___________________________________________________________________________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended: September 30, 1997Ended March 31, 1998
Commission File Number:No. 1-8968

______________________

ANADARKO PETROLEUM CORPORATION
(Exact name of registrant as specified17001 Northchase Drive, Houston, Texas 77060-2141
(281) 875-1101

Incorporated in its charter)

Delaware 76-0146568
(State of incorporation) (I.R.S.the Employer Identification
No.)

17001 NORTHCHASE DRIVE, HOUSTON, TEXAS 77060-2141
(AddressState of executive offices)

(281) 875-1101
(Registrant's telephone number)Delaware No. 76-0146568

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 X No _____

The number of shares outstanding of each of the registrant's
classes of common stock as of October 31, 1997April 30, 1998 is shown below:

Number of Shares
Title of Class Outstanding

Common Stock, $0.10 par value 59,865,248

__________________________________________________________________________per share 60,015,081

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

Three Months Ended
Nine Months EndedMarch 31
thousands except September 30 September 30 per share amounts 1998 1997 1996 1997 1996
Revenues
Gas sales $ 94,773 $ 81,960 $284,971 $259,14593,520 $107,051
Oil and condensate sales 42,036 34,275 124,556 100,04131,398 42,595
Natural gas liquids and other 21,514 12,316 58,183 40,16021,470 20,860
Total 158,323 128,551 467,710 399,346146,388 170,506

Cost and Expenses
Operating expenses 39,319 27,454 105,630 81,90640,257 32,855
Administrative and general 19,486 18,132 53,673 52,83021,243 17,035
Depreciation, depletion and amortization 51,062 40,708 144,323 123,91451,337 45,339
Other taxes 10,720 9,212 34,333 29,627
Gains and impairments
related to international
properties, net --- (16,356) --- (16,356)10,829 12,913
Total 120,587 79,150 337,959 271,921123,666 108,142
Operating Income 37,736 49,401 129,751 127,42522,722 62,364
Other Income and (Expenses)
Other income 394 768 1,354 1,113613 839
Interest expense (11,452) (9,707) (28,657) (28,808)(12,358) (9,238)

Income before Income Taxes 26,678 40,462 102,448 99,73010,977 53,965

Income Taxes 9,586 15,513 37,148 36,6363,962 19,531

Net Income $ 17,0927,015 $ 24,949 $ 65,300 $ 63,09434,434

Per Common Share
Net income - basic $ 0.290.12 $ 0.420.58
Net income - diluted $ 1.090.12 $ 1.070.57
Dividends $ 0.075 $ 0.075
$ 0.225 $ 0.225

Average Number of Shares Outstanding 59,742 59,267 59,665 59,16159,917 59,612

After giving effect to the two-for-one stock split, effected in the form
of a 100 percent stock dividend, declared on April 30, 1998 (Note 9)

Per Common Share
Net income - basic $ 0.06 $ 0.29
Net income - diluted $ 0.06 $ 0.29
Average Number of Shares Outstanding 119,834 119,223

See accompanying notes to consolidated financial statements.
-2-2

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)

September 30,March 31, December 31,
thousands 1998 1997 1996
ASSETS
Current Assets
Cash and cash equivalents $ 13,8387,902 $ 14,6018,907
Accounts receivable 173,827 226,824156,397 177,157
Inventories, at average cost 33,573 24,54030,731 28,564
Prepaid expenses 4,940 3,8433,603 4,366
Total 226,178 269,808198,633 218,994

Properties and Equipment
Original cost 4,482,406 4,036,1654,929,098 4,669,251
Less accumulated depreciation, depletion
and amortization 1,857,715 1,738,7091,962,385 1,914,472
Net properties and equipment - based on
the full cost method of accounting
for oil and gas properties 2,624,691 2,297,4562,966,713 2,754,779

Deferred Charges 17,869 16,766

$2,868,738 $2,584,03024,485 18,692

$3,189,831 $2,992,465

See accompanying notes to consolidated financial statements.
-3-3

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET (continued)
(Unaudited)

September 30,March 31, December 31,
thousands 1998 1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
Trade and other $ 198,501249,951 $ 244,219202,822
Banks 19,355 17,99514,567 22,102
Accrued expenses
Interest 10,261 12,81213,541 13,607
Taxes and other 22,868 10,22720,686 13,799
Total 250,985 285,253298,745 252,330

Long-term Debt 890,571 731,0491,095,142 955,733

Deferred Credits
Deferred income taxes 527,866 498,973550,177 546,792
Other 122,847 54,675123,030 120,830
Total 650,713 553,648673,207 667,622

Stockholders' Equity Note 9
Common stock, par value $0.10
(200,000,000 shares authorized,
60,852,586121,882,064 and 60,525,69960,885,994 shares issued
as of September 30, 1997March 31, 1998 and December 31,
1996,1997, respectively) 6,130 6,09812,188 6,134
Preferred stock, par value $1.00
(2,000,000 shares authorized, no
shares issued as of September 30, 1997March 31, 1998
and December 31, 1996)1997) --- ---
Paid-in capital 362,942 335,848359,241 353,125
Retained earnings (as of September 30, 1997,
$426,469,000March 31, 1998,
$472,737,000 was not restricted as to
the payment of dividends) 791,262 739,395831,307 828,787
Deferred compensation (12,084) (3,444)(10,278) (11,203)
Executives and directors benefit trust,Directors Benefits Trust,
at market value (1,000,000(2,000,000 and 1,000,000
shares as of September 30, 1997March 31, 1998 and
December 31, 1996) (71,781) (63,813)1997, respectively) (69,719) (60,063)
Treasury stock (70(56 shares as of
DecemberMarch 31, 1996)1998) (2) ---
(4)
Total 1,076,469 1,014,080

$2,868,738 $2,584,0301,122,737 1,116,780

$3,189,831 $2,992,465

See accompanying notes to consolidated financial statements.
-4-4

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

NineThree Months Ended
September 30March 31
thousands 1998 1997 1996
Cash Flow from Operating Activities
Net income $ 65,3007,015 $ 63,09434,434
Adjustments to reconcile net income to net
cash fromprovided by operating activities:
Depreciation, depletion and amortization 144,319 123,91451,337 45,339
Amortization of restricted stock 1,424 1,331294 589
Deferred income taxes 29,014 25,384
Provision for impairment of
international properties --- 5,400
240,057 219,1233,935 9,734
62,581 90,096
Decrease in accounts receivable 52,997 19,24520,760 83,716
Increase in inventories (9,033) (5,587)
Decrease(2,167) (617)
Increase (decrease) in accounts payable -
trade and other and accrued expenses (35,628) (23,072)53,950 (75,996)
Other items - net (342) 5,082(2,800) (2,755)
Net cash provided by operating activities 248,051 214,791132,324 94,444

Cash Flow from Investing Activities
Additions to properties and equipment (496,402) (260,522)(268,131) (120,472)
Proceeds from the sale of assets to be
leased, net --- 87,900 ---
Sales and retirements of properties
and equipment 3,141 45,8114,860 2,635
Net cash used in investing activities (405,361) (214,711)(263,271) (29,937)

Cash Flow from Financing Activities
Additions to debt 159,522 100,000239,409 ---
Retirements of debt --- (73,008)
Increase(100,000) (31,049)
Decrease in accounts payable, banks 1,360 1,912(7,535) (6,688)
Dividends paid (13,433) (13,319)(4,495) (4,553)
Issuance of common stock 9,094 10,6602,565 4,548
Issuance (purchase) of treasury stock 739 677
Purchase of treasury stock (735) (677)(2) 4
Net cash provided by (used in) financing
activities 156,547 26,245129,942 (37,738)

Net Increase (Decrease) in Cash and Cash
Equivalents (763) 26,325(1,005) 26,769

Cash and Cash Equivalents at Beginning
of Period 8,907 14,601 17,090

Cash and Cash Equivalents at End of Period $13,838 $ 43,4157,902 $ 41,370

See accompanying notes to consolidated financial statements.
-5-5

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Summary1. Summary of Accounting Policies

General Anadarko Petroleum Corporation is engaged in the exploration,explora-
tion, development, production and marketing of natural gas, crude oil,
condensate and natural gas liquids (NGLs). The terms "Anadarko" and
"Company" refer to Anadarko Petroleum Corporation and its subsidiaries.
The principal subsidiaries of Anadarko are: Anadarko Gathering Company;Algeria Corpora-
tion (Anadarko Algeria), Anadarko Energy Services Company;Company and Anadarko
Algeria Corporation.

