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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: June 30, 1996
Commission File Number: 1-8968
_____________________
ANADARKO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0146568
(State of incorporation) (I.R.S. Employer
Identification No.)
17001 NORTHCHASE DRIVE, HOUSTON, TEXAS 77060
(Address of executive offices)
(713) 875-1101
(Registrant's telephone number)
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 July 31, 1996 is shown below:
Number of Shares
Title of Class Outstanding
Common Stock, $0.10 par value 59,254,290
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
thousands 1996 1995 1996 1995
Revenues
Gas sales $ 88,070 $ 69,323 $177,185 $127,855
Oil and condensate sales 34,894 34,434 65,766 65,387
Natural gas liquids and other 12,124 10,133 27,844 23,475
Total 135,088 113,890 270,795 216,717
Cost and Expenses
Operating expenses 27,918 24,712 54,451 52,166
Administrative and general 19,499 14,832 34,698 28,922
Depreciation, depletion and
amortization 40,268 42,130 83,207 78,834
Other taxes 10,276 9,970 20,415 20,186
Total 97,961 91,644 192,771 180,108
Operating Income 37,127 22,246 78,024 36,609
Other Income and (Expenses)
Other income 147 213 345 272
Interest expense (9,600) (9,012) (19,102) (17,024)
Income before Income Taxes 27,674 13,447 59,267 19,857
Income Taxes 10,046 4,394 21,123 6,724
Net Income $ 17,628 $ 9,053 $ 38,144 $ 13,133
Per Common Share
Net income $ 0.30 $ 0.15 $ 0.65 $ 0.22
Dividends $ 0.075 $ 0.075 $ 0.15 $ 0.15
Average Number of Shares Outstanding 59,162 58,910 59,108 58,894
See accompanying notes to consolidated financial statements.
-2-
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, December 31,
thousands 1996 1995
ASSETS
Current Assets
Cash and cash equivalents $ 17,165 $ 17,090
Accounts receivable 125,761 127,943
Inventories, at average cost 18,410 14,859
Prepaid expenses 794 3,306
Total 162,130 163,198
Properties and Equipment
Original cost 3,867,099 3,717,672
Less accumulated depreciation, depletion
and amortization 1,712,938 1,628,922
Net properties and equipment - based on
the full cost method of accounting
for oil and gas properties 2,154,161 2,088,750
Deferred Charges 15,169 15,099
$2,331,460 $2,267,047
See accompanying notes to consolidated financial statements.
-3-
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET (continued)
(Unaudited)
June 30, December 31,
thousands 1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
Trade and other $ 113,063 $ 153,502
Banks 16,543 12,849
Accrued expenses
Interest 10,482 10,729
Taxes and other 13,727 13,393
Total 153,815 190,473
Long-term Debt 715,155 674,008
Deferred Credits
Deferred income taxes 465,974 449,798
Other 50,326 43,074
Total 516,300 492,872
Stockholders' Equity
Common stock, par value $0.10
(200,000,000 shares authorized,
60,179,985 and 60,016,045 shares issued
as of June 30, 1996 and December 31, 1995,
respectively) 6,063 6,047
Preferred stock, par value $1.00
(2,000,000 shares authorized, no
shares issued as of June 30, 1996
and December 31, 1995) --- ---
Paid-in capital 314,592 304,125
Retained earnings (as of June 30, 1996,
$296,190,000 was not restricted
as to the payment of dividends) 685,728 656,455
Deferred compensation (2,060) (2,808)
Executives and directors benefit trust,
at market value (1,000,000 shares
as of June 30, 1996 and December 31, 1995) (58,000) (54,125)
Treasury stock (2,441 shares as of June 30, 1996) (133) ---
Total 946,190 909,694
$2,331,460 $2,267,047
See accompanying notes to consolidated financial statements.
