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, 1999
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 and entitled to vote of the
Company's common stock as of July 30, 1999 is shown below:
Number of Shares
Title of Class Outstanding
Common Stock, par value $0.10 per share 127,418,936
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
thousands except June 30 June 30
per share amounts 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues
Gas sales $ 83,806 $ 87,671 $161,646 $181,190
Oil and condensate sales 58,061 31,581 101,641 62,979
Natural gas liquids and other 19,652 18,274 34,596 40,358
Total 161,519 137,526 297,883 284,527
Cost and Expenses
Operating expenses 34,440 38,649 68,496 78,906
Administrative and general 23,195 21,722 47,604 42,964
Depreciation, depletion and
amortization 53,938 48,387 110,462 99,724
Other taxes 8,524 8,486 17,757 19,316
Impairments related to
international properties --- --- 20,000 ---
Total 120,097 117,244 264,319 240,910
Operating Income 41,422 20,282 33,564 43,617
Interest Expense 18,504 13,778 37,142 26,136
Income (Loss) Before 22,918 6,504 (3,578) 17,481
Income Taxes
Income Taxes 12,226 2,163 6,085 6,125
Net Income (Loss) $ 10,692 $ 4,341 $ (9,663) $ 11,356
Preferred Stock Dividends 2,730 1,638 5,460 1,638
Net Income (Loss) Available
to Common Stockholders $ 7,962 $ 2,703 $(15,123) $ 9,718
Per Common Share
Net income (loss) - basic $ 0.06 $ 0.02 $ (0.12) $ 0.08
Net income (loss) - diluted $ 0.06 $ 0.02 $ (0.12) $ 0.08
Dividends $ 0.05 $ 0.05 $ 0.10 $ 0.0875
Average Number of Common
Shares Outstanding 125,255 120,049 122,874 119,942
</TABLE>
See accompanying notes to consolidated financial statements.
2
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
thousands 1999 1998
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 16,861 $ 17,008
Accounts receivable 183,709 181,491
Inventories 30,175 25,860
Prepaid expenses 3,180 5,569
Total 233,925 229,928
Properties and Equipment
Original cost 5,598,854 5,488,721
Less accumulated depreciation, depletion
and amortization 2,194,827 2,107,183
Net properties and equipment - based on
the full cost method of accounting
for oil and gas properties 3,404,027 3,381,538
Deferred Charges 52,654 21,524
$3,690,606 $3,632,990
</TABLE>
See accompanying notes to consolidated financial statements.
3
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET (continued)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
thousands 1999 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
Trade and other $ 174,012 $ 227,988
Banks 12,381 26,723
Accrued expenses
Interest 19,853 15,210
Taxes and other 16,360 18,805
Total 222,606 288,726
Long-term Debt 1,305,805 1,425,392
Deferred Credits
Deferred income taxes 524,899 522,953
Other 144,505 136,463
Total 669,404 659,416
Stockholders' Equity
Preferred stock, par value $1.00
(2,000,000 shares authorized, 200,000
shares issued as of June 30, 1999
and December 31, 1998) 200,000 200,000
Common stock, par value $0.10
(300,000,000 shares authorized,
129,408,296 and 122,436,712 shares issued
as of June 30, 1999 and December 31,
1998, respectively) 12,941 12,244
Paid-in capital 634,090 361,390
Retained earnings (as of June 30, 1999,
retained earnings was not restricted as
to the payment of dividends) 729,450 756,971
Deferred compensation (9,565) (9,461)
Executives and Directors Benefits Trust,
at market value (2,000,000 shares as of
June 30, 1999 and December 31, 1998) (74,125) (61,688)
Treasury stock (0 and 20 shares as of
June 30, 1999 and December 31, 1998,
respectively) --- ---
Total 1,492,791 1,259,456
$3,690,606 $3,632,990
</TABLE>
See accompanying notes to consolidated financial statements.
4
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
thousands 1999 1998
<S> <C> <C>
Cash Flow from Operating Activities
Net income (loss) $ (9,663) $ 11,356
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 110,462 99,724
Amortization of restricted stock 715 574
Deferred U.S. income taxes (5,353) 5,918
Impairments of international properties 20,000 ---
116,161 117,572
(Increase) decrease in accounts receivable (2,218) 23,740
Increase in inventories (4,315) (1,299)
Decrease in accounts payable - trade and
other and accrued expenses (51,778) (29,730)
Other items - net (10,643) (3,095)
Net cash provided by operating activities 47,207 107,188
Cash Flow from Investing Activities
Additions to properties and equipment (261,024) (467,745)
Sales and retirements of properties
and equipment 102,678 5,253
Proceeds from the sale of assets to be
leased, net 3,777 ---
Net cash used in investing activities (154,569) (462,492)
Cash Flow from Financing Activities
Additions to debt 300,000 283,693
Retirements of debt (419,587) (100,000)
Issuance of preferred stock --- 195,809
Issuance of common stock 259,002 7,206
Increase (decrease) in accounts payable,
banks (14,342) 1,531
Dividends paid (17,858) (12,162)
Purchase of treasury stock --- (1)
Net cash provided by financing activities 107,215 376,076
Net Increase (Decrease) in Cash
and Cash Equivalents (147) 20,772
Cash and Cash Equivalents at Beginning
of Period 17,008 8,907
Cash and Cash Equivalents at End of Period $ 16,861 $ 29,679
</TABLE>
See accompanying notes to consolidated financial statements.
5
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Accounting Policies
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 Energy Services Company and
Anadarko Gathering Company.
