10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q 

(Mark One)  

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-4300

APACHE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	41-0747868
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400

(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:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.625 par value	APA	New York Stock Exchange
Common Stock, $0.625 par value	APA	Chicago Stock Exchange
Common Stock, $0.625 par value	APA	NASDAQ Global Select Market
7.75% Notes Due 2029	APA/29	New York Stock Exchange

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  ☐

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	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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  ☒

Number of shares of registrant’s common stock outstanding as of October 30, 2019 376,036,287

	TABLE OF CONTENTS
	DESCRIPTION
Item		Page
	PART I - FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS	1
	STATEMENT OF CONSOLIDATED OPERATIONS	1
	STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2
	STATEMENT OF CONSOLIDATED CASH FLOWS	3
	CONSOLIDATED BALANCE SHEET	4
	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTEREST	5
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	39
4.	CONTROLS AND PROCEDURES	41
	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	42
1A.	RISK FACTORS	42
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42
5.	OTHER INFORMATION	42
6.	EXHIBITS	43

Forward-Looking Statements and Risk

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, the information that was used to prepare our estimate of proved reserves as of December 31, 2018, and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” or “continue” or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:

• the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services;

• 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;

• the availability of capital resources;

• capital expenditure and other contractual obligations;

• currency exchange rates;

• weather conditions;

• inflation rates;

• the availability of goods and services;

• legislative, regulatory, or policy changes;

• terrorism or cyber attacks;

• occurrence of property acquisitions or divestitures;

• the integration of acquisitions;

• the securities or capital markets and related risks such as general credit, liquidity, market, and interest-rate risks; and

• other factors disclosed under Items 1 and 2—Business and Properties—Estimated Proved Reserves and Future Net Cash Flows, Item 1A—Risk Factors, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in our most recently filed Annual Report on Form 10-K, other risks and uncertainties in our third-quarter 2019 earnings release, other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q, and other filings that we make with the Securities and Exchange Commission.

All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions, except per common share data)
REVENUES AND OTHER:
Oil and gas production revenues
Oil revenues	$	1,207		$	1,555		$	3,914		$	4,524
Natural gas revenues	136			241			490			675
Natural gas liquids revenues	95			180			286			446
	1,438			1,976			4,690			5,645
Derivative instrument losses, net	(2		)	(23		)	(40		)	(46		)
Gain on divestitures	—			1			20			10
Other	41			29			45			50
	1,477			1,983			4,715			5,659
OPERATING EXPENSES:
Lease operating expenses	350			382			1,104			1,087
Gathering, processing, and transmission	66			92			230			260
Taxes other than income	44			58			141			162
Exploration	56			99			220			251
General and administrative	98			99			323			330
Transaction, reorganization, and separation	7			8			17			20
Depreciation, depletion, and amortization	711			610			1,959			1,771
Asset retirement obligation accretion	27			27			80			81
Impairments	9			10			249			10
Financing costs, net	95			192			365			385
	1,463			1,577			4,688			4,357
NET INCOME BEFORE INCOME TAXES	14			406			27			1,302
Current income tax provision	141			262			514			709
Deferred income tax benefit	(10		)	(17		)	(52		)	(43		)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(117		)	161			(435		)	636
Net income attributable to noncontrolling interest - Egypt	38			80			125			215
Net loss attributable to noncontrolling interest - Altus	(3		)	—			(5		)	—
Net income attributable to Altus Preferred Unit limited partners	18			—			22			—
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	(170	)	$	81		$	(577	)	$	421
NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	(0.45	)	$	0.21		$	(1.53	)	$	1.10
Diluted	$	(0.45	)	$	0.21		$	(1.53	)	$	1.09
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	377			383			377			383
Diluted	377			385			377			385

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)

	For the Quarter Ended September 30,					For the Nine Months Ended September 30,
	2019			2018		2019			2018
	(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	$	(117	)	$	161	$	(435	)	$	636
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Share of equity method interests other comprehensive loss	(1		)	—		(1		)	—
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(118		)	161		(436		)	636
Comprehensive income attributable to noncontrolling interest - Egypt	38			80		125			215
Comprehensive loss attributable to noncontrolling interest - Altus	(3		)	—		(5		)	—
Comprehensive income attributable to Altus Preferred Unit limited partners	18			—		22			—
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	(171	)	$	81	$	(578	)	$	421

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 Nine Months Ended September 30,
	2019			2018
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interest	$	(435	)	$	636
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized derivative instrument losses (gains), net	52			(88		)
Gain on divestitures	(20		)	(10		)
Exploratory dry hole expense and unproved leasehold impairments	107			133
Depreciation, depletion, and amortization	1,959			1,771
Asset retirement obligation accretion	80			81
Impairments	249			10
Deferred income tax benefit	(52		)	(43		)
Loss on extinguishment of debt	75			94
Other	35			96
Changes in operating assets and liabilities:
Receivables	124			(113		)
Inventories	(16		)	(7		)
Drilling advances	(2		)	(22		)
Deferred charges and other	(1		)	91
Accounts payable	(82		)	110
Accrued expenses	(1		)	(3		)
Deferred credits and noncurrent liabilities	17			(2		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	2,089			2,734
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property	(2,015		)	(2,338		)
Leasehold and property acquisitions	(39		)	(86		)
Additions to Altus gathering, processing, and transmission facilities	(294		)	(412		)
Altus equity method interests	(1,008		)	—
Proceeds from sale of oil and gas properties	590			51
Other, net	(17		)	(55		)
NET CASH USED IN INVESTING ACTIVITIES	(2,783		)	(2,840		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Altus credit facility	235			—
Fixed-rate debt borrowings	989			992
Payments on fixed-rate debt	(1,150		)	(1,370		)
Distributions to noncontrolling interest - Egypt	(235		)	(256		)
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	611			—
Dividends paid	(282		)	(287		)
Other	(25		)	(48		)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	143			(969		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(551		)	(1,075		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	714			1,668
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	163		$	593
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	318		$	344
Income taxes paid, net of refunds	473			649

The accompanying notes to consolidated financial statements

are an integral part of this statement.

3

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

In millions except share and per-share amounts	September 30, 2019			December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($3 and $450 related to Altus VIE)	$	163		$	714
Receivables (net of allowance of $86 and $92)	1,070			1,194
Other current assets (Note 5) ($35 and $7 related to Altus VIE)	738			779
	1,971			2,687
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of successful efforts accounting:
Proved properties	40,114			42,345
Unproved properties and properties under development	1,256			1,435
Gathering, processing, and transmission facilities ($1,457 and $1,251 related to Altus VIE)	2,061			1,856
Other ($38 and nil related to Altus VIE)	1,177			1,120
	44,608			46,756
Less: Accumulated depreciation, depletion, and amortization ($52 and $24 related to Altus VIE)	(26,953		)	(28,335		)
	17,655			18,421
OTHER ASSETS:
Equity method interests ($1,095 and $91 related to Altus VIE)	1,095			121
Deferred charges and other ($73 and $71 related to Altus VIE)	684			353
	$	21,405		$	21,582
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	661		$	709
Current debt ($18 and nil related to Altus VIE)	19			151
Other current liabilities (Note 7) ($38 and $85 related to Altus VIE)	1,241			1,341
	1,921			2,201
LONG-TERM DEBT (Note 10) ($235 and nil related to Altus VIE)	8,393			8,093
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	340			391
Asset retirement obligation ($34 and $29 related to Altus VIE)	1,853			1,866
Other ($98 and nil related to Altus VIE)	491			219
	2,684			2,476
COMMITMENTS AND CONTINGENCIES (Note 11)
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)	539			—
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 416,986,332 and 415,692,116 shares issued, respectively	261			260
Paid-in capital	11,852			12,106
Accumulated deficit	(2,625		)	(2,048		)
Treasury stock, at cost, 40,964,193 and 40,995,894 shares, respectively	(3,190		)	(3,192		)
Accumulated other comprehensive income	3			4
APACHE SHAREHOLDERS’ EQUITY	6,301			7,130
Noncontrolling interest - Egypt	1,165			1,275
Noncontrolling interest - Altus	402			407
TOTAL EQUITY	7,868			8,812
	$	21,405		$	21,582

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 AND NONCONTROLLING INTEREST

(Unaudited)

	Redeemable Noncontrolling Interest — Altus Preferred Unit Limited Partners		Common Stock		Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			APACHE SHAREHOLDERS’ EQUITY			Noncontrolling Interests			TOTAL EQUITY
			(In millions)
For the Quarter Ended September 30, 2018
BALANCE AT JUNE 30, 2018	$	—	$	260	$	12,011		$	(1,748	)	$	(2,887	)	$	4		$	7,640		$	1,355		$	8,995
Net income attributable to common stock	—		—		—			81			—			—			81			—			81
Net income attributable to noncontrolling interest - Egypt	—		—		—			—			—			—			—			80			80
Distributions to noncontrolling interest - Egypt	—		—		—			—			—			—			—			(101		)	(101		)
Common dividends ($0.25 per share)	—		—		(96		)	—			—			—			(96		)	—			(96		)
Other	—		—		30			—			(43		)	—			(13		)	—			(13		)
BALANCE AT SEPTEMBER 30, 2018	$	—	$	260	$	11,945		$	(1,667	)	$	(2,930	)	$	4		$	7,612		$	1,334		$	8,946
For the Quarter Ended September 30, 2019
BALANCE AT JUNE 30, 2019	$	521	$	261	$	11,931		$	(2,455	)	$	(3,190	)	$	4		$	6,551		$	1,603		$	8,154
Net loss attributable to common stock	—		—		—			(170		)	—			—			(170		)	—			(170		)
Net income attributable to noncontrolling interest - Egypt	—		—		—			—			—			—			—			38			38
Net loss attributable to noncontrolling interest - Altus	—		—		—			—			—			—			—			(3		)	(3		)
Net income attributable to Altus Preferred Unit limited partners	18		—		—			—			—			—			—			—			—
Distributions to noncontrolling interest - Egypt	—		—		—			—			—			—			—			(71		)	(71		)
Common dividends ($0.25 per share)	—		—		(94		)	—			—			—			(94		)	—			(94		)
Other	—		—		15			—			—			(1		)	14			—			14
BALANCE AT SEPTEMBER 30, 2019	$	539	$	261	$	11,852		$	(2,625	)	$	(3,190	)	$	3		$	6,301		$	1,567		$	7,868

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 AND NONCONTROLLING INTEREST – (Continued)

(Unaudited)

	Redeemable Noncontrolling Interest — Altus Preferred Unit Limited Partners		Common Stock		Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			APACHE SHAREHOLDERS’ EQUITY			Noncontrolling Interests			TOTAL EQUITY
			(In millions)
For the Nine Months Ended September 30, 2018
BALANCE AT DECEMBER 31, 2017	$	—	$	259	$	12,128		$	(2,088	)	$	(2,887	)	$	4		$	7,416		$	1,375		$	8,791
Net income attributable to common stock	—		—		—			421			—			—			421			—			421
Net income attributable to noncontrolling interest - Egypt	—		—		—			—			—			—			—			215			215
Distributions to noncontrolling interest - Egypt	—		—		—			—			—			—			—			(256		)	(256		)
Common dividends ($0.75 per share)	—		—		(287		)	—			—			—			(287		)	—			(287		)
Other	—		1		104			—			(43		)	—			62			—			62
BALANCE AT SEPTEMBER 30, 2018	$	—	$	260	$	11,945		$	(1,667	)	$	(2,930	)	$	4		$	7,612		$	1,334		$	8,946
For the Nine Months Ended September 30, 2019
BALANCE AT DECEMBER 31, 2018	$	—	$	260	$	12,106		$	(2,048	)	$	(3,192	)	$	4		$	7,130		$	1,682		$	8,812
Net loss attributable to common stock	—		—		—			(577		)	—			—			(577		)	—			(577		)
Net income attributable to noncontrolling interest - Egypt	—		—		—			—			—			—			—			125			125
Net loss attributable to noncontrolling interest - Altus	—		—		—			—			—			—			—			(5		)	(5		)
Issuance of Altus Preferred Units	517		—		—			—			—			—			—			—			—
Net income attributable to Altus Preferred Unit limited partners	22		—		—			—			—			—			—			—			—
Distributions to noncontrolling interest - Egypt	—		—		—			—			—			—			—			(235		)	(235		)
Common dividends ($0.75 per share)	—		—		(282		)	—			—			—			(282		)	—			(282		)
Other	—		1		28			—			2			(1		)	30			—			30
BALANCE AT SEPTEMBER 30, 2019	$	539	$	261	$	11,852		$	(2,625	)	$	(3,190	)	$	3		$	6,301		$	1,567		$	7,868

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)

These consolidated financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements discussed below. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which contains a summary of the Company’s significant accounting policies and other disclosures.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 30, 2019, Apache’s significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of its consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, with the exception of Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” (see “Leases” section in this Note 1 below).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated.

The Company consolidates all other investments in which, either through direct or indirect ownership, Apache has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated Apache subsidiary and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in Apache’s Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate component of equity in Apache’s consolidated balance sheet.

Additionally, third-party investors own a minority interest of approximately 21 percent of Altus Midstream Company (ALTM), which is reflected as a separate noncontrolling interest component of equity in Apache’s consolidated balance sheet. Apache consolidates the activities of ALTM, which qualifies as a variable interest entity (VIE) under GAAP. Apache has concluded that it is the primary beneficiary of the VIE, as defined in the accounting standards, since Apache has the power, through its ownership, to direct those activities that most significantly impact the economic performance of ALTM and the obligation to absorb losses or the right to receive benefits that could be potentially significant to ALTM. This conclusion was based on a qualitative analysis that considered ALTM’s governance structure, the commercial agreements between ALTM, Altus Midstream LP (collectively with ALTM, Altus), and Apache, and the voting rights established between the members, which provide Apache with the ability to control the operations of Altus. On June 12, 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) through a private offering that admitted additional limited partners with separate rights for the Preferred Unit holders. For further details on the terms of the Preferred Units and rights of the holders, refer to Note 12—Redeemable Noncontrolling Interest - Altus.

Investments in which Apache holds less than 50 percent of the voting interest are typically accounted for under the equity method of accounting, with the balance recorded separately as “Equity method interests” in Apache’s consolidated balance sheet and results of operations recorded as a component of “Other” under “Revenues and Other” in the Company’s statement of consolidated operations. Refer to Note 6—Equity Method Interests for more detail.

Use of Estimates

Preparation of financial statements in conformity with GAAP 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. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities, the estimate of proved oil and gas reserves and related present value estimates of

7

future net cash flows therefrom, the assessment of asset retirement obligations, the estimates of fair value for long-lived assets, and the estimate of income taxes. Actual results could differ from those estimates.

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in Apache’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).

Recurring fair value measurements are presented in further detail in Note 4—Derivative Instruments and Hedging Activities, Note 10—Debt and Financing Costs, and Note 12—Redeemable Noncontrolling Interest - Altus.

Apache also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. For the third quarter and nine-month period ended September 30, 2019, the Company recorded asset impairments totaling $9 million and $249 million, respectively, in connection with fair value assessments.

During the third quarter of 2019, Apache recorded an impairment of $9 million on gathering, processing, and transmission (GPT) assets held for sale by the Company’s Altus Midstream reporting segment. The estimated fair value of the assets held for sale was approximately $18 million and was determined using a market approach based on proceeds expected to be received in the fourth quarter, a Level 1 fair value measurement. The Company reflects held for sale assets as a component of “Other current assets” on its consolidated balance sheet.

In the second quarter of 2019, the Company entered into an agreement to sell certain of its assets in the Western Anadarko Basin in Oklahoma and Texas. As a result of this agreement, a separate impairment analysis was performed for each of the assets within the disposal group. The analyses were based on the agreed-upon proceeds less costs to sell for the transaction, a Level 1 fair value measurement. The carrying value of the net assets to be divested exceeded the fair value implied by the expected net proceeds, resulting in impairments totaling $240 million, including $86 million on the Company’s proved properties, $149 million on its unproved properties, and $5 million on other working capital. See Note 2—Acquisitions and Divestitures for more detail.

In the third quarter of 2018, Apache agreed to sell certain of its unproved properties offshore the U.K. in the North Sea (North Sea). As a result, the Company performed a fair value assessment of the properties and recorded a $10 million impairment on the carrying values of the associated capitalized exploratory well costs in the third quarter and first nine months of 2018. The fair value of the impaired assets was determined using the negotiated sales price, a Level 1 fair value measurement.

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.

8

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 Apache’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review.

The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil and Gas Property:
Proved	$	—	$	—	$	86	$	—
Unproved	12		49		223		86

Proved properties impaired during the first nine months of 2019 related to assets held for sale at June 30, 2019 with an aggregate fair value of $379 million.

On the statement of consolidated operations, unproved leasehold impairments are typically recorded as a component of “Exploration” expense; however, in the first nine months of 2019, unproved impairments of $149 million were recorded in “Impairments” in connection with an agreement to sell certain non-core leasehold properties in Oklahoma and Texas. In the third quarter and first nine months of 2018, unproved impairments of $10 million were recorded in “Impairments” in connection with an agreement to sell certain unproved properties in the North Sea.

Gains and losses on divestitures of the Company’s oil and gas properties are recognized in the statement of consolidated operations upon closing of the transaction. See Note 2—Acquisitions and Divestitures for more detail.

9

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the nine months ended September 30, 2019. Apache recognizes revenue from its contracts with customers from the sale of its crude oil, natural gas, and natural gas liquids (NGLs) production as well as volumes purchased from third parties. Each unit of quantity represents a single performance obligation that is satisfied at a point in time as control of the product has been transferred to the customer.

The contracted price is variable and is determined based on market-indexed prices adjusted for quality, transportation, and other market-reflective differentials. Sales proceeds related to third-party purchased volumes are considered revenue from a contract with a customer. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively. Associated purchase costs for these volumes totaled $23 million and $109 million for the third quarters of 2019 and 2018, respectively, and $60 million and $308 million for the first nine months of 2019 and 2018, respectively. Proceeds and costs are both recorded as “Other” under “Revenues and Other” in the Company’s statement of consolidated operations.

The following table represents revenues from customers and non-customers for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Revenues from customers	$	1,361	$	1,902	$	4,414	$	5,437
Revenues from non-customers	107		198		347		534

Payment from contracts with customers is typically received on a short-term basis after physical delivery of the product. Receivables from contracts with customers, net of allowance for doubtful accounts, totaled $919 million and $1.0 billion as of September 30, 2019 and December 31, 2018, respectively.

Apache has concluded that disaggregating revenue by geographic area and by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14—Business Segment Information for a disaggregation of revenue by each product sold.

Leases

On January 1, 2019, Apache adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize separate right-of-use (ROU) assets and lease liabilities for most leases classified as operating leases under previous GAAP. Prior to adoption, the Financial Accounting Standards Board (FASB) issued transition guidance permitting an entity the option to not evaluate under ASU 2016-02 those existing or expired land easements that were not previously accounted for as leases, as well as an option to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the financial statements. Apache elected both transitional practical expedients. Under these transition options, comparative reporting was not required, and the provisions of the standard were applied prospectively to leases in effect at the date of adoption.

As allowed under the standard, the Company also applied practical expedients to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. Apache also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes. Short-term lease expense was not material for the third quarter and first nine months of 2019.

The Company determines if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, Apache records an ROU asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental borrowing rate when calculating the present value. In the normal course of business, Apache enters into various lease agreements for real estate, drilling rigs, vessels, aircraft, and equipment related to its exploration and development activities, which are typically classified as operating leases under the provisions of the standard. ROU assets are reflected within “Deferred charges and other” within “Other” assets on the Company’s consolidated balance sheet, and the associated operating lease liabilities are reflected within “Other current liabilities” and “Other” within “Deferred Credits and Other Noncurrent Liabilities,” as applicable.

10

Operating lease expense associated with ROU assets is recognized on a straight-line basis over the lease term. Lease expense is reflected on the statement of consolidated operations commensurate with the leased activities and nature of the services performed. Gross fixed operating lease expense, inclusive of amounts billable to partners and other working interest owners, was $53 million and $167 million for the third quarter and first nine months of 2019, respectively.

In addition, the Company periodically enters into finance leases that are similar to those leases classified as capital leases under previous GAAP. Finance lease assets are included in “Other” within “Property and Equipment” on the consolidated balance sheet, and the associated finance lease liabilities are reflected within “Current debt” and “Long-term debt,” as applicable. Prior periods include the reclassification of $39 million finance lease obligations from “Other” within “Deferred Credits and Other Noncurrent Liabilities” to “Long-term debt” on the Company’s consolidated balance sheet to conform with this presentation. There was no material impact to the Company’s statement of consolidated operations and statement of consolidated cash flows for its treatment of finance leases. Depreciation on the Company’s finance lease assets was $2 million and $6 million for the third quarter and first nine months of 2019, respectively. Interest on the Company’s finance lease assets was $1 million and $2 million for the third quarter and first nine months of 2019, respectively.

The following table represents the Company’s weighted average lease term and discount rate as of September 30, 2019:

	Operating Leases		Finance Leases
Weighted average remaining lease term	3.3 years		9.7 years
Weighted average discount rate	4.4	%	4.3	%

The undiscounted future minimum lease payments reconciled to the carrying value of the lease liabilities as of September 30, 2019 were as follows:

Net Minimum Commitments	Operating Leases(1)			Finance Leases(2)
	(In millions)
2019	$	48		$	9
2020	124			13
2021	50			3
2022	41			3
2023	24			3
Thereafter	40			40
Total future minimum lease payments	327			71
Less: imputed interest	(26		)	(14		)
Total lease liabilities	301			57
Current portion	(149		)	(19		)
Non-current portion	$	152		$	38

(1) Amounts included for drilling rig and related operational equipment obligations represent future payments associated with oil and gas operations inclusive of amounts billable to partners and other working interest owners. Such payments may be capitalized as a component of oil and gas properties and subsequently depreciated, impaired, or written off as exploration expense.

(2) Amounts represent the Company’s finance lease obligation related to physical power generators being leased on a one-year term with the right to purchase and a separate lease for the Company’s Midland, Texas regional office building.

The lease liability reflected in the table above represents the Company’s fixed minimum payments that are settled in accordance with the lease terms. Actual lease payments during the period may also include variable lease components such as common area maintenance, usage-based sales taxes and rate differentials, or other similar costs that are not determinable at the inception of the lease. Gross variable lease payments, inclusive of amounts billable to partners and other working interest owners, for the third quarter and first nine months of 2019 were $3 million and $44 million, respectively.

New Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses.” The standard changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans, and other financial assets measured at amortized cost. The ASU requires the use of a new forward-looking “expected loss” model compared to the current “incurred loss” model, resulting in accelerated recognition of credit losses. This update is effective for the Company beginning in the first quarter of 2020, with early adoption permitted. The Company is in the process of finalizing its project plan for the implementation of the ASU and continues to evaluate and monitor standard setting activity. The Company does not believe the adoption and implementation of this ASU will have a material impact on its financial statements.

11

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement,” which changes the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures. ASU 2018-13 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans,” which eliminates, modifies, and adds disclosure requirements for defined benefit plans. The ASU is effective for financial statements issued for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This pronouncement clarifies the requirements for capitalizing implementation costs in cloud computing arrangements and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements and does not expect it to have a material impact.

2. ACQUISITIONS AND DIVESTITURES

2019 Activity

Leasehold and Property Acquisitions

During the third quarter and first nine months of 2019, Apache completed leasehold and property acquisitions for total cash consideration of $5 million and $39 million, respectively, primarily in its U.S. onshore regions. For discussion on the Company’s acquisition of equity method interests during the period, refer to Note 6—Equity Method Interests.

U.S. Divestitures

In the third quarter of 2019, Apache completed the sale of non-core assets in the Western Anadarko Basin of Oklahoma and Texas for aggregate cash proceeds of approximately $325 million and the assumption of asset retirement obligations of $49 million. These assets met the criteria to be classified as held for sale in the second quarter of 2019. Accordingly, the Company performed a fair value assessment of the assets and recorded impairments of $240 million in the second quarter of 2019 to the carrying value of proved and unproved oil and gas properties, other fixed assets, and working capital. The transaction closed in the third quarter of 2019, and the Company recognized a $9 million loss in association with the sale.

In the second quarter of 2019, Apache completed the sale of certain non-core assets in Oklahoma that had a net carrying value of $206 million for aggregate cash proceeds of approximately $223 million. The Company recognized a $17 million gain in association with the sale.

During the first nine months of 2019, the Company also completed the sale of certain other non-core producing assets and leasehold, primarily in the Permian region, in multiple transactions for total cash proceeds of $21 million. The Company recognized a net gain of approximately $12 million upon closing of these transactions.

2018 Activity

During the third quarter and first nine months of 2018, Apache completed $48 million and $86 million, respectively, of leasehold and property acquisitions primarily in its U.S. onshore and Egypt regions. During the first nine months of 2018, the Company also completed the sale of certain non-core assets, primarily in the Permian region, in multiple transactions for total cash proceeds of $51 million. The Company recognized a total net gain of approximately $10 million during the first nine months upon closing of these transactions.

12

3.   CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $193 million and $159 million at September 30, 2019 and December 31, 2018, respectively. The increase is primarily attributable to drilling activities in Suriname and the North Sea during the period, partially offset by successful transfers of well costs and dry hole write-offs. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2018 were charged to dry hole expense during the nine months ended September 30, 2019. 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.

4.   DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies

The Company is exposed to fluctuations in crude oil and natural gas prices, foreign currency exchange rates, and interest rates. The Company utilizes various types of derivative financial instruments to manage fluctuations in cash flows resulting from these fluctuations. Apache has elected not to designate any of its derivative contracts as cash flow hedges.

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, Apache utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of September 30, 2019, Apache had derivative positions with 5 counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, Apache may not realize the benefit of some of its derivative instruments resulting from changes in commodity prices, currency exchange rates, or interest rates.

Derivative Instruments

Commodity Derivative Instruments

As of September 30, 2019, Apache had the following open crude oil financial basis swap contracts:

Production Period	Settlement Index	Mbbls	Weighted Average Price Differential
October—December 2019	Midland-WTI/Cushing-WTI	1,380	$(3.72)

As of September 30, 2019, Apache had the following open natural gas financial basis swap contracts:

Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Price Differential
October—December 2019	NYMEX Henry Hub/Waha	3,680	$(0.45)

Foreign Currency Derivative Instruments

Apache has open foreign currency costless collar contracts in GBP/USD for £12.5 million per each calendar month for 2019 with a weighted average floor and ceiling price of $1.20 and $1.35, respectively.

Altus Preferred Units Embedded Derivative

During the second quarter of 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units. Certain redemption features (the Redemption Option) embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. For further discussion of this derivative, see “Fair Value Measurements” below and Note 12—Redeemable Noncontrolling Interest - Altus.

13

Fair Value Measurements

The fair values of the Company’s derivative contracts are not actively quoted in the open market. The Company primarily uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing futures pricing for the underlying positions provided by a reputable third party, a Level 2 fair value measurement.

The fair value of the Redemption Option, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units.

The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting(1)			Carrying Amount
	(In millions)
September 30, 2019
Assets:
Commodity Derivative Instruments	$	—	$	2	$	—	$	2	$	—		$	2
Liabilities:
Commodity Derivative Instruments	—		6		—		6		—			6
Foreign Currency Derivative Instruments	—		1		—		1		—			1
Preferred Units Embedded Derivative	—		—		98		98		—			98
December 31, 2018
Assets:
Commodity Derivative Instruments	$	—	$	69	$	—	$	69	$	(14	)	$	55
Liabilities:
Commodity Derivative Instruments	—		25		—		25		(14		)	11

(1) The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.

All derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

	September 30, 2019		December 31, 2018
	(In millions)
Current Assets: Other current assets	$	2	$	55
Total Assets	$	2	$	55
Current Liabilities: Other current liabilities	$	7	$	11
Deferred Credits and Other Noncurrent Liabilities: Other	98		—
Total Liabilities	$	105	$	11

14

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 September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Realized gain (loss):
Derivative settlements, realized gain (loss)	$	(16	)	$	7		$	12		$	(110	)
Amortization of put premium, realized loss	—			(14		)	—			(24		)
Unrealized gain (loss)	14			(16		)	(52		)	88
Derivative instrument losses, net	$	(2	)	$	(23	)	$	(40	)	$	(46	)

Derivative instrument gains and losses are recorded in “Derivative instrument losses, net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized gains and 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 (gains), net” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.”

5. OTHER CURRENT ASSETS

The following table provides detail of the Company’s other current assets as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
	(In millions)
Inventories	$	475	$	401
Drilling advances	161		218
Assets held for sale	18		—
Prepaid assets and other	84		160
Total other current assets	$	738	$	779

6. EQUITY METHOD INTERESTS

Apache, through its ownership of Altus, has the following equity method interests in Permian Basin long-haul pipeline entities which are accounted for under the equity method of accounting. For each of the equity method interests, Altus has the ability to exercise significant influence based on certain governance provisions and its participation in activities and decisions that impact the management and economic performance of the equity method interests.

