Anadarko Petroleum 10-Q 4 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	APC
Entity Registrant Name	ANADARKO PETROLEUM CORP
Entity Central Index Key	0000773910
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	494,744,305

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues and Other
Gas sales	$1,081	$871
Oil and condensate sales	1,502	636
Natural-gas liquids sales	274	83
Gathering, processing and marketing sales	273	161
Gains (losses) on divestitures and other, net	9	45
Total	3,139	1,796
Costs and Expenses
Oil and gas operating	187	241
Oil and gas transportation and other	191	174
Exploration	155	301
Gathering, processing and marketing	183	135
General and administrative	210	209
Depreciation, depletion and amortization	981	806
Other taxes	301	150
Impairments	12	51
Total	2,220	2,067
Operating Income (Loss)	919	(271)
Other (Income) Expense
Interest expense	224	182
(Gains) losses on commodity derivatives, net	(588)	201
(Gains) losses on other derivatives, net	29	(98)
Other (income) expense, net	9	(11)
Total	(326)	274
Income (Loss) Before Income Taxes	1,245	(545)
Income Tax Expense (Benefit)	517	(214)
Net Income (Loss)	728	(331)
Net Income Attributable to Noncontrolling Interests	12	7
Net Income (Loss) Attributable to Common Stockholders	$716	($338)
Per Common Share:
Net income (loss) attributable to common stockholders - basic	1.44	-0.73
Net income (loss) attributable to common stockholders - diluted	1.43	-0.73
Average Number of Common Shares Outstanding - Basic	493	460
Average Number of Common Shares Outstanding - Diluted	496	460
Dividends (per Common Share)	0.09	0.09

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current Assets
Cash and cash equivalents	$3,692	$3,531
Accounts receivable, net of allowance:
Customers	1,097	1,019
Others	1,002	1,033
Other current assets	611	500
Total	6,402	6,083
Properties and Equipment
Cost	51,422	50,344
Less accumulated depreciation, depletion and amortization	14,069	13,140
Net properties and equipment	37,353	37,204
Other Assets	1,640	1,514
Goodwill and Other Intangible Assets	5,313	5,322
Total Assets	50,708	50,123
Current Liabilities
Accounts payable	2,449	2,876
Accrued expenses	972	948
Current debt	478
Total	3,899	3,824
Long-term Debt	11,110	11,149
Midstream Subsidiary Note Payable to a Related Party	1,349	1,599
Other Long-term Liabilities
Deferred income taxes	9,952	9,925
Other	3,273	3,211
Total	13,225	13,136
Stockholders' Equity
Common stock, par value $0.10 per share (1.0 billion shares authorized, 507.6 million and 505.0 million shares issued as of March 31, 2010, and December 31, 2009, respectively)	51	50
Paid-in capital	7,348	7,243
Retained earnings	14,539	13,868
Treasury stock (12.8 million and 12.4 million shares as of March 31, 2010, and December 31, 2009, respectively)	(749)	(721)
Accumulated other comprehensive income (loss)	(522)	(512)
Total Stockholders' Equity	20,667	19,928
Noncontrolling Interests	458	487
Total Equity	21,125	20,415
Commitments and Contingencies (Note 8)
Total Liabilities and Equity	$50,708	$50,123

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
	Mar. 31, 2010	Dec. 31, 2009
Common stock, par value	0.1	0.1
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	507,600,000	505,000,000
Treasury stock, shares	12,800,000	12,400,000

CONSOLIDATED STATEMENT OF EQUIT

CONSOLIDATED STATEMENT OF EQUITY (USD $)
In Millions	Common Stock	Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	Total Stockholders' Equity	Noncontrolling Interests	Total
Beginning Balance at Dec. 31, 2009	$50	$7,243	$13,868	($721)	($512)	$19,928	$487	$20,415
Net income (loss)			716			716	12	728
Common stock issued	1	105				106		106
Dividends			(45)			(45)		(45)
Repurchase of common stock				(28)		(28)		(28)
Distributions to noncontrolling interest owners and other, net							(41)	(41)
Previously deferred losses on derivative instruments					4	4		4	[1]
Pension and other postretirement plans adjustments					(14)	(14)		(14)
Ending Balance at Mar. 31, 2010	$51	$7,348	$14,539	($749)	($522)	$20,667	$458	$21,125
[1]Net of income tax benefit (expense) of $(2) million and $(3) million for the quarters ended March 31, 2010 and 2009, respectively.

