<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NO. 1-8968
ANADARKO PETROLEUM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0146568
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17001 NORTHCHASE DRIVE, HOUSTON, TEXAS 77060
(ADDRESS OF EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (713) 875-1101
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $0.10 par value The New York Stock Exchange, Inc.
Preferred Stock Purchase Rights The New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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
----- -----
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x .
-----
The aggregate market value of the voting stock held by non-affiliates of
the registrant computed using the average of the high and low sales prices at
which the stock sold on January 31, 1994 was $2,798,280,755.
The number of shares outstanding of each of the registrant's classes of
common stock as of January 31, 1994 is shown below:
NUMBER OF SHARES
TITLE OF CLASS OUTSTANDING
-------------- ----------------
Common Stock, $0.10 par value 58,679,544
PART OF
FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
- --------- -----------------------------------
Part I Portions of the Anadarko Petroleum Corporation 1993 Annual
Report to Stockholders.
Part III Portions of the Proxy Statement, dated March 21, 1994,
for the Annual Meeting of Stockholders of Anadarko
Petroleum Corporation to be held April 28, 1994.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
Item 1. Business
General 3
Employees 3
Proved Reserves and Future Net Cash Flows 3
Exploration, Development, Acquisition and
Marketing Activities 4
Volumes and Prices 4
Properties and Activities - United States - Onshore 5
Properties and Activities - United States - Offshore 7
Properties and Activities - International 7
Drilling Programs 8
Drilling Statistics 8
Productive Wells 9
Regulatory and Legislative Developments 10
Additional Factors Affecting Business 11
Title to Properties 11
Capital Spending 12
Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends 12
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Executive Officers of the Registrant 13
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 65
PART III
Item 10. Directors and Executive Officers of the Registrant 65
Item 11. Executive Compensation 65
Item 12. Security Ownership of Certain Beneficial Owners
and Management 65
Item 13. Certain Relationships and Related Transactions 65
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 66
Index to Consolidated Schedules 71
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Anadarko Petroleum Corporation and its subsidiaries are engaged in the
exploration, development, production and marketing of gas, oil and natural gas
liquids (NGLs), both domestically and internationally. Anadarko's U. S.
drilling and production operations are focused primarily in Kansas, Oklahoma,
Texas and the Gulf of Mexico. In the United States, approximately 80 percent of
the Company's reserves are located in major producing basins in the
Mid-continent and West Texas. Approximately 14 percent of Anadarko's reserves
are in the Gulf of Mexico, where the Company owns interests in 124 lease
blocks. Anadarko has oil and gas reserves in Canada where the Company has a
drilling program focusing on trends in southern and central Alberta. Anadarko
also is searching for oil reserves on a 5.1 million acre concession in Algeria
and is participating in other select joint-venture projects overseas.
In order to manage production more effectively and improve recovery of
natural gas reserves, the Company owns interests in 17 gas gathering systems,
and 20 gas processing plants in the Mid-continent area. Anadarko also explores
for geothermal energy in the western United States.
Anadarko is a Delaware corporation which was organized in 1985 as the
successor to the oil and gas business of Anadarko Production Company
(Production), which was founded in 1959 as a subsidiary of Panhandle Eastern
Corporation (Panhandle). Anadarko's common stock was distributed to Panhandle
stockholders in 1986. The principal subsidiaries of Anadarko are: Anadarko
Gathering Company; Anadarko Marketing Company; Anadarko Trading Company;
Anadarko Petroleum of Canada Ltd.; and, Anadarko Algeria Corporation.
Unless the context otherwise requires, the terms "Anadarko" or "Company"
refer to Anadarko and its subsidiaries. The Company's executive offices are
located at 17001 Northchase Drive, Houston, Texas 77060, where the telephone
number is (713) 875-1101.
EMPLOYEES
On December 31, 1993, the Company employed approximately 1,020 persons.
The Company's employees are not represented by any union. Relations between
the Company and its employees are considered to be satisfactory, and the
Company has had no work stoppages or strikes.
PROVED RESERVES AND FUTURE NET CASH FLOWS
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and NGLs which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Reservoirs are considered
proved if economical producibility is supported by either actual production or
conclusive formation tests. Reserves which can be produced economically
through application of improved recovery techniques are included in the
"proved" classification when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the project or program was based.
Proved developed oil and gas reserves are reserves which can be expected
to be recovered through existing wells with existing equipment and operating
methods.
As of December 31, 1993, Anadarko had proved reserves of 1.88 trillion
cubic feet (Tcf) of natural gas and 78.5 million barrels (MMBbls) of crude oil,
condensate and NGLs. Combined, these proved reserves are equivalent to 391.1
MMBbls of oil or 2.35 Tcf of gas. As of December 31, 1993, Anadarko had proved
developed reserves of 1.71 Tcf of natural gas and 64.2 MMBbls of crude oil,
condensate and NGLs. Proved developed reserves comprise 89 percent of the
total proved reserves.
The Company's estimates of proved reserves and proved developed reserves,
net of royalty interests, of gas, oil and NGLs owned at December 31, 1993,
1992, 1991 and 1990 and changes in proved reserves during the last three years
are contained in the Supplemental Information on Oil and Gas Exploration and
Production Activities (Supplemental Information) in the Anadarko Petroleum
Corporation 1993 Consolidated Financial Statements (Consolidated Financial
Statements) under Item 8 of this Form 10-K Annual Report (Form 10-K). The
Company files annual estimates of proved oil and gas reserves with the
Department of Energy, which are within five percent of these amounts.
Also contained in the Supplemental Information in the Consolidated
Financial Statements are the Company's estimates of future net cash flows,
discounted future net cash flows before income taxes and discounted future net
cash flows after income taxes from proved reserves of gas, oil and NGLs.
3
<PAGE> 4
EXPLORATION, DEVELOPMENT, ACQUISITION AND MARKETING ACTIVITIES
See narrative description of "Exploration", "Development", "Acquisition"
and "Marketing" on pages 6 through 14 of the Anadarko Petroleum Corporation
1993 Annual Report to Stockholders (Annual Report), which is incorporated
herein by reference, and see "Marketing Strategies" and "Operating Results" in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) under Item 7 of this Form 10-K.
VOLUMES AND PRICES
The following table shows the Company's annual volumes. Volumes for
natural gas are in millons of cubic feet (MMcf) at a pressure base of 14.73
pounds per square inch (psi) and volumes for oil and condensate and NGLs are in
thousands of barrels (MBbls).
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
UNITED STATES
Natural gas (MMcf) 158,662 143,865 134,357
Oil and condensate (MBbls) 7,223 3,845 4,183
Natural gas liquids (MBbls) 2,680 2,434 1,943
CANADA
Natural gas (MMcf) 3,236 2,561 3,527
Oil and condensate (MBbls) 687 814 785
Natural gas liquids (MBbls) 17 13 14
TOTAL
Natural gas (MMcf) 161,898 146,426 137,884
Oil and condensate (MBbls) 7,910 4,659 4,968
Natural gas liquids (MBbls) 2,697 2,447 1,957
</TABLE>
The following table shows the Company's annual average sales
prices and average production costs. Production costs are per energy
equivalent barrel (EEB). For this computation, one barrel is the energy
equivalent of six thousand cubic feet (Mcf).
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
UNITED STATES
Sales price $ 1.92 $ 1.71 $ 1.51
Natural gas (per MMcf) 16.35 18.45 19.61
Oil and condensate (per barrel) 0.30 0.32 0.33
Natural gas liquids (per gallon) 3.30 2.78 2.90
Production cost (per EEB)
CANADA
Sales price $ 1.53 $ 1.22 $ 1.30
Natural gas (per MMcf) 12.85 14.60 14.01
Oil and condensate (per barrel) 0.24 0.24 0.30
Natural gas liquids (per gallon) 4.51 5.26 4.69
Production cost (per EEB)
TOTAL
Sales price
Natural gas (per MMcf) $ 1.91 $ 1.70 $ 1.51
Oil and condensate (per barrel) 16.05 17.78 18.72
Natural gas liquids (per gallon) 0.30 0.32 0.33
Production cost (per EEB) 3.34 2.88 2.99
</TABLE>
Additional information on volumes and prices is contained in "Analysis of
Volumes and Prices" in the MD&A under Item 7 of this Form 10-K. Additional
information on major customers is contained in Note 8 of the Notes to
Consolidated Financial Statements under Item 8 of this Form 10-K.
4
<PAGE> 5
PROPERTIES AND ACTIVITIES - UNITED STATES - ONSHORE
ACREAGE Approximately 88 percent of the Company's 2,522,000 gross (797,000
net) onshore undeveloped acres in the United States at year-end 1993 lie within
four producing provinces: the Anadarko Basin of Kansas and Oklahoma, the Gulf
Coast region, the Permian Basin of West Texas and the Rocky Mountains. As of
December 31, 1993, approximately 98 percent of the Company's 2,145,000 gross
(895,000 net) developed acres onshore in the United States are located within
these same provinces. Other significant areas of developed acreage are in
Oklahoma.
The accompanying map illustrates by state Anadarko's developed and
undeveloped net acres, number of producing net wells and other data relevant to
its onshore oil and gas operations in the United States.
GEOTHERMAL The Company is actively exploring for geothermal energy because
of its long-term potential for economic and environmentally safe electric power
generation. Geothermal exploratory holdings in California, Nevada and Oregon
totaled 160,000 net acres at year-end 1993. During 1993, the Company recorded
a $500,000 (pre-tax) charge to earnings for the impairment of miscellaneous
geothermal projects in Nevada.
GAS GATHERING SYSTEMS Anadarko owns and operates four gas gathering systems
in the nation's mid-continent area: the Antioch Gathering System in the
Southwest Antioch Field of Oklahoma; the Hobart Ranch Gathering System, located
in Hemphill County, Texas; the Hugoton Gathering System in southwest Kansas;
and the Sneed System in the West Panhandle Field of Texas. In addition, the
Company owns a 43 percent working interest in the Limestone Ridge Gas Gathering
System, located in the Arkoma Basin near Wilburton, Oklahoma. In addition to
these systems, Anadarko owns interests in 12 other smaller systems. In the
aggregate, these 17 systems have approximately 700 miles of pipeline and over
400 MMcf per day (MMcf/d) of gas gathering capacity.
GAS PROCESSING PLANTS Anadarko owns and operates seven gas processing
plants and has interests in 13 other plants. Virtually all of these plants are
located within the Company's areas of gas production. Many also are integrated
with the gas gathering systems described previously. The following table sets
forth the average daily gas throughput and NGLs production for the three years
ended December 31, 1993 and capacity as of December 31, 1993.
<TABLE>
<CAPTION>
Throughput and Production Capacity
For the Years Ended December 31 December 31,
1993 1992 1991 1993
--------- -------- --------- ------------
<S> <C> <C> <C> <C>
Gas throughput (MMcf/d) 98 102 100 200
NGLs production (Bbls per day) 7,040 6,640 5,410 9,000
</TABLE>
5
<PAGE> 6
ONSHORE MAP (GRAPHIC MATERIAL OMITTED)
<TABLE>
<CAPTION>
NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
--------- ----------- ---------
<S> <C> <C> <C>
ONSHORE:
United States
Arkansas 5,356 33,637 44
Colorado* 6,162 49,268 13
Kansas* 366,284 72,417 1,326
Louisiana 1,341 2,267 8
Mississippi 242 60,669 --
Montana 18,372 8,797 24
Nebraska 109 483 --
Nevada* -- 192,712 --
New Mexico* 30,126 4,206 268
North Dakota 1,390 294 3
Oklahoma* 228,147 51,346 815
Texas* 195,953 144,331 1,677
Utah* 407 112,864 12
Wyoming* 41,182 64,142 48
United States - Geothermal
California -- 113,610 --
Nevada -- 11,639 --
Oregon -- 34,857 --
Canada
Alberta* 46,719 58,941 109
British Columbia 8,748 10,653 32
Saskatchewan 3,429 2,327 19
OFFICE LOCATIONS:
United States
Houston, Texas
Midland, Texas
Oklahoma City, Oklahoma
Liberal, Kansas
Santa Rosa, California
Canada
Calgary, Alberta
</TABLE>
*1993 Onshore Drilling Activities Area
6
<PAGE> 7
PROPERTIES AND ACTIVITIES - UNITED STATES - OFFSHORE
ACREAGE At year-end 1993, Anadarko owned an average 40 percent interest in
124 lease blocks and held 40,000 net acres in developed properties and 200,000
net acres in undeveloped properties.
The accompanying map illustrates the Company's exploratory and development
net acres, number of producing net wells and other data relevant to its
offshore properties.
PROPERTIES AND ACTIVITIES - INTERNATIONAL
In recent years, the Company has devoted a small portion of its
exploration budget to selected joint-venture projects overseas. Anadarko's
objective in international exploration is to bring high-potential prospects to
the balanced mix of domestic plays. These projects offer significant upside
potential, albeit with corresponding exposure to write-offs in the event
exploration is unsuccessful. The Company recorded $6.5 million (pre-tax) and
$21 million (pre-tax) of charges to earnings during 1993 and 1992,
respectively, related to unsuccessful exploration activity in China, Yemen and
various other international locations.
CANADA Approximately three percent of the Company's proved reserves are
located in Canada. Activities in Canada are concentrated in the western
provinces of Alberta, British Columbia and Saskatchewan. At the end of 1993,
Anadarko held interests in 241,000 gross (131,000 net) acres of which 105,000
gross (72,000 net) acres were undeveloped and 136,000 gross (59,000 net) acres
were developed. The accompanying onshore map illustrates by province
Anadarko's developed and undeveloped net acres, number of producing net wells
and other data relevant to its oil and gas operations in Canada.
ALGERIA Anadarko's primary international exploration venture is in Algeria,
where the Company is exploring for oil under a production sharing agreement
secured in 1989 from Sonatrach, the national oil and gas enterprise of Algeria.
Anadarko's partners, each with a 25 percent working interest, in the Algerian
venture are LASMO Oil (Algeria) Limited, a wholly owned subsidiary of LASMO
plc, and Maersk Olie Algeriet AS, a wholly owned subsidiary of Maersk Olie Og
Gas AS, a company in the Danish A.P. Moeller group. Over a ten year period,
the Company and its two partners are committed to spend over $100 million and
drill ten wells exploring on 5.1 million acres in the eastern Sahara Desert in
Algeria.
Liquid hydrocarbons discovered and produced will be shared by Anadarko and
its partners, and Sonatrach in accordance with the terms of the agreement.
Sonatrach is the beneficial owner of 10.2 percent of the Company's outstanding
common stock. As of December 31, 1993, Anadarko had incurred a total of
approximately $72,408,000 related to exploration activities, of which
approximately $26,964,000 was incurred in 1993.
At the present time, political unrest continues in Algeria. The Company
is closely monitoring the situation and is presently unable to predict with
certainty the short-term effects it may have on activity planned for 1994.
However, the situation has not had any material effect on the Company's
operations or exploration activity in Algeria to date. The Company's
activities in Algeria also are subject to the risks associated with
international operations.
INDONESIA The Company's ongoing commitment to international exploration
includes future exploration on the Jabung Block in the Jambi Province of
Indonesia. Anadarko and its partners, Santa Fe Energy Resources (Jabung),
Ltd., a wholly owned subsidiary of Santa Fe Energy Resources Inc., and
Kerr-McGee Sumatra Ltd., a wholly owned subsidiary of Kerr-McGee Corporation,
have a Production Sharing Contract which includes a $15.1 million commitment to
exploration activities which include seismic acquisition and reprocessing, as
well as the drilling of three exploratory wells, during the first three years.
The Jabung Block, which is located on the island of Sumatra in the northernmost
part of the South Sumatra Basin, covers an area of 2.0 million acres.
7
<PAGE> 8
OFFSHORE MAP (GRAPHIC MATERIAL OMITTED)
<TABLE>
<CAPTION>
NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
--------- ----------- ---------
<S> <C> <C> <C>
OFFSHORE:
United States
Alaska -- 6,397 --
Florida -- 54,734 --
Louisiana 14,141 72,708 18
Mississippi -- 2,194 --
Texas 25,560 63,905 20
</TABLE>
DRILLING PROGRAMS
The Company's 1993 drilling program again focused on known oil and gas
provinces onshore in North America, as well as offshore in the Gulf of Mexico.
Onshore activity was concentrated in the mid-continent regions of Kansas and
Oklahoma, the Yegua Trend along the Texas Gulf Coast and the Permian Basin of
West Texas. Exploration activity consisted of 21 wells onshore in the United
States, seven wells offshore United States, two wells in Canada and two
wells in Algeria. Development activity included 178 wells onshore in the
United States, four wells offshore United States and five wells in
Canada.
DRILLING STATISTICS
The following table shows the results of the oil and gas wells drilled and
tested:
<TABLE>
<CAPTION>
NET EXPLORATORY NET DEVELOPMENT
---------------------------- ----------------------------
PRODUCTIVE DRY HOLES TOTAL PRODUCTIVE DRY HOLES TOTAL TOTAL
---------- ---------- ----- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1993
United States 11.4 6.2 17.6 100.5 10.4 110.9 128.5
Canada 0.0 1.0 1.0 0.5 3.0 3.5 4.5
Algeria 0.5 0.5 1.0 0.0 0.0 0.0 1.0
--- --- ---- ---- ---- ----- -----
Total 11.9 7.7 19.6 101.0 13.4 114.4 134.0
==== === ==== ===== ==== ===== =====
1992
United States 3.5 4.5 8.0 43.5 5.4 48.9 56.9
Canada 0.0 2.5 2.5 5.4 0.0 5.4 7.9
China 0.0 1.0 1.0 0.0 0.0 0.0 1.0
Yemen 0.0 0.9 0.9 0.0 0.0 0.0 0.9
--- ---- ---- ---- ---- ----- -----
Total 3.5 8.9 12.4 48.9 5.4 54.3 66.7
=== ==== ==== ==== ==== ===== =====
1991
United States 4.6 7.0 11.6 63.5 8.0* 71.5 83.1
Canada 1.0 3.0 4.0 3.8 1.4 5.2 9.2
Algeria 0.0 0.5 0.5 0.0 0.0 0.0 0.5
--- ---- ---- ---- --- ----- ----
Total 5.6 10.5 16.1 67.3 9.4 76.7 92.8
=== ==== ==== ==== === ==== ====
</TABLE>
____________
*Does not include 1.3 net development Hugoton "deep" dry holes in 1991 that
were later completed as infill wells.
8
<PAGE> 9
The following table shows the number of wells in the process of drilling or
in active completion stages and the number of wells suspended or waiting on
completion as of December 31, 1993:
<TABLE>
<CAPTION>
UNITED STATES CANADA ALGERIA TOTAL
------------- ---------- ---------- -----------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ---- ----- --- ----- --- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wells in the process
of drilling or active
completion
Exploration 8.0 5.0 --- --- 2.0 1.0 10.0 6.0
Development 13.0 7.6 --- --- --- --- 13.0 7.6
Wells suspended or
waiting on completion
Exploration 9.0 5.6 13.0 6.9 --- --- 22.0 12.5
Development 82.0 54.5 --- --- --- --- 82.0 54.5
</TABLE>
PRODUCTIVE WELLS
As of December 31, 1993, the Company owned productive wells in the United
States and Canada as follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA TOTAL
---------------- ------------ ---------------
GROSS NET GROSS NET GROSS NET
----- ------- ----- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Oil wells* 6,990 2,433.0 553 118.9 7,543 2,551.9
Gas wells* 2,760 1,842.8 125 40.6 2,885 1,883.4
----- ------- --- ----- ------ -------
Total 9,750 4,275.8 678 159.5 10,428 4,435.3
===== ======= === ===== ====== =======
</TABLE>
_______________
*Wells containing multiple completions
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Oil wells 78 27.0 1 1.0 79 28.0
Gas wells 165 72.2 2 1.0 167 73.2
</TABLE>
9
<PAGE> 10
REGULATORY AND LEGISLATIVE DEVELOPMENTS
NATURAL GAS PRORATION State agencies in many of the states where Anadarko
operates are empowered by laws unique to each state to prevent waste in the
production of natural gas and protect the correlative rights of each mineral
interest owner to produce its fair share of gas in a field. To prevent waste
and protect correlative rights, state agencies have developed proration systems
for limiting production by assigning each unit in a prorated field an allowable
production volume which the producer is legally permitted to produce. These
allowables are based on market demand and other factors as determined by the
state agency.
In Kansas, where Anadarko has significant gas reserves and production
capacity, the Kansas Corporation Commission (KCC) voted on December 3, 1993 to
modify its basic proration order for the Hugoton Field, the largest dry gas
reservoir in the United States. A written order was issued February 1, 1994.
This order changes the formula currently used by the KCC to calculate field and
unit allowables and will increase the portion of overall production allowables
assigned to Anadarko's wells in the Hugoton Field. As a result of the order,
Anadarko's share of the total field allowable will increase from its current
level of about 12 percent to 15 percent.
