APACHE CORP
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
Commission File Number:
1-4300
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) (Zip Code)
(
713
)
296-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
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
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes
☒
No
☐
Note: The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
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☒ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
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Number of shares of registrant’s common stock outstanding as of July 31, 2023 (100% owned by APA Corporation)
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OMISSION OF CERTAIN INFORMATION
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format.
TABLE OF CONTENTS
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PART I
- FINANCIAL INFORMATION
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| 1. | |||||||||||
| 2. | |||||||||||
| 3. | |||||||||||
| 4. | |||||||||||
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PART II
- OTHER INFORMATION
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| 1. | |||||||||||
| 1A. | |||||||||||
| 6. | |||||||||||
FORWARD-LOOKING STATEMENTS AND RISKS
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company’s 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 the Company’s examination of historical operating trends, the information that was used to prepare its estimate of proved reserves as of December 31, 2022, and other data in the Company’s 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,” “continue,” “seek,” “guidance,” “goal,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under the circumstances, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, its assumptions about:
•
changes in local, regional, national, and international economic conditions, including as a result of any epidemics or pandemics, such as the coronavirus disease (COVID-19) pandemic and any related variants;
•
the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services, including the prices received for natural gas purchased from third parties to sell and deliver to a U.S. LNG export facility;
•
the Company’s commodity hedging arrangements;
•
the supply and demand for oil, natural gas, NGLs, and other products or services;
•
production and reserve levels;
•
drilling risks;
•
economic and competitive conditions, including market and macro-economic disruptions resulting from the Russian war in Ukraine and from actions taken by foreign oil and gas producing nations, including the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members that participate in OPEC initiatives (OPEC+);
•
the availability of capital resources;
•
capital expenditures and other contractual obligations;
•
currency exchange rates;
•
weather conditions;
•
inflation rates;
•
the impact of changes in tax legislation;
•
the availability of goods and services;
•
the impact of political pressure and the influence of environmental groups and other stakeholders on decisions and policies related to the industries in which the Company and its affiliates operate;
•
legislative, regulatory, or policy changes, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, or water disposal;
•
the Company’s performance on environmental, social, and governance measures;
•
terrorism or cyberattacks;
•
the occurrence of property acquisitions or divestitures;
•
the integration of acquisitions;
•
the Company’s ability to access the capital markets;
•
market-related risks, such as general credit, liquidity, and interest-rate risks;
•
the benefits derived from the operating structure implemented pursuant to the Holding Company Reorganization (as defined in the Notes to the Company’s Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022);
•
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 Narrative Analysis of Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022;
•
other risks and uncertainties disclosed in APA Corporation’s second-quarter 2023 earnings release;
•
other factors disclosed under Part II,
Item 1A—Risk Factors
of this Quarterly Report on Form 10-Q; and
•
other factors disclosed in the other filings that the Company makes with the Securities and Exchange Commission.
Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. 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 these cautionary statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise these statements, whether based on changes in internal estimates or expectations, new information, future developments, or otherwise.
DEFINITIONS
All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this Quarterly Report on Form 10-Q. As used herein:
“3-D” means three-dimensional.
“4-D” means four-dimensional.
“b/d” means barrels of oil or NGLs per day.
“bbl” or “bbls” means barrel or barrels of oil or NGLs.
“bcf” means billion cubic feet of natural gas.
“bcf/d” means one bcf per day.
“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 NGLs.
“LNG” means liquefied natural gas.
“Mb/d” means Mbbls per day.
“Mbbls” means thousand barrels of oil or NGLs.
“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 NGLs.
“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 the 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 the Company’s working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by the Company’s working interest therein. Unless otherwise specified, all references to wells and acres are gross.
References to “Apache,” the “Company,” “we,” “us,” and “our” refer to Apache Corporation and its consolidated subsidiaries, unless otherwise specifically stated. References to “APA” refer to APA Corporation, the Company’s parent holding company, and its consolidated subsidiaries, including the Company, unless otherwise specifically stated.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
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For the Quarter Ended
June 30,
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For the Six Months Ended
June 30,
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|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| REVENUES AND OTHER: | ||||||||||||||||||||||||||
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Oil, natural gas, and natural gas liquids production revenues
(1)
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$ |
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$ |
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$ |
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$ |
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Purchased oil and gas sales
(1)
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| Total revenues |
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| Derivative instrument losses, net |
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(
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(
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| Gain (loss) on divestitures, net |
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(
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| Other, net |
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| OPERATING EXPENSES: | ||||||||||||||||||||||||||
| Lease operating expenses |
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Gathering, processing, and transmission
(1)
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Purchased oil and gas costs
(1)
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| Taxes other than income |
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| Exploration |
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| General and administrative |
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| Transaction, reorganization, and separation |
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| Depreciation, depletion, and amortization |
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| Asset retirement obligation accretion |
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| Impairments |
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| Financing costs, net |
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| NET INCOME BEFORE INCOME TAXES |
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| Current income tax provision |
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| Deferred income tax provision (benefit) |
(
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(
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(
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| NET INCOME INCLUDING NONCONTROLLING INTERESTS |
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| Net income attributable to noncontrolling interest – Sinopec |
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| Net income attributable to noncontrolling interest – Altus |
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| Net income attributable to noncontrolling interest – APA Corporation |
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| Net loss attributable to Altus Preferred Unit limited partners |
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(
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| NET INCOME ATTRIBUTABLE TO APACHE CORPORATION | $ |
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$ |
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$ |
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$ |
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(1)
For transactions associated with Kinetik, refer to
Note 7—Equity Method Interests
for further detail.
The accompanying notes to consolidated financial statements are an integral part of this statement.
1
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(Unaudited)
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For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| NET INCOME INCLUDING NONCONTROLLING INTERESTS | $ |
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$ |
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$ |
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$ |
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| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | ||||||||||||||||||||||||||
| Pension and postretirement benefit plan |
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(
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| COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS |
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| Comprehensive income attributable to noncontrolling interest – Sinopec |
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| Comprehensive income attributable to noncontrolling interest – Altus |
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| Comprehensive income attributable to noncontrolling interest – APA Corporation |
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| Comprehensive loss attributable to Altus Preferred Unit limited partners |
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(
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| COMPREHENSIVE INCOME ATTRIBUTABLE TO APACHE CORPORATION | $ |
|
$ |
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$ |
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$ |
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The accompanying notes to consolidated financial statements are an integral part of this statement.
2
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
|
For the Six Months Ended
June 30,
|
||||||||||||||
| 2023 | 2022 | |||||||||||||
| (In millions) | ||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
| Net income including noncontrolling interests | $ |
|
$ |
|
||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Unrealized derivative instrument losses, net |
|
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||||||||||||
| Gain on divestitures, net |
(
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(
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| Exploratory dry hole expense and unproved leasehold impairments |
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| Depreciation, depletion, and amortization |
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| Asset retirement obligation accretion |
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| Impairments |
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| Provision for (benefit from) deferred income taxes |
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(
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| (Gain) loss on extinguishment of debt |
(
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| Other, net |
(
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(
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| Changes in operating assets and liabilities: | ||||||||||||||
| Receivables |
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(
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| Inventories |
(
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(
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| Drilling advances and other current assets |
(
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| Deferred charges and other long-term assets |
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(
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| Accounts payable |
(
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| Accounts receivable from/payable to APA Corporation |
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(
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| Accrued expenses |
(
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| Deferred credits and noncurrent liabilities |
(
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(
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| NET CASH PROVIDED BY OPERATING ACTIVITIES |
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| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
| Additions to upstream oil and gas property |
(
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(
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| Leasehold and property acquisitions |
(
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(
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| Notes receivable from APA Corporation |
(
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| Proceeds from sale of oil and gas properties |
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| Proceeds from sale of Kinetik shares |
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| Deconsolidation of Altus cash and cash equivalents |
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(
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| Other, net |
(
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| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
(
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| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
| Proceeds from Apache credit facility, net |
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| Payments on note payable to APA Corporation, net |
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(
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| Payments on fixed-rate debt |
(
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(
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| Distributions to noncontrolling interest – Sinopec |
(
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(
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| Distributions to APA Corporation |
(
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(
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| Other, net |
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(
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| NET CASH USED IN FINANCING ACTIVITIES |
(
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(
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| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(
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(
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| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
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| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ |
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$ |
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| SUPPLEMENTARY CASH FLOW DATA: | ||||||||||||||
| Interest paid, net of capitalized interest | $ |
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$ |
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| Income taxes paid, net of refunds |
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| Non-cash financing adjustment: APA’s assumption of Apache’s borrowings on its syndicated credit facility |
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The accompanying notes to consolidated financial statements are an integral part of this statement.
3
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
June 30,
2023
|
December 31,
2022
|
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| (In millions, except share data) | ||||||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS: | ||||||||||||||
| Cash and cash equivalents | $ |
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$ |
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Receivables, net of allowance of $
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| PROPERTY AND EQUIPMENT: | ||||||||||||||
| Oil and gas properties |
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| Gathering, processing, and transmission facilities |
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| Other |
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| Less: Accumulated depreciation, depletion, and amortization |
(
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(
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| OTHER ASSETS: | ||||||||||||||
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| Deferred charges and other |
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| $ |
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$ |
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| LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT) | ||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||
| Accounts payable | $ |
|
$ |
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| Current debt |
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| DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: | ||||||||||||||
| Income taxes |
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| Other |
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| EQUITY (DEFICIT): | ||||||||||||||
|
Common stock, $
|
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| Paid-in capital |
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| Accumulated deficit |
(
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(
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| Accumulated other comprehensive income |
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| EQUITY ATTRIBUTABLE TO APACHE CORPORATION |
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| Noncontrolling interest – Sinopec |
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| Noncontrolling interest – APA Corporation |
|
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| TOTAL EQUITY |
|
|
||||||||||||
| $ |
|
$ |
|
|||||||||||
The accompanying notes to consolidated financial statements are an integral part of this statement.
4
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS
(Unaudited)
|
Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners
(1)
|
Paid-In
Capital |
Accumulated Deficit |
Accumulated
Other Comprehensive Income |
EQUITY (DEFICIT) ATTRIBUTABLE TO APACHE CORPORATION |
Noncontrolling
Interests
(1)
|
TOTAL
EQUITY |
|||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
|
For the Quarter Ended June 30, 2022
|
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|
Balance at March 31, 2022
|
$ | — | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
| Net income attributable to Apache Corporation | — | — |
|
— |
|
— |
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – APA | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – Sinopec | — | — | — | — | — |
|
|
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| Distributions to noncontrolling interest – Sinopec | — | — | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Distributions to APA Corporation | — |
(
|
— | — |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Other | — |
|
— | — |
|
— |
|
||||||||||||||||||||||||||||||||||||||||
|
Balance at June 30, 2022
|
$ | — | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
|
For the Quarter Ended June 30, 2023
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Balance at March 31, 2023
|
$ | — | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
| Net income attributable to Apache Corporation | — | — |
|
— |
|
— |
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – APA | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – Sinopec | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interest – Sinopec | — | — | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Distributions to APA Corporation | — | — | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Other | — |
|
— | — |
|
— |
|
||||||||||||||||||||||||||||||||||||||||
|
Balance at June 30, 2023
|
$ | — | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
(1)
As a result of the BCP Business Combination (as defined herein), the Company deconsolidated Altus (as defined herein) on February 22, 2022. Refer to
Note 1—Summary of Significant Accounting Policies
and
Note 3—Acquisitions and Divestitures
for further detail.