	September 30, 2019				December 31, 2018
	Interest		Amount		Interest		Amount
	($ in millions)
Gulf Coast Express Pipeline LLC	16.0	%	$	275	15.0	%	$	91
EPIC Crude Holdings, LP	15.0	%	128		—		—
Permian Highway Pipeline LLC	26.7	%	224		—		—
Shin Oak Pipeline (Breviloba, LLC)	33.0	%	468		—		—
			$	1,095			$	91

As of September 30, 2019 and December 31, 2018, unamortized basis differences included in the equity method interest balances were $26 million and $6 million, respectively. These amounts represent differences in contributions to date and Altus’ underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into net income over the useful lives of the underlying pipeline assets when they are placed into service.

15

The following table presents the activity in Altus’ equity method interests during the nine months ended September 30, 2019:

	Gulf Coast Express Pipeline LLC			EPIC Crude Holdings, LP			Permian Highway Pipeline LLC		Breviloba, LLC		Total
	(In millions)
Balance at December 31, 2018	$	91		$	—		$	—	$	—	$	91
Acquisitions	15			52			161		442		670
Capital contributions	169			83			63		23		338
Distributions	(3		)	—			—		—		(3		)
Equity income (loss), net	3			(5		)	—		3		1
Accumulated other comprehensive loss	—			(2		)	—		—		(2		)
Balance at September 30, 2019	$	275		$	128		$	224	$	468	$	1,095

As of December 31, 2018, Apache also held an investment in Marine Well Containment Company. This investment was sold in the first quarter of 2019 for $30 million, with no gain or loss recorded on the sale.

7. OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
	(In millions)
Accrued operating expenses	$	187	$	65
Accrued exploration and development	355		667
Accrued gathering, processing, and transmission - Altus	25		81
Accrued compensation and benefits	171		177
Accrued interest	114		137
Accrued income taxes	80		58
Current asset retirement obligation	66		66
Current operating lease liability	149		—
Other	94		90
Total other current liabilities	$	1,241	$	1,341

8. ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the nine-month period ended September 30, 2019:

	(In millions)
Asset retirement obligation at December 31, 2018	$	1,932
Liabilities incurred	11
Liabilities settled	(49		)
Liabilities divested	(55		)
Accretion expense	80
Asset retirement obligation at September 30, 2019	1,919
Less current portion	(66		)
Asset retirement obligation, long-term	$	1,853

16

9. 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 of 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 third quarters of 2019 and 2018, Apache’s effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.

Apache’s 2019 and 2018 year-to-date effective income tax rates were primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.

Apache and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. The Company is currently under IRS audit for the 2014-2017 tax years and is also under audit in various states and foreign jurisdictions as part of its normal course of business.

10. DEBT AND FINANCING COSTS

The following table presents the carrying value of the Company’s debt as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs(1)	$	8,217		$	8,299
Altus credit facility(2)	235			—
Finance lease obligations	57			40
Unamortized discount	(43		)	(44		)
Debt issuance costs	(54		)	(51		)
Total debt	8,412			8,244
Current maturities	(19		)	(151		)
Long-term debt	$	8,393		$	8,093

(1) The fair value of the Company’s notes and debentures was $8.2 billion and $7.8 billion as of September 30, 2019 and December 31, 2018, respectively. Apache uses a market approach to determine the fair value of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

(2) The carrying amount of borrowings by Altus Midstream LP on its credit facility approximate fair value because the interest rates are variable and reflective of market rates.

As of September 30, 2019, current debt included $19 million of finance lease obligations. As of December 31, 2018, current debt included $150 million of 7.625% senior notes due July 1, 2019 and $1 million of finance lease obligations. On July 1, 2019, Apache’s 7.625% senior notes in original principal amount of $150 million matured and were repaid.

On June 19, 2019, Apache closed offerings of $1.0 billion in aggregate principal amount of senior unsecured notes, comprised of $600 million in aggregate principal amount of 4.250% notes due January 15, 2030 and $400 million in aggregate principal amount of 5.350% notes due July 1, 2049. The notes are redeemable at any time, in whole or in part, at Apache’s option, subject to a make-whole premium. The net proceeds from the sale of the notes were used to purchase certain outstanding notes in cash tender offers and for general corporate purposes.

On June 21, 2019, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $932 million aggregate principal amount of certain notes covered by the tender offers. Apache paid holders an aggregate of approximately $1.0 billion reflecting principal, the net premium to par, early tender premium, and accrued and unpaid interest. The Company recorded a net loss of $75 million on extinguishment of debt, including $7 million of unamortized debt issuance costs and discount, in connection with the note purchases.

In March 2018, the Company entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0

17

billion, of which $2.08 billion was committed as of September 30, 2019. The facility is for general corporate purposes, and committed borrowing capacity fully supports Apache’s commercial paper program. As of September 30, 2019, a letter of credit for approximately £3.1 million and no borrowings were outstanding under this facility.

The Company’s $3.5 billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days at competitive interest rates. As of September 30, 2019, the Company had no commercial paper outstanding.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s two, one-year extension options). The agreement for this facility, as amended, provides aggregate commitments from a syndicate of banks of $650 million until the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the agreement, for the immediately preceding fiscal quarter equals or exceeds $175 million on an annualized basis (such period, the Initial Period). Following the Initial Period, the aggregate commitments equal $800 million. All aggregate commitments include a letter of credit subfacility of up to $100 million and a swingline loan subfacility of up to $100 million. After the Initial Period, Altus Midstream LP may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2019, there were $235 million of borrowings and no letters of credit outstanding under this facility. As of December 31, 2018, no borrowings or letters of credit were outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.

Financing Costs, Net

The following table presents the components of Apache’s financing costs, net:

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Interest expense	$	107		$	113		$	323		$	335
Amortization of deferred loan costs	2			2			5			8
Capitalized interest	(9		)	(11		)	(26		)	(36		)
Loss on extinguishment of debt	—			94			75			94
Interest income	(5		)	(6		)	(12		)	(16		)
Financing costs, net	$	95		$	192		$	365		$	385

11. COMMITMENTS AND CONTINGENCIES

Legal Matters

Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. As of September 30, 2019, the Company has an accrued liability of approximately $19 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

For additional information on Legal Matters described below, please see Note 9—Commitments and Contingencies to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Argentine Environmental Claims and Argentina Tariff

No material change in the status of the YPF Sociedad Anónima indemnities matter has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Regarding the Pioneer Natural Resources Company indemnities matter, Company subsidiaries, on one hand, and Pioneer Natural Resources Company and TDF Holdings Company LDC, on the other, have settled and voluntarily dismissed certain indemnity-related claims against each other in a case captioned

18

Apache Corporation, et al. v. Pioneer Natural Resources Co., et al., Cause No. 2014-64407, pending in the 189^th Judicial District of Harris County, Texas. Company subsidiaries retain certain rights to enforce certain Argentina-related indemnification obligations against Pioneer 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 Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including Apache, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to 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, except as noted. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While an adverse judgment against the Company is possible, the Company intends to actively defend these lawsuits and claims.

Starting in November of 2013 and continuing into 2019, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including Apache. These cases were all removed to federal courts in Louisiana. Some of the cases have been remanded to state court with the remand orders being appealed. Other of the cases have been stayed pending appeal. 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 an adverse judgment against the Company is possible, the Company intends to vigorously oppose these claims.

No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Apollo Exploration Lawsuit

In a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th 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 areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The Court recently 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 plaintiffs have appealed. No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Australian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, Apache filed suit against Quadrant for breach of the Quadrant SPA. In its suit, Apache seeks approximately $80 million. In December 2017, Quadrant filed a defense of equitable set-off to Apache’s claim and a counterclaim seeking approximately $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 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

19

equity plans. In the suit, the purported class seeks approximately $60 million USD and punitive damages. The Company believes that Plaintiffs’ claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

California Litigation

On July 17, 2017, in three separate actions, San Mateo County, California, Marin County, California, 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, gas, and coal 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 and in a separate action on January 22, 2018, the City of Richmond, filed similar lawsuits against many of the same defendants. On November 14, 2018, the Pacific Coast Federation of Fishermen’s Associations, Inc. also filed a similar lawsuit against many of the same defendants. The Company believes that the claims made against it are baseless and intends to vigorously defend these lawsuits.

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 which they recently disclosed to be 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 Company is appealing.

Environmental Matters

As of September 30, 2019, the Company had an undiscounted reserve for environmental remediation of approximately $3 million. The Company is not aware of any environmental claims existing as of September 30, 2019 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.

12. REDEEMABLE NONCONTROLLING INTEREST - ALTUS

Preferred Units Issuance

On June 12, 2019, Altus Midstream LP, an indirectly controlled subsidiary of Apache, issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act of 1933 (the Closing). Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. Pursuant to the partnership agreement of Altus Midstream LP:

• The Preferred Units bear quarterly distributions at a rate of 7 percent per annum, increasing after the fifth anniversary of Closing and upon the occurrence of specified events. Altus Midstream LP may pay distributions in-kind for the first six quarters after the Preferred Units are issued.

• The Preferred Units are redeemable at Altus Midstream LP’s option at any time in cash at a redemption price (the Redemption Price) equal to the greater of an 11.5 percent internal rate of return (increasing after the fifth anniversary of Closing to 13.75 percent) and a 1.3x multiple of invested capital. The Preferred Units will be redeemable at the holder’s option upon a change of control or liquidation of Altus Midstream LP and certain other events, including certain asset dispositions.

• The Preferred Units will be exchangeable for shares of ALTM’s Class A common stock at the holder’s election after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be exchangeable for a number of shares of ALTM’s Class A common stock equal to the Redemption Price divided by the volume-weighted average trading price of ALTM’s Class A common stock on the NASDAQ Capital Market for the 20 trading days immediately preceding the second trading day prior to the applicable exchange date, less a 6 percent discount.

• Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream LP’s common units and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

• Preferred Units holders have rights to approve certain partnership business, financial, and governance-related matters.

20

• Altus Midstream LP is restricted from declaring or making cash distributions on its common units until all required distributions on the Preferred Units have been paid. In addition, before the fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Altus Midstream LP’s common units are limited to $650 million of cash from ordinary course operations if permitted under its credit facility. Cash distributions on, and redemptions of, Altus Midstream LP’s common units also are subject to satisfaction of leverage ratio requirements specified in its partnership agreement.

Classification

The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.

Initial Measurement

Altus recorded the net transaction price of $611 million, calculated as the negotiated transaction price of $625 million, less issue discounts of $4 million and transaction costs totaling $10 million.

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Altus bifurcated and recognized at fair value an embedded derivative related to the Preferred Units of $94 million for a redemption option of the Preferred Unit holders. The derivative is reflected in “Other” within “Deferred Credits and Other Noncurrent Liabilities” on the Company’s consolidated balance sheet at its current fair value of $98 million. The fair value of the embedded derivative, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units. See Note 4—Derivative Instruments and Hedging Activities for more detail.

The net transaction price was allocated to the preferred redeemable noncontrolling interest and the embedded features according to the associated initial fair value measurements as follows:

	June 12, 2019
	(In millions)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners	$	517
Preferred Units embedded derivative	94
	$	611

Subsequent Measurement

Altus applies a two-step approach to subsequent measurement of the redeemable noncontrolling interest related to the Preferred Units by first allocating a portion of the net income of Altus Midstream LP in accordance with the terms of the partnership agreement. An additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end may be recorded, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of Closing. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a)(i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability or (b) the accreted value of the net transaction price.

21

Activity related to the Preferred Units during the nine months ended September 30, 2019 is as follows:

	Units Outstanding	Financial Position(2)
	(In millions, except unit data)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: beginning of period	—	$	—
Issuance of Preferred Units, net	625,000	517
Distribution of in-kind additional Preferred Units(1)	2,188	—
Allocation of Altus Midstream LP net income	N/A	21
Accreted value adjustment	N/A	1
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: end of period	627,188	539
Preferred Units embedded derivative		98
		$	637

(1) Subsequent to the balance sheet date, Altus Midstream LP provided notice to the Preferred Unit holders of record at September 30, 2019 of the amount of the distribution on the Preferred Units for the quarter ended September 30, 2019. The holders also were notified that Altus Midstream LP elected to pay the entire amount of the approximate $11 million distribution in-kind in additional Preferred Units (PIK Units) on November 14, 2019. In total, 10,975.8 PIK Units will be issued in satisfaction of the required distribution.

(2) As at September 30, 2019, the aggregate Redemption Price was $646 million, based on an internal rate of return of 11.5 percent.

N/A - not applicable.

13. CAPITAL STOCK

Net Income (Loss) per Common Share

A reconciliation of the components of basic and diluted net income (loss) per common share for the quarters and nine months ended September 30, 2019 and 2018, is presented in the table below.

 

	For the Quarter Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	383	$	0.21
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	—
Diluted:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	385	$	0.21

	For the Nine Months Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	383	$	1.10
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	(0.01	)
Diluted:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	385	$	1.09

22

The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling 5.2 million and 4.9 million for the quarters ended September 30, 2019 and 2018, respectively, and 5.1 million and 5.8 million for the nine months ended September 30, 2019 and 2018, respectively. The impact to net income (loss) attributable to common stock of an assumed conversion of the redeemable noncontrolling Preferred Units interests in Altus Midstream LP were anti-dilutive for the three- and nine-month periods ended September 30, 2019.

Common Stock Dividends

For the quarters ended September 30, 2019 and 2018, Apache paid $94 million and $96 million, respectively, in dividends on its common stock. For the nine months ended September 30, 2019 and 2018, the Company paid $282 million and $287 million, respectively.

Stock Repurchase Program

In 2013 and 2014, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased from time to time either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, 2019, had repurchased a total of 40 million shares at an average price of $79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during 2019.

23

14. BUSINESS SEGMENT INFORMATION

As of September 30, 2019, Apache is engaged in exploration and production (Upstream) activities across three operating segments: Egypt, the North Sea, and the U.S. Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Apache’s Upstream business explores for, develops, and produces natural gas, crude oil and natural gas liquids. During the fourth quarter of 2018, Apache established a new reporting segment for its U.S. midstream business separate from its upstream oil and gas development activities. The midstream business is operated by Altus, which owns, develops, and operates a midstream energy asset network in the Permian Basin of West Texas, anchored by midstream service contracts to Apache’s production from its Alpine High resource play. Altus primarily generates revenue by providing fee-based natural gas gathering, compression, processing, and transportation services. Financial information for each segment is presented below:

	Egypt(1)		North Sea		U.S.			Altus			Intersegment Eliminations & Other			Total(2)
	Upstream							Midstream
	(In millions)
For the Quarter Ended September 30, 2019
Oil revenues	$	472	$	231	$	504		$	—		$	—		$	1,207
Natural gas revenues	72		14		50			—			—			136
Natural gas liquids revenues	2		5		88			—			—			95
Oil and gas production revenues	546		250		642			—			—			1,438
Midstream service affiliate revenues	—		—		—			34			(34		)	—
Operating Expenses:
Lease operating expenses	115		76		159			—			—			350
Gathering, processing, and transmission	9		9		69			13			(34		)	66
Taxes other than income	—		—		40			4			—			44
Exploration	27		—		25			—			4			56
Depreciation, depletion, and amortization	177		71		452			11			—			711
Asset retirement obligation accretion	—		19		8			—			—			27
Impairments	—		—		—			9			—			9
	328		175		753			37			(30		)	1,263
Operating Income (Loss)(3)	$	218	$	75	$	(111	)	$	(3	)	$	(4	)	175
Other Income (Expense):
Derivative instrument losses, net														(2		)
Other(4)														41
General and administrative														(98		)
Transaction, reorganization, and separation														(7		)
Financing costs, net														(95		)
Income Before Income Taxes														$	14

24

	Egypt(1)		North Sea		U.S.			Altus		Intersegment Eliminations & Other			Total(2)
	Upstream							Midstream
	(In millions)
For the Nine Months Ended September 30, 2019
Oil revenues	$	1,509	$	868	$	1,537		$	—	$	—		$	3,914
Natural gas revenues	223		64		203			—		—			490
Natural gas liquids revenues	9		16		261			—		—			286
Oil and gas production revenues	1,741		948		2,001			—		—			4,690
Midstream service affiliate revenues	—		—		—			92		(92		)	—
Operating Expenses:
Lease operating expenses	365		240		501			—		(2		)	1,104
Gathering, processing, and transmission	31		32		214			43		(90		)	230
Taxes other than income	—		—		131			10		—			141
Exploration	89		2		117			—		12			220
Depreciation, depletion, and amortization	538		269		1,125			27		—			1,959
Asset retirement obligation accretion	—		56		23			1		—			80
Impairments	—		—		240			9		—			249
	1,023		599		2,351			90		(80		)	3,983
Operating Income (Loss)(3)	$	718	$	349	$	(350	)	$	2	$	(12	)	707
Other Income (Expense):
Gain on divestitures													20
Derivative instrument losses, net													(40		)
Other(4)													45
General and administrative													(323		)
Transaction, reorganization, and separation													(17		)
Financing costs, net													(365		)
Income Before Income Taxes													$	27
Total Assets(5)	$	3,851	$	2,529	$	12,288		$	2,649	$	88		$	21,405
For the Quarter Ended September 30, 2018
Oil revenues	$	669	$	303	$	583		$	—	$	—		$	1,555
Natural gas revenues	86		30		125			—		—			241
Natural gas liquids revenues	4		5		171			—		—			180
Oil and gas production revenues	759		338		879			—		—			1,976
Midstream service affiliate revenues	—		—		—			25		(25		)	—
Operating Expenses:
Lease operating expenses	112		92		178			—		—			382
Gathering, processing, and transmission	12		12		76			17		(25		)	92
Taxes other than income	—		—		57			1		—			58
Exploration	10		2		86			—		1			99
Depreciation, depletion, and amortization	187		89		329			5		—			610
Asset retirement obligation accretion	—		19		8			—		—			27
Impairments	—		10		—			—		—			10
	321		224		734			23		(24		)	1,278
Operating Income (Loss)(3)	$	438	$	114	$	145		$	2	$	(1	)	698
Other Income (Expense):
Gain on divestitures													1
Derivative instrument losses, net													(23		)
Other(4)													29
General and administrative													(99		)
Transaction, reorganization, and separation													(8		)
Financing costs, net													(192		)
Income Before Income Taxes													$	406

25

	Egypt(1)		North Sea		U.S.		Altus			Intersegment Eliminations & Other			Total(2)
	Upstream						Midstream
	(In millions)
For the Nine Months Ended September 30, 2018
Oil revenues	$	1,887	$	894	$	1,743	$	—		$	—		$	4,524
Natural gas revenues	263		81		331		—			—			675
Natural gas liquids revenues	11		14		421		—			—			446
Oil and gas production revenues	2,161		989		2,495		—			—			5,645
Midstream service affiliate revenues	—		—		—		50			(50		)	—
Operating Expenses:
Lease operating expenses	316		264		507		—			—			1,087
Gathering, processing, and transmission	35		32		204		39			(50		)	260
Taxes other than income	—		—		156		6			—			162
Exploration	70		19		159		—			3			251
Depreciation, depletion, and amortization	564		281		913		13			—			1,771
Asset retirement obligation accretion	—		56		24		1			—			81
Impairments	—		10		—		—			—			10
	985		662		1,963		59			(47		)	3,622
Operating Income (Loss)(3)	$	1,176	$	327	$	532	$	(9	)	$	(3	)	2,023
Other Income (Expense):
Gain on divestitures													10
Derivative instrument losses, net													(46		)
Other(4)													50
General and administrative													(330		)
Transaction, reorganization, and separation													(20		)
Financing costs, net													(385		)
Income Before Income Taxes													$	1,302
Total Assets(5)	$	4,404	$	3,033	$	13,335	$	1,054		$	44		$	21,870

(1) Includes revenue from non-customers for the third quarters and nine-month periods of 2019 and 2018 of:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil	$	98	$	181	$	316	$	485
Natural gas	9		16		30		47
Natural gas liquids	—		1		1		2

(2) Includes a noncontrolling interest in Egypt for the 2019 and 2018 periods, and Altus for the 2019 period.

(3) The operating income (loss) of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $10 million, and $2 million, respectively, for the third quarter of 2019. The operating income of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $308 million, and $6 million, respectively, for the first nine months of 2019. The operating income (loss) of U.S. and North Sea includes leasehold and unproved impairments totaling $39 million and $10 million, respectively, for the third quarter of 2018. The operating income of U.S. and North Sea includes leasehold and unproved impairments totaling $76 million and $10 million, respectively, for the first nine months of 2018.

(4) Included in Other are sales proceeds related to U.S. third-party purchased oil and gas volumes which are determined to be revenue from customers. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively.

(5) Intercompany balances are excluded from total assets.

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion relates to Apache Corporation and its consolidated subsidiaries and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included under Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q, as well as the Company’s consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Overview

Apache Corporation, a Delaware corporation formed in 1954, is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. The Company’s upstream business currently has exploration and production operations in three geographic areas: the United States (U.S.), Egypt, and offshore the United Kingdom (U.K.) in the North Sea (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Apache’s midstream business is operated by Altus Midstream Company through its subsidiary Altus Midstream LP (collectively, Altus), which owns, develops, and operates a midstream energy asset network in the Permian Basin of West Texas, anchored by midstream service contracts to Apache’s production from its Alpine High resource play. Altus primarily generates revenue by providing fee-based natural gas gathering, compression, processing, and transportation services.

Apache’s U.S. assets are complemented by its international assets in Egypt and the North Sea, each of which adds to the Company’s inventory of exploration and development opportunities and generates cash flows in excess of current capital investments, facilitating the Company’s ability to develop its onshore Permian properties while maintaining financial flexibility in a volatile commodity price environment. Apache’s diverse regional portfolio and asset inventory includes, at scale, both conventional and unconventional resources covering oil, rich gas with NGLs, and lean gas. This range of assets provides optionality to fund a capital program capable of delivering a sustainable combination of long-term returns with a moderate pace of growth. Consistent with this strategy, Apache is closely monitoring oil, NGL, and natural gas fundamentals and will allocate capital within its portfolio in response to price signals as part of its ongoing planning process.

The Company generated $2.1 billion in cash from operating activities during the first nine months of 2019, a decrease of 24 percent from the comparative prior-year period, driven by reduced revenues from lower realized commodity prices. Apache continuously monitors changes in its operating environment and has the ability, with its dynamic capital allocation process, to adjust the Company’s capital investment program to levels commensurate with cash from operating activities and to maximize value for Apache’s shareholders over the long term. In light of the lower commodity price environment at the end of 2018, Apache curtailed its 2019 upstream development program, with capital costs incurred for the third quarter and first nine months of 2019 reflecting reductions of 29 percent and 22 percent, respectively, from the comparative 2018 periods.

Apache reported a third quarter loss of $170 million, or $0.45 per common share, compared to income of $81 million, or $0.21 per common share, in the third quarter of 2018. The decrease in net income compared to the prior-year quarter is primarily the result of lower commodity price realizations. Daily production in the third quarter of 2019 averaged 451 thousand barrels of oil equivalent per day (Mboe/d), a decrease of five percent from the comparative prior-year quarter driven primarily by natural decline in Egypt and the Company’s sale of non-core assets in Oklahoma and Texas.

Operating Highlights

Key operational highlights for the quarter include:

United States

• Third quarter equivalent production from the Permian region, which accounts for 96 percent of Apache’s total U.S. production, increased 14 percent from the third quarter of 2018, which was driven by continued production ramp-up at Alpine High and strong performance in the Midland Basin. The Company averaged five rigs at Alpine High during the quarter and is currently running only two rigs, deferring several fourth quarter completions into 2020.

27

International

• The Egypt region’s gross equivalent production decreased 11 percent and net production decreased 15 percent from the third quarter of 2018 primarily a result of natural decline and fewer wells brought on-line during the period. The region continues to build and enhance its robust drilling inventory, supplemented with recent seismic acquisitions and new play concept evaluations, on both new and existing acreage.

• The North Sea region averaged 3 rigs and drilled 2 gross wells during the third quarter of 2019. The region’s daily production increased six percent from the third quarter 2018, primarily the result of production from the Garten field, which came on-line in November 2018.

• The North Sea region’s Storr exploration discovery and its second well at Garten are expected to come on-line in the fourth quarter. The first well at the Company’s Storr development is a high-rate gas condensate well and will be tied back to existing infrastructure connecting to the Beryl Alpha platform. The Garten #2 well encountered approximately 1,200 feet of net pay and compares favorably to the Garten #1 well, which came on-line in November 2018 with initial 30-day production rates of 13 thousand barrels of oil per day (Mb/d) and 17 million cubic feet of natural gas per day (MMcf/d) from 700 feet of net pay. Apache holds a 100 percent working interest in the Garten complex.

• The Company continues to progress its exploration efforts in Suriname and is currently drilling its first well, the Maka Central #1, on the 100 percent-owned Block 58. The well is expected to reach total depth in November. Additionally, the Company has committed to drill a second and third well on Block 58, which in conjunction with optional future well commitments, enables the retention of the entirety of the Block with no relinquishment requirements through June 2026.

28

Results of Operations

Oil and Gas Revenues

The table below presents third-quarter and year-to-date 2019 and 2018 revenues by geographic region and each region’s percent contribution to revenues.

	For the Quarter Ended September 30,								For the Nine Months Ended September 30,
	2019				2018				2019				2018
	$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution
	($ in millions)
Oil Revenues:
United States	$	504	42	%	$	583	37	%	$	1,537	39	%	$	1,743	39	%
Egypt (1)	472		39	%	669		43	%	1,509		39	%	1,887		41	%
North Sea	231		19	%	303		20	%	868		22	%	894		20	%
Total (1)	$	1,207	100	%	$	1,555	100	%	$	3,914	100	%	$	4,524	100	%
Natural Gas Revenues:
United States	$	50	37	%	$	125	52	%	$	203	41	%	$	331	49	%
Egypt (1)	72		53	%	86		36	%	223		46	%	263		39	%
North Sea	14		10	%	30		12	%	64		13	%	81		12	%
Total (1)	$	136	100	%	$	241	100	%	$	490	100	%	$	675	100	%
Natural Gas Liquids (NGL) Revenues:
United States	$	88	93	%	$	171	95	%	$	261	91	%	$	421	94	%
Egypt (1)	2		2	%	4		2	%	9		3	%	11		3	%
North Sea	5		5	%	5		3	%	16		6	%	14		3	%
Total (1)	$	95	100	%	$	180	100	%	$	286	100	%	$	446	100	%
Oil and Gas Revenues:
United States	$	642	45	%	$	879	44	%	$	2,001	43	%	$	2,495	44	%
Egypt (1)	546		38	%	759		39	%	1,741		37	%	2,161		38	%
North Sea	250		17	%	338		17	%	948		20	%	989		18	%
Total (1)	$	1,438	100	%	$	1,976	100	%	$	4,690	100	%	$	5,645	100	%

(1) Includes revenues attributable to a noncontrolling interest in Egypt.

29

Production

The table below presents third-quarter and year-to-date 2019 and 2018 production volumes and the relative increase or decrease from the prior period.

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019	Increase (Decrease)		2018	2019	Increase (Decrease)		2018
Oil Volume – b/d
United States	100,045	(3	)%	103,538	103,912	1	%	102,830
Egypt(1)(2)	84,114	(13	)%	97,129	86,470	(10	)%	96,201
North Sea	44,281	4	%	42,769	49,584	10	%	45,076
Total	228,440	(6	)%	243,436	239,966	(2	)%	244,107
Natural Gas Volume – Mcf/d
United States	563,162	(14	)%	651,782	633,239	12	%	563,299
Egypt(1)(2)	275,569	(17	)%	331,681	289,397	(15	)%	338,813
North Sea	47,875	15	%	41,455	51,596	23	%	41,932
Total	886,606	(13	)%	1,024,918	974,232	3	%	944,044
NGL Volume – b/d
United States	72,005	20	%	60,239	64,329	13	%	56,886
Egypt(1)(2)	891	18	%	753	979	4	%	939
North Sea	1,540	53	%	1,008	1,678	54	%	1,092
Total	74,436	20	%	62,000	66,986	14	%	58,917
BOE per day(3)
United States	265,910	(2	)%	272,406	273,781	8	%	253,599
Egypt(1)(2)	130,934	(15	)%	153,163	135,681	(12	)%	153,609
North Sea(4)	53,800	6	%	50,686	59,861	13	%	53,157
Total	450,644	(5	)%	476,255	469,323	2	%	460,365

(1) Gross oil, natural gas, and NGL production in Egypt for the third quarter and nine-month period of 2019 and 2018 were as follows:

	For the Quarter Ended September 30,		For the Nine Months Ended September 30,
	2019	2018	2019	2018
Oil (b/d)	187,589	208,889	196,643	205,822
Natural Gas (Mcf/d)	673,065	766,128	719,083	775,405
NGL (b/d)	1,529	1,161	1,810	1,450

(2) Includes production volumes per day attributable to a noncontrolling interest in Egypt for the third quarter and nine-month period of 2019 and 2018 of:

	For the Quarter Ended September 30,		For the Nine Months Ended September 30,
	2019	2018	2019	2018
Oil (b/d)	28,052	32,385	28,839	32,077
Natural Gas (Mcf/d)	92,212	110,777	96,706	113,164
NGL (b/d)	297	251	326	313

(3) The table shows production on a barrel of oil equivalent basis (boe) in which natural gas is converted to an equivalent barrel of oil based on a 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 third quarter of 2019 and 2018 were 49,349 boe/d and 51,765 boe/d, respectively, and 58,843 boe/d and 53,985 boe/d for the first nine months of 2019 and 2018, respectively. Sales volumes may vary from production volumes as a result of the timing of liftings in the Beryl field.

