APACHE CORP
10-Qs and 10-Ks
PROXIES
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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[X]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2016
or
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number 1-4300
APACHE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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41-0747868
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400
(Address of principal executive offices)
Registrant’s telephone number, including area code
(713) 296-6000
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange
on which registered
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Common Stock, $0.625 par value
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New York Stock Exchange, Chicago Stock Exchange
and NASDAQ Global Select Market
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Apache Finance Canada Corporation
7.75% Notes Due 2029
Irrevocably and Unconditionally
Guaranteed by Apache Corporation
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.625 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [X] Accelerated filer[ ] Non-accelerated filer[ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [ ] No [X]
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Aggregate market value of the voting and non-voting common equity held by non-affiliates of registrant as of June 30, 2016
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$
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21,118,858,691
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Number of shares of registrant’s common stock outstanding as of January 31, 2017
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379,687,129
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Documents Incorporated By Reference
Portions of registrant’s proxy statement relating to registrant’s 2017 annual meeting of stockholders have been incorporated by reference in Part II and Part III of this annual report on Form 10-K.
TABLE OF CONTENTS
DESCRIPTION
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Item
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Page
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10.
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i
FORWARD-LOOKING STATEMENTS AND RISK
This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, the information that was used to prepare our estimate of proved reserves as of
December 31, 2016
, and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” or “continue” or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:
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the market prices of oil, natural gas, NGLs, and other products or services;
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our commodity hedging arrangements;
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the supply and demand for oil, natural gas, NGLs, and other products or services;
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production and reserve levels;
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drilling risks;
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economic and competitive conditions;
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the availability of capital resources;
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capital expenditure and other contractual obligations;
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currency exchange rates;
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weather conditions;
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inflation rates;
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the availability of goods and services;
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legislative, regulatory, or policy changes;
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terrorism or cyber attacks;
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occurrence of property acquisitions or divestitures;
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the integration of acquisitions;
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the securities or capital markets and related risks such as general credit, liquidity, market, and interest-rate risks; and
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other factors disclosed under Items 1 and 2—Business and Properties—Estimated Proved Reserves and Future Net Cash Flows, Item 1A—Risk Factors, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in this Form 10-K.
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All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.
ii
DEFINITIONS
All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this report. As used in this document:
“3-D” means three-dimensional.
“4-D” means four-dimensional.
“b/d” means barrels of oil or natural gas liquids per day.
“bbl” or “bbls” means barrel or barrels of oil or natural gas liquids.
“bcf” means billion cubic feet of natural gas.
“boe” means barrel of oil equivalent, determined by using the ratio of one barrel of oil or NGLs to six Mcf of gas.
“boe/d” means boe per day.
“Btu” means a British thermal unit, a measure of heating value.
“Liquids” means oil and natural gas liquids.
“LNG” means liquefied natural gas.
“Mb/d” means Mbbls per day.
“Mbbls” means thousand barrels of oil or natural gas liquids.
“Mboe” means thousand boe.
“Mboe/d” means Mboe per day.
“Mcf” means thousand cubic feet of natural gas.
“Mcf/d” means Mcf per day.
“MMbbls” means million barrels of oil or natural gas liquids.
“MMboe” means million boe.
“MMBtu” means million Btu.
“MMBtu/d” means MMBtu per day.
“MMcf” means million cubic feet of natural gas.
“MMcf/d” means MMcf per day.
“NGL” or “NGLs” means natural gas liquids, which are expressed in barrels.
“NYMEX” means New York Mercantile Exchange.
“oil” includes crude oil and condensate.
“PUD” means proved undeveloped.
“SEC” means United States Securities and Exchange Commission.
“Tcf” means trillion cubic feet of natural gas.
“U.K.” means United Kingdom.
“U.S.” means United States.
With respect to information relating to our working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by our working interest therein. Unless otherwise specified, all references to wells and acres are gross.
iii
PART I
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ITEMS 1 and 2.
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BUSINESS AND PROPERTIES
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General
Apache Corporation, a Delaware corporation formed in 1954, is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. Apache currently has exploration and production operations in four geographic areas: the United States (U.S.), Canada, Egypt, and offshore the United Kingdom (U.K.) in the North Sea. Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity.
Our common stock, par value $0.625 per share, has been listed on the New York Stock Exchange (NYSE) since 1969, on the Chicago Stock Exchange (CHX) since 1960, and on the NASDAQ Global Select Market (NASDAQ) since 2004. On May 31, 2016, we filed certifications of our compliance with the listing standards of the NYSE and the NASDAQ, including our principal executive officer’s certification of compliance with the NYSE standards. Through our website,
www.apachecorp.com
, you can access, free of charge, electronic copies of the charters of the committees of our Board of Directors, other documents related to our corporate governance (including our Code of Business Conduct and Governance Principles), and documents we file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as well as any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Included in our annual and quarterly reports are the certifications of our principal executive officer and our principal financial officer that are required by applicable laws and regulations. Access to these electronic filings is available as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. You may also request printed copies of our corporate charter, bylaws, committee charters, or other governance documents free of charge by writing to our corporate secretary at the address on the cover of this report. Our reports filed with the SEC are made available to read and copy at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C., 20549. You may obtain information about the Public Reference Room by contacting the SEC at 1-800-SEC-0330. Reports filed with the SEC are also made available on its website at
www.sec.gov
. From time to time, we also post announcements, updates, and investor information on our website in addition to copies of all recent press releases. Information on our website or any other website is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K.
Properties to which we refer in this document may be held by subsidiaries of Apache Corporation. References to “Apache” or the “Company” include Apache Corporation and its consolidated subsidiaries unless otherwise specifically stated.
During the second quarter of 2016, Apache changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method of accounting. Financial information for all periods has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements under Part IV, Item 15 of this Form 10-K.
During 2015, Apache sold its Australia LNG business and oil and gas assets. During 2014, Apache sold its operations in Argentina. Results of operations and cash flows from operations for Argentina and Australia are reflected as discontinued operations in the Company’s financial statements for all periods presented. Certain historical information has been recast to reflect the results of operations for Argentina and Australia as discontinued operations.
Business Strategy
Apache’s mission is to grow a profitable exploration and production company in a safe and environmentally responsible manner for the long-term benefit of our shareholders. Apache’s long-term perspective has many dimensions, which are centered on the following core strategic components:
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rigorous portfolio management
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conservative capital structure
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optimization of returns
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Rigorous management of the Company’s asset portfolio plays a key role in optimizing shareholder value over the long-term. The Company has monetized certain capital intensive projects that were not accretive to earnings in the near-term and other non-strategic assets. These divestitures over the past few years included selling Apache’s interest in LNG projects in Australia and Canada, all of its exploration and production operations in Australia and Argentina, mature assets offshore in the Gulf of Mexico, and various leasehold areas in North America onshore plays where the Company made strategic decisions to allocate resources to other, more impactful development opportunities.
1
Preserving financial flexibility is also key to the Company’s business philosophy. In response to the significant decline in commodity prices that began in 2014, Apache immediately took proactive measures to reduce activity levels and bring costs in alignment with activity levels, while taking concrete steps to cut overhead, operating, and drilling costs. The Company allocated a portion of its reduced overall capital spend in North America for strategic testing and completion optimization, which resulted in significant expansion of our economic drilling inventory and improved well performance. In addition, the Company completed confirmation testing and initiated a delineation program that confirmed a significant exploration discovery in the Delaware Basin, “Alpine High.”
For a more in-depth discussion of the Company’s
Alpine High discovery, please refer to the Permian region discussion. For a more in-depth discussion of the Company’s
divestitures, strategy, 2016 results, and its capital resources and liquidity, please see Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.
Geographic Area Overviews
Apache has exploration and production interests in four geographic areas: the United States (U.S.), Canada, Egypt, and the United Kingdom (U.K.) North Sea. Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity.
The following table sets out a brief comparative summary of certain key
2016
data for each of Apache’s operating areas. Additional data and discussion is provided in Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.
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Production
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Percentage
of Total
Production
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Production
Revenue
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Year-End
Estimated
Proved
Reserves
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Percentage
of Total
Estimated
Proved
Reserves
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Gross
Wells
Drilled
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Gross
Productive
Wells
Drilled
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(In MMboe)
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(In millions)
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(In MMboe)
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United States
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82.0
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43
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%
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$
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1,997
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733
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56
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%
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168
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161
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Canada
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21.7
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11
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343
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175
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13
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17
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15
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Total North America
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103.7
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54
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2,340
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908
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69
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185
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176
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Egypt
(1)
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62.3
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33
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2,057
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280
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21
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61
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54
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North Sea
(2)
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25.0
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13
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970
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123
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10
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14
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10
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Total International
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87.3
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46
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3,027
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403
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31
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75
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64
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Total
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191.0
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100
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%
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$
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5,367
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1,311
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100
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%
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260
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240
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(1)
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Apache's operations in Egypt, excluding a one-third noncontrolling interest, contributed
24 percent
of
2016
production and accounted for
15 percent
of year-end estimated proved reserves and
28 percent
of estimated discounted future net cash flows.
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(2)
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Average sales volumes from the North Sea for 2016 were
24.5
MMboe. Sales volumes may vary from production volumes as a result of the timing of liftings in the Beryl field.
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North America
In 2016, Apache’s North American operations contributed approximately 54 percent of production and 69 percent of estimated year-end proved reserves. Apache has access to significant liquid hydrocarbons across its 11.3 million gross acres in North America, 59 percent of which is undeveloped.
2
In North America Apache has three onshore regions:
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The Permian region located in West Texas and New Mexico includes the Permian sub-basins, the Midland Basin, Central Basin Platform/Northwest Shelf, and Delaware Basin. Examples of shale plays within this region include the Woodford, Barnett, Pennsylvanian, Cline, Wolfcamp, Bone Spring, and Spraberry.
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The Midcontinent/Gulf Coast region (formerly Gulf Coast and Central regions) includes the Granite Wash, Tonkawa, Canyon Lime, Marmaton, and Cleveland formations of the West Anadarko Basin, the Woodford-SCOOP and Stack plays located in Central Oklahoma, and the Eagle Ford shale in South East Texas.
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The Canada region has exploration and production operations in the provinces of British Columbia, Alberta, and Saskatchewan. Current drilling activities are primarily focused in the Duvernay and Montney shale plays.
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Apache also has one offshore region in North America, the Gulf of Mexico region, which consists of both shallow and deep water exploration and production activities.
Permian Region
The Permian region is one of Apache’s core growth areas. Highlights of the Company’s operations in the region include:
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Over 3.1 million gross acres with exposure to numerous plays focused primarily in the Midland Basin, the Central Basin Platform/Northwest Shelf, and the Delaware Basin.
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Estimated proved reserves of 611 MMboe at year-end 2016, representing 47 percent of the Company’s worldwide reserves.
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Annual production decline of only
4 percent
, despite operating an average rig count of 5, down from 12 rigs in 2015 and 40 rigs in 2014. The reduced rig count reflected the Company’s decisive action to curtail capital spending in response to continued weakness in commodity prices until commodity prices and costs come into better equilibrium.
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In 2016, the Permian region drilled or participated in 132 wells, 96 of which were horizontal, with a 96 percent success rate.
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In September 2016, after more than two years of extensive geological and geophysical work, methodical acreage accumulation, and strategic testing and delineation drilling, Apache announced the discovery of a significant new resource play, “Alpine High.” Apache’s Alpine High acreage lies in the southern portion of the Delaware Basin, primarily in Reeves County, Texas. The Company has established an acreage position of over 320,000 contiguous net acres, which it acquired at an attractive average cost of approximately $1,300 per acre. Since first announcing the Alpine High last September, the Company has made substantial progress further delineating the opportunity. The Company has confirmed an extensive play fairway which spans 55 miles and a 5,000-foot vertical column encompassing five geologic formations, with multiple target zones spanning the hydrocarbon phase window from dry gas to wet gas to oil. We have recently identified an additional landing zone in the Woodford formation, and confirmed production from the Pennsylvanian. Based on these results, Apache now believes the drilling locations at Alpine High will exceed the 2,000 to 3,000 previously announced. During 2017, we expect to average 4 to 6 drilling rigs at Alpine High. A second hydraulic fracturing crew was added at the start of the year to accelerate completions and data collection. Using data collected from strategic testing and delineation drilling, the Company is now beginning to optimize wells drilled in Alpine High using customized targeting, larger fracs, and longer laterals. Combined with multi-well pad drilling, the Company believes these measures contribute to the optimized development of the area to maximize economic value. The field is expected to have low levels of water production which will also have a positive impact on long-term economics. We are currently installing the infrastructure, which will allow gas sales from the field around mid-year 2017.
In addition to activity in Alpine High, the Permian region drilled or participated in over 110 wells in 2016, with a 100 percent success rate. In the Midland Basin, where Apache holds approximately 443,000 net acres, activity was focused on stratigraphic and development pad drilling of the Wolfcamp and Spraberry shale formations in the Wildfire, Powell, and Azalea areas. Activity in Midland Basin has been significantly increased in 2017: the region has increased the rig count to five, compared to an average of one in 2016. The additional rigs will be dedicated to long-term pad development drilling. The Company’s assets in the Central Basin Platform/Northwest Shelf span 739,000 net acres. The Yeso play was the primary focus of 2016 development activities in this area. In the Delaware Basin, Apache holds approximately 392,000 net acres. In addition to drilling and development activities at Alpine High, the Company targeted plays in the Bone Spring and Wolfcamp plays.
3
Apache plans to significantly increase activity in the Permian region during 2017, while continuing to balance capital investments between its larger development project at Alpine High and focused exploration and development programs on other core assets in its Permian region. During 2017, the Company expects to average 15 drilling rigs in the Permian Basin and drill approximately 250 wells, which includes a four to six rig delineation drilling program at Alpine High. The Company plans to allocate approximately two-thirds of its 2017 capital budget to the Permian region.
Midcontinent/Gulf Coast Region
As part of Apache’s 2015 strategic efforts to reduce its operating cost structure, the Company combined the Midcontinent (formerly Central region) and Gulf Coast regions. Apache’s Midcontinent/Gulf Coast region includes 2.6 million gross acres and over 3,200 producing wells primarily in western Oklahoma, the Texas Panhandle and south Texas. In 2016, the region accounted for 11 percent of the Company’s production and approximately 9 percent of the Company’s year-end estimated proved reserves.
In
2016
, Apache drilled or participated in drilling 35 wells with a 94 percent success rate. Activity was focused primarily in the Woodford-SCOOP and Canyon Lime formations. In 2017, Apache plans to run a targeted program, drilling four wells in the Woodford-SCOOP play. In addition, the region will continue its focus on high grading acreage and building its inventory of future drilling locations.
Canada Region
Apache holds 3.5 million gross acres across the provinces of British Columbia, Alberta, and Saskatchewan. The region’s large acreage position provides significant drilling opportunities and portfolio diversification with exposure to oil, gas, and liquids rich fairways. The Canadian region provided approximately
11 percent
of Apache’s
2016
worldwide production and 175 MMboe of estimated proved reserves at year-end.
In
2016
, Apache drilled or participated in drilling 17 wells in the region with an 88 percent success rate. Drilling operations primarily focused on the Wapiti Montney, Ante Creek Montney, Duvernay, and Glauconite plays. In 2017, the Company expects to drill 10 wells: a six-well pad in the Duvernay play, three wells in the Wapiti Montney play, and one exploratory well in the East Shale Basin.
Gulf of Mexico Region
The Gulf of Mexico region comprises assets in the offshore waters of the Gulf of Mexico and onshore Louisiana. In addition to its interest in several deepwater exploration and development offshore leases, when the Company sold substantially all of its offshore assets in water depths less than 1,000 feet, it retained a 50 percent ownership interest in all exploration blocks and in horizons below production in development blocks, and access to existing infrastructure. Apache’s offshore technical teams continue to focus on evaluating subsalt and other deeper exploration opportunities in water depths less than 1,000 feet, which have been relatively untested by the industry, where high-potential deep hydrocarbon plays may exist. During 2016, Apache’s Gulf of Mexico region contributed 7.7 Mboe/d to the Company’s total production. During 2017, the Company expects to participate in one non-operated exploration well.
North America Marketing
In general, most of the Company’s North American gas is sold at either monthly or daily market prices. The Company also occasionally enters into fixed physical sales contracts for durations of up to one year. These physical sales volumes are typically sold at fixed prices over the term of the contract. Natural gas is sold primarily to local distribution companies (LDCs), utilities, end-users, marketers, and integrated major oil companies. Apache strives to maintain a diverse client portfolio, which is intended to reduce the concentration of credit risk.
Apache primarily markets its North American crude oil to integrated major oil companies, marketing and transportation companies, and refiners based on a West Texas Intermediate (WTI) price, adjusted for quality, transportation, and a market-reflective differential.
In the U.S., Apache’s objective is to maximize the value of crude oil sold by identifying the best markets and most economical transportation routes available to move the product. Sales contracts are generally 30-day evergreen contracts that renew automatically until canceled by either party. These contracts provide for sales that are priced daily at prevailing market prices. Also, from time to time, the Company will enter into physical term sales contracts for durations up to five years. These term contracts typically have a firm transport commitment and often provide for the higher of prevailing market prices from multiple market hubs.
In Canada, crude is transported by pipeline or truck within Western Canada to market hubs in Alberta and Manitoba where it is sold, allowing for a more diversified group of purchasers and a higher netback price. The Company evaluates its transport options monthly to maximize its netback prices.
Apache’s NGL production is sold under contracts with prices based on local supply and demand conditions, less the costs for transportation and fractionation, or on a weighted-average sales price received by the purchaser.
4
International
In
2016
, international assets contributed
46 percent
of Apache’s production and
56 percent
of oil and gas revenues. Approximately
31 percent
of estimated proved reserves at year-end were located outside North America.
Apache has two international regions:
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The Egypt region includes onshore conventional assets in Egypt’s Western Desert.
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The North Sea region includes offshore assets based in the United Kingdom.
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The Company also has an offshore exploration program in Suriname.
Egypt
Apache’s Egypt operations are conducted pursuant to production sharing contracts (PSCs). Under the terms of the Company’s PSCs, the contractor partners (Contractor) bears the risk and cost of exploration, development, and production activities. In return, if exploration is successful, the Contractor receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of production after cost recovery. Additionally, the Contractor’s income taxes, which remain the liability of the Contractor under domestic law, are paid by Egyptian General Petroleum Corporation (EGPC) on behalf of the Contractor out of EGPC’s production entitlement. Income taxes paid to the Arab Republic of Egypt on behalf of the Contractor are recognized as oil and gas sales revenue and income tax expense and reflected as production and estimated reserves. Because Contractor cost recovery entitlement and income taxes paid on its behalf are determined as a monetary amount, the quantities of production entitlement and estimated reserves attributable to these monetary amounts will fluctuate with commodity prices. In addition, because the Contractor income taxes are paid by EGPC, the amount of the income tax has no economic impact on Apache’s Egypt operations despite impacting Apache’s production and reserves. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) holds a one-third minority participation interest in Apache’s oil and gas operations in Egypt.
Apache has 21 years of exploration, development and operations experience in Egypt and is one of the largest acreage holders in Egypt’s Western Desert. At year-end 2016, the Company held 4.8 million gross acres in 23 separate concessions. Development leases within concessions currently have expiration dates ranging from 4 to 20 years, with extensions possible for additional commercial discoveries or on a negotiated basis. Approximately 63 percent of the Company’s acreage in Egypt is undeveloped, providing us with considerable exploration and development opportunities for the future. In December 2016, the Company was notified by the Egyptian Ministry that it was the successful bidder in two new concessions, which will add an additional 1.6 million gross undeveloped acres to its portfolio. Apache anticipates these concessions will be signed into law mid-2017.
The Company’s estimated proved reserves in Egypt are reported under the economic interest method and exclude the host country’s share of reserves. The Egypt region, including the one-third noncontrolling interest, contributed
33 percent
of
2016
production,
21 percent
of year-end estimated proved reserves, and
37 percent
of estimated discounted future net cash flows. Excluding the noncontrolling interest, Egypt contributed
24 percent
of
2016
production,
15 percent
of year-end estimated proved reserves, and
28 percent
of estimated discounted future net cash flows.
While Apache has historically been one of the most active drillers in the Western Desert, activity has been curtailed for the past several years in response to weak oil prices. In 2016, the region drilled 47 development and 14 exploration wells. Approximately 57 percent of the exploration wells were successful, further expanding Apache’s presence in the westernmost concessions and unlocking additional opportunities in existing plays. A key component of the region’s success has been the ability to acquire and evaluate 3-D seismic surveys that enable Apache’s technical teams to consistently high-grade existing prospects and identify new targets across multiple pay horizons in the Cretaceous, Jurassic, and deeper Paleozoic formations.
In 2017, Apache plans to operate 8 to 10 drilling rigs and drill approximately 90 to 100 wells. In addition, Apache will initiate a large, continuous 3-D seismic survey program to support development on its existing acreage and exploration on its new concessions. The program will provide newer vintage, higher resolution imaging of the substrata across Apache’s Western Desert position, allowing Apache to build and high-grade its drilling inventory.
Egypt Marketing
Apache’s gas production in Egypt is sold to EGPC primarily under an industry-pricing formula, a sliding scale based on Dated Brent crude oil with a minimum of $1.50 per MMBtu and a maximum of $2.65 per MMBtu, plus an upward adjustment for liquids content. The region averaged
$2.71
per Mcf in
2016
.
Oil production is sold to third parties in the export market or to EGPC when called upon to supply domestic demand. Oil production sold to third parties is exported from or sold at one of two terminals on the northern coast of Egypt. Oil production sold to EGPC is sold at prices equivalent to the export market
.
5
North Sea
Apache has interests in approximately 380,000 gross acres in the U.K. North Sea. The region contributed 13 percent of Apache’s 2016 production and approximately 10 percent of year-end estimated proved reserves.
Apache entered the North Sea in 2003 after acquiring an approximate 97 percent working interest in the Forties field (Forties). Since acquiring Forties, Apache has actively invested in the region and has established a large inventory of drilling prospects through successful exploration programs and the interpretation of acquired 3-D and 4-D seismic data. Building upon its success in Forties, in 2011 Apache acquired Mobil North Sea Limited, providing the region with additional exploration and development opportunities across numerous fields, including operated interests in the Beryl, Nevis, Nevis South, Skene, and Buckland fields and non-operated interests in the Maclure and Nelson field. The Beryl field, which is a geologically complex area with multiple fields and stacked pay potential, provides for significant exploration opportunity. The North Sea region plays a strategic role in Apache’s portfolio by providing competitive investment opportunities and potential reserve upside with high-impact exploration potential.
During the year, the region drilled 12 development wells with an 83 percent success rate: six at Forties, five at Beryl, and one at Aviat. In addition, it drilled or participated in three exploration wells with a 33 percent success rate. The Storr discovery, an exploration prospect targeting the Beryl and Nansen sands, encountered hydrocarbons in two separate fault blocks. The region is evaluating a development plan for the Storr discovery. Apache holds a 55 percent working interest in the prospect.
Apache progressed the development of the 2015 Callater (formerly K) exploration discovery in the Beryl area, with first production projected in the second half of 2017. Initial production is expected at 20,000 boe/d on a gross basis. Apache plans to drill two additional wells in the second half of the year. Apache holds a 55 percent working interest in Callater, and operates the field. The region also continued to assess development plans for two earlier exploration discoveries, Seagull and Corona, in which Apache holds 35 and 100 percent interests, respectively.
Also during the year, Apache completed the Aviat gas-for-power project at Forties. This project enables a switch from diesel to natural gas to power the Forties field. The use of natural gas to power the field will extend the economic life, lower operating costs, and reduce certain reliability and safety risks associated with bunkering diesel. Annual fuel and other savings are projected at $15 million.
In 2017, Apache currently plans to operate an average of three rigs in the North Sea region, two platform rigs (one at Forties and one at Beryl) and two semi-submersible rigs on rig-sharing agreements, and drill 15 to 16 wells.
North Sea Marketing
Apache has traditionally sold its North Sea crude oil under term contracts, with a market-based index price plus a premium, which reflects the higher market value for term arrangements.
Natural gas from the Beryl field is processed through the SAGE gas plant operated by Apache. The gas is sold to a third party at the St. Fergus entry point of the national grid on a National Balancing Point index price basis. The condensate mix from the SAGE plant is processed further downstream. The split streams of propane and butane are sold on a monthly entitlement basis, and condensate is sold on a spot basis at the Braefoot Bay terminal using index pricing less transportation.
Australia/Argentina
During the second quarter of 2015, Apache completed the sale of its Australian LNG business and oil and gas assets. In March 2014, Apache completed the sale of all of its operations in Argentina. Results of operations and consolidated cash flows for the divested Australia assets and Argentina operations are reflected as discontinued operations in the Company’s financial statements for all periods presented in this Annual Report on Form 10-K.
Other Exploration
New Ventures
Apache’s global New Ventures team provides exposure to new growth opportunities by looking outside of the Company’s traditional core areas and targeting higher-risk, higher-reward exploration opportunities located in frontier basins as well as new plays in more mature basins. Plans for 2017 include continued analysis and review of the Company’s deepwater prospects in offshore Suriname, including fully processing the data set from its 3-D seismic shoot completed in the third quarter of 2016. Apache will begin drilling an exploration well in the first quarter of 2017.
Major Customers
In 2016 and 2015, purchases by China Petroleum & Chemical Corporation and its subsidiaries accounted for
21 percent
and
12 percent
, respectively, of the Company’s worldwide oil and gas production revenues. In 2016 and 2015, purchases by Egyptian General Petroleum Company and its subsidiaries accounted for
12 percent
and
11 percent
, respectively, of the Company’s worldwide oil and gas production revenues. In
2015
and
2014
, purchases by Royal Dutch Shell plc and its subsidiaries accounted for
11 percent
and
19 percent
, respectively, of the Company’s worldwide oil and gas production revenues.
6
Drilling Statistics
Worldwide in
2016
, Apache participated in drilling 260 gross wells, with 240 (92 percent) completed as producers. Historically, Apache’s drilling activities in the U.S. have generally concentrated on exploitation and extension of existing producing fields rather than exploration. As a general matter, Apache’s operations outside of North America focus on a mix of exploration and development wells. In addition to Apache’s completed wells, at year-end a number of wells had not yet reached completion: 70 gross (33.7 net) in the U.S., 14 gross (14 net) in Egypt, and 5 gross (3.1 net) in the North Sea.
The following table shows the results of the oil and gas wells drilled and completed for each of the last three fiscal years:
|
|
Net Exploratory
|
Net Development
|
Total Net Wells
|
||||||||||||||||||||||||
|
|
Productive
|
Dry
|
Total
|
Productive
|
Dry
|
Total
|
Productive
|
Dry
|
Total
|
||||||||||||||||||
|
2016
|
|||||||||||||||||||||||||||
|
United States
|
18.9
|
|
5.0
|
|
23.9
|
|
79.5
|
|
1.9
|
|
81.4
|
|
98.4
|
|
6.9
|
|
105.3
|
|
|||||||||
|
Canada
|
—
|
|
2.0
|
|
2.0
|
|
10.2
|
|
—
|
|
10.2
|
|
10.2
|
|
2.0
|
|
12.2
|
|
|||||||||
|
Egypt
|
7.3
|
|
5.1
|
|
12.4
|
|
40.5
|
|
1.0
|
|
41.5
|
|
47.8
|
|
6.1
|
|
53.9
|
|
|||||||||
|
North Sea
|
—
|
|
0.9
|
|
0.9
|
|
8.2
|
|
1.6
|
|
9.8
|
|
8.2
|
|
2.5
|
|
10.7
|
|
|||||||||
|
Total
|
26.2
|
|
13.0
|
|
39.2
|
|
138.4
|
|
4.5
|
|
142.9
|
|
164.6
|
|
17.5
|
|
182.1
|
|
|||||||||
|
2015
|
|||||||||||||||||||||||||||
|
United States
|
14.7
|
|
8.0
|
|
22.7
|
|
289.0
|
|
5.3
|
|
294.3
|
|
303.7
|
|
13.3
|
|
317.0
|
|
|||||||||
|
Canada
|
4.0
|
|
—
|
|
4.0
|
|
16.7
|
|
—
|
|
16.7
|
|
20.7
|
|
—
|
|
20.7
|
|
|||||||||
|
Egypt
|
13.4
|
|
8.6
|
|
22.0
|
|
82.3
|
|
3.0
|
|
85.3
|
|
95.7
|
|
11.6
|
|
107.3
|
|
|||||||||
|
North Sea
|
1.6
|
|
0.7
|
|
2.3
|
|
15.9
|
|
3.5
|
|
19.4
|
|
17.5
|
|
4.2
|
|
21.7
|
|
|||||||||
|
Other International
|
—
|
|
0.5
|
|
0.5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
0.5
|
|
0.5
|
|
|||||||||
|
Total
|
33.7
|
|
17.8
|
|
51.5
|
|
403.9
|
|
11.8
|
|
415.7
|
|
437.6
|
|
29.6
|
|
467.2
|
|
|||||||||
|
2014
|
|||||||||||||||||||||||||||
|
United States
|
18.5
|
|
6.4
|
|
24.9
|
|
781.5
|
|
10.1
|
|
791.6
|
|
800.0
|
|
16.5
|
|
816.5
|
|
|||||||||
|
Canada
|
1.0
|
|
1.0
|
|
2.0
|
|
83.9
|
|
2.0
|
|
85.9
|
|
84.9
|
|
3.0
|
|
87.9
|
|
|||||||||
|
Egypt
|
18.6
|
|
22.8
|
|
41.4
|
|
143.3
|
|
9.9
|
|
153.2
|
|
161.9
|
|
32.7
|
|
194.6
|
|
|||||||||
|
Australia
|
1.6
|
|
1.7
|
|
3.3
|
|
2.9
|
|
—
|
|
2.9
|
|
4.5
|
|
1.7
|
|
6.2
|
|
|||||||||
|
North Sea
|
—
|
|
—
|
|
—
|
|
17.6
|
|
1.1
|
|
18.7
|
|
17.6
|
|
1.1
|
|
18.7
|
|
|||||||||
|
Argentina
|
—
|
|
—
|
|
—
|
|
1.0
|
|
—
|
|
1.0
|
|
1.0
|
|
—
|
|
1.0
|
|
|||||||||
|
Total
|
39.7
|
|
31.9
|
|
71.6
|
|
1,030.2
|
|
23.1
|
|
1,053.3
|
|
1,069.9
|
|
55.0
|
|
1,124.9
|
|
|||||||||
Productive Oil and Gas Wells
The number of productive oil and gas wells, operated and non-operated, in which the Company had an interest as of
December 31, 2016
, is set forth below:
|
|
Oil
|
Gas
|
Total
|
|||||||||||||||
|
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||
|
United States
|
13,716
|
|
8,936
|
|
3,192
|
|
1,581
|
|
16,908
|
|
10,517
|
|
||||||
|
Canada
|
1,786
|
|
795
|
|
2,313
|
|
1,873
|
|
4,099
|
|
2,668
|
|
||||||
|
Egypt
|
1,135
|
|
1,072
|
|
120
|
|
116
|
|
1,255
|
|
1,188
|
|
||||||
|
North Sea
|
158
|
|
119
|
|
25
|
|
16
|
|
183
|
|
135
|
|
||||||
|
Total
|
16,795
|
|
10,922
|
|
5,650
|
|
3,586
|
|
22,445
|
|
14,508
|
|
||||||
|
Domestic
|
13,716
|
|
8,936
|
|
3,192
|
|
1,581
|
|
16,908
|
|
10,517
|
|
||||||
|
Foreign
|
3,079
|
|
1,986
|
|
2,458
|
|
2,005
|
|
5,537
|
|
3,991
|
|
||||||
|
Total
|
16,795
|
|
10,922
|
|
5,650
|
|
3,586
|
|
22,445
|
|
14,508
|
|
||||||
Gross natural gas and crude oil wells include 640 wells with multiple completions.
7
Production, Pricing, and Lease Operating Cost Data
The following table describes, for each of the last three fiscal years, oil, NGL, and gas production volumes, average lease operating costs per boe (including transportation costs but excluding severance and other taxes), and average sales prices for each of the countries where the Company has operations:
|
|
Production
|
Average Lease
Operating
Cost per Boe
|
Average Sales Price
|
||||||||||||||||||||||
|
Oil
|
NGL
|
Gas
|
Oil
|
NGL
|
Gas
|
||||||||||||||||||||
|
Year Ended December 31,
|
(MMbbls)
|
(MMbbls)
|
(Bcf)
|
(Per bbl)
|
(Per bbl)
|
(Per Mcf)
|
|||||||||||||||||||
|
2016
|
|||||||||||||||||||||||||
|
United States
|
38.0
|
|
19.8
|
|
145.0
|
|
$
|
7.72
|
|
$
|
39.43
|
|
$
|
9.28
|
|
$
|
2.17
|
|
|||||||
|
Canada
|
4.8
|
|
2.1
|
|
88.8
|
|
11.52
|
|
37.62
|
|
8.15
|
|
1.64
|
|
|||||||||||
|
Egypt
(1)
|
37.9
|
|
0.4
|
|
143.4
|
|
7.86
|
|
43.66
|
|
28.68
|
|
2.71
|
|
|||||||||||
|
North Sea
(2)
|
20.0
|
|
0.6
|
|
26.3
|
|
13.14
|
|
42.93
|
|
24.20
|
|
4.51
|
|
|||||||||||
|
Total
|
100.7
|
|
22.9
|
|
403.5
|
|
8.90
|
|
41.63
|
|
9.92
|
|
2.40
|
|
|||||||||||
|
2015
|
|||||||||||||||||||||||||
|
United States
|
45.1
|
|
19.7
|
|
160.6
|
|
$
|
8.81
|
|
$
|
45.71
|
|
$
|
9.72
|
|
$
|
2.38
|
|
|||||||
|
Canada
|
5.8
|
|
2.2
|
|
100.3
|
|
13.46
|
|
42.33
|
|
5.52
|
|
2.41
|
|
|||||||||||
|
Egypt
(1)
|
33.1
|
|
0.4
|
|
134.8
|
|
10.11
|
|
50.97
|
|
30.97
|
|
2.91
|
|
|||||||||||
|
North Sea
|
21.7
|
|
0.4
|
|
23.7
|
|
13.74
|
|
51.26
|
|
26.53
|
|
6.73
|
|
|||||||||||
|
Total
|
105.7
|
|
22.7
|
|
419.4
|
|
10.40
|
|
48.31
|
|
9.98
|
|
2.80
|
|
|||||||||||
|
2014
|
|||||||||||||||||||||||||
|
United States
|
48.7
|
|
21.5
|
|
215.8
|
|
$
|
9.55
|
|
$
|
87.33
|
|
$
|
25.57
|
|
$
|
4.33
|
|
|||||||
|
Canada
|
6.4
|
|
2.3
|
|
117.8
|
|
17.90
|
|
83.57
|
|
33.61
|
|
4.07
|
|
|||||||||||
|
Egypt
(1)
|
33.0
|
|
0.2
|
|
146.5
|
|
9.37
|
|
97.06
|
|
51.60
|
|
2.96
|
|
|||||||||||
|
North Sea
|
22.2
|
|
0.5
|
|
20.5
|
|
17.30
|
|
95.53
|
|
59.42
|
|
8.29
|
|
|||||||||||
|
Total
|
110.3
|
|
24.5
|
|
500.6
|
|
11.51
|
|
91.66
|
|
27.28
|
|
4.03
|
|
|||||||||||
|
(1)
|
Includes production volumes attributable to a one-third noncontrolling interest in Egypt.
|
|
(2)
|
Average sales volumes from the North Sea for 2016 were
24.5
MMboe. Sales volumes may vary from production volumes as a result of the timing of liftings in the Beryl field.
|
Gross and Net Undeveloped and Developed Acreage
The following table sets out Apache’s gross and net acreage position as of
December 31, 2016
, in each country where the Company has operations:
|
|
Undeveloped Acreage
|
Developed Acreage
|
||||||||||
|
|
Gross Acres
|
Net Acres
|
Gross Acres
|
Net Acres
|
||||||||
|
|
(in thousands)
|
|||||||||||
|
United States
|
5,739
|
|
2,697
|
|
2,057
|
|
1,134
|
|
||||
|
Canada
|
948
|
|
740
|
|
2,554
|
|
1,857
|
|
||||
|
Egypt
|
3,007
|
|
2,616
|
|
1,758
|
|
1,657
|
|
||||
|
North Sea
|
230
|
|
139
|
|
150
|
|
115
|
|
||||
|
Total
|
9,924
|
|
6,192
|
|
6,519
|
|
4,763
|
|
||||
As of
December 31, 2016
, Apache had 1.2 million net undeveloped acres scheduled to expire by year-end 2017 if production is not established or Apache takes no other action to extend the terms. Additionally, Apache has 668,000 and 854,000 net undeveloped acres set to expire in 2018 and 2019, respectively. The Company strives to extend the terms of many of these licenses and concession areas through operational or administrative actions, but cannot assure that such extensions can be achieved on an economic basis or otherwise on terms agreeable to both the Company and third parties, including governments.
8
Exploration concessions in Apache’s Egypt region comprise a significant portion of Apache’s net undeveloped acreage expiring over the next three years. Apache has 0.7 million, 0.4 million, and 0.6 million net undeveloped acres set to expire in 2017, 2018, and 2019, respectively. Apache will continue to pursue acreage extensions in areas in which it believes exploration opportunities exist. There were no reserves recorded on this undeveloped acreage. Separately, Apache was awarded the NW Razzak and South Alam El Shawish concession blocks in December 2016. The agreements are currently progressing and formal approval and signing of the agreements by Apache, EGPC, and the Ministry of Petroleum is expected to occur by the summer of 2017. Combined, the two concessions are expected to add approximately 1.6 million of undeveloped gross acres in Egypt in 2017.
As of
December 31, 2016
, 34 percent of U.S. net undeveloped acreage and 44 percent of Canadian net undeveloped acreage was held by production.
In addition, Apache has exploration interests in Suriname consisting of 1.8 million net undeveloped acreage in two blocks set to expire in 2017 and 2018. Apache will commence drilling operations on a commitment well in 2017, and will determine a course of action based on the results of drilling tests. No reserves have been booked on this undeveloped acreage.
Estimated Proved Reserves and Future Net Cash Flows
Proved oil and gas reserves are those quantities of natural gas, crude oil, condensate, and NGLs, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Estimated proved developed oil and gas reserves can be expected to be recovered through existing wells with existing equipment and operating methods. The Company reports all estimated proved reserves held under production-sharing arrangements utilizing the “economic interest” method, which excludes the host country’s share of reserves.
Estimated reserves that can be produced economically through application of improved recovery techniques are included in the “proved” classification when successful testing by a pilot project or the operation of an active, improved recovery program using reliable technology establishes the reasonable certainty for the engineering analysis on which the project or program is based. Economically producible means a resource that generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. Reasonable certainty means a high degree of confidence that the quantities will be recovered. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field-tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. In estimating its proved reserves, Apache uses several different traditional methods that can be classified in three general categories: (1) performance-based methods; (2) volumetric-based methods; and (3) analogy with similar properties. Apache will, at times, utilize additional technical analysis, such as computer reservoir models, petrophysical techniques, and proprietary 3-D seismic interpretation methods, to provide additional support for more complex reservoirs. Information from this additional analysis is combined with traditional methods outlined above to enhance the certainty of our reserve estimates.
Proved undeveloped reserves include those reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Undeveloped reserves may be classified as proved reserves on undrilled acreage directly offsetting development areas that are reasonably certain of production when drilled, or where reliable technology provides reasonable certainty of economic producibility. Undrilled locations may be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless specific circumstances justify a longer time period.
9
The following table shows proved oil, NGL, and gas reserves as of
December 31, 2016
, based on average commodity prices in effect on the first day of each month in
2016
, held flat for the life of the production, except where future oil and gas sales are covered by physical contract terms. This table shows reserves on a boe basis in which natural gas is converted to an equivalent barrel of oil based on a ratio of 6 Mcf to 1 bbl. This ratio is not reflective of the current price ratio between the two products.
|
Oil
|
NGL
|
Gas
|
Total
|
|||||||||
|
(MMbbls)
|
(MMbbls)
|
(Bcf)
|
(MMboe)
|
|||||||||
|
Proved Developed:
|
||||||||||||
|
United States
|
301
|
|
155
|
|
1,200
|
|
656
|
|
||||
|
Canada
|
51
|
|
14
|
|
554
|
|
157
|
|
||||
|
Egypt
(1)
|
139
|
|
1
|
|
676
|
|
253
|
|
||||
|
North Sea
|
91
|
|
2
|
|
87
|
|
108
|
|
||||
|
Total Proved Developed
|
582
|
|
172
|
|
2,517
|
|
1,174
|
|
||||
|
Proved Undeveloped:
|
||||||||||||
|
United States
|
21
|
|
17
|
|
231
|
|
77
|
|
||||
|
Canada
|
8
|
|
2
|
|
45
|
|
18
|
|
||||
|
Egypt
(1)
|
20
|
|
—
|
|
42
|
|
27
|
|
||||
|
North Sea
|
11
|
|
1
|
|
24
|
|
15
|
|
||||
|
Total Proved Undeveloped
|
60
|
|
20
|
|
342
|
|
137
|
|
||||
|
TOTAL PROVED
|
642
|
|
192
|
|
2,859
|
|
1,311
|
|
||||
|
(1)
|
Includes total proved reserves of 93 MMboe attributable to a one-third noncontrolling interest in Egypt
|
As of
December 31, 2016
, Apache had total estimated proved reserves of
642
MMbbls of crude oil,
192
MMbbls of NGLs, and
2.9
Tcf of natural gas. Combined, these total estimated proved reserves are the volume equivalent of
1.3 billion
barrels of oil or 7.9 Tcf of natural gas, of which oil represents 49 percent. As of
December 31, 2016
, the Company’s proved developed reserves totaled
1,174
MMboe and estimated PUD reserves totaled
137
MMboe, or approximately 10.5 percent of worldwide total proved reserves. Apache has elected not to disclose probable or possible reserves in this filing.
During
2016
, Apache added 103 MMboe of proved reserves through exploration and development activity and 2 MMboe through purchases of minerals in-place. Apache sold a combined 7 MMboe through several divestiture transactions. During
2016
, Apache also had combined downward revisions of previously estimated reserves of
159
MMboe. Changes in product prices accounted for
172
MMboe, lease ownership changes accounted for
6
MMboe, offset by engineering and performance upward revisions totaling
19
MMboe.
The Company’s estimates of proved reserves, proved developed reserves, and PUD reserves as of
December 31, 2016
,
2015
, and
2014
, changes in estimated proved reserves during the last three years, and estimates of future net cash flows from proved reserves are contained in Note 16—Supplemental Oil and Gas Disclosures in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K. Estimated future net cash flows were calculated using a discount rate of 10 percent per annum, end of period costs, and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements.
Proved Undeveloped Reserves
The Company’s total estimated PUD reserves of
137
MMboe as of
December 31, 2016
, decreased by 95 MMboe from 232 MMboe of PUD reserves reported at the end of
2015
. During the year, Apache converted 22 MMboe of PUD reserves to proved developed reserves through development drilling activity. In North America, Apache converted 15 MMboe, with the remaining 7 MMboe in Apache’s international areas. Apache sold 3 MMboe and acquired no PUD reserves during the year. Apache added 48 MMboe of new PUD reserves through extensions and discoveries. Apache recognized a 118 MMboe downward revision in proved undeveloped reserves during the year, of which 99 MMboe was associated with lower product prices, 5 MMboe was associated with interest revisions, and 14 MMboe was a result of changes in development plans.
10
During the year, a total of approximately $357 million was spent on projects associated with reserves that were carried as PUD reserves at the end of 2015. A portion of Apache’s costs incurred each year relate to development projects that will be converted to proved developed reserves in future years. Apache spent approximately $289 million on PUD reserve development activity in North America and $68 million in the international areas. As of
December 31, 2016
, Apache had no material amounts of proved undeveloped reserves scheduled to be developed beyond five years from initial disclosure.
Preparation of Oil and Gas Reserve Information
Apache’s reported reserves are reasonably certain estimates which, by their very nature, are subject to revision. These estimates are reviewed throughout the year and revised either upward or downward, as warranted.
Apache’s proved reserves are estimated at the property level and compiled for reporting purposes by a centralized group of experienced reservoir engineers that is independent of the operating groups. These engineers interact with engineering and geoscience personnel in each of Apache’s operating areas and with accounting and marketing employees to obtain the necessary data for projecting future production, costs, net revenues, and ultimate recoverable reserves. All relevant data is compiled in a computer database application, to which only authorized personnel are given security access rights consistent with their assigned job function. Reserves are reviewed internally with senior management and presented to Apache’s Board of Directors in summary form on a quarterly basis. Annually, each property is reviewed in detail by our corporate and operating region engineers to ensure forecasts of operating expenses, netback prices, production trends, and development timing are reasonable.
Apache’s Executive Vice President of Corporate Reservoir Engineering is the person primarily responsible for overseeing the preparation of our internal reserve estimates and for coordinating any reserves audits conducted by a third-party engineering firm. He has a Bachelor of Science degree in Petroleum Engineering and over 36 years of industry experience with positions of increasing responsibility within Apache’s corporate reservoir engineering department. The Executive Vice President of Corporate Reservoir Engineering reports directly to our Chief Executive Officer.
The estimate of reserves disclosed in this Annual Report on Form 10-K is prepared by the Company’s internal staff, and the Company is responsible for the adequacy and accuracy of those estimates. However, the Company engages Ryder Scott Company, L.P. Petroleum Consultants (Ryder Scott) to review our processes and the reasonableness of our estimates of proved hydrocarbon liquid and gas reserves. The Company selects the properties for review by Ryder Scott based primarily on relative reserve value. The Company also considers other factors such as geographic location, new wells drilled during the year and reserves volume. During
2016
, the properties selected for each country ranged from 87 to 100 percent of the total future net cash flows discounted at 10 percent. These properties also accounted for over 88 percent of the reserves value of our international proved reserves and 93 percent of the new wells drilled in each country. In addition, all fields containing five percent or more of the Company’s total proved reserves volume were included in Ryder Scott’s review. The review covered 83 percent of total proved reserves by volume.
During
2016
,
2015
, and
2014
, Ryder Scott’s review covered 92, 90, and 91 percent, respectively, of the Company’s worldwide estimated proved reserves value and 83, 83, and 85 percent, respectively, of the Company’s total proved reserves volume. Ryder Scott’s review of
2016
covered 81 percent of U.S., 81 percent of Canada, 85 percent of Egypt, and 92 percent of the U.K.’s total proved reserves.
Ryder Scott’s review of
2015
covered 81 percent of U.S., 81 percent of Canada, 86 percent of Egypt, and 88 percent of the U.K.’s total proved reserves.
Ryder Scott’s review of
2014
covered 83 percent of U.S., 75 percent of Canada, 99.5 percent of Australia, 86 percent of Egypt, and 94 percent of the U.K.’s total proved reserves.
The Company has filed Ryder Scott’s independent report as an exhibit to this Form 10-K.
According to Ryder Scott’s opinion, based on their review, including the data, technical processes, and interpretations presented by Apache, the overall procedures and methodologies utilized by Apache in determining the proved reserves comply with the current SEC regulations, and the overall proved reserves for the reviewed properties as estimated by Apache are, in aggregate, reasonable within the established audit tolerance guidelines as set forth in the Society of Petroleum Engineers auditing standards.
Employees
On
December 31, 2016
, the Company had 3,727 employees.
11
Offices
Our principal executive offices are located at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. At year-end 2016, the Company maintained regional exploration and/or production offices in Midland, Texas; San Antonio, Texas; Houston, Texas; Calgary, Alberta; Cairo, Egypt; and Aberdeen, Scotland. Apache leases all of its primary office space. The current lease on our principal executive offices runs through December 31, 2019. The Company has two, five-year options to extend the lease through 2024 and 2029, which may be exercised in five or ten-year increments. For information regarding the Company’s obligations under its office leases, please see Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Contractual Obligations and Note 10—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
Title to Interests
As is customary in our industry, a preliminary review of title records, which may include opinions or reports of appropriate professionals or counsel, is made at the time we acquire properties. We believe that our title to all of the various interests set forth above is satisfactory and consistent with the standards generally accepted in the oil and gas industry, subject only to immaterial exceptions that do not detract substantially from the value of the interests or materially interfere with their use in our operations. The interests owned by us may be subject to one or more royalty, overriding royalty, or other outstanding interests (including disputes related to such interests) customary in the industry. The interests may additionally be subject to obligations or duties under applicable laws, ordinances, rules, regulations, and orders of arbitral or governmental authorities. In addition, the interests may be subject to burdens such as production payments, net profits interests, liens incident to operating agreements and current taxes, development obligations under oil and gas leases, and other encumbrances, easements, and restrictions, none of which detract substantially from the value of the interests or materially interfere with their use in our operations.
Additional Information about Apache
In this section, references to “we,” “us,” “our,” and “Apache” include Apache Corporation and its consolidated subsidiaries, unless otherwise specifically stated.
Response Plans and Available Resources
Apache and its wholly owned subsidiary, Apache Deepwater LLC (ADW), developed Oil Spill Response Plans (the Plans) for their respective Gulf of Mexico operations and offshore operations in the North Sea and Suriname. These plans ensure rapid and effective responses to spill events that may occur on such entities’ operated properties. Annually, drills are conducted to measure and maintain the effectiveness of the Plans.
Apache is a member of Oil Spill Response Limited (OSRL), a large international oil spill response cooperative, which entitles any Apache entity worldwide to access OSRL’s services. Apache also has a contract in place for response resources and services with Polyeco Group, a large, privately owned, tier three Oil Spill Response Organization (OSRO), which has resources strategically staged at six bases worldwide.
In the event of a spill in the Gulf of Mexico, Clean Gulf Associates (CGA) is the primary oil spill response association available to Apache and ADW. Both Apache and ADW are members of CGA, a not-for-profit association of producing and pipeline companies operating in the Gulf of Mexico. CGA was created to provide a means of effectively staging response equipment and providing immediate spill response for its member companies’ operations in the Gulf of Mexico. In the event of a spill, CGA’s equipment, which is positioned at various staging points around the Gulf, is ready to be mobilized. In addition, ADW is a member of Marine Spill Response Corporation (MSRC), and their equipment and resources are also available to ADW for its deepwater Gulf of Mexico and new venture operations.
An Apache subsidiary is also a member of the Marine Well Containment Company (MWCC) to help the Company fulfill the government’s permit requirements for containment and oil spill response plans in deepwater Gulf of Mexico operations. MWCC is a not-for-profit, stand-alone organization whose goal is to improve capabilities for containing an underwater well control incident in the U.S. Gulf of Mexico. Members and their affiliates have access to MWCC’s extensive containment network and systems. As of
December 31, 2016
, Apache’s investment in MWCC totals $163 million and is reflected in “Deferred charges and other” in the Company’s consolidated balance sheet.
12
Competitive Conditions
The oil and gas business is highly competitive in the exploration for and acquisitions of reserves, the acquisition of oil and gas leases, equipment and personnel required to find and produce reserves, and the gathering and marketing of oil, gas, and natural gas liquids. Our competitors include national oil companies, major integrated oil and gas companies, other independent oil and gas companies, and participants in other industries supplying energy and fuel to industrial, commercial, and individual consumers.
Certain of our competitors may possess financial or other resources substantially larger than we possess or have established strategic long-term positions and maintain strong governmental relationships in countries in which we may seek new entry. As a consequence, we may be at a competitive disadvantage in bidding for leases or drilling rights.
However, we believe our diversified portfolio of core assets, which comprises large acreage positions and well-established production bases across four geographic areas, our balanced production mix between oil and gas, our management and incentive systems, and our experienced personnel give us a strong competitive position relative to many of our competitors who do not possess similar geographic and production diversity. Our global position provides a large inventory of geologic and geographic opportunities in the four geographic areas in which we have producing operations to which we can reallocate capital investments in response to changes in commodity prices, local business environments, and markets. It also reduces the risk that we will be materially impacted by an event in a specific area or country.
Environmental Compliance
As an owner or lessee and operator of oil and gas properties and facilities, we are subject to numerous federal, provincial, state, local, and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations, subject the lessee to liability for pollution damages and require suspension or cessation of operations in affected areas. Although environmental requirements have a substantial impact upon the energy industry as a whole, we do not believe that these requirements affect us differently, to any material degree, than other companies in our industry.
We have made and will continue to make expenditures in our efforts to comply with these requirements, which we believe are necessary business costs in the oil and gas industry. We have established policies for continuing compliance with environmental laws and regulations, including regulations applicable to our operations in all countries in which we do business. We have established operating procedures and training programs designed to limit the environmental impact of our field facilities and identify and comply with changes in existing laws and regulations. The costs incurred under these policies and procedures are inextricably connected to normal operating expenses such that we are unable to separate expenses related to environmental matters; however, we do not believe expenses related to training and compliance with regulations and laws that have been adopted or enacted to regulate the discharge of materials into the environment will have a material impact on our capital expenditures, earnings, or competitive position.
13
|
ITEM 1A.
|
RISK FACTORS
|
Our business activities and the value of our securities are subject to significant hazards and risks, including those described below. If any of such events should occur, our business, financial condition, liquidity, and/or results of operations could be materially harmed, and holders and purchasers of our securities could lose part or all of their investments. Additional risks relating to our securities may be included in the prospectuses for securities we issue in the future.
Crude oil and natural gas price volatility, including the recent decline in prices for oil and natural gas, could adversely affect our operating results and the price of our common stock.
