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 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						Six Months Ended
	June 30,						June 30,
millions	2018			2017			2018			2017
Income (loss) before income taxes	$	142		$	(372	)	$	442		$	(550	)
Interest expense	237			229			465			452
DD&A	1,003			1,037			1,993			2,152
Exploration expense	94			532			262			1,616
(Gains) losses on divestitures, net	(52		)	(205		)	(28		)	(1,009		)
Impairments	128			10			147			383
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	267			45			240			(110		)
Restructuring charges	—			18			—			17
Less net income (loss) attributable to noncontrolling interests	(12		)	81			41			124
Consolidated Adjusted EBITDAX	$	1,831		$	1,213		$	3,480		$	2,827

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 June 30, 2018
Sales revenues	$	2,772	$	308	$	49	$	39		$	3,168
Intersegment revenues	14		128		58		(200		)	—
Other	3		32		9		27			71
Total revenues and other ⁽¹⁾	2,789		468		116		(134		)	3,239
Operating costs and expenses ⁽²⁾	905		196		77		69			1,247
Net cash from settlement of commodity derivatives	—		—		—		170			170
Other (income) expense, net	—		—		—		4			4
Net income (loss) attributable to noncontrolling interests	—		—		—		(12		)	(12		)
Total expenses and other	905		196		77		231			1,409
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—		—		—		1			1
Adjusted EBITDAX	$	1,884	$	272	$	39	$	(364	)	$	1,831

Three Months Ended June 30, 2017
Sales revenues	$	1,952	$	402	$	45	$	20		$	2,419
Intersegment revenues	3		117		40		(160		)	—
Other	8		55		7		22			92
Total revenues and other ⁽¹⁾	1,963		574		92		(118		)	2,511
Operating costs and expenses ⁽²⁾	800		299		56		55			1,210
Net cash from settlement of commodity derivatives	—		—		—		(13		)	(13		)
Other (income) expense, net	—		—		—		20			20
Net income (loss) attributable to noncontrolling interests	—		—		—		81			81
Total expenses and other	800		299		56		143			1,298
Adjusted EBITDAX	$	1,163	$	275	$	36	$	(261	)	$	1,213

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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.

18. Segment Information (Continued)



millions	Exploration & Production			WES Midstream		Other Midstream		Other and Intersegment Eliminations			Total
Six Months Ended June 30, 2018
Sales revenues	$	5,428		$	618	$	85	$	63		$	6,194
Intersegment revenues	24			255		110		(389		)	—
Other	(6		)	61		19		40			114
Total revenues and other ⁽¹⁾	5,446			934		214		(286		)	6,308
Operating costs and expenses ⁽²⁾	1,781			390		131		262			2,564
Net cash from settlement of commodity derivatives	—			—		—		238			238
Other (income) expense, net	—			—		—		(8		)	(8		)
Net income (loss) attributable to noncontrolling interests	—			—		—		41			41
Total expenses and other	1,781			390		131		533			2,835
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		7			7
Adjusted EBITDAX	$	3,665		$	544	$	83	$	(812	)	$	3,480

Six Months Ended June 30, 2017
Sales revenues	$	4,403		$	768	$	81	$	65		$	5,317
Intersegment revenues	6			268		82		(356		)	—
Other	10			85		13		49			157
Total revenues and other ⁽¹⁾	4,419			1,121		176		(242		)	5,474
Operating costs and expenses ⁽²⁾	1,723			591		106		86			2,506
Net cash from settlement of commodity derivatives	—			—		—		(7		)	(7		)
Other (income) expense, net	—			—		—		22			22
Net income (loss) attributable to noncontrolling interests	—			—		—		124			124
Total expenses and other	1,723			591		106		225			2,645
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—		—		(2		)	(2		)
Adjusted EBITDAX	$	2,696		$	530	$	70	$	(469	)	$	2,827

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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.