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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, 1994
COMMISSION FILE NO. 1-8968
ANADARKO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
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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)
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REGISTRANT'S TELEPHONE NUMBER: (713) 875-1101
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE 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.
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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, 1995 was $2,240,697,316.
The number of shares outstanding of each of the registrant's classes of
common stock as of January 31, 1995 is shown below:
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TITLE OF CLASS NUMBER OF SHARES OUTSTANDING
Common Stock, $0.10 Par Value 58,868,895
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PART OF
FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
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Part I Portions of the Anadarko Petroleum Corporation 1994 Annual Report to Stockholders.
Part III Portions of the Proxy Statement, dated March 20, 1995, for the Annual Meeting of
Stockholders of Anadarko Petroleum Corporation to be held April 27, 1995.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business 2
General 2
Employees 2
Proved Reserves and Future Net Cash Flows 2
Exploration, Development, Acquisition and Marketing Activities 3
Volumes and Prices 3
Properties and Activities -- United States -- Onshore 4
Properties and Activities -- United States -- Offshore 8
Properties and Activities -- International 8
Drilling Programs 12
Drilling Statistics 12
Productive Wells 13
Regulatory and Legislative Developments 13
Additional Factors Affecting Business 14
Title to Properties 15
Capital Spending 15
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends 15
Item 2. Properties 16
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Executive Officers of the Registrant 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 18
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 19
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 63
PART III
Item 10. Directors and Executive Officers of the Registrant 63
Item 11. Executive Compensation 63
Item 12. Security Ownership of Certain Beneficial Owners and Management 63
Item 13. Certain Relationships and Related Transactions 63
PART IV
Item 14. Exhibits and Reports on Form 8-K 64
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PART I
ITEM 1. BUSINESS
GENERAL
Anadarko Petroleum Corporation and its subsidiaries are engaged in the
exploration, development, production and marketing of natural gas, crude oil,
condensate 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 where about 85
percent of the Company's reserves are located. Approximately 19 percent of
Anadarko's reserves are in the Gulf of Mexico, where the Company owns interests
in 125 lease blocks. Anadarko also has found and continues to explore for crude
oil reserves on a 5.1 million acre area in Algeria. The Company is participating
in other joint-venture projects overseas in Indonesia and China.
In order to manage production more effectively and improve recovery of
natural gas reserves, the Company owns interests in 15 gas gathering systems and
eight gas processing plants in the mid-continent area. Anadarko also owns
acreage and is pursuing the development of 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 Trading Company; and, Anadarko Algeria Corporation
(Anadarko Algeria).
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, 1994, the Company employed 1,085 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 natural gas,
crude oil, condensate 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. Reserves 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 can be expected to be recovered
through existing wells, with existing equipment and operating methods.
As of December 31, 1994, Anadarko had proved reserves of 1.91 trillion
cubic feet (Tcf) of natural gas and 157.4 million barrels (MMBbls) of crude oil,
condensate and NGLs. Combined, these proved reserves are equivalent to 476.4
MMBbls of oil or 2.86 Tcf of gas. Crude oil and condensate reserves have grown
from 20 percent of total reserves in 1993 to 33 percent of total reserves in
1994.
Proved developed reserves comprise 78 percent of the total proved reserves
on an energy equivalent barrel (EEB) basis. As of December 31, 1994, Anadarko
had proved developed reserves of 1.79 Tcf of natural gas and 74.2 MMBbls of
crude oil, condensate and NGLs.
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The Company's estimates of proved reserves and proved developed reserves,
net of royalty interests, of natural gas, crude oil, condensate and NGLs owned
at December 31, 1994, 1993, 1992 and 1991 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 1994 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 natural gas, crude oil,
condensate and NGLs.
The Company emphasizes the volumes of reserves 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.
EXPLORATION, DEVELOPMENT, ACQUISITION AND MARKETING ACTIVITIES
See narrative description of "Exploration", "Development", "Acquisitions"
and "Marketing" on pages five through eight of the Anadarko Petroleum
Corporation 1994 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 millions of cubic feet (MMcf) at a pressure base of 14.73 pounds per
square inch (psi) and volumes for oil, condensate and NGLs are in thousands of
barrels (MBbls).
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1994 1993 1992
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UNITED STATES
Natural gas (MMcf) 173,047 158,662 143,865
Oil and condensate (MBbls) 7,958 7,223 3,845
Natural gas liquids (MBbls) 3,493 3,303 2,925
CANADA*
Natural gas (MMcf) 2,771 3,236 2,561
Oil and condensate (MBbls) 345 687 814
Natural gas liquids (MBbls) 19 17 13
TOTAL
Natural gas (MMcf) 175,818 161,898 146,426
Oil and condensate (MBbls) 8,303 7,910 4,659
Natural gas liquids (MBbls) 3,512 3,320 2,938
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* In December 1994, the Company sold its Canadian subsidiary.
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The following table shows the Company's annual average sales prices and
average production costs. Production costs are per EEB. For this computation,
one barrel is the energy equivalent of six thousand cubic feet (Mcf).
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1994 1993 1992
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UNITED STATES
Sales price
Natural gas (per Mcf) $ 1.72 $ 1.92 $ 1.71
Oil and condensate (per barrel) 15.06 16.35 18.45
Natural gas liquids (per gallon) 0.28 0.30 0.32
Production cost (per EEB) 3.01 3.30 2.78
CANADA*
Sales price
Natural gas (per Mcf) $ 1.70 $ 1.53 $ 1.22
Oil and condensate (per barrel) 12.04 12.85 14.60
Natural gas liquids (per gallon) 0.23 0.24 0.24
Production cost (per EEB) 4.91 4.51 5.26
TOTAL
Sales price
Natural gas (per Mcf) $ 1.72 $ 1.91 $ 1.70
Oil and condensate (per barrel) 14.93 16.05 17.78
Natural gas liquids (per gallon) 0.28 0.30 0.32
Production cost (per EEB) 3.05 3.34 2.88
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* In December 1994, the Company sold its Canadian subsidiary.
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 9 of the Notes to
Consolidated Financial Statements under Item 8 of this Form 10-K.
PROPERTIES AND ACTIVITIES -- UNITED STATES -- ONSHORE
ACREAGE Approximately 53 percent of the Company's 1,838,000 gross (607,000 net)
onshore undeveloped acres in the United States at year-end 1994 lie within three
producing provinces: the Anadarko Basin of Kansas and Oklahoma, the Gulf Coast
region and the Permian Basin of West Texas. In addition, the Company has 25,000
gross (6,000 net) undeveloped acres onshore in Alaska. As of December 31, 1994,
approximately 89 percent of the Company's 1,991,000 gross (841,000 net)
developed acres onshore in the United States are located within these same
provinces.
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.
HUGOTON Anadarko is an industry leader in developing the shallow reserves in
the Hugoton Field of Kansas. In 1994, Anadarko drilled 44 infill wells, bringing
the total to 325 infill wells since 1987. Currently, Anadarko owns 347,000 net
lease acres in the Field with 762 producing natural gas wells. Anadarko's net
production from the Field was 53.4 billion cubic feet (Bcf) in 1994.
The Company also is developing deeper oil and gas pay zones in southwest
Kansas. In 1994, Anadarko drilled 41 "deep" wells. Recovery of reserves from
some deeper oil fields is enhanced through secondary recovery techniques
(waterflooding). A notable example is the Hitch Unit, located in Seward County,
Kansas. After injection began in 1991, oil production increased from 220 barrels
of oil per day (BOPD) to a peak of 3,860 BOPD in June 1994. Production is
declining, as expected, but remains over 2,200 BOPD. Anadarko owns a 91 percent
working interest in this waterflood unit. The Company has been active in
waterflood operations for more than 30 years.
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ONSHORE MAP (GRAPHIC MATERIAL OMITTED)
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NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
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ONSHORE:
United States
Colorado* 7,498 46,967 13
Kansas* 365,785 68,020 1,374
Louisiana 699 308 6
Mississippi 223 60,831 --
Nebraska 273 319 --
Nevada* -- 167,984 --
New Mexico* 30,175 3,482 265
Oklahoma* 222,614 30,550 826
Texas* 187,956 102,369 1,796
Utah* 8,473 81,559 34
Wyoming* 17,781 44,397 28
United States -- Geothermal
California -- 113,519 --
Nevada -- 11,639 --
Oregon -- 34,857 --
OFFICE LOCATIONS:
United States
Houston, Texas
Midland, Texas
Oklahoma City, Oklahoma
Liberal, Kansas
Santa Rosa, California
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* Drilling activities were conducted in these areas in 1994.
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PERMIAN BASIN About half of the Company's oil production comes from the Permian
Basin of West Texas and eastern New Mexico. In addition to waterflood
operations, the Company has been acquiring properties to increase production and
enhance operations. In the Permian Basin, Anadarko holds 132,200 net lease acres
and operates nearly 2,100 active wells. Anadarko's oil production over the past
10 years has increased 63 percent. The Company's oil production from the Permian
Basin in 1994 totaled about 4 MMBbls.
GOLDEN TREND Anadarko's most active year in central Oklahoma's Golden Trend was
1994. The Company drilled 44 wells in 1994 and currently holds 13,700 net
developed lease acres in the Field. To date, the Company owns interests in 246
Golden Trend wells, of which 169 are Company-operated. Anadarko has an
additional 19,800 net undeveloped lease acres in the Golden Trend. Gas
production from the Golden Trend averaged 23 million cubic feet per day (MMcf/d)
of gas in 1994, an increase of 64 percent over 1993. In 1994, oil production
totaled 700 BOPD, an increase of 87 percent over 1993.
COAL-BED METHANE Since 1989, the Company has been exploring coal-bed methane
acreage in Colorado, Wyoming and Utah. In August 1994, Anadarko acquired 24
producing coal-bed methane wells, a gas pipeline and 16,300 gross acres in
Carbon County, Utah, from Pacific Gas and Electric Resources. Known as the
Castlegate Field, the wells are near Price, Utah. The Company operates two other
coal-bed methane pilot study programs in Colorado and Utah.
YEGUA During 1994, Anadarko participated in 10 Yegua wells, located along the
Texas Gulf Coast. Anadarko holds 91,300 gross lease acres in the Yegua play.
Since entering the play in 1991, the Company has drilled or participated in 19
wildcat wells and four development wells. Six wells are planned for 1995. Net
production from the Yegua play was 9.2 MMcf/d of gas and 324 barrels of
condensate per day in 1994.
ALASKA Anadarko has maintained an active oil exploration effort on the North
Slope of Alaska since 1992. ARCO Alaska, the operator, plans to drill two wells
in the first quarter of 1995 in the Colville Delta, west of Prudhoe Bay.
Anadarko owns a 22 percent working interest in both wells.
GEOTHERMAL The Company has an interest in geothermal energy because of its
long-term potential for economic and environmentally clean electric power
generation. Geothermal exploratory holdings in California, Nevada and Oregon
totaled 160,000 net acres at year-end 1994. The Company is working to develop a
commercial geothermal electric power generation project at the site of its
Pueblo Valley discovery, in southeastern Oregon. In the first half of 1995, the
Company expects to sign a Memorandum of Understanding with Portland General
Electric for a power sales agreement. Following the execution of the Memorandum,
Anadarko will participate in a Federal Environmental Impact Statement (EIS),
designed to assess any significant impact this plant could have on the
environment. When the EIS review is completed and following negotiation of a
power purchase agreement, the Company may construct a power generating facility
near this discovery.
GAS GATHERING SYSTEMS Anadarko owns and operates five gas gathering systems in
the nation's mid-continent area: the Antioch Gathering System in the Southwest
Antioch Field of Oklahoma; the Hemphill Gathering System, located in Hemphill
County, Texas; the Hugoton Gathering System in southwest Kansas; the Cimmaron
River System (CRS) in southwest Kansas; and the Sneed System in the West
Panhandle Field of Texas.
In October 1994, the Company signed agreements to purchase two gathering
systems in the Kansas Hugoton Field from Panhandle. The systems include the CRS
and a portion of the Panhandle Eastern Pipe Line (PEPL) gathering system serving
the Hugoton Field area. The systems serve about 1,000 Anadarko-operated wells
and 200 third-party wells and are located primarily in Stevens, Seward and
Morton Counties, Kansas, and Texas County, Oklahoma. Anadarko acquired and began
operating the CRS in October 1994. The Company expects to acquire and take over
operation of the PEPL system in late 1995, pending Federal Energy Regulatory
Commission (FERC) approval. This acquisition will triple the Company's gas
gathering capability. In addition to these systems, Anadarko owns interests in
10 other smaller systems. Including the acquisition of the PEPL system, these 16
systems have approximately 2,100 miles of pipeline and over 480 MMcf/d of gas
gathering capability.
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During 1994, Anadarko sold its interests in the Limestone Ridge Gathering
System in the Arkoma Basin and a gathering system in the Bridger Lake Field, in
Wyoming. Both sales were in connection with sales of non-strategic producing
properties.
GAS PROCESSING PLANTS Anadarko owns and operates two gas processing plants and
has interests in six other plants. Most of these plants are located within the
Company's major areas of gas production. In 1994, the Company sold its interests
in six plants and closed four plants. In most cases, the Company was able to
arrange to have the gas processed more efficiently in third-party processing
facilities, discussed below. The Company-operated plants are integrated with the
gas gathering systems described previously.
In conjunction with the CRS and PEPL gathering system acquisitions in 1994,
Anadarko entered into agreements to commit a majority of its gas connected to
the systems for processing at the National Helium Corporation plant in Liberal,
Kansas, which is owned by Panhandle. Anadarko and Panhandle also entered into
gathering agreements for Anadarko's gas on the facilities remaining with
Panhandle.
In addition, the Company entered into long-term processing agreements with
the Seagull Energy-operated Matagorda Island Plant on the Texas Gulf Coast for
processing of Anadarko's gas from the Company's Matagorda Island development
project.
The following table sets forth the average daily gas throughput and NGLs
production for the three years ended December 31, 1994 and capacity as of
December 31, 1994.
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THROUGHPUT AND PRODUCTION
FOR THE YEARS ENDED DECEMBER 31 CAPACITY
---------------------------------- DECEMBER 31,
1994 1993 1992 1994
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Gas throughput (MMcf/d) 80 98 102 106
NGLs production (Bbls per day) 6,900 7,040 6,640 5,700
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PROPERTIES AND ACTIVITIES -- UNITED STATES -- OFFSHORE
ACREAGE At year-end 1994, Anadarko owned an average 45 percent interest in 125
lease blocks and held 42,000 net acres in developed properties and 234,000 net
acres in undeveloped properties offshore.
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.
OFFSHORE EXPLORATION In March 1994, Anadarko invested $72 million (net) as high
bidder on 26 offshore lease blocks at the Minerals Management Service Offshore
Lease Sale #147. All but two of the blocks are related to sub-salt exploration
projects.
In 1994, the Company drilled two exploration wells in the sub-salt play in
the Gulf of Mexico. In July, Anadarko and partner, Phillips Petroleum Company
(Phillips) announced results from the "Teak" exploratory well, located on South
Timbalier South Addition Block 260. The discovery well tested more than 4,400
BOPD and 7.7 MMcf/d of gas from several zones. Further evaluation of the
discovery will be conducted in 1995 to determine if the field is commercial.
Phillips, the operator, and Anadarko each have a 50 percent working interest in
the well.
The "Mesquite" exploratory well, located at Vermilion Block 349, was
plugged and abandoned in June 1994 after finding no commercial hydrocarbons.
Anadarko, the operator of the well, and partner Phillips each have a 50 percent
working interest.
The Company drilled four conventional exploration wells in the Gulf of
Mexico in 1994 that were dry holes.
OFFSHORE DEVELOPMENT Production commenced from Anadarko's Matagorda Island
Block 636 discovery, announced in 1993. The Matagorda Island Block 636 discovery
was tied back to the Matagorda Island 622 "C" platform through a pipeline and
production from the well commenced in the Fall of 1994. Initial production from
the well was 4 MMcf/d of gas. Additional drilling operations continue on the
four blocks that comprise the Matagorda Island Field.
In 1994, Anadarko installed two production platforms in the Gulf of Mexico.
A platform was installed in August 1994 at High Island Block A-376, located 150
miles offshore Louisiana. The Field began production, less than two years after
discovery, at an initial rate of 1,700 BOPD and 2.8 MMcf/d of gas. Production
from the platform is currently suspended, pending final regulatory approval.
Anadarko is operator of the Block with a 33 percent working interest.
A production platform was also installed at East Cameron Block 157 in
October 1994, only 10 months after discovery. Completion operations are underway
and initial production is expected in the second quarter of 1995.
Confirmation drilling continued at the "Mahogany" project, Ship Shoal Block
349 No. 1, a sub-salt discovery well announced by Anadarko and Phillips in
September 1993. A delineation well, Ship Shoal 349 No. 2, tested 4,366 BOPD and
5.3 MMcf/d of gas. This well produced oil from zones not previously tested in
the first well. A third development well, Ship Shoal 359 No. 2, is currently
drilling. A production platform for the Field is in the design stage. Anadarko
owns a 37.5 percent working interest in the project.