Net Income and Dividends Per Common Share The calculations of
net income and dividends per common shareGathering Company. Certain amounts have been computed based
on the average number of common shares of stock outstanding.

Use of Derivatives Anadarko uses derivative financial instrumentsrestated to reduce the Company's exposure to changes in the market price of
natural gas and crude oil, to fix the price for natural gas and crude
oil independently of the physical purchase or sale, and to manage
interest rates. Commodity financial instruments also provide methods
to meet customer pricing requirements while achieving a price
structure consistent with the Company's overall pricing strategy.
The types of commodity derivative financial instruments currently
used by Anadarko are futures, options and swaps.

Anadarko utilizes the hedge or deferral method of accounting for
commodity derivative financial instruments (with the exception of
certain written options) whereby gains and losses on these hedging
instruments are realized and recorded as revenues on the income
statement when the related natural gas or oil production has been
produced, purchased or delivered. As a result, gains and losses on
commodity financial instruments are generally offset by similar
changes in the realized prices of natural gas and crude oil.
Unrealized gains and losses on these hedging instruments are deferred
and recorded as assets or liabilities on the balance sheet at fair
market value as of the balance sheet date. To qualify as hedging
instruments, these instruments must be highly correlated to
anticipated future sales such that the Company's exposureconform to
the risks of commodity price changes is reduced. While commodity
financial instruments are intended to reduce the Company's exposure
to declines in the market price of natural gas and crude oil, the
commodity financial instruments may also limit Anadarko's gain from
increases in the market price of natural gas and crude oil.

Written options that are not combined with other offsetting instru-
ments are not classified as hedges. Unrealized losses on these
written options, offset by any option premiums received for these
written options, are charged to the income statement as a reduction
to revenues on a current basis.

-6-

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

1.Summary of Accounting Policies (continued)

Use of Derivatives (continued)

Gains and losses related to the Company's interest rate swap agreement
are included in interest expense on a current basis. The swap agree-
ment effectively converts a portion of the Company's fixed interest
rate debt to variable interest rate debt.

2.Inventoriespresentation. See Note 9.

2. Inventories Inventories are stated at the lower of average cost
or market. NGLs and naturalNatural gas, when sold from inventory, areis charged to
expense using the average-cost method. The major classes of
inventories are as follows:

September 30,March 31, December 31,
thousands 1998 1997 1996
Materials and supplies $33,461 $23,495
Natural gas liquids, stored in inventory --- 28$27,173 $27,332
Natural gas, stored in inventory 112 1,017
$33,573 $24,540

3.Properties3,558 1,232
$30,731 $28,564

3. Properties and Equipment Oil and gas properties include costs of
$304,212,000$379,546,000 and $254,811,000$343,789,000 at September 30, 1997March 31, 1998 and December 31, 1996,1997,
respectively, which were excluded from capitalized costs being
amortized. These amounts represent costs associated with unevaluated
properties and major development projects.

4.Long-term4. Long-term Debt A summary of long-term debt follows:

September 30,March 31, December 31,
thousands 1998 1997 1996
Commercial Paper $162,271 $ 31,049213,642 $125,733
Notes Payable, Banks 28,300 ---81,500 30,000
8 3/4% Notes due 1998 100,000--- 100,000
8 1/4% Notes due 2001 100,000 100,000
6 3/4% Notes due 2003 100,000 100,000
5 7/8% Notes due 2003 100,000 100,000
7 1/4% Debentures due 2025 100,000 100,000
7% Debentures due 2027 100,000 100,000
6.625% Debentures due 2028 100,000 ---
7.73% Debentures due 2096 100,000 100,000
7 1/4% Debentures due 2096 100,000 100,000
$890,571 $731,049$1,095,142 $955,733

The commercial paper, notes payable to banks and 8 3/4% Notes due 1998
have been classified as long-term debt in accordance with Statement of
Financial Accounting Standards No. 6, "Classification of Short-term
Obligations Expected to be Refinanced",Refinanced," under the terms of Anadarko's
Bank Credit Agreements.
-7-6

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

4. Long-term Debt (continued)

In June 1997, the Company's Revolving Credit Agreement and 364-Day
Credit AgreementJanuary 1998, Anadarko issued $100,000,000 principal amount of
6.625% Debentures due 2028. The proceeds were amended. The Agreements were amended as
follows: the principal amounts of the Agreements were reduced from
$250,000,000 and $150,000,000, respectively,used to $225,000,000 and
$125,000,000, respectively; the number of commercial banksfund capital
spending projects in the
group was changed from eleven to eight; and, the expiration dates of
the Agreements were extended for one year. During 1996 and the first
nine months of 1997, there were no outstanding borrowings under these
Agreements.core operating areas.

In July 1997,March 1998, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$300,000,000$500,000,000 in senior and subordinated debt securities and equity securities. This registration
statement includes $100,000,000 in debt and equity securities
registered and remaining unissued under the Company's previous shelf
registration statement. Net proceeds, terms and pricing of offerings
of securities issued under the shelf registration statement will be
determined at the time of the offering. Anadarko has used similar
shelf registration statements since 1989 to provide added flexibility
in financing strategies. There have been no securities issued under
this shelf registration.offerings. See Note 9.

5. Compressor Sale-Leaseback Agreement In January 1997, the
Company entered into a sale-leaseback agreement for $87,900,000 (net)
involving 145 natural gas compressors in Anadarko's major mid-
continent gathering systems. Proceeds from the transaction were used
for general corporate purposes. The gain of $66,200,000 is deferred
and will be amortized over the lease term as a reduction to operating
expenses.

6. Common Stock For the thirdfirst quarter of 1997,1998, dividends of seven
and one-half cents per share were paid to holders of common stock.
Under the most restrictive provisions of the Company's credit
agreements, which limit the payment of dividends, retained earnings of
$426,469,000$472,737,000 and $364,080,000$466,780,000 were not restricted as to the payment of
dividends at September 30, 1997March 31, 1998 and December 31, 1996,1997, respectively.

7. StatementThe Company's basic earnings per share amounts have been computed based
on the average number of Cash Flows Supplemental Informationcommon shares outstanding. Diluted earnings
per share amounts include the effect of the Company's outstanding stock
options under the treasury stock method.

The amountsfollowing table illustrates the reconciliation of cash paidthe numerators
and denominators of the basic and diluted earnings per common share
computations for interest (net of amounts capitalized)income related to the unexercised stock options
outstanding at March 31, 1998 and income taxes are as follows:
Nine1997. See Note 9.

Three Months Ended September 30Three Months Ended
March 31, 1998 March 31, 1997
thousands 1997 1996
Interest $28,903 $29,898except Per Share Per Share
per share amounts Income taxes $10,930 $ 8,436

-8-Shares Amount Income Shares Amount
Basic earnings per
share
Income available to
common stockholders $7,015 59,917 $0.12 $34,434 59,612 $0.58
Stock options -- 325 -- 436

Diluted earnings per
share
Income available to
common stockholders
and assumed
conversion $7,015 60,242 $0.12 $34,434 60,048 $0.57

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

8.6. Statement of Cash Flows Supplemental Information The amounts
of cash paid (received) for interest (net of amounts capitalized) and
income taxes are as follows:

Three Months Ended
March 31
thousands 1998 1997
Interest $13,798 $11,046
Income taxes $(6,660) $ (43)

7. Operating Expenses Operating expenses by category are as follows:

Three Months Ended
Nine Months Ended
September 30 September 30March 31
thousands 1998 1997 1996 1997 1996
Oil and gas $21,011 $15,870 $ 59,427 $48,157$20,939 $18,018
Plant, gathering and marketing 14,342 8,080 33,937 23,667
Gas purchases 2,922 2,551 10,107 8,612
Other 1,044 953 2,159 1,470
$39,319 $27,454 $105,630 $81,906

9.19,318 14,837
$40,257 $32,855

8. Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978 (NGPA)
allowsallowed a "severance, production or similar" tax to be included as an
add-on, over and above the maximum lawful price for natural gas. Based
on the Federal Energy Regulatory Commission (FERC) ruling that the
Kansas ad valorem tax was such a tax, the Company collected the Kansas
ad valorem tax in addition to the otherwise maximum lawful price.

