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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
Commission File No. 1-8968
ANADARKO PETROLEUM CORPORATION
17001 Northchase Drive, Houston, Texas 77060-2141
(281) 875-1101
Incorporated in the Employer Identification
State of Delaware No. 76-0146568
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days. Yes X No _____
The number of shares outstanding of each of the registrant's
classes of common stock as of July 31, 1998 is shown below:
Number of Shares
Title of Class Outstanding
Common Stock, $0.10 par value per share 120,082,837
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
thousands except June 30 June 30
per share amounts 1998 1997 1998 1997
Revenues
Gas sales $ 87,671 $ 83,147 $181,190 $190,198
Oil and condensate sales 31,581 39,926 62,979 82,521
Natural gas liquids and other 18,274 15,929 40,358 37,628
Total 137,526 139,002 284,527 310,347
Cost and Expenses
Operating expenses 38,649 33,456 78,906 66,311
Administrative and general 21,722 17,152 42,964 34,187
Depreciation, depletion and
amortization 48,387 47,922 99,724 93,261
Other taxes 8,486 10,701 19,316 23,614
Total 117,244 109,231 240,910 217,373
Operating Income 20,282 29,771 43,617 92,974
Interest Expense 13,778 7,967 26,136 17,205
Income before Income Taxes 6,504 21,804 17,481 75,769
Income Taxes 2,163 8,030 6,125 27,561
Net Income $ 4,341 $ 13,774 $ 11,356 $ 48,208
Preferred Stock Dividends 1,638 --- 1,638 ---
Net Income Applicable to
Common Stockholders $ 2,703 $ 13,774 $ 9,718 $ 48,208
Per Common Share
Net income - basic $ 0.02 $ 0.12 $ 0.08 $ 0.40
Net income - diluted $ 0.02 $ 0.11 $ 0.08 $ 0.40
Dividends $ 0.05 $ 0.0375 $ 0.0875 $ 0.075
Average Number of Common
Shares Outstanding 120,049 119,280 119,942 119,252
See accompanying notes to consolidated financial statements.
2
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, December 31,
thousands 1998 1997
ASSETS
Current Assets
Cash and cash equivalents $ 29,679 $ 8,907
Accounts receivable 153,417 177,157
Inventories, at average cost 29,863 28,564
Prepaid expenses 3,387 4,366
Total 216,346 218,994
Properties and Equipment
Original cost 5,121,345 4,669,251
Less accumulated depreciation, depletion
and amortization 2,003,798 1,914,472
Net properties and equipment - based on
the full cost method of accounting
for oil and gas properties 3,117,547 2,754,779
Deferred Charges 26,490 18,692
$3,360,383 $2,992,465
See accompanying notes to consolidated financial statements.
3
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET (continued)
(Unaudited)
June 30, December 31,
thousands 1998 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
Trade and other $ 168,906 $ 202,822
Banks 23,633 22,102
Accrued expenses
Interest 14,308 13,607
Taxes and other 17,284 13,799
Total 224,131 252,330
Long-term Debt 1,139,426 955,733
Deferred Credits
Deferred income taxes 551,200 546,792
Other 124,929 120,830
Total 676,129 667,622
Stockholders' Equity
Preferred stock, par value $1.00
(2,000,000 shares authorized, 200,000
and no shares issued as of June 30, 1998
and December 31, 1997, respectively) 200,000 ---
Common stock, par value $0.10
(200,000,000 shares authorized,
122,069,722 and 121,771,988 shares issued
as of June 30, 1998 and December 31,
1997, respectively) 12,207 6,134
Paid-in capital 357,078 353,125
Retained earnings (as of June 30, 1998,
$670,697,000 was not restricted as to
the payment of dividends) 827,981 828,787
Deferred compensation (9,443) (11,203)
Executives and Directors Benefit Trust,
at market value (2,000,000 shares as of
June 30, 1998 and December 31, 1997) (67,125) (60,063)
Treasury stock (9 shares as of
June 30, 1998) (1) ---
Total 1,320,697 1,116,780
$3,360,383 $2,992,465
See accompanying notes to consolidated financial statements.
4
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
thousands 1998 1997
Cash Flow from Operating Activities
Net income $ 11,356 $ 48,208
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation, depletion and amortization 99,724 93,261
Amortization of restricted stock 574 953
Deferred U.S. income taxes 5,918 18,456
117,572 160,878
Decrease in accounts receivable 23,740 80,025
Increase in inventories (1,299) (3,560)
Decrease in accounts payable - trade and
other and accrued expenses (29,730) (72,256)
Other items - net (3,095) 18
Net cash provided by operating activities 107,188 165,105
Cash Flow from Investing Activities
Additions to properties and equipment (467,745) (309,265)
Proceeds from the sale of assets to be
leased, net --- 87,900
Sales and retirements of properties
and equipment 5,253 2,843
Net cash used in investing activities (462,492) (218,522)
Cash Flow from Financing Activities
Additions to debt 283,693 72,000
Retirements of debt (100,000) (11,076)
Issuance of preferred stock 195,809 ---
Increase (decrease) in accounts payable,
banks 1,531 (3,216)
Dividends paid (12,162) (8,954)
Issuance of common stock 7,206 6,344
Purchase of treasury stock (1) (140)
Net cash provided by financing activities 376,076 54,958
Net Increase in Cash and Cash Equivalents 20,772 1,541
Cash and Cash Equivalents at Beginning
of Period 8,907 14,601
Cash and Cash Equivalents at End of Period $ 29,679 $ 16,142
See accompanying notes to consolidated financial statements.
5
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Algeria Corporation (Anadarko Algeria), Anadarko Energy
Services Company and Anadarko Gathering Company. Certain amounts have
been restated to conform to the current presentation.
2.Inventories Materials and supplies and natural gas inventory are
stated at the lower of average cost or market. Natural gas, when sold
from inventory, is charged to expense using the average-cost method.
Oil inventory is stated at market value. The major classes of
inventories are as follows:
June 30, December 31,
thousands 1998 1997
Materials and supplies $24,818 $27,332
Natural gas 3,702 1,232
Oil 1,343 ---
$29,863 $28,564
3.Properties and Equipment Oil and gas properties include costs of
$410,018,000 and $343,789,000 at June 30, 1998 and December 31, 1997,
respectively, which were excluded from capitalized costs being
amortized. These amounts represent costs associated with unevaluated
properties and major development projects.