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:
<TABLE>
<CAPTION>
June 30, December 31,
thousands 1999 1998
<S> <C> <C>
Materials and supplies $15,212 $20,231
Natural gas, stored in inventory 8,512 1,813
Oil, stored in inventory 6,451 3,816
$30,175 $25,860
</TABLE>
3. Properties and Equipment Oil and gas properties include costs
of $335,722,000 and $353,647,000 at June 30, 1999 and December 31,
1998, 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:
<TABLE>
<CAPTION>
June 30, December 31,
thousands 1999 1998
<S> <C> <C>
Commercial Paper $ 180,805 $ 367,892
Notes Payable, Banks 25,000 257,500
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 100,000 100,000
7.20% Debentures due 2029 300,000 ---
7.73% Debentures due 2096 100,000 100,000
7 1/4% Debentures due 2096 100,000 100,000
$1,305,805 $1,425,392
</TABLE>
6
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 March 1999, Anadarko issued $300,000,000 principal amount of 7.20%
Debentures due 2029. The proceeds were used to repay floating interest
rate debt.
In April 1999, the Company amended the Revolving Credit Agreement and
entered into a new 364-Day Credit Agreement. The Revolving Credit
Agreement provides for $225,000,000 principal amount and the 364-Day
Credit Agreement provides for $285,000,000 principal amount. The
Revolving Credit Agreement expires in 2002.
In April 1999, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$1,000,000,000 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.
5. Preferred Stock In the first and second quarters of 1999,
dividends of $13.65 per share (equivalent to $1.365 per Depositary
Share) were paid to holders of preferred stock. In the second quarter
of 1998, dividends of $8.19 per share (equivalent to $0.819 per
Depositary Share) were paid to holders of preferred stock. The
Company's preferred stock was issued in May 1998.
6. Common Stock Under the most restrictive provisions of the
Company's credit agreements, which limit the payment of dividends,
retained earnings of $729,450,000 and $609,456,000 were not restricted
as to the payment of dividends at June 30, 1999 and December 31, 1998,
respectively.
The Company's basic earnings per share (EPS) amounts have been computed
based on the average number of common shares outstanding. Diluted EPS
amounts include the effect of the Company's outstanding stock options
under the treasury stock method.
7
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
6. Common Stock (continued)
The reconciliation between basic and diluted EPS is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
thousands except Per Share Per Share
per share amounts Income Shares Amount Income Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available
to common stockholders $ 7,962 125,255 $0.06 $2,703 120,049 $0.02
Effect of dilutive
stock options -- 1,113 -- 945
Diluted EPS
Income available
to common stockholders
plus assumed conversion $ 7,962 126,368 $0.06 $2,703 120,994 $0.02
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
thousands except Per Share Per Share
per share amounts Loss Shares Amount Income Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income (loss) available
to common stockholders $(15,123) 122,874 $(0.12) $9,718 119,942 $0.08
Effect of dilutive
stock options -- -- -- 821
Diluted EPS
Income (loss) available
to common stockholders
plus assumed conversion $(15,123) 122,874 $(0.12) $9,718 120,763 $0.08
</TABLE>
For the six months ended June 30, 1999, there were 556,000 common stock
equivalents related to outstanding stock options that were excluded
from the computation of diluted EPS, since they had an anti-dilutive
effect. For both the three and six months ended June 30, 1998, options
for 3,206,000 shares of common stock were excluded from the diluted EPS
calculation because the options' exercise price was greater than the
average market price of common stock for the periods.
In May 1999, Anadarko issued 6,250,000 shares of common stock.
Aggregate proceeds from the offering were approximately $240,500,000
after all expenses. Proceeds from the offering were used initially to
repay floating interest rate debt. The common stock was issued under
the Company's shelf registration statement.
8
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
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:
<TABLE>
<CAPTION>
Six Months Ended
June 30
thousands 1999 1998
<S> <C> <C>
Interest $33,275 $26,215
Income taxes $ (187) $(6,516)
</TABLE>
8. Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978
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.
Background of Present Litigation FERC's ruling regarding the
ability of producers to collect the Kansas ad valorem tax was appealed
to the United States Court of Appeals for the District of Columbia
Circuit (D.C. Circuit). The Court held in June 1988 that FERC failed
to provide a reasoned basis for its findings and remanded the case to
FERC.
Ultimately, the D.C. Circuit issued a decision on August 2, 1996
ruling that producers must refund all Kansas ad valorem taxes
collected relating to production since October 1983. The Company filed
a petition for writ of certiorari with the Supreme Court. That
petition was denied on May 12, 1997.
Anadarko estimates that the maximum amount of principal and interest
at issue which has not been paid to date, assuming that the October
1983 effective date remains in effect, is about $44,400,000 (pretax)
as of June 30, 1999.
FERC Proceedings Depending on future FERC orders, 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 the courts.
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 (pretax) and, if the petition for
9
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
8. Kansas Ad Valorem Tax (continued)
adjustment is denied in its entirety by FERC with respect to PanEnergy
refunds, interest in an amount of $28,700,000 (pretax) as of June 30,
1999. The Company also seeks from PanEnergy the return of $816,000 of
the $830,000 (pretax) 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 17, 1998 staying the litigation,
pending the exercise by FERC of its regulatory jurisdiction.
FERC Order of October 13, 1998 On October 13, 1998, FERC issued a
final order on Anadarko's complaint. The order declares that Anadarko
Production Company (now an affiliate of Duke Energy) is responsible as
first seller for making refunds of Kansas ad valorem tax
reimbursements collected from 1983 through August 1, 1985. The Company
estimates this amount to be as much as $26,000,000. The Company is
responsible to make refunds for reimbursements it collected as first
seller from August 1, 1985 through 1988. The Company estimates this
amount to be as much as $16,000,000. The FERC order states that
whether Anadarko Production Company or the Company is entitled to
reimbursement from another party for the refunds ordered is a matter
to be pursued in an appropriate judicial forum. On January 15, 1999,
FERC issued an order denying a request for rehearing filed by
PanEnergy and reaffirming the October 1998 order. FERC may, in the
near future, issue an order based upon the above allocation regarding
when the refunds must be paid and the specific refund amount. The
issue of reimbursement will now be pursued in U.S. District Court. On
April 16, 1999, the U.S. District Court ordered the parties to
mediation. The mediation is currently scheduled for August 25, 1999.