Background of Present Litigation FERC's ruling regarding the
ability of producers to collect the Kansas ad valorem tax in addition
to applicable maximum lawful prices was appealed to the United States
Court of Appeals for the District of Columbia Circuit (D.C. Circuit),
which held in June 1988 that FERC failed to provide a reasoned basis
for its findings and remanded the case to FERC for further
consideration.

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

8. Kansas Ad Valorem Tax (continued)

Numerous parties filed appeals of FERC's action in the D.C. Circuit.
Anadarko, together with other natural gas producers, challenged the
FERC's orders on two grounds: (1) that the Kansas ad valorem tax,
properly understood, doesdid qualify for reimbursement under the NGPA;
and, (2) FERC's ruling should, in any event, have been applied
prospectively. Other parties separately challenged FERC's orders on
the grounds that FERC's ruling should have been applied retroactively
to December 1, 1978, the date of the enact-
mentenactment of the NGPA and
producers should have been required to pay refunds accordingly.

-9-

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

9. Kansas Ad Valorem Tax (continued)

The D.C. Circuit issued its decision on August 2, 1996 which holds that
producers must make refunds of all Kansas ad valorem taxes collected
with respect to production since October 1983. Petitions for rehearing
were denied November 6, 1996. The Company, along with other gas producing
companies, subsequently filed a petition for writ of certiorari with
the United States Supreme Court seeking to limit the scope of the
potential refunds to tax bills rendered on or after June 28, 1988 (the
effective date originally selected by FERC). Williams Natural Gas
Company filed a cross-petition for certiorari seeking to impose refund
liability back to December 1, 1978. Both petitions were denied on
May 12, 1997.

Anadarko estimates that the maximum amount of principal and interest
at issue which has not been paid to date and assuming that the October
1983 effective date remains in effect, is about $39,000,000$40,100,000 (pre-tax)
as of September 30, 1997.March 31, 1998.

FERC Proceedings The Company, along with other gas producing companies,
filed a petition for adjustment with FERC on May 12, 1997. In so
doing, the Company is seekingsought waiver of all interest which might otherwise
be due. The total interest at issue is approximately
$25,000,000about $25,500,000 (pre-tax). as
of March 31, 1998. On September 10, 1997, FERC denied the petition for
adjustment and established procedures for the payment of refunds.
Under FERC's order, interstate and intrastate pipelines are required
to serve onadjustment. On January 28, 1998, FERC denied rehearing, but granted
first sellers statements of refunds due. This statement is
duethe right to escrow funds in dispute by a separate order
(the "Order Clarifying Procedures"). By order dated February 26, 1998,
in response to producers' requests and Anadarko's particular request
based on or before November 10, 1997. Refunds are due to be paid bythe litigation with PanEnergy referenced below, FERC granted
first sellers within 180 daysthe right to secure a surety bond instead of the dateplacing cash
in escrow. Requests for rehearing of the FERCthis order or by
Marchare pending before
FERC.

9 1998.

The Company, along with other gas producers and the State of Kansas,
have sought rehearing, clarification and a stay of the FERC's
September 10 Order. On November 10, 1997, FERC issued an order
allowing for more time to consider the rehearing requests, but denied
the stay request at this time. If FERC denies rehearing, appeals of
the FERC's decision may be filed. The filing of any such appeal will
not, in and of itself, result in a stay of FERC's order.

FERC's September 10 Order permits affected first sellers to file
individual petitions for adjustment. Depending on the nature of the
claims submitted by pipeline purchasers on November 10, 1997, the
Company may pursue an individual petition for adjustment, and may seek
deferral of the refund obligation on other specific grounds. The
Company reserves all rights to contest any specific Statement of
Refunds due submitted by any pipeline purchaser.

-10-

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

9.8. Kansas Ad Valorem Tax (continued)

The Company and other producers filed petitions for review of FERC's
January 28, 1998 order denying adjustment relief with the United States
Court of Appeals for the Fifth Circuit (Fifth Circuit). The State of
Kansas and the Kansas Corporation Commission (KCC), as well as another
producer of natural gas, filed appeals of the same orders in the United
States Court of Appeals for the Tenth Circuit.

The Public Service Company of Colorado and an affiliate filed a motion
in the Fifth Circuit to dismiss the pending appeals or to transfer them
to the D.C. Circuit. On April 27, 1998, the Fifth Circuit denied the
motion to dismiss but granted the motion to transfer the appeals to the
D.C. Circuit.

Several parties, including Anadarko, sought rehearing or clarification
of the Order Clarifying Procedures issued by FERC on January 28, 1998.
In that rehearing request, the Company outlined in detail its
interpretation of the scope of the phrase "amounts in dispute" as
encompassing legal disputes. At least one adverse party has requested
that FERC change its order to permit only so-called "computational"
disputes, rather than legal disputes, to be eligible for escrow.

On March 4, 1998, FERC granted rehearing of its Order Clarifying
Procedures solely for purposes of further consideration. No substantive
guidance was offered to the parties in the March 4, 1998 order.

If FERC should change or clarify its policy regarding the availability
or scope of a first sellers' right to bond or escrow disputed amounts,
either on its own motion or in response to pending requests from
adverse parties, or if FERC should reject the Company's legal defenses,
the Company could be required to pay all or part of the amounts claimed
by all pipelines (which might include PanEnergy) pending further
potential review by FERC or the courts. However, a FERC order issued
February 26, 1998 involving refunds paid by another producer to
Northern Natural Gas Company indicates that, if a producer prevails in
subsequent legal challenges, the producer may recoup amounts paid
directly from the pipeline itself, even if the pipeline already
distributed refunds to the pipeline's customers. Requests for
rehearing of this order are pending.

The Company intends to comply fully with all lawful orders issued by
FERC, without waiver of any claim of right or any defense or the right
to seek judicial review or intercession.

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

8. Kansas Ad Valorem Tax (continued)

FERC's September 10, 1997 and January 28, 1998 orders permit affected
first sellers to file individual petitions for adjustment. The Company
may pursue an individual petition for adjustment and has reserved all
rights to contest specific Statements of Refunds submitted by pipeline
purchasers. Offers of settlement and demands for a hearing have been
filed by producers, including Anadarko. The offer of settlement filed
by Anadarko with respect to PanEnergy is subject to the litigation
discussed below such that if a settlement amount is agreed to, the
litigation will determine whether PanEnergy or Anadarko issues the
agreed refund amount. On March 3, 1998, FERC issued notices regarding
those settlement offers and requested comment by all interested
persons.

On March 9, 1998 and March 10, 1998, the Company filed several
compliance filings with FERC paying undisputed amounts billed by
pipelines and bonding amounts in dispute. The entire refund claim by
Panhandle Eastern Pipe Line Company, a PanEnergy affiliate, was
disputed, and the Company posted a surety bond for the amount in
controversy.

PanEnergy Litigation On May 13, 1997, the Company also filed a lawsuit
in the Federal District Court for the Southern District of Texas
against PanEnergy seeking a declaration that pursuant to prior agreements
Anadarko is not required to issue refunds to PanEnergy for the
principal amount of $14,000,000 (pre-tax) and, if the petition for
adjustment discussed
above is not granteddenied in its entirety by FERC with respect to PanEnergy
refunds, interest in an amount up to $23,000,000of $24,600,000 (pre-tax) as of September 30, 1997.March 31,
1998. The Company also seeks from PanEnergy the return of $816,000 of
the $830,000 (pre-tax) charged against income in 1993 and 1994. NetIn
response to a motion filed by PanEnergy, the United States District
Court issued an order on March 19, 1998 staying the litigation, pending
the exercise by FERC of its regulatory jurisdiction. On May 4, 1998,
the Company filed a complaint against PanEnergy at FERC, requesting
that FERC either refer the proceeding back to the federal court or
resolve the matters in dispute.