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 a 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 maximum
lawful price. FERC's ruling was appealed to the United States Court of Appeals
for the District of Columbia, 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 sales that were made on or after June
28, 1988. Based on Anadarko's interpretation of the FERC order, $130,000
(pretax) was charged to expense in 1993. Numerous parties have filed requests
for rehearing at the FERC asking that the December 1, 1993, order be
reconsidered and the Company is unable to predict the outcome of this matter.
ENVIRONMENTAL The Company's oil and gas operations and properties are
subject to numerous federal, state and local laws and regulations relating to
the protection of the environment. These laws and regulations govern, among
other things, the amounts and types of substances and materials that may be
released into the environment, the issuance of permits in connection with
drilling and production activities, the discharge and disposition of waste
materials, offshore oil and gas operations, the reclamation and abandonment of
wells and facility sites and the remediation of contaminated sites. In
addition, these laws and regulations may impose substantial liabilities for the
Company's failure to comply with them or for any contamination resulting from
the Company's operations.
Compliance with such laws and regulations has not had a material adverse
effect on the Company's operations or financial condition in the past.
However, because environmental laws and regulations are becoming increasingly
more stringent, there can be no assurances that such laws and regulations or
any environmental law or regulation enacted in the future will not have a
material adverse effect on the Company's operations or financial condition.
For a description of certain environmental proceedings in which the
Company is involved, see Note 13 of the Notes to Consolidated Financial
Statements under Item 8 of this Form 10-K.
OTHER Regulatory agencies in certain states have authority to issue permits
for the drilling of wells, regulate the spacing of wells, prevent the waste of
oil and gas resources through proration and regulate environmental matters.
Operations conducted by the Company on federal oil and gas leases must
comply with numerous regulatory restrictions, including various
nondiscrimination statutes. Additionally, certain operations must be conducted
pursuant to appropriate permits issued by the Bureau of Land Management and the
Minerals Management Service of the Department of Interior and, in regard to
certain federal leases, with prior approval of drill site locations by the
Environmental Protection Agency.
10
<PAGE> 11
ADDITIONAL FACTORS AFFECTING BUSINESS
The oil and gas business is highly competitive in the search for and
acquisition of reserves and in the gathering and marketing of oil and gas
production. The Company's competitors include the major oil companies,
independent oil and gas concerns, individual producers and major pipeline
companies, as well as participants in other industries supplying energy and
fuel to industrial, commercial and individual consumers.
Crude oil prices continue to be affected by political developments in the
Middle East, pricing decisions of the Organization of Petroleum Exporting
Countries (OPEC) and the volatile trading patterns in the oil futures markets.
The domestic and international operations of the Company have been, and at
times in the future may be, affected by political developments and by federal,
state and local laws and regulations such as restrictions on production,
changes in taxes, royalties and other amounts payable to governments or
governmental agencies, price or gathering rate controls, and environmental
protection regulations.
The Company's business is subject to all of the operating risks normally
associated with the exploration for and production of oil and gas, including
blow-outs, cratering and fire, each of which could result in damage to or
destruction of oil and gas wells or formations or production facilities and
other property and injury to persons. As protection against financial loss
resulting from these operating hazards, the Company maintains insurance
coverage, including certain physical damage, employer's liability,
comprehensive general liability and workmen's compensation insurance. Although
the Company is not fully insured against all risks in its business, the Company
believes that the coverage it maintains is adequate and customary for companies
engaged in similar operations. The occurrence of a significant event against
which the Company is not fully insured could have a material adverse effect on
the Company's financial position.
TITLE TO PROPERTIES
As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time properties believed to be suitable for
drilling operations are acquired by the Company. Prior to the commencement of
drilling operations, a thorough title examination of the drill site tract is
conducted and curative work is performed with respect to significant defects,
if any, before proceeding with operations. A thorough title examination has
been performed with respect to substantially all leasehold producing properties
owned by the Company. The Company believes that the title to its leasehold
properties is good and defensible in accordance with standards generally
acceptable in the oil and gas industry subject to such exceptions which, in the
opinion of counsel employed in the various areas in which the Company has
conducted exploration activities, are not so material as to detract
substantially from the use of such properties. The leasehold properties
owned by the Company are subject to royalty, overriding royalty and other
outstanding interests customary in the industry. The properties may be subject
to burdens such as liens incident to operating agreements and current taxes,
development obligations under oil and gas leases and other encumbrances,
easements and restrictions. The Company does not believe that any of these
burdens will materially interfere with its use of these properties.
11
<PAGE> 12
CAPITAL SPENDING
See "Capital Expenditures, Liquidity and Long-Term Debt" of the MD&A under
Item 7 of this Form 10-K.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The Company's ratios of earnings to fixed charges for the years ended
December 31, 1993, 1992 and 1991 were 2.68, 1.81 and 1.99, respectively. These
ratios were computed by dividing earnings by fixed charges. For this purpose,
earnings include income before income taxes and fixed charges. Fixed charges
include interest and amortization of debt expenses, and the estimated interest
component of rentals.
During the three years ended December 31, 1993, there were no shares of
preferred stock outstanding. Accordingly, the ratio of earnings to combined
fixed charges and preferred stock dividends for each of the three years is the
same as the ratio of earnings to fixed charges.
ITEM 2. PROPERTIES
See information appearing under Item 1 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
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 has
entered, as a party Plaintiff, a suit filed against Heritage Resources, Inc.
(Heritage) by Tribal Drilling Company. The Plaintiffs, among other things,
seek to have Heritage removed as operator of a well in which Plaintiffs own
interests. The Defendants have asserted counterclaims against Anadarko and the
19 other Plaintiffs alleging that, among other things, the assertions of the
Plaintiffs are frivolous and were made in bad faith and that the Plaintiffs
breached the joint operating agreements. The trial previously scheduled for
April 1993 has been continued indefinitely until such time as the appeal of a
companion case, a case in which Anadarko is not a party, has been concluded.
While the outcome of the litigation cannot be predicted, Anadarko's management
believes that any recovery on the counterclaims in a material amount is remote.
12
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT END
NAME OF 1994 POSITION
---- ---------- --------
<S> <C> <C>
Robert J. Allison, Jr. 55 Chairman of the Board, President and
Chief Executive Officer
Charles G. Manley 50 Senior Vice President, Administration
Michael E. Rose 47 Senior Vice President, Finance and
Chief Financial Officer
Charles K. Abernathy 51 Vice President-Operations,
International/Gulf of Mexico
Rex Alman III 43 Vice President, Engineering
Richard J. Sharples 47 Vice President, Marketing
John N. Seitz 43 Vice President, Exploration
Bruce H. Stover 45 Vice President, Acquisitions
William D. Sullivan 38 Vice President-Operations,
U. S. Onshore
A. P. Taylor, Jr. 45 Vice President, Corporate
Communications
Lewis L. Williams 65 Vice President and General Counsel
</TABLE>
Mr. Allison joined Production in 1973 as Vice President-Operations, was
named President in 1976 and was President and Chief Executive Officer from 1979
until 1985 when he assumed the position of President and Chief Executive
Officer of Anadarko. Mr. Allison was named Chairman and Chief Executive
Officer effective October 1986. In January 1993, he was elected the additional
position of President.
Mr. Manley was employed by Production in 1976 and was Vice President,
Administration and Employee Relations, from 1977 until August 1985. He held
that position with Anadarko until January 1993 when he was named Senior Vice
President, Administration.
Mr. Rose joined Production as Chief Accountant in January 1978 and became
Vice President and Controller in May 1981. He held that position at Anadarko
from August 1985 until he was named Vice President, Finance, in October 1986.
In January 1993, he was named Senior Vice President, Finance and Chief
Financial Officer.
13
<PAGE> 14
Mr. Abernathy joined Production in January 1975 as a Senior Petroleum
Engineer. He served as the Southern Region's Operations Manager before
becoming Manager, Exploration and Production Operations, of Anadarko in June
1987. He was named Vice President, Exploration and Production Operations, in
July 1987 and Vice President and General Manager, International, in October
1989. He was named Vice President Operations, International/Gulf of Mexico, in
January, 1992.
Mr. Alman joined Production in 1976 as an Evaluation Engineer. He served
as Manager, Production and Planning, prior to being named Manager, Exploration
and Production Operations, in February 1990. He was named Vice President,
Exploration and Production Operations, in April 1990 and was named Vice
President, Operations, U. S. Onshore, in January 1992. In January 1993, he was
named Vice President, Engineering.
Mr. Sharples was employed by Anadarko and named Vice President, Marketing,
in March 1993. Prior to coming to Anadarko, he held a vice president's
position in marketing with Maxus Energy Corporation from October 1984 until
March 1993.
Mr. Seitz joined Production in 1977 as a Petroleum Geologist. He served as
Manager of Exploration and Chief Geologist before becoming General Manager,
Exploration, of Anadarko in June 1987. He was named Vice President,
Exploration and Production Operations, in October 1989 and Vice President and
General Manager, Houston Region, in February 1990. He was named Vice
President, Exploration, International/Gulf of Mexico, in January 1992 and Vice
President, Exploration in January 1993.
Mr. Stover joined Anadarko in 1980 as Chief Engineer and was named General
Manager - Special Projects, International in 1987. He assumed the position of
President and General Manager, Anadarko Algeria Corporation, in 1989. In
January 1993, he was named Vice President, Acquisitions.
Mr. Sullivan joined the Company in 1981 as Senior Reservoir Engineer -
Southern Region. He held several positions in engineering and operations
before being named Manager, Acquisitions in 1987. In 1991, he was named Vice
President and General Manager, Anadarko China Company. In January 1993, he was
named Vice President Operations, U. S. Onshore.
Mr. Taylor was employed by Anadarko in October 1986 as Director, Corporate
Communications, and became Vice President, Corporate Communications, in January
1987. Prior to coming to Anadarko, he held the position of Director of
Investor Relations at Panhandle. He had been with Panhandle since 1982.
Mr. Williams was employed by Anadarko in March 1988 as Regional Counsel and
was named Vice President and General Counsel in January 1989. Prior to coming
to Anadarko, he served as Counsel for K-N Operating Corporation. He had been
with K-N Operating Corporation since 1981.
All officers of Anadarko are elected in April of each year at the
organization meeting of the Board of Directors to hold office until their
successors are duly elected and shall have qualified. There are no family
relationships between any directors or executive officers of Anadarko.
14
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information on the market price and cash dividends declared per share of
common stock is included in the Stockholders' Information in the Annual Report,
which is incorporated herein by reference.
As of December 31, 1993, there were approximately 8,500 direct holders of
Anadarko common stock. The following table sets forth the amount of dividends
paid on Anadarko common stock during the two years ended December 31, 1993.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
thousands
1993 $4,152 $4,171 $4,494 $4,400
1992 $4,139 $4,144 $4,147 $4,147
</TABLE>
The amount of future dividends will depend on earnings, financial
condition, capital requirements and other factors, and will be determined by
the Directors on a quarterly basis.
For additional information, see Note 5 of the Notes to Consolidated
Financial Statements under Item 8 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
See Summary Financial Data in the Annual Report, which is incorporated
herein by reference.
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL RESULTS
NET INCOME AND REVENUES Anadarko's net income for 1993 before the
cumulative effect of changes in accounting principles was $40.0 million (70
cents per share) compared to $27.3 million (49 cents per share) for 1992 and
$32.4 million (59 cents per share) in 1991. Stated without the effect of a
special tax charge of $11.2 million related to a change in corporate tax rates
recorded in the third quarter of 1993, Anadarko's net income would have been
$51.3 million (90 cents per share). Including the cumulative effect of two
accounting changes and the special tax charge, Anadarko's net income for 1993
was $117.4 million ($2.05 per share).
Revenues for 1993 were $476.3 million, 27 percent higher than 1992
revenues of $375.2 million and 41 percent higher than revenues of $336.6
million in 1991. The increase in earnings and revenues (before the special
charge and before the cumulative effect of changes in accounting principles)
was due primarily to significantly stronger gas markets and increased crude oil
production.
During 1993, Anadarko's net income was affected by the following items:
(1) Implementation in the first quarter of Statement of Financial
Accounting Standards (SFAS) No. 106 which required a change in
accounting for postretirement benefits other than pensions. The
Company recognized the cumulative transition obligation as of
January 1, 1993, which resulted in a decrease to net income of $9.7
million (17 cents per share).
(2) Implementation in the first quarter of SFAS No. 109 which changed
the accounting method for deferred income taxes and increased
Anadarko's net income by $87.1 million ($1.52 per share).
(3) SFAS No. 109 also requires that the effect on existing deferred tax
liabilities of any change in income tax rates must be recognized in
income during the period in which the change in tax rates is
enacted. In August, Congress enacted the Omnibus Budget
Reconciliation Act of 1993, which raised the top corporate income
tax rate from 34 to 35 percent. As a result, Anadarko recorded a
charge to net income of $11.2 million (20 cents per share) in the
third quarter.
Anadarko's net income for 1992 was down 16 percent compared to 1991, due
primarily to $21 million (pretax) in provisions for impairments of
international properties related to unsuccessful drilling operations in China
and Yemen during 1992.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
millions except per share amounts 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Revenues $476.3 $375.2 $336.6
Costs and expenses 372.2 307.6 263.6
Interest expense 29.4 28.2 27.2
Net income 40.0* 27.3 32.4
Earnings per share $ 0.70* $ 0.49 $ 0.59
</TABLE>
_____________
*Excludes the cumulative effect of changes in accounting principles.
16
<PAGE> 17
COSTS AND EXPENSES For 1993, Anadarko's costs and expenses were $372.2
million, an increase of approximately $65 million (21 percent) compared to
$307.6 million in 1992. The increase was a result of several factors:
(1) Depreciation, depletion and amortization (DD&A) was up $34.7
million (or 26 percent) compared to 1992 due to an 11 percent
increase in gas production volumes and a 70 percent increase in
crude oil and condensate production volumes;
(2) Operating expenses were up $23.7 million or 32 percent compared to
1992 due primarily to increased production volumes as a result of
the acquisition of secondary recovery oil properties in West Texas
in December 1992;
(3) Other taxes increased $10.9 million or 36 percent compared to 1992
because of higher production related (severance) and ad valorem
taxes; and,
(4) Administrative and general expenses were up $9.2 million or 19
percent compared to 1992 due to costs associated with
postretirement benefits other than pension as required under SFAS
No. 106 and increased salary and benefits for the Company's
growing workforce.
Anadarko incurred $7 million in provisions for impairments of
international and geothermal properties in 1993. This compares to $21 million
of provisions for impairments in 1992.
Anadarko's costs and expenses in 1992 were up 17 percent compared to 1991.
There were four reasons for the increase: (1) $21 million (pretax) of
provisions for impairments of international properties; (2) increased
administrative and general expenses primarily related to accelerated vesting of
benefits under the Company's restricted stock plan; (3) increased DD&A expense
due to higher natural gas production volumes; and (4) higher production related
taxes.
<TABLE>
<CAPTION>
COSTS AND EXPENSES
millions 1993 1992 1991
----- ------ ------
<S> <C> <C> <C>
Operating expenses $ 98.6 $ 74.9 $ 76.2
Administrative and general 57.4 48.2 38.5
DD&A 167.7 132.9 121.1
Other taxes 41.5 30.6 27.8
Provisions for impairments 7.0 21.0 --
------ ------ ------
Total $372.2 $307.6 $263.6
</TABLE>
INTEREST EXPENSE Anadarko's interest expense for 1993 was $29.4 million, up
4 percent compared to $28.2 million in 1992 and up 8 percent compared to $27.2
million in 1991.
Despite declining interest rates since 1992, Anadarko has experienced
modest growth in interest expense primarily due to higher average borrowings
during 1992 and 1993 and lower amounts of capitalized interest in 1992 and 1993
compared to 1991.
Anadarko's long-term debt at December 31, 1993 decreased by about $105
million compared to year-end 1992 primarily due to conversion in July of 99.8
percent of the Company's outstanding $100 million principal amount of 6 1/4%
Convertible Subordinated Debentures. Long-term debt increased by 47 percent at
year-end 1992 compared to year-end 1991 due to the large acquisition of
producing properties in December 1992. (See Liquidity and Long-term Debt)
17
<PAGE> 18
ANALYSIS OF VOLUMES AND PRICES
NATURAL GAS In 1993, Anadarko achieved record natural gas production of
161.9 billion cubic feet (Bcf) or 444 million cubic feet per day (MMcf/d).
This was an 11 percent increase over natural gas production of 146.4 Bcf in
1992 and a 17 percent increase over gas production of 137.9 Bcf in 1991. Early
in 1993, the Company increased its natural gas sales in response to higher gas
prices. Anadarko's average U.S. gas price in 1993 was $1.92 per thousand cubic
feet (Mcf), up 12 percent compared to 1992 and up 27 percent compared to 1991.
Generally, Anadarko's annual gas sales are below the Company's total
capacity due to state regulations limiting allowable production, any seasonal
weaknesses in gas prices and the Company's long-standing policy to sell minimum
volumes of discretionary gas during periods of weak prices.
Historically, natural gas sales markets have been highly seasonal because
of the increase in residential heating demand during the winter. Due to this
seasonality, Anadarko's natural gas prices and production volumes and,
therefore, financial results have traditionally been stronger in the first and
fourth quarters. However, in 1993, this seasonal variance diminished somewhat
due to overall growth in gas demand and continuing declines in gas supply.
This was most evident in the summer of 1993 when demand for natural gas storage
injections dramatically increased natural gas prices during the second and
third quarters of the year.
The historical role of natural gas storage to supplement wellhead
production during peak demand periods has been somewhat skewed over the past
three years. Warm winters saw weak prices as local distribution companies
(LDCs) used storage as a supply source during the winters of 1990-91 and
1991-92. Many natural gas customers began using storage volumes as a price
hedge or arbitrage tool which disrupted the seasonal injection and withdrawal
pattern in the nation's storage fields. As a result, prices in March 1992, for
example, fell to 15-year record low levels.
During the 1992-93 winter heating season, the ability of gas consumers to
utilize this price arbitrage was diminished as cold weather blanketed the
nation late in the season and storage gas was needed for peak-day demand. The
effect of a significant net storage drawdown in the first quarter of 1993
resulted in aggressive injections during the summer refill cycle and
subsequently higher prices for gas.
Anadarko believes that while seasonality in gas markets will continue,
the tight balance in supply and demand will extend the recent strength in
natural gas markets.
<TABLE>
<CAPTION>
QUARTERLY NATURAL GAS
VOLUMES AND U.S. PRICES
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
First Quarter
Bcf 46.8 39.6 40.3
MMcf per day 520 435 447
Price per Mcf $1.73 $1.37 $1.56
Second Quarter
Bcf 34.8 28.0 29.7
MMcf per day 382 308 326
Price per Mcf $2.05 $1.46 $1.30
Third Quarter
Bcf 35.7 32.7 25.6
MMcf per day 388 355 279
Price per Mcf $1.94 $1.67 $1.28
Fourth Quarter
Bcf 44.6 46.1 42.3
MMcf per day 485 502 460
Price per Mcf $1.97 $2.17 $1.76
</TABLE>
18
<PAGE> 19
CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS Anadarko achieved record
crude oil and condensate production of 7.9 million barrels (MMBbls) in 1993, a
70 percent increase over 1992 oil and condensate production and a 59 percent
increase over 1991 oil and condensate production. This increase was primarily
related to producing oil properties in the Permian Basin of West Texas which
were acquired by Anadarko in December 1992, as well as increased waterflood
recovery operations in West Texas and the Mid-continent.
Anadarko's crude oil production over the past three years has been
enhanced by the use of secondary recovery techniques and development drilling
in existing fields. These activities have generally offset the production
decline normally associated with oil fields.
Crude oil markets suffered dramatically in late 1993 as a result of the
failure of the Organization of Petroleum Exporting Countries (OPEC) to
effectively reduce a perceived surplus of crude oil. West Texas Intermediate
(WTI) crude oil prices fell to a low of $13.02 per barrel in December 1993, the
lowest level since 1986.
Anadarko's average U.S. crude oil price for 1993 was $16.35 per barrel,
down 11 percent compared to 1992 and down 17 percent compared to 1991. The
Company's crude oil price has averaged about $12.50 per barrel in January 1994.
Generally, the Company's oil production is sold on a monthly basis as it
is produced. Volumes of oil are not affected by seasonal swings in market
prices.
The Company's natural gas liquids (NGLs) sales volumes were 2.7 MMBbls,
up ten percent over 1992 and up 38 percent over 1991. The 1993 average price
of 30 cents per gallon was six percent lower than the average price in 1992 and
nine percent lower than the average price in 1991. The increase in NGL volumes
for 1993 is due primarily to increased sales from inventory in 1993 and the
acquisition of NGL plants included in the purchase of producing properties in
December 1992. NGLs markets were weak in 1993 despite low levels of inventory
and strong natural gas markets.
<TABLE>
<CAPTION>
ANNUAL VOLUMES AND U.S. PRICES
1993 1992 1991
------ ----- ------
<S> <C> <C> <C>
Natural gas (Bcf) 161.9 146.4 137.9
MMcf per day 444 400 378
Price per Mcf $ 1.92 $ 1.71 $ 1.51
Crude oil and
condensate (MBbls) 7,910 4,659 4,968
MBbls per day 21.7 12.7 13.6
Price per barrel $16.35 $18.45 $19.61
Natural gas
liquids (MBbls) 2,697 2,447 1,957
Price per gallon $ 0.30 $ 0.32 $ 0.33
</TABLE>
19
<PAGE> 20
MARKETING STRATEGIES
Anadarko's marketing strategies are designed to capture maximum value when
the Company sells natural gas, crude oil, condensate and NGLs.
