Anadarko Reports 2006 Fourth-Quarter and Full-Year Results.

HOUSTON -- Anadarko Petroleum Corporation (NYSE:APC) today announced fourth-quarter and full-year 2006 financial and operational results.

"In 2006, we announced and closed two significant acquisitions and embarked on an asset optimization process that is setting the stage for future performance," Anadarko Chairman, President and CEO Jim Hackett said. "Our focused asset base is already delivering better oil and natural gas volumes and exploration success. This portfolio is expected to drive very competitive, consistent growth."

FOURTH-QUARTER 2006 RESULTS

Fourth-quarter net income available to common shareholders was $1.92 billion, or $4.13 per share (diluted), on revenues of $3.18 billion, and income from continuing operations was $186 million, or $.40 per share (diluted). These results included international impairments amounting to $329 million after tax, or $.71 per share (diluted), severance costs amounting to $52 million after tax, or $.11 per share (diluted), and unrealized losses on derivatives of $26 million after tax, or $.06 per share (diluted), partially offset by realized gains on derivatives of $167 million after tax, or $.36 per share (diluted). In addition, net income included a gain of $1.77 billion after tax, or $3.80 per share (diluted), on the sale of Anadarko's Canadian subsidiary.

By comparison, net income for the fourth quarter of 2005 was $874 million, or $1.87 per share (diluted), on revenues of $1.92 billion. Fourth-quarter 2005 net income included costs associated with certain legal proceedings and international impairments amounting to $84 million after tax, or $.18 per share (diluted), partially offset by unrealized gains on commodity-related derivatives and gains from the company's firm transportation keep-whole agreement that totaled $50 million after tax, or $.11 per share (diluted).

Cash flow from operating activities of continuing operations was $1.61 billion in the fourth-quarter 2006, and discretionary cash flow totaled $1.73 billion(1).

Sales volumes of natural gas, crude oil and natural gas liquids from continuing operations in the fourth-quarter 2006 totaled 61 million barrels of oil equivalent (BOE), or 665,000 BOE per day. Natural gas sales volumes from continuing operations averaged 2.23 billion cubic feet per day. Oil sales volumes from continuing operations averaged 243,000 barrels per day. Natural gas liquids sales volumes from continuing operations averaged 51,000 barrels per day.

Overall sales volumes were up from the third-quarter 2006, due to a full quarter of production related to acquisitions and record production rates from the company's Greater Natural Buttes and Powder River Basin properties in the Rocky Mountain region and Haley in West Texas.

FULL-YEAR 2006 RESULTS

Anadarko reported full-year 2006 net income available to common shareholders of $4.85 billion, or $10.46 per share (diluted), on revenues of $10.19 billion, and income from continuing operations of $2.80 billion, or $6.02 per share (diluted). Net income in 2005 was $2.47 billion, or $5.19 per share (diluted), on revenues of $6.19 billion.

Cash flow from operating activities of continuing operations totaled $5.03 billion in 2006. Discretionary cash flow totaled $4.91 billion(1).

Sales volumes of natural gas, crude oil and natural gas liquids from continuing operations for 2006 totaled 178 million BOE, up from 2005 volumes of 138 million BOE.

"Following the acquisitions of Kerr-McGee and Western Gas Resources in the third quarter of 2006, we began efforts to build a more balanced portfolio with a lower-risk reserve and production profile," Hackett said. "In terms of asset divestitures, we have continued to meet our expectations. The market remains robust, and we have announced the execution of agreements to divest of properties approaching nearly $9 billion of after-tax proceeds. That puts us well on our way to reducing the debt associated with the acquisitions."

Additional 2006 operational highlights include: advancement of the Independence Hub project, which remains on budget and on schedule to deliver first production in the second half of 2007; nine deepwater Gulf of Mexico discoveries out of 14 attempts; and production start-up at new fields in Alaska and China.

PROVED RESERVES

Anadarko added 1.04 billion BOE of proved reserves, excluding sales of reserves in place, primarily from acquisitions completed during 2006. Net of property sales, the company ended 2006 with a total of 3.0 billion BOE, up 23 percent from year-end 2005. Organic reserve additions of 248 million BOE - those derived from the drilling program - came primarily from core U.S. onshore properties such as the Greater Natural Buttes and Wattenberg fields and coalbed methane and enhanced oil recovery projects in the Rockies, as well as the Haley, Bossier and Carthage fields in Texas. Anadarko's year-end 2006 proved reserves were balanced between natural gas (58 percent, or 10.5 trillion cubic feet) and liquids (42 percent, or 1.3 billion barrels), which include crude oil, condensate and natural gas liquids. Downward reserve revisions included 99 million BOE resulting from lower prices at year end and 136 million BOE due to performance issues, most notably at the K2 complex in the deepwater Gulf of Mexico.

"Our 2006 organic reserve replacement rate was impacted by downward reserve revisions and is not indicative of the success of our exploration program. For example, the sale of the Genghis Khan, Knotty Head and Big Foot deepwater discoveries generated substantial value, selling for $2.3 billion from an initial investment of approximately $300 million, prior to fully booking these discoveries. Going forward, we have a pipeline of reserves ready to bring on from a portfolio of longer-lived, less-capital-intensive resource plays in the Rockies, in addition to existing discoveries in the Gulf of Mexico and Brazil," Hackett said.

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

Anadarko will host a conference call on Tuesday, Feb. 6, at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) to discuss 2006 results and the company's outlook for 2007. The dial-in number is 913.981.5523, and the confirmation number is 4471952. For complete instructions on how to actively participate in the conference call, or to listen to the live audio web cast or a replay, please refer to www.anadarko.com.

ANADARKO OPERATIONS REPORT

For more details on Anadarko's operations, please refer to the comprehensive report on 2006 drilling activity. The report will be available at www.anadarko.com on the Investor Relations page.

FINANCIAL DATA

Ten pages of summary financial and reserves data follow, including current hedge positions and guidance for 2007.

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 2006, the company had 3.0 billion barrels-equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. In August 2006, Anadarko acquired Kerr-McGee Corporation and Western Gas Resources, Inc. in separate transactions. For more information about how Anadarko is bringing excellence to the surface, please visit: www.anadarko.com.

(1) 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. Anadarko cannot guarantee that it will successfully integrate the recently acquired businesses or complete its pending or proposed asset sales, nor can it guarantee the outcome from the proceedings related to the Algerian exceptional profits tax. See "Risk Factors" in the company's 2005 Annual Report on Form 10-K and other public filings, press releases and discussions with company management. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.

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