Third-Quarter 2010filecache.drivetheweb.com/mr5ir_anadarko/727/download/3Q10...the Marcellus, Eagleford and Haynesville shale plays from 13,300 net BOE/d in the 2nd quarter to 17,000

w INVESTOR RELATIONS CONTACTS: John Colglazier Chris Campbell , CFA Dean Hennings Vice President 832/636-2306 Manager 832/636-8434 Manager 832/636-2462

OPERATIONS REPORT

Third-Quarter 2010November 1, 2010

Cautionary Note ........................................ 2

Overview.................................................... 2

Rockies ...................................................... 4

Southern & Appalachia ............................. 7

Gulf of Mexico ......................................... 10

International / Frontier ............................. 12

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ANADARKO PETROLEUM CORPORATION | Third-Quarter 2010

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Anadarko continued to deliver solid performance in the 3rd quarter, with sales at the upper end of guidance, material international deepwater exploration success and significant growth in its onshore shale programs, and a 17% year-to-date improvement in Lease Operating Expense (LOE) per barrels of oil equivalent (BOE). In addition, the company remains on track to deliver first production at the Jubilee field by the end of the year. The Caesar/Tonga and El Merk developments remain on time and on budget. In total, these three mega projects are expected to deliver approximately 60,000 barrels of oil per day (BOPD) net to Anadarko in 2012.

Sales volumes for the quarter totaled 58 million BOE. This growth was driven by strong results in Anadarko’s U.S. onshore portfolio, with the Rocky Mountain and Southern & Appalachia regions sales volumes increasing by 10% and 9% respectively, over the 3rd quarter of 2009. Liquids (oil and NGLs) volumes represented approximately 41% of total sales volumes for the quarter.

The company maintained its successful focus on reducing operating costs and keeping capital spending in line with cash flow. LOE during the 3rd quarter was $3.57 per BOE, which was favorable to guidance and equates to a 17% year-to-date reduction per unit. Capital expenditures were within guidance at $1.286 billion for the quarter.

Anadarko continued to be successful with its international deepwater exploration program. During the quarter, the company announced a major oil discovery at the Owo field offshore Ghana. The Owo discovery well encountered more than 174 net feet of high-quality oil pay, and the subsequent sidetrack well encountered an additional 115 net feet of pay.

In mid-October, Anadarko announced the world-class Barquentine natural gas discovery offshore Mozambique, that encountered more than 416 net feet of natural gas pay approximately two miles northeast of the company’s previously announced Windjammer discovery.

In early November, Anadarko announced that the Badik #1 exploration well encountered more than 133 net feet of oil and gas pay offshore Indonesia.

OVERVIEW

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. While Anadarko believes that its expectations are based on reasonable assumptions as and when made, no assurance can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this report, including the following: the outcome of events in the Gulf of Mexico relating to the Macondo well; the Company’s ability to successfully defend its stated position under the Macondo joint operating agreement; the impact of the recently lifted deepwater drilling moratorium and resulting legislative and regulatory changes on the Company’s Gulf of Mexico and International offshore operations; the Company’s ability to achieve its production and budget expectation on its mega projects; Anadarko’s ability to achieve its production targets, successfully manage its capital expenditures and to complete, test and produce the wells and prospects identified in this report. Other factors that could impact the forward-looking statements are described in “Risk Factors” in the company’s 2009 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.



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The capital program totaled $1.286 billion for the quarter. The company lowered its full-year guidance for capital expenditures, including expensed G&G, to a range of $5.3 to $5.5 billion.

VOLUMES

Sales volumes for the quarter were at the upper end of guidance at approximately 58 million BOE. The Rocky Mountain region and

the Southern & Appalachia region delivered sales volumes growth of 10% and 9%, respectively over the 3rd quarter of 2009. The company experienced continued growth in its average daily sales volumes from the Marcellus, Eagleford and Haynesville shale plays from 13,300 net BOE/d in the 2nd quarter to 17,000 net BOE/d in the 3rd quarter. Year to date, sales for the company averaged 655 MBOE/d representing a 7% growth over the comparable period a year ago.