NATURAL GAS With a large base of uncommitted gas reserves available for
sale, Anadarko can continue to sell greater volumes at market-responsive
prices. Over the past three years, Anadarko has increased natural gas sales
and captured market share by aggressively offering customers an array of gas
supply options at market-responsive prices.
Anadarko sells natural gas under a variety of contracts, including 30-day
spot market contracts, long-term contracts and "term" sales contracts. Term
sales contracts were implemented by the Company in 1989 to provide gas sales
over an extended period of time (three months to three years). Through these
term contracts, the Company is able to enhance the commodity value of gas with
a service fee related to the level of reliability and service required by the
customer.
In 1993, the Company's marketing subsidiary, Anadarko Trading Company
(ATC), increased its purchase of non-affiliated gas for sale into the Company's
market areas. Sales of non-affiliated gas totaled 82 Bcf in 1993 compared to
58 Bcf in 1992 and 28 Bcf in 1991.
In addition, ATC made great strides during the year in developing a
variety of marketing related services which are available to customers. These
services include transportation contracting and scheduling, gas supply
nominations, supply and delivery monitoring, contract administration and
account coordination.
CRUDE OIL AND CONDENSATE The majority of the Company's crude oil production
is sold on 30-day "evergreen" contracts with prices based on postings plus a
premium.
PLANTS AND PIPELINES Anadarko's investment in gas gathering operations
allows the Company to better manage its gas production, improve ultimate
recovery of reserves and enhance its marketing opportunities. Since 1988, the
Company has invested approximately $54 million to build or acquire gas
gathering pipeline systems and gas processing plants. Anadarko currently owns
and operates four major gas gathering systems in core producing areas and
operates or has interests in 13 other systems. The four major systems have
capacity of 300 MMcf/d of gas and are connected to 536 wells.
In 1993, Anadarko began a $1.6 million expansion of its Hugoton Gathering
System (HUGS) in southwest Kansas, which was built in 1990. With completion of
this project in January 1994, the HUGS system has 120 MMcf/d of gas capacity to
serve Anadarko's markets in the Midwest through two interstate and one
intrastate pipeline connection. Also in 1993, Anadarko invested $1.7 million
to expand and add compression to its Antioch Gathering System in central
Oklahoma. As a result, throughput at the Panther Creek Plant increased from 16
MMcf/d to 26 MMcf/d of gas.
In 1994, Anadarko will aggressively pursue further expansion of its gas
gathering operations. The Company expects to spend approximately $36 million
in 1994 for construction of new gathering facilities, installation of
additional compressors, expansion of existing gathering systems and improving
access to multiple pipeline "market hubs".
Over the past few years, Anadarko has become increasingly active in the
natural gas liquids (NGLs) business, primarily as a result of its gas gathering
and processing operations. The Company sells NGLs on a monthly basis.
Anadarko generally markets NGLs under short-term contracts. Anadarko had
175,354 barrels of NGLs in inventory at the end of 1993.
HEDGING STRATEGIES In order to provide customers competitive, attractive
pricing options, Anadarko has utilized the energy futures and derivatives
markets since 1990 to hedge in the physical market and improve the flexibility
in pricing short-term and long-term sales and purchases. From time to time,
Anadarko may employ hedging strategies such as swaps, calls, puts, collars,
fixed-price hedging and other strategies.
20
<PAGE> 21
OPERATING RESULTS
With higher cash flows in 1993 compared to 1992 Anadarko increased
spending for exploration and development drilling activities. Exploration and
development spending increased to $175 million in 1993 from $92 million in 1992
and $108 million in 1991. However, dollars invested in drilling activity are
not a true measure of success for an exploration and production company.
Anadarko focuses on growth and profitability as the best measures of success in
operations. Reserve replacement is the key to growth for an exploration and
production company. In addition, Anadarko believes profitability depends on
the cost of finding oil and gas reserves. Anadarko believes the Company's
performance in both areas has been excellent.
DRILLING ACTIVITY During 1993, Anadarko participated in a total of 219
wells, including 55 gas wells, 131 oil wells and 33 dry holes. This compares
to 126 wells (38 gas wells, 56 oil wells and 32 dry holes) in 1992 and 172
wells (69 gas wells, 64 oil wells and 39 dry holes) in 1991.
During 1993, the Company made several significant well completions in its
exploration and development drilling program which are discussed in the
narrative descriptions under "Exploration" and "Development" in the Annual
Report to Stockholders, incorporated herein by reference.
<TABLE>
<CAPTION>
DRILLING PROGRAM ACTIVITY GAS OIL DRY TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
1993 EXPLORATORY
Gross 10 8 14 32
Net 6.6 5.3 7.7 19.6
1993 DEVELOPMENT
Gross 45 123 19 187
Net 30.2 70.8 13.4 114.4
1992 EXPLORATORY
Gross 11 -- 16 27
Net 3.5 -- 8.9 12.4
1992 DEVELOPMENT
Gross 27* 56 16 99
Net 16.4 32.5 5.4 54.3
</TABLE>
Gross: total wells in which there was participation.
Net: working interest ownership.
* Includes 2 (1.7 net) Hugoton infill wells.
21
<PAGE> 22
RESERVE REPLACEMENT For the 12th consecutive year, Anadarko replaced annual
production volumes with proved reserves of natural gas, crude oil and natural
gas liquids, stated on an energy equivalent basis. During 1993, Anadarko's
reserve replacement was 162 percent of total production. The Company's reserve
replacement performance in 1992 was 200 percent of total production and was 166
percent of total production in 1991.
During 1993, the Company replaced 151 percent of total production through
exploration and development drilling and improved recovery operations and
replaced 15 percent of total production through acquisitions of producing
properties. Due to weak oil prices as of December 31, 1993, the Company
recorded modest downward revisions to prior estimates of oil reserves.
Anadarko's natural gas reserve replacement in 1993 was 192 percent of
total production compared with 88 percent in 1992 and 129 percent in 1991. The
Company replaced 83 percent of its crude oil, condensate and natural gas
liquids production in 1993 compared to 585 percent in 1992 and 289 percent in
1991.
In 1993, acquisitions added 5.7 million energy equivalent barrels
(MMEEBs) compared to 44.4 MMEEBs in 1992 and 1.6 MMEEBs in 1991.
The Company's reserve replacement for 1991 included an addition to proved
reserves of 120 Bcf of natural gas in the Hugoton Field of Kansas. Anadarko
also had a net increase of 11 MMBbls of NGLs in 1991 associated with the
Company's purchase of the Sneed Gas Plant and Gathering System in late 1990.
Anadarko continues to increase its reserves of crude oil and natural gas
while the nation's energy reserves are steadily declining. The Company's U.S.
reserve replacement for the five-year period 1988 through 1992 was 144 percent
of production compared to a U.S. industry average of 74 percent. (Source:
Energy Information Administration.) Anadarko's U.S. reserve replacement
performance for the period 1989 through 1993 was 154 percent of production.
Industry data for 1993 are not yet available.
COST OF FINDING For 1993, Anadarko's worldwide finding cost for proved
reserves was $4.07 per energy equivalent barrel (EEB) compared to $5.43 per EEB
in 1992 and $3.13 per EEB in 1991. The Company's U.S. finding cost for 1993
was $3.55 per EEB compared to $4.61 per EEB in 1992 and $2.62 per EEB in 1991.
Cost of finding results in any one year can be misleading due to the long
lead times associated with exploration and development. A better measure of
cost of finding performance is over a five-year period. For the period 1988
through 1992, Anadarko's U.S. cost of finding was $4.46 per EEB compared to a
U.S. industry average of $5.09 per EEB (Source: Arthur Andersen & Co.)
Anadarko's worldwide finding cost for the same five-year period was $4.92 per
EEB compared to an industry average of $5.32 per EEB (Source: Arthur Andersen &
Co.). For the five-year period 1989 through 1993, Anadarko's U.S. finding
cost was $4.16 per EEB and the Company's worldwide finding cost was $4.67 per
EEB. Industry data for 1993 are not yet available.
22
<PAGE> 23
PROVED RESERVES At the end of 1993, Anadarko's proved energy reserves
totaled 391.1 MMEEBs compared to 368.0 MMEEBs at year-end 1992 and 336.5 MMEEBs
at year-end 1991. Reserves increased in 1993 due to exploration and
development drilling, improved recovery and acquisitions.
The Company's natural gas reserves at year-end 1993 were 1.88 Tcf
compared to 1.73 Tcf at year-end 1992 and 1.74 Tcf at year-end 1991.
Anadarko's crude oil and natural gas liquids reserves at year-end 1993 were
78.5 MMBbls. This compares to 80.3 MMBbls at year-end 1992 and 45.8 MMBbls at
year-end 1991.
The increase in the Company's total reserves on an EEB basis in 1992 was
due primarily to the acquisition of properties with estimated proved reserves
of 60.6 Bcf of natural gas and 34.2 MMBbls of crude oil, condensate and natural
gas liquids, or 44.4 MMEEBs. In addition, the Company increased its reserves
of crude oil, condensate and NGLs through secondary recovery techniques and
development drilling in existing fields.
At December 31, 1993, the present value (discounted at 10 percent) of
future net revenues from Anadarko's proved reserves, before income taxes, was
$1.81 billion (stated in accordance with the regulations of the Securities and
Exchange Commission and Financial Accounting Standards Board). Despite the
increase in proved energy reserves and higher natural gas prices at year-end
1993, the estimated present value of future net revenues, before income taxes,
remained comparable to that at year-end 1992 due primarily to lower oil prices
at year-end 1993. (See Supplemental Information on Oil and Gas Exploration and
Production Activities in the Consolidated Financial Statements.)
The present value of future net revenues does not purport to be an
estimate of the fair market value of Anadarko's proved reserves. An estimate
of fair value would also take into account, among other things, anticipated
changes in future prices and costs, the expected recovery of reserves in excess
of proved reserves and a discount factor more representative of the time value
of money and the risks inherent in producing oil and gas.
23
<PAGE> 24
ACQUISITIONS
In 1993, Anadarko evaluated numerous potential acquisition opportunities
in both the United States and Canada. By year-end, the Company closed 24
property transactions within core producing areas which included net reserves
of 5.7 MMEEBs at a cost of $27.8 million or $4.90 per EEB. The acquisition
cost per barrel does not include future investment costs of $8.3 million, which
will be spent over the next few years to develop additional reserves from the
properties.
In June 1993, Anadarko acquired deep producing oil and gas properties and
additional lease acres in the Hugoton area of southwest Kansas from Mesa
Operating Limited Partnership for approximately $20 million. The purchase
included proved reserves of about 3.7 MMEEBs and a 6-1/2 percent override
interest in an additional 188,000 lease acres which are under a pre-existing
farm-out arrangement with another company until 1999 when the undeveloped
portion of the acreage will revert to Anadarko.
In December 1992, Anadarko completed the largest acquisition in the
Company's history when it purchased from Atlantic Richfield Company proved oil
and gas properties with estimated reserves of 26.4 MMBbls of crude oil,
condensate and NGLs and 53.4 Bcf of natural gas, or about 35.3 MMEEBs, for
about $190 million. The purchase also included "deep" exploration rights on
54,000 gross (39,000 net) lease acres held by production.
Over the past three years, Anadarko has acquired 51.6 MMEEBs of proved
reserves at a cost of $238 million or $4.61 per EEB.
PRODUCING PROPERTIES AND LEASES
The Company owns interests in 2,552 producing oil wells and 1,883
producing gas wells. The following schedule shows the number of developed and
undeveloped acres in which Anadarko held interests at December 31, 1993.
<TABLE>
<CAPTION>
ACREAGE Producing Undeveloped Total
--------------- ---------------- ------------------
thousands Gross Net Gross Net Gross Net
----- --- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
United States
Onshore 2,145 895 2,522 797 4,667 1,692
Offshore 165 40 439 200 604 240
----- --- ----- ----- ----- -----
Total 2,310 935 2,961 997 5,271 1,932
Geothermal -- -- 164 160 164 160
Canada 136 59 105 72 241 131
Algeria -- -- 5,135 2,567 5,135 2,567
Indonesia -- -- 2,030 676 2,030 676
</TABLE>
24
<PAGE> 25
REGULATORY AND LEGISLATIVE DEVELOPMENTS
HUGOTON FIELD ALLOWABLE RULES In Kansas, where Anadarko has significant gas
reserves and production capacity, the Kansas Corporation Commission (KCC) voted
on December 3, 1993, to modify its basic proration order for the Hugoton Field,
the largest dry gas reservoir in the United States. A written order was issued
in February 1994. This order will change the formula currently used by the KCC
to calculate field and unit allowables and will increase the portion of overall
production allowables assigned to Anadarko's wells in the Hugoton Field. As a
result of the order, Anadarko's share of the total field allowable will
increase from its current level of about 12 percent to about 15 percent.
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 a 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, 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 that
were made on or after June 28, 1988. Based on Anadarko's interpretation of the
FERC order, $130,000 (pretax) has been charged to income during 1993. Numerous
parties have filed requests for rehearing at the FERC asking that the December
1, 1993, order be reconsidered and, accordingly, the Company is unable to
predict the final outcome of this matter.
CAPITAL EXPENDITURES, LIQUIDITY AND LONG-TERM DEBT
CAPITAL EXPENDITURES Anadarko's capital spending in 1993 totalled $264.5
million, which included $97.3 million for exploration, $77.7 million for
development, $27.8 million for producing property acquisitions, $18.5 million
for gas gathering and other operations and capitalized interest and overhead of
$43.2 million. This compares to Anadarko's capital expenditures in 1992 of
$359.9 million, which included $206 million in producing property acquisitions
and $42.6 million of capitalized interest and overhead. Capital spending was
$165.5 million in 1991, which included $4.2 million for producing property
acquisitions and $41.9 million of capitalized interest and overhead.
Capital spending for 1994 initially has been set at approximately $370
million, including $105 million for exploration, $142 million for development,
$25 million for producing property acquisitions, $48 million for gas gathering
and other operations and $50 million of capitalized interest and overhead.
Historically the Company has based capital spending on anticipated cash
flows, but certain portions of the capital spending budget have been financed
from time to time. In addition, the Company's budget is adjusted periodically
to reflect changes in market prices for oil and natural gas. The Company
believes cash flows and existing credit facilities will be sufficient to meet
capital and operating requirements during 1994.
25
<PAGE> 26
LIQUIDITY AND LONG-TERM DEBT Over the past three years, Anadarko has taken
several steps to strengthen its balance sheet and control interest costs. The
Company has made significant efforts to secure fixed rate debt with longer term
maturities at competitive rates when available in the financial markets.
At year-end 1993, Anadarko's total debt was $542.5 million, down $104.7
million or 16 percent from total debt of $647.2 million at year-end 1992.
This compares to total debt of $439.6 million at year-end 1991.
In March 1993, Anadarko issued $100 million principal amount of 10-year
Notes with a coupon of 6 3/4%. Net proceeds of the offering were used to
refinance a portion of the cost of the producing oil properties acquired by
Anadarko in December 1992.
In July 1993, Anadarko successfully converted 99.8 percent of the
Company's outstanding $100 million principal amount of 6 1/4% Convertible
Subordinated Debentures due 2014.
Debentures in the principal amount of about $99.8 million were converted
into about 2.9 million shares of Anadarko common stock. The remaining
debentures were redeemed for a cash payment to debenture holders. With the
newly issued shares, Anadarko's average number of common shares outstanding for
1993 was 57.2 million. The number of outstanding shares at year-end 1993 was
58.7 million.
In October 1993, Anadarko issued $100 million principal amount of 10-year
Notes with a coupon of 5 7/8%. Net proceeds from the offering were used to
refinance outstanding borrowings under non-committed lines of credit and
commercial paper incurred for general corporate purposes.
In October 1993, Anadarko filed a shelf registration with the Securities
and Exchange Commission that permits the issuance of up to $300 million in
senior and subordinated debt securities and equity securities. Net proceeds,
terms and pricings of offerings of securities issued under the shelf
registration are determined at the time of the offering. Anadarko has used
similar shelf registrations since 1989 to provide added flexibility in
financing strategies.
In February 1992, Anadarko entered into a $250 million Revolving Credit
Agreement with a group of commercial banks. The Agreement provides for a $75
million commitment reduction at the end of years three and four and expires in
March 1997. This agreement replaced the Revolving Credit and Term Loan
Agreement the Company entered into in June 1989. As of December 31, 1993 and
1992, there were no outstanding borrowings under this agreement.
In May 1992, all of the $100 million principal amount of 8.95% Notes
issued in May 1988 became due and were retired using existing floating rate
credit facilities.
Anadarko's net cash from operating activities in 1993 was $274 million
compared to $172 million in 1992 and $160 million in 1991.
26
<PAGE> 27
CHANGES IN ACCOUNTING PRINCIPLES
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Statement of Financial
Accounting Standards (SFAS) No. 106 focuses primarily on postretirement health
care benefits. SFAS No. 106 changed the accounting treatment for these
benefits from a "pay-as-you-go" basis to accrual of the expected costs of
providing these benefits during the years the employee renders service.
The Company chose to recognize the cumulative transition obligation as of
January 1, 1993, as the effect of a change in accounting principle in the first
quarter of 1993. The Company's cumulative transition obligation was
approximately $19.8 million, resulting in a decrease to net income of about
$9.7 million (17 cents per share) which is net of $5.4 million deferred income
tax benefit. The 1993 cost under SFAS No. 106 was approximately $3.4 million.
This compares to costs on the "pay-as-you-go" basis of about $453,000 in 1992
and $538,000 in 1991.
DEFERRED INCOME TAXES SFAS No. 109 requires a change from the deferred
method of accounting for income taxes to the asset and liability method. SFAS
No. 109 was adopted by the Company in the first quarter of 1993 and increased
net income by $87.1 million ($1.52 per share).
Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applicable to those years in which the temporary differences
between the financial statement carrying amounts and tax bases are expected to
be recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period when the change
was enacted.
The Omnibus Budget Reconciliation Act of 1993, which was enacted in
August 1993, raised the top corporate income tax rate from 34 to 35 percent
retroactive to January 1, 1993. As a result, Anadarko recorded a charge to
earnings of $11.2 million (20 cents per share) in the third quarter of 1993.
DIVIDENDS
In 1993, Anadarko paid $17.2 million in dividends to its common
stockholders (7.5 cents per share per quarter). The dividend amount was $16.6
million (7.5 cents per share per quarter) in 1992 and $16.5 million (7.5 cents
per share per quarter) in 1991. Anadarko has paid a dividend continuously
since becoming an independent company in 1986. The amount of future dividends
will depend on earnings, financial condition, capital requirements and other
factors, and will be determined by the Directors on a quarterly basis.
27
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANADARKO PETROLEUM CORPORATION
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Management 29
Independent Auditors' Report 30
Statement of Income, Three Years Ended December 31, 1993 31
Balance Sheet, December 31, 1993 and 1992 32
Statement of Stockholders' Equity, Three Years Ended
December 31, 1993 33
Statement of Cash Flows, Three Years Ended December 31, 1993 34
Notes to Consolidated Financial Statements 35
Supplemental Information on Oil and Gas Exploration
and Production Activities 55
Supplemental Quarterly Information 64
28
<PAGE> 29
ANADARKO PETROLEUM CORPORATION
REPORT OF MANAGEMENT
The management of Anadarko Petroleum Corporation is responsible for the
preparation and integrity of all information contained in the accompanying
consolidated financial statements. The financial statements have been prepared
in conformity with generally accepted accounting principles appropriate in the
circumstances. In preparing the financial statements, management makes
informed judgements and estimates.
Management maintains and relies on the Company's system of internal accounting
controls. Although no system can ensure elimination of all errors and
irregularities, this system is designed to provide reasonable assurance that
assets are safeguarded, transactions are executed in accordance with manage-
ment's authorization and accounting records are reliable as a basis for the
preparation of financial statements. This system includes the selection and
training of qualified personnel, an organizational structure providing
appropriate delegation of authority and division of responsibility, the
establishment of accounting and business policies for the Company and the
conduct of internal audits.
The Board of Directors pursues its responsibility for the consolidated
financial information through its Audit Committee, which is composed solely of
directors who are not officers or employees of Anadarko. The Audit Committee
recommends to the Board of Directors the selection of independent auditors and
reviews their fee arrangements. The Audit Committee meets periodically with
management, the internal auditors and the independent auditors to review that
each is carrying out its responsibilities. The internal and independent
auditors have full and free access to the Audit Committee to discuss auditing
and financial reporting matters.
We believe that Anadarko's policies and procedures, including its system of
internal accounting controls, provide reasonable assurance that the financial
statements are prepared in accordance with the applicable securities laws.
{ROBERT J. ALLISON, JR.}
Robert J. Allison, Jr.