The accompanying notes to consolidated financial statements are an integral part of this statement.
5
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS - Continued
(Unaudited)
|
Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners
(1)
|
Paid-In
Capital |
Accumulated Deficit |
Accumulated
Other Comprehensive Income |
EQUITY (DEFICIT) ATTRIBUTABLE TO APACHE CORPORATION |
Noncontrolling
Interests
(1)
|
TOTAL
EQUITY |
|||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
|
For the Six Months Ended June 30, 2022
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2021
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
| Net income attributable to APA Corporation | — |
|
— |
|
— |
|
|||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – APA | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – Sinopec | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – Altus | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Net loss attributable to Altus Preferred Unit limited partners |
(
|
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interest – Sinopec | — | — | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Distributions to APA Corporation | — |
(
|
— | — |
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Deconsolidation of Altus |
(
|
— | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Other | — |
|
— |
(
|
|
— |
|
||||||||||||||||||||||||||||||||||||||||
|
Balance at June 30, 2022
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
|
For the Six Months Ended June 30, 2023
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2022
|
$ | — | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
| Net income attributable to APA Corporation | — | — |
|
— |
|
— |
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – APA | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest – Sinopec | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interest – Sinopec | — | — | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Distributions to APA Corporation | — | — | — | — | — |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||
| Other | — |
|
— |
|
|
— |
|
||||||||||||||||||||||||||||||||||||||||
|
Balance at June 30, 2023
|
$ | — | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||
(1)
As a result of the BCP Business Combination (as defined herein), the Company deconsolidated Altus (as defined herein) on February 22, 2022. Refer to
Note 1—Summary of Significant Accounting Policies
and
Note 3—Acquisitions and Divestitures
for further detail.
The accompanying notes to consolidated financial statements are an integral part of this statement.
6
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of June 30, 2023, the Company's significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The Company’s financial statements for prior periods may include reclassifications that were made to conform to the current-year presentation.
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, it 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 subsidiary of Apache and are reflected separately in the Company’s financial statements.
Apache has determined that one of its limited partnership subsidiaries, which has control over Apache’s Egyptian operations, qualified as a variable interest entity (VIE) under GAAP. Apache continues to consolidate this limited partnership subsidiary because the Company has concluded that it has a controlling financial interest in the Egyptian operations and was determined to be the primary beneficiary of the VIE. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business as a noncontrolling interest. APA Corporation (APA) also owns a noncontrolling interest in Apache’s consolidated Egypt oil and gas business. Refer to
Note 2—Transactions with Parent Affiliate
for detail regarding APA’s noncontrolling interest. All noncontrolling interests are reflected as a separate component of equity in the Company’s consolidated balance sheet.
Additionally, prior to the BCP Business Combination defined below, third-party investors owned a minority interest of approximately
21
percent of Altus Midstream Company (ALTM or Altus), which was reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. ALTM qualified as a VIE under GAAP, which Apache consolidated because a wholly owned subsidiary of Apache had a controlling financial interest and was determined to be the primary beneficiary.
On February 22, 2022, ALTM closed a previously announced transaction to combine with privately owned BCP Raptor Holdco LP (BCP and, together with BCP Raptor Holdco GP, LLC, the Contributed Entities) in an all-stock transaction, pursuant to the Contribution Agreement entered into by and among ALTM, Altus Midstream LP, New BCP Raptor Holdco, LLC (the Contributor), and BCP (the BCP Contribution Agreement). Pursuant to the BCP Contribution Agreement, the Contributor contributed all of the equity interests of the Contributed Entities (the Contributed Interests) to Altus Midstream LP, with each Contributed Entity becoming a wholly owned subsidiary of Altus Midstream LP (the BCP Business Combination). Upon closing the transaction, the combined entity was renamed Kinetik Holdings Inc. (Kinetik), and the Company determined that it was no longer the primary beneficiary of Kinetik. The Company further determined that Kinetik no longer qualified as a VIE under GAAP.
As a result, the Company deconsolidated ALTM on February 22, 2022. Refer to
Note 3—Acquisitions and Divestitures
for further detail.
7
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 the 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. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of the Company’s financial statements, and changes in these estimates are recorded when known.
Significant estimates with regard to these financial statements include the estimates of fair value for long-lived assets (refer to “Fair Value Measurements” and “Property and Equipment” sections in this Note 1 below), the fair value determination of acquired assets and liabilities (refer to
Note 3—Acquisitions and Divestitures
), the fair value of equity method interests (refer to “Equity Method Interests” within this Note 1 below and
Note 7—Equity Method Interests
), the assessment of asset retirement obligations (refer to
Note 9—Asset Retirement Obligation
), the estimate of income taxes (refer to
Note 11—Income Taxes
), the estimation of the contingent liability representing Apache’s potential decommissioning obligations on sold properties in the Gulf of Mexico (refer to
Note 12—Commitments and Contingencies
), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom.
Fair Value Measurements
Certain assets and liabilities are reported at fair value on a recurring basis in the Company’s consolidated balance sheet. Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), 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).
Refer to
Note 5—Derivative Instruments and Hedging Activities
,
Note 7—Equity Method Interests
, and
Note 10—Debt and Financing Costs
for further detail regarding the Company’s fair value measurements recorded on a recurring basis.
During the three and six months ended June 30, 2023 and 2022, the Company recorded
no
asset impairments in connection with fair value assessments.
8
Revenue Recognition
There have been no significant changes to the Company’s contracts with customers during the six months ended June 30, 2023 and 2022.
Payments under all contracts with customers are typically due and received within a short-term period of one year or less after physical delivery of the product or service has been rendered. Receivables from contracts with customers, including receivables for purchased oil and gas sales, in each case, net of allowance for credit losses, were $
1.2
billion and $
1.3
billion as of June 30, 2023 and December 31, 2022, respectively.
Oil and gas production revenues from non-customers represent income taxes paid to the Arab Republic of Egypt by Egyptian General Petroleum Corporation on behalf of the Company. Revenue and associated expenses related to such tax volumes are recorded as “Oil, natural gas, and natural gas liquids production revenues” and “Current income tax provision,” respectively, in the Company’s statement of consolidated operations.
Refer to
Note 13—Business Segment Information
for a disaggregation of oil, gas, and natural gas production revenue by product and reporting segment.
Inventories
Inventories consist principally of tubular goods and equipment and are stated at the lower of weighted-average cost or net realizable value. Oil produced but not sold, primarily in the North Sea, is also recorded to inventory and is stated at the lower of the cost to produce or net realizable value.
During the three and six months ended June 30, 2023, the Company recorded $
46
million of impairments in connection with valuations of drilling and operations equipment inventory upon the Company’s decision to suspend drilling operations in the North Sea.
9
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.
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 associated proved oil and gas properties. 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. The reserve base used to calculate the depreciation for capitalized well costs is the sum of proved developed reserves only. 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 the carrying value of proved oil and gas properties may not be recoverable, 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 the Company’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 ASC 820. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments, a Level 3 fair value measurement.
Gathering, Processing, and Transmission (GPT) Facilities
GPT 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 GPT assets, whether Apache-operated or third party-operated, as well as potential development plans by the Company for undeveloped acreage within, or close to, those fields.
10
2.
TRANSACTIONS WITH PARENT AFFILIATE
Apache is a direct, wholly owned subsidiary of APA. Apache holds assets in the U.S., Egypt, and the U.K. and provides administrative and support operations for certain APA subsidiaries with interests in the U.S., Suriname, and the Dominican Republic.
Notes Receivable from APA Corporation
On March 1, 2021, Apache sold to APA all of the equity in the
three
Apache subsidiaries through which Apache’s interests in Suriname and the Dominican Republic were held. The purchase price is payable pursuant to a senior promissory note made by APA payable to Apache, dated March 1, 2021. The note has a
seven-year
term, maturing on February 29, 2028, and bears interest at a rate of
4.5
percent per annum, payable semi-annually, subject to APA’s option to allow accrued interest to convert to principal (PIK) during the first
5.5
years of the note’s term (to August 31, 2026). The note is guaranteed by each of the
three
subsidiaries sold by Apache to APA. APA allowed interest accrued from March 1, 2021 through February 28, 2023, totaling $
125
million, to PIK pursuant to the note. As of June 30, 2023 and December 31, 2022, there was $
1.4
billion in principal outstanding under this note.
APA also made a senior promissory note payable to Apache, dated March 31, 2023, pursuant to which Apache may loan and APA may borrow, repay, and reborrow up to $
1.5
billion in aggregate principal amount outstanding at any time. The note has a
five-year
term, maturing March 31, 2028. The note bears interest at a rate per annum of
6.0
percent, payable semi-annually; however, APA may allow accrued interest to convert to principal, subject to the aggregate maximum principal amount of the note. APA allowed interest accrued from March 31, 2023 through May 15, 2023, totaling approximately $
6
million, to PIK pursuant to the note. As of June 30, 2023, there were $
994
million in borrowings outstanding under this note. The note is intended to facilitate cash management of APA and Apache.
These notes are both reflected in “Notes receivable from APA Corporation” on the Company’s consolidated balance sheet. The Company recognized interest income on these notes totaling $
29
million and $
16
million during the second quarters of 2023 and 2022, respectively, and $
45
million and $
31
million during the first six months of 2023 and 2022, respectively. The interest income related to these notes is reflected in “Financing costs, net” on the Company’s statement of consolidated operations.
Noncontrolling Interest – APA Corporation
In the fourth quarter of 2021, in conjunction with the ratification of a new merged concession agreement (MCA) with the Egyptian General Petroleum Corporation, Apache entered into an agreement with APA under which the historical value of existing concessions prior to ratifying the MCA was retained by Apache, with any excess value from the MCA terms being allocated to APA. Sinopec owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business, and approximately
50
percent of the remaining net income and distributable cash flow for the Company’s Egyptian operations is being allocated to APA in 2023. Apache consolidates its Egyptian operations, with APA’s noncontrolling interest reflected as a separate component in the Company’s consolidated balance sheet. The Company recorded net income attributable to APA’s noncontrolling interest of $
81
million and $
85
million in the second quarters of 2023 and 2022, respectively, and $
165
million and $
156
million in the first six months of 2023 and 2022, respectively. The Company also distributed $
100
million and $
95
million in the first six months of 2023 and 2022, respectively, of cash to APA in association with its noncontrolling interest.
11
Accounts Receivable from / Accounts Payable to APA
In connection with the Company’s role as service provider, Apache is reimbursed by APA for employee costs, certain internal costs, and third-party costs paid by the Company on behalf of APA. All reimbursements are based on actual costs incurred, and no market premium is applied by the Company to APA. The Company incurred $
6
million and $
5
million in the second quarters of 2023 and 2022, respectively, and $
11
million and $
9
million in the first six months of 2023 and 2022, respectively, in reimbursable corporate overhead charges. The Company also collects third-party receivables on behalf of APA. As of June 30, 2023, the Company had accounts payable to APA in connection with these services totaling $
126
million, which is reflected in “Accounts payable to APA Corporation” on the Company’s consolidated balance sheet. As of December 31, 2022, the Company had a receivable from APA totaling $
869
million, which is reflected in “Noncurrent receivable from APA Corporation.” This balance was incorporated into the senior promissory note dated March 31, 2023, discussed above during the first six months of 2023.
