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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NO. 1-8968
ANADARKO PETROLEUM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0146568
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17001 NORTHCHASE DRIVE, HOUSTON, TEXAS 77060
(ADDRESS OF EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (713) 875-1101
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $0.10 par value The New York Stock Exchange, Inc.
Preferred Stock Purchase Rights The New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES x NO
----- -----
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x .
-----
The aggregate market value of the voting stock held by non-affiliates of
the registrant computed using the average of the high and low sales prices at
which the stock sold on January 31, 1994 was $2,798,280,755.
The number of shares outstanding of each of the registrant's classes of
common stock as of January 31, 1994 is shown below:
NUMBER OF SHARES
TITLE OF CLASS OUTSTANDING
-------------- ----------------
Common Stock, $0.10 par value 58,679,544
PART OF
FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
- --------- -----------------------------------
Part I Portions of the Anadarko Petroleum Corporation 1993 Annual
Report to Stockholders.
Part III Portions of the Proxy Statement, dated March 21, 1994,
for the Annual Meeting of Stockholders of Anadarko
Petroleum Corporation to be held April 28, 1994.
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Business
General 3
Employees 3
Proved Reserves and Future Net Cash Flows 3
Exploration, Development, Acquisition and
Marketing Activities 4
Volumes and Prices 4
Properties and Activities - United States - Onshore 5
Properties and Activities - United States - Offshore 7
Properties and Activities - International 7
Drilling Programs 8
Drilling Statistics 8
Productive Wells 9
Regulatory and Legislative Developments 10
Additional Factors Affecting Business 11
Title to Properties 11
Capital Spending 12
Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends 12
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Executive Officers of the Registrant 13
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 65
PART III
Item 10. Directors and Executive Officers of the Registrant 65
Item 11. Executive Compensation 65
Item 12. Security Ownership of Certain Beneficial Owners
and Management 65
Item 13. Certain Relationships and Related Transactions 65
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 66
Index to Consolidated Schedules 71
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PART I
ITEM 1. BUSINESS
GENERAL
Anadarko Petroleum Corporation and its subsidiaries are engaged in the
exploration, development, production and marketing of gas, oil and natural gas
liquids (NGLs), both domestically and internationally. Anadarko's U. S.
drilling and production operations are focused primarily in Kansas, Oklahoma,
Texas and the Gulf of Mexico. In the United States, approximately 80 percent of
the Company's reserves are located in major producing basins in the
Mid-continent and West Texas. Approximately 14 percent of Anadarko's reserves
are in the Gulf of Mexico, where the Company owns interests in 124 lease
blocks. Anadarko has oil and gas reserves in Canada where the Company has a
drilling program focusing on trends in southern and central Alberta. Anadarko
also is searching for oil reserves on a 5.1 million acre concession in Algeria
and is participating in other select joint-venture projects overseas.
In order to manage production more effectively and improve recovery of
natural gas reserves, the Company owns interests in 17 gas gathering systems,
and 20 gas processing plants in the Mid-continent area. Anadarko also explores
for geothermal energy in the western United States.
Anadarko is a Delaware corporation which was organized in 1985 as the
successor to the oil and gas business of Anadarko Production Company
(Production), which was founded in 1959 as a subsidiary of Panhandle Eastern
Corporation (Panhandle). Anadarko's common stock was distributed to Panhandle
stockholders in 1986. The principal subsidiaries of Anadarko are: Anadarko
Gathering Company; Anadarko Marketing Company; Anadarko Trading Company;
Anadarko Petroleum of Canada Ltd.; and, Anadarko Algeria Corporation.
Unless the context otherwise requires, the terms "Anadarko" or "Company"
refer to Anadarko and its subsidiaries. The Company's executive offices are
located at 17001 Northchase Drive, Houston, Texas 77060, where the telephone
number is (713) 875-1101.
EMPLOYEES
On December 31, 1993, the Company employed approximately 1,020 persons.
The Company's employees are not represented by any union. Relations between
the Company and its employees are considered to be satisfactory, and the
Company has had no work stoppages or strikes.
PROVED RESERVES AND FUTURE NET CASH FLOWS
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and NGLs which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Reservoirs are considered
proved if economical producibility is supported by either actual production or
conclusive formation tests. Reserves which can be produced economically
through application of improved recovery techniques are included in the
"proved" classification when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the project or program was based.
Proved developed oil and gas reserves are reserves which can be expected
to be recovered through existing wells with existing equipment and operating
methods.
As of December 31, 1993, Anadarko had proved reserves of 1.88 trillion
cubic feet (Tcf) of natural gas and 78.5 million barrels (MMBbls) of crude oil,
condensate and NGLs. Combined, these proved reserves are equivalent to 391.1
MMBbls of oil or 2.35 Tcf of gas. As of December 31, 1993, Anadarko had proved
developed reserves of 1.71 Tcf of natural gas and 64.2 MMBbls of crude oil,
condensate and NGLs. Proved developed reserves comprise 89 percent of the
total proved reserves.
The Company's estimates of proved reserves and proved developed reserves,
net of royalty interests, of gas, oil and NGLs owned at December 31, 1993,
1992, 1991 and 1990 and changes in proved reserves during the last three years
are contained in the Supplemental Information on Oil and Gas Exploration and
Production Activities (Supplemental Information) in the Anadarko Petroleum
Corporation 1993 Consolidated Financial Statements (Consolidated Financial
Statements) under Item 8 of this Form 10-K Annual Report (Form 10-K). The
Company files annual estimates of proved oil and gas reserves with the
Department of Energy, which are within five percent of these amounts.
Also contained in the Supplemental Information in the Consolidated
Financial Statements are the Company's estimates of future net cash flows,
discounted future net cash flows before income taxes and discounted future net
cash flows after income taxes from proved reserves of gas, oil and NGLs.
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EXPLORATION, DEVELOPMENT, ACQUISITION AND MARKETING ACTIVITIES
See narrative description of "Exploration", "Development", "Acquisition"
and "Marketing" on pages 6 through 14 of the Anadarko Petroleum Corporation
1993 Annual Report to Stockholders (Annual Report), which is incorporated
herein by reference, and see "Marketing Strategies" and "Operating Results" in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) under Item 7 of this Form 10-K.
VOLUMES AND PRICES
The following table shows the Company's annual volumes. Volumes for
natural gas are in millons of cubic feet (MMcf) at a pressure base of 14.73
pounds per square inch (psi) and volumes for oil and condensate and NGLs are in
thousands of barrels (MBbls).
1993 1992 1991
------- ------- -------
UNITED STATES
Natural gas (MMcf) 158,662 143,865 134,357
Oil and condensate (MBbls) 7,223 3,845 4,183
Natural gas liquids (MBbls) 2,680 2,434 1,943
CANADA
Natural gas (MMcf) 3,236 2,561 3,527
Oil and condensate (MBbls) 687 814 785
Natural gas liquids (MBbls) 17 13 14
TOTAL
Natural gas (MMcf) 161,898 146,426 137,884
Oil and condensate (MBbls) 7,910 4,659 4,968
Natural gas liquids (MBbls) 2,697 2,447 1,957
The following table shows the Company's annual average sales
prices and average production costs. Production costs are per energy
equivalent barrel (EEB). For this computation, one barrel is the energy
equivalent of six thousand cubic feet (Mcf).
1993 1992 1991
------ ------ ------
UNITED STATES
Sales price $ 1.92 $ 1.71 $ 1.51
Natural gas (per MMcf) 16.35 18.45 19.61
Oil and condensate (per barrel) 0.30 0.32 0.33
Natural gas liquids (per gallon) 3.30 2.78 2.90
Production cost (per EEB)
CANADA
Sales price $ 1.53 $ 1.22 $ 1.30
Natural gas (per MMcf) 12.85 14.60 14.01
Oil and condensate (per barrel) 0.24 0.24 0.30
Natural gas liquids (per gallon) 4.51 5.26 4.69
Production cost (per EEB)
TOTAL
Sales price
Natural gas (per MMcf) $ 1.91 $ 1.70 $ 1.51
Oil and condensate (per barrel) 16.05 17.78 18.72
Natural gas liquids (per gallon) 0.30 0.32 0.33
Production cost (per EEB) 3.34 2.88 2.99
Additional information on volumes and prices is contained in "Analysis of
Volumes and Prices" in the MD&A under Item 7 of this Form 10-K. Additional
information on major customers is contained in Note 8 of the Notes to
Consolidated Financial Statements under Item 8 of this Form 10-K.
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PROPERTIES AND ACTIVITIES - UNITED STATES - ONSHORE
ACREAGE Approximately 88 percent of the Company's 2,522,000 gross (797,000
net) onshore undeveloped acres in the United States at year-end 1993 lie within
four producing provinces: the Anadarko Basin of Kansas and Oklahoma, the Gulf
Coast region, the Permian Basin of West Texas and the Rocky Mountains. As of
December 31, 1993, approximately 98 percent of the Company's 2,145,000 gross
(895,000 net) developed acres onshore in the United States are located within
these same provinces. Other significant areas of developed acreage are in
Oklahoma.
The accompanying map illustrates by state Anadarko's developed and
undeveloped net acres, number of producing net wells and other data relevant to
its onshore oil and gas operations in the United States.
GEOTHERMAL The Company is actively exploring for geothermal energy because
of its long-term potential for economic and environmentally safe electric power
generation. Geothermal exploratory holdings in California, Nevada and Oregon
totaled 160,000 net acres at year-end 1993. During 1993, the Company recorded
a $500,000 (pre-tax) charge to earnings for the impairment of miscellaneous
geothermal projects in Nevada.