The Court has also set the matter for trial on the May/June 2000 trial
term.
Kansas Corporation Commission (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 of Kansas ad valorem tax
refunds. The refunds at issue relate to sales made by Anadarko
Production Company, 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, the successor of
Anadarko Production Company, in 1995. The petition, among other
things, asks the KCC to determine whether AGC or Anadarko Production
Company is responsible for the payment or distribution of refunds
received from first sellers to Anadarko Production Company's former
customers and requests guidance concerning the disposition of refunds
10
Item 1. Financial Statements (continued)
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
8. Kansas Ad Valorem Tax (continued)
received that are attributable to sales made to Anadarko Production
Company customers that did not reimburse Anadarko Production Company
for Kansas ad valorem taxes during the relevant time periods. This
matter is presently being pursued before the KCC. On June 1, 1999, the
KCC entered an order approving the plan proposed by AGC. Under this
order, after the conclusion of all litigation related to Kansas ad
valorem tax proceedings, "AGC shall be authorized to deduct from the
amounts of refunds due for the period from 1986 to and through 1988
all amounts shown not to have been collected by AGC's predecessor in
interest, Centana Energy Corporation by year, for the period from 1986
through 1988." The order is now final.
Anadarko's net income for 1997 included a $1,800,000 charge (pretax)
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 amounts recorded
in 1993, 1994 and 1997) has been made in the accompanying financial
statements.
9. The information, as furnished, reflects all normal recurring
adjustments that are, in the opinion of management, necessary to
a fair statement of financial position as of June 30, 1999 and
December 31, 1998, the results of operations for the three and
six months ended June 30, 1999 and 1998, and cash flows for the
six months ended June 30, 1999 and 1998.
11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company has made in this report, and may from time to time
otherwise make in other public filings, press releases and discussions
with Company management, 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, schedules, plans, timing of development, 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 1998
Annual Report on Form 10-K.
Overview of Operating Results
For 1999's second quarter, Anadarko had net income available to common
stockholders of $8 million, or 6 cents per share (diluted), on $161.5
million of revenues. By comparison, during the same period in 1998,
the Company had net income of $2.7 million, or 2 cents per share, on
$137.5 million of revenues. The higher earnings in the second quarter
of 1999, compared to the second quarter of 1998, were due to increased
crude oil prices and production volumes.
For 1999's first half, Anadarko had a net loss available to common
stockholders of $15.1 million, or 12 cents per share (diluted), on
$297.9 million of revenues. The loss reflects a non-cash charge in the
first quarter of 1999 of $20 million before taxes ($13 million after
taxes) related to the remaining operations in the Company's Eritrean
exploration program. During the first half of 1998, Anadarko had net
income of $9.7 million, or 8 cents per share (diluted), on $284.5
million of revenues.
Excluding the foreign impairment, the Company's net loss available to
common stockholders for the first half of 1999 was $2.1 million, or two
cents per share (diluted). In addition to the charge for Eritrea, the
earnings for the first six months of 1999, compared to the same period
in 1998, were affected by lower natural gas prices, higher interest
expense and preferred stock dividends, partially offset by higher oil
production volumes.
12
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, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Natural gas
Bcf 41.9 42.2 86.0 86.2
MMcf/d 461 463 475 476
Price per Mcf $1.95 $1.98 $1.77 $2.00
Crude oil and condensate
United States
MBbls 2,167 2,559 4,491 4,811
MBbls/d 24 28 25 27
Price per barrel $14.65 $11.50 $12.20 $12.21
Algeria
MBbls 1,647 121 3,291 121
MBbls/d 18 1 18 1
Price per barrel $15.38 $12.25 $13.48 $12.25
Total
MBbls 3,814 2,680 7,782 4,932
MBbls/d 42 29 43 28
Price per barrel $14.97 $11.54 $12.74 $12.21
Natural gas liquids
MBbls 1,530 1,569 3,162 3,273
MBbls/d 17 17 17 18
Price per barrel $11.91 $10.90 $10.20 $11.31
Total Energy Equivalent
Barrels (MMEEBs) 12.3 11.3 25.3 22.6
</TABLE>
___________
Bcf - billion cubic feet
MBbls - thousand barrels
MBbls/d - thousand barrels per day
Mcf - thousand cubic feet
MMcf/d - million cubic feet per day
MMEEBs - million energy equivalent barrels
13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Costs and expenses during the second quarter of 1999 were $120.1
million, an increase of 2% compared to $117.2 million for the second
quarter of 1998. For the first six months of 1999, costs and expenses
excluding the impairment totaled $244.3 million, an increase of 1%
compared to $240.9 million for the first six months of 1998. The
increase for both periods is primarily due to higher depreciation,
depletion and amortization expense related to the increase in
production volumes and higher administrative and general expenses
associated with the Company's growing workforce, partly offset by lower
operating expenses.
Interest expense for the second quarter of 1999 increased 34% to $18.5
million compared to $13.8 million for the second quarter of 1998. For
the first six months of 1999, interest expense was $37.1 million, an
increase of 42% compared to $26.1 million for the same period of 1998.
The increases in interest expense are primarily due to higher levels
of long-term debt in 1999 compared to 1998.