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

8. Kansas Ad Valorem Tax (continued)

KCC Proceeding On April 30, 1998, the Company's subsidiary,
Anadarko Gathering Company (AGC) filed a petition with the KCC to
clarify AGC's rights and obligations, if any, related to the payment by
first sellers, including the Company, of Kansas ad valorem tax refunds.
The refunds at issue relate to sales made by Centana Energy Corporation,
a PanEnergy affiliate, through facilities known as the Cimmaron River
System during the time period from 1983 to 1988. AGC purchased the
Cimmaron River System from Centana in 1995. The petition, among other
things, asks the KCC to determine whether AGC or Centana is responsible
for the payment or distribution of refunds received from first sellers to
Centana's former customers and requests guidance concerning the
disposition of refunds received that are attributable to sales made to
Centana customers that did not reimburse Centana for Kansas ad valorem
taxes during the relevant time periods.

Anadarko's net income for the third quarter of 1997 included a $1,700,000$1,800,000 charge (before
income taxes) related to the Kansas ad valorem tax refunds. This charge
reflects all principal and interest which may be due at the conclusion
of all regulatory proceedings and litigation to parties other than
PanEnergy. The Company is unable at this time to predict the final
outcome of this matter and no provision for liability (excluding the
amounts recorded in 1993, 1994 and the third quarter of
1997) has been made in the
accompanying financial statements.

9. Subsequent Events

On April 30, 1998, the Board of Directors approved a two-for-one stock
split, to be effected in the form of a 100 percent stock dividend. The
distribution date is July 1, 1998 to stockholders of record on June 15,
1998. In connection with the stock dividend, $6,049,000 was transferred
to common stock from paid-in capital in the March 31, 1998 balance sheet.

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

9. Subsequent Events (continued)

The following table illustrates the reconciliation of the numerators
and denominators of the restated basic and diluted earnings per common
share computations for income related to the unexercised stock options
outstanding at March 31, 1998 and 1997.

Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
thousands except Per Share Per Share
per share amounts Income Shares Amount Income Shares Amount
Basic earnings per
share
Income available to
common stockholders $7,015 119,834 $0.06 $34,434 119,223 $0.29
Stock options -- 651 -- 873

Diluted earnings per
share
Income available to
common stockholders
and assumed
conversion $7,015 120,485 $0.06 $34,434 120,096 $0.29

In addition, the Board of Directors approved an increase in its
quarterly dividend to $0.10 per share (up from seven and one-half cents
per share). The dividend is payable on June 24, 1998 to stockholders
of record on June 10, 1998. Following the stock split, the Company
expects to pay quarterly dividends in the amount of $0.05 per share of
Common Stock. Anadarko has paid common stock dividends every quarter
since 1986. The amount of future dividend payments will depend on the
Company's earnings, financial condition, capital requirements and other
factors and will be determined by the Board on a quarterly basis.

On May 7, 1998, Anadarko issued $200,000,000 of 5.46% Series B
Cumulative Preferred Stock in the form of two million depositary
shares, each depositary share representing 1/10th of a share of the
5.46% Series B Cumulative Preferred Stock. The Preferred Stock has no
stated maturity and is not subject to a sinking fund or mandatory
redemption. The shares are not convertible into other securities of the
Company.

Anadarko has the option to redeem the shares at $100 per depositary
share on or after May 15, 2008. Holders of the shares will be entitled
to receive, when, and as declared by the Board of Directors, cumulative
cash dividends at an annual dividend rate of $5.46 per depositary
share. The proceeds from the offering will be used to reduce
commercial paper and bank borrowings and provide capital for Anadarko's
1998 work program. The Preferred Stock was issued under the Company's
shelf registration statement.
13

Item 1. Financial Statements (continued)

ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

10. The information, as furnished, reflects all normal recurring
adjustments that are, in the opinion of management, necessary to a fair
statement of financial position as of September 30, 1997March 31, 1998 and December 31,
1996,1997, the results of operations for the three and nine
months ended September 30,March 31,
1998 and 1997 and 1996, and cash flows for the ninethree months ended September 30, 1997March 31, 1998
and 1996.

-11-1997.

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

The Company has included a number ofmade in this report, forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 in Item 2 of this Form 10-Q.concerning the Company's
operations, economic performance and financial condition. These forward
looking statements including anyinclude information concerning future production and
reserve
disclosuresreserves, contributions from Algerian properties, and those statements
preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends", "estimates",
"projects", "target", "goal", "plans", "objective", "should" 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 therein,in the Private Securities Litigation Reform Act of
1995. Such statements are based on the best data available at
the time this report was released for printing; however,subject to various risks and uncertainties,
and actual results could differ materially from those expressed or
implied by such state-
mentsstatements due to a number of factors including: commodity pricingin addition to
those discussed elsewhere in this Form 10-Q and demand, explorationin the Company's other
public filings, press releases and operating risks, development risks, domestic
governmental risks, foreign operations risk and competition.discussions with Company management.
See Additional Factors Affecting Business in the Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's 19961997 Annual Report on Form 10-K.

Overview of Operating Results

For the thirdfirst quarter of 1997,1998, Anadarko's net income was $17.1$7.0 million
(29(12 cents per share) on revenues of $158.3 million. By comparison, net
income for the third quarter of 1996 was $24.9 million (42 cents per
share) on revenues of $128.6 million.

Net income for the third quarter 1996 includes a gain on the sale of
the Company's Indonesia interests of $21.8 million ($13.8 million after
taxes). This gain was partially offset by provisions for impairment of
other international properties of $5.4 million ($3.4 million after
taxes). Stated without the effect of the gain and impairments of
international properties, net income for the third quarter of 1996
would have been $14.6 million (25 cents per share).

Excluding the effect of the unusual items, the higher revenues and net
income in the third quarter of 1997 are primarily due to higher
production volumes of oil and gas and higher natural gas prices. The
increase in revenues is partially offset by higher operating costs and
depreciation, depletion and amortization (DD&A) expenses compared to
the same period in 1996.

For the first nine months of 1997, Anadarko's net income was $65.3
million ($1.09 per share) on revenues of $467.7$146.4 million. By comparison, net
income for the first nine monthsquarter of 19961997 was $63.1$34.4 million ($1.07(58 cents per
share) on revenues of $399.3 million; and, stated
without the effect of the gain and impairments of international
properties,$170.5 million. The decrease in net income would have been $52.7 million (89 cents per
share). Excluding the unusual items, the increases in revenues and net
income in 1997 areis
primarily due to higher natural gassignificantly lower commodity prices and higher
production volumes of oil and gas. The increase in revenues is1998,
partially offset by higher operatingproduction volumes. Net income for 1998
also reflects higher costs and DD&A expenses compared
to the same period in 1996.

-12-

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)as well as increased interest
expense.

The following table shows the Company's volumes and U.S. prices for the
three and nine months ended September 30, 1997March 31, 1998 and 1996:1997:

Three Months Ended
September 30March 31 % Increase
1998 1997 1996 (Decrease)
Natural gas, Bcf 45.4 39.8 1444.0 42.3 4
Average daily volumes, MMcf/d 494 433 14489 470 4
Price per Mcf $ 2.02 $ 1.95 42.66 (24)

Crude oil and condensate, MBbls 2,392 1,611 482,251 2,002 12
Average daily volumes, MBOD 26 17 5325 22 14
Price per barrel $17.06 $20.67 (17)$13.02 $20.58 (37)

Natural gas liquids, MBbls 1,430 710 1011,704 1,231 38
Average daily volumes, MBOD 16 7 12919 14 36
Price per barrel $14.65 $15.32 (4)

Nine Months Ended
September 30 % Increase
1997 1996 (Decrease)

Natural gas, Bcf 131.5 123.9 6
Average daily volumes, MMcf/d 482 453 6
Price per Mcf $ 2.17 $ 1.98 10

Crude oil and condensate, MBbls 6,643 4,983 33
Average daily volumes, MBOD 24 18 33
Price per barrel $18.26 $19.35 (6)

Natural gas liquids, MBbls 3,693 2,478 49
Average daily volumes, MBOD 14 9 56
Price per barrel $14.65 $14.53 1

__________________$11.68 $15.65 (25)

See "Natural Gas Volumes and Prices" and "Crude Oil, Condensate
and Natural Gas Liquids Volumes and Prices".

Costs and expenses during the third quarter of 1997 were $120.6
million, an increase of 26 percent compared to $95.5 million for the
third quarter of 1996 excluding the effect of the unusual items. The
increase is primarily due to higher operating expenses and DD&A
expense related to the increase in production volumes during the third
quarter of 1997.

