtu/d)256
Average price per MMBtu (Henry Hub)$3.02

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

Marketing and Trading Derivative Activities  The Company had financial derivative transactions with notional volumes of natural gas totaling 15 Bcf at September 30, 2017, and 2 Bcf at December 31, 2016, that were entered into to mitigate commodity-price risk related to fixed-price purchase and sales contracts and storage activity.


1518
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


7.8. 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 June 2017, the Company amended certain interest-rate swaps with an aggregate notional principal amount of $625 million, extending the mandatory termination dates fromAt March 31, 2018, to 2020, 2022, and 2023 in exchange for cash payments of approximately $57 million. In July 2017, the Company amended an interest-rate swap with a notional principal amount of $125 million, extending the mandatory termination date from 2018 to 2022 in exchange for a cash payment of approximately $15 million.
At September 30, 2017, 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 the potential refinancing of the Company’s future debt maturities. 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, 2017:March 31, 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%
$200
  September 2017 - 2047 September 2018 6.049%
$100
  September 2017 - 2047 September 2020 6.891%
$250
  September 2017 - 2047 September 2021 6.570%
$250
  September 2017 - 2047 September 2023 6.761%

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 $118$46 million during the ninethree months ended September 30, 2017,March 31, 2018, and $275$24 million during the ninethree months ended September 30, 2016.March 31, 2017.


1619
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


7.8. Derivative Instruments (Continued)

Effect of Derivative Instruments—Balance Sheet  The following summarizes the fair value of the Company’s derivative instruments:
 Gross Derivative Assets Gross Derivative Liabilities Gross Derivative Assets Gross Derivative Liabilities
millions September 30, December 31, September 30, December 31, March 31, December 31, March 31, December 31,
Balance Sheet Classification 2017 2016 2017 2016 2018 2017 2018 2017
Commodity derivatives                
Other current assets $58
 $10
 $(40) $(3) $6
 $7
 $—
 $(1)
Other assets 33
 9
 (29) —
 1
 2
 —
 —
Other current liabilities 38
 66
 (44) (201) 31
 45
 (292) (206)
Other liabilities 163
 —
 (166) (12) —
 —
 (1) (2)
 292
 85
 (279) (216) 38
 54
 (293) (209)
Interest-rate derivatives 
       
      
Other current assets 12
 8
 —
 —
 17
 14
 —
 —
Other assets 42
 23
 —
 —
 47
 40
 —
 —
Other current liabilities —
 —
 (237) (48) —
 —
 (211) (236)
Other liabilities —
 —
 (1,176) (1,328) —
 —
 (1,045) (1,183)
 54
 31
 (1,413) (1,376) 64
 54
 (1,256) (1,419)
Total derivatives $346
 $116
 $(1,692) $(1,592) $102
 $108
 $(1,549) $(1,628)

Effect of Derivative Instruments—Statement of Income  The following summarizes gains and losses related to derivative instruments:
millions Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
Classification of (Gain) Loss Recognized 2017 2016 2017 2016 2018 2017
Commodity derivatives            
Gathering, processing, and marketing sales (1)
 $—
 $(1) $—
 $5
 $1
 $—
(Gains) losses on derivatives, net 43
 (59) (164) 7
 162
 (135)
Interest-rate derivatives 
 
   
   
(Gains) losses on derivatives, net 39
 84
 131
 622
 (127) (12)
Total (gains) losses on derivatives, net $82
 $24
 $(33) $634
 $36
 $(147)

(1) 
Represents the effect of Marketing and Trading Derivative Activities.


1720
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


7.8. 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 may alsogenerally require full or partial collateralization or immediate settlement of the Company’s obligations ifdepending on certain credit-risk-related provisions, are triggered, such as if the Company’s credit rating from S&P and Moody’s declines to a level that is below investment grade.Moody’s. As of September 30, 2017,March 31, 2018, the Company’s long-term debt was rated investment grade (BBB) by both S&P and Fitch Ratings and below investment grade (Ba1) by Moody’s. Although certain counterpartiesThe Company may be required to post additional collateral with respect to its derivative instruments if its credit ratings decline below current levels. For example, based on the derivative positions as of March 31, 2018, if Anadarko’s credit rating were to be downgraded one level by either S&P or Moody’s, the Company would be required to post additional collateral dueof up to the Moody’s rating, no counterparties have requested termination or full settlement of derivative positions.approximately $60 million. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed was $1.2$1.4 billion (net of $159$69 million of collateral) at September 30, 2017,March 31, 2018, and $1.4 billion (net of $117$170 million of collateral) at December 31, 2016.2017.


1821
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


7.8. 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:
millionsLevel 1 Level 2 Level 3 
Netting (1)
 Collateral TotalLevel 1 Level 2 Level 3 
Netting (1)
 Collateral Total
September 30, 2017           
March 31, 2018           
Assets                      
Commodity derivatives$—
 $292
 $—
 $(271) $—
 $21
$—
 $38
 $—
 $(31) $—
 $7
Interest-rate derivatives—
 54
 —
 —
 —
 54
—
 64
 —
 —
 —
 64
Total derivative assets$—
 $346
 $—
 $(271) $—
 $75
$—
 $102
 $—
 $(31) $—
 $71
Liabilities                      
Commodity derivatives$—
 $(279) $—
 $271
 $—
 $(8)$—
 $(293) $—
 $31
 $7
 $(255)
Interest-rate derivatives—
 (1,413) —
 —
 159
 (1,254)—
 (1,256) —
 —
 69
 (1,187)
Total derivative liabilities$—
 $(1,692) $—
 $271
 $159
 $(1,262)$—
 $(1,549) $—
 $31
 $76
 $(1,442)
                      
December 31, 2016           
December 31, 2017           
Assets                      
Commodity derivatives$2
 $83
 $—
 $(69) $—
 $16
$1
 $53
 $—
 $(46) $(1) $7
Interest-rate derivatives—
 31
 —
 —
 —
 31
—
 54
 —
 —
 —
 54
Total derivative assets$2
 $114
 $—
 $(69) $—
 $47
$1
 $107
 $—
 $(46) $(1) $61
Liabilities                      
Commodity derivatives$(3) $(213) $—
 $69
 $6
 $(141)$(1) $(208) $—
 $46
 $3
 $(160)
Interest-rate derivatives—
 (1,376) —
 —
 117
 (1,259)—
 (1,419) —
 —
 170
 (1,249)
Total derivative liabilities$(3) $(1,589) $—
 $69
 $123
 $(1,400)$(1) $(1,627) $—
 $46
 $173
 $(1,409)
 __________________________________________________________________
(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.


19
22
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

9. Tangible Equity Units

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 is comprised of a prepaid equity purchase contract for common units of WGP and a senior amortizing note. Subsequent to issuance, each TEU may be legally separated into the two components. The prepaid equity purchase contract is considered a freestanding financial instrument, indexed to WGP common units, and meets the conditions for equity classification.

Equity ComponentUnless settled earlier at the holder’s option, each purchase contract has a mandatory settlement date of June 7, 2018. Anadarko has a right to elect to issue and deliver shares of Anadarko Petroleum Corporation common stock (APC shares) in lieu of delivering WGP common units at settlement. The Company will deliver not more than 0.8862 WGP common units and not less than 0.7383 WGP common units (or a computed number of APC shares) per TEU on the settlement date, subject to adjustment, at the settlement rate based upon the applicable market value of WGP common units (or APC shares).

Debt Component Each senior amortizing note has an initial principal amount of $10.95 and bears interest at 1.50% per year. The senior amortizing notes have a final installment payment date of June 7, 2018, and are senior unsecured obligations of the Company. 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 three months ended March 31, 2018:
 Carrying Value  
millionsWES 
WGP (1)
 
Anadarko (2)
 Anadarko Consolidated Description
Balance at December 31, 2017$3,465
 $28
 $11,965
 $15,458
  
Issuances394
 —
 —
 394
 WES 4.500% Senior Notes due 2028
 687
 —
 —
 687
 WES 5.300% Senior Notes due 2048
Borrowings260
 —
 —
 260
 WES RCF
Repayments(630) —
 —
 (630) WES RCF
 —
 —
 (8) (8) TEUs - senior amortizing notes
Other, net—
 —
 13
 13
 Amortization of discounts, premiums, and debt issuance costs
Balance at March 31, 2018$4,176
 $28
 $11,970
 $16,174
  

(1)
Excludes WES.
(2)
Excludes WES and WGP.


23
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8.10. Debt (Continued)

Debt  The following summarizes the Company’s outstanding debt, including capital lease obligations, after eliminating the effect of intercompany transactions:
millionsWES 
WGP (1)
 
Anadarko (2)
 ConsolidatedWES 
WGP (1)
 
Anadarko (2)
 Consolidated
September 30, 2017       
March 31, 2018       
Total borrowings at face value$3,370
 $28
 $13,523
 $16,921
$4,220
 $28
 $13,506
 $17,754
Net unamortized discounts, premiums, and debt issuance costs (3)
(26) —
 (1,563) (1,589)(44) —
 (1,536) (1,580)
Total borrowings (4)
3,344
 28
 11,960
 15,332
4,176
 28
 11,970
 16,174
Capital lease obligations—
 —
 241
 241
—
 —
 230
 230
Less short-term debt—
 —
 149
 149
—
 28
 733
 761
Total long-term debt$3,344
 $28
 $12,052
 $15,424
$4,176
 $—
 $11,467
 $15,643
              
December 31, 2016       
December 31, 2017       
Total borrowings at face value$3,120
 $28
 $13,558
 $16,706
$3,490
 $28
 $13,514
 $17,032
Net unamortized discounts, premiums, and debt issuance costs (3)
(29) —
 (1,599) (1,628)(25) —
 (1,549) (1,574)
Total borrowings (4)
3,091
 28
 11,959
 15,078
3,465
 28
 11,965
 15,458
Capital lease obligations—
 —
 245
 245
—
 —
 231
 231
Less short-term debt—
 —
 42
 42
—
 —
 142
 142
Total long-term debt$3,091
 $28
 $12,162
 $15,281
$3,465
 $28
 $12,054
 $15,547

(1) 
Excludes WES.
(2) 
Excludes WES and WGP.
(3) 
Unamortized discounts, premiums, and debt issuance costs are amortized over the term of the related debt. Debt issuance costs related to RCFs are included in other current assets and other assets on the Company’s Consolidated Balance Sheets.
(4) 
The Company’s outstanding borrowings, except for borrowings under the WGP RCF, are senior unsecured.

Fair Value  The Company uses a market approach to determine the fair value of its fixed-rate debt using observable market data, which results in a Level 2 fair-value measurement. The carrying amount of floating-rate debt approximates fair value as the interest rates are variable and reflective of market rates. The estimated fair value of the Company’s total borrowings was $17.4$18.1 billion at September 30, 2017,March 31, 2018, and $17.1$17.7 billion at December 31, 2016.2017.