30

Pricing

The table below presents third-quarter and year-to-date 2019 and 2018 pricing and the relative increase or decrease from the prior period.

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019		Increase (Decrease)		2018		2019		Increase (Decrease)		2018
Average Oil Price - Per barrel
United States	$	54.70	(11	)%	$	61.20	$	54.16	(13	)%	$	62.08
Egypt	61.10		(18	)%	74.92		63.96		(11	)%	71.85
North Sea	63.12		(16	)%	75.01		65.45		(8	)%	71.32
Total	58.60		(15	)%	69.12		60.00		(11	)%	67.65
Average Natural Gas Price - Per Mcf
United States	$	0.97	(54	)%	$	2.09	$	1.17	(46	)%	$	2.15
Egypt	2.81		(1	)%	2.85		2.82		(1	)%	2.85
North Sea	3.20		(59	)%	7.78		4.56		(36	)%	7.07
Total	1.66		(35	)%	2.56		1.84		(30	)%	2.62
Average NGL Price - Per barrel
United States	$	13.26	(57	)%	$	30.84	$	14.93	(45	)%	$	27.15
Egypt	27.76		(40	)%	45.92		33.17		(18	)%	40.67
North Sea	26.63		(51	)%	54.73		33.98		(28	)%	47.16
Total	13.71		(56	)%	31.42		15.68		(43	)%	27.74

Third-Quarter 2019 compared to Third-Quarter 2018

Crude Oil Revenues Crude oil revenues for the third quarter of 2019 totaled $1.2 billion, a $348 million decrease from the comparative 2018 quarter. A 15 percent decrease in average realized prices reduced third-quarter 2019 revenues by $237 million compared to the prior-year quarter, while 6 percent lower average daily production decreased revenues by $111 million. Crude oil accounted for 84 percent of oil and gas production revenues and 51 percent of worldwide production in the third quarter of 2019. Crude oil prices realized in the third quarter of 2019 averaged $58.60 per barrel, compared with $69.12 per barrel in the comparative prior-year quarter.

Worldwide oil production decreased 15.0 Mb/d to 228.4 Mb/d in the third quarter of 2019 from the comparative prior-year period, primarily a result of lower gross production due to natural decline, particularly in Egypt.

Natural Gas Revenues Gas revenues for the third quarter of 2019 totaled $136 million, a $105 million decrease from the comparative 2018 quarter. A 35 percent decrease in average realized prices reduced third-quarter 2019 revenues by $85 million compared to the prior-year quarter, while 13 percent lower average daily production decreased revenues by $20 million. Natural gas accounted for 9 percent of Apache’s oil and gas production revenues and 33 percent of its equivalent production during the third quarter of 2019.

Worldwide natural gas production decreased 138 MMcf/d to 887 MMcf/d in the third quarter of 2019 from the comparative prior-year period, primarily a result of lower gross production due to general decline in Egypt and the sale of the Company’s Woodford-SCOOP and STACK plays and Western Anadarko Basin assets in the U.S.

NGL Revenues NGL revenues for the third quarter of 2019 totaled $95 million, an $85 million decrease from the comparative 2018 quarter. A 56 percent decrease in average realized prices reduced third-quarter 2019 revenues by $101 million compared to the prior-year quarter, while 20 percent higher average daily production increased revenues by $16 million. NGLs accounted for 7 percent of Apache’s oil and gas production revenues and 16 percent of its equivalent production during the third quarter of 2019.

Worldwide production of NGLs increased 12.4 Mb/d to 74.4 Mb/d in the third quarter of 2019 from the comparative prior-year period, primarily a result of the Alpine High development, partially offset by a decrease from the sale of the Company’s Woodford-SCOOP and STACK plays and Western Anadarko Basin assets in the U.S.

31

Year-to-Date 2019 compared to Year-to-Date 2018

Crude Oil Revenues Crude oil revenues for the first nine months of 2019 totaled $3.9 billion, a $610 million decrease from the comparative 2018 period. An 11 percent decrease in average realized prices reduced 2019 oil revenues by $512 million compared to the prior-year period, while 2 percent lower average daily production reduced revenues by $98 million. Crude oil accounted for 83 percent of oil and gas production revenues and 51 percent of worldwide production for the first nine months of 2019, compared to 80 percent and 53 percent, respectively, for the 2018 period. Crude oil prices realized in the first nine months of 2019 averaged $60.00 per barrel, compared with $67.65 per barrel in the comparative prior-year period.

Worldwide oil production decreased 4.1 Mb/d to 240.0 Mb/d in the first nine months of 2019 from the comparative prior-year period, primarily a result of lower gross production in Egypt due to natural decline.

Natural Gas Revenues Gas revenues for the first nine months of 2019 totaled $490 million, a $185 million decrease from the comparative 2018 period. A 30 percent decrease in average realized prices reduced 2019 natural gas revenues by $200 million compared to the prior-year period, while 3 percent higher average daily production increased revenues by $15 million. Natural gas accounted for 10 percent of Apache’s oil and gas production revenues and 35 percent of its equivalent production for the first nine months of 2019, compared to 12 percent and 34 percent, respectively, for the 2018 period.

Worldwide natural gas production increased 30.2 MMcf/d to 974.2 MMcf/d in the first nine months of 2019 from the comparative prior-year period, primarily a result of the Alpine High development, partially offset by lower gross production in Egypt due to natural decline and the sale of the Company’s Woodford-SCOOP and STACK plays and Western Anadarko Basin assets in the U.S.

NGL Revenues NGL revenues for the first nine months of 2019 totaled $286 million, a $160 million decrease from the comparative 2018 period. A 43 percent decrease in average realized prices reduced 2019 NGL revenues by $194 million compared to the prior-year period, while 14 percent higher average daily production increased revenues by $34 million. NGLs accounted for nearly 7 percent of oil and gas production revenues and 14 percent of its equivalent production for the first nine months of 2019, compared to 8 percent and 13 percent, respectively, for the 2018 period.

Worldwide production of NGLs increased 8.1 Mb/d to 67.0 Mb/d in the first nine months of 2019 from the comparative prior-year period, primarily a result of the Alpine High development partially offset by the sale of the Company’s Woodford-SCOOP and STACK plays and Western Anadarko Basin assets in the U.S.

Altus Revenues

Midstream services revenues totaled $34 million and $25 million, respectively, for the third quarters of 2019 and 2018 and $92 million and $50 million, respectively, for the first nine months of 2019 and 2018. Midstream services revenues were generated through fee-based contractual arrangements between Apache and Altus and are eliminated upon consolidation. The increase for both comparative periods is primarily driven by higher throughput volumes of natural gas as Apache increased production from Alpine High. The volume increase was partially limited by Apache’s deferral of a portion of its gas volumes at Alpine High beginning April 2019. These volumes returned incrementally throughout the third quarter of 2019.

32

Operating Expenses

The table below presents a comparison of the Company’s expenses on an absolute dollar basis. The Company’s discussion may reference expenses on a boe basis, on an absolute dollar basis or both, depending on context. All operating expenses include costs attributable to a noncontrolling interest in Altus and Egypt.

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Lease operating expenses	$	350	$	382	$	1,104	$	1,087
Gathering, processing, and transmission	66		92		230		260
Taxes other than income	44		58		141		162
Exploration	56		99		220		251
General and administrative	98		99		323		330
Transaction, reorganization, and separation	7		8		17		20
Depreciation, depletion, and amortization:
Oil and gas property and equipment	667		575		1,836		1,666
GPT assets	28		21		76		62
Other assets	16		14		47		43
Asset retirement obligation accretion	27		27		80		81
Impairments	9		10		249		10
Financing costs, net	95		192		365		385

Lease Operating Expenses (LOE) LOE decreased $32 million and increased $17 million for the third quarter and first nine months of 2019, respectively, on an absolute dollar basis relative to the comparable periods of 2018, primarily a result of changes in production. On a per-unit basis, LOE remained flat for the third quarter of 2019, and decreased 2 percent for the first nine months of 2019 as compared to the prior-year periods.

Gathering, Processing, and Transmission (GPT) GPT expenses include transmission and processing costs paid to third-party carriers and to Altus for Apache’s upstream oil and gas production. GPT expenses also include midstream operating costs incurred by Altus. The following table presents a summary of these expenses:

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Third-party processing and transmission costs	$	53		$	75		$	187		$	221
Midstream service affiliate costs	34			25			90			50
Upstream processing and transmission costs	87			100			277			271
Midstream operating expenses	13			17			43			39
Intersegment eliminations	(34		)	(25		)	(90		)	(50		)
Total GPT costs	$	66		$	92		$	230		$	260

GPT costs decreased $26 million and $30 million from the third quarter and first nine months of 2018, respectively. Third-party processing and transmission costs decreased $22 million and $34 million from the third quarter and first nine months of 2018, respectively, primarily driven by a decrease in pricing and the Company’s sale of non-core assets in Oklahoma and Texas. Midstream operating expenses decreased $4 million and increased $4 million from the third quarter and first nine months of 2018, respectively. The decrease from prior-year quarter is primarily driven by a decrease in employee-related costs and lower repair and maintenance expenses as a result of transitioning to the Company’s centralized Diamond cryogenic complex from mechanical refrigeration units. The increase year-over-year is primarily driven by higher operating costs including contract labor, equipment rentals, and supplies as a result of increased throughput volumes.

Midstream service affiliate costs increased $9 million and $40 million from the third quarter and first nine months of 2018, respectively, as a result of increased Alpine High volumes. These affiliate costs are eliminated upon consolidation.

33

Taxes other than Income Taxes other than income decreased $14 million and $21 million from the third quarter and first nine months of 2018, respectively, primarily the result of a decrease in severance taxes on lower commodity prices.

Exploration Expense Exploration expense includes unproved leasehold impairments, exploration dry hole expense, geological and geophysical expenses, and the costs of maintaining and retaining unproved leasehold properties. Exploration expenses in the third quarter and first nine months of 2019 decreased $43 million and $31 million, respectively, compared to the prior-year periods.

The following table presents a summary of exploration expense:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Unproved leasehold impairments	$	12	$	39	$	74	$	76
Dry hole expense	5		21		33		57
Geological and geophysical expense	18		6		56		41
Exploration overhead and other	21		33		57		77
	$	56	$	99	$	220	$	251

Unproved leasehold impairments decreased $27 million and $2 million from the third quarter and first nine months of 2018, respectively. Higher leasehold impairments in the 2018 period were associated with decreased planned activity in the Company’s Midcontinent/Gulf Coast region. Dry hole expense decreased $16 million and $24 million from the third quarter and first nine months of 2018, respectively, primarily a result of unsuccessful international exploration in the 2018 period. Exploration overhead decreased $12 million and $20 million from the third quarter and first nine months of 2018, respectively, primarily a result of a decrease in exploratory activity. During the nine months ended September 30, 2019 and 2018, the Company drilled 25 and 44 gross exploration wells, respectively.

General and Administrative (G&A) Expenses G&A expense for the third quarter remained relatively flat compared to the prior-year period and decreased $7 million from the first nine months of 2018. The decrease in G&A expenses between the year-to-date periods was primarily related to lower cash-based stock compensation expense resulting from a decrease in the Company’s stock price. The prior year periods also reflect a non-recurring charge to accelerate vesting on outstanding stock awards for certain retirement eligible employees.

Transaction, Reorganization, and Separation (TRS) Costs TRS costs for the third quarter remained relatively flat compared to the prior-year period and decreased $3 million from the first nine months of 2018, primarily a result of legal fees incurred for transactions.

Depreciation, Depletion, and Amortization (DD&A) Oil and gas property DD&A expense increased $92 million and $170 million compared to the third quarter and first nine months of 2018, respectively, primarily a result of negative reserve revisions related to pricing. The Company’s oil and gas property DD&A rate increased $3.15 per boe and $1.13 per boe in the third quarter and first nine months of 2019, respectively, from the prior-year periods. GPT depreciation increased $7 million and $14 million from the third quarter and first nine months of 2018, respectively, associated with capital spending on Altus infrastructure.

Impairments The Company recorded asset impairments in connection with fair value assessments in the third quarter and first nine months of 2019 totaling $9 million and $249 million, respectively. The Company recorded a $9 million impairment in the third quarter of 2019 on certain Altus Midstream held-for-sale assets, as well as a $240 million impairment during the second quarter of 2019 on held-for-sale assets in the Western Anadarko Basin in Oklahoma and Texas. The Company recorded asset impairments totaling $10 million for each of the third quarter and first nine months of 2018 in connection with fair value assessments on North Sea unproved assets to be divested. For more information regarding asset impairments, please refer to “Fair Value Measurements” and “Oil and Gas Property” within Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

34

Financing Costs, Net Financing costs incurred during the periods comprised the following:

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Interest expense	$	107		$	113		$	323		$	335
Amortization of debt issuance costs	2			2			5			8
Capitalized interest	(9		)	(11		)	(26		)	(36		)
Loss on extinguishment of debt	—			94			75			94
Interest income	(5		)	(6		)	(12		)	(16		)
Financing costs, net	$	95		$	192		$	365		$	385

Net financing costs decreased $97 million and $20 million compared with the third quarter and first nine months of 2018, respectively, primarily a result of a $94 million loss on extinguishment of debt incurred in the third quarter of 2018. The first nine months of 2019 also had a loss on extinguishment of debt of $75 million. Interest expense decreased $6 million and $12 million compared to the third quarter and first nine months of 2018, respectively, as a result of the Company’s debt refinancing in the fourth quarter of 2018 and the second quarter of 2019.

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 of 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 third quarters of 2019 and 2018, Apache’s effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.

Apache’s 2019 and 2018 year-to-date effective income tax rates were primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.

The Company continues to record a full valuation allowance against its U.S. net deferred tax assets and will continue to maintain a full valuation allowance until there is sufficient evidence to support the reversal of all or some portion of this allowance.

Apache and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. The Company is currently under IRS audit for the 2014-2017 tax years and is also under audit in various states and foreign jurisdictions as part of its normal course of business.

Capital Resources and Liquidity

Operating cash flows are the Company’s primary source of liquidity. The Company may also elect to utilize available cash on hand, committed borrowing capacity, access to both debt and equity capital markets, or proceeds from the sale of nonstrategic assets for all other liquidity and capital resource needs.

Apache’s operating cash flows, both in the short-term and the long-term, are impacted by highly volatile oil and natural gas prices, as well as costs and sales volumes. Significant changes in commodity prices impact Apache’s revenues, earnings, and cash flows. These changes potentially impact Apache’s liquidity if costs do not trend with changes in commodity prices. Historically, costs have trended with commodity prices, albeit on a lag. Sales volumes also impact cash flows; however, they have a less volatile impact in the short term.

Apache’s long-term operating cash flows are dependent on reserve replacement and the level of costs required for ongoing operations. Cash investments are required to fund activity necessary to offset the inherent declines in production and proved crude oil and natural gas reserves. Future success in maintaining and growing reserves and production is highly dependent on the success of Apache’s drilling program and its ability to add reserves economically. Changes in commodity prices also impact estimated quantities of proved reserves. In the first nine months of 2019, Apache recognized negative reserve revisions of approximately 11 percent of its year-end 2018 estimated proved reserves as a result of lower prices. If prices for the remainder of 2019 approximate commodity future prices as of September 30, 2019, the Company is reasonably likely to report additional negative revisions, currently estimated at five percent of year-end 2018 estimated proved reserves.

35

Apache believes the liquidity and capital resource alternatives available to the Company, combined with proactive measures to adjust its capital budget to reflect volatile commodity prices and anticipated operating cash flows, will be adequate to fund short-term and long-term operations, including Apache’s capital development program, repayment of debt maturities, payment of dividends, and any amount that may ultimately be paid in connection with commitments and contingencies.

For additional information, please see Part I, Items 1 and 2, “Business and Properties,” and Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Sources and Uses of Cash

The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented.

	For the Nine Months Ended September 30,
	2019			2018
	(In millions)
Sources of Cash and Cash Equivalents:
Net cash provided by operating activities	$	2,089		$	2,734
Proceeds from sale of oil and gas properties	590			51
Fixed-rate debt borrowings	989			992
Proceeds from Altus credit facility	235			—
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	611			—
	4,514			3,777
Uses of Cash and Cash Equivalents:
Additions to oil and gas property(1)	$	2,015		$	2,338
Leasehold and property acquisitions	39			86
Additions to Altus gathering, processing, and transmission facilities(1)	294			412
Altus equity method interests	1,008			—
Payments on fixed-rate debt	1,150			1,370
Dividends paid	282			287
Distributions to noncontrolling interest - Egypt	235			256
Other	42			103
	5,065			4,852
Decrease in cash and cash equivalents	$	(551	)	$	(1,075	)

(1) The table presents capital expenditures on a cash basis; therefore, the amounts may differ from those discussed elsewhere in this document, which include accruals.

Sources of Cash and Cash Equivalents

Net Cash Provided by Operating Activities Operating cash flows are Apache’s primary source of capital and liquidity and are impacted, both in the short term and the long term, by volatile oil and natural gas prices. The factors that determine operating cash flows are largely the same as those that affect net earnings, with the exception of non-cash expenses such as DD&A, exploratory dry hole expense, asset impairments, asset retirement obligation (ARO) accretion, and deferred income tax expense.

Net cash provided by operating activities for the first nine months of 2019 totaled $2.1 billion, a decrease of $645 million from the first nine months of 2018. The decrease primarily reflects lower commodity prices compared to the prior-year period.

For a detailed discussion of commodity prices, production, and expenses, refer to the “Results of Operations” of this Item 2. For additional detail on the changes in operating assets and liabilities and the non-cash expenses that do not impact net cash provided by operating activities, please see the statement of consolidated cash flows in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q.

Asset Divestitures The Company recorded proceeds from non-core asset divestitures totaling $590 million and $51 million in the first nine months of 2019 and 2018, respectively. For more information regarding the Company’s acquisitions and divestitures, please see Note 2—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

36

Fixed-Rate Debt Borrowings On June 19, 2019, Apache closed offerings of $1.0 billion in aggregate principal amount of senior unsecured notes, comprised of $600 million in aggregate principal amount of 4.250% notes due January 15, 2030 (2030 notes) and $400 million in aggregate principal amount of 5.350% notes due July 1, 2049 (2049 notes). The notes are redeemable at any time, in whole or in part, at Apache’s option, subject to a make-whole premium. The aggregate net proceeds of $989 million from the sale of the notes, comprised of net proceeds from the sale of the 2030 notes of $595 million and the 2049 notes of $394 million, were used to purchase certain outstanding notes in cash tender offers and for general corporate purposes.

Proceeds from Altus Credit Facility The construction of Altus’ gathering and processing assets and the exercise of its options for equity interests in Permian Basin long-haul pipeline entities required capital expenditures in excess of Altus’ cash on hand and operational cash flows. As of September 30, 2019, $235 million in borrowings were outstanding under Altus Midstream LP’s revolving credit facility. The Company anticipates that Altus Midstream LP will continue to utilize revolving credit facility borrowing capacity in addition to Altus’ cash flow from operating activities to fund its future capital needs.

Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners On June 12, 2019, Altus Midstream LP, an indirectly controlled subsidiary of Apache, issued and sold Series A Cumulative Redeemable Preferred Units for an aggregate issue price of $625 million in a private offering. Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. These proceeds were used to fund capital contributions related to Altus’ equity interests in Permian Basin long-haul pipeline entities and repayment of outstanding principal on the revolving credit facility (discussed above). For more information, please refer to Note 12—Redeemable Noncontrolling Interest - Altus in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Uses of Cash and Cash Equivalents

Additions to Oil & Gas Property Worldwide exploration and development (E&D) cash expenditures for the first nine months of 2019 totaled $2.0 billion, compared to $2.3 billion for the first nine months of 2018. Expenditures were primarily in the Permian region as Apache continues development of its Alpine High play and other core holdings. Apache operated an average of 20 drilling rigs during the third quarter of 2019.

Leasehold and Property Acquisitions Apache completed leasehold and property acquisitions for cash totaling $39 million and $86 million during the first nine months of 2019 and 2018, respectively. Acquisition investments continued to focus on adding new leasehold positions to the Company’s U.S. onshore regions.

Additions to Altus GPT Facilities Apache’s cash expenditures in GPT facilities totaled $294 million and $412 million in the first nine months of 2019 and 2018, respectively, nearly all comprising midstream infrastructure expenditures incurred by Altus Midstream LP.

Altus Equity Method Interests Altus made acquisitions and contributions of $1.0 billion in the first nine months of 2019 for equity interests in multiple Permian Basin long-haul pipeline entities and received distributions of $4 million. The Company had no equity method interest cash activity in the first nine months of 2018. For more information regarding the Company’s equity method interests, please see Note 6—Equity Method Interests in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Payments on Fixed-Rate Debt On June 21, 2019, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $932 million aggregate principal amount of notes for approximately $1.0 billion, which included principal, the net premium to par, and an early tender premium totaling $28 million, as well as accrued and unpaid interest of $14 million. The Company recorded a net loss of $75 million on extinguishment of debt, including $7 million of unamortized debt issuance costs and discounts, in connection with the note purchases. Additionally, on July 1, 2019, Apache’s 7.625% senior notes in original principal amount of $150 million matured and were repaid.

Dividends For the nine-month periods ended September 30, 2019 and 2018, the Company paid $282 million and $287 million, respectively, in dividends on its common stock.

Egypt Noncontrolling Interest Sinopec International Petroleum Exploration and Production Corporation (Sinopec) holds a one-third minority participation interest in Apache’s oil and gas business in Egypt. Apache made cash distributions totaling $235 million and $256 million to Sinopec in the first nine months of 2019 and 2018, respectively.

37

Liquidity

The following table presents a summary of the Company’s key financial indicators at the dates presented:

	September 30, 2019		December 31, 2018
	(In millions)
Cash and cash equivalents	$	163	$	714
Total debt	8,412		8,244
Equity	7,868		8,812
Available committed borrowing capacity	3,996		3,857
Available committed borrowing capacity - Altus	415		450

Cash and cash equivalents The Company had $163 million in cash and cash equivalents as of September 30, 2019, of which approximately $3 million was held by Altus. The majority of the cash is invested in highly liquid, investment grade securities with maturities of three months or less at the time of purchase.

Debt As of September 30, 2019, outstanding debt, which consisted of notes, debentures, subsidiary credit facility borrowings, and finance lease obligations, totaled $8.4 billion. Current debt as of September 30, 2019, included $19 million of finance lease obligations.

In March 2018, the Company entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of September 30, 2019. The facility is for general corporate purposes, and committed borrowing capacity fully supports Apache’s commercial paper program. As of September 30, 2019, a letter of credit for approximately £3.1 million and no borrowings were outstanding under this facility.

The Company’s $3.5 billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days at competitive interest rates. As of September 30, 2019, the Company had no commercial paper outstanding.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s two, one-year extension options). The agreement for this facility, as amended, provides aggregate commitments from a syndicate of banks of $650 million until the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the agreement, for the immediately preceding fiscal quarter equals or exceeds $175 million on an annualized basis (such period, the Initial Period). Following the Initial Period, the aggregate commitments equal $800 million. All aggregate commitments include a letter of credit subfacility of up to $100 million and a swingline loan subfacility of up to $100 million. After the Initial Period, Altus Midstream LP may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2019, there were $235 million of borrowings and no letters of credit outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.

The Company was in compliance with the terms of its credit facilities as of September 30, 2019.

Off-Balance Sheet Arrangements Apache enters into customary agreements in the oil and gas industry for drilling rig commitments, firm transportation agreements, and other obligations as described in “Contractual Obligations” in Part II, Item 7 of the Form 10-K for the year ended December 31, 2018. There have been no material changes to the contractual obligations described therein.

38

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk

The Company’s revenues, earnings, cash flow, capital investments and, ultimately, future rate of growth are highly dependent on the prices the Company receives for its crude oil, natural gas, and NGLs, which have historically been very volatile because of unpredictable events such as economic growth or retraction, weather, political climate, and global supply and demand. The Company’s average crude oil realizations have decreased 15 percent to $58.60 per barrel in the third quarter of 2019 from $69.12 per barrel in the comparable period of 2018. The Company’s average natural gas price realizations have decreased 35 percent to $1.66 per Mcf in the third quarter of 2019 from $2.56 per Mcf in the comparable period of 2018. The Company’s average NGL realizations have decreased 56 percent to $13.71 per barrel in the third quarter of 2019 from $31.42 per barrel in the comparable period of 2018. Based on average daily production for the third quarter of 2019, a $1.00 per barrel change in the weighted average realized oil price would have increased or decreased revenues for the quarter by approximately $21 million, a $0.10 per Mcf change in the weighted average realized price of natural gas would have increased or decreased revenues for the quarter by approximately $8 million, and a $1.00 per barrel change in the weighted average realized NGL price would have increased or decreased revenues for the quarter by approximately $7 million.

Apache periodically enters into derivative positions on a portion of its projected oil and natural gas production through a variety of financial and physical arrangements intended to manage fluctuations in cash flows resulting from changes in commodity prices. Such derivative positions may include the use of futures contracts, swaps, and/or options. Apache does not hold or issue derivative instruments for trading purposes. As of September 30, 2019, the Company had open natural gas derivatives not designated as cash flow hedges in an asset position with a fair value of $2 million. A 10 percent increase in gas prices would decrease the asset by approximately $1 million, while a 10 percent decrease in prices would increase the asset by approximately $1 million. As of September 30, 2019, the Company had open oil derivatives not designated as cash flow hedges in a liability position with a fair value of $6 million. A 10 percent increase in oil prices would increase the liability by approximately $5 million, while a 10 percent decrease in prices would decrease the liability by approximately $5 million. These fair value changes assume volatility based on prevailing market parameters at September 30, 2019. See Note 4—Derivative Instruments and Hedging Activities in the Notes to Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q for notional volumes and terms with the Company’s derivative contracts.

Interest Rate Risk

At September 30, 2019, Apache had approximately $8.2 billion net carrying value of notes and debentures outstanding, all of which was fixed-rate debt, with a weighted average interest rate of 4.88 percent. Although near-term changes in interest rates may affect the fair value of Apache’s fixed-rate debt, they do not expose the Company to the risk of earnings or cash flow loss associated with that debt. Apache is also exposed to interest rate risk related to its interest-bearing cash and cash equivalents balances and amounts outstanding under its commercial paper program and credit facilities. As of September 30, 2019, the Company’s cash and cash equivalents totaled approximately $163 million, approximately 81 percent of which was invested in money market funds and short-term investments with major financial institutions. A change in the interest rate applicable to the Company’s short-term investments and credit facility borrowings would have a de minimis impact on earnings and cash flows but could impact interest costs associated with future debt issuances or any future borrowings under its commercial paper program, revolving credit facilities, and money market lines of credit.

Foreign Currency Exchange Rate Risk

The Company’s cash activities relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. The Company’s North Sea production is sold under U.S. dollar contracts, and the majority of costs incurred are paid in British pounds. In Egypt, substantially all oil and gas production is sold under U.S. dollar contracts, and the majority of the costs incurred are denominated in U.S. dollars. Transactions denominated in British pounds are converted to U.S. dollar equivalents based on average exchange rates during the period.

Foreign currency gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated at the end of each month. Currency gains and losses are included as either a component of “Other” under “Revenues and Other” or, as is the case when the Company re-measures its foreign tax liabilities, as a component of the Company’s provision for income tax expense on the statement of consolidated operations. A foreign currency net gain or loss of $7 million would result from a 10 percent weakening or strengthening, respectively, in the British pound as of September 30, 2019.

As of September 30, 2019, the Company has outstanding foreign exchange contracts with a total notional amount of £38 million that are used to reduce its exposure to fluctuating foreign exchange rates for the British pound. A 10 percent strengthening

39

of the British pound against the U.S. dollar would result in a foreign currency net gain of $2 million, while a 10 percent weakening of the British pound against the U.S. dollar would result in a loss of $3 million.

40

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 our disclosure controls and procedures as of September 30, 2019, 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 information we are required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

We periodically review the design and effectiveness of our disclosure controls, including compliance with various laws and regulations that apply to our operations both inside and outside the United States. We make modifications to improve the design and effectiveness of our disclosure controls, and may take other corrective action, if our reviews identify deficiencies or weaknesses in our controls.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2019, the Company completed the implementation of Quorum Land Management (Quorum), a software system for managing land assets, including the acquisition, maintenance, geographic information system mapping, and reporting of land, ownership and lease information. The Company believes the implementation of the system and related changes to internal controls will enhance internal controls over financial reporting. The Company has updated its internal controls, as applicable, to facilitate modifications to its business processes and accounting procedures and will continue to evaluate the operating effectiveness of related key controls during subsequent periods. The Company does not believe that the Quorum implementation has had an adverse effect on its internal control over financial reporting.