-4-
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
thousands 1996 1995
Cash Flow from Operating Activities
Net income $ 38,144 $ 13,133
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation, depletion and amortization 83,207 78,834
Amortization of restricted stock 868 819
Deferred income taxes 17,656 6,624
139,875 99,410
Decrease in accounts receivable 2,182 21,176
Increase in inventories (3,551) (2,674)
Decrease in accounts payable - trade and
other (40,439) (29,684)
Increase in accrued expenses 87 7,162
Other items - net 7,980 6,466
Net cash provided by operating activities 106,134 101,856
Cash Flow from Investing Activities
Additions to properties and equipment (151,756) (121,561)
Sales and retirements of properties and equipment 3,373 2,591
Net cash used in investing activities (148,383) (118,970)
Cash Flow from Financing Activities
Additions to debt 41,147 155,000
Retirements of debt --- (117,561)
Increase (decrease) in accounts payable, banks 3,694 (8,228)
Dividends paid (8,871) (8,913)
Issuance of common stock 6,487 1,891
Issuance of treasury stock 475 252
Purchase of treasury stock (608) (252)
Net cash provided by financing activities 42,324 22,189
Net Increase in Cash and Cash Equivalents 75 5,075
Cash and Cash Equivalents at Beginning of Period 17,090 6,530
Cash and Cash Equivalents at End of Period $ 17,165 $ 11,605
See accompanying notes to consolidated financial statements.
-5-
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Accounting Policies Anadarko Petroleum Corporation is engaged in
the exploration, development, production and marketing of gas, oil 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, Anadarko Trading Company and Anadarko
Algeria Corporation.
Certain amounts for prior years have been reclassified to conform to the
current presentation.
2. Inventories Inventories are stated at the lower of average cost or market.
NGLs and natural gas, when sold from inventory, are charged to expense using
the average-cost method. The major classes of inventories are as follows:
June 30, December 31,
thousands 1996 1995
Materials and supplies $18,392 $13,969
Natural gas liquids, stored in inventory 18 412
Natural gas, stored in inventory --- 478
$18,410 $14,859
3. Properties and Equipment Oil and gas properties include costs of
$256,557,000 and $245,577,000 at June 30, 1996 and December 31, 1995,
respectively, which were excluded from capitalized costs being amortized.
These amounts represent costs associated with unevaluated properties and major
development projects.
4. Long-term Debt A summary of long-term debt follows:
June 30, December 31,
thousands 1996 1995
Notes Payable, Banks $162,100 $154,100
Commercial Paper 53,055 19,908
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
$715,155 $674,008
-6-
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Long-term Debt (continued)
The notes payable to banks and commercial paper 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", under the terms of Anadarko's Bank Credit Agreements.
5. Common Stock For the second quarter of 1996, dividends of seven and one-
half cents per share were paid to holders of common stock. Under the most
restrictive provisions of the various credit agreements, which limit the
payment of dividends by the Company, retained earnings of $296,190,000 and
$259,694,000 were not restricted as to the payment of dividends at June 30,
1996 and December 31, 1995, respectively.
6. Statement of Cash Flows Supplemental Information The amounts of cash
paid for interest (net of amounts capitalized) and income taxes are as
follows:
Six Months Ended
June 30
thousands 1996 1995
Interest $18,931 $14,161
Income taxes $ 3,905 $ 1,008
7. Operating Expenses Operating expenses by category are as follows:
Three Months Ended Six Months Ended
June 30 June 30
thousands 1996 1995 1996 1995
Oil and gas $17,165 $16,512 $32,288 $32,348
Plant, gathering and marketing 8,117 5,748 15,587 13,608
Gas purchases 2,476 2,158 6,061 4,863
Other 160 294 515 1,347
$27,918 $24,712 $54,451 $52,166
8. Subsequent Event
Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978 (NGPA) allowed 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.
-7-
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
8. Subsequent Event (Continued)
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 interpre-
tation 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 date of the
enactment of the NGPA and producers should have been required 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. If further judicial review of
the decision is unsuccessful, the pursuit of other judicial and regulatory
relief from the application of this decision to the Company will be
considered. The Company is unable at this time to predict the final
outcome of this matter. If, however, the August 2, 1996 decision is not
reversed or modified by judicial review and if Anadarko is unable to limit
application of the decision to the Company, Anadarko estimates the maximum
amount of the principal and interest at issue is approximately $35 million
(pre-tax) as of June 30, 1996.
