UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

or

[    ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period fromto

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 incorporation or organization)	(I.R.S. Employer Identification No.)

1201 Lake Robbins Drive, The Woodlands, Texas 77380-1046

(Address of principal executive offices)

Registrant’s telephone number, including area code (832) 636-1000

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  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ý    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

The number of shares outstanding of the Company’s common stock at April 27, 2015, is shown below:

Title of Class	Number of Shares Outstanding
Common Stock, par value $0.10 per share	507,935,794

TABLE OF CONTENTS

PART I		Page
Item 1.	Financial Statements
	Consolidated Statements of Income for the Three Months Ended March 31, 2015 and 2014	2
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	3
	Consolidated Balance Sheets at March 31, 2015, and December 31, 2014	4
	Consolidated Statement of Equity for the Three Months Ended March 31, 2015	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	44

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended   March 31,
millions except per-share amounts	2015			2014
Revenues and Other
Natural-gas sales	$	641		$	1,217
Oil and condensate sales	1,419			2,424
Natural-gas liquids sales	232			386
Gathering, processing, and marketing sales	293			311
Gains (losses) on divestitures and other, net	(264		)	1,506
Total	2,321			5,844
Costs and Expenses
Oil and gas operating	296			313
Oil and gas transportation and other	361			266
Exploration	1,083			299
Gathering, processing, and marketing	254			252
General and administrative	310			298
Depreciation, depletion, and amortization	1,256			1,124
Other taxes	182			314
Impairments	2,783			3
Deepwater Horizon settlement and related costs	4			—
Total	6,529			2,869
Operating Income (Loss)	(4,208		)	2,975
Other (Income) Expense
Interest expense	216			183
(Gains) losses on derivatives, net	152			453
Other (income) expense, net	47			1
Tronox-related contingent loss	5			4,300
Total	420			4,937
Income (Loss) Before Income Taxes	(4,628		)	(1,962		)
Income tax expense (benefit)	(1,392		)	664
Net Income (Loss)	(3,236		)	(2,626		)
Net income attributable to noncontrolling interests	32			43
Net Income (Loss) Attributable to Common Stockholders	$	(3,268	)	$	(2,669	)
Per Common Share
Net income (loss) attributable to common stockholders—basic	$	(6.45	)	$	(5.30	)
Net income (loss) attributable to common stockholders—diluted	$	(6.45	)	$	(5.30	)
Average Number of Common Shares Outstanding—Basic	507			504
Average Number of Common Shares Outstanding—Diluted	507			504
Dividends (per common share)	$	0.27		$	0.18

See accompanying Notes to Consolidated Financial Statements.

2

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended   March 31,
millions	2015			2014
Net Income (Loss)	$	(3,236	)	$	(2,626	)
Other Comprehensive Income (Loss)
Adjustments for derivative instruments
Reclassification of previously deferred derivative losses to (gains) losses on    derivatives, net	2			2
Income taxes on reclassification of previously deferred derivative losses to (gains)    losses on derivatives, net	(1		)	(1		)
Total adjustments for derivative instruments, net of taxes	1			1
Adjustments for pension and other postretirement plans
Amortization of net actuarial (gain) loss to general and administrative expense	13			7
Income taxes on amortization of net actuarial (gain) loss to general and    administrative expense	(4		)	(2		)
Total adjustments for pension and other postretirement plans, net of taxes	9			5
Total	10			6
Comprehensive Income (Loss)	(3,226		)	(2,620		)
Comprehensive income attributable to noncontrolling interests	32			43
Comprehensive Income (Loss) Attributable to Common Stockholders	$	(3,258	)	$	(2,663	)

See accompanying Notes to Consolidated Financial Statements.

3

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

millions	March 31, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	2,308		$	7,369
Accounts receivable (net of allowance of $9 million and $7 million)
Customers	1,025			1,118
Others	1,149			1,409
Other current assets	683			1,325
Total	5,165			11,221
Properties and Equipment
Cost	76,040			75,107
Less accumulated depreciation, depletion, and amortization	37,770			33,518
Net properties and equipment	38,270			41,589
Other Assets	2,998			2,310
Goodwill and Other Intangible Assets	6,540			6,569
Total Assets	$	52,973		$	61,689
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,252		$	3,683
Current asset retirement obligations	282			257
Accrued expenses	1,100			994
Short-term debt	500			—
Deepwater Horizon settlement and related costs	94			90
Tronox-related contingent liability	—			5,210
Total	5,228			10,234
Long-term Debt	16,365			15,092
Other Long-term Liabilities
Deferred income taxes	7,521			9,249
Asset retirement obligations	1,803			1,796
Other	3,122			3,000
Total	12,446			14,045
Equity
Stockholders’ equity
Common stock, par value $0.10 per share (1.0 billion shares authorized, 527.6 million and 525.9 million shares issued)	52			52
Paid-in capital	9,045			9,005
Retained earnings	8,718			12,125
Treasury stock (19.7 million and 19.3 million shares)	(976		)	(940		)
Accumulated other comprehensive income (loss)	(507		)	(517		)
Total Stockholders’ Equity	16,332			19,725
Noncontrolling interests	2,602			2,593
Total Equity	18,934			22,318
Total Liabilities and Equity	$	52,973		$	61,689

See accompanying Notes to Consolidated Financial Statements.

4

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

	Total Stockholders’ Equity
	Common Stock		Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total Equity
millions
Balance at December 31, 2014	$	52	$	9,005		$	12,125		$	(940	)	$	(517	)	$	2,593		$	22,318
Net income (loss)	—		—			(3,268		)	—			—			32			(3,236		)
Common stock issued	—		50			—			—			—			—			50
Dividends—common stock	—		—			(139		)	—			—			—			(139		)
Repurchase of common stock	—		—			—			(36		)	—			—			(36		)
Subsidiary equity transactions	—		(10		)	—			—			—			44			34
Distributions to noncontrolling    interest owners	—		—			—			—			—			(67		)	(67		)
Reclassification of previously    deferred derivative losses to    (gains) losses on derivatives, net	—		—			—			—			1			—			1
Adjustments for pension and other    postretirement plans	—		—			—			—			9			—			9
Balance at March 31, 2015	$	52	$	9,045		$	8,718		$	(976	)	$	(507	)	$	2,602		$	18,934

See accompanying Notes to Consolidated Financial Statements.

5

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended   March 31,
millions	2015			2014
Cash Flows from Operating Activities
Net income (loss)	$	(3,236	)	$	(2,626	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)    operating activities
Depreciation, depletion, and amortization	1,256			1,124
Deferred income taxes	(1,198		)	46
Dry hole expense and impairments of unproved properties	1,009			198
Impairments	2,783			3
(Gains) losses on divestitures, net	334			(1,459		)
Total (gains) losses on derivatives, net	152			461
Operating portion of net cash received (paid) in settlement of derivative instruments	91			(98		)
Other	45			54
Changes in assets and liabilities
Deepwater Horizon settlement and related costs	4			—
Tronox-related contingent liability	(5,210		)	4,300
(Increase) decrease in accounts receivable	357			(266		)
Increase (decrease) in accounts payable and accrued expenses	(283		)	(63		)
Other items—net	(608		)	55
Net cash provided by (used in) operating activities	(4,504		)	1,729
Cash Flows from Investing Activities
Additions to properties and equipment and dry hole costs	(1,957		)	(2,501		)
Acquisition of businesses	—			(4		)
Divestitures of properties and equipment and other assets	22			3,257
Other—net	10			(170		)
Net cash provided by (used in) investing activities	(1,925		)	582
Cash Flows from Financing Activities
Borrowings, net of issuance costs	4,583			918
Repayments of debt	(2,830		)	(930		)
Financing portion of net cash received (paid) for derivative instruments	(146		)	—
Increase (decrease) in outstanding checks	(39		)	97
Dividends paid	(139		)	(92		)
Repurchase of common stock	(36		)	(35		)
Issuance of common stock, including tax benefit on share-based compensation awards	12			13
Sale of subsidiary units	31			18
Distributions to noncontrolling interest owners	(67		)	(51		)
Net cash provided by (used in) financing activities	1,369			(62		)
Effect of Exchange Rate Changes on Cash	(1		)	(23		)
Net Increase (Decrease) in Cash and Cash Equivalents	(5,061		)	2,226
Cash and Cash Equivalents at Beginning of Period	7,369			3,698
Cash and Cash Equivalents at End of Period	$	2,308		$	5,924

See accompanying Notes to Consolidated Financial Statements.

