12. Debt and Interest Expense

Debt Activity The following summarizes the Company’s borrowing activity, after eliminating the effect of intercompany transactions:



	Carrying Value
millions	WES			WGP ⁽¹⁾		Anadarko ⁽²⁾			Consolidated			Description
Balance at December 31, 2015	$	2,691		$	—	$	12,957		$	15,648
Issuances	—			—		794			794			4.850% Senior Notes due 2021 ⁽³⁾
	—			—		1,088			1,088			5.550% Senior Notes due 2026 ⁽³⁾
	—			—		1,088			1,088			6.600% Senior Notes due 2046 ⁽³⁾
	495			—		—			495			WES 4.650% Senior Notes due 2026
	203			—		—			203			WES 5.450% Senior Notes due 2044
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
	—			—		(1,994		)	(1,994		)	6.375% Senior Notes due 2017
	—			—		(1,750		)	(1,750		)	364-Day Facility
	(900		)	—		—			(900		)	WES RCF
	—			—		(250		)	(250		)	Commercial paper notes, net
	—			—		(34		)	(34		)	TEUs - senior amortizing notes
Other, net	2			—		59			61			Amortization of discounts, premiums, and debt issuance costs
Balance at December 31, 2016	$	3,091		$	28	$	11,959		$	15,078
Borrowings	370			—		—			370			WES RCF
Repayments	—			—		(6		)	(6		)	7.000% Debentures due 2027
	—			—		(3		)	(3		)	6.625% Debentures due 2028
	—			—		(1		)	(1		)	7.950% Debentures due 2029
	—			—		(34		)	(34		)	TEUs - senior amortizing notes
Other, net	4			—		50			54			Amortization of discounts, premiums, and debt issuance costs
Balance at December 31, 2017	$	3,465		$	28	$	11,965		$	15,458

__________________________________________________________________


⁽¹⁾	Excludes WES.


⁽²⁾	Excludes WES and WGP


⁽³⁾	Represent senior notes issued in March 2016.

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. In December 2016, the Company redeemed its remaining $750 million 6.375% Senior Notes due September 2017. The Company recognized losses of $155 million for the early retirement and redemption of these senior notes, which included $144 million of premiums paid.

12. Debt and Interest Expense (Continued)

Debt See Note 8—Equity-Method Investments for disclosure regarding Anadarko’s notes payable related to its ownership of certain noncontrolling mandatorily redeemable interests that are not included in the Company’s reported debt balance and do not affect consolidated interest expense. The following summarizes the Company’s outstanding debt, including capital lease obligations, after eliminating the effect of intercompany transactions:



	December 31, 2017
millions	WES			WGP⁽¹⁾		Anadarko ⁽²⁾			Consolidated
7.050% Debentures due 2018	$	—		$	—	$	114		$	114
TEUs - senior amortizing notes due 2018	—			—		17			17
WES 2.600% Senior Notes due 2018	350			—		—			350
6.950% Senior Notes due 2019	—			—		300			300
8.700% Senior Notes due 2019	—			—		600			600
4.850% Senior Notes due 2021	—			—		800			800
WES 5.375% Senior Notes due 2021	500			—		—			500
WES 4.000% Senior Notes due 2022	670			—		—			670
3.450% Senior Notes due 2024	—			—		625			625
6.950% Senior Notes due 2024	—			—		650			650
WES 3.950% Senior Notes due 2025	500			—		—			500
WES 4.650% Senior Notes due 2026	500			—		—			500
5.550% Senior Notes due 2026	—			—		1,100			1,100
7.500% Debentures due 2026	—			—		112			112
7.000% Debentures due 2027	—			—		48			48
7.125% Debentures due 2027	—			—		150			150
6.625% Debentures due 2028	—			—		14			14
7.150% Debentures due 2028	—			—		235			235
7.200% Debentures due 2029	—			—		135			135
7.950% Debentures due 2029	—			—		116			116
7.500% Senior Notes due 2031	—			—		900			900
7.875% Senior Notes due 2031	—			—		500			500
Zero Coupon Senior Notes due 2036	—			—		2,360			2,360
6.450% Senior Notes due 2036	—			—		1,750			1,750
7.950% Senior Notes due 2039	—			—		325			325
6.200% Senior Notes due 2040	—			—		750			750
4.500% Senior Notes due 2044	—			—		625			625
WES 5.450% Senior Notes due 2044	600			—		—			600
6.600% Senior Notes due 2046	—			—		1,100			1,100
7.730% Debentures due 2096	—			—		61			61
7.500% Debentures due 2096	—			—		78			78
7.250% Debentures due 2096	—			—		49			49
WES RCF	370			—		—			370
WGP RCF	—			28		—			28
Total borrowings at face value	$	3,490		$	28	$	13,514		$	17,032
Net unamortized discounts, premiums, and debt issuance costs ⁽³⁾	(25		)	—		(1,549		)	(1,574		)
Total borrowings ⁽⁴⁾	3,465			28		11,965			15,458
Capital lease obligations	—			—		231			231
Less short-term debt	—			—		142			142
Total long-term debt	$	3,465		$	28	$	12,054		$	15,547