4.Long-term Debt A summary of long-term debt follows:
June 30, December 31,
thousands 1998 1997
Commercial Paper $ 228,426 $125,733
Notes Payable, Banks 111,000 30,000
8 3/4% Notes due 1998 --- 100,000
8 1/4% Notes due 2001 100,000 100,000
6 3/4% Notes due 2003 100,000 100,000
5 7/8% Notes due 2003 100,000 100,000
7 1/4% Debentures due 2025 100,000 100,000
7% Debentures due 2027 100,000 100,000
6.625% Debentures due 2028 100,000 ---
7.73% Debentures due 2096 100,000 100,000
7 1/4% Debentures due 2096 100,000 100,000
$1,139,426 $955,733
6
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Long-term Debt (continued)
The commercial paper and notes payable to banks have been classified
as long-term debt in accordance with Statement of Financial Accounting
Standards No. 6, "Classification of Short-term Obligations Expected to
be Refinanced", under the terms of Anadarko's Bank Credit Agreements.
In January 1998, Anadarko issued $100,000,000 principal amount of
6.625% Debentures due 2028. The proceeds were used to fund capital
spending projects in core operating areas.
In March 1998, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$500,000,000 in debt and equity securities. Net proceeds, terms and
pricing of offerings of securities issued under the shelf registration
statement will be determined at the time of the offerings. In May
1998, $200,000,000 in preferred stock was issued under the shelf
registration statement. (See Note 5).
In April 1998, the Company's Revolving Credit and 364-Day Credit
Agreements were amended. The Revolving Credit Agreement was amended
to increase the number of commercial banks in the group from eight to
nine. The 364-Day Credit Agreement was amended as follows: the
principal amount of the Agreement was increased from $125,000,000 to
$175,000,000; the number of commercial banks in the group was changed
from eight to nine; and the expiration date of the Agreement was
extended for 10 months.
5. Preferred Stock On May 7, 1998, Anadarko issued $200,000,000 of
5.46% Series B Cumulative Preferred Stock in the form of two million
depositary shares, each depositary share representing 1/10th of a
share of the 5.46% Series B Cumulative Preferred Stock. The Preferred
Stock has no stated maturity and is not subject to a sinking fund or
mandatory redemption. The shares are not convertible into other
securities of the Company.
7
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Preferred Stock (continued)
Anadarko has the option to redeem the shares at $100 per depositary
share on or after May 15, 2008. Holders of the shares are entitled to
receive, when, and as declared by the Board of Directors, cumulative
cash dividends at an annual dividend rate of $5.46 per depositary
share. The proceeds from the offering were used to reduce commercial
paper and bank borrowings and provide capital for Anadarko's 1998
capital expenditures. The Preferred Stock was issued under the
Company's shelf registration statement.
6. Common Stock On April 30, 1998, the Board of Directors approved
a two-for-one stock split, to be effected in the form of a stock
dividend. The distribution date was July 1, 1998 to stockholders of
record on June 15, 1998. All share and per share information has been
restated to reflect the stock split.
For the second quarter of 1998, dividends of $0.05 per share were paid
to holders of common stock. Under the most restrictive provisions of
the Company's credit agreements, which limit the payment of dividends,
retained earnings of $670,697,000 and $466,780,000 were not restricted
as to the payment of dividends at June 30, 1998 and December 31, 1997,
respectively.
The Company's basic earnings per share amounts have been computed based
on the average number of common shares outstanding. Diluted earnings
per share amounts include the effect of the Company's outstanding stock
options under the treasury stock method.
8
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
6. Common Stock (continued)
The following tables illustrate the reconciliation of the numerators
and denominators of the basic and diluted earnings per common share
computations for income related to the unexercised stock options
outstanding for the three and six months ended June 30, 1998 and 1997,
respectively.
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
thousands except Per Share Per Share
per share amounts Income Shares Amount Income Shares Amount
Basic earnings per
share
Income available to
common stockholders $2,703 120,049 $0.02 $13,774 119,280 $0.12
Stock options --- 945 --- 771
Diluted earnings per
share
Income available to
common stockholders
and assumed
conversion $2,703 120,994 $0.02 $13,774 120,051 $0.11
Six Months Ended Six Months Ended
June 30, 1998 June 30, 1997
thousands except Per Share Per Share
per share amounts Income Shares Amount Income Shares Amount
Basic earnings per
share
Income available to
common stockholders $9,718 119,942 $0.08 $48,208 119,252 $0.40
Stock options --- 821 --- 827
Diluted earnings per
share
Income available to
common stockholders
and assumed
conversion $9,718 120,763 $0.08 $48,208 120,079 $0.40
7. Statement of Cash Flows Supplemental Information The amounts
of cash paid (received) for interest (net of amounts capitalized)
and income taxes are as follows:
Six Months Ended
June 30
thousands 1998 1997
Interest $26,215 $17,423
Income taxes $(6,516) $10,903
9
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
8. Operating Expenses Operating expenses by category are as
follows:
Three Months Ended Six Months Ended
June 30 June 30
thousands 1998 1997 1998 1997
Oil and gas $21,781 $20,398 $42,720 $38,416
Plant, gathering and
marketing 16,868 13,058 36,186 27,895
$38,649 $33,456 $78,906 $66,311
9. Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978 (NGPA)
allowed a "severance, production or similar" tax to be included as an
add-on, over and above the maximum lawful price for natural gas.
Based on the Federal Energy Regulatory Commission (FERC) ruling that
the Kansas ad valorem tax was such a tax, the Company collected the
Kansas ad valorem tax in addition to the otherwise maximum lawful price.
Background of Present Litigation FERC's ruling regarding the
ability of producers to collect the Kansas ad valorem tax in addition
to applicable maximum lawful prices was appealed to the United States
Court of Appeals for the District of Columbia Circuit (D.C. Circuit),
which held in June 1988 that FERC failed to provide a reasoned basis
for its findings and remanded the case to FERC for further
consideration.
On December 1, 1993, FERC issued an order reversing its prior ruling,
but limiting the effect of its decision to Kansas ad valorem taxes for
sales made on or after June 28, 1988. FERC clarified the effective
date of its decision by an order dated May 19, 1994. The clarification
provided that the June 28, 1988 effective date applies to tax bills
rendered after that date, not sales made on or after that date. Based
on Anadarko's interpretation of FERC's orders, $700,000 (pre-tax) was
charged against income in 1994, in addition to $130,000 (pre-tax)
charged against income in 1993.
Numerous parties filed appeals of FERC's action in the D.C. Circuit.
Anadarko, together with other natural gas producers, challenging the
FERC's orders on two grounds: (1) that the Kansas ad valorem tax,
properly understood, did qualify for reimbursement under the NGPA;
and, (2) FERC's ruling should, in any event, have been applied
prospectively. Other parties separately challenged FERC's orders on
the grounds that FERC's ruling should have been applied retroactively
to December 1, 1978, the date of the enactment of the NGPA and
producers should have been required to pay refunds accordingly.