6

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Summary of Significant Accounting Policies

General  Anadarko Petroleum Corporation is engaged in the exploration, development, production, and marketing of natural gas, oil, condensate, natural gas liquids (NGLs), and anticipated production of liquefied natural gas (LNG). In addition, the Company engages in the gathering, processing, treating, and transporting of natural gas, oil, and NGLs. The Company also participates in the hard-minerals business through royalty arrangements. Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries.

Basis of Presentation  The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the Company’s consolidated financial statements. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

Use of Estimates  The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, including those related to proved reserves; the value of properties and equipment; goodwill; intangible assets; asset retirement obligations; litigation liabilities; environmental liabilities; pension assets, liabilities, and costs; income taxes; and fair values. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates.

Recently Issued Accounting Standards  The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-02, Consolidation—Amendments to the Consolidation Analysis. This ASU will simplify existing requirements by reducing the number of consolidation models and placing more emphasis on risk of loss when determining a controlling financial interest. The provisions will affect how limited partnerships and similar entities are assessed for consolidation, including the elimination of the presumption that a general partner should consolidate a limited partnership. This ASU is effective for annual and interim periods beginning in 2016 and is required to be adopted using a retrospective or modified retrospective approach, with early adoption permitted. The Company is evaluating the impact of the adoption of this ASU on its consolidated financial statements.

The FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and industry-specific guidance in Subtopic 932-605, Extractive Activities—Oil and Gas—Revenue Recognition, and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. This ASU is effective for annual and interim periods beginning in 2017 and is required to be adopted using one of two retrospective application methods, with no early adoption permitted. The Company is evaluating the impact of the adoption of this ASU on its consolidated financial statements.

2. Acquisitions, Divestitures, and Assets Held for Sale

In November 2014, Western Gas Partners, LP (WES) acquired Nuevo Midstream, LLC (Nuevo) for $1.554 billion. Following the acquisition, WES changed the name of Nuevo to Delaware Basin Midstream, LLC (DBM). The acquisition constitutes a business combination and was accounted for using the acquisition method of accounting. The fair-value measurements of the assets acquired and liabilities assumed at the acquisition date were still preliminary as of March 31, 2015, pending final review of support related to the acquired entity’s assets. There were no material changes to the fair value of assets acquired and liabilities assumed from the amounts included on the Company’s Consolidated Balance Sheet at December 31, 2014.

7

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Acquisitions, Divestitures, and Assets Held for Sale (Continued)

For the three months ended March 31, 2015, the Company recognized net losses on divestitures of $334 million related to assets included in the oil and gas exploration and production reporting segment. During the first quarter of 2015, certain U.S. onshore assets in the Rocky Mountains Region (Rockies) satisfied criteria to be considered held for sale. These assets were remeasured to their current fair value using a market approach and Level 2 fair-value measurement, and the Company recognized a loss of $340 million. Gains and losses on assets held for sale are included in gains (losses) on divestitures and other, net in the Company’s Consolidated Statements of Income. At March 31, 2015, the Company’s Consolidated Balance Sheet included current assets of $29 million, long-term assets of $743 million, current liabilities of $17 million, and long-term liabilities of $78 million associated with assets held for sale. The sale of these assets closed in April 2015 for proceeds of $703 million.

3. Inventories

The following summarizes the major classes of inventories included in other current assets:

millions	March 31, 2015		December 31, 2014
Oil	$	97	$	133
Natural gas	3		27
NGLs	70		83
Total inventories	$	170	$	243

4. Impairments

The following summarizes impairments of proved properties and the related post-impairment fair values by segment:

	Three Months Ended
millions	Impairment		Fair Value (1)
March 31, 2015
Oil and gas exploration and production
Long-lived assets held for use
U.S. onshore properties	$	2,307	$	1,299
Midstream
Long-lived assets held for use	476		206
Total	$	2,783	$	1,505
March 31, 2014
Oil and gas exploration and production
Cost-method investment (2)	$	1	$	32
Midstream
Long-lived assets held for use	2		—
Total	$	3	$	32

__________________________________________________________________

⁽¹⁾  Measured using the income approach and Level 3 inputs.

⁽²⁾  Represents the after-tax net investment.

Impairments during the first quarter of 2015 were primarily related to the Company’s Greater Natural Buttes oil and gas and midstream properties in the Rockies, which were impaired due to lower commodity prices. Impairments of proved properties are included in impairment expense in the Company’s Consolidated Statements of Income. In addition to the proved property impairments above, the Company also recognized a $935 million impairment of unproved Greater Natural Buttes properties as a result of lower commodity prices during the first quarter of 2015. Impairments of unproved properties are included in exploration expense in the Company’s Consolidated Statements of Income.

8

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Suspended Exploratory Well Costs

The Company’s suspended exploratory well costs were $1.6 billion at March 31, 2015, and $1.5 billion at December 31, 2014. Projects with suspended exploratory well costs are those identified by management as exhibiting sufficient quantities of hydrocarbons to justify potential development and where management is actively pursuing efforts to assess whether reserves can be attributed to these projects. If additional information becomes available that raises substantial doubt as to the economic or operational viability of any of these projects, the associated costs will be expensed at that time. During the three months ended March 31, 2015, no exploratory well costs previously capitalized as suspended exploratory well costs for greater than one year at December 31, 2014, were charged to dry hole expense.

6. Noncontrolling Interests

Western Gas Equity Partners, LP (WGP) is a publicly traded consolidated subsidiary that owns partnership interests in WES. At March 31, 2015, Anadarko’s ownership interest in WGP consisted of an 88.3% limited partner interest and the entire non-economic general partner interest. The remaining 11.7% limited partner interest in WGP was owned by the public.

WES, a publicly traded consolidated subsidiary, is a limited partnership that acquires, owns, develops, and operates midstream assets. During the three months ended March 31, 2015, WES issued 480 thousand common units to the public under its continuous offering program, raising net proceeds of $31 million. In 2014, WES issued 11 million Class C units to Anadarko to partially fund the acquisition of DBM. These Class C units receive distributions in the form of additional Class C units until the end of 2017 unless WES elects to convert the units earlier or Anadarko extends the conversion date. During the three months ended March 31, 2015, WES distributed 46 thousand Class C units to Anadarko. At March 31, 2015, WGP’s ownership interest in WES consisted of a 34.8% limited partner interest, the entire 1.8% general partner interest, and all of the WES incentive distribution rights. At March 31, 2015, Anadarko also owned an 8.3% limited partner interest in WES through other subsidiaries’ ownership of common and Class C units. The remaining 55.1% limited partner interest in WES was owned by the public.

