18. Segment Information

Anadarko’s business segments are separately managed due to distinct operational differences. Anadarko has three reporting segments: Exploration and Production, WES Midstream, and Other Midstream, which include their respective marketing results. The Company has reclassified prior period amounts to conform to the current period’s presentation.

The Exploration and Production reporting segment is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and in advancing its Mozambique LNG project toward FID. The WES Midstream and Other Midstream reporting segments engage in gathering, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water. The WES Midstream segment consists of WES midstream assets, and the Other Midstream segment consists of the Company’s other midstream assets.

To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. The Company defines Adjusted EBITDAX as income (loss) before income taxes; interest expense; DD&A; exploration expense; gains (losses) on divestitures, net; impairments; total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives; and less net income (loss) attributable to noncontrolling interests.

The Company’s definition of Adjusted EBITDAX excludes gains (losses) on divestitures, net and exploration expense as they are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from Adjusted EBITDAX as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred. Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives are excluded from Adjusted EBITDAX because these (gains) losses are not considered a measure of asset operating performance. Finally, net income (loss) attributable to noncontrolling interests is excluded from the Company’s measure of Adjusted EBITDAX because it represents earnings that are not attributable to the Company’s common stockholders.

Management believes Adjusted EBITDAX provides information useful in assessing the Company’s operating and financial performance across periods. Adjusted EBITDAX as defined by Anadarko may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) attributable to common stockholders and other performance measures, such as operating income. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes:



	Three Months Ended March 31,
millions	2018			2017
Income (loss) before income taxes	$	300		$	(178	)
Interest expense	228			223
DD&A	990			1,115
Exploration expense	168			1,084
(Gains) losses on divestitures, net	24			(804		)
Impairments	19			373
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	(27		)	(155		)
Restructuring charges	—			(1		)
Less net income (loss) attributable to noncontrolling interests	53			43
Consolidated Adjusted EBITDAX	$	1,649		$	1,614

18. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fee expenses, results from hard-minerals royalties, net cash from settlement of commodity derivatives, and net income (loss) attributable to noncontrolling interests. The following summarizes selected financial information for Anadarko’s reporting segments:



millions	Exploration & Production			WES Midstream		Other Midstream		Other and Intersegment Eliminations			Total
Three Months Ended March 31, 2018
Sales revenues	$	2,656		$	310	$	36	$	24		$	3,026
Intersegment revenues	10			127		52		(189		)	—
Other	(9		)	29		10		13			43
Total revenues and other ⁽¹⁾	2,657			466		98		(152		)	3,069
Operating costs and expenses ⁽²⁾	876			194		54		193			1,317
Net cash from settlement of commodity derivatives	—			—		—		68			68
Other (income) expense, net	—			—		—		(12		)	(12		)
Net income (loss) attributable to noncontrolling interests	—			—		—		53			53
Total expenses and other	876			194		54		302			1,426
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		6			6
Adjusted EBITDAX	$	1,781		$	272	$	44	$	(448	)	$	1,649

Three Months Ended March 31, 2017
Sales revenues	$	2,451		$	366	$	36	$	45		$	2,898
Intersegment revenues	3			151		42		(196		)	—
Other	2			30		6		27			65
Total revenues and other ⁽¹⁾	2,456			547		84		(124		)	2,963
Operating costs and expenses ⁽²⁾	923			292		50		31			1,296
Net cash from settlement of commodity derivatives	—			—		—		6			6
Other (income) expense, net	—			—		—		2			2
Net income (loss) attributable to noncontrolling interests	—			—		—		43			43
Total expenses and other	923			292		50		82			1,347
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		(2		)	(2		)
Adjusted EBITDAX	$	1,533		$	255	$	34	$	(208	)	$	1,614

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⁽¹⁾	Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.


⁽²⁾	Operating costs and expenses excludes exploration expense, DD&A, impairments, restructuring charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.