Other Transactions with APA Corporation
3.
ACQUISITIONS AND DIVESTITURES
2023 Activity
During the second quarter and first six months of 2023, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of approximately $
5
million and $
10
million, respectively.
During the second quarter and first six months of 2023, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $
7
million and $
28
million, respectively, recognizing a gain of approximately $
5
million and $
6
million, respectively, upon closing of these transactions.
2022 Activity
During the second quarter and first six months of 2022, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $
26
million.
During the second quarter and first six months of 2022, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $
7
million and $
15
million, respectively, recognizing a gain of approximately $
1
million and $
2
million, respectively, upon closing of these transactions.
During the first six months of 2022, the Company completed a transaction to sell certain non-core mineral rights in the Delaware Basin. The Company received total cash proceeds of approximately $
726
million after certain post-closing adjustments and recognized an associated gain of approximately $
560
million.
The BCP Business Combination was completed on February 22, 2022. As consideration for the contribution of the Contributed Interests, ALTM issued
50
million shares of Class C Common Stock (and Altus Midstream LP issued a corresponding number of common units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. ALTM’s stockholders continued to hold their existing shares of common stock. As a result of the transaction, the Contributor, or its designees, collectively owned approximately
75
percent of the issued and outstanding shares of ALTM common stock. Apache Midstream LLC, a wholly owned subsidiary of APA, which owned approximately
79
percent of the issued and outstanding shares of ALTM common stock prior to the BCP Business Combination, owned approximately
20
percent of the issued and outstanding shares of Kinetik common stock after the transaction closed.
As a result of the BCP Business Combination, the Company deconsolidated ALTM on February 22, 2022 and recognized a gain of approximately $
609
million that reflects the difference between the Company’s share of ALTM’s deconsolidated balance sheet of $
193
million and the fair value of $
802
million of its approximate
20
percent retained ownership in the combined entity.
During the first quarter of 2022, the Company sold
four million
of its shares of Kinetik Class A Common Stock for cash proceeds of $
224
million and recognized a loss of $
25
million, including transaction fees. Refer to
Note 7—Equity Method Interests
for further detail.
12
4.
CAPITALIZED EXPLORATORY WELL COSTS
The Company’s capitalized exploratory well costs were $
71
million and $
50
million as of June 30, 2023 and December 31, 2022, respectively. The increase is primarily attributable to additional drilling activity in Egypt, partially offset by successful transfer of well costs during the quarter.
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 proved reserves can be attributed to these projects.
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, as well as fluctuations in exchange rates in connection with transactions denominated in foreign currencies. The Company manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production and foreign currency transactions. The Company may utilize various types of derivative financial instruments, including forward contracts, futures contracts, swaps, and options, to manage fluctuations in cash flows resulting from changes in commodity prices or foreign currency values.
In December 2022, counterparty agreements for Apache’s commodity derivative instruments were transferred from Apache to APA Corporation. Apache had no outstanding derivative positions as of June 30, 2023 or December 31, 2022.
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:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Realized: | ||||||||||||||||||||||||||
| Commodity derivative instruments | $ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||
| Foreign currency derivative instruments |
|
(
|
|
(
|
||||||||||||||||||||||
| Realized losses, net |
|
(
|
|
(
|
||||||||||||||||||||||
| Unrealized: | ||||||||||||||||||||||||||
| Commodity derivative instruments |
|
(
|
|
(
|
||||||||||||||||||||||
| Foreign currency derivative instruments |
|
(
|
|
(
|
||||||||||||||||||||||
| Preferred Units embedded derivative |
|
|
|
(
|
||||||||||||||||||||||
| Unrealized losses, net |
|
(
|
|
(
|
||||||||||||||||||||||
| Derivative instrument losses, net | $ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||
Derivative instrument gains and losses were recorded in “Derivative instrument losses, net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized losses for derivative activity recorded in the statement of consolidated operations are reflected in the statement of consolidated cash flows separately as “Unrealized derivative instrument losses, net” under “Adjustments to reconcile net income to net cash provided by operating activities.”
13
6.
OTHER CURRENT ASSETS
The following table provides detail of the Company’s other current assets:
|
June 30,
2023
|
December 31,
2022
|
|||||||||||||
| (In millions) | ||||||||||||||
| Inventories | $ |
|
$ |
|
||||||||||
| Drilling advances |
|
|
||||||||||||
| Prepaid assets and other |
|
|
||||||||||||
| Current decommissioning security for sold Gulf of Mexico assets |
|
|
||||||||||||
| Total Other current assets | $ |
|
$ |
|
||||||||||
7.
EQUITY METHOD INTERESTS
The Kinetik Class A Common Stock held by the Company is treated as an interest in equity securities measured at fair value. The Company elected the fair value option for measuring its equity method interest in Kinetik based on practical expedience, variances in reporting timelines, and cost-benefit considerations. The fair value of the Company’s interest in Kinetik is determined using observable share prices on a major exchange, a Level 1 fair value measurement. Fair value adjustments are recorded as a component of “Other, net” under “Revenues and other” in the Company’s statement of consolidated operations.
The Company’s initial interest in Kinetik was measured at fair value based on the Company’s ownership of approximately
12.9
million shares of Kinetik Class A Common stock as of February 22, 2022. In March 2022, the Company sold
four million
of its shares of Kinetik Class A Common Stock for a loss, including underwriters fees, of $
25
million, which was recorded as a component of “Gain on divestitures, net” under “Revenues and other” in the Company’s statement of consolidated operations. Refer to
Note 3—Acquisitions and Divestitures
for further detail. During the second quarter of 2022, Kinetik issued a
two
-for-one split of its common stock, resulting in the Company owning approximately
17.7
million shares.
The Company has received approximately
2.1
million shares of Kinetik’s Class A Common Stock as paid-in-kind dividends through June 30, 2023. As of June 30, 2023, the Company’s ownership of
19.8
million shares represented approximately
13
percent of Kinetik’s outstanding Class A Common Stock.
The Company recorded changes in the fair value of its equity method interest in Kinetik totaling gains of $
90
million and $
42
million in the second quarters of 2023 and 2022, respectively, and gains of $
71
million and $
66
million in the first six months of 2023 and 2022, respectively. These gains were recorded as a component of “Revenues and other” in the Company’s statement of consolidated operations.
The following table represents sales and costs associated with Kinetik:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Natural gas and NGLs sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Purchased oil and gas sales |
|
|
|
|
||||||||||||||||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Gathering, processing, and transmission costs | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Purchased oil and gas costs |
|
|
|
|
||||||||||||||||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
As of June 30, 2023, the Company has recorded accrued costs payable to Kinetik of approximately $
37
million and receivables from Kinetik of approximately $
19
million.
14
8.
OTHER CURRENT LIABILITIES
The following table provides detail of the Company’s other current liabilities:
|
June 30,
2023
|
December 31,
2022
|
|||||||||||||
| (In millions) | ||||||||||||||
| Accrued operating expenses | $ |
|
$ |
|
||||||||||
| Accrued exploration and development |
|
|
||||||||||||
| Accrued compensation and benefits |
|
|
||||||||||||
| Accrued interest |
|
|
||||||||||||
| Accrued income taxes |
|
|
||||||||||||
| Current asset retirement obligation |
|
|
||||||||||||
| Current operating lease liability |
|
|
||||||||||||
| Current decommissioning contingency for sold Gulf of Mexico properties |
|
|
||||||||||||
| Other |
|
|
||||||||||||
| Total Other current liabilities | $ |
|
$ |
|
||||||||||
9.
ASSET RETIREMENT OBLIGATION
The following table describes changes to the Company’s asset retirement obligation (ARO) liability:
|
June 30,
2023
|
||||||||
| (In millions) | ||||||||
|
Asset retirement obligation, December 31, 2022
|
$ |
|
||||||
| Liabilities incurred |
|
|||||||
| Liabilities settled |
(
|
|||||||
| Accretion expense |
|
|||||||
|
Asset retirement obligation, June 30, 2023
|
|
|||||||
| Less current portion |
(
|
|||||||
| Asset retirement obligation, long-term | $ |
|
||||||
10.
DEBT AND FINANCING COSTS
The following table presents the carrying values of the Company’s debt:
|
June 30,
2023
|
December 31,
2022
|
|||||||||||||
| (In millions) | ||||||||||||||
|
Notes and debentures before unamortized discount and debt issuance costs
(1)
|
$ |
|
$ |
|
||||||||||
| Finance lease obligations |
|
|
||||||||||||
| Unamortized discount |
(
|
(
|
||||||||||||
| Debt issuance costs |
(
|
(
|
||||||||||||
| Total debt |
|
|
||||||||||||
| Current maturities |
(
|
(
|
||||||||||||
| Long-term debt | $ |
|
$ |
|
||||||||||
(1) The fair values of the Company’s notes and debentures were $
4.1
billion and $
4.2
billion as of June 30, 2023 and December 31, 2022, respectively.
Apache uses a market approach to determine the fair values of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).
At each of June 30, 2023 and December 31, 2022, current debt included $
2
million of finance lease obligations.
During the six months ended June 30, 2023, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $
74
million for an aggregate purchase price of $
65
million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $
10
million. The Company recognized a $
9
million gain on these repurchases. The repurchases were partially financed by Apache’s borrowing under the US dollar-denominated revolving credit facility of APA Corporation described below.
15
During the six months ended June 30, 2022, Apache closed cash tender offers for certain outstanding notes issued under its indentures, accepting for purchase $
1.1
billion aggregate principal amount of notes. Apache paid holders an aggregate $
1.2
billion in cash, reflecting principal, premium to par, and accrued and unpaid interest. The Company recognized a $
66
million loss on extinguishment of debt, including $
11
million of unamortized debt discount and issuance costs in connection with the note purchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.
During the six months ended June 30, 2022, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $
15
million for an aggregate purchase price of $
16
million in cash, including accrued interest and broker fees, reflecting a premium to par of $
1
million. The Company recognized a $
1
million loss on these repurchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.
On January 18, 2022, Apache redeemed the outstanding $
213
million principal amount of
3.25
% senior notes due April 15, 2022, at a redemption price equal to
100
percent of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed by borrowing under Apache’s former revolving credit facility.
Apache intends to reduce debt outstanding under its indentures from time to time.
On April 29, 2022, Apache entered into
two
unsecured guaranties of obligations under
two
unsecured syndicated credit agreements then entered into by APA, of which Apache is a wholly owned subsidiary. APA’s new credit agreements are for general corporate purposes and replaced and refinanced Apache’s 2018 unsecured syndicated credit agreement (the Former Facility).
•
One credit agreement is denominated in US dollars (the USD Agreement) and provides for an unsecured
five-year
revolving credit facility, with aggregate commitments of US$
1.8
billion (including a letter of credit subfacility of up to US$
750
million, of which US$
150
million currently is committed). APA may increase commitments up to an aggregate US$
2.3
billion by adding new lenders or obtaining the consent of any increasing existing lenders. This facility matures in April 2027, subject to APA’s
two
,
one-year
extension options.
