22. 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 oil, condensate, natural gas, 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.

22. 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; gains (losses) on divestitures, net; exploration expense; 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 (loss) attributable to noncontrolling interests. During the periods presented, items not related to the Company’s normal operations included other operating expenses such as Deepwater Horizon settlement and related costs and the 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 gains (losses) on divestitures, net and exploration expense as they are not indicators 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 (loss) 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	2015			2014			2013
Income (loss) before income taxes	$	(9,689	)	$	54		$	2,106
(Gains) losses on divestitures, net	1,022			(1,891		)	470
Exploration expense	2,644			1,639			1,329
DD&A	4,603			4,550			3,927
Impairments	5,075			836			794
Interest expense	825			772			686
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	235			578			(307		)
Other operating expense	74			97			48
Tronox-related contingent loss	5			4,360			850
Certain other nonoperating items	22			22			110
Less net income (loss) attributable to noncontrolling interests	(120		)	187			140
Consolidated Adjusted EBITDAX	$	4,936		$	10,830		$	9,873

22. 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 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 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
2015
Sales revenues	$	4,734	$	727		$	4,025		$	—		$	9,486
Intersegment revenues	3,178		1,207			(3,476		)	(909		)	—
Other	—		—			—			234			234
Total revenues and other ⁽¹⁾	7,912		1,934			549			(675		)	9,720
Operating costs and expenses ⁽²⁾	3,456		998			743			(86		)	5,111
Net cash from settlement of commodity derivatives	—		—			—			(335		)	(335		)
Other (income) expense, net ⁽³⁾	—		—			—			127			127
Net income (loss) attributable to noncontrolling interests	—		(120		)	—			—			(120		)
Total expenses and other	3,456		878			743			(294		)	4,783
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—			(1		)	—			(1		)
Adjusted EBITDAX	$	4,456	$	1,056		$	(195	)	$	(381	)	$	4,936
Net properties and equipment	$	25,742	$	5,876		$	—		$	2,133		$	33,751
Capital expenditures	$	5,029	$	770		$	—		$	89		$	5,888
Goodwill	$	4,945	$	450		$	—		$	—		$	5,395

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⁽¹⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽²⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, and other operating expense since these expenses are excluded from Adjusted EBITDAX.


⁽³⁾	Other (income) expense, net excludes certain other nonoperating items since these items are excluded from Adjusted EBITDAX.

22. Segment Information (Continued)



millions	Oil and Gas Exploration & Production		Midstream		Marketing			Other and Intersegment Eliminations			Total
2014
Sales revenues	$	8,603	$	484	$	7,288		$	—		$	16,375
Intersegment revenues	6,225		1,338		(6,771		)	(792		)	—
Other	—		—		—			204			204
Total revenues and other ⁽¹⁾	14,828		1,822		517			(588		)	16,579
Operating costs and expenses ⁽²⁾	4,216		972		740			17			5,945
Net cash from settlement of commodity derivatives	—		—		—			(377		)	(377		)
Other (income) expense, net ⁽³⁾	—		—		—			(2		)	(2		)
Net income (loss) attributable to noncontrolling interests	—		187		—			—			187
Total expenses and other	4,216		1,159		740			(362		)	5,753
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—		4			—			4
Adjusted EBITDAX	$	10,612	$	663	$	(219	)	$	(226	)	$	10,830
Net properties and equipment	$	32,717	$	6,697	$	—		$	2,175		$	41,589
Capital expenditures	$	7,934	$	1,149	$	—		$	173		$	9,256
Goodwill	$	5,123	$	453	$	—		$	—		$	5,576
2013
Sales revenues	$	7,090	$	387	$	7,390		$	—		$	14,867
Intersegment revenues	6,405		1,105		(6,859		)	(651		)	—
Other	—		—		—			184			184
Total revenues and other ⁽¹⁾	13,495		1,492		531			(467		)	15,051
Operating costs and expenses⁽²⁾	3,635		843		652			20			5,150
Net cash from settlement of commodity derivatives	—		—		—			(95		)	(95		)
Other (income) expense, net ⁽³⁾	—		—		—			(21		)	(21		)
Net income (loss) 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 from settlement	—		—		(4		)	—			(4		)
Adjusted EBITDAX	$	9,860	$	509	$	(125	)	$	(371	)	$	9,873
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

__________________________________________________________________


⁽¹⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽²⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, and other operating expense since these expenses are excluded from Adjusted EBITDAX.


⁽³⁾	Other (income) expense, net excludes certain other nonoperating items since these items are excluded from Adjusted EBITDAX.

22. 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	2015		2014		2013
Sales Revenues
United States	$	7,819	$	13,083	$	11,290
Algeria	1,189		2,435		2,184
Other International	478		857		1,393
Total sales revenues	$	9,486	$	16,375	$	14,867



	December 31,
millions	2015		2014
Net Properties and Equipment
United States	$	29,625	$	37,186
Algeria	1,271		1,431
Other International	2,855		2,972
Total net properties and equipment	$	33,751	$	41,589

Major Customers In 2015 and 2014, there were no sales to customers that exceeded 10% of the Company’s total sales revenues. Sales to Total S.A. were $2.0 billion in 2013. These amounts are included in the oil and gas exploration and production reporting segment.