19. 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, condensate, 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, condensate, natural-gas, and NGLs production as well as third-party purchased volumes.

19. 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 restructuring charges related to the workforce reduction program included in general and administrative expenses, Deepwater Horizon settlement and related costs included in other operating expenses, loss on early extinguishment of debt, 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 Adjusted EBITDAX provides information useful in assessing the Company’s operating and financial performance across periods. 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. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes:



	Three Months Ended September 30,						Nine Months Ended September 30,
millions	2016			2015			2016			2015
Income (loss) before income taxes	$	(1,007	)	$	(3,077	)	$	(3,313	)	$	(7,520	)
(Gains) losses on divestitures, net	414			578			516			1,003
Exploration expense	304			1,074			506			2,260
DD&A	1,069			1,111			3,202			3,581
Impairments	27			758			61			3,571
Interest expense	220			199			657			616
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	88			360			863			374
Restructuring charges	112			—			363			—
Other operating expense	—			—			1			4
Loss on early extinguishment of debt	—			—			124			—
Tronox-related contingent loss	—			—			—			5
Certain other nonoperating items	—			—			(56		)	22
Less net income (loss) attributable to noncontrolling interests	83			75			200			154
Consolidated Adjusted EBITDAX	$	1,144		$	928		$	2,724		$	3,762

19. 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 September 30, 2016
Sales revenues	$	1,109	$	174	$	968		$	—		$	2,251
Intersegment revenues	717		370		(841		)	(246		)	—
Other	—		—		—			56			56
Total revenues and other ⁽¹⁾	1,826		544		127			(190		)	2,307
Operating costs and expenses ⁽²⁾	807		273		173			(79		)	1,174
Net cash from settlement of commodity derivatives	—		—		—			(63		)	(63		)
Other (income) expense, net	—		—		—			(31		)	(31		)
Net income (loss) attributable to noncontrolling interests	—		83		—			—			83
Total expenses and other	807		356		173			(173		)	1,163
Adjusted EBITDAX	$	1,019	$	188	$	(46	)	$	(17	)	$	1,144

Three Months Ended September 30, 2015
Sales revenues	$	1,067	$	195	$	968		$	—		$	2,230
Intersegment revenues	750		315		(832		)	(233		)	—
Other	—		—		—			36			36
Total revenues and other ⁽¹⁾	1,817		510		136			(197		)	2,266
Operating costs and expenses ⁽²⁾	840		287		181			(14		)	1,294
Net cash from settlement of commodity derivatives	—		—		—			(79		)	(79		)
Other (income) expense, net	—		—		—			47			47
Net income (loss) attributable to noncontrolling interests	—		75		—			—			75
Total expenses and other	840		362		181			(46		)	1,337
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—		(1		)	—			(1		)
Adjusted EBITDAX	$	977	$	148	$	(46	)	$	(151	)	$	928

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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, restructuring charges, and other operating expense since these expenses are excluded from Adjusted EBITDAX.

19. Segment Information (Continued)



millions	Oil and Gas Exploration & Production		Midstream		Marketing			Other and Intersegment Eliminations			Total
Nine Months Ended September 30, 2016
Sales revenues	$	2,853	$	440	$	2,577		$	—		$	5,870
Intersegment revenues	1,885		1,012		(2,180		)	(717		)	—
Other	—		—		—			128			128
Total revenues and other ⁽¹⁾	4,738		1,452		397			(589		)	5,998
Operating costs and expenses ⁽²⁾	2,370		675		526			(233		)	3,338
Net cash from settlement of commodity derivatives	—		—		—			(226		)	(226		)
Other (income) expense, net ⁽³⁾	—		—		—			(30		)	(30		)
Net income (loss) attributable to noncontrolling interests	—		200		—			—			200
Total expenses and other	2,370		875		526			(489		)	3,282
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—		8			—			8
Adjusted EBITDAX	$	2,368	$	577	$	(121	)	$	(100	)	$	2,724

Nine Months Ended September 30, 2015
Sales revenues	$	3,493	$	560	$	3,399		$	—		$	7,452
Intersegment revenues	2,752		920		(2,977		)	(695		)	—
Other	—		—		—			196			196
Total revenues and other ⁽¹⁾	6,245		1,480		422			(499		)	7,648
Operating costs and expenses ⁽²⁾	2,674		761		571			(110		)	3,896
Net cash from settlement of commodity derivatives	—		—		—			(251		)	(251		)
Other (income) expense, net ⁽³⁾	—		—		—			87			87
Net income (loss) attributable to noncontrolling interests	—		154		—			—			154
Total expenses and other	2,674		915		571			(274		)	3,886
Adjusted EBITDAX	$	3,571	$	565	$	(149	)	$	(225	)	$	3,762

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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, restructuring charges, 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.