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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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February 28, 2006 |
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Estimated average burden hours per
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12.75 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Anadarko Petroleum
Corporation
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
P.O. Box 1330
Houston, Texas 77251-1330
March 27, 2006
TO THE STOCKHOLDERS:
The 2006 Annual Meeting of Stockholders of Anadarko Petroleum
Corporation will be held at The Woodlands Waterway Marriott
Hotel and Convention Center, 1601 Lake Robbins Drive, The
Woodlands, Texas, 77380 on Thursday, May 11, 2006, at
8:00 a.m. (CDT).
The Notice of the Annual Meeting and Proxy Statement, which are
attached, provide information concerning the matters to be
considered at the meeting. The meeting will be a business-only
meeting. There will be no management presentation.
We value your opinions and encourage you to participate in this
years meeting by voting your proxy. You may vote either by
Internet or by telephone using the instructions on the proxy
card or by signing and returning your proxy card in the enclosed
envelope. You may also attend and vote at the Annual Meeting.
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Very truly yours, |
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JAMES T. HACKETT |
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Chairman of the Board, President and |
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Chief Executive Officer |
P. O. Box 1330
Houston, Texas 77251-1330
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Anadarko Petroleum
Corporation will be held at The Woodlands Waterway Marriott
Hotel and Convention Center, 1601 Lake Robbins Drive, The
Woodlands, Texas, 77380, on Thursday, May 11, 2006, at
8:00 a.m. (CDT) to:
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(1) Elect two directors; |
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(2) Approve the amendment to the Companys Restated
Certificate of Incorporation to increase the number of
authorized shares of Common Stock to 1,000,000,000 shares
in connection with the Companys announced two-for-one
stock split; |
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(3) Ratify the appointment of KPMG LLP as the
Companys independent auditor for 2006; and |
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(4) Transact such other business as may properly come
before the meeting and any adjournments or postponements thereof. |
If you are a record holder of common stock at the close of
business on March 13, 2006, the record date, then you are
entitled to receive notice of and to vote at the meeting.
Please take the time to vote by following the Internet or
telephone voting instructions on the enclosed proxy card or by
completing and mailing the proxy card. A postage-prepaid
envelope has been provided for your convenience if you wish to
vote by mail. You may also attend and vote at the meeting. You
may revoke your proxy at any time before the vote is taken by
following the instructions in this proxy statement.
Regardless of the number of Anadarko common stock shares you
hold, as a stockholder your vote is very important and the Board
strongly encourages you to exercise your right to vote.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Charlene A. Ripley |
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Vice President, General Counsel, |
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Corporate Secretary and Chief |
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Compliance Officer |
Dated: March 27, 2006
The Woodlands, Texas
P. O. Box 1330
Houston, Texas 77251-1330
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 11, 2006
GENERAL INFORMATION
We are furnishing you this proxy statement in connection with
the solicitation of proxies by our Board of Directors to be
voted at the Annual Meeting of Stockholders of Anadarko
Petroleum Corporation. The Annual Meeting will be held on
Thursday, May 11, 2006. In this proxy statement, Anadarko
Petroleum Corporation is referred to as the Company
or Anadarko. This proxy statement and the enclosed
proxy card are first being mailed to stockholders of record on
or about March 27, 2006.
QUESTIONS AND ANSWERS ABOUT THE MEETING
Where and when is the Annual Meeting?
The Annual Meeting will be at The Woodlands Waterway Marriott
Hotel and Convention Center, 1601 Lake Robbins Drive, The
Woodlands, Texas, 77380, on Thursday, May 11, 2006, at
8:00 a.m. (CDT).
Who may vote?
You may vote if you were the record holder of Anadarko common
stock as of the close of business on March 13, 2006, the
record date for the meeting. Each share of Anadarko common stock
is entitled to one vote at the meeting. On the record date,
there were 233,822,689 shares of common stock outstanding
and entitled to vote at the meeting.
May I attend the Annual Meeting?
Yes. Attendance is limited to stockholders of record as of the
record date for the meeting. Admission will be on a first-come,
first-served basis. You may be asked to present valid picture
identification, such as a drivers license or passport. If
your shares are held in the name of a bank, broker, or other
holder of record and you plan to attend the meeting, you must
present proof of your ownership of Company stock, such as a
current bank or brokerage account statement reflecting ownership
as of the record date for the meeting, to be admitted. Cameras,
recording devices and other electronic devices will not be
permitted at the meeting.
What am I voting on?
You are voting on:
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the election of two directors; |
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amending the Companys Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock to 1,000,000,000 shares in connection with the
Companys announced two-for-one stock split; |
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the ratification of KPMG LLP as our independent auditor for
2006; and |
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any other business properly coming before the meeting. |
How does the Board recommend that I vote?
The Board recommends that you vote:
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FOR each of the nominees for director; |
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FOR amending the Companys Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock to 1,000,000,000 shares in connection with the
Companys announced two-for-one stock split; and |
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FOR the ratification of KPMG LLP as our independent
auditor for 2006. |
Why should I vote?
Your vote is very important. Regardless of the number of shares
you hold, the Board strongly encourages you to exercise your
right to vote as a stockholder of the Company.
How do I vote?
You may vote by any of the following methods:
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Vote on the Internet at the website for Internet voting. Simply
follow the instructions on the proxy card and you can confirm
that your vote has been properly recorded. If you vote on the
Internet, you can request electronic delivery of future proxy
materials. Internet voting facilities for stockholders of record
will be available 24 hours a day and will close at
11:59 p.m. (EDT) on May 10, 2006. |
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Vote by telephone by using the toll-free number listed on the
proxy card and following the instructions on the proxy card.
Easy-to-follow voice
prompts allow you to vote your shares and confirm that your vote
has been properly recorded. Telephone voting facilities for
stockholders of record will be available 24 hours a day and
will close at 11:59 p.m. (EDT) on May 10, 2006. |
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Vote by mail by completing, signing, dating and returning your
proxy card in the pre-addressed, postage-paid envelope provided.
If you vote by mail and your proxy card is returned unsigned,
then your vote cannot be counted. If you vote by mail and the
returned proxy card is signed without indicating how you want to
vote, then your proxy will be voted as recommended by the Board
of Directors. If mailed, your completed and signed proxy card
must be received by May 10, 2006. |
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You may attend and vote at the meeting. The Board recommends
that you vote on the Internet, by telephone or by mail as it is
not practical for most stockholders to attend and vote at the
meeting. Using one of these methods to vote your proxy card will
not limit your right to vote at the meeting if you later decide
to attend in person. If your shares are held in street name
(e.g., held in the name of a bank, broker, or other
holder of record) you must obtain a proxy, executed in your
favor, from your bank, broker or other holder of record to be
able to vote at the meeting. |
If I vote by telephone or Internet, do I need to return my
proxy card?
No.
If I vote by mail, telephone or Internet, may I still attend
the meeting?
Yes.
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Is my vote confidential?
Yes. All voting records which identify stockholders are kept
permanently confidential except as necessary to meet legal
requirements and in other limited circumstances such as proxy
contests. The vote tabulators and the inspectors of election are
required to execute confidentiality agreements.
Can I change my vote?
If you are a stockholder of record, you may revoke your proxy at
any time before the vote is taken by:
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voting at a later time by Internet or telephone; |
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voting in person at the meeting; or |
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delivering to the Corporate Secretary of Anadarko a proxy with a
later date or a written revocation of your proxy. |
If you are a street name stockholder and you vote by proxy, you
may later revoke your proxy by informing the holder of record in
accordance with that entitys procedures.
How many votes must be present to hold the meeting?
Your shares are counted as present at the meeting if you attend
the meeting and vote in person or if you properly return a proxy
by Internet, telephone or mail. In order for us to hold our
meeting, holders of a majority of our common stock entitled to
vote must be present in person or by proxy at the meeting. This
is referred to as a quorum. Abstentions and broker non-votes
will be counted as present for purposes of determining a quorum.
What is a broker non-vote?
The New York Stock Exchange permits brokers to vote their
customers shares held in street name on routine matters
when the brokers have not received voting instructions from
their customers. Brokers may not vote their customers
shares held in street name on non-routine matters unless they
have received voting instructions from their customers.
Non-voted shares on non-routine matters are called broker
non-votes. Broker non-votes will have no effect on the vote for
any matter properly introduced at the Annual Meeting.
What are routine matters?
The election of directors, the amendment of the Companys
Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock to 1,000,000,000 shares
in connection with the Companys announced two-for-one
stock split and the ratification of the independent auditor are
examples of routine matters on which brokers may vote even if
they have not received instructions from their customers.
What are non-routine matters?
Non-routine matters are matters such as stockholder proposals,
although there are no stockholder proposals under consideration
at the Annual Meeting.
How many votes are needed to approve each of the
proposals?
Directors are elected by plurality vote. This means that the
director nominees who receive the most votes will be elected to
fill the available seats on the Board. Neither abstentions nor
broker non-votes will have an effect on the votes for or against
the election of a director.
The proposal to amend the Companys Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock to 1,000,000,000 shares will be approved if a
majority of the shares issued and outstanding are cast in favor
of the proposal. All other proposals will be approved if a
majority
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of the shares present in person or by proxy are cast for the
proposal. Shares represented by proxy which are marked
abstain will count toward the number of shares
present but will not count as an affirmative vote and,
therefore, an abstention will have the effect of a vote against
the proposal. Broker non-votes will not be considered present at
the meeting with respect to the proposals and so will have no
effect on the approval of proposals.
Could other matters be decided at the meeting?
We are not aware of any matters that will be considered at the
Annual Meeting other than those on the proxy card. However, if
any other matters arise at the Annual Meeting, the person named
in your proxy will vote in accordance with their best judgment.
Where can I find the voting results of the meeting?
We will announce voting results at the meeting, and we will
publish the final results in our quarterly report for the second
quarter of 2006. You can get a copy of this and other reports
free of charge on the Companys website at
www.anadarko.com, or by contacting our Investor Relations
Department at investor@anadarko.com.
ANADARKO BOARD OF DIRECTORS
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Item 1 Election of Directors |
The Board of Directors of Anadarko is divided into three classes
of directors for purposes of election. One class of directors is
elected at each annual meeting of stockholders to serve for a
three-year term. All of the director nominees listed below are
current directors of the Company.
At the 2006 meeting, the terms of three directors are expiring.
Two of these directors have been nominated and, if elected at
this meeting, will hold office until the expiration of each of
their terms in 2009. Mr. Alberts term expires at the
end of the 2006 Annual Meeting and he is not standing for
reelection. Those directors not up for election this year will
continue in office for the remainder of their terms.
If a nominee is unavailable for election, then the proxies will
be voted for the election of another nominee proposed by the
Board or, as an alternative, the Board may reduce the number of
directors to be elected at the meeting.
The Board recommends that you vote FOR each of
the nominees listed below.
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Directors Nominated this Year by the Board of Directors
for Terms Expiring in 2009 |
Robert J. Allison, Jr. (67)
Mr. Allison has been Chairman Emeritus of the Board of the
Company since January 2006 and a director since 1985. He was
Chairman of the Board from 1986 until December 2005. He also
served as Chief Executive Officer of the Company from 1986 until
January 2002, and from March 2003 until December 2003.
Mr. Allison is also a director of Freeport-McMoRan
Copper & Gold Inc.
John W. Poduska, Sr. (68)
Mr. Poduska resides in Boston, Massachusetts. He is a
retired business executive. Mr. Poduska was Chairman of
Advanced Visual Systems, Inc., a provider of visualization
software, from 1992 until 2002. Mr. Poduska is a director
of Novell, Inc. and Safeguard Scientific, Inc. He was a director
of Union Pacific Resources Group, Inc. from 1995 until 2000.
Mr. Poduska has been a director of the Company since 2000.
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Continuing Directors with Terms Expiring in 2007 |
Larry Barcus (68) Since 1990, Mr. Barcus
has served as Chairman of L.G. Barcus and Sons, Inc., a
general contractor, located in Kansas City, Kansas with
operations nationwide. He has also served as
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Chairman of First Community Bancshares and Chairman of First
Community Bank since 1995. Mr. Barcus has been a director
of the Company since 1986.
James L. Bryan (69) Mr. Bryan is a
retired business executive. From 1999 until December 2003,
Mr. Bryan was Executive Vice President of Newpark Drilling
Fluids, Inc., an oilfield services firm headquartered in
Houston, Texas. He retired as Senior Vice President of Dresser
Industries, Inc. in 1998. He had been a Vice President of
Dresser since 1990. Mr. Bryan has been a director of the
Company since 1986.
H. Paulett Eberhart (52)
Ms. Eberhart is a retired business executive residing in
Plano, Texas. From 2003 until her retirement in March 2004,
Ms. Eberhart was President Americas of
Electronic Data Systems Corporation (EDS), an information
technology and business process outsourcing company. From 2002
to 2003, she was Senior Vice President EDS and
President Solutions Consulting. She was also a
member of the Executive Operations Team and Investment Committee
of EDS. From 2001 to 2002, Ms. Eberhart served as the
Senior Vice President, Information Solutions, U.S. and from 1999
to 2001 as the Senior Vice President, Information Solutions,
Southwest Region. Ms. Eberhart was an employee of EDS from
1985 to 2004. Ms. Eberhart is a member of the Financial
Executives International and American Institute of Certified
Public Accountants. Ms. Eberhart also serves on the Board
of Directors of Advanced Micro Devices, Inc. and Solectron
Corporation. Ms. Eberhart has been a director of the
Company since 2004.