10
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
9. Kansas Ad Valorem Tax (continued)
The D.C. Circuit issued its decision on August 2, 1996 which held that
producers must make refunds of all Kansas ad valorem taxes collected
with respect to production since October 1983. Petitions for rehearing
were denied November 6, 1996. The Company, along with other producing
companies, subsequently filed a petition for writ of certiorari with
the United States Supreme Court seeking to limit the scope of the
potential refunds to tax bills rendered on or after June 28, 1988 (the
effective date originally selected by FERC). Williams Natural Gas
Company filed a cross-petition for certiorari seeking to impose refund
liability back to December 1, 1978. Both petitions were denied on May
12, 1997.
Anadarko estimates that the maximum amount of principal and interest
at issue which has not been paid to date and assuming that the October
1983 effective date remains in effect, is about $40,900,000 (pre-tax)
as of June 30, 1998.
FERC Proceedings The Company, along with other producing companies,
filed a petition for adjustment with FERC on May 12, 1997. In so
doing, the Company sought waiver of all interest which might otherwise
be due. The total interest at issue is about $26,400,000 (pre-tax) as
of June 30, 1998. On September 10, 1997, FERC denied the petition for
adjustment. FERC also established initial refund procedures. In so
doing, FERC held that refunds were due for all tax bills rendered after
October 4, 1983, rather than for production attributable to the period
after October 4, 1983. (The estimate set forth above is based on FERC's
interpretation of the starting date for refunds. This issue is
presently pending on appeal, however). On January 28, 1998, FERC denied
rehearing, but granted first sellers the right to escrow funds in
dispute by a separate order (the "Order Clarifying Procedures"). By
order dated February 26, 1998, in response to producers' requests and
Anadarko's particular request based on the litigation with PanEnergy
referenced below, FERC granted first sellers the right to secure a
surety bond instead of placing cash in escrow. Requests for rehearing
of this order are pending before FERC.
The Company and other producers filed petitions for review of FERC's
January 28, 1998 order denying adjustment relief with the United States
Court of Appeals for the Fifth Circuit (Fifth Circuit). The State of
Kansas and the Kansas Corporation Commission (KCC), as well as another
producer of natural gas, filed appeals of the same orders in the United
States Court of Appeals for the Tenth Circuit.
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
9. Kansas Ad Valorem Tax (continued)
The Public Service Company of Colorado and an affiliate filed a motion
in the Fifth Circuit to dismiss the pending appeals or to transfer them
to the D.C. Circuit. On April 27, 1998, the Fifth Circuit denied the
motion to dismiss but granted the motion to transfer the appeals to the
D.C. Circuit.
Several parties, including Anadarko, sought rehearing or clarification
of the Order Clarifying Procedures issued by FERC on January 28, 1998.
In that rehearing request, the Company outlined in detail its
interpretation of the scope of the phrase "amounts in dispute" as
encompassing legal disputes. At least one adverse party has requested
that FERC change its order to permit only so-called "computational"
disputes, rather than legal disputes, to be eligible for escrow.
On March 4, 1998, FERC granted rehearing of its Order Clarifying
Procedures dated January 28, 1998, solely for purposes of further
consideration. No substantive guidance was offered to the parties in
the March 4, 1998 order granting rehearing. On June 3, 1998, FERC
denied the relief sought in the motion for rehearing. FERC held that
it was permissible for producers to adjust pipeline statements of
refunds due to reflect refund amounts attributable to other working
interest owners, amounts associated with uncollectible royalty
interest, and amounts associated with sales made below applicable FERC
set maximum lawful prices. Adjustments associated with the disputed
starting date for refunds, refunds associated with payments made to
pipeline purchasers who did not pass through such charges to their
customers, related interest payment adjustments and amounts associated
with the so-called "gross up" or tax on tax feature of the Kansas tax
were deemed "impermissible." In addition, claims for a generic waiver
of interest on refunds due were denied. Additional pipeline specific
refund procedures were established for all affected pipelines,
including Panhandle. Requests for rehearing of this order have been
denied. An appeal has been filed. Requests for rehearing of related
orders may be filed.
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
9. Kansas Ad Valorem Tax (continued)
If FERC should change or clarify its policy regarding the availability
or scope of a first sellers' right to bond or escrow disputed amounts,
either on its own motion or in response to pending requests from
adverse parties, or if FERC should reject the Company's legal defenses,
the Company could be required to pay all or part of the amounts claimed
by all pipelines (which might include PanEnergy) pending further
potential review by FERC or courts. However, a FERC order issued
February 26, 1998 involving refunds paid by another producer to
Northern Natural Gas Company indicates that, if a producer prevails in
subsequent legal challenges, the producer may recoup amounts paid
directly from the pipeline itself, even if the pipeline already
distributed refunds to the pipeline's customers. Requests for
rehearing of this order are pending.
The Company intends to comply fully with all lawful orders issued by
FERC, without waiver of any claim of right or any defense or the right
to seek judicial review or intervention.
FERC's September 10, 1997 and January 28, 1998 orders permit affected
first sellers to file individual petitions for adjustment. The Company
may pursue an individual petition for adjustment and has reserved all
rights to contest specific Statements of Refunds submitted by pipeline
purchasers. Offers of settlement and demands for a hearing have been
filed by producers, including Anadarko. The offer of settlement filed
by Anadarko with respect to PanEnergy is subject to the litigation
discussed below such that if a settlement amount is agreed to, the
litigation will determine whether PanEnergy or Anadarko issues the
agreed refund amount. On March 3, 1998, FERC issued notices regarding
those settlement offers and requested comment by all interested
persons.
On March 9, 1998 and March 10, 1998, the Company filed several
compliance filings with FERC paying undisputed amounts billed by
pipelines and bonding amounts in dispute. The entire refund claim by
Panhandle Eastern Pipe Line Company, a PanEnergy affiliate, was
disputed, and the Company posted a surety bond for the amount in
controversy of $25,125,000.
13
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
9. Kansas Ad Valorem Tax (continued)
PanEnergy Litigation On May 13, 1997, the Company filed a lawsuit
in the Federal District Court for the Southern District of Texas
against PanEnergy seeking declaration that pursuant to prior agreements
Anadarko is not required to issue refunds to PanEnergy for the
principal amount of $14,000,000 (pre-tax) and, if the petition for
adjustment is denied in its entirety by FERC with respect to PanEnergy
refunds, interest in an amount of $25,400,000 (pre-tax) as of June 30,
1998. The Company also seeks from PanEnergy the return of $816,000 of
the $830,000 (pre-tax) charged against income in 1993 and 1994. In
response to a motion filed by PanEnergy, the United States District
Court issued an order on March 19, 1998 staying the litigation, pending
the exercise by FERC of its regulatory jurisdiction. On May 4, 1998,
the Company filed a complaint against PanEnergy at FERC, requesting
that FERC either refer the proceeding back to the federal court or
resolve the matters in dispute. PanEnergy has submitted an answer in
opposition. The matter is still pending before FERC.
