Anadarko Petroleum (APC)

2009 HIGHLIGHTS

• Increased sales volumes by 7 percent year-over-year, while spending 35-percent less on near-term projects
• Reduced lease operating expense (LOE) per unit by more than 20 percent year-over-year
• Added 314 million barrels of oil equivalent (BOE) of proved reserves before price revisions and divestitures, which equates to replacing 140 percent of production
• Achieved a 50-percent success rate in the 2009 global deepwater exploration program
• Discovered nearly 360 million BOE of net resources from 2009 exploration activities
• Advanced three sanctioned mega projects on time and on budget

“2009 was a very successful year in advancing our strategy and illustrating the high quality of our portfolio. We feel 2009 has set the stage for continuing success in 2010 and beyond,” Anadarko Chairman and CEO, Jim Hackett said. “The results demonstrated the ability of our operating teams to grow our production and reserve base, prudently manage our capital spending, reduce costs, improve drilling efficiencies and move our sanctioned mega projects closer to first production. In addition, our 2009 worldwide drilling program resulted in nine significant deepwater discoveries and four successful deepwater appraisal wells that de-risked our portfolio and added to a growing list of future mega projects. When combined with the growing success of our U.S. onshore shale plays, we are confident that future years will see a material increase in production and reserve additions.”

Full-year 2009 sales volumes of natural gas, crude oil and natural gas liquids (NGLs) totaled 220 million BOE, or 604,000 BOE per day, representing a 7-percent increase over full-year 2008 sales volumes of 206 million BOE. Fourth-quarter 2009 sales volumes of natural gas, crude oil and NGLs totaled 53 million BOE, or 583,000 BOE per day.

Anadarko added 314 million BOE of proved reserves in 2009, before the effects of price revisions and divestitures, and incurred costs of approximately $4.66 billion associated with its oil and natural gas exploration and development activities.⁽²⁾ The company estimates its proved reserves at year-end 2009 totaled 2.3 billion BOE. Anadarko ended 2009 with approximately 70 percent of its reserves in the proved, developed category and approximately 30 percent categorized as proved, undeveloped. At year-end 2009, Anadarko’s product mix of proved reserves was made up of approximately 56 percent natural gas and 44 percent liquids.

THIRD-QUARTER 2009 HIGHLIGHTS

• Achieved record quarterly sales volumes (from retained properties), a 12-percent increase over third-quarter 2008
• Reduced lease operating expense (LOE) per barrel of oil equivalent (BOE) by 9 percent sequentially over the second-quarter 2009, and by 15 percent year-to-date over the comparable nine-month period in 2008
• Announced deepwater drilling successes in the Gulf of Mexico and West Africa
• Received Ghanaian government approval for the Jubilee field Phase I development plan

“The positive third-quarter results continue to demonstrate the value of Anadarko’s portfolio, with strong performance from both our producing assets and deepwater exploration program,” Anadarko Chairman and CEO Jim Hackett said. “Our exploration, drilling and operations teams continued to perform very well in achieving record sales volumes, lower costs, increased efficiencies and differentiating deepwater drilling success.”

Third-quarter 2009 sales volumes of natural gas, crude oil and natural gas liquids totaled 57 million BOE, or 616,000 BOE per day, comprised of natural gas sales volumes that averaged 2.144 billion cubic feet per day, oil sales volumes that averaged 205,000 barrels per day and natural gas liquids sales volumes that averaged 54,000 barrels per day.

“As a result of both improved operating performance and the absence of severe weather in the Gulf of Mexico, we expect our full-year sales volumes to be approximately 220 million BOE, up from our original midpoint of 210 million BOE at the beginning of the year, without increasing capital spending,” continued Hackett. “This equates to a forecasted growth rate of approximately 7 percent over our 2008 total sales volumes of 206 million BOE, while spending approximately 35 percent less capital on near-term projects.”

In July, Anadarko announced the Vito exploration well in the deepwater Gulf of Mexico encountered more than 250 net feet of oil pay in Miocene sands. This success was followed by the announcement of the Venus discovery offshore Sierra Leone in September. The results of the Venus well confirmed the existence of an active petroleum system in this frontier basin, thereby enhancing the prospectivity of the company’s approximately 8 million gross acres offshore West Africa.

Anadarko also continued to make significant progress on its mega projects in West Africa and in the Gulf of Mexico. Offshore Ghana, Anadarko and its partners successfully drilled the Mahogany-4 appraisal well. The well, which was located outside the existing Jubilee Unit boundary, encountered more than 140 net feet of oil pay and expanded the potential productive area of the Jubilee field to the south and east. Also in Ghana, the Jubilee project reached an important milestone during the third quarter, as the Ghanaian government formally approved the Jubilee field Phase I Plan of Development and Unitization Agreement. The partnership has drilled approximately 70 percent of the development wells in the field, awarded all contracts and completed about 70 percent of the construction work on the FPSO (floating production, storage and offloading vessel). Jubilee remains on schedule to achieve first production during the fourth quarter of 2010.