7. Derivative Instruments

Objective and Strategy  The Company uses derivative instruments to manage its exposure to cash-flow variability from commodity-price and interest-rate risks. Futures, swaps, and options are used to manage exposure to commodity-price risk inherent in the Company’s oil and natural-gas production and natural-gas processing operations (Oil and Natural-Gas Production/Processing Derivative Activities). Futures contracts and commodity-price swap agreements are used to fix the price of expected future oil and natural-gas sales at major industry trading locations, such as Henry Hub, Louisiana, for natural gas and Cushing, Oklahoma, or Sullom Voe, Scotland, for oil. Basis swaps are periodically used to fix or float the price differential between product prices at one market location versus another. Options are used to establish a floor price, a ceiling price, or a floor and a ceiling price (collar) for expected future oil and natural-gas sales. Derivative instruments are also used to manage commodity-price risk inherent in customer price requirements and to fix margins on the future sale of natural gas and NGLs from the Company’s leased storage facilities (Marketing and Trading Derivative Activities).

Interest-rate swaps are used to fix or float interest rates on existing or anticipated indebtedness. The purpose of these instruments is to manage the Company’s existing or anticipated exposure to interest-rate changes. The fair value of the Company’s current interest-rate swap portfolio increases (decreases) when interest rates increase (decrease).

The Company does not apply hedge accounting to any of its derivative instruments. As a result, gains and losses associated with derivative instruments are recognized currently in earnings. Net derivative losses attributable to derivatives previously subject to hedge accounting reside in accumulated other comprehensive income (loss) and are reclassified to earnings as the transactions to which the derivatives relate are recognized in earnings. See Note 10—Accumulated Other Comprehensive Income (Loss).

9

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Derivative Instruments (Continued)

Oil and Natural-Gas Production/Processing Derivative Activities  The natural-gas prices listed below are New York Mercantile Exchange (NYMEX) Henry Hub prices. The following is a summary of the Company’s derivative instruments related to natural-gas production/processing derivative activities at March 31, 2015:

	2015 Settlement
Natural Gas
Three-Way Collars (thousand MMBtu/d)	635
Average price per MMBtu
Ceiling sold price (call)	$	4.76
Floor purchased price (put)	$	3.75
Floor sold price (put)	$	2.75
Extendable Fixed-Price Contracts (thousand MMBtu/d) (1)	170
Average price per MMBtu	$	4.17

__________________________________________________________________

⁽¹⁾  The extendable fixed-price contracts have a contract term of January 2015 to December 2015 with an option for the counterparty to extend the contract term to December 2016 at the same price.

MMBtu—million British thermal units

MMBtu/d—million British thermal units per day

A three-way collar is a combination of three options: a sold call, a purchased put, and a sold put. The sold call establishes the maximum price that the Company will receive for the contracted commodity volumes. The purchased put establishes the minimum price that the Company will receive for the contracted volumes unless the market price for the commodity falls below the sold put strike price, at which point the minimum price equals the reference price (e.g., NYMEX) plus the excess of the purchased put strike price over the sold put strike price.

Marketing and Trading Derivative Activities  The Company had financial derivative transactions with notional volumes of natural gas totaling 3 billion cubic feet (Bcf) at March 31, 2015, and 6 Bcf at December 31, 2014, that were entered into to mitigate commodity-price risk related to fixed-price purchase and sales contracts and storage activity.

Interest-Rate Derivatives  Anadarko has outstanding interest-rate swap contracts to manage interest-rate risk associated with anticipated debt issuances. The Company has locked in a fixed interest rate in exchange for a floating interest rate indexed to the three-month London Interbank Offered Rate (LIBOR). These swap instruments include a provision that requires both the termination of the swaps and cash settlement in full at the start of the reference period.

Derivative settlements and collateralization are classified as cash flows from operating activities unless the derivatives contain an other-than-insignificant financing element, in which case the settlements and collateralization are classified as cash flows from financing activities. As a result of prior extensions of reference-period start dates without settlement of the related interest-rate derivative obligations, the interest-rate derivatives in the Company’s portfolio contain an other-than-insignificant financing element and, therefore, any settlements or collateralization related to these extended interest-rate derivatives are classified as cash flows from financing activities.

The Company had the following outstanding interest-rate swaps at March 31, 2015:

millions except percentages		Reference Period		Weighted-Average
Notional Principal Amount		Start	End	Interest Rate
$	50	September 2016	September 2026	5.91%
$	1,850	September 2016	September 2046	6.06%

10

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Derivative Instruments (Continued)

Effect of Derivative Instruments—Balance Sheet  The following summarizes the fair value of the Company’s derivative instruments:

	Gross Derivative Assets				Gross Derivative Liabilities
millions	March 31,		December 31,		March 31,			December 31,
Balance Sheet Classification	2015		2014		2015			2014
Commodity derivatives
Other current assets	$	351	$	421	$	(86	)	$	(118	)
Other assets	35		1		—			—
Accrued expenses	65		71		(117		)	(114		)
Other liabilities	—		—		(31		)	(6		)
	451		493		(234		)	(238		)
Interest-rate derivatives
Other liabilities	—		—		(1,422		)	(1,217		)
Total derivatives	$	451	$	493	$	(1,656	)	$	(1,455	)

Effect of Derivative Instruments—Statement of Income  The following summarizes gains and losses related to derivative instruments:

millions	Three Months Ended   March 31,
Classification of (Gain) Loss Recognized	2015			2014
Commodity derivatives
Gathering, processing, and marketing sales (1)	$	—		$	8
(Gains) losses on derivatives, net	(53		)	215
Interest-rate derivatives
(Gains) losses on derivatives, net	205			238
Total (gains) losses on derivatives, net	$	152		$	461

__________________________________________________________________

⁽¹⁾  Represents the effect of Marketing and Trading Derivative Activities.

Credit-Risk Considerations  The financial integrity of exchange-traded contracts, which are subject to nominal credit risk, is assured by NYMEX or IntercontinentalExchange, Inc. through systems of financial safeguards and transaction guarantees. Over-the-counter traded swaps, options, and futures contracts expose the Company to counterparty credit risk. The Company monitors the creditworthiness of its counterparties, establishes credit limits according to the Company’s credit policies and guidelines, and assesses the impact on fair value of its counterparties’ creditworthiness. The Company has the ability to require cash collateral or letters of credit to mitigate its credit-risk exposure.

The Company has netting agreements with financial institutions that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities, and routinely exercises its contractual right to offset gains and losses when settling with derivative counterparties. In addition, the Company has setoff agreements with certain financial institutions that may be exercised in the event of default and provide for contract termination and net settlement across derivative types. At March 31, 2015, $237 million of the Company’s $1.656 billion gross derivative liability balance, and at December 31, 2014, $289 million of the Company’s $1.455 billion gross derivative liability balance would have been eligible for setoff against the Company’s gross derivative asset balance in the event of default. Other than in the event of default, the Company does not net settle across derivative types.

11

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Derivative Instruments (Continued)

The Company’s derivative instruments are subject to individually negotiated credit provisions that may require collateral of cash or letters of credit depending on the derivative’s valuation versus negotiated credit thresholds. These credit thresholds may also require full or partial collateralization or immediate settlement of the Company’s obligations if certain credit-risk-related provisions are triggered, such as if the Company’s credit rating from major credit rating agencies declines to below investment grade. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed was $1.2 billion (net of collateral) at March 31, 2015, and $97 million (net of collateral) at December 31, 2014. The increase is primarily a result of additional derivative counterparties no longer maintaining secured positions under the Company’s credit facilities and, therefore, the derivative instruments are now subject to credit-risk-related provisions. For information on the Company’s revolving credit facilities, see Note 8—Debt and Interest Expense—Anadarko Revolving Credit Facilities and Commercial Paper Program.

