10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Year Ended December 31, 2007

Commission File No. 1-8968

ANADARKO PETROLEUM CORPORATION

1201 Lake Robbins Drive, The Woodlands, Texas 77380-1046

(832) 636-1000

Incorporated in the State of Delaware Employer Identification No. 76-0146568

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.10 per share

Preferred Stock Purchase Rights

The above Securities are listed on the New York Stock Exchange.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.    Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨.

Indicate by check mark whether the registrant is a shell company.    Yes  ¨    No  x.

The aggregate market value of the Company’s common stock held by non-affiliates of the registrant on June 29, 2007 was $24.1 billion based on the closing price as reported on the New York Stock Exchange.

The number of shares outstanding of the Company’s common stock as of January 31, 2008 is shown below:

Title of Class	Number of Shares Outstanding
Common Stock, par value $0.10 per share	468,065,186

Part of Form 10-K	Documents Incorporated By Reference
Part II	Portions of the Anadarko Petroleum Corporation 2007 Annual Report to Stockholders.
Part III	Portions of the Proxy Statement for the Annual Meeting of Stockholders of Anadarko Petroleum Corporation to be held May 20, 2008 (to be filed with the Securities and Exchange Commission prior to April 10, 2008).

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	2
	General	2
	Oil and Gas Properties and Activities	3
	Proved Reserves	3
	Sales Volumes and Prices	4
	Properties and Activities—United States	6
	Properties and Activities—Algeria	11
	Properties and Activities—Other International	13
	Drilling Programs	13
	Drilling Statistics	14
	Productive Wells	15
	Properties and Leases	15
	Midstream Properties and Activities	16
	Marketing Activities	16
	Segment and Geographic Information	16
	Employees	17
	Regulatory Matters, Environmental and Additional Factors Affecting Business	17
	Title to Properties	17
	Capital Spending	17
	Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends	17
Item 1a.	Risk Factors	18
Item 1b.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	25
	Executive Officers of the Registrant	25
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7a.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	131
Item 9a.	Controls and Procedures	131
Item 9b.	Other Information	131
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	131
Item 11.	Executive Compensation	132
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	132
Item 13.	Certain Relationships and Related Transactions, and Director Independence	132
Item 14.	Principal Accounting Fees and Services	132
PART IV
Item 15.	Exhibits, Financial Statement Schedules	133

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PART I

Item 1. Business

General

Anadarko Petroleum Corporation is among the largest independent oil and gas exploration and production companies in the world, with 2.43 billion barrels of oil equivalent (BOE) of proved reserves as of December 31, 2007. The Company’s major areas of operation are located onshore in the United States, the deepwater of the Gulf of Mexico and Algeria. Anadarko also has production in China and a development project in Brazil and is executing strategic exploration programs in several other countries. The Company actively markets natural gas, oil and natural gas liquids (NGLs) and owns and operates gas gathering and processing systems. In addition, the Company has hard minerals properties that contribute operating income through non-operated joint ventures and royalty arrangements in several coal, trona (natural soda ash) and industrial mineral mines located on lands within and adjacent to its Land Grant holdings. The Land Grant is an 8 million acre strip running through portions of Colorado, Wyoming and Utah where the Company owns most of its fee mineral rights. Anadarko is committed to minimizing the environmental impact of exploration and production activities in its worldwide operations through programs such as carbon dioxide (CO₂) sequestration and the reduction of surface area used for production facilities. Unless the context otherwise requires, the terms “Anadarko” or “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. The Company’s corporate headquarters are located at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, where the telephone number is (832) 636-1000.

On August 10, 2006, Anadarko completed the acquisition of Kerr-McGee Corporation (Kerr-McGee) in an all-cash transaction totaling $16.5 billion plus the assumption of approximately $2.6 billion in debt. On August 23, 2006, Anadarko completed the acquisition of Western Gas Resources, Inc. (Western) in an all-cash transaction totaling $4.8 billion plus the assumption of $625 million in debt. Anadarko financed $22.5 billion for the acquisitions under a 364-day committed acquisition facility. As part of an asset realignment associated with the acquisitions, the Company sold its wholly-owned Canadian oil and gas subsidiary, Anadarko Canada Corporation, in November 2006 for approximately $4 billion. Anadarko also divested, in 2007 and 2006, certain properties onshore in the United States, in the Gulf of Mexico and Qatar for total proceeds of approximately $13 billion before income taxes. The proceeds from all of these transactions were used to reduce indebtedness. Through December 31, 2007, the Company had reduced the initial amount financed under the acquisition facility from $22.5 billion to approximately $1 billion, using divestiture proceeds, long-term refinancing and cash flow from operations. For additional information, see Acquisitions and Divestitures and Outlook under Item 7 of this Form 10-K.

During 2007, Anadarko changed its method of accounting for its oil and gas exploration and development activities from full cost to the successful efforts method. In accordance with Statement of Financial Accounting Standards (SFAS) No. 154, “Accounting Changes and Error Corrections,” financial information for prior periods has been revised to reflect retrospective application of the successful efforts method, as prescribed by SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” Additionally, unless noted otherwise, the following information relates to Anadarko’s continuing operations and excludes the discontinued Canadian operations. For additional information, see Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Available Information The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, registration statements and other items with the Securities and Exchange Commission (SEC). Anadarko provides access free of charge to all of these SEC filings, as soon as reasonably practicable after filing or furnishing, on its internet site located at www.anadarko.com. The Company will also make available to any stockholder, without charge, copies of its Annual Report on Form 10-K as filed with the SEC. For copies of this, or any other filing, please contact: Anadarko Petroleum Corporation, Investor Relations Department, P.O. Box 1330, Houston, Texas 77251-1330 or call (832) 636-1216.

In addition, the public may read and copy any materials Anadarko files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. The public may obtain information

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on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, like Anadarko, that file electronically with the SEC.

Oil and Gas Properties and Activities

Proved Reserves

As of December 31, 2007, Anadarko had proved reserves of 8.5 trillion cubic feet (Tcf) of natural gas and 1.0 billion barrels of crude oil, condensate and NGLs. Combined, these proved reserves are equivalent to 2.43 billion barrels of oil or 14.6 Tcf of gas. During 2007, sales of proved reserves in place associated with the Company’s asset realignment program totaled 620 million barrels of oil equivalent (MMBOE). Excluding the effect of divestitures, the Company added approximately 252 MMBOE of proved reserves in 2007. Reserve adds were primarily driven by successful drilling in coalbed methane (CBM) and conventional plays and positive revisions associated with successful infill drilling onshore in the United States, as well as the initial recognition of proved reserves for the Peregrino development offshore in Brazil. As of December 31, 2007, Anadarko had proved developed reserves of 6.3 Tcf of natural gas and 574 million barrels (MMBbls) of crude oil, condensate and NGLs. Proved developed reserves comprise 67% of total proved reserves.

Anadarko’s estimates of proved reserves and associated future net cash flows as of December 31, 2007 were made solely by the Company’s engineers and are the responsibility of management. The methods and procedures used in preparing the Company’s estimates of proved reserves, as of December 31, 2007, were reviewed by Netherland, Sewell & Associates, Inc. (NSAI). It should be understood that NSAI’s review of the Company’s procedures and methods relating to Anadarko’s estimates of proved reserves does not constitute a complete review, study or audit of the estimated proved reserves. Through participation in the procedures and methods review of Anadarko properties, NSAI was able to: (1) observe, in some detail, the methods and procedures, and the degree to which the Company’s engineers adhere to the definitions and guidelines of the SEC in developing the reserve estimates; (2) provide opinions to Anadarko’s reserves group and reserves estimators regarding questions and issues raised during the meetings; (3) provide Anadarko’s reserves group and reserves estimators with industry information related to reserves estimating issues and practices. Anadarko incorporated NSAI’s suggestions for changes in methods and procedures into its reserve estimation process where the Company deemed appropriate. NSAI’s opinions resulting from their participation in the review meetings should not be construed as NSAI expressing a view on the overall reasonableness of the Company’s reserve estimates or procedures and methods. Management’s intent in retaining NSAI to review its methods and procedures is to provide for objective third-party input on these methods and procedures and gather industry information applicable to its reserve estimation and reporting process.

The Company’s estimates of proved reserves, proved developed reserves and proved undeveloped reserves at December 31, 2007, 2006 and 2005 and changes in proved reserves during the last three years are contained in the Supplemental Information on Oil and Gas Exploration and Production Activities—Unaudited (Supplemental Information) in the Consolidated Financial Statements under Item 8 of this Form 10-K. Additional information with respect to the Company’s methods and procedures employed in the reserve estimation process, are also found in the Supplemental Information. The Company files annual estimates of certain proved oil and gas reserves with the U.S. Department of Energy (DOE), which are within 5% of the amounts included in the above estimates.

Also contained in the Supplemental Information in the Consolidated Financial Statements are the Company’s estimates of future net cash flows and discounted future net cash flows from proved reserves. See Operating Results and Critical Accounting Policies and Estimates under Item 7 of this Form 10-K for additional information on the Company’s proved reserves.

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Sales Volumes and Prices

The following table shows the Company’s annual sales volumes from continuing operations. Sales volumes for 2007 include approximately 15 MMBOE associated with properties that were divested during 2007. Volumes for natural gas are in billion cubic feet (Bcf) at a pressure base of 14.73 pounds per square inch. For the computation of MMBOE, six thousand cubic feet (Mcf) of gas is the energy equivalent of one barrel of oil, condensate or NGLs.

Sales Volumes

	2007	2006	2005
United States
Natural gas (Bcf)	698	558	414
Oil and condensate (MMBbls)	48	39	24
Natural gas liquids (MMBbls)	16	15	13
Total (MMBOE)	180	147	106
Algeria
Oil and condensate (MMBbls)	24	23	25
Total (MMBOE)	24	23	25
Other International
Oil and condensate (MMBbls)	7	8	8
Total (MMBOE)	7	8	8
Total
Natural gas (Bcf)	698	558	414
Oil and condensate (MMBbls)	79	70	57
Natural gas liquids (MMBbls)	16	15	13
Total (MMBOE)	211	178	139

The following table shows the Company’s annual average sales prices and average production costs from continuing operations. The impact on average sales prices from derivative instruments the Company utilizes to manage price risk related to the Company’s sales volumes is shown separately in the table. Natural gas sales and oil and condensate sales include net unrealized gains (losses) related to these derivatives of $(395) million and $(653) million for 2007 and $579 million and $258 million for 2006, respectively. Unrealized gains (losses) related to derivatives were not material in 2005. Production costs are costs incurred to operate and maintain the Company’s wells and related equipment and include cost of labor, well service and repair, location maintenance, power and fuel, transportation, cost of product, property taxes, production and severance taxes and production related general and administrative costs. Certain amounts for prior years have been reclassified to conform to the current presentation. Additional information on volumes, prices, production costs and markets is contained in Financial Results and Marketing Strategies under Item 7 of this Form 10-K. Additional detail of production costs is contained in the Supplemental Information under Item 8 of this Form 10-K. Information on major customers is contained in Note 16—Major Customers of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

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Sales Prices and Production Costs

	2007		2006			2005
United States
Sales price
Natural gas price per Mcf, excluding derivatives	$  5.74		$	6.14		$	7.44
Realized gains (losses) on derivatives	0.73			0.33			(0.25	)
Unrealized gains (losses) on derivatives	(0.57	)		1.03			(0.03	)
Total gains (losses) on derivatives	0.16			1.36			(0.28	)
Total price per Mcf	$  5.90		$	7.50		$	7.16
Oil and condensate price per barrel, excluding derivatives	$66.64		$	59.41		$	51.67
Realized gains (losses) on derivatives	1.35			2.64			(7.45	)
Unrealized gains (losses) on derivatives	(10.75	)		6.54			0.13
Total gains (losses) on derivatives	(9.40	)		9.18			(7.32	)
Total price per barrel	$57.24		$	68.59		$	44.35
Natural gas liquids price per barrel, excluding derivatives	$45.87		$	39.71		$	34.56
Realized gains (losses) on derivatives	0.03			(0.13	)		—
Unrealized gains (losses) on derivatives	—			—			—
Total gains (losses) on derivatives	0.03			(0.13	)		—
Total price per barrel	$45.90		$	39.58		$	34.56
Total price per BOE	$42.13		$	50.77		$	42.29
Production cost per BOE	$11.14		$	10.76		$	9.19
Algeria
Sales price
Oil and condensate price per barrel, excluding derivatives	$75.50		$	65.55		$	54.37
Realized gains (losses) on derivatives	—			—			—
Unrealized gains (losses) on derivatives	(5.91	)		—			—
Total gains (losses) on derivatives	(5.91	)		—			—
Total price per barrel	$69.59		$	65.55		$	54.37
Production cost per BOE	$34.13		$	7.48		$	2.88
Other International
Sales price
Oil and condensate price per barrel	$59.91		$	48.58		$	39.37
Production cost per BOE	$14.78		$	10.43		$	9.54
Total
Sales price
Natural gas price per Mcf, excluding derivatives	$  5.74		$	6.14		$	7.44
Realized gains (losses) on derivatives	0.73			0.33			(0.25	)
Unrealized gains (losses) on derivatives	(0.57	)		1.03			(0.03	)
Total gains (losses) on derivatives	0.16			1.36			(0.28	)
Total price per Mcf	$  5.90		$	7.50		$	7.16
Oil and condensate price per barrel, excluding derivatives	$68.68		$	60.28		$	51.04
Realized gains (losses) on derivatives	0.82			1.48			(3.23	)
Unrealized gains (losses) on derivatives	(8.31	)		3.67			0.06
Total gains (losses) on derivatives	(7.49	)		5.15			(3.17	)
Total price per barrel	$61.19		$	65.43		$	47.87
Natural gas liquids price per barrel, excluding derivatives	$45.87		$	39.71		$	34.56
Realized gains (losses) on derivatives	0.03			(0.13	)		—
Unrealized gains (losses) on derivatives	—			—			—
Total gains (losses) on derivatives	0.03			(0.13	)		—
Total price per barrel	$45.90		$	39.58		$	34.56
Total price per BOE	$45.81		$	52.63		$	44.21
Production cost per BOE	$13.84		$	10.31		$	8.12

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Properties and Activities—United States

Overview Anadarko’s active areas in the United States include the Lower 48 states, Alaska and the deepwater Gulf of Mexico. Reserves in the United States comprised 85% of Anadarko’s total proved reserves at year-end 2007. During 2007, the Company’s drilling efforts in the United States resulted in 1,760 gas wells, 16 oil wells and 18 dry holes. The accompanying maps illustrate the locations of Anadarko’s domestic onshore and offshore oil and gas operations.

The following table presents selected 2007 United States operating data by area.

	Net Sales Volumes			Net Proved Reserves at Year End   (MMBOE)	Producing Wells(1)	Drilling Statistics
	Natural Gas   (MMcf/d)	Oil and NGLs   (MBbls/d)	Total   (MBOE/d)			Wells Drilled(2)	Success Rate		Nature of Interest(3)
Rockies:
Tight Gas
-Greater Natural Buttes	202	2	35	234	1,988	238	100.0	%	W
-Wattenberg	167	15	43	264	4,142	192	100.0	%	W/R
-Wamsutter	84	8	22	98	1,424	154	100.0	%	W/R
-Pinedale and Jonah	57	—	10	88	674	188	100.0	%	W
Enhanced Oil Recovery	4	11	12	207	1,292	1	100.0	%	W
Other	369	4	65	283	10,282	597	99.2	%	W/R
Divested Properties	8	2	4	—	—	—	n/a		W/R
	891	42	191	1,174	19,802	1,370	99.6	%
Southern Region:
Bossier	164	—	27	150	919	38	100.0	%	W
Carthage	81	5	19	120	1,485	107	100.0	%	W/R
Haley	115	—	19	39	94	37	100.0	%	W
Ozona	43	1	8	53	2,260	100	100.0	%	W
Austin Chalk	42	12	19	28	627	23	100.0	%	W/R
Other	156	9	34	160	3,098	89	100.0	%	W/R
Divested Properties	126	9	31	—	—	1	100.0	%	W/R
	727	36	157	550	8,483	395	100.0	%
Total Onshore—Lower 48 States	1,618	78	348	1,724	28,285	1,765	99.7	%
Alaska	—	23	23	58	194	9	77.8	%	W
Gulf of Mexico(4)	294	72	121	297	171	20	45.0	%	W/R
Total United States	1,912	173	492	2,079	28,650	1,794	99.0	%

⁽¹⁾ Gross number of wells in which Anadarko has an interest.

⁽²⁾ Includes 1,750 gross development wells with a 99.6% success rate and 44 gross exploration wells with a 75.0% success rate.

⁽³⁾ W = Working, R = Royalty

⁽⁴⁾ Includes 2007 sales volumes of 2 MMcf/d of gas and 3 MBbls/d of oil associated with partial interests that were divested during 2007.

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7

Anadarko

Petroleum Corporation

ONSHORE PROPERTIES

ROCKIES

MONTANA

Powder River Basin

NORTH DAKOTA

IDAHO

WYOMING

Pinedale & Jonah

EOR

CBM

Wamsutter

SOUTH DAKOTA

UTAH

Greater Natural Buttes

CBM

COLORADO

DENVER

Fee Mineral (Net) 8,686,001 7,978

MONTANA

ROCKIES

Wattenberg

SOUTHERN REGION

NEBRASKA

KANSAS

Hugoton

ARIZONA

NEW MEXICO

OKLAHOMA

ARKANSAS

TEXAS

Carthage

Haley

Ozona

South Texas

Bossier

Austin Chalk

THE WOODLANDS

MISSISSIPPI

LOUISIANA

GAS FIELD (CONTAINS OPERATED WELLS)

OIL FIELD (CONTAINS OPERATED WELLS)

LAND GRANT

CORPORATE OFFICES

ALASKA

Colville River Unit

Note: Alaska not to scale

ACREAGE LOWER 48 ALASKA

UNDEVELOPED LEASEHOLD (Net) 3,849,760 1,346,152

DEVELOPED LEASEHOLD (Net) 2,025,430 7,693

FEE MINERAL (Net) 8,686,001 7,978

JANUARY 2008

N SCALE 0 100MI. 200MI.

Onshore—Lower 48 States At the end of 2007, about 71% of the Company’s proved reserves were located onshore in the Lower 48 states. The Company has allocated approximately 50% of the 2008 capital budget to the Lower 48 states. Of this amount, approximately 60% is allocated to the Rockies and approximately 40% is allocated to the Southern Region.

Rockies During 2007, part of Anadarko’s focus was on the integration of the properties it acquired in 2006 through the acquisitions of Kerr-McGee and Western. The acquired properties, which increased Anadarko’s tight gas and CBM holdings in the Rockies, included tight gas plays in the Greater Natural Buttes, Wattenberg and the Pinedale and Jonah fields. Prior to the acquisitions, the Company’s activity in the region was primarily associated with developing tight gas in the Wamsutter area, conventional reservoirs, CBM and enhanced oil recovery (EOR) projects.

In the Greater Natural Buttes area of northeast Utah, the Company continues to be primarily focused on development of the Wasatch and Mesa Verde formations through infill drilling operations and the deepening of existing producing wells. Anadarko operates approximately 1,300 wells in the Greater Natural Buttes field area and has an interest in over 675 non-operated wells. In 2008, Anadarko plans to drill approximately 195 wells, continue its down spacing pilot program and target deeper pool formations.

The Wattenberg natural gas field is located in the Denver Julesburg basin in northeast Colorado. The acquisition of Kerr-McGee added an operated component to the Company’s already significant royalty position in this basin. Development activities in this area focus primarily on improved recovery through infill drilling, re-completions and re-fracture stimulations of older wells. In 2008, Anadarko expects to engage in development drilling, re-completion and re-fracturing stimulations of over 600 wells.

Anadarko also was active in the Wamsutter and Moxa Arch fields in 2007. Both fields are located on the Land Grant in southern Wyoming. The Land Grant provides the Company with the added economic benefit of royalty revenues on operated wells. It also allows Anadarko to benefit from the success of outside operators as they drill on Anadarko’s net revenue fee acreage. In addition, the Land Grant provides the Company with a large captured area on which to explore. In 2008, Anadarko intends to participate in over 150 wells in this area.

The Company’s Pinedale and Jonah fields, located in the Green River basin of southwest Wyoming, were acquired as part of the Western acquisition. The gas produced at Pinedale and Jonah is transported through Company-owned gathering systems that deliver gas to an Anadarko processing facility, located on the Land Grant. In 2008, Anadarko plans to participate in over 200 wells in this area.

During 2007, the Company’s phased development projects at its EOR operations at Salt Creek, Monell and Sussex, located in Wyoming, continued to demonstrate year-over-year increases in production due to CO₂ injection. In 2008, Anadarko plans to continue to develop and monitor these activities.

Other areas in the Rockies include CBM and conventional type plays in various areas that have a high number of shallow low-cost wells. The Company’s CBM operations are located in Wyoming’s Powder River basin and Atlantic Rim field, as well as the Helper and Clawson fields in Utah. The Company’s acreage position in the Powder River basin was increased with the acquisition of Western in 2006.

Southern Region Anadarko’s properties in the Southern Region are located primarily in Texas with a focus on natural gas plays.

Production and development activities at the Company’s properties in the east Texas area concentrated in the Bossier and Carthage areas. In 2008, Anadarko plans to continue its Cotton Valley infill and pilot horizontal drilling programs in the Carthage area. Anadarko’s east Texas Austin Chalk activity continues to focus on horizontal drilling in Tyler and Jasper counties. Much of the 2007 activity and 2008 plans involve extending the field boundaries and drilling infill development wells to optimize well spacing.

Operations in west Texas are concentrated on increasing production and reserves in the tight gas play of the Haley field. During 2007, the Company entered into a joint venture on a portion of the Haley field to reduce risk and increase acreage in the basin. In 2008, the joint venture expects to drill 44 wells in the Haley field. The Company also continues its development activities in the Ozona field where it anticipates drilling approximately 50 wells in 2008.

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Other areas in the Southern Region include properties in South Texas and the Hugoton field. In South Texas, the Company had an active drilling program in Starr and Hidalgo counties during 2007. Drilling and completion activities are expected to continue in 2008. The Hugoton field in southern Kansas continues to be a long-life, slow-decline asset for Anadarko with over 1,200 producing gas wells.

Alaska Anadarko’s activity in Alaska is concentrated primarily on the North Slope. Approximately 2% of the Company’s proved reserves at year-end 2007 were in Alaska. In 2008, the Company expects to participate in four exploration wells in Alaska.

During 2007, development activity at the Colville River Unit (22% WI) focused on continued drilling in the Alpine, Nanuq and Fiord fields. Development of the Qannik field was sanctioned in 2007 with first production expected in late 2008. Of the four exploration wells, the Company anticipates drilling two natural gas prospects in the Foothills area in 2008.

Gulf of Mexico At year-end 2007, about 12% of the Company’s proved reserves were located offshore in the deepwater Gulf of Mexico where Anadarko owns an average 63% working interest in 561 blocks and has access to an additional 22 blocks through participation agreements. Anadarko has allocated approximately 25% of the capital budget to the deepwater Gulf of Mexico for 2008.

Anadarko significantly increased its holdings in the deepwater Gulf of Mexico through the acquisition of Kerr-McGee. Notable properties acquired in this area include interests in the Nansen, Boomvang, Gunnison, Red Hawk and Constitution/Ticonderoga fields as well as several additional discoveries in the eastern Gulf of Mexico. The Company had one exploration discovery well in 2007 in the deepwater Gulf of Mexico, holds interests in 25 producing fields and is in the process of developing 4 additional fields.

Independence Hub The Independence Hub, located in approximately 8,000 feet of water, began production in July 2007. Anadarko operates the facility, which is owned by third parties. The facility, capable of processing 1 Bcf of gas per day, serves several ultra-deepwater natural gas fields, including eight field discoveries operated by Anadarko. Anadarko’s working interests in these fields range from 20% to 100%. Initial production is from 15 wells, of which Anadarko has an interest in 14. In 2008, the Company plans to drill one development well in the area.

Marco Polo/K2 complex Anadarko operates, and a third party owns, the platform and production facilities for the Marco Polo deepwater development project. Six K2 subsea wells (42% WI) are tied back to the Marco Polo platform, where four Marco Polo field wells (100% WI) are also producing. In early 2007, Anadarko reduced its working interest in K2 through the sale of a 23% WI. During 2008, the Company plans to drill three wells at K2 and bring on three new Marco Polo completions.

Nansen field (50% WI) The Nansen field began production in 2002 and was developed with the world’s first truss spar in 3,700 feet of water. During 2006, the Company completed a multi-well satellite drilling program in the northwest Nansen field area with four discoveries, and development of a tie-back to the Nansen spar commenced. The Company expects to begin production from this area by early 2008. Also in 2008, the Company expects to drill two new wells and re-complete two additional wells in the Nansen area.

Boomvang field, East Breaks Blocks 641, 642, 643, 686 and 688 (30% WI), Block 598 (100% WI), and Block 599 (33% WI) The Boomvang field began production in 2002 and was developed with a truss spar in 3,450 feet of water. During 2007, the Company initiated production from three successful exploration satellites that were tied back to the Boomvang spar. In 2008, the Company plans to drill one well and re-complete three additional wells.

Gunnison field (50% WI) The Gunnison field has been producing since 2003 and incorporates a truss spar in 3,100 feet of water. During 2006, the Dawson Deep discovery began production as a subsea tie-back to the Gunnison spar. The Company plans to drill a development well in 2008.

9

10

Anadarko

Petroleum Corporation

GULF OF MEXICO FIELDS

TEXAS

Houston

LOUISIANA

Lake Charles

New Orleans

MISSISSIPPI

Biloxi

ALABAMA

Mobile

FLORIDA

Pensacola

Nansen

Boomvang

Gunnison

Red Hawk

Constitution Ticonderoga

K2 & K2N

Marco Polo

Blind Faith

Independence Hub

Houston

TEXAS

N 0 60 MILES

APC FIELDS

ACREAGE

UNDEVELOPED (Net) 1,994,661

DEVELOPED (Net) 132,351

PRODUCING BLOCKS 53

EXPLORATORY BLOCKS 508

JANUARY 2008

Red Hawk field (50% WI) The Red Hawk field, located in approximately 5,300 feet of water, began production in 2004 utilizing the world’s first cell spar designed for developing smaller reservoirs in deepwater basins. During 2007, the Company completed installation of compression equipment at the spar which is expected to extend the life of the field. During 2008, the Company expects to re-complete one well.

Constitution/Ticonderoga fields The Constitution field (100% WI) began production in 2006 utilizing a truss spar located in approximately 5,000 feet of water. The Ticonderoga field (50% WI) also began production in 2006 as a subsea tie-back to the Constitution spar. During 2007, the initial phase of development was completed for the Constitution field bringing the producing well count to six. Additional drilling and completion at the Ticonderoga field is expected to result in three producing wells in 2008. The Company is evaluating the Constitution spar as a potential hub for the accelerated development of several nearby discoveries.

Other During 2008, the Company is expecting first production from the Blind Faith field (25% WI). Anadarko also has participation agreements to explore deepwater blocks in the central and western Gulf of Mexico.

Exploration Anadarko’s exploration program in the Gulf of Mexico is currently focused on the extensive middle-to-lower Miocene play within the central Gulf of Mexico and the developing lower Tertiary play near the 2006 Kaskida discovery in the western Gulf of Mexico. During 2007, the Company announced one exploration discovery, West Tonga at Green Canyon Block 726 (37.5% WI). Anadarko also participated in one well still drilling at year-end and three unsuccessful wells. The Company expects to participate in approximately six to eight exploration wells and three delineation wells in the area in 2008.

Properties and Activities—Algeria

Overview Anadarko is engaged in exploration, development and production activities in Algeria’s Sahara Desert. At the end of 2007, about 11% of the Company’s proved reserves were located in Algeria where a total of eight fields discovered by the Company were on production. In 2007, net sales volumes from the Company’s properties in Algeria represented 11% of the Company’s total sales volumes. During 2007, Anadarko participated in six development wells with a 100% success rate. During 2008, the Company expects to drill about 22 development wells and one exploration well in Algeria.

Production and Development On Block 404, production from the HBNS field averaged 125 MBbls/d of oil (gross) and production from five of the satellite fields averaged 35 MBbls/d of oil (gross) in 2007. Production from the HBN field, which extends from Block 404 into Block 403 and is unitized with other companies, averaged 72 MBbls/d of oil (gross) in 2007. Anadarko is also actively involved in the unitized Ourhoud field, which is located in the southern portion of Block 404 and extends into Block 406a and Block 405. Production from the Ourhoud field averaged 238 MBbls/d of oil (gross) in 2007. Anadarko has an interest in several fields farther south on Block 208. Development of the Block 208 fields, including contract tendering for the new production facility, is progressing. Initial production from Block 208 is targeted for late 2011.

Exploration During 2007, Anadarko had a satellite discovery at the ZENN-1 and one unsuccessful exploration well. One well was drilled to further appraise the BBKS discovery. During 2008, the Company expects to delineate the ZENN-1 discovery and participate in drilling one exploration well.

Contracts and Partners Anadarko’s interest in the Production Sharing Agreement (PSC) for Blocks 404 and 208 is 50% before participation at the exploitation stage by Sonatrach, the national oil and gas company of Algeria. The Company has two partners, each with a 25% interest, also prior to participation by Sonatrach. Under the terms of the PSC, oil reserves that are discovered, developed and produced are shared by Sonatrach, Anadarko and its two partners. Sonatrach is responsible for 51% of the development and production costs. Anadarko and its partners also have an exploration program under way on Blocks 404 and 208 and have an exploration license, under a separate PSC, for Block 403c/e (67% interest). Anadarko and its joint-venture partners fund Sonatrach’s share of exploration costs and are entitled to recover these exploration costs from production in the development phase.

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Anadarko’s operations in Algeria have been governed by the PSC since October 1989. In March 2006, Anadarko received from Sonatrach a letter purporting to give notice under the PSC that enactment of a law in 2005 (2005 Law) relating to hydrocarbons triggered Sonatrach’s right under the PSC to renegotiate the PSC in order to re-establish the equilibrium of Anadarko’s and Sonatrach’s interests. Anadarko and Sonatrach reached an impasse over whether Sonatrach has a right to renegotiate the PSC based on the 2005 Law and entered into a formal non-binding conciliation process under the terms of the PSC in an attempt to resolve this dispute. The conciliation on the 2005 Law dispute was concluded in 2007, without a definitive resolution. There have been no further developments on the 2005 Law dispute. At this time, Anadarko is unable to reasonably estimate what the economic impact under the PSC might be if Sonatrach were to succeed in modifying the PSC.

Exceptional Profits Tax In July 2006, the Algerian parliament approved legislation establishing an exceptional profits tax on foreign companies’ Algerian oil production. In December 2006, implementing regulations regarding this legislation were issued. These regulations provide for an exceptional profits tax imposed on gross production at rates of taxation ranging from 5% to 50% based on average daily production volumes for each calendar month in which the price of Brent crude averages over $30 per barrel, retroactively effective to August 2006 production. Uncertainty existed at the time as to whether the exceptional profits tax would apply to the full value of production or only to the value of production in excess of $30 per barrel.

In January 2007, Sonatrach advised Anadarko that it would begin collecting the exceptional profits tax from Anadarko’s share of production commencing with March 2007 liftings, including for the prior months since the new tax went into effect. In April 2007, ALNAFT, the new agency in the Algerian Ministry of Energy and Mines responsible for overseeing the Algerian hydrocarbons industry, issued the Application Procedure further defining the procedure and conditions under which the exceptional profits tax is applied and the methodology for its calculation. The Application Procedure and other information supplied by Sonatrach revealed that the exceptional profits tax was being applied to the full value of production rather than to the amount in excess of $30 per barrel. This was evidenced by changes in the Company’s crude oil lifting schedule, which was conveyed to Anadarko by Sonatrach. As a result, Anadarko changed the measurement basis for the exceptional profits tax liability for the first quarter of 2007 to reflect the application of the tax to the full value of production. For additional information, see Note 18—Other Taxes of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

At December 31, 2007, Anadarko had 106 MMBbls of proved undeveloped reserves in Algeria, the economics of which are sensitive to the exceptional profits tax. Anadarko is continuing to evaluate the impact of the exceptional profits tax on the economic viability of its future projects in Algeria, as well as its legal remedies with regard to the exceptional profits tax.

In response to the Algerian government’s imposition of the exceptional profits tax, the Company has notified Sonatrach of its disagreement with the collection of the exceptional profits tax. The Company believes that the PSC provides fiscal stability through several of its provisions that require Sonatrach to pay all taxes and royalties. To facilitate discussions between the parties in an effort to resolve the dispute, on October 31, 2007, the Company initiated a conciliation proceeding on the exceptional profits tax as provided in the PSC. The conciliation proceeding is non-binding on the parties. At this time, the Company cannot determine the ultimate outcome of the conciliation proceeding, any intervening negotiations or any subsequent recourse to arbitration by either side.

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Properties and Activities—Other International

Overview The Company’s other international oil and gas production and/or development operations are located primarily in China and Brazil. The Company has exploration acreage in China, Brazil, Ghana, Indonesia and other selected areas. About 4% of the Company’s total proved reserves were located in these other international locations at year-end 2007. During 2007, net sales volumes from the Company’s other international properties accounted for 3% of the Company’s total volumes. In 2008, the Company expects to drill about 16 development and 16 exploration wells at various other international locations.

China Anadarko’s development and production project in China straddles Blocks 04/36 and 05/36 in Bohai Bay in approximately 75 feet of water. Development drilling has been ongoing through 2007 and is anticipated to continue in 2008. Further investment is planned in 2008 to install additional processing equipment and add further drilling slots to the existing platforms. At the end of 2007, net production from China was approximately 17 MBbls/d of oil. During 2007, Anadarko participated in two exploration wells that were both plugged and abandoned.

The Company also has an exploration project (100% WI in exploration phase) under way at South China Sea Block 43/11. During 2008, the Company plans to drill one deepwater exploration well in the South China Sea.

Brazil Anadarko holds a 50% interest and is the operator of the Peregrino field located in the Campos basin in approximately 350 feet of water. During 2007, development of the field was sanctioned, and a successful appraisal well was drilled. First production is expected in 2010.

Anadarko also holds exploration interests in several blocks located offshore in the Campos and Espírito Santo basins. During 2007, Anadarko participated in one exploration well in the Espírito Santo basin that was still drilling at year end. In 2008, Anadarko expects to participate in four deepwater exploration wells.

Ghana The Company announced two offshore discoveries in Ghana in 2007; one in West Cape Three Points block (30.9% interest) and one in Deep Tano block (18% interest). Additional seismic data was acquired to help with delineation. In 2008, the Company expects to drill three to six appraisal wells and two to three additional exploration wells in the two blocks, subject to rig availability.

Indonesia Anadarko has a participating interest in approximately 2.4 million exploration acres in Indonesia through a combination of several operated and non-operated Production Sharing Contracts. Anadarko also has entered into an outside-operated agreement, under which the Company has access to an additional 7.4 million acres. Anadarko participated in one successful exploration well in Indonesia in 2007. During 2008, Anadarko plans to participate in two exploration wells.

Other Anadarko also has active exploration projects in Mozambique, Qatar, Trinidad, Tunisia and several countries in West Africa, as well as activities in other potential new venture areas overseas. In October 2007, the Company divested certain interests in Qatar for approximately $350 million, however, Anadarko still continues an exploration program in Qatar.

Drilling Programs

The Company’s 2007 drilling program focused on known oil and gas areas in the United States (Lower 48 states, Alaska and Gulf of Mexico), Algeria and other countries where it holds acreage. Exploration activity consisted of 55 wells, including 32 wells in the Lower 48 states, 2 wells in Alaska, 10 wells offshore in the Gulf of Mexico, 3 wells in Algeria and 8 wells in other international locations. Development activity consisted of 1,768 wells, which included 1,733 wells in the Lower 48 states, 7 wells in Alaska, 10 wells offshore in the Gulf of Mexico, 6 wells in Algeria and 12 wells in other international locations.

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Drilling Statistics

The following table shows the number of oil and gas wells completed in each of the last three years:

	Net Exploratory			Net Development
	Productive	Dry Holes	Total	Productive	Dry Holes	Total	Total
2007
United States	18.1	4.2	22.3	902.1	2.4	904.5	926.8
Algeria	0.3	0.5	0.8	0.5	—	0.5	1.3
Other International	—	3.3	3.3	4.1	—	4.1	7.4
Total	18.4	8.0	26.4	906.7	2.4	909.1	935.5
2006
United States	37.4	2.3	39.7	831.9	2.2	834.1	873.8
Algeria	0.8	0.8	1.6	1.8	—	1.8	3.4
Other International	—	2.6	2.6	3.5	—	3.5	6.1
Total	38.2	5.7	43.9	837.2	2.2	839.4	883.3
2005
United States	10.8	3.2	14.0	376.0	1.0	377.0	391.0
Algeria	0.5	0.3	0.8	2.9	0.2	3.1	3.9
Other International	0.5	—	0.5	5.4	—	5.4	5.9
Total	11.8	3.5	15.3	384.3	1.2	385.5	400.8

The following table shows the number of wells in the process of drilling or in active completion stages and the number of wells suspended or waiting on completion as of December 31, 2007:

	Wells in the process of drilling or in active completion		Wells suspended or waiting on completion
	Exploration	Development	Exploration	Development
United States
Gross	11	129	46	489
Net	5.3	65.0	35.5	270.1
Algeria
Gross	—	—	—	10
Net	—	—	—	2.0
Other International
Gross	3	—	4	1
Net	1.0	—	1.1	0.5
Total
Gross	14	129	50	500
Net	6.3	65.0	36.6	272.6

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Productive Wells

As of December 31, 2007, the Company had an ownership interest in productive wells as follows:

	Oil Wells*	Gas Wells*
United States
Gross	4,349	24,301
Net	3,295.8	14,481.3
Algeria
Gross	165	—
Net	32.0	—
Other International
Gross	98	—
Net	35.2	—
Total
Gross	4,612	24,301
Net	3,363.0	14,481.3
*  Includes wells containing multiple completions as follows:
Gross	439	1,480
Net	402.0	1,257.3

Properties and Leases

The following schedule shows the number of developed lease, undeveloped lease and fee mineral acres in which Anadarko held interests at December 31, 2007:

	Developed Lease		Undeveloped Lease		Fee Minerals		Total
thousands	Gross	Net	Gross	Net	Gross	Net	Gross	Net
United States
Onshore—Lower 48 states	4,066	2,026	7,089	3,850	10,351	8,686	21,506	14,562
Offshore	305	133	3,121	1,997	—	—	3,426	2,130
Alaska	41	8	3,980	1,379	16	8	4,037	1,395
Total	4,412	2,167	14,190	7,226	10,367	8,694	28,969	18,087
Algeria*	225	55	1,417	416	—	—	1,642	471
Other International	62	22	32,811	16,851	—	—	32,873	16,873

* Developed acreage in Algeria relates only to areas with an Exploitation License. A portion of the undeveloped acreage in Algeria will be relinquished in the future consistent with contractual obligations or upon finalization of Exploitation License boundaries.

15

Midstream Properties and Activities

Anadarko invests in midstream (gathering and processing) facilities to complement its oil and gas operations in regions where the Company has natural gas production. The Company is better able to manage both the value received for, and cost of, gathering, treating and processing natural gas through its ownership and operation of these facilities. In addition, Anadarko’s midstream business provides gathering, treating and processing services for third-party customers, including major and independent producers. Anadarko generates revenues in its gathering and processing activities through various fee structures that include fixed-rate, percent of proceeds, or keep-whole agreements. The Company also processes a portion of its gas at various third-party plants.

In 2006, Anadarko significantly increased the size and scope of its midstream business through the acquisitions of Western and Kerr-McGee. With these acquisitions, Anadarko has systems in eight states (Wyoming, Colorado, Utah, New Mexico, Kansas, Oklahoma, Texas and Louisiana) located in major onshore producing basins. During 2007, the Company divested control of its interests in two natural gas gathering systems and associated processing plants, in areas where Anadarko has limited or no oil and gas production, for $1.85 billion. During 2008, approximately 10% of the Company’s capital budget is allocated to midstream operations. The following table provides key statistics for Company-owned gathering and processing facilities.

	Number of Gathering and Processing Facilities		Miles of Gathering Systems		Total Horsepower		2007 Average Throughput (MMcf/d)
Legacy Anadarko	15		3,300		245,000		1,085
Acquired in 2006	18		14,300		985,000		2,260
Divested in 2007	(4	)	(6,300	)	(295,000	)	(730	)
Total	29		11,300		935,000		2,615

Marketing Activities

The Company’s marketing department actively manages the sales of Anadarko’s natural gas, crude oil and NGLs. In marketing its production, the Company attempts to maximize realized prices while managing credit risk exposure. The Company also purchases natural gas, crude oil, condensate and NGLs volumes for resale primarily from partners and producers near Anadarko’s production. These purchases allow Anadarko to aggregate larger volumes and attract larger, creditworthy customers, which helps enable the Company to maximize prices received for the Company’s production and minimize balancing issues with customers and pipelines during operational disruptions.

The Company sells natural gas under a variety of contracts. The Company has the marketing capability to move large volumes of gas into and out of the daily gas market to take advantage of any price volatility. The Company may also engage in trading activities for the purpose of generating profits from exposure to changes in market prices of natural gas, crude oil, condensate and NGLs. The Company’s marketing strategy includes the use of leased natural gas storage facilities and various derivative instruments. However, the Company does not engage in market-making practices nor does it trade in any non-energy-related commodities. The Company’s marketing function does not participate in any energy marketing-related partnerships.

In 2007, the Company also engaged in sales of greenhouse gas emission reduction credits (ERCs) derived from CO₂ injection operations in Wyoming. The Company expects additional sales of ERCs in the future.

Segment and Geographic Information

Information on operations by segment and geographic location is contained in Note 17—Segment and Geographic Information of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

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Employees

As of December 31, 2007, the Company had approximately 4,000 employees. Anadarko considers its relations with its employees to be satisfactory. The Company has had no significant work stoppages or strikes associated with its employees.

Regulatory Matters, Environmental and Additional Factors Affecting Business

See Risk Factors under Item 1a and Environmental under Item 7 of this Form 10-K.

Title to Properties

As is customary in the oil and gas industry, only a preliminary title review is conducted at the time properties believed to be suitable for drilling operations are acquired by the Company. Prior to the commencement of drilling operations, a thorough title examination of the drill site tract is conducted and curative work is performed with respect to significant defects, if any, before proceeding with operations. Anadarko believes the title to its leasehold properties is good and defensible in accordance with standards generally acceptable in the oil and gas industry subject to such exceptions that, in the opinion of legal counsel for the Company, are not so material as to detract substantially from the use of such properties.

The leasehold properties owned by the Company are subject to royalty, overriding royalty and other outstanding interests customary in the industry. The properties may be subject to burdens such as liens incident to operating agreements and current taxes, development obligations under oil and gas leases and other encumbrances, easements and restrictions. Anadarko does not believe any of these burdens will materially interfere with its use of these properties.

Capital Spending

See Capital Resources and Liquidity under Item 7 of this Form 10-K.

Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends

	2007	2006	2005
Ratio of earnings to fixed charges	4.66	5.24	12.50
Ratio of earnings to combined fixed charges and preferred stock dividends	4.64	5.21	12.15

These ratios were computed by dividing earnings by either fixed charges or combined fixed charges and preferred stock dividends. For this purpose, earnings include income from continuing operations before income taxes and fixed charges and excludes undistributed earnings of equity investees. Fixed charges include interest and amortization of debt expenses and the estimated interest component of rentals. Preferred stock dividends are adjusted to reflect the amount of pretax earnings required for payment. The 2006 and 2005 ratios have been revised to reflect retrospective application of the successful efforts method of accounting.

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Item 1a. Risk Factors

Forward-Looking Statements The Company has made in this report, and may from time to time otherwise make in other public filings, press releases and discussions with Company management, 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 concerning the Company’s operations, economic performance and financial condition. These forward-looking statements include information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and gas properties, and those statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions or variations on such expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the Company’s assumptions about energy markets, production levels, reserve levels, operating results, competitive conditions, technology, the availability of capital resources, capital expenditures and other contractual obligations, the supply and demand for and the price of oil, natural gas, NGLs and other products or services, the weather, inflation, the availability of goods and services, drilling risks, future processing volumes and pipeline throughput, general economic conditions, either internationally or nationally or in the jurisdictions in which the Company or its subsidiaries are doing business, legislative or regulatory changes, including changes in environmental regulation, environmental risks and liability under federal, state and foreign environmental laws and regulations, potential environmental obligations arising from Kerr-McGee’s former chemical business, the securities or capital markets, our ability to repay debt, the outcome of any proceedings related to the Algerian exceptional profits tax, the Company’s ability to successfully market and complete its proposed midstream Master Limited Partnership initial public offering, and other factors discussed below and elsewhere in this Form 10-K and in the Company’s other public filings, press releases and discussions with Company management. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.

Our debt and other financial commitments may limit our financial and operating flexibility.

As of December 31, 2007, our total debt was about $14.7 billion, which included a $2.2 billion note payable from a midstream subsidiary to a related party. We also have various commitments for operating leases, drilling contracts and transportation and purchase obligations for services and products. Our financial commitments could have important consequences to you. For example, they could:

• increase our vulnerability to general adverse economic and industry conditions;

• limit our ability to fund future working capital and capital expenditures, to engage in future acquisitions or development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow from operations to payments on our debt or to comply with any restrictive terms of our debt;

• limit our flexibility in planning for, or reacting to, changes in the industry in which we operate; and

• place us at a competitive disadvantage compared to our competitors that have less debt and fewer financial commitments.

A downgrade in our credit rating could negatively impact our cost of capital.

Standard and Poor’s (S&P) and Moody’s Investors Service (Moody’s) rate our debt at “BBB-” with a stable outlook and “Baa3” with a negative outlook, respectively. Although we are not aware of any current plans of S&P or Moody’s to lower their respective ratings on our debt, we cannot be assured that such credit ratings will not be downgraded. A downgrade in our credit ratings could negatively impact our cost of capital or our ability to effectively execute aspects of our strategy. The only outstanding debt that contains rating downgrade triggers that

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would accelerate the maturity dates of outstanding debt is a $2.2 billion midstream note held by one of Anadarko’s subsidiaries, the maturity of which could accelerate if Anadarko’s senior unsecured credit rating were to be rated below BB- by S&P or Ba3 by Moody’s. The $2.2 billion midstream note is not guaranteed by the Anadarko parent company but is unconditionally guaranteed, jointly and severally, by certain midstream subsidiaries.

We may incur substantial costs to comply with environmental requirements, including costs arising from Kerr-McGee’s former chemical business.

Prior to the merger, Kerr-McGee spun off its chemical manufacturing business to a newly created and separate company, Tronox Incorporated (Tronox). Under the terms of a Master Separation Agreement (MSA), Kerr-McGee agreed to reimburse Tronox for certain qualifying environmental remediation costs, subject to certain limitations and conditions and up to a maximum aggregate reimbursement of $100 million. However, Kerr-McGee could be subject to joint and several liability for certain costs of cleaning up hazardous substance contamination attributable to the facilities and operations conveyed to Tronox if Tronox becomes insolvent or otherwise unable to pay for certain remediation costs. As a result of the merger, we will be responsible to provide reimbursements to Tronox pursuant to the MSA, and we may be subject to potential joint and several liability, as the successor to Kerr-McGee, if Tronox is unable to perform certain remediation obligations.

Commodity pricing and demand may limit our production and profitability.

Crude oil prices continue to be affected by political developments worldwide, pricing decisions and production quotas of OPEC and volatile trading patterns in the commodity futures markets. In addition, in OPEC countries in which we have production, such as Algeria, when the world oil market is weak we may be subject to periods of decreased production due to government-mandated cutbacks. Natural gas prices also continue to be highly volatile. In periods of sharply lower commodity prices, we may curtail production and capital spending projects, as well as delay or defer drilling wells in certain areas because of lower cash flows. Changes in crude oil and natural gas prices can impact our determination of proved reserves and our calculation of the standardized measure of discounted future net cash flows relating to oil and gas reserves. In addition, demand for oil and gas in the United States and worldwide may affect our level of production.

Our results of operations could be adversely affected by asset impairments.

If we expect significant sustained decreases in oil and natural gas prices in the future, we may be required to write down the value of our oil and gas properties if the future cash flows from these properties fall below their net book value. Future non-cash asset impairments could negatively affect our results of operations.

As a result of mergers and acquisitions, at December 31, 2007 we had approximately $5.0 billion of goodwill on our balance sheet. Goodwill is not amortized, but instead must be tested at least annually for impairment by applying a fair-value-based test. Goodwill is deemed impaired to the extent that its carrying amount exceeds its implied fair value. Although our latest tests indicate that no goodwill impairment is currently required, various factors such as future deterioration in market conditions could lead to goodwill impairments that could have a substantial negative effect on our profitability.

We are subject to complex laws and regulations relating to environmental protection that can adversely affect the cost, manner and feasibility of doing business.

Our operations and properties are subject to numerous federal, state and local laws and regulations relating to environmental protection from the time projects commence until abandonment. These laws and regulations govern, among other things:

• the amounts and types of substances and materials that may be released into the environment;

• the issuance of permits in connection with exploration, drilling and production activities;

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• the release of emissions into the atmosphere;

• the discharge and disposition of generated waste materials;

• offshore oil and gas operations;

• the reclamation and abandonment of wells and facility sites; and

• the remediation of contaminated sites.

In addition, these laws and regulations may impose substantial liabilities for our failure to comply with them or for any contamination resulting from our operations. For a description of certain environmental proceedings in which we are involved, see Legal Proceedings under Item 3 of this Form 10-K.

We may not be insured against all of the operating risks to which our business is exposed.

Our business is subject to all of the operating risks normally associated with the exploration for and production, gathering, processing and transportation of oil and gas, including blowouts, cratering and fire, any of which could result in damage to, or destruction of, oil and gas wells or formations or production facilities and other property and injury to persons. As protection against financial loss resulting from these operating hazards, we maintain insurance coverage, including certain physical damage, employer’s liability, comprehensive general liability and worker’s compensation insurance. However, we are not fully insured against all risks in all aspects of our business, such as political risk, business interruption risk and risk of major terrorist attacks. The occurrence of a significant event against which we are not fully insured could have a material adverse effect on our financial position.

Material differences between the estimated and actual timing of critical events may affect the completion of and commencement of production from development projects.

We are involved in several large development projects. Key factors that may affect the timing and outcome of such projects include:

• project approvals by joint-venture partners;

• timely issuance of permits and licenses by governmental agencies;

• weather conditions;

• manufacturing and delivery schedules of critical equipment; and

• commercial arrangements for pipelines and related equipment to transport and market hydrocarbons.

Delays and differences between estimated and actual timing of critical events may affect the forward looking statements related to large development projects.

Our domestic operations are subject to governmental risks that may impact our operations.

Our domestic operations have been, and at times in the future may be, affected by political developments and by federal, state and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls and environmental protection regulations.

We operate in other countries and are subject to political, economic and other uncertainties.

Our operations in areas outside the United States are subject to various risks inherent in foreign operations. These risks may include, among other things:

• loss of revenue, property and equipment as a result of hazards such as expropriation, war, insurrection and other political risks;

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• increases in taxes and governmental royalties;

• renegotiation of contracts with governmental entities;

• difficulties enforcing our rights against a governmental agency because of the doctrine of sovereign immunity and foreign sovereignty over international operations;

• changes in laws and policies governing operations of foreign-based companies; and

• currency restrictions and exchange rate fluctuations.

Our international operations may also be adversely affected by laws and policies of the United States affecting foreign trade and taxation.

Realization of any of these factors could materially and adversely affect our financial position, results of operations and cash flows.

The oil and gas exploration and production industry is very competitive, and some of our exploration and production competitors have greater financial and other resources than we do.

The oil and gas business is highly competitive in the search for and acquisition of reserves and in the gathering and marketing of oil and gas production. Our competitors include national oil companies, major oil and gas companies, independent oil and gas companies, individual producers, gas marketers and major pipeline companies, as well as participants in other industries supplying energy and fuel to industrial, commercial and individual consumers. Some of our competitors may have greater and more diverse resources upon which to draw than we do. If we are not successful in our competition for oil and gas reserves or in our marketing of production, our financial condition and results of operations may be adversely affected.

The unavailability or high cost of drilling rigs, equipment, supplies, personnel and other oil field services could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget.

Our industry is cyclical and, from time to time, there is a shortage of drilling rigs, equipment, supplies or qualified personnel. During these periods, the costs of rigs, equipment, supplies and personnel are substantially greater and their availability may be limited. As a result of increasing levels of exploration and production in response to strong demand for crude oil and natural gas, the demand for oilfield services has risen and the costs of these services are increasing, while the quality of these services may suffer. Additionally, these services may not be available on commercially reasonable terms.

Our drilling activities may not be productive.

Drilling for oil and gas involves numerous risks, including the risk that we will not encounter commercially productive oil or gas reservoirs. The costs of drilling, completing and operating wells are often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including:

• unexpected drilling conditions;

• pressure or irregularities in formations;

• equipment failures or accidents;

• fires, explosions, blow-outs and surface cratering;

• marine risks such as capsizing, collisions and hurricanes;

• title problems;

• other adverse weather conditions; and

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• shortages or delays in the delivery of equipment.

Certain of our future drilling activities may not be successful and, if unsuccessful, this failure could have an adverse effect on our future results of operations and financial condition. While all drilling, whether developmental or exploratory, involves these risks, exploratory drilling involves greater risks of dry holes or failure to find commercial quantities of hydrocarbons. Because of the percentage of our capital budget devoted to higher-risk exploratory projects, it is likely that we will continue to experience significant exploration and dry hole expenses.

We are vulnerable to risks associated with operating in the Gulf of Mexico that could negatively impact our operations and financial results.

Our operations and financial results could be significantly impacted by conditions in the Gulf of Mexico because we explore and produce extensively in that area. As a result of this activity, we are vulnerable to the risks associated with operating in the Gulf of Mexico, including those relating to:

• adverse weather conditions;

• oil field service costs and availability;

• compliance with environmental and other laws and regulations;

• remediation and other costs resulting from oil spills or releases of hazardous materials; and

• failure of equipment or facilities.

In addition, we are currently conducting some of our exploration in the deep waters (greater than 1,000 feet) of the Gulf of Mexico, where operations are more difficult and costly than in shallower waters. The deep waters in the Gulf of Mexico lack the physical and oilfield service infrastructure present in its shallower waters. As a result, deepwater operations may require a significant amount of time between a discovery and the time that we can market our production, thereby increasing the risk involved with these operations.

Further, production of reserves from reservoirs in the Gulf of Mexico generally declines more rapidly than from reservoirs in many other producing regions of the world. This results in recovery of a relatively higher percentage of reserves from properties in the Gulf of Mexico during the initial few years of production and, as a result, our reserve replacement needs from new prospects may be greater there than for our operations elsewhere. Also, our revenues and return on capital will depend significantly on prices prevailing during these relatively short production periods.

Our proved reserves are estimates. Any material inaccuracies in our reserve estimates or assumptions underlying our reserve estimates could cause the quantities and net present value of our reserves to be overstated or understated.

There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond our control that could cause the quantities and net present value of our reserves to be overstated. The reserve information included or incorporated by reference in this report represents estimates prepared by our internal engineers. The procedures and methods for estimating the reserves by our internal engineers were reviewed by independent petroleum consultants. Estimation of reserves is not an exact science. Estimates of economically recoverable oil and natural gas reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, any of which may cause these estimates to vary considerably from actual results, such as:

• historical production from an area compared with production from similar producing areas;

• assumed effects of regulation by governmental agencies;

• assumptions concerning future oil and natural gas prices, future operating costs and capital expenditures; and

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• estimates of future severance and excise taxes, workover and remedial costs.

Estimates of reserves based on risk of recovery and estimates of expected future net cash flows prepared or audited by different engineers, or by the same engineers at different times, may vary substantially. Actual production, revenues and expenditures with respect to our reserves will likely vary from estimates, and the variance may be material. The net present values referred to in this report should not be construed as the current market value of the estimated oil and natural gas reserves attributable to our properties. In accordance with SEC requirements, the estimated discounted net cash flows from proved reserves are generally based on prices and costs as of the date of the estimate, whereas actual future prices and costs may be materially higher or lower.

Failure to replace reserves may negatively affect our business.

Our future success depends upon our ability to find, develop or acquire additional oil and natural gas reserves that are economically recoverable. Our proved reserves generally decline when reserves are produced, unless we conduct successful exploration or development activities or acquire properties containing proved reserves, or both. We may not be able to find, develop or acquire additional reserves on an economic basis. Furthermore, if oil and natural gas prices increase, our costs for additional reserves could also increase.

We have limited control over the activities on properties we do not operate.

Other companies operate some of the properties in which we have an interest. We have limited ability to influence or control the operation or future development of these non-operated properties or the amount of capital expenditures that we are required to fund with respect to them. Our dependence on the operator and other working interest owners for these projects and our limited ability to influence or control the operation and future development of these properties could materially adversely affect the realization of our targeted returns on capital and lead to unexpected future costs.

Our ability to sell our natural gas and crude oil production could be materially harmed if we fail to obtain adequate services such as transportation.

The marketability of our production depends in part upon the availability, proximity and capacity of pipeline facilities and tanker transportation. If any of the pipelines or tankers become unavailable, we would be required to find a suitable alternative to transport the gas and oil, which could increase our costs and/or reduce the revenues we might obtain from the sale of the gas and oil.

Our commodity price risk management and trading activities may prevent us from benefiting fully from price increases and may expose us to other risks.

To the extent that we engage in price risk management activities to protect ourselves from commodity price declines, we may be prevented from realizing the full benefits of price increases above the levels of the derivative instruments used to manage price risk. In addition, we engage in speculative trading in hydrocarbon commodities, which subjects us to additional risk.

We may reduce or cease to pay dividends on our common stock.

We can provide no assurance that we will continue to pay dividends at the current rate or at all. The amount of cash dividends, if any, to be paid in the future will depend upon their declaration by our Board of Directors and upon our financial condition, results of operations, cash flow, the levels of our capital and exploration expenditures, our future business prospects and other related matters that our Board of Directors deems relevant.

Repercussions from terrorist activities or armed conflict could harm our business.

Terrorist activities, anti-terrorist efforts or other armed conflict involving the United States or its interests abroad may adversely affect the United States and global economies and could prevent us from meeting our

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financial and other obligations. If events of this nature occur and persist, the attendant political instability and societal disruption could reduce overall demand for oil and natural gas, potentially putting downward pressure on prevailing oil and natural gas prices and causing a reduction in our revenues. Oil and natural gas production facilities, transportation systems and storage facilities could be direct targets of terrorist attacks, and our operations could be adversely impacted if infrastructure integral to our operations is destroyed or damaged by such an attack. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

Provisions in our corporate documents and Delaware law could delay or prevent a change of control of Anadarko, even if that change would be beneficial to our stockholders.

Our certificate of incorporation and bylaws contain provisions that may make a change of control of Anadarko difficult, even if it may be beneficial to our stockholders, including provisions governing the classification, nomination and removal of directors, prohibiting stockholder action by written consent and regulating the ability of our stockholders to bring matters for action before annual stockholder meetings, and the authorization given to our Board of Directors to issue and set the terms of preferred stock.

In addition, we have adopted a stockholder rights plan, which would cause extreme dilution to any person or group that attempts to acquire a significant interest in Anadarko without advance approval of our Board of Directors, while Section 203 of the Delaware General Corporation Law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock.

The loss of key members of our management team, or difficulty attracting and retaining experienced technical personnel, could reduce our competitiveness and prospects for future success.

The successful implementation of our strategies and handling of other issues integral to our future success will depend, in part, on our experienced management team. The loss of key members of our management team, including James T. Hackett, our Chairman, President and Chief Executive Officer, could have an adverse effect on our business. We entered into an employment agreement with Mr. Hackett to secure his employment with us. We do not carry key man insurance. Our exploratory drilling success and the success of other activities integral to our operations will depend, in part, on our ability to attract and retain experienced explorationists, engineers and other professionals. Competition for such professionals is extremely intense. If we cannot retain our technical personnel or attract additional experienced technical personnel, our ability to compete could be harmed.

Item 1b. Unresolved Staff Comments

The Company has no outstanding or unresolved SEC staff comments.

Item 2. Properties

Information on Properties is contained in Item 1 of this Form 10-K and in Note 21—Commitments of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Item 3. Legal Proceedings

General The Company is a defendant in a number of lawsuits and is involved in governmental proceedings arising in the ordinary course of business, including, but not limited to, royalty claims, contract claims and environmental claims. The Company has also been named as a defendant in various personal injury claims, including claims by employees of third-party contractors alleging exposure to asbestos, silica and benzene while working at refineries (previously owned by predecessors of acquired companies) located in Texas, California and Oklahoma. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or cash flow of the Company.

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Environmental Matters In June 2005 and November 2005, Kerr-McGee Oil and Gas Onshore LP received Notices of Violation from the Colorado Department of Public Health and Environment alleging that allowable air emissions under the Clean Air Act were exceeded with respect to certain production operations in Colorado. Kerr-McGee Oil and Gas Onshore LP also received a letter from the Department of Justice in November 2005 alleging violations of certain air quality and permitting regulations at the Cottonwood and Ouray compressor stations in Uintah County, Utah, which were operated by Westport Oil and Gas Company, L.P. prior to Westport’s merger with Kerr-McGee in 2004. The Department of Justice later alleged that certain air quality regulations were also violated at the Bridge compressor station in Uintah County. The Company has negotiated a Consent Decree with the state and federal agencies to resolve all of the air issues by agreeing to pay a monetary penalty of $200,000 and by performing Supplemental Environmental Projects, at an estimated cost of $250,000. The settlement will also require the Company to perform certain air emission control measures requiring capital expenditures of approximately $18 million over a period of several years. The Consent Decree has been filed with the United States District Court for the District of Colorado in a matter styled United States of America v. Kerr-McGee Corporation. On August 17, 2007, the Rocky Mountain Clean Air Committee and the Natural Resources Defense Council filed a motion to intervene in the litigation, asserting that the monetary penalty was insufficient, and on September 28, 2007, the Court approved an order allowing the parties to intervene. The parties are currently briefing the Court on the level of intervention the intervening parties should be allowed in the matter. The Consent Decree must be approved by the Court before it becomes final.

On December 28, 2005, a subsidiary of the Company, Kerr-McGee Oil & Gas Onshore LP (formerly known as Westport Oil and Gas Company, L.P.) (KMOG Onshore), received a letter from the Environmental Protection Agency (EPA) alleging that KMOG Onshore constructed well pads and associated roads and pipelines in a wetland adjacent to the Hams Fork River in Lincoln County, Wyoming without obtaining necessary permits required by the Clean Water Act. The letter also directed KMOG Onshore to cease and desist the unauthorized discharge (which Kerr-McGee had already stopped) and undertake removal and restoration activities. A restoration plan has been approved by the EPA. The estimated five year cost for restoration is $900,000. This amount will be used to purchase five acres of land dedicated to wetlands preservation, relocation of facility equipment, re-vegetation and monitoring. The EPA did not require KMOG Onshore to shut in the wells. In addition to implementation of the restoration plan, on September 17, 2007, the EPA and the Company entered into a consent agreement whereby the Company agreed to pay an administrative penalty of $157,000 to resolve the alleged violation, which the Company paid in October 2007.

Other Matters The Company is subject to other legal proceedings, claims and liabilities which arise in the ordinary course of its business. In the opinion of Anadarko, the liability with respect to these actions will not have a material effect on the consolidated financial position, results of operations or cash flow of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of 2007.

Executive Officers of the Registrant

Name	Age at End of 2008	Position
James T. Hackett	54	Chairman of the Board, President and Chief Executive Officer
Karl F. Kurz	47	Chief Operating Officer
Robert P. Daniels	49	Senior Vice President, Worldwide Exploration
Charles A. Meloy	48	Senior Vice President, Worldwide Operations
Robert K. Reeves	51	Senior Vice President, General Counsel and Chief Administrative Officer
R. A. Walker	51	Senior Vice President, Finance and Chief Financial Officer
Bruce W. Busmire	51	Vice President and Chief Accounting Officer

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Mr. Hackett was named President and Chief Executive Officer in December 2003 and assumed the additional role of Chairman of the Board in January 2006. Prior to joining Anadarko, he served as President and Chief Operating Officer of Devon Energy Corporation following its merger with Ocean Energy, Inc. in April 2003. Mr. Hackett served as President and Chief Executive Officer of Ocean Energy, Inc. from March 1999 to April 2003 and as Chairman of the Board from January 2000 to April 2003. He currently serves as a director of Fluor Corporation and Temple-Inland, Inc. and serves as Chairman of the Board of the Federal Reserve Bank of Dallas.

Mr. Kurz was named Chief Operating Officer in December 2006. Prior to this position, he served as Senior Vice President, Marketing and General Manager, U.S. Onshore since 2005, Vice President, Marketing since 2003 and Manager, Energy Marketing since 2001. He previously worked in Anadarko’s marketing department since 2000.

Mr. Daniels was named Senior Vice President, Worldwide Exploration in December 2006, Senior Vice President, Exploration and Production in 2004 and named Vice President, Canada in 2001. Prior to this position, he served in various managerial roles in the Exploration Department for Anadarko Algeria Company, LLC. He has worked for the Company since 1985.

Mr. Meloy was named Senior Vice President, Worldwide Operations in December 2006 and had served as Senior Vice President, Gulf of Mexico and International Operations since the acquisition of Kerr-McGee in August 2006. Prior to joining Anadarko, he served Kerr-McGee as Vice President of Exploration and Production since 2005, Vice President of Gulf of Mexico Exploration, Production and Development since 2004, Vice President and Managing Director of Kerr-McGee North Sea (U.K.) Limited since 2002 and Vice President of Gulf of Mexico Deep Water since 2000.

Mr. Reeves was named Senior Vice President, General Counsel and Chief Administrative Officer in February 2007. He had previously served as Senior Vice President, Corporate Affairs & Law and Chief Governance Officer since 2004. Prior to joining Anadarko, he served as Executive Vice President, Administration and General Counsel of North Sea New Ventures from 2003 to 2004, and as Executive Vice President, General Counsel and Secretary of Ocean Energy, Inc. and its predecessor companies from 1997 to 2003. He has also served as a director of Key Energy Services, Inc., a publicly traded oil field services company, since October 2007.

Mr. Walker was named Senior Vice President, Finance and Chief Financial Officer in September 2005. Prior to joining Anadarko, he served as Managing Director for the Global Energy Group of UBS Investment Bank since 2003 and was President and Chief Financial Officer of 3TEC Energy Corporation from 2000 to 2003. From 1987 to 2000, he worked for Prudential Financial in a variety of merchant banking positions.

Mr. Busmire was named Vice President and Chief Accounting Officer in 2006. Prior to joining Anadarko, he served as Senior Vice President, Chief Financial Officer, Treasurer and Controller of Noble Corporation since 2005 and was a Managing Director of Pickering Energy Partners, Inc. since 2004. Prior to this position, he served as Vice President of Investor Relations at Ocean Energy, Inc. since 2000. Prior to this position, Mr. Busmire served as Controller of Altura Energy since 1997.

Officers of Anadarko are elected at an organizational meeting of the Board of Directors following the annual meeting of stockholders, which is expected to occur on May 20, 2008, and hold office until their successors are duly elected and shall have qualified. There are no family relationships between any directors or executive officers of Anadarko.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Information on the market price and cash dividends declared per share of common stock is included in Corporate Information in the Anadarko Petroleum Corporation 2007 Annual Report (Annual Report) which is incorporated herein by reference.

As of January 31, 2008, there were approximately 17,600 record holders of Anadarko common stock. The following table sets forth the amount of dividends declared and paid on Anadarko common stock during the two years ended December 31, 2007:

millions	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2007	$	43	$	43	$	42	$	42
2006	$	41	$	42	$	42	$	42

The amount of future common stock dividends will depend on earnings, financial condition, capital requirements and other factors, and will be determined by the Directors on a quarterly basis. For additional information, see Dividends under Item 7 and Note 6—Stock-Based Compensation and Note 14—Common Stock under Item 8 of this Form 10-K.

Common Stock Repurchase Table The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the fourth quarter of 2007.

Period	Total number of shares purchased(1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs(2)
October 1-31	2,927	$	56.08	—
November 1-30	84,273	$	55.99	—
December 1-31	311,535	$	56.90	—
Fourth Quarter 2007	398,735	$	56.70	—	$	636,000,000

⁽¹⁾ During the fourth quarter of 2007, no shares were purchased under the Company’s share repurchase program. During the fourth quarter of 2007, the 398,735 shares purchased were related to stock received by the Company for the payment of withholding taxes due on shares issued under employee stock plans.

⁽²⁾ In November 2005, the Company announced a stock buyback program to purchase up to $1 billion in shares of common stock. The Company may purchase additional shares under this program in the future; however, the repurchase program does not obligate Anadarko to acquire any specific number of shares and may be discontinued at any time.

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Performance Graph

The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

The following graph compares the cumulative 5-year total return to shareholders on Anadarko’s common stock relative to the cumulative total returns of the S & P 500 index and two customized peer groups, the 2007 Peer Group consisting of eleven companies and the 2006 Peer Group comprised of twelve companies. The companies included in the customized 2007 peer group are: Apache Corp., ConocoPhillips, Devon Energy Corp., EnCana Corp., EOG Resources Inc, Hess Corp., Marathon Oil Corp., Noble Energy Inc, Occidental Petroleum Corp., Pioneer Natural Resources Company and Talisman Energy Inc. The companies included in the customized 2006 peer group are: Apache Corp., Chesapeake Energy Corp., Chevron Corp., ConocoPhillips, Devon Energy Corp., EnCana Corp., EOG Resources Inc, Hess Corp., Marathon Oil Corp., Noble Energy Inc, Occidental Petroleum Corp. and Pioneer Natural Resources Company. The Company has chosen to change the performance index from that used in the Company’s 2006 Form 10-K, the 2006 Peer Group, to the 2007 Peer Group because it believes that the 2007 Peer Group represents a better comparator group for the Company following the 2006 mergers with Kerr-McGee and Western. Ten of the twelve companies in the 2006 Peer Group are also included in the 2007 Peer Group. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in the Company’s common stock, in the index and in the peer groups on December 31, 2002 and its relative performance is tracked through December 31, 2007.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG

ANADARKO PETROLEUM CORPORATION, THE S & P 500 INDEX,

THE 2007 PEER GROUP AND THE 2006 PEER GROUP

Fiscal Year Ended December 31	2002		2003		2004		2005		2006		2007
Anadarko Petroleum Corporation	$	100.00	$	107.52	$	137.92	$	203.32	$	188.20	$	286.14
S & P 500		100.00		128.68		142.69		149.70		173.34		182.87
2007 Peer Group		100.00		130.79		176.23		266.62		305.74		417.18
2006 Peer Group		100.00		133.01		174.25		236.40		285.77		389.74

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Item 6. Selected Financial Data

	Summary Financial Information*
millions, except per share amounts	2007		2006			2005		2004		2003
Sales Revenues and Other	$	11,232	$	10,204		$	6,200	$	5,114	$	4,224
Gains (Losses) on Divestitures, net		4,660		26			108		726		(24	)
Total Revenues and Other		15,892		10,230			6,308		5,840		4,200
Operating Income		7,347		4,381			3,398		2,577		923
Income from Continuing Operations		3,770		2,474			1,975		1,325		233
Income from Discontinued Operations, net of taxes		11		2,275			356		37		283
Net Income Available to Common Stockholders before Change in Accounting Principle		3,778		4,746			2,326		1,357		511
Net Income Available to Common Stockholders		3,778		4,746			2,326		1,357		558
Per Common Share:
Income from Continuing Operations—Basic	$	8.09	$	5.37		$	4.19	$	2.64	$	0.46
Income from Continuing Operations—Diluted	$	8.05	$	5.33		$	4.15	$	2.62	$	0.46
Income from Discontinued Operations—Basic	$	0.02	$	4.94		$	0.76	$	0.07	$	0.57
Income from Discontinued Operations—Diluted	$	0.02	$	4.91		$	0.75	$	0.07	$	0.56
Net Income Available to Common Stockholders—Basic	$	8.12	$	10.31		$	4.95	$	2.72	$	1.12
Net Income Available to Common Stockholders—Diluted	$	8.08	$	10.24		$	4.90	$	2.69	$	1.11
Dividends	$	0.36	$	0.36		$	0.36	$	0.28	$	0.22
Average Number of Common Shares Outstanding—Basic		465		460			470		499		499
Average Number of Common Shares Outstanding—Diluted		468		464			475		503		507
Cash Provided by Operating Activities—Continuing Operations	$	2,766	$	4,671		$	3,221	$	2,412	$	2,088
Cash Provided by (Used in) Operating Activities—Discontinued Operations		134		(178	)		591		400		549
Net Cash Provided by Operating Activities		2,900		4,493			3,812		2,812		2,637
Capital Expenditures	$	3,990	$	4,212		$	2,644	$	2,185	$	1,919
Total Debt	$	14,747	$	22,991		$	3,627	$	3,790	$	4,959
Stockholders’ Equity		16,364		12,403			8,649		7,027		6,593
Total Assets	$	48,481	$	54,964		$	18,902	$	16,714	$	17,520
Annual Sales Volumes:
Continuing Operations
Gas (Bcf)		698		558			414		499		503
Oil and Condensate (MMBbls)		79		70			57		63		61
Natural Gas Liquids (MMBbls)		16		15			13		16		16
Total (MMBOE)**		211		178			139		162		161
Discontinued Operations (MMBOE)		—		17			20		29		30
Total (MMBOE)**		211		195			159		191		191
Average Daily Sales Volumes:
Continuing Operations
Gas(MMcf/d)		1,912		1,529			1,136		1,363		1,379
Oil and Condensate (MBbls/d)		215		193			155		172		165
Natural Gas Liquids (MBbls/d)		43		42			36		43		45
Total (MBOE/d)		577		489			380		442		440
Discontinued Operations (MBOE/d)		—		46			55		79		83
Total (MBOE/d)		577		535			435		521		523
Reserves:
Continuing Operations
Oil Reserves (MMBbls)		1,014		1,264			1,090		1,073		1,161
Gas Reserves (Tcf)		8.5		10.5			6.6		6.2		6.2
Total Reserves (MMBOE)		2,431		3,011			2,187		2,113		2,199
Discontinued Operations (MMBOE)		—		—			262		254		314
Total Reserves (MMBOE)		2,431		3,011			2,449		2,367		2,513
Number of Employees		4,000		5,200			3,300		3,300		3,500

* Consolidated for Anadarko Petroleum Corporation and its subsidiaries. Certain amounts for prior years have been reclassified to conform to the current presentation. Financial information for 2006 and prior years has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 2 – Change in Accounting Principle of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K. Factors that materially effect the comparability of this information are disclosed in Management’s Discussion and Analysis under Item 7 of this Form 10-K.

** Natural gas converted to equivalent barrels at the rate of 6,000 cubic feet per barrel.

Table of Measures
Bcf—Billion cubic feet	MMBbls—Million barrels
BOE—Barrels of oil equivalent	MMBOE—Million barrels of oil equivalent
MBbls/d—Thousand barrels per day	MMcf/d—Million cubic feet per day
MBOE/d—Thousand BOE per day	Tcf—Trillion cubic feet

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

General Anadarko Petroleum Corporation’s primary line of business is the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and NGLs. The Company’s major areas of operations are located in the United States and Algeria. The Company also has activity in China, Brazil and several other countries. The Company’s focus is on adding high-margin oil and natural gas reserves at competitive costs and continuing to develop more efficient and effective ways of exploring for and producing oil and gas. The primary factors that affect the Company’s results of operations include, among other things, commodity prices for natural gas, crude oil and NGLs, production volumes, the Company’s ability to find additional oil and gas reserves, as well as the cost of finding reserves and changes in the levels of costs and expenses required for continuing operations. Unless the context otherwise requires, the terms “Anadarko” or “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries.

On August 10, 2006, Anadarko completed the acquisition of Kerr-McGee in an all-cash transaction totaling $16.5 billion plus the assumption of $2.6 billion of debt. On August 23, 2006, Anadarko completed the acquisition of Western in an all-cash transaction totaling $4.8 billion plus the assumption of $625 million of debt. Anadarko initially financed $22.5 billion for the acquisitions under a 364-day committed acquisition facility. In conjunction with the 2006 acquisitions, Anadarko implemented an asset realignment program. The goal of the Kerr-McGee and Western acquisitions was to provide a more economically efficient platform with higher and more consistent growth potential, with the intent of divesting properties that were no longer deemed to be core to Anadarko’s operations. During 2007, the Company successfully completed the majority of the divestitures associated with the realignment program. Divestitures under the realignment program in 2007 and 2006 contributed proceeds of approximately $17 billion before income taxes. As expected, Anadarko’s proved reserves after completing the divestitures were about equal to levels before the acquisitions. For additional information about the benefits the Company believes are provided by the realigned portfolio, see Outlook. Through December 31, 2007, the Company had paid down its borrowings under the acquisition facility to $1.0 billion with proceeds from asset divestitures, long-term refinancing and free cash flow from operations. Unless noted otherwise, the following information relates to continuing operations and excludes discontinued Canadian operations. See Acquisitions and Divestitures, Outlook and Discontinued Operations for additional information.

The following discussion pertains to Anadarko’s financial condition, results of operations and changes in financial condition. Following is an index by major category of discussion including a brief description of contents:

Table of Contents
	Page
Financial Results — comparative discussion of financial results of operations	32
Operating Results — discussion of business activities	38
Capital Resources and Liquidity — discussion of sources and uses of cash, outlook on operations and material financial arrangements, obligations and commitments	45
Critical Accounting Policies and Estimates — discussion of significant judgments and estimates	52
Recent Accounting Developments — discussion of accounting guidance effective in future periods	56

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Results of Continuing Operations

Selected Data

millions except per share amounts	2007		2006		2005
Financial Results
Sales revenues and other	$	11,232	$	10,204	$	6,200
Gains on divestitures, net		4,660		26		108
Total revenues and other		15,892		10,230		6,308
Costs and expenses		8,545		5,849		2,910
Interest expense and other (income) expense		1,018		644		145
Income tax expense		2,559		1,263		1,278
Income from continuing operations	$	3,770	$	2,474	$	1,975
Earnings per common share—diluted	$	8.05	$	5.33	$	4.15
Average number of common shares outstanding—diluted		468		464		475
Operating Results
Adjusted EBITDAX(1)		11,217		7,203		4,835
Total proved reserves (MMBOE)		2,431		3,011		2,187
Annual sales volumes (MMBOE)		211		178		139
Capital Resources and Liquidity
Cash provided by operating activities	$	2,766	$	4,671	$	3,221
Capital expenditures		3,990		4,212		2,644
Total debt		14,747		22,991		3,627
Stockholders’ equity	$	16,364	$	12,403	$	8,649
Debt to total capitalization ratio		47%		65%		30%

⁽¹⁾ See Segment Analysis—Adjusted EBITDAX for a description of Adjusted EBITDAX, which is not presented in accordance with Generally Accepted Accounting Principles (GAAP), and reconciliation to income from continuing operations before income taxes, which is presented in accordance with GAAP.

During 2007, Anadarko changed its method of accounting for its oil and gas exploration and development activities from full cost to the successful efforts method. In accordance with Statement of Financial Accounting Standards (SFAS) No. 154, “Accounting Changes and Error Corrections,” financial information for prior periods has been revised to reflect retrospective application of the successful efforts method, as prescribed by SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” Although the full cost method of accounting for oil and gas exploration and development continues to be an accepted alternative, the successful efforts method of accounting is the preferred method. The Company believes the successful efforts method provides a more transparent representation of its results of operations and the ability to assess the Company’s investments in oil and gas properties for impairment based on their estimated fair values rather than being required to base the valuation on prices and costs as of the balance sheet date.

The effect of the accounting change on income from continuing operations for the full year ended December 31, 2007 was an increase of approximately $2.0 billion or $4.32 per diluted share. The effect of the accounting change on income from continuing operations for the year ended December 31, 2006 was a decrease of $322 million or $0.69 per diluted share. The effect of the accounting change on income from continuing operations for the year ended December 31, 2005 was a decrease of $98 million or $0.21 per diluted share. There was no effect on cash and cash equivalents. For additional information on the impact of the change to the successful efforts method of accounting see Note 1—Summary of Significant Accounting Policies—Properties and Equipment, Note 2—Change in Accounting Principle and Note 8—Properties and Equipment of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Anadarko’s financial and operating results for 2006 include the operating results of Kerr-McGee and Western since the dates of their acquisitions.

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Financial Results

Net Income Anadarko’s income from continuing operations for 2007 totaled $3.8 billion, or $8.05 per share (diluted), compared to income from continuing operations for 2006 of $2.5 billion, or $5.33 per share (diluted). Anadarko had income from continuing operations in 2005 of $2.0 billion, or $4.15 per share (diluted). The increase in income from continuing operations for 2007 compared to 2006 was primarily due to gains on divestitures and higher sales volumes, partially offset by the impact of lower natural gas and oil and condensate prices, higher costs and expenses, including other taxes related to an Algerian exceptional profits tax, and higher interest expense. The increase in 2006 net income compared to 2005 was primarily due to higher sales volumes and prices, partially offset by higher operating costs and expenses and higher interest expense. In 2007 and 2006, the higher sales volumes, costs and expenses and interest expense were due primarily to the impact of operations acquired and debt incurred with the third quarter 2006 acquisitions. Results for 2006 were also impacted by charges associated with impairments of certain international properties. The Company’s sales revenues for 2007 and 2006 include $(1,048) million and $837 million, respectively, related to the recognition of net unrealized gains (losses) on derivatives used to manage price risk on natural gas, crude oil, condensate and NGLs sales. The significant fluctuations in unrealized gains (losses) are due primarily to an increase in Anadarko’s derivative portfolio as a result of the 2006 acquisition of Kerr-McGee, as well as the discontinuance of hedge accounting effective January 1, 2007. The majority of the unrealized gains recorded in 2006 related to derivatives assumed with the Kerr-McGee acquisition. Unrealized gains (losses) related to derivatives were not material in 2005.

Revenues and Other

millions	2007		2006		2005
Gas sales	$	4,119	$	4,186	$	2,968
Oil and condensate sales		4,807		4,618		2,716
Natural gas liquids sales		719		594		437
Gathering, processing and marketing sales		1,487		718		76
Gains on divestitures, net		4,660		26		108
Other		100		88		3
Total	$	15,892	$	10,230	$	6,308

Anadarko’s total revenues and other for 2007 increased 55% compared to 2006 due to gains on divestitures and higher sales volumes, partially offset by significantly lower natural gas and oil and condensate prices. The decrease in prices for 2007 was largely attributed to the significant impact unrealized gains and losses on derivatives had on prices during 2007 and 2006. The increase in 2006 compared to 2005 was primarily due to higher sales volumes and the significant impact unrealized gains and losses on derivatives had on prices.

Gains on divestitures in 2007 related primarily to the Company’s asset realignment program. During 2007, net gains of $4.1 billion were related to divestitures of oil and gas properties and net gains of $0.6 billion were related to the divestiture of certain gathering and processing interests that generally were not affiliated with the Company’s operating areas. For additional information see, Acquisitions and Divestitures.

The Company utilizes derivative instruments to manage the risk of a decrease in the market prices for its anticipated sales of natural gas, crude oil, condensate and NGLs. This activity is referred to as price risk management. The impact of price risk management (including realized and unrealized gains and losses) decreased total revenues $472 million during 2007 compared to an increase of $1,131 million in 2006. The impact of price risk management decreased total revenues $294 million during 2005. See Energy Price Risk under Item 7a and Note 10—Financial Instruments under Item 8 of this Form 10-K.

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Analysis of Oil and Gas Operations Sales Volumes

	2007	2006	2005
Barrels of Oil Equivalent (MMBOE)
United States	180	147	106
Algeria	24	23	25
Other International	7	8	8
Total	211	178	139
Barrels of Oil Equivalent per Day (MBOE/d)
United States	492	404	292
Algeria	65	64	66
Other International	20	21	22
Total	577	489	380

Anadarko’s daily sales volumes increased 18% in 2007 compared to 2006 primarily due to higher sales volumes of 138 MBOE/d associated with the full-period impact of the 2006 acquisitions and higher sales volumes in the Gulf of Mexico of 18 MBOE/d associated with production start up at Independence Hub in the second half of 2007, partially offset by a decrease in sales volumes of 64 MBOE/d associated with the impact of 2007 divestitures in the onshore United States, the Gulf of Mexico and Qatar. During 2006, Anadarko’s daily sales volumes increased 29% compared to 2005 primarily due to higher sales volumes associated with the third quarter 2006 acquisitions of 114 MBOE/d and higher sales volumes from the Gulf of Mexico, partially offset by lower legacy gas volumes in east Texas and Louisiana, and lower oil sales volumes in Venezuela.

Sales volumes represent actual production volumes adjusted for changes in commodity inventories. Anadarko employs marketing strategies to help manage volumes and mitigate the effect of price volatility, which is likely to continue in the future.

Natural Gas Sales Volumes, Average Prices and Revenues

	2007			2006		2005
United States
Sales volumes—Bcf		698			558		414
MMcf/d		1,912			1,529		1,136
Price per Mcf, excluding derivatives	$	5.74		$	6.14	$	7.44
Realized gains (losses) on derivatives		0.73			0.33		(0.25	)
Unrealized gains (losses) on derivatives		(0.57	)		1.03		(0.03	)
Gains (losses) on derivatives	$	0.16		$	1.36	$	(0.28	)
Total average price per Mcf	$	5.90		$	7.50	$	7.16
Gas sales revenues	$	4,119		$	4,186	$	2,968

The Company’s daily natural gas sales volumes increased 25% in 2007 compared to 2006 primarily due to higher sales volumes associated with the 2006 acquisitions of 491 MMcf/d and higher sales volumes of 106 MMcf/d in the Gulf of Mexico related to the start up of the Independence Hub, partially offset by decreases in sales volumes of 224 MMcf/d associated with 2007 divestitures in the onshore United States and Gulf of Mexico. Anadarko’s daily natural gas sales volumes in 2006 increased 35% compared to 2005. The increases were primarily due to higher sales volumes of 423 MMcf/d associated with the third quarter 2006 acquisitions and higher volumes in the Haley field of West Texas, partially offset by natural declines in east Texas and north Louisiana. Production of natural gas is generally not directly affected by seasonal swings in demand.

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Excluding the impact of gains and losses on derivatives, Anadarko’s average natural gas price for 2007 decreased 7% compared to 2006. The relative difference in 2007 and 2006 prices is primarily attributed to a higher than average North America natural gas storage level, the full year effect in 2007 of the return of Gulf of Mexico gas production capacity in 2006 that was damaged during the 2005 hurricane season and a significant increase in liquefied natural gas supply into the United States. Excluding the impact of both realized and unrealized gains and losses on derivatives, Anadarko’s average natural gas price for 2006 decreased 17% compared to 2005. As of December 31, 2007, the Company has implemented price risk management on about two-thirds of its anticipated natural gas wellhead sales volumes for 2008.

Crude Oil and Condensate Sales Volumes, Average Prices and Revenues

	2007			2006		2005
United States
Sales volumes—MMBbls		48			39		24
MBbls/d		130			108		68
Price per barrel, excluding derivatives	$	66.64		$	59.41	$	51.67
Realized gains (losses) on derivatives		1.35			2.64		(7.45	)
Unrealized gains (losses) on derivatives		(10.75	)		6.54		0.13
Total gains (losses) on derivatives	$	(9.40	)	$	9.18	$	(7.32	)
Total average price per barrel	$	57.24		$	68.59	$	44.35
Algeria
Sales volumes—MMBbls		24			23		25
MBbls/d		65			64		65
Price per barrel, excluding derivatives	$	75.50		$	65.55	$	54.37
Realized gains (losses) on derivatives		—			—		—
Unrealized gains (losses) on derivatives		(5.91	)		—		—
Total gains (losses) on derivatives	$	(5.91	)	$	—	$	—
Total average price per barrel	$	69.59		$	65.55	$	54.37
Other International (MMBbls)
Sales volumes—MMBbls		7			8		8
MBbls/d		20			21		22
Total average price per barrel	$	59.91		$	48.58	$	39.37
Total (MMBbls)
Sales volumes—MMBbls		79			70		57
MBbls/d		215			193		155
Total price per barrel, excluding derivatives	$	68.68		$	60.28	$	51.04
Realized gains (losses) on derivatives		0.82			1.48		(3.23	)
Unrealized gains (losses) on derivatives		(8.31	)		3.67		0.06
Total gains (losses) on derivatives	$	(7.49	)	$	5.15	$	(3.17	)
Total average price per barrel	$	61.19		$	65.43	$	47.87
Total oil and condensate sales revenues	$	4,807		$	4,618	$	2,716

Anadarko’s daily crude oil and condensate sales volumes were up 11% in 2007 compared to 2006 primarily due to an increase in sales volumes of 48 MBbls/d associated with the 2006 acquisitions, partially offset by a decrease in sales volumes of 20 MBbls/d associated with 2007 divestitures in the onshore United States, the Gulf of Mexico and Qatar and a decrease in Venezuela sales volumes due to contract changes in late 2006. Anadarko’s daily crude oil and condensate sales volumes for 2006 were up 25% compared to the same period of 2005. The increases in 2006 compared to 2005 were primarily due to higher sales volumes associated with the third quarter 2006 acquisitions of 37 MBbls/d and additional wells being tied in and put into production at the Company’s legacy properties in the Gulf of Mexico, partially offset by a decrease in sales volumes from Venezuela. Production of oil usually is not affected by seasonal swings in demand.

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Excluding the impact of gains and losses on derivatives, Anadarko’s average crude oil price for 2007 increased 14% compared to 2006. The higher crude oil prices were attributed primarily to additional global demand, limited excess production capacity and heightened geopolitical tension. Excluding the impact of both realized and unrealized gains and losses on derivatives, Anadarko’s average crude oil price for 2006 increased 18% compared to 2005. The higher crude oil prices were attributed to continuing political unrest in oil exporting countries, increased worldwide demand and the impact of hurricanes in the Gulf of Mexico on oil production and infrastructure. As of December 31, 2007, the Company has utilized price risk management on about half of its anticipated oil and condensate sales volumes for 2008.

Natural Gas Liquids Sales Volumes, Average Prices and Revenues

	2007		2006			2005
United States
Sales volumes—MMBbls		16		15			13
MBbls/d		43		42			36
Price per barrel, excluding derivatives	$	45.87	$	39.71		$	34.56
Realized gains (losses) on derivatives		0.03		(0.13	)		—
Unrealized gains (losses) on derivatives		—		—			—
Total gains (losses) on derivatives	$	0.03	$	(0.13	)	$	—
Total average price per barrel	$	45.90	$	39.58		$	34.56
Natural gas liquids sales revenues	$	719	$	594		$	437

Anadarko’s daily NGLs sales volumes were up 2% in 2007 compared to 2006 primarily due to higher sales volumes of 8 MBbls/d associated with the 2006 acquisitions, partially offset by a decrease in sales volumes of 6 MBbls/d related to the 2007 divestitures. Anadarko’s daily NGLs sales volumes in 2006 were up 17% compared to 2005, primarily due to higher sales volumes associated with the third quarter 2006 acquisitions of 6 MBbls/d.

For 2007, the average NGLs price increased 16% compared to 2006. During 2006, average NGLs prices increased 15% compared to 2005. NGLs production is dependent on natural gas and NGLs prices as well as the economics of processing the natural gas to extract NGLs. NGLs sales represent revenues derived from the processing of Anadarko’s natural gas production.

Gathering, Processing and Marketing Revenues

millions	2007		2006		2005
Gathering and processing sales	$	1,259	$	538	$	26
Marketing sales		228		180		50
Total	$	1,487	$	718	$	76

During 2007, gathering and processing sales increased $721 million compared to 2006 primarily due to gathering and processing operations acquired with the 2006 acquisitions, partially offset by a decrease associated with divestitures in 2007. During 2006, gathering and processing sales increased $512 million compared to 2005 also due to the 2006 acquisitions. Gathering and processing revenues represent revenues derived from gathering and processing natural gas from sources other than the Company’s production. Marketing sales primarily represent the revenues earned on sales of third-party gas, oil and NGLs, net of the related purchases.

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Costs and Expenses

millions	2007		2006		2005
Oil and gas operating	$	1,101	$	822	$	415
Oil and gas transportation and other		453		341		256
Exploration		905		737		445
Gathering, processing and marketing		1,025		553		56
General and administrative		936		768		477
Depreciation, depletion and amortization		2,840		1,752		901
Other taxes		1,234		549		345
Impairments		51		327		15
Total	$	8,545	$	5,849	$	2,910

During 2007, Anadarko’s costs and expenses increased 46% compared to 2006 due to the following factors:

— Oil and gas operating expense increased 34% primarily due to approximately $227 million in operating expenses on properties acquired with the 2006 acquisitions, an increase of $71 million in expenses in the deepwater Gulf of Mexico related primarily to subsurface repairs and operating costs of Independence Hub which began production in 2007, a $28 million increase in costs associated primarily with the ramp up of activity in the Rockies and an increase of approximately $20 million related to severance cost associated with the Company’s post-acquisition asset realignment program. These increases were partially offset by decreases of approximately $66 million associated with properties divested during 2007.

— Oil and gas transportation and other expenses increased 33%. Transportation expenses increased primarily due to higher volumes transported as a result of the 2006 acquisitions, partially offset by a decrease associated with properties divested in 2007.

— Exploration expense increased $168 million due primarily to a $140 million increase in impairments of unproved properties, primarily associated with a significant increase in unproved leasehold interests as a result of the 2006 acquisitions, and a $28 million increase in dry hole expense related to international activities.

— Gathering, processing and marketing (GPM) expenses increased $472 million. Costs associated with gathering and processing operations increased $389 million primarily due to facilities acquired in 2006. Marketing transportation and cost of product increased $83 million primarily due to higher volumes transported as a result of the 2006 acquisitions and the assumption of firm transportation contracts in 2006.

— General and administrative (G&A) expense increased 22% primarily due to increases in compensation and benefit expenses of $158 million associated primarily to rising base compensation and benefit costs for employees, higher performance-based bonus expense and an increase in the average number of employees associated with the 2006 acquisitions.

— Depreciation, depletion and amortization (DD&A) expense increased 62%. DD&A expense associated with oil and gas properties increased approximately $719 million as a result of operations acquired in 2006, approximately $367 million due to higher costs associated with acquiring, finding and developing oil and gas reserves and approximately $43 million due to higher organic sales volumes primarily associated with first production at Independence Hub in the Gulf of Mexico. Depreciation of other properties and equipment increased approximately $105 million primarily due to gathering, processing and general properties obtained with the 2006 acquisitions. These increases were partially offset by a decrease of approximately $149 million related to oil and gas properties divested in 2007.

