EX-99.6 9 dex996.htm PRO FORMA FINANCIAL INFORMATION Pro Forma financial information

EXHIBIT 99.6

ANADARKO PETROLEUM CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma financial statements combine the historical consolidated balance sheets and statements of income of Anadarko Petroleum Corporation (“Anadarko” or “the Company”) and Kerr-McGee Corporation (“KMG”), giving effect to the acquisition using the purchase method of accounting. These unaudited pro forma financial statements also include the effects of the subsequent acquisition of Western Gas Resources, Inc. (“WGR”) using the purchase method of accounting. The Company’s Canadian operations have been classified as held for sale and the related results of discontinued operations are excluded from Anadarko’s historical statements of income.

These unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements, including the notes thereto, of Anadarko, KMG and WGR, which are included in the annual reports that the companies have filed with the United States Securities and Exchange Commission and as exhibits in this Form 8-K/A.

The unaudited pro forma combined statements of income assume the acquisitions occurred on January 1, 2005. The unaudited pro forma combined balance sheet gives effect to the acquisitions as if they had occurred on June 30, 2006.

The unaudited pro forma financial statements are presented for illustration purposes only, in accordance with the assumptions set forth below, and are not necessarily indicative of the operating results or financial position that would have occurred had the acquisitions been completed at the assumed dates. Nor is it necessarily indicative of future operating results or the financial position of the combined enterprise. The unaudited pro forma condensed combined financial statements do not reflect any adjustments to conform accounting practices, other than those mentioned in the notes thereto, or to reflect any cost savings or other synergies anticipated as a result of the acquisitions, or any future merger related expenses.


ANADARKO PETROLEUM CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2005

 

millions except per share amounts    Anadarko     KMG *     WGR *    Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenues

           

Gas sales

   $ 2,968     $ 2,036     $ 410    $ —       $ 5,414  

Oil and condensate sales

     2,703       1,515       —        —         4,218  

Natural gas liquids sales

     437       135       —        —         572  

Other sales

     79       877       3,559      —         4,515  
                                       

Total

     6,187       4,563       3,969      —         14,719  
                                       

Costs and Expenses

           

Direct operating

     437       494       69      —         1,000  

Transportation and cost of product

     275       1,004       3,326      —         4,605  

Exploration expense

     —         389       45      (434 )(a)     —    

General and administrative

     393       260       60      —         713  

Depreciation, depletion and amortization

     1,111       871       129      433  (b)     2,544  

Other taxes

     358       157       —        —         515  

Impairments and (gains) losses on assets

     78       (194 )     1      193  (c)     78  
                                       

Total

     2,652       2,981       3,630      192       9,455  
                                       

Operating Income

     3,535       1,582       339      (192 )     5,264  

Interest Expense and Other (Income) Expense

           

Interest expense

     206       268       17      595  (d)     1,086  

Other (income) expense

     (76 )     (104 )     —        —    (d)     (180 )
                                       

Total

     130       164       17      595       906  
                                       

Income from Continuing Operations Before Income Taxes

     3,405       1,418       322      (787 )     4,358  

Income Tax Expense

     1,332       486       115      (286 )(e)     1,647  
                                       

Income from Continuing Operations

   $ 2,073     $ 932     $ 207    $ (501 )   $ 2,711  
                                       

Income from Continuing Operations – Per Common Share

           

Basic

   $ 4.40            $ 5.77  

Diluted

   $ 4.36            $ 5.71  

Average Number of Common Shares Outstanding – Basic

     470              470  
                       

Average Number of Common Shares Outstanding – Diluted

     475              475  
                       

* Certain amounts have been reclassified to conform to Anadarko’s current presentation. See Summary of Conforming Adjustments.

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

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ANADARKO PETROLEUM CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

SIX MONTHS ENDED JUNE 30, 2006

 

millions except per share amounts    Anadarko     KMG *     WGR *    Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenues

           

Gas sales

   $ 1,371     $ 1,383     $ 209    $ —       $ 2,963  

Oil and condensate sales

     1,808       688       —        —         2,496  

Natural gas liquids sales

     245       91       —        —         336  

Other sales

     86       405       1,572      —         2,063  
                                       

Total

     3,510       2,567       1,781      —         7,858  
                                       

Costs and Expenses

           