Chairman, President and
Chief Executive Officer
{MICHAEL E. ROSE}
Michael E. Rose
Senior Vice President and
Chief Financial Officer
29
<PAGE> 30
ANADARKO PETROLEUM CORPORATION
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Anadarko Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of Anadarko
Petroleum Corporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993,
as contained in the 1993 Form 10-K Annual Report. These consolidated finan-
cial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Anadarko Petroleum
Corporation and subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in notes 10 and 12 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board
Statements of Financial Accounting Standards No. 109, Accounting For Income
Taxes, and No. 106, Employers' Accounting for Postretirement Benefits Other
than Pensions, respectively, in 1993.
{KPMG PEAT MARWICK}
Houston, Texas
January 27, 1994
30
<PAGE> 31
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1993 1992 1991
-------- -------- --------
thousands
<S> <C> <C> <C>
REVENUES
Gas sales $310,576 $256,418 $212,311
Oil and condensate sales 127,042 82,916 93,139
Natural gas liquids and other 38,647 35,884 31,166
------- ------- -------
Total 476,265 375,218 336,616
------- ------- -------
COSTS AND EXPENSES
Operating expenses 98,637 74,899 76,167
Administrative and general 57,363 48,192 38,549
Depreciation, depletion and
amortization 167,699 132,951 121,110
Other taxes Note 9 41,497 30,583 27,763
Provisions for impairments of
international and geothermal
properties Note 3 7,000 21,000 ---
------- ------- -------
Total 372,196 307,625 263,589
------- ------- -------
Operating Income 104,069 67,593 73,027
OTHER INCOME 2,755 718 2,404
------- ------- -------
Gross Income 106,824 68,311 75,431
INTEREST EXPENSE Notes 3 and 4 29,423 28,246 27,188
------- ------- -------
Income before Income Taxes and Cumulative
Effect of Changes in Accounting
Principles 77,401 40,065 48,243
INCOME TAXES Note 10
Income taxes 26,147 12,752 15,848
Effect of change in income tax rate 11,249 --- ---
------- ------- -------
Total 37,396 12,752 15,848
------- ------- -------
Net Income before Cumulative Effect of
Changes in Accounting Principles 40,005 27,313 32,395
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES Notes 10 and 12 77,403 --- ---
------- ------- -------
NET INCOME $117,408 $ 27,313 $ 32,395
======= ======= =======
PER COMMON SHARE
Net income before cumulative effect of
changes in accounting principles $ 0.70 $ 0.49 $ 0.59
Cumulative effect of changes in
accounting principles 1.35 --- ---
Net income 2.05 0.49 0.59
------- ------ -------
Dividends Note 5 $ 0.30 $ 0.30 $ 0.30
-------- ------ -------
AVERAGE NUMBER OF SHARES OUTSTANDING Note 5 57,220 55,257 55,044
------- ------ -------
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 32
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31 1993 1992
---------- ----------
ASSETS thousands
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 17,799 $ 14,833
Accounts receivable 110,486 111,435
Inventories Note 2 9,551 10,249
Prepaid expenses 3,025 2,290
--------- ---------
Total 140,861 138,807
--------- ---------
PROPERTIES AND EQUIPMENT
Original cost 3,266,825 3,030,633
Less accumulated depreciation, depletion
and amortization 1,425,098 1,276,077
--------- ---------
Net properties and equipment - based on
the full cost method of accounting
for oil and gas properties Note 3 1,841,727 1,754,556
--------- ---------
DEFERRED CHARGES 40,198 11,604
--------- ---------
$2,022,786 $1,904,967
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade and other $ 92,311 $ 75,159
Bank 13,328 15,373
Accrued expenses
Interest 7,663 5,637
Taxes and other 12,715 11,244
--------- ---------
Total 126,017 107,413
--------- ---------
LONG-TERM DEBT Note 4 542,500 647,162
--------- ---------
DEFERRED CREDITS
Deferred income taxes Note 10 424,293 478,636
Other 65,810 14,861
--------- ---------
Total 490,103 493,497
--------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $0.10
(200,000,000 shares authorized, 58,668,407
and 55,311,251 shares issued and out-
standing as of December 31, 1993
and 1992, respectively) 5,912 5,580
Preferred stock, par value $1.00
(2,000,000 shares authorized, no shares
issued as of December 31, 1993 and 1992) --- ---
Paid-in capital 236,001 125,217
Retained earnings (as of December 31, 1993
$464,166,000 was not restricted as to
the payment of dividends) 625,308 527,103
Deferred compensation (3,055) ---
Treasury stock (34,235 shares as of
December 31, 1992) --- (1,005)
--------- --------
Total 864,166 656,895
--------- ---------
COMMITMENTS AND CONTINGENCIES Notes 8, 12 and 13
--------- ---------
$2,022,786 $1,904,967
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 33
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1993 1992 1991
-------- -------- --------
thousands
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 5,580 $ 5,559 $ 5,543
Exercise of stock options 21 5 9
Issuance of restricted stock 11 --- ---
Issued for employee savings plan 8 16 7
Conversion of 6 1/4% Debentures 292 --- ---
------- ------- -------
Balance at end of year 5,912 5,580 5,559
------- ------- -------
PAID-IN CAPITAL
Balance at beginning of year 125,217 120,095 115,970
Exercise of stock options, net of income
tax effects 4,248 1,502 2,426
Issuance of restricted stock 4,442 --- 27
Issuance of stock for employee savings plan 3,309 3,620 1,672
Conversion of 6 1/4% Debentures, net 98,785 --- ---
------- ------- -------
Balance at end of year 236,001 125,217 120,095
------- ------- -------
RETAINED EARNINGS
Balance at beginning of year 527,103 520,234 504,969
Net income 117,408 27,313 32,395
Foreign translation gains (losses) (1,701) (3,799) 140
------- ------- -------
642,810 543,748 537,504
Dividends paid (17,217) (16,577) (16,527)
Issuance of treasury stock (285) (68) (743)
------- ------- ------
Balance at end of year 625,308 527,103 520,234
------- ------- -------
DEFERRED COMPENSATION
Balance at beginning of year --- (5,372) (6,487)
Issuance of restricted stock (4,522) (7) (27)
Amortization of restricted stock 1,467 5,379 1,142
------- ------- -------
Balance at end of year (3,055) --- (5,372)
------- ------- -------
TREASURY STOCK
Balance at beginning of year (1,005) --- (2,026)
Issued for exercise of stock options 377 --- ---
Issuance of restricted stock 92 5 ---
Issued to employee savings plan 981 1,858 4,357
Purchase of treasury stock (445) (2,868) (2,331)
------- ------- -------
Balance at end of year --- (1,005) ---
------- ------- -------
STOCKHOLDERS' EQUITY Notes 5 and 6 $864,166 $656,895 $640,516
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 34
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1993 1992 1991
--------- -------- --------
thousands
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 117,408 $ 27,313 $ 32,395
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation, depletion and amortization 167,699 132,951 121,110
Amortization of restricted stock 1,467 5,379 1,142
Deferred income taxes 35,126 5,373 9,696
Cumulative effect of changes in
accounting principles (77,403) --- ---
Provisions for impairments of international
and geothermal properties 7,000 21,000 ---
------- ------- -------
251,297 192,016 164,343
(Increase) decrease in accounts receivable 949 (32,187) 14,107
(Increase) decrease in inventories 698 184 (2,733)
Increase (decrease) in accounts payable - trade
and other and accrued expenses 20,649 9,941 (16,433)
Other items - net 681 1,659 688
-------- ------- -------
Net cash from operating activities 274,274 171,613 159,972
-------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to properties and equipment (259,894) (362,405) (169,794)
Sales and retirements of properties and equipment 4,824 3,084 7,453
-------- ------- -------
Net cash used in investing activities (255,070) (359,321) (162,341)
-------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Additions to debt 200,000 307,534 204,000
Retirements of debt (204,884) (100,000) (191,485)
Increase (decrease) in accounts payable, banks (2,045) (6,733) 2,951
Dividends paid (17,217) (16,577) (16,527)
Issuance of common stock 7,517 5,136 4,114
Issuance of treasury stock 1,165 1,795 3,614
Purchase of treasury stock (445) (2,868) (2,331)
-------- ------- -------
Net cash from financing activities (15,909) 188,287 4,336
-------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (329) (729) 8
-------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,966 (150) 1,975
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,833 14,983 13,008
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 17,799 $ 14,833 $ 14,983
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 35
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF ACCOUNTING POLICIES
GENERAL Anadarko Petroleum Corporation is engaged in the exploration,
development, production and marketing of gas, oil and natural gas liquids. The
terms "Anadarko" and "Company" refer to Anadarko Petroleum Corporation and its
subsidiaries. The principal subsidiaries of Anadarko are: Anadarko Gathering
Company; Anadarko Marketing Company; Anadarko Trading Company; Anadarko
Petroleum of Canada Ltd. (Anadarko Canada); and Anadarko Algeria Corporation
(Anadarko Algeria).
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Anadarko and its subsidiaries. All significant intercompany
transactions have been eliminated.
CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1993, Anadarko adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes", and SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". See Notes 10 and 12.
REVENUES Natural gas revenues generally are recorded using the sales method,
whereby the Company recognizes natural gas revenues based on the amount of gas
sold to purchasers on its behalf. All other revenues also are recorded using
the sales method.
HEDGING ACTIVITIES The Company periodically hedges gas sales in order to
minimize the impact of gas price fluctuations for Anadarko and its customers.
Gains or losses on these hedging activities are recognized in revenues for the
periods to which the hedge relates.
PROPERTIES AND EQUIPMENT The Company uses the full cost method of accounting
for exploration and development activities as defined by the United States
Securities and Exchange Commission (SEC). Under this method of accounting, the
costs for unsuccessful as well as successful exploration and development
activities are capitalized as properties and equipment.
The sum of net capitalized costs and estimated future development and
dismantlement costs is amortized using the unit-of-production method. Excluded
from amounts subject to amortization are costs associated with unevaluated
properties and major development projects. On a country-by-country basis,
should the net capitalized costs exceed the estimated present value of future
net cash flows from proved oil and gas reserves, such excess costs would be
charged to current expense. Gain or loss on the sale or other disposition of
oil and gas properties is not recognized unless significant oil and gas
reserves are involved.
35
<PAGE> 36
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF ACCOUNTING POLICIES (Continued)
Unsuccessful geothermal exploration costs are charged to expense. All other
properties and equipment are stated at original cost, which does not purport to
represent replacement or market values.
ENVIRONMENTAL CONTINGENCIES The Company accrues for environmental
contingencies when liabilities are likely to occur and reasonable estimates can
be made. In accordance with full cost accounting rules, the Company provides
for environmental clean-up costs associated with oil and gas activities as a
component of its depreciation, depletion and amortization expense. Recoveries
from third parties for environmental liabilities are not recognized unless
collection is probable.
INTEREST CAPITALIZED The Company capitalizes interest on borrowed funds
related to oil and gas expenditures which are not subject to amortization until
completion of evaluation or development activities.
INCOME TAXES The Company, excluding Anadarko Canada, files a U.S. consolidated
federal income tax return. Deferred federal and state income taxes are
provided on all significant temporary differences, except for those that are
essentially permanent in duration, between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS The financial statements of Anadarko
Canada have been translated to U.S. dollars. All balance sheet accounts are
translated at the current exchange rate and income statement items are
translated at the average exchange rate for the year; resulting translation
adjustments are made directly to a separate component of stockholders' equity.
Transaction adjustments are reported in net income. Deferred federal income
taxes have not been provided on translation adjustments because the unremitted
earnings of Anadarko Canada are considered to be permanently invested.
CASH EQUIVALENTS The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
ACCOUNTS PAYABLE, BANKS This account represents credit balances to the extent
that checks issued have not been presented to the Company's banks for payment.
36
<PAGE> 37
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
2. INVENTORIES
Inventories are stated at the lower of average cost or market. Natural gas
liquids, when sold from inventory, are charged to expense using the
average-cost method. The major classes of inventories are as follows:
<TABLE>
<CAPTION>
thousands 1993 1992
------ -------
<S> <C> <C>
Materials and supplies $8,226 $ 8,354
Natural gas liquids, stored in inventory 1,325 1,895
----- ------
$9,551 $10,249
----- ------
</TABLE>
3. PROPERTIES AND EQUIPMENT
A summary of the original cost of properties and equipment by classification
follows:
<TABLE>
<CAPTION>
thousands 1993 1992
---------- ----------
<S> <C> <C>
Oil and gas properties $3,123,271 $2,901,633
Plant facilities 23,361 18,980
Gathering facilities 55,793 49,401
General properties 64,400 60,619
--------- ---------
$3,266,825 $3,030,633
--------- ---------
</TABLE>
Oil and gas properties are amortized using the unit-of-production method. All
other properties are depreciated on the straight-line basis over the useful
lives of the assets, which range from 3 to 25 years.
Oil and gas properties include costs of $180,933,000 and $117,362,000 at
December 31, 1993 and 1992, respectively, which were excluded from capitalized
costs being amortized. These amounts represent costs associated with
unevaluated properties and major development projects. Anadarko excludes all
costs on a country-by-country basis until proved reserves are found or until it
is determined that the costs are impaired. All excluded costs are reviewed
quarterly to determine if impairment has occurred.
During 1993 and 1992, the Company made provisions for impairments of
international properties of $6,500,000 and $21,000,000, respectively, which
were related to oil and gas properties. These impairments were related to
unsuccessful drilling or related activities in China, Yemen and various other
international locations. During 1993, the Company made a provision for
impairment of geothermal properties of $500,000.
Total interest costs incurred during 1993, 1992 and 1991 were $38,000,000,
$36,620,000 and $36,829,000, respectively. Of these amounts, the Company
capitalized $8,577,000, $8,374,000 and $9,641,000 during 1993, 1992 and 1991,
respectively. Capitalized interest is included as part of the cost of oil and
gas properties. The capitalization rates are based on the Company's weighted
average cost of borrowings used to finance the expenditures.
37
<PAGE> 38
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
4. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
PRINCIPAL
---------------------------
thousands 1993 1992
-------- --------
<S> <C> <C>
Notes Payable, Banks, 3.44%* $142,500 $287,500
Commercial Paper --- 59,662
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 ---
5 7/8% Notes due 2003 100,000 ---
6 1/4% Convertible Subordinated
Debentures due 2014 --- 100,000
------- -------
$542,500 $647,162
------- -------
</TABLE>
*The average rate in effect at December 31, 1993.
Anadarko has noncommitted lines of credit from several banks. The general
provisions of these lines of credit provide for Anadarko to borrow funds for
terms and rates offered from time to time by the banks. There are no fees
associated with these lines of credit.
The Company has a commercial paper program which allows Anadarko to borrow
funds by issuing notes to investors for terms of up to 270 days, at rates as
offered.
As of December 31, 1992, approximately $110,000,000 of the Notes Payable, Banks
were due in 1994. The remaining notes payable to banks and commercial paper in
1992 and the notes payable to banks in 1993 have been classified as long-term
debt in accordance with SFAS No. 6, "Classification of Short-term Obligations
Expected to be Refinanced".
In February 1992, the Company entered into a $250,000,000 Revolving Credit
Agreement with a group of 13 commercial banks. The Agreement provides for a
$75,000,000 commitment reduction at the end of years three and four. Interest
rates are based on either the reference rate, the rate for certificates of
deposit, the Eurodollar rate or a combination thereof. The Agreement provides
for commitment fees on the unused balances at a rate of 1/4 of 1%. The
Agreement will expire in 1997. This Agreement replaced the Revolving Credit and
Term Loan Agreement entered into in June 1989. During 1993 and 1992, there were
no outstanding borrowings under these Agreements.
During 1993 and 1992, the Company had available $20,000,000 in a bank line of
credit which was not used. The maximum interest rate for loans against the line
was the reference rate of the bank. The line of credit is renewable annually,
but may be withdrawn at any time by the bank. In 1993 and 1992, Anadarko
maintained an average daily compensating balance of $1,000,000 for this line of
credit.
In May 1992, all of the $100,000,000 principal amount of 8.95% Notes due 1992
became due and were retired using existing floating rate credit facilities.
38
<PAGE> 39
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
4. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS (continued)
In March 1993, Anadarko issued $100,000,000 principal amount of 6 3/4% Notes
due 2003, which are noncallable. Net proceeds from the offering were used to
refinance a portion of the debt related to the acquisition of producing
properties in December 1992, which was funded using noncommitted lines of
credit and commercial paper.
In June 1993, Anadarko called for redemption of its outstanding $100,000,000
principal amount of 6 1/4% Convertible Subordinated Debentures due 2014.
Debentures in the principal amount of $99,778,000 were converted at a price of
$34.20 per share into 2,917,276 shares of Anadarko common stock. The principal
amount of $99,778,000 includes unamortized debt issuance costs, cash paid for
fractional shares and forfeited interest expense for a net of $701,000.
Debentures in the principal amount of $222,000 were redeemed for a total
payment to debenture holders by the Company of $232,000 for principal, premium
and interest. The cash portion of the redemption was funded through existing
credit facilities.
In October 1993, Anadarko issued $100,000,000 principal amount of 5 7/8% Notes
due 2003, which are noncallable. Net proceeds from the offering were used to
refinance outstanding borrowings incurred for general corporate purposes using
noncommitted lines of credit and commercial paper.
In October 1993, Anadarko filed a shelf registration with the SEC that permits
the issuance of up to $300,000,000 in senior and subordinated debt securities
and equity securities. Net proceeds, terms and pricing of offerings of
securities issued under the shelf registration will be determined at the time
of the offering. Anadarko has used similar shelf registrations since 1989 to
provide added flexibility in financing strategies.
Total sinking fund and installment payments related to long-term debt for the
five years ending December 31, 1998 are shown below. The payments related to
the redemption of the notes payable to banks and commercial paper are included
in the amounts shown in a manner consistent with the terms for repayment of the
Revolving Credit Agreement.
<TABLE>
<CAPTION>
thousands
<S> <C>
1994 $ ---
1995 ---
1996 42,500
1997 100,000
1998 $100,000
</TABLE>
39
<PAGE> 40
The following information discloses the fair value of the Company's financial
instruments:
<TABLE>
<CAPTION>
Carrying Amount Fair Value
thousands --------------- ----------
<S> <C> <C>
1993
Cash and cash equivalents $ 17,799 $ 17,799
Long-term debt 542,500 562,583
Deferred gas hedges
Gain 2,105 2,105
Loss (607) (607)
1992
Cash and cash equivalents 14,833 14,833
Long-term debt 647,162 662,162
Deferred gas hedges
Gain 3,041 3,041
Loss $(2,373) $(2,373)
</TABLE>
CASH AND CASH EQUIVALENTS The carrying amount reported on the balance sheet
approximates fair value.
LONG-TERM DEBT The fair value of long-term debt at December 31, 1993 and
1992 is the value the Company would have to pay to retire the debt, including
any premium or discount to the debt holder for the differential between stated
interest rate and year-end market rate. The fair values are based on quoted
market prices from Standard & Poor's Year-end Bond Guides and, where such
quotes were not available, on the average rate in effect at year-end.
PRICE RISK MANAGEMENT The Company periodically hedges gas sales in order
to reduce the risk caused by fluctuations in the price of natural gas. Deferred
hedge gains and losses are currently comprised of swaps, futures and options
with settlement dates through August 1994. In December 1993, the Company
entered into a separate swap agreement for $27,254,000 in conjunction with a
gas purchase agreement requiring prepayment for gas at a fixed price. The
Company will make payments to a third party who financed the prepayment, based
upon the index price specified in the contract. The settlement period is the
first of each month effective April 1994 through March 1995. The carrying
amounts reported on the balance sheet represent fair value at year-end.
40
<PAGE> 41
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
5. STOCK AND STOCK OPTIONS
Following is a schedule of the changes in the Company's shares of common stock:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
SHARES OF COMMON STOCK ISSUED
Beginning of year 55,345,486 55,139,158 54,983,910
Exercise of stock options 213,054 50,031 87,005
Issuance of restricted stock 110,700 --- 1,050
Issuance of shares for employee
savings plan 81,891 156,297 67,193
Conversion of 6 1/4% Debentures 2,917,276 --- ---
---------- ---------- ----------
End of year 58,668,407 55,345,486 55,139,158
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
SHARES OF COMMON STOCK HELD
IN TREASURY
Beginning of year 34,235 --- 55,794
Issuance of shares for exercise
of stock options (12,398) --- ---
Issuance of shares for employee
savings plan (30,746) (62,654) (136,311)
Issuance of restricted stock (3,150) (184) ---
Purchase of treasury stock 12,059 97,073 80,517
---------- ---------- ----------
End of year --- 34,235 ---
---------- ---------- ----------
SHARES OF COMMON STOCK OUTSTANDING
AT END OF YEAR 58,668,407 55,311,251 55,139,158
========== ========== ==========
</TABLE>
In each quarter of 1993, 1992 and 1991, dividends of 7.5 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 $464,166,000 were not restricted as to the payment of
dividends at December 31, 1993.
41
<PAGE> 42
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
5. STOCK AND STOCK OPTIONS (continued)
During 1993, 1992 and 1991, the Company acquired treasury stock only as a
result of stock option exercises or restricted stock transactions.