2024
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


8.10. Debt (Continued)

Anadarko Borrowings  Anadarko has aIn January 2018, the Company amended its $3.0 billion senior unsecured RCF maturing into extend the maturity date to January 20212022 (APC RCF) and aamended its $2.0 billion 364-day senior unsecured RCF maturing into extend the maturity date to January 20182019 (364-Day Facility). At September 30, 2017, the CompanyMarch 31, 2018, Anadarko had no outstanding borrowings under the APC RCF or the 364-Day Facility and was in compliance with all covenants.
At March 31, 2018, Anadarko had outstanding borrowings of $9 million of senior amortizing notes associated with the TEUs, $114 million of 7.05% Debentures due May 2018, and $600 million of 8.70% Debentures due March 2019 classified as short-term debt on the Company’s Consolidated Balance Sheet. Short-term debt also included the current portion of the Company’s capital lease obligations.
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 ofCoupons, which, if put in whole, will be $930 million at the next put date in October 2018. Anadarko’s Zero Coupons were put toclassified as long-term debt on the Company’s Consolidated Balance Sheet at March 31, 2018, as the Company in October 2017. The Zero Coupons can nexthas the ability and intent to refinance these obligations using long-term debt, should the put be put to the Company in October 2018, in whole or in part, for the then-accreted value of $930 million.exercised.
The Company also has notes payable related to its ownership of certain noncontrolling mandatorily redeemable interests that are not included in the Company’s reported debt balance and do not affect consolidated interest expense. See Note 8—Equity MethodEquity-Method Investments in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.

WES and WGP Borrowings  At September 30, 2017,In February 2018, WES was in compliance with all covenants contained inamended its $1.2 billion senior unsecured RCF maturing into extend the maturity date from February 2020 to February 2023 and expanded the borrowing capacity to $1.5 billion (WES RCF), which. As part of the amendment, the WES RCF is expandable to $1.5a maximum of $2.0 billion. During the ninethree months ended September 30, 2017,March 31, 2018, WES borrowed $250$260 million under its RCF, which was used for general partnership purposes.purposes, and made repayments of $630 million. At September 30, 2017,March 31, 2018, WES had no outstanding borrowings under its RCF, of $250 million at an interest rate of 2.54%, had outstanding letters of credit of $5 million, and had available borrowing capacity of $945 million.$1.495 billion, and was in compliance with all covenants. WES’s $350 million 2.60%2.600% Senior Notes due August 2018 were classified as long-term debt on the Company’s Consolidated Balance Sheet at September 30, 2017,March 31, 2018, as WES has the ability and intent to refinance these obligations using long-term debt.
At September 30, 2017,In March 2018, WES completed a public offering of $400 million aggregate principal amount of 4.500% 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 the remaining net proceeds were used for general partnership purposes, including to fund capital expenditures.
In February 2018, WGP was in compliance with all covenants contained involuntarily reduced the aggregate commitments of the lenders under its $250 million three-year senior secured RCF maturing in March 2019 from $250 million to $35 million (WGP RCF), which is expandable to $500 million subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions.. 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, 2017,March 31, 2018, WGP had outstanding borrowings under its RCF of $28 million at an interest rate of 3.24%3.88%, classified as short-term debt on the Company’s Consolidated Balance Sheet, and had available borrowing capacity of $222$7 million. At March 31, 2018, WGP was in compliance with all covenants.


2125
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11. Income Taxes

9. 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%. The Company expects to complete the accounting for the income tax effects related to the adoption of the Tax Reform Legislation and record any necessary adjustments to provisional tax amounts before the end of the measurement period on December 21, 2018. See Note 13—Income Taxes

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
The following summarizes income tax expense (benefit) and effective tax rates:
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except percentages2017 2016 2017 2016 2018 2017
Current income tax expense (benefit)$430
 $64
 $670
 $212
 $90
 $762
Deferred income tax expense (benefit)(855) (324) (1,036) (1,169) 36
 (665)
Total income tax expense (benefit)$(425) $(260) $(366) $(957) $126
 $97
Income (loss) before income taxes(1,066) (1,007) (1,616) (3,313) 300
 (178)
Effective tax rate40% 26% 23% 29% 42% (54)%

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 increase from the U.S. federal statutory rate of 21% for the three months ended March 31, 2018, was primarily attributable to the following:
state taxes, net of federal benefits
tax impact from foreign operations
non-deductible Algerian exceptional profits tax for Algerian income tax purposes
net changes in uncertain tax positions
These increases were partially offset by income attributable to noncontrolling interests.

The Company reported a loss before income taxes for the three and nine months ended September 30, 2017 and 2016.March 31, 2017. As a result, items that ordinarily increase or decrease tax rate will have the opposite effect. The increasedecrease from the 35% U.S. federal statutory rate of 35% for the three months ended September 30,March 31, 2017, was primarily attributable to the following:following decreases:
tax impact from foreign operations
income attributable to noncontrolling interests
state taxes, net of federal manufacturing deduction
These increases from the 35% U.S. federal statutory rate were partially offset by the following:
•non-deductible Algerian exceptional profits tax for Algerian income tax purposes
net changes in uncertain tax positions
The decrease from the 35% U.S. federal statutory rate for the nine months ended September 30, 2017, was primarily attributable to the following:benefit
non-deductible Algerian exceptional profits tax for Algerian income tax purposes
tax impact from foreign operations
net changes in uncertain tax positions
These decreases from the 35% U.S. federal statutory rate were partially offset by the following:
•income attributable to noncontrolling interests
•federal manufacturing deduction
The decrease from the 35% U.S. federal statutory rate for the three and nine months ended September 30, 2016, was primarily attributable to non-deductible Algerian exceptional profits tax for Algerian income tax purposes, the tax impact from foreign operations, non-deductible goodwilldeficiency related to divestitures, and net changes in uncertain tax positions. share-based compensation due to the adoption of ASU 2016-09
These decreases were partially offset by increases to state taxes, net of federal benefit, and the following increases:
income attributable to noncontrolling interests. See Note 14—Noncontrolling Interests.interests
federal manufacturing deduction


2226
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


11. Income Taxes (Continued)

The Company recognized a net tax benefit of $346 million as of March 31, 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 March 31, 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 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. The Company disagrees and plans to defend its tax position. Accordingly, the Company has not revised its estimate of the benefit that will ultimately be realized. It is reasonably possible the amount of uncertain tax position and/or tax benefit could materially change as the Company defends its tax position through the appeals process and other available avenues. The Company could be required to repay all or a portion of the tentative refund received with interest prior to determining the final outcome of its position either upon IRS request or litigation of the matter in District or Federal Claims Court. If the payment is ultimately determined not to be deductible, the Company would be required to repay the tentative refund received plus interest and reverse the net benefit of $346 million previously recognized in its consolidated financial statements.

10.12. Contingencies

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, 2016.2017.

11. Restructuring Charges

In the first quarter of 2016, the Company initiated a workforce reduction program to align the size and composition of its workforce with its expected future operating and capital plans. Employee notifications related to the workforce reduction program were completed by June 30, 2016. The Company recognized restructuring charges included in G&A in the Company’s Consolidated Statements of Income of $112 million during the three months ended September 30, 2016, and $363 million during the nine months ended September 30, 2016. All material restructuring charges were recognized in 2016, with the exception of settlement expense expected to be recognized during 2017 for lump-sum payments to terminated participants. During the nine months ended September 30, 2017, the Company recognized restructuring charges of $20 million, primarily related to settlement expense. Settlement expenses for the remainder of 2017 are not expected to be material.


23
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


12.13. 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 BenefitsPension Benefits Other Benefits
millions2017 2016 2017 20162018 2017 2018 2017
Three Months Ended September 30       
Three Months Ended March 31       
Service cost$22
 $24
 $—
 $1
$23
 $21
 $—
 $—
Interest cost21
 24
 3
 3
19
 21
 3
 3
Expected (return) loss on plan assets(21) (24) —
 —
(21) (21) —
 —
Amortization of net actuarial loss (gain)7
 12
 —
 —
7
 6
 —
 —
Amortization of net prior service cost (credit)(1) —
 (6) (6)—
 —
 (6) (6)
Settlement expense (1)
22
 102
 —
 —
—
 3
 —
 —
Net periodic benefit cost$50
 $138
 $(3) $(2)
       
Nine Months Ended September 30       
Service cost$64
 $73
 $1
 $2
Interest cost63
 73
 9
 9
Expected (return) loss on plan assets(63) (75) —
 —
Amortization of net actuarial loss (gain)20
 30
 —
 —
Amortization of net prior service cost (credit)(1) —
 (18) (18)
Settlement expense (1)
80
 126
 —
 —
Termination benefits expense (1)
4
 44
 —
 —
Curtailment expense (1)
—
 8
 —
 —
Net periodic benefit cost$167
 $279
 $(8) $(7)
Termination benefits expense—
 4
 —
 —
Net periodic benefit cost (1)
$28
 $34
 $(3) $(3)

(1) 
Settlement expense, termination benefitsThe 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 curtailmentall other components of net periodic benefit cost are included in other (income) expense for 2016 relate toon the workforce reduction program. See Note 11—Restructuring Charges.
Company’s Consolidated Statements of Income.

The Company contributed $167$46 million to funded pension plans and $84$16 million to unfunded pension plans during the ninethree months ended September 30, 2017, andMarch 31, 2018. The Company expects to contribute an additional $3$116 million to funded pension plans and $14 million to unfunded pension plans during 2017.2018.


2427
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


13.14. 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, TEUs, and WES Series A Preferred units,TEUs, if the inclusion of these items is dilutive.
The following provides a reconciliation between basic and diluted EPS attributable to common stockholders:
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except per-share amounts2017 2016 2017 2016 2018 2017
Net income (loss)           
Net income (loss) attributable to common stockholders$(699) $(830) $(1,432) $(2,556) $121
 $(318)
Income (loss) effect of TEUs(2) (2) (6) (5) (3) (2)
Less distributions on participating securities—
 1
 —
 1
 1
 —
Basic$(701) $(833) $(1,438) $(2,562) $117
 $(320)
Income (loss) effect of TEUs—
 —
 (1) (1) (1) —
Diluted$(701) $(833) $(1,439) $(2,563) $116
 $(320)
Shares           
Average number of common shares outstanding—basic553
 517
 552
 512
 518
 551
Dilutive effect of stock options 1
 —
Average number of common shares outstanding—diluted553
 517
 552
 512
 519
 551
Excluded due to anti-dilutive effect11
 11
 11
 11
 10
 11
Net income (loss) per common share           
Basic$(1.27) $(1.61) $(2.60) $(5.00) $0.23
 $(0.58)
Diluted$(1.27) $(1.61) $(2.61) $(5.00) $0.22
 $(0.58)

Common Stock  Repurchase Program In September 2017, theThe Company announced a $2.5 billion share-repurchase program underin September 2017, which shareswas expanded to $3.0 billion in February 2018 ($3.0 Billion Share-Repurchase Program). The program authorizes the repurchase of the Company’s common stock may be repurchased either in the open market or through private transactions. The program is authorized to extendtransactions through the end of 2018. In October 2017,February 2018, Anadarko completed the repurchase of 8.5 million shares of its common stock for $500 million (average price of $58.82 per share) under an ASR Agreement. All of the repurchased shares were classified as treasury stock.
In March 2018, Anadarko entered into an accelerated share-repurchase agreement (ASR Agreement) with an investment bank (Bank)additional ASR Agreement to repurchase $1.0the remaining $1.4 billion of the Company’s common stock as part ofunder the share-repurchase program.$3.0 Billion Share-Repurchase Program. Under the terms of the ASR Agreement,agreement, the Company paid $1.0$1.4 billion in cash and received an initial delivery of 19.1 million shares of the Company’s common stock. AtThe initial delivery of shares represented the conclusionminimum number of shares to be repurchased under the agreement. The value of the terminitial 19.1 million shares delivered on the date of purchase was $1.1 billion (average price of $58.16 per share) and was recorded in treasury stock, with the remaining $332 million recorded in paid-in capital on the Company’s Consolidated Balance Sheet at March 31, 2018. The final number of shares to be delivered upon settlement of this ASR Agreement will be determined in the Company and the Bank will enter into a final share settlementsecond quarter of 2018 with the settlement price determined by applying a percentage discountreference to the volume-weighted average price of the shares during the term.term of the agreement less a negotiated settlement price adjustment. The ASR Agreement is subjectvalue recorded in paid-in capital at March 31, 2018, will be transferred to customary adjustment and termination provisions, andtreasury stock upon final settlementsettlement. The $3.0 Billion Share-Repurchase Program is expected to occur prior to year end. Allbe completed in the second quarter of the2018.
These transactions were accounted for as equity transactions. For shares acquired by Anadarko under the ASR Agreement will be classifiedreceived and recorded as treasury stock.stock, these shares reduced the average number of shares of common stock outstanding used to compute both basic and diluted EPS.