Our revenues, operating results, and future rate of growth depend highly upon the prices we receive for our crude oil and natural gas production. Historically, the markets for crude oil and natural gas have been volatile and are likely to continue to be volatile in the future. For example, the NYMEX daily settlement price for the prompt month oil contract in 2016 ranged from a high of $54.06 per barrel to a low of $26.21 per barrel. The NYMEX daily settlement price for the prompt month natural gas contract in 2016 ranged from a high of $3.93 per MMBtu to a low of $1.64 per MMBtu. The market prices for crude oil and natural gas depend on factors beyond our control. These factors include demand for crude oil and natural gas, which fluctuates with changes in market and economic conditions, and other factors, including:
|
•
|
worldwide and domestic supplies of crude oil and natural gas;
|
|
•
|
actions taken by foreign oil and gas producing nations, including the Organization of the Petroleum Exporting Countries (OPEC);
|
|
•
|
political conditions and events (including instability, changes in governments, or armed conflict) in crude oil or natural gas producing regions;
|
|
•
|
the level of global crude oil and natural gas inventories;
|
|
•
|
the price and level of imported foreign crude oil and natural gas;
|
|
•
|
the price and availability of alternative fuels, including coal and biofuels;
|
|
•
|
the availability of pipeline capacity and infrastructure;
|
|
•
|
the availability of crude oil transportation and refining capacity;
|
|
•
|
weather conditions;
|
|
•
|
domestic and foreign governmental regulations and taxes; and
|
|
•
|
the overall economic environment.
|
Our results of operations, as well as the carrying value of our oil and gas properties, are substantially dependent upon the prices of oil and natural gas, which have declined significantly since June 2014. Despite slight increases in oil and natural gas prices in 2016, prices have remained significantly lower than levels seen in recent years, which has adversely affected our revenues, operating income, cash flow, and proved reserves. Continued low prices could have a material adverse impact on our operations and limit our ability to fund capital expenditures. Without the ability to fund capital expenditures, we would be unable to replace reserves and production. Sustained low prices of crude oil and natural gas may further adversely impact our business as follows:
|
•
|
limiting our financial condition, liquidity, and/or ability to fund planned capital expenditures and operations;
|
|
•
|
reducing the amount of crude oil and natural gas that we can produce economically;
|
|
•
|
causing us to delay or postpone some of our capital projects;
|
|
•
|
reducing our revenues, operating income, and cash flows;
|
|
•
|
limiting our access to sources of capital, such as equity and long-term debt;
|
|
•
|
reducing the carrying value of our crude oil and natural gas properties, resulting in additional non-cash impairments;
|
|
•
|
reducing the carrying value of our gathering, transmission, and processing facilities, resulting in additional impairments; or
|
|
•
|
reducing the carrying value of goodwill.
|
14
Our ability to sell natural gas or oil and/or receive market prices for our natural gas or oil may be adversely affected by pipeline and gathering system capacity constraints and various transportation interruptions.
A portion of our natural gas and oil production in any region may be interrupted, limited, or shut in, from time to time for numerous reasons, including as a result of weather conditions, accidents, loss of pipeline or gathering system access, field labor issues or strikes, or capital constraints that limit the ability of third parties to construct gathering systems, processing facilities, or interstate pipelines to transport our production, or we might voluntarily curtail production in response to market conditions. If a substantial amount of our production is interrupted at the same time, it could temporarily adversely affect our cash flows.
Future economic conditions in the U.S. and certain international markets may materially adversely impact our operating results.
Current global market conditions, and uncertainty, including economic instability in Europe and certain emerging markets, is likely to have significant long-term effects. Global economic growth drives demand for energy from all sources, including fossil fuels. A lower future economic growth rate could result in decreased demand growth for our crude oil and natural gas production as well as lower commodity prices, which would reduce our cash flows from operations and our profitability.
Weather and climate may have a significant adverse impact on our revenues and production.
Demand for oil and natural gas are, to a degree, dependent on weather and climate, which impact the price we receive for the commodities we produce. In addition, our exploration and development activities and equipment can be adversely affected by severe weather, such as freezing temperatures, hurricanes in the Gulf of Mexico or storms in the North Sea, which may cause a loss of production from temporary cessation of activity or lost or damaged equipment. Our planning for normal climatic variation, insurance programs, and emergency recovery plans may inadequately mitigate the effects of such weather conditions, and not all such effects can be predicted, eliminated, or insured against.
Our operations involve a high degree of operational risk, particularly risk of personal injury, damage, or loss of equipment, and environmental accidents.
Our operations are subject to hazards and risks inherent in the drilling, production, and transportation of crude oil and natural gas, including:
|
•
|
well blowouts, explosions, and cratering;
|
|
•
|
pipeline or other facility ruptures and spills;
|
|
•
|
fires;
|
|
•
|
formations with abnormal pressures;
|
|
•
|
equipment malfunctions;
|
|
•
|
hurricanes, storms, and/or cyclones, which could affect our operations in areas such as on and offshore the Gulf Coast and North Sea and other natural disasters and weather conditions; and
|
|
•
|
surface spillage and surface or ground water contamination from petroleum constituents, saltwater, or hydraulic fracturing chemical additives.
|
Failure or loss of equipment as the result of equipment malfunctions, cyber attacks, or natural disasters such as hurricanes, could result in property damages, personal injury, environmental pollution and other damages for which we could be liable. Litigation arising from a catastrophic occurrence, such as a well blowout, explosion, or fire at a location where our equipment and services are used, or ground water contamination from hydraulic fracturing chemical additives may result in substantial claims for damages. Ineffective containment of a drilling well blowout or pipeline rupture, or surface spillage and surface or ground water contamination from petroleum constituents or hydraulic fracturing chemical additives could result in extensive environmental pollution and substantial remediation expenses. If a significant amount of our production is interrupted, our containment efforts prove to be ineffective or litigation arises as the result of a catastrophic occurrence, our cash flows, and, in turn, our results of operations could be materially and adversely affected.
15
Cyber attacks targeting systems and infrastructure used by the oil and gas industry may adversely impact our operations.
Our business has become increasingly dependent on digital technologies to conduct certain exploration, development, and production activities. We depend on digital technology to estimate quantities of oil and gas reserves, process and record financial and operating data, analyze seismic and drilling information, communicate with our employees and third party partners, and conduct many of our activities. Unauthorized access to our digital technology could lead to operational disruption, data corruption or exposure, communication interruption, loss of intellectual property, loss of confidential and fiduciary data, and loss or corruption of reserves or other proprietary information. Also, external digital technologies control nearly all of the oil and gas distribution and refining systems in the United States and abroad, which are necessary to transport and market our production. A cyber attack directed at oil and gas distribution systems could damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets, and make it difficult or impossible to accurately account for production and settle transactions.
While we have experienced cyber attacks, we have not suffered any material losses relating to such attacks; however, there is no assurance that we will not suffer such losses in the future. Further, as cyber attacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerabilities to cyber attacks.
Our commodity price risk management and trading activities may prevent us from benefiting fully from price increases and may expose us to other risks.
To the extent that we engage in price risk management activities to protect ourselves from commodity price declines, we may be prevented from realizing the benefits of price increases above the levels of the derivative instruments used to manage price risk. In addition, our hedging arrangements may expose us to the risk of financial loss in certain circumstances, including instances in which:
|
•
|
our production falls short of the hedged volumes;
|
|
•
|
there is a widening of price-basis differentials between delivery points for our production and the delivery point assumed in the hedge arrangement;
|
|
•
|
the counterparties to our hedging or other price risk management contracts fail to perform under those arrangements; or
|
|
•
|
an unexpected event materially impacts oil and natural gas prices.
|
The credit risk of financial institutions could adversely affect us.
We have exposure to different counterparties, and we have entered into transactions with counterparties in the financial services industry, including commercial banks, investment banks, insurance companies, other investment funds, and other institutions. These transactions expose us to credit risk in the event of default of our counterparty. Deterioration in the credit or financial markets may impact the credit ratings of our current and potential counterparties and affect their ability to fulfill their existing obligations to us and their willingness to enter into future transactions with us. We may also have exposure to financial institutions in the form of derivative transactions in connection with any hedges. We also have exposure to insurance companies in the form of claims under our policies. In addition, if any lender under our credit facilities is unable to fund its commitment, our liquidity will be reduced by an amount up to the aggregate amount of such lender’s commitment under our credit facilities.
We are exposed to a risk of financial loss if a counterparty fails to perform under a derivative contract. This risk of counterparty non-performance is of particular concern given the recent volatility of the financial markets and significant decline in oil and natural gas prices, which could lead to sudden changes in a counterparty’s liquidity and impair its ability to perform under the terms of the derivative contract. We are unable to predict sudden changes in a counterparty’s creditworthiness or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending upon market conditions. Furthermore, the bankruptcy of one or more of our hedge providers, or some other similar proceeding or liquidity constraint, might make it unlikely that we would be able to collect all or a significant portion of amounts owed to us by the distressed entity or entities. During periods of falling commodity prices our hedge receivable positions increase, which increases our exposure. If the creditworthiness of our counterparties deteriorates and results in their nonperformance, we could incur a significant loss.
16
The distressed financial conditions of our purchasers and partners could have an adverse impact on us in the event they are unable to pay us for the products or services we provide or to reimburse us for their share of costs.
Concerns about global economic conditions and the volatility of oil and natural gas prices have had a significant adverse impact on the oil and gas industry. We are exposed to risk of financial loss from trade, joint venture, joint interest billing, and other receivables. We sell our crude oil, natural gas, and NGLs to a variety of purchasers. As operator, we pay expenses and bill our non-operating partners for their respective shares of costs. As a result of current economic conditions and the severe decline in oil and natural gas prices, some of our customers and non-operating partners may experience severe financial problems that may have a significant impact on their creditworthiness. We cannot provide assurance that one or more of our financially distressed customers or non-operating partners will not default on their obligations to us or that such a default or defaults will not have a material adverse effect on our business, financial position, future results of operations, or future cash flows. Furthermore, the bankruptcy of one or more of our customers or non-operating partners, or some other similar proceeding or liquidity constraint, might make it unlikely that we would be able to collect all or a significant portion of amounts owed by the distressed entity or entities. Nonperformance by a trade creditor or non-operating partner could result in significant financial losses.
A downgrade in our credit rating could negatively impact our cost of and ability to access capital.
We receive debt ratings from the major credit rating agencies in the United States. Factors that may impact our credit ratings include debt levels, planned asset purchases or sales, and near-term and long-term production growth opportunities. Liquidity, asset quality, cost structure, product mix, and commodity pricing levels and others are also considered by the rating agencies. A ratings downgrade could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit or other forms of collateral for certain obligations. On February 2, 2016, our credit rating was downgraded by Standard and Poor’s to BBB/Stable, and on February 25, 2016, our credit rating was downgraded by Moody’s to Baa3/negative outlook, in each case as part of an industry-wide review and downgrade of U.S. exploration and production and oilfield services companies due to deteriorating commodity prices. Subsequently, on November 11, 2016, Moody’s changed our rating outlook to stable and affirmed our Baa3 rating. Any future downgrades could result in additional postings ranging from approximately $400 million to $1.0 billion, depending upon timing and availability of tax relief.
Market conditions may restrict our ability to obtain funds for future development and working capital needs, which may limit our financial flexibility.
The financial markets are subject to fluctuation and are vulnerable to unpredictable shocks. We have a significant development project inventory and an extensive exploration portfolio, which will require substantial future investment. We and/or our partners may need to seek financing in order to fund these or other future activities. Our future access to capital, as well as that of our partners and contractors, could be limited if the debt or equity markets are constrained. This could significantly delay development of our property interests.
Our ability to declare and pay dividends is subject to limitations.
The payment of future dividends on our capital stock is subject to the discretion of our board of directors, which considers, among other factors, our operating results, overall financial condition, credit-risk considerations, and capital requirements, as well as general business and market conditions. Our board of directors is not required to declare dividends on our common stock and may decide not to declare dividends.
Any indentures and other financing agreements that we enter into in the future may limit our ability to pay cash dividends on our capital stock, including common stock. In addition, under Delaware law, dividends on capital stock may only be paid from “surplus,” which is the amount by which the fair value of our total assets exceeds the sum of our total liabilities, including contingent liabilities, and the amount of our capital; if there is no surplus, cash dividends on capital stock may only be paid from our net profits for the then current and/or the preceding fiscal year. Further, even if we are permitted under our contractual obligations and Delaware law to pay cash dividends on common stock, we may not have sufficient cash to pay dividends in cash on our common stock.
17
Discoveries or acquisitions of additional reserves are needed to avoid a material decline in reserves and production.
The production rate from oil and gas properties generally declines as reserves are depleted, while related per-unit production costs generally increase as a result of decreasing reservoir pressures and other factors. Therefore, unless we add reserves through exploration and development activities or, through engineering studies, identify additional behind-pipe zones, secondary recovery reserves, or tertiary recovery reserves, or acquire additional properties containing proved reserves, our estimated proved reserves will decline materially as reserves are produced. Future oil and gas production is, therefore, highly dependent upon our level of success in acquiring or finding additional reserves on an economic basis. Furthermore, if oil or gas prices increase, our cost for additional reserves could also increase.
We may not realize an adequate return on wells that we drill.
Drilling for oil and gas involves numerous risks, including the risk that we will not encounter commercially productive oil or gas reservoirs. The wells we drill or participate in may not be productive, and we may not recover all or any portion of our investment in those wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well that crude or natural gas is present or may be produced economically. The costs of drilling, completing, and operating wells are often uncertain, and drilling operations may be curtailed, delayed, or canceled as a result of a variety of factors including, but not limited to:
|
•
|
unexpected drilling conditions;
|
|
•
|
pressure or irregularities in formations;
|
|
•
|
equipment failures or accidents;
|
|
•
|
fires, explosions, blowouts, and surface cratering;
|
|
•
|
marine risks such as capsizing, collisions, and hurricanes;
|
|
•
|
other adverse weather conditions; and
|
|
•
|
increases in the cost of, or shortages or delays in the availability of, drilling rigs and equipment.
|
Future drilling activities may not be successful, and, if unsuccessful, this failure could have an adverse effect on our future results of operations and financial condition. While all drilling, whether developmental or exploratory, involves these risks, exploratory drilling involves greater risks of dry holes or failure to find commercial quantities of hydrocarbons.
Material differences between the estimated and actual timing of critical events or costs may affect the completion and commencement of production from development projects.
We are involved in several large development projects and the completion of these projects may be delayed beyond our anticipated completion dates. Our projects may be delayed by project approvals from joint venture partners, timely issuances of permits and licenses by governmental agencies, weather conditions, manufacturing and delivery schedules of critical equipment, and other unforeseen events. Delays and differences between estimated and actual timing of critical events may adversely affect our large development projects and our ability to participate in large-scale development projects in the future. In addition, our estimates of future development costs are based on current expectation of prices and other costs of equipment and personnel we will need to implement such projects. Our actual future development costs may be significantly higher than we currently estimate. If costs become too high, our development projects may become uneconomic to us, and we may be forced to abandon such development projects.
18
We may fail to fully identify potential problems related to acquired reserves or to properly estimate those reserves.
Although we perform a review of properties that we acquire that we believe is consistent with industry practices, such reviews are inherently incomplete. It generally is not feasible to review in-depth every individual property involved in each acquisition. Ordinarily, we will focus our review efforts on the higher-value properties and will sample the remainder. However, even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit us as a buyer to become sufficiently familiar with the properties to assess fully and accurately their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, we often assume certain environmental and other risks and liabilities in connection with acquired properties. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and future production rates and costs with respect to acquired properties, and actual results may vary substantially from those assumed in the estimates. In addition, there can be no assurance that acquisitions will not have an adverse effect upon our operating results, particularly during the periods in which the operations of acquired businesses are being integrated into our ongoing operations.
Our liabilities could be adversely affected in the event one or more of our transaction counterparties become the subject of a bankruptcy case.
Over the last several years, we have taken action to enhance and streamline our North American portfolio through not only the acquisition of assets in key operating regions but also the divestitures of noncore domestic assets and the monetization of certain nonstrategic international assets. The agreements relating to these transactions contain provisions pursuant to which liabilities related to past and future operations have been allocated between the parties by means of liability assumptions, indemnities, escrows, trusts, and similar arrangements. One or more of the counterparties in these transactions could, either as a result of the severe decline in oil and natural gas prices or other factors related to the historical or future operations of their respective businesses, face financial problems that may have a significant impact on its ability to perform its obligations under these agreements and its solvency and ability to continue as a going concern. In the event that any such counterparty were to become unable financially to perform its liabilities or obligations assumed and as a result become the subject of a case or proceeding under Title 11 of the United States Code (the bankruptcy code) or any other relevant insolvency law or similar law (which we collectively refer to as Insolvency Laws) the counterparty may not perform its obligations under the agreements related to these transactions. In that case, our remedy would be a claim in the proceeding for damages for the breach of the contractual arrangement, which may be either a secured claim or an unsecured claim depending on whether or not we have collateral from the counterparty for the performance of the obligations. Resolution of our damage claim in such a proceeding may be delayed, and we may be forced to use available cash to cover the costs of the obligations assumed by the counterparties under such agreements should they arise.
Despite the provisions in our agreements requiring purchasers of our state or federal leasehold interests to assume certain liabilities and obligations related to such interests, if a purchaser of such interests becomes the subject of a case or proceeding under relevant Insolvency Laws and/or becomes unable financially to perform such liabilities or obligations, the relevant governmental authorities could require us to perform, and hold us responsible for, such liabilities and obligations, such as the decommissioning of such transferred assets. In such event, we may be forced to use available cash to cover the costs of such liabilities and obligations should they arise.
If a court or a governmental authority were to make any of the foregoing determinations or take any of the foregoing actions, or any similar determination or action, it could adversely impact our cash flows, operations, or financial condition.
Crude oil and natural gas reserves are estimates, and actual recoveries may vary significantly.
There are numerous uncertainties inherent in estimating crude oil and natural gas reserves and their value. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. Because of the high degree of judgment involved, the accuracy of any reserve estimate is inherently imprecise, and a function of the quality of available data and the engineering and geological interpretation. Our reserves estimates are based on 12-month average prices, except where contractual arrangements exist; therefore, reserves quantities will change when actual prices increase or decrease. In addition, results of drilling, testing, and production may substantially change the reserve estimates for a given reservoir over time. The estimates of our proved reserves and estimated future net revenues also depend on a number of factors and assumptions that may vary considerably from actual results, including:
|
•
|
historical production from the area compared with production from other areas;
|
|
•
|
the effects of regulations by governmental agencies, including changes to severance and excise taxes;
|
|
•
|
future operating costs and capital expenditures; and
|
|
•
|
workover and remediation costs.
|
19
For these reasons, estimates of the economically recoverable quantities of crude oil and natural gas attributable to any particular group of properties, classifications of those reserves and estimates of the future net cash flows expected from them prepared by different engineers or by the same engineers but at different times may vary substantially. Accordingly, reserves estimates may be subject to upward or downward adjustment, and actual production, revenue and expenditures with respect to our reserves likely will vary, possibly materially, from estimates.
Additionally, because some of our reserves estimates are calculated using volumetric analysis, those estimates are less reliable than the estimates based on a lengthy production history. Volumetric analysis involves estimating the volume of a reservoir based on the net feet of pay of the structure and an estimation of the area covered by the structure. In addition, realization or recognition of proved undeveloped reserves will depend on our development schedule and plans. A change in future development plans for proved undeveloped reserves could cause the discontinuation of the classification of these reserves as proved.
Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage.
A sizeable portion of our acreage is currently undeveloped. Unless production in paying quantities is established on units containing certain of these leases during their terms, the leases will expire. If our leases expire, we will lose our right to develop the related properties. Our drilling plans for these areas are subject to change based upon various factors, including drilling results, oil and natural gas prices, the availability and cost of capital, drilling, and production costs, availability of drilling services and equipment, gathering system and pipeline transportation constraints, and regulatory approvals.
We may incur significant costs related to environmental matters.
As an owner or lessee and operator of oil and gas properties, we are subject to various federal, provincial, state, local, and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up and other remediation activities resulting from operations, subject the lessee to liability for pollution and other damages, limit or constrain operations in affected areas, and require suspension or cessation of operations in affected areas. Our efforts to limit our exposure to such liability and cost may prove inadequate and result in significant adverse effects to our results of operations. In addition, it is possible that the increasingly strict requirements imposed by environmental laws and enforcement policies could require us to make significant capital expenditures. Such capital expenditures could adversely impact our cash flows and our financial condition.
Our North American operations are subject to governmental risks.
Our North American operations have been, and at times in the future may be, affected by political developments and by federal, state, provincial, and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls, and environmental protection laws and regulations.
In response to the Deepwater Horizon incident in the U.S. Gulf of Mexico in April 2010, and as directed by the Secretary of the U.S. Department of the Interior, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) issued new guidelines and regulations regarding safety, environmental matters, drilling equipment, and decommissioning applicable to drilling in the Gulf of Mexico. These regulations imposed additional requirements and caused delays with respect to development and production activities in the Gulf of Mexico.
With respect to oil and gas operations in the Gulf of Mexico, the BOEM has issued a new Notice to Lessees (NTL No. 2016-N01) significantly revising the obligations of companies operating in the Gulf of Mexico to provide supplemental assurances of performance with respect to plugging, abandonment, and decommissioning obligations associated with wells, platforms, structures, and facilities located upon or used in connection with such companies’ oil and gas leases. While requirements under the new NTL have not yet been fully implemented by BOEM, the new NTL may require that Apache provide additional security to BOEM with respect to plugging, abandonment, and decommissioning obligations relating to Apache’s current ownership interests in various Gulf of Mexico leases. We are working closely with BOEM to make arrangements for the provision of such additional required security, if such security becomes necessary under the new NTL. Additionally, we are not able to predict the effect that these changes might have on counterparties to which Apache has sold Gulf of Mexico assets or with whom Apache has joint ownership. Such changes could cause the bonding obligations of such parties to increase substantially, thereby causing a significant impact on the counterparties’ solvency and ability to continue as a going concern.
20
New political developments, laws, and the enactment of new or stricter regulations in the Gulf of Mexico or otherwise impacting our North American operations, and increased liability for companies operating in this sector may adversely impact our results of operations.
Changes to existing regulations related to emissions and the impact of any changes in climate could adversely impact our business.
Certain countries where we operate, including Canada and the United Kingdom, either tax or assess some form of greenhouse gas (GHG) related fees on our operations. Exposure has not been material to date, although a change in existing regulations could adversely affect our cash flows and results of operations.
In the event the predictions for rising temperatures and sea levels suggested by reports of the United Nations Intergovernmental Panel on Climate Change do transpire, we do not believe those events by themselves are likely to impact our assets or operations. However, any increase in severe weather could have a material adverse effect on our assets and operations.
The present U.S. federal and state income tax laws affecting oil and natural gas exploration, development, and extraction may be modified by administrative, legislative, or judicial interpretation at any time. Future legislation may result in the elimination of certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and development.
The present U.S. federal and state income tax laws affecting oil and natural gas exploration, development, and extraction may be modified by administrative, legislative, or judicial interpretation at any time. Previous legislative proposals, if enacted into law, could make significant changes to such laws, including the elimination of certain key U.S. federal income tax incentives currently available to oil and natural gas exploration and production companies. These changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and natural gas properties, (ii) the elimination of current deductions for intangible drilling and development costs, (iii) the elimination of the deduction for certain U.S. production activities, and (iv) an extension of the amortization period for certain geological and geophysical expenditures. The President and Congress could include some or all of these previously proposed changes in conjunction with lower tax rates as part of fundamental tax reform legislation. The passage or adoption of these changes, or similar changes, could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development. Further, the President and Congress may propose and implement more general tax reform changes including changes to cost recovery rules, the deductibility of interest expense, the taxation of foreign dividends, and a border adjustability provision that would impact the taxation of oil and gas companies. We are unable to predict whether any of these changes or other proposals will be enacted. Any such changes could adversely affect our business, financial condition, and results of operations.
Proposed federal, state, or local regulation regarding hydraulic fracturing could increase our operating and capital costs.
Several proposals are before the U.S. Congress that, if implemented, would either prohibit or restrict the practice of hydraulic fracturing or subject the process to regulation under the Safe Drinking Water Act. Several states are considering legislation to regulate hydraulic fracturing practices that could impose more stringent permitting, transparency, and well construction requirements on hydraulic-fracturing operations or otherwise seek to ban fracturing activities altogether. Hydraulic fracturing of wells and subsurface water disposal are also under public and governmental scrutiny due to potential environmental and physical impacts, including possible contamination of groundwater and drinking water and possible links to earthquakes. In addition, some municipalities have significantly limited or prohibited drilling activities and/or hydraulic fracturing, or are considering doing so. We routinely use fracturing techniques in the U.S. and other regions to expand the available space for natural gas and oil to migrate toward the wellbore. It is typically done at substantial depths in very tight formations.
Although it is not possible at this time to predict the final outcome of the legislation regarding hydraulic fracturing, any new federal, state, or local restrictions on hydraulic fracturing that may be imposed in areas in which we conduct business could result in increased compliance costs or additional operating restrictions in the U.S.
International operations have uncertain political, economic, and other risks.
Our operations outside North America are based primarily in Egypt and the United Kingdom. On a barrel equivalent basis, approximately
46 percent
of our
2016
production was outside North America, and approximately
31 percent
of our estimated proved oil and gas reserves on
December 31, 2016
, were located outside North America. As a result, a significant portion of our production and resources are subject to the increased political and economic risks and other factors associated with international operations including, but not limited to:
|
•
|
general strikes and civil unrest;
|
21
|
•
|
the risk of war, acts of terrorism, expropriation and resource nationalization, forced renegotiation or modification of existing contracts;
|
|
•
|
import and export regulations;
|
|
•
|
taxation policies, including royalty and tax increases and retroactive tax claims, and investment restrictions;
|
|
•
|
price control;
|
|
•
|
transportation regulations and tariffs;
|
|
•
|
constrained natural gas markets dependent on demand in a single or limited geographical area;
|
|
•
|
exchange controls, currency fluctuations, devaluation, or other activities that limit or disrupt markets and restrict payments or the movement of funds;
|
|
•
|
laws and policies of the United States affecting foreign trade, including trade sanctions;
|
|
•
|
the possibility of being subject to exclusive jurisdiction of foreign courts in connection with legal disputes relating to licenses to operate and concession rights in countries where we currently operate;
|
|
•
|
the possible inability to subject foreign persons, especially foreign oil ministries and national oil companies, to the jurisdiction of courts in the United States; and
|
|
•
|
difficulties in enforcing our rights against a governmental agency because of the doctrine of sovereign immunity and foreign sovereignty over international operations.
|
Foreign countries have occasionally asserted rights to oil and gas properties through border disputes. If a country claims superior rights to oil and gas leases or concessions granted to us by another country, our interests could decrease in value or be lost. Even our smaller international assets may affect our overall business and results of operations by distracting management’s attention from our more significant assets. Certain regions of the world in which we operate have a history of political and economic instability. This instability could result in new governments or the adoption of new policies that might result in a substantially more hostile attitude toward foreign investments such as ours. In an extreme case, such a change could result in termination of contract rights and expropriation of our assets. This could adversely affect our interests and our future profitability.
The impact that future terrorist attacks or regional hostilities as have occurred in Egypt and Libya may have on the oil and gas industry in general, and on our operations in particular, is not known at this time. Uncertainty surrounding military strikes or a sustained military campaign may affect operations in unpredictable ways, including disruptions of fuel supplies and markets, particularly oil, and the possibility that infrastructure facilities, including pipelines, production facilities, processing plants, and refineries, could be direct targets of, or indirect casualties of, an act of terror or war. We may be required to incur significant costs in the future to safeguard our assets against terrorist activities.
A deterioration of conditions in Egypt or changes in the economic and political environment in Egypt could have an adverse impact on our business.
Deterioration in the political, economic, and social conditions or other relevant policies of the Egyptian government, such as changes in laws or regulations, export restrictions, expropriation of our assets or resource nationalization, and/or forced renegotiation or modification of our existing contracts with EGPC, or threats or acts of terrorism, could materially and adversely affect our business, financial condition, and results of operations. Our operations in Egypt, excluding a one-third noncontrolling interest, contributed
24 percent
of our
2016
production and accounted for
15 percent
of our year-end estimated proved reserves and
28 percent
of our estimated discounted future net cash flows.
Our operations are sensitive to currency rate fluctuations.
Our operations are sensitive to fluctuations in foreign currency exchange rates, particularly between the U.S. dollar and the Canadian dollar, and between the U.S. dollar and the British Pound. Our financial statements, presented in U.S. dollars, may be affected by foreign currency fluctuations through both translation risk and transaction risk. Volatility in exchange rates may adversely affect our results of operations, particularly through the weakening of the U.S. dollar relative to other currencies.
22
We do not always control decisions made under joint operating agreements and the parties under such agreements may fail to meet their obligations.
We conduct many of our E&P operations through joint operating agreements with other parties under which we may not control decisions, either because we do not have a controlling interest or are not operator under the agreement. There is risk that these parties may at any time have economic, business, or legal interests or goals that are inconsistent with ours, and therefore decisions may be made which are not what we believe is in our best interest. Moreover, parties to these agreements may be unable to meet their economic or other obligations and we may be required to fulfill those obligations alone. In either case, the value of our investment may be adversely affected.
We face strong industry competition that may have a significant negative impact on our results of operations.
Strong competition exists in all sectors of the oil and gas exploration and production industry. We compete with major integrated and other independent oil and gas companies for acquisition of oil and gas leases, properties, and reserves, equipment, and labor required to explore, develop, and operate those properties, and marketing of oil and natural gas production. Crude oil and natural gas prices impact the costs of properties available for acquisition and the number of companies with the financial resources to pursue acquisition opportunities. Many of our competitors have financial and other resources substantially larger than we possess and have established strategic long-term positions and maintain strong governmental relationships in countries in which we may seek new entry. As a consequence, we may be at a competitive disadvantage in bidding for drilling rights. In addition, many of our larger competitors may have a competitive advantage when responding to factors that affect demand for oil and natural gas production, such as fluctuating worldwide commodity prices and levels of production, the cost and availability of alternative fuels, and the application of government regulations. We also compete in attracting and retaining personnel, including geologists, geophysicists, engineers, and other specialists. These competitive pressures may have a significant negative impact on our results of operations.
Our insurance policies do not cover all of the risks we face, which could result in significant financial exposure.
Exploration for and production of crude oil and natural gas can be hazardous, involving natural disasters and other events such as blowouts, cratering, fire and explosion and loss of well control, which can result in damage to or destruction of wells or production facilities, injury to persons, loss of life, or damage to property and the environment. Our international operations are also subject to political risk. The insurance coverage that we maintain against certain losses or liabilities arising from our operations may be inadequate to cover any such resulting liability; moreover, insurance is not available to us against all operational risks.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
As of
December 31, 2016
, we did not have any unresolved comments from the SEC staff that were received 180 or more days prior to year-end.
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
The information set forth under “Legal Matters” and “Environmental Matters” in Note 10—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K is incorporated herein by reference.
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
None.
23
APACHE CORPORATION
PART II
|
ITEM 5.
|
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
|
During
2016
, Apache common stock, par value $0.625 per share, was traded on the New York and Chicago Stock Exchanges and the NASDAQ Global Select Market under the symbol “APA.” The table below provides certain information regarding our common stock for
2016
and
2015
. Prices were obtained from The New York Stock Exchange, Inc. Composite Transactions Reporting System. Per-share prices and quarterly dividends shown below have been rounded to the indicated decimal place.
|
|
2016
|
2015
|
||||||||||||||||||||||||||||||
|
|
Price Range
|
Dividends Per Share
|
Price Range
|
Dividends Per Share
|
||||||||||||||||||||||||||||
|
|
High
|
Low
|
Declared
|
Paid
|
High
|
Low
|
Declared
|
Paid
|
||||||||||||||||||||||||
|
First Quarter
|
$
|
51.02
|
|
$
|
34.38
|
|
$
|
0.25
|
|
$
|
0.25
|
|
$
|
68.37
|
|
$
|
58.46
|
|
$
|
0.25
|
|
$
|
0.25
|
|
||||||||
|
Second Quarter
|
58.29
|
|
46.82
|
|
0.25
|
|
0.25
|
|
71.40
|
|
56.54
|
|
0.25
|
|
0.25
|
|
||||||||||||||||
|
Third Quarter
|
63.87
|
|
48.78
|
|
0.25
|
|
0.25
|
|
56.78
|
|
36.20
|
|
0.25
|
|
0.25
|
|
||||||||||||||||
|
Fourth Quarter
|
67.35
|
|
55.52
|
|
0.25
|
|
0.25
|
|
53.94
|
|
39.72
|
|
0.25
|
|
0.25
|
|
||||||||||||||||
The closing price of our common stock, as reported on the New York Stock Exchange Composite Transactions Reporting System for January 31,
2017
(last trading day of the month), was $59.82 per share. As of January 31,
2017
, there were 379,687,129 shares of our common stock outstanding held by approximately 4,300 stockholders of record and 263,000 beneficial owners.
We have paid cash dividends on our common stock for 52 consecutive years through
December 31, 2016
. When, and if, declared by our Board of Directors, future dividend payments will depend upon our level of earnings, financial requirements, and other relevant factors.
Information concerning securities authorized for issuance under equity compensation plans is set forth under the caption “Equity Compensation Plan Information” in the proxy statement relating to the Company’s
2017
annual meeting of stockholders, which is incorporated herein by reference.
24
The following stock price performance graph is intended to allow review of stockholder returns, expressed in terms of the appreciation of the Company’s common stock relative to two broad-based stock performance indices. The information is included for historical comparative purposes only and should not be considered indicative of future stock performance. The graph compares the yearly percentage change in the cumulative total stockholder return on the Company’s common stock with the cumulative total return of the Standard & Poor’s Composite 500 Stock Index and of the Dow Jones U.S. Exploration & Production Index (formerly Dow Jones Secondary Oil Stock Index) from December 31, 2011, through
December 31, 2016
. The stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Apache Corporation, S&P 500 Index,
and the Dow Jones US Exploration & Production Index
* $100 invested on 12/31/11 in stock including reinvestment of dividends.
Fiscal year ending December 31.
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||||||||||
|
Apache Corporation
|
$
|
100.00
|
|
$
|
87.29
|
|
$
|
96.48
|
|
$
|
71.15
|
|
$
|
51.42
|
|
$
|
74.88
|
|
||||||
|
S & P’s Composite 500 Stock Index
|
100.00
|
|
116.00
|
|
153.57
|
|
174.60
|
|
177.01
|
|
198.18
|
|
||||||||||||
|
DJ US Expl & Prod Index
|
100.00
|
|
105.82
|
|
139.52
|
|
124.48
|
|
94.94
|
|
118.19
|
|
||||||||||||
25
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
The following table sets forth selected financial data of the Company and its consolidated subsidiaries over the five-year period ended
December 31, 2016
. This information should be read in connection with, and is qualified in its entirety by, the more detailed information in the Company’s financial statements set forth in Part IV, Item 15 of this Form 10-K. Financial information for prior periods have been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements under Part IV, Item 15 of this Form 10-K. Certain amounts for prior years have been reclassified to conform to the current presentation. Factors that materially affect the comparability of this information are disclosed in Management’s Discussion and Analysis under Item 7 of this Form 10-K.
|
|
As of or for the Year Ended December 31,
|
|||||||||||||||||||
|
|
2016
|
2015
|
2014
|
2013
|
2012
|
|||||||||||||||
|
|
(In millions, except per share amounts)
|
|||||||||||||||||||
|
Income Statement Data
|
||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
5,367
|
|
$
|
6,510
|
|
$
|
12,795
|
|
$
|
14,825
|
|
$
|
14,965
|
|
|||||
|
Net income (loss) from continuing operations attributable to common shareholders
|
(1,372
|
)
|
(10,844
|
)
|
(6,653
|
)
|
(94
|
)
|
484
|
|
||||||||||
|
Net income (loss) from continuing operations per share:
|
||||||||||||||||||||
|
Basic
|
(3.62
|
)
|
(28.70
|
)
|
(17.32
|
)
|
(0.24
|
)
|
1.00
|
|
||||||||||
|
Diluted
|
(3.62
|
)
|
(28.70
|
)
|
(17.32
|
)
|
(0.24
|
)
|
1.00
|
|
||||||||||
|
Cash dividends declared per common share
|
1.00
|
|
1.00
|
|
1.00
|
|
0.80
|
|
0.68
|
|
||||||||||
|
Balance Sheet Data
|
||||||||||||||||||||
|
Total assets
|
$
|
22,519
|
|
$
|
25,500
|
|
$
|
44,264
|
|
$
|
54,828
|
|
$
|
56,775
|
|
|||||
|
Long-term debt
|
8,544
|
|
8,716
|
|
11,178
|
|
9,600
|
|
11,270
|
|
||||||||||
|
Total equity
|
7,679
|
|
9,490
|
|
20,541
|
|
30,756
|
|
28,538
|
|
||||||||||
|
Common shares outstanding
|
379
|
|
378
|
|
377
|
|
396
|
|
392
|
|
||||||||||
For a discussion of significant acquisitions and divestitures, see Note 3—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
26
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Apache Corporation, a Delaware corporation formed in 1954, is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. Apache currently has exploration and production interests in four geographic areas: the U.S., Canada, Egypt, and the U.K. (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity.
During the second quarter of 2016, Apache changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method of accounting. Financial information for all periods has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements under Part IV, Item 15 of this Form 10-K.
During 2015, Apache sold its Australia LNG business and oil and gas assets. During 2014, Apache sold its operations in Argentina. Results of operations and cash flows from operations for Argentina and Australia are reflected as discontinued operations in the Company’s financial statements for all periods presented. Certain historical information has been recast to reflect the results of operations for Argentina and Australia as discontinued operations.
The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K, and the risk factors and related information set forth in Part I, Item 1A and Part II, Item 7A of this Form 10-K.
Overview of 2016 Results
The Company took decisive action at the start of the significant decline in commodity prices that began in 2014 in order to preserve its financial position, improve its operational capabilities, and to position Apache for a lower-for-longer commodity price environment. The cornerstone of its approach has been capital discipline and cost structure rationalization. We accomplished these objectives through a rigorous and more centralized process for capital allocations, more detailed, long-term planning, and relentless pursuit of cost reductions in our operations and overhead structure. Apache remained focused on its mission to grow the Company for the long-term benefit of its shareholders, allocating a significant portion of its reduced capital spending program to well completion optimization, strategic testing, and strategic acreage acquisitions as opposed to investing its entire capital budget on more near-term production growth.
In September 2016, after more than two years of extensive geological and geophysical work, methodical acreage accumulation, and strategic testing and delineation drilling, Apache announced the discovery of a significant new resource play, “Alpine High.” Apache’s Alpine High acreage lies in the southern portion of the Delaware Basin, primarily in Reeves County, Texas. The Company has established an acreage position of over 320,000 contiguous net acres, which it acquired at an attractive average cost of approximately $1,300 per acre. Since first announcing the Alpine High last September, the Company has made substantial progress further delineating the opportunity. The Company has confirmed an extensive play fairway which spans 55 miles and a 5,000-foot vertical column encompassing five geologic formations, with multiple target zones spanning the hydrocarbon phase window from dry gas to wet gas to oil. We have recently identified an additional landing zone in the Woodford formation, and confirmed production from the Pennsylvanian. Based on these results, Apache now believes the drilling locations at Alpine High will exceed the 2,000 to 3,000 previously announced. During 2017, we expect to average 4 to 6 drilling rigs at Alpine High. A second hydraulic fracturing crew was added at the start of the year to accelerate completions and data collection. Using data collected from strategic testing and delineation drilling, the Company is now beginning to optimize wells drilled in Alpine High using customized targeting, larger fracs, and longer laterals. Combined with multi-well pad drilling, the Company believes these measures contribute to the optimized development of the area to maximize economic value. The field is expected to have low levels of water production which will also have a positive impact on long-term economics. We are currently installing the infrastructure, which will allow gas sales from the field around mid-year 2017.
Daily production of 522 Mboe/d decreased only four percent from 2015, despite investing a significant portion of curtailed capital spending on acreage, delineation wells, and infrastructure at Alpine High rather than drilling development wells with a focus on maintaining production levels in the shorter-term. The Company’s ability to maintain production levels is the result of several successful initiatives during the downturn: reduction of Apache’s cost structure; implementation of a more rigorous and integrated capital allocation and planning process; upgrades to, and expansion of, drilling inventory; and improvements in its capital efficiency, including reduction in service costs. Lease operating expenses were 19 percent lower than 2015 and 33 percent lower than 2014. General and administrative expenses decreased 9 percent over the past two years.
27
During 2016, Apache reported a $1.4 billion loss attributable to common stock, or $3.71 per diluted common share, compared to a loss of $10.4 billion, or $27.40 per share in 2015. Results for both periods were directly impacted by asset impairments primarily resulting from the significant drop in crude oil prices beginning in late 2014. Apache generated $2.5 billion in cash from continuing operating activities in 2016, a decrease of 4 percent from the prior year, as a result of falling commodity prices and lower production following curtailment of exploration and development activity. Apache has reduced debt by 24 percent from year-end 2014 levels, while increasing cash by $698 million during the same period. At the end of 2016, in addition to $1.4 billion of cash on hand, Apache has $3.5 billion in available committed borrowing capacity.
2017 Outlook
The Company currently plans to increase 2017 capital investments by more than 60 percent over 2016 spending, to approximately $3.1 billion, excluding capital associated with the one-third noncontrolling interest in Egypt. The Company’s 2017 plan assumes $50 per barrel for WTI, $51 per barrel for Brent indexed crude, $3.15 per Mcf for NYMEX natural gas, and $5.25 per Mcf for UK-indexed gas. At these price levels, our capital program will exceed anticipated operating cash flows. Based on current strip pricing, the remaining outspend will be funded primarily by proceeds from non-core asset sales, approximately $400 million of which has already occurred. In early 2017, the Company entered into put option contracts which will mitigate the downside risk of price volatility while providing full exposure to upside price potential. The put contracts provide an average floor of $50.47 per barrel and cover most of the Company’s second-half 2017 oil production.
Nearly two-thirds, or approximately $2 billion, of Apache’s capital spending in 2017 will be allocated to the Permian Basin, primarily in the Midland and Delaware Basins. This allocation includes approximately $500 million for construction of infrastructure at Alpine High. The infrastructure at Alpine High will include multiple pipeline connections along with compression, gathering, centralized processing facilities and tank batteries designed to accommodate expected volume increases as the play is developed. Internationally, Apache’s capital plan is intended to sustain longer-term free cash flow generation in Egypt and the North Sea. International spending will account for approximately 30 percent of Apache’s total 2017 budget, split nearly evenly between Egypt and the North Sea. Apache’s 2017 opportunity set in these regions is primarily centered on development drilling and lower-risk, step-out exploration wells, where the Company has a long-standing track record of success. Apache’s remaining capital budget is allocated between its remaining North American regions and an exploration well in Suriname expected to commence drilling in the first quarter.
The Company anticipates that production volumes will decline through the second quarter of 2017, before showing consistent quarterly growth beginning in the second half of the year. For the full year, the Company projects reported production in the range of 486 to 506 Mboe/d. Production excluding the noncontrolling interest and tax volumes in Egypt is expected to be in the range of 398 to 415 Mboe/d.
Operational Highlights
Apache’s deliberate focus on strategic testing and targeted development drilling during the price downturn, in addition to the Alpine High discovery, significantly impacted results in its Permian Basin plays, Egypt, and the North Sea.
Other operational highlights for the year include:
North America
|
•
|
North America onshore liquids averaged 171,691 barrels per day, with crude oil representing 65 percent of this liquids production. North America onshore liquids production represented 51 percent of worldwide liquids production and 33 percent of overall production, contributing $1.8 billion of liquids revenues in 2016. Onshore equivalent production was down 11 percent relative to 2015 as a result of a significant reduction in exploration and development capital spending during 2015 and 2016.
|
|
•
|
The Permian region averaged 5 operated rigs during the year, drilling 132 gross wells, 93 net wells. Over half of the region’s production is crude oil and 23 percent is NGLs. Combined, this represents more than a third of Apache’s total liquids production for 2016. The region averaged 161 Mboe/d during 2016 and contributed $1.5 billion of revenues during 2016.
|
|
•
|
The Midcontinent/Gulf Coast region drilled or participated in drilling 35 gross wells, with a 94 percent success rate. The region focused its drilling activities in the Woodford-SCOOP and Canyon Lime formations during 2016. The region averaged 55 Mboe/d during 2016, contributing $378 million of revenues for the year.
|
|
•
|
The Canada region drilled or participated in drilling 17 gross wells, with an 88 percent success rate. Drilling operations were primarily focused on the region’s Wapiti Montney, Ante Creek Montney, Duvernay, and Glauconite plays, with a goal of reducing drilling and completion costs. The region averaged 59 Mboe/d and contributed $343 million of revenues during 2016.
|
28
International and Offshore
|
•
|
The Egypt region continued to reduce its drilling program throughout 2016, averaging 6 rigs and drilling 61 gross wells. As a result of the reduced investment in drilling activity over the past several years, gross production decreased one percent. Egypt’s net production increased 11 percent from 2015, a function of the mechanics of its production-sharing contracts. In December 2016, Apache was notified by the Egyptian Ministry that it was the successful bidder in two new concessions, which will add 1.6 million gross undeveloped acres to its portfolio. Apache anticipates these concessions will be signed into law mid-2017. The region averaged 170 net Mboe/d and contributed $2.1 billion of revenues during 2016.
|
|
•
|
The North Sea region averaged 4 rigs during 2016, drilling 14 gross wells, 11 net wells. During the year, the region averaged production of 68 Mboe/d and contributed $970 million of revenues. Apache was able to minimize production decline to 4 percent year over year despite a significant reduction in capital expenditures. Apache continues to progress the development of its 2015 Callater (formerly K) exploration discovery in the Beryl area, with first production projected in the second half of 2017. The Company continues appraisal activities on two additional 2015 exploration discoveries: the Corona discovery, which logged 225 feet total vertical depth net pay in excellent reservoir-quality sandstone, and the Seagull discovery, which confirmed 672 feet of net oil pay over a 1,092-foot column in Triassic-age sands.
|
For a more detailed discussion related to Apache’s various geographic regions, please refer to the “Geographic Area Overviews” section set forth in Part I, Item 1 and 2 of this Form 10-K.