-13-15

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

ForCosts and expenses during the first nine monthsquarter of 1997, costs and expenses totaled $338.01998 were $123.7
million, an increase of 17 percent$15.6 million (14 percent) compared to $288.3$108.1
million for the first nine monthsquarter of 1996 excluding the effect of the unusual
items.1997. The increase iswas primarily due
to higher operating expenses and DD&A expensedepreciation, depletion and amortization
expenses related to increased volumes and higher administrative and
general expenses due to costs associated with the increase in production volumes during 1997.Company's growing
workforce.

Interest expense for the thirdfirst quarter of 1997 increased 181998 was $12.4 million, an
increase of 34 percent
to $11.5 million compared to $9.7$9.2 million for the thirdfirst quarter
of 1996.1997. The increase is due primarily to higher levels of borrowings in
1997. For the first nine months of 1997, interest expense was $28.7
million, a decrease of one percent compared to $28.8 million for the
same period of 1996. The decrease is primarily due to higher average borrowings
partially offset by lower interest rates in 1998 and an increase in
capitalized interest in 1997 partially offset by an increase related to
higher levelsthe first quarter of borrowings in 1997.1998.

Natural Gas Volumes and Prices DuringThe Company's average U.S. wellhead
gas price in the thirdfirst quarter of 1997,
Anadarko's1998 was $2.02 per thousand cubic
feet (Mcf), down 24 percent from $2.66 per Mcf in the first quarter of
1997. Lower U.S. natural gas prices were partly offset by a four
percent increase in gas production increased 14 percent to 45.4volumes in the first quarter of
1998. Anadarko produced 44.0 billion cubic feet (Bcf) of gas or 494489
million cubic feet per day (MMcf/d) of gas in the first quarter of 1998
compared to 39.842.3 Bcf of gas or 433470 MMcf/d in the third quarter of 1996. The
increase in production volumes is due to increased activity in all of
the Company's core operating areas in 1997. The Company's average
wellhead gas price increased four percent to $2.02 per thousand cubic
feet (Mcf) in the third quarter of 1997 compared to $1.95 per Mcf in the same period of
1996.

Anadarko's natural gas production in the first nine months of 1997
increased six percent to 131.5 Bcf or 482 MMcf/d. This compares to
natural gas production of 123.9 Bcf or 453 MMcf/d in the first nine
months of 1996. The Company's average wellhead gas price for the first
nine months of 1997 increased 10 percent to $2.17 per Mcf compared to
$1.98 per Mcf in the same period of 1996.1997.

Crude Oil, Condensate and Natural Gas Liquids Volumes and Prices
CrudeDuring the first quarter of 1998, the Company's average U.S. price for
crude oil and condensate volumes increaseddropped nearly 5040 percent to 2.4
million barrels (MMBbls) or 26 thousand barrels of oil per day (MBOD)
compared to 1.6 MMBbls or 17 MBOD in the third quarter of 1996. The
increase in oil volumes is due to increased activity in all of the
Company's core operating areas, including the Mahogany Field in the
Gulf of Mexico. Anadarko's average U.S. oil price in the third
quarter of 1997 was $17.06$13.02 per barrel a decrease of 17 percent
compared to $20.67from $20.58
per barrel in the same periodfirst quarter of 1996.1997. The Company's crude oil and
condensate volumes during the first quarter of 1998 were up 12 percent
to 2.3 million barrels (MMBbls) or 25 thousand barrels (MBbls) per day.
This compares to first quarter 1997 volumes of 2.0 MMBbls or 22 MBbls
per day. The increase in oil and condensate volumes is primarily due to
increased production from the Mahogany (Ship Shoal 349/359) platform in
the Gulf of Mexico and the Permian Basin in west Texas.

Natural gas liquids (NGLs) sales volumes increased
33 percent in the first nine monthsquarter of 19971998
increased nearly 40 percent to 6.61.7 MMBbls or 24 MBOD19 MBbls per day compared
to 5.01.2 MMBbls or 18 MBOD14 MBbls per day in 1997. Prices for NGLs in the
same periodfirst quarter of 1996. Oil1998 decreased 25 percent to an average of $11.68 per
barrel. NGLs prices in the first nine monthsquarter of 1997 decreased six percent to
$18.26averaged $15.65 per
barrel compared to $19.35 per barrel in the first nine
months of 1996.

-14-barrel.

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

Anadarko'sUse of Derivatives Anadarko produces, purchases and sells natural
gas, liquids (NGLs) sales volumescrude oil, and NGLs. As a result, Anadarko's financial results
can be significantly affected by changes in the third
quarter of 1997 more than doubled to 1.4 MMBbls or 16 MBOD compared to
710 thousand barrels (MBbls) or 7 MBOD in the third quarter of 1996.
During the third quarter of 1997, prices for NGLs declined four
percent to $14.65 per barrel compared to $15.32 per barrel in the same
period of 1996.

NGLs volumes in the first nine months of 1997 increased about 50 per-
cent to 3.7 MMBbls or 14 MBOD compared to 2.5 MMBbls or 9 MBOD in the
same period of 1996. The Company's NGLs price averaged $14.65 per
barrel in the first nine months of 1997 compared to $14.53 per barrel
in the same period of 1996.

Use of Derivativesthese commodity prices.
Anadarko uses derivative financial instruments to hedge the Company's
exposure to changes in the market price of natural gas and crude oil,
to provide methods to fix the price for natural gas independently of
the physical purchase or sale and to manage interest rates. Commodity
financial instruments also provide methods to meet customer pricing
requirements while achieving a price structure consistent with the
Company's overall pricing strategy. While commodity financial
instruments are intended to reduce the Company's exposure to declines
in the market price of natural gas and crude oil, the commodity
financial instruments may also limit Anadarko's gain from increases in
the market price of natural gas and crude oil. As a result, gains and
losses on commodity financial instruments are generally offset by
similar changes in the realized price of natural gas and crude oil.
Gains and losses generally are recognized in revenues for the periods to which
the commodity financial instruments relate. Anadarko's commodity
financial instruments currently are comprised of futures, swaps and
options. See Note 1options contracts.

While the volume of derivative commodity instruments utilized by the
Company to hedge its market price risk can vary during the year within
the boundaries of its established policy guidelines, the fair value of
those instruments at March 31, 1998 and December 31, 1997 was, in the
judgment of the Notes to ConsolidatedCompany, immaterial. Additionally, through the use of
sensitivity analysis, the Company evaluates the potential effect that
reasonably possible near term changes in the market prices of natural
gas and crude oil may have on the fair value of the Company's
derivative commodity instruments. Based upon an analysis utilizing
the actual derivative contractual volumes and assuming a ten percent
adverse movement in commodity prices, the potential decrease in the
fair value of the derivative commodity instruments at March 31, 1998
and December 31, 1997 does not have a material adverse effect on the
financial position or results of operations of the Company.

The Company also evaluated the potential effect that reasonably
possible near term changes in interest rates may have on the fair
value of the Company's interest rate swap agreement. Based upon an
analysis, utilizing the actual interest rates in effect as of March
1998 and December 1997, and assuming a ten percent increase in
interest rates, the potential decrease in the fair value of the
derivative interest swap instrument at March 31, 1998 and December 31,
1997 does not have a material effect on the financial position or
results of operations of the Company.

Item 2. Management's Discussion and Analysis of Financial Statements under Item 1Condition
and Results of this Form 10-Q.Operations (continued)

Capital Expenditures, Liquidity and Dividends

During the first nine monthsquarter of 1997,1998, Anadarko's capital spending
(including capitalized interest and overhead) was $496.4$268.1 million
compared to $260.5$120.5 million in the same periodfirst quarter of 1996. The increase
is due to increased exploration and development activity in Algeria
and the U.S. Capital expenditures in both periods related primarily
to the Company's oil and gas exploration and development activities.

The Company has increased its anticipated capital expenditures for
1997 from $560 million to about $700 million, a 25 percent increase.
The Company's revised spending estimate includes increased investments
in exploration and development activities.1997.

The Company believes cash flows, including proceeds from divestitures,
issuances of additional debt or securities, and existing credit
facilities will be sufficient to meet capital and operating
requirements, including any contingencies, during 1997.

-15-

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)1998.