GAS GATHERING SYSTEMS Anadarko owns and operates four gas gathering systems
in the nation's mid-continent area: the Antioch Gathering System in the
Southwest Antioch Field of Oklahoma; the Hobart Ranch Gathering System, located
in Hemphill County, Texas; the Hugoton Gathering System in southwest Kansas;
and the Sneed System in the West Panhandle Field of Texas. In addition, the
Company owns a 43 percent working interest in the Limestone Ridge Gas Gathering
System, located in the Arkoma Basin near Wilburton, Oklahoma. In addition to
these systems, Anadarko owns interests in 12 other smaller systems. In the
aggregate, these 17 systems have approximately 700 miles of pipeline and over
400 MMcf per day (MMcf/d) of gas gathering capacity.
GAS PROCESSING PLANTS Anadarko owns and operates seven gas processing
plants and has interests in 13 other plants. Virtually all of these plants are
located within the Company's areas of gas production. Many also are integrated
with the gas gathering systems described previously. The following table sets
forth the average daily gas throughput and NGLs production for the three years
ended December 31, 1993 and capacity as of December 31, 1993.
Throughput and Production Capacity
For the Years Ended December 31 December 31,
1993 1992 1991 1993
--------- -------- --------- ------------
Gas throughput (MMcf/d) 98 102 100 200
NGLs production (Bbls per day) 7,040 6,640 5,410 9,000
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ONSHORE MAP (GRAPHIC MATERIAL OMITTED)
NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
--------- ----------- ---------
ONSHORE:
United States
Arkansas 5,356 33,637 44
Colorado* 6,162 49,268 13
Kansas* 366,284 72,417 1,326
Louisiana 1,341 2,267 8
Mississippi 242 60,669 --
Montana 18,372 8,797 24
Nebraska 109 483 --
Nevada* -- 192,712 --
New Mexico* 30,126 4,206 268
North Dakota 1,390 294 3
Oklahoma* 228,147 51,346 815
Texas* 195,953 144,331 1,677
Utah* 407 112,864 12
Wyoming* 41,182 64,142 48
United States - Geothermal
California -- 113,610 --
Nevada -- 11,639 --
Oregon -- 34,857 --
Canada
Alberta* 46,719 58,941 109
British Columbia 8,748 10,653 32
Saskatchewan 3,429 2,327 19
OFFICE LOCATIONS:
United States
Houston, Texas
Midland, Texas
Oklahoma City, Oklahoma
Liberal, Kansas
Santa Rosa, California
Canada
Calgary, Alberta
*1993 Onshore Drilling Activities Area
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PROPERTIES AND ACTIVITIES - UNITED STATES - OFFSHORE
ACREAGE At year-end 1993, Anadarko owned an average 40 percent interest in
124 lease blocks and held 40,000 net acres in developed properties and 200,000
net acres in undeveloped properties.
The accompanying map illustrates the Company's exploratory and development
net acres, number of producing net wells and other data relevant to its
offshore properties.
PROPERTIES AND ACTIVITIES - INTERNATIONAL
In recent years, the Company has devoted a small portion of its
exploration budget to selected joint-venture projects overseas. Anadarko's
objective in international exploration is to bring high-potential prospects to
the balanced mix of domestic plays. These projects offer significant upside
potential, albeit with corresponding exposure to write-offs in the event
exploration is unsuccessful. The Company recorded $6.5 million (pre-tax) and
$21 million (pre-tax) of charges to earnings during 1993 and 1992,
respectively, related to unsuccessful exploration activity in China, Yemen and
various other international locations.
CANADA Approximately three percent of the Company's proved reserves are
located in Canada. Activities in Canada are concentrated in the western
provinces of Alberta, British Columbia and Saskatchewan. At the end of 1993,
Anadarko held interests in 241,000 gross (131,000 net) acres of which 105,000
gross (72,000 net) acres were undeveloped and 136,000 gross (59,000 net) acres
were developed. The accompanying onshore map illustrates by province
Anadarko's developed and undeveloped net acres, number of producing net wells
and other data relevant to its oil and gas operations in Canada.
ALGERIA Anadarko's primary international exploration venture is in Algeria,
where the Company is exploring for oil under a production sharing agreement
secured in 1989 from Sonatrach, the national oil and gas enterprise of Algeria.
Anadarko's partners, each with a 25 percent working interest, in the Algerian
venture are LASMO Oil (Algeria) Limited, a wholly owned subsidiary of LASMO
plc, and Maersk Olie Algeriet AS, a wholly owned subsidiary of Maersk Olie Og
Gas AS, a company in the Danish A.P. Moeller group. Over a ten year period,
the Company and its two partners are committed to spend over $100 million and
drill ten wells exploring on 5.1 million acres in the eastern Sahara Desert in
Algeria.
Liquid hydrocarbons discovered and produced will be shared by Anadarko and
its partners, and Sonatrach in accordance with the terms of the agreement.
Sonatrach is the beneficial owner of 10.2 percent of the Company's outstanding
common stock. As of December 31, 1993, Anadarko had incurred a total of
approximately $72,408,000 related to exploration activities, of which
approximately $26,964,000 was incurred in 1993.
At the present time, political unrest continues in Algeria. The Company
is closely monitoring the situation and is presently unable to predict with
certainty the short-term effects it may have on activity planned for 1994.
However, the situation has not had any material effect on the Company's
operations or exploration activity in Algeria to date. The Company's
activities in Algeria also are subject to the risks associated with
international operations.
INDONESIA The Company's ongoing commitment to international exploration
includes future exploration on the Jabung Block in the Jambi Province of
Indonesia. Anadarko and its partners, Santa Fe Energy Resources (Jabung),
Ltd., a wholly owned subsidiary of Santa Fe Energy Resources Inc., and
Kerr-McGee Sumatra Ltd., a wholly owned subsidiary of Kerr-McGee Corporation,
have a Production Sharing Contract which includes a $15.1 million commitment to
exploration activities which include seismic acquisition and reprocessing, as
well as the drilling of three exploratory wells, during the first three years.
The Jabung Block, which is located on the island of Sumatra in the northernmost
part of the South Sumatra Basin, covers an area of 2.0 million acres.
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OFFSHORE MAP (GRAPHIC MATERIAL OMITTED)
NET NET NET
DEVELOPED UNDEVELOPED PRODUCING
ACRES ACRES WELLS
--------- ----------- ---------
OFFSHORE:
United States
Alaska -- 6,397 --
Florida -- 54,734 --
Louisiana 14,141 72,708 18
Mississippi -- 2,194 --
Texas 25,560 63,905 20
DRILLING PROGRAMS
The Company's 1993 drilling program again focused on known oil and gas
provinces onshore in North America, as well as offshore in the Gulf of Mexico.
Onshore activity was concentrated in the mid-continent regions of Kansas and
Oklahoma, the Yegua Trend along the Texas Gulf Coast and the Permian Basin of
West Texas. Exploration activity consisted of 21 wells onshore in the United
States, seven wells offshore United States, two wells in Canada and two
wells in Algeria. Development activity included 178 wells onshore in the
United States, four wells offshore United States and five wells in
Canada.
DRILLING STATISTICS
The following table shows the results of the oil and gas wells drilled and
tested:
NET EXPLORATORY NET DEVELOPMENT
---------------------------- ----------------------------
PRODUCTIVE DRY HOLES TOTAL PRODUCTIVE DRY HOLES TOTAL TOTAL
---------- ---------- ----- ---------- ---------- ----- -----
1993
United States 11.4 6.2 17.6 100.5 10.4 110.9 128.5
Canada 0.0 1.0 1.0 0.5 3.0 3.5 4.5
Algeria 0.5 0.5 1.0 0.0 0.0 0.0 1.0
--- --- ---- ---- ---- ----- -----
Total 11.9 7.7 19.6 101.0 13.4 114.4 134.0
==== === ==== ===== ==== ===== =====
1992
United States 3.5 4.5 8.0 43.5 5.4 48.9 56.9
Canada 0.0 2.5 2.5 5.4 0.0 5.4 7.9
China 0.0 1.0 1.0 0.0 0.0 0.0 1.0
Yemen 0.0 0.9 0.9 0.0 0.0 0.0 0.9
--- ---- ---- ---- ---- ----- -----
Total 3.5 8.9 12.4 48.9 5.4 54.3 66.7
=== ==== ==== ==== ==== ===== =====
1991
United States 4.6 7.0 11.6 63.5 8.0* 71.5 83.1
Canada 1.0 3.0 4.0 3.8 1.4 5.2 9.2
Algeria 0.0 0.5 0.5 0.0 0.0 0.0 0.5
--- ---- ---- ---- --- ----- ----
Total 5.6 10.5 16.1 67.3 9.4 76.7 92.8
=== ==== ==== ==== === ==== ====
____________
*Does not include 1.3 net development Hugoton "deep" dry holes in 1991 that
were later completed as infill wells.