James T. Hackett (52) Mr. Hackett was
named President and Chief Executive Officer of the Company in
December 2003 and Chairman of the Board of the Company in
January 2006. Prior to joining the Company, Mr. Hackett was
the Chief Operating Officer of Devon Energy Corporation from
April 2003 to December 2003, following Devons merger with
Ocean Energy, Inc. Mr. Hackett was President and Chief
Executive Officer of Ocean Energy, Inc. from March 1999 to April
2003 and was Chairman of the Board from January 2000 to April
2003. He served as Chief Executive Officer and President of
Seagull Energy Corporation from September 1998 until March 1999
and as Chairman of the Board from January 1999 to March 1999
prior to its merger with Ocean Energy. He currently serves as a
Director of Fluor Corporation and Temple-Inland, Inc. and serves
on the board of the Federal Reserve Bank of Dallas.
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Continuing Directors with Terms Expiring in 2008 |
John R. Butler, Jr. (67) Since 1976,
Mr. Butler has been Chairman of J. R. Butler and Company, a
reservoir engineering company located in Houston, Texas. He was
Chairman and Chief Executive Officer of GeoQuest International
Holdings, Inc., Senior Chairman of Petroleum Information Corp.
and Vice Chairman of Petroleum Information/ Dwights, L.L.C.
until 1997. He is currently a member of the Society of Petroleum
Evaluation Engineers, and was also Chairman of the Society of
Exploration Geophysicists Foundation until December 2001.
Mr. Butler was a director of Kelman Technologies Inc., a
Toronto Stock Exchange Company, from 2000 until 2004.
Mr. Butler has been a director of the Company since 1996.
John R. Gordon (57) Mr. Gordon is Senior
Managing Director of Deltec Asset Management LLC, an investment
firm located in New York, New York. He was President of Deltec
Securities Corporation from 1988 until it was converted into
Deltec Asset Management LLC. Mr. Gordon has been a director
of the Company since 1988.
CORPORATE GOVERNANCE
In 2005, the Board continued to focus on excellence in corporate
governance through implementing and refining various processes
that the Board and its committees adopted in 2002. The Board has
been comprised of a majority of independent directors since the
Company became an independent company in 1986. The Audit
Committee, the Compensation and Benefits Committee, the
Nominating and Corporate Governance Committee and the Enterprise
Resource Planning Committee have each been comprised entirely of
independent directors since their inception. The written
charters for the Audit Committee, the Compensation and Benefits
Committee and the Nominating and Corporate Governance Committee
can be
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found on the Companys website at www.anadarko.com together
with the Code of Business Conduct and Ethics, the Code of Ethics
for the Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer, and the Corporate Governance
Guidelines. Any of these documents will be furnished in print
free of charge to any stockholder who requests it.
Board of Directors
The Board of Directors currently has nine members. The Board, on
the recommendation of the Nominating and Corporate Governance
Committee, has determined that Ms. Eberhart and
Messrs. Albert, Barcus, Bryan, Butler, Gordon and Poduska
are independent directors as defined under the Companys
Corporate Governance Guidelines, which reflect the current New
York Stock Exchange (NYSE) director independence standards.
Ms. Eberhart and Messrs. Albert, Barcus, Bryan, Gordon
and Poduska have no relationships with the Company other than
being a director and shareholder of the Company. With respect to
Mr. Butler, the Board specifically considered that
Mr. Butlers
son-in-law is a
non-executive employee of the Company. The Board determined that
this is not a relevant factor in determining
Mr. Butlers independence. Mr. Hackett is a
management director and Mr. Allison, although a
non-management director, is a non-independent director according
to NYSE guidelines due to employment as an executive officer of
the Company within the last three years.
The Company is required to report whether any director attended
fewer than 75 percent of the sum of the total number of
Board meetings and the total number of Board committee meetings
that a director was eligible to attend in 2005. There were 10
Board meetings in 2005 and 27 Board committee meetings as
described below. All of the Companys directors exceeded
the attendance threshold, and all but one director had
100 percent attendance at all Board meetings and Board
committee meetings that they were eligible to attend. All of the
directors attended the 2005 Annual Meeting of Stockholders.
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Corporate Governance Guidelines |
In January 2005, the Board amended and restated the Corporate
Governance Guidelines. The Corporate Governance Guidelines were
amended to allow for compliance with changes to the definition
of director independence adopted by the NYSE.
Additionally, in February 2006, the Board changed the
Companys mandatory retirement age policy by amending and
restating the paragraph of the Corporate Governance Guidelines
entitled Retirement from the Board. The paragraph
now reads as follows:
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A Director shall retire from the Board at the end of the
calendar year in which he or she reaches 72 years of age,
unless (1) the members of the Nominating and Corporate
Governance Committee unanimously waive such requirement due to
special circumstances, and (2) the Committees action
is ratified and approved by a majority of the disinterested
directors on the Board of Directors. In any event, a Director
shall retire from the Board at the end of the calendar year in
which he or she reaches 75 years of age, and no waiver
shall be permitted. |
The amended and restated Corporate Governance Guidelines are
posted on the Companys website at www.anadarko.com.
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Code of Business Conduct and Ethics |
In January 2005, the Board amended and restated the Code of
Business Conduct and Ethics. The amended and restated Code of
Business Conduct and Ethics is posted on the Companys
website at www.anadarko.com. The Code of Business Conduct and
Ethics was amended to be consistent with the Companys
current practices and provide better communication of the
Companys policies to the public. Additionally, in February
2006, the Board reviewed the Code of Business Conduct and Ethics
and determined that no changes were necessary at that time.
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The Companys Corporate Governance Guidelines state that
the Nominating and Corporate Governance Committee shall, for
positions on the Board of Directors not currently filled:
(a) identify the personal characteristics needed in a
director nominee so that the Board as a whole will possess the
Qualifications of the Board as a Whole as these
qualifications are set forth in the Corporate Governance
Guidelines; (b) compile, through such means as the
Committee considers appropriate, a list of potential director
nominees thought to possess the Individual Qualifications
identified in the Corporate Governance Guidelines;
(c) if the Committee so determines it to be appropriate,
engage an outside consultant to assist in the search for
nominees and to conduct background investigations on all
nominees regardless of how nominated; (d) review the resume
of each nominee; (e) conduct interviews with the nominees
meeting the desired set of qualifications; (f) following
interviews, compile a short list of nominees (which, at the
discretion of the Committee, may consist of a single individual)
who may meet, at a minimum, with the Chairman of the Board, the
Chief Executive Officer and the Chairman of the Nominating and
Corporate Governance Committee and/or the Lead Director; and
(g) evaluate the nominee(s) in relationship to the culture
of the Company and the Board and its needs.
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Stockholder Participation in the Selection of Director
Nominees |
The Nominating and Corporate Governance Committee did not
receive any names of individuals suggested for nomination to the
Companys Board of Directors by its stockholders during the
past year. However, the Board will consider individuals
identified by stockholders on the same basis as nominees
identified from other sources. Stockholders wishing to submit
the name of an individual for consideration must submit the
recommendation in writing to the Companys Corporate
Secretary by certified or registered mail to the Companys
mailing address, including:
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the name, address and comprehensive biography of the director
nominee and an explanation of why the nominee is qualified to
serve as a director; |
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the name, address and telephone number of the stockholder or
group of stockholders making the recommendation, proof of
ownership, number of shares and length of time the shares of the
Companys voting securities have been beneficially owned by
the stockholder or group of stockholders, and a representation
that the stockholder or group of stockholders is entitled to and
will remain entitled to vote at the Companys next annual
meeting; and |
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a letter in writing from the individual being recommended
certifying his or her willingness to serve, if elected as a
director. |
For more information on stockholder participation in the
selection of director nominees, please refer to that section in
the Companys Corporate Governance Guidelines, which are
posted on the Companys website at www.anadarko.com.
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Directors Continuing Education |
The Companys Director Education Policy encourages all
members of the Board of Directors to attend director education
programs appropriate to their individual backgrounds to stay
abreast of developments in corporate governance and best
practices relevant to their contribution to the Board of
Directors as well as their responsibilities in their specific
committee assignments. The Director Education Policy provides
that the Company will reimburse the Board of Directors for all
costs associated with attending any director education program.
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Lead Director at the Non-Management Directors
Executive Sessions |
The Board of Directors has elected Mr. Gordon as its Lead
Director. As Lead Director, Mr. Gordons role is to
aid and assist the Chairman and the remainder of the Board of
Directors in assuring effective corporate governance in managing
the affairs of the Board of Directors and the Company.
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Additionally, Mr. Gordon presides at executive sessions of
the non-management directors. The executive sessions are held
immediately after each regularly scheduled quarterly meeting of
the Board of Directors and at any other board meetings as
requested by the directors. Mr. Gordon has also been added
to the Executive Committee of the Board, providing additional
representation for the independent directors in any actions
taken by the Executive Committee between Board meetings.
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Communication with the Directors of the Company |
The Board of Directors welcomes questions or comments about the
Company and its operations. Interested parties may contact the
Board of Directors, including the Lead Director, at
nominating governance@apcdirector.com or at Anadarko
Petroleum Corporation, Attn: Corporate Secretary, 1201 Lake
Robbins Drive, The Woodlands, Texas, 77380. Any questions or
comments will be kept confidential, if requested. These
procedures may change from time to time, and you are encouraged
to visit our website for the most current means of contacting
our directors.
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Transactions with Entities Connected to Independent
Directors |
During 2005, there were no Company transactions with entities
connected to independent directors.
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Compensation and Benefits Committee Interlocks and Insider
Participation |
The Compensation and Benefits Committee is made up of three
independent, non-employee directors, Messrs. Bryan, Gordon
and Poduska. No interlocking relationship exists between the
members of our Compensation and Benefits Committee and the board
of directors or compensation committee of any other company.
In May 2005, the Compensation and Benefits Committee increased
the annual retainer that each non-management director receives
for serving on the Audit Committee from $3,000 to $6,000.
Additionally, the Compensation and Benefits Committee increased
the Lead Director annual retainer from $15,000 to $25,000.
In addition to the deferred stock and stock options described
below, the non-management directors receive the following
compensation, which he or she may elect to receive in cash,
common stock or a combination of both:
|
|
|
(1) an annual retainer of $50,000; |
|
|
(2) an annual committee membership retainer of $6,000 for
each director who serves on the Audit Committee; |
|
|
(3) an annual committee membership retainer of $3,000 for
each committee on which the director serves (except for members
of the Audit Committee and the Enterprise Resource Planning
Committee); |
|
|
(4) a retainer of $15,000 for serving as the chairman of
the Compensation and Benefits Committee or the Nominating and
Corporate Governance Committee, a retainer of $25,000 for
serving as Audit Committee chairman, a retainer of $25,000 for
serving as Lead Director, and a retainer of $75,000 for serving
as non-executive Chairman of the Board; |
|
|
(5) a fee of $2,000 for each Board meeting attended, plus
expenses related to attendance; and |
|
|
(6) a fee of $2,000 for each committee meeting attended,
plus expenses related to attendance. |
|
|
|
Stock Plan for Non-Management Directors |
Under the Companys stock ownership guidelines for
non-management directors, each non-management director is
required to own Company stock in an amount equal to three times
the annual
8
Board retainer for non-management directors. Directors have
three years from the date of their initial election to the Board
to comply with the guidelines. All non-management directors have
met the Companys stock ownership guidelines.
Under the 1998 Director Stock Plan, the directors may grant
stock-based awards to non-management directors.
Non-management directors currently receive annual grants of
deferred stock and stock options. Each non-management director
is automatically issued 250 shares of deferred stock
(1,000 shares annually) on the first business day of each
calendar quarter. The deferred stock will be distributed to the
director when he or she resigns or retires from the Board.
Directors receive dividends on, and are entitled to vote, the
deferred stock. In addition, upon approval by the Compensation
and Benefits Committee, each non-management director is granted
an annual option to purchase 3,750 shares of common
stock. The option price is the fair market value on the date of
grant. The options will vest 100% one year from the date of
grant and options will expire ten years from the date of grant.
Additionally, upon initial election to the Board, non-management
directors receive an initial grant of an option to
purchase 10,000 shares of common stock of the Company.
The options vest 100% on the date of grant and expire ten years
from the date of grant.
On each of January 3, 2005, April 1, 2005,
July 1, 2005 and October 3, 2005, the Board made
deferred stock grants of 250 shares to each non-management
director. The deferred stock will be distributed in shares when
the director ceases to serve as a director of the Company.
Directors receive dividends on and are entitled to vote the
deferred stock.