There were no other changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

41

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (filed with the SEC on March 1, 2019) and Note 11—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, for a description of material legal proceedings.

ITEM 1A. RISK FACTORS

Please refer to Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and Part I, Item 3—Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q. There have been no material changes to our risk factors since our annual report on Form 10-K for the fiscal year ended December 31, 2018. Given the nature of its business, Altus Midstream Company may be subject to different and additional risks than those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and this Quarterly Report on Form 10-Q. For a description of these risks, please refer to the Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q filed by Altus Midstream Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In 2013 and 2014, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased from time to time either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, 2019, had repurchased a total of 40 million shares at an average price of $79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during 2019.

ITEM 5. OTHER INFORMATION

The registrant elects to disclose under this Item 5 the following information otherwise disclosable in a report on Form 8-K under “Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year”:

Effective October 31, 2019, the Board of Directors of Apache Corporation (“Apache”) amended Article VII of Apache’s bylaws to update indemnification provisions and as so amended, restated the bylaws (the “Amended and Restated Bylaws”). The amendments clarify and add certain procedural terms to the indemnification provisions of Article VII, which continues to provide for mandatory indemnification of certain officers, directors, employees, and agents.

The foregoing summary and description of the provisions of the Amended and Restated Bylaws does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.3 to this report and incorporated herein by reference.

42

ITEM 6. EXHIBITS

3.1	–	Restated Certificate of Incorporation of Registrant, dated September 19, 2013, as filed with the Secretary of State of Delaware on September 19, 2013 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed September 20, 2013, SEC File No. 001-4300).
3.2	–	Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated May 14, 2015, as filed with the Secretary of State of Delaware on May 14, 2015 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed May 20, 2015, SEC File No. 001-4300).
*3.3	–	Amended and Restated Bylaws of Registrant, dated October 31, 2019.
4.1	–	Form of 4.250% Notes due 2030, dated June 5, 2019 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed June 10, 2019, SEC File No. 001-4300).
4.2	–	Form of 5.350% Notes due 2049, dated June 5, 2019 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K filed June 10, 2019, SEC File No. 001-4300).
*31.1	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
*31.2	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
*32.1	–	Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
*101	–	The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, 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 Sheets, (v) Statement of Consolidated Changes in Equity and Noncontrolling Interest 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

43

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:	October 31, 2019	/s/ STEPHEN J. RINEY
		Stephen J. Riney
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
Dated:	October 31, 2019	/s/ REBECCA A. HOYT
		Rebecca A. Hoyt
		Senior Vice President, Chief Accounting Officer, and Controller
		(Principal Accounting Officer)

44

EX-3.3

Exhibit 3.3

AMENDED AND RESTATED BYLAWS

OF APACHE CORPORATION

(October 31, 2019)

ARTICLE I.

NAME OF CORPORATION

The name of the corporation is Apache Corporation.

ARTICLE II.

OFFICES

SECTION 1. The principal office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of its resident agent in charge thereof is The Corporation Trust Company.

SECTION 2. The corporation may have such other offices either within or without the State of Delaware as the board of directors may designate or as the business of the corporation may from time to time require.

ARTICLE III.

SEAL

The corporate seal shall have inscribed upon it the name of the corporation and other designations as the board of directors from time to time determine. There may be alternate seals of the corporation.

ARTICLE IV.

MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders of the corporation shall be held at the office of the corporation in the City of Houston, Texas, or at any other place within or without the State of Delaware that shall be stated in the notice of the meeting.

SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of the corporation shall be held at the place and time within or without the State of Delaware that may be designated by the board of directors, on the last Thursday in April in each year or on such other date as may be designated by the board of directors, if not a legal holiday, and if a legal holiday, then at the same time on the next succeeding business day for the purpose of electing directors and for the transaction of any other business that may properly come before the meeting.

SECTION 3. SPECIAL MEETINGS OF THE STOCKHOLDERS. Special meetings of the stockholders of the corporation, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the (i) chairman of the board or the chief executive officer, (ii) chairman of the board, chief

1

executive officer, or secretary at the request in writing of a majority of the board of directors or (iii) chairman of the board or the secretary of the corporation at the written request in proper form of one or more stockholders of record of the corporation (acting on their own behalf and not by assigning or delegating their rights to any other person or entity) that together have continuously held, for their own accounts, beneficial ownership of at least fifteen percent (15%) aggregate net long position in the issued and outstanding voting stock of the corporation entitled to vote generally for the election of directors (the “requisite percent”) for at least three continuous years prior to the date such request is delivered to the corporation and at the meeting date, provided that, each such stockholder shall have held, for their own accounts, beneficial ownership of not less than ten thousand (the “minimum ownership”) and not more than ten percent (10%) (the “maximum ownership”) of the issued and outstanding voting stock of the corporation entitled to vote generally for the election of directors. For purposes of determining the requisite percent, “net long position” shall be determined with respect to each requesting stockholder in accordance with the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934, as amended, provided that (i) for the purposes of such definition, reference in such rule to (A) “the date the tender offer is first publicly announced or otherwise made known by the bidder to the holders of the security to be acquired” shall be the date of the relevant special meeting request, (B) the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the corporation’s common stock on the NYSE on such date (or, if such date is not a trading day, the next succeeding trading day), (C) the “person whose securities are the subject of the offer” shall refer to the corporation, (D) a “subject security” shall refer to the issued and outstanding voting stock of the corporation; and (ii) the net long position of such stockholder shall be reduced by the number of shares as to which such stockholder does not, or will not, have the right to vote on its own behalf at the special meeting or as to which such stockholder has entered into any derivative or other agreement, arrangement, or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares. Whether the requesting stockholders have complied with the requirements of this Section 3 and related provisions of the bylaws shall be determined in good faith by the board of directors, which determination shall be conclusive and binding on the corporation and the stockholders. In order for a special meeting upon stockholder request (a “stockholder requested special meeting”) to be called, one or more requests for a special meeting (each, a “special meeting request,” and collectively, the “special meeting requests”) must be signed by the stockholders of the corporation holding the requisite percent of the voting stock of the corporation and must be delivered to the secretary at the principal executive offices of the corporation by registered mail, return receipt requested; provided, however, that no stockholder requested special meeting shall be called pursuant to any special meeting request unless one or more special meeting requests relating to such meeting constituting the requisite percent have been delivered to the secretary in compliance with all of the requirements of this Section 3 within 60 days of the earliest dated special meeting request in respect of such stockholder requested special meeting. The special meeting request(s) shall (i) set forth the name and address, as they appear on the corporation’s books, of each stockholder of the corporation signing such request, (ii) state the specific purpose or purposes of the special meeting, the matter or matters proposed to be acted on at the special meeting, the reasons for conducting such business at the special meeting, and the text of any proposal or business to be considered at the special meeting (including the text of any resolutions proposed to be considered and, in the event that such business includes a proposal to amend these bylaws, the language of the proposed amendment, which language shall be contained in the notice of special meeting as required by Article XIII, Section 1 (Amendments), hereof), (iii) bear the date of signature of each such stockholder signing the special meeting request, (iv) provide documentary evidence that the stockholder(s) requesting the special meeting own the requisite percent and not less than the minimum ownership and not more than the maximum ownership as of the date on which the special meeting request(s) constituting the requisite percent are delivered to the secretary and attach a notarized affidavit swearing to the net long position of such stockholder(s), (v) provide a representation by each

2

stockholder signing the special meeting request that such stockholder intends to appear in person at the stockholder requested special meeting and is entitled to vote thereon, (vi) provide a representation by each stockholder signing the special meeting request that such stockholder intends to continue ownership of such shares through the date of the special meeting, and (vii) if applicable, include any additional information required by ARTICLE IV, Section 13 (Notice of Stockholder Nominees) hereof. Any requesting stockholder may revoke its special meeting request at any time by written revocation delivered to the secretary at the principal executive offices of the corporation.

In the event of the delivery, in the manner provided in this Section 3, to the corporation of the requisite special meeting request or requests and/or any related revocation or revocations, the corporation may engage nationally recognized independent inspectors for the purpose of promptly performing a ministerial review of the validity of the requests and revocations. For the purpose of permitting the inspectors to perform such review, no special meeting request shall be granted until such date as the independent inspectors certify to the corporation that the requests delivered to the corporation in accordance with this Section 3, and not revoked, represent at least the minimum number of shares held for the minimum amount of time to call such a stockholder requested special meeting. Nothing contained in this Section 3 shall in any way be construed to suggest or imply that the board of directors or any stockholder shall not be entitled to contest the validity of any request or revocation thereof, whether before or after such certification by the independent inspectors, or take any other action (including, without limitation, the commencement, prosecution, or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

Except as provided in the next sentence, any special meeting shall be held at such date and time as may be fixed by the board of directors in accordance with these bylaws and in compliance with the General Corporation Law of the State of Delaware. In the case of a stockholder requested special meeting, such meeting shall be held at such date, time and place as shall be provided in the notice of such meeting delivered in accordance with Article IV, Section 4 below, and the record date for stockholders entitled to notice of and to vote at such meeting shall be determined in accordance with Article IV, Section 5 below; provided that, except as otherwise provided herein or unless a later date is required in order to allow the corporation to file the information required under Item 8 (or any comparable or successor provision) of Schedule 14A under the Securities Exchange Act of 1934, as amended, if applicable, the date of any stockholder requested special meeting shall be not more than 90 days after (i) the determination of the validity of the special meeting request(s) by the independent inspectors in the manner provided in this Section 3 or (ii) if no such independent inspectors are engaged to review the validity of one or more special meeting requests, not more than 90 days after the special meeting request(s) constituting the requisite percent have been delivered to or received by the secretary.

Business transacted at any stockholder requested special meeting shall be limited to the purpose(s) stated in the valid special meeting request(s) signed by stockholders holding the requisite percent of the corporation’s voting stock; provided, however, that nothing herein shall prohibit the board of directors from submitting matters, whether or not described in the stockholder special meeting request(s), to the stockholders at any stockholder requested special meeting. If none of the stockholders who submitted a special meeting request appears at or sends a qualified representative to the stockholder requested special meeting to present the matters to be presented for consideration that were specified in the special meeting request, the corporation need not present such matters for a vote at such meeting.

Except as otherwise provided by law, in the case of a stockholder requested special meeting, the chairman of the meeting shall have the power and duty (i) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in

3

accordance with the procedures set forth in this Section 3 and (ii) if any proposed nomination or business was not made or proposed in compliance with this Section 3 or the stated business to be brought before the special meeting is not a proper subject for stockholder action under applicable law, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. In addition, a special meeting requested by stockholders shall not be held if the board of directors has called or calls for a special or regular meeting of stockholders to be held within 90 days after the special meeting request(s) constituting the requisite percent have been delivered to or received by the secretary and the board of directors determines in good faith that the business of such meeting includes (among any other matters properly brought before the meeting) the business specified in such special meeting request. The board of directors, in its discretion, also may cancel a special meeting (or, if the special meeting has not yet been called, may direct the chairman of the board or the secretary of the corporation not to call such a meeting) if, at any time after receipt by the secretary of the corporation of a proper special meeting request, there are no longer valid special meeting requests from stockholders holding in the aggregate at least the requisite percent, whether because of revoked requests or otherwise. In such event, the stockholder(s) who requested such meeting may not call (or participate in calling) another special meeting for one year after such cancellation.

SECTION 4. NOTICE OF MEETING. Written or printed notice stating the place, day and hour of the meeting and in the case of special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than 60 days before the date of the meeting either personally, by mail or other lawful means by or at the direction of the chairman of the board, the chief executive officer, or the secretary to each stockholder of record entitled to vote at the meetings. If mailed, the notice shall be deemed to be delivered when deposited in the United States Postal Service, addressed to the stockholder at his address as it appears on the stock transfer books of the corporation with postage thereon prepaid.

SECTION 5. CLOSING OF TRANSFER BOOKS FOR FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, the board of directors may close the stock transfer books of the corporation for a period not exceeding 60 days preceding the date of any meeting of stockholders. In lieu of closing the stock transfer books, the board of directors may fix in advance a date, not exceeding 60 days preceding the date of any meeting of stockholders, as a record date for the determination of the stockholders entitled to notice of and to vote at the meeting and any adjournment thereof, and only the stockholders as shall be stockholders of record on the date so fixed shall be entitled to the notice of and to vote at the meeting and any adjournment thereof.

SECTION 6. VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the corporation shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The list shall be open to the examination of any stockholder during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the election is to be held and which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and subject to the inspection of any stockholder who may be present. Upon the willful neglect or refusal of the board of directors of the corporation to produce a list at any meeting of the stockholders at which an election is to be held in accordance with this Section 6, they shall be ineligible to hold any office at such election.

4

SECTION 7. VOTING RIGHTS. At each meeting of the stockholders of the corporation, every stockholder having the right to vote thereat shall be entitled to vote in person or by proxy, but no proxy shall be voted after three years from its date unless the proxy provides for a longer period. Except as otherwise provided by law or the Certificate of Incorporation, each stockholder shall have one vote for each share of stock having voting power registered in his name. The vote at an election for directors, and upon the demand of any stockholder, the vote upon any question before a meeting of the stockholders, shall be by written ballot. All elections shall be had and all questions decided by a plurality vote except where by statute, by provision in the Certificate of Incorporation or these bylaws it is otherwise provided.

Prior to any meeting, but subsequent to the date fixed by the board of directors pursuant to Section 5 of Article IV of these bylaws, any proxy may submit his proxy to the secretary for examination. The certificate of the secretary as to the regularity of the proxy and as to the number of shares held by the persons who severally and respectively executed such proxies shall be received as prima facie evidence of the number of shares represented by the holder of the proxy for the purpose of establishing the presence of a quorum at the meeting and of organizing the same.

SECTION 8. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, initially present in person or represented by proxy, shall be requisite, and shall constitute a quorum of all meetings of the stockholders for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these bylaws. If, however, a majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice, other than announcement at the meeting, until the requisite amount of voting stock shall be present. At the adjourned meeting at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified.

SECTION 9. INSPECTORS. At each meeting of the stockholders, the polls shall be opened and closed. The proxies and the ballots shall be received and taken in charge and all questions touching the qualifications of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by three inspectors. The inspectors shall be appointed by the board of directors before or at the meeting, or if no appointment shall have been made, then by the presiding officer at the meeting. If, for any reason any of the inspectors previously appointed shall fail to attend or refuse or be unable to serve, inspectors in place of any so failing to attend or refusing or unable to serve shall be appointed in like manner.

SECTION 10. WAIVER OF NOTICE. Whenever any notice whatever is required to be given pursuant to the provisions of a statute, the Certificate of Incorporation or these bylaws of the corporation, a waiver thereof in writing signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

SECTION 11. STOCKHOLDER ACTION. Any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing by stockholders.

SECTION 12. NOTICE OF STOCKHOLDER BUSINESS. At an annual meeting of the stockholders, only business shall be conducted that has been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought

5

before the meeting by a stockholder, which stockholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than 120 days prior to the meeting. A stockholders’ notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (w) a brief description of the business desired to be brought before the annual meeting, (x) the name and address, as they appear on the corporation’s books, of the stockholder proposing the business, (y) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (z) any material interest of the stockholder in the business. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 12. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 12, and if he should so determine, he shall so declare to the meeting and any business not properly brought before the meeting shall not be transacted. This section sets forth only the procedure by which business may be properly brought before an annual meeting of stockholders and does not in any way grant additional rights to stockholders beyond those currently afforded them by law.

SECTION 13. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are nominated in accordance with the procedures set forth in this Section 13 or in Section 14 of this Article IV shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders (i) by or at the direction of the board of directors, (ii) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 13 or (iii) by any Eligible Stockholder (as defined below) who satisfies the requirements and complies with the procedures set forth in Section 14 of this Article IV. Any nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than 120 days prior to the meeting. The stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation the person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation’s books, of the stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder. At the request of the board of directors, any person nominated by the board of directors for election as a director shall furnish to the secretary of the corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 13 or Section 14 of this Article IV. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

SECTION 14. INCLUSION OF STOCKHOLDER NOMINEES IN THE CORPORATION’S PROXY MATERIALS. Subject to the terms and conditions set forth in these bylaws, the corporation shall include in its proxy materials for an annual meeting of stockholders after the 2016 annual meeting the

6

name, together with the Required Information (defined below), of any person nominated for election (the “Stockholder Nominee”) to the board of directors by a stockholder or group of stockholders that satisfy the requirements of this Section 14, including qualifying as an Eligible Stockholder (as defined below), and that expressly elects at the time of providing the written notice required by this Section 14 (a “Proxy Access Notice”) to have its nominee included in the corporation’s proxy materials pursuant to this Section 14.

A. DEFINITIONS. For the purposes of this Section 14:

(1) “Voting Stock” shall mean outstanding shares of capital stock of the corporation entitled to vote generally for the election of directors;

(2) “Constituent Holder” shall mean any stockholder or beneficial holder whose stock ownership is counted for the purposes of qualifying as holding the Proxy Access Request Required Shares (as defined below) or qualifying as an Eligible Stockholder (as defined below);

(3) “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Exchange Act; provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership; and

(4) a stockholder shall be deemed to “own” only those outstanding shares of Voting Stock as to which the stockholder (or any Constituent Holder) possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit and risk of loss on) such shares. The number of shares calculated in accordance with the foregoing clauses (a) and (b) shall be deemed not to include (and to the extent any of the following arrangements have been entered into by affiliates of the stockholder (or of any Constituent Holder), shall be reduced by) any shares (x) sold by such stockholder (or any of its affiliates) in any transaction that has not been settled or closed, including any short sale, (y) borrowed by such stockholder (or any of its affiliates) for any purposes or purchased by such stockholder (or any of its affiliates) pursuant to an agreement to resell, or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative, or similar agreement entered into by such stockholder (or any of its affiliates), whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of Voting Stock, in any such case which instrument or agreement has, or is intended to have, or if exercised by either party thereto would have, the purpose or effect of (i) reducing in any manner, to any extent, or at any time in the future such stockholder’s (or affiliate’s) full right to vote or direct the voting of any such shares and/or (ii) hedging, offsetting, or altering to any degree gain or loss arising from the full economic ownership of such shares by such stockholder (or affiliate), other than any such arrangements solely involving an exchange listed multi-industry market index fund in which Voting Stock represents at the time of entry into such arrangement less than five percent of the proportionate value of such index. A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and the right to direct the disposition thereof and possesses the full economic interest in the shares. A stockholder’s (including any Constituent Holder’s) ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares so long as such stockholder retains the unrestricted power to recall such shares at any time by giving not more than five business days’ notice or has delegated voting power over such shares by means of a proxy, power of attorney, or other instrument or arrangement so long as such delegation is revocable at any time by the stockholder. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings.

7

B. REQUIRED INFORMATION. For the purposes of this Section 14, the “Required Information” is (1) the information concerning the Stockholder Nominee and the Eligible Stockholder that the corporation determines is required to be disclosed in the corporation’s proxy statement by the regulations promulgated under the Exchange Act and (2) if the Eligible Stockholder so elects, a Statement (defined below). The corporation shall also include the name of the Stockholder Nominee in its proxy card. For the avoidance of doubt, and any other provision of these bylaws notwithstanding, the corporation may in its sole discretion solicit against, and include in the proxy statement its own statements or other information relating to, any Eligible Stockholder and/or Stockholder Nominee, including any information provided to the corporation with respect to the foregoing.

C. NOTICE. To be timely, a stockholder’s Proxy Access Notice must be delivered to the principal executive offices of the corporation not less than 120 calendar days nor more than 150 day calendar days before the anniversary date of the corporation’s definitive proxy statement being released to stockholders in connection with the previous year’s annual meeting. In no event shall any adjournment or postponement of an annual meeting, the date of which has been announced by the corporation, commence a new time period for the giving of a Proxy Access Notice.

D. PERMITTED NUMBER. The maximum number of Stockholder Nominees required to appear in the corporation’s proxy materials pursuant to this Section 14 with respect to an annual meeting of stockholders shall equal the largest whole number that does not exceed 25% of the number of directors in office as of the last day on which a Proxy Access Notice may be delivered in accordance with the procedures set forth in this Section 14 (such number, the “Permitted Number”); provided, however, that for purposes of determining whether the Permitted Number has been reached, each of the following persons shall be counted as a Stockholder Nominee: (i) individuals submitted by an Eligible Stockholder for inclusion in the corporation’s proxy materials pursuant to this Section 14 that the board of directors decides to nominate as a nominee of the board of directors; (ii) individuals nominated by an Eligible Stockholder for inclusion in the corporation’s proxy materials pursuant to this Section 14 whose nominations are subsequently withdrawn; and (iii) directors in office that will be included in the corporation’s proxy materials with respect to such annual meeting for whom access to the corporation’s proxy materials was previously provided or requested pursuant to this Section 14, other than any such director referred to in this clause (iii) who at the time of such annual meeting will have served as a director continuously, as a nominee of the board of directors, and not as a nominee of an Eligible Stockholder, for at least two annual terms. In the event the board of directors resolves to reduce the size of the board of directors effective on or prior to the date of the annual meeting, the Permitted Number shall be calculated based on the number of directors in office as so reduced. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 14 exceeds the Permitted Number, each Eligible Stockholder will select one Stockholder Nominee for inclusion in the corporation’s proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Voting Stock reasonably believed by the corporation to be owned by each Eligible Stockholder and disclosed as owned in its Proxy Access Notice submitted to the corporation. If the Permitted Number is not reached after each Eligible Stockholder has selected one Stockholder Nominee, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached. Following such determination, if any Stockholder Nominee who satisfies the eligibility requirements in this Section 14 thereafter is nominated by the board of directors, not included in the corporation’s proxy materials or not submitted for director election for any reason (including the Eligible Stockholder’s or Stockholder Nominee’s failure to comply with this Section 14), no other nominee or nominees shall be required to be included in the corporation’s proxy materials or otherwise submitted for election as a director at the applicable annual meeting in substitution for such Stockholder Nominee.

8

E. ELIGIBLE STOCKHOLDER. An “Eligible Stockholder” is one or more stockholders of record who own or have owned, or are acting on behalf of one or more beneficial owners who own and have owned (in each case as defined above), in each case continuously for at least three (3) years as of both the date that the Proxy Access Notice is received by the corporation pursuant to this Section 14, and as of the record date for determining stockholders eligible to vote at the annual meeting, an aggregate net long position (as defined in Section 3 of this Article IV) of at least three percent (3%) of the aggregate voting power of the Voting Stock (the “Proxy Access Request Required Shares”), and who continue to own the Proxy Access Request Required Shares at all times between the date such Proxy Access Notice is received by the corporation and the date of the applicable annual meeting, provided that the aggregate number of stockholders, and, if and to the extent that a stockholder is acting on behalf of one or more beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed twenty (20). Two or more collective investment funds that are (I) under common management and investment control; (II) under common management and sponsored primarily by the same employer; or (III) a “group of investment companies” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940 (a “Qualifying Fund”) shall be treated as one stockholder for the purpose of determining the aggregate number of stockholders in this paragraph (E), provided that each fund included within a Qualifying Fund otherwise meets the requirements set forth in this Section 14. No shares may be attributed to more than one group constituting an Eligible Stockholder under this Section 14 (and, for the avoidance of doubt, no stockholder may be a member of more than one group constituting an Eligible Stockholder). A record holder acting on behalf of one or more beneficial owners will not be counted separately as a stockholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each such beneficial owner will be counted separately, subject to the other provisions of this paragraph (E), for purposes of determining the number of stockholders whose holdings may be considered as part of an Eligible Stockholder’s holdings. For the avoidance of doubt, Proxy Access Request Required Shares will qualify as such if and only if the beneficial owner of such shares as of the date of the Proxy Access Notice has itself individually beneficially owned such shares continuously for the three-year (3-year) period ending on that date and through the other applicable dates referred to above (in addition to the other applicable requirements being met). Any Eligible Stockholder (including each Constituent Holder or fund comprising a Qualifying Fund and/or beneficial owner whose stock ownership is counted for the purposes of qualifying as an Eligible Stockholder) whose Stockholder Nominee is elected as a director at the annual meeting of stockholders will not be eligible to nominate or participate in the nomination of a Stockholder Nominee for the following two (2) annual meetings of stockholders other than the nomination of such previously elected Stockholder Nominee.

F. INFORMATION. No later than the final date when a Proxy Access Notice pursuant to this Section 14 may be delivered to the corporation, an Eligible Stockholder (including each Constituent Holder) must provide the following information in writing to the secretary of the corporation:

(1) with respect to each Constituent Holder, the name and address of, and number of shares of Voting Stock owned by such person;

(2) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three (3) year holding period) verifying that, as of a date within seven calendar days prior to the date the Proxy Access Notice is delivered to the corporation, such person owns, and has owned continuously for the preceding three (3) years, the Proxy Access Request Required Shares, and such person’s agreement to provide:

9

(a) within ten (10) days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying such person’s continuous ownership of the Proxy Access Request Required Shares through the record date, together with any additional information reasonably requested to verify such person’s ownership of the Proxy Access Request Required Shares; and

(b) immediate notice if the Eligible Stockholder ceases to own any of the Proxy Access Request Required Shares prior to the date of the applicable annual meeting of stockholders;

(3) any information relating to such Eligible Stockholder (including any Constituent Holder) and their respective affiliates or associates or others acting in concert therewith, and any information relating to such Eligible Stockholder’s Stockholder Nominee(s), in each case that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for the election of such Stockholder Nominee(s) in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

(4) a description of all direct and indirect compensation and other material monetary agreements, arrangements, and understandings during the past three (3) years, and any other material relationships, between or among the Eligible Stockholder (including any Constituent Holder) and its or their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each of such Eligible Stockholder’s Stockholder Nominee(s), and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including without limitation all information that would be required to be disclosed pursuant to Item 404 promulgated under Regulation S-K if the Eligible Stockholder (including any Constituent Holder), or any affiliate or associate thereof or person acting in concert there-with, were the “registrant” for purposes of such rule and the Stockholder Nominee were a director or executive officer of such registrant;

(5) a representation that such person:

(a) acquired the Proxy Access Request Required Shares in the ordinary course of business and not with the intent to change or influence control of the corporation, and does not presently have such intent;

(b) has not nominated and will not nominate for election to the board of directors at the annual meeting any person other than the Stockholder Nominee(s) being nominated pursuant to this Section 14;

(c) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the board of directors;

(d) will not distribute to any stockholder any form of proxy for the annual meeting other than the form distributed by the corporation; and

(e) will provide facts, statements, and other information in all communications with the corporation and its stockholders that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and will otherwise comply with all applicable laws, rules, and regulations in connection with any actions taken pursuant to this Section 14;

10

(6) in the case of a nomination by a group of stockholders that together is such an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and

(7) an undertaking that such person agrees to:

(a) assume all liability stemming from, and indemnify and hold harmless the corporation and each of its directors, officers, and employees individually against any liability, loss, or damages in connection with any threatened or pending action, suit, or proceeding, whether legal, administrative, or investigative, against the corporation or any of its directors, officers, or employees arising out of any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the corporation or out of the information that the Eligible Stockholder (including such person) provided to the corporation;

(b) promptly provide such information to the corporation as the corporation may reasonably request; and

(c) file with the Securities and Exchange Commission any solicitation by the Eligible Stockholder of stockholders of the corporation relating to the annual meeting at which the Stockholder Nominee will be nominated.

In addition, no later than the final date when a Proxy Access Notice pursuant to this Section 14 may be delivered to the corporation, a Qualifying Fund whose stock ownership is counted for purposes of qualifying as an Eligible Stockholder must provide to the secretary of the corporation documentation reasonably satisfactory to the board of directors that demonstrates that the funds included within the Qualifying Fund satisfy the definition thereof.

In order to be considered timely, any information required by this Section 14 to be provided to the corporation must be supplemented (by delivery to the secretary of the corporation) (1) no later than ten (10) days following the record date for the applicable annual meeting, to disclose the foregoing information as of such record date and (2) no later than the fifth day before the annual meeting, to disclose the foregoing information as of the date that is no earlier than ten (10) days prior to such annual meeting. For the avoidance of doubt, the requirement to update and supplement such information shall not permit any Eligible Stockholder or other person to change or add any proposed Stockholder Nominee or be deemed to cure any defects or limit the remedies (including without limitation under these bylaws) available to the corporation relating to any defect.

G. STATEMENT. The Eligible Stockholder may provide to the secretary of the corporation, at the time the information required by this Section 14 is originally provided, a written statement for inclusion in the corporation’s proxy statement for the annual meeting, not to exceed five hundred (500) words, in support of the candidacy of such Eligible Stockholder’s Stockholder Nominee(s) (the “Statement”). Notwithstanding anything to the contrary contained in this Section 14, the corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, or would violate any applicable law or regulation.