In the Gulf of Mexico during the third quarter, the company successfully drilled a development well near the Tonga West discovery as part of the Caesar/Tonga complex in the Green Canyon area. The well encountered more than 500 net feet of oil pay, and it will be tied back to Anadarko’s Constitution spar. The partnership is currently drilling another development well in the complex, a sidetrack to the original Caesar discovery, which will be the third of four expected subsea wells in the development. The project currently remains on schedule, with first production expected in early 2011.

SECOND-QUARTER 2009 HIGHLIGHTS

• Achieved 4-percent sequential volume growth over first-quarter 2009
• Reduced lease operating expense per barrel of oil equivalent (BOE) by 12 percent from first-quarter 2009
• Announced a deepwater discovery in the Gulf of Mexico
• Strengthened liquidity by effectively accessing the capital markets

“The strength of Anadarko’s portfolio was clearly demonstrated during the quarter, as we delivered record sales volumes (from retained properties) and improved lease operating expenses relative to both the prior-year period and the first quarter of 2009,” Anadarko Chairman and CEO Jim Hackett said. “We are continuing to drive down costs to better align them with the current commodity-price environment. I am also very pleased with the excellent performance of our exploration teams, which have announced six deepwater discoveries so far this year. Additionally, during the quarter we continued to prudently manage our balance sheet by accessing the capital markets to substantially strengthen our liquidity position.”

Last week, Anadarko announced the Vito discovery in the Gulf of Mexico in Mississippi Canyon block 984. The well encountered more than 250 net feet of oil pay, and the partners are currently evaluating the data and timing of future appraisal activity. During the second quarter, Anadarko announced the Samurai discovery in the Gulf of Mexico in Green Canyon block 432, which is 12 miles north of the company’s Marco Polo facility. The discovery well encountered more than 120 feet of net oil pay. The company plans to drill an appraisal well within the next year. These discoveries add to the deepwater discoveries announced during the first quarter of this year at the Heidelberg and Shenandoah wells in the Gulf of Mexico and the Tweneboa and Mahogany Deep discoveries offshore Ghana. Anadarko plans to drill several significant appraisal wells and at least six high-impact exploration wells during the remainder of 2009, with each exploration well targeting resources of more than 100 million BOE.

“Anadarko’s exploration success,” continued Hackett, “coupled with our strong operational performance and the advancement of our three mega projects, including the recent approval of the Jubilee Phase I Plan of Development and Unitization Agreement by the Ghanaian government, continues to deliver excellent value today and positions the company to continue to do so in the future.”

Second-quarter 2009 sales volumes of natural gas, crude oil and natural gas liquids totaled 56 million BOE, or 617,000 BOE per day, comprised of natural gas sales volumes that averaged 2.336 billion cubic feet per day, oil sales volumes that averaged 182,000 barrels per day and natural gas liquids sales volumes that averaged 46,000 barrels per day.

FIRST-QUARTER 2009 HIGHLIGHTS

• Announced four significant deepwater discoveries
• Achieved sequential volume growth over fourth-quarter 2008
• Recognized further improvements in cost structure and drilling efficiencies
• Issued bonds to refinance near-term debt and supplement liquidity

“Our portfolio yielded very good operating results during the quarter; however, we continue to face a challenging period until we see better alignment between costs and commodity prices,” Anadarko Chairman and CEO Jim Hackett said. “We prudently scaled back our near-term capital spending and still improved sales volumes by approximately 2 million barrels from the fourth quarter of 2008. Toward the end of the second quarter we expect to resume production of approximately 30,000 net BOE (barrels of oil equivalent) per day, currently shut-in due to the lingering effects of hurricane-related outages to downstream infrastructure in the Gulf of Mexico. We remain on track to achieve our 2009 production target of between 208 million and 212 million BOE.”

“We also had an outstanding quarter with regard to exploration success, which reinforces our commitment to invest in this program. We announced four high-impact discoveries during the quarter – the Heidelberg and Shenandoah prospects in the deepwater Gulf of Mexico and the Tweneboa and Mahogany Deep prospects in West Africa. Additionally, we achieved important milestones in the development of our three mega projects, enabling us to effectively manage costs and maintain schedules for first production.”

Anadarko and its partners continue to move forward with the Phase I development of the Jubilee field. The Ghanaian government is currently reviewing the field’s Plan of Development, and Jubilee remains on track to deliver first production in late 2010. In the deepwater Gulf of Mexico, preparations are under way to begin development drilling in the third quarter at the company’s Caesar/Tonga complex, with first production anticipated in early 2011. In Algeria, Anadarko and its partners have awarded the key contracts for the development of the El Merk project, with production expected to commence in 2012.

“The advancement of these major development projects and our exploration successes continue to position Anadarko for material future reserve and production growth. Our financial position, improving cost structure and drilling efficiencies are allowing us to manage through the current market environment with a focus on future growth,” Hackett added.

First-quarter 2009 sales volumes of natural gas, crude oil and natural gas liquids totaled 54 million BOE, or 600,000 BOE per day. First-quarter 2009 natural gas sales volumes averaged 2.3 billion cubic feet per day. Oil sales volumes in the first quarter averaged 174,000 barrels per day and natural gas liquids sales volumes averaged 40,000 barrels per day.