— Other taxes increased 125%. Other taxes include an increase of $602 million associated with the Algerian exceptional profits tax. The remaining increase of $83 million is primarily due to the effect of higher sales volumes on production taxes, the effect of a new Alaskan severance tax, the effect of a windfall profits tax in China and higher franchise taxes.

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During 2006, Anadarko’s costs and expenses increased 101% compared to 2005 due to the following factors:

— Oil and gas operating expense increased 98% due primarily to $253 million in operating expenses for properties acquired with the 2006 acquisitions and $146 million associated with increased workover, maintenance and repair activity in the United States, an increase in expenses in the Gulf of Mexico associated with higher volumes, and rising utility and fuel expenses as a result of higher energy costs and industry demand.

— Oil and gas transportation and other expenses increased 33%. Transportation expenses increased primarily due to higher volumes transported as a result of the 2006 acquisitions.

— Exploration expense increased $292 million due primarily to a $173 million increase in dry hole expense related mostly to activities in the Gulf of Mexico, a $71 million increase in geological and geophysical costs and a $21 million increase in impairments of unproved properties, primarily associated with a significant increase in unproved leasehold interests as a result of the 2006 acquisitions.

— GPM expenses increased $497 million. Costs associated with gathering and processing operations increased $430 million primarily due to facilities acquired with the 2006 acquisitions. Marketing transportation and cost of product increased $67 million primarily due to higher volumes transported as a result of the 2006 acquisitions and the assumption of firm transportation contracts during the year.

— G&A expense increased 61% due primarily to increases of $117 million related to compensation, legal and other general expenses attributed to the operations acquired in the 2006 acquisitions, $77 million associated with rising compensation costs for legacy employees, $77 million related to severance and one-time benefits associated with Company’s initial post acquisition asset realignment and restructuring efforts and $28 million related to increases in general office expenses at legacy locations.

— DD&A expense increased 94%. DD&A expense associated with oil and gas properties increased approximately $566 million as a result of operations acquired in 2006 and approximately $219 million due to higher costs associated with acquiring, finding and developing oil and gas reserves. Depreciation of other properties and equipment increased approximately $66 million primarily due to gathering, processing and general properties obtained with the 2006 acquisitions.

— Other taxes increased 59%. The increase includes a $103 million accrual for the estimated impact of an Algerian exceptional profits tax. The remaining increase of $101 million is primarily due to the effect of higher production volumes and higher commodity prices on production taxes.

— Impairments in 2006 include a $166 million loss associated with the termination of the Venezuela operating service agreement in exchange for an 18% equity interest in a new operating company and a $139 million impairment related to the decision to suspend construction of the Company’s Bear Head LNG project in Nova Scotia.

Interest Expense and Other (Income) Expense

millions	2007			2006			2005
Interest Expense
Gross interest expense	$	1,214		$	730		$	266
Capitalized interest		(122	)		(80	)		(45	)
Net interest expense		1,092			650			221
Other (Income) Expense
Interest income		(84	)		(47	)		(17	)
Firm transportation keep-whole contract valuation		—			4			(56	)
Other		10			37			(3	)
Total other (income) expense		(74	)		(6	)		(76	)
Total	$	1,018		$	644		$	145

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Interest Expense Anadarko’s gross interest expense for 2007 increased 66% compared to 2006. The increase was primarily due to higher average borrowings associated with the 2006 acquisitions and higher interest rates compared to 2006. Anadarko’s gross interest expense increased 174% during 2006 compared to 2005. The increase was primarily due to an increase in debt associated with the 2006 acquisitions. For additional information see Acquisitions and Divestitures and Debt below and Interest Rate Risk under Item 7a of this Form 10-K.

In 2007, capitalized interest increased by 53% compared to 2006. In 2006, capitalized interest increased by 78% compared to 2005. These increases were primarily due to higher capitalized costs that qualify for interest capitalization.

Other (Income) Expense For 2007, the Company had other income of $74 million compared to $6 million for 2006. The increase of $68 million was primarily due to higher interest income of $37 million, a $22 million loss on an impaired equity investment in 2006 and a $10 million loss related to environmental reserve adjustments in 2006.

For 2006, the Company had other income of $6 million compared to $76 million for 2005. The decrease of $70 million was primarily due to a $60 million decrease in gains related to the effect of market values for firm transportation subject to a keep-whole agreement, a $22 million loss on an impaired equity investment and an $18 million loss related to environmental and legal reserve adjustments, partially offset by a $30 million increase in interest income. The keep-whole agreement was terminated April 1, 2006.

Income Tax Expense

millions except percentages	2007		2006		2005
Income tax expense	$	2,559	$	1,263	$	1,278
Effective tax rate		40%		34%		39%

For 2007, income tax expense related to continuing operations increased 103% compared to 2006 primarily due to an increase in income before income taxes and variances from the statutory rate. For 2006, income taxes decreased 1% compared to 2005 primarily due to a decrease in state income taxes resulting from enacted Texas legislation, excess U.S. foreign tax credits and a decrease in net foreign income taxes.

The variance from the 35% statutory rate in 2007 is primarily caused by the Algerian exceptional profits tax which is non-deductible for Algerian income tax purposes, other foreign taxes in excess of federal statutory rates, state income taxes and other items. For 2006 and 2005, variances from the 35% statutory rate are caused by foreign taxes in excess of federal statutory rates, state income taxes, excess U.S. foreign tax credits and other items.

Texas House Bill 3, signed into law in May 2006, eliminates the taxable capital and earned surplus components of the existing franchise tax and replaces these components with a taxable margin tax calculated on a combined basis. The new tax is effective for reports due on or after January 1, 2008 (based on business activity during 2007). Anadarko is required to include the impact of the law change on its deferred state income taxes in income for the period which includes the date of enactment. The adjustment, a reduction in Anadarko’s deferred state income taxes in the amount of approximately $14 million and $69 million, net of federal benefit, was included in the 2007 and 2006 tax provision, respectively.

Operating Results

Segment Analysis—Adjusted EBITDAX To assess the operating results of Anadarko’s segments, management uses income from continuing operations before income taxes, interest expense, exploration expense, DD&A expense and impairments (Adjusted EBITDAX). The Company’s definition of Adjusted EBITDAX, which is a non-GAAP measure, excludes exploration expense, as exploration expense is not an indicator of operating efficiency for a given reporting period, but is monitored by management as part of costs incurred in exploration and development activities. Similarly, DD&A expense and impairments are excluded from Adjusted EBITDAX

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as a measure of segment operating performance, as capital expenditures are evaluated at the time capital costs are incurred. Anadarko’s definition of Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to the Company’s financing methods or capital structure. Management believes that the presentation of Adjusted EBITDAX provides information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBITDAX is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures and make distributions to shareholders.

Adjusted EBITDAX, as defined by Anadarko, may not be comparable to similarly titled measures used by other companies, and therefore, the Company’s consolidated Adjusted EBITDAX should be considered in conjunction with income from continuing operations and other performance measures prepared in accordance with GAAP, such as operating income or cash flow from operating activities. Adjusted EBITDAX has important limitations as an analytical tool because it excludes certain items that affect income from continuing operations and net cash provided by operating activities. Adjusted EBITDAX should not be considered in isolation or as a substitute for analysis of Anadarko’s results as reported under GAAP. Below is a reconciliation of consolidated Adjusted EBITDAX to income from continuing operations before income taxes.

Adjusted EBITDAX

millions	2007			2006			2005
Oil and gas exploration and production	$	10,637		$	7,350		$	4,931
Midstream		894			183			108
Marketing		234			78			(21	)
Other and intersegment eliminations		(548	)		(408	)		(183	)
Consolidated Adjusted EBITDAX	$	11,217		$	7,203		$	4,835
Exploration expense		905			737			445
Depreciation, depletion and amortization expense		2,840			1,752			901
Impairments		51			327			15
Interest expense		1,092			650			221
Income from continuing operations before income taxes	$	6,329		$	3,737		$	3,253

Oil and Gas Exploration and Production The increase in Adjusted EBITDAX for 2007 compared to 2006 was primarily due to an increase in gains on divestitures of $4.1 billion and higher sales volumes, partially offset by the impact of lower natural gas and oil and condensate prices and higher costs and expenses, including the Algerian exceptional profits tax. The increase in 2006 Adjusted EBITDAX compared to 2005 was primarily due to higher sales volumes and prices, partially offset by higher operating costs and expenses. In 2007 and 2006, the higher sales volumes and costs and expenses were due primarily to the impact of operations acquired with the third quarter 2006 acquisitions. The Company’s sales revenues include the impact of price risk management (including realized and unrealized gains and losses) which decreased total revenues $472 million during 2007, compared to an increase of $1,131 million in 2006 and a decrease of $294 million during 2005. Of these amounts for 2007 and 2006, $(1,048) million and $837 million, respectively, were related to the recognition of net unrealized gains (losses) on derivatives used to manage price risk on natural gas, crude oil, condensate and NGLs sales. Unrealized gains and (losses) on derivatives were not material in 2005.

Midstream The increase in Adjusted EBITDAX for 2007 compared to 2006 resulted primarily from an increase in gains on divestitures of $532 million related to midstream assets and an increased scope of midstream operations resulting from the 2006 acquisitions, partially offset by a decrease in earnings associated with the 2007 divestitures. During July 2007, the Company divested its interests in two natural gas gathering systems and associated processing plants that did not operate in areas where Anadarko has significant oil and gas production. These divested facilities accounted for $75 million, or 21%, of Anadarko’s midstream segment’s adjusted EBITDAX excluding gains on divestitures during 2007. The increase in 2006 Adjusted EBITDAX compared to 2005 was also primarily due to the 2006 acquisitions.

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Marketing Marketing earnings primarily represents the revenues earned on sales of third-party gas, oil and NGLs, net of the related purchases. The increase in Adjusted EBITDAX for 2007 compared to 2006, as well as 2006 compared to 2005, resulted primarily from the effects of higher volumes transported as a result of the 2006 acquisitions.

Other and Intersegment Eliminations All other and intersegment eliminations consists primarily of the elimination of revenues and expenses between segments, corporate costs that are not allocated to the operating segments and income from hard minerals investments and royalties. The decrease in Adjusted EBITDAX for 2007 compared to 2006 was primarily due to increased interest expense from the 2006 acquisitions, increases in compensation expense from the increased average number of employees associated with the 2006 acquisitions and an increase in eliminations of intersegment transactions. The decrease in 2006 Adjusted EBITDAX compared to 2005 was primarily due to higher interest, compensation, legal and other general expenses attributed to the 2006 acquisitions as well as an increase in eliminations of intersegment transactions.

Acquisitions and Divestitures In August 2006, Anadarko acquired Kerr-McGee and Western in separate all-cash transactions. Anadarko initially financed $22.5 billion for the acquisitions through a 364-day committed acquisition facility with plans to repay it with proceeds from asset divestitures, free cash flow from operations and the issuance of equity, debt and bank financing during the term of the facility. Through December 31, 2007, the Company had reduced the initial amount owed under the acquisition facility from $22.5 billion to approximately $1.0 billion, using divestiture proceeds, long-term debt financing and cash flow from operations.

Kerr-McGee Transaction On August 10, 2006, Anadarko completed the acquisition of Kerr-McGee for $16.5 billion, or $70.50 per share, plus the assumption of $2.6 billion of debt. Kerr-McGee’s year-end 2005 proved reserves, excluding Gulf of Mexico shelf divestitures, totaled 898 MMBOE, of which approximately 62% was natural gas. Proved undeveloped reserves represented 30% of the total.

Kerr-McGee’s legacy core properties are located in the deepwater Gulf of Mexico and onshore in Colorado and Utah. They include deepwater Gulf of Mexico blocks which are supported by Kerr-McGee’s “hub-and-spoke” infrastructure. In Colorado, Kerr-McGee holds acreage in the Wattenberg natural gas play, located largely on Anadarko’s Land Grant holdings, where Anadarko owns the royalty interest. In Utah, Kerr-McGee holds acreage in the Uinta basin’s prolific Greater Natural Buttes gas play. In addition to its U.S. portfolio, Kerr-McGee produces oil and is continuing to develop and explore offshore China, has made discoveries and is pursuing the development of fields offshore Brazil, and is exploring West Africa and the islands of Trinidad and Tobago.

Western Transaction On August 23, 2006, Anadarko completed the acquisition of Western for $4.8 billion, or $61.00 per share, plus the assumption of $625 million of debt. Western’s year-end 2005 proved reserves totaled 153 MMBOE, with proved undeveloped reserves representing 57% of the total. Essentially all of the reserves are natural gas.

Western’s coalbed methane properties within the Powder River basin are directly adjacent to Anadarko’s assets in this developing play. Anadarko believes that combining its properties with Western’s will accelerate the development of these natural gas resources and produce volume growth through the end of the decade, and possibly longer, with more than 12,000 identified drilling locations in inventory. The acquisition of Western also significantly increased the Company’s holdings in gathering and processing systems.

Divestitures As a result of a portfolio refocusing effort stemming from the acquisitions of Kerr-McGee and Western, Anadarko divested certain properties during 2007 and 2006 for approximately $17 billion before income taxes. Net proceeds from these divestitures were used to retire debt. While the Company has identified some additional assets for possible monetization, the vast majority of producing property divestitures were closed by year-end 2007.

During 2006, Anadarko sold its wholly-owned subsidiary, Anadarko Canada Corporation, for approximately $4 billion before taxes. See Discontinued Operations. On the acquisition date, Kerr-McGee’s other assets included approximately $1 billion of assets held for sale. The sale of these assets closed in August 2006 and the proceeds were also used to pay down debt incurred to fund the acquisitions.

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During 2007, the Company closed several unrelated divestiture transactions representing approximately $11 billion before income taxes. The most significant of these transactions are discussed below.

In January 2007, the Company sold its interests in the Knotty Head and Big Foot oil discoveries, as well as the Big Foot North prospect in the Gulf of Mexico, for $0.9 billion. During February 2007, Anadarko also closed the sale of its Genghis Khan discovery in the deepwater Gulf of Mexico for $1.3 billion. In March 2007, Anadarko divested control of its interests in 28 Permian basin oil and gas fields in West Texas for $1.0 billion (see Off-Balance Sheet Arrangements), sold its Vernon and Ansley fields located in Jackson Parish, Louisiana, for $1.5 billion and sold its interests in the Elk basin and Gooseberry area of the Northern Rockies for $0.4 billion.

In April 2007, Anadarko sold its interests in the Williston basin area of the Northern Rockies for $0.4 billion. In May 2007, Anadarko sold its interests in certain natural gas properties in Oklahoma and Texas for $0.9 billion and also sold a 23% working interest in the K2 Unit in the Gulf of Mexico for $1.2 billion. Anadarko remains the K2 Unit operator with a 42% working interest. In June 2007, Anadarko sold certain of its interests in the Austin Chalk play in central and east Texas for $0.8 billion.

In July 2007, the Company divested control of its interests in the Chaney Dell and Midkiff/Benedum natural gas gathering systems and associated processing plants for $1.9 billion (see Off-Balance Sheet Arrangements).

In October 2007, the Company divested certain interests in Qatar for approximately $350 million. Anadarko used the net proceeds from this transaction to further reduce debt. For additional information, see Note 5—Discontinued Operations, Assets Held for Sale and Other Divestitures under Item 8 of this Form 10-K.

Proved Reserves Anadarko focuses on growth and profitability. Reserve replacement is a key to growth. Future profitability depends upon the cost of finding and developing oil and gas reserves, among other factors. Reserve growth can be achieved through successful exploration and development drilling, improved recovery or acquisition of producing properties.

In conjunction with the August 2006 acquisition of Kerr-McGee and Western, Anadarko implemented an asset realignment program. The goal of the Kerr-McGee and Western acquisitions was to provide a more economically efficient platform with higher and more consistent growth potential, with the intent of divesting properties that were no longer deemed to be core to Anadarko’s operations. During 2007, the Company successfully completed the majority of the divestiture stage of the realignment program. As expected, Anadarko’s proved reserves were about equal to levels before the acquisitions. For additional information about the benefits the Company believes are provided by the realigned portfolio, see Outlook.

The following discussion of proved reserves, reserve additions and revisions and future net cash flows from proved reserves includes both continuing and discontinued operations. A breakdown of reserve information by continuing and discontinued operations is contained in the Supplemental Information under Item 8 of this Form 10-K.

MMBOE	2007		2006		2005
Proved Reserves
Beginning of year	3,011		2,449		2,367
Reserve additions and revisions	252		1,043		291
Sales in place	(620	)	(287	)	(51	)
Production	(212	)	(194	)	(158	)
End of year	2,431		3,011		2,449
Proved Developed Reserves
Beginning of year	1,989		1,524		1,517
End of year	1,625		1,989		1,524

The Company’s proved natural gas reserves at year-end 2007 were 8.5 Tcf compared to 10.5 Tcf at year-end 2006 and 7.9 Tcf at year-end 2005. Anadarko’s proved crude oil, condensate and NGLs reserves at year-end 2007 were 1.0 billion barrels compared to 1.3 billion barrels at year-end 2006 and 1.1 billion barrels at year-end 2005. Crude oil, condensate and NGLs comprised about 42%, 42% and 46% of the Company’s proved reserves at year-end 2007, 2006 and 2005, respectively.

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The Company’s estimates of proved reserves are made using available geological and reservoir data as well as production performance data. These estimates, made by the Company’s engineers, are reviewed annually and revised, either upward or downward, as warranted by additional data. The available data reviewed include, among other things, seismic data, structure and isopach maps, well logs, production tests, material balance calculations, reservoir simulation models, reservoir pressures, individual well and field performance data, individual well and field projections, offset performance data, operating expenses, capital costs and product prices. Revisions are necessary due to changes in, among other things, reservoir performance, prices, economic conditions and governmental restrictions, as well as changes in the expected recovery rates associated with infill drilling. Sustained decreases in prices, for example, may cause a reduction in some proved reserves due to reaching economic limits sooner.

Reserve Additions and Revisions During 2007, the Company added 252 MMBOE of proved reserves as a result of additions (purchases in place, discoveries, improved recovery and extensions) and revisions. The Company expects the majority of future reserve adds to come from positive revisions associated with infill drilling and extensions of current fields and new discoveries onshore in North America and the deepwaters of the Gulf of Mexico, as well as through improved recovery operations, purchases of proved properties in strategic areas and successful exploration in international growth areas. The success of these operations will directly impact reserve additions or revisions in the future.

Additions During 2007, Anadarko added 131 MMBOE of proved reserves. The Company added 130 MMBOE of proved reserves primarily as a result of successful drilling in coalbed methane and conventional plays of the Rockies and the initial recognition of proved reserves at the Peregrino field in Brazil. During 2006, Anadarko added 1,118 MMBOE of proved reserves. Of this amount, 1,030 MMBOE were related to purchases in place primarily associated with the acquisitions of Kerr-McGee and Western in August 2006. In addition, the Company added 88 MMBOE of proved reserves primarily as a result of successful drilling in core areas onshore in the United States. During 2005, Anadarko added 212 MMBOE of proved reserves. Of this amount, 207 MMBOE were added as a result of successful drilling in the deepwater Gulf of Mexico and fields in the north Louisiana Vernon, east Texas Bossier, west Texas Haley and Canadian Wild River areas and successful improved recovery operations in Wyoming.

Revisions Total revisions in 2007 were 121 MMBOE or 4.0% of the beginning of year reserve base. The revisions were related primarily to the large onshore natural gas plays such as Greater Natural Buttes, Wattenberg, and Pinedale and Jonah fields, where the reserve bookings for the infill wells are treated as a positive revision, and the increase in oil and natural gas prices. Total revisions for 2006 and 2005 were (75) MMBOE and 79 MMBOE, respectively. Revisions in 2006 related primarily to performance revisions of (136) MMBOE mainly due to downward revisions of the Company’s reserves at the K2 complex in the Gulf of Mexico and adjustments in Algeria, and price revisions of (99) MMBOE primarily due to a significant decrease in natural gas prices since the end of 2005, partially offset by additional infill drilling reserve bookings of 160 MMBOE. Revisions in 2005 related primarily to additional infill drilling reserve bookings of 102 MMBOE, partially offset by the impact of government imposed limits on production in Venezuela, as well as a reduction of NGLs reserves in Algeria resulting from a change in project scope.

Sales in Place In 2007, the Company sold properties located in the United States and Qatar representing 609 MMBOE and 11 MMBOE of proved reserves, respectively. In 2006, the Company sold properties located in Canada representing 248 MMBOE of proved reserves. In addition, sales in place included 39 MMBOE of proved reserves related to government imposed contract changes which resulted in the Company’s Venezuelan properties being exchanged for an equity interest in a new Venezuela operating entity. In 2005, Anadarko sold properties located in the United States, Oman and Canada representing 25 MMBOE, 25 MMBOE and 1 MMBOE of proved reserves, respectively.

Future Net Cash Flows At December 31, 2007, the present value (discounted at 10%) of future net cash flows from Anadarko’s proved reserves was $28.9 billion (stated in accordance with the regulations of the Securities

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and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB)). This present value was calculated based on prices at year-end held flat for the life of the reserves, adjusted for any contractual provisions. The increase of $3.3 billion or 13% in 2007 compared to 2006 is primarily due to higher natural gas and oil prices at year-end 2007 and successful exploration and development, partially offset by the divestiture program. See Supplemental Information under Item 8 of this Form 10-K.

The present value of future net cash flows does not purport to be an estimate of the fair market value of Anadarko’s proved reserves. An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected recovery of reserves in excess of proved reserves and a discount factor more representative of the time value of money and the risks inherent in producing oil and gas.

Midstream Strategies

Anadarko invests in midstream (gathering and processing) facilities to complement its oil and gas operations in regions where the Company has natural gas production. The Company is better able to control the timing of development of its oil and gas properties and manage both the value received for, and cost of, gathering, treating and processing natural gas through its ownership and operation of these facilities. In addition, Anadarko’s midstream business provides gathering, treating and processing services for third-party customers, including major and independent producers. Anadarko generates revenues in its gathering and processing activities through various fee structures that include fixed-rate, percent of proceeds, or keep-whole agreements. The Company also processes a portion of its gas at various third-party plants.

In 2006, Anadarko significantly increased the size and scope of its midstream business through the acquisitions of Western and Kerr-McGee. Anadarko currently has systems in eight states (Wyoming, Colorado, Utah, New Mexico, Kansas, Oklahoma, Texas and Louisiana) located in major producing basins of the onshore United States.

On October 15, 2007, Western Gas Partners, LP (the Partnership), a newly formed 100% owned subsidiary of the Company, filed a registration statement on Form S-1 with the SEC relating to a proposed underwritten initial public offering of 18.75 million common units, representing limited partnership interests in the Partnership, plus an option for the underwriters to purchase up to an additional 2.81 million common units. The Partnership was initially formed by Anadarko, the indirect owner of the general partner of the Partnership, to own and develop midstream assets. Upon completion of this transaction, Anadarko expects to hold approximately 59% of the interests in the Partnership. Anadarko will retain indirect ownership of the general partnership interest in the Partnership and will continue to operate the Partnership’s assets pursuant to an omnibus agreement, a services and secondment agreement and a tax sharing agreement. Since gathering and processing assets support Anadarko’s oil and gas producing activities, Anadarko plans to maintain operational control of the assets and expects to continue to consolidate the results of that business in its financial statements. The Company expects to use proceeds it receives from this transaction to repay a portion of the midstream note payable to a related party discussed below.

In December 2007, a midstream subsidiary issued a $2.2 billion note payable to a related party. See Note 9—Debt and Interest Expense of the Notes to Consolidated Financial Statements under Item 8 and Debt below for additional information.

Marketing Strategies

The Company’s marketing department manages sales of its natural gas, crude oil and NGLs. In marketing its production, the Company attempts to maximize realized prices while managing credit exposure. The Company’s sales of natural gas, crude oil, condensate and NGLs are generally made at the market prices of those products at the time of sale. In 2007, the Company also engaged in sales of greenhouse gas emission reduction credits (ERCs) derived from CO₂ injection operations in Wyoming. The Company expects additional sales of ERCs in the future.

The Company also purchases natural gas, crude oil, condensate and NGLs volumes for resale primarily from partners and producers near Anadarko’s production. These purchases allow Anadarko to aggregate larger volumes, fully utilize transportation capacity, attract larger, creditworthy customers and facilitate its efforts to

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maximize prices received for the Company’s production and minimize balancing issues with customers and pipelines during operational disruptions.

The Company may also engage in trading activities for the purpose of generating profits from exposure to changes in market prices of natural gas, crude oil, condensate and NGLs. The Company does not engage in market-making practices and limits its trading activities to natural gas, crude oil and NGLs commodity contracts. The Company’s trading risk position, typically, is a net short position that is offset by the Company’s natural long position as a producer. See Energy Price Risk under Item 7a of this Form 10-K.

In an effort to protect the Company from commodity price risk stemming from the 2006 acquisitions, the Company entered into derivatives covering 72% and 55% of the acquired companies’ then expected production volumes for 2007 and 2008, respectively. This price risk management program employed collars and other derivatives, intended to help ensure a return on investment while maintaining upside potential that could result from higher commodity prices.

In recent years, all segments of the energy market have experienced increased scrutiny of their financial condition, liquidity and credit. This has been reflected in credit rating downgrades of many merchant energy trading companies. Anadarko has not experienced any material financial losses associated with credit deterioration of third parties; however, in certain situations the Company has declined to transact with some counterparties and changed its sales terms to require some counterparties to pay in advance or post letters of credit for purchases.

Natural Gas Natural gas continues to fulfill a significant portion of North America’s energy needs and the Company believes the importance of natural gas in meeting this energy need will continue. Natural gas prices have varied over the last year, with an overall decline in prices during 2007. Price volatility persists due to a relatively tight supply and demand balance. Anadarko markets its natural gas production to maximize the commodity value and reduce the inherent risks of the physical commodity markets. Anadarko Energy Services Company (AESC), a wholly-owned subsidiary of Anadarko, is a marketing company offering supply assurance, competitive pricing, risk management and other services tailored to its customers’ needs. The Company sells natural gas under a variety of contracts and may also receive a service fee related to the level of reliability and service required by the customer. The Company has the marketing capability to move large volumes of gas into and out of the “daily” gas market to take advantage of any price volatility.

The Company owns a significant amount of natural gas firm transportation capacity that is used to help ensure access to downstream markets and provides the opportunity to capture incremental value when pricing differentials between physical locations occur. The Company also stores some of its purchased natural gas in contracted storage facilities with the intent of selling the gas at a higher price in the future. Normally, the Company will have forward contracts in place (physical delivery or financial derivative instruments) to sell the stored gas at a fixed price.

Western and Kerr-McGee both have gas marketing organizations that are being incorporated into AESC. Kerr-McGee had a long-term gas sales contract with Cinergy (since acquired by Fortis). In 2006, approximately 50% of gas volumes and revenues associated with the Kerr-McGee acquisition were sold under this legacy contract. This contract was terminated in March 2007, and the associated volumes were integrated into the Company’s marketing operations.

Crude Oil, Condensate and NGLs Anadarko’s crude oil, condensate and NGLs revenues are derived from production in the U.S., Algeria and other international areas. Most of the Company’s U.S. crude oil and NGLs production is sold under contracts with prices based on market indices, adjusted for location, quality and transportation. Oil from Algeria is sold by tanker as Saharan Blend to customers primarily in the Mediterranean area. Saharan Blend is a high quality crude that provides refiners large quantities of premium products such as jet and diesel fuel. Oil from China is sold by tanker as Cao Fei Dian (CFD Blend) to customers primarily in the Far East markets. CFD Blend is a heavy sour crude oil which is sold into both the prime fuels refining market and the heavy fuel oil blend stock market. The Company also purchases and sells third-party produced crude oil, condensate and NGLs in the Company’s domestic and international market areas. Included in this strategy is the use of contracted NGLs storage facilities and various derivative instruments.

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Capital Resources and Liquidity

Overview Anadarko’s primary sources of cash during 2007 were divestiture transactions, cash flow from operating activities and proceeds from the midstream subsidiary note to a related party. The Company used cash primarily to retire debt, to fund Anadarko’s capital spending program and to pay income taxes and dividends. Anadarko’s primary sources of cash during 2006 were the issuance of debt, cash flow from operating activities and divestitures. During 2006, the Company used cash primarily to fund the acquisitions of Kerr-McGee and Western, to fund its capital spending program, repurchase Anadarko common stock, pay dividends and retire debt as well as preferred stock. Anadarko’s primary source of cash during 2005 was cash flow from operating activities. The Company used 2005 cash flow primarily to fund its capital spending program, repurchase Anadarko common stock and pay dividends. In addition, the Company used $170 million of cash from the 2004 divestitures to retire debt in 2005.

Following is a discussion of significant sources and uses of cash flows during the period. Forward-looking information related to the Company’s capital resources and liquidity are discussed in Outlook that follows.

Divestitures During 2007, Anadarko derived significant sources of cash from its divestiture program. See Acquisitions and Divestitures. Proceeds from these divestitures were used to reduce debt and pay income taxes on taxable gains associated with the divestitures.

Cash Flow from Operating Activities Anadarko’s cash flow from continuing operating activities in 2007 was $2.8 billion compared to $4.7 billion in 2006 and $3.2 billion in 2005. The decrease in 2007 cash flow was attributed to the impact of income taxes on divestitures and higher costs and expenses, partially offset by the impact of higher sales volumes associated with the acquisitions. The Company had tax payments of $2.3 billion in 2007 that significantly impacted cash flow from operating activities as a result of the taxable gains on the divestitures. This decrease was effectively offset by an increase in cash flow from investing activities where proceeds from divestitures are presented before income taxes. The increase in 2006 cash flow compared to 2005 was attributed to the impact of the acquisitions and higher commodity prices, partially offset by higher costs and expenses and slightly lower legacy sales volumes.

Excluding the impact of acquisitions and divestitures, fluctuations in commodity prices have been the primary reason for the Company’s short-term changes in cash flow from operating activities. Anadarko holds derivative instruments to help manage commodity price risk. Sales volume changes can also impact cash flow in the short-term, but have not been as volatile as commodity prices in prior years. Anadarko’s long-term cash flow from operating activities is dependent on commodity prices, reserve replacement, the level of costs and expenses required for continued operations and the level of acquisition and divestiture activity.

Debt At year-end 2007, Anadarko’s total debt was $14.7 billion compared to total debt of $23.0 billion at year-end 2006 and $3.6 billion at year-end 2005. During 2007, the Company repaid $10.5 billion in debt that was classified as current at December 31, 2006, primarily with proceeds from divestitures and the issuance of a long-term $2.2 billion midstream note payable discussed below. The increase in debt in 2006 was attributed primarily to borrowings associated with the 2006 acquisitions.

In January 2008, Anadarko entered into forward-looking 18-month interest rate swaps effective March 2008 with an aggregate notional value of $1.0 billion whereby the Company will pay a weighted-average fixed interest rate of 2.74% and receive a floating interest rate indexed to the three-month LIBOR rate. Anadarko discontinued hedge accounting on January 1, 2007, therefore all gains and losses associated with these swaps will be recorded to interest expense.

For additional information on the Company’s debt instruments, such as transactions during the period, years of maturity and interest rates, see Note 9—Debt and Interest Expense of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Midstream Subsidiary Note Payable to a Related Party In late December 2007, Anadarko and an entity formed by a group of unrelated third-party investors (the Investor) formed Trinity Associates LLC (Trinity). As discussed in Note 11—Unconsolidated Affiliates of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K, Trinity’s initial capitalization consisted of Anadarko’s $100 million cash contribution in

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exchange for a common interest in Trinity and the Investor’s $2.2 billion cash contribution in exchange for a preferred interest. Trinity, a related party, extended a $2.2 billion loan to a wholly-owned subsidiary of Anadarko, referred to herein as Midstream Holding, which holds and operates midstream assets directly and through its subsidiaries. The Company used all of the loan proceeds received by Midstream Holding to repay a portion of the Company’s acquisition facility indebtedness. The principal balance owed by Midstream Holding to Trinity is reflected in the consolidated balance sheet as Midstream Subsidiary Note Payable to a Related Party. Midstream Holding’s obligations under the loan agreement are not guaranteed by Anadarko Petroleum Corporation but are unconditionally guaranteed, jointly and severally, by all of Midstream Holding’s subsidiaries.

Capital Expenditures The following table shows the Company’s capital expenditures relating to continuing operations by category.

millions	2007			2006			2005
Property acquisitions
Development—proved	$	(591	)	$	14,496		$	44
Exploration—unproved		(293	)		13,372			201
Development		2,805			3,084			1,910
Exploration		834			806			560
Total oil and gas costs incurred*		2,755			31,758			2,715
Less: Corporate acquisitions and property exchanges		1,001			(27,491	)		—
Less: Asset retirement costs		(194	)		(158	)		(29	)
Less: Geological and geophysical, exploration overhead and delay rentals expense		(261	)		(254	)		(162	)
Less: Amortization of acquired drilling rig contract intangibles		(86	)		—			—
Total oil and gas capital expenditures		3,215			3,855			2,524
Gathering, processing and marketing and other		775			357			120
Total capital expenditures*	$	3,990		$	4,212		$	2,644

* Oil and gas costs incurred represent costs related to finding and developing oil and gas reserves. Capital expenditures represent additions to property and equipment excluding corporate acquisitions, property exchanges and asset retirement costs. Capital expenditures and cost incurred are presented on an accrual basis. Additions to properties and equipment on the consolidated statement of cash flows include certain adjustments that give effect for the timing of actual cash payments in order to represent a cash basis.

Anadarko’s capital expenditures decreased 5% in 2007 compared to 2006. The Company’s capital spending increased 59% in 2006 compared to 2005. The 2007 decrease was primarily due to a decrease in development drilling and construction expenditures and a decrease in exploration lease acquisition activity, partially offset by an increase in capital expenditures on gathering and processing facilities. The increase in 2006 resulted primarily from an increase in exploration lease acquisitions, offshore drilling completions, development of the CBM infrastructure and capital expenditures of the acquired companies. Additionally, all of the periods were impacted by rising service and material costs. The variances in the mix of oil and gas spending reflect the Company’s available opportunities based on the near-term ranking of projects by net asset value potential.

Proved property acquisitions and unproved property acquisitions in 2007 include adjustments of $(600) million and $(484) million, respectively, related to finalizing the allocation of fair value to oil and gas properties acquired from Kerr-McGee and Western in 2006. The property acquisitions in 2006 related primarily to Kerr-McGee and Western. The property acquisitions in 2005 primarily related to exploratory nonproducing leases.

Anadarko participated in a total of 1,823 gross wells in 2007 compared to 1,537 gross wells in 2006 and 688 gross wells in 2005.

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The following table provides additional detail of the Company’s drilling activity in 2007 and 2006.

	Gas	Oil	Dry	Total
2007 Exploratory
Gross	33	1	21	55
Net	18.1	0.3	8.0	26.4
2007 Development
Gross	1,727	34	7	1,768
Net	894.7	12.0	2.4	909.1
2006 Exploratory
Gross	56	7	13	76
Net	34.6	3.6	5.7	43.9
2006 Development
Gross	1,183	272	6	1,461
Net	631.6	205.6	2.2	839.4

Gross: total wells in which there was participation.

Net: working interest ownership.

The Company’s 2007 exploration and development drilling program is discussed in Oil and Gas Properties and Activities under Item 1 of this Form 10-K.

Dividends In 2007, 2006 and 2005, Anadarko paid $170 million, $167 million and $170 million, respectively, in dividends to its common stockholders (nine cents per share per quarter). Anadarko has paid a dividend to its common stockholders continuously since becoming an independent company in 1986. The amount of future dividends for Anadarko common stock will depend on earnings, financial conditions, capital requirements and other factors, and will be determined by the Board of Directors on a quarterly basis.

The covenants in the Company’s credit agreement provide for a maximum capitalization ratio of 60% debt, exclusive of the effect of any non-cash writedowns. As of December 31, 2007, Anadarko’s capitalization ratio was 47%. Although the covenants of the agreement do not specifically restrict the payment of dividends, the Company could be limited in the amount of dividends it could pay in order to stay below the maximum capitalization ratio. Based on these covenants, retained earnings of approximately $6.6 billion were not limited as to the payment of dividends.

In 2007, 2006 and 2005, Anadarko also paid $3 million, $3 million and $5 million, respectively, in preferred stock dividends. In 2008, preferred stock dividends are expected to be $2 million.

Common Stock Repurchase Program During 2005, a $2 billion stock buyback program announced in 2004 was completed and an additional $1 billion stock buyback program was authorized in November 2005. Shares may be repurchased either in the open market or through privately negotiated transactions. During 2007, no shares were repurchased under the plan. During 2006 and 2005, Anadarko purchased 2.5 million and 21.6 million shares of common stock for $0.1 billion and $0.9 billion, respectively, under these programs. The repurchase program does not obligate Anadarko to acquire any specific number of shares and may be discontinued at any time. At December 31, 2007, $636 million remained available for stock repurchases under the program authorized in 2005.

Outlook The Company’s goals include continuing to find or acquire high-margin oil and gas reserves at competitive prices while keeping operating costs at efficient levels. Anadarko completed the acquisitions of Kerr-McGee and Western in August 2006 in two separate all-cash transactions. As of December 31, 2007, the Company had reduced the initial amount owed under a facility that was used to finance the acquisitions to approximately $1.0 billion using divestiture proceeds, long-term debt financings and cash flow from operations. The Company expects to repay the remaining balance owed under the facility, which matures in March 2008, with proceeds from identified divestitures and excess cash, possibly supplemented with short-term

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borrowings. As discussed previously, Anadarko intends to reduce its economic interest in certain midstream assets through the formation and initial public offering of a Master Limited Partnership. The net after-tax proceeds from this transaction will be used to reduce indebtedness under the midstream note payable to a related party.

The objective of the Kerr-McGee and Western acquisitions was to provide a more economically efficient platform with higher and more consistent growth potential, with the intent of divesting properties that were no longer deemed to be core to Anadarko’s operations. During 2007, the Company successfully completed the majority of the divestiture stage of the realignment program. As expected, Anadarko’s proved reserves after completing the divestitures were about equal to levels before the acquisitions. The Company estimates that approximately 7% of the sales volumes for 2007 are associated with the properties which have been divested. The new portfolio is intended to be better balanced, with lower-risk U.S. onshore resource plays complementing the volatility inherent in the Company’s deepwater Gulf of Mexico and international programs. The Company believes the acquisitions and optimization of its portfolio provide:

• A more efficient collection of lower-risk, predictable and consistent producing properties;

• Access to high-impact exploration opportunities worldwide through an expanded leasehold position;

• A substantial inventory of identified prospects, which will help deliver value from the exploratory drilling program over many years to come; and

• Expanded technical capabilities, combining the exploration, development, project management and operational skill sets of all three companies.

The Company has an approved 2008 capital spending budget of $4.7 billion. The Company has allocated about 65% of capital spending to development activities, 20% to exploration activities, 10% to gas gathering and processing activities, with the remaining 5% for capitalized interest and other items. The Company expects capital spending by area to be approximately 30% for the Rockies, 20% for the Southern region, 25% for the Gulf of Mexico, 15% for International and Alaska and 10% for Midstream. Emphasis will be on production growth in the Rockies, continued development in the Gulf of Mexico, including the start-up of the Blind Faith platform, and progress toward first production in Brazil that is expected in 2010. The Company’s capital discipline strategy is to set capital activity at levels that can be funded with operating cash flows. Anadarko believes that its expected level of cash flow will be sufficient to fund the Company’s projected operational program for 2008.

If capital expenditures were to exceed operating cash flow, funds would be supplemented as needed by short-term borrowings. To facilitate such borrowings, the Company has in place a $750 million committed credit agreement, which is supplemented by various noncommitted credit lines that may be offered by certain banks from time to time at then-quoted rates. As of December 31, 2007, the Company had no outstanding borrowings under its credit facility. The Company’s policy is to limit commercial paper borrowing to levels that are fully supported by unused balances from its committed credit facilities. The Company may choose to refinance certain portions of these short-term borrowings by issuing long-term debt in the public or private debt markets. To facilitate such financings, the Company may sell securities under its shelf registration statement filed with the SEC in September 2006.

The Company continuously monitors its debt position and coordinates its capital expenditure program with expected cash flows and projected debt repayment schedules. The Company will continue to evaluate funding alternatives, including property divestitures and additional borrowings, to secure funds when needed.

Recent Activities Prices for the Company’s natural gas sales are a function of both the New York Mercantile Exchange (NYMEX) prices as well as basis differentials for various sales regions. The Company has been active recently trying to protect against wider basis differentials versus NYMEX index by utilizing basis hedges and firm transportation agreements. In January and February of 2008, the Company added to its existing NYMEX hedging program an additional 340 thousand MMBtu/d for 2009 using three-way option collars. The Company now has a total of 530 thousand MMBtu/d (0.5 Bcf/d) of 2009 natural gas hedged using three-way option collars. Averaging the total 2009 hedged position of the Company results in a floor of $7.50 per MMBtu in place until

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$5.45 per MMBtu, at which point the Company will receive market plus $2.05 per MMBtu for prices below $5.45 per MMBtu. Additionally, the price will be capped at $11.25 per MMBtu for gas prices above that level.

For additional information on factors that could impact Anadarko’s future results of operations, cash flows from operating activities or financial position see Critical Accounting Policies and Estimates below and Risk Factors under Item 1a of this Form 10-K.

Off-Balance Sheet Arrangements

In 2007, Anadarko contributed certain of its producing oil and gas properties and gathering and processing assets, with an aggregate fair value of approximately $2.9 billion, to newly formed entities in exchange for noncontrolling mandatorily redeemable interests in those entities. Subsequent to their formation, the investee entities loaned Anadarko an aggregate of $2.9 billion, which the Company used to repay its acquisition-related debt. Anadarko has a legal right to setoff and intends to net-settle its obligations under each of the notes payable to the investees and the distributable value of its interest in the corresponding investee. Accordingly, the $2.9 billion aggregate principal amount of such notes does not affect Anadarko’s reported debt balance, since the notes and the carrying amount of Anadarko’s investments in the investees are presented on the consolidated balance sheet on a net basis. Note 11—Unconsolidated Affiliates of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K provides additional information with respect to each of these transactions. Completion of these transactions resulted in Anadarko divesting control of its interests in certain non-core exploration and production and midstream assets and operations, while retaining a participating 5% interest in profits, losses and residual value of the investees.

With respect to each investee, liquidation of the investee or redemption of Anadarko’s interest in the investee is expected to result in Anadarko net-settling in cash its obligation under the corresponding note payable with the distributable value of its interest in the investee. The Company does not currently expect such net settlement to have a material effect on its future financial condition, results of operations or cash flows. Each of Anadarko’s noncontrolling interests in the investees is optionally redeemable by Anadarko or the controlling investor in or after 2022 and is mandatorily redeemable in 2037.

Obligations and Commitments

Following is a summary of the Company’s obligations as of December 31, 2007:

	Obligations by Period
millions	1 Year		2-3 Years		4-5 Years		More than 5 Years		Total
Total debt*
Principal—current debt	$	1,397	$	—	$	—	$	—	$	1,397
Principal—long-term debt		—		2,052		1,877		9,032		12,961
Midstream subsidiary note payable to a related party		—		—		2,200		—		2,200
Interest		837		1,499		1,272		7,817		11,425
Operating leases
Drilling rig commitments		1,373		1,793		1,054		230		4,450
Production platforms		85		123		106		365		679
Other		69		122		80		81		352
Asset retirement obligations		15		87		92		907		1,101
Midstream and marketing activities		145		193		177		354		869
Oil and gas activities		475		633		142		12		1,262

* Excludes amount discussed above under Off-Balance Sheet Arrangements.

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Operating Leases Operating lease obligations include several drilling rig commitments that qualify as operating leases. Over the past three years, Anadarko has entered into several agreements to secure the necessary drilling rigs to execute its drilling strategy over several years. A previous review of the Company’s worldwide deepwater drilling inventory, along with the tightening deepwater and onshore rig market, led Anadarko to secure the drilling rigs it needs to execute its strategy. The Company believes these rig-contracting efforts offer compelling economics and facilitate its drilling strategy. The portion of lease payments associated with successful exploratory wells and development wells, net of amounts billed to partners, will be capitalized as a component of oil and gas properties.

The Company also has $1.0 billion in commitments under noncancelable operating lease agreements for production platforms and equipment, buildings, facilities and aircraft.

For additional information see Note 21—Commitments of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Midstream and Marketing Activities Anadarko has entered into various transportation, storage and purchase agreements in order to access markets and provide flexibility for the sale of its natural gas and crude oil in certain areas. The above table includes amounts related to these commitments.

Oil and Gas Activities As is common in the oil and gas industry, Anadarko has various long-term contractual commitments pertaining to exploration, development and production activities, which extend beyond the 2008 budget. The Company has work-related commitments for, among other things, drilling wells, obtaining and processing seismic and fulfilling rig commitments. The preceding table includes long-term drilling and work- related commitments of $1,262 million, comprised of $391 million in the United States, $45 million in Algeria and $826 million in other international locations.

The Company also has option and swap contracts in place to manage price risk associated with a portion of its expected future sales of its oil and gas production. Both exchange and over-the-counter traded derivative instruments are subject to margin deposit requirements. Margin deposits are required of the Company whenever its unrealized losses with a counterparty exceed predetermined credit limits. Given the Company’s price risk management position and price volatility, the Company may be required from time to time to advance cash to its counterparties in order to satisfy these margin deposit requirements. During 2007, the Company’s margin deposit requirements have ranged from $21 to $119 million. The Company had margin deposits of $51 million outstanding at December 31, 2007.

Marketing and Trading Contracts The following tables provide information as of December 31, 2007 regarding the Company’s marketing and trading portfolio of physical delivery and financially settled derivative instruments. See Critical Accounting Policies and Estimates for an explanation of how the fair value for derivatives is calculated.

millions	Marketing and Trading
Fair value of contracts outstanding as of December 31, 2006—assets (liabilities)	$	59
Contracts realized or otherwise settled during 2007		(52	)
Fair value of new contracts when entered into during 2007		2
Other changes in fair value		2
Fair value of contracts outstanding as of December 31, 2007—assets (liabilities)	$	11

	Fair Value of Contracts as of December 31, 2007
Assets (Liabilities) millions	Maturity less than 1 Year		Maturity 1-3 Years			Maturity 4-5 Years		Maturity in excess of 5 Years		Total
Marketing and Trading
Prices actively quoted	$	12	$	(1	)	$	—	$	—	$	11

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Environmental Anadarko is also subject to various environmental remediation and reclamation obligations arising from federal, state and local laws and regulations. As of December 31, 2007, the Company’s balance sheet included a $132 million liability for remediation and reclamation obligations, most of which were incurred by companies that Anadarko has acquired. The Company continually monitors the liability recorded and the remediation and reclamation process, and believes the amount recorded is appropriate. For additional information see Legal Proceedings—Environmental Matters under Item 3 of this Form 10-K.

Other In 2007 the Company made contributions of $16 million to its funded pension plans, $74 million to its unfunded pension plans and $22 million to its unfunded other postretirement benefit plans. Contributions to the funded plans increase the plan assets while contributions to unfunded plans are used for current benefit payments. In 2008, the Company expects to contribute $15 million to its funded pension plans, $11 million to its unfunded pension plans and $22 million to its unfunded other postretirement benefit plans. Future contributions to funded pension plans will be affected by actuarial assumptions, market performance and individual year funding decisions. The Company is unable to accurately predict what contribution levels will be required beyond 2008 for the pension plans; however, they are expected to be at levels similar to those planned to be made in 2008. The Company expects future payments for other postretirement benefit plans to be at levels similar to those made in 2007.

For additional information on contracts, obligations and arrangements the Company enters into from time to time, see Note 9—Debt and Interest Expense, Note 10—Financial Instruments, Note 21—Commitments, Note 12 —Asset Retirement Obligations, Note 22—Pension Plans, Other Postretirement Benefits and Employee Savings Plans and Note 23—Contingencies of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Discontinued Operations

In November 2006, Anadarko sold its wholly-owned subsidiary, Anadarko Canada Corporation, for approximately $4 billion before income taxes. Accordingly, the Canadian oil and gas operations have been classified as discontinued operations in the consolidated statements of income and cash flows. The following table summarizes selected data pertaining to discontinued operations.

millions except per share amounts	2007		2006			2005
Revenues and other	$	24	$	717		$	925
Income from discontinued operations	$	18	$	311		$	444
Gain on disposition of discontinued operations		8		2,494			—
Income from discontinued operations before income taxes		26		2,805			444
Income tax expense		15		530			88
Income from discontinued operations, net of taxes	$	11	$	2,275		$	356
Earnings per common share from discontinued operations—diluted	$	0.02	$	4.91		$	0.75
Annual sales volumes (MMBOE)		—		17			20
Cash flow provided by (used in) operating activities	$	134	$	(178	)	$	591
Capital expenditures	$	—	$	537		$	417

Income from discontinued operations for 2007 related primarily to marketing activities that were exited during 2007 and the effect of foreign currency translation on the indemnity liability discussed in Note 23—Contingencies of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Income from discontinued operations, net of tax, for 2006 increased compared to 2005 primarily due to the gain on the sale of Canadian operations, a decrease in Canadian tax rates and higher oil prices, partially offset by an increase in Canadian taxes associated with the gain on sale and a decrease in recognized sales volumes as a result of the November 2006 sale.

Under the Company’s initial 364-day term loan agreement, the Company was required to use net cash proceeds from significant dispositions to repay debt. Because the Canadian assets were subject to this requirement, approximately $58 million of interest expense related to the portion of debt that was repaid with proceeds from the sale of the Canadian operations is included in results of discontinued operations for 2006.

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Critical Accounting Policies and Estimates

Financial Statements and Use of Estimates In preparing financial statements in accordance with generally accepted accounting principles, management makes informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management reviews its estimates, including those related to determination of proved reserves, litigation, environmental liabilities, income taxes and fair values. In 2006, significant estimates were also involved in accounting for business combinations. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates. Management considers the following to be its most critical accounting policies and estimates that involve judgment and discusses the selection and development of these policies and estimates with the Company’s Audit Committee.

Change in Accounting Principle In the third quarter of 2007, Anadarko changed its method of accounting for its oil and gas exploration and development activities from the full cost to the successful efforts method. In accordance with SFAS No. 154, “Accounting Changes and Error Corrections,” financial information for prior periods has been revised to reflect retrospective application of the successful efforts method, as prescribed by SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” For additional information on the impact of the change to the successful efforts method of accounting see Note 1—Summary of Significant Accounting Policies – Properties and Equipment, Note 2—Change in Accounting Principle and Note 8—Properties and Equipment of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Business Combinations Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets and liabilities of the acquired business and recording deferred taxes for any differences between the allocated values and tax basis of assets and liabilities. Any excess of the purchase price over the amounts assigned to assets and liabilities is recorded as goodwill. In connection with Anadarko’s August 2006 acquisitions of Kerr-McGee and Western, the Company recorded goodwill for the excess of the purchase price over the value assigned to individual assets acquired and liabilities assumed.

Purchase Price Allocation The purchase price allocation is accomplished by recording the asset or liability at its estimated fair value. Anadarko uses all available information to make these fair value determinations, including information commonly considered by the Company’s engineers in valuing individual oil and gas properties and sales prices for similar assets. Estimated deferred taxes are based on available information concerning the tax basis of the acquired company’s assets and liabilities and carryforwards at the merger date, although such estimates may change in the future as additional information becomes known. The amount of goodwill recorded in any particular business combination can vary significantly depending upon the values attributed to assets acquired and liabilities assumed relative to the total acquisition cost.

Goodwill The Company is required to assess goodwill for impairment annually, or more often as circumstances warrant. The first step of that process is to compare the fair value of the reporting unit to which goodwill has been assigned to the carrying amount of the associated net assets and goodwill. If the estimated fair value is greater than the carrying amount of the reporting unit, then no impairment loss is required. The Company completed its most recent annual goodwill impairment test, with no impairment indicated. Although Anadarko cannot predict when or if goodwill will be impaired in the future, impairment charges may occur if the Company is unable to replace the value of our depleting asset base or if other adverse events (for example, lower sustained oil and gas prices) reduce the fair value of the associated reporting unit.

Proved Reserves Proved oil and gas reserves, as defined by SEC Regulation S-X Rule 4-10(a) (2i), (2ii), (2iii), (3) and (4), are the estimated quantities of crude oil, natural gas and NGLs that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.

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The Company’s estimates of proved reserves are made using available geological and reservoir data as well as production performance data. These estimates are reviewed annually and revised, either upward or downward, as warranted by additional data. Revisions are necessary due to changes in, among other things, reservoir performance, prices, economic conditions and governmental restrictions as well as changes in the expected recovery rates associated with infill drilling. Decreases in prices, for example, may cause a reduction in some proved reserves due to reaching economic limits sooner. A material change in the estimated volumes of reserves could have an impact on the DD&A rate calculation and the financial statements.

Unproved Leasehold Costs Leasehold acquisition costs are initially capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed periodically for impairment individually, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated. For unproved oil and gas properties with individually insignificant lease acquisition costs, such costs are amortized on a group basis (thereby establishing a valuation allowance) over the average lease terms of the leases at rates that provide for full amortization of unsuccessful leases upon expiration. Costs of expired or abandoned leases are charged against the valuation allowance, while costs of productive leases are transferred to proved oil and gas properties. Amortization of individual insignificant leases and impairment of unsuccessful leases, are included in exploration expense. As of December 31, 2007, the Company had approximately $12.6 billion of capitalized unproved leasehold costs, primarily from its August 2006 acquisitions of Kerr-McGee and Western.

Significant undeveloped leasehold costs are assessed for impairment at a lease level or resource play (for example, Greater Natural Buttes area in the Rocky Mountain region), while leasehold acquisition costs associated with prospective areas that have had limited or no previous exploratory drilling are generally assessed for impairment by major prospect area.

A majority of the Company’s unproved leasehold costs are associated with leases or concessions to which proved developed producing reserves are also attributed. Generally, economic recovery of unproved reserves in such areas is not yet supported by actual production or conclusive formation tests, but may be confirmed by the Company’s continuing exploitation program. Ultimate recovery of potentially recoverable reserves in areas with established production generally has greater probability than in areas with limited or no prior drilling activity.

A portion of the Company’s unproved leasehold costs are associated with the Company’s exploration program, in which drilling activities have not yet commenced or are inconclusive, and the disposition of such costs will be determined by the success of the Company’s exploration program.

Another portion of the Company’s unproved leasehold costs are associated with the Land Grant acreage in which the Company owns mineral interests in perpetuity and plans to explore and evaluate the acreage through a 10- to 12-year program.

An estimate as to sensitivity to earnings if assumptions other than those used for impairment of unproved properties is impractical given the broad range and number of assumptions involved and the relatively low level of exploration activities which have occurred during 2007 on assets acquired in the Kerr-McGee and Western acquisitions.

Suspended Exploratory Drilling Costs Under the successful efforts method of accounting, exploratory drilling costs associated with a discovery well are initially capitalized, or suspended, pending determination of whether proved reserves can be attributed to the area as a result of drilling. At the end of each quarter, management reviews the status of all suspended exploratory drilling costs in light of ongoing exploration activities—in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are under way and proceeding as planned. If management determines that future appraisal drilling or development activities are not likely to occur, associated suspended exploratory drilling costs are expensed. Therefore, at any point in time, the Company has capitalized costs on its consolidated balance sheet associated with exploratory wells that may be charged to exploration expense in a future period. At December 31, 2007, suspended exploratory drilling costs were $308 million compared to $312 million at December 31, 2006.

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Impairment of Assets A long-lived asset other than unproved oil and gas property is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying amount may be greater than its future net cash flows. Impairment loss, if any, is measured as the excess of its carrying amount over the asset’s fair value. Such evaluations involve a significant amount of judgment, since the results are based on expected future events or conditions, such as sales prices for oil, gas or NGLs; estimates of future oil and gas production; development and operating costs and the timing thereof; economic and regulatory climates and other factors. The Company’s estimates of future net cash flows used in the impairment assessments are inherently imprecise because they reflect management’s expectation of future conditions that are often outside of management’s control. However, assumptions used reflect management’s long-term outlook on prices, costs and other factors, and are consistent with assumptions used in the Company’s business plans and investment decisions.

Derivative Instruments Current accounting rules require that all derivative instruments, other than those that meet specific exclusions, be recorded at fair value. Quoted market prices are the best evidence of fair value. If quotations are not available, management’s best estimate of fair value is based on the quoted market price of derivatives with similar characteristics or on valuation techniques.

The Company’s derivative instruments are either exchange traded or transacted in an over-the-counter market. Valuation is determined by reference to readily available public data. Option fair values are based on the Black-Scholes option pricing model and verified against the applicable counterparty’s fair values.

Derivative accounting rules require that fair value changes of derivative instruments that do not qualify for hedge accounting be reported in current period earnings, rather than in the period the derivatives are settled and/ or the hedged transaction is settled. This can result in significant earnings volatility. Through the end of 2006, Anadarko applied hedge accounting to some of its commodity derivatives. Derivative accounting rules are complex, subject to interpretation in their application, and interpretative guidance continues to evolve. As a result of this accounting risk, effective January 1, 2007, Anadarko discontinued hedge accounting on all existing commodity and interest rate derivatives. Such a change did not affect Anadarko’s reported financial position or cash flows and did not require adjustments to previously reported financial statements.

Benefit Plan Obligations The Company has defined benefit pension plans and supplemental pension plans that are noncontributory and a foreign contributory defined benefit pension plan. The Company also provides certain health care and life insurance benefits for retired employees. Determination of the projected benefit obligations for the Company’s defined benefit pension and postretirement plans is important to the recorded amounts for such obligations on the balance sheet and to the amount of benefit expense in the income statement. This also impacts the Company’s decisions for amounts contributed into the plans.

Accounting for pension and other postretirement benefit obligations involves numerous assumptions, the most significant of which relate to discount rate for measuring the present value of future plan obligations; expected long-term rates of return on plan assets; rate of future increases in compensation levels; and health care cost projections. Anadarko develops demographics and utilizes the work of third-party actuaries to assist in the measurement of these obligations.

Discount rate The discount rate assumption used by the Company is meant to reflect the interest rate at which the pension and other postretirement obligations could effectively be settled on the measurement date. The Company currently uses a yield curve analysis, for a majority of the plans, to support the discount rate assumption. This analysis involves the creation of a hypothetical Aa spot yield curve represented by a series of high-quality, non-callable, marketable bonds, then discounts the projected cash flows from each plan at interest rates on the created curve specifically applicable to the timing of each respective cash flow. The present values of the cash flows are then accumulated, and a weighted-average discount rate is calculated by imputing the single discount rate that equates to the total present value of the cash flows. The consolidated discount rate assumption is determined by evaluation of the weighted-average discount rates determined for each of the Company’s significant pension and postretirement plans. The weighted-average discount rate assumption used by the Company as of December 31, 2007 was 6.0% for pension plans and 6.25% for other postretirement plans.

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Expected long-term rate of return The expected long-term rate of return on assets assumption was determined using the year-end 2007 pension investment balances by category and projected target asset allocations for 2008. The expected return for each of these categories was determined by using capital market projections, with consideration of actual five-year performance statistics for investments in place. The weighted-average expected long-term rate of return on plan assets assumption used by the Company as of December 31, 2007 was 7.75%.

Rate of compensation increases The Company determines this assumption based on its long-term plans for compensation increases specific to employee groups covered and expected economic conditions. The assumed rate of salary increases includes the effects of merit increases, promotions and general inflation. The weighted- average rate of increase in long-term compensation levels assumption used by the Company as of December 31, 2007 was 5.0%.

Health care cost trend rate The health care cost trend assumptions are developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends. For year-end 2007 measurement purposes, the Company used separate assumptions of cost increase rates for medical, prescription drugs and dental benefits covered by the plans. A 7.0% annual rate of increase in the per capita cost of covered medical benefits was assumed for 2008, decreasing gradually to 5.0% in 2015 and later years. For prescription drug benefits, a rate of increase of 11.0% in the per capita cost was assumed for 2008, decreasing gradually to 5.0% in 2015 and later years. For dental care costs, the Company assumed a flat rate of increase of 5.0%.

Environmental Obligations and Other Contingencies Management makes judgments and estimates in accordance with applicable accounting rules when it establishes reserves for environmental remediation, litigation and other contingent matters. Provisions for such matters are charged to expense when it is probable that a liability has been incurred and reasonable estimates of the liability can be made. Estimates of environmental liabilities are based on a variety of matters, including, but not limited to, the stage of investigation, the stage of the remedial design, evaluation of existing remediation technologies, and presently enacted laws and regulations. In future periods, a number of factors could significantly change the Company’s estimate of environmental remediation costs, such as changes in laws and regulations, or changes in their interpretation or administration, revisions to the remedial design, unanticipated construction problems, identification of additional areas or volumes of contaminated soil and groundwater, and changes in costs of labor, equipment and technology. Consequently, it is not possible for management to reliably estimate the amount and timing of all future expenditures related to environmental or other contingent matters and actual costs may vary significantly from the Company’s estimates. The Company’s in-house legal counsel and environmental personnel regularly assess these contingent liabilities and, in certain circumstances, outside legal counsel or consultants are utilized.

Income Taxes The amount of income taxes recorded by the Company requires the interpretation of complex rules and regulations of various taxing jurisdictions throughout the world. The Company has recognized deferred tax assets and liabilities for temporary differences, operating losses and tax credit carryforwards. The Company routinely assesses the realizability of its deferred tax assets and reduces such assets by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company routinely assesses potential uncertain tax positions and, if required, establishes accruals for such amounts. The accruals for deferred tax assets and liabilities are subject to a significant amount of judgment by Company management and are reviewed and adjusted routinely based on changes in facts and circumstances. Although Company management believes its tax accruals are adequate, material changes in these accruals may occur in the future, based on the progress of ongoing tax audits, changes in legislation and resolution of pending tax matters.

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Recent Accounting Developments

New Accounting Principles In April 2007, the FASB issued FASB Staff Position (FSP) FASB Interpretation (FIN) No. 39-1, “Amendment of FASB Interpretation No. 39” (FSP FIN 39-1), which addresses certain modifications to FIN No. 39, “Offsetting of Amounts Related to Certain Contracts.” The FSP provides for offsetting fair value amounts recognized for the right to reclaim cash collateral (a receivable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. FSP FIN 39-1 is effective for Anadarko as of January 1, 2008. As of December 31, 2007, Anadarko had approximately $50 million in current assets for the right to reclaim cash for derivative instruments. Upon adoption in the first quarter of 2008, Anadarko will offset the right to reclaim cash collateral against net derivative positions for which a master netting agreement exists. Because FSP FIN 39-1 requires retrospective application, the Company’s historical balance sheets will be revised accordingly. Anadarko does not expect the impact to be material.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS No. 141(R)), a replacement of SFAS No. 141, “Business Combinations.” SFAS No. 141 (R) modifies the accounting for business combinations under SFAS No. 141 and will apply to Anadarko prospectively for future business combinations with an acquisition date on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51.” SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as a component of consolidated equity. This is a change from the current practice to present noncontrolling interests in liabilities or between liabilities and stockholders’ equity. Similarly, SFAS No. 160 requires consolidated net income and comprehensive income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interests. Anadarko will be required to adopt accounting provisions of SFAS No. 160 prospectively with respect to transactions involving noncontrolling financial interests that occur on or after January 1, 2009. Presentation and disclosure requirements of SFAS No. 160 will also be applied effective January 1, 2009, but with respect to all periods presented. After adopting SFAS No. 160 in 2009, the Company will apply provisions of this standard to noncontrolling interests created or acquired in future periods.

For additional information on recently issued accounting standards not yet adopted, see Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

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Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary market risks are fluctuations in energy prices and interest rates. These fluctuations can affect revenues and the cost of operating, investing and financing activities. The Company’s risk management policy provides for the use of derivative instruments to manage these risks. The types of derivative instruments utilized by the Company include futures, swaps, options and fixed price physical delivery contracts. The volume of derivative instruments utilized by the Company is governed by the risk management policy and can vary from year to year. For information regarding the Company’s accounting policies and additional information related to the Company’s derivative and financial instruments, see Note 1—Summary of Significant Accounting Policies, Note 9—Debt and Interest Expense and Note 10—Financial Instruments of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.

Energy Price Risk The Company’s most significant market risk is the pricing for natural gas, crude oil and NGLs. Management expects energy prices to remain volatile and unpredictable. If energy prices decline significantly, revenues and cash flow would significantly decline. In addition, a non-cash write down of the Company’s oil and gas properties could be required under successful efforts accounting rules if future oil and gas commodity prices sustained significant decline. Below is a sensitivity analysis of the Company’s commodity price related derivative instruments.

Derivative Instruments Held for Non-Trading Purposes The Company had derivative instruments in place to reduce the price risk associated with future equity production of 582 Bcf of natural gas and 57 MMBbls of crude oil as of December 31, 2007. As of December 31, 2007, the Company had a net unrealized loss of $264 million on these derivative instruments. Utilizing the actual derivative contractual volumes, a 10% increase in underlying commodity prices would reduce the fair value of these instruments by approximately $527 million. However, this loss would be substantially offset by an increase in the value of that portion of the Company’s production covered by the derivative instruments.

Derivative Instruments Held for Trading Purposes As of December 31, 2007, the Company had a net unrealized gain of $11 million (gains of $41 million and losses of $30 million) on derivative financial instruments entered into for trading purposes. Utilizing the actual derivative contractual volumes, a 10% increase in underlying commodity prices would result in an additional loss on these derivative instruments of $8 million.

For additional information regarding the Company’s marketing and trading portfolio, see Marketing Strategies under Item 7 of this Form 10-K.

Interest Rate Risk As of December 31, 2007, Anadarko had outstanding $5.2 billion of variable-rate debt (including the midstream subsidiary note payable to a related party) and $9.5 billion of fixed-rate debt. A 10% increase in LIBOR interest rates would increase gross interest expense approximately $26 million per year.

In January 2008, Anadarko entered into forward-looking 18-month interest rate swaps effective March 2008 with an aggregate notional value of $1.0 billion whereby the Company will pay a weighted-average fixed interest rate of 2.74% and receive a floating interest rate indexed to the three-month LIBOR rate.

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Item 8. Financial Statements and Supplementary Data

ANADARKO PETROLEUM CORPORATION

INDEX

CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Management	59
Management’s Assessment of Internal Control Over Financial Reporting	59
Reports of Independent Registered Public Accounting Firm	60
Statements of Income, Three Years Ended December 31, 2007	62
Balance Sheets, December 31, 2007 and 2006	63
Statements of Stockholders’ Equity, Three Years Ended December 31, 2007	64
Statements of Comprehensive Income, Three Years Ended December 31, 2007	65
Statements of Cash Flows, Three Years Ended December 31, 2007	66
Notes to Consolidated Financial Statements	67
Supplemental Information on Oil and Gas Exploration and Production Activities	117
Supplemental Quarterly Information	129

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ANADARKO PETROLEUM CORPORATION

REPORT OF MANAGEMENT

Management prepared, and is responsible for, the consolidated financial statements and the other information appearing in this annual report. The consolidated financial statements present fairly the Company’s financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. In preparing its consolidated financial statements, the Company includes amounts that are based on estimates and judgments that Management believes are reasonable under the circumstances. The Company’s financial statements have been audited by KPMG LLP, an independent registered public accounting firm appointed by the Audit Committee of the Board of Directors. Management has made available to KPMG LLP all of the Company’s financial records and related data, as well as the minutes of the stockholders’ and Directors’ meetings.

MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Anadarko’s internal control system was designed to provide reasonable assurance to the Company’s Management and Directors regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. This assessment was based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we believe that as of December 31, 2007 the Company’s internal control over financial reporting is effective based on those criteria.

/S/    JAMES T. HACKETT

James T. Hackett

Chairman, President and Chief Executive Officer

/S/    R.A. WALKER

R.A. Walker

Senior Vice President, Finance and

Chief Financial Officer

February 28, 2008

59

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Anadarko Petroleum Corporation:

We have audited Anadarko Petroleum Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Anadarko Petroleum Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Anadarko Petroleum Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Anadarko Petroleum Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 28, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/    KPMG LLP

Houston, Texas

February 28, 2008

60

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Anadarko Petroleum Corporation:

We have audited the accompanying consolidated balance sheets of Anadarko Petroleum Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Anadarko Petroleum Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for oil and gas producing activities and its method of accounting for uncertainty in income taxes in 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Anadarko Petroleum Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/    KPMG LLP

Houston, Texas

February 28, 2008

61

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31
	2007			2006*			2005*
millions except per share amounts
Revenues and Other
Gas sales	$	4,119		$	4,186		$	2,968
Oil and condensate sales		4,807			4,618			2,716
Natural gas liquids sales		719			594			437
Gathering, processing and marketing sales		1,487			718			76
Gains on divestitures, net		4,660			26			108
Other		100			88			3
Total		15,892			10,230			6,308
Costs and Expenses
Oil and gas operating		1,101			822			415
Oil and gas transportation and other		453			341			256
Exploration		905			737			445
Gathering, processing and marketing		1,025			553			56
General and administrative		936			768			477
Depreciation, depletion and amortization		2,840			1,752			901
Other taxes		1,234			549			345
Impairments		51			327			15
Total		8,545			5,849			2,910
Operating Income		7,347			4,381			3,398
Interest Expense and Other (Income) Expense
Interest expense		1,092			650			221
Other (income) expense		(74	)		(6	)		(76	)
Total		1,018			644			145
Income from Continuing Operations Before Income Taxes		6,329			3,737			3,253
Income Tax Expense		2,559			1,263			1,278
Income from Continuing Operations		3,770			2,474			1,975
Income from Discontinued Operations, net of taxes		11			2,275			356
Net Income	$	3,781		$	4,749		$	2,331
Preferred Stock Dividends		3			3			5
Net Income Available to Common Stockholders	$	3,778		$	4,746		$	2,326
Per Common Share
Income from continuing operations — basic	$	8.09		$	5.37		$	4.19
Income from continuing operations — diluted	$	8.05		$	5.33		$	4.15
Income from discontinued operations, net of taxes — basic	$	0.02		$	4.94		$	0.76
Income from discontinued operations, net of taxes — diluted	$	0.02		$	4.91		$	0.75
Net income available to common stockholders — basic	$	8.12		$	10.31		$	4.95
Net income available to common stockholders — diluted	$	8.08		$	10.24		$	4.90
Dividends	$	0.36		$	0.36		$	0.36
Average Number of Common Shares Outstanding — Basic		465			460			470
Average Number of Common Shares Outstanding — Diluted		468			464			475

* Financial information for 2006 and 2005 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 2.

See accompanying notes to consolidated financial statements.

62

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31
	2007			2006*
millions
ASSETS
Current Assets
Cash and cash equivalents	$	1,268		$	491
Accounts receivable, net of allowance:
Customers		1,465			1,476
Others		1,123			1,815
Other current assets		660			762
Current assets held for sale		—			68
Total		4,516			4,612
Properties and Equipment
Cost (includes unproved properties of $13,106 and $14,411 as of December 31, 2007 and 2006, respectively)		44,205			46,122
Less accumulated depreciation, depletion and amortization		6,754			4,686
Net properties and equipment — based on the successful efforts method of accounting for oil and gas properties		37,451			41,436
Other Assets		1,030			838
Goodwill and Other Intangible Assets		5,166			4,332
Long-term Assets Held for Sale		318			3,746
Total Assets	$	48,481		$	54,964
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	2,778		$	3,501
Accrued expenses		1,083			1,739
Current debt		1,396			11,471
Current liabilities associated with assets held for sale		—			47
Total		5,257			16,758
Long-term Debt		11,151			11,520
Midstream Subsidiary Note Payable to a Related Party		2,200			—
Other Long-term Liabilities
Deferred income taxes		10,214			11,870
Other		3,289			2,370
Long-term liabilities associated with assets held for sale		6			43
Total		13,509			14,283
Stockholders’ Equity
Preferred stock, par value $1.00 per share
(2.0 million shares authorized, 0.05 million shares issued as of December 31, 2007 and 2006)		45			46
Common stock, par value $0.10 per share
(1.0 billion shares authorized, 469.1 million and 463.4 million shares issued as of December 31, 2007 and 2006, respectively)		47			47
Paid-in capital		5,511			5,255
Retained earnings		11,089			7,409
Treasury stock (1.1 million and 0.4 million shares as of December 31, 2007 and 2006, respectively)		(55	)		(20	)
Accumulated other comprehensive income (loss):
Unrealized loss on derivative instruments		(132	)		(137	)
Foreign currency translation adjustments		(1	)		—
Pension and other postretirement plans		(140	)		(197	)
Total		(273	)		(334	)
Total		16,364			12,403
Commitments and Contingencies (Note 21 and Note 23)
Total Liabilities and Stockholders’ Equity	$	48,481		$	54,964

* Financial information for 2006 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 2.

See accompanying notes to consolidated financial statements.

63

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Years Ended December 31
	2007			2006*			2005*
millions
Preferred Stock
Balance at beginning of year	$	46		$	89		$	89
Preferred stock repurchased and retired		(1	)		(43	)		—
Balance at end of year		45			46			89
Common Stock
Balance at beginning of year		47			27			26
Common stock issued		—			1			1
Two-for-one stock split		—			23			—
Retirement of treasury stock		—			(4	)		—
Balance at end of year		47			47			27
Paid-in Capital
Balance at beginning of year		5,255			5,874			5,611
Common stock issued		256			224			263
Two-for-one stock split		—			(23	)		—
Retirement of treasury stock		—			(820	)		—
Balance at end of year		5,511			5,255			5,874
Retained Earnings
Balance at beginning of year (See Note 2)		7,409			4,552			2,396
Net income		3,781			4,749			2,331
Dividends — preferred		(3	)		(3	)		(5	)
Dividends — common		(170	)		(167	)		(170	)
Retirement of treasury stock		—			(1,722	)		—
Adoption of FIN 48		72			—			—
Balance at end of year		11,089			7,409			4,552
Treasury Stock
Balance at beginning of year		(20	)		(2,423	)		(1,476	)
Purchase of treasury stock		(35	)		(142	)		(947	)
Retirement of treasury stock		—			2,545			—
Balance at end of year		(55	)		(20	)		(2,423	)
Accumulated Other Comprehensive Income (Loss), net of taxes
Balance at beginning of year		(334	)		530			388
Unrealized gain (loss) on derivative instruments		5			(132	)		18
Foreign currency translation adjustments		(1	)		(552	)		63
Pension and other postretirement liability adjustments		57			7			61
Adoption of SFAS No. 158		—			(187	)		—
Balance at end of year		(273	)		(334	)		530
Total Stockholders’ Equity	$	16,364		$	12,403		$	8,649

* Financial information for 2006 and 2005 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 2.

See accompanying notes to consolidated financial statements.

64

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31
	2007			2006*			2005*
millions
Net Income Available to Common Stockholders	$	3,778		$	4,746		$	2,326
Add: Preferred stock dividends		3			3			5
Net Income		3,781			4,749			2,331
Other Comprehensive Income (Loss), net of taxes
Unrealized gains (losses) on derivative instruments:
Unrealized losses during the period (1)		—			(135	)		(126	)
Reclassification adjustment for loss included in net income (2)		5			3			144
Total unrealized gains (losses) on derivative instruments		5			(132	)		18
Foreign currency translation adjustments:
Unrealized foreign currency (losses) gains (3)		(1	)		67			63
Reclassification of foreign currency translation to gain on the disposition of Canadian operations (4)		—			(619	)		—
Total foreign currency translation adjustments		(1	)		(552	)		63
Pension and other postretirement plans adjustments:
Minimum pension liability adjustments (5)		—			7			61
Net gain incurred during period (6)		42			—			—
Amortization of net loss included in net periodic pension cost (7)		11			—			—
Prior service credit incurred during period (8)		4			—			—
Total pension and other postretirement plans adjustments		57			7			61
Total		61			(677	)		142
Comprehensive Income	$	3,842		$	4,072		$	2,473
(1) net of income tax benefit of:	$	—		$	77		$	73
(2) net of income tax expense of:		(3	)		(2	)		(82	)
(3) net of income tax expense of:		—			(10	)		(6	)
(4) net of income tax benefit of:		—			103			—
(5) net of income tax expense of:		—			(3	)		(35	)
(6) net of income tax expense of:		(23	)		—			—
(7) net of income tax expense of:		(7	)		—			—
(8) net of income tax expense of:		(2	)		—			—

* Financial information for 2006 and 2005 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 2.

See accompanying notes to consolidated financial statements.

65

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31
	2007			2006*			2005*
millions
Cash Flow from Operating Activities
Net income	$	3,781		$	4,749		$	2,331
Less income from discontinued operations, net of taxes		11			2,275			356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		2,840			1,752			901
Deferred income taxes		(1,057	)		328			414
Dry hole expense and impairments of unproved properties		632			460			265
Impairments		51			327			15
Gains on divestitures, net		(4,660	)		(26	)		(108	)
Unrealized (gains) losses on derivatives		1,048			(837	)		7
Other noncash items		172			68			(24	)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		379			(398	)		(516	)
Increase (decrease) in accounts payable and accrued expenses		(1,498	)		647			351
Other items — net		1,089			(124	)		(59	)
Cash provided by (used in) operating activities — continuing operations		2,766			4,671			3,221
Cash provided by (used in) operating activities — discontinued operations		134			(178	)		591
Net cash provided by (used in) operating activities		2,900			4,493			3,812
Cash Flow from Investing Activities
Acquisitions, net of cash acquired		(7	)		(21,087	)		—
Additions to properties and equipment and dry hole costs		(4,246	)		(4,206	)		(2,637	)
Divestitures of properties and equipment and other assets		8,260			1,086			160
Investment in Trinity Associates LLC		(100	)		—			—
Other-net		(63	)		—			—
Cash provided by (used in) investing activities — continuing operations		3,844			(24,207	)		(2,477	)
Cash provided by (used in) investing activities — discontinued operations		(66	)		3,652			(442	)
Net cash provided by (used in) investing activities		3,778			(20,555	)		(2,919	)
Cash Flow from Financing Activities
Borrowings, net of issuance costs		(40	)		28,603			4
Borrowings from unconsolidated affiliates, net of issuance costs		2,848			—			—
Issuance of midstream subsidiary note payable, net of issuance costs		2,176			—			—
Retirements of debt		(10,475	)		(12,482	)		(170	)
Increase (decrease) in accounts payable, banks		(29	)		61			86
Dividends paid		(173	)		(170	)		(175	)
Settlement of derivatives with a financing element		(306	)		(122	)		—
Purchase of treasury stock		(35	)		(142	)		(947	)
Repurchase and retirement of preferred stock		(1	)		(43	)		—
Issuance of common stock		114			130			168
Cash provided by (used in) financing activities — continuing operations		(5,921	)		15,835			(1,034	)
Cash provided by (used in) financing activities — discontinued operations		—			(12	)		3
Net cash provided by (used in) financing activities		(5,921	)		15,823			(1,031	)
Effect of Exchange Rate Changes on Cash — discontinued operations		—			11			3
Net (Decrease) Increase in Cash and Cash Equivalents		757			(228	)		(135	)
Cash and Cash Equivalents at Beginning of Period		511			739			874
Cash and Cash Equivalents at End of Period	$	1,268		$	511		$	739

* Financial information for 2006 and 2005 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 2.

See accompanying notes to consolidated financial statements.

66

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

1. Summary of Significant Accounting Policies

General  Anadarko Petroleum Corporation is engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids (NGLs). The Company also engages in the hard minerals business through non-operated joint ventures and royalty arrangements. In August 2006, Anadarko completed the acquisitions of Kerr-McGee Corporation (Kerr-McGee) and Western Gas Resources, Inc. (Western). See Note 3. The terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its subsidiaries.

Discontinued Operations and Assets Held for Sale  The Company’s Canadian operations have been classified as discontinued operations. Unless otherwise indicated, information presented in the notes to the financial statements relates only to Anadarko’s continuing operations. Additionally, certain assets met the held for sale criteria as of December 31, 2007 and 2006. See Note 5.

Principles of Consolidation and Use of Estimates  The consolidated financial statements include the accounts of Anadarko and entities in which it holds a controlling financial interest. All significant intercompany transactions have been eliminated. Investments in entities over which Anadarko has significant influence, but not control, are carried at cost, adjusted for Anadarko’s equity in investee earnings or losses and distributions received. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain amounts for prior periods have been reclassified to conform to the current presentation. In preparing financial statements, management makes informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, management reviews its estimates, including those related to determination of proved reserves, litigation, environmental liabilities, income taxes, and fair values. Changes in facts and circumstances or discovery of new information may result in revised estimates and actual results may differ from these estimates.

Changes in Accounting Principles  In the third quarter of 2007, Anadarko changed its method of accounting for its oil and gas exploration and development activities from full cost to the successful efforts method. In accordance with Statement of Financial Accounting Standards (SFAS) No. 154, “Accounting Changes and Error Corrections,” financial information for prior periods has been revised to reflect retrospective application of the successful efforts method, as prescribed by SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” Although the full cost method of accounting for oil and gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the preferred method. The Company believes the successful efforts method provides a more transparent representation of its results of operations and the ability to assess the Company’s investments in oil and gas properties for impairment based on their estimated fair values rather than being required to base valuation on prices and costs as of the balance sheet date. See Note 2.

Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” was issued in 2006 and became effective January 1, 2007 for Anadarko. FIN 48 defines the criteria an individual tax position must meet for any part of the benefit of that position to be recognized in the financial statements. FIN 48 also provides guidance, among other things, on the measurement of the income tax benefit associated with uncertain tax positions, de-recognition, classification, interest and penalties and financial statement disclosures. See Note 20.

In 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires companies to recognize the overfunded or underfunded status of a defined benefit postretirement plan in its balance sheet, measured as the difference between the fair value of plan assets and the benefit obligation, and

67

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

1. Summary of Significant Accounting Policies (Continued)

recognize changes in the funded status of a plan during the reporting period as a component of accumulated other comprehensive income. The recognition and disclosure provisions of SFAS No. 158 were effective for Anadarko as of December 31, 2006 and were adopted as of that date. See Note 22.

In January 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment,” using the modified prospective method. See Note 6.

Properties and Equipment Properties and equipment are stated at cost less accumulated depreciation, depletion and amortization (DD&A). Costs of improvements that appreciably improve the efficiency or productive capacity of existing properties or extend their lives are capitalized. Maintenance and repairs are expensed as incurred. Upon retirement or sale, the cost of properties and equipment, net of the related accumulated DD&A, is removed and, if appropriate, gains or losses are recognized in Revenues and Other.

Oil and Gas Exploration and Development  Exploration costs such as exploratory geological and geophysical costs, delay rentals and exploration overhead are charged against earnings as incurred. Costs of drilling exploratory wells are capitalized pending determination of whether proved reserves can be attributed to the area as a result of drilling the well. See Note 8. If management determines that commercial quantities of hydrocarbons have not been discovered, capitalized costs associated with exploratory wells are charged to exploration expense. Costs of drilling successful exploratory wells, all development wells, and related production equipment and facilities and asset retirement costs are capitalized and depleted or depreciated using the unit-of-production method as oil and gas is produced.

Leasehold acquisition costs are initially capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed periodically for impairment individually, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated. For unproved oil and gas properties with individually insignificant lease acquisition costs, such costs are amortized on a group basis (thereby establishing a valuation allowance) over the average lease terms of the leases at rates that provide for full amortization of unsuccessful leases upon expiration or abandonment. Costs of expired or abandoned leases are charged against the valuation allowance, while costs of productive leases are transferred to proved oil and gas properties. Costs of maintaining and retaining undeveloped leaseholds, as well as amortization of individually insignificant leases and impairment of unsuccessful leases, are included in exploration expense.

Proved oil and gas properties are reviewed for impairment at the lowest level for which identifiable cash flows are independent of cash flows of other assets when facts and circumstances indicate that their net book values may not be recoverable. In performing this review, future net cash flows are determined based on estimated future oil and gas sales revenues less future expenditures necessary to develop and produce the reserves. If the sum of these undiscounted estimated future net cash flows is less than the net book value of the property, an impairment loss is recognized for the excess, if any, of the property’s net book value over its estimated fair value, which is generally based on discounted future net cash flows.

Depreciation, Depletion and Amortization  Costs of drilling and equipping successful exploratory wells, development wells, costs to construct or acquire facilities other than offshore platforms and associated asset retirements costs are depreciated using the unit-of-production method based on total estimated proved developed oil and gas reserves. Costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved leaseholds and costs to construct or acquire offshore platforms and associated asset retirement costs, are depleted using the unit-of-production method based on total estimated proved developed and undeveloped reserves. Mineral properties are depleted using the unit-of-production method. All other properties are stated at

68

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

1. Summary of Significant Accounting Policies (Continued)

historical acquisition cost, net of allowance for impairment, and depreciated using the straight-line method over the useful lives of the assets, which range from three to 15 years for furniture and equipment, up to 40 years for buildings, and up to 47 years for gathering facilities.

Capitalized Interest  Interest is capitalized as part of the historical cost of developing and constructing assets. Significant oil and gas investments in unproved properties and significant exploration and development projects, on which DD&A expense is not currently recognized and on which exploration or development activities are in progress, qualify for capitalization of interest. Significant construction projects also qualify for interest capitalization until the asset is ready for service. Capitalized interest is determined by multiplying the Company’s weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once the asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment, along with other capitalized costs related to that asset.

Asset Retirement Obligations  The initial estimated asset retirement obligation is recognized as a liability, with an associated increase in properties and equipment. Accretion expense related to the asset retirement obligation is recognized over the estimated productive life of the related assets, which represents the estimated timing of obligation settlement. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded to both the asset retirement obligation and the asset retirement cost. Revisions in estimated liabilities can result from revisions of estimated inflation rates, escalating retirement costs and changes in the estimated timing of settling asset retirement obligations.

Revenues  The Company recognizes sales revenues based on the amount of gas, oil, condensate and NGLs sold to purchasers when delivery to the purchaser has occurred and title has transferred. This occurs when production has been delivered to a pipeline or a tanker lifting has occurred. The Company follows the sales method of accounting for natural gas production imbalances. If the Company’s excess sales of production volumes for a well exceed the estimated remaining recoverable reserves of the well, a liability is recognized. No receivables are recorded for those wells on which the Company has taken less than its ownership share of production.

Realized gains and losses on derivative instruments that received cash flow hedge accounting treatment and any associated hedge ineffectiveness, as well as realized and unrealized gains and losses on derivative instruments that did not receive cash flow hedge accounting treatment are included in gas sales, oil and condensate sales and NGLs sales. The Company discontinued hedge accounting effective January 1, 2007, as discussed in Derivative Instruments below.

The Company enters into buy/sell arrangements for a portion of its crude oil production. Under these arrangements, barrels are sold at prevailing market prices at a location, and in an additional transaction entered into in contemplation of the sale transaction with the same third party, barrels are re-purchased at a different location at the market prices prevailing at that location. The barrels are then sold at prevailing market prices at the re-purchase location. These arrangements are often a requirement of private transporters. In these transactions, the re-purchase price is more than the original sales price with the difference representing a transportation fee. Other buy/sell arrangements are entered to move the ultimate sales point of the Company’s production to a more liquid location and thereby avoid potential marketing fees and deductions from the market price in the field. In these transactions, the sales price in the field and the re-purchase price are each at prevailing market prices for the respective location. Anadarko uses these buy/sell arrangements in its marketing and trading activities and, as such, reports these transactions in the income statement on a net basis.

Marketing margins related to the Company’s production are included in gas sales, oil and condensate sales and NGLs sales. Marketing margins related to purchase of third-party commodities are included in gathering, processing and marketing sales.

69

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

1. Summary of Significant Accounting Policies (Continued)

Derivative Instruments  Anadarko utilizes derivative instruments in conjunction with its marketing and trading activities and to manage the price risk attributable to the Company’s forecasted sales of oil, natural gas and NGLs production. Anadarko also periodically utilizes derivatives to manage its exposure associated with NGLs processing, interest rates and foreign currency exchange rates. All derivatives that do not satisfy the normal purchases and sales exception criteria are carried on the balance sheet at fair value and are included in other current assets, other assets, accrued expenses or other long-term liabilities, depending on the position and expected timing of settlement. To the extent a legal right of offset with a counterparty exists, the Company reports derivative assets and liabilities net.

The Company’s derivative instruments are either exchange traded or traded through an over-the-counter market. Valuation is determined by reference to available market data. Option valuations are based on the Black-Scholes option pricing model. See Note 10.

Through the end of 2006, Anadarko applied hedge accounting to certain commodity and interest rate derivatives whereby gains and losses on these instruments were recognized in earnings in the same period in which the hedged transactions affected earnings. Effective January 1, 2007, Anadarko discontinued its application of hedge accounting to all commodity and interest rate derivatives. As a result of this change, both realized and unrealized gains and losses on derivative instruments are recognized in gas sales, oil and condensate sales or interest expense as they occur. Net derivative losses attributable to derivatives previously subject to hedge accounting and residing in accumulated other comprehensive income as of December 31, 2007 will be reclassified to earnings in future periods as the economic transactions to which the derivatives relate affect earnings.

As a result of discontinuing its application of hedge accounting, the Company’s reported earnings are potentially more volatile, since unrealized derivative gains and losses are being recognized in earnings in periods preceding the period in which the hedged transactions affect earnings.

Inventories  Materials and supplies and commodity inventories are stated at the lower of average cost or market.

Goodwill and Other Intangible Assets  Goodwill represents the excess of the purchase price of a business over the estimated fair value of the assets acquired and liabilities assumed. The Company assesses the carrying amount of goodwill by testing the goodwill for impairment annually, as of January 1, and when impairment indicators arise. The impairment test requires allocating goodwill and all other assets and liabilities to business levels referred to as reporting units. The fair value of each reporting unit is determined and compared to the carrying value of the reporting unit. If the fair value of the reporting unit is less than the carrying value, including goodwill, then the goodwill is written down to the implied fair value of the goodwill through a charge to expense. No goodwill impairment was indicated in 2007.

Changes in goodwill may result from, among other things, changes in deferred income tax liabilities related to previous acquisitions, impairments, future acquisitions or future divestitures.

Other intangible assets represent contractual rights obtained in connection with acquisitions that have favorable contractual terms relative to market as of the acquisition date. Other intangible assets are amortized over their estimated useful lives and are reviewed for impairment whenever impairment indicators are present. See Note 4.

Legal Contingencies  The Company is subject to legal proceedings, claims and liabilities which arise in the ordinary course of its business. Except for legal contingencies acquired in a business combination which are recorded at fair value, the Company accrues for losses associated with legal claims when such losses are probable and can be reasonably estimated. These estimates are adjusted as additional information becomes available or circumstances change. See Note 23.

70

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

1. Summary of Significant Accounting Policies (Continued)

Environmental Contingencies  Except for environmental contingencies acquired in a business combination that are recorded at fair value, the Company accrues for losses associated with environmental remediation obligations when such losses are probable and can be reasonably estimated. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than the time of the completion of the remediation feasibility study. These accruals are adjusted as additional information becomes available or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded at their undiscounted value as assets when their receipt is deemed probable. See Note 23.

Income Taxes  The Company files various United States federal, state and foreign income tax returns. Deferred federal, state and foreign income taxes are provided on temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis.

Cash Equivalents  The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Payable  Accounts payable includes property expenditure accruals of $504 million and $780 million at December 31, 2007 and 2006, respectively. Also included in accounts payable at December 31, 2007 and 2006 are liabilities of $302 million and $331 million, respectively, representing the amount by which checks issued, but not presented to the Company’s banks for collection, exceeded balances in applicable bank accounts.

Stock-Based Compensation  The Company accounts for stock-based compensation at fair value. The Company grants various types of stock-based awards including stock options, nonvested equity shares (restricted stock awards and units) and performance-based awards. The fair value of stock option awards is determined using the Black-Scholes option pricing model. Restricted stock awards and units are valued using the market price of Anadarko common stock on the grant date. For performance-based awards, the fair value of the market condition portion of the award is measured using a Monte Carlo simulation. The performance condition portion of the performance-based awards is measured at the market price of Anadarko common stock on the grant date. Liability-classified awards are remeasured at estimated fair value at the end of each period based on the specifications of each plan. The Company records compensation cost for stock-based compensation awards over the requisite service period. Compensation cost is recognized net of estimated forfeitures. As each award vests, an adjustment is made to compensation cost for any difference between the estimated forfeitures and the actual forfeitures related to the vested awards. For equity awards that contain service and market conditions, compensation cost is recorded using the straight-line method. If the requisite service period is satisfied, compensation cost is not adjusted unless the award contains a performance condition. If an award contains a performance condition, expense is recognized only for those shares that ultimately vest using the fair value per share measured at the grant-date. See Note 6.

Earnings Per Share  The Company’s basic earnings per share (EPS) amounts have been computed based on the average number of shares of common stock outstanding for the period. Diluted EPS amounts include the effect of the Company’s outstanding stock options, restricted stock awards, restricted stock units and performance-based stock awards under the treasury stock method, if including such potential shares of common stock is dilutive. See Note 14.

71

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

1. Summary of Significant Accounting Policies (Continued)

Recently Issued Accounting Standards Not Yet Adopted  In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements for fair value measurements. SFAS No. 157 does not require new fair value measurements. Rather, its provisions will apply when fair value measurements are performed under other accounting pronouncements. The Company adopted SFAS No. 157 effective January 1, 2008, applied prospectively, and does not expect it to have any effect on the Company’s financial statements other than expanded disclosures about fair value measurements in future reporting periods.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS No. 141(R)), a replacement of SFAS No. 141, “Business Combinations.” SFAS No. 141(R) modifies the accounting for business combinations under SFAS No. 141 and will apply to Anadarko prospectively for future business combinations with an acquisition date on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51”. SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as a component of consolidated equity. This is a change from the current practice to present noncontrolling interests in liabilities or between liabilities and stockholders’ equity. Similarly, SFAS No. 160 requires consolidated net income and comprehensive income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interests. Anadarko will be required to adopt accounting provisions of SFAS No. 160 prospectively with respect to transactions involving noncontrolling financial interests that occur on or after January 1, 2009. Presentation and disclosure requirements of SFAS No. 160 will also be applied effective January 1, 2009, but with respect to all periods presented. After adopting SFAS No. 160 in 2009, the Company will apply provisions of this standard to noncontrolling interests created or acquired in future periods.

