8. Debt and Interest Expense

Debt Activity The following summarizes the Company’s borrowing activity, after eliminating the effect of intercompany transactions, during the nine months ended September 30, 2016:



	Carrying Value
millions	WES			WGP ⁽¹⁾		Anadarko ⁽²⁾			Anadarko Consolidated			Description
Balance at December 31, 2015	$	2,691		$	—	$	12,957		$	15,648
Issuances	—			—		794			794			4.850% Senior Notes due 2021
	—			—		1,088			1,088			5.550% Senior Notes due 2026
	—			—		1,088			1,088			6.600% Senior Notes due 2046
	495			—		—			495			WES 4.650% Senior Notes due 2026
Borrowings	—			—		1,750			1,750			364-Day Facility
	600			—		—			600			WES RCF
	—			28		—			28			WGP RCF
Repayments	—			—		(1,749		)	(1,749		)	5.950% Senior Notes due 2016
	—			—		(1,245		)	(1,245		)	6.375% Senior Notes due 2017
	—			—		(1,750		)	(1,750		)	364-Day Facility
	(880		)	—		—			(880		)	WES RCF
	—			—		(250		)	(250		)	Commercial paper notes, net
	—			—		(25		)	(25		)	TEUs - senior amortizing notes
Other, net	1			—		40			41			Amortization of discounts, premiums, and debt issuance costs
Balance at September 30, 2016	$	2,907		$	28	$	12,698		$	15,633

__________________________________________________________________


⁽¹⁾	Excludes WES.


⁽²⁾	Excludes WES and WGP.

During the second quarter of 2016, the Company used proceeds from its $3.0 billion March 2016 Senior Notes issuances to purchase and retire $1.250 billion of its $2.0 billion 6.375% Senior Notes due September 2017 pursuant to a tender offer and to redeem its $1.750 billion 5.950% Senior Notes due September 2016. The Company recognized a loss of $124 million for the early retirement and redemption of these senior notes, which included $114 million of premiums paid.

8. Debt and Interest Expense (Continued)

Debt The following summarizes the Company’s outstanding debt, including capital lease obligations, after eliminating the effect of intercompany transactions:



millions	WES			WGP ⁽¹⁾		Anadarko ⁽²⁾			Anadarko Consolidated
September 30, 2016
Total borrowings at face value	$	2,940		$	28	$	14,317		$	17,285
Net unamortized discounts, premiums, and debt issuance costs ⁽³⁾	(33		)	—		(1,619		)	(1,652		)
Total borrowings ⁽⁴⁾	2,907			28		12,698			15,633
Capital lease obligations	—			—		245			245
Less short-term debt ⁽⁵⁾	—			—		788			788
Total long-term debt	$	2,907		$	28	$	12,155		$	15,090

December 31, 2015
Total borrowings at face value	$	2,720		$	—	$	14,592		$	17,312
Net unamortized discounts, premiums, and debt issuance costs ⁽³⁾	(29		)	—		(1,635		)	(1,664		)
Total borrowings ⁽⁴⁾	2,691			—		12,957			15,648
Capital lease obligations	—			—		20			20
Less short-term debt	—			—		32			32
Total long-term debt	$	2,691		$	—	$	12,945		$	15,636

__________________________________________________________________


⁽¹⁾	Excludes WES.


⁽²⁾	Excludes WES and WGP.


⁽³⁾	Unamortized discounts, premiums, and debt issuance costs are amortized over the term of the related debt. Debt issuance costs related to revolving credit facilities are included in other current assets and other assets on the Company’s Consolidated Balance Sheets.


⁽⁴⁾	The Company’s outstanding borrowings, except for borrowings under the WGP revolving credit facility, are senior unsecured.


⁽⁵⁾	Short-term debt includes $750 million of 6.375% Senior Notes due September 2017. In October 2016, the Company provided notice of its intent to redeem the notes prior to year end.

Anadarko’s Zero Coupons can be put to the Company in October of each year, in whole or in part, for the then-accreted value of the outstanding Zero Coupons. None of the Zero Coupons (accreted value of $839 million) were put to the Company in October 2016.

Fair Value The Company uses a market approach to determine the 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 interest rates are variable and reflective of market rates. The estimated fair value of the Company’s total borrowings was $17.6 billion at September 30, 2016, and $15.7 billion at December 31, 2015.

