26. Segment Information

Anadarko has previously presented three reporting segments in its quarterly and annual filings: Oil and Gas Exploration and Production, Midstream, and Marketing. In the first half of 2017, Anadarko substantially completed a repositioning of its asset portfolio to focus on higher margin liquids production. This shift resulted in a substantial decrease in the number of U.S. operating areas. Following the portfolio repositioning, the chief operating decision maker reviews operating results for Exploration and Production and Midstream when making operating and capital allocation decisions. Accordingly, as of the second quarter of 2017, Anadarko no longer identifies marketing activities as a separate reporting segment. Also, in prior periods, the Company aggregated its two midstream operating segments, WES Midstream and Other Midstream, into one Midstream reporting segment due to similar financial and operating characteristics. While the aggregation criteria continues to be met, the Company will no longer aggregate these operating segments in order to provide additional information about its midstream operations. Accordingly, Anadarko now has three reporting segments: Exploration and Production, WES Midstream, and Other Midstream, which include their respective marketing results. The Company has reclassified prior period amounts to conform to the current period’s presentation.

The Exploration and Production reporting segment is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and in advancing its Mozambique LNG project toward FID. The WES Midstream and Other Midstream reporting segments engage in gathering, processing, treating, and transporting Anadarko and third-party oil, natural-gas, and NGLs production as well as gathering and disposal of produced water. The WES Midstream segment consists of Western Gas Partners, LP, a publicly traded limited partnership, which is a consolidated subsidiary of Anadarko. The Other Midstream segment consists of the Company’s other midstream assets.

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; interest expense; DD&A; exploration expense; gains (losses) on divestitures, net; impairments; 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 G&A, loss on early extinguishment of debt, 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. 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.

26. Segment Information (Continued)

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 for the years ended December 31:



millions	2017			2016			2015
Income (loss) before income taxes	$	(1,688	)	$	(3,829	)	$	(9,689	)
(Gains) losses on divestitures, net	(674		)	757			1,022
Exploration expense	2,541			946			2,644
DD&A	4,279			4,301			4,603
Impairments	408			227			5,075
Interest expense	932			890			825
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	156			559			235
Restructuring charges	21			389			—
Other operating expense	—			1			74
Loss on early extinguishment of debt	2			155			—
Certain other nonoperating items	—			(58		)	27
Less net income (loss) attributable to noncontrolling interests	245			263			(120		)
Consolidated Adjusted EBITDAX	$	5,732		$	4,075		$	4,936

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.

26. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fees, results from hard-minerals royalties, net cash from settlement of commodity derivatives, and net income (loss) attributable to noncontrolling interests. The following summarizes selected financial information for Anadarko’s reporting segments:



millions	Exploration & Production		WES Midstream		Other Midstream		Other and Intersegment Eliminations			Total
2017
Sales revenues	$	8,946	$	1,715	$	187	$	121		$	10,969
Intersegment revenues	23		523		172		(718		)	—
Other ⁽¹⁾	15		153		30		67			265
Total revenues and other ⁽²⁾	8,984		2,391		389		(530		)	11,234
Operating costs and expenses ⁽³⁾	3,555		1,330		234		212			5,331
Net cash from settlement of commodity derivatives	—		—		—		(27		)	(27		)
Other (income) expense, net	—		—		—		(53		)	(53		)
Net income (loss) attributable to noncontrolling interests ⁽¹⁾	—		—		—		245			245
Total expenses and other	3,555		1,330		234		377			5,496
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—		—		(6		)	(6		)
Adjusted EBITDAX	$	5,429	$	1,061	$	155	$	(913	)	$	5,732
Net properties and equipment	$	18,598	$	5,731	$	1,140	$	1,982		$	27,451
Capital expenditures	$	3,779	$	956	$	458	$	107		$	5,300
Goodwill	$	4,343	$	416	$	30	$	—		$	4,789

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⁽¹⁾	Presentation has been adjusted to align with the current analysis of segment performance. Net income (loss) attributable to noncontrolling interests, previously reported within the Midstream segment, is now presented within Other and Intersegment Eliminations. Other revenues, previously reported within Other and Intersegment Eliminations, is now presented within the applicable segments.