•
The second credit agreement is denominated in pounds sterling (the GBP Agreement) and provides for an unsecured
five-year
revolving credit facility, with aggregate commitments of £
1.5
billion for loans and letters of credit. This facility matures in April 2027, subject to APA’s
two
,
one-year
extension options.
In connection with APA’s entry into the USD Agreement and the GBP Agreement (each, a New Agreement), Apache terminated US$
4.0
billion of commitments under the Former Facility, borrowings then outstanding under the Former Facility were deemed outstanding under APA’s USD Agreement, and letters of credit then outstanding under the Former Facility were deemed outstanding under a New Agreement, depending upon whether denominated in US dollars or pounds sterling. Apache has guaranteed obligations under each New Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$
1.0
billion.
Apache may borrow under APA’s USD Agreement up to an aggregate principal amount of US$
300
million outstanding at any given time. As of June 30, 2023 and December 31, 2022, there were
no
borrowings by Apache outstanding under the USD Agreement.
Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of June 30, 2023 and December 31, 2022, there were
no
outstanding borrowings under these facilities. As of June 30, 2023, there were £
185
million and $
3
million in letters of credit outstanding under these facilities. As of December 31, 2022, there were £
199
million and $
17
million in letters of credit outstanding under these facilities.
16
Financing Costs, Net
The following table presents the components of the Company’s financing costs, net:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Interest expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Amortization of debt issuance costs |
|
|
|
|
||||||||||||||||||||||
| Capitalized interest |
|
(
|
|
(
|
||||||||||||||||||||||
| (Gain) loss on extinguishment of debt |
|
|
(
|
|
||||||||||||||||||||||
| Interest income |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||
| Financing costs, net | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
11.
INCOME TAXES
The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments on the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.
During the second quarter of 2023, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2023 year-to-date effective income tax rate was primarily impacted by a deferred tax expense related to the remeasurement of taxes in the U.K. as a result of the enactment of Finance Act 2023 on January 10, 2023, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets. During the second quarter of 2022, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2022 year-to-date effective income tax rate was primarily impacted by the gain associated with deconsolidation of Altus, the gain on sale of certain non-core mineral rights in the Delaware Basin, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets.
On January 10, 2023, Finance Act 2023 was enacted, receiving Royal Assent, and included amendments to the Energy (Oil and Gas) Profits Levy Act of 2022, increasing the levy from a 25 percent rate to a 35 percent rate, effective for the period of January 1, 2023 through March 31, 2028. Under U.S. GAAP, the financial statement impact of new legislation is recorded in the period of enactment. Therefore, in the first quarter of 2023, the Company recorded a deferred tax expense of $
174
million related to the remeasurement of the December 31, 2022 U.K. deferred tax liability.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA). The IRA includes a new 15 percent corporate alternative minimum tax (Corporate AMT) on applicable corporations with an average annual financial statement income that exceeds $1 billion for any three consecutive years preceding the tax year at issue. The Corporate AMT is effective for tax years beginning after December 31, 2022. The Company is continuing to evaluate the provisions of the IRA and awaits further guidance from the U.S. Treasury Department to properly assess the impact of these provisions on the Company. Under the existing guidance, the Company does not believe the IRA will have a material impact for 2023.
The Company has a full valuation allowance against its U.S. net deferred tax assets. The Company will continue to maintain a full valuation allowance on its U.S. net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. However, given the Company’s current and anticipated future domestic earnings, the Company believes that there is a reasonable possibility that within the next 12 months sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the U.S. valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense, which could be material, for the period the release is recorded.
17
12.
COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls, which also may include controls related to the potential impacts of climate change. As of June 30, 2023, the Company has an accrued liability of approximately $
52
million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. The Company’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 the Company’s financial position, results of operations, or liquidity after consideration of recorded accruals. With respect to material matters for which the Company 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.
For additional information on Legal Matters described below, refer to Note 11—Commitments and Contingencies to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Argentine Environmental 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 $
45
million pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.
Louisiana Restoration
As more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including the Company, 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 its 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. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While adverse judgments against the Company are possible, the Company intends to actively defend these lawsuits and claims.
Starting in November of 2013 and continuing into 2023, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including the Company. In these cases, the Parishes, as plaintiffs, allege that 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 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 adverse judgments against the Company might be possible, the Company intends to vigorously oppose these claims.
18
Apollo Exploration Lawsuit
In a case captioned
Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation
, Cause No. CV50538 in the 385
th
Judicial District Court, Midland County, Texas, plaintiffs alleged damages in excess of $
200
million (having previously claimed in excess of $
1.1
billion) relating to purchase and sale agreements, mineral leases, and area of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The trial court entered final judgment in favor of the Company, ruling that the plaintiffs take nothing by their claims and awarding the Company its attorneys’ fees and costs incurred in defending the lawsuit. The court of appeals affirmed in part and reversed in part the trial court’s judgment thereby reinstating some of plaintiffs’ claims. The Texas Supreme Court granted the Company’s petition for review and heard oral argument in October 2022. On April 28, 2023, the Texas Supreme Court reversed the court of appeals’ decision and remanded the case back to the court of appeals for further proceedings. After plaintiffs’ request for rehearing, on July 21, 2023, the Texas Supreme Court reaffirmed its reversal of the court of appeals’ decision and remand of the case back to the court of appeals for further proceedings.
Australian Operations Divestiture Dispute
Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, the Company filed suit against Quadrant for breach of the Quadrant SPA. In its suit, the Company seeks approximately AUD $
80
million. In December 2017, Quadrant filed a defense of equitable set-off to the Company’s claim and a counterclaim seeking approximately AUD $
200
million in the aggregate. The Company believes that Quadrant’s claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.
Canadian Operations Divestiture Dispute
Pursuant to a Sale and Purchase Agreement dated July 6, 2017 (Paramount SPA), the Company and its subsidiaries divested their remaining Canadian operations to Paramount Resources LTD (Paramount). Closing occurred on August 16, 2017. On September 11, 2019,
four
ex-employees of Apache Canada LTD on behalf of themselves and individuals employed by Apache Canada LTD on July 6, 2017, filed an Amended Statement of Claim in a matter styled
Stephen Flesch et. al. v Apache Corporation et. al
., No. 1901-09160 Court of Queen’s Bench of Alberta against the Company and others seeking class certification and a finding that the Paramount SPA amounted to a Change of Control of the Company, entitling them to accelerated vesting under the Company’s equity plans. In the suit, the class seeks approximately $
60
million USD and punitive damages. Without acknowledging or admitting any liability and solely to avoid the expense and uncertainty of future litigation, Apache has agreed to a settlement in the
Flesch
class action matter under which Apache will pay $
7
million USD to resolve all claims against the Company asserted by the class. The settlement is subject to court approval and is expected to be finalized by the end of 2023.
California and Delaware Litigation
On July 17, 2017, in
three
separate actions, San Mateo and Marin Counties, and the City of Imperial Beach, California, all filed suit individually and on behalf of the people of the state of California against over
30
oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. On December 20, 2017, in
two
separate actions, the City of Santa Cruz and Santa Cruz County filed similar lawsuits against many of the same defendants. On January 22, 2018, the City of Richmond filed a similar lawsuit. On November 14, 2018, the Pacific Coast Federation of Fishermen’s Associations, Inc. also filed a similar lawsuit against many of the same defendants.
On September 10, 2020, the State of Delaware filed suit, individually and on behalf of the people of the State of Delaware, against over
25
oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories.
The Company believes that it is not subject to jurisdiction of the California courts and that claims made against it in the California and Delaware litigation are baseless. The Company intends to challenge jurisdiction in California and to vigorously defend the Delaware lawsuit.
19
Castex Lawsuit
In a case styled
Apache Corporation v. Castex Offshore, Inc., et. al.
, Cause No. 2015-48580, in the 113th Judicial District Court of Harris County, Texas, Castex filed claims for alleged damages of approximately $
200
million, relating to overspend on the Belle Isle Gas Facility upgrade, and the drilling of
five
sidetracks on the Potomac #3 well. After a jury trial, a verdict of approximately $
60
million, plus fees, costs, and interest was entered against the Company. The Fourteenth Court of Appeals of Texas reversed the judgment, in part, reducing the judgment to approximately $
13.5
million, plus fees, costs, and interest against the Company.
Kulp Minerals Lawsuit
On or about April 7, 2023, Apache was sued in a purported class action in New Mexico styled
Kulp Minerals LLC v. Apache Corporation
, Case No. D-506-CV-2023-00352 in the Fifth Judicial District. The
Kulp Minerals
case has not been certified and seeks to represent a group of owners allegedly owed statutory interest under New Mexico law as a result of purported late oil and gas payments. The amount of this claim is not yet reasonably determinable. The Company intends to vigorously defend against the claims asserted in this lawsuit.
Shareholder and Derivative Lawsuits
On February 23, 2021, a case captioned
Plymouth County Retirement System v. Apache Corporation, et al.
was filed in the United States District Court for the Southern District of Texas (Houston Division) against the Company and certain current and former officers. The complaint, which is a shareholder lawsuit styled as a class action, alleges that (1) the Company intentionally used unrealistic assumptions regarding the amount and composition of available oil and gas in Alpine High; (2) the Company did not have the proper infrastructure in place to safely and/or economically drill and/or transport those resources even if they existed in the amounts purported; (3) certain statements and omissions artificially inflated the value of the Company’s operations in the Permian Basin; and (4) as a result, the Company’s public statements were materially false and misleading. The Company believes that plaintiffs’ claims lack merit and intends to vigorously defend this lawsuit.
On January 18, 2023, a case captioned
Jerry Hight, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al.
was filed in the 61st District Court of Harris County, Texas. Then, on February 21, 2023, a case captioned
Steve Silverman, Derivatively and on behalf of Nominal Defendant APA Corp. v. John J. Christmann IV, et al.
was filed in federal district court for the Southern District of Texas. Then, on April 20, 2023, a case captioned
William Wessels, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al.
was filed in the 151st District Court of Harris County, Texas. Then, on July 21, 2023, a case captioned
Yang-Li-Yu, Derivatively and on behalf of Nominal Defendant APA Corp. v. John J. Christmann IV, et al.
was filed in federal district court for the Southern District of Texas. These cases purport to be derivative actions brought against senior management and Company directors over many of the same allegations included in the
Plymouth County Retirement System
matter and asserts claims of (1) breach of fiduciary duty; (2) waste of corporate assets; and (3) unjust enrichment. The defendants believe that plaintiffs’ claims lack merit and intend to vigorously defend these lawsuits.
Environmental Matters
As of June 30, 2023, the Company had an undiscounted reserve for environmental remediation of approximately $
1
million.
On September 11, 2020, the Company received a Notice of Violation and Finding of Violation, and accompanying Clean Air Act Information Request, from the U.S. Environmental Protection Agency (EPA) following site inspections in April 2019 at several of the Company’s oil and natural gas production facilities in Lea and Eddy Counties, New Mexico. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and has responded to the information request. The EPA has referred the notice for civil enforcement proceedings; however, at this time the Company is unable to reasonably estimate whether such proceedings will result in monetary sanctions and, if so, whether they would be more or less than $100,000, exclusive of interest and costs.