2528
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


14.15. Noncontrolling Interests

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 for net proceeds of $687 million and issued 1.3 million common units to the Company. Proceeds from these issuances were primarily used to acquire interests in Springfield Pipeline LLC from the Company.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 theall remaining Series A Preferred units were converted on May 2, 2017.
WES 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 to extend the conversion date. WES distributed 620261 thousand Class C units to Anadarko during the ninethree months ended September 30, 2017,March 31, 2018, and 946886 thousand Class C units to Anadarko during 2016.2017.
WGP is a limited partnership formed by Anadarko to own interests in WES. During 2016, Anadarko sold 12.5 million WGP common units to the public for net proceeds of $476 million. At September 30, 2017,March 31, 2018, Anadarko’s ownership interest in WGP consisted of an 81.6% limited partner interest and the entire non-economic general partner interest. The remaining 18.4% limited partner interest in WGP was owned by the public.
At September 30, 2017,March 31, 2018, WGP’s ownership interest in WES consisted of a 29.8%29.7% limited partner interest, the entire 1.5% general partner interest, and all of the WES incentive distribution rights. At September 30, 2017,March 31, 2018, Anadarko also owned a 9.0%9.2% limited partner interest in WES through other subsidiaries’ ownership of common and Class C units. The remaining 59.7%59.6% limited partner interest in WES was owned by the public.


2629
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


15.16. 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 isconsideredtheprimary beneficiary and consolidates WGP, WES, and all of their consolidated subsidiaries. See Note 14—Noncontrolling InterestsforFor additional information on WGP and WES.WES, see Note 15—Noncontrolling Interests.
The following tables present selected financial data from the consolidated financial statements of WGP:
 Three Months Ended 
 March 31,
millions2018 2017
Statement of Operations Data   
Total revenues and other$437
 $516
Operating income (loss)187
 138
Net income (loss)150
 103
Statement of Cash Flows Data   
Net cash provided by (used in) operating activities$241
 $192
Net cash provided by (used in) investing activities(294) (252)
Net cash provided by (used in) financing activities497
 (176)

millionsMarch 31, 
 2018		 December 31, 
 2017
Balance Sheet Data   
Cash and cash equivalents$524
 $80
Net property, plant, and equipment6,064
 5,731
Total assets8,816
 8,016
Long-term debt4,176
 3,493
Total liabilities4,967
 4,071
Total equity and partners’ capital3,849
 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, 2017,March 31, 2018 and December 31, 2016,2017, 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, 2017,March 31, 2018 and December 31, 2016,2017, 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 8—10—Debt for additional information on WGP and WES short-term and long-term debt balances.

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, orand debt offerings. See Note 8—10—Debt and Note 14—15—Noncontrolling Interests for additional information on WGP and WES financing activity.


30
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

16. Variable Interest Entities (Continued)

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 $5$4 million for each of the three months ended September 30, 2017March 31, 2018 and 2016, and $13 million for each of the nine months ended September 30, 2017 and 2016.2017. The note receivable and related interest income are eliminated in consolidation.
In March 2015, WES acquired the Company’s interest in DBJV. The acquisition was financed using a deferred purchase price obligation that required a cash payment from WES to the Company due on March 31, 2020. In May 2017, WES reached an agreement with the Company to settle this obligation whereby WES made a cash payment to the Company of $37 million, equal to the estimated net present value of the obligation at March 31, 2017.
In order 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, 2017.2018. WES has 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 $47$14 million for the ninethree months ended September 30, 2017,March 31, 2018, and $35$12 million for the ninethree months ended September 30, 2016.March 31, 2017.


2731
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


16.17. 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 
 September 30,		Three Months Ended 
 March 31,
millions2017 20162018 2017
Cash paid (received)      
Interest, net of amounts capitalized$764
 $735
$326
 $308
Income taxes, net of refunds (1)
169
 (878)12
 1
Non-cash investing activities      
Fair value of properties and equipment from non-cash transactions$619
 $2
Fair value of properties and equipment acquired$2
 $549
Asset retirement cost additions228
 85
63
 61
Accruals of property, plant, and equipment786
 454
965
 608
Net liabilities assumed (divested) in acquisitions and divestitures(115) (39)(25) (82)
Non-cash investing and financing activities      
Capital lease obligation (2)
$—
 $10
FPSO construction period obligation (2)
—
 11
Deferred drilling lease liability14
 3
$—
 $7

(1)
Includes $881 million from a tax refund in 2016 related to the income tax benefit associated with the Company’s 2015 tax net operating loss carryback.
(2)
Upon completion of the FPSO in the third quarter of 2016, the Company reported the construction period obligation as a capital lease obligation based on the fair value of the FPSO.
 
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:
millionsMarch 31, 
 2018		 December 31, 
 2017
Cash and cash equivalents$3,361
 $4,553
Restricted cash and restricted cash equivalents included in Other Assets123
 121
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents$3,484
 $4,674

Included in cash and cash equivalents is restricted cash and restricted cash equivalents of $225 million at March 31, 2018, and $255 million at December 31, 2017. 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 17—Contingencies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.


32
17.
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

18. Segment Information

Anadarko’s business segments are separately managed due to distinct operational differences. Anadarko has previously presented three reporting segments in its quarterly and annual filings: Oil and Gassegments: Exploration and Production, WES Midstream, and Marketing. In the first half of 2017, Anadarko substantially completed a repositioning of its asset portfolio to focus on higher margin liquids production. This shift resulted in a substantial decrease in the number of U.S. operating areas. Following the portfolio repositioning, the chief operating decision maker reviews operating results for Exploration and Production and Midstream when making operating and capital allocation decisions. Accordingly, Anadarko no longer identifies marketing activities as a separate reporting segment and has two reporting segments, Exploration and Production andOther Midstream, which include their respective marketing results. The Company has reclassified prior period amounts to conform to the current period’s presentation.
The Exploration and Production reporting segment explores for, produces,is engaged in the exploration, development, production, and sellssale of oil, natural gas, and NGLs and plans for the development and operation of the Company’sin advancing its Mozambique LNG project in Mozambique.toward FID. The WES Midstream and Other Midstream reporting segment engagessegments engage in gathering, compressing, treating, processing, treating, and transporting Anadarkoof natural gas; gathering, stabilizing, and third-partytransporting of oil natural-gas, and NGLs production as well asNGLs; and gathering and disposaldisposing of produced water. The WES Midstream reporting segment consists of two operating segments, WES midstream assets, and the Other Midstream which are aggregated into one reporting segment due to similar financial and operating characteristics.


28
Tableconsists of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


17. Segment Information (Continued)

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; and certain items not related to the Company’s normal operations, less net income (loss) attributable to noncontrolling interests. During the periods presented, items not related to the Company’s normal operations included restructuring charges related to the workforce reduction program included in G&A, loss on early extinguishment of debt, and certain other nonoperating items included in other (income) expense, net.
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 
 September 30,		 Nine Months Ended 
 September 30,		Three Months Ended 
 March 31,
millions2017 2016 2017 20162018 2017
Income (loss) before income taxes$(1,066) $(1,007) $(1,616) $(3,313)$300
 $(178)
Interest expense230
 220
 680
 657
228
 223
DD&A1,083
 1,069
 3,235
 3,202
990
 1,115
Exploration expense751
 304
 2,371
 506
168
 1,084
(Gains) losses on divestitures, net194
 414
 (815) 516
24
 (804)
Impairments—
 27
 383
 61
19
 373
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives98
 88
 (12) 863
(27) (155)
Restructuring charges3
 112
 20
 363
—
 (1)
Other operating expense—
 —
 —
 1
Loss on early extinguishment of debt—
 —
 2
 124
Certain other nonoperating items—
 —
 —
 (56)
Less net income (loss) attributable to noncontrolling interests58
 83
 182
 200
53
 43
Consolidated Adjusted EBITDAX$1,235
 $1,144
 $4,066
 $2,724
$1,649
 $1,614


2933
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


17.18. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fees,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
 Midstream 
Other and
Intersegment
Eliminations
 Total
Exploration
& Production
 WES Midstream Other Midstream 
Other and
Intersegment
Eliminations
 Total
Three Months Ended September 30, 2017       
Three Months Ended March 31, 2018         
Sales revenues$2,101
 $496
 $13
 $2,610
$2,656
 $310
 $36
 $24
 $3,026
Intersegment revenues—
 158
 (158) —
10
 127
 52
 (189) —
Other (1)
6
 39
 35
 80
Total revenues and other (2)
2,107
 693
 (110) 2,690
Operating costs and expenses (3)
959
 391
 84
 1,434
Other(9) 29
 10
 13
 43
Total revenues and other (1)
2,657
 466
 98
 (152) 3,069
Operating costs and expenses (2)
876
 194
 54
 193
 1,317
Net cash from settlement of commodity derivatives—
 —
 (16) (16)—
 —
 —
 68
 68
Other (income) expense, net—
 —
 (21) (21)—
 —
 —
 (12) (12)
Net income (loss) attributable to noncontrolling interests(1)
—
 —
 58
 58
Net income (loss) attributable to noncontrolling interests—
 —
 —
 53
 53
Total expenses and other959
 391
 105
 1,455
876
 194
 54
 302
 1,426
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement—
 —
 —
 6
 6
Adjusted EBITDAX$1,148
 $302
 $(215) $1,235
$1,781
 $272
 $44
 $(448) $1,649
                
Three Months Ended September 30, 2016       
Three Months Ended March 31, 2017         
Sales revenues$1,901
 $329
 $21
 $2,251
$2,451

$366
 $36
 $45

$2,898
Intersegment revenues—
 227
 (227) —
3

151
 42
 (196)
—
Other (1)
(2) 35
 23
 56
Total revenues and other (2)
1,899
 591
 (183) 2,307
Operating costs and expenses (3)
877
 284
 13
 1,174
Other2

30
 6
 27

65
Total revenues and other (1)
2,456

547
 84
 (124)
2,963
Operating costs and expenses (2)
923

292
 50
 31

1,296
Net cash from settlement of commodity derivatives—
 —
 (63) (63)—

—
 —
 6

6
Other (income) expense, net—
 —
 (31) (31)—

—
 —
 2

2
Net income (loss) attributable to noncontrolling interests(1)
—
 —
 83
 83
Net income (loss) attributable to noncontrolling interests—

—
 —
 43

43
Total expenses and other877
 284
 2
 1,163
923

292
 50
 82

1,347
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement—

—
 —
 (2)
(2)
Adjusted EBITDAX$1,022
 $307
 $(185) $1,144
$1,533

$255
 $34
 $(208)
$1,614
 __________________________________________________________________
(1)
Presentation has been adjusted to align with the current analysis of segment performance. Net income (loss) attributable to noncontrolling interests, previously reported within the Midstream segment, is now presented within Other and Intersegment Eliminations. Other revenues, previously reported within Other and Intersegment Eliminations, is now presented within the applicable segments.
(2) 
Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.
(3)(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.