8. Debt and Interest Expense (Continued)

Anadarko Revolving Credit Facilities and Commercial Paper Program Anadarko has a $3.0 billion five-year senior unsecured revolving credit facility maturing in January 2021 (Five-Year Facility). In addition, the Company has a $2.0 billion 364-day senior unsecured revolving credit facility (364-Day Facility) that will mature in January 2017. At September 30, 2016, the Company had no outstanding borrowings under the Five-Year Facility or the 364-Day Facility and was in compliance with all related covenants.

In January 2015, the Company initiated a commercial paper program, which allows for a maximum of $3.0 billion of unsecured commercial paper notes and is supported by the Five-Year Facility. The maturities of the commercial paper notes may vary, but may not exceed 397 days. In February 2016, Moody’s downgraded the Company’s commercial paper program credit rating, which eliminated the Company’s access to the commercial paper market. The Company has not issued commercial paper notes since the downgrade and had no outstanding borrowings under the commercial paper program at September 30, 2016.

WES and WGP Borrowings In July 2016, WES completed a public offering of $500 million aggregate principal amount of 4.650% Senior Notes due July 2026. Net proceeds were used to repay a portion of the amount outstanding under WES’s $1.2 billion five-year senior unsecured revolving credit facility maturing in February 2019 (WES RCF), which is expandable to $1.5 billion.

At September 30, 2016, WES had outstanding borrowings under its RCF of $20 million at an interest rate of 1.82%, had outstanding letters of credit of $5 million, and had available borrowing capacity of $1.18 billion. At September 30, 2016, WES was in compliance with all related covenants.

In March 2016, WGP entered into a $250 million three-year senior secured revolving credit facility maturing in March 2019 (WGP RCF), which is expandable to $500 million, subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions. Obligations under the WGP RCF are secured by a first priority lien on all of WGP’s assets (not including the consolidated assets of WES), as well as all equity interests owned by WGP. Borrowings under the WGP RCF bear interest at LIBOR (with a floor of 0%), plus applicable margins ranging from 2.00% to 2.75% depending on WGP’s consolidated leverage ratio, or at a base rate equal to the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, or (iii) LIBOR plus 1.00%, in each case plus applicable margins ranging from 1.00% to 1.75% based upon WGP’s consolidated leverage ratio. At September 30, 2016, WGP had outstanding borrowings under its RCF of $28 million at an interest rate of 2.53%, had available borrowing capacity of $222 million, and was in compliance with all related covenants.

In October 2016, WES completed a public offering of $200 million aggregate principal amount of 5.450% Senior Notes due April 2044. Net proceeds were used to repay amounts outstanding under the WES RCF and the remaining proceeds will be used for general partnership purposes, including capital expenditures.

8. Debt and Interest Expense (Continued)

Capital Lease Obligations Construction of a floating production, storage and offloading unit (FPSO) for the Company’s Tweneboa/Enyenra/Ntomme (TEN) field operations in Ghana commenced in 2013. The Company recognized an asset and related obligation for its approximate 19% nonoperated working interest share during the construction period. Upon completion of the construction during the third quarter of 2016, the Company reported the asset and related obligation as a capital lease of $225 million for the Company’s share of the fair value of the FPSO. The FPSO lease provides for an initial term of 10 years with annual renewal periods for an additional 10 years, annual purchase options that decrease over time, and no residual value guarantees. The capital lease asset will be depreciated over the estimated proved reserves of the TEN field using the unit-of-production method, with the associated depreciation included in depreciation, depletion, and amortization (DD&A) in the Company’s Consolidated Statement of Income. The capital lease obligation will be accreted to the present value of the minimum lease payments using the effective interest method. The Company will make the first payment under the FPSO capital lease in the fourth quarter of 2016.

At September 30, 2016, future minimum lease payments due under capital leases were:



millions
2016	$	16
2017	42
2018	42
2019	42
2020	42
Remaining years	433
Total future minimum lease payments	$	617
Less portion representing imputed interest	372
Capital lease obligations	$	245

Interest Expense The following summarizes interest expense:



	Three Months Ended September 30,						Nine Months Ended September 30,
millions	2016			2015			2016			2015
Debt and other	$	251		$	245		$	768		$	743
Capitalized interest	(31		)	(46		)	(111		)	(127		)
Total interest expense	$	220		$	199		$	657		$	616