PROPERTIES AND ACTIVITIES -- INTERNATIONAL
OVERVIEW In recent years, Anadarko has devoted a portion of its exploration
budget to selected international joint-venture exploration projects. The
Company's objective is to add high-potential prospects to its balanced portfolio
of domestic plays.
Foreign investment projects often offer significant economic potential for
oil and gas exploration activities. However, to achieve commercial success in
foreign exploration, companies must overcome many obstacles, such as: a
difficult operating environment, lack of an oil field service company
infrastructure, complex regulations and relationships with the host government,
and above all the geologic risk of finding commercial hydrocarbons. In some
countries, political risk and uncertainty can complicate the situation and may
lead to delay or cancellation of a project.
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OFFSHORE MAP (GRAPHIC MATERIAL OMITTED)
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NET NET NET
DEVELOPMENT EXPLORATORY PRODUCING
ACRES ACRES WELLS
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OFFSHORE:
United States
Alaska -- 6,397 --
Florida -- 37,454 --
Louisiana 14,141 159,306 18.4
Mississippi -- 2,194 --
Texas 27,720 35,154 20.5
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There is exposure to write-offs in the event foreign exploration projects
are unsuccessful. Anadarko recorded pre-tax charges to earnings (provisions for
impairments) of $3.1 million in 1994, $6.5 million in 1993 and $21 million in
1992. These charges reflect unsuccessful exploration drilling in China and
Yemen, as well as costs associated with extensive reviews of several other
potential international opportunities, which the Company elected not to pursue.
The Company's primary international ventures underway are discussed below.
ALGERIA Anadarko's largest international venture involves exploration and
development of liquid hydrocarbons in Algeria. In 1989, Anadarko Algeria became
the first U.S. firm to secure a production sharing agreement (PSA) from
Sonatrach, the national oil and gas enterprise of Algeria, under the modern
economic terms of Algeria's 1986 Hydrocarbon Law. Since 1989, Sonatrach has
entered into more than 20 similar contracts with other international exploration
and production companies and many of these companies are currently exploring for
crude oil in the Ghadames and Illizi Basins of the eastern Sahara Desert.
Sonatrach is the beneficial owner of 10.2 percent of Anadarko's common stock.
Anadarko's interest in the PSA is 50 percent. The Company has two partners,
each with a 25 percent interest in the Algerian venture; they 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. Under the terms of the PSA, liquid hydrocarbons
that are discovered, developed and produced will be shared by Anadarko, its two
partners and Sonatrach. In addition, Anadarko and its partners are entitled to
recover exploration costs out of production.
The PSA requires Anadarko and its two partners to invest over $100 million
over a 10-year period. Anadarko believes this obligation will be fully met in
1995. As of December 31, 1994, Anadarko's total net investment in Algeria for
exploration and related activities amounted to $105.6 million of which about
$33.2 million was spent in 1994. Due to the success of the project thus far,
these expenditures are currently being capitalized and no provision for loss or
impairment has been made. To date, the Company has elected not to insure its
investment in Algeria. See Note 9 of the Notes to Consolidated Financial
Statements under Item 8 of this Form 10-K.
Since 1989, Anadarko as operator has drilled seven exploration wells in
Algeria; five wells successfully discovered oil and two wells were dry holes.
The Company has also drilled two delineation wells to confirm reservoir quality
and areal extent of two discoveries; a delineation well at a third discovery is
currently drilling. The Company believes these five discoveries could contain
total gross recoverable oil reserves of between 850 MMBbls and 1,250 MMBbls.
Additional drilling and production information will be required to determine an
accurate estimate of total reserves. During 1994, Anadarko added 44 MMBbls of
proved oil reserves, based on preliminary development studies and the
contractual rights granted under the Sonatrach agreement.
The Company has budgeted $34 million net for further delineation drilling
and development work in Algeria during 1995. Full development of the discoveries
could take several years to complete. The Company is actively pursuing
development on an accelerated basis.
The PSA originally specified an exploration area totaling 5.1 million
acres. Anadarko and its partners proposed to Sonatrach to relinquish about 25
percent of this area, pursuant to the relinquishment clause in the PSA. This
would leave Anadarko and its partners approximately 3.8 million acres of the
original exploration area for continued exploration drilling in the future.
During 1994, the Company and its two partners also acquired, subject to approval
by Algerian authorities, a minority interest in a PSA covering two additional
blocks in the same region, which are operated by BHP Petroleum (Algerie) Inc. An
exploration program is already underway on these two blocks, which contain about
1.2 million acres. At the end of 1994, the Company's total gross acreage in
Algeria was still about 5.1 million acres.
The current political unrest in Algeria has been the subject of numerous
news media reports. The Company is closely monitoring the situation and has
taken reasonable and prudent steps to insure the safety of employees working in
the remote regions of the Sahara Desert. Anadarko is presently unable to predict
with certainty any effect the current situation may have on activity planned for
1995 and beyond. However, the situation has not had any material effect on the
Company's operations.
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CANADA Anadarko sold all of its interests in Canada in four separate
transactions during 1994. Proved Canadian reserves at the end of 1993 were about
10 million energy equivalent barrels (MMEEBs), which was less than three percent
of Anadarko's total proved reserves. Proceeds from the sales were about $58
million. The Company will continue to evaluate potential acquisitions that could
reestablish Anadarko's presence in areas with exploration and development
potential in Canada's western provinces.
INDONESIA The Company's ongoing commitment to international exploration
includes 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. (Santa Fe), and
Kerr-McGee Sumatra, Ltd., a wholly-owned subsidiary of Kerr-McGee Corporation,
have a production sharing contract which includes a $15 million commitment to
exploration activities 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 two million acres. Two exploration wells are planned
for 1995. The first well has reached target depth and was being tested and
evaluated at the time this report was released for printing. Santa Fe is the
operator.
CHINA In 1994, Anadarko signed a joint study agreement with Chengdu Huachuan
Petroleum and Natural Gas Exploration and Development Corporation. The one-year
agreement allows for a complete geological, geophysical and engineering
evaluation of two areas within the Sichuan Basin in China's Sichuan Province.
The areas under study total approximately two million acres. Depending on the
results of the study, the Company could negotiate a production sharing agreement
in 1995.
11
<PAGE> 13
DRILLING PROGRAMS
The Company's 1994 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 16 wells onshore in the United
States, six wells offshore United States, four wells in Canada and six wells in
Algeria. Development activity included 238 wells onshore United States, five
wells offshore United States and six 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>
1994
United States 6.9 8.1 15.0 162.5 16.8 179.3 194.3
Canada 1.0 1.2 2.2 2.5 0.5 3.0 5.2
Algeria 2.0 0.8 2.8 0.0 0.0 0.0 2.8
----- ----- ----- ------ ----- ----- -----
Total 9.9 10.1 20.0 165.0 17.3 182.3 202.3
----- ----- ----- ------ ----- ----- -----
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
----- ----- ----- ------ ----- ----- -----
</TABLE>
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, 1994:
<TABLE>
<CAPTION>
UNITED STATES ALGERIA TOTAL
-------------- ------------- --------------
GROSS NET GROSS NET GROSS NET
----- ---- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C>
WELLS IN THE PROCESS OF DRILLING OR ACTIVE
COMPLETION
Exploration 4 2.4 1 0.5 5 2.9
Development 26 18.1 0 0.0 26 18.1
WELLS SUSPENDED OR WAITING ON COMPLETION
Exploration 7 5.0 0 0.0 7 5.0
Development 65 49.5 0 0.0 65 49.5
</TABLE>
12
<PAGE> 14
PRODUCTIVE WELLS
As of December 31, 1994, the Company owned productive wells in the United
States and Algeria as follows:
<TABLE>
<CAPTION>
UNITED STATES ALGERIA TOTAL
---------------- -------------- ----------------
GROSS NET GROSS NET GROSS NET
----- ------ ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Oil wells* 5,966 2,518 5 3 5,971 2,521
Gas wells* 2,712 1,862 -- -- 2,712 1,862
----- ------ ----- ---- ----- ------
Total 8,678 4,380 5 3 8,683 4,383
----- ------ ----- ---- ----- ------
- ---------------
* Includes wells containing multiple
completions
Oil wells 74 25.8 -- -- 74 25.8
Gas wells 165 71.6 -- -- 165 71.6
</TABLE>
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 in December 1993 to
modify its basic proration order for the Hugoton Field, the largest gas field in
the United States. A written order was issued in February 1994. This order
changed the formula used by the KCC to calculate Field and unit allowables and
increased 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 increased from about 12 percent in 1993 to about 15
percent in 1994. Anadarko's 1994 net production from the Field increased 18
percent, from 45,000 MMcf in 1993 to 53,000 MMcf in 1994. In 1995, the Company
expects gas production from the Field to be flat compared to 1994.
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 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 and
concluded the effective date for refunds should be June 28, 1988. FERC clarified
the effective date of its December 1, 1993 order by an order dated May 19, 1994.
Based on Anadarko's interpretation of FERC's orders, $700,000 (pre-tax) has been
charged to income in 1994, in addition to the $130,000 (pre-tax) charged to
income in 1993. Numerous parties have filed appeals of FERC's action in the D.C.
Circuit and, accordingly, the Company is unable to predict the final outcome of
this matter.
13
<PAGE> 15
ENVIRONMENTAL The Company's oil and gas operations and properties are subject
to numerous federal, state and local laws and regulations relating to the
environmental protection. 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.
Anadarko takes the issue of environmental stewardship very seriously and
has worked diligently to insure that all areas of the Company's operations are
in compliance with applicable environmental rules and regulations. In 1994, the
Company was recognized by the Department of Interior's Minerals Management
Service for exemplary operating performance in the Gulf of Mexico.
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 15 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.
ADDITIONAL FACTORS AFFECTING BUSINESS
The oil and gas business is highly competitive in the search for and
acquisition of reserves, as well as, 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, gas marketers 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
worldwide, pricing decisions of the Organization of Petroleum Exporting
Countries (OPEC) and the volatile trading patterns in the oil and gas futures
markets. Natural gas prices also continue to be highly volatile.
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
blowouts, 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.
14
<PAGE> 16
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 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 any of these burdens will materially interfere with its use of these
properties.
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, 1994, 1993 and 1992 were 2.23, 2.68 and 1.81, 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, 1994, 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.
15
<PAGE> 17
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 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.
See "Regulatory and Legislative Developments -- Kansas Ad Valorem Tax"
under Item 1 and Note 15 of the Notes to Consolidated Financial Statements under
Item 8 of this Form 10-K.
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 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT END
NAME OF 1995 POSITION
---- ---------- --------
<S> <C> <C>
Robert J. Allison, Jr. 56 Chairman of the Board, President and Chief Executive
Officer
Charles G. Manley 51 Senior Vice President, Administration
Michael E. Rose 48 Senior Vice President, Finance and Chief Financial
Officer
Charles K. Abernathy 52 Vice President-Operations, International/Offshore
Rex Alman III 44 Vice President, Engineering
John N. Seitz 44 Vice President, Exploration
Richard J. Sharples 48 Vice President, Marketing
Bruce H. Stover 46 Vice President, Acquisitions
William D. Sullivan 39 Vice President-Operations, U.S. Onshore
A. Paul Taylor, Jr. 46 Vice President, Corporate Communications
Lewis L. Williams 66 Vice President and General Counsel (retired effective
January 1, 1995)
</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.
16
<PAGE> 18
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/Offshore, in January 1992. Algeria
Exploration was added to his responsibilities in December 1994
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. 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. 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. 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. 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.
Mr. Williams was employed by Anadarko in March 1988 as Regional Counsel and
was named Vice President and General Counsel in January 1989. Mr. Williams
retired effective January 1, 1995. J. Stephen Martin was named General Counsel,
effective January 1, 1995. Mr. Martin was employed by Anadarko in June 1987 and
was promoted to Senior Attorney in 1989 and to General Attorney in 1994.
All officers of Anadarko are elected in April of each year at an
organizational 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.
17
<PAGE> 19
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, 1994, there were approximately 7,800 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, 1994.
<TABLE>
<CAPTION>
First Second Third Fourth
thousands Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994 $4,403 $4,408 $4,411 $4,413
1993 $4,152 $4,171 $4,494 $4,400
</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 "Dividends" of the MD&A under Item 7 and
Note 6 of the Notes to Consolidated Financial Statements under Item 8 of this
Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
See Selected Summary Financial Data in the Annual Report, which is
incorporated herein by reference.
18
<PAGE> 20
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 1994 (after a special charge)
was $41.1 million (70 cents per share). This compares to Anadarko's 1993 net
income before the cumulative effect of changes in accounting principles of $40.0
million (70 cents per share) and 1992 net income of $27.3 million (49 cents per
share). Including the cumulative effect of two accounting changes, Anadarko's
net income for 1993 was $117.4 million ($2.05 per share).
The Company's 1994 income was impacted by the sale for $58 million of a
wholly-owned subsidiary, Anadarko Petroleum of Canada Ltd. Stated without the
effect of a special charge of $6.6 million (after taxes) related to this sale,
1994 net income was $47.7 million (81 cents per share). The charge is primarily
due to foreign currency translation losses that had been incurred over the life
of the investment and previously accounted for on the Company's balance sheet.
Revenues for 1994 were $482.5 million, slightly above 1993 revenues of
$482.0 million and 27 percent higher than 1992 revenues of $379.7 million.
Revenues in 1994 reflect record production and sales volumes for natural gas,
crude oil, condensate and natural gas liquids (NGLs), offset by lower prices.
The increase in 1993 revenues compared to 1992 revenues is due to significantly
stronger gas markets in 1993 and increased crude oil production.
During 1993, Anadarko's net income was affected by the items discussed
below.
(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 1993, 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 decrease in net income of
$11.2 million (20 cents per share) in the third quarter of 1993.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
millions except per share amounts 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Revenues $482.5 $482.0 $379.7
Costs and expenses 388.2 377.9 312.1
Interest expense 26.1 29.4 28.2
Net income 41.1 40.0* 27.3
Earnings per share $ 0.70 $ 0.70* $ 0.49
</TABLE>
- ---------------
*Excludes the cumulative effect of changes in accounting principles.
COSTS AND EXPENSES For 1994, Anadarko's costs and expenses were $388.2 million,
an increase of three percent from the $377.9 million in 1993. The increase was a
result of several factors:
(1) Operating expenses increased $5.8 million (six percent) due primarily
to higher oil and gas operating expenses and gas purchased expense;
(2) Depreciation, depletion and amortization (DD&A) expense was up $5.1
million (three percent) due to a nine percent increase in gas
production volumes and a five percent increase in crude oil and
condensate production volumes; the increase was partially offset by a
four-percent decline in the DD&A rate due to additional reserves booked
during the year; and,
(3) Administrative and general expenses were up $3.8 million (seven
percent) primarily due to costs associated with salaries and benefits,
as well as related administrative costs.
19
<PAGE> 21
These factors were partly offset by lower provisions for impairments of
international and geothermal properties in 1994 of $3.1 million compared to $7.0
million in 1993. These impairments primarily reflect costs associated with
review and study of potential exploration projects in several foreign countries,
which the Company has elected not to pursue. In 1992, impairments totaled $21
million and were primarily due to unsuccessful exploration projects in China and
Yemen.
Anadarko's costs and expenses in 1993 were up 21 percent compared to 1992.
There were four reasons for the increase: (1) Increased DD&A expense due to
higher production volumes; (2) Increased operating expenses due primarily to
higher production volumes as a result of secondary recovery oil properties
acquired in West Texas in 1992; (3) Increased taxes because of higher production
related (severance) and ad valorem taxes; and, (4) Higher administrative and
general expenses, including postretirement benefits other than pensions and
increased salary and benefits for the Company's growing workforce.
COSTS AND EXPENSES
<TABLE>
<CAPTION>
millions 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Operating expenses $110.2 $104.3 $ 79.4
Administrative and general 61.1 57.4 48.2
DD&A 172.8 167.7 132.9
Other taxes 41.0 41.5 30.6
Provisions for impairments 3.1 7.0 21.0
------ ------ ------
Total $388.2 $377.9 $312.1
------ ------ ------
</TABLE>
INTEREST EXPENSE Anadarko's interest expense for 1994 was $26.1 million, down
11 percent compared to $29.4 million in 1993 and down seven percent compared to
$28.2 million in 1992. Interest expense benefitted in 1994 from an option sold
for an interest rate swap agreement that was not exercised by the purchaser;
and, as a result the Company reduced interest expense in the fourth quarter of
1994 by $2.6 million. After this reduction, gross interest expense was $41.6
million in 1994 compared to $38.0 million in 1993 and $36.6 million in 1992. The
increase in gross interest expense in 1994 compared to 1993 is primarily due to
higher average borrowings and interest rates. The increase in gross interest
expense for 1993 compared to 1992 is primarily related to higher average
borrowings during that year. During the period 1992-94, increased interest
expense has been partly offset by higher capitalized interest due to increases
in costs excluded offshore in the Gulf of Mexico and in Algeria. See Liquidity
and Long-term Debt.
ANALYSIS OF VOLUMES AND PRICES
NATURAL GAS In 1994, Anadarko achieved record natural gas production of 175.8
billion cubic feet (Bcf) or 482 million cubic feet per day (MMcf/d). The 1994
production was up nine percent over natural gas production of 161.9 Bcf or 444
MMcf/d in 1993 and 20 percent over natural gas production of 146.4 Bcf in 1992.