Acquisition and Divestiture Activity
Over Apache’s 60-year history, it has repeatedly demonstrated its ability to capitalize quickly and decisively on changes in its industry and economic conditions. A key component of this strategy is to continuously review and optimize Apache’s portfolio of assets in response to changes. Most recently, Apache has completed a series of divestitures designed to monetize nonstrategic assets and enhance Apache’s portfolio in order to strategically allocate resources to more impactful development opportunities. These divestments comprised primarily capital intensive projects and assets that were not accretive to earnings in the near-term, and included all of Apache’s operations in Australia and Argentina. These divestments include:
|
•
|
Australia Operations
On June 5, 2015, Apache’s subsidiaries completed the sale of the Company’s Australian subsidiary Apache Energy Limited to a consortium of private equity funds managed by Macquarie Capital Group Limited and Brookfield Asset Management Inc. for total proceeds of $1.9 billion. Additionally, in October 2015, Apache’s subsidiaries completed the sale of its 49 percent interest in Yara Pilbara Holdings Pty Ltd (YPHPL), to Yara International for total proceeds of $391 million. The effective date of the transaction was January 1, 2015.
|
|
•
|
LNG Projects
On April 2, 2015 and April 10, 2015, Apache subsidiaries completed the sale of its interest in the Wheatstone LNG and Kitimat LNG projects, respectively, along with accompanying upstream oil and gas reserves to Woodside Petroleum Limited (Woodside) for a total cash consideration of $3.7 billion.
|
|
•
|
Nonstrategic Assets in the Anadarko Basin and in Southern Louisiana
On December 31, 2014, Apache completed the sale of certain Anadarko basin and southern Louisiana oil and gas assets for approximately $1.3 billion in two separate transactions. In the Anadarko basin, Apache sold approximately 115,000 net acres in Wheeler County, Texas, and western Oklahoma. In southern Louisiana, the Company sold working interests in approximately 90,000 net acres. The effective date of both of these transactions was October 1, 2014.
|
|
•
|
Certain Gulf of Mexico Deepwater Assets
On June 30, 2014, Apache completed the sale of non-operated interests in the Lucius and Heidelberg development projects and 11 primary term deepwater exploration blocks in the Gulf of Mexico for $1.4 billion. The effective date of the transaction was May 1, 2014.
|
|
•
|
Nonstrategic Canadian Assets
On April 30, 2014, Apache completed the sale of primarily dry gas producing hydrocarbon assets in the Deep Basin area of western Alberta and British Columbia, Canada, for $374 million. The assets comprise 328,400 net acres in the Ojay, Noel, and Wapiti areas. Apache retained 100 percent of its working interest in horizons below the Cretaceous in the Wapiti area, including rights to the liquids-rich Montney and other deeper horizons. The effective date of the transaction was January 1, 2014.
|
|
•
|
Argentina Operations
On March 12, 2014, Apache’s subsidiaries completed the sale of all of the Company’s operations in Argentina to YPF Sociedad Anónima for $800 million (subject to customary closing adjustments) plus the assumption of $52 million of bank debt as of June 30, 2013.
|
For detailed information regarding Apache’s acquisitions and divestitures, please refer to Note 3—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
29
Results of Operations
Oil and Gas Revenues
Apache’s oil and gas revenues by region are as follows:
|
|
For the Year Ended December 31,
|
||||||||||||||||||||
|
|
2016
|
2015
|
2014
|
||||||||||||||||||
|
|
$ Value
|
% Contribution
|
$ Value
|
% Contribution
|
$ Value
|
% Contribution
|
|||||||||||||||
|
|
($ in millions)
|
||||||||||||||||||||
|
Total Oil Revenues:
|
|||||||||||||||||||||
|
United States
|
$
|
1,499
|
|
36
|
%
|
$
|
2,063
|
|
40
|
%
|
$
|
4,260
|
|
42
|
%
|
||||||
|
Canada
|
180
|
|
4
|
%
|
244
|
|
5
|
%
|
537
|
|
5
|
%
|
|||||||||
|
North America
|
1,679
|
|
40
|
%
|
2,307
|
|
45
|
%
|
4,797
|
|
47
|
%
|
|||||||||
|
Egypt
(1)
|
1,657
|
|
40
|
%
|
1,690
|
|
33
|
%
|
3,196
|
|
32
|
%
|
|||||||||
|
North Sea
|
836
|
|
20
|
%
|
1,110
|
|
22
|
%
|
2,117
|
|
21
|
%
|
|||||||||
|
International
(1)
|
2,493
|
|
60
|
%
|
2,800
|
|
55
|
%
|
5,313
|
|
53
|
%
|
|||||||||
|
Total
(1)
|
$
|
4,172
|
|
100
|
%
|
$
|
5,107
|
|
100
|
%
|
$
|
10,110
|
|
100
|
%
|
||||||
|
Total Natural Gas Revenues:
|
|||||||||||||||||||||
|
United States
|
$
|
314
|
|
33
|
%
|
$
|
382
|
|
32
|
%
|
$
|
935
|
|
46
|
%
|
||||||
|
Canada
|
146
|
|
15
|
%
|
242
|
|
21
|
%
|
479
|
|
24
|
%
|
|||||||||
|
North America
|
460
|
|
48
|
%
|
624
|
|
53
|
%
|
1,414
|
|
70
|
%
|
|||||||||
|
Egypt
(1)
|
389
|
|
40
|
%
|
393
|
|
33
|
%
|
434
|
|
22
|
%
|
|||||||||
|
North Sea
|
118
|
|
12
|
%
|
159
|
|
14
|
%
|
169
|
|
8
|
%
|
|||||||||
|
International
(1)
|
507
|
|
52
|
%
|
552
|
|
47
|
%
|
603
|
|
30
|
%
|
|||||||||
|
Total
(1)
|
$
|
967
|
|
100
|
%
|
$
|
1,176
|
|
100
|
%
|
$
|
2,017
|
|
100
|
%
|
||||||
|
Total NGL Revenues:
|
|||||||||||||||||||||
|
United States
|
$
|
184
|
|
81
|
%
|
$
|
191
|
|
84
|
%
|
$
|
549
|
|
82
|
%
|
||||||
|
Canada
|
17
|
|
7
|
%
|
12
|
|
5
|
%
|
76
|
|
12
|
%
|
|||||||||
|
North America
|
201
|
|
88
|
%
|
203
|
|
89
|
%
|
625
|
|
94
|
%
|
|||||||||
|
Egypt
(1)
|
11
|
|
5
|
%
|
13
|
|
6
|
%
|
13
|
|
2
|
%
|
|||||||||
|
North Sea
|
16
|
|
7
|
%
|
11
|
|
5
|
%
|
30
|
|
4
|
%
|
|||||||||
|
International
(1)
|
27
|
|
12
|
%
|
24
|
|
11
|
%
|
43
|
|
6
|
%
|
|||||||||
|
Total
(1)
|
$
|
228
|
|
100
|
%
|
$
|
227
|
|
100
|
%
|
$
|
668
|
|
100
|
%
|
||||||
|
Total Oil and Gas Revenues:
|
|||||||||||||||||||||
|
United States
|
$
|
1,997
|
|
37
|
%
|
$
|
2,636
|
|
40
|
%
|
$
|
5,744
|
|
45
|
%
|
||||||
|
Canada
|
343
|
|
7
|
%
|
498
|
|
8
|
%
|
1,092
|
|
8
|
%
|
|||||||||
|
North America
|
2,340
|
|
44
|
%
|
3,134
|
|
48
|
%
|
6,836
|
|
53
|
%
|
|||||||||
|
Egypt
(1)
|
2,057
|
|
38
|
%
|
2,096
|
|
32
|
%
|
3,643
|
|
29
|
%
|
|||||||||
|
North Sea
|
970
|
|
18
|
%
|
1,280
|
|
20
|
%
|
2,316
|
|
18
|
%
|
|||||||||
|
International
(1)
|
3,027
|
|
56
|
%
|
3,376
|
|
52
|
%
|
5,959
|
|
47
|
%
|
|||||||||
|
Total
(1)
|
$
|
5,367
|
|
100
|
%
|
$
|
6,510
|
|
100
|
%
|
$
|
12,795
|
|
100
|
%
|
||||||
|
Discontinued Operations:
|
|||||||||||||||||||||
|
Oil Revenue
|
$
|
—
|
|
$
|
138
|
|
$
|
757
|
|
||||||||||||
|
Natural Gas Revenue
|
—
|
|
140
|
|
385
|
|
|||||||||||||||
|
NGL Revenue
|
—
|
|
—
|
|
3
|
|
|||||||||||||||
|
Total
|
$
|
—
|
|
$
|
278
|
|
$
|
1,145
|
|
||||||||||||
|
(1)
|
Amounts include revenue attributable to a noncontrolling interest in Egypt.
|
30
Production
The following table presents production volumes by region:
|
|
For the Year Ended December 31,
|
||||||||||||
|
|
2016
|
Increase
(Decrease)
|
2015
|
Increase
(Decrease) |
2014
|
||||||||
|
Oil Volume – b/d:
|
|||||||||||||
|
United States
|
103,827
|
|
(16)%
|
123,666
|
|
(7)%
|
133,667
|
|
|||||
|
Canada
|
13,081
|
|
(17)%
|
15,768
|
|
(10)%
|
17,593
|
|
|||||
|
North America
|
116,908
|
|
(16)%
|
139,434
|
|
(8)%
|
151,260
|
|
|||||
|
Egypt
(1)(2)
|
103,719
|
|
14%
|
90,857
|
|
1%
|
90,230
|
|
|||||
|
North Sea
|
54,630
|
|
(8)%
|
59,334
|
|
(2)%
|
60,699
|
|
|||||
|
International
|
158,349
|
|
5%
|
150,191
|
|
—
|
150,929
|
|
|||||
|
Total
|
275,257
|
|
(5)%
|
289,625
|
|
(4)%
|
302,189
|
|
|||||
|
Natural Gas Volume – Mcf/d:
|
|||||||||||||
|
United States
|
396,227
|
|
(10)%
|
440,037
|
|
(26)%
|
591,312
|
|
|||||
|
Canada
|
242,602
|
|
(12)%
|
274,764
|
|
(15)%
|
322,783
|
|
|||||
|
North America
|
638,829
|
|
(11)%
|
714,801
|
|
(22)%
|
914,095
|
|
|||||
|
Egypt
(1)(2)
|
391,968
|
|
6%
|
369,507
|
|
(8)%
|
401,431
|
|
|||||
|
North Sea
|
71,751
|
|
11%
|
64,787
|
|
16%
|
55,964
|
|
|||||
|
International
|
463,719
|
|
7%
|
434,294
|
|
(5)%
|
457,395
|
|
|||||
|
Total
|
1,102,548
|
|
(4)%
|
1,149,095
|
|
(16)%
|
1,371,490
|
|
|||||
|
NGL Volume – b/d:
|
|||||||||||||
|
United States
|
54,165
|
|
—
|
53,928
|
|
(8)%
|
58,807
|
|
|||||
|
Canada
|
5,731
|
|
(6)%
|
6,126
|
|
(1)%
|
6,180
|
|
|||||
|
North America
|
59,896
|
|
—
|
60,054
|
|
(8)%
|
64,987
|
|
|||||
|
Egypt
(1)(2)
|
1,084
|
|
2%
|
1,064
|
|
55%
|
687
|
|
|||||
|
North Sea
|
1,703
|
|
51%
|
1,131
|
|
(19)%
|
1,392
|
|
|||||
|
International
|
2,787
|
|
27%
|
2,195
|
|
6%
|
2,079
|
|
|||||
|
Total
|
62,683
|
|
1%
|
62,249
|
|
(7)%
|
67,066
|
|
|||||
|
BOE per day:
(3)
|
|||||||||||||
|
United States
|
224,029
|
|
(11)%
|
250,934
|
|
(14)%
|
291,027
|
|
|||||
|
Canada
|
59,246
|
|
(12)%
|
67,688
|
|
(13)%
|
77,569
|
|
|||||
|
North America
|
283,275
|
|
(11)%
|
318,622
|
|
(14)%
|
368,596
|
|
|||||
|
Egypt
(1)(2)
|
170,131
|
|
11%
|
153,506
|
|
(3)%
|
157,822
|
|
|||||
|
North Sea
(4)
|
68,292
|
|
(4)%
|
71,262
|
|
—
|
71,419
|
|
|||||
|
International
|
238,423
|
|
6%
|
224,768
|
|
(2)%
|
229,241
|
|
|||||
|
Total
|
521,698
|
|
(4)%
|
543,390
|
|
(9)%
|
597,837
|
|
|||||
|
Discontinued Operations:
|
|||||||||||||
|
Oil (b/d)
|
—
|
|
7,610
|
|
22,227
|
|
|||||||
|
Natural Gas (Mcf/d)
|
—
|
|
94,114
|
|
248,837
|
|
|||||||
|
NGL (b/d)
|
—
|
|
—
|
|
317
|
|
|||||||
|
BOE/d
|
—
|
|
23,296
|
|
64,017
|
|
|||||||
|
(1)
|
Gross oil, natural gas, and NGL production in Egypt were as follows:
|
|
2016
|
2015
|
2014
|
|||||||||||
|
Oil (b/d)
|
209,659
|
|
206,501
|
|
197,366
|
|
|||||||
|
Natural Gas (Mcf/d)
|
827,202
|
|
856,950
|
|
894,802
|
|
|||||||
|
NGL (b/d)
|
1,861
|
|
2,459
|
|
1,901
|
|
|||||||
|
(2)
|
Includes net production volumes per day attributable to a noncontrolling interest in Egypt of:
|
|
Oil (b/d)
|
34,530
|
|
30,224
|
|
30,063
|
|
|||||||
|
Natural Gas (Mcf/d)
|
130,856
|
|
122,985
|
|
133,901
|
|
|||||||
|
NGL (b/d)
|
361
|
|
363
|
|
229
|
|
|||||||
|
(3)
|
The table shows production on a barrel of oil equivalent basis (boe) in which natural gas is converted to an equivalent barrel of oil based on a ratio of 6 Mcf to 1 bbl. This ratio is not reflective of the price ratio between the two products.
|
|
(4)
|
Average sales volumes from the North Sea for 2016 were
66,872
boe/d. Sales volumes may vary from production volumes as a result of the timing of liftings in the Beryl field.
|
31
Pricing
The following table presents pricing information by region:
|
|
For the Year Ended December 31,
|
|||||||||||||||
|
|
2016
|
Increase
(Decrease) |
2015
|
Increase
(Decrease) |
2014
|
|||||||||||
|
Average Oil Price - Per barrel:
|
||||||||||||||||
|
United States
|
$
|
39.43
|
|
(14)%
|
$
|
45.71
|
|
(48)%
|
$
|
87.33
|
|
|||||
|
Canada
|
37.62
|
|
(11)%
|
42.33
|
|
(49)%
|
83.57
|
|
||||||||
|
North America
|
39.23
|
|
(13)%
|
45.33
|
|
(48)%
|
86.89
|
|
||||||||
|
Egypt
|
43.66
|
|
(14)%
|
50.97
|
|
(47)%
|
97.06
|
|
||||||||
|
North Sea
|
42.93
|
|
(16)%
|
51.26
|
|
(46)%
|
95.53
|
|
||||||||
|
International
|
43.41
|
|
(15)%
|
51.09
|
|
(47)%
|
96.44
|
|
||||||||
|
Total
|
41.63
|
|
(14)%
|
48.31
|
|
(47)%
|
91.66
|
|
||||||||
|
Average Natural Gas Price - Per Mcf:
|
||||||||||||||||
|
United States
|
$
|
2.17
|
|
(9)%
|
$
|
2.38
|
|
(45)%
|
$
|
4.33
|
|
|||||
|
Canada
|
1.64
|
|
(32)%
|
2.41
|
|
(41)%
|
4.07
|
|
||||||||
|
North America
|
1.97
|
|
(18)%
|
2.39
|
|
(44)%
|
4.24
|
|
||||||||
|
Egypt
|
2.71
|
|
(7)%
|
2.91
|
|
(2)%
|
2.96
|
|
||||||||
|
North Sea
|
4.51
|
|
(33)%
|
6.73
|
|
(19)%
|
8.29
|
|
||||||||
|
International
|
2.99
|
|
(14)%
|
3.48
|
|
(4)%
|
3.61
|
|
||||||||
|
Total
|
2.40
|
|
(14)%
|
2.80
|
|
(31)%
|
4.03
|
|
||||||||
|
Average NGL Price - Per barrel:
|
||||||||||||||||
|
United States
|
$
|
9.28
|
|
(5)%
|
$
|
9.72
|
|
(62)%
|
$
|
25.57
|
|
|||||
|
Canada
|
8.15
|
|
48%
|
5.52
|
|
(84)%
|
33.61
|
|
||||||||
|
North America
|
9.17
|
|
(1)%
|
9.29
|
|
(65)%
|
26.33
|
|
||||||||
|
Egypt
|
28.68
|
|
(7)%
|
30.97
|
|
(40)%
|
51.60
|
|
||||||||
|
North Sea
|
24.20
|
|
(9)%
|
26.53
|
|
(55)%
|
59.42
|
|
||||||||
|
International
|
25.94
|
|
(10)%
|
28.68
|
|
(50)%
|
56.83
|
|
||||||||
|
Total
|
9.92
|
|
(1)%
|
9.98
|
|
(63)%
|
27.28
|
|
||||||||
|
Discontinued Operations:
|
||||||||||||||||
|
Oil price ($/Bbl)
|
$
|
—
|
|
$
|
49.76
|
|
$
|
93.28
|
|
|||||||
|
Natural Gas price ($/Mcf)
|
—
|
|
4.07
|
|
4.24
|
|
||||||||||
|
NGL price ($/Bbl)
|
—
|
|
—
|
|
24.57
|
|
||||||||||
Crude Oil Prices
A substantial portion of our crude oil production is sold at prevailing market prices, which fluctuate in response to many factors that are outside of the Company’s control. Average realized crude oil prices for
2016
were
down
14 percent
compared to
2015
, a direct result of the sharply lower benchmark oil prices over the past year. Crude oil prices realized in
2016
averaged
$41.63
per barrel.
Continued volatility in the commodity price environment reinforces the importance of our asset portfolio. While the market price received for natural gas varies among geographic areas, crude oil tends to trade within a global market. Price movements for all types and grades of crude oil generally move in the same direction.
Natural Gas Prices
Natural gas, which currently has a limited global transportation system, is subject to price variances based on local supply and demand conditions. Our primary markets include North America, Egypt, and the U.K. An overview of the market conditions in our primary gas-producing regions follows:
|
•
|
North America has a common market; most of our gas is sold on a monthly or daily basis at either monthly or daily market prices. Our North American regions averaged
$1.97
per Mcf in
2016
,
down
from
$2.39
per Mcf in
2015
.
|
32
|
•
|
In Egypt, our gas is sold to EGPC, primarily under an industry pricing formula indexed to Dated Brent crude oil with a minimum gas price of $1.50 per MMBtu and a maximum gas price of $2.65 per MMBtu, plus an upward adjustment for liquids content. Overall, the region averaged
$2.71
per Mcf in
2016
, down
7 percent
from the prior year.
|
|
•
|
Natural gas from the North Sea Beryl field is processed through the SAGE gas plant operated by Apache. The gas is sold to a third party at the St. Fergus entry point of the national grid on a National Balancing Point index price basis. The region averaged
$4.51
per Mcf in
2016
, a
33 percent
decrease
from an average of
$6.73
per Mcf in
2015
.
|
NGL Prices
Apache’s NGL production is sold under contracts with prices at market indices based on local supply and demand conditions, less the costs for transportation and fractionation, or on a weighted-average sales price received by the purchaser.
Crude Oil Revenues
2016
vs.
2015
Crude oil revenues for
2016
totaled
$4.2 billion
, a
$935 million
decrease
from the
2015
total of
$5.1 billion
. A
5 percent
decrease
in average daily production
reduced
2016
revenues by $228 million compared to
2015
, while
14 percent
lower
average realized prices
decreased
revenues by $707 million. Average daily production in
2016
was
275.3
Mb/d, with prices averaging
$41.63
per barrel. Crude oil accounted for
78 percent
of our
2016
oil and gas production revenues and
53 percent
of our worldwide production.
Worldwide crude oil production from continuing operations
decrease
d
14.4
Mb/d compared to
2015
, primarily the result of reduced drilling activity in response to lower commodity prices and natural decline.
2015
vs.
2014
During 2015, crude oil revenues totaled
$5.1 billion
, approximately 49 percent lower than the 2014 total of
$10.1 billion
, driven by a
47 percent
decrease in average crude oil prices and a
4 percent
decrease in worldwide production. Average daily production in 2015 was
289.6
Mb/d, with prices averaging
$48.31
per barrel. Crude oil represented
78
percent of our 2015 oil and gas production revenues and
53 percent
of our equivalent production, compared to 79 and 51 percent, respectively, in the prior year. Lower realized prices reduced revenues $4.8 billion, while lower production volumes reduced revenues an additional $222 million.
Worldwide crude oil production from continuing operations decreased
12.6
Mb/d. When excluding production from asset divestitures during 2015 and 2014, crude oil production remained essentially flat as drilling and recompletion activity in our North American onshore regions offset natural decline in all regions.
Natural Gas Revenues
2016
vs.
2015
Natural gas revenues for
2016
totaled
$1.0 billion
, a
$209 million
decrease
from the
2015
total of
$1.2 billion
. A
4 percent
decrease
in average production
reduced
2016
revenues by $38 million compared to
2015
, while
14 percent
lower
average realized prices
decreased
revenues by $171 million. Average daily production in
2016
was
1,103
MMcf/d, with prices averaging
$2.40
per Mcf. Natural gas accounted for
18 percent
of our
2016
oil and gas production revenues and
35 percent
of our worldwide production.
Worldwide gas production from continuing operations
decrease
d
46.5
MMcf/d compared to
2015
, primarily the result of reduced drilling activity in response to lower commodity prices and natural decline.
2015
vs.
2014
Natural gas revenues of
$1.2 billion
for 2015 were
$841 million
lower than 2014, the result of a
31 percent
decrease in realized prices and a
16 percent
decrease in production volumes. Worldwide production decreased
222.4
MMcf/d, lowering revenues by $228 million. Realized prices in 2015 averaged
$2.80
per Mcf, a decrease of
$1.23
per Mcf compared to 2014, which decreased revenues by $613 million.
Worldwide gas production from continuing operations decreased
16 percent
. Excluding production from asset divestitures during 2015 and 2014, gas production decreased only 2 percent. This decrease was driven primarily by natural decline and well shut-ins in Egypt and Canada. This decrease was primarily offset by drilling and recompletion activity in North America onshore regions.
33
NGL Revenues
2016
vs.
2015
NGL revenues for
2016
totaled
$228 million
, essentially unchanged from
2015
. A
1 percent
increase
in average production was offset by
1 percent
lower
average realized prices. Average daily production in
2016
was
62.7
Mb/d, with prices averaging
$9.92
per barrel. NGLs accounted for nearly
4 percent
of our
2016
oil and gas production revenues and
12 percent
of our worldwide production.
2015
vs.
2014
NGL revenues totaled
$227 million
in 2015, a decrease of
$441 million
from 2014, the result of a
7 percent
decrease in production volumes and a
63 percent
decrease in realized prices. Worldwide production from continuing operations decreased
4.8
Mb/d, reducing revenues by $17 million. Realized prices in 2015 averaged
$9.98
per barrel, a decrease of
$17.30
per barrel, which reduced revenues by $424 million.
Operating Expenses
The table below presents a comparison of our expenses on an absolute dollar basis and an equivalent unit of production (boe) basis. Our discussion may reference expenses on a boe basis, on an absolute dollar basis or both, depending on context. All operating expenses include costs attributable to a noncontrolling interest in Egypt. Operating expenses for all periods exclude discontinued operations in Argentina and Australia.
|
|
For the Year Ended December 31,
|
|||||||||||||||||||||||
|
|
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
||||||||||||||||||
|
|
(In millions)
|
(Per boe)
|
||||||||||||||||||||||
|
Lease operating expenses
(1)
|
$
|
1,494
|
|
$
|
1,854
|
|
$
|
2,238
|
|
$
|
7.85
|
|
$
|
9.35
|
|
$
|
10.26
|
|
||||||
|
Gathering and transportation
(1)
|
200
|
|
211
|
|
273
|
|
1.05
|
|
1.05
|
|
1.25
|
|
||||||||||||
|
Taxes other than income
|
126
|
|
282
|
|
577
|
|
0.66
|
|
1.42
|
|
2.65
|
|
||||||||||||
|
Exploration
|
473
|
|
2,771
|
|
2,499
|
|
2.48
|
|
13.97
|
|
11.45
|
|
||||||||||||
|
General and administrative
|
410
|
|
380
|
|
453
|
|
2.15
|
|
1.92
|
|
2.07
|
|
||||||||||||
|
Depreciation, depletion and amortization:
|
||||||||||||||||||||||||
|
Oil and gas property and equipment
(1)
|
2,460
|
|
2,976
|
|
4,195
|
|
12.92
|
|
15.01
|
|
19.22
|
|
||||||||||||
|
Other assets
|
158
|
|
324
|
|
331
|
|
0.83
|
|
1.63
|
|
1.52
|
|
||||||||||||
|
Asset retirement obligation accretion
|
156
|
|
145
|
|
154
|
|
0.82
|
|
0.73
|
|
0.71
|
|
||||||||||||
|
Impairments
|
1,103
|
|
9,472
|
|
7,102
|
|
5.78
|
|
47.75
|
|
32.55
|
|
||||||||||||
|
Transaction, reorganization, and separation
|
39
|
|
132
|
|
67
|
|
0.20
|
|
0.67
|
|
0.31
|
|
||||||||||||
|
Financing costs, net
|
417
|
|
511
|
|
413
|
|
2.18
|
|
2.58
|
|
1.89
|
|
||||||||||||
(1) For expenses impacted by the timing of
2016
liftings in the North Sea, per-boe calculations are based on sales volumes rather than production volumes.
Lease Operating Expenses (LOE)
LOE includes several key components, such as direct operating costs, repair and maintenance, and workover costs. Direct operating costs generally trend with commodity prices and are impacted by the type of commodity produced and the location of properties (i.e., offshore, onshore, remote locations, etc.). Fluctuations in commodity prices impact operating cost elements both directly and indirectly. They directly impact costs such as power, fuel, and chemicals, which are commodity price based. Commodity prices also affect industry activity and demand, thus indirectly impacting the cost of items such as rig rates, labor, boats, helicopters, materials, and supplies. Oil, which contributed more than half of our 2016 production, is inherently more expensive to produce than natural gas. Repair and maintenance costs are typically higher on offshore properties.
During 2016, LOE
decreased
$360 million
, or
19 percent
, on an absolute dollar basis compared to
2015
. On a per-unit basis, LOE
decreased
$1.50
, or
16 percent
compared to 2015. During 2015, LOE
decreased
$384 million
, or
17 percent
, on an absolute dollar basis compared to 2014. On a per-unit basis, LOE
decreased
$0.91
, or
9 percent
, compared to 2014. These reductions reflect our continued focus on cost reductions consistent with the current price environment.
34
Gathering and Transportation
Apache generally sells oil and natural gas under two common types of agreements, both of which include a transportation charge. One is a netback arrangement, under which we sell oil or natural gas at the wellhead and collect a lower relative price to reflect transportation costs to be incurred by the purchaser. In this case, we record sales at the netback price received from the purchaser. Alternatively, we sell oil or natural gas at a specific delivery point, pay our own transportation to a third-party carrier, and receive a price with no transportation deduction. In this case, we record the separate transportation cost as gathering and transportation costs.
In the U.S. and Canada we sell oil and natural gas under both types of arrangements. In the North Sea, we pay transportation charges to a third-party carrier. In Egypt, our oil and natural gas production that is sold to EGPC is primarily under netback arrangements. The Egypt crude oil that is exported is sold under both types of arrangements.
2016
vs.
2015
Gathering and transportation costs
decreased
$11 million
from
2015
. The decrease was driven primarily by a decrease in volumes and rate changes in Canada, partially offset by rate changes in the Permian Basin.
2015
vs.
2014
Gathering and transportation costs decreased $62 million from 2014. The decrease was driven primarily by North American onshore divestitures.
Taxes Other Than Income
Taxes other than income primarily consist of U.K. Petroleum Revenue Tax (PRT), severance taxes on properties onshore and in state waters off the coast of the U.S., and ad valorem taxes on properties in the U.S. and Canada. Severance taxes are generally based on a percentage of oil and gas production revenues, while the U.K. PRT is assessed on net receipts from qualifying fields in the U.K. North Sea. We are subject to a variety of other taxes including U.S. franchise taxes and various Canadian taxes, including the Freehold Mineral tax and Saskatchewan Resource surcharge.
|
|
2016
vs.
2015
Taxes other than income in 2016 were
$156 million
lower than 2015. In the third quarter of this year, the rate of U.K. PRT, historically assessed on qualifying fields in the U.K. North Sea, was reduced to zero percent effective January 1, 2016. As a result, U.K. PRT decreased $92 million over the comparable 2015 period. Severance tax decreased $25 million as a result of the decline in oil and gas production and lower prices. Ad valorem taxes decreased $21 million as a result of a decrease in property values in 2016.
2015
vs.
2014
Taxes other than income in 2015 were $295 million lower than 2014. U.K. PRT decreased $118 million over the comparable 2014 period as the result of decreased production revenues in the North Sea from qualifying fields during the year. Severance tax decreased $138 million as the result of lower revenues and the divestiture of properties in Louisiana and Oklahoma. Ad valorem taxes decreased $27 million as a result of property divestitures.
Exploration Expense
Exploration expense includes unproved leasehold impairments, exploration dry hole expense, geological and geophysical expense, and the costs of maintaining and retaining unproved leasehold properties. The following table presents a summary of these expenses:
|
For the Year Ended December 31,
|
||||||||||||
|
2016
|
2015
|
2014
|
||||||||||
|
(In millions)
|
||||||||||||
|
Unproved leasehold impairments
|
$
|
272
|
|
$
|
2,462
|
|
$
|
1,976
|
|
|||
|
Dry hole expense
|
81
|
|
133
|
|
318
|
|
||||||
|
Geological and geophysical expense
|
44
|
|
89
|
|
122
|
|
||||||
|
Exploration overhead and other
|
76
|
|
87
|
|
83
|
|
||||||
|
$
|
473
|
|
$
|
2,771
|
|
$
|
2,499
|
|
||||
2016
vs.
2015
Exploration expenses in
2016
decreased
$2.3 billion
, or
83 percent
, compared to
2015
, primarily a result of stabilizing commodity and leasehold prices reducing unproved leasehold impairments during 2016 in all key geographic areas. Dry hole expense decreased $52 million primarily as a result of reduced capital spending during 2016. Geological and geophysical expense decreased by $45 million during 2016 compared to 2015 as a result of reduced capital spending.
35
2015
vs.
2014
Exploration expenses in 2015
increased
$272 million
, or
11 percent
, compared to 2014 as lower commodity prices impacted exploration activity and resulted in unproved leasehold impairments increasing in all key geographic areas. This increase was partially offset by reduced exploration dry hole costs in 2015. Dry hole expense was $185 million higher in 2014 as a result of unsuccessful drilling activities expensed in that period associated with wells primarily in the Gulf of Mexico and Egypt. Geological and geophysical expense decreased $33 million as a result of fewer seismic purchases in Canada during 2015.
General and Administrative (G&A) Expenses
2016
vs.
2015
G&A expenses
increased
$30 million
, or
8 percent
, from 2015. On a per-unit basis, G&A expenses
increased
$0.23
to
$2.15
per boe. The increase in G&A expense was primarily related to non-cash stock-based compensation expense.
2015
vs.
2014
G&A expenses
decreased
$73 million
, or
16 percent
, from 2014. On a per-unit basis, G&A expenses
decreased
$0.15
to
$1.92
per boe. These reductions reflect Apache’s intense focus on driving internal efficiencies and bringing overhead in line with the current commodity price environment. In 2015, we rationalized our entire organizational structure, eliminating layers of management, consolidating office locations, and reducing corporate and regional staffing to more closely align with activity levels expected in the future.
Depreciation, Depletion and Amortization (DD&A)
2016
vs.
2015
Oil and gas property DD&A expense of
$2.5 billion
in
2016
decreased
$516 million
compared to
2015
. The Company’s oil and gas property DD&A rate
decreased
$2.09
per boe in
2016
compared to
2015
. The primary factor driving both lower absolute dollar expense and lower DD&A per boe rates was the reduction in the Company’s oil and gas properties as a result of impairments to proved properties in 2015 and 2016. Other asset depreciation
decreased
$166 million
compared to
2015
primarily related to a reduction in the Company
’
s gas gathering, transmission, and processing (GTP) assets as a result of impairments to GTP assets during 2015.
2015
vs.
2014
Oil and gas property DD&A expense decreased
$1.2 billion
compared to 2014. The Company’s oil and gas property DD&A rate decreased
$4.21
to
$15.01
per boe in 2015 compared to 2014. The primary factor driving both lower absolute dollar expense and lower DD&A per boe rates was the reduction in the Company’s oil and gas properties as a result of impairments to proved properties in 2014 and 2015. Other asset depreciation remained relatively flat.
Impairments
During 2016, the Company recorded asset impairments totaling
$1.1 billion
in connection with fair value assessments, including
$486 million
for a PRT decommissioning asset that is no longer expected to be realizable from future abandonment activities in the North Sea,
$427 million
impairments of oil and gas proved properties in the U.S. and Canada,
$135 million
impairments of certain GTP facilities in the North Sea, and
$55 million
for inventory write-downs.
During 2015, the Company recorded asset impairments totaling
$9.5 billion
, including $7.4 billion impairments of oil and gas proved properties, $1.7 billion impairments of GTP facilities, a $148 million impairment of our YPHPL equity method investment sold in the fourth quarter, $163 million impairment of goodwill in our North Sea reporting unit, and $55 million for inventory write-downs. Oil and gas proved property impairments resulted from lower commodity prices and downward revisions of reserves resulting from changes to the Company's development plans in certain areas. GTP impairments included $555 million for facilities in Canada, $102 million in the U.S., and $1.1 billion in Egypt. The Egyptian impairments resulted in net losses for the year in the applicable concessions, significantly reducing tax expense recorded under our production-sharing contracts.
During 2014, the Company recorded asset impairments totaling
$7.1 billion
, including $6.1 billion impairments of oil and gas proved properties, $655 million impairment of assets held for sale, $347 million impairments of goodwill in our U.S. and Canadian reporting units, and $32 million for inventory write-downs.
36
The following table presents a summary of asset impairments recorded for
2016
,
2015
, and
2014
:
|
For the Year Ended December 31,
|
||||||||||||
|
2016
|
2015
|
2014
|
||||||||||
|
(In millions)
|
||||||||||||
|
Oil and gas proved property
|
$
|
427
|
|
$
|
7,389
|
|
$
|
6,068
|
|
|||
|
GTP facilities
|
135
|
|
1,717
|
|
—
|
|
||||||
|
Equity method investment
|
—
|
|
148
|
|
—
|
|
||||||
|
Assets held for sale
|
—
|
|
—
|
|
655
|
|
||||||
|
Goodwill
|
—
|
|
163
|
|
347
|
|
||||||
|
PRT decommissioning asset
|
486
|
|
—
|
|
—
|
|
||||||
|
Inventory
|
55
|
|
55
|
|
32
|
|
||||||
|
Total impairments
|
$
|
1,103
|
|
$
|
9,472
|
|
$
|
7,102
|
|
|||
Transaction, Reorganization, and Separation Costs
Apache recorded
$39 million
,
$132 million
and
$67 million
of expenses during
2016
,
2015
, and
2014
, respectively, primarily related to company reorganization, including separation costs, investment banking fees and other associated costs. The charges for
2016
include $33 million for employee separation and $6 million for consolidation of office space and other reorganization efforts.
Financing Costs, Net
Financing costs incurred during the period comprised the following:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Interest expense
|
$
|
464
|
|
$
|
486
|
|
$
|
499
|
|
|||
|
Amortization of deferred loan costs
|
8
|
|
11
|
|
6
|
|
||||||
|
Capitalized interest
|
(48
|
)
|
(15
|
)
|
(85
|
)
|
||||||
|
Loss on extinguishment of debt
|
1
|
|
39
|
|
—
|
|
||||||
|
Interest income
|
(8
|
)
|
(10
|
)
|
(7
|
)
|
||||||
|
Total Financing costs, net
|
$
|
417
|
|
$
|
511
|
|
$
|
413
|
|
|||
2016
vs.
2015
Net financing costs
decreased
$94 million
from
2015
. The decrease is primarily related to an
increase
of
$33 million
in capitalized interest, a
decrease
of
$22 million
in interest expense, and a $39 million loss on the early extinguishment of debt incurred in 2015.
2015
vs.
2014
Net financing costs
increased
$98 million
from 2014. The increase is primarily related to a
decrease
of
$70 million
in capitalized interest from lower asset balances qualifying for capitalized interest and a $39 million loss on the early extinguishment of debt during 2015, partially offset by a decrease of $13 million in interest expense resulting from lower average debt balances.
Provision for Income Taxes
The 2016 income tax benefit from continuing operations totaled
$442 million
. During 2016, Apache’s effective tax rate was impacted primarily by non-cash impairments of the carrying value of the Company’s oil and gas properties, non-cash impairments of the Company’s PRT decommissioning asset, the impact of the change in U.K. statutory income tax rate, and an increase in the amount of valuation allowances on U.S. and Canadian deferred tax assets.
In 2016, the U.K. government enacted Finance Bill 2016 which provides income tax relief to Exploration and Production (E&P) companies operating in the North Sea through a reduction of Supplementary Charge from 20 percent to 10 percent, effective January 1, 2016. As a result of the enacted legislation in the third quarter of 2016, the Company recorded a deferred tax benefit of $238 million related to the remeasurement of the Company’s December 31, 2015 U.K. deferred income tax liability.
37
In 2015, Apache repatriated the sales proceeds from the divestment of its interest in LNG projects and Australian upstream assets. Upon the repatriation of these proceeds, Apache recognized a U.S. current income tax liability of $560 million. Pursuant to its plan of divestiture of these assets, Apache recorded a deferred income tax liability of $560 million on undistributed foreign earnings in 2014.
The 2015 income tax benefit from continuing operations totaled $1.0 billion. The 2015 effective tax rate reflects the tax benefit from $11.9 billion of asset impairments, the recognition of $2.1 billion of deferred tax assets related to foreign tax credit carryforwards, and an increase in valuation allowance against the Canadian region’s net deferred tax assets. Separately, the U.K. government enacted Finance Bill 2015 which provided income tax relief to E&P companies operating in the North Sea through a reduction of Supplementary Charge from 32 percent to 20 percent, effective January 1, 2015. As a result of the enacted legislation, in 2015, Apache recorded a deferred tax benefit of $414 million related to the remeasurement of the Company’s December 31, 2014 U.K. deferred income tax liability.
For additional information regarding income taxes, please refer to Note 9—Income Taxes in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
Capital Resources and Liquidity
Operating cash flows are the Company’s primary source of liquidity. We may also elect to utilize available cash on hand, committed borrowing capacity, access to both debt and equity capital markets, or proceeds from the sale of nonstrategic assets for all other liquidity and capital resource needs.
Apache’s operating cash flows, both in the short-term and the long-term, are impacted by highly volatile oil and natural gas prices, as well as costs and sales volumes. Significant changes in commodity prices impact our revenues, earnings and cash flows. These changes potentially impact our liquidity if costs do not trend with changes in commodity prices. Historically, costs have trended with commodity prices, albeit on a lag. Sales volumes also impact cash flows; however, they have a less volatile impact in the short-term.
Apache’s long-term operating cash flows are dependent on reserve replacement and the level of costs required for ongoing operations. Cash investments are required to fund activity necessary to offset the inherent declines in production and proved crude oil and natural gas reserves. Future success in maintaining and growing reserves and production is highly dependent on the success of our drilling program and our ability to add reserves economically. Deterioration in commodity prices also impacts estimated quantities of proved reserves. During 2016, we recognized negative reserve revisions of approximately 11 percent of our year-end 2015 estimated proved reserves as a result of lower prices. If realized prices for the remainder of 2017 approximate commodity futures prices as of December 31, 2016, the Company does not expect additional negative revisions for the year.
The Company currently plans to increase 2017 capital investments by more than 60 percent from 2016 spending, to approximately $3.1 billion, excluding capital associated with the one-third noncontrolling interest in Egypt. The Company’s 2017 plan assumes $50 per barrel for WTI, $51 per barrel for Brent indexed crude, $3.15 per Mcf for NYMEX natural gas, and $5.25 per Mcf for UK-indexed gas. At these price levels, our capital program will exceed anticipated operating cash flows. Based on current strip pricing, the remaining outspend will be funded primarily by proceeds from non-core asset sales, approximately $400 million of which has already occurred. In early 2017, the Company entered into put option contracts which will mitigate the downside risk of price volatility while providing full exposure to upside price potential. Nearly two-thirds, or approximately $2 billion, of Apache’s capital spending in 2017 will be allocated to the Permian Basin, primarily in the Midland and Delaware Basins. This allocation includes approximately $500 million for construction of infrastructure at Alpine High. International spending will account for approximately 30 percent of Apache’s total 2017 budget, split nearly evenly between Egypt and the North Sea. Apache’s remaining capital budget is allocated between its remaining North American regions and an exploration well in Suriname expected to commence drilling in the first quarter.
We believe the liquidity and capital resource alternatives available to Apache will be adequate to fund short-term and long-term operations, including our capital spending program, repayment of debt maturities, payment of dividends, and any amount that may ultimately be paid in connection with commitments and contingencies.
For additional information, please see Part I, Items 1 and 2—Business and Properties and Part I, Item 1A—Risk Factors of this Form 10-K.
38
Sources and Uses of Cash
The following table presents the sources and uses of our cash and cash equivalents for the years presented:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Sources of Cash and Cash Equivalents:
|
||||||||||||
|
Net cash provided by continuing operating activities
|
$
|
2,453
|
|
$
|
2,554
|
|
$
|
7,013
|
|
|||
|
Proceeds from Australian divestitures
|
—
|
|
4,693
|
|
—
|
|
||||||
|
Net cash provided by Argentina discontinued operations
|
—
|
|
—
|
|
788
|
|
||||||
|
Proceeds from asset divestitures
|
134
|
|
1,513
|
|
3,092
|
|
||||||
|
Commercial paper and bank loan borrowings, net
|
—
|
|
—
|
|
1,568
|
|
||||||
|
Other
|
148
|
|
59
|
|
—
|
|
||||||
|
2,735
|
|
8,819
|
|
12,461
|
|
|||||||
|
Uses of Cash and Cash Equivalents:
|
||||||||||||
|
Capital expenditures
|
$
|
1,768
|
|
$
|
4,441
|
|
$
|
9,489
|
|
|||
|
Leasehold and property acquisitions
|
181
|
|
367
|
|
1,475
|
|
||||||
|
Net cash used by Australia discontinued operations
|
23
|
|
208
|
|
105
|
|
||||||
|
Commercial paper, credit facility and bank loan repayments, net
|
—
|
|
1,570
|
|
—
|
|
||||||
|
Payments on fixed-rate debt
|
181
|
|
939
|
|
—
|
|
||||||
|
Shares repurchased
|
—
|
|
—
|
|
1,864
|
|
||||||
|
Dividends paid
|
379
|
|
377
|
|
365
|
|
||||||
|
Distributions to noncontrolling interest
|
293
|
|
129
|
|
140
|
|
||||||
|
Other
|
—
|
|
—
|
|
250
|
|
||||||
|
2,825
|
|
8,031
|
|
13,688
|
|
|||||||
|
Increase (decrease) in cash and cash equivalents
|
$
|
(90
|
)
|
$
|
788
|
|
$
|
(1,227
|
)
|
|||
Net Cash Provided by Continuing Operating Activities
Operating cash flows are our primary source of capital and liquidity and are impacted, both in the short-term and the long-term, by volatile oil and natural gas prices. The factors that determine operating cash flows are largely the same as those that affect net earnings, with the exception of non-cash expenses such as DD&A, asset retirement obligation (ARO) accretion, exploratory dry hole expense, asset impairments, and deferred income tax expense.
Net cash provided by continuing operating activities for
2016
totaled
$2.5 billion
, down
$101 million
from
2015
. The decrease primarily reflects lower commodity prices.
For a detailed discussion of commodity prices, production, and expenses, please see “Results of Operations” in this Item 7. For additional detail on the changes in operating assets and liabilities and the non-cash expenses which do not impact net cash provided by operating activities, please see the Statement of Consolidated Cash Flows in the Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
Australia Discontinued Operations
During 2015, Apache completed the sale of its Wheatstone LNG project and associated upstream assets to Woodside for total proceeds of $2.8 billion. During 2015, Apache also completed the sale of its Australian subsidiary Apache Energy Limited (AEL) to a consortium of private equity funds managed by Macquarie Capital Group Limited and Brookfield Asset Management Inc. for total proceeds of $1.9 billion. The results of operations for the divested Australian assets, asset impairments, and losses on disposal are classified as discontinued operations in all periods presented in this Annual Report on Form 10-K.
39
Argentina Discontinued Operations
During 2014, Apache completed the sale of our Argentina operations and properties to YPF Sociedad Anónima for cash proceeds of $800 million (subject to customary closing adjustments). The results of operations related to Argentina have been classified as discontinued operations in all periods presented in this Annual Report on Form 10-K. Net cash provided by Argentina discontinued operations for the first quarter of 2014 was $2 million.
Asset Divestitures
During
2016
,
2015
, and
2014
, Apache recorded proceeds from divestitures totaling
$134 million
,
$1.5 billion
, and
$3.1 billion
, respectively. For information regarding our acquisitions and divestitures, please see Note 3—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
Egypt Noncontrolling Interest
Sinopec International Petroleum Exploration and Production Corporation (Sinopec) holds a one-third minority participation interest in Apache’s oil and gas business in Egypt. Apache made cash distributions totaling
$293 million
,
$129 million
, and
$140 million
to Sinopec in
2016
,
2015
, and
2014
, respectively.
Capital Expenditures
During
2016
,
2015
, and
2014
, capital spending for exploration and development (E&D) activities totaled
$1.6 billion
,
$4.2 billion
, and
$8.6 billion
, respectively. This reduction is a direct result of our proactive measures to adjust our capital budget to reflect lower commodity prices and operating cash flows during 2016. Apache’s E&D capital spending was evenly distributed between our North American onshore and international regions. Apache’s investment in gas gathering, transmission, and processing facilities totaled
$158 million
,
$233 million
, and
$881 million
during
2016
,
2015
, and
2014
, respectively. GTP expenditures in
2016
primarily comprise investments in infrastructure for the Alpine High play.
Apache also completed leasehold and property acquisitions totaling
$181 million
,
$367 million
, and
$1.5 billion
in
2016
,
2015
, and
2014
, respectively. Our acquisition investments continued to focus on adding new leasehold positions to our North American onshore portfolio.
Shares Repurchased
Apache’s Board of Directors has authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through December 31, 2014, had repurchased a total of 32.2 million shares at an average price of $88.96 per share. The Company has not purchased any additional shares during
2016
or 2015 and is not obligated to acquire any specific number of shares.
Dividends
The Company has paid cash dividends on its common stock for 52 consecutive years through
2016
. Future dividend payments will depend on the Company’s level of earnings, financial requirements, and other relevant factors. Common stock dividends paid during
2016
totaled
$379 million
, compared with
$377 million
in
2015
and
$365 million
in
2014
.
Liquidity
|
|
At December 31,
|
|||||||
|
|
2016
|
2015
|
||||||
|
|
(In millions)
|
|||||||
|
Cash and cash equivalents
|
$
|
1,377
|
|
$
|
1,467
|
|
||
|
Total debt
|
8,544
|
|
8,717
|
|
||||
|
Equity
|
7,679
|
|
9,490
|
|
||||
|
Available committed borrowing capacity
|
3,500
|
|
3,500
|
|
||||
40
Cash and Cash Equivalents
At
December 31, 2016
, we had
$1.4 billion
in cash and cash equivalents, of which $1 billion of cash was held by foreign subsidiaries, and approximately $347 million was held by Apache Corporation and U.S. subsidiaries. The cash held by foreign subsidiaries should not be subject to additional U.S. income taxes if repatriated. The majority of the cash is invested in highly liquid, investment-grade instruments with maturities of three months or less at the time of purchase.
Debt
At
December 31, 2016
, outstanding debt, which consisted of notes and debentures, totaled
$8.5 billion
. We have $550 million maturing in 2018, $150 million maturing in 2019, $493 million maturing in 2021, and the remaining maturing in years 2022 through 2096. At
December 31, 2016
, we had $483,000 of notes due March 2017 classified as current debt on the consolidated balance sheet.
In November 2016, the Company initiated a program to purchase in the open market up to $250 million in aggregate principal amount of senior notes issued under its indentures. In the fourth quarter of 2016, Apache purchased and canceled $181 million aggregate principal amount of its senior notes through open market repurchases for $182 million in cash, including accrued interest and $0.5 million of premium. These repurchases resulted in a $1 million net loss on extinguishment of debt, which is included in “Financing costs, net” in our statement of consolidated operations. The net loss includes an acceleration of related discount and deferred financing costs.
In January 2017, we purchased and canceled an additional $69 million aggregate principal amount of senior notes for $71 million in cash, including accrued interest and $1 million of premium, which completed the open market repurchase program.
Available Credit Facilities
In June 2015, the Company entered into a five-year revolving credit facility which matures in June 2020, subject to Apache’s two, one-year extension options. The facility provides for aggregate commitments of $3.5 billion (including a $750 million letter of credit subfacility), with rights to increase commitments up to an aggregate $4.5 billion. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under this facility supports its commercial paper program. In connection with entry into the $3.5 billion facility, Apache terminated $5.3 billion in commitments under existing credit facilities. As of December 31, 2016, there were no borrowings under this credit facility, leaving aggregate available borrowing capacity at $3.5 billion.
At the Company’s option, the interest rate per annum for borrowings under the 2015 facility is either a base rate, as defined, plus a margin, or the London Inter-bank Offered Rate (LIBOR), plus a margin. The Company also pays quarterly a facility fee at a per annum rate on total commitments. The margins and the facility fee vary based upon the Company’s senior long-term debt rating. At
December 31, 2016
, the base rate margin was 0.075 percent, the LIBOR margin was 1.075 percent, and the facility fee was 0.175 percent.
The financial covenants of the 2015 credit facility require the Company to maintain an adjusted debt-to-capital ratio of not greater than 60 percent at the end of any fiscal quarter. For purposes of this calculation, capital excludes the effects of non-cash write-downs, impairments, and related charges occurring after June 30, 2015. At
December 31, 2016
, the Company’s debt-to-capital ratio as calculated under the credit facility was 33 percent.
The 2015 facility's negative covenants restrict the ability of the Company and its subsidiaries to create liens securing debt on its hydrocarbon-related assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens, liens on subsidiary assets located outside of the United States and Canada, and liens arising as a matter of law, such as tax and mechanics’ liens. The Company also may incur liens on assets if debt secured thereby does not exceed 5 percent of the Company’s consolidated assets, or approximately $1.1 billion as of
December 31, 2016
. Negative covenants also restrict Apache’s ability to merge with another entity unless it is the surviving entity, dispose of substantially all of its assets, and guarantee debt of non-consolidated entities in excess of the stated threshold.
In February 2016, Apache entered into a three-year letter of credit facility providing £900 million in commitments, with options to increase commitments to £1.075 billion and extend the term by one year. The facility is available for letters of credit denominated in pounds sterling, U.S. dollars, Canadian dollars, and any other foreign currency consented to by an issuing bank. The facility also is available for loans in pounds sterling, U.S. dollars, and Canadian dollars to cash collateralize letters of credit or obligations to provide letters of credit, in each case, to the extent letters of credit are unavailable under the facility. The facility’s representations and warranties, covenants, and events of default are substantially similar to those in Apache’s 2015 $3.5 billion revolving credit facility.
41
Commissions are payable on letters of credit outstanding under the 2016 facility at a per annum rate equal to a LIBOR margin. Borrowings bear interest per annum at a base rate or LIBOR, plus a margin. A facility fee at a per annum rate on aggregate commitments also is payable. Letter of credit commissions, the interest margin, and the facility fee vary depending on Apache’s senior unsecured long-term debt rating. At December 31, 2016, the LIBOR margin was 1.075 percent, the base rate margin was 0.075 percent, and the facility fee was 0.175 percent.
The 2016 facility is available for the Company’s letter of credit needs, particularly those which may arise in respect of abandonment obligations assumed in various North Sea acquisitions. As of December 31, 2016, three letters of credit aggregating approximately £147.5 million and no borrowings were outstanding under this facility.
There are no clauses in the 2015 $3.5 billion or 2016 £900 million credit facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The agreements for these facilities do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if the Company or any of its U.S. or Canadian subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if the Company undergoes a specified change in control or any borrower has specified pension plan liabilities in excess of the stated threshold. The Company was in compliance with the terms of these credit facilities as of December 31, 2016.
There is no assurance that the financial condition of banks with lending commitments to the Company will not deteriorate. We closely monitor the ratings of the banks in our bank groups. Having large bank groups allows the Company to mitigate the potential impact of any bank’s failure to honor its lending commitment.
Commercial Paper Program
As of December 31, 2016, the Company has available a $3.5 billion commercial paper program. The commercial paper program generally enables Apache to borrow funds for up to 270 days at competitive interest rates. The commercial paper program is fully supported by available borrowing capacity under the Company’s 2015 $3.5 billion committed credit facility. If the Company is unable to issue commercial paper following a significant credit downgrade or dislocation in the market, the Company’s 2015 committed credit facility, which expires in 2020, is available as a 100 percent backstop. As of
December 31, 2016
, the Company had no borrowings under its commercial paper program.
Off-Balance Sheet Arrangements
Apache enters into customary agreements in the oil and gas industry for drilling rig commitments, firm transportation agreements, and other obligations as described below in “Contractual Obligations” in this Item 7. Other than the off-balance sheet arrangements described herein, Apache does not have any off-balance sheet arrangements with unconsolidated entities that are reasonably likely to materially affect our liquidity or capital resource positions.
42
C
ontractual Obligations
The following table summarizes the Company’s contractual obligations as of
December 31, 2016
. For additional information regarding these obligations, please see Note 8—Debt and Note 10—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
|
Contractual Obligations
(1)
|
Note
Reference
|
Total
|
2017
|
2018-2019
|
2020-2021
|
2022 & Beyond
|
||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||
|
On-Balance Sheet:
|
||||||||||||||||||||||
|
Debt, at face value
|
Note 8
|
$
|
8,650
|
|
$
|
—
|
|
$
|
700
|
|
$
|
493
|
|
$
|
7,457
|
|
||||||
|
Interest payments
|
Note 8
|
8,622
|
|
440
|
|
836
|
|
772
|
|
6,574
|
|
|||||||||||
|
Capital lease
(2)
|
43
|
|
1
|
|
3
|
|
3
|
|
36
|
|
||||||||||||
|
Off-Balance Sheet:
|
||||||||||||||||||||||
|
Drilling rigs
|
244
|
|
177
|
|
67
|
|
—
|
|
—
|
|
||||||||||||
|
Purchase obligations
(3)
|
Note 10
|
680
|
|
119
|
|
287
|
|
250
|
|
24
|
|
|||||||||||
|
Operating lease obligations
(4)
|
Note 10
|
258
|
|
56
|
|
95
|
|
37
|
|
70
|
|
|||||||||||
|
Total Contractual Obligations
|
$
|
18,497
|
|
$
|
793
|
|
$
|
1,988
|
|
$
|
1,555
|
|
$
|
14,161
|
|
|||||||
|
(1)
|
This table does not include the Company’s liability for dismantlement, abandonment, and restoration costs of oil and gas properties or pension or postretirement benefit obligations. For additional information regarding these liabilities, please see Notes 7 and 11, respectively, in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
|
|
(2)
|
This represents our capital lease obligation discounted at 4.4 percent for a Midland office building.
|
|
(3)
|
Amounts represent any agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. These include minimum commitments associated with long-term take-or-pay contracts, NGL processing agreements, drilling work program commitments, and agreements to secure capacity rights on third-party pipelines. Amounts exclude certain product purchase obligations related to marketing and trading activities for which there are no minimum purchase requirements or the amounts are not fixed or determinable.
|
|
(4)
|
Amounts include long-term lease payments for office space, aircraft, supply and standby vessels, gas pipeline and land leases, and equipment related to exploration, development, and production activities, such as compressors. The Company expects to receive $10 million in sublease income associated with these leases.
|
Apache is also subject to various contingent obligations that become payable only if certain events or rulings were to occur. The inherent uncertainty surrounding the timing of and monetary impact associated with these events or rulings prevents any meaningful accurate measurement, which is necessary to assess settlements resulting from litigation. Apache’s management believes that it has adequately reserved for its contingent obligations, including approximately
$51 million
for environmental remediation and approximately
$15 million
for various contingent legal liabilities. For a detailed discussion of the Company’s environmental and legal contingencies, please see Note 10—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
In addition to our recorded environmental and legal liabilities, we have potential exposure to future obligations related to divested properties. Apache has divested various leases, wells, and facilities located in the Gulf of Mexico where the purchasers typically assume all obligations to plug, abandon, and decommission the associated wells, structures, and facilities acquired. One or more of the counterparties in these transactions could, either as a result of the severe decline in oil and natural gas prices or other factors related to the historical or future operations of their respective businesses, face financial problems that may have a significant impact on their solvency and ability to continue as a going concern. If a purchaser of our Gulf of Mexico assets becomes the subject of a case or proceeding under relevant insolvency laws or otherwise fails to perform required abandonment obligations, Apache could be required to perform such actions under applicable federal laws and regulations. In such event, we may be forced to use available cash to cover the costs of such liabilities and obligations should they arise.
With respect to our retained oil and gas operations in the Gulf of Mexico, the Bureau of Ocean Energy Management (BOEM) has issued Notice to Lessees (NTL) No. 2016-N01 pertaining to the obligations of companies to provide supplemental assurances for performance with respect to plugging, abandonment, decommissioning, and site clearance obligations associated with wells, platforms, structures, and facilities located upon or used in connection with such companies’ oil and gas leases. Under this NTL, the Company will likely be required to provide additional security to BOEM with respect to plugging, abandonment, and decommissioning obligations relating to the Company’s current ownership interests in various Gulf of Mexico leases. We are working closely with the BOEM to make arrangements for the provision of such additional required security, if such security becomes necessary under the new NTL. Additionally, we are not able to predict the effect that these changes might have on counterparties to which Apache has sold Gulf of Mexico assets. Such changes could cause the bonding obligations of such parties to increase substantially, thereby causing a significant impact on the counterparties’ solvency and ability to continue as a going concern.
43
Insurance Program
We maintain insurance policies that include coverage for physical damage to our assets, general liabilities, workers’ compensation, employers’ liability, sudden and accidental pollution, and other risks. Our insurance coverage is subject to deductibles or retentions that we must satisfy prior to recovering on insurance. Additionally, our insurance is subject to policy exclusions and limitations. There is no assurance that our insurance will adequately protect us against liability from all potential consequences and damages.
Our current insurance policies covering physical damage to our assets provide up to $1 billion in coverage per occurrence. These policies also provide sudden and accidental pollution coverage. Coverage for Gulf of Mexico named windstorms is excluded from this coverage.
Our current insurance policies covering general liabilities provide approximately $500 million in coverage, scaled to Apache’s interest. Our service agreements, including drilling contracts, generally indemnify Apache for injuries and death of the service provider’s employees as well as subcontractors hired by the service provider.
Apache purchases multi-year political risk insurance from the Overseas Private Investment Corporation (OPIC) and highly-rated insurers covering a portion of its investments in Egypt for losses arising from confiscation, nationalization, and expropriation risks. The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC, an agency of the Islamic Development Bank) reinsures OPIC. In the aggregate, these insurance policies provide up to $750 million of coverage to Apache, subject to policy terms and conditions and a retention of approximately $1 billion.
Apache has an additional insurance policy with OPIC, which, subject to policy terms and conditions, provides up to $300 million of coverage through 2024 for losses arising from (1) non-payment by EGPC of arbitral awards covering amounts owed Apache on past due invoices and (2) expropriation of exportable petroleum in the event that actions taken by the government of Egypt prevent Apache from exporting our share of production. The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, provides $150 million in reinsurance to OPIC.
Future insurance coverage for our industry could increase in cost and may include higher deductibles or retentions. In addition, some forms of insurance may become unavailable.
Critical Accounting Policies and Estimates
Apache prepares its financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes. Apache identifies certain accounting policies as critical based on, among other things, their impact on the portrayal of Apache’s financial condition, results of operations, or liquidity and the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies. The following is a discussion of Apache’s most critical accounting policies.
Reserves Estimates
Proved oil and gas reserves are the estimated quantities of natural gas, crude oil, condensate, and NGLs that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing conditions, operating conditions, and government regulations.
Proved undeveloped reserves include those reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Undeveloped reserves may be classified as proved reserves on undrilled acreage directly offsetting development areas that are reasonably certain of production when drilled, or where reliable technology provides reasonable certainty of economic producibility. Undrilled locations may be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless specific circumstances justify a longer time.
Despite the inherent imprecision in these engineering estimates, our reserves are used throughout our financial statements. For example, since we use the units-of-production method to amortize our oil and gas properties, the quantity of reserves could significantly impact our DD&A expense. A material adverse change in the estimated volumes of reserves could result in property impairments. Finally, these reserves are the basis for our supplemental oil and gas disclosures.
44
Reserves are calculated using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation.
Apache has elected not to disclose probable and possible reserves or reserve estimates in this filing.