Fair Value  Valuations of physical-delivery purchase and sale agreements, over-the-counter financial swaps, and commodity option collars are based on similar transactions observable in active markets and industry-standard models that primarily rely on market-observable inputs. Inputs used to estimate fair value in industry-standard models are categorized as Level 2 inputs because substantially all assumptions and inputs are observable in active markets throughout the full term of the instruments. Inputs used to estimate the fair value of swaps and options include market-price curves; contract terms and prices; credit-risk adjustments; and, for Black-Scholes option valuations, discount factors and implied market volatility.

The following summarizes the fair value of the Company’s derivative assets and liabilities, by input level within the fair-value hierarchy:

millions
March 31, 2015	Level 1		Level 2			Level 3		Netting (1)			Collateral			Total
Assets
Commodity derivatives
Financial institutions	$	—	$	431		$	—	$	(151	)	$	(4	)	$	276
Other counterparties	—		20			—		—			—			20
Total derivative assets	$	—	$	451		$	—	$	(151	)	$	(4	)	$	296
Liabilities
Commodity derivatives
Financial institutions	$	—	$	(183	)	$	—	$	151		$	1		$	(31	)
Other counterparties	—		(51		)	—		—			—			(51		)
Interest-rate derivatives	—		(1,422		)	—		—			169			(1,253		)
Total derivative liabilities	$	—	$	(1,656	)	$	—	$	151		$	170		$	(1,335	)
December 31, 2014
Assets
Commodity derivatives
Financial institutions	$	—	$	471		$	—	$	(187	)	$	(13	)	$	271
Other counterparties	—		22			—		(2		)	—			20
Total derivative assets	$	—	$	493		$	—	$	(189	)	$	(13	)	$	291
Liabilities
Commodity derivatives
Financial institutions	$	—	$	(234	)	$	—	$	187		$	—		$	(47	)
Other counterparties	—		(4		)	—		2			—			(2		)
Interest-rate derivatives	—		(1,217		)	—		—			23			(1,194		)
Total derivative liabilities	$	—	$	(1,455	)	$	—	$	189		$	23		$	(1,243	)

 __________________________________________________________________

⁽¹⁾  Represents the impact of netting commodity derivative assets and liabilities with counterparties where the Company has the contractual right and intends to net settle.

12

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Debt and Interest Expense

Debt  The Company’s outstanding debt is senior unsecured. The following summarizes the Company’s outstanding debt:

millions	March 31, 2015			December 31, 2014
Total debt at face value	$	18,450		$	16,687
Net unamortized discounts and premiums (1)	(1,606		)	(1,616		)
Total borrowings	$	16,844		$	15,071
Capital lease obligation	21			21
Less short-term debt	500			—
Total long-term debt	$	16,365		$	15,092

__________________________________________________________________

⁽¹⁾  Unamortized discounts and premiums are amortized over the term of the related debt.

Anadarko’s Zero-Coupon Senior Notes due 2036 (Zero Coupons) can be put to the Company in October of each year, in whole or in part, for the then-accreted value, which will be $796 million at the next put date in October 2015. Anadarko’s Zero Coupons are classified as long-term debt on the Company’s Consolidated Balance Sheets, as the Company has the ability and intent to refinance these obligations using long-term debt.

Fair Value  The Company uses a market approach to determine fair value of its fixed-rate debt using observable market data, which results in a Level 2 fair-value measurement. The carrying amount of floating-rate debt approximates fair value as the variable interest rates are reflective of market rates. The estimated fair value of the Company’s total borrowings was $19.3 billion at March 31, 2015, and $17.4 billion at December 31, 2014.

Debt Activity  The following summarizes the Company’s debt activity during the three months ended March 31,2015:

	Carrying
millions	Value			Description
Balance at December 31, 2014	$	15,071
Borrowings	1,500			$5.0 billion revolving credit facility
	1,800			364-Day Facility
	140			WES revolving credit facility
	1,153			Commercial paper notes
Repayments	(1,500		)	$5.0 billion revolving credit facility
	(1,300		)	364-Day Facility
	(30		)	WES revolving credit facility
Other, net	10			Amortization of debt discounts and premiums
Balance at March 31, 2015	$	16,844

13

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Debt and Interest Expense (Continued)

Anadarko Revolving Credit Facilities and Commercial Paper Program  In January 2015, upon satisfaction of certain conditions, including the settlement payment related to the Tronox Adversary Proceeding, the Company’s $5.0 billion senior secured revolving credit facility was replaced by a $3.0 billionfive-year senior unsecured revolving credit facility (Five-Year Facility), which is expandable to $4.0 billion, and a $2.0 billion364-day senior unsecured revolving credit facility (364-Day Facility). For additional information, see Note 11—Contingencies—Tronox Litigation.

Borrowings under the Five-Year and 364-Day Facilities generally bear interest under one of two rate options, at Anadarko’s election, using either LIBOR (or Euro Interbank Offered Rate in the case of borrowings under the Five-Year Facility denominated in Euro) or an alternate base rate, in each case plus an applicable margin ranging from 0.00% to 1.65% for the Five-Year Facility and 0.00% to 1.675% for the 364-Day Facility. The applicable margin will vary depending on Anadarko’s credit ratings.

The Five-Year and 364-Day Facilities contain certain customary affirmative and negative covenants, including a financial covenant requiring maintenance of a consolidated indebtedness to total capitalization ratio of no greater than 65% and limitations on certain secured indebtedness, sale-and-leaseback transactions, and mergers and other fundamental changes. At March 31, 2015, the Company was in compliance with all covenants contained in its Five-Year and 364-Day Facilities.

At March 31, 2015, the Company had no outstanding borrowings under the Five-Year Facility and had $500 million of outstanding borrowings under its 364-Day Facility at an interest rate of 1.29%. The Company had available borrowing capacity of $1.5 billion under its 364-Day Facility.

During the first quarter of 2015, the Company initiated a commercial paper program, which allows a maximum of $3.0 billion of unsecured commercial paper notes and is supported by the Company’s Five-Year Facility. The maturities of the commercial paper notes vary, but may not exceed 397 days. The commercial paper notes are sold under customary terms in the commercial paper market and are issued either at a discounted price to their principal face value or will bear interest at varying interest rates on a fixed or floating basis. Such discounted price or interest amounts are dependent on market conditions and the ratings assigned to the commercial paper program by credit rating agencies at the time of issuance of the commercial paper notes. At March 31, 2015, the Company had $1.2 billion of commercial paper notes outstanding at a weighted-average interest rate of 0.67%. The Company classified the outstanding commercial paper notes as long-term debt on the Company’s Consolidated Balance Sheet, as the Company currently intends to refinance these obligations at maturity with additional commercial paper notes supported by the Company’s Five-Year Facility.

WES Borrowings  At March 31, 2015, WES was in compliance with all covenants contained in its five-year $1.2 billion senior unsecured revolving credit facility maturing in February 2019 (RCF), which is expandable to $1.5 billion. At March 31, 2015, WES had outstanding borrowings under its RCF of $620 million at an interest rate of 1.48%, had outstanding letters of credit of $13 million, and had available borrowing capacity of $567 million.

Interest Expense  The following summarizes interest expense:

	Three Months Ended   March 31,
millions	2015			2014
Debt and other	$	254		$	240
Capitalized interest	(38		)	(57		)
Total interest expense	$	216		$	183

14

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Stockholders’ Equity

The following provides a reconciliation between basic and diluted earnings per share attributable to common stockholders:

	Three Months Ended   March 31,
millions except per-share amounts	2015			2014
Net income (loss)
Net income (loss) attributable to common stockholders	$	(3,268	)	$	(2,669	)
Less distributions on participating securities	1			—
Basic	$	(3,269	)	$	(2,669	)
Diluted	$	(3,269	)	$	(2,669	)
Shares
Average number of common shares outstanding—basic	507			504
Average number of common shares outstanding—diluted	507			504
Excluded (1)	11			11
Net income (loss) per common share
Basic	$	(6.45	)	$	(5.30	)
Diluted	$	(6.45	)	$	(5.30	)
Dividends per common share	$	0.27		$	0.18

 __________________________________________________________________

⁽¹⁾  Inclusion of certain shares would have had an anti-dilutive effect.