In January 1997, the Company entered into a sale-leaseback agreement
for $87.91998, Anadarko issued $100 million (net) involving 145 natural gas compressors in
Anadarko's major mid-continent gathering systems. Proceeds from the
transactionprincipal amount of
6.625% Debentures due 2028. The proceeds were used for general corporate purposes.to fund capital
spending projects in core operating areas.

In June 1997, the Company's Revolving Credit Agreement and 364-Day
Credit Agreement were amended. The Agreements were amended as
follows: the principal amounts of the Agreements were reduced from
$250,000,000 and $150,000,000, respectively, to $225,000,000 and
$125,000,000, respectively; the number of commercial banks in the
group was changed from eleven to eight; and, the expiration dates
of the Agreements were extended for one year. During 1996 and the
first nine months of 1997, there were no outstanding borrowings under
these Agreements.

In July 1997,March 1998, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$300,000,000$500 million in senior and subordinated debt securities and equity securities. This registration
statement includes $100 million in debt and equity securities
registered and remaining unissued under the Company's previous shelf
registration statement. Net proceeds, terms and pricing of offerings
of securities issued under the shelf registration statement will be
determined at the time of the offering. Anadarko has used similar
shelf registration statements since 1989offerings.

In April 1998, the Company's Revolving Credit and 364-Day Credit
Agreements were amended. The Revolving Credit Agreement was amended to
provide added flexibilityincrease the number of commercial banks in financing strategies. There have been no securities issued under
this shelf registration.

Anadarko'sthe group from eight to
nine. The 364-Day Credit Agreement was amended as follows: the
principal amount of the Agreement was increased from $125 million to
$175 million; the number of commercial banks in the group was changed
from eight to nine; and the expiration date of the Agreement was
extended for 10 months.

On April 30, 1998, the Board of Directors declaredapproved a two-for-one stock
split. The stock split will be effected by way of a 100 percent stock
dividend. The distribution date is July 1, 1998 to stockholders of
record on June 15, 1998.

In addition, the Board of Directors approved an increase in its
quarterly dividend ofto $0.10 per share (up from seven and one-half cents
per share of common stock outstanding.share). The dividend is payable on DecemberJune 24, 19971998 to stockholders
of record on DecemberJune 10, 1997. Under1998. Following the most restrictive provisionsstock split, the Company
expects to pay quarterly dividends in the amount of the
Company's credit agreements, which limit the payment$0.05 per share of
Common Stock. Anadarko has paid common stock dividends retained earnings of $426,469,000 were not restricted as to the
payment of dividends at September 30, 1997.every quarter
since 1986. The amount of future dividends for Anadarkodividend payments will depend on the
Company's earnings, financial condition, capital requirements and other
factors and will be determined by the Board of Directors on a quarterly basis.

Changes in Accounting Principles

Earnings per Share Statement of Financial Accounting Standards
(SFAS) No. 128 focuses on additional disclosures related to earnings
per share. SFAS No. 128 is effective for financial statements for
periods ending after December 15, 1997. Anadarko does not expect SFAS
No. 128 to have any material effect on its calculations of earnings
per share.

Comprehensive Income SFAS No. 130 focuses on reporting comprehen-
sive income. SFAS No. 130 is effective for financial statements for
periods beginning after December 15, 1997. Anadarko does not expect
SFAS No. 130 to have any material effect on its calculations of net
income.

-16-18

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

On May 7, 1998, Anadarko issued $200 million of 5.46% Series B
Cumulative Preferred Stock in the form of two million depositary
shares, each depositary share representing 1/10th of a share of the
5.46% Series B Cumulative Preferred Stock. The Preferred Stock has
no stated maturity and is not subject to a sinking fund or mandatory
redemption. The shares are not convertible into other securities of
the Company.

Exploration and Development Activities

During the thirdfirst quarter of 1997,1998, Anadarko drilled or participated in
a total of 172109 wells, including 11066 oil wells, 4332 gas wells and 1911 dry
holes. This compares to a total of 64126 wells in the first quarter of
1997, including 4075 oil wells, 1540 gas wells and nine11 dry holes during the third quarter of 1996. For the
first nine months of 1997, Anadarko participated in a total of 447
wells, including 276 oil wells, 125 gas wells and 46 dry holes. This
compares to a total of 180 wells, including 100 oil wells, 46 gas
wells and 34 dry holes during the first nine months of 1996. Following
is a description of activity during the first nine months of
1997.

Domesticquarter.

Gulf of Mexico High activity levels at theThe Matagorda Island 622/623
complex continued in the third quarter of 1997. During August, the
Matagorda Island 623 No. B-1587 A-1 well was recompleted
in another productive zone
and tested 33.5March 1998, flowing 15.1 MMcf/d of gas and 8958 barrels of condensate
per day (BCPD). Thefrom a new perforations rangezone. Anadarko is operator with a 36-percent working
interest.

Hugoton Embayment In January 1998, the Boles F-1 well in depththe
recently renamed Archer Field of Seward County, Kansas, was completed
as a discovery, flowing 200 barrels of oil per day (BOPD) from 9,346-9,400 feet.

The Matagorda Island 623 B-8 developmentthe St.
Louis Formation. Traditionally, this formation has been very difficult
to image with conventional seismic. Anadarko is relying on 3-D seismic
data in this area for its exploratory program. In March 1998, the
discovery well was also drilled during
the third quarteroffset by two delineation wells -- The Boles F-2
well flowed 291 BOPD and flowed 50.2 MMcf/d170 thousand cubic feet per day (Mcf/d) of gas
and 250 BCPD.
Currently, there are six production platformsthe Boles F-3 well tested 287 BOPD and three single-well
structures set in the Matagorda Island 622/623 complex. Since the Field
was discovered by Anadarko in 1980, the Matagorda Island 622/623
complex has produced nearly 750 Bcf of gas and eight MMBbls of
condensate (gross). The work program of development wells, workovers
and recompletions has increased gross production at Matagorda Island
622/623 from 189 MMcf/d of gas in early 1997 to a current rate of 370
MMcf/100 Mcf/d of gas. Anadarko
owns a 37.5-percent100-percent working interest in these wells.

Also in Seward County, Kansas, the Amoco-operated field.

ProductionBlackmer A-3 well flowed 386 BOPD
and 276 Mcf/d of gas from the Phillips-operated MahoganyChester interval. Located in the Fedder
Southwest Field, located at Ship
Shoal 349/359, averaged 13,100 barrels of oil per day (BOPD) and 24.1the Malin B-1 well produced 1.0 MMcf/d of gas duringfrom the
third quarter of 1997. Production is currently
11,500 BOPD and 22Upper Morrow Sands. From the same Field, the Milhon B-1 well flowed 1.6
MMcf/d of gas. Four wells are on production with
only one of the wells producinggas from the "P" sand, the Field's main pay
zone.

Three of the wells at the Mahogany platform are producing from other
zones that holdUpper Morrow Sands. Anadarko owns a small portion of the Field's total reserves.
Hydrocarbons from these zones must be produced before recompleting
these wells to the "P" sand. Once wells are recompleted to the "P"
sand, Management believes production should increase. A fifth well is
currently drilling from the platform and additional development wells
are planned in 1998. Anadarko has a 37.5-percent100-percent
working interest in the Mahogany Field.

-17-all three wells.

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

Hugoton Embayment Anadarko continued to aggressively develop the
"deep" horizons of the Hugoton Embayment. The deep drilling program
features multiple pay objectives from 3,000-6,000 feet deep, low cost
of finding and high rates of return. Year-to-date, the Company has
achieved an 85 percent success rate in the deep drilling program,
primarily in SewardIn Morton County, Kansas, and Texas and Beaver Counties,
Oklahoma. Current production from the Company's deep acreage in the
Hugoton Embayment is 85USA Barker A-3 tested 2.5 MMcf/d of gas
equivalent. During the third
quarter of 1997, the Company drilled 37 wells (30 deep and 7 shallow)
and completed 41 wells in the Hugoton Embayment; some of the most
significant include:

Krey D-2 (Richland Center N. Field) Texas County, Oklahoma - 15.0
MMcf/d of gas
Keller D-1 (Arkalon Field) Seward County, Kansas - 3.8 MMcf/d of gas
Bennett F-1 (Floris Field) Beaver County, Oklahoma - 7.0 MMcf/d of
gas
Malin A-4 (Shuck Field) Seward County, Kansas - 5.8 MMcf/d of gas
Brown K-1 (Condit Field) Seward County, Kansas - 3.3 MMcf/d of gas
Going A-7 (Dunkle Field) Morton County, Kansas - 3.3 MMcf/d of gas
Dorman C-1 (Floris Field) Beaver County, Oklahoma - 2.9 MMcf/d of
gas
Gregory C-2 (Gentzler SW Field), Seward County, Kansas - 2.7 MMcf/d
of gas

In the third quarter of 1997, the Company completed a six-well
delineation program in the Unity Field of Texas County, Oklahoma.
Combined initial production from the five successful wells totaled 25.2
MMcf/d of gas.Upper Morrow Sands. Anadarko owns a 100-percent working
interest in fourthis well, located in the Berryman Richfield Field.