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The following table shows the number of wells in the process of drilling or
in active completion stages and the number of wells suspended or waiting on
completion as of December 31, 1993:
UNITED STATES CANADA ALGERIA TOTAL
------------- ---------- ---------- -----------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ---- ----- --- ----- --- ----- -----
Wells in the process
of drilling or active
completion
Exploration 8.0 5.0 --- --- 2.0 1.0 10.0 6.0
Development 13.0 7.6 --- --- --- --- 13.0 7.6
Wells suspended or
waiting on completion
Exploration 9.0 5.6 13.0 6.9 --- --- 22.0 12.5
Development 82.0 54.5 --- --- --- --- 82.0 54.5
PRODUCTIVE WELLS
As of December 31, 1993, the Company owned productive wells in the United
States and Canada as follows:
UNITED STATES CANADA TOTAL
---------------- ------------ ---------------
GROSS NET GROSS NET GROSS NET
----- ------- ----- ----- ------ -------
Oil wells* 6,990 2,433.0 553 118.9 7,543 2,551.9
Gas wells* 2,760 1,842.8 125 40.6 2,885 1,883.4
----- ------- --- ----- ------ -------
Total 9,750 4,275.8 678 159.5 10,428 4,435.3
===== ======= === ===== ====== =======
_______________
*Wells containing multiple completions
Oil wells 78 27.0 1 1.0 79 28.0
Gas wells 165 72.2 2 1.0 167 73.2
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REGULATORY AND LEGISLATIVE DEVELOPMENTS
NATURAL GAS PRORATION State agencies in many of the states where Anadarko
operates are empowered by laws unique to each state to prevent waste in the
production of natural gas and protect the correlative rights of each mineral
interest owner to produce its fair share of gas in a field. To prevent waste
and protect correlative rights, state agencies have developed proration systems
for limiting production by assigning each unit in a prorated field an allowable
production volume which the producer is legally permitted to produce. These
allowables are based on market demand and other factors as determined by the
state agency.
In Kansas, where Anadarko has significant gas reserves and production
capacity, the Kansas Corporation Commission (KCC) voted on December 3, 1993 to
modify its basic proration order for the Hugoton Field, the largest dry gas
reservoir in the United States. A written order was issued February 1, 1994.
This order changes the formula currently used by the KCC to calculate field and
unit allowables and will increase the portion of overall production allowables
assigned to Anadarko's wells in the Hugoton Field. As a result of the order,
Anadarko's share of the total field allowable will increase from its current
level of about 12 percent to 15 percent.
KANSAS AD VALOREM TAX The Natural Gas Policy Act of 1978 (NGPA) allows a
"severance, production or similar" tax to be included as an add-on, over and
above the maximum lawful price for natural gas. Based on a Federal Energy
Regulatory Commission (FERC) ruling that the Kansas ad valorem tax was such a
tax, the Company collected the Kansas ad valorem tax in addition to the maximum
lawful price. FERC's ruling was appealed to the United States Court of Appeals
for the District of Columbia, which held in June 1988 that FERC failed to
provide a reasoned basis for its findings and remanded the case to FERC for
further consideration.
On December 1, 1993, FERC issued an order reversing its prior ruling, but
limiting the effect of its decision to sales that were made on or after June
28, 1988. Based on Anadarko's interpretation of the FERC order, $130,000
(pretax) was charged to expense in 1993. Numerous parties have filed requests
for rehearing at the FERC asking that the December 1, 1993, order be
reconsidered and the Company is unable to predict the outcome of this matter.
ENVIRONMENTAL The Company's oil and gas operations and properties are
subject to numerous federal, state and local laws and regulations relating to
the protection of the environment. These laws and regulations govern, among
other things, the amounts and types of substances and materials that may be
released into the environment, the issuance of permits in connection with
drilling and production activities, the discharge and disposition of waste
materials, offshore oil and gas operations, the reclamation and abandonment of
wells and facility sites and the remediation of contaminated sites. In
addition, these laws and regulations may impose substantial liabilities for the
Company's failure to comply with them or for any contamination resulting from
the Company's operations.
Compliance with such laws and regulations has not had a material adverse
effect on the Company's operations or financial condition in the past.
However, because environmental laws and regulations are becoming increasingly
more stringent, there can be no assurances that such laws and regulations or
any environmental law or regulation enacted in the future will not have a
material adverse effect on the Company's operations or financial condition.
For a description of certain environmental proceedings in which the
Company is involved, see Note 13 of the Notes to Consolidated Financial
Statements under Item 8 of this Form 10-K.
OTHER Regulatory agencies in certain states have authority to issue permits
for the drilling of wells, regulate the spacing of wells, prevent the waste of
oil and gas resources through proration and regulate environmental matters.
Operations conducted by the Company on federal oil and gas leases must
comply with numerous regulatory restrictions, including various
nondiscrimination statutes. Additionally, certain operations must be conducted
pursuant to appropriate permits issued by the Bureau of Land Management and the
Minerals Management Service of the Department of Interior and, in regard to
certain federal leases, with prior approval of drill site locations by the
Environmental Protection Agency.
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ADDITIONAL FACTORS AFFECTING BUSINESS
The oil and gas business is highly competitive in the search for and
acquisition of reserves and in the gathering and marketing of oil and gas
production. The Company's competitors include the major oil companies,
independent oil and gas concerns, individual producers and major pipeline
companies, as well as participants in other industries supplying energy and
fuel to industrial, commercial and individual consumers.
Crude oil prices continue to be affected by political developments in the
Middle East, pricing decisions of the Organization of Petroleum Exporting
Countries (OPEC) and the volatile trading patterns in the oil futures markets.
The domestic and international operations of the Company have been, and at
times in the future may be, affected by political developments and by federal,
state and local laws and regulations such as restrictions on production,
changes in taxes, royalties and other amounts payable to governments or
governmental agencies, price or gathering rate controls, and environmental
protection regulations.
The Company's business is subject to all of the operating risks normally
associated with the exploration for and production of oil and gas, including
blow-outs, cratering and fire, each of which could result in damage to or
destruction of oil and gas wells or formations or production facilities and
other property and injury to persons. As protection against financial loss
resulting from these operating hazards, the Company maintains insurance
coverage, including certain physical damage, employer's liability,
comprehensive general liability and workmen's compensation insurance. Although
the Company is not fully insured against all risks in its business, the Company
believes that the coverage it maintains is adequate and customary for companies
engaged in similar operations. The occurrence of a significant event against
which the Company is not fully insured could have a material adverse effect on
the Company's financial position.
TITLE TO PROPERTIES
As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time properties believed to be suitable for
drilling operations are acquired by the Company. Prior to the commencement of
drilling operations, a thorough title examination of the drill site tract is
conducted and curative work is performed with respect to significant defects,
if any, before proceeding with operations. A thorough title examination has
been performed with respect to substantially all leasehold producing properties
owned by the Company. The Company believes that the title to its leasehold
properties is good and defensible in accordance with standards generally
acceptable in the oil and gas industry subject to such exceptions which, in the
opinion of counsel employed in the various areas in which the Company has
conducted exploration activities, are not so material as to detract
substantially from the use of such properties. The leasehold properties
owned by the Company are subject to royalty, overriding royalty and other
outstanding interests customary in the industry. The properties may be subject
to burdens such as liens incident to operating agreements and current taxes,
development obligations under oil and gas leases and other encumbrances,
easements and restrictions. The Company does not believe that any of these
burdens will materially interfere with its use of these properties.
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CAPITAL SPENDING
See "Capital Expenditures, Liquidity and Long-Term Debt" of the MD&A under
Item 7 of this Form 10-K.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The Company's ratios of earnings to fixed charges for the years ended
December 31, 1993, 1992 and 1991 were 2.68, 1.81 and 1.99, respectively. These
ratios were computed by dividing earnings by fixed charges. For this purpose,
earnings include income before income taxes and fixed charges. Fixed charges
include interest and amortization of debt expenses, and the estimated interest
component of rentals.
During the three years ended December 31, 1993, there were no shares of
preferred stock outstanding. Accordingly, the ratio of earnings to combined
fixed charges and preferred stock dividends for each of the three years is the
same as the ratio of earnings to fixed charges.
ITEM 2. PROPERTIES
See information appearing under Item 1 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
HERITAGE RESOURCES, INC. LITIGATION Pursuant to an order of the 162nd
Judicial District Court for Dallas County, Texas, dated January 29, 1988,
requiring all owners of interests in certain properties in Winkler County,
Texas, to be joined as parties Plaintiff or parties Defendant, Anadarko has
entered, as a party Plaintiff, a suit filed against Heritage Resources, Inc.
(Heritage) by Tribal Drilling Company. The Plaintiffs, among other things,
seek to have Heritage removed as operator of a well in which Plaintiffs own
interests. The Defendants have asserted counterclaims against Anadarko and the
19 other Plaintiffs alleging that, among other things, the assertions of the
Plaintiffs are frivolous and were made in bad faith and that the Plaintiffs
breached the joint operating agreements. The trial previously scheduled for
April 1993 has been continued indefinitely until such time as the appeal of a
companion case, a case in which Anadarko is not a party, has been concluded.
While the outcome of the litigation cannot be predicted, Anadarko's management
believes that any recovery on the counterclaims in a material amount is remote.
12
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
AGE AT END
NAME OF 1994 POSITION
---- ---------- --------
Robert J. Allison, Jr. 55 Chairman of the Board, President and
Chief Executive Officer
Charles G. Manley 50 Senior Vice President, Administration
Michael E. Rose 47 Senior Vice President, Finance and
Chief Financial Officer
Charles K. Abernathy 51 Vice President-Operations,
International/Gulf of Mexico
Rex Alman III 43 Vice President, Engineering
Richard J. Sharples 47 Vice President, Marketing
John N. Seitz 43 Vice President, Exploration
Bruce H. Stover 45 Vice President, Acquisitions
William D. Sullivan 38 Vice President-Operations,
U. S. Onshore
A. P. Taylor, Jr. 45 Vice President, Corporate
Communications
Lewis L. Williams 65 Vice President and General Counsel
Mr. Allison joined Production in 1973 as Vice President-Operations, was
named President in 1976 and was President and Chief Executive Officer from 1979
until 1985 when he assumed the position of President and Chief Executive
Officer of Anadarko. Mr. Allison was named Chairman and Chief Executive
Officer effective October 1986. In January 1993, he was elected the additional
position of President.