The increases in gas production stem primarily from higher production allowables
in the Hugoton Field of Kansas and the West Panhandle Field of Texas. However,
in the fourth quarter of 1994, the Company began curtailing some natural gas
production in response to lower gas prices. Anadarko's average U.S. gas price in
1994 was $1.72 per thousand cubic feet (Mcf), down 10 percent compared to 1993
and nearly equal to prices in 1992.
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, this market trend abruptly changed in 1992 -- prices
were lowest in the winter and highest in late summer. The pattern of highest and
lowest monthly prices changed again in 1993, but the trend toward higher average
annual prices gave rise to great optimism in the industry that gas prices had
finally turned the corner following years of persistent price weakness. However,
the anticipated price improvement did not materialize in 1994.
20
<PAGE> 22
Gas prices weakened through most of 1994; prices declined from peak winter
levels in February to extremely low levels during December. These low gas prices
have continued in January and February 1995. There were several reasons cited by
industry experts: increased domestic deliverability; mild summer and winter
temperatures which limited demand; increased volumes in inventory or natural gas
storage fields; increased volumes imported from Canada; and, improved efficiency
of the national supply network. In stark contrast to the price optimism that
prevailed in 1993, most observers now expect 1995 gas prices will be well below
1994 levels. If this occurs, Anadarko's earnings and cash flow are likely to
fall below 1994 levels.
Recent experience clearly demonstrates that no one can predict the precise
movement of U.S. natural gas prices. Anadarko has developed marketing strategies
to help manage production and sales volumes, despite the price volatility that
is likely to continue. See Marketing Strategies.
QUARTERLY NATURAL GAS
VOLUMES AND U.S. AVERAGE PRICES
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
FIRST QUARTER
Bcf 48.2 46.8 39.6
MMcf/d 536 520 435
Price per Mcf $ 2.03 $ 1.73 $ 1.37
SECOND QUARTER
Bcf 43.0 34.8 28.0
MMcf/d 472 382 308
Price per Mcf $ 1.74 $ 2.05 $ 1.46
THIRD QUARTER
Bcf 40.9 35.7 32.7
MMcf/d 445 388 355
Price per Mcf $ 1.59 $ 1.94 $ 1.67
FOURTH QUARTER
Bcf 43.7 44.6 46.1
MMcf/d 475 485 502
Price per Mcf $ 1.47 $ 1.97 $ 2.17
</TABLE>
- ---------------
Mcf -- thousand cubic feet
MMcf/d -- million cubic feet per day
Bcf -- billion cubic feet
CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS Anadarko achieved record crude
oil and condensate production of 8.3 million barrels (MMBbls) in 1994, a five
percent increase over 1993 oil and condensate production and a 78 percent
increase over 1992 oil and condensate production. The continuing increase in oil
production is primarily related to aggressive drilling and development of
secondary recovery (waterflood) oil fields in West Texas and the mid-continent,
some of which were purchased by the Company in a large acquisition in December
1992. These activities have generally offset the production decline normally
associated with oil fields. However, oil production is expected to be down in
1995 due to normal depletion and sales of some producing properties during 1994.
21
<PAGE> 23
Anadarko's average U.S. crude oil price for 1994 was $15.06 per barrel,
down eight percent compared to 1993 and down 18 percent compared to 1992. Since
the Gulf War in 1991, oil prices have been consistently lower due to sluggish
demand growth worldwide, weak winter demand in the U.S. and ample supplies.
Anadarko believes the continuing demand growth, albeit modest, and stable world
supplies could lead to some price improvement in 1995 and beyond. The Company's
crude oil price averaged about $16.00 per barrel in January 1995. Generally, the
Company's oil production is sold on a monthly basis as it is produced.
Production of oil is usually not affected by seasonal swings in demand or in
market prices.
The Company's NGLs sales volumes in 1994 were 3.5 MMBbls, up six percent
over 1993 and up 20 percent over 1992. The 1994 average price of 28 cents per
gallon was seven percent lower than the average price in 1993 and 13 percent
lower than the average price in 1992. The increase in NGL volumes is due
primarily to the Company's increased gas production. Anadarko's NGLs volumes in
1995 should benefit from new processing contracts that provide better economic
terms for gas processed in southwest Kansas and offshore Texas. However, total
NGLs sales are expected to be down in 1995 due to the closing of several plants,
weak markets and the sale of some producing properties.
ANNUAL VOLUMES AND U.S. AVERAGE PRICES
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
NATURAL GAS (BCF) 175.8 161.9 146.4
MMcf/d 482 444 400
Price per Mcf $ 1.72 $ 1.92 $ 1.71
CRUDE OIL AND CONDENSATE (MBBLS) 8,303 7,910 4,659
MBbls per day 22.7 21.7 12.7
Price per barrel $ 15.06 $ 16.35 $ 18.45
NATURAL GAS LIQUIDS (MBBLS) 3,512 3,320 2,938
Price per gallon $ 0.28 $ 0.30 $ 0.32
</TABLE>
MARKETING STRATEGIES
NATURAL GAS The domestic natural gas market has grown significantly throughout
the last 10 years and continued growth appears likely. The Company's excellent
portfolio of exploration and development prospects will position Anadarko to
continue to participate in this growth.
Over the past three years, Anadarko's wholly-owned marketing
subsidiary -- Anadarko Trading Company (ATC) -- has evolved into a full-service
marketing company offering supply assurance, competitive pricing and tailored
services to its customers. ATC purchases and resells most of the Company's
production.
ATC sells natural gas under a variety of contracts and may also receive a
service fee related to the level of reliability and service required by the
customer. ATC has also expanded its marketing capabilities to move larger
volumes of gas into and out of the "daily" gas market to take advantage of any
price volatility. Included in this strategy is expanded use of leased natural
gas storage facilities. In addition, various hedging strategies are sometimes
utilized to better manage price risk associated with natural gas sales. See
Hedging Strategies.
ATC has increased its purchase of third-party gas for sale into the
Company's market areas. Sales of third-party gas totaled 84 Bcf in 1994 compared
to 82 Bcf in 1993 and 58 Bcf in 1992. ATC's sales have increased 45 percent
since 1992.
CRUDE OIL AND CONDENSATE Currently, all of the Company's crude oil production
is domestic and the majority is sold on 30-day "evergreen" contracts with prices
based on postings plus a premium. The Company's exploration success in Algeria,
and the ongoing development of five discoveries there since 1993, could
significantly impact Anadarko's production volumes of crude oil and condensate
in 1996 and beyond. As these discoveries are brought on-line, Anadarko will
begin marketing oil worldwide. See "Properties and Activities --
International -- Algeria" under Item 1 of this Form 10-K.
22
<PAGE> 24
GAS GATHERING SYSTEMS AND PROCESSING PLANTS Anadarko's investment in gas
gathering operations allows the Company to better manage its gas production,
improve ultimate recovery of reserves, enhance the value of reserves and expand
marketing opportunities. Since 1988, the Company has invested approximately $67
million to build or acquire gas gathering pipeline systems and gas processing
plants. Anadarko owns interests in 15 gas gathering systems and eight gas
processing plants in core producing areas.
In October 1994, Anadarko signed agreements to acquire two natural gas
gathering systems in the Kansas Hugoton Field from Panhandle for a purchase
price of $36 million. The purchase of the intrastate Cimmaron River System (CRS)
was completed that month for $2 million and Anadarko took over operation of the
system. Purchase of the second system is currently pending approval from the
Federal Energy Regulatory Commission (FERC). Anadarko expects that the purchase
will close in late 1995 for about $34 million and the Company will take over
operations at that time. Purchase of these two gathering systems will triple the
Company's overall gas gathering capability -- from 155 MMcf/d to 480
MMcf/d -- and the new systems serve approximately 1,000 Anadarko-operated wells
and 200 third-party wells.
During 1994, Anadarko sold the Limestone Ridge Gathering System in the
Arkoma Basin and a gathering system in the Bridger Lake Field in Wyoming. Both
sales were in connection with sales of non-strategic producing properties
In 1994, Anadarko completed a $2.5 million expansion of its Hugoton
Gathering System (HUGS) in southwest Kansas, which was built in 1990. The
expansion added 46 shallow, low pressure wells to HUGS and increased connected
well capacity by 20 MMcf/d of gas. With completion of this expansion, 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 connections. The expansion
was completed without the installation of new compression, maximizing the use of
existing compressors at HUGS.
In 1995, in addition to the purchase of the PEPL system, Anadarko will
pursue further expansion of its gas gathering operations. The Company expects to
spend approximately $9 million in 1995 for construction of new gathering
facilities, installation of additional compressors, expansion of existing
gathering systems and improving access to multiple pipeline "market hubs."
Anadarko remains active in the 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
89,000 barrels of NGLs in inventory at the end of 1994 compared to 175,000
barrels at the end of 1993.
HEDGING STRATEGIES Anadarko uses financial instruments to limit exposure to
changes in the market price of natural gas and crude oil for both the Company
and its customers. While financial instruments are intended to reduce the
Company's exposure to declines in the market price of natural gas and crude oil,
the financial instruments may also limit Anadarko's gain from increases in the
market price of natural gas and crude oil. As a result, gains and losses on
financial instruments are generally offset by similar changes in the realized
price of natural gas and crude oil. Gains and losses are recognized in revenues
for the periods to which the financial instruments relate. Anadarko's financial
instruments currently are comprised of futures, swaps and options. See Note 5 of
the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.
OPERATING RESULTS
In 1994, Anadarko increased spending for exploration and development
activities to $325 million compared to $175 million in 1993 and $92 million in
1992. The 1994 spending included $72 million for exploratory leases offshore in
the Gulf of Mexico. 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. Reserve
replacement is the key to growth for an exploration and production company. In
addition, Anadarko believes future profitability depends on the cost of finding
oil and gas reserves. The Company's performance in both areas has been
excellent.
DRILLING ACTIVITY During 1994, Anadarko participated in a total of 281 wells,
including 95 gas wells, 147 oil wells and 39 dry holes. This compares to 219
wells (55 gas wells, 131 oil wells and 33 dry holes) in 1993 and 126 wells (38
gas wells, 56 oil wells and 32 dry holes) in 1992.
23
<PAGE> 25
During 1994, 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, and "Properties and
Activities" under Item 1 of this Form 10-K.
DRILLING PROGRAM ACTIVITY
<TABLE>
<CAPTION>
GAS OIL DRY TOTAL
------ ------ ------ -------
<S> <C> <C> <C> <C>
1994 EXPLORATORY
Gross 9 6 17 32
Net 7.1 2.8 10.1 20.0
1994 DEVELOPMENT
Gross 86 141 22 249
Net 70.8 94.2 17.3 182.3
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
</TABLE>
- ---------------
Gross: total wells in which there was participation
Net: working interest ownership
RESERVE REPLACEMENT For the 13th consecutive year, Anadarko more than replaced
annual production volumes with proved reserves of natural gas, crude oil,
condensate and NGLs, stated on an energy equivalent barrel (EEB) basis. During
1994, Anadarko's reserve replacement was 308 percent of total production,
including the effect of property sales. Production in 1994 was 41.0 million
energy equivalent barrels (MMEEBs), the highest level in Company history. By
comparison, the Company's reserve replacement was 162 percent of total
production of 37.5 MMEEBs in 1993 and 200 percent of total production of 31.6
MMEEBs in 1992.
It is noteworthy, that during 1994, the Company replaced 253 percent of
total production through exploration and development drilling and improved
recovery operations. By comparison, these drilling categories accounted for 151
percent of reserve replacement in 1993 and just 36 percent of reserve
replacement in 1992.
Anadarko's natural gas reserve replacement in 1994 was 122 percent of total
production compared with 192 percent in 1993 and 88 percent in 1992. The Company
replaced 773 percent of its crude oil, condensate and NGLs production in 1994
compared to 83 percent in 1993 and 585 percent in 1992. The oil reserve increase
in 1994 includes 44 MMBbls related to Anadarko's successful exploration efforts
in Algeria.
In 1994, acquisitions, including purchases and trades, added 14.6 MMEEBs
compared to 5.7 MMEEBs in 1993 and 44.4 MMEEBs in 1992. In addition, Anadarko
sold 17.1 MMEEBs of reserves in 1994. See Acquisitions and Divestitures.
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 1990-94 was 179 percent of
production. By comparison, the most recent published U.S. industry average
(1989-93) was 81 percent. (Source: Energy Information Administration.)
Anadarko's U.S. reserve replacement performance for the same period 1989-93 was
154 percent of production. Industry data for 1994 are not yet available.
COST OF FINDING For 1994, Anadarko's worldwide finding cost for proved reserves
was $2.76 per EEB compared to $4.07 per EEB in 1993 and $5.43 per EEB in 1992.
The Company's worldwide finding costs were lower in 1994 due to the initial
success of the Algerian exploration program. Anadarko's U.S. finding cost for
1994 was $3.57 per EEB compared to $3.55 per EEB in 1993 and $4.61 per EEB in
1992.
24
<PAGE> 26
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. Anadarko has consistently
outperformed the industry in average finding costs. For the period 1990-94,
Anadarko's U.S. cost of finding was $3.80 per EEB. Anadarko's worldwide finding
cost for the same five-year period was $3.78 per EEB. Industry data for 1994 are
not yet available. For comparison purposes, the most recent published five-year
average (1989-93) for the industry shows U.S. average cost of finding was $5.01
per EEB and worldwide cost of finding was $5.19 per EEB. (Source: Arthur
Andersen & Co.) For the same period, Anadarko's U.S. finding cost was $4.16 per
EEB and worldwide finding cost was $4.67 per EEB.
PROVED RESERVES At the end of 1994, Anadarko's proved energy reserves were
476.4 MMEEBs compared to 391.1 MMEEBs at year-end 1993 and 368.0 MMEEBs at
year-end 1992. Reserves increased by 22 percent in 1994 compared to 1993, due to
exploration and development drilling, improved recovery and acquisitions.
Anadarko's proved reserves have grown by 29 percent since 1992, primarily as a
result of successful exploration projects in the Gulf of Mexico and Algeria, as
well as successful exploitation and development drilling programs in major
domestic fields onshore and offshore.
The Company's proved natural gas reserves at year-end 1994 were 1.91
trillion cubic feet (Tcf) compared to 1.88 Tcf at year-end 1993 and 1.73 Tcf at
year-end 1992. Anadarko's crude oil, condensate and NGLs reserves at year-end
1994 were 157.4 MMBbls. This compares to 78.5 MMBbls at year-end 1993 and 80.3
MMBbls at year-end 1992. Natural gas reserves now comprise 66 percent of the
Company's proved reserves compared to about 80 percent at year-end 1993 and
1992.
During 1994, the Company sold 17.1 MMEEBs of proved reserves. The largest
sale was the Canadian reserves, which amounted to about 10 MMEEBs at year-end
1993. During 1994, Anadarko added proved reserves of 44 MMEEBs in Algeria, based
on preliminary development studies and the contractual rights granted under the
Sonatrach agreement.
The current political unrest in Algeria has been the subject of numerous
news media reports. The Company is closely monitoring the situation and has
taken reasonable and prudent steps to insure the safety of employees working in
the remote regions of the Sahara Desert. Anadarko is presently unable to predict
with certainty any effect the current situation may have on activity planned for
1995 and beyond. However, the situation has not had any material effect on the
Company's operations. See "Properties and Activities --
International -- Algeria" under Item 1 of this Form 10-K.
At December 31, 1994, the present value (discounted at 10 percent) of
future net revenues from Anadarko's proved reserves, before income taxes, was
$2.01 billion (stated in accordance with the regulations of the Securities and
Exchange Commission and Financial Accounting Standards Board). The 1994
estimated present value of future net revenues, before income taxes, increased
11 percent compared to the prior year primarily due to the additions of proved
reserves related to successful drilling in Algeria and offshore in the Gulf of
Mexico, offset partially by a decrease in natural gas prices. 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.
ACQUISITIONS AND DIVESTITURES
In 1994, the Company added through purchases and trades 14.6 MMEEBs of
reserves in producing properties for $18.1 million cash. Anadarko plans to
invest $8 million over the next few years to further develop these reserves. The
largest property acquisition was the Castlegate Field covering 16,300 gross
acres in Carbon County, Utah. The Company acquired 24 producing coal-bed methane
wells and a gas pipeline from Pacific Gas and Electric Resources. Anadarko has
maintained an active interest in coal-bed methane production and drilled pilot
programs in Utah and Colorado over the past few years.
Anadarko traded acreage positions with the operators of two major
properties in the Permian Basin of West Texas. These trades improve the
Company's control over field operations in waterflood projects that offer
excellent development potential.
25
<PAGE> 27
The Company sold 17.1 MMEEBs through four separate transactions (shown in
the following table) totaling $109 million in 1994. Anadarko took advantage of a
"sellers market" in 1994 and sold non-strategic assets, which were generally
scattered properties where the Company had small working interests and
relatively high operating costs. The proceeds from these sales were reinvested
in the Company's core operating areas and the divestiture program may continue
in 1995.