KCC Proceeding On April 30, 1998, the Company's subsidiary,
Anadarko Gathering Company (AGC) filed a petition with the KCC to
clarify AGC's rights and obligations, if any, related to the payment
by first sellers, including the Company, of Kansas ad valorem tax
refunds. The refunds at issue relate to sales made by Centana Energy
Corporation, a PanEnergy affiliate, through facilities known as the
Cimmaron River System during the time period from 1983 to 1988.
AGC purchased the Cimmaron River System from Centana in 1995. The
petition, among other things, asks the KCC to determine whether AGC
or Centana is responsible for the payment or distribution of refunds
received from first sellers to Centana's former customers and requests
guidance concerning the disposition of refunds received that are
attributable to sales made to Centana customers that did not reimburse
Centana for Kansas ad valorem taxes during the relevant time periods.
Anadarko's net income for 1997 included a $1,800,000 charge (before
income taxes) related to the Kansas ad valorem tax refunds. This charge
reflects all principal and interest which may be due at the conclusion
of all regulatory proceedings and litigation to parties other than
PanEnergy. The Company is unable at this time to predict the final
outcome of this matter and no provision for liability (excluding the
amounts recorded in 1993, 1994 and 1997) has been made in the
accompanying financial statements.
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Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
10. The information, as furnished, reflects all normal recurring
adjustments that are, in the opinion of management, necessary to a
fair statement of financial position as of June 30, 1998 and
December 31, 1997, the results of operations for the three and six
months ended June 30, 1998 and 1997, and cash flows for the six
months ended June 30, 1998 and 1997.
15
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company has made in this report, forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 concerning the Company's
operations, economic performance and financial condition. These forward
looking statements include information concerning future production and
reserves, contributions from Algerian properties, and those statements
preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends", "estimates",
"projects", "target", "goal", "plans", "objective", "should" or similar
expressions or variations on such expressions. For such statements, the
Company claims the protection of the safe harbor for forward looking
statements contained in the Private Securities Litigation Reform Act of
1995. Such statements are subject to various risks and uncertainties,
and actual results could differ materially from those expressed or
implied by such statements due to a number of factors in addition to
those discussed elsewhere in this Form 10-Q and in the Company's other
public filings, press releases and discussions with Company management.
See Additional Factors Affecting Business in the Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's 1997 Annual Report on Form 10-K.
Overview of Operating Results
For the second quarter of 1998, Anadarko's net income applicable to
common stockholders was $2.7 million (two cents per share). Revenues
for the second quarter of 1998 were $137.5 million. By comparison, net
income for the second quarter of 1997 was $13.8 million (12 cents per
share) on revenues of $139.0 million. The decrease in net income and
revenues is due to significantly lower oil prices and lower natural
gas volumes during the 1998 second quarter, partially offset by higher
oil production volumes. Net income for the second quarter of 1998 also
reflects slightly higher costs and expenses, higher interest expense
and preferred stock dividends.
For the first half of 1998, Anadarko's net income applicable to
common stockholders was $9.7 million (eight cents per share).
Revenues for the first six months of 1998 were $284.5 million. By
comparison, net income for the first half of 1997 was $48.2 million
(40 cents per share) on revenues of $310.3 million. The decrease in
net income and revenues reflects significantly lower commodity prices
for oil, gas and natural gas liquids (NGLs), partially offset by
higher production volumes. Net income also reflects higher costs and
expenses, higher interest expense and preferred stock dividends during
the first half of 1998.
16
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The following table shows the Company's volumes and average prices for
the three and six months ended June 30, 1998 and 1997:
Three Months Ended
June 30 % Increase
1998 1997 (Decrease)
Natural gas, Bcf 42.2 43.8 (4)
Average daily volumes, MMcf/d 463 481 (4)
Price per Mcf $1.98 $1.85 7
Crude oil and condensate, MBbls 2,680 2,249 19
Average daily volumes, MBOD 29 25 19
Price per barrel $11.54 $17.48 (34)
Natural gas liquids, MBbls 1,569 1,032 52
Average daily volumes, MBOD 17 11 52
Price per barrel $10.90 $13.45 (19)
Six Months Ended
June 30 % Increase
1998 1997 (Decrease)
Natural gas, Bcf 86.2 86.1 -
Average daily volumes, MMcf/d 476 476 -
Price per Mcf $2.00 $2.24 (11)
Crude oil and condensate, MBbls 4,932 4,251 16
Average daily volumes, MBOD 28 23 16
Price per barrel $12.21 $18.94 (36)
Natural gas liquids, MBbls 3,273 2,263 45
Average daily volumes, MBOD 18 13 45
Price per barrel $11.31 $14.65 (23)
__________________
See "Natural Gas Volumes and Prices" and "Crude Oil, Condensate
and Natural Gas Liquids Volumes and Prices".
Costs and expenses during the second quarter of 1998 were $117.2
million, an increase of seven percent compared to $109.2 million for
the second quarter of 1997. The increase is primarily due to higher
operating expenses related to revised NGLs contracts that provide for
processing through third-parties and higher administrative and general
expenses associated with the Company's growing workforce, offset
slightly by lower other taxes.
17
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
For the first six months of 1998, costs and expenses totaled $240.9
million, an increase of 11 percent compared to $217.4 million for the
first six months of 1997. The increase is primarily due to higher
operating expenses related to revised NGLs contracts that provide for
processing through third-parties, higher administrative and general
expense associated with the Company's growing workforce and higher
depreciation, depletion and amortization (DD&A) expense related to the
increase in production volumes.
Interest expense for the second quarter of 1998 increased 73 percent
to $13.8 million compared to $8.0 million for the second quarter of
1997. For the first six months of 1998, interest expense was $26.1
million, an increase of 52 percent compared to $17.2 million for the
same period of 1997. The increases in interest expense are primarily
due to higher levels of long-term debt in 1998 compared to 1997.
Natural Gas Volumes and Prices Anadarko's natural gas production
during the second quarter of 1998 was 42.2 billion cubic feet (Bcf) or
463 million cubic feet per day (MMcf/d). This represents a slight
decrease over second quarter 1997 gas production of 43.8 Bcf or 481
MMcf/d. The decrease in gas volumes is partly due to annual allowable
testing in the Hugoton Embayment and curtailments due to allowables in
the West Pannhandle Field of Texas. Anadarko's average wellhead price
for natural gas in the second quarter of 1998 was $1.98 per thousand
cubic feet (Mcf) compared to $1.85 per Mcf in the same period of 1997.
Anadarko's natural gas production in the first half of 1998 was flat
compared to the same period of 1997. During the first half of 1998,
Anadarko produced 86.2 Bcf of gas or 476 MMcf/d. During the period,
average natural gas wellhead prices decreased 11 percent to $2.00 per
Mcf compared to $2.24 per Mcf in the same period of 1997.