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Net income (loss)	$728		($331)
Other Comprehensive Income (Loss), net of taxes
Previously deferred losses on derivative instruments	4	[1]	6	[1]
Pension and other postretirement plans adjustments:
Net gain (loss) incurred during period	(25)	[2]
Amortization of net actuarial loss to net periodic benefit cost	11	[3]	8	[3]
Total	(10)		14
Comprehensive Income (Loss)	718		(317)
Comprehensive Income Attributable to Noncontrolling Interests	12		7
Comprehensive Income (Loss) Attributable to Common Stockholders	$706		($324)
[1]Net of income tax benefit (expense) of $(2) million and $(3) million for the quarters ended March 31, 2010 and 2009, respectively.
[2]Net of income tax benefit (expense) of $14 million and $0 million for the quarters ended March 31, 2010 and 2009, respectively.
[3]Net of income tax benefit (expense) of $(6) million and $(5) million for the quarters ended March 31, 2010 and 2009, respectively.

1_CONSOLIDATED STATEMENTS OF CO

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Previously deferred losses on derivative instruments, income tax benefit (expense)	($2)	($3)
Net gain (loss) incurred during period, income tax benefit (expense)	14	0
Amortization of net actuarial loss to net periodic benefit cost, income tax benefit (expense)	($6)	($5)

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash Flow from Operating Activities
Net income (loss)	$728	($331)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	981	806
Deferred income taxes	154	(299)
Dry hole expense and impairments of unproved properties	113	228
Impairments	12	51
(Gains) losses on divestitures, net	(13)	(10)
Unrealized (gains) losses on derivatives	(545)	240
Other non-cash items	100	47
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	(27)	256
Increase (decrease) in accounts payable and accrued expenses	(281)	(589)
Other items - net	95	134
Net cash provided by (used in) operating activities	1,317	533
Cash Flow from Investing Activities
Additions to properties and equipment and dry hole costs	(1,178)	(1,133)
Divestitures of properties and equipment and other assets	8	5
Other - net	(11)	(7)
Net cash provided by (used in) investing activities	(1,181)	(1,135)
Cash Flow from Financing Activities
Borrowings, net of issuance costs	947	1,088
Retirements of debt	(562)	(451)
Repayment of midstream subsidiary note payable to a related party	(250)
Increase (decrease) in accounts payable, banks	(82)	(174)
Dividends paid	(45)	(42)
Repurchase of common stock	(28)	(8)
Issuance of common stock, including tax benefit on stock option exercises	67
Distributions to noncontrolling interest owners	(11)	(6)
Net cash provided by (used in) financing activities	36	407
Effect of Exchange Rate Changes on Cash	(11)
Net Increase (Decrease) in Cash and Cash Equivalents	161	(195)
Cash and Cash Equivalents at Beginning of Period	3,531	2,360
Cash and Cash Equivalents at End of Period	$3,692	$2,165