PROPERTIES SOLD IN 1994
<TABLE>
<CAPTION>
PRODUCTION
AT TIME OF SALE
RESERVES ------------------ PROCEEDS
(MMEEBS) (MMCF/D) (MBOPD) (MILLIONS)
-------- ------- ------ ----------
<S> <C> <C> <C> <C>
Arkoma Basin 2.2 9.1 0.1 $ 23.5
Rocky Mountains 3.7 4.3 0.8 26.0
Canada 10.0 11.6 1.8 58.0
Other 1.2 -- -- 1.5
-------- ------- ------ ----------
Total 17.1 25.0 2.7 $109.0
-------- ------- ------ ----------
</TABLE>
In June 1993, Anadarko acquired deep producing oil and gas properties and
additional lease acreage 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 6.5 percent overriding
royalty 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 1994, Anadarko
drilled or re-completed 21 wells on these properties and tripled production from
the wells.
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 MMEEBs, for $190
million. The purchase also included "deep" exploration rights on 54,000 gross
(39,000 net) lease acres held by production. The Company has drilled over 60
wells and expanded water injection operations in these producing fields since
taking over operations, which is the primary reason for increased oil production
Company-wide since 1992.
Over the past three years, Anadarko has acquired through purchases and
trades 64.6 MMEEBs of proved reserves at a cash cost of $252 million or $3.90
per EEB.
PRODUCING PROPERTIES AND LEASES
The Company owns 2,521 net producing oil wells and 1,862 net producing gas
wells worldwide. The following schedule shows the number of developed and
undeveloped acres in which Anadarko held interests at December 31, 1994. The
Company's ownership position declined in 1994 due to sales of some producing
properties.
ACREAGE
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED TOTAL
------------- --------------- ---------------
thousands GROSS NET GROSS NET GROSS NET
----- --- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
United States
Onshore 1,991 841 1,838 607 3,829 1,448
Offshore 162 42 471 240 633 282
----- --- ----- ----- ----- -----
Total 2,153 883 2,309 847 4,462 1,730
----- --- ----- ----- ----- -----
United States -- Geothermal -- -- 163 160 163 160
Algeria -- -- 5,066 2,255 5,066 2,255
Indonesia -- -- 2,030 677 2,030 677
</TABLE>
26
<PAGE> 28
REGULATORY AND LEGISLATIVE DEVELOPMENTS
HUGOTON FIELD ALLOWABLE RULES In 1994, the Kansas Corporation Commission (KCC)
changed the method by which production is allocated to the many wells in the
Hugoton Field. Under a Basic Proration Order effective April 1, 1994, infilled
units receive an allowable at least 30 percent greater than if the unit had no
infill well. As a result of the order, Anadarko's share of the total Field
allowable increased from approximately 12 percent in 1993 to 15 percent in 1994.
On Anadarko's properties, more than 74 percent of the units have infill wells.
With nine percent of the spacing units in the Field, Anadarko currently receives
15 percent of the Field allowable production under rules administered by the
KCC. Net production volumes from the Kansas Hugoton Field in 1994 increased 19
percent from 45 Bcf in 1993 to 53.4 Bcf in 1994.
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 FERC ruling that the
Kansas ad valorem tax was such a tax, the Company collected the Kansas ad
valorem tax in addition to the otherwise maximum lawful price. FERC's ruling was
appealed to the United States Court of Appeals for the District of Columbia
(D.C. Circuit), which held in June 1988 that FERC failed to provide a reasoned
basis for its findings and remanded the case to FERC for further consideration.
On December 1, 1993, FERC issued an order reversing its prior ruling, but
limiting the effect of its decision to Kansas ad valorem taxes for sales made on
or after June 28, 1988. FERC clarified the effective date of its decision by an
order dated May 19, 1994. Based on Anadarko's interpretation of FERC's orders,
$700,000 (pre-tax) has been charged against income in 1994, in addition to the
$130,000 (pre-tax) charged against income in 1993. Numerous parties have filed
appeals of FERC's action in the D.C. Circuit 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 total capital spending in 1994 was $423
million, an increase of 60 percent from the $265 million spent in 1993 and an
increase of 17 percent from the $360 million spent in 1992. The largest category
of capital spending in 1994 was for exploration and development in the U.S. and
overseas. In 1993, exploration and development spending also garnered the bulk
of capital dollars. However, in 1992, the largest category of capital spending
was the acquisition of producing oil and gas properties located in the Permian
Basin of West Texas.
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
millions 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Exploration $196.0 $97.3 $63.6
Development 128.8 77.7 28.8
Acquisitions of Producing Properties 18.1 27.8 206.0
Gathering 13.0 6.9 4.8
Miscellaneous 12.1 11.6 14.1
Interest and Overhead 54.7 43.2 42.6
------- ------- -------
Total $422.7 $264.5 $359.9
------- ------- -------
</TABLE>
The Company's 1994 exploration expenditures of $196 million included $72
million to purchase 26 offshore lease blocks in the Gulf of Mexico at the
Minerals Management Service Offshore Lease Sale #147 in March 1994. The Company
funded its capital investment program in 1994 primarily through cash flow, plus
proceeds from property sales and an increase in long-term debt. Similar
strategies will be used to fund the 1995 capital expenditure program.
Capital spending for 1995 initially has been set at $314.0 million,
including $78.3 million for exploration, $120.6 million for development, $5.0
million for producing property acquisitions, $43.2 million for gas gathering and
other operations, $8.8 million for miscellaneous and $58.1 million of
capitalized interest and overhead. The decreased investment level planned for
1995 is based primarily on anticipated lower prices for natural gas.
27
<PAGE> 29
The growth in capital investment has generally tracked increased cash flows
in recent years from higher gas and oil production volumes. The increased
spending has been accompanied by significant performance in reserve replacement
at competitive finding costs and growth in the Company's proved reserves.
Historically, the Company has based capital spending on anticipated cash
flows including proceeds from divestitures, but certain portions of the capital
spending budget -- such as acquisitions -- 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 1995.
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 1994, Anadarko's total debt was $629.3 million, which included
$400 million of fixed interest rate debt and $229.3 million of floating interest
rate debt. This compares to total debt of $542.5 million at year-end 1993, which
included $400 million of fixed and $142.5 million of floating interest rate
debt. The increase of $86.8 million or 16 percent in 1994 over 1993 primarily
related to Anadarko's purchase of offshore leases in the Gulf of Mexico in 1994.
At year-end 1992, following a large acquisition of producing properties
that closed in December 1992, the Company's total debt was $647.2 million. The
total debt included $300 million of fixed and $347.2 million of floating
interest rate debt. The decrease of $104.7 million or 16 percent in 1993
compared to 1992 primarily related to the conversion in 1993 of Anadarko's
outstanding $100 million principal amount of 6 1/4% Convertible Subordinated
Debentures due 2014. Debentures in the principal amount of $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.
In May 1994, Anadarko entered into a $250 million Revolving Credit
Agreement and a $150 million 364-Day Credit Agreement with a group of commercial
banks. These agreements replace the Revolving Credit and Term Loan Agreement the
Company entered into in February 1992. As of December 31, 1994 and 1993, there
were no outstanding borrowings under these agreements.
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. As of December 31, 1994 and 1993, there had been no securities
issued under the shelf registration.
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, the Company accepted a $2.6 million payment for an option
giving the purchaser the right to enter into an interest rate swap agreement
exercisable in October 1994. This agreement represented a hedge for a portion of
the Company's floating interest rate debt, since, if exercised, it would have
fixed the rate the Company would have paid on a notional $100 million of
floating interest rate debt at six percent for nine years. The option was not
exercised in October 1994 and as a result, the Company recorded a reduction to
interest expense of $2.6 million in the fourth quarter of 1994.
In July 1993, Anadarko 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.
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.
Anadarko's net cash from operating activities in 1994 was $240 million
compared to $274 million in 1993 and $172 million in 1992.
28
<PAGE> 30
CHANGES IN ACCOUNTING PRINCIPLES
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Statement of Financial Accounting
Standards (SFAS) No. 106 focuses primarily on 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 1993 net income of about $9.7 million (17 cents per share) which is net of
$5.4 million deferred income tax benefit.
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 1993 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.
IMPAIRMENT OF LONG-LIVED ASSETS In November 1993, an Exposure Draft was issued
on accounting for the Impairment of Long-Lived Assets. The Exposure Draft would
require review of an asset for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. It is not anticipated that the Exposure Draft, if finalized, would
have any significant impact on companies like Anadarko that use the full-cost
method of accounting for oil and gas properties. See Note 1 of the Notes to
Consolidated Financial Statements under Item 8 of this Form 10-K.
DIVIDENDS
In 1994, Anadarko paid $17.6 million in dividends to its common
stockholders (7.5 cents per share per quarter). The dividend amount was $17.2
million (7.5 cents per share per quarter) in 1993 and $16.6 million (7.5 cents
per share per quarter) in 1992. Anadarko has paid a dividend continuously since
becoming an independent company in 1986.
The Revolving Credit Agreement and the 364-Day Credit Agreement require a
minimum balance of $650 million to be maintained in retained earnings. As a
result, the amount of retained earnings available for dividends as of December
31, 1994 is $249.6 million. The amount of future dividends will depend on
earnings, financial condition, capital requirements and other factors, and will
be determined by the Board of Directors on a quarterly basis.
29
<PAGE> 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANADARKO PETROLEUM CORPORATION
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Management 31
Independent Auditors' Report 32
Statement of Income, Three Years Ended December 31, 1994 33
Balance Sheet, December 31, 1994 and 1993 34
Statement of Stockholders' Equity, Three Years Ended December 31, 1994 35
Statement of Cash Flows, Three Years Ended December 31, 1994 36
Notes to Consolidated Financial Statements 37
Supplemental Information on Oil and Gas Exploration and Production Activities 54
Supplemental Quarterly Information 62
</TABLE>
30
<PAGE> 32
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
management'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
31
<PAGE> 33
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, 1994 and 1993, 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, 1994, as
contained in the 1994 Form 10-K Annual Report. These consolidated financial
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, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in notes 12 and 14 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 LLP]
Houston, Texas
January 26, 1995
32
<PAGE> 34
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1994 1993 1992
- ----------------------- -------- -------- --------
thousands
<S> <C> <C> <C>
REVENUES
Gas sales $313,470 $310,576 $256,418
Oil and condensate sales 125,640 127,042 82,916
Natural gas liquids and other 43,366 44,382 40,358
-------- -------- --------
Total 482,476 482,000 379,692
-------- -------- --------
COSTS AND EXPENSES
Operating expenses Note 10 110,202 104,372 79,373
Administrative and general 61,138 57,363 48,192
Depreciation, depletion and amortization 172,825 167,699 132,951
Other taxes Note 11 40,973 41,497 30,583
Provisions for impairments of international and geothermal
properties Note 4 3,100 7,000 21,000
-------- -------- --------
Total 388,238 377,931 312,099
-------- -------- --------
Operating Income 94,238 104,069 67,593
OTHER INCOME 2,123 2,755 718
-------- -------- --------
Gross Income 96,361 106,824 68,311
OTHER EXPENSES
Interest expense Notes 4 and 5 26,128 29,423 28,246
Disposition of foreign subsidiary Note 2 5,567 -- --
-------- -------- --------
Total 31,695 29,423 28,246
-------- -------- --------
Income before Income Taxes and Cumulative Effect of
Changes in Accounting Principles 64,666 77,401 40,065
INCOME TAXES Note 12
Income taxes 23,567 26,147 12,752
Effect of change in income tax rate -- 11,249 --
-------- -------- --------
Total 23,567 37,396 12,752
-------- -------- --------
Net Income before Cumulative Effect of Changes in
Accounting Principles 41,099 40,005 27,313
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Notes 12 and 14 -- 77,403 --
-------- -------- --------
NET INCOME $ 41,099 $117,408 $ 27,313
-------- -------- --------
PER COMMON SHARE
Net income before cumulative effect of changes in
accounting principles $ 0.70 $ 0.70 $ 0.49
Cumulative effect of changes in accounting principles -- 1.35 --
Net income 0.70 2.05 0.49
Dividends Note 6 $ 0.30 $ 0.30 $ 0.30
-------- -------- --------
AVERAGE NUMBER OF SHARES OUTSTANDING Note 6 58,776 57,220 55,257
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 35
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31 1994 1993
- ----------- ---------- ----------
thousands
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,530 $ 17,799
Accounts receivable 115,181 110,486
Inventories Note 3 13,420 9,551
Prepaid expenses 3,496 3,025
---------- ----------
Total 138,627 140,861
---------- ----------
PROPERTIES AND EQUIPMENT
Original cost 3,446,252 3,266,825
Less accumulated depreciation, depletion and amortization 1,460,196 1,425,098
---------- ----------
Net properties and equipment -- based on the full cost method of
accounting for oil and gas properties Note 4 1,986,056 1,841,727
---------- ----------
DEFERRED CHARGES 17,418 40,198
---------- ----------
$2,142,101 $2,022,786
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade and other $ 95,829 $ 92,311
Bank 14,287 13,328
Accrued expenses
Interest 7,676 7,663
Taxes and other 10,359 12,715
---------- ----------
Total 128,151 126,017
---------- ----------
LONG-TERM DEBT Note 5 629,281 542,500
---------- ----------
DEFERRED CREDITS
Deferred income taxes Note 12 438,684 424,293
Other 46,386 65,810
---------- ----------
Total 485,070 490,103
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $0.10
(200,000,000 shares authorized, 58,857,290 and 58,668,407 shares
issued and outstanding as of December 31, 1994 and 1993,
respectively) 5,931 5,912
Preferred stock, par value $1.00
(2,000,000 shares authorized, no shares issued as of December 31,
1994 and 1993) -- --
Paid-in capital 243,976 236,001
Retained earnings (as of December 31, 1994,
$249,599,000 was not restricted as to the payment of dividends) 653,112 625,308
Deferred compensation (3,420) (3,055)
---------- ----------
Total 899,599 864,166
---------- ----------
COMMITMENTS AND CONTINGENCIES Notes 9, 14 and 15 -- --
---------- ----------
$2,142,101 $2,022,786
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 36
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1994 1993 1992
- ----------------------- -------- -------- --------
thousands
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 5,912 $ 5,580 $ 5,559
Exercise of stock options 9 21 5
Issuance of restricted stock 3 11 --
Issued for employee savings plan 7 8 16
Conversion of 6 1/4% Debentures -- 292 --
-------- -------- --------
Balance at end of year 5,931 5,912 5,580
-------- -------- --------
PAID-IN CAPITAL
Balance at beginning of year 236,001 125,217 120,095
Exercise of stock options, net of income tax effects 3,115 4,248 1,502
Issuance of restricted stock 1,812 4,442 --
Issuance of stock for employee savings plan 3,048 3,309 3,620
Conversion of 6 1/4% Debentures, net -- 98,785 --
-------- -------- --------
Balance at end of year 243,976 236,001 125,217
-------- -------- --------
RETAINED EARNINGS
Balance at beginning of year 625,308 527,103 520,234
Net income 41,099 117,408 27,313
Foreign translation losses (1,686) (1,701) (3,799)
Cumulative translation losses transferred to the income
statement upon disposition of foreign subsidiary 6,065 -- --
-------- -------- --------
670,786 642,810 543,748
Dividends paid (17,635) (17,217) (16,577)
Issuance of treasury stock (39) (285) (68)
-------- -------- --------
Balance at end of year 653,112 625,308 527,103
-------- -------- --------
DEFERRED COMPENSATION
Balance at beginning of year (3,055) -- (5,372)
Issuance of restricted stock (1,668) (4,522) (7)
Amortization of restricted stock 1,303 1,467 5,379
-------- -------- --------
Balance at end of year (3,420) (3,055) --
-------- -------- --------
TREASURY STOCK
Balance at beginning of year -- (1,005) --
Issued for exercise of stock options -- 377 --
Issuance of restricted stock -- 92 5
Issued to employee savings plan 405 981 1,858
Purchase of treasury stock (405) (445) (2,868)
-------- -------- --------
Balance at end of year -- -- (1,005)
-------- -------- --------
STOCKHOLDERS' EQUITY Notes 6 and 7 $899,599 $864,166 $656,895
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 37
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1994 1993 1992
- ----------------------- --------- --------- ---------
thousands
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 41,099 $ 117,408 $ 27,313
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation, depletion and amortization 172,825 167,699 132,951
Amortization of restricted stock 1,303 1,467 5,379
Deferred income taxes 15,912 35,126 5,373
Cumulative effect of changes in accounting principles -- (77,403) --
Provisions for impairments of international and geothermal
properties 3,100 7,000 21,000
Cumulative translation losses transferred to the income
statement upon disposition of foreign subsidiary 6,065 -- --
--------- --------- ---------
240,304 251,297 192,016
(Increase) decrease in accounts receivable (4,695) 949 (32,187)
(Increase) decrease in inventories (3,869) 698 184
Increase in accounts payable -- trade and other and
accrued expenses 1,175 20,649 9,941
Other items -- net 6,772 681 1,659
--------- --------- ---------
Net cash from operating activities 239,687 274,274 171,613
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to properties and equipment (422,718) (259,894) (362,405)
Sales and retirements of properties and equipment 95,370 4,824 3,084
--------- --------- ---------
Net cash used in investing activities (327,348) (255,070) (359,321)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Additions to debt 180,281 200,000 307,534
Retirements of debt (93,500) (204,884) (100,000)
Increase (decrease) in accounts payable, banks 959 (2,045) (6,733)
Dividends paid (17,635) (17,217) (16,577)
Issuance of common stock 6,326 7,517 5,136
Issuance of treasury stock 366 1,165 1,795
Purchase of treasury stock (405) (445) (2,868)
--------- --------- ---------
Net cash from financing activities 76,392 (15,909) 188,287
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- (329) (729)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,269) 2,966 (150)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 17,799 14,833 14,983
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,530 $ 17,799 $ 14,833
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 38
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1. SUMMARY OF ACCOUNTING POLICIES
GENERAL Anadarko Petroleum Corporation is engaged in the exploration,
development, production and marketing of natural gas, crude oil, condensate and
natural gas liquids (NGLs). The terms "Anadarko" and "Company" refer to Anadarko
Petroleum Corporation and its subsidiaries. The principal subsidiaries of
Anadarko are: Anadarko Gathering Company; Anadarko Trading Company; and Anadarko
Algeria Corporation (Anadarko Algeria). In December 1994, the Company sold its
wholly-owned subsidiary, Anadarko Petroleum of Canada Ltd. (Anadarko Canada).