In April 2007, the FASB issued FASB Staff Position (FSP) FASB Interpretation (FIN) No. 39-1, “Amendment of FASB Interpretation No. 39” (FSP FIN 39-1), which addresses certain modifications to FIN No. 39, “Offsetting of Amounts Related to Certain Contracts”. The FSP provides for offsetting fair value amounts recognized for the right to reclaim cash collateral (a receivable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. FSP FIN 39-1 is effective for Anadarko as of January 1, 2008. As of December 31, 2007, Anadarko had approximately $50 million in current assets for the right to reclaim cash for derivative instruments. Upon adoption in the first quarter of 2008, Anadarko will offset the right to reclaim cash collateral against net derivative positions for which a master netting agreement exists. Because FSP FIN 39-1 requires retrospective application, the Company’s historical balance sheets will be revised accordingly. Anadarko does not expect the impact to be material.

2. Change in Accounting Principle

During 2007, the Company changed its method of accounting for oil and gas exploration and development activities from the full cost to the successful efforts method. Accordingly, financial information for prior periods has been revised to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration expenditures such as exploratory geological and geophysical costs, delay rentals and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. DD&A expense, impairments and other adjustments and income tax expense have been revised to reflect these differences. In addition, gains or losses, if applicable, are generally recognized on the dispositions of oil and gas property and equipment.

72

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

2. Change in Accounting Principle (Continued)

The following presents the effects of the change to the successful efforts method.

	Changes to the Consolidated Statements of Income
millions except per share amounts	Under Full Cost		Change			As Reported Under Successful Efforts
Year Ended December 31, 2007:
Oil and condensate sales	$	4,841	$	(34	)	$	4,807
Gains on divestitures, net		670		3,990			4,660
Exploration expense		—		905			905
General and administrative expense		810		126			936
Depreciation, depletion and amortization expense		3,112		(272	)		2,840
Impairment expense		88		(37	)		51
Interest expense		1,015		77			1,092
Income tax expense		1,423		1,136			2,559
Income from continuing operations		1,749		2,021			3,770
Net income available to common stockholders	$	1,757	$	2,021		$	3,778
Per Common Share
Income from continuing operations — basic	$	3.75	$	4.34		$	8.09
Income from continuing operations — diluted	$	3.73	$	4.32		$	8.05
Income from discontinued operations, net of taxes — basic	$	0.02	$	—		$	0.02
Income from discontinued operations, net of taxes — diluted	$	0.02	$	—		$	0.02
Net income available to common stockholders — basic	$	3.77	$	4.35		$	8.12
Net income available to common stockholders — diluted	$	3.75	$	4.33		$	8.08
Year Ended December 31, 2006:
Oil and condensate sales	$	4,601	$	17		$	4,618
Gains on divestitures, net		—		26			26
Exploration expense		—		737			737
General and administrative expense		668		100			768
Depreciation, depletion and amortization expense		1,976		(224	)		1,752
Impairment expense		388		(61	)		327
Interest expense		655		(5	)		650
Income tax expense		1,442		(179	)		1,263
Income from continuing operations		2,796		(322	)		2,474
Income from discontinued operations, net of taxes		2,058		217			2,275
Net income available to common stockholders	$	4,851	$	(105	)	$	4,746
Per Common Share
Income from continuing operations — basic	$	6.06	$	(0.69	)	$	5.37
Income from continuing operations — diluted	$	6.02	$	(0.69	)	$	5.33
Income from discontinued operations, net of taxes — basic	$	4.47	$	0.47		$	4.94
Income from discontinued operations, net of taxes — diluted	$	4.44	$	0.47		$	4.91
Net income available to common stockholders — basic	$	10.54	$	(0.23	)	$	10.31
Net income available to common stockholders — diluted	$	10.46	$	(0.22	)	$	10.24

73

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

2. Change in Accounting Principle (Continued)

	Changes to the Consolidated Statements of Income
millions except per share amounts	Under Full Cost		Change			As Reported Under Successful Efforts
Year Ended December 31, 2005
Oil and condensate sales	$	2,703	$	13		$	2,716
Gains on divestitures, net		—		108			108
Exploration expense		—		445			445
General and administrative expense		393		84			477
Depreciation, depletion and amortization expense		1,111		(210	)		901
Impairment expense		78		(63	)		15
Interest expense		206		15			221
Income tax expense		1,332		(54	)		1,278
Income from continuing operations		2,073		(98	)		1,975
Income from discontinued operations, net of taxes		398		(42	)		356
Net income available to common stockholders	$	2,466	$	(140	)	$	2,326
Per Common Share
Income from continuing operations — basic	$	4.40	$	(0.21	)	$	4.19
Income from continuing operations — diluted	$	4.36	$	(0.21	)	$	4.15
Income from discontinued operations, net of taxes — basic	$	0.85	$	(0.09	)	$	0.76
Income from discontinued operations, net of taxes — diluted	$	0.84	$	(0.09	)	$	0.75
Net income available to common stockholders — basic	$	5.24	$	(0.29	)	$	4.95
Net income available to common stockholders — diluted	$	5.19	$	(0.29	)	$	4.90

74

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

2. Change in Accounting Principle (Continued)

	Changes to the Consolidated Balance Sheets
millions	Under Full Cost		Change			As Reported Under Successful Efforts
December 31, 2007:
Other current assets	$	664	$	(4	)	$	660
Properties and equipment - cost		50,735		(6,530	)		44,205
Less accumulated depreciation, depletion and amortization		12,569		(5,815	)		6,754
Net properties and equipment		38,166		(715	)		37,451
Other assets		1,091		(61	)		1,030
Goodwill and other intangible assets		5,433		(267	)		5,166
Long-term assets held for sale		—		318			318
Deferred income taxes		10,454		(240	)		10,214
Other long-term liabilities		3,295		(6	)		3,289
Long-term liabilities associated with assets held for sale		—		6			6
Retained earnings (1)		11,578		(489	)		11,089
December 31, 2006:
Other current assets	$	764	$	(2	)	$	762
Properties and equipment - cost		57,965		(11,843	)		46,122
Less accumulated depreciation, depletion and amortization		9,226		(4,540	)		4,686
Net properties and equipment		48,739		(7,303	)		41,436
Other assets		865		(27	)		838
Goodwill and other intangible assets		4,616		(284	)		4,332
Long-term assets held for sale		10		3,736			3,746
Deferred income taxes		13,240		(1,370	)		11,870
Other long-term liabilities		2,413		(43	)		2,370
Long-term liabilities associated with assets held for sale		—		43			43
Retained earnings (1)		9,919		(2,510	)		7,409

⁽¹⁾ The cumulative effect of the change to the successful efforts method on retained earnings as of January 1, 2005 was a decrease of $2,265 million.

75

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

2. Change in Accounting Principle (Continued)

	Changes to the Consolidated Statements of Cash Flows
millions	Under Full Cost			Change			As Reported Under Successful Efforts
Year Ended December 31, 2007:
Net income	$	1,760		$	2,021		$	3,781
Depreciation, depletion and amortization		3,112			(272	)		2,840
Deferred income taxes		(2,227	)		1,170			(1,057	)
Dry hole expense and impairments of unproved properties		—			632			632
Impairments		88			(37	)		51
Gains on divestitures, net		(670	)		(3,990	)		(4,660	)
Other noncash items		149			23			172
Other items - net		1,112			(23	)		1,089
Cash provided by (used in) operating activities - continuing operations		3,242			(476	)		2,766
Additions to properties and equipment and dry hole costs		(4,722	)		476			(4,246	)
Year Ended December 31, 2006:
Net income	$	4,854		$	(105	)	$	4,749
Less income from discontinued operations, net of taxes		2,058			217			2,275
Depreciation, depletion and amortization		1,976			(224	)		1,752
Deferred income taxes		523			(195	)		328
Dry hole expense and impairments of unproved properties		—			460			460
Impairments		388			(61	)		327
Gains on divestitures, net		—			(26	)		(26	)
Other noncash items		52			16			68
Other items - net		(113	)		(11	)		(124	)
Cash provided by (used in) operating activities - continuing operations		5,034			(363	)		4,671
Cash provided by (used in) operating activities - discontinued operations		(139	)		(39	)		(178	)
Additions to properties and equipment and dry hole costs		(4,569	)		363			(4,206	)
Cash provided by (used in) investing activities - discontinued operations		3,613			39			3,652
Year Ended December 31, 2005:
Net income	$	2,471		$	(140	)	$	2,331
Less income from discontinued operations, net of taxes		398			(42	)		356
Depreciation, depletion and amortization		1,111			(210	)		901
Deferred income taxes		480			(66	)		414
Dry hole expense and impairments of unproved properties		—			265			265
Impairments		78			(63	)		15
Gains on divestitures, net		—			(108	)		(108	)
Other noncash items		(33	)		9			(24	)
Other items - net		(49	)		(10	)		(59	)
Cash provided by (used in) operating activities - continuing operations		3,502			(281	)		3,221
Cash provided by (used in) operating activities - discontinued operations		644			(53	)		591
Additions to properties and equipment and dry hole costs		(2,918	)		281			(2,637	)
Cash provided by (used in) investing activities - discontinued operations		(495	)		53			(442	)

76

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

3. Acquisitions

On August 10, 2006, Anadarko completed the acquisition of Kerr-McGee, an independent exploration and production company, in an all-cash transaction totaling $16.5 billion, plus the assumption of debt of approximately $2.6 billion. On August 23, 2006, Anadarko completed the acquisition of Western, also an independent exploration and production company, in an all-cash transaction totaling $4.8 billion, plus the assumption of debt of $625 million. These transactions were initially financed with a $22.5 billion 364-day committed acquisition facility. See Note 9.

Management believes that one of the most attractive aspects of Kerr-McGee and Western is the overlap of their assets with Anadarko’s then-existing portfolio, resulting in the Company holding increased positions in two important North American oil and gas basins, the Rockies and the deepwater Gulf of Mexico. These two geographic areas tie directly to Anadarko’s strategy to identify and develop unconventional resources and explore in these proven basins. Other important contributing factors of the acquisitions were the ability to secure intellectual talent to help exploit these areas as well as others, and expansion of the Company’s gas gathering, processing and treating operations.

The acquisitions were accounted for under the purchase method of accounting. Under this method of accounting, the Company’s historical operating results for periods prior to the acquisitions remain unchanged. As of the date of the acquisitions, the assets and liabilities of Anadarko continue to be recorded based upon their historical costs, while the assets and liabilities of Kerr-McGee and Western were recognized at their estimated fair values.

Following is the allocation of the purchase price to the assets acquired and liabilities assumed in the Kerr-McGee and Western acquisitions as of their respective acquisition dates.

millions	Kerr-McGee			Western			Total
Allocation of Purchase Price
Current assets	$	2,195		$	522		$	2,717
Property and equipment		22,768			6,896			29,664
Other assets		1,284			124			1,408
Intangible assets		254			137			391
Goodwill		3,835			485			4,320
Current debt		(309	)		(625	)		(934	)
Other current liabilities		(2,704	)		(455	)		(3,159	)
Long-term debt		(2,280	)		—			(2,280	)
Deferred income taxes		(6,950	)		(2,203	)		(9,153	)
Other long-term liabilities		(1,577	)		(101	)		(1,678	)
	$	16,516		$	4,780		$	21,296

The purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the Kerr-McGee and Western transactions. The assessment of the fair values of oil and gas properties and certain plant and gathering facilities acquired were based on projections of expected future net cash flows, discounted to present value. Other assets and liabilities were recorded at their historical book values, which the Company believes to represent the best estimate of fair value at the acquisition date. The liabilities assumed include certain amounts associated with contingencies, such as legal, environmental and guarantees, for which the fair values were estimated by management. Assumed long-term debt was recorded at fair value based on the market prices of Kerr-McGee’s publicly traded debt as of August 10, 2006. The amount allocated to goodwill is associated with the oil and gas exploration and production segment and the midstream segment.

Allocations of the purchase price to Kerr-McGee’s and Western’s property and equipment include approximately $12.4 billion for the estimated fair value associated with unproved oil and gas properties.

77

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

3. Acquisitions (Continued)

Kerr-McGee’s other assets include approximately $1 billion of assets Kerr-McGee previously held for sale. The sale of these assets closed in August 2006 and the proceeds were used to reduce debt incurred to fund the acquisitions. No gain or loss was recognized from the sale of these assets.

The following table presents summarized pro forma information for Anadarko as if the acquisitions occurred on January 1, 2006 and 2005.

millions except per share amounts	2006		2005
Revenues and other	$	13,712	$	12,177
Income from continuing operations	$	2,490	$	2,214
Earnings per share from continuing operations — basic	$	5.41	$	4.71
Earnings per share from continuing operations — diluted	$	5.37	$	4.66

The pro forma information is presented for illustration purposes only, in accordance with the assumptions set forth below, and is not necessarily indicative of the operating results that would have occurred had the acquisitions been completed at the assumed date, nor is it necessarily indicative of future operating results of the combined enterprise. The pro forma information does not reflect any cost savings or other synergies anticipated as a result of the acquisitions or any future acquisition-related expenses. The pro forma adjustments are based on estimates and assumptions. Management believes the estimates and assumptions are reasonable, and that the significant effects of the transactions are properly reflected.

The pro forma information for 2006 and 2005 is a result of combining the income statement of Anadarko with the pre-acquisition results from January 1, 2006 and 2005 of Kerr-McGee and Western adjusted for 1) recording pro forma interest expense on debt incurred to acquire Kerr-McGee and Western; 2) DD&A expense of Kerr-McGee and Western calculated based on the adjusted basis of the properties acquired using the purchase method of accounting; and 3) the related income tax effects of these adjustments based on the applicable statutory tax rates. The pro forma information for 2006 and 2005 has been revised to reflect retrospective application of the successful efforts method of accounting.

4. Goodwill and Other Intangible Assets

During 2006, the Company recorded goodwill of $3.3 billion associated with the acquisitions of Kerr-McGee and Western. Changes in the carrying amount of goodwill during 2007 included a $1.0 billion increase attributable to Anadarko revising preliminary estimates of the purchase price allocation for the Kerr-McGee and Western acquisitions, largely with respect to finalizing fair value estimates of oil, gas and midstream properties, deferred taxes and legal and environmental contingencies. Additionally, for certain divestiture transactions completed during 2007, goodwill of $329 million was included in the carrying amount of net assets divested, thus reducing the realized gain on divestitures. None of Anadarko’s goodwill is deductible for tax purposes.

78

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

4. Goodwill and Other Intangible Assets (Continued)

Changes in the carrying amount of goodwill by segment for 2007 and 2006 are as follows:

	2007									2006
millions	Oil and Gas Exploration & Production			Midstream			Total			Oil and Gas Exploration & Production
Balance at beginning of year	$	4,048		$	—		$	4,048		$	1,089
Goodwill associated with 2006 acquisitions		901			170			1,071			3,292
Goodwill associated with divestitures, including
changes is estimates		17			(62	)		(45	)		(284	)
Goodwill adjustment related to FIN 48 adoption		(139	)		—			(139	)		—
Other changes, net		20			—			20			(49	)
Balance at end of year	$	4,847		$	108		$	4,955		$	4,048

Intangible assets subject to amortization at December 31, 2007 and 2006 are as follows:

millions	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Balance at December 31, 2007
Transportation contracts	$	171	$	(38	)	$	133
Drilling contracts		155		(118	)		37
Offshore platform leases		60		(19	)		41
	$	386	$	(175	)	$	211
Balance at December 31, 2006
Transportation contracts	$	171	$	(10	)	$	161
Drilling contracts		160		(37	)		123
	$	331	$	(47	)	$	284

Amortization of drilling contract intangibles are initially capitalized to oil and gas properties as exploratory or development drilling costs. In 2007 and 2006, $81 million and $37 million, respectively, of drilling contract intangible value was amortized to oil and gas properties. The estimated amortization associated with the drilling contracts for 2008 and 2009 is $36 million and $1 million, respectively. Amortization of transportation contract and offshore platform lease intangibles reduces earnings. Amortization expense for the transportation contract and offshore platform lease intangibles was $47 million and $10 million for 2007 and 2006, respectively. The aggregate estimated amortization expense for the next five years is $34 million, $34 million, $29 million, $24 million and $23 million, respectively. The remaining weighted-average amortization period for the offshore platform leases, transportation contracts and drilling contracts is 12 years, 5 years and 1 year, respectively. Transportation contracts are associated with the Company’s marketing segment. Drilling contracts and offshore platform leases are associated with the Company’s oil and gas exploration and production segment.

79

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

5. Discontinued Operations, Assets Held for Sale and Other Divestitures

Discontinued Operations  In November 2006, Anadarko sold its wholly-owned subsidiary, Anadarko Canada Corporation, for approximately $4.3 billion before taxes. Accordingly, the results of Anadarko’s Canadian operations have been classified as discontinued operations in the consolidated statements of income and cash flows. The disposition is part of a portfolio refocusing effort stemming from the acquisitions of Kerr-McGee and Western. Net proceeds from the Canadian divestiture were used to retire debt. Under the Company’s 364-day term loan agreement, the Company was required to use net cash proceeds from any significant dispositions of assets to repay debt. Because the Canadian assets were subject to this requirement, approximately $58 million of interest expense related to the portion of debt that was repaid upon the sale of the Canadian operations is included in results of discontinued operations for the year ended December 31, 2006. Results of discontinued operations during 2007 relate primarily to marketing contracts that have been exited during 2007 and the effect of foreign currency translation on the indemnity liability discussed in Note 23.

In December 2006, the Company also exchanged its remaining oil and gas properties in Canada for interests in oil and gas properties in the United States. The associated $70 million pretax gain is included in gain on disposition of discontinued operations.

The following table summarizes the amounts included in income from discontinued operations for all periods presented.

millions	2007		2006		2005
Revenues and other	$	24	$	717	$	925
Income from discontinued operations	$	18	$	311	$	444
Gain on disposition of discontinued operations		8		2,494		—
Income from discontinued operations before income taxes		26		2,805		444
Income tax expense		15		530		88
Income from discontinued operations, net of taxes	$	11	$	2,275	$	356

Total income taxes differed from the amount computed by applying the U.S. statutory income tax rate to income from discontinued operations. The sources of these differences are as follows:

millions	2007			2006			2005
Income from discontinued operations	$	26		$	2,805		$	444
Statutory tax rate		35	%		35	%		35	%
Tax computed at statutory rate	$	9		$	982		$	155
Adjustment resulting from:
Foreign taxes in excess of federal statutory tax rate		(2	)		48			(16	)
Cross border financing		—			(45	)		(51	)
Effect of change in Canadian income tax rate		—			(79	)		—
Tax on sale of discontinued operations differing from statutory rate		8			(376	)		—
Total income tax expense related to discontinued operations	$	15		$	530		$	88
Effective tax rate		58	%		19	%		20	%

80

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

5. Discontinued Operations, Assets Held for Sale and Other Divestitures (Continued)

Assets Held for Sale  At December 31, 2007, assets and liabilities associated with certain properties in northern Louisiana and the Rocky Mountain region were classified as held for sale. At December 31, 2006, long-term assets held for sale includes $3.45 billion and $0.3 billion related to net properties and equipment and allocated goodwill, respectively, associated with divestitures which closed during 2007. The following presents the main classes of assets and liabilities held for sale as of December 31, 2007 and 2006.

millions	2007		2006
ASSETS
Cash	$	—	$	20
Accounts receivable		—		27
Other current assets		—		21
Total Current Assets Held for Sale		—		68
Net properties and equipment		318		3,452
Other assets		—		10
Goodwill		—		284
Total Long-term Assets Held for Sale	$	318	$	3,746
LIABILITIES
Accounts payable	$	—	$	32
Accrued expenses		—		15
Total Current Liabilities associated with Assets Held for Sale		—		47
Other liabilities		6		43
Total Long-term Liabilities associated with Assets Held for Sale	$	6	$	43

Other Divestitures  During 2007, the Company closed several unrelated property divestiture transactions associated with the portfolio refocusing effort, realizing proceeds of approximately $8.2 billion before income taxes. Anadarko received $2.9 billion in connection with its contributions of certain assets to newly-created entities in exchange for noncontrolling interests in those entities, which were accounted for as divestitures. See Note 11.

During 2006, the Company closed the sale of certain properties previously held for sale by Kerr-McGee for approximately $1 billion before tax. During 2007, 2006 and 2005, net gains on divestitures were $4.7 billion, $26 million and $108 million, respectively. The 2007 gains include $4.1 billion related to the divestiture of certain oil and gas properties and $0.6 billion related to the divestiture of certain gathering and processing facilities. The 2006 gains primarily relate to the divestiture of certain international oil and gas properties. The 2005 gains were primarily associated with the divestiture of certain oil and gas properties located onshore in the United States.

6. Stock-Based Compensation

Effective January 2006, the Company adopted SFAS No. 123(R), which, among other things, requires the Company to estimate forfeitures in calculating the expense related to share-based compensation as opposed to recognizing these forfeitures and the corresponding reduction in expense as they occur. The related cumulative adjustment as of January 1, 2006 of $2 million before income taxes was recorded as a reduction to general and administrative expense in 2006 and was not presented separately in the income statement due to immateriality. Prior to the adoption of SFAS No. 123(R), the Company followed the fair value method of accounting for share-based compensation under SFAS No. 123, “Accounting for Stock-Based Compensation.” Results for prior

81

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

6. Stock-Based Compensation (Continued)

periods have not been revised. The adoption of SFAS No. 123(R) did not have a material impact on the Company’s income before income taxes, net income or basic and diluted earnings per share for 2006. The effect on net income and earnings per share for 2005, had the Company applied the fair value recognition provisions of SFAS No. 123(R) to all options, was not material.

Prior to the adoption of SFAS No. 123(R), the Company reported amounts attributable to the benefits of tax deductions in excess of recognized compensation in the financial statements (excess tax benefits) in the statement of cash flows as operating activities in other items, net. SFAS No. 123(R) requires the cash flows resulting from excess tax benefits to be classified as financing cash flows. For 2007 and 2006, $23 million and $36 million, respectively, in excess tax benefits were included in cash flow from financing activities. For 2005, $35 million in excess tax benefits, which would have been presented in cash flow from financing activities under SFAS No. 123(R), was included in cash flow from operating activities. Cash received from stock option exercises for 2007, 2006 and 2005 was $89 million, $91 million and $168 million, respectively.

Activities and balances presented in this Note 6 include amounts associated with discontinued operations. All share and per share information presented has been revised to give retroactive effect to the May 2006 two-for-one stock split that was affected in the form of a stock dividend. See Note 14.

The Company generally issues new shares to satisfy employee share-based payment plans. At December 31, 2007, 8 million shares of the 47 million shares of Anadarko common stock originally authorized for awards under the active share-based compensation plans remain available for future issuance. The number of shares available is reduced by awards granted. A summary of stock-based compensation cost is presented below:

millions	2007		2006		2005
Compensation cost:
Restricted stock	$	115	$	53	$	29
Value Creation Plan and other		55		26		28
Total compensation cost, pretax		170		79		57
Income tax benefit		62		26		21

Equity Classified Awards

Stock Options  Certain employees may be granted options to purchase shares of Anadarko common stock under the 1999 Stock Incentive Plan. Stock options are granted with an exercise price equal to, or greater than, the fair market value of Anadarko common stock on the date of grant and have a maximum term of seven years from the date of grant. Stock options vest over service periods ranging from three to four years.

Nonemployee directors may be granted nonqualified stock options under the 1998 Director Stock Plan. Stock options are granted with an exercise price equal to the fair market value of Anadarko common stock on the date of grant and have a maximum term of ten years from the date of grant. Stock options vest over a one year service period from the date of grant.

The fair value of stock option awards is determined using the Black-Scholes option pricing model. For 2007, 2006 and 2005, the expected life of the option was estimated based upon historical exercise behavior. For 2007 and 2006, the expected forfeiture rate was estimated based upon historical forfeiture experience. For 2007 and 2006, the volatility assumption was based upon historical and implied volatilities over a term commensurate with the expected life of the option. For 2005, the volatility assumption was based upon historical price volatility over a term commensurate with the expected life of the option. For 2007, 2006 and 2005, the risk-free interest rate was based on the U.S. Treasury rate for a term commensurate with the expected life of the option. For 2007 and 2006, the dividend yield was based upon a 12-month average dividend yield. For 2005, the dividend yield

82

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

6. Stock-Based Compensation (Continued)

was based on a historical dividend yield. The Company used the following weighted-average assumptions to estimate the fair value of stock options granted during 2007, 2006 and 2005.

	2007		2006		2005
Expected option life — years	5.0		5.0		5.4
Volatility	28.9	%	29.8	%	29.6	%
Risk-free interest rate	4.4	%	4.4	%	4.5	%
Dividend yield	0.8	%	0.8	%	0.7	%

A summary of stock option activity for the year ended December 31, 2007 is presented below:

	Shares (millions)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2007	6.65		$	31.78
Granted	1.48		$	54.65
Exercised	(3.34	)	$	26.61
Forfeited or expired	(0.06	)	$	46.57
Outstanding at December 31, 2007	4.73		$	42.42	5.3	$	110
Vested or expected to vest at December 31, 2007	4.64		$	42.28	5.2	$	109
Exercisable at December 31, 2007	2.31		$	33.09	4.3	$	75

The weighted-average grant-date fair value of stock options granted during 2007, 2006 and 2005 was $16.51, $15.44 and $14.43, respectively, using the Black-Scholes option pricing model. The total intrinsic value of stock options exercised during 2007, 2006 and 2005 was $79 million, $107 million and $136 million, respectively, based on the difference between the market price at the exercise date and the option price. As of December 31, 2007, there was $32 million of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock  Certain employees may be granted restricted stock in the form of restricted stock awards or restricted stock units under the 1999 Stock Incentive Plan. Nonemployee directors may be granted restricted stock awards under the 1998 Director Stock Plan. Restricted stock is subject to forfeiture restrictions and cannot be sold, transferred or disposed of during the restriction period. The holders of restricted stock awards generally have the same rights as a stockholder of the Company with respect to such shares, including the right to vote and receive dividends or other distributions paid with respect to the shares. A restricted stock unit is equivalent to a restricted stock share with the exception that unit holders receive cash dividend equivalents during the restriction period and do not have the right to vote the units. Restricted stock vests over service periods ranging from the date of grant up to four years. Restricted stock is not considered issued and outstanding until it vests.

83

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

6. Stock-Based Compensation (Continued)

A summary of restricted stock activity for the year ended December 31, 2007 is presented below:

	Shares (millions)		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2007	4.85		$	46.51
Granted	2.46		$	52.53
Vested	(2.30	)	$	45.24
Forfeited	(0.31	)	$	48.38
Nonvested at December 31, 2007	4.70		$	50.17

The weighted-average grant-date fair value of restricted stock granted during 2006 and 2005 was $48.88 and $42.38, respectively. The total fair value of restricted shares vested during 2007, 2006 and 2005 was $119 million, $84 million and $32 million, respectively, based on the market price at the vesting date. As of December 31, 2007, there was $197 million of total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted-average period of 2.1 years.

Performance-Based Share Awards  Key officers of the Company were provided Performance Unit Agreements with three-year terms ending in 2007, 2008 and 2009 under the 1999 Stock Incentive Plan. These three agreements provided for the issuance of up to a maximum of 200,400 shares of Anadarko common stock after a three-year performance period that ended in 2007, a maximum of 506,000 shares of Anadarko common stock after a three-year performance period ending in 2008 and a maximum of 358,200 shares of Anadarko common stock after a three-year performance period ending in 2009. The number of shares to be issued was to be determined based on a market objective and a performance objective. Under these agreements, the shares were equally weighted between the two objectives. The number of performance units to be issued with respect to the first objective was to be determined by comparing the Company’s total shareholder return to the total shareholder return of a predetermined group of peer companies over the performance period. The number of performance units to be issued with respect to the second objective was to be determined based on the Company’s return on capital over the performance period. The fair value per share for the performance conditions is $31.54, $47.14 and $49.86 for the agreements related to the three-year periods ending 2007, 2008 and 2009, respectively. No shares were awarded to current key employees for the performance period that ended in 2007. During 2007 and 2006, 24,700 shares and 73,200 shares, respectively, were issued under these agreements with a fair value of $1 million and $3 million, respectively, to certain key employees upon termination of employment.

In November 2007, the Company cancelled, without value and subject to approval by the key officers, the two outstanding Performance Unit Agreements that had performance periods ending in 2008 and 2009. All key officers agreed to the cancellation of these agreements which provided for the issuance of up to 712,000 shares based on performance.

In November 2007, two new Performance Unit Agreements were awarded which are based solely on comparing the Company’s total shareholder return to the total shareholder return of a predetermined group of peer companies over performance periods ranging from one to three years. Under the transitional award with a performance period beginning in 2008, key officers now have award agreements that provide for the issuance of up to a maximum of 184,512 shares of Anadarko common stock after a one-year performance period ending in 2008, and a maximum of 184,512 shares of Anadarko common stock after a two-year performance period ending in 2009. This transitional award resulted in incremental compensation cost of $7 million attributable to the modification of the awards which will be recognized along with the cost of the original award over the life of the new award. Under the second new award with a performance period beginning in 2008, key officers have award

84

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

6. Stock-Based Compensation (Continued)

agreements that provide for the issuance of up to a maximum of 282,700 shares of Anadarko common stock after a two-year performance period ending in 2009 and a maximum of 282,700 shares of Anadarko common stock after a three-year performance period ending in 2010.

Anadarko and a key officer of the Company have entered into a Performance Unit Agreement under the 1999 Stock Incentive Plan. The agreement provides for issuance of up to 160,000 shares of Anadarko common stock after a two-year performance period that ended in 2005 and a four-year performance period that ended in 2007. The number of shares to be issued is determined by comparing the Company’s total shareholder return to the total shareholder return of a predetermined group of peer companies. During 2008, no shares were issued for the performance period that ended in 2007. During 2006, 28,800 shares were issued for the performance period that ended in 2005 with a fair value of $2 million.

As of December 31, 2007, there was $30 million of total estimated unrecognized compensation cost related to performance-based share awards, which is expected to be recognized over a weighted-average period of 2.1 years.

Liability Classified Awards

Value Creation Plan  The Company offers a cash incentive program that provides employees the opportunity to earn cash bonus awards based on the Company’s total shareholder return for the year compared to the total shareholder return of a predetermined group of peer companies. As of December 31, 2007, the liability was $32 million for the 2007 performance period, and the cash bonus award was paid in early 2008.

7. Inventories

The major classes of inventories, which are included in other current assets, are as follows:

	2007		2006
millions
Materials and supplies	$	202	$	158
Natural gas		42		42
Crude oil and NGLs		114		51
Total	$	358	$	251

8. Properties and Equipment

A summary of the cost of properties and equipment by function follows:

	2007		2006
millions
Oil and gas	$	39,219	$	39,720
Gathering, processing and marketing		2,987		4,486
Minerals		1,198		1,201
Other		801		715
Total	$	44,205	$	46,122

85

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

8. Properties and Equipment (Continued)

During 2007, 2006 and 2005, the Company recorded provisions for impairments of $51 million, $327 million and $15 million, respectively. Impairments in 2006 include a $166 million loss associated with the contract and structural changes in Venezuela and a $139 million impairment related to the decision to suspend construction of the Company’s LNG facility in Nova Scotia.

Suspended Exploratory Drilling Costs  If an exploratory well has found sufficient quantities of hydrocarbons to justify its potential completion as a producing well, drilling costs associated with the well are initially capitalized, or suspended, pending determination of whether proved reserves can be attributed to the area as a result of drilling. Such determination may take longer than one year in certain areas (generally, deepwater exploration and international locations) depending upon, among other things, 1) the amount of hydrocarbons discovered, 2) the outcome of planned geological and engineering studies, 3) the need for additional appraisal drilling to determine whether the discovery is sufficient to support an economic development plan and 4) the requirement for government sanctioning in certain international locations before proceeding with development activities.

At the end of each quarter, management reviews the status of all suspended exploratory drilling costs in light of ongoing exploration activities — in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are under way and proceeding as planned. If management determines that future appraisal drilling or development activities are not likely to occur, any associated suspended exploratory drilling costs are expensed in that period.

The following table presents the amount of suspended exploratory drilling costs relating to continuing operations at December 31 for each of the last three years, and changes in those amounts during the years then ended. The table excludes amounts capitalized and either reclassified to proved oil and gas properties or charged to expense in the same year.

millions	2007			2006			2005
Balance at January 1	$	312		$	112		$	51
Additions pending the determination of proved reserves		252			352			105
Reclassifications to proved properties		(87	)		(57	)		(15	)
Charges to exploration expense		(169	)		(95	)		(29	)
Balance at December 31	$	308		$	312		$	112

The following table presents the total amount of suspended exploratory drilling costs as of December 31, 2007 by geographic area, including the year the costs were originally incurred.

			Year Costs Incurred
millions	Total		2007		2006		2005
United States — Offshore	$	162	$	74	$	88	$	—
United States — Onshore		71		40		26		5
International		75		73		2		—
	$	308	$	187	$	116	$	5

The well costs that have been suspended for longer than one year are associated with 16 projects. The majority of such costs associated with projects in the United States are suspended under economic evaluation for possible development. The international projects with costs suspended for longer than one year are primarily suspended pending the results of additional appraisal drilling. Management believes these projects have found sufficient quantities of hydrocarbons to justify their potential development and is actively pursing efforts to assess whether reserves can be attributed to the respective areas.

86

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

9. Debt and Interest Expense

	December 31,
	2007				2006
millions	Principal		Carrying Value		Principal		Carrying Value
Acquisition Facility	$	1,000	$	1,000	$	11,000	$	11,000
Commercial Paper, current		—		—		182		182
5.375% Notes due 2007		—		—		143		143
6.625% Notes due 2007		—		—		150		146
3.25% Notes due 2008		350		350		—		—
6.75% Notes due 2008		47		46		—		—
Current Debt		1,397		1,396		11,475		11,471
3.25% Notes due 2008		—		—		350		350
6.75% Notes due 2008		—		—		47		46
7.30% Notes due 2009		52		52		52		52
Floating Rate Notes due 2009		2,000		2,000		2,000		2,000
6.75% Notes due 2011		950		927		950		922
6.875% Notes due 2011		675		702		675		708
6.125% Notes due 2012		170		169		170		168
5.00% Notes due 2012		82		82		82		81
5.95% Notes due 2016		1,750		1,743		1,750		1,743
7.05% Debentures due 2018		114		107		114		106
6.95% Notes due 2024		650		675		650		676
7.50% Debenture due 2026		112		106		112		106
7.00% Debentures due 2027		54		54		54		54
7.125% Debentures due 2027		150		157		150		158
6.625% Debentures due 2028		17		17		17		17
7.15% Debentures due 2028		235		214		235		213
7.20% Debentures due 2029		135		135		135		135
7.95% Debentures due 2029		117		116		117		117
7.50% Notes due 2031		900		855		900		855
7.875% Notes due 2031		500		583		500		584
Zero Coupon Notes due 2036		2,360		533		2,360		505
6.45% Notes due 2036		1,750		1,742		1,750		1,742
7.73% Debentures due 2096		61		61		61		61
7.50% Debentures due 2096		78		72		78		72
7.25% Debentures due 2096		49		49		49		49
Long-term Debt		12,961		11,151		13,358		11,520
Midstream Subsidiary Note Payable to a Related Party due 2012		2,200		2,200		—		—
Total Debt	$	16,558	$	14,747	$	24,833	$	22,991

Except for Anadarko’s Midstream Subsidiary Note Payable to a Related Party (see following discussion), none of the Company’s notes, debentures or credit agreements contain credit rating triggers that may result in accelerating debt maturity. All of the Company’s debt is senior unsecured debt; therefore, all debt has equal priority with respect to the payment of principal and interest.

87

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

9. Debt and Interest Expense (Continued)

The net unamortized debt discount, represented in the table above, of $1.8 billion as of December 31, 2007 and 2006 is being amortized to interest expense over the terms of the related debt.

See Note 11 for Anadarko’s notes payable to certain investees that do not affect the reported debt balance.

Current and Long-term Debt — non-affiliates  The Company has commercial paper programs that allow Anadarko to borrow funds, at rates as offered, by issuing notes to investors for terms of up to one year. The average interest rate in effect for commercial paper issued as of December 31, 2006 was 5.45%.

During 2007, the Company retired for cash an aggregate principal amount of $10.5 billion of debt that was outstanding as of December 31, 2006.

Current debt includes a variable-rate 354-day facility (amended acquisition facility) which replaced the initial 2006 364-day acquisition facility (initial acquisition facility) in April 2007. The pricing for the amended acquisition facility is based on the London Interbank Offered Rate (LIBOR) and had a weighted-average interest rate of approximately 5.68% at December 31, 2007. As of December 31, 2007, the amended acquisition facility had an outstanding balance of $1 billion, compared to the initial acquisition facility balance of $11 billion at December 31, 2006. Other than the facility amount and maturity date, the terms of the amended acquisition facility remain substantially the same as the initial acquisition facility.

In August 2006, the Company financed $22.5 billion under the initial acquisition facility in order to fund the Kerr-McGee and Western acquisitions. The pricing for the variable-rate facility was based on LIBOR and had a weighted-average interest rate of approximately 5.80% at December 31, 2006. During 2006, Anadarko repaid approximately $11.5 billion of debt under the initial acquisition facility with a combination of proceeds from divestitures, long-term refinancing and available cash flow from operations.

In September 2006, the Company issued $5.5 billion of senior notes, including Floating Rate Notes due 2009, 5.95% Notes due 2016 and 6.45% Notes due 2036. The net proceeds were used to repay a portion of the initial acquisition facility. The Floating Rate Notes due 2009 had an average interest rate of approximately 5.39% and 5.76% at December 31, 2007 and 2006, respectively.

In October 2006, the Company received $500 million of proceeds from a private offering of Zero Coupon Senior Notes due 2036 with an aggregate principal amount at maturity of $2.4 billion. The Company initially recorded the note in long-term debt at the proceeds amount. The carrying amount as of December 31, 2007 includes an increase of $28 million and $5 million related to accretion expense recognized in 2007 and 2006, respectively. The notes were issued with a yield to maturity of 5.24%, and the holders have an option to put the notes back to the Company periodically at the accreted value. The net proceeds from the private offering were used to repay a portion of the acquisition facility.

An aggregate principal amount of $2.4 billion of outstanding debt was assumed in connection with the Kerr-McGee acquisition, of which $2.0 billion was outstanding as of December 31, 2007 and $457 million was repaid at maturity subsequent to the acquisition. The Company recorded $155 million of debt premium, representing the excess of the fair value over the face value of the debt assumed, which is being amortized to interest expense over the remaining term of the related debt.

An aggregate principal amount of $625 million of outstanding debt was assumed in connection with the Western acquisition and redeemed for cash immediately upon completion of the acquisition.

Midstream Subsidiary Note Payable to a Related Party  In December 2007, Anadarko and an entity formed by a group of unrelated third-party investors (the Investor) formed Trinity Associates LLC (Trinity), with initial capitalization totaling $2.3 billion. Note 11 provides additional information about Anadarko’s interest in Trinity. Trinity extended a $2.2 billion loan to a wholly-owned subsidiary of Anadarko, referred to herein as Midstream Holding, which holds and operates substantially all of Anadarko’s midstream assets, directly and through its subsidiaries. The Company used all of the loan proceeds received by Midstream Holding to repay a portion of the Company’s acquisition facility indebtedness.

88

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

9. Debt and Interest Expense (Continued)

The principal balance owed by Midstream Holding to Trinity is reflected in the accompanying consolidated balance sheet as Midstream Subsidiary Note Payable to a Related Party. Midstream Holding’s obligations for the payment of note principal and interest are not guaranteed by the Anadarko parent company, but are unconditionally guaranteed, jointly and severally, by all of Midstream Holding’s subsidiaries. The loan has an initial maturity date of December 27, 2012, subject to renewals for additional five-year periods on market terms at the time of renewal. Interest on the loan is based on three-month LIBOR. The rate in effect at the beginning of 2008 is 6.13%.

Midstream Holding may repay the loan in whole or in part at any time prior to maturity. The loan terms provide for customary representations and warranties and affirmative and negative covenants, and include a financial covenant requiring Midstream Holding to maintain a ratio of debt to earnings before interest, taxes, depreciation and amortization (EBITDA), as defined in the loan agreement, of less than 6.0x at December 31, 2007, declining to 3.5x at June 30, 2012 and thereafter. As of December 31, 2007, Midstream Holding was in compliance with the covenant. In certain circumstances, including a sale or transfer of assets to other entities within the Anadarko consolidated group, Midstream Holding and/or its subsidiaries may be required to repay a portion of the loan principal if failure to do so would cause Midstream Holding to violate the covenant. Further, maturity of the midstream subsidiary loan could be accelerated if Anadarko’s senior unsecured credit rating were to be rated below “BB-” by Standard and Poor’s (S&P) or “Ba3” by Moody’s Investors Service (Moody’s). As of December 31, 2007, S&P and Moody’s rated the Company’s debt at “BBB-” and “Baa3”, respectively.

Revolving Credit Agreement  In September 2004, the Company entered into a $750 million, five-year Revolving Credit Agreement with a syndicate of 20 U.S. and Canadian lenders. Under the terms of the agreement, the Company can, under certain conditions, request an increase in the borrowing capacity under the agreement up to a total available credit amount of $1.25 billion. The credit agreement initially had a maximum 60% debt to capital covenant (not affected by noncash charges). The Company amended the credit agreement prior to closing the 2006 acquisitions to provide for a maximum capitalization ratio of 75% debt, exclusive of the effect of any noncash writedowns, until September 30, 2007. After September 30, 2007, the maximum capitalization ratio is once again 60% debt. The agreement terminates in August 2009. As of December 31, 2007, the Company had no outstanding borrowings under this agreement; however, outstanding letters of credit under the agreement have reduced the available credit amount by $1 million.

Scheduled Maturities Total maturities related to debt for the five years ending December 31, 2012 are shown below.

millions
2008	$	1,397
2009		2,052
2010		—
2011		1,625
2012		2,452

Interest Expense The following table summarizes the amounts included in interest expense.

	2007			2006			2005
millions
Interest Expense
Gross interest expense	$	1,214		$	730		$	266
Capitalized interest		(122	)		(80	)		(45	)
Net interest expense	$	1,092		$	650		$	221

89

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

10. Financial Instruments

The following information provides the carrying value and estimated fair value of the Company’s financial instruments. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable reported on the balance sheet approximates fair value.

	Carrying Amount			Fair Value
millions
2007
Total debt	$	14,747		$	15,237
Derivative instruments:
Asset		139			139
Liability		(393	)		(393	)
2006
Total debt	$	22,991		$	23,455
Derivative instruments:
Asset		420			420
Liability		(326	)		(326	)

Debt The fair value of debt at December 31, 2007 and 2006 is the estimated amount the Company would have to pay to repurchase the debt, including any premium or discount to the debt holder for the differential between stated interest rate and year-end market rate. The fair values are based on quoted market prices and, where such quotes were not available, on the average rate in effect at year-end.

Derivative Instruments  The Company is exposed to price risk inherent with changing commodity prices. Management believes it is prudent to periodically reduce the Company’s exposure to cash flow variability resulting from changing commodity prices by entering into various derivative financial instruments to manage price risk associated with a portion of the Company’s oil and gas production or gas processing operations. The types of derivative financial instruments utilized by the Company include futures, swaps and options. In addition to derivative financial instruments, the Company may also enter into fixed-price physical delivery sales contracts to manage cash flow variability. The Company’s marketing and trading business routinely enters into derivative financial instruments (futures, swaps and options) and physical delivery contracts for trading purposes with the objective of generating profits from exposure to changes in market prices of natural gas, NGLs and crude oil. Derivative financial instruments are also used to manage price risk that is incurred to meet customers’ pricing requirements and to fix margins on the future sale of natural gas and NGLs from the Company’s leased storage facilities. In addition, the Company may use options and swaps to manage exposure associated with changes in interest rates and foreign currency exchange rates. As discussed in Note 1, Anadarko discontinued hedge accounting for all of its commodity and interest derivatives prospectively, effective January 1, 2007.

Futures contracts are generally used to fix the price of expected future gas sales and oil sales at major industry trading locations; for example, Henry Hub, Louisiana for gas and Cushing, Oklahoma for oil. Commodity swap agreements are generally used to fix or float the price of oil and gas at major trading locations. Basis swaps are used to fix or float the price differential between the price of gas at Henry Hub and various other market locations. Physical delivery purchase and sale agreements require the receipt or delivery of physical product at a specified location and price. The pricing can be fixed or market-based. Options are generally used to fix a floor and a ceiling price (collar) for expected future oil and gas sales. Interest rate swaps are used to fix or float interest rates attributable to the Company’s existing or anticipated debt issuances.

90

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

10. Financial Instruments (Continued)

Settlements of exchange-traded contracts are guaranteed by the New York Mercantile Exchange (NYMEX) or the Intercontinental Exchange and have nominal credit risk. Over-the-counter traded swaps, options and physical delivery contracts expose the Company to credit risk to the extent the counterparty is unable to meet its settlement commitment. The Company monitors the creditworthiness of each counterparty and assesses the impact, if any, on fair value. In addition, the Company routinely exercises its contractual right to net realized gains against realized losses when settling with its swap and option counterparties.

At December 31, 2007 and 2006, the Company had unrealized derivative amounts recorded in other current assets in the consolidated balance sheet of $84 million and $271 million, respectively.

Oil and Gas Activities  At December 31, 2007 and 2006, the Company had option and swap contracts in place to manage price risk associated with a portion of its expected future sales of its oil and gas production. Effective January 1, 2007, the Company discontinued its application of hedge accounting. As a result of this change, both realized and unrealized gains and losses related to derivative financial instruments entered into to economically hedge the sales price of the Company’s future sales of its gas and oil production are recorded to gas sales and oil and condensate sales as they occur. During 2007, unrealized losses of $(1,048) million and realized gains of $576 million were recognized in natural gas, oil and NGLs sales. During 2006 and 2005, unrealized gains (losses) of $837 million and $(7) million, respectively, and realized gains (losses) of $294 million and $(287) million, respectively, were recognized in natural gas, oil and NGLs sales.

The fair value of all oil and gas related derivative instruments (excluding physical delivery sales contracts) and the accumulated other comprehensive income balance attributable to unrealized gains and losses on oil and gas derivative financial instruments previously designated as cash flow hedges are as follows:

	2007			2006
millions
Fair Value —
Current asset	$	47		$	134
Current liability		(156	)		(229	)
Long-term asset		52			143
Long-term liability		(207	)		(13	)
Total	$	(264	)	$	35
Accumulated other comprehensive income (loss) before income taxes	$	(21	)	$	(10	)
Accumulated other comprehensive income (loss) after income taxes	$	(14	)	$	(6	)

91

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

10. Financial Instruments (Continued)

Below is a summary of the Company’s financial derivative instruments related to its oil and gas production as of December 31, 2007. The natural gas prices are NYMEX Henry Hub. The crude oil prices reflect a combination of NYMEX Cushing and Brent Dated.

	2008			2009			2010
Natural Gas
Three-Way Collars (thousand MMBtu/d)		1,400			190			—
Average price per MMBtu
Ceiling sold price	$	10.97		$	11.54		$	—
Floor purchased price	$	7.50		$	7.50		$	—
Floor sold price	$	5.32		$	5.37		$	—
Basis Swaps (thousand MMBtu/d)		1,405			1,030			345
Price per MMBtu	$	(0.85	)	$	(0.87	)	$	(1.08	)

MMBtu — million British thermal units

MMBtu/d — million British thermal units per day

	2008		2009		2010		Average 2011- 2012
Crude Oil
Three-Way Collars (MBbls/d)		86		48		18		2
Average price per barrel
Ceiling sold price	$	92.98	$	87.04	$	86.76	$	88.17
Floor purchased price	$	56.07	$	52.51	$	49.19	$	50.00
Floor sold price	$	41.07	$	37.51	$	34.18	$	35.00

MBbls/d — thousand barrels per day

A three-way collar is a combination of options; a sold call, a purchased put and a sold put. The sold call establishes the maximum price that the Company will receive for the contracted commodity volumes. The purchased put establishes the minimum price that the Company will receive for the contracted volumes unless the market price for the commodity falls below the sold put strike price, at which point the minimum price equals the reference price (i.e., NYMEX) plus the excess of the purchased put strike price over the sold put strike price.

92

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

10. Financial Instruments (Continued)

Marketing and Trading Activities  Gains and losses attributable to the Company’s marketing and trading derivative instruments (both physically and financially settled) are recognized currently in earnings. The marketing and trading gains and losses attributable to the Company’s production are reported in gas sales, oil and condensate sales and NGLs sales. The marketing and trading gains and losses attributable to third-party production are reported in gathering, processing and marketing sales. The fair values of these derivatives as of December 31, 2007 and 2006 are as follows:

	2007			2006
millions
Fair Value —
Current asset	$	37		$	137
Current liability		(25	)		(80	)
Long-term asset		4			6
Long-term liability		(5	)		(4	)
Total	$	11		$	59

Interest Rate Swap  An interest rate swap entered into in March 2006 having an initial term of 25 years on a notional amount of $600 million was settled in September 2007 at a cost of $10 million. This swap was initially designated for fair value hedge accounting. Effective January 1, 2007, hedge accounting was discontinued for this swap. The change in the fair value of the hedged debt from the date of inception of the swap through December 31, 2006 was $8 million and is being amortized to interest expense over the remaining term of the debt. As of December 31, 2007, $8 million of this fair value remained to be amortized.

In anticipation of the debt financing associated with the August 2006 acquisitions, Anadarko entered into swap agreements to fix interest rates, thereby mitigating the Company’s exposure to interest rate risk resulting from unfavorable changes in interest rates prior to the Company’s issuance of debt. These swap transactions qualified for cash flow hedge accounting and were accounted for as such. Due to interest rate movements during the hedge period, the Company realized a pretax loss of $211 million ($132 million after tax) upon the settlement of these swap agreements, which occurred in September 2006 at the time of the Company’s debt issuance. This loss was recorded to accumulated other comprehensive income, and is being amortized to interest expense over the term of the hedged debt. At December 31, 2007, the unamortized balance of the accumulated other comprehensive loss was $187 million pretax, or $119 million after tax. At December 31, 2006, the unamortized balance of the accumulated other comprehensive loss was $206 million pretax, or $131 million after tax.

11. Unconsolidated Affiliates

Noncontrolling Mandatorily Redeemable Interests  In 2007, Anadarko contributed certain of its oil and gas properties and gathering and processing assets with an aggregate fair value of approximately $2.9 billion to newly formed entities in exchange for non-controlling mandatorily redeemable interests in those entities. The Company accounts for such investments under the equity method of accounting. Subsequent to their formation, the investee entities loaned Anadarko an aggregate of $2.9 billion. Anadarko has legal right of setoff and intends to net-settle its obligations under each of the notes payable to the investees and the distributable value of its interest in the corresponding investee. Accordingly, the carrying amount of the notes payable ($2,848 million in the aggregate) and Anadarko’s investments in these unconsolidated investees ($2,833 million in the aggregate) are presented on the consolidated balance sheet on a net basis. Such net amount represents deferred gains on the contribution transactions (a portion of the total gains realized that will be recognized in earnings over the

93

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

11. Unconsolidated Affiliates (Continued)

estimated useful life of the contributed assets). The deferred gain balance is included in other noncurrent liabilities at December 31, 2007. Other income (expense) for the year ended December 31, 2007 included interest expense on the notes payable to the investees of $(102) million and equity in earnings from Anadarko’s investments in these entities of $98 million.

Permian LLC  In March 2007, Anadarko contributed its working interests in proved and unproved oil and gas properties located in the Permian basin to an unconsolidated entity, Permian Basin LLC (the Permian LLC). Subsequent to its formation, the Permian LLC loaned $1.0 billion to Anadarko for a 35-year term. In exchange for its contribution of assets to the Permian LLC, Anadarko received a noncontrolling mandatorily redeemable interest in that entity, which entitles Anadarko to a LIBOR-based preferred return on the value of the contributed assets ($1 billion), plus a common return consisting of a 5% participation in profits, losses and any residual value of the Permian LLC. At December 31, 2007, the priority return rate was 5.67%. Anadarko’s interest also provides Anadarko with limited consent rights with respect to certain matters, such as acquisition and disposition of assets and incurrence of debt. The exchange of oil and gas property interests for the interest in the Permian LLC was accounted for at fair value, which was determined based on the consideration received. Anadarko recognized a gain of approximately $443 million on the exchange.

The common equity of the Permian LLC is 95% owned by a third party that also maintains operational control over the assets. Distributions to the Permian LLC interest holders, including Anadarko, are payable quarterly. Anadarko may redeem its noncontrolling interest and the owner of the controlling interest in the Permian LLC may cause the redemption of Anadarko’s interest after March 2022. Anadarko’s interest is mandatorily redeemable in March 2037. Redemption of Anadarko’s interest for any reason is based on the fair value of Anadarko’s capital account in the Permian LLC and is net-settled against the fair value of Anadarko’s note payable to the Permian LLC.

The interest rate on the $1.0 billion 35-year note is LIBOR-based, varies based on Anadarko’s credit rating, and was 5.99% at December 31, 2007. Interest on the note is due quarterly, while principal is due at maturity, subject to the net settlement provision. The note is equal in seniority to Anadarko’s other unsecured unsubordinated indebtedness and contains a maximum 67% debt to capital covenant. The loan was funded through the initial contribution to the Permian LLC by the third-party investor in exchange for a controlling interest in the Permian LLC. Proceeds from the note were used to repay a portion of Anadarko’s acquisition facility debt balance.

Midstream LLCs  In July 2007, Anadarko contributed its interests in the Chaney Dell and Midkiff/Benedum natural gas gathering systems and associated processing plants to two separate unconsolidated entities (the Midstream LLCs). Subsequent to their formation, the Midstream LLCs loaned an aggregate of approximately $1.9 billion to Anadarko for a 35-year term. In exchange for its contribution of assets to the Midstream LLCs, Anadarko received noncontrolling mandatorily redeemable interests in the Midstream LLCs, which entitle Anadarko to a LIBOR-based preferred return on the value of the contributed midstream operations ($1.85 billion), plus a common return consisting of a 5% participation in profits, losses and residual value of each of the Midstream LLCs. At December 31, 2007, the priority return rate was 5.65%. Anadarko’s interest also provides Anadarko with limited consent rights with respect to certain matters, such as acquisition and disposition of assets and incurrence of debt. The exchange of the Chaney Dell and Midkiff/Benedum midstream systems for the interests in the Midstream LLCs was accounted for at fair value, which was determined based on the consideration received. Anadarko recognized a gain of approximately $300 million on the exchanges.

The common equity of each of the Midstream LLCs is 95% owned by a third party that also maintains operational control over the assets. Distributions to the Midstream LLC interest holders, including Anadarko, are payable quarterly. Anadarko may separately redeem its interests and the owner of the controlling interest in the

94

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

11. Unconsolidated Affiliates (Continued)

Midstream LLCs may separately cause the redemption of Anadarko’s interests after July 2022. Anadarko’s interests are mandatorily redeemable in July 2037. Redemption of Anadarko’s interests for any reason is based on the fair value of Anadarko’s capital account in the respective Midstream LLC and is net-settled against the fair value of Anadarko’s note payable to that entity.

The 35-year notes have a variable LIBOR-based interest rate that varies based on Anadarko’s credit rating, and was 5.99% at December 31, 2007. Interest on the notes is due quarterly, while the principal on the notes is due at maturity, subject to the net settlement provision. The notes are equal in seniority to Anadarko’s other unsecured unsubordinated indebtedness and were funded through the capital contributions to the Midstream LLCs by the third-party investor in exchange for its controlling interests in those entities. Note proceeds were used by Anadarko to repay a portion of Anadarko’s acquisition facility debt balance.

Midstream Financing Arrangement As discussed in Note 9, in December 2007, Anadarko and the Investor formed Trinity. Trinity’s initial capitalization consisted of Anadarko’s $100 million cash contribution in exchange for Class A member and managing interests in Trinity and the Investor’s $2.2 billion cash contribution in exchange for a Class B member cumulative preferred interest. Trinity invested $100 million in a U.S. Government securities money market fund and used $2.2 billion to extend a loan to a wholly-owned subsidiary of Anadarko, Midstream Holding. The Company used all of the loan proceeds received by Midstream Holding to repay a portion of the Company’s acquisition facility indebtedness. See Note 9 for additional information about the Midstream Subsidiary Note Payable.

Through its Class A member and managing member interests, Anadarko has significant influence over Trinity and accounts for its investment under the equity method of accounting. Trinity’s earnings, which consist primarily of interest income from the Midstream Holding note and the government money market fund investment are to be allocated first to the Investor’s Class B member interest until its cumulative preferred return is satisfied, with the remaining earnings allocated to Anadarko’s Class A member interest. Anadarko absorbs first-dollar losses of Trinity, if any, until its Class A member capital account in Trinity is reduced to zero. As of December 31, 2007, the carrying amount of Anadarko’s investment in Trinity was $100 million and is included in other assets. Investment earnings are included in other income (expense) and were not material.

95

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

12. Asset Retirement Obligations

The majority of Anadarko’s asset retirement obligations relate to the plugging and abandonment of oil and gas properties. The following table provides a rollforward of the asset retirement obligations. Liabilities settled include, among other things, asset retirement obligations that were assumed by the purchasers of divested properties. Revisions in estimated liabilities during the period relate primarily to escalating asset retirement costs and can include, among other things, revisions of estimated inflation rates, changes in property lives and the expected timing of settling asset retirement obligations.

	2007			2006
millions
Carrying amount of asset retirement obligations at beginning of year	$	1,050		$	253
Liabilities assumed with acquisitions		—			672
Other liabilities incurred		51			39
Liabilities settled		(170	)		(57	)
Accretion expense		61			24
Revisions in estimated liabilities		109			119
Carrying amount of asset retirement obligations at end of year	$	1,101		$	1,050

At December 31, 2007 and 2006, asset retirement obligations of $1,058 million and $970 million, respectively, were included in other long-term liabilities.

13. Preferred Stock

Anadarko has $45 million of 5.46% Series B Cumulative Preferred Stock issued in the form of 0.5 million Depositary Shares, each Depositary Share representing 1/10th of a share of the 5.46% Series B Cumulative Preferred Stock. The preferred stock has no stated maturity and is not subject to a sinking fund or mandatory redemption. The shares are not convertible into other securities of the Company. Anadarko has the option to redeem the shares at $100 per Depositary Share on or after May 15, 2008. Holders of the shares are entitled to receive, when, and as declared by the Board of Directors, cumulative cash dividends at an annual dividend rate of $5.46 per Depositary Share. In the event of a liquidation of the Company, the holders of the shares will be entitled to receive liquidating distributions in the amount of $100 per Depositary Share plus any accrued or unpaid dividends, before any distributions are made on the Company’s common stock.

Anadarko repurchased $1 million and $43 million of preferred stock during 2007 and 2006, respectively. For each of the years 2007, 2006 and 2005, dividends of $54.60 per share (equivalent to $5.46 per Depositary Share) were paid to holders of preferred stock.

14. Common Stock

In May 2006, the Company’s shareholders approved an increase in authorized shares so Anadarko could complete a two-for-one stock split to be effected in the form of a stock dividend. The distribution date was May 26, 2006 to stockholders of record on May 12, 2006. In addition, the Company’s Board of Directors approved the retirement of the Company’s existing treasury stock prior to the stock split distribution date. The book value of the treasury shares was allocated to common stock, paid-in capital and retained earnings at the time of retirement. Except for the presentation of common shares authorized and issued on the consolidated balance sheet and shares presented in the table below, all share and per share information has been revised to give retroactive effect to the stock split.

96

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

14. Common Stock (Continued)

The changes in the Company’s shares of common stock are as follows:

	2007	2006		2005
millions
Shares of common stock issued
Beginning of year	463	264		260
Exercise of stock options	4	3		4
Issuance of restricted stock	2	2		—
Retirement of treasury stock	—	(36	)	—
Two-for-one stock split	—	230		—
End of year	469	463		264
Shares of common stock held in treasury
Beginning of year	—	34		23
Purchase of treasury stock	—	1		11
Shares received for restricted stock vested and options exercised	1	1		—
Retirement of treasury stock	—	(36	)	—
End of year	1	—		34
Shares of common stock outstanding at end of year	468	463		230

The number of shares of common stock issued and outstanding presented in the table above excludes 4 million shares, 4 million shares and 2 million shares at the end of 2007, 2006 and 2005, respectively, held by the Anadarko Petroleum Corporation Executives and Directors Benefits Trust, a grantor trust associated with the Company’s obligations under certain of its pension and deferred compensation plans.

In 2007, 2006 and 2005, quarterly dividends of nine cents per share were paid to holders of common stock. As of December 31, 2007, the covenants in certain of the Company’s agreements provided for a maximum capitalization ratio of 60% debt. Although these covenants do not specifically restrict the payment of dividends, the impact of dividends paid on the Company’s debt to total capitalization ratio must be considered prior to the payment of dividends in order to ensure the maximum debt to total capitalization ratio is not exceeded. Based on these covenants, as of December 31, 2007, retained earnings of approximately $6.6 billion were not limited as to the payment of dividends.

Under the Anadarko Stockholders Rights Plan, Rights were attached automatically to each outstanding share of common stock in 1998. Each Right, at the time it becomes exercisable and transferable apart from the common stock, entitles stockholders to purchase from the Company 1/1000th of a share of a new series of junior participating preferred stock at an exercise price of $175. The Right will be exercisable only if a person or group acquires 15% or more of Anadarko common stock or announces a tender offer or exchange offer, the consummation of which would result in ownership by a person or group of 15% or more of Anadarko common stock. The Board of Directors may elect to exchange and redeem the Rights. The Rights expire in 2008.

During 2005, a $2 billion stock buyback program announced in 2004 was completed and an additional $1 billion stock buyback program was authorized. Shares may be repurchased either in the open market or through privately negotiated transactions. The repurchase program does not obligate Anadarko to acquire any specific number of shares and may be discontinued at any time. During 2007, no shares were purchased under the program. During 2006 and 2005, Anadarko purchased 2.5 million and 21.6 million shares of common stock for $0.1 billion and $0.9 billion, respectively, under these programs through purchases in the open market and under share repurchase agreements.

97

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

14. Common Stock (Continued)

The reconciliation between basic and diluted EPS from continuing operations is as follows:

	For the Year Ended December 31, 2007				For the Year Ended December 31, 2006					For the Year Ended December 31, 2005
	Income		Shares	Per Share Amount	Income		Shares	Per Share Amount		Income		Shares	Per Share Amount
millions except per share amounts
Basic EPS
Income from continuing operations	$	3,770			$	2,474				$	1,975
Preferred stock dividends		3				3					5
Net income from continuing operations available to common stockholders	$	3,767	465	8.09	$	2,471	460	$	5.37	$	1,970	470	$	4.19
Effect of ZYP-CODES		—	—			—	—				—	1
Effect of dilutive stock options, restricted stock and performance-based stock awards		—	3			—	4				—	4
Diluted EPS
Net income from continuing operations available to common stockholders	$	3,767	468	8.05	$	2,471	464	$	5.33	$	1,970	475	$	4.15

For the years ended December 31, 2007, 2006 and 2005, awards for 2.5 million, 1.8 million and 0.1 million average shares, respectively, of common stock were excluded from the diluted EPS calculation because their inclusion would have been anti-dilutive.

See Note 6 for information related to common stock issued under stock-based compensation plans.

98

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

15. Statements of Cash Flows Supplemental Information

Net cash provided by investing activities of discontinued operations in 2006 includes proceeds of $4.2 billion from the disposition of Canadian operations, net of cash included in the sale. The difference between cash and cash equivalents on the consolidated balance sheet and statement of cash flows at December 31, 2006 is due to $20 million related to Canadian operations which is included in Current Assets Held for Sale on the balance sheet. In cash flow from operating activities, the changes reported as other items—net include increases in other long-term liabilities—other of $626 million related to operating activities.

The following table presents amounts of cash paid for interest (net of amounts capitalized) and income taxes, including amounts related to discontinued operations, and non-cash transactions.

	2007		2006		2005
millions
Cash paid:
Interest	$	1,012	$	594	$	215
Income taxes (1)	$	2,241	$	778	$	439
Non-cash investing activities:
Receipt of interest in Permian LLC in exchange for interests in oil and gas properties (See Note 11)	$	1,000	$	—	$	—
Receipt of interest in Midstream LLCs in exchange for interests in natural gas gathering systems and associated processing plants (See Note 11)	$	1,848	$	—	$	—
Fair value of properties and equipment received in non-cash exchange transactions	$	88	$	151	$	—

⁽¹⁾ Includes $2.3 billion in 2007 related to taxable gains on divestitures.

16. Major Customers

The Company’s natural gas is sold to interstate and intrastate gas pipelines, direct end-users, industrial users, local distribution companies and gas marketers. Crude oil and condensate are sold to marketers, gatherers and refiners. NGLs are sold to direct end-users, refiners and marketers. These purchasers are located in the United States, Singapore, Switzerland, and China. The majority of the Company’s receivables are paid within two months following the month of purchase.

The Company generally performs a credit analysis of customers prior to making any sales to new customers or increasing credit for existing customers. Based upon this credit analysis, the Company may require a standby letter of credit or a financial guarantee. As of December 31, 2007 and 2006, accounts receivable are shown net of allowance for uncollectible accounts of $10 million and $5 million, respectively.

In 2007 and 2006, there were no sales to individual customers that exceeded 10% of the Company’s total sales revenues. In 2005, sales to affiliates of Duke were $747 million, which accounted for 12% of the Company’s total 2005 sales revenues.

17. Segment and Geographic Information

Anadarko’s primary business segments are vertically integrated within the oil and gas industry. These segments are managed separately because of the nature of their products and services, as well as unique technology, distribution and marketing requirements. The Company’s three operating segments are oil and gas exploration and production, midstream, and marketing. The exploration and production segment explores for and produces natural gas, crude oil, condensate and NGLs. The midstream segment engages in gathering, processing,

99

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

17. Segment and Geographic Information (Continued)

treating and transporting Anadarko’s and third party oil and gas production. The marketing segment sells most of Anadarko’s production, as well as commodities purchased from third parties.

In prior financial statements, midstream and marketing operations were reported as a single gathering, processing and marketing segment. However, following the Company’s August 2006 acquisition of Western and Kerr-McGee, subsequent integration of acquired operations, and substantial completion of the asset divestiture and realignment program by the end of 2007, management increased its focus on the Company’s midstream business on an individual basis. Accordingly, in the fourth quarter of 2007 the Company changed its alignment of operating segments and now presents information for the midstream and marketing operations separately. Additionally, hard minerals activities have become relatively insignificant to Anadarko’s consolidated results and, accordingly, financial information for those activities is no longer reported separately. In the tables that follow, information for prior periods has been revised to retroactively reflect the change in segment alignment.

To assess the operating results of Anadarko’s segments, management uses income from continuing operations before income taxes, interest expense, exploration expense, DD&A and impairments (Adjusted EBITDAX). Anadarko’s definition of Adjusted EBITDAX excludes exploration expense, as exploration expense is not an indicator of operating efficiency for a given reporting period, but is monitored by management as part of costs incurred in exploration and development activities. Similarly, depreciation expense 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. The Company’s Adjusted EBITDAX also excludes interest expense, to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Management believes that the presentation of Adjusted EBITDAX provides information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBITDAX is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures and make distributions to stockholders.

Adjusted EBITDAX, as defined by Anadarko, may not be comparable to similarly titled measures used by other companies. Therefore, Anadarko’s consolidated Adjusted EBITDAX should be considered in conjunction with income from continuing operations and other performance measures, such as operating income or cash flow from operating activities. Below is a reconciliation of consolidated Adjusted EBITDAX to income from continuing operations before income taxes.

	2007		2006		2005
millions
Consolidated Adjusted EBITDAX	$	11,217	$	7,203	$	4,835
Exploration expense		905		737		445
Depreciation, depletion and amortization		2,840		1,752		901
Impairments		51		327		15
Interest expense		1,092		650		221
Income from continuing operations before income taxes	$	6,329	$	3,737	$	3,253

The Company’s accounting policies for individual segments are the same as those described in the summary of significant accounting policies, with the following exceptions. Certain intersegment commodity contracts may meet the Generally Accepted Accounting Principles (GAAP) definition of a derivative instrument, which would be accounted for at fair value under GAAP. However, Anadarko accounts for such intersegment arrangements as executory contracts. Additionally, intersegment asset transfers are accounted for at historical cost basis, and do not give rise to gain or loss recognition.

100

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

17. Segment and Geographic Information (Continued)

The following table presents selected financial information for Anadarko’s operating segments. Information presented as “Other and Intersegment Eliminations” includes results from hard minerals joint ventures and royalty arrangements, operating activities that are not considered operating segments, as well as corporate and financing activities.

	Oil and Gas Exploration & Production		Midstream		Marketing			Other and Intersegment Eliminations			Total
millions
2007
Sales revenues and other	$	5,490	$	202	$	5,503		$	37		$	11,232
Intersegment revenues		3,872		1,268		(4,850	)		(290	)		—
Gains on divestitures, net		4,129		532		—			(1	)		4,660
Total revenues and other	$	13,491	$	2,002	$	653		$	(254	)	$	15,892
Operating costs and expenses (1)		2,854		1,108		419			368			4,749
Other (income) expense		—		—		—			(74	)		(74	)
Total costs and expenses		2,854		1,108		419			294			4,675
Adjusted EBITDAX	$	10,637	$	894	$	234		$	(548	)	$	11,217
Net properties and equipment	$	33,150	$	2,694	$	28		$	1,579		$	37,451
Capital expenditures	$	3,215	$	665	$	22		$	88		$	3,990
Goodwill	$	4,847	$	108	$	—		$	—		$	4,955
2006
Sales revenues and other	$	5,045	$	140	$	5,111		$	(92	)	$	10,204
Intersegment revenues		4,141		577		(4,730	)		12			—
Gains on divestitures, net		26		—		—			—			26
Total revenues and other	$	9,212	$	717	$	381		$	(80	)	$	10,230
Operating costs and expenses (1)		1,862		534		303			334			3,033
Other (income) expense		—		—		—			(6	)		(6	)
Total costs and expenses		1,862		534		303			328			3,027
Adjusted EBITDAX	$	7,350	$	183	$	78		$	(408	)	$	7,203
Net properties and equipment	$	35,506	$	4,281	$	25		$	1,624		$	41,436
Capital expenditures	$	3,769	$	229	$	50		$	78		$	4,126
Goodwill	$	4,048	$	—	$	—		$	—		$	4,048

101

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

17. Segment and Geographic Information (Continued)

	Oil and Gas Exploration & Production		Midstream		Marketing			Other and Intersegment Eliminations			Total
2005
Sales revenues and other	$	1,891	$	153	$	4,198		$	(42	)	$	6,200
Intersegment revenues		3,999		109		(3,977	)		(131	)		—
Gains on divestitures, net		108		—		—			—			108
Total revenues and other	$	5,998	$	262	$	221		$	(173	)	$	6,308
Operating costs and expenses (1)		1,067		154		242			86			1,549
Other (income) expense		—		—		—			(76	)		(76	)
Total costs and expenses		1,067		154		242			10			1,473
Adjusted EBITDAX	$	4,931	$	108	$	(21	)	$	(183	)	$	4,835
Net properties and equipment	$	9,943	$	295	$	110		$	1,510		$	11,858
Capital expenditures	$	2,524	$	43	$	27		$	50		$	2,644
Goodwill	$	1,089	$	—	$	—		$	—		$	1,089

⁽¹⁾ Operating costs and expenses exclude exploration, DD&A and impairment expenses since they are excluded from Adjusted EBITDAX.

The following table shows Anadarko’s sales revenues and other (based on the origin of the sales) and net properties and equipment by geographic area:

	2007		2006		2005
millions
Sales Revenues and Other
United States	$	9,134	$	8,285	$	4,573
Algeria		1,641		1,543		1,305
Other International		457		376		322
Total	$	11,232	$	10,204	$	6,200

	2007		2006
millions
Net Properties and Equipment
United States	$	34,603	$	38,694
Algeria		604		613
Other International		2,244		2,129
Total	$	37,451	$	41,436

102

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

18. Other Taxes

Taxes incurred, other than income taxes, are as follows:

	2007		2006		2005
Production and severance	$	998	$	339	$	213
Ad valorem		178		187		121
Other		58		23		11
Total	$	1,234	$	549	$	345

In July 2006, the Algerian parliament approved legislation establishing an exceptional profits tax on foreign companies’ Algerian oil production. In December 2006, implementing regulations regarding this legislation were issued. These regulations provide for an exceptional profits tax imposed on gross production at rates of taxation ranging from 5% to 50% based on average daily production volumes for each calendar month in which the price of Brent crude averages over $30 per barrel, retroactively effective to August 2006 production. Uncertainty existed at that time as to whether the exceptional profits tax would apply to the full value of production or only to the value of production in excess of $30 per barrel. In 2006, Anadarko recorded a $103 million accrual for the tax, assuming the tax would be applied only to the amounts in excess of $30 per barrel.

In January 2007, Sonatrach, the national oil and gas company of Algeria, advised Anadarko that it would begin collecting the exceptional profits tax from Anadarko’s share of production commencing with March 2007 liftings, including for the prior months since the new tax went into effect. In April 2007, ALNAFT, the new agency in the Algerian Ministry of Energy and Mines responsible for overseeing the Algerian hydrocarbons industry, issued the Application Procedure further defining the procedure and conditions under which the exceptional profits tax is applied and the methodology for its calculation. The Application Procedure and other information supplied by Sonatrach revealed that the exceptional profits tax was being applied to the full value of production rather than to the amounts in excess of $30 per barrel. This was evidenced by changes in the Company’s crude oil lifting schedule, which was conveyed to Anadarko by Sonatrach. As a result, Anadarko changed the measurement basis for the exceptional profits tax liability in the first quarter of 2007, to reflect the application of the tax rate to the full value of production. On that measurement basis, the Company recognized production tax expense of $705 million for 2007. Of this amount, $87 million, or $0.19 per diluted share is related to 2006 sales and income from continuing operations.

19. Severance and Asset Realignment Expenses

During 2007, general and administrative (G&A) expense includes a charge of $85 million associated with employee severance and benefits arising from the Company’s post-acquisition asset realignment and restructuring efforts initiated in the fourth quarter of 2006, including certain charges for stock-based awards and retirement plan costs that were not reasonably estimable until 2007. The $85 million charge in 2007 reflects $32 million in accelerated amortization expense related to stock-based awards held by our employees affected by the restructuring, a $36 million charge for retirement plan termination benefits and a $17 million increase in the estimate of severance costs. As of December 31, 2007, the liability remaining for severance costs is not material. During 2006, G&A expense included $77 million related to severance and benefits associated with the Company’s post acquisition asset realignment and restructuring efforts. G&A expense during 2007 also includes a charge of $5 million for office lease termination costs associated with the Company’s asset realignment efforts.

Oil and gas operating expense in 2007 includes a charge of approximately $20 million for employee-related severance costs associated with field operations. During 2006, oil and gas operating expense included $5 million related to severance and benefits associated with the Company’s post-acquisition asset realignment and restructuring efforts.

103

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

20. Income Taxes

Components of income tax expense are as follows:

	2007			2006			2005
millions
Current
Federal	$	2,764		$	291		$	327
State		189			25			2
Foreign		658			616			523
Total		3,611			932			852
Deferred
Federal		(989	)		525			285
State		(40	)		(73	)		70
Foreign		(23	)		(121	)		71
Total		(1,052	)		331			426
Total	$	2,559		$	1,263		$	1,278

Total income taxes differed from the amounts computed by applying the statutory income tax rate to income from continuing operations before income taxes. The sources of these differences are as follows:

	2007			2006			2005
millions
Income from continuing operations before income taxes
Domestic	$	5,449		$	2,897		$	2,133
Foreign		880			840			1,120
Total	$	6,329		$	3,737		$	3,253
Statutory tax rate		35	%		35%			35	%
Tax computed at statutory rate	$	2,215		$	1,308		$	1,139
Adjustments resulting from:
State income taxes (net of federal income tax benefit)		111			39			50
Texas margin tax law change (net of federal income tax benefit)		(14	)		(69	)		—
Foreign taxes in excess of federal statutory tax rate		59			123			154
Non-deductible Algerian exceptional profits tax (1)		268			39			—
Excess U.S. foreign tax credit generated		—			(195	)		(79	)
Other — net		(80	)		18			14
Total income tax expense	$	2,559		$	1,263		$	1,278
Effective tax rate		40	%		34	%		39	%

⁽¹⁾ Exceptional profits tax is not deductible for Algerian income tax purposes.

The effect of stock-based compensation deducted for tax purposes in excess of amounts recognized for financial accounting purposes has been credited directly to paid-in capital in amounts of $28 million, $45 million and $53 million for 2007, 2006 and 2005, respectively.

Tax effects related to restructuring of certain foreign operations in prior years have been recorded to other assets and other long-term liabilities on the balance sheet at December 31, 2007 and 2006 and are being

104

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

20. Income Taxes (Continued)

recognized in the income statement over the estimated life of the related properties under Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements.” During 2005, an ARB No. 51 liability of $21 million associated with a previous restructuring of the Company’s Venezuelan operations was reversed to income. During 2007, an ARB No. 51 liability of $184 million associated with an internal restructuring was recorded to other long-term liabilities and will be recognized in future periods.

Certain subsidiaries of the Company are currently in administrative appeals with the Internal Revenue Service (IRS) or under examination with various foreign jurisdictions for years prior to their acquisition by the Company. The Company determined in 2006 and 2007 that deferred tax liabilities related to pre-acquisition tax contingencies of approximately $45 million and $16 million, respectively, were no longer required due to completion of audits and administrative appeals, filing amended returns, reevaluation of contingencies and changes in the Company’s estimate of the ultimate tax basis of acquired assets and liabilities. Accordingly, these liabilities were reversed with an offsetting decrease to goodwill. Future events, including the conclusion of examinations and administrative appeals by taxing authorities and resolution of pre-acquisition contingencies, may result in additional adjustments to goodwill.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31, 2007 and 2006 are as follows:

	2007			2006
millions
Net current deferred tax assets	$	112		$	7
Net long-term deferred tax assets		17			—
Net current deferred tax liability		—			(426	)
Oil and gas exploration and development operations		(9,538	)		(10,767	)
Mineral operations		(424	)		(432	)
Other depreciable properties		(1,197	)		(1,403	)
Other		(233	)		(81	)
Gross long-term deferred tax liabilities		(11,392	)		(12,683	)
Oil and gas exploration and development costs		185			183
Net operating loss carryforward		303			303
Foreign tax credit carryforward		163			—
Other		997			792
Gross long-term deferred tax assets		1,648			1,278
Less: valuation allowance on deferred tax assets not expected to be realized		(472	)		(465	)
Net long-term deferred tax assets		1,176			813
Net long-term deferred tax liabilities		(10,216	)		(11,870	)
Total deferred taxes	$	(10,087	)	$	(12,289	)

Total deferred taxes at December 31, 2007 and 2006 include state deferred taxes, net of federal benefit, of approximately $309 million and $422 million, respectively. Total deferred taxes as of December 31, 2007 and 2006 also include foreign deferred taxes of approximately $487 million and $511 million, respectively. Changes to the valuation allowance, due to a change in judgement about the realizability of the related deferred assets in future years, were $3 million for 2007.

105

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

20. Income Taxes (Continued)

At December 31, 2007 and 2006, the Company had income taxes receivable of $591 million and $899 million, respectively, that are included in accounts receivable others. In addition, $271 million and $574 million of accrued income taxes were included in accrued expenses at December 31, 2007 and 2006, respectively.

The American Jobs Creation Act of 2004 (Jobs Act) introduced a special one-time, 85% dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer provided certain criteria are met. In 2005, Anadarko’s Chief Executive Officer and Board of Directors approved a domestic reinvestment plan for a $500 million repatriation of foreign earnings under the Jobs Act. The $26 million tax effect of this repatriation was recorded as current tax expense in 2005.

Tax carryforwards at December 31, 2007, which are available for utilization on future income tax returns, are as follows:

	Domestic		Foreign		Expiration
millions
Net operating loss — regular tax	$	—	$	105	2010-indef.
Net operating loss — state	$	4,409	$	—	2008-2026
Foreign tax credits	$	163	$	—	2014-2016
Texas margins tax credit	$	22	$	—	2016

Anadarko adopted the provisions of FIN 48 on January 1, 2007. As of the date of adoption, the Company had unrecognized tax benefits of $120 million, including $23 million of tax interest and penalties net of federal benefit. The adoption of FIN 48 resulted in an increase of $72 million to retained earnings and a decrease of $139 million to goodwill.

A rollforward of unrecognized tax benefits excluding tax interest and penalties is as follows:

millions
Balance at January 1, 2007	$	97
Increases related to prior year tax positions		84
Decreases related to prior year tax positions		(20	)
Increases related to current year tax positions		84
Settlements		(7	)
Lapse of statue		—
Balance at December 31, 2007		$238

Included in the balance of unrecognized tax benefits are potential benefits of $31 million that would affect the effective tax rate on income from continuing operations if recognized and $39 million that would be recorded as an adjustment to goodwill if recognized. Also included in the balance at December 31, 2007 are $168 million related to tax positions for which the ultimate deductibility is highly certain but the timing of such deductibility is uncertain. The Company does not anticipate any significant changes in its unrecognized tax positions within the next twelve months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of January 1, 2007 and December 31, 2007, the Company had approximately $21 million and $8 million of accrued interest related to uncertain tax positions, respectively. During 2007, the Company recognized $4 million in income tax expense for interest and penalties.

106

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

20. Income Taxes (Continued)

The following is a list of tax years subject to examination by major tax jurisdiction:

	Tax Year
United States	1995-1996 and 1998-2006
China	2005-2006
Algeria	2004-2007

21. Commitments

Leases  The Company has long-term drilling rig commitments that meet the operating lease criteria, totaling $4.5 billion. The Company also has various commitments under noncancelable operating lease agreements of $1.0 billion for production platforms and equipment, buildings, facilities and aircraft. These operating leases expire at various dates through 2024. Certain of these operating leases contain residual value guarantees at the end of the lease term, however, at December 31, 2007, no material liabilities were accrued for these guarantees. At December 31, 2007, future minimum lease payments under operating leases are as follows:

	Operating Leases
millions
2008	$	1,527
2009		1,144
2010		894
2011		677
2012		563
Later years		676
Total future minimum lease payments	$	5,481

Total rental expense, net of sublease income, amounted to $229 million in 2007, $125 million in 2006 and $40 million in 2005. Total rental expense includes contingent rental expense related to processing fees of $6 million, $14 million and $7 million in 2007, 2006 and 2005, respectively.

Drilling Rig Commitments  Anadarko has entered into various agreements to secure a portion of the drilling rigs necessary to execute its drilling plans over the next several years. The table of future minimum lease payments above includes approximately $4.0 billion for eight offshore drilling vessels and $480 million for certain contracts for onshore United States drilling rigs. In February 2008, the Company extended the terms of one of the drilling rig contracts, which gave rise to $586 million in additional commitment for minimum lease payments in years 2010 through 2013 that is not included in the above table. The portion of these lease payments associated with exploratory wells and development wells, net of amounts billed to partners, will initially be capitalized as a component of oil and gas properties, and either depreciated in future periods or written off as exploration expense.

Production Platforms  During 2004, Anadarko and a group of energy companies (Atwater Valley Producers Group) executed agreements with third parties for the dedication, processing and gathering of natural gas and condensate production from several natural gas fields in the deepwater Gulf of Mexico. Third parties constructed

107

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

21. Commitments (Continued)

and own Independence Hub, a semi-submersible platform in the deepwater Gulf of Mexico. Anadarko became operator of the platform structure upon mechanical completion in 2007. First production from Anadarko’s discoveries to be processed on the facility began in 2007.

The Company is also a party to an agreement under which a floating production platform for its Marco Polo discovery in the deepwater Gulf of Mexico was installed in 2004. The other party to the agreement constructed and owns the platform and production facilities that upon mechanical completion became operated by Anadarko. The agreement provides that Anadarko dedicate its production from Green Canyon Block 608 and 11 other Green Canyon blocks to the production facilities.

The table of future minimum lease payments above includes $161 million related to the monthly demand charge under these agreements. The agreements do not contain any purchase options, purchase obligations or value guarantees.

Spar Platform and Production Vessel Leases  Anadarko has operating leases related to certain spar platforms in the Gulf of Mexico and a floating production, storage and offloading vessel in China. The table of future minimum lease payments above includes approximately $518 million for these agreements. These agreements also contain residual value guarantees totaling $37 million at the end of the lease periods.

Buildings  The table of future minimum lease payments above includes the Company’s lease payment obligations of $137 million related to office building leases. The Company leases two corporate office buildings located in The Woodlands, Texas. The lease term is seven years and contains various covenants including covenants regarding the Company’s financial condition. Default under the lease, including violation of these covenants, could require the Company to purchase the facilities for a specified amount, which approximates the lessor’s original cost of $214 million. As of December 31, 2007, the Company was in compliance with these covenants. The Company has provided a residual value guarantee for any deficiency of up to $187 million if the properties are sold for less than the lease balance. Currently, management does not believe it is probable that the fair market value of the properties will be less than the lease balance at the end of the lease term.

Aircraft  The table of future minimum lease payments above includes the Company’s lease payment obligations of $50 million related to aircraft leases. Some of these leases provide for a residual value guarantee for any deficiency if the aircraft are sold for less than the sale option amount (approximately $27 million). In addition, the Company is entitled to any proceeds from a sale of the aircraft in excess of the sale option amount.

Other Equipment Leases  Included in the table of future minimum lease payments above are lease payments of approximately $95 million related to equipment associated with various gas gathering and processing systems. In the event the Company does not purchase the equipment at the end of the leases, the Company may be required to make payments in connection with residual value guarantees for a total of up to $16 million.

Other Commitments  In the normal course of business, the Company enters into other contractual agreements to purchase natural gas or crude oil, pipeline capacity, storage capacity, utilities and other services. Aggregate future payments under these contracts total $2.13 billion, of which $620 million is expected to be paid in 2008, $527 million in 2009, $299 million in 2010, $186 million in 2011, $133 million in 2012 and $366 million thereafter.

108

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

21. Commitments (Continued)

Sale of Future Hard Minerals Royalty Revenues  In 2004, the Company entered into an agreement whereby it sold a portion of its future royalties associated with existing coal and trona leases to a third party for $158 million, net of transaction costs. The Company conveyed a limited-term nonparticipating royalty interest, which was carved out of the Company’s royalty interests, that entitles the third party to receive future coal and trona royalty revenue over an 11-year period. Additionally, the third party is entitled to receive 5% of the aggregate royalties earned during the first ten years of the agreement that exceed $400 million. The specified cumulative future amount that the third-party investor expects to receive, prior to the 5% of any excess royalties described above, is $147 million. This amount and the payment timing are subject to change based upon the actual royalties received by the Company during the term of the agreement. The third party relies solely on the royalty payments to recover their investment and, as such, has the risk of the royalties not being sufficient to recover their investment over the term of the agreement.

Proceeds from this 2004 transaction were accounted for as deferred revenues and classified as liabilities on the balance sheet. The deferred revenues are amortized to other sales on a unit-of-revenue basis over the term of the agreement. For each of the years 2007, 2006 and 2005, the Company amortized $16 million of deferred revenues to other sales revenues related to this agreement.

22. Pension Plans, Other Postretirement Benefits and Employee Savings Plans

Pension Plans and Other Postretirement Benefits  The Company has non-contributory defined benefit pension plans, including both qualified and supplemental plans, and a foreign contributory defined benefit pension plan. The Company also provides certain health care and life insurance benefits for retired employees. Health care benefits are funded by contributions from the Company and the retiree. The Company’s retiree life insurance plan is noncontributory. The Company uses a December 31 measurement date for each of the plans, with the exception of one plan which has a measurement date of September 30.

In 2007, the Company made contributions of $16 million to its funded pension plans, $74 million to its unfunded pension plans and $22 million to its unfunded other postretirement benefit plans. Contributions to the funded plans increase the plan assets while contributions to unfunded plans are used for current benefit payments. In 2008, the Company expects to contribute $15 million to its funded pension plans, $11 million to its unfunded pension plans and $22 million to its unfunded other postretirement benefit plans.

Anadarko adopted SFAS No. 158 as of December 31, 2006. SFAS No. 158 requires the Company, among other things, to recognize the overfunded or underfunded status of each defined benefit postretirement plan in its balance sheet, measured as the difference between the fair value of plan assets and the benefit obligation, and recognize changes in the funded status of a plan during the reporting period as a component of accumulated comprehensive income (loss).

109

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

22. Pension Plans, Other Postretirement Benefits and Employee Savings Plans (Continued)

The following table sets forth changes in the benefit obligations and fair value of plan assets for the Company’s pension and other postretirement benefit plans for the years ended December 31, 2007 and 2006, as well as the funded status of the plans and amounts recognized in the financial statements as of December 31, 2007 and 2006.

	Pension Benefits						Other Benefits
	2007			2006			2007			2006
millions
Change in benefit obligations
Benefit obligations at beginning of year	$	1,487		$	762		$	343		$	188
Service cost		58			49			15			16
Interest cost		80			59			20			13
Plan amendments		1			—			(2	)		7
Settlements		1			5			—			—
Curtailments		(27	)		—			(20	)		—
Termination benefits		31			—			5			—
Actuarial (gain) loss		(16	)		43			(12	)		(1	)
Contributions by plan participants		1			1			4			4
Benefit payments		(296	)		(190	)		(26	)		(18	)
Foreign currency exchange rate changes		1			8			—			—
Acquisition of Kerr-McGee		—			784			—			137
Sale of Canadian operations		—			(34	)		—			(3	)
Benefit obligations at end of year	$	1,321		$	1,487		$	327		$	343
Change in plan assets
Fair value of plan assets at beginning of year	$	1,219		$	588		$	—		$	—
Actual return on plan assets		74			135			—			—
Employer contributions		90			145			22			14
Contributions by plan participants		1			1			4			4
Benefit payments		(296	)		(190	)		(26	)		(18	)
Foreign currency exchange rate changes		—			6			—			—
Acquisition of Kerr-McGee		—			580			—			—
Sale of Canadian operations		—			(46	)		—			—
Fair value of plan assets at end of year	$	1,088		$	1,219		$	—		$	—
Funded status of the plans at end of year	$	(233	)	$	(268	)	$	(327	)	$	(343	)
Total recognized amounts in the balance sheet consist of:
Accrued expenses	$	(11	)	$	(50	)	$	(22	)	$	(21	)
Other long-term liabilities—other		(222	)		(218	)		(305	)		(322	)
Total	$	(233	)	$	(268	)	$	(327	)	$	(343	)
Total recognized amounts in accumulated other comprehensive income consist of:
Prior service cost	$	4		$	5		$	1		$	7
Net actuarial loss		207			255			8			42
Total	$	211		$	260		$	9		$	49

110

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

22. Pension Plans, Other Postretirement Benefits and Employee Savings Plans (Continued)

The accumulated benefit obligation for all defined benefit pension plans was $1.1 billion and $1.2 billion as of December 31, 2007 and 2006, respectively. For the Company’s defined benefit pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $609 million, $550 million and $447 million, respectively, as of December 31, 2007, and $815 million, $710 million and $611 million, respectively, as of December 31, 2006.

The following table sets forth the Company’s pension and other postretirement benefit cost and amounts recognized in other comprehensive income (before tax benefit).

	Pension Benefits									Other Benefits
	2007			2006			2005			2007		2006		2005
millions
Components of net periodic benefit cost
Service cost	$	58		$	49		$	36		$	15	$	16	$	15
Interest cost		80			59			38			20		14		9
Expected return on plan assets		(82	)		(64	)		(38	)		—		—		—
Settlements		4			8			—			—		—		—
Curtailments		(4	)		—			—			2		—		—
Termination benefits		31			—			—			5		—		—
Amortization of prior service cost (credit)		1			1			1			—		1		(1	)
Amortization of actuarial loss		15			20			17			1		3		3
Net periodic benefit cost	$	103		$	73		$	54		$	43	$	34	$	26
Amounts recognized in other comprehensive income
Net actuarial gain	$	31		$	—		$	—		$	34	$	—	$	—
Amortization of net actuarial loss		17			—			—			1		—		—
Prior service credit		—			—			—			6		—		—
Additional minimum liability		—			10			96			—		—		—
Total amounts recognized in other comprehensive income	$	48		$	10		$	96		$	41	$	—	$	—

The estimated net actuarial loss for the pension plans, which will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2008, is $12 million.

Following are the weighted-average assumptions used by the Company in determining the pension and other postretirement benefit obligations as of December 31, 2007 and 2006:

	Pension Benefits				Other Benefits
	2007		2006		2007		2006
percent
Discount rate	6.0	%	5.75	%	6.25	%	5.75	%
Rates of increase in compensation levels	5.0	%	5.0	%	5.0	%	5.0	%

111

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

22. Pension Plans, Other Postretirement Benefits and Employee Savings Plans (Continued)

The discount rate assumption used by the Company is meant to reflect the interest rate at which the pension and other postretirement obligations could effectively be settled on the measurement date. The Company currently uses a yield curve analysis, for a majority of the plans, to support the discount rate assumption. This analysis involves the creation of a hypothetical Aa spot yield curve represented by a series of high-quality, non-callable, marketable bonds, then discounts the projected cash flows from each plan at interest rates on the created curve specifically applicable to the timing of each respective cash flow. The present values of the cash flows are then accumulated, and a weighted-average discount rate is calculated by imputing the single discount rate that equates to the total present value of the cash flows. The consolidated discount rate assumption is determined by evaluation of the weighted-average discount rates determined for each of the Company’s significant pension and postretirement plans.

Following are the weighted-average assumptions used by the Company in determining the net periodic pension and other postretirement benefit cost for 2007, 2006 and 2005:

	Pension Benefits						Other Benefits
	2007		2006		2005		2007		2006		2005
percent
Discount rate	5.75	%	5.75	%	5.75	%	5.75	%	5.75	%	5.75	%
Long-term rate of return on plan assets	7.75	%	7.75	%	8.0	%	n/a		n/a		n/a
Rates of increase in compensation levels	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%

The Company has adopted a balanced, diversified investment strategy, with the intent of maximizing returns without exposure to undue risk. Investments are typically made through investment managers across several investment categories (Domestic Large and Small Cap, International, Domestic Fixed Income, Real Estate and Private Equity), with selective exposure to Growth/Value investment styles. Performance for each investment is measured relative to the appropriate index benchmark for its category. Target asset allocation percentages by major category are 55%-65% equity securities, 25%-35% fixed income and zero to 10% other. Investment managers have full discretion as to investment decisions regarding all funds under their management to the extent permitted within investment guidelines. Certain investments are prohibited, including short sales, sales on margin, securities of companies in bankruptcy, investments in financial futures and commodities and currency exchanges.

