DBRS Confirms Issuer Ratings of Anadarko Petroleum Corporation at BBB with Stable Trends

DBRS has today confirmed the Issuer Rating of Anadarko Petroleum Corporation (Anadarko or the Company) at BBB and the Senior Unsecured Notes and Debentures rating of Anadarko and Kerr-McGee Corporation (Kerr-McGee), a wholly owned subsidiary of Anadarko, at BBB (low). All trends are Stable. This removes the Under Review with Negative Implications status applied to the ratings on December 13, 2013.

DBRS placed the ratings of Anadarko and Kerr-McGee Under Review with Negative Implications when the interim opinion from the bankruptcy court regarding the ongoing Tronox Inc. (Tronox) litigation imposed a liability of up to $15 billion on the Company. DBRS viewed this interim adverse opinion against the Company as a credit negative which, if finalized, would have significantly deteriorated the credit metrics of the Company beyond the minimum requirements of its credit rating.

On April 3, 2014, Anadarko reached an agreement in the Tronox litigation case, removing the uncertainty around the final payout outcome of the adversary proceedings carried on since May 2009. Anadarko has agreed to pay a total sum of $5.15 billion to the plaintiffs, in exchange for a complete release of all previously asserted claims against Kerr-McGee in the complaint. Under the terms of the agreement, the plaintiffs and Kerr-McGee have agreed to mutually release claims against each other and the U.S. Government, and Kerr-McGee have agreed not to sue. The agreed-upon settlement payment is to be made subject to recommendation by the U.S. Bankruptcy Court and District Court’s approval of the settlement agreement. The claims against Kerr-McGee are expected to be dismissed with prejudice after the settlement payment is made, and the injunction will be final and non-appealable. Although all agreements have been signed, final settlement, subject to District Court’s approval, is expected before the end of the third quarter.

DBRS recognizes that, as at December 31, 2013, Anadarko’s key credit metrics have further improved from when the Under Review with Negative Implications status was put into place and continue to support the Company’s credit ratings.

Anadarko has sufficient liquidity to fund the expected payout, with $3.7 billion of cash on hand, approximately $2.6 billion of proceeds from the sale of its 10% interest in Mozambique and another $1.075 billion expected from the sale of its Chinese subsidiary (announced February 2014; expected to close later in the year). DBRS expects Anadarko to fund the payout with cash on hand and the expected proceeds from asset sales, with only temporary drawdown on the revolver in case of any timing issues. In the case the prerequisite approvals are not obtained as expected, the ratings would be placed Under Review as required.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the Oil and Gas Industry (July 2013), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.