30
Table of Contents
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


17. Segment Information (Continued)

millions
Exploration
& Production
 Midstream 
Other and
Intersegment
Eliminations
 Total
Nine Months Ended September 30, 2017       
Sales revenues$6,510
 $1,346
 $71
 $7,927
Intersegment revenues—
 507
 (507) —
Other (1)
16
 126
 95
 237
Total revenues and other (2)
6,526
 1,979
 (341) 8,164
Operating costs and expenses (3)
2,687
 1,063
 230
 3,980
Net cash from settlement of commodity derivatives—
 —
 (23) (23)
Other (income) expense, net—
 —
 (43) (43)
Net income (loss) attributable to noncontrolling interests(1)
—
 —
 182
 182
Total expenses and other2,687
 1,063
 346
 4,096
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement—
 —
 (2) (2)
Adjusted EBITDAX$3,839
 $916
 $(689) $4,066
        
Nine Months Ended September 30, 2016       
Sales revenues$4,975

$823

$72

$5,870
Intersegment revenues—

671

(671)
—
Other (1)
(17)
76

69

128
Total revenues and other (2)
4,958

1,570

(530)
5,998
Operating costs and expenses (3)
2,586

714

38

3,338
Net cash from settlement of commodity derivatives—

—

(226)
(226)
Other (income) expense, net—

—

(30)
(30)
Net income (loss) attributable to noncontrolling interests (1)
—

—

200

200
Total expenses and other2,586

714

(18)
3,282
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement—

—

8

8
Adjusted EBITDAX$2,372

$856

$(504)
$2,724
 __________________________________________________________________
(1)
Presentation has been adjusted to align with the current analysis of segment performance. Net income (loss) attributable to noncontrolling interests, previously reported within the Midstream segment, is now presented within Other and Intersegment Eliminations. Other revenues, previously reported within Other and Intersegment Eliminations, is now presented within the applicable segments.
(2)
Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.
(3)
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.

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

CAUTIONARY STATEMENT ABOUT 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, 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 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, and 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; 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

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, repurchase shares of common stock, repay or refinance its debt, and the impact of changes in the Company’s credit ratings
the Company’s ability to successfully complete its $3.0 Billion Share-Repurchase Program
uncertainties associated with acquired 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 ourthe 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, 2016,2017, 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, 2016;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, 2016.2017.


MANAGEMENT OVERVIEW

Anadarko’s strategy is to explore for, develop, and commercialize resources globally; ensure health, safety, and environmental excellence; and focus on financial discipline, flexibility, and value creation; and demonstratecreation, while demonstrating 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 influenced bydependent on commodity prices, which affect the value the Company receives from its sales of oil, natural gas, and NGLs.
To effectively manage the influence of potential commodity-price volatility, in 2017, Anadarko continues to optimizefocus on cash-margin improvement and further concentratehas actively managed its portfolio to focus on higher-return, oil-levered opportunities in areas where it possesses both scale and competitive advantages, namely in the Delaware and DJ basins in the U.S. onshore and the deepwater Gulf of Mexico. Anadarko’s deepwater Gulf of Mexico assets are expected to generate substantial cash flows over the next five years at current strip prices. The Company plansexpects to use the cash flows generated from theits Gulf of Mexico as well as from itsand international producing assets to fund activity in the Company’sits unconventional assets in the U.S. onshore. Much
In 2018, the Company plans to leverage its foundational principle of efficient capital allocation to generate attractive returns on, and of, capital and expects to invest within cash flow. If realized commodity prices are above investment assumptions, Anadarko plans to return capital to stakeholders versus materially increasing activity for incremental production-volume growth. In the first quarter of 2018, the Company increased the quarterly cash dividend by 400% and expanded its share-repurchase program from $2.5 billion to $3.0 billion. The Company also announced its plans to retire debt at par for over $1.0 billion of fixed income securities over the balance of 2018 and 2019. These actions demonstrate the strength of the 2017 operationalCompany’s portfolio and investment focus is preparingcommitment to capital efficiency.
In the Delaware basin, forthe Company continues to build out one of the most expansive and integrated infrastructure positions in the region and advance its efforts to capture operatorship on 70% of its acreage position, primarily in Reeves and Loving counties. Additionally, Anadarko continues to progress the construction of two regional oil treating facilities to support its more cost-effective and environmentally beneficial tankless battery design field-wide, while also securing necessary gathering, processing, and takeaway capacity. This comprehensive build-out plan and phased development with increased operatorship and infrastructureapproach in the Delaware basin is expected to facilitate long-term growth and value.deliver incremental oil sales volumes during the second half of 2018. The Company ended the thirdfirst quarter of 20172018 with 138 operated drilling rigs in the Delaware basin, which compares to 10 operated drilling rigs at year-end 2017. Subsequent to quarter end, the Company reduced the operated drilling rig count to seven and 6plans to operate at this level for the remainder of 2018.
In the DJ basin, the Company continues to leverage its minerals-interest ownership and extensive infrastructure position to deliver development wells with attractive rates of return. The Company ended the first quarter of 2018 with five operated drilling rigs in the DJ basin, which compares to 9six operated drilling rigs inat year-end 2017. Subsequent to quarter end, the Delaware basin and 5Company reduced the operated drilling rigs inrig count to four and plans to operate at this level for the DJ basin at year end 2016. remainder of 2018.
In the deepwater Gulf of Mexico, Anadarko has three floating rigsdrillships and one platform rig drilling with a focus on leveragingtoward high-return oil development opportunities near the Company’s expansive infrastructure position.infrastructure. Internationally, drilling has resumed in offshore Ghana with continued TEN development drilling and completion activity as well as additional drilling operations in the Jubilee field following the Ghanaian government’s approval of the full-field plan of development in October 2017.
In September 2017,order to reduce commodity-price risk and increase the predictability of 2018 cash flows, the Company announced a $2.5 billion share-repurchase program under which shareshas strategic derivative positions covering approximately 50% of the Company’s common stock may be repurchased either in the open market or through private transactions. The program is authorized to extend through the endits anticipated oil sales volumes for 2018, including approximately 100% of 2018.its expected international, Brent-levered sales volumes. In October 2017,January 2018, the Company entered into additional fixed-price swaps consisting of 280 MMBtu/d at an agreementaverage price of $3.02, increasing its coverage to complete $1.0 billionslightly more than 50% of its anticipated 2018 natural-gas sales volumes. See Note 8—Derivative Instruments in the share-repurchase program priorNotes to the endConsolidated Financial Statements under Part I, Item 1 of 2017.this Form 10-Q.
Following a home explosion in Firestone, Colorado in April 2017,In January 2018, the Company took precautionary measuresdivested its nonoperated interest in Alaska for net proceeds of $383 million. This transaction is subject to shut in all operated vertical wells in the DJ basin to conduct additional inspections. It subsequently tested and permanently plugged, abandoned, and capped all one-inch return lines associated with these wells. In May 2017, the Colorado Oil & Gas Conservation Commission (COGCC) issued a two-phase Notice to Operators (NTO) requiring all operators to inventory and integrity test existing flowlines within 1,000 feet of a building unit and abandon all inactive flowlines in such areas. During the third quarter, the Company substantially completed the requirements of the NTO. In August 2017, following a three-month review of oil and gas operations, the Governor of Colorado announced several policy initiatives designed to enhance public safety, which are to be implemented over the next several months through rulemaking or legislation. The Company continues to work cooperatively with state regulators and others and is also cooperating with the NTSB in its investigation related to the incident.regulatory approval.


Significant operating and financial activities for the thirdfirst quarter of 20172018 include the following:

Total Company
Anadarko’s overall sales-volume product mix increased to 57% oil in the thirdfirst quarter of 2017,2018, compared to 42%46% in the thirdfirst quarter of 2016,2017, which significantly improved margins and returns.
Anadarko’s third-quarter oil sales volumes averaged 353 MBbls/d, representing an 11% increase from the third quarter of 2016, primarily due to increased volumes from the Gulf of Mexico, partially offset by the divestiture of certain U.S. onshore oil and gas assets in 2016 and 2017.
U.S. Onshore
Oil sales volumes in the Delaware basin increased by 1021 MBbls/d, representing a 40%70% increase from the thirdfirst quarter of 2016,2017, primarily due to continued drilling and completion activities.
Gulf of MexicoInternational
Oil sales volumes averaged 126 MBbls/d, representing a 95% increaseGhana
The operating agreement with the Ghanaian Government for the TEN fields was not affected by the 2017 ruling from the third quarter of 2016, primarily due to the GOM Acquisition and continued tieback activity at several facilities, partially offset by deferred production as a result of Hurricanes Harvey and Irma during the third quarter of 2017.

International
The International Tribunal for the Law of the Sea issued a ruling in September 2017 regarding the delimitation of the maritime boundary between Ghana and Côte d’Ivoire in the Atlantic Ocean. The new maritime boundary as determined by the tribunal does not affect the TEN fields,Ocean, and the operator now plans to work withresumed drilling operations in the Governmentfirst quarter of Ghana to put in place2018.
In the permits necessary to resume development drilling.
Interim spread mooringfirst quarter of 2018, the operator of the FPSO at the Jubilee field in Ghana commenced in the fourth quarter of 2016 and was completed during the first quarter of 2017. Anadarko continuesthree shutdown periods that are expected to work with its partnersoccur in 2018 to optimize a permanent turret solution that will effectively stabilize the vessel with a minimum amount of shut-in time, which is expectedturret and rotate the FPSO to start in early 2018.its permanent heading. In October,addition, the partnership receivedoperator resumed drilling operations after receiving Ghanaian Government approval for the full-field plan of development, with drilling operations expected to commence in 2018.development.
Mozambique
The foundational legal and contractual framework was completedGovernment of Mozambique approved the Development Plan for the Company’s onshore LNG project in Mozambique. A few formal government approvals remain beforeAnadarko-operated, initial two-train Golfinho/Atum project.
In Mozambique, the commencement ofCompany continues to progress the resettlement and site preparation activities, which will position the onshore area for construction of the LNG facilities.
Anadarko and its co-venturers in Offshore Area 1 in Mozambique reached agreement on the project’s firsta long-term sale and purchase agreement (SPA) for 2.61.2 million tonnes per annum for 15 years with PTT Public Company Limited (PTT), Thailand’s national oil and gas company. The SPA is subject to the approval of the Government of Thailand.Électricité de France, S.A.
Financial
The Company generated $639 million$1.4 billion of cash flow from operations and ended the quarter with $5.3$3.4 billion of cash.
In September 2017, AnadarkoFebruary 2018, the Company expanded the announced a $2.5share-repurchase program to $3.0 billion share-repurchase program. and completed the repurchase of 8.5 million shares of its common stock for $500 million (average price of $58.82 per share) under an ASR Agreement.
In October 2017,March 2018, the Company entered into an additional ASR Agreement to complete $1.0repurchase the remaining $1.4 billion of the share-repurchase program priorCompany’s common stock under the $3.0 Billion Share-Repurchase Program and received an initial delivery of 19.1 million shares. The $3.0 Billion Share-Repurchase Program is expected to be completed in the endsecond quarter of 2017.2018.