Mr. Manley was employed by Production in 1976 and was Vice President,
Administration and Employee Relations, from 1977 until August 1985. He held
that position with Anadarko until January 1993 when he was named Senior Vice
President, Administration.
Mr. Rose joined Production as Chief Accountant in January 1978 and became
Vice President and Controller in May 1981. He held that position at Anadarko
from August 1985 until he was named Vice President, Finance, in October 1986.
In January 1993, he was named Senior Vice President, Finance and Chief
Financial Officer.
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Mr. Abernathy joined Production in January 1975 as a Senior Petroleum
Engineer. He served as the Southern Region's Operations Manager before
becoming Manager, Exploration and Production Operations, of Anadarko in June
1987. He was named Vice President, Exploration and Production Operations, in
July 1987 and Vice President and General Manager, International, in October
1989. He was named Vice President Operations, International/Gulf of Mexico, in
January, 1992.
Mr. Alman joined Production in 1976 as an Evaluation Engineer. He served
as Manager, Production and Planning, prior to being named Manager, Exploration
and Production Operations, in February 1990. He was named Vice President,
Exploration and Production Operations, in April 1990 and was named Vice
President, Operations, U. S. Onshore, in January 1992. In January 1993, he was
named Vice President, Engineering.
Mr. Sharples was employed by Anadarko and named Vice President, Marketing,
in March 1993. Prior to coming to Anadarko, he held a vice president's
position in marketing with Maxus Energy Corporation from October 1984 until
March 1993.
Mr. Seitz joined Production in 1977 as a Petroleum Geologist. He served as
Manager of Exploration and Chief Geologist before becoming General Manager,
Exploration, of Anadarko in June 1987. He was named Vice President,
Exploration and Production Operations, in October 1989 and Vice President and
General Manager, Houston Region, in February 1990. He was named Vice
President, Exploration, International/Gulf of Mexico, in January 1992 and Vice
President, Exploration in January 1993.
Mr. Stover joined Anadarko in 1980 as Chief Engineer and was named General
Manager - Special Projects, International in 1987. He assumed the position of
President and General Manager, Anadarko Algeria Corporation, in 1989. In
January 1993, he was named Vice President, Acquisitions.
Mr. Sullivan joined the Company in 1981 as Senior Reservoir Engineer -
Southern Region. He held several positions in engineering and operations
before being named Manager, Acquisitions in 1987. In 1991, he was named Vice
President and General Manager, Anadarko China Company. In January 1993, he was
named Vice President Operations, U. S. Onshore.
Mr. Taylor was employed by Anadarko in October 1986 as Director, Corporate
Communications, and became Vice President, Corporate Communications, in January
1987. Prior to coming to Anadarko, he held the position of Director of
Investor Relations at Panhandle. He had been with Panhandle since 1982.
Mr. Williams was employed by Anadarko in March 1988 as Regional Counsel and
was named Vice President and General Counsel in January 1989. Prior to coming
to Anadarko, he served as Counsel for K-N Operating Corporation. He had been
with K-N Operating Corporation since 1981.
All officers of Anadarko are elected in April of each year at the
organization meeting of the Board of Directors to hold office until their
successors are duly elected and shall have qualified. There are no family
relationships between any directors or executive officers of Anadarko.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information on the market price and cash dividends declared per share of
common stock is included in the Stockholders' Information in the Annual Report,
which is incorporated herein by reference.
As of December 31, 1993, there were approximately 8,500 direct holders of
Anadarko common stock. The following table sets forth the amount of dividends
paid on Anadarko common stock during the two years ended December 31, 1993.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
thousands
1993 $4,152 $4,171 $4,494 $4,400
1992 $4,139 $4,144 $4,147 $4,147
The amount of future dividends will depend on earnings, financial
condition, capital requirements and other factors, and will be determined by
the Directors on a quarterly basis.
For additional information, see Note 5 of the Notes to Consolidated
Financial Statements under Item 8 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
See Summary Financial Data in the Annual Report, which is incorporated
herein by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL RESULTS
NET INCOME AND REVENUES Anadarko's net income for 1993 before the
cumulative effect of changes in accounting principles was $40.0 million (70
cents per share) compared to $27.3 million (49 cents per share) for 1992 and
$32.4 million (59 cents per share) in 1991. Stated without the effect of a
special tax charge of $11.2 million related to a change in corporate tax rates
recorded in the third quarter of 1993, Anadarko's net income would have been
$51.3 million (90 cents per share). Including the cumulative effect of two
accounting changes and the special tax charge, Anadarko's net income for 1993
was $117.4 million ($2.05 per share).
Revenues for 1993 were $476.3 million, 27 percent higher than 1992
revenues of $375.2 million and 41 percent higher than revenues of $336.6
million in 1991. The increase in earnings and revenues (before the special
charge and before the cumulative effect of changes in accounting principles)
was due primarily to significantly stronger gas markets and increased crude oil
production.
During 1993, Anadarko's net income was affected by the following items:
(1) Implementation in the first quarter of Statement of Financial
Accounting Standards (SFAS) No. 106 which required a change in
accounting for postretirement benefits other than pensions. The
Company recognized the cumulative transition obligation as of
January 1, 1993, which resulted in a decrease to net income of $9.7
million (17 cents per share).
(2) Implementation in the first quarter of SFAS No. 109 which changed
the accounting method for deferred income taxes and increased
Anadarko's net income by $87.1 million ($1.52 per share).
(3) SFAS No. 109 also requires that the effect on existing deferred tax
liabilities of any change in income tax rates must be recognized in
income during the period in which the change in tax rates is
enacted. In August, Congress enacted the Omnibus Budget
Reconciliation Act of 1993, which raised the top corporate income
tax rate from 34 to 35 percent. As a result, Anadarko recorded a
charge to net income of $11.2 million (20 cents per share) in the
third quarter.
Anadarko's net income for 1992 was down 16 percent compared to 1991, due
primarily to $21 million (pretax) in provisions for impairments of
international properties related to unsuccessful drilling operations in China
and Yemen during 1992.
SELECTED FINANCIAL DATA
millions except per share amounts 1993 1992 1991
------ ------ ------
Revenues $476.3 $375.2 $336.6
Costs and expenses 372.2 307.6 263.6
Interest expense 29.4 28.2 27.2
Net income 40.0* 27.3 32.4
Earnings per share $ 0.70* $ 0.49 $ 0.59
_____________
*Excludes the cumulative effect of changes in accounting principles.
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COSTS AND EXPENSES For 1993, Anadarko's costs and expenses were $372.2
million, an increase of approximately $65 million (21 percent) compared to
$307.6 million in 1992. The increase was a result of several factors:
(1) Depreciation, depletion and amortization (DD&A) was up $34.7
million (or 26 percent) compared to 1992 due to an 11 percent
increase in gas production volumes and a 70 percent increase in
crude oil and condensate production volumes;
(2) Operating expenses were up $23.7 million or 32 percent compared to
1992 due primarily to increased production volumes as a result of
the acquisition of secondary recovery oil properties in West Texas
in December 1992;
(3) Other taxes increased $10.9 million or 36 percent compared to 1992
because of higher production related (severance) and ad valorem
taxes; and,
(4) Administrative and general expenses were up $9.2 million or 19
percent compared to 1992 due to costs associated with
postretirement benefits other than pension as required under SFAS
No. 106 and increased salary and benefits for the Company's
growing workforce.
Anadarko incurred $7 million in provisions for impairments of
international and geothermal properties in 1993. This compares to $21 million
of provisions for impairments in 1992.
Anadarko's costs and expenses in 1992 were up 17 percent compared to 1991.
There were four reasons for the increase: (1) $21 million (pretax) of
provisions for impairments of international properties; (2) increased
administrative and general expenses primarily related to accelerated vesting of
benefits under the Company's restricted stock plan; (3) increased DD&A expense
due to higher natural gas production volumes; and (4) higher production related
taxes.
COSTS AND EXPENSES
millions 1993 1992 1991
----- ------ ------
Operating expenses $ 98.6 $ 74.9 $ 76.2
Administrative and general 57.4 48.2 38.5
DD&A 167.7 132.9 121.1
Other taxes 41.5 30.6 27.8
Provisions for impairments 7.0 21.0 --
------ ------ ------
Total $372.2 $307.6 $263.6
INTEREST EXPENSE Anadarko's interest expense for 1993 was $29.4 million, up
4 percent compared to $28.2 million in 1992 and up 8 percent compared to $27.2
million in 1991.
Despite declining interest rates since 1992, Anadarko has experienced
modest growth in interest expense primarily due to higher average borrowings
during 1992 and 1993 and lower amounts of capitalized interest in 1992 and 1993
compared to 1991.
Anadarko's long-term debt at December 31, 1993 decreased by about $105
million compared to year-end 1992 primarily due to conversion in July of 99.8
percent of the Company's outstanding $100 million principal amount of 6 1/4%
Convertible Subordinated Debentures. Long-term debt increased by 47 percent at
year-end 1992 compared to year-end 1991 due to the large acquisition of
producing properties in December 1992. (See Liquidity and Long-term Debt)
17
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ANALYSIS OF VOLUMES AND PRICES
NATURAL GAS In 1993, Anadarko achieved record natural gas production of
161.9 billion cubic feet (Bcf) or 444 million cubic feet per day (MMcf/d).