Summary of Significant Accounti

Summary of Significant Accounting Policies
	3 Months Ended Mar. 31, 2010
Summary of Significant Accounting Policies	1. Summary of Significant Accounting Policies GeneralAnadarko Petroleum Corporation is engaged in the exploration, development, production and marketing of natural gas, crude oil, condensate and natural gas liquids (NGLs). The Company also engages in the gathering, processing and treating of natural gas, and transporting natural gas, crude oil and NGLs. The Company also participates in the hard minerals business through its ownership of non-operated joint ventures and royalty arrangements. The terms Anadarko and Company refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. The accompanying financial statements and notes should be read in conjunction with the Companys 2009 Annual Report on Form 10-K. Basis of PresentationThe information, as furnished herein, reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the Companys Consolidated Balance Sheets as of March31, 2010, and December31, 2009, the Consolidated Statements of Income, Comprehensive Income and Cash Flows for the quarters ended March31, 2010, and 2009, and the Consolidated Statement of Equity for the quarter ended March31, 2010. Certain prior-period amounts have been reclassified to conform to the current-period presentation. In the fourth quarter of 2009, the Company changed the manner in which gains and losses on commodity derivatives, used to economically hedge production, are presented within the Consolidated Statements of Income to provide enhanced transparency into asset operating performance. Previously, all realized and unrealized gains and losses on commodity derivatives were reported in gas sales, oil and condensate sales or NGLs sales. Gains and losses on commodity derivatives are now presented as a separate line item on the Consolidated Statements of Income. Prior periods have been reclassified to conform to this presentation. See Note 5 for disclosures regarding derivative instruments. In preparing financial statements in accordance with accounting principles generally accepted in the United States, management makes informed judgments and estimates that affect both the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods reported. Management reviews its estimates periodically, including those related to the carrying value of properties and equipment, proved reserves, goodwill, intangible assets, asset retirement obligations, litigation reserves, environmental liabilities, pension liabilities and costs, income taxes and fair values. Changes in facts and circumstances or additional information may result in revised estimates and actual results may differ from these estimates. Changes in Accounting PrinciplesEffective January1, 2010, the Company adopted revised oil and gas reserve estimation standards. These standards allow the use of reliable technology in determining estimates of proved reserve quantities and require the use of a 12-month first-day-of-the-month average price to estimate proved reserves. Adoption of these new standards did not have a material impact o

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Inventories	2. Inventories The major classes of inventories, included in other current assets, are as follows: millions March31, 2010 December31, 2009 Crude oil and NGLs $ 112 $ 142 Natural gas 37 94 Total $ 149 $ 236

Properties and Equipment

Properties and Equipment
	3 Months Ended Mar. 31, 2010
Properties and Equipment	3. PropertiesandEquipment Suspended Exploratory Drilling CostsThe Companys capitalized suspended well costs at March31, 2010, and December31, 2009, were $734million and $579million, respectively. The increase primarily relates to capitalization of additional costs associated with successful exploration drilling activities in Brazil and the Gulf of Mexico. For the quarter ended March31, 2010, $2million of exploratory well costs, previously capitalized as suspended well costs for greater than one year, were charged to dry hole expense. In addition, during the quarter ended March31, 2010, $43million of capitalized suspended well costs were reclassified to proved properties. Management believes projects with suspended exploratory drilling costs exhibit sufficient quantities of hydrocarbons to justify potential development and is actively pursuing efforts to assess whether reserves can be attributed to these areas. 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.

Investments

Investments
	3 Months Ended Mar. 31, 2010
Investments	4. Investments Noncontrolling Mandatorily Redeemable InterestsIn 2007, Anadarko contributed certain of its oil and gas properties and gathering and processing assets with an aggregate fair value of $2.9billion at the time of the contribution to newly formed unconsolidated entities in exchange for noncontrolling mandatorily redeemable interests in those entities. Subsequent to their formation, the investee entities loaned Anadarko an aggregate of $2.9billion. The Company accounts for its investment in these entities under the equity method of accounting. At March31, 2010, the carrying amount of these investments was $2.8billion, while the carrying amount of notes payable to affiliates was $2.9billion. Anadarko has legal right of setoff and intends to net-settle its obligations under each of the notes payable to the investees with the distributable value of its interest in the corresponding investee. Accordingly, the investments and the obligations are presented net on the consolidated balance sheets with the excess of the notes payable to affiliates over the aggregate investment carrying amount reported in other long-term liabilities other for all periods presented. Other (income) expense, net for the quarters ended March31, 2010 and 2009, includes interest expense on the notes payable to the investee entities of $9million and $20million, respectively. Other (income) expense, net also includes equity in earnings from Anadarkos investments in the investee entities of $(9)million for the quarters ended March31, 2010 and 2009. Investment Associated with Midstream Subsidiary NoteIn December 2007, Anadarko, and an entity formed by a group of unrelated third-party investors (the Investor), formed Trinity Associates LLC (Trinity), a variable interest entity. Trinity was initially capitalized with a $100million cash contribution by Anadarko in exchange for ClassA member and managing member interests in Trinity, and a $2.2billion cash contribution by the Investor in exchange for a Class B member cumulative preferred interest. Trinity invested $100million in a U.S. Government securities money market fund (the Fund) and loaned $2.2billion to a wholly owned midstream subsidiary of Anadarko (Midstream Holding). Trinitys assets consist of $100million invested in the Fund and the $1.3 billion note receivable from Midstream Holding. Trinitys earnings, which consist primarily of interest income from the note receivable and the Fund, are allocated first to the Investors Class B member interest, until its cumulative preferred return is satisfied, with the remaining earnings allocated to Anadarkos ClassA member interest. These earnings-allocation provisions generally result in Anadarko receiving a minor share of Trinitys total earnings, consistent with the relative sizes of Anadarkos ClassA and the Investors Class B member capital account balances. Should Trinity incur a loss, Anadarko would absorb first-dollar losses of Trinity, until its ClassA member capital account in Trinity is reduced to zero. Through its ClassA member and managing member interests, Anadarko has significant influence over Trinity; therefore, Anadarko accounts for its investmen