FINANCIAL RESULTS
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except per-share amounts 2017 2016 2017 2016 2018 2017
Oil, natural-gas, and NGLs sales $2,101
 $1,901
 $6,510
 $4,975
 $2,666
 $2,454
Gathering, processing, and marketing sales 509
 350
 1,417
 895
 360
 444
Gains (losses) on divestitures and other, net (114) (358) 1,052
 (388) 19
 869
Revenues and other $2,496
 $1,893
 $8,979
 $5,482
 $3,045
 $3,767
Costs and expenses 3,271
 2,686
 9,989
 7,471
 2,494
 3,867
Other (income) expense 291
 214
 606
 1,324
 251
 78
Income tax expense (benefit) (425) (260) (366) (957) 126
 97
Net income (loss) attributable to common stockholders $(699) $(830) $(1,432) $(2,556) $121
 $(318)
Net income (loss) per common share attributable to common stockholders—diluted $(1.27) $(1.61) $(2.61) $(5.00) $0.22
 $(0.58)
Average number of common shares outstanding—diluted 553
 517
 552
 512
 519
 551

The following discussion pertains to Anadarko’s results of operations, financial condition, and changes in financial condition. Increases or decreases “for the three months ended September 30, 2017,March 31, 2018,” refer to the comparison of the three months ended September 30, 2017,March 31, 2018, to the three months ended September 30, 2016, and increases or decreases “for the nine months ended September 30, 2017,” refer to the comparison of the nine months ended September 30, 2017, to the nine months ended September 30, 2016.March 31, 2017. The primary factors that affect the Company’s results of operations include commodity prices for oil, natural gas, and NGLs; sales volumes; the cost of finding and developing such reserves; and operating costs.


Revenues and Sales Volumes
 Three Months Ended September 30, Three Months Ended March 31,
millions except percentages Oil 
Natural
Gas
 NGLs Total Oil Natural Gas NGLs Total
2016 sales revenues $1,239
 $435
 $227
 $1,901
2017 sales revenues $1,663
 $502
 $289
 $2,454
Changes associated with prices 189
 33
 103
 325
 445
 (37) 56
 464
Changes associated with sales volumes 139
 (199) (65) (125) 19
 (218) (53) (252)
2017 sales revenues $1,567
 $269
 $265
 $2,101
Increase (decrease) vs. 2016 26% (38)% 17% 11%
        
 Nine Months Ended September 30,
millions except percentages Oil 
Natural
Gas
 NGLs Total
2016 sales revenues $3,214
 $1,121
 $640
 $4,975
Changes associated with prices 1,027
 372
 269
 1,668
Changes associated with sales volumes 411
 (403) (141) (133)
2017 sales revenues $4,652
 $1,090
 $768
 $6,510
Increase (decrease) vs. 2016 45% (3)% 20% 31%
2018 sales revenues $2,127
 $247
 $292
 $2,666
Increase (decrease) vs. 2017 28% (51)% 1% 9%

The above table illustrates the effects of the increasechanges in commodity prices and sales volumes. The changes in sales volumes include increases associated with sales volumes, which include increases related to assets acquiredcontinued drilling and completion activities in the Gulf of Mexico in December 2016 (primarily oil)Delaware and DJ basins and decreases associated with U.S. onshore asset divestitures (primarily natural gas).in 2017 and 2018.

The following provides Anadarko’s sales volumes for the three and nine months ended September 30:March 31:
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Barrels of Oil Equivalent                 
(MMBOE except percentages)                 
United States50
 (22)% 64
 161
 (18)% 196
 50
 (20)% 62
International8
 —
 8
 26
 13
 23
 8
 (16) 10
Total barrels of oil equivalent58
 (20) 72
 187
 (15) 219
 58
 (19) 72
                 
Barrels of Oil Equivalent per Day                 
(MBOE/d except percentages)                 
United States535
 (22)% 689
 587
 (18)% 715
 555
 (20)% 691
International91
 —
 91
 96
 14
 85
 88
 (16) 104
Total barrels of oil equivalent per day626
 (20) 780
 683
 (15) 800
 643
 (19) 795

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. Anadarko employs marketing strategiesThe Company has derivative instruments in place to minimize market-related shut-ins, maximize realized prices, and manage credit-risk exposure.reduce the price risk associated with future production. For additional information, see Note 7—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.


Oil Sales Revenues, Average Prices, and Volumes
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Oil sales revenues (millions) $1,567
 26% $1,239
 $4,652
 45% $3,214
 $2,127
 28 % $1,663
                  
United States                  
Sales volumes—MMBbls 25
 14% 22
 71
 12% 63
 25
 7 % 24
MBbls/d 266
 14
 233
 259
 12
 230
 288
 7
 269
Price per barrel $46.89
 14
 $41.29
 $47.63
 30
 $36.52
 $62.58
 27
 $49.23
                  
International                  
Sales volumes—MMBbls 8
 4% 8
 25
 15% 22
 8
 (15)% 9
MBbls/d 87
 4
 84
 91
 15
 79
 83
 (15) 98
Price per barrel $52.61
 15
 $45.82
 $51.59
 23
 $41.98
 $67.39
 26
 $53.36
                  
Total                  
Sales volumes—MMBbls 33
 11% 30
 96
 13% 85
 33
 1 % 33
MBbls/d 353
 11
 317
 350
 13
 309
 371
 1
 367
Price per barrel $48.31
 14
 $42.49
 $48.66
 28
 $37.91
 $63.66
 26
 $50.34

The following summarizes primary drivers for the change in oil sales revenues:
millions 
Change in
Revenues
 
Due to Change
in Prices
 
Due to Change
in Volumes
Three months ended September 30, 2017 vs. 2016 $328
 $189
 $139
Nine months ended September 30, 2017 vs. 2016 1,438
 1,027
 411
millions 
Change in
Revenues
 
Due to Change
in Prices
 
Due to Change
in Volumes
Three months ended March 31, 2018 vs. 2017 $464
 $445
 $19

Oil Prices
The average oil price received increased for the three and nine months ended September 30, 2017,March 31, 2018, primarily due to the expectation of decreasing global oversupply as a result of OPEC’s agreement to reduce production through the first quarterend of 2018.

Oil Sales Volumes
20172018 vs. 20162017  The Company’s oil sales volumes increased by 364 MBbls/d for the three months ended September 30, 2017, and 41 MBbls/d for the nine months ended September 30, 2017,March 31, 2018, primarily due to the following:
U.S. Onshore
Sales volumes increased for the Delaware basin increased by 1021 MBbls/d and for the three months ended September 30, 2017, and 11DJ basin by 19 MBbls/d, for the nine months ended September 30, 2017, primarily due to continued drilling and completion activities in 2017.
Sales volumes for the DJ basin decreased by 10 MBbls/d for the three months ended September 30, 2017, and 15 MBbls/d for the nine months ended September 30, 2017, primarily due to reduced capital activity in 2016 during the low commodity-price cycle resulting in production declines during 2017 and downtime related to the Company’s response efforts in Colorado in the second and third quarters of 2017. This decrease was partially offset by increased production due to increased drilling and completion activity in 2017.2018.
Divestitures resulted in a decrease in sales volumes of 3325 MBbls/d, for the three months ended September 30, 2017, and 30 MBbls/d for the nine months ended September 30, 2017, primarily related to the sale of the Eagleford and West Chalk assets in the first half of 2017.2017 and the Alaska nonoperated assets in the first quarter of 2018.
Gulf of MexicoInternational
Sales volumes increasedfor Algeria decreased by 6115 MBbls/d, for the three months ended September 30, 2017, and 62 MBbls/d for the nine months ended September 30, 2017, primarily due to a decrease in production driven by statutory maintenance completed on the GOM Acquisition in December 2016El Merk facility and continued tieback activity at several facilities, partially offset by deferred production as a resulttiming of Hurricanes Harvey and Irma during the third quarter of 2017.liftings.
International
SalesvolumesforGhanaincreasedby8MBbls/dforthethreemonthsendedSeptember30,2017,and12MBbls/d for the nine months ended September 30, 2017, primarily due to liftings from the TEN development project, which came online late in the third quarter of 2016, and downtime in 2016 to address new production and offtake procedures resulting from issues associated with the Jubilee field FPSO turret bearing.


Natural-Gas Sales Volumes,Revenues, Average Prices, and RevenuesVolumes
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Natural-gas sales revenues (millions) $269
 (38)% $435
 $1,090
 (3)% $1,121
 $247
 (51)% $502
                  
United States                  
Sales volumes—Bcf 100
 (46)% 184
 380
 (36)% 593
 95
 (43)% 167
MMcf/d 1,086
 (46) 2,003
 1,392
 (36) 2,164
 1,051
 (43) 1,859
Price per Mcf $2.69
 14
 $2.36
 $2.87
 52
 $1.89
 $2.61
 (13) $3.00

The following summarizes primary drivers for the change in natural-gas sales revenues:
millions 
Change in
Revenues
 
Due to Change
in Prices
 
Due to Change
in Volumes
Three months ended September 30, 2017 vs. 2016 $(166) $33
 $(199)
Nine months ended September 30, 2017 vs. 2016 (31) 372
 (403)
millions 
Change in
Revenues
 
Due to Change
in Prices
 
Due to Change
in Volumes
Three months ended March 31, 2018 vs. 2017 $(255) $(37) $(218)

Natural-Gas Prices
The average natural-gas price received increaseddecreased for the three and nine months ended September 30, 2017,March 31, 2018, primarily due to the industry’s year-over-yearincreased U.S. natural-gas production, declinespartially offset by increased weather-driven residential and increasedcommercial demand coupled with an increase in exports to Mexico, resulting in reduced gas storage industry-wide.Mexico.

Natural-Gas Sales Volumes
20172018 vs. 20162017  TheCompany’snatural-gassalesvolumesdecreasedby 917 808MMcf/dforthethree months ended September 30, 2017, and 772 MMcf/d for the nine months ended September 30, 2017,March 31, 2018, primarily due to the sale of the Marcellus, Eagleford, West Chalk, and EaglefordUtah CBM assets in the first half of 2017 and the Elm Grove and CarthageMoxa assets in the second half of 2016.2017.



Natural-Gas Liquids Sales Volumes,Revenues, Average Prices, and RevenuesVolumes
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
  2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016
Natural-gas liquids sales revenues (millions) $265
 17 % $227
 $768
 20 % $640
             
United States            
Sales volumes—MMBbls 9
 (28)% 11
 27
 (23)% 34
MBbls/d 88
 (28) 122
 96
 (22) 124
Price per barrel $31.07
 65
 $18.87
 $27.43
 54
 $17.78
             
International            
Sales volumes—MMBbls —
 (44)% —
 1
 (12)% 1
MBbls/d 4
 (44) 7
 5
 (12) 6
Price per barrel $32.98
 39
 $23.74
 $34.02
 44
 $23.55
             
Total            
Sales volumes—MMBbls 9
 (29)% 11
 28
 (22)% 35
MBbls/d 92
 (29) 129
 101
 (22) 130
Price per barrel $31.15
 63
 $19.13
 $27.77
 54
 $18.04
  Three Months Ended 
 March 31,
  2018 Inc (Dec) 
 vs. 2017		 2017
Natural-gas liquids sales revenues (millions)
 $292
 1 % $289
       
Total      
Sales volumes—MMBbls (1)
 9
 (18)% 11
MBbls/d (1)
 97
 (18) 118
Price per barrel $33.63
 24
 $27.17
 _______________________________________________________________________________
(1)
The percentage of total and daily NGLs sales volumes from the U.S. was 95% for the three months ended March 31, 2018 and 2017.

