Fitch Rates Anadarko's Senior Note Issuance 'BBB-'

CHICAGO--()--Fitch Ratings has assigned a rating of 'BBB-' to Anadarko Petroleum's (Anadarko) issuance of senior notes due 2024 and 2044. The issuance is to re-finance debt that matured earlier this year and for general corporate purposes.

Anadarko's Rating Outlook is Positive.

KEY RATING DRIVERS

The current ratings reflect Anadarko's large size, high-quality asset position worldwide, modestly levered capital structure and strong liquidity position. The company had nearly 2.8 billion barrels of proved reserves at the end of 2013 making it one of the world's largest independent exploration and production companies. At year-end 2013, more than 70% of the proved reserves were developed and production is currently expected to be over 800,000 barrels of oil equivalent per day for 2014 which would mark six straight years of production increases. As of March 31, 2014, Anadarko's balance sheet debt levels stood at approximately $15 billion.

The Positive Outlook reflects Anadarko's strong operational performance over the last several years as well as the anticipated satisfactory resolution of the Tronox Proceedings. Operationally, the company's production levels have grown over a third since the end of 2009 with essentially the same balance sheet debt levels. Other operational metrics are very strong as well with three year average reserve replacement well in excess of 100% at competitive finding, development and acquisition costs of approximately $15 per barrel of oil equivalent. Debt/proved developed reserves and debt/daily production metrics are solidly within the 'BBB' category expected range.

Liquidity is primarily provided by existing cash balances of nearly $6 billion and the company's current $5 billion secured revolving credit facility. Additionally, a newly signed five-year $3 billion unsecured facility and a $2.0 billion 364 agreement will become effective once the $5 billion secured revolving credit facility has been fully repaid and the Tronox settlement has been satisfactorily approved and paid. After that point, the $5 billion facility terminates. The Tronox settlement is expected to be paid by the end of the third quarter of this year and will be approximately $5.2 billion including accrued interest. Additional liquidity is provided by Western Gas Partners LP's $1.2 billion senior unsecured credit revolver due 2019. Anadarko's nearest term maturity is $1.75 billion due in September of 2016. In addition, holders of the company's zero coupon senior notes due 2036 have the option to put the then accreted value of the outstanding notes in October of each year. The accreted value is approximately $0.7 billion. Fitch does not currently expect these notes to be put.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

--Completion of necessary final and non-appealable recommendations, approvals and injunctions related to the Tronox Adversary Proceeding settlement process.

--Strong operating results combined with continued conservative financial management of the balance sheet.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

--Large debt-financed acquisitions or share repurchases;

--A significant and sustained deterioration in credit metrics.

Fitch rates Anadarko and its affiliate Kerr-McGee as follows:

Anadarko Petroleum Corp.

--LT IDR 'BBB-';

--Sr. Notes & Debentures 'BBB-';

--Secured Credit Facility 'BBB'.

Kerr-McGee Corp.

--LT IDR 'BBB-';

--Sr. Unsecured 'BBB-'.

The Rating Outlook is Positive.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Relevant Research:

--'Corporate Rating Methodology' (May 28, 2014);

--'Cash Flow Trends in the U.S. Energy Sector-Shareholder Activism Having an Impact' (Feb. 4, 2014);

--'Scenario Analysis: Lifting the U.S. Crude Export Ban' (Jan. 27, 2014);

--'2014 Outlook: North American Oil & Gas' (Dec. 12, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Cash Flow Trends in the U.S. Energy Sector (Shareholder Activism Having an Impact)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=733556

Scenario Analysis: Lifting the Crude Export Ban (Overall Credit Impact Limited but Varies by Industry)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732055

2014 Outlook: North American Oil & Gas (Strong Oil Prices Continue to Support Energy Complex)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726499

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837530

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Sean T. Sexton, CFA
Managing Director
+1-312-368-3130
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Mark C. Sadeghian, CFA
Senior Director
+1-312-368-2090
or
Committee Chairperson
Stephen Brown
Senior Director
+1-312-368-3139
or
Media Relations
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Sean T. Sexton, CFA
Managing Director
+1-312-368-3130
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Mark C. Sadeghian, CFA
Senior Director
+1-312-368-2090
or
Committee Chairperson
Stephen Brown
Senior Director
+1-312-368-3139
or
Media Relations
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com