21. Segment Information

Anadarko’s business segments are separately managed due to distinct operational differences and unique technology, distribution, and marketing requirements. The Company’s three reporting segments are oil and gas exploration and production, midstream, and marketing. The oil and gas exploration and production segment explores for and produces natural gas, crude oil, condensate, and NGLs, and plans for the development and operation of the Company’s LNG project in Mozambique. The midstream segment engages in gathering, processing, treating, and transporting Anadarko and third-party oil, natural-gas, and NGLs production. The midstream reporting segment consists of two operating segments, WES and other midstream, which are aggregated into one reporting segment due to similar financial and operating characteristics. The marketing segment sells much of Anadarko’s production, as well as third-party purchased volumes.

21. Segment Information (Continued)

To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. The Company defines Adjusted EBITDAX as income (loss) before income taxes; exploration expense; depreciation, depletion, and amortization (DD&A); impairments; interest expense; total (gains) losses on derivatives, net, less net cash received in settlement of commodity derivatives; and certain items not related to the Company’s normal operations, less net income attributable to noncontrolling interests. During the periods presented, certain items not related to the Company’s normal operations included Deepwater Horizon settlement and related costs, Algeria exceptional profits tax settlement, Tronox-related contingent loss, and certain other nonoperating items included in other (income) expense, net. The Company’s definition of Adjusted EBITDAX excludes exploration expense, as it is not an indicator of operating efficiency for a given reporting period. However, exploration expense is monitored by management as part of costs incurred in exploration and development activities. Similarly, DD&A and impairments are excluded from Adjusted EBITDAX as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred. Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Total (gains) losses on derivatives, net, less net cash received in settlement of commodity derivatives, are excluded from Adjusted EBITDAX because these (gains) losses are not considered a measure of asset operating performance. Finally, net income attributable to noncontrolling interests is excluded from the Company’s measure of Adjusted EBITDAX because it represents earnings that are not attributable to the Company’s common stockholders.

Management believes that the presentation of Adjusted EBITDAX provides information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBITDAX is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures, and make distributions to stockholders. Adjusted EBITDAX, as defined by Anadarko, may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) attributable to common stockholders and other performance measures, such as operating income or cash flows from operating activities. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes for the years ended December 31:



millions	2013			2012			2011
Income (loss) before income taxes	$	2,106		$	3,565		$	(3,424	)
Exploration expense	1,329			1,946			1,076
DD&A	3,927			3,964			3,830
Impairments	794			389			1,774
Interest expense	686			742			839
Total (gains) losses on derivatives, net, less net cash received in settlement of commodity derivatives	(307		)	443			675
Deepwater Horizon settlement and related costs	15			18			3,930
Algeria exceptional profits tax settlement	33			(1,797		)	—
Tronox-related contingent loss	850			(250		)	250
Certain other nonoperating items	110			—			—
Less net income attributable to noncontrolling interests	140			54			81
Consolidated Adjusted EBITDAX	$	9,403		$	8,966		$	8,869

21. Segment Information (Continued)

The Company’s accounting policies for individual segments are the same as those described in the summary of significant accounting policies, with the following exception: certain intersegment commodity contracts may meet the U.S. Generally Accepted Accounting Principles (GAAP) definition of a derivative instrument, which would be accounted for at fair value under GAAP. However, Anadarko does not recognize any mark-to-market adjustments on such intersegment arrangements. Additionally, intersegment asset transfers are accounted for at historical cost basis, and do not give rise to gain or loss recognition.

Information presented below as “Other and Intersegment Eliminations” includes results from hard-minerals royalty arrangements and corporate, financing, and certain derivative activities. The following summarizes selected financial information for Anadarko’s reporting segments:



millions	Oil and Gas Exploration & Production			Midstream			Marketing			Other and Intersegment Eliminations			Total
2013
Sales revenues	$	7,090		$	387		$	7,390		$	—		$	14,867
Intersegment revenues	6,405			1,105			(6,859		)	(651		)	—
Gains (losses) on divestitures and other, net	(622		)	(1		)	—			337			(286		)
Total revenues and other	12,873			1,491			531			(314		)	14,581
Operating costs and expenses ⁽¹⁾	3,635			843			652			20			5,150
Net cash received in settlement of commodity derivatives	—			—			—			(95		)	(95		)
Other (income) expense, net ⁽²⁾	—			—			—			(21		)	(21		)
Net income attributable to noncontrolling interests	—			140			—			—			140
Total expenses and other	3,635			983			652			(96		)	5,174
Total (gains) losses on derivatives, net included in marketing revenue, less net cash received in settlement	—			—			(4		)	—			(4		)
Adjusted EBITDAX	$	9,238		$	508		$	(125	)	$	(218	)	$	9,403
Net properties and equipment	$	33,409		$	5,408		$	9		$	2,103		$	40,929
Capital expenditures	$	7,008		$	1,248		$	—		$	267		$	8,523
Goodwill	$	5,317		$	175		$	—		$	—		$	5,492