In the Hough South Field, the Long D-1 well tested 335 BOPD and 246
Mcf/d of gas from the wells andUpper Morrow Sands. Anadarko owns a 97-percent100-percent
working interest in the fifth well.

Permian Basin Anadarko also completed a 50 square-mile 3-D seismic survey over a 32,000-acre
area, which includescontinued its successful field extension
drilling program at the Unity Field.Ketchum Mountain (Clear Fork) Field in Irion
County, Texas. In addition to development drilling, Anadarko carried out a number of
important recompletions and workovers. During the thirdfirst quarter of 1997,1998, 15 wells were drilled,
including 11 wells on the Busby "10" and Sugg/Farmar "11" leases that
extend the northeast limits of the Field. To date, nine wells have been
completed on these two leases, with a combined initial production rate
of 1,076 BOPD. Anadarko has a 100-percent working interest in these
wells.

The Company recompleted 10 wells,plans to implement secondary recovery operations in the
Ketchum Mountain East (KME) development area. The planned waterflood
encompasses about 3,850 acres adjacent to the existing Ketchum Mountain
(Clear Fork) Field waterflood. Current production of 2,460 BOPD from
the KME area is expected to increase to approximately 3,400 BOPD by
2000.

Central Oklahoma Anadarko acquired 37,000 acres with 370 production
and worked over another 17injection wells in the Hugoton Embayment. The Leathers Land A-2 wellGolden Trend of Oklahoma from OXY USA, Inc.
in the Eubank Southfirst quarter of 1998 for a purchase price of $120 million. As
part of the agreement, Anadarko purchased working interests in five oil
and gas fields and an interest in a 120-mile, eight-inch CO2 pipeline.
Current production from the properties is 2,600 BOPD and 5.4 MMcf/d of
gas and Anadarko estimates proved reserves from the purchase of about
20 million energy equivalent barrels. Anadarko has identified more
than 150 drilling locations that could further add to reserves and
production during 1998 and beyond.

In the Golden Trend's Antioch Southwest Field of HaskellGarvin County,
Kansas was fracture stimulated,
increasing production from 23 BOPD and 40 thousand cubic feet per day
(Mcf/d)Oklahoma, the Tomlinson "A" No. 4-26 flowed 1.2 MMcf/d of gas to 290 BOPD and 370 Mcf/d of gas. The Ray C-4 well109
BOPD. Anadarko owns a 74-percent working interest in the Eubankwell.

East Texas' Bossier Sand Play From the Dew Field of Haskellin Freestone
County, Kansas was recompleted in another
productive zone and tested 2.0 MMcf/d of gas.

In late August 1997, operations began at Anadarko's West Ward No. 1 andTexas, Anadarko completed the Johnson "A" No. 2 satellite compressor stations. Combined, the two stations have
reduced suction pressure in the field to 18 pounds per square inch
(psi) and increased production by 3.0well, flowing
7.1 MMcf/d of gas. The facilities are
among 16 satellite booster stationsJohnson "A" No. 1 exploratory well flowed 2.3
MMcf/d of gas. Also in the CompanyDew Field, the McAdams A-1 flowed 5.4 MMcf/d
of gas and 12 BOPD. The Black "A" No. 6 flowed 4.4 MMcf/d of gas.
Anadarko owns more than 16,000 acres in the Bossier Sand Play and has
added in 1997.

-18-achieved a 100-percent drilling success rate to date. This is now the
Company's third largest onshore gas field.

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

DuringAlgeria Anadarko announced in March 1998 the discovery of another
potentially significant oil field in Algeria's Sahara Desert - the El
Merk North (EMN) Field. The EMN-1 well, located on Block 208, flowed
21,395 BOPD and encountered 119 feet of net oil pay. This was the
highest flow rate ever achieved by the Company. Anadarko owns a 50-
percent interest in the Production Sharing Agreement, prior to
participation by SONATRACH during exploitation.

On the BHP-operated Block 402, Anadarko and partners participated in
the completion of the Bir Sif Fatima No. 1 well in February 1998,
flowing 1,960 BOPD. Also on Block 402, the Rhourde Oulad Djemma No. 2
well tested at a peak rate of 18,100 BOPD in March 1998. Anadarko has a
27.5-percent interest in the Production Sharing Agreement with BHP.

Anadarko currently has three rigs running in Algeria. Two rigs are
drilling delineation wells (El Kheit Et Tessekha No. 3 on Block 208 and
Qoubba North No. 2 on Block 404) and the third quarter of 1997, Anadarko installed 27 wellhead
compressors, which have added 6.6 MMcf/d of gas to gross production
volumes.rig is drilling
development wells in the Hassi Berkine South (HBNS) Field.

In addition,May 1998, the Company connected 32 new wells which added
39.8 MMcf/d in initial production volumes. Anadarko also reduced the
field pressure of its system by installing 12 miles of additional pipe
alongside selected gathering lines - a technique known as "line-
looping."

Permian Basin In the Permian Basin, Anadarko continued its growth
strategy which focuses on field expansion, infill drilling, waterflood
operations and strategic property acquisitions. In the third quarter of
1997, the Company operated 10 drilling rigs and drilled 110 wells. Net
production increased 32 percent to 12,533 BOPD compared to 9,461 BOPD
for the same period in 1996.

A multi-rig infill drilling program continued in Ector County, Texas,
where the Company operates three large waterflood units. In the third
quarter of 1997, 50 wells were spudded, including wells in a 10-acre
spacing pilot program. Results from the pilot program have averaged
about 60 BOPD per well. Total grossannounced first crude oil production from the
Ector County
Units has more than doubled to 8,000 BOPD compared to a 1996 average of
3,670 BOPD.

The Company's field extension program continues at the Ketchum Mountain
(Clearfork)HBNS Field, located on Block 404 of Algeria's Berkine Basin.
Production from the HBNS 1B well began flowing through the Stage I
production facilities. During the start-up phase, production from the
first well will be brought on in Irion County, Texas. Anadarko drilled 12increments to minimize safety
concerns. As the flow rate is increased and stabilized, additional
development wells in the Field inwill be brought on line. The Central
Production Facility's design capacity is 60,000 BOPD.

Year 2000

Anadarko has assessed the third quarter of 1997 and completed seven new
wells on the Scott "2" lease, which extended the Field's limit.
Production from the Ketchum Mountain Field is 2,900 BOPD, an increase
of 60 percent over an average of 1,820 BOPD in 1996.

In the Sharon Ridge/Diamond M Field of Scurry County, Texas where
Anadarko is actively involved in a waterflood expansion program, the
Company completed 36 wells in the third quarter of 1997, which have
increased production to 2,300 BOPD compared to average production of
1,425 BOPD in 1996.

West Panhandle Field In the West Panhandle Field of Carson and
Moore Counties, Texas, Anadarko continued its aggressive
sidetrack/lateral drilling program. Through the first nine months of
1997, Anadarko completed 41 sidetracks, increasing Field capability by
14 MMcf/d of gas. Production from the West Panhandle Field is currently
61 MMcf/d of gas (gross).

The Bossier Play In Freestone County, Texas, successful results
were reported from the Black "A" No. 1 during the third quarter of
1997. The well tested 7.1 MMcf/d of gas through an 18.5/64-inch choke.
Anadarko owns a 100-percent working interest in the discovery, known as
the Caroline prospect. Anadarko now has interests in 12 wells in the
Bossier Play with net production of 8.2 MMcf/d of gas. Two drilling
rigs are currently operating in the Bossier Play.