On November 15, 2005, the directors granted each
non-management director an option to
purchase 3,750 shares of common stock. The option
price is the fair market value on the date of grant. The options
will vest 100% one year from the date of grant and options will
expire ten years from the date of grant.
|
|
|
Director Compensation Table |
The following table sets forth information concerning total
director compensation during the 2005 fiscal year for each
current non-management director:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned | |
|
Stock | |
|
Option | |
|
Non-Stock | |
|
All Other | |
|
|
|
|
or Paid In | |
|
Awards | |
|
Awards | |
|
Incentive Plan | |
|
Compensation | |
Name |
|
Total ($) | |
|
Cash ($)(1) | |
|
($)(2) | |
|
($)(3) | |
|
Compensation ($) | |
|
($)(4) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Conrad P. Albert
|
|
|
299,585 |
|
|
|
109,750 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
Robert J. Allison, Jr.
|
|
|
336,835 |
|
|
|
147,000 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
Larry Barcus
|
|
|
297,585 |
|
|
|
107,750 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
James L. Bryan
|
|
|
310,835 |
|
|
|
121,000 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
John R. Butler, Jr.
|
|
|
332,585 |
|
|
|
142,750 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
H. Paulett Eberhart
|
|
|
303,585 |
|
|
|
113,750 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
John R. Gordon
|
|
|
312,668 |
|
|
|
122,833 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
1,805 |
|
John W. Poduska, Sr.
|
|
|
311,885 |
|
|
|
121,000 |
|
|
|
80,126 |
|
|
|
107,904 |
|
|
|
0 |
|
|
|
2,855 |
|
|
|
(1) |
Each non-management director earned or was paid in cash the
following fees: (a) an annual retainer of $50,000; and
(b) board meeting fees of $22,000. Excluding
Mr. Allison, each non-director also earned or was paid in
cash for committee retainer fees, committee meeting fees and a
committee chairmanship retainer based on the committees on which
they served. Please see page 10 for a listing of each
directors committee service. Mr. Allison received a
retainer of $75,000 for serving as non-executive Chairman of the
Board through December 31, 2005. Additionally,
Mr. Gordon received a Lead Director retainer of $20,833. |
|
(2) |
On each of January 3, 2005, April 1, 2005,
July 1, 2005 and October 3, 2005, the Board made
deferred stock grants of 250 shares to each non-management
director. The Company uses the grant |
9
|
|
|
date fair value of the award as determined pursuant to
FAS 123R for financial reporting purposes to estimate the
value of the award. |
|
(3) |
On November 15, 2005, the directors granted each
non-management director an option to
purchase 3,750 shares of common stock. The Company
uses the grant date fair value of the award as determined
pursuant to FAS 123R for financial reporting purposes to
estimate the value of the award. |
|
(4) |
Includes annual premiums in the amount of $155 and $1,650
respectively for Accidental Death & Dismemberment
coverage and Personal Excess Liability coverage paid by the
Company for each directors benefit. Additionally,
Mr. Poduska was credited with $1,050 in earnings under the
Deferred Compensation Plan, as described on page 26. |
Committees of the Board
The Board of Directors has five committees: the Audit Committee;
the Compensation and Benefits Committee; the Nominating and
Corporate Governance Committee; the Executive Committee; and the
Enterprise Resource Planning Committee. The Audit Committee, the
Compensation and Benefits Committee, the Nominating and
Corporate Governance Committee and the Enterprise Resource
Planning Committee are independent committees, which means that
all of the members of these committees have been determined by
the Board to be independent in accordance with the
Companys Corporate Governance Guidelines. The Executive
Committee is not an independent committee as it has both
non-management and management directors as members; however, the
majority of the members of the Executive Committee are
independent directors. Each of the independent committees of the
Board and the entire Board evaluated their performance in 2005.
The performance evaluations were supervised by the Nominating
and Corporate Governance Committee and discussed by the
applicable committee and the Board.
The table below shows the current membership of each committee
of the Board and the number of meetings each committee held in
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating | |
|
|
|
Enterprise | |
|
|
|
|
Compensation | |
|
& Corporate | |
|
|
|
Resource | |
Director |
|
Audit | |
|
& Benefits | |
|
Governance | |
|
Executive | |
|
Planning | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Mr. Albert
|
|
|
X |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
Mr. Allison
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
Mr. Barcus
|
|
|
X |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
Mr. Bryan
|
|
|
|
|
|
|
X |
|
|
|
X |
* |
|
|
X |
|
|
|
|
|
Mr. Butler
|
|
|
X |
* |
|
|
|
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
Ms. Eberhart
|
|
|
X |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
X |
* |
Mr. Gordon
|
|
|
|
|
|
|
X |
|
|
|
X |
|
|
|
X |
** |
|
|
|
|
Mr. Hackett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
* |
|
|
|
|
Mr. Poduska
|
|
|
|
|
|
|
X |
* |
|
|
X |
|
|
|
|
|
|
|
X |
|
2005 Meetings
|
|
|
11 |
|
|
|
8 |
|
|
|
4 |
|
|
|
2 |
|
|
|
2 |
|
|
|
** |
Serves in his capacity as Lead Director |
The Board re-elected Ms. Eberhart and Messrs. Albert,
Barcus and Butler as members of the Audit Committee in May 2005.
The Committee re-elected Mr. Butler as chairman of the
Audit Committee in May 2005. During 2005, the Audit Committee
held eleven meetings.
The purpose of the Audit Committee is to assist the Board in
monitoring:
|
|
|
|
|
the integrity of the Companys financial statements; |
10
|
|
|
|
|
the Companys compliance with legal and regulatory
requirements; |
|
|
|
the independent auditors qualifications and independence; |
|
|
|
the performance of the Companys internal and independent
auditors; and |
|
|
|
the business practices and ethical standards of the Company. |
The Audit Committee Charter (as adopted by the Board of
Directors and amended from time to time) has been posted on the
Companys website at www.anadarko.com.
The Audit Committee is also directly responsible for:
|
|
|
|
|
the appointment, approval of compensation, retention and
oversight of the work of the Companys independent auditor,
KPMG LLP; |
|
|
|
the preparation of the Audit Committee report, which is on
page 15; and |
|
|
|
the appointment, compensation, retention and oversight of the
work of the Companys independent reserve engineering
consultants. |
All of the members of the Audit Committee meet the independence
requirements of the NYSE, the Sarbanes-Oxley Act, the Securities
Exchange Act and the rules of the Securities and Exchange
Commission (the SEC) adopted thereunder, and the Companys
Corporate Governance Guidelines.
In February 2006, the Board of Directors determined that
Ms. Eberhart is an Audit Committee financial expert as
defined by the SEC.
|
|
|
Compensation and Benefits Committee |
The Board re-elected Messrs. Bryan, Gordon and Poduska as
members of the Compensation and Benefits Committee in May 2005.
Mr. Poduska was re-elected as chairman of the Compensation
and Benefits Committee by the Board in May 2005. During 2005,
the Compensation and Benefits Committee met eight times.
The Compensation and Benefits Committee has overall
responsibility for approving and evaluating the director and
executive officer compensation plans, policies and programs of
the Company. The Compensation and Benefits Committee is also
responsible for producing the annual report on executive
compensation, which is on page 16. The Compensation and
Benefits Committee Charter is posted on the Companys
website at www.anadarko.com.
|
|
|
Nominating and Corporate Governance Committee |
Ms. Eberhart and Messrs. Albert, Barcus, Bryan,
Butler, Gordon and Poduska served as members of the Nominating
and Corporate Governance Committee throughout 2005.
Mr. Bryan served as chairman of the Nominating and
Corporate Governance Committee. The Nominating and Corporate
Governance Committee held four meetings in 2005.
The Nominating and Corporate Governance Committee has overall
responsibility for:
|
|
|
|
|
recommending nominees for director to the full Board; |
|
|
|
reviewing the qualifications of existing Board members before
they are nominated for
re-election to the
Board; |
|
|
|
recommending members of the Board for committee membership; |
|
|
|
proposing Corporate Governance Guidelines for the Company and
reviewing them annually; |
|
|
|
oversight of the Companys compliance structure and
programs; |
|
|
|
developing an evaluation process for the Board; |
11
|
|
|
|
|
overseeing the emergency and expected CEO succession
plans; and |
|
|
|
reviewing and investigating any reports to the Companys
anonymous reporting hotline regarding non-financial matters. |
The Nominating and Corporate Governance Committee Charter is
posted on the Companys website at www.anadarko.com.
The Board re-elected Messrs. Allison, Bryan, Butler and
Hackett as members of the Executive Committee in May 2005. In
February 2006, the Board elected Mr. Gordon, in his
capacity as Lead Director, as a member of the Executive
Committee. This Committee is not an independent committee;
however, the majority of the members of the Executive Committee
are independent directors. Mr. Allison, a retired Company
executive, and Mr. Hackett, the Companys Chairman,
President and CEO, are members of this Committee. In connection
with Mr. Hacketts election as the Companys
Chairman, Mr. Hackett was named the chairman of the
Executive Committee effective January 1, 2006. In
accordance with the Companys bylaws, the Executive
Committee acts with the power and authority of the Board in the
management of the business and affairs of the Company while the
Board is not in session. The Executive Committee has generally
held meetings to approve specific terms of financing or other
transactions that have previously been approved by the Board.
During 2005, the Executive Committee met twice.
|
|
|
Enterprise Resource Planning Committee |
The Board created the Enterprise Resource Planning Committee in
January 2005 for the special purpose of providing input and
advice to the Company during its implementation of the
Enterprise Resource Planning Project. The Board elected
Messrs. Butler and Poduska and Ms. Eberhart as members
of the Enterprise Resource Planning Committee, with
Ms. Eberhart serving as the chairman. Enterprise Resource
Planning integrates back-office systems across the Company by
implementing a modern, integrated software system that automates
the tasks necessary to perform various business functions. The
Enterprise Resource Planning Committee was created with an
initial term of one year. In early February 2006, the Board
renewed and extended the term of the Enterprise Resource
Planning Committee by one year. The members of the Enterprise
Resource Planning Committee receive only the standard meeting
attendance fee and do not receive a committee membership
retainer or a retainer for serving as chairman of the committee.
The Enterprise Resource Planning Committee met twice in 2005.
STOCK OWNERSHIP
As of March 13, 2006, there were 233,822,689 shares of
Anadarko common stock outstanding entitled to vote at the
meeting. Each of these shares is entitled to one vote. The
information provided below summarizes the beneficial ownership
of officers and directors of the Company and owners of more than
5% of outstanding common stock. Beneficial ownership
generally includes those shares of common stock someone has the
power to vote, sell or acquire within 60 days. It includes
common stock that is held directly and also shares held
indirectly through a relationship, a position as a trustee or
under a contract or understanding.
12
Directors and Executive Officers
On February 28, 2006, the directors and executive officers
of the Company beneficially owned, in the aggregate,
2,746,966 shares of Anadarko common stock (approximately
1.2% of the outstanding shares entitled to vote at that time).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial Ownership | |
|
|
| |
|
|
|
|
Shares | |
|
|
|
|
Number of Shares | |
|
Acquirable | |
|
Total | |
|
|
|
|
Beneficially | |
|
Within | |
|
Beneficial | |
|
Percent | |
Name of Beneficial Owner |
|
Owned(1) | |
|
60 Days | |
|
Ownership | |
|
of Class | |
|
|
| |
|
| |
|
| |
|
| |
James T. Hackett
|
|
|
147,167 |
|
|
|
125,000 |
|
|
|
272,167 |
|
|
|
* |
|
R. A. Walker
|
|
|
33,100 |
|
|
|
0 |
|
|
|
33,100 |
|
|
|
* |
|
Robert P. Daniels
|
|
|
36,569 |
|
|
|
169,100 |
|
|
|
205,669 |
|
|
|
* |
|
Karl F. Kurz
|
|
|
30,738 |
|
|
|
18,334 |
|
|
|
49,072 |
|
|
|
* |
|
James R. Larson(2)
|
|
|
36,264 |
|
|
|
0 |
|
|
|
36,264 |
|
|
|
* |
|
Mark L. Pease
|
|
|
66,042 |
|
|
|
99,100 |
|
|
|
165,142 |
|
|
|
* |
|
Robert K. Reeves
|
|
|
20,256 |
|
|
|
48,600 |
|
|
|
68,856 |
|
|
|
* |
|
Conrad P. Albert(3)
|
|
|
38,364 |
|
|
|
43,750 |
|
|
|
82,114 |
|
|
|
* |
|
Robert J. Allison, Jr
|
|
|
276,381 |
|
|
|
753,750 |
|
|
|
1,030,131 |
|
|
|
* |
|
Larry Barcus
|
|
|
53,854 |
|
|
|
33,750 |
|
|
|
87,604 |
|
|
|
* |
|
James L. Bryan
|
|
|
26,378 |
|
|
|
53,750 |
|
|
|
80,128 |
|
|
|
* |
|
John R. Butler, Jr.
|
|
|
30,233 |
|
|
|
33,750 |
|
|
|
63,983 |
|
|
|
* |
|
H. Paulett Eberhart
|
|
|
1,500 |
|
|
|
13,750 |
|
|
|
15,250 |
|
|
|
* |
|
John R. Gordon
|
|
|
72,076 |
|
|
|
53,750 |
|
|
|
125,826 |
|
|
|
* |
|
John W. Poduska, Sr.
|
|
|
17,031 |
|
|
|
23,750 |
|
|
|
40,781 |
|
|
|
* |
|
All directors and executive officers as a group,
(25 persons)
|
|
|
1,117,263 |
|
|
|
1,629,703 |
|
|
|
2,746,966 |
|
|
|
1.2 |
% |
|
|
* |
Less than one percent. |
|
(1) |
This number does not include shares of common stock which the
directors or officers of the Company have the right to acquire
within 60 days of February 28, 2006. |
|
(2) |
On May 17, 2005, Mr. Larson announced his retirement
from the Company. Mr. Larson continued to serve as Senior
Vice President, Finance and CFO until Mr. Walkers
appointment effective September 6, 2005, and thereafter
served as Senior Vice President until his retirement effective
January 1, 2006. |
|
(3) |
Mr. Albert disclaims beneficial ownership of
11,573 shares held by his wife and children. |
13
Owners of More than Five Percent of Anadarko Stock
The following table shows the beneficial owners of more than
five percent of the Companys common stock as of
December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature | |
|
|
|
|
|
|
of Beneficial | |
|
|
Title of Class |
|
Name and Address of Beneficial Owner |
|
Ownership | |
|
Percent of Class | |
|
|
|
|
| |
|
| |
Common Stock
|
|
Barclays Global Investors, NA. |
|
|
14,817,580 |
(1) |
|
|
6.30 |
% |
|
|
45 Fremont Street, 17th Floor San Francisco, CA 94105 |
|
|
|
|
|
|
|
|
Common Stock
|
|
CAM North America, LLC |
|
|
13,744,644 |
(2) |
|
|
5.85 |
% |
|
|
399 Park Avenue
New York, NY 10022 |
|
|
|
|
|
|
|
|
Common Stock
|
|
Neuberger Berman Inc. |
|
|
13,610,699 |
(3) |
|
|
5.79 |
% |
|
|
605 Third Avenue
New York, NY 10158 |
|
|
|
|
|
|
|
|
|
|
(1) |
Based upon its Schedule 13G filed January 26, 2006
with the SEC with respect to its securities as of
December 31, 2005, Barclays Global Investors, NA has sole
voting power as to 9,914,400 shares and sole dispositive
power as to 11,572,621 shares, Barclays Global
Fund Advisors has sole voting power as to
1,391,254 shares and sole dispositive power as to
1,401,761 shares, Barclays Global Investors, Ltd. has sole
voting power as to 1,532,225 shares and sole dispositive
power as to 1,643,499 shares, and Barclays Global Investors
Japan Trust and Banking Company Limited has sole voting and
dispositive power as to 199,699 shares. |
|
(2) |
Based upon its Schedule 13G filed February 14, 2006
with the SEC with respect to its securities as of
December 31, 2005, CAM North America, LLC has shared voting
power as to 2,925,814 shares and shared dispositive power
as to 4,106,830 shares, Salomon Brothers Asset Management
Inc. has shared voting and dispositive power as to
112,595 shares, Smith Barney Fund Management LLC has shared
voting and dispositive power as to 9,446,557 shares and
TIMCO Asset Management Inc. has shared voting and dispositive
power as to 78,662 shares. |
|
(3) |
Based upon its Schedule 13G filed February 15, 2006
with the SEC with respect to its securities as of
December 31, 2005, Neuberger Berman Inc. has sole voting
power as to 9,634,521 shares, shared voting power as to
484,600 shares and shared dispositive power as to
13,610,699 shares. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Companys directors and executive
officers, and persons who own more than ten percent of a
registered class of the Companys equity securities, to
file with the SEC and any exchange or other system on which such
securities are traded or quoted, initial reports of ownership
and reports of changes in ownership of the Companys common
stock and other equity securities. Officers, directors and
greater than ten percent stockholders are required by the
SECs regulations to furnish the Company and any exchange
or other system on which such securities are traded or quoted
with copies of all Section 16(a) forms they filed with the
SEC.