The Company’s pension plans as of December 31, 2007 and 2006 were comprised of assets by category as follows:

	2007		2006
percent
Assets
Equity securities	63	%	67	%
Fixed income	32		29
Other	5		4
Total	100	%	100	%

There are no direct investments in Anadarko securities included in plan assets; however, there may be indirect investments in Anadarko securities through the plans’ mutual fund investments. The expected long-term rate of return on assets assumption was determined using the year-end 2007 pension investment balances by category and projected target asset allocations for 2008. The expected return for each of these categories was determined by using capital market projections, with consideration of actual five-year performance statistics for investments in place.

112

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

22. Pension Plans, Other Postretirement Benefits and Employee Savings Plans (Continued)

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid as follows:

	Pension Benefit Payments		Other Benefit Payments
millions
2008	$	94	$	22
2009		84		21
2010		90		21
2011		99		22
2012		102		22
2013-2017		630		112

For year-end 2007 measurement purposes, the Company used separate assumptions of cost increase rates for medical, prescription drugs and dental benefits covered by the plans. A 7% annual rate of increase in the per capita cost of covered medical benefits was assumed for 2008, decreasing gradually to 5% in 2015 and later years. For prescription drug benefits, a rate of increase of 11% in the per capita cost was assumed for 2008, decreasing gradually to 5% in 2015 and later years. For dental care costs, the Company assumed a flat rate of increase of 5%. For year-end 2006 measurement purposes, the Company used separate assumptions of cost increase rates for medical, prescription drugs and dental benefits covered by the plans. A 7.5% annual rate of increase in the per capita cost of covered medical benefits was assumed for 2007, decreasing gradually to 5% in 2015 and later years. For prescription drug benefits, a rate of increase of 12% in the per capita cost was assumed for 2007, decreasing gradually to 5% in 2015 and later years. For dental care costs, the Company assumed a flat rate of increase of 5%. The assumed health care cost trend rate has a significant effect on the amounts reported for the health care plan. A 1% change in the assumed health care cost trend rate over the projected period would have the following effects:

	1% Increase		1% Decrease
millions
Effect on total of service and interest cost components	$	3	$	(3)
Effect on other postretirement benefit obligation	$	14	$	(11)

Employee Savings Plan  The Company has employee savings plans (ESP) which are defined contribution plans. The Company matches a portion of employees’ contributions. Participation in the ESP is voluntary and all regular employees of the Company are eligible to participate. The Company charged to expense plan contributions of $25 million, $20 million and $14 million for 2007, 2006 and 2005, respectively.

113

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

23. Contingencies

General  Litigation charges of $56 million, $16 million and $64 million were expensed during 2007, 2006 and 2005, respectively. The Company is a defendant in a number of lawsuits and is involved in governmental proceedings arising in the ordinary course of business, including, but not limited to, royalty claims, contract claims and environmental claims. The Company has also been named as a defendant in various personal injury claims, including claims by employees of third-party contractors alleging exposure to asbestos, silica and benzene while working at refineries (previously owned by predecessors of acquired companies) located in Texas, California and Oklahoma. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or cash flow of the Company.

Litigation The Company is subject to various claims from its royalty owners in the regular course of business as an oil and gas producer, including disputes regarding measurement, costs and expenses beyond the wellhead and basis for royalty valuations. The Company was named as a defendant in a case styled U.S. of America ex rel. Harold E. Wright v. AGIP Company, et al. filed in September 2000 in the U.S. District Court for the Eastern District of Texas, Lufkin Division. Kerr-McGee was also named as a defendant in this legal proceeding. This lawsuit generally alleges that the Company, including Kerr-McGee, and 117 other defendants undervalued natural gas in connection with a payment of royalties on production from federal and Indian lands. Based on the Company’s present understanding of these various governmental and False Claims Act proceedings, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. However, if the Company is found to have violated the False Claims Act, the Company could be subject to a variety of sanctions, including treble damages and substantial monetary fines. All defendants jointly filed a motion to dismiss the action on jurisdictional grounds based on Mr. Wright’s failure to qualify as the original source of the information underlying his fraud claims, and the Company filed additional motions to dismiss on separate grounds. On September 14, 2005, the trial court declined an early appeal of its order denying the defendants’ motion to dismiss. Meanwhile, the discovery process is ongoing. The court has entered an order whereby the case will be tried in phases, with Phase I beginning on August 5, 2008, and Phase II beginning on February 3, 2009. Prior to its acquisition by Anadarko, Kerr-McGee reached a settlement with the government; however, the court has permitted Mr. Wright to conduct additional discovery to test the reasonableness of the settlement. Discovery is currently underway. Management has accrued a liability for only the settlement amount. The Company believes that an additional loss, if any, is unlikely to have a material adverse effect on Anadarko’s financial position, results of operations or cash flows.

The Company was named as a defendant in a case styled Ivan J. Simmons, Madaline M. Thompson and Gaylon Lee Mitchusson v. Anadarko Petroleum Corporation, which was filed in February 2004 and is pending in the District Court in Caddo County, Oklahoma. Plaintiffs claim the Company failed to correctly pay royalties on gas, arguing that costs associated with compression, gathering, dehydration, and processing should not have been deducted or factored into the royalty calculation. Plaintiffs are seeking an award of monetary and punitive damages. In January 2008, the District Judge issued an order certifying this case as a class action. The defined class generally includes all royalty interest owners in Oklahoma wells where the Company is or was the operator, working interest owner or lessee and relates only to payment of hydrocarbons produced from those wells since 1985. The Company has accrued a liability for this matter and is preparing an interlocutory appeal of this class certification order.

114

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

23. Contingencies (Continued)

Deepwater Royalty Relief Act In 1995, the United States Congress passed the Deepwater Royalty Relief Act (DWRRA) to stimulate exploration and production of oil and natural gas by providing relief from the obligation to pay royalty on certain federal leases located in the deep waters of the Gulf of Mexico. After the passage of the DWRRA, the Minerals Management Service (MMS) included price thresholds on leases issued in 1996, 1997 and 2000 that eliminated this royalty relief if these price thresholds were exceeded. The 1998 and 1999 leases did not contain price threshold provisions. The Company currently owns interests in several deepwater Gulf of Mexico leases granted during the 1996-2000 time period (some originally owned by Kerr-McGee). In January 2006, the Department of the Interior (DOI) ordered Kerr-McGee Oil and Gas Corporation (KMOG) to pay oil and gas royalties and accrued interest on KMOG’s deepwater Gulf of Mexico production associated with eight 1996, 1997 and 2000 leases, for which KMOG believes royalties are suspended under the DWRRA. MMS is an agency of DOI. DOI issued the Order to Pay based on the assertion that DOI has the discretion to eliminate royalty relief under the DWRRA when oil and gas prices exceed certain levels specified by DOI. KMOG believes that DOI does not have the discretion to eliminate royalty relief on the DWRRA leases issued 1996 through 2000 and accordingly, is contesting the Order to Pay additional royalties. In that regard, on March 17, 2006, KMOG filed a lawsuit styled Kerr-McGee Oil and Gas Corp. v. C. Stephen Allred, Assistant Secretary for Land & Minerals Mgt. and the Deprt of the Interior in the U.S. District Court for the Western District of Louisiana against DOI for injunctive and declaratory relief with respect to DOI’s claims for additional royalties. KMOG and DOI agreed to mediate the dispute voluntarily and although the parties participated actively in the mediation, the mediation concluded without resolution of the dispute.

KMOG filed a motion for summary judgment, and in October 2007 the District Court ruled in favor of KMOG. The DOI has appealed the decision to the U.S. Court of Appeals for the Fifth Circuit.

In addition to interests in the eight KMOG deepwater Gulf of Mexico leases subject to this proceeding, Anadarko and KMOG own interests in other 1996, 1997 and 2000 deepwater Gulf of Mexico leases, and these leases contain similar pricing thresholds as the eight KMOG leases. The Company has accrued a liability of approximately $377 million, which, as of December 31, 2007, is equal to the royalties (plus accrued interest) that could be owed on the 1996, 1997 and 2000 leases granted to the Company in the Gulf of Mexico that contain price threshold provisions. The liability will continue to be adjusted monthly as production is sold and sales prices are confirmed, until the resolution of the matter is final. Under the applicable statutes, regulations and lease terms attributable to the 1998 and 1999 leases, no royalties are owed on production from these leases until the applicable royalty suspension volumes are exhausted; accordingly, no amounts have been accrued for potential royalty payments under those leases.

Guarantees and Indemnifications Under the terms of the Master Separation Agreement entered into between Kerr-McGee and Tronox Incorporated (Tronox), a former wholly-owned subsidiary that held Kerr-McGee’s chemical business, Kerr-McGee agreed to reimburse Tronox for 50% of certain qualifying environmental remediation costs incurred and paid by Tronox and its subsidiaries before November 28, 2012, subject to certain limitations and conditions. The reimbursement obligation is limited to a maximum aggregate reimbursement of $100 million. As of December 31, 2007, the Company has a $98 million liability recorded for the guarantee obligation.

The Company is guarantor for specific financial obligations of a trona mining affiliate. The investment in this entity is accounted for using the equity method. The Company has guaranteed a portion of amounts due under a term loan. The Company’s guarantee under the term loan expires in 2010, coinciding with the maturity of that agreement. The Company would be obligated to pay $15 million under the term loan if the affiliate defaulted on the obligation. No liability has been recognized for this guarantee as of December 31, 2007.

115

ANADARKO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

23. Contingencies (Continued)

In connection with its various acquisitions, the Company routinely indemnifies the former officers and directors of acquired companies in respect to acts or omissions occurring prior to the effective date of the acquisition. The Company also agrees to maintain directors’ and officers’ liability insurance on these individuals with respect to acts or omissions occurring prior to the acquisition, generally for a period of six years. No liability has been recognized for these indemnifications.

The Company also provides certain indemnifications in relation to dispositions of assets. These indemnifications typically relate to disputes, litigation or tax matters existing at the date of disposition. In connection with the 2006 sale of its Canadian subsidiary, the Company indemnified the purchaser for potential future audit adjustments that may be imposed by the Canadian taxing authorities for tax years prior to the sale. The Company believes it is probable that these liabilities will be settled with the purchaser in cash. At December 31, 2007, the Company had a $138 million liability for the contingency.

Other  The Company is subject to other legal proceedings, claims and liabilities which arise in the ordinary course of its business. In the opinion of Anadarko, the liability with respect to these actions will not have a material effect on the Company.

Anadarko is also subject to various environmental remediation and reclamation obligations arising from federal, state and local laws and regulations. As of December 31, 2007, the Company’s balance sheet included a $132 million liability for remediation and reclamation obligations, most of which were incurred by companies that Anadarko has acquired. The Company continually monitors the liability recorded and the remediation and reclamation process.

116

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

The supplementary oil and gas data that follows is presented in accordance with SFAS No. 69, “Disclosures about Oil and Gas Producing Activities” and includes (1) capitalized costs, costs incurred and results of operations related to oil and gas producing activities, (2) net proved oil and gas reserves, and (3) a standardized measure of discounted future net cash flows relating to proved oil and gas reserves. The Other International reserves as of December 31, 2007 were located primarily in Brazil and China. The discontinued operations presented on the following pages are associated with the Company’s Canadian operations that were divested in 2006.

millions	United States		Algeria		Other Int’l		Total Continuing Operations		Discontinued Operations		Total
Capitalized Costs Related to Oil and Gas Activities
2007
Capitalized
Unproved properties	$	11,689	$	13	$	1,404	$	13,106	$	—	$	13,106
Proved properties		24,082		1,030		1,001		26,113		—		26,113
		35,771		1,043		2,405		39,219		—		39,219
Accumulated DD&A		5,429		446		194		6,069		—		6,069
Net capitalized costs	$	30,342	$	597	$	2,211	$	33,150	$	—	$	33,150
2006
Capitalized
Unproved properties	$	12,794	$	11	$	1,606	$	14,411	$	—	$	14,411
Proved properties		23,632		981		696		25,309		—		25,309
		36,426		992		2,302		39,720		—		39,720
Accumulated DD&A		3,634		385		202		4,221		—		4,221
Net capitalized costs	$	32,792	$	607	$	2,100	$	35,499	$	—	$	35,499

117

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

Costs Incurred in Oil and Gas Activities

The following table reflects total costs incurred, both capitalized and expensed, for oil and gas property acquisition, exploration and development activities.

millions	United States			Algeria		Other Int’l		Total Continuing Operations			Discontinued Operations		Total
2007
Property acquisitions
Unproved (1)	$	(500	)	$	—	$	207	$	(293	)	$	—	$	(293	)
Proved (2)		(604	)		—		13		(591	)		—		(591	)
Exploration		575			23		236		834			—		834
Development (3)		2,623			46		136		2,805			—		2,805
Total Costs Incurred	$	2,094		$	69	$	592	$	2,755		$	—	$	2,755
2006
Property acquisitions
Unproved	$	11,975		$	—	$	1,397	$	13,372		$	54	$	13,426
Proved		13,893			3		600		14,496			1		14,497
Exploration		673			22		111		806			92		898
Development (3)		2,958			54		72		3,084			400		3,484
Total Costs Incurred	$	29,499		$	79	$	2,180	$	31,758		$	547	$	32,305
2005
Property acquisitions
Unproved	$	191		$	—	$	10	$	201		$	40	$	241
Proved		44			—		—		44			1		45
Exploration		505			11		44		560			124		684
Development (3)		1,810			43		57		1,910			287		2,197
Total Costs Incurred	$	2,550		$	54	$	111	$	2,715		$	452	$	3,167

⁽¹⁾ Includes purchase price adjustments related to finalizing the allocation of fair value to unproved properties acquired with the Kerr-McGee and Western acquisitions in 2006 of $(608) million and $124 million associated with properties in the United States and other international areas, respectively.

⁽²⁾ Includes purchase price adjustments related to finalizing the allocation of fair value to proved properties acquired with the Kerr-McGee and Western acquisitions in 2006 of $(613) million and $13 million associated with properties in the United States and other international areas, respectively.

⁽³⁾ Development costs incurred for the year include costs related to the prior year-end proved undeveloped reserves as follows:

	2007		2006		2005
millions
United States	$	857	$	1,161	$	367
Algeria		11		34		28
Other International		68		16		34
Total Continuing Operations	$	936	$	1,211	$	429

118

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

Results of Operations

Net revenues from production in the following schedule includes only the revenues from the production and sale of gas, oil, condensate and NGLs. The income tax expense is calculated by applying the current statutory tax rates to the revenues after deducting costs, which include DD&A allowances, after giving effect to permanent differences. The results of operations exclude general office overhead and interest expense attributable to oil and gas activities.

	United States		Algeria		Other Int’l			Total Continuing Operations		Discontinued Operations		Total
millions except per barrel amounts
2007
Net revenues from production
Third-party sales	$	4,190	$	1,223	$	360		$	5,773	$	—	$	5,773
Sales to consolidated affiliates		3,384		418		70			3,872		—		3,872
Gains on property dispositions		3,940		—		189			4,129		—		4,129
		11,514		1,641		619			13,774		—		13,774
Production costs
Oil and gas operating		993		47		59			1,099		—		1,099
Oil and gas transportation and other		426		24		1			451		—		451
Production related general and administrative expenses		137		29		13			179		—		179
Other taxes		446		705		33			1,184		—		1,184
		2,002		805		106			2,913		—		2,913
Exploration expenses		671		15		219			905		—		905
Depreciation, depletion and amortization		2,435		63		113			2,611		—		2,611
Impairments related to oil and gas properties		13		—		11			24		—		24
		6,393		758		170			7,321		—		7,321
Income tax expense		2,252		540		31			2,823		—		2,823
Results of operations	$	4,141	$	218	$	139		$	4,498	$	—	$	4,498
2006
Net revenues from production
Third-party sales	$	4,480	$	535	$	246		$	5,261	$	695	$	5,956
Sales to consolidated affiliates		3,011		1,008		122			4,141		—		4,141
Gains on property dispositions		—		—		26			26		—		26
		7,491		1,543		394			9,428		695		10,123
Production costs
Oil and gas operating		713		42		67			822		110		932
Oil and gas transportation and other		317		23		1			341		—		341
Production related general and administrative expenses		152		8		9			169		62		231
Other taxes		405		103		2			510		10		520
		1,587		176		79			1,842		182		2,024
Exploration expenses		568		21		148			737		18		755
Depreciation, depletion and amortization		1,428		59		125			1,612		119		1,731
Impairments related to oil and gas properties		4		—		184			188		4		192
		3,904		1,287		(142	)		5,049		372		5,421
Income tax expense		1,396		528		(68	)		1,856		140		1,996
Results of operations	$	2,508	$	759	$	(74	)	$	3,193	$	232	$	3,425

119

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

Results of Operations (Continued)

	United States		Algeria		Other Int’l		Total Continuing Operations		Discontinued Operations		Total
millions except per barrel amounts
2005
Net revenues from production
Third-party sales	$	1,446	$	468	$	209	$	2,123	$	913	$	3,036
Sales to consolidated affiliates		3,050		837		112		3,999		—		3,999
Gains on property dispositions		92		—		16		108		12		120
		4,588		1,305		337		6,230		925		7,155
Production costs
Oil and gas operating		324		34		57		415		108		523
Oil and gas transportation and other		233		23		—		256		16		272
Production related general and administrative expenses		108		12		14		134		80		214
Other taxes		313		—		7		320		18		338
		978		69		78		1,125		222		1,347
Exploration expenses		394		6		45		445		28		473
Depreciation, depletion and amortization		674		57		98		829		215		1,044
Impairments related to oil and gas properties		—		—		15		15		—		15
		2,542		1,173		101		3,816		460		4,276
Income tax expense		886		446		53		1,385		175		1,560
Results of operations	$	1,656	$	727	$	48	$	2,431	$	285	$	2,716

120

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AND PRODUCTION ACTIVITIES

(Unaudited)

Oil and Gas Reserves

The following table shows estimates of proved reserves, proved developed reserves and proved undeveloped reserves (PUDs), net of royalty interests, of natural gas, crude oil, condensate and NGLs owned at year-end and changes in proved reserves during the last three years. Volumes for natural gas are in billions of cubic feet (Bcf) at a pressure base of 14.73 pounds per square inch and volumes for oil, condensate and NGLs are in millions of barrels (MMBbls). Total volumes are in millions of barrels of oil equivalent (MMBOE). For this computation, one barrel is the equivalent of six thousand cubic feet of gas. NGLs are included with oil and condensate reserves and the associated shrinkage has been deducted from the gas reserves.

Algerian reserves are shown in accordance with each Production Sharing Agreement (PSC). The reserves include estimated quantities allocated to Anadarko for recovery of costs and Algerian income taxes and Anadarko’s net equity share after recovery of such costs. Other international reserves are shown in accordance with the respective PSC or risk service contract and are calculated using the economic interest method.

During 2007, sales of proved reserves in place associated with the Company’s asset realignment program totaled 620 MMBOE. Excluding the effect of divestitures, the Company added approximately 252 MMBOE of proved reserves in 2007. Reserve adds were primarily driven by successful drilling in coalbed methane and conventional plays and successful infill drilling onshore in the United States, as well as the initial recognition of proved reserves for the Peregrino development offshore Brazil. The Company’s reserves increased in 2006 primarily due to the acquisitions of Kerr-McGee and Western and successful exploration and development drilling onshore in the United States, partially offset by the disposition of Canadian properties and downward revisions primarily related to the K2 complex in the Gulf of Mexico, adjustments in Algeria (not related to the exceptional profits tax) and a decrease in natural gas prices.

The estimates of proved reserves are made using available geological and reservoir data as well as production performance data. These estimates are reviewed annually and revised, either upward or downward, as warranted by additional data. Revisions are necessary due to changes in, among other things, reservoir performance, prices, economic conditions and governmental restrictions as well as changes in the expected recovery rates associated with infill drilling. Decreases in prices, for example, may cause a reduction in some proved reserves due to reaching economic limits sooner.

Anadarko’s estimates of proved reserves and associated future net cash flows as of December 31, 2007 were made solely by the Company’s engineers and are the responsibility of management. The methods and procedures used in preparing the Company’s estimates of proved reserves, as of December 31, 2007, were reviewed by Netherland, Sewell & Associates, Inc. (NSAI). It should be understood that NSAI’s review of the Company’s procedures and methods relating to Anadarko’s estimates of proved reserves does not constitute a complete review, study or audit of the estimated proved reserves. Through participation in the procedures and methods review of Anadarko properties, NSAI was able to: (1) observe, in some detail, the methods and procedures, and the degree to which the Company’s engineers adhere to the definitions and guidelines of the U.S. Securities and Exchange Commission (SEC) in developing the reserve estimates; (2) provide opinions to Anadarko’s reserves group and reserves estimators regarding questions and issues raised during the meetings; (3) provide Anadarko’s reserves group and reserves estimators with industry information related to reserves estimating issues and practices. Anadarko incorporated NSAI suggestions for changes in methods and procedures into its reserve estimation process where the Company deemed appropriate. NSAI’s opinions resulting from their participation in the review meetings should not be construed as NSAI expressing a view on the overall reasonableness of the Company’s reserve estimates or procedures and methods. Management’s intent in retaining NSAI to review its methods and procedures is to provide for objective third party input on these methods and procedures and gather industry information applicable to its reserve estimation and reporting process.

121

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AND PRODUCTION ACTIVITIES

(Unaudited)

Oil and Gas Reserves (Continued)

	Natural Gas (Bcf)
	United States		Other Int’l		Total Continuing Operations		Discontinued Operations		Total
Proved Reserves
December 31, 2004	6,093		153		6,246		1,282		7,528
Revisions of prior estimates	627		—		627		(34	)	593
Extensions, discoveries and other additions	342		—		342		188		530
Purchases in place	28		—		28		2		30
Sales in place	(98	)	(153	)	(251	)	(4	)	(255	)
Production	(414	)	—		(414	)	(102	)	(516	)
December 31, 2005	6,578		—		6,578		1,332		7,910
Revisions of prior estimates	(34	)	—		(34	)	(14	)	(48	)
Extensions, discoveries and other additions	234		—		234		31		265
Improved recovery	11		—		11		—		11
Purchases in place	4,256		—		4,256		—		4,256
Sales in place	(1	)	—		(1	)	(1,263	)	(1,264	)
Production	(558	)	—		(558	)	(86	)	(644	)
December 31, 2006	10,486		—		10,486		—		10,486
Revisions of prior estimates	460		—		460		—		460
Extensions, discoveries and other additions	460		—		460		—		460
Improved recovery	4		—		4		—		4
Purchases in place	4		—		4		—		4
Sales in place	(2,212	)	—		(2,212	)	—		(2,212	)
Production	(698	)	—		(698	)	—		(698	)
December 31, 2007	8,504		—		8,504		—		8,504
Proved Developed Reserves
December 31, 2004	4,469		—		4,469		997		5,466
December 31, 2005	4,553		—		4,553		1,024		5,577
December 31, 2006	7,618		—		7,618		—		7,618
December 31, 2007	6,308		—		6,308		—		6,308
Proved Undeveloped Reserves
December 31, 2004	1,624		153		1,777		285		2,062
December 31, 2005	2,025		—		2,025		308		2,333
December 31, 2006	2,868		—		2,868		—		2,868
December 31, 2007	2,196		—		2,196		—		2,196

122

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AND PRODUCTION ACTIVITIES

(Unaudited)

Oil and Gas Reserves (Continued)

	Oil, Condensate and NGLs (MMBbls)
	United States		Algeria		Other Int’l		Total Continuing Operations		Discontinued Operations		Total
Proved Reserves
December 31, 2004	632		350		91		1,073		40		1,113
Revisions of prior estimates	10		(6	)	(25	)	(21	)	1		(20	)
Extensions, discoveries and other additions	67		4		—		71		2		73
Improved recovery	45		—		—		45		—		45
Sales in place	(9	)	—		—		(9	)	—		(9	)
Production	(37	)	(24	)	(8	)	(69	)	(3	)	(72	)
December 31, 2005	708		324		58		1,090		40		1,130
Revisions of prior estimates	(46	)	(21	)	1		(66	)	—		(66	)
Extensions, discoveries and other additions	11		6		—		17		—		17
Improved recovery	25		—		—		25		—		25
Purchases in place	281		—		40		321		—		321
Sales in place	—		—		(39	)	(39	)	(38	)	(77	)
Production	(54	)	(22	)	(8	)	(84	)	(2	)	(86	)
December 31, 2006	925		287		52		1,264		—		1,264
Revisions of prior estimates	42		2		—		44		—		44
Extensions, discoveries and other additions	8		—		54		62		—		62
Improved recovery	(9	)	—		—		(9	)	—		(9	)
Sales in place	(240	)	—		(11	)	(251	)	—		(251	)
Production	(64	)	(25	)	(7	)	(96	)	—		(96	)
December 31, 2007	662		264		88		1,014		—		1,014
Proved Developed Reserves
December 31, 2004	350		176		51		577		29		606
December 31, 2005	340		195		31		566		28		594
December 31, 2006	505		176		38		719		—		719
December 31, 2007	392		158		24		574		—		574
Proved Undeveloped Reserves
December 31, 2004	282		174		40		496		11		507
December 31, 2005	368		129		27		524		12		536
December 31, 2006	420		111		14		545		—		545
December 31, 2007	270		106		64		440		—		440

123

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(Unaudited)

Oil and Gas Reserves (Continued)

	Total (MMBOE)
	United States		Algeria		Other Int’l		Total Continuing Operations		Discontinued Operations		Total
Proved Reserves
December 31, 2004	1,646		350		117		2,113		254		2,367
Revisions of prior estimates (1)	116		(6	)	(26	)	84		(5	)	79
Extensions, discoveries and other additions	124		4		—		128		34		162
Improved recovery	45		—		—		45		—		45
Purchases in place	5		—		—		5		—		5
Sales in place	(25	)	—		(25	)	(50	)	(1	)	(51	)
Production	(106	)	(24	)	(8	)	(138	)	(20	)	(158	)
December 31, 2005	1,805		324		58		2,187		262		2,449
Revisions of prior estimates (1)	(53	)	(21	)	1		(73	)	(2	)	(75	)
Extensions, discoveries and other additions	50		6		—		56		5		61
Improved recovery	27		—		—		27		—		27
Purchases in place	990		—		40		1,030		—		1,030
Sales in place	—		—		(39	)	(39	)	(248	)	(287	)
Production	(147	)	(22	)	(8	)	(177	)	(17	)	(194	)
December 31, 2006	2,672		287		52		3,011		—		3,011
Revisions of prior estimates (1)	119		2		—		121		—		121
Extensions, discoveries and other additions	85		—		54		139		—		139
Improved recovery	(9	)	—		—		(9	)	—		(9	)
Purchases in place	1		—		—		1		—		1
Sales in place	(609	)	—		(11	)	(620	)	—		(620	)
Production	(180	)	(25	)	(7	)	(212	)	—		(212	)
December 31, 2007	2,079		264		88		2,431		—		2,431
Proved Developed Reserves
December 31, 2004	1,095		176		51		1,322		195		1,517
December 31, 2005	1,099		195		31		1,325		199		1,524
December 31, 2006	1,775		176		38		1,989		—		1,989
December 31, 2007	1,443		158		24		1,625		—		1,625
Proved Undeveloped Reserves
December 31, 2004	551		174		66		791		59		850
December 31, 2005	706		129		27		862		63		925
December 31, 2006	897		111		14		1,022		—		1,022
December 31, 2007	636		106		64		806		—		806

⁽¹⁾ Revisions of prior estimates for 2007, 2006 and 2005 include 109 MMBOE, 160 MMBOE and 102 MMBOE, respectively, of additions generated by Anadarko’s infill drilling programs.

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AND PRODUCTION ACTIVITIES

(Unaudited)

Discounted Future Net Cash Flows

Estimates of future net cash flows from proved reserves of gas, oil, condensate and NGLs were made in accordance with SFAS No. 69, “Disclosures about Oil and Gas Producing Activities.” The amounts were prepared by the Company’s engineers and are shown in the following table. The estimates are based on prices at year-end. Gas, oil, condensate and NGLs prices are escalated only for fixed and determinable amounts under provisions in some contracts. Estimated future cash inflows are reduced by estimated future development, production, abandonment and dismantlement costs based on year-end cost levels, assuming continuation of existing economic conditions, and by estimated future income tax expense. Income tax expense, both U.S. and foreign, is calculated by applying the existing statutory tax rates, including any known future changes, to the pretax net cash flows giving effect to any permanent differences and reduced by the applicable tax basis. The effect of tax credits is considered in determining the income tax expense.

At December 31, 2007, the present value (discounted at 10%) of future net cash flows from Anadarko’s proved reserves was $28.9 billion, (stated in accordance with the regulations of the SEC and the FASB). The increase of $3.3 billion or 13% in 2007 compared to 2006 is primarily due to higher natural gas and oil prices at year-end 2007 and successful exploration and development, partially offset by the Company’s divestiture program.

The present value of future net cash flows does not purport to be an estimate of the fair market value of Anadarko’s proved reserves. An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected recovery of reserves in excess of proved reserves and a discount factor more representative of the time value of money and the risks inherent in producing oil and gas. Significant changes in estimated reserve volumes or commodity prices could have a material effect on the Company’s consolidated financial statements.

Expected future development costs over the next three years to develop PUDs as of December 31, 2007 are as follows:

	2008		2009		2010
millions
United States	$	1,481	$	1,178	$	659
Algeria		56		382		356
Other International		292		275		93
Total	$	1,829	$	1,835	$	1,108

125

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

Standardized Measure of Discounted Future Net Cash Flows

Relating to Proved Oil and Gas Reserves

	United States		Algeria		Other Int’l		Total Continuing Operations		Discontinued Operations		Total
millions
2007
Future cash inflows	$	106,439	$	25,296	$	6,403	$	138,138	$	—	$	138,138
Future production costs		27,124		8,874		2,543		38,541		—		38,541
Future development costs		8,358		1,156		924		10,438		—		10,438
Future income tax expenses		24,257		8,502		1,126		33,885		—		33,885
Future net cash flows		46,700		6,764		1,810		55,274		—		55,274
10% annual discount for estimated timing of cash flows		22,424		3,427		506		26,357		—		26,357
Standardized measure of discounted future net cash flows	$	24,276	$	3,337	$	1,304	$	28,917	$	—	$	28,917
2006
Future cash inflows	$	98,537	$	18,301	$	2,425	$	119,263	$	—	$	119,263
Future production costs		26,407		3,858		814		31,079		—		31,079
Future development costs		10,142		983		83		11,208		—		11,208
Future income tax expenses		20,891		5,592		365		26,848		—		26,848
Future net cash flows		41,097		7,868		1,163		50,128		—		50,128
10% annual discount for estimated timing of cash flows		19,743		4,356		396		24,495		—		24,495
Standardized measure of discounted future net cash flows	$	21,354	$	3,512	$	767	$	25,633	$	—	$	25,633
2005
Future cash inflows	$	87,304	$	19,192	$	2,507	$	109,003	$	12,679	$	121,682
Future production costs		17,262		1,025		515		18,802		2,847		21,649
Future development costs		5,231		746		238		6,215		1,076		7,291
Future income tax expenses		22,671		6,445		607		29,723		2,692		32,415
Future net cash flows		42,140		10,976		1,147		54,263		6,064		60,327
10% annual discount for estimated timing of cash flows		22,384		5,238		338		27,960		3,075		31,035
Standardized measure of discounted future net cash flows	$	19,756	$	5,738	$	809	$	26,303	$	2,989	$	29,292

126

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

Changes in Standardized Measure of Discounted Future Net Cash Flows

Relating to Proved Oil and Gas Reserves

	United States			Algeria			Other Int’l			Total Continuing Operations			Discontinued Operations			Total
millions
2007
Beginning of year	$	21,354		$	3,512		$	767		$	25,633		$	—		$	25,633
Sales and transfers of oil and gas produced, net of production costs		(5,572	)		(836	)		(324	)		(6,732	)		—			(6,732	)
Net changes in prices and production costs		11,735			4,150			358			16,243			—			16,243
Changes in estimated future development costs		(11	)		(494	)		(635	)		(1,140	)		—			(1,140	)
Extensions, discoveries, additions and improved recovery, less related costs		196			—			1,601			1,797			—			1,797
Development costs incurred during the period		900			39			47			986			—			986
Revisions of previous quantity estimates		1,700			(1,722	)		41			19			—			19
Purchases of minerals in place		16			—			—			16			—			16
Sales of minerals in place		(9,088	)		—			(214	)		(9,302	)		—			(9,302	)
Accretion of discount		3,173			652			102			3,927			—			3,927
Net change in income taxes		(1,375	)		(1,676	)		(500	)		(3,551	)		—			(3,551	)
Other		1,248			(288	)		61			1,021			—			1,021
End of year	$	24,276		$	3,337		$	1,304		$	28,917		$	—		$	28,917
2006
Beginning of year	$	19,756		$	5,738		$	809		$	26,303		$	2,989		$	29,292
Sales and transfers of oil and gas produced, net of production costs		(5,904	)		(1,367	)		(289	)		(7,560	)		(513	)		(8,073	)
Net changes in prices and production costs		(10,974	)		(1,441	)		5			(12,410	)		48			(12,362	)
Changes in estimated future development costs		(266	)		(520	)		154			(632	)		420			(212	)
Extensions, discoveries, additions and improved recovery, less related costs		(432	)		113			—			(319	)		—			(319	)
Development costs incurred during the period		1,021			66			12			1,099			191			1,290
Revisions of previous quantity estimates		(1,866	)		(267	)		(22	)		(2,155	)		(13	)		(2,168	)
Purchases of minerals in place		16,390			—			850			17,240			38			17,278
Sales of minerals in place		—			—			(1,073	)		(1,073	)		(4,638	)		(5,711	)
Accretion of discount		3,016			915			126			4,057			408			4,465
Net change in income taxes		27			403			195			625			1,088			1,713
Other		586			(128	)		—			458			(18	)		440
End of year	$	21,354		$	3,512		$	767		$	25,633		$	—		$	25,633

127

ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES

(Unaudited)

Changes in Standardized Measure of Discounted Future Net Cash Flows

Relating to Proved Oil and Gas Reserves (Continued)

	United States			Algeria			Other Int’l			Total Continuing Operations			Discontinued Operations			Total
2005
Beginning of year	$	11,923		$	4,115		$	810		$	16,848		$	1,801		$	18,649
Sales and transfers of oil and gas produced, net of production costs		(3,518	)		(1,236	)		(243	)		(4,997	)		(721	)		(5,718	)
Net changes in prices and production costs		10,736			3,732			771			15,239			1,809			17,048
Changes in estimated future development costs		(255	)		(235	)		14			(476	)		(259	)		(735	)
Extensions, discoveries, additions and improved recovery, less related costs		1,415			120			—			1,535			648			2,183
Development costs incurred during the period		874			45			57			976			76			1,052
Revisions of previous quantity estimates		1,363			(465	)		(688	)		210			(104	)		106
Purchases of minerals in place		73			—			—			73			4			77
Sales of minerals in place		(324	)		—			(51	)		(375	)		(8	)		(383	)
Accretion of discount		1,828			650			118			2,596			241			2,837
Net change in income taxes		(4,043	)		(1,034	)		(75	)		(5,152	)		(478	)		(5,630	)
Other		(316	)		46			96			(174	)		(20	)		(194	)
End of year	$	19,756		$	5,738		$	809		$	26,303		$	2,989		$	29,292

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ANADARKO PETROLEUM CORPORATION

SUPPLEMENTAL QUARTERLY INFORMATION

(Unaudited)

Quarterly Financial Data

The following table shows summary quarterly financial data for 2007 and 2006. As discussed in Note 2 of the Consolidated Financial Statements, in the third quarter of 2007, Anadarko changed its method of accounting for its oil and gas exploration and development activities from full cost to the successful efforts method. Because this change in accounting principle is required to be applied retroactively, financial information for the second quarter of 2007 and prior periods presented in the table below has been revised.

Additionally, as part of finalizing Anadarko’s consolidated financial statements as of and for the year ended December 31, 2007, management identified inadvertent errors in its calculations of gains on asset divestitures that closed during the first nine months of 2007, which resulted in the Company reporting in its Quarterly Report on Form 10-Q net gains on asset divestitures of $343 million and $4.6 billion for the three and nine months ended September 30, 2007, respectively, compared to $308 million and $4.4 billion, respectively, based on the corrected gain calculations. Management concluded that the misstatement of the net gains on divestitures was not material to affected interim periods in 2007, and, therefore concluded that amending its previously filed Quarterly Report was not necessary. While the identified interim period misstatements have no effect on reported results for the full year 2007, the Company, in the summary quarterly financial data that follows, is providing the corrected gain amounts for all interim periods presented. Taking into account income tax effects, correction of previously reported net divestiture gains for the three and nine months ended September 30, 2007 reduced net income available to common stockholders by $23 million and $112 million, respectively, and reduced corresponding diluted earnings per share by $0.05 and $0.23, respectively.

	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
millions except share amounts
2007
Sales revenues and other	$	2,652	$	3,091	$	2,687		$	2,802
Gains on divestitures, net	$	2,598	$	1,494	$	308		$	260
Operating income	$	3,031	$	2,394	$	1,061		$	861
Income from continuing operations	$	1,695	$	1,306	$	493		$	276
Income (loss) from discontinued operations, net of taxes	$	27	$	7	$	(12	)	$	(11	)
Net income	$	1,722	$	1,313	$	481		$	265
Net income available to common stockholders	$	1,721	$	1,313	$	480		$	264
Earnings per share:
Income from continuing operations — basic	$	3.66	$	2.81	$	1.06		$	0.59
Income from continuing operations — diluted	$	3.64	$	2.79	$	1.05		$	0.59
Income (loss) from discontinued operations, net of taxes — basic	$	0.06	$	0.02	$	(0.03	)	$	(0.02	)
Income (loss) from discontinued operations, net of taxes — diluted	$	0.06	$	0.02	$	(0.03	)	$	(0.02	)
Net income available to common stockholders — basic	$	3.71	$	2.82	$	1.03		$	0.56
Net income available to common stockholders — diluted	$	3.70	$	2.81	$	1.03		$	0.56
Average number common shares outstanding — basic		463		465		466			467
Average number common shares outstanding — diluted		465		467		468			470

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(Unaudited)

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
millions except share amounts
2006
Sales revenues and other	$	1,705	$	1,813	$	3,503	$	3,183
Gains on divestitures, net	$	—	$	23	$	3	$	—
Operating income	$	883	$	1,016	$	2,072	$	410
Income (loss) from continuing operations	$	538	$	658	$	1,310	$	(32	)
Income from discontinued operations, net of taxes	$	87	$	158	$	75	$	1,955
Net income	$	625	$	816	$	1,385	$	1,923
Net income available to common stockholders	$	624	$	815	$	1,385	$	1,922
Earnings per share:
Income (loss) from continuing operations — basic	$	1.17	$	1.43	$	2.85	$	(0.08	)
Income (loss) from continuing operations — diluted	$	1.16	$	1.42	$	2.83	$	(0.08	)
Income from discontinued operations, net of taxes — basic	$	0.19	$	0.34	$	0.16	$	4.24
Income from discontinued operations, net of taxes — diluted	$	0.19	$	0.34	$	0.16	$	4.24
Net income available to common stockholders — basic	$	1.36	$	1.77	$	3.01	$	4.16
Net income available to common stockholders — diluted	$	1.34	$	1.76	$	2.99	$	4.16
Average number common shares outstanding — basic		460		459		460		462
Average number common shares outstanding — diluted		465		463		463		462

130

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9a. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Anadarko’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the Company’s disclosure controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of December 31, 2007.

Management’s Annual Report on Internal Control Over Financial Reporting

See Management’s Assessment of Internal Control Over Financial Reporting under Item 8 of this Form 10-K.

Attestation Report of the Registered Public Accounting Firm

See Report of Independent Registered Public Accounting Firm under Item 8 of this Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in Anadarko’s internal controls over financial reporting during the fourth quarter of 2007 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In August 2006, the Company completed the acquisitions of Kerr-McGee and Western. Management completed the integration process of the acquired companies’ historical internal control over financial reporting with the Company’s internal control over financial reporting in 2007. The integration did not materially affect the Company’s internal control over financial reporting.

In the third quarter of 2007, the Company changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method. The change in accounting method did not materially affect the Company’s internal control over financial reporting.

Item 9b. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

See Anadarko Board of Directors, Corporate Governance—Board of Directors, Corporate Governance—Committees of the Board and Section 16(a) Beneficial Ownership Reporting Compliance in the Anadarko Petroleum Corporation Proxy Statement (Proxy Statement), for the Annual Meeting of Stockholders of Anadarko Petroleum Corporation to be held May 20, 2008 (to be filed with the Securities and Exchange Commission prior to April 10, 2008), each of which is incorporated herein by reference.

131

See list of Executive Officers of the Registrant under Item 4 of this Form 10-K, which is incorporated herein by reference.

The Company’s Code of Business Conduct and Ethics and the Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer (Code of Ethics) can be found on the Company’s internet website located at www.anadarko.com. If the Company amends the Code of Ethics or grants a waiver, including an implicit waiver, from the Code of Ethics, the Company intends to disclose the information on its internet website. The waiver information will remain on the website for at least 12 months after the initial disclosure of such waiver.

Item 11. Executive Compensation

See Corporate Governance—Board of Directors—Compensation and Benefits Committee Interlocks and Insider Participation, Corporate Governance—Board of Directors—Director Compensation, Corporate Governance—Director Compensation Table for 2007, Compensation and Benefits Committee Report on 2007 Executive Compensation, Compensation Discussion and Analysis and Executive Compensation in the Proxy Statement, each of which is incorporated herein by reference. The Compensation and Benefits Committee Report and related information incorporated by reference herein shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

See Security Ownership of Certain Beneficial Owners and Management in the Proxy Statement, which is incorporated herein by reference.

Equity Compensation Plan Table The following table sets forth information with respect to the equity compensation plans available to directors, officers and employees of the Company as of December 31, 2007:

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
Equity compensation plans approved by security holders	4,730,654	$	42.42	7,996,038
Equity compensation plans not approved by security holders	—		—	—
Total	4,730,654	$	42.42	7,996,038

Item 13. Certain Relationships and Related Transactions, and Director Independence

See Corporate Governance—Board of Directors and Transactions with Related Persons in the Proxy Statement, each of which is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

See Independent Auditor in the Proxy Statement, which is incorporated herein by reference.

132

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Exhibits The following documents are filed as a part of this report or incorporated by reference:

(1) The consolidated financial statements of Anadarko Petroleum Corporation are listed on the Index to this report, page 58.

(2) Exhibits not incorporated by reference to a prior filing are designated by an asterisk (*) and are filed herewith; all exhibits not so designated are incorporated herein by reference to a prior filing as indicated.

Exhibit Number	Description	Originally Filed as Exhibit	File Number
2(a)	Agreement and Plan of Merger dated as of June 22, 2006, among Anadarko Petroleum Corporation, APC Merger Sub, Inc. and Western Gas Resources, Inc.	2.1 to Form 8-K dated June 26, 2006	1-8968
(b)	Amendment No. 1 to Agreement and Plan of Merger dated as of June 22, 2006, among Anadarko Petroleum Corporation, APC Merger Sub, Inc. and Western Gas Resources, Inc.	2.1 to Form 8-K dated July 12, 2006	1-8968
(c)	Agreement and Plan of Merger dated as of June 22, 2006, among Anadarko Petroleum Corporation, APC Acquisition Sub, Inc. and Kerr-McGee Corporation	2.2 to Form 8-K dated June 26, 2006	1-8968
3(a)	Restated Certificate of Incorporation of Anadarko Petroleum Corporation, dated August 28, 1986	4(a) to Form S-3 dated May 9, 2001	333-60496
(b)	By-laws of Anadarko Petroleum Corporation, as amended	3.1 to Form 8-K dated February 16, 2007	1-8968
(c)	Certificate of Amendment of Anadarko’s Restated Certificate of Incorporation	4.1 to Form 8-K dated July 28, 2000	1-8968
(d)	Certificate of Amendment of Anadarko’s Restated Certificate of Incorporation	3(d) to Form 10-Q for quarter ended June 30, 2006	1-8968
4(a)	Certificate of Designation of 5.46% Cumulative Preferred Stock, Series B	4(a) to Form 8-K dated May 6, 1998	1-8968
(b)	Rights Agreement, dated as of October 29, 1998, between Anadarko Petroleum Corporation and The Chase Manhattan Bank	4.1 to Form 8-A dated October 30, 1998	1-8968
(c)	Amendment No. 1 to Rights Agreement, dated as of April 2, 2000 between Anadarko and the Rights Agent	2.4 to Form 8-K dated April 2, 2000	1-8968
(d)	Underwriting Agreement, dated September 14, 2006, among Anadarko Petroleum Corporation and the Underwriters	1.1 to Form 8-K dated September 19, 2006	1-8968
(e)	Trustee Indenture dated as of September 19, 2006, Anadarko Petroleum Corporation to The Bank of New York Trust Company, N.A.	4.1 to Form 8-K dated September 19, 2006	1-8968

133

Exhibit Number	Description	Originally Filed as Exhibit	File Number
4(f)	Second Supplemental Indenture dated October 4, 2006, among Anadarko Petroleum Corporation, Kerr-McGee Corporation, and Citibank, N.A.	4.1 to Form 8-K dated October 5, 2006	1-8968
(g)	Ninth Supplemental Indenture dated October 4, 2006, among Anadarko Petroleum Corporation, Kerr-McGee Corporation, and Citibank, N.A.	4.2 to Form 8-K dated October 5, 2006	1-8968
10(i)	Anadarko Petroleum Corporation Amended and Restated 1988 Stock Option Plan for Non-Employee Directors	Attachment A to DEF 14A filed March 16, 1994	1-8968
(ii)	Amendment to Anadarko Petroleum Corporation 1988 Stock Option Plan for Non-Employee Directors	10(b)(vii) to Form 10-K for year ended December 31, 1997	1-8968
(iii)	Second Amendment to Anadarko Petroleum Corporation 1988 Stock Option Plan for Non-Employee Directors	10(b)(viii) to Form 10-K for year ended December 31, 1997	1-8968
(iv)	Third Amendment to 1988 Stock Option Plan for Non- Employee Directors	10(b)(v) to Form 10-K for year ended December 31, 2003	1-8968
(v)	1998 Director Stock Plan of Anadarko Petroleum Corporation, effective January 30, 1998	Appendix A to DEF 14A filed March 16, 1998	1-8968
(vi)	Form of Anadarko Petroleum Corporation 1998 Director Stock Plan Stock Option Agreement	10.1 to Form 8-K dated November 17, 2005	1-8968
(vii)	1993 Stock Incentive Plan	10(b)(xii) to Form 10-K for year ended December 31, 1993	1-8968
(viii)	First Amendment to Anadarko Petroleum Corporation 1993 Stock Incentive Plans	Appendix A to DEF 14A filed March 12, 1997	1-8968
(ix)	Second Amendment to Anadarko Petroleum Corporation 1993 Stock Incentive Plans	10(b)(xv) to Form 10-K for year ended December 31, 1997	1-8968
(x)	Anadarko Petroleum Corporation 1993 Stock Incentive Plan Stock Option Agreement	10(a) to Form 10-Q for quarter ended March 31, 1996	1-8968
(xi)	Form of Anadarko Petroleum Corporation 1993 Stock Incentive Plan Stock Option Agreement	10(b)(xvii) to Form 10-K for year ended December 31, 1997	1-8968
(xii)	Form of Anadarko Petroleum Corporation 1993 Stock Incentive Plan Restricted Stock Agreement	10(b)(xviii) to Form 10-K for year ended December 31, 1997	1-8968
(xiii)	Anadarko Petroleum Corporation Amended and Restated 1999 Stock Incentive Plan	Appendix A to DEF 14A filed March 18, 2005	1-8968
(xiv)	Form of Anadarko Petroleum Corporation Executive 1999 Stock Incentive Plan Stock Option Agreement	10.2 to Form 8-K dated November 17, 2005	1-8968

134

Exhibit Number	Description	Originally Filed as Exhibit	File Number
10(xv)	Form of Anadarko Petroleum Corporation Non-Executive 1999 Stock Incentive Plan Stock Option Agreement	10.3 to Form 8-K dated November 17, 2005	1-8968
(xvi)	Form of Stock Option Agreement—1999 Stock Incentive Plan (UK Nationals)	10.4 to Form 8-K dated November 17, 2005	1-8968
(xvii)	Amendment to Stock Option Agreement Under the Anadarko Petroleum Corporation 1999 Stock Incentive Plan	10.1 to Form 8-K dated January 23, 2007	1-8968
(xviii)	Anadarko Petroleum Corporation 1999 Stock Incentive Plan (Amendment to Performance Unit Agreement)	10.3 to Form 8-K dated November 13, 2007	1-8968
(xix)	Form of Anadarko Petroleum Corporation 1999 Stock Incentive Plan Restricted Stock Agreement	10(b)(xxiv) to Form 10-K for year ended December 31, 1999	1-8968
(xx)	Anadarko Petroleum Corporation 1999 Stock Incentive Plan Performance Share Agreement	10(b) to Form 10-Q for quarter ended March 31, 2004	1-8968
(xxi)	Anadarko Petroleum Corporation 1999 Stock Incentive Plan Performance Unit Agreement	10.1 to Form 8-K dated December 14, 2004	1-8968
(xxii)	Form of Anadarko Petroleum Corporation 1999 Stock Incentive Plan Performance Unit Agreement	10.1 to Form 8-K dated December 9, 2005	1-8968
(xxiii)	Form of Anadarko Petroleum Corporation 1999 Stock Incentive Plan Performance Unit Agreement	10.2 to Form 8-K dated December 11, 2006	1-8968
(xxiv)	The Approved UK Sub-Plan of the Anadarko Petroleum Corporation 1999 Stock Incentive Plan	10(b)(xxiv) to Form 10-K for year ended December 31, 2003	1-8968
(xxv)	Annual Incentive Bonus Plan, as amended January 1, 2004	Appendix C to DEF 14A filed March 12, 2004	1-8968
(xxvi)	Key Employee Change of Control Contract	10(b)(xxii) to Form 10-K for year ended December 31, 1997	1-8968
(xxvii)	First Amendment to Anadarko Petroleum Corporation Key Employee Change of Control Contract	10(b) to Form 10-Q for quarter ended September 30, 2000	1-8968
(xviii)	Form of Amendment to Anadarko Petroleum Corporation Key Employee Change of Control Contract	10(b)(ii) to Form 10-Q for quarter ended June 30, 2003	1-8968
(xxix)	Employment Agreement—James T. Hackett	10.1 to Form 8-K dated December 11, 2006	1-8968
(xxx)	Letter Agreement regarding Post-Retirement Benefits, dated February 16, 2004—Robert J. Allison, Jr.	10(b)(xxxiv) to Form 10-K for year ended December 31, 2003	1-8968
(xxxi)	Anadarko Retirement Restoration Plan, effective January 1, 1995	10(b)(xix) to Form 10-K for year ended December 31, 1995	1-8968

135

Exhibit Number	Description	Originally Filed as Exhibit	File Number
10(xxxii)	Anadarko Savings Restoration Plan, effective January 1, 1995	10(b)(xx) to Form 10-K for year ended December 31, 1995	1-8968
(xxxiii)	First Amendment to Anadarko Retirement Restoration Plan, effective July 31, 2003	10(b)(xxxiii) to Form 10-K for year ended December 31, 2005	1-8968
(xxxiv)	Anadarko Retirement Restoration Plan (As Amended and Restated Effective as of November 7, 2007)	10.2 to Form 8-K dated November 13, 2007	1-8968
(xxxv)	Amendment to Amended and Restated Anadarko Savings Restoration Plan, effective January 29, 1998	10(b)(xxxi) to Form 10-K for year ended December 31, 1997	1-8968
(xxxvi)	Amendment to Amended and Restated Anadarko Savings Restoration Plan, effective January 1, 2005	10(b)(xxxv) to Form 10-K for year ended December 31, 2005	1-8968
(xxxvii)	Anadarko Petroleum Corporation Estate Enhancement Program	10(b)(xxxiv) to Form 10-K for year ended December 31, 1998	1-8968
(xxxviii)	Estate Enhancement Program Agreement between Anadarko Petroleum Corporation and Eligible Executives	10(b)(xxxv) to Form 10-K for year ended December 31, 1998	1-8968
(xxxix)	Estate Enhancement Program Agreements effective November 29, 2000	10(b)(xxxxii) to Form 10-K for year ended December 31, 2000	1-8968
(xl)	Anadarko Petroleum Corporation Management Life Insurance Plan, restated November 1, 2002	10(b)(xxxii) to Form 10-K for year ended December 31, 2002	1-8968
(xli)	First Amendment to Anadarko Petroleum Corporation Management Life Insurance Plan, effective June 30, 2003	10(b)(xliii) to Form 10-K for year ended December 31, 2003	1-8968
(xlii)	Management Disability Plan—Plan Summary	10(b)(xxxiii) to Form 10-K for year ended December 31, 2002	1-8968
(xliii)	Anadarko Petroleum Corporation Officer Severance Plan	10(b)(iv) to Form 10-Q for quarter ended September 30, 2003	1-8968
(xliv)	Form of Termination Agreement and Release of All Claims Under Officer Severance Plan	10(b)(v) to Form 10-Q for quarter ended September 30, 2003	1-8968
(xlv)	Anadarko Petroleum Corporation Deferred Compensation Plan effective January 1, 2005	10(b)(ii) to Form 10-Q for quarter ended September 30, 2004	1-8968
(xlvi)	Director and Officer Indemnification Agreement	10 to Form 8-K dated September 3, 2004	1-8968

136

Exhibit Number	Description	Originally Filed as Exhibit	File Number
10(xlvii)	Summary of Director Compensation	10.1 to Form 8-K dated May 17, 2005	1-8968
(xlviii)	Summary of Material Terms of Employment—R. A. Walker	10.1 to Form 8-K dated August 11, 2005	1-8968
(xlix)	Summary of Material Terms of Employment—Bruce W. Busmire	10.1 to Form 8-K dated May 4, 2006	1-8968
(l)	Retention Agreement between Anadarko Petroleum Corporation and Charles A. Meloy dated August 10, 2006	10.1 to Form 8-K dated August 15, 2006	1-8968
(li)	Amended and Restated Continuity Agreement, dated as of June 22, 2006, between Kerr-McGee Corporation and Luke R. Corbett	10.1 to Form 8-K dated June 26, 2006	1-16619
(lii)	Compensatory Arrangements for Certain Officers	Form 8-K dated January 17, 2007	1-8968
(liii)	$8.0 billion Term Loan Agreement, dated as of April 10, 2007, among Anadarko Petroleum Corporation and the Lenders	10.1 to Form 8-K dated April 13, 2007	1-8968
*(liv)	$2.2 billion Term Loan Agreement, dated as of December 27, 2007, among WGR Asset Holding Company LLC and Trinity Associates LLC
*(lv)	Amended and Restated Limited Liability Company Agreement of Trinity Associates LLC, dated as of December 27, 2007
*(lvi)	Sponsor Agreement, dated as of December 27, 2007, among Anadarko Petroleum Corporation and Pecos Investors LLC
*12	Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends
*13	Portions of the Anadarko Petroleum Corporation 2007 Annual Report to Stockholders
*21	List of Significant Subsidiaries
*23.1	Consent of KPMG LLP
*23.2	Consent of Netherland, Sewell & Associates, Inc.
*24	Power of Attorney
*31.1	Rule 13a-14(a)/15d-14(a) Certification—Chief Executive Officer
*31.2	Rule 13a-14(a)/15d-14(a) Certification—Chief Financial Officer
*32	Section 1350 Certifications
*99	2007 Report of Netherland, Sewell & Associates, Inc.

The total amount of securities of the registrant authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the Securities and Exchange Commission, to furnish copies of any or all of such instruments to the Securities and Exchange Commission.

(b) Financial Statement Schedules Financial statement schedules have been omitted because they are not required, not applicable or the information is included in the Company’s consolidated financial statements.

137

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ANADARKO PETROLEUM CORPORATION
February 28, 2008	By:	/s/    R. A. WALKER
		(R. A. Walker, Senior Vice President, Finance and Chief Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 28, 2008.

Name and Signature	Title
(i) Principal executive officer:*
JAMES T. HACKETT (James T. Hackett)	Chairman of the Board, President and Chief Executive Officer
(ii) Principal financial officer:
/s/    R. A. WALKER         (R. A. Walker)	Senior Vice President, Finance and Chief Financial Officer
(iii) Principal accounting officer:
/s/    BRUCE W. BUSMIRE         (Bruce W. Busmire)	Vice President and Chief Accounting Officer
(iv) Directors:*
ROBERT J. ALLISON, JR. LARRY BARCUS JAMES L. BRYAN JOHN R. BUTLER, JR. LUKE R. CORBETT H. PAULETT EBERHART PETER J. FLUOR JOHN R. GORDON JAMES T. HACKETT JOHN W. PODUSKA, SR., PH.D. PAULA ROSPUT REYNOLDS

* Signed on behalf of each of these persons and on his own behalf:

By:	/s/    R. A. WALKER
	(R. A. Walker, Attorney-in-Fact)

138

EX-10.(LIV)

Exhibit 10(liv)

EXECUTION VERSION

$2.2 BILLION

WGRAH TERM LOAN AGREEMENT

Dated as of December 27, 2007

among

WGR ASSET HOLDING COMPANY LLC

as borrower,

TRINITY ASSOCIATES LLC

as lender,

and

CITIBANK, N.A., AGENCY & TRUST

as collateral agent

TABLE OF CONTENTS

		Page
Article I         DEFINITIONS AND ACCOUNTING TERMS		1
Section 1.01	Defined Terms	1
Section 1.02	Use of Defined Terms	1
Section 1.03	Accounting Terms	1
Section 1.04	Interpretation	1
Article II         AMOUNT AND TERMS OF LOAN		1
Section 2.01	Loan	1
Section 2.02	Repayment of WGRAH Loan; Extension of WGRAH Maturity Date; Evidence of Debt	1
Section 2.03	Procedure for Borrowing	2
Section 2.04	Termination of Commitments	3
Section 2.05	Prepayments	3
Section 2.06	Interest	3
Section 2.07	Computation of Interest	4
Section 2.08	Funding of Loan	4
Section 2.09	Payments; Trinity Expenses	4
Section 2.10	Taxes	5
Article III         REPRESENTATIONS AND WARRANTIES		6
Section 3.01	Representations of WGRAH	6
Article IV         AFFIRMATIVE COVENANTS		10
Section 4.01	Financial Statements and Other Information	10
Section 4.02	Notices of Material Events	11
Section 4.03	Compliance with Laws	12
Section 4.04	Use of Proceeds	12
Section 4.05	Insurance	12
Section 4.06	Preservation of Existence, Etc	13
Section 4.07	Payment of WGRAH Obligations	13
Section 4.08	Maintenance of Properties, Title	13
Section 4.09	Books and Records	13
Section 4.10	Inspection Rights	13

i

TABLE OF CONTENTS

(continued)

		Page
Section 4.11	Further Assurances	14
Section 4.12	Environmental Matters	14
Section 4.13	Performance of Documents; Entry Into Written Midstream Agreements	14
Section 4.14	Subsidiaries	15
Section 4.15	Grant of Additional Security Upon a Security Trigger Event	15
Section 4.16	Amendments Upon Anadarko Credit Event, Etc	16
Section 4.17	Post-Closing Requirements	16
Article V         NEGATIVE COVENANTS		16
Section 5.01	Liens	16
Section 5.02	Investments	16
Section 5.03	Indebtedness	17
Section 5.04	Fundamental Changes	17
Section 5.05	Asset Sales	18
Section 5.06	Restricted Payments	18
Section 5.07	Change in Nature of Business	19
Section 5.08	Transactions with Affiliates	19
Section 5.09	Burdensome Agreements	19
Section 5.10	Financial Covenant	20
Section 5.11	Amendment, Etc., of Transaction Agreements	20
Section 5.12	Acquisitions and Sale Leaseback Transactions	21
Section 5.13	Hedge Agreements	21
Article VI         CONDITIONS OF LENDING		21
Section 6.01	Conditions Precedent to this Agreement	21
Article VII         EVENTS OF DEFAULT		24
Section 7.01	Events of Default	24
Section 7.02	Application of Funds	27
Article VIII       PLEDGED ACCOUNT		27
Section 8.01	Maintaining the Pledged Account	27
Section 8.02	Deposit of Funds into the Pledged Accounts	28

ii

TABLE OF CONTENTS

(continued)

		Page
Section 8.03	Permitted Pledged Account Investments	28
Section 8.04	Transfers from the Pledged Account During an Event of Default and on the WGRAH Maturity Date	29
Article IX         WGRAH COLLATERAL AGENT		29
Section 9.01	Authorization and Action	29
Section 9.02	WGRAH Collateral Agent’s Reliance, Etc	30
Section 9.03	Trinity Credit Decision	31
Section 9.04	Fee	31
Article X         MISCELLANEOUS		31
Section 10.01	Notices	31
Section 10.02	Waivers; Amendments	32
Section 10.03	Expenses; Indemnity; Damage Waiver	32
Section 10.04	Successors and Assigns	33
Section 10.05	Survival	34
Section 10.06	Counterparts; Integration; Effectiveness	34
Section 10.07	Severability	34
Section 10.08	Right of Setoff	35
Section 10.09	Governing Law; Jurisdiction; Consent to Service of Process	35
Section 10.10	WAIVER OF PUNITIVE DAMAGES, JURY TRIAL	36
Section 10.11	Disclosure	36
Section 10.12	Headings	36
Section 10.13	USA Patriot Act Notice	36
Section 10.14	Sponsor Note Option Agreement	37
Schedules and Exhibits:
Schedule I	(Subsidiaries)
Schedule II	(Properties)
Schedule III-A	(Material Midstream Agreements – Written on Effective Date)
Schedule III-B	(Material Midstream Agreements – Not Written on Effective Date)
Schedule IV	(Post-Closing Requirements)
Exhibit A	(Form of WGRAH Note)
Exhibit B	(Subordination Terms)

iii

This WGRAH Term Loan Agreement is made as of December 27, 2007 by and among WGR ASSET HOLDING COMPANY LLC, a limited liability company organized under the laws of the State of Delaware (“WGRAH”), as borrower, TRINITY ASSOCIATES LLC, a Delaware limited liability company (together with its successors and assigns, “Trinity”), as lender, and CITIBANK, N.A., AGENCY & TRUST, as collateral agent for Trinity (the “WGRAH Collateral Agent”).

In consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

Article I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Defined Terms. Unless otherwise defined herein, words and expressions used herein shall have the meanings provided in Exhibit A to the Amended and Restated Limited Liability Company Agreement of Trinity Associates LLC, dated as of the date of this Agreement, between Pecos Investors LLC and Trinity Associates Class A Holdings, LLC. A reference to this “Agreement” is a reference to this WGRAH Term Loan Agreement, as amended, modified, supplemented or restated from time to time in accordance with the terms hereof.

Section 1.02 Use of Defined Terms. Any defined term used in the plural preceded by the definite article shall be taken to encompass all members of the relevant class. Any defined term used in the singular preceded by “any” shall be taken to indicate any number of the members of the relevant class.

Section 1.03 Accounting Terms. All accounting terms not specifically defined herein or in Exhibit A to the Trinity Company Agreement shall be construed in each case in accordance with GAAP as in effect from time to time.

Section 1.04 Interpretation. The word “including” (and with correlative meaning “include”) means “including, without limitation”.

Article II

AMOUNT AND TERMS OF LOAN

Section 2.01 Loan. Subject to the terms and conditions of this Agreement, on the Effective Date, Trinity agrees to make the WGRAH Loan to WGRAH in an amount not to exceed the WGRAH Commitment. The WGRAH Commitment is not revolving; and amounts repaid may not be reborrowed.

Section 2.02 Repayment of WGRAH Loan; Extension of WGRAH Maturity Date; Evidence of Debt.

(a) WGRAH hereby unconditionally promises to pay to Trinity the then unpaid principal of and accrued interest on the WGRAH Loan on the WGRAH Maturity Date, or such earlier date upon which the maturity of the WGRAH Loan shall have been accelerated pursuant to Article VII.

(b) WGRAH may, by written notice to Trinity no later than 180 days prior to the then effective WGRAH Maturity Date, request an extension of the WGRAH Maturity Date to a date that is five years after the then effective WGRAH Maturity Date, and the WGRAH Maturity Date shall be so extended; provided that (i) prior to the then effective WGRAH Maturity Date, Trinity and WGRAH shall have agreed upon a revised Interest Rate to be effective on the first day of such new five-year period, (ii) each of Trinity and each Trinity Member has approved such extension and such revised Interest Rate in writing, (iii) each Pecos Lender shall have agreed to such extension, and (iv) WGRAH shall have delivered a certificate in the form required by Section 6.01(c), making such certifications as of the first day of such new five-year period.

(c) Trinity shall maintain accounts in which it shall record (i) the amount of the WGRAH Loan made hereunder and the relevant Interest Period, (ii) the amount of any principal or interest due and payable or to become due and payable from WGRAH to Trinity hereunder, and (iii) the amount of any payment received by Trinity hereunder.

(d) The entries made in the accounts maintained pursuant to paragraph (b) of this Section 2.02 shall be prima facie evidence of the existence and amounts of the obligations and payments recorded therein; provided that the failure of Trinity to maintain such accounts or any error therein shall not in any manner affect the obligation of WGRAH to repay the WGRAH Loan in accordance with the terms of this Agreement.

(e) Trinity may request that the WGRAH Loan be evidenced by a promissory note. In such event, WGRAH shall prepare, execute and deliver to Trinity a WGRAH Note. Thereafter, the unpaid principal amount of the WGRAH Loan and interest thereon shall, at all times (including after assignment pursuant to Section 10.04), be represented by one or more WGRAH Notes in such form payable to the order of Trinity.

(f) Trinity is authorized to and shall endorse the date and amount of the WGRAH Loan and the date and amount of each payment of principal with respect thereto on the schedule annexed to and constituting a part of its WGRAH Note. No failure to make or error in making any such endorsement as authorized hereby shall affect the validity of the obligations of WGRAH to repay the unpaid principal amount of the WGRAH Loan with interest thereon as provided in Section 2.06 or the validity of any payment thereof made by WGRAH. Trinity shall, at the request of WGRAH, deliver to WGRAH copies of the WGRAH Note and the schedules annexed thereto.

Section 2.03 Procedure for Borrowing. Not later than 11:00 a.m., New York City time on the Business Day prior to the Effective Date, WGRAH shall deliver to Trinity a borrowing request (the “Borrowing Request”), signed by WGRAH. The Borrowing Request shall specify the following information:

(a) the amount of the requested WGRAH Loan (which shall not exceed the WGRAH Commitment);

(b) the effective date for the WGRAH Loan, which shall be a Business Day;

(c) the location and number of WGRAH’s account to which funds are to be disbursed.

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Provided that all conditions set forth in Article VI have been satisfied, Trinity will make the amount of the WGRAH Loan available to the account of WGRAH in accordance with Section 2.08.

Section 2.04 Termination of Commitments. The WGRAH Commitment shall terminate at 4:00 p.m. New York City time on the Effective Date.

Section 2.05 Prepayments.

(a) WGRAH may, at its option, as provided in this Section 2.05, at any time and from time to time prepay the WGRAH Loan, in whole or in part, upon at least two (2) Business Days’ prior notice to Trinity, specifying the date and amount of prepayment. The payment amount specified in such notice shall be due and payable on the date specified.

(b) At any time when WGRAH’s Consolidated EBITDA is less than $100,000,000 for the most recently ended Measurement Period, WGRAH shall prepay the WGRAH Loan in a principal amount equal to the Net Cash Proceeds received from any Disposition of assets as soon as reasonably practicable but not more than three Business Days after the receipt of such amounts; provided that such amounts required for a prepayment pursuant to this sentence may not be used as an Investment or Restricted Payment or otherwise permitted to leave the possession of the WGRAH Loan Parties after the WGRAH Loan Parties’ receipt thereof.

(c) Upon any Disposition of any assets by WGRAH or any of its Subsidiaries, WGRAH shall prepay the WGRAH Loan in a principal amount equal to the amount necessary for WGRAH to comply with the requirements of Sections 5.05(b) as soon as reasonably practicable but not more than three Business Days after such Disposition occurs; provided that such amounts required for a prepayment pursuant to this sentence may not be used as an Investment or Restricted Payment or otherwise permitted to leave the possession of the WGRAH Loan Parties after the WGRAH Loan Parties’ receipt thereof.

(d) All prepayments pursuant to this Section 2.05 shall include accrued interest on the amount prepaid to the date of prepayment, expenses, Trinity Expenses, indemnities, and other WGRAH Obligations (and as to which, in the case of Trinity Expenses, demand for payment with respect to which has been received by WGRAH on or before 12:30 p.m. on the Business Day immediately preceding the date on which any such payment or prepayment of principal is to be made).

(e) Partial optional prepayments pursuant to this Section 2.05 shall be in an aggregate principal amount of $10,000,000 or any whole multiple of $5,000,000 in excess thereof. All prepayments of the WGRAH Loan pursuant to this Section 2.05 shall be without the payment of any premium or penalty except for amounts payable pursuant to Section 2.09 and shall be payable at the time specified in Section 2.09(a).

Section 2.06 Interest.

(a) WGRAH shall pay interest on the unpaid principal amount of the WGRAH Loan outstanding from time to time from the Effective Date until the principal amount shall be paid in full, at a rate per annum at all times during each Interest Period equal to the Interest Rate for such

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Interest Period, payable in arrears on each Payment Date; provided that, in the event of any repayment or prepayment of the WGRAH Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment.

(b) Trinity shall determine the Interest Rate for each Interest Period (or portion thereof) and shall notify WGRAH of such Interest Rate three Business Days prior to the Payment Date for such Interest Period. A notice by Trinity to WGRAH of the Interest Rate shall be binding on WGRAH. A notice to WGRAH pursuant to Section 5.6 of the Trinity Company Agreement shall be deemed to satisfy the foregoing notification requirement.

Section 2.07 Computation of Interest.

(a) All computations of interest hereunder shall be made on the basis of a year of 360 days, for the actual number of days (including the first day but excluding the last day) elapsed. Each determination by Trinity of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.

(b) Trinity shall, at the request of WGRAH, deliver to WGRAH a statement showing the computations used by Trinity in determining any interest rate or fee pursuant to Section 2.06(b) or Section 2.07(a).

Section 2.08 Funding of Loan. Trinity shall make the WGRAH Loan to be made by it hereunder by wire transfer of immediately available funds to the account of WGRAH before 11:30 a.m., New York City time, on the Effective Date.

Section 2.09 Payments; Trinity Expenses.

(a) All payments (including prepayments) to be made by WGRAH whether on account of principal, interest, fees or otherwise shall be made in Dollars and in immediately available funds without setoff or counterclaim at or before 12:00 noon, New York City time on the day when due and shall be made to the Trinity Operating Account.

(b) (i) WGRAH shall from time to time, upon demand or deemed demand by Trinity to WGRAH as set forth in clause (b)(ii) below, pay to Trinity additional amounts sufficient to reimburse Trinity for all Trinity Expenses in accordance with clause (ii).

(ii) Trinity may deliver to WGRAH written notice with supporting documents therefor certifying in reasonable detail the nature of, and if applicable, the method of computation of, Trinity Expenses. Trinity shall specify whether such Trinity Expenses will be recurring, and, if known, the duration of such recurrence. Recurring amounts claimed shall be paid on each specified recurrence without further notice by Trinity. Subject to the next sentence, such notice shall specify whether Trinity requests the amount claimed to be paid on the immediately following Payment Date (for which no less than two Business Days prior notice shall be required) after the initial occurrence or after each specified recurrence or, with respect to claims for amounts other than recurring amounts, on a day other than a Payment Date (for which no less than six Business Days prior notice shall be required). Notwithstanding the foregoing, any Trinity Expenses (A) arising by reason of the late receipt of principal of or interest on the WGRAH Loan shall

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in all cases be payable upon demand and (B) payable in connection with a prepayment of principal under Section 2.05 shall be payable at the time specified in Section 2.09(a). Trinity shall notify WGRAH if any such recurring cost ceases to be recurring (or if the amount thereof decreases) promptly after becoming aware thereof and agrees to refund any excess payment received in respect of such ceased or reduced recurring costs.

Section 2.10 Taxes.

(a) Any and all payments by or on account of any obligation of WGRAH under each WGRAH Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes; provided that if WGRAH shall be required by Applicable Law to deduct or withhold any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions or withholding (including deductions or withholding applicable to additional sums payable under this Section 2.10), Trinity or the WGRAH Collateral Agent, as applicable, receives an amount equal to the sum it would have received had no such deductions or withholding been made, (ii) WGRAH shall make such deductions or withholding, and (iii) WGRAH shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law.

(b) In addition, WGRAH shall pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

(c) WGRAH shall indemnify Trinity and the WGRAH Collateral Agent, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by Trinity or the WGRAH Collateral Agent, as applicable, on or with respect to any payment by or on account of any obligation of WGRAH under each WGRAH Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.10) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to WGRAH by Trinity or the WGRAH Collateral Agent, as applicable, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by WGRAH to a Governmental Authority, WGRAH shall deliver to Trinity or the WGRAH Collateral Agent, as applicable, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Trinity or the WGRAH Collateral Agent, as applicable.

(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which WGRAH is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to WGRAH at the time or times prescribed by Applicable Law, such properly completed and executed documentation prescribed by Applicable Law or reasonably requested by WGRAH (including, without limitation, Form W-8BEN or Form W-8ECI, as applicable) as will permit

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such payments to be made without withholding or at a reduced rate. Lenders that are not Foreign Lenders shall provide a duly completed Form W-9 or other reasonable evidence of exemption from U.S. back-up withholding.

(f) If Trinity or the WGRAH Collateral Agent determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes (or any other taxes owed by Trinity or the WGRAH Collateral Agent, as applicable, under or in connection with this Agreement and indemnified by WGRAH or paid by WGRAH on behalf of Trinity) as to which it has been indemnified by WGRAH or with respect to which WGRAH has paid additional amounts pursuant to this Section 2.10, it shall pay over such refund to WGRAH (but only to the extent of indemnity payments made, or additional amounts paid, by WGRAH under this Section 2.10 with respect to the Indemnified Taxes or Other Taxes (or any other taxes owed by Trinity or the WGRAH Collateral Agent, as applicable, under this Agreement and indemnified by WGRAH or paid by WGRAH on behalf of Trinity or the WGRAH Collateral Agent, as applicable) giving rise to such refund), net of all out-of-pocket expenses of Trinity or the WGRAH Collateral Agent, as applicable, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that WGRAH, upon the request of Trinity or the WGRAH Collateral Agent, as applicable, agrees to forthwith repay the amount paid over to WGRAH (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to Trinity or the WGRAH Collateral Agent, as applicable, if Trinity or the WGRAH Collateral Agent, as applicable, is required to repay such refund to such Governmental Authority. Nothing contained in this Section 2.10 shall require Trinity or the WGRAH Collateral Agent, as applicable, to make available its Tax Returns (or any other information relating to its Taxes which it deems confidential) to WGRAH or any other Person.

Article III

REPRESENTATIONS AND WARRANTIES

Section 3.01 Representations of WGRAH. WGRAH represents and warrants to Trinity that:

(a) WGRAH and each of its Subsidiaries (i) has been duly formed and is validly existing and in good standing under the laws of the state of its organization, and (ii) is qualified to do business as a foreign corporation, partnership, or limited liability company, as applicable, and is in good standing in each jurisdiction of the United States in which the ownership of its properties or the conduct of its business requires such qualification and where the failure to so qualify could reasonably be expected to constitute a WGRAH Material Adverse Change.

(b) This Agreement and all other WGRAH Loan Documents to which WGRAH or any of its Subsidiaries is a party have been duly authorized, executed and delivered by WGRAH or such Subsidiary, and each of this Agreement, the WGRAH Notes and the other WGRAH Loan Documents to which it is a party constitutes a valid and binding agreement of WGRAH, enforceable in accordance with its respective terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability. There are no actions, suits or proceedings pending or, to the knowledge of WGRAH, threatened against WGRAH or any of its Subsidiaries which purport to affect the legality, validity or enforceability of this Agreement or any other WGRAH Loan Document.

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(c) The execution, delivery and performance of the WGRAH Loan Documents by WGRAH and its Subsidiaries and the execution, issuance, delivery and performance by WGRAH of the WGRAH Notes will not (i) violate or conflict with (A) the WGRAH Company Agreement or the Organizational Documents of any Subsidiary, (B) any indenture, loan agreement or other similar agreement or instrument binding on WGRAH or any Subsidiary, or (C) any provision of applicable law, or (ii) result in the creation or imposition of a Lien on any of its assets, except for Permitted Liens.

(d) There are no actions, suits, or proceedings pending or, to the knowledge of WGRAH, threatened against or involving WGRAH or any of its Subsidiaries or their respective Property, before any Governmental Authority as to which, in the opinion of WGRAH, there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to constitute a WGRAH Material Adverse Change.

(e) Neither WGRAH nor any Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

(f) No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Change. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that could reasonably be expected to be a Material Adverse Change.

(g) With respect to the date hereof or the later date of delivery of any information hereunder (each, a “Relevant Date”), as the case may be:

(i) subject to Section 3.01(g)(iii) below, all written information that has been made available to Trinity by or on behalf of WGRAH or any of its Affiliates, or any of their respective Representatives, prior to such Relevant Date in connection with this Agreement and the transactions contemplated hereby, in each case taken as a whole and as modified or supplemented from time to time prior to such Relevant Date, was complete and correct in all material respects on such Relevant Date and did not on such Relevant Date contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in any material respect in light of the circumstances under which such statements were made;

(ii) any historical financial data provided by or on behalf of WGRAH or any of its Affiliates, or any of their respective Representatives, to Trinity prior to such Relevant Date in connection with the transactions contemplated by this Agreement was prepared in accordance with GAAP then in effect (or with appropriate reconciliation to

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such GAAP if required by applicable Law or requested by Trinity) and fairly presents the financial condition and results of operations of WGRAH and its Subsidiaries (subject to year end audit adjustments) as of the date thereof, except as otherwise disclosed therein or in the footnotes thereto or as otherwise disclosed in writing to Trinity; and

(iii) all financial projections that were prepared by WGRAH, its Affiliates, or its Representatives and made available to Trinity prior to such Relevant Date in connection with the transactions contemplated by this Agreement were prepared in good faith based upon assumptions believed by WGRAH and its Affiliates to be reasonable at the time such projections were prepared (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond WGRAH’s and its Affiliates’ control, and that no assurance can be given that the projections will be realized or that the assumptions on which the projections were based will prove to be correct).

(h) WGRAH’s Subsidiaries as of the Effective Date are listed on Part A of Schedule I hereto, and each such Subsidiary that is a Significant Subsidiary is indicated as such on Part A of Schedule I.

(i) No Default or Event of Default has occurred and is continuing.

(j) (i) The execution, delivery and performance by each WGRAH Loan Party of each Transaction Agreement to which it is a party and the consummation of the transactions contemplated thereby, including the making of the WGRAH Loan, and (ii) the granting and perfection by the WGRAH Loan Parties of Liens in the Collateral pursuant to the WGRAH Security Documents, in each case do not require any action by or in respect of (including any license or permit), consent or approval of, or registration or filing with, any Governmental Authority or any other Person, nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any WGRAH Loan Document, except for (A) the filing of financing statements and any continuation statements with respect to filings under the UCC (or its equivalent) in relevant jurisdictions permitted by the provisions of the Transaction Agreements to be performed or filed at a later date, and (B) such consents, authorizations, approvals, actions, notices and filings as (1) have been obtained, made, taken or given, are in full force and effect and copies of which have been furnished to Trinity and the WGRAH Collateral Agent or (2) are not yet required to be obtained, made, taken or given under the terms of the Transaction Agreement to which it is a party.

(k) Since the date of its formation, it has not engaged in any activity other than that contemplated by the Transaction Agreements or entered into any commitment or incurred any Indebtedness other than pursuant to, or as permitted under, the Transaction Agreements to which it is a party.

(l) It was formed to carry out the activities set forth in the WGRAH Company Agreement and, except in connection therewith (and except as contemplated by the Transaction Agreements), has no significant assets or liabilities.

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(m) Since the date of its formation, there has been no event with respect to it that has resulted, or could reasonably be expected to result, in a WGRAH Material Adverse Change.

(n) Schedule III-A describes and sets forth the commercial terms of each material Midstream Agreement with any Affiliate of Anadarko that exists and is in written form on the Effective Date (and no other agreements). Schedule III-B describes and sets forth the commercial terms of each material Midstream Agreement with any Affiliate of Anadarko that exists but is not in written form on the Effective Date (and no other agreements). The sum of the gross revenues under the contracts listed on Schedule III-A and the gross revenues under the contracts listed on Schedule III-B is greater than or equal to 90% of the gross revenues under all written and unwritten Midstream Agreements with Affiliates of Anadarko existing on the Effective Date. None of the Midstream Agreements with any Affiliate of Anadarko has been amended or otherwise modified except as otherwise permitted by the Transaction Agreements, and each Midstream Agreement with any Affiliate of Anadarko is in full force and effect. No WGRAH Loan Party is, and to WGRAH’s knowledge no other party to any Midstream Agreement is, in default of its material obligations under any Midstream Agreement.

(o) Each WGRAH Loan Party’s chief place of business and chief executive office are located at 1201 Lake Robbins Drive, The Woodlands, Texas 77380.

(p) Neither it nor any of its officers or directors has actual knowledge of any facts, circumstances, conditions or occurrences that could reasonably be anticipated to form the basis of any tort claim against WGRAH, any of its Subsidiaries, or Trinity or any WGRAH Property or Property of Trinity that individually or in the aggregate could reasonably be expected to result in a WGRAH Material Adverse Change.

(q) It has filed and paid, or caused to be filed and paid on a timely basis, all Tax Returns and Taxes (whether gains Taxes, transfer Taxes, recording fees or Taxes and all other Taxes) due and owing by it or any of its Subsidiaries and such other Tax Returns and Taxes that arise in connection with the transactions contemplated in the Transaction Agreements, but excluding Taxes the non-timely filing or payment of which, in the context of the Transaction Agreements, such transactions, and the rights and remedies of the respective parties thereto, individually or in the aggregate, could not reasonably be expected to result in a WGRAH Material Adverse Change.

(r) Each of WGRAH and each of its Subsidiaries has good title to its properties and assets, free and clear of all mortgages, liens and encumbrances, except for Permitted Liens. Schedule II describes by owner all of the gathering systems, processing plants, and other material assets (including all partnership and joint venture interests) owned by WGRAH and its Subsidiaries. Each of WGRAH and each of its Subsidiaries owns all of the assets necessary to continue to own and operate its gathering systems, processing plants, and other material assets in a manner substantially similar to the manner such assets were operated for the twelve months prior to the Effective Date.

(s) Each of WGRAH and each of its Subsidiaries is in compliance with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to so comply, individually or in the aggregate, could not reasonably be

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expected to result in a WGRAH Material Adverse Change. Without limiting the generality and coverage of the foregoing, WGRAH and each of its Subsidiaries is in compliance with all Environmental Laws and all laws, regulations, or directives with respect to equal employment opportunity and employee safety in all jurisdictions in which WGRAH or any of its Subsidiaries does business, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a WGRAH Material Adverse Change.

Article IV

AFFIRMATIVE COVENANTS

WGRAH covenants and agrees with Trinity that:

Section 4.01 Financial Statements and Other Information. WGRAH will furnish to Trinity:

(a) As soon as available, and in any event not later than 120 days after the end of each fiscal year of WGRAH, its unaudited consolidated balance sheet and the related consolidated statements of operations, members’ equity and cash flows as of the end of and for such year, in each case derived from the audited financial statements of Anadarko as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified by a Responsible Officer as presenting fairly in all material respects the financial condition and results of operations of WGRAH and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to the absence of footnotes.

(b) As soon as available, and in any event not later than 150 days after the end of each fiscal year of WGRAH, its audited consolidated balance sheet and the related consolidated statements of operations, members’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year all certified by a Responsible Officer of WGRAH as presenting fairly in all material respects the financial condition and results of operations of WGRAH and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(c) As soon as available, and in any event not later than 60 days after the close of each fiscal quarter (including the fourth fiscal quarter) of each fiscal year of WGRAH, its unaudited consolidated balance sheet and related consolidated statements of operations, members’ equity and cash flows as of the end of and for such quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods (or, in the case of the balance sheet, as of) the previous fiscal year all certified by a Responsible Officer of WGRAH as presenting fairly in all material respects the financial condition and results of operations of WGRAH and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

(d) Concurrently with any delivery of financial statements under Sections 4.01(a), (b), and (c), a certificate of a Responsible Officer of WGRAH certifying and (i) stating whether to the knowledge of WGRAH an event has occurred during such period and is continuing which

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constitutes an Event of Default or a Default, and, if so, stating the relevant facts with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance (or, if applicable, non-compliance) with Section 5.10, including, with respect to the calculation of Consolidated EBITDA, the amount of Consolidated EBITDA attributable to Commodity Payment Amounts for the relevant period, (iii) stating whether any change in GAAP or in the application thereof has occurred since the Effective Date and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate, (iv) summarizing any material changes to the existing Midstream Agreements with Affiliates of Anadarko during such period and attaching copies of any amendments to such existing Midstream Agreements during such period, (v) attaching copies of any new Midstream Agreements with Affiliates of Anadarko entered into during such period, (vi) certifying that the pricing and other terms of all Midstream Agreements with Affiliates of Anadarko existing on the last day of such period are not, taken as a whole, materially less beneficial to WGRAH and its Subsidiaries than the pricing and other terms of all Midstream Agreements (both in written form and not in written form) with Affiliates of Anadarko existing on the Effective Date, and (vii) setting forth total system volumes for such period.

(e) Promptly upon receipt thereof, copies of any other notices, requests, reports, financial statements and other information and documents received by WGRAH under or pursuant to any other Transaction Agreement (other than those issued or sent by or at the request of Trinity) and, from time to time upon request by Trinity, such information and reports required under such other Transaction Agreements as Trinity may reasonably request.

(f) To the extent reasonably practicable to do so, five Business Days’ (or such lesser period as may be practicable) prior notice of any proposed Disposition and, to the extent it is not reasonably practicable to give such prior notice, WGRAH shall give notice of any such Disposition promptly after such Disposition.

(g) On or before the date that is 60 days after the Effective Date, a certificate of a Responsible Officer of WGRAH (i) certifying that WGRAH has, on or prior to such date, entered into written contracts, binding and enforceable against all parties thereto, evidencing all Midstream Agreements listed on Schedule III-B, on the terms specified on Schedule III-B, and (ii) attaching copies of such signed, written contracts.

Section 4.02 Notices of Material Events. WGRAH will furnish to Trinity and the WGRAH Collateral Agent the following:

(a) a notice of the occurrence of any Default or Event of Default promptly, but in any event no later than three Business Days, after a Responsible Officer of WGRAH has actual knowledge of such occurrence or such event becomes generally publicly known;

(b) promptly, but in any event no later than three Business Days after a Responsible Officer of WGRAH has actual knowledge of such occurrence or such event becomes generally publicly known, a notice of the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting WGRAH that if adversely determined, individually or in the aggregate, could reasonably be expected to result in a WGRAH Material Adverse Change;

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(c) promptly, but in any event no later than three Business Days after a Responsible Officer of WGRAH has actual knowledge of such occurrence or such event becomes generally publicly known, a notice of the occurrence of any ERISA Event; and

(d) promptly, but in any event no later than three Business Days after a Responsible Officer of WGRAH has actual knowledge of such occurrence or such event becomes generally publicly known, a notice of any other development that, individually or in the aggregate, results in, or could reasonably be expected to result in, a WGRAH Material Adverse Change.

Each notice delivered under this Section 4.02 shall be accompanied by a statement of a Responsible Officer of WGRAH setting forth the details of the event or development requiring such notice and any action taken with respect thereto.

Section 4.03 Compliance with Laws. WGRAH will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a WGRAH Material Adverse Change.

Section 4.04 Use of Proceeds. The proceeds of the WGRAH Loan shall be used to make one or more loans to WGR on the date the WGRAH Loan is made, in an aggregate amount equal to the amount of the WGRAH Loan. No part of the proceeds of the WGRAH Loan will be used for any purpose which violates the provisions of Regulations U or X of the Board of Governors of the Federal Reserve System.

Section 4.05 Insurance.

(a) Maintenance of Insurance. WGRAH will at all times maintain, and will cause its Subsidiaries to maintain, in each case directly or indirectly through Anadarko, with financially sound and reputable insurers, insurance of the kinds, covering the risks and in the relative proportionate amounts (including as to self-insurance, including with respect to Property including Midstream Assets) consistent with that carried by companies engaged in the same or similar business as Anadarko and similarly situated to Anadarko. WGRAH will not, and will not permit any of its Subsidiaries to, bring or keep any article on any business location of WGRAH or any of its Subsidiaries, or cause or allow any condition to exist, if the presence of such article or the occurrence of such condition could reasonably be expected to cause the invalidation of any insurance required by this Section 4.05, or would otherwise be prohibited by the terms thereof.

(b) Evidence of Insurance Coverage. WGRAH will deliver to Trinity and the WGRAH Collateral Agent on the Effective Date, an Insurance Certificate from Anadarko’s insurance broker dated such date showing the amount of coverage under all policies relevant to Section 4.05(a). WGRAH shall provide Insurance Certificates for all such insurance policies annually, as well as such additional information as to the applicable policies as is reasonably requested by Trinity or WGRAH Collateral Agent. WGRAH will deliver to Trinity and WGRAH Collateral Agent (i) promptly after receipt by Anadarko or any of its Subsidiaries from any insurer, a copy of any notice of cancellation, nonrenewal, or material change in coverage from that existing under any such policy immediately prior to such notice and (iii) promptly upon delivery to any insurer by Anadarko or any of its Subsidiaries, a copy of any notice of any cancellation of, nonrenewal of, or requested material change in coverage under, any such policy.

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Section 4.06 Preservation of Existence, Etc. Except in a transaction permitted by Section 5.04 or 5.05, WGRAH will, and will cause each of its Subsidiaries to, (a) preserve, renew and maintain in full force and effect its legal existence and good standing under the laws of the jurisdiction of its organization; and (b) maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business; except in the case of clause (a) (other than with respect to WGRAH) and clause (b), to the extent that failure to do so could not reasonably be expected to result in a WGRAH Material Adverse Change.

Section 4.07 Payment of WGRAH Obligations. WGRAH will, and will cause each of its Subsidiaries to, pay and discharge as the same shall become due and payable (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by WGRAH or any Subsidiary, and (b) all lawful claims which, if unpaid, would by law become a Lien upon its property (other than a Permitted Lien or a claim being contested in good faith by appropriate procedures diligently conducted).

Section 4.08 Maintenance of Properties, Title. WGRAH will, and will cause each of its Subsidiaries to (a) maintain, preserve and protect all of its material Property and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted and (b) make all necessary repairs thereto and renewals and replacements thereof; except, in the case of clauses (a) and (b), where the failure to do so could not reasonably be expected to result in a WGRAH Material Adverse Change; provided that the foregoing shall not (i) require such maintenance, preservation, protection, repair, renewal or replacement of obsolete, surplus or worn out Property or with respect to Property that is no longer commercially viable to operate and maintain or (ii) otherwise restrict an Asset Sale otherwise permitted under Section 5.05. WGRAH will, and will cause each of its Subsidiaries to, maintain legal and beneficial title to each of its assets, except as otherwise permitted under Sections 5.04 and 5.05 or as could not reasonably be expected to result in a WGRAH Material Adverse Change.

Section 4.09 Books and Records. WGRAH will, and will cause each of its Subsidiaries to, maintain such proper books of record and account as are necessary to prepare the financial statements and other documentation required by Section 4.01.

Section 4.10 Inspection Rights. WGRAH will, and will cause each of its Subsidiaries to, permit representatives of Trinity and WGRAH Collateral Agent to visit and inspect any of its Property, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances, and accounts with its directors and officers, all at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to WGRAH and subject to any applicable safety rules and procedures; provided that (a) when no Default or Event of Default exists, one such visit for each of Trinity and the WGRAH Collateral Agent per fiscal year of WGRAH shall be at the expense of WGRAH, and additional visits shall be at the expense of Trinity, except that each of Trinity and the WGRAH Collateral Agent may conduct two additional visits at

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WGRAH’s expense when no Default or Event of Default exists over the term of this Agreement (regardless of the number of visits already conducted in the relevant fiscal year), and (b) when a Default or Event of Default exists, Trinity and the WGRAH Collateral Agent (or any of their respective representatives) may do any of the foregoing at the expense of WGRAH at any time during normal business hours, without advance notice and without any limit on the number of such visits that shall be at the expense of WGRAH or on frequency of such visits.

Section 4.11 Further Assurances. WGRAH will, and will cause each of its Subsidiaries to:

(a) promptly upon request by Trinity, correct any material defect or error that may be discovered in any WGRAH Loan Document or in the execution, acknowledgment, filing or recordation thereof; and

(b) promptly upon request by Trinity, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as Trinity may reasonably require from time to time in order to (A) carry out more effectively the purposes of the WGRAH Loan Documents, (B) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto Trinity the rights granted or now or hereafter purported to be granted to Trinity under any WGRAH Loan Document or under any other instrument executed in connection with any WGRAH Loan Document, (C) to the fullest extent permitted by Applicable Law, subject all WGRAH Property intended to be Collateral to the Liens now or hereafter intended to be granted by the WGRAH Security Documents, and (D) perfect and maintain the validity, effectiveness, and priority (subject to Permitted Collateral Liens) of the WGRAH Loan Documents and the Liens intended to be created thereunder.

Section 4.12 Environmental Matters. WGRAH will, and will cause each of its Subsidiaries to, comply with all Environmental Laws and Environmental Permits binding upon them, except to the extent that non-compliance could not, individually or in the aggregate, reasonably be expected to result in a WGRAH Material Adverse Change.

Section 4.13 Performance of Documents; Entry Into Written Midstream Agreements.

(a) WGRAH will (i) perform and observe in all material respects all of the terms and provisions of, and obligations under, each Transaction Agreement (other than Midstream Agreements) to be performed or observed by it, (ii) maintain, to the extent it has the capacity to do so, each Transaction Agreement (other than Midstream Agreements) to which it is a party in full force and effect, (iii) promptly enforce in all material respects its rights under each such Transaction Agreement (other than Midstream Agreements) in accordance with its terms, and (iv) upon request of Trinity, make to each other party to each Transaction Agreement (other than Midstream Agreements) to which WGRAH is a party or a beneficiary such demands and requests for information and reports or for action as WGRAH is entitled to make under such Transaction Agreement.