H. STOCKHOLDER NOMINEE REPRESENTATIONS. No later than the final date when a Proxy Access Notice pursuant to this Section 14 may be delivered to the corporation, each Stockholder Nominee must:

11

(1) provide an executed agreement, in a form deemed satisfactory by the board of directors or its designee (which form shall be provided by the corporation reasonably promptly upon written request of a stockholder), that such Stockholder Nominee:

(a) consents to being named in the corporation’s proxy statement and a form of proxy card (and will not agree to be named in any other person’s proxy statement or form of proxy card) as a nominee for election to the board of directors and to serving as a director of the corporation if elected;

(b) agrees, if elected, to adhere to the corporation’s Corporate Governance Principles and Code of Business Conduct and all other publicly available corporation policies and guidelines applicable to directors;

(c) is not and will not become a party to any compensatory, payment, or other financial agreement, arrangement, or understanding with any person or entity other than the corporation in connection with his or her nomination to be a director of the corporation or with respect to his or her service or action as a director of the corporation that, in either such case, has not been disclosed to the corporation;

(d) is not and will not become a party to any agreement, arrangement, or understanding with any person or entity as to how the Stockholder Nominee would vote or act on any issue or question as a director;

(2) complete, sign, and submit all other questionnaires, representations, and agreements required of the corporation’s directors generally; and

(3) provide such additional information required for stockholder notices pursuant to Section 13 of this Article IV and as necessary to permit the board of directors to determine if such one or more of the items contemplated by paragraph (J) below apply with respect to such Stockholder Nominee or if such Stockholder Nominee has any direct or indirect relationship with the corporation other than those relationships that have been deemed categorically immaterial pursuant to the corporation’s corporate governance guidelines or is or has been subject to any event specified in Item 401(f) of Regulation S-K (or successor rule) of the Securities and Exchange Commission.

In the event that any information or communications provided by the Eligible Stockholder (or any Constituent Holder) or the Stockholder Nominee to the corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the secretary of the corporation of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood for the avoidance of doubt that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including without limitation under these bylaws) available to the corporation relating to any such defect.

I. INELIGIBILITY. Any Stockholder Nominee who is included in the corporation’s proxy materials for a particular annual meeting of stockholders but either (1) withdraws from or becomes ineligible or unavailable for election at that annual meeting (other than by reason of such Stockholder Nominee’s disability or other health reason) or (2) does not receive votes cast in favor of the Stockholder Nominee’s election at least equal 25% of the shares present in person or by proxy and entitled to vote at the meeting, will be ineligible to be a Stockholder Nominee pursuant to this Section 14 for the next two annual meetings. For the avoidance of doubt, any Stockholder Nominee who is included in the

12

corporation’s proxy statement for a particular annual meeting of stockholders, but subsequently is determined not to satisfy the eligibility requirements of this Section 14 or any other provision of these bylaws, the corporation’s Certificate of Incorporation, or other applicable regulation any time before the annual meeting of stockholders, will not be eligible for election at the relevant annual meeting of stockholders.

J. DISQUALIFICATION. The corporation shall not be required to include, pursuant to this Section 14, a Stockholder Nominee in its proxy materials for any annual meeting of stockholders, or, if the proxy statement already has been filed, to allow the nomination of a Stockholder Nominee (and may declare any such nomination ineligible), notwithstanding that proxies in respect of such vote may have been received by the corporation:

(1) who is not independent under the listing standards of any U.S. exchange upon which the common stock of the corporation is listed, any applicable rules of the Securities and Exchange Commission, and any publicly disclosed standards used by the board of directors in determining and disclosing independence of the corporation’s directors, in each case as determined by the board of directors;

(2) who (x) is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, (y) is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in a criminal proceeding within the past ten years, or (z) is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, or whose service as a member of the board of directors would violate or cause the corporation to be in violation of these bylaws, the corporation’s Certificate of Incorporation, the rules and listing standards of any U.S. exchange upon which the common stock of the corporation is traded, or any applicable law, rule, or regulation;

(3) if the Eligible Stockholder (or any Constituent Holder) or applicable Stockholder Nominee otherwise breaches or fails to comply in material respect with its obligations pursuant to this Section 14 or any agreement, representation, or undertaking required by this Section;

(4) if the Eligible Stockholder ceases to be an Eligible Stockholder for any reason, including but not limited to not owning the Proxy Access Request Required Shares through the date of the applicable annual meeting; or

(5) at any meeting of stockholders for which the secretary of the corporation receives a notice that a stockholder has nominated a person for election to the board of directors pursuant to Section 13 of this Article IV.

ARTICLE V.

DIRECTORS

SECTION 1. GENERAL POWERS. The property, business and affairs of the corporation shall be managed by its board of directors which may exercise all powers of the corporation and do all lawful acts and things as are not by statute or by the Certificate of Incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

13

SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The directors shall be elected in the manner set forth in Article Ninth of the Certification of Incorporation of the corporation; however, if the corporation has outstanding any shares of one or more series of stock with conditional rights to elect a set number of directors, and if the conditions precedent to the exercise of any such rights arise, the number of directors of the corporation shall be automatically increased to permit the exercise of the voting rights of each such series of stock. The term of office of directors shall be as provided in Article Ninth of the Certificate of Incorporation of the corporation. Directors need not be stockholders or residents of the State of Delaware. A majority of the directors shall be “independent” under the criteria set by any applicable law, regulation and/or listing standard.

At any meeting for the election of directors at which a quorum is present, each director shall be elected by the vote of a majority of the votes cast representing shares present in person or by proxy and entitled to vote at the meeting. However, if the number of nominees on the ballot for any election of directors exceeds the number of directors to be elected, then the directors shall be elected by the vote of a plurality of the votes cast representing shares present in person or by proxy and entitled to vote on the election of directors.

For the purposes hereof, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” the election of that director. “Votes cast” shall not include abstentions. Ballots will not give stockholders the option to “withhold” votes from the election of directors, but rather will give the choice to vote “for” or “against” each director or to abstain.

Promptly (and in any event within 10 days) after each meeting for the election of directors, each incumbent director who did not receive a majority of the votes cast representing shares present in person or by proxy and entitled to vote at such meeting shall submit to the board of directors an irrevocable letter of resignation, which shall become effective upon acceptance by the board of directors. The board of directors will determine whether to accept or reject such resignation, or what other action should be taken, and publicly disclose and explain its decision on the corporation’s web site within 90 days from the date of the certification of election results. Any director not elected shall not participate in the board of director’s decision with respect to his or her resignation.

If the board of directors determines to accept the resignation of an unsuccessful incumbent, then the board of directors may fill the resulting vacancy pursuant to Article V, Section 3 of these bylaws or may decrease the size of the board of directors pursuant to the provisions of Article Ninth of the Certificate of Incorporation of the corporation. If the board of directors elects to fill the resulting vacancy, the corporate governance and nominating committee will promptly recommend a candidate to the board of directors to fill the office formerly held by the unsuccessful incumbent. The board of directors shall promptly consider and act upon the corporate governance and nominating committee’s recommendation. The corporate governance and nominating committee, in making its recommendation, and the board of directors, in acting on such recommendation, may consider any factors or other information that they determine appropriate and relevant.

The board of directors at its first meeting after each annual meeting, or as often as may be required, shall elect a chairman of the board.

SECTION 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancies on the board of directors or any newly created directorships shall be filled by the board of directors in the manner set forth in Article Ninth of the Certificate of Incorporation of the corporation.

14

SECTION 4. CATASTROPHE. During any emergency period following a national catastrophe due to enemy attack, or act of God, a majority of the surviving members of the board who have not been rendered incapable of acting due to physical or mental incapacity or due to the difficulty of transportation to the place of the meeting shall constitute a quorum for the purpose of filling vacancies on the board of directors and among the elected and appointed officers of the corporation.

SECTION 5. PLACE OF MEETINGS. The directors of the corporation may hold their meetings, both regular and special, at a place or places within or without the State of Delaware that the board of directors may from time to time determine.

SECTION 6. FIRST MEETING. The first meeting of the board of directors following the annual meeting of stockholders shall be held at the time and place that shall be fixed by the chairman of the board or the chief executive officer and shall be called in the same manner as a special meeting.

SECTION 7. REGULAR MEETINGS. Regular meetings of the board of directors may be held without notice at the time and place that shall from time to time be determined by the board of directors.

SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors may be called by the chairman of the board or the chief executive officer on three days’ notice to each director, either personally or by mail, by telegram, or by facsimile or other lawful means; special meetings of the board of directors shall be called by the chairman of the board, chief executive officer, or secretary in like manner and upon like notice upon the written request of two directors.

SECTION 9. QUORUM. At all meetings of the board of directors, a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting, at which there is a quorum present, shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or by these bylaws. If at any meeting of the board of directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice, other than by announcement at the meeting, until a sufficient number of directors to constitute a quorum shall attend. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting as originally notified.

SECTION 10. BUSINESS TO BE CONDUCTED. Unless otherwise indicated in the notice, any and all business may be transacted at a regular or special meeting of the board of directors. In the event a special meeting of the board of directors is held without notice, any and all business may be transacted at the meeting provided all directors are present.

SECTION 11. ORDER OF BUSINESS. At all meetings of the board of directors, business shall be transacted in the order that from time to time the board may determine by resolution. At all meetings of the board of directors the chairman of the board or in his absence the chief executive officer shall preside. In the absence of the chairman and the chief executive officer, the directors present shall elect any director as chairman of the meeting.

SECTION 12. COMPENSATION OF DIRECTORS. Directors of the corporation shall receive the compensation for their services that the board of directors may from time to time determine and all directors shall be reimbursed for their expenses of attendance at each regular or special meeting of the board or any committee thereof.

15

SECTION 13. COMMITTEES. The board of directors may, by resolution passed by a majority of the board, designate one or more committees. Each such committee shall consist of one or more of the directors of the corporation, such number to be set by resolution of the board of directors. Any committee, to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Any committee or committees shall have the name or names that may be determined from time to time by resolution adopted by the board of directors. Other than for a committee of one director, the chairman of the board and the chief executive officer shall be ex officio members of any board committee except the audit committee, the management development and compensation committee, and the corporate governance and nominating committee.

SECTION 14. AUDIT COMMITTEE. The Audit Committee shall be governed by the Audit Committee Charter, as adopted, amended, modified, or supplemented from time to time by the board of directors, which shall set forth the membership, authority, and responsibilities of the Audit Committee. The Audit Committee Charter shall be issued, modified, amended, supplemented, or repealed only by a majority vote of the full board of directors.

SECTION 15. MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE. The Management Development and Compensation (“MD&C”) Committee shall be governed by the MD&C Committee Charter, as adopted, amended, modified, or supplemented from time to time by the board of directors, which shall set forth the membership, authority, and responsibilities of the MD&C Committee. The MD&C Committee Charter shall be issued, modified, amended, supplemented, or repealed only by a majority vote of the full board of directors.

SECTION 16. CORPORATE GOVERNANCE AND NOMINATING COMMITTEE. The Corporate Governance and Nominating Committee shall be governed by the Corporate Governance and Nominating Committee Charter, as adopted, amended, modified, or supplemented from time to time by the board of directors, which shall set forth the membership, authority, and responsibilities of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee Charter shall be issued, modified, amended, supplemented, or repealed only by a majority vote of the full board of directors.

SECTION 17. ELECTION OF OFFICERS. At the first meeting of the board of directors in each year, at which a quorum shall be present, following the annual meeting of the stockholders of the corporation, the board of directors shall proceed to the election of the officers of the corporation, except regional or staff officers who are subject to appointment in accordance with Section 18 of Article VI of these bylaws.

SECTION 18. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if prior to the action a written consent thereto is signed by all members of the board of directors or of the committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the board of directors or committee.

SECTION 19. WAIVER OF NOTICE. Whenever any notice whatever is required to be given pursuant to the provisions of a statute, the Certificate of Incorporation or these bylaws of the corporation, a waiver thereof in writing signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

16

ARTICLE VI.

OFFICERS

SECTION 1. OFFICERS. The officers of the corporation shall be (a) a chief executive officer, president, one or more executive vice presidents, each other executive “officer” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, and a secretary, controller, treasurer, and head of internal audit, all as the board of directors may provide for and elect and (b) one or more senior vice presidents, vice presidents, and such assistant vice presidents, assistant secretaries, assistant treasurers, and assistant controllers as the chief executive officer may appoint or as the board of directors may elect. Any two or more offices may be held by the same person. The board of directors may appoint such other officers as they shall deem necessary, who shall have the authority and shall perform the duties that from time to time may be prescribed by the board of directors. In its discretion, the board of directors by a vote of a majority thereof may leave unfilled for any period that it may fix by resolution any office except those of president, treasurer, and secretary. The board of directors may designate a chief financial officer and a chief accounting officer from among the officers elected by the board. The chief financial officer shall be the corporation’s principal financial officer and the chief accounting officer shall be the corporation’s principal accounting officer for purposes of the Securities Exchange Act of 1934, as amended. Officers appointed by the chief executive officer shall not perform “policy-making functions” as defined pursuant to Section 16 or any successor section(s) of the Securities Exchange Act of 1934, as amended, and shall be deemed not to be subject to such Section 16 and the rules and regulations promulgated thereunder.

SECTION 2. ELECTION. The board of directors at its first meeting after each annual meeting of the stockholders or at any regular or special meeting shall elect, as may be required, a chief executive officer, president, one or more executive vice presidents, each other executive “officer” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, and a secretary, treasurer, controller, and head of internal audit.

SECTION 3. TENURE. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any officer appointed by the chief executive officer may be removed at any time by the chief executive officer of the corporation.

SECTION 4. SALARIES. The salaries of the officers of the corporation at the level of executive vice president or above shall be recommended by the management development and compensation committee and approved by the board of directors.

SECTION 5. VACANCIES. If the office of any officer of the corporation elected by the board of directors becomes vacant by reason of death, resignation, disqualification or otherwise, the directors by a majority vote, may choose his successor or successors.

SECTION 6. RESIGNATION. Any officer may resign his office at any time, such resignation to be made in writing and take effect at the time of receipt by the corporation, unless some time be fixed in the resignation and then from that time. The acceptance of a resignation shall not be required to make it effective.

SECTION 7. DELEGATION OF DUTIES. Duties of officers may be delegated in case of the absence of any officer of the corporation or for any reason that the board of directors may deem sufficient.

17

The board of directors may delegate the powers or duties of the officer to any other officer or to any director, except as otherwise provided by statute, for the time being, provided a majority of the entire board of directors concurs therein.

SECTION 8. CHIEF EXECUTIVE OFFICER. The chief executive officer shall be the chief executive officer of the corporation and shall have, subject to the direction of the board of directors, general control and management of the corporation’s business and affairs and shall also see that all the policies and resolutions of the board of directors are carried into effect, subject, however, to the right of the board of directors to delegate any specific powers, except such as may be by statute exclusively conferred on the president or to any other officer or officers of the corporation. He shall preside at all meetings of stockholders and the board of directors at which he may be present and from which the chairman of the board may be absent.

SECTION 9. PRESIDENT. The president shall perform those duties that shall be specifically assigned to him from time to time by the chief executive officer or the board of directors. In the absence of the chief executive officer or in the event of his death, inability or refusal to act, the president shall perform the duties of the chief executive officer, and when so acting shall have the powers of and be subject to all the restrictions upon the chief executive officer.

SECTION 10. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS, AND VICE PRESIDENTS. In the absence of the president or in the event of his death, inability or refusal to act, the senior executive vice president present shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. In the absence of the president and all executive or senior vice presidents, or in the event of their deaths, inability or refusal to act, a vice president designated by the board of directors, or in case the board of directors has failed to act, designated by the chief executive officer, shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president. The executive vice presidents, the senior vice presidents, and all other vice presidents shall perform those duties consistent with these bylaws and that may be specifically designated by the chief executive officer, the president, or the board of directors.

SECTION 11. ASSISTANT VICE PRESIDENTS. The assistant vice presidents shall perform those duties, not inconsistent with these bylaws, the Certificate of Incorporation or statute that may be specifically designated by the board of directors, the chief executive officer, or the president. In the absence of the executive vice presidents, senior vice presidents, or vice presidents, an assistant vice president (or in the event there be more than one assistant vice president, the assistant vice presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the executive vice presidents, senior vice presidents or vice presidents, and when so acting, shall have all the powers of and be subject to all restrictions upon the executive vice presidents, the senior vice presidents, and vice presidents.

SECTION 12. SECRETARY. The secretary shall attend and keep all the minutes of all meetings of the board of directors and all meetings of the stockholders and, when requested by the board of directors, of any committees of the board of directors. He shall give, or cause to be given, notice of all meetings of the stockholders and board of directors and when so ordered by the board of directors, shall affix the seal of the corporation thereto; he shall have charge of all of those books and records that the board of directors may direct, all of which shall, at all reasonable times, be open to the examination of any director at the office of the corporation during business hours; he shall, in general, perform all of the duties incident to the office of secretary subject to the control of the board of directors, the chief executive

18

officer, or the president, under whose supervision he shall be, and shall do and perform any other duties that may from time to time be assigned to him by the board of directors.

SECTION 13. ASSISTANT SECRETARIES. In the absence of the secretary or in the event of his death, inability or refusal to act, the assistant secretary (or in the event there be more than one assistant secretary, the assistant secretaries in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the secretary, and when so acting shall have all the powers of and be subject to all the restrictions upon the secretary and shall perform any other duties that may from time to time be assigned to him by the board of directors, the chief executive officer, the president, or the secretary.

SECTION 14. TREASURER. The treasurer shall have custody of and be responsible for all funds and securities of the corporation, receive and give receipts for money due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in those banks or depositories that shall be selected and designated by the board of directors and shall in general perform all of the duties incident to the office of treasurer and any other duties that may be assigned to him by the chief financial officer, the president, the chief executive officer, or the board of directors. If required by the board of directors, the treasurer shall give bond for the faithful discharge of his duties in the sum and with the surety or sureties as the board of directors shall determine.

SECTION 15. ASSISTANT TREASURERS. In the absence of the treasurer or in the event of his death, inability or refusal to act, the assistant treasurer (or in the event there be more than one assistant treasurer, the assistant treasurers in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the treasurer and when so acting shall have all the powers and be subject to all the restrictions upon the treasurer, and shall perform any other duties that from time to time may be assigned to him by the chief executive officer, the president, the chief financial officer, the treasurer, or the board of directors. The assistant treasurers shall, if required by the board of directors, give bonds for the faithful discharge of their duties in the sums and with the surety or sureties that the board of directors shall determine.

SECTION 16. CONTROLLER. The controller shall maintain adequate records of all assets, liabilities and transactions of the corporation; see that adequate audits thereof are currently and regularly made; and, in conjunction with other officers and department heads, initiate and enforce measures and procedures whereby the business of the corporation shall be conducted with the maximum safety, efficiency and economy. Except as otherwise determined by the board of directors, or lacking a determination by the board of directors, then by the president, his duties and powers shall extend to all subsidiary corporations and, so far as may be practicable, to all affiliate corporations. He shall have any other powers and perform other duties that may be assigned to him by the chief executive officer, the president, the chief financial officer, or the board of directors. If required by the board of directors, the controller shall give bond for the faithful discharge of his duties in the sum and with the surety or sureties as the board of directors shall determine.

SECTION 17. ASSISTANT CONTROLLERS. In the absence of the controller or in the event of his death, inability or refusal to act, the assistant controller (or in the event there be more than one assistant controller, the assistant controllers, in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the controller and when so acting shall have all the powers and be subject to all the restrictions upon the controller, and shall perform any other duties that from time to time may be assigned to him by the chief executive officer, the president, the chief financial officer, the controller, or the board of directors. The assistant

19

controllers shall, if required by the board of directors, give bonds for the faithful discharge of their duties in the sums and with the surety or sureties that the board of directors shall determine.

SECTION 18. REGIONAL VICE PRESIDENTS.

A. ELECTION. One or more regional vice presidents may be appointed by the chief executive officer, or the authority for such appointments may be delegated by the chief executive officer to the president of the corporation.

B. TENURE. The regional vice presidents appointed by the chief executive officer or the president of the corporation shall hold office until their successors are chosen and qualify in their stead. Any regional vice president so appointed may be removed at any time by the chief executive officer or the president of the corporation.

C. DUTIES. The regional vice presidents shall do and perform those duties that shall from time to time be specifically designated or assigned by the chief executive officer or the president of the corporation; however, the regional vice presidents shall not perform “policy-making functions” as defined pursuant to Section 16 or any successor section(s) of the Securities Exchange Act of 1934, as amended, and shall be deemed not to be subject to such Section 16 and the rules and regulations promulgated thereunder.

ARTICLE VII.

INDEMNIFICATION OF OFFICERS, DIRECTORS,

EMPLOYEES, AND AGENTS

SECTION 1. RIGHT TO INDEMNIFICATION.

A. PROCEEDINGS BY THIRD PARTIES. The board of directors shall cause the corporation to indemnify and hold harmless, to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, to the fullest extent permitted by law, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), any person (and that person’s heirs and personal representatives) who was or is a party or is threatened or expected to be made a party to any threatened, pending, or completed action, suit, arbitration, alternative dispute resolution procedure, investigation, or other threatened, actual, or completed proceeding, whether civil, criminal, administrative, investigative, or private in nature and irrespective of the initiator thereof, including any appeal of any such proceeding (each, a “Proceeding”) (other than a Proceeding by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, partner, or agent of another corporation, partnership (including a partnership in which the corporation is a partner), limited liability company, joint venture, trust, non-profit entity, including service with respect to employee benefit plans, or other entity or enterprise (in such capacity, an “Authorized Person”), against any and all Expenses (as hereinafter defined), judgments, damages, arbitration awards, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such Proceeding, including any interest payable thereon, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful.

20

B. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The board of directors shall indemnify and hold harmless any person (and that person’s heirs and personal representatives) who was or is a party or is threatened or expected to be made a party to any Proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was an Authorized Person against Expenses actually and reasonably incurred by him in connection with the defense or settlement of such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation; provided, however, that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware shall deem proper.

SECTION 2. EXPENSES.

A. REIMBURSEMENT OF EXPENSES. To the extent that an Indemnitee (as hereinafter defined) has been successful on the merits or otherwise in defense of any Proceeding, or in defense of any claim, issue, or matter therein, he shall be indemnified against Expenses actually and reasonably incurred by him in connection therewith.

B. ADVANCEMENT OF EXPENSES TO DIRECTORS AND OFFICERS. The board of directors shall cause the corporation to advance to any Indemnitee who is or was a director or officer of the corporation the Expenses incurred by such Indemnitee, from time to time, in defending a Proceeding, in each case, within ten (10) calendar days after the corporation’s receipt of a statement from such Indemnitee requesting an advance, whether prior to or after final disposition of the applicable Proceeding; provided, however, that the corporation will have no obligation to advance Expenses if such advance will be in violation of applicable law. Each such statement must include an undertaking by or on behalf of that Indemnitee to repay any Expenses advanced if it is ultimately determined that the Indemnitee is not legally entitled to indemnification by the corporation and shall specifically state that no bond, collateral, or other security shall be required by such officer or director to insure his performance and that no interest on any amount advanced shall be required to be paid to the corporation if the officer or director is determined ultimately to be not legally entitled to indemnification by the corporation. The corporation will accept any such undertaking without reference to the financial ability of Indemnitee to make repayment.

C. ADVANCEMENT OF EXPENSES TO EMPLOYEES AND AGENTS. The board of directors shall cause the corporation to advance to any Indemnitee who is not a present or past director or officer of the corporation the Expenses incurred by such Indemnitee, from time to time, in defending a Proceeding, in each case, in advance of the final disposition of such Proceeding; provided, however, that any such advance shall be conditional upon evidence of compliance with the terms and conditions, if any, deemed appropriate and specified by the board of directors for such advance if it is ultimately determined that such Indemnitee is not legally entitled to indemnification by the corporation.

D. EXPENSES INCURRED IN ENFORCING RIGHTS. The board of directors shall cause the corporation to advance to any Indemnitee, in accordance with this Section 2, all Expenses incurred by such Indemnitee in enforcing his rights to indemnification and/or advancement of Expenses under this Article VII, including Expenses incurred in preparing and forwarding statements to the corporation to

21

support the advances claimed, whether or not such Indemnitee is successful in enforcing such rights and whether or not Proceedings are commenced.

SECTION 3. DETERMINATION OF ENTITLEMENT TO INDEMNFICATION.

A. PROCEDURE. Any indemnification hereunder (unless ordered by the Court of Chancery of the State of Delaware) shall be made by the corporation upon a determination that indemnification is proper under the circumstances because the Indemnitee has met the applicable standard of conduct set forth in this Article VII. All such determinations shall be made by the board of directors within 30 calendar days after the corporation receives a statement from an Indemnitee requesting indemnification in respect of a Proceeding under this Article VII. Notwithstanding the foregoing, with respect to an Indemnitee who is or was a director or officer of the corporation, such determination shall be made: (i) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum, or (ii) by a committee of directors designated by majority vote of such Disinterested Directors, even though less than a quorum, or (iii) if there are no Disinterested Directors, or if such Disinterested Directors so direct, in writing by Independent Counsel (as hereinafter defined); provided, however, that, if a Change of Control (as hereinafter defined) shall have occurred, then such determination shall be made in writing by Independent Counsel. The corporation shall promptly inform the Indemnitee in writing of a determination under this subsection regarding the propriety of indemnification.

B. PRESUMPTIONS. In making a determination with respect to the entitlement of any Indemnitee to indemnification under this Article VII, the Indemnitee shall be presumed to be entitled to such indemnification upon submission to the corporation of a statement requesting indemnification in respect of such Proceeding under this Article VII. The presumption shall be used by the person or persons determining entitlement to indemnification as a basis for such determination, unless the corporation provides information sufficient to overcome such presumption by clear and convincing evidence. Furthermore, the termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person (i) did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation and (ii) with respect to any criminal Proceeding, had reasonable cause to believe that his conduct was unlawful.

C. PAYMENTS. If it is determined that any Indemnitee is entitled to indemnification under this Article VII, then the corporation shall thereafter, on written request by such Indemnitee, pay to such Indemnitee, within ten (10) calendar days after the corporation’s receipt of such request, such amounts theretofore incurred by or on behalf of such Indemnitee in respect of which such Indemnitee is entitled to that indemnification by reason of that determination.

D. EXPENSES. Any Indemnitee shall be entitled to be indemnified against the Expenses actually and reasonably incurred by such Indemnitee in cooperating with the person or persons making the determination of entitlement to indemnification (irrespective of the determination as to the Indemnitee’s entitlement to indemnification) and, to the extent successful, in connection with any Proceeding with respect to the determination of such Indemnitee’s entitlement to indemnification or the enforcement thereof.

SECTION 4. INDEMNIFICATION FUND. The board of directors, in its sole discretion, may establish and may fund in advance and from time to time, in whole or in part, a separate provision or provisions, which may be in the form of a trust fund, periodic or advance retainers to counsel, or otherwise as the board of directors may determine in each instance, to be used as payment and/or

22

advances of indemnification obligations under this Article VII; provided, however, that any amount which is contributed to such fund shall not in any way be construed to be a limitation on the amount of indemnification and/or advances of the corporation.

SECTION 5. INSURANCE. The corporation may maintain insurance, at its expense, to protect itself and any Indemnitee who is or was a director or officer of the corporation against any expenses, liabilities, or losses, whether or not the corporation would have the power to indemnify such person against such expenses, liabilities, or losses under the General Corporation Law of the State of Delaware; provided, however, that, for a period of six (6) years after any Change of Control, the corporation shall maintain, at its expense, policies of directors’ and officers’ liability insurance providing coverage at least comparable to and in the same amounts as that provided by any such policies in effect immediately prior to such Change of Control.

SECTION 6. CONTRIBUTION. If it is determined that any Indemnitee is entitled to indemnification under this Article VII, but that right is unenforceable by reason of any applicable law or public policy, then, to the fullest extent applicable law permits, the corporation, in lieu of indemnifying or causing the indemnification of such Indemnitee, shall contribute or cause to be contributed to the amount that such Indemnitee has incurred, whether for judgments, fines, penalties, excise taxes, amounts paid, or to be paid in settlement or for Expenses reasonably incurred, in connection with the applicable Proceeding, in such proportion as is deemed fair and reasonable in light of all the circumstances of such Proceeding in order to reflect: (i) the relative benefits that such Indemnitee and the corporation have received as a result of the event(s) or transaction(s) giving rise to the Proceeding or (ii) the relative fault of such Indemnitee and of the corporation in connection with those event(s) or transaction(s).

SECTION 7. MISCELLANEOUS.

A. NO CONDITIONS OR LIMITATIONS. Except as expressly set forth in this Article VII or required by applicable law, there shall be no conditions or limitations on an Indemnitee’s rights to indemnification or advancement of Expenses hereunder.

B. AMENDMENTS. Any amendment to this Article VII shall only apply prospectively and shall in no way affect the corporation’s obligations to indemnify and make advances to any Indemnitee as set forth in this Article VII for actions or events which occurred before any such amendment, and provided that any amendment to this Article VII shall require the unanimous vote of the board of directors.