This was an 11 percent increase over natural gas production of 146.4 Bcf in
1992 and a 17 percent increase over gas production of 137.9 Bcf in 1991. Early
in 1993, the Company increased its natural gas sales in response to higher gas
prices. Anadarko's average U.S. gas price in 1993 was $1.92 per thousand cubic
feet (Mcf), up 12 percent compared to 1992 and up 27 percent compared to 1991.
Generally, Anadarko's annual gas sales are below the Company's total
capacity due to state regulations limiting allowable production, any seasonal
weaknesses in gas prices and the Company's long-standing policy to sell minimum
volumes of discretionary gas during periods of weak prices.
Historically, natural gas sales markets have been highly seasonal because
of the increase in residential heating demand during the winter. Due to this
seasonality, Anadarko's natural gas prices and production volumes and,
therefore, financial results have traditionally been stronger in the first and
fourth quarters. However, in 1993, this seasonal variance diminished somewhat
due to overall growth in gas demand and continuing declines in gas supply.
This was most evident in the summer of 1993 when demand for natural gas storage
injections dramatically increased natural gas prices during the second and
third quarters of the year.
The historical role of natural gas storage to supplement wellhead
production during peak demand periods has been somewhat skewed over the past
three years. Warm winters saw weak prices as local distribution companies
(LDCs) used storage as a supply source during the winters of 1990-91 and
1991-92. Many natural gas customers began using storage volumes as a price
hedge or arbitrage tool which disrupted the seasonal injection and withdrawal
pattern in the nation's storage fields. As a result, prices in March 1992, for
example, fell to 15-year record low levels.
During the 1992-93 winter heating season, the ability of gas consumers to
utilize this price arbitrage was diminished as cold weather blanketed the
nation late in the season and storage gas was needed for peak-day demand. The
effect of a significant net storage drawdown in the first quarter of 1993
resulted in aggressive injections during the summer refill cycle and
subsequently higher prices for gas.
Anadarko believes that while seasonality in gas markets will continue,
the tight balance in supply and demand will extend the recent strength in
natural gas markets.
QUARTERLY NATURAL GAS
VOLUMES AND U.S. PRICES
1993 1992 1991
----- ----- -----
First Quarter
Bcf 46.8 39.6 40.3
MMcf per day 520 435 447
Price per Mcf $1.73 $1.37 $1.56
Second Quarter
Bcf 34.8 28.0 29.7
MMcf per day 382 308 326
Price per Mcf $2.05 $1.46 $1.30
Third Quarter
Bcf 35.7 32.7 25.6
MMcf per day 388 355 279
Price per Mcf $1.94 $1.67 $1.28
Fourth Quarter
Bcf 44.6 46.1 42.3
MMcf per day 485 502 460
Price per Mcf $1.97 $2.17 $1.76
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CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS Anadarko achieved record
crude oil and condensate production of 7.9 million barrels (MMBbls) in 1993, a
70 percent increase over 1992 oil and condensate production and a 59 percent
increase over 1991 oil and condensate production. This increase was primarily
related to producing oil properties in the Permian Basin of West Texas which
were acquired by Anadarko in December 1992, as well as increased waterflood
recovery operations in West Texas and the Mid-continent.
Anadarko's crude oil production over the past three years has been
enhanced by the use of secondary recovery techniques and development drilling
in existing fields. These activities have generally offset the production
decline normally associated with oil fields.
Crude oil markets suffered dramatically in late 1993 as a result of the
failure of the Organization of Petroleum Exporting Countries (OPEC) to
effectively reduce a perceived surplus of crude oil. West Texas Intermediate
(WTI) crude oil prices fell to a low of $13.02 per barrel in December 1993, the
lowest level since 1986.
Anadarko's average U.S. crude oil price for 1993 was $16.35 per barrel,
down 11 percent compared to 1992 and down 17 percent compared to 1991. The
Company's crude oil price has averaged about $12.50 per barrel in January 1994.
Generally, the Company's oil production is sold on a monthly basis as it
is produced. Volumes of oil are not affected by seasonal swings in market
prices.
The Company's natural gas liquids (NGLs) sales volumes were 2.7 MMBbls,
up ten percent over 1992 and up 38 percent over 1991. The 1993 average price
of 30 cents per gallon was six percent lower than the average price in 1992 and
nine percent lower than the average price in 1991. The increase in NGL volumes
for 1993 is due primarily to increased sales from inventory in 1993 and the
acquisition of NGL plants included in the purchase of producing properties in
December 1992. NGLs markets were weak in 1993 despite low levels of inventory
and strong natural gas markets.
ANNUAL VOLUMES AND U.S. PRICES
1993 1992 1991
------ ----- ------
Natural gas (Bcf) 161.9 146.4 137.9
MMcf per day 444 400 378
Price per Mcf $ 1.92 $ 1.71 $ 1.51
Crude oil and
condensate (MBbls) 7,910 4,659 4,968
MBbls per day 21.7 12.7 13.6
Price per barrel $16.35 $18.45 $19.61
Natural gas
liquids (MBbls) 2,697 2,447 1,957
Price per gallon $ 0.30 $ 0.32 $ 0.33
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20
MARKETING STRATEGIES
Anadarko's marketing strategies are designed to capture maximum value when
the Company sells natural gas, crude oil, condensate and NGLs.
NATURAL GAS With a large base of uncommitted gas reserves available for
sale, Anadarko can continue to sell greater volumes at market-responsive
prices. Over the past three years, Anadarko has increased natural gas sales
and captured market share by aggressively offering customers an array of gas
supply options at market-responsive prices.
Anadarko sells natural gas under a variety of contracts, including 30-day
spot market contracts, long-term contracts and "term" sales contracts. Term
sales contracts were implemented by the Company in 1989 to provide gas sales
over an extended period of time (three months to three years). Through these
term contracts, the Company is able to enhance the commodity value of gas with
a service fee related to the level of reliability and service required by the
customer.
In 1993, the Company's marketing subsidiary, Anadarko Trading Company
(ATC), increased its purchase of non-affiliated gas for sale into the Company's
market areas. Sales of non-affiliated gas totaled 82 Bcf in 1993 compared to
58 Bcf in 1992 and 28 Bcf in 1991.
In addition, ATC made great strides during the year in developing a
variety of marketing related services which are available to customers. These
services include transportation contracting and scheduling, gas supply
nominations, supply and delivery monitoring, contract administration and
account coordination.
CRUDE OIL AND CONDENSATE The majority of the Company's crude oil production
is sold on 30-day "evergreen" contracts with prices based on postings plus a
premium.
PLANTS AND PIPELINES Anadarko's investment in gas gathering operations
allows the Company to better manage its gas production, improve ultimate
recovery of reserves and enhance its marketing opportunities. Since 1988, the
Company has invested approximately $54 million to build or acquire gas
gathering pipeline systems and gas processing plants. Anadarko currently owns
and operates four major gas gathering systems in core producing areas and
operates or has interests in 13 other systems. The four major systems have
capacity of 300 MMcf/d of gas and are connected to 536 wells.
In 1993, Anadarko began a $1.6 million expansion of its Hugoton Gathering
System (HUGS) in southwest Kansas, which was built in 1990. With completion of
this project in January 1994, the HUGS system has 120 MMcf/d of gas capacity to
serve Anadarko's markets in the Midwest through two interstate and one
intrastate pipeline connection. Also in 1993, Anadarko invested $1.7 million
to expand and add compression to its Antioch Gathering System in central
Oklahoma. As a result, throughput at the Panther Creek Plant increased from 16
MMcf/d to 26 MMcf/d of gas.
In 1994, Anadarko will aggressively pursue further expansion of its gas
gathering operations. The Company expects to spend approximately $36 million
in 1994 for construction of new gathering facilities, installation of
additional compressors, expansion of existing gathering systems and improving
access to multiple pipeline "market hubs".
Over the past few years, Anadarko has become increasingly active in the
natural gas liquids (NGLs) business, primarily as a result of its gas gathering
and processing operations. The Company sells NGLs on a monthly basis.
Anadarko generally markets NGLs under short-term contracts. Anadarko had
175,354 barrels of NGLs in inventory at the end of 1993.
HEDGING STRATEGIES In order to provide customers competitive, attractive
pricing options, Anadarko has utilized the energy futures and derivatives
markets since 1990 to hedge in the physical market and improve the flexibility
in pricing short-term and long-term sales and purchases. From time to time,
Anadarko may employ hedging strategies such as swaps, calls, puts, collars,
fixed-price hedging and other strategies.
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OPERATING RESULTS
With higher cash flows in 1993 compared to 1992 Anadarko increased
spending for exploration and development drilling activities. Exploration and
development spending increased to $175 million in 1993 from $92 million in 1992
and $108 million in 1991. However, dollars invested in drilling activity are
not a true measure of success for an exploration and production company.
Anadarko focuses on growth and profitability as the best measures of success in
operations. Reserve replacement is the key to growth for an exploration and
production company. In addition, Anadarko believes profitability depends on
the cost of finding oil and gas reserves. Anadarko believes the Company's
performance in both areas has been excellent.
DRILLING ACTIVITY During 1993, Anadarko participated in a total of 219
wells, including 55 gas wells, 131 oil wells and 33 dry holes. This compares
to 126 wells (38 gas wells, 56 oil wells and 32 dry holes) in 1992 and 172
wells (69 gas wells, 64 oil wells and 39 dry holes) in 1991.
During 1993, the Company made several significant well completions in its
exploration and development drilling program which are discussed in the
narrative descriptions under "Exploration" and "Development" in the Annual
Report to Stockholders, incorporated herein by reference.
