DBRS Confirms Issuer Rating of Anadarko Petroleum at BBB, Stable Trend

DBRS has today confirmed the Issuer Rating of Anadarko Petroleum Corporation (Anadarko or the Company) at BBB with a Stable trend. In addition, the Senior Unsecured Notes and Debentures of Anadarko and Kerr-McGee Corporation (Kerr-McGee) have been confirmed at BBB (low) with Stable trends. The Senior Unsecured Debt ratings are one notch below that of the Issuer Rating, a direct result of the existing $5 billion secured credit facility’s ranking ahead of the Unsecured Notes and Debentures. These confirmations are based on results and corporate developments in the first six months ended June 30, 2012 (H1 2012).

Anadarko’s financial profile improved modestly in H1 2012. Strong cash flow was underpinned by increased production and continued strong oil prices. Adjusted debt-to-capital improved to 47.2% (from 50.6% in 2011), while debt-to-cash flow improved to 2.0 times (x) for the twelve months ended June 30, 2012, from 2.12x in 2011. Metrics for 2011 were negatively impacted by the payment of settlement funds of $4 billion ($2.5 billion in debt) to BP p.l.c. in December 2011 to settle current and future claims against Anadarko associated with the Deepwater Horizon oil spill in the Gulf of Mexico (the Spill) in April 2010.

The Company continues with its strategy to manage spending within operating cash flow. Although the budgeted capital expenditure (capex) for 2012 is increased ($6.6 billion to $6.9 billion) from 2011, it is expected to be fully funded (along with dividends estimated at $180 million) by operating cash flow, assuming continued favorable oil pricing. Any excess cash flow is expected to be used to reduce debt. In addition, the Company received first payment ($113 million) from the settlement in the Algeria Exceptional Profits Tax (TPE) dispute ($1.8 billion total). Anadarko expects approximately $1 billion in further payments prior to the end of 2012, with the final amount (approximately $700 million) to be paid in the first half of 2013. Proceeds of the settlement are expected to be used to reduce the Company’s leverage.

Notes:
All figures are in U.S. dollars unless otherwise noted.
The applicable methodology is Rating Oil and Gas Companies, which can be found on our website under Methodologies.