18. Segment Information

Anadarko’s business segments are separately managed due to distinct operational differences. Anadarko 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 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, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water. The WES Midstream segment consists of WES midstream assets, and 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; restructuring charges; and less net income (loss) attributable to noncontrolling interests.

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.

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						Nine Months Ended
	September 30,						September 30,
millions	2018			2017			2018			2017
Income (loss) before income taxes	$	683		$	(1,066	)	$	1,125		$	(1,616	)
Interest expense	240			230			705			682
DD&A	1,130			1,083			3,123			3,235
Exploration expense ⁽¹⁾	118			750			380			2,366
(Gains) losses on divestitures, net	(3		)	194			(31		)	(815		)
Impairments	172			—			319			383
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	(167		)	98			73			(12		)
Restructuring charges	13			3			13			20
Less net income (loss) attributable to noncontrolling interests	64			58			105			182
Consolidated Adjusted EBITDAX	$	2,122		$	1,234		$	5,602		$	4,061

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⁽¹⁾	Includes restructuring charges of $20 million for the three and nine months ended September 30, 2018.

18. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fee expenses, 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
Three Months Ended September 30, 2018
Sales revenues	$	3,161	$	394	$	39	$	13		$	3,607
Intersegment revenues	25		114		78		(217		)	—
Other	1		52		11		23			87
Total revenues and other ⁽¹⁾	3,187		560		128		(181		)	3,694
Operating costs and expenses ⁽²⁾	1,059		245		55		(67		)	1,292
Net cash from settlement of commodity derivatives	—		—		—		199			199
Other (income) expense, net ⁽³⁾	—		—		—		17			17
Net income (loss) attributable to noncontrolling interests	—		—		—		64			64
Total expenses and other	1,059		245		55		213			1,572
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—		—		—			—
Adjusted EBITDAX	$	2,128	$	315	$	73	$	(394	)	$	2,122

Three Months Ended September 30, 2017
Sales revenues	$	2,097	$	445	$	53	$	15		$	2,610
Intersegment revenues	4		119		43		(166		)	—
Other	6		39		7		28			80
Total revenues and other ⁽¹⁾	2,107		603		103		(123		)	2,690
Operating costs and expenses ⁽²⁾	956		345		62		49			1,412
Net cash from settlement of commodity derivatives	—		—		—		(16		)	(16		)
Other (income) expense, net	—		—		—		2			2
Net income (loss) attributable to noncontrolling interests	—		—		—		58			58
Total expenses and other	956		345		62		93			1,456
Adjusted EBITDAX	$	1,151	$	258	$	41	$	(216	)	$	1,234

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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 certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.


⁽³⁾	Other (income) expense, net excludes restructuring charges since these expenses are excluded from Adjusted EBITDAX.

18. Segment Information (Continued)



millions	Exploration & Production			WES Midstream		Other Midstream		Other and Intersegment Eliminations			Total
Nine Months Ended September 30, 2018
Sales revenues	$	8,589		$	1,063	$	73	$	76		$	9,801
Intersegment revenues	49			369		188		(606		)	—
Other	(5		)	113		30		63			201
Total revenues and other ⁽¹⁾	8,633			1,545		291		(467		)	10,002
Operating costs and expenses ⁽²⁾	2,840			687		134		195			3,856
Net cash from settlement of commodity derivatives	—			—		—		437			437
Other (income) expense, net ⁽³⁾	—			—		—		9			9
Net income (loss) attributable to noncontrolling interests	—			—		—		105			105
Total expenses and other	2,840			687		134		746			4,407
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		7			7
Adjusted EBITDAX	$	5,793		$	858	$	157	$	(1,206	)	$	5,602

Nine Months Ended September 30, 2017
Sales revenues	$	6,500		$	1,213	$	134	$	80		$	7,927
Intersegment revenues	10			387		125		(522		)	—
Other	16			124		20		77			237
Total revenues and other ⁽¹⁾	6,526			1,724		279		(365		)	8,164
Operating costs and expenses ⁽²⁾	2,679			936		168		135			3,918
Net cash from settlement of commodity derivatives	—			—		—		(23		)	(23		)
Other (income) expense, net	—			—		—		24			24
Net income (loss) attributable to noncontrolling interests	—			—		—		182			182
Total expenses and other	2,679			936		168		318			4,101
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		(2		)	(2		)
Adjusted EBITDAX	$	3,847		$	788	$	111	$	(685	)	$	4,061

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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 certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.


⁽³⁾	Other (income) expense, net excludes restructuring charges since these expenses are excluded from Adjusted EBITDAX.