Crude Oil, Condensate and Natural Gas Liquids Volumes and Prices
During the second quarter of 1998, Anadarko's oil volumes increased 19
percent to 2.7 million barrels (MMBbls) or 29 thousand barrels (MBbls)
per day compared to 2.2 MMBbls or 25 MBbls per day in the same period
of 1997. The increase in oil volumes is partly due to higher
production from the Mahogany Field in the Gulf of Mexico and first oil
production from the Company's Hassi Berkine South Field in Algeria.
Algerian oil production began May 4, 1998 and totaled about 450,000
barrels (gross) through the end of the second quarter of 1998. Higher
oil production volumes were offset by a 34 percent decrease in oil
prices during the second quarter of 1998. Anadarko's average oil price
in the second quarter of 1998 was $11.54 per barrel compared to $17.48
per barrel in the same period of 1997.
18
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Anadarko's oil production in the first half of 1998 increased 16
percent over the same period in 1997. The 1998 oil volumes to date
total 4.9 MMBbls or 28 MBbls per day compared to 4.3 MMBbls or 23
MBbls per day in the first half of 1997. The significant increase in
oil volumes is partly due to higher production from the Mahogany Field
and first oil production from Algeria. Average oil prices, however,
decreased 36 percent during the first half of 1998 to $12.21 per
barrel compared to $18.94 per barrel in the first half of 1997.
Anadarko's NGLs sales volumes in the second quarter of 1998 increased
52 percent to 1.6 MMBbls or 17 MBbls per day compared to 1.0 MMBbls or
11 MBbls per day in the same period of 1997. Higher volumes were
partly offset by 19 percent lower NGLs prices, averaging $10.90 per
barrel in the second quarter of 1998 compared to $13.45 per barrel in
the same period of 1997.
NGLs volumes in the first half of 1998 increased 45 percent to 3.3
MMBbls or 18 MBbls per day. This compares to production of 2.3 MMBbls
or 13 MBbls per day in the same period of 1997. The significant
increase in volumes was partly offset by a 23 percent decrease in NGLs
prices during the first half of 1998. Anadarko's average NGLs price
was $11.31 per barrel in the first half of 1998 compared to $14.65 per
barrel in the same period of 1997.
Use of Derivatives Anadarko produces, purchases and sells natural
gas, crude oil, and NGLs. As a result, Anadarko's financial results
can be significantly affected by changes in these commodity prices.
Anadarko uses derivative financial instruments to hedge the Company's
exposure to changes in the market price of natural gas and crude oil,
to provide methods to fix the price for natural gas independently of
the physical purchase or sale and to manage interest rates. Commodity
financial instruments also provide methods to meet customer pricing
requirements while achieving a price structure consistent with the
Company's overall pricing strategy. While commodity financial
instruments are intended to reduce the Company's exposure to declines
in the market price of natural gas and crude oil, the commodity
financial instruments may also limit Anadarko's gain from increases in
the market price of natural gas and crude oil. As a result, gains and
losses on commodity financial instruments are generally offset by
similar changes in the realized price of natural gas and crude oil.
Gains and losses are recognized in revenues for the periods to which
the commodity financial instruments relate. Anadarko's commodity
financial instruments currently are comprised of futures, swaps and
options contracts.
19
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
While the volume of derivative commodity instruments utilized by the
Company to hedge its market price risk can vary during the year within
the boundaries of its established policy guidelines, the fair value of
those instruments at June 30, 1998 and December 31, 1997 was, in the
judgment of the Company, immaterial. Additionally, through the use of
sensitivity analysis, the Company evaluates the potential effect that
reasonably possible near term changes in the market prices of natural
gas and crude oil may have on the fair value of the Company's
derivative commodity instruments. Based upon an analysis utilizing
the actual derivative contractual volumes and assuming a ten percent
adverse movement in commodity prices, the potential decrease in the
fair value of the derivative commodity instruments at June 30, 1998
and December 31, 1997 does not have a material adverse effect on the
financial position or results of operations of the Company.
The Company also evaluated the potential effect that reasonably
possible near term changes in interest rates may have on the fair
value of the Company's interest rate swap agreement. Based upon an
analysis, utilizing the actual interest rates in effect as of June
1998 and December 1997, and assuming a ten percent increase in
interest rates, the potential decrease in the fair value of the
derivative interest swap instrument at June 30, 1998 and December 31,
1997 does not have a material effect on the financial position or
results of operations of the Company.
Capital Expenditures, Liquidity and Dividends
During the first six months of 1998, Anadarko's capital spending
(including capitalized interest and overhead) was $467.7 million
compared to $309.3 million in the same period of 1997.
The Company believes cash flows, including proceeds from divestitures,
issuances of additional debt or securities, and existing credit
facilities will be sufficient to meet capital and operating
requirements, including any contingencies, during 1998.
In January 1998, Anadarko issued $100 million principal amount of
6.625% Debentures due 2028. The proceeds were used to fund capital
spending projects in core operating areas.
In March 1998, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$500 million in debt and equity securities. Net proceeds, terms and
pricing of offerings of securities issued under the shelf registration
statement will be determined at the time of the offerings.
20
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
In April 1998, the Company's Revolving Credit and 364-Day Credit
Agreements were amended. The Revolving Credit Agreement was amended to
increase the number of commercial banks in the group from eight to
nine. The 364-Day Credit Agreement was amended as follows: the
principal amount of the Agreement was increased from $125 million to
$175 million; the number of commercial banks in the group was changed
from eight to nine; and the expiration date of the Agreement was
extended for 10 months.
In April 1998, the Board of Directors approved a two-for-one stock
split. The stock split was effected by way of a stock dividend. The
distribution date was July 1, 1998 to stockholders of record on
June 15, 1998.
In May 1998, Anadarko issued $200 million of 5.46% Series B Cumulative
Preferred Stock in the form of two million depositary shares, each
depositary share representing 1/10th of a share of the 5.46% Series B
Cumulative Preferred Stock. The Preferred Stock has no stated maturity
and is not subject to a sinking fund or mandatory redemption. The
shares are not convertible into other securities of the Company.
Anadarko has the option to redeem the shares at $100 per depositary
share on or after May 15, 2008. Holders of the shares are entitled to
receive, when, and as declared by the Board of Directors, cumulative
cash dividends at an annual dividend rate of $5.46 per depositary
share. The proceeds from the offering were used to reduce commercial
paper and bank borrowings and provide capital for Anadarko's 1998
capital expenditures. The Preferred Stock was issued under the
Company's shelf registration statement.
Anadarko's Board of Directors declared a quarterly dividend of $0.05
per share of common stock outstanding. The dividend is payable on
September 23, 1998 to stockholders of record on September 9, 1998.
Under the most restrictive provisions of the Company's credit
agreements, which limit the payment of dividends, retained earnings of
$670,697,000 were not restricted as to the payment of dividends at
June 30, 1998. The amount of future dividend payments will depend on the
Company's earnings, financial condition, capital requirements and other
factors and will be determined by the Board on a quarterly basis.
