Anadarko Announces 2008 Fourth-Quarter and Full-Year Results

Anadarko Petroleum Corporation (NYSE:APC) today announced net income available to common stockholders totaled $3.29 billion, or $7.05 per share (diluted), for the year ended Dec. 31, 2008. Income from continuing operations for the year totaled $3.24 billion, or $6.92 per share (diluted).

For the quarter ended Dec. 31, 2008, Anadarko’s net income available to common stockholders totaled $824 million, or $1.79 per share (diluted). Fourth-quarter net income from continuing operations totaled $819 million, or $1.78 per share (diluted).

The net income results include certain items affecting comparability that are typically excluded by the investment community in published estimates. In total, these items increased net income by approximately $750 million, or $1.63 per share (diluted), for the quarter, on an after-tax basis.⁽¹⁾ Cash flow from continuing operations in the fourth-quarter of 2008 was $442 million, and discretionary cash flow totaled $551 million.⁽²⁾

OPERATIONAL HIGHLIGHTS

• Organically added 290 million barrels of oil equivalent (BOE) of proved reserves before price revisions – replacing 141 percent of sales volumes
• Increased sales volumes by 5 percent over 2007 from retained properties
• Achieved 17-percent year-over-year sales-volume growth in the Rockies

“We consistently met or surpassed our operating objectives in 2008, demonstrating the resiliency and quality of our asset portfolio,” Anadarko Chairman and CEO Jim Hackett said. “We exceeded our guidance for organic reserve adds and production replacement, while also overcoming an approximate 13-million-barrel production impact from hurricanes and third-party interruptions to achieve our production targets for the quarter and the year.”

Full-year 2008 sales volumes of natural gas, crude oil and natural gas liquids (NGLs) totaled 206 million BOE, or 563,000 BOE per day, representing a 5-percent increase over 2007 sales volumes from retained properties. Fourth-quarter 2008 sales volumes of natural gas, crude oil and NGLs totaled 52 million BOE, or 569,000 BOE per day.

In 2008, the company added 290 million BOE of proved reserves, before the effects of price revisions, and spent approximately $4.78 billion associated with its oil and natural gas exploration and development activities.⁽²⁾ The company estimates its proved reserves at year-end 2008 totaled 2.28 billion BOE, after the reduction of approximately 137 million BOE associated with property divestitures. The company’s total proved reserves at year end were also reduced by 4 percent (102 million BOE) as a result of price-related revisions, primarily associated with the year-over-year decline in prices for crude oil and NGLs. Reserve additions were primarily driven by development and infill activities in the Rockies and appraisal drilling in the Gulf of Mexico. No reserves were booked in 2008 in association with the world-class Jubilee field discovery offshore Ghana or the pre-salt Wahoo discovery in Brazil.

Additionally, the company recorded significant production growth in the Rocky Mountain region, where overall sales volumes increased by 17 percent over 2007. Greater Natural Buttes and the Powder River Basin recorded year-over-year sales-volume growth of approximately 30 percent and 45 percent, respectively. Anadarko’s improving drilling efficiencies contributed to this growth and performance. These improved efficiencies are being realized throughout the company’s U.S. onshore development programs and are described in detail in the company’s fourth-quarter 2008 Operations Report available at www.anadarko.com.

EXPLORATION HIGHLIGHTS

• Recently announced substantial deepwater Gulf of Mexico discovery
• Announced significant drilling success offshore Ghana and Brazil in 2008
• Achieved positive results in the U.S. onshore exploration program

“The high quality of our exploration prospects is being validated. Our E&P (exploration and production) teams continue to prove that they can effectively apply their skill sets on a global basis and explore in high-potential deepwater basins, discover world-class fields, and execute mega-projects on time and on budget. We expect that this capability will be a differentiating factor for Anadarko in 2009 and beyond,” Hackett said.

This morning, Anadarko announced a substantial discovery at the Heidelberg prospect in Green Canyon block 859 in the deepwater Gulf of Mexico. The discovery well, which targeted a Middle-Miocene objective, encountered more than 200 feet of net pay in multiple high-quality Miocene sands. The Heidelberg well encountered the same age sands with similar reservoir characteristics to those found in the nearby Caesar/Tonga discoveries, also operated by Anadarko. Anadarko intends to conduct appraisal activity in the second half of 2009.