On December 29, 2020, the Company received a Notice of Violation and Opportunity to Confer, and accompanying Clean Air Act Information Request, from the EPA following helicopter flyovers in September 2019 of several of the Company’s oil and natural gas production facilities in Reeves County, Texas. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and has responded to the information request. The EPA has referred the notice for civil enforcement proceedings; however, at this time the Company is unable to reasonably estimate whether such proceedings will result in monetary sanctions and, if so, whether they would be more or less than $100,000, exclusive of interest and costs.
20
The Company was recently served with two lawsuits filed in Lea County, New Mexico:
William O. Stephens v. Apache Corporation
; No. D-506-CV-2023-00632, in the Fifth Judicial District and
Merchant Livestock Company v. Apache Corporation, Exxon Corporation, et al.
; No. D-506-CV-2023-00664, in the Fifth Judicial District. Each lawsuit alleges property damage and environmental impacts from previous oil and gas operations that require remediation. The Company disputes that it is responsible for the damages claimed and/or relief sought and intends to vigorously defend each lawsuit. At this time, the Company is unable to reasonably estimate whether either lawsuit, individually, will result in damages that are more or less than $100,000, exclusive of interest and costs.
The Company is not aware of any environmental claims existing as of June 30, 2023 that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity. 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.
Potential Decommissioning Obligations on Sold Properties
In 2013, Apache sold its Gulf of Mexico (GOM) Shelf operations and properties and its GOM operating subsidiary, GOM Shelf LLC (GOM Shelf) to Fieldwood Energy LLC (Fieldwood). Under the terms of the purchase agreement, Apache received cash consideration of $
3.75
billion and Fieldwood assumed the obligation to decommission the properties held by GOM Shelf and the properties acquired from Apache and its other subsidiaries (collectively, the Legacy GOM Assets). In respect of such abandonment obligations, Fieldwood posted letters of credit in favor of Apache (Letters of Credit) and established trust accounts (Trust A and Trust B) of which Apache was a beneficiary and which were funded by
two
net profits interests (NPIs) depending on future oil prices. On February 14, 2018, Fieldwood filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In connection with the 2018 bankruptcy, Fieldwood confirmed a plan under which Apache agreed, inter alia, to (i) accept bonds in exchange for certain of the Letters of Credit and (ii) amend the Trust A trust agreement and one of the NPIs to consolidate the trusts into a single Trust (Trust A) funded by both remaining NPIs. Currently, Apache holds
two
bonds (Bonds) and
five
Letters of Credit to secure Fieldwood’s asset retirement obligations on the Legacy GOM Assets as and when Apache is required to perform or pay for decommissioning any Legacy GOM Asset over the remaining life of the Legacy GOM Assets.
On August 3, 2020, Fieldwood again filed for protection under Chapter 11 of the U.S. Bankruptcy Code. On June 25, 2021, the United States Bankruptcy Court for the Southern District of Texas (Houston Division) entered an order confirming Fieldwood’s bankruptcy plan. On August 27, 2021, Fieldwood’s bankruptcy plan became effective. Pursuant to the plan, the Legacy GOM Assets were separated into a standalone company, which was subsequently merged into GOM Shelf. Under GOM Shelf’s limited liability company agreement, the proceeds of production of the Legacy GOM Assets will be used to fund decommissioning of Legacy GOM Assets.
By letter dated April 5, 2022, replacing two prior letters dated September 8, 2021 and February 22, 2022, and by subsequent letter dated March 1, 2023, GOM Shelf notified the Bureau of Safety and Environmental Enforcement (BSEE) that it was unable to fund the decommissioning obligations that it is currently obligated to perform on certain of the Legacy GOM Assets. As a result, Apache and other current and former owners in these assets have received orders from BSEE to decommission certain of the Legacy GOM Assets included in GOM Shelf’s notifications to BSEE. Apache expects to receive similar orders on the other Legacy GOM Assets included in GOM Shelf’s notification letters. Apache has also received orders to decommission other Legacy GOM Assets that were not included in GOM Shelf’s notification letters. Further, Apache anticipates that GOM Shelf may send additional such notices to BSEE in the future and that it may receive additional orders from BSEE requiring it to decommission other Legacy GOM Assets.
As of June 30, 2023, Apache has incurred $
464
million in decommissioning costs related to several Legacy GOM Assets. GOM Shelf did not, and has confirmed that it will not, reimburse Apache for these decommissioning costs. As a result, Apache has sought and will continue to seek reimbursement from its security for these costs, of which $
276
million had been reimbursed from Trust A as of June 30, 2023. If GOM Shelf does not reimburse Apache for further decommissioning costs incurred with respect to Legacy GOM Assets, then Apache will continue to seek reimbursement from Trust A, to the extent of available funds, and thereafter, will seek reimbursement from the Bonds and the Letters of Credit until all such funds and securities are fully utilized. In addition, after such sources have been exhausted, Apache has agreed to provide a standby loan to GOM Shelf of up to $
400
million to perform decommissioning (Standby Loan Agreement), with such standby loan secured by a first and prior lien on the Legacy GOM Assets.
21
If the combination of GOM Shelf’s net cash flow from its producing properties, the Trust A funds, the Bonds, and the remaining Letters of Credit are insufficient to fully fund decommissioning of any Legacy GOM Assets that Apache may be required to perform or fund, or if GOM Shelf’s net cash flow from its remaining producing properties after the Trust A funds, Bonds, and Letters of Credit are exhausted is insufficient to repay any loans made by Apache under the Standby Loan Agreement, then Apache may be forced to effectively use its available cash to fund the deficit.
As of June 30, 2023, Apache estimates that its potential liability to fund the remaining decommissioning of Legacy GOM Assets it may be ordered to perform or fund ranges from $
922
million to $
1.1
billion on an undiscounted basis. Management does not believe any specific estimate within this range is a better estimate than any other. Accordingly, the Company has recorded a contingent liability of $
922
million as of June 30, 2023, representing the estimated costs of decommissioning it may be required to perform or fund on Legacy GOM Assets. Of the total liability recorded, $
472
million is reflected under the caption “Decommissioning contingency for sold Gulf of Mexico properties,” and $
450
million is reflected under “Other current liabilities” in the Company’s consolidated balance sheet. Changes in significant assumptions impacting Apache’s estimated liability, including expected decommissioning rig spread rates, lift boat rates, and planned abandonment logistics could result in a liability in excess of the amount accrued.
As of June 30, 2023, the Company has also recorded a $
507
million asset, which represents the amount the Company expects to be reimbursed from the Trust A funds, the Bonds, and the Letters of Credit for decommissioning it may be required to perform on Legacy GOM Assets. Of the total asset recorded, $
57
million is reflected under the caption “Decommissioning security for sold Gulf of Mexico properties,” and $
450
million is reflected under “Other current assets.”
On June 21, 2023, the two sureties that issued bonds directly to Apache and two sureties that issued bonds to the issuing bank on the Letters of Credit filed suit against Apache in a case styled
Zurich American Insurance Company, HCC International Insurance Company PLC, Philadelphia Indemnity Insurance Company and Everest Reinsurance Company (Insurers) v. Apache Corporation
, Cause No. 2023-38238 in the 281
st
Judicial District Court, Harris County Texas. Insurers are seeking to prevent Apache from drawing on the Bonds and Letters of Credit and further allege that they are discharged from their reimbursement obligations related to decommissioning costs and are entitled to other relief. On July 20, 2023, the 281
st
Judicial District Court denied the Insurers’ request for a temporary injunction. Apache believes that Insurers’ claims lack merit, intends to vigorously defend these claims, and will vigorously pursue counterclaims.
22
13.
BUSINESS SEGMENT INFORMATION
As of June 30, 2023, the Company is engaged in exploration and production (Upstream) activities across
three
operating segments: Egypt, North Sea, and the U.S. The Company’s Upstream business explores for, develops, and produces crude oil, natural gas, and natural gas liquids. Prior to the deconsolidation of Altus on February 22, 2022, the Company’s Midstream business was operated by ALTM, which owned, developed, and operated a midstream energy asset network in the Permian Basin of West Texas.
Financial information for each segment is presented below:
|
Egypt
(1)
|
North Sea | U.S. | Altus Midstream |
Intersegment
Eliminations
& Other
|
Total
(4)
|
|||||||||||||||||||||||||||||||||
| Upstream | ||||||||||||||||||||||||||||||||||||||
|
For the Quarter Ended June 30, 2023
|
(In millions) | |||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Oil revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Natural gas revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Natural gas liquids revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Oil, natural gas, and natural gas liquids production revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas sales |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||||||||
| Lease operating expenses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Gathering, processing, and transmission |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas costs |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Taxes other than income |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Exploration |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Asset retirement obligation accretion |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Impairments |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Operating Income
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|||||||||||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||||||||||||||||
| Gain on divestitures, net |
|
|||||||||||||||||||||||||||||||||||||
| Other, net |
|
|||||||||||||||||||||||||||||||||||||
| General and administrative |
(
|
|||||||||||||||||||||||||||||||||||||
| Transaction, reorganization, and separation |
(
|
|||||||||||||||||||||||||||||||||||||
| Financing costs, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Income Before Income Taxes | $ |
|
||||||||||||||||||||||||||||||||||||
23
|
|
Egypt
(1)
|
North Sea | U.S. | Altus Midstream |
Intersegment
Eliminations
& Other
|
Total
(4)
|
||||||||||||||||||||||||||||||||
| Upstream | ||||||||||||||||||||||||||||||||||||||
|
For the Six Months Ended June 30, 2023
|
(In millions) | |||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Oil revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Natural gas revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Natural gas liquids revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Oil, natural gas, and natural gas liquids production revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas sales |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||||||||
| Lease operating expenses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Gathering, processing, and transmission |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas costs |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Taxes other than income |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Exploration |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Asset retirement obligation accretion |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Impairments |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Operating Income
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|||||||||||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||||||||||||||||
| Gain on divestitures, net |
|
|||||||||||||||||||||||||||||||||||||
| Other, net |
|
|||||||||||||||||||||||||||||||||||||
| General and administrative |
(
|
|||||||||||||||||||||||||||||||||||||
| Transaction, reorganization, and separation |
(
|
|||||||||||||||||||||||||||||||||||||
| Financing costs, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Income Before Income Taxes | $ |
|
||||||||||||||||||||||||||||||||||||
|
Total Assets
(3)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
24
|
Egypt
(1)
|
North Sea | U.S. | Altus Midstream |
Intersegment
Eliminations
& Other
|
Total
(4)
|
|||||||||||||||||||||||||||||||||
| Upstream | ||||||||||||||||||||||||||||||||||||||
|
For the Quarter Ended June 30, 2022
|
(In millions) | |||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Oil revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Natural gas revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Natural gas liquids revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Oil, natural gas, and natural gas liquids production revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas sales |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||||||||
| Lease operating expenses |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Gathering, processing, and transmission |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas costs |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Taxes other than income |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Exploration |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Asset retirement obligation accretion |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
Operating Income
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|||||||||||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||||||||||||||||
| Derivative instrument losses, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Loss on divestitures, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Other, net |
|
|||||||||||||||||||||||||||||||||||||
| General and administrative |
(
|
|||||||||||||||||||||||||||||||||||||
| Transaction, reorganization, and separation |
(
|
|||||||||||||||||||||||||||||||||||||
| Financing costs, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Income Before Income Taxes | $ |
|
||||||||||||||||||||||||||||||||||||
25
|
|
Egypt
(1)
|
North Sea | U.S. | Altus Midstream |
Intersegment
Eliminations
& Other
|
Total
(4)
|
||||||||||||||||||||||||||||||||
| Upstream | ||||||||||||||||||||||||||||||||||||||
|
For the Six Months Ended June 30, 2022
|
(In millions) | |||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Oil revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Natural gas revenues |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Natural gas liquids revenues |
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Oil, natural gas, and natural gas liquids production revenues |
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas sales |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Midstream service affiliate revenues | — | — | — |
|
(
|
— | ||||||||||||||||||||||||||||||||
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||||||||
| Lease operating expenses |
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Gathering, processing, and transmission |
|
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Purchased oil and gas costs |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Taxes other than income |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Exploration |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
| Asset retirement obligation accretion |
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||
|
Operating Income (Loss)
(2)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
|
|||||||||||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||||||||||||||||
| Derivative instrument losses, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Gain on divestitures, net |
|
|||||||||||||||||||||||||||||||||||||
| Other, net |
|
|||||||||||||||||||||||||||||||||||||
| General and administrative |
(
|
|||||||||||||||||||||||||||||||||||||
| Transaction, reorganization, and separation |
(
|
|||||||||||||||||||||||||||||||||||||
| Financing costs, net |
(
|
|||||||||||||||||||||||||||||||||||||
| Income Before Income Taxes | $ |
|
||||||||||||||||||||||||||||||||||||
|
Total Assets
(3)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
(1) Includes revenue from non-customers for the quarters and six months ended June 30, 2023 and 2022 of:
|
For the Quarter Ended June 30,
|
For the Six Months Ended June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Oil | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Natural gas |
|
|
|
|
||||||||||||||||||||||
| Natural gas liquids |
|
|
|
|
||||||||||||||||||||||
(2)
Operating income of U.S. and North Sea includes leasehold impairments of $
3
million and $
3
million, respectively, for the second quarter of 2023.