On October 28, 1993, the 1993 Stock Incentive Plan was adopted by the Company,
subject to stockholder approval. Anadarko has four other stock option plans -
the 1988 Stock Option Plan for Non-employee Directors, the 1987 Stock Option
Plan, the 1986 Stock Option Plan and the Substitute Stock Option Plan - under
which key employees and directors of the Company may be granted options to
purchase shares of Anadarko common stock. In addition, the 1993 Stock
Incentive Plan and the 1987 Stock Option Plan provide that up to 800,000 and
400,000 shares of common stock, respectively, which may be granted under the
Plans, may be granted as restricted stock.
Incentive stock options and non-qualified stock options have a maximum term of
ten years from the date of grant and are issued at the market value of Anadarko
stock on the date of grant. The options vest over time and may be exercised no
earlier than one year from the date of grant.
Unexercised stock options do not have a dilutive effect on earnings per common
share. Information regarding the Company's stock option plans is summarized
below:
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
SHARES UNDER OPTION
AT BEGINNING OF YEAR 1,931,535 1,728,920 1,509,551
Granted 540,350 280,500 308,300
Exercised* (628,873) (58,385) (87,931)
Surrendered or expired (24,000) (19,500) (1,000)
--------- --------- --------
SHARES UNDER OPTION AT END OF YEAR 1,819,012 1,931,535 1,728,920
--------- --------- ---------
Option price range per share $16.60- $14.65- $14.65-
at December 31 $47.00 $37.00 $37.00
--------- --------- ---------
Options exercisable at December 31 1,213,737 1,533,135 1,248,070
--------- --------- ---------
Price range per share $16.60- $14.65- $14.65-
of options exercised $37.00 $26.06 $26.06
--------- --------- ---------
SHARES AVAILABLE FOR FUTURE
GRANT AT END OF YEAR 4,120,950 637,300 898,300
--------- --------- ---------
</TABLE>
_______________
* Options exercised in excess of common stock issued relate to the plan
provisions which allow the exercise of options with previously acquired shares.
42
<PAGE> 43
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
5. STOCK AND STOCK OPTIONS (continued)
The Company had a Restricted Stock Plan which covered 400,000 shares of common
stock, all of which were granted in 1987 to certain key officers of the
Company. Shares were subject to forfeiture restrictions and could not be sold,
transferred or disposed of during the restriction period. The employees had
all the rights of a stockholder of the Company with respect to such shares,
including the right to vote and receive dividends or other distributions paid
with respect to such shares. The forfeiture restrictions lapsed as to ten
percent of the shares granted on the date of stockholders' approval and lapsed
as to an additional ten percent on each anniversary of the date of grant. In
November 1992, all of the remaining forfeiture restrictions lapsed, due to an
acceleration of vesting of benefits.
6. FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
The following is an analysis of currency translation adjustments reflected in
stockholders' equity:
<TABLE>
<CAPTION>
thousands 1993 1992 1991
------- ------- ------
<S> <C> <C> <C>
Balance at beginning of year $(2,678) $ 1,121 $ 981
Current translation gains (losses) (1,701) (3,799) 140
------ ------ -----
Balance at end of year $(4,379) $(2,678) $1,121
------ ------ -----
</TABLE>
7. STATEMENT OF CASH FLOWS SUPPLEMENTAL INFORMATION
The amounts of cash paid for interest (net of amounts capitalized) and income
taxes are as follows:
<TABLE>
<CAPTION>
thousands 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Interest $26,840 $27,224 $30,056
Income taxes $ 5,726 $12,064 $ 9,775
</TABLE>
In July 1993, $99,778,000 principal amount of the 6 1/4% Convertible
Subordinated Debentures due 2014 were converted into 2,917,276 shares of
Anadarko common stock.
43
<PAGE> 44
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
8. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS
During 1989, Anadarko Algeria, a wholly owned subsidiary of the Company,
entered into an agreement with Sonatrach, the national oil and gas enterprise
of Algeria. Sonatrach is the beneficial owner of 10.2 percent of the Company's
common stock. The agreement gives Anadarko Algeria the right to explore for and
produce liquid hydrocarbons in a 5.1-million acre area in Algeria, subject to
the sharing of production with Sonatrach. The agreement provides for a
commitment from Anadarko Algeria of over $100,000,000 of exploration costs
(including the cost of certain assets) over a ten-year period, subject to
certain provisions. Anadarko Algeria has obtained two partners to participate
in the project and share in the exploration cost commitment. The Company
believes that anticipated operating cash flows and existing credit facilities
will be sufficient to meet its share of these costs. A total of approximately
$72,408,000 related to exploration activities has been incurred by Anadarko
Algeria, of which approximately $26,964,000 was incurred in 1993.
At the present time, political unrest continues in Algeria. The Company is
closely monitoring the situation and is presently unable to predict with
certainty the short-term effects it may have on activity planned for 1994.
However, the situation has not had any material effect on the Company's
operations or exploration activity in Algeria to date. The Company's
activities in Algeria also are subject to the risks associated with foreign
operations.
The Company purchases oil field services from a number of companies including
Dresser Industries, Inc. and its affiliates and subsidiaries. The aggregate
amount paid to Dresser Industries, Inc. and its affiliates and subsidiaries was
approxi- mately $641,000 in 1993, $3,256,000 in 1992 and $3,352,000 in 1991.
James L. Bryan, a director of the Company, is Senior Vice President Operations
of Dresser Industries, Inc.
Approximately $155,000 and $81,000 was paid to L. G. Barcus and Sons, Inc.
during 1993 and 1992, respectively, for consulting fees concerning the
construction of facilities for the Company in 1993. Larry Barcus, a director
of the Company, is the Chairman of L. G. Barcus and Sons, Inc., a general
contractor with operations nationwide.
The Company's natural gas is sold to interstate and intrastate gas pipelines,
direct end-users, industrial users, local distribution companies and gas
marketers. Crude oil and condensate are sold to marketers, gatherers and
refiners. Natural gas liquids are sold to direct end-users, refiners and
marketers. These purchasers are located in the United States, Canada and
Mexico. The majority of the Company's receivables are paid within two months
following the month of purchase.
The Company generally performs a credit analysis of customers prior to making
any sales to new customers. Based upon this credit analysis, the Company may
require a standby letter of credit or a financial guarantee.
44
<PAGE> 45
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
8. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS (Continued)
In 1993, sales to CNG Transmission Corporation and its subsidiaries were
$75,378,000 (of which $60,191,000 were to East Ohio Gas Company, a wholly owned
subsidiary of CNG) and sales to Indiana Gas Company Incorporated were
$65,754,000, each of which accounted for more than ten percent of the Company's
total revenues. In 1992, sales to CNG Transmission Corporation and its
subsidiaries were $42,570,000 (of which $36,715,000 were to East Ohio Gas
Company) and sales to Indiana Gas Company Incorporated were $39,869,000, each
of which accounted for more than ten percent of the Company's total revenues.
In 1991, sales to Phibro Energy, Inc. were $33,857,000, which was more than ten
percent of the Company's total revenues.
9. OTHER TAXES
Significant taxes other than income taxes are as follows:
<TABLE>
<CAPTION>
thousands 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Production and severance $22,049 $15,945 $14,226
Ad valorem 15,679 11,166 10,670
Payroll and other 3,769 3,472 2,867
------ ------ ------
Total $41,497 $30,583 $27,763
------ ------ ------
</TABLE>
10. INCOME TAXES
SFAS No. 109 requires a change from the deferred method of accounting for
income taxes to the asset and liability method. Under the new method, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates applicable to those
years in which the temporary differences between financial statement carrying
amounts and tax bases are expected to be recovered or settled. The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in
income in the period when the change is enacted. The cumulative effect of
adopting SFAS No. 109 in the first quarter of 1993 was an increase to net
income of $87,071,000.
Under the deferred method of accounting for income taxes which was applied in
1992 and prior years, deferred income taxes applicable to each year's net
timing differences were provided based on the tax rates in effect during that
year and no adjustments were made to the deferred income tax liability amounts
for subsequent changes in tax rates.
45
<PAGE> 46
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
10. INCOME TAXES (Continued)
Income tax expense, including deferred amounts, is summarized as follows:
<TABLE>
<CAPTION>
thousands 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
CURRENT
Federal $ 1,469 $ 5,874 $ 4,590
Foreign 766 891 1,121
State 35 614 441
------ ------ ------
Total 2,270 7,379 6,152
------ ------ ------
DEFERRED
Federal 22,925 4,530 9,324
Adjustment to the deferred
tax liabilities and assets
at the enactment date for
the change in the corporate
income tax rate 11,249 --- ---
Foreign (141) 500 (577)
State 1,093 343 949
------ ------ ------
Total 35,126 5,373 9,696
------ ------ ------
Total income taxes allocated
to income before income
taxes and cumulative effect
of changes in accounting
principles $37,396 $12,752 $15,848
====== ====== ======
</TABLE>
The Company's current federal income tax expense has been determined under the
alternative minimum tax system.
The Omnibus Budget Reconciliation Act of 1993, which was enacted in August
1993, raised the top corporate income tax rate from 34 to 35 percent
retroactive to January 1, 1993. As a result, Anadarko recorded a charge to
1993 earnings of $11,249,000. The tax benefit of compensation expense for tax
purposes in excess of amounts recognized for financial accounting purposes has
been credited directly to stockholders' equity. For the current year, the tax
benefit amounted to $2,743,000.
Total income taxes were different than the amounts computed by applying the
statutory income tax rate to Income before Income Taxes and Cumulative Effect
of Changes in Accounting Principles. The sources of these differences are as
follows:
46
<PAGE> 47
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
10. INCOME TAXES (Continued)
<TABLE>
<CAPTION>
thousands 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Income before Income Taxes
and Cumulative Effect of Changes
in Accounting Principles
Domestic $77,059 $36,652 $46,007
Foreign 342 3,413 2,236
------ ------ ------
Total $77,401 $40,065 $48,243
------ ------ ------
Statutory tax rate 35% 34% 34%
Tax computed at
statutory tax rate $27,090 $13,622 $16,403
Adjustments resulting from:
State income taxes (net
of federal income tax benefit) 733 632 917
Section 29 credit (718) (1,221) ---
Adjustment to the beginning
of year deferred tax liabili-
ties and assets for the
change in the corporate
income tax rate 10,741 --- ---
Other - net (450) (281) (1,472)
------ ----- ------
Total income taxes $37,396 $12,752 $15,848
------ ------ ------
Effective tax rate 48% 32% 33%
------ ------ ------
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax liabilities (assets) at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
thousands
<S> <C>
Oil and gas exploration and development costs $449,859
Other 12,382
-------
Gross deferred tax liabilities 462,241
-------
Alternative minimum tax credit carryforward (22,691)
Other (15,257)
-------
Gross deferred tax assets (37,948)
-------
Net deferred tax liabilities $424,293
=======
</TABLE>
The Company has determined that the deferred tax assets will be realized and a
valuation allowance for such assets is not required.
47
<PAGE> 48
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
10. INCOME TAXES (Continued)
Deferred income tax expense for the years ended December 31, 1992 and 1991,
resulted from timing differences in the recognition of revenue and expense for
tax and financial accounting purposes. The source of these differences is as
follows:
<TABLE>
<CAPTION>
thousands 1992 1991
------- ------
<S> <C> <C>
Oil and gas exploration and
development costs $(1,326) $9,293
Depreciation (41) 3,504
Net operating loss utilized (generated) 1,688 (943)
Investment tax credit utilized 1,734 1,731
Alternative minimum tax credit
(carryforward) 2,303 (6,192)
Other 1,015 2,303
------- ------
Total deferred income taxes $ 5,373 $9,696
------- ------
</TABLE>
Deferred income taxes have not been recognized on the excess of the financial
statement carrying amount over the tax basis of the Company's investment in
Anadarko Canada. The excess, approximately $33,000,000 at December 31, 1993,
consists primarily of undistributed earnings which have been reinvested
indefinitely as part of the subsidiary's ongoing business. Should
circumstances change and it become apparent that this temporary difference is
no longer essentially permanent in duration, the Company will recognize as an
expense at that time the appropriate amount of deferred income taxes. However,
it is impracticable to estimate the amount of such taxes at this time.
Alternative minimum tax, unreduced by investment tax credit utilization, can be
carried forward indefinitely as a credit against regular tax liability. The
alternative minimum tax credit generated in 1993 has reduced deferred federal
income tax expense. To the extent the cumulative remaining carryforward is
utilized against future income taxes, accumulated deferred income taxes will be
restored at the then current rate.
Net operating loss and alternative minimum tax credit carryforwards at December
31, 1993, which are available for future utilization on federal income tax
returns, are as follows:
<TABLE>
<CAPTION>
Alternative
Regular Minimum
thousands Tax Tax Expiration
------- ----------- ----------
<S> <C> <C> <C>
Net operating loss $ 1,900 $ 386 1998-2008
Alternative minimum tax
credit $23,100 $ --- Unlimited
</TABLE>
48
<PAGE> 49
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
11. LEASE COMMITMENTS
The Company has various commitments under non-cancelable operating lease
agreements for buildings, facilities, and equipment, the majority of which
expire at various dates through 2003. The leases are expected to be renewed or
replaced as they expire. At December 31, 1993, future minimum rental payments
due under operating leases are as follows:
<TABLE>
<CAPTION>
thousands
<S> <C>
1994 $ 8,946
1995 7,865
1996 7,623
1997 7,326
1998 7,316
Later years 25,604
------
Total minimum lease payments $64,680
------
</TABLE>
Total rental expense amounted to $9,207,000, $8,212,000 and $6,129,000 in 1993,
1992 and 1991, respectively.
12. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT BENEFITS
PENSION PLANS The Company has a non-contributory defined benefit pension plan
covering all permanent employees, except certain employees in foreign
countries. The benefits for this plan are based primarily on years of service
and pay near retirement. Plan assets consist principally of fixed income
investments and equity securities. The Company funds the plan with annual
contributions as determined in accordance with the Employee Retirement Income
Security Act of 1974 and Internal Revenue Code limitations.
During 1992, the plan was amended to increase the percent of average
compensation returned in benefit payments, which increased the actuarial
liability by $3,920,000. In addition, the plan was automatically updated in
1992 to reflect cost-of-living increases to the Internal Revenue Code (IRC)
Section 415 limit on benefits and the IRC Section 401(a)(27) limit on
considered compensation, which increased the actuarial liability by $100,000.
During 1991, the plan was amended and restated effective January 1, 1989 to
comply with new non-discrimination regulations, IRC Sections 401(a)(4) and
401(1). This redesign increased the actuarial liability by $490,000. In
addition, the plan was automatically updated in 1991 to reflect cost-of-living
increases to the IRC Section 415 limit on benefits and the IRC Section
401(a)(27) limit on considered compensation, which increased the actuarial
liability by $300,000.
The Company has an equalization plan to ensure payments to certain executive
officers of amounts to which they are already entitled under the provisions of
the pension plan, but which are subject to limitations imposed by federal tax
laws. This plan is unfunded; however, the Company has purchased life insurance
policies to supplement its contractual obligations.
49
<PAGE> 50
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
12. PENSION PLANS (Continued)
In addition, the Company has a pension plan for non-employee directors, which
is unfunded.
The 1993, 1992 and 1991 pension cost related to these plans includes the
following components:
<TABLE>
<CAPTION>
thousands 1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
Service costs-benefits earned in
the period $2,785 $2,357 $1,733
Interest cost on projected benefit
obligation 2,612 2,394 1,835
Actual return on plan assets (3,493) (2,589) (5,046)
Amortization values and deferrals (71) (821) 1,552
----- ----- -----
Pension cost $1,833 $1,341 $ 74
----- ----- -----
</TABLE>
The Company had an additional minimum liability of $947,000 and $1,241,000 at
December 31, 1993 and 1992, respectively, which represents the difference
between the unfunded accumulated benefit obligation and the accrued pension
cost related to the equalization plan. This liability was offset by an
intangible asset of an equal amount.
The funded status of the plans at December 31, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS
thousands (FUNDED) (UNFUNDED)
------------- ---------------
<S> <C> <C>
1993
Actuarial present value of:
Vested benefit obligation $23,045 $ 1,632
Accumulated benefit obligation 27,908 2,178
Projected benefit obligation 38,173 2,863
Plan assets at market value 44,715 ---
Projected benefit obligation less
than (in excess of) plan assets 6,542 (2,863)
Unrecognized initial asset (6,251) ---
Unrecognized (gain) loss (641) 798
Unrecognized prior service cost 3,524 753
Adjustment required to recognize
additional minimum liability --- (947)
------ ------
Prepaid (accrued) pension cost $ 3,174 $(2,259)
------ ------
</TABLE>
50
<PAGE> 51
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
12. PENSION PLANS (continued)
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS
thousands (FUNDED) (UNFUNDED)
------------- ---------------
<S> <C> <C>
1992
Actuarial present value of:
Vested benefit obligation $17,170 $ 1,456
Accumulated benefit obligation 20,653 1,913
Projected benefit obligation 29,965 2,765
Plan assets at market value 42,099 --
Projected benefit obligation
less than (in excess of)
plan assets 12,134 (2,765)
Unrecognized initial asset (6,778) --
Unrecognized (gain) loss (5,045) 1,146
Unrecognized prior service cost 3,989 867
Adjustment required to recognize
additional minimum liability --- (1,241)
------ ------
Prepaid (accrued) pension cost $ 4,300 $(1,993)
------ ------
</TABLE>
The Company's assumptions used as of December 31 in determining the pension
cost and pension liability were as follows:
<TABLE>
<CAPTION>
percent 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.25 8.25 7.8
Rates of increase in compensation
levels 5.0 6.0 6.0
Long-term rate of return on
plan assets 8.0 9.0 9.0
</TABLE>
EMPLOYEE SAVINGS PLAN The Company has an employee savings plan (ESP) which is
a defined contribution plan. The Company matches a portion of employees'
contributions with shares of the Company's common stock. Participation in the
ESP is voluntary and all regular employees of the Company are eligible to
participate. The Company charged to expense plan contributions of $3,426,000,
$2,842,000, and $2,841,000 during 1993, 1992 and 1991, respectively.
51
<PAGE> 52
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
12. PENSION PLANS (Continued)
OTHER POSTRETIREMENT BENEFITS As of January 1, 1993, the Company adopted SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". The Company recognized the cumulative transition obligation of
$19,767,000 as the effect of an accounting change in the first quarter of 1993,
resulting in a decrease to net income of $9,668,000 (net of $5,416,000 deferred
income tax benefit). For the years ended December 31, 1992 and 1991, the
Company recognized postretirement benefit costs other than pensions as
incurred. As a result, the amounts recognized as expense in prior years are
not comparable.
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits for retired employees. Substantially all of
the Company's employees, including employees in foreign countries, may become
eligible for these benefits if they reach retirement age while working for the
Company. These benefits and similar benefits for active employees are provided
through contributory and non-contributory trusteed benefit plans.
Health care benefits are funded by contributions from the Company and its
employees, with retiree contributions adjusted per the provisions of the
Company's health care plans. The Company's current policy is to fund the cost
of postretirement health care benefits on a pay-as-you-go basis. The Company's
retiree life insurance plan is noncontributory and is currently fully funded
through insurance premiums paid by the Company.
The following table sets forth the Company's postretirement benefits other than
pension combined liability as of December 31, 1993:
<TABLE>
<CAPTION>
thousands
<S> <C>
Accumulated postretirement
benefit obligation
Retirees $10,038
Fully eligible active
plan participants 4,004
Other active plan participants 11,961
------
Total 26,003
Plan assets at fair value 3,326
------
Accumulated postretirement benefit
obligation in excess of plan assets $22,677
======
</TABLE>
The Company charges postretirement benefits other than pensions as accrued,
based on actuarial calculations for each plan.
52
<PAGE> 53
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ENDED DECEMBER 31, 1993, 1992 AND 1991
12. PENSION PLANS (Continued)
OTHER POSTRETIREMENT BENEFITS (continued)
The net annual cost for postretirement benefits other than pensions for 1993
included the following components:
<TABLE>
<CAPTION>
thousands
<S> <C>
Transition obligation $19,767
Service cost-benefits earned
during the period 1,520
Interest cost on accumulated
obligation 1,895
Actual return on plan assets (281)
------
Net postretirement benefit cost $22,901
======
</TABLE>
The Company's assumptions used as of December 31 in determining postretirement
benefits other than pension cost and the accumulated benefit obligation were
as follows:
<TABLE>
<CAPTION>
percent 1993 1992
------- -------
<S> <C> <C>
Discount rate 7.25 8.25
Rates of increase in
compensation levels 5.0 6.0
Medical cost trend rate 15.0-5.0 18.0-5.5
</TABLE>
The medical cost trend rate for the health care plans starts at the maximum
rate for the current year and is gradually reduced to the ultimate rate for
2002 and later years. A change in the medical cost trend rate of one percent
would change the annual cost (excluding the transition obligation) in 1993 by
approximately $595,000.
Retiree life insurance expense was $78,000 and $172,000 for 1992 and 1991,
respectively. The cost of providing health care benefits for 129 retirees in
1992 and 127 retirees in 1991 was $375,000 and $366,000, respectively.
