Analysis of Debt
Total Debt (Carrying Amount)
Anadarko Petroleum Corp., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The total debt carrying amount experienced a period of expansion from 2012 through 2015, followed by a moderate reduction in 2016. Total obligations rose from 13,269 million US$ at the end of 2012 to a peak of 15,751 million US$ by December 31, 2015, before declining to 15,323 million US$ in 2016.
- Aggregate Debt Trajectory
- A sustained upward trend in total liabilities was observed between 2012 and 2015. The most significant increase occurred between 2013 and 2014, during which total debt rose by approximately 1,527 million US$, representing a year-over-year growth rate of 11.3%.
- Liability Structure and Composition
- The debt profile is characterized by a heavy reliance on long-term financing. Long-term debt, excluding the current portion, constituted the primary component of the carrying amount throughout the entire period, reaching its maximum value of 15,718 million US$ in 2015.
- Short-term Debt Analysis
- Short-term debt remained largely immaterial relative to the total debt load. A temporary increase to 500 million US$ was noted in 2013, but subsequent levels remained minimal, with values of 33 million US$ and 42 million US$ recorded in 2015 and 2016, respectively.
- Recent Debt Movement
- Following the peak in 2015, a slight contraction in the debt load was observed in 2016. Total debt decreased by 428 million US$, or approximately 2.7%, primarily driven by a reduction in long-term obligations.
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Total Debt (Fair Value)
| Dec 31, 2016 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Total debt (fair value) | 17,100) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.12 |
Based on: 10-K (reporting date: 2016-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 5.87%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 7.05% | 114) | 8) | |
| 2.60% | 350) | 9) | |
| 6.95% | 300) | 21) | |
| 8.70% | 600) | 52) | |
| 4.85% | 800) | 39) | |
| 5.38% | 500) | 27) | |
| 4.00% | 670) | 27) | |
| 3.45% | 625) | 22) | |
| 6.95% | 650) | 45) | |
| 3.95% | 500) | 20) | |
| 4.65% | 500) | 23) | |
| 5.55% | 1,100) | 61) | |
| 7.50% | 112) | 8) | |
| 7.00% | 54) | 4) | |
| 7.12% | 150) | 11) | |
| 6.63% | 17) | 1) | |
| 7.15% | 235) | 17) | |
| 7.20% | 135) | 10) | |
| 7.95% | 117) | 9) | |
| 7.50% | 900) | 68) | |
| 7.88% | 500) | 39) | |
| 5.24% | 2,360) | 124) | |
| 6.45% | 1,750) | 113) | |
| 7.95% | 325) | 26) | |
| 6.20% | 750) | 47) | |
| 4.50% | 625) | 28) | |
| 5.45% | 600) | 33) | |
| 6.60% | 1,100) | 73) | |
| 7.73% | 61) | 5) | |
| 7.50% | 78) | 6) | |
| 7.25% | 49) | 4) | |
| Total | 16,627) | 977) | |
| 5.87% | |||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × 977 ÷ 16,627 = 5.87%
Interest Costs Incurred
Anadarko Petroleum Corp., interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The total interest costs incurred exhibited a consistent upward trajectory from 2013 through 2016, surpassing the $1 billion threshold by the end of the period. While 2013 saw a slight decrease to $949 million compared to $963 million in 2012, the subsequent three years were characterized by uninterrupted growth in the overall cost of debt.
- Interest Expense Trends
- Interest expense, representing the costs recognized immediately in the income statement, showed significant growth over the majority of the analyzed period. After a dip to $686 million in 2013, expenses climbed steadily each year, reaching $890 million by December 31, 2016. This trend indicates a rising annual funding cost charged against operational earnings.
- Capitalized Interest Trends
- A contrasting trend is observed in capitalized interest, which peaked at $263 million in 2013 before entering a period of consistent decline. By 2016, capitalized interest had dropped to $132 million, representing a reduction of approximately 50% from its 2013 peak. This downward trend suggests a decrease in the scale of new capital projects under construction or the transition of existing projects from the development phase to the operational phase.
- Aggregate Interest Cost Dynamics
- The financial profile indicates a structural shift in how interest is accounted for, moving from capitalization toward immediate expensing. Although the total interest costs incurred remained relatively stable between 2012 and 2014, the acceleration of interest expenses began to outweigh the reduction in capitalized interest in the later years, resulting in an increased total financial burden by the end of 2016.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
2016 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= -2,939 ÷ 890 = -3.30
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= -2,939 ÷ 1,022 = -2.88
A significant deterioration in debt-servicing capacity is evident between 2012 and 2016. Both measured interest coverage ratios exhibit a consistent downward trajectory, transitioning from healthy positive margins to negative values, which indicates that operating earnings became insufficient to cover interest obligations.
- Interest coverage ratio (without capitalized interest)
- A sharp decline is observed from 2012 to 2014, with the ratio falling from 5.80 to 1.07. The metric entered negative territory in 2015, reaching a low of -10.74, which reflects a period of substantial operating losses. Although a partial recovery occurred in 2016 with a value of -3.30, the ratio remained negative, indicating a continued inability to cover interest expenses from operations.
- Adjusted interest coverage ratio (with capitalized interest)
- The adjusted ratio mirrored the primary trend, decreasing from 4.47 in 2012 to 0.85 in 2014. The drop below 1.0 in 2014 signifies that earnings were no longer adequate to service interest costs even when capitalizing a portion of those expenses. A severe contraction followed in 2015, with the ratio falling to -8.96, before moderating to -2.88 in 2016.
The convergence of both ratios into negative values during 2015 and 2016 highlights a period of severe financial distress. The consistent gap between the two ratios suggests that capitalized interest provided a slight buffer, but this was insufficient to offset the broader collapse in operating profitability relative to the debt burden.
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