DRILLING PROGRAM ACTIVITY GAS OIL DRY TOTAL
---- ---- ---- -----
1993 EXPLORATORY
Gross 10 8 14 32
Net 6.6 5.3 7.7 19.6
1993 DEVELOPMENT
Gross 45 123 19 187
Net 30.2 70.8 13.4 114.4
1992 EXPLORATORY
Gross 11 -- 16 27
Net 3.5 -- 8.9 12.4
1992 DEVELOPMENT
Gross 27* 56 16 99
Net 16.4 32.5 5.4 54.3
Gross: total wells in which there was participation.
Net: working interest ownership.
* Includes 2 (1.7 net) Hugoton infill wells.
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RESERVE REPLACEMENT For the 12th consecutive year, Anadarko replaced annual
production volumes with proved reserves of natural gas, crude oil and natural
gas liquids, stated on an energy equivalent basis. During 1993, Anadarko's
reserve replacement was 162 percent of total production. The Company's reserve
replacement performance in 1992 was 200 percent of total production and was 166
percent of total production in 1991.
During 1993, the Company replaced 151 percent of total production through
exploration and development drilling and improved recovery operations and
replaced 15 percent of total production through acquisitions of producing
properties. Due to weak oil prices as of December 31, 1993, the Company
recorded modest downward revisions to prior estimates of oil reserves.
Anadarko's natural gas reserve replacement in 1993 was 192 percent of
total production compared with 88 percent in 1992 and 129 percent in 1991. The
Company replaced 83 percent of its crude oil, condensate and natural gas
liquids production in 1993 compared to 585 percent in 1992 and 289 percent in
1991.
In 1993, acquisitions added 5.7 million energy equivalent barrels
(MMEEBs) compared to 44.4 MMEEBs in 1992 and 1.6 MMEEBs in 1991.
The Company's reserve replacement for 1991 included an addition to proved
reserves of 120 Bcf of natural gas in the Hugoton Field of Kansas. Anadarko
also had a net increase of 11 MMBbls of NGLs in 1991 associated with the
Company's purchase of the Sneed Gas Plant and Gathering System in late 1990.
Anadarko continues to increase its reserves of crude oil and natural gas
while the nation's energy reserves are steadily declining. The Company's U.S.
reserve replacement for the five-year period 1988 through 1992 was 144 percent
of production compared to a U.S. industry average of 74 percent. (Source:
Energy Information Administration.) Anadarko's U.S. reserve replacement
performance for the period 1989 through 1993 was 154 percent of production.
Industry data for 1993 are not yet available.
COST OF FINDING For 1993, Anadarko's worldwide finding cost for proved
reserves was $4.07 per energy equivalent barrel (EEB) compared to $5.43 per EEB
in 1992 and $3.13 per EEB in 1991. The Company's U.S. finding cost for 1993
was $3.55 per EEB compared to $4.61 per EEB in 1992 and $2.62 per EEB in 1991.
Cost of finding results in any one year can be misleading due to the long
lead times associated with exploration and development. A better measure of
cost of finding performance is over a five-year period. For the period 1988
through 1992, Anadarko's U.S. cost of finding was $4.46 per EEB compared to a
U.S. industry average of $5.09 per EEB (Source: Arthur Andersen & Co.)
Anadarko's worldwide finding cost for the same five-year period was $4.92 per
EEB compared to an industry average of $5.32 per EEB (Source: Arthur Andersen &
Co.). For the five-year period 1989 through 1993, Anadarko's U.S. finding
cost was $4.16 per EEB and the Company's worldwide finding cost was $4.67 per
EEB. Industry data for 1993 are not yet available.
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PROVED RESERVES At the end of 1993, Anadarko's proved energy reserves
totaled 391.1 MMEEBs compared to 368.0 MMEEBs at year-end 1992 and 336.5 MMEEBs
at year-end 1991. Reserves increased in 1993 due to exploration and
development drilling, improved recovery and acquisitions.
The Company's natural gas reserves at year-end 1993 were 1.88 Tcf
compared to 1.73 Tcf at year-end 1992 and 1.74 Tcf at year-end 1991.
Anadarko's crude oil and natural gas liquids reserves at year-end 1993 were
78.5 MMBbls. This compares to 80.3 MMBbls at year-end 1992 and 45.8 MMBbls at
year-end 1991.
The increase in the Company's total reserves on an EEB basis in 1992 was
due primarily to the acquisition of properties with estimated proved reserves
of 60.6 Bcf of natural gas and 34.2 MMBbls of crude oil, condensate and natural
gas liquids, or 44.4 MMEEBs. In addition, the Company increased its reserves
of crude oil, condensate and NGLs through secondary recovery techniques and
development drilling in existing fields.
At December 31, 1993, the present value (discounted at 10 percent) of
future net revenues from Anadarko's proved reserves, before income taxes, was
$1.81 billion (stated in accordance with the regulations of the Securities and
Exchange Commission and Financial Accounting Standards Board). Despite the
increase in proved energy reserves and higher natural gas prices at year-end
1993, the estimated present value of future net revenues, before income taxes,
remained comparable to that at year-end 1992 due primarily to lower oil prices
at year-end 1993. (See Supplemental Information on Oil and Gas Exploration and
Production Activities in the Consolidated Financial Statements.)
The present value of future net revenues does not purport to be an
estimate of the fair market value of Anadarko's proved reserves. An estimate
of fair value would also take into account, among other things, anticipated
changes in future prices and costs, the expected recovery of reserves in excess
of proved reserves and a discount factor more representative of the time value
of money and the risks inherent in producing oil and gas.
23
24
ACQUISITIONS
In 1993, Anadarko evaluated numerous potential acquisition opportunities
in both the United States and Canada. By year-end, the Company closed 24
property transactions within core producing areas which included net reserves
of 5.7 MMEEBs at a cost of $27.8 million or $4.90 per EEB. The acquisition
cost per barrel does not include future investment costs of $8.3 million, which
will be spent over the next few years to develop additional reserves from the
properties.
In June 1993, Anadarko acquired deep producing oil and gas properties and
additional lease acres in the Hugoton area of southwest Kansas from Mesa
Operating Limited Partnership for approximately $20 million. The purchase
included proved reserves of about 3.7 MMEEBs and a 6-1/2 percent override
interest in an additional 188,000 lease acres which are under a pre-existing
farm-out arrangement with another company until 1999 when the undeveloped
portion of the acreage will revert to Anadarko.
In December 1992, Anadarko completed the largest acquisition in the
Company's history when it purchased from Atlantic Richfield Company proved oil
and gas properties with estimated reserves of 26.4 MMBbls of crude oil,
condensate and NGLs and 53.4 Bcf of natural gas, or about 35.3 MMEEBs, for
about $190 million. The purchase also included "deep" exploration rights on
54,000 gross (39,000 net) lease acres held by production.
Over the past three years, Anadarko has acquired 51.6 MMEEBs of proved
reserves at a cost of $238 million or $4.61 per EEB.
PRODUCING PROPERTIES AND LEASES
The Company owns interests in 2,552 producing oil wells and 1,883
producing gas wells. The following schedule shows the number of developed and
undeveloped acres in which Anadarko held interests at December 31, 1993.
ACREAGE Producing Undeveloped Total
--------------- ---------------- ------------------
thousands Gross Net Gross Net Gross Net
----- --- ----- ----- ----- -----
United States
Onshore 2,145 895 2,522 797 4,667 1,692
Offshore 165 40 439 200 604 240
----- --- ----- ----- ----- -----
Total 2,310 935 2,961 997 5,271 1,932
Geothermal -- -- 164 160 164 160
Canada 136 59 105 72 241 131
Algeria -- -- 5,135 2,567 5,135 2,567
Indonesia -- -- 2,030 676 2,030 676
24
25
REGULATORY AND LEGISLATIVE DEVELOPMENTS
HUGOTON FIELD ALLOWABLE RULES In Kansas, where Anadarko has significant gas
reserves and production capacity, the Kansas Corporation Commission (KCC) voted
on December 3, 1993, to modify its basic proration order for the Hugoton Field,
the largest dry gas reservoir in the United States. A written order was issued
in February 1994. This order will change the formula currently used by the KCC
to calculate field and unit allowables and will increase the portion of overall
production allowables assigned to Anadarko's wells in the Hugoton Field. As a
result of the order, Anadarko's share of the total field allowable will
increase from its current level of about 12 percent to about 15 percent.
KANSAS AD VALOREM TAX The Natural Gas Policy Act of 1978 (NGPA) allows a
"severance, production or similar" tax to be included as an add- on, over and
above the maximum lawful price for natural gas. Based on a Federal Energy
Regulatory Commission (FERC) ruling that the Kansas ad valorem tax was such a
tax, the Company collected the Kansas ad valorem tax in addition to the
otherwise maximum lawful price. FERC's ruling was appealed to the United
States Court of Appeals for the District of Columbia, which held in June 1988
that FERC failed to provide a reasoned basis for its findings and remanded the
case to FERC for further consideration.
On December 1, 1993, FERC issued an order reversing its prior ruling, but
limiting the effect of its decision to Kansas ad valorem taxes for sales that
were made on or after June 28, 1988. Based on Anadarko's interpretation of the
FERC order, $130,000 (pretax) has been charged to income during 1993. Numerous
parties have filed requests for rehearing at the FERC asking that the December
1, 1993, order be reconsidered and, accordingly, the Company is unable to
predict the final outcome of this matter.