⁽²⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽³⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, restructuring charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.

26. Segment Information (Continued)



millions	Exploration & Production			WES Midstream		Other Midstream		Other and Intersegment Eliminations			Total
2016
Sales revenues	$	7,146		$	1,055	$	146	$	100		$	8,447
Intersegment revenues	7			712		185		(904		)	—
Other ⁽¹⁾	(5		)	114		19		51			179
Total revenues and other ⁽²⁾	7,148			1,881		350		(753		)	8,626
Operating costs and expenses ⁽³⁾	3,518			853		228		5			4,604
Net cash from settlement of commodity derivatives	—			—		—		(265		)	(265		)
Other (income) expense, net ⁽⁴⁾	—			—		—		(43		)	(43		)
Net income (loss) attributable to noncontrolling interests⁽¹⁾	—			—		—		263			263
Total expenses and other	3,518			853		228		(40		)	4,559
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		8			8
Adjusted EBITDAX	$	3,630		$	1,028	$	122	$	(705	)	$	4,075
Net properties and equipment	$	24,251		$	5,050	$	885	$	1,982		$	32,168
Capital expenditures	$	2,685		$	491	$	59	$	79		$	3,314
Goodwill	$	4,550		$	418	$	32	$	—		$	5,000
2015
Sales revenues	$	8,250		$	958	$	195	$	83		$	9,486
Intersegment revenues	10			659		172		(841		)	—
Other ⁽¹⁾	40			109		16		69			234
Total revenues and other ⁽²⁾	8,300			1,726		383		(689		)	9,720
Operating costs and expenses⁽³⁾	3,778			818		282		233			5,111
Net cash from settlement of commodity derivatives	—			—		—		(335		)	(335		)
Other (income) expense, net ⁽⁴⁾	—			—		—		127			127
Net income (loss) attributable to noncontrolling interests ⁽¹⁾	—			—		—		(120		)	(120		)
Total expenses and other	3,778			818		282		(95		)	4,783
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		(1		)	(1		)
Adjusted EBITDAX	$	4,522		$	908	$	101	$	(595	)	$	4,936
Net properties and equipment	$	25,742		$	4,859	$	1,038	$	2,112		$	33,751
Capital expenditures	$	5,029		$	525	$	245	$	89		$	5,888
Goodwill	$	4,945		$	388	$	62	$	—		$	5,395

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⁽¹⁾	Presentation has been adjusted to align with the current analysis of segment performance. Net income (loss) attributable to noncontrolling interests, previously reported within the Midstream segment, is now presented within Other and Intersegment Eliminations. Other revenues, previously reported within Other and Intersegment Eliminations, is now presented within the applicable segments.


⁽²⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽³⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, restructuring charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.


⁽⁴⁾	Other (income) expense, net excludes certain other nonoperating items since these items are excluded from Adjusted EBITDAX.

26. 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	2017		2016		2015
Sales Revenues
United States	$	9,176	$	7,049	$	7,819
Algeria	1,249		1,103		1,189
Other International	544		295		478
Total sales revenues	$	10,969	$	8,447	$	9,486



	December 31,
millions	2017		2016
Net Properties and Equipment
United States	$	24,382	$	28,024
Algeria	965		1,117
Other International ⁽¹⁾	2,104		3,027
Total net properties and equipment	$	27,451	$	32,168

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⁽¹⁾	Includes $413 million of capitalized costs related to the Mozambique LNG project at December 31, 2017.

Major Customers In 2017, sales to BP PLC were $1.1 billion. This amount is included in the Exploration and Production reporting segment. In 2016 and 2015, there were no sales to customers that exceeded 10% of the Company’s total sales revenues.