Oil and Gas Exploration Costs
Apache accounts for its exploration and production activities using the successful efforts method of accounting. Costs of acquiring unproved and proved oil and gas leasehold acreage are capitalized. Costs of drilling and equipping productive wells, including development dry holes, and related production facilities are also capitalized. Oil and gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. Costs associated with drilling an exploratory well are initially capitalized, or suspended, pending a determination as to whether proved reserves have been found. On a quarterly basis, management reviews the status of all suspended exploratory drilling costs in light of ongoing exploration activities and determines whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are recorded as dry hole expense and reported in exploration expense in the statement of consolidated operations. Otherwise, the costs of exploratory wells remain capitalized.
Long-Lived Assets
Long-lived assets used in operations, including proved oil and gas properties, are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in future cash flows expected to be generated by an asset group. Individual assets are grouped for impairment purposes based on a judgmental assessment of the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. If there is an indication the carrying amount of an asset may not be recovered, the asset is assessed by management through an established process in which changes to significant assumptions such as prices, volumes, and future development plans are reviewed. If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value. Because there usually is a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined based on the present values of expected future cash flows using discount rates believed to be consistent with those used by principal market participants. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review.
During the past two years, there was a substantial decline in commodity prices. The resulting change in future commodity price assumptions and impact to our future development plan was a triggering event which required us to reassess our long-lived assets for impairment. Based on the results of this assessment, we recorded impairments of certain proved oil and gas properties and gathering, transmission, and processing facilities. For discussion of these impairments, see “Fair Value Measurements” of Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements.
Asset Retirement Obligation (ARO)
The Company has significant obligations to remove tangible equipment and restore land or seabed at the end of oil and gas production operations. Apache’s removal and restoration obligations are primarily associated with plugging and abandoning wells and removing and disposing of offshore oil and gas platforms in the North Sea and Gulf of Mexico. Estimating the future restoration and removal costs is difficult and requires management to make estimates and judgments. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety, and public relations considerations.
ARO associated with retiring tangible long-lived assets is recognized as a liability in the period in which the legal obligation is incurred and becomes determinable. The liability is offset by a corresponding increase in the underlying asset. The ARO liability reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with Apache’s oil and gas properties. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit-adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.
45
Income Taxes
Our oil and gas exploration and production operations are subject to taxation on income in numerous jurisdictions worldwide. We record deferred tax assets and liabilities to account for the expected future tax consequences of events that have been recognized in our financial statements and our tax returns. We routinely assess the ability to realize our deferred tax assets. If we conclude that it is more likely than not that some portion or all of the deferred tax assets will not be realized under accounting standards, the tax asset would be reduced by a valuation allowance. Numerous judgments and assumptions are inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil and gas prices).
The Company regularly assesses and, if required, establishes accruals for tax contingencies that could result from assessments of additional tax by taxing jurisdictions in countries where the Company operates. Tax reserves have been established and include any related interest, despite the belief by the Company that certain tax positions meet certain legislative, judicial, and regulatory requirements. These reserves are subject to a significant amount of judgment and are reviewed and adjusted on a periodic basis in light of changing facts and circumstances considering the progress of ongoing tax audits, case law, and any new legislation. The Company believes that the reserves established are adequate in relation to the potential for any additional tax assessments.
Purchase Price Allocation
Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets and liabilities of the acquired business and recording deferred taxes for any differences between the allocated values and tax basis of assets and liabilities. Any excess of the purchase price over the amounts assigned to assets and liabilities is recorded as goodwill.
The purchase price allocation is accomplished by recording each asset and liability at its estimated fair value. Estimated deferred taxes are based on available information concerning the tax basis of the acquired company’s assets and liabilities and tax-related carryforwards at the merger date, although such estimates may change in the future as additional information becomes known. The amount of goodwill recorded in any particular business combination can vary significantly depending upon the values attributed to assets acquired and liabilities assumed relative to the total acquisition cost.
In estimating the fair values of assets acquired and liabilities assumed, we made various assumptions. The most significant assumptions relate to the estimated fair values assigned to proved and unproved crude oil and natural gas properties. To estimate the fair values of these properties, we prepared estimates of crude oil and natural gas reserves as described above in “Reserve Estimates” of this Item 7. Estimated fair values assigned to assets acquired can have a significant effect on results of operations in the future.
Goodwill
As of
December 31, 2016
, the Company’s consolidated balance sheet included
$87 million
of goodwill, all of which has been assigned to the Egypt reporting unit. Goodwill is assessed at least annually for impairment at the reporting unit level. We conduct a qualitative goodwill impairment assessment as of July 1 of each year, and whenever impairment indicators arise, by examining relevant events and circumstances which could have a negative impact on our goodwill such as macroeconomic conditions, industry and market conditions, cost factors that have a negative effect on earnings and cash flows, overall financial performance, acquisitions and divestitures, and other relevant entity-specific events.
The first step of the impairment test requires management to make estimates regarding the fair value of each reporting unit to which goodwill has been assigned. If it is necessary to determine the fair value of the reporting unit, we use a combination of the income approach and the market approach.
Under the income approach, the fair value of each reporting unit is estimated based on the present value of expected future cash flows. The income approach is dependent on a number of factors including estimates of forecasted revenue and operating costs, proved reserves, the success of future exploration for and development of unproved reserves, discount rates, and other variables. Negative revisions of estimated reserves quantities, increases in future cost estimates, divestiture of a significant component of the reporting unit, or sustained decreases in crude oil or natural gas prices could lead to a reduction in expected future cash flows and possibly an impairment of all or a portion of goodwill in future periods.
Key assumptions used in the discounted cash flow model described above include estimated quantities of crude oil and natural gas reserves, including both proved reserves and risk-adjusted unproved reserves; estimates of market prices considering forward commodity price curves as of the measurement date; and estimates of operating, administrative, and capital costs adjusted for inflation. We discount the resulting future cash flows using discount rates similar to those used by the Company in the valuation of acquisitions and divestitures.
46
To assess the reasonableness of our fair value estimate, we use a market approach to compare the fair value to similar businesses whose securities are actively traded in the public market. This requires management to make certain judgments about the selection of comparable companies, recent comparable asset transactions, and transaction premiums. Associated market multiples are applied to various financial metrics of the reporting unit to estimate fair value.
Although we base the fair value estimate of each reporting unit on assumptions we believe to be reasonable, those assumptions are inherently unpredictable and uncertain, and actual results could differ from the estimate. In the event of a prolonged global recession, commodity prices may stay depressed or decline further, thereby causing the fair value of the reporting unit to decline, which could result in an impairment of goodwill.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our exposure to market risk. The term market risk relates to the risk of loss arising from adverse changes in oil, gas, and NGL prices, interest rates, or foreign currency and adverse governmental actions. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. The forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.
Commodity Risk
The Company’s revenues, earnings, cash flow, capital investments and, ultimately, future rate of growth are highly dependent on the prices we receive for our crude oil, natural gas and NGLs, which have historically been very volatile because of unpredictable events such as economic growth or retraction, weather and political climate. In
2016
, our average crude oil realizations decreased to
$41.63
per barrel compared to
$48.31
per barrel in
2015
. Our average natural gas price realizations decreased
14 percent
in
2016
to
$2.40
per Mcf from
$2.80
per Mcf in
2015
. Based on average daily production for 2016, a $1.00 per barrel change in the weighted average realized oil price would have increased or decreased revenues for the year by approximately $101 million, and a $0.10 per Mcf change in the weighted average realized price of natural gas would have increased or decreased revenues for the year by approximately $40 million.
We periodically enter into derivative positions on a portion of our projected oil and natural gas production through a variety of financial and physical arrangements intended to manage fluctuations in cash flows resulting from changes in commodity prices. Apache typically uses futures contracts, swaps, and options to mitigate commodity price risk. During
2016
and
2015
, the Company did not have any derivative positions.
Subsequent to December 31, 2016, the Company entered into put option derivative contracts not designated as cash flow hedges for 2017 crude oil production of
175,000
barrels per day. These contracts will be settled against either NYMEX WTI or Dated Brent between July 1, 2017 and December 31, 2017, with a weighted average strike price of
$50.47
per barrel. Apache paid a total premium of
$100 million
for these contracts, averaging
$3.09
per barrel.
See Note 5—Derivative Instruments and Hedging Activities in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Form 10-K.
Foreign Currency Risk
The Company’s cash flow stream relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. In Canada, oil and gas prices and costs, such as equipment rentals and services, are generally denominated in Canadian dollars but are heavily influenced by U.S. markets. Our North Sea production is sold under U.S. dollar contracts, and the majority of costs incurred are paid in British pounds. In Egypt, substantially all oil and gas production is sold under U.S. dollar contracts, and the majority of the costs incurred are denominated in U.S. dollars. Revenue and disbursement transactions denominated in Canadian dollars and British pounds are converted to U.S. dollar equivalents based on the average exchange rates during the period.
Foreign currency gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated at the end of each month. Currency gains and losses are included as either a component of “Other” under “Revenues and Other” or, as is the case when we re-measure our foreign tax liabilities, as a component of the Company’s provision for income tax expense on the statement of consolidated operations. A 10 percent strengthening or weakening of the Canadian dollar and British pound against the U.S. dollar as of
December 31, 2016
, would result in a foreign currency net loss or gain, respectively, of approximately $99 million.
47
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
The financial statements and supplementary financial information required to be filed under this Item 8 are presented on pages F-1 through F-70 in Part IV, Item 15 of this Form 10-K and are incorporated herein by reference.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
The financial statements for the fiscal years ended
December 31, 2016
,
2015
, and
2014
, included in this report, have been audited by Ernst & Young LLP, independent registered public accounting firm, as stated in their audit report appearing herein. There have been no changes in or disagreements with the accountants during the periods presented.
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
Disclosure Controls and Procedures
John J. Christmann IV, the Company’s Chief Executive Officer and President, in his capacity as principal executive officer, and Stephen J. Riney, the Company’s Executive Vice President and Chief Financial Officer, in his capacity as principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2016
, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective, providing effective means to ensure that the information we are required to disclose under applicable laws and regulations is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. We made no changes in internal controls over financial reporting during the quarter ending
December 31, 2016
, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
We periodically review the design and effectiveness of our disclosure controls, including compliance with various laws and regulations that apply to our operations both inside and outside the United States. We make modifications to improve the design and effectiveness of our disclosure controls and may take other corrective action, if our reviews identify deficiencies or weaknesses in our controls.
Management’s Annual Report on Internal Control Over Financial Reporting; Attestation Report of the Registered Public Accounting Firm
The management report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to the “Report of Management on Internal Control Over Financial Reporting,” included on Page F-1 in Part IV, Item 15 of this Form 10-K.
The independent auditors attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to the “Report of Independent Registered Public Accounting Firm,” included on Page F-3 in Part IV, Item 15 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting during the quarter ending
December 31, 2016
, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
|
ITEM 9B.
|
OTHER INFORMATION
|
None.
48
PART III
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information set forth under the captions “Nominees for Election as Directors,” “Continuing Directors,” “Executive Officers of the Company,” and “Securities Ownership and Principal Holders” in the proxy statement relating to the Company’s 2017 annual meeting of shareholders (the Proxy Statement) is incorporated herein by reference.
Code of Business Conduct
Pursuant to Rule 303A.10 of the NYSE and Rule 4350(n) of the NASDAQ, we are required to adopt a code of business conduct and ethics for our directors, officers, and employees. In February 2004, the Board of Directors adopted the Code of Business Conduct (Code of Conduct), and revised it in July 2016. The revised Code of Conduct also meets the requirements of a code of ethics under Item 406 of Regulation S-K. You can access the Company’s Code of Conduct on the Governance page of the Company’s website at
www.apachecorp.com
. Any shareholder who so requests may obtain a printed copy of the Code of Conduct by submitting a request to the Company’s corporate secretary at the address on the cover of this Form 10-K. Changes in and waivers to the Code of Conduct for the Company’s directors, chief executive officer and certain senior financial officers will be posted on the Company’s website within five business days and maintained for at least 12 months. Information on our website or any other website is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K.
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
The information set forth under the captions “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Grants of Plan Based Awards Table,” “Outstanding Equity Awards at Fiscal Year-End Table,” “Option Exercises and Stock Vested Table,” “Non-Qualified Deferred Compensation Table,” “Potential Payments Upon Termination or Change in Control” and “Director Compensation Table” in the Proxy Statement is incorporated herein by reference.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The information set forth under the captions “Securities Ownership and Principal Holders” and “Equity Compensation Plan Information” in the Proxy Statement is incorporated herein by reference.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
The information set forth under the captions “Certain Business Relationships and Transactions” and “Director Independence” in the Proxy Statement is incorporated herein by reference.
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
The information set forth under the caption “Ratification of Appointment of Independent Auditors” in the Proxy Statement is incorporated herein by reference.
49
PART IV
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
|
(a)
|
Documents included in this report:
|
|
1.
|
Financial Statements
|
|
Report of management on internal control over financial reporting
|
F-1
|
|
Report of independent registered public accounting firm
|
F-2
|
|
Report of independent registered public accounting firm
|
F-3
|
|
Statement of consolidated operations for each of the three years in the period ended December 31, 2016
|
F-4
|
|
Statement of consolidated comprehensive income (loss) for each of the three years in the period ended December 31, 2016
|
F-5
|
|
Statement of consolidated cash flows for each of the three years in the period ended December 31, 2016
|
F-6
|
|
Consolidated balance sheet as of December 31, 2016 and 2015
|
F-7
|
|
Statement of consolidated changes in equity for each of the three years in the period ended December 31, 2016
|
F-8
|
|
Notes to consolidated financial statements
|
F-9
|
|
2.
|
Financial Statement Schedules
|
|
Financial statement schedules have been omitted because they are either not required, not applicable or the information required to be presented is included in the Company’s financial statements and related notes.
|
|
|
3.
|
Exhibits
|
See Index to Exhibits of this report.
|
ITEM 16.
|
FORM 10-K SUMMARY
|
None
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
APACHE CORPORATION
/s/ John J. Christmann IV
John J. Christmann IV
Chief Executive Officer and President
Dated:
February 24, 2017
POWER OF ATTORNEY
The officers and directors of Apache Corporation, whose signatures appear below, hereby constitute and appoint John J. Christmann IV, Stephen J. Riney, and Rebecca A. Hoyt, and each of them (with full power to each of them to act alone), the true and lawful attorney-in-fact to sign and execute, on behalf of the undersigned, any amendment(s) to this report and each of the undersigned does hereby ratify and confirm all that said attorneys shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Name
|
|
Title
|
|
Date
|
|
/s/ John J. Christmann IV
John J. Christmann IV
|
|
Chief Executive Officer and President
(principal executive officer)
|
|
February 24, 2017
|
|
/s/ Stephen J. Riney
Stephen J. Riney
|
|
Executive Vice President and Chief Financial Officer (principal financial officer)
|
|
February 24, 2017
|
|
/s/ Rebecca A. Hoyt
Rebecca A. Hoyt
|
|
Senior Vice President, Chief Accounting Officer, and Controller
(principal accounting officer)
|
|
February 24, 2017
|
|
/s/ ANNELL R. BAY
Annell R. Bay
|
|
Director
|
|
February 24, 2017
|
|
/s/ CHANSOO JOUNG
Chansoo Joung
|
|
Director
|
|
February 24, 2017
|
|
/s/ GEORGE D. LAWRENCE
George D. Lawrence
|
|
Director
|
|
February 24, 2017
|
|
/s/ JOHN E. LOWE
John E. Lowe
|
|
Director
|
|
February 24, 2017
|
|
/s/ WILLIAM C. MONTGOMERY
William C. Montgomery
|
|
Director
|
|
February 24, 2017
|
|
/s/ AMY H. NELSON
Amy H. Nelson
|
|
Director
|
|
February 24, 2017
|
|
/s/ RODMAN D. PATTON
Rodman D. Patton
|
|
Director
|
|
February 24, 2017
|
|
/s/ CHARLES J. PITMAN
Charles J. Pitman
|
|
Director
|
|
February 24, 2017
|
|
/s/ DANIEL W. RABUN
Daniel W. Rabun
|
|
Director
|
|
February 24, 2017
|
|
/s/ PETER A. RAGAUSS
Peter A. Ragauss
|
|
Director
|
|
February 24, 2017
|
51
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for the preparation and integrity of the consolidated financial statements appearing in this annual report on Form 10-K. The financial statements were prepared in conformity with accounting principles generally accepted in the United States and include amounts that are based on management’s best estimates and judgments.
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal control over financial reporting is supported by a program of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel and a written code of business conduct adopted by our Company’s board of directors, applicable to all Company directors and all officers and employees of our Company and subsidiaries.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control – Integrated Framework (2013).
Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2016.
The Company’s independent auditors, Ernst & Young LLP, a registered public accounting firm, are appointed by the Audit Committee of the Company’s board of directors. Ernst & Young LLP have audited and reported on the consolidated financial statements of Apache Corporation and subsidiaries and the effectiveness of the Company’s internal control over financial reporting. The reports of the independent auditors follow this report on pages F-2 and F-3.
|
/s/ John J. Christmann IV
|
|
Chief Executive Officer and President
|
|
(principal executive officer)
|
|
/s/ Stephen J. Riney
|
|
Executive Vice President and Chief Financial Officer
|
|
(principal financial officer)
|
|
/s/ Rebecca A. Hoyt
|
|
Senior Vice President, Chief Accounting Officer and Controller
|
|
(principal accounting officer)
|
Houston, Texas
February 24, 2017
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Apache Corporation:
We have audited the accompanying consolidated balance sheet of Apache Corporation and subsidiaries as of December 31, 2016 and 2015, and the related statements of consolidated operations, comprehensive income (loss), cash flows, and changes in equity for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Apache Corporation and subsidiaries at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company has elected to change its method of accounting for oil and gas exploration and development activities from the full-cost method of accounting to the successful-efforts method of accounting in 2016.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Apache Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria established in
Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
February 24, 2017
, expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 24, 2017
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Apache Corporation:
We have audited Apache Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in
Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Apache Corporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Apache Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Apache Corporation and subsidiaries as of December 31, 2016 and 2015, and the related statements of consolidated operations, comprehensive income (loss), cash flows, and changes in equity for each of the three years in the period ended December 31, 2016 of Apache Corporation and subsidiaries, and our report dated
February 24, 2017
, expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 24, 2017
F-3
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015*
|
2014*
|
|||||||||
|
|
(In millions, except per common share data)
|
|||||||||||
|
REVENUES AND OTHER:
|
||||||||||||
|
Oil and gas production revenues:
|
||||||||||||
|
Oil revenues
|
$
|
4,172
|
|
$
|
5,107
|
|
$
|
10,110
|
|
|||
|
Natural gas revenues
|
967
|
|
1,176
|
|
2,017
|
|
||||||
|
Natural gas liquids revenues
|
228
|
|
227
|
|
668
|
|
||||||
|
5,367
|
|
6,510
|
|
12,795
|
|
|||||||
|
Other
|
(34
|
)
|
98
|
|
285
|
|
||||||
|
Gain (loss) on divestiture
|
21
|
|
281
|
|
(1,608
|
)
|
||||||
|
5,354
|
|
6,889
|
|
11,472
|
|
|||||||
|
OPERATING EXPENSES:
|
||||||||||||
|
Lease operating expenses
|
1,494
|
|
1,854
|
|
2,238
|
|
||||||
|
Gathering and transportation
|
200
|
|
211
|
|
273
|
|
||||||
|
Taxes other than income
|
126
|
|
282
|
|
577
|
|
||||||
|
Exploration
|
473
|
|
2,771
|
|
2,499
|
|
||||||
|
General and administrative
|
410
|
|
380
|
|
453
|
|
||||||
|
Depreciation, depletion, and amortization:
|
||||||||||||
|
Oil and gas property and equipment
|
2,460
|
|
2,976
|
|
4,195
|
|
||||||
|
Other assets
|
158
|
|
324
|
|
331
|
|
||||||
|
Asset retirement obligation accretion
|
156
|
|
145
|
|
154
|
|
||||||
|
Impairments
|
1,103
|
|
9,472
|
|
7,102
|
|
||||||
|
Transaction, reorganization, and separation
|
39
|
|
132
|
|
67
|
|
||||||
|
Financing costs, net
|
417
|
|
511
|
|
413
|
|
||||||
|
7,036
|
|
19,058
|
|
18,302
|
|
|||||||
|
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(1,682
|
)
|
(12,169
|
)
|
(6,830
|
)
|
||||||
|
Current income tax provision
|
391
|
|
435
|
|
1,281
|
|
||||||
|
Deferred income tax benefit
|
(833
|
)
|
(1,445
|
)
|
(1,799
|
)
|
||||||
|
NET LOSS FROM CONTINUING OPERATIONS
|
||||||||||||
|
INCLUDING NONCONTROLLING INTEREST
|
(1,240
|
)
|
(11,159
|
)
|
(6,312
|
)
|
||||||
|
Net income (loss) from discontinued operations, net of tax
|
(33
|
)
|
492
|
|
(1,707
|
)
|
||||||
|
NET LOSS INCLUDING NONCONTROLLING INTEREST
|
(1,273
|
)
|
(10,667
|
)
|
(8,019
|
)
|
||||||
|
Net income (loss) attributable to noncontrolling interest
|
132
|
|
(315
|
)
|
341
|
|
||||||
|
NET LOSS ATTRIBUTABLE TO COMMON STOCK
|
$
|
(1,405
|
)
|
$
|
(10,352
|
)
|
$
|
(8,360
|
)
|
|||
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
|
||||||||||||
|
Net loss from continuing operations attributable to common shareholders
|
$
|
(1,372
|
)
|
$
|
(10,844
|
)
|
$
|
(6,653
|
)
|
|||
|
Net income (loss) from discontinued operations
|
(33
|
)
|
492
|
|
(1,707
|
)
|
||||||
|
Net loss attributable to common shareholders
|
$
|
(1,405
|
)
|
$
|
(10,352
|
)
|
$
|
(8,360
|
)
|
|||
|
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE:
|
||||||||||||
|
Basic and diluted net loss from continuing operations per share
|
$
|
(3.62
|
)
|
$
|
(28.70
|
)
|
$
|
(17.32
|
)
|
|||
|
Basic and diluted net income (loss) from discontinued operations per share
|
(0.09
|
)
|
1.30
|
|
(4.44
|
)
|
||||||
|
Basic and diluted net loss per share
|
$
|
(3.71
|
)
|
$
|
(27.40
|
)
|
$
|
(21.76
|
)
|
|||
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
|
||||||||||||
|
Basic
|
379
|
|
378
|
|
384
|
|
||||||
|
Diluted
|
379
|
|
378
|
|
384
|
|
||||||
|
DIVIDENDS DECLARED PER COMMON SHARE
|
$
|
1.00
|
|
$
|
1.00
|
|
$
|
1.00
|
|
|||
*Financial information for 2015 and 2014 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements are an integral part of this statement.
F-4
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015*
|
2014*
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
NET LOSS INCLUDING NONCONTROLLING INTEREST
|
$
|
(1,273
|
)
|
$
|
(10,667
|
)
|
$
|
(8,019
|
)
|
|||
|
OTHER COMPREHENSIVE INCOME (LOSS):
|
||||||||||||
|
Pension and postretirement benefit plan, net of tax
|
7
|
|
(3
|
)
|
—
|
|
||||||
|
Commodity cash flow hedge activity, net of tax:
|
||||||||||||
|
Change in fair value of derivative instruments
|
—
|
|
—
|
|
(1
|
)
|
||||||
|
7
|
|
(3
|
)
|
(1
|
)
|
|||||||
|
COMPREHENSIVE LOSS INCLUDING NONCONTROLLING INTEREST
|
(1,266
|
)
|
(10,670
|
)
|
(8,020
|
)
|
||||||
|
Comprehensive income (loss) attributable to noncontrolling interest
|
132
|
|
(315
|
)
|
341
|
|
||||||
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCK
|
$
|
(1,398
|
)
|
$
|
(10,355
|
)
|
$
|
(8,361
|
)
|
|||
*Financial information for 2015 and 2014 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements are an integral part of this statement.
F-5
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015*
|
2014*
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net loss including noncontrolling interest
|
$
|
(1,273
|
)
|
$
|
(10,667
|
)
|
$
|
(8,019
|
)
|
|||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||
|
Loss (income) from discontinued operations
|
33
|
|
(492
|
)
|
1,707
|
|
||||||
|
Loss (gain) on divestitures
|
(21
|
)
|
(281
|
)
|
1,608
|
|
||||||
|
Exploratory dry hole expense and unproved leasehold impairments
|
353
|
|
2,595
|
|
2,294
|
|
||||||
|
Depreciation, depletion, and amortization
|
2,618
|
|
3,300
|
|
4,526
|
|
||||||
|
Asset retirement obligation accretion
|
156
|
|
145
|
|
154
|
|
||||||
|
Impairments
|
1,103
|
|
9,472
|
|
7,102
|
|
||||||
|
Benefit from deferred income taxes
|
(833
|
)
|
(1,445
|
)
|
(1,799
|
)
|
||||||
|
Other
|
164
|
|
7
|
|
(231
|
)
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Receivables
|
126
|
|
663
|
|
757
|
|
||||||
|
Inventories
|
(27
|
)
|
21
|
|
(31
|
)
|
||||||
|
Drilling advances
|
91
|
|
138
|
|
107
|
|
||||||
|
Deferred charges and other
|
115
|
|
(345
|
)
|
(301
|
)
|
||||||
|
Accounts payable
|
(63
|
)
|
(489
|
)
|
(216
|
)
|
||||||
|
Accrued expenses
|
(9
|
)
|
(156
|
)
|
(572
|
)
|
||||||
|
Deferred credits and noncurrent liabilities
|
(80
|
)
|
88
|
|
(73
|
)
|
||||||
|
NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES
|
2,453
|
|
2,554
|
|
7,013
|
|
||||||
|
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
|
(23
|
)
|
113
|
|
944
|
|
||||||
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
2,430
|
|
2,667
|
|
7,957
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Additions to oil and gas property
|
(1,610
|
)
|
(4,208
|
)
|
(8,608
|
)
|
||||||
|
Additions to gas gathering, transmission, and processing facilities
|
(158
|
)
|
(233
|
)
|
(881
|
)
|
||||||
|
Leasehold and property acquisitions
|
(181
|
)
|
(367
|
)
|
(1,475
|
)
|
||||||
|
Proceeds from sale of Kitimat LNG
|
—
|
|
854
|
|
—
|
|
||||||
|
Proceeds from sale of Yara Pilbara
|
—
|
|
391
|
|
—
|
|
||||||
|
Proceeds from sale of Deepwater Gulf of Mexico assets
|
—
|
|
—
|
|
1,360
|
|
||||||
|
Proceeds from sale of Anadarko basin and southern Louisiana assets
|
—
|
|
—
|
|
1,262
|
|
||||||
|
Proceeds from sale of oil and gas properties, other
|
134
|
|
268
|
|
470
|
|
||||||
|
Other, net
|
155
|
|
6
|
|
(299
|
)
|
||||||
|
NET CASH USED IN CONTINUING INVESTING ACTIVITIES
|
(1,660
|
)
|
(3,289
|
)
|
(8,171
|
)
|
||||||
|
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
|
—
|
|
4,372
|
|
(219
|
)
|
||||||
|
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(1,660
|
)
|
1,083
|
|
(8,390
|
)
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Commercial paper, credit facilities and bank notes, net
|
—
|
|
(1,570
|
)
|
1,568
|
|
||||||
|
Payments on fixed rate debt
|
(181
|
)
|
(939
|
)
|
—
|
|
||||||
|
Distributions to noncontrolling interest
|
(293
|
)
|
(129
|
)
|
(140
|
)
|
||||||
|
Dividends paid
|
(379
|
)
|
(377
|
)
|
(365
|
)
|
||||||
|
Treasury stock activity, net
|
—
|
|
—
|
|
(1,864
|
)
|
||||||
|
Other
|
(7
|
)
|
53
|
|
49
|
|
||||||
|
NET CASH USED IN CONTINUING FINANCING ACTIVITIES
|
(860
|
)
|
(2,962
|
)
|
(752
|
)
|
||||||
|
NET CASH USED IN DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
(42
|
)
|
||||||
|
NET CASH USED IN FINANCING ACTIVITIES
|
(860
|
)
|
(2,962
|
)
|
(794
|
)
|
||||||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(90
|
)
|
788
|
|
(1,227
|
)
|
||||||
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
1,467
|
|
679
|
|
1,906
|
|
||||||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
1,377
|
|
$
|
1,467
|
|
$
|
679
|
|
|||
|
SUPPLEMENTARY CASH FLOW DATA:
|
||||||||||||
|
Interest paid, net of capitalized interest
|
$
|
413
|
|
$
|
461
|
|
$
|
260
|
|
|||
|
Income taxes paid, net of refunds
|
305
|
|
573
|
|
1,357
|
|
||||||
*Financial information for 2015 and 2014 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements are an integral part of this statement.
F-6
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
|
|
December 31,
|
|||||||
|
|
2016
|
2015*
|
||||||
|
|
(In millions)
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS:
|
||||||||
|
Cash and cash equivalents
|
$
|
1,377
|
|
$
|
1,467
|
|
||
|
Receivables, net of allowance
|
1,128
|
|
1,253
|
|
||||
|
Inventories
|
476
|
|
570
|
|
||||
|
Drilling advances
|
81
|
|
172
|
|
||||
|
Prepaid assets and other
|
179
|
|
290
|
|
||||
|
3,241
|
|
3,752
|
|
|||||
|
PROPERTY AND EQUIPMENT:
|
||||||||
|
Oil and gas, on the basis of successful efforts accounting:
|
||||||||
|
Proved properties
|
42,693
|
|
41,728
|
|
||||
|
Unproved properties and properties under development
|
1,969
|
|
2,277
|
|
||||
|
Gathering, transmission, and processing facilities
|
976
|
|
1,052
|
|
||||
|
Other
|
1,111
|
|
1,093
|
|
||||
|
46,749
|
|
46,150
|
|
|||||
|
Less: Accumulated depreciation, depletion, and amortization
|
(27,882
|
)
|
(25,312
|
)
|
||||
|
18,867
|
|
20,838
|
|
|||||
|
OTHER ASSETS:
|
||||||||
|
Deferred charges and other
|
411
|
|
910
|
|
||||
|
$
|
22,519
|
|
$
|
25,500
|
|
|||
|
LIABILITIES AND EQUITY
|
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Accounts payable
|
$
|
585
|
|
$
|
618
|
|
||
|
Other current liabilities
|
1,258
|
|
1,223
|
|
||||
|
1,843
|
|
1,841
|
|
|||||
|
LONG-TERM DEBT
|
8,544
|
|
8,716
|
|
||||
|
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
|
||||||||
|
Income taxes
|
1,710
|
|
2,529
|
|
||||
|
Asset retirement obligation
|
2,432
|
|
2,562
|
|
||||
|
Other
|
311
|
|
362
|
|
||||
|
4,453
|
|
5,453
|
|
|||||
|
COMMITMENTS AND CONTINGENCIES (Note 10)
|
|
|
||||||
|
EQUITY:
|
||||||||
|
Common stock, $0.625 par, 860,000,000 shares authorized, 412,612,102 and 411,218,105 shares issued, respectively
|
258
|
|
257
|
|
||||
|
Paid-in capital
|
12,364
|
|
12,619
|
|
||||
|
Accumulated deficit
|
(3,385
|
)
|
(1,980
|
)
|
||||
|
Treasury stock, at cost, 33,172,426 and 33,183,930 shares, respectively
|
(2,887
|
)
|
(2,889
|
)
|
||||
|
Accumulated other comprehensive loss
|
(112
|
)
|
(119
|
)
|
||||
|
APACHE SHAREHOLDERS’ EQUITY
|
6,238
|
|
7,888
|
|
||||
|
Noncontrolling interest
|
1,441
|
|
1,602
|
|
||||
|
TOTAL EQUITY
|
7,679
|
|
9,490
|
|
||||
|
$
|
22,519
|
|
$
|
25,500
|
|
|||
*Financial information for 2015 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements are an integral part of this statement.
F-7
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
|
Common
Stock
|
Paid-In
Capital
|
Retained
Earnings
(Accumulated
Deficit)
|
Treasury
Stock
|
Accumulated
Other
Comprehensive
(Loss)
|
APACHE
SHAREHOLDERS’
EQUITY
|
Non-
Controlling
Interest
|
TOTAL
EQUITY
|
||||||||||||||||||||||||
|
|
(In millions)
|
||||||||||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2013*
|
$
|
255
|
|
$
|
12,403
|
|
$
|
17,395
|
|
$
|
(1,027
|
)
|
$
|
(115
|
)
|
$
|
28,911
|
|
$
|
1,845
|
|
$
|
30,756
|
|
|||||||
|
Net income (loss)
|
—
|
|
—
|
|
(8,360
|
)
|
—
|
|
—
|
|
(8,360
|
)
|
341
|
|
(8,019
|
)
|
|||||||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(140
|
)
|
(140
|
)
|
|||||||||||||||
|
Commodity hedges, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
—
|
|
(1
|
)
|
|||||||||||||||
|
Common dividends ($1.00 per share)
|
—
|
|
—
|
|
(380
|
)
|
—
|
|
—
|
|
(380
|
)
|
—
|
|
(380
|
)
|
|||||||||||||||
|
Common stock activity, net
|
1
|
|
(11
|
)
|
—
|
|
—
|
|
—
|
|
(10
|
)
|
—
|
|
(10
|
)
|
|||||||||||||||
|
Treasury stock activity, net
|
—
|
|
(1
|
)
|
—
|
|
(1,863
|
)
|
—
|
|
(1,864
|
)
|
—
|
|
(1,864
|
)
|
|||||||||||||||
|
Compensation expense
|
—
|
|
202
|
|
—
|
|
—
|
|
—
|
|
202
|
|
—
|
|
202
|
|
|||||||||||||||
|
Other
|
—
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
—
|
|
(3
|
)
|
|||||||||||||||
|
BALANCE AT DECEMBER 31, 2014*
|
$
|
256
|
|
$
|
12,590
|
|
$
|
8,655
|
|
$
|
(2,890
|
)
|
$
|
(116
|
)
|
$
|
18,495
|
|
$
|
2,046
|
|
$
|
20,541
|
|
|||||||
|
Net loss
|
—
|
|
—
|
|
(10,352
|
)
|
—
|
|
—
|
|
(10,352
|
)
|
(315
|
)
|
(10,667
|
)
|
|||||||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(129
|
)
|
(129
|
)
|
|||||||||||||||
|
Postretirement benefit plans, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
(3
|
)
|
—
|
|
(3
|
)
|
|||||||||||||||
|
Common dividends ($1.00 per share)
|
—
|
|
(95
|
)
|
(283
|
)
|
—
|
|
—
|
|
(378
|
)
|
—
|
|
(378
|
)
|
|||||||||||||||
|
Common stock activity, net
|
1
|
|
(15
|
)
|
—
|
|
—
|
|
—
|
|
(14
|
)
|
—
|
|
(14
|
)
|
|||||||||||||||
|
Treasury stock activity, net
|
—
|
|
(1
|
)
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||
|
Compensation expense
|
—
|
|
140
|
|
—
|
|
—
|
|
—
|
|
140
|
|
—
|
|
140
|
|
|||||||||||||||
|
BALANCE AT DECEMBER 31, 2015*
|
$
|
257
|
|
$
|
12,619
|
|
$
|
(1,980
|
)
|
$
|
(2,889
|
)
|
$
|
(119
|
)
|
$
|
7,888
|
|
$
|
1,602
|
|
$
|
9,490
|
|
|||||||
|
Net income (loss)
|
—
|
|
—
|
|
(1,405
|
)
|
—
|
|
—
|
|
(1,405
|
)
|
132
|
|
(1,273
|
)
|
|||||||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(293
|
)
|
(293
|
)
|
|||||||||||||||
|
Postretirement benefit plans, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
7
|
|
7
|
|
—
|
|
7
|
|
|||||||||||||||
|
Common dividends ($1.00 per share)
|
—
|
|
(379
|
)
|
—
|
|
—
|
|
—
|
|
(379
|
)
|
—
|
|
(379
|
)
|
|||||||||||||||
|
Common stock activity, net
|
1
|
|
(39
|
)
|
—
|
|
—
|
|
—
|
|
(38
|
)
|
—
|
|
(38
|
)
|
|||||||||||||||
|
Treasury stock activity, net
|
—
|
|
(1
|
)
|
—
|
|
2
|
|
—
|
|
1
|
|
—
|
|
1
|
|
|||||||||||||||
|
Compensation expense
|
—
|
|
164
|
|
—
|
|
—
|
|
—
|
|
164
|
|
—
|
|
164
|
|
|||||||||||||||
|
BALANCE AT DECEMBER 31, 2016
|
$
|
258
|
|
$
|
12,364
|
|
$
|
(3,385
|
)
|
$
|
(2,887
|
)
|
$
|
(112
|
)
|
$
|
6,238
|
|
$
|
1,441
|
|
$
|
7,679
|
|
|||||||
*Financial information for 2015, 2014, and 2013 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements are an integral part of this statement.
F-8
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nature of Operations
Apache Corporation (Apache or the Company) is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. The Company has exploration and production interests in
four
geographic areas: the United States (U.S.), Canada, Egypt, and the United Kingdom (U.K.) North Sea (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies used by Apache and its subsidiaries reflect industry practices and conform to accounting principles generally accepted in the U.S. (GAAP). The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-year presentation. During the second quarter of 2015, Apache completed the sale of its Australian LNG business and oil and gas assets. In March 2014, Apache completed the sale of all of its operations in Argentina. Results of operations and cash flows for the divested Australia assets and Argentina operations are reflected as discontinued operations in the Company’s financial statements for all periods presented. Significant policies are discussed below.
Recast Financial Information for Change in Accounting Principle
In the second quarter of 2016, Apache voluntarily changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method of accounting. The financial information for prior periods has been recast to reflect retrospective application of the successful efforts method, as prescribed by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 932 “Extractive Activities—Oil and Gas.” Although the full cost method of accounting for oil and gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the generally preferred method of the U.S. Securities and Exchange Commission (SEC) and is more widely used in the industry such that the change improves comparability of the Company’s financial statements to its peers. The Company believes the successful efforts method provides a more representational depiction of assets and operating results. The successful efforts method also provides for the Company’s investments in oil and gas properties to be assessed for impairment in accordance with ASC 360 “Property, Plant, and Equipment” rather than valuations based on prices and costs prescribed under the full cost method as of the balance sheet date. For more detailed information regarding the effects of the change to the successful efforts method, please refer to Note 2—Change in Accounting Principle. The Company has recast certain historical information for the years ended 2015 and 2014, including the Statement of Consolidated Operations, Statement of Consolidated Comprehensive Income (Loss), Statement of Consolidated Cash Flows, Consolidated Balance Sheet, Statement of Consolidated Changes in Equity, and related information in Notes 1, 2, 3, 4, 6, 7, 8, 9, 12, 13, 15, 16, 17, and 18.
In addition, in the first quarter of 2016, the Company retrospectively adopted a new accounting standard update for all periods presented which requires debt issuance costs to be presented as a direct deduction from the carrying value of the associated debt liability, consistent with debt discounts. For more information regarding this update, please refer to Note 8—Debt and Financing Costs.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated. The Company consolidates all other investments in which, either through direct or indirect ownership, Apache has more than a
50 percent
voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated Apache subsidiary and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in Apache’s Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate component of equity in Apache’s consolidated balance sheet. Investments in which Apache holds less than
50 percent
of the voting interest are typically accounted for under the equity method of accounting, with the balance recorded as a component of “Deferred charges and other” in Apache’s consolidated balance sheet and results of operations recorded as a component of “Other” under “Revenues and Other” in the Company’s statement of consolidated operations.
F-9
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Use of Estimates
Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Apache evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its financial statements and changes in these estimates are recorded when known. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities and assets held for sale at year-end (see Note 3—Acquisitions and Divestitures), the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom (see Note 16—Supplemental Oil and Gas Disclosures), the assessment of asset retirement obligations (see Note 7—Asset Retirement Obligation), the estimates of fair value for long-lived assets and goodwill (see “Fair Value Measurements,” “Property and Equipment,” and “Goodwill” sections in this Note 1 below), and the estimate of income taxes (see Note 9—Income Taxes).
Fair Value Measurements
Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. ASC 820-10-35 provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.
The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
Recurring fair value measurements are presented in further detail in Note 8—Debt and Note 11—Retirement and Deferred Compensation Plans.
Apache also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. For the year ended
December 31, 2016
, the Company recorded asset impairments totaling
$1.1 billion
in connection with fair value assessments in the current low commodity price environment. Impairments totaling
$427 million
and
$135 million
were recorded for proved properties and gathering, transmission, and processing (GTP) facilities, respectively, which were written down to their fair values. These impairments are discussed in further detail below in “Property and Equipment.” Also in 2016, the Company recorded
$486 million
for a U.K. Petroleum Revenue Tax (PRT) decommissioning asset that is no longer expected to be realizable from future abandonment activities in the North Sea and
$55 million
for inventory write-downs.
In 2016, the U.K. government enacted Finance Bill 2016, providing tax relief to exploration and production (E&P) companies operating in the U.K. North Sea. Under the enacted legislation, the U.K. PRT rate was reduced to
zero
from the previously enacted
35 percent
rate in effect from January 1, 2016. PRT expense ceased prospectively from that date. As a further result of this change, the Company reduced the recoverable PRT decommissioning asset that would have been realized from future abandonment activities by
$486 million
(
$292 million
net of tax). This recoverable PRT decommissioning asset had an aggregate remaining value of
$8 million
as of December 31, 2016, which is recorded in “Deferred charges and other” on the consolidated balance sheet. The recoverable value of the PRT decommissioning asset was estimated using the income approach. The expected future cash flows used in the determination were based on anticipated spending and timing of planned future abandonment activities for applicable fields, considering all available information at the date of review. Apache has classified this fair value measurement as Level 3 in the fair value hierarchy.
For the year ended December 31, 2015, the Company recorded asset impairments totaling
$9.5 billion
in connection with fair value assessments. Impairments totaling
$7.4 billion
and
$1.7 billion
were recorded for proved properties and GTP facilities, respectively, which were written down to their fair values. These impairments are discussed in further detail below in “Property and Equipment.” Also in 2015, the Company recorded
$163 million
for the impairment of goodwill,
$148 million
for the impairment of an equity method investment sold in the fourth quarter, and
$55 million
for inventory write-downs. For a discussion of the equity method investment impairment, see Note 3—Acquisitions and Divestitures.
F-10
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For the year ended December 31, 2014, the Company recorded asset impairments totaling
$7.1 billion
in connection with fair value assessments, including
$6.1 billion
for proved properties,
$347 million
for the impairment of goodwill,
$655 million
for the impairment of assets held for sale, and
$32 million
for inventory write-downs. The Company also recorded
$833 million
in impairments related to the sale of the Company’s Australian assets and an additional
$271 million
in impairment of proved properties and inventory in Australia. These impairments are classified as discontinued operations in 2014. For discussion of these impairments, see “Property and Equipment” and “Goodwill” below and Note 3—Acquisitions and Divestitures.
Cash Equivalents
The Company considers all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value. As of
December 31, 2016
and
2015
, Apache had
$1.4 billion
and
$1.5 billion
, respectively, of cash and cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the historical carrying amount net of write-offs and an allowance for doubtful accounts. The carrying amount of Apache’s accounts receivable approximates fair value because of the short-term nature of the instruments. The Company routinely assesses the collectability of all material trade and other receivables. Many of Apache’s receivables are from joint interest owners on properties Apache operates. The Company may have the ability to withhold future revenue disbursements to recover any non-payment of these joint interest billings. The Company accrues a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. As of
December 31, 2016
,
2015
, and
2014
, the Company had an allowance for doubtful accounts of
$93 million
,
$103 million
, and
$98 million
, respectively.
The following table describes changes to the Company’s allowance for doubtful accounts for
2016
,
2015
, and
2014
:
|
2016
|
2015
|
2014
|
||||||||||
|
(In millions)
|
||||||||||||
|
Allowance for doubtful accounts at beginning of year
|
$
|
103
|
|
$
|
98
|
|
$
|
78
|
|
|||
|
Additional provisions for the year
|
14
|
|
40
|
|
4
|
|
||||||
|
Uncollectible accounts written off net of recoveries
|
(24
|
)
|
(35
|
)
|
16
|
|
||||||
|
Allowance for doubtful accounts at end of year
|
$
|
93
|
|
$
|
103
|
|
$
|
98
|
|
|||
Inventories
Inventories consist principally of tubular goods and equipment, stated at weighted-average cost, and oil produced but not sold, stated at the lower of cost or market.
Property and Equipment
The carrying value of Apache’s property and equipment represents the cost incurred to acquire the property and equipment, including capitalized interest, net of any impairments. For business combinations, property and equipment cost is based on the fair values at the acquisition date.
Oil and Gas Property
The Company follows the successful efforts method of accounting for its oil and gas property. Under this method of accounting, exploration costs such as exploratory geological and geophysical costs, delay rentals, and exploration overhead are expensed as incurred. All costs related to production, general corporate overhead, and similar activities are expensed as incurred. If an exploratory well provides evidence to justify potential development of reserves, drilling costs associated with the well are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. This determination may take longer than one year in certain areas depending on, among other things, the amount of hydrocarbons discovered, the outcome of planned geological and engineering studies, the need for additional appraisal drilling activities to determine whether the discovery is sufficient to support an economic development plan, and government sanctioning of development activities in certain international locations. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities; in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.
F-11
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Acquisition costs of unproved properties are assessed for impairment at least annually and are transferred to proved oil and gas properties to the extent the costs are associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment based on the Company’s current exploration plans. Unproved oil and gas properties with individually insignificant lease acquisition costs are amortized on a group basis over the average lease term at rates that provide for full amortization of unsuccessful leases upon lease expiration or abandonment. Costs of expired or abandoned leases are charged to exploration expense, while costs of productive leases are transferred to proved oil and gas properties. Costs of maintaining and retaining unproved properties, as well as amortization of individually insignificant leases and impairment of unsuccessful leases, are included in exploration costs in the statement of consolidated operations.
Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of crude oil and natural gas, are capitalized. Depreciation of the cost of proved oil and gas properties is calculated using the unit-of-production (UOP) method. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the carrying value of those reserves. The reserve base used to calculate depreciation for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. With respect to lease and well equipment costs, which include development costs and successful exploration drilling costs, the reserve base includes only proved developed reserves. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are included in the depreciable cost.
Oil and gas properties are grouped for depreciation in accordance with ASC 932 “Extractive Activities - Oil and Gas.” The basis for grouping is a reasonable aggregation of properties with a common geological structural feature or stratigraphic condition, such as a reservoir or field.
When circumstances indicate that proved oil and gas properties may be impaired, the Company compares unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on Apache’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in the ASC 820 “Fair Value Measurement.” If applicable, the Company utilizes accepted bids as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. Apache has classified these fair value measurements as Level 3 in the fair value hierarchy.
The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for
2016
,
2015
, and
2014
:
|
For the Year Ended December 31,
|
||||||||||||
|
2016
|
2015
|
2014
|
||||||||||
|
(In millions)
|
||||||||||||
|
Oil and Gas Property:
|
||||||||||||
|
Proved
|
$
|
427
|
|
$
|
7,389
|
|
$
|
6,068
|
|
|||
|
Unproved
|
272
|
|
2,462
|
|
1,976
|
|
||||||
The fair values of the impaired proved properties as of the most recent date of impairment were
$306 million
,
$3.9 billion
, and
$4.8 billion
for
2016
,
2015
, and
2014
, respectively.
In the statement of consolidated operations, unproved property impairments are recorded in exploration expense, and proved property impairments are recorded in impairments.
Gains and losses on significant divestitures are recognized in the statement of consolidated operations. See Note 3—Acquisitions and Divestitures for more detail.
F-12
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Gathering, Transmission, and Processing Facilities
GTP facilities totaled
$976 million
and
$1.1 billion
at
December 31, 2016
and
2015
, respectively, with accumulated depreciation for these assets totaling
$130 million
and
$160 million
for the respective periods. GTP facilities are depreciated on a straight-line basis over the estimated useful lives of the assets. The estimation of useful life takes into consideration anticipated production lives from the fields serviced by the GTP assets, whether Apache-operated or third party, as well as potential development plans by Apache for undeveloped acreage within or in close proximity to those fields.
The Company assesses the carrying amount of its GTP facilities whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If the carrying amount of these facilities is more than the sum of the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying value over its fair value. During 2016, the Company recorded impairments of
$135 million
on certain GTP assets in the North Sea, which were written down to their fair values of
$142 million
. The fair values of the impaired assets were determined using a combination of the income approach and the market approach. The income approach considers internal estimates of future throughput volumes, processing rates, and costs. These assumptions were applied to develop future cash flow projections that were then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. Apache has classified these non-recurring fair value measurements as Level 3 in the fair value hierarchy. During 2015, the Company recorded impairments of
$1.7 billion
on certain GTP assets, including
$1.1 billion
in Egypt,
$555 million
in Canada, and
$103 million
in the U.S., which were written down to their fair values of
$306 million
in aggregate. During 2014, the Company recorded impairments of
$1.1 billion
of its GTP assets related to the sale of Apache’s Wheatstone and Kitimat LNG projects, and the remaining carrying value of those assets was reclassified to “Assets held for sale” on the Company’s consolidated balance sheet as of December 31, 2014. The
$430 million
impairment of GTP assets related to Apache's Wheatstone LNG project is reflected in discontinued operations in the Company's statement of consolidated operations.
The costs of GTP facilities retired or otherwise disposed of and associated accumulated depreciation are removed from Apache’s consolidated financial statements, and the resulting gain or loss is reflected in “Gain (loss) on divestitures” under “Revenues and Other” in the Company’s statement of consolidated operations. No gain or loss on the sales of GTP facilities was recognized during 2016. During 2015, Apache recorded a gain on the sale of GTP facilities totaling
$59 million
associated with the Company’s divestitures of certain Permian Basin assets. During 2014, the Company recorded a loss totaling
$180 million
associated with divestitures of certain Anadarko basin and southern Louisiana assets.
Other Property and Equipment
Other property and equipment includes computer software and equipment, buildings, vehicles, furniture and fixtures, land, and other equipment. These assets are depreciated on a straight-line basis over the estimated useful lives of the assets, which range from
3
to
20
years. Accumulated depreciation for these assets totaled
$780 million
and
$693 million
at
December 31, 2016
and
2015
, respectively.
Asset Retirement Costs and Obligations
The initial estimated asset retirement obligation related to property and equipment is recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. Revisions in estimated liabilities can result from changes in estimated inflation rates, changes in service and equipment costs and changes in the estimated timing of an asset’s retirement. Asset retirement costs are depreciated using a systematic and rational method similar to that used for the associated property and equipment. Accretion expense on the liability is recognized over the estimated productive life of the related assets.
Capitalized
Interest
For significant projects, interest is capitalized as part of the historical cost of developing and constructing assets. Significant oil and gas investments in unproved properties actively being explored, significant exploration and development projects that have not commenced production, significant midstream development activities that are in progress, and investments in equity method affiliates that are undergoing the construction of assets that have not commenced principal operations qualify for interest capitalization. Interest is capitalized until the asset is ready for service. Capitalized interest is determined by multiplying the Company’s weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment.
F-13
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Goodwill
Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed, and it is recorded in “Deferred charges and other” in the Company's consolidated balance sheet. The Company assesses the carrying amount of goodwill by testing for impairment annually and when impairment indicators arise. The impairment test requires allocating goodwill and all other assets and liabilities to assigned reporting units. As of
December 31, 2016
, Apache assesses each country as a reporting unit. The fair value of each unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then goodwill is written down to the implied fair value of the goodwill through a charge to expense.
In order to determine the fair value of each reporting unit, the Company uses a combination of the income approach and the market approach. The income approach considers management views on current operating measures as well as assumptions pertaining to market forces in the oil and gas industry, such as future production, future commodity prices, and costs. These assumptions are applied to develop future cash flow projections that are then discounted to estimate fair value, using a discount rate similar to those used by the Company in the valuation of acquisitions and divestitures. To assess the reasonableness of its fair value estimate, the Company uses a market approach to compare the fair value to similar businesses whose securities are actively traded in the public market. This requires management to make certain judgments about the selection of comparable companies, recent comparable asset transactions, and transaction premiums. Associated market multiples are applied to various financial metrics of the reporting unit to estimate fair value. Apache has classified this reporting unit estimation as a non-recurring Level 3 fair value measurement.
When there is a disposal of a reporting unit or a portion of a reporting unit that constitutes a business, goodwill associated with that business is included in the carrying amount to determine the gain or loss on disposal. The amount of goodwill allocated to the carrying amount of a business can significantly impact the amount of gain or loss recognized on the sale of that business. The amount of goodwill to be included in that carrying amount is based on the relative fair value of the business to be disposed of and the portion of the reporting unit that will be retained.
The following presents the changes to goodwill for the years ended
2016
,
2015
, and
2014
:
|
United States
|
Canada
|
Egypt
|
North Sea
|
Total
|
||||||||||||||||
|
(In millions)
|
||||||||||||||||||||
|
Goodwill at December 31, 2013
|
$
|
384
|
|
$
|
103
|
|
$
|
87
|
|
$
|
163
|
|
$
|
737
|
|
|||||
|
Divested
|
(140
|
)
|
—
|
|
—
|
|
—
|
|
(140
|
)
|
||||||||||
|
Impairments
|
(244
|
)
|
(103
|
)
|
—
|
|
—
|
|
(347
|
)
|
||||||||||
|
Goodwill at December 31, 2014
|
—
|
|
—
|
|
87
|
|
163
|
|
250
|
|
||||||||||
|
Impairments
|
—
|
|
—
|
|
—
|
|
(163
|
)
|
(163
|
)
|
||||||||||
|
Goodwill at December 31, 2015
|
—
|
|
—
|
|
87
|
|
—
|
|
87
|
|
||||||||||
|
Impairments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||
|
Goodwill at December 31, 2016
|
$
|
—
|
|
$
|
—
|
|
$
|
87
|
|
$
|
—
|
|
$
|
87
|
|
|||||
Reductions in estimated net present value of expected future cash flows from oil and gas properties resulted in implied fair values below the carrying values of Apache’s U.S., North Sea, and Canada reporting units. These goodwill impairments have been recorded in “Impairments” in the Company’s statement of consolidated operations.
