Fitch Rates Anadarko Petroleum's Sr. Note Issuance 'BBB-'

Ratings has assigned a 'BBB-' rating to Anadarko's Petroleum's (Anadarko; NYSE: APC) issuance of $750 million in 30-year senior unsecured notes. Fitch rates Anadarko's debt securities as listed below:

Anadarko Petroleum Corp.

--Long-term Issuer Default Rating (IDR) 'BBB-';

--Senior unsecured 'BBB-';

--Bank Loan 'BBB-'.

Kerr-McGee Corp.

--LT IDR 'BBB-';

--Senior unsecured 'BBB-'.

The Rating Outlook is Stable.

In addition, Fitch has withdrawn the following Anadarko ratings:

--Short-term IDR 'F3';

--Commercial paper 'F3'.

Anadarko is issuing $750 million in 30-year senior unsecured notes while at the same time tendering cash for up to a total of $1 billion in principal of its senior notes that are due in 2011 and 2012. Anadarko finished 2009 with $12.75 billion of balance sheet debt which was just slightly higher than 2008's ending balance. For the past year, Anadarko was approximately $600 million free cash flow negative as capex ($4.4 billion) and dividends ($176 million) exceeded cash flow from operations of $3.9 billion. That said, Anadarko experienced good drill bit success with several substantial discoveries worldwide that in part helped drive the company's reserve replacement to over 100% with an F&D cost of approximately $17 per barrel of oil equivalent (boe). The balance sheet debt results in a debt per proved developed producing reserves (PDP) of $6.87 after excluding midstream related debt of $1.6 billion but before adding other adjustments such as asset retirement obligations, leases, etc. For 2010, Anadarko has hedged approximately 70% of its oil production, 75% of its natural gas production and has basis hedges established for its Rockies and Mid-Continent production. This will help lock in internal funding for an aggressive capex budget of $5.3 billion-$5.6 billion although it is possible that the company could again outspend cash flow depending on overall price realizations for the year. In terms of liquidity, Anadarko has approximately $3.5 billion of cash on hand as of year-end 2009 and has full availability under its $1.3 billion revolving credit facility due 2013 and is well within all of its covenants on the facility. This issuance along with the cash tender, if successful, should reduce maturities due in 2011 and 2012 to approximately $2.4 billion, although an additional approximately $600 million in zero coupon notes due 2036 may be put back to the company starting this year.

The following applicable criteria reports are available at 'www.fitchratings.com':

--'Corporate Rating Methodology' (Nov. 24, 2009);

--'Oil and Gas Sector Exploration and Production Rating Methodology' (Oct. 16, 2008).

Additional information is available at 'www.fitchratings.com'.

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