To the Companys knowledge, based solely on a review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, the Company
believes that all reporting obligations of the Companys
officers, directors and greater than ten percent stockholders
under Section 16(a) were satisfied during the year ended
December 31, 2005, except that in February 2006 a
Form 4 for the purchase of 1,000 shares of common
stock by Mr. Gordon in 2001 was filed late.
14
AUDIT COMMITTEE REPORT
The following report of the Audit Committee of the Company
shall not be deemed to be soliciting material or to
be filed with the Securities and Exchange
Commission, nor shall this report be incorporated by reference
into any filing made by the Company under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended.
The Audit Committee of the Board is responsible for independent,
objective oversight of the Companys accounting functions
and internal controls over financial reporting. The Audit
Committee is composed of four directors, each of whom is
independent as defined by the NYSE listing standards. The Audit
Committee operates under a written charter approved by the Board
of Directors.
Management is responsible for the Companys internal
controls over financial reporting. The independent auditor is
responsible for performing an independent audit of the
Companys consolidated financial statements in accordance
with generally accepted auditing standards in the United States
of America and issuing a report thereon. The independent auditor
is also responsible for performing independent audits of the
Companys internal controls over financial reporting and of
managements assessment of the effectiveness of controls
over financial reporting. The Audit Committees
responsibility is to monitor and oversee these processes.
KPMG LLP served as the Companys independent auditor during
2005 and was appointed by the Audit Committee to serve in that
capacity for 2006. KPMG LLP has served as the Companys
independent auditor since its initial public offering in 1986.
In connection with these responsibilities, the Audit Committee
met with management and the independent auditor to review and
discuss the December 31, 2005 financial statements and
matters related to Section 404 of the Sarbanes-Oxley Act of
2002. The Audit Committee also discussed with the independent
auditor the matters required by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Audit Committee also received written disclosures from the
independent auditor required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit
Committees) and the Audit Committee discussed with the
independent auditor that firms independence.
Based upon the Audit Committees (i) review and
discussions with management and the independent auditor and
(ii) review of the representations of management and the
independent auditor, the Audit Committee recommended that the
Board of Directors include the audited consolidated financial
statements in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2005 filed with the SEC.
|
|
|
THE AUDIT COMMITTEE |
|
John R. Butler, Jr., Chairman |
|
Conrad P. Albert |
|
Larry Barcus |
|
H. Paulett Eberhart |
15
EXECUTIVE COMPENSATION
Compensation and Benefits Committee Report
on 2005 Executive Compensation
The Compensation and Benefits Committee (Compensation
Committee), listed on page 11, is responsible for
establishing and administering the executive compensation
programs of the Company. This report describes the compensation
philosophy and actions taken by the Compensation Committee
during 2005 with respect to Anadarkos executive officers.
Compensation Philosophy of the Company
The Companys compensation program for executive officers,
which consists of base salary, performance-based annual bonus
and long-term incentive awards, is designed to promote the
strategic objectives that are critical to the long-term success
of the Company. Collectively, these components are designed to
deliver total compensation opportunities targeted at the
75th percentile of a peer group of oil and gas companies
that the Company considers essential to attract, retain and
reward key personnel. The compensation program provides
executives the opportunity to earn total compensation levels
within the top quartile of the peer group, to the extent that
Company and executive performance on a combined and individual
basis so warrants. The peer group (shown on the Performance
Graph) consists of energy companies similar in business
operations and comparable in size to Anadarko. Many of these
energy companies are also included in the Dow Jones
U.S. Exploration & Production index also shown on
the Performance Graph. The Dow Jones
U.S. Exploration & Production index is comprised
of specific energy companies representing most facets of the
industry including independent oil and gas companies. Not all
companies included in the index are considered reasonably
comparable to Anadarko with respect to analyzing executive
compensation and benefit levels. As a result, we no longer
believe that this index provides a good comparison of total
shareholder return against a consistent representation of oil
and gas companies with whom Anadarko currently competes for
investment dollars.
The Compensation Committee utilizes an independent compensation
consultant to review executive compensation and benefit programs
as well as total compensation levels provided to the CEO and
executive officers. On at least an annual basis, the
Compensation Committee reviews performance measures of the
short-term and long-term incentive compensation programs to
ensure they are properly aligned with and support the
Companys business strategy. The performance measures of
the short-term bonus program recognize the contributions of
executive officers and employees for the Companys
performance against the specific annual financial, operational
and strategic goals. The performance measures of the long-term
incentive program use a combination of multi-year internal and
external relative performance measures to focus the executive
officers on executing the Companys longer-term strategic
goals and maximizing shareholder returns. The Company believes
that, collectively, these programs support the Companys
business strategy and align the interests of executive officers
with those of the Companys stockholders.
Base Salary
Base salary compensation is reviewed annually by the
Companys independent compensation consultant and the
Compensation Committee. Adjustments, if any, reflect each
executive officers contribution to the performance of the
Company as well as changes in market conditions or job
responsibilities. Base salaries are generally targeted between
the 50th and 75th percentiles of the comparative
market data of the peer group. In establishing base salaries for
the CEO and executive officers, the Compensation Committee
considers a number of factors including the executives job
responsibilities, individual achievements and contributions,
level of experience, length of time in the position and
comparative market data for similar positions within the peer
group. In November 2005, the Committee reviewed the competitive
data for the executive officers and confirmed that, on average,
the base salaries for the executive officers were slightly above
the 50th percentile. Based on the competitive
16
review and the factors described above, the Compensation
Committee approved base salary increases for the Companys
officers in 2005, including certain executives named in the
Summary Compensation Table.
Annual Incentive Bonus
The Annual Incentive Plan puts a significant portion of total
compensation at risk by linking potential annual compensation to
the Companys achievement of specific performance goals
during the year. These goals are established by the Compensation
Committee at the beginning of each calendar year and for 2005
included:
|
|
|
1) Operational goals consisting of finding and development
costs, reserve replacement and production growth, measured
against internal objectives established by the Company; |
|
|
2) Financial discipline goals consisting of net operating
lease expense per barrel of oil equivalent produced and
pre-capitalized general and administrative expense, both of
which are measured against internal objectives; and |
|
|
3) Safety goals which measure the Companys total
recordable incident rate (an industry safety performance
standard) against an internal objective. |
Each performance goal and its specific criteria are weighted
based upon the relative importance of the goal as determined by
the Compensation Committee.
Under the Annual Incentive Plan, a bonus target is established
for each executive officer based upon a review of the
competitive data for that position, level of responsibility and
the positions ability to impact the Companys
success. For 2005, these individual targets ranged up to 120% of
base salary. Actual bonus awards are based on the Companys
achievement of the performance goals and the executives
individual performance. Individuals may receive up to 200% of
their individual bonus target if the Company significantly
exceeds the specified goals and, conversely, no bonus is paid if
the Company does not achieve a minimum threshold level of
performance.
Following the Committees formal evaluation of the
Companys performance for 2005, as measured against the
prescribed performance goals, the Committee approved an
above-target level bonus payout of 119% for eligible employees
and executive officers under the Annual Incentive Plan. The
Compensation Committee also approved additional cash bonuses to
certain of the executive officers, excluding Mr. Hackett,
which are separate from the Annual Incentive Plan. These bonuses
were awarded to recognize several targeted accomplishments for
the year including: implementation of focused cost-control
initiatives; proactive efforts in securing rigs and acreage that
are critical to the execution of the Companys long-term
strategy; advancement of international and deepwater
opportunities and specific exploration and drilling successes;
the successful execution of the share buyback program well ahead
of expectations and the immediate commencement of the second
share buyback program; and efforts exhibited toward the further
strengthening of the balance sheet, balanced with prudent
capital investments and returns to shareholders through stock
buybacks and increased dividends. The individual bonus amounts
for the current named executive officers are reflected in the
Summary Compensation Table.
Long-Term Incentive Program
The Company makes equity-based awards under the 1999 Stock
Incentive Plan to align the interests of executive officers with
those of stockholders by emphasizing the long-term growth in
value of the Company. The Compensation Committee annually
reviews competitive market data to determine appropriate stock
awards based on the executives position and the market
value of the stock. In addition, the Compensation Committee
considers target compensation and the value of previous stock
grants when determining the grant sizes for executive officers.
The equity grants consist of a combination of stock options,
restricted stock and stock performance awards.
The performance awards may be earned if specific goals, focused
on the long-term strategic objectives of the Company, are
achieved. Each performance award is denominated in shares of
stock of the Company
17
and has a three-year cliff vesting performance
period. The ultimate payout of these awards, if any, is
dependent on two equally weighted performance measures: Reserve
Replacement Efficiency (RRE) and Total Shareholder Return
(TSR). RRE is a proxy for return on capital and is measured
against the companys cost of capital. Payouts only occur
if RRE exceeds the companys cost of capital. The TSR
measure provides an external comparison of the Companys
performance against the peer group described in the Performance
Graph and will only provide payout if the Companys
relative total shareholder return ranks in the top half of the
peer group. Of the total mix of long-term incentive equity-based
awards, the stock performance awards comprise approximately 50%
of the overall value while stock options and restricted shares
deliver approximately 15% and 35%, respectively, of the overall
value. The Compensation Committee believes the structure of the
equity-based awards under the long-term incentive program
provides a combination of vehicles, and relative weightings,
that are performance-based in absolute and relative terms, while
also encouraging retention. In addition, the use of stock
performance awards and restricted shares enables the Company to
better manage its stock dilution. Both the stock options and
restricted shares are subject to a pro-rata three-year vesting
schedule and the stock options have a seven-year term.
Following the annual review of competitive levels of total
compensation for executive officers in 2005, the Compensation
Committee made stock option, restricted share and stock
performance awards to the executive officers, including the
named executive officers as reflected in the Summary
Compensation Table.
Anadarko has maintained stock ownership guidelines for executive
officers since 1993. The ownership guidelines are currently
established at the following levels: two times base salary for
Vice Presidents; two and one-half times base salary for Senior
Vice Presidents; and five times base salary for the Chief
Executive Officer. Anadarko believes the program has
accomplished the desired objective of requiring our executives
to acquire and maintain, for the duration of their careers, a
significant position in Anadarko stock.
CEO Compensation
Each year the Board of Directors formally evaluates the
performance of the CEO. Through this evaluation process, the
Compensation Committee assesses the CEOs performance and
recommends any changes that may be appropriate for the
CEOs compensation program based on individual performance
as well as the competitive market data. Based on the
Compensation Committees evaluation and assessment of
Mr. Hacketts individual performance and contributions
to the strategic direction of the Company, the Compensation
Committee approved the following actions with respect to
Mr. Hacketts compensation for 2005:
|
|
|
Base Salary. Mr. Hackett was initially elected
President and Chief Executive Officer of the Company on
December 3, 2003. Throughout 2004 and for the first
10 months of 2005, Mr. Hacketts base salary
remained at $1,100,000 which was the base salary originally
prescribed in his employment agreement. Following the
Committees review of the competitive base salaries for
comparable positions at the peer companies and with advice from
the Companys executive compensation consultant, the
Compensation Committee approved that Mr. Hacketts
base salary be increased to $1,300,000 in November 2005 in
consideration of his leadership over the past 23 months. |
|
|
Bonus. For 2005, Mr. Hacketts target bonus
opportunity was established at 120% of base salary. Based on the
Companys performance for 2005, the Compensation Committee
awarded Mr. Hackett a $1,859,000 cash bonus under the
Annual Incentive Plan, or 119% of his target bonus. |
|
|
Following the Committees review of the competitive total
cash compensation opportunity provided for comparable positions
at the peer companies and with advice from the Companys
executive compensation consultant, the Committee approved that
Mr. Hacketts bonus target for 2006 be established at
130% of base salary. |
18
|
|
|
Long-Term Incentives. Mr. Hackett was granted
performance shares on December 3, 2003 when he was
initially hired by the Company. The performance shares consist
of two separate performance periods: a two-year period beginning
December 3, 2003 and ending December 2, 2005; and a
four-year period beginning December 3, 2003 and ending
December 2, 2007. For each performance period,
Mr. Hackett was granted 40,000 targeted performance shares
with the opportunity to earn 80,000 performance shares at
maximum performance level. Payout for each of the performance
periods is based on the Companys relative TSR ranking as
compared to a select group of peer companies that was
established at the time of the award. With the exception of any
companies who have since ceased to be publicly traded, these
peer companies are the same companies used in the Companys
review of executive compensation. On February 1, 2006,
following review of the results of the first performance period
which ended December 2, 2005, the Committee certified and
approved an award of 14,400 shares of Company stock to
Mr. Hackett based on the Companys relative TSR
performance against the peer companies. This represents 36% of
the targeted award and reflects the performance element intended
in the original grant. |
|
|
In November 2005, the Committee approved long-term incentive
awards to executive officers and eligible employees under the
Companys 1999 Stock Incentive Plan. Following the
Committees review of the competitive market data,
Mr. Hackett was awarded 40,000 non-qualified stock options,
30,000 restricted shares and 45,000 stock performance units. The
stock options and restricted shares will vest equally over three
years, beginning one year from the date of grant. The
performance units are for the three-year performance period
beginning January 1, 2006. Any payout will be based on the
Companys performance against the established TSR and RRE
performance measures for the performance period (as described
earlier in this report). |
Summary
The Compensation Committee believes the design of the
Companys total executive compensation program provides
executives the incentive to maximize long-term operational
performance using sound financial controls and high standards of
integrity. It is the Compensation Committees belief that
this focus will continue to be reflected in Anadarkos
operational, financial and stock price performance. The
Compensation Committee also believes that total compensation for
each executive should be commensurate with the achievement of
specified short-term and long-term operational, financial and
strategic objectives.