Derivative Instruments

Derivative Instruments
	3 Months Ended Mar. 31, 2010
Derivative Instruments	5. Derivative Instruments Objective StrategyThe Company is exposed to commodity price and interest-rate risk, and management considers it prudent to periodically enter into derivative instruments in order to manage the Companys exposure to cash flow variability resulting from these risks. Futures, swaps and options are used to manage the Companys exposure to commodity price risk inherent in the Companys oil and gas production and gas-processing operations (Oil and Gas Production/Processing Derivative Activities). Futures contracts and commodity swap agreements are used to fix the price of expected future oil and gas sales at major industry trading locations, such as Henry Hub, Louisiana for gas and Cushing, Oklahoma for oil. Basis swaps are used to fix or float the price differential between the product price at one market location versus another. Options are used to establish a floor and a ceiling price (collar) for expected future oil and gas sales. Derivative instruments are also used to manage commodity price risk inherent in customer pricing requirements and to fix margins on the future sale of natural gas and NGLs from the Companys leased storage facilities (Marketing and Trading Derivative Activities). The Company may also enter into physical-delivery sales contracts to manage cash flow variability. These contracts call for the receipt or delivery of physical product at a specified location and price, which may be fixed or market-based. Interest-rate swaps are used to fix or float interest rates on existing or anticipated indebtedness. The purpose of these instruments is to mitigate the Companys existing or anticipated exposure to unfavorable interest-rate changes. The Company does not apply hedge accounting to any of its derivative instruments. The application of hedge accounting was discontinued by the Company for periods beginning on or after January1, 2007. As a result, both realized and unrealized gains and losses associated with derivative instruments are recognized 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 in future periods as the economic transactions to which the derivatives relate are recorded in earnings. The accumulated other comprehensive loss balances related to commodity derivatives at March31, 2010, and December31, 2009, were $8million ($5million after tax) and $10million ($7million after tax), respectively. The accumulated other comprehensive loss balances related to interest-rate derivatives at March31, 2010, and December31, 2009, were $137million ($87million after tax) and $141million ($89million after tax), respectively. Oil and Gas Production/Processing Derivative ActivitiesBelow is a summary of the Companys derivative instruments related to its oil and gas production as of March31, 2010. The natural-gas prices listed below are New York Mercantile Exchange (NYMEX) Henry Hub prices. The crude-oil prices listed below reflect a combination of NYMEX Cushing and London Brent Dated prices. 2010 2011 2012 Natural Gas

