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Rating Action:

Moody's changes Anadarko Petroleum's outlook to positive

Global Credit Research - 30 Sep 2013

Approximately $14 billion of rated debt affected

New York, September 30, 2013 -- Moody's Investors Service changed Anadarko Petroleum Corporation's (Anadarko) rating outlook to positive from stable. Moody's affirmed Anadarko's Baa3 senior unsecured ratings and those of its guaranteed subsidiaries, including Kerr McGee Corporation and Union Pacific Resources. The Baa3 senior unsecured ratings and stable outlook of Western Gas Partners (WES) were not affected by this action.

"Anadarko's strong operating performance and improving financial position support its positive outlook," commented Pete Speer, Moody's Vice-President. "We believe that the company's legal contingencies are likely to become sufficiently defined within the next eighteen months to consider a positive rating action."

RATINGS RATIONALE

Anadarko's Baa3 senior unsecured ratings are supported by its proved reserve and production scale that is among the largest of all independent E&P companies and comparable to Baa1 and A3 rated peers. The company benefits from having nearly half of its production from oil and natural gas liquids, which offsets the effect of weak natural gas prices on its cash flows. The property base is well diversified in the US and has exposure to numerous international offshore oil and gas developments. Anadarko's strong oil-weighted production and proved reserve growth trend in the US combined with its impressive offshore success around the world has led to rising cash flows from operations and asset sales, enabling the company to improve its leverage metrics while also building substantial cash balances.

The company's ratings are restrained by the significant contingent liabilities related to the Tronox litigation and any residual liabilities related to Macondo. Anadarko's cash balance of $4.6 billion at June 30, 2013 will be further bolstered by the proceeds of its recently agreed upon sale of a 10% interest in its Mozambique development for $2.64 billion that is expected to close around the end of this year. The rising cash balance and $5 billion committed revolving credit facility provide ample liquidity for larger than expected adverse litigation judgments.

The positive outlook is based on Moody's expectation that any losses related to Tronox and Macondo are likely to be well within Anadarko's cash balances with no significant detriment to its leverage metrics. If the Tronox contingency gets resolved or at least more clarified through judicial rulings, the company maintains its strong operating momentum and improving leverage trends, and replaces its current senior secured credit facility with an unsecured facility, then the ratings could be upgraded to Baa2. Debt/average daily production and debt/proved developed (PD) reserves were about $20,100/boe and $8.10/boe at June 30, 2013. We expect these metrics to continue to improve through production and reserve growth, allowing Anadarko to sustain leverage on production and PD reserves comfortably below the $20,000/boe and $8/boe levels that are supportive of a Baa2 rating.

In the event that there are adverse rulings against Anadarko for Tronox or Macondo and the monetary damages are much larger than expected, Moody's would expect the company to pursue the appeals process. Moody's would re-evaluate the potential financial loss for Anadarko and consider the company's potential for further sales of undeveloped properties or other assets to mitigate the effect of this loss on its debt levels and credit metrics. If debt/average daily production and debt/PD were to rise above $27,000/boe and $10/boe on a sustained basis then the ratings could be downgraded.

WES' Baa3 senior unsecured ratings and stable outlook reflect its Ba1 stand-alone credit profile and a one-notch uplift for its strategic importance to Anadarko. In order for WES' ratings to be upgraded, its stand-alone credit profile would have to strengthen sufficiently to support a Baa3 rating, in addition to the ratings of Anadarko being upgraded. Therefore this rating action on Anadarko had no effect on WES' ratings and outlook.

The principal methodology used in this rating was the Global Independent Exploration and Production Industry Methodology published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Anadarko Petroleum Corporation is headquartered in The Woodlands, Texas and is among the largest independent exploration and production companies.

The rating actions are summarized as follows:

Issuer: Anadarko Petroleum Corporation

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

.... Senior Unsecured Regular Bond/Debentures, Affirmed Baa3

.BACKED Senior Unsecured Regular Bond/Debentures, Affirmed Baa3

.Preferred Stock, Affirmed Ba1

....BACKED Preferred Shelf, Affirmed (P)Ba1

Issuer: Anadarko Finance Company

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

.BACKED Senior Unsecured Regular Bond/Debentures, Affirmed Baa3

Issuer: Anadarko Petroleum Capital Trust I

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

....BACKED Preferred Shelf, Affirmed (P)Ba1

Issuer: Anadarko Petroleum Capital Trust II

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

....BACKED Preferred Shelf, Affirmed (P)Ba1

Issuer: Anadarko Petroleum Capital Trust III

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

....BACKED Preferred Shelf, Affirmed (P)Ba1

Issuer: Kerr McGee Corporation

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

.... Senior Unsecured Regular Bond/Debentures, Affirmed Baa3

.BACKED Senior Unsecured Regular Bond/Debentures, Affirmed Baa3

Issuer: Union Pacific Resources Group Inc.

..Outlook Actions:

....Outlook, Changed To Positive From Stable

..Affirmations:

.BACKED Senior Unsecured Regular Bond/Debentures, Affirmed Baa3

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Speer
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's changes Anadarko Petroleum's outlook to positive
No Related Data.

 

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