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(b) WGRAH will (i) promptly enforce its rights under each Midstream Agreement in accordance with its terms, except where failure to do so could not reasonably be expected to result in a WGRAH Material Adverse Change, and (ii) upon request of Trinity or the WGRAH Collateral Agent during the existence of an Event of Default, make to each other party to each Midstream Agreement to which WGRAH is a party or a beneficiary such demands and requests for information and reports or for action as WGRAH is entitled to make under such Midstream Agreement.

(c) WGRAH will, and will cause each of its relevant Subsidiaries to, enter into written contracts that are binding and enforceable against all parties thereto, evidencing the Midstream Agreements with Affiliates, reflecting the commercial terms set forth on Schedule III-B, on or before the date that is 60 days after the Effective Date.

Section 4.14 Subsidiaries. WGRAH shall cause each of its Subsidiaries to be a party to a Subsidiary Guaranty. Contemporaneously with the creation or acquisition of any Subsidiary, to be effective upon such creation or acquisition, WGRAH shall cause (a) such Subsidiary to execute and deliver to Trinity a joinder to the Subsidiary Guaranty in substantially the form attached as Exhibit A to the Subsidiary Guaranty, with such changes as Trinity or the WGRAH Collateral Agent may reasonably request, (b) such Subsidiary to deliver to Trinity and the WGRAH Collateral Agent evidence of its corporate, partnership, or limited liability company authority, as applicable, to enter into such documentation as Trinity or the WGRAH Collateral Agent may reasonably request, including, without limitation, if requested by Trinity, a legal opinion regarding the enforceability of such documentation, and (c) such Subsidiary to deliver to Trinity such other documentation, or authorize Trinity to take such other action, as is reasonably requested by Trinity or the WGRAH Collateral Agent in order to carry out the purposes of the WGRAH Loan Documents.

Section 4.15 Grant of Additional Security Upon a Security Trigger Event. Upon the occurrence of a Security Trigger Event, WGRAH shall, and shall cause each of its Subsidiaries to, (a) grant to Trinity or, if requested by Trinity, a collateral agent for the benefit of Trinity first-priority Liens over all WGRAH Property to secure the WGRAH Obligations, to the extent that such grant would not trigger ratable security provisions in agreements governing other Indebtedness of Anadarko and its Affiliates that would require the grant of a Lien on any WGRAH Property to secure such other Indebtedness, (b) execute and deliver to Trinity or such collateral agent such security agreements, mortgages, deeds of trust, account control agreements, financing statements, and such other documents as are reasonably requested by Trinity or such collateral agent to evidence or perfect such grant of Liens, (c) deliver to Trinity or such collateral agent, or otherwise grant control to Trinity or such collateral agent over, all such collateral in which a Lien may be perfected by control, (d) deliver to Trinity or such collateral agent evidence of its corporate, partnership, or limited liability company authority, as applicable, to enter into such documentation as Trinity or such collateral agent may reasonably request, including without limitation, if so requested, legal opinions covering such matters as are specified by Trinity or such collateral agent, and (e) take such other action, deliver such other documentation, and authorize Trinity or such collateral agent to take such other action, as is reasonably requested by Trinity or such collateral agent.

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Section 4.16 Amendments Upon Anadarko Credit Event, Etc. At any time after the occurrence and during the continuation of an Anadarko Credit Event, an Event of Default, or a Liquidating Event, Trinity may change the pricing of the WGRAH Loan if Trinity or any of its successors or assigns determines that such change is advisable in order to sell the entire WGRAH Loan at par, and may amend the WGRAH Loan Documents to add terms customary for a syndicated multibank term loan facility and necessary or reasonably desirable for the remarketing of the WGRAH Loan as a syndicated multibank term loan facility. WGRAH hereby agrees that (a) it will, and will cause each of its Subsidiaries to, promptly following notice thereof, execute any amendment to the WGRAH Loan Documents reasonably requested by Trinity or its successors or assigns to effect such changes, and (b) any failure to do so shall be an Event of Default hereunder.

Section 4.17 Post-Closing Requirements. WGRAH shall, and shall cause each of its Subsidiaries to, perform all duties and obligations specified on Schedule IV, to the reasonable satisfaction of the Pecos First Lien Agent, within the time limitations stated in Schedule IV.

Article V

NEGATIVE COVENANTS

WGRAH covenants and agrees with Trinity that:

Section 5.01 Liens. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, or suffer to exist any Lien upon any WGRAH Property, whether now owned or hereafter acquired, other than Permitted Liens.

Section 5.02 Investments. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, make or hold any Investments except the following:

(a) any Investment in (i) WGR, so long as no Default, Event of Default, or Anadarko Credit Event exists at the time of such Investment or would be caused thereby, (ii) WGRAH, or (iii) any WGRAH Loan Party;

(b) any Investment in Cash Equivalents;

(c) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 5.05;

(d) any Investments received (i) in compromise or resolution of obligations of trade creditors or customers that were incurred in the ordinary course of business of WGRAH or any of its Subsidiaries, including (A) obligations of financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and (B) pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer, (ii) in compromise or resolution of litigation, arbitration or other disputes, or (iii) on account of any claim against, or an interest in, any other Person (A) acquired in good faith in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of such other Person or (B) as a result of a bona fide foreclosure by WGRAH or any of its Subsidiaries with respect to any claim against any other Person;

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(e) any Investment consisting of extensions of credit including, without limitation, accounts receivables or notes receivables arising from the grant of trade credit or prepayments or similar transactions, if created or acquired in the ordinary course of business and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

(f) Investments in the form of, or pursuant to, joint ventures, partnership agreements, processing agreements, contracts for the transportation or exchange of oil and natural gas, or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case, made or entered into in the ordinary course of business;

(g) Investments in any (i) Person in which WGRAH or any of its Subsidiaries, directly or indirectly, owns Equity Interests to provide for the operation, maintenance or working capital of such Person or pursuant to Capital Commitments, in an aggregate amount not to exceed $10,000,000 in any calendar year, or (ii) Investments in any Proportionately Consolidated Interests consisting of the payment of the proportional share of operating expenses through joint interest billings pursuant to applicable construction and operating agreements;

(h) any Guarantees permitted to be incurred pursuant to Section 5.03(d); and

(i) Permitted Pledged Account Investments.

Section 5.03 Indebtedness. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness owed to (i) Anadarko or any Subsidiary of Anadarko so long as such Indebtedness is Subordinated to the WGRAH Obligations, (ii) WGRAH, or (iii) any Subsidiary of WGRAH;

(b) Indebtedness under the WGRAH Loan Documents;

(c) obligations to pay the deferred purchase price of goods or services, or progress payments in connection with such goods and services, including Midstream Assets but excluding the Anadarko Contributions, so long as such obligations are incurred in the ordinary course of business; and

(d) any Guarantee of Indebtedness, which Indebtedness is otherwise permitted pursuant to this Section 5.03.

Section 5.04 Fundamental Changes.

(a) WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, consolidate or merge with or into another Person, or sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets (whether now owned or hereafter acquired) of WGRAH and its Subsidiaries taken as a whole, in one or more related transactions, to another Person except that:

(i) so long as no Default or Event of Default exists or would result therefrom, any Subsidiary of WGRAH may merge with or dissolve into (A) WGRAH, provided that WGRAH shall be the continuing or surviving Person or (B) any one or more other Wholly Owned Subsidiaries of WGRAH; and

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(ii) in connection with any Asset Sale permitted under Section 5.05, pursuant to which a Subsidiary of WGRAH shall cease to be a Subsidiary of WGRAH, such Subsidiary may dissolve, liquidate, consolidate or merge with or into any other Person or permit any other Person to merge into or consolidate with it;

provided that in each case, immediately after giving effect thereto, in the case of any such merger, consolidation or dissolution to which WGRAH is a party, WGRAH is the surviving or continuing Person; and

(b) WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person;

provided that this Section 5.04 shall not apply to any sale, transfer, assignment, conveyance, lease or other Disposition of properties or assets between or among WGRAH Loan Parties, so long as all of the Collateral immediately prior to such sale, transfer, assignment, conveyance, lease or other Disposition continues to be pledged, transferred, and assigned to the WGRAH Collateral Agent under the WGRAH Security Documents, and such pledge, transfer, and assignment to the WGRAH Collateral Agent continues to be perfected in accordance with the terms thereof, in each case after giving effect to such sale, transfer, assignment, conveyance, lease, or other Disposition.

Section 5.05 Asset Sales. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:

(a) WGRAH or such Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of (as determined by WGRAH in good faith);

(b) WGRAH shall be in compliance, on a pro forma basis after giving effect to such Asset Sale and any substantially contemporaneous repayment of the WGRAH Loan, with the covenant set forth in Section 5.10, as recomputed as at the last day of the most recently ended fiscal quarter for which financial statements are required to be delivered pursuant to Section 4.01(a) or (b) as if such Asset Sale and repayment of the WGRAH Loan had occurred on the first day of the applicable Measurement Period; and

(c) WGRAH makes any mandatory prepayment required in connection with such Asset Sale under Section 2.05.

Section 5.06 Restricted Payments. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, make any Restricted Payment, except for the following:

(a) the payment by any Person of any dividend solely in the common stock or other common Equity Interests of such Person; and

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(b) so long as no Default, Event of Default, or Anadarko Credit Event has occurred and is continuing or would be caused thereby, any other Restricted Payment.

Section 5.07 Change in Nature of Business. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, engage in any line of business other than Permitted Business.

Section 5.08 Transactions with Affiliates. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into any Affiliate Transaction, unless such Affiliate Transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of WGRAH or the relevant Subsidiary, and (c) on terms that are no less favorable (as reasonably determined by WGRAH) to WGRAH or the relevant Subsidiary than those that would have been obtained in a comparable transaction by WGRAH or such Subsidiary with an unrelated Person. The foregoing notwithstanding, Section 5.08 shall not apply to Investments in Affiliates that are permitted pursuant to Section 5.02 or Restricted Payments that are permitted pursuant to Section 5.06.

Section 5.09 Burdensome Agreements. WGRAH shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into any Contractual Obligation (other than this Agreement, any other WGRAH Loan Document or any agreement with, or any agreement resulting from, the application of any law by any Governmental Authority) that limits the ability (a) of any Subsidiary to make Restricted Payments to WGRAH or any Subsidiary or to otherwise transfer property to or invest in WGRAH or any Subsidiary, (b) of any Subsidiary to Guarantee the Indebtedness of WGRAH, or (c) of WGRAH or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person. The restrictions in this Section 5.09 will not apply to encumbrances or restrictions existing under or by reason of:

(i) customary encumbrances and restrictions entered into in the ordinary course of business that are not more restrictive, taken as a whole, than the encumbrances existing on the date hereof;

(ii) customary non-assignment provisions in contracts, agreements, leases, permits and licenses;

(iii) any agreement for the sale or other disposition of the stock or assets of a Subsidiary that restricts distributions by that Subsidiary pending the sale or other disposition;

(iv) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements, which limitation is applicable only to the assets that are the subject of such agreements;

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(v) restrictions on cash or other deposits or net worth or other similar requirements imposed by customers under contracts entered into in connection with a Permitted Business;

(vi) restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or similar agreement to which WGRAH or any Subsidiary is a party entered into in connection with a Permitted Business; provided that such agreement prohibits the encumbrance of solely the property or assets of WGRAH or such Subsidiary that are the subject of that agreement, the payment rights arising thereunder and/or the proceeds thereof and not of any other asset or property of WGRAH or such Subsidiary or the assets or property of any other Subsidiary;

(vii) customary provisions in joint venture, stockholder, membership, limited liability company or partnership agreements or organizational documents relating to joint ventures; and

(viii) any encumbrance or restriction of the type referred to in clauses (a), (b) or (c) of this Section 5.09 (except to the extent that any of clauses (i) through (vii) of this Section 5.09 refers or applies only to certain of such clauses (a), (b) or (c), and, in such case, only to such applicable clause), imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (vii) of this Section 5.09; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, when taken as a whole, in the good faith judgment of the chief financial officer of WGRAH, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

Section 5.10 Financial Covenant. WGRAH shall not permit the Debt/EBITDA Ratio for any Measurement Period ending on or before the relevant dates indicated below to exceed :

Measurement Period ending:	Maximum Debt/EBITDA:
on or before March 31, 2008	6.0
June 30, 2008 through September 30, 2008	5.5
December 31, 2008 through March 31, 2009	5.0
June 30, 2009 through March 30, 2011	4.5
June 30, 2011 through March 30, 2012	4.0
June 30, 2012 and thereafter	3.5

Section 5.11 Amendment, Etc., of Transaction Agreements.

(a) WGRAH shall not, and shall not permit any of its Subsidiaries to, (i) cancel or terminate, or consent to or accept any cancellation or termination of, any WGRAH Loan Document, (ii) forgive any obligation under, or amend, modify, or change in any manner any term or condition of any WGRAH Loan Document, (iii) give any consent, waiver, or approval

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under any WGRAH Loan Document, (iv) waive any default under or any breach of any term or condition of any WGRAH Loan Document, or (v) agree in any manner to any other amendment, modification or change of any term or condition of any WGRAH Loan Document, in each case other than any amendment, supplement, cancellation, termination, consent, approval, waiver, forgiveness, or modification, or agreement with respect thereto, in each case consented to or waived in writing by Trinity.

(b) WGRAH shall not, and shall not permit any of its Subsidiaries to, (i) forgive any obligation under, or amend, modify, or change in any manner any term or condition of any Midstream Agreement with an Affiliate of Anadarko, (ii) give any consent, waiver, or approval under any Midstream Agreement with an Affiliate of Anadarko, (iii) waive any default under or any breach of any term or condition of any Midstream Agreement with an Affiliate of Anadarko, or (iv) agree in any manner to any other amendment, modification or change of any term or condition of any Midstream Agreement with an Affiliate of Anadarko, in each case other than (x) any amendment, supplement, cancellation, termination, consent, approval, waiver, forgiveness, or modification, or agreement with respect thereto, in each case consented to or waived in writing by Trinity or (y) except where such action could not reasonably be expected to result in a WGRAH Material Adverse Change.

Section 5.12 Acquisitions and Sale Leaseback Transactions. WGRAH shall not, and shall not permit any of its Subsidiaries to, make any Acquisition or sale leaseback transaction other than a Permitted Acquisition.

Section 5.13 Hedge Agreements. WGRAH shall not, and shall not permit any of its Subsidiaries to, enter into any Hedge Agreements. Section 5.2(n)(ii) of the Sponsor Agreement shall not be prohibited by this Section 5.13.

Article VI

CONDITIONS OF LENDING

Section 6.01 Conditions Precedent to this Agreement. The obligation of Trinity to make the WGRAH Loan hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02) (such date, the “Effective Date”):

(a) An appropriate, fully executed WGRAH Note is issued payable to the order of Trinity and delivered to Trinity.

(b) Trinity (or its counsel) shall have received the following:

(i) fully executed counterparts of this Agreement signed on behalf of each party hereto;

(ii) a fully executed Subsidiary Guaranty;

(iii) a fully executed WGRAH Security Agreement;

(iv) a fully executed WGRAH Account Control Agreement;

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(v) a fully executed WGRAH Collateral Agent Fee Letter;

(vi) fully executed WGRAH Loan Documents (other than those listed above);

(vii) proper financing statements in form appropriate for filing under the Uniform Commercial Code of all jurisdictions that Trinity may deem necessary or desirable in order to perfect the Liens created under the WGRAH Security Documents; and

(c) Trinity (or its counsel) shall have received a certificate of a Responsible Officer of WGRAH (i) that prior to and after the making of the WGRAH Loan, the representations and warranties contained in Section 3.01 are true and accurate on and as of the Effective Date, and (ii) that no event has occurred and is continuing or would result from the proposed borrowing, which constitutes an Event of Default or a Default.

(d) Trinity (or its counsel) shall have received a certificate of a Responsible Officer of WGRAH setting forth and certifying the accuracy of an estimated calculation of the Debt/EBITDA Ratio as of January 1, 2008, using an estimate of Consolidated EBITDA made in good faith and based on reasonable assumptions, in form and substance and to a level of detail satisfactory to Trinity.

(e) Trinity (or its counsel) shall have received such evidence of the good standing of WGRAH and each Subsidiary and the authority of WGRAH and each Subsidiary to execute, deliver and perform this Agreement and the other WGRAH Loan Documents as Trinity may reasonably request, including a secretary’s certificate of each of WGRAH and each Subsidiary certifying and attaching the Organizational Documents, resolutions, and incumbency of such Person.

(f) Trinity (or its counsel) shall have received the Insurance Certificates required by Section 4.05(b).

(g) No event, condition, change, occurrence or development of a state of circumstances which, individually or in the aggregate, has had or would reasonably be expected to constitute a WGRAH Material Adverse Change has occurred.

(h) Holdings shall be the Trinity Class A Member and shall have made all required Capital Contributions to Trinity, and Pecos shall be the Trinity Class B Member and shall have made all required Capital Contributions to Trinity.

(i) All agreements related to, and the capital and legal structure of, WGRAH and its Subsidiaries (including, but not limited to, the Transaction Agreements) and all their Organizational Documents shall be reasonably satisfactory to Trinity.

(j) All necessary governmental and third-party approvals in connection with the transactions contemplated in the Transaction Agreements shall have been received, except for such governmental and third party approvals that, pursuant to the provisions hereof or the Transaction Agreements, are not required to be obtained on or prior to the Effective Date.

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(k) There are no actions, suits, or proceedings pending or, to the knowledge of WGRAH or its Subsidiaries, threatened against or involving WGRAH or any of its Subsidiaries, or any Anadarko Contributions, or affecting any of their respective properties, assets, rights or businesses in any court, or before any arbitrator of any kind, or before or by any Governmental Authority as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to constitute a WGRAH Material Adverse Change.

(l) Trinity shall be reasonably satisfied with all legal issues including tax and regulatory matters relating to the Transaction Agreements and the transactions contemplated therein.

(m) Trinity and the WGRAH Collateral Agent shall have received evidence that the Pledged Account has been established with the Depository Bank.

(n) Trinity and the WGRAH Collateral Agent shall have received all fees and other amounts due and payable on the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees and expenses of legal counsel) required to be reimbursed or paid by WGRAH hereunder.

(o) Trinity shall have received an opinion of Akin Gump Strauss Hauer & Feld LLP, special US counsel to WGRAH in form and substance satisfactory to Trinity. In rendering such opinion, Akin Gump Strauss Hauer & Feld LLP may assume matters covered by other opinions delivered hereunder and may state that they have relied as to certain matters on information obtained from public officials and officers of WGRAH.

(p) Trinity (or its counsel) shall have received a favorable opinion of an associate general counsel or the general counsel of WGRAH, to the effect that:

(i) WGRAH is validly existing and in good standing under the laws of the State of Delaware and each Subsidiary that is a party to any WGRAH Loan Document is validly existing and in good standing under the laws of its jurisdiction of organization;

(ii) this Agreement and the other WGRAH Loan Documents have been duly authorized, executed and delivered by WGRAH and each Subsidiary that is a party thereto;

(iii) WGRAH is qualified to do business as a foreign limited liability company and is in good standing in the States of Arizona, Colorado, Kansas, Oklahoma, Texas, Utah, and Wyoming, and each Subsidiary is qualified to do business as a foreign corporation, partnership, or limited liability company and is in good standing in each jurisdiction where the ownership of its Property or the conduct of its business requires it to be so qualified;

(iv) the execution, delivery and performance by WGRAH and each of its Subsidiaries of this Agreement and by WGRAH and each of its Subsidiaries of each other WGRAH Loan Document to which it is party will not violate the WGRAH Company Agreement or the applicable Organizational Documents of any such Subsidiary, as in effect on the date of such opinion;

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(v) the execution, delivery and performance of this Agreement and the other WGRAH Loan Documents by WGRAH and its Subsidiaries will not (A) violate any provision of any Applicable Law or (B) violate any provision of any indenture, loan agreement or other similar agreement or instrument known to such counsel (having made due inquiry with respect thereto) binding on WGRAH or any such Subsidiary or affecting their respective property; and

(vi) to the knowledge of such counsel (having made due inquiry with respect thereto), there is no proceeding pending or threatened before any court or administrative agency which, in the opinion of such counsel, which, if adversely determined, could reasonably be expected to result in a WGRAH Material Adverse Change.

In rendering such opinion, the associate general counsel or the general counsel of WGRAH shall opine only as to matters governed by the federal laws of the United States of America, the laws of the State of Texas and the DGCL. Such counsel may also state that he/she has relied on certificates of public officials, certificates of officers of WGRAH and other sources believed by him/her to be responsible.

Article VII

EVENTS OF DEFAULT

Section 7.01 Events of Default. If one or more of the following events or conditions (“Events of Default”) shall occur and be continuing:

(a) WGRAH shall (i) default in any payment of principal of the WGRAH Loan when and as the same shall become due and payable, or (ii) default in any payment of interest on the WGRAH Loan, or in the payment of any fees or other amounts, when and as the same shall become due and payable, and such default under this clause (ii) shall continue for a period of three (3) Business Days;

(b) any representation or warranty or certification made or deemed to be made by WGRAH or any Subsidiary in any WGRAH Loan Document or in any certificate or report prepared by or furnished by or on behalf of WGRAH or any Subsidiary shall prove to have been incorrect in any material respect when made or deemed made;

(c) WGRAH shall fail to observe or perform any covenant, condition or agreement contained in Section 4.02(a), Section 4.04, Section 4.05, Section 4.06, Section 4.15, Section 4.16, Article V, or Section 8.02(a);

(d) Anadarko shall fail to observe or perform any covenant, condition or agreement contained in Section 5.2(i) or Section 5.2(n) of the Sponsor Agreement;

(e) WGRAH, Anadarko, or any Subsidiary shall default in the performance of any other term, condition, covenant or agreement contained in any WGRAH Loan Document (except as set forth in Section 7.01(a), Section 7.01(c), or Section 7.01(d)) required to be performed by it

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and such default shall continue unremedied for a period of thirty (30) days after written notice thereof, specifying such default and requiring it to be remedied, shall have been received by WGRAH from Trinity;

(f) WGRAH or any Subsidiary shall (i) default in the payment of principal of any Indebtedness in an aggregate principal amount in excess of $100,000,000 (other than the WGRAH Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created as and when the same shall become due and payable and such default shall have resulted in such Indebtedness being declared due and payable prior to its stated maturity, or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, and such default shall permit such Indebtedness to be declared due and payable prior to its stated maturity;

(g) WGRAH or any Significant Subsidiary shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of its property, (ii) admit in writing its inability to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under any Bankruptcy Law, (v) file a petition seeking to take advantage of any other law providing for similar relief of debtors, or (vi) consent or acquiesce in writing to any petition duly filed against it in any involuntary case under any Bankruptcy Law;

(h) a proceeding or case shall be commenced, without the application or consent of WGRAH or any Significant Subsidiary in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution or winding up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of its assets, or (iii) similar relief in respect of it, under any law providing for the relief of debtors, and such proceeding or case shall continue undismissed, or unstayed and in effect, for a period of 60 days (or such longer period, so long as WGRAH or such Significant Subsidiary shall be taking such action in good faith as shall be reasonably necessary to obtain the timely dismissal or stay of such proceeding or case); or an order for relief shall be entered in an involuntary case under any applicable Bankruptcy Law, against WGRAH or such Significant Subsidiary;

(i) one or more judgments for the payment of money in an aggregate amount in excess of $100,000,000 shall be rendered against WGRAH, any Subsidiary or any combination thereof, and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of WGRAH or any Subsidiary to enforce any such judgment;

(j) any provision of the WGRAH Loan Agreement, the WGRAH Security Agreement, the WGRAH Account Control Agreement, or the Sponsor Agreement shall for any reason fail to be valid and binding on or enforceable against WGRAH, Anadarko, or any Subsidiary that is a party thereto, or WGRAH, Anadarko, or any of their respective Affiliates shall so assert;

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(k) any provision of any other WGRAH Loan Document not specified in clause (j) above shall for any reason fail to be valid and binding on or enforceable against WGRAH, Anadarko, or any Subsidiary that is a party thereto, or WGRAH, Anadarko, or any of their respective Affiliates shall so assert, and the consequence of such failure to be valid, binding, and enforceable could reasonably be expected to result in a Material Adverse Change;

(l) a Liquidating Event shall have occurred;

(m) any Person who holds an Equity Interest in WGRAH shall transfer its interest therein so that as a result of any such transfer WGRAH is caused to be required to be registered as an “investment company” within the meaning of the Investment Company Act;

(n) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a WGRAH Material Adverse Change;

(o) any Change of Control shall occur; or

(p) WGRAH fails to have entered into binding and enforceable written contracts evidencing the Midstream Agreements listed on Schedule III-B, which written contracts shall meet the requirements and reflect the commercial terms set forth on Schedule III-B, on or before the date that is 60 days after the Effective Date;

(q) there occurs any change to the terms of any Midstream Agreement with an Affiliate of Anadarko, or termination or nonrenewal of any Midstream Agreement with an Affiliate of Anadarko, that could reasonably be expected to result in a WGRAH Material Adverse Change, individually or in the aggregate with all other such changes, terminations, and nonrenewals; or

(r) the WGRAH Collateral Agent shall, at any time, not have a valid and perfected first-priority security interest in the Collateral (other than as a result of Permitted Collateral Liens);

then and in each and every case Trinity, by notice in writing to WGRAH, may declare the unpaid balance of the WGRAH Loan and any other WGRAH Obligations to be forthwith due and payable and thereupon such balance shall become so due and payable without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived by WGRAH; provided that in the case of Section 7.01(f) or (g) above, the WGRAH Loan and any other WGRAH Obligations shall forthwith be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by WGRAH. After the WGRAH Loan becomes due and payable pursuant to the foregoing sentence, Trinity shall have the right to appoint a receiver or liquidator to liquidate the Properties of WGRAH and its Subsidiaries. Trinity and the WGRAH Collateral Agent shall have, in addition to all other rights and remedies under the WGRAH Loan Documents or otherwise, all other rights and remedies provided under the UCC of each applicable jurisdiction and other Applicable Laws, which rights shall be cumulative. Without limiting the foregoing, after the occurrence of an Event of Default, (i) Trinity may direct the WGRAH Collateral Agent to apply all or any part of the credit balance in the Pledged Account in prepayment of any WGRAH Obligations, and the WGRAH Collateral

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Agent may so apply such credit balance; (ii) Trinity may make such demands on the Anadarko Capital Contribution Obligations and direct the WGRAH Collateral Agent to liquidate such Permitted Pledged Account Investments as are necessary to pay the WGRAH Obligations then due and payable, whether by acceleration or otherwise; and (iii) to the extent that Anadarko or its Affiliates have arranged to have letters of credit issued for the benefit of WGRAH in respect of any obligations owing to WGRAH by Anadarko or such Affiliates (including the Anadarko Capital Contribution Obligations), the WGRAH Collateral Agent shall be entitled to draw under such letters of credit in compliance therewith and shall draw upon such letters of credit at the direction of Trinity.

Section 7.02 Application of Funds. After the exercise of remedies provided for above (or after the WGRAH Loan has automatically become immediately due and payable as set forth in Section 7.01), any amounts received on account of the WGRAH Obligations shall be applied by Trinity in the following order of priority (without duplication):

First, to accrued and unpaid Pecos Additional Financing Costs then due and payable;

Second, to accrued and unpaid interest then due and payable under this Agreement;

Third, to the repayment of principal of the WGRAH Loan;

Fourth, to accrued but unpaid Pecos Transaction Costs then due and payable;

Fifth, to any other payment to be made by WGRAH or its Subsidiaries on such date; and

Sixth, the balance (if any) to WGRAH.

Article VIII

PLEDGED ACCOUNT

Section 8.01 Maintaining the Pledged Account.

(a) WGRAH shall maintain the Pledged Account with the Depository Bank, each such account to be in the name of WGRAH, but subject to the sole dominion and control of the WGRAH Collateral Agent.

(b) It shall be a term and condition of the Pledged Account that, notwithstanding any term or condition to the contrary in any other agreement relating to the Pledged Account, no amount (including interest on Permitted Pledged Account Investments held in the Pledged Account) shall be paid or released from the Pledged Account to or for the account of, or withdrawn by or for the account of, WGRAH, any Subsidiary, or any other Person; provided that (i)WGRAH may (by requesting that Trinity instruct the Collateral Agent to) invest amounts standing to the credit of the Pledged Account in Permitted Pledged Account Investments in accordance with Section 8.03; and (ii) withdrawals may be made from the Pledged Account in accordance with Section 8.04; and

(c) The Pledged Account shall be subject to Applicable Laws and applicable regulations of any competent banking authority, as may now or hereafter be in effect.

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(d) Trinity shall give all necessary directions to the WGRAH Collateral Agent to effect the payments, withdrawals, or investments under this Section 8.01, and the WGRAH Collateral Agent may rely on such directions as certifying that the requirements of the Transaction Agreements have been met with respect to such payments, withdrawals, and investments.

(e) The WGRAH Collateral Agent shall (and WGRAH agrees not to take any action inconsistent with any such action by the WGRAH Collateral Agent) hold all funds in the Pledged Account for application, pursuant to Section 8.04 hereof, as directed by Trinity.

(f) WGRAH hereby acknowledges and agrees that the WGRAH Collateral Agent has sole dominion and control of the Pledged Account. WGRAH agrees not to take any action inconsistent with the preceding sentence.

Section 8.02 Deposit of Funds into the Pledged Accounts.

(a) WGRAH shall deposit, or shall cause to be deposited, into the Pledged Account forthwith upon receipt thereof all amounts received by it or any of its Subsidiaries in connection with, or payable to it or any of its Subsidiaries on account of, the Anadarko Capital Contribution Obligations.

(b) On or prior to the Effective Date, WGRAH shall obtain from Anadarko an agreement in writing (which agreement may be contained in the Sponsor Agreement) by Anadarko, for itself and its Affiliates, to deposit all amounts payable by Anadarko and its Affiliates to WGRAH or any of its Subsidiaries in respect of the Anadarko Capital Contribution Obligations directly into the Pledged Account.

(c) WGRAH shall cause the WGRAH Collateral Agent to promptly notify WGRAH and Trinity of any such deposit made pursuant to this Section 8.02 and to provide to WGRAH and Trinity monthly reports of holdings and transactions in the Pledged Account during any month when amounts are on deposit in the Pledged Account.

Section 8.03 Permitted Pledged Account Investments.

(a) Provided no Event of Default or Incipient Event has occurred and is continuing, WGRAH may, subject to the provisions set forth in Section 8.01 concerning withdrawals and Section 8.04 concerning transfers, from time to time direct Trinity to direct the WGRAH Collateral Agent to:

(i) invest amounts on deposit in the Pledged Account in such Cash Equivalents as WGRAH may select; and

(ii) to the extent practicable, invest interest and other earnings paid on the Permitted Pledged Account Investments referred to in Section 8.03(a)(i) above and reinvest other proceeds of any such Cash Equivalents, in each case, in such Cash Equivalents as WGRAH may select

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(the Cash Equivalents referred to in Sections 8.03(a)(i) and (ii) above being the “Permitted Pledged Account Investments”); provided that the WGRAH Collateral Agent shall (at the direction of the Liquidator or, if no Liquidator has been appointed, at the direction of Trinity) liquidate, convert or call in, or demand payment of, any Permitted Pledged Account Investment prior to its maturity, in connection with an exercise by the WGRAH Collateral Agent of the rights and remedies available under the WGRAH Loan Documents. WGRAH will give all necessary directions to Trinity and the WGRAH Collateral Agent to effect the investments made by WGRAH pursuant to this Section 8.03(a).

(b) Interest and proceeds that are not invested or reinvested as provided in Section 8.03(a) above shall be deposited and held in the Pledged Account.

(c) The WGRAH Collateral Agent shall, as directed by Trinity (at the request of WGRAH) and to the extent reasonably practicable, dispose of investments in the Pledged Accounts so as to minimize any loss on such investments, but in no event shall the WGRAH Collateral Agent be liable for any losses incurred as the result of any sale or disposition of Permitted Pledged Account Investments, and WGRAH hereby releases the WGRAH Collateral Agent from any liability arising out of, or in connection with, any investment or liquidation or conversion made by it hereunder, except where such liability arises from the WGRAH Collateral Agent’s gross negligence or willful misconduct, as determined in a final, nonappealable judgment by a court of competent jurisdiction.

Section 8.04 Transfers from the Pledged Account During an Event of Default and on the WGRAH Maturity Date.

(a) During the continuation of an Event of Default, upon direction from Trinity, the WGRAH Collateral Agent shall (and WGRAH agrees not to take any action inconsistent with such action by the WGRAH Collateral Agent) transfer (free from any Lien under the WGRAH Loan Documents) to the Trinity Operating Account all amounts on deposit in the Pledged Account and such proceeds, such transfer to be applied as set forth in Section 7.02.

(b) On the WGRAH Maturity Date, the WGRAH Collateral Agent shall (and WGRAH agrees not to take any action inconsistent with such action by the WGRAH Collateral Agent) transfer (free from any Lien under the WGRAH Loan Documents) to the Trinity Operating Account all amounts on deposit in the Pledged Account and such proceeds, such transfer to be applied as set forth in Section 7.02.

Article IX

WGRAH COLLATERAL AGENT

Section 9.01 Authorization and Action. Trinity hereby appoints and authorizes Citibank, N.A., Agency & Trust, as the WGRAH Collateral Agent hereunder to take such action as WGRAH Collateral Agent on its behalf and to exercise such powers under this Agreement and the other WGRAH Loan Documents as are expressly delegated to the WGRAH Collateral Agent by the terms hereof and thereof. The WGRAH Collateral Agent agrees to take any actions or exercise any powers or remedies provided for it under the WGRAH Loan Documents if so instructed by Trinity; provided, however, that the WGRAH Collateral Agent shall not be

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required to take any action that exposes it to personal liability, requires it to advance or expend funds, or that is contrary to this Agreement, the WGRAH Loan Documents, or Applicable Law. As to any matters not expressly provided for by the WGRAH Loan Documents, including enforcement or collection of the Indebtedness resulting from the WGRAH Loan and enforcement of this Agreement, the WGRAH Collateral Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Trinity and such instructions shall be binding upon Trinity; provided, however, that the WGRAH Collateral Agent shall not be required to take any action that exposes it to personal liability, requires it to advance or expend funds, or that is contrary to this Agreement or Applicable Law. The WGRAH Collateral Agent agrees to give to Trinity prompt notice of each notice and copies of all other documents (if any) given to it by WGRAH and its Subsidiaries pursuant to the terms of this Agreement and the other WGRAH Loan Documents. Notwithstanding anything to the contrary contained herein, the WGRAH Collateral Agent shall not be required to take any actions or exercise any right or remedy hereunder, unless so directed by Trinity.

Section 9.02 WGRAH Collateral Agent’s Reliance, Etc. Neither the WGRAH Collateral Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the WGRAH Loan Documents, except for its or their own gross negligence or willful misconduct, and Trinity agrees that it will not assert or seek to assert any claim it might have against any of them in violation of this provision. Without limiting the generality of the foregoing:

(a) the WGRAH Collateral Agent may consult with legal counsel (including counsel for WGRAH), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts;

(b) the WGRAH Collateral Agent makes no warranty or representation to Trinity and shall not be responsible to Trinity for any statements, warranties or representations made in or in connection with the WGRAH Loan Documents;

(c) the WGRAH Collateral Agent shall have no duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any WGRAH Loan Document on the part of WGRAH or any Subsidiary or to inspect the property (including the books and records) of WGRAH or any Subsidiary;

(d) the WGRAH Collateral Agent shall not be responsible to Trinity for the due execution, legality, validity, enforceability, genuineness, sufficiency, or value of any WGRAH Loan Document or any other instrument or document furnished pursuant hereto or thereto;

(e) the WGRAH Collateral Agent shall not be liable under or in respect of any WGRAH Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy) believed by it to be genuine and signed or sent by the proper party or parties;

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(f) the WGRAH Collateral Agent shall not be liable to Trinity for any losses incurred as the result of any sale or disposition of Permitted Pledged Account Investments or the transfer of any funds pursuant to the terms hereof;

(g) the WGRAH Collateral Agent makes no representation or warranty and shall have no responsibility concerning the value or validity of the Collateral or the validity or the perfection of the pledge thereof; and

(h) notwithstanding any other provision of the Transaction Agreements, the WGRAH Collateral Agent shall not be liable (i) for any indirect, incidental, consequential, punitive or special losses or damages, regardless of the form of action and whether or not any such losses or damages were foreseeable or contemplated, or (ii) for the acts or omissions of any nominees, correspondents, designees, agents, subagents or subcustodians selected by it with due care; provided that any such selection made by the WGRAH Collateral Agent at the direction of Trinity shall be deemed made with due care.

Section 9.03 Trinity Credit Decision. Trinity acknowledges that it has, independently and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Trinity also acknowledges that it will, independently and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

Section 9.04 Fee. WGRAH shall pay the WGRAH Collateral Agent an annual fee in the amount set out in and pursuant to the terms of the WGRAH Collateral Agent Fee Letter.

Article X

MISCELLANEOUS

Section 10.01 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(a) if to WGRAH, to it care of Anadarko at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attention of the Treasurer, Telecopy No. (832) 636-5029; messenger delivery to 1201 Lake Robbins Drive, The Woodlands, Texas 77380.

(b) if to Trinity, to it care of Anadarko at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attention of the Treasurer, Telecopy No. (832) 636-5029; messenger delivery to 1201 Lake Robbins Drive, The Woodlands, Texas 77380.

(c) if to the WGRAH Collateral Agent, at Citibank, N.A., Global Transaction Services, 388 Greenwich Street, 14^th Floor, New York, New York 10013, Attention: Jenny Cheng, Telecopy No. (212) 816-5544; messenger delivery to 388 Greenwich Street, 14^th Floor, New York, New York 10013.

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Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

Section 10.02 Waivers; Amendments.

(a) No failure or delay by Trinity or the WGRAH Collateral Agent in exercising any right or power hereunder or under the other WGRAH Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Trinity and the WGRAH Collateral Agent provided herein are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by WGRAH therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, to the fullest extent permitted by applicable law, the making of a WGRAH Loan shall not be construed as a waiver of any Event of Default, regardless of whether Trinity or the WGRAH Collateral Agent may have had notice or knowledge of such Event of Default at the time.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by WGRAH and Trinity; provided that, if the amendment, waiver, modification, or supplement relates to the rights or obligations of the WGRAH Collateral Agent under this Agreement, then the consent of the WGRAH Collateral Agent shall also be required.

Section 10.03 Expenses; Indemnity; Damage Waiver.

(a) WGRAH shall pay (i) all reasonable out-of-pocket costs and expenses of Trinity and the WGRAH Collateral Agent, including the reasonable fees, charges and disbursements of counsel for Trinity and the WGRAH Collateral Agent, in connection with the preparation, execution, delivery and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions (including the WGRAH Loan Transactions) contemplated hereby or thereby shall be consummated) and (ii) all costs and expenses incurred by Trinity and the WGRAH Collateral Agent, including the fees, charges and disbursements of any counsel for Trinity and the WGRAH Collateral Agent, in connection with the enforcement or protection of its rights under this Agreement and the other WGRAH Loan Documents, including its rights under this Section, or in connection with the WGRAH Loan made, including all such costs and expenses incurred during any workout, restructuring or negotiations in respect of the WGRAH Loan.

(b) WGRAH shall indemnify each Indemnified Person against, and hold each Indemnified Person harmless from, any and all losses, claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, including the fees, charges and disbursements of any counsel for any Indemnified Person, incurred by or

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asserted against any Indemnified Person arising out of, in connection with, or as a result of (i) the execution, delivery, negotiation, or preparation of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder, or the consummation of the WGRAH Loan Transactions or any other transactions contemplated hereby, (ii) the WGRAH Loan or the use of the proceeds therefrom, or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnified Person is a party thereto; provided that such indemnity shall not, as to any Indemnified Person, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or willful misconduct of such Indemnified Person, as determined in a final, nonappealable judgment by a court of competent jurisdiction. Furthermore, WGRAH shall defend, indemnify, and hold harmless each Indemnified Person from and against any losses, claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to, (w) the presence, disposal, release, or threatened release of any Hazardous Materials which are on, from, or affecting the soil, water, vegetation, buildings, personal property, persons, animals, or otherwise; (x) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials; (y) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials, and/or (z) any violation of laws, orders, regulations, requirements or demands of government authorities, or any policies or requirements of the Agency or the Trustee, which are based upon or in any way related to such Hazardous Materials including, without limitation, attorney and consultant fees and expenses, investigation and laboratory fees, court costs, and litigation expenses. The foregoing indemnities shall expressly include any indemnified amounts attributable to the ordinary, sole or contributory negligence of any Indemnified Person, in each case to the extent not constituting gross negligence.

(c) All amounts due under this Section shall be payable promptly after written demand therefor together with a copy of the invoice(s) or other documentation setting forth in reasonable detail the amount demanded and the matter(s) to which it relates.

(d) The indemnities set forth in this Section 10.03 shall be in addition to any other obligations or liabilities of WGRAH hereunder or at common law or otherwise and shall survive the resignation or replacement of the WGRAH Collateral Agent, any assignment by Trinity of its rights hereunder, any Liquidating Event, the termination of this Agreement, the termination of the WGRAH Commitment, and the repayment, satisfaction or discharge of all the WGRAH Obligations.

Section 10.04 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby.

(b) WGRAH may not assign or otherwise transfer any of its rights or obligations under this Agreement (and any attempted assignment or transfer by WGRAH without such consent shall be null and void).

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(c) Trinity may, with Pecos’s consent, assign to one or more lenders or other entities (upon consultation with WGRAH) any or all of its rights and obligations under this Agreement.

(d) After the occurrence of a Liquidating Event or an Anadarko Credit Event, Trinity may, with Pecos’s consent, assign any or all of its rights or obligations under this Agreement to any Person.

(e) Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Persons of Trinity and the WGRAH Collateral Agent) any legal or equitable right, remedy or claim under or by reason of this Agreement.

Section 10.05 Survival. All covenants, agreements, representations and warranties made by WGRAH herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of the WGRAH Loan, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Trinity may have had notice or knowledge of any Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on the WGRAH Loan or any other amount payable under this Agreement is outstanding and unpaid. The provisions of Section 2.10, Section 10.03, and this Section 10.05 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the WGRAH Loan or the termination of this Agreement or any other provision hereof.

Section 10.06 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other WGRAH Loan Documents, and any separate letter agreements with respect to fees payable to Trinity or the WGRAH Collateral Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 6.01, this Agreement shall become effective when it shall have been executed by Trinity and the WGRAH Collateral Agent and when Trinity shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.07 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

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Section 10.08 Right of Setoff. If (a) an Event of Default shall have occurred and be continuing and (b) the principal of the WGRAH Loan has been accelerated, each of Trinity and the WGRAH Collateral Agent is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by Trinity or the WGRAH Collateral Agent to or for the credit or the account of WGRAH against any of and all the obligations of WGRAH now or hereafter existing under this Agreement held by Trinity or the WGRAH Collateral Agent, irrespective of whether or not Trinity or the WGRAH Collateral Agent shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of Trinity and the WGRAH Collateral Agent under this Section are in addition to other rights and remedies (including other rights of setoff) which Trinity or the WGRAH Collateral Agent may have. Upon the exercise by Trinity or the WGRAH Collateral Agent of its rights under this Section, Trinity or the WGRAH Collateral Agent, as applicable, shall notify WGRAH thereof.

Section 10.09 Governing Law; Jurisdiction; Consent to Service of Process.

(a) THIS AGREEMENT AND THE WGRAH NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM EITHER THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER WGRAH LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER WGRAH LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT TRINITY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST WGRAH OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.

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(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.01. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

Section 10.10 WAIVER OF PUNITIVE DAMAGES, JURY TRIAL. EACH PARTY HERETO HEREBY (i) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, (A) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE WGRAH LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, ANY “SPECIAL DAMAGES,” AS DEFINED BELOW, AND (B) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER WGRAH LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY; (ii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER WGRAH LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENT OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.

Section 10.11 Disclosure. Notwithstanding any other term hereof, Trinity, the WGRAH Collateral Agent, and their respective Representatives may disclose to any and all persons, without limitation of any kind, the corporate structure and U.S. tax treatment of the contemplated transaction, and all materials of any kind (including opinions or other tax analyses) relating to such corporate structure and U.S. tax treatment, other than any information for which non-disclosure is reasonably necessary in order to comply with applicable securities law.

Section 10.12 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 10.13 USA Patriot Act Notice. Trinity hereby notifies WGRAH that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies WGRAH and its Subsidiaries, which information includes the name and address of WGRAH and such Subsidiaries and other information that will allow such Trinity to identify WGRAH and such Subsidiaries in accordance with the USA Patriot Act.

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Section 10.14 Sponsor Note Option Agreement. This Agreement and the WGRAH Note are subject to the terms of the Sponsor Note Option Agreement.

[SIGNATURES BEGIN ON NEXT PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

BORROWER:	WGR ASSET HOLDING COMPANY, LLC
	By:	/s/ Robert G. Gwin
	Name:	Robert G. Gwin
	Title:	President and Chief Executive Officer
LENDER:	TRINITY ASSOCIATES LLC
	By:	Trinity Associates Class A Holdings LLC, its Managing Member
	By:	/s/ Robert G. Gwin
	Name:	Robert G. Gwin
	Title:	President and Chief Executive Officer

[Signature Page – WGRAH Term Loan Agreement]

WGRAH COLLATERAL AGENT:	CITIBANK, N.A., AGENCY & TRUST
	By:	/s/ Jenny Cheng
	Name:	Jenny Cheng
	Title:	Vice President

[Signature Page – WGRAH Term Loan Agreement]

SCHEDULE I

SUBSIDIARIES

Name	Jurisdiction of Formation	Ownership
1. Anadarko Gathering Company LLC	Delaware	100% owned by WGRAH
2. Springfield Pipeline LLC	Texas	100% owned by WGRAH
3. Anadarko Wattenberg Company, LLC	Delaware	100% owned by WGRAH
4. Pinnacle Gas Treating LLC	Texas	100% owned by WGRAH
5. Anadarko Natural Gas Company LLC	Delaware	100% owned by WGRAH
6. Kerr-McGee Gathering LLC	Colorado	100% owned by WGRAH
7. Sabine Valley Pipeline LLC	Delaware	100% owned by WGRAH
8. Wamsutter Pipeline LLC	Delaware	100% owned by WGRAH
9. MIGC LLC	Delaware	100% owned by WGRAH
10. Mountain Gas Resources LLC	Delaware	100% owned by WGRAH
11. Western Gas Resources Texas LLC	Texas	100% owned by WGRAH
12. Western Gas Wyoming, L.L.C.	Wyoming	100% owned by WGRAH
13. WGR Holdings, LLC	Delaware	100% owned by WGRAH
14. Westport Field Services, LLC	Delaware	100% owned by WGRAH
15. Western Gas Operating, LLC	Delaware	100% owned by Western Gas Partners, LP
16. WGR Operating, LP	Delaware	0.01% General Partner interest owned by Western Gas Operating, LLC; 99.99% Limited Partner interest owned by Western Gas Partners, LP
17. Western Gas Holdings, LLC	Delaware	100% owned by WGR Holdings, LLC
18. Western Gas Partners, LP	Delaware	2% General Partner interest owned by Western Gas Holdings, LLC; 98% Limited Partner interest owned by WGR Holdings, LLC
19. Mountain Gas Transportation LLC	Delaware	100% owned by Mountain Gas Resources LLC

List of Significant Subsidiaries:

1. Anadarko Gathering Company LLC

2. Kerr-McGee Gathering LLC

3. Mountain Gas Resources LLC

4. Westport Field Services, LLC

Schedule I – Subsidiaries

SCHEDULE II

PROPERTIES

1. WGR Asset Holding Company LLC

1.1. West Texas Treating Facility – Includes the Gomez and Mitchell Puckett Plants and 550 miles of gathering system.

1.2. Powder River Basin

(a) CBM Gathering – 1,500-mile system located in the Powder River Basin of Northeast Wyoming.

(b) Hilight Gas Plant – a gathering system and plant located in the Powder River Basin of Northeast Wyoming.

(c) Newcastle – 50% jointly owned but operated plant and gathering system in Powder River Basin.

(d) Reno Junction – an isometrization unit located in the Powder River Basin.

(e) North Buck Draw – a compressor station located in the Powder River Basin.

1.3. San Juan – a sour gas plant and gathering system located in the Four Corners Region of New Mexico, Arizona, Utah and Colorado.

1.4. Equity/Joint Venture Interests

(a) Atlantic Rim – a gathering system located in Sweetwater County, Wyoming. WGR Asset Holding Company LLC owns 50% working interest through a JV with Warren Resources.

(b) Equity interests in Subsidiaries as set forth on Schedule I.

2. Anadarko Gathering Company LLC

2.1. Dew Gathering System – The 316-mile Dew gathering system is located in Anderson, Freestone, Leon and Robertson Counties of East Texas.

2.2. Haley Gathering System – approximately 79-mile Haley gathering system is located in Loving County, Texas.

2.3. Helper Gathering System – The 67-mile Helper gathering system, located in Carbon County, Utah.

Schedule II – Properties

2.4. Clawson Gathering System – The 47-mile Clawson gathering system, located in Carbon and Emery Counties of Utah.

2.5. Hugoton Gathering System – 1,752-mile Hugoton gathering system is primarily located in Seward, Stevens, Grant and Morton Counties of Southwest Kansas and Texas County in Oklahoma.

3. Mountain Gas Resources LLC

3.1. Granger Complex – consists of the Lincoln Road Plant, the Yellow Creek Plant and the Granger Gathering System. Located in the Southwest corner of Wyoming.

3.2. Granger Straddle Plant – Processing plant located in Southwestern Wyoming that processes gas on Questar pipeline.

3.3. Red Desert Complex – Located in the Sweetwater and Carbon Counties of Wyoming, the Red Desert gathers, compresses, treats, processes and fractionates natural gas and NGL’s.

3.4. Wind River Gathering – Gathering system in Central Wyoming.

3.5. Equity/Joint Venture Interests

(a) Rendezvous – A 50% working interest in the gathering system, which gathers gas from the Pinedale and Jonah fields, and is operated by Questar.

(b) Equity interests in Subsidiary as set forth on Schedule I.

4. Pinnacle Gas Treating LLC

4.1. Pinnacle System – consists of the Pinnacle gathering system and the Bethel treating plant providing service in Anderson, Freestone, Leon and Robertson Counties of East Texas.

5. Springfield Pipeline LLC

5.1. Tyler County – gathering system in Tyler, Polk and Jasper Counties of Texas.

6. Sabine Valley Pipeline LLC

6.1. Sabine Valley – gathering system located in Rusk, Gregg and Harrison Counties, Texas.

7. MIGC LLC

7.1. MIGC System – 264-mile interstate pipeline operating within the Powder River Basin of Wyoming and is regulated by the Federal Energy Regulatory Commission.

Schedule II – Properties

8. Westport Field Services, LLC

8.1. Natural Buttes Gathering System- Natural Buttes Gas Gathering System spans over 700 miles of gas gathering pipeline.

8.2. Chapita Plant – Processing plant in Eastern Utah that processing gas from the Natural Buttes Field.

9. Kerr-McGee Gathering LLC

Wattenberg – Gathering System located in the DJ Basin, northeast of Denver and includes the Fort Lupton Processing Plant.

10. Western Gas Wyoming, L.L.C.

10.1. Joint Venture Interests

(a) Fort Union – The Fort Union partnership owns a gathering and treating system in the Powder River Basin. Western Gas Wyoming, L.L.C. owns a 14.81% stake and is the physical operator of the system.

11. Western Gas Partners, LP

Equity interests (including partnership interests) in Subsidiaries as set forth on Schedule I.

12. WGR Holdings, LLC

Equity interests (including partnership interests) in Subsidiaries as set forth on Schedule I.

13. Western Gas Operating, LLC

Partnership interest in Subsidiary as set forth on Schedule I.

14. Western Gas Holdings, LLC

Partnership interest in Subsidiary as set forth on Schedule I.

Schedule II – Properties

SCHEDULE III-A

MATERIAL MIDSTREAM AGREEMENTS

WITH AFFILIATES

(IN WRITTEN FORM ON THE EFFECTIVE DATE)

See attached.

Schedule III-A – Midstream Agreements (Written)

SCHEDULE III-(A) TO WGRAH TERM LOAN AGREEMENT

MATERIAL MIDSTREAM AGREEMENTS – WRITTEN ON THE EFFECTIVE DATE

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
1	Helper Gas Gathering Agreement	Anadarko Gathering Company LLC (“Gatherer”) Anadarko Petroleum Corporation (“Shipper”)	Shipper dedicates and delivers dedicated production to the system and Gatherer receives, accepts, gathers and re-delivers dedicated production	Carbon County, Utah	Effective 1/1/08 to 1/1/18; year- to-year automatic renewal thereafter, with 90 day notice of termination	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	• $0.575/ MMBtu escalating at 3% per annum • $150 gathering fee (or actual cost) per receipt point per month Option to adjust the rate if 15% difference in expected volume	Unrestricted to affiliates; consent required for third-party transfer
2	Dew Gas Gathering Agreement	Anadarko Gathering Company LLC (“Gatherer”) Anadarko Petroleum Corporation (“Shipper”)	Shipper dedicates and delivers dedicated production to the system and Gatherer receives, accepts, gathers and re-delivers dedicated production	Anderson, Freestone, Leon, Limestone and Robertson Counties, Texas	Effective 1/1/08 to 1/1/18; year- to-year automatic renewal thereafter, with 90 day notice of termination.	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	• $0.399/ MMBtu escalating at 3% per annum • $150 gathering fee (or actual cost) per receipt point per month Option to adjust the rate if 15% difference in expected volume	Unrestricted to affiliates; consent required for third-party transfer

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
3	Hugoton Gas Gathering Agreement	Anadarko Gathering Company LLC (“Gatherer”) Anadarko Petroleum Corporation (“Shipper”)	Shipper dedicates and delivers dedicated production to the system and Gatherer receives, accepts, gathers and re-delivers dedicated production	Grant, Haskell, Meade, Morton, Seward, Stevens Counties, Kansas and Texas County, Oklahoma	Effective 1/1/08 to 1/1/18; year- to-year automatic renewal thereafter, with 90 day notice of termination	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	• $0.795/ MMBtu escalating at 3% per annum • $150 gathering fee (or actual cost) per receipt point per month Option to adjust the rate if 15% difference in expected volume	Unrestricted to affiliates; consent required for third-party transfer
4	Clawson Springs Gas Gathering Agreement	Anadarko Gathering Company LLC (“Gatherer”) Anadarko Petroleum Corporation (“Shipper”)	Shipper dedicates and delivers dedicated production to the system and Gatherer receives, accepts, gathers and re-delivers dedicated production	Carbon and Emery Counties, Utah	Effective 1/1/08 to 1/1/18; year- to-year automatic renewal thereafter, with 90 day notice of termination	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	• $1.148/ MMBtu escalating at 3% per annum • $150 gathering fee (or actual cost) per receipt point per month Option to adjust the rate if 15% difference in expected volume	Unrestricted to affiliates; consent required for third-party transfer
5	Haley Gas Gathering Agreement	Anadarko Gathering Company LLC (“Gatherer”) Anadarko Petroleum Corporation (“Shipper”)	Shipper dedicates and delivers dedicated production to the system and Gatherer receives, accepts, gathers and re-delivers dedicated production	Loving County, Texas	Effective 1/1/08 to 1/1/18; year- to-year automatic renewal thereafter, with 90 day notice of termination	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	•$0.163/ MMBtu escalating at 3% per annum • $150 gathering fee (or actual cost) per receipt point per month Option to adjust the rate if 15% difference in expected volume	Unrestricted to affiliates; consent required for third-party transfer

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
6	Pinnacle Gas Gathering Agreement	Anadarko Gathering Company LLC (“Gatherer”) Anadarko Petroleum Corporation (“Shipper”)	Shipper dedicates and delivers dedicated production to the system and Gatherer receives, accepts, gathers and re-delivers dedicated production	Anderson, Freestone, Leon, Limestone and Robertson Counties, Texas	Effective 1/1/08 to 1/1/18; year- to-year automatic renewal thereafter, with 90 day notice of termination	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	• $0.247/ MMBtu escalating at 3% per annum • $150 gathering fee (or actual cost) per receipt point per month Option to adjust the rate if 15% difference in expected volume	Unrestricted to affiliates; consent required for third-party transfer
7	Coal Seam Amended and Restated Gas Gathering Agreement #3169	WGR Asset Holding Company LLC, Williams Production RMT Company and Lance Oil & Gas Company	Gather, compress and redeliver gas	Campbell and Johnson Counties, Wyoming	Effective 11/1/03 with a life of lease commitment	Termination rights: • Uneconomic out	Current tiered fees by area from $0.32895 to $0.37491 per Mcf 12 month volume requirement for new compression or deficiency payment	Contract may be assigned – provide copy of executed instrument

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
8	Coal Seam Firm Gathering Agreement #8237	Western Gas Wyoming LLC (“Shipper”) and Fort Union Gas Gathering LLC (“Gatherer”)	Gather, treat and redeliver gas	Campbell and Johnson Counties, Wyoming	Effective 1/1/07 to 1/1/17 and automatic renewal thereafter until terminated	Failure by shipper to pay amounts due gatherer may terminate contract; Default if failure to pay	Variable service fee of $0.14 per Mcf Fixed gathering fee = daily service fee X times of days ($9800 per day); Treating fee = $0.0271 per Mcf if CO2 4% or greater	Prior written approval except to affiliate
9	Coal Seam Firm Gathering Agreement #3179	Western Gas Wyoming LLC (“Shipper”) and Fort Union Gas Gathering LLC (“Gatherer”)	Gather, treat and redeliver gas	Campbell and Johnson Counties, Wyoming	Effective 2/1/00 to 2/1/10 and automatic renewal thereafter until terminated	Termination by Gatherer for Shipper’s failure to pay	Variable service fee of $0.14 per Mcf Fixed gathering fee = daily service fee X times of days ($8400 per day); Treating fee = $0.0271 per Mcf if CO2 4% or greater	Prior written approval except to affiliate
10	Rendezvous Gas Services Agreement #7643	Rendezvous Gas Services LLC and Mountain Gas Resources LLC	Receive and redeliver gas at points on the Granger System	Sweetwater County, Wyoming	2001 to 2011	Termination rights: • Uneconomic out	Tiered fee based on volume and redelivery points from $0.04 to $0.10 per MMBtu	Provide notice and copy of instrument – ratification required to be executed by assignee
11	Wattenberg Gathering Agreement #25000	Kerr McGee Oil and Gas Onshore LP as Producer and Kerr McGee Gathering LLC as Gatherer	Gather and redeliver gas	Weld, Adams and Boulder Counties, Colorado	Currently in year to year automatic renewal		Current fee = $.4088 per MMBtu	Prior written approval except to affiliate

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
12	Wattenberg Gathering Agreement #25050	Kerr McGee Oil and Gas Onshore LP as Producer and Kerr McGee Gathering LLC as Gatherer	Gather and redeliver gas	Weld, Adams and Boulder Counties, Colorado	3/5/93 to 3/5/2008		Current fee = $.3861 per MMBtu	Written notice and copy of instrument
13	QCM-8989 (North Oakhill)	Sabine Valley Pipeline, LLC & Anadarko E&P Company LP	Gathering, Dehydration, Compression	Harrison, Rusk and Gregg Counties, Texas	Effective 10/1/90 through 12/31/95; with month to month automatic renewal thereafter, with 30 days notice of termination	Failure to meet quality specifications	Gathering $0.35/MMBtu, Salt Water Disposal $0.7812/barrel	Consent required
14	QCM-8990 (South Oakhill)	Sabine Valley Pipeline, LLC & Anadarko E&P Company LP	Gathering	Rusk County, Texas	Effective 6/1/84 to 6/1/2014	Gathering system becomes uneconomic; Failure to meet quality specifications	Gathering $0.3036/Mcf, Salt Water Disposal $0.6594/barrel	Required to provide written notice and copy of assignment
15	QCM-276 – Atlantic Rim	Anadarko Gathering Company (“Gatherer”) and Anadarko Energy Services Company (“Shipper”)	Gas Gathering Agreement		Effective 1/1/04 to 1/1/14; with month to month automatic renewal thereafter, with 90 days notice of termination	Uneconomical escape clause for Gatherer. If neither party installs needed compression, affected receipt points released at Shipper’s option. Non-conforming gas refused by Gatherer released at Shipper’s option. If Shipper’s nomination of gas in excess of Maximum Controlled Volume not accepted by Gatherer, such excess gas released at Shipper’s option	First 12 months: Initial Fee of $0.25/MMBtu; can be redetermined by Gatherer in order to achieve the targeted after federal income tax return on capital invested. After first 12 months: Fee adjusted January 1st annually by Gatherer in order to achieve the targeted after federal income tax return on capital invested. Shipper owns drip.	Assignments of rights, obligations or interests under this Agreement require written consent of other party

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
16	QCM 8974 – South End Strawn	Anadarko Gathering Company, LLC & Anadarko E&P Company LP	Gathering	Crockett County, Texas	Effective 7/1/03 to 6/30/08; with month to month automatic renewal thereafter, with 30 days notice of termination	Gathering system becomes uneconomic, Gatherer must provide 30 days notice to Shipper; Failure to meet quality specifications	$0.885/MMBtu	Consent required
17	Western Gas Resources, Inc. and MIGC, Inc.- FT-288-Form of Transportation Service Agreement Applicable to Firm Service Under Rate Schedule FTS-1	Western Gas Resources, Inc. and MIGC, Inc.	Form of Transportation Service Agreement Applicable to Firm Service Under Rate Schedule FTS-1		9/13/07-1/31/09		Shipper shall pay the product of the Shipper’s Transportation Contract Demand specified on Exhibit A and a Reservation Charge of $10.515. Additionally, shipper shall pay the Maximum Commodity rate from MIGC’s FTS-1 rate schedule or currently effective Sheet No. 4 for the quantity of natural gas in MMBtu delivered. Additionally, Fuel Reimbursement Charge will be assessed as specified on Sheet No. 6 of the currently effective Tariff. Demand $10.5150; Commodity $0.0043; ACA $0.0019; MDQ (mmbtu/d) 40,000	No assignment provision.

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
18	Anadarko Energy Services, Inc. and MIGC, Inc.- FT-290- Form of Transportation Service Agreement Applicable to Firm Service Under Rate Schedule FTS-1	Western Gas Resources, Inc. and MIGC, Inc.	Transportation Service Agreement Applicable to Firm Service Under Rate Schedule FTS-1		Effective from the date of MIGC’s written notice to Shipper that its Python Compressor Station facilities are operational and ready to receive Shipper’s gas. (Sec. 5.1). and continues in full force and effect for 5 years, after becoming effective. 9/13/07-9/13/12		Shipper shall pay the product of the Shipper’s Transportation Contract Demand specified on Exhibit A and a Reservation Charge of $4.4317. Additionally, shipper shall pay the Maximum Commodity rate from MIGC’s FTS-1 rate schedule or currently effective Sheet No. 4 for the quantity of natural gas in MMBtu delivered. Additionally, Fuel Reimbursement Charge will be assessed as specified on Sheet No. 6 of the currently effective Tariff. Demand $4.4300; Commodity $0.0043; ACA $0.0019; MDQ (mmbtu/d) 45,000	No assignment provision.

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
19	Anadarko Energy Services, Inc. and MIGC, Inc.- FT-290-Precedent Agreement for Firm Transportation Service on MIGC, Inc.	Anadarko Energy Services, Inc. and MIGC, Inc.	Anadarko Energy Services, Inc. and MIGC, Inc.- FT-290-Precedent Agreement for Firm Transportation Service on MIGC, Inc.		1/5/07-9/13/12	On or after July 1, 2007, MIGC may, by written notice to Anadarko, terminate this agreement and any associated TSA in the event that MIGC has not, as of the date of termination, secured all necessary permits, regulatory approvals, or site lease agreements in a form acceptable to MIGC. Anadarko may, by written notice to MIGC, terminate this agreement and any TSA in the event that MIGC has not commenced construction of the Compression by August 1, 2007.	Demand $4.4300; Commodity $0.0043; ACA $0.0019; MDQ (mmbtu/d) 45,000	Either party may assign to its affiliates, or to any entity with the prior written consent of the other party. Any successor by merger, purchase, or consolidation shall be entitled to the rights, and subject to the obligations, of its predecessor.

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
20	IT 204	Western Gas Resources, Inc. and MIGC, Inc.			9/1/87-9/30/00 and automatic renewal thereafter until terminated		Demand mmbtu Max Rate $13.3567-Current Discount mmbtu $10.5150; Commodity mmbtu Max Rate $0.4437-Current Discount mmbtu $0.3500; ACA $0.0019; MDQ (mmbtu/d) 50,000
21	FT 231	Western Gas Resources, Inc. and MIGC, Inc.			9/23/07-1/31/09		Demand mmbtu Max Rate $13.3567-Current Discount mmbtu $10.5150; Commodity 0.0043; ACA $0.0019; MDQ (mmbtu/d) 45,000
22	FT 243	MGTC, Inc. and MIGC, Inc.			10/1/98-5/31/10		Commodity $0.4437; ACA $0.0019; MDQ (mmbtu/d) 20,000
23	FT 293	Western Gas Resources, Inc. and MIGC, Inc.			10/23/07-9/30/08

SCHEDULE III-B

MATERIAL MIDSTREAM AGREEMENTS

WITH AFFILIATES

(NOT IN WRITTEN FORM ON THE EFFECTIVE DATE)

See attached.

Schedule III-B – Midstream Agreements (Not Written)

SCHEDULE III-(B) TO WGRAH TERM LOAN AGREEMENT

MATERIAL MIDSTREAM AGREEMENTS – NOT WRITTEN ON THE EFFECTIVE DATE

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
1	Natural Buttes Gas Processing Agreement	Kerr McGee Oil and Gas Onshore LP (“Producer”) Westport Field Services LLC (“Processor)	Producer delivers gas and Processor receives, processes and redelivers gas	Unitah County, Utah	Effective 1/1/08 to 1/1/09; year- to-year automatic renewal thereafter with 30 days advance notice for termination	By Processor, if operations become unprofitable for two consecutive months, upon 30 day notice.	Processing fee = $0.16 per MMBtu adjusted on an annual basis in accordance with CPI.	Assignment permitted, effective on the first day of the month after conveyance document is delivered to the other party; if assigned by Producer ratification of the assignment by the other party is required
2	Natural Buttes Gas Gathering Agreement	Kerr McGee Oil and Gas Onshore LP (“Producer”) Westport Field Services LLC (“Gatherer”)	Gas Gathering Agreement	Unitah County, Utah	Effective 1/1/08 to 1/1/09; month- to-month automatic renewal thereafter with 90 days advance notice for termination	Termination rights: • by affected party upon 30 days notice if governmental authority action make agreement uneconomic; • by either party if force majeure exceeds 90 consecutive days, upon 30 days notice. • by Shipper upon notice if Service Levels are not maintained by Gatherer.	Natural Buttes gathering fee by Receipt Point(s) = QGM Mainline 43 =$0.24 per MMBtu. All other Receipt Points=$0.38 per MMBtu.	Unrestricted to affiliates; consent required for third-party transfer

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
3	Fort Lupton Gas Processing Agreement	Kerr McGee Oil and Gas Onshore LP (“Producer”) Kerr McGee Gathering LLC (“Gatherer”)	Producer delivers gas and Processor receives, processes and redelivers gas	Weld County, Colorado	Effective 4/1/08 and month to month automatic renewal thereafter	By Processor, if operations become unprofitable for two consecutive months, upon 30 day notice.	Processing fee = $0.15 per Mcf	Assignment permitted, effective on the first day of the month after conveyance document is delivered to the other party; if assigned by Producer ratification of the assignment by the other party is required
4	Granger Gas Gathering and Conditioning Agreement #8065	Lance Oil & Gas Company as Producer and Mountain Gas Resources LLC as Gatherer	Gas Gathering Agreement	Sweetwater County, Wyoming	Effective 11/30/2005 to 11/30/2015 and year to year automatic renewal thereafter		Tiered fee based on pressure from $0.098 to $0.15 per MMBtu – additional fee of $0.102 per MMBtu for gas delivered received at Bird Canyon and delivered into the Granger Plant	Copy of instrument. If producer assigns, notification to assignee of contract and executed ratification

	Title	Parties	Type	Geographic Location	Term	Termination	Fees	Assignment
5	Granger Amended and Restated Gathering & Processing Agreement #8066	Lance Oil & Gas Company as Producer and Mountain Gas Resources LLC as Gatherer	Gas Gathering Agreement	Sweetwater County, Wyoming	Effective to 10/30/2012 and then wells move under agreement #8065		Tiered payment for plant products POI based on gross heating value 85-90% Tiered processing fee based on gross heating value - $0.03 - $0.12 Gathering fee = $0.26064/MMBtu - escalated	Copy of instrument. If producer assigns, notification to assignee of contract and executed ratification
6	QCM-282 – Tyler County	Springfield Pipeline, LLC and Anadarko E&P Company LP	Gathering, Treating, Dehydration Compression & Processing	Tyler, Polk & Jasper Counties, Texas	Effective 12/1/03 to 12/1/08 and year-to-year automatic renewal thereafter with 90 days advance notice for termination		Current 2007 COS Rate – Gathering $0.24605/Mcf,Dehydration $0.02099/Mcf, Treating $0.06296/Mcf, Processing $0.42/Mcf	Consent required

SCHEDULE IV

POST-CLOSING REQUIREMENTS

	Requirement	Delivery/Compliance Date
1.	To the extent not delivered on or prior to the Effective Date, WGRAH shall deliver evidence of (a) existence or qualification to do business and (b) good standing, in each case for each WGRAH Loan Party in each jurisdiction where such WGRAH Loan Party’s conduct of business or ownership of properties requires such existence, qualification, or good standing, unless failure to so exist, be qualified, or be in good standing could not reasonably be expected to result in a WGRAH Material Adverse Change.	30 days after the Effective Date, or such later date as is approved by the Pecos First Lien Agent in its sole discretion.

Schedule IV – Post-Closing Requirements

EXHIBIT A

FORM OF WGRAH NOTE

                , 20    

For value received, WGR ASSET HOLDING COMPANY LLC, a limited liability company organized under the laws of the State of Delaware (“WGRAH”), promises to pay to the order of TRINITY ASSOCIATES LLC, the lender (together with its successors and assigns, “Trinity”) under the $2.2 Billion WGRAH Term Loan Agreement, dated as of December 27, 2007, among WGRAH and the Trinity (as may be amended, supplemented or modified from time to time hereafter, the “WGRAH Loan Agreement;” terms defined in the WGRAH Loan Agreement shall have their defined meanings when used in this Note), in lawful money of the United States of America the principal amount of         *     DOLLARS ($        *    ) or, if less than such principal amount, the aggregate unpaid principal amount of the WGRAH Loan made by Trinity to the undersigned pursuant to Section 2.01 of the WGRAH Loan Agreement. The undersigned further agrees to pay interest at said account, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof at the rates specified in Section 2.06 of the WGRAH Loan Agreement. Such interest shall be payable on the dates specified in Section 2.06 of the WGRAH Loan Agreement. The date, Interest Period and amount of the WGRAH Loan made by Trinity pursuant to Section 2.01 of the WGRAH Loan Agreement, and the date and amount of each payment of principal with respect thereto shall be endorsed by the holder of this Note on Schedule A annexed hereto, which holder may add additional pages to such Schedule. No failure to make or error in making any such endorsement as authorized hereby shall affect the validity of the obligations of WGRAH hereunder or the validity of any payment hereof made by WGRAH.

This Note is one of the WGRAH Notes referred to in the WGRAH Loan Agreement and is entitled to the benefits thereof and is subject to prepayment in whole or in part as provided therein.

Upon the occurrence of any one or more of the Events of Default specified in the WGRAH Loan Agreement, all amounts then remaining unpaid on this Note may be declared to be immediately due and payable as provided in the WGRAH Loan Agreement.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

WGR ASSET HOLDING COMPANY LLC

By:

Name:

Title:

* Insert amount of Trinity’s WGRAH Commitment

Exhibit A

Form of WGRAH Note

SCHEDULE A

LOAN AND REPAYMENTS

Date Amount of
Loan Interest
Rate Amount of
Principal
Repaid Notation
Made by

Exhibit A

Form of WGRAH Note

EXHIBIT B

SUBORDINATION TERMS

Article [x]

Section [x].1 Subordination of Obligations. WGRAH and each Subsidiary covenant and agree, and each Subordinated Lender covenants and agrees, that the payment of the Subordinated Obligations shall, to the extent set forth in this Article, be subordinate and junior and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness, whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed.

Section [x].2 Senior Defaults. Except under circumstances when the terms of Section [x].3 of this Article are applicable, if a Senior Default shall have occurred and be continuing, then neither WGRAH nor any Subsidiary may make, and no Subordinated Lender shall accept, receive or collect, any direct or indirect payment or distribution of any kind or character (in cash, securities, other Property, by setoff, or otherwise other than Reorganization Securities or payment in kind interest) of any properties or assets of WGRAH or any Subsidiary on account of the Subordinated Obligations during the Blockage Period, and no Subordinated Lender shall ask, demand or sue for, payment on account of the Subordinated Obligations, or seek any other remedy allowed at law or in equity against WGRAH or any Subsidiary for breach of any of WGRAH’s or any Subsidiary’s obligations under the Subordinated Loan Documents during the Blockage Period. In the event that, notwithstanding the foregoing, either WGRAH or any Subsidiary shall make any payment or distribution to any Subordinated Lender prohibited by the foregoing provisions of this Section [x].2, then and in such event such payment or distribution shall be held in trust for the benefit of and immediately shall be paid over to the holders of the Senior Indebtedness or the Senior Indebtedness Representative for application against the Senior Indebtedness remaining unpaid until such Senior Indebtedness is paid in full in cash.

Section [x].3 Insolvency; Bankruptcy; Etc. In the event of the institution of any Insolvency Proceeding relative to WGRAH or any Subsidiary, then:

(a) The holders of the Senior Indebtedness shall be entitled to receive payment in full in cash of the Senior Indebtedness before the Subordinated Lenders are entitled to receive any direct or indirect payment or distribution of any kind or character, whether in cash, Property or securities (other than Reorganization Securities) on account of the Subordinated Obligations.

(b) Any direct or indirect payment or distribution of any kind or character, whether in cash, Property or securities, by setoff or otherwise, which may be payable or deliverable in such proceedings in respect of the Subordinated Obligations but for the provisions of this Article shall be paid or delivered by the Person making such payment or distribution, whether WGRAH, a Subsidiary of WGRAH, a trustee in bankruptcy, a receiver, a liquidating trustee, or otherwise, directly to the holders of the Senior Indebtedness or the Senior

Exhibit B

Subordination Terms

Indebtedness Representative, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid; provided, however, that no such delivery of any Reorganization Securities shall be made to any holders of the Senior Indebtedness. In the event that, notwithstanding the foregoing provisions of this Section [x].3, any Subordinated Lender shall have received any such payment or distribution of any kind or character, whether in cash, Property or securities (other than Reorganization Securities), by setoff or otherwise, before all Senior Indebtedness is paid in full in cash, which is to be paid to the holders of the Senior Indebtedness under the foregoing provisions of this Section [x].3, then and in such event such payment or distribution shall be held in trust for the benefit of and immediately shall be paid over to the holders of the Senior Indebtedness or the Senior Indebtedness Representative for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full in cash.

(c) If no proof of claim is filed in any Insolvency Proceeding with respect to any Subordinated Obligations by the tenth day prior to the bar date for any such proof of claim, the Senior Indebtedness Representative may, after notice to the Subordinated Lenders or the Subordinated Lender Representative or other representative, file such a proof of claim on behalf of the Subordinated Lenders, and each Subordinated Lender hereby irrevocably appoints the Senior Indebtedness Representative as its agent and attorney-in-fact for such limited purpose; provided, that the foregoing shall not confer to the holder of any Senior Indebtedness the right to vote on behalf of the Subordinated Lenders in any Insolvency Proceedings.

Section [x].4 No Impairment. No right of any present or future holder of Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of WGRAH or any Subsidiary or by any non-compliance by WGRAH or any Subsidiary with the terms, provisions, and covenants of this Article, the Subordinated Loan Agreement or the Subordinated Loan Documents, regardless of any knowledge thereof any such Subordinated Lender may have or be otherwise charged with. The provisions of this Article shall be enforceable directly by the Senior Indebtedness Representative.

Section [x].5 Rights of Creditors; Subrogation. The provisions of this Article are for the purpose of defining the relative rights of the holders of the Senior Indebtedness on the one hand, and the Subordinated Lenders on the other hand, and nothing herein shall impair, as between WGRAH and the Subordinated Lenders, the obligation of WGRAH, which are unconditional and absolute, to pay to the Subordinated Lenders the principal thereof and interest thereon in accordance with their terms and the provisions thereof, nor shall anything herein prevent the Subordinated Lenders from exercising all remedies otherwise permitted by applicable law or hereunder upon default under the Subordinated Loan Agreement or under the Subordinated Loan Documents (including the right to demand payment and sue for performance thereof and of the Subordinated Loan Documents and to accelerate the maturity thereof as provided by the terms of the Subordinated Loan Documents), subject to the rights of holders of the Senior Indebtedness under this Article. Upon payment in full of the Senior Indebtedness in cash and termination of the commitments of any holder of the Senior Indebtedness to make loans or extensions of credit, and expiration or termination of all letters of credit issued by any holder of the Senior Indebtedness, the Subordinated Lenders shall, to the extent of any payments or distributions paid or delivered to the holders of the Senior Indebtedness or otherwise applied to the Senior

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Indebtedness pursuant to the provisions of this Article, be subrogated to the rights of the holders of the Senior Indebtedness to receive payments or distributions of assets of WGRAH made on Senior Indebtedness (and any security therefor) until the Subordinated Obligations shall be paid in full (and, for this purpose, no such payments or distributions paid or delivered to the holders of the Senior Indebtedness or otherwise applied to the Senior Indebtedness shall be deemed to have discharged the Subordinated Obligations), and, for the purposes of such subrogation, no payments to the holders of the Senior Indebtedness of any cash, assets, stock, or obligations to which the Subordinated Lenders would be entitled except for the provisions of this Article shall, as between WGRAH, any of their respective creditors (other than the holders of the Senior Indebtedness), and the Subordinated Lenders, be deemed to be a payment by WGRAH to or on account of Senior Indebtedness. The fact that failure to make any payment on account of the Subordinated Obligations is caused by reason of the operation of any provision of this Article shall not be construed as preventing the occurrence of an Event of Default.

Section [x].6 Payments on Senior Indebtedness. In the event that any Subordinated Lender determines in good faith that evidence is required with respect to the right of any holder of the Senior Indebtedness to participate in any payment or distribution pursuant to this Article or the amount of such participation, such Subordinated Lender may request such Person to furnish evidence to the reasonable satisfaction of such Subordinated Lender as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, such Subordinated Lender may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment; provided that, upon the written request of such Person to such Subordinated Lender, such payment shall be made to the court having jurisdiction over such judicial determination or to another Person mutually satisfactory to such Person and such Subordinated Lender, as escrowee, to be held and invested pending such judicial determination in accordance with such instructions as shall be mutually satisfactory to such Person and such Subordinated Lender and upon such judicial determination becoming final and non-appealable to be distributed in accordance therewith to the Person entitled thereto.

Section [x].7 Notice of Acceleration. Each Subordinated Lender agrees that in the event any Event of Default shall occur, and as a result thereof, any Subordinated Lender or the Subordinated Lender Representative or other representative of such Subordinated Lender accelerates maturity or demands payment of the Subordinated Loan Documents, then such Subordinated Lender or the Subordinated Lender Representative or other representative shall give prompt (and in any event within three (3) Business Days) notice thereof in writing to the holders of the Senior Indebtedness or the Senior Indebtedness Representative. Neither WGRAH nor any Subsidiary may pay the Subordinated Obligations until five (5) Business Days after the Senior Indebtedness Representative receives the notice described above and, after that five (5) Business Day period, may pay the Subordinated Obligations, and the Subordinated Lenders may receive or collect such payment, only if the provisions of this Article do not prohibit such payment at that time.

Section [x].8 Reinstatement. The provisions of this Article shall remain in force and effect until the indefeasible payment in full of all Senior Indebtedness in cash and the termination of all commitments of any holder of the Senior Indebtedness to make loans or extensions of credit, and

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expiration or termination of all letters of credit issued by any holder of the Senior Indebtedness. To the extent any payment of or distribution in respect of the Senior Indebtedness (whether by or on behalf of WGRAH or any of its Subsidiaries, as proceeds of security or enforcement of any right of set off or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to WGRAH or any Subsidiary or any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment or distribution is recovered by, or paid over to, WGRAH or any Subsidiary or such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Indebtedness or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment has not occurred and the provisions of this Article shall continue to be applicable in respect of said reinstated Senior Indebtedness.

Section [x].9 Rights of Holders of the Senior Indebtedness. The holders of the Senior Indebtedness may, at any time and from time to time subject to the terms of the Senior Indebtedness, without the consent of or notice to the Subordinated Lenders or the Subordinated Lender or other representative of the Subordinated Lenders, without incurring responsibility to the Subordinated Lenders and without impairing or releasing the subordination or other benefits provided in this Article or the obligations hereunder of the Subordinated Lenders to the holders of the Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew, increase (but not in excess of the cap provided for in the definition of “Senior Indebtedness”), alter or amend, Senior Indebtedness or any instrument evidencing the same or any covenant or agreement under which Senior Indebtedness is outstanding or secured or any liability of any obligor thereon; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) settle or compromise any Senior Indebtedness or any liability of any obligor thereon or release any Person liable in any manner for the payment of Senior Indebtedness; and (d) waive any default under Senior Indebtedness and exercise or refrain from exercising any rights against WGRAH, any Subsidiary or any other Person. The foregoing provisions are not intended to permit a change to the definition of “Senior Indebtedness”.

Section [x].10 Amendments. No amendment of this Article [x], or the definitions used in this Article [x], or which would have the effect of modifying the agreement set forth in this Article [x], or the definitions used in this Article [x], shall be effective unless it is in writing and made with the prior written consent of the Senior Lender or by the Senior Indebtedness Representative acting at their written direction on their behalf.

Section [x].11 Identity of Subordinated Lenders for Notice Purposes. For purposes of any notice required or permitted to be given hereunder by the holders of the Senior Indebtedness or the Senior Indebtedness Representative to the Subordinated Lenders, or any of them, the holders of the Senior Indebtedness and the Senior Indebtedness Representative shall be entitled to rely, conclusively, on the identity and address of each Subordinated Lender as set forth in the Subordinated Loan Agreement or as otherwise set forth in the most recent notice received by the Senior Indebtedness Representative from a Subordinated Lender referring to the Subordinated Loan Agreement for purposes of providing the identity and address of each Subordinated Lender. The Subordinated Lenders agree that any notices required to be given to the Subordinated Lenders shall be effective if such notice is given to the Subordinated Lender Representative or

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other representative of the Subordinated Lenders. For so long as the Subordinated Obligations are outstanding, the Subordinated Lenders agree to designate and maintain an agent or other representative for such purposes.

Section [x].12 Successors and Assigns. Each Subordinated Lender acknowledges and agrees that the provisions of this Article are, and are intended to be, an inducement and a consideration to each holder of the Senior Indebtedness to make, extend and continue the Senior Indebtedness; and each holder of the Senior Indebtedness shall be deemed conclusively to have relied upon the provisions of this Article in permitting WGRAH to incur the Subordinated Obligations and in making, extending, continuing and/or acquiring such Senior Indebtedness. This Article shall pass to and be fully binding upon the successors and assigns of each Subordinated Lender and shall inure to the benefit of the present and future holders of the Senior Indebtedness and the Senior Indebtedness Representative and their respective successors and assigns (including without limitation any Person refinancing any Senior Indebtedness). Each Subordinated Lender agrees that its Subordinated Obligations may not be assigned to or held by any Person other than Andarko or it Subsidiaries.

Section [x].13 Defined Terms.

(a) Each capitalized term used in this Article, but not defined herein, shall have the meaning ascribed such term in the Senior Loan Agreement. If such terms are not defined in the Senior Loan Agreement, such terms shall have the meanings ascribed to them in the Subordinated Loan Agreement.

(b) The following terms have the following meanings when used in this Article:

“Blockage Period” means, with respect to any Senior Default, the period from and including the date of the occurrence of such Senior Default until the first to occur of (a) the date upon which the Senior Indebtedness has been paid in full in cash, all commitments of any holder of Senior Indebtedness to make loans or extensions of credit have terminated, and all letters of credit issued by any holder of Senior Indebtedness have expired, terminated or been fully collateralized in cash or (b) the date on which all Senior Defaults have been waived in writing by the applicable holder or holders of the Senior Indebtedness or an agent or representative on their behalf, is cured or ceases to exist.

“Event of Default” has the meaning given such term in the Subordinated Loan Documents.

“Insolvency Proceeding” means (a) WGRAH or any Subsidiary shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of its property, (ii) admit in writing its inability to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under any Bankruptcy Law, (v) file a petition seeking to take advantage of any other law providing for similar relief of debtors, or (vi) consent or acquiesce in writing to any petition duly filed against it in any involuntary case under any Bankruptcy Law; or (b) a proceeding or case shall be commenced, without the application or consent of WGRAH or any Subsidiary in any court of competent jurisdiction seeking (i) its liquidation, reorganization,

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dissolution or winding up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of its assets, or (iii) similar relief in respect of it, under any law providing for the relief of debtors, and such proceeding or case shall continue undismissed, or unstayed and in effect, for a period of 60 days (or such longer period, so long as WGRAH or such Subsidiary shall be taking such action in good faith as shall be reasonably necessary to obtain the timely dismissal or stay of such proceeding or case); or an order for relief shall be entered in an involuntary case under any applicable Bankruptcy Law, against WGRAH or such Subsidiary.

“Reorganization Securities” means (a) debt securities that are issued pursuant to an Insolvency Proceeding the payment of which is subordinate and junior at least to the extent provided in this Article to the payment of the Senior Indebtedness outstanding at the time of the issuance thereof (including any refinancing of Senior Indebtedness pursuant to an Insolvency Proceeding) and to the payment of all debt securities issued in exchange for such Senior Indebtedness in such Insolvency Proceeding (whether such subordination is effected by the terms of such securities, an order or decree issued in such Insolvency Proceeding, by agreement of the Subordinated Lenders or otherwise), or (b) equity securities that are issued pursuant to an Insolvency Proceeding; provided, in either case, that such securities are authorized by an order or decree made by a court of competent jurisdiction in such Insolvency Proceeding.

“Senior Collateral Agent” means Citibank, N.A., as collateral agent for the Senior Indebtedness Representative and the Lenders under the Senior Loan Agreement, and any successor or assignee.

“Senior Default” means a Default, Event of Default or Anadarko Event, each as defined in the Senior Loan Agreement.

“Senior Indebtedness” means and includes (a) all principal indebtedness for loans now outstanding or hereafter incurred under the Senior Loan Agreement, (b) all other amounts now or hereafter owing to the Senior Lender, (c) all interest accruing on the Senior Indebtedness described in the preceding clauses (a) and (b), and (d) all other monetary obligations (whether now outstanding or hereafter incurred) for which WGRAH or any of its Subsidiaries is responsible or liable as obligor, guarantor or otherwise under or pursuant to any of the Senior Loan Documents including, without limitation, all fees, penalties, yield protections, breakage costs, damages, indemnification obligations, reimbursement obligations, and expenses (including, without limitation, fees and expenses of counsel to the Senior Collateral Agent and the Senior Lender) together with interest on the foregoing to the extent provided for in the Senior Loan Documents. The interest described in the preceding clause (c) and the premiums and penalties described in the preceding clause (d) include, without limitation, all interest accruing after the commencement of any Insolvency Proceeding under the terms of the Senior Loan Documents whether or not such interest constitutes an allowed claim in any such Insolvency Proceeding.

“Senior Indebtedness Representative” means (a) initially, Trinity Associates LLC, as lender under the Senior Loan Agreement or (b) such other Person that is the successor or assignee to Trinity Associates LLC as lender.

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“Senior Loan Agreement” means that certain $2.2 Billion WGRAH Term Loan Agreement dated as of December 27, 2007 among WGRAH, the Senior Lender, and the Senior Collateral Agent as from time to time renewed, extended, amended, supplemented, or restated, and any agreements representing the refinancing, replacement, or substitution in whole or in part of the loans made or incurred under such Senior Loan Agreement.

“Senior Loan Documents” means, collectively, (a) the Senior Loan Agreement, (b) any note, bond or other instrument evidencing Senior Indebtedness, (c) all security agreements, pledge agreements or financing statements evidencing, creating or perfecting any lien to secure the Senior Indebtedness in any way, (d) all guarantees of the Senior Indebtedness, (d) all other documents, instruments or agreements relating to the Senior Indebtedness now or hereafter executed or delivered by and among WGRAH, any Subsidiary, the Senior Lender or the Senior Collateral Agent, including without limitation each of the other “WGRAH Loan Documents” as such term is defined in the Senior Loan Agreement, and (e) all renewals, extensions, amendments, modifications or restatements of the foregoing.

“Senior Lender” means (a) initially, Trinity Associates LLC or (b) all other Persons which now or hereafter constitute a “Lender” under the Senior Loan Agreement and their respective successors and assigns, and all Persons refinancing any Senior Indebtedness and their respective successors and assigns.

“Subordinated Lender Representative” means (a) initially, [                    ], as administrative agent for the Subordinated Lenders under the Subordinated Loan Agreement or (b) such other Person selected to replace [                    ] or the then Subordinated Lender Representative.

“Subordinated Lenders” means any of Anadarko or any of its Subsidiaries which now or hereafter constitute a “Lender” or “Holder” under the Subordinated Loan Agreement and their respective successors and assigns.

“Subordinated Loan Agreement” means that certain [                    ] dated as of [                    ] among WGRAH, the Subordinated Lender Representative, as [administrative agent] and the Persons listed therein from time to time as Subordinated Lenders, as from time to time renewed, extended, amended, supplemented, or restated, and any agreements representing the refinancing, replacement, or substitution in whole or in part of the loans made or incurred under such Subordinated Loan Agreement.

“Subordinated Loan Documents” means, collectively, (a) the Subordinated Loan Agreement, (b) the Subordinated Loan Notes and any other note, bond or other instrument evidencing Subordinated Indebtedness, (c) all guarantees thereof, (d) all other documents, instruments or agreements relating to the Subordinated Loan Agreement now or hereafter executed or delivered by and among WGRAH, any Subsidiary, and any Subordinated Lender, including without limitation each of the other “[Loan Documents]” as such term is defined in the Subordinated Loan Agreement, and (e) all renewals, extensions, amendments, modifications or restatements of the foregoing.

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“Subordinated Loan Notes” means each promissory note issued under the Subordinated Loan Agreement evidencing the loans made pursuant to the term thereof, as from time to time renewed, extended, amended, supplemented, or restated, and any agreements representing the refinancing, replacement, or substitution in whole or in part thereof.

“Subordinated Obligations” means any and all indebtedness (whether for principal, interest, fees, indemnifications or otherwise, but not expenses) now or hereafter owing by WGRAH or any Subsidiary under or in connection with the Subordinated Loan Agreement, the Subordinated Loan Documents, any mortgage, guaranty or other security instrument given in connection therewith, and any letter agreement or other agreement providing for payment of fees in connection therewith.

“WGRAH” means WGR Asset Holding Company LLC, a Delaware limited liability company.

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EX-10.(LV)

Exhibit 10(lv)

EXECUTION VERSION

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

TRINITY ASSOCIATES LLC

(a Delaware limited liability company)

Dated as of December 27, 2007

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS			2
	1.1	Specific Definitions	2
	1.2	Other Terms	2
	1.3	Construction	2
ARTICLE II ORGANIZATION			3
	2.1	Formation	3
	2.2	Name	3
	2.3	Principal Office in the United States; Other Offices	3
	2.4	Purpose	3
	2.5	Foreign Qualification	4
	2.6	Term	4
	2.7	Mergers and Exchanges	4
	2.8	Business Opportunities—No Implied Duty or Obligation	4
	2.9	Agent for Service of Process	4
	2.10	Separateness	4
	2.11	Title to Trinity Property	10
ARTICLE III MEMBERSHIP INTERESTS AND TRANSFERS			10
	3.1	Members	10
	3.2	Number of Trinity Members	10
	3.3	Trinity Membership Interests	11
	3.4	Representations and Warranties	11
	3.5	Restrictions on the Transfer of a Trinity Membership Interest	12
	3.6	Additional Trinity Members; Substituted Members	14
	3.7	Information	14
	3.8	Liability to Third Parties	15
	3.9	Resignation	16
	3.10	Meetings of Trinity Members	16
	3.11	Partition	17
	3.12	Termination of Status as Trinity Member	17

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ARTICLE IV CAPITAL CONTRIBUTIONS			18
	4.1	Initial Capital Contributions	18
	4.2	Return of Contributions	18
	4.3	Capital Accounts	18
	4.4	Additional Capital Contributions	19
	4.5	Custodian	19
	4.6	Cash Capital Contributions	19
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS			19
	5.1	Allocations for Capital Account Purposes	19
	5.2	Allocations for Tax Purposes	23
	5.3	Distributions	23
	5.4	Special Distributions	24
	5.5	Making of Payments; Etc	24
	5.6	Determination of the Preferred Return	24
	5.7	Preferred Return Reset	25
ARTICLE VI MANAGEMENT OF TRINITY			26
	6.1	Trinity Managing Member	26
	6.2	Restrictions on the Trinity Managing Member’s Authority	27
	6.3	Approval of Transaction Agreements	29
	6.4	Compensation and Reimbursement	29
	6.5	Covenants of Trinity Managing Member	29
	6.6	Trinity Operating Account	29
	6.7	Required Actions	29
	6.8	The Trinity Custodian	30
ARTICLE VII INDEMNIFICATION			30
	7.1	Indemnification of the Trinity Members	30
	7.2	Indemnification for Registration and Business Qualification Requirements	31
	7.3	Liquidator Indemnification	31
	7.4	Survival of Indemnification Obligations	31
	7.5	Limitations on Indemnification Obligations	32
	7.6	Payments; No Reduction of Capital Account	32
	7.7	Procedural Requirements	32

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ARTICLE VIII TAXES			34
	8.1	Tax Returns	34
	8.2	Tax Elections	35
	8.3	Trinity Tax Matters Member	35
	8.4	State Taxes	36
ARTICLE IX BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS			36
	9.1	Maintenance of Books; Audit Firm	36
	9.2	Financial Statements and Reports	36
	9.3	Tax Statements	38
	9.4	Accounts	38
ARTICLE X ADDITIONAL MATTERS			38
	10.1	Sponsor Purchase Option	38
	10.2	Redemption of Trinity Class B Membership	38
ARTICLE XI DISSOLUTION, LIQUIDATION, AND TERMINATION			39
	11.1	Liquidation	39
	11.2	Winding Up	39
	11.3	Restoration of Deficit Capital Accounts	40
	11.4	Rights of Members	41
	11.5	Occurrence of Liquidating Event	41
	11.6	Allocations and Distributions During Period of Liquidation	41
	11.7	Character of Liquidating Distributions	41
	11.8	The Liquidator	41
	11.9	Liquidation Procedures	42
	11.10	Form of Liquidating Distributions to Trinity Members	43
ARTICLE XII AMENDMENT OF THE TRINITY COMPANY AGREEMENT			43
	12.1	Amendments to be Adopted by Trinity	43
	12.2	Amendment Procedures	44
ARTICLE XIII MEMBERSHIP INTERESTS			44
	13.1	Certificates	44
	13.2	Registered Holders	44
	13.3	Security	44
	13.4	Power of Attorney	44

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ARTICLE XIV GENERAL PROVISIONS			46
	14.1	Entire Agreement; Supersedure	46
	14.2	Waivers	46
	14.3	Binding Effect	46
	14.4	Governing Law; Severability	46
	14.5	Further Assurances	47
	14.6	Exercise of Certain Rights	47
	14.7	Notice to Trinity Members of Provisions of the Trinity Company Agreement	47
	14.8	Counterparts	47
	14.9	Checks, Notes and Contracts	47
	14.10	No Third Party Beneficiaries	47
	14.11	Notices	48
	14.12	Trinity Member Trademarks	48
	14.13	Setoff	48
	14.14	Construction	48
	14.15	Waiver of Jury Trial	48
	14.16	Consent to Jurisdiction and Service of Process	48

Exhibit A:	Defined Terms
Exhibit B:	Trinity Member Information
Exhibit C:	Form of Membership Interest Redemption Agreement

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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

TRINITY ASSOCIATES LLC

(a Delaware limited liability company)

This Amended and Restated Limited Liability Company Agreement (this “Trinity Company Agreement”) of Trinity Associates LLC (“Trinity”), dated as of December 27, 2007 (the “Effective Date”), is (a) adopted by the Trinity Members (as defined below) and (b) executed and agreed to, for good and valuable consideration, by the Trinity Members.