OVERVIEW

CapitalSpending

3Q10 2Q10

$ MM $ MM

Rockies 395 312 Southern 231 267 Lower48 626 578 Alaska 7 9 Gulf of Mexico 27 323 TotalU.S. 660 910 International 396 324 Midstream 140 96 Capitalized Items / Other 91 35

TotalCompany 1,286 1,367

CAPITAL SPENDING

AverageOperatedRigActivity 3Q10 2Q10

Rockies 22 15 Southern 22 22 Lower48 44 37 Alaska 0 0 Gulf of Mexico 3 3 TotalU.S. 47 39 International 7 7 TotalCompany 54 45

NetSalesVolumes 3Q10 3Q09 MMBOE MMBOE YOY%

Rockies 25 23 10 Southern 12 11 9 Lower48 37 34 10 Alaska 2 2 -8 Gulf of Mexico 14 15 -9 TotalU.S. 52 50 4 International 6 6 -11

TotalCompany 58 57 2



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During the 3rd quarter, sales volumes in the Rockies increased by 10% relative to the 3rd quarter 2009 with volumes averaging 274,000 BOE/d.

ROCKIES NetSalesVolumes

3Q10 3Q10 3Q10 3Q09 3Q09 3Q09 Gas NGLs Oil Gas NGLs Oil

MMcf/d MBbl/d MBbl/d MMcf/d MBbl/d MBbl/d

TightGas Natural Buttes* 293 8 2 263 10 2 Wattenberg* 194 8 19 194 8 16 Pinedale 106 3 1 86 0 1 Wamsutter 111 10 2 105 9 2 Other 93 3 2 74 1 2 CBM 430 0 0 391 0 0 EOR 0 0 11 1 0 12 Total 1,228 33 36 1,113 29 35

Capital RigActivity

3Q10 3Q10 2Q10

$ MM Oper Oper

105 8 6 124 5 4 39 0 0 31 1 2 17 0 0 50 6 1 29 1 2 395 22 15

TightGas Natural Buttes Wattenberg Pinedale Wamsutter Other CBM EOR Total

UTAH COLORADO

WYOMING Salt Creek

Monell

Wattenberg

Wamsutter

Powder River

Moxa

Pinedale

GreaterNatural Buttes

EOR TightGas CBM

* NGL sales were affected due to unscheduled processing plant downtime



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ROCKIES

TIGHT GAS/OIL DEVELOPMENTWattenberg:

• During the 3rd quarter, Anadarko set a new weekly net production record of 63,500 BOE/d in the Wattenberg field, and also set a single-day oil delivery record of 29,000 barrels.

• Anadarko drilled 96 wells in the 3rd quarter and ended the quarter with six operated rigs.

• The company continued its active recompletions and refrac program. A total of 273 refrac and recomplete fracs were pumped during the 3rd quarter, compared to 102 for the 3rd quarter of 2009. Year to date, the company has performed 1,379 fracs on

854 wellbores, surpassing the full-year record of 1,102 fracs set in 2008.

• Anadarko’s Wattenberg team was recognized by the Colorado Oil and Gas Conservation Commission with awards for operator excellence in the areas of operational efficiencies and community involvement.

Greater Natural Buttes:• The company set a daily gross production record of 412

MMcfe/d at Greater Natural Buttes during the 3rd quarter and increased total sales volumes by approximately 4% compared to the 3rd quarter 2009.

• Anadarko ended the 3rd quarter with eight rigs and drilled 76 wells in the quarter, while maintaining a spud-to-rig-release time of less than 8.5 days for the sixth consecutive quarter.

• Anadarko inaugurated its new Central Dispatch Center to facilitate 24/7 field surveillance and improve operating efficiency.

Horizontal Niobrara:• Anadarko drilled four vertical Niobrara test wells and spud its

first operated horizontal Niobrara well during the 3rd quarter, after completing a 160-mile2 3-D seismic survey. The company plans to remain active in the play for the rest of the year and expects to add additional rigs during 2011.



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COALBED METHANE DEVELOPMENTPowder River Basin CBM:

• During the 3rd quarter, Anadarko operated six rigs and participated in 188 total wells. Activity increased due to the limited drilling window allowed under the stipulations mandated by various federal and state agencies.

GREATER GREEN RIVER BASINWamsutter:

• The company achieved a weekly operated net production record of almost 12,000 BOE/d.