Accounts Payable
Included in accounts payable at
December 31, 2016
and
2015
, are liabilities of approximately
$86 million
and
$129 million
, respectively, representing the amount by which checks issued but not presented to the Company’s banks for collection exceeded balances in applicable bank accounts.
Commitments and Contingencies
Accruals for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change.
F-14
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Revenue Recognition and Imbalances
Oil and gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable. Cash received relating to future revenues is deferred and recognized when all revenue recognition criteria are met.
Apache uses the sales method of accounting for gas production imbalances. The volumes of gas sold may differ from the volumes to which Apache is entitled based on its interests in the properties. These differences create imbalances that are recognized as a liability only when the properties’ estimated remaining reserves net to Apache will not be sufficient to enable the under-produced owner to recoup its entitled share through production. The Company’s recorded liability is generally reflected in other non-current liabilities. No receivables are recorded for those wells where Apache has taken less than its share of production. Gas imbalances are reflected as adjustments to estimates of proved gas reserves and future cash flows in the unaudited supplemental oil and gas disclosures.
Apache markets its own North American natural gas production. Since the Company’s production fluctuates because of operational issues, it is occasionally necessary to purchase third-party oil and gas to fulfill sales obligations and commitments. The costs of third-party oil and gas purchases totaled
$159 million
,
$105 million
, and
$70 million
, for 2016, 2015, and 2014, respectively, which offset the related sales proceeds recorded as “Other” under “Revenues and Other” in the statement of consolidated operations.
The Company’s Egyptian operations are conducted pursuant to production sharing contracts under which contractor partners pay all operating and capital costs for exploring and developing the concessions. A percentage of the production, generally up to
40 percent
, is available to contractor partners to recover these operating and capital costs over contractually defined periods. Cost recovery is reflected in revenue. The balance of the production is split among the contractor partners and the Egyptian General Petroleum Corporation (EGPC) on a contractually defined basis.
Derivative Instruments and Hedging Activities
Apache periodically enters into derivative contracts to manage its exposure to commodity price risk. These derivative contracts, which are generally placed with major financial institutions, may take the form of forward contracts, futures contracts, swaps, or options. The oil and gas reference prices upon which the commodity derivative contracts are based reflect various market indices that have a high degree of historical correlation with actual prices received by the Company for its oil and gas production. As of
December 31, 2016
, Apache had no open derivative positions.
When applicable, Apache records all derivative instruments, other than those that meet the normal purchases and sales exception, on the balance sheet as either an asset or liability measured at fair value. Changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses from the change in fair value of derivative instruments that do not qualify for hedge accounting are reported in current-period income as “Other” under “Revenues and Other” in the statement of consolidated operations. Hedge accounting treatment allows unrealized gains and losses on cash flow hedges to be deferred in other comprehensive income. Realized gains and losses from the Company’s 2014 oil and gas cash flow hedges, including terminated contracts, were recognized in oil and gas production revenues when the forecasted transaction occurred. For more information, please refer to Note 5—Derivative Instruments and Hedging Activities.
Income Taxes
Apache records deferred tax assets and liabilities to account for the expected future tax consequences of events that have been recognized in the financial statements and tax returns. The Company routinely assesses the ability to realize its deferred tax assets. If the Company concludes that it is more likely than not that some or all of the deferred tax assets will not be realized, the tax asset is reduced by a valuation allowance. Numerous judgments and assumptions are inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil and gas prices) and changing tax laws.
Apache does not record U.S. deferred income taxes on foreign subsidiaries that are deemed to be permanently reinvested. When such earnings are no longer deemed permanently reinvested, Apache will recognize the appropriate U.S. current or deferred income tax liabilities. For more information, please refer to Note 9—Income Taxes.
F-15
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Foreign Currency Transaction Gains and Losses
The U.S. dollar is the functional currency for each of Apache’s international operations. The functional currency is determined country-by-country based on relevant facts and circumstances of the cash flows, commodity pricing environment and financing arrangements in each country. Foreign currency transaction gains and losses arise when monetary assets and liabilities denominated in foreign currencies are remeasured to their U.S. dollar equivalent at the exchange rate in effect at the end of each reporting period. Foreign currency gains and losses also arise when revenue and disbursement transactions denominated in a country’s local currency are converted to a U.S. dollar equivalent based on the average exchange rates during the reporting period.
Foreign currency transaction gains and losses related to current taxes payable and deferred tax assets and liabilities are recorded as components of the provision for income taxes. For further discussion, please refer to Note 9—Income Taxes. All other foreign currency transaction gains and losses are reflected in “Other” under “Revenues and Other” in the statement of consolidated operations. The Company’s other foreign currency gains and losses netted to a loss in 2016 of
$25 million
, a loss in 2015 of
$11 million
, and a gain in 2014 of
$8 million
.
Insurance Coverage
The Company recognizes an insurance receivable when collection of the receivable is deemed probable. Any recognition of an insurance receivable is recorded by crediting and offsetting the original charge. Any differential arising between insurance recoveries and insurance receivables is recorded as a capitalized cost or as an expense, consistent with its original treatment.
Earnings Per Share
The Company’s basic earnings per share (EPS) amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects potential dilution, using the treasury stock method, which assumes that options were exercised and restricted stock was fully vested.
Stock-Based Compensation
The Company accounts for stock-based compensation under the fair value recognition provisions of ASC Topic 718, “Compensation—Stock Compensation.” The Company grants various types of stock-based awards including stock options, nonvested restricted stock units, and performance-based awards. Additionally, the Company also grants cash-based stock appreciation rights. These plans and related accounting policies are defined and described more fully in Note 12—Capital Stock. Stock compensation awards granted are valued on the date of grant and are expensed, net of estimated forfeitures, over the required service period.
ASC Topic 718 also requires that benefits of tax deductions in excess of recognized compensation cost be reported as financing cash flows rather than as operating cash flows. The Company classified
$2 million
,
$1 million
, and
$35,000
as financing cash inflows in
2016
,
2015
, and
2014
, respectively.
Treasury Stock
The Company follows the weighted-average-cost method of accounting for treasury stock transactions.
New Pronouncements Issued But Not Yet Adopted
In January 2017, the FASB issued Accounting Standards Update (ASU) 2017-04, “Simplifying the Test for Goodwill Impairment.” ASU 2017-04 seeks to simplify the accounting for goodwill by eliminating the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Under the new guidance, an entity will recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. This update will be applied prospectively and is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company plans to early adopt this ASU, and does not expect the adoption to have a material impact on its consolidated financial statements.
F-16
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 seeks to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the provisions of ASU 2016-15 and assessing the impact, if any, it may have on its statement of consolidated cash flows.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The standard changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for a fiscal year beginning after December 15, 2018, including interim periods within that fiscal year. The Company does not expect to adopt the guidance early. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is evaluating the new guidance and does not believe this standard will have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, which seeks to simplify accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard requires the Company to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance is effective for fiscal years beginning after December 15, 2016. The Company has evaluated the new guidance and recorded a cumulative-effect adjustment of
$11 million
as of January 1, 2017 representing an increase in accumulated deficit with the offset to paid-in capital to reflect actual forfeitures versus the previously-estimated forfeiture rate.
In February 2016, the FASB issued ASU 2016-02, a new lease standard requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.
In May 2014, the FASB and the International Accounting Standards Board (IASB) issued a joint revenue recognition standard, ASU 2014-09. The new standard removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers, and increases disclosure requirements. The codification was amended through additional ASUs and, as amended, requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. The Company will adopt the new standard utilizing the modified retrospective approach. Upon preliminary evaluation, the Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. The Company is continuing to evaluate the disclosure requirements of this ASU and does not plan on early adopting the standard.
F-17
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2. CHANGE IN ACCOUNTING PRINCIPLE
During the second quarter of 2016, the Company voluntarily changed its method of accounting for oil and gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods has been recast to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration expenditures such as exploratory dry holes, exploratory geological and geophysical costs, delay rentals, unproved impairments, and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. Successful efforts also provides for the assessment of potential property impairments under ASC 360 by comparing the net carrying value of oil and gas properties with associated projected undiscounted pre-tax future net cash flows. If the expected undiscounted pre-tax future net cash flows are lower than the unamortized capitalized costs, the capitalized cost is reduced to fair value. Under the full cost method of accounting, a write-down would be required if the net carrying value of oil and gas properties exceeds a full cost “ceiling,” using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are generally recognized on the dispositions of oil and gas property and equipment under the successful efforts method, as opposed to an adjustment to the net carrying value of the remaining assets under the full cost method. Apache’s consolidated financial statements have been recast to reflect these differences.
The following tables present the effects of the change to the successful efforts method in the statement of consolidated operations:
|
Changes to the Statement of Consolidated Operations and Statement of Consolidated Comprehensive Income (Loss)
|
|||||||||||
|
For the Year Ended December 31, 2016
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions, except per share data)
|
|||||||||||
|
Oil revenues
|
$
|
3,983
|
|
$
|
189
|
|
$
|
4,172
|
|
||
|
Natural gas revenues
|
997
|
|
(30
|
)
|
967
|
|
|||||
|
NGL revenues
|
228
|
|
—
|
|
228
|
|
|||||
|
Oil and gas production revenues
|
5,208
|
|
159
|
|
5,367
|
|
|||||
|
Other
|
(38
|
)
|
4
|
|
(34
|
)
|
|||||
|
Gain on divestiture
|
17
|
|
4
|
|
21
|
|
|||||
|
Exploration
|
—
|
|
473
|
|
473
|
|
|||||
|
Depreciation, depletion, and amortization:
|
|||||||||||
|
Oil and gas property and equipment
|
|||||||||||
|
Recurring
|
1,974
|
|
486
|
|
2,460
|
|
|||||
|
Additional
|
1,438
|
|
(1,438
|
)
|
—
|
|
|||||
|
Impairments
|
677
|
|
426
|
|
1,103
|
|
|||||
|
Financing costs, net
|
365
|
|
52
|
|
417
|
|
|||||
|
Current income tax provision
|
232
|
|
159
|
|
391
|
|
|||||
|
Deferred income tax benefit
|
(721
|
)
|
(112
|
)
|
(833
|
)
|
|||||
|
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
|
(1,361
|
)
|
121
|
|
(1,240
|
)
|
|||||
|
Net income (loss) attributable to noncontrolling interest
|
(26
|
)
|
158
|
|
132
|
|
|||||
|
NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
(1,335
|
)
|
(37
|
)
|
(1,372
|
)
|
|||||
|
Net loss from discontinued operations, net of tax
|
(33
|
)
|
—
|
|
(33
|
)
|
|||||
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
(1,368
|
)
|
(37
|
)
|
(1,405
|
)
|
|||||
|
Per Common Share
|
|||||||||||
|
Basic and diluted net loss from continuing operations per share
|
$
|
(3.52
|
)
|
$
|
(0.10
|
)
|
$
|
(3.62
|
)
|
||
|
Basic and diluted net loss from discontinued operations per share
|
(0.09
|
)
|
—
|
|
(0.09
|
)
|
|||||
|
Basic and diluted net loss per share
|
$
|
(3.61
|
)
|
$
|
(0.10
|
)
|
$
|
(3.71
|
)
|
||
|
Other Comprehensive Income
|
|||||||||||
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCK
|
(1,361
|
)
|
(37
|
)
|
(1,398
|
)
|
|||||
F-18
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
Changes to the Statement of Consolidated Operations and Statement of Consolidated Comprehensive Income (Loss)
|
|||||||||||
|
For the Year Ended December 31, 2015
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions, except per share data)
|
|||||||||||
|
Oil revenues
|
$
|
4,999
|
|
$
|
108
|
|
$
|
5,107
|
|
||
|
Natural gas revenues
|
1,157
|
|
19
|
|
1,176
|
|
|||||
|
NGL revenues
|
227
|
|
—
|
|
227
|
|
|||||
|
Oil and gas production revenues
|
6,383
|
|
127
|
|
6,510
|
|
|||||
|
Other
|
(76
|
)
|
174
|
|
98
|
|
|||||
|
Gain on divestiture
|
59
|
|
222
|
|
281
|
|
|||||
|
Exploration
|
—
|
|
2,771
|
|
2,771
|
|
|||||
|
General and administrative
|
377
|
|
3
|
|
380
|
|
|||||
|
Depreciation, depletion, and amortization:
|
|||||||||||
|
Oil and gas property and equipment
|
|||||||||||
|
Recurring
|
3,531
|
|
(555
|
)
|
2,976
|
|
|||||
|
Additional
|
25,517
|
|
(25,517
|
)
|
—
|
|
|||||
|
Impairments
|
1,920
|
|
7,552
|
|
9,472
|
|
|||||
|
Financing costs, net
|
299
|
|
212
|
|
511
|
|
|||||
|
Current income tax provision
|
309
|
|
126
|
|
435
|
|
|||||
|
Deferred income tax benefit
|
(5,778
|
)
|
4,333
|
|
(1,445
|
)
|
|||||
|
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
|
(22,757
|
)
|
11,598
|
|
(11,159
|
)
|
|||||
|
Net loss attributable to noncontrolling interest
|
(409
|
)
|
94
|
|
(315
|
)
|
|||||
|
NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
(22,348
|
)
|
11,504
|
|
(10,844
|
)
|
|||||
|
Net income (loss) from discontinued operations, net of tax
|
(771
|
)
|
1,263
|
|
492
|
|
|||||
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
(23,119
|
)
|
12,767
|
|
(10,352
|
)
|
|||||
|
Per Common Share
|
|||||||||||
|
Basic and diluted net loss from continuing operations per share
|
$
|
(59.16
|
)
|
$
|
30.46
|
|
$
|
(28.70
|
)
|
||
|
Basic and diluted net income (loss) from discontinued operations per share
|
(2.04
|
)
|
3.34
|
|
1.30
|
|
|||||
|
Basic and diluted net loss per share
|
$
|
(61.20
|
)
|
$
|
33.80
|
|
$
|
(27.40
|
)
|
||
|
Other Comprehensive Income
|
|||||||||||
|
Pension and postretirement benefit plan, net of tax
|
$
|
—
|
|
$
|
(3
|
)
|
$
|
(3
|
)
|
||
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCK
|
(23,119
|
)
|
12,764
|
|
(10,355
|
)
|
|||||
F-19
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
Changes to the Statement of Consolidated Operations and Statement of Consolidated Comprehensive Income (Loss)
|
|||||||||||
|
For the Year Ended December 31, 2014
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions, except per share data)
|
|||||||||||
|
Oil revenues
|
$
|
10,040
|
|
$
|
70
|
|
$
|
10,110
|
|
||
|
Natural gas revenues
|
1,983
|
|
34
|
|
2,017
|
|
|||||
|
NGL revenues
|
668
|
|
—
|
|
668
|
|
|||||
|
Oil and gas production revenues
|
12,691
|
|
104
|
|
12,795
|
|
|||||
|
Other
|
290
|
|
(5
|
)
|
285
|
|
|||||
|
Loss on divestiture
|
(180
|
)
|
(1,428
|
)
|
(1,608
|
)
|
|||||
|
Exploration
|
—
|
|
2,499
|
|
2,499
|
|
|||||
|
General and administrative
|
451
|
|
2
|
|
453
|
|
|||||
|
Depreciation, depletion, and amortization:
|
|||||||||||
|
Oil and gas property and equipment
|
|||||||||||
|
Recurring
|
4,388
|
|
(193
|
)
|
4,195
|
|
|||||
|
Additional
|
5,001
|
|
(5,001
|
)
|
—
|
|
|||||
|
Impairments
|
1,919
|
|
5,183
|
|
7,102
|
|
|||||
|
Financing costs, net
|
211
|
|
202
|
|
413
|
|
|||||
|
Current income tax provision
|
1,177
|
|
104
|
|
1,281
|
|
|||||
|
Deferred income tax benefit
|
(514
|
)
|
(1,285
|
)
|
(1,799
|
)
|
|||||
|
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
|
(3,472
|
)
|
(2,840
|
)
|
(6,312
|
)
|
|||||
|
Net income attributable to noncontrolling interest
|
343
|
|
(2
|
)
|
341
|
|
|||||
|
NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
(3,815
|
)
|
(2,838
|
)
|
(6,653
|
)
|
|||||
|
Net loss from discontinued operations, net of tax
|
(1,588
|
)
|
(119
|
)
|
(1,707
|
)
|
|||||
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
(5,403
|
)
|
(2,957
|
)
|
(8,360
|
)
|
|||||
|
Per Common Share
|
|||||||||||
|
Basic and diluted net loss from continuing operations per share
|
$
|
(9.93
|
)
|
$
|
(7.39
|
)
|
$
|
(17.32
|
)
|
||
|
Basic and diluted net loss from discontinued operations per share
|
(4.13
|
)
|
(0.31
|
)
|
(4.44
|
)
|
|||||
|
Basic and diluted net loss per share
|
$
|
(14.06
|
)
|
$
|
(7.70
|
)
|
$
|
(21.76
|
)
|
||
|
Other Comprehensive Income
|
|||||||||||
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCK
|
$
|
(5,404
|
)
|
$
|
(2,957
|
)
|
$
|
(8,361
|
)
|
||
The following tables present the effects of the change to the successful efforts method in the statement of consolidated cash flows:
|
Changes to the Statement of Consolidated Cash Flows
|
|||||||||||
|
For the Year Ended December 31, 2016
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions)
|
|||||||||||
|
Net loss including noncontrolling interest
|
$
|
(1,394
|
)
|
$
|
121
|
|
$
|
(1,273
|
)
|
||
|
Gain on divestitures, net
|
(17
|
)
|
(4
|
)
|
(21
|
)
|
|||||
|
Exploratory dry hole expense and unproved leasehold impairments
|
—
|
|
353
|
|
353
|
|
|||||
|
Depreciation, depletion, and amortization
|
3,570
|
|
(952
|
)
|
2,618
|
|
|||||
|
Impairments
|
677
|
|
426
|
|
1,103
|
|
|||||
|
Benefit from deferred income taxes
|
(721
|
)
|
(112
|
)
|
(833
|
)
|
|||||
|
Changes in operating assets and liabilities
|
138
|
|
15
|
|
153
|
|
|||||
|
Net cash provided by continuing operating activities
|
2,606
|
|
(153
|
)
|
2,453
|
|
|||||
|
Additions to oil and gas property
|
(1,776
|
)
|
166
|
|
(1,610
|
)
|
|||||
|
Net cash used in investing activities
|
(1,826
|
)
|
166
|
|
(1,660
|
)
|
|||||
|
Other
|
6
|
|
(13
|
)
|
(7
|
)
|
|||||
|
Net cash used in financing activities
|
(847
|
)
|
(13
|
)
|
(860
|
)
|
|||||
|
NET DECREASE IN CASH
|
(90
|
)
|
—
|
|
(90
|
)
|
|||||
|
BEGINNING CASH BALANCE
|
1,467
|
|
—
|
|
1,467
|
|
|||||
|
ENDING CASH BALANCE
|
1,377
|
|
—
|
|
1,377
|
|
|||||
F-20
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
Changes to the Statement of Consolidated Cash Flows
|
|||||||||||
|
For the Year Ended December 31, 2015
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions)
|
|||||||||||
|
Net loss including noncontrolling interest
|
$
|
(23,528
|
)
|
$
|
12,861
|
|
$
|
(10,667
|
)
|
||
|
Loss (income) from discontinued operations
|
771
|
|
(1,263
|
)
|
(492
|
)
|
|||||
|
Gain on divestitures, net
|
(59
|
)
|
(222
|
)
|
(281
|
)
|
|||||
|
Exploratory dry hole expense and unproved leasehold impairments
|
—
|
|
2,595
|
|
2,595
|
|
|||||
|
Depreciation, depletion, and amortization
|
29,372
|
|
(26,072
|
)
|
3,300
|
|
|||||
|
Impairments
|
1,920
|
|
7,552
|
|
9,472
|
|
|||||
|
Other noncash items, net
|
161
|
|
(154
|
)
|
7
|
|
|||||
|
Benefit from deferred income taxes
|
(5,778
|
)
|
4,333
|
|
(1,445
|
)
|
|||||
|
Changes in operating assets and liabilities
|
(170
|
)
|
90
|
|
(80
|
)
|
|||||
|
Net cash provided by operating activities - continuing operations
|
2,834
|
|
(280
|
)
|
2,554
|
|
|||||
|
Net cash provided by operating activities - discontinued operations
|
150
|
|
(37
|
)
|
113
|
|
|||||
|
Additions to oil and gas property
|
(4,578
|
)
|
370
|
|
(4,208
|
)
|
|||||
|
Net cash used in investing activities - continuing operations
|
(3,659
|
)
|
370
|
|
(3,289
|
)
|
|||||
|
Net cash provided by investing activities - discontinued operations
|
4,335
|
|
37
|
|
4,372
|
|
|||||
|
NET INCREASE IN CASH
|
698
|
|
90
|
|
788
|
|
|||||
|
BEGINNING CASH BALANCE
|
769
|
|
(90
|
)
|
679
|
|
|||||
|
ENDING CASH BALANCE
|
1,467
|
|
—
|
|
1,467
|
|
|||||
|
Changes to the Statement of Consolidated Cash Flows
|
|||||||||||
|
For the Year Ended December 31, 2014
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions)
|
|||||||||||
|
Net loss including noncontrolling interest
|
$
|
(5,060
|
)
|
$
|
(2,959
|
)
|
$
|
(8,019
|
)
|
||
|
Income from discontinued operations
|
1,588
|
|
119
|
|
1,707
|
|
|||||
|
Loss on divestitures, net
|
180
|
|
1,428
|
|
1,608
|
|
|||||
|
Exploratory dry hole expense and unproved leasehold impairments
|
—
|
|
2,294
|
|
2,294
|
|
|||||
|
Depreciation, depletion, and amortization
|
9,720
|
|
(5,194
|
)
|
4,526
|
|
|||||
|
Impairments
|
1,919
|
|
5,183
|
|
7,102
|
|
|||||
|
Benefit from deferred income taxes
|
(514
|
)
|
(1,285
|
)
|
(1,799
|
)
|
|||||
|
Changes in operating assets and liabilities
|
(239
|
)
|
(90
|
)
|
(329
|
)
|
|||||
|
Net cash provided by operating activities - continuing operations
|
7,517
|
|
(504
|
)
|
7,013
|
|
|||||
|
Net cash provided by operating activities - discontinued operations
|
944
|
|
—
|
|
944
|
|
|||||
|
Additions to oil and gas property
|
(9,022
|
)
|
414
|
|
(8,608
|
)
|
|||||
|
Net cash used in investing activities - continuing operations
|
(8,585
|
)
|
414
|
|
(8,171
|
)
|
|||||
|
Net cash used in investing activities - discontinued operations
|
(219
|
)
|
—
|
|
(219
|
)
|
|||||
|
NET DECREASE IN CASH
|
(1,137
|
)
|
(90
|
)
|
(1,227
|
)
|
|||||
|
BEGINNING CASH BALANCE
|
1,906
|
|
—
|
|
1,906
|
|
|||||
|
ENDING CASH BALANCE
|
769
|
|
(90
|
)
|
679
|
|
|||||
F-21
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables present the effects of the change to the successful efforts method in the consolidated balance sheet:
|
Changes to the Consolidated Balance Sheet
|
|||||||||||
|
December 31, 2016
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions)
|
|||||||||||
|
PROPERTY AND EQUIPMENT:
|
|||||||||||
|
Property and equipment - cost
|
$
|
95,371
|
|
$
|
(48,622
|
)
|
$
|
46,749
|
|
||
|
Less: Accumulated depreciation, depletion, and amortization
|
(83,230
|
)
|
55,348
|
|
(27,882
|
)
|
|||||
|
PROPERTY AND EQUIPMENT, NET
|
12,141
|
|
6,726
|
|
18,867
|
|
|||||
|
TOTAL ASSETS
|
15,793
|
|
6,726
|
|
22,519
|
|
|||||
|
Income taxes
|
353
|
|
1,357
|
|
1,710
|
|
|||||
|
Paid-in capital
|
12,225
|
|
139
|
|
12,364
|
|
|||||
|
Accumulated deficit
|
(8,521
|
)
|
5,136
|
|
(3,385
|
)
|
|||||
|
Accumulated other comprehensive loss
|
(109
|
)
|
(3
|
)
|
(112
|
)
|
|||||
|
Noncontrolling interest
|
1,344
|
|
97
|
|
1,441
|
|
|||||
|
TOTAL EQUITY
|
2,310
|
|
5,369
|
|
7,679
|
|
|||||
|
Changes to the Consolidated Balance Sheet
|
|||||||||||
|
December 31, 2015
|
Under Full Cost
|
Changes*
|
As Reported Under Successful Efforts
|
||||||||
|
(In millions)
|
|||||||||||
|
PROPERTY AND EQUIPMENT:
|
|||||||||||
|
Property and equipment - cost
|
$
|
93,825
|
|
$
|
(47,675
|
)
|
$
|
46,150
|
|
||
|
Less: Accumulated depreciation, depletion, and amortization
|
(79,706
|
)
|
54,394
|
|
(25,312
|
)
|
|||||
|
PROPERTY AND EQUIPMENT, NET
|
14,119
|
|
6,719
|
|
20,838
|
|
|||||
|
TOTAL ASSETS
|
18,781
|
|
6,719
|
|
25,500
|
|
|||||
|
Income taxes
|
1,072
|
|
1,457
|
|
2,529
|
|
|||||
|
Paid-in capital
|
12,467
|
|
152
|
|
12,619
|
|
|||||
|
Accumulated deficit
|
(7,153
|
)
|
5,173
|
|
(1,980
|
)
|
|||||
|
Accumulated other comprehensive loss
|
(116
|
)
|
(3
|
)
|
(119
|
)
|
|||||
|
Noncontrolling interest
|
1,662
|
|
(60
|
)
|
1,602
|
|
|||||
|
TOTAL EQUITY
|
4,228
|
|
5,262
|
|
9,490
|
|
|||||
*In conjunction with recasting the financial information for the adoption of the successful efforts method of accounting, the Company corrected certain immaterial errors in the North Sea pertaining to the improper calculation of deferred tax liabilities associated with capitalized interest under the full cost method.
F-22
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
3. ACQUISITIONS AND DIVESTITURES
2016 Activity
During the fourth quarter of 2016, Apache entered into multiple transactions to sell certain non-core assets in our Permian region, primarily leasehold acreage, for cash proceeds of
$440 million
, subject to customary closing adjustments. The Company expects to recognize a gain of approximately
$300 million
during the first quarter of 2017 upon closing of the transaction.
Also during the fourth quarter of 2016, Apache entered into an agreement to sell its
30.28 percent
interest in the Scottish Area Gas Evacuation system (SAGE) and its
60.56 percent
interest in the Beryl pipeline in the North Sea to Ancala Midstream Acquisitions Limited (Ancala). The transaction is subject to regulatory and third party approvals.
The Company received refundable deposits of
$174 million
in connection with the transactions, which are recorded in “Other current liabilities” on the consolidated balance sheet.
Leasehold and Property Acquisitions
Apache completed
$181 million
of leasehold and property acquisitions during
2016
, primarily in our North America onshore regions.
Divestiture of Other Oil and Gas Properties
Apache recorded
$134 million
of proceeds from the divestiture of other oil and gas properties during
2016
. An associated
$21 million
of gain was recorded in 2016.
2015 Activity
Yara Pilbara Holdings Pty Limited Sale
In October 2015, Apache sold its
49 percent
interest in Yara Pilbara Holdings Pty Limited (YPHPL) for total cash proceeds of
$391 million
. The investment in YPHPL was accounted for under the equity method of accounting, with the balance recorded as a component of “Deferred charges and other” in Apache’s consolidated balance sheet and the results of operations recorded as a component of “Other” under “Revenue and other” in the Company’s statement of consolidated operations. As of September 30, 2015, Apache recognized an impairment of
$148 million
on the YPHPL equity investment based on negotiated sales proceeds. No additional gain or loss was recorded upon completion of the sale.
Canada Divestiture
In April 2015, Apache completed the sale of its
50 percent
interest in the Kitimat LNG project and upstream acreage in the Horn River and Liard natural gas basins to Woodside Petroleum Limited (Woodside). Proceeds at closing were
$854 million
, of which approximately
$344 million
was associated with LNG assets and
$510 million
was associated with upstream assets. For additional details related to post-closing adjustments, please see Note 10—Commitments and Contingencies.
The Kitimat LNG assets were classified as held for sale and impaired
$655 million
in the fourth quarter of 2014. In 2015, Apache recognized a
$146 million
gain on the sale of the upstream assets upon completion of the sale.
Australia Divestitures
Woodside Sale
In April 2015, Apache completed the sale of the Wheatstone LNG project and associated upstream oil and gas assets to Woodside. Proceeds at closing were
$2.8 billion
, of which approximately
$1.4 billion
was associated with LNG assets and
$1.4 billion
was associated with the upstream assets.
The Wheatstone LNG assets and associated upstream assets were classified as held for sale and impaired
$833 million
in the fourth quarter of 2014. An additional impairment of approximately
$49 million
was recognized in the first quarter of 2015. During the third quarter of 2016, Apache recognized an additional
$23 million
loss on the sale related to post-closing adjustments.
Consortium Sale
In June 2015, Apache completed the sale of its Australian subsidiary Apache Energy Limited (AEL) to a consortium of private equity funds managed by Macquarie Capital Group Limited and Brookfield Asset Management Inc. Total proceeds of
$1.9 billion
include customary, post-closing adjustments for the period between the effective date, October 1, 2014, and closing. A loss of approximately
$139 million
was recognized for the sale of AEL.
F-23
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Upon closing of the sale of substantially all Australian operations, the associated results of operations for the divested Australian assets and the losses on disposal were classified as discontinued operations in the Company’s financial statements for all periods presented.
Sales and other operating revenues and loss from discontinued operations related to the Australia dispositions were as follows:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
(In millions)
|
||||||||||||
|
Revenues and other from discontinued operations
|
$
|
—
|
|
$
|
288
|
|
$
|
1,050
|
|
|||
|
Impairment on Woodside sale
|
$
|
—
|
|
$
|
(49
|
)
|
$
|
(833
|
)
|
|||
|
Loss on Woodside sale
|
(23
|
)
|
—
|
|
—
|
|
||||||
|
Loss on Consortium sale
|
—
|
|
(139
|
)
|
—
|
|
||||||
|
Income (loss) from divested Australian operations
|
—
|
|
28
|
|
(12
|
)
|
||||||
|
Income tax benefit (expense)
|
—
|
|
652
|
|
(231
|
)
|
||||||
|
Income (loss) from Australian discontinued operations, net of tax
|
$
|
(23
|
)
|
$
|
492
|
|
$
|
(1,076
|
)
|
|||
Leasehold and Property Acquisitions
Apache completed
$367 million
of leasehold and property acquisitions during
2015
, primarily in our North America onshore regions.
Divestiture of Other Oil and Gas Properties
Apache recorded
$268 million
of proceeds from the divestiture of other oil and gas properties during
2015
. An associated
$135 million
of gain was recorded in
2015
.
2014 Activity
Anadarko Basin and Southern Louisiana Divestitures
In December 2014, Apache completed the sale of certain Anadarko basin and non-core southern Louisiana oil and gas assets for approximately
$1.3 billion
in two separate transactions. In the Anadarko basin, Apache sold approximately
115,000
net acres in Wheeler County, Texas, and western Oklahoma. In southern Louisiana, Apache sold its working interest in approximately
90,000
net acres. The effective date of both of these transactions is October 1, 2014. Apache recognized a net
$823 million
loss on these transactions, of which approximately
$10 million
was associated with goodwill and approximately
$180 million
was associated with GTP facilities.
Gulf of Mexico Deepwater Divestiture
On June 30, 2014, Apache completed the sale of non-operated interests in the Lucius and Heidelberg development projects and
11
primary-term deepwater exploration blocks in the Gulf of Mexico for
$1.4 billion
. The effective date of the transaction was
May 1, 2014
. Apache recognized a
$332 million
loss as a result of the transaction, of which approximately
$130 million
was associated with goodwill.
Canada Divestiture
On April 30, 2014, Apache completed the sale of primarily dry gas producing hydrocarbon assets in the Deep Basin area of western Alberta and British Columbia, Canada, for
$374 million
. The assets comprise
328,400
net acres in the Ojay, Noel, and Wapiti areas. Apache retained
100 percent
of its working interest in horizons below the Cretaceous in the Wapiti area, including rights to the liquids-rich Montney and other deeper horizons. The effective date of the transaction was
January 1, 2014
. Apache recognized a
$237 million
loss related to the sale of the assets.
F-24
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Argentina Divestiture
On March 12, 2014, Apache’s subsidiaries completed the sale of all of the Company’s operations in Argentina to YPF Sociedad Anónima for cash consideration of
$800 million
(subject to customary closing adjustments) plus the assumption of
$52 million
of bank debt as of
June 30, 2013
. The results of operations related to Argentina have been classified as discontinued operations in all periods presented.
Sales and other operating revenues and loss from discontinued operations related to the Argentina disposition were as follows:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Revenues and other from discontinued operations
|
$
|
—
|
|
$
|
—
|
|
$
|
87
|
|
|||
|
Loss from Argentina divestiture
|
$
|
(10
|
)
|
$
|
—
|
|
$
|
(654
|
)
|
|||
|
Loss from operations in Argentina
|
—
|
|
—
|
|
(1
|
)
|
||||||
|
Income tax benefit
|
—
|
|
—
|
|
23
|
|
||||||
|
Loss from discontinued operations, net of tax
|
$
|
(10
|
)
|
$
|
—
|
|
$
|
(632
|
)
|
|||
Leasehold and Property Acquisitions
Apache completed
$1.5 billion
of leasehold and property acquisitions during
2014
, primarily in our North America onshore regions.
Divestiture of Other Oil and Gas Properties
Apache recorded
$96 million
of proceeds from the divestiture of other oil and gas properties during
2014
. An associated
$216 million
of loss was recorded in
2014
.
Transaction, Reorganization, and Separation
Apache recorded
$39 million
,
$132 million
, and
$67 million
of expenses during
2016
,
2015
, and
2014
, respectively, primarily related to various transactions, company reorganization, and employee separation.
F-25
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
4. CAPITALIZED EXPLORATORY WELL COSTS
The following summarizes the changes in capitalized exploratory well costs for each of the last three years ended December 31,
2016
,
2015
, and
2014
. Additions pending the determination of proved reserves excludes amounts capitalized and subsequently charged to expense within the same year.
|
2016
|
2015
|
2014
|
||||||||||
|
(In millions)
|
||||||||||||
|
Balance at January 1
|
$
|
245
|
|
$
|
849
|
|
$
|
630
|
|
|||
|
Additions pending determination of proved reserves
|
249
|
|
382
|
|
622
|
|
||||||
|
Divestitures and other
|
—
|
|
(557
|
)
|
(54
|
)
|
||||||
|
Reclassifications to proved properties
|
(211
|
)
|
(369
|
)
|
(207
|
)
|
||||||
|
Charged to exploration expense
|
(19
|
)
|
(60
|
)
|
(142
|
)
|
||||||
|
Balance at December 31
(1)
|
$
|
264
|
|
$
|
245
|
|
$
|
849
|
|
|||
(1)
Includes
$49 million
of assets that were held for sale in Australia at December 31, 2014.
The following provides an aging of capitalized exploratory well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling:
|
2016
|
2015
|
2014
|
||||||||||
|
(In millions)
|
||||||||||||
|
Exploratory well costs capitalized for a period of one year or less
|
$
|
119
|
|
$
|
184
|
|
$
|
504
|
|
|||
|
Exploratory well costs capitalized for a period greater than one year
|
145
|
|
61
|
|
345
|
|
||||||
|
Balance at December 31
(1)
|
$
|
264
|
|
$
|
245
|
|
$
|
849
|
|
|||
|
Number of projects with exploratory well costs capitalized for a period greater than one year
|
3
|
|
2
|
|
18
|
|
||||||
(1)
Includes
$49 million
of assets that were held for sale in Australia at December 31, 2014.
The following summarizes a further aging by geographic area of those exploratory well costs that have been capitalized for a period greater than one year since the completion of drilling at
December 31, 2016
:
|
2013 and
|
||||||||||||||||
|
Total
|
2015
|
2014
|
Prior
|
|||||||||||||
|
North Sea
|
$
|
113
|
|
$
|
53
|
|
$
|
58
|
|
$
|
2
|
|
||||
|
Other International
|
32
|
|
28
|
|
3
|
|
1
|
|
||||||||
|
$
|
145
|
|
$
|
81
|
|
$
|
61
|
|
$
|
3
|
|
|||||
Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling are those identified by management as exhibiting sufficient quantities of hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether reserves can be attributed to these projects.
Suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling at December 31, 2016 primarily relate to the Seagull and Corona discoveries in the North Sea. In Seagull, appraisal work continues as the Company interprets the multi-azimuth 3-D survey acquired in late 2015. The survey will be used to create a development plan to be submitted to the Oil and Gas Authority in the U.K. in 2017. The suspended exploratory well costs related to the Corona discovery are pending development plan approval. In December 2016, the Company submitted the full field development plan to the Oil and Gas Authority in the U.K. Remaining activities required to classify the associated reserves as proved include approval of development plans and project sanctioning.
The remaining capitalized well costs in excess of one year relate to exploratory drilling in Suriname. The suspended exploratory well costs for the Block 53 Popokai well are pending the results of the Block 53 Kolibrie exploratory well. The Company plans to drill Kolibrie in 2017.
F-26
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Strategies
The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production. Apache manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production. When appropriate, the Company utilizes various types of derivative financial instruments, including swaps and options, to manage fluctuations in cash flows resulting from changes in commodity prices. As of
December 31, 2016
, Apache had no open commodity derivative positions.
Subsequent to December 31, 2016, the Company entered into put option derivative contracts not designated as cash flow hedges for 2017 crude oil production of
175,000
barrels per day. These contracts will be settled against either NYMEX WTI or Dated Brent between July 1, 2017 and December 31, 2017, with a weighted average strike price of
$50.47
per barrel. Apache paid a total premium of
$100 million
for these contracts, averaging
$3.09
per barrel.
Derivative Activity Recorded in the Statement of Consolidated Operations
The following table summarizes the effect of derivative instruments on the Company’s statement of consolidated operations:
|
|
Gain (Loss) on Derivatives
Recognized in Income
|
For the Year Ended December 31,
|
||||||||||||
|
2016
|
2015
|
2014
|
||||||||||||
|
|
|
(In millions)
|
||||||||||||
|
Derivatives not designated as cash flow hedges:
|
||||||||||||||
|
Realized loss
|
$
|
—
|
|
$
|
—
|
|
$
|
(16
|
)
|
|||||
|
Unrealized gain (loss)
|
—
|
|
—
|
|
300
|
|
||||||||
|
Gain (loss) on derivatives not designated as cash flow hedges
|
Revenues and Other: Other
|
$
|
—
|
|
$
|
—
|
|
$
|
284
|
|
||||
Unrealized gains and losses for derivative activity recorded in the statement of consolidated operations is reflected in the statement of consolidated cash flows as a component of “Other” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.”
6. OTHER CURRENT LIABILITIES
The following table provides detail of the Company’s other current liabilities at
December 31, 2016
and
2015
:
|
|
December 31,
|
|||||||
|
|
2016
|
2015
|
||||||
|
|
(In millions)
|
|||||||
|
Accrued operating expenses
|
$
|
110
|
|
$
|
139
|
|
||
|
Accrued exploration and development
|
463
|
|
637
|
|
||||
|
Accrued compensation and benefits
|
201
|
|
166
|
|
||||
|
Accrued interest
|
145
|
|
144
|
|
||||
|
Accrued income taxes
|
22
|
|
47
|
|
||||
|
Current asset retirement obligation
|
66
|
|
36
|
|
||||
|
Current debt
|
—
|
|
1
|
|
||||
|
Refundable deposits
|
174
|
|
—
|
|
||||
|
Other
|
77
|
|
53
|
|
||||
|
Total Other current liabilities
|
$
|
1,258
|
|
$
|
1,223
|
|
||
F-27
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
7. ASSET RETIREMENT OBLIGATION
The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the years ended
December 31, 2016
and
2015
:
|
2016
|
2015
|
|||||||
|
|
(In millions)
|
|||||||
|
Asset retirement obligation at beginning of year
|
$
|
2,598
|
|
$
|
2,952
|
|
||
|
Liabilities incurred
|
41
|
|
68
|
|
||||
|
Liabilities divested
|
(7
|
)
|
(490
|
)
|
||||
|
Liabilities settled
|
(57
|
)
|
(90
|
)
|
||||
|
Accretion expense
|
156
|
|
158
|
|
||||
|
Revisions in estimated liabilities
|
(233
|
)
|
—
|
|
||||
|
Asset retirement obligation at end of year
|
2,498
|
|
2,598
|
|
||||
|
Less current portion
|
(66
|
)
|
(36
|
)
|
||||
|
Asset retirement obligation, long-term
|
$
|
2,432
|
|
$
|
2,562
|
|
||
The ARO liability reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with Apache’s oil and gas properties. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. The Company estimates the ultimate productive life of the properties, a risk-adjusted discount rate, and an inflation factor in order to determine the current present value of this obligation. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance.
Accretion expense for
2015
includes discontinued operations of
$13 million
, which are included in “Net income (loss) from discontinued operations, net of tax” in the statement of consolidated operations.
During
2016
and
2015
, the Company recorded
$41 million
and
$68 million
, respectively, in abandonment liabilities resulting from Apache’s exploration and development capital program. Liabilities settled primarily relate to individual properties, platforms, and facilities plugged and abandoned during the period. Approximately
$233 million
of abandonment costs were revised downward to reflect changes in estimates of timing and costs, primarily in the North Sea.
8. DEBT
Overview
All of the Company’s debt is senior unsecured debt and has equal priority with respect to the payment of both principal and interest. The indentures for the notes described below place certain restrictions on the Company, including limits on Apache’s ability to incur debt secured by certain liens and its ability to enter into certain sale and leaseback transactions. Upon certain changes in control, all of these debt instruments would be subject to mandatory repurchase, at the option of the holders. None of the indentures for the notes contain prepayment obligations in the event of a decline in credit ratings.
In November 2016, the Company initiated a program to purchase in the open market up to
$250 million
in aggregate principal amount of senior notes issued under its indentures. In the fourth quarter of 2016, Apache purchased and canceled
$181 million
aggregate principal amount of its senior notes through open market repurchases for
$182 million
in cash, including accrued interest and
$0.5 million
of premium. These repurchases resulted in a
$1 million
net loss on extinguishment of debt, which is included in “Financing costs, net” in Apache's consolidated statement of operations. The net loss includes an acceleration of related discount and deferred financing costs.
In January 2017, Apache purchased and canceled an additional
$69 million
aggregate principal amount of senior notes for
$71 million
in cash, including accrued interest and
$1 million
of premium, which completed the open market repurchase program.
F-28
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents the carrying value of the Company’s debt at December 31,
2016
and
2015
:
|
|
December 31,
|
|||||||
|
|
2016
|
2015
|
||||||
|
|
(In millions)
|
|||||||
|
Commercial paper
|
$
|
—
|
|
$
|
—
|
|
||
|
6.9% notes due 2018
(1)
|
400
|
|
400
|
|
||||
|
7.0% notes due 2018
|
150
|
|
150
|
|
||||
|
7.625% notes due 2019
|
150
|
|
150
|
|
||||
|
3.625% notes due 2021
(1)
|
493
|
|
500
|
|
||||
|
3.25% notes due 2022
(1)
|
857
|
|
919
|
|
||||
|
2.625% notes due 2023
(1)
|
528
|
|
531
|
|
||||
|
7.7% notes due 2026
|
100
|
|
100
|
|
||||
|
7.95% notes due 2026
|
180
|
|
180
|
|
||||
|
6.0% notes due 2037
(1)
|
1,000
|
|
1,000
|
|
||||
|
5.1% notes due 2040
(1)
|
1,499
|
|
1,500
|
|
||||
|
5.25% notes due 2042
(1)
|
500
|
|
500
|
|
||||
|
4.75% notes due 2043
(1)
|
1,413
|
|
1,500
|
|
||||
|
4.25% notes due 2044
(1)
|
780
|
|
800
|
|
||||
|
7.375% debentures due 2047
|
150
|
|
150
|
|
||||
|
7.625% debentures due 2096
|
150
|
|
150
|
|
||||
|
8,350
|
|
8,530
|
|
|||||
|
Subsidiary and other obligations:
|
||||||||
|
Notes due in 2017
|
—
|
|
1
|
|
||||
|
Apache Finance Canada 7.75% notes due 2029
|
300
|
|
300
|
|
||||
|
300
|
|
301
|
|
|||||
|
Debt before unamortized discount and debt issuance costs
|
8,650
|
|
8,831
|
|
||||
|
Unamortized discount
|
(50
|
)
|
(53
|
)
|
||||
|
Debt issuance costs
|
(56
|
)
|
(61
|
)
|
||||
|
Total debt
|
8,544
|
|
8,717
|
|
||||
|
Current maturities
|
—
|
|
(1
|
)
|
||||
|
Long-term debt
|
$
|
8,544
|
|
$
|
8,716
|
|
||
|
(1)
|
These notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The remaining notes and debentures are not redeemable.
|
Debt maturities as of
December 31, 2016
, excluding discounts and debt issuance costs, are as follows:
|
|
(In millions)
|
||
|
2017
|
$
|
—
|
|
|
2018
|
550
|
|
|
|
2019
|
150
|
|
|
|
2020
|
—
|
|
|
|
2021
|
493
|
|
|
|
Thereafter
(1)
|
7,457
|
|
|
|
Total Debt
(1)
, excluding discounts and debt issuance costs
|
$
|
8,650
|
|
|
(1)
|
In January 2017, Apache purchased and canceled
$69 million
aggregate principal amount of senior notes (see overview above), which reduces “Thereafter” and “Total Debt” maturities to
$7.4 billion
and
$8.6 billion
, respectively, as of January 31, 2017.
|
F-29
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In April 2015, the FASB issued ASU 2015-03 “Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented as a direct deduction from the carrying value of the associated debt liability. The Company adopted this update in the first quarter of 2016 and applied the changes retrospectively for all periods presented. At December 31, 2015, the Company had debt issuance costs of
$61 million
classified as a long-term asset as a component of “Deferred charges and other” on the balance sheet that have been netted against “Long-term debt” in these financial statements. As of
December 31, 2016
, long-term debt is presented net of debt issuance costs of
$56 million
.
Fair Value
The Company’s debt is recorded at the carrying amount, net of unamortized discount and debt issuance costs, on its consolidated balance sheet. The carrying amount of the Company’s commercial paper and uncommitted credit facilities and overdraft lines approximate fair value because the interest rates are variable and reflective of market rates. Apache uses a market approach to determine the fair value of its fixed-rate debt using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).
|
|
December 31, 2016
|
December 31, 2015
|
||||||||||||||
|
|
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
||||||||||||
|
|
(In millions)
|
|||||||||||||||
|
Commercial paper
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
||||
|
Notes and debentures
|
8,544
|
|
9,183
|
|
8,717
|
|
8,330
|
|
||||||||
|
Total Debt
|
$
|
8,544
|
|
$
|
9,183
|
|
$
|
8,717
|
|
$
|
8,330
|
|
||||
Money Market and Overdraft Lines of Credit
The Company has certain uncommitted money market and overdraft lines of credit that are used from time to time for working capital purposes. As of
December 31, 2016
and
2015
, there was
no
outstanding balance on Apache’s lines of credit.
Unsecured Committed Bank Credit Facilities
In June 2015, the Company entered into a
five
-year revolving credit facility which matures in
June 2020
, subject to Apache’s
two
,
one
-year extension options. The facility provides for aggregate commitments of
$3.5 billion
(including a
$750 million
letter of credit subfacility), with rights to increase commitments up to an aggregate
$4.5 billion
. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under this facility supports its commercial paper program. In connection with entry into the
$3.5 billion
facility, Apache terminated
$5.3 billion
in commitments under existing credit facilities. As of
December 31, 2016
, there were no borrowings under this credit facility, leaving aggregate available borrowing capacity at
$3.5 billion
.
At the Company’s option, the interest rate per annum for borrowings under the 2015 facility is either a base rate, as defined, plus a margin or the London Inter-bank Offered Rate (LIBOR), plus a margin. The Company also pays quarterly a facility fee at per annum rate on total commitments. The margins and the facility fee vary based upon the Company’s senior long-term debt rating. At
December 31, 2016
, the base rate margin was
0.075 percent
, the LIBOR margin was
1.075 percent
, and the facility fee was
0.175 percent
.
The financial covenants of the 2015 credit facility require the Company to maintain an adjusted debt-to-capital ratio of not greater than
60 percent
at the end of any fiscal quarter. For purposes of this calculation, capital excludes the effects of non-cash write-downs, impairments, and related charges occurring after June 30, 2015.
The 2015 facility’s negative covenants restrict the ability of the Company and its subsidiaries to create liens securing debt on its hydrocarbon-related assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens, liens on subsidiary assets located outside of the United States and Canada, and liens arising as a matter of law, such as tax and mechanics’ liens. The Company also may incur liens on assets if debt secured thereby does not exceed
5 percent
of the Company’s consolidated assets, or approximately
$1.1 billion
as of
December 31, 2016
. Negative covenants also restrict Apache’s ability to merge with another entity unless it is the surviving entity, dispose of substantially all of its assets, and guarantee debt of non-consolidated entities in excess of the stated threshold.
F-30
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In February 2016, Apache entered into a
three
-year letter of credit facility providing
£900 million
in commitments, with options to increase commitments to
£1.075 billion
and extend the term by
one year
. The facility is available for letters of credit denominated in pounds sterling, U.S. Dollars, Canadian Dollars, and any other foreign currency consented to by an issuing bank. The facility also is available for loans in pounds sterling, U.S. Dollars, and Canadian Dollars to cash collateralize letters of credit or obligations to provide letters of credit, in each case, to the extent letters of credit are unavailable under the facility. The facility’s representations and warranties, covenants, and events of default are substantially similar to those in Apache’s 2015
$3.5 billion
revolving credit facility.
Commissions are payable on letters of credit outstanding under the 2016 facility at a per annum rate equal to a LIBOR margin. Borrowings bear interest per annum at a base rate or LIBOR, plus a margin. A facility fee at a per annum rate on aggregate commitments also is payable. Letter of credit commissions, the interest margin, and the facility fee vary depending on Apache’s senior unsecured long-term debt rating. At December 31, 2016, the LIBOR margin was
1.075 percent
, the base rate margin was
0.075 percent
, and the facility fee was
0.175 percent
.
The 2016 facility is available for the Company’s letter of credit needs, particularly those which may arise in respect of abandonment obligations assumed in various North Sea acquisitions. As of December 31, 2016,
three
letters of credit aggregating approximately
£147.5 million
and no borrowings were outstanding under this facility.
There are no clauses in the 2015
$3.5 billion
or 2016
£900 million
credit facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The agreements for these facilities do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if the Company or any of its U.S. or Canadian subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if the Company undergoes a specified change in control or any borrower has specified pension plan liabilities in excess of the stated threshold. The Company was in compliance with the terms of these credit facilities as of December 31, 2016.
Commercial Paper Program
The Company has available a
$3.5 billion
commercial paper program which generally enables Apache to borrow funds for up to
270
days at competitive interest rates. The commercial paper program is fully supported by available borrowing capacity under the Company’s 2015 committed credit facility. At
December 31, 2016
and
2015
, the Company had
no
commercial paper outstanding.
Subsidiary Notes – Apache Finance Canada
Apache Finance Canada has approximately
$300 million
of publicly traded notes due in 2029 that are fully and unconditionally guaranteed by Apache. For further discussion of subsidiary debt, please see Note 18—Supplemental Guarantor Information.
Financing Costs, Net
The following table presents the components of Apache’s financing costs, net:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Interest expense
|
$
|
464
|
|
$
|
486
|
|
$
|
499
|
|
|||
|
Amortization of deferred loan costs
|
8
|
|
11
|
|
6
|
|
||||||
|
Capitalized interest
|
(48
|
)
|
(15
|
)
|
(85
|
)
|
||||||
|
Loss on extinguishment of debt
|
1
|
|
39
|
|
—
|
|
||||||
|
Interest income
|
(8
|
)
|
(10
|
)
|
(7
|
)
|
||||||
|
Financing costs, net
|
$
|
417
|
|
$
|
511
|
|
$
|
413
|
|
|||
As of
December 31, 2016
, the Company has
$50 million
of debt discounts, which will be charged to interest expense over the life of the related debt issuances. Discount amortization of
$3 million
was recorded as interest expense in each of
2016
,
2015
, and
2014
.
