Fitch Affirms Anadarko Petroleum's IDR at 'BBB-'; Outlook Stable
CHICAGO -- August 1, 2013
Fitch Ratings has affirmed the Issuer Default Rating (IDR) and associated
unsecured debt ratings for Anadarko Petroleum at 'BBB-'. Additionally, Fitch
has affirmed the IDR and senior unsecured ratings for its subsidiary
Kerr-McGee at 'BBB-'. The Rating Outlooks have been revised to Stable from
Key Rating Drivers
The ratings are reflective of Anadarko's large size and high-quality asset
position worldwide, modestly levered capital structure, strong liquidity and
cash flow generating capability. Anadarko is one of the largest independent
E&P companies globally focusing on exploration, development and production.
Its proven reserve base is approximately 2.6 billion barrels of oil equivalent
(boe) with nearly 75% of those reserves developed as of Dec. 31, 2012.
Additionally, the company has substantial unbooked resources worldwide, the
most notable being the company's offshore Mozambique properties. The company's
balance sheet debt was approximately $13.5 billion at the end of the second
quarter 2013 and using an annualized run rate, EBITDAX for the first half of
2013 of $9.8 billion would result in a debt/EBITDAX metric of approximately
1.4x. Debt/proved developed (PD) reserves is approximately $7/PD and
debt/flowing boe/d of production is approximately $18,000/boe/d, both of which
are in line with the current rating.
Liquidity is robust and is provided by approximately $4.6 billion in cash and
marketable securities on hand as of June 30, 2013 and a fully undrawn and
available $5 billion secured revolver expiring in September 2015. Additional
liquidity is provided by the company's Western Gas Resources' $800 million
unsecured revolver which had $537 million of availability as of June 30, 2013
as well as potential monetizations of the company's vast worldwide asset base.
Expectations are for the company to be free cash flow positive this year
despite a growth-oriented capital expenditure budget of between $7.2
billion-$7.6 billion and dividends estimated to be around $180 million. There
are no scheduled debt maturities for 2013; however, $775 million is due in
2014 and $1.75 billion is due in 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.
Operationally, Anadarko's performance continues to be very strong with
outstanding exploration results over the last several years that have resulted
in reserve and production growth year after year at economic costs. Reserve
replacement has been consistently above 100% and the company's three-year
finding, development and acquisition (FD&A) costs are approximately $15/boe.
Production has grown from 562,000 boe/d in 2008 to over 750,000 boe/d expected
for 2013. Additional resources discovered worldwide but yet to be booked
provide the platform for future growth.
The revision in Outlook stems from Fitch's belief that resolution of the
Tronox litigation will not significantly impact Anadarko's credit profile.
Fitch previously stated that a judgment of less than $5 billion could result
in a Stable Outlook provided funding was achieved in a debt-neutral manner.
Although no judgment has been yet rendered, Fitch believes a judgment
significantly exceeding $5 billion is unlikely. In addition, the company's
improved asset and liquidity position versus a few quarters ago would help
insulate Anadarko's credit profile in the unexpected scenario in which a
judgment did exceed $5 billion; as such, the Outlook is revised to Stable.
Anadarko's remaining potential liabilities from Macondo should be relatively
small and, as a result, be manageable for the company to handle within the
context of its current rating.
Negative: Future developments that may, individually or collectively, lead to
negative rating action include:
--A significantly larger than expected judgment against Anadarko in the Tronox
--Large debt-financed acquisitions or share repurchases;
--A significant and sustained deterioration in credit metrics.
Positive: Future developments that may, individually or collectively, lead to
positive rating action include:
--A very favorable judgment in the Tronox proceedings;
--Continued robust operating results combined with conservative financial
management of the balance sheet.
Fitch has affirmed the following ratings and revised the Rating Outlook to
Stable from Negative:
Anadarko Petroleum Corp.
--LT IDR at 'BBB-';
--Sr. Notes & Debentures at 'BBB-';
--Secured Credit Facility at 'BBB'.
--LT IDR at 'BBB-';
--Sr. Unsecured at 'BBB-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Relevant Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Rating Oil and Gas Exploration and Production Companies: Sector Credit
Factors' (Aug. 9, 2012);
--'Updating Fitch's Oil and Gas Price Deck' (July 29, 2013)
--'Full Cycle Cost Survey for E&P Companies (2012 Numbers Up But Adjustments
Tell a Different Story) (May 28, 2013)
Applicable Criteria and Related Research:
Full Cycle Cost Survey for E&P Companies (2012 Numbers Up, but Adjustments
Tell a Different Story)
Updating Fitch's Oil and Gas Price Deck
Rating Oil and Gas Production Companies
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Sean T. Sexton, CFA
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
Mark C. Sadeghian, CFA
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