12. Debt and Interest Expense (Continued)



	December 31, 2016
millions	WES			WGP⁽¹⁾		Anadarko ⁽²⁾			Consolidated
7.050% Debentures due 2018	—			—		114			114
TEUs - senior amortizing notes due 2018	—			—		51			51
WES 2.600% Senior Notes due 2018	350			—		—			350
6.950% Senior Notes due 2019	—			—		300			300
8.700% Senior Notes due 2019	—			—		600			600
4.850% Senior Notes due 2021	—			—		800			800
WES 5.375% Senior Notes due 2021	500			—		—			500
WES 4.000% Senior Notes due 2022	670			—		—			670
3.450% Senior Notes due 2024	—			—		625			625
6.950% Senior Notes due 2024	—			—		650			650
WES 3.950% Senior Notes due 2025	500			—		—			500
WES 4.650% Senior Notes due 2026	500			—		—			500
5.550% Senior Notes due 2026	—			—		1,100			1,100
7.500% Debentures due 2026	—			—		112			112
7.000% Debentures due 2027	—			—		54			54
7.125% Debentures due 2027	—			—		150			150
6.625% Debentures due 2028	—			—		17			17
7.150% Debentures due 2028	—			—		235			235
7.200% Debentures due 2029	—			—		135			135
7.950% Debentures due 2029	—			—		117			117
7.500% Senior Notes due 2031	—			—		900			900
7.875% Senior Notes due 2031	—			—		500			500
Zero Coupon Senior Notes due 2036	—			—		2,360			2,360
6.450% Senior Notes due 2036	—			—		1,750			1,750
7.950% Senior Notes due 2039	—			—		325			325
6.200% Senior Notes due 2040	—			—		750			750
4.500% Senior Notes due 2044	—			—		625			625
WES 5.450% Senior Notes due 2044	600			—		—			600
6.600% Senior Notes due 2046	—			—		1,100			1,100
7.730% Debentures due 2096	—			—		61			61
7.500% Debentures due 2096	—			—		78			78
7.250% Debentures due 2096	—			—		49			49
WGP RCF	—			28		—			28
Total borrowings at face value	$	3,120		$	28	$	13,558		$	16,706
Net unamortized discounts, premiums, and debt issuance costs ⁽³⁾	(29		)	—		(1,599		)	(1,628		)
Total borrowings ⁽⁴⁾	3,091			28		11,959			15,078
Capital lease obligations	—			—		245			245
Less short-term debt	—			—		42			42
Total long-term debt	$	3,091		$	28	$	12,162		$	15,281

__________________________________________________________________


⁽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 RCFs 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 RCF, are senior unsecured.

12. Debt and Interest Expense (Continued)

In a 2006 private offering, Anadarko received $500 million of loan proceeds upon issuing the Zero Coupons. The Zero Coupons mature in 2036 and have an aggregate principal amount due at maturity of approximately $2.4 billion, reflecting a yield to maturity of 5.24%. The 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. The accreted value of the outstanding Zero Coupons was $894 million at December 31, 2017. Anadarko’s Zero Coupons were classified as long-term debt on the Company’s Consolidated Balance Sheet at December 31, 2017, as the Company has the ability and intent to refinance these obligations using long-term debt, should the put be exercised.