In designing the Companys compensation programs, the
Compensation Committees primary consideration is
Anadarkos achievement of strategic business goals that
serve to enhance stockholder value. Consideration is also given
to competitive compensation practices, market economics, and
other factors. Section 162(m) of the Internal Revenue Code,
as amended (the Code), limits a companys
ability to deduct compensation paid in excess of $1 million
during any fiscal year to the Chief Executive Officer and the
next four highest paid officers, unless the compensation meets
stockholder approved performance-based requirements. Awards
under the Annual Incentive Plan and the 1999 Stock Incentive
Plan satisfy the performance-based requirements under
section 162(m). The Compensation Committee is committed to
making awards that qualify as deductible compensation under
section 162(m) of the Code whenever possible. However,
where granting awards is consistent with the strategic goals of
the Company, the Compensation Committee may make awards that are
non-deductible when it believes it is in the best interest of
the Company.
|
|
|
THE COMPENSATION AND BENEFITS |
|
COMMITTEE |
|
|
John W. Poduska, Sr., Chairman |
|
James L. Bryan |
|
John R. Gordon |
19
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Annual Compensation | |
|
Awards | |
|
Payouts | |
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
Other | |
|
|
|
Securities | |
|
|
|
|
|
|
|
|
|
|
|
|
Annual | |
|
|
|
Underlying | |
|
|
|
All Other | |
|
|
|
|
|
|
|
|
Compen- | |
|
Restricted | |
|
Options/ | |
|
Payouts | |
|
Compen- | |
|
|
|
|
|
|
Salary | |
|
Bonus | |
|
sation | |
|
Stock (1) | |
|
SARs(2) | |
|
LTIP | |
|
sation | |
Name |
|
Principal Position |
|
Year | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
(#) | |
|
($) | |
|
($) | |
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
James T. Hackett(3)
|
|
Chairman, President and Chief Executive Officer |
|
|
2005 |
|
|
|
1,133,333 |
|
|
|
1,859,000 |
(7) |
|
|
354,757 |
(11) |
|
|
2,609,100 |
|
|
|
40,000 |
|
|
|
1,538,568 |
|
|
|
176,900 |
(12) |
|
|
President and Chief Executive Officer |
|
|
2004 |
|
|
|
1,100,000 |
|
|
|
1,815,000 |
|
|
|
217,660 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,766,000 |
|
|
|
President and Chief Executive Officer |
|
|
2003 |
|
|
|
83,696 |
|
|
|
0 |
|
|
|
0 |
|
|
|
9,324,000 |
|
|
|
250,000 |
|
|
|
0 |
|
|
|
0 |
|
R. A. Walker(4)
|
|
Senior Vice President, Finance and CFO |
|
|
2005 |
|
|
|
136,837 |
|
|
|
150,000 |
(8) |
|
|
529 |
|
|
|
2,838,857 |
|
|
|
36,400 |
|
|
|
0 |
|
|
|
0 |
|
Robert P. Daniels
|
|
Senior Vice President, Exploration and Production |
|
|
2005 |
|
|
|
429,167 |
|
|
|
476,500 |
(8) |
|
|
57,535 |
(10)(11) |
|
|
547,911 |
|
|
|
8,900 |
|
|
|
0 |
|
|
|
74,417 |
(12) |
|
|
Senior Vice President, Exploration and Production |
|
|
2004 |
|
|
|
366,667 |
|
|
|
461,750 |
|
|
|
42,816 |
|
|
|
488,514 |
|
|
|
9,300 |
|
|
|
0 |
|
|
|
59,827 |
|
|
|
Vice President, Canada |
|
|
2003 |
|
|
|
255,833 |
|
|
|
171,000 |
|
|
|
135,401 |
|
|
|
257,100 |
|
|
|
16,000 |
|
|
|
0 |
|
|
|
44,563 |
|
Karl F. Kurz
|
|
Senior Vice President, Marketing & GM, US Onshore |
|
|
2005 |
|
|
|
316,970 |
|
|
|
396,750 |
(8) |
|
|
19,112 |
(10)(11) |
|
|
1,335,489 |
|
|
|
8,100 |
|
|
|
0 |
|
|
|
33,298 |
(12) |
|
|
Vice President, Marketing |
|
|
2004 |
|
|
|
267,500 |
|
|
|
238,000 |
|
|
|
21,767 |
|
|
|
186,172 |
|
|
|
4,000 |
|
|
|
0 |
|
|
|
25,590 |
|
|
|
Vice President, Marketing |
|
|
2003 |
|
|
|
235,983 |
|
|
|
159,000 |
|
|
|
507 |
|
|
|
171,400 |
|
|
|
80,000 |
|
|
|
0 |
|
|
|
19,495 |
|
James R. Larson(5)
|
|
Senior Vice President |
|
|
2005 |
|
|
|
475,000 |
|
|
|
525,000 |
(9) |
|
|
23,052 |
(10)(11) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
148,766 |
(12) |
|
|
Senior Vice President, Finance and CFO |
|
|
2004 |
|
|
|
454,167 |
|
|
|
516,250 |
|
|
|
20,381 |
|
|
|
405,589 |
|
|
|
8,600 |
|
|
|
0 |
|
|
|
45,250 |
|
|
|
Senior Vice President, Finance and CFO |
|
|
2003 |
|
|
|
375,000 |
|
|
|
300,000 |
|
|
|
14,428 |
|
|
|
342,800 |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
47,650 |
|
Mark L. Pease
|
|
Senior Vice President, Exploration and Production |
|
|
2005 |
|
|
|
429,167 |
|
|
|
476,500 |
(8) |
|
|
19,863 |
(10)(11) |
|
|
547,911 |
|
|
|
8,900 |
|
|
|
0 |
|
|
|
53,455 |
(12) |
|
|
Senior Vice President, Exploration and Production |
|
|
2004 |
|
|
|
400,000 |
|
|
|
461,750 |
|
|
|
12,706 |
|
|
|
488,514 |
|
|
|
9,300 |
|
|
|
0 |
|
|
|
37,140 |
|
|
|
Vice President, U.S. Onshore and Offshore |
|
|
2003 |
|
|
|
344,167 |
|
|
|
219,000 |
|
|
|
13,281 |
|
|
|
257,100 |
|
|
|
16,000 |
|
|
|
0 |
|
|
|
64,794 |
|
Robert K. Reeves(6)
|
|
Senior Vice President, Corporate Affairs & Law and
Chief Governance Officer |
|
|
2005 |
|
|
|
403,333 |
|
|
|
445,000 |
(8) |
|
|
42,715 |
(10)(11) |
|
|
460,941 |
|
|
|
7,400 |
|
|
|
0 |
|
|
|
50,300 |
(12) |
|
|
Senior Vice President, Corporate Affairs & Law and
Chief Governance Officer |
|
|
2004 |
|
|
|
311,594 |
|
|
|
435,000 |
|
|
|
2,307 |
|
|
|
920,291 |
|
|
|
93,300 |
|
|
|
0 |
|
|
|
18,696 |
|
|
|
|
|
(1) |
Messrs. Hackett, Walker, Daniels, Kurz, Pease and Reeves
each received a restricted stock award in 2005 which vests
331/3% per
year each November 15th beginning in 2006. As part of
the compensation package awarded to Mr. Walker upon his
employment, Mr. Walker was awarded restricted stock in 2005
which vests 25% per year each
September 6th beginning in 2006. Upon his appointment
to Senior Vice President, Mr. Kurz received a restricted
stock award in 2005 which vests 100% on May 12, 2008. The
restricted stock awarded to Mr. Kurz in 2004 vests
331/3% per
year each November 16th beginning in 2005. The
restricted stock awarded to Mr. Kurz in 2003 vests 100% on
October 30, 2006. Dividends will be paid on unvested
shares. As of December 31, 2005, Mr. Hackett held
130,000 restricted shares valued at $12,317,500, Mr. Walker
held 31,100 restricted shares valued at $2,946,725,
Mr. Daniels held 16,950 restricted shares valued at
$1,606,013, Mr. Kurz held 23,566 restricted shares valued
at $2,232,879, Mr. Larson held 12,066 restricted shares
valued at $1,143,254, Mr. Pease held 16,950 restricted
shares valued at $1,606,013 and Mr. Reeves held 15,899
restricted shares valued at $1,506,430. |
|
|
(2) |
No SARs are outstanding. |
|
|
(3) |
Upon his employment in December 2003, Mr. Hackett was named
President and Chief Executive Officer. Effective January 1,
2006, Mr. Hackett was also named Chairman of the Board. |
|
|
(4) |
Effective September 6, 2005, Mr. Walker was named
Senior Vice President, Finance and CFO. |
|
|
(5) |
On May 17, 2005, Mr. Larson announced his retirement
from the Company. Mr. Larson continued to serve as Senior
Vice President, Finance and CFO until Mr. Walkers
appointment effective September 6, 2005, and thereafter
served as Senior Vice President until his retirement effective
January 1, 2006. |
|
|
(6) |
Upon his employment in March 2004, Mr. Reeves was named
Senior Vice President, Corporate Affairs and Law.