Natural Gas Volumes and Prices In 1999's second quarter, Anadarko's
natural gas production averaged 461 MMcf/d, essentially level with the
same period in 1998. The Company's wellhead price for natural gas was
$1.95 per Mcf for the second quarter of 1999, off slightly from $1.98
per Mcf a year ago.
In 1999's first six months, Anadarko's natural gas production averaged
475 MMcf/d, level with the same period in 1998. The Company's wellhead
price for natural gas was $1.77 per Mcf for the first half of 1999, off
12% from $2.00 per Mcf a year ago.
Crude Oil, Condensate and Natural Gas Liquids Volumes and Prices
The Company's average oil price for the second quarter of 1999 was
$14.97 per barrel, up 30% from $11.54 per barrel a year ago. In the
second quarter of 1999, Anadarko's oil production rose 42% to an
average of 42 MBbls/d, up from 29 MBbls/d in 1998's corresponding
period. The increase in volume was driven by oil production from the
Company's operations in Algeria, which came onstream in May 1998.
Anadarko's oil production for the first six months of 1999 rose 58% to
an average of 43 MBbls/d, up from 28 MBbls/d in 1998's corresponding
period. The Company's average oil price for the first half of 1999 was
$12.74 per barrel, up 4% from $12.21 per barrel a year ago.
14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
During the second quarter of 1999, Anadarko's natural gas liquids
(NGLs) sales volumes averaged 17 MBbls/d, level with 1998's
corresponding period. The Company's average price for NGLs was $11.91
per barrel in 1999's second quarter, a 9% increase from $10.90 per
barrel a year ago.
During the first six months of 1999, Anadarko's NGLs sales volumes
averaged 17 MBbls/d, down 3% from 18 MBbls/d in 1998's corresponding
period. The Company's average price for NGLs was $10.20 per barrel in
1999's first half, 10% below an average price of $11.31 per barrel a
year ago.
Capital Expenditures, Liquidity and Dividends
During the first six months of 1999, Anadarko's capital spending
(including capitalized interest and overhead) was $261.0 million
compared to $467.7 million in the same period of 1998.
In March 1999, Anadarko issued $300 million principal amount of 7.20%
Debentures due 2029. The proceeds were used to repay floating interest
rate debt.
In April 1999, the Company amended its Revolving Credit Agreement and
entered into a new 364-Day Credit Agreement. The Revolving Credit
Agreement provides for $225 million principal amount and the 364-Day
Credit Agreement provides for $285 million principal amount. The
Revolving Credit Agreement expires in 2002.
In April 1999, Anadarko filed a shelf registration statement with the
Securities and Exchange Commission that permits the issuance of up to
$1 billion 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 1999, Anadarko issued 6.25 million shares of common stock.
Aggregate proceeds from the offering were approximately $240.5 million
after all expenses. Proceeds from the offering were used initially to
repay floating interest rate debt. The common stock was issued under
the Company's shelf registration statement.
Anadarko increased its capital budget for 1999 from $410 million to
$650 million. The largest portion of the Company's capital budget
increase will be spent on development. The $197 million originally
earmarked for this category has increased about 80% to $353 million to
cover projects in the Gulf of Mexico, East Texas and Alaska. It also
reflects the decision not to pursue an off balance sheet financing
arrangement for the Tanzanite and Hickory development projects. The
Company increased exploration spending from $97 million to $171
million.
15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Company believes that the equity issue along with cash flow and
proceeds from asset sales will provide the majority of funds to meet
Anadarko's capital and operating requirements for 1999.
Exploration and Development Activities
During the second quarter of 1999, Anadarko participated in a total of
29 wells, including 3 oil wells, 22 gas wells and 4 dry holes. This
compares to a total of 95 wells, including 49 oil wells, 34 gas wells
and 12 dry holes during the second quarter of 1998.
For the first six months of 1999, Anadarko participated in a total of
84 wells, including 24 oil wells, 43 gas wells and 17 dry holes. This
compares to a total of 204 wells, including 115 oil wells, 66 gas
wells and 23 dry holes during the first six months of 1998.
Following is a description of activity during the first half of 1999.
Gulf of Mexico At the end of July, delineation of the Tanzanite
Field (Eugene Island Block 346) continued with the No. 4 well drilling.
Based on the results of wells drilled to date - including sidetracks -
the Company believes that the amplitude of the No. 1 discovery well, is
now mapped differently from initial interpretations. Additional
drilling and seismic processing will be required to further delineate
the field.
Following are the Tanzanite well results:
No. 1 - 617 feet of pay in six zones; wellbore saved as future
producer
No. 2 - wellbore inadvertently sidetracked before reaching
objective section
No. 2 (sidetrack 1) - 31 feet of potential productive sands;
wellbore plugged and abandoned (P&A)
No. 2 (sidetrack 2) - dry hole, drilled into salt; wellbore P&A
No. 2 (sidetrack 3) - 393 feet of pay in two zones; wellbore saved
as future producer
No. 3 - 230 feet of potential productive sand in four zones;
wellbore P&A
No. 3 (sidetrack 1) - 158 feet of potential productive sand in one
zone; wellbore lost due to stuck pipe
No. 3 (sidetrack 2) - 40 feet of potential productive sand in one
zone; wellbore P&A
No. 4 - currently drilling in salt
16
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Construction of the Tanzanite jacket and deck began during the second
quarter and is being fabricated by Aker Gulf Marine. The platform will
have a capacity of 200 MMcf/d of gas and 15 thousand barrels of oil per
day (MBOPD); however, the deck is designed to handle more equipment so
capacity figures may change before first production, which is expected
to begin in the second half of 2000. Anadarko has a 100% working
interest in the Tanzanite Field.
