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, marketing and midstream activities 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 of, demand for and the price of natural gas, oil, NGLs and other products or services, volatility in the commodity futures market, 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 or other obligations arising from Kerr-McGee's former chemical business, the capital or credit markets, our ability to repay debt, the outcome of any proceedings related to the Algerian exceptional profits tax, and other factors discussed below and elsewhere in "Risk Factors" and in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" included in the Company's 2008 Annual Report on Form 10-K, this Form 10-Q 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.

The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in this report in Item 1 and the Risk Factors information, which is included in this report in Item 1A, as well as the Consolidated Financial Statements and the Notes to Consolidated Financial Statements which are included in Item 8, and the Risk Factors information, which is set forth in Item 1A of the 2008 Annual Report on Form 10-K.

Overview

Anadarko Petroleum Corporation is among the world's largest independent oil and natural gas exploration and production companies. Anadarko's primary line of business is the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids (NGLs). The Company's major areas of operations are located in the United States and Algeria, with additional activity in Brazil, China, Ghana, Indonesia, Mozambique and several other countries.

Operating Highlights

The Company's significant operational highlights by area during the second quarter of 2009 include:

United States Onshore

• The Rockies produced 252 thousand barrels of oil equivalent per day (MBOE/d) in the second quarter of 2009, achieving an 18% increase in production over the second quarter of 2008.

• The Company commenced transporting oil through the White Cliffs pipeline in the Wattenberg area in early June 2009, thereby generating direct sales into the Cushing market, increasing operational efficiencies and improving economics on crude oil production.

• In May 2009, the second phase of the Chipeta cryogenic unit was brought online and increased NGLs production from 2,500 barrels per day (Bbls/d) to 12,000 Bbls/d.

Gulf of Mexico

• The Company announced an oil discovery at the Samurai prospect in the deepwater Gulf of Mexico in Green Canyon Block 432. Anadarko operates the block with a 33.3% working interest.

• Average gross production at Independence Hub was approximately 890 million cubic feet per day (MMcf/d) for the second quarter of 2009.

• The Turtle Lake prospect (Green Canyon Block 847) was drilled to a total depth of 32,212 feet. The well encountered no commercial hydrocarbons and was plugged and abandoned. Anadarko participated in the well with a 20% working interest.

International

• The Company mobilized the Belford Dolphin drillship to West Africa to commence drilling on the Company's Venus prospect in Block SL-6/07 (50% working interest) offshore Sierra Leone followed by the South Grand Lahou prospect in Block 105 (55.88% working interest) offshore Cote d'Ivoire. Following these drilling activities, Anadarko plans to move the drillship to begin the Company's multi-well, deepwater drilling program offshore Mozambique.

• In Ghana, the Ministry of Energy approved the Jubilee Field Phase 1 Development Plan and Unitization Agreement. This project remains on schedule to achieve first production during 2010.

• The Aster-5 appraisal well (33.75% working interest), drilled in the Bukat Block in Indonesia, did not encounter hydrocarbons.

• The Gouda prospect (30% working interest) in Brazil was drilled to a total depth of 12,244 feet and encountered reservoir-quality sands, but no hydrocarbons.

Financial Highlights

The Company's significant financial highlights during the second quarter of 2009 include:

• The Company completed a public offering of 30 million shares of common stock at $45.50 per share generating net proceeds of $1.3 billion.

• The Company completed a public offering of $900 million of Senior Notes. Net proceeds from the offering were primarily used to fund the retirement of $968 million of outstanding Floating Rate Notes due September 15, 2009, which were retired in June 2009.

• The Company generated $1.2 billion of cash flow from operations for the quarter ended June 30, 2009 (including $552 million related to the reset of interest rate swaps) and ended the quarter on June 30, 2009 with $3.5 billion of cash on hand.

• The Company expanded its commodity derivative program with gas positions added for June, July and August 2009 and both oil and gas positions added for the full-year 2010.