10. Accumulated Other Comprehensive Income (Loss)

The following summarizes the after-tax changes in the balances of accumulated other comprehensive income (loss):

millions	Interest-rate Derivatives Previously Subject to Hedge Accounting			Pension and Other Postretirement Plans			Total
Balance at December 31, 2014	$	(48	)	$	(469	)	$	(517	)
Reclassifications to Consolidated Statement of Income	1			9			10
Balance at March 31, 2015	$	(47	)	$	(460	)	$	(507	)

15

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Contingencies

Litigation  The Company is a defendant in a number of lawsuits, is involved in governmental proceedings, and is subject to regulatory controls arising in the ordinary course of business, including, but not limited to, personal injury claims; property damage claims; title disputes; tax disputes; royalty claims; contract claims; contamination claims relating to oil and gas production, transportation, and processing; and environmental claims, including claims involving assets owned by acquired companies and claims involving assets previously sold to third parties and no longer a part of the Company’s current operations. Anadarko is also subject to various environmental-remediation and reclamation obligations arising from federal, state, and local laws and regulations. While the ultimate outcome and impact on the Company cannot be predicted with certainty, after consideration of recorded expense and liability accruals, management believes that the resolution of pending proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

The following is a discussion of any material developments in previously reported contingencies and any other material matters that have arisen since the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Tronox Litigation  On April 3, 2014, Anadarko and Kerr-McGee Corporation and certain of its subsidiaries entered into a settlement agreement to resolve all claims asserted by Tronox Incorporated (Tronox) and certain of its affiliates, including claims for actual and constructive fraudulent conveyance (Adversary Proceeding), for $5.15 billion. In addition, the Company agreed to pay interest on that amount from April 3, 2014, through the payment of the settlement. In January 2015, the Company paid $5.2 billion after the settlement agreement became effective. For additional disclosure of the Tronox Adversary Proceeding, see Note 17—Contingencies—Tronox Litigation in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Anadarko recognized Tronox-related contingent losses of $850 million in the fourth quarter of 2013 and $4.3 billion in the first quarter of 2014. In addition, Anadarko recognized settlement-related interest expense, included in Tronox-related contingent loss in the Company’s Consolidated Statement of Income, of $60 million during the year ended December 31, 2014, and $5 million during the three months ended March 31, 2015. For information on the tax effects of the settlement agreement, see Note 12—Income Taxes.

Deepwater Horizon Events  In April 2010, the Macondo well in the Gulf of Mexico blew out and an explosion occurred on the Deepwater Horizon drilling rig, resulting in an oil spill. The well was operated by BP Exploration and Production Inc. (BP) and Anadarko held a 25% nonoperated interest. In October 2011, the Company and BP entered into a settlement agreement relating to the Deepwater Horizon events (Settlement Agreement). Pursuant to the Settlement Agreement, the Company is fully indemnified by BP against all claims and damages arising under the Oil Pollution Act of 1990 (OPA), claims for natural resource damages (NRD) and assessment costs, and any claims arising under the Operating Agreement with BP. This indemnification is guaranteed by BP Corporation North America Inc. (BPCNA) and, in the event that the net worth of BPCNA declines below an agreed-upon amount, BP p.l.c. has agreed to become the sole guarantor. Under the Settlement Agreement, BP does not indemnify the Company against penalties and fines, punitive damages, shareholder derivative or securities laws claims, or certain other claims. The Company has not recorded a liability for any costs that are subject to indemnification by BP. For additional disclosure of the Deepwater Horizon events, the Company’s Settlement Agreement with BP, environmental claims under OPA, NRD claims, potential penalties and fines, and civil litigation, see Note 17—Contingencies—Deepwater Horizon Events in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Penalties and Fines  In December 2010, the U.S. Department of Justice (DOJ), on behalf of the United States, filed a civil lawsuit in the U.S. District Court for the Eastern District of Louisiana in New Orleans, Louisiana (Louisiana District Court) against several parties, including the Company, seeking an assessment of civil penalties under the Clean Water Act (CWA) in an amount to be determined by the Louisiana District Court. In February 2012, the Louisiana District Court entered a declaratory judgment that, as a partial owner of the Macondo well, Anadarko is liable for civil penalties under Section 311 of the CWA. The declaratory judgment, which was affirmed in June 2014 by the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit), addresses liability only, and does not address the amount of any civil penalty. In March 2015, Anadarko filed a petition for a writ of certiorari with the U.S. Supreme Court appealing the Fifth Circuit’s decision.

16

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Contingencies (Continued)

Applicable accounting guidance requires the Company to accrue a liability if it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The Louisiana District Court’s declaratory judgment in February 2012 satisfies the requirement that a liability arising from the future assessment of a civil penalty against Anadarko is probable. In an effort to resolve this matter, the Company made a settlement offer to the DOJ in July 2014 of $90 million and recorded a contingent liability for this amount at June 30, 2014. The Company subsequently engaged in further discussions regarding settlement, but the parties have not been able to reach agreement on either the amount of, or the terms and conditions governing, a settlement. The Company’s settlement offer of $90 million remains outstanding and the Company remains open to resolving the matter through settlement discussions. The Company believes that $90 million under a settlement scenario is a better estimate of loss at this time than any other amount. Based on the above accounting guidance, the Company’s contingent liability for CWA penalties and fines remains $90 million at March 31, 2015. However, the Company may ultimately incur a liability related to CWA penalties in excess of the current accrued liability.

The actual amount of a CWA penalty is subject to uncertainty, including whether the Company will be able to reach a settlement with the DOJ or will await the Louisiana District Court’s opinion. The CWA sets forth subjective criteria to be considered by the court in assessing the magnitude of any CWA penalty, including the degree of fault of the owner. For the Phase I and II trials (defined in Civil Litigation Damage Claims below) and again for the penalty phase trial in January 2015, the Louisiana District Court ruled that no evidence of Anadarko’s alleged culpability or fault could be presented. In addition, in its Phase I Findings of Fact and Conclusions of Law (Phase I Findings and Conclusions), the Louisiana District Court did not allocate any fault to Anadarko. Given the subjective nature of the CWA criteria used to determine penalty assessments and the Louisiana District Court’s prior rulings related to culpability and allocation of fault, the Company currently cannot reasonably estimate the amount of any such penalty to be assessed or determine a reasonable range of potential loss if the matter is resolved by the Louisiana District Court following trial. However, given the Company’s lack of direct operational involvement in the event, the Louisiana District Court’s rulings excluding any evidence of Anadarko’s alleged culpability or fault, the Phase I Findings and Conclusions that did not allocate any fault to Anadarko, and the subjective criteria of the CWA, the Company believes that any CWA penalties assessed to it will not materially impact the Company’s financial condition, results of operations, or cash flows.

Events or factors that could assist the Company in estimating the amount of settlement or potential civil penalty or a range of potential loss related to such penalty include (i) an assessment by the DOJ, (ii) a ruling by a court of competent jurisdiction, or (iii) substantive settlement negotiations between the Company and the DOJ.

As discussed below, numerous Deepwater Horizon event-related civil lawsuits have been filed against BP and other parties, including the Company. Certain state and local governments appealed, or provided indication of a likely appeal of, the Louisiana District Court’s decision that only federal law, and not state law, applies to Deepwater Horizon event-related claims. If any appeal is successful, state and/or local laws and regulations could become sources of penalties or fines against the Company.