Exploration and Development Activities
During the second quarter of 1998, Anadarko participated in a total of
95 wells, including 49 oil wells, 34 gas wells and 12 dry holes. This
compares to a total of 149 wells, including 91 oil wells, 42 gas wells
and 16 dry holes during the second quarter of 1997. For the first six
months of 1998, Anadarko participated in a total of 204 wells,
including 115 oil wells, 66 gas wells and 23 dry holes. This compares
to a total of 275 wells, including 166 oil wells, 82 gas wells and 27
dry holes during the first six months of 1997. Following is a
description of activity during the first half of 1998.
21
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Gulf of Mexico In July 1998, Anadarko announced a significant crude
oil and natural gas discovery in its "sub-salt" exploration program.
The Tanzanite discovery is located in the Gulf of Mexico at Eugene
Island South Addition Block 346 in 314 feet of water about 75 miles
offshore Louisiana. Tanzanite encountered more than 450 feet of
continuous hydrocarbon pay. An extensive suite of well logs has been
run on the reservoir, which confirms a major accumulation of hydro-
carbons and shows excellent porosity of about 30 percent. Extensive
3-D seismic data indicate a productive reservoir extent of about 1,000
acres. Based on all of the available information to date, Anadarko
believes this reservoir contains at least 140 million energy equivalent
barrels of reserves. Three additional shallower pay zones totaling
approximately 70 feet of net pay are present in the wellbore. Rowan
has been contracted to immediately drill a field delineation well.
Further drilling on the prospect could significantly increase the
size of these estimates by increasing the aerial extent of the main
reservoir and determining the extent of the other pay zones. Plans
for the construction of a production platform are underway. Anadarko
owns a 100-percent working interest in the Tanzanite Field.
Also in July, the East Cameron 157 A-7 exploratory well was announced,
flowing 40 MMcf/d of gas and 1,129 barrels of condensate per day
(BCPD). The A-7 well encountered new reserves that were fault separated
from the main field reservoir. Also from East Cameron 157, two wells
were recompleted -- the A-4 well tested 25.4 MMcf/d of gas and 557 BCPD
and the A-3 well produced 4.9 MMcf/d of gas and 245 BCPD. Current
production from the platform is 70 MMcf/d and 1,700 BCPD. Anadarko has
a 100-percent working interest in East Cameron 157.
During May 1998, the Matagorda Island 623 No. A-4 well tested at 11
MMcf/d of gas and 58 BCPD. The Company has a 37.5-percent working
interest in the Amoco-operated field. A new pipeline is under
construction that will bring an additional 60 MMcf/d of gas to market
and should be completed in August 1998. At that time, platform capacity
will be over 400 MMcf/d. Current production is averaging about 300
MMcf/d of gas.
Also in May, the A-4 well at the Phillips-operated Mahogany platform
(Ship Shoal Block 349/359) was placed on production flowing 10,292 BOPD
and 17 MMcf/d of gas. Production from Mahogany is currently 15,000 BOPD
and 30 MMcf/d of gas. A seventh well is being completed and another
development well is planned for later this year.
22
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
At High Island Block A-376, Anadarko completed the B-4 well, the
Company's first horizontal well from an offshore platform. The well
flowed 20 MMcf/d of gas. A second extended reach well, the B-5, was
drilled and tested at 7 MMcf/d of gas. Anadarko owns a 100-percent
working interest in the B-5 well. A gas compressor package is
currently under construction and should be operational later this year.
Platform production is currently 8 MMcf/d of gas and 2,100 BCPD.
Anadarko has a 33.8-percent working interest in the field.
East Texas' Bossier Sand Play Six company-operated rigs are
currently running in the Dew Field of Freestone County, Texas where
Anadarko has completed 35 wells to date and achieved a 100-percent
success rate. Anadarko owns more than 16,000 acres in the Bossier Sand
Play, which is now the Company's third largest onshore gas field.
Current Field production is 35 MMcf/d of gas. Noteworthy among the
completions at mid-year are:
Johnson "A" No. 2 (7.1 MMcf/d of gas)
McAdams "A" No. 1 (5.4 MMcf/d of gas)
Black "A" No. 3 (4.9 MMcf/d of gas)
Black "A" No. 6 (4.4 MMcf/d of gas)
Alma Moore No. 3 (3.3 MMcf/d of gas, 10 BCPD)
Johnson "A" No. 3 (3.2 MMcf/d of gas, 10 BCPD)
McAdams "A" No. 2 (2.1 MMcf/d of gas)
English No. 3 (9.5 MMcf/d of gas)
Algeria Anadarko received its Exploitation License for the Hassi
Berkine South Field in May 1998. Located on Block 404 in the Sahara
Desert of Algeria, production from the Field started on May 4, 1998.
This was the Company's first production from Algeria. Gross production
during the second quarter was 450,000 barrels. During the start up
phase for the central production facility, production has ranged from
6,000 BOPD to 30,000 BOPD.
At the end of July 1998, Anadarko had five company-operated rigs
running in Algeria: Block 208 - EMN-2, EMN-3; EME-4, and Block 404 -
BKNE-2; HBNS-8. In addition, one outside-operated rig is drilling the
Qoubba No. 2 well. The Company expects to drill over 40 company-
operated wells in Algeria during 1998 -- more than the total number of
wells that Anadarko has drilled since entering the country in 1989.
Eritrea On July 8, 1998, Anadarko began drilling its Bulissar
prospect on the Zula Block in the Red Sea. Santa Fe International's
Key Manhattan rig is being used for the operation and was at a depth of
about 800 meters at the end of July. Following Bulissar, Anadarko
plans to drill two additional wells in 1998. Anadarko is operator for
its Eritrean program with a 50-percent interest.
23
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Hugoton Embayment In the first half of 1998, Anadarko has announced
results from its first seven wells completed as part of a delineation
drilling program in the Archer Field of Seward County, Kansas. Combined
production totaled 1,540 BOPD and 1.1 MMcf/d of gas. The Archer Field
exploitation program targets the St. Louis formation, which has
traditionally been very difficult to image with conventional seismic.
Anadarko is using 3-D seismic to develop oil and gas reserves below
shallow producing zones in the Hugoton Embayment, as well as extend the
limits of the Archer Field. Anadarko owns a 100-percent working
interest in the Archer Field. Some of the more significant Archer Field
completions in the first six months of the year include:
Downs A-1 (354 BOPD, 279 Mcf/d of gas)
Boles F-1 (200 BOPD)
Boles F-2 (291 BOPD, 170 Mcf/d of gas)
Boles F-3 (287 BOPD, 100 Mcf/d of gas)
The following wells were among several significant completions in the
Hugoton Embayment during the first half of 1998. Anadarko owns a 100-
percent working interest in each.