F-31
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. INCOME TAXES
Loss from continuing operations before income taxes is composed of the following:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
U.S.
|
$
|
(997
|
)
|
$
|
(9,386
|
)
|
$
|
(4,807
|
)
|
|||
|
Foreign
|
(685
|
)
|
(2,783
|
)
|
(2,023
|
)
|
||||||
|
Total
|
$
|
(1,682
|
)
|
$
|
(12,169
|
)
|
$
|
(6,830
|
)
|
|||
The total income tax provision (benefit) from continuing operations consists of the following:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Current income taxes:
|
||||||||||||
|
Federal
|
$
|
(14
|
)
|
$
|
363
|
|
$
|
(10
|
)
|
|||
|
State
|
(30
|
)
|
41
|
|
1
|
|
||||||
|
Foreign
|
435
|
|
31
|
|
1,290
|
|
||||||
|
391
|
|
435
|
|
1,281
|
|
|||||||
|
Deferred income taxes:
|
||||||||||||
|
Federal
|
(257
|
)
|
(1,123
|
)
|
(671
|
)
|
||||||
|
State
|
—
|
|
(51
|
)
|
(45
|
)
|
||||||
|
Foreign
|
(576
|
)
|
(271
|
)
|
(1,083
|
)
|
||||||
|
(833
|
)
|
(1,445
|
)
|
(1,799
|
)
|
|||||||
|
Total
|
$
|
(442
|
)
|
$
|
(1,010
|
)
|
$
|
(518
|
)
|
|||
The total income tax provision (benefit) differs from the amounts computed by applying the U.S. statutory income tax rate to loss before income taxes. A reconciliation of the tax on the Company’s loss from continuing operations before income taxes and total tax expense is shown below:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Income tax expense (benefit) at U.S. statutory rate
|
$
|
(589
|
)
|
$
|
(4,259
|
)
|
$
|
(2,391
|
)
|
|||
|
State income tax, less federal effect
(1)
|
(19
|
)
|
(7
|
)
|
(28
|
)
|
||||||
|
Taxes related to foreign operations
|
303
|
|
(662
|
)
|
(147
|
)
|
||||||
|
Tax credits
|
(1
|
)
|
(6
|
)
|
—
|
|
||||||
|
Tax on distributed foreign earnings
|
80
|
|
726
|
|
311
|
|
||||||
|
Foreign tax credits
|
(136
|
)
|
(2,090
|
)
|
—
|
|
||||||
|
Deferred tax on undistributed foreign earnings
|
(31
|
)
|
1,903
|
|
560
|
|
||||||
|
Tax impact of goodwill adjustments
|
—
|
|
82
|
|
161
|
|
||||||
|
Change in U.K. tax rate
|
(238
|
)
|
(414
|
)
|
—
|
|
||||||
|
Net change in tax contingencies
|
(19
|
)
|
20
|
|
(3
|
)
|
||||||
|
Canadian USD functional currency election
|
158
|
|
—
|
|
—
|
|
||||||
|
Valuation allowances
(1)
|
10
|
|
3,746
|
|
1,021
|
|
||||||
|
All other, net
|
40
|
|
(49
|
)
|
(2
|
)
|
||||||
|
$
|
(442
|
)
|
$
|
(1,010
|
)
|
$
|
(518
|
)
|
||||
|
(1)
|
The change in state valuation allowance is included as a component of state income tax.
|
F-32
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The net deferred income tax liability reflects the net tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under the U.S. GAAP method of accounting and amounts utilized for income tax purposes. The net deferred income tax liability consists of the following:
|
|
December 31,
|
|||||||
|
|
2016
|
2015
|
||||||
|
|
(In millions)
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Deferred income
|
$
|
105
|
|
$
|
20
|
|
||
|
U.S. and state net operating losses
|
1,095
|
|
329
|
|
||||
|
Foreign net operating losses
|
1,424
|
|
1,507
|
|
||||
|
Tax credits and other tax incentives
|
62
|
|
82
|
|
||||
|
Foreign tax credits
|
2,226
|
|
2,090
|
|
||||
|
Accrued expenses and liabilities
|
153
|
|
136
|
|
||||
|
Asset retirement obligation
|
875
|
|
1,037
|
|
||||
|
Property and equipment
|
1,189
|
|
1,534
|
|
||||
|
Total deferred tax assets
|
7,129
|
|
6,735
|
|
||||
|
Valuation allowance
|
(5,401
|
)
|
(5,434
|
)
|
||||
|
Net deferred tax assets
|
1,728
|
|
1,301
|
|
||||
|
Deferred tax liabilities:
|
||||||||
|
Deferred income
|
—
|
|
140
|
|
||||
|
Investment in foreign subsidiaries
|
1,872
|
|
1,903
|
|
||||
|
Equity investments
|
23
|
|
5
|
|
||||
|
Property and equipment
|
1,533
|
|
1,773
|
|
||||
|
Other
|
5
|
|
4
|
|
||||
|
Total deferred tax liabilities
|
3,433
|
|
3,825
|
|
||||
|
Net deferred income tax liability
|
$
|
1,705
|
|
$
|
2,524
|
|
||
Net deferred tax assets and liabilities are included in the consolidated balance sheet as follows:
|
|
December 31,
|
|||||||
|
|
2016
|
2015
|
||||||
|
|
(In millions)
|
|||||||
|
Assets:
|
||||||||
|
Deferred charges and other
|
$
|
5
|
|
$
|
5
|
|
||
|
Liabilities:
|
||||||||
|
Deferred income taxes
|
1,710
|
|
2,529
|
|
||||
|
Net deferred income tax liability
|
$
|
1,705
|
|
$
|
2,524
|
|
||
In 2016, the U.K. government enacted Finance Bill 2016, which provides tax relief to E&P companies operating in the North Sea through a reduction of Supplementary Charge from
20 percent
to
10 percent
, effective January 1, 2016. As a result of the enacted legislation, in 2016, Apache recorded a deferred tax benefit of
$238 million
related to the remeasurement of the Company’s December 31, 2015 U.K. deferred income tax liability.
In 2015, Apache repatriated the sales proceeds from the divestment of its interest in LNG projects and Australian upstream assets. Upon the repatriation of these proceeds, Apache recognized a U.S. current income tax liability of
$560 million
. Also in 2015, the U.K. government enacted Finance Bill 2015, which provided a reduction of Supplementary Charge from
32 percent
to
20 percent
, effective January 1, 2015. As a result of the enacted legislation, in 2015, Apache recorded a deferred tax benefit of
$414 million
related to the remeasurement of the Company’s December 31, 2014 U.K. deferred income tax liability.
F-33
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In 2014, Apache evaluated its permanent reinvestment position and determined that undistributed earnings from certain foreign subsidiaries located in Apache’s Australia, Egypt, and North Sea regions will no longer be permanently reinvested. As a result of this change in position, the Company recorded
$560 million
of U.S. deferred income tax expense on undistributed earnings that were previously considered permanently reinvested as a component of continuing operations. In addition, the Company recorded
$311 million
of U.S. deferred income tax expense on foreign earnings that were distributed to the U.S. in 2014. The Company’s Canadian subsidiaries do not currently have undistributed earnings.
The Company has recorded an increase in valuation allowance against certain deferred tax assets, primarily driven by asset impairments. The Company has assessed the future potential to realize these deferred tax assets and has concluded that it is more likely than not that these deferred tax assets will not be realized based on current economic conditions and expectations for the future.
In
2016
,
2015
, and
2014
, the Company's valuation allowance decreased by
$33 million
, increased by
$3.9 billion
, and increased by
$966 million
, respectively, as detailed in the table below:
|
2016
|
2015
|
2014
|
||||||||||
|
|
(In millions)
|
|||||||||||
|
Balance at beginning of year
|
$
|
5,434
|
|
$
|
1,564
|
|
$
|
598
|
|
|||
|
State
(1)
|
(43
|
)
|
151
|
|
62
|
|
||||||
|
U.S.
|
139
|
|
2,159
|
|
—
|
|
||||||
|
Foreign
(2)
|
(129
|
)
|
1,560
|
|
1,021
|
|
||||||
|
Discontinued operations
(3)
|
—
|
|
—
|
|
(117
|
)
|
||||||
|
Balance at end of year
|
$
|
5,401
|
|
$
|
5,434
|
|
$
|
1,564
|
|
|||
|
(1)
|
Reported as a component of state income taxes.
|
|
(2)
|
In 2015, Apache’s subsidiaries completed the sale of its interest in the Kitimat LNG project. As such, the deferred tax assets, liabilities, and valuation allowance related to the project were removed for 2015.
|
|
(3)
|
In 2014, Apache’s subsidiaries completed the sale of all of the Company’s operations in Argentina. As such, the deferred tax assets, liabilities, and valuation allowance related to Argentina were removed for 2014.
|
On
December 31, 2016
, the Company had net operating losses as follows:
|
|
Amount
|
Expiration
|
||||
|
|
(In millions)
|
|
||||
|
Net operating losses:
|
||||||
|
U.S.
|
$
|
2,452
|
|
2018 - 2037
|
||
|
State
|
4,774
|
|
Various
|
|||
|
Canada
|
125
|
|
2028 - 2035
|
|||
The Company has a U.S. net operating loss carryforward of
$2.5 billion
, which includes
$197 million
of net operating loss subject to annual limitation under Section 382 of the Internal Revenue Code. The Company also has
$829 million
of capital loss carryforwards in Canada, which have an indefinite carryover period. The Company has recorded a valuation allowance against the U.S. net operating loss subject to Section 382 limitation, the state net operating loss, the Canadian net operating loss, and the Canadian capital loss because it is probable that these attributes will expire unutilized.
On
December 31, 2016
, the Company had foreign tax credits as follows:
|
|
Amount
|
Expiration
|
||||
|
|
(In millions)
|
|
||||
|
Foreign tax credits
|
$
|
2,226
|
|
2025-2026
|
||
The Company has a
$2.2 billion
U.S. foreign tax credit carryforward. The Company has recorded a valuation allowance against the U.S. foreign tax credits listed above because it is probable that these attributes will expire unutilized.
F-34
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
2016
|
2015
|
2014
|
||||||||||
|
|
(In millions)
|
|||||||||||
|
Balance at beginning of year
|
$
|
19
|
|
$
|
—
|
|
$
|
3
|
|
|||
|
Additions based on tax positions related to the current year
|
15
|
|
19
|
|
—
|
|
||||||
|
Reductions for tax positions of prior years
|
(19
|
)
|
—
|
|
(3
|
)
|
||||||
|
Balance at end of year
|
$
|
15
|
|
$
|
19
|
|
$
|
—
|
|
|||
The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Each quarter the Company assesses the amounts provided for and, as a result, may increase (expense) or reduce (benefit) the amount of interest and penalties. During the years ended
December 31, 2016
,
2015
, and
2014
the Company recorded tax expense of
nil
, tax expense of
$1 million
, and tax benefit of
$1 million
, respectively, for interest and penalties. At
December 31, 2016
,
2015
, and
2014
the Company had an accrued liability for interest and penalties of
nil
,
$1 million
, and
nil
, respectively.
In 2016 and 2015, the Company recorded a
$4 million
net reduction and a
$19 million
increase in its reserve for uncertain tax positions, respectively. In 2014, the Internal Revenue Service concluded its audit of the 2011 and 2012 tax years, and the Company reduced its unrecognized tax benefit by
$3 million
as a result of the conclusion of this audit.
Apache and its subsidiaries are subject to U.S. federal income tax as well as income tax in various states and foreign jurisdictions. The Company’s uncertain tax positions are related to tax years that may be subject to examination by the relevant taxing authority. Apache’s earliest open tax years in its key jurisdictions are as follows:
Jurisdiction
|
U.S.
|
2012
|
|
Canada
|
2012
|
|
Egypt
|
1998
|
|
U.K.
|
2014
|
F-35
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
10. COMMITMENTS AND CONTINGENCIES
Legal Matters
Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. The Company has an accrued liability of approximately
$15 million
for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.
Argentine Claims
On March 12, 2014, the Company and its subsidiaries completed the sale of all of the Company’s subsidiaries’ operations and properties in Argentina to YPF Sociedad Anonima (YPF). As part of that sale, YPF assumed responsibility for all of the past, present, and future litigation in Argentina involving Company subsidiaries, except that Company subsidiaries have agreed to indemnify YPF for certain environmental, tax, and royalty obligations capped at an aggregate of
$100 million
. The indemnity is subject to specific agreed conditions precedent, thresholds, contingencies, limitations, claim deadlines, loss sharing, and other terms and conditions. On April 11, 2014, YPF provided its first notice of claims pursuant to the indemnity. Company subsidiaries have not paid any amounts under the indemnity but will continue to review and consider claims presented by YPF. Further, Company subsidiaries retain the right to enforce certain Argentina-related indemnification obligations against Pioneer Natural Resources Company (Pioneer) in an amount up to
$67.5 million
pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.
Louisiana Restoration
Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including Apache, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to their original condition, regardless of the value of the underlying property. From time-to-time restoration lawsuits and claims are resolved by the Company for amounts that are not material to the Company, while new lawsuits and claims are asserted against the Company. With respect to each of the pending lawsuits and claims, the amount claimed is not currently determinable or is not material, except as noted. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While an adverse judgment against Apache is possible, Apache intends to actively defend these lawsuits and claims.
On July 24, 2013, a lawsuit captioned
Board of Commissioners of the Southeast Louisiana Flood Protection Authority – East v. Tennessee Gas Pipeline Company et al.
, Case No. 2013-6911 was filed in the Civil District Court for the Parish of Orleans, State of Louisiana, in which plaintiff on behalf of itself and as the board governing the levee districts of Orleans, Lake Borgne Basin, and East Jefferson alleges that Louisiana coastal lands have been damaged as a result of oil and gas industry activity, including a network of canals for access and pipelines. Plaintiff seeks unspecified damages and injunctive relief in the form of abatement and restoration based on claims of negligence, strict liability, natural servitude of drain, public nuisance, private nuisance, and breach of contract – third party beneficiary. Apache has been indiscriminately named as one of many defendants in the lawsuit. In 2014 the Louisiana state government passed a law (SB 469) clarifying that only entities authorized under the Coastal Zone Management Act may bring litigation to assert claims arising out of the permitted activities. Plaintiff is not one of those authorized entities. On February 13, 2015, the federal court entered judgment in favor of defendants dismissing all of plaintiff’s claims with prejudice on various grounds, and plaintiff appealed the case to the 5
th
Circuit Court of Appeals. The appeal is still pending. The overall exposure related to this lawsuit is not currently determinable. While an adverse judgment against Apache might be possible, Apache intends to continue to vigorously oppose the claims, including by defending against plaintiff’s appeal of the federal court’s judgment.
F-36
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
On November 8, 2013, Plaquemines Parish, Louisiana, filed three lawsuits against Apache and other oil and gas producers in the Parish’s 25t
h
Judicial District Court, captioned
Parish of Plaquemines v. Rozel Operating Company et al.,
Docket No. 60-996;
Parish of Plaquemines v. Apache Oil Corporation et al.,
Docket No. 610; and
Parish of Plaquemines v. HHE Energy Company et al.,
Docket No. 60-983. On or about February 4, 2016, Cameron Parish, Louisiana, filed six new lawsuits against Apache and other oil and gas producers in the Parish’s 38t
h
Judicial District Court, captioned
Parish of Cameron v. BEPCO, L.P., et al.
, Docket No. 10-19572;
Parish of Cameron v. BP America Production Company et al.
, Docket No. 10-19576;
Parish of Cameron v. Apache Corporation (of Delaware) et al.
, Docket No. 10-19579;
Parish of Cameron v. Atlantic Richfield Company et al.
, Docket No. 10-19577;
Parish of Cameron v. Alpine Exploration Companies, Inc., et al.
, Docket No. 19580; and
Parish of Cameron v. Auster Oil and Gas, Inc., et al
, Docket No. 10-19582. On July 28, 2016, Vermillion Parish, Louisiana, filed an amended petition against Apache and other oil and gas producers in the 15
th
Judicial District Court, captioned Keith
Stutes, District Attorney
for the 15
th
Judicial District of the State of Louisiana v. Gulfport Energy, et al.,
Docket No
.
102156. On September 30, 2016, St. Bernard Parish, Louisiana, filed an Amended Petition against Apache and other oil and gas producers in the 34
th
Judicial District Court, captioned
The Parish of St. Bernard v. Atlantic Richfield et al.,
Docket No. 16-1228. Many similar lawsuits have been filed against other oil and gas producers in Parishes across south Louisiana. In these cases, the Parishes, as plaintiffs, allege that certain of defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable state law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While an adverse judgment against Apache might be possible, Apache intends to vigorously oppose these claims.
Apollo Exploration Lawsuit
In a case captioned
Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation
, Cause No. CV50538 in the 385t
h
Judicial District Court, Midland County, Texas, in a Fourth Amended Petition filed on March 21, 2016, plaintiffs allege damages in excess of
$500 million
(having previously claimed in excess of
$1.1 billion
) relating to purchase and sale agreements, mineral leases, and areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. Apache believes that plaintiffs’ claims lack merit, and further that plaintiffs’ alleged damages are grossly inflated. Apache will vigorously oppose the claims.
Escheat Audits
In September 2010, the State of Delaware, Department of Finance, Division of Revenue (Unclaimed Property) (Delaware), notified Apache Corporation that Delaware’s consultant, Kelmar Associates (Kelmar), would examine Apache’s books and records and those of its subsidiaries and related entities to determine compliance with Delaware Escheat Laws.
Delaware completed its audit of the Company's accounts payable, payroll, and royalty payments, on which the Company expects an assessment of less than
$200,000
. However, Delaware suspended its audit before completing its examination of the Company’s accounts receivable, following the June 2016
Temple-Inland v. Cook
court decision, in which the Delaware federal court determined that
Delaware’s current method and technique for estimating a company’s unclaimed property liability violates the due process requirements of the U.S. Constitution. In response to that decision, the Delaware Legislature is considering changes to its unclaimed property statute. The timing and extent of any legislative modifications is currently unknown.
Burrup-Related Gas Supply Lawsuits
In the cases captioned
Radhika Oswal v. Australia and New Zealand Banking Group Limited
(ANZ)
et al.
, No. SCI 2011 4653 and
Pankaj Oswal v. Australia and New Zealand Banking Group Limited
(ANZ)
et al.
, No. SCI 2012 01995, in the Supreme Court of Victoria, Australia, trial commenced on May 30, 2016. In August 2016, the cases settled on confidential terms including an exchange of consideration that did not have a material effect on the Company’s financial position.
F-37
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Environmental Matters
The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, provincial, state, local, and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. We maintain insurance coverage, which we believe is customary in the industry, although we are not fully insured against all environmental risks.
Apache manages its exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. The Company also conducts periodic reviews, on a Company-wide basis, to identify changes in its environmental risk profile. These reviews evaluate whether there is a probable liability, the amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees who are expected to devote a significant amount of time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, the Company may exclude a property from the acquisition, require the seller to remediate the property to Apache’s satisfaction, or agree to assume liability for the remediation of the property. The Company’s general policy is to limit any reserve additions to any incidents or sites that are considered probable to result in an expected remediation cost exceeding
$300,000
. Any environmental costs and liabilities that are not reserved for are treated as an expense when actually incurred. In Apache’s estimation, neither these expenses nor expenses related to training and compliance programs are likely to have a material impact on its financial condition.
As of
December 31, 2016
, the Company had an undiscounted reserve for environmental remediation of approximately
$51 million
. Apache is not aware of any environmental claims existing as of
December 31, 2016
that have not been provided for or would otherwise have a material impact on its financial position or results of operations. There can be no assurance however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.
Apache Canada Ltd. (ACL) reported a produced water release from a water injection pipeline in a remote area of the Belloy Field that occurred on or about May 4, 2016, and an H2S leak at the Zama 10-33-115-06 on or about September 19, 2016. The causes of these incidents remain under investigation. With respect to previous releases of produced water that occurred in the Zama area on or between October 3 and October 25, 2013, and in the Belloy Field on or about January 20, 2014, the Company resolved all of the charges associated with these releases with the Crown. The Company does not expect the economic impact of any of these incidents to have a material effect on the Company’s financial position, results of operations, or liquidity.
LNG Divestiture Dispute
Each of Woodside and the Company asserted claims against the other resulting in court proceedings in the Supreme Court of Western Australia and the Court of Queen’s Bench of Alberta, Calgary. Woodside also initiated third party expert determination proceedings at the ICC International Centre for ADR concerning certain aspects of its purchase price adjustment claims. Each of these proceedings has now been dismissed by agreement in November 2016. The parties have resolved the central matters in dispute on mutually agreeable terms and there was no significant impact on the Company’s financial position, results of operations, or liquidity.
Australian Operations Divestiture Dispute
By a Sale and Purchase Agreement dated April 9, 2015 (SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. By letter dated June 6, 2016, Quadrant provided the Company with a notice of claim under the SPA claiming approximately
$200 million
in the aggregate. The Company believes that these claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.
F-38
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Contractual Obligations
At
December 31, 2016
, contractual obligations for long-term operating leases, capital leases, and purchase obligations are as follows:
|
Net Minimum Commitments
|
Total
|
2017
|
2018-2019
|
2020-2021
|
2022 &
Beyond
|
|||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||
|
Drilling rigs
|
$
|
244
|
|
$
|
177
|
|
$
|
67
|
|
$
|
—
|
|
$
|
—
|
|
|||||
|
Purchase obligations
(1)
|
680
|
|
119
|
|
287
|
|
250
|
|
24
|
|
||||||||||
|
Operating lease obligations
(2)
|
258
|
|
56
|
|
95
|
|
37
|
|
70
|
|
||||||||||
|
Capital lease obligations
|
$
|
43
|
|
$
|
1
|
|
$
|
3
|
|
$
|
3
|
|
$
|
36
|
|
|||||
|
Total Net Minimum Commitments
|
$
|
1,225
|
|
$
|
353
|
|
$
|
452
|
|
$
|
290
|
|
$
|
130
|
|
|||||
|
(1)
|
Includes minimum commitments associated with long-term take-or-pay contracts, NGL processing agreements, drilling work program commitments, and agreements to secure capacity rights on third-party pipelines.
|
|
(2)
|
Amounts include long-term lease payments for office space, aircraft, supply and standby vessels, gas pipeline and land leases, and equipment related to exploration, development, and production activities, such as compressors. The Company expects to receive
$10 million
in sublease income associated with these leases.
|
The table above includes leases for buildings, facilities, and related equipment with varying expiration dates through
2042
. Net rental expense for continuing operations was
$59 million
,
$57 million
, and
$45 million
for
2016
,
2015
, and
2014
, respectively. Costs incurred under take-or-pay and throughput obligations were
$86 million
,
$92 million
, and
$89 million
for
2016
,
2015
, and
2014
, respectively.
F-39
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
11. RETIREMENT AND DEFERRED COMPENSATION PLANS
Apache Corporation provides retirement benefits to its U.S. employees through the use of multiple plans: a 401(k) savings plan, a money purchase retirement plan, a non-qualified retirement/savings plan, and a non-qualified restorative retirement savings plan. The 401(k) savings plan provides participating employees the ability to elect to contribute up to
50 percent
of eligible compensation, as defined, to the plan with the Company making matching contributions up to a maximum of
8 percent
of each employee’s annual eligible compensation. In addition, the Company, at its discretion, annually contributes
6 percent
of each participating employee’s annual eligible compensation to a money purchase retirement plan. The 401(k) savings plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions that limit the amount of employee and Company contributions. For certain eligible employees, the Company also provides a non-qualified retirement/savings plan or a non-qualified restorative retirement savings plan. These plans allow the deferral of up to
50 percent
of each employee’s base salary, up to
75 percent
of each employee’s annual bonus (that accepts employee contributions) and the Company’s matching contributions in excess of the government mandated limitations imposed in the 401(k) savings plan and money purchase retirement plan.
Vesting in the Company’s contributions in the 401(k) savings plan, the money purchase retirement plan, the non-qualified retirement savings plan and the non-qualified restorative retirement savings plan occurs at the rate of
20 percent
for every completed year of employment. Upon a change in control of ownership, immediate and full vesting occurs.
Additionally, Apache Canada Ltd. and Apache North Sea Limited maintain separate retirement plans, as required under the laws of Canada and the U.K., respectively.
The aggregate annual cost to Apache of all U.S. plans, the money purchase retirement plan, non-qualified retirement/savings plan, and non-qualified restorative retirement savings plan was
$82 million
,
$77 million
, and
$107 million
for
2016
,
2015
, and
2014
, respectively.
Apache also provides a funded noncontributory defined benefit pension plan (U.K. Pension Plan) covering certain employees of the Company’s North Sea operations in the U.K. The plan provides defined pension benefits based on years of service and final salary. The plan applies only to employees who were part of BP North Sea’s pension plan as of April 2, 2003, prior to the acquisition of BP North Sea by the Company effective July 1, 2003.
Additionally, the Company offers postretirement medical benefits to U.S. employees who meet certain eligibility requirements. Eligible participants receive medical benefits up until the age of
65
or at the date they become eligible for Medicare, provided the participant remits the required portion of the cost of coverage. The plan is contributory with participants’ contributions adjusted annually. The postretirement benefit plan does not cover benefit expenses once a covered participant becomes eligible for Medicare.
F-40
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables set forth the benefit obligation, fair value of plan assets and funded status as of
December 31, 2016
,
2015
, and
2014
, and the underlying weighted average actuarial assumptions used for the U.K. Pension Plan and U.S. postretirement benefit plan. Apache uses a measurement date of December 31 for its pension and postretirement benefit plans.
|
|
2016
|
2015
|
2014
|
|||||||||||||||||||||
|
|
Pension
Benefits
|
Postretirement
Benefits
|
Pension
Benefits
|
Postretirement
Benefits
|
Pension
Benefits
|
Postretirement
Benefits
|
||||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||||
|
Change in Projected Benefit Obligation
|
||||||||||||||||||||||||
|
Projected benefit obligation beginning of year
|
$
|
202
|
|
$
|
26
|
|
$
|
216
|
|
$
|
22
|
|
$
|
189
|
|
$
|
28
|
|
||||||
|
Service cost
|
4
|
|
2
|
|
5
|
|
2
|
|
5
|
|
3
|
|
||||||||||||
|
Interest cost
|
7
|
|
1
|
|
8
|
|
1
|
|
9
|
|
1
|
|
||||||||||||
|
Foreign currency exchange rate changes
|
(39
|
)
|
—
|
|
(10
|
)
|
—
|
|
(13
|
)
|
—
|
|
||||||||||||
|
Actuarial losses (gains)
|
32
|
|
(2
|
)
|
(10
|
)
|
—
|
|
31
|
|
(9
|
)
|
||||||||||||
|
Effect of curtailment and settlements
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
||||||||||||
|
Benefits paid
|
(4
|
)
|
(3
|
)
|
(7
|
)
|
(2
|
)
|
(5
|
)
|
(2
|
)
|
||||||||||||
|
Retiree contributions
|
—
|
|
2
|
|
—
|
|
1
|
|
—
|
|
1
|
|
||||||||||||
|
Projected benefit obligation at end of year
|
202
|
|
26
|
|
202
|
|
26
|
|
216
|
|
22
|
|
||||||||||||
|
Change in Plan Assets
|
||||||||||||||||||||||||
|
Fair value of plan assets at beginning of year
|
197
|
|
—
|
|
206
|
|
—
|
|
191
|
|
—
|
|
||||||||||||
|
Actual return on plan assets
|
46
|
|
—
|
|
1
|
|
—
|
|
25
|
|
—
|
|
||||||||||||
|
Foreign currency exchange rates
|
(39
|
)
|
—
|
|
(10
|
)
|
—
|
|
(13
|
)
|
—
|
|
||||||||||||
|
Employer contributions
|
6
|
|
1
|
|
7
|
|
1
|
|
8
|
|
1
|
|
||||||||||||
|
Benefits paid
|
(4
|
)
|
(3
|
)
|
(7
|
)
|
(2
|
)
|
(5
|
)
|
(2
|
)
|
||||||||||||
|
Retiree contributions
|
—
|
|
2
|
|
—
|
|
1
|
|
—
|
|
1
|
|
||||||||||||
|
Fair value of plan assets at end of year
|
206
|
|
—
|
|
197
|
|
—
|
|
206
|
|
—
|
|
||||||||||||
|
Funded status at end of year
|
$
|
4
|
|
$
|
(26
|
)
|
$
|
(5
|
)
|
$
|
(26
|
)
|
$
|
(10
|
)
|
$
|
(22
|
)
|
||||||
|
Amounts recognized in Consolidated Balance Sheet
|
||||||||||||||||||||||||
|
Current liability
|
$
|
—
|
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
(1
|
)
|
||||||
|
Non-current asset (liability)
|
4
|
|
(24
|
)
|
(5
|
)
|
(24
|
)
|
(10
|
)
|
(21
|
)
|
||||||||||||
|
$
|
4
|
|
$
|
(26
|
)
|
$
|
(5
|
)
|
$
|
(26
|
)
|
$
|
(10
|
)
|
$
|
(22
|
)
|
|||||||
|
Pre-tax Amounts Recognized in Accumulated Other Comprehensive Income (Loss)
|
||||||||||||||||||||||||
|
Accumulated gain (loss)
|
$
|
(25
|
)
|
$
|
9
|
|
$
|
(32
|
)
|
$
|
9
|
|
$
|
(37
|
)
|
$
|
10
|
|
||||||
|
Weighted Average Assumptions used as of December 31
|
||||||||||||||||||||||||
|
Discount rate
|
2.70
|
%
|
3.76
|
%
|
3.90
|
%
|
3.95
|
%
|
3.70
|
%
|
3.62
|
%
|
||||||||||||
|
Salary increases
|
4.80
|
%
|
N/A
|
|
4.60
|
%
|
N/A
|
|
4.60
|
%
|
N/A
|
|
||||||||||||
|
Expected return on assets
|
3.40
|
%
|
N/A
|
|
4.10
|
%
|
N/A
|
|
3.90
|
%
|
N/A
|
|
||||||||||||
|
Healthcare cost trend
|
||||||||||||||||||||||||
|
Initial
|
N/A
|
|
7.00
|
%
|
N/A
|
|
7.00
|
%
|
N/A
|
|
7.00
|
%
|
||||||||||||
|
Ultimate in 2025
|
N/A
|
|
5.00
|
%
|
N/A
|
|
5.00
|
%
|
N/A
|
|
5.00
|
%
|
||||||||||||
F-41
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of
December 31, 2016
,
2015
, and
2014
, the accumulated benefit obligation for the U.K. Pension Plan was
$181 million
,
$169 million
, and
$183 million
, respectively.
Apache’s defined benefit pension plan assets are held by a non-related trustee who has been instructed to invest the assets in a blend of equity securities and low-risk debt securities. The Company intends that this blend of investments will provide a reasonable rate of return such that the benefits promised to members are provided. The U.K. Pension Plan policy is to target an ongoing funding level of
100 percent
through prudent investments and includes policies and strategies such as investment goals, risk management practices, and permitted and prohibited investments. A breakout of previous allocations for plan asset holdings and the target allocation for the Company’s plan assets are summarized below:
|
|
Target
Allocation
|
Percentage of
Plan Assets at
Year-End
|
|||||||
|
|
2016
|
2016
|
2015
|
||||||
|
Asset Category
|
|||||||||
|
Equity securities:
|
|||||||||
|
U.K. quoted equities
|
14
|
%
|
14
|
%
|
14
|
%
|
|||
|
Overseas quoted equities
|
26
|
%
|
26
|
%
|
26
|
%
|
|||
|
Total equity securities
|
40
|
%
|
40
|
%
|
40
|
%
|
|||
|
Debt securities:
|
|||||||||
|
U.K. Government bonds
|
47
|
%
|
47
|
%
|
48
|
%
|
|||
|
U.K. corporate bonds
|
12
|
%
|
12
|
%
|
12
|
%
|
|||
|
Debt securities
|
59
|
%
|
59
|
%
|
60
|
%
|
|||
|
Cash
|
1
|
%
|
1
|
%
|
—
|
%
|
|||
|
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
|||
F-42
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The plan’s assets do not include any direct ownership of equity or debt securities of Apache. The fair value of plan assets is based upon unadjusted quoted prices for identical instruments in active markets, which is a Level 1 fair value measurement. The following tables present the fair values of plan assets for each major asset category based on the nature and significant concentration of risks in plan assets at
December 31, 2016
and
December 31, 2015
:
|
|
Fair Value Measurements Using:
|
|
||||||||||||||
|
|
Quoted Price
in Active
Markets
(Level 1)
|
Significant
Other Inputs
(Level 2)
|
Unobservable
Inputs
(Level 3)
|
Total Fair
Value
|
||||||||||||
|
|
(In millions)
|
|||||||||||||||
|
December 31, 2016
|
||||||||||||||||
|
Equity securities:
|
||||||||||||||||
|
U.K. quoted equities
(1)
|
$
|
28
|
|
$
|
—
|
|
$
|
—
|
|
$
|
28
|
|
||||
|
Overseas quoted equities
(2)
|
54
|
|
—
|
|
—
|
|
54
|
|
||||||||
|
Total equity securities
|
82
|
|
—
|
|
—
|
|
82
|
|
||||||||
|
Debt securities:
|
||||||||||||||||
|
U.K. Government bonds
(3)
|
97
|
|
—
|
|
—
|
|
97
|
|
||||||||
|
U.K. corporate bonds
(4)
|
25
|
|
—
|
|
—
|
|
25
|
|
||||||||
|
Total debt securities
|
122
|
|
—
|
|
—
|
|
122
|
|
||||||||
|
Cash
|
2
|
|
—
|
|
—
|
|
2
|
|
||||||||
|
Fair value of plan assets
|
$
|
206
|
|
$
|
—
|
|
$
|
—
|
|
$
|
206
|
|
||||
|
December 31, 2015
|
||||||||||||||||
|
Equity securities:
|
||||||||||||||||
|
U.K. quoted equities
(1)
|
$
|
27
|
|
$
|
—
|
|
$
|
—
|
|
$
|
27
|
|
||||
|
Overseas quoted equities
(2)
|
53
|
|
—
|
|
—
|
|
53
|
|
||||||||
|
Total equity securities
|
80
|
|
—
|
|
—
|
|
80
|
|
||||||||
|
Debt securities:
|
||||||||||||||||
|
U.K. Government bonds
(3)
|
93
|
|
—
|
|
—
|
|
93
|
|
||||||||
|
U.K. corporate bonds
(4)
|
24
|
|
—
|
|
—
|
|
24
|
|
||||||||
|
Total debt securities
|
117
|
|
—
|
|
—
|
|
117
|
|
||||||||
|
Fair value of plan assets
|
$
|
197
|
|
$
|
—
|
|
$
|
—
|
|
$
|
197
|
|
||||
|
(1)
|
This category comprises U.K. passive equities, which are benchmarked against the FTSE 350 Index.
|
|
(2)
|
This category includes overseas equities, which comprises
30 percent
passive global equities benchmarked against the MSCI World (NDR) Index,
12 percent
passive global equities (hedged) benchmarked against the MSCI World (NDR) Hedged Index,
30 percent
fundamental indexation global equities benchmarked against the FTSE RAFI Developed 1000 index,
12 percent
fundamental indexation global equities (hedged) benchmarked against the FTSE RAFI Developed 1000 Hedge Index, and
16 percent
emerging markets benchmarked against the MSCI Emerging Markets (NDR) Index, which has a performance target of
2 percent
per annum over the benchmark over a rolling
three
-year period.
|
|
(3)
|
This category includes U.K. Government bonds, which comprises
48 percent
index-linked gilts benchmarked against the FTSE Actuaries Government Securities Index-Linked Over
5
Years Index,
37 percent
sterling nominal LDI bonds, and
15 percent
sterling inflation linked LDI bonds, both benchmarked against ILIM Custom Benchmark index.
|
|
(4)
|
This category comprises U.K. corporate bonds:
12 percent
benchmarked against the BofAML Sterling Corporate & Collaterlised (excluding Subordinated) Index with a performance target of
0.75 percent
per annum over the benchmark over a rolling
five
-year period.
|
The expected long-term rate of return on assets assumptions are derived relative to the yield on long-dated fixed-interest bonds issued by the U.K. government (gilts). For equities, outperformance relative to gilts is assumed to be
3.5 percent
per year.
F-43
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions used for the pension and postretirement benefit plans as of
December 31, 2016
,
2015
, and
2014
:
|
|
2016
|
2015
|
2014
|
|||||||||||||||||||||
|
|
Pension
Benefits
|
Postretirement
Benefits
|
Pension
Benefits
|
Postretirement
Benefits
|
Pension
Benefits
|
Postretirement
Benefits
|
||||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||||
|
Component of Net Periodic Benefit Costs
|
||||||||||||||||||||||||
|
Service cost
|
$
|
4
|
|
$
|
2
|
|
$
|
5
|
|
$
|
2
|
|
$
|
5
|
|
$
|
3
|
|
||||||
|
Interest cost
|
7
|
|
1
|
|
8
|
|
1
|
|
9
|
|
1
|
|
||||||||||||
|
Expected return on assets
|
(7
|
)
|
—
|
|
(8
|
)
|
—
|
|
(11
|
)
|
—
|
|
||||||||||||
|
Amortization of actuarial (gain) loss
|
1
|
|
(1
|
)
|
2
|
|
—
|
|
1
|
|
—
|
|
||||||||||||
|
Curtailment (gain) loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||||
|
Net periodic benefit cost
|
$
|
5
|
|
$
|
2
|
|
$
|
7
|
|
$
|
3
|
|
$
|
4
|
|
$
|
4
|
|
||||||
|
Weighted Average Assumptions used to determine Net Period Benefit Cost for the Years ended December 31
|
||||||||||||||||||||||||
|
Discount rate
|
3.90
|
%
|
3.95
|
%
|
3.70
|
%
|
3.62
|
%
|
4.60
|
%
|
4.33
|
%
|
||||||||||||
|
Salary increases
|
4.60
|
%
|
N/A
|
|
4.60
|
%
|
N/A
|
|
4.90
|
%
|
N/A
|
|
||||||||||||
|
Expected return on assets
|
4.10
|
%
|
N/A
|
|
3.90
|
%
|
N/A
|
|
5.60
|
%
|
N/A
|
|
||||||||||||
|
Healthcare cost trend
|
||||||||||||||||||||||||
|
Initial
|
N/A
|
|
7.00
|
%
|
N/A
|
|
7.00
|
%
|
N/A
|
|
7.00
|
%
|
||||||||||||
|
Ultimate in 2025
|
N/A
|
|
5.00
|
%
|
N/A
|
|
5.00
|
%
|
N/A
|
|
5.00
|
%
|
||||||||||||
Assumed health care cost trend rates affect amounts reported for postretirement benefits. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
|
|
Postretirement Benefits
|
|||||||
|
|
1% Increase
|
1% Decrease
|
||||||
|
|
(In millions)
|
|||||||
|
Effect on service and interest cost components
|
$
|
1
|
|
$
|
(1
|
)
|
||
|
Effect on postretirement benefit obligation
|
5
|
|
(4
|
)
|
||||
Apache expects to contribute approximately
$5 million
to its pension plan and
$2 million
to its postretirement benefit plan in
2017
. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|
Pension
Benefits
|
Postretirement
Benefits
|
|||||||
|
|
(In millions)
|
|||||||
|
2017
|
$
|
4
|
|
$
|
2
|
|
||
|
2018
|
4
|
|
2
|
|
||||
|
2019
|
4
|
|
2
|
|
||||
|
2020
|
4
|
|
2
|
|
||||
|
2021
|
4
|
|
2
|
|
||||
|
Years 2022-2026
|
24
|
|
9
|
|
||||
F-44
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
12. CAPITAL STOCK
Common Stock Outstanding
|
2016
|
2015
|
2014
|
|||||||
|
Balance, beginning of year
|
378,034,175
|
|
376,504,892
|
|
395,772,908
|
|
|||
|
Shares issued for stock-based compensation plans:
|
|||||||||
|
Treasury shares issued
|
11,504
|
|
17,525
|
|
17,454
|
|
|||
|
Common shares issued
|
1,393,997
|
|
1,511,758
|
|
1,665,259
|
|
|||
|
Treasury shares acquired
|
—
|
|
—
|
|
(20,950,729
|
)
|
|||
|
Balance, end of year
|
379,439,676
|
|
378,034,175
|
|
376,504,892
|
|
|||
Net Income (Loss) per Common Share
A reconciliation of the components of basic and diluted net income (loss) per common share for the years ended December 31,
2016
,
2015
, and
2014
is presented in the table below.
|
|
2016
|
2015
|
2014
|
||||||||||||||||||||||||||||||
|
|
Loss
|
Shares
|
Per Share
|
Income (Loss)
|
Shares
|
Per Share
|
Loss
|
Shares
|
Per Share
|
||||||||||||||||||||||||
|
|
(In millions, except per share amounts)
|
||||||||||||||||||||||||||||||||
|
Basic and Diluted:
|
|||||||||||||||||||||||||||||||||
|
Loss from continuing operations
|
$
|
(1,372
|
)
|
379
|
|
$
|
(3.62
|
)
|
$
|
(10,844
|
)
|
378
|
|
$
|
(28.70
|
)
|
$
|
(6,653
|
)
|
384
|
|
$
|
(17.32
|
)
|
|||||||||
|
Income (loss) from discontinued operations
|
(33
|
)
|
379
|
|
(0.09
|
)
|
492
|
|
378
|
|
1.30
|
|
(1,707
|
)
|
384
|
|
(4.44
|
)
|
|||||||||||||||
|
Loss attributable to common stock
|
$
|
(1,405
|
)
|
379
|
|
$
|
(3.71
|
)
|
$
|
(10,352
|
)
|
378
|
|
$
|
(27.40
|
)
|
$
|
(8,360
|
)
|
384
|
|
$
|
(21.76
|
)
|
|||||||||
The diluted EPS calculation excludes options and restricted shares that were anti-dilutive totaling
4.7 million
,
7.0 million
, and
4.5 million
for the years ended December 31,
2016
,
2015
, and
2014
, respectively.
Stock Repurchase Program
Apache’s Board of Directors has authorized the purchase of up to
40 million
shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through December 31, 2014, had repurchased a total of
32.2 million
shares at an average price of
$88.96
per share. The Company has not purchased any additional shares during
2016
or 2015, and is not obligated to acquire any specific number of shares.
Common Stock Dividend
The Company paid common stock dividends of
$1.00
per share in
2016
,
$1.00
per share in
2015
, and
$0.95
per share in
2014
.
Stock Compensation Plans
The Company has several stock-based compensation plans, which include stock options, restricted stock, and conditional restricted stock unit plans. On May 12, 2016, the Company's shareholders approved the 2016 Omnibus Compensation Plan (the 2016 Plan), which is intended to provide eligible employees with equity-based incentives. The 2016 Plan provides for the granting of Incentive Stock Options, Non-Qualified Stock Options, Performance Awards, Restricted Stock Awards, Restricted Stock Units, Stock Appreciation Rights, Cash Awards, or any combination of the foregoing. A total of
22.9 million
shares were authorized and available for grant under the 2016 Plan as of
December 31, 2016
. Previously approved plans remain in effect solely for the purpose of governing grants still outstanding that were issued prior to approval of the 2016 Plan. All new grants are issued from the 2016 Plan.
F-45
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For
2016
,
2015
, and
2014
, stock-based compensation expensed was
$131 million
,
$100 million
, and
$148 million
(
$93 million
,
$65 million
, and
$95 million
after tax), respectively. Costs related to the plans are capitalized or expensed based on the nature of each employee’s activities. A description of the Company’s stock-based compensation plans and related costs follows:
|
2016
|
2015
|
2014
|
||||||||||
|
|
(In millions)
|
|||||||||||
|
Stock-based compensation expensed
|
$
|
131
|
|
$
|
100
|
|
$
|
148
|
|
|||
|
Stock-based compensation capitalized
|
40
|
|
53
|
|
62
|
|
||||||
|
Total stock-based compensation costs
|
$
|
171
|
|
$
|
153
|
|
$
|
210
|
|
|||
Stock Options
As of
December 31, 2016
, the Company had issued options to purchase shares of the Company’s common stock under the employee stock option plan adopted in 2005 (the Stock Option Plan), as well as the 2007 Omnibus Equity Compensation Plan (the 2007 Plan), the 2011 Plan, and the 2016 Plan (together, the Omnibus Plans). New shares of Company stock will be issued for employee stock option exercises. Under the Stock Option Plan and the Omnibus Plans, the exercise price of each option equals the closing price of Apache’s common stock on the date of grant. Options issued prior to 2016 generally become exercisable ratably over a
four
-year period and expire
10
years after granted. Options granted in or after 2016 become exercisable ratably over a
three
-year period and expire
10 years
after granted. The Omnibus Plans and the Stock Option Plan were submitted to and approved by the Company’s shareholders.
A summary of stock options issued and outstanding under the Stock Option Plan and the Omnibus Plans is presented in the table and narrative below:
|
|
2016
|
||||||
|
|
Shares
Under Option
|
Weighted Average
Exercise Price
|
|||||
|
|
(In thousands)
|
|
|||||
|
Outstanding, beginning of year
|
4,931
|
|
$
|
91.52
|
|
||
|
Granted
|
873
|
|
41.24
|
|
|||
|
Exercised
|
—
|
|
—
|
|
|||
|
Forfeited or expired
|
(691
|
)
|
76.99
|
|
|||
|
Outstanding, end of year
(1)
|
5,113
|
|
84.89
|
|
|||
|
Expected to vest
(2)
|
887
|
|
46.88
|
|
|||
|
Exercisable, end of year
(3)
|
4,177
|
|
93.40
|
|
|||
|
(1)
|
As of
December 31, 2016
, options outstanding had a weighted average remaining contractual life of
4.6
years and aggregate intrinsic value of
$18 million
.
|
|
(2)
|
As of
December 31, 2016
, options expected to vest had a weighted average remaining contractual life of
8.7
years and aggregate intrinsic value of
$17 million
.
|
|
(3)
|
As of
December 31, 2016
, options exercisable had a weighted average remaining contractual life of
3.7
years and aggregate intrinsic value of
nil
.
|
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Assumptions used in the valuation are disclosed in the following table. Expected volatilities are based on historical volatility of the Company's common stock and other factors. The expected dividend yield is based on historical yields on the date of grant. The expected term of stock options granted represents the period of time that the stock options are expected to be outstanding and is derived from historical exercise behavior, current trends, and values derived from lattice-based models. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.
|
2016
|
2015
|
2014
|
||||||
|
Expected volatility
|
32.72
|
%
|
N/A
|
N/A
|
||||
|
Expected dividend yields
|
2.42
|
%
|
N/A
|
N/A
|
||||
|
Expected term (in years)
|
6
|
|
N/A
|
N/A
|
||||
|
Risk-free rate
|
1.44
|
%
|
N/A
|
N/A
|
||||
|
Weighted-average grant-date fair value
|
$
|
10.38
|
|
N/A
|
N/A
|
|||
F-46
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
There were
no
options exercised during 2016. The intrinsic value of options exercised during
2015
and
2014
was approximately
$3 million
and
$13 million
, respectively. As of
December 31, 2016
, the total compensation cost related to non-vested options not yet recognized was
$6 million
, which will be recognized over the remaining vesting period of the options.
In January 2017, the Company issued
489,773
options to purchase shares of the Company’s common stock to eligible employees under the 2016 Plan. The total compensation cost of
$9 million
is estimated to be recognized over a
three
-year vesting period of these options.
Restricted Stock and Restricted Stock Units
The Company has restricted stock and restricted stock unit plans for eligible employees including officers. The programs created under the Omnibus Plans have been approved by Apache’s Board of Directors. In
2016
, the Company awarded
4,049,023
restricted stock units at a weighted-average per-share market price of
$47.37
. In
2015
and
2014
, the Company awarded
2,976,562
and
3,046,744
restricted stock units at a weighted-average per-share market price of
$61.65
and
$86.87
, respectively. The value of the stock issued was established by the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms. During
2016
,
2015
, and
2014
,
$113 million
(
$73 million
after tax),
$90 million
(
$58 million
after tax), and
$111 million
(
$72 million
after tax), respectively, was charged to expense. In
2016
,
2015
, and
2014
,
$35 million
,
$48 million
, and
$47 million
was capitalized, respectively. As of
December 31, 2016
, there was
$233 million
of total unrecognized compensation cost related to
6,061,803
unvested restricted stock units. The weighted-average remaining life of unvested restricted stock units is approximately
1.3
years.
The fair value of the awards vested during
2016
,
2015
, and
2014
was approximately
$151 million
,
$149 million
, and
$138 million
, respectively. A summary of restricted stock unit activity for the year ended
December 31, 2016
, is presented below.
|
Shares
|
Weighted-
Average Grant-
Date Fair Value
|
||||||
|
|
(In thousands)
|
|
|||||
|
Non-vested at January 1, 2016
|
4,570
|
|
$
|
70.86
|
|
||
|
Granted
|
4,049
|
|
47.37
|
|
|||
|
Vested
|
(2,081
|
)
|
72.59
|
|
|||
|
Forfeited
|
(476
|
)
|
58.05
|
|
|||
|
Non-vested at December 31, 2016
|
6,062
|
|
55.55
|
|
|||
In January 2017, the Company awarded
1,866,606
restricted stock units at a weighted-average per-share market price of
$63.25
under the 2016 Plan to eligible employees. The total compensation cost of
$118 million
, absent any forfeitures, is estimated to be recognized over a
three
-year vesting period of these restricted stock units.
Total Shareholder Return (TSR) Stock Units
To provide long-term incentives for Apache employees to deliver competitive returns to the Company’s stockholders, the Company has granted conditional restricted stock units to eligible employees. The ultimate number of shares awarded from these conditional restricted stock units is based upon measurement of total shareholder return of Apache common stock as compared to a designated peer group during a three-year performance period. Should any restricted stock units be awarded at the end of the three-year performance period,
50 percent
of restricted stock units awarded will immediately vest, and an additional
25 percent
will vest on succeeding anniversaries of the end of the performance period. Grants from the total shareholder return programs were outstanding at
December 31, 2016
, as described below:
|
•
|
In January 2013, the Company’s Board of Directors approved the 2013 TSR Program, pursuant to the 2011 Plan. In January 2013, eligible employees received initial conditional restricted stock unit awards totaling
1,232,176
units. In May 2013, the Company’s Board of Directors canceled
918,016
awards under the 2013 Performance Program for nonexecutive employees. Based on measurements of total shareholder return relative to the designated peer group at December 31, 2015, shares were paid out at
70 percent
of target. A total of
29,957
awards were outstanding at
December 31, 2016
.
|
F-47
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
•
|
In January 2014, the Company’s Board of Directors approved the 2014 TSR Program, pursuant to the 2011 Plan. In January 2014, eligible employees received initial conditional restricted stock unit awards totaling
157,406
units. Based on measurements of total shareholder return relative to the designated peer group at December 31, 2016, shares were paid out at
100 percent
of target. A total of
47,867
awards were outstanding at
December 31, 2016
.
|
The fair value cost of the awards was estimated on the date of grant and is being recorded as compensation expense ratably over the vesting terms. During
2016
,
2015
, and
2014
,
$0.7 million
(
$0.5 million
after tax),
$0.6 million
(
$0.4 million
after tax), and
$18 million
(
$11 million
after tax), respectively, was charged to expense. During
2016
,
2015
, and
2014
,
$0.1 million
,
$0.3 million
, and
$7 million
was capitalized, respectively. As of
December 31, 2016
, there was
$1.2 million
of total unrecognized compensation cost related to
77,824
unvested conditional restricted stock units. The weighted-average remaining life of the unvested conditional restricted stock units is approximately
0.7
years.
|
Shares
|
Weighted-
Average Grant-
Date Fair
Value
(1)
|
||||||
|
|
(In thousands)
|
|
|||||
|
Non-vested at January 1, 2016
|
172
|
|
$
|
78.22
|
|
||
|
Granted
|
—
|
|
—
|
|
|||
|
Vested
|
(34
|
)
|
76.07
|
|
|||
|
Forfeited or expired
|
(60
|
)
|
71.20
|
|
|||
|
Non-vested at December 31, 2016
|
78
|
|
77.10
|
|
|||
|
(1)
|
The fair value of each conditional restricted stock unit award is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a three-year continuous risk-free interest rate; (ii) a constant volatility assumption based on the historical realized stock price volatility of the Company and the designated peer group; and (iii) the historical stock prices and expected dividends of the common stock of the Company and its designated peer group.
|
Business Performance Restricted Stock Units
Apache has a business performance program for certain eligible employees with
50 percent
of the shares payout based upon the TSR program payout model as described above, and the remaining
50 percent
of the shares based on performance and financial objectives as defined in the plan. The overall results of the objectives will be calculated at the end of the award’s stated performance period and, if a payout is warranted, applied to the target number of restricted stock units awarded. The business performance shares will immediately vest
50 percent
at the end of the
three
-year performance period, with the remaining
50 percent
vesting at the end of the following year. Grants from the total shareholder return programs outstanding at
December 31, 2016
, are as described below:
|
•
|
In February 2015, the Company’s Board of Directors approved the 2015 Business Performance Program, pursuant to the 2011 Plan. Eligible employees received initial conditional restricted stock unit awards totaling
602,304
units. The actual amount of shares awarded will be between
zero
and
150 percent
of target. A total of
431,707
units were outstanding as of
December 31, 2016
, from which a minimum of
zero
and a maximum of
647,561
shares could be awarded.
|
|
•
|
In January 2016, the Company’s Board of Directors approved the 2016 Business Performance Program, pursuant to the 2011 Plan. Eligible employees received the initial conditional restricted stock unit totaling
871,369
. The actual amount of shares awarded will be between
zero
and
200 percent
of target. A total of
793,442
units were outstanding as of
December 31, 2016
, from which a minimum of
zero
and a maximum of
1,586,884
shares could be awarded.
|
F-48
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The fair value cost of the awards was estimated on the date of grant and is being recorded as compensation expense ratably over the vesting terms. During
2016
and
2015
,
$14 million
(
$9 million
after tax) and
$3 million
(
$2 million
after tax), respectively, were charged to expense. During
2016
and
2015
,
$2 million
and
$1 million
were capitalized, respectively. As of
December 31, 2016
, there was
$37 million
of total unrecognized compensation cost related to
1,225,149
unvested conditional restricted stock units. The weighted-average remaining life of the unvested conditional restricted stock units is approximately
2.1
years.
|
Shares
|
Weighted
Average Grant-
Date Fair
Value
(1)
|
||||||
|
|
(In thousands)
|
|
|||||
|
Non-vested at January 1, 2016
|
501
|
|
$
|
66.53
|
|
||
|
Granted
|
871
|
|
34.19
|
|
|||
|
Vested
|
—
|
|
—
|
|
|||
|
Forfeited or expired
|
(147
|
)
|
45.65
|
|
|||
|
Non-vested at December 31, 2016
|
1,225
|
|
45.60
|
|
|||
|
(1)
|
The fair value of each conditional restricted stock unit award is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a three-year continuous risk-free interest rate; (ii) a constant volatility assumption based on the historical realized stock price volatility of the Company and the designated peer group; and (iii) the historical stock prices and expected dividends of the common stock of the Company and its designated peer group.
|
In January 2017, the Company’s Board of Directors approved the 2017 Performance Program, pursuant to the 2016 Plan, with terms similar to the 2016 Performance Program described above. Eligible employees received the initial conditional restricted stock unit totaling
604,147
units, with the ultimate number of restricted stock units to be awarded ranging from
zero
to a maximum of
1,208,294
units. The grant date fair value per award was
$66.97
.