C. NON-EXCLUSIVITY. The rights to indemnification and advancement of Expenses and the remedies this Article VII provides are not and will not be deemed exclusive of any other rights or remedies to which any Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, any agreement, a vote of the corporation’s stockholders or Disinterested Directors, or otherwise, but each such right or remedy under this Article VII will be cumulative with all such other rights and remedies.

D. EQUIVALENCE TO CONTRACTUAL RIGHTS. The rights to indemnification and advancement of Expenses and the remedies this Article VII provides shall be considered the equivalent of a contract right that vests upon the occurrence or alleged occurrence of any act or omission that forms the basis for or is related to the claim for which indemnification is sought by an Indemnitee, to the same extent as if the provisions of this Article VII were set forth in a separate, written contract between such Indemnitee and the corporation.

23

E. DETRIMENTAL RELIANCE. Any person who at any time on or after the adoption of this Article VII serves or has served in any of the capacities indicated in this Article VII shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein.

F. NO IMPUTATION OF KNOWLEDGE OR CONDUCT. For purposes of making a determination under this Article VII with respect to whether any Indemnitee is entitled to indemnification, neither the knowledge nor the conduct of any other director, officer, manager, administrator, employee, agent, representative, or other functionary of the corporation shall be imputed to such Indemnitee.

G. FORUM, JURISDICTION, AND VENUE. Each Indemnitee, by seeking any indemnification or advancement of Expenses under this Article VII, shall be deemed: (i) to have agreed that any proceeding arising out of or in connection with this Article VII must be brought only in the Court of Chancery of the State of Delaware and not in any other state or federal court in the United States of America or any court in any other country, (ii) to have consented to submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware for purposes of any proceeding arising out of or in connection with this Article VII, (iii) to have waived any objection to the laying of venue of any such proceeding in the Court of Chancery of the State of Delaware, and (iv) to have waived, and to have agreed not to plead or to make, any claim that any such proceeding brought in the Court of Chancery of the State of Delaware has been brought in an improper or otherwise inconvenient forum.

SECTION 8. DEFINITIONS. For purposes of this Article VII:

(1) “Affiliate” has the meaning ascribed to such term in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

(2) “Change of Control” means (i) any individual, entity, or group (including within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 20% or more of either (a) the then-outstanding shares of common stock of the corporation (the “Outstanding Common Stock”) or (b) the combined voting power of the then-outstanding voting securities of the corporation entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that, for purposes of this Article VII, the following acquisitions shall not constitute a Change of Control: (I) any acquisition of Outstanding Common Stock or Outstanding Voting Securities directly from the corporation that is approved by the Incumbent Board (as hereinafter defined), (II) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the corporation, (III) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the corporation or any Affiliate thereof, or (IV) any acquisition of Outstanding Common Stock or Outstanding Voting Securities in a transaction that is part of a Business Combination that complies with clauses (iii)(a), (iii)(b), and (iii)(c) of this definition; (ii) individuals who, as of October 28, 2019, constitute the board of directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the board of directors; provided, however, that any individual becoming a director subsequent to October 28, 2019 whose election, or nomination for election, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the board of directors; (iii) consummation of a

24

reorganization, merger, statutory share exchange, or consolidation or similar transaction involving the corporation, a sale or other disposition of all or substantially all of the assets of the corporation (including by sale, reorganization, merger, statutory share exchange, or consolidation or similar transaction involving the shares of all or substantially all of the corporation’s subsidiaries), or the acquisition of assets or securities of another entity by the corporation or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (a) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the corporation or all or substantially all of the corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination, and (b) no person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the corporation or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination, and (c) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement and at the time of the action of the board of directors providing for such Business Combination; or (iv) approval by the stockholders of the corporation of a complete liquidation or dissolution of the corporation.

(3) “Disinterested Director” means, with respect to any Proceeding in respect of which indemnification is sought by an Indemnitee under this Article VII, a director of the corporation who is not and was not (i) a party to such Proceeding, (ii) a party to any claim for damages, or to any declaratory, equitable, or other substantive remedy, or to any other issue or matter in such Proceeding or Proceeding therein or related thereto, and (iii) during the last ten (10) years an Affiliate of such Indemnitee.

(4) “Expenses” include all attorneys’ fees, expert fees, witness fees, bonds, prospective and retrospective insurance premiums or costs, litigation, appeal and court costs, including, without limitation, retainers, transcript costs, and travel expenses, and all other disbursements and expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding, including any interest payable thereon. Should any payments by the corporation to or for the account of any Indemnitee under this Article VII be determined to be subject to any federal, state, or local income or excise tax, “Expenses” also include such amounts as are necessary to place the Indemnitee in the same after-tax position, after giving effect to all applicable taxes, that such Indemnitee would have been in had no such tax been determined to apply to those payments.

(5) “Indemnitee” means any Authorized Person making a claim for indemnification or advancement of Expenses under this Article VII.

(6) “Independent Counsel” means a law firm that is experienced in matters of corporation law and neither presently is, nor in the ten (10) years previous to its selection or appointment has been, retained to

25

represent: (i) the corporation, the Indemnitee, or any of their respective Affiliates; (ii) any other party to the Proceeding giving rise to a claim for indemnification; or (iii) any direct or indirect beneficial owner of securities of the corporation representing 20% or more of the combined voting power of the corporation’s then outstanding voting securities. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any law firm or person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the corporation or the Indemnitee in an action to determine the Indemnitee’s rights to indemnification under these Bylaws.

ARTICLE VIII.

CONTRACTS, LOANS, CHECKS AND DEPOSITS

SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances.

SECTION 2. LOANS. No loan shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name, unless authorized by resolution of the board of directors. Such authority may be general or confined to specific instances.

SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other order or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents and in such manner that shall from time to time be determined by resolution of the board of directors.

SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in the bank or banks or other depositories that the board of directors may elect.

ARTICLE IX.

VOTING OF STOCK OF OTHER CORPORATIONS

Unless otherwise ordered by the board of directors, the chief executive officer, the president, each executive vice president, and each senior vice president shall have full power and authority on behalf of the corporation to act and vote at any meeting of stockholders of any corporation in which the corporation may hold stock, and at any such meeting, shall possess, and may exercise, any and all of the rights and powers incident to the ownership of the stock, which, as the owner thereof, the corporation might have possessed and exercised if present. The board of directors by resolution from time to time, may confer like powers upon any other person or persons.

ARTICLE X.

NOTICES

SECTION 1. FORM OF NOTICE. Whenever under the provisions of the statutes, the Certificate of Incorporation, or these bylaws, notice is required to be given to any director or stockholder, it shall not

26

be construed to mean personal notice, but the notice may be given in writing by mail, which shall mean depositing same in a United States Postal Service post office or letter box, in a postage paid, sealed envelope, addressed to the stockholder or director at the address that appears on the books of the corporation or, in default of other address, to such director or stockholder at the United States Postal Service general post office in the City of Wilmington, Delaware, and the notice shall be deemed to be given at the time when the same shall be thus mailed or by any other means expressly provided for in these bylaws.

SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given under the provision of the statutes, the Certificate of Incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to the notice whether before or after the time stated therein shall be deemed equivalent thereto.

ARTICLE XI.

STOCK CERTIFICATES

SECTION 1. CERTIFICATED AND UNCERTIFICATED SHARES. Shares of the capital stock of the corporation may be certificated or uncertificated, as provided by the laws of the State of Delaware. The certificates for shares of the capital stock of the corporation shall be in the form, not inconsistent with the Certificate of Incorporation, that shall be approved by the board of directors. The certificate shall be signed by the chairman of the board, chief executive officer, president or a vice president, and either the treasurer or an assistant treasurer, or the secretary or an assistant secretary, but where the certificate is signed by a transfer agent or an assistant transfer agent and a registrar, the signatures of the chairman of the board, chief executive officer, president, vice president, treasurer, assistant treasurer, secretary or assistant secretary may be facsimiles. All certificates shall be consecutively numbered, and the name of the person owning the shares represented thereby, with the number of shares and the date of issue shall be entered in the corporation’s books. No certificate shall be valid unless it is signed by the chairman of the board, chief executive officer, president, or a vice president, and either the treasurer or an assistant treasurer, or the secretary or an assistant secretary, but where the certificate is signed by a transfer agent or an assistant transfer agent and a registrar, the signatures of the chairman of the board, chief executive officer, president, vice president, treasurer, assistant treasurer, secretary or assistant secretary may be facsimiles. All certificates surrendered to the corporation shall be canceled, and no new certificates shall be issued until the former certificate for the same number of shares of the same class shall have been surrendered and canceled.

SECTION 2. TRANSFER OF SHARES. Shares of the capital stock of the corporation shall be transferred only on the books of the corporation by the holder thereof in person or by his attorney and, in the case of certificated shares, upon surrender and cancellation of certificates for the same number of shares.

SECTION 3. REGULATIONS. The board of directors shall have authority to make any rules and regulations that they may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. The board of directors may appoint one or more transfer agents or assistant transfer agents and one or more registrars of transfers and may require all certificates to bear the signature of the transfer agent or assistant transfer agent and a registrar of transfers. The board of directors may at any time terminate the appointment of any transfer agent or any assistant transfer agent or any registrar of transfers by the vote of a majority of the board of directors.

27

SECTION 4. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS’ RIGHTS. The board of directors may close the stock transfer books of the corporation for a period not exceeding 60 days preceding the date of any meeting of stockholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or for a period not exceeding 60 days in connection with obtaining the consent of stockholders for any purpose. In lieu of closing the stock transfer books as aforesaid, the board of directors may fix a date not exceeding 60 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, or to give such consent, and in such case the stockholders and only the stockholders that shall be stockholders of record on the date so fixed shall be entitled to the notice or to receive payment of the dividend, or to receive the allotment of rights, or to exercise the rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any record date fixed as aforesaid.

SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in the share or shares on the part of any other person whether or not it shall have express or other notice thereof except as otherwise provided by the laws of the State of Delaware.

SECTION 6. LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact with the person claiming the certificate of stock to be lost or destroyed. When authorizing the issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost or destroyed certificate or certificates, or his legal representative, to advertise the same in a manner that it shall require for each share of stock having voting power registered in his name and to give the corporation a bond in the sum that it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

SECTION 7. DIVIDENDS. The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

SECTION 8. RESERVE FUNDS. Before payment of any dividend there may be set aside out of any funds of the corporation available for dividends the sum or sums that the board of directors may from time to time in their absolute discretion think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for any other purpose that the directors shall think conducive to the interest of the corporation and the board of directors may modify or abolish the reserve in the manner in which it was created.

28

ARTICLE XII.

GENERAL PROVISIONS

SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall begin on the first day of January in each year.

SECTION 2. INSPECTION OF BOOKS. The board of directors shall determine from time to time whether, and if allowed, when and under what conditions and regulations, the accounts and books of the corporation (except as may be by statute specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and a stockholder’s rights in this respect are, and shall be, restricted and limited accordingly.

SECTION 3. GENDER. The use of the masculine gender in these bylaws shall be deemed to include the feminine gender.

ARTICLE XIII.

AMENDMENTS TO AND SUSPENSION OF BYLAWS

SECTION 1. AMENDMENTS. Subject to the provisions of Section 12 of Article IV, these bylaws may be altered or repealed at any regular meeting of the stockholders or at any special meeting of the stockholders at which a quorum is present or represented, provided notice of the proposed alteration or repeal be contained in the notice of the special meeting, by the affirmative vote of a majority of the stockholders entitled to vote at the meeting and present or represented thereat, or by the affirmative vote of a majority of the board of directors at any regular meeting of the board of directors or at any special meeting of the board of directors, if notice of the proposed alteration or repeal be contained in the notice of the special meeting.

SECTION 2. SUSPENSION. Any provision of these bylaws may be suspended by vote of two-thirds of the votes cast upon the motion to suspend except that the suspension of the bylaw provision might be in contravention of any provision of any statute or of the Certificate of Incorporation.

* * *

29

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, John J. Christmann IV, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Apache Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ John J. Christmann IV

John J. Christmann IV

Chief Executive Officer and President

(principal executive officer)

Date: October 31, 2019

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Stephen J. Riney, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Apache Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Stephen J. Riney

Stephen J. Riney

Executive Vice President and Chief Financial Officer

(principal financial officer)

Date: October 31, 2019

EX-32.1

EXHIBIT 32.1

APACHE CORPORATION

Certification of Principal Executive Officer

and Principal Financial Officer

I, John J. Christmann IV, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the quarterly report on Form 10-Q of Apache Corporation for the quarterly period ending September 30, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o (d)) and that information contained in such report fairly represents, in all material respects, the financial condition and results of operations of Apache Corporation.

/s/ John J. Christmann IV
By:	John J. Christmann IV
Title:	Chief Executive Officer and President
	(principal executive officer)

Date: October 31, 2019

I, Stephen J. Riney, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the quarterly report on Form 10-Q of Apache Corporation for the quarterly period ending September 30, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o (d)) and that information contained in such report fairly represents, in all material respects, the financial condition and results of operations of Apache Corporation.

/s/ Stephen J. Riney
By:	Stephen J. Riney
Title:	Executive Vice President and Chief Financial Officer
	(principal financial officer)

Date: October 31, 2019

XML

CAPITAL STOCK

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

CAPITAL STOCK

REDEEMABLE NONCONTROLLING INTEREST - ALTUS

Preferred Units Issuance

On June 12, 2019, Altus Midstream LP, an indirectly controlled subsidiary of Apache, issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act of 1933 (the Closing). Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. Pursuant to the partnership agreement of Altus Midstream LP:

• The Preferred Units bear quarterly distributions at a rate of 7 percent per annum, increasing after the fifth anniversary of Closing and upon the occurrence of specified events. Altus Midstream LP may pay distributions in-kind for the first six quarters after the Preferred Units are issued.

• The Preferred Units are redeemable at Altus Midstream LP’s option at any time in cash at a redemption price (the Redemption Price) equal to the greater of an 11.5 percent internal rate of return (increasing after the fifth anniversary of Closing to 13.75 percent) and a 1.3x multiple of invested capital. The Preferred Units will be redeemable at the holder’s option upon a change of control or liquidation of Altus Midstream LP and certain other events, including certain asset dispositions.

• The Preferred Units will be exchangeable for shares of ALTM’s Class A common stock at the holder’s election after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be exchangeable for a number of shares of ALTM’s Class A common stock equal to the Redemption Price divided by the volume-weighted average trading price of ALTM’s Class A common stock on the NASDAQ Capital Market for the 20 trading days immediately preceding the second trading day prior to the applicable exchange date, less a 6 percent discount.

• Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream LP’s common units and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

• Preferred Units holders have rights to approve certain partnership business, financial, and governance-related matters.

• Altus Midstream LP is restricted from declaring or making cash distributions on its common units until all required distributions on the Preferred Units have been paid. In addition, before the fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Altus Midstream LP’s common units are limited to $650 million of cash from ordinary course operations if permitted under its credit facility. Cash distributions on, and redemptions of, Altus Midstream LP’s common units also are subject to satisfaction of leverage ratio requirements specified in its partnership agreement.

Classification

The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.

Initial Measurement

Altus recorded the net transaction price of $611 million, calculated as the negotiated transaction price of $625 million, less issue discounts of $4 million and transaction costs totaling $10 million.

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Altus bifurcated and recognized at fair value an embedded derivative related to the Preferred Units of $94 million for a redemption option of the Preferred Unit holders. The derivative is reflected in “Other” within “Deferred Credits and Other Noncurrent Liabilities” on the Company’s consolidated balance sheet at its current fair value of $98 million. The fair value of the embedded derivative, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units. See Note 4—Derivative Instruments and Hedging Activities for more detail.

The net transaction price was allocated to the preferred redeemable noncontrolling interest and the embedded features according to the associated initial fair value measurements as follows:

	June 12, 2019
	(In millions)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners	$	517
Preferred Units embedded derivative	94
	$	611

Subsequent Measurement

Altus applies a two-step approach to subsequent measurement of the redeemable noncontrolling interest related to the Preferred Units by first allocating a portion of the net income of Altus Midstream LP in accordance with the terms of the partnership agreement. An additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end may be recorded, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of Closing. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a)(i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability or (b) the accreted value of the net transaction price.

Activity related to the Preferred Units during the nine months ended September 30, 2019 is as follows:

	Units Outstanding	Financial Position(2)
	(In millions, except unit data)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: beginning of period	—	$	—
Issuance of Preferred Units, net	625,000	517
Distribution of in-kind additional Preferred Units(1)	2,188	—
Allocation of Altus Midstream LP net income	N/A	21
Accreted value adjustment	N/A	1
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: end of period	627,188	539
Preferred Units embedded derivative		98
		$	637

(1) Subsequent to the balance sheet date, Altus Midstream LP provided notice to the Preferred Unit holders of record at September 30, 2019 of the amount of the distribution on the Preferred Units for the quarter ended September 30, 2019. The holders also were notified that Altus Midstream LP elected to pay the entire amount of the approximate $11 million distribution in-kind in additional Preferred Units (PIK Units) on November 14, 2019. In total, 10,975.8 PIK Units will be issued in satisfaction of the required distribution.

(2) As at September 30, 2019, the aggregate Redemption Price was $646 million, based on an internal rate of return of 11.5 percent.

N/A - not applicable.

CAPITAL STOCK

Net Income (Loss) per Common Share

A reconciliation of the components of basic and diluted net income (loss) per common share for the quarters and nine months ended September 30, 2019 and 2018, is presented in the table below.

 

	For the Quarter Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	383	$	0.21
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	—
Diluted:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	385	$	0.21

	For the Nine Months Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	383	$	1.10
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	(0.01	)
Diluted:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	385	$	1.09

The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling 5.2 million and 4.9 million for the quarters ended September 30, 2019 and 2018, respectively, and 5.1 million and 5.8 million for the nine months ended September 30, 2019 and 2018, respectively. The impact to net income (loss) attributable to common stock of an assumed conversion of the redeemable noncontrolling Preferred Units interests in Altus Midstream LP were anti-dilutive for the three- and nine-month periods ended September 30, 2019.

Common Stock Dividends

For the quarters ended September 30, 2019 and 2018, Apache paid $94 million and $96 million, respectively, in dividends on its common stock. For the nine months ended September 30, 2019 and 2018, the Company paid $282 million and $287 million, respectively.

Stock Repurchase Program

In 2013 and 2014, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased from time to time either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, 2019, had repurchased a total of 40 million shares at an average price of $79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during 2019.

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of commodity derivative positions

As of September 30, 2019, Apache had the following open crude oil financial basis swap contracts:

Production Period	Settlement Index	Mbbls	Weighted Average Price Differential
October—December 2019	Midland-WTI/Cushing-WTI	1,380	$(3.72)

As of September 30, 2019, Apache had the following open natural gas financial basis swap contracts:

Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Price Differential
October—December 2019	NYMEX Henry Hub/Waha	3,680	$(0.45)

Schedule of derivative assets measured at fair value

The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting(1)			Carrying Amount
	(In millions)
September 30, 2019
Assets:
Commodity Derivative Instruments	$	—	$	2	$	—	$	2	$	—		$	2
Liabilities:
Commodity Derivative Instruments	—		6		—		6		—			6
Foreign Currency Derivative Instruments	—		1		—		1		—			1
Preferred Units Embedded Derivative	—		—		98		98		—			98
December 31, 2018
Assets:
Commodity Derivative Instruments	$	—	$	69	$	—	$	69	$	(14	)	$	55
Liabilities:
Commodity Derivative Instruments	—		25		—		25		(14		)	11

(1)

The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.

Schedule of derivative liabilities measured at fair value

The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting(1)			Carrying Amount
	(In millions)
September 30, 2019
Assets:
Commodity Derivative Instruments	$	—	$	2	$	—	$	2	$	—		$	2
Liabilities:
Commodity Derivative Instruments	—		6		—		6		—			6
Foreign Currency Derivative Instruments	—		1		—		1		—			1
Preferred Units Embedded Derivative	—		—		98		98		—			98
December 31, 2018
Assets:
Commodity Derivative Instruments	$	—	$	69	$	—	$	69	$	(14	)	$	55
Liabilities:
Commodity Derivative Instruments	—		25		—		25		(14		)	11

(1)

The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.

Schedule of derivative instruments on consolidated balance sheet and statement of consolidated operations

The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

	September 30, 2019		December 31, 2018
	(In millions)
Current Assets: Other current assets	$	2	$	55
Total Assets	$	2	$	55
Current Liabilities: Other current liabilities	$	7	$	11
Deferred Credits and Other Noncurrent Liabilities: Other	98		—
Total Liabilities	$	105	$	11

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 September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Realized gain (loss):
Derivative settlements, realized gain (loss)	$	(16	)	$	7		$	12		$	(110	)
Amortization of put premium, realized loss	—			(14		)	—			(24		)
Unrealized gain (loss)	14			(16		)	(52		)	88
Derivative instrument losses, net	$	(2	)	$	(23	)	$	(40	)	$	(46	)

XML

ASSET RETIREMENT OBLIGATION (Tables)

9 Months Ended

Sep. 30, 2019

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the nine-month period ended September 30, 2019:

	(In millions)
Asset retirement obligation at December 31, 2018	$	1,932
Liabilities incurred	11
Liabilities settled	(49		)
Liabilities divested	(55		)
Accretion expense	80
Asset retirement obligation at September 30, 2019	1,919
Less current portion	(66		)
Asset retirement obligation, long-term	$	1,853

XML

OTHER CURRENT LIABILITIES (Detail) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accrued operating expenses	$ 187	$ 65
Accrued exploration and development	355	667
Accrued gathering, processing, and transmission - Altus	25	81
Accrued compensation and benefits	171	177
Accrued interest	114	137
Accrued income taxes	80	58
Current asset retirement obligation	66	66
Current operating lease liability	149
Other	94	90
Total other current liabilities	$ 1,241	$ 1,341

XML

OTHER CURRENT ASSETS (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Inventories	$ 475	$ 401
Drilling advances	161	218
Assets held for sale	18	0
Prepaid assets and other	84	160
Total other current assets	$ 738	$ 779

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Derivative Instruments (Detail) bbl in Thousands, £ in Millions	9 Months Ended
	Sep. 30, 2019 GBP (£) MMBTU $ / MMBTU Counterparty bbl
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Number of derivative counterparties | Counterparty	5
Put Options | October—December 2019 | Crude Oil | Midland-WTI/Cushing-WTI
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, nonmonetary notional amount, volume | bbl	1,380
Weighted Average Price Differential	(3.72)
Collars | January—December 2019
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, notional amount | £	£ 12.5
Derivative, weighted average floor price (USD per bbl)	1.20
Derivative, weighted average ceiling price (USD per bbl)	1.35
Basis Swap | October—December 2019 | Natural Gas | NYMEX Henry Hub/Waha
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Weighted Average Price Differential | MMBTU	(0.45)
Derivative, nonmonetary notional amount, energy | MMBTU	3,680,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 30, 2019, Apache’s significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of its consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, with the exception of Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” (see “Leases” section in this Note 1 below).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated.

The Company consolidates all other investments in which, either through direct or indirect ownership, Apache has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated Apache subsidiary and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in Apache’s Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate component of equity in Apache’s consolidated balance sheet.

Additionally, third-party investors own a minority interest of approximately 21 percent of Altus Midstream Company (ALTM), which is reflected as a separate noncontrolling interest component of equity in Apache’s consolidated balance sheet. Apache consolidates the activities of ALTM, which qualifies as a variable interest entity (VIE) under GAAP. Apache has concluded that it is the primary beneficiary of the VIE, as defined in the accounting standards, since Apache has the power, through its ownership, to direct those activities that most significantly impact the economic performance of ALTM and the obligation to absorb losses or the right to receive benefits that could be potentially significant to ALTM. This conclusion was based on a qualitative analysis that considered ALTM’s governance structure, the commercial agreements between ALTM, Altus Midstream LP (collectively with ALTM, Altus), and Apache, and the voting rights established between the members, which provide Apache with the ability to control the operations of Altus. On June 12, 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) through a private offering that admitted additional limited partners with separate rights for the Preferred Unit holders. For further details on the terms of the Preferred Units and rights of the holders, refer to Note 12—Redeemable Noncontrolling Interest - Altus.

Investments in which Apache holds less than 50 percent of the voting interest are typically accounted for under the equity method of accounting, with the balance recorded separately as “Equity method interests” in Apache’s consolidated balance sheet and results of operations recorded as a component of “Other” under “Revenues and Other” in the Company’s statement of consolidated operations. Refer to Note 6—Equity Method Interests for more detail.

Use of Estimates

Preparation of financial statements in conformity with GAAP 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. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities, the estimate of proved oil and gas reserves and related present value estimates of

future net cash flows therefrom, the assessment of asset retirement obligations, the estimates of fair value for long-lived assets, and the estimate of income taxes. Actual results could differ from those estimates.

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in Apache’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).

Recurring fair value measurements are presented in further detail in Note 4—Derivative Instruments and Hedging Activities, Note 10—Debt and Financing Costs, and Note 12—Redeemable Noncontrolling Interest - Altus.

Apache also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. For the third quarter and nine-month period ended September 30, 2019, the Company recorded asset impairments totaling $9 million and $249 million, respectively, in connection with fair value assessments.

During the third quarter of 2019, Apache recorded an impairment of $9 million on gathering, processing, and transmission (GPT) assets held for sale by the Company’s Altus Midstream reporting segment. The estimated fair value of the assets held for sale was approximately $18 million and was determined using a market approach based on proceeds expected to be received in the fourth quarter, a Level 1 fair value measurement. The Company reflects held for sale assets as a component of “Other current assets” on its consolidated balance sheet.

In the second quarter of 2019, the Company entered into an agreement to sell certain of its assets in the Western Anadarko Basin in Oklahoma and Texas. As a result of this agreement, a separate impairment analysis was performed for each of the assets within the disposal group. The analyses were based on the agreed-upon proceeds less costs to sell for the transaction, a Level 1 fair value measurement. The carrying value of the net assets to be divested exceeded the fair value implied by the expected net proceeds, resulting in impairments totaling $240 million, including $86 million on the Company’s proved properties, $149 million on its unproved properties, and $5 million on other working capital. See Note 2—Acquisitions and Divestitures for more detail.

In the third quarter of 2018, Apache agreed to sell certain of its unproved properties offshore the U.K. in the North Sea (North Sea). As a result, the Company performed a fair value assessment of the properties and recorded a $10 million impairment on the carrying values of the associated capitalized exploratory well costs in the third quarter and first nine months of 2018. The fair value of the impaired assets was determined using the negotiated sales price, a Level 1 fair value measurement.

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 Apache’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review.

The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil and Gas Property:
Proved	$	—	$	—	$	86	$	—
Unproved	12		49		223		86

Proved properties impaired during the first nine months of 2019 related to assets held for sale at June 30, 2019 with an aggregate fair value of $379 million.

On the statement of consolidated operations, unproved leasehold impairments are typically recorded as a component of “Exploration” expense; however, in the first nine months of 2019, unproved impairments of $149 million were recorded in “Impairments” in connection with an agreement to sell certain non-core leasehold properties in Oklahoma and Texas. In the third quarter and first nine months of 2018, unproved impairments of $10 million were recorded in “Impairments” in connection with an agreement to sell certain unproved properties in the North Sea.

Gains and losses on divestitures of the Company’s oil and gas properties are recognized in the statement of consolidated operations upon closing of the transaction. See Note 2—Acquisitions and Divestitures for more detail.

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the nine months ended September 30, 2019. Apache recognizes revenue from its contracts with customers from the sale of its crude oil, natural gas, and natural gas liquids (NGLs) production as well as volumes purchased from third parties. Each unit of quantity represents a single performance obligation that is satisfied at a point in time as control of the product has been transferred to the customer.

The contracted price is variable and is determined based on market-indexed prices adjusted for quality, transportation, and other market-reflective differentials. Sales proceeds related to third-party purchased volumes are considered revenue from a contract with a customer. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively. Associated purchase costs for these volumes totaled $23 million and $109 million for the third quarters of 2019 and 2018, respectively, and $60 million and $308 million for the first nine months of 2019 and 2018, respectively. Proceeds and costs are both recorded as “Other” under “Revenues and Other” in the Company’s statement of consolidated operations.

The following table represents revenues from customers and non-customers for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Revenues from customers	$	1,361	$	1,902	$	4,414	$	5,437
Revenues from non-customers	107		198		347		534

Payment from contracts with customers is typically received on a short-term basis after physical delivery of the product. Receivables from contracts with customers, net of allowance for doubtful accounts, totaled $919 million and $1.0 billion as of September 30, 2019 and December 31, 2018, respectively.

Apache has concluded that disaggregating revenue by geographic area and by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14—Business Segment Information for a disaggregation of revenue by each product sold.

Leases

On January 1, 2019, Apache adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize separate right-of-use (ROU) assets and lease liabilities for most leases classified as operating leases under previous GAAP. Prior to adoption, the Financial Accounting Standards Board (FASB) issued transition guidance permitting an entity the option to not evaluate under ASU 2016-02 those existing or expired land easements that were not previously accounted for as leases, as well as an option to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the financial statements. Apache elected both transitional practical expedients. Under these transition options, comparative reporting was not required, and the provisions of the standard were applied prospectively to leases in effect at the date of adoption.