Direct operating

     284       259       36      —         579  

Transportation and cost of product

     183       468       1,431      —         2,082  

Exploration expense

     —         158       29      (187 )(a)     —    

General and administrative

     228       145       41      —         414  

Depreciation, depletion and amortization

     655       390       71      250  (b)     1,366  

Other taxes

     208       74       —        —         282  

Impairments and (gains) losses on assets

     18       (5 )     —        5  (c)     18  
                                       

Total

     1,576       1,489       1,608      68       4,741  
                                       

Operating Income

     1,934       1,078       173      (68 )     3,117  

Interest Expense and Other (Income) Expense

           

Interest expense

     104       171       9      298  (d)     582  

Other (income) expense

     (7 )     6       —        —         (1 )
                                       

Total

     97       177       9      298       581  
                                       

Income from Continuing Operations Before Income Taxes

     1,837       901       164      (366 )     2,536  

Income Tax Expense

     609       319       60      (129 )(e)     859  
                                       

Income from Continuing Operations

   $ 1,228     $ 582     $ 104    $ (237 )   $ 1,677  
                                       

Income from Continuing Operations – Per Common Share

           

Basic

   $ 2.67            $ 3.65  

Diluted

   $ 2.65            $ 3.61  

Average Number of Common Shares Outstanding – Basic

     460              460  
                       

Average Number of Common Shares Outstanding – Diluted

     464              464  
                       

* Certain amounts have been reclassified to conform to Anadarko’s current presentation. See Summary of Conforming Adjustments.

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

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ANADARKO PETROLEUM CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2006

 

millions    Anadarko    KMG    WGR    Pro Forma
Adjustments
    Pro Forma
Combined

ASSETS

             

Current Assets

             

Cash and cash equivalents

   $ 671    $ 156    $ 4    $ —       $ 831

Accounts receivable

     1,325      751      286      —         2,362

Other current assets

     207      584      203      —         994

Current assets held for sale

     369      24      —        —         393
                                   
     2,572      1,515      493      —         4,580
                                   

Properties and Equipment

             

Original cost

     24,825      12,091      2,641      11,409  (f)     50,966

Less accumulated DD&A

     8,592      3,874      751      (4,625 )(f)     8,592
                                   

Net properties and equipment

     16,233      8,217      1,890      16,034       42,374
                                   

Other Assets

     609      321      105      —         1,035
                                   

Goodwill and Intangibles

     1,092      1,175      —        5,410  (f)     7,677
                                   

Long-Term Assets Held For Sale

     3,159      710      —        447  (f)     4,316
                                   

Total Assets

   $ 23,665    $ 11,938    $ 2,488    $ 21,891     $ 59,982
                                   

LIABILITIES AND STOCKHOLDERS’ EQUITY

             

Current Liabilities

             

Accounts payable and accrued expenses

   $ 1,690    $ 2,159    $ 462    $ —       $ 4,311

Current debt

     211      309      —        21,940  (g)     22,460

Liabilities associated with assets held for sale

     306      25      —        —         331
                                   
     2,207      2,493      462      21,940       27,102
                                   

Long-term Debt

     3,361      2,097      572      (390 )(g)     5,640
                                   

Other Long-term Liabilities

             

Deferred income taxes

     4,070      1,620      357      5,821  (f)     11,868

Other

     951      986      71      —         2,008

Liabilities associated with assets held for sale

     712      126      —        162  (f)     1,000
                                   

Total

     5,733      2,732      428      5,983       14,876
                                   

Stockholders’ equity

     12,364      4,616      1,026      (5,642 )(h)     12,364
                                   

Total Liabilities and Stockholders’ Equity

   $ 23,665    $ 11,938    $ 2,488    $ 21,891     $ 59,982
                                   

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

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ANADARKO PETROLEUM CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Pro Forma Income Statement Adjustments

 

(a) To eliminate KMG’s and WGR’s exploration expense to conform to the full-cost method of accounting for oil and gas activities. KMG’s and WGR’s historical results were prepared in accordance with the successful efforts method of accounting.

 

(b) To adjust depreciation, depletion and amortization (DD&A) expense to be in accordance with the full-cost method of accounting for oil and gas activities and to record DD&A expense on the estimated fair value of other depreciable assets. Producing properties, grouped by country, are depleted utilizing the unit-of-production method, while gathering and processing facilities are depreciated on a straight-line basis with lives ranging from 17 to 20 years. Based on current production rates, the reserve life index of proved reserves acquired range from 6 to 10 years.

 

(c) To eliminate KMG’s and WGR’s historical impairments and gains or losses on sales of oil and gas properties to conform to the full-cost method of accounting for oil and gas activities.