21. Segment Information (Continued)



millions	Oil and Gas Exploration & Production			Midstream			Marketing			Other and Intersegment Eliminations			Total
2012
Sales revenues	$	6,752		$	325		$	6,230		$	—		$	13,307
Intersegment revenues	5,318			959			(5,734		)	(543		)	—
Gains (losses) on divestitures and other, net	(65		)	(8		)	—			177			104
Total revenues and other	12,005			1,276			496			(366		)	13,411
Operating costs and expenses ⁽¹⁾	3,505			748			616			295			5,164
Net cash received in settlement of commodity derivatives	—			—			—			(753		)	(753		)
Other (income) expense, net ⁽²⁾	—			—			—			(4		)	(4		)
Net income attributable to noncontrolling interests	—			54			—			—			54
Total expenses and other	3,505			802			616			(462		)	4,461
Total (gains) losses on derivatives, net included in marketing revenue, less net cash received in settlement	—			—			16			—			16
Adjusted EBITDAX	$	8,500		$	474		$	(104	)	$	96		$	8,966
Net properties and equipment	$	32,024		$	4,459		$	9		$	1,906		$	38,398
Capital expenditures	$	5,906		$	1,250		$	—		$	155		$	7,311
Goodwill	$	5,317		$	175		$	—		$	—		$	5,492
2011
Sales revenues	$	7,519		$	342		$	6,023		$	(2	)	$	13,882
Intersegment revenues	5,005			957			(5,515		)	(447		)	—
Gains (losses) on divestitures and other, net	(41		)	(13		)	—			139			85
Total revenues and other	12,483			1,286			508			(310		)	13,967
Operating costs and expenses⁽¹⁾	3,696			786			559			186			5,227
Net cash received in settlement of commodity derivatives	—			—			—			(226		)	(226		)
Other (income) expense, net ⁽²⁾	—			—			—			4			4
Net income attributable to noncontrolling interests	—			81			—			—			81
Total expenses and other	3,696			867			559			(36		)	5,086
Total (gains) losses on derivatives, net included in marketing revenue, less net cash received in settlement	—			—			(12		)	—			(12		)
Adjusted EBITDAX	$	8,787		$	419		$	(63	)	$	(274	)	$	8,869
Net properties and equipment	$	32,235		$	3,432		$	9		$	1,825		$	37,501
Capital expenditures	$	5,026		$	1,420		$	—		$	107		$	6,553
Goodwill	$	5,475		$	166		$	—		$	—		$	5,641

__________________________________________________________________


⁽¹⁾	Operating costs and expenses exclude exploration expense, DD&A, impairments, Deepwater Horizon settlement and related costs, and Algeria exceptional profits tax settlement since these expenses are excluded from Adjusted EBITDAX.


⁽²⁾	Other (income) expense, net excludes Tronox-related contingent loss since this expense is excluded from Adjusted EBITDAX.

21. Segment Information (Continued)

The following represents Anadarko’s sales revenues (based on the origin of the sales) and net properties and equipment by geographic area:



	Years Ended December 31,
millions	2013		2012		2011
Sales Revenues
United States	$	11,290	$	9,911	$	10,477
Algeria	2,184		2,182		2,258
Other International	1,393		1,214		1,147
Total	$	14,867	$	13,307	$	13,882



	December 31,
millions	2013		2012
Net Properties and Equipment
United States	$	35,486	$	33,337
Algeria	1,582		1,575
Other International	3,861		3,486
Total	$	40,929	$	38,398

Major Customers Sales to Total S.A. were $2.0 billion in 2013 and $1.9 billion in 2012. These amounts are included in the oil and gas exploration and production reporting segment. In 2011, there were no sales to individual customers that exceeded 10% of the Company’s total sales revenues.