Mr. Reeves was also appointed as Chief Governance Officer
in August 2004. |
|
|
|
|
(7) |
Based on the Companys performance against specified goals
for 2005, Mr. Hackett was awarded a bonus of $1,859,000
under the Annual Incentive Plan of which $1,560,000 was paid in
cash and $299,000 was paid in stock compensation under the
Companys 1999 Stock Incentive Plan. |
20
|
|
|
|
(8) |
Based on the Companys performance against specified goals
for 2005, Messrs. Walker, Daniels, Kurz, Pease and Reeves
were awarded a bonus of $143,000, $454,000, $378,000, $454,000
and $424,000, respectively, under the Annual Incentive Plan. As
discussed in the Compensation and Benefits Committee Report on
2005 Executive Compensation on page 16, the Compensation
and Benefits Committee awarded Messrs. Walker, Daniels,
Kurz, Pease and Reeves an additional cash bonus of $7,000,
$22,500, $18,750, $22,500 and $21,000, respectively. |
|
|
(9) |
On December 6, 2005, and in anticipation of
Mr. Larsons retirement from the Company at the end of
2005, the Compensation Committee of the Companys Board of
Directors approved a bonus award of $525,000 to Mr. Larson,
related to the performance of services in the fiscal year ending
December 31, 2005. The bonus was determined based on
projected performance of the goals established in connection
with the Companys Annual Incentive Plan, which include
specified operational, financial and safety performance goals,
and also in consideration of Mr. Larsons role in
executing several key Company initiatives. The bonus was paid to
Mr. Larson in 2006. |
|
|
(10) |
For Messrs. Daniels, Kurz, Larson, Pease and Reeves, Other
Annual Compensation includes amounts reimbursed during 2005 for
the payment of taxes related to imputed income from financial
counseling services of $5,535, $6,108, $6,108, $6,108 and
$12,948, respectively. The amount reported for Mr. Daniels
in 2005 also includes incremental foreign assignment related tax
reimbursements in the amount of $36,054. |
|
(11) |
Other Annual Compensation consists of the total of all
perquisites provided by or paid for by the Company on behalf of
the named executive officers. For 2005, aggregate perquisites
received by each named executive officer, with the exception of
Mr. Walker, exceeded $10,000. For Messrs. Daniels,
Kurz, Larson, Pease and Reeves, perquisites reported in 2005
include the value of financial counseling services in the
amounts of $9,650, $10,650, $10,650, $10,650 and $22,575,
respectively. Other perquisites reported in this column include
the value of personal use of the Companys aircraft,
personal excess liability insurance and imputed income from
group term life insurance coverage. Mr. Hacketts
amount consists solely of perquisites, of which $333,640
represents personal use of the Companys aircraft and
$15,465 represents expenditures to improve and maintain
Mr. Hacketts home security system. Pursuant to the
Companys security policy, the Company requires the Chief
Executive Officer to use the Companys aircraft for
personal use as well as business travel. The value of travel to
board meetings for companies and civic organizations for which
Mr. Hackett serves as a director is considered personal use
and is included in the amount reported above. The value of
personal aircraft use is based on the Companys aggregate
incremental direct operating costs, including cost of fuel,
maintenance, landing and ramp fees, and other miscellaneous
trip-related variable costs. Because the Companys aircraft
are used predominantly for business purposes, fixed costs, which
do not change based on use of the aircraft, are excluded. |
|
(12) |
For Messrs. Hackett, Daniels, Kurz, Larson, Pease and
Reeves, All Other Compensation includes Company contributions to
the Anadarko Employee Savings Plan and the Anadarko Savings
Restoration Plan (collectively, the Savings Plans)
of $176,900, $53,455, $33,298, $59,475, $53,455 and $50,300
respectively. Mr. Larsons amount also includes
$89,291 of earned, unused vacation that was due him upon his
retirement. Mr. Daniels amount also includes $20,962
of reimbursements related to the relocation from his previous
foreign assignment in Canada to the United States. |
21
The following table sets forth information concerning individual
grants of stock options made during 2005 to each of the named
executive officers:
OPTION/ SAR GRANTS IN LAST FISCAL YEAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
Number of | |
|
% of Total | |
|
|
|
|
|
|
|
|
Securities | |
|
Options/SARs | |
|
Exercise | |
|
|
|
|
|
|
Underlying | |
|
Granted to | |
|
or Base | |
|
|
|
|
|
|
Options/SARs | |
|
Employees in | |
|
Price(2) | |
|
Expiration | |
|
Grant Date | |
Name |
|
Granted (#)(1) | |
|
Fiscal Year | |
|
($/SH) | |
|
Date | |
|
Present Value ($)(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
James T. Hackett(4)
|
|
|
40,000 |
|
|
|
9.88 |
% |
|
$ |
87.11 |
|
|
|
11/15/12 |
|
|
$ |
1,150,972 |
|
R. A. Walker(4)(5)
|
|
|
25,000 |
|
|
|
6.18 |
% |
|
$ |
91.60 |
|
|
|
09/06/12 |
|
|
$ |
727,908 |
|
|
|
|
11,400 |
|
|
|
2.82 |
% |
|
$ |
87.11 |
|
|
|
11/15/12 |
|
|
$ |
328,027 |
|
Robert P. Daniels(4)
|
|
|
8,900 |
|
|
|
2.20 |
% |
|
$ |
87.11 |
|
|
|
11/15/12 |
|
|
$ |
256,091 |
|
Karl F. Kurz(4)
|
|
|
8,100 |
|
|
|
2.00 |
% |
|
$ |
87.11 |
|
|
|
11/15/12 |
|
|
$ |
233,072 |
|
James R. Larson
|
|
|
0 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Mark L. Pease(4)
|
|
|
8,900 |
|
|
|
2.20 |
% |
|
$ |
87.11 |
|
|
|
11/15/12 |
|
|
$ |
256,091 |
|
Robert K. Reeves(4)
|
|
|
7,400 |
|
|
|
1.83 |
% |
|
$ |
87.11 |
|
|
|
11/15/12 |
|
|
$ |
212,930 |
|
|
|
(1) |
No SARs were granted in 2005. |
|
(2) |
The exercise price equals the fair market value of the common
stock on the date of grant. |
|
(3) |
The Company uses the Black-Scholes option pricing model to
estimate the fair value of stock options granted. The fair value
of each option grant was estimated on the date of grant using
the following assumptions: (a) for options with an
expiration date of November 15, 2012 an expected option
life of 5.4 years, a risk-free interest rate of 4.5%, a
dividend yield of 0.7% and expected volatility of 29.6%; and
(b) for options with an expiration date of
September 6, 2012 an expected option life of
5.3 years, a risk-free interest rate of 3.9%, a dividend
yield of 0.7% and expected volatility of 29.7%. The estimated
fair value was not adjusted for non-transferability during the
vesting period or for risk of forfeiture. |
|
(4) |
Stock options granted on November 15, 2005, were granted
under the Companys 1999 Stock Incentive Plan. Thirty-three
and one-third percent
(331/3%)
of the options become exercisable each year on the anniversary
date of the date of grant beginning on November 15, 2006.
In the event of a change of control, any outstanding options
will automatically vest. The Board may also take any one or more
of the following actions: (i) provide for the purchase of
any outstanding awards by the Company; (ii) make
adjustments to any outstanding awards; or (iii) allow for
the substitution of any outstanding awards by the acquiring
companys stock. |
|
(5) |
Stock options granted on September 6, 2005 were granted
under the Companys 1999 Stock Incentive Plan. Fifty
percent (50%) of the options become exercisable on
September 6, 2007, the second anniversary date of the
grant, with the other 50% to become exercisable on
September 6, 2009. |
22
AGGREGATED OPTION/ SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/ SAR VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
Shares | |
|
|
|
Underlying Unexercised | |
|
Value of Unexercised | |
|
|
Acquired | |
|
|
|
Options/SARs at Fiscal | |
|
In-the-Money Options/SARs | |
|
|
on Exercise | |
|
Value | |
|
Year-End (#) | |
|
at Fiscal Year-End ($) | |
Name |
|
(#) | |
|
Realized ($) | |
|
Exercisable/Unexercisable | |
|
Exercisable/Unexercisable(*) | |
|
|
| |
|
| |
|
| |
|
| |
James T. Hackett
|
|
|
0 |
|
|
$ |
0 |
|
|
|
125,000/165,000 |
|
|
$ |
5,954,375/$6,240,775 |
|
R. A. Walker
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0/36,400 |
|
|
$ |
0/$148,374 |
|
Robert P. Daniels
|
|
|
3,500 |
|
|
$ |
207,931 |
|
|
|
169,100/15,100 |
|
|
$ |
6,728,684/$234,472 |
|
Karl F. Kurz
|
|
|
14,000 |
|
|
$ |
338,402 |
|
|
|
18,334/90,766 |
|
|
$ |
662,978/$4,240,618 |
|
James R. Larson
|
|
|
140,000 |
|
|
$ |
5,684,630 |
|
|
|
2,867/5,733 |
|
|
$ |
78,957/$157,887 |
|
Mark L. Pease
|
|
|
194,000 |
|
|
$ |
6,676,584 |
|
|
|
99,100/15,100 |
|
|
$ |
4,566,314/$234,472 |
|
Robert K. Reeves
|
|
|
0 |
|
|
$ |
0 |
|
|
|
2,767/97,933 |
|
|
$ |
76,203/$3,696,313 |
|
|
|
* |
Computed based upon the difference between the fair market value
of the Companys common stock on December 31, 2005
($94.27 per share) and the aggregate exercise price. |
LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL
YEAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under | |
|
|
|
|
Performance or | |
|
Non-Stock Price Based Plans(3) | |
|
|
Number of Shares, | |
|
Other Period Until | |
|
| |
|
|
Units or Other | |
|
Maturation or | |
|
Threshold | |
|
Target | |
|
Maximum | |
Name |
|
Rights(1) | |
|
Payout(2) | |
|
(#) | |
|
(#) | |
|
(#) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
James T. Hackett
|
|
|
45,000 |
|
|
|
3 years |
|
|
|
33,750 |
|
|
|
45,000 |
|
|
|
90,000 |
|
R. A. Walker
|
|
|
13,200 |
|
|
|
3 years |
|
|
|
9,900 |
|
|
|
13,200 |
|
|
|
26,400 |
|
Robert P. Daniels
|
|
|
10,200 |
|
|
|
3 years |
|
|
|
7,650 |
|
|
|
10,200 |
|
|
|
20,400 |
|
Karl F. Kurz
|
|
|
9,300 |
|
|
|
3 years |
|
|
|
6,975 |
|
|
|
9,300 |
|
|
|
18,600 |
|
Mark L. Pease
|
|
|
10,200 |
|
|
|
3 years |
|
|
|
7,650 |
|
|
|
10,200 |
|
|
|
20,400 |
|
Robert K. Reeves
|
|
|
8,600 |
|
|
|
3 years |
|
|
|
6,450 |
|
|
|
8,600 |
|
|
|
17,200 |
|
|
|
(1) |
Each performance unit represents the value of one share of the
Companys common stock. |
|
(2) |
Pursuant to the individual agreements, payout of the performance
units is contingent upon the Companys achievement of two
performance goals during the performance period of
January 1, 2006 to December 31, 2008: (i) total
shareholder return (TSR) relative to a designated
peer group of companies and (ii) reserve replacement
efficiency (RRE). |
|
(3) |
One-half of the target units will be earned based on the
performance of the TSR goal. If, at the end of the performance
period, the Companys TSR rank is equal to or greater than
the 50th percentile of the peer group, the units earned by
the named executives will be equal to two times the
Companys percentile rank multiplied by one-half of the
target units. If, at the end of the performance period, the
Companys TSR rank is less than the 50th percentile of
the peer group, no performance units will be earned. |
|
|
|
One-half of the target units will be earned based on the
performance of the RRE goal. If, at the end of the performance
period, the Companys RRE is equal to the threshold,
target, or maximum objectives, the units earned by the named
executives will be equal to 50%, 100%, or 200%, respectively,
multiplied by one-half of the target units. If the
Companys RRE is between the threshold and maximum
objectives, the units earned by the named executives will be
determined by interpolation relative to the target objective.
If, at the end of the performance period, the Companys RRE
is less than the threshold objective, no performance units will
be earned. |
|
|
Performance units earned for a given performance period are
issued to a participant only following the Compensation and
Benefits Committees review and certification of the actual
performance results for |
23
|
|
|
the applicable performance period. The Compensation and Benefits
Committee may pay out an award in cash, shares of Company common
stock, or a combination of both. |
|
|
A participant will receive the target amount of
performance units in the event of death, disability, change of
control or involuntary termination, as those terms are defined
in the agreement. If a participant retires before the end of a
performance period and the performance goals for such
performance period are met, the participant will receive a pro
rata portion of the performance units for that period. If a
participant terminates for any other reason, the award will be
forfeited. |
PENSION PLAN TABLE
The Company has a defined benefit retirement plan and, due to
limitations imposed by the Internal Revenue Code that restrict
the amount of benefits payable under tax-qualified plans, a
Restoration Plan (collectively the Retirement Plans)
that cover all United States employees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of Service | |
|
|
| |
Remuneration ($) |
|
15 ($) | |
|
20 ($) | |
|
25 ($) | |
|
30 ($) | |
|
35 ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
1,000,000
|
|
|
267,000 |
|
|
|
356,000 |
|
|
|
445,000 |
|
|
|
534,000 |
|
|
|
623,000 |
|
1,250,000
|
|
|
335,000 |
|
|
|
446,000 |
|
|
|
558,000 |
|
|
|
669,000 |
|
|
|
781,000 |
|
1,500,000
|
|
|
402,000 |
|
|
|
536,000 |
|
|
|
670,000 |
|
|
|
804,000 |
|
|
|
938,000 |
|
1,750,000
|
|
|
470,000 |
|
|
|
626,000 |
|
|
|
783,000 |
|
|
|
939,000 |
|
|
|
1,096,000 |
|
2,000,000
|
|
|
537,000 |
|
|
|
716,000 |
|
|
|
895,000 |
|
|
|
1,074,000 |
|
|
|
1,253,000 |
|
2,250,000
|
|
|
605,000 |
|
|
|
806,000 |
|
|
|
1,008,000 |
|
|
|
1,209,000 |
|
|
|
1,411,000 |
|
2,500,000
|
|
|
672,000 |
|
|
|
896,000 |
|
|
|
1,120,000 |
|
|
|
1,344,000 |
|
|
|
1,568,000 |
|
2,750,000
|
|
|
740,000 |
|
|
|
986,000 |
|
|
|
1,233,000 |
|
|
|
1,479,000 |
|
|
|
1,726,000 |
|
3,000,000
|
|
|
807,000 |
|
|
|
1,076,000 |
|
|
|
1,345,000 |
|
|
|
1,614,000 |
|
|
|
1,883,000 |
|
3,250,000
|
|
|
875,000 |
|
|
|
1,166,000 |
|
|
|
1,458,000 |
|
|
|
1,749,000 |
|
|
|
2,041,000 |
|
3,500,000
|
|
|
942,000 |
|
|
|
1,256,000 |
|
|
|
1,570,000 |
|
|
|
1,884,000 |
|
|
|
2,198,000 |
|
3,750,000
|
|
|
1,010,000 |
|
|
|
1,346,000 |
|
|
|
1,683,000 |
|
|
|
2,019,000 |
|
|
|
2,356,000 |
|
4,000,000
|
|
|
1,077,000 |
|
|
|
1,436,000 |
|
|
|
1,795,000 |
|
|
|
2,154,000 |
|
|
|
2,513,000 |
|
4,250,000
|
|
|
1,145,000 |
|
|
|
1,526,000 |
|
|
|
1,908,000 |
|
|
|
2,289,000 |
|
|
|
2,671,000 |
|
4,500,000
|
|
|
1,212,000 |
|
|
|
1,616,000 |
|
|
|
2,020,000 |
|
|
|
2,424,000 |
|
|
|
2,828,000 |
|
4,750,000
|
|
|
1,280,000 |
|
|
|
1,706,000 |
|
|
|
2,133,000 |
|
|
|
2,559,000 |
|
|
|
2,986,000 |
|
The Retirement Plans provide benefits based on a formula that
considers length of service and final average pay, and do not
require employee contributions. For this purpose,
pay or remuneration generally includes the amounts
shown in the Salary and Bonus columns of the Summary
Compensation Table. The compensation covered by the Plans for
the most recent three years does not differ by more than 10%
from the annual compensation shown in the Summary Compensation
Table. The above table reflects the estimated single life
annuity payable annually at normal retirement at age 65 in
specified remuneration and
years-of-service
classifications, based on the benefit formula in effect on
December 31, 2005 and such benefits are not subject to
deduction for Social Security or any other offset amounts.