Operating income of U.S. and Egypt includes leasehold impairments of $
1
million and $
1
million, respectively, for the second quarter of 2022. Operating income of U.S. and North Sea includes leasehold impairments of $
5
million and $
6
million, respectively, for the first six months of 2023. Operating income of U.S. and Egypt includes leasehold impairments of $
4
million and $
2
million, respectively, for the first six months of 2022.
Operating income of U.S. and Egypt includes leasehold impairments of $
(3)
Intercompany balances are excluded from total assets.
(4)
Includes noncontrolling interests of Sinopec, Altus prior to deconsolidation, and APA.
26
ITEM 2
.
MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The following discussion relates to Apache Corporation (Apache or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Part I,
Item 1—Financial Statements
of this Quarterly Report on Form 10-Q, as well as related information set forth in the Company’s Consolidated Financial Statements, accompanying Notes to Consolidated Financial Statements, and Management’s Narrative Analysis of Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Overview
Apache, a direct, wholly owned subsidiary of APA Corporation (APA), is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids (NGLs). The Company’s upstream business currently has exploration and production operations in three geographic areas: the U.S., Egypt, and offshore the U.K. in the North Sea (North Sea). Prior to the BCP Business Combination (as defined in the Notes to the Company’s Consolidated Financial Statements set forth in Part I,
Item 1—Financial Statements
of this Quarterly Report on Form 10-Q), the Company’s midstream business was operated by Altus Midstream Company (ALTM) through its subsidiary Altus Midstream LP (collectively, Altus).
The Company’s mission is to grow in an innovative, safe, environmentally responsible, and profitable manner for the long-term benefit of its stakeholders. The Company is focused on rigorous portfolio management, disciplined financial structure, and optimization of returns.
The global economy and the energy industry continue to be impacted by the effects of the conflict in Ukraine and the coronavirus disease 2019 (COVID-19) pandemic. Uncertainties in the global supply chain and financial markets, including the impact of inflation and rising interest rates, and actions taken by foreign oil and gas producing nations, including OPEC+, continue to impact oil supply and demand and contribute to commodity price volatility. Despite these uncertainties, the Company remains committed to its longer-term objectives: (1) to maintain a balanced asset portfolio; (2) to invest for long-term returns over production growth; and (3) to budget conservatively to generate cash flow in excess of its upstream exploration, appraisal, and development capital program that can be directed to debt reduction, share repurchases, and other return of capital to its shareholders. The Company continues to aggressively manage its cost structure regardless of the oil price environment and closely monitors hydrocarbon pricing fundamentals to reallocate capital as part of its ongoing planning process.
In the second quarter of 2023, the Company reported net income of $290 million compared to net income of $903 million in the second quarter of 2022. Net income for the second quarter of 2023 was impacted by lower revenues attributable to significantly lower realized commodity prices when compared to the prior-year period.
The Company generated $1.3 billion of cash from operating activities during the first six months of 2023, 46 percent lower than the first six months of 2022. The Company’s lower operating cash flows for the first six months of 2023 were driven by lower commodity prices and associated revenues and the timing of working capital items.
Operational Highlights
Key operational highlights for the quarter include:
United States
•
Daily boe production from the Company’s U.S. assets accounted for 51 percent of its total production during the second quarter of 2023. The Company averaged four drilling rigs in the U.S. during the quarter, including two rigs in the Southern Midland Basin and two rigs in the Delaware Basin, and drilled and brought online 10 operated wells in the quarter. Two-thirds of those wells came online in June, so the full impact will be realized in the third quarter. The Company’s core Midland Basin development program continues to represent a key growth area for the U.S. assets.
International
•
In Egypt, the Company averaged 17 drilling rigs and drilled 19 new productive wells during the second quarter of 2023. Second quarter 2023 gross equivalent production in the Company’s Egypt assets decreased 3 percent from the second quarter of 2022, and net production remained relatively flat. The Company has increased drilling and workover activity with a heavier focus on oil prospects and anticipates increases in gross oil production volumes throughout the remainder of the year as it maintains a steady operational cadence.
27
•
The Company suspended all new drilling activity in the North Sea during the second quarter of 2023. The Company will manage its base production and maximize economic recovery of its oil and gas wells through well intervention activities.
28
Results of Operations
Oil, Natural Gas, and Natural Gas Liquids Production Revenues
Revenue
The Company’s production revenues and respective contribution to total revenues by country were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ Value |
%
Contribution |
$ Value |
%
Contribution |
$ Value |
%
Contribution |
$ Value |
%
Contribution |
|||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 473 | 36 | % | $ | 654 | 35 | % | $ | 912 | 34 | % | $ | 1,253 | 35 | % | ||||||||||||||||||||||||||||||||||
|
Egypt
(1)
|
618 | 47 | % | 902 | 48 | % | 1,247 | 47 | % | 1,692 | 47 | % | ||||||||||||||||||||||||||||||||||||||
| North Sea | 235 | 17 | % | 307 | 17 | % | 517 | 19 | % | 635 | 18 | % | ||||||||||||||||||||||||||||||||||||||
|
Total
(1)
|
$ | 1,326 | 100 | % | $ | 1,863 | 100 | % | $ | 2,676 | 100 | % | $ | 3,580 | 100 | % | ||||||||||||||||||||||||||||||||||
| Natural Gas Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 46 | 26 | % | $ | 281 | 65 | % | $ | 131 | 32 | % | $ | 464 | 57 | % | ||||||||||||||||||||||||||||||||||
|
Egypt
(1)
|
90 | 52 | % | 88 | 20 | % | 183 | 44 | % | 186 | 23 | % | ||||||||||||||||||||||||||||||||||||||
| North Sea | 39 | 22 | % | 64 | 15 | % | 99 | 24 | % | 163 | 20 | % | ||||||||||||||||||||||||||||||||||||||
|
Total
(1)
|
$ | 175 | 100 | % | $ | 433 | 100 | % | $ | 413 | 100 | % | $ | 813 | 100 | % | ||||||||||||||||||||||||||||||||||
| NGL Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 95 | 96 | % | $ | 214 | 93 | % | $ | 203 | 94 | % | $ | 418 | 92 | % | ||||||||||||||||||||||||||||||||||
|
Egypt
(1)
|
— | 0 | % | 3 | 1 | % | — | 0 | % | 6 | 2 | % | ||||||||||||||||||||||||||||||||||||||
| North Sea | 4 | 4 | % | 12 | 6 | % | 14 | 6 | % | 28 | 6 | % | ||||||||||||||||||||||||||||||||||||||
|
Total
(1)
|
$ | 99 | 100 | % | $ | 229 | 100 | % | $ | 217 | 100 | % | $ | 452 | 100 | % | ||||||||||||||||||||||||||||||||||
| Oil and Gas Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 614 | 38 | % | $ | 1,149 | 46 | % | $ | 1,246 | 38 | % | $ | 2,135 | 44 | % | ||||||||||||||||||||||||||||||||||
|
Egypt
(1)
|
708 | 44 | % | 993 | 39 | % | 1,430 | 43 | % | 1,884 | 39 | % | ||||||||||||||||||||||||||||||||||||||
| North Sea | 278 | 18 | % | 383 | 15 | % | 630 | 19 | % | 826 | 17 | % | ||||||||||||||||||||||||||||||||||||||
|
Total
(1)
|
$ | 1,600 | 100 | % | $ | 2,525 | 100 | % | $ | 3,306 | 100 | % | $ | 4,845 | 100 | % | ||||||||||||||||||||||||||||||||||
(1) Includes revenues attributable to a noncontrolling interest in Egypt.