Debt and Interest Expense

Debt and Interest Expense
	3 Months Ended Mar. 31, 2010
Debt and Interest Expense	6. Debt and Interest Expense Debt The following table presents the outstanding debt of the Company as of March 31, 2010, and December 31, 2009. See Note4 for disclosure regarding Anadarkos notes payable related to its ownership of certain noncontrolling mandatorily redeemable interests that do not affect the Companys reported debt balance or consolidated interest expense. March31, 2010 December31, 2009 millions Principal Carrying Value Fair Value Principal Carrying Value Fair Value Current and long-term notes and debentures $ 13,131 $ 11,378 $ 12,342 $ 12,909 $ 11,149 $ 12,133 Midstream subsidiary note payable to a related party 1,349 1,349 1,349 1,599 1,599 1,599 WES* credit facility borrowing 210 210 210 Total debt $ 14,690 $ 12,937 $ 13,901 $ 14,508 $ 12,748 $ 13,732 * Western Gas Partners, LP (WES), a consolidated subsidiary of Anadarko The following table presents the debt activity of the Company for the quarter ended March31, 2010. millions Activity Principal Carrying Value Description Balance as of December 31, 2009 $ 14,508 $ 12,748 Issuance 750 745 6.200% Senior Notes due 2040 WESborrowing 210 210 WES credit facility borrowing Retirements (528 ) (522 ) Tender-offer repurchases Repayments (250 ) (250 ) Midstream subsidiary note repayment Other, net 6 Accretion and discount amortization Balance as of March 31, 2010 $ 14,690 $ 12,937 In March 2010, Anadarko commenced a cash tender offer for up to $1.0billion aggregate principal amount of specified series of its outstanding debt. Pursuant to the tender-offer terms, the Company repurchased $528million and $472million principal amount of debt in March 2010 and April 2010, respectively, as summarized in the following table. millions Principal Amount Description Month of Repurchase Early-Tender Premium Repurchased Remaining OutstandingBalance 6.750% Notes due 2011 March2010 $ 34 $ 528 $422 6.875% Notes due 2011 April 2010 32 390 285 6.125% Notes due 2012 April 2010 3 38 132 5.000% Notes due 2012 April 2010 2 44 38 $ 71 $ 1,000 $877 At March 31, 2010, Anadarko was in compliance with the covenants contained in its $1.3 billion committed revolving credit agreement (RCA), available through March 2013, and the full amount of the RCA was available for borrowing. At March31, 2010, WES was in compliance with its $350million senior unsecured revolving credit facility (RCF). Outstanding borrowings under the RCF, at an annual interest rate of 2.62%, were $210million at March31, 2010. Interest Expense The following table summarizes the amounts included in interes

Stockholders' Equity

Stockholders' Equity
	3 Months Ended Mar. 31, 2010
Stockholders' Equity	7. Stockholders Equity Common Stock The reconciliation between basic and diluted earnings per share (EPS) from income attributable to common stockholders is as follows: QuarterEnded March31, millions except per-share amounts 2010 2009 Income (loss): Income (loss) attributable to common stockholders $ 716 $ (338 ) Less: Distributions on participating securities Less: Undistributed income allocated to participating securities 5 Basic $ 711 $ (338 ) Diluted $ 711 $ (338 ) Shares: Basic Weighted-average common shares outstanding 493 460 Dilutive effect of stock options and performance-based stock awards 3 Diluted 496 460 Income (loss) per common share: Basic $ 1.44 $ (0.73 ) Diluted $ 1.43 $ (0.73 ) For the quarters ended March31, 2010 and 2009, 5million and 13million average shares, respectively, of common stock were excluded from the diluted EPS calculation because the inclusion of these shares would have had an anti-dilutive effect. For all periods presented, quarterly dividends of nine cents per share were paid to holders of common stock.