The following discussion pertains to Anadarko's financial condition, results of operations and changes in financial condition. Unless noted otherwise, the following information relates to continuing operations. 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 discover additional oil and natural 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. Below is an index by major category of discussion including a brief description of contents:

Results of Continuing Operations

                                 Selected Data



                                                  Three Months Ended            Six Months Ended
                                                       June 30                      June 30
millions except per share amounts                2009            2008         2009            2008
Financial Results
Total revenues and other                      $    1,745      $    2,786   $    3,340      $    5,764
Costs and expenses                                 2,235           2,392        4,302           4,575
Other (income) expense                              (141 )           137          (68 )           352
Income tax expense (benefit)                        (135 )           236         (349 )           580
Income (loss) from continuing operations
attributable to
common stockholders                           $     (224 )    $       16   $     (562 )    $      252
Income (loss) from continuing operations
per common share
attributable to common stockholders -
diluted                                       $    (0.47 )    $     0.03   $    (1.20 )    $     0.53
Average number of common shares outstanding
- diluted                                            477             469          468             469

Operating Results
Adjusted EBITDAX(1)                           $    1,088      $    1,462   $    1,875      $    3,322
Sales volumes (MMBOE)                                 56              50          110             103

MMBOE - million barrels of oil equivalent

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

Financial Results

Income (Loss) from Continuing Operations Attributable to Common Stockholders For the second quarter of 2009, Anadarko's loss from continuing operations attributable to common stockholders was $224 million or $0.47 per share (diluted). This compares to income from continuing operations attributable to common stockholders of $16 million or $0.03 per share (diluted) for the second quarter of 2008. For the six months ended June 30, 2009, Anadarko's loss from continuing operations attributable to common stockholders was $562 million or $1.20 per share (diluted). This compares to income from continuing operations attributable to common stockholders of $252 million or $0.53 per share (diluted) for the same period of 2008.

The decrease for the three months ended June 30, 2009 compared to the same period of 2008 was primarily due to sustained lower natural gas and NGLs sales revenues, including the impact of commodity derivatives, and the impact of decreased gains on divestitures, increased depreciation, depletion and amortization (DD&A) expense and lower Gathering, Processing and Marketing (GPM) margin, partially offset by higher oil and condensate sales revenues, including the impact of commodity derivatives, and the impact of higher net gains (realized and unrealized) on interest rate swaps, lower other tax expense and lower income tax expense. In addition to those items impacting the three months ended June 30, 2009, the decrease for the six months ended June 30, 2009 compared to the same period of 2008 was attributable to lower oil and condensate sales revenues, including the impact of commodity derivatives.

                                 Sales Revenues



                                    Three Months Ended                         Six Months Ended
                                          June 30           Inc/(Dec)               June 30           Inc/(Dec)
millions except percentages          2009         2008      vs. 2008           2009         2008      vs. 2008

Gas sales                         $      653   $    1,495         (56 )%    $    1,333   $    2,694         (51 )%
Oil and condensate sales                 756          344         120            1,382        1,694         (18 )
Natural gas liquids sales                116          258         (55 )            199          459         (57 )
Gathering, processing and
marketing sales                          201          319         (37 )            362          587         (38 )

Total                             $    1,726   $    2,416         (29 )     $    3,276   $    5,434         (40 )

Anadarko's sales revenues for the three and six months ended June 30, 2009 decreased compared to the same periods of 2008. Including the impact of commodity derivatives, the decrease in sales revenues for the quarter was primarily due to lower natural gas and NGLs commodity prices, partially offset by higher oil and condensate sales. The decrease for the six months ended June 30, 2009 was primarily due to lower natural gas, oil and condensate and NGLs commodity prices, including the impact of commodity derivatives.

The Company's sales revenues for the three months ended June 30, 2009 and 2008 include $269 million and $1.6 billion, respectively, of net unrealized losses on derivatives. The Company's sales revenues for the six months ended June 30, 2009 and 2008 include $594 million and $2.1 billion, respectively, of net unrealized losses on derivatives. Derivatives are entered into in order to manage price risk on natural gas, crude oil and condensate, NGLs and marketing sales. Realization of these unrealized losses is expected to be substantially offset by the value realized from the actual sale of production covered by the derivative instruments.

               Analysis of Oil and Gas Operations Sales Revenues

The following table provides a summary of the effects of changes in volumes,
prices and derivative gains and losses on Anadarko's sales revenues for the
three and six months ended June 30, 2009 compared to the same period of 2008.