RECITALS

A. Trinity was formed as a limited liability company pursuant to the Act (as defined below) by filing its Certificate of Formation (the “Certificate”) with the Secretary of State of Delaware on December 17, 2007 (the “Formation Date”) and the execution of that certain Limited Liability Company Agreement of Trinity dated as of December 17, 2007 by Trinity Associates Class A Holdings LLC (the “Initial Trinity Agreement”).

B. The parties hereto wish to enter into this Trinity Company Agreement to, among other things, amend and restate the Initial Trinity Agreement in its entirety on the terms and conditions set forth herein, and to provide for the management of Trinity and set forth their respective rights and obligations.

AGREEMENT

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration (the receipt and sufficiency of which are hereby confirmed and acknowledged), the parties hereto hereby stipulate and agree as follows:

ARTICLE I

DEFINITIONS

1.1 Specific Definitions. As used in the Trinity Company Agreement, capitalized terms defined in Exhibit A shall have the meanings set forth therein.

1.2 Other Terms. Other terms may be defined elsewhere in the text of the Trinity Company Agreement and shall have the meaning so given.

1.3 Construction. Except where the context requires otherwise, the gender of all words used in the Trinity Company Agreement includes the masculine, feminine, and neuter, the singular shall include the plural, and the plural shall include the singular. All references to Articles and Sections refer to articles and sections of the Trinity Company Agreement, and all references to Exhibits are to exhibits attached hereto, each of which is incorporated herein for all purposes. Article and section titles or headings are for convenience only and neither limit nor

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amplify the provisions of the Trinity Company Agreement itself, and all references herein to articles, sections or subdivisions thereof shall refer to the corresponding article, section or subdivision thereof of the Trinity Company Agreement unless specific reference is made to such articles, sections or subdivisions of another document or instrument. Unless the context of the Trinity Company Agreement clearly requires otherwise, the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” and the words “hereof,” “herein,” “hereunder” and similar terms in the Trinity Company Agreement shall refer to the Trinity Company Agreement as a whole and not any particular section or Article in which such words appear. Any reference to federal, state, local or foreign Applicable Law will be deemed also to refer to such Applicable Law as amended (including any successor statute) and all rules and regulations promulgated thereunder, unless the context explicitly requires otherwise. Any reference to the Trinity Company Agreement or any other agreement or instrument shall, unless the context explicitly requires otherwise, refer to such agreement or instrument as amended, restated, supplemented or otherwise modified from time to time. In the Trinity Company Agreement in the computation of periods of time from a specified date to a later specified date, the word or phrase “from” and “commencing on” mean “from and including” and the words or phrase “to” and “until” and “ending on” mean “to but excluding.” All accounting terms not specifically defined herein shall be construed in accordance with GAAP, except with respect to Capital Accounts and items entering into the computation of Capital Accounts, and except to the extent otherwise specified in the terms hereof.

ARTICLE II

ORGANIZATION

2.1 Formation. Trinity was organized as a Delaware limited liability company by the filing of the Certificate with the Secretary of State of the State of Delaware pursuant to the Act on the Formation Date.

2.2 Name. The name of Trinity shall be as set forth in the Certificate, and all Trinity business must be conducted in that name or such other names that comply with Applicable Law as the Trinity Managing Member may select from time to time.

2.3 Principal Office in the United States; Other Offices. The principal office of Trinity in the United States shall be at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attn: Treasurer, Telecopy No.: (832) 636-5029 or at such other place as the Trinity Managing Member may designate in writing to the Trinity Members from time to time, which need not be in the State of Delaware but which must be within the United States of America and within a state that permits the qualification as a foreign limited liability company of a limited liability company organized under the laws of the State of Delaware. Trinity may have such other offices as the Trinity Managing Member may designate from time to time.

2.4 Purpose. The purposes of Trinity are (1) to enter into and perform its obligations under, and exercise its rights under, the Transaction Agreements to which it is a party (including the WGRAH Loan Documents), and (2) to own Permitted Assets. Except for activities related to such purposes (including the management of Trinity’s internal company and administrative affairs in accordance with this Trinity Company Agreement) there are no other authorized business purposes of Trinity, and Trinity shall not engage in any activity or conduct other than that which is consistent with such purposes.

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2.5 Foreign Qualification. Prior to Trinity’s conducting business in any jurisdiction other than Delaware, Trinity shall comply, to the extent procedures are available and those matters are reasonably within the control of Trinity, with all requirements necessary to qualify Trinity as a foreign limited liability company, and, if necessary, keep Trinity in good standing, in that jurisdiction.

2.6 Term. Subject to earlier termination pursuant to other provisions of the Trinity Company Agreement (including those contained in Article XI), the term of Trinity shall terminate upon the filing of a Certificate of Cancellation upon completion of the winding up and liquidation of Trinity in accordance with Article XI.

2.7 Mergers and Exchanges. Except as otherwise provided in the Trinity Company Agreement or required by Applicable Law, Trinity may not be a party to any merger, share exchange, consolidation, exchange or acquisition or any other type of reorganization.

2.8 Business Opportunities—No Implied Duty or Obligation. Each Trinity Member and its Affiliates may engage, directly or indirectly, without the consent or approval of the other Trinity Members or Trinity, in the businesses conducted by such Trinity Member and its Affiliates as of the Effective Date and in any other business opportunities, transactions, ventures or other arrangements of any nature or description, independently or with others, including business of a nature which may be competitive with or the same as or similar to the business of Trinity, regardless of the geographic location of such business, and without any duty or obligation to account to the other Trinity Members or Trinity in connection therewith. Nothing herein is intended to create a partnership, joint venture, agency or other relationship creating fiduciary or quasi-fiduciary duties or similar duties and obligations or subject the Members to joint and several or vicarious liability or to impose any duty, obligation or liability that would arise there from with respect to any or all of the Members of Trinity. To the extent that, at law or in equity, a Member has any fiduciary duty to Trinity or any other Member pursuant to Trinity Company Agreement, such duty is hereby eliminated pursuant to Section 18-1101(c) of the Act; provided, however, that the foregoing does not eliminate the implied contractual covenant of good faith and fair dealing. Notwithstanding the foregoing, Holdings shall not engage in any business or other activity other than ownership of its Trinity Membership Interest and business incidental to such ownership, except with the written consent of Pecos.

2.9 Agent for Service of Process. The registered agent for service of process on Trinity in the State of Delaware shall be The Corporation Trust Company or any successor appointed by the Trinity Managing Member in accordance with the Act.

2.10 Separateness.

(a) Each Trinity Member hereby covenants to each other Trinity Member that such Trinity Member will, in connection with any transaction, agreement or dealing with or relating to Trinity or any other Person, comply (except for such noncompliance that, in the aggregate, is not material) with the following undertakings:

(i) Such Trinity Member will maintain its books, financial records and accounts, including checking and other bank accounts and custodian and other securities safekeeping accounts, separate and distinct from those of Trinity.

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(ii) Such Trinity Member will maintain its books, financial records and accounts (including inter-entity transaction accounts) in a manner so that it will not be difficult, or costly to segregate, ascertain or otherwise identify its assets and. liabilities separate and distinct from the assets and liabilities of Trinity.

(iii) Such Trinity Member will not commingle any of its assets, funds, liabilities or business functions with the assets, funds, liabilities or business functions of Trinity, and such Trinity Member will hold all of its own assets in its own name, except as otherwise contemplated in the Transaction Agreements.

(iv) Such Trinity Member will conduct its own business in its own name, and will observe all requisite organizational and internal procedures and formalities, including the holding of periodic and special meetings of shareholders, managers and boards of directors or managers (or other governing body), as applicable, the recordation and maintenance of minutes of such meetings, and the recordation and maintenance of resolutions adopted at such meetings.

(v) Such Trinity Member will not be consensually merged or consolidated with Trinity (other than for financial reporting purposes).

(vi) If such Trinity Member prepares or agrees to be included in consolidated financial statements with Trinity, such Trinity Member will include or cause to be included in its or such consolidated financial statements footnotes that clearly disclose, among other things, the separate existence and identity of Trinity from such Trinity Member, and that Trinity has separate assets and liabilities.

(vii) All transactions, agreements, and dealings between such Trinity Member and Trinity (including transactions, agreements and dealings pursuant to which the assets or property of one is used or to be used by the, other) will reflect the separate identity and, legal existence of each entity.

(viii) Except as otherwise specified in the Transaction Agreements, such Trinity Member will not pay its own liabilities from Trinity’s assets.

(ix) Representatives and agents of such Trinity Member (whether or not they are “loaned” employees of any Trinity Member or any Affiliates) will, when purporting to act on behalf of such Trinity Member (other than, if applicable, in its capacity as managing member of Trinity), not hold themselves out to third parties as being representatives or agents, as the case may be, of Trinity and will not utilize business cards, letterhead, purchase orders, invoices and the like of Trinity.

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(x) Such Trinity Member will not compensate any consultants, independent, contractors and agents from the funds of Trinity for services provided to such Trinity Member by such consultants, independent contractors and agents.

(xi) To the extent that Trinity, on the one hand, and such Trinity Member, on the other hand, jointly contract or do business with vendors or service providers or share overhead expenses, the costs and expenses incurred in so doing will be fairly and nonarbitrarily allocated between or among such entities, with the result that each such entity bears its fair share of all such costs and expenses. To the extent that Trinity, on the one hand, and such Trinity Member, on the other hand, contracts or does business with vendors or service providers where the goods or services are wholly or partially for the benefit of the other, then the costs incurred in so doing will be fairly and nonarbitrarily allocated to the entity for whose benefit the goods or services are provided, with the result that each such entity bears its fair share of all such costs, except to the extent otherwise provided in the Transaction Agreements.

(xii) Such Trinity Member will not make any loans, advances, guarantees, extensions of credit or contributions of capital to, from or for the benefit of Trinity without proper documentation and proper accounting in accordance with GAAP and other than in accordance with the provisions of the Transaction Agreements.

(xiii) Such Trinity Member will cause to be prepared and filed all legally required tax returns for itself (including Federal and state income tax returns) separately from the tax returns of Trinity.

(xiv) Such Trinity Member will not refer to Trinity as a department or division of such Trinity Member and will not otherwise refer to Trinity in a manner inconsistent with its status as a separate and distinct legal entity. In addition, Trinity will hold itself out as separate and distinct from such Trinity Member and from any other Person.

(xv) Such Trinity Member will not hold out the credit of Trinity as being available to satisfy the obligations of such Trinity Member (except as permitted under the Transaction Agreements).

(xvi) Such Trinity Member will not acquire the obligations or securities of Trinity (except as permitted under the Transaction Agreements).

(xvii) Such Trinity Member will not use stationery, invoices, and checks bearing Trinity’s name (except in its capacity as a managing member of Trinity).

(xviii) Such Trinity Member will not pledge its assets for the benefit of Trinity (except as permitted under the Transaction Agreements).

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(xix) Such Trinity Member will correct any known misunderstanding regarding its identity as separate from the identity of Trinity.

(xx) No Trinity Member (or any of its Affiliates) will use the separate existence of Trinity to abuse creditors or to perpetrate a fraud, injury, or injustice on creditors.

(xxi) All transactions between a Trinity Member (or any of its Affiliates), on the one hand, and Trinity, on the other, are, and will be, duly authorized and documented, and recorded accurately in the appropriate books and records of such entities. All such transactions are, and will be, fair to each party, constitute exchanges for fair consideration and for reasonably equivalent value, and are, and will be, made in good faith and without any intent to hinder, delay, or defraud creditors. The parties hereto agree that the transactions contemplated in the Transaction Agreements satisfy the requirements of this Section 2.10(a)(xxi).

(xxii) Such Trinity Member has not entered into the transactions contemplated by the Trinity Company Agreement or any Transaction Agreement to which it is a party in contemplation of insolvency or with a design to prefer one or more creditors to the exclusion in whole or in part of others or with an intent to hinder, delay or defraud any of its creditors.

(xxiii) The assets of such Trinity Member are now, and are intended to be, sufficient to pay the ongoing business expenses of such Trinity Member as they are incurred and to discharge all of its respective liabilities.

(b) The Trinity Managing Member will, within the scope of its authority as Trinity Managing Member hereunder, cause Trinity to comply with the following undertakings (provided that the Trinity Managing Member shall not be required to make any Capital Contributions pursuant to this Section 2.10(b)):

(i) Trinity will maintain its books, financial records and accounts, including checking and other bank accounts and custodian and other securities safekeeping accounts, separate and distinct from those of any other Person.

(ii) Trinity will maintain its books, financial records and accounts (including inter-entity transaction accounts) in a manner so that it will not be difficult or costly to segregate, ascertain or otherwise identify its assets and liabilities separate and distinct from the assets and liabilities of any other Person.

(iii) Trinity will not commingle any of its assets, funds, liabilities or business functions with the assets, funds, liabilities or business functions of any other Person, and Trinity will hold all of its own assets in its own name, except as otherwise contemplated in the Transaction Agreements.

(iv) Trinity will conduct its own business in its own name, and will observe all requisite organizational and internal procedures and formalities, including the holding of periodic and special meetings of shareholders, managers,

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and boards of directors or managers (or other governing body), as applicable, the recordation and maintenance of minutes of such meetings, and the recordation and maintenance of resolutions adopted at such meetings.

(v) Trinity will not be consensually merged or consolidated with any other Person (other than certain Affiliates for financial reporting purposes).

(vi) If Trinity prepares consolidated financial statements, it will include in its consolidated financial statements footnotes that clearly disclose, among other things the separate existence and identity of Trinity from such consolidated entities, and that Trinity has separate assets and liabilities from such consolidated entities.

(vii) All transactions, agreements and dealings between Trinity and any other Person (including transactions, agreements and dealings pursuant to which the assets or property of one is used or to be used by the other) will reflect the separate identity and legal existence of Trinity from such other Person.

(viii) Transactions between Trinity, on the one hand, and any third parties, on the other hand, will be conducted by Trinity in the name of Trinity as an entity separate and distinct from any other Person.

(ix) Except as otherwise specified in the Transaction Agreements, Trinity will pay its own liabilities from its own assets.

(x) Representatives and agents of Trinity (whether or not they are “loaned” employees of such Trinity Member) will, when purporting to act on behalf of Trinity, hold themselves out to third parties as being representatives or agents, as the case may be, of Trinity and will utilize business cards, letterhead, purchase orders, invoices and the like of Trinity.

(xi) Trinity will compensate all consultants, independent contractors and agents from its own funds for services provided to it by such consultants, independent contractors and agents.

(xii) To the extent that Trinity, on the one hand, and any other Person, on the other hand, jointly contract or do business with vendors or service providers or share overhead expenses, the costs and expenses incurred in so doing will be fairly and nonarbitrarily allocated between or among such entities, with the result that each such entity bears its fair share of all such costs and expenses. To the extent that Trinity, on the one hand, and any other Person, on the other hand, contracts or does business with vendors or service providers where the goods or services are wholly or partially for the benefit of the other, then the costs incurred in so doing will be fairly and nonarbitrarily allocated to the entity for whose benefit the goods or services are provided, with the result that each such entity bears its fair share of all such costs, except to the extent otherwise provided in the Transaction Agreements.

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(xiii) Trinity will have annual financial statements prepared in accordance with GAAP separate from such Trinity Member and any other Person; provided, that Trinity and such Trinity Member may be consolidated with certain Affiliates for financial reporting purposes. Such Trinity annual financial statements will show Trinity’s assets and liabilities separate and apart from those of any other Person.

(xiv) Trinity will not make any loans, advances, guarantees, extensions of credit or contributions of capital to, from or for the benefit of any other Person without proper accounting in accordance with GAAP and proper documentation.

(xv) Trinity will cause to be prepared and filed all legally required tax returns for itself (including Federal and state income tax returns) separately from the tax returns of any other Person, and will not file a consolidated tax return with any other Person.

(xvi) Trinity will hold itself out as separate and distinct from such Trinity Member and from any other Person. Trinity will not refer to itself as a department or division of such Trinity Member and will not otherwise refer to itself in a manner inconsistent with its status as a legal entity separate and distinct from any other Person.

(xvii) Trinity will maintain adequate capital in light of its contemplated business operations.

(xviii) Trinity will not hold out its credit as being available to satisfy the obligations of any other Person.

(xix) Trinity will not acquire the obligations or securities of its Affiliates or owners (except as permitted under the Transaction Agreements).

(xx) Trinity will not buy or hold evidence of Indebtedness issued by any other Person (except as permitted under the Transaction Agreements).

(xxi) Trinity will use separate stationery, invoices, and checks bearing its own name.

(xxii) Trinity will not pledge its assets for the benefit of any other Person (except as permitted under the Transaction Agreements).

(xxiii) Trinity will correct any known misunderstanding regarding its separate identity from any other Person.

(xxiv) Trinity will not use its separate existence, and Trinity will not permit that its separate existence will be used by any Trinity Member (or any of its Affiliates), in each case, to abuse creditors or to perpetrate a fraud, injury, or injustice on creditors.

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(xxv) All transactions between a Trinity Member (or any of its Affiliates), on the one hand, and Trinity, on the other, are, and will be, duly authorized and documented, and recorded accurately in the appropriate books and records of such entities. All such transactions are, and will be, fair to each party, constitute exchanges for fair consideration and for reasonably equivalent value, and are, and will be, made in good faith and without any intent to hinder, delay, or defraud creditors. Trinity will not take any action, and will not engage in transactions with any Trinity Member (or any of its Affiliates), unless the respective Boards of Managers, managing members, or officers, as appropriate, of Trinity and the applicable Trinity Member, as the case may be, determine in a reasonable fashion that such actions or transactions are in their respective companies’ best interests. The parties hereto agree that the transactions contemplated in the Transaction Agreements satisfy the requirements of this Section 2.10(b)(xxv).

(xxvi) Trinity has not entered into the transactions contemplated by the Trinity Company Agreement or any Transaction Agreement to which it is a party in contemplation of insolvency or with a design to prefer one or more creditors to the exclusion in whole or in part of others or with an intent to hinder, delay or defraud any of its creditors.

(xxvii) The assets of Trinity are now, and are intended to be, sufficient to pay the ongoing business expenses of each such respective entity as they are incurred and to discharge all of their respective liabilities.

2.11 Title to Trinity Property. All Trinity Property shall be owned by Trinity as an entity, and no Trinity Member shall have any ownership interest in such property in its individual name or right. Each Trinity Member’s interest in Trinity shall be personal property for all purposes. Trinity shall hold all of the Trinity Property in the name of Trinity or the name of the Trinity Custodian (on behalf of Trinity) and not in the name of any Trinity Member.

ARTICLE III

MEMBERSHIP INTERESTS AND TRANSFERS

3.1 Members. Simultaneously with the execution hereof, (a) Holdings’ limited liability company interest under the Initial Trinity Agreement is converted into, and Holdings is admitted to the Company as a Trinity Class A Member in respect of, a Trinity Class A Membership Interest, and (b) Pecos is admitted to the Company as a Trinity Class B Member in respect of a Trinity Class B Membership Interest. Additional Trinity Members may be admitted to Trinity either as additional Trinity Members or Substituted Members solely as provided in this Trinity Company Agreement.

3.2 Number of Trinity Members. The number of Trinity Members of Trinity shall never be fewer than one.

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3.3 Trinity Membership Interests. The Trinity Members agree that each Trinity Member’s ownership in Trinity shall be that which is set forth in Exhibit B, which exhibit shall be amended by the Trinity Managing Member as necessary to reflect changes and adjustments resulting from the admission or substitution of any Trinity Member, or any Transfer or adjustment in Trinity Membership Interests, made in accordance with the terms of the Trinity Company Agreement (provided, that a failure to reflect any such change or adjustment on Exhibit B shall not prevent any such change or adjustment from being effective).

3.4 Representations and Warranties. Each Trinity Member hereby represents and warrants to Trinity and each other Trinity Member that:

(a) it is duly formed, validly existing and (if applicable) in good standing under the Applicable Law of the state of its formation, and if required by Applicable Law is duly qualified to do business and (if applicable) is in good standing in the jurisdiction of its principal place of business (if not formed therein);

(b) it has full corporate, limited liability company, partnership, trust, or other applicable power and authority to execute and agree to the Trinity Company Agreement and the other Transaction Agreements to which it is a party and to perform its obligations hereunder and thereunder and all necessary actions by the board of directors, shareholders, managers, members, partners, trustees, beneficiaries, or other Persons necessary for the due authorization, execution, delivery, and performance of the Trinity Company Agreement and the other Transaction Agreements to which it is a party by that Trinity Member have been duly taken;

(c) it has duly executed and delivered the Trinity Company Agreement and the other Transaction Agreements to which it is a party, and the Trinity Company Agreement and the other Transaction Agreements to which it is a party is each enforceable against such Trinity Member in accordance with its terms, subject to bankruptcy, moratorium, insolvency and other Applicable Law generally affecting creditors’ rights and general principles of equity (whether applied in a proceeding in a court of law or equity);

(d) its authorization, execution, delivery, and performance of the Trinity Company Agreement and the other Transaction Agreements to which it is a party does not conflict with (i) any material obligation under any other material agreement or arrangement to which that Trinity Member is a party or by which it is bound, (ii) Applicable Law, or (iii) any judgment, injunction, order, or decree binding upon such Trinity Member;

(e) there is no Legal Proceeding pending or, to such Trinity Member’s knowledge, threatened against or affecting such Trinity Member or any of its properties, rights, assets, or businesses in any court or before any Governmental Authority; and

(f) it (i) has been furnished with such information about Trinity and the Trinity Membership Interest as that Trinity Member has requested, (ii) has made its own independent inquiry and investigation into, and based thereon has formed an

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independent judgment concerning, Trinity and that Trinity Member’s Trinity Membership Interest therein, (iii) has adequate means of providing for its current needs and possible individual contingencies and is able to bear the economic risks of this investment and has a sufficient net worth to sustain a loss of its entire investment in Trinity in the event such loss should occur, (iv) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in Trinity, (v) is an “accredited investor” within the meaning of “accredited investor” under Regulation D of the Securities Act of 1933, as amended, (vi) understands and agrees that its Trinity Membership Interest shall not be sold, pledged, hypothecated or otherwise transferred except in accordance with the terms of the Trinity Company Agreement and pursuant to an applicable exemption from registration under the Securities Act of 1933 and other applicable securities Applicable Law, (vii) intends hereby to form a limited liability company for the purpose of making an economic profit from the transactions proposed to be entered into by Trinity and it is not acting as an agent or in some other representative capacity for any other Person, and (viii) has acquired its Trinity Membership Interest for its own account for investment and not with a view to the sale or distribution thereof.

3.5 Restrictions on the Transfer of a Trinity Membership Interest. Except as otherwise expressly permitted by the Trinity Company Agreement, no Trinity Member may Transfer all or any part of its Trinity Membership Interest. Any purported Transfer in breach of the terms of the Trinity Company Agreement shall be null and void ab initio, and Trinity shall not recognize any such prohibited Transfer; provided, that, if Trinity is required by Applicable Law to recognize a Transfer that is not an expressly permitted Transfer hereunder, the Trinity Membership Interest Transferred shall be strictly limited to the Transferor’s rights to allocations and distributions as provided by the Trinity Company Agreement with respect to the Trinity Membership Interest, which allocations and distributions may be applied (without limiting any other legal or equitable rights of Trinity) to satisfy any debts, obligations, or liabilities for damages that the Transferor or Transferee of such Trinity Membership Interest may have to Trinity. In the case of a Transfer or attempted Transfer of a Trinity Membership Interest that is not permitted hereunder, the parties engaging or attempting to engage in such Transfer shall indemnify and hold harmless Trinity and the other Trinity Members from all cost, liability, and damage that any of such indemnified Persons may incur (including incremental tax , liability and attorneys’ fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby.

(a) Specific Restrictions on Transfers.

(i) No Trinity Class A Membership Interest, and no rights or obligations arising out of or relating thereto, shall be Transferred except to a wholly-owned subsidiary of Anadarko or as otherwise contemplated by the Transaction Agreements.

(ii) Other than in accordance with Article X or as otherwise contemplated by the Transaction Agreements, no Trinity Class B Membership Interest, and no rights or obligations arising out of or relating thereto, shall be Transferred except following the occurrence of a Termination Event. Following a Termination Event, there shall no restrictions under the Trinity Company Agreement on the transfer of the Trinity Class B Membership Interest.

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(b) General Restrictions on Transfers.

(i) Except as contemplated by the Transaction Agreements, no Trinity Member shall Transfer a Trinity Membership Interest, or any portion thereof or interest therein, except pursuant to an applicable exemption from registration under the Securities Act of 1933 and other applicable securities Applicable Law.

(ii) Except as contemplated by the Transaction Agreements, no Trinity Member shall Transfer a Trinity Membership Interest, or any portion thereof or interest therein, unless such Trinity Member has delivered to the other Trinity Member an opinion of counsel, from counsel (and in form and substance) reasonably acceptable to such other Trinity Member, to the effect that such Transfer (A) will be exempt from all applicable registration requirements, including the Securities Act and any applicable state securities Applicable Law, and will not violate any Applicable Law regulating the Transfer of securities, (B) will not cause Trinity to become a publicly traded partnership for United States federal income tax purposes or cause a termination of Trinity under Code section 708 that would have an adverse effect on the other Trinity Member or Trinity Members, and (C) will not cause Trinity to be deemed to be an “investment company,” as such term is defined in the Investment Company Act of 1940.

(c) Requirements In Connection With Transfers.

(i) Except as contemplated by the Transaction Agreements, no Transfer shall be effective, and Trinity shall not recognize for any purpose any purported Transfer, unless and until Trinity has received a document in a form reasonably acceptable to the Trinity Managing Member executed by both the Transferor and the Transferee, which document shall (i) include the Transferee’s notice address, (ii) include the Transferee’s agreement to be bound by the Trinity Company Agreement with respect to the Trinity Membership Interest or part thereof being obtained, (iii) set forth the Trinity Membership Interest (after the Transfer) of the Transferor and the Transferee (which together must total the Trinity Membership Interest of the Transferor before the Transfer), (iv) contain a representation and warranty from the Transferor and the Transferee that the Transfer was made in accordance with all Applicable Law (including state and federal securities Applicable Law) and the terms and conditions of this Trinity Company Agreement, (v) contain the Transferee’s representation that the representations and warranties in Section 3.4 are true and correct with respect to such Person, and (vi) include the Transferee’s taxpayer identification number and sufficient information to determine the Transferee’s initial basis in the Transferred Membership Interest, the amount realized by the Transferor in respect of the Transfer, and any other information reasonably necessary to permit Trinity to file all required federal and state tax returns.

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(ii) The Trinity Managing Member may, in its reasonable discretion, charge a Trinity Member a reasonable fee to cover out-of-pocket expenses necessary to effect a Transfer with respect to such Trinity Member’s Trinity Membership Interest.

(iii) Neither Trinity nor any Trinity Member shall be bound or otherwise affected by any Transfer of any Trinity Membership Interest until all of the requirements of this Section 3.5(c) have been met.

(iv) Each Transfer shall be effective as of the first Business Day immediately succeeding the day in which all requirements of this Section 3.5(c) have been met.

3.6 Additional Trinity Members; Substituted Members.

(a) Any Transferee with respect to a Transfer made in accordance with this Article III shall be admitted automatically as a Substituted Member upon compliance with Section 3.5(c) with respect to such Transfer, without the consent or approval of Trinity or any Trinity Member being required.

(b) Upon becoming a Substituted Member, (i) such Substituted Member shall have all of the powers, rights, privileges, duties, obligations and liabilities of a Trinity Member, as provided in the Trinity Company Agreement and by Applicable Law, to the extent of the Trinity Membership Interest so Transferred and (ii) the Transferor shall be relieved of all of the obligations and liabilities with respect to such Trinity Membership Interest, to the extent of the Trinity Membership Interest so Transferred; provided, that such Transferor shall remain fully liable for all liabilities and obligations relating to such Trinity Membership Interest that accrued prior to the effective date of the applicable Transfer.

3.7 Information.

(a) Each Trinity Member acknowledges that, from time to time, it may receive written information from Trinity that is marked as confidential or proprietary, the release of which may be damaging to Trinity. Each Trinity Member shall hold in strict confidence any such information it receives and may not disclose such information to any Person other than another Trinity Member, except for disclosures (i) required to comply with Applicable Law (including applicable stock exchange or quotation system requirements), (ii) to Affiliates, advisers or representatives of the Trinity Member or Persons to which that Trinity Member’s Trinity Membership Interest may be Transferred as permitted by the Trinity Company Agreement, but only if the recipients of such information have agreed to be bound by the provisions of this Section 3.7(a), (iii) of information that a Trinity Member also has received from a source independent of Trinity if such Trinity Member does not have knowledge that such source obtained such information due to a breach of any obligation of confidentiality, (iv) to lenders, accountants and other representatives of the disclosing Trinity Member with a need to know such information, provided, that the disclosing Trinity Member shall be

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responsible for such representatives’ use and disclosure of any such information, (v) of public information, or (vi) in connection with any proposed Transfer of a Trinity Membership Interest in accordance with the Trinity Company Agreement, or in connection with any proposed sale of a Trinity Member’s ultimate parent, to advisers or representatives of the Trinity Member, its direct or indirect parent or Persons to which such interest may be Transferred as permitted by the Trinity Company Agreement, but only if the recipients of such information have agreed in writing to be bound by confidentiality provisions that are no less stringent than those set forth in this Section. Each Trinity Member acknowledges that a breach of the provisions of this Section 3.7(a) may cause irreparable injury to Trinity or another Trinity Member for which monetary damages are inadequate, difficult to compute, or both. Accordingly, each Trinity Member agrees that the provisions of this Section 3.7(a) may be enforced by injunctive action or specific performance, and such Trinity Member hereby waives any requirement to post bond in connection with any injunctive order or order for specific performance. Notwithstanding anything herein to the contrary, the parties and their respective representatives may disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and corporate structure of the transaction and all materials of any kind (including opinions and other tax analyses) that are provided to such party relating to such tax treatment and corporate structure, except where confidentiality is reasonably necessary to comply with securities laws. For this purpose, “corporate structure” is limited to facts relevant to the U.S. federal income tax treatment of the transaction and does not include information relating to the identity of the parties, their affiliates, agents or advisors.

(b) The Trinity Members acknowledge that, from time to time, Trinity may need information from any or all of such Trinity Members for various reasons, including for complying with various federal and state regulations. Each Trinity Member shall provide to Trinity all information reasonably requested by Trinity for purposes of complying with federal or state regulations or for purposes of providing information to federal or state regulatory authorities, in each case within a reasonable amount of time from the date such Trinity Member receives such request; provided, however, that no Trinity Member shall be obligated to provide such information to Trinity to the extent such disclosure (i) could reasonably be expected to result in the breach or violation of any contractual obligation (if a waiver of such restriction cannot reasonably be obtained) or Applicable Law or (ii) involves secret, confidential or proprietary information; and provided, further, however, that in the alternative, any Trinity Member may provide such information directly to such federal or state regulatory authorities.

(c) Notwithstanding anything herein to the contrary, any Trinity Member may disclose to any and all persons, without limitation of any kind, the corporate structure and US tax treatment of the transactions contemplated hereby, and all materials of any kind (including opinions or other tax analyses) relating to such corporate structure and US tax treatment, other than any information for which non-disclosure is reasonably necessary in order to comply with applicable securities law.

3.8 Liability to Third Parties. Except as required by the Act, no Trinity Member shall be liable to any Person (including any third party, Trinity or another Trinity Member or

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another Trinity Member’s Affiliate) (i) as the result of any act or omission of another Trinity Member or (ii) for Trinity losses, liabilities or obligations (except, in each case, as otherwise expressly agreed to in writing by such Trinity Member).

3.9 Resignation. Each Trinity Member hereby covenants and agrees that it will not resign or withdraw from Trinity as a Trinity Member except (i) with the prior written consent of the Trinity Members or (ii) as a consequence of a Transfer permitted hereunder pursuant to which the Transferee is admitted as a Substituted Member.

3.10 Meetings of Trinity Members.

(a) Notice. Meetings of the Trinity Members shall be called upon the written request of any Trinity Member. The notice shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Trinity Members not less than five Business Days nor more than 30 days prior to the date of such meeting. Trinity Members may vote in person, by proxy or by telephone at such meeting.

(b) Record Date. For the purpose of determining the Trinity Members entitled to vote on, or to vote at, any meeting of the Trinity Members or any adjournment thereof, the Trinity Member requesting such meeting may fix, in advance, a date as the record date for any such determination. Such date shall not be more than 30 days nor less than seven Business Days before any such meeting.

(c) Proxy. Any Trinity Member may authorize any Person or Persons to act for it by proxy on all matters in which such Trinity Member is entitled to participate; including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by such Trinity Member or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy given by a Trinity Member shall be revocable at the pleasure of the Trinity Member executing it unless otherwise expressly stated in such proxy.

(d) Consents. The approval or consent of any Trinity Member required under the Trinity Company Agreement may, except as expressly provided to the contrary in the Trinity Company Agreement, be given or withheld in the sole and absolute discretion of such Trinity Member. If the Trinity Managing Member receives the necessary approval or consent of the Trinity Members to such action, the Trinity Managing Member shall be authorized and empowered to implement such action without further authorization by the Trinity Members.

(e) Conduct of Meeting. Each meeting of the Trinity Members shall be conducted by the Trinity Managing Member or such other Person as the Trinity Managing Member may appoint pursuant to such rules for the conduct of the meeting as the Trinity Managing Member or such other Person deems appropriate. Any meeting duly called at which the Trinity Managing Member does not appear shall be conducted by the Trinity Class B Member.

(f) Consent in Lieu of Meeting. In the event the consent of any Trinity Member is required for any action to be taken by Trinity, such consent may be given at

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a meeting, which may be conducted by conference telephone call, or provided in writing, executed by the Trinity Member necessary to authorize such action at a meeting.

(g) No Meeting Required for Certain Actions. Any action, consent or approval that by the terms of the Trinity Company Agreement may be taken by any class of Trinity Member acting as a class or alone may be taken without the necessity of calling or holding a meeting of Trinity Members.

3.11 Partition. To the fullest extent permitted under Applicable Law, each Trinity Member waives any and all rights that it may have to maintain an action for partition of Trinity’s property.

3.12 Termination of Status as Trinity Member.

(a) A Person shall cease to be a Trinity Member only upon the first to occur of:

(i) The Transfer of all of its Trinity Membership Interest in accordance with this Trinity Company Agreement; provided, that the Transferee of such Trinity Membership Interest is admitted as a Substituted Member in accordance with the Trinity Company Agreement.

(ii) The happening of any of the events specified in Section 18-801(b) of the Act (which shall not relieve such Person from any liability under the Trinity Company Agreement, including liabilities for an unpermitted resignation).

(iii) The involuntary Transfer by operation of Applicable Law of its Trinity Membership Interest (which shall not relieve such Person from any liability under the Trinity Company Agreement, including liabilities for an unpermitted resignation).

(iv) The vote of the Trinity Members required to approve a request by such Trinity Member to withdraw.

(b) The happening of the events set forth in Section 3.12(a) shall not cause a dissolution of Trinity, except as provided in Article XI. Except to the extent specifically set forth herein, upon the termination of a Person’s status as a Trinity Member, such Person shall not be entitled to any distributions from Trinity, including a distribution based on the Fair Market Value of such Person’s Trinity Membership Interest.

(c) Any debts, obligations, or liabilities in damages to Trinity of any Person who ceases to be a Trinity Member shall be collectible by any legal means and Trinity is authorized, in addition to any other remedies at law or in equity, to apply any amounts otherwise distributable or payable by Trinity to such Person to satisfy such debts, obligations or liabilities.

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(d) Except as otherwise provided in the Trinity Company Agreement, in the event a Person ceases to be a Trinity Member without having Transferred all of its Trinity Membership Interest in accordance with the Trinity Company Agreement (including upon removal or resignation), such Person shall be treated as an unadmitted transferee pursuant to Section 3.5.

ARTICLE IV

CAPITAL CONTRIBUTIONS

4.1 Initial Capital Contributions. On the Effective Date, the Trinity Members have made the following Capital Contributions (the “Initial Capital Contributions”):

(a) The Trinity Class A Member has contributed to Trinity $100,000,000 in cash; and

(b) The Trinity Class B Member has contributed to Trinity $2,200,000,000 in cash.

4.2 Return of Contributions. Other than as set forth in the Trinity Company Agreement, a Trinity Member is not entitled (a) to the return of any part of any Capital Contributions or (b) to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of Trinity or of any Trinity Member. A Trinity Member is not required to contribute or to lend any cash or property to Trinity to enable Trinity to return any other Trinity Member’s Capital Contributions.

4.3 Capital Accounts. Trinity shall maintain for each Trinity Member a separate Capital Account in accordance with the rules of Treasury Regulation section 1.704-1(b)(2)(iv) and in accordance with the following provisions:

(a) Each Trinity Member’s Capital Account shall be increased by (i) the amount of all Capital Contributions made to Trinity by such Trinity Member pursuant to the Trinity Company Agreement, (ii) all Profits allocated to such Trinity Member pursuant to Section 5.1, (iii) the amount of any Trinity liabilities assumed by such Trinity Member or that are secured by any Trinity Property distributed to such Trinity Member, and (iv) any items in the nature of income or gain that are specially allocated to such Trinity Member pursuant to the Trinity Company Agreement, and decreased by (x) all Losses allocated to such Trinity Member pursuant to Section 5.1, (y) the amount of any liabilities of such Trinity Member assumed by Trinity or that are secured by any property contributed by such Trinity Member to Trinity, and (z) any items in the nature of expenses or Losses that are specially allocated to such Trinity Member pursuant to the Trinity Company Agreement.

(b) A Transferee shall succeed to the pro rata portion of the Capital Account of the Transferor relating to the Trinity Membership Interest so Transferred. Except as otherwise provided herein, all items of income, gain, expense, loss, deduction, and credit allocable to any Trinity Membership Interest that may have been Transferred during any calendar year shall, if permitted by Applicable Law, be allocated between the Transferor and the Transferee based on the portion of the calendar year during which

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each was recognized as owning that Trinity Membership Interest, based upon the interim closing of the books method; provided, however, that this allocation must be made in accordance with a method permissible under section 706 of the Code and the Treasury Regulations thereunder.

(c) The foregoing provisions and other provisions of the Trinity Company Agreement relating to Capital Accounts are intended to comply with Treasury Regulation Section 1.704-1(b) and shall be applied in a manner consistent with such regulation.

4.4 Additional Capital Contributions. No Member shall have any obligation to make any additional Capital Contribution beyond that set forth in Section 4.1 other than as expressly set forth in this Trinity Company Agreement.

4.5 Custodian. If the Trinity Class A Member or the Trinity Class B Member makes a Capital Contribution under Section 4.4 or otherwise (except under Section 4.1) to Trinity, the Trinity Managing Member shall notify the Trinity Custodian of the provision, if any, of the Trinity Company Agreement pursuant to which such Capital Contribution is made or the reason such Capital Contribution is made.

4.6 Cash Capital Contributions. No Trinity Member shall make any Capital Contribution hereunder otherwise than in cash.

ARTICLE V

ALLOCATIONS AND DISTRIBUTIONS

5.1 Allocations for Capital Account Purposes. After applying Section 5.1(c) and Section 5.1(d), for purposes of maintaining the Capital Accounts, Trinity’s Profits and Losses or items thereof for each Fiscal Quarter or other period shall be allocated among the Trinity Members as provided herein below.

(a) Profits. Profits shall be allocated as follows:

(i) First, 100% to the Trinity Class B Member in respect of its Trinity Class B Membership Interests, until the amount so allocated is equal to the Cumulative Preferred Return Allocation Amount;

(ii) Second, 100% to the Trinity Members until each Trinity Member has been allocated Profits pursuant to this Section 5.1(a)(ii) (including all Profits allocations made pursuant to this Section 5.1(a)(ii) for prior periods) equal to all Losses previously allocated to such Trinity Member in the reverse order and priority as such Losses were allocated pursuant to Section 5.1(b); and

(iii) Thereafter, the balance, if any, 100% to the Trinity Class A Member in respect of its Trinity Class A Membership Interests.

(b) Losses. Losses shall be allocated as follows:

(i) First, 100% to the Trinity Class A Member in respect of its Trinity Class A Membership Interests, until the Trinity Class A Member’s Capital Account is zero;

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(ii) Second, 100% to the Trinity Class B Member in respect of its Trinity Class B Membership Interests, until the Trinity Class B Member’s Capital Account is zero; and

(iii) Thereafter, the balance, if any, 100% to the Trinity Class A Member in respect of its Trinity Class A Membership Interests.

(c) Special Allocations. All Trinity Expenses associated with Trinity Indemnified Amounts shall be specially allocated to the Trinity Class A Member. All Trinity Expense Reimbursement Income shall be specially allocated to the Trinity Class B Member, provided however, that Trinity Expense Reimbursement Income attributable to amounts received from WGRAH and applied by Trinity as Trinity Indemnified Amounts shall be specially allocated to the Trinity Class A Member.

(d) Other Special Allocations. Notwithstanding any other provision of this Section 5.1, the following special allocations shall be made for such taxable period in the following order and priority:

(i) Trinity Minimum Gain Chargeback. Notwithstanding the other provisions of this Section 5.1, if there is a net decrease in Trinity Minimum Gain during any Trinity taxable period, each Trinity Member shall be allocated items of Trinity income and gain for such taxable period (and, if necessary, subsequent taxable periods) in the manner and amounts provided in Treasury Regulation sections 1.704-2(f)(6) and (g)(2) and section 1.704-2(j)(2)(i), or any successor provisions. For purposes of this Section 5.1(d), each Trinity Member’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d) with respect to such taxable period (other than an allocation pursuant to Section 5.1(d)(vi) and Section 5.1(d)(vii). This Section 5.1(d)(i) is intended to comply with the Trinity Minimum Gain chargeback requirement in Treasury Regulation section 1.704-2(f) and shall be interpreted consistently therewith.

(ii) Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt. Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(d)(i)), except as provided in Treasury Regulation section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Trinity taxable period, any Trinity Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Trinity income and gain for such taxable period (and, if necessary, subsequent taxable periods) in the manner and amounts provided in Treasury Regulation sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For purposes of this Section 5.1(d), each Trinity

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Member’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i) and other than an allocation pursuant to Section 5.1(d)(vi) and Section 5.1(d)(vii), with respect to such taxable period. This Section 5.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(iii) Qualified Income Offset. In the event any Trinity Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation section 1.704-1(b)(2)(ii)(d)(4) through (6), items of Trinity income and gain shall be specially allocated to such Trinity Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; provided, that, an allocation pursuant to this Section 5.1(d)(iii) shall be made only if and to the extent that such Trinity Member would have a deficit in such Trinity Member’s Adjusted Capital Account after all other allocations provided in this Article V have been tentatively made as if this Section 5.1(d)(iii) were not a part of the Trinity Company Agreement. This Section 5.1(d)(iii) is intended to be a “qualified income offset” as that term is used in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(iv) Stop Loss. No amount of Loss shall be allocated pursuant to Section 5.1(b) to the extent that such allocation would cause any Trinity Member to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit balance in its Adjusted Capital Account). All Losses in excess of the limitation set forth in the preceding sentence shall be allocated among such other Trinity Members, who have positive Adjusted Capital Account balances, in proportion to their respective Trinity Membership Interests until each Trinity Member’s Adjusted Capital Account balance is reduced to zero. Thereafter, any remaining Loss shall be allocated to the Trinity Members in proportion to their relative interests in Trinity as required by Section 704(b) of the Code.

(v) Gross Income Allocations. In the event any Trinity Member has a deficit balance in its Adjusted Capital Account at the end of any Trinity taxable period in excess of the sum of (A) the amount such Trinity Member is obligated to restore pursuant to any provision of the Trinity Company Agreement and (B) the amount such Trinity Member is deemed obligated to restore pursuant to Treasury Regulations sections 1.704-2(g) and 1.704-2(i)(5), such Trinity Member shall be specially allocated items of Trinity gross income and gain in the amount of such excess as quickly as possible; provided, that, an allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the extent that such Trinity Member would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.1 have been tentatively made as if Section 5.1(d)(iii) and this Section 5.1(d)(v) were not in the Trinity Company Agreement.

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(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Trinity Class A Members in accordance with their respective Trinity Class A Membership Interests. If the Trinity Managing Member determines that Trinity’s Nonrecourse Deductions should be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under section 704(b) of the Code, the Trinity Managing Member is authorized, upon notice to the Trinity Members, to revise the prescribed ratio to the numerically closest ratio which does satisfy such requirements.

(vii) Member Nonrecourse Deductions. Member Nonrecourse Deductions for any taxable period shall be allocated 100% to the Trinity Member that bears the Economic Risk of Loss with respect to such Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation section 1.704-2(i). If more than one Trinity Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, such Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Trinity Members in accordance with the ratios in which they share such Economic Risk of Loss.

(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation section 1.752-3(a)(3), the Trinity Members agree that Nonrecourse Liabilities of Trinity in excess of Trinity Minimum Gain shall be allocated among the Trinity Class A Members in accordance with their respective Trinity Class A Membership Interests.

(ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Trinity asset pursuant to section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) , and such item of gain or loss shall be specially allocated to the Trinity Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such section of the Treasury Regulations.

(x) Curative Allocation.

(A) Notwithstanding any other provision of this Section 5.1, other than the Required Allocations, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss or deduction allocated to each Trinity Member pursuant to the Required Allocations

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and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Trinity Member under the Agreed Allocations had the Required Allocations and the related Curative Allocations not otherwise been provided in this Section 5.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Trinity Minimum Gain and (2) Member Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Member Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section 5.1(d)(x)(A) shall only be made with respect to Required Allocations to the extent the Trinity Managing Member reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Trinity Members. Further, allocations pursuant to this Section 5.1(d)(x)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the Trinity Managing Member determines that such allocations are likely to be offset by subsequent Required Allocations.

(B) The Trinity Managing Member shall, with respect to each taxable period, (1) apply the provisions of Section 5.1(d)(x)(A) in whatever order is most likely to minimize economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 5.1(d)(x)(A) among the Trinity Members in a manner that is likely to minimize such economic distortions.

5.2 Allocations for Tax Purposes. Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Trinity Members in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 5.1.

5.3 Distributions.

(a) In addition to any distributions required under Section 18-607 of the Act, Section 5.3(b), Section 5.4, and Section 5.7(b), on each Payment Date Trinity shall make a distribution at least equal to the following:

(i) First, to the Trinity Class B Member in respect of its Trinity Class B Membership Interest up to the amount of the Cumulative Preferred Return Distribution Amount; and

(ii) Second, at the election of the Trinity Managing Member, any Available Cash to the Trinity Class A Member in respect of its Trinity Class A Membership Interest.

(b) Notwithstanding the foregoing, any Early Retirement Proceeds shall be immediately distributed to the Trinity Class B Member upon their receipt. All of such

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funds shall be distributed to the Trinity Class B Member in respect of its Trinity Class B Membership Interest and (i) the Cumulative Preferred Return Distribution Amount shall be reduced by the amount of such distribution and (ii) if the funds distributed are in excess of the Cumulative Preferred Return Distribution Amount, the Unrecovered Capital shall be reduced by such excess. The Trinity Class B Member will provide notice of the Interest Rate as of the expected date of payment of such Early Retirement Proceeds and any Trinity Expenses relating to the receipt of such Early Retirement Proceeds in accordance with Section 5.6 of the Trinity Company Agreement within 1 Business Day following receipt by the Trinity Class B Member of notice from the Trinity Managing Member that a prepayment is being made pursuant to Section 2.05 of the WGRAH Loan Agreement.

5.4 Special Distributions.

(a) All payments received by Trinity from WGRAH pursuant to Section 2.09 of the WGRAH Loan Agreement on account of Trinity Expenses and not applied by Trinity to pay Trinity Indemnified Amounts shall be distributed promptly (and in no event later than the next succeeding Business Day) after receipt of such amounts to the Trinity Class B Member.

(b) The distributions required pursuant to Section 5.7(b) shall be made on the date set forth in such section.

5.5 Making of Payments; Etc. All payments to the Trinity Members pursuant to any provision of the Trinity Company Agreement shall be made in immediately available funds no later than 12:00 noon (New York City time) on the day of such payment, and, at the time of the making of any such payment, the Trinity Managing Member shall provide (or shall cause the Trinity Custodian to provide) to the Trinity Class B Member and the Trinity Custodian a notice identifying the nature of such payment, the Section or Sections of the Trinity Company Agreement pursuant to which it is being made and the amount being distributed or paid pursuant to, each such Section. The Trinity Managing Member or, after the Liquidation Start Date, the Liquidator, shall notify the Trinity Custodian of the amount of each such payment hereunder, the calculation thereof, in reasonable, detail, and the Section of the Trinity Company Agreement pursuant to which such payment is to be made no later than 12:00 noon (Wilmington, Delaware time) on the second Business Day prior to any such payment pursuant to Section 5.3 and to the extent practicable with respect to each payment pursuant to Section 5.4. To the extent that any Preferred Return accrues but is unpaid during any Payment Period, such unpaid amount shall accrue interest at a rate per annum equal to the Interest Rate plus 2%.

5.6 Determination of the Preferred Return. The Trinity Class B Member shall notify the Trinity Managing Member or the Liquidator, as the case may be, on behalf of Trinity, and shall notify WGRAH on behalf of Trinity under the WGRAH Loan Agreement, (x) three Business Days prior to the Payment Date for each Payment Period (in respect of any payments to be made under Section 5.3) and (y) no later than 10:00 am (New York City time) on the date of any other payment under Article V, of the Interest Rate applicable to such Payment Period (or portion thereof). Each determination by the Trinity Class B Member of the Interest Rate shall be conclusive and binding for all purposes, absent manifest error, and shall be accompanied by such supporting documentation as to the determination of the Interest Rate as the Trinity Managing Member, or the Liquidator, as the case may be, or WGRAH may reasonably request.

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5.7 Preferred Return Reset.

(a) Prior to the 5th anniversary of the Effective Date (and, in the event of agreement, on each 5th successive anniversary thereafter) (each such date, a “Reset Date”), the Trinity Members shall meet to discuss amendments to the definitions of “Preferred Return” and related terms. The Trinity Class A Member shall propose whether to maintain the then-effective definitions of “Preferred Return” and related terms or to make adjustments thereto. The Trinity Class B Member shall determine, in its sole discretion, whether or not to accept the proposal made by the Trinity Class A Member (which determination may be made by the Trinity Class B Member regardless of whether or not the Trinity Class A Member proposes any changes to the definition of “Preferred Return” and related terms). If the Trinity Class B Member does not accept such proposal prior to the Reset Date, such failure shall constitute a Notice Event.

(b) If the Trinity Class B Member does not agree (in its sole discretion) to the Trinity Class A Member’s proposal as set forth in Section 5.7(a) before the third month prior to the Reset Date, Trinity will engage an underwriter or other sales agent, reasonably acceptable to the Trinity Class A Member (the “Sales Agent”), designated by the Trinity Class B Member to effect a sale of the WGRAH Note. Trinity and the Trinity Managing Member will, and the Managing Member will cause Anadarko to, use their best efforts to assist the Sales Agent in the conduct of such sale. The Sales Agent will be entitled to reset the interest rate on the WGRAH Note to a level sufficient to enable the sale of the WGRAH Note for no less than the sum of (i) all outstanding principal, accrued and unpaid interest, and accrued and unpaid expenses and fees thereunder, plus (ii) all fees including reasonable costs and expenses (including reasonable attorneys’ fees and the fees and expenses of the Sales Agent) and all other unpaid Trinity Expenses and Trinity Expenses reasonably anticipated to become due, minus (iii) the current value of any Permitted Assets then owned by Trinity other than those arising under or related to the WGRAH Loan Documents (such sum being the “Minimum Sale Proceeds”). Unless the Trinity Class B Membership Interest is previously retired or purchased in accordance with Article X of this Trinity Company Agreement or the WGRAH Note is purchased in accordance with the Sponsor Note Option Agreement, the Sales Agent shall sell the WGRAH Note for cash consideration of at least the Minimum Sale Proceeds as promptly as practicable after its appointment (and in no event later than the Reset Date). No sale of the WGRAH Note for either (A) any consideration other than cash, or (B) total consideration less than the Minimum Sale Proceeds may be made by the Sales Agent other than with the prior consent of the Trinity Class B Member in its sole discretion. The sum of (I) the proceeds of any sale pursuant to this Section 5.7(b) and (II) the proceeds of all other Permitted Assets then owned by Trinity shall immediately be used by Trinity to make a distribution to the Trinity Class B Member in an amount equal to the sum of all (x) Unrecovered Capital plus (y) the Cumulative Preferred Return Distribution Amount at the time of distribution, plus (z) all Trinity Expenses then unpaid and that will be incurred in connection with such distribution.

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(c) Within ten days following an ASCE Trigger Date, the Trinity Class B Member may (in its sole discretion) propose to the Trinity Class A Member an adjustment to the then-effective definitions of “Preferred Return” and related terms (the date when such proposal is made to the Trinity Class A Member being the “Reset Proposal Date”). If the Trinity Class B Member makes such a proposal, then the Trinity Class A Member shall have 5 days following the Reset Proposal Date to accept or reject such proposal in its sole discretion. If either (i) the Trinity Class B Member fails to make such a proposal within ten days following an ASCE Trigger Date, (ii) the Trinity Class B Member notifies the Trinity Class A Member prior to the tenth day following an ASCE Trigger Date that it will not be making such a proposal, (iii) the Trinity Class A Member rejects such proposal, or (iv) the Trinity Class A Member fails to accept such proposal by the fifth day following the Reset Proposal Date, then upon such occurrence Trinity shall engage a Sales Agent designated by the Trinity Class B Member, to effect a sale of the WGRAH Note. Trinity and the Managing Member will, and the Managing Member will cause Anadarko to, use their best efforts to assist the Sales Agent in the conduct of such sale. The Sales Agent will be entitled to reset the interest rate on the WGRAH Note to a level sufficient to enable the sale of the WGRAH Note for no less than the Minimum Sale Proceeds. Unless the Trinity Class B Membership Interest is previously retired or purchased in accordance with Article X of this Trinity Company Agreement, the Sales Agent shall sell the WGRAH Note for cash consideration of at least the Minimum Sale Proceeds as promptly as practicable after its appointment (and in no event later than the date that is 60 days following the ASCE Trigger Date). No sale of the WGRAH Note for either (A) any consideration other than cash, or (B) total consideration less than the Minimum Sale Proceeds may be made by the Sales Agent other than with the prior consent of the Trinity Class B Member in its sole discretion. The sum of (I) the proceeds of any sale pursuant to this Section 5.7(c) and (II) the proceeds of all other Permitted Assets then owned by Trinity shall immediately be used by Trinity to make a distribution to the Trinity Class B Member in an amount equal to the sum of all (x) Unrecovered Capital plus (y) the Cumulative Preferred Return Distribution Amount at the time of redemption, plus (z) all Trinity Expenses then unpaid. Failure to sell the WGRAH Note for the Minimum Sale Proceeds by the date that is 60 days following the ASCE Trigger Date will be a Notice Event.

ARTICLE VI

MANAGEMENT OF TRINITY

6.1 Trinity Managing Member. Subject to the limitations set forth in the Trinity Company Agreement (including Section 6.2), the business and affairs of Trinity shall be managed by the Trinity Managing Member, which is hereby designated a manager of Trinity by the Trinity Members for purposes of the Act. The Trinity Class A Member will act as the Trinity Managing Member, and shall remain the Trinity Managing Member at all times. Subject to the limitations set forth in the Trinity Company Agreement (including Section 6.2), the Trinity Managing Member shall have the power, right and authority to take all actions which the Trinity Managing Member deems necessary, useful or appropriate for the management and conduct of Trinity’s business or to the accomplishment of the purposes of Trinity. Any Person dealing with Trinity, other than a Trinity Member or a Trinity Member’s Affiliate, may rely on the authority

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of the Trinity Managing Member in taking any action in the name of Trinity without inquiry into the provisions of the Trinity Company Agreement or compliance with it, regardless of whether that action actually is taken in accordance with the provisions of the Trinity Company Agreement. Except as otherwise expressly provided in the Trinity Company Agreement, each Trinity Member hereby (a) specifically delegates to the Trinity Managing Member its rights and powers to manage and control the business and affairs of Trinity in accordance with the provisions of Section 18-407 of the Act, and (b) revokes its right to bind Trinity, as contemplated by the provisions of Section 18-402 of the Act.

6.2 Restrictions on the Trinity Managing Member’s Authority.

(a) Subject to Section 6.7, Trinity shall not take any of the following actions (directly or through any subsidiary) without Unanimous Consent (which consent may be withheld in each Trinity Member’s sole discretion):

(i) Any action in contravention of the Trinity Company Agreement or that would make it impossible to carry on the business purpose of Trinity;

(ii) confess any judgment against Trinity or settle any Legal Proceeding (A) with any Trinity Member or its Affiliate or (B) as a result of which the rights or assets of Trinity or any Trinity Member would be adversely affected;

(iii) assign, transfer or otherwise dispose of any Trinity Property, except as contemplated by the Transaction Agreements;

(iv) take any action that would cause any Trinity Member to have personal liability for any obligation of Trinity;

(v) merge, consolidate, or sell all or substantially all of its assets;

(vi) make a general assignment for the benefit of creditors, file a voluntary bankruptcy petition, file a petition or answer seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Applicable Law, file an answer or other pleading admitting or failing to contest the material allegations of a petition filed against Trinity in a proceeding of the type described in this subclause (vi), or seek, consent, or acquiesce to the appointment of a trustee, receiver, or liquidator of Trinity or of all or any substantial part of Trinity’s properties;

(vii) incur Indebtedness other than accounts payable in the ordinary course of Trinity’s business;

(viii) direct the Trinity Custodian to release Trinity Property from its custody under the Trinity Custodian Agreement other than pursuant to the terms of the Trinity Custodian Agreement or this Trinity Company Agreement, close any account established pursuant to the Trinity Custodian Agreement, or appoint a replacement Trinity Custodian;

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(ix) grant a Lien in any Trinity Property other than (A) Trinity Permitted Liens or (B) as otherwise explicitly contemplated by the Transaction Agreements;

(x) own, directly or indirectly, any assets other than Permitted Assets;

(xi) take any accounting or tax position inconsistent with the purposes of the Transaction Agreements or, except as may be required by Applicable Law, cause or permit changes in any material tax position or policy of Trinity, or cause or permit changes in or adoption of any accounting position, practice, or policy (including a change in its fiscal year) of Trinity not in accordance with GAAP;

(xii) reimburse any Trinity Member for any cost or expense;

(xiii) admit any new Trinity Member;

(xiv) cause or agree to any amendment, supplement, waiver, or other modification to, or any termination, cancellation, assignment, or delegation of, any Transaction Agreement (whether such action relates to the rights or obligation of Trinity or any other Person);

(xv) cause or permit Trinity to (a) agree, elect, or consent to, or approve the taking of, by WGRAH or any WGRAH Affiliate any action requiring the prior approval, election, or consent of Trinity under the WGRAH Loan Documents, (b) decline or fail to enforce the obligations of WGRAH or any WGRAH Affiliate under the WGRAH Loan Documents or exercise any discretionary right, remedy, or privilege granted to or reserved for Trinity in its capacity as the lender and the secured party under the WGRAH Loan Documents, or (c) take any Trinity Required Action other than in accordance with Section 6.7;

(xvi) sell, lease, dispose of or otherwise encumber or acquire any assets other than the reinvestment of one Permitted Asset into another;

(xvii) enter into (other than as contemplated or required under the Transaction Agreements), modify or terminate any agreement or transaction (except as permitted under the WGRAH Loan Agreement) with a Trinity Member or any Affiliate thereof, or grant any waiver or consent in connection therewith;

(xviii) amend the Certificate or amend the Trinity Company Agreement;

(xix) issue, sell or repurchase any Trinity Membership Interest, except as expressly set forth in the Trinity Company Agreement;

(xx) commence any Legal Proceeding against any Person;

(xxi) possess any Trinity Property other than for a Trinity purpose; or

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(xxii) cause or permit any distributions of cash or other Trinity assets to be made to the Trinity Members other than as expressly provided in the Trinity Company Agreement.

6.3 Approval of Transaction Agreements. The Trinity Members hereby ratify, confirm and approve Trinity entering into each Transaction Agreement and performing its obligations thereunder.

6.4 Compensation and Reimbursement. The Trinity Managing Member shall not receive any compensation for managing the affairs of Trinity.

6.5 Covenants of Trinity Managing Member. The Trinity Managing Member shall:

(a) cause Trinity to comply with all Applicable Law;

(b) cause Trinity to fulfill its obligations under the Trinity Company Agreement and the Transaction Agreements to which it is a party, including payment of all Trinity Expenses;

(c) not permit Trinity to have any employees;

(d) cause Trinity to take the Trinity Required Actions in accordance with Section 6.7; and

(e) not take any action with respect to the management of Trinity that would cause Trinity to have nexus with any state other than Delaware and Texas or, subject to section 8.4, cause Trinity to be subject to any state taxes.

6.6 Trinity Operating Account. The Trinity Managing Member shall cause Trinity to maintain the Trinity Operating Account with the Trinity Custodian in accordance with the Trinity Custodian Agreement. All amounts received by Trinity from any source shall be initially deposited into the Trinity Operating Account. If Trinity receives any Early Retirement Proceeds, the Trinity Managing Member shall immediately distribute such proceeds pursuant to Section 5.3(b).

6.7 Required Actions. The Trinity Managing Member shall take or cause to be taken each of the Trinity Required Actions (as such Trinity Required Actions may be requested, and as any determinations or calculations to be made in connection therewith may be made, by the Trinity Class B Member in accordance with the Transaction Agreements) promptly (and, in any event, not later than the next succeeding Business Day) upon receipt of a written request therefore from the Trinity Class B Member, which notice shall provide in reasonable detail the Trinity Required Action to be taken. In the event that the Trinity Managing Member shall fail to take any Trinity Required Action requested by the Trinity Class B Member prior to the close of business on the next succeeding Business Day after receipt of such request, the Trinity Class B Member may, on behalf of Trinity, cause Trinity to take (or cause Trinity to direct the Trinity Custodian to take) the Trinity Required Action and in connection therewith the Trinity Class B Member (or the Trinity Custodian, as the case may be) shall have all requisite power and authority to bind Trinity for the purpose of, and to the extent of the exercise of, such Trinity Required Action.

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6.8 The Trinity Custodian. Simultaneously with the execution of this Trinity Company Agreement, the Trinity Managing Member shall cause Trinity to enter into the Trinity Custodian Agreement and all other documents as may be reasonably required to be executed by Trinity in connection therewith and take such other actions as may be reasonably necessary to consummate the transactions contemplated thereby and appoint the Trinity Custodian. The Trinity Members acknowledge that the Trinity Managing Member has delegated certain responsibilities to Wells Fargo Delaware Trust Company, as Trinity Custodian pursuant to this Trinity Company Agreement, the Trinity Custodian Agreement, and the other Transaction Agreements, and agree that (x) such delegation is reasonable and appropriate under the circumstances and (y) the Trinity Managing Member shall have no responsibility or liability for errors and omissions of Wells Fargo Delaware Trust Company, as Trinity Custodian, in performing such responsibilities. The Trinity Managing Member shall instruct the Trinity Custodian to make all payments to be made on behalf of Trinity, including all payments in respect of Preferred Return, Additional Financing Costs, Pecos Transaction Costs, and other Trinity Expenses in accordance with the Trinity Custodian Agreement.

ARTICLE VII

INDEMNIFICATION

7.1 Indemnification of the Trinity Members. Subject to the limitations set forth in Section 7.5, each of the Trinity Class A Member and Trinity (each of the foregoing Persons being an “Indemnitor”) hereby agrees jointly and severally, to the fullest extent permitted by Applicable Law, (i) to indemnify and hold harmless each Indemnified Person, and the Liquidator, or any receiver or trustee of Trinity (in the case of the Liquidator, receiver or trustee, solely to the extent of Trinity Property) shall indemnify and hold harmless, each Indemnified Person from and against, and (ii) to pay on an After-Tax Basis, all Expenses (the Expenses, on an After-Tax Basis, being collectively referred to as “Trinity Indemnified Amounts”) that may be incurred or realized by or asserted against such Indemnified Person, relating to, growing out of or resulting from:

(a) Trinity Obligations. Any failure by Trinity to perform or observe each of its covenants and obligations under the Trinity Company Agreement or any other Transaction Agreement to which it is a party (collectively, the “Covered Documents”), including Trinity Indemnified Amounts resulting from or arising out of or in connection with enforcement of the Covered Documents (or determining whether or how to enforce any Covered Documents, whether through negotiations, legal proceedings or otherwise), or responding to any subpoena or other legal process or informal investigative demand in connection herewith or therewith; or

(b) Representations and Warranties. Any inaccuracy in, or any breach of, any written certification, representation or warranty made by or on behalf of Trinity in any Covered Document or in any written report or certification required hereunder or under any other Covered Document, in each case (i) if but only if such certification, representation or warranty is made as of a specific date, as of the date as of which the

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facts stated therein were certified, represented or warranted and (ii) in all other cases, as of any date or during any period to which such certification, representation or warranty may be applicable; or

(c) Investigations; Litigation; Proceedings. Any investigation, litigation or Legal Proceeding, whether or not such Indemnified Person is a party thereto, that (i) relates to, grows out of, or results from any action, or omission, or alleged action or omission, by or on behalf of or attributable to Trinity and (ii) would not have resulted in Trinity Indemnified Amounts incurred or realized by or asserted against such Indemnified Person but for the Transaction Agreements or the transactions thereunder or contemplated thereby.

7.2 Indemnification for Registration and Business Qualification Requirements. Subject to the limitations set forth in Section 7.5, each Indemnitor shall indemnify and save harmless (in the case of a receiver or trustee, to the extent of Trinity Property) each Indemnified Person from and against, and pay to each Indemnified Person, all Trinity Indemnified Amounts with respect to such Indemnified Person resulting from (i) to the extent required hereunder, the need to register, file any notice or other document, or pay any amount to any Governmental Authority in order to market or Transfer any Trinity Class B Membership Interests, or (ii) the failure of the Trinity Class B Member or any other Indemnified Person to qualify to do business in any state (other than Delaware) or other jurisdiction in which the Trinity Class B Member or a direct or indirect member, partner, shareholder or other equity holder of the Trinity Class B Member would not be required to qualify to do business but for its being a Trinity Class B Member, or a direct or indirect member, partner, shareholder or other equity holder of the Trinity Class B Member.

7.3 Liquidator Indemnification. Subject to the limitations set forth in Section 7.5, Trinity, or in the event that the liquidation of Trinity has been completed, the Trinity Class A Member, shall indemnify and save harmless each Indemnified Person from and against, and pay to each Indemnified Person, all Trinity Indemnified Amounts incurred on behalf of Trinity by each Indemnified Person or otherwise incurred, realized by or asserted against each Indemnified Person, in connection with any disposition of Trinity Property or the liquidation of Trinity, or by reason of any act performed or omitted to be performed by any Indemnified Person in connection therewith, including reasonable attorneys’ fees incurred by each Indemnified Person in connection with the defense of any litigation or other proceeding based on any such act or omission, or alleged act or omission, or any other investigation, litigation or proceeding, whether or not such Indemnified Person is a party thereto, arising in connection with any such disposition or liquidation, and including any indemnity claims against the Liquidator arising under Section 7.1.

7.4 Survival of Indemnification Obligations. All indemnities provided for in the Trinity Company Agreement shall survive the Transfer of any Trinity Membership Interest and the liquidation of Trinity. After any such Transfer or liquidation, the provisions of this Article VII shall inure to the benefit of each Transferring Member with respect to Trinity Indemnified Amounts arising in respect of the period during which such Transferring Member was a Trinity Member (including with respect to actions taken or omitted to be taken, and events occurring and circumstances existing, during such period).

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7.5 Limitations on Indemnification Obligations. The indemnities provided in Section 7.1, Section 7.2, and Section 7.3 shall be subject to the following limitations:

(a) Limitation by Law. Such sections shall be enforced only to the maximum extent permitted by Applicable Law.

(b) Misconduct, Etc. No Indemnified Person shall be indemnified or held harmless for, and no Indemnitor shall have any liability with respect to any Indemnified Person for or in respect of, any Expenses to the extent caused by or resulting from (i) the actual fraud, willful misconduct, bad faith or gross negligence of such Indemnified Person or any of its Related Persons or (ii) any inaccuracy in, or breach of, any written certification, representation or warranty made by such Indemnified Person or any of its Related Persons in any Transaction Agreement or in any written report or certification required under any Transaction Agreement (unless and to the extent such inaccuracy or breach is attributable to any written information provided by Anadarko or its Affiliates), in each case under this clause (ii) (A) if, but only it such certification, representation or warranty is made as of a specific date, as of the date as of which the facts stated therein were certified, represented or warranted and (B) in all other cases, as of any date or during any period to which such certification, representation or warranty may be applicable.

(c) No Duplication. Trinity Indemnified Amounts under this Article VII shall be without duplication of any amounts payable under indemnification provisions of any other Transaction Agreement or other agreement or any amounts actually paid thereunder.

7.6 Payments; No Reduction of Capital Account. Any amounts subject to the indemnification provisions of this Article VII shall be paid by the applicable Indemnitor within five Business Days following demand therefor, accompanied, as may be appropriate in the context, by supporting documentation in reasonable detail. Payments to a Trinity Member pursuant to this Article VII shall not reduce the Capital Account of such Trinity Member. To the extent Trinity is required to indemnify any Indemnified Person hereunder, each such Indemnified Person shall be a creditor of Trinity to the extent of the Trinity Indemnified Amounts owing to such Indemnified Person hereunder from time to time. Payment shall be made to the bank account or at another location as such Indemnified Person shall designate in writing or as is expressly required under any Transaction Agreement the obligations under which are the subject of any such payment, not later than 1:00 p.m. (New York City time) on the date for such payment in immediately available funds.

7.7 Procedural Requirements.

(a) Notice of Claims. Any Indemnified Person that proposes to assert a right to be indemnified under this Article VII will, promptly after receipt of notice of commencement of any action, suit or proceeding against such Indemnified Person in respect of which a claim is to be made against the relevant Indemnitor under this Article VII (a “Trinity Indemnified Proceeding”), or the incurrence or realization of Trinity Indemnified Amounts in respect of which a claim is to be made against such

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Indemnitor under this Article VII, notify such Indemnitor of the commencement of such Trinity Indemnified Proceeding or of such incurrence or realization, enclosing a copy of all relevant documents, including all papers served and claims made, but the failure so to notify such Indemnitor promptly of any such Trinity Indemnified Proceeding or incurrence or realization shall not relieve (i) such Indemnitor from any liability that it may have to such Indemnified Person under this Article VII or otherwise, except, as to such Indemnitor’s liability under this Article VII, to the extent, but only to the extent, that such Indemnitor shall have been prejudiced by such omission or (ii) any other Indemnitor from liability that it may have to any Indemnified Person under the Transaction Agreements.

(b) Defense of Proceedings. In case any Trinity Indemnified Proceeding shall be brought against any Indemnified Person and it shall notify the relevant Indemnitor of the commencement thereof, such Indemnitor shall be entitled to participate in, and to assume the defense of, such Trinity Indemnified Proceeding with counsel reasonably satisfactory to such Indemnified Person, and after notice from such Indemnitor to such Indemnified Person of such Indemnitor’s election so to assume the defense thereof and the failure by such Indemnified Person to object to such counsel within ten Business Days following its receipt of such notice, such Indemnitor shall not be liable to such Indemnified Person for legal or other expenses incurred after such notice of election to assume such defense except as provided below and except for the reasonable costs of investigating, monitoring or cooperating in such defense subsequently incurred by such Indemnified Person reasonably necessary in connection with the defense thereof. Such Indemnified Person shall have the right to employ its counsel in any such Trinity Indemnified Proceeding, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless:

(i) the employment of counsel by such Indemnified Person at the expense of such Indemnitor has been authorized in writing by such Indemnitor (which authorization shall not be unreasonably withheld or delayed);

(ii) such Indemnified Person shall have reasonably concluded in its good faith (which conclusion shall be determinative unless a court determines that conclusion was not reached reasonably and in good faith) that there is or may be a conflict of interest between such Indemnitor and such Indemnified Person in the conduct of the defense of such Trinity Indemnified Proceeding or that there are or may be one or more different or additional defenses, claims, counterclaims, or causes of action available to such Indemnified Person (it being agreed that in any case referred to in this clause (ii), such Indemnitor shall not have the right to direct the defense of such Trinity Indemnified Proceeding on behalf of the Indemnified Person);

(iii) such Indemnitor shall not have employed counsel reasonably acceptable to the Indemnified Person, to assume the defense of such Trinity Indemnified Proceeding within a reasonable time after notice of the commencement thereof (provided, however, that this clause (iii) shall not constitute a waiver of any conflict of interest which may arise with respect to any such counsel); or

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(iv) any counsel employed by such Indemnitor shall fail to timely commence or maintain the defense of such Trinity Indemnified Proceeding, in each of which cases the fees and expenses of counsel for such Indemnified Person shall be at the expense of such Indemnitor; provided, that without the prior written consent of such Indemnified Person, such Indemnitor shall not settle or compromise, or consent to the entry of any judgment in, any pending or threatened Trinity Indemnified Proceeding, unless such settlement, compromise or consent or related judgment includes an unconditional release of such Indemnified Person from all liability for Expenses arising out of such claim, action, investigation, suit or other legal proceeding. No Indemnified Person shall settle or compromise, or consent to the entry of any judgment in, any pending or threatened Trinity Indemnified Proceeding in respect of which any payment would result hereunder or under the other Transaction Agreements without the prior written consent of such Indemnitor, such consent not to be unreasonably withheld or delayed. Only one counsel shall be retained by all Indemnified Persons with respect to any Trinity Indemnified Proceeding, unless counsel for any Indemnified Person reasonably concludes in good faith (which conclusion shall be determinative unless a court determines that conclusion was not reached reasonably and in good faith) that there is or may be a conflict of interest between such Indemnified Person and one or more other Indemnified Persons in the conduct of the defense of such Trinity Indemnified Proceeding or that there are or may be one or more different or additional defenses, claims, counterclaims, or causes of action available to such Indemnified Person (it being agreed that in any case referred to in this sentence such Indemnified Person may retain separate counsel together with all other Indemnified Persons subject to the same conflict of interest or sharing such additional defenses, claims, counterclaims or causes of action).

The foregoing Indemnities shall expressly include any Trinity Indemnified Amounts attributable to the ordinary, sole or contributory negligence of any Indemnified Person.

ARTICLE VIII

TAXES

8.1 Tax Returns. The Trinity Tax Matters Member shall cause to be prepared and filed all necessary federal and state tax returns for Trinity, including making the elections described in Section 8.2. Upon written request by Trinity, each Trinity Member shall furnish to Trinity all pertinent information in its possession relating to Trinity operations that is necessary to enable Trinity’s tax returns to be prepared and filed. All returns filed by Trinity in respect of federal, state and local income taxes shall be filed on the basis that Trinity is a partnership for federal, state and local income tax purposes unless otherwise (i) required by Applicable Law; or (ii) unanimously agreed by all Trinity Members. The Trinity Members shall take all steps pursuant to Applicable Law in order to achieve partnership classification for Trinity for federal, state and local income tax purposes and, in this connection, the Trinity Class B Member will join

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in the making of any election requested in good faith by the Trinity Class A Member in furtherance of this objective; provided, that any such election could not reasonably be expected to reduce the amount or change the timing, treatment, or character of the receipts of any payments expected to be received by the Trinity Class B Member.

8.2 Tax Elections. Trinity shall make the following elections on the appropriate tax returns:

(a) to adopt the accrual method of accounting;

(b) an election pursuant to section 754 of the Code;

(c) to elect to deduct the organizational expenses of Trinity as permitted by Section 709(b) of the Code;

(d) to elect to deduct the start-up expenditures of Trinity as permitted by Section 195(b) of the Code; and

(e) any other election that the Trinity Members may deem appropriate and in the best interests of Trinity or Trinity Members, as the case may be.

Neither Trinity nor any Trinity Member may make an election for Trinity to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law, and no provision of the Trinity Company Agreement shall be construed to sanction or approve such an election.

8.3 Trinity Tax Matters Member. The “Tax Matters Member” of Trinity pursuant to section 6231(a)(7) of the Code shall be the Trinity Managing Member. The Trinity Tax Matters Member shall take such action as may be necessary to cause each Trinity Member to become a “notice partner” within the meaning of section 6223 of the Code and shall inform each Trinity Member of all significant matters that may come to its attention in its capacity as Trinity Tax Matters Member by giving written notice thereof promptly, and in no event later than the third Business Day after becoming aware thereof, and, within that time, shall forward to each other Trinity Member copies of all significant written communications it may receive in that capacity. The Trinity Tax Matters Member may not take any action contemplated by sections 6222 through 6231 of the Code without the consent of the Trinity Members, but this sentence does not authorize the Trinity Tax Matters Member to take any action left to the determination of an individual Trinity Member under sections 6222 through 6231 of the Code. The Trinity Tax Matters Member shall provide any Trinity Member, upon request, access to all accounting and tax information, workpapers and schedules related to Trinity. The Trinity Tax Matters Member shall make regular and current reports to the Trinity Class B Member on the status of all representations of Trinity and the Trinity Members before taxing authorities and courts of competent jurisdiction. Furthermore, without the prior written consent of the Trinity Class B Member (which consent shall not be unreasonably withheld), the Trinity Tax Matters Member may not enter into any agreements or documents that would affect the amount, timing, treatment or character of any items of income, gain, loss, deduction or credit allocated to, or otherwise realized by, the Trinity Class B Member.

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8.4 State Taxes. Subject to the limitations provided in Section 6.5(f), to the extent Trinity is subject to any state taxes, including, without limitation, state taxes imposed by Texas, the Trinity Class A Member shall contribute the amount of such taxes to Trinity and shall cause Trinity to pay such taxes on a timely basis.

ARTICLE IX

BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

9.1 Maintenance of Books; Audit Firm.

(a) The Trinity Managing Member shall keep books and records of accounts for Trinity. The books of account for Trinity shall be maintained on an accrual basis in accordance with the terms of the Trinity Company Agreement and GAAP, except that the Capital Accounts of the Trinity Members shall be maintained in accordance with Section 4.3. The accounting year of Trinity shall be the calendar year.

(b) Trinity shall engage an external audit firm that is registered with the Public Company Accounting Overnight Board pursuant to Section 102 of the Sarbanes-Oxley Act of 2002, as amended, which audit firm may be the same audit firm as the audit firm engaged by Anadarko with respect to the auditing of Anadarko’s financial statements.

(c) Any Trinity Member or any agents or representatives of such Trinity Member, at Trinity’s expense, may visit and inspect any of the properties of Trinity and examine any information it may reasonably request from Trinity’s financial and operating records and books of account of Trinity; and discuss the affairs, finances and accounts of Trinity with the Trinity Managing Member and the officers of the Trinity Managing Member, all at such reasonable times (i.e., during normal business hours, at reasonable intervals and upon reasonable notice) and, other than during the continuance of any Notice Event, Termination Event, Anadarko Event, Liquidating Event, or Incipient Event at such reasonable intervals, as such Trinity Member or any agents or representatives of such Trinity Member may reasonably request for purposes related to this Trinity Company Agreement. In addition, any Trinity Member may discuss the affairs, finances and accounts of Trinity with the independent accountants of Trinity at reasonable intervals and with the knowledge of the Trinity Managing Member where feasible.

9.2 Financial Statements and Reports.

(a) Within 60 days after the end of each Fiscal Quarter of Trinity (except the last quarter of the Fiscal Year), Trinity shall provide to each Trinity Member (i) an unaudited copy of (A) a balance sheet of Trinity as of the end of such Fiscal Quarter, (B) an income statement of Trinity for such Fiscal Quarter and the Fiscal Year to date and (C) a statement of cash flows of Trinity for such Fiscal Quarter and (ii) a compliance certificate in a form reasonably acceptable to the Trinity Class B Member, signed by a senior financial officer of the Person that ultimately Controls the Trinity Managing Member.

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(b) Within 120 days after the end of each Fiscal Year of Trinity, Trinity shall provide to each Trinity Member (i) an audited copy of (A) a balance sheet of Trinity as of the end of such Fiscal Year, (B) an income statement of Trinity for such Fiscal Year, (C) a statement of cash flows of Trinity for such Fiscal Year, and (D) an audit report thereon of Trinity’s certified public accountants and (ii) a compliance certificate, in a form reasonably acceptable to the Trinity Class B Member, signed by a senior financial officer of the Person that ultimately Controls the Trinity Managing Member.

(c) Trinity will promptly deliver to each Trinity Member a copy of each notice or report delivered to it pursuant to any Transaction Agreement.

(d) In addition to the obligations under Sections 9.2(a), (b) and (c), the Trinity Managing Member shall timely prepare and deliver to any Trinity Member, upon such Trinity Member’s reasonable request, all of such additional financial statements, notes thereto and additional financial information with respect to Trinity as may be required in order for such Trinity Member or its Affiliate to comply with any reporting requirements under (i) the Securities Act, and the rules and regulations promulgated thereunder, (ii) the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and (iii) any national securities exchange or automated quotation system.

(e) The Trinity Managing Member shall use commercially reasonable efforts to cause Trinity’s external audit firm to consent (i) to the inclusion or incorporation by reference of its audit opinion with respect to the audited financial statements of Trinity referred to in Section 9.2(b) to the extent such audited financial statements are required to be included in any registration statement, prospectus, offering memorandum, report or other document of a Trinity Member or an Affiliate of a Trinity Member in order to comply with the reporting requirements referred to in Section 9.2(d) and (ii) perform a review of the unaudited financial statements of Trinity pursuant to the Statement on Auditing Standards No. 100 (Interim Financial Information) (or any successor statement related to the topic of accountants’ comfort letters) that is included in any such registration statement, prospectus, offering memorandum, report or other document of a Trinity Member or an Affiliate of a Trinity Member in order to comply with the reporting requirements referred to in Section 9.2(d). The Trinity Managing Member shall execute and deliver to the external audit firm such representation letters, in form and substance customary for representation letters provided to external audit firms by management of the company whose financial statements are the subject of an audit or are subject of a review pursuant to Statement of Accounting Standards No. 100 (Interim Financial Information) (or any successor statement related to the topic of accountants’ comfort letters), as may be reasonably requested by its external audit firm with respect to any such financial statements. The Trinity Managing Member shall use commercially reasonable efforts to cause the external audit firm to deliver a comfort letter in form and substance customary with respect to offerings of securities registered under the Securities Act with respect to any such financial statements and any other

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financial information related to Trinity that is included in a registration statement, prospectus or offering memorandum related to an offering of securities of the type for which comfort letters are customarily provided to the underwriters or initial purchasers in connection therewith.

(f) Promptly following receipt from WGRAH (and in no event more than two Business Days thereafter), the Trinity Managing Member shall distribute to the Trinity Members a copy of all notices, reports, and other information received from WGRAH pursuant to or relating to the WGRAH Loan Documents.

(g) The Trinity Managing Member shall deliver to the Trinity Members a notice of the occurrence of any Liquidating Event, Termination Event, Anadarko Event, Notice Event or Incipient Event promptly, but in any event no later than three Business Days after a Responsible Officer of the Trinity Managing Member or Anadarko has actual knowledge of such occurrence or such event becomes generally publicly known, and a notice setting forth details of the actions that the Trinity Managing Member or Anadarko has taken or proposes to take with respect thereto within ten Business Days after such Responsible Officer obtains actual knowledge of such event or after such event becomes generally publicly known.

9.3 Tax Statements. On or before the last day of March during the existence of Trinity, the Trinity Managing Member shall furnish to each Trinity Member all information reasonably necessary or appropriate to file its respective tax reports, including its Schedule K-1, apportionment schedules for the immediately preceding tax year. In addition, to the extent reasonably possible, the Trinity Managing Member will cause each Trinity Member to be provided with estimates of all such information on or before the first day of February each year.

9.4 Accounts. The Trinity Managing Member shall establish and maintain the Trinity Operating Account with the Trinity Custodian. The Trinity Managing Member shall not establish or maintain any other bank and investment accounts or arrangements for Trinity funds. Trinity’s funds shall not be commingled with the funds of any other Person.

ARTICLE X

ADDITIONAL MATTERS

10.1 Sponsor Purchase Option. The Trinity Members acknowledge that, pursuant to the Sponsor Option Agreement, Anadarko (or its assignee or deignee as permitted therein) has the right to purchase the Trinity Class B Member’s entire Trinity Class B Membership Interest without any approval or consent required from the Trinity Class A Member (the “Sponsor Purchase Option”).

10.2 Redemption of Trinity Class B Membership. The Trinity Managing Member shall have the right at any time to direct Trinity to redeem the entire Trinity Class B Membership Interest upon 10 Business Days’ prior written notice thereof to the Trinity Class B Member for an amount equal to the sum of all (i) Unrecovered Capital plus (ii) the Cumulative Preferred Return Distribution Amount at the time of redemption, plus (iii) all Trinity Expenses then unpaid. Such redemption shall be accomplished pursuant to a Membership Interest Redemption

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Agreement substantially in the form of that attached hereto as Exhibit C. The closing of any redemption under this Section 10.2 shall occur within 30 days following the date that Trinity is directed to redeem the Trinity Class B Membership Interest.

ARTICLE XI

DISSOLUTION, LIQUIDATION, AND TERMINATION

11.1 Liquidation.

(a) Liquidating Events. Trinity shall dissolve and commence winding up and liquidating upon, and only upon, the occurrence of a Liquidating Event.

(b) Termination Notice. At any time on or after the occurrence and during the continuance of any Notice Event, the Trinity Class B Member may elect to cause such Notice Event to result in a Termination Event by delivering to the Managing Member a notice (a “Termination Notice”) of such election. Such Termination Notice shall be effective on the Business Day it is delivered (unless stated to be effective on any other day after the day of delivery) to the Managing Member (or if such delivery day or such other day is not a Business Day, the immediately following Business Day) (the date of such effectiveness being the “Termination Notice Effective Date”). Any such Termination Notice may be rescinded by the Trinity Class B Member giving such Termination Notice prior to the Termination Notice Effective Date by delivery of a rescission notice to the Managing Member.

11.2 Winding Up.

(a) Distribution of Assets. Upon the occurrence of a Liquidating Event, Trinity shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Trinity Members, and no Trinity Member shall take any action with respect to Trinity that is inconsistent with the winding up of Trinity’s business and affairs; provided, that all covenants contained in the Trinity Company Agreement and obligations provided for in the Trinity Company Agreement shall continue to be fully binding upon the Trinity Members until the Trinity Property has been distributed pursuant to this Section 11.2 and the Certificate has been cancelled pursuant to the Act. The Liquidator shall be responsible for overseeing the winding up and dissolution of Trinity (including taking any actions required by Section 11.9), shall take full account of Trinity’s liabilities and the Trinity Property, and, subject to Section 11.2(c), shall cause the Trinity Property or the proceeds from the disposition thereof and the proceeds from the repayment of the WGRAH Note, to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by Applicable Law, in the following order:

(i) First, as provided in Section 18-804(a)(1) of the Act; and

(ii) Second, the balance, if any, to the Trinity Members in an amount equal to their Capital Account balances, after giving effect to all contributions, distributions, and allocations made for all periods through the end of the Liquidation Period; provided, that, at the option of the Trinity Class B Member, cash (as opposed to other property) shall be first applied and distributed to the Trinity Class B Member and second to the Trinity Class A Member.

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(b) Reserves. Subject to Section 11.2(c), in the reasonable good faith discretion of the Liquidator, with the consent of the Trinity Class B Member, a portion (determined in the manner provided below) of the distributions that would otherwise be made to the Trinity Members pursuant to Section 11.2(a) may be:

(i) Distributed to a trust established solely for the purposes of liquidating Trinity Property, collecting amounts owed to Trinity, and paying any reasonably anticipated contingent or unforeseen liabilities or obligations of Trinity arising out of or in connection with Trinity. The assets of any such trust shall be distributed from time to time, in the reasonable good faith discretion of the Liquidator, in the same order of priority as the amount distributed to such trust by Trinity would otherwise have been distributed to the Trinity Members pursuant to Section 11.2(a); or

(ii) Withheld to provide a reasonable reserve for reasonably anticipated Trinity liabilities (contingent or otherwise) and to allow for the collection of the unrealized portion of any installment obligations owed to Trinity; provided, that such withheld amounts shall be distributed pursuant to Section 11.2(a) as soon as practicable.

The portion of the Distributions that would otherwise have been made to each of the Trinity Members that is instead distributed to a trust pursuant to Section 11.2(b)(i) or withheld to provide a reserve pursuant to Section 11.2(b)(ii) shall be determined in the same manner as the expense or deduction that would have been allocated if Trinity had realized an expense equal to such amounts immediately prior to a distribution being made pursuant to Section 11.2(a).

(c) Distribution Upon an Anadarko Credit Event. In the event that a Liquidating Event occurs as the result of an Anadarko Credit Event, (i) the WGRAH Note and the WRGAH Advance Documents will be immediately distributed to the Trinity Class B Member, (ii) all other Trinity Property will be placed into a trust in accordance with the procedures set forth in Section 11.2(b), and (iii) Trinity shall grant the Trinity Class B Member a security interest in the trust and the proceeds therefrom to secure Trinity’s obligation to make payments to the Trinity Class B Member pursuant to Section 11.2(a), to the extent that such payments are necessary following liquidation by the Trinity Class B Member of the Trinity Property distributed to it pursuant to Section 11.2(c)(i).

11.3 Restoration of Deficit Capital Accounts. Notwithstanding anything in the Trinity Company Agreement to the contrary, if a Liquidating Event has occurred and Trinity is wound up in accordance with Section 11.2, no Trinity Member shall be obligated to make any Capital Contributions to Trinity in respect of a deficit balance in its Capital Account, and such deficit shall not be considered to be a debt owed to Trinity or to any other Person for any purpose whatsoever.

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11.4 Rights of Members. Each Trinity Member shall look solely to the Trinity Property for the return of its Capital Contribution and, except as otherwise provided in Section 11.10, shall have no right or power to demand or receive property other than cash, from Trinity.

11.5 Occurrence of Liquidating Event.

(a) A “Liquidating Event” will occur (the date of such occurrence being the “Liquidation Start Date”) on the earlier of (i) first Business Day occurring immediately after the expiration of the Purchase Option Period following the occurrence of a Termination Event or (ii) the occurrence of any event which requires dissolution of Trinity under the Act.

(b) The Trinity Members hereby agree that Trinity shall not be dissolved or required to be wound up notwithstanding the occurrence of an event that caused the last Trinity Member to cease to be a Trinity Member, if within ninety (90) days after such event the Personal Representative (as defined in the Act) of such last remaining Trinity Member agrees in writing to continue the business of Trinity and to the admission, effective as of the date of such event, of one or more additional Trinity Members.

11.6 Allocations and Distributions During Period of Liquidation. During the Liquidation Period, the Trinity Members shall continue to share Profits, Losses and other items of Trinity income, gain, loss or deduction in the manner provided in Article V and Preferred Return, distributions and other payments shall continue to be made as set forth in Article V. In addition, the Liquidator, in its sole discretion, may make cash distributions to the Trinity Class B Member at any time.

11.7 Character of Liquidating Distributions. All payments made in liquidation of Trinity Membership Interests shall be made in exchange for the interest of such Trinity Member in Trinity Property pursuant to Section 736(b)(1) of the Code, including the interest of such Trinity Member in Trinity goodwill.

11.8 The Liquidator.

(a) Definition. The “Liquidator” shall mean (i) in the event that a liquidation of Trinity results from a Termination Event described in clause (d) of the definition of Termination Event, the Trinity Class A Member or any other Affiliate of Anadarko appointed as Liquidator by the Trinity Class A Member; provided, however, that, if the Collection Date does not occur within 30 days after the Liquidation Start Date, then the Liquidator shall be appointed by the Trinity Class B Member upon written notice to the Trinity Class A Member and (ii) in any other circumstance, any other Person appointed as Liquidator by the Trinity Class B Member.

The Trinity Class B Member (or the Trinity Class A Member if it may then appoint the Liquidator) may appoint an appointee to be Liquidator prior to the Liquidation Start Date by delivering written notice of such appointment to the other Trinity Members. Any such appointment may be subsequently withdrawn by similar written notice.