Anadarko has received partner approval for the construction of the
Hickory production platform with the capacity to produce 300 MMcf/d of
gas and 15 MBOPD. Gulf Island Fabrication, based in Houma, Louisiana,
has been awarded the construction contract.
The Company is encouraged by initial results of the first development
well from the Hickory discovery (Grand Isle 116) and evaluation
continues. Anadarko serves as operator of the Hickory Field and has a
50% working interest. First production is scheduled for the second
half of 2000.
In July, Anadarko announced that it has signed an agreement with
Texaco Exploration and Production Inc., a wholly-owned subsidiary of
Texaco Inc. for an exploration program in the Gulf of Mexico's sub-
salt play. As part of the agreement, Anadarko will acquire rights to
future exploration at certain depths on 82 lease blocks offshore
Louisiana. The tracts cover approximately 400,000 acres (gross) and
range in water depths from 85 to 2,400 feet. Anadarko's working
interests in new prospects that it identifies and drills will vary
depending on current Texaco partners. Texaco has an average working
interest of 50% in the 82 blocks, which are subject to agreement.
Other sub-salt activity during the first half of 1999 included the
commencement of drilling at the Garnet (East Cameron 347) and Moonstone
(South Marsh Island 196) prospects. Anadarko has a 100% working
interest in both wells.
Conventional activity in the Gulf of Mexico during the first half of
the year was highlighted by a number of significant recompletions. At
the East Cameron 157 platform, the A-1 well was recompleted from the
Rob E-2 interval to the Rob E-1 interval and tested 6.1 MMcf/d of gas
and 157 barrels of condensate per day (BCPD). Anadarko has a 100%
working interest in the well. Two successful recompletion projects
also took place at the Matagorda Island 587 platform during the second
quarter. The A-2 well was recompleted to the RM-1 sand and flowed 6.5
MMcf/d of gas while the A-3 well, also recompleted in the RM-1 sand,
tested 5.4 MMcf/d of gas. The Company owns a 36.1% working interest in
Matagorda Island 587.
17
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Also during the second quarter, the A-3 well at Vermilion Block 78,
offshore Louisiana, tested 2.5 MMcf/d of gas and 307 BCPD after being
recompleted from the Text L-2 interval to the CIB Carst Zone. The
Company has a 37.5% working interest in the well.
At the Phillips-operated Mahogany Platform (Ship Shoal Block 349/359),
two development wells were recompleted in a shallower gas formation
above the main "P" sand pay zone and placed on production. The A-8 well
flowed 4.5 MMcf/d of gas through a 1/2-inch choke while the A-10 well
tested 4.1 MMcf/d of gas from a 1/4-inch choke. Gross production from
the Mahogany platform at the end of June was 17.4 MMcf/d of gas and
9,300 barrels of oil per day (BOPD). Production was down from the first
quarter due to the well at Agate going off production due to sand
problems. An updip location is currently being evaluated. Anadarko has
a 37.5% working interest in the Mahogany Field and a 50% working
interest in the Agate Field.
East Texas' Bossier Sand Play Activity in Anadarko's second-
largest onshore gas field continued at a strong pace in the second
quarter of 1999 as two rigs were added to the Company's drilling
operations in Freestone County, Texas bringing to 10 the number of
rigs that are currently running. In the past three years, Anadarko has
drilled more than 90 wells in the Bossier Sand Play and in the process
achieved a success rate above 90%. Gross production from the Dew and
Mimms Creek Fields is currently about 85 MMcf/d of gas. During the
first half of 1999, the Company added a compression package to its Dew
Gathering System, which reduced line pressure from 1,100 psi to about
350 psi. Anadarko currently owns nearly 40,000 acres (gross) in the
Bossier Play.
Some of the most significant completions in the first half of 1999
include:
Lane A-1R (7.7 MMcf/d), 100% Anadarko working interest (W.I.)
Eubanks Trust No. 4 (6.8 MMcf/d), 100% Anadarko W.I.
High A-5 (5.1 MMcf/d), 100% Anadarko W.I.
High A-2 (4.8 MMcf/d), 100% Anadarko W.I.
B.K. Johnson B-2 (4.6 MMcf/d), 79.6% Anadarko W.I.
McAdams A No. 4 (4.5 MMcf/d), 100% Anadarko W.I.
Lancaster A-4 (4.0 MMcf/d), 100% Anadarko W.I.
High A-1 (3.8 MMcf/d), 100% Anadarko W.I.
B.K. Johnson A-3 (3.6 MMcf/d), 79.2% Anadarko W.I.
Black A-8 (3.5 MMcf/d), 100% Anadarko W.I.
Black A-7 (3.2 MMcf/d), 100% Anadarko W.I.
18
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Hugoton Embayment During the second quarter of 1999, the Company
reported the completion of the Anadarko B-2 well in the Simmons Field
of Morton County, Kansas. Anadarko owns a 100% working interest in the
well which is currently flowing 7.2 MMcf/d of gas and 10 BCPD.
A successful deep recompletion project in the Eubank Field of Haskell
County, Kansas increased production from the Gregg F-7 well from 40
thousand cubic feet per day (Mcf/d) of gas to 766 Mcf/d of gas.
Anadarko has a 100% working interest in the well which was recompleted
in the Marmaton and Kansas City formations.
A 3-D seismic shoot conducted in 1997 that led to the discovery of a
new interval in the Basal Chester formation continued to produce
excellent results through the first half of 1999. The Smith AE-3 well,
in the Lorena East Field of Beaver County, Oklahoma, tested 480 BOPD
and 180 Mcf/d of gas. This marks the second oil well discovery (sixth
successful well overall) in the Basal Chester formation. The Company
has a 100% working interest in the well.