 

(d) To record pro forma interest expense on debt incurred to acquire KMG and WGR, less amounts capitalized on unevaluated properties.

The Company’s policy is that oil and gas investments in unproved properties and major development projects, on which DD&A expense is not currently recorded and on which exploration or development activities are in progress, qualify for capitalization of interest. The Company is continuing to evaluate its exploration and development plans with respect to the acreage acquired in the acquisitions. Pending finalization of those plans, it has been assumed for purposes of these pro forma financial statements that all unevaluated acreage acquired qualifies for capitalization of interest. Accordingly, interest of $639 million and $320 million for the year ended December 31, 2005 and the six months ended June 30, 2006, respectively, has been capitalized on the carrying costs of unevaluated properties for the periods presented. The ultimate amount to be capitalized will be impacted by amounts actually recorded to unevaluated properties and finalization of our exploration and development plans for those properties.

The amount of incremental interest expense was calculated based on the average variable interest rate in effect on the Company’s 364-day committed acquisition facility on the funding date, which was approximately 5.7%. A change in the interest rate of 0.125% would impact pro forma operating income by approximately $15 million on an annual basis.

KMG’s historical interest expense includes charges for $42 million and $81 million related to early debt retirement or modification for the year ended December 31, 2005 and the six months ended June 30, 2006, respectively. KMG’s historical other income for the year ended December 31, 2005, includes a $120 million gain on sale of an equity investment.

 

(e) To record income tax expense on the pro forma adjustments based on the applicable statutory federal and state income tax rates.

Pro Forma Balance Sheet Adjustments

 

(f) To adjust KMG’s and WGR’s historical properties and equipment and long-term assets held for sale to fair value, to record goodwill and deferred income taxes associated with the purchase price allocation and to reverse KMG’s and WGR’s historical accumulated DD&A and goodwill.

 

(g) To record debt incurred of $21.3 billion to purchase KMG and WGR (see Purchase Price Allocation) and to reflect a $232 million increase in the estimated fair value of KMG’s and WGR’s historical debt.

 

(h) To eliminate KMG’s and WGR’s historical stockholders’ equity.

 

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Purchase Price Allocation Following is a calculation and allocation of the purchase price to the assets acquired and liabilities assumed based on their relative fair values.

 

millions    KMG    WGR    Total

Purchase price

   $ 16,507    $ 4,811    $ 21,318
                    

Allocation of Purchase Price

        

Current assets

   $ 1,515    $ 493    $ 2,008

Property and equipment

     19,238      6,903      26,141

Other assets

     1,478      105      1,583

Goodwill

     5,940      645      6,585

Current debt - acquired

     306      625      931

Current liabilities

     2,184      462      2,646

Long-term debt

     2,279      —        2,279

Deferred income taxes

     5,621      2,177      7,798

Other long-term liabilities

     1,274      71      1,345
                    
   $ 16,507    $ 4,811    $ 21,318
                    

The above purchase price has been allocated based on a preliminary assessment of the fair value of the assets acquired and liabilities assumed from KMG and WGR. The preliminary assessment of fair value resulted in $6.6 billion of goodwill, which will be subject to periodic impairment testing, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” The purchase price allocation is tentative and does not reflect final appraisals of assets acquired or final evaluation of all liabilities assumed as of the August 10, 2006 and August 23, 2006 acquisition dates for KMG and WGR, respectively.

The preliminary assessment of the fair values of oil and gas properties and certain plant and gathering facilities acquired were based on projections of expected future net cash flows, discounted to present value. KMG’s and WGR’s other assets and liabilities were valued at their historical book values. The historical liabilities acquired include certain amounts associated with contingencies, such as legal, environmental and guarantees, which were estimated by the management of KMG and WGR. Long-term debt assumed was valued at fair value based on the prices of KMG’s publicly traded debt. These and other preliminary estimates will change as additional information becomes available and is assessed by Anadarko.