29
Production
The Company’s production volumes by country were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||||||||||||||
| 2023 |
Increase
(Decrease) |
2022 | 2023 |
Increase
(Decrease) |
2022 | |||||||||||||||||||||||||||||||||
| Oil Volume (b/d) | ||||||||||||||||||||||||||||||||||||||
| United States | 70,087 | 8% | 64,759 | 67,515 | 0% | 67,184 | ||||||||||||||||||||||||||||||||
|
Egypt
(1)(2)
|
87,790 | 3% | 85,502 | 87,792 | 3% | 85,261 | ||||||||||||||||||||||||||||||||
| North Sea | 35,048 | 8% | 32,493 | 36,268 | 7% | 33,860 | ||||||||||||||||||||||||||||||||
| Total | 192,925 | 6% | 182,754 | 191,575 | 3% | 186,305 | ||||||||||||||||||||||||||||||||
| Natural Gas Volume (Mcf/d) | ||||||||||||||||||||||||||||||||||||||
| United States | 422,325 | (8)% | 457,459 | 417,213 | (11)% | 467,493 | ||||||||||||||||||||||||||||||||
|
Egypt
(1)(2)
|
337,413 | (3)% | 346,424 | 346,829 | (5)% | 366,390 | ||||||||||||||||||||||||||||||||
| North Sea | 37,194 | (13)% | 42,802 | 38,769 | (5)% | 40,645 | ||||||||||||||||||||||||||||||||
| Total | 796,932 | (6)% | 846,685 | 802,811 | (8)% | 874,528 | ||||||||||||||||||||||||||||||||
| NGL Volume (b/d) | ||||||||||||||||||||||||||||||||||||||
| United States | 56,973 | (4)% | 59,267 | 54,122 | (11)% | 60,482 | ||||||||||||||||||||||||||||||||
|
Egypt
(1)(2)
|
— | NM | 297 | — | NM | 394 | ||||||||||||||||||||||||||||||||
| North Sea | 872 | (27)% | 1,195 | 1,062 | (21)% | 1,345 | ||||||||||||||||||||||||||||||||
| Total | 57,845 | (5)% | 60,759 | 55,184 | (11)% | 62,221 | ||||||||||||||||||||||||||||||||
|
BOE per day
(3)
|
||||||||||||||||||||||||||||||||||||||
| United States | 197,448 | (1)% | 200,269 | 191,172 | (7)% | 205,582 | ||||||||||||||||||||||||||||||||
|
Egypt
(1)(2)
|
144,026 | 0% | 143,536 | 145,597 | (1)% | 146,720 | ||||||||||||||||||||||||||||||||
|
North Sea
(4)
|
42,118 | 3% | 40,822 | 43,792 | 4% | 41,979 | ||||||||||||||||||||||||||||||||
| Total | 383,592 | NM | 384,627 | 380,561 | (3)% | 394,281 | ||||||||||||||||||||||||||||||||
(1) Gross oil, natural gas, and NGL production in Egypt were as follows:
|
For the Quarter Ended June 30,
|
For the Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||
| Oil (b/d) | 140,652 | 141,432 | 140,708 | 137,934 | ||||||||||||||||||||||||||||||||||
| Natural Gas (Mcf/d) | 517,291 | 555,694 | 531,093 | 576,637 | ||||||||||||||||||||||||||||||||||
| NGL (b/d) | — | 464 | — | 599 | ||||||||||||||||||||||||||||||||||
(2) Includes net production volumes per day attributable to noncontrolling interests in Egypt of:
|
For the Quarter Ended June 30,
|
For the Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||
| Oil (b/d) | 58,561 | 45,616 | 58,560 | 45,475 | ||||||||||||||||||||||||||||||||||
| Natural Gas (Mcf/d) | 225,080 | 184,819 | 231,348 | 195,390 | ||||||||||||||||||||||||||||||||||
| NGL (b/d) | — | 158 | — | 210 | ||||||||||||||||||||||||||||||||||
(3) The table shows production on a boe basis in which natural gas is converted to an equivalent barrel of oil based on a 6:1 energy equivalent ratio. This ratio is not reflective of the price ratio between the two products.
(4) Average sales volumes from the North Sea for the second quarters of 2023 and 2022 were 40,099 boe/d and 38,029 boe/d, respectively, and 43,347 boe/d and 40,833 boe/d for the first six months of 2023 and 2022, respectively. Sales volumes may vary from production volumes as a result of the timing of liftings.
NM — Not Meaningful
30
Pricing
The Company’s average selling prices by country were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||||||||||||||
| 2023 |
Increase
(Decrease) |
2022 | 2023 |
Increase
(Decrease) |
2022 | |||||||||||||||||||||||||||||||||
| Average Oil Price – Per barrel | ||||||||||||||||||||||||||||||||||||||
| United States | $ | 74.04 | (33)% | $ | 110.98 | $ | 74.57 | (28)% | $ | 103.05 | ||||||||||||||||||||||||||||
| Egypt | 77.39 | (33)% | 115.97 | 78.48 | (28)% | 109.65 | ||||||||||||||||||||||||||||||||
| North Sea | 79.27 | (30)% | 113.77 | 80.51 | (25)% | 107.47 | ||||||||||||||||||||||||||||||||
| Total | 76.48 | (33)% | 113.79 | 77.47 | (28)% | 106.87 | ||||||||||||||||||||||||||||||||
| Average Natural Gas Price – Per Mcf | ||||||||||||||||||||||||||||||||||||||
| United States | $ | 1.21 | (82)% | $ | 6.75 | $ | 1.74 | (68)% | $ | 5.48 | ||||||||||||||||||||||||||||
| Egypt | 2.95 | 6% | 2.78 | 2.92 | 4% | 2.80 | ||||||||||||||||||||||||||||||||
| North Sea | 11.29 | (38)% | 18.15 | 14.47 | (41)% | 24.72 | ||||||||||||||||||||||||||||||||
| Total | 2.42 | (57)% | 5.65 | 2.85 | (45)% | 5.16 | ||||||||||||||||||||||||||||||||
| Average NGL Price – Per barrel | ||||||||||||||||||||||||||||||||||||||
| United States | $ | 18.13 | (54)% | $ | 39.79 | $ | 20.71 | (46)% | $ | 38.20 | ||||||||||||||||||||||||||||
| Egypt | — | NM | 75.14 | — | NM | 76.80 | ||||||||||||||||||||||||||||||||
| North Sea | 39.24 | (45)% | 71.71 | 49.52 | (32)% | 73.29 | ||||||||||||||||||||||||||||||||
| Total | 18.61 | (55)% | 40.97 | 21.52 | (46)% | 39.63 | ||||||||||||||||||||||||||||||||
NM — Not Meaningful
Second-Quarter 2023 compared to Second-Quarter 2022
Crude Oil
Crude oil revenues for the second quarter of 2023 totaled $1.3 billion, a $537 million decrease from the comparative 2022 quarter. A 33 percent decrease in average realized prices decreased second-quarter 2023 oil revenues by $611 million compared to the prior-year quarter, while 6 percent higher average daily production increased revenues by $74 million. Crude oil revenues accounted for 83 percent of total oil and gas production revenues and 50 percent of worldwide production in the second quarter of 2023. Crude oil prices realized in the second quarter of 2023 averaged $76.48 per barrel, compared with $113.79 per barrel in the comparative prior-year quarter.
The Company’s worldwide oil production increased 10.2 Mb/d to 192.9 Mb/d during the second quarter of 2023 from the comparative prior-year period, primarily a result of increased drilling activity and recompletions, partially offset by natural production decline across all assets.
Natural Gas
Gas revenues for the second quarter of 2023 totaled $175 million, a $258 million decrease from the comparative 2022 quarter. A 57 percent decrease in average realized prices decreased second-quarter 2023 natural gas revenues by $248 million compared to the prior-year quarter, while 6 percent lower average daily production decreased revenues by $10 million. Natural gas revenues accounted for 11 percent of total oil and gas production revenues and 35 percent of worldwide production during the second quarter of 2023. The Company’s worldwide natural gas production decreased 49.8 MMcf/d to 796.9 MMcf/d during the second quarter of 2023 from the comparative prior-year period, primarily a result of natural production decline across all assets and sale of non-core assets in the U.S., partially offset by increased drilling activity and recompletions.
NGL
NGL revenues for the second quarter of 2023 totaled $99 million, a $130 million decrease from the comparative 2022 quarter. A 55 percent decrease in average realized prices decreased second-quarter 2023 NGL revenues by $125 million compared to the prior-year quarter, while 5 percent lower average daily production decreased revenues by $5 million. NGL revenues accounted for 6 percent of total oil and gas production revenues and 15 percent of worldwide production during the second quarter of 2023. The Company’s worldwide NGL production decreased 2.9 Mb/d to 57.8 Mb/d during the second quarter of 2023 from the comparative prior-year period, primarily a result of natural production decline, partially offset by increased drilling activity and recompletions.
31
Year-to-Date 2023 compared to Year-to-Date 2022
Crude Oil
Crude oil revenues for the first six months of 2023 totaled $2.7 billion, a $904 million decrease from the comparative 2022 period. A 28 percent decrease in average realized prices decreased oil revenues for the 2023 period by $984 million compared to the prior-year period, while 3 percent higher average daily production increased revenues by $80 million. Crude oil revenues accounted for 81 percent of total oil and gas production revenues and 50 percent of worldwide production for the first six months of 2023. Crude oil prices realized during the first six months of 2023 averaged $77.37 per barrel, compared to $106.87 per barrel in the comparative prior-year period.
The Company’s worldwide oil production increased 5.3 Mb/d to 191.6 Mb/d in the first six months of 2023 compared to the prior-year period, primarily a result of increased drilling activity and recompletions, partially offset by natural production decline across all assets.
Natural Gas
Gas revenues for the first six months of 2023 totaled $413 million, a $400 million decrease from the comparative 2022 period. A 45 percent decrease in average realized prices decreased natural gas revenues for the 2023 period by $364 million compared to the prior-year period, while 8 percent lower average daily production decreased revenues by $36 million compared to the prior-year period. Natural gas revenues accounted for 12 percent of total oil and gas production revenues and 35 percent of worldwide production for the first six months of 2023. The Company’s worldwide natural gas production decreased 72 MMcf/d to 802.8 MMcf/d in the first six months of 2023 compared to the prior-year period, primarily a result of natural production decline across all assets and sale of non-core assets in the U.S., partially offset by increased drilling activity and recompletions.
NGL
NGL revenues for the first six months of 2023 totaled $217 million, a $235 million decrease from the comparative 2022 period. A 46 percent decrease in average realized prices decreased NGL revenues for the 2023 period by $206 million compared to the prior-year period, while 11 percent lower average daily production decreased revenues by $29 million compared to the prior-year period. NGL revenues accounted for 7 percent of total oil and gas production revenues and 15 percent of worldwide production for the first six months of 2023. The Company’s worldwide NGL production decreased 7.0 Mb/d to 55.2 Mb/d in the first six months of 2023 compared to the prior-year period, primarily a result of natural production decline, partially offset by increased drilling activity and recompletions.
Purchased Oil and Gas Sales
Purchased oil and gas sales represent volumes primarily attributable to transport, fuel, and physical in-basin gas purchases that were sold by the Company to fulfill natural gas takeaway obligations. Sales related to these purchased volumes totaled $144 million and $522 million during the second quarters of 2023 and 2022, respectively, and $383 million and $871 million during the first six months of 2023 and 2022, respectively. Purchased oil and gas sales were offset by associated purchase costs of $131 million and $528 million during the second quarters of 2023 and 2022, respectively, and $347 million and $879 million during the first six months of 2023 and 2022, respectively. Gross purchased oil and gas sales values were lower in the second quarter and the first six months of 2023, primarily due to lower average natural gas prices during the 2023 periods.