                                                                 Three Months Ended
                                                                       June 30
                                                      Natural           Oil and
millions                                                Gas           Condensate          NGLs

2008 sales revenues                                 $      1,495      $       344      $      258
Changes associated with sales volumes                        419             (157 )            35
Changes in prices, excluding derivatives                  (1,449 )         (1,058 )          (177 )
Changes in realized derivative gains and losses              193              246               -
Changes in unrealized derivative gains and losses             (5 )          1,381               -

2009 sales revenues                                 $        653      $       756      $      116


                                                                  Six Months Ended
                                                                       June 30
                                                      Natural           Oil and
millions                                                Gas           Condensate          NGLs

2008 sales revenues                                 $      2,694      $     1,694      $      459
Changes associated with sales volumes                        487             (315 )            34
Changes in prices, excluding derivatives                  (2,155 )         (1,868 )          (294 )
Changes in realized derivative gains and losses              337              333               -
Changes in unrealized derivative gains and losses            (30 )          1,538               -

2009 sales revenues                                 $      1,333      $     1,382      $      199

The Company utilizes commodity derivative instruments to manage the risk of a decrease in the market prices for its anticipated sales of natural gas and crude oil. This activity is referred to as commodity price risk management. The impact of commodity price risk management (comprised of realized and unrealized gains and losses) was a revenue decrease of $157 million during the second quarter of 2009 compared to a decrease of $2.0 billion in the second quarter of 2008. The impact of commodity price risk management was a revenue decrease of $325 million during the first six months of 2009 compared to a decrease of $2.5 billion in the first six months of 2008. See Energy Price Risk under Part I, Item 3 and Note 7 - Derivative Instruments under Part I, Item 1 of this Form 10-Q.

                Analysis of Oil and Gas Operations Sales Volumes



                                         Three Months Ended                     Six Months Ended
                                              June 30           Inc/(Dec)           June 30         Inc/(Dec)
                                         2009         2008      vs. 2008         2009       2008    vs. 2008
Barrels of Oil Equivalent (MMBOE
except percentages)
United States                                 49           43          14 %          97        90           8 %
Algeria                                        5            5           -            10        10           -
Other International                            2            2           -             3         3           -

Total                                         56           50          12           110       103           7

Barrels of Oil Equivalent per Day
(MBOE/d except percentages)
United States                                546          475          15           537       495           8
Algeria                                       52           56          (7 )          55        54           2
Other International                           19           17          12            16        17          (6 )

Total                                        617          548          13           608       566           7

Anadarko's daily sales volumes for the second quarter of 2009 increased 69 MBOE/d compared to the same period in 2008. Volumes in the United States increased 71 MBOE/d in the second quarter of 2009 primarily due to higher volumes in the Rockies of 39 MBOE/d due to positive results from base production including dewatering coalbed methane wells, higher production uptime due to favorable weather, increased ethane recovery and bringing a new processing train online during the second quarter of 2009. The increase in production was also due to higher volumes in the Gulf of Mexico of 33 MBOE/d related to increased Independence Hub runtime during the current quarter compared to the downtime resulting from export pipeline repair work that occurred during the second quarter of 2008. Algeria volumes decreased 4 MBOE/d in the second quarter of 2009 due to the timing of cargo liftings and variances in Organization of Petroleum Exporting Countries (OPEC) quotas. Anadarko's daily sales volumes for the six months ended June 30, 2009 increased 42 MBOE/d compared to the same period in 2008, primarily attributable to increased production in the Rockies due to the items discussed above.

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 into the future.

             Natural Gas Sales Volumes, Average Prices and Revenues



                                                  Three Months Ended                                        Six Months Ended
                                                       June 30                     Inc/(Dec)                    June 30                     Inc/(Dec)
                                                2009              2008             vs. 2008              2009              2008             vs. 2008
                                                                                 (Percentages)                                            (Percentages)
United States
Sales volumes - Bcf                                 213               170                   25 %             421               365                   15 %
               MMcf/d                             2,336             1,869                   25             2,325             2,003                   16
Price per Mcf, excluding derivatives         $     3.05        $     9.88                  (69 )      $     3.53        $     8.64                  (59 )
Realized gains (losses) on derivatives             0.50             (0.51 )                198              0.55             (0.29 )                290