Lemon Trust B-2, Condit Field (2.0 MMcf/d of gas)
Box A-1, Condit Field (1.5 MMcf/d of gas)
Schneider Alley A-1, Liberal SE Field (1.0 MMcf/d of gas)
Blackmer A-3, Condit Field (386 BOPD, 276 Mcf/d of gas)
Malin B-1, Fedder Southwest Field (1.0 MMcf/d of gas)
Milhon B-1, Fedder Southwest Field (1.6 MMcf/d of gas)
Taylor B-2, Gentzler SW Field (2.0 MMcf/d of gas)
The USA Barker A-3, Berryman Richfield Field (2.5 MMcf/d of gas)
Leathers Land A-4, Eubank Field (168 BOPD)
In the Light Field of Beaver County, Oklahoma, the Trader A-1 well
flowed 2.2 MMcf/d of gas. Anadarko owns a 72-percent working interest
in the well. In a nearby field, the Smith AC-1 tested 1.7 MMcf/d of
gas and the Harryman A-1 tested 2.9 MMcf/d of gas. The Company has a
100-percent working interest in both basal Chester producers.
Central Oklahoma Among the Golden Trend wells placed on production
during the second quarter of 1998, was the Lance "A" No. 3-33 well in
the Bradley Field, which tested 2.6 MMcf/d of comingled gas from four
zones. Additional completions include: the Jack Hammer No. 2-31 well
(1.2 MMcf/d of gas, 110 BOPD); the Manatt A-2 well (1.1 MMcf/d of gas,
160 BOPD); and, the EXPH 2-31 well (736 Mcf/d of gas, 83 BOPD).
24
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Permian Basin In response to lower oil prices, Anadarko has
deferred some drilling projects into 1999. Anadarko drilled about 70
wells in the Permian Basin during the first half of 1998. Efforts have
concentrated on continuing development of the Ketchum Mountain
(Clearfork) Field and on secondary recovery operations in the TXL North
and South Fields. Anadarko has a 100-percent working interest in the
wells.
Year 2000
Anadarko has established a Year 2000 Compliance Task Force with
representatives from every major department company wide. The focus
of the Task Force is to ensure that the Company has assessed the
impact of the year 2000 on its computer systems and other operations
and has devised plans to prepare for the millennium change.
The Company has instituted a program designed to minimize risk to our
operations and to ensure that all material systems and procedures will
handle the year 2000 change. This coordinated program of work involves
completing a variety of compliance steps including implementing
appropriate hardware and software upgrades and thoroughly testing
mission critical applications. In addition, the Company is assessing
risks associated with significant third parties whose products or
business relations with the Company may raise year 2000 concerns.
To date, there have not been any material expenditures of the year
2000 implementation and the Company does not believe that any material
expenditures will be required to complete the program. The Company
expects that all significant systems and procedures will be compliant
by the year 2000.
Changes in Accounting Principles
Pensions and Other Postretirement Benefits Reporting Statement of
Financial Accounting Standards (SFAS) No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", amends the
disclosure requirements with respect to pensions and other post-
retirement benefits in annual financial statements. SFAS No. 132 does
not change any of the current guidance on measurement or recognition
related to these areas. The Company will adopt SFAS No. 132 for the
year ended December 31, 1998.
Accounting for Derivatives SFAS No. 133, "Accounting for Derivative
Instruments and for Hedging Activities", provides guidance for
accounting for derivative instruments and hedging activities. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999.
The Company has not yet completed an evaluation of the impact of the
provisions of SFAS No. 133.
25
<PAGE>
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Kansas Ad Valorem Tax See Note 9 of the Notes to Consolidated
Financial Statements under Part I, Financial Information, of this Form
10-Q.
Item 4. Submission of Matters to a Vote of Security Holders
(a) On April 30, 1998, the Company held its Annual Stockholders'
Meeting.
(b) Messrs. Larry Barcus and James L. Bryan were re-elected as Class
III directors to serve for a term of three years. Messrs. Ronald
Brown, John R. Butler, Jr. and John R. Gordon will continue to
serve as Class I directors and Messrs. Conrad P. Albert,
Robert J. Allison, Jr. and John N. Seitz will continue to serve
as Class II directors.
Mr. Larry Barcus was re-elected with votes for of 49,368,011
and votes withheld of 472,235. Mr. James L. Bryan was
re-elected with votes for of 49,365,029 and votes withheld of
475,217.
(c) The stockholders approved the 1998 Director Stock Plan (the
Plan). The purposes of the Plan are to attract and retain
experienced and knowledgeable non-employee directors for the
benefit of the Company and stockholders, and for such directors
to acquire a proprietary interest in the Company and to further
align the interests of such directors with the interest of the
Company and its stockholders. A total of 29,654,343 shares of
common stock voted for the Plan, 20,083,592 shares of common
stock voted against the Plan and 102,311 shares of common stock
abstained.
26
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits not incorporated by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all
exhibits not so designated are incorporated herein by reference
to a prior filing as indicated.
Exhibit Original Filed File
Number Description Exhibit Number
3(a) Restated Certificate of
Incorporation of Anadarko 19(a)(i) to Form 10-Q 1-8968
Petroleum Corporation, for quarter ended
Dated August 28, 1986 September 30, 1986
(b) By-laws of Anadarko 3(b) to Form 10-Q 1-8968
Petroleum Corporation, for quarter ended
as amended June 30, 1997
10(b) 1998 Director Stock Plan 99 - Attachment A to 1-8968
of Anadarko Petroleum Form 10-K for year
Corporation, effective ended December 31,
January 30, 1998 1997
*12 Computation of Ratios of
Earnings to Combined Fixed
Charges and Preferred
Stock Dividends
*27(a) Financial Data Schedule
*27(b) Restated Financial Data
Schedules (restated to
reflect adoption of SFAS
No. 128, "Earnings per
Share", and the two-for-one
stock split effective
July 1, 1998) for 1998
and 1997
*27(c) Restated Financial Data
Schedules (restated to
reflect adoption of SFAS
No. 128, "Earnings per
Share", and the two-for-one
stock split effective
July 1, 1998) for 1996
and 1995
27
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K
A report on Form 8-K dated May 1, 1998 was filed in which the
earliest event reported was April 30, 1998. This event was
reported under Item 5, "Other Events".
A report on Form 8-K dated May 6, 1998 was filed in which the
earliest event reported was May 7, 1998. This event was
reported under Item 5, "Other Events", and Item 7, "Financial
Statements and Exhibits".
28
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned duly authorized officer and principal
financial officer.