CAPITAL EXPENDITURES, LIQUIDITY AND LONG-TERM DEBT
CAPITAL EXPENDITURES Anadarko's capital spending in 1993 totalled $264.5
million, which included $97.3 million for exploration, $77.7 million for
development, $27.8 million for producing property acquisitions, $18.5 million
for gas gathering and other operations and capitalized interest and overhead of
$43.2 million. This compares to Anadarko's capital expenditures in 1992 of
$359.9 million, which included $206 million in producing property acquisitions
and $42.6 million of capitalized interest and overhead. Capital spending was
$165.5 million in 1991, which included $4.2 million for producing property
acquisitions and $41.9 million of capitalized interest and overhead.
Capital spending for 1994 initially has been set at approximately $370
million, including $105 million for exploration, $142 million for development,
$25 million for producing property acquisitions, $48 million for gas gathering
and other operations and $50 million of capitalized interest and overhead.
Historically the Company has based capital spending on anticipated cash
flows, but certain portions of the capital spending budget have been financed
from time to time. In addition, the Company's budget is adjusted periodically
to reflect changes in market prices for oil and natural gas. The Company
believes cash flows and existing credit facilities will be sufficient to meet
capital and operating requirements during 1994.
25
26
LIQUIDITY AND LONG-TERM DEBT Over the past three years, Anadarko has taken
several steps to strengthen its balance sheet and control interest costs. The
Company has made significant efforts to secure fixed rate debt with longer term
maturities at competitive rates when available in the financial markets.
At year-end 1993, Anadarko's total debt was $542.5 million, down $104.7
million or 16 percent from total debt of $647.2 million at year-end 1992.
This compares to total debt of $439.6 million at year-end 1991.
In March 1993, Anadarko issued $100 million principal amount of 10-year
Notes with a coupon of 6 3/4%. Net proceeds of the offering were used to
refinance a portion of the cost of the producing oil properties acquired by
Anadarko in December 1992.
In July 1993, Anadarko successfully converted 99.8 percent of the
Company's outstanding $100 million principal amount of 6 1/4% Convertible
Subordinated Debentures due 2014.
Debentures in the principal amount of about $99.8 million were converted
into about 2.9 million shares of Anadarko common stock. The remaining
debentures were redeemed for a cash payment to debenture holders. With the
newly issued shares, Anadarko's average number of common shares outstanding for
1993 was 57.2 million. The number of outstanding shares at year-end 1993 was
58.7 million.
In October 1993, Anadarko issued $100 million principal amount of 10-year
Notes with a coupon of 5 7/8%. Net proceeds from the offering were used to
refinance outstanding borrowings under non-committed lines of credit and
commercial paper incurred for general corporate purposes.
In October 1993, Anadarko filed a shelf registration with the Securities
and Exchange Commission that permits the issuance of up to $300 million in
senior and subordinated debt securities and equity securities. Net proceeds,
terms and pricings of offerings of securities issued under the shelf
registration are determined at the time of the offering. Anadarko has used
similar shelf registrations since 1989 to provide added flexibility in
financing strategies.
In February 1992, Anadarko entered into a $250 million Revolving Credit
Agreement with a group of commercial banks. The Agreement provides for a $75
million commitment reduction at the end of years three and four and expires in
March 1997. This agreement replaced the Revolving Credit and Term Loan
Agreement the Company entered into in June 1989. As of December 31, 1993 and
1992, there were no outstanding borrowings under this agreement.
In May 1992, all of the $100 million principal amount of 8.95% Notes
issued in May 1988 became due and were retired using existing floating rate
credit facilities.
Anadarko's net cash from operating activities in 1993 was $274 million
compared to $172 million in 1992 and $160 million in 1991.
26
27
CHANGES IN ACCOUNTING PRINCIPLES
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Statement of Financial
Accounting Standards (SFAS) No. 106 focuses primarily on postretirement health
care benefits. SFAS No. 106 changed the accounting treatment for these
benefits from a "pay-as-you-go" basis to accrual of the expected costs of
providing these benefits during the years the employee renders service.
The Company chose to recognize the cumulative transition obligation as of
January 1, 1993, as the effect of a change in accounting principle in the first
quarter of 1993. The Company's cumulative transition obligation was
approximately $19.8 million, resulting in a decrease to net income of about
$9.7 million (17 cents per share) which is net of $5.4 million deferred income
tax benefit. The 1993 cost under SFAS No. 106 was approximately $3.4 million.
This compares to costs on the "pay-as-you-go" basis of about $453,000 in 1992
and $538,000 in 1991.
DEFERRED INCOME TAXES SFAS No. 109 requires a change from the deferred
method of accounting for income taxes to the asset and liability method. SFAS
No. 109 was adopted by the Company in the first quarter of 1993 and increased
net income by $87.1 million ($1.52 per share).
Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applicable to those years in which the temporary differences
between the financial statement carrying amounts and tax bases are expected to
be recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period when the change
was enacted.
The Omnibus Budget Reconciliation Act of 1993, which was enacted in
August 1993, raised the top corporate income tax rate from 34 to 35 percent
retroactive to January 1, 1993. As a result, Anadarko recorded a charge to
earnings of $11.2 million (20 cents per share) in the third quarter of 1993.
DIVIDENDS
In 1993, Anadarko paid $17.2 million in dividends to its common
stockholders (7.5 cents per share per quarter). The dividend amount was $16.6
million (7.5 cents per share per quarter) in 1992 and $16.5 million (7.5 cents
per share per quarter) in 1991. Anadarko has paid a dividend continuously
since becoming an independent company in 1986. The amount of future dividends
will depend on earnings, financial condition, capital requirements and other
factors, and will be determined by the Directors on a quarterly basis.
27
28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANADARKO PETROLEUM CORPORATION
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Management 29
Independent Auditors' Report 30
Statement of Income, Three Years Ended December 31, 1993 31
Balance Sheet, December 31, 1993 and 1992 32
Statement of Stockholders' Equity, Three Years Ended
December 31, 1993 33
Statement of Cash Flows, Three Years Ended December 31, 1993 34
Notes to Consolidated Financial Statements 35
Supplemental Information on Oil and Gas Exploration
and Production Activities 55
Supplemental Quarterly Information 64
28
29
ANADARKO PETROLEUM CORPORATION
REPORT OF MANAGEMENT
The management of Anadarko Petroleum Corporation is responsible for the
preparation and integrity of all information contained in the accompanying
consolidated financial statements. The financial statements have been prepared
in conformity with generally accepted accounting principles appropriate in the
circumstances. In preparing the financial statements, management makes
informed judgements and estimates.
Management maintains and relies on the Company's system of internal accounting
controls. Although no system can ensure elimination of all errors and
irregularities, this system is designed to provide reasonable assurance that
assets are safeguarded, transactions are executed in accordance with manage-
ment's authorization and accounting records are reliable as a basis for the
preparation of financial statements. This system includes the selection and
training of qualified personnel, an organizational structure providing
appropriate delegation of authority and division of responsibility, the
establishment of accounting and business policies for the Company and the
conduct of internal audits.
The Board of Directors pursues its responsibility for the consolidated
financial information through its Audit Committee, which is composed solely of
directors who are not officers or employees of Anadarko. The Audit Committee
recommends to the Board of Directors the selection of independent auditors and
reviews their fee arrangements. The Audit Committee meets periodically with
management, the internal auditors and the independent auditors to review that
each is carrying out its responsibilities. The internal and independent
auditors have full and free access to the Audit Committee to discuss auditing
and financial reporting matters.
We believe that Anadarko's policies and procedures, including its system of
internal accounting controls, provide reasonable assurance that the financial
statements are prepared in accordance with the applicable securities laws.
{ROBERT J. ALLISON, JR.}
Robert J. Allison, Jr.
Chairman, President and
Chief Executive Officer
{MICHAEL E. ROSE}
Michael E. Rose
Senior Vice President and
Chief Financial Officer
29
30
ANADARKO PETROLEUM CORPORATION
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Anadarko Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of Anadarko
Petroleum Corporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993,
as contained in the 1993 Form 10-K Annual Report. These consolidated finan-
cial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Anadarko Petroleum
Corporation and subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in notes 10 and 12 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board
Statements of Financial Accounting Standards No. 109, Accounting For Income
Taxes, and No. 106, Employers' Accounting for Postretirement Benefits Other
than Pensions, respectively, in 1993.
{KPMG PEAT MARWICK}
Houston, Texas
January 27, 1994
30
31
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31 1993 1992 1991
-------- -------- --------
thousands
REVENUES
Gas sales $310,576 $256,418 $212,311
Oil and condensate sales 127,042 82,916 93,139
Natural gas liquids and other 38,647 35,884 31,166
------- ------- -------
Total 476,265 375,218 336,616
------- ------- -------
COSTS AND EXPENSES
Operating expenses 98,637 74,899 76,167
Administrative and general 57,363 48,192 38,549
Depreciation, depletion and
amortization 167,699 132,951 121,110
Other taxes Note 9 41,497 30,583 27,763
Provisions for impairments of
international and geothermal
properties Note 3 7,000 21,000 ---
------- ------- -------
Total 372,196 307,625 263,589
------- ------- -------
Operating Income 104,069 67,593 73,027
OTHER INCOME 2,755 718 2,404
------- ------- -------
Gross Income 106,824 68,311 75,431
INTEREST EXPENSE Notes 3 and 4 29,423 28,246 27,188
------- ------- -------
Income before Income Taxes and Cumulative
Effect of Changes in Accounting
Principles 77,401 40,065 48,243
INCOME TAXES Note 10
Income taxes 26,147 12,752 15,848
Effect of change in income tax rate 11,249 --- ---
------- ------- -------
Total 37,396 12,752 15,848
------- ------- -------
Net Income before Cumulative Effect of
Changes in Accounting Principles 40,005 27,313 32,395
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES Notes 10 and 12 77,403 --- ---
------- ------- -------
NET INCOME $117,408 $ 27,313 $ 32,395
======= ======= =======
PER COMMON SHARE
Net income before cumulative effect of
changes in accounting principles $ 0.70 $ 0.49 $ 0.59
Cumulative effect of changes in
accounting principles 1.35 --- ---
Net income 2.05 0.49 0.59
------- ------ -------
Dividends Note 5 $ 0.30 $ 0.30 $ 0.30
-------- ------ -------
AVERAGE NUMBER OF SHARES OUTSTANDING Note 5 57,220 55,257 55,044
------- ------ -------
See accompanying notes to consolidated financial statements.