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The Liquidator shall have the rights set forth in Section 18-803(b) of the Act and exclusively shall have the rights, power and authority of the Managing Member necessary or appropriate in its discretion to effect the dissolution, winding up and liquidation of Trinity. In furtherance of the foregoing and not as a limitation, the Liquidator shall have the authority to enter into any agreement or incur obligations on behalf of Trinity to the extent necessary, in its sole judgment, to facilitate the liquidation of Trinity and the marshalling or collection of its assets, including, without limitation, the authority to engage sales agents or other professional advisors on market terms. The actions of the Liquidator shall for all purposes be the actions of Trinity.

(b) Fees and Expenses. Trinity is authorized to pay a reasonable fee to the Liquidator for its services performed pursuant to this Article XI and to reimburse the Liquidator for its reasonable costs and expenses incurred in performing those services, including costs and expenses of counsel, accountants, sales agents and other professional advisors to the Liquidator.

(c) Resignation of Liquidator. At any time any Liquidator may, in its discretion, resign as Liquidator and the Trinity Class B Member shall appoint a replacement Trinity Liquidator pursuant to Section 11.8(a).

(d) Notification to the Trinity Custodian. The Trinity Class B Member shall notify the Trinity Custodian of the identity of the Liquidator and any change in the identity of the Liquidator.

11.9 Liquidation Procedures. Upon the occurrence of the Liquidation Start Date, the Liquidator shall commence the winding up of Trinity’s business and in so doing shall, among other things, cause the following to occur:

(a) Demand under the WGRAH Loan Documents. The Liquidator shall accelerate and demand payment in full under the WGRAH Loan Documents and take all necessary action in furtherance thereof and to enforce such payment.

(b) Sale of Trinity Property. The Liquidator shall commence the sale and/or liquidation of the Trinity Property. Trinity shall comply with all Applicable Law and all applicable transfer restrictions, except to the extent that such transfer restrictions shall be waived or any transfer shall be consented to by any relevant parties. The Liquidator shall sell and/or liquidate the Trinity Property in a commercially reasonable manner in order to maximize the proceeds of such sale and/or liquidation.

(c) Reporting Requirement. As soon as practicable but in any event not later than the fifth Business Day after the Liquidation Start Date, the Trinity Managing Member shall instruct the Trinity Custodian to prepare and deliver to the Trinity Class B Member a notice stating: (i) the amount of cash held by the Trinity Custodian (including any cash received upon demand under the WGRAH Loan Agreement and from the sale of any Trinity Property) and (ii) the face value less unamortized discount, if any, of any Cash Equivalents (other than cash) held by the Trinity Custodian.

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(d) Audit Report. If, following completion of the Liquidation Period, the Unrecovered Capital of the Trinity Class B Member is greater than zero, then not later than 120 days after the last day of the Liquidation Period, the Trinity Class A Member shall cause to be delivered to each Trinity Member an audited statement of the Trinity Members’ Capital Accounts and, a balance sheet reflecting Fair Market Values of the Trinity Property, each as of such last day, together with a report of a nationally recognized accounting firm stating that such statement and balance sheet were prepared and fairly stated in accordance with this Trinity Company Agreement.

(e) Liquidating Distributions. All distributions to be made pursuant to Section 11.2 shall be made by the Liquidator from time to time immediately upon receipt of any proceeds of the liquidation of Trinity Property, but in any event not later than the last day of the Liquidation Period.

(f) Discretion to Sell. Except to the extent otherwise expressly provided herein, the Liquidator shall have the discretion to dispose of Trinity Property in any manner in its sole discretion.

11.10 Form of Liquidating Distributions to Trinity Members. For purposes of making distributions required by Section 11.2, the Liquidator may determine whether to distribute to the Trinity Members all or any portion of the Trinity Property in kind or to sell or otherwise liquidate all or any portion of the Trinity Property and distribute the proceeds therefrom; provided, that the Liquidator shall not, without the prior written consent of the Trinity Class B Member, distribute Trinity Property other than cash to the Trinity Class B Member. Following the payment in full in cash of all amounts due and payable to the Trinity Class B Member hereunder, and if requested by the Trinity Class A Member, distributions in kind of the Trinity Property shall be made to the Trinity Class A Member.

ARTICLE XII

AMENDMENT OF THE TRINITY COMPANY AGREEMENT

12.1 Amendments to be Adopted by Trinity. Each Trinity Member agrees that the Trinity Managing Member, in accordance with and subject to the limitations contained in Article VI, may execute, swear to, acknowledge, deliver, file and record whatever documents may be required to reflect:

(a) a change in the name of Trinity, the location of the principal place of business of Trinity or the registered agent or office of Trinity;

(b) admission or substitution of Trinity Members in accordance with this Trinity Company Agreement;

(c) an amendment that is necessary, in the opinion of counsel, to qualify or continue the qualification of Trinity as a limited liability company under the Applicable Law of any state or that is necessary or advisable in the opinion of the Trinity Managing Member to ensure that Trinity will not be taxable as a corporation or otherwise taxed as an entity for federal income tax purposes;

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(d) an amendment that is necessary, in the opinion of counsel, to prevent Trinity or its officers from in any manner being subjected to the provisions of the Investment Company Act of 1940 or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; and

12.2 Amendment Procedures. Except as provided in Section 12.1, amendments, restatements and corrections to, and waivers of any provisions of and cancellation of, the Trinity Company Agreement may be proposed by any Trinity Member by notice to Trinity and each other Trinity Member. Following such proposal, the Trinity Class A Member on behalf of Trinity shall submit to the Trinity Members a verbatim statement of any proposed amendment, restatement, correction, waiver, or cancellation and shall seek the written vote of the Trinity Members thereon or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. Except as provided in Section 12.1, a proposed amendment, restatement, correction, waiver, or cancellation shall be adopted and be effective as an amendment, restatement, correction, waiver, or cancellation of the Trinity Company Agreement only if such amendment, restatement, correction, waiver, or cancellation receives the affirmative vote of all the Trinity Members.

ARTICLE XIII

MEMBERSHIP INTERESTS

13.1 Certificates. Trinity Membership Interests will not be certificated unless otherwise approved by, and subject to the provisions set by, the Trinity Managing Member.

13.2 Registered Holders. Trinity shall be entitled to recognize the exclusive right of a Person registered on its books as the owner of the indicated Trinity Membership Interest and shall not be bound to recognize any equitable or other claim to or interest in such Trinity Membership Interest on the part of any Person other than such registered owner, whether or not it shall have express or other notice thereof, except as otherwise provided by Applicable Law.

13.3 Security. For purposes of providing for Transfer of, perfecting a Lien in, and other relevant matters related to a Trinity Membership Interest, the Trinity Membership Interest will be deemed to be a “security” subject to the rules set forth in Chapters 8 and 9 of the Delaware Uniform Commercial Code and any similar Uniform Commercial Code provision adopted by the States of New York or Texas or any other relevant jurisdiction.

13.4 Power of Attorney.

(a) Each Trinity Member hereby makes, constitutes, and appoints the Trinity Managing Member and, effective as of the Liquidation Start Date, the Liquidator, severally, with full power of substitution and resubstitution, its true and lawful attorney-in-fact for it and in its name, place, and stead and for its use and benefit, to sign, execute, certify, acknowledge, swear to, file, publish and record (i) all certificates of Trinity, amended name or similar certificates, and other certificates and instruments (including counterparts of the Trinity Company Agreement in the form identical to the

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original counterpart thereof manually executed by such Trinity Member (as amended, restated or modified in accordance with clause (ii) below)) that the Trinity Managing Member or Liquidator may deem necessary to be filed by Trinity under the laws of the State of Delaware or any other state or jurisdiction in which Trinity is doing or intends to do business approved by the Trinity Members; (ii) any and all amendments, restatements or modifications to the Trinity Company Agreement and the instruments described in clause (i), as now or hereafter amended, which the Trinity Managing Member or the Liquidator may deem necessary to effect a change or modification of Trinity in the form approved by the Trinity Members in accordance with the terms of this Trinity Company Agreement, including amendments, restatements or modifications to reflect (A) the exercise by any Trinity Member of any power granted to it under the Trinity Company Agreement, (B) any amendments adopted by the Trinity Members in accordance with the terms of the Trinity Company Agreement, (C) the admission of any Substituted Member and (D) the disposition by any Trinity Member of its Trinity Membership Interest; (iii) all certificates of cancellation and other instruments that the Trinity Managing Member or Liquidator deems necessary or appropriate to effect the dissolution and termination of Trinity pursuant to the terms of the Trinity Company Agreement; and (iv) any other instrument that is now or may hereafter be required by Applicable Law to be filed on behalf of Trinity or is deemed necessary by the Trinity Managing Member or Liquidator to carry out fully the provisions of the Trinity Company Agreement in accordance with its terms, provided, that nothing in this Section 13.4 shall authorize or be deemed to authorize any such attorney-in-fact to take any action for or in the name, place or stead of any Trinity Member, or otherwise referred to in this Section 13.4 with respect to any Trinity Member, to the extent such action requires the consent of such Trinity Member pursuant to the terms of the Trinity Company Agreement and such Trinity Member has not so consented. Each Trinity Member authorizes each such attorney-in-fact to take any further action that such attorney-in-fact shall consider necessary in connection with any of the foregoing, hereby giving each such attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite to be done in connection with the foregoing as fully as such Trinity Member might or could do personally, and hereby ratifying and confirming all that any such attorney-in-fact shall lawfully do or cause to be done by virtue thereof or hereof.

(b) The power of attorney granted pursuant to this Section 13.4:

(i) Is a special power of attorney coupled with an interest and is irrevocable;

(ii) May be exercised by any such attorney-in-fact by listing the Trinity Members executing any agreement, certificate, instrument, or other document with the single signature of any such attorney-in-fact acting as attorney-in-fact for such Trinity Members; and

(iii) Shall survive and not be affected by the subsequent Bankruptcy, dissolution, or cessation of existence of a Trinity Member and shall survive the delivery of a permitted assignment by a Trinity Member of the whole or a portion

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of its Trinity Membership Interest (except that where the assignment is of all of such Trinity Member’s Trinity Membership Interest in Trinity and the Transferee is admitted as a Substituted Member, the power of attorney shall survive the delivery of such assignment for the sole purpose of enabling any such attorney-in-fact to effect such substitution) and shall extend to such Trinity Member’s or assignee’s successors and assigns.

ARTICLE XIV

GENERAL PROVISIONS

14.1 Entire Agreement; Supersedure. The Trinity Company Agreement constitutes the entire agreement and supersedes (i) all prior oral or written proposals or agreements, (ii) all contemporaneous oral proposals or agreements and (iii) all previous negotiations and all other communications or understandings between the Parties with respect to the subject matter hereof, but excluding the Transaction Agreements and the other documents and instruments executed in connection with each of them.

14.2 Waivers. Neither action taken (including any investigation by or on behalf of any Party) nor inaction pursuant to the Trinity Company Agreement, shall be deemed to constitute a waiver of compliance with any representation, warranty, covenant or agreement contained herein by the Party not committing such action or inaction. A waiver by any Party of a particular right, including breach of any provision of the Trinity Company Agreement, shall not operate or be construed as a subsequent waiver of that same right or a waiver of any other right.

14.3 Binding Effect. Except as otherwise provided in the Trinity Company Agreement, every covenant, term and provision of the Trinity Company Agreement shall be binding upon the Trinity Members and inure to the benefit of the Trinity Members and each Indemnified Person and their respective permitted successors, transferees, and assigns (including any assignee for security purposes or Person holding a security interest). The Trinity Company Agreement and the rights and obligations hereunder may not be assigned to any Person, other than a Transferee permitted in accordance with Article III, without the prior written Unanimous Consent of the Trinity Members.

14.4 Governing Law; Severability.

(a) THE TRINITY COMPANY AGREEMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE CONSTRUED, INTERPRETED AND GOVERNED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES WHICH, IF APPLIED, MIGHT PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

(b) In the event of a direct conflict between the provisions of the Trinity Company Agreement and any mandatory provision of the Act or Applicable Law, the applicable provision of the Act or other Applicable Law, as the case may be, shall control. If any provision of this Trinity Company Agreement, or the application thereof to any Person or circumstance, is held invalid or unenforceable to any extent, the

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remainder of the Trinity Company Agreement and the application of that provision to other Persons or circumstances shall not be affected thereby and that provision shall be enforced to the greatest extent permitted by the Act or other Applicable Law, as the case may be. The preceding sentence of this Section shall be of no force or effect if the consequence of enforcing the remainder of the Trinity Company Agreement without such illegal or invalid term or provision would be to cause any Trinity Member to lose the benefit of its economic bargain.

14.5 Further Assurances. Subject to the terms and conditions set forth in the Trinity Company Agreement, each of the Parties agrees to use all reasonable efforts to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things necessary, proper or advisable under Applicable Law and regulations to consummate and make effective the transactions contemplated by the Trinity Company Agreement. In case, at any time after the execution of the Trinity Company Agreement, any further action is necessary or desirable to carry out its purposes, the proper officers or directors of the Parties shall take or cause to be taken all such necessary action.

14.6 Exercise of Certain Rights. No Trinity Member shall maintain any action for partition of the property of Trinity. No Trinity Member shall maintain any action for dissolution and liquidation of Trinity other than as set forth herein.

14.7 Notice to Trinity Members of Provisions of the Trinity Company Agreement. By executing the Trinity Company Agreement, each Trinity Member acknowledges that it has actual notice of all of the provisions of the Trinity Company Agreement. Each Trinity Member hereby agrees that the Trinity Company Agreement constitutes adequate notice of all such provisions.

14.8 Counterparts. The Trinity Company Agreement may be executed in multiple counterparts, each of which, when executed, shall be deemed an original, and all of which shall constitute but one and the same instrument.

14.9 Checks, Notes and Contracts. Checks and other orders for the payment of money shall be signed by such Person or Persons as the Trinity Managing Member shall from time to time determine. To the extent permitted by the Trinity Company Agreement, contracts and other instruments or documents may be signed in the name of Trinity by the Trinity Managing Member. Checks and other orders for the payment of money made payable to Trinity may be endorsed for deposit to the credit of Trinity, with a depositary authorized by resolution of the Trinity Members, by such Persons as the Trinity Members may from time to time by resolution determine.

14.10 No Third Party Beneficiaries. The provisions of the Trinity Company Agreement are for the exclusive benefit of the Trinity Members and their respective successors and permitted assigns and, solely with respect to Article VII, the Indemnified Persons described therein. Except for the foregoing, the Trinity Company Agreement is not intended to benefit or create rights in any other Person.

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14.11 Notices. Except as otherwise expressly provided in the Trinity Company Agreement to the contrary, any notice required or permitted to be given under the Trinity Company Agreement shall be in writing (including telex, facsimile, telecopier or similar writing) and sent to the address of the Party set forth below, or to such other more recent address of which the sending Party actually has received written notice:

(a) if to Trinity, to:

WGR Asset Holding Company LLC

1201 Lake Robbins Drive

The Woodlands, Texas 77380

Attn: Treasurer

Telecopy No.: (832) 636-5029

(b) if to any Trinity Member, at the address of such Trinity Member listed on Exhibit B.

Each such notice, demand or other communication shall be effective, if given by registered or certified mail, return receipt requested, as of the third day after the date indicated on the mailing certificate, or if given by any other means, when delivered at the address specified in this Section.

14.12 Trinity Member Trademarks. Neither Trinity nor any Trinity Member shall be permitted to use any trademark owned by any other Trinity Member or its Affiliates, without the express written consent of such Trinity Member or its Affiliate or as otherwise required by Applicable Law.

14.13 Setoff. Trinity shall not be entitled to offset against any payments required to be made by it hereunder any claims that it may have against any Trinity Class B Member, and hereby waives any setoff rights that it may have in respect of any such Trinity Class B Member.

14.14 Construction. The terms of the Trinity Company Agreement are intended to embody the economic relationship among the Trinity Members and shall not be subject to modification by or conform with any actions by any Governmental Authority except as the Trinity Company Agreement may be explicitly so amended.

14.15 Waiver of Jury Trial. EACH TRINITY MEMBER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRINITY COMPANY AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

14.16 Consent to Jurisdiction and Service of Process. The parties hereto hereby (a) consent to the non-exclusive jurisdiction of (i) the courts of the State of Delaware and (ii) the United States District Court for the District of Delaware sitting in Wilmington, Delaware and (b) and consent to service of process delivered in accordance with Section 14.11. This Section 14.16 shall not be construed as limiting a party’s ability to bring an action in any other jurisdiction or to serve process by any other legal means. Notwithstanding the foregoing to the

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contrary, to the fullest extent permitted by Applicable Law, the parties agree that any action brought in any court of the State of Delaware shall be brought in a court sitting in New Castle County, Delaware.

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IN WITNESS WHEREOF, the Trinity Members have executed the Trinity Company Agreement as of the date first set forth in the Trinity Company Agreement.

TRINITY MEMBERS:
Trinity Associates Class A Holdings LLC
By:	/s/ Robert G. Gwin
Name:	Robert G. Gwin
Title:	President and Chief Executive Officer

Signature Page for Amended and Restated Limited Liability Company Agreement of Trinity Associates LLC

PECOS INVESTORS LLC
By:	GSO Special Situations Fund LP, as a managing member
	By:	GSO Capital Partners LP, its investment manager
By:	/s/ George Fan
Name:	George Fan
Title:	Chief Legal Officer
By:	GSO COF Facility LLC, as a managing member
	By:	GSO Capital Partners LP, its investment manager
By:	/s/ George Fan
Name:	George Fan
Title:	Chief Legal Officer

Signature Page to Trinity Company Agreement

EXECUTION VERSION

EXHIBIT A

DEFINED TERMS

I. CONSTRUCTION

Except where the context requires otherwise, the gender of all words used in this Exhibit A includes the masculine, feminine, and neuter, the singular shall include the plural, and the plural shall include the singular. Any defined term used in the plural preceded by the definite article shall be taken to encompass all members of the relevant class. Any defined term used in the singular preceded by “any” shall be taken to indicate any number of the members of the relevant class. All references to Articles and Sections refer to articles and sections of the document noted, and any references to Exhibits are to exhibits of the document noted, each of which is incorporated herein for all purposes. Article and section titles or headings are for convenience only and neither limit nor amplify the provisions of any agreement itself, and all references herein to articles, sections or subdivisions thereof shall refer to the corresponding article, section or subdivision thereof of this Exhibit A unless specific reference is made to such articles, sections or subdivisions of another document or instrument. Unless the context of this Exhibit A clearly requires otherwise, the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” and the words “hereof,” “herein,” “hereunder” and similar terms in this Exhibit A shall refer to this Exhibit A as a whole and not any particular section or Article in which such words appear. Any reference to federal, state, local or foreign Applicable Law will be deemed also to refer to such Applicable Law as amended (including any successor statute) and all rules and regulations promulgated thereunder, unless the context explicitly requires otherwise. Any reference to this Exhibit A or any other agreement or instrument shall, unless the context explicitly requires otherwise, refer to such agreement or instrument as amended, restated, supplemented or otherwise modified from time to time. In this Exhibit A in the computation of periods of time from a specified date to a later specified date, the word or phrase “from” and “commencing on” mean “from and including” and the words or phrase “to” and “until” and “ending on” mean “to but excluding.” All accounting terms not specifically defined herein shall be construed in accordance with GAAP, except with respect to Capital Accounts and items entering into the computation of Capital Accounts, and except to the extent otherwise specified in the terms hereof. All defined terms used within each definition herein, have the meaning set forth herein.

II. DEFINITIONS

“Acceptable Letter of Credit” means a direct-pay letter of credit in form and substance reasonably acceptable to the Pecos Collateral Agent, issued by a Person whose long-term debts, at the time of issuance of such letter of credit, are rated “A+” or better by S&P and “A1” or better by Moody’s and naming the Pecos First Lien Collateral Agent or the Pecos Second Lien Collateral Agent, as applicable, as beneficiary, drawable upon presentation of a sight draft.

“Account Collateral” has the meaning given such term in Section 2.1 of the WGRAH Security Agreement.

“Acquisition” means any transaction or any series of related transactions by which a

Person (a) acquires Midstream Assets, whether through purchase of assets, merger, or otherwise or (b) directly or indirectly acquires greater than 50% of the Capital Stock with voting rights of any other Person.

“Act” means the Delaware Limited Liability Company Act.

“Adjusted Capital Account” means the Capital Account, with respect to each Trinity Member, maintained for such Trinity Member as of the end of each taxable year of Trinity, (a) increased by any amounts that such Trinity Member is obligated to restore under the standards set by Treasury Regulation section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation sections 1.704-2(g) and 1.704-2(i)(5)), and (b) decreased by the items described in Treasury Regulation sections 1.704-1(b)(2)(ii)(d)(4) through (6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

“Adverse Claim” means a claim that a claimant has a property interest in the Pecos Member Interest and that it is a violation of the rights of the claimant for another Person to hold, transfer, or deal with the Pecos Member Interest.

“Affiliate” means, with respect to any Person, another Person that directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, the Person specified; provided that Trinity shall be included as an Affiliate of Anadarko.

“Affiliate Transaction” means, with respect to any Person, a payment by such Person to, or a sale, lease, transfer, or other disposition of any of its properties or assets to, or a purchase of any property or assets from, or the entry into or making or amendment of any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of such Person.

“After-Tax Basis” means, with respect to any payment to be made on an “After-Tax Basis”, that such payment will be grossed-up by the payor to make the payee whole for the net amount of additional Taxes payable as a result of the receipt or accrual of such payment and such gross-up amount (taking into account all credits or deductions attributable to the payment or accrual of such additional Taxes actually utilized by the payee). In calculating the gross-up amount, the Tax rates used shall be the highest marginal Tax rates in effect for (and payable by) the payee (or in the case of a payee that is a pass-through entity for any Tax purposes, the Persons who are required to take into account any items of income, gain, loss, deduction or credit with respect to such entity) on the date of such payment or accrual.

“Agreed Allocation” means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 5.1 of the Trinity Company Agreement, including a Curative Allocation (if appropriate to the context in which the term “Agreed Allocation” is used).

“Anadarko” means Anadarko Petroleum Corporation, a Delaware corporation.

“Anadarko Capital Contribution Obligations” means the obligation of Anadarko to contribute capital to WGRAH pursuant to Section 5.2(n) of the Sponsor Agreement.

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“Anadarko Contributions” means those Midstream Properties directly or indirectly contributed to WGRAH by Anadarko.

“Anadarko Credit Event” means that Anadarko’s long term unsecured non-credit enhanced public senior indebtedness (a) is unrated by S&P and Moody’s or (b) has been rated (i) BB- by S&P if rated by S&P and Ba3 by Moody’s if rated by Moody’s, or (ii) below BB- by S&P, or (iii) below Ba3 by Moody’s.

“Anadarko Event” means the occurrence of any of the following:

(a) Anadarko fails to pay (i) any amount payable by it under the Sponsor Option Agreement or the Sponsor Note Option Agreement when due and payable or (ii) amounts due under any Anadarko (or Affiliate) financial asset held by Trinity when due and payable, which failure (in either case) shall continue for a period of 3 Business Days after the date when such payment was to have been made;

(b) any certification, representation or warranty prepared by or furnished by or on behalf of Anadarko pursuant to any Transaction Agreement to which Anadarko is a party proves incorrect in any material respect when made or deemed made;

(c) Anadarko fails to perform or observe any material term, agreement or covenant contained in any Transaction Agreement to which Anadarko is a party, which failure shall continue unremedied for a period of 30 days after the date when such performance was due;

(d) Anadarko (or any Subsidiary) (i) shall default in the payment of principal of any Indebtedness in an aggregate principal amount in excess of $100,000,000 beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created as and when the same will become due and payable and such default shall have resulted in such Indebtedness being declared due and payable prior to its stated maturity or (ii) shall default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, security or relating thereto, and such default shall have resulted in such Indebtedness being declared due and payable prior to its stated maturity;

(e) the entry of any judgment, decree, or order for the payment of money in excess of $100,000,000 is rendered against Anadarko or any Subsidiary and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Anadarko to enforce any such judgment;

(f) Anadarko shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of its property, (ii) admit in writing its inability to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under any Bankruptcy Law, (v) file a petition seeking to take advantage of any other law providing for similar relief of debtors, or (vi) consent or acquiesce in writing to any petition duly filed against it in any involuntary case under any Bankruptcy Law;

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(g) a proceeding or case shall be commenced, without the application or consent of Anadarko in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution or winding up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of its assets, or (iii) similar relief in respect of it, under any law providing for the relief of debtors, and such proceeding or case shall continue undismissed, or unstayed and in effect, for a period of sixty (60) days (or such longer period, so long as Anadarko shall be taking such action in good faith as shall be reasonably necessary to obtain the timely dismissal or stay of such proceeding or case); or an order for relief shall be entered in an involuntary case under any applicable Bankruptcy Law, against Anadarko;

(h) any Transaction Agreement to which Anadarko is a party shall cease to be the legal, valid and binding obligation of Anadarko; or

(i) Anadarko ceases to directly or indirectly own 100% of the Trinity Class A Member.

“Anadarko Material Adverse Change” means:

(a) any material adverse change in, or a material adverse effect upon, the operations, business or financial condition of Anadarko and its Subsidiaries taken as a whole;

(b) any material adverse change in the rights and remedies of Pecos under the Sponsor Agreement, or of the ability of Anadarko to perform its obligations under the Sponsor Agreement; or

(c) any material adverse change in the legality, binding effect or enforceability against Anadarko of the Sponsor Agreement.

“Anadarko Subsequent Credit Event” means the long-term senior unsecured indebtedness of Anadarko becomes unrated by S&P and Moody’s or becomes rated below BB- by S&P, if rated by S&P, or Ba3 by Moody’s, if rated by Moody’s, regardless of the other rating, if any.

“Applicable Law” means any applicable statute, law (including common law), rule, ordinance, regulation, ruling, requirement, writ, rule, injunction, judgment, decree, order, permit, concession, grant, franchise, license, agreement, directive, requirement of, or other official act of, or any binding interpretation or administration of any of the foregoing by, any Governmental Authority or any arbitral tribunal, whether such Applicable Law now exists or hereafter comes into effect.

“ASCE Trigger Date” means the date upon which an Anadarko Subsequent Credit Event occurs.

“Asset Sale” means any Disposition by WGRAH or any of its Subsidiaries not constituting the Disposition of all or substantially all of the properties or assets of WGRAH and its Subsidiaries taken as a whole; provided that none of the following shall constitute an Asset Sale: (a) the sale or issuance of any of WGRAH’s Subsidiaries’ Property or Capital Stock to

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WGRAH or any other Wholly Owned Subsidiary of WGRAH; (b) the sale of claims against customers, working interest owners, other industry partners or any other Person in connection with workouts or bankruptcy, insolvency or other similar proceedings with respect thereto; or (c) the sale of obsolete, worn out or surplus equipment in the ordinary course of business.

“Assignment” means, (i) when used in the Sponsor Option Agreement the assignment of the Pecos Member Interest, substantially in the form annexed as Exhibit A to the Sponsor Option Agreement, appropriately completed in conformity therewith, signed by the parties thereto, and (ii) when used in the Sponsor Note Option Agreement the assignment of the WGRAH Note and the WGRAH Loan Documents, substantially in the form annexed as Exhibit A to the Sponsor Note Option Agreement, appropriately completed in conformity therewith, signed by the parties thereto.

“Available Cash” means interest received by Trinity on account of Permitted Investments, to the extent that such interest is not, in the reasonable determination of the Trinity Managing Member, likely to be necessary for Trinity to pay any expenses or other amounts coming due or reasonably likely to come due prior to the next following Payment Date.

“Bankruptcy Action” means, with respect to any Person: (a) an admission in writing by such Person of its inability to pay its debts generally or a general assignment by such Person for the benefit of creditors; (b) the filing of any petition by such Person seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any Applicable Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for such Person or for any substantial part of its property or the filing of an answer or other pleading admitting or failing to contest the allegations of a petition filed against it in any proceeding of the foregoing nature; or (c) action taken by such Person to authorize any of the actions set forth above

“Bankruptcy Laws” means Title 11 of the United States Code entitled “Bankruptcy”, and any similar other applicable law or statute in any other jurisdiction.

“Base Rate” has the meaning set forth in Section 1.01 of the Pecos First Lien Credit Agreement.

“Borrowing Request” means a request by WGRAH for the borrowing of the WGRAH Loan on the Effective Date in accordance with Section 2.03 of the WGRAH Loan Agreement.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City, New York or Wilmington, Delaware are authorized or required by law to remain closed; provided that when used in connection with a WGRAH Loan that has an Interest Rate based on the LIBO Rate, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Business Entity” means any corporation, limited liability company, partnership (general or limited), joint venture, association, joint-stock company, trust, or unincorporated organization.

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“Capital Account” means the capital account maintained for each Trinity Member pursuant to Section 4.3 of the Trinity Company Agreement.

“Capital Commitment” means any contractual commitment or obligation under an equity contribution or other agreement the purpose of which is for WGRAH or any of its Subsidiaries to provide to another Person (other than WGRAH or any of its Subsidiaries) a portion of the capital for such Person or for a Proportionately Consolidated Interest.

“Capital Contribution” means any cash or Cash Equivalents that a Trinity Member contributes to Trinity.

“Capital Contribution Event” means any of the following:

(a) Anadarko’s long term unsecured non-credit enhanced public senior indebtedness becomes (i) rated BB or lower by S&P, if rated, and Ba2 or lower by Moody’s, if rated, or (ii) unrated by both S&P and Moody’s; or

(b) the occurrence of an Event of Default.

“Capital Expenditures” means any expenditure or acquisition of property by Trinity that is required to be capitalized for purposes of Trinity’s financial statements in accordance with GAAP.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Cash Equivalents” means;

(a) Dollars;

(b) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;

(c) certificates of deposit, demand deposits, and time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any Lender or with any domestic branch of a commercial bank having capital and surplus in excess of $500,000,000 and a Thomson Bank Watch Rating of “B” or better;

(d) repurchase obligations with a term of not more than one year for underlying securities of the types described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above;

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(e) commercial paper, notes and bonds having one of the two highest ratings obtainable from Moody’s or S&P, and in each case maturing within one year after the date of acquisition;

(f) auction rate securities having one of the two highest ratings obtainable from Moody’s, S&P or Fitch Ratings Inc. (or any successor thereto) and in each case maturing within one year after the date of acquisition; and

(g) money market funds which invest primarily in assets of the kinds described in clauses (a) through (f) above.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), state and local analogs, and all rules and regulations and requirements thereunder in each case as now or hereafter in effect.

“Certificate” has the meaning given to such term in the Recitals to the Trinity Company Agreement.

“Clearing Agency” has the meaning given such term in Section 4.8 of the WGRAH Security Agreement.

“Change of Control” means (a) Anadarko shall cease to own and control, directly or indirectly, 100% of the outstanding Capital Stock of WGRAH and 100% of the Trinity Class A Membership Interests, or (b) the acquisition by any Person or two or more Persons acting in concert of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act as promulgated by the Commission) of 50% or more of the outstanding shares of voting stock of Anadarko, unless the Board of Directors of Anadarko shall have publicly announced its support for such acquisition, or (c) a majority of the members of the Board of Directors of Anadarko on any date shall not have been (i) members of the Board of Directors of Anadarko on the date 12 months prior to such date or (ii) approved by Persons who constitute at least a majority of the members of the Board of Directors of Anadarko as constituted on the date 12 months prior to such date.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all Property of WGRAH or any of its Subsidiaries which is subject to a Lien in favor of, or which under the terms of any WGRAH Security Document is purported to be subject to a Lien in favor of, the WGRAH Collateral Agent or any of its successors or assigns.

“Collection Date” means the date on which (a) if Anadarko exercises the Sponsor Purchase Option, all amounts due and payable by Anadarko (or its designee) under the Sponsor Option Agreement and all amounts payable by Trinity in respect of such exercise are paid in full or (b) otherwise, after the occurrence of the Liquidation Start Date, all amounts in respect of the retirement or redemption of Capital Accounts shall have been paid in full and all other amounts owing in respect of the Trinity Class B Member’s Trinity Class B Membership Interest through the date of the payment of amounts in respect of the retirement or redemption of Capital Accounts shall have been paid in full and all other amounts, if any, owing to Trinity Class B Member under the Sponsor Option Agreement shall have been paid in full and (if applicable)

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Trinity Class B Member shall have received the report described in Section 11.9(d) of the Trinity Company Agreement; provided, however, that if, after any payment that would otherwise have constituted “payment in full” of any such amount, such payment or any part thereof is deemed to be fraudulent or preferential, set aside or required to be paid to a trustee, receiver or similar Person by a court of competent jurisdiction at any time during the one-year period following such payment in the case of any fraudulent conveyance, or during the 90-day period following such payment in the case of any preference or otherwise, then the amount of such payment or such part thereof shall be reinstated and outstanding or unpaid as if such payment or part thereof had not occurred unless such payment or such part thereof shall have been discharged in bankruptcy.

“Commercial Operation Date” means, with respect to any Material Project, the date on which such Material Project is substantially complete and commercially operable.

“Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of the WGRAH Loan Agreement such Commission is not existing and performing the duties now assigned to it, then the body performing such duties at such time.

“Commodity Payment Amount” means, with respect to any Commodity Payment Period, (i) for each Product other than natural gas, an amount equal to (a) the Fixed Product Price for such Product for such Commodity Payment Period multiplied by (b) the Notional Product Amount for such Product applicable to such Commodity Payment Period and (ii) for natural gas, the sum of the Delivery Point Natural Gas Amount for all Delivery Points.

“Commodity Payment Period” means each Fiscal Quarter, commencing on January 1, 2008 and ending on the WGRAH Maturity Date.

“Compliance Certificate” means each certificate delivered pursuant to Section 4.01(d) of the WGRAH Loan Agreement.

“Consolidated EBITDA” means, for any period, the Consolidated Net Income for such period plus, without duplication and in accordance with GAAP and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) Consolidated Interest Expense and amortization or write-off of debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness, (c) depreciation, depletion and amortization expense, (d) amortization of intangibles and organization costs, (e) any extraordinary or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business) and (f) any other non-cash charges, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (i) interest income (except to the extent deducted in determining Consolidated Interest Expense), (ii) any extraordinary or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business, in each case in accordance with GAAP), (iii) any other non-cash income, all as determined on a consolidated basis.

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Consolidated EBITDA (A) for any Measurement Period shall be calculated after giving effect, on a pro forma basis, to (1) Acquisitions and Dispositions made by WGRAH and its Subsidiaries during such period as if such Acquisitions or Dispositions occurred on the first day of the period and (2) Material Project EBITDA Adjustments; and (B) shall exclude actual Consolidated EBITDA attributable to any Subsidiary (including a Subsidiary that is not a Significant Subsidiary):

(1) that has (aa) applied for or consented to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of its property, (bb) admitted in writing its inability to pay its debts as such debts become due, (cc) made a general assignment for the benefit of its creditors, (dd) commenced a voluntary case under any Bankruptcy Law, (ee) filed a petition seeking to take advantage of any other law providing for similar relief of debtors, or (ff) consented or acquiesced in writing to any petition duly filed against it in any involuntary case under any Bankruptcy Law; or

(2) against whom a proceeding or case has been commenced (and, on the date on which Consolidated EBITDA is measured, continues undismissed, unstayed, and in effect), without the application or consent of such Subsidiary, in any court of competent jurisdiction seeking (aa) its liquidation, reorganization, dissolution or winding up, or the composition or readjustment of its debts, (bb) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of its assets, (cc) similar relief in respect of it under any law providing for the relief of debtors, or (dd) an order for relief shall be entered in an involuntary case under any applicable Bankruptcy Law against such Subsidiary.

“Consolidated Interest Expense” means, with respect to WGRAH and its Subsidiaries on a consolidated basis for any fiscal period, total interest expenses (including that portion attributable to the obligations set forth in clause (a) of the definition of Lease Obligations and capitalized interest) of WGRAH and its Subsidiaries in such fiscal period which are classified as interest expense on the consolidated financial statements of WGRAH and its Subsidiaries, all as determined in conformity with GAAP.

“Consolidated Net Income” means, with respect to WGRAH and its Subsidiaries on a consolidated basis, for any fiscal period, without duplication, the sum of (i) the aggregate of the net income (or loss) of WGRAH and its Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP, (ii) Commodity Payment Amounts for such period, and (iii) contributions made to WGRAH pursuant to Section 5.2(n)(iii) of the Sponsor Agreement; provided that there shall be excluded from such net income (or loss) (to the extent otherwise included therein) the following: (a) the net income (or loss) for such period of any Person that is not a Subsidiary, or that is accounted for by the equity method of accounting; (b) the net income (or loss) during such period of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any gains or losses attributable to writeups or writedowns of assets; and (e) the net income (or loss) for such period of WGRAH and its Subsidiaries in respect of quantities used to determine the Commodity Payment Amount for such period.

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“Consolidated Taxes” means all Taxes based on the net income of any Transaction Party to the extent that such Taxes are included in a consolidated, combined, unitary, or any similar Tax return with Anadarko or with any Affiliate of Anadarko.

“Consolidated Total Debt” means, at any date, the aggregate principal amount of all Indebtedness (other than financial obligations in respect of Hedge Agreements) of WGRAH and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement to which such Person is a party or by which it or any of its Property is bound.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract, or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Cumulative Preferred Return Allocation Amount” means, for any Fiscal Quarter, (a) the sum of (i) the sum of all Preferred Return for the current and all previous Fiscal Quarters and (ii) all accrued unpaid interest thereon pursuant to Section 5.5 of the Trinity Company Agreement minus (b) the sum of all amounts allocated by Trinity in respect of the Trinity Class B Membership Interest in all previous periods pursuant to Section 5.1(a)(i) of the Trinity Company Agreement.

“Cumulative Preferred Return Distribution Amount” means, for any Payment Date, (a) the sum of all Preferred Return for the current and all previous Payment Periods minus (b) the sum of all amounts distributed by Trinity in respect of the Trinity Class B Membership Interest in all previous Payment Periods pursuant to Section 5.3(a)(i) of the Trinity Company Agreement and, to the extent that such payment is to offset Preferred Return as set forth therein, Section 5.3(b) of the Trinity Company Agreement.

“Curative Allocation” means any allocation of an item of income, gain, deduction or loss pursuant to the provisions of Section 5.1(d)(x) of the Trinity Company Agreement.

“Damage Amount” has the meaning set forth in Section 8(a) of the Sponsor Option Agreement.

“Debt Amount” means, for any Payment Period (or any portion thereof), an amount equal to the aggregate amount of all interest payable by Pecos pursuant to the Pecos First Lien Credit Agreement and the Pecos Second Lien Credit Agreement for such Payment Period (or portion thereof).

“Debt/EBITDA Ratio” means, for any Measurement Period, the ratio of Consolidated Total Debt on the last day of such period to Consolidated EBITDA for such period.

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“Debt Rating” means, as of any date, the rating that has been most recently assigned by S&P or Moody’s, as applicable, for any class of long-term public senior unsecured and unguaranteed debt securities issued by Anadarko, or, if such securities are not so rated or are not outstanding, Anadarko’s implied senior unsecured and unguaranteed debt rating as determined by S&P or Moody’s.

“Default” means:

(a) as used in and with respect to the WGRAH Loan Documents (other than the Sponsor Agreement), an event which, with the giving of notice or the passage of time, or both, would constitute an “Event of Default” as defined in the WGRAH Loan Agreement; and

(b) as used in and with respect to the Sponsor Agreement, an event which, with the giving of notice or the passage of time, or both, would constitute an “Event of Default” as defined in any of the WGRAH Loan Agreement, the Pecos First Lien Credit Agreement, or the Pecos Second Lien Credit Agreement.

“Delivery Point” means the pricing points specified on Schedule A. Natural gas shall be allocated to the Delivery Point most closely associated with the actual physical delivery of such natural gas.

“Delivery Point Natural Gas Amount” means, for each Commodity Payment Period and for each Delivery Point an amount equal to (x) the Notional Gas Amount for such Delivery Point for such Commodity Payment Period multiplied by (y) the Fixed Gas Price for such Delivery Point for such Commodity Payment Period.

“Depository Bank” has the meaning given such term in the preamble of the WGRAH Security Agreement.

“DGCL” means the General Corporation Law of the State of Delaware as in effect on the Effective Date.

“Disposition” (including the correlative terms “Dispose” or “Disposed”) means any sale, assignment, transfer, lease, conveyance, gift, pledge, distribution, hypothecation or other encumbrance or any other disposition, whether voluntary, involuntary or by operation of law, effected directly or indirectly, in one or a series of transactions (and including by way of merger or consolidation) and including any issuance or sale of Capital Stock of any Subsidiary and the receipt of insurance or condemnation proceeds after the occurrence of a casualty event or condemnation.

“Dollars” or “$” means the lawful money of the United States of America.

“Early Retirement Proceeds” means (i) the amount of any prepayment by WGRAH of amounts owing under the WGRAH Loan Agreement in advance of the date such amounts were otherwise due under the WGRAH Loan Agreement and (ii) all Note Purchase Amounts received by Trinity pursuant to the Sponsor Note Purchase Option.

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“Economic Risk of Loss” has the meaning set forth in Treasury Regulation section 1.752-2(a).

“Effective Date” has the meaning given such term in Section 6.01 of the WGRAH Loan Agreement.

“Environment” or “Environmental” shall have the meanings set forth in 42 U.S.C. § 9601(8) (1988).

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of noncompliance or violation, notice of liability or potential liability, investigation, regulatory action or proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any Governmental Authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“Environmental Law” means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance, including common law, arising from, relating to, or in connection with the Environment or natural resources, including without limitation common law and CERCLA, or relating to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or restoration of the air, surface water, groundwater, land surface or subsurface strata, or other natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or transportation; (c) exposure to pollutants, contaminants, Hazardous Materials, or Hazardous Wastes; (d) the safety or health of employees, to the extent relating to occupational safety or exposure to Hazardous Materials; or (e) the manufacture, processing, handling, transportation, distribution in commerce, treatment, use, storage or disposal of Hazardous Materials or Hazardous Wastes.

“Environmental Permit” means any permit, approval, order, identification number, license or other authorization required under any Environmental Law.

“Equity Amount” means, for any Payment Period (or portion thereof), the “Current Return” (as defined in the Pecos Company Agreement) for such Payment Period (or portion thereof).

“Equity Interests” means, with respect to any Person, Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock in such Person.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with WGRAH, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

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“ERISA Event” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived), (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (d) the incurrence by WGRAH or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, (e) the receipt by WGRAH or any ERISA Affiliate from the Pension Benefit Guaranty Corporation or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (f) the incurrence by WGRAH or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Multiemployer Plan, or (g) the receipt by WGRAH or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from WGRAH or any ERISA Affiliate of any notice, concerning the imposition of withdrawal liability under Section 4202 of ERISA, or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Event of Default” means:

(i) as used in and with respect to the WGRAH Loan Documents (other than the Sponsor Agreement) and in the definition of “Capital Contribution Event”, any of the events of default set forth in Article VII therein; and

(ii) as used in and with respect to the Sponsor Agreement, any of the events of default set forth in Article VII of the WGRAH Loan Agreement, any of the events of default set forth in Article VI of the Pecos First Lien Credit Agreement, and any of the events of default set forth in Article VI of the Pecos Second Lien Credit Agreement.

“Exchange Act” means the Securities Exchange Act of 1934.

“Excluded Taxes” means, with respect to Trinity or any other recipient of any payment to be made by or on account of any obligation of WGRAH under the WGRAH Loan Agreement, (a) income or franchise taxes imposed on (or measured by) its net income by the United States or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of Trinity, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which WGRAH is located, and (c) in the case of a Foreign Lender, any withholding tax that is imposed in respect of amounts payable by WGRAH in respect of the WGRAH Loan to such Foreign Lender by the United States of America or by any other jurisdiction in which such Lender is organized, has its principal office or its applicable lending office on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a change in Applicable Law after the Effective Date) to comply with Section 2.11(e) of the WGRAH Loan Agreement, except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from WGRAH with respect to such withholding tax pursuant to Section 2.11(a) of the WGRAH Loan Agreement. For the avoidance of doubt, Excluded Taxes includes any incremental income or franchise tax expense resulting from Trinity’s inclusion in a consolidated or combined income tax return.

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“Expenses” means (i) any and all judgments, damages or penalties with respect to, or amounts paid in settlement of, claims (including negligence, strict or absolute liability, liability in tort and liabilities arising out of violation of laws or regulatory requirements of any kind), actions, or suits and (ii) any and all liabilities, obligations, losses (including loss of value), costs, expenses, (including reasonable fees and disbursements of counsel and claims, damages, losses, liabilities and expenses relating to environmental matters) but excluding Taxes.

“Extended Note Purchase Closing Date” has the meaning set forth in Section 4(b) of the Sponsor Note Option Agreement.

“Extended Purchase Closing Date” has the meaning set forth in Section 4(c) of the Sponsor Option Agreement.

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in an arm’s-length transaction not involving distress or necessity of either party, determined in good faith by the Person required to make such determination.

“Financial Model” has the meaning set forth in Section 2.15(d) of the Sponsor Agreement.

“Fiscal Quarter” means any period commencing on each of January 1, April 1, July 1 and October 1 and ending on the last date before the next such date.

“Fiscal Year” of Trinity, and its taxable year for Federal income tax purposes, shall be the calendar year.

“Fixed Gas Price” means, with respect to any Commodity Payment Period at each Delivery Point, the price per MMBtu of natural gas at such Delivery Point for such Commodity Payment Period as set forth below:

Each Payment Period during the years below	NATURAL GAS DELIVERY POINTS ($/MMBtu)
	Rockies		Mid Continent		West Texas		East Texas
2008	$	6.66	$	7.24	$	7.30	$	7.85
2009	$	7.36	$	7.67	$	7.73	$	8.23
2010	$	7.39	$	7.49	$	7.55	$	8.05
2011	$	7.19	$	7.29	$	7.35	$	7.85
2012	$	7.19	$	7.29	$	7.35	$	7.85

“Fixed Product Price” means, with respect to any Commodity Payment Period and each Product, the price per unit of each such Product for such Commodity Payment Period as set forth below:

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Each Payment Period during the years below	PRODUCTS ($/Gallon)
	Ethane		Propane		Iso-butane		Butane		Pentane
2008	$	0.89	$	1.39	$	1.68	$	1.61	$	2.04
2009	$	0.74	$	1.30	$	1.57	$	1.54	$	2.04
2010	$	.73	$	1.26	$	1.53	$	1.50	$	1.99
2011	$	.72	$	1.26	$	1.53	$	1.50	$	1.98
2012	$	.72	$	1.26	$	1.53	$	1.50	$	1.98

“Foreign Lender” means Trinity or any of its successors or assigns, to the extent such Person is organized under the laws of a jurisdiction other than that in which WGRAH is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Formation Date” has the meaning given to such term in the Recitals to the Trinity Company Agreement.

“GAAP” means the generally accepted accounting principles in the United States of America, consistently applied.

“Governmental Authority” means the government of the United States or any other nation (including any tribe), or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government.

“Gross Cash Proceeds” means, with respect to any Disposition by WGRAH or any of its Subsidiaries, the aggregate amount (without reduction by reason of the fact that some of such proceeds may be received after the time of such Disposition) of cash received or to be received from time to time (whether as initial consideration or deferred consideration) by or on behalf of WGRAH or such Subsidiary in connection with such disposition.

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or

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other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business or, for the avoidance of doubt, obligations of such Person to provide capital under a Capital Commitment. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

“Hazardous Materials” means (a) petroleum or petroleum products and by-products or breakdown products thereof, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“Hazardous Waste” means the substances regulated as such pursuant to any Environmental Law.

“Hedge Agreements” means interest rate swap, cap, or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity swap and forward agreements and other similar agreements.

“Holdings” means Trinity Associates Class A Holdings LLC, a Delaware limited liability company.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“Incipient Event” means any event that, with notice or lapse of time, or both, would constitute a Termination Event, Notice Event, Anadarko Event, Liquidating Event, or an Event of Default under the WGRAH Loan Agreement.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) all direct or contingent obligations of such Person to reimburse any letter of credit issuer or other Person in respect of amounts paid under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

(c) all accounts payable of such Person to pay the deferred purchase price of property or services (other than accounts payable in the ordinary course of business that are not more than 90 days past due unless being contested in good faith);

(d) all Lease Obligations;

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(e) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in cash (whether dividends, interest or otherwise) on or prior to the WGRAH Maturity Date in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends;

(f) the net amount of all financial obligations of such Person in respect of Hedge Agreements;

(g) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (whether or not the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); and

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes, the Indebtedness of any Person shall include the Indebtedness described in clauses (a) through (g) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, except to the extent such Indebtedness is non-recourse to such Person (other than through a JV Lien) or the only assets of such Person are its interests in such partnership or joint venture, and such partnership or joint venture itself is not a WGRAH Loan Party.

“Indemnified Person” means:

(a) as used in Section 7.1 and Section 7.2 of the Trinity Company Agreement and Section 7.5, Section 7.6, and Section 7.7 of the Trinity Company Agreement (as such Sections relate to the indemnities under Section 7.1 or Section 7.2 of the Trinity Company Agreement), Pecos, the Pecos First Lien Agent, the Pecos First Lien Collateral Agent, each Pecos First Lien Lender, the Pecos Second Lien Agent, the Pecos Second Lien Collateral Agent, each Pecos Second Lien Lender, the Pecos Member Interest Owners and any successor and permitted assignee of any such Person (whether pursuant to an assignment for security or otherwise), and the direct and indirect members, partners, shareholders, and other equity holders of any of the foregoing, and each of the respective directors, officers, trustees, managers, employees, administrators and agents (including sales agents) of any of the foregoing;

(b) as used in Section 7.3 of the Trinity Company Agreement and Section 7.5, Section 7.6, and Section 7.7 of the Trinity Company Agreement (as such Sections relate to the indemnities under Section 7.3 of the Trinity Company Agreement), the Liquidator, its officers, directors, agents (including sales agents) or employees;

(c) as used in the Sponsor Agreement, Pecos, the Pecos First Lien Agent, the Pecos First Lien Collateral Agent, each Pecos First Lien Lender, the Pecos Second Lien Agent, the Pecos Second Lien Collateral Agent, each Pecos Second Lien Lender, the Pecos Member Interest Owners, the Pecos Administrator, and any successor and permitted assignee of any such Person (whether pursuant to an assignment for security or

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otherwise), and the direct and indirect members, partners, shareholders, and other equity holders of any of the foregoing, and each of the respective directors, officers, trustees, managers, employees, administrators and agents (including sales agents) of any of the foregoing;

(d) as used in the WGRAH Loan Agreement and the Subsidiary Guaranty, Trinity, the WGRAH Collateral Agent, and each of their respective Related Persons.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitor” has the meaning set forth in Section 7.1 of the Trinity Company Agreement.

“Information Memorandum” means any written materials relating to WGRAH, WGR, Holdings, Trinity, any of their respective assets or liabilities, the Transaction Agreements, or the transactions described therein that have been disseminated to the Pecos Lenders or potential Pecos Lenders with Anadarko’s prior written approval.

“Initial Capital Contribution” has the meaning set forth in Section 4.1 of the Trinity Company Agreement.

“Initial Trinity Agreement” has the meaning set forth in Recital A to the Trinity Company Agreement.

“Insurance Certificate” means a “Certificate of Insurance” issued by an insurance broker on the form ACORD-25 or its substantial equivalent, in form reasonably satisfactory to Trinity and the WGRAH Collateral Agent.

“Interest Period” means (i) the period commencing on the third Business Day after the Effective Date and ending on, but not including, April 1, 2008 and (ii) thereafter, each subsequent period commencing on the last day of the next preceding Interest Period and ending on, but not including, the next succeeding first Business Day of January, April, July, or October, as the case may be; provided, that, in the case of any Interest Period that commences before the WGRAH Maturity Date or the Liquidation Start Date, as applicable, and would otherwise end on a date occurring after the WGRAH Maturity Date or the Liquidation Start Date, as applicable, such-Interest Period shall end on the WGRAH Maturity Date or the Liquidation Start Date, as applicable, and the duration of each Interest Period that commences on or after the WGRAH Maturity Date or the Liquidation Start Date, as applicable, shall be initially the period commencing on the WGRAH Maturity Date or the Liquidation Start Date, as applicable, and ending on, but not including, the first Business Day of the immediately following calendar quarter and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on, but not including, the next succeeding first Business Day of January, April, July or October, as the case may be, of each year.

“Interest Rate” means, for any Payment Period (or any portion thereof) or any Interest Period (or any portion thereof) (the “Relevant Period”), the rate per annum equal to the product of (a) the quotient obtained by dividing 360 by the actual number of days in such Relevant Period, multiplied by (b) the quotient obtained by dividing:

(i) the sum of (A) the Debt Amount for such Relevant Period and (B) the Equity Amount for such Relevant Period, by

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(ii) the Unrecovered Capital of the Trinity Class B Member on the date of measurement or, in the case of a prepayment, the Unrecovered Capital of the Trinity Class B Member that is being prepaid on such date.

“Internal Revenue Code” means the Internal Revenue Code of 1986.

“Investment Company Act of 1940” means the Investment Company Act of 1940 and any rule, order or regulation promulgated thereunder.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

“JV Lien” means a Lien on the Equity Interests owned by WGRAH or any of its Subsidiaries in a partnership or joint venture in which WGRAH or such Subsidiary is a general partner or joint venturer securing Indebtedness of such partnership or joint venture; provided that such Indebtedness is non-recourse to WGRAH or such Subsidiary other than to such Equity Interests.

“Lease Obligations” means, when used with respect to any Person, without duplication, (a) all obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) Property, or a combination thereof, which obligations shall have been or should be, in accordance with GAAP, capitalized on the books of such Person, (b) obligations of such Person under any lease which is treated as an operating lease for financial accounting purposes and a financing lease for tax purposes (i.e., a “synthetic lease”); and (c) (i) leveraged lease arrangements receiving certain accounting and tax treatment (i.e., a “leveraged lease”) and (ii) transactions entered into by such Person, the proceeds from which would be reflected on the financial statements of such Person in accordance with GAAP as cash flows from financings at the time such transaction was entered into (other than as a result of the issuance of Equity Interests). For the sake of clarity, obligations of a Person under a true operating lease shall not constitute Lease Obligations except to the extent provided in clause (b) of the preceding sentence.

“Legal Proceeding” means any litigation, arbitration, mediation, investigation, or any other proceeding at law or in equity before or by any Governmental Authority.

“LIBO Rate” has the meaning set forth in Section 1.01 of the Pecos First Lien Credit Agreement.

“Lien” means any mortgage, lien, pledge, hypothecation, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that, in each case, has the practical effect of creating a security interest. WGRAH or any of its Subsidiaries shall be

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deemed to own, subject to a Lien, any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease, or other title retention agreement relating to such asset.

“Liquidating Event” has the meaning given to such term in Section 11.5 of the Trinity Company Agreement.

“Liquidator” has the meaning given to such term in Section 11.8 of the Trinity Company Agreement.

“Liquidation Period” means the period commencing on the Liquidation Start Date and ending on the date of the disposition or collection of or realization upon all of the Trinity Property.

“Liquidation Start Date” has the meaning given to such term in Section 11.5(a) of the Trinity Company Agreement.

“Losses” has the meaning given to such term in the definition of “Profits.”

“Margin Stock” means “margin stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Market Rate” has the meaning given such term in the Pecos First Lien Credit Agreement.

“Material Project” means (a) the Natural Buttes Gathering Project, the PRCS Gathering System Project, and the Natural Buttes Processing (Chapita) Project and (b) any other capital construction or expansion project of WGRAH or its Subsidiaries, the aggregate capital cost or budgeted capital cost of which, in the case of this clause (b), including capital costs expended prior to the acquisition of any such project by WGRAH or its Subsidiaries, as the case may be, exceeds $20,000,000.00.

“Material Project EBITDA Adjustments” means (a) with respect to the Natural Buttes Gathering Project, the PRCS Gathering System Project, and the Natural Buttes Processing (Chapita) Project, $35,000,000.00 in the aggregate for the Measurement Period ending December 31, 2007, $26,250,000.00 in the aggregate for the Measurement Period ending March 31, 2008, $17,500,000.00 in the aggregate for the Measurement Period ending June 30, 2008, and $8,750,000.00 in the aggregate for the Measurement Period ending September 30, 2008 and (b) with respect to each other Material Project:

(i) for any period of four consecutive fiscal quarters ending on or prior to the last day of the fiscal quarter in which the Commercial Operation Date of such Material Project occurs, a percentage (based on the then-current completion percentage of such Material Project) of an amount determined by WGRAH as the projected Consolidated EBITDA attributable to such Material Project for the first 12-month period following the scheduled Commercial Operation Date of such Material Project (such proposed amount to be calculated by WGRAH in good faith and in a commercially reasonable manner based on multi-year customer contracts relating to such Material Project, the

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creditworthiness of the other parties to such contracts, projected revenues from such contracts, capital costs and expenses, scheduled Commercial Operation Date, commodity price assumptions and other factors deemed appropriate by WGRAH) which may, at WGRAH’s option, be added to Consolidated EBITDA for the fiscal quarter in which construction or expansion of such Material Project commences and for each fiscal quarter thereafter until the Commercial Operation Date of such Material Project (including the fiscal quarter in which such Commercial Operation Date occurs, but without duplication of any actual Consolidated EBITDA attributable to such Material Project following such Commercial Operation Date); provided that if the actual Commercial Operation Date does not occur by the scheduled Commercial Operation Date as reflected in the Responsible Officer’s certificate delivered pursuant to clause (iii)(A) of this definition then the foregoing amount shall be reduced, for quarters ending after the scheduled Commercial Operation Date to (but excluding) the first full quarter after the actual Commercial Operation Date, by the following percentage amounts depending on the period of delay (based on the actual period of delay or then-estimated delay, whichever is longer): (i) 90 days or less, 0%, (ii) longer than 90 days, but not more than 180 days, 25%, (iii) longer than 180 days but not more than 270 days, 50%, (iv) longer than 270 days, 75%; and (v) longer than 365 days, 100%; and

(ii) for each period of four consecutive fiscal quarters ending on the last day of the first, second and third fiscal quarters following the fiscal quarter during which the Commercial Operation Date occurs, an amount equal to the projected Consolidated EBITDA attributable to the Material Project for the balance of the four fiscal quarter period following the fiscal quarter during which the Commercial Operation Date occurs, may, at WGRAH’s option, be added to Consolidated EBITDA for such period (net of any actual Consolidated EBITDA attributable to the Material Project).

(iii) Notwithstanding the foregoing:

(A) except for Material Project EBITDA Adjustments that are reflected in the certificate delivered on the Effective Date pursuant to Section 6.01(c) of the WGRAH Loan Agreement, no such additions shall be allowed with respect to any Material Project unless at least 20 days prior to the delivery of any Compliance Certificate on which Material Project EBITDA Adjustments will be reflected for a Material Project (or such shorter time period as may be agreed by Trinity),

(1) WGRAH shall have delivered to Trinity a certificate of a Responsible Officer of WGRAH certifying as to the scheduled Commercial Operation Date of such Material Project and the projected Consolidated EBITDA attributable to such Material Project, together with a reasonably detailed explanation of the basis therefor and such other information and documentation as Trinity may reasonably request, and

(2) within ten (10) Business Days after delivery of the certificate described in clause (iii)(A)(1) above, Trinity shall not have objected to the projected Consolidated EBITDA therein referenced on the grounds that it was not calculated in compliance with clause (a) of this definition, or if such an objection has been made, it shall have been resolved in a manner reasonably satisfactory to Trinity,

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(B) prior to the date such Compliance Certificate is required to be delivered, Trinity shall have received such other information and documentation as Trinity may reasonably request, all in form and substance satisfactory to Trinity, and

(C) the aggregate amount of all Material Project EBITDA Adjustments during any period shall be limited to 25% of the total actual Consolidated EBITDA for such period (which total actual Consolidated EBITDA shall be determined without including any Material Project EBITDA Adjustments or any adjustments for Acquisitions or Dispositions pursuant to the definition of Consolidated EBITDA).

“Maximum Liability” means the maximum amount of liability that will result in the aggregate obligations of a Subsidiary Guarantor under Article 2 of the Subsidiary Guaranty not constituting a fraudulent transfer or conveyance under Bankruptcy Laws, the Uniform Fraudulent Conveyance Act (as adopted by any applicable state), the Uniform Fraudulent Transfer Act (as adopted by any applicable state) or any similar foreign, federal or state law to the extent applicable to the Subsidiary Guaranty and the obligations under of any Subsidiary Guarantor under Article 2 of the Subsidiary Guaranty.

“Measurement Period” means, at any date, the most recently completed four consecutive fiscal quarters ending on or prior to such date.

“Member Nonrecourse Debt” has the meaning set forth for “partner nonrecourse debt” in Treasury Regulation section 1.704-2(b)(4).

“Member Nonrecourse Debt Minimum Gain” has the meaning set forth for the term “partner nonrecourse debt minimum gain” in Treasury Regulation section 1.704-2(i)(3).

“Member Nonrecourse Deductions” has the meaning set forth for the term “partner nonrecourse deductions” in Treasury Regulation section 1.704-2(i).

“Midstream Agreement” means any written or unwritten contract for gathering, transport, processing, or other similar services, between WGRAH or any of its Subsidiaries, on the one hand, and any other Person, on the other hand, whether existing on the Effective Date or entered into thereafter.

“Midstream Assets” means assets used or useful in the “midstream” energy industry, including, without limitation, gathering systems, processing systems, pipelines, storage, and compressors and other equipment used and useful in connection therewith.

“Midstream Properties” means Midstream Assets now or hereafter owned by WGRAH and its Subsidiaries and contracts executed in connection therewith and all properties belonging, affixed or incidental to such Midstream Assets, including, without limitation, any and all Property now owned by WGRAH and its Subsidiaries and situated upon or to be situated upon,

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the real property to which the Midstream Assets are so attached as to constitute real property or fixtures, and all additions, substitutions, replacements for, and attachments to any and all of the foregoing owned directly or indirectly by WGRAH and its Subsidiaries.

“Minimum Sale Proceeds” has the meaning set forth in Section 5.7(b) of the Trinity Company Agreement.

“Moody’s” means Moody’s Investment Service, Inc., and any successor thereto that is a nationally recognized rating agency.

“MLP” means Western Gas Partners, LP, a Delaware limited partnership.

“MMBtu” means one million (1,000,000) British thermal units.

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA.

“Natural Buttes Gathering Project” means the gas gathering system comprised of gas gathering pipelines and gas compressors located in the Uinta Basin in Utah.

“Natural Buttes Processing (Chapita) Project” means the gas processing system comprised of a refrigeration facility located in the Uinta Basin in Utah.

“Net Cash Proceeds” means, with respect to any Disposition, the Gross Cash Proceeds with respect to such Disposition after deducting therefrom (without duplication) (a) reasonable and customary brokerage, commissions, underwriting fees and discounts, legal fees, finder’s fees and other similar fees and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable or an obligation to pay which has been incurred or, in the case of taxes, that are estimated by Anadarko to be payable to a Person that is not Anadarko or an Affiliate of Anadarko and are properly attributable to such transaction, and (c) the amount of any Indebtedness required to be repaid in connection with such Disposition provided in connection with or as a result of such transaction, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable or an obligation to pay which has been incurred or, in the case of taxes, that are estimated by Anadarko to be payable to a Person that is not Anadarko or an Affiliate of Anadarko and are properly attributable to such transaction.

“Nonrecourse Deductions” means any and all items of loss, deduction, or expenditure (described in section 705(a)(2)(b) of the Code) that, in accordance with the principles of Treasury Regulation section 1.704-2(b)(1), are attributable to a Nonrecourse Liability.

“Nonrecourse Liability” has the meaning assigned to such term in Treasury Regulation section 1.704-2(b)(3).

“Note Damage Amount” has the meaning set forth in Section 8(a) of the Sponsor Note Option Agreement.

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“Note Purchase Amount” has the meaning set forth in Section 3(c) of the Sponsor Note Option Agreement.

“Note Purchase Closing Date” means the 30^th day after the Note Purchase Exercise Date or, if Section 4(b) of the Sponsor Note Option Agreement applies, the Extended Note Purchase Closing Date.

“Note Purchase Exercise Date” means the date that the Note Purchase Exercise Notice shall have been given to Trinity, as provided in Section 3(a) of the Sponsor Note Option Agreement.

“Note Purchase Exercise Notice” means the notice given by Anadarko (or its assignee or designee) in accordance with Section 3(a) of the Sponsor Note Option Agreement, substantially in the form annexed as Exhibit B to the Sponsor Note Option Agreement, appropriately completed in conformity with such agreement, signed by Anadarko (or its assignee or designee).

“Note Purchase Option Expenses” has the meaning set forth in Section 5 of the Sponsor Note Option Agreement.

“Note Purchase Option Period” means the period (a) commencing on the date of the Sponsor Note Option Agreement and (b) ending on the first to occur of (i) the occurrence of a Termination Event, and (ii) the 60^th day following an ASCE Trigger Date.

“Notice Event” means any of the following:

(a) the failure of Trinity to timely make any distribution required under Section 5.3, Section 5.4, Section 5.7(b), or Section 6.9 of the Trinity Company Agreement;

(b) the failure of Trinity to timely make any other payment to a Trinity Member required to be made by it under the Trinity Company Agreement, which failure shall continue for a period of 30 days after the date when such payment was to have been made;

(c) the failure of the Trinity Class A Member to satisfy any of its material obligations under the Trinity Company Agreement, which failure shall continue for a period of 30 days after the date when such performance was due;

(d) the failure as of the 5^th anniversary of the Effective Date (or as of the expiration of any successive 5-year period) of the Trinity Class B Member to agree to a revised Preferred Return for an additional 5-year period in accordance with Section 5.7 of the Trinity Company Agreement;

(e) the failure to retire the Trinity Class B Membership Interest on the 5^th anniversary of the Effective Date or any subsequent anniversary thereof, unless the Trinity Members have previously agreed on a reset of the Preferred Return for the upcoming 5-year period in accordance with Section 5.7 of the Trinity Company Agreement;

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(f) the occurrence of an Event of Default under the WGRAH Loan Agreement;

(g) the occurrence of an Anadarko Event; or

(h) Failure to sell the WGRAH Note for the Minimum Sale Proceeds by the date that is 60 days following an ASCE Trigger Date.

“Notional Gas Amount” means, with respect to any Commodity Payment Period and Delivery Point, the aggregate quantity of natural gas (measured in MMBtu) attributed to such Delivery Point for which WGRAH and its Subsidiaries shall have received a payment from any Person based on the price of such Product.

“Notional Product Amount” means, with respect to any Commodity Payment Period and each Product, the aggregate sum of the quantity of such Product (expressed in the units applicable to such Product as set forth on Schedule A hereto) for which WGRAH and its Subsidiaries shall have received a payment from any Person based on the price of such Product.

“OECD” means the Organization for Economic Cooperation and Development.

“Organizational Documents” means, with respect to any Person, any certificate of incorporation, charter, by-laws, memorandum of association, articles of association, partnership agreement, limited liability company agreement, certificate of limited partnership, certificate of formation, trust agreement, certificate of trust, indenture or other agreement or instrument under which such person is formed or organized under Applicable Law.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under, or from the execution, delivery or enforcement of, or otherwise with respect to, the WGRAH Loan Agreement, other than income, franchise and similar taxes and Excluded Taxes.

“Other Sponsor Taxes” has the meaning set forth in Section 4.2(b) of the Sponsor Agreement.

“Payment Date” means the last day of each Interest Period, commencing April 1, 2008, or, if notification of any amount required to determine the Preferred Return is not timely made, the third Business Day after such notification is made; provided that, after the WGRAH Maturity Date or the Liquidation Start Date, as applicable, the Payment Date shall be each day selected by the Trinity Class B Member in its sole discretion.

“Payment Period” means (i) the period commencing on the third Business Day after the Effective Date and ending on, but not including, April 1, 2008 and (ii) thereafter, each subsequent period commencing on the last day of the immediately preceding Payment Period and ending on, but not including, the next succeeding first Business Day of January, April, July or October, as the case may be, of each year; provided that (x) in the case of any Payment Period under the Trinity Company Agreement that commences before the WGRAH Maturity Date, the Liquidation Start Date, the date of a redemption of the Trinity Class B Member Interest in accordance with Section 10.2 of the Trinity Company Agreement, or payment of Early Retirement Proceeds other than on a Payment Date in accordance with Section 5.3(b) of the

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Trinity Company Agreement, (each, an “Event Date”) and would otherwise end on a date occurring after such Event Date, such Payment Period shall end on such Event Date, and (y) the duration of each Payment Period that commences on or after an Event Date shall be initially the period commencing on such Event Date and ending on, but not including, the first Business Day of the immediately following calendar quarter and, thereafter, each subsequent period commencing on the last day of the immediately preceding Payment Period and ending on, but not including, the next succeeding first Business Day of January, April, July or October, as the case may be, of each year or of such other duration as shall be selected by the Trinity Class B Member in its sole discretion.

“Pecos” means Pecos Investors LLC, a Delaware limited liability company.

“Pecos Additional Financing Costs” means at any time, the sum of (a) the “Additional Financing Costs” under (and as defined in) the Pecos First Lien Credit Agreement at such time and (b) the “Additional Financing Costs” under (and as defined in) the Pecos Second Lien Credit Agreement at such time.

“Pecos Administrator” means the “Administrator” as defined in the Pecos Company Agreement.

“Pecos Administration Agreement” means the “Administration Agreement” as defined in the Pecos Company Agreement.

“Pecos Company Agreement” means the First Amended and Restated Limited Liability Company Agreement of Pecos dated as of December 27, 2007 among the Pecos Member Interest Owners.

“Pecos Consents” mean such consents to assignment by counterparties of agreements with Pecos as are entered into from time to time pursuant to the Pecos First Lien Credit Agreement or the Pecos Second Lien Credit Agreement to secure the obligations of Pecos to the Pecos Lenders.

“Pecos First Lien Agent” means the “Agent” as defined in the Pecos First Lien Credit Agreement.

“Pecos First Lien Collateral Agent” means the “Collateral Agent,” as defined in the Pecos First Lien Credit Agreement.

“Pecos First Lien Credit Agreement” means the First Lien Credit and Security Agreement dated as of December 27, 2007 by and between Pecos, the Pecos First Lien Agent, the Pecos First Lien Collateral Agent, and the Pecos First Lien Lenders.

“Pecos First Lien Lender” has the meaning set forth in the Pecos First Lien Credit Agreement.

“Pecos First Lien Loan Documents” means the “Loan Documents” as defined in the Pecos First Lien Credit Agreement.

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“Pecos First Lien Maturity Date” means the “Maturity Date” as defined in the Pecos First Lien Credit Agreement.

“Pecos Intercreditor Agreement” means the Intercreditor Agreement dated as of December 27, 2007 among Pecos, the Pecos First Lien Agent, the Pecos First Lien Collateral Agent, the Pecos Second Lien Agent, and the Pecos Second Lien Collateral Agent.

“Pecos Lenders” means the Pecos First Lien Lenders and the Pecos Second Lien Lenders.

“Pecos Loan Documents” means, collectively, the Pecos First Lien Loan Documents and the Pecos Second Lien Loan Documents.

“Pecos Managing Member” means the “Managing Member” as defined in the Pecos Company Agreement.

“Pecos Member Interest” means the Trinity Class B Membership Interest held by Pecos on the Purchase Exercise Date.

“Pecos Member Interest Owners” means the “Members” as defined in the Pecos Company Agreement.

“Pecos Second Lien Agent” means the “Agent” as defined in the Pecos Second Lien Credit Agreement.

“Pecos Second Lien Credit Agreement” means the Second Lien Credit and Security Agreement dated as of December 27, 2007 by and between Pecos, the Pecos Second Lien Agent, the Pecos Second Lien Collateral Agent, and the Pecos Second Lien Lenders.

“Pecos Second Lien Collateral Agent” means the “Collateral Agent,” as defined in the Pecos Second Lien Credit Agreement.

“Pecos Second Lien Maturity Date” means the “Maturity Date” as defined in the Pecos Second Lien Credit Agreement.

“Pecos First Lien Loan Documents” means the “Loan Documents” as defined in the Pecos Second Lien Credit Agreement.

“Pecos Second Lien Lender” has the meaning set forth in the Pecos Second Lien Credit Agreement.

“Pecos Transaction Costs” means all “Transaction Costs” as defined in the Pecos Company Agreement.

“Pecos Trinity Interest” means the total member interest in Trinity held from time to time by Pecos, as such Pecos Trinity Interest may be increased or decreased in accordance with the terms of the Trinity Company Agreement.

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“Permitted Acquisition” means (a) any making of Permitted Pledged Account Investments in the ordinary course of business and in accordance with Section 8.03 of the WGRAH Loan Agreement and (b) any Acquisition of the Anadarko Contributions so long as (i) such Acquisition and all transactions related thereto shall be consummated in accordance with all Applicable Laws; (ii) after giving effect to such Acquisition, no Default or Event of Default under the WGRAH Loan Agreement shall have occurred and be continuing; and (c) WGRAH shall be in compliance, on a pro forma basis after giving effect to such Acquisition, with the covenants set forth in Section 5.10 of the WGRAH Loan Agreement, as recomputed as at the last day of the most recently ended fiscal quarter of WGRAH for which financial statements are required to be delivered pursuant to Section 4.01(a) of the WGRAH Loan Agreement as if such Acquisition had occurred on the first day of the applicable Measurement Period.

“Permitted Assets” means (a) cash, (b) Cash Equivalents of the type set forth in subsection (b) of the definition thereof or subsection (g) of the definition thereof to the extent that it relates to subsections (a) and (b) thereof, (c) U.S. government treasury obligations, and (d) Trinity’s rights under the Transaction Agreements, including the WGRAH Loan; for purposes of the preceding sentence, “investments” excludes contractual rights that inure to Trinity concurrent with the close of this transaction.

“Permitted Business” means (a) the business of owning and/or operating Midstream Assets, and (b) any business or activity that is reasonably related, ancillary or complementary to any thereof or a reasonable extension, development or expansion of any thereof.

“Permitted Claims” has the meaning given such term in Section 6.5(a) of the Sponsor Agreement.

“Permitted Collateral Liens” means:

(a) Liens securing the WGRAH Obligations;

(b) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(c) Liens securing judgments for the payment of money not constituting an Event of Default under Section 7.01(i) of the WGRAH Loan Agreement or securing appeal or other surety bonds related to such judgments; and

(d) inchoate statutory Liens arising under ERISA.

“Permitted Liens” means:

(a) Liens securing the WGRAH Obligations;

(b) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

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(c) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, employee’s, landlord’s, lessor’s, contractor’s, operator’s or other like Liens arising in the ordinary course of business that are not past due for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted;

(d) survey exceptions, zoning restrictions, easements, rights-of-way, reservations, servitudes, permits, encroachments, exceptions, conditions, covenants, restrictions, rights of others and other similar encumbrances affecting real property which do not in any case or in the aggregate materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

(e) Liens securing judgments for the payment of money not constituting an Event of Default under Section 7.01(h) of the WGRAH Loan Agreement or securing appeal or other surety bonds related to such judgments;

(f) Liens arising under any obligations or duties to any municipality or public authority with respect to any franchise, grant, license or permit and the rights reserved or vested in any Governmental Authority or public utility to terminate any such franchise, grant, license, or permit or to condemn or expropriate any property, which do not in the aggregate materially impair the use of such property for the purposes for which it is held;

(g) Liens on cash deposits in the nature of a right of setoff, banker’s lien, counterclaim or netting of cash amounts owed, in each case arising in the ordinary course of business on deposit accounts;

(h) Liens in respect of any obligations that are not Indebtedness, including Liens in connection with “true leases” that are not Indebtedness, and Liens comprised of Uniform Commercial Code financing statements filed for information purposes with respect to leases incurred in the ordinary course of business and not otherwise prohibited by this Agreement;

(i) inchoate statutory Liens arising under ERISA;

(j) any restrictions on any Equity Interest of a Person providing for a breach, termination or default under any owners, participation, shared facility, joint venture, stockholder, membership, limited liability company or partnership agreement between such Person and one or more other holders of Equity Interests of such Person, if a security interest or other Lien is created on such Equity Interest as a result thereof and other similar Liens and restrictions described in Sections 5.09(iv) and 5.09(vii) of the WGRAH Loan Agreement; and

(k) set-off or netting rights granted by WGRAH or any of its Subsidiaries pursuant to any agreement permitted hereunder or arising by operation of law.

“Permitted Pledged Account Investments” has the meaning given such term in Section 8.03 of the WGRAH Loan Agreement.

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“Person” means any individual, corporation, limited liability company, partnership (general or limited), joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Authority.

“Plan” means any employee pension benefit plan, as defined in Section 3(2) of ERISA, which (a) is currently or hereafter sponsored, maintained or contributed to by WGRAH, a Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the Effective Date sponsored, maintained or contributed to by WGRAH or a Subsidiary or an ERISA Affiliate.

“Pledged Account” has the meaning given such term in Section 4.1 of the WGRAH Security Agreement.

“Pledged Financial Assets” means all financial assets credited from time to time to the Pledged Account.

“Pledged Security Entitlement” means all security entitlements with respect to the Pledged Financial Assets.

“PRCS Gathering System Project” means the gas gathering system comprised of gas gathering pipelines and gas compressors located in the Powder River Basin of northeast Wyoming.

“Preferred Return” means, for any Payment Period (or portion thereof), the sum of the Debt Amount for such Payment Period (or portion thereof) plus the Equity Amount for such Payment Period (or portion thereof).

“Proceeds” means all of each WGRAH Loan Party’s present and future (a) proceeds of the Account Collateral, whether arising from the collection, sale, lease, exchange, assignment, licensing, or other disposition of the Account Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Account Collateral by any Governmental Authority (or any person acting under authority from a Governmental Authority), (c) claims against third parties for impairment, loss, damage, or impairment of the value of such Account Collateral, and (d) any and all proceeds of, and all claims for, any insurance, indemnity, warranty or guaranty payable from time to time with respect to any of the Account Collateral, in each case whether represented as money, deposit accounts, accounts, general intangibles, securities, instruments, documents, chattel paper, inventory, equipment, fixtures, or goods.

“Product” means each of the hydrocarbon products specified in Schedule A.

“Profits” and “Losses” in relation to Trinity, means, for each Fiscal Quarter, an amount equal to Trinity’s taxable income or loss for such Fiscal Quarter, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

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(a) Any income of Trinity that is exempt from Federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

(b) Any expenditures of Trinity described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be subtracted from such taxable income or loss;

(c) In the event the gross asset value of any Trinity Property is adjusted, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

(d) Gain or loss resulting from any disposition of Trinity Property with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the gross asset value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its gross asset value; and

(e) Any items that are specially allocated pursuant to Section 5.1(c) or Section 5.1(d) of the Trinity Company Agreement shall not be taken into account in computing Profits or Losses.

The amounts of the items of income, gain, loss or deduction available to be specially allocated pursuant to Section 5.1(c) and Section 5.1(d) of the Trinity Company Agreement shall be determined by applying rules analogous to those set forth in clauses (a) through (f) above.

“Project Financing Subsidiary” means any Subsidiary of Anadarko whose principal purpose is the construction, acquisition or operation of a project or assets related or incidental to a project, whose debt is without recourse or liability to Anadarko or any of its other Subsidiaries (except (i) recourse against another Project Financing Subsidiary, including any direct or indirect parent entity of any Project Financing Subsidiary, substantially all of the assets of which consist of the equity of one or more Project Financing Subsidiaries, and (ii) recourse against the Equity Interests in a Project Financing Subsidiary pledged by Anadarko of any of its Subsidiaries to secure the debt of such Project Financing Subsidiary or any Subsidiary of such Project Financing Subsidiary).

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

“Proportionately Consolidated Interest” means undivided ownership interests in plants and/or gathering systems that are (a) co-owned with others and (b) are consolidated on a proportional basis in WGRAH’s financial information.

“Public Indenture” means the Indenture, dated as of September 19, 2006, between Anadarko and The Bank of New York Trust Company, N.A., as Trustee.

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“Purchase Amount” has the meaning set forth in Section 3(c) of the Sponsor Option Agreement.

“Purchase Closing Date” means the 30^th day after the Purchase Exercise Date or, if Section 4(c) of the Sponsor Option Agreement applies, the Extended Purchase Closing Date.

“Purchase Default” means, if a Purchase Exercise Notice shall have been delivered in accordance with Section 3(a) of the Sponsor Option Agreement or if a Note Purchase Exercise Notice shall have been delivered in accordance with Section 3(a) of the Sponsor Note Option Agreement:

(a) the occurrence of a Termination Event (or, if the Sponsor Purchase Option has been assigned in accordance with Section 15 of the Sponsor Purchase Option or the Sponsor Note Purchase Option has been assigned in accordance with Section 15 of the Sponsor Note Purchase Option, as applicable, and Anadarko is not required to guarantee the obligations of the assignee, the occurrence of a Termination Event or the occurrence with respect to such assignee of an event substantially similar to those described in clauses (f) or (g) of the definition of Anadarko Event); or

(b) the occurrence of any of the following at any time after the Purchase Exercise Date or the Note Purchase Exercise Date (as applicable) and on or before the Purchase Closing Date or the Note Purchase Closing Date (as applicable:

(i) Anadarko shall fail to pay any amount payable by it under the Sponsor Agreement or Anadarko (or an assignee) shall fail to pay any amount payable by it under the Sponsor Purchase Option or the Sponsor Note Purchase Option, in each case after the same becomes due and payable or Anadarko (or an assignee) shall fail to post any Acceptable Letter of Credit at the time required to be posted pursuant to the Sponsor Option Agreement or the Sponsor Note Option Agreement; or

(ii) Trinity shall fail:

(A) to distribute in cash to the Trinity Class B Member all amounts due and payable to the Trinity Class B Member pursuant to Article V of the Trinity Company Agreement when the same shall become due and payable in accordance with such Article V; or

(B) to make any other payment required to be made by it under the Trinity Company Agreement within three Business Days of the time when due.

“Purchase Exercise Date” means the date that the Purchase Exercise Notice shall have been given to Pecos, with a copy to each of the Pecos First Lien Collateral Agent and the Pecos Second Lien Collateral Agent, as provided in Section 3(a) of the Sponsor Option Agreement.

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“Purchase Exercise Notice” means the notice given by Anadarko (or its assignee or designee) in accordance with Section 3(a) of the Sponsor Option Agreement, substantially in the form annexed as Exhibit B to the Sponsor Option Agreement, appropriately completed in conformity with such agreement, signed by Anadarko (or its assignee or designee).

“Purchase Option Expenses” has the meaning set forth in Section 5 of the Sponsor Option Agreement.

“Purchase Option Period” means the period (a) commencing on the date of the Sponsor Option Agreement and (b) ending on the first to occur of (i) the occurrence of a Termination Event, and (ii) the 60^th day following an ASCE Trigger Date.

“Registration Statement” means the MLP’s registration statement on Form S-1 as filed with the Securities and Exchange Commission on October 15, 2007.

“Related Persons” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, advisors, representatives, and agents of such Person and such Person’s Affiliates.

“Relevant Date” has the meaning set forth in Section 2.15 of the Sponsor Agreement.

“Representatives” means, with respect to any Person, any of such Person’s directors, partners, officers, employees, agents, advisors or representatives.

“Required Allocations” means any allocation of an item of income, gain, loss or deduction pursuant to Section 5.1(d)(i), Section 5.1(d)(ii), Section 5.1(d)(iii), Section 5.1(d)(iv), Section 5.1(d)(v), Section 5.1(d)(vii), or Section 5.1(d)(ix) of the Trinity Company Agreement.

“Reset Date” has the meaning set forth in Section 5.7(a) of the Trinity Company Agreement.

“Reset Proposal Date” has the meaning set forth in Section 5.7(c) of the Trinity Company Agreement.

“Responsibilities” means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any requirement to comply with a covenant and any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding.

“Responsible Officer” means, with respect to (a) Anadarko, the Chief Financial Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary, of Anadarko; (b) WGRAH or any of its Subsidiaries, the chief executive officer, president or chief financial officer of such Person, but in any event, with respect to financial matters, the chief financial officer, principal accounting officer, treasurer or controller of WGRAH; and (c) any other Person, the President, any Vice President, the Treasurer, any Assistant. Treasurer, or the Secretary of such Person or of a managing member, manager or

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general partner of such Person, in the case of each of clauses (a) through (c) above, responsible for the administration of, or monitoring compliance with, the Trinity Company Agreement or any other Transaction Agreement.

“Restricted Payment” means, with respect to any Person, any of the following:

(a) any dividend or other payment or distribution on account of such Person’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving such Person) or to the direct or indirect holders of such Person’s Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests of such Person);

(b) any purchase, redemption, or other acquisition or retirement for value (including, without limitation, in connection with any merger or consolidation involving such Person) of any Equity Interests of such Person held by any other Person (other than a Subsidiary of such Person); or

(c) any payment on or with respect to, or any purchase, redemption, defeasance, or other acquisition or retirement for value of any Indebtedness of such Person or any Subsidiary of such Person that is contractually subordinated to the WGRAH Obligations (excluding any intercompany Indebtedness between or among the WGRAH Loan Parties).

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.

“Sales Agent” has the meaning set forth in Section 5.7(b) of the Trinity Company Agreement.

“Securities Act” means the Securities Act of 1933.

“Security Trigger Event” means the granting of a Lien on any Property of Anadarko or its domestic Subsidiaries to secure one or more debt facilities or commercial paper facilities (other than a Lien securing Indebtedness of a Project Financing Subsidiary), in each case, with banks or other institutional lenders providing for revolving credit loans, term loans, or letters of credit.

“Service” means the Internal Revenue Service.

“Significant Subsidiary” means any Subsidiary of WGRAH that would constitute a “significant subsidiary” (as defined in Regulation S-X of the Commission under the Exchange Act). The Significant Subsidiaries shall change from time to time to reflect the then “significant subsidiaries” (as defined in such Regulation S-X) at such time.

“Sponsor Agreement” means the Sponsor Agreement by and among Anadarko and Pecos, dated as of December 27, 2007.

“Sponsor Indemnified Amounts” has the meaning set forth in Section 3.2 of the Sponsor Agreement.

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“Sponsor Indemnified Proceeding” has the meaning given such term in Section 3.5(a) of the Sponsor Agreement.

“Sponsor Liquidation Guaranty” means that Liquidation Guaranty made by Anadarko in favor of the Liquidator dated as of December 27, 2007.

“Sponsor Note Option Agreement” means the Sponsor Note Option Agreement dated as of the Effective Date between Trinity and Anadarko.

“Sponsor Option Agreement” means the Sponsor Option Agreement dated as of the Effective Date between the Trinity Class B Member and Anadarko.

“Sponsor Note Purchase Option” has the meaning given such term in Section 2 of the Sponsor Note Option Agreement.

“Sponsor Purchase Option” has the meaning given such term in Section 2 of the Sponsor Option Agreement.

“Sponsor Term Credit Agreement” means the $8.0 Billion Term Loan Agreement by and among Anadarko, UBS, AG, Stamford Branch as Administrative Agent, Credit Suisse, Cayman Islands Branch and Citicorp North America, Inc. as Co-Syndication Agents, and the lenders party thereto, dated as of April 10, 2007.

“Subordinated” means subordinated on terms set forth on Exhibit B to the WGRAH Loan Agreement.

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless the context otherwise clearly requires, reference in the WGRAH Loan Agreement to a “Subsidiary” or the “Subsidiaries” refers to a Subsidiary or the Subsidiaries of WGRAH.

“Subsidiary Guarantors” means all of the present and future Subsidiaries of WGRAH; provided that any such Subsidiaries that will be Subsidiaries of the MLP immediately after its initial public offering described in the Registration Statement (a) shall have no liability under the Subsidiary Guaranty prior to the earlier to occur of (i) February 16, 2008 and (ii) the occurrence of a Notice Event, and (b) shall be released as Subsidiary Guarantors automatically, immediately before the consummation of such initial public offering.

“Subsidiary Guaranty” means the Subsidiary Guarantee Agreement dated as of December 27, 2007 made by the Subsidiary Guarantors existing on the date hereof, and any

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additional guaranty agreements, joinders, or supplements thereto executed by Subsidiary Guarantor in respect of the WGRAH Loan Agreement after the date hereof, in each case as amended or otherwise modified from time to time.

“Subsidiary Guarantee Release Date” means the later of (i) the WGRAH Maturity Date and (ii) the date on which all payment obligations, if any, of each Subsidiary Guarantor in respect of the Guaranteed Obligations and the payment obligations, if any, under the guarantee contained in Article 2 of the Subsidiary Guaranty shall have been satisfied by indefeasible payment in full in cash.

“Substituted Member” means a Person who is admitted as a Trinity Member, at such time as such Person has complied with the requirements of Section 3.5(c) of the Trinity Company Agreement, in place of and with all the rights of a Transferor with respect to the Trinity Membership Interest transferred and who is shown as a Trinity Member on the books and records of Trinity.

“Tax” or “Taxes” means any and all taxes (including net income, gross income, franchise, withholding, transfer, documentary, recording, employment, value added, ad valorem, gross receipts, leasing, excise, fuel, excess profits, sales, use, property (personal or real, tangible or intangible), transfer and stamp taxes), levies, imposts, duties, charges, assessments, or withholdings of any nature whatsoever, general or special, ordinary or extraordinary, now existing or hereafter created or adopted, whether imposed by law or contract (including under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign tax law) together with any and all penalties, fines, additions to tax and interest thereon.

“Tax Returns” means all returns, reports, forms, information statements and other filings with respect to Taxes, including all required schedules, attachments, elections and similar documentation.

“Termination Event” means any of the following events:

(a) the occurrence of a Termination Notice Effective Date;

(b) the occurrence of any event which makes it unlawful or impossible to carry on the purpose of Trinity as set forth in Section 2.4 of the Trinity Company Agreement, or the entry of a decree of judicial dissolution of Trinity under section 18-802 of the Act;

(c) approval by Unanimous Consent to dissolve, wind up and liquidate Trinity;

(d) if the Trinity Managing Member is Holdings, the Trinity Managing Member shall have approved the dissolution, winding up and liquidation of Trinity or, if the Trinity Managing Member is not Holdings, the Trinity Managing Member has delivered a written notice of such approval to the Trinity Members;

(e) Trinity, Anadarko, Holdings, WGRAH, or any Significant Subsidiary shall

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(i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of its property, (ii) admit in writing its inability to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under any Bankruptcy Law, (v) file a petition seeking to take advantage of any other law providing for similar relief of debtors, or (vi) consent or acquiesce in writing to any petition duly filed against it in any involuntary case under any Bankruptcy Law;

(f) a proceeding or case shall be commenced, without the application or consent of Trinity, Anadarko, Holdings, WGRAH, or any Significant Subsidiary in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution or winding up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of its assets, or (iii) similar relief in respect of it, under any law providing for the relief of debtors, and such proceeding or case shall continue undismissed, or unstayed and in effect, for a period of sixty (60) days (or such longer period, so long as Trinity, Anadarko, Holdings, WGRAH, or any Significant Subsidiary shall be taking such action in good faith as shall be reasonably necessary to obtain the timely dismissal or stay of such proceeding or case); or an order for relief shall be entered in an involuntary case under any applicable Bankruptcy Law, against Trinity, Anadarko, Holdings, WGRAH, or any Significant Subsidiary;

(g) after Anadarko has exercised the Sponsor Purchase Option or the Sponsor Note Purchase Option, a Purchase Default;

(h) the occurrence of the WGRAH Maturity Date; and

(i) at the election of the Trinity Class B Member, in its sole discretion, the distribution of the WGRAH Note to the Trinity Class B Member.

“Termination Notice” has the meaning given such term in Section 11.1(b) of the Trinity Company Agreement.

“Termination Notice Effective Date” has the meaning given such term in Section 11.1(b) of the Trinity Company Agreement.

“Transaction Agreements” means, collectively, the Trinity Company Agreement, the Pecos Company Agreement, the certificate of formation of Trinity, the certificate of formation of Pecos, each WGRAH Loan Document, each Pecos Loan Document, the Sponsor Agreement, the Sponsor Liquidation Guaranty, the Sponsor Option Agreement, the Sponsor Note Option Agreement, the Trinity Custodian Agreement, the Pecos Administration Agreement, the Tax Indemnification Agreement, and the Midstream Agreements.

“Transaction Obligations” has the meaning defined in Section 3.1 of the Sponsor Agreement.

“Transaction Party” means Anadarko, Holdings, WGRAH, all of the Subsidiaries of WGRAH, any borrower under any demand loan from WGRAH, any Affiliate of Anadarko that is a party to a Transaction Agreement, and any Affiliate of Anadarko that is a party to a Midstream Agreement.

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“Transfer” or “Transferred” means, with respect to a Trinity Membership Interest, (a) a voluntary or involuntary sale, assignment, transfer, conveyance, exchange, bequest, devise, gift or any other alienation (in each case, with or without consideration) of any rights, interests or obligations with respect to all or any portion of such Trinity Membership Interest, or (b) a grant or sufferance of a Lien on all or any portion of such Trinity Membership Interest.

“Transferee” means a Person who receives all or part of a Trinity Member’s Trinity Membership Interest through a Transfer.

“Transferor” means a Trinity Member who Transfers all or part of its Trinity Membership Interest.

“Treasury Regulation” means the Income Tax Regulations promulgated under the Code (including corresponding provisions of successor regulations).

“Trinity” means Trinity Associates LLC, a Delaware limited liability company, and its successors and assigns (including, for purposes of the WGRAH Loan Documents, any successor to or assignee of Trinity’s rights under such agreement).

“Trinity Class A Member” means the Trinity Member holding the Trinity Class A Membership Interest.

“Trinity Class A Membership Interest” means the Trinity Membership Interest designated as a “Trinity Class A Membership Interest” on Exhibit A to the Trinity Company Agreement.

“Trinity Class B Member” means the Trinity Member holding the Trinity Class B Membership Interest.

“Trinity Class B Membership Interest” means the Trinity Membership Interest designated as a “Trinity Class B Membership Interest” on Exhibit A to the Trinity Company Agreement.

“Trinity Company Agreement” means the Amended and Restated Limited Liability Company Agreement of Trinity, dated as of December 27, 2007 among the Trinity Members.

“Trinity Custodian” means Wells Fargo Delaware Trust Company, or any successor thereto pursuant to the Trinity Custodian Agreement.

“Trinity Custodian Agreement” means the Custody Agreement dated as of December 27, 2007 by and between Trinity and the Trinity Custodian.