13. CONTINGENCIES
ENVIRONMENTAL PROTECTION AGENCY In January 1994, the Company received a
Special Notice for Remedial Design/Remedial Action from the Environmental
Protection Agency (EPA) in connection with the disposal of oil and gas
exploration and production wastes at the PAB Oil Superfund site ("the Site") at
Abbeville, Louisiana. The Company had previously received a Notice of
Potential Liability from the EPA as one of the potentially responsible parties
(PRP) in connection with this Site. In the Notice of Potential Liability, the
EPA attributed 40 barrels of waste to the Company which was disposed of by a
third party contractor on behalf of the Company.
53
<PAGE> 54
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ENDED DECEMBER 31, 1993, 1992 AND 1991
13. CONTINGENCIES (Continued)
ENVIRONMENTAL PROTECTION AGENCY (Continued)
Pursuant to the Special Notice, the EPA shall attempt to negotiate
reimbursement of the EPA's past and future costs, among other things, and
pursue settlement with PRPs who may have contributed only a minor portion of
the hazardous substances at the Site (a de minimis party). The EPA has
determined that parties who contributed less than 400 barrels of waste to the
Site are de minimis parties and are entitled to a de minimis settlement of
their liability at the Site. Enclosed with the Special Notice was a report
which summarized the information in the EPA's possession regarding the amount
of waste disposed at the Site by individual PRPs. According to the report, the
amount of waste disposed of on behalf of the Company has not been determined
and Anadarko is not being offered a de minimis settlement. After further
investigation, the Company believes it should be entitled to a de minimis
settlement and has made a request to the EPA to participate in the de minimis
settlement.
On December 17, 1993, the Company received a notice from the Department of
Justice in the State of California indicating that the Company may be a PRP for
the study, cleanup and closure of the waste facility owned by Geothermal, Inc.
in Middletown, California (the "GI site"). Anadarko's records indicate the
disposal of a limited number of barrels of drilling mud at the GI site in 1982.
Based on the amount and toxicity of the waste the Company sent to the GI site,
the Company believes it will not incur any material liability in connection
with the GI site.
As part of the 1992 acquisition of properties from Atlantic Richfield Company
(ARCO), the Company conducted an extensive environmental audit of the acquired
properties. To the extent that significant environmental problems were found to
exist during the audit, ARCO had contractually agreed, with certain
limitations, to correct such problems or take back the affected properties and
refund the pro rata share of the purchase price attributable to the properties
pursuant to the terms of the underlying asset purchase and sale agreement.
Negotiations are currently being conducted to determine compensation due the
Company from ARCO for certain environmental conditions which have been found on
the properties.
54
<PAGE> 55
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
OIL AND GAS PRODUCTION
The following is historical revenue and cost information relating to the
Company's oil and gas operations.
Excluded from amounts subject to amortization as of December 31, 1993 and 1992
were $180,933,000 and $117,362,000, respectively, of costs associated with
unevaluated properties and major development projects. The majority of the
evaluation activities are expected to be completed in five years.
COSTS EXCLUDED FROM AMORTIZATION
<TABLE>
<CAPTION>
YEAR COSTS INCURRED EXCLUDED
------------------------------------------------- COSTS AT
PRIOR DEC. 31,
thousands YEARS 1991 1992 1993 1993
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Property acquisition $10,107 $ 9,543 $ 8,753 $34,936 $ 63,339
Exploration 14,844 17,793 22,669 45,757 101,063
Capitalized interest 1,616 2,693 3,364 8,858 16,531
------- ------- ------- ------- --------
Total $26,567 $30,029 $34,786 $89,551 $180,933
------- ------- ------- ------- --------
</TABLE>
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
thousands 1993 1992
---------- ----------
<S> <C> <C>
UNITED STATES
Capitalized
Unproved properties $ 97,694 $ 74,081
Proved properties 2,857,110 2,688,577
Plant facilities 23,361 18,980
---------- ----------
2,978,165 2,781,638
Accumulated depreciation,
depletion and amortization 1,356,800 1,216,178
---------- ----------
Net capitalized costs 1,621,365 1,565,460
---------- ----------
CANADA
Capitalized
Unproved properties 4,425 4,909
Proved properties 86,586 82,194
---------- ----------
91,011 87,103
Accumulated depreciation,
depletion and amortization 42,288 35,719
---------- ----------
Net capitalized costs 48,723 51,384
---------- ----------
ALGERIA AND OTHER OVERSEAS
Capitalized
Unproved properties 77,456 51,872
---------- ----------
TOTAL
Capitalized
Unproved properties 179,575 130,862
Proved properties 2,943,696 2,770,771
Plant facilities 23,361 18,980
---------- ----------
3,146,632 2,920,613
Accumulated depreciation,
depletion and amortization 1,399,088 1,251,897
---------- ----------
Net capitalized costs $1,747,544 $1,668,716
---------- ----------
</TABLE>
55
<PAGE> 56
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
thousands 1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
UNITED STATES
Capitalized
Property acquisition
Exploration $ 15,637 $ 11,955 $17,389
Development 27,806 205,977 4,033
Exploration 84,457 47,073 56,245
Development 80,122 34,923 52,632
------- ------- -------
208,022 299,928 130,299
------- ------- -------
CANADA
Capitalized
Property acquisition
Exploration 273 594 494
Development --- 31 131
Exploration 2,665 2,491 2,847
Development 2,561 3,853 1,926
------- ------- ------
5,499 6,969 5,398
------- ------- ------
ALGERIA AND OTHER OVERSEAS
Capitalized
Property acquisition
Exploration --- 125 ---
Exploration 32,898 35,487 20,085
------- ------- ------
32,898 35,612 20,085
------- ------- ------
TOTAL
Capitalized
Property acquisition
Exploration 15,910 12,674 17,883
Development 27,806 206,008 4,164
Exploration 120,020 85,051 79,177
Development 82,683 38,776 54,558
------- ------- -------
$246,419 $342,509 $155,782
------- ------- -------
</TABLE>
56
<PAGE> 57
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
The following schedule includes only the revenues from the production and sale
of gas, oil, condensate and natural gas liquids (NGLs). Revenues from gas
marketing and gas gathering are excluded. The income tax expense is calculated
by applying the current statutory tax rates to the revenues after deducting
costs, which include depreciation, depletion and amortization allowances, after
giving effect to permanent differences. The results of operations exclude
general office overhead and interest expense attributable to oil and gas
production.
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
thousands 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
UNITED STATES
Net revenues from production
Gas sold to consolidated affiliates $250,907 $199,820 $132,267
Other sales of gas, oil and NGLs 206,961 150,533 181,459
------- ------- -------
457,868 350,353 313,726
Production (lifting) costs 119,832 84,304 82,957
Depreciation, depletion and amortization* 154,450 122,961 111,820
------- ------- -------
183,586 143,088 118,949
Income tax expense 66,928 51,832 43,459
------- ------- -------
Results of operations 116,658 91,256 75,490
------- ------- -------
*DD&A rate per net equivalent barrel $ 4.26 $ 4.06 $ 3.91
------- ------- -------
CANADA
Net revenues from production
Other sales of gas, oil and NGLs 13,945 15,138 15,747
Production (lifting) costs 5,611 6,593 6,511
Depreciation, depletion and amortization* 6,110 4,664 4,859
------- ------- -------
2,224 3,881 4,377
Income tax expense 580 1,438 1,479
------- ------- -------
Results of operations 1,644 2,443 2,898
------- ------- -------
*DD&A rate per net equivalent barrel $ 4.92 $ 3.72 $ 3.50
------- ------- -------
TOTAL
Net revenues from production
Gas sold to consolidated affiliates 250,907 199,820 132,267
Other sales of gas, oil and NGLs 220,906 165,671 197,206
------- ------- -------
471,813 365,491 329,473
Production (lifting) costs 125,443 90,897 89,468
Depreciation, depletion and amortization 160,560 127,625 116,679
------- ------- -------
185,810 146,969 123,326
Income tax expense 67,508 53,270 44,938
------- ------- -------
Results of operations $118,302 $ 93,699 $ 78,388
------- ------- -------
</TABLE>
57
<PAGE> 58
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
OIL AND GAS RESERVES
The following table shows estimates prepared by the Company's engineers of
proved reserves and proved developed reserves, net of royalty interests, of
gas, oil, condensate and NGLs owned at year-end and changes in proved reserves
during the last three years. Volumes for natural gas are in billions of cubic
feet (Bcf) at a pressure base of 14.73 pounds per square inch and volumes for
oil, condensate and NGLs are in millions of barrels (MMBbls). Total volumes are
in millions of energy equivalent barrels (MMEEBs). For this computation, one
barrel is the equivalent of six thousand cubic feet.
The Company's reserve additions in 1993 came primarily from exploration and
development drilling and improved recovery. Reserve revisions for 1993
included an increase of about 60 Bcf to reflect a portion of the effect of the
Kansas Corporation Commission order which increased production allowables in
the Hugoton Field. This was offset by a modest downward revision to prior
estimates of oil and condensate reserves due to weak oil prices at year-end
1993.
The Company's reserve additions in 1992 included the purchase of oil and gas
properties from Atlantic Richfield Company. This acquisition added 26.4 MMBbls
of crude oil, condensate and NGLs and 53.4 Bcf of natural gas, or about 35
million energy equivalent barrels.
The Company's reserve additions for 1991 included an increase of 120 Bcf of gas
in the Hugoton Field of Kansas. Anadarko began an infill drilling program in
the Hugoton Field in 1987 and had invested $36,000,000 as of year-end 1991 to
drill 267 wells. The increase in proved reserves in 1991 reflects the
additional drainage area these infill wells will deplete. With a drilling
program of this type in a reservoir with multiple pay zones, it usually takes
several years of drilling and analysis to gain sufficient reservoir and well
performance data to support a reserve increase. Using a three-dimensional
reservoir modeling system for the Hugoton Field, which the Company began to
develop in 1985, the Company was able to quantify this increase in proved
reserves.
Anadarko also had a net reserve increase of 11 MMBbls of NGLs in 1991. This
increase is primarily associated with the Company's purchase of a significant
plant and pipeline system in late 1990. Improvement modifications were made to
the gas processing plant in 1991 that will yield additional recovery of NGLs
reserves to the Company.
Beginning in 1991, NGLs are included with oil and condensate reserves, and the
associated shrinkage has been deducted from the gas reserves. Previously,
these gas reserves were reported on a wet basis.
The Company emphasizes that the volumes of reserves shown below are estimates
which, by their nature, are subject to revision. The estimates are made using
all available geological and reservoir data as well as production performance
data. These estimates are reviewed annually and revised, either upward or
downward, as warranted by additional performance data.
58
<PAGE> 59
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
OIL AND GAS RESERVES (continued)
<TABLE>
<CAPTION>
NATURAL GAS OIL, CONDENSATE AND NGLS TOTAL
(BCF) (MMBBLS) (MMEEBS)
--------------------------- ------------------------------- -----------------------------
U.S. CANADA TOTAL U.S. CANADA TOTAL U.S. CANADA TOTAL
----- ------ ----- ---- ------ ----- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED RESERVES
DECEMBER 31, 1990 1,650 54 1,704 27.7 4.9 32.6 302.8 13.8 316.6
Revisions of prior
estimates 34 (5) 29 4.7 0.1 4.8 10.4 (0.8) 9.6
Extensions, discoveries
and other additions 139 -- 139 16.1 0.5 16.6 39.1 0.7 39.8
Improved recovery 5 -- 5 (2.3) 0.3 (2.0) (1.5) 0.3 (1.2)
Purchases in place 5 -- 5 0.8 -- 0.8 1.6 -- 1.6
Production (134) (4) (138 (6.2) (0.8) (7.0) (28.5) (1.4) (29.9)
----- -- ----- --- --- ---- ----- ---- -----
DECEMBER 31, 1991 1,699 45 1,744 40.8 5.0 45.8 323.9 12.6 336.5
Revisions of prior
estimates 31 (6) 25 4.7 (1.2) 3.5 9.9 (2.3) 7.6
Extensions, discoveries
and other additions 41 -- 41 1.5 0.3 1.8 8.3 0.3 8.6
Improved recovery 3 -- 3 2.1 -- 2.1 2.7 -- 2.7
Purchases in place 61 -- 61 34.2 -- 34.2 44.3 -- 44.3
Sales in Place (1) -- (1 -- -- -- (0.1) -- (0.1)
Production (144) (3) (147 (6.3) (0.8) (7.1) (30.3) (1.3) (31.6)
---- -- ----- ---- --- ---- ----- ---- -----
DECEMBER 31, 1992 1,690 36 1,726 77.0 3.3 80.3 358.7 9.3 368.0
Revisions of prior
estimates 59 -- 59 (11.5) 0.2 (11.3) (1.7) 0.1 (1.6)
Extensions, discoveries
and other additions 220 6 226 8.6 -- 8.6 45.3 1.2 46.5
Improved recovery 13 -- 13 7.3 0.6 7.9 9.4 0.6 10.0
Purchases in place 13 -- 13 3.5 -- 3.5 5.7 -- 5.7
Sales in place --- -- --- -- -- -- -- -- --
Production (159) (3) (162 (9.8) (0.7) (10.5) (36.3) (1.2) (37.5)
----- -- ----- ---- ---- ----- ----- ---- -----
DECEMBER 31, 1993 1,836 39 1,875 75.1 3.4 78.5 381.1 10.0 391.1
----- -- ----- ---- ---- ----- ----- ---- -----
PROVED DEVELOPED RESERVES
December 31, 1990 1,602 54 1,656 27.6 4.9 32.5 294.7 13.8 308.5
December 31, 1991 1,676 45 1,721 39.2 4.8 44.0 318.5 12.3 330.8
December 31, 1992 1,656 36 1,692 69.3 3.3 72.6 345.3 9.3 354.6
December 31, 1993 1,674 40 1,714 60.8 3.4 64.2 339.8 10.0 349.8
</TABLE>
59
<PAGE> 60
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
DISCOUNTED FUTURE NET CASH FLOWS
Estimates of future net cash flows from proved reserves of gas, oil, condensate
and NGLs were made in accordance with SFAS No. 69, "Disclosures about Oil and
Gas Producing Activities." The amounts were prepared by the Company's
engineers and are shown in the following table. The estimates are based on
prices at year-end.
Gas prices are escalated only for fixed and determinable amounts under
provisions in some contracts. Estimated future cash inflows are reduced by
estimated future development and production costs based on year-end cost
levels, assuming continuation of existing economic conditions, and by estimated
future income tax expense. Tax expense is calculated by applying the existing
statutory tax rates, including any known future changes, to the pretax net cash
flows, less depreciation of the tax basis of the properties and depletion
allowances applicable to the gas, oil, condensate and NGLs production.
At December 31, 1993, the present value (discounted at 10 percent) of future
net revenues from Anadarko's proved reserves, before income taxes, was $1.81
billion (stated in accordance with the regulations of the Securities Exchange
Commission and the Financial Accounting Standards Board). Despite the increase
in proved energy reserves and higher natural gas prices at year-end 1993, the
estimated present value of future net revenues, before income taxes, remained
virtually flat compared to year-end 1992 due primarily to extremely low oil
prices at year-end 1993.
The present value of future net revenues does not purport to be an estimate of
the fair market value of Anadarko's proved reserves. An estimate of fair value
would also take into account, among other things, anticipated changes in future
prices and costs, the expected recovery of reserves in excess of proved
reserves and a discount factor more representative of the time value of money
and the risks inherent in producing oil and gas.
60
<PAGE> 61
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET
CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (Continued)
<TABLE>
<CAPTION>
thousands 1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
UNITED STATES ---------- ---------- ----------
Future cash inflows $4,700,391 $4,640,825 $3,751,948
Future production and
development costs 1,529,616 1,402,240 1,057,344
---------- ---------- ----------
Future net cash flows
before income taxes 3,170,775 3,238,585 2,694,604
10% annual discount for
estimated timing of cash flows 1,402,505 1,475,520 1,180,984
---------- ---------- ----------
Discounted future net cash flows
before income taxes 1,768,270 1,763,065 1,513,620
Future income taxes, net of 10%
annual discount 544,440 490,295 478,136
---------- ---------- ----------
Standardized measure of discounted
future net cash flows relating
to oil and gas reserves 1,223,830 1,272,770 1,035,484
---------- ---------- ----------
CANADA
Future cash inflows 102,175 112,304 130,449
Future production and develop-
ment costs 28,466 39,959 66,010
---------- ---------- ----------
Future net cash flows before
income taxes 73,709 72,345 64,439
10% annual discount for estimated
timing of cash flows 29,760 30,545 24,227
---------- ---------- ----------
Discounted future net cash flows
before income taxes 43,949 41,800 40,212
Future income taxes, net of 10%
annual discount 13,883 12,867 11,759
---------- ---------- ----------
Standardized measure of discounted
future net cash flows relating
to oil and gas reserves 30,066 28,933 28,453
---------- ---------- ----------
TOTAL
Future cash inflows 4,802,566 4,753,129 3,882,397
Future production and develop-
ment costs 1,558,082 1,442,199 1,123,354
---------- ---------- ----------
Future net cash flows before
income taxes 3,244,484 3,310,930 2,759,043
10% annual discount for estimated
timing of cash flows 1,432,265 1,506,065 1,205,211
---------- ---------- ----------
Discounted future net cash flows
before income taxes 1,812,219 1,804,865 1,553,832
Future income taxes, net of 10%
annual discount 558,323 503,162 489,895
---------- ---------- ----------
Standardized measure of discounted
future net cash flows relating to
oil and gas reserves $1,253,896 $1,301,703 $1,063,937
---------- ---------- ----------
</TABLE>
61
<PAGE> 62
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
DISCOUNTED FUTURE NET CASH FLOWS (continued)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES
<TABLE>
<CAPTION>
thousands 1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
UNITED STATES
Beginning of year $1,272,770 $1,035,484 $1,045,399
Sales and transfers of oil and gas
produced, net of production costs (338,036) (266,049) (230,769)
Net changes in prices and develop-
ment and production costs (185,382) 192,875 (211,002)
Extensions, discoveries, additions
and improved recovery, less
related costs 285,640 71,544 100,319
Development costs incurred during
the period 5,167 3,367 7,968
Revisions of previous quantity
estimates 1,443 54,073 78,563
Net change in purchases and sales
of minerals in place 24,951 196,073 6,491
Accretion of discount 176,307 151,362 157,957
Net change in income taxes (54,145) (12,159) 56,031
Other 35,115 (153,800) 24,527
--------- --------- ---------
End of year 1,223,830 1,272,770 1,035,484
--------- --------- ---------
CANADA
Beginning of year 28,933 28,453 39,748
Sales and transfers of oil and gas
produced, net of production costs (8,334) (8,545) (9,236)
Net changes in prices and develop-
ment and production costs (4,378) 19,428 (12,358)
Extensions, discoveries, additions
and improved recovery, less
related costs 7,308 2,578 7,017
Development costs incurred during
the period 2 11 ---
Revisions of previous quantity
estimates 883 (15,554) (3,305)
Net change in purchases and sales
of minerals in place --- 103 100
Accretion of discount 4,180 4,021 5,747
Net change in income taxes (1,016) (1,108) 5,962
Other 2,488 (454) (5,222)
-------- --------- ---------
End of year $ 30,066 $ 28,933 $ 28,453
-------- --------- ---------
</TABLE>
62
<PAGE> 63
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
(Unaudited)
DISCOUNTED FUTURE NET CASH FLOWS (continued)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES
<TABLE>
<CAPTION>
thousands 1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
TOTAL
Beginning of year $1,301,703 $1,063,937 $1,085,147
Sales and transfers of oil and gas
produced, net of production costs (346,370) (274,594) (240,005)
Net changes in prices and develop-
ment and production costs (189,760) 212,303 (223,360)
Extensions, discoveries, additions
and improved recovery, less
related costs 292,948 74,122 107,336
Development costs incurred during
the period 5,169 3,378 7,968
Revisions of previous quantity
estimates 2,326 38,519 75,258
Net change in purchases and sales
of minerals in place 24,951 196,176 6,591
Accretion of discount 180,487 155,383 163,704
Net change in income taxes (55,161) (13,267) 61,993
Other 37,603 (154,254) 19,305
--------- --------- ---------
End of year $1,253,896 $1,301,703 $1,063,937
--------- --------- ---------
</TABLE>
63
<PAGE> 64
SUPPLEMENTAL QUARTERLY INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
The following table shows summary quarterly financial data for 1993 and 1992.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
thousands except per share amounts QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1993
Operating revenues $129,324 $112,471 $103,271 $131,199
Operating income, pretax 30,798 25,392 18,974 28,905
Net income before changes in
accounting principles 15,278 12,370 (1,990) 14,347
Net income $ 92,681 $ 12,370 $ (1,990) $ 14,347
Earnings per common share
Primary
Net income before changes
in accounting principles $ 0.28 $ 0.22 $ (0.03) $ 0.24
Net income 1.67 0.22 (0.03) 0.24
Fully Diluted
Net income before changes
in accounting principles 0.28 0.22 (0.03) 0.24
Net income $ 1.60 $ 0.22 $ (0.03) $ 0.24
1992
Operating revenues $ 83,405 $ 69,550 $ 85,089 $137,174
Operating income, pretax 13,668 (4,791) 18,315 40,401
Net income 4,217 (7,730) 7,956 22,870
Earnings per common share $ 0.08 $ (0.14) $ 0.14 $ 0.41
</TABLE>
64
<PAGE> 65
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Election of Directors" in the Anadarko Petroleum Corporation Proxy
Statement, dated March 21, 1994 ("Proxy Statement"), which is incorporated
herein by reference.