Permian Basin A successful recompletion in the Morrow formation
during the second quarter increased production at the Arnold Federal
Com No. 1 well in Eddy County, New Mexico from 30 Mcf/d of gas to
5,100 Mcf/d of gas. Anadarko owns an 83.7% working interest in the
well, which is located in the Cedar Breaks Field.
Alaska Activity during the first half of 1999 was focused primarily
on the North Slope where development of the Alpine Field continues.
Development drilling is underway from the first of two permanent gravel
pad locations, with the remaining facilities about 80% complete.
Production modules, which had been under construction at fabrication
yards in Nikiski on Alaska's southern coast and Corpus Christi, Texas
for the past 16 months, are now en route to the North Slope. First
production of 40 MBOPD (gross) from the Alpine Field is expected to
begin in the third quarter of 2000, increasing to 70 MBOPD (gross) in
2001. Anadarko owns a 22% working interest in the ARCO Alaska-operated
field.
In July 1999, Anadarko and partner ARCO Alaska announced an oil
discovery that could become the first satellite field to Alpine. The
Fiord No. 5 well encountered a 60-foot vertical section of oil-bearing
sand in a Jurassic-aged reservoir and a 15-foot vertical section of oil-
bearing sand in the Kuparuk formation. The Jurassic interval tested 1.4
MBOPD of 29 degree API gravity oil and 650 Mcf/d of gas after being
fracture stimulated. A subsequent combined flow test of the Jurassic
and unstimulated Kuparuk reservoir yielded 2.5 MBOPD of 30 degree API
gravity oil and 1.2 MMcf/d of gas.
19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Fiord No. 4 well, two miles northeast of the No. 5 well, also
encountered an oil-bearing Jurassic reservoir. Plans for further
delineation and development of the field are under evaluation. ARCO
Alaska (operator) has a 78% working interest in the Fiord Field with
Anadarko owning the remaining 22%.
Anadarko strengthened its North Slope acreage position during the
second quarter by acquiring 99 blocks in the National Petroleum Reserve-
Alaska lease sale held in May 1999. The Company joined forces with ARCO
Alaska on 92 of the tracts and bid alone on the remaining seven.
Overall, Anadarko invested $16.5 million (net) to acquire more than
628,000 gross lease acres-almost doubling the 676,000 acres (gross) of
state, federal and fee lands in Alaska where Anadarko held interests
prior to the sale. Anadarko acquired an interest in more blocks than
any other bidder participating in the sale.
In addition, Anadarko has exploration rights to 3.3 million acres in
the Foothills region of Alaska as a result of an agreement with the
Arctic Slope Regional Corporation. Anadarko now has access to more
acreage than any other oil company operating in Alaska.
Algeria In July, Anadarko and partner LASMO plc sold their non-
operated interests in Blocks 401a and 402a to Agip Algeria Exploration
B.V. The $127 million agreement ($84.7 million net to Anadarko) covers
contract areas operated by BHP that contain several previously
announced oil discoveries. The sale allows Anadarko, which had a 27.5%
interest in the contract area, to capture the value of non-operated
properties and use the proceeds to develop its primary Algerian
operating areas on Blocks 404 and 208. The agreement is subject to
SONATRACH's preferential right to purchase as well as the approval of
state authorities in Algeria.
The focus of the Company's activities in Algeria during the first half
of 1999 was on continued development of several important fields,
including Hassi Berkine South (HBNS) where 8 development wells were
drilled and planning of Stage II production facilities continued. A
letter of intent was signed June 30 to award the construction of Stage
II production facilities to Brown & Root Condor. Other highlights from
the first six months include positive development drilling results in
the Ourhroud (ORD) Field. The QB-3 well in the northwest portion of the
field (Block 404) came in structurally high to expectations, indicating
significantly higher reserve potential in the Anadarko block and for
the field overall. Development drilling continues. The Exploitation
License for ORD was issued in April by the Government of Algeria and
preparations are continuing for the invitation to tender for surface
facility construction.
20
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Anadarko anticipates that oil production from Algeria may be limited
until about November 1 as a result of a seal failure in a gas
injection turbine which occurred in July. The gas injection turbine
is used to reinject natural gas back into the reservoir. Gross
production for July averaged about 21 MBOPD compared to the 53.6 MBOPD
in the second quarter 1999.
Tunisia As part of a farmin agreement with Ampolex (Tunisia) Pty
Limited, a subsidiary of Mobil, Anadarko acquired a 33.3% interest in
the 1.4 million acre Anaguid Permit in Tunisia. The block, now in its
second exploration term, is operated by COHO Anaguid Inc. The other
partner in the block is Bligh Tunisia Inc. ETAP, the Tunisian national
oil company, has the option to participate for 50% of any development
activity. Currently, the AMG No. 1 well is drilling. The transfer of
the interest from Ampolex to Anadarko is subject to approval by the
Tunisian government.
Year 2000 Overview The Year 2000 issue relates to the inability of
certain computers and software applications to correctly recognize and
process date sensitive information for the Year 2000 and beyond.
Without correction, the computers and software applications could fail
or create erroneous information. The Company has established a Year
2000 Compliance Program focused on minimizing disruptions of the
Company's operations as a result of the millennium change. Since this
problem could affect the Company's systems, as well as the systems of
its business partners, the Program focuses on the internal systems and
external services considered most critical to Anadarko's continuing
operations.
Since 1993, the Company has enhanced its scientific processing
capabilities, implemented new business systems and upgraded its
network infrastructure. These information systems were purchased from
leading suppliers of technology, most of whom are representing their
products to be Year 2000 compliant. The Company is about 80% complete
in testing third-party hardware and software for compliance. This
testing should be completed by the end of the third quarter 1999. Any
necessary replacements of non-compliant computer equipment and
software are underway and should also be completed by the end of the
third quarter 1999.