See Note 2.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Anadarko and its subsidiaries. All significant intercompany
transactions have been eliminated. Certain amounts for prior years have been
restated to conform to the current presentation.
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 12 and 14.
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.
PRICE RISK MANAGEMENT Anadarko uses financial instruments to minimize the
impact of price fluctuations for the Company and its customers. Anadarko's
financial instruments currently are comprised of futures, swaps and options.
Gains and losses on these activities are recognized in revenues for the periods
to which they relate. Unrealized gains and losses are recorded as assets and
liabilities on the balance sheet. See Note 5.
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. This includes any
internal costs that can be directly identified with acquisition, exploration and
development activities, but does not include any costs related to production,
general corporate overhead or similar activities.
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 amounts of oil and gas reserves
are involved.
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 that are not subject to amortization until
completion of evaluation or development activities.
37
<PAGE> 39
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1. SUMMARY OF ACCOUNTING POLICIES -- (CONTINUED)
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 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. In prior years, deferred
federal income taxes were not provided on translation adjustments because the
earnings of Anadarko Canada were considered to be permanently invested. Due to
the sale of Anadarko Canada in 1994, the cumulative foreign currency translation
losses were transferred from stockholders' equity and included in disposition of
foreign subsidiary on the income statement. See Note 2.
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.
2. DISPOSITION OF FOREIGN SUBSIDIARY
In December 1994, Anadarko sold Anadarko Canada for $57,937,000. The sale
price included $17,600,000 for the remaining Canadian properties, as well as
Anadarko Canada's cash and other working capital, which included $34,055,000 of
proceeds from property dispositions earlier in 1994. In connection with the
sale, Anadarko recorded a charge of $5,567,000 before taxes ($6,635,000 after
taxes) primarily due to a non-cash charge of $6,065,000 for cumulative foreign
currency translation losses previously recorded as a reduction in stockholders'
equity.
The gain relating to the sale was taxable in the U.S. As a result, the
Company recorded U.S. income tax expense of $17,454,000 on the taxable gain. The
Company also reversed previously provided deferred Canadian taxes in the amount
of $16,386,000 for a net income tax expense associated with the sale of
$1,068,000.
At the end of 1993, proved reserves of oil and gas for the Canadian
properties were less than three percent of the Company's total proved reserves.
3. INVENTORIES
Inventories are stated at the lower of average cost or market. NGLs and
natural gas, when sold from inventory, are charged to expense using the
average-cost method. The major classes of inventories are as follows:
<TABLE>
<CAPTION>
thousands 1994 1993
------- ------
<S> <C> <C>
Materials and supplies $11,953 $8,226
Natural gas liquids, stored in inventory 842 1,325
Natural gas, stored in inventory 625 --
------- ------
$13,420 $9,551
------- ------
</TABLE>
38
<PAGE> 40
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
4. PROPERTIES AND EQUIPMENT
A summary of the original cost of properties and equipment by
classification follows:
<TABLE>
<CAPTION>
thousands 1994 1993
---------- ----------
<S> <C> <C>
Oil and gas properties $3,280,837 $3,123,271
Plant facilities 16,063 23,361
Gathering facilities 68,694 55,793
General properties 80,658 64,400
---------- ----------
$3,446,252 $3,266,825
---------- ----------
</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 three to 25 years.
Oil and gas properties include costs of $270,956,000 and $180,933,000 at
December 31, 1994 and 1993, 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 1994, 1993 and 1992, the Company made provisions for impairments of
international properties of $3,100,000, $6,500,000 and $21,000,000,
respectively, which were related to oil and gas properties. These impairments
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 1994, 1993 and 1992 were $41,635,000,
$38,000,000 and $36,620,000, respectively. Of these amounts, the Company
capitalized $15,507,000, $8,577,000 and $8,374,000 during 1994, 1993 and 1992,
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.
In addition to capitalized interest, the Company also capitalized internal
costs of $37,898,000, $34,637,000 and $34,177,000 during 1994, 1993 and 1992,
respectively. These internal costs were directly related to acquisition,
exploration and development activities and are included as part of the cost of
oil and gas properties.
5. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
Principal
---------------------
thousands 1994 1993
-------- --------
<S> <C> <C>
Notes Payable, Banks, 6.46%* $ 49,000 $142,500
Commercial Paper, 6.49%* 180,281 --
8 3/4% Notes due 1998 100,000 100,000
8 1/4% Notes due 2001 100,000 100,000
6 3/4% Notes due 2003 100,000 100,000
5 7/8% Notes due 2003 100,000 100,000
-------- --------
$629,281 $542,500
-------- --------
</TABLE>
- ---------------
*The average rates in effect at December 31, 1994.
39
<PAGE> 41
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
5. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
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 that allows Anadarko to borrow
funds by issuing notes to investors for terms of up to 270 days, at rates as
offered.
The notes payable to banks and commercial paper in 1994 and 1993 have been
classified as long-term debt in accordance with SFAS No. 6, "Classification of
Short-term Obligations Expected to be Refinanced," under the terms of Anadarko's
Bank Credit Agreements.
In May 1994, the Company entered into a $250,000,000 Revolving Credit
Agreement and a $150,000,000 364-Day Credit Agreement with a group of 11
commercial banks. Interest rates are based on either the reference rate, the
rate of certificate of deposit, the Eurodollar rate or a combination thereof.
The Agreements provide for commitment fees on the unused balances at a rate of
18.5/100 of one percent and 12.5/100 of one percent for the Revolving Credit
Agreement and 364-Day Credit Agreement, respectively. The Revolving Credit
Agreement will expire in 1999. The Agreements replaced the Revolving Credit
Agreement entered into in February 1992. During 1994 and 1993, there were no
outstanding borrowings under these Agreements.
During 1994 and 1993, 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 1994 and 1993,
Anadarko maintained an average daily compensating balance of $1,000,000 for this
line of credit.
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. As of December 31, 1994 and
1993, there had been no securities issued under the shelf registration.
40
<PAGE> 42
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
5. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
Total sinking fund and installment payments related to long-term debt for
the five years ending December 31, 1999 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>
1995 $ --
1996 --
1997 --
1998 100,000
1999 $229,281
</TABLE>
The following information discloses the fair value of the Company's
financial instruments:
<TABLE>
<CAPTION>
thousands CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
1994
Cash and cash equivalents $ 6,530 $ 6,530
Long-term debt 629,281 603,656
Derivative financial instruments
Gain 3,323 3,323
Loss (2,889) (2,889)
1993
Cash and cash equivalents $ 17,799 $ 17,799
Long-term debt 542,500 562,583
Derivative financial instruments
Gain 1,745 1,745
Loss (3,061) (3,061)
</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, 1994 and 1993
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 Standards & Poor's Year-end Bond Guides and, where such
quotes were not available, on the average rate in effect at year-end.
DERIVATIVE FINANCIAL INSTRUMENTS Anadarko uses financial
instruments -- futures, swaps and options -- to fix a price on the Company's
production volumes or to convert a customer's requested price structure to a
price structure that is consistent with the Company's overall pricing strategy.
Gains and losses are recorded when the related gas or oil production had been
produced or delivered or the financial instrument expires. As a result, gains
and losses are generally offset by similar changes in the price of natural gas
and crude oil. Unrealized gains and losses are recorded as assets and
liabilities on the balance sheet at fair market value as of the balance sheet
date. While financial instruments are intended to reduce the Company's exposure
to declines in the market price of natural gas and crude oil, the financial
instruments may limit Anadarko's gain from increases in the market price of
natural gas and crude oil.
41
<PAGE> 43
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
5. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
FUTURES Anadarko uses futures contracts to hedge the Company's production
volume exposure to price risk and to minimize the Company's customers' exposure
to price risk. Futures contracts are guaranteed settlement by the New York
Mercantile Exchange (NYMEX) and have nominal credit risk.
At year-end 1994, Anadarko had open futures contracts totaling 35 million
cubic feet per day (MMcf/d) of the Company's natural gas production for February
through April 1995 and August through September 1995. Anadarko also had open
futures contracts for the Company's natural gas customers of 3 MMcf/d for
February through September 1995.
At year-end 1993, Anadarko had open futures contracts totaling 32 MMcf/d of
the Company's natural gas production for February through August 1994.
SWAPS Anadarko uses swap agreements with third-parties to hedge against
potential adverse effects of fluctuations in future prices for the Company's
production and for the Company's customers. In addition, Anadarko uses basis
swap agreements to hedge against potential adverse effects of fluctuations in
the price differential between the NYMEX price at Henry Hub and the price at the
market location of Anadarko's production or a customer's market location
requirements. These energy swap agreements expose the Company to third-party
credit risk to the extent the third-parties are unable to meet their monthly
settlement commitment to the Company. The Company monitors the credit standing
of the third-parties and anticipates the third-parties will be able to fully
satisfy their obligations under the contracts.
At year-end 1994, Anadarko had open basis swap agreements for the Company's
production averaging 119 MMcf/d for the entire year of 1995 and averaging 30
MMcf/d for the years 1996 through 1999. In addition, the Company had open swap
agreements for its customers of 20 MMcf/d for the year 1995 and open basis swap
agreements for its customers of 28 MMcf/d for January through August 1995.
At year-end 1993, Anadarko had open swap agreements for its customers of 46
MMcf/d for January 1994 through March 1995.
The swap agreements discussed above include a swap agreement entered into
in December 1993 for which Anadarko received a prepayment of $27,254,000. This
swap is in conjunction with a fixed price gas purchase agreement that required
Anadarko to make a $27,254,000 prepayment for gas, which will be delivered over
the term of the swap agreement. Under the swap agreement, the Company will make
payments to a third-party, based on an index price equal to the market value of
the gas purchased under the related gas purchase agreement. 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.
The effect of the swap agreement is to convert the fixed price obligation to
purchase gas into a market price obligation.
OPTIONS The Company generally uses options to fix a floor and a ceiling
for prices on its production volumes. The Company also has used options to
"straddle" a price, effectively setting a price above the then present market
price at which the Company is willing to sell production volumes and a price
below the then present market price at which the Company is willing to buy to
supply third-party markets. Like futures, NYMEX options are guaranteed
settlement and have nominal credit risk. Over-the-counter (OTC) options with
third-parties have credit risks similar to swaps.
At year-end 1994, Anadarko had open NYMEX options on 57 MMcf/d for puts and
for calls in order to fix a range of prices (a "collar") for the Company's
natural gas production during February through April 1995.
At year-end 1993, Anadarko had open OTC options on 25 MMcf/d for puts and
for calls as a straddle of the Company's natural gas production and third-party
purchase requirements during February through March 1994.
42
<PAGE> 44
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
5. LONG-TERM DEBT AND FINANCIAL INSTRUMENTS -- (CONTINUED)
INTEREST RATE SWAP OPTION AGREEMENT In October 1993, Anadarko accepted a
payment of $2,600,000 granting the purchaser the option to enter into a
nine-year interest rate swap agreement with the Company. The option was
exercisable in October 1994. This agreement, if exercised, would have
effectively fixed the rate the Company would have paid on a notional
$100,000,000 of its floating interest rate debt at six percent for nine years.
The $2,600,000 payment and the related agreement hedged the Company's floating
interest rate debt, which was 3.44 percent at December 31, 1993. The option was
not exercised and, as a result, the Company recorded a reduction to interest
expense of $2,600,000 during the fourth quarter of 1994.
6. STOCK AND STOCK OPTIONS
Following is a schedule of the changes in the Company's shares of common
stock:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
SHARES OF COMMON STOCK ISSUED
Beginning of year 58,668,407 55,345,486 55,139,158
Exercise of stock options 91,829 213,054 50,031
Issuance of restricted stock 31,950 110,700 --
Issuance of shares for employee savings plan 65,104 81,891 156,297
Conversion of 6 1/4% Debentures -- 2,917,276 --
---------- ---------- ----------
End of year 58,857,290 58,668,407 55,345,486
---------- ---------- ----------
SHARES OF COMMON STOCK HELD IN TREASURY
Beginning of year -- 34,235 --
Issuance of shares for exercise of stock options -- (12,398) --
Issuance of shares for employee savings plan (7,257) (30,746) (62,654)
Issuance of restricted stock -- (3,150) (184)
Purchase of treasury stock 7,257 12,059 97,073
---------- ---------- ----------
End of year -- -- 34,235
---------- ---------- ----------
SHARES OF COMMON STOCK OUTSTANDING AT END OF YEAR 58,857,290 58,668,407 55,311,251
---------- ---------- ----------
</TABLE>
In each quarter of 1994, 1993 and 1992, 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 $249,599,000, $464,166,000 and $256,895,000 were
not restricted as to the payment of dividends at December 31, 1994, 1993 and
1992, respectively.
During 1994, 1993 and 1992, the Company acquired treasury stock only as a
result of stock option exercises or restricted stock transactions.
Anadarko has four stock option plans -- the 1993 Stock Incentive Plan, the
1988 Stock Option Plan for Non-employee Directors, the 1987 Stock Option Plan
and the 1986 Stock Option Plan -- under which key employees and directors of the
Company may be granted options to purchase shares of Anadarko common 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.
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.
Generally, restricted stock is subject to forfeiture restrictions and cannot be
sold, transferred or disposed of during the restriction period. The holders of
the restricted stock have 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. During 1994 and 1993, the
Company issued 31,950 and 110,700 shares, respectively, of restricted stock at a
market value of $1,669,000 and $4,429,000, respectively.
43
<PAGE> 45
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
6. STOCK AND STOCK OPTIONS -- (CONTINUED)
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>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
SHARES UNDER OPTION AT BEGINNING OF YEAR 1,819,012 1,931,535 1,728,920
Granted 431,950 540,350 280,500
Exercised (142,787) (628,873) (58,385)
Surrendered or expired (1,500) (24,000) (19,500)
------------- ------------- -------------
SHARES UNDER OPTION AT END OF YEAR 2,106,675 1,819,012 1,931,535
------------- ------------- -------------
Option price range per share
at December 31 $16.79-$49.00 $16.60-$47.00 $14.65-$37.00
------------- ------------- -------------
Options exercisable at December 31 1,433,050 1,213,737 1,533,135
------------- ------------- -------------
Price range per share
of options exercised $19.68-$47.00 $16.60-$37.00 $14.65-$26.06
------------- ------------- -------------
SHARES AVAILABLE FOR FUTURE GRANT AT END OF
YEAR 3,690,500 4,120,950 637,300
------------- ------------- -------------
</TABLE>
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.
7. FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
The following is an analysis of currency translation adjustments reflected
in stockholders' equity:
<TABLE>
<CAPTION>
thousands 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year $(4,379) $(2,678) $ 1,121
Current translation losses (1,686) (1,701) (3,799)
Cumulative translation losses transferred to the income
statement upon disposition of foreign subsidiary 6,065 -- --
------- ------- -------
Balance at year-end $ -- $(4,379) $(2,678)
------- ------- -------
</TABLE>
8. 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 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Interest $ 25,675 $ 26,840 $ 27,224
Income taxes $ 516 $ 5,726 $ 12,064
</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.
44
<PAGE> 46
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
9. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS
During 1989, Anadarko Algeria entered into a production sharing agreement
(PSA) 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 PSA
gives Anadarko Algeria the right to explore for and produce liquid hydrocarbons
in Algeria, subject to the sharing of production with Sonatrach. The PSA
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 PSA and share in the exploration cost commitment. Anadarko
believes this obligation will be fully met in 1995. During 1994, the Company and
its two partners also acquired, subject to approval by Algerian authorities, a
minority interest in a PSA covering two additional blocks in the same region,
which are operated by BHP Petroleum (Algerie) Inc., where an exploration program
is already underway. The Company believes anticipated operating cash flows and
existing credit facilities will be sufficient to meet its share of these costs.
As of December 31, 1994, Anadarko Algeria's total net investment in Algeria for
exploration and related activities was $105,597,000, of which approximately
$33,189,000 was incurred in 1994.