                                                   3.55              9.37                  (62 )            4.08              8.35                  (51 )
Unrealized gains (losses) on derivatives          (0.48 )           (0.58 )                 17             (0.91 )           (0.96 )                  5

Total                                        $     3.07        $     8.79                  (65 )      $     3.17        $     7.39                  (57 )
Gas sales revenues (millions)                $      653        $    1,495                  (56 )      $    1,333        $    2,694                  (51 )

Bcf - billion cubic feet

MMcf/d - million cubic feet per day

Mcf - thousand cubic feet

The Company's daily natural gas sales volumes increased 467 MMcf/d and 322 MMcf/d, respectively, for the three and six months ended June 30, 2009 compared to the same periods in 2008. These increases were primarily related to increased production in the Gulf of Mexico of 279 MMcf/d and 126 MMcf/d, respectively, for the three and six months ended June 30, 2009 due to increased Independence Hub runtime during these periods compared to the downtime resulting from export pipeline repair work that occurred during the second quarter of 2008, and higher sales volumes in the Rockies of 209 MMcf/d and 212 MMcf/d, respectively, for the three and six months ended June 30, 2009 due to positive results from base production including dewatering coalbed methane wells and higher production uptime due to favorable weather. In general, production of natural gas is not directly affected by seasonal changes in demand.

Excluding the impact of gains and losses on derivatives, Anadarko's average natural gas price for the three and six months ended June 30, 2009 decreased when compared to the same period for 2008. The lower price realized during the three and six months ended June 30, 2009 was primarily attributable to higher year-over-year natural gas production and storage volumes coupled with lower United States demand for natural gas. As of June 30, 2009, the Company has entered into commodity price risk management on approximately 43% of its anticipated natural gas sales volumes for the remainder of 2009 and on approximately 75% for the full year of 2010.

      Crude Oil and Condensate Sales Volumes, Average Prices and Revenues



                                          Three Months Ended                               Six Months Ended
                                                June 30                Inc/(Dec)                June 30               Inc/(Dec)
                                          2009          2008           vs. 2008           2009          2008          vs. 2008
                                                                     (Percentages)                                  (Percentages)
United States
Sales volumes - MMBbls                         9             11                (18 )%         19            22                (14 )%
               MBbls/d                       111            122                 (9 )         106           121                (12 )
Price per barrel, excluding
derivatives                             $  55.37      $  117.63                (53 )     $ 47.29      $ 105.19                (55 )
Realized gains (losses) on
derivatives                                 0.49         (16.14 )              103          1.64         (9.69 )              117

                                           55.86         101.49                (45 )       48.93         95.50                (49 )
Unrealized gains (losses) on
derivatives                               (13.09 )       (85.80 )               85         (7.75 )      (49.29 )               84

Total                                   $  42.77      $   15.69                173       $ 41.18      $  46.21                (11 )

Algeria
Sales volumes - MMBbls                         5              5                  -            10            10                  -
               MBbls/d                        52             56                 (7 )          55            54                  2
Price per barrel, excluding
derivatives                             $  56.81      $  127.15                (55 )     $ 51.08      $ 113.27                (55 )
Realized gains (losses) on
derivatives                                    -         (11.98 )              100          0.74         (8.08 )              109

                                           56.81         115.17                (51 )       51.82        105.19                (51 )
Unrealized gains (losses) on
derivatives                                (7.36 )      (115.46 )               94         (6.37 )      (67.25 )               91

Total                                   $  49.45      $   (0.29 )           17,152       $ 45.45      $  37.94                 20

Other International
Sales volumes - MMBbls                         2              2                  -             3             3                  -
               MBbls/d                        19             17                 12            16            17                 (6 )
Total                                   $  53.88      $  111.01                (51 )     $ 47.07      $  95.86                (51 )

Total
Sales volumes - MMBbls                        16             18                (11 )          32            35                 (9 )
               MBbls/d                       182            195                 (7 )         177           192                 (8 )
Total price per barrel, excluding
derivatives                             $  55.62      $  119.81                (54 )     $ 48.44      $ 106.62                (55 )
Realized gains (losses) on
derivatives                                 0.30         (13.56 )              102          1.22         (8.38 )              115
. . .