9. 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 June 30, 1996 and December 31, 1995, the results of
operations for the three and six months ended June 30, 1996 and 1995, and
cash flows for the six months ended June 30, 1996 and 1995.
-8-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview of Operating Results
For the second quarter of 1996, Anadarko's net income was $17.6 million
(30 cents per share), an increase of 95 percent, compared to net income of
$9.1 million (15 cents per share) for the second quarter of 1995. Revenues for
the second quarter of 1996 were $135.1 million, up 19 percent compared to
$113.9 million for the second quarter of 1995.
For the first six months of 1996, Anadarko's net income was $38.1 million (65
cents per share) an increase of 190 percent compared to net income of $13.1
million (22 cents per share) for the same period of 1995. Revenues for the
first six months of 1996 were $270.8 million, an increase of 25 percent
compared to $216.7 million for the same period of 1995. The increases in net
income and revenues for the second quarter and the first six months of 1996 are
due primarily to significantly higher prices for natural gas, crude oil and
natural gas liquids (NGLs).
The following table shows the Company's volumes and U.S. prices for the three
and six months ended June 30, 1996 and 1995:
Three Months Ended
June 30 % Increase
1996 1995 (Decrease)
Natural gas, Bcf 40.4 43.5 (7)
Average daily volumes, MMcf/d 444 479 (7)
Price per Mcf $ 2.04 $ 1.46 40
Crude oil and condensate, MBbls 1,670 1,936 (14)
Average daily volumes, MBOD 18 21 (14)
Price per barrel $ 19.83 $ 17.44 14
Natural gas liquids, MBbls 779 754 3
Average daily volumes, MBOD 9 8 ---
Price per gallon $ 0.34 $ 0.30 13
-9-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Six Months Ended
June 30 % Increase
1996 1995 (Decrease)
Natural gas, Bcf 84.1 84.9 (1)
Average daily volumes, MMcf/d 462 469 (1)
Price per Mcf $ 1.99 $ 1.38 44
Crude oil and condensate, MBbls 3,372 3,774 (11)
Average daily volumes, MBOD 19 21 (10)
Price per barrel $ 18.73 $ 16.97 10
Natural gas liquids, MBbls 1,767 1,768 ---
Average daily volumes, MBOD 10 10 ---
Price per gallon $ 0.34 $ 0.31 10
See "Natural Gas Volumes and Prices" and "Crude Oil,
Condensate and Natural Gas Liquids Volumes and Prices".
Costs and expenses during the second quarter of 1996 were $98.0 million, an
increase of seven percent compared to $91.6 million for the second quarter of
1995. The increase was mostly related to higher administrative and general
expenses related to an increase in employee salaries and benefits and operating
expenses related to higher gas gathering expenses.
For the first six months of 1996, costs and expenses totaled $192.8 million, an
increase of seven percent compared to $180.1 million for the first six months
of 1995. The increase is primarily due to higher depreciation, depletion and
amortization expense related to an increase in depreciation of general
properties, and higher administrative and general expenses related to an
increase in employee salaries and benefits and higher operating expenses
related to higher gas gathering expenses.
Interest expense for the second quarter of 1996 increased seven percent to $9.6
million compared to $9.0 million for the second quarter of 1995. For the first
six months of 1996, interest expense was $19.1 million, an increase of 12
percent compared to $17.0 million for the same period of 1995. The increases
are due primarily to higher levels of borrowings in 1996.
Natural Gas Volumes and Prices During the second quarter of 1996, Anadarko
produced 40.4 billion cubic feet (Bcf) or 444 million cubic feet per day
(MMcf/d) of natural gas, down seven percent compared to 43.5 Bcf or 479 MMcf/d
of gas in the second quarter of 1995. In addition to sales of Anadarko gas,
the Company marketed about 46 Bcf or 511 MMcf/d of third-party gas during the
second quarter of 1996 compared to 24 Bcf or 266 MMcf/d during the second
quarter of 1995. Anadarko's average U.S. wellhead gas price during the second
quarter of 1996 was $2.04 per thousand cubic feet (Mcf), a 40 percent increase
from $1.46 per Mcf in the second quarter of 1995.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
For the first half of 1996, Anadarko produced 84.1 Bcf or 462 MMcf/d of gas,
down one percent compared to 84.9 Bcf or 469 MMcf/d of gas for the same period
of 1995. In addition to sales of Anadarko gas, the Company also marketed about
94 Bcf or 519 MMcf/d of third-party gas in the first half of 1996 compared to
47 Bcf or 261 MMcf/d in the same period of 1995. The Company's average U.S.
wellhead gas price for the first six months of 1996 was $1.99 per Mcf, a 44
percent increase compared to $1.38 per Mcf for the same period of 1995.