The current political unrest in Algeria has been the subject of numerous
news media reports. The Company is closely monitoring the situation and has
taken reasonable and prudent steps to insure the safety of employees working in
the remote regions of the Sahara Desert. Anadarko is presently unable to predict
with certainty any effect the current situation may have on activity planned for
1995 and beyond. However, the situation has not had any material effect on the
Company's operations. The Company's activities in Algeria also are subject to
the general risks associated with all 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 approximately $671,000 in 1994, $641,000 in 1993 and $3,256,000
in 1992. 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. There were no amounts paid
by the Company to L.G. Barcus and Sons, Inc. during 1994. 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. NGLs 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.
In 1994, sales to Indiana Gas Company Incorporated were $67,348,000, which
was more than ten percent of the Company's total revenues. 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.
45
<PAGE> 47
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
10. OPERATING EXPENSES
Operating expenses by category are as follows:
<TABLE>
<CAPTION>
thousands 1994 1993 1992
--------- --------- --------
<S> <C> <C> <C>
Oil and gas $ 70,164 $ 67,668 $ 48,073
Plant and gathering 24,905 23,750 18,326
Gas purchases 14,292 12,016 12,184
Other 841 938 790
--------- --------- --------
Total $ 110,202 $ 104,372 $ 79,373
--------- --------- --------
</TABLE>
11. OTHER TAXES
Significant taxes other than income taxes are as follows:
<TABLE>
<CAPTION>
thousands 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Production and severance $ 22,228 $ 22,049 $ 15,945
Ad valorem 16,786 15,679 11,166
Payroll and other 1,959 3,769 3,472
-------- -------- --------
Total $ 40,973 $ 41,497 $ 30,583
-------- -------- --------
</TABLE>
12. INCOME TAXES
Income tax expense, including deferred amounts, is summarized as follows:
<TABLE>
<CAPTION>
thousands 1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
CURRENT
Federal $ 5,798 $ 1,469 $ 5,874
Foreign 1,422 766 891
State 435 35 614
-------- ------- -------
Total 7,655 2,270 7,379
-------- ------- -------
DEFERRED
Federal 29,838 22,925 4,530
Adjustment to the deferred tax liabilities and assets at the
enactment date for the change in the corporate income tax
rate -- 11,249 --
Foreign (16,224) (141) 500
State 2,298 1,093 343
-------- ------- -------
Total 15,912 35,126 5,373
-------- ------- -------
Total income taxes allocated to Income before Income Taxes
and Cumulative Effect of Changes in Accounting Principles $ 23,567 $37,396 $12,752
-------- ------- -------
</TABLE>
The Company's current federal income tax expense has been determined under
the alternative minimum tax system.
46
<PAGE> 48
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
12. INCOME TAXES -- (CONTINUED)
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:
<TABLE>
<CAPTION>
thousands 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income before Income Taxes and Cumulative Effect
of Changes in Accounting Principles
Domestic $63,963 $77,059 $36,652
Foreign 703 342 3,413
------- ------- -------
Total $64,666 $77,401 $40,065
------- ------- -------
Statutory tax rate 35% 35% 34%
Tax computed at statutory tax rate $22,633 $27,090 $13,622
Adjustments resulting from:
State income taxes (net of federal income tax benefit) 1,777 733 632
Section 29 credit (3,072) (718) (1,221)
Disposition of foreign subsidiary 3,017 -- --
Adjustment to the beginning of year deferred tax liabilities
and assets for the change in the corporate income tax rate -- 10,741 --
Other -- net (788) (450) (281)
------- ------- -------
Total income taxes $23,567 $37,396 $12,752
------- ------- -------
Effective tax rate 36% 48% 32%
------- ------- -------
</TABLE>
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 1994 and 1993, the tax benefit amounted to $968,000
and $2,743,000, respectively.
SFAS No. 109 was adopted by the Company in the first quarter of 1993 and
increased net income by $87,071,000. SFAS No. 109 requires a change from the
deferred method of accounting for income taxes to the asset and liability
method. 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 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 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
$11,249,000 in the third quarter of 1993.
47
<PAGE> 49
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
12. INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities (assets) at December 31, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
thousands 1994 1993
-------- --------
<S> <C> <C>
Oil and gas exploration and development costs $473,043 $449,859
Other 14,391 12,382
-------- --------
Gross deferred tax liabilities 487,434 462,241
-------- --------
Alternative minimum tax credit carryforward (28,752) (22,691)
Other (19,998) (15,257)
-------- --------
Gross deferred tax assets (48,750) (37,948)
-------- --------
Net deferred tax liabilities $438,684 $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.
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.
Deferred income tax expense for the year ended December 31, 1992 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
-------
<S> <C>
Oil and gas exploration and development costs $(1,326)
Depreciation (41)
Net operating loss utilized 1,688
Investment tax credit utilized 1,734
Alternative minimum tax credit 2,303
Other 1,015
-------
Total deferred income taxes $ 5,373
-------
</TABLE>
In December 1994, the Company sold Anadarko Canada. Under current
accounting rules, Anadarko had not previously provided deferred U.S. income
taxes on the amount by which its investment in Anadarko Canada exceeded the tax
basis or on the cumulative foreign currency translation losses because these
temporary differences were previously considered permanent in duration. See Note
2.
Alternative minimum tax can be carried forward indefinitely as a credit
against regular tax liability. The alternative minimum tax credit generated in
1994 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, 1994, 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 $ 6,800 $ 386 1995 - 2009
Alternative minimum tax credit $28,800 $ -- Unlimited
</TABLE>
48
<PAGE> 50
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
13. 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 2002. The leases are expected to be renewed or replaced
as they expire. At December 31, 1994, future minimum rental payments due under
operating leases are as follows:
<TABLE>
<CAPTION>
thousands
<S> <C>
1995 $ 6,376
1996 5,806
1997 5,659
1998 5,540
1999 5,321
Later years 11,867
-------
Total minimum lease payments $40,569
-------
</TABLE>
Total rental expense amounted to $8,441,000, $9,207,000 and $8,212,000 in
1994, 1993 and 1992, respectively.
14. 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.
In 1994, the Plan was amended, effective January 1, 1992, to bring the
definition of compensation in compliance with Section 414(s) of the Internal
Revenue Code of 1986, as amended (Code). Effective January 1, 1993, a rollover
provision was added to the Plan allowing a member's retirement benefit to be
rolled over to another qualified pension plan or Individual Retirement Account.
Effective January 1, 1994, a section was added preserving benefits of those
members whose accrued benefit under the Plan was determined based on
compensation received prior to January 1, 1994, which exceeded the limit on
compensation which may be considered for Plan purposes commencing January 1,
1994. Also effective January 1, 1994, provisions were added to clarify the
treatment of employees of Anadarko Canada who transfer their employment to
Anadarko. Finally, effective July 1, 1994, a section was added to the Plan to
allow members who had attained age 50 by July 1, 1994, to retire from Anadarko
with a pension benefit as if they had attained age 55, if they were working at
one of two specific locations and whose employment was terminated in conjunction
with the closing of these specific locations.
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 Code Section 415 limit on benefits
and the Code Section 401(a)(17) limit on considered compensation, which
increased the actuarial liability by $100,000.
The Company has an equalization plan to ensure payments to certain
employees 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 and payable solely from the general assets of the
Company.
In addition, the Company has a pension plan for non-employee directors,
which is unfunded.
49
<PAGE> 51
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
14. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT
BENEFITS -- (CONTINUED)
The 1994, 1993 and 1992 pension cost related to these plans includes the
following components:
<TABLE>
<CAPTION>
thousands 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service costs-benefits earned in the period $ 3,502 $ 2,785 $ 2,357
Interest cost on projected benefit obligation 2,895 2,612 2,394
Actual return on plan assets 1,208 (3,675) (3,516)
Amortization values and deferrals (4,560) 111 106
Special termination benefits 346 -- --
------- ------- -------
Pension cost $ 3,391 $ 1,833 $ 1,341
------- ------- -------
</TABLE>
The special termination benefits incurred in 1994 relate to the closing of
several plant locations.
The Company had an additional minimum liability of $1,591,000 and $947,000
at December 31, 1994 and 1993, 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, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS
thousands (FUNDED) (UNFUNDED)
------------- ---------------
<S> <C> <C>
1994
Actuarial present value of:
Vested benefit obligation $ 19,040 $ 2,675
Accumulated benefit obligation 23,896 3,535
Projected benefit obligation $ 33,668 $ 4,387
------------- ---------------
Plan assets at market value $ 37,734 $ --
------------- ---------------
Projected benefit obligation less than (in excess of) plan
assets $ 4,066 $ (4,387)
Unrecognized initial asset (5,724) --
Unrecognized loss 469 855
Unrecognized prior service cost 1,784 1,483
Adjustment required to recognize additional minimum
liability -- (1,591)
------------- ---------------
Prepaid (accrued) pension cost $ 595 $ (3,640)
------------- ---------------
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> 52
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
14. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT
BENEFITS -- (CONTINUED)
The Company's assumptions used as of December 31 in determining the pension
cost and pension liability were as follows:
<TABLE>
<CAPTION>
percent 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate 8.0 7.25 8.25
Rates of increase in compensation levels 5.0 5.0 6.0
Long-term rate of return on plan assets 8.0 8.0 9.0
</TABLE>
EMPLOYEE SAVINGS PLAN The Company has an employee savings plan (ESP) that 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 $3,579,000,
$3,426,000 and $2,842,000 during 1994, 1993 and 1992, respectively.
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 year ended December 31, 1992, the Company
recognized postretirement benefit costs other than pensions as incurred. As a
result, the amounts recognized as expense in 1992 are not comparable to 1993 and
1994.
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 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, 1994 and 1993:
<TABLE>
<CAPTION>
thousands 1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ (6,344) $(10,038)
Fully eligible active plan participants (3,538) (4,004)
Other active plan participant (11,321) (11,961)
-------- --------
Total (21,203) (26,003)
Plan assets at fair value -- 3,326
-------- --------
Accumulated postretirement benefit obligation
in excess of plan assets (21,203) (22,677)
-------- --------
Unrecognized net (gain) loss (3,887) 198
-------- --------
Accrued postretirement benefit cost $(25,090) $(22,479)
-------- --------
</TABLE>
51
<PAGE> 53
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
14. PENSION PLANS, EMPLOYEE SAVINGS PLAN AND OTHER POSTRETIREMENT
BENEFITS -- (CONTINUED)
The Company charges postretirement benefits other than pensions as accrued,
based on actuarial calculations for each plan. The net annual costs for
postretirement benefits other than pensions for 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
thousands 1994 1993
------ -------
<S> <C> <C>
Transition obligation $ -- $19,767
Service cost-benefits attributed to service during the period 1,575 1,520
Interest cost on accumulated obligation 1,863 1,895
Actual return on plan assets (260) (281)
Special termination expense 44 --
------ -------
Net postretirement benefit cost $3,222 $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 shown above were as follows:
<TABLE>
<CAPTION>
percent 1994 1993
--------- ----------
<S> <C> <C>
Discount rate 8.0 7.25
Rates of increase in compensation levels 5.0 5.0
Health care trend rate 15.0-5.0 15.0-5.0
</TABLE>
The health care trend rate for the health care plans starts at the maximum
rate for the current year and is gradually reduced to an ultimate rate for 2001
and later years. A change in the health care trend rate of one percent would
change the annual cost in 1994 by approximately $742,000 and would change the
accumulated postretirement benefit obligation in 1994 by approximately
$2,775,000.
Retiree life insurance expense was $78,000 for 1992 and the cost of
providing health care benefits for 129 retirees in 1992 was $375,000.
15. CONTINGENCIES
ENVIRONMENTAL 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. In October 1994, Anadarko signed an Administrative Order on Consent
with the EPA for $8,040 in settlement of the Company's potential liability.
On December 17, 1993, the Company received a notice from the Department of
Justice in the State of California indicating 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. During
the first quarter of 1994, the Company, along with other PRPs, became a party to
a Cost Sharing, Joint Defense and Confidentiality Agreement, effective October
20, 1993. The Company believes its share of costs in connection with the cleanup
of the GI site will not have a material effect on its financial position or
results of operations and will be approximately $35,000 to $70,000.
52
<PAGE> 54
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
15. CONTINGENCIES -- (CONTINUED)
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 with ARCO continue to determine compensation due the Company from
ARCO for certain environmental conditions which have been found on the
properties. The Company believes any liability in connection with any
environmental conditions existing as of the date of purchase on the properties
rest with ARCO and, as such, the Company believes it will not have any material
potential liability related thereto.
53
<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, 1994 and 1993 are $270,956,000 and $180,933,000,
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>
EXCLUDED
YEAR COSTS INCURRED COSTS AT
PRIOR -------------------------------- DEC. 31,
thousands YEARS 1992 1993 1994 1994
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Property acquisition $10,348 $ 4,874 $32,330 $ 82,306 $129,858
Exploration 15,814 16,235 28,299 59,949 120,297
Capitalized interest 2,267 2,247 6,578 9,709 20,801
------- ------- ------- -------- --------
Total $28,429 $23,356 $67,207 $151,964 $270,956
------- ------- ------- -------- --------
</TABLE>
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
thousands 1994 1993
---------- ----------
<S> <C> <C>
UNITED STATES
Capitalized
Unproved properties $ 180,447 $ 97,694
Proved properties 2,989,037 2,857,110
Plant facilities 16,063 23,361
---------- ----------
3,185,547 2,978,165
---------- ----------
Accumulated depreciation, depletion and amortization 1,426,480 1,356,800
---------- ----------
Net capitalized costs 1,759,067 1,621,365
---------- ----------
CANADA
Capitalized
Unproved properties -- 4,425
Proved properties -- 86,586
---------- ----------
-- 91,011
Accumulated depreciation, depletion and amortization -- 42,288
---------- ----------
Net capitalized costs -- 48,723
---------- ----------
ALGERIA AND OVERSEAS
Capitalized
Unproved properties 82,308 77,456
Proved properties 29,045 --
---------- ----------
Net capitalized costs 111,353 77,456
---------- ----------
TOTAL
Capitalized
Unproved properties 262,755 179,575
Proved properties 3,018,082 2,943,696
Plant facilities 16,063 23,361
---------- ----------
3,296,900 3,146,632
---------- ----------
Accumulated depreciation, depletion and amortization 1,426,480 1,399,088
---------- ----------
Net capitalized costs $1,870,420 $1,747,544
---------- ----------
</TABLE>
54
<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 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
UNITED STATES -- Capitalized
Property acquisition
Exploration $ 87,747 $ 15,637 $ 11,955
Development 16,005 27,806 205,977
Exploration 115,486 84,457 47,073
Development 132,846 80,122 34,923
-------- -------- --------
352,084 208,022 299,928
-------- -------- --------
CANADA -- Capitalized
Property acquisition
Exploration 987 273 594
Development 2,122 -- 31
Exploration 770 2,665 2,491
Development 2,866 2,561 3,853
-------- -------- --------
6,745 5,499 6,969
-------- -------- --------
ALGERIA AND OVERSEAS -- Capitalized
Property acquisition
Exploration -- -- 125
Exploration 37,713 32,898 35,487
Development 88 -- --
-------- -------- --------
37,801 32,898 35,612
-------- -------- --------
TOTAL -- Capitalized
Property acquisition
Exploration 88,734 15,910 12,674
Development 18,127 27,806 206,008
Exploration 153,969 120,020 85,051
Development 135,800 82,683 38,776
-------- -------- --------
$396,630 $246,419 $342,509
-------- -------- --------
</TABLE>
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
The following schedule includes only the results of operations from the
production and sale of natural gas, crude oil, condensate and NGLs. Results of
operations 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.
55
<PAGE> 57
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
thousands 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
UNITED STATES
Net revenues from production
Gas sold to consolidated affiliates $253,667 $250,907 $199,820
Other sales of gas, oil and NGLs 204,698 212,696 155,007
-------- -------- --------
458,365 463,603 354,827
Production (lifting) costs 121,023 119,832 84,304
Depreciation, depletion and amortization* 161,308 154,450 122,961
-------- -------- --------
176,034 189,321 147,562
Income tax expense 61,983 66,928 51,832
-------- -------- --------
Results of operations 114,051 122,393 95,730
-------- -------- --------
*DD&A rate per net equivalent barrel $ 4.01 $ 4.26 $ 4.06
-------- -------- --------
CANADA
Net revenues from production
Other sales of gas, oil and NGLs 9,046 13,945 15,138
Production (lifting) costs 4,052 5,611 6,593
Depreciation, depletion and amortization* 2,763 6,110 4,664
-------- -------- --------
2,231 2,224 3,881
Income tax expense 556 580 1,438
-------- -------- --------
Results of operations 1,675 1,644 2,443
-------- -------- --------
*DD&A rate per net equivalent barrel $ 3.35 $ 4.92 $ 3.72
-------- -------- --------
TOTAL
Net revenues from production
Gas sold to consolidated affiliates 253,667 250,907 199,820
Other sales of gas, oil and NGLs 213,744 226,641 170,145
-------- -------- --------
467,411 477,548 369,965
Production (lifting) costs 125,075 125,443 90,897
Depreciation, depletion and amortization 164,071 160,560 127,625
-------- -------- --------
178,265 191,545 151,443
Income tax expense 62,539 67,508 53,270
-------- -------- --------
Results of operations $115,726 $124,037 $ 98,173
-------- -------- --------
</TABLE>
56
<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
natural gas, crude 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 reserves increased in 1994 due to exploration and development
drilling and improved recovery. During 1994, the Company added 44 MMBbls of oil
reserves, based on preliminary development studies and the contractual rights
granted under the Sonatrach agreement.