32
Operating Expenses
The Company’s operating expenses were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Lease operating expenses | $ | 352 | $ | 359 | $ | 666 | $ | 703 | ||||||||||||||||||
| Gathering, processing, and transmission | 75 | 94 | 148 | 175 | ||||||||||||||||||||||
| Purchased oil and gas costs | 131 | 528 | 347 | 879 | ||||||||||||||||||||||
| Taxes other than income | 47 | 78 | 97 | 148 | ||||||||||||||||||||||
| Exploration | 37 | 15 | 81 | 40 | ||||||||||||||||||||||
| General and administrative | 66 | 83 | 124 | 234 | ||||||||||||||||||||||
| Transaction, reorganization, and separation | 2 | 3 | 6 | 17 | ||||||||||||||||||||||
| Depreciation, depletion, and amortization: | ||||||||||||||||||||||||||
| Oil and gas property and equipment | 326 | 269 | 627 | 547 | ||||||||||||||||||||||
| Gathering, processing, and transmission assets | 1 | 1 | 3 | 6 | ||||||||||||||||||||||
| Other assets | 12 | 8 | 17 | 16 | ||||||||||||||||||||||
| Asset retirement obligation accretion | 29 | 29 | 57 | 58 | ||||||||||||||||||||||
| Impairments | 46 | — | 46 | — | ||||||||||||||||||||||
| Financing costs, net | 42 | 62 | 91 | 202 | ||||||||||||||||||||||
| Total Operating Expenses | $ | 1,166 | $ | 1,529 | $ | 2,310 | $ | 3,025 | ||||||||||||||||||
Lease Operating Expenses (LOE)
LOE remained essentially flat in the second quarter of 2023 when compared to the second quarter of 2022 and decreased $37 million in the first six months of 2023 when compared to the first six months of 2022. On a per-unit basis, LOE decreased 5 percent and 6 percent in the second quarter and the first six months of 2023, respectively, from the comparative prior-year period. The decrease was primarily driven by the impact from changes in foreign currency exchange rates against the US dollar, decreased workover activity, primarily in the North Sea, and mark-to-market adjustments for cash-based stock compensation expense resulting from changes in APA’s stock price. These decreases were offset by overall higher labor costs and chemical and other operating costs trending with global inflation.
Gathering, Processing, and Transmission (GPT)
The Company’s GPT expenses were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Third-party processing and transmission costs | $ | 49 | $ | 68 | $ | 98 | $ | 134 | ||||||||||||||||||
| Midstream service costs – ALTM | — | — | — | 18 | ||||||||||||||||||||||
| Midstream service costs – Kinetik | 26 | 26 | 50 | 36 | ||||||||||||||||||||||
| Upstream processing and transmission costs | 75 | 94 | 148 | 188 | ||||||||||||||||||||||
| Midstream operating expenses | — | — | — | 5 | ||||||||||||||||||||||
| Intersegment eliminations | — | — | — | (18) | ||||||||||||||||||||||
| Total Gathering, processing, and transmission | $ | 75 | $ | 94 | $ | 148 | $ | 175 | ||||||||||||||||||
GPT costs decreased $19 million and $27 million in the second quarter and the first six months of 2023, respectively, from the comparative prior-year period, primarily the result of lower upstream processing and transmission costs, partially offset by impacts of the BCP Business Combination. Upstream processing and transmission costs decreased $19 million and $40 million in the second quarter and the first six months of 2023, respectively, from the comparative prior-year period, primarily driven by a decrease in natural gas production volumes when compared to the prior-year period. Costs for services provided by ALTM in the first six months of 2022, prior to the BCP Business Combination, totaling $18 million were eliminated in the Company’s consolidated financial statements and reflected as “Intersegment eliminations” in the table above. Subsequent to the BCP Business Combination and the Company’s deconsolidation of Altus on February 22, 2022, these midstream services continue to be provided by Kinetik Holdings Inc. (Kinetik) but are no longer eliminated.
33
Taxes Other Than Income
Taxes other than income decreased $31 million and $51 million from the second quarter and the first six months of 2022, respectively, primarily from lower severance taxes driven by lower commodity prices as compared to the prior-year periods.
Exploration Expenses
The Company’s exploration expenses were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Unproved leasehold impairments | $ | 6 | $ | 2 | $ | 11 | $ | 6 | ||||||||||||||||||
| Dry hole expense | 22 | 4 | 50 | 9 | ||||||||||||||||||||||
| Geological and geophysical expense | — | 1 | 1 | 2 | ||||||||||||||||||||||
| Exploration overhead and other | 9 | 8 | 19 | 23 | ||||||||||||||||||||||
| Total Exploration | $ | 37 | $ | 15 | $ | 81 | $ | 40 | ||||||||||||||||||
Exploration expenses increased $22 million and $41 million from the second quarter and the first six months of 2022, respectively, primarily the result of higher dry hole expense from increased Egypt exploration activity during 2023.
General and Administrative (G&A) Expenses
G&A expenses decreased $17 million and $110 million compared to the second quarter and the first six months of 2022, respectively. The decrease in expenses for the second quarter of 2023 and the first six months of 2023 compared to the prior-year period was primarily driven by lower cash-based stock compensation expense resulting from changes in APA’s stock price.
Transaction, Reorganization, and Separation (TRS) Costs
TRS costs remained essentially flat compared to the second quarter of 2022 and decreased $11 million compared to the first six months of 2022. The decrease in costs during the first six months of 2023 compared to the prior-year period was primarily a result of transaction costs from the BCP Business Combination in the first quarter of 2022.
Depreciation, Depletion, and Amortization (DD&A)
DD&A expenses on the Company’s oil and gas properties increased $57 million and $80 million from the second quarter and the first six months of 2022, respectively. The Company’s DD&A rate on its oil and gas properties increased $1.29 per boe and $1.06 per boe from the second quarter and the first six months of 2022, respectively, driven by general cost inflation. The increase on an absolute basis was also impacted by an increase in capital investment activity in Egypt and acquisitions in the U.S. over the past year.
Impairments
During the three and six months ended June 30, 2023, the Company recorded $46 million of impairments in connection with valuations of drilling and operations equipment inventory upon the Company’s decision to suspend drilling operations in the North Sea.
34
Financing Costs, Net
The Company’s Financing costs were as follows:
|
For the Quarter Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Interest expense | $ | 74 | $ | 75 | $ | 149 | $ | 165 | ||||||||||||||||||
| Amortization of debt issuance costs | — | 4 | 1 | 6 | ||||||||||||||||||||||
| Capitalized interest | — | (1) | — | (1) | ||||||||||||||||||||||
| (Gain) loss on extinguishment of debt | — | — | (9) | 67 | ||||||||||||||||||||||
| Interest income | (3) | (1) | (5) | (5) | ||||||||||||||||||||||
| Interest income from APA Corporation, net | (29) | (15) | (45) | (30) | ||||||||||||||||||||||
| Total Financing costs, net | $ | 42 | $ | 62 | $ | 91 | $ | 202 | ||||||||||||||||||
Net financing costs decreased $20 million and $111 million from the second quarter and the first six months of 2022, respectively. The lower overall interest expense was a result of the reduction of fixed-rate debt during 2023 coupled with losses incurred on the extinguishment of debt during the first six months of 2022 and gains on extinguishment of debt in the first six months of 2023.
Provision for Income Taxes
The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments on the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.
During the second quarter of 2023, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2023 year-to-date effective income tax rate was primarily impacted by a deferred tax expense related to the remeasurement of taxes in the U.K. as a result of the enactment of Finance Act 2023 on January 10, 2023, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets. During the second quarter of 2022, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2022 year-to-date effective income tax rate was primarily impacted by the gain associated with deconsolidation of Altus, the gain on sale of certain non-core mineral rights in the Delaware Basin, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets.
On January 10, 2023, Finance Act 2023 was enacted, receiving Royal Assent, and included amendments to the Energy (Oil and Gas) Profits Levy Act of 2022, increasing the levy from a 25 percent rate to a 35 percent rate, effective for the period of January 1, 2023 through March 31, 2028. Under U.S. GAAP, the financial statement impact of new legislation is recorded in the period of enactment. Therefore, in the first quarter of 2023, the Company recorded a deferred tax expense of $174 million related to the remeasurement of the December 31, 2022 U.K. deferred tax liability.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA). The IRA includes a new 15 percent corporate alternative minimum tax (Corporate AMT) on applicable corporations with an average annual financial statement income that exceeds $1 billion for any three consecutive years preceding the tax year at issue. The Corporate AMT is effective for tax years beginning after December 31, 2022. The Company is continuing to evaluate the provisions of the IRA and awaits further guidance from the U.S. Treasury Department to properly assess the impact of these provisions on the Company. Under the existing guidance, the Company does not believe the IRA will have a material impact for 2023.
The Company has a full valuation allowance against its U.S. net deferred tax assets. The Company will continue to maintain a full valuation allowance on its U.S. net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. However, given the Company’s current and anticipated future domestic earnings, the Company believes that there is a reasonable possibility that within the next 12 months sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the U.S. valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense, which could be material, for the period the release is recorded.
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The Company and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various states and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority.
Critical Accounting Estimates
The Company prepares its financial statements and accompanying notes in conformity with accounting principles generally accepted in the U.S., which require management to make estimates and assumptions about future events that affect reported amounts in the financial statements and the accompanying notes. The Company identifies certain accounting policies involving estimation as critical accounting estimates based on, among other things, their impact on the portrayal of the Company’s financial condition, results of operations, or liquidity, as well as the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting estimates address accounting matters that are inherently uncertain due to unknown future resolution of such matters. Management routinely discusses the development, selection, and disclosure of each critical accounting estimate. For a discussion of the Company’s most critical accounting estimates, please see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Some of the more significant estimates include reserve estimates, oil and gas exploration costs, offshore decommissioning contingency, long-lived asset impairments, asset retirement obligations, and income taxes.
New Accounting Pronouncements
There were no material changes in recently issued or adopted accounting standards from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted.
ITEM 4. 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 the Company’s disclosure controls and procedures as of June 30, 2023, 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 the Company is 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.
The Company periodically reviews the design and effectiveness of its disclosure controls, including compliance with various laws and regulations that apply to its operations, both inside and outside the United States. The Company makes modifications to improve the design and effectiveness of our disclosure controls, and may take other corrective action, if the Company’s reviews identify deficiencies or weaknesses in its controls.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to Part I, Item 3—Legal Proceedings of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and
Note 12—Commitments and Contingencies
in the Notes to the Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q (which is hereby incorporated by reference herein), for a description of material legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Given the nature of its business, APA Corporation may be subject to different or additional risks than those applicable to the Company. For a description of these risks, refer to the disclosures in APA Corporation’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023 and APA Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
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ITEM 6. EXHIBITS
| 3.1 | – | |||||||
| 3.2 | – | |||||||
| 3.3 | – | |||||||
| *31.1 | – | |||||||
| *31.2 | – | |||||||
| **32.1 | – | |||||||
| *101 | – |
The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL: (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Comprehensive Income (Loss), (iii) Statement of Consolidated Cash Flows, (iv) Consolidated Balance Sheet, (v) Statement of Consolidated Changes in Equity (Deficit) and Noncontrolling Interests and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
|
||||||
| *101.SCH | – | Inline XBRL Taxonomy Schema Document. | ||||||
| *101.CAL | – | Inline XBRL Calculation Linkbase Document. | ||||||
| *101.DEF | – | Inline XBRL Definition Linkbase Document. | ||||||
| *101.LAB | – | Inline XBRL Label Linkbase Document. | ||||||
| *101.PRE | – | Inline XBRL Presentation Linkbase Document. | ||||||
| *104 | – | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||||
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements 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 | |||||||||||
| Dated: | August 3, 2023 | /s/ STEPHEN J. RINEY | |||||||||
| Stephen J. Riney | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
| Dated: | August 3, 2023 | /s/ REBECCA A. HOYT | |||||||||
| Rebecca A. Hoyt | |||||||||||
| Senior Vice President, Chief Accounting Officer, and Controller | |||||||||||
| (Principal Accounting Officer) | |||||||||||
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TABLE OF CONTENTS
Part I Financial InformationprintItem 1. Financial StatementsprintItem 2. Management S Narrative Analysis Of Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II - Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 6. Exhibitsprint