Internationally, Anadarko and its partners continue to have success in the Cretaceous trend offshore Ghana. Appraisal activities in the Jubilee field expanded the areal extent of the field to more than seven miles from the northwest at the Hyedua-2 appraisal well, which was announced in the fourth quarter, to the recently drilled Mahogany-3 appraisal well on the southeast. The Mahogany-3 well also encountered oil pay in a deeper, previously unpenetrated reservoir section. As previously announced, the recent successful drillstem test at Hyedua-2 demonstrated excellent reservoir continuity and indicated future well deliverability of more than 20,000 barrels per day of light sweet crude. Further appraisal and development activity is expected to continue in the Jubilee field in 2009, and additional exploration is planned in the area, including the recently spud Tweneboa prospect, which has characteristics similar to Jubilee.

In addition to the international success in Ghana, Anadarko became the first foreign operator to drill a pre-salt discovery offshore Brazil at the Wahoo prospect in the Campos Basin. The discovery, which was announced near the beginning of the fourth quarter, encountered at least 195 feet of net pay and showed characteristics similar to the giant Jubarte field, which is Brazil’s first deepwater producing pre-salt field. A drillstem test at Wahoo and additional appraisal and exploration drilling is planned in and around the block in 2009.

In 2008, Anadarko’s U.S. onshore exploration program continued to show positive results in the Marcellus, Haynesville and Maverick Basin shale plays. The company completed its first Marcellus Shale horizontal well, testing approximately 4.5 million cubic feet of natural gas per day. A second horizontal test is currently being completed with two additional tests in various stages of drilling. The company has provided additional details on this program and other activities in its fourth-quarter 2008 Operations Report at www.anadarko.com.

FINANCIAL HIGHLIGHTS

• Achieved year-end net debt-to-cap target of approximately 34 percent⁽²⁾
• Closed the divestiture of Peregrino for approximately $1.4 billion of net after-tax proceeds
• Retired approximately $370 million of total debt during the fourth quarter for a total reduction of approximately $2.4 billion in 2008

“Restoring our balance sheet has been a consistent focus since the time of the significant corporate acquisitions in 2006. We met or exceeded our commitments on property-sales value, debt reduction and reserve growth and, now, our net debt-to-cap target for year-end 2008,” Hackett said. “Through reducing leverage and building significant liquidity, we’ve maintained the financial flexibility necessary to execute upon our strategy in the current financial environment.”

CONFERENCE CALL TOMORROW AT 9 A.M. CST, 10 A.M. EST

Anadarko will host a conference call on Tuesday, Feb. 3, at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) to discuss fourth-quarter and year-end results. The dial-in number is 888.679.8018 in the United States or 617.213.4845 internationally. The confirmation number is 72981678. For complete instructions on how to participate in the conference call, or to listen to the live audio webcast and slide presentation, please visit www.anadarko.com. A replay of the call will also be available on the Web site for approximately 30 days following the conference call.

ANADARKO OPERATIONS REPORT

For more details on Anadarko’s operations, please refer to the comprehensive report on fourth-quarter 2008 activity. The report will be available at www.anadarko.com on the Investor Relations page.

FINANCIAL DATA

Ten pages of summary financial data follow, including current hedge positions and retained property sales.

Anadarko Petroleum Corporation’s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world’s health and welfare. As of year-end 2007, Anadarko had 2.4 billion barrels of oil equivalent of proved reserves, making it one of the world’s largest independent oil and natural gas exploration and production companies. For more information about Anadarko, please visit www.anadarko.com.

⁽¹⁾ See the accompanying table for details of certain items affecting comparability.

⁽²⁾ See the accompanying table for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP measures are useful information for investors.

This news release 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. Anadarko believes that its expectations are based on reasonable assumptions. No assurance, however, 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 news release, including Anadarko’s ability to finalize year-end reserves and complete and commercially operate the drilling prospects identified in this news release. See “Risk Factors” in the company’s 2007 Annual Report on Form 10-K and other public filings and press releases. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.