Fitch Revises Anadarko's Outlook to Positive; Affirms Ratings

  Fitch Revises Anadarko's Outlook to Positive; Affirms Ratings  Business Wire  CHICAGO -- April 8, 2014  Fitch Ratings has revised Anadarko Petroleum Corp.'s and its subsidiary, Kerr-McGee's, Rating Outlooks to Positive from Stable following the announcement late last week that Anadarko has settled its Tronox litigation with the plaintiffs for $5.15 billion. Additionally, Fitch has affirmed all ratings for Anadarko and Kerr-McGee. A full list of the ratings is included at the end of this press release.  KEY RATING DRIVERS  The settlement agreement for $5.15 billion results in a complete release of all claims asserted by the plaintiffs against Kerr-McGee. The agreement is subject to recommendation by the U.S. bankruptcy court and a U.S. District Court approval as well as the issuance of an injunction barring similar claims from being asserted by third parties. This process is expected to be completed by the end of the third quarter and payment is expected soon thereafter from existing cash balances. Additional liquidity is provided by an undrawn $5 billion credit facility.  The Outlook revision results from the removal of litigation risk of a larger judgment and Anadarko's very strong operating results over the last few years and improving credit metrics. The settlement amount of $5.15 billion is at the low end of the range given by the U.S. Bankruptcy Court judge in December of last year. Anadarko has experienced strong exploration and development success over the last five years that have resulted in strong reserve and production growth. For example, production has grown slightly over 38% to approximately 781,000 barrels of oil equivalent since the end of 2009 with roughly the same balance sheet debt levels. Resultantly, this has helped to drive debt/EBITDA over that time period from 3.1 times (x) at year-end 2009 to 1.6x at the end of 2013. Other debt/operating metrics has decreased noticeably over that time frame as well. These figures are unadjusted for Western Gas's debt which is consolidated into Anadarko's financial statements.  The current ratings reflect Anadarko's large size and high-quality asset position worldwide, modestly levered capital structure and strong liquidity position. It had nearly 2.8 billion barrels of proved reserves at the end of 2013 making it one of the larger independent exploration and production companies globally. Of the proved reserves, slightly over 70% were developed at year-end 2013. Reserve replacement on a three-year average basis is well over 100% at finding, development and acquisition costs of approximately $15 per barrel of oil equivalent.  Liquidity is provided by existing cash balances and the aforementioned $5 billion credit facility. Maturities are $775 million in 2014 and $1,750 million 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. Fitch does not currently expect these notes to be put.  RATING SENSITIVITIES  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.  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.  Fitch has affirmed the following ratings:  Anadarko Petroleum Corp.  --Long-term Issuer Default Rating (IDR) at 'BBB-'; --Senior notes and debentures at 'BBB-'; --Secured credit facility at 'BBB'.  Kerr-McGee Corp. --Long-term IDR at 'BBB-'; --Senior unsecured at 'BBB-'.  The Rating Outlooks are revised to Positive from Stable.  Additional information is available at  Applicable Criteria and Relevant Research: --'Corporate Rating Methodology' (Aug. 5, 2013); --'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: Scenario Analysis: Lifting the Crude Export Ban (Overall Credit Impact Limited but Varies by Industry) 2014 Outlook: North American Oil & Gas (Strong Oil Prices Continue to Support Energy Complex) Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage Cash Flow Trends in the U.S. Energy Sector (Shareholder Activism Having an Impact)  Additional Disclosure Solicitation Status 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.  Contact:  Fitch Ratings Primary Analyst: Sean T. Sexton, CFA, +1-312-368-3130 Managing Director Fitch Ratings, Inc. 70 West Madison St. Chicago, IL 60602 or Secondary Analyst: Dino Kritikos, +1-312-368-3150 Director or Committee Chairperson: Stephen Brown, +1-312-368-3139 Senior Director or Media Relations: Brian Bertsch, +1-212-908-0549  
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