-19-

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

Coal-Bed Methane Anadarko is nearing completion of Phase I
developmentimpact of the Helper Field in Carbon County, Utah. Inyear 2000 on its computer
systems and applications and has developed a plan to ensure that all
information systems will handle the first
nine monthsmillennium date change. To date,
about 80 percent of 1997, Anadarko drilledAnadarko's information systems are already year
2000 compliant and completed 20 coal-bed methane
wells inan additional 19 percent will be year 2000 compliant
by the Helper Field. Installationend of a gathering system is
underway and Management believes the gathering system should be
completed in the fourth quarter of 1997. Anadarko has a 100-percent
working interest in this play.

International

Algeria In the third quarter of 1997, Anadarko raised its reserve
estimate for crude oil and condensate discovered in the Sahara Desert1998. There have been no significant expenditures to 2.0 billion barrels (gross). The previous reserve estimate, made in
1995, was 1.5 billion barrels of crude oil and condensate (gross). The
reserve increase was due to continued success in both exploration and
delineation drilling. In the first nine months of 1997, Anadarko
drilled ten wells, six of which were discoveries.

Stage I construction of the Central Production Facilitydate
for the Hassi
Berkine South Field (HBNS), located on Block 404, is approximately 80
percent complete.year 2000 conversion. The construction contractor, Brown & Root Condor,
currently has about 400 workers at this desert location. Initial
production from Stage I is expected in early 1998 at a rate of 60,000
BOPD (gross).

Eritrea In September 1997, Anadarko added additional exploration
acreage in Eritrea's Red Sea. A Production Sharing Agreement was signed
for an additional 2.3 million acres, bringingCompany does not expect any incremental
expenditures to complete the Company's acreage
positionyear 2000 conversion to 9.0 million acres. Anadarko now has two blocks - the
original Zula Block and the new Edd Block. Anadarko signed a rig
contract with an international drilling company and plans to drill
three exploration wells in Eritrea in 1998.

Jordanbe significant. The
Company is currently drilling the first of two planned
stratigraphic test wells on the Safawi Block, a 4.2 million acre area
in northeast Jordan. The test wells are designed to prove the existence
of quality source rock and reservoir sands prior to conducting a
seismic survey.

Peru In July 1997, Anadarko began a seismic acquisition program on
Block 84 in Peru. The Company is conducting a 600 kilometer seismic
program on this 2.56-million acre Block, located in the Ucayali Basin
nearprocess of initiating formal communications with its
significant suppliers and large customers to determine the Brazilian border. The initial seismic acquisition program is
expectedextent to take about 12 monthswhich
the Company's operations may be potentially vulnerable to complete.

-20-those third
parties' failure to prepare for the year 2000 change.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978 (NGPA)
allows a "severance, production or similar" tax to be included as an
add-on, over and above the maximum lawful price for natural gas.
Based on the Federal Energy Regulatory Commission (FERC) ruling that
the Kansas ad valorem tax was such a tax, the Company collected the
Kansas ad valorem tax in addition to the otherwise maximum lawful
price. FERC's ruling was appealed to the United States Court of
Appeals for the District of Columbia (D.C. Circuit), which held in
June 1988 that FERC failed to provide a reasoned basis for its
findings and remanded the case to FERC for further consideration.

On December 1, 1993, FERC issued an order reversing its prior ruling,
but limiting the effect of its decision to Kansas ad valorem taxes for
sales made on or after June 28, 1988. FERC clarified the effective
date of its decision by an order dated May 19, 1994. The clarification
provided that the June 28, 1988 effective date applies to tax bills
rendered after that date, not sales made on or after that date. Based
on Anadarko's interpretation of FERC's orders, $700,000 (pre-tax) was
charged against income in 1994, in addition to $130,000 (pre-tax)
charged against income in 1993. Numerous parties filed appeals of
FERC's action in the D.C. Circuit. Anadarko, together with other
natural gas producers, challenged FERC's orders on two grounds:
(1) that the Kansas ad valorem tax, properly understood, does qualify
for reimbursement under the NGPA; and (2) FERC's ruling should, in any
event, have been applied prospectively. Other parties separately
challenged FERC's orders on the grounds that FERC's ruling should have
been applied retroactively to December 1, 1978, the dateSee Note 8 of the enactment of the NGPA and producers should have been requiredNotes to pay
refunds accordingly.

The D.C. Circuit issued its decision on August 2, 1996 which holds
that producers must make refunds of all Kansas ad valorem taxes
collected with respect to production since October 1983. Petitions
for rehearing were denied November 6, 1996. The Company, along with
other gas producing companies, subsequently filed a petition for writ
of certiorari with the United States Supreme Court seeking to limit
the scope of the potential refunds to tax bills rendered on or after
June 28, 1988 (the effective date originally selected by FERC).
Williams Natural Gas Company filed a cross-petition for certiorari
seeking to impose refund liability back to December 1, 1978. Both
petitions were denied on May 12, 1997.

-21-

Item 1. Legal Proceedings (continued)

Kansas Ad Valorem Tax (continued)

Anadarko estimates the maximum amount of principal and interest at
issue which has not been paid to date and assuming that the October
1983 effective date remains in effect, is about $39,000,000 (pre-tax)
as of September 30, 1997. The Company along with other gas producing
companies, filed a petition for adjustment with FERC on May 12, 1997.
In so doing the Company is seeking waiver of all interest which might
otherwise be due. The total interest at issue is approximately
$25,000,000 (pre-tax). On September 10, 1997, FERC denied the
petition for adjustment and established procedures for the payment of
refunds. Under FERC's order, interstate and intrastate pipelines are
required to serve on first sellers statements of refunds due. This
statement is due on or before November 10, 1997. Refunds are due to
be paid by first sellers within 180 days of the date of the FERC
order, or by March 9, 1998.

On May 13, 1997 the Company also filed a lawsuit in the Federal
District Court for the Southern District of Texas against PanEnergy
seeking a declaration that pursuant to prior agreements Anadarko is
not required to issue refunds to PanEnergy for the principal amount of
$14,000,000 (pre-tax) and, if the petition for adjustment discussed
above is not granted in its entirety by FERC with respect to PanEnergy
refunds, interest in an amount up to $23,000,000 (pre-tax) as of
September 30, 1997. The Company also seeks from PanEnergy the return
of $816,000 of the $830,000 (pre-tax) charged against income in 1993
and 1994.

-22-

Item 1. Legal Proceedings (continued)

Kansas Ad Valorem Tax (continued)

Net income for the third quarter of 1997, included a $1,700,000 charge
(before income taxes) related to the Kansas ad valorem tax refunds.
This charge reflects all principal and interest which may be due at
the conclusion of all regulatory proceedings and litigation to parties
other than PanEnergy. The Company is unable at this time to predict
the final outcomeConsolidated
Financial Statements under Part I. Financial Information of this matter and no provision for liability
(excluding the amounts recorded in 1993, 1994 and the third quarter of
1997) has been made in the accompanying financial statements.

Item 5. Other Information

On July 28, 1997, John N. Seitz was promoted to the position of
Executive Vice President - Exploration and Production and was elected
to Anadarko's Board of Directors as a Class II director.

-23-
Form
10-Q.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibits not incorporated by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits
not so designated are incorporated herein by reference to a prior
filing as indicated.

Exhibit
Original Filed File
Number Description Exhibit Number

3(a) Restated Certificate of
Incorporation of Anadarko 19(a)(i) to Form 10-Q 1-8968
Petroleum Corporation, for quarter ended
Dateddated August 28, 1986 September 30, 1986

(b) By-laws of Anadarko 3(b) to Form 10-Q 1-8968
Petroleum Corporation, for quarter ended
as amended June 30, 1996

*4(a) Amendment to Credit
Agreement, dated as of
April 17, 1998

*12 Computation of Ratios of
Earnings to Fixed Charges
and
Earnings to Combined
Fixed Charges and Preferred
Stock Dividends

*27 Financial Data Schedule

(b) Reports on Form 8-K

There were no reports filed on Form 8-K for the three months
ended September 30, 1997.

-24-March 31, 1998.

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 duly authorized officer and principal financial
officer.

ANADARKO PETROLEUM CORPORATION
(Registrant)

November 13, 1997May 14, 1998 [MICHAEL E. ROSE]
Michael E. Rose - Senior Vice President,
Finance and Chief Financial Officer