• Drilling activity continued in Wamsutter with one operated and four non-operated rigs. For the quarter, Anadarko and its partners spud 46 wells and completed 56 wells.

Pinedale:• Drilling activity continued in Pinedale with an average of 13

non-operated rigs running during the 3rd quarter. Anadarko and its partners spud 74 wells and completed 75 wells during the quarter.

ROCKIES



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During the 3rd quarter, the Southern & Appalachia region averaged 128,000 BOE/d, an increase of 9% compared to the 3rd quarter 2009.

NetSalesVolumes

3Q10 3Q10 3Q10 3Q09 3Q09 3Q09 Gas NGLs Oil Gas NGLs Oil

MMcf/d MBbl/d MBbl/d MMcf/d MBbl/d MBbl/d

Delaware Basin 68 0 2 94 0 1 Shales* 72 2 3 13 0 0 Bossier 109 0 0 116 0 0 Carthage 93 7 1 92 6 1 Hugoton 51 3 0 57 2 0 Ozona 37 3 0 34 3 0 Chalk 50 7 6 48 5 6 Other 61 2 1 77 3 1 Total 540 24 15 531 19 9

Capital RigActivity

3Q10 3Q10 2Q10

$ MM Oper Oper

58 4 4 125 13 13 6 0 0 12 1 1 1 0 0 0 0 0 27 5 4 2 0 0 231 22 22

Delaware Basin Shales* Bossier Carthage Hugoton Ozona Chalk Other Total

HugotonMarcellus

Haley Bossier Carthage

Haynesville

East Chalk

South Texas

Ozona

Eagleford

Tight Gas

Fractured Reservoirs

Shales

Other

* Shales includes Marcellus, Eagleford and Haynesville

SOUTHERN & APPALACHIA



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SHALE DEVELOPMENTMarcellus:

At the end of the 3rd quarter, Anadarko was operating six rigs and participating in an additional 15 non-operated rigs. The company spud 18 operated wells and completed five wells. Record gross production of almost 175 MMcf/d from 46 wells was set during the 3rd quarter.

During the 3rd quarter, Anadarko continued to see multiple wells across its acreage position flow at initial rates in excess of 7 MMcf/d.

The company recently inaugurated its 200 MMcf/d Grugan gathering system and expects to significantly increase takeaway capacity during the 4th quarter, from 600 MMcf/d to 1.15 Bcf/d, gross.

Eagleford:Anadarko continued to increase production and activity levels in the Eagleford during the 3rd quarter, setting a new one-day gross production record of nearly 16,000 BOE/d.

The company operated six rigs during the quarter and spud 32 wells, with an average spud-to-rig-release time of approximately 14 days.

Haynesville:During the 3rd quarter, Anadarko participated in three non-operated wells that were brought on line at initial rates of up to 15 MMcf/d. Anadarko had no operated rig activity during the 3rd quarter in the Haynesville, having moved its rigs to the liquids-rich Eagleford and Bone Spring plays.




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FIELD DEVELOPMENTDelaware Basin:

Anadarko continued its active Bone Spring horizontal oil program, operating four drilling rigs and participating in three non-operated rigs. At the end of the quarter, gross production from the Bone Spring was approximately 7,000 BOPD and 14 MMcf/d. During the quarter, the company spud 10 operated wells and completed eight wells.

During the 3rd quarter, Anadarko participated in two non-operated and three operated exploration wells in the Avalon Shale play. The evaluation program is ongoing, with the initial two well testing at rates approaching 700 BOE/d.

Chalk: Drilling activity continued with three operated rigs. Anadarko

spud three wells.

During the quarter, the company completed the 15th well of its planned 25 well re-entry program in the Northstars field.




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GULF OF MEXICO

PRODUCING PROPERTIES

The Gulf of Mexico region reported sales of approximately 148,000 BOE/d in the 3rd quarter, which includes the effects of routine maintenance and well testing across all facilities. During the government-mandated deepwater moratorium, Anadarko's project teams kept the Caesar/Tonga mega project moving forward and continued to advance development planning at its operated Lucius project and the Shell-operated Vito project.In addition, the company received a workover permit at the K2 field and was able to advance the Callisto tieback at Independence Hub.