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended Mar. 31, 2010
Commitments and Contingencies	8. Commitments and Contingencies General Litigation charges and adjustments of $4million and $13million increased earnings during the first quarter of 2010 and 2009, respectively. The Company is a defendant in a number of lawsuits and is involved in governmental proceedings, including, but not limited to, royalty claims, contract claims and environmental claims. The Company has also been named as a defendant in various personal injury claims, including claims by employees of third-party contractors alleging exposure to asbestos, silica and benzene while working at refineries (previously owned by predecessors of acquired companies) located in Texas, California and Oklahoma. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will not have a material adverse effect on the Companys consolidated financial position, results of operations or cash flows. Litigation The Company is subject to various claims by its royalty owners in the regular course of business as an oil and gas producer, including disputes regarding measurement, post-production costs and expenses and royalty valuations. The Company was named as a defendant in a case styled U.S. of America ex rel. Harold E. Wright v. AGIP Company, et al. filed in September 2000 in the U.S. District Court for the Eastern District of Texas, Lufkin Division. Kerr-McGee Corporation (Kerr-McGee) was also named as a defendant in this legal proceeding. This lawsuit generally alleges that the Company, including Kerr-McGee, and other industry defendants knowingly undervalued natural gas in connection with royalty payments on production from federal and Indian lands. Based on the Companys present understanding of these various governmental and False Claims Act proceedings, the Company believes that it has substantial defenses to these claims and is vigorously asserting such defenses. However, if the Company is found to have violated the False Claims Act, the Company could be subject to a variety of damages, including treble damages and substantial monetary fines. The discovery process is ongoing. The claims against the Company have yet to be set for trial. The Company is currently in settlement discussions with the U.S. Government to resolve this litigation against Anadarko and Kerr-McGee, as well as any related administrative actions. Management has accrued a liability for the estimated settlement amount. The Company believes that an additional loss, in excess of the amount accrued, is unlikely to have a material adverse effect on Anadarkos consolidated financial position, results of operations or cash flows. Deepwater Royalty Relief ActIn 1995, the United States Congress passed the Deepwater Royalty Relief Act (DWRRA) to stimulate exploration and production of oil and natural gas by providing relief from the obligation to pay royalties on certain federal leases located in the deep waters of the Gulf of Mexico. The Company currently owns interests in several deepwater Gulf of Mexico leases. After the passage of the DWRRA, the Minerals Management Service (MMS), an agency of the Department of the Interio

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	9. Income Taxes Following is a summary of income tax expense (benefit) and effective tax rates for the first quarters of 2010 and 2009. QuarterEnded March31, millions except percentages 2010 2009 Income tax expense (benefit) $ 517 $ (214 ) Effective tax rate 42 % 39 % The increase in the Companys effective tax rate as compared to the 35% statutory rate for the quarter ended March31,2010, is primarily attributable to the accrual of the Algerian exceptional profits tax (which is non-deductible for Algerian income tax purposes), U.S. tax on foreign income inclusions and distributions, other foreign taxes in excess of the federal statutory rate, and state income taxes. This increase in the effective tax rate is partially reduced by U.S. tax on losses from foreign operations, federal manufacturing deduction and other items. The increase in the Companys effective tax rate as compared to the 35% statutory rate for the quarter ended March31, 2009, is primarily attributable to changes in uncertain tax positions and state income taxes, partially reduced by the accrual of the Algerian exceptional profits tax, other foreign taxes in excess of federal statutory rates, U.S. tax on foreign income inclusions and distributions and other items.

Statements of Cash Flows Supple

Statements of Cash Flows Supplemental Information
	3 Months Ended Mar. 31, 2010
Statements of Cash Flows Supplemental Information	10. Statements of Cash Flows Supplemental Information The following table presents amounts of cash paid for interest (net of amounts capitalized) and income taxes, as well as amounts related to non-cash transactions. QuarterEnded March31, millions 2010 2009 Cash paid: Interest $ 240 $ 226 Income taxes $ 3 $ 207 Non-cash investing activities: Fair value of properties and equipment received in non-cash exchange transactions $ 17 $ 38