 

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Summary of Conforming Adjustments

Kerr-McGee Corporation

 

     Year Ended December 31, 2005     Six Months Ended June 30, 2006  
     Historical
KMG
    Conforming
Adjustments
    Conformed
KMG
    Historical
KMG
    Conforming
Adjustments
    Conformed
KMG
 

Revenues

            

Oil and gas sales

   $ 4,704     $ (4,704 )   $ —       $ 2,406     $ (2,406 )   $ —    

Loss on commodity derivatives

     (1,018 )     1,018       —         (244 )     244       —    

Gas sales

     —         2,036       2,036       —         1,383       1,383  

Oil and condensate sales

     —         1,515       1,515       —         688       688  

Natural gas liquids sales

     —         135       135       —         91       91  

Gas marketing revenues

     804       (804 )     —         360       (360 )     —    

Other sales

     73       804       877       45       360       405  
                                                

Total

     4,563       —         4,563       2,567       —         2,567  
                                                

Costs and Expenses

            

Direct operating

     494       —         494       259       —         259  

Transportation expense

     92       (92 )     —         48       (48 )     —    

Gas marketing costs

     800       (800 )     —         359       (359 )     —    

Gas gathering, processing and other

     112       (112 )     —         61       (61 )     —    

Transportation and cost of product

     —         1,004       1,004       —         468       468  

Merger related costs

     —         —         —         8       (8 )     —    

Provision for environmental remediation costs

     12       (12 )     —         3       (3 )     —    

General and administrative

     248       12       260       134       11       145  

Production and ad valorem taxes

     157       (157 )     —         74       (74 )     —    

Other taxes

     —         157       157       —         74       74  

Accretion expense

     22       (22 )     —         7       (7 )     —    

Depreciation, depletion and amortization

     849       22       871       383       7       390  

Asset impairments

     17       (17 )     —         —         —         —    

Impairments and (gain) losses on assets

     (211 )     17       (194 )     (5 )     —         (5 )

Exploration expense

     389       —         389       158       —         158  
                                                

Total

     2,981       —         2,981       1,489       —         1,489  
                                                

Operating Income

     1,582       —         1,582       1,078       —         1,078  

Interest Expense and Other (Income) Expense

            

Loss on early repayment and modification of debt

     42       (42 )     —         81       (81 )     —    

Interest expense

     226       42       268       90       81       171  

Other (income) expense

     (104 )     —         (104 )     6       —         6  
                                                

Total

     164       —         164       177       —         177  
                                                

Income from Continuing Operations before Taxes

     1,418       —         1,418       901       —         901  

Income Tax Expense

     486       —         486       319       —         319  
                                                

Income from Continuing Operations

   $ 932     $ —       $ 932     $ 582     $ —       $ 582  
                                                

 

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Western Gas Resources

 

     Year Ended December 31, 2005    Six Months Ended June 30, 2006
     Historical
WGR
    Conforming
Adjustments
    Conformed
WGR
   Historical
WGR
    Conforming
Adjustments
    Conformed
WGR

Revenues

             

Gas sales

   $ 3,201     $ (2,791 )   $ 410    $ 1,348     $ (1,139 )   $ 209

Sales of natural gas liquids

     655       (655 )     —        340       (340 )     —  

Gathering, processing and transportation

     106       (106 )     —        54       (54 )     —  

Price risk management activities

     (9 )     9       —        30       (30 )     —  

Other sales (1)

     6       3,553       3,559      4       1,568       1,572
                                             

Total

     3,959       10       3,969      1,776       5       1,781
                                             

Costs and Expenses

             

Product purchases

     3,210       (3,210 )     —        1,369       (1,369 )     —  

Plant transportation and operating expense

     116       (116 )     —        62       (62 )     —  

Transportation and cost of product

     —         3,326       3,326      —         1,431       1,431

Oil and gas exploration and production costs

     114       (114 )     —        65       (65 )     —  

Direct operating

     —         69       69      —         36       36

Exploration expense

     —         45       45      —         29       29

Selling and administrative expenses

     60       (60 )     —        41       (41 )     —  

General and administrative

     —         60       60      —         41       41

Depreciation, depletion and amortization

     129       —         129      71       —         71

Impairments and (gain) losses on assets

     1       —         1      —         —         —  

Earnings from equity investments

     (10 )     10       —        (5 )     5       —  

Interest expense

     17       (17 )     —        9       (9 )     —  
                                             

Total

     3,637       (7 )     3,630      1,612       (4 )     1,608
                                             

Operating Income

     322       17       339      164       9       173

Interest Expense and Other (Income) Expense

             

Interest expense

     —         17       17      —         9       9

Other (income) expense

     —         —         —        —         —         —  
                                             

Total

     —         17       17      —         9       9
                                             

Income from Continuing Operations before Taxes

     322       —         322      164       —         164

Income Tax Expense

     115       —         115      60       —         60
                                             

Income from Continuing Operations

   $ 207     $ —       $ 207    $ 104     $ —       $ 104
                                             

(1) Other sales includes revenues from the sales of third party natural gas and NGLs and processing fees.

 

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