NGLs 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:
millions 
Change in
Revenues
 
Due to Change
in Prices
 
Due to Change
in Volumes
Three months ended September 30, 2017 vs. 2016 $38
 $103
 $(65)
Nine months ended September 30, 2017 vs. 2016 128
 269
 (141)
millions 
Change in
Revenues
 
Due to Change
in Prices
 
Due to Change
in Volumes
Three months ended March 31, 2018 vs. 2017 $3
 $56
 $(53)

NGLs Prices
The average NGLs price received increased for the three and nine months ended September 30, 2017,March 31, 2018, primarily due to increased ethane and propane prices stemming from higher exports and increased domestic demand.

NGLs Sales Volumes
20172018 vs. 20162017  The Company’s NGLs sales volumes decreased by 3721 MBbls/d for the three months ended September 30, 2017, and 29 MBbls/d for the nine months ended September 30, 2017,March 31, 2018, primarily due to the sale of the Eagleford assets in the first halfquarter of 2017 and the Carthage assets in the second half of 2016.2017.


Gathering, Processing, and Marketing
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except percentages 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Gathering, processing, and marketing sales(1) $509
 45% $350
 $1,417
 58% $895
 $360
 (19)% $444
Gathering, processing, and marketing expense(1) 398
 37
 291
 1,108
 46
 758
 237
 (32) 350
Total gathering, processing, and marketing, net $111
 88
 $59
 $309
 126
 $137
Gathering, processing, and marketing, net $123
 31
 $94
 __________________________________________________________________
(1)
As a result of adopting ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as of January 1, 2018, the change in accounting policy decreased gathering, processing, and marketing sales by $217 million and decreased gathering, processing, and marketing expenses by $214 million for the three months ended March 31, 2018. Refer to Note 2—Revenue from Contracts with Customersin 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 well as fee revenue earned by providing gathering,agent is also included. Gathering and processing compression, and treating services to third parties. Marketing sales include the margin earned from purchasing and selling third-party oil and natural gas. Gathering, processing, and marketing expense includes the cost of third-party natural gas purchased and processed by Anadarko as well as other operating and transportation 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 marketing activities.
Gathering,Total gathering, processing, and marketing, net increased by $52$29 million for the three months ended September 30, 2017, and by $172 million for the nine months ended September 30, 2017,March 31, 2018, primarily relateddue to increased throughput volumes at the DBM complexComplex, which were partially due to increased processing capacity from the start-up of newly constructed facilities200 MMcf/d cryogenic train that commenced service in MayDecember 2017, and October 2016higher overall liquid prices and previously existing facilities returning to service after the 2016 outageincreased throughput volumes at the DBM complex.DJ Basin Complex.

Gains (Losses) on Divestitures and Other, net
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except percentages 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Gains (losses) on divestitures, net $(194) 53% $(414) $815
 NM
 $(516) $(24) (103)% $804
Other 80
 43
 56
 237
 85% 128
 43
 (34) 65
Total gains (losses) on divestitures and other, net $(114) 68
 $(358) $1,052
 NM
 $(388)
Gains (losses) on divestitures and other, net $19
 (98) $869

Gains (losses) on divestitures and other, net includes gains (losses) on divestitures and other operating revenues, including hard-minerals royalties, earnings (losses) from equity investments, and other revenues.
During the three and nine months ended September 30,March 31, 2018 and 2017, and 2016, Anadarko divested certain non-core U.S. onshore assets. See Note 3—Acquisitions, 4—Divestitures and Assets Held for Sale in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information.


Costs and Expenses

The following provides Anadarko’s total costs and expenses for three and nine months ended September 30:March 31:
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
millions 2017 2016 2017 2016 2018 2017
Oil and gas operating $257
 $198
 $748
 $608
 $276
 $256
Oil and gas transportation 220
 256
 698
 744
 196
 249
Exploration 751
 304
 2,371
 506
 168
 1,084
Gathering, processing, and marketing (1)
 398
 291
 1,108
 758
 237
 350
General and administrative 280
 362
 840
 1,116
Depreciation, depletion, and amortization 1,083
 1,069
 3,235
 3,202
G&A 278
 263
DD&A 990
 1,115
Production, property, and other taxes 159
 148
 449
 422
 190
 155
Impairments —
 27
 383
 61
 19
 373
Other operating expense 123
 31
 157
 54
 140
 22
Total $3,271
 $2,686
 $9,989
 $7,471
 $2,494
 $3,867

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

Oil and Gas Operating Expenseand Transportation Expenses
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Oil and gas operating (millions)
 $257
 30% $198
 $748
 23% $608
 $276
 8 % $256
Oil and gas operating—per BOE 4.46
 62
 2.76
 4.01
 44
 2.78
 4.77
 33
 3.60
Oil and gas transportation (millions)

 196
 (21) 249
Oil and gas transportation—per BOE

 3.38
 (3) 3.47

Oil and Gas Operating Expense

Oil and gas operating expenseexpenses increased by $140$20 million for the ninethree months ended September 30, 2017,March 31, 2018, primarily due to the following:
higher operating costs of $180 million primarily related to increased activity in the Gulf of Mexico and the GOM Acquisition
higher operating costs of $48$32 million related to increased activity in the DJ and Delaware basins, and additional costs related to the Company’s response efforts in Colorado in the second and third quarters of 2017
lower non-operating costs of $18 million in Ghana primarily related to FPSO maintenance costs in 2016, partially offset by higher costs due to increased production from the TEN development in 2017, which came online late in the third quarter of 2016
lower expenses of $67$24 million as a result of U.S. onshore asset divestitures in 2017
higher operating costs of $14 million, primarily related to increased platform maintenance and workovers in the Gulf of Mexico
The related costs per BOE increased by $1.23$1.17 for the ninethree months ended September 30, 2017,March 31, 2018, primarily due to increased costs as discussed above anda result of shifting to a higher-return, oil-levered portfolio.portfolio that includes the Gulf of Mexico and DJ and Delaware basins, which operate at a higher cost compared to the divested lower-return, gas-levered assets.

Oil and Gas Transportation Expense

Oil and gas transportation expenses decreased by $53 million, primarily due to U.S. onshore divestitures in 2018 and 2017. Oil and gas transportation expenses per BOE remained relatively flat.


Exploration Expense
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions 2017 2016 2017 2016 2018 2017
Exploration Expense        
Dry hole expense $565
 $203
 $1,408
 $209
 $53
 $476
Impairments of unproved properties 113
 52
 736
 91
 53

537
Geological and geophysical, exploration overhead, and other expense 73
 49
 227
 206
 62
 71
Total exploration expense $751
 $304
 $2,371
 $506
Total $168
 $1,084

Total exploration expense increased by $447 million forFor the three months ended September 30, 2017, and $1.9 billion for the nine months ended September 30, 2017,March 31, 2018, total exploration expense decreased by $916 million, primarily related to the following:

Dry Hole Expense

Dry hole expense decreased by $423 million, primarily due to the following:
The Company expensed exploratory well costs of $49 million in the Gulf of Mexico related to unsuccessful drilling activities in the first quarter of 2018.
The Company expensed $1.4 billion ofsuspended exploratory well costs forof $435 million related to the nine months ended September 30,Shenandoah project in the Gulf of Mexico in the first quarter of 2017. See Note 5—6—Suspended Exploratory Well Costsin the Notes to Consolidated Financial Statements under Part I,II, Item 18 of thisthe Form 10-Q for additional information.10-K.
Dry hole expense for the nine months ended September 30, 2017, primarily related to the following:
$438 million related to the Shenandoah project in the Gulf of Mexico
$221 million related to the Phobos project in the Gulf of Mexico
$110 million related to the Warrior project in the Gulf of Mexico
$325 million related to wells in Côte d’Ivoire
$243 million related to wells in the Grand Fuerte area in Colombia
Dry hole expense for the nine months ended September 30, 2016, primarily related to the following:
$92 million related to certain wells in Mozambique
$64 million related to a Shenandoah well in the Gulf of Mexico
$38 million related to a well in Côte d’Ivoire

Impairments of Unproved Properties

ImpairmentsFor further discussion related to impairments of unproved properties, for the nine months ended September 30, 2017, primarily related to the following:
•
The Company recognized $586 million of impairments of unproved Gulf of Mexico properties, 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. For additional details on the Shenandoah project, see Note 5—Exploratory Well Costs in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
The Company recognized $88 million of impairments of unproved international properties during the nine months ended September 30, 2017.
See Note 4—Impairments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


General and Administrative ExpenseG&A
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except percentages 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
General and administrative $280
 (23)% $362
 $840
 (25)% $1,116
G&A $278
 6% $263

G&A expenses decreasedincreased by $82$15 million for the three months ended September 30, 2017,March 31, 2018, primarily due to an increase 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 Anadarko’s historical share price and $276 millionshare 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 nine months ended September 30, 2017. Excluding the $91performance-based unit awards.


DD&A Expense
  Three Months Ended 
 March 31,
millions except percentages 2018 Inc (Dec) 
 vs. 2017		 2017
DD&A $990
 (11)% $1,115

DD&A expense decreased by $125 million decrease related to the 2016 workforce reduction program and other severance-related costs for the three months ended September 30, 2017, and the $285 million decrease for the nine months ended September 30, 2017, G&A expenses remained relatively flat. See Note 11—Restructuring Charges in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Depreciation, Depletion, and Amortization
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
millions except percentages 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016
Depreciation, depletion, and amortization $1,083
 1% $1,069
 $3,235
 1% $3,202

DD&A expense increased by $33 million for the nine months ended September 30, 2017,March 31, 2018, primarily due to the following:
$36346 million related to higher sales volumes in the Gulf of Mexico primarily due to the GOM Acquisition
$236 million related to international production DD&A primarily due to higher sales volumes from the Ghana TEN project, which came online late in the third quarter of 2016
These increases were offset by the following:
$584 million related to lower 2017 sales volumes and asset property balances associated with U.S. onshore properties as a result of divestitures in 20162018 and 2017
$43 million related to the DJ and Delaware basins as a result of decreased DD&A rates due to an increase in reserves, partially offset by higher sales volumes
$24 million related to Ghana as a result of decreased DD&A rates due to an increase in reserves

Impairments
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
Three Months Ended 
 March 31,
millions 2017 2016 2017 2016
2018
2017
Impairments $—
 $27
 $383
 $61

$19

$373

During the nine months ended September 30, 2017, impairments included $211 million associated with Gulf of Mexico oil and gas properties due to lower forecasted commodity prices. Additional impairments of $172 million primarily related to a U.S. onshore midstream property due to a reduced throughput fee as a result of a producer’s bankruptcy. For further discussion related to impairments, including the potential for future impairments, see Note 4—5—Impairments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Other Operating ExpensesExpense
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except percentages 2017 Inc (Dec) 
 vs. 2016		 2016 2017 Inc (Dec) 
 vs. 2016		 2016 2018 Inc (Dec) 
 vs. 2017		 2017
Other operating expense $123
 NM $31
 $157
 191% $54
 $140
 NM $22

Other operating expenses increased by $92 million for the three months ended September 30, 2017,expense includes contingency accruals, adjustments to estimated early rig termination fees, and $103 million for the nine months ended September 30, 2017, primarily due to $105 million expensed in the third quarter of 2017 for the early termination of a drilling rig.surface owner payments.