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 MMEEBs.
NGLs are included with oil and condensate reserves and the associated
shrinkage has been deducted from the gas reserves.
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.
57
<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 ALGERIA TOTAL U.S. CANADA ALGERIA TOTAL
----- ------ ----- ----- ------ ------- ----- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED RESERVES
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
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
Revisions of prior
estimates 134 -- 134 2.5 -- -- 2.5 24.9 -- -- 24.9
Extensions,
discoveries and
other additions 76 2 78 30.9 -- 44.0 74.9 43.5 0.4 44.0 87.9
Improved recovery 8 -- 8 14.8 -- -- 14.8 16.1 -- -- 16.1
Purchases in place 59 -- 59 4.4 0.4 -- 4.8 14.2 0.4 -- 14.6
Sales in place (26) (38) (64) (3.0) (3.4) -- (6.4) (7.2) (9.9) -- (17.1)
Production (173) (3) (176) (11.3) (0.4) -- (11.7) (40.2) (0.9) -- (41.1)
----- ------ ----- ----- ------ ------- ----- ----- ------ ------- -----
DECEMBER 31, 1994 1,914 -- 1,914 113.4 -- 44.0 157.4 432.4 -- 44.0 476.4
----- ------ ----- ----- ------ ------- ----- ----- ------ ------- -----
PROVED DEVELOPED
RESERVES
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
December 31, 1994 1,787 -- 1,787 74.2 -- -- 74.2 372.0 -- -- 372.0
</TABLE>
58
<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, 1994, the present value (discounted at ten percent) of
future net revenues from Anadarko's proved reserves, before income taxes, was
$2.01 billion (stated in accordance with the regulations of the Securities
Exchange Commission and the Financial Accounting Standards Board). The increase
of 11 percent compared to 1993 primarily is due to the additions of proved
reserves related to successful drilling in Algeria and offshore in the Gulf of
Mexico, offset partially by a decrease in natural gas prices.
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.
59
<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
<TABLE>
<CAPTION>
thousands 1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
UNITED STATES
Future cash inflows $ 4,672,527 $ 4,700,391 $ 4,640,825
Future production and development costs 1,534,223 1,529,616 1,402,240
----------- ----------- -----------
Future net cash flows before income taxes 3,138,304 3,170,775 3,238,585
10% annual discount for estimated timing of cash flows 1,385,442 1,402,505 1,475,520
----------- ----------- -----------
Discounted future net cash flows before income taxes 1,752,862 1,768,270 1,763,065
Future income taxes, net of 10% annual discount 518,408 544,440 490,295
----------- ----------- -----------
Standardized measure of discounted future net cash
flows relating to oil and gas reserves 1,234,454 1,223,830 1,272,770
----------- ----------- -----------
CANADA
Future cash inflows -- 102,175 112,304
Future production and development costs -- 28,466 39,959
----------- ----------- -----------
Future net cash flows before income taxes -- 73,709 72,345
10% annual discount for estimated timing of cash flows -- 29,760 30,545
----------- ----------- -----------
Discounted future net cash flows before income taxes -- 43,949 41,800
Future income taxes, net of 10% annual discount -- 13,883 12,867
----------- ----------- -----------
Standardized measure of discounted future net cash
flows relating to oil and gas reserves -- 30,066 28,933
----------- ----------- -----------
ALGERIA
Future cash inflows 834,900 -- --
Future production and development costs 323,100 -- --
----------- ----------- -----------
Future net cash flows before income taxes 511,800 -- --
10% annual discount for estimated timing of cash flows 252,352 -- --
----------- ----------- -----------
Discounted future net cash flows before income taxes 259,448 -- --
Future income taxes, net of 10% annual discount 101,725 -- --
----------- ----------- -----------
Standardized measure of discounted future net cash
flows relating to oil and gas reserves 157,723 -- --
----------- ----------- -----------
TOTAL
Future cash inflows 5,507,427 4,802,566 4,753,129
Future production and development costs 1,857,323 1,558,082 1,442,199
----------- ----------- -----------
Future net cash flows before income taxes 3,650,104 3,244,484 3,310,930
10% annual discount for estimated timing of cash flows 1,637,794 1,432,265 1,506,065
----------- ----------- -----------
Discounted future net cash flows before income taxes 2,012,310 1,812,219 1,804,865
Future income taxes, net of 10% annual discount 620,133 558,323 503,162
----------- ----------- -----------
Standardized measure of discounted future net cash
flows relating to oil and gas reserves $ 1,392,177 $ 1,253,896 $ 1,301,703
----------- ----------- -----------
</TABLE>
60
<PAGE> 62
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES
(UNAUDITED)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES
<TABLE>
<CAPTION>
thousands 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
UNITED STATES
Beginning of year $1,223,830 $1,272,770 $1,035,484
Sales and transfers of oil and gas produced, net of
production costs (337,342) (338,036) (266,049)
Net changes in prices and development and production costs (360,925) (185,382) 192,875
Extensions, discoveries, additions and improved recovery,
less related costs 226,670 285,640 71,544
Development costs incurred during the period 47,600 5,167 3,367
Revisions of previous quantity estimates 137,045 1,443 54,073
Purchases of minerals in place 24,938 25,001 196,471
Sales of minerals in place (38,649) (50) (398)
Accretion of discount 176,827 176,307 151,362
Net change in income taxes 26,032 (54,145) (12,159)
Other 108,428 35,115 (153,800)
---------- ---------- ----------
End of year 1,234,454 1,223,830 1,272,770
---------- ---------- ----------
CANADA
Beginning of year 30,066 28,933 28,453
Sales and transfers of oil and gas produced, net of
production costs (4,994) (8,334) (8,545)
Net changes in prices and development and production costs -- (4,378) 19,428
Extensions, discoveries, additions and improved recovery,
less related costs 986 7,308 2,578
Development costs incurred during the period -- 2 11
Revisions of previous quantity estimates -- 883 (15,554)
Purchases of minerals in place 3,948 -- 103
Sales of minerals in place (48,284) -- --
Accretion of discount 4,395 4,180 4,021
Net change in income taxes 13,883 (1,016) (1,108)
Other -- 2,488 (454)
---------- ---------- ----------
End of year -- 30,066 28,933
---------- ---------- ----------
ALGERIA
Beginning of year -- -- --
Extensions, discoveries, additions and improved recovery,
less related costs 259,448 -- --
Net change in income taxes (101,725) -- --
---------- ---------- ----------
End of year 157,723 -- --
---------- ---------- ----------
TOTAL
Beginning of year 1,253,896 1,301,703 1,063,937
Sales and transfers of oil and gas produced, net of
production costs (342,336) (346,370) (274,594)
Net changes in prices and development and production costs (360,925) (189,760) 212,303
Extensions, discoveries, additions and improved recovery,
less related costs 487,104 292,948 74,122
Development costs incurred during the period 47,600 5,169 3,378
Revisions of previous quantity estimates 137,045 2,326 38,519
Purchases of minerals in place 28,886 25,001 196,574
Sales of minerals in place (86,933) (50) (398)
Accretion of discount 181,222 180,487 155,383
Net change in income taxes (61,810) (55,161) (13,267)
Other 108,428 37,603 (154,254)
---------- ---------- ----------
End of year $1,392,177 $1,253,896 $1,301,703
---------- ---------- ----------
</TABLE>
61
<PAGE> 63
ANADARKO PETROLEUM CORPORATION
SUPPLEMENTAL QUARTERLY INFORMATION
(UNAUDITED)
QUARTERLY FINANCIAL DATA
The following table shows summary quarterly financial data for 1994 and
1993. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" under Item 7 of this Form 10-K.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
thousands except per share amounts QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Operating revenues $133,629 $121,062 $112,511 $115,274
Operating income, pretax 33,803 22,829 20,887 16,719
Net income $ 17,062 $ 11,683 $ 10,305 $ 2,049
Earnings per common share $ 0.29 $ 0.20 $ 0.18 $ 0.03
1993
Operating revenues $131,194 $113,925 $104,287 $132,594
Operating income, pretax 30,798 25,392 18,974 28,905
Net income (loss) before cumulative effect of
changes in accounting principles 15,278 12,370 (1,990) 14,347
Net income (loss) $ 92,681 $ 12,370 $ (1,990) $ 14,347
Earnings per common and common equivalent share
Net income (loss) before cumulative effect of
changes in accounting principles $ 0.28 $ 0.22 $ (0.03) $ 0.24
Net income (loss) $ 1.60 $ 0.22 $ (0.03) $ 0.24
</TABLE>
62
<PAGE> 64
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 20, 1995 ("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 "Compensation and Benefits Committee
Report on Executive Compensation" in the Proxy Statement, which are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Voting Securities and Principle Holders -- 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 "Voting Securities and Principle Holders -- Transactions with
Management and Others" in the Proxy Statement, which is incorporated herein by
reference.
63
<PAGE> 65
PART IV
ITEM 14. EXHIBITS 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 30.
(2) 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 Incorporation of 19(a)(i) to Form 10-Q 1-8968
Anadarko Petroleum Corporation, dated for quarter ended
August 28, 1986 September 30, 1986
(b) By-laws of Anadarko Petroleum 19(a)(ii) to Form 10-Q 1-8968
Corporation, as amended for quarter ended
September 30, 1986
4(a) Rights Agreement, dated as of October 4, 4 to Form 8-K dated 1-8968
1988, between Anadarko Petroleum October 5, 1988
Corporation and Manufacturers Hanover
Trust Company, Rights Agent
(b) Indenture, dated as of May 10, 1988, 4(a) to Form S-3 33-21094
between Anadarko Petroleum Corporation Registration Statement
and Continental Illinois National Bank
and Trust Company of Chicago, Trustee
(c) First Supplemental Indenture, dated as 4(d) to Form 10-K 1-8968
of November 15, 1991, between Anadarko for year ended
Petroleum Corporation and Continental December 31, 1991
Bank, National Association, Trustee
(d) Revolving Credit Agreement dated as of 4.1 to Form S-8 dated 1-8968
May 24, 1994 July 8, 1994
(e) 364-Day Credit Agreement dated as of May 4.2 to Form S-8 dated 1-8968
24, 1994 July 8, 1994
10(a) (i) Tax Sharing Agreement, dated September 19(c)(i) to Form 10-Q 1-8968
30, 1986, among Panhandle Eastern for quarter ended
Corporation, Centana Energy Corporation September 30, 1986
and Anadarko Petroleum Corporation
(ii) Spin-Off Agreement, dated September 30, 10(a)(iii) to Form 10-K 1-8968
1986, between Panhandle Eastern for year ended December
Corporation and Anadarko Petroleum 31, 1988
Corporation
(iii) Global Settlement Agreement between 28(a) to Form 10-Q 1-8968
Panhandle Eastern Corporation and for quarter ended
Anadarko Petroleum Corporation, dated March 31, 1989
March 31, 1989
(b) (i) Director Deferred Compensation Plan of 10(b)(viii) to Form 10-K 1-8968
Anadarko Petroleum Corporation, for year ended December
effective January 1, 1987 31, 1986
</TABLE>
64
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------- ---------------- ------
<S> <C> <C> <C>
10(b) (ii) Director Deferred Compensation Agreement 19(a)(i) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for quarter ended March
and each Director electing to 31, 1987
participate
(iii) Anadarko Petroleum Corporation Director 10(b)(ix) to Form 10-K 1-8968
Retirement Income Plan, effective for year ended December
October 1, 1986 31, 1986
(iv) Anadarko Petroleum Corporation 1988 19(b) to Form 10-Q 1-8968
Stock Option Plan for Non-Employee for quarter ended
Directors September 30, 1988
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
(v) Anadarko Petroleum Corporation and 19(c)(ix) to Form 10-Q 1-8968
Participating Affiliates and for quarter ended
Subsidiaries Annual Override Pool Bonus September 30, 1986
Plan, as amended October 6, 1986
(vi) Second Amendment to Anadarko Petroleum 10(b)(ii) to Form 10-K 1-8968
Corporation and Participating Affiliates for year ended December
and Subsidiaries Annual Override Pool 31, 1987
Bonus Plan
(vii) Anadarko Petroleum Corporation 1986 10(b)(vi) to Form 10-K 1-8968
Stock Option Plan, as amended October for year ended December
28, 1987 (and Related Agreement) 31, 1987
(viii) Restatement of the Anadarko Petroleum Post Effective Amendment 33-22134
Corporation 1987 Stock Option Plan (and No. 1 to Forms S-8 and
Related Agreement) S-3, Anadarko Petroleum
Corporation 1987 Stock
Option Plan
(ix) 1993 Stock Incentive Plan 10(b)(xii) to Form 10-K 1-8968
for year ended December
31, 1993
(x) Annual Incentive Bonus Plan 10(b)(xiii) to Form 10-K 1-8968
for year ended December
31, 1993
(xi) Agreement between Employee and Anadarko 28(c) to Form 10-Q 1-8968
Petroleum Corporation related to Change for quarter ended
in Control, Death or Disability, or September 30, 1987
Termination Without Cause
(xii) Anadarko Petroleum Corporation Key 19(c)(v) to Form 10-Q 1-8968
Employee Contract of Employment for quarter ended
September 30, 1986
(xiii) Restatement of Key Employee Contract of 19(a) to Form 10-Q 1-8968
Employment for quarter ended
June 30, 1988
(xiv) Restatement of Key Employee Contract of 19(a) to Form 10-Q 1-8968
Employment Amended October 27, 1988 for quarter ended
September 30, 1988
</TABLE>
65
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
- --------------- ---------------------------------------- ------------------------ --------
<S> <C> <C> <C> <C>
10(b) (xv) Executive Deferred Compensation Plan of 10(b)(xii) to Form 10-K 1-8968
Anadarko Petroleum Corporation and for year ended December
Participating Subsidiaries and 31, 1987
Affiliates, effective October 1, 1986
(xvi)
Executive Deferred Compensation Plan of 10(b)(vi) to Form 10-K 1-8968
Anadarko Petroleum Corporation, for year ended December
effective January 1, 1987 31, 1986
(xvii)
Executive Deferred Compensation 19(a)(ii) to Form 10-Q 1-8968
Agreement between Anadarko Petroleum for quarter ended March
Corporation and each Executive electing 31, 1987
to participate
(xviii)
Amendments to Executive Deferred 10(b)(xv) to Form 10-K 1-8968
Compensation Agreement between Anadarko for year ended December
Petroleum Corporation and each Executive 31, 1987
electing to participate
(xix)
Anadarko Petroleum Corporation Executive 19(b) to Form 10-Q 1-8968
Benefit Equalization Plan as Restated for quarter ended June
and Amended, effective January 1, 1988 30, 1988
10(c) (i) Purchase and Sale Agreement by and 10(c)(i) to Form 8-K 1-8968
between Atlantic Richfield Company, a dated January 13, 1994
Delaware Corporation, as Seller and
Anadarko Petroleum Corporation, 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
*13 Portions of the Anadarko Petroleum
Corporation 1994 Annual Report to
Stockholders
*21 List of Significant Subsidiaries:
Anadarko Algeria Corporation,
a Delaware Corporation
*23 Consents of Experts and Counsel
Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule
*99 Anadarko Petroleum Corporation Proxy
Statement, dated March 20, 1995
</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, 1994.
66
<PAGE> 68
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 7, 1995 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 7, 1995.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE
------------------ -----
<S> <C> <C>
(i) Principal executive officer:*
ROBERT J. ALLISON, JR. Chairman of the Board, President and
--------------------------------------------- Chief Executive Officer
(Robert J. Allison, Jr.)
(ii) Principal financial officer:*
MICHAEL E. ROSE Senior Vice President, Finance and Chief
--------------------------------------------- Financial Officer
(Michael E. Rose)
(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
</TABLE>
- ---------------
* Signed on behalf of each of these persons and on his own behalf:
By [MICHAEL E. ROSE]
-------------------------------------------------
(Michael E. Rose, Attorney-in-Fact)
67
<PAGE> 69
GRAPHICS APPENDIX LIST
<TABLE>
<CAPTION>
EDGAR VERSION TYPESET VERSION
- -------------------------- -----------------------------------------------------------------
<S> <C>
1994 Form 10-K, Part I,
Item 1 -- Business
Page 5 -- One map omitted Page 5 -- One map depicting Anadarko's interest in onshore
developed and undeveloped acres, producing wells, 1994 drilling
activity and office locations by state in the United States. (The
text and numbers used in this map appear in the text of the EDGAR
version.)
Page 9 -- One map omitted Page 9 -- One map depicting Anadarko's interest in offshore
United States exploratory and development acres and producing
wells by state, as well as location of producing, development,
exploration and 1994 lease acquisition blocks. (The text and
numbers used in this map appear in the text of the EDGAR
version).