Messrs. Hackett, Walker, Daniels, Kurz, Larson, Pease, and
Reeves, respectively, have 2, 0, 20, 5, 25, 27,
and 2 years of accrued service under the Retirement Plans.
An employee becomes vested in his or her benefit under the
Retirement Plans at completion of five years of vesting service
as defined in the Retirement Plans. Mr. Hacketts
participation in the Retirement Plans is discussed below as a
term of his Employment Agreement with the Company.
24
PERFORMANCE GRAPH
The following performance graph compares the performance of the
Companys common stock to the S&P 500 Index and to the
Dow Jones U.S. Exploration & Production Index for
the last five years. The graph also shows the performance of the
Companys stock for the same five year period to our peer
group of companies consisting of Amerada Hess, Apache,
Burlington Resources, ConocoPhillips, Devon Energy, EOG
Resources, Kerr-McGee, Marathon Oil, Noble Energy, Occidental
Petroleum and Pioneer Natural Resources. The Company changed to
the peer group comparison because (1) the peer group
consists of energy companies most similar in business operations
and comparable in size to the Company and (2) the Company
no longer believes that the Dow Jones
U.S. Exploration & Production Index provides a
good comparison of total shareholder return against a consistent
representation of oil and gas companies with whom the Company
currently competes for investment dollars. The graph assumes
that the value of the investment in the Companys common
stock and each index was $100 at December 31, 2000, and
that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG ANADARKO PETROLEUM CORPORATION, THE S&P 500
INDEX,
THE DOW JONES US EXPLORATION & PRODUCTION INDEX AND
A PEER GROUP
Fiscal Year Ended December 31
|
|
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|
|
|
|
|
|
|
|
|
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|
| |
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| |
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| |
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2000 |
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2001 |
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2002 |
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2003 |
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2004 |
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2005 |
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Anadarko Petroleum Corporation
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100.00 |
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80.29 |
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68.11 |
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73.23 |
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93.93 |
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138.47 |
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S&P 500 Index
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100.00 |
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88.12 |
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68.64 |
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88.33 |
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97.94 |
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102.75 |
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Dow Jones U.S. Exploration & Production Index
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100.00 |
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91.81 |
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93.80 |
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122.93 |
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174.41 |
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288.33 |
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Peer Group
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100.00 |
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90.18 |
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86.99 |
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118.49 |
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161.82 |
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247.29 |
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Total Return Data Provided by S&Ps Institutional
Market Services and Dow Jones & Company Inc.
25
DEFERRED COMPENSATION PLAN
The Company maintains a Deferred Compensation Plan for directors
and certain employees, including the named executive officers.
The Deferred Compensation Plan allows employees to voluntarily
defer receipt of up to 75% of their salary and/or up to 100% of
their annual incentive bonus payments. It allows directors to
defer receipt of up to 100% of their board and committee
retainers and/or board and committee meeting fees. The Deferred
Compensation Plan permits participants to allocate the deferred
amounts among a group of notional accounts that mirror the gains
and/or losses of various investment funds. In general, deferred
amounts are distributed to the participant upon termination or
at a specific date as elected by the participant.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Change of Control Arrangements
The Company has entered into key employee change of control
contracts with each of the named executive officers and with
certain other key executives. These contracts have an initial
three-year term that is automatically extended for one year upon
each anniversary, unless a notice not to extend is given by the
Company. If a change of control of the Company (as defined
below) occurs during the term of the contract, then the contract
becomes operative for a fixed three-year period. These contracts
generally provide that the executives terms of employment
(including position, work location, compensation and benefits)
will not be adversely changed during the three-year period after
a change of control. If the Company terminates the
executives employment (other than for cause, death or
disability), the executive terminates for good reason during
such three-year period, or, in certain change of control
transactions, the executive terminates employment for any reason
during the 30-day
period following the first anniversary of the change of control,
and upon certain terminations prior to a change of control or in
connection with or in anticipation of a change of control, the
executive is generally entitled to receive the following payment
and benefits:
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(i) earned but unpaid compensation; |
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(ii) up to 2.9 times the executives base salary plus
annual bonus (based on historic annual bonus); |
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(iii) the Company matching contributions which would have
been made had the executive continued to participate in the
Savings Plans for up to an additional three years; |
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(iv) the value of any investments credited to the executive
under the Anadarko Savings Restoration Plan; and |
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(v) the present value of the accrued retirement benefit
under the Retirement Plans and the additional retirement
benefits, including retiree medical, which the executive would
have received had he or she continued service for up to an
additional three years. |
Under the change of control contracts, any executives good
faith determination of good reason for termination
is generally conclusive except during the
30-day period
immediately following the first anniversary of the effective
date of the change of control if the effective date is
attributable to the consummation of a business combination
wherein a majority of the directors of the continuing entity
were members of the incumbent board at the time of the execution
of the initial acquisition or merger agreement.
In addition, the change of control contracts provide for a
continuation of various medical, dental, disability and life
insurance benefits and financial counseling for a period of up
to three years, outplacement services and the payment of all
legal fees and expenses incurred by the executive in enforcing
any right or benefit provided by the change of control contract.
The executive will also be entitled to receive a payment in an
amount sufficient to make the executive whole for any excise tax
on excess parachute payments imposed under Section 4999 of
the Internal Revenue Code.
26
As a condition to receipt of these change of control benefits,
the executive must remain in the employ of the Company and
render services commensurate with his or her position until the
executive is terminated pursuant to the provisions of the
agreement. The executive must also agree to retain in confidence
any and all confidential information known to him or her
concerning the Company and its business so long as the
information is not otherwise publicly disclosed. In 2005, no
amounts were paid under the change of control contracts.
In addition, pursuant to the Companys stock plans, upon a
change of control of the Company:
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outstanding options and stock appreciation rights that are not
vested and exercisable become fully vested and exercisable; |
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the restrictions on any outstanding restricted stock lapse; and |
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if any performance awards or performance-based restricted stock
awards are outstanding, they become fully vested and the
performance goals are deemed to be earned unless otherwise
provided in the participants award agreement. |
For purposes of the change of control contracts and the
Companys stock plans, a change of control is generally
defined as:
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(1) Any individual, entity or group acquiring beneficial
ownership of 20% or more of either the outstanding shares of the
Companys common stock or the combined voting power of the
outstanding voting securities of the Company entitled to vote
generally for the election of directors; |
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(2) Individuals who constitute the Board on the date of
either the change of control contract or the Companys
stock plans, as applicable, cease to constitute a majority of
the Board, provided that an individual whose election or
nomination as a director is approved by a vote of at least a
majority of the directors as of the date of either the change of
control contract or the Companys stock plans, as
applicable, will be deemed a member of the incumbent Board; |
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(3) Consummation by the Companys stockholders of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another entity, unless
following the business combination: |
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(a) all or substantially all of the beneficial owners of
the Companys outstanding common stock prior to the
business combination own more than 60% of the outstanding common
stock of the corporation resulting from the business combination; |
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(b) no person, entity or group owns 20% or more of the
outstanding voting securities of the corporation resulting from
the business combination; and |
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(c) at least a majority of the board of the corporation
resulting from the business combination were members of the
Companys Board prior to the business combination; or |
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(4) Approval by the Companys stockholders of a
complete liquidation or dissolution of the Company. |
James T. Hackett Employment Agreement
In connection with Mr. Hacketts joining the Company,
he and the Company entered into an employment agreement that
became effective December 3, 2003. The agreement has an
initial term of three years with automatic extensions for
successive one-year periods, so that the term of the agreement
will always be between two and three years, unless either party
gives notice of non-renewal.
Under the employment agreement, Mr. Hackett serves as
President and Chief Executive Officer of the Company, has been
appointed to the Board of Directors, and will be nominated for
election and re-election to the Board throughout the term of the
agreement. The employment agreement provides that
Mr. Hackett is generally expected to maintain ownership of
Company common stock having a value equal to five times his
annual base salary.
27
Under the employment agreement, Mr. Hackett is entitled to
the following cash compensation: a minimum annual base salary of
$1.1 million; a signing bonus of $1 million, which was
paid in January 2004; $5.7 million, which was paid in May
2004; and eligibility for an annual cash performance bonus. The
$5.7 million payment was made in recognition of
Mr. Hacketts loss of his right to receive certain
compensation from his previous employer as a result of his
termination of that employment prior to May 1, 2004.
Payments made with respect to 2005, 2004 and 2003 under this
agreement are included in the summary compensation table on page
20.
The employment agreement provides that the target amount of
Mr. Hacketts annual cash bonus will be at least 120%
of his annual base salary (the Incentive Target),
with a maximum annual cash bonus of 200% of the Incentive
Target. The Compensation Committee will determine the actual
amount of Mr. Hacketts annual bonus based on the
Company achieving specific performance goals in accordance with
the Companys Annual Incentive Bonus Plan.
In addition, on December 3, 2003, Mr. Hackett was
granted a non-qualified stock option to
purchase 250,000 shares of the Companys common
stock and 200,000 shares of restricted stock pursuant to
the Companys 1999 Stock Incentive Plan. The option vested
as to 125,000 shares on December 3, 2005, and will
vest as to the remaining shares on December 3, 2007. The
restricted stock vests in four annual equal installments
beginning on December 3, 2004. Mr. Hackett was also
granted performance units under the Stock Incentive Plan. These
performance units represent the right to receive
80,000 shares at the target level of performance and
160,000 shares at the maximum level of performance, to be
earned one-half based on total shareholder return from
December 3, 2003 through December 2, 2005 and one-half
based on total shareholder return from December 3, 2003
through December 2, 2007. However, upon a change of control
of the Company, the performance units will vest at the maximum
level. These options, restricted stock and performance unit
awards are intended to represent Mr. Hacketts equity
awards for the first two years of his employment with the
Company. The employment agreement provides that after this
two-year period, he will be eligible for additional equity
awards in accordance with normal competitive pay practices on
terms no less favorable than the Companys other senior
executives as determined by the Compensation Committee.
The employment agreement also provides that if Mr. Hackett
remains employed by the Company until at least December 3,
2008, he will receive a special pension benefit, computed so
that his total pension benefits from the Company will equal
those to which he would have been entitled if his actual years
of employment with the Company were doubled. Mr. Hackett is
also entitled to receive five weeks of vacation per year, and
the employee and executive benefits provided by the Company to
its most senior executives.
If Mr. Hacketts employment is terminated by the
Company without cause or by him for good reason, as those terms
are defined in the employment agreement, he will be entitled to
receive the following: (a) a cash lump sum payment equal to
the salary that he would have been entitled to receive through
the end of the remaining term of the agreement; (b) full
vesting of his unvested stock options and restricted stock, and
a guaranteed period to exercise his stock options of one year,
or until the end of the options term, if sooner;
(c) pro-rata vesting of the performance units described
above, at the target level; (d) a pro-rata annual bonus for
the year of termination, at the target level; (e) credit,
for purposes of his special pension benefit, for service through
the end of the remaining term of the agreement; and
(f) continuation of medical benefits on the same basis as
active employees for up to 18 months.
Mr. Hackett is also subject to covenants regarding
confidentiality, non-competition and non-solicitation of the
Companys employees. The employment agreement requires that
Mr. Hackett be provided with a Key Employee Change of
Control Agreement, generally in the form provided to other
senior executives of the Company, but modified as necessary to
preserve his special benefits under the employment agreement and
to ensure that his severance following a change of control is
not less than it would have been under the employment agreement.
28
Ongoing Benefits
In 2004, the Company replaced, in its entirety, the Memorandum
of Understanding dated October 26, 2000 between the Company
and Mr. Allison. The 2004 Agreement was effective as of
Mr. Allisons retirement from the Company in December
2003. The Agreement provides that during Mr. Allisons
lifetime, he has the use of the Companys aircraft, or an
alternative aircraft for up to 200 hours annually. If the
Company no longer maintains an aircraft, the Company will
provide an annual payment sufficient to allow him to secure
comparable aircraft usage. In addition, the Agreement provides
that the Company will furnish Mr. Allison, during his
lifetime, office space, secretarial assistance, office utilities
and a monitored security system for his residence.
Director and Officer Indemnification Agreements
The Company has entered into indemnification agreements with its
directors and certain executive officers, in part to enable the
Company to attract and retain qualified directors and executive
officers. These agreements require the Company, among other
things, to indemnify such persons against certain liabilities
that may arise by reason of their status or service as directors
or officers, to advance their expenses for proceedings for which
they may be indemnified and to cover such person under any
directors and officers liability insurance policy
the Company may maintain from time to time. These agreements are
intended to provide indemnification rights to the fullest extent
permitted under applicable Delaware law and are in addition to
any other rights the Companys directors and executive
officers may have under the Companys restated certificate
of incorporation, bylaws and applicable law.
Performance Unit Agreements
On December 8, 2004 the Compensation and Benefits Committee
adopted a form of performance unit agreement under the
Companys 1999 Stock Incentive Plan. Under the form of
agreement, certain eligible executive officers may earn
performance units. Each performance unit represents
the value of one share of the Companys common stock.
Pursuant to the form of agreement, payout of performance units
is contingent upon the Companys achievement of certain
performance goals related to total shareholder return and
reserve replacement efficiency over a predetermined performance
period. Performance units earned for a given performance period
are issued to a participant only following the Compensation and
Benefits Committees review and certification of the actual
performance results for the applicable performance period. The
Compensation and Benefits Committee may pay out an award in
cash, shares of Company common stock, or a combination of both.
A participant will receive the target amount of
performance units in the event of death, disability, change of
control or involuntary termination, as those terms are defined
in the agreement. If a participant retires before the end of a
performance period and the performance goals for such
performance period are met, the participant will receive a pro
rata portion of the performance units for that period. If a
participant terminates for any other reason, the award will be
forfeited.