Other (Income) Expense

The following provides Anadarko’s other (income) expense for the three and nine months ended September 30:March 31:
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
millions 2017 2016 2017 2016 2018 2017
Interest expense $230
 $220
 $680
 $657
 $228
 $223
Loss on early extinguishment of debt —
 —
 2
 124
(Gains) losses on derivatives, net (1)
 82
 25
 (33) 629
 35
 (147)
Other (income) expense, net (21) (31) (43) (86) (12) 2
Total $291
 $214
 $606
 $1,324
 $251
 $78

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

Income Tax Expense (Benefit)
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions except percentages 2017 2016 2017 2016 2018 2017
Income tax expense (benefit) $(425) $(260) $(366) $(957) $126
 $97
Income (loss) before income taxes (1,066) (1,007) (1,616) (3,313) 300
 (178)
Effective tax rate 40% 26% 23% 29% 42% (54)%

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%. The Company reported a lossexpects to make any necessary adjustments to the provisional income tax estimates related to the adoption of the Tax Reform Legislation before income taxes for the three and nine months ended September 30, 2017 and 2016. 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. Additionally, the Company’s effective tax rate is typically impacted by state income taxes (net of federal income tax benefit), non-deductible Algerian exceptional profits tax for Algerian income tax purposes, net changes in uncertain tax positions, and pre-tax income allocateddispositions of non-deductible goodwill.
The Company received an $881 million tentative refund in 2016 related to noncontrollingits $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. If the payment is ultimately determined to not be deductible, the Company would be required to repay the tentative refund previously received plus interest, typically impactand the Company’s effective tax rate. Company would be required to reverse the net benefit of $346 million previously recognized in its financial statements.
For additional information on income taxes, see Note 9—11—Income Taxes in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


LIQUIDITY AND CAPITAL RESOURCES
 Nine Months Ended 
 September 30,		 Three Months Ended 
 March 31,
millions 2017 2016 2018 2017
Net cash provided by (used in) operating activities $2,619
 $1,877
 $1,430
 $1,123
Net cash provided by (used in) investing activities (26) (1,256) (1,113) 1,723
Net cash provided by (used in) financing activities (527) 2,421
 (1,507) (198)

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.
Through September 2017,During the first quarter of 2018, Anadarko paid $1.9 billion to repurchase shares under the $3.0 Billion Share-Repurchase Program and received net proceeds of $3.5 billion$371 million from divestitures, primarily related to the sale of the Company’s Eagleford, Marcellus, Eaglebine, and Utah CBM assets.nonoperated interest in Alaska, which is subject to regulatory approval. As of September 30, 2017,March 31, 2018, Anadarko had $5.3$3.4 billion of cash plus $5.0 billion of borrowing capacity under its RCFs.APC RCF and 364-Day Facility. Anadarko believes that its current available cash and anticipated operating cash flows will be sufficient to fund the Company’s remaining 2017 and projected long-term operational and capital programs as well as its quarterly dividends and to fund the Company’s $2.5 billion share-repurchase program announced by the Companyretirement of Anadarko’s debt maturing in September 2017.2018 and 2019. 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 provided byflows from operating activities was $2.6$1.4 billion for the ninethree months ended September 30, 2017, $742March 31, 2018, $307 million higher compared to the same period of 2016. This increase was2017, primarily as a result of higher sales revenues in 2017 due to the impact of higher commodity prices as well as the $159.5 million paymentand a higher oil composition of the Clean Water Act penalty in 2016 and $217 million related to severance costs and retirement benefits paid in 2016 in connection with the workforce reduction program. These increases were partially offset by an $881 million tax refund received in 2016 related to the income tax benefit associated with the Company’s 2015 tax net operating loss carryback.sales volumes.


Investing Activities

Capital Expenditures  Anadarko currently estimates a 2017 capital spending range of $5.0 billion to $5.25 billion, which includes WES capital spending of approximately $800 million to $850 million. These capital spending estimates represent decreases of more than 5% for Anadarko and 10% for WES from the initial 2017 estimates. The Company has currently allocated approximately 80% of its 2017 capital spending budget to the U.S. onshore upstream and midstream and deepwater Gulf of Mexico development; 15% to future value areas, such as deepwater exploration and Mozambique LNG; 2% to international cash generation assets in Algeria and Ghana; and 3% to corporate activities. The Company’s 2017 capital program was designed to leverage its streamlined portfolio and sharpened focus on higher-margin oil production.
The following presents the Company’s capital expenditures for the ninethree months ended September 30:March 31:
millions 2017 2016 2018 2017
Cash Flows from Investing Activities        
Additions to properties and equipment (1)
 $3,538
 $2,618
 $1,547
 $1,194
Adjustments for capital expenditures        
Changes in capital accruals 237
 (300) 142
 58
Other 21
 3
 15
 3
Total capital expenditures (2)
 $3,796
 $2,321
 $1,704
 $1,255
        
Exploration and Production and other capital expenditures $2,877
 $1,921
 $1,115
 $945
Midstream capital expenditures - Anadarko (3)
 258
 45
Midstream capital expenditures - WES 661
 355
WES Midstream capital expenditures 327
 286
Other Midstream capital expenditures 262
 24
 ________________________________________________________________________________________
(1) 
Additions to properties and equipment as presented within Anadarko’s cash flows from investing activities include cash payments for cost of properties, equipment, and facilities. The cost of properties includes the initial capitalization of drilling costs associated with all exploratory wells, whether or not they were deemed to have a commercially sufficient quantity of proved reserves.
(2)
Capital expenditures exclude the FPSO capital lease asset.
(3)
Excludes WES.

The Company’s capital expenditures increased by $1.5 billion$449 million for the ninethree months ended September 30, 2017.March 31, 2018. Exploration and Production capital expenditures increased primarily due to increasedhigher development costs of $694$391 million driven by U.S. onshoreincreased drilling and completion activity primarily in the DelawareDJ and DJDelaware basins and increasedGulf of Mexico. This increase was partially offset by decreased exploration costs of $281$138 million primarily duerelated to decreased exploration drilling in the Gulf of Mexico and $216 million primarily driven by U.S. onshore acreage acquisitions, partially offset by decreased development costs of $220 million driven by the TEN development project in Ghana, which achieved first oil in the third quarter of 2016.Colombia. Other Midstream capital expenditures increased primarily$238 million due to $306asset development primarily in the Delaware basin. WES Midstream capital expenditures increased $41 million primarily related to the development of WES midstream assets primarily in the Delaware and DJ basins and $213basins.

Divestitures  During the three months ended March 31, 2018, Anadarko received net proceeds of $371 million from divestitures, primarily related to the developmentsale of APC midstream assets primarily in the Delaware basin.

Property Exchange On March 17, 2017, WES acquired a third party’s 50%Company’s 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 funded the cash consideration with cash on hand and recognized a gain of $126 million as a result of this transaction. After the acquisition, the DBJV systemAlaska, which is 100% owned by WES and consolidated by Anadarko.subject to regulatory approval. See Note 3—Acquisitions, 4—Divestitures and Assets Held for Sale in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Carried-Interest Arrangements  In the third quarter of 2014, the Company entered into a carried-interest arrangement that required a third party to fund $442 million of Anadarko’s capital costs in exchange for a 34% working interest in the Company’s Eaglebine development, located in Southeast Texas. The carry was canceled as part of the sale of the Eaglebine assets in the second quarter of 2017.

Divestitures  During the nine months ended September 30, 2017, Anadarko received net proceeds of $3.5 billion from divestitures, primarily related to the sale of the Company’s Eagleford, Marcellus, Eaglebine, and Utah CBM assets. See Note 3—Acquisitions, Divestitures, and Assets Held for Salein the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Financing Activities
millions except percentagesSeptember 30, 
 2017		 December 31, 
 2016		March 31, 
 2018		 December 31, 
 2017
Anadarko$12,201
 $12,204
$12,200
 $12,196
WES3,344
 3,091
4,176
 3,465
WGP28
 28
28
 28
Total debt$15,573
 $15,323
$16,404
 $15,689
Total equity13,922
 15,497
11,756
 13,790
Debt to total capitalization ratio52.8% 49.7%
Consolidated debt to total capitalization ratio58.3% 53.2%

Debt Activity
Anadarko RCFs  Anadarko has aIn January 2018, the Company amended its $3.0 billion senior unsecured RCF that matures into extend the maturity date to January 20212022 (APC RCF) and aamended its $2.0 billion 364-Day Facility that matures in364-day senior unsecured RCF to extend the maturity date to January 2018.2019 (364-Day Facility). At September 30, 2017, the CompanyMarch 31, 2018, Anadarko had no outstanding borrowings under the APC RCF or the 364-Day Facility.Facility and was in compliance with all covenants.
WES Senior Notes In March 2018, WES completed a public offering of $400 million aggregate principal amount of 4.500% 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 the remaining net proceeds were used for general partnership purposes, including to fund capital expenditures.

WES and WGP RCFs  In February 2018, WES has a $1.2 billionamended its RCF that matures into 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 $1.5a maximum of $2.0 billion. During the ninethree months ended September 30, 2017,March 31, 2018, WES borrowed $250$260 million under its RCF, which was used for general partnership purposes.purposes, and made repayments of $630 million. At September 30, 2017,March 31, 2018, WES had $250 million ofno outstanding borrowings under its RCF, at an interest rate of 2.54%, had outstanding letters of credit of $5 million, and had available borrowing capacity of $945 million.$1.495 billion, and was in compliance with all covenants.
In February 2018, WGP has a $250 millionvoluntarily reduced the aggregate commitments of the lenders under its senior secured RCF that maturesmaturing in March 2019 and is expandablefrom $250 million to $500$35 million subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions.(WGP RCF). At September 30, 2017,March 31, 2018, WGP had outstanding borrowings under its RCF of $28 million at an interest rate of 3.24%3.88%, classified as short-term debt on the Company’s Consolidated Balance Sheet, and had available borrowing capacity of $222$7 million.

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

Debt Maturities  At September 30, 2017, Anadarko’s remaining scheduled debt maturities during 2017 consistedMarch 31, 2018, Anadarko had outstanding borrowings of $9 million of senior amortizing notes associated with the TEUs. At September 30, 2017, Anadarko’s scheduled debt maturities during 2018 consisted of $17 million of senior amortizing notes associated with the TEUs, and $114 million of 7.05% Debentures due May 2018.2018, and $600 million of 8.70% Debentures due March 2019 classified as short-term debt on the Company’s Consolidated Balance Sheet. In addition, WES has a scheduled debt maturity during 2018 of $350 million of 2.60% Senior Notes due August 2018.
WES’s $350 million 2.60%2.600% Senior Notes due August 2018, werewhich was classified as long-term debt on the Company’s Consolidated Balance Sheet at September 30, 2017,March 31, 2018, as WES has the ability and intent to refinance these obligations using long-term debt.
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 ofCoupons, which, if put in whole, will be $930 million at the next put date in October 2018. Anadarko’s Zero Coupons were put toclassified as long-term debt on the Company’s Consolidated Balance Sheet at March 31, 2018, as the Company in October 2017. The Zero Coupons can nexthas the ability and intent to refinance these obligations using long-term debt, should the put be put to the Company in October 2018, in whole or in part, for the then-accreted value of $930 million. exercised.
For additional information on the Company’s debt instruments, see Note 8—10—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


Equity Transactions  WES can issueIn February 2018, the Company expanded the announced share-repurchase program to $3.0 billion and completed the repurchase of 8.5 million shares of its common units to the public under itsstock for $500 million continuous offering program,(average price of $58.82 per share) under an ASR Agreement. In March 2018, the Company entered into an additional ASR Agreement to repurchase the remaining $1.4 billion under the $3.0 Billion Share-Repurchase Program. The Company received an initial delivery of 19.1 million shares (average price of $58.16 per share) of its common stock, of which allows$1.1 billion was recorded in treasury stock with the remaining $332 million recorded in paid-in capital. The $3.0 Billion Share-Repurchase Program is expected to be completed in the second quarter of 2018. For additional information, see Note 14—Stockholders’ Equity in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
In July 2017, WES filed a registration statement with the SEC for the issuance of up to an aggregate of $500 million of WES common units.units pursuant to a continuous offering program that has not yet been initiated.