“Trinity Expense Reimbursement Income” means, all income recognized by Trinity with respect to amounts received from WGRAH under Section 2.09 of the WGRAH Loan Agreement for, without duplication, all interest, costs, expenses, indemnities, fees (including reasonable attorneys’ and accountants’ fees), Pecos Additional Financing Costs, Pecos

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Transaction Costs, Taxes and other payment or distribution obligations incurred or owing by Trinity (excluding any Preferred Return and any liquidating distributions in respect of a Trinity Member’s Capital Account pursuant to Article XI of the Trinity Company Agreement).

“Trinity Expenses” means, without duplication, all interest, costs, expenses, indemnities, fees (including reasonable attorneys’ and accountants’ fees), Pecos Additional Financing Costs, Pecos Transaction Costs, Taxes and other payment or distribution obligations incurred or owing by Trinity (excluding any Preferred Return and any liquidating distributions in respect of a Trinity Member’s Capital Account pursuant to Article XI of the Trinity Company Agreement).

“Trinity Indemnified Amounts” is defined in Section 7.1 of the Trinity Company Agreement.

“Trinity Indemnified Proceeding” has the meaning given such term in Section 7.7(a) of the Trinity Company Agreement.

“Trinity Managing Member” means the Trinity Member designated as the Managing Member in accordance with the Trinity Company Agreement.

“Trinity Member” means any Person executing the Trinity Company Agreement as of even date herewith as a Trinity Member or any Person hereafter admitted to Trinity as an additional Trinity Member or Substituted Member as provided in the Trinity Company Agreement, but does not include any Person who has ceased to be a Trinity Member.

“Trinity Membership Interest” means the ownership interest (on a percentage basis) of a Trinity Member in Trinity, including rights to distributions (liquidating or otherwise), allocations, information, and to consent or approve, which ownership interest is more particularly described and identified in Section 3.3 of the Trinity Company Agreement and Exhibit B thereto.

“Trinity Minimum Gain” has the meaning given the term “partnership minimum gain” in Treasury Regulation section 1.704-2(b)(2) and the amount of which shall be determined in accordance with the principles of Treasury Regulation section 1.704-2(d).

“Trinity Operating Account” has the meaning set forth in the Trinity Custodian Agreement.

“Trinity Permitted Lien” means, as to any property, any of the following:

(a) Liens for taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; and

(b) Liens on cash deposits in the nature of a right of setoff, banker’s lien, counterclaim or netting of cash amounts owed arising in the ordinary course of business on deposit accounts.

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“Trinity Property” means at any time all property owned at such time by Trinity, and shall include both tangible and intangible property.

“Trinity Required Actions” means the delivery of all notices, certificates, and other documents, the making of all determinations (including discretionary determinations), and the taking of all discretionary and mandatory actions, in each case to be delivered, made, or taken by Trinity under the Transaction Agreements, and the exercise of all other rights and remedies of Trinity under the Transaction Agreements, including:

(a) accelerating the WGRAH Loan at any time when Trinity is entitled to do so pursuant to the WGRAH Loan Agreement;

(b) enforcing or exercising Trinity’s rights and remedies under the WGRAH Loan Documents or any other Transaction Agreement; and

(c) demanding payment of Pecos Additional Financing Costs, Pecos Transaction Costs, and other Trinity Expenses from WGRAH pursuant to the WGRAH Loan Documents.

“Trinity Tax Matters Member” has the meaning given such term in Section 8.3 of the Trinity Company Agreement.

“UCC” means, with respect to any state or territory of the United States, the Uniform Commercial Code in effect in such state or territory.

“US” or “United States” means the United States of America, its fifty states, and the District of Columbia.

“USA Patriot Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“Unanimous Consent” means the written consent of the Trinity Class A Member and the Trinity Class B Member.

“Unrecovered Capital” means, with respect to the Trinity Class B Membership Interest at any time, the aggregate of all Capital Contributions made in respect of such Trinity Membership Interest less payments received by the Trinity Class B Member pursuant to Section 5.3(b) of the Trinity Company Agreement to the extent that such payment is to offset Unrecovered Capital as set forth therein.

“WGR” means Western Gas Resources, Inc., a Delaware corporation.

“WGRAH” means WGR Asset Holding Company LLC, a Delaware limited liability company.

“WGRAH Account Control Agreement” means the Account Control Agreement dated as of the Effective Date among WGRAH, the WGRAH Collateral Agent, and the Depository Bank.

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“WGRAH Collateral Agent” means Citibank, N.A., Agency and Trust, as collateral agent for Trinity under the WGRAH Loan Agreement and the WGRAH Security Documents.

“WGRAH Collateral Agent Fee Letter” means the agreement dated as of December 27, 2007 between Anadarko and the WGRAH Collateral Agent.

“WGRAH Commitment” means the commitment of Trinity to make the WGRAH Loan in the amount of $2.2 billion.

“WGRAH Company Agreement” means the Limited Liability Company Agreement of WGRAH, dated as of June 19, 2007, by WGR.

“WGRAH Loan” means a loan made by Trinity to WGRAH pursuant to the WGRAH Loan Agreement.

“WGRAH Loan Agreement” means the as $2.2 Billion Term Loan Agreement dated as of December 27, 2007 among WGRAH, Trinity, and the WGRAH Collateral Agent.

“WGRAH Loan Documents” means the WGRAH Loan Agreement, the Subsidiary Guaranty, any WGRAH Note, the WGRAH Security Documents, the WGRAH Collateral Agent Fee Letter, and each other agreement executed in connection with the WGRAH Loan Agreement.

“WGRAH Loan Parties” means WGRAH and its Subsidiaries, collectively, and “WGRAH Loan Party” shall mean any one of such Persons.

“WGRAH Loan Transactions” means the execution, delivery, and performance WGRAH of the WGRAH Loan Agreement, the borrowing of the WGRAH Loan, the guarantee of the WGRAH Loan by the Subsidiary Guarantors, and the use of the proceeds thereof.

“WGRAH Material Adverse Change” means:

(a) any material adverse change in, or a material adverse effect upon, the operations, business or financial condition of WGRAH and its Subsidiaries taken as a whole;

(b) any material adverse change in the rights and remedies of Trinity under the WGRAH Loan Documents, taken as a whole, or of the ability of the WGRAH Loan Parties to perform their obligations under the WGRAH Loan Documents, taken as a whole; or

(c) any material adverse change in the legality, binding effect or enforceability against the WGRAH Loan Parties, taken as a whole, of the WGRAH Loan Documents, taken as a whole.

“WGRAH Maturity Date” means December 27, 2012 or such later date as to which the WGRAH Maturity Date may be extended pursuant to Section 2.02(b) of the WGRAH Loan Agreement.

“WGRAH Note” means any promissory note of WGRAH payable to the order of Trinity in substantially the form attached as Exhibit A to the WGRAH Loan Agreement.

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“WGRAH Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any of WGRAH or any of its Subsidiaries arising under any WGRAH Loan Document or otherwise with respect to the WGRAH Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any of WGRAH or any Subsidiary or any Affiliate thereof of any proceeding under any Bankruptcy Law naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“WGRAH Property” means all property owned by WGRAH and its Subsidiaries and shall include tangible and intangible property.

“WGRAH Security Agreement” means the WGRAH Security Agreement dated as of the Effective Date between WGRAH and the WGRAH Collateral Agent.

“WGRAH Security Documents” means the WGRAH Security Agreement and the WGRAH Account Control Agreement.

“Wholly Owned Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, partnership, association or other entity of which securities or other ownership interests representing all of the equity or all of the ordinary voting power or, in the case of a partnership, all of the general partnership interests are, as of such date, owned, controlled or held by the parent.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title IV of ERISA.

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EXHIBIT B

OWNERSHIP INFORMATION

Name of Each Trinity Member	Class
Trinity Associates Class A Holdings LLC c/o Anadarko 1201 Lake Robbins Drive The Woodlands, Texas 77380	Trinity Class A Membership Interest
Pecos Investors LLC 280 Park Avenue 11th Floor, East Tower New York, NY 10017	Trinity Class B Membership Interest

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EXHIBIT C

FORM OF MEMBERSHIP INTEREST REDEMPTION AGREEMENT

MEMBERSHIP INTEREST REDEMPTION AGREEMENT

BY AND BETWEEN

[                                         ]

and

TRINITY ASSOCIATES LLC

Dated as of [                            ]

CLASS B MEMBERSHIP INTEREST REDEMPTION AGREEMENT

THIS CLASS B MEMBERSHIP INTEREST REDEMPTION AGREEMENT (the “Agreement”), dated as of [            ], is agreed by and between [            ] (the “Trinity Class B Member”) and TRINITY ASSOCIATES LLC, a Delaware limited liability company (“Trinity”). The JV Class B Member and Trinity are each referred to individually as a “Party,” and collectively as the “Parties.”

W I T N E S S E T H

WHEREAS, the Trinity Class B Member has entered into the Trinity Company Agreement as a Trinity Member in Trinity;

WHEREAS, the Trinity Class B Member owns a [            ]% Trinity Class B Membership Interest (the “Subject Class B Membership Interest”) in Trinity; and

WHEREAS, the Trinity Class B Member has agreed that the Trinity Class B Membership Interest may be retired and redeemed by Trinity upon the conditions set forth in the Trinity Company Agreement and Trinity has determined to retire and redeem the Subject Class B Membership Interest in accordance with the Trinity Company Agreement; and

WHEREAS, in accordance with the terms and conditions of the Trinity Company Agreement and this Agreement, the Trinity Class B Member shall withdraw as a member as of Trinity, all as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows.

ARTICLE 1

DEFINITIONS

1.1 Definitions. Unless otherwise defined herein, words and expressions used herein shall have the meanings provided in Exhibit A to the Amended and Restate Limited Liability Company Agreement of Trinity Associates LLC, dated as of December [__], 2007, between Pecos Investors LLC and Trinity Associates Class A Holdings, LLC.

1.2 Certain Interpretive Matters. In construing this Agreement, the rules of construction set forth in Exhibit A to the Trinity Company Agreement shall apply as if set forth fully herein.

ARTICLE 2

RETIREMENT AND REDEMPTION

2.1 Redemption of the Class B Membership Interest. Trinity shall redeem the Subject Class B Membership Interest upon 10 Business Days’ prior written notice to the Trinity Class B

Member of its intent to so redeem the Subject Class B Membership Interest. Such redemption shall be in accordance with the terms and subject to the satisfaction of the conditions contained in this Agreement and the Trinity Company Agreement. At the Closing (as defined below), upon receipt by the Trinity Class B Member of the consideration set forth in Section 3.2, the Subject Class B Membership Interest shall be redeemed by Trinity and the Trinity Class B Member shall sell, assign, convey, and transfer the entire Subject Class B Membership Interest to Trinity and withdraw from Trinity as of the close of business on the Closing Date (as defined below).

2.2 Continuation of Limited Liability Company. The Members hereby agree that Trinity shall continue and shall not be dissolved because of the redemption of the Subject Class B Membership Interest or the withdrawal of the Trinity Class B Member from Trinity.

ARTICLE 3

THE CLOSING

3.1 Closing. The execution and delivery of this Agreement and the consummation of the other respective obligations of the Parties contemplated by this Agreement (the “Closing”) will take place on the later of (i) the 10^th Business Day following receipt by the Trinity Class B Member of the written notice described in Section 2.1, or (ii) such later date as may be specified in such notice (the “Closing Date”). The Closing shall be effective for all purposes as of 12:01 a.m. on the Closing Date.

3.2 Consideration. In consideration of the redemption of the Subject Class B Membership Interest, Trinity shall pay to the Trinity Class B Member as consideration for the Subject Class B Membership Interest an amount equal to the sum of all (i) Unrecovered Capital plus (ii) the Cumulative Preferred Return Distribution Amount at the time of redemption, plus (iii) all Trinity Expenses then unpaid.

ARTICLE 4

REPRESENTATIONS, WARRANTIES AND DISCLAIMERS

OF THE TRINITY CLASS B MEMBER

The Trinity Class B Member shall represent and warrant to Trinity on the date of this Agreement and on the Closing as follows:

4.1 Organization. The Trinity Class B Member is a [            ] duly formed, validly existing and in good standing under the laws of the State of [            ]. The Trinity Class B Member has all requisite partnership power and authority to own and operate its material properties and assets and to carry on its business as it is now being conducted in all material respects.

4.2 Authority Relative to this Agreement; Enforceability. The Trinity Class B Member has full power and authority to execute and deliver this Agreement and to consummate

the transactions contemplated by it hereby. The execution and delivery of this Agreement by the Trinity Class B Member and the consummation by the Trinity Class B Member of the transactions contemplated hereby have been duly and validly authorized by all necessary organizational action required on the part of the Trinity Class B Member and this Agreement has been duly and validly executed and delivered by the Trinity Class B Member. This Agreement constitutes a legal, valid and binding agreement of the Trinity Class B Member, enforceable against the Trinity Class B Member in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).

4.3 Legal Proceedings, etc. There is no action, suit, investigation, condemnation, audit or proceeding pending or, to the knowledge of the Trinity Class B Member, overtly threatened to which the Trinity Class B Member is a party before any arbitrator, court or other Governmental Authority, which could, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Trinity Class B Member or on the Trinity Class B Member’s ability to consummate the transactions contemplated hereby. The Trinity Class B Member is not subject to any outstanding judgments, rules, orders, writs, injunctions or decrees of any court, arbitrator or Governmental Authority that could reasonably be expected to have a material adverse effect on the Trinity Class B Member’s ability to consummate the transactions contemplated hereby.

4.4 Title and Related Matters. The Subject Class B Membership Interest is owned beneficially and of record by the Trinity Class B Member. The Trinity Class B Member has good and valid title to the Subject Class B Membership Interest free and clear of all Liens, except as may be created by this Agreement and for any Permitted Liens or any restrictions on sales of securities under applicable securities laws. The Trinity Class B Member is not a party to any warrant, option, purchase right, or other contract or commitment (other than this Agreement, the Trinity Company Agreement, and the Sponsor Purchase Option) that would require the Trinity Class B Member to sell, transfer, or otherwise dispose of the Subject Class B Membership Interest.

4.5 Bankruptcy. There are no bankruptcy, reorganization, or arrangement proceedings pending against, being contemplated by or, to the knowledge of the Trinity Class B Member, threatened against the Trinity Class B Member.

4.6 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 4, THE TRINITY CLASS B MEMBER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. TRINITY HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THIS

ARTICLE 4, TRINITY IS REDEEMING THE SUBJECT CLASS B MEMBERSHIP INTEREST ON AN “AS IS, WHERE IS” BASIS.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF TRINITY

Trinity represents and warrants to the Trinity Class B Member on the date of this Agreement and on the Closing as follows:

5.1 Organization. Trinity is a limited liability company, duly formed, validly existing and in good standing under the laws of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as is now being conducted.

5.2 Authority Relative to this Agreement. Trinity has full limited liability company power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Trinity and the consummation by Trinity of the transactions contemplated hereby have been duly and validly authorized by all necessary limited liability company action required on the part of Trinity, and this Agreement has been duly and validly executed and delivered by Trinity. This Agreement constitutes a legal, valid and binding agreement of Trinity, enforceable against Trinity in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).

5.3 Legal Proceedings. There are no actions or proceedings pending or, to the knowledge of Trinity, overtly threatened against Trinity before any arbitrator or court or other Governmental Authority, which could reasonably be expected to have a material adverse effect on Trinity or on Trinity’s ability to consummate the transactions contemplated hereby.

5.4 Investment Company. Trinity is not an “investment company” as that term is defined under the Investment Company Act of 1940, and the rules and regulations promulgated thereunder.

ARTICLE 6

COVENANTS OF THE PARTIES

6.1 Public Statements. Subject to the requirements imposed by any Applicable Law or any Governmental Authority or stock exchange, and provided that both the Trinity Class B Member and Trinity may make announcements to credit rating agencies and creditors of themselves and their Affiliates, no press release or other public announcement or public statement or comment in response to any inquiry relating to the transactions contemplated by this Agreement shall be issued or made by any Party without the prior approval of the other Parties (which approval shall not be unreasonably withheld or delayed). The Parties agree to cooperate in preparing such announcements.

6.2 Expenses. Except to the extent specifically provided herein, whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Party incurring such costs and expenses.

6.3 Further Assurances. Each of Trinity and the Trinity Class B Member agrees that it will execute and deliver (including, to the extent that it is able to do so under Applicable Law and the Trinity Company Agreement) to execute and deliver such further instruments, and take (including, to the extent that it is able to do so under Applicable Law and the Trinity Company Agreement) such other action, as may be reasonably necessary to carry out the purposes and intents of this Agreement.

6.4 Access to Books and Records.

(a) For a period of [            ] years after the Closing Date (or such longer period as may be required by Applicable Law or by any other provision of this Agreement), the Trinity Class B Member and its Representatives shall have, during normal business hours and upon reasonable notice, reasonable access to all books and records of Trinity in existence as of the Closing Date, for the purposes of:

(i) complying with any Applicable Law affecting the Trinity Class B Member’s ownership of any Trinity Class B Membership Interest prior to the Closing Date; and

(ii) preparing any audit of the books and records of any third party relating to the Trinity Class B Membership Interest prior to the Closing Date, or responding to any audit prepared by such third parties.

(b) Trinity agrees that it shall keep and maintain such books during such period.

ARTICLE 7

MISCELLANEOUS PROVISIONS

7.1 Amendment and Modification. This Agreement may be amended, modified or supplemented only by written agreement of the Parties.

7.2 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any Party to comply with any obligation, covenant, agreement or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver of such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith.

7.3 Survival. The representations and warranties given or made by any Party to this Agreement or in any certificate or other writing furnished in connection herewith shall survive the Closing. The indemnities and covenants given or made by any Party to this Agreement or in any certificate or other writing furnished in connection herewith shall survive for a period of

[            ] months after the Closing Date and shall thereafter terminate and be of no further force or effect.

7.4 Notices. All notices and other communications hereunder shall be given in accordance with the provisions of Section 14.11 of the Trinity Company Agreement.

7.5 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either Party hereto, including by operation of law, without the prior written consent of the other Party, nor is this Agreement intended to confer upon any other Person except the Parties hereto any rights, interests, obligations or remedies hereunder.

7.6 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware (without giving effect to conflict of law principles that would require the application of the laws of another jurisdiction) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies.

7.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. No party shall become bound by this Agreement or any other instrument executed in connection herewith by counterpart until both Parties have affixed their respective signatures hereto.

7.8 Entire Agreement. This Agreement, including the Exhibits, Schedules, documents, certificates and instruments referred to herein or therein, embody the entire agreement and understanding of the Parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such transactions.

7.9 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to a Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

IN WITNESS WHEREOF, Trinity and the Trinity Class B Member have executed this Agreement as of the date first set forth above.

EX-10.(LVI)

Exhibit 10(lvi)

EXECUTION VERSION

SPONSOR AGREEMENT

Dated as of December 27, 2007

Among

ANADARKO PETROLEUM CORPORATION

and

PECOS INVESTORS LLC

TABLE OF CONTENTS

		Page
SECTION 1	DEFINED TERMS; RULES OF CONSTRUCTION	1
1.1	Definitions	1
1.2	Use of Certain Terms	1
1.3	Accounting Terms	2
1.4	No Presumption Against Any Party	2
1.5	Headings and References	2
SECTION 2	REPRESENTATIONS AND WARRANTIES	2
2.1	Due Formation	2
2.2	Authorization of Transaction Agreements	3
2.3	Consents	3
2.4	Enforceability	3
2.5	Accounts	3
2.6	Compliance with Laws, Etc	4
2.7	Litigation	4
2.8	Taxes	4
2.9	Environmental	4
2.10	Title to Assets	4
2.11	ERISA	4
2.12	Investment Company; Holding Company	5
2.13	Sponsor Subsidiaries	5
2.14	Priority	5
2.15	Demand Loans	5
2.16	No Default	6
2.17	Disclosure	6
2.18	Gathering and Processing Agreements	7
SECTION 3	PERFORMANCE GUARANTEE AND INDEMNIFICATION	7
3.1	Subsidiary Guaranties	7
3.2	General Indemnities	7
3.3	Survival of Indemnification Obligations	10
3.4	Limitations on Indemnification Obligations	10

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TABLE OF CONTENTS

(continued)

		Page
3.5	Procedural Requirements	11
3.6	Contributory Negligence	11
3.7	Limitation with Respect to Obligations Under WGRAH Advance Documents	12
SECTION 4	PAYMENTS	12
4.1	Payments	12
4.2	Taxes	12
SECTION 5	SPONSOR COVENANTS	14
5.1	Separate Existence	14
5.2	Affirmative Covenants	18
5.3	Negative Covenants	20
5.4	Reporting Requirements	21
SECTION 6	MISCELLANEOUS	23
6.1	Amendments	23
6.2	Addresses for Notices	23
6.3	No Waiver; Cumulative Remedies	23
6.4	Waiver of Jury Trial	24
6.5	Jurisdiction, Etc	24
6.6	Assignment	24
6.7	Governing Law	25
6.8	Counterparts	25
6.9	Survival of Representations, Warranties and Indemnities; Entire Agreement	25
6.10	Severability	25
6.11	No Third-Party Beneficiaries	25
6.12	Obligations Absolute	25
6.13	Waiver	26
6.14	Subrogation	26

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SPONSOR AGREEMENT

This SPONSOR AGREEMENT, dated as of December 27, 2007 (this “Sponsor Agreement”), is entered into by and between Anadarko Petroleum Corporation, a Delaware corporation, in favor of Pecos Investors LLC, a Delaware limited liability company, and the other Indemnified Persons.

PRELIMINARY STATEMENTS

A. Anadarko is, through one or more wholly owned subsidiaries, the owner of 100% of the member interests of Trinity Associates Class A Holdings LLC, a Delaware limited liability company. Holdings is the Trinity Class A Member and is the Trinity Managing Member of Trinity;

B. Anadarko and Holdings desire Pecos to become a Trinity Class B Member in accordance with that certain Trinity Company Agreement;

C. It is a condition to Pecos becoming a Trinity Class B Member that Anadarko provides certain assurances as set forth in this Sponsor Agreement; and

In consideration of the premises, and intending to be legally bound by this Sponsor Agreement, Anadarko agrees as follows:

SECTION 1

DEFINED TERMS; RULES OF CONSTRUCTION

1.1 Definitions.

As used in this Sponsor Agreement, capitalized terms defined in the preamble and other Sections of this Sponsor Agreement shall have the meanings set forth therein and capitalized terms used herein (including in the Preliminary Statements) but not otherwise defined herein shall have the meanings set forth in Exhibit A to the Trinity Company Agreement.

1.2 Use of Certain Terms.

In this Sponsor Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” mean “to but excluding”. Unless the context of this Sponsor Agreement requires otherwise, the plural includes the singular the singular includes the plural, and “including” has the meaning of “including without limitation”. The words “hereof”, “herein”, “hereby”, “hereunder “, and other similar terms of this Sponsor Agreement refer to this Sponsor Agreement as a whole and not exclusively to any particular provision of this Sponsor Agreement. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. All pronouns and any variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural, as the identity of the Person or Persons may require.

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1.3 Accounting Terms.

All accounting terms not specifically defined herein shall be construed in accordance with GAAP applied consistently.

1.4 No Presumption Against Any Party.

Neither this Sponsor Agreement nor any uncertainty or ambiguity herein shall be construed against any particular party, whether under any rule of construction or otherwise. On the contrary, this Sponsor Agreement has been reviewed by each of the parties and their counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

1.5 Headings and References.

Section and other headings are for reference only, and shall not affect the interpretation or meaning of any provision of this Sponsor Agreement. Unless otherwise provided, references to Articles, Sections, Schedules, Annexes and Exhibits shall be deemed references to Articles and Sections of, and Schedules, Annexes and Exhibits to, this Sponsor Agreement. Whether or not specified herein or therein, references to this Sponsor Agreement and any other Transaction Agreement include this Sponsor Agreement and the other Transaction Agreements as the same may be modified, amended, restated or supplemented from time to time pursuant to the provisions hereof or thereof as permitted by the Transaction Agreements. Whether or not specified herein, a reference to any law shall mean, that law as it may be amended, modified or supplemented from time to time, and any successor law. A reference to a Person includes the successors and assigns of such Person, but such reference shall not increase, decrease or otherwise modify in any way the provisions in this Sponsor Agreement governing the assignment of rights and obligations under or the binding effect of any provision of this Sponsor Agreement, including Section 6.6.

SECTION 2

REPRESENTATIONS AND WARRANTIES

Anadarko hereby represents and warrants as of the Effective Date and, with respect to Section 2.15 only, the date of each Information Memorandum as follows:

2.1 Due Formation. Anadarko is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Transaction Party is duly incorporated or formed, validly existing and in good standing in the jurisdiction of its incorporation or formation. Each Transaction Party possesses all corporate, limited liability company or other applicable Business Entity powers and other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have an Anadarko Material Adverse Change.

2.2 Authorization of Transaction Agreements. The execution, delivery and performance by each Transaction Party of each Transaction Agreement to which it is a party and the consummation of the transactions contemplated thereby are within its applicable Business

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Entity powers, have been duly authorized by all necessary corporate, limited liability company or other applicable Business Entity action, and do not contravene (i) its organizational documents or (ii) any Applicable Law or material contractual restriction binding on or affecting it.

2.3 Consents. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required for the due execution, delivery and performance by each Transaction Party of each Transaction Agreement to which it is a party, except those necessary to comply with Applicable Law required in the ordinary course to comply with the ongoing obligations of Anadarko under Sections 5.2 and 5.3 and of the other Transaction Parties under the Transaction Agreements and to perfect security interests. In connection with the asset and equity transfers that were consummated in connection with the formation of WGRAH and its Affiliates, there are no authorizations or approvals or other action by, and no notice to or filing with, any Governmental Authority or any other third party that were required to be obtained that have not yet been obtained, except for authorizations and approvals the absence of which is not reasonably likely to cause an Anadarko Material Adverse Change.

2.4 Enforceability. This Sponsor Agreement and each other Transaction Agreement to which a Transaction Party is a party has been duly executed and delivered by Anadarko or the Transaction Party, as applicable. Each Transaction Agreement to which any Transaction Party is a party constitutes the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by general principles of equity.

2.5 Accounts.

(a) The consolidated balance sheet of Anadarko and its consolidated Subsidiaries as of December 31, 2006 and the related consolidated statements of income and cash flows of Anadarko and its consolidated Subsidiaries for the fiscal year then ended, reported on by KPMG LLP, independent public accountants, fairly present the consolidated financial condition of Anadarko and its consolidated Subsidiaries as of such date and the consolidated results of operations of Anadarko and its consolidated Subsidiaries for the period ended on such date, all in accordance with GAAP consistently applied, and except as may have been disclosed in public filings of Anadarko since December 31, 2006 there has been no material adverse change in such condition or operations.

(b) The unaudited consolidated balance sheet of Anadarko and its consolidated Subsidiaries as of September 30, 2007, and the related consolidated statements of income and cash flows of Anadarko and its consolidated Subsidiaries for the three months then ended, certified by the chief financial officer of Anadarko, fairly present the consolidated results of operations of Anadarko and its consolidated Subsidiaries for the three months then ended, all in accordance with GAAP consistently applied (except that Anadarko adopted successful efforts accounting and except as approved by the chief financial officer of Anadarko and as disclosed therein) and subject to normal year end audit adjustments.

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2.6 Compliance with Laws, Etc. Anadarko and each Transaction Party is in compliance with all Applicable Laws applicable to it or its property, except where the failure to so comply, individually or in, the aggregate, would not be expected to result in an Anadarko Material Adverse Change.

2.7 Litigation. Except as set forth in public filings of Anadarko pursuant to the Exchange Act or the Securities Act, there is no action, suit or proceeding pending, or to the knowledge of Anadarko threatened, against or involving Anadarko or any Transaction Party in any court, or before any arbitrator of any kind, or before or by any governmental body, which (taking into account the exhaustion of all appeals) if adversely determined would be reasonably likely to have an Anadarko Material Adverse Change, or which purports to affect the legality, validity, binding effect or enforceability of any Transaction Agreement.

2.8 Taxes. Anadarko and each of its Subsidiaries have duly filed all Tax Returns required to be filed, and have duly paid and discharged all Taxes imposed upon them or against their properties or have made adequate provision for any such Taxes not yet due and payable on the appropriate balance sheet, in accordance with GAAP, except to the extent the failure to pay or make such provision would not result in an Anadarko Material Adverse Change. Anadarko and each of its Subsidiaries have duly withheld and remitted all Taxes which such parties have the responsibility to withhold or remit other than such Taxes the failure to withhold or remit would not result in an Anadarko Material Adverse Change. Each Subsidiary of Anadarko that is eligible to be included in the U.S. federal income tax consolidated return of Anadarko will elect to be so included. Each Transaction Party listed on Schedule 2.8 hereto is included in the U.S. federal income tax consolidated return of Anadarko. WGRAH is, and at all times from and after the date of its formation has been, a disregarded entity for U.S. federal income tax purposes.

2.9 Environmental. Each of Anadarko and each of the Transaction Parties: (i) is in compliance in all material respects with all applicable Environmental Laws including without limitation requirements to possess, maintain in full force and effect, and comply with any Environmental Permits; (ii) is not subject to any pending or, to its knowledge, threatened Environmental Actions, including without limitation any claims by any Governmental Authority or any third party arising under Environmental Laws or relating in any way to a release of or exposure to any Hazardous Materials; and (iii) has no knowledge of any other occurrences, circumstances, or conditions that could be reasonably expected to result in losses, costs, expenses, obligations, responsibilities, liabilities, or claims relating to Environmental Laws or Hazardous Materials which would be reasonably likely to cause an Anadarko Material Adverse Change.

2.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would be reasonably likely to cause an Anadarko Material Adverse Change. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that could reasonably be expected to be an Anadarko Material Adverse Change.

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2.11 Investment Company; Holding Company. Neither Anadarko nor any Transaction Party is an “investment company” within the meaning of the Investment Company Act of 1940.

2.12 Entities. Each of Holdings and each WGRAH Loan Party is a direct or indirect wholly owned Subsidiary of Anadarko.

2.13 Priority. The obligations of Anadarko under this Sponsor Agreement are not contractually subordinated to any other unsecured Indebtedness of Anadarko

2.14 No Default. As of the Effective Date, no Anadarko Event, Event of Default, Notice Event, Liquidating Event, Termination Event or Incipient Event has occurred and is continuing.

2.15 Disclosure. With respect to the Effective Date or the date of each Information Memorandum (each, a “Relevant Date”), as the case may be:

(a) Subject to Section 2.15(c), all written information (including information in electronic form) that has been made available to the Agent and the Pecos Member Interest Owners (and the members of the Pecos Member Interest Owners or their agents (it being agreed that Citibank, NA. and its Affiliates are not agents of the Pecos Member Interest Owners)) by Anadarko or any of its Affiliates or any of its directors, partners, officers, employees, agents, advisors or representatives (all of the foregoing, collectively, “Representatives”) prior to such Relevant Date in connection with the Transaction Agreements and the Transaction Agreements and the transactions contemplated by the Transaction Agreements, in each case taken as a whole and as modified or supplemented from time to time prior to such Relevant Date, was complete and correct in all material respects on such Relevant Date and did not on such Relevant Date contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in any material respect in light of the circumstances under which such statements were made.

(b) Any historical financial data provided by Anadarko or any of its Affiliates or any of their respective Representatives to the Agent and the Pecos Member Interest Owners (and the members of the Pecos Member Interest Owners or their agents) prior to such Relevant Date in connection with the transactions contemplated by the Transaction Agreements and the Transaction Agreements was prepared in accordance with GAAP then in effect (or with appropriate reconciliation to such GAAP if required by Applicable Law or requested by the Agent or the Pecos Member Interest Owners) and fairly presents the financial condition and results of operations of the WGRAH Loan Parties (subject to year end audit adjustments) as of the date thereof except as otherwise disclosed therein or in the footnotes thereto or as otherwise disclosed in writing to the Agent and the Pecos Member Interest Owners.

(c) All financial projections that were prepared by Anadarko or any of its Affiliates or their Representatives and made available to, the Agent and the Pecos Member Interest Owners (and the members of the Pecos Member Interest Owners or their agents) prior to such Relevant Date in connection with the transactions contemplated by the Transaction Agreements were prepared in good faith based upon assumptions believed by Anadarko to be reasonable at the time such projections were prepared (it being understood that such projections

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are subject to significant uncertainties and contingencies, many of which are beyond Anadarko ‘s control, and that no assurance can be given that the projections will be realized or that such assumptions will prove to be correct).

(d) The financial model for Pecos dated as of the Effective Date attached hereto as Annex I (the “Financial Model”), subject to the qualifications and assumptions set forth in the Financial Model, (x) contains formulas which are consistent with and fairly reflect (i) the allocations provided in the Trinity Company Agreement and (ii) the other relevant financial terms of the Transaction Documents and (y) sets forth computed amounts that fairly reflect the application of such formulae to the assumptions contained in the Financial Model. The parties hereto recognize that the financial projections set out in the Financial Model are subject to significant uncertainties and contingencies, many of which are beyond Anadarko’s control.

The Parties acknowledge that Anadarko is not obligated to supplement any information or projection or other materials referred to in this Section 2.15 after the Effective Date except with respect to the making of the foregoing representations and warranties on the date of any Information Memorandum and except as otherwise required pursuant to the Transaction Agreements.

2.16 Value. Anadarko, as direct or indirect owner of WGRAH and Holdings, has received reasonably equivalent value for its agreement to enter into this Sponsor Agreement.

SECTION 3

PERFORMANCE GUARANTEE AND INDEMNIFICATION

3.1 Subsidiary Guaranties.

Subject to the limitations set forth in Section 3.7, Anadarko hereby absolutely, unconditionally and irrevocably guarantees, for the benefit of the Indemnified Persons, the due and punctual payment, performance and observance by each Transaction Party of its Responsibilities under each Transaction Agreement to which it is a party, but excluding any obligation of Trinity (or of Holdings as the Trinity Managing Member to cause Trinity) to make any distribution pursuant to Article V of the Trinity Company Agreement (except to the extent that there are funds available to Trinity to be applied to such payment at the time such payment is due, and then only from such funds) (such non-excluded Responsibilities, the “Transaction Obligations”).

3.2 General Indemnities.

Subject to the limitations set forth in Sections 3.4 and 3.7 below, Anadarko agrees to the fullest extent permitted by Applicable Law to indemnify and hold harmless each Indemnified Person for and against and to pay on an After-Tax Basis, all Expenses (the Expenses on an After-Tax Basis being referred to collectively as the “Sponsor Indemnified Amounts”) that may be incurred or realized by or asserted against such Indemnified Person relating to, growing out of or resulting from:

(a) Transactions Obligations. Any breach by any Transaction Party of any Transaction Obligation; or

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(b) Sponsor Obligations. Any breach by Anadarko in the due and punctual payment, performance and observance of each of its covenants and obligations under this Sponsor Agreement and each other Transaction Agreement to which it is a party; or

(c) Representations and Warranties. Any material inaccuracy in, or any material breach of, any written certification, representation or warranty made or deemed made:

(i) by Anadarko in this Sponsor Agreement or by any of its Affiliates (or any officer or other authorized representative thereof) to or for the benefit of any Indemnified Person, in any Transaction Agreement or Transaction Agreement to which Anadarko or any of its Affiliates is a party; or

(ii) by any Transaction Party (or any officer or other authorized representative thereof) in any written report or certification required hereunder or under any Transaction Agreement or Transaction Agreement to which any Transaction Party is a party, in each case (A) if such certification, representation or warranty is made as of a specific date, as of the date as of which the facts stated therein were certified, represented or warranted and (B) in all other cases, as of any date or during any period to which such certification, representation or warranty may be applicable; or

(d) Investigations; Litigation; Proceedings; Enforcement. (i) Enforcement of this Sponsor Agreement or any other Transaction Agreement or Transaction Agreement to which a Transaction Party is a party and (ii) any investigation, litigation or proceeding, whether or not such Indemnified Person is a party thereto, that:

(i) relates to, grows out of or results from any action or omission, or alleged action or omission, by or on behalf of or attributable to any Transaction Party in the performance or observance of its obligations under or in relation to the Transaction Agreements or the transactions contemplated thereby; and

(ii) would not have resulted in Sponsor Indemnified Amounts incurred or realized by or asserted against such Indemnified Person but for their being a party to, or a direct or indirect participant in, or having a relationship described in the definition of “Indemnified Person” to a party to, or a direct or indirect participant in, the Transaction Agreements or any of the transactions contemplated thereby; or

(e) Substantive Consolidation. (i) Any petition or proceeding (x) seeking or asserting or (y) a court ordering, in any case or proceeding under the United States Bankruptcy Code involving Anadarko or any Transaction Party, as debtor, that the assets and liabilities of Trinity be consolidated substantively with the assets and liabilities of Anadarko or any Transaction Party (other than Trinity) and (ii) defending against any petition, proceeding or order referred to in clause (i) above; it being agreed that upon the occurrence of an event described in clause (i)(y) above, the Indemnified Persons involved shall be entitled to recover from Anadarko, as liquidated damages for Sponsor Indemnified Amounts under such clause (i) (but without prejudice to amounts recoverable under clause (ii) above or any other provision of the

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Transaction Agreements), and not as a penalty, an aggregate amount equal to the sum of all (x) Unrecovered Capital plus (y) the Cumulative Preferred Return Distribution Amount at the time of redemption, plus (z) all Trinity Expenses then unpaid in addition to all other Sponsor Indemnified Amounts hereunder; or

(f) ERISA. Any liability or other Sponsor Indemnified Amounts that Trinity or any Transaction Party may incur in connection with any Plan or Multiemployer Plan or otherwise under Title IV of ERISA; or

(g) Expenses. Any amendment, supplement, modification, consent or waiver of, to or under any Transaction Agreement (to the extent not otherwise reimbursed pursuant to any Transaction Agreement); or

(h) Environmental Liabilities. The actual or alleged presence of Hazardous Materials on any property of any Transaction Party, any Environmental Action relating in any way to any Transaction Party, any violation of applicable Environmental Laws (including without limitation any penalties associated therewith, as well as any costs of correcting any such violation), or any other losses, costs, expenses, obligations, responsibilities, liabilities, or claims arising under Environmental Laws or relating in any way to a release of or exposure to any Hazardous Materials; or

(i) Casualty, Etc. Any casualty, theft, personal injury, tort or other liability to a third party arising under or in connection with or attributable to the operations or properties of Anadarko or any Transaction Party or any violation of any Applicable Law by Anadarko or any of its Affiliates; or

(j) Fraudulent Transfer or Conveyance. Any transfer, pledge or conveyance by any Transaction Party to Trinity, Holdings, WGRAH or any of their Subsidiaries or the transfer, pledge or conveyance thereof under the WGRAH Loan Documents to the extent found in any bankruptcy, insolvency, receivership or other similar proceeding to be a “fraudulent transfer” or “fraudulent conveyance” or “fraudulent preference”; or

(k) Tax Liability. All Taxes for which Anadarko or any of its Subsidiaries is liable (including with respect to any assets or income of a partnership or disregarded entity owned in whole or in part by Anadarko or any of its Subsidiaries). If the shares of any Transaction Party and any assets directly or indirectly held thereby (including any assets held by any partnership or disregarded entity in which a Transaction Party is a partner or owner) are sold following a Liquidating Event, the benefits of this Section 3.2(k) shall inure to the purchaser of such shares or assets with respect to any taxable period or portion thereof ending on or prior to the date of such sale.

3.3 Survival of Indemnification Obligations. All indemnities provided for in this Sponsor Agreement shall survive the Transfer of any Trinity Membership Interest or the liquidation of Trinity. After any such Transfer or liquidation, the provisions of Section 3.2 shall inure to the benefit of each Indemnified Person with respect to Sponsor Indemnified Amounts arising in respect of the period during which the member or shareholder or other holder of an Equity Interest (as applicable) who has Transferred its Trinity Membership Interest was a member (including with respect to actions taken or omitted to be taken, and events occurring and circumstances existing, during such period) of Trinity.

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3.4 Limitations on Indemnification Obligations. The indemnities provided in Section 3.2 and Section 3.8 shall be subject to the following limitations:

(a) Limitation by Law. Such Sections shall be enforced only to the maximum extent permitted by Applicable Law.

(b) Misconduct, Etc. No Person, shall be indemnified or held harmless for, and Anadarko shall have no liability for or in respect of, any Expenses with respect to such Person to the extent caused by or resulting from (i) the actual fraud, willful misconduct, bad faith or gross negligence of such Person or any of its Related Persons or (ii) any inaccuracy in, or breach of, any written certification, representation or warranty made by such Person or any of its Related Persons in any Transaction Agreement or in any written report or certification required hereunder or under any other Transaction Agreement (unless and to the extent such inaccuracy or breach is attributable to any written information provided by any Transaction Party), in each case under this clause (ii): (x) if, but only if, such certification, representation or warranty is made as of a specific date, as of the date as of which the facts stated therein were certified, represented or warranted and (y) in all other cases as of any date or during any period to which such certification, representation or warranty may be applicable. For purposes of this Section 3.4(b), it is agreed that Trinity is not a Related Person of Pecos.

(c) No Duplication. Sponsor Indemnified Amounts under Section 3.2 shall be without duplication of any amounts payable under indemnification provisions of any other Transaction Agreement or other agreement or any amounts actually paid thereunder.

(d) Exculpation. ANADARKO, ON BEHALF OF ITSELF AND ITS AFFILIATES, AGREES THAT NO INDEMNIFIED PERSON SHALL BE LIABLE TO ANADARKO OR ANY OF ITS AFFILIATES FOR ANY ACTION IN GOOD FAITH TAKEN OR OMITTED TO BE TAKEN BY SUCH INDEMNIFIED PERSON PURSUANT TO, IN CONNECTION WITH, OR IN ANY WAY RELATED TO THIS SPONSOR AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT, INCLUDING AN INDEMNIFIED PERSON’S OWN NEGLIGENCE OR CO-NEGLIGENCE EXCEPT TO THE EXTENT SUCH ACTION OR OMISSION CONSTITUTES WILLFUL MISCONDUCT, FRAUD OR GROSS NEGLIGENCE ON THE PART OF SUCH INDEMNIFIED PERSON.

3.5 Procedural Requirements.

(a) Notice of Claims. Any Indemnified Person that proposes to assert a right to be indemnified under this Section 3 will, promptly after receipt of notice of commencement of any action, suit, or proceeding against such Indemnified Person in respect of which a claim is to be made against Anadarko under this Section 3 (a “Sponsor Indemnified Proceeding”), or the incurrence or realization of Sponsor Indemnified Amounts in respect of which a claim is to be made against Anadarko, under this Section 3, notify Anadarko of the commencement of such Sponsor Indemnified Proceeding or of such incurrence or realization, enclosing a copy of all relevant documents, including all papers served and claims made, but the omission so to notify

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Anadarko promptly of any such Sponsor Indemnified Proceeding or incurrence or realization shall not relieve (i) Anadarko from any liability that it may have to such Indemnified Person under this Section 3 or otherwise, except, as to Anadarko’s liability, under this Section 3, to the extent, but only to the extent, that Anadarko shall have been prejudiced by such omission or (ii) any other indemnitor from liability that it may have to any Indemnified Person under the Transaction Agreements.

(b) Defense of Proceedings. In case any Sponsor Indemnified Proceeding shall be brought against any Indemnified Person and it shall notify Anadarko of the commencement thereof, Anadarko shall be entitled to participate in, and to assume the defense of, such Sponsor Indemnified Proceeding with counsel reasonably satisfactory to such Indemnified Person, and after notice from Anadarko to such Indemnified Person of Anadarko’s election so to assume the defense thereof and the failure by such Indemnified Person to object to such counsel within ten (10) Business Days following its receipt of such notice, Anadarko shall not be liable to such Indemnified Person for legal or other expenses incurred after such notice of election to assume such defense except as provided below and except for the reasonable costs of investigating, monitoring or cooperating in such defense subsequently incurred by such Indemnified Person reasonably necessary, in connection with the defense thereof; provided that without the prior written consent of such Indemnified Person, Anadarko shall not settle or compromise, or consent to the entry of any judgment in, any pending or threatened Sponsor Indemnified Proceeding, unless such settlement, compromise or consent or related judgment includes an unconditional release of such Indemnified Person from all liability for Expenses arising out of such claim, action, investigation, suit or other legal proceeding. No Indemnified Person shall settle or compromise, or consent to the entry of any judgment in, any pending or threatened Sponsor Indemnified Proceeding in respect of which any payment would result hereunder or under the other Transaction Agreements without the prior written consent of Anadarko, such consent not to be unreasonably withheld or delayed. Such Indemnified Person shall have the right to employ its separate counsel in any such Sponsor Indemnified Proceeding, in which case the fees and expenses of counsel for such Indemnified Person shall be at the expense of the Indemnified Person unless (i) Anadarko and the Indemnified Person shall have mutually agreed to the retention of such counsel and the payment of fees and expenses thereof by Anadarko, (ii) the use of counsel chosen by Anadarko to represent the Indemnified Person would present such counsel with a conflict of interest, (iii) the actual or potential parties to any Sponsor Indemnified Proceeding (including any impleaded parties) include both Anadarko and an Indemnified Party and the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it which are different from or additional to those available to Anadarko, or (iv) Anadarko shall have failed to retain satisfactory counsel as provided herein.

3.6 Contributory Negligence. The indemnities set forth herein shall expressly include any Sponsor Indemnified Amounts attributable to the ordinary, sole or contributory negligence of any Indemnified Person.

3.7 Limitation with Respect to Obligations Under WGRAH Loan Documents.

(a) Notwithstanding anything to the contrary contained in this Sponsor Agreement or in any other Transaction Agreement, without limiting the liability of Anadarko for damages in respect of any indemnity obligation, however such damages may be measured,

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Anadarko does not guaranty any payment obligation or deficiency of any Transaction Party for or in respect of principal or interest under the WGRAH Loan Documents (or any instrument or security evidencing any obligation in respect thereof).

(b) Notwithstanding anything to the contrary contained in this Sponsor Agreement or in any other Transaction Agreement, without limiting the liability of Anadarko for damages in respect of any indemnity obligation, however such damages may be measured, Anadarko shall have no liability to indemnify or hold harmless any Indemnified Person for, or to pay, any Expense arising out of any failure by any Subsidiary to pay any payment obligation or any deficiency of any Subsidiary for or in respect of principal or interest under the WGRAH Loan Documents (or any instrument or security evidencing any obligation in respect thereof).

3.8 Indemnification of Pecos Administrator and Trinity Custodian. Subject to the limitations set forth in Sections 3.4 and 3.7, Anadarko agrees to the fullest extent permitted by Applicable Law to (a) indemnify and hold harmless each of the “Indemnified Parties” (as such term is defined in the Pecos Administration Agreement to the same extent that Pecos is required to indemnify such persons in accordance with Section 7 of the Pecos Administration Agreement, and (b) indemnify and hold harmless each of the “Indemnified Parties” (as such term is defined in the Trinity Custodian Agreement to the same extent that Trinity is required to indemnify such persons in accordance with Section 7 of the Trinity Custodian Agreement.

SECTION 4

PAYMENTS

4.1 Payments.

All payments to be made by Anadarko under Section 3 shall be paid by Anadarko within five (5) Business Days following demand therefor, accompanied, as may be appropriate in the context, by supporting documentation in reasonable detail. Payment shall be made to the bank account or at another location as such Indemnified Person shall designate in writing or as is expressly required under any Transaction Agreement the obligations under which are the subject of any such payment, not later than 10:00 AM (New York time) on the date for such payment in immediately available funds.

4.2 Taxes.

(a) Any and all payments by Anadarko hereunder to each Indemnified Person shall be made, in accordance with Section 4.1, free and clear of and without deduction for any and all present or future Taxes. If Anadarko shall be required by Applicable Law to deduct any Taxes from or in respect of any sum payable hereunder to any Indemnified Person, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.2) such Indemnified Person receives an amount equal to the sum it would have received had no such deductions been made, (ii) Anadarko shall make or cause to be made such deductions and (iii) Anadarko shall pay or cause to be paid the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law, provided that should an

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Indemnified Person become subject to Taxes because of its failure to deliver a form required under Section 4.2(d), Anadarko shall take such steps as such Indemnified Person shall reasonably request to assist such Indemnified Person to recover such Taxes, and provided further; that each Indemnified Person, with respect to itself, agrees to indemnify and hold harmless Anadarko from any taxes, penalties, interest or other expenses, costs and losses incurred or payable by Anadarko as a result of the failure of Anadarko to comply with its obligations under Section 4.2(a)(ii) or (iii) in reliance on any form or certificate provided to it by such Indemnified Person pursuant to Section 4.2(d). If any Indemnified Person receives a net credit, refund or reduction in Taxes in respect of such Taxes or amounts so paid by Anadarko, it shall promptly notify Anadarko of such net credit, refund or reduction in Taxes and shall promptly pay such net credit, refund or reduction in Taxes to Anadarko, provided that Anadarko agrees to return such net credit, refund or reduction in Taxes if the Indemnified Person to which such net credit, refund or reduction in Taxes is applicable is required to repay it.

(b) In addition, Anadarko agrees to pay any present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies, which arise from any payment made by Anadarko hereunder or from the execution, delivery or performance of, or otherwise with respect to, this Sponsor Agreement (hereinafter referred to as “Other Sponsor Taxes”).

(c) Anadarko will indemnify each Indemnified Person for the full amount of Taxes or Other Sponsor Taxes (including, without limitation, any Taxes or Other Sponsor Taxes imposed by any jurisdiction on amounts payable under this Section 4.2) paid by such Indemnified Person and any liability (including penalties, interest and expenses) arising, therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Person to provide to Anadarko any form or certificate that it was required to provide pursuant to subsection (d) below and such Indemnified Person was able to provide under Applicable Law) or willful misconduct of such Indemnified Person, whether or not such Taxes or Other Sponsor Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date such Indemnified Person makes written demand therefor.

(d) On or prior to the date on which each Indemnified Person organized under the laws of a jurisdiction outside the United States becomes an Indemnified Person hereunder, such Indemnified Person to the extent permitted under Applicable Law, shall provide Anadarko with U.S. Internal Revenue Service form W-BEN or W-8ECI, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Person is fully exempt from or subject to a reduced rate of United States withholding taxes with respect to all payments to be made to such Indemnified Person hereunder, or other documents satisfactory to Anadarko indicating that all payments to be made to such Indemnified Person hereunder are fully exempt from or subject to a reduced rate of such taxes. Thereafter and from time to time (but only so long as such Indemnified Person remains lawfully able to do so), each such Indemnified Person shall submit to Anadarko such additional duly completed and signed copies of one or the other of such forms (or such successor forms as shall be adopted from time to time by the relevant U.S. taxing authorities) as may be (i) requested by Anadarko from such Indemnified Person and (ii) required under then-current U.S. law or regulations to avoid or reduce U.S. withholding taxes on payments in respect of all amounts to be received by such

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Indemnified Person pursuant to this Sponsor Agreement. Each Indemnified Person that is a U.S. person (as such term is defined in Section 7701(a)(30) of the Code) shall submit to Anadarko a certificate to the effect that it is such a U.S. person. If any Indemnified Person determines as a result of any change in Applicable Law, or in any official application or interpretation thereof, that it is unable to submit to Anadarko any form or certificate that such Indemnified Person is obligated to submit pursuant to this subsection (d), or that such Indemnified Person is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Person shall promptly notify Anadarko of such fact.

(e) Without prejudice to the survival of any other agreement of Anadarko hereunder, the agreements and obligations of Anadarko and each Indemnified Person contained in this Section 4.2 shall survive the payment in full of principal and interest owing under the WGRAH Loan Agreement.

(f) Any other provision of this Sponsor Agreement to the contrary notwithstanding, any amounts which are payable by Anadarko under this Section 4.2 shall not also be payable under Section 3.

SECTION 5

SPONSOR COVENANTS

5.1 Separate Existence.

Anadarko hereby covenants and agrees that, so long as Pecos, or its successors and assigns (other than any Transaction Party), holds an interest in Trinity, Anadarko will, and will cause each of the Transaction Parties, Trinity (for so long as the Trinity Class A Member is a Transaction Party and has the power and authority to manage the business and affairs of Trinity) and each Transaction Party, to comply with the following undertakings:

(i) Anadarko and its Affiliates (other than Trinity) will maintain their books, financial records and accounts, including checking and other bank accounts and custodian and other securities safekeeping accounts, separate and distinct from those of Trinity.

(ii) Anadarko and its Affiliates (other than Trinity) will maintain their books, financial records and accounts (including inter-entity transaction accounts) in a manner so that it will not be difficult or costly to segregate, ascertain or otherwise identify their assets and liabilities separate and distinct from the assets and liabilities of Trinity.

(iii) Anadarko and its Affiliates (other than Trinity) on the one hand, will not commingle any of their assets, funds, liabilities or business functions with the assets, funds, liabilities or business functions of Trinity on the other hand.

(iv) Anadarko and its Affiliates (other than Trinity) will each observe all requisite corporate procedures and formalities, including the holding of periodic and special meetings of shareholders and boards of directors, the recordation and maintenance of minutes of such meetings, and the recordation and maintenance of resolutions adopted at such meetings.

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(v) Trinity will observe all requisite organizational procedures and formalities, including the holding of meetings of members and boards of managers as required by the Trinity Company Agreement, the recordation and maintenance of minutes of such meetings, and the recordation of and maintenance of resolutions adopted at such meetings.

(vi) None of Anadarko or its Affiliates (other than Trinity) will be consensually merged or consolidated with Trinity (other than with respect to Trinity, for financial reporting purposes, and with respect to Anadarko and its Subsidiaries that are eligible to be consolidated with Anadarko under Code Section 1504, for federal income tax purposes). None of the Transaction Parties (other than Trinity) will be consensually merged or consolidated with Pecos for any purpose.

(vii) Anadarko will include in its consolidated financial statements footnotes that clearly disclose, among other things, the separate existence and identity of Trinity from the other Transaction Parties and that Trinity has separate assets and liabilities. Schedule 5.1(vii) sets out the language that will be included in such disclosures. Pecos will not be consolidated with Anadarko for the purposes of Anadarko’s consolidated financial statements.

(viii) All transactions, agreements and dealings between the Anadarko and its Affiliates (other than Trinity), on the one hand, and Trinity, as the case may be, on the other hand (including transactions, agreements and dealings pursuant to which the assets or property of one is used or to be used by the other), will reflect the separate identity and legal existence of each entity.

(ix) Transactions between Trinity, on the one hand, and any third parties, on the other hand, will be conducted in the name of Trinity as an entity separate and distinct from the Transaction Parties (other than Trinity).

(x) Except as otherwise specified in the Transaction Agreements, each of Trinity, on the one hand, will pay its liabilities and losses from its respective assets, and the Anadarko and its Affiliates (other than Trinity), on the other hand, will pay their liabilities and losses from their respective assets.

(xi) Representatives and agents of Trinity (whether or not they are “loaned” employees of Anadarko and its Affiliates (other than Trinity)) will, when purporting to act on behalf of Trinity, hold themselves out to third parties as being representatives or agents, as the case may be, of Trinity, and will utilize business cards, letterhead, purchase orders, invoices and the like of Trinity.

(xii) Except for capital expenditures funded by Anadarko, Trinity will compensate all consultants, independent contractors and agents from its own funds for services provided to it by such consultants, independent contractors and agents.

(xiii) To the extent that Trinity, on the one hand, and Anadarko and its Affiliates (other than Trinity), on the other hand, jointly contract or do business with vendors or service providers or share overhead expenses, the costs and expenses incurred in so doing will be fairly and nonarbitrarily allocated between or among such entities, with the result that

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each such entity bears its fair share of all such costs and expenses. To the extent that Trinity, on the one hand, and Anadarko and its Affiliates (other than Trinity), on the other hand, contracts or does business with vendors or service providers where the goods or services are wholly or partially for the benefit of the other, then the costs incurred in so doing will be fairly and nonarbitrarily allocated to the entity for whose benefit the goods or services are provided, with the result that each such entity bears its fair share of all such costs, except to the extent otherwise provided in the Transaction Agreements.

(xiv) Trinity will have annual financial statements prepared in accordance with GAAP, separate from Anadarko and its Affiliates (other than Trinity), provided that Anadarko may consolidate Trinity for Anadarko’s financial reporting purposes.

(xv) Neither Anadarko nor its Affiliates (other than Trinity) will make any inter-entity loans, advances, guarantees, extensions of credit or contributions of capital to, from or for the benefit of Trinity, as the case may be, without proper documentation and accounting in accordance with GAAP and only in accordance with, or as contemplated by, the provisions of the Trinity Company Agreement and the other Transaction Agreements.

(xvi) Trinity will not be included in the consolidated Tax Returns of Anadarko and its consolidated Subsidiaries but their share of taxable income or loss from Trinity may be included in such consolidated Tax Returns.

(xvii) Anadarko and its Affiliates (other than Trinity) will not refer to Trinity as a department or division of Anadarko or any of its Affiliates (other than Trinity) and will not otherwise refer to Trinity in a manner inconsistent with its status as a separate and distinct legal entity. In addition, Trinity will hold itself out as separate and distinct from Anadarko and its Affiliates (other than Trinity).

(xviii) Anadarko and its Affiliates (other than Trinity) will not hold out the credit of Trinity as being available to satisfy the obligations of Anadarko and its Affiliates (other than Trinity).

(xix) Anadarko and its Affiliates will not acquire the obligations or securities of Trinity (except as contemplated by or permitted under the Transaction Agreements).

(xx) Anadarko and its Affiliates (other than Trinity) will not use stationery, invoices, and checks bearing the name of Trinity.

(xxi) Anadarko and its Affiliates (other than Trinity) will not pledge their respective assets for the benefit of Trinity (except as contemplated by or permitted under the Transaction Agreements).

(xxii) Anadarko and its Affiliates (other than Trinity) will correct any known misunderstanding regarding their respective identities as separate from the identity of Trinity.

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(xxiii) Neither Anadarko nor its Affiliates will use the separate existence of Trinity to abuse creditors or to perpetrate a fraud, injury, or injustice on creditors.

(xxiv) All transactions between Anadarko and its Affiliates (other than Trinity), on the one hand, and Trinity, on the other, are, and will be, duly authorized and documented, and recorded accurately in the appropriate books and records of such entities. All such transactions will be made in good faith and without any intent to hinder, delay, or defraud creditors.

(xxv) Neither Anadarko nor its Affiliates (including Trinity) has entered into the transactions contemplated by this Sponsor Agreement or any Transaction Agreement to which it is a party in contemplation of insolvency or with a design to prefer one or more creditors of such Person to the exclusion in whole or in part of others in violation of Applicable Law or with an intent to hinder, delay or defraud any of its creditors.

(xxvi) The assets of Sponsor and its Affiliates (including Trinity) are, as of the date hereof, intended to be sufficient to pay the ongoing business expenses of each such respective entity as they are incurred and to discharge all of their respective liabilities.

5.2 Affirmative Covenants. Anadarko hereby covenants and agrees that, until the Collection Date:

(a) Preservation of Corporate Existence, Etc. Anadarko shall preserve and maintain, and cause Trinity and each WGRAH Loan Party to preserve and maintain, its corporate existence, rights (organizational and statutory) and material franchises, except in the case of each such Person as otherwise permitted by Section 5.3(c); provided, however, that nothing herein shall prevent any change in Business Entity form of Anadarko of any Affiliate of Anadarko (other than Trinity or any WGRAH Loan Party).

(b) Compliance with Laws, Etc. Anadarko shall comply, and cause each of the WGRAH Loan Parties to comply, with all Applicable Law applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in an Anadarko Material Adverse Change.

(c) Visitation Rights. Anadarko shall, at any reasonable time and from time to time, permit Pecos, the Agent, the Collateral Agent, and the Pecos Member Interest Owners (as such terms are defined in the Pecos Credit Agreement), or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of any Transaction Party and to discuss the affairs, finances and accounts of any Transaction Party (other than Trinity) with any of their respective officers and with their respective independent certified public accountants. Anadarko shall assume or pay all reasonable costs and expenses associated with any such discussion or examination at any time when an Event of Default, Incipient Event, or Anadarko Event has occurred and is continuing and shall assume or pay all reasonable costs and expenses of such single discussion or examination per calendar year for each of Pecos, the Pecos Member Interest Owners, the Agent and the Collateral Agent at all other times.

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(d) Tax Status. Anadarko shall, and cause each of its Subsidiaries, to maintain (i) WGRAH as a disregarded entity and (ii) Trinity as a partnership for U.S. federal income tax purposes, to the extent possible under Applicable Law.

(e) Liquidator Notices. Upon receipt of a notice from the Liquidator following the occurrence of a Liquidating Event, Anadarko shall: (i) contribute, to the capital of the WGRAH Loan Parties, or, at Anadarko’s sole option waive repayment of, those amounts receivable from such WGRAH Loan Parties in respect of Consolidated Taxes as may be specified in the notice from the Trinity Liquidator and (ii) cause those WGRAH Loan Parties that the Liquidator may request to make the election provided in Code Section 754 provided that the underlying WGRAH Loan Party member agreement or partnership agreement permits such election to be made and that such WGRAH Loan Party is classified as a partnership for U.S. federal income tax purposes.

(f) Capital Expenditures. Anadarko shall cause WGR to contribute capital to WGRAH for the payment of capital expenditures incurred by WGRAH and its Subsidiaries, to the extent that such capital expenditures are incurred.

(g) Casualty and other Losses. Anadarko shall reimburse WGRAH for any losses suffered by any WGRAH Loan Party as a result of any casualty, business interruption, acts of terrorism, acts of God or other force majeure events, theft, personal injury, tort or other liability to a third party, and all other litigation costs (including any losses associated with any Environmental Actions) arising in any such case in connection with or attributable to any WGRAH Loan Party or the operations or properties of any WGRAH Loan Party, but only to the extent such Person is not reimbursed for any such loss or cost through the receipt of insurance proceeds.

(h) Operational Losses. Anadarko shall reimburse WGRAH for any losses suffered by any WGRAH Loan Party as a result of (i) the failure of any WGRAH Loan Party to be in compliance with all Applicable Laws including all Environmental Laws; (ii) the remediation of any conditions as required by any Governmental Authority including without limitation any remediation, correction, or costs associated with any environmental conditions or releases of Hazardous Materials; and (iii) the failure of any WGRAH Loan Party to have good and defensible title to all of its tangible and intangible assets, including all costs incurred in curing any title defect and obtaining replacement assets.

(i) Midstream Agreements. Within sixty (60) days after the Effective Date, Anadarko shall cause the Transaction Parties to document the Midstream Agreements more fully described on Schedule III-B to the WGRAH Loan Agreement, which documentation of such Midstream Agreements shall include the commercial terms more fully set out on such Schedule. Anadarko shall reimburse WGRAH for any losses suffered by any WGRAH Loan Party as a result of the failure to have such Midstream Agreements in place as of the Effective Date. Anadarko shall cause the Transaction Parties to enter into or renew Midstream Agreements from time to time such that at all times the pricing and other terms of all Midstream Agreements with Transaction Parties are not, taken as a whole, materially less beneficial to WGRAH and its Subsidiaries than the pricing and other terms of all Midstream Agreements (both in written form and not in written form) with Transaction Parties existing on the Effective Date.

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(j) Form of Contribution. With respect to any payments due by Anadarko to a Transaction Party pursuant to the terms of Sections 5.2 (g), (h) and (i), all such payments shall be funded by Anadarko either directly to the third party entitled to any such payment or directly or indirectly to WGRAH. All payments made by Anadarko to WGRAH with respect to such obligations shall be made directly or indirectly by Anadarko as capital contributions and shall be made within thirty (30) days of the occurrence of the event giving rise to such payment obligation.

(k) Compliance with Indenture. Anadarko shall comply with the provisions of Sections 1004 and 1005 of the Public Indenture, which provisions, together with related definitions, are hereby incorporated herein by reference for the benefit of the Indemnified Parties and shall continue in effect for purposes of this Section 5.2(k), regardless of termination, or any amendment or waiver of, or any consent to any deviation from or other modification of, the Public Indenture; provided, however, that, for purposes of this Section 5.2(k), (i) references in the Public Indenture to “the Securities” shall be deemed to refer to the Responsibilities of Anadarko under this Sponsor Agreement, (ii) references in the Public Indenture to “the Trustee” shall be deemed to refer to Pecos, (iii) references in the Public Indenture to “this Indenture” shall be deemed to refer to this Sponsor Agreement, and (iv) references in the Public Indenture to “supplemental indentures” shall be deemed to refer to amendments or supplements to this Sponsor Agreement.

(l) Insurance. Anadarko shall at all times maintain, and will cause its Subsidiaries to maintain, with financially sound and reputable insurers, insurance of the kinds, covering the risks and in the relative proportionate amounts (including as to self-insurance) consistent with that carried by companies engaged in the same or similar business and similarly situated; provided, that Anadarko shall not be required to maintain insurance against risks or in amounts no longer economically available, on a de novo or renewal basis, as applicable, to Anadarko and other companies engaged in the same or similar business and similarly situated.

(m) Trinity Expenses. In the event Trinity is required to make any payment (without duplication) (i) in respect of Trinity Expenses, or (ii) pursuant to Article VII of the Trinity Company Agreement, Anadarko shall make such required payment to Pecos; provided, however; that in the case of Trinity Expenses comprising Additional Financing Costs and/or Pecos Transaction Costs, Anadarko shall only be required to make such payment to Pecos in respect of such Trinity Expenses to the extent such Trinity Expenses are not paid when due by WGRAH pursuant to the terms of the WGRAH Loan Agreement.

(n) Capital Contribution Obligations.

(i) Anadarko shall cause a cash contribution to be made to WGRAH in the amount of $200,000,000 upon the first occurrence of a Capital Contribution Event and shall ensure that such amount is deposited into the Pledged Accounts.

(ii) Anadarko shall cause a cash contribution to be made to WGRAH on the each date that financial statements are to be delivered pursuant to Section 4.01 of the WGRAH Loan Agreement in an amount equal to the Commodity Payment Amount relating to the Payment Period to which such financial statements relate.

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(iii) Anadarko shall cause cash contributions to be made to WGRAH in the amounts and on the dates as set forth on Schedule 5.2(n)(iii) attached hereto.

5.3 Negative Covenants.

Anadarko hereby covenants and agrees that, at any time until the Collection Date:

(a) Limitations on Sales and Leasebacks. Anadarko will not itself, and will not permit any Transaction Party or other Subsidiary to,

(i) except as otherwise permitted under Section 5.3(c) below or the other Transaction Agreements, enter into any arrangement for the sale, transfer, conveyance, either directly or indirectly, of any Equity Interests in Trinity or any Transaction Party; or

(ii) enter into any arrangement with any bank, insurance company or other lender or investor or to which any such lender or investor is a party, providing for the leasing by a Transaction Party for a period, including renewals, in excess of three years, of any property or assets of any Transaction Party which has been or is to be sold or transferred more than one hundred eighty (180) days after the completion of construction and commencement of full operation thereof, by any Transaction Party to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of any properties or assets of the Transaction Parties (herein referred to as a “sale and leaseback transaction”) unless Anadarko or any Transaction Party within one hundred eighty (180) days after the sale or transfer shall have been made by the Transaction Party, applies an amount equal to the greater of (i) the net proceeds of the sale of the properties or assets of the Transaction Parties sold and leased back pursuant to such arrangement or (ii) the net amount (after deducting applicable reserves) at which such property or assets is carried on the books of such Transaction Party at the time of entering into such arrangement, to the retirement of Indebtedness under the WGRAH Loan Agreement.

(b) Limitation on Secured Indebtedness. Anadarko will not, nor permit any Subsidiary to, grant or allow to exist any Lien on any Equity Interests in Trinity or any Transaction Party. Anadarko will not incur, issue, assume or guarantee any Indebtedness secured by a mortgage on oil, gas, coal or other minerals in place, or on related leasehold or other property interests, which is incurred for any reason if the aggregate amount of all such Indebtedness exceeds 10% of Consolidated Net Tangible Assets (as defined in the Public Indenture).

(c) Fundamental Changes. Except as otherwise permitted under the Transaction Agreements, Anadarko shall not itself, and will not permit Trinity or any Transaction Party to, consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (i) (A) in the case of a merger or amalgamation of Anadarko, Anadarko is the surviving entity; or (B) the Person formed by such consolidation or into which Anadarko is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of Anadarko substantially as an entirety shall be a corporation, partnership or trust, shall be organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, shall have

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unsecured non-credit enhanced publicly held indebtedness rated “investment grade” by S&P or Moody’s, and shall expressly assume, by an agreement supplemental hereto, executed and delivered to Pecos, in form satisfactory to Pecos, the obligations of Anadarko hereunder, including the due and punctual payment of and the performance of every covenant of this Sponsor Agreement on the part of the Anadarko to be performed or observed; and (ii) immediately after giving effect to such transaction, no Notice Event, Liquidating Event, Termination Event, Event of Default or Incipient Event or any “Event of Default” as such term is defined in the Sponsor Term Credit Agreement shall have occurred and be continuing.

(d) Trinity, Holdings, WGR, WGRAH Loan Parties or Pecos Bankruptcy. Anadarko will not itself, and will not permit any Transaction Party or other Subsidiary to,

(i) Consent to, vote for, or otherwise cause or permit (or permit any of its Subsidiaries or, to the extent it can control them, other Affiliates, to consent, to, or vote for, or otherwise cause or permit) Trinity, WGR, Holdings or any WGRAH Loan Party voluntarily to take any Bankruptcy Action.

(ii) Consent to, vote for, or otherwise cause (or permit any of its Affiliates, to consent to, or vote for, or otherwise cause) Pecos voluntarily to take any Bankruptcy Action.

(e) Subsidiaries. Permit at any time any of WGRAH, WGR, or Holdings to fail to be a Wholly-Owned Subsidiary of Anadarko.

(f) Consolidated Taxes. Permit any WGRAH Loan Party to pay any Consolidated Taxes (including, without limitation, any Consolidated Taxes attributable to such WGRAH Loan Party) or to pay or reimburse any Transaction Party for or in respect of any Consolidated Taxes (including, without limitation, any Consolidated Taxes attributable to such WGRAH Loan Party).

5.4 Reporting Requirements. Anadarko hereby covenants and, agrees that, until the Collection Date, it will furnish to Pecos the following:

(a) Financial Statements and Other Information. Anadarko will furnish to Pecos:

(i) Within fifteen (15) days after the Anadarko is required to file the same with the Securities and Exchange Commission, copies of the annual reports of the information, documents and other reports (or copies of such portions of any of the foregoing as the Securities and Exchange Commission may from time to time by rules and regulations prescribe) which the Anadarko may be required to file with the Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of the Securities Act; or, if Anadarko is not required to file information, documents or reports pursuant to either of said Sections, then such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; provided, however, that Anadarko shall be deemed to have furnished the information required by this Section 5.4(a)(i) if it shall have timely made the same available on

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“EDGAR” and/or on its home page on the worldwide web (at the date of this Sponsor Agreement located at http://www.anadarko.com) and complied with Section 5.4(a)(i) in respect thereof; provided further, however, that if Pecos is unable to access EDGAR or the Anadarko’s home page on the worldwide web, Anadarko agrees to provide Pecos with paper copies of the information required to be furnished pursuant to this Section 5.4(a) promptly following notice from Pecos.

(ii) Within sixty (60) days after the close of each of the first three quarters of each fiscal year of Anadarko, a statement by a Responsible Officer of Anadarko stating whether to the knowledge of Anadarko an event has occurred during such period and is continuing which constitutes a Notice Event, Liquidating Event, Termination Event, Event of Default or Incipient Event or any “Event of Default” as such term is defined in the Sponsor Term Credit Agreement, and, if so, stating the facts with respect thereto.

(iii) Within one hundred twenty (120) days after the close of each fiscal year of Anadarko a statement by a Responsible Officer of Anadarko stating whether to the knowledge of Anadarko an event has occurred during such period and is continuing which constitutes a Notice Event, Liquidating Event, Termination Event, Event of Default or Incipient Event or any “Event of Default” as such term is defined in the Sponsor Term Credit Agreement, if so, stating the facts with respect thereto.

(iv) Such other information respecting the financial condition or operations of the Anadarko and its Subsidiaries as Pecos may from time to time reasonably request.

(v) Information required to be delivered pursuant to Section 5.4(a)(i) above shall be deemed to have been delivered on the date on which Anadarko provides notice to Pecos that such information has been posted on “EDGAR” or Anadarko’s website or another website identified in such notice and accessible by Anadarko without charge (and the Anadarko hereby agrees to provide such notice).

(b) Notices of Material Events. Anadarko will furnish to Pecos prompt written notice of the following:

(i) the occurrence of any Notice Event, Liquidating Event, Termination Event, Event of Default, Incipient Event, or any “Event of Default” as such term is defined in the Sponsor Term Credit Agreement;

(ii) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Anadarko, Trinity or any Transaction Party that if adversely determined, could reasonably be expected to result in an Anadarko Material Adverse Change; and

(iii) any other development that results in, or could reasonably be expected to result in, an Anadarko Material Adverse Change. Each notice delivered under this Section 5.4(b)(iii) shall be accompanied by a statement of a Responsible Officer of the Anadarko setting forth the details of the event or development requiring such notice and any action taken with respect thereto.

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SECTION 6

MISCELLANEOUS

6.1 Amendments. No amendment or waiver of any provision of this Sponsor Agreement, and no consent to any departure by Anadarko herefrom, shall in any event be effective unless the same shall be in writing and signed by Pecos and Anadarko. No such waiver of a provision or consent to a departure in any one instance shall be construed as a further or continuing waiver of or consent to subsequent occurrences, or a waiver of any other provision or consent to any other departure. Any such amendment, waiver or consent signed by Pecos shall be binding on all Indemnified Persons.

6.2 Addresses for Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows

(a) if to Anadarko, to it at 1201 Lake Robbins Drive, The Woodlands, Texas 77380, Attention of the Treasurer, Telecopy No. (832) 636-5029; messenger delivery to 1201 Lake Robbins Drive, The Woodlands, Texas 77380;

(b) if to Pecos, at its address specified in accordance with Section 14.11 of the Trinity Company Agreement; and

(c) if to any other Indemnified Party, at its address specified by notice given in the manner provided herein to each other Person entitled to receive notice hereunder, or, in each case, to, such other address (and with copies to such other Persons) as the Person entitled to receive notice hereunder shall specify by notice given in the manner provided herein to the other Persons entitled to receive notice hereunder.

6.3 No Waiver; Cumulative Remedies. No failure on the part of any Indemnified Person to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by Applicable Law.

6.4 Waiver of Jury Trial. ANADARKO AND BY ACCEPTING THE BENEFITS HEREOF, EACH INDEMNIFIED PERSON, EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS SPONSOR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

22

6.5 Jurisdiction, Etc.

(a) Anadarko hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by any Indemnified Person in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Sponsor Agreement (such claims and causes of action collectively, being “Permitted Claims”), and Anadarko hereby irrevocably agrees that all. Permitted Claims may be heard and determined in such New York State court or in such Federal court. Anadarko hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Each party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law.

(b) Nothing in this Section 6.5 shall affect the right of any Indemnified Person to serve legal process in any other manner permitted, by Applicable Law or affect any right otherwise existing of any Indemnified Person to bring any action or proceeding against Anadarko or its property in the, courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any, action or proceeding in respect of any claim or cause of action other than Permitted Claims.

6.6 Assignment. All covenants and other agreements and obligations in this Sponsor Agreement shall (a) be binding upon Anadarko and its successors, but Anadarko may not assign its obligations hereunder without the consent of Pecos, except pursuant to a merger or consolidation not prohibited by Section 5.3(c), and (b) inure to the exclusive benefit of, and be enforceable by, Pecos and any Indemnified Person and, in each case, by its respective permitted successors, transferees and assigns (including any assignee for security purposes or Person holding a security interest herein).

6.7 Governing Law. This Sponsor Agreement shall be governed by, and construed in accordance with the laws of the State of New York.

6.8 Counterparts. This Sponsor Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. This agreement may be delivered by facsimile transmission of the relevant signature pages hereof.

6.9 Survival of Representations, Warranties and Indemnities; Entire Agreement.

All representations, warranties and indemnities and undertakings to pay costs and expenses contained herein or made by or on behalf of Anadarko, as the case may be, in connection herewith or in connection with the Transaction Agreements shall survive (a) the execution and delivery of this Sponsor Agreement, (b) the completion of the performance by each other Transaction Party of its Responsibilities under the Transaction Agreements to which it is a party, and (c) the Transfer (whether or not such Transfer was a permitted Transfer) by any Transaction Party of all or a portion of its Trinity Class A Membership Interest or any termination of its status as a Trinity Class A Member pursuant to the Trinity Company

23

Agreement and may be relied upon by any Indemnified Person, or any assignee of such Indemnified Person permitted hereunder, regardless of any investigation made at any time by or on behalf of any Indemnified Person or any such assignee.

6.10 Severability. Every provision of this Sponsor Agreement that is prohibited by or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render-unenforceable such-provision in any other jurisdiction.

6.11 No Third-Party Beneficiaries. This Sponsor Agreement is intended for the exclusive benefit of the Indemnified Persons and no other Person shall have any rights hereunder, whether as a third-party beneficiary or otherwise.

6.12 Obligations Absolute.

(a) To the fullest extent permitted under Applicable Law, Anadarko covenants and agrees that its obligations hereunder will be performed strictly in accordance with the terms of this Sponsor Agreement, regardless of any Applicable Law now or hereafter in effect in any jurisdiction affecting the ability of any Transaction Party to perform its obligations under any Transaction Agreement or the rights of any Indemnified Person with respect thereto.

(b) To the fullest extent permitted under Applicable Law, any action or actions may be brought hereunder by any Indemnified Person without the necessity of joining any prior or other Indemnified Person in such action or actions. To the fullest extent permitted under Applicable Law, the liability of Anadarko under this Sponsor Agreement shall be irrevocable, absolute and unconditional irrespective of, and Anadarko hereby irrevocably, waives any defenses it may now or hereafter have in any way relating to, any or all of the following:

(i) Any change in the time, manner or place of performance, or in any other term, of all or any of the Responsibilities of Anadarko or any Transaction Party under any other Transaction Agreement, or any other amendment, supplement or waiver of or any consent to departure from any of the Transaction Agreements, including any increase in or modification of the Responsibilities of Anadarko or any Transaction Party thereunder or the dissolution of any of the Transaction Parties;

(ii) Any change, restructuring or termination of the corporate, limited liability company, or partnership structure, as the case may be, or in the existence or ownership of any of the Transaction Parties;

(iii) Any act or omission of any Indemnified Person or any prior or subsequent Indemnified Person hereunder (other than any written amendment or waiver of, or consent to departure from, this Sponsor Agreement meeting the requirements of Section 6.1);

(iv) Any failure of any Indemnified Person to disclose to Anadarko any information relating to the financial condition, operations, properties or prospects of Pecos, Trinity, any Transaction Party or any Pecos Member now or in the future known to any Indemnified Person (Anadarko waiving any duty on the part of each Indemnified Person to disclose such information);

24

(v) Any lack of validity or unenforceability of any of the Transactions Obligations;

(vi) Any Transaction Obligation being unenforceable or not allowable due to the existence of a Bankruptcy involving any Transaction Party; or

(vii) Any other circumstance (including any statute of limitations or any existence of or reliance on any representation by any Indemnified Person) that might otherwise constitute a defense available to, or a discharge of, any of the Transaction Parties or Anadarko or a guarantor or indemnitor generally other than payment and performance when due.

(c) Anadarko’s obligations under this Sponsor Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment by Anadarko or any Transaction Party in satisfaction of any of the obligations of Anadarko or any Transaction Party under the Transaction Agreements, is rescinded or must otherwise be returned upon the insolvency, bankruptcy or reorganization of Anadarko or any Transaction Party or any Subsidiary of such Person, or otherwise, all as though such payment had not been made.

6.13 Waiver. Subject to the provisions of Section 3, Anadarko hereby waives (to the extent it may do so under Applicable Law) promptness, diligence, and any notice from any Indemnified Person with respect to any of Anadarko’s obligations under this Sponsor Agreement and any requirement that any Indemnified Person exhaust any right or take any action against any of the Transaction Parties or any other Person.

6.14 Subrogation. Until indefeasible payment in full of (a) Anadarko’s obligations hereunder (b) the Transactions Obligations, and (c) any other obligations of any other Transaction Party under the Transaction Agreements, Anadarko hereby waives any rights that it may acquire by way of subrogation hereunder, by any payment made hereunder or otherwise. If any amount shall be paid to Anadarko on account of such subrogation rights at any time prior to such obligations having been paid in full, such amount shall be held in trust for the benefit of the, relevant Indemnified Person and shall forthwith be paid to such Indemnified Person to be credited and applied to any such obligations; whether matured or unmatured, in accordance with the terms hereof.

[Remainder of page intentionally left blank]

25

IN WITNESS WHEREOF, Anadarko and Pecos have each caused this Sponsor Agreement to be duly executed and delivered by its officer or other duly authorized signatory thereunto duly authorized as of the date first above written.

ANADARKO PETROLEUM CORPORATION
By:	/s/ Robert G. Gwin
Name:	Robert G. Gwin
Title:	Vice-President and Treasurer

Signature Page to Sponsor Agreement

PECOS INVESTORS LLC
By:	GSO Special Situations Fund LP, as a managing member
	By:	GSO Capital Partners LP, its investment manager
By:	/s/ George Fan
Name:	George Fan
Title:	Chief Legal Officer
By:	GSO COF Facility LLC, as a managing member
	By:	GSO Capital Partners LP, its investment manager
By:	/s/ George Fan
Name:	George Fan
Title:	Chief Legal Officer

Signature Page to Sponsor Agreement

Schedule 5.2(n)(iii)

“Contributed Margins from National Helium and Satanta Contracts”

(a) One payment in the amount of $43.1 million no later than February 28, 2008;

(b) Four payments each in the amount of $9.0 million no later than 60 days following the last day of each calendar quarter during 2008, or May 31, August 31, November 30 and February 28, 2009;

(c) Four payments each in the amount of $6.3 million no later than 60 days following the last day of each calendar quarter during 2009, or May 31, August 31, November 30 and February 28, 2010;

(d) Four payments each in the amount of $5.8 million no later than 60 days following the last day of each calendar quarter during 2010, or May 31, August 31, November 30 and February 28, 2011;

(e) Four payments each in the amount of $6.0 million no later than 60 days following the last day of each calendar quarter during 2011, or May 31, August 31, November 30 and February 28, 2012; and

(f) Four payments each in the amount of $6.0 million no later than 60 days following the last day of each calendar quarter during 2012, or May 31, August 31, November 30 and February 28, 2013.

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EX-12

EXHIBIT 12

ANADARKO PETROLEUM CORPORATION

CONSOLIDATED STATEMENT OF COMPUTATION OF RATIOS OF

EARNINGS TO FIXED CHARGES AND EARNINGS TO

COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

	Years Ended December 31 (Unaudited)
millions except ratio amounts	2007			2006*			2005*		2004*		2003*
Income from continuing operating before income taxes (a)	$	6,329		$	3,737		$	3,253	$	2,110	$	583
Fixed charges, to the extent they affect current year earnings (b)		1,328			778			234		418		254
Undistributed (earnings) losses of equity investees		(54	)		(21	)		—		13		11
Total Earnings		7,603			4,494			3,487		2,541		848
Interest expense including capitalized interest		1,214			730			266		428		249
Interest expense included in other (income) expense		102			—			—		—		—
Estimated interest portion of rental expenditures (c)		316			128			13		10		8
Total Fixed Charges	$	1,632		$	858		$	279	$	438	$	257
Preferred Stock Dividends		5			5			8		8		9
Combined Fixed Charges and Preferred Stock Dividends	$	1,637		$	863		$	287	$	446	$	266
Ratio of Earnings to Fixed Charges		4.66			5.24			12.50		5.80		3.30
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends		4.64			5.21			12.15		5.70		3.19

* Financial information has been revised to reflect retrospective application of the successful efforts method of accounting.

These ratios were computed by dividing earnings by either fixed charges or combined fixed charges and preferred stock dividends. For this purpose, earnings include income before income taxes before considering the effect of fixed charges and undistributed earnings of equity method investees. Fixed charges include amortization of debt issuance costs, interest on debt and the estimated interest component of rentals, whether expensed or capitalized. Preferred stock dividends are adjusted to reflect the amount of pretax earnings required for payment.

(a) Pretax income from continuing operations for the year ended December 31, 2007 includes gain on asset divestitures of $4.66 billion. Gains (losses) on asset divestitures for earlier periods presented did not have a significant effect on the corresponding ratios of earnings to fixed charges and to combined fixed charges and preferred stock dividends.

(b) For the purpose of the ratio computation, pretax income from continuing operations is increased by the amount of expense arising from fixed charges. Because fixed charges, as presented herein, include interest that is capitalized when incurred, only a portion of total fixed charges enters in determination of earnings.

(c) Reflects a portion of rental expenditures representative of interest factor, whether such rentals are expensed or capitalized when incurred. For the years ended December 31, 2007 and 2006, estimated interest component in rentals includes approximately $225 million and $80 million, respectively, associated with the Company’s drilling rig leases.

EX-13

EXHIBIT 13

Corporate Information

The common stock of Anadarko Petroleum Corporation is traded on the New York Stock Exchange. Average daily trading volume was 4,870,000 shares in 2007, 5,034,000 shares in 2006 and 4,648,000 shares in 2005. The ticker symbol for Anadarko is APC and daily stock reports published in local newspapers carry trading summaries for the Company under the headings Anadrk or AnadrkPete. The following shows information regarding the closing market price of and dividends paid on the Company’s common stock by quarter for 2007 and 2006.

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2007
Market Price
High	$	43.92	$	55.33	$	54.77	$	67.05
Low	$	38.63	$	43.68	$	47.14	$	53.89
Dividends	$	0.09	$	0.09	$	0.09	$	0.09
2006
Market Price
High	$	54.52	$	56.71	$	50.24	$	50.03
Low	$	47.15	$	43.62	$	41.66	$	41.09
Dividends	$	0.09	$	0.09	$	0.09	$	0.09

EX-21

EXHIBIT 21

LIST OF SIGNIFICANT SUBSIDIARIES

Anadarko Algeria Company, LLC

a Delaware limited liability company,

Anadarko E&P Company LP

a Delaware limited partnership,

Anadarko Energy Services Company

a Delaware corporation,

Anadarko Holding Company

A Utah corporation,

Anadarko Land Corp.

a Nebraska corporation,

Anadarko Petroleo Ltda.

a Brazil limited liability company,

Headwater LLC

a Delaware limited liability company,

Kerr-McGee Corporation

a Delaware corporation,

Kerr-McGee Oil & Gas Corporation

a Delaware corporation,

Kerr-McGee Oil & Gas Onshore LP

a Delaware limited partnership,

KM BM-C-Seven Ltd.

a Bahama Islands limited liability company,

Lance Oil & Gas Company, Inc.

a Delaware corporation,

Mountain Gas Resources LLC

A Delaware limited liability company,

Western Gas Resources, Inc.

a Delaware corporation,

WGR Asset Holding Company LLC

a Delaware limited liability company

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Anadarko Petroleum Corporation:

We consent to the incorporation by reference in the registration statements on Form S-3 and S-8 (No. 33-8643), Form S-3 (Nos. 333-103102, 333-86356, 333-137183) and Form S-8 (Nos. 33-54485, 333-78301, 333-126520) of Anadarko Petroleum Corporation of our reports dated February 28, 2008, with respect to the consolidated balance sheets of Anadarko Petroleum Corporation as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, comprehensive income, and cash flows for each of the years in the three year period ended December 31, 2007, and the effectiveness of internal control over financial reporting as of December 31, 2007, which reports appear in the December 31, 2007 annual report on Form 10-K of Anadarko Petroleum Corporation.

/s/ KPMG LLP

Houston, Texas

February 28, 2008

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

The Board of Directors

Anadarko Petroleum Corporation:

We consent to the inclusion in the Anadarko Petroleum Corporation annual report on Form 10-K for the year ended December 31, 2007 and the incorporation by reference in the following registration statements on Form S-3 and S-8 (No. 33-8643), Form S-3 (Nos. 333-103102, 333-86356, 333-137183) and Form S-8 (Nos. 33-54485, 333-78301, 333-126520) of Anadarko Petroleum Corporation of our letter dated February 22, 2008 relating to our participation in Anadarko Petroleum Corporations review of procedures and methods that are used by its engineers when preparing its estimates of proved reserves as of December 31, 2007.

NETHERLAND, SEWELL & ASSOCIATES, INC.
By:	/s/ J. CARTER HENSON, JR., P.E.
	J. Carter Henson, Jr., P.E. Senior Vice President

Houston, Texas

February 27, 2008

EX-24

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS that each undersigned Director of ANADARKO PETROLEUM CORPORATION (the “Company”), a Delaware corporation, does hereby constitute and appoint R. A. WALKER, BRUCE W. BUSMIRE, and ROBERT K. REEVES, and each of them, his or her true and lawful attorney and agent to do any and all acts and things and execute any and all instruments which, with the advice of counsel, said attorney and agent may deem necessary or advisable to enable the Company to comply with the Securities Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in connection with the filing under said Act of the Form 10-K Annual Report for the Year Ended December 31, 2007, including specifically, but without limitation thereof, to sign his or her name as a Director of the Company to the Form 10-K Annual Report for the Year Ended December 31, 2007 filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, or in connection with, said Form 10-K Annual Report for the Year Ended December 31, 2007 or amendment thereto; and the undersigned does hereby ratify and confirm all that said attorney and agent shall do or cause to be done by virtue thereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 12th day of February, 2008.

/s/ JAMES T. HACKETT	/s/ ROBERT J. ALLISON, JR.
James T. Hackett	Robert J. Allison, Jr.
/s/ LARRY BARCUS	/s/ JAMES L. BRYAN
Larry Barcus	James L. Bryan
/s/ JOHN R. BUTLER, JR.	/s/ LUKE R. CORBETT
John R. Butler, Jr.	Luke R. Corbett
/s/ H. PAULETT EBERHART	/s/ PETER J. FLUOR
H. Paulett Eberhart	Peter J. Fluor
/s/ JOHN R. GORDON	/s/ JOHN W. PODUSKA, SR.
John R. Gordon	John W. Poduska, Sr.
/s/ PAULA ROSPUT REYNOLDS
Paula Rosput Reynolds

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, James T. Hackett, certify that:

1. I have reviewed this annual report on Form 10-K of Anadarko Petroleum Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2008

/s/    JAMES T. HACKETT        

Chairman, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, R.A. Walker, certify that:

1. I have reviewed this annual report on Form 10-K of Anadarko Petroleum Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2008

/s/    R. A. WALKER        

Senior Vice President, Finance and Chief Financial Officer

EX-32

EXHIBIT 32

SECTION 1350 CERTIFICATION OF PERIODIC REPORT

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, James T. Hackett, Chairman, President and Chief Executive Officer of Anadarko Petroleum Corporation (Company) and R. A. Walker, Senior Vice President, Finance and Chief Financial Officer of the Company, certify that:

(1) the Annual Report on Form 10-K of the Company for the period ending December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (Report), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

February 28, 2008

/s/    JAMES T. HACKETT        

James T. Hackett

Chairman, President and Chief Executive Officer

February 28, 2008

/s/    R. A. WALKER        

R.A. Walker

Senior Vice President, Finance and Chief Financial Officer

This certification is made solely pursuant to 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 will be retained by Anadarko and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99

EXHIBIT 99

February 22, 2008

Mr. R. A. Walker

Senior Vice President, Finance

    and Chief Financial Officer

Anadarko Petroleum Corporation

1201 Lake Robbins Drive

The Woodlands, Texas 77380

Dear Mr. Walker:

As requested by Anadarko Petroleum Corporation (Anadarko), we have prepared this letter to document our participation in the Anadarko reserves process during 2007. Anadarko’s estimates of proved reserves and future revenue, as of December 31, 2007, were prepared by Anadarko’s internal reserves estimators and are the responsibility of Anadarko’s management. The scope of our work allowed us to observe and provide input on portions of Anadarko’s reserves estimating process, as described subsequently in this letter.

During the period from September to November 2007, we participated with Anadarko in 20 reserves review meetings held at Anadarko’s offices in The Woodlands, Texas; Denver, Colorado; and Uxbridge, England. In those meetings, the Anadarko reserves estimators presented preliminary summary-level information about the basis for the intended reserves estimates. In most cases, the final reserves estimates were not yet complete, but the estimators described the procedures and methods to be used in preparing the year-end reserves estimates.

The review meetings were usually attended by representatives from Anadarko’s reserves group, the Area Manager responsible for the field being reviewed, and other supporting technical and supervisory personnel. Through our participation in the review meetings, we were able to observe in some detail, the procedures and methods used by Anadarko’s reserves estimators, the enforcement of management’s reserves booking policies and controls, and the degree to which the estimators adhere to the definitions and guidelines of the U.S. Securities and Exchange Commission in developing the reserves estimates. During and after the review meetings, we provided opinions to Anadarko’s reserves group and reserves estimators regarding questions and issues raised during those meetings along with industry information related to reserves estimating issues and practices.

Our opinions, comments, and concerns were further documented in a follow-up letter for each review meeting that was subsequently provided to Anadarko’s reserves group. Those letters typically contained (1) a list of what was presented to us, (2) who from Anadarko made the presentation, (3) a brief background of the relevant issues, (4) a description of the basis for Anadarko’s reserves estimates, and (5) our specific recommendations, opinions, and concerns, if any. Anadarko has informed us that some changes have been made to the reserves estimates based on our advice.

It should be understood that any NSAI opinion or lack of opinion resulting from our participation in the review meetings should not be construed as NSAI expressing a view on the reasonableness of the reserves estimates or procedures and methods. It should be further understood that our participation in the reserves process does not constitute a complete review, study, or audit of the estimated proved reserves. In our opinion, in the absence of other investigation and independent testing, our participation in the reserves process does not enable us to validate the numerous underlying judgments required in the preparation of reserves estimates, nor does it allow us to fully examine the uncertainty ranges in basic engineering and geologic data.

Supporting data documenting this process are on file in our office. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists with respect to Anadarko Petroleum Corporation. We do not own an interest in these properties and are not employed on a contingent basis.

Sincerely, NETHERLAND, SEWELL & ASSOCIATES, INC.
By:	/s/ C. H. SCOTT REES
	C. H. (Scott) Rees III, P.E. Chairman and Chief Executive Officer

By:	/s/ LEE E. GEORGE	By:	/s/ PATRICK L. HIGGS
	Lee E. George, P.E. Vice President		Patrick L. Higgs, P.G Vice President

Date Signed: February 22, 2008 Date Signed: February 22, 2008

LEG:BMG

cc: Ms. H. Paulett Eberhart

Audit Committee – Chairperson

Board of Directors