</TABLE>
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------- ----------------- ------
<S> <C> <C> <C>
3(a) Restated Certificate of Incorporation of 19(a)(i) to Form 10-Q 1-8968
Anadarko Petroleum Corporation, dated for quarter ended
August 28, 1986 September 30, 1986
(b) By-laws of Anadarko Petroleum 19(a)(ii) to Form 10-Q 1-8968
Corporation, as amended for quarter ended
September 30, 1986
4(a) Rights Agreement, dated as of October 4, 4 to Form 8-K dated 1-8968
1988, between Anadarko Petroleum October 5, 1988
Corporation and Manufacturers Hanover
Trust Company, Rights Agent
(b) Indenture, dated as of May 10, 1988, 4(a) to Form S-3 33-21094
between Anadarko Petroleum Corporation Registration Statement
and Continental Illinois National Bank
and Trust Company of Chicago, Trustee
(c) First Supplemental Indenture, dated as 4(d) to Form 10-K 1-8968
of November 15, 1991, between Anadarko for year ended
Petroleum Corporation and Continental December 31, 1991
Bank, National Association, Trustee
(d) Revolving Credit Agreement dated as of 4.1 to Form S-8 dated 1-8968
May 24, 1994 July 8, 1994
(e) 364-Day Credit Agreement dated as of May 4.2 to Form S-8 dated 1-8968
24, 1994 July 8, 1994
10(a) (i) Tax Sharing Agreement, dated September 19(c)(i) to Form 10-Q 1-8968
30, 1986, among Panhandle Eastern for quarter ended
Corporation, Centana Energy Corporation September 30, 1986
and Anadarko Petroleum Corporation
(ii) Spin-Off Agreement, dated September 30, 10(a)(iii) to Form 10-K 1-8968
1986, between Panhandle Eastern for year ended December
Corporation and Anadarko Petroleum 31, 1988
Corporation
(iii) Global Settlement Agreement between 28(a) to Form 10-Q 1-8968
Panhandle Eastern Corporation and for quarter ended
Anadarko Petroleum Corporation, dated March 31, 1989
March 31, 1989
(b) (i) Director Deferred Compensation Plan of 10(b)(viii) to Form 10-K 1-8968
Anadarko Petroleum Corporation, for year ended December
effective January 1, 1987 31, 1986
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------- ---------------- ------
<S> <C> <C> <C>
10(b) (ii) Director Deferred Compensation Agreement 19(a)(i) to Form 10-Q 1-8968
between Anadarko Petroleum Corporation for quarter ended March
and each Director electing to 31, 1987
participate
(iii) Anadarko Petroleum Corporation Director 10(b)(ix) to Form 10-K 1-8968
Retirement Income Plan, effective for year ended December
October 1, 1986 31, 1986
(iv) Anadarko Petroleum Corporation 1988 19(b) to Form 10-Q 1-8968
Stock Option Plan for Non-Employee for quarter ended
Directors September 30, 1988
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
(v) Anadarko Petroleum Corporation and 19(c)(ix) to Form 10-Q 1-8968
Participating Affiliates and for quarter ended
Subsidiaries Annual Override Pool Bonus September 30, 1986
Plan, as amended October 6, 1986
(vi) Second Amendment to Anadarko Petroleum 10(b)(ii) to Form 10-K 1-8968
Corporation and Participating Affiliates for year ended December
and Subsidiaries Annual Override Pool 31, 1987
Bonus Plan
(vii) Anadarko Petroleum Corporation 1986 10(b)(vi) to Form 10-K 1-8968
Stock Option Plan, as amended October for year ended December
28, 1987 (and Related Agreement) 31, 1987
(viii) Restatement of the Anadarko Petroleum Post Effective Amendment 33-22134
Corporation 1987 Stock Option Plan (and No. 1 to Forms S-8 and
Related Agreement) S-3, Anadarko Petroleum
Corporation 1987 Stock
Option Plan
(ix) 1993 Stock Incentive Plan 10(b)(xii) to Form 10-K 1-8968
for year ended December
31, 1993
(x) Annual Incentive Bonus Plan 10(b)(xiii) to Form 10-K 1-8968
for year ended December
31, 1993
(xi) Agreement between Employee and Anadarko 28(c) to Form 10-Q 1-8968
Petroleum Corporation related to Change for quarter ended
in Control, Death or Disability, or September 30, 1987
Termination Without Cause
(xii) Anadarko Petroleum Corporation Key 19(c)(v) to Form 10-Q 1-8968
Employee Contract of Employment for quarter ended
September 30, 1986
(xiii) Restatement of Key Employee Contract of 19(a) to Form 10-Q 1-8968
Employment for quarter ended
June 30, 1988
(xiv) Restatement of Key Employee Contract of 19(a) to Form 10-Q 1-8968
Employment Amended October 27, 1988 for quarter ended
September 30, 1988
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT ORIGINALLY FILED FILE
NUMBER DESCRIPTION AS EXHIBIT NUMBER
------- ----------- ---------------- ------
<S> <C> <C> <C>
10(b) (xv) Executive Deferred Compensation Plan of 10(b)(xii) to Form 10-K 1-8968
Anadarko Petroleum Corporation and for year ended December
Participating Subsidiaries and 31, 1987
Affiliates, effective October 1, 1986
(xvi) Executive Deferred Compensation Plan of 10(b)(vi) to Form 10-K 1-8968
Anadarko Petroleum Corporation, for year ended December
effective January 1, 1987 31, 1986
(xvii) Executive Deferred Compensation 19(a)(ii) to Form 10-Q 1-8968
Agreement between Anadarko Petroleum for quarter ended March
Corporation and each Executive electing 31, 1987
to participate
(xviii) Amendments to Executive Deferred 10(b)(xv) to Form 10-K 1-8968
Compensation Agreement between Anadarko for year ended December
Petroleum Corporation and each Executive 31, 1987
electing to participate
(xix) Anadarko Petroleum Corporation Executive 19(b) to Form 10-Q 1-8968
Benefit Equalization Plan as Restated for quarter ended June
and Amended, effective January 1, 1988 30, 1988
10(c) (i) Purchase and Sale Agreement by and 10(c)(i) to Form 8-K 1-8968
between Atlantic Richfield Company, a dated January 13, 1994
Delaware Corporation, as Seller and
Anadarko Petroleum Corporation, 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
*13 Portions of the Anadarko Petroleum
Corporation 1994 Annual Report to
Stockholders
*21 List of Significant Subsidiaries:
Anadarko Algeria Corporation,
a Delaware Corporation
*23 Consents of Experts and Counsel
Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule
*99 Anadarko Petroleum Corporation Proxy
Statement, dated March 20, 1995
</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.
<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, 1994
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------
thousands 1994 1993 1992 1991 1990
------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Gross Income $96,361 $106,824 $68,311 $75,431 $119,363
Rentals 2,814 3,069 2,737 2,043 1,688
------- -------- ------- ------- --------
Earnings 99,175 109,893 71,048 77,474 121,051
------- -------- ------- ------- --------
Gross Interest Expense 41,635 38,000 36,620 36,829 42,903
Rentals 2,814 3,069 2,737 2,043 1,688
------- -------- ------- ------- --------
Fixed Charges $44,449 $ 41,069 $39,357 $38,872 $ 44,591
------- -------- ------- ------- --------
Ratio of Earnings to Fixed Charges 2.23 2.68 1.81 1.99 2.71
------- -------- ------- ------- --------
</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, 1994, 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
SUMMARY FINANCIAL DATA*
<TABLE>
<CAPTION>
% CHANGE
millions, except per share amounts 1994 93-94 1993 1992 1991 1990
- -------------------------------------------- ------ -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $482.5 -- $482.0 $379.7 $336.6 $388.5
Operating Income 94.2 (10) 104.1 67.6 73.0 118.6
Net Income before Cumulative Effect of
Changes in Accounting Principles 41.1 3 40.0 27.3 32.4 55.2
Net Income 41.1 (65) 117.4 27.3 32.4 55.2
Net Cash from Operating Activities 239.7 (13) 274.3 171.6 160.0 207.7
Per Common Share
Net Income before Cumulative Effect of
Changes in Accounting Principles 0.70 -- 0.70 0.49 0.59 1.04
Net Income 0.70 (66) 2.05 0.49 0.59 1.04
Dividends 0.30 -- 0.30 0.30 0.30 0.30
Average Shares Outstanding 58.8 3 57.2 55.3 55.0 53.0
------ -------- ------ ------ ------ ------
Capital Expenditures 423 60 264 360 166 211
------ -------- ------ ------ ------ ------
Long-term Debt 629 16 543 647 440 427
Stockholders' Equity 900 4 864 657 641 618
------ -------- ------ ------ ------ ------
Total Assets $2,142 6 $2,023 $1,905 $1,676 $1,648
------ -------- ------ ------ ------ ------
Oil Reserves (MMBbls) 157.4 101 78.5 80.3 45.8 32.6
Gas Reserves (Tcf) 1.91 2 1.88 1.73 1.74 1.70
Total Reserves (MMEEBs) 476.4 22 391.1 368.0 336.5 316.6
------ -------- ------ ------ ------ ------
U.S. Finding Cost ($/EEB) $ 3.57 1 $ 3.55 $ 4.61 $ 2.62 $ 5.29
Reserve Replacement
(% of Production) 308 90 162 200 166 100
</TABLE>
- ---------------
* Consolidated for Anadarko Petroleum Corporation (referred to herein as
Anadarko) and its principal subsidiaries, including Anadarko Gathering
Company, Anadarko Trading Company and Anadarko Algeria Corporation. See
Management's Discussion and Analysis.
EXPLORATION
Anadarko is an energy exploration company, with a portfolio of drilling
prospects carefully balanced as to potential risk and reward. For 13 consecutive
years, the Company has consistently increased reserves with an unyielding
commitment to pursue exploration in mature as well as frontier areas.
During 1994, Anadarko and partners made four crude oil discoveries -- one
in the Gulf of Mexico and three in Algeria's Sahara Desert -- in the early
stages of two long-term exploration programs that show great potential.
In Algeria, the Company is exploring for and developing hydrocarbons on an
exploration area covering more than five million acres. Drilling will continue
in 1995 and the Company is preparing a conceptual plan to develop the five large
oil discoveries.
In the Gulf of Mexico, Anadarko drilled four conventional exploratory wells
and two sub-salt exploratory wells in 1994. Anadarko is an industry leader in
the sub-salt play, searching for hydrocarbons beneath large salt layers. The
Company plans to drill four sub-salt wildcats in 1995 and continue investing in
advanced seismic imaging techniques which are essential to this exploration
effort.
<PAGE> 2
Drilling activities continue in southwest Kansas where new oil and gas
reserves continue to be found beneath shallow pay zones of the Hugoton Field.
The Company is also actively exploring for oil and gas along the Gulf Coast.
In 1995, the Company plans to invest $78 million in exploration activities
compared to $196 million spent in 1994. The 1994 exploration investment program
included $72 million spent in March when the Company acquired 26 lease blocks
offshore Louisiana. All but two blocks are related to sub-salt exploration.
DEVELOPMENT
Anadarko's development operations convert successful exploration
discoveries into commercial producing fields. Efficient exploitation of the
Company's oil and gas fields helps achieve maximum value for the Company's oil
and gas reserves.
Anadarko installed two offshore production platforms in the Gulf of Mexico
in 1994 at the site of the recent exploration discoveries. One platform was
installed at High Island Block A-376 in 341 feet of water less than two years
after discovery. Initial production from the platform was 1,700 barrels of oil
per day (BOPD) and 2.8 million cubic feet per day (MMcf/d) of gas. Production
from the platform has been suspended, pending final regulatory approval. The
second production platform was installed at East Cameron Block 157, only 10
months after discovery. Initial production from this new Field is expected in
1995 and further development drilling is planned.
Drilling continued at the Mahogany Field on Ship Shoal Blocks 349/359, the
Company's first sub-salt discovery announced in September 1993. In August 1994,
a delineation well found additional reservoir sand and tested over 4,000 BOPD
and 5 MMcf/d of gas. A second delineation well was drilling at the time this
report was released for printing. A production platform is currently being
designed for the Field.
In the Hugoton Field of Kansas, Anadarko drilled 44 infill wells, for a
total of 325 infill wells since the program began in 1987. Because of this
aggressive drilling program, the Company was able to capitalize on revised Field
rules in 1994 and increase gas production from the Field by about 18 percent.
The Company drilled or re-completed 17 wells on properties acquired in July
1993 from another operator in southwest Kansas. As a result, oil and gas
production from the acquired properties has tripled since Anadarko began
operations.
In the Permian Basin of West Texas, Anadarko continued to develop existing
oil fields to enhance production through secondary recovery (waterflood)
techniques. Activity focused on properties acquired over the past three years.
In 1994, the Company drilled 75 wells in the area and acquired additional
working interests in two major fields.
In 1994, Anadarko drilled 44 development wells in central Oklahoma's Golden
Trend and oil and gas production from the Field increased sharply. Net gas
production increased 64 percent to 23 MMcf/d and oil production increased 87
percent to 700 BOPD.
In 1995, the Company plans to invest $121 million in development activities
compared to $129 million in 1994. Spending will again focus on major onshore
domestic producing basins, as well as development of recent exploration
discoveries in the U.S. and Algeria.
ACQUISITIONS
Anadarko's strategy is to strengthen operations in its main producing areas
through a highly-selective program of property acquisitions. When it's
advantageous, the Company also sells non-strategic properties and reinvests the
proceeds in core areas of operation.
In 1994, the Company acquired through purchases and trades 14.6 million
energy equivalent barrels (MMEEBs) of reserves for about $18.1 million and plans
to invest another $8 million over the next few years to further develop these
reserves. Anadarko also sold 17.1 MMEEBs in non-strategic areas for $109
million. The largest transaction involved selling the Company's Canadian
subsidiary for $58 million.
In October 1994, Anadarko signed agreements to acquire two natural gas
gathering systems in southwest Kansas from an interstate pipeline company. These
acquisitions complement the Company's marketing strategies and should increase
gas gathering system capability from 155 MMcf/d of gas to 480 MMcf/d of gas.
<PAGE> 3
MARKETING
Over the past three years, Anadarko has adopted a number of marketing
strategies in response to rapidly changing conditions in energy markets.
However, the Company's commitment to long-term customers -- matching supply
assurance with a full array of services and competitive pricing -- remains
unchanged.
A number of tools are used to manage price volatility and uncertainty in
today's gas markets, including: increased sales of third-party gas; price
hedging strategies; the increased use of storage; and, improved capabilities to
trade large volumes of gas on a daily basis. These strategies have helped the
Company increase sales volumes, capture more market share and improve earnings
over the past few years.
Recent oil discoveries in Algeria and the Gulf of Mexico will make crude
oil marketing more critical as new fields are brought on-line.
STOCKHOLDERS' INFORMATION
The common stock of Anadarko Petroleum Corporation is traded on the New
York Stock Exchange. Average daily trading volume was 326,000 shares in 1994,
283,000 shares in 1993 and 205,000 shares in 1992.
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 1994 and 1993.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
MARKET PRICE
High $49.88 $58.00 $56.88 $49.38
Low $42.50 $46.00 $43.75 $37.38
DIVIDENDS $0.075 $0.075 $0.075 $0.075
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
</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 report dated January 26,
1995, relating to the consolidated balance sheets of Anadarko Petroleum
Corporation and subsidiaries as of December 31, 1994 and 1993, 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, 1994, which report
appears in the December 31, 1994 annual report on Form 10-K of Anadarko
Petroleum Corporation. Such report on the consolidated financial statements
refers to changes in the Company's method of accounting for income taxes and
postretirement benefits other than pensions.
(a) Post-Effective Amendment No. 1 of Forms S-8 and S-3, Anadarko Petroleum
Corporation 1986 Stock Option Plan (No. 33-8496).
(b) Post-Effective Amendment No. 2 to Forms S-8 and S-3, Anadarko Employee
Savings Plan (No. 33-8643).
(c) Post-Effective Amendment No. 1 to Forms S-8 and S-3, Anadarko Petroleum
Corporation 1987 Stock Option Plan (No. 33-22134).
(d) Forms S-8 and S-3, Anadarko Petroleum Corporation 1988 Stock Option
Plan for Non-Employee Directors (No. 33-30384).
(e) Amendment No. 1 to Form S-3, Anadarko Petroleum Corporation Shelf
Registration Statement for $300 million of Equity or Debt Securities
(No. 33-50717).
(f) Form S-8, Anadarko Petroleum Corporation 1993 Stock Incentive Plan (No.
33-54485).
[KPMG PEAT MARWICK LLP]
Houston, Texas
March 7, 1995
<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 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
27th day of February 1995.
[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
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000773910
<NAME> ANADARKO PETROLEUM CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,530
<SECURITIES> 0
<RECEIVABLES> 115,181
<ALLOWANCES> 0
<INVENTORY> 13,420
<CURRENT-ASSETS> 138,627
<PP&E> 3,446,252
<DEPRECIATION> 1,460,196
<TOTAL-ASSETS> 2,142,101
<CURRENT-LIABILITIES> 128,151
<BONDS> 629,281
<COMMON> 5,931
0
0
<OTHER-SE> 893,668
<TOTAL-LIABILITY-AND-EQUITY> 2,142,101
<SALES> 482,476
<TOTAL-REVENUES> 482,476
<CGS> 324,000
<TOTAL-COSTS> 324,000
<OTHER-EXPENSES> 3,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,128
<INCOME-PRETAX> 64,666
<INCOME-TAX> 23,567
<INCOME-CONTINUING> 41,099
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