Civil Litigation Damage Claims  Numerous Deepwater Horizon event-related civil lawsuits have been filed against BP and other parties, including the Company. This litigation has been consolidated into a federal Multidistrict Litigation (MDL) action pending before Judge Carl Barbier in the Louisiana District Court.

The first phase of the trial in the MDL (Phase I) commenced in February 2013. The issues tried in Phase I included the cause of the blowout and all related events leading up to April 22, 2010, the date the Deepwater Horizon sank, as well as allocation of fault. In September 2014, the Louisiana District Court issued its Phase I Findings and Conclusions. The Louisiana District Court found that BP and BP America Production Company (BPAP), Transocean Ltd. (Transocean), and Halliburton Energy Services, Inc. (Halliburton), but not Anadarko, are each liable under general maritime law for the blowout, explosion, and oil spill. The court determined that BP’s and BPAP’s conduct was reckless and that both Transocean’s and Halliburton’s conduct was negligent. The Louisiana District Court apportioned 67% of the fault to BP and BPAP, 30% to Transocean, and 3% to Halliburton. No fault was allocated to Anadarko. The plaintiffs and BP have appealed the Phase I Findings and Conclusions.

17

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Contingencies (Continued)

The second phase of trial (Phase II) began in September 2013. The issues tried in Phase II included spill-source control and quantification of the spill for the period from April 20, 2010, until the well was capped. In January 2015, the Louisiana District Court issued its Phase II Findings of Fact and Conclusions of Law (Phase II Findings and Conclusions). The Louisiana District Court found that, for purposes of calculating the maximum possible civil penalty under the CWA, 3.19 million barrels of oil were discharged into the Gulf of Mexico. The United States has appealed the Phase II Findings and Conclusions.

The penalty phase of the trial began in January 2015. In March 2014, the Louisiana District Court ruled that no evidence of Anadarko’s alleged culpability or fault could be presented during the penalty phase trial. The parties rested their case in February 2015, post-trial briefing concluded in April 2015, and the matter is pending before the Louisiana District Court. The trial included Anadarko, BP, and the United States, and will assess findings and penalties under the CWA.

Remaining Liability Outlook  It is possible that the Company may recognize additional Deepwater Horizon event-related liabilities for potential fines and penalties and certain other claims not covered by the indemnification provisions of the Settlement Agreement; however, the Company does not believe that any potential liability attributable to the foregoing items, individually or in the aggregate, will have a material impact on the Company’s financial condition, results of operations, or cash flows. This assessment takes into account certain qualitative factors, including the subjective and fault-based nature of CWA penalties, the Company’s indemnification by BP against certain damage claims as discussed above and BP’s creditworthiness.

Although the Company is fully indemnified by BP against OPA damage claims, NRD claims and assessment costs, and certain other potential liabilities, the Company may be required to recognize a liability for these amounts in advance of or in connection with recognizing a receivable from BP for the related indemnity payment. In all circumstances, however, the Company expects that any additional indemnified liability that may be recognized by the Company will be subsequently recovered from BP itself or through the guarantees of BPCNA or BP p.l.c.

The Company will continue to monitor the MDL and other legal proceedings discussed above, as well as federal investigations related to the Deepwater Horizon events. The Company cannot predict the nature of additional evidence that may be discovered during the course of legal proceedings or the timing of completion of any legal proceedings.

Environmental Matters  Anadarko is also subject to various environmental-remediation and reclamation obligations arising from federal, state, and local laws and regulations. The Company continually monitors remediation and reclamation processes and adjusts its liability for these obligations as necessary.

18

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Income Taxes

The following summarizes income tax expense (benefit) and effective tax rates:

	Three Months Ended   March 31,
millions except percentages	2015			2014
Income tax expense (benefit)	$	(1,392	)	$	664
Effective tax rate	30		%	(34		)%

The Company reported a loss before income taxes for the three months ended March 31, 2015 and 2014. As a result, items that ordinarily increase or decrease the tax rate will have the opposite effect.

The decrease from the 35% U.S. federal statutory rate for the three months ended March 31, 2015, was primarily attributable to net changes in uncertain tax positions, Algerian exceptional profits taxes, and the tax impact from foreign operations. The decrease from the 35% U.S. federal statutory rate for the three months ended March 31, 2014, was primarily attributable to net changes in uncertain tax positions related to the settlement agreement associated with the Tronox Adversary Proceeding, Algerian exceptional profits taxes, and the tax impact from foreign operations.

At March 31, 2015, the Company had recorded a $577 million tax benefit related to the Tronox settlement. This benefit was net of a $1.3 billion uncertain tax position due to the uncertainty related to the deductibility of the settlement payment. At March 31, 2015, $561 million of this net benefit was presented in other assets and the remainder was presented in deferred income taxes on the Company’s Consolidated Balance Sheet. The Company is a participant in the U.S. Internal Revenue Service’s (IRS) Compliance Assurance Process and has regular discussions with the IRS concerning the Company’s tax positions. Depending on the outcome of such discussions, it is reasonably possible that the amount of the uncertain tax position related to the settlement could change, perhaps materially. See Note 11—Contingencies—Tronox Litigation.

At March 31, 2015, accrued expenses on the Company’s Consolidated Balance Sheet included $388 million of accrued income taxes.

13. Supplemental Cash Flow Information

For the three months ended March 31, 2015, other items—net in the Company’s Consolidated Statements of Cash Flows includes a $561 million current tax benefit associated with the Tronox settlement. The following summarizes cash paid (received) for interest and income taxes, as well as non-cash investing and financing activities:

	Three Months Ended   March 31,
millions	2015			2014
Cash paid (received)
Interest, net of amounts capitalized (1)	$	1,532		$	265
Income taxes, net of refunds	(5		)	598
Non-cash investing activities
Fair value of properties and equipment from non-cash transactions	$	54		$	—
Asset retirement cost additions	63			47
Accruals of property, plant, and equipment	1,061			1,544
Net liabilities assumed (divested) in acquisitions and divestitures	19			(25		)
Non-cash investing and financing activities
Floating production, storage, and offloading vessel construction period obligation	$	18		$	34

__________________________________________________________________

⁽¹⁾  Includes $1.2 billion of interest related to the Tronox settlement payment in 2015.

19

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

14. 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, 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 oil, natural-gas, and NGLs production, as well as third-party purchased volumes.

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 from 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, items not related to the Company’s normal operations included Deepwater Horizon settlement and related costs, 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 from 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:

	Three Months Ended   March 31,
millions	2015			2014
Income (loss) before income taxes	$	(4,628	)	$	(1,962	)
Exploration expense	1,083			299
DD&A	1,256			1,124
Impairments	2,783			3
Interest expense	216			183
Total (gains) losses on derivatives, net, less net cash from settlement of    commodity derivatives	243			363
Deepwater Horizon settlement and related costs	4			—
Tronox-related contingent loss	5			4,300
Certain other nonoperating items	22			—
Less net income attributable to noncontrolling interests	32			43
Consolidated Adjusted EBITDAX	$	952		$	4,267