13. ACCUMULATED OTHER COMPREHENSIVE LOSS
Components of accumulated other comprehensive loss include the following:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Currency translation adjustment
(1)
|
$
|
(109
|
)
|
$
|
(109
|
)
|
$
|
(109
|
)
|
|||
|
Unfunded pension and postretirement benefit plan (Note 11)
|
(3
|
)
|
(10
|
)
|
(7
|
)
|
||||||
|
Accumulated other comprehensive loss
|
$
|
(112
|
)
|
$
|
(119
|
)
|
$
|
(116
|
)
|
|||
|
(1)
|
Currency translation adjustments resulting from translating the Canadian subsidiaries’ financial statements into U.S. dollar equivalents, prior to adoption of the U.S. dollar as their functional currency, were reported separately and accumulated in other comprehensive income (loss).
|
14. MAJOR CUSTOMERS
In 2016 and 2015, purchases by China Petroleum & Chemical Corporation and its subsidiaries accounted for
21 percent
and
12 percent
, respectively, of the Company's worldwide oil and gas production revenues. In 2016 and 2015, purchases by Egyptian General Petroleum Company and its subsidiaries accounted for
12 percent
and
11 percent
, respectively, of the Company's worldwide oil and gas production revenues. In
2015
and
2014
, purchases by Royal Dutch Shell plc and its subsidiaries accounted for
11 percent
and
19 percent
, respectively, of the Company’s worldwide oil and gas production revenues.
F-49
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15. BUSINESS SEGMENT INFORMATION
Apache is engaged in a single line of business. Both domestically and internationally, the Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. At
December 31, 2016
, the Company had production in
four
reporting segments: the United States, Canada, Egypt, and the U.K. North Sea. Apache also pursues exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Financial information for each area is presented below:
|
United
States
|
Canada
|
Egypt
(1)
|
North Sea
|
Other
International
|
Total
(1)
|
|||||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||||
|
2016
|
||||||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
1,997
|
|
$
|
343
|
|
$
|
2,057
|
|
$
|
970
|
|
$
|
—
|
|
$
|
5,367
|
|
||||||
|
Operating Expenses:
|
||||||||||||||||||||||||
|
Lease operating expenses
|
553
|
|
181
|
|
446
|
|
314
|
|
—
|
|
1,494
|
|
||||||||||||
|
Gathering and transportation
|
80
|
|
68
|
|
44
|
|
8
|
|
—
|
|
200
|
|
||||||||||||
|
Taxes other than income
|
139
|
|
20
|
|
—
|
|
(33
|
)
|
—
|
|
126
|
|
||||||||||||
|
Depreciation, depletion, and amortization
|
1,138
|
|
183
|
|
778
|
|
519
|
|
—
|
|
2,618
|
|
||||||||||||
|
Exploration
|
285
|
|
88
|
|
48
|
|
37
|
|
15
|
|
473
|
|
||||||||||||
|
Asset retirement obligation accretion
|
34
|
|
47
|
|
—
|
|
75
|
|
—
|
|
156
|
|
||||||||||||
|
Impairments
|
80
|
|
367
|
|
1
|
|
655
|
|
—
|
|
1,103
|
|
||||||||||||
|
Operating Income (Loss)
|
$
|
(312
|
)
|
$
|
(611
|
)
|
$
|
740
|
|
$
|
(605
|
)
|
$
|
(15
|
)
|
(803
|
)
|
|||||||
|
Other Income (Expense):
|
||||||||||||||||||||||||
|
Gain on divestitures, net
|
21
|
|
||||||||||||||||||||||
|
Other
|
(34
|
)
|
||||||||||||||||||||||
|
General and administrative
|
(410
|
)
|
||||||||||||||||||||||
|
Transaction, reorganization, and separation
|
(39
|
)
|
||||||||||||||||||||||
|
Financing costs, net
|
(417
|
)
|
||||||||||||||||||||||
|
Net Loss From Continuing Operations Before Income Taxes
|
$
|
(1,682
|
)
|
|||||||||||||||||||||
|
Net Property and Equipment
|
$
|
11,168
|
|
$
|
1,464
|
|
$
|
3,362
|
|
$
|
2,834
|
|
$
|
39
|
|
$
|
18,867
|
|
||||||
|
Total Assets
|
$
|
12,403
|
|
$
|
1,591
|
|
$
|
4,893
|
|
$
|
3,584
|
|
$
|
48
|
|
$
|
22,519
|
|
||||||
|
Additions to Net Property and Equipment
|
$
|
926
|
|
$
|
34
|
|
$
|
459
|
|
$
|
260
|
|
$
|
2
|
|
$
|
1,681
|
|
||||||
F-50
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
United
States
|
Canada
|
Egypt
(1)
|
North
Sea
|
Other
International
|
Total
(1)
|
|||||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||||
|
2015
|
||||||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
2,637
|
|
$
|
498
|
|
$
|
2,095
|
|
$
|
1,280
|
|
$
|
—
|
|
$
|
6,510
|
|
||||||
|
Operating Expenses:
|
||||||||||||||||||||||||
|
Lease operating expenses
|
739
|
|
244
|
|
522
|
|
349
|
|
—
|
|
1,854
|
|
||||||||||||
|
Gathering and transportation
|
68
|
|
89
|
|
45
|
|
9
|
|
—
|
|
211
|
|
||||||||||||
|
Taxes other than income
|
184
|
|
26
|
|
9
|
|
63
|
|
—
|
|
282
|
|
||||||||||||
|
Depreciation, depletion, and amortization
|
1,558
|
|
301
|
|
927
|
|
514
|
|
—
|
|
3,300
|
|
||||||||||||
|
Exploration
|
2,145
|
|
231
|
|
154
|
|
237
|
|
4
|
|
2,771
|
|
||||||||||||
|
Asset retirement obligation accretion
|
28
|
|
43
|
|
—
|
|
74
|
|
—
|
|
145
|
|
||||||||||||
|
Impairments
|
6,266
|
|
1,593
|
|
1,255
|
|
211
|
|
147
|
|
9,472
|
|
||||||||||||
|
Operating Loss
|
$
|
(8,351
|
)
|
$
|
(2,029
|
)
|
$
|
(817
|
)
|
$
|
(177
|
)
|
$
|
(151
|
)
|
(11,525
|
)
|
|||||||
|
Other Income (Expense):
|
||||||||||||||||||||||||
|
Gain on divestitures, net
|
281
|
|
||||||||||||||||||||||
|
Other
|
98
|
|
||||||||||||||||||||||
|
General and administrative
|
(380
|
)
|
||||||||||||||||||||||
|
Transaction, reorganization, and separation
|
(132
|
)
|
||||||||||||||||||||||
|
Financing costs, net
|
(511
|
)
|
||||||||||||||||||||||
|
Net Loss From Continuing Operations Before Income Taxes
|
$
|
(12,169
|
)
|
|||||||||||||||||||||
|
Net Property and Equipment
|
$
|
11,753
|
|
$
|
2,074
|
|
$
|
3,712
|
|
$
|
3,263
|
|
$
|
36
|
|
$
|
20,838
|
|
||||||
|
Total Assets
|
$
|
12,782
|
|
$
|
2,225
|
|
$
|
6,165
|
|
$
|
4,280
|
|
$
|
48
|
|
$
|
25,500
|
|
||||||
|
Additions to Net Property and Equipment
|
$
|
2,099
|
|
$
|
403
|
|
$
|
862
|
|
$
|
715
|
|
$
|
27
|
|
$
|
4,106
|
|
||||||
|
2014
|
||||||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
5,744
|
|
$
|
1,092
|
|
$
|
3,643
|
|
$
|
2,316
|
|
$
|
—
|
|
$
|
12,795
|
|
||||||
|
Operating Expenses:
|
||||||||||||||||||||||||
|
Lease operating expenses
|
921
|
|
384
|
|
499
|
|
434
|
|
—
|
|
2,238
|
|
||||||||||||
|
Gathering and transportation
|
93
|
|
123
|
|
40
|
|
17
|
|
—
|
|
273
|
|
||||||||||||
|
Taxes other than income
|
350
|
|
31
|
|
11
|
|
185
|
|
—
|
|
577
|
|
||||||||||||
|
Depreciation, depletion, and amortization
|
2,408
|
|
439
|
|
872
|
|
807
|
|
—
|
|
4,526
|
|
||||||||||||
|
Exploration
|
2,113
|
|
162
|
|
112
|
|
119
|
|
(7
|
)
|
2,499
|
|
||||||||||||
|
Asset retirement obligation accretion
|
43
|
|
39
|
|
—
|
|
72
|
|
—
|
|
154
|
|
||||||||||||
|
Impairments
|
2,622
|
|
2,412
|
|
173
|
|
1,895
|
|
—
|
|
7,102
|
|
||||||||||||
|
Operating Income (Loss)
|
$
|
(2,806
|
)
|
$
|
(2,498
|
)
|
$
|
1,936
|
|
$
|
(1,213
|
)
|
$
|
7
|
|
(4,574
|
)
|
|||||||
|
Other Income (Expense):
|
||||||||||||||||||||||||
|
Loss on divestitures, net
|
(1,608
|
)
|
||||||||||||||||||||||
|
Other
|
285
|
|
||||||||||||||||||||||
|
General and administrative
|
(453
|
)
|
||||||||||||||||||||||
|
Transaction, reorganization, and separation
|
(67
|
)
|
||||||||||||||||||||||
|
Financing costs, net
|
(413
|
)
|
||||||||||||||||||||||
|
Net Loss From Continuing Operations Before Income Taxes
|
$
|
(6,830
|
)
|
|||||||||||||||||||||
|
Net Property and Equipment
|
$
|
19,507
|
|
$
|
4,197
|
|
$
|
5,141
|
|
$
|
3,300
|
|
$
|
9
|
|
$
|
32,154
|
|
||||||
|
Total Assets
|
$
|
21,487
|
|
$
|
4,728
|
|
$
|
6,926
|
|
$
|
4,480
|
|
$
|
544
|
|
$
|
38,165
|
|
||||||
|
Additions to Net Property and Equipment
|
$
|
7,006
|
|
$
|
1,358
|
|
$
|
1,293
|
|
$
|
1,060
|
|
$
|
8
|
|
$
|
10,725
|
|
||||||
|
(1)
|
Includes a noncontrolling interest in Egypt.
|
F-51
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
16. SUPPLEMENTAL OIL AND GAS DISCLOSURES (Unaudited)
Oil and Gas Operations
The following table sets forth revenue and direct cost information relating to the Company’s oil and gas exploration and production activities. Apache has no long-term agreements to purchase oil or gas production from foreign governments or authorities. In the second quarter of 2015, Apache completed the sale of its Australian LNG business and oil and gas assets, and as such the results of Australia oil and gas assets have been classified as discontinued operations.
|
United
States
|
Canada
|
Egypt
(3)
|
North Sea
|
Other
International
|
Total
(3)(4)
|
|||||||||||||||||||
|
|
(In millions, except per boe)
|
|||||||||||||||||||||||
|
2016
|
||||||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
1,997
|
|
$
|
343
|
|
$
|
2,057
|
|
$
|
970
|
|
$
|
—
|
|
$
|
5,367
|
|
||||||
|
Operating cost:
|
||||||||||||||||||||||||
|
Depreciation, depletion, and amortization
(1)
|
1,055
|
|
174
|
|
733
|
|
498
|
|
—
|
|
2,460
|
|
||||||||||||
|
Asset retirement obligation accretion
|
34
|
|
47
|
|
—
|
|
75
|
|
—
|
|
156
|
|
||||||||||||
|
Lease operating expenses
|
553
|
|
181
|
|
446
|
|
314
|
|
—
|
|
1,494
|
|
||||||||||||
|
Gathering and transportation
|
80
|
|
68
|
|
44
|
|
8
|
|
—
|
|
200
|
|
||||||||||||
|
Exploration expenses
|
285
|
|
88
|
|
48
|
|
37
|
|
15
|
|
473
|
|
||||||||||||
|
Impairments related to oil and gas properties
|
61
|
|
366
|
|
—
|
|
—
|
|
—
|
|
427
|
|
||||||||||||
|
Production taxes
(2)
|
135
|
|
18
|
|
—
|
|
(33
|
)
|
—
|
|
120
|
|
||||||||||||
|
Income tax
|
(72
|
)
|
(162
|
)
|
354
|
|
28
|
|
—
|
|
148
|
|
||||||||||||
|
2,131
|
|
780
|
|
1,625
|
|
927
|
|
15
|
|
5,478
|
|
|||||||||||||
|
Results of operation
|
$
|
(134
|
)
|
$
|
(437
|
)
|
$
|
432
|
|
$
|
43
|
|
$
|
(15
|
)
|
$
|
(111
|
)
|
||||||
|
2015
|
||||||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
2,637
|
|
$
|
498
|
|
$
|
2,095
|
|
$
|
1,280
|
|
$
|
—
|
|
$
|
6,510
|
|
||||||
|
Operating cost:
|
||||||||||||||||||||||||
|
Depreciation, depletion, and amortization
(1)
|
1,455
|
|
251
|
|
780
|
|
490
|
|
—
|
|
2,976
|
|
||||||||||||
|
Asset retirement obligation accretion
|
28
|
|
43
|
|
—
|
|
74
|
|
—
|
|
145
|
|
||||||||||||
|
Lease operating expenses
|
739
|
|
244
|
|
522
|
|
349
|
|
—
|
|
1,854
|
|
||||||||||||
|
Gathering and transportation
|
68
|
|
89
|
|
45
|
|
9
|
|
—
|
|
211
|
|
||||||||||||
|
Exploration expenses
|
2,145
|
|
231
|
|
154
|
|
237
|
|
4
|
|
2,771
|
|
||||||||||||
|
Impairments related to oil and gas properties
|
6,154
|
|
1,031
|
|
193
|
|
11
|
|
—
|
|
7,389
|
|
||||||||||||
|
Production taxes
(2)
|
178
|
|
23
|
|
—
|
|
58
|
|
—
|
|
259
|
|
||||||||||||
|
Income tax
|
(2,886
|
)
|
(369
|
)
|
180
|
|
26
|
|
—
|
|
(3,049
|
)
|
||||||||||||
|
7,881
|
|
1,543
|
|
1,874
|
|
1,254
|
|
4
|
|
12,556
|
|
|||||||||||||
|
Results of operation
|
$
|
(5,244
|
)
|
$
|
(1,045
|
)
|
$
|
221
|
|
$
|
26
|
|
$
|
(4
|
)
|
$
|
(6,046
|
)
|
||||||
|
2014
|
||||||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
5,744
|
|
$
|
1,092
|
|
$
|
3,643
|
|
$
|
2,316
|
|
$
|
—
|
|
$
|
12,795
|
|
||||||
|
Operating cost:
|
||||||||||||||||||||||||
|
Depreciation, depletion, and amortization
(1)
|
2,294
|
|
382
|
|
735
|
|
784
|
|
—
|
|
4,195
|
|
||||||||||||
|
Asset retirement obligation accretion
|
43
|
|
39
|
|
—
|
|
72
|
|
—
|
|
154
|
|
||||||||||||
|
Lease operating expenses
|
921
|
|
384
|
|
499
|
|
434
|
|
—
|
|
2,238
|
|
||||||||||||
|
Gathering and transportation
|
93
|
|
123
|
|
40
|
|
17
|
|
—
|
|
273
|
|
||||||||||||
|
Exploration expenses
|
2,113
|
|
162
|
|
112
|
|
119
|
|
(7
|
)
|
2,499
|
|
||||||||||||
|
Impairments related to oil and gas properties
|
2,372
|
|
1,645
|
|
173
|
|
1,878
|
|
—
|
|
6,068
|
|
||||||||||||
|
Production taxes
(2)
|
342
|
|
27
|
|
—
|
|
177
|
|
—
|
|
546
|
|
||||||||||||
|
Income tax
|
(864
|
)
|
(421
|
)
|
938
|
|
(723
|
)
|
—
|
|
(1,070
|
)
|
||||||||||||
|
7,314
|
|
2,341
|
|
2,497
|
|
2,758
|
|
(7
|
)
|
14,903
|
|
|||||||||||||
|
Results of operation
|
$
|
(1,570
|
)
|
$
|
(1,249
|
)
|
$
|
1,146
|
|
$
|
(442
|
)
|
$
|
7
|
|
$
|
(2,108
|
)
|
||||||
F-52
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
(1)
|
This amount only reflects DD&A of capitalized costs of oil and gas properties and, therefore, does not agree with DD&A reflected on Note 15—Business Segment Information.
|
|
(2)
|
Only reflects amounts directly related to oil and gas producing properties and, therefore, does not agree with taxes other than income reflected on Note 15—Business Segment Information.
|
|
(3)
|
Includes noncontrolling interest in Egypt.
|
|
(4)
|
Prior year amounts have been recast to exclude discontinued operations.
|
Costs Incurred in Oil and Gas Property Acquisitions, Exploration, and Development Activities
|
United
States
|
Canada
|
Egypt
(2)
|
Australia
|
North Sea
|
Argentina
|
Other
International
|
Total
(2)
|
|||||||||||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||||||||||||
|
2016
|
||||||||||||||||||||||||||||||||
|
Acquisitions:
|
||||||||||||||||||||||||||||||||
|
Proved
|
$
|
—
|
|
$
|
1
|
|
$
|
6
|
|
$
|
—
|
|
$
|
38
|
|
$
|
—
|
|
$
|
—
|
|
$
|
45
|
|
||||||||
|
Unproved
|
110
|
|
7
|
|
49
|
|
—
|
|
4
|
|
—
|
|
—
|
|
170
|
|
||||||||||||||||
|
Exploration
|
278
|
|
23
|
|
67
|
|
—
|
|
84
|
|
—
|
|
18
|
|
470
|
|
||||||||||||||||
|
Development
|
420
|
|
27
|
|
353
|
|
—
|
|
150
|
|
—
|
|
—
|
|
950
|
|
||||||||||||||||
|
Costs incurred
(1)
|
$
|
808
|
|
$
|
58
|
|
$
|
475
|
|
$
|
—
|
|
$
|
276
|
|
$
|
—
|
|
$
|
18
|
|
$
|
1,635
|
|
||||||||
|
(1)
Includes capitalized interest and asset retirement costs as follows:
|
||||||||||||||||||||||||||||||||
|
Capitalized interest
|
$
|
21
|
|
$
|
6
|
|
$
|
—
|
|
$
|
—
|
|
$
|
21
|
|
$
|
—
|
|
$
|
—
|
|
$
|
48
|
|
||||||||
|
Asset retirement costs
|
(51
|
)
|
(13
|
)
|
—
|
|
—
|
|
(128
|
)
|
—
|
|
—
|
|
(192
|
)
|
||||||||||||||||
|
2015
|
||||||||||||||||||||||||||||||||
|
Acquisitions:
|
||||||||||||||||||||||||||||||||
|
Proved
|
$
|
1
|
|
$
|
8
|
|
$
|
29
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
38
|
|
||||||||
|
Unproved
|
313
|
|
23
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
336
|
|
||||||||||||||||
|
Exploration
|
194
|
|
51
|
|
125
|
|
32
|
|
246
|
|
—
|
|
29
|
|
677
|
|
||||||||||||||||
|
Development
|
1,729
|
|
151
|
|
741
|
|
98
|
|
479
|
|
—
|
|
—
|
|
3,198
|
|
||||||||||||||||
|
Costs incurred
(1)
|
$
|
2,237
|
|
$
|
233
|
|
$
|
895
|
|
$
|
130
|
|
$
|
725
|
|
$
|
—
|
|
$
|
29
|
|
$
|
4,249
|
|
||||||||
|
(1)
Includes capitalized interest and asset retirement costs as follows:
|
||||||||||||||||||||||||||||||||
|
Capitalized interest
|
$
|
—
|
|
$
|
—
|
|
$
|
8
|
|
$
|
6
|
|
$
|
7
|
|
$
|
—
|
|
$
|
—
|
|
$
|
21
|
|
||||||||
|
Asset retirement costs
|
123
|
|
8
|
|
—
|
|
—
|
|
(66
|
)
|
—
|
|
—
|
|
65
|
|
||||||||||||||||
|
2014
|
||||||||||||||||||||||||||||||||
|
Acquisitions:
|
||||||||||||||||||||||||||||||||
|
Proved
|
$
|
102
|
|
$
|
—
|
|
$
|
11
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
113
|
|
||||||||
|
Unproved
|
1,221
|
|
141
|
|
—
|
|
16
|
|
—
|
|
—
|
|
—
|
|
1,378
|
|
||||||||||||||||
|
Exploration
|
505
|
|
93
|
|
207
|
|
131
|
|
103
|
|
9
|
|
1
|
|
1,049
|
|
||||||||||||||||
|
Development
|
5,078
|
|
789
|
|
1,122
|
|
990
|
|
956
|
|
6
|
|
—
|
|
8,941
|
|
||||||||||||||||
|
Costs incurred
(1)
|
$
|
6,906
|
|
$
|
1,023
|
|
$
|
1,340
|
|
$
|
1,137
|
|
$
|
1,059
|
|
$
|
15
|
|
$
|
1
|
|
$
|
11,481
|
|
||||||||
|
(1)
Includes capitalized interest and asset retirement costs as follows:
|
||||||||||||||||||||||||||||||||
|
Capitalized interest
|
$
|
17
|
|
$
|
—
|
|
$
|
9
|
|
$
|
90
|
|
$
|
29
|
|
$
|
3
|
|
$
|
—
|
|
$
|
148
|
|
||||||||
|
Asset retirement costs
|
43
|
|
175
|
|
—
|
|
55
|
|
34
|
|
—
|
|
—
|
|
307
|
|
||||||||||||||||
|
(2)
Includes a noncontrolling interest in Egypt.
|
||||||||||||||||||||||||||||||||
F-53
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Capitalized Costs
The following table sets forth the capitalized costs and associated accumulated depreciation, depletion, and amortization relating to the Company’s oil and gas acquisition, exploration, and development activities:
|
United
States
|
Canada
|
Egypt
(1)
|
North
Sea
|
Other
International
|
Total
(1)
|
|||||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||||||
|
2016
|
||||||||||||||||||||||||
|
Proved properties
|
$
|
19,170
|
|
$
|
5,434
|
|
$
|
10,169
|
|
$
|
7,920
|
|
$
|
—
|
|
$
|
42,693
|
|
||||||
|
Unproved properties
|
1,465
|
|
109
|
|
76
|
|
280
|
|
39
|
|
1,969
|
|
||||||||||||
|
20,635
|
|
5,543
|
|
10,245
|
|
8,200
|
|
39
|
|
44,662
|
|
|||||||||||||
|
Accumulated DD&A
|
(10,034
|
)
|
(4,120
|
)
|
(7,287
|
)
|
(5,531
|
)
|
—
|
|
(26,972
|
)
|
||||||||||||
|
$
|
10,601
|
|
$
|
1,423
|
|
$
|
2,958
|
|
$
|
2,669
|
|
$
|
39
|
|
$
|
17,690
|
|
|||||||
|
2015
|
||||||||||||||||||||||||
|
Proved properties
|
$
|
18,692
|
|
$
|
5,812
|
|
$
|
9,798
|
|
$
|
7,426
|
|
$
|
—
|
|
$
|
41,728
|
|
||||||
|
Unproved properties
|
1,615
|
|
172
|
|
25
|
|
429
|
|
36
|
|
2,277
|
|
||||||||||||
|
20,307
|
|
5,984
|
|
9,823
|
|
7,855
|
|
36
|
|
44,005
|
|
|||||||||||||
|
Accumulated DD&A
|
(9,027
|
)
|
(3,958
|
)
|
(6,559
|
)
|
(4,913
|
)
|
—
|
|
(24,457
|
)
|
||||||||||||
|
$
|
11,280
|
|
$
|
2,026
|
|
$
|
3,264
|
|
$
|
2,942
|
|
$
|
36
|
|
$
|
19,548
|
|
|||||||
|
(1)
Includes a noncontrolling interest in Egypt.
|
||||||||||||||||||||||||
Oil and Gas Reserve Information
Proved oil and gas reserves are the estimated quantities of natural gas, crude oil, condensate, and natural gas liquids (NGLs) that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing conditions, operating conditions, and government regulations. Estimated proved developed oil and gas reserves can be expected to be recovered through existing wells with existing equipment and operating methods. The Company reports all estimated proved reserves held under production-sharing arrangements utilizing the “economic interest” method, which excludes the host country’s share of reserves.
Estimated reserves that can be produced economically through application of improved recovery techniques are included in the “proved” classification when successful testing by a pilot project or the operation of an active, improved recovery program using reliable technology establishes the reasonable certainty for the engineering analysis on which the project or program is based. Economically producible means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. Reasonable certainty means a high degree of confidence that the quantities will be recovered. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field-tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. In estimating its proved reserves, Apache uses several different traditional methods that can be classified in three general categories: 1) performance-based methods; 2) volumetric-based methods; and 3) analogy with similar properties. Apache will, at times, utilize additional technical analysis such as computer reservoir models, petrophysical techniques, and proprietary 3-D seismic interpretation methods to provide additional support for more complex reservoirs. Information from this additional analysis is combined with traditional methods outlined above to enhance the certainty of our reserve estimates.
There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The reserve data in the following tables only represent estimates and should not be construed as being exact.
F-54
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Crude Oil and Condensate
|
||||||||||||||||||||
|
|
(Thousands of barrels)
|
||||||||||||||||||||
|
|
United
States
|
Canada
|
Egypt
(1)
|
Australia
|
North
Sea
|
Argentina
|
Total
(1)
|
||||||||||||||
|
Proved developed reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
457,981
|
|
80,526
|
|
119,242
|
|
22,524
|
|
100,327
|
|
14,195
|
|
794,795
|
|
|||||||
|
December 31, 2014
|
444,440
|
|
75,876
|
|
128,712
|
|
29,996
|
|
105,746
|
|
—
|
|
784,770
|
|
|||||||
|
December 31, 2015
|
348,797
|
|
67,847
|
|
144,164
|
|
—
|
|
104,255
|
|
—
|
|
665,063
|
|
|||||||
|
December 31, 2016
|
300,900
|
|
51,508
|
|
138,771
|
|
—
|
|
91,138
|
|
—
|
|
582,317
|
|
|||||||
|
Proved undeveloped reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
195,835
|
|
56,366
|
|
16,302
|
|
36,703
|
|
29,253
|
|
2,231
|
|
336,690
|
|
|||||||
|
December 31, 2014
|
170,125
|
|
59,923
|
|
14,617
|
|
25,775
|
|
19,059
|
|
—
|
|
289,499
|
|
|||||||
|
December 31, 2015
|
60,505
|
|
38,326
|
|
17,856
|
|
—
|
|
11,309
|
|
—
|
|
127,996
|
|
|||||||
|
December 31, 2016
|
21,088
|
|
7,906
|
|
20,187
|
|
—
|
|
10,784
|
|
—
|
|
59,965
|
|
|||||||
|
Total proved reserves:
|
|||||||||||||||||||||
|
Balance December 31, 2013
|
653,816
|
|
136,892
|
|
135,544
|
|
59,227
|
|
129,580
|
|
16,426
|
|
1,131,485
|
|
|||||||
|
Extensions, discoveries and other additions
|
57,011
|
|
9,657
|
|
38,074
|
|
4,254
|
|
17,386
|
|
5
|
|
126,387
|
|
|||||||
|
Purchase of minerals in-place
|
15,240
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,240
|
|
|||||||
|
Revisions of previous estimates
|
3,083
|
|
(812
|
)
|
2,645
|
|
(216
|
)
|
(7
|
)
|
—
|
|
4,693
|
|
|||||||
|
Production
|
(48,789
|
)
|
(6,421
|
)
|
(32,934
|
)
|
(7,494
|
)
|
(22,154
|
)
|
(620
|
)
|
(118,412
|
)
|
|||||||
|
Sale of properties
|
(65,796
|
)
|
(3,517
|
)
|
—
|
|
—
|
|
—
|
|
(15,811
|
)
|
(85,124
|
)
|
|||||||
|
Balance December 31, 2014
|
614,565
|
|
135,799
|
|
143,329
|
|
55,771
|
|
124,805
|
|
—
|
|
1,074,269
|
|
|||||||
|
Extensions, discoveries and other additions
|
13,903
|
|
4,550
|
|
24,524
|
|
—
|
|
16,579
|
|
—
|
|
59,556
|
|
|||||||
|
Purchase of minerals in-place
|
—
|
|
1,763
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,763
|
|
|||||||
|
Revisions of previous estimates
|
(173,907
|
)
|
(27,966
|
)
|
27,330
|
|
11,189
|
|
(2,255
|
)
|
—
|
|
(165,609
|
)
|
|||||||
|
Production
|
(45,138
|
)
|
(5,755
|
)
|
(33,163
|
)
|
(2,778
|
)
|
(21,657
|
)
|
—
|
|
(108,491
|
)
|
|||||||
|
Sale of properties
|
(121
|
)
|
(2,218
|
)
|
—
|
|
(64,182
|
)
|
(1,908
|
)
|
—
|
|
(68,429
|
)
|
|||||||
|
Balance December 31, 2015
|
409,302
|
|
106,173
|
|
162,020
|
|
—
|
|
115,564
|
|
—
|
|
793,059
|
|
|||||||
|
Extensions, discoveries and other additions
|
9,614
|
|
3,372
|
|
17,599
|
|
—
|
|
9,766
|
|
—
|
|
40,351
|
|
|||||||
|
Purchase of minerals in-place
|
21
|
|
—
|
|
—
|
|
—
|
|
438
|
|
—
|
|
459
|
|
|||||||
|
Revisions of previous estimates
|
(58,882
|
)
|
(43,282
|
)
|
17,301
|
|
—
|
|
(3,851
|
)
|
—
|
|
(88,714
|
)
|
|||||||
|
Production
|
(38,000
|
)
|
(4,787
|
)
|
(37,962
|
)
|
—
|
|
(19,995
|
)
|
—
|
|
(100,744
|
)
|
|||||||
|
Sale of properties
|
(67
|
)
|
(2,062
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,129
|
)
|
|||||||
|
Balance December 31, 2016
|
321,988
|
|
59,414
|
|
158,958
|
|
—
|
|
101,922
|
|
—
|
|
642,282
|
|
|||||||
(1)
2016
,
2015
,
2014
, and
2013
includes proved reserves of
53
MMbbls,
54
MMbbls,
48
MMbbls, and
45
MMbbls, respectively, attributable to a noncontrolling interest in Egypt.
F-55
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Natural Gas Liquids
|
||||||||||||||||||||
|
|
(Thousands of barrels)
|
||||||||||||||||||||
|
|
United
States
|
Canada
|
Egypt
(1)
|
Australia
|
North
Sea
|
Argentina
|
Total
(1)
|
||||||||||||||
|
Proved developed reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
184,485
|
|
26,099
|
|
—
|
|
—
|
|
2,435
|
|
4,110
|
|
217,129
|
|
|||||||
|
December 31, 2014
|
183,565
|
|
17,947
|
|
1,346
|
|
—
|
|
1,770
|
|
—
|
|
204,628
|
|
|||||||
|
December 31, 2015
|
150,265
|
|
15,246
|
|
1,491
|
|
—
|
|
1,784
|
|
—
|
|
168,786
|
|
|||||||
|
December 31, 2016
|
155,124
|
|
13,866
|
|
1,266
|
|
—
|
|
1,627
|
|
—
|
|
171,883
|
|
|||||||
|
Proved undeveloped reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
63,538
|
|
9,970
|
|
—
|
|
—
|
|
215
|
|
1,009
|
|
74,732
|
|
|||||||
|
December 31, 2014
|
69,828
|
|
7,168
|
|
212
|
|
—
|
|
371
|
|
—
|
|
77,579
|
|
|||||||
|
December 31, 2015
|
24,939
|
|
4,839
|
|
78
|
|
—
|
|
295
|
|
—
|
|
30,151
|
|
|||||||
|
December 31, 2016
|
17,311
|
|
2,473
|
|
131
|
|
—
|
|
646
|
|
—
|
|
20,561
|
|
|||||||
|
Total proved reserves:
|
|||||||||||||||||||||
|
Balance December 31, 2013
|
248,023
|
|
36,069
|
|
—
|
|
—
|
|
2,650
|
|
5,119
|
|
291,861
|
|
|||||||
|
Extensions, discoveries and other additions
|
47,516
|
|
1,163
|
|
1,820
|
|
—
|
|
1
|
|
—
|
|
50,500
|
|
|||||||
|
Purchase of minerals in-place
|
2,916
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,916
|
|
|||||||
|
Revisions of previous estimates
|
2,594
|
|
116
|
|
(11
|
)
|
—
|
|
(2
|
)
|
—
|
|
2,697
|
|
|||||||
|
Production
|
(21,464
|
)
|
(2,256
|
)
|
(251
|
)
|
—
|
|
(508
|
)
|
(116
|
)
|
(24,595
|
)
|
|||||||
|
Sale of properties
|
(26,192
|
)
|
(9,977
|
)
|
—
|
|
—
|
|
—
|
|
(5,003
|
)
|
(41,172
|
)
|
|||||||
|
Balance December 31, 2014
|
253,393
|
|
25,115
|
|
1,558
|
|
—
|
|
2,141
|
|
—
|
|
282,207
|
|
|||||||
|
Extensions, discoveries and other additions
|
5,768
|
|
1,473
|
|
144
|
|
—
|
|
689
|
|
—
|
|
8,074
|
|
|||||||
|
Purchase of minerals in-place
|
—
|
|
976
|
|
—
|
|
—
|
|
—
|
|
—
|
|
976
|
|
|||||||
|
Revisions of previous estimates
|
(64,226
|
)
|
(4,886
|
)
|
255
|
|
—
|
|
(321
|
)
|
—
|
|
(69,178
|
)
|
|||||||
|
Production
|
(19,684
|
)
|
(2,236
|
)
|
(388
|
)
|
—
|
|
(413
|
)
|
—
|
|
(22,721
|
)
|
|||||||
|
Sale of properties
|
(47
|
)
|
(357
|
)
|
—
|
|
—
|
|
(17
|
)
|
—
|
|
(421
|
)
|
|||||||
|
Balance December 31, 2015
|
175,204
|
|
20,085
|
|
1,569
|
|
—
|
|
2,079
|
|
—
|
|
198,937
|
|
|||||||
|
Extensions, discoveries and other additions
|
10,238
|
|
755
|
|
208
|
|
—
|
|
671
|
|
—
|
|
11,872
|
|
|||||||
|
Purchase of minerals in-place
|
2
|
|
—
|
|
—
|
|
—
|
|
5
|
|
—
|
|
7
|
|
|||||||
|
Revisions of previous estimates
|
6,824
|
|
(1,355
|
)
|
17
|
|
—
|
|
141
|
|
—
|
|
5,627
|
|
|||||||
|
Production
|
(19,824
|
)
|
(2,098
|
)
|
(397
|
)
|
—
|
|
(623
|
)
|
—
|
|
(22,942
|
)
|
|||||||
|
Sale of properties
|
(9
|
)
|
(1,048
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,057
|
)
|
|||||||
|
Balance December 31, 2016
|
172,435
|
|
16,339
|
|
1,397
|
|
—
|
|
2,273
|
|
—
|
|
192,444
|
|
|||||||
(1)
2016
,
2015
, and
2014
includes proved reserves of
466
Mbbls,
523
Mbbls, and
519
Mbbls, respectively, attributable to a noncontrolling interest in Egypt.
F-56
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Natural Gas
|
||||||||||||||||||||
|
|
(Millions of cubic feet)
|
||||||||||||||||||||
|
|
United
States
|
Canada
|
Egypt
(1)
|
Australia
|
North
Sea
|
Argentina
|
Total
(1)
|
||||||||||||||
|
Proved developed reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
2,005,966
|
|
1,294,420
|
|
621,825
|
|
626,543
|
|
88,177
|
|
289,133
|
|
4,926,064
|
|
|||||||
|
December 31, 2014
|
1,616,504
|
|
990,145
|
|
637,187
|
|
640,265
|
|
87,259
|
|
—
|
|
3,971,360
|
|
|||||||
|
December 31, 2015
|
1,364,174
|
|
759,321
|
|
776,263
|
|
—
|
|
85,532
|
|
—
|
|
2,985,290
|
|
|||||||
|
December 31, 2016
|
1,200,379
|
|
553,724
|
|
675,559
|
|
—
|
|
86,948
|
|
—
|
|
2,516,610
|
|
|||||||
|
Proved undeveloped reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
667,160
|
|
439,037
|
|
190,355
|
|
975,224
|
|
18,988
|
|
121,584
|
|
2,412,348
|
|
|||||||
|
December 31, 2014
|
580,299
|
|
527,623
|
|
171,696
|
|
964,554
|
|
23,228
|
|
—
|
|
2,267,400
|
|
|||||||
|
December 31, 2015
|
208,594
|
|
162,809
|
|
53,969
|
|
—
|
|
19,760
|
|
—
|
|
445,132
|
|
|||||||
|
December 31, 2016
|
231,304
|
|
45,312
|
|
42,109
|
|
—
|
|
23,813
|
|
—
|
|
342,538
|
|
|||||||
|
Total proved reserves:
|
|||||||||||||||||||||
|
Balance December 31, 2013
|
2,673,126
|
|
1,733,457
|
|
812,180
|
|
1,601,767
|
|
107,165
|
|
410,717
|
|
7,338,412
|
|
|||||||
|
Extensions, discoveries and other additions
|
203,318
|
|
383,077
|
|
125,899
|
|
81,156
|
|
23,803
|
|
—
|
|
817,253
|
|
|||||||
|
Purchase of minerals in-place
|
21,337
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21,337
|
|
|||||||
|
Revisions of previous estimates
|
35,910
|
|
(12,626
|
)
|
17,326
|
|
—
|
|
(54
|
)
|
—
|
|
40,556
|
|
|||||||
|
Production
|
(215,829
|
)
|
(117,816
|
)
|
(146,522
|
)
|
(78,104
|
)
|
(20,427
|
)
|
(12,722
|
)
|
(591,420
|
)
|
|||||||
|
Sale of properties
|
(521,059
|
)
|
(468,324
|
)
|
—
|
|
—
|
|
—
|
|
(397,995
|
)
|
(1,387,378
|
)
|
|||||||
|
Balance December 31, 2014
|
2,196,803
|
|
1,517,768
|
|
808,883
|
|
1,604,819
|
|
110,487
|
|
—
|
|
6,238,760
|
|
|||||||
|
Extensions, discoveries and other additions
|
40,901
|
|
121,216
|
|
94,777
|
|
—
|
|
41,755
|
|
—
|
|
298,649
|
|
|||||||
|
Purchase of minerals in-place
|
—
|
|
24,727
|
|
—
|
|
—
|
|
—
|
|
—
|
|
24,727
|
|
|||||||
|
Revisions of previous estimates
|
(503,939
|
)
|
(325,375
|
)
|
61,442
|
|
8,162
|
|
(22,373
|
)
|
—
|
|
(782,083
|
)
|
|||||||
|
Production
|
(160,614
|
)
|
(100,289
|
)
|
(134,870
|
)
|
(34,352
|
)
|
(23,647
|
)
|
—
|
|
(453,772
|
)
|
|||||||
|
Sale of properties
|
(383
|
)
|
(315,917
|
)
|
—
|
|
(1,578,629
|
)
|
(930
|
)
|
—
|
|
(1,895,859
|
)
|
|||||||
|
Balance December 31, 2015
|
1,572,768
|
|
922,130
|
|
830,232
|
|
—
|
|
105,292
|
|
—
|
|
3,430,422
|
|
|||||||
|
Extensions, discoveries and other additions
|
219,633
|
|
30,234
|
|
35,202
|
|
—
|
|
20,814
|
|
—
|
|
305,883
|
|
|||||||
|
Purchase of minerals in-place
|
7
|
|
—
|
|
—
|
|
—
|
|
6,677
|
|
—
|
|
6,684
|
|
|||||||
|
Revisions of previous estimates
|
(215,378
|
)
|
(242,080
|
)
|
(4,305
|
)
|
—
|
|
4,239
|
|
—
|
|
(457,524
|
)
|
|||||||
|
Production
|
(145,019
|
)
|
(88,792
|
)
|
(143,461
|
)
|
—
|
|
(26,261
|
)
|
—
|
|
(403,533
|
)
|
|||||||
|
Sale of properties
|
(328
|
)
|
(22,456
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(22,784
|
)
|
|||||||
|
Balance December 31, 2016
|
1,431,683
|
|
599,036
|
|
717,668
|
|
—
|
|
110,761
|
|
—
|
|
2,859,148
|
|
|||||||
(1)
2016
,
2015
,
2014
, and
2013
include proved reserves of
239
Bcf,
277
Bcf,
270
Bcf, and
271
Bcf, respectively, attributable to a noncontrolling interest in Egypt.
F-57
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
Total Equivalent Reserves
|
||||||||||||||||||||
|
|
(Thousands barrels of oil equivalent)
|
||||||||||||||||||||
|
|
United
States
|
Canada
|
Egypt
(1)
|
Australia
|
North
Sea
|
Argentina
|
Total
(1)
|
||||||||||||||
|
Proved developed reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
976,795
|
|
322,362
|
|
222,880
|
|
126,948
|
|
117,457
|
|
66,494
|
|
1,832,936
|
|
|||||||
|
December 31, 2014
|
897,422
|
|
258,848
|
|
236,256
|
|
136,707
|
|
122,058
|
|
—
|
|
1,651,291
|
|
|||||||
|
December 31, 2015
|
726,424
|
|
209,647
|
|
275,033
|
|
—
|
|
120,293
|
|
—
|
|
1,331,397
|
|
|||||||
|
December 31, 2016
|
656,087
|
|
157,662
|
|
252,630
|
|
—
|
|
107,256
|
|
—
|
|
1,173,635
|
|
|||||||
|
Proved undeveloped reserves:
|
|||||||||||||||||||||
|
December 31, 2013
|
370,566
|
|
139,509
|
|
48,028
|
|
199,240
|
|
32,633
|
|
23,504
|
|
813,480
|
|
|||||||
|
December 31, 2014
|
336,670
|
|
155,028
|
|
43,446
|
|
186,534
|
|
23,301
|
|
—
|
|
744,979
|
|
|||||||
|
December 31, 2015
|
120,210
|
|
70,300
|
|
26,929
|
|
—
|
|
14,897
|
|
—
|
|
232,336
|
|
|||||||
|
December 31, 2016
|
76,950
|
|
17,931
|
|
27,336
|
|
—
|
|
15,399
|
|
—
|
|
137,616
|
|
|||||||
|
Total proved reserves:
|
|||||||||||||||||||||
|
Balance December 31, 2013
|
1,347,361
|
|
461,871
|
|
270,908
|
|
326,188
|
|
150,090
|
|
89,998
|
|
2,646,416
|
|
|||||||
|
Extensions, discoveries and other additions
|
138,413
|
|
74,666
|
|
60,877
|
|
17,780
|
|
21,354
|
|
5
|
|
313,095
|
|
|||||||
|
Purchase of minerals in-place
|
21,712
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21,712
|
|
|||||||
|
Revisions of previous estimates
|
11,662
|
|
(2,800
|
)
|
5,522
|
|
(216
|
)
|
(18
|
)
|
—
|
|
14,150
|
|
|||||||
|
Production
|
(106,225
|
)
|
(28,313
|
)
|
(57,605
|
)
|
(20,511
|
)
|
(26,067
|
)
|
(2,856
|
)
|
(241,577
|
)
|
|||||||
|
Sale of properties
|
(178,831
|
)
|
(91,548
|
)
|
—
|
|
—
|
|
—
|
|
(87,147
|
)
|
(357,526
|
)
|
|||||||
|
Balance December 31, 2014
|
1,234,092
|
|
413,876
|
|
279,702
|
|
323,241
|
|
145,359
|
|
—
|
|
2,396,270
|
|
|||||||
|
Extensions, discoveries and other additions
|
26,488
|
|
26,226
|
|
40,464
|
|
—
|
|
24,227
|
|
—
|
|
117,405
|
|
|||||||
|
Purchase of minerals in-place
|
—
|
|
6,860
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,860
|
|
|||||||
|
Revisions of previous estimates
|
(322,123
|
)
|
(87,081
|
)
|
37,825
|
|
12,549
|
|
(6,305
|
)
|
—
|
|
(365,135
|
)
|
|||||||
|
Production
|
(91,591
|
)
|
(24,706
|
)
|
(56,029
|
)
|
(8,503
|
)
|
(26,011
|
)
|
—
|
|
(206,840
|
)
|
|||||||
|
Sale of properties
|
(232
|
)
|
(55,228
|
)
|
—
|
|
(327,287
|
)
|
(2,080
|
)
|
—
|
|
(384,827
|
)
|
|||||||
|
Balance December 31, 2015
|
846,634
|
|
279,947
|
|
301,962
|
|
—
|
|
135,190
|
|
—
|
|
1,563,733
|
|
|||||||
|
Extensions, discoveries and other additions
|
56,458
|
|
9,166
|
|
23,674
|
|
—
|
|
13,906
|
|
—
|
|
103,204
|
|
|||||||
|
Purchase of minerals in-place
|
24
|
|
—
|
|
—
|
|
—
|
|
1,556
|
|
—
|
|
1,580
|
|
|||||||
|
Revisions of previous estimates
|
(87,954
|
)
|
(84,984
|
)
|
16,599
|
|
—
|
|
(3,002
|
)
|
—
|
|
(159,341
|
)
|
|||||||
|
Production
|
(81,994
|
)
|
(21,684
|
)
|
(62,269
|
)
|
—
|
|
(24,995
|
)
|
—
|
|
(190,942
|
)
|
|||||||
|
Sale of properties
|
(131
|
)
|
(6,852
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(6,983
|
)
|
|||||||
|
Balance December 31, 2016
|
733,037
|
|
175,593
|
|
279,966
|
|
—
|
|
122,655
|
|
—
|
|
1,311,251
|
|
|||||||
(1)
2016
,
2015
,
2014
, and
2013
include total proved reserves of
93
MMboe,
101
MMboe,
93
MMboe, and
90
MMboe, respectively, attributable to a noncontrolling interest in Egypt.
During
2016
, Apache sold a combined
7
MMboe primarily through divestiture transactions in Canada. The Company added
2
MMboe of estimated proved reserves through purchases of minerals in-place and
103
MMboe from extensions, discoveries, and other additions. The Company recorded
66
MMboe of exploration and development adds in North America, primarily associated with Woodford, Bone Springs, and Wolfcamp drilling programs in the Permian Basin (
49
MMboe), Montney and Glauconite drilling in Canada (
9
MMboe), and Woodford drilling activity in the MidContinent region (
8
MMboe).
F-58
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The international regions contributed
37
MMboe of exploration and development adds during 2016 with Egypt contributing
23
MMboe from onshore exploration and appraisal activity in the Khalda, Khalda 2, and East Beni Suef concessions. The North Sea offshore region contributed
14
MMboe from drilling success in the Beryl, Forties, and Nevis fields.
During
2016
, Apache also had combined downward revisions of previously estimated reserves of
159
MMboe. Changes in product prices accounted for
172
MMboe, lease ownership changes accounted for
6
MMboe, offset by engineering and performance upward revisions totaling
19
MMboe.
Approximately
9 percent
of Apache’s year-end
2016
estimated proved developed reserves are classified as proved not producing. These reserves relate to zones that are either behind pipe, or that have been completed but not yet produced, or zones that have been produced in the past, but are not now producing because of mechanical reasons. These reserves are considered to be a lower tier of reserves than producing reserves because they are frequently based on volumetric calculations rather than performance data. Future production associated with behind pipe reserves is scheduled to follow depletion of the currently producing zones in the same wellbores. Additional capital may have to be spent to access these reserves. The capital and economic impact of production timing are reflected in this Note 16, under “Future Net Cash Flows.”
Future Net Cash Flows
Future cash inflows as of
December 31, 2016
and
2015
were calculated using an unweighted arithmetic average of oil and gas prices in effect on the first day of each month in the respective year, except where prices are defined by contractual arrangements. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation.
The following table sets forth unaudited information concerning future net cash flows for proved oil and gas reserves, net of income tax expense. Income tax expense has been computed using expected future tax rates and giving effect to tax deductions and credits available, under current laws, and which relate to oil and gas producing activities. This information does not purport to present the fair market value of the Company’s oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.
|
United
States
|
Canada
|
Egypt
(2)
|
North
Sea
|
Total
(2)
|
||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||
|
2016
|
||||||||||||||||||||
|
Cash inflows
|
$
|
20,067
|
|
$
|
3,625
|
|
$
|
8,778
|
|
$
|
4,734
|
|
$
|
37,204
|
|
|||||
|
Production costs
|
(8,858
|
)
|
(2,582
|
)
|
(1,967
|
)
|
(2,255
|
)
|
(15,662
|
)
|
||||||||||
|
Development costs
|
(1,653
|
)
|
(1,565
|
)
|
(1,111
|
)
|
(2,410
|
)
|
(6,739
|
)
|
||||||||||
|
Income tax expense
|
(32
|
)
|
—
|
|
(1,775
|
)
|
(8
|
)
|
(1,815
|
)
|
||||||||||
|
Net cash flows
|
9,524
|
|
(522
|
)
|
3,925
|
|
61
|
|
12,988
|
|
||||||||||
|
10 percent discount rate
|
(5,319
|
)
|
549
|
|
(956
|
)
|
798
|
|
(4,928
|
)
|
||||||||||
|
Discounted future net cash flows
(1)
|
$
|
4,205
|
|
$
|
27
|
|
$
|
2,969
|
|
$
|
859
|
|
$
|
8,060
|
|
|||||
|
2015
|
||||||||||||||||||||
|
Cash inflows
|
$
|
26,610
|
|
$
|
7,345
|
|
$
|
11,124
|
|
$
|
6,994
|
|
$
|
52,073
|
|
|||||
|
Production costs
|
(12,178
|
)
|
(3,841
|
)
|
(2,185
|
)
|
(3,209
|
)
|
(21,413
|
)
|
||||||||||
|
Development costs
|
(2,255
|
)
|
(1,939
|
)
|
(1,515
|
)
|
(2,346
|
)
|
(8,055
|
)
|
||||||||||
|
Income tax expense
|
(63
|
)
|
—
|
|
(2,326
|
)
|
(691
|
)
|
(3,080
|
)
|
||||||||||
|
Net cash flows
|
12,114
|
|
1,565
|
|
5,098
|
|
748
|
|
19,525
|
|
||||||||||
|
10 percent discount rate
|
(6,876
|
)
|
(868
|
)
|
(1,330
|
)
|
143
|
|
(8,931
|
)
|
||||||||||
|
Discounted future net cash flows
(1)
|
$
|
5,238
|
|
$
|
697
|
|
$
|
3,768
|
|
$
|
891
|
|
$
|
10,594
|
|
|||||
|
(1)
|
Estimated future net cash flows before income tax expense, discounted at
10 percent
per annum, totaled approximately
$9.5 billion
and
$13.1 billion
as of
December 31, 2016
and
2015
, respectively.
|
|
(2)
|
Includes discounted future net cash flows of approximately
$1.0 billion
and
$1.3 billion
in
2016
and
2015
, respectively, attributable to a noncontrolling interest in Egypt.
|
F-59
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table sets forth the principal sources of change in the discounted future net cash flows:
|
|
For the Year Ended December 31,
|
|||||||||||
|
|
2016
|
2015
|
2014
|
|||||||||
|
|
(In millions)
|
|||||||||||
|
Sales, net of production costs
|
$
|
(3,479
|
)
|
$
|
(4,056
|
)
|
$
|
(10,350
|
)
|
|||
|
Net change in prices and production costs
|
(3,835
|
)
|
(21,710
|
)
|
(1,029
|
)
|
||||||
|
Discoveries and improved recovery, net of related costs
|
1,153
|
|
1,953
|
|
6,297
|
|
||||||
|
Change in future development costs
|
309
|
|
705
|
|
(1,136
|
)
|
||||||
|
Previously estimated development costs incurred during the period
|
986
|
|
1,991
|
|
4,462
|
|
||||||
|
Revision of quantities
|
(574
|
)
|
(2,292
|
)
|
256
|
|
||||||
|
Purchases of minerals in-place
|
8
|
|
22
|
|
508
|
|
||||||
|
Accretion of discount
|
1,313
|
|
3,642
|
|
4,442
|
|
||||||
|
Change in income taxes
|
1,070
|
|
7,264
|
|
836
|
|
||||||
|
Sales of properties
|
(52
|
)
|
(5,240
|
)
|
(4,780
|
)
|
||||||
|
Change in production rates and other
|
567
|
|
(3,343
|
)
|
(442
|
)
|
||||||
|
$
|
(2,534
|
)
|
$
|
(21,064
|
)
|
$
|
(936
|
)
|
||||
F-60
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (Unaudited)
|
First
|
Second
|
Third
|
Fourth
|
Total
|
||||||||||||||||
|
|
(In millions, except per share amounts)
|
|||||||||||||||||||
|
2016
|
||||||||||||||||||||
|
Revenues and other
|
$
|
1,084
|
|
$
|
1,365
|
|
$
|
1,433
|
|
$
|
1,451
|
|
$
|
5,333
|
|
|||||
|
Gain (loss) on divestitures
|
(1
|
)
|
17
|
|
5
|
|
—
|
|
21
|
|
||||||||||
|
Expenses
(1)
|
1,454
|
|
1,582
|
|
1,964
|
|
1,594
|
|
6,594
|
|
||||||||||
|
Net loss from continuing operations including noncontrolling interest
|
(371
|
)
|
(200
|
)
|
(526
|
)
|
(143
|
)
|
(1,240
|
)
|
||||||||||
|
Net loss from discontinued operations, net of tax
|
—
|
|
—
|
|
(33
|
)
|
—
|
|
(33
|
)
|
||||||||||
|
Net loss including noncontrolling interest
|
$
|
(371
|
)
|
$
|
(200
|
)
|
$
|
(559
|
)
|
$
|
(143
|
)
|
$
|
(1,273
|
)
|
|||||
|
Net loss attributable to common stock
|
$
|
(372
|
)
|
$
|
(244
|
)
|
$
|
(607
|
)
|
$
|
(182
|
)
|
$
|
(1,405
|
)
|
|||||
|
Basic and diluted net loss per common share
(2)
:
|
||||||||||||||||||||
|
Net loss from continuing operations
|
$
|
(0.98
|
)
|
$
|
(0.65
|
)
|
$
|
(1.51
|
)
|
$
|
(0.48
|
)
|
$
|
(3.62
|
)
|
|||||
|
Net loss from discontinued operations
|
—
|
|
—
|
|
(0.09
|
)
|
—
|
|
(0.09
|
)
|
||||||||||
|
Net loss per share
|
$
|
(0.98
|
)
|
$
|
(0.65
|
)
|
$
|
(1.60
|
)
|
$
|
(0.48
|
)
|
$
|
(3.71
|
)
|
|||||
|
2015
|
||||||||||||||||||||
|
Revenues and other
|
$
|
1,653
|
|
$
|
2,019
|
|
$
|
1,531
|
|
$
|
1,405
|
|
$
|
6,608
|
|
|||||
|
Gain (loss) on divestitures
|
(18
|
)
|
227
|
|
(5
|
)
|
77
|
|
281
|
|
||||||||||
|
Expenses
(1)
|
2,703
|
|
3,163
|
|
5,645
|
|
6,537
|
|
18,048
|
|
||||||||||
|
Net loss from continuing operations including noncontrolling interest
|
(1,068
|
)
|
(917
|
)
|
(4,119
|
)
|
(5,055
|
)
|
(11,159
|
)
|
||||||||||
|
Net income (loss) from discontinued operations, net of tax
|
(238
|
)
|
120
|
|
(17
|
)
|
627
|
|
492
|
|
||||||||||
|
Net loss including noncontrolling interest
|
$
|
(1,306
|
)
|
$
|
(797
|
)
|
$
|
(4,136
|
)
|
$
|
(4,428
|
)
|
$
|
(10,667
|
)
|
|||||
|
Net loss attributable to common stock
|
$
|
(1,334
|
)
|
$
|
(860
|
)
|
$
|
(4,143
|
)
|
$
|
(4,015
|
)
|
$
|
(10,352
|
)
|
|||||
|
Basic and diluted net income (loss) per common share
(2)
:
|
||||||||||||||||||||
|
Net loss from continuing operations
|
$
|
(2.91
|
)
|
$
|
(2.60
|
)
|
$
|
(10.91
|
)
|
$
|
(12.28
|
)
|
$
|
(28.70
|
)
|
|||||
|
Net income (loss) from discontinued operations
|
(0.63
|
)
|
0.32
|
|
(0.04
|
)
|
1.66
|
|
1.30
|
|
||||||||||
|
Net loss per share
|
$
|
(3.54
|
)
|
$
|
(2.28
|
)
|
$
|
(10.95
|
)
|
$
|
(10.62
|
)
|
$
|
(27.40
|
)
|
|||||
|
(1)
|
Continuing operating expenses for 2016 include non-cash asset impairments totaling
$42 million
,
$238 million
,
$951 million
, and
$144 million
in the first, second, third, and fourth quarters of 2016, respectively. Continuing operating expenses for 2015 include non-cash asset impairments totaling
$2.1 billion
,
$660 million
,
$4.1 billion
, and
$5.1 billion
in the first, second, third, and fourth quarters of 2015, respectively.
|
|
(2)
|
The sum of the individual quarterly net income per common share amounts may not agree with full-year net income per common share as each quarterly computation is based on the weighted-average number of common shares outstanding during that period.
|
F-61
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
18. SUPPLEMENTAL GUARANTOR INFORMATION
In December 1999, Apache Finance Canada issued approximately
$300 million
of publicly-traded notes due in
2029
, which are fully and unconditionally guaranteed by Apache. The following condensed consolidating financial statements are provided as an alternative to filing separate financial statements.
