Anadarko Announces Record 2004 Results

Anadarko Petroleum Corporation (NYSE:APC) President and CEO Jim Hackett said: "Anadarko performed exceptionally well in 2004 -- a period in which we have reshaped the entire company and changed the way we think and work in order to focus on improving returns for shareholders and positioning ourselves for sustainable, profitable growth.

"We achieved record 2004 net income, with outstanding contributions from our Texas, Louisiana and other core onshore properties. In addition, we made discoveries and advanced development projects in the deepwater Gulf of Mexico and made progress on our international growth strategy. I believe Anadarko is well prepared for the future."

FOURTH-QUARTER 2004 FINANCIAL RESULTS

Fourth-quarter net income available to common shareholders was $405 million, or $1.64 per share (diluted), on revenues of $1.6 billion. Net income included an impairment in Qatar, certain legal settlements and charges related to the implementation of the refocused strategy, such as the repurchase of debt and the sale of non-core properties, offset partly by a change in Canadian tax rates. These items amounted to a net decrease of $96 million after taxes, or 39 cents per share (diluted). Net income included no gains or losses from the oil and gas asset sales, as proceeds were recognized as an adjustment of capitalized costs under full-cost accounting rules. Earnings for the fourth quarter of 2003 were $294 million, or $1.17 per share (diluted), on revenues of $1.28 billion. Fourth quarter 2003 net income included a net increase of $32 million after taxes, or 13 cents per share (diluted), related to a decrease in Canadian tax rates offset partly by impairments and restructuring costs.

Cash flow from operating activities totaled $456 million in the fourth quarter, compared with $744 million for the fourth quarter of 2003. Cash flow from operations before changes in assets and liabilities for the fourth quarter of 2004 totaled $1.03 billion, which includes a reduction of $93 million for current income taxes related to the 2004 asset divestitures. The changes in assets and liabilities, as well as other items, were primarily a result of U.S. tax payments and Canadian deferred taxes in the fourth quarter, both of which were in connection with the asset divestitures. Fourth-quarter 2003 cash flow was $728 million.

Fourth-quarter sales volumes totaled 46 million barrels of oil equivalent (BOE), compared to 49 million BOE in 2003. Property divestitures prior to the end of the year reduced Anadarko's fourth-quarter 2004 production by about 5 million BOE.

FULL YEAR 2004 FINANCIAL RESULTS

Anadarko reported full-year 2004 net income available to common shareholders of $1.6 billion, or $6.36 per share (diluted), on revenues of $6.07 billion. Net income included international property impairments, certain litigation and other settlements, and costs associated with the refocused strategy, offset partly by a change in Canadian tax rates. These items totaled a net decrease of $226 million after taxes, or 90 cents per share (diluted). Net income in 2003 was $1.29 billion, or $5.09 per share (diluted), on revenues of $5.12 billion, which included a net decrease of $26 million after taxes, or 10 cents per share (diluted), for impairments and restructuring costs, partly offset by a decrease in Canadian tax rates and a change in accounting principle.

Cash flow from operating activities totaled $3.21 billion in 2004, up from $3.04 billion in 2003. Cash flow from 2004 operations before changes in assets and liabilities totaled $3.48 billion, which includes a reduction of $440 million for current income taxes related to the 2004 asset divestitures. This compares to $3.16 billion in 2003.

Sales volumes of natural gas, crude oil and natural gas liquids for 2004 totaled 190 million BOE, compared to 2003 volumes of 192 million BOE. Assuming the divested properties were owned by Anadarko for the entire year, the company believes 2004 volumes would have been approximately 196 million BOE.

"This year, we made some tough decisions to implement a new strategy for Anadarko. We completed over $3 billion in pre-tax asset sales and refocused our efforts into areas where we have a competitive advantage: exploration and unconventional resource exploitation on a global basis," Hackett said. "The divested assets represent about 11 percent of 2003 year-end reserves and about 20 percent of 2004 annual production. The proceeds were used primarily to repurchase $1.3 billion, or 20.3 million shares, of outstanding common stock and to retire approximately $1.2 billion in debt. In addition, we ended the year with nearly $900 million of cash. Altogether, our greatly enhanced net debt to proved developed reserves and lower debt-to-capitalization ratios reflect our stronger and more flexible balance sheet."

PROVED RESERVES & OIL AND GAS CAPITAL EXPENDITURES

Anadarko added 335 million BOE in proved reserves during 2004, ending the year with a total of 2.37 billion BOE. This is the 23rd consecutive year that Anadarko has more than replaced annual production with new proved reserves. Oil and gas capital expenditures totaled $2.99 billion in 2004.

Anadarko sold properties accounting for 288 million BOE of 2003 year-end reserves, which contributed to a year-over-year reduction.

Reserve additions in 2004 came primarily from fields in the North Louisiana Vernon, East Texas Bossier, West Texas Haley, Wyoming Salt Creek and Canadian Wild River areas, as well as the K2, K2 North, Spiderman and Jubilee deepwater discoveries in the Gulf of Mexico.

Anadarko's proved reserves remain nearly balanced between natural gas (53 percent) and liquids (crude oil, condensate and natural gas liquids) (47 percent). Proved reserves of oil and other liquids totaled 1.11 billion barrels at year-end 2004. Proved natural gas reserves at year-end 2004 totaled 7.5 trillion cubic feet.

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