See list of "Executive Officers of the Registrant" appearing under Item 4
of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
See "Compensation of Directors" and "Executive Compensation" in the Proxy
Statement, which are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Security Ownership - Security Ownership of Management and Security
Ownership of Certain Beneficial Owners" in the Proxy Statement, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Security Ownership - Transactions with Management and Others" in the
Proxy Statement, which is incorporated herein by reference.
65
<PAGE> 66
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report or incorporated
by reference:
(1) The consolidated financial statements of Anadarko Petroleum Corporation
are listed on the Index to this report, page 28.
(2) The consolidated schedules of Anadarko Petroleum Corporation are listed
on the Index to this report, page 71.
(3) 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.
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
- ------- --------------------------- ------------------- -------
<S> <C> <C> <C>
3(a) Restated Certificate of 19(a)(i) to Form 10-Q 1-8968
Incorporation of Anadarko for quarter ended
Petroleum Corporation, September 30, 1986
dated August 28, 1986
(b) By-laws of Anadarko 19(a)(ii) to Form 10-Q 1-8968
Petroleum Corporation, for quarter ended
as amended September 30, 1986
4(a) Rights Agreement, dated as 4 to Form 8-K dated 1-8968
of October 4, 1988, between October 5, 1988
Anadarko Petroleum Corpora-
tion and Manufacturers
Hanover Trust Company,
Rights Agent
(b) Indenture, dated as of May 4.1 to Form 8-K dated 1-8968
15, 1989, between Anadarko May 23, 1989
Petroleum Corporation and
Manufacturers Hanover Trust
Company, Trustee
(c) Indenture, dated as of 4(a) to Form S-3 33-21094
May 10, 1988, between Registration Statement
Anadarko Petroleum Corpora-
tion and Continental Illinois
National Bank and Trust
Company of Chicago, Trustee
(d) First Supplemental Indenture, 4(d) to Form 10-K for 1-8968
dated as of November 15, 1991, year ended December 31,
between Anadarko Petroleum 1991
Corporation and Continental
Bank, National Association,
Trustee
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
- ------- --------------------------- ------------------- -------
<S> <C> <C> <C>
4(e) Revolving Credit Agreement 4(e) to Form 10-K for 1-8968
dated as of February 15, year ended December 31,
1992 1991
10(a)(i) Tax Sharing Agreement, 19(c)(i) to Form 10-Q 1-8968
dated September 30, 1986, for quarter ended
among Panhandle Eastern September 30, 1986
Corporation, Centana
Energy Corporation and
Anadarko Petroleum
Corporation
(ii) Spin-Off Agreement, dated 10(a)(iii) to Form 10-K 1-8968
September 30, 1986, between for year ended
Panhandle Eastern Corpora- December 31, 1988
tion and Anadarko Petroleum
Corporation
(iii) Global Settlement 28(a) to Form 10-Q 1-8968
Agreement between Panhandle for quarter ended
Eastern Corporation and March 31, 1989
Anadarko Petroleum Corpora-
tion, dated March 31, 1989
(iv) Construction Management Contract 10(a)(iv) to Form 10-K 1-8968
between Anadarko Petroleum for year ended
Corporation and L. G. Barcus December 31, 1992
and Sons, Inc. dated October
14, 1992
(b)(i) Director Deferred Compensa- 10(b)(viii) to Form 10-K 1-8968
tion Plan of Anadarko for year ended
Petroleum Corporation, December 31, 1986
effective January 1, 1987
(ii) Director Deferred Compensa- 19(a)(i) to Form 10-Q 1-8968
tion Agreement between for quarter ended
Anadarko Petroleum Corpora- March 31, 1987
tion and each Director
electing to participate
(iii) Anadarko Petroleum Corpora- 10(b)(ix) to Form 10-K 1-8968
tion Director Retirement for year ended
Income Plan, effective December 31, 1986
October 1, 1986
(iv) Anadarko Petroleum Corpora- 19(b) to Form 10-Q for 1-8968
tion 1988 Stock Option Plan quarter ended
for Non-Employee Directors September 30, 1988
</TABLE>
67
<PAGE> 68
Executive Compensation Plans and Arrangements
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
- ------- --------------------------- ------------------- -------
<S> <C> <C> <C>
10(b) (v) Anadarko Petroleum Corpora- 19(c)(ix) to Form 10-Q 1-8968
tion and Participating for quarter ended
Affiliates and Subsidiaries September 30, 1986
Annual Override Pool Bonus
Plan, as amended October 6,
1986
(vi) Second Amendment to Anadarko 10(b)(ii) to Form 10-K 1-8968
Petroleum Corporation and for year ended
Participating Affiliates and December 31, 1987
Subsidiaries Annual Override
Pool Bonus Plan
(vii) Anadarko Petroleum Corpora- 19(a) to Form 10-Q for 1-8968
tion Management Incentive quarter ended June 30,
Plan 1987
(viii) Anadarko Petroleum Corpora- 19(c)(viii) to Form 10-Q 1-8968
tion Substitute Stock Option for quarter ended
Plan September 30, 1986
(ix) Anadarko Petroleum Corpora- 10(b)(v) to Form 10-K 1-8968
tion Substitute Stock Option for year ended
Agreement, as amended December 31, 1987
October 28, 1987
(x) Anadarko Petroleum Corpora- 10(b)(vi) to Form 10-K 1-8968
tion 1986 Stock Option Plan, for year ended
as amended October 28, 1987 December 31, 1987
(and Related Agreement)
(xi) Restatement of the Anadarko Post Effective Amendment 33-22134
Petroleum Corporation 1987 No. 1 to Forms S-8 and
Stock Option Plan (and S-3, Anadarko Petroleum
Related Agreement) Corporation 1987 Stock
Option Plan
(xii) 1993 Stock Incentive Plan Attachment C to Anadarko
Petroleum Corporation
Proxy Statement, dated
March 21, 1994, filed
pursuant to Section 14A
(xiii) Annual Incentive Bonus Plan Attachment B to Anadarko
Petroleum Corporation
Proxy Statement, dated
March 21, 1994, filed
pursuant to Section 14A
(xiv) Agreement between Employee 28(c) to Form 10-Q 1-8968
and Anadarko Petroleum for quarter ended
Corporation related to September 30, 1987
Change in Control, Death
or Disability, or Termina-
tion Without Cause
(xv) Anadarko Petroleum Corpora- 19(c)(v) to Form 10-Q 1-8968
tion Key Employee Contract for quarter ended
of Employment September 30, 1986
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
- ------- --------------------------- ------------------- -------
<S> <C> <C> <C>
10(b)(xvi) Restatement of Key Employee 19(a) to Form 10-Q for 1-8968
Contract of Employment quarter ended June 30,
1988
(xvii) Restatement of Key Employee 19(a) to Form 10-Q for 1-8968
Contract of Employment quarter ended
Amended October 27, 1988 September 30, 1988
(xviii) Executive Deferred Compen- 10(b)(xii) to Form 10-K 1-8968
sation Plan of Anadarko for year ended
Petroleum Corporation and December 31, 1987
Participating Subsidiaries
and Affiliates, effective
October 1, 1986
(xix) Executive Deferred Compensa- 10(b)(vi) to Form 10-K 1-8968
tion Plan of Anadarko for year ended
Petroleum Corporation, December 31, 1986
effective January 1, 1987
(xx) Executive Deferred Compensa- 19(a)(ii) to Form 10-Q 1-8968
tion Agreement between for quarter ended
Anadarko Petroleum Corpora- March 31, 1987
tion and each Executive
electing to participate
(xxi) Amendments to Executive 10(b)(xv) to Form 10-K 1-8968
Deferred Compensation Agree- for year ended
ment between Anadarko December 31, 1987
Petroleum Corporation and
each Executive electing to
participate
(xxii) Anadarko Petroleum Corpora- 19(b) to Form 10-Q for 1-8968
tion Executive Benefit quarter ended June 30,
Equalization Plan as 1988
Restated and Amended,
effective January 1, 1988
10(c)(i) Purchase and Sale Agreement 10(c)(i) to Form 8-K 1-8968
by and between Atlantic dated January 13, 1993
Richfield Company, a Delaware
Corporation, as Seller and
Anadarko Petroleum Corpora-
tion, a Delaware corporation,
as Purchaser, dated December 8,
1992
*12 Computation of Ratios of
Earnings to Fixed Charges and
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends
</TABLE>
69
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------
<S> <C>
*13 Portions of the Anadarko Petroleum Corporation
1993 Annual Report to Stockholders
*21 List of Significant Subsidiaries:
Anadarko Trading Company, a Delaware Corporation
Anadarko Algeria Corporation, a Delaware Corporation
*23 Consents of Experts and Counsel
Consent of KPMG Peat Marwick
*24 Powers of Attorney
</TABLE>
_______________
The total amount of securities of the Registrant authorized under any
instrument with respect to long-term debt not filed as an Exhibit does not
exceed ten percent of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees, upon request of the Securities
and Exchange Commission, to furnish copies of any or all of such instruments to
the Securities and Exchange Commission.
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the three months ended
December 31, 1993.
70
<PAGE> 71
ANADARKO PETROLEUM CORPORATION
INDEX
CONSOLIDATED SCHEDULES
Page
Schedule V - Properties and Equipment S-1
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Properties and Equipment S-2
Schedule IX - Short-term Borrowings S-3
Independent Auditors' Report S-4
All other Schedules are omitted because they are not applicable, not required
or the information is included in the Consolidated Financial Statements or
Notes thereto.
71
<PAGE> 72
SCHEDULE V
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED PROPERTIES AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
PLANT GATHERING GENERAL
OIL AND GAS FACILI- FACILI- PROPER-
thousands PROPERTIES TIES TIES TIES TOTAL
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1,
1991 $2,473,490 $15,809 $43,391 $43,445 $2,576,135
Additions, at cost 156,952 1,559 5,123 6,160 169,794
Retirements or sales 19,151 7 219 1,469 20,846
Other changes 287 --- (2,180) 19 (1,874)
--------- ------ ------ ------ ---------
BALANCE DECEMBER 31,
1991 2,611,578 17,361 46,115 48,155 2,723,209
Additions, at cost 343,744 1,626 3,286 13,749 362,405
Retirements or sales 25,558 7 --- 502 26,067
Other changes (28,131) --- --- (783) (28,914)
--------- ------ ------ ------ ---------
BALANCE DECEMBER 31,
1992 2,901,633 18,980 49,401 60,619 3,030,633
Additions, at cost 241,730 4,682 6,509 11,655 264,576
Retirements or sales 15,728 301 5 7,122 23,156
Other changes (4,364) --- (112) (752) (5,228)
--------- ------ ------ ------ ---------
BALANCE DECEMBER 31,
1993 $3,123,271 $23,361 $55,793 $64,400 $3,266,825
========= ====== ====== ====== =========
</TABLE>
S-1
<PAGE> 73
SCHEDULE VI
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTIES AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
thousands
<S> <C>
BALANCE JANUARY 1, 1991 $1,058,497
Additions charged to income 121,368
Retirements 13,393
Other changes 1,599
---------
BALANCE DECEMBER 31, 1991 $1,168,071
Additions charged to income 133,232
Retirements 22,983
Other changes (2,243)
---------
BALANCE DECEMBER 31, 1992 1,276,077
Additions charged to income 167,504
Retirements 17,548
Other changes (935)
---------
BALANCE DECEMBER 31, 1993 $1,425,098
=========
</TABLE>
S-2
<PAGE> 74
SCHEDULE IX
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
WEIGHTED
MAXIMUM AVERAGE AVERAGE
AMOUNT AMOUNT INTEREST
CATEGORY OF WEIGHTED OUTSTAND- OUTSTAND- RATE DUR-
AGGREGATE BALANCE AVERAGE ING AT ING DURING ING THE
SHORT-TERM AT END OF INTEREST ANY MONTH THE PERIOD PERIOD
BORROWINGS PERIOD RATE END (1) (2)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
thousands
1993
Commercial paper $--- ---% $ 5,000 $11,893 3.3%
Notes payable,
banks --- --- --- --- ---
All categories --- --- 5,000 11,893 3.3
1992
Commercial paper --- --- 23,693 10,397 3.9
Notes payable,
banks --- --- --- --- ---
All categories --- --- 23,693 10,397 3.9
1991
Commercial paper --- --- 414 6,864 6.3
Notes payable,
banks --- --- 2,250 36 5.8
All categories $--- ---% $ 2,664 $ 6,900 6.3%
- ----------
</TABLE>
(1) Average of daily balances for 365 days in 1993 and 1991 and 366 days in
1992.
(2) Total interest accrued divided by average daily balance.
S-3
<PAGE> 75
ANADARKO PETROLEUM CORPORATION
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Anadarko Petroleum Corporation:
Under date of January 27, 1994, we reported on the consolidated balance
sheets of Anadarko Petroleum Corporation and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of income, stock-
holders' equity and cash flows for each of the years in the three-year period
ended December 31, 1993, as contained in the 1993 Form 10-K Annual Report. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules as
listed in the accompanying index. These financial statements schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
{KPMG PEAT MARWICK}
Houston, Texas
January 27, 1994
S-4
<PAGE> 76
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ANADARKO PETROLEUM CORPORATION
March 17, 1994 By MICHAEL E. ROSE
(Michael E. Rose, Senior Vice President,
Finance and Chief Financial Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 17, 1994.
NAME AND SIGNATURE TITLE
------------------ -----
(i) Principal executive officer:*
ROBERT J. ALLISON, JR. Chairman of the Board,
(Robert J. Allison, Jr.) President and Chief
Executive Officer
(ii) Principal financial officer:*
MICHAEL E. ROSE Senior Vice President,
(Michael E. Rose) Finance and Chief
Financial Officer
(iii) Principal accounting officer:*
JAMES R. LARSON Controller
(James R. Larson)
(iv) Directors:*
ROBERT J. ALLISON, JR.
CONRAD P. ALBERT
LARRY BARCUS
RONALD BROWN
JAMES L. BRYAN
JOHN R. GORDON
CHARLES M. SIMMONS
______________
* Signed on behalf of each of these persons and on his own behalf:
By {MICHAEL E. ROSE}
(Michael E. Rose, Attorney-in-Fact)
<PAGE> 77
GRAPHICS APPENDIX LIST
EDGAR VERSION TYPESET VERSION
- ------------- ---------------
1993 Form 10-K, Part I,
Item 1 - Business
Page 6 - One map omitted Page 5 - One map depicting Anadarko's
onshore developed and undeveloped net
acres, producing net wells, 1993
drilling activity areas and office
locations by state and province in
the United States and Canada. (The
text and numbers used in this map
appear in the text of the EDGAR
version.)
Page 8 - One map omitted Page 7 - One map depicting Anadarko's
offshore United States exploratory
and development net acres and producing
net wells by state, as well as location
of producing, development, exploration
and 1993 lease acquisition blocks.
(The text and numbers used in this map
appear in the text of the EDGAR
version).
<PAGE> 1
EXHIBIT 12
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF COMPUTATION OF RATIOS
OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FIVE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------
thousands 1993 1992 1991 1990 1989
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Gross Income $106,824 $ 68,311 $75,431 $119,363 $115,475
Rentals 3,069 2,737 2,043 1,688 1,305
------- ------- ------ ------- -------
Earnings 109,893 71,048 77,474 121,051 116,780
======= ======= ====== ======= =======
Gross Interest Expense 38,000 36,620 36,829 42,903 50,866
Rentals 3,069 2,737 2,043 1,688 1,305
------- ------- ------ ------- -------
Fixed Charges $ 41,069 $ 39,357 $38,872 $ 44,591 $ 52,171
======= ======= ====== ======= =======
Ratio of Earnings to Fixed
Charges 2.68 1.81 1.99 2.71 2.24
======= ======= ====== ======= =======
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings include income before income
taxes and fixed charges. Fixed charges include interest and amortization of
debt expenses, and the estimated interest component of rentals.
During the five years ended December 31, 1993, there were no shares of
preferred stock outstanding. Accordingly, the ratio of earnings to combined
fixed charges and preferred stock dividends for each of the five years is the
same as the ratio of earnings to fixed charges.
<PAGE> 1
EXHIBIT 13
ANADARKO PETROLEUM CORPORATION
PORTIONS OF THE ANADARKO PETROLEUM CORPORTION
1993 ANNUAL REPORT TO STOCKHOLDERS
Summary Financial Data*
<TABLE>
<CAPTION>
% Change
Millions except per share amounts 1993 92-93 1992 1991 1990 1989
-------- ----------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 476.3 27 $375.2 $336.6 $388.5 $361.5
Operating Income 104.1 53 67.6 73.0 118.6 113.3
Net Income before Cumulative Effect
of Changes in Accounting Principles 40.0 47 27.3 32.4 55.2 48.0
Net Income 117.4 330 27.3 32.4 55.2 48.0
Net Cash from Operating Activities 274.3 60 171.6 160.0 207.7 210.8
Per Common Share
Net Income before Cumulative Effect
of Changes in Accounting Principles 0.70 43 0.49 0.59 1.04 0.92
Net Income 2.05 318 0.49 0.59 1.04 0.92
Dividends 0.30 -- 0.30 0.30 0.30 0.30
Average Shares Outstanding 57.2 3 55.3 55.0 53.0 52.2
------- ---- ------ ------ ------ ------
Capital Expenditures 264.5 (27) 359.9** 165.5 211.0 201.2
------- ---- ------ ------ ------ ------
Long-term Debt 543 (16) 647 440 427 492
Stockholders' Equity 864 32 657 641 618 495
------- ---- ------ ------ ------ ------
Total Assets $ 2,023 6 $1,905 $1,676 $1,648 $1,553
------- ---- ------ ------ ------ ------
Oil Reserves (MMBbls) 78.5 (2) 80.3 45.8 32.6 28.4
Gas Reserves (Tcf) 1.88 9 1.73 1.74 1.70 1.73
Total Reserves (MMEEBs) 391.1 6 368.0 336.5 316.6 316.5
------- ---- ------ ------ ------ ------
U.S. Finding Cost ($/EEB) $ 3.55 (23) $ 4.61 $ 2.62 $ 5.29 $ 5.82
Reserve Replacement
(% of Production) 162 (19) 200 166 100 111
------- ---- ------ ------ ------ ------
</TABLE>
* Consolidated for Anadarko Petroleum Corporation (referred to herein as
Anadarko) and its subsidiaries, including Anadarko Gathering Company,
Anadarko Marketing Company, Anadarko Trading Company, Anadarko Petroleum of
Canada Ltd. and Anadarko Algeria Corporation.
** Includes acquisition of producing properties of approximately $206 million.
1
<PAGE> 2
EXPLORATION
- -----------
In 1993, Anadarko realized outstanding success in its exploration drilling
program. During the year, the Company drilled 32 exploration wells with a 56
percent success rate compared to 27 wells drilled with a 41 percent success
rate in 1992. Significant discoveries were made in the United States, both
onshore and offshore, and in Algeria.
Key to Anadarko's success is an ongoing commitment to stay active in
exploration and maintain a balanced portfolio of prospects. As a result,
Anadarko was better positioned than many of our industry peers to take
advantage of higher than expected cash flows in 1993.
Exploration spending in 1993 was approximately $97 million, compared to $64
million in 1992. Anadarko expects to increase its exploration spending in 1994
to about $105 million.
GULF OF MEXICO
The Gulf of Mexico has been one of the nation's most prolific exploration plays
for more than three decades. With the increased use of three-dimensional (3-D)
seismic and other integrated exploration technology, the Gulf of Mexico is
offering new opportunities for oil and gas exploration unmatched in many years.
In 1993, Anadarko strengthened its position in the offshore arena with
significant discoveries in the new sub-salt play and in conventional
exploration plays. During the year, Anadarko drilled seven exploration wells in
the Gulf with three discoveries. These discoveries hold the potential for
significant increases in reserves and production over the next several years.
The Company plans to drill 11 exploratory wells offshore in 1994.
THE SUB-SALT PLAY
No play better symbolizes Anadarko's technological edge in the Gulf of Mexico
than the sub-salt trend -- which is becoming the high-potential domestic
exploration play of the 1990s. Processing techniques -- with 3-D seismic --
called pre-stack and post-stack depth migration analysis are allowing energy
explorers to "see" below large, horizontal salt sheets for the first time.