Crude Oil, Condensate and Natural Gas Liquids Volumes and Prices Anadarko's
crude oil and condensate production for the second quarter of 1996 decreased 14
percent to 1.7 million barrels (MMBbls) or 18 thousand barrels of oil per day
(MBOD) compared to 1.9 MMBbls or 21 MBOD in the second quarter of 1995.
Anadarko's average U.S. oil price was up 14 percent to $19.83 per barrel in the
second quarter of 1996 compared to $17.44 per barrel for the same period in
1995.
For the first six months of 1996, crude oil and condensate production was 3.4
MMBbls or 19 MBOD, a decrease of 11 percent compared to 3.8 MMBbls or 21 MBOD
for the same period of 1995. Anadarko's average U.S. oil price for the first
half of 1996 was $18.73 per barrel, an increase of 10 percent compared to
$16.97 per barrel for the same period of 1995.
The volume declines in both periods are due primarily to sales of producing
properties in 1995.
NGLs sales volumes were up three percent to 779 thousand barrels (MBbls) at an
average price of 34 cents per gallon for the second quarter of 1996. This
compares to 754 MBbls at an average price of 30 cents per gallon for the same
period of 1995.
NGLs volumes for the first six months of 1996 were 1.8 MMBbls, which was equal
to volumes in the first half of 1995. The Company's NGLs price per gallon
increased 10 percent in the first half of 1996 to 34 cents per gallon compared
to 31 cents per gallon in the first six months of 1995.
Use of Derivatives Anadarko uses derivative financial instruments to limit
exposure to changes in the market price of natural gas and crude oil for the
Company and to provide methods to fix the price for natural gas independently
of the physical purchase or sale. Derivative instruments also provide methods
to meet customer pricing requirements while achieving a price structure
consistent with the Company's overall pricing strategy. While financial
instruments are intended to reduce the Company's exposure to declines in the
market price of natural gas and crude oil, the 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 financial instruments are
generally offset by similar changes in the realized price of natural gas and
crude oil. Gains and losses are recognized in revenues for the periods to
which the financial instruments relate. Anadarko's financial instruments
currently are comprised of futures, swaps and options.
-11-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Capital Expenditures, Liquidity and Dividends
During the first six months of 1996, Anadarko's capital spending (including
capitalized interest and overhead) was $151.7 million compared to $121.0
million in the same period of 1995. Capital expenditures in both periods
related primarily to the Company's oil and gas exploration and development
activities.
The Company believes cash flows, including proceeds from divestitures, and
existing available credit facilities will be sufficient to meet capital and
operating requirements during 1996. However, Anadarko may pursue other
financing options to reduce or stabilize interest costs.
Anadarko's Board of Directors declared a quarterly dividend of seven and one-
half cents per share of common stock outstanding. The dividend is payable on
September 25, 1996 to stockholders of record on September 11, 1996. Under the
most restrictive provisions of the various credit agreements, which limit the
payment of dividends by the Company, retained earnings of $296,190,000 were
not restricted as to the payment of dividends at June 30, 1996. The amount of
future dividends for Anadarko will depend on earnings, financial condition,
capital requirements and other factors, and will be determined by the
Directors on a quarterly basis.
Exploration and Development Drilling
During the second quarter of 1996, Anadarko participated in a total of 55
wells, including 28 oil wells, 18 gas wells and nine dry holes. This compares
to a total of 76 wells, including 37 oil wells, 25 gas wells and 14 dry holes
during the second quarter of 1995. For the first six months of 1996, Anadarko
participated in a total of 116 wells, including 60 oil wells, 31 gas wells and
25 dry holes. This compares to a total of 153 wells, including 79 oil wells,
52 gas wells and 22 dry holes during the first six months of 1995. Following
is a listing of significant activity during the second quarter of 1996.