Segment Information

Segment Information
	3 Months Ended Mar. 31, 2010
Segment Information	11. Segment Information Anadarkos primary business segments are vertically integrated within the oil and gas industry. These segments are separately managed due to distinct operational differences and unique technology, distribution and marketing requirements. The Companys three reportable operating segments are oil and gas exploration and production, midstream, and marketing. The exploration and production segment explores for and produces natural gas, crude oil, condensate and NGLs. The midstream segment engages in gathering, processing, treating and transporting Anadarko and third-party oil, gas and NGLs production. The marketing segment sells most of Anadarkos production, as well as third-party purchased volumes. To assess the operating results of Anadarkos segments, the chief operating decision maker analyzes income (loss) before income taxes, interest expense, exploration expense, depreciation, depletion and amortization (DDA) expense and impairments, less net income attributable to noncontrolling interests (Adjusted EBITDAX). Anadarkos definition of Adjusted EBITDAX excludes exploration expense, as exploration expense is not an indicator of operating efficiency for a given reporting period. However, exploration expense is monitored by management as part of costs incurred in exploration and development activities. Similarly, DDA expense 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. The Companys definition of Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarkos financing methods or capital structure. Management believes that the presentation of Adjusted EBITDAX provides information useful in assessing the Companys financial condition and results of operations and that Adjusted EBITDAX is a widely accepted financial indicator of a companys ability to incur and service debt, fund capital expenditures and make distributions to stockholders. Adjusted EBITDAX may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with income (loss) attributable to common stockholders and other performance measures, such as operating income or cash flow from operating activities. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes. Quarter Ended March31, millions 2010 2009 Income (loss) before income taxes $ 1,245 $ (545 ) Exploration expense 155 301 Depreciation, depletion and amortization expense 981 806 Impairments 12 51 Interest expense 224 182 Less: Net income attributable to noncontrolling interests 12 7 Consolidated Adjusted EBITDAX $ 2,605 $ 788 The following table presents selected financial information for Anadarkos operating segments. Information presented below as Other and Intersegment Eliminations includes results from hard minerals non-operated joint ventures and royalty arrangements, o

Pension Plans and Other Postret

Pension Plans and Other Postretirement Benefits
	3 Months Ended Mar. 31, 2010
Pension Plans and Other Postretirement Benefits	12. Pension Plans and Other Postretirement Benefits The Company has non-contributory defined-benefit pension plans, including both qualified and supplemental plans, and a foreign contributory defined-benefit pension plan. 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 Company and the retiree. The Companys retiree life insurance plan is noncontributory. During the quarter ended March31, 2010, the Company made contributions of $49million to its funded pension plans, $1million to its unfunded pension plans and $4million to its unfunded other postretirement benefit plans. Contributions to funded plans increase plan assets while contributions to unfunded plans are used to fund current benefit payments. During the remainder of 2010, the Company expects to contribute approximately $45million to its funded pension plans, approximately $18million to its unfunded pension plans and approximately $15million to its unfunded other postretirement benefit plans. The following table sets forth the Companys pension and other postretirement benefit costs. PensionBenefits OtherBenefits Quarter Ended March31, QuarterEnded March31, millions 2010 2009 2010 2009 Components of net periodic benefit cost Service cost $ 17 $ 13 $ 2 $ 2 Interest cost 21 20 4 4 Expected return on plan assets (21 ) (18 ) Amortization of actuarial loss (gain) 17 13 (1 ) Amortization of prior service cost (credit) 1 Net periodic benefit cost $ 35 $ 28 $ 5 $ 6

Subsequent Event

Subsequent Event
	3 Months Ended Mar. 31, 2010
Subsequent Event	13. Subsequent Event In April 2010, the Macondo exploration well in the Gulf of Mexico, in which Anadarko holds a 25% non-operating interest, discovered hydrocarbon accumulations. An explosion occurred on the deepwater drilling rig during operations on the well, following which the drilling rig sank and hydrocarbons flowed into the Gulf of Mexico. A full response and investigation is being conducted by the operator of the well, the drilling rig owner and governmental entities. The cause of the explosion, the environmental impact and the ultimate costs associated with this event are not yet known. Contractual language between various parties associated with this well provides for indemnification in certain instances; however, any responsibilities under such indemnities are not yet known. The Company carries insurance to protect against potential financial losses occurring as a result of such events for its share of gross covered costs up to a level of approximately $710million, less up to $60million of deductibles. Based on its 25% non-operated interest in this well, the Company estimates its net insurance coverage will total approximately $178million, less deductibles of $15million. Given its role as a non-operating interest owner and due to the continuing response to the event, the Company is currently unable to estimate its potential liability for costs arising in connection with this event.