Apache Finance Canada is
100 percent
owned by Apache Corporation. As such, these condensed consolidating financial statements should be read in conjunction with Apache’s consolidated financial statements and notes thereto, of which this note is an integral part.
F-62
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Year Ended December 31, 2016
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||
|
REVENUES AND OTHER:
|
||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
1,035
|
|
$
|
—
|
|
$
|
4,332
|
|
$
|
—
|
|
$
|
5,367
|
|
|||||
|
Equity in net income (loss) of affiliates
|
(575
|
)
|
(173
|
)
|
—
|
|
748
|
|
—
|
|
||||||||||
|
Other
|
15
|
|
(19
|
)
|
(29
|
)
|
(1
|
)
|
(34
|
)
|
||||||||||
|
Gain on divestiture
|
2
|
|
—
|
|
19
|
|
—
|
|
21
|
|
||||||||||
|
477
|
|
(192
|
)
|
4,322
|
|
747
|
|
5,354
|
|
|||||||||||
|
OPERATING EXPENSES:
|
||||||||||||||||||||
|
Lease operating expenses
|
285
|
|
—
|
|
1,209
|
|
—
|
|
1,494
|
|
||||||||||
|
Gathering and transportation
|
33
|
|
—
|
|
167
|
|
—
|
|
200
|
|
||||||||||
|
Taxes other than income
|
76
|
|
—
|
|
50
|
|
—
|
|
126
|
|
||||||||||
|
Exploration
|
258
|
|
—
|
|
215
|
|
—
|
|
473
|
|
||||||||||
|
General and administrative
|
344
|
|
—
|
|
67
|
|
(1
|
)
|
410
|
|
||||||||||
|
Depreciation, depletion, and amortization
|
618
|
|
—
|
|
2,000
|
|
—
|
|
2,618
|
|
||||||||||
|
Asset retirement obligation accretion
|
18
|
|
—
|
|
138
|
|
—
|
|
156
|
|
||||||||||
|
Impairments
|
80
|
|
—
|
|
1,023
|
|
—
|
|
1,103
|
|
||||||||||
|
Transaction, reorganization, and separation
|
39
|
|
—
|
|
—
|
|
—
|
|
39
|
|
||||||||||
|
Financing costs, net
|
256
|
|
(27
|
)
|
188
|
|
—
|
|
417
|
|
||||||||||
|
2,007
|
|
(27
|
)
|
5,057
|
|
(1
|
)
|
7,036
|
|
|||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(1,530
|
)
|
(165
|
)
|
(735
|
)
|
748
|
|
(1,682
|
)
|
||||||||||
|
Provision (benefit) for income taxes
|
(158
|
)
|
8
|
|
(292
|
)
|
—
|
|
(442
|
)
|
||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
|
(1,372
|
)
|
(173
|
)
|
(443
|
)
|
748
|
|
(1,240
|
)
|
||||||||||
|
Net loss from discontinued operations, net of tax
|
(33
|
)
|
—
|
|
—
|
|
—
|
|
(33
|
)
|
||||||||||
|
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST
|
(1,405
|
)
|
(173
|
)
|
(443
|
)
|
748
|
|
(1,273
|
)
|
||||||||||
|
Net income attributable to noncontrolling interest
|
—
|
|
—
|
|
132
|
|
—
|
|
132
|
|
||||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
$
|
(1,405
|
)
|
$
|
(173
|
)
|
$
|
(575
|
)
|
$
|
748
|
|
$
|
(1,405
|
)
|
|||||
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
$
|
(1,398
|
)
|
$
|
(173
|
)
|
$
|
(575
|
)
|
$
|
748
|
|
$
|
(1,398
|
)
|
|||||
F-63
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Year Ended December 31, 2015
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||
|
REVENUES AND OTHER:
|
||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
1,446
|
|
$
|
—
|
|
$
|
5,064
|
|
$
|
—
|
|
$
|
6,510
|
|
|||||
|
Equity in net income (loss) of affiliates
|
(5,254
|
)
|
(740
|
)
|
57
|
|
5,937
|
|
—
|
|
||||||||||
|
Other
|
(71
|
)
|
54
|
|
96
|
|
19
|
|
98
|
|
||||||||||
|
Gain on divestiture
|
36
|
|
—
|
|
245
|
|
—
|
|
281
|
|
||||||||||
|
(3,843
|
)
|
(686
|
)
|
5,462
|
|
5,956
|
|
6,889
|
|
|||||||||||
|
OPERATING EXPENSES:
|
||||||||||||||||||||
|
Lease operating expenses
|
399
|
|
—
|
|
1,455
|
|
—
|
|
1,854
|
|
||||||||||
|
Gathering and transportation
|
35
|
|
—
|
|
176
|
|
—
|
|
211
|
|
||||||||||
|
Taxes other than income
|
103
|
|
—
|
|
179
|
|
—
|
|
282
|
|
||||||||||
|
Exploration
|
2,096
|
|
—
|
|
675
|
|
—
|
|
2,771
|
|
||||||||||
|
General and administrative
|
296
|
|
—
|
|
65
|
|
19
|
|
380
|
|
||||||||||
|
Depreciation, depletion, and amortization
|
966
|
|
—
|
|
2,334
|
|
—
|
|
3,300
|
|
||||||||||
|
Asset retirement obligation accretion
|
15
|
|
—
|
|
130
|
|
—
|
|
145
|
|
||||||||||
|
Impairments
|
3,885
|
|
—
|
|
5,587
|
|
—
|
|
9,472
|
|
||||||||||
|
Transaction, reorganization, and separation
|
132
|
|
—
|
|
—
|
|
—
|
|
132
|
|
||||||||||
|
Financing costs, net
|
475
|
|
(14
|
)
|
50
|
|
—
|
|
511
|
|
||||||||||
|
8,402
|
|
(14
|
)
|
10,651
|
|
19
|
|
19,058
|
|
|||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(12,245
|
)
|
(672
|
)
|
(5,189
|
)
|
5,937
|
|
(12,169
|
)
|
||||||||||
|
Provision (benefit) for income taxes
|
(2,065
|
)
|
11
|
|
1,044
|
|
—
|
|
(1,010
|
)
|
||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
|
(10,180
|
)
|
(683
|
)
|
(6,233
|
)
|
5,937
|
|
(11,159
|
)
|
||||||||||
|
Net income (loss) from discontinued operations, net of tax
|
(172
|
)
|
—
|
|
664
|
|
—
|
|
492
|
|
||||||||||
|
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST
|
(10,352
|
)
|
(683
|
)
|
(5,569
|
)
|
5,937
|
|
(10,667
|
)
|
||||||||||
|
Net loss attributable to noncontrolling interest
|
—
|
|
—
|
|
(315
|
)
|
—
|
|
(315
|
)
|
||||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
$
|
(10,352
|
)
|
$
|
(683
|
)
|
$
|
(5,254
|
)
|
$
|
5,937
|
|
$
|
(10,352
|
)
|
|||||
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
$
|
(10,355
|
)
|
$
|
(683
|
)
|
$
|
(5,254
|
)
|
$
|
5,937
|
|
$
|
(10,355
|
)
|
|||||
F-64
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Year Ended December 31, 2014
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
|
(In millions)
|
|||||||||||||||||||
|
REVENUES AND OTHER:
|
||||||||||||||||||||
|
Oil and gas production revenues
|
$
|
3,399
|
|
$
|
—
|
|
$
|
9,396
|
|
$
|
—
|
|
$
|
12,795
|
|
|||||
|
Equity in net income (loss) of affiliates
|
(3,489
|
)
|
(1,191
|
)
|
73
|
|
4,607
|
|
—
|
|
||||||||||
|
Other
|
375
|
|
55
|
|
(150
|
)
|
5
|
|
285
|
|
||||||||||
|
Loss on divestiture
|
(1,031
|
)
|
—
|
|
(577
|
)
|
—
|
|
(1,608
|
)
|
||||||||||
|
(746
|
)
|
(1,136
|
)
|
8,742
|
|
4,612
|
|
11,472
|
|
|||||||||||
|
OPERATING EXPENSES:
|
||||||||||||||||||||
|
Lease operating expenses
|
509
|
|
—
|
|
1,729
|
|
—
|
|
2,238
|
|
||||||||||
|
Gathering and transportation
|
58
|
|
—
|
|
215
|
|
—
|
|
273
|
|
||||||||||
|
Taxes other than income
|
206
|
|
—
|
|
371
|
|
—
|
|
577
|
|
||||||||||
|
Exploration
|
1,966
|
|
—
|
|
533
|
|
—
|
|
2,499
|
|
||||||||||
|
General and administrative
|
370
|
|
—
|
|
78
|
|
5
|
|
453
|
|
||||||||||
|
Depreciation, depletion, and amortization
|
1,493
|
|
—
|
|
3,033
|
|
—
|
|
4,526
|
|
||||||||||
|
Asset retirement obligation accretion
|
31
|
|
—
|
|
123
|
|
—
|
|
154
|
|
||||||||||
|
Impairments
|
1,626
|
|
—
|
|
5,476
|
|
—
|
|
7,102
|
|
||||||||||
|
Transaction, reorganization, and separation
|
67
|
|
—
|
|
—
|
|
—
|
|
67
|
|
||||||||||
|
Financing costs, net
|
372
|
|
(24
|
)
|
65
|
|
—
|
|
413
|
|
||||||||||
|
6,698
|
|
(24
|
)
|
11,623
|
|
5
|
|
18,302
|
|
|||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(7,444
|
)
|
(1,112
|
)
|
(2,881
|
)
|
4,607
|
|
(6,830
|
)
|
||||||||||
|
Provision (benefit) for income taxes
|
789
|
|
6
|
|
(1,313
|
)
|
—
|
|
(518
|
)
|
||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
|
(8,233
|
)
|
(1,118
|
)
|
(1,568
|
)
|
4,607
|
|
(6,312
|
)
|
||||||||||
|
Net loss from discontinued operations, net of tax
|
(127
|
)
|
—
|
|
(1,580
|
)
|
—
|
|
(1,707
|
)
|
||||||||||
|
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST
|
(8,360
|
)
|
(1,118
|
)
|
(3,148
|
)
|
4,607
|
|
(8,019
|
)
|
||||||||||
|
Net income attributable to noncontrolling interest
|
—
|
|
—
|
|
341
|
|
—
|
|
341
|
|
||||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
$
|
(8,360
|
)
|
$
|
(1,118
|
)
|
$
|
(3,489
|
)
|
$
|
4,607
|
|
$
|
(8,360
|
)
|
|||||
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
$
|
(8,361
|
)
|
$
|
(1,118
|
)
|
$
|
(3,489
|
)
|
$
|
4,607
|
|
$
|
(8,361
|
)
|
|||||
F-65
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2016
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
(In millions)
|
||||||||||||||||||||
|
CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES
|
$
|
625
|
|
$
|
51
|
|
$
|
1,777
|
|
$
|
—
|
|
$
|
2,453
|
|
|||||
|
CASH USED IN DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
(23
|
)
|
—
|
|
(23
|
)
|
||||||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
$
|
625
|
|
$
|
51
|
|
$
|
1,754
|
|
$
|
—
|
|
$
|
2,430
|
|
|||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
|
Additions to oil and gas property
|
(813
|
)
|
—
|
|
(797
|
)
|
—
|
|
(1,610
|
)
|
||||||||||
|
Additions to gas gathering, transmission, and processing facilities
|
(111
|
)
|
—
|
|
(47
|
)
|
—
|
|
(158
|
)
|
||||||||||
|
Leasehold and property acquisitions
|
(108
|
)
|
—
|
|
(73
|
)
|
—
|
|
(181
|
)
|
||||||||||
|
Proceeds from sale of oil and gas properties, other
|
88
|
|
—
|
|
46
|
|
—
|
|
134
|
|
||||||||||
|
Investment in subsidiaries, net
|
914
|
|
—
|
|
—
|
|
(914
|
)
|
—
|
|
||||||||||
|
Other
|
(77
|
)
|
—
|
|
232
|
|
—
|
|
155
|
|
||||||||||
|
NET CASH USED IN INVESTING ACTIVITIES
|
(107
|
)
|
—
|
|
(639
|
)
|
(914
|
)
|
(1,660
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Intercompany borrowings
|
—
|
|
(23
|
)
|
(891
|
)
|
914
|
|
—
|
|
||||||||||
|
Payments on fixed rate debt
|
(181
|
)
|
—
|
|
—
|
|
—
|
|
(181
|
)
|
||||||||||
|
Dividends paid
|
(379
|
)
|
—
|
|
—
|
|
—
|
|
(379
|
)
|
||||||||||
|
Common stock activity, net
|
—
|
|
(28
|
)
|
28
|
|
—
|
|
—
|
|
||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
(293
|
)
|
—
|
|
(293
|
)
|
||||||||||
|
Other
|
8
|
|
—
|
|
(15
|
)
|
—
|
|
(7
|
)
|
||||||||||
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(552
|
)
|
(51
|
)
|
(1,171
|
)
|
914
|
|
(860
|
)
|
||||||||||
|
NET DECREASE IN CASH AND CASH
EQUIVALENTS
|
(34
|
)
|
—
|
|
(56
|
)
|
—
|
|
(90
|
)
|
||||||||||
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
378
|
|
—
|
|
1,089
|
|
—
|
|
1,467
|
|
||||||||||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
344
|
|
$
|
—
|
|
$
|
1,033
|
|
$
|
—
|
|
$
|
1,377
|
|
|||||
F-66
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2015
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
(In millions)
|
||||||||||||||||||||
|
CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES
|
$
|
98
|
|
$
|
18
|
|
$
|
2,438
|
|
$
|
—
|
|
$
|
2,554
|
|
|||||
|
CASH PROVIDED BY DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
113
|
|
—
|
|
113
|
|
||||||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
98
|
|
18
|
|
2,551
|
|
—
|
|
2,667
|
|
||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
|
Additions to oil and gas property
|
(1,500
|
)
|
—
|
|
(2,708
|
)
|
—
|
|
(4,208
|
)
|
||||||||||
|
Additions to gas gathering, transmission, and processing facilities
|
(156
|
)
|
—
|
|
(77
|
)
|
—
|
|
(233
|
)
|
||||||||||
|
Proceeds from sale of Kitimat LNG
|
—
|
|
—
|
|
854
|
|
—
|
|
854
|
|
||||||||||
|
Proceeds from sale of Yara Pilbara
|
—
|
|
—
|
|
391
|
|
—
|
|
391
|
|
||||||||||
|
Leasehold and property acquisitions
|
(313
|
)
|
—
|
|
(54
|
)
|
—
|
|
(367
|
)
|
||||||||||
|
Proceeds from sale of oil and gas properties
|
163
|
|
—
|
|
105
|
|
—
|
|
268
|
|
||||||||||
|
Investment in subsidiaries, net
|
6,363
|
|
—
|
|
—
|
|
(6,363
|
)
|
—
|
|
||||||||||
|
Other
|
(34
|
)
|
—
|
|
40
|
|
—
|
|
6
|
|
||||||||||
|
NET CASH PROVIDED BY (USED IN) CONTINUING INVESTING ACTIVITIES
|
4,523
|
|
—
|
|
(1,449
|
)
|
(6,363
|
)
|
(3,289
|
)
|
||||||||||
|
NET CASH PROVIDED BY DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
4,372
|
|
—
|
|
4,372
|
|
||||||||||
|
NET CASH USED IN INVESTING ACTIVITIES
|
4,523
|
|
—
|
|
2,923
|
|
(6,363
|
)
|
1,083
|
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Commercial paper, credit facility, and bank notes, net
|
(1,570
|
)
|
—
|
|
—
|
|
—
|
|
(1,570
|
)
|
||||||||||
|
Intercompany borrowings
|
(1,621
|
)
|
(18
|
)
|
(4,724
|
)
|
6,363
|
|
—
|
|
||||||||||
|
Payments on fixed rate debt
|
(939
|
)
|
—
|
|
—
|
|
—
|
|
(939
|
)
|
||||||||||
|
Dividends paid
|
(377
|
)
|
—
|
|
—
|
|
—
|
|
(377
|
)
|
||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
(129
|
)
|
—
|
|
(129
|
)
|
||||||||||
|
Other
|
(3
|
)
|
—
|
|
56
|
|
—
|
|
53
|
|
||||||||||
|
NET CASH USED IN CONTINUING FINANCING ACTIVITIES
|
(4,510
|
)
|
(18
|
)
|
(4,797
|
)
|
6,363
|
|
(2,962
|
)
|
||||||||||
|
NET CASH USED IN FINANCING ACTIVITIES
|
(4,510
|
)
|
(18
|
)
|
(4,797
|
)
|
6,363
|
|
(2,962
|
)
|
||||||||||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
111
|
|
—
|
|
677
|
|
—
|
|
788
|
|
||||||||||
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
267
|
|
—
|
|
412
|
|
—
|
|
679
|
|
||||||||||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
378
|
|
$
|
—
|
|
$
|
1,089
|
|
$
|
—
|
|
$
|
1,467
|
|
|||||
F-67
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2014
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
(In millions)
|
||||||||||||||||||||
|
CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES
|
$
|
3,104
|
|
$
|
17
|
|
$
|
3,892
|
|
$
|
—
|
|
$
|
7,013
|
|
|||||
|
CASH PROVIDED BY DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
944
|
|
—
|
|
944
|
|
||||||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
3,104
|
|
17
|
|
4,836
|
|
—
|
|
7,957
|
|
||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
|
Additions to oil and gas property
|
(4,364
|
)
|
—
|
|
(4,244
|
)
|
—
|
|
(8,608
|
)
|
||||||||||
|
Additions to gas gathering, transmission, and processing facilities
|
(9
|
)
|
—
|
|
(872
|
)
|
—
|
|
(881
|
)
|
||||||||||
|
Proceeds from sale of Deepwater Gulf of Mexico assets
|
1,360
|
|
—
|
|
—
|
|
—
|
|
1,360
|
|
||||||||||
|
Proceeds from sale of Anadarko basin and southern Louisiana assets
|
1,262
|
|
—
|
|
—
|
|
—
|
|
1,262
|
|
||||||||||
|
Leasehold and property acquisitions
|
(1,475
|
)
|
—
|
|
—
|
|
—
|
|
(1,475
|
)
|
||||||||||
|
Proceeds from sale of oil and gas properties
|
15
|
|
—
|
|
455
|
|
—
|
|
470
|
|
||||||||||
|
Investment in subsidiaries, net
|
1,132
|
|
—
|
|
—
|
|
(1,132
|
)
|
—
|
|
||||||||||
|
Other
|
(186
|
)
|
—
|
|
(113
|
)
|
—
|
|
(299
|
)
|
||||||||||
|
NET CASH USED IN CONTINUING INVESTING ACTIVITIES
|
(2,265
|
)
|
—
|
|
(4,774
|
)
|
(1,132
|
)
|
(8,171
|
)
|
||||||||||
|
NET CASH USED IN DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
(219
|
)
|
—
|
|
(219
|
)
|
||||||||||
|
NET CASH USED IN INVESTING ACTIVITIES
|
(2,265
|
)
|
—
|
|
(4,993
|
)
|
(1,132
|
)
|
(8,390
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Commercial paper, credit facility, and bank notes, net
|
1,570
|
|
—
|
|
(2
|
)
|
—
|
|
1,568
|
|
||||||||||
|
Intercompany borrowings
|
—
|
|
8
|
|
(1,152
|
)
|
1,144
|
|
—
|
|
||||||||||
|
Dividends paid
|
(365
|
)
|
—
|
|
—
|
|
—
|
|
(365
|
)
|
||||||||||
|
Distributions to noncontrolling interest
|
—
|
|
—
|
|
(140
|
)
|
—
|
|
(140
|
)
|
||||||||||
|
Shares repurchased
|
(1,864
|
)
|
—
|
|
—
|
|
—
|
|
(1,864
|
)
|
||||||||||
|
Other
|
(68
|
)
|
(28
|
)
|
157
|
|
(12
|
)
|
49
|
|
||||||||||
|
NET CASH USED IN CONTINUING FINANCING ACTIVITIES
|
(727
|
)
|
(20
|
)
|
(1,137
|
)
|
1,132
|
|
(752
|
)
|
||||||||||
|
NET CASH USED IN DISCONTINUED OPERATIONS
|
—
|
|
—
|
|
(42
|
)
|
—
|
|
(42
|
)
|
||||||||||
|
NET CASH USED IN FINANCING ACTIVITIES
|
(727
|
)
|
(20
|
)
|
(1,179
|
)
|
1,132
|
|
(794
|
)
|
||||||||||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
112
|
|
(3
|
)
|
(1,336
|
)
|
—
|
|
(1,227
|
)
|
||||||||||
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
155
|
|
3
|
|
1,748
|
|
—
|
|
1,906
|
|
||||||||||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
267
|
|
$
|
—
|
|
$
|
412
|
|
$
|
—
|
|
$
|
679
|
|
|||||
F-68
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2016
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries
of Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
|
|
|
(In millions)
|
|
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
344
|
|
$
|
—
|
|
$
|
1,033
|
|
$
|
—
|
|
$
|
1,377
|
|
|||||
|
Receivables, net of allowance
|
358
|
|
—
|
|
770
|
|
—
|
|
1,128
|
|
||||||||||
|
Inventories
|
29
|
|
—
|
|
447
|
|
—
|
|
476
|
|
||||||||||
|
Drilling advances
|
4
|
|
—
|
|
77
|
|
—
|
|
81
|
|
||||||||||
|
Prepaid assets and other
|
134
|
|
—
|
|
45
|
|
—
|
|
179
|
|
||||||||||
|
Intercompany receivable
|
5,038
|
|
—
|
|
—
|
|
(5,038
|
)
|
—
|
|
||||||||||
|
5,907
|
|
—
|
|
2,372
|
|
(5,038
|
)
|
3,241
|
|
|||||||||||
|
PROPERTY AND EQUIPMENT, NET
|
7,014
|
|
—
|
|
11,853
|
|
—
|
|
18,867
|
|
||||||||||
|
OTHER ASSETS:
|
||||||||||||||||||||
|
Intercompany receivable
|
—
|
|
—
|
|
12,152
|
|
(12,152
|
)
|
—
|
|
||||||||||
|
Equity in affiliates
|
15,517
|
|
(1,240
|
)
|
706
|
|
(14,983
|
)
|
—
|
|
||||||||||
|
Deferred charges and other
|
97
|
|
1,000
|
|
314
|
|
(1,000
|
)
|
411
|
|
||||||||||
|
$
|
28,535
|
|
$
|
(240
|
)
|
$
|
27,397
|
|
$
|
(33,173
|
)
|
$
|
22,519
|
|
||||||
|
LIABILITIES AND EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES:
|
||||||||||||||||||||
|
Accounts payable
|
$
|
371
|
|
$
|
(12
|
)
|
$
|
226
|
|
$
|
—
|
|
$
|
585
|
|
|||||
|
Other current liabilities
|
653
|
|
3
|
|
602
|
|
—
|
|
1,258
|
|
||||||||||
|
Intercompany payable
|
—
|
|
—
|
|
5,038
|
|
(5,038
|
)
|
—
|
|
||||||||||
|
1,024
|
|
(9
|
)
|
5,866
|
|
(5,038
|
)
|
1,843
|
|
|||||||||||
|
LONG-TERM DEBT
|
8,247
|
|
297
|
|
—
|
|
—
|
|
8,544
|
|
||||||||||
|
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
|
||||||||||||||||||||
|
Intercompany payable
|
12,152
|
|
—
|
|
—
|
|
(12,152
|
)
|
—
|
|
||||||||||
|
Income taxes
|
(271
|
)
|
5
|
|
1,976
|
|
—
|
|
1,710
|
|
||||||||||
|
Asset retirement obligation
|
257
|
|
—
|
|
2,175
|
|
—
|
|
2,432
|
|
||||||||||
|
Other
|
888
|
|
1
|
|
422
|
|
(1,000
|
)
|
311
|
|
||||||||||
|
13,026
|
|
6
|
|
4,573
|
|
(13,152
|
)
|
4,453
|
|
|||||||||||
|
COMMITMENTS AND CONTINGENCIES APACHE SHAREHOLDERS’ EQUITY
|
6,238
|
|
(534
|
)
|
15,517
|
|
(14,983
|
)
|
6,238
|
|
||||||||||
|
Noncontrolling interest
|
—
|
|
—
|
|
1,441
|
|
—
|
|
1,441
|
|
||||||||||
|
TOTAL EQUITY
|
6,238
|
|
(534
|
)
|
16,958
|
|
(14,983
|
)
|
7,679
|
|
||||||||||
|
$
|
28,535
|
|
$
|
(240
|
)
|
$
|
27,397
|
|
$
|
(33,173
|
)
|
$
|
22,519
|
|
||||||
F-69
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2015
|
Apache
Corporation
|
Apache
Finance
Canada
|
All Other
Subsidiaries of
Apache
Corporation
|
Reclassifications
& Eliminations
|
Consolidated
|
||||||||||||||||
|
(In millions)
|
||||||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
378
|
|
$
|
—
|
|
$
|
1,089
|
|
$
|
—
|
|
$
|
1,467
|
|
|||||
|
Receivables, net of allowance
|
314
|
|
—
|
|
939
|
|
—
|
|
1,253
|
|
||||||||||
|
Inventories
|
34
|
|
—
|
|
536
|
|
—
|
|
570
|
|
||||||||||
|
Drilling advances
|
16
|
|
—
|
|
156
|
|
—
|
|
172
|
|
||||||||||
|
Prepaid assets and other
|
102
|
|
—
|
|
188
|
|
—
|
|
290
|
|
||||||||||
|
Intercompany receivable
|
5,212
|
|
—
|
|
—
|
|
(5,212
|
)
|
—
|
|
||||||||||
|
6,056
|
|
—
|
|
2,908
|
|
(5,212
|
)
|
3,752
|
|
|||||||||||
|
PROPERTY AND EQUIPMENT, NET
|
6,546
|
|
—
|
|
14,292
|
|
—
|
|
20,838
|
|
||||||||||
|
OTHER ASSETS:
|
||||||||||||||||||||
|
Intercompany receivable
|
—
|
|
—
|
|
10,744
|
|
(10,744
|
)
|
—
|
|
||||||||||
|
Equity in affiliates
|
16,092
|
|
(807
|
)
|
446
|
|
(15,731
|
)
|
—
|
|
||||||||||
|
Deferred charges and other
|
96
|
|
1,001
|
|
813
|
|
(1,000
|
)
|
910
|
|
||||||||||
|
$
|
28,790
|
|
$
|
194
|
|
$
|
29,203
|
|
$
|
(32,687
|
)
|
$
|
25,500
|
|
||||||
|
LIABILITIES AND EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES:
|
||||||||||||||||||||
|
Accounts payable
|
$
|
409
|
|
$
|
—
|
|
$
|
209
|
|
$
|
—
|
|
$
|
618
|
|
|||||
|
Other current liabilities
|
539
|
|
3
|
|
681
|
|
—
|
|
1,223
|
|
||||||||||
|
Intercompany payable
|
—
|
|
—
|
|
5,212
|
|
(5,212
|
)
|
—
|
|
||||||||||
|
948
|
|
3
|
|
6,102
|
|
(5,212
|
)
|
1,841
|
|
|||||||||||
|
LONG-TERM DEBT
|
8,418
|
|
298
|
|
—
|
|
—
|
|
8,716
|
|
||||||||||
|
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
|
||||||||||||||||||||
|
Intercompany payable
|
10,744
|
|
—
|
|
—
|
|
(10,744
|
)
|
—
|
|
||||||||||
|
Income taxes
|
(412
|
)
|
4
|
|
2,937
|
|
—
|
|
2,529
|
|
||||||||||
|
Asset retirement obligation
|
271
|
|
—
|
|
2,291
|
|
—
|
|
2,562
|
|
||||||||||
|
Other
|
933
|
|
250
|
|
179
|
|
(1,000
|
)
|
362
|
|
||||||||||
|
11,536
|
|
254
|
|
5,407
|
|
(11,744
|
)
|
5,453
|
|
|||||||||||
|
COMMITMENTS AND CONTINGENCIES
APACHE SHAREHOLDERS’ EQUITY
|
7,888
|
|
(361
|
)
|
16,092
|
|
(15,731
|
)
|
7,888
|
|
||||||||||
|
Noncontrolling interest
|
—
|
|
—
|
|
1,602
|
|
—
|
|
1,602
|
|
||||||||||
|
TOTAL EQUITY
|
7,888
|
|
(361
|
)
|
17,694
|
|
(15,731
|
)
|
9,490
|
|
||||||||||
|
$
|
28,790
|
|
$
|
194
|
|
$
|
29,203
|
|
$
|
(32,687
|
)
|
$
|
25,500
|
|
||||||
F-70
INDEX TO EXHIBITS
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
3.1
|
–
|
Restated Certificate of Incorporation of Registrant, dated September 19, 2013, as filed with the Secretary of State of Delaware on September 19, 2013 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed September 20, 2013, SEC File No. 001-4300).
|
|
3.2
|
–
|
Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated May 14, 2015, as filed with the Secretary of State of Delaware on May 14, 2015 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed May 20, 2015, SEC File No. 001-04300).
|
|
3.3
|
–
|
Bylaws of Registrant, as amended February 3, 2016, (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed February 9, 2016, SEC File No. 001-4300).
|
|
4.1
|
–
|
Form of Certificate for Registrant’s Common Stock (incorporated by reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, SEC File No. 001-4300).
|
|
4.2
|
–
|
Form of 3.625% Notes due 2021 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated November 30, 2010, filed on December 3, 2010, SEC File No. 001-4300).
|
|
4.3
|
–
|
Form of 5.250% Notes due 2042 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated November 30, 2010, filed on December 3, 2010, SEC File No. 001-4300).
|
|
4.4
|
–
|
Form of 5.100% Notes due 2040 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated August 17, 2010, filed on August 20, 2010, SEC File No. 001-4300).
|
|
4.5
|
–
|
Form of 1.75% Notes due 2017 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated April 3, 2012, filed on April 9, 2012, SEC File No. 001-4300).
|
|
4.6
|
–
|
Form of 3.25% Note due 2022 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated April 3, 2012, filed on April 9, 2012, SEC File No. 001-4300).
|
|
4.7
|
–
|
Form of 4.75% Notes due 2043 (incorporated by reference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K, dated April 3, 2012, filed on April 9, 2012, SEC File No. 001-4300).
|
|
4.8
|
–
|
Form of 2.625% Notes due 2023 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated November 28, 2012, filed on December 4, 2012, SEC File No. 001-4300).
|
|
4.9
|
–
|
Form of 4.250% Notes due 2044 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated November 28, 2012, filed on December 4, 2012, SEC File No. 001-4300).
|
|
4.10
|
–
|
Rights Agreement, dated January 31, 1996, between Registrant and Wells Fargo Bank, N.A. (as successor-in-interest to Norwest Bank Minnesota, N.A.), rights agent, relating to the declaration of a rights dividend to Registrant's common shareholders of record on January 31, 1996 (incorporated by reference to Exhibit (a) to Registrant's Registration Statement on Form 8-A, dated January 24, 1996, SEC File No. 001-4300).
|
|
4.11
|
–
|
Amendment No. 1, dated as of January 31, 2006, to the Rights Agreement dated as of January 31, 1996 between Registrant and Wells Fargo Bank, N.A. (as successor-in-interest to Norwest Bank Minnesota, N.A.) (incorporated by reference to Exhibit 4.4 to Registrant's Amendment No. 1 to Registration Statement on Form 8-A, dated January 31, 2006, SEC File No. 001-4300).
|
|
4.12
|
–
|
Amendment No. 2, dated March 10, 2014, to the Rights Agreement by and between Registrant and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 4.3 to Amendment No. 2 to Registrant’s Registration Statement on Form 8-A, filed March 10, 2014, SEC File No. 001-4300).
|
|
4.13
|
–
|
Senior Indenture, dated February 15, 1996, between Registrant and The Bank of New York Mellon Trust Company, N.A. (formerly known as the Bank of New York Trust Company, N.A., as successor-in-interest to JPMorgan Chase Bank), formerly known as The Chase Manhattan Bank, as trustee, governing the senior debt securities and guarantees (incorporated by reference to Exhibit 4.6 to Registrant’s Registration Statement on Form S-3, dated May 23, 2003, Reg. No. 333-105536).
|
|
4.14
|
–
|
First Supplemental Indenture to the Senior Indenture, dated as of November 5, 1996, between Registrant and The Bank of New York Mellon Trust Company, N.A. (formerly known as the Bank of New York Trust Company, N.A., as successor-in-interest to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank), as trustee, governing the senior debt securities and guarantees (incorporated by reference to Exhibit 4.7 to Registrant’s Registration Statement on Form S-3, dated May 23, 2003, Reg. No. 333-105536).
|
|
4.15
|
–
|
Form of Indenture among Apache Finance Pty Ltd, Registrant and The Bank of New York Mellon Trust Company, N.A. (formerly known as the Bank of New York Trust Company, N.A., as successor-in-interest to The Chase Manhattan Bank), as trustee, governing the debt securities and guarantees (incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-3, dated November 12, 1997, Reg. No. 333-339973).
|
|
4.16
|
–
|
Form of Indenture among Registrant, Apache Finance Canada Corporation and The Bank of New York Mellon Trust Company, N.A. (formerly known as the Bank of New York Trust Company, N.A., as successor-in-interest to The Chase Manhattan Bank), as trustee, governing the debt securities and guarantees (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to Registrant’s Registration Statement on Form S-3, dated November 12, 1999, Reg. No. 333-90147).
|
INDEX TO EXHIBITS
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
4.17
|
–
|
Senior Indenture, dated May 19, 2011, between Registrant and Wells Fargo Bank, National Association, as trustee, governing the senior debt securities of Apache Corporation (incorporated by reference to Exhibit 4.14 to Registrant’s Registration Statement on Form S-3, dated May 23, 2011, Reg. No. 333-174429).
|
|
4.18
|
–
|
Senior Indenture, dated May 19, 2011, among Apache Finance Pty Ltd, Apache Corporation, as guarantor, and Wells Fargo Bank, National Association, as trustee, governing the senior debt securities of Apache Finance Pty Ltd and the related guarantees (incorporated by reference to Exhibit 4.16 to Registrant’s Registration Statement on Form S-3, dated May 23, 2011, Reg. No. 333-174429).
|
|
4.19
|
–
|
Senior Indenture, dated May 19, 2011, among Apache Finance Canada Corporation, Apache Corporation, as guarantor, and Wells Fargo Bank, National Association, as trustee, governing the senior debt securities of Apache Finance Corporation and the related guarantees (incorporated by reference to Exhibit 4.20 to Registrant’s Registration Statement on Form S-3, dated May 23, 2011, Reg. No. 333-174429).
|
|
†4.20
|
–
|
Form of Apache Corporation November 10, 2010 First Non-Qualified Stock Option Agreement for Certain Employees of Apache Corporation (incorporated by reference to Exhibit 4.6 to Registrant’s Registration Statement on Form S-8 filed on November 10, 2010, Reg. No. 333-170533).
|
|
†4.21
|
–
|
Form of Apache Corporation November 10, 2010 Second Non-Qualified Stock Option Agreement for Certain Employees of Apache Corporation (incorporated by reference to Exhibit 4.7 to Registrant’s Registration Statement on Form S-8 filed on November 10, 2010, Reg. No. 333-170533).
|
|
†4.22
|
–
|
Form of Apache Corporation November 10, 2010 Non-Statutory Stock Option Agreement for Certain Employees of Apache Corporation (incorporated by reference to Exhibit 4.8 to Registrant’s Registration Statement on Form S-8 filed on November 10, 2010, Reg. No. 333-170533).
|
|
10.1
|
–
|
Credit Agreement, dated August 12, 2011, among Registrant, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Citibank, N.A., Bank of America, N.A., and Wells Fargo Bank, National Association, as Syndication Agents (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 18, 2011, SEC File No. 001-4300).
|
|
10.2
|
–
|
First Amendment to Credit Agreement, dated as of July 17, 2013, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto, amending Credit Agreement, dated as of August 12, 2011, among the same parties (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, SEC File No. 001-4300).
|
|
10.3
|
–
|
Credit Agreement, dated as of June 4, 2012, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Global Syndication Agents, and The Royal Bank of Scotland plc and Royal Bank of Canada, as Global Documentation Agents (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed June 7, 2012, SEC File No. 001-04300).
|
|
10.4
|
–
|
Credit Agreement, dated as of June 4, 2012, among Apache Canada Ltd., the lenders party thereto, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Royal Bank of Canada, as Canadian Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Global Syndication Agents, and The Royal Bank of Scotland plc and Royal Bank of Canada, as Global Documentation Agents (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed June 7, 2012, SEC File No. 001-04300).
|
|
10.5
|
–
|
Syndicated Facility Agreement, dated as of June 4, 2012, among Apache Energy Limited (ACN 009 301 964), the lenders party thereto, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Citisecurities Limited (ABN 51 008 489 610), as Australian Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Global Syndication Agents, and The Royal Bank of Scotland plc and Royal Bank of Canada, as Global Documentation Agents (incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed June 7, 2012, SEC File No. 001-04300).
|
|
10.6
|
–
|
Credit Agreement, dated December 11, 2014, among Apache Corporation, the lenders party thereto, Citibank, N.A., as Administrative Agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, and The Royal Bank of Scotland plc and Wells Fargo Bank, National Association, as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed December 15, 2014, SEC File No. 001-4300).
|
|
10.7
|
–
|
Credit Agreement, dated as of June 4, 2015, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and Royal Bank of Canada, HSBC Bank USA, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Wells Fargo Bank, National Association, and Mizuho Bank, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed June 9, 2015, SEC File No. 001-04300).
|
INDEX TO EXHIBITS
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
10.8
|
–
|
First Amendment to Credit Agreement, dated as of September 9, 2015, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto, amending Credit Agreement, dated as of June 4, 2015 among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and Royal Bank of Canada, HSBC Bank USA, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Wells Fargo Bank, National Association, and Mizuho Bank, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, SEC File No. 001-04300).
|
|
10.9
|
–
|
Second Amendment to Credit Agreement, dated as of February 22, 2016, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto, amending Credit Agreement, dated as of June 4, 2015, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and Royal Bank of Canada, HSBC Bank USA, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Wells Fargo Bank, National Association, and Mizuho Bank, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.9 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
|
|
10.10
|
–
|
Credit Agreement, dated as of February 22, 2016, among Apache Corporation, the lenders party thereto, the issuing banks party thereto, J.P. Morgan Europe Limited, as Administrative Agent, HSBC Bank USA, National Association, Royal Bank of Canada, The Bank of Nova Scotia, The Toronto-Dominion Bank, New York Branch, and Bank of Montreal, as Co-Syndication Agents, and Deutsche Bank AG New York Branch and Société Générale, as Co-Documentation Agents (incorporated by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.11
|
–
|
Apache Corporation Corporate Incentive Compensation Plan A (Senior Officers' Plan), dated July 16, 1998 (incorporated by reference to Exhibit 10.13 to Registrant's Annual Report on Form 10-K for year ended December 31, 1998, SEC File No. 001-4300).
|
|
†10.12
|
–
|
First Amendment to Apache Corporation Corporate Incentive Compensation Plan A, dated November 20, 2008, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2008, SEC File No. 001-4300).
|
|
†10.13
|
–
|
Apache Corporation Corporate Incentive Compensation Plan B (Strategic Objectives Format), dated July 16, 1998 (incorporated by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for year ended December 31, 1998, SEC File No. 001-4300).
|
|
†10.14
|
–
|
First Amendment to Apache Corporation Corporate Incentive Compensation Plan B, dated November 20, 2008, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.19 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2008, SEC File No. 001-4300).
|
|
†10.15
|
–
|
Apache Corporation 401(k) Savings Plan, as amended and restated, dated March 17, 2015, effective January 31, 2014 (incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.16
|
–
|
Amendment to Apache Corporation 401(k) Savings Plan, dated April 17, 2014 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, SEC File No. 001-4300.)
|
|
†10.17
|
–
|
Amendment to Apache Corporation 401(k) Savings Plan, dated May 16, 2014 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, SEC File No. 001-4300).
|
|
†10.18
|
–
|
Amendment to Apache Corporation 401(k) Savings Plan, effective February 3, 2016 (incorporated by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.19
|
–
|
Non-Qualified Retirement/Savings Plan of Apache Corporation, as amended and restated, dated July 16, 2014, effective January 1, 2015 (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, SEC File No. 001-4300).
|
|
†10.20
|
–
|
Non-Qualified Restorative Retirement Savings Plan of Apache Corporation, as amended and restated, dated July 16, 2014, effective January 1, 2015 (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, SEC File No. 001-4300).
|
|
†10.21
|
–
|
Apache Corporation 2016 Omnibus Compensation Plan, dated February 3, 2016, effective May 12, 2016 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed May 16, 2016, SEC File No. 001-4300).
|
|
†10.22
|
–
|
Apache Corporation 2011 Omnibus Equity Compensation Plan, as amended and restated May 12, 2016 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, SEC File No. 001-4300).
|
INDEX TO EXHIBITS
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
†10.23
|
–
|
Apache Corporation 2007 Omnibus Equity Compensation Plan, as amended and restated May 4, 2011 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, SEC File No. 001-4300).
|
|
†10.24
|
–
|
Apache Corporation 2005 Stock Option Plan, as amended and restated September 16, 2013 (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, File No. 001-4300).
|
|
†10.25
|
–
|
Apache Corporation Income Continuance Plan, as amended and restated July 14, 2010, effective January 1, 2009 (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, SEC File No. 001-4300).
|
|
†10.26
|
–
|
Apache Corporation Deferred Delivery Plan, as amended and restated May 12, 2016 (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, SEC File No. 001-4300).
|
|
†10.27
|
–
|
Apache Corporation Non-Employee Directors’ Compensation Plan, as amended and restated May 14, 2015 (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, SEC File No. 001-4300).
|
|
†10.28
|
–
|
Apache Corporation Outside Directors’ Retirement Plan, as amended and restated July 16, 2014, effective June 30, 2014 (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, SEC File No. 001-4300).
|
|
†10.29
|
–
|
Apache Corporation Equity Compensation Plan for Non-Employee Directors, as amended and restated February 8, 2007 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, SEC File No. 001-4300).
|
|
†10.30
|
–
|
Apache Corporation Non-Employee Directors’ Restricted Stock Units Program, as amended and restated May 14, 2015 (incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, SEC File No. 001-4300).
|
|
†10.31
|
–
|
Apache Corporation Non-Employee Directors’ Restricted Stock Units Program, effective May 12, 2016, pursuant to Apache Corporation 2016 Omnibus Compensation Plan (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, SEC File No. 001-4300).
|
|
†10.32
|
–
|
Apache Corporation Outside Directors’ Deferral Program, effective May 12, 2016, pursuant to Apache Corporation 2016 Omnibus Compensation Plan (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, SEC File No. 001-4300).
|
|
†10.33
|
–
|
Apache Corporation Outside Directors’ Deferral Program, effective July 16, 2014, pursuant to Apache Corporation 2011 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, SEC File No. 001-4300).
|
|
†10.34
|
–
|
Employment Agreement between Registrant and G. Steven Farris, dated June 6, 1988, and First Amendment, dated November 20, 2008, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.44 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2008, SEC File No. 001-4300).
|
|
†10.35
|
–
|
Retirement Agreement, dated January 19, 2015, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.39 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, SEC File No. 001-4300).
|
|
†10.36
|
–
|
Apache Corporation Executive Termination Policy (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, SEC File No. 001-4300).
|
|
†10.37
|
–
|
2016 Employee Release and Settlement Agreement between Registrant and Thomas E. Voytovich, effective November 30, 2015 (incorporated by reference to Exhibit 10.41 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.38
|
–
|
Form of Stock Option Award Agreement, dated May 6, 2009 (incorporated by reference to Exhibit 10.39 to Registrant's Annual Report on Form 10-K for year ended December 31, 2009, SEC File No. 001-4300).
|
|
†10.39
|
–
|
Form of 2014 Performance Agreement (Total Shareholder Return), dated January 9, 2014 (incorporated by reference to Exhibit 10.46 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2013, SEC File No. 001-4300).
|
|
†10.40
|
–
|
Form of 2014 Performance Agreement (Business Performance), dated February 3, 2014 (incorporated by reference to Exhibit 10.47 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2013, SEC File No. 001-4300).
|
|
†10.41
|
–
|
Form of 2015 Performance Share Program Award Notice and Agreement, dated February 19, 2015 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, SEC File No. 001-4300).
|
INDEX TO EXHIBITS
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
†10.42
|
–
|
Restricted Stock Unit Award Agreement between Registrant and John J. Christmann, dated February 18, 2015 (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, SEC File No. 001-4300).
|
|
†10.43
|
–
|
2015 Long Term Cash Performance Program Award Notice and Agreement between Registrant and Stephen J. Riney, dated April 8, 2015 (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, SEC File No. 001-4300).
|
|
†10.44
|
–
|
Form of 2016 Performance Share Program Award Notice and Agreement, dated January 7, 2016 (incorporated by reference to Exhibit 10.59 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
*†10.45
|
–
|
Form of 2017 Performance Share Program Award Notice and Agreement, dated December 13, 2016.
|
|
†10.46
|
–
|
Form of Restricted Stock Unit Award Agreement, dated February 3, 2016 (incorporated by reference to Exhibit 10.60 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.47
|
–
|
Form of Restricted Stock Unit Award Agreement dated September 14, 2016 (2016 Omnibus Compensation Plan) (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, SEC File No. 001-4300).
|
|
*†10.48
|
–
|
Form of Stock Option Grant Agreement, dated December 13, 2016 (2016 Omnibus Compensation Plan).
|
|
†10.49
|
–
|
Form of Stock Option Award Agreement, dated February 3, 2016 (incorporated by reference to Exhibit 10.61 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.50
|
–
|
Amendment of Stock Option Grants (2011 Omnibus Equity Compensation Plan), dated January 20, 2015, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.63 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2014, SEC File No. 001-4300).
|
|
†10.51
|
–
|
Amendment of Restricted Stock Unit Awards (2007 and 2011 Omnibus Equity Compensation Plans), dated January 20, 2015, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.64 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2014, SEC File No. 001-4300).
|
|
†10.52
|
–
|
Amendment of 2014 Performance Program (Business Performance) Award (2011 Omnibus Compensation Plan), dated January 20, 2015, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.65 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2014, SEC File No. 001-4300).
|
|
†10.53
|
–
|
Amendment of 2014 Performance Program (Business Performance) Award (2011 Omnibus Equity Compensation Plan), effective November 30, 2015, between Registrant and Thomas E. Voytovich (incorporated by reference to Exhibit 10.74 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.54
|
–
|
Amendment of Restricted Stock Unit Awards (2011 Omnibus Equity Compensation Plan), effective November 30, 2015, between Registrant and Thomas E. Voytovich (incorporated by reference to Exhibit 10.75 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.55
|
–
|
Amendment of Stock Option Grants (2007 and 2011 Omnibus Equity Compensation Plans), effective November 30, 2015, between Registrant and Thomas E. Voytovich (incorporated by reference to Exhibit 10.76 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
†10.56
|
–
|
Amendment of Stock Option Grants (2005 Stock Option Plan), effective November 30, 2015, between Registrant and Thomas E. Voytovich (incorporated by reference to Exhibit 10.77 to Registrant's Annual Report on Form 10-K for year ended December 31, 2015, SEC File No. 001-4300).
|
|
*12.1
|
–
|
Statement of Computation of Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends.
|
|
*21.1
|
–
|
Subsidiaries of Registrant.
|
|
*23.1
|
–
|
Consent of Ernst & Young LLP.
|
|
*23.2
|
–
|
Consent of Ryder Scott Company, L.P., Petroleum Consultants.
|
|
*24.1
|
–
|
Power of Attorney (included as a part of the signature pages to this report).
|
|
*31.1
|
–
|
Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
|
|
*31.2
|
–
|
Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
|
|
*32.1
|
–
|
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
|
|
*99.1
|
–
|
Report of Ryder Scott Company, L.P., Petroleum Consultants.
|
|
*101.INS
|
–
|
XBRL Instance Document.
|
|
*101.SCH
|
–
|
XBRL Taxonomy Schema Document.
|
|
*101.CAL
|
–
|
XBRL Calculation Linkbase Document.
|
INDEX TO EXHIBITS
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
*101.DEF
|
–
|
XBRL Definition Linkbase Document.
|
|
*101.LAB
|
–
|
XBRL Label Linkbase Document.
|
|
*101.PRE
|
–
|
XBRL Presentation Linkbase Document.
|
|
* Filed herewith.
|
|
† Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 15 hereof.
|
NOTE: Debt instruments of the Registrant defining the rights of long-term debt holders in principal amounts not exceeding 10 percent of the Registrant’s consolidated assets have been omitted and will be provided to the Commission upon request.
TABLE OF CONTENTS
Part IprintItem 1A. Risk FactorsprintItem 1B. Unresolved Staff CommentsprintItem 3. Legal ProceedingsprintItem 4. Mine Safety DisclosuresprintPart IIprintItem 5. Market For The Registrant S Common Equity, Related Stockholder Matters, and Issuer Purchases Of Equity SecuritiesprintItem 6. Selected Financial DataprintItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 7A. Quantitative and Qualitative Disclosures About Market RiskprintItem 8. Financial Statements and Supplementary DataprintItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureprintItem 9A. Controls and ProceduresprintItem 9B. Other InformationprintPart IIIprintItem 10. Directors, Executive Officers and Corporate GovernanceprintItem 11. Executive CompensationprintItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersprintItem 13. Certain Relationships and Related Transactions, and Director IndependenceprintItem 14. Principal Accounting Fees and ServicesprintPart IVprintItem 15. Exhibits, Financial Statement SchedulesprintItem 16. Form 10-k Summaryprint