International
Algeria
In July 1996, Anadarko and partners received a Provisional Exploitation
Authorization (PEA) from the Government of Algeria for wells in two crude oil
fields in the southeastern Sahara Desert. Both Fields, the Hassi Berkine (HBN)
and the Hassi Berkine South (HBNS), are on Block 404 in the Ghadames Basin.
Contracts for equipment and engineering and construction services necessary to
begin production are being negotiated. At this time, it is anticipated that
production will begin in early 1998. See Additional Factors Affecting Business
and Forward Looking Statements under Item 7, pages 28-29, of the 1995 Form 10-K.
The drilling rig used on the Berkine Northeast No. 1 (BKNE-1) was released from
location on May 20, 1996. The well, which was drilled in the Ghadames Basin on
Block 404, was cased and suspended for future testing and evaluation. The rig
was transported to the Berkine East No. 4 (BKE-4) location, also on Block 404,
and is currently drilling. The El Merk East No. 2 (EME-2) on Block 208 spud
July 20, 1996. The EME-2 well will evaluate the El Merk East No. 1 (EME-1)
discovery made in 1994.
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The political unrest in Algeria has been the subject of numerous media reports.
Although the Company was encouraged by democratic elections held in 1995, the
Company is closely monitoring the situation and has taken reasonable and
prudent steps to ensure the safety of employees working in the remote regions
of the Sahara Desert. Anadarko is presently unable to predict with certainty
any effect the current situation may have on activity planned for 1996 and
beyond. However, the situation has not had any material effect on the Company's
operations.
Indonesia
Anadarko and partners filed a Plan of Development in June 1996 for the North
Geragai Field with Pertamina, the state oil company of Indonesia. The North
Geragai Field was discovered in the first quarter of 1995. Anadarko Indonesia
Company, Jabung, a wholly owned subsidiary of Anadarko, holds a 33.33-percent
participating interest in the Indonesia venture.
United States - Offshore
Gulf of Mexico
Drilling operations on the Mahogany No. 5 development well, at Ship Shoal South
Addition 349/359, were suspended temporarily to allow for the installation of
the production platform in August 1996. The No. 5 well was drilled to the top
of salt, casing was set and the wellbore was temporarily plugged. The
production platform will be set in place during the third quarter of 1996, on
which a drilling rig will be installed to complete the four wells drilled to
date. Afterwards, drilling operations will resume on the No. 5 well.
Production from the Mahogany platform should commence in December 1996.
Initial production from the wells drilled to date is expected to be about
22,000 barrels of oil per day (BOPD) and 30 MMcf/d of gas. The drilling of
additional development wells is expected to increase production. The platform
has the capacity to handle 45,000 BOPD and 100 MMcf/d of gas through a
maximum of 20 wellbores. Anadarko has a 37.5-percent working interest in the
Mahogany project.
-13-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
United States - Onshore
Southwest Kansas
The Beaty Trust "A" #1 flowed 4.1 MMcf/d of gas and 2 BOPD. The well is located
in the Angman Field of Seward County, Kansas. Anadarko owns a 100-percent
working interest in the well. Located in the Eubank Field of Haskell County,
Kansas, the Ray "C" #4 flowed 2.0 MMcf/d of gas and 2 BOPD. Anadarko owns a
100-percent working interest in the well.
Three wells were completed in Stevens County, Kansas, during the second quarter
of 1996. The Brollier "D" #2H, produced 479 thousand cubic feet per day (Mcf/d)
of gas. Anadarko owns a 50-percent working interest in the well. The Lahey "B"
#1, located in the Cave West Field, produced 655 Mcf/d of gas and 5 barrels of
condensate per day (BCPD). Anadarko owns a 97.7-percent working interest in
this well. The Ratzlaff "B" #3 was completed in the Gentzler SW Field flowing
2.1 MMcf/d of gas and 8 BCPD. Anadarko owns a 94-percent working interest in
this well.