HEIDELBERGHEIDELBERGHEIDELBERGHEIDELBERGHEIDELBERGHEIDELBERGSHENANDOAHSHENANDOAHSHENANDOAHSHENANDOAHSHENANDOAHSHENANDOAH

SAMURAISAMURAISAMURAISAMURAISAMURAISAMURAI

PHOBOSPHOBOS

CORONADOCORONADODAVY CROCKETTDAVY CROCKETT

LYELLLYELL

FLINT CREEKFLINT CREEKBLACKTAILBLACKTAIL

SILVERADOSILVERADO

MAUNA KEAMAUNA KEA

HALEAKALAHALEAKALA

SILVERTONSILVERTONTORREYSTORREYS

PEBBLE BEACHPEBBLE BEACH

VITOVITOVITOVITOVITOVITO

LUCIUSLUCIUSLUCIUSLUCIUSLUCIUSLUCIUS LOWER TERTIARY PROSPECT

MIOCENE/PLIOCENE PROSPECT

DISCOVERY

APC ACREAGE

NetSalesVolumes

3Q10 3Q10 3Q10 3Q09 3Q09 3Q09 Gas NGLs Oil Gas NGLs Oil MMcf/d MBbl/d MBbl/d MMcf/d MBbl/d MBbl/d

Total 464 8 63 503 5 73



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Marco Polo:

Green Canyon 608 (APC 100% WI) • The GC 608 A8ST development well was brought on line at

4,000 BOPD and 4 MMcf/d.

MAJOR DEVELOPMENTSCaesar / Tonga:

Green Canyon 683/726/727/770 (APC 33.75%)• Anadarko continues to progress the Caesar/Tonga development

program with first production remaining on schedule for the first half of 2011. During the 3rd quarter, the first riser and flowlines were successfully installed and work continued on the planned topsides upgrades at the Constitution spar.

• The company intends to initiate work on well completions during the 4th quarter, subject to obtaining regulatory approval.

GOM EXPLORATION• At Lucius (Keathley Canyon 875, 50% WI), Anadarko

continued to carry out development planning and preliminary front end engineering studies.

• At Vito (Mississippi Canyon 984/940, 20% WI), the operator, Shell Offshore, Inc., continued to carry out development planning.

• At Heidelberg (Green Canyon 903, 44.25% WI), Anadarko intends to redrill the appraisal well after it receives the necessary federal permits and authorizations.

GULF OF MEXICO

Independence Hub:• Anadarko’s Independence Hub averaged 482 MMcfe/d gross

production (359 MMcfe/d net) in the 3rd quarter.

• The Callisto pipeline work was approved by the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) and the subsea tieback installation is on track to bring the Callisto #1 ST2 on line in the 4th quarter. The company’s deepwater development and exploration teams continue to mature multiple drilling opportunities for potential tieback to the Independence Hub.

Nansen:

East Breaks 602 (APC 50% WI) • Nansen EB 602 #13 was brought on line at 24 MMcf/d and

1,500 BOPD, gross.



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NetSalesVolumes Capital 3Q10 3Q09 3Q10 Oil Oil MBbl/d MBbl/d $ MM

Alaska 17 18 7

Algeria* 47 57 90

Brazil 0 0 30

China* 15 11 22

Ghana/W.Africa* 0 0 182

Other 0 1 71 Total 78 87 403

INTERNATIONAL / FRONTIER

Anadarko continued to advance its sanctioned international mega projects with Phase I of the Jubilee development in Ghana expected to achieve first oil by the end of this year, and the El Merk project in Algeria is on track for first production around the end of 2011.

* Quarterly sales volumes are influenced by the timing and scheduling of tankers.



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DEVELOPMENT

Alaska:• Oil production for the Colville River Unit averaged 90,700 BOPD

gross in the 3rd quarter, up from 89,600 BOPD gross in the 2nd quarter.

• During the 3rd quarter, two new wells were brought on line at rates exceeding 6,000 BOPD gross.

Algeria:• During the 3rd quarter, oil production from the Hassi Berkine South

and the Ourhoud central processing facilities was approximately 398,000 BOPD, up slightly from 395,000 BOPD during the 2nd quarter 2010. Progress continues on the El Merk project with the facilities

construction and the drilling of five wells during the quarter. The overall project is currently approximately 55% complete.