On December 6, 2005, the Compensation and Benefits
Committee adopted a form of performance unit agreement under the
Companys 1999 Stock Incentive Plan under the same terms
described above, except that (i) the agreement covers a
different performance period, and (ii) the Company expanded
eligibility under the performance unit agreement so that all
executive officers will be eligible to receive awards under the
performance unit agreement.
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Item 2 |
Approval of the Amendment of the Restated Certificate of
Incorporation |
On February 2, 2006, the Board voted to recommend to the
stockholders that the number of authorized shares of the
Companys Common Stock be increased from
450,000,000 shares to 1,000,000,000 shares in
connection with the Companys announced two-for-one stock
split. The stock split will be effected in the form of a stock
dividend of one share of Common Stock for each share of the
Companys Common Stock outstanding on May 12, 2006,
the record date for the stock split. The stock split is
conditioned upon approval by the stockholders of the proposed
amendment.
29
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Reasons for the Proposed Amendment |
As of February 28, 2006, 268,294,802 shares of Common
Stock, $0.10 par value, were issued, of which
233,810,607 shares were outstanding and
34,484,195 shares were held by the Company as treasury
shares. Additionally, approximately 12,572,694 shares were
reserved for issuance pursuant to director and employee stock
option, incentive and benefit plans. The current number of
authorized and unreserved shares of Common Stock is insufficient
to effect the stock split. Assuming the increase in the number
of authorized shares of Common Stock and the stock split were
effective on February 28, 2006, 467,621,214 shares
would be outstanding, 34,484,195 shares would be held by
the Company as treasury shares and 472,749,203 shares would
be authorized and available for issuance by the Company. The
Board is recommending increasing the number of authorized shares
of Common Stock to 1,000,000,000 shares in order to
(i) facilitate the currently proposed stock split, and
(ii) provide for the continued flexibility to issue Common
Stock for valid corporate purposes.
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Purpose of the Stock Split |
The proposed split of the Companys Common Stock is
intended to result in a trading range for the Companys
Common Stock that is more attractive to certain investors and
more consistent with that of the Companys peer group. The
closing price of the Companys Common Stock on the New York
Stock Exchange on February 28, 2006 was $99.16, and trading
prices in the month of February 2006 ranged from $97.06 to
$105.59. This trading range is higher than that of many other
major companies, including many in the Companys peer
group, and may be less attractive to certain investors.
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Stock Split Implementation |
If the proposed amendment is approved, holders of record of
Common Stock as of the close of business on the stock split
record date will receive, as a stock dividend, one additional
share of Common Stock for each share of Common Stock owned as of
that date. The stockholders of the Company as of the stock split
record date will not pay, and the Company will not receive, any
payment or other consideration for the additional shares that
will be issued or the adjustments that will be made pursuant to
the stock split. A stockholders equity interest in the
Company will not increase as a result of the stock split. The
Company will apply to the New York Stock Exchange for listing of
the additional shares of Common Stock to be issued if the
proposed amendment is approved.
Holders of Common Stock should retain their Common Stock
certificates issued before the stock split record date, and
those certificates issued prior to that date will continue to
represent the number of shares of Common Stock evidenced
thereby. Mellon Investor Services LLC, the Companys
transfer agent, will deliver the additional shares of Common
Stock that each holder of Common Stock is entitled to receive as
a result of the stock split registered in uncertificated
book-entry form (unless a holder of Common Stock requests a
certificate representing such holders shares of Common
Stock). As a result, instead of receiving Common Stock
certificates, holders of Common Stock will receive account
statements reflecting their ownership interest in shares of
Common Stock. The book-entry shares will be held with Mellon
Investor Services LLC, which will serve as the record keeper for
all shares of Common Stock being issued in connection with the
stock split. Any stockholder who wants to receive a physical
certificate evidencing shares of Common Stock issued in the
stock split will be able to obtain a certificate at no charge by
contacting Mellon Investor Services LLC at
(888) 470-5786.
Holders of Common Stock whose shares are held by a broker or
other nominee in street name also will not receive
certificates representing the new shares. Instead, their
accounts will be credited with the new shares in accordance with
the procedures used by their broker or nominee.
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Accounting Effects of the Proposed Stock Split |
If the proposed amendment is approved, an amount equal to the
par value of shares issued in the stock split will be
transferred from the Companys additional paid-in capital
account to its common stock account. The $0.10 par value of
the Common Stock will not change.
30
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Tax Effects of the Stock Split |
The Company has been advised that the proposed stock split will
result in no gain or loss or realization of taxable income to
owners of Common Stock under existing United States federal
income tax laws. The tax basis of each share of Common Stock
held immediately before the stock split will be allocated pro
rata between the original share and the new share of Common
Stock distributed with respect to the original share. Each new
share will be deemed to have been acquired at the same time as
the original share with respect to which the new share was
issued. The laws of jurisdictions other than the United States
may impose income taxes on the issuance of the additional
shares, and stockholders are urged to consult their own tax
advisers.
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Additional Effects of the Stock Split |
Upon completing the stock split, appropriate adjustments will be
made to stock options and other stock-based instruments awarded
and to be awarded under the Companys compensation,
incentive and benefit programs.
Under Delaware law, the Companys stockholders are not
entitled to dissenters rights with respect to the proposed
amendment to the Companys Restated Certificate of
Incorporation. Furthermore, the Companys stockholders do
not have preemptive rights, which means they do not have the
right to purchase shares in any future issuance of Common Stock
in order to maintain their proportionate equity interests in the
Company.
Although the Board will authorize the further issuance of Common
Stock after the stock split only when it considers such issuance
to be in the best interests of the Company, stockholders should
recognize that any such issuance of additional stock will have
the effect of diluting the earnings per share and book value per
share of outstanding shares of Common Stock and the equity and
voting rights of holders of shares of Common Stock.
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Recommendation of the Board |
The Board of Directors recommends that you vote
FOR the proposed amendment to the Companys
Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock to 1,000,000,000 shares
in connection with the Companys announced two-for-one
stock split.
Item 3 Ratification of the Appointment of
the Independent Auditor
The Audit Committee has appointed KPMG LLP, an independent
registered public accounting firm, to audit the Companys
financial statements for 2006. The management of the Company is
asking you to ratify that appointment.
The Board recommends that you vote FOR
ratification of the appointment of KPMG LLP to audit the
Companys financial statements for 2006. If the
stockholders do not ratify the appointment of KPMG LLP, the
Audit Committee will make the final determination of the
independent auditor for 2006.
STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING OF
STOCKHOLDERS
An eligible stockholder who wants to have a qualified proposal
considered for inclusion in the proxy statement for the 2007
Annual Meeting must notify the Corporate Secretary of the
Company no later than November 27, 2006 to be considered for
inclusion in the proxy statement and form of proxy relating to
the 2007 Annual Meeting. Under the Companys By-Laws, for
any stockholder proposal that is not included in the 2006 proxy
statement and form of proxy to be brought before the 2007 Annual
Meeting, such proposal must be received by the Corporate
Secretary of the Company at its principal executive offices as
more fully described in the Companys By-Laws.
31
INDEPENDENT AUDITOR
KPMG LLP, an independent registered public accounting firm,
served as the Companys independent auditor during 2005.
Representatives of KPMG LLP will be present at the meeting to
make a statement, if they desire to do so, and to respond to
appropriate questions from stockholders.
The following table presents fees for the audits of the
Companys annual consolidated financial statements for 2005
and 2004 and for other services provided by KPMG LLP.
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2005 | |
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2004 | |
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Audit Fees
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$ |
3,583,000 |
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$ |
4,624,000 |
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Audit-Related Fees
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566,000 |
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300,000 |
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Tax Fees
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520,000 |
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1,232,000 |
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All Other Fees
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0 |
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26,000 |
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Totals
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$ |
4,669,000 |
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$ |
6,182,000 |
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Audit fees are primarily for the audit of the Companys
consolidated financial statements including the audit of the
effectiveness of the Companys internal controls over
financial reporting and the reviews of the Companys
financial statements included in the
Form 10-Qs.
Audit-related fees are primarily for the audits of the
Companys benefit plans, other audits and certain financial
accounting consultation. Tax fees are primarily for tax planning
compliance and services including approximately $280,000 and
$400,000 in 2005 and 2004, respectively, for services related to
individual income tax services for Company employees in
connection with foreign assignments. All other fees generally
consist of assistance in preparing statutory filings in foreign
jurisdictions. The Audit Committee has concluded that the
provision of tax services is compatible with maintaining KPMG
LLPs independence.
The Audit Committee adopted a Pre-Approval Policy with respect
to services which may be performed by KPMG LLP. This policy
lists specific audit-related and tax services as well as any
other services that KPMG LLP is authorized to perform and sets
out specific dollar limits for each specific service, which may
not be exceeded without additional Audit Committee
authorization. The Audit Committee receives quarterly reports on
the status of expenditures pursuant to that Pre-Approval Policy.
The Audit Committee reviews the policy at least annually in
order to approve services and limits for the current year. Any
service that is not clearly enumerated in the policy must
receive specific pre-approval by the Audit Committee or by its
Chairman, to whom such authority has been conditionally
delegated, prior to engagement. During 2005, no fees for
services outside the scope of audit, review, or attestation that
exceed the waiver provisions of 17 CFR 210.2-01(c)(7)(i)(C)
were approved by the Audit Committee.
PROXY SOLICITATION
The Company pays for the cost of preparing, assembling and
mailing the material in connection with the solicitation of
proxies. The Company expects that the solicitation of proxies
will be primarily by mail but solicitations may also be made
personally or by telephone, email or facsimile by officers and
other employees of the Company without additional compensation.
The Company pays all costs of solicitation, including certain
expenses of brokers and nominees who mail proxy material to
their customers or principals. In addition, the Company has
engaged Morrow & Co., Inc. to assist in the
solicitation of proxies for this meeting at an estimated fee of
$10,000.00 plus disbursements.
32
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
In some cases, only one copy of this proxy statement or annual
report is being delivered to multiple stockholders sharing an
address unless we have received contrary instructions from one
or more of the stockholders. We will deliver promptly, upon
written or oral request, a separate copy of this proxy statement
or annual report to a stockholder at a shared address to which a
single copy of the document was delivered. To request separate
or multiple delivery of these materials now or in the future, a
stockholder may submit a written request to the Corporate
Secretary, Anadarko Petroleum Corporation, 1201 Lake
Robbins Drive, The Woodlands, Texas
77380-1046 or an oral
request by calling the Corporate Secretary at
(832) 636-1000.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Charlene A. Ripley |
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Vice President, General Counsel, |
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Corporate Secretary and Chief |
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Compliance Officer |
Dated: March 27, 2006
The Woodlands, Texas
See enclosed proxy card please vote
promptly
33
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THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS
INDICATED, WILL BE VOTED
FOR ITEMS 1, 2 AND 3.
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Please Mark Here
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for
Address Change or Comments |
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SEE REVERSE SIDE |
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The Board of Directors recommends |
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a vote FOR Items 1, 2 and 3. |
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WITHHELD |
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FOR |
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FOR ALL |
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FOR |
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AGAINST |
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ABSTAIN |
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ITEM
1. ELECTION OF DIRECTORS
Nominees: |
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ITEM 2. |
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APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION. |
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Each signatory to this proxy acknowledges receipt from Anadarko Petroleum
Corporation prior to execution
of this proxy of a Notice of
Annual Meeting of Stockholders and a Proxy Statement dated March 27, 2006.
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01 Robert J. Allison, Jr. and |
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FOR |
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AGAINST |
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ABSTAIN |
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02 John W. Poduska, Sr. |
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ITEM 3. |
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR. |
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WILL ATTEND |
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Withheld for the nominees you list below: (Write that
nominees name in the space provided below.) |
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If you plan to attend
the Annual Meeting,
please mark the WILL ATTEND box. |
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Choose
MLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements,
tax documents and more. Simply log on to Investor ServiceDirect® at www.melloninvestor.com/isd where step-by-step
instructions will prompt you through enrollment. |
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Signature
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Signature |
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Dated |
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, 2006 |
NOTE: Please sign as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
5 FOLD AND DETACH HERE 5
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet
and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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Internet
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Telephone
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Mail |
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http://www.proxyvoting.com/apc
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1-866-540-5760 |
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Mark, sign and date
your proxy card
and
return it in the
enclosed postage-paid
envelope. |
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Use the internet to vote your proxy.
Have your proxy card in hand when
you access the web site.
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OR
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Use any touch-tone telephone to vote
your proxy. Have your proxy card in
hand when you call.
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OR
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If you vote your proxy by Internet or by telephone,
you do
NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the internet at
www.anadarko.com
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ANADARKO PETROLEUM CORPORATION
The undersigned hereby appoints Robert J. Allison, Jr., James T. Hackett and Charlene
A. Ripley, and each of them, with power to act without the other and with power of
substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and
vote, as provided on the other side, all the shares of Anadarko Petroleum Corporation Common
Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such
other business as may properly come before the Annual Meeting of Stockholders of the company to
be held May 11, 2006 or at any adjournment or postponement thereof, with all powers which the
undersigned would possess if present at the Meeting.
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(Continued and to be marked, dated and signed, on the other side)
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Address Change/Comments (Mark the corresponding box on the reverse side) |
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5 FOLD AND DETACH HERE 5
You can now access your Anadarko Petroleum Corporation account online.
Access your Anadarko Petroleum Corporation shareholder account online via Investor
ServiceDirect® (ISD).
Mellon Investor Services LLC, Transfer Agent for Anadarko Petroleum Corporation, now makes it
easy and convenient to get current information on your shareholder account.
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View account status
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View payment history for dividends |
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View certificate history
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Make address changes |
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View book-entry information
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Obtain a duplicate 1099 tax form |
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Establish/change your PIN |
Visit us on the web at http://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect® is a registered trademark of Mellon Investor Services LLC