Central Oklahoma
The Sanford #1-12A, located in the West Panhandle Field, flowed 6.5 MMcf/d of
gas. Anadarko owns a 100-percent working interest in this well.
The Eichwald "A" #3 well, located in the Ivanhoe Field in Beaver County,
Oklahoma,flowed 1.7 MMcf/d of gas and 5 BCPD. Anadarko owns a 50-percent
working interest in this well.
From the Campbell East Field in Major and Woods Counties, Oklahoma, the Barnes
17 #2 well flowed 680 Mcf/d of gas. Anadarko owns a 40-percent working interest
in this well.
The Mitchell "B" #1-22, located in Purdy Field of Garvin County, Oklahoma,
flowed 1.2 MMcf/d of gas and 67 BOPD. The closest well producing from the same
interval is about three miles away. Anadarko owns a 99.7-percent working
interest in the well.
Permian Basin
In the Ketchum Mountain (Clearfork) Field, located in Irion County, Texas, the
Scott "32" #3206 flowed 93 BOPD. Anadarko owns a 100-percent working interest
in this well. In the same Field, two wells were completed on the Sugg Lease.
The Sugg "5" #513 produced 115 BOPD and 50 Mcf/d of gas. The Sugg "5" #514
produced 89 BOPD and 49 Mcf/d of gas. Anadarko owns a 100-percent working
interest in both wells.
In Scurry County, Texas, Anadarko completed six wells in the Sharon Ridge
(Clearfork) Field. Two producing wells and three injection wells were added to
the West Texas National Bank lease and one producing well was added to the W.T.
Falls lease. Both leases are in initial stages of waterflood development.
Anadarko owns a 100-percent working interest in both leases.
-14-
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978 (NGPA) allowed 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 date of the enactment of the NGPA and producers should have been
required 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. If further judicial review of the
decision is unsuccessful, the pursuit of other judicial and regulatory relief
from the application of this decision to the Company will be considered. The
Company is unable at this time to predict the final outcome of this matter.
If, however, the August 2, 1996 decision is not reversed or modified by
judicial review and if Anadarko is unable to limit application of the
decision to the Company, Anadarko estimates the maximum amount of principal
and interest at issue is approximately $35 million (pre-tax) as of June 30,
1996.
Heritage Resources, Inc. Litigation Pursuant to an order of the 162nd Judicial
District Court for Dallas County, Texas, dated January 29, 1988, requiring all
owners of interests in certain properties in Winkler County, Texas, to be
joined as parties Plaintiff or parties Defendant, Anadarko entered, as a party
Plaintiff, a suit filed against Heritage Resources, Inc. (Heritage) by Tribal
Drilling Company. The Plaintiffs, among other things, sought to have Heritage
removed as operator of a well in which Plaintiffs own interests. The
Defendants asserted counterclaims against Anadarko and other Plaintiffs
alleging that, among other things, the assertions of the Plaintiffs were
frivolous and were made in bad faith and the Plaintiffs breached the joint
operating agreements. Trial was scheduled to start on June 10, 1996.
However, prior to trial a settlement agreement was reached. The Company's
settlement payment was an immaterial amount.
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Item 4. Submission of Matters to a Vote of Security Holders
(a) On April 25, 1996, the Company held its Annual Stockholders' Meeting.
(b) Messrs. Ronald Brown and John R. Gordon were re-elected as Class I
directors to serve for a term of three years. Messrs. Conrad P. Albert,
Robert J. Allison, Jr. and Charles M. Simmons will continue to serve as
Class II directors and Messrs. Larry Barcus and James L. Bryan will
continue to serve as Class III directors.
Mr. Ronald Brown was re-elected with votes for of 50,121,815 and votes
withheld of 195,419. Mr. John R. Gordon was re-elected with votes for of
50,124,185 and votes withheld of 193,049.
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 19(a)(I) to Form 10-Q 1-8968
of Anadarko Petroleum Corporation, for quarter ended
Dated August 28, 1986 September 30, 1986
*(b) By-laws of Anadarko Petroleum
Corporation, as amended
*27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended
June 30, 1996.
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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)
August 12, 1996 [MICHAEL E. ROSE]
Michael E. Rose - Senior Vice President,
Finance and Chief Financial Officer