Assessment and remediation of critical embedded systems in domestic
and international operations is 100% complete.
The Company is assessing the readiness of its business partners,
including joint-venture operators and outside-operated pipeline and
processing facilities as well as suppliers of goods and services.
Interruptions in these services could disrupt Anadarko's production
and delivery of oil, gas and NGLs early in 2000. Analysis and review
21
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
of key business partners is underway. Natural gas affiliates providing
gathering, transportation and processing services are being contacted
to determine Year 2000 compliance at inter-connect and sales points.
The assessment of the critical suppliers and availability of goods and
services is 100% complete for U.S. operations. By the end of the third
quarter 1999, assessment of critical international suppliers and
service providers should be completed.
Business Contingency Planning The Company is developing contingency
plans to provide business continuity and to address operations, safety
and environmental concerns. Planning by the individual departments is
in progress and expected to be completed by the end of the third
quarter of 1999.
Estimated Cost The total cost of testing, remediation and business
contingency planning is expected to be less than $5 million, which will
be funded by operating cash flows. This estimate does not include the
Company's share of potential Year 2000 costs as a result of
participation in partnerships in which Anadarko is not the operator.
As of June 30, 1999, the Company had spent less than $2 million for the
Year 2000 project. These expenditures include costs to establish Year
2000 testing facilities, inventory, assess and remediate field
automation equipment domestically and internationally, purchase Year
2000 scanning software, and upgrade infrastructure and desktop
equipment. In total, the Company expects to spend less than $3.5
million to test internal systems, upgrade and replace hardware and
software, including field automation equipment. The remaining $1.5
million is for consulting services and contingency planning.
Anadarko's Year 2000 Program is an on-going process that may result in
changes to cost estimates and schedules as testing and business partner
assessment progresses.
Risks The Company expects to have all internal systems and computer
equipment Year 2000 compliant prior to the millennium change. The
Company is relying on its business partners and suppliers to be Year
2000 ready as well. Failure of significant third parties to complete
their Year 2000 compliance projects could interrupt the supply of
materials and contract services needed for oil and gas operations.
Disruptions to oil and gas transportation networks controlled by third-
party carriers could result in reduced production volumes delivered to
market. Risk associated with foreign operations may increase with the
uncertainty of Year 2000 compliance by foreign governments and their
supporting infrastructures. Such occurrences could have a material
adverse effect on the Company's business, results of operations and
financial condition. However, the Year 2000 Program is expected to
significantly reduce the Company's level of uncertainty about the Year
2000 issue.
22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Changes in Accounting Principles
Accounting for Derivatives Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
for Hedging Activities", provides guidance for accounting for
derivative instruments and hedging activities. In July 1999, SFAS
No. 137 "Deferring Statement 133's Effective Date", was issued which
delays the effective date for one year, to fiscal years beginning
after June 15, 2000. The Company has not yet completed an evaluation
of the impact of the provisions of SFAS No. 133.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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.
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, 1999 and December 31, 1998 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 10% adverse
movement in commodity prices, the potential decrease in the fair value
of the derivative commodity instruments at June 30, 1999 and
December 31, 1998 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 30, 1999 and
December 31, 1998 and assuming a 10% increase in interest rates, the
potential decrease in the fair value of the derivative interest swap
instrument at June 30, 1999 and December 31, 1998 does not have a
material effect on the financial position or results of operations of
the Company.
24
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Kansas Ad Valorem Tax See Note 8 of the Notes to Consolidated
Financial Statements under Part I. Financial Information of this Form
10-Q.
Item 4. Submissions of Matters to a Vote of Security Holders
(a) On April 29, 1999 the Company held its Annual Stockholders'
Meeting.
(b) Messrs. Ronald Brown, John R. Butler, Jr. and John R. Gordon were
re-elected as Class I directors to serve for a term of three years.
Messrs. Conrad P. Albert, Robert J. Allison, Jr. and John N. Seitz will
continue to serve as Class II directors and Messrs. Larry Barcus and
James L. Bryan will continue to serve as Class III directors.
Mr. Ronald Brown was re-elected with 89,652,526 votes for and
17,109,547 votes withheld. Mr. John R. Butler, Jr. was re-elected
with 89,674,849 votes for and 17,087,224 votes withheld. Mr. John
R. Gordon was re-elected with 89,655,185 votes for and 17,106,888
votes withheld.
(c) The stockholders approved the 1999 Stock Incentive Plan (the
Plan). The purpose of the Plan is to promote the interests of the
Company and its stockholders by (i) attracting and retaining
employees; (ii) motivating employees by means of performance-
related incentives to achieve longer-range performance goals; and
(iii) enabling employees to participate in the long-term growth
and financial success of the Company. At the discretion of the
Compensation and Benefits Committee, any employee of the Company
or its affiliates may be granted an award under the Plan. A total
of 89,722,623 shares of common stock voted for the Plan,
16,701,994 shares of common stock voted against the Plan and
133,891 shares of common stock abstained.
(d) The stockholders approved the performance criteria under and
amendment to the Annual Incentive Bonus Plan (Incentive Plan). For
each calendar year, the Compensation and Benefits Committee
establishes, in writing, the performance goals, the specific
performance criteria and the performance target or range of targets to
measure satisfaction of the performance goals. One or more of the
following performance criteria will be used to establish the
performance goals: (i) cost of finding of energy equivalent barrels;
(ii) reserve replacement; (iii) cash flow; (iv) net income; and (v)
stock price performance. The amendment to the Incentive Plan increased
the maximum bonus amount
25
Item 4. Submissions of Matters to a Vote of Security
Holders (continued)
that could be paid to any individual for any calendar year under
the Incentive Plan to $3 million. A total of 104,349,096 shares
of common stock voted for the amendment, 2,258,022 shares of
common stock voted against the amendment and 154,452 shares of
common stock abstained.