ANADARKO PETROLEUM CORPORATION
(Registrant)
August 13, 1998 [Michael E. Rose]
Michael E. Rose - Senior Vice President,
Finance and Chief Financial Officer
<PAGE>
<PAGE>
EXHIBIT 12
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF COMPUTATION OF RATIOS
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Six Months Ended June 30, 1998 and Five Years Ended December 31, 1997
Six Months
Ended
June 30 Years Ended December 31
thousands 1998 1997 1996 1995 1994 1993
Gross Income $43,617 $205,318 $196,763 $65,624 $90,794 $106,824
Rentals 5,425 8,266 4,234 2,457 2,814 3,069
Earnings 49,042 213,584 200,997 68,081 93,608 109,893
Gross Interest
Expense 38,406 62,095 55,986 52,557 41,635 38,000
Rentals 5,425 8,266 4,234 2,457 2,814 3,069
Preferred Stock
Dividends 2,521 --- --- --- --- ---
Fixed Charges $46,352 $70,361 $60,220 $55,014 $44,449 $41,069
Ratio of Earnings
to Fixed Charges 1.06 3.04 3.34 1.24 2.11 2.68
The ratios of earnings to fixed charges and preferred stock dividends 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, the estimated interest component
of rentals and preferred stock dividends.
During the six months ended June 30, 1998 and five years ended December 31,
1997, there were two million shares and no shares of preferred stock
outstanding, respectively. A pro forma ratio for prior periods is not
presented due to immateriality.
<PAGE>
<PAGE>
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<NAME> ANADARKO PETROLEUM CORPORATION
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 29,679
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<RECEIVABLES> 153,417
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<INVENTORY> 29,863
<CURRENT-ASSETS> 216,346
<PP&E> 5,121,345
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<COMMON> 12,207
<OTHER-SE> 1,108,490
<TOTAL-LIABILITY-AND-EQUITY> 3,360,383
<SALES> 284,527
<TOTAL-REVENUES> 284,527
<CGS> 197,946
<TOTAL-COSTS> 197,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,136
<INCOME-PRETAX> 17,481
<INCOME-TAX> 6,125
<INCOME-CONTINUING> 11,356
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,356
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
APPLICABLE 1997 ANNUAL AND INTERIM FINANCIAL STATEMENTS OF ANADARKO PETROLEUM
CORPORATION. THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1998
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997 MAR-31-1998
<CASH> 41,370 16,142 13,838 8,907 7,902
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 143,108 146,799 173,827 177,157 156,397
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 25,157 28,100 33,573 28,564 30,731
<CURRENT-ASSETS> 212,977 193,234 226,178 218,994 198,633
<PP&E> 4,111,912 4,299,484 4,482,406 4,669,251 4,929,098
<DEPRECIATION> 1,763,682 1,810,575 1,857,715 1,914,472 1,962,385
<TOTAL-ASSETS> 2,580,337 2,697,761 2,868,738 2,992,465 3,189,831
<CURRENT-LIABILITIES> 202,569 209,781 250,985 252,330 298,745
<BONDS> 700,000 791,973 890,571 955,733 1,095,142
0 0 0 0 0
0 0 0 0 0
<COMMON> 6,107 6,111 6,130 6,134 12,188
<OTHER-SE> 1,042,995 1,054,380 1,070,339 1,110,646 1,110,549
<TOTAL-LIABILITY-AND-EQUITY> 2,580,337 2,697,761 2,868,738 2,992,465 3,189,831
<SALES> 170,506 309,387 467,710 673,201 146,388
<TOTAL-REVENUES> 170,506 309,387 467,710 673,201 146,388
<CGS> 91,107 183,186 284,286 396,252 102,423
<TOTAL-COSTS> 91,107 183,186 284,286 396,252 102,423
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 9,238 17,205 28,657 40,959 12,358
<INCOME-PRETAX> 53,965 75,769 102,448 164,359 10,977
<INCOME-TAX> 19,531 27,561 37,148 57,041 3,962
<INCOME-CONTINUING> 34,434 48,208 65,300 107,318 7,015
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 34,434 48,208 65,300 107,318 7,015
<EPS-PRIMARY> 0.58 0.81 1.09 1.80 0.12
<EPS-DILUTED><F1> 0.57 0.80 1.09 1.78 0.12
[EPS-PRIMARY]<F2> 0.29 0.40 0.55 0.90 0.06
[EPS-DILUTED]<F2> 0.29 0.40 0.54 0.89 0.06
<FN>
<F1>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 123, "EARNINGS PER SHARE".
<F2>RESTATED TO REFLECT A TWO FOR ONE STOCK SPLIT ON JULY 1, 1998.
</FN>
<PAGE>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
APPLICABLE 1995 AND 1996 ANNUAL AND INTERIM FINANCIAL STATEMENTS OF
ANADARKO PETROLEUM CORPORATION. THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 17,090 13,390 17,165 43,415 14,601
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 127,943 142,277 125,761 108,698 226,824
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 14,859 16,549 18,410 20,446 24,540
<CURRENT-ASSETS> 163,198 174,155 162,130 177,023 269,808
<PP&E> 3,717,672 3,784,771 3,867,099 3,887,100 4,036,165
<DEPRECIATION> 1,628,922 1,671,750 1,712,938 1,712,721 1,738,709
<TOTAL-ASSETS> 2,267,047 2,295,078 2,331,460 2,366,547 2,584,030
<CURRENT-LIABILITIES> 190,473 141,548 153,815 169,313 285,253
<BONDS> 674,008 720,578 715,155 701,000 731,049
0 0 0 0 0
0 0 0 0 0
<COMMON> 6,047 6,052 6,063 6,073 6,098
<OTHER-SE> 903,647 921,911 940,127 965,387 1,007,982
<TOTAL-LIABILITY-AND-EQUITY> 2,267,047 2,295,078 2,331,460 2,366,547 2,584,030
<SALES> 434,014 135,707 270,795 399,346 569,028
<TOTAL-REVENUES> 434,014 135,707 270,795 399,346 569,028
<CGS> 307,463 79,611 158,073 219,091 319,696
<TOTAL-COSTS> 307,463 79,611 158,073 219,091 319,696
<OTHER-EXPENSES> 2,600 0 0 (16,356) (13,986)
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 36,358 9,502 19,102 28,808 38,973
<INCOME-PRETAX> 29,266 31,593 59,267 99,730 157,790
<INCOME-TAX> 8,231 11,077 21,123 36,636 57,070
<INCOME-CONTINUING> 21,035 20,516 38,144 63,094 100,720
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 21,035 20,516 38,144 63,094 100,720
<EPS-PRIMARY> 0.36 0.35 0.65 1.07 1.70
<EPS-DILUTED><F1> 0.36 0.35 0.64 1.06 1.69
[EPS-PRIMARY]<F2> 0.18 0.17 0.32 0.53 0.85
[EPS-DILUTED]<F2> 0.18 0.17 0.32 0.53 0.85
<FN>
<F1>RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 123, "EARNINGS PER SHARE".
<F2>RESTATED TO REFLECT A TWO FOR ONE STOCK SPLIT ON JULY 1, 1998.
</FN>
</TABLE>