Derivative Instruments  For information on derivative instruments, including cash flow treatment, see Note 7—8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Common Stock Repurchase Program  In September 2017, the Company announced a $2.5 billion share-repurchase program under which shares of the Company’s common stock may be repurchased either in the open market or through private transactions. The program is authorized to extend through the end of 2018. In October 2017, the Company entered into an agreement to complete $1.0 billion of the share-repurchase program prior to the end of 2017. See Note 13—Stockholders’ Equity 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 $84$127 million during the ninethree months ended September 30, 2017, and $78 million during the nine months ended September 30, 2016.March 31, 2018. In response to the commodity-price environment,February 2018, the Company decreasedannounced an increase in the quarterly dividend from $0.27to $0.25 per share to $0.05 per share in February 2016.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 the following for the ninethree months ended September 30:March 31:
millions 2017 2016 2018 2017
WES distributions to unitholders (excluding Anadarko and WGP) (1)
 $235
 $192
 $92
 $68
WES distributions to Series A Preferred unitholders (2)
 22
 16
 —
 15
WGP distributions to unitholders (excluding Anadarko) (3)
 60
 41
 22
 19

(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 $0.905$0.935 per common unit for the thirdfirst quarter of 20172018 (to be paid in November 2017)May 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 havehad converted into WES common units; see Note 14—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 $0.53750$0.56875 per unit for the thirdfirst quarter of 20172018 (to be paid in November 2017)May 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.


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 7—8—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 had derivative instruments in place to reduce the price risk associated with future production of 853 MMBbls of oil and 170146 Bcf of natural gas at September 30, 2017,March 31, 2018, with a net derivative assetliability position of $9$255 million. Based on actual derivative contractual volumes, a 10% increase in underlying commodity prices would reduce the fair value of these derivatives by $34$338 million, while a 10% decrease in underlying commodity prices would increase the fair value of these derivatives by $36$307 million. However, any cash received or paid to settle these derivatives would be substantially offset by the sales value of production covered by the derivative instruments.

Derivative Instruments Held for Trading Purposes  At September 30, 2017, the Company had a net derivative asset position of $3 million on outstanding derivative instruments entered into for trading purposes. Based on actual derivative contractual volumes, a 10% increase or decrease in underlying commodity prices would not materially impact the Company’s gains or losses on these derivative instruments.

INTEREST-RATE RISK  Borrowings, if any, under each of the 364-Day Facility, the APC RCF, the WES RCF, and the WGP RCF are subject to variable interest rates. The balance of Anadarko’s short-term and long-term debt on the Company’s Consolidated Balance Sheets 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 LIBOR would not materially impact the Company’s interest cost, it would affect the fair value of outstanding fixed-rate debt.
At September 30, 2017,March 31, 2018, the Company had a net derivative liability position of $1.4$1.2 billion related to interest-rate swaps. A 10% increase (decrease) in the three-month LIBOR interest-rate curve would decrease (increase) the aggregate fair value of outstanding interest-rate swap agreements by $88$93 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—8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and 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 30, 2017.March 31, 2018.

Changes in Internal Control over Financial Reporting

There were no changes in Anadarko’s internal control over financial reporting during the thirdfirst quarter of 20172018 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
The Company is a defendant in a number of lawsuits and is involved in governmental proceedings and regulatory controls arising in the ordinary course of business, including personal injury and death claims; title disputes; tax disputes; royalty claims; contract claims; contamination claims relating to oil and gas exploration, development, production, transportation, and processing; and environmental claims, including claims involving assets owned by acquired companies and claims involving assets previously sold to third parties and no longer a part of the Company’s current operations. Anadarko is also subject to various environmental-remediation and reclamation obligations arising from federal, state, tribal, and local laws and regulations. While the ultimate outcome and impact on the Company cannot be predicted with certainty, after consideration of recorded expense and liability accruals, management believes that the resolution of pending proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
WGR Operating, LP, a wholly owned subsidiary of the Company, is currently in negotiations with the EPAU.S. Environmental Protection Agency (EPA) with respect to alleged noncompliance with the leak detection and repair requirements of the Clean Air Act at its Granger, Wyoming facilities. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matterthese matters will result in a fine or penalty in excess of $100,000.
Anadarko E&P Onshore LLC, a wholly owned subsidiary of the Company, is currently in negotiations with the Pennsylvania Department of Environmental Protection concerning enforcement over a produced water release in Pennsylvania in 2015. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matter will result in a fine or penalty in excess of $100,000.
Kerr-McGee Oil and Gas Onshore, LP, a wholly owned subsidiary of the Company, is currently in negotiations with the State of Colorado’s Department of Public Health and Environment with respect to alleged noncompliance with the Colorado Air Quality Control Commission’s Regulations. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matter will result in a fine or penalty in excess of $100,000.
Kerr-McGee Gathering, LLC, a wholly owned subsidiary of the Company, is currently in negotiations with the EPA and the Department of Justice with respect to alleged noncompliance with the leak detection and repair requirements of the Clean Air Act at its Fort Lupton complex. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matter will result in a fine or penalty in excess of $100,000.
TheDelaware Basin Midstream, LLC, a subsidiary of the Company, is currently in negotiations with the EPA with respect to alleged violations ofnoncompliance with certain Risk Management Plan regulations under the Resource Conservation and RecoveryClean Air Act at certain facilities in the Gulf of Mexico.its Ramsey Gas Plant. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matter will result in a fine or penalty in excess of $100,000.
The Company continues to work cooperatively with Colorado state regulators and others following a home explosion that occurred in Firestone, Colorado in April 2017. The Company also is cooperating with the NTSB at the federal level in its investigation related to the accident.
See Note 10—12—Contingencies intheNotestoConsolidatedFinancialStatementsunderPartI,Item1ofthisForm10-Q, which is incorporated herein by reference, for a discussion of material legal matters that have arisen sinceproceedings to which the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.Company is a party.

Item 1A.  Risk Factors
There have been no material changes from the risk factors included under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
The following sets forth information with respect to repurchases by the Company of its shares of common stock during the thirdfirst quarter of 2017:2018:
Period 
Total number of shares purchased (1)
 Average price paid per share Total number of shares purchased as part of publicly announced plans or programs 
Approximate dollar value of shares that may yet be purchased under the plans or programs (2)
July 1 - 31, 2017 4,369
 $44.80
 —
 $—
August 1 - 31, 2017 2,304
 $44.69
 —
 $—
September 1 - 30, 2017 1,158
 $40.92
 —
 $2,500,000,000
Total 7,831
 $44.20
 —
  
Period 
Total number of shares purchased (1)
 Average price paid per share 
Total number of shares purchased as part of publicly announced plans or programs (2)
 
Approximate dollar value of shares that may yet be purchased under the plans or programs (2)(3)
January 1 - 31, 2018 (2)
 6,982,477
 $58.82
 6,981,212
 $1,030,085,039
February 1 - 28, 2018 (2)
 1,521,555
 $58.82
 1,518,778
 $1,440,745,052
March 1 - 31, 2018 (3)
 19,362,473
 $58.16
 19,054,147
 $—
Total 27,866,505
 $58.36
 27,554,137
 

 ____________________________________________________________
(1) 
During the thirdfirst quarter of 2017,2018, (i) no27.6 million shares were purchased under the Company’s share-repurchase program$3.0 Billion Share-Repurchase Program and (ii) all312 thousand shares were purchased related to stock received by the Company for the payment of withholding taxes due on employee share issuances under share-based compensation plans. For additional information, see Note 14—Stockholders’ Equity in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10‑Q.
(2) 
On September 20, 2017, the Company announced a share-repurchase program to purchase up to $2.5 billion in shares of common stock. The program is authorized to extend through the end of 2018. In October 2017,In January 2018, the Company entered into thean ASR Agreement to complete $1.0repurchase $500 million of the Company’s common stock as part of the $3.0 Billion Share-Repurchase Program and received an initial delivery of 7.0 million shares. The transaction was completed in February 2018, at which time the Company received an additional 1.5 million shares to settle the agreement. The settlement price was determined by the volume-weighted average price of the shares during the term less a negotiated settlement price adjustment. In February 2018, the $3.0 Billion Share-Repurchase Program was expanded from its original announcement by the Company as a $2.5 billion share-repurchase program. For additional information, see Note 14—Stockholders’ Equity in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10‑Q.
(3)
In March 2018, the Company entered into an additional ASR Agreement to repurchase the remaining $1.4 billion of the share-repurchase program priorCompany’s common stock under the $3.0 Billion Share-Repurchase Program and received an initial delivery of 19.1 million shares, of which $1.1 billion was recorded in treasury stock with the remaining $332 million recorded in paid-in capital. The $3.0 Billion Share-Repurchase Program is expected to be completed in the endsecond quarter of 2017.2018. For additional information, see Note 14—Stockholders’ Equity in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10‑Q.

Item 6.  Exhibits

Exhibits designated by an asterisk (*) are filed herewith or double asterisk (**) are furnished herewith; all exhibits not so designated are incorporated herein by reference to a prior filing under File Number 1-8968 as indicated.
Exhibit Number Description
 3(i) 
Restated Certificate of Incorporation of Anadarko Petroleum Corporation, dated May 21, 2009, filed as Exhibit 3.3 to Form 8-K filed on May 22, 2009
  (ii) 
By-Laws of Anadarko Petroleum Corporation, amended and restated as of September 15, 2015,November 14, 2017, filed as Exhibit 3.1 to Form 8-K filed on September 21, 2015November 16, 2017
10(i)
Third Amendment and Maturity Extension Agreement, dated January 12, 2018, among Anadarko Petroleum Corporation, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto, filed as Exhibit 10.1 to Form 8-K filed on January 16, 2018
(ii)
Second Amendment to 364-Day Revolving Credit Agreement, dated January 12, 2018, among Anadarko Petroleum Corporation, JPMorgan Chase Bank, N.A., as Administrative Agent, and the additional lenders party thereto, filed as Exhibit 10.2 to Form 8-K filed on January 16, 2018
*(iii)
Terms and Conditions of Elective Deferred Share Awards for the Anadarko Petroleum Corporation 2008 Director Compensation Plan and the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, each as amended
*31(i) 
Rule 13a-14(a)/15d-14(a) Certification—Chief Executive Officer
*31(ii) 
Rule 13a-14(a)/15d-14(a) Certification—Chief Financial Officer
**32  
Section 1350 Certifications
*101.INS XBRL Instance Document
*101.SCH XBRL Schema Document
*101.CAL XBRL Calculation Linkbase Document
*101.DEF XBRL Definition Linkbase Document
*101.LAB XBRL Label Linkbase Document
*101.PRE XBRL Presentation Linkbase Document

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  ANADARKO PETROLEUM CORPORATION
                               (Registrant) 
   
October 31, 2017May 1, 2018By:/s/ ROBERT G. GWIN
  
Robert G. Gwin
Executive Vice President, Finance and Chief Financial Officer

5558