(e) The stockholders approved an amendment to the Restated Certificate
of Incorporation. The amendment increased the number of authorized
shares of common stock to 300,000,000. A total of 104,189,971 shares of
common stock voted for the amendment, 2,441,207 shares of common stock
voted against the amendment and 130,860 shares of common stock
abstained.
26
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 19(a)(i) to Form 10-Q 1-8968
Incorporation of Anadarko for quarter ended
Petroleum Corporation, September 30, 1986
dated August 28, 1986
(b) Amendment to the Restated 3(b) to Form 10-Q 1-8968
Certificate of for quarter ended
Incorporation of Anadarko March 31, 1999
Petroleum Corporation,
dated April 29, 1999
*(c) Certificate of Correction
filed to correct the
Amendment to the Restated
Certificate of
Incorporation of Anadarko
Petroleum Corporation,
dated June 15, 1999
(d) By-laws of Anadarko 3(b) to Form 10-Q 1-8968
Petroleum Corporation, for quarter ended
as amended June 30, 1996
*12 Computation of Ratios of
Earnings to Fixed Charges
and Earnings to Combined
Fixed Charges and Preferred
Stock Dividends
*27 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated April 29, 1999 was filed in which the
earliest event reported was April 29, 1999. This event was
reported under Item 5, "Other Events".
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned duly authorized officer and principal
financial officer.
ANADARKO PETROLEUM CORPORATION
(Registrant)
August 12, 1999 By: [MICHAEL E. ROSE]
(Michael E. Rose - Senior Vice President,
Finance and Chief Financial Officer)
28
<PAGE>
Exhibit 3(c)
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF
OF
AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON MAY 7, 1999.
ANADARKO PETROLEUM CORPORATION, corporation organized and
existing under and by virtue of the General Corporation Law
of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is ANADARKO PETROLEUM
CORPORATION.
2. That a Certificate of Amendment of the Restated
Certificate of Incorporation of Anadarko Petroleum
Corporation was filed by the Secretary of State of Delaware
on May 7, 1999, and that said Certificate requires
correction as permitted by Section 103 of the General
Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be
corrected is as follows:
The amendment could have been wrongly construed to replace
not only the first paragraph of Article Fourth but also the
designations, powers, preferences and rights and the
qualifications, limitations or restrictions of the Preferred
Stock and the Common Stock as set forth in Article Fourth.
4. The Certificate of Amendment of the Restated
Certificate of Incorporation of Anadarko Petroleum
Corporation is corrected as follows:
RESOLVED, that the Restated Certificate of
Incorporation of this corporation be amended by changing
the first paragraph of Article FOURTH thereof, including
clauses (a) and (b) thereof, to read as follows:
FOURTH. The total number of shares which the
Corporation shall have authority to issue is
302,000,000 shares, of which (a) 2,000,000 shares shall
be Preferred Stock, issuable in series, of the par
value of $1.00 per share and (b) 300,000,000 shares
shall be Common Stock, of the par value of $0.10 per
share.
IN WITNESS WHEREOF, said Anadarko Petroleum Corporation
has caused this Certificate to be signed by Suzanne Suter,
its Corporate Secretary this 15th day of June, 1999.
By: ____________________________
Title: Corporate Secretary
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
Six Months Ended June 30, 1999 and Five Years Ended December 31, 1998
<TABLE>
<CAPTION>
Six Months
Ended
June 30 Years Ended December 31
thousands 1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Gross Income $33,564 $ (7,388) $205,318 $196,763 $65,624 $90,794
Rentals 5,880 12,477 8,266 4,234 2,457 2,814
Earnings 39,444 5,089 213,584 200,997 68,081 93,608
Gross Interest Expense 48,135 82,415 62,095 55,986 52,557 41,635
Rentals 5,880 12,477 8,266 4,234 2,457 2,814
Fixed Charges $54,015 $ 94,892 $ 70,361 $ 60,220 $55,014 $44,449
Preferred Stock
Dividends 8,531 10,951 -- -- -- --
Combined Fixed Charges
and Preferred Stock
Dividends $62,546 $105,843 $ 70,361 $ 60,220 $55,014 $44,449
Ratio of Earnings to
Fixed Charges 0.73 0.05 3.04 3.34 1.24 2.11
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends 0.63 0.05 3.04 3.34 1.24 2.11
</TABLE>
For the six months ended June 30, 1999 and the year ended December 31,
1998, Anadarko's earnings did not cover fixed charges by $15 million and
$90 million, respectively, and did not cover combined fixed charges and
preferred stock dividends by $23 million and $101 million, respectively.
The ratios were computed by dividing earnings by either fixed charges or
combined fixed charges and preferred stock dividends. 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.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000773910
<NAME> ANADARKO PETROLEUM CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 16,861
<SECURITIES> 0
<RECEIVABLES> 183,709
<ALLOWANCES> 0
<INVENTORY> 30,175
<CURRENT-ASSETS> 233,925
<PP&E> 5,598,854
<DEPRECIATION> 2,194,827
<TOTAL-ASSETS> 3,690,606
<CURRENT-LIABILITIES> 222,606
<BONDS> 1,305,805
0
200,000
<COMMON> 12,941
<OTHER-SE> 1,279,850
<TOTAL-LIABILITY-AND-EQUITY> 3,690,606
<SALES> 297,883
<TOTAL-REVENUES> 297,883
<CGS> 196,715
<TOTAL-COSTS> 196,715
<OTHER-EXPENSES> 20,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,142
<INCOME-PRETAX> (3,578)
<INCOME-TAX> 6,085
<INCOME-CONTINUING> (9,663)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,663)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
