This excerpt taken from the APC 10-K filed Mar 15, 2005.
Cash Flow from Operating Activities Anadarkos cash flow from operating activities in 2004 was $3.2 billion compared to $3.0 billion in 2003 and $2.2 billion in 2002. The increase in 2004 cash flow is primarily attributed to higher commodity prices, partially offset by higher costs and expenses. Also, although the property divestitures resulted in no gain or loss recognition for financial reporting purposes, 2004 cash flow was reduced by about $440 million of current income taxes associated with the divestiture program. This increase in current tax expense was offset by a reduction in deferred tax expense. The increase in 2003 cash flow compared to 2002 is attributed to the significant increase in commodity prices. Fluctuations in commodity prices have been the primary reason for the Companys short-term changes in cash flow from operating activities. Anadarko holds derivative instruments to help manage commodity price risk. Sales volume changes can also impact cash flow in the short-term, but have not been as volatile as commodity prices in the past. Sales volume decreases associated with divestitures made during 2004 are expected to result in lower cash flow from operating activities. Anadarkos long-term cash flow from operating activities is dependent on commodity prices, reserve replacement and the level of costs and expenses required for continued operations.