China:• Bohai Bay achieved its highest monthly oil production in

August 2010, with an average of more than 53,000 BOPD gross.

• Anadarko’s Bohai Bay oil field reached the 100-million-barrel cumulative production milestone in September.

• Development activities continued with two jackup rigs drilling and seven new wells placed on line during the 3rd quarter.

Ghana:• The company expects first oil from the Jubilee Field Phase

I mega project prior to year-end 2010. The FPSO vessel is being commissioned, and hook-up and well completions are under way. Three wells were completed, five of the nine risers have been pulled in to the FPSO and subsea installation is about 90% complete.



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EXPLORATIONMozambique:

• The Barquentine discovery in Offshore Area 1 (APC 36.5% WI, operator), was drilled to a total depth of 16,860 feet, encountering more than 416 net feet of natural gas pay in Oligocene and Paleocene sands. Appraisal planning and development scoping is now under way for this large gas accumulation.

• The Ironclad well encountered oil shows in a tight reservoir. This new well data is being analyzed and will be incorporated into the company’s basin understanding and will help guide the future drilling program.

• The Lagosta gas prospect was recently spud to test similar targets as seen at Barquentine and Windjammer. The rig will then be mobilized to drill the Tuburão prospect further to the southwest.

• With the results to date, the company plans to keep the Belford Dolphin working in Mozambique in 2011.

Ghana:• During the quarter, Anadarko announced another significant discovery

offshore Ghana at the Owo prospect in the Deepwater Tano Block (APC 18% WI). The discovery well was drilled to a total depth of 12,765 feet and encountered approximately 174 net feet of high-quality oil pay in stacked Turonian-age reservoir sands.

• The Owo well was then sidetracked approximately 2,000 feet to the east and drilled to a total depth of 13,120 feet. The well encountered 115 net feet of oil and gas pay: a portion of which appears to be in pressure communication with the original well. The well also encountered deeper hydrocarbon-bearing sands not seen in the original well. No oil/water contacts were encountered in either well.

• At the end of the 3rd quarter, the Onyina prospect in the Deepwater Tano Block (APC 18% WI) was drilled to a total depth of 8,954 feet to test a Campanian fan system between the Jubilee field and the Tweneboa discovery. The well encountered well developed sands that were water-bearing.

• Upcoming Ghana activities include appraisal drilling and testing of the Tweneboa and Owo discoveries in the Deepwater Tano Block. The company also plans to spud the Teak prospect in West Cape Three Points (APC 31% WI) prior to year end.

Sierra Leone:• At the end of the 3rd quarter, the Deepwater Millennium was

mobilized from Brazil to West Africa to test the Mercury prospect in SL-07 (APC 65% WI, operator). The well is being drilled to a planned total depth of 16,120 feet to test multiple Cretaceous fan targets. Following the completion of the Mercury well, the rig will be mobilized to Ghana and will be used to appraise the Tweneboa and Owo discoveries.




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EXPLORATION Brazil:

• The Itauna prospect in BM-C-29 (APC 50% WI, operator) was spud during the quarter and encountered oil shows in a shallow zone. The company continues to drill ahead towards the primary post- and pre-salt targets with a planned total depth of 18,000 feet.

• During the 3rd quarter, the company drilled the Wahoo South prospect in BM-C-30 (APC 30% WI, operator) to a total depth of 17,056 feet to test a pre-salt objective. Data from the well are being incorporated into the regional picture and will determine the next activity on the block.

• The planned Itaipu appraisal well in BM-C-32 (APC 33% WI) is scheduled to spud in early 2011. The well will test the down-dip area of the large geologic feature encountered by the discovery well.

Indonesia:

• After the quarter, Anadarko announced that the Badik discovery well encountered more than 133 net feet of oil and gas pay in Upper Miocene high-quality deltaic sandstones. The discovery well was drilled in 230 feet of water to a total depth of approximately 12, 950 feet in the Tarakan Basin in the Nunukan PSC (APC 35% WI, operator). The company intends to obtain a new 3D seismic survey to optimize its appraisal program.


Documents

Third-Quarter 2010filecache.drivetheweb.com/mr5ir_anadarko/727/download/3Q10...the Marcellus, Eagleford and Haynesville shale plays from 13,300 net BOE/d in the 2nd quarter to 17,000