DBRS Assigns Anadarko Petroleum Issuer Rating at BBB, Stable Trend and Confirms Anadarko Petroleum and Kerr-McGee Senior Unsecured Debt at BBB (low), Stable Trends

DBRS has today confirmed the Senior Unsecured Notes and Debentures (the Unsecured Notes) of Anadarko Petroleum Corporation (Anadarko or the Company) and of Kerr-McGee Corporation at BBB (low), with Stable trends. In addition, DBRS has today assigned an Issuer Rating of BBB, with a Stable trend, to Anadarko. The senior unsecured debt ratings are one notch below that of the Issuer Rating given that the existing five-year, $5 billion secured credit facility ranks ahead of the Unsecured Notes (refer to the press release dated August 10, 2010, for more details). The rating actions follow the announcement that Anadarko has agreed to pay $4 billion to BP p.l.c. (BP) to settle BP’s current and future claims against Anadarko associated with the Deepwater Horizon oil spill in the Gulf of Mexico in April 2010. With the deal, the Company transfers its 25% non-operating leasehold interest in the Macondo well associated with the spill to BP.

Anadarko is expected to pay BP $4 billion within 45 days, to be funded partly by cash on its balance sheet ($3.4 billion as of June 30, 2011) and through the use of its five-year, $5 billion secured credit facility (undrawn as of June 30, 2011). The Company plans to repay borrowings under this facility, partly through proceeds received from the potential divestiture of its non-core Brazilian subsidiary in 2012. Furthermore, the Company expects to receive in excess of $163 million from pending insurance claims and has the opportunity for a 12.5% participation in future recoveries from third parties or insurance proceeds, cumulatively exceeding $1.5 billion, with up to a total of $1 billion net to Anadarko.

Although Anadarko’s potential Macondo liability was not accrued in its prior financial statements, DBRS considered the contingent liability in its rating assessment of Anadarko. In DBRS’s December 23, 2010, rating report, a potential payment scenario of $4 billion was used to assess the potential impact on the Company’s credit metrics. DBRS continues to believe that the payment would be manageable within the current rating category given its liquidity and the proceeds expected from the pending Brazilian divestiture. Anadarko’s settlement is in line with DBRS’s prior expectations and removes the uncertainty of future liabilities due to BP associated with the Deepwater Horizon event.

The settlement agreement does not provide for indemnification by BP against fines and penalties, punitive damages or certain other claims, none of which Anadarko considers to represent a material financial risk to the Company.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on the DBRS website under Methodologies.