31
32
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31 1993 1992
---------- ----------
ASSETS thousands
CURRENT ASSETS
Cash and cash equivalents $ 17,799 $ 14,833
Accounts receivable 110,486 111,435
Inventories Note 2 9,551 10,249
Prepaid expenses 3,025 2,290
--------- ---------
Total 140,861 138,807
--------- ---------
PROPERTIES AND EQUIPMENT
Original cost 3,266,825 3,030,633
Less accumulated depreciation, depletion
and amortization 1,425,098 1,276,077
--------- ---------
Net properties and equipment - based on
the full cost method of accounting
for oil and gas properties Note 3 1,841,727 1,754,556
--------- ---------
DEFERRED CHARGES 40,198 11,604
--------- ---------
$2,022,786 $1,904,967
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade and other $ 92,311 $ 75,159
Bank 13,328 15,373
Accrued expenses
Interest 7,663 5,637
Taxes and other 12,715 11,244
--------- ---------
Total 126,017 107,413
--------- ---------
LONG-TERM DEBT Note 4 542,500 647,162
--------- ---------
DEFERRED CREDITS
Deferred income taxes Note 10 424,293 478,636
Other 65,810 14,861
--------- ---------
Total 490,103 493,497
--------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $0.10
(200,000,000 shares authorized, 58,668,407
and 55,311,251 shares issued and out-
standing as of December 31, 1993
and 1992, respectively) 5,912 5,580
Preferred stock, par value $1.00
(2,000,000 shares authorized, no shares
issued as of December 31, 1993 and 1992) --- ---
Paid-in capital 236,001 125,217
Retained earnings (as of December 31, 1993
$464,166,000 was not restricted as to
the payment of dividends) 625,308 527,103
Deferred compensation (3,055) ---
Treasury stock (34,235 shares as of
December 31, 1992) --- (1,005)
--------- --------
Total 864,166 656,895
--------- ---------
COMMITMENTS AND CONTINGENCIES Notes 8, 12 and 13
--------- ---------
$2,022,786 $1,904,967
========= =========
See accompanying notes to consolidated financial statements.
32
33
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31 1993 1992 1991
-------- -------- --------
thousands
COMMON STOCK
Balance at beginning of year $ 5,580 $ 5,559 $ 5,543
Exercise of stock options 21 5 9
Issuance of restricted stock 11 --- ---
Issued for employee savings plan 8 16 7
Conversion of 6 1/4% Debentures 292 --- ---
------- ------- -------
Balance at end of year 5,912 5,580 5,559
------- ------- -------
PAID-IN CAPITAL
Balance at beginning of year 125,217 120,095 115,970
Exercise of stock options, net of income
tax effects 4,248 1,502 2,426
Issuance of restricted stock 4,442 --- 27
Issuance of stock for employee savings plan 3,309 3,620 1,672
Conversion of 6 1/4% Debentures, net 98,785 --- ---
------- ------- -------
Balance at end of year 236,001 125,217 120,095
------- ------- -------
RETAINED EARNINGS
Balance at beginning of year 527,103 520,234 504,969
Net income 117,408 27,313 32,395
Foreign translation gains (losses) (1,701) (3,799) 140
------- ------- -------
642,810 543,748 537,504
Dividends paid (17,217) (16,577) (16,527)
Issuance of treasury stock (285) (68) (743)
------- ------- ------
Balance at end of year 625,308 527,103 520,234
------- ------- -------
DEFERRED COMPENSATION
Balance at beginning of year --- (5,372) (6,487)
Issuance of restricted stock (4,522) (7) (27)
Amortization of restricted stock 1,467 5,379 1,142
------- ------- -------
Balance at end of year (3,055) --- (5,372)
------- ------- -------
TREASURY STOCK
Balance at beginning of year (1,005) --- (2,026)
Issued for exercise of stock options 377 --- ---
Issuance of restricted stock 92 5 ---
Issued to employee savings plan 981 1,858 4,357
Purchase of treasury stock (445) (2,868) (2,331)
------- ------- -------
Balance at end of year --- (1,005) ---
------- ------- -------
STOCKHOLDERS' EQUITY Notes 5 and 6 $864,166 $656,895 $640,516
======= ======= =======
See accompanying notes to consolidated financial statements.
33
34
ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31 1993 1992 1991
--------- -------- --------
thousands
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 117,408 $ 27,313 $ 32,395
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation, depletion and amortization 167,699 132,951 121,110
Amortization of restricted stock 1,467 5,379 1,142
Deferred income taxes 35,126 5,373 9,696
Cumulative effect of changes in
accounting principles (77,403) --- ---
Provisions for impairments of international
and geothermal properties 7,000 21,000 ---
------- ------- -------
251,297 192,016 164,343
(Increase) decrease in accounts receivable 949 (32,187) 14,107
(Increase) decrease in inventories 698 184 (2,733)
Increase (decrease) in accounts payable - trade
and other and accrued expenses 20,649 9,941 (16,433)
Other items - net 681 1,659 688
-------- ------- -------
Net cash from operating activities 274,274 171,613 159,972
-------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to properties and equipment (259,894) (362,405) (169,794)
Sales and retirements of properties and equipment 4,824 3,084 7,453
-------- ------- -------
Net cash used in investing activities (255,070) (359,321) (162,341)
-------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Additions to debt 200,000 307,534 204,000
Retirements of debt (204,884) (100,000) (191,485)
Increase (decrease) in accounts payable, banks (2,045) (6,733) 2,951
Dividends paid (17,217) (16,577) (16,527)
Issuance of common stock 7,517 5,136 4,114
Issuance of treasury stock 1,165 1,795 3,614
Purchase of treasury stock (445) (2,868) (2,331)
-------- ------- -------
Net cash from financing activities (15,909) 188,287 4,336
-------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (329) (729) 8
-------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,966 (150) 1,975
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,833 14,983 13,008
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 17,799 $ 14,833 $ 14,983
======== ======= =======
See accompanying notes to consolidated financial statements.
34
35
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF ACCOUNTING POLICIES
GENERAL Anadarko Petroleum Corporation is engaged in the exploration,
development, production and marketing of gas, oil and natural gas liquids. The
terms "Anadarko" and "Company" refer to Anadarko Petroleum Corporation and its
subsidiaries. The principal subsidiaries of Anadarko are: Anadarko Gathering
Company; Anadarko Marketing Company; Anadarko Trading Company; Anadarko
Petroleum of Canada Ltd. (Anadarko Canada); and Anadarko Algeria Corporation
(Anadarko Algeria).
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Anadarko and its subsidiaries. All significant intercompany
transactions have been eliminated.
CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1993, Anadarko adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes", and SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". See Notes 10 and 12.
REVENUES Natural gas revenues generally are recorded using the sales method,
whereby the Company recognizes natural gas revenues based on the amount of gas
sold to purchasers on its behalf. All other revenues also are recorded using
the sales method.
HEDGING ACTIVITIES The Company periodically hedges gas sales in order to
minimize the impact of gas price fluctuations for Anadarko and its customers.
Gains or losses on these hedging activities are recognized in revenues for the
periods to which the hedge relates.
PROPERTIES AND EQUIPMENT The Company uses the full cost method of accounting
for exploration and development activities as defined by the United States
Securities and Exchange Commission (SEC). Under this method of accounting, the
costs for unsuccessful as well as successful exploration and development
activities are capitalized as properties and equipment.
The sum of net capitalized costs and estimated future development and
dismantlement costs is amortized using the unit-of-production method. Excluded
from amounts subject to amortization are costs associated with unevaluated
properties and major development projects. On a country-by-country basis,
should the net capitalized costs exceed the estimated present value of future
net cash flows from proved oil and gas reserves, such excess costs would be
charged to current expense. Gain or loss on the sale or other disposition of
oil and gas properties is not recognized unless significant oil and gas
reserves are involved.
35
36
ANADARKO PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF ACCOUNTING POLICIES (Continued)
Unsuccessful geothermal exploration costs are charged to expense. All other
properties and equipment are stated at original cost, which does not purport to
represent replacement or market values.
ENVIRONMENTAL CONTINGENCIES The Company accrues for environmental
contingencies when liabilities are likely to occur and reasonable estimates can
be made. In accordance with full cost accounting rules, the Company provides
for environmental clean-up costs associated with oil and gas activities as a
component of its depreciation, depletion and amortization expense. Recoveries
from third parties for environmental liabilities are not recognized unless
collection is probable.
INTEREST CAPITALIZED The Company capitalizes interest on borrowed funds
related to oil and gas expenditures which are not subject to amortization until
completion of evaluation or development activities.
INCOME TAXES The Company, excluding Anadarko Canada, files a U.S. consolidated
federal income tax return. Deferred fed