20

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

14. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, results from hard-minerals royalties, and net cash from settlement of commodity derivatives. The following summarizes selected financial information for Anadarko’s reporting segments:

millions	Oil and Gas Exploration & Production			Midstream			Marketing			Other and Intersegment Eliminations			Total
Three Months Ended March 31, 2015
Sales revenues	$	1,070		$	174		$	1,341		$	—		$	2,585
Intersegment revenues	1,117			302			(1,191		)	(228		)	—
Gains (losses) on divestitures and other, net	(338		)	—			—			74			(264		)
Total revenues and other	1,849			476			150			(154		)	2,321
Operating costs and expenses (1)	1,002			240			198			(37		)	1,403
Net cash from settlement of commodity derivatives	—			—			—			(90		)	(90		)
Other (income) expense, net (2)	—			—			—			25			25
Net income attributable to noncontrolling interests	—			32			—			—			32
Total expenses and other	1,002			272			198			(102		)	1,370
Total (gains) losses on derivatives, net    included in marketing revenue, less net    cash from settlement	—			—			1			—			1
Adjusted EBITDAX	$	847		$	204		$	(47	)	$	(52	)	$	952
Three Months Ended March 31, 2014
Sales revenues	$	2,389		$	120		$	1,829		$	—		$	4,338
Intersegment revenues	1,553			320			(1,689		)	(184		)	—
Gains (losses) on divestitures and other, net	1,460			(2		)	—			48			1,506
Total revenues and other	5,402			438			140			(136		)	5,844
Operating costs and expenses (1)	1,012			232			181			18			1,443
Net cash from settlement of commodity    derivatives	—			—			—			92			92
Other (income) expense, net	—			—			—			1			1
Net income attributable to noncontrolling interests	—			43			—			—			43
Total expenses and other	1,012			275			181			111			1,579
Total (gains) losses on derivatives, net    included in marketing revenue, less net    cash from settlement	—			—			2			—			2
Adjusted EBITDAX	$	4,390		$	163		$	(39	)	$	(247	)	$	4,267

 __________________________________________________________________

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

⁽²⁾   Other (income) expense, net excludes certain other nonoperating items since these items are excluded from Adjusted EBITDAX.

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ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Pension Plans and Other Postretirement Benefits

The Company has contributory and non-contributory defined-benefit pension plans, which include both qualified and supplemental plans. The Company also provides certain health care and life insurance benefits for certain retired employees. Retiree health care benefits are funded by contributions from the retiree, and in certain circumstances, contributions from the Company. The Company’s retiree life insurance plan is noncontributory. The following summarizes the Company’s pension and other postretirement benefit cost:

	Pension Benefits						Other Benefits
millions	2015			2014			2015		2014
Three Months Ended March 31
Service cost	$	30		$	25		$	3	$	2
Interest cost	25			25			4		4
Expected return on plan assets	(27		)	(27		)	—		—
Amortization of net actuarial loss (gain)	13			9			—		(2		)
Net periodic benefit cost	$	41		$	32		$	7	$	4

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. The Company has made in this report, and may from time to time make in other public filings, press releases, and management discussions, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning the Company’s operations, economic performance, and financial condition. These forward-looking statements include, among other things, information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and gas properties, marketing and midstream activities, and also include those statements preceded by, followed by, or that otherwise include the words “may,” “could,” “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” “would,” “will,” “potential,” “continue,” “forecast,” “future,” “likely,” “outlook,” or similar expressions or variations on such expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will be realized. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

These forward-looking statements involve risk and uncertainties. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the following risks and uncertainties:

• the Company’s assumptions about energy markets

• production and sales volume levels

• reserves levels

• operating results

• competitive conditions

• technology

• availability of capital resources, levels of capital expenditures, and other contractual obligations

• supply and demand for, the price of, and the commercialization and transporting of natural gas, oil, natural gas liquids (NGLs), and other products or services

• volatility in the commodity-futures market

• weather

• inflation

• availability of goods and services, including unexpected changes in costs

• drilling risks

• processing volumes and pipeline throughput

• general economic conditions nationally, internationally, or in the jurisdictions in which the Company or its subsidiaries are, or in the future may be, doing business

• the Company’s inability to timely obtain or maintain permits or other governmental approvals, including those necessary for drilling and/or development projects

• legislative or regulatory changes, including changes relating to hydraulic fracturing; retroactive royalty or production tax regimes; deepwater drilling and permitting regulations; derivatives reform; changes in state, federal, and foreign income taxes; environmental regulation; environmental risks; and liability under federal, state, foreign, and local environmental laws and regulations

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• the ability of BP Exploration & Production Inc. (BP) to meet its indemnification obligations to the Company for Deepwater Horizon events, including, among other things, damage claims arising under the Oil Pollution Act of 1990 (OPA), claims for natural resource damages (NRD) and associated damage-assessment costs, and any claims arising under the Operating Agreement (OA) for the Macondo well, as well as the ability of BP Corporation North America Inc. (BPCNA) and BP p.l.c. to satisfy their guarantees of such indemnification obligations

• the impact of remaining claims related to the Deepwater Horizon events, including, but not limited to, fines, penalties, and punitive damages against the Company, for which it is not indemnified by BP

• civil or political unrest or acts of terrorism in a region or country

• the creditworthiness and performance of the Company’s counterparties, including financial institutions, operating partners, and other parties

• volatility in the securities, capital, or credit markets and related risks such as general credit, liquidity, and interest-rate risk

• the Company’s ability to successfully monetize select assets, repay its debt, and the impact of changes in the Company’s credit ratings

• disruptions in international oil, NGLs, and condensate cargo shipping activities

• physical, digital, internal, and external security breaches

• supply and demand, technological, political, governmental, and commercial conditions associated with long-term development and production projects in domestic and international locations

• other factors discussed below and elsewhere in “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the Company’s 2014 Annual Report on Form 10-K, this Form 10-Q, and in the Company’s other public filings, press releases, and discussions with Company management

The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in this report in Part I, Item 1; the information set forth in Risk Factors under Part II, Item 1A; the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in Part II, Item 8 of the 2014 Annual Report on Form 10-K; and the information set forth in the Risk Factors under Part I, Item 1A of the 2014 Annual Report on Form 10-K.

OVERVIEW

Anadarko is among the world’s largest independent exploration and production companies. Anadarko is engaged in the exploration, development, production, and marketing of natural gas, oil, condensate, NGLs, and anticipated production of liquefied natural gas. The Company also engages in the gathering, processing, treating, and transporting of natural gas, oil, and NGLs. The Company has production and exploration activities worldwide, including activities in the United States, Mozambique, Algeria, Ghana, Brazil, Colombia, Côte d’Ivoire, Kenya, New Zealand, and other countries.

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Significant operating and financial activities for the first quarter of 2015 include the following:

Overall

• Anadarko’s first-quarter sales volumes averaged 934 thousand barrels of oil equivalent per day (MBOE/d), representing a 14%increase over the first quarter of 2014.

• Anadarko’s first-quarter liquids sales volumes averaged 478 thousand barrels per day (MBbls/d), representing a 29%increase over the first quarter of 2014, primarily due to increased sales volumes from the Wattenberg field and the Eagleford shale, and the timing of cargo liftings in Algeria and Ghana.

• The Company paid $5.2 billion related to a settlement agreement to resolve all claims asserted in the Tronox Adversary Proceeding. See Note 11—Contingencies—Tronox Litigation in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

• The Company’s overall sales product mix increased to 51% liquids in the first quarter of 2015 compared to 45% in the first quarter of 2014.

U.S. Onshore

• U.S. onshore first-quarter sales volumes averaged 740 MBOE/d, representing a 17%increase over the first quarter of 2014, primarily due to increased sales volumes from the Wattenberg field and the Eagleford shale.

• The Company sold certain U.S. onshore oil and gas assets in the Rocky Mountains Region (Rockies) for $703 million in April 2015, recognizing a loss of $340 million in the first quarter of 2015.

Gulf of Mexico

• Gulf of Mexico first-quarter sales volumes averaged 89 MBOE/d, representing a 9%decrease from the first quarter of 2014, primarily due to natural-gas production declines at Independence Hub.

• Anadarko’s Lucius development project in the deepwater Gulf of Mexico achieved first oil in January 2015.