Scheduled Maturities Total principal amount of debt maturities related to borrowings for the five years ending December 31, 2022, excluding the potential repayment of the outstanding Zero Coupons that may be put by the holders to the Company annually, were as follows:



	Principal Amount of Debt Maturities
millions	WES		WGP ⁽¹⁾		Anadarko ⁽²⁾		Consolidated
2018	$	350	$	—	$	131	$	481
2019	—		28		900		928
2020	370		—		—		370
2021	500		—		800		1,300
2022	670		—		—		670

__________________________________________________________________


⁽¹⁾	Excludes WES.


⁽²⁾	Excludes WES and WGP.

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 $17.7 billion at December 31, 2017, and $17.1 billion at December 31, 2016.

Anadarko Borrowings At December 31, 2017, Anadarko had a $3.0 billion senior unsecured RCF (APC RCF) and a $2.0 billion 364-day senior unsecured RCF (364-Day Facility). In January 2018, the Company amended the APC RCF to extend the maturity date to January 2022 and amended the 364-Day Facility to extend the maturity date to January 2019.

Borrowings under the APC RCF and the 364-Day Facility (collectively, the Credit 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 APC RCF denominated in Euro) or an alternate base rate, in each case plus an applicable margin ranging from 0.00% to 1.65% for the APC RCF and 0.00% to 1.675% for the 364-Day Facility. The applicable margin will vary depending on Anadarko’s credit ratings.

The Credit 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% (excluding the effect of non-cash write-downs), and limitations on certain secured indebtedness, sale-and-leaseback transactions, and mergers and other fundamental changes. At December 31, 2017, the Company had no outstanding borrowings under the Credit Facilities and was in compliance with all 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 APC RCF. The maturities of the commercial paper notes may vary, but may not exceed 397 days. As a result of Moody’s credit rating on Anadarko, the Company’s access to the commercial paper market has been eliminated. The Company has not issued commercial paper notes since the downgrade and had no outstanding borrowings under the commercial paper program at December 31, 2017.

12. Debt and Interest Expense (Continued)

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 senior unsecured RCF previously maturing in February 2019 (WES RCF), which is expandable to $1.5 billion. 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 primarily used to repay amounts outstanding under the WES RCF, and the remaining proceeds were used for general partnership purposes, including capital expenditures. In December 2016, WES amended the WES RCF to extend the maturity date to February 2020. In February 2018, the WES RCF was amended to extend the maturity date from February 2020 to February 2023 and expand the borrowing capacity to $1.5 billion.

Borrowings under the WES RCF bear interest at LIBOR plus an applicable margin ranging from 0.975% to 1.45% depending on WES’s credit rating, or the greatest of (i) rates at a margin above the one-month LIBOR, (ii) the federal funds rate, or (iii) prime rates offered by certain designated banks. At December 31, 2017, WES had outstanding borrowings under its RCF of $370 million at an interest rate of 2.87%, had outstanding letters of credit of $5 million, and had available borrowing capacity of $825 million. At December 31, 2017, WES was in compliance with all covenants. WES’s $350 million 2.600% Senior Notes due August 2018 were classified as long-term debt on the Company’s Consolidated Balance Sheet at December 31, 2017, as WES has the ability and intent to refinance these obligations using long-term debt.

In March 2016, WGP entered into a $250 million senior secured RCF 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 December 31, 2017, WGP had outstanding borrowings under its RCF of $28 million at an interest rate of 3.57%, had available borrowing capacity of $222 million, and was in compliance with all covenants. In February 2018, WGP voluntarily reduced the aggregate commitments of the lenders under the WGP RCF to $35 million.

12. Debt and Interest Expense (Continued)

Capital Lease Obligations Construction of a FPSO for the Company’s TEN field in Ghana commenced in 2013. The Company recognized an asset and related obligation for its approximate 19% nonoperated participating interest share during the construction period. Upon completion of the construction in the third quarter of 2016, the Company reported the asset and related obligation as a capital lease of $225 million for the Company’s proportionate 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 UOP method, with the associated depreciation included in 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 made capital lease payments of $44 million in 2017.

At December 31, 2017, future minimum lease payments related to the Company’s capital leases were:



millions
2018	$	53
2019	42
2020	43
2021	42
2022	42
Remaining years	365
Total future minimum lease payments	$	587
Less portion representing imputed interest	356
Capital lease obligations	$	231

Interest Expense The following summarizes interest expense for the years ended December 31:



millions	2017			2016			2015
Debt and other	$	1,003		$	1,022		$	989
Capitalized interest	(71		)	(132		)	(164		)
Total interest expense	$	932		$	890		$	825