In September 1993, Anadarko and its partners announced a major oil discovery at
Ship Shoal Blocks 349/359, tagged with the prospect name "Mahogany." The first
well tested at flow rates of up to 7,256 barrels of oil per day (BOPD) and 9.9
million cubic feet per day (MMcf/d) of gas through a 1/2-inch choke at 7,063
pounds per square inch (psi) flowing tubing pressure. A delineation well -- the
Mahogany #2 -- began drilling in January 1994; a third delineation well will
follow later this year. Anadarko owns a 37.5-percent working interest in
Mahogany.
Shortly after the Mahogany discovery was made, Anadarko and Phillips Petroleum
Company began drilling an exploratory well on a second sub-salt prospect, named
"Teak," located in 250 feet of water at South Timbalier Blocks 259/260/283,
offshore Louisiana. Anadarko owns a 50-percent working interest in the Teak
prospect.
2
<PAGE> 3
The third sub-salt prospect being explored by Anadarko and Phillips,
named "Mesquite," began drilling in February 1994 on Vermilion Block 349,
offshore Louisiana in 270 feet of water. Anadarko is operator of the well and
owns a 50-percent working interest.
Anadarko and Phillips own interests in 15 offshore lease blocks in the sub-salt
play. The Company plans to drill five more sub-salt prospects in 1994 and 1995.
CONVENTIONAL OFFSHORE EXPLORATION
While the sub-salt play is significant to Anadarko and to industry exploration
in the Gulf, the Company is also using 3-D techniques for more conventional
exploration targets in traditional areas offshore Texas and Louisiana. At
Matagorda Island Block 636, offshore Texas, Anadarko and its partners made an
important natural gas discovery in 1993. The discovery is adjacent to the
Matagorda Island 623 field, which is one of the largest offshore Texas gas
fields ever found and consists of a four block area encompassing Matagorda
Island Blocks 622/623/635/636. Discovered by Anadarko in the early 1980s, gross
production from the field averaged about 185 MMcf/d of gas and 1,400 barrels of
condensate per day (BCPD) in 1993. A pipeline is being installed to connect the
new discovery to a production platform on Matagorda Island Block 622. Flow test
results from the discovery are expected in the second quarter of 1994. Anadarko
owns a 37.5-percent working interest in all four of the Matagorda Island
Blocks.
In December 1993, Anadarko announced a significant natural gas discovery at
East Cameron Block 157, located 50 miles offshore Louisiana. The well
encountered over 250 feet of net gas pay in six separate Mio-Pliocene sands
between 9,500 feet and 15,000 feet. Development drilling will begin in the
second quarter of 1994 to further delineate the field. Anadarko has also begun
the design of a drilling and production platform and related equipment, which
are expected to be installed in late 1994. Anadarko owns a 100-percent working
interest in East Cameron Block 157 and a 50-percent working interest in the
adjacent East Cameron Block 158, where an exploratory well is slated for the
second half of 1994.
YEGUA TREND
Anadarko continues to be one of the most active companies exploring the Yegua
Trend of Southeast Texas. Since the Company began exploring the trend in 1992,
Anadarko has participated in 11 successful wells out of a total 16 wells
drilled -- an exceptional success rate for an exploration play.
One reason for the Company's success is its use of technology. High-density,
two-dimensional seismic analysis -- including a technique called amplitude
versus offset (AVO) -- has served to reduce risk in the trend. The Company has
an average working interest of 50 percent in 32,000 lease acres encompassing 12
drillable prospects with significant gross reserve potential.
Anadarko expects to continue its active exploration and development of the
Yegua Trend with 10 wells planned for 1994.
3
<PAGE> 4
ALGERIA
Anadarko's international exploration efforts in 1993 continued to be focused in
Algeria where the Company has had three significant discoveries since 1989 on a
5.1-million acre concession secured from Sonatrach, the national oil and gas
enterprise of Algeria. Sonatrach is beneficial owner of 10.2 percent of
Anadarko's common stock. Anadarko's objective in international exploration is
to bring high-potential prospects to the balanced mix of domestic plays.
In February 1993, the Company announced its first discovery in Algeria located
in the Ghadames Basin on Block 208. The El Merk #1 (EMK #1) well flowed over
3,700 BOPD and 17 MMcf/d of gas from two Triassic zones. A subsequent
delineation well -- the El Merk #2 (EMK #2) -- drilled in August proved
inconclusive as to the commerciality of the EMK #1 discovery well.
In November 1993, Anadarko began drilling a third well on Block 208 -- the El
Merk East #1 (EME #1). Located approximately six kilometers southeast of the
EMK #1, the EME #1 was drilled to a total depth of 4,529 meters (14,859 feet)
and encountered more than 70 meters (230 feet) of net hydrocarbon pay from
various Triassic and Devonian sandstones. The well flowed over 8,100 barrels of
oil and condensate per day and 82 MMcf/d of gas from four zones.
Also in November, Anadarko contracted a second drilling rig and began drilling
another discovery well in Algeria. The Hassi Berkine North #1 (HBN #1), located
on Block 404, was drilled to a total depth of 3,430 meters (11,251 feet) and
encountered 23 meters (75 feet) of net pay in a Triassic sandstone. The well
tested 4,900 BOPD of 42 degree API gravity crude oil and 6.3 MMcf/d of gas
through a 3/4-inch choke with 1,330 psi of flowing tubing pressure.
Delineation plans are currently being considered by the partners.
During the first half of 1994, Anadarko and partners will drill two more
exploration wells -- Berkine East #1 (BKE #1) and Hassi Berkine East #1 (HBE
#1) -- both of which are located on Block 404.
Anadarko is operator of these wells with a 50-percent working interest. Other
partners in the Algerian venture -- each with a 25-percent working interest --
are LASMO Oil (Algeria) Limited, a wholly-owned subsidiary of LASMO plc; and,
Maersk Olie Algeriet AS, a wholly owned subsidiary of Maersk Olie og Gas AS, a
company in the Danish A.P. Moeller group.
PUEBLO VALLEY
In November 1993, Anadarko successfully tested two offset confirmation wells to
its 1989 geothermal discovery in the Pueblo Valley of southeast Oregon. Located
in the Alvord Known Geothermal Resources Area (Alvord KGRA), the well flowed at
an average rate of 290 gallons of water per minute with a wellhead temperature
of 296 degrees Fahrenheit.
4
<PAGE> 5
Anadarko is considering development of the field for electric power generation
using binary (closed system) power plants. Binary geothermal power plants have
no atmospheric emissions and have the least environmental impact of all
renewable energy sources capable of firm power generation. The Company has been
selected to participate in contract negotiations with Portland General Electric
Company to provide electric power under a long-term contract from a proposed 22
megawatt binary plant.
Results of negotiations are expected during 1994. Subsequent to a successful
contract, full project development would take about four years.
Anadarko holds 8,120 net lease acres at the Pueblo Valley discovery site and an
additional 39,485 net lease acres within the Alvord KGRA. Anadarko maintains
an active interest in geothermal energy because of its long-term economic
potential.
DEVELOPMENT
- -----------
While Anadarko's exploration program yielded major discoveries for the Company
in 1993, the Company's development program provides low-risk additions to
proved reserves and production capacity year after year. Anadarko drilled 187
development wells with a 90 percent success rate in 1993 compared to 99
development wells drilled in 1992 with an 84 percent success rate.
Capital spending for development activities in 1993 was approximately $78
million or 29 percent of total capital spending. This compares to development
spending of $29 million or 8 percent of total capital expenditures in 1992. In
1994, Anadarko expects to allocate about $142 million for development, which is
38 percent of the Company's 1994 capital budget.
HUGOTON
Anadarko continues to develop its natural gas reserves through development
drilling in the shallow Hugoton Field of Kansas. Anadarko implemented an infill
program in 1987 to enhance natural gas production and improve recovery from the
Hugoton Field Chase Group formation.
In 1993, Anadarko had interests in a total of 674 producing gas wells in the
Hugoton Field, including 282 infill wells. The Company's natural gas production
from the field in 1993 was approximately 44 billion cubic feet (Bcf), up 18
percent from 38 Bcf produced in 1992.
Anadarko's production from the Hugoton Field is expected to increase in 1994
due to modifications in production allowable rules approved by the Kansas
Corporation Commission (KCC) in December 1993. The KCC issued a written order
on their decision in February 1994. (See Regulatory and Legislative
Developments included in Management's Discussion and Analysis.) In 1993,
Anadarko recorded a modest positive revision to its Hugoton Field reserves to
reflect a portion of the effect of the KCC order. (See Supplemental Information
to Oil and Gas Exploration and Production Activities included in the
Consolidated Financial Statements.)
In 1994, Anadarko expects to drill about 40 infill wells in the field, as well
as expand its Hugoton area gas gathering and compression facilities.
5
<PAGE> 6
SOUTHWEST KANSAS
In 1993, Anadarko continued its "deep" drilling program to find and develop oil
and gas reservoirs beneath the shallow natural gas pay zones in the Hugoton
Field area.
One example of Anadarko's success in deep drilling has been in the Stirrup
Field of Morton County, Kansas. Anadarko has drilled 17 oil wells and five gas
wells since the Stirrup Field was discovered in 1985. Gross production averaged
1,450 BOPD and 12 MMcf/d of gas in 1993, an 86-percent increase over field
production in 1992. Anadarko expects to drill 36 "deep" oil and gas wells in
southwest Kansas in 1994.
Anadarko continues to boost its crude oil production in southwest Kansas
through secondary recovery or "waterflood" operations. At Anadarko's Hitch
Unit, gross production increased over 400 percent in 1993 to an average 2,200
BOPD compared to an average of 420 BOPD in 1992. At year-end 1993, the Hitch
Unit was producing over 3,000 BOPD. Anadarko has a 91-percent working interest
in the Hitch Unit.
GOLDEN TREND
One of Anadarko's most important development plays is the Golden Trend of
central Oklahoma, where the Company owns interests in 206 wells, most of which
are connected to the Company's Antioch Gathering System. During 1993, the
Company drilled 37 development wells in the trend to extend the known
geographic limits of the reservoir. Production from the trend was 16.6 MMcf/d
of gas and 583 BOPD at year-end 1993. Anadarko plans to drill another 44
development wells in the Golden Trend in 1994.
PERMIAN BASIN
Anadarko continues to increase its use of secondary recovery ("waterflood")
techniques to maximize production of the Company's oil reserves in the Permian
Basin of West Texas. Anadarko's net crude oil production from the area is more
than 10,000 BOPD or about 50 percent of the Company's total crude oil and
condensate production. This compares to net production from the area of 3,300
BOPD in 1992.
Since 1988, Anadarko has focused much of its acquisition efforts on Permian
Basin oil properties. During 1992, the Company invested over $200 million to
buy additional oil properties mainly in the Permian Basin. The Company spent
another $9 million to develop and upgrade these properties in 1993. As a result
of acquisition and development strategies, Anadarko's total crude oil and
condensate production increased over 70 percent in 1993 compared to 1992.
In 1994, Anadarko expects to invest $15 million to further develop its
waterflood oil properties in the Permian Basin, as well as other secondary
recovery properties in the Mid-continent.
6
<PAGE> 7
GULF OF MEXICO
Anadarko's development of its offshore producing properties in 1993 included
drilling four development wells. Anadarko's 1993 production in the Gulf of
Mexico remained steady at 94 MMcf/d of gas and 1,600 BOPD compared to 1992 and
1991.
Most notable during the year was Anadarko's continued development of the High
Island Block A-376 field. In March 1993, Anadarko drilled a successful
delineation well that flowed approximately 5 MMcf/d of gas and 424 BCPD. The
well encountered 162 feet of net pay and confirmed a discovery well, drilled in
November 1992, which encountered 178 feet of net pay. The discovery tapped a
new reservoir that is separate from the existing production areas which have
produced over 9 MMBbls of oil and 55 Bcf of gas since being discovered by
Anadarko in 1979. A second production platform will be installed on High Island
A-376 in mid-1994 with production expected to be on stream by year-end.
Anadarko is operator of the block and owns a 33-percent working interest.
During 1994, Anadarko expects to participate in seven development wells in the
Gulf of Mexico. Platform design and installation work will commence in 1994 on
a number of discoveries made in 1993.
ACQUISITIONS
- ------------
Anadarko's acquisitions strategy places special emphasis on oil and gas
producing properties in the United States and Canada where the Company's
exploration and production activities are already strong. The goal is to
enhance the Company's position and increase profitability in the areas Anadarko
knows best.
In 1993, Anadarko maintained an active program to evaluate numerous potential
acquisition opportunities in both the United States and Canada. By year-end,
the Company closed 24 property acquisition transactions in core producing areas
with net proved reserves of 5.7 million energy equivalent barrels (MMEEBs) at a
cost of $27.8 million or $4.90 per EEB. Over the next few years, the Company
expects to spend about $8 million to further develop reserves on the acquired
properties. Acquisitions replaced about 15 percent of total production in 1993.
The largest transaction in 1993 involved $20 million paid for "deep" oil and
gas properties encompassing 24,000 lease acres in southwest Kansas from Mesa
Operating Limited Partnership. The purchase included proved reserves of about
3.7 MMEEBs and a 6-1/2 percent over-ride interest in an additional 188,000
lease acres which are under a pre-existing farm-out arrangement with another
company until 1999, when the undeveloped portion of the acreage will revert to
Anadarko.
With further evaluation of these properties and results from seven development
wells drilled in 1993, the Company added another 1.9 MMEEBs to reserves from
this acquisition. By year-end 1993, production from the properties had
increased to 985 BOPD and 2.5 MMcf/d of gas from 450 BOPD and 1.4 MMcf/d of gas
when the properties were acquired in late June 1993. Development drilling will
continue in 1994 on about 40 identified prospects on the properties.
Anadarko expects competition in the acquisitions arena to remain keen. In 1994,
the Company will continue to concentrate on acquisitions of quality producing
properties with long reserve lives that mesh profitably and strategically with
Anadarko's ongoing operations. As part of this focus on core producing areas,
Anadarko will complement its property acquisition efforts with a divestment
strategy to include sales of non-strategic assets during 1994.
7
<PAGE> 8
MARKETING
- ---------
Anadarko's marketing strategies are designed to capture maximum value when the
Company sells natural gas, crude oil and natural gas liquids.
NATURAL GAS
Since becoming an independent company in 1986, Anadarko has significantly
increased its natural gas sales and gained market share by offering customers
secure supplies under a variety of contract options with innovative pricing
structures and marketing related services.
In 1993, the Company's marketing subsidiary Anadarko Trading Company (ATC) was
redesigned to provide a variety of value-added marketing services to end-use
customers primarily in midwest and northeast markets. Installation began on a
computerized decision-support system which will allow ATC to move gas to the
most profitable markets and take advantage of the lowest cost transportation
available.
ATC continues to expand its gas sales capacity by increasing its purchase of
non-affiliated gas. In 1993, sales of non-affiliated purchased gas totaled 82
Bcf compared to 58 Bcf in 1992 and 28 Bcf in 1991. In December 1993, ATC
entered into a one-year gas purchase agreement with PanCanadian Petroleum
Company (U.S.), effective April 1, 1994, under which ATC will purchase 42
MMcf/d of gas from PanCanadian for sale into market areas in Illinois,
Wisconsin and Minnesota. In 1993, ATC sold about 100 MMcf/d of gas into this
Midwest market.
Gas is sold under a portfolio of contracts, the majority of which are
market-responsive with pricing being determined based on the term of the
contract, the level of reliability and the types of services provided. In 1993,
about half of Anadarko's gas sales volumes (including sales of gas purchased
from non-affiliated parties) was sold directly to local distribution companies
and industrial end-users compared to about one-third in 1992.
PLANTS AND PIPELINES
Anadarko's investment in gas gathering operations allows the Company to better
manage its gas production, improve theultimate recovery of reserves and enhance
marketing opportunities.
Since 1988, the Company has invested approximately $54 million to build or
acquire gas gathering systems and gas processing plants. Anadarko currently
owns and operates four major gas gathering systems in core producing areas and
operates or has interests in 13 other systems. These four large systems have
capacity of 300 MMcf/d of gas and are connected to 536 wells.
In 1993, Anadarko began a $1.6 million expansion of its Hugoton Gathering
System (HUGS) in southwest Kansas, built in 1990. With completion of this
expansion in January 1994, HUGS has 120 MMcf/d of gas capacity to serve
Anadarko's markets in the Midwest through two interstate and one intrastate
pipeline connection. Additional expansion projects are planned on HUGS in 1994.
Also in 1993, Anadarko invested $1.7 million to expand and add compression
equipment to its Antioch Gathering System in central Oklahoma. As a result,
throughput at the Panther Creek Plant increased from 16 to 26 MMcf/d of gas.
8
<PAGE> 9
In 1994, Anadarko will aggressively pursue further expansion of its gas
gathering and processing operations. A new Plants and Pipelines Division will
invest approximately $36 million in 1994 for construction of new gathering and
processing facilities, installation of additional compressors and expansion of
existing gathering systems.
Anadarko also will continue its aggressive pursuit of additional marketing and
transportation options through participation in development of market trading
centers (hubs) in areas of Company operations.
CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS
Anadarko's crude oil and condensate sales volumes were up 70 percent in 1993
compared to 1992 primarily due to the purchase of producing oil properties in
the Permian Basin in December 1992.
The majority of Anadarko's crude oil production is sold on 30-day "evergreen"
contracts with prices based on postings plus a premium.
Over the past few years, Anadarko has become increasingly active in the natural
gas liquids (NGLs) business, primarily as a result of its gas gathering and
processing operations. In 1993, Anadarko's sales of NGLs reached record levels
of 2.7 MMBbls. The increase is related primarily to the acquisition of
producing properties in the Permian Basin of West Texas in December 1992, as
well as sales from inventory.
9
<PAGE> 10
STOCKHOLDERS' INFORMATION
The common stock of Anadarko Petroleum Corporation is traded on the New York
Stock Exchange. Average daily trading volume was 283,000 shares in 1993,
205,000 shares in 1992 and 183,000 shares in 1991.
The ticker symbol for Anadarko is APC and daily stock reports published in
local newspapers carry trading summaries for the Company under the headings
ANADRK or ANADRKPETE.
The following shows information regarding the closing market price of and
dividends paid on the Company's common stock by quarter for 1993 and 1992.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1993
Market Price
High $38.25 $43.63 $47.50 $51.75
Low 25.88 36.25 38.25 39.50
Dividends $0.075 $0.075 $0.075 $0.075
1992
Market Price
High $24.00 $27.00 $32.75 $30.88
Low 18.88 20.25 23.38 26.63
Dividends $0.075 $0.075 $0.075 $0.075
10
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Anadarko Petroleum Corporation:
We consent to the incorporation by reference in the following registration
statements of Anadarko Petroleum Corporation of our reports dated January 27,
1994, relating to the consolidated balance sheets of Anadarko Petroleum
Corporation and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity, and cash flows and
related schedules for each of the years in the three-year period ended December
31, 1993, which reports appear or are incorporated by reference in the December
31, 1993 annual report on Form 10-K of Anadarko Petroleum Corporation.
(a) Post-Effective Amendment No. 2 to Forms S-8 and S-3, Anadarko Petroleum
Corporation Substitute Stock Option Plan (No. 33-8434).
(b) Post-Effective Amendment No. 1 of Form S-8 and S-3, Anadarko Petroleum
Corporation 1986 Stock Option Plan (No. 33-8496).
(c) Post-Effective Amendment No. 2 to Forms S-8 and S-3, Anadarko Employee
Savings Plan (No. 33-8643).
(d) Forms S-8 and S-3, Anadarko Petroleum Corporation 1987 Stock Option Plan
(No. 33-22134).
(e) Forms S-8 and S-3, Anadarko Petroleum Corporation 1988 Stock Option Plan
for Non-Employee Directors (No. 33-30384).
(f) Form S-3, Anadarko Petroleum Corporation Shelf Registration Statement
for $300 Million of Equity Securities (No. 33-50717).
{KPMG Peat Marwick}
Houston, Texas
March 17, 1994
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Officer and/or
Director of ANADARKO PETROLEUM CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint SUZANNE SUTER and MICHAEL E.
ROSE, and each of them, his true and lawful attorney and agent to do any and
all acts and things and execute any and all instruments which, with the advice
of Counsel, said attorney and agent may deem necessary or advisable to enable
the Company to comply with the Securities Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission
in connection with the filing under said Act of the Form 10-K Annual Report,
including specifically, but without limitation thereof, to sign his name as an
Officer and/or Director of the Company to the Form 10-K Annual Report filed
with the Securities and Exchange Commission, and to any instrument or document
filed as a part of, or in connection with, said Form 10-K Annual Report or
amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents
this 14th day of March, 1994.
{Robert J. Allison, Jr.} {James L. Bryan}
- ---------------------------------- ---------------------------------
Robert J. Allison, Jr. James L. Bryan
{Conrad P. Albert} {John R. Gordon}
- ---------------------------------- ---------------------------------
Conrad P. Albert John R. Gordon
{Larry Barcus} {Charles M. Simmons}
- --------------------------------- ---------------------------------
Larry Barcus Charles M. Simmons
{Ronald Brown} {Michael E. Rose}
- --------------------------------- ---------------------------------
Ronald Brown Michael E. Rose
{J. R. Larson} {Suzanne Suter}
- --------------------------------- ---------------------------------
J. R. Larson Suzanne Suter