• The Company participated in the successful drilling of the Yeti exploration well (37.5% working interest) in Walker Ridge Block 160 and the well was successfully sidetracked to test the down-dip limits of the field.

International

• International first-quarter sales volumes averaged 105 MBOE/d, representing a 16% increase from the first quarter of 2014, primarily due to the timing of cargo liftings in Algeria and Ghana.

Financial

• Anadarko’s net loss attributable to common stockholders for the first quarter of 2015 totaled $3.3 billion, which included $3.7 billion of pretax expenses for proved and unproved property impairments related to the Company’s Greater Natural Buttes properties in the Rockies.

• The Company’s net cash used in operating activities was $4.5 billion, which included the $5.2 billion Tronox settlement payment. The Company ended the quarter with $2.3 billion of cash on hand.

• The Company initiated a commercial paper program, which allows a maximum of $3.0 billion of unsecured commercial paper notes. The Company had $1.2 billion of borrowings outstanding under this program at March 31, 2015.

• The Company replaced its $5.0 billion senior secured revolving credit facility with a $3.0 billion five-year senior unsecured revolving credit facility (Five-Year Facility), which is expandable to $4.0 billion, and a $2.0 billion 364-day senior unsecured revolving credit facility (364-Day Facility). The Company had $500 million of borrowings outstanding under the 364-Day Facility and no borrowings under the Five-Year Facility at March 31, 2015.

25

The following discussion pertains to Anadarko’s results of operations, financial condition, and changes in financial condition. Any increases or decreases “for the three months ended March 31, 2015,” refer to the comparison of the three months ended March 31, 2015, to the three months ended March 31, 2014. The primary factors that affect the Company’s results of operations include commodity prices for natural gas, oil, and NGLs; sales volumes; the Company’s ability to discover additional oil and natural-gas reserves; the cost of finding such reserves; and operating costs.

RESULTS OF OPERATIONS

	Three Months Ended   March 31,
millions except per-share amounts	2015			2014
Financial Results
Revenues and other	$	2,321		$	5,844
Costs and expenses	6,529			2,869
Other (income) expense	420			4,937
Income tax expense (benefit)	(1,392		)	664
Net income (loss) attributable to common stockholders	$	(3,268	)	$	(2,669	)
Net income (loss) per common share attributable to common stockholders—diluted	$	(6.45	)	$	(5.30	)
Average number of common shares outstanding—diluted	507			504
Operating Results
Adjusted EBITDAX (1)	$	952		$	4,267
Sales volumes (MMBOE)	84			74

 ________________________________________________________________________________________________________

MMBOE—million barrels of oil equivalent

⁽¹⁾  See Operating Results—Segment Analysis—Adjusted EBITDAX for a description of Adjusted EBITDAX, which is not a U.S. Generally Accepted Accounting Principles (GAAP) measure, and for a reconciliation of Adjusted EBITDAX to income (loss) before income taxes, which is presented in accordance with GAAP.

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FINANCIAL RESULTS

Sales Revenues and Volumes

	Three Months Ended March 31,
millions except percentages	Natural Gas			Oil and Condensate			NGLs			Total
2014 sales revenues	$	1,217		$	2,424		$	386		$	4,027
Changes associated with sales volumes	19			568			173			760
Changes associated with prices	(595		)	(1,573		)	(327		)	(2,495		)
2015 sales revenues	$	641		$	1,419		$	232		$	2,292
Increase (decrease) vs. 2014	(47		)%	(41		)%	(40		)%	(43		)%

Anadarko’s sales revenues decreased for the three months ended March 31, 2015, due to lower average commodity prices, partially offset by higher sales volumes for all commodities.

	Three Months Ended   March 31,
Sales Volumes	2015	Inc/(Dec) vs. 2014		2014
Barrels of Oil Equivalent (MMBOE except percentages)
United States	75	14	%	66
International	9	16		8
Total barrels of oil equivalent	84	14		74
Barrels of Oil Equivalent per Day (MBOE/d except percentages)
United States	829	14	%	729
International	105	16		90
Total barrels of oil equivalent per day	934	14		819

Sales volumes represent actual production volumes adjusted for changes in commodity inventories and natural-gas production volumes provided to satisfy a commitment established in conjunction with a development plan. Anadarko employs marketing strategies to minimize market-related shut-ins, maximize realized prices, and manage credit-risk exposure. For additional information, see Note 7—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q and Other (Income) Expense—(Gains) Losses on Derivatives, net.

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Natural-Gas Sales Volumes, Average Prices, and Revenues

	Three Months Ended   March 31,
	2015		Inc/(Dec) vs. 2014		2014
United States
Sales volumes—Bcf	246		2	%	243
MMcf/d	2,738		2		2,697
Price per Mcf	$	2.60	(48	)	$	5.01
Natural-gas sales revenues (millions)	$	641	(47	)	$	1,217

 _______________________________________________________________________________

Bcf—billion cubic feet

MMcf/d—million cubic feet per day

Mcf—thousand cubic feet

The Company’s natural-gas sales volumes increased by 41 MMcf/d for the three months ended March 31, 2015.

• Sales volumes in the Southern and Appalachia Region increased by 63 MMcf/d primarily as a result of continued horizontal drilling in the Eagleford shale.

• Sales volumes in the Rockies increased by 32 MMcf/d due to higher sales volumes in the Wattenberg field as a result of continued horizontal drilling. This increase was partially offset by the natural production declines at Greater Natural Buttes and the Powder River basin and the sale of the Company’s Pinedale/Jonah assets in January 2014.

• Sales volumes in the Gulf of Mexico decreased by 54 MMcf/d primarily due to natural production declines at Independence Hub.

The average natural-gas price Anadarko received decreased for the three months ended March 31, 2015, primarily due to lower weather-driven residential and commercial demand year over year and strong production growth in the northeast United States.

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Oil and Condensate Sales Volumes, Average Prices, and Revenues

	Three Months Ended   March 31,
	2015		Inc/(Dec) vs. 2014		2014
United States
Sales volumes—MMBbls	22		31	%	16
MBbls/d	237		31		180
Price per barrel	$	44.19	(53	)	$	94.84
International
Sales volumes—MMBbls	8		9	%	8
MBbls/d	98		9		90
Price per barrel	$	54.15	(50	)	$	108.41
Total
Sales volumes—MMBbls	30		23	%	24
MBbls/d	335		23		270
Price per barrel	$	47.12	(53	)	$	99.37
Oil and condensate sales revenues (millions)	$	1,419	(41	)	$	2,424

 _______________________________________________________________________________

MMBbls—million barrels

Anadarko’s oil and condensate sales volumes increased by 65 MBbls/d for the three months ended March 31, 2015.

• Sales volumes in the Rockies increased by 42 MBbls/d primarily in the Wattenberg field due to continued horizontal drilling.

• Southern and Appalachia Region sales volumes increased by 15 MBbls/d primarily as a result of continued horizontal drilling in the Eagleford shale.

• International sales volumes increased by 8 MBbls/d due to higher sales volumes in Ghana and Algeria due to the timing of cargo liftings, partially offset by lower sales volumes due to the sale of the Company’s Chinese subsidiary in August 2014.

• Sales volumes in the Gulf of Mexico were relatively flat as sales volumes from the Lucius development, which achieved first oil in January 2015, were offset by natural production declines primarily at Marco Polo.

Anadarko’s average oil price received decreased for the three months ended March 31, 2015, as a result of global oversupply and reduced oil demand.

29

Natural-Gas Liquids Sales Volumes, Average Prices, and Revenues

	Three Months Ended   March 31,
	2015	Inc/(Dec) vs. 2014			2014
United States
Sales volumes—MMBbls	12	38	%	</