As allowed under the standard, the Company also applied practical expedients to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. Apache also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes. Short-term lease expense was not material for the third quarter and first nine months of 2019.

The Company determines if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, Apache records an ROU asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental borrowing rate when calculating the present value. In the normal course of business, Apache enters into various lease agreements for real estate, drilling rigs, vessels, aircraft, and equipment related to its exploration and development activities, which are typically classified as operating leases under the provisions of the standard. ROU assets are reflected within “Deferred charges and other” within “Other” assets on the Company’s consolidated balance sheet, and the associated operating lease liabilities are reflected within “Other current liabilities” and “Other” within “Deferred Credits and Other Noncurrent Liabilities,” as applicable.

Operating lease expense associated with ROU assets is recognized on a straight-line basis over the lease term. Lease expense is reflected on the statement of consolidated operations commensurate with the leased activities and nature of the services performed. Gross fixed operating lease expense, inclusive of amounts billable to partners and other working interest owners, was $53 million and $167 million for the third quarter and first nine months of 2019, respectively.

In addition, the Company periodically enters into finance leases that are similar to those leases classified as capital leases under previous GAAP. Finance lease assets are included in “Other” within “Property and Equipment” on the consolidated balance sheet, and the associated finance lease liabilities are reflected within “Current debt” and “Long-term debt,” as applicable. Prior periods include the reclassification of $39 million finance lease obligations from “Other” within “Deferred Credits and Other Noncurrent Liabilities” to “Long-term debt” on the Company’s consolidated balance sheet to conform with this presentation. There was no material impact to the Company’s statement of consolidated operations and statement of consolidated cash flows for its treatment of finance leases. Depreciation on the Company’s finance lease assets was $2 million and $6 million for the third quarter and first nine months of 2019, respectively. Interest on the Company’s finance lease assets was $1 million and $2 million for the third quarter and first nine months of 2019, respectively.

The following table represents the Company’s weighted average lease term and discount rate as of September 30, 2019:

	Operating Leases		Finance Leases
Weighted average remaining lease term	3.3 years		9.7 years
Weighted average discount rate	4.4	%	4.3	%

The undiscounted future minimum lease payments reconciled to the carrying value of the lease liabilities as of September 30, 2019 were as follows:

Net Minimum Commitments	Operating Leases(1)			Finance Leases(2)
	(In millions)
2019	$	48		$	9
2020	124			13
2021	50			3
2022	41			3
2023	24			3
Thereafter	40			40
Total future minimum lease payments	327			71
Less: imputed interest	(26		)	(14		)
Total lease liabilities	301			57
Current portion	(149		)	(19		)
Non-current portion	$	152		$	38

(1) Amounts included for drilling rig and related operational equipment obligations represent future payments associated with oil and gas operations inclusive of amounts billable to partners and other working interest owners. Such payments may be capitalized as a component of oil and gas properties and subsequently depreciated, impaired, or written off as exploration expense.

(2) Amounts represent the Company’s finance lease obligation related to physical power generators being leased on a one-year term with the right to purchase and a separate lease for the Company’s Midland, Texas regional office building.

The lease liability reflected in the table above represents the Company’s fixed minimum payments that are settled in accordance with the lease terms. Actual lease payments during the period may also include variable lease components such as common area maintenance, usage-based sales taxes and rate differentials, or other similar costs that are not determinable at the inception of the lease. Gross variable lease payments, inclusive of amounts billable to partners and other working interest owners, for the third quarter and first nine months of 2019 were $3 million and $44 million, respectively.

New Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses.” The standard changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans, and other financial assets measured at amortized cost. The ASU requires the use of a new forward-looking “expected loss” model compared to the current “incurred loss” model, resulting in accelerated recognition of credit losses. This update is effective for the Company beginning in the first quarter of 2020, with early adoption permitted. The Company is in the process of finalizing its project plan for the implementation of the ASU and continues to evaluate and monitor standard setting activity. The Company does not believe the adoption and implementation of this ASU will have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement,” which changes the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures. ASU 2018-13 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans,” which eliminates, modifies, and adds disclosure requirements for defined benefit plans. The ASU is effective for financial statements issued for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This pronouncement clarifies the requirements for capitalizing implementation costs in cloud computing arrangements and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements and does not expect it to have a material impact.

XML

Cover - shares	9 Months Ended
	Sep. 30, 2019	Oct. 30, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	1-4300
Entity Registrant Name	APACHE CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-0747868
Entity Address, Address Line One	One Post Oak Central, 2000 Post Oak Boulevard, Suite 100
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77056-4400
City Area Code	713
Local Phone Number	296-6000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		376,036,287
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Central Index Key	0000006769
Current Fiscal Year End Date	--12-31
Common Stock | New York Stock Exchange
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, $0.625 par value
Trading Symbol	APA
Security Exchange Name	NYSE
Common Stock | Chicago Stock Exchange
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, $0.625 par value
Trading Symbol	APA
Security Exchange Name	CHX
Common Stock | NASDAQ Global Select Market
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, $0.625 par value
Trading Symbol	APA
Security Exchange Name	NASDAQ
7.75% Notes Due 2029 | New York Stock Exchange
Entity Information [Line Items]
Title of 12(b) Security	7.75% Notes Due 2029
Trading Symbol	APA/29
Security Exchange Name	NYSE

XML

CONSOLIDATED BALANCE SHEET (Unaudited) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
CURRENT ASSETS:
Cash and cash equivalents ($3 and $450 related to Altus VIE)	$ 163	$ 714
Receivables (net of allowance of $86 and $92)	1,070	1,194
Other current assets (Note 5) ($35 and $7 related to Altus VIE)	738	779
Total current assets	1,971	2,687
Oil and gas, on the basis of successful efforts accounting:
Proved properties	40,114	42,345
Unproved properties and properties under development	1,256	1,435
Gathering, processing, and transmission facilities ($1,457 and $1,251 related to Altus VIE)	2,061	1,856
Other ($38 and nil related to Altus VIE)	1,177	1,120
Property and equipment, gross	44,608	46,756
Less: Accumulated depreciation, depletion, and amortization ($52 and $24 related to Altus VIE)	(26,953)	(28,335)
Property and equipment, net	17,655	18,421
OTHER ASSETS:
Equity method interests ($1,095 and $91 related to Altus VIE)	1,095	121
Deferred charges and other ($73 and $71 related to Altus VIE)	684	353
Total assets	21,405	21,582
CURRENT LIABILITIES:
Accounts payable	661	709
Current debt ($18 and nil related to Altus VIE)	19	151
Other current liabilities (Note 7) ($38 and $85 related to Altus VIE)	1,241	1,341
Total current liabilities	1,921	2,201
LONG-TERM DEBT (Note 10) ($235 and nil related to Altus VIE)	8,393	8,093
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	340	391
Asset retirement obligation ($34 and $29 related to Altus VIE)	1,853	1,866
Other ($98 and nil related to Altus VIE)	491	219
Total deferred credits and other noncurrent liabilities	2,684	2,476
COMMITMENTS AND CONTINGENCIES (Note 11)
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)	539	0
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 416,986,332 and 415,692,116 shares issued, respectively	261	260
Paid-in capital	11,852	12,106
Accumulated deficit	(2,625)	(2,048)
Treasury stock, at cost, 40,964,193 and 40,995,894 shares, respectively	(3,190)	(3,192)
Accumulated other comprehensive income	3	4
APACHE SHAREHOLDERS’ EQUITY	6,301	7,130
TOTAL EQUITY	7,868	8,812
TOTAL LIABILITIES AND EQUITY	21,405	21,582
Noncontrolling interests, Egypt
EQUITY:
Noncontrolling interest	1,165	1,275
Noncontrolling interests, Altus
EQUITY:
Noncontrolling interest	$ 402	$ 407

XML

DEBT AND FINANCING COSTS - Additional Information (Detail)		1 Months Ended		3 Months Ended		9 Months Ended
	Jun. 21, 2019 USD ($)	Mar. 31, 2019	Nov. 30, 2018 USD ($) contract	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 GBP (£)	Jun. 19, 2019 USD ($)	Mar. 01, 2019 USD ($)	Feb. 28, 2019 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)
Debt Instrument [Line Items]
Finance lease obligations, current				$ 19,000,000		$ 19,000,000
Current debt outstanding amount				19,000,000		19,000,000						$ 151,000,000
Capital lease obligations, current												1,000,000
Loss on extinguishment of debt				0	$ 94,000,000	75,000,000	$ 94,000,000
Available commercial paper				3,500,000,000		3,500,000,000
Commercial paper outstanding				0		0
Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, committed amount													$ 4,000,000,000.0
Extended financing agreement term		1 year
Letters of credit outstanding, amount				0		0
Letter of Credit
Debt Instrument [Line Items]
Line of credit facility, committed amount				2,080,000,000.00		2,080,000,000.00
Credit facility maximum borrowing capacity				3,000,000,000.0		3,000,000,000.0
Line of credit facility aggregate commitment amount | £								£ 3,100,000
Senior Notes | 7.625% Senior Notes Due July 1, 2019
Debt Instrument [Line Items]
Current debt outstanding amount												$ 150,000,000
Debt instrument, stated interest rate												7.625%
Unsecured Debt
Debt Instrument [Line Items]
Debt instrument, face amount									$ 1,000,000,000.0
Unsecured Debt | 4.250% Notes Due January 15, 2030
Debt Instrument [Line Items]
Debt instrument, stated interest rate									4.25%
Debt instrument, face amount									$ 600,000,000
Unsecured Debt | 5.350% Notes Due July 1, 2049
Debt Instrument [Line Items]
Debt instrument, stated interest rate									5.35%
Debt instrument, face amount									$ 400,000,000
Altus Midstream LP | Line of Credit
Debt Instrument [Line Items]
Borrowing amount				235,000,000		235,000,000						$ 0
Altus Midstream LP | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, committed amount			$ 650,000,000							$ 1,500,000,000	$ 800,000,000
Extended financing agreement term			1 year
Letters of credit outstanding, amount				0		0						0
Line of credit facility, number of extension options | contract			2
Debt covenant, minimum consolidated net income for three consecutive calendar months			$ 175,000,000
Borrowing amount				$ 235,000,000		$ 235,000,000						$ 0
Altus Midstream LP | Line of Credit | Letter of Credit
Debt Instrument [Line Items]
Line of credit facility, committed amount											100,000,000
Altus Midstream LP | Line of Credit | Swingline Loan Subfacility
Debt Instrument [Line Items]
Line of credit facility, committed amount											$ 100,000,000
Commercial Paper
Debt Instrument [Line Items]
Period for borrowing funds						270 days
Senior Notes
Debt Instrument [Line Items]
Debt repurchased principal amount	$ 932,000,000
Extinguishment of debt amount	1,000,000,000.0
Loss on extinguishment of debt	75,000,000
Unamortized debt issuance costs and discount	$ 7,000,000
Maximum | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, committed amount													$ 5,000,000,000.0

XML

REDEMABLE NONCONTROLLING INTEREST - ALTUS - Schedule of Preferred Units (Details) - Altus Midstream LP - USD ($) $ in Millions	Sep. 30, 2019	Jun. 12, 2019
Class of Stock [Line Items]
Embedded derivative	$ 98	$ 94
Altus Preferred Unit limited partners
Class of Stock [Line Items]
Redeemable noncontrolling interest — Preferred Unit limited partners		517
Embedded derivative		94
Transaction price, net		$ 611

XML

BUSINESS SEGMENT INFORMATION (Detail) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) Segment	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Segment Reporting [Abstract]
Number of reporting segments | Segment			3
Segment Reporting Information [Line Items]
Oil and gas production revenues	$ 1,438	$ 1,976	$ 4,690	$ 5,645
Lease operating expenses	350	382	1,104	1,087
Gathering, processing, and transmission	66	92	230	260
Taxes other than income	44	58	141	162
Exploration	56	99	220	251
Depreciation, depletion, and amortization	711	610	1,959	1,771
Asset retirement obligation accretion	27	27	80	81
Impairments	9	10	249	10
Operating expenses	1,263	1,278	3,983	3,622
Operating Income (Loss)	175	698	707	2,023
Other Income (Expense):
Gain on divestitures	0	1	20	10
Derivative instrument losses, net	(2)	(23)	(40)	(46)
Other	41	29	45	50
General and administrative	(98)	(99)	(323)	(330)
Transaction, reorganization, and separation	(7)	(8)	(17)	(20)
Financing costs, net	(95)	(192)	(365)	(385)
NET INCOME BEFORE INCOME TAXES	14	406	27	1,302
Revenues from non-customers	107	198	347	534
Total Assets	21,405	21,870	21,405	21,870	$ 21,582
Impairments	9	10	249	10
Operating Segments | Egypt
Segment Reporting Information [Line Items]
Oil and gas production revenues	546	759	1,741	2,161
Lease operating expenses	115	112	365	316
Gathering, processing, and transmission	9	12	31	35
Taxes other than income	0	0	0	0
Exploration	27	10	89	70
Depreciation, depletion, and amortization	177	187	538	564
Asset retirement obligation accretion	0	0	0	0
Impairments	0	0	0	0
Operating expenses	328	321	1,023	985
Operating Income (Loss)	218	438	718	1,176
Other Income (Expense):
Total Assets	3,851	4,404	3,851	4,404
Impairments	2		6
Operating Segments | North Sea
Segment Reporting Information [Line Items]
Oil and gas production revenues	250	338	948	989
Lease operating expenses	76	92	240	264
Gathering, processing, and transmission	9	12	32	32
Taxes other than income	0	0	0	0
Exploration	0	2	2	19
Depreciation, depletion, and amortization	71	89	269	281
Asset retirement obligation accretion	19	19	56	56
Impairments	0	10	0	10
Operating expenses	175	224	599	662
Operating Income (Loss)	75	114	349	327
Other Income (Expense):
Total Assets	2,529	3,033	2,529	3,033
Impairments		10		10
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Oil and gas production revenues	642	879	2,001	2,495
Lease operating expenses	159	178	501	507
Gathering, processing, and transmission	69	76	214	204
Taxes other than income	40	57	131	156
Exploration	25	86	117	159
Depreciation, depletion, and amortization	452	329	1,125	913
Asset retirement obligation accretion	8	8	23	24
Impairments	0	0	240	0
Operating expenses	753	734	2,351	1,963
Operating Income (Loss)	(111)	145	(350)	532
Other Income (Expense):
Total Assets	12,288	13,335	12,288	13,335
Impairments	10	39	308	76
Operating Segments | Altus Midstream
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Lease operating expenses	0	0	0	0
Gathering, processing, and transmission	13	17	43	39
Taxes other than income	4	1	10	6
Exploration	0	0	0	0
Depreciation, depletion, and amortization	11	5	27	13
Asset retirement obligation accretion	0	0	1	1
Impairments	9	0	9	0
Operating expenses	37	23	90	59
Operating Income (Loss)	(3)	2	2	(9)
Other Income (Expense):
Total Assets	2,649	1,054	2,649	1,054
Impairments	9		9
Intersegment Eliminations & Other
Segment Reporting Information [Line Items]
Oil and gas production revenues	(34)	(25)	(92)	(50)
Lease operating expenses	0	0	(2)	0
Gathering, processing, and transmission	(34)	(25)	(90)	(50)
Taxes other than income	0	0	0	0
Exploration	4	1	12	3
Depreciation, depletion, and amortization	0	0	0	0
Asset retirement obligation accretion	0	0	0	0
Impairments	0	0	0	0
Operating expenses	(30)	(24)	(80)	(47)
Operating Income (Loss)	(4)	(1)	(12)	(3)
Other Income (Expense):
Total Assets	88	44	88	44
Intersegment Eliminations & Other | Egypt
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Intersegment Eliminations & Other | North Sea
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Intersegment Eliminations & Other | U.S.
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Intersegment Eliminations & Other | Altus Midstream
Segment Reporting Information [Line Items]
Oil and gas production revenues	34	25	92	50
Oil and Gas, Purchased
Segment Reporting Information [Line Items]
Oil and gas production revenues	30	124	71	326
Gathering, processing, and transmission	23	109	60	308
Oil
Segment Reporting Information [Line Items]
Oil and gas production revenues	1,207	1,555	3,914	4,524
Other Income (Expense):
Revenues from non-customers	98	181	316	485
Oil | Operating Segments | Egypt
Segment Reporting Information [Line Items]
Oil and gas production revenues	472	669	1,509	1,887
Oil | Operating Segments | North Sea
Segment Reporting Information [Line Items]
Oil and gas production revenues	231	303	868	894
Oil | Operating Segments | U.S.
Segment Reporting Information [Line Items]
Oil and gas production revenues	504	583	1,537	1,743
Oil | Operating Segments | Altus Midstream
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Oil | Intersegment Eliminations & Other
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Natural Gas
Segment Reporting Information [Line Items]
Oil and gas production revenues	136	241	490	675
Other Income (Expense):
Revenues from non-customers	9	16	30	47
Natural Gas | Operating Segments | Egypt
Segment Reporting Information [Line Items]
Oil and gas production revenues	72	86	223	263
Natural Gas | Operating Segments | North Sea
Segment Reporting Information [Line Items]
Oil and gas production revenues	14	30	64	81
Natural Gas | Operating Segments | U.S.
Segment Reporting Information [Line Items]
Oil and gas production revenues	50	125	203	331
Natural Gas | Operating Segments | Altus Midstream
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Natural Gas | Intersegment Eliminations & Other
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Natural Gas liquids
Segment Reporting Information [Line Items]
Oil and gas production revenues	95	180	286	446
Other Income (Expense):
Revenues from non-customers	0	1	1	2
Natural Gas liquids | Operating Segments | Egypt
Segment Reporting Information [Line Items]
Oil and gas production revenues	2	4	9	11
Natural Gas liquids | Operating Segments | North Sea
Segment Reporting Information [Line Items]
Oil and gas production revenues	5	5	16	14
Natural Gas liquids | Operating Segments | U.S.
Segment Reporting Information [Line Items]
Oil and gas production revenues	88	171	261	421
Natural Gas liquids | Operating Segments | Altus Midstream
Segment Reporting Information [Line Items]
Oil and gas production revenues	0	0	0	0
Natural Gas liquids | Intersegment Eliminations & Other
Segment Reporting Information [Line Items]
Oil and gas production revenues	$ 0	$ 0	$ 0	$ 0

XML

OTHER CURRENT ASSETS (Notes)

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

OTHER CURRENT ASSETS

OTHER CURRENT ASSETS

The following table provides detail of the Company’s other current assets as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
	(In millions)
Inventories	$	475	$	401
Drilling advances	161		218
Assets held for sale	18		—
Prepaid assets and other	84		160
Total other current assets	$	738	$	779

XML

INCOME TAXES

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

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 of 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 third quarters of 2019 and 2018, Apache’s effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.

Apache’s 2019 and 2018 year-to-date effective income tax rates were primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.

Apache and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. The Company is currently under IRS audit for the 2014-2017 tax years and is also under audit in various states and foreign jurisdictions as part of its normal course of business.

XML

ACQUISITIONS AND DIVESTITURES (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Business Acquisition [Line Items]
Leasehold and property acquisitions				$ 39	$ 86
Proceeds from sale of oil and gas properties				590	51
Impairments of oil and gas properties	$ 9		$ 10	249	10
US Onshore Regions
Business Acquisition [Line Items]
Leasehold and property acquisitions	5			39
Oklahoma and Texas | Disposed of by Sale
Business Acquisition [Line Items]
Proceeds from sale of oil and gas properties	325
Asset retirement obligation assumed	49
Impairments of oil and gas properties		$ 240
Gain (loss) on sale of non-core assets	$ (9)
Oklahoma | Disposed of by Sale
Business Acquisition [Line Items]
Proceeds from sale of oil and gas properties		223
Gain (loss) on sale of non-core assets		17
Non-core assets disposed, net carrying value		$ 206
Permian Region | Disposed of by Sale
Business Acquisition [Line Items]
Proceeds from sale of oil and gas properties				21	51
Gain (loss) on sale of non-core assets				$ 12	10
US Onshore and Egypt Regions
Business Acquisition [Line Items]
Leasehold and property acquisitions			$ 48		$ 86

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 01, 2019	Dec. 31, 2018
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties	$ 9,000,000		$ 10,000,000	$ 249,000,000	$ 10,000,000
Oil and gas production revenues	1,438,000,000		1,976,000,000	4,690,000,000	5,645,000,000
Cost of oil and gas purchased	66,000,000		92,000,000	230,000,000	260,000,000
Receivables from contracts with customer, net	919,000,000			919,000,000			$ 1,000,000,000.0
Fixed operating lease expenses	53,000,000			167,000,000
Other noncurrent liabilities	(491,000,000)			(491,000,000)			(219,000,000)
Long-term debt	8,393,000,000			8,393,000,000			$ 8,093,000,000
Variable lease payment	3,000,000			44,000,000
Accounting Standards Update 2016-02
Schedule Of Significant Accounting Policies [Line Items]
Other noncurrent liabilities						$ 39,000,000
Long-term debt						$ 39,000,000
Oil and Gas, Purchased
Schedule Of Significant Accounting Policies [Line Items]
Oil and gas production revenues	30,000,000		124,000,000	71,000,000	326,000,000
Cost of oil and gas purchased	23,000,000		109,000,000	60,000,000	308,000,000
Oil and Gas Properties, Proved
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties	0		0	86,000,000	0
Assets held-for-sale, fair value		$ 379,000,000
Oil and Gas Properties, Unproved
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties	12,000,000		49,000,000	223,000,000	86,000,000
Assets held under Finance Leases
Schedule Of Significant Accounting Policies [Line Items]
Depreciation	2,000,000			6,000,000
Interest costs	$ 1,000,000			$ 2,000,000
Altus Midstream Company
Schedule Of Significant Accounting Policies [Line Items]
Ownership percentage by noncontrolling owners	21.00%			21.00%
Minimum
Schedule Of Significant Accounting Policies [Line Items]
Percentage of voting interests acquired	50.00%			50.00%
Maximum
Schedule Of Significant Accounting Policies [Line Items]
Percentage of voting interests acquired	50.00%			50.00%
North Sea | Oil and Gas Properties, Unproved
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties			$ 10,000,000		$ 10,000,000
Altus Midstream
Schedule Of Significant Accounting Policies [Line Items]
Assets held-for-sale, fair value	$ 18,000,000			$ 18,000,000
Disposed of by Sale | Oklahoma and Texas
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties		240,000,000
Disposed of by Sale | Oklahoma and Texas | Oil and Gas Properties, Proved
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties		86,000,000
Disposed of by Sale | Oklahoma and Texas | Oil and Gas Properties, Unproved
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties				$ 149,000,000
Disposed of by Sale | Oklahoma and Texas | Other Working Capital
Schedule Of Significant Accounting Policies [Line Items]
Impairments of oil and gas properties		$ 5,000,000

XML

DEBT AND FINANCING COSTS (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Debt

The following table presents the carrying value of the Company’s debt as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs(1)	$	8,217		$	8,299
Altus credit facility(2)	235			—
Finance lease obligations	57			40
Unamortized discount	(43		)	(44		)
Debt issuance costs	(54		)	(51		)
Total debt	8,412			8,244
Current maturities	(19		)	(151		)
Long-term debt	$	8,393		$	8,093

(1) The fair value of the Company’s notes and debentures was $8.2 billion and $7.8 billion as of September 30, 2019 and December 31, 2018, respectively. Apache uses a market approach to determine the fair value of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

(2)

The carrying amount of borrowings by Altus Midstream LP on its credit facility approximate fair value because the interest rates are variable and reflective of market rates.

Components of Financing Costs, Net

The following table presents the components of Apache’s financing costs, net:

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Interest expense	$	107		$	113		$	323		$	335
Amortization of deferred loan costs	2			2			5			8
Capitalized interest	(9		)	(11		)	(26		)	(36		)
Loss on extinguishment of debt	—			94			75			94
Interest income	(5		)	(6		)	(12		)	(16		)
Financing costs, net	$	95		$	192		$	365		$	385

XML

CAPITAL STOCK - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended		70 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Mar. 31, 2019	Dec. 31, 2018	Dec. 31, 2014
Equity [Abstract]
Options and restricted stock, anti-dilutive (in shares)	5,200,000	4,900,000	5,100,000	5,800,000
Payments of dividend on common stock	$ 94	$ 96	$ 282	$ 287
Number of shares authorized to be repurchased (in shares)						40,000,000	40,000,000
Number of shares repurchased during period (in shares)			0		40,000,000
Average price of shares repurchased during period (in USD per share)					$ 79.18

XML

DEBT AND FINANCING COSTS - Schedule of Debt (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Finance lease obligations	$ 57
Capital lease obligations		$ 40
Unamortized discount	(43)	(44)
Debt issuance costs	(54)	(51)
Total debt	8,412	8,244
Current maturities	(19)	(151)
Long-term debt	8,393	8,093
Notes And Debentures
Debt Instrument [Line Items]
Debt instrument, fair value	8,200	7,800
Notes And Debentures | Unsecured Debt
Debt Instrument [Line Items]
Long-term debt, gross	8,217	8,299
Altus Midstream LP | Line of Credit
Debt Instrument [Line Items]
Long-term debt, gross	$ 235	$ 0

XML

REDEMABLE NONCONTROLLING INTEREST - ALTUS - Additional Information (Details) - USD ($) $ in Millions		3 Months Ended	9 Months Ended
	Jun. 12, 2019	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Class of Stock [Line Items]
Redeemable noncontrolling interest - Altus Preferred Unit limited partners			$ 611	$ 0
Altus Midstream LP
Class of Stock [Line Items]
Preferred Units, redemption terms, internal rate of return		11.50%	11.50%
Embedded derivative	$ 94	$ 98	$ 98
Altus Midstream LP | Altus Preferred Unit limited partners
Class of Stock [Line Items]
Aggregate issue price of Preferred Units	625
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	611
Preferred Units, quarterly distribution rate per annum		7.00%
Preferred Units, redemption terms, internal rate of return		11.50%	11.50%
Preferred Units, redemption terms, internal rate of return after fifth anniversary of closing		13.75%	13.75%
Preferred Units, redemption terms, multiple of invested capital		1.3	1.3
Preferred Units, exchangeable, number of preceding trading days		20 days
Preferred Units, exchangeable, discount percentage		6.00%	6.00%
Maximum amount of distributions to common unit holders	650
Issue discount	4
Transaction costs	10
Embedded derivative	$ 94

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies

The Company is exposed to fluctuations in crude oil and natural gas prices, foreign currency exchange rates, and interest rates. The Company utilizes various types of derivative financial instruments to manage fluctuations in cash flows resulting from these fluctuations. Apache has elected not to designate any of its derivative contracts as cash flow hedges.

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, Apache utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of September 30, 2019, Apache had derivative positions with 5 counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, Apache may not realize the benefit of some of its derivative instruments resulting from changes in commodity prices, currency exchange rates, or interest rates.

Derivative Instruments

Commodity Derivative Instruments

As of September 30, 2019, Apache had the following open crude oil financial basis swap contracts:

Production Period	Settlement Index	Mbbls	Weighted Average Price Differential
October—December 2019	Midland-WTI/Cushing-WTI	1,380	$(3.72)

As of September 30, 2019, Apache had the following open natural gas financial basis swap contracts:

Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Price Differential
October—December 2019	NYMEX Henry Hub/Waha	3,680	$(0.45)

Foreign Currency Derivative Instruments

Apache has open foreign currency costless collar contracts in GBP/USD for £12.5 million per each calendar month for 2019 with a weighted average floor and ceiling price of $1.20 and $1.35, respectively.

Altus Preferred Units Embedded Derivative

During the second quarter of 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units. Certain redemption features (the Redemption Option) embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. For further discussion of this derivative, see “Fair Value Measurements” below and Note 12—Redeemable Noncontrolling Interest - Altus.

Fair Value Measurements

The fair values of the Company’s derivative contracts are not actively quoted in the open market. The Company primarily uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing futures pricing for the underlying positions provided by a reputable third party, a Level 2 fair value measurement.

The fair value of the Redemption Option, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units.

The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting(1)			Carrying Amount
	(In millions)
September 30, 2019
Assets:
Commodity Derivative Instruments	$	—	$	2	$	—	$	2	$	—		$	2
Liabilities:
Commodity Derivative Instruments	—		6		—		6		—			6
Foreign Currency Derivative Instruments	—		1		—		1		—			1
Preferred Units Embedded Derivative	—		—		98		98		—			98
December 31, 2018
Assets:
Commodity Derivative Instruments	$	—	$	69	$	—	$	69	$	(14	)	$	55
Liabilities:
Commodity Derivative Instruments	—		25		—		25		(14		)	11

(1) The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.

All derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

	September 30, 2019		December 31, 2018
	(In millions)
Current Assets: Other current assets	$	2	$	55
Total Assets	$	2	$	55
Current Liabilities: Other current liabilities	$	7	$	11
Deferred Credits and Other Noncurrent Liabilities: Other	98		—
Total Liabilities	$	105	$	11

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 September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Realized gain (loss):
Derivative settlements, realized gain (loss)	$	(16	)	$	7		$	12		$	(110	)
Amortization of put premium, realized loss	—			(14		)	—			(24		)
Unrealized gain (loss)	14			(16		)	(52		)	88
Derivative instrument losses, net	$	(2	)	$	(23	)	$	(40	)	$	(46	)

Derivative instrument gains and losses are recorded in “Derivative instrument losses, net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized gains and 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 (gains), net” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.”

XML

ASSET RETIREMENT OBLIGATION

9 Months Ended

Sep. 30, 2019

Asset Retirement Obligation Disclosure [Abstract]

ASSET RETIREMENT OBLIGATION

ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the nine-month period ended September 30, 2019:

	(In millions)
Asset retirement obligation at December 31, 2018	$	1,932
Liabilities incurred	11
Liabilities settled	(49		)
Liabilities divested	(55		)
Accretion expense	80
Asset retirement obligation at September 30, 2019	1,919
Less current portion	(66		)
Asset retirement obligation, long-term	$	1,853

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Revenues from Customers and Non-Customers (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Accounting Policies [Abstract]
Revenues from customers	$ 1,361	$ 1,902	$ 4,414	$ 5,437
Revenues from non-customers	$ 107	$ 198	$ 347	$ 534

XML

REDEMABLE NONCONTROLLING INTEREST - ALTUS (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Preferred Units

The net transaction price was allocated to the preferred redeemable noncontrolling interest and the embedded features according to the associated initial fair value measurements as follows:

	June 12, 2019
	(In millions)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners	$	517
Preferred Units embedded derivative	94
	$	611

Activity related to the Preferred Units during the nine months ended September 30, 2019 is as follows:

	Units Outstanding	Financial Position(2)
	(In millions, except unit data)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: beginning of period	—	$	—
Issuance of Preferred Units, net	625,000	517
Distribution of in-kind additional Preferred Units(1)	2,188	—
Allocation of Altus Midstream LP net income	N/A	21
Accreted value adjustment	N/A	1
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: end of period	627,188	539
Preferred Units embedded derivative		98
		$	637

(1) Subsequent to the balance sheet date, Altus Midstream LP provided notice to the Preferred Unit holders of record at September 30, 2019 of the amount of the distribution on the Preferred Units for the quarter ended September 30, 2019. The holders also were notified that Altus Midstream LP elected to pay the entire amount of the approximate $11 million distribution in-kind in additional Preferred Units (PIK Units) on November 14, 2019. In total, 10,975.8 PIK Units will be issued in satisfaction of the required distribution.

(2)

As at September 30, 2019, the aggregate Redemption Price was $646 million, based on an internal rate of return of 11.5 percent.

XML

CAPITALIZED EXPLORATORY WELL COSTS (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Extractive Industries [Abstract]
Capitalized exploratory well costs	$ 193,000,000	$ 159,000,000
Capitalized exploratory well costs that have been capitalized for period greater than one year		$ 0

XML

OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

Detail of Other Current Liabilities

The following table provides detail of the Company’s other current liabilities as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
	(In millions)
Accrued operating expenses	$	187	$	65
Accrued exploration and development	355		667
Accrued gathering, processing, and transmission - Altus	25		81
Accrued compensation and benefits	171		177
Accrued interest	114		137
Accrued income taxes	80		58
Current asset retirement obligation	66		66
Current operating lease liability	149		—
Other	94		90
Total other current liabilities	$	1,241	$	1,341

XML

REDEMABLE NONCONTROLLING INTEREST - ALTUS

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

REDEMABLE NONCONTROLLING INTEREST - ALTUS

REDEEMABLE NONCONTROLLING INTEREST - ALTUS

Preferred Units Issuance

On June 12, 2019, Altus Midstream LP, an indirectly controlled subsidiary of Apache, issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act of 1933 (the Closing). Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. Pursuant to the partnership agreement of Altus Midstream LP:

• The Preferred Units bear quarterly distributions at a rate of 7 percent per annum, increasing after the fifth anniversary of Closing and upon the occurrence of specified events. Altus Midstream LP may pay distributions in-kind for the first six quarters after the Preferred Units are issued.

• The Preferred Units are redeemable at Altus Midstream LP’s option at any time in cash at a redemption price (the Redemption Price) equal to the greater of an 11.5 percent internal rate of return (increasing after the fifth anniversary of Closing to 13.75 percent) and a 1.3x multiple of invested capital. The Preferred Units will be redeemable at the holder’s option upon a change of control or liquidation of Altus Midstream LP and certain other events, including certain asset dispositions.

• The Preferred Units will be exchangeable for shares of ALTM’s Class A common stock at the holder’s election after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be exchangeable for a number of shares of ALTM’s Class A common stock equal to the Redemption Price divided by the volume-weighted average trading price of ALTM’s Class A common stock on the NASDAQ Capital Market for the 20 trading days immediately preceding the second trading day prior to the applicable exchange date, less a 6 percent discount.

• Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream LP’s common units and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

• Preferred Units holders have rights to approve certain partnership business, financial, and governance-related matters.

• Altus Midstream LP is restricted from declaring or making cash distributions on its common units until all required distributions on the Preferred Units have been paid. In addition, before the fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Altus Midstream LP’s common units are limited to $650 million of cash from ordinary course operations if permitted under its credit facility. Cash distributions on, and redemptions of, Altus Midstream LP’s common units also are subject to satisfaction of leverage ratio requirements specified in its partnership agreement.

Classification

The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.

Initial Measurement

Altus recorded the net transaction price of $611 million, calculated as the negotiated transaction price of $625 million, less issue discounts of $4 million and transaction costs totaling $10 million.

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Altus bifurcated and recognized at fair value an embedded derivative related to the Preferred Units of $94 million for a redemption option of the Preferred Unit holders. The derivative is reflected in “Other” within “Deferred Credits and Other Noncurrent Liabilities” on the Company’s consolidated balance sheet at its current fair value of $98 million. The fair value of the embedded derivative, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units. See Note 4—Derivative Instruments and Hedging Activities for more detail.

The net transaction price was allocated to the preferred redeemable noncontrolling interest and the embedded features according to the associated initial fair value measurements as follows:

	June 12, 2019
	(In millions)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners	$	517
Preferred Units embedded derivative	94
	$	611

Subsequent Measurement

Altus applies a two-step approach to subsequent measurement of the redeemable noncontrolling interest related to the Preferred Units by first allocating a portion of the net income of Altus Midstream LP in accordance with the terms of the partnership agreement. An additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end may be recorded, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of Closing. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a)(i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability or (b) the accreted value of the net transaction price.

Activity related to the Preferred Units during the nine months ended September 30, 2019 is as follows:

	Units Outstanding	Financial Position(2)
	(In millions, except unit data)
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: beginning of period	—	$	—
Issuance of Preferred Units, net	625,000	517
Distribution of in-kind additional Preferred Units(1)	2,188	—
Allocation of Altus Midstream LP net income	N/A	21
Accreted value adjustment	N/A	1
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: end of period	627,188	539
Preferred Units embedded derivative		98
		$	637

(1) Subsequent to the balance sheet date, Altus Midstream LP provided notice to the Preferred Unit holders of record at September 30, 2019 of the amount of the distribution on the Preferred Units for the quarter ended September 30, 2019. The holders also were notified that Altus Midstream LP elected to pay the entire amount of the approximate $11 million distribution in-kind in additional Preferred Units (PIK Units) on November 14, 2019. In total, 10,975.8 PIK Units will be issued in satisfaction of the required distribution.

(2) As at September 30, 2019, the aggregate Redemption Price was $646 million, based on an internal rate of return of 11.5 percent.

N/A - not applicable.

CAPITAL STOCK

Net Income (Loss) per Common Share

A reconciliation of the components of basic and diluted net income (loss) per common share for the quarters and nine months ended September 30, 2019 and 2018, is presented in the table below.

 

	For the Quarter Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	383	$	0.21
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	—
Diluted:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	385	$	0.21

	For the Nine Months Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	383	$	1.10
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	(0.01	)
Diluted:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	385	$	1.09

The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling 5.2 million and 4.9 million for the quarters ended September 30, 2019 and 2018, respectively, and 5.1 million and 5.8 million for the nine months ended September 30, 2019 and 2018, respectively. The impact to net income (loss) attributable to common stock of an assumed conversion of the redeemable noncontrolling Preferred Units interests in Altus Midstream LP were anti-dilutive for the three- and nine-month periods ended September 30, 2019.

Common Stock Dividends

For the quarters ended September 30, 2019 and 2018, Apache paid $94 million and $96 million, respectively, in dividends on its common stock. For the nine months ended September 30, 2019 and 2018, the Company paid $282 million and $287 million, respectively.

Stock Repurchase Program

In 2013 and 2014, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased from time to time either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, 2019, had repurchased a total of 40 million shares at an average price of $79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during 2019.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of Non-cash Impairments of Proved and Unproved Property and Equipment

The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil and Gas Property:
Proved	$	—	$	—	$	86	$	—
Unproved	12		49		223		86

Schedule of Revenues Revenues from Customers and Non-Customers

The following table represents revenues from customers and non-customers for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Revenues from customers	$	1,361	$	1,902	$	4,414	$	5,437
Revenues from non-customers	107		198		347		534

Schedule of Weighted Average Lease Term and Discount Rate Related to Leases

The following table represents the Company’s weighted average lease term and discount rate as of September 30, 2019:

	Operating Leases		Finance Leases
Weighted average remaining lease term	3.3 years		9.7 years
Weighted average discount rate	4.4	%	4.3	%

Operating Lease, Liability, Maturity

The undiscounted future minimum lease payments reconciled to the carrying value of the lease liabilities as of September 30, 2019 were as follows:

Net Minimum Commitments	Operating Leases(1)			Finance Leases(2)
	(In millions)
2019	$	48		$	9
2020	124			13
2021	50			3
2022	41			3
2023	24			3
Thereafter	40			40
Total future minimum lease payments	327			71
Less: imputed interest	(26		)	(14		)
Total lease liabilities	301			57
Current portion	(149		)	(19		)
Non-current portion	$	152		$	38

(1) Amounts included for drilling rig and related operational equipment obligations represent future payments associated with oil and gas operations inclusive of amounts billable to partners and other working interest owners. Such payments may be capitalized as a component of oil and gas properties and subsequently depreciated, impaired, or written off as exploration expense.

(2)

Amounts represent the Company’s finance lease obligation related to physical power generators being leased on a one-year term with the right to purchase and a separate lease for the Company’s Midland, Texas regional office building

Finance Lease, Liability, Maturity

The undiscounted future minimum lease payments reconciled to the carrying value of the lease liabilities as of September 30, 2019 were as follows:

Net Minimum Commitments	Operating Leases(1)			Finance Leases(2)
	(In millions)
2019	$	48		$	9
2020	124			13
2021	50			3
2022	41			3
2023	24			3
Thereafter	40			40
Total future minimum lease payments	327			71
Less: imputed interest	(26		)	(14		)
Total lease liabilities	301			57
Current portion	(149		)	(19		)
Non-current portion	$	152		$	38

(1) Amounts included for drilling rig and related operational equipment obligations represent future payments associated with oil and gas operations inclusive of amounts billable to partners and other working interest owners. Such payments may be capitalized as a component of oil and gas properties and subsequently depreciated, impaired, or written off as exploration expense.

(2)

Amounts represent the Company’s finance lease obligation related to physical power generators being leased on a one-year term with the right to purchase and a separate lease for the Company’s Midland, Texas regional office building

XML

EQUITY METHOD INTERESTS - Summary of Investments (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Equity method interests	$ 1,095	$ 121
Shin Oak Pipeline (Breviloba, LLC)
Schedule of Equity Method Investments [Line Items]
Interest		0.00%
Equity method interests	468	$ 0
Altus Midstream Company
Schedule of Equity Method Investments [Line Items]
Equity method interests	$ 1,095	$ 91
Altus Midstream Company | Gulf Coast Express Pipeline LLC
Schedule of Equity Method Investments [Line Items]
Interest	16.00%	15.00%
Equity method interests	$ 275	$ 91
Altus Midstream Company | EPIC Crude Holdings, LP
Schedule of Equity Method Investments [Line Items]
Interest	15.00%	0.00%
Equity method interests	$ 128	$ 0
Altus Midstream Company | Permian Highway Pipeline LLC
Schedule of Equity Method Investments [Line Items]
Interest	26.70%	0.00%
Equity method interests	$ 224	$ 0
Altus Midstream Company | Shin Oak Pipeline (Breviloba, LLC)
Schedule of Equity Method Investments [Line Items]
Interest	33.00%
Equity method interests	$ 0

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Schedule of Derivative Assets and Liabilities Measured at Fair Value (Details) - Recurring - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Derivative [Line Items]
Derivative asset	$ 2	$ 55
Derivative liability	105	11
Commodity Derivative Instruments
Derivative [Line Items]
Derivative asset, fair value	2	69
Derivative asset, netting	0	(14)
Derivative asset	2	55
Derivative liability, fair value	6	25
Derivative liability, netting	0	(14)
Derivative liability	6	11
Commodity Derivative Instruments | Quoted Price in Active Markets (Level 1)
Derivative [Line Items]
Derivative asset, fair value	0	0
Derivative liability, fair value	0	0
Commodity Derivative Instruments | Significant Other Inputs (Level 2)
Derivative [Line Items]
Derivative asset, fair value	2	69
Derivative liability, fair value	6	25
Commodity Derivative Instruments | Significant Unobservable Inputs (Level 3)
Derivative [Line Items]
Derivative asset, fair value	0	0
Derivative liability, fair value	0	$ 0
Foreign Currency Derivative Instruments
Derivative [Line Items]
Derivative asset, fair value	1
Derivative asset, netting	0
Derivative asset	1
Foreign Currency Derivative Instruments | Quoted Price in Active Markets (Level 1)
Derivative [Line Items]
Derivative asset, fair value	0
Foreign Currency Derivative Instruments | Significant Other Inputs (Level 2)
Derivative [Line Items]
Derivative asset, fair value	1
Foreign Currency Derivative Instruments | Significant Unobservable Inputs (Level 3)
Derivative [Line Items]
Derivative asset, fair value	0
Preferred Units Embedded Derivative
Derivative [Line Items]
Derivative liability, fair value	98
Derivative liability, netting	0
Derivative liability	98
Preferred Units Embedded Derivative | Quoted Price in Active Markets (Level 1)
Derivative [Line Items]
Derivative liability, fair value	0
Preferred Units Embedded Derivative | Significant Other Inputs (Level 2)
Derivative [Line Items]
Derivative liability, fair value	0
Preferred Units Embedded Derivative | Significant Unobservable Inputs (Level 3)
Derivative [Line Items]
Derivative liability, fair value	$ 98

XML

ASSET RETIREMENT OBLIGATION (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Asset retirement obligation at the beginning of period	$ 1,932
Liabilities incurred	11
Liabilities settled	(49)
Liabilities divested	(55)
Accretion expense	80
Asset retirement obligation at the end of period	1,919
Less current portion	(66)	$ (66)
Asset retirement obligation, long-term	$ 1,853	$ 1,866

XML

STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interest	$ (435)	$ 636
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized derivative instrument losses (gains), net	52	(88)
Gain on divestitures	(20)	(10)
Exploratory dry hole expense and unproved leasehold impairments	107	133
Depreciation, depletion, and amortization	1,959	1,771
Asset retirement obligation accretion	80	81
Impairments	249	10
Deferred income tax benefit	(52)	(43)
Loss on extinguishment of debt	75	94
Other	35	96
Changes in operating assets and liabilities:
Receivables	124	(113)
Inventories	(16)	(7)
Drilling advances	(2)	(22)
Deferred charges and other	(1)	91
Accounts payable	(82)	110
Accrued expenses	(1)	(3)
Deferred credits and noncurrent liabilities	17	(2)
NET CASH PROVIDED BY OPERATING ACTIVITIES	2,089	2,734
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property	(2,015)	(2,338)
Leasehold and property acquisitions	(39)	(86)
Additions to Altus gathering, processing, and transmission facilities	(294)	(412)
Altus equity method interests	(1,008)	0
Proceeds from sale of oil and gas properties	590	51
Other, net	(17)	(55)
NET CASH USED IN INVESTING ACTIVITIES	(2,783)	(2,840)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Lines of Credit	235	0
Fixed-rate debt borrowings	989	992
Payments on fixed-rate debt	(1,150)	(1,370)
Distributions to noncontrolling interest - Egypt	(235)	(256)
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	611	0
Dividends paid	(282)	(287)
Other	(25)	(48)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	143	(969)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(551)	(1,075)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	714	1,668
CASH AND CASH EQUIVALENTS AT END OF PERIOD	163	593
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	318	344
Income taxes paid, net of refunds	$ 473	$ 649

XML

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTEREST(Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Stockholders' Equity [Abstract]
Common stock, dividends, per share (in USD per share)	$ 0.25	$ 0.25	$ 0.75	$ 0.75

XML

DEBT AND FINANCING COSTS - Components of Financing Costs, Net (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Debt Disclosure [Abstract]
Interest expense	$ 107	$ 113	$ 323	$ 335
Amortization of deferred loan costs	2	2	5	8
Capitalized interest	(9)	(11)	(26)	(36)
Loss on extinguishment of debt	0	94	75	94
Interest income	(5)	(6)	(12)	(16)
Financing costs, net	$ 95	$ 192	$ 365	$ 385

XML

REDEMABLE NONCONTROLLING INTEREST - ALTUS - Activity Related to Preferred Units (Details) - USD ($) $ in Millions		3 Months Ended	9 Months Ended
	Nov. 14, 2019	Sep. 30, 2019	Sep. 30, 2019	Jun. 12, 2019
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			$ 0
Ending balance		$ 539	539
Altus Preferred Unit limited partners
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance		521	0
Issuance of Preferred Units, net			517
Allocation of Altus Midstream LP net income		18	22
Ending balance		539	539
Altus Midstream LP
Increase (Decrease) in Temporary Equity [Roll Forward]
Embedded derivative liability		98	98	$ 94
Redeemable Noncontrolling Interest, Net Of Embedded Derivative Liability		637	637
Preferred Units, Redemption Price		$ 646	$ 646
Preferred Units, redemption terms, internal rate of return		11.50%	11.50%
Altus Midstream LP | Altus Preferred Unit limited partners
Movement In Preferred Units [Roll Forward]
Preferred Units: beginning of period (in shares)			0
Issuance of Preferred Units, net (in shares)			625,000
Distribution of in-kind additional Preferred Units (in shares)			2,188
Preferred Units: end of period (in shares)		627,188	627,188
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			$ 0
Issuance of Preferred Units, net		$ 517
Distribution of in-kind additional Preferred Units		0
Allocation of Altus Midstream LP net income		21
Accreted value adjustment		1
Ending balance		$ 539	$ 539
Embedded derivative liability				$ 94
Preferred Units, redemption terms, internal rate of return		11.50%	11.50%
Altus Midstream LP | Scenario, Forecast
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred Units, distribution in-kind	$ 11
Preferred Units, distribution, PIK units	10,975.8

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Future Minimum Lease Payments (Details) $ in Millions	Sep. 30, 2019 USD ($)
Operating Leases
2019	$ 48
2020	124
2021	50
2022	41
2023	24
Thereafter	40
Total future minimum lease payments	327
Less: imputed interest	(26)
Total lease liabilities	301
Current portion	(149)
Non-current portion	152
Finance Leases
2019	9
2020	13
2021	3
2022	3
2023	3
Thereafter	40
Total future minimum lease payments	71
Less: imputed interest	(14)
Total lease liabilities	57
Current portion	(19)
Non-current portion	$ 38

XML

BUSINESS SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Financial Segment Information

Financial information for each segment is presented below:

	Egypt(1)		North Sea		U.S.			Altus			Intersegment Eliminations & Other			Total(2)
	Upstream							Midstream
	(In millions)
For the Quarter Ended September 30, 2019
Oil revenues	$	472	$	231	$	504		$	—		$	—		$	1,207
Natural gas revenues	72		14		50			—			—			136
Natural gas liquids revenues	2		5		88			—			—			95
Oil and gas production revenues	546		250		642			—			—			1,438
Midstream service affiliate revenues	—		—		—			34			(34		)	—
Operating Expenses:
Lease operating expenses	115		76		159			—			—			350
Gathering, processing, and transmission	9		9		69			13			(34		)	66
Taxes other than income	—		—		40			4			—			44
Exploration	27		—		25			—			4			56
Depreciation, depletion, and amortization	177		71		452			11			—			711
Asset retirement obligation accretion	—		19		8			—			—			27
Impairments	—		—		—			9			—			9
	328		175		753			37			(30		)	1,263
Operating Income (Loss)(3)	$	218	$	75	$	(111	)	$	(3	)	$	(4	)	175
Other Income (Expense):
Derivative instrument losses, net														(2		)
Other(4)														41
General and administrative														(98		)
Transaction, reorganization, and separation														(7		)
Financing costs, net														(95		)
Income Before Income Taxes														$	14

	Egypt(1)		North Sea		U.S.			Altus		Intersegment Eliminations & Other			Total(2)
	Upstream							Midstream
	(In millions)
For the Nine Months Ended September 30, 2019
Oil revenues	$	1,509	$	868	$	1,537		$	—	$	—		$	3,914
Natural gas revenues	223		64		203			—		—			490
Natural gas liquids revenues	9		16		261			—		—			286
Oil and gas production revenues	1,741		948		2,001			—		—			4,690
Midstream service affiliate revenues	—		—		—			92		(92		)	—
Operating Expenses:
Lease operating expenses	365		240		501			—		(2		)	1,104
Gathering, processing, and transmission	31		32		214			43		(90		)	230
Taxes other than income	—		—		131			10		—			141
Exploration	89		2		117			—		12			220
Depreciation, depletion, and amortization	538		269		1,125			27		—			1,959
Asset retirement obligation accretion	—		56		23			1		—			80
Impairments	—		—		240			9		—			249
	1,023		599		2,351			90		(80		)	3,983
Operating Income (Loss)(3)	$	718	$	349	$	(350	)	$	2	$	(12	)	707
Other Income (Expense):
Gain on divestitures													20
Derivative instrument losses, net													(40		)
Other(4)													45
General and administrative													(323		)
Transaction, reorganization, and separation													(17		)
Financing costs, net													(365		)
Income Before Income Taxes													$	27
Total Assets(5)	$	3,851	$	2,529	$	12,288		$	2,649	$	88		$	21,405
For the Quarter Ended September 30, 2018
Oil revenues	$	669	$	303	$	583		$	—	$	—		$	1,555
Natural gas revenues	86		30		125			—		—			241
Natural gas liquids revenues	4		5		171			—		—			180
Oil and gas production revenues	759		338		879			—		—			1,976
Midstream service affiliate revenues	—		—		—			25		(25		)	—
Operating Expenses:
Lease operating expenses	112		92		178			—		—			382
Gathering, processing, and transmission	12		12		76			17		(25		)	92
Taxes other than income	—		—		57			1		—			58
Exploration	10		2		86			—		1			99
Depreciation, depletion, and amortization	187		89		329			5		—			610
Asset retirement obligation accretion	—		19		8			—		—			27
Impairments	—		10		—			—		—			10
	321		224		734			23		(24		)	1,278
Operating Income (Loss)(3)	$	438	$	114	$	145		$	2	$	(1	)	698
Other Income (Expense):
Gain on divestitures													1
Derivative instrument losses, net													(23		)
Other(4)													29
General and administrative													(99		)
Transaction, reorganization, and separation													(8		)
Financing costs, net													(192		)
Income Before Income Taxes													$	406

	Egypt(1)		North Sea		U.S.		Altus			Intersegment Eliminations & Other			Total(2)
	Upstream						Midstream
	(In millions)
For the Nine Months Ended September 30, 2018
Oil revenues	$	1,887	$	894	$	1,743	$	—		$	—		$	4,524
Natural gas revenues	263		81		331		—			—			675
Natural gas liquids revenues	11		14		421		—			—			446
Oil and gas production revenues	2,161		989		2,495		—			—			5,645
Midstream service affiliate revenues	—		—		—		50			(50		)	—
Operating Expenses:
Lease operating expenses	316		264		507		—			—			1,087
Gathering, processing, and transmission	35		32		204		39			(50		)	260
Taxes other than income	—		—		156		6			—			162
Exploration	70		19		159		—			3			251
Depreciation, depletion, and amortization	564		281		913		13			—			1,771
Asset retirement obligation accretion	—		56		24		1			—			81
Impairments	—		10		—		—			—			10
	985		662		1,963		59			(47		)	3,622
Operating Income (Loss)(3)	$	1,176	$	327	$	532	$	(9	)	$	(3	)	2,023
Other Income (Expense):
Gain on divestitures													10
Derivative instrument losses, net													(46		)
Other(4)													50
General and administrative													(330		)
Transaction, reorganization, and separation													(20		)
Financing costs, net													(385		)
Income Before Income Taxes													$	1,302
Total Assets(5)	$	4,404	$	3,033	$	13,335	$	1,054		$	44		$	21,870

(1) Includes revenue from non-customers for the third quarters and nine-month periods of 2019 and 2018 of:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil	$	98	$	181	$	316	$	485
Natural gas	9		16		30		47
Natural gas liquids	—		1		1		2

(2) Includes a noncontrolling interest in Egypt for the 2019 and 2018 periods, and Altus for the 2019 period.

(3) The operating income (loss) of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $10 million, and $2 million, respectively, for the third quarter of 2019. The operating income of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $308 million, and $6 million, respectively, for the first nine months of 2019. The operating income (loss) of U.S. and North Sea includes leasehold and unproved impairments totaling $39 million and $10 million, respectively, for the third quarter of 2018. The operating income of U.S. and North Sea includes leasehold and unproved impairments totaling $76 million and $10 million, respectively, for the first nine months of 2018.

(4) Included in Other are sales proceeds related to U.S. third-party purchased oil and gas volumes which are determined to be revenue from customers. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively.

(5)

Intercompany balances are excluded from total assets.

XML

ACQUISITIONS AND DIVESTITURES

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

ACQUISITIONS AND DIVESTITURES

ACQUISITIONS AND DIVESTITURES

2019 Activity

Leasehold and Property Acquisitions

During the third quarter and first nine months of 2019, Apache completed leasehold and property acquisitions for total cash consideration of $5 million and $39 million, respectively, primarily in its U.S. onshore regions. For discussion on the Company’s acquisition of equity method interests during the period, refer to Note 6—Equity Method Interests.

U.S. Divestitures

In the third quarter of 2019, Apache completed the sale of non-core assets in the Western Anadarko Basin of Oklahoma and Texas for aggregate cash proceeds of approximately $325 million and the assumption of asset retirement obligations of $49 million. These assets met the criteria to be classified as held for sale in the second quarter of 2019. Accordingly, the Company performed a fair value assessment of the assets and recorded impairments of $240 million in the second quarter of 2019 to the carrying value of proved and unproved oil and gas properties, other fixed assets, and working capital. The transaction closed in the third quarter of 2019, and the Company recognized a $9 million loss in association with the sale.

In the second quarter of 2019, Apache completed the sale of certain non-core assets in Oklahoma that had a net carrying value of $206 million for aggregate cash proceeds of approximately $223 million. The Company recognized a $17 million gain in association with the sale.

During the first nine months of 2019, the Company also completed the sale of certain other non-core producing assets and leasehold, primarily in the Permian region, in multiple transactions for total cash proceeds of $21 million. The Company recognized a net gain of approximately $12 million upon closing of these transactions.

2018 Activity

During the third quarter and first nine months of 2018, Apache completed $48 million and $86 million, respectively, of leasehold and property acquisitions primarily in its U.S. onshore and Egypt regions. During the first nine months of 2018, the Company also completed the sale of certain non-core assets, primarily in the Permian region, in multiple transactions for total cash proceeds of $51 million. The Company recognized a total net gain of approximately $10 million during the first nine months upon closing of these transactions.

XML

EQUITY METHOD INTERESTS

9 Months Ended

Sep. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

EQUITY METHOD INTERESTS

EQUITY METHOD INTERESTS

Apache, through its ownership of Altus, has the following equity method interests in Permian Basin long-haul pipeline entities which are accounted for under the equity method of accounting. For each of the equity method interests, Altus has the ability to exercise significant influence based on certain governance provisions and its participation in activities and decisions that impact the management and economic performance of the equity method interests.

	September 30, 2019				December 31, 2018
	Interest		Amount		Interest		Amount
	($ in millions)
Gulf Coast Express Pipeline LLC	16.0	%	$	275	15.0	%	$	91
EPIC Crude Holdings, LP	15.0	%	128		—		—
Permian Highway Pipeline LLC	26.7	%	224		—		—
Shin Oak Pipeline (Breviloba, LLC)	33.0	%	468		—		—
			$	1,095			$	91

As of September 30, 2019 and December 31, 2018, unamortized basis differences included in the equity method interest balances were $26 million and $6 million, respectively. These amounts represent differences in contributions to date and Altus’ underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into net income over the useful lives of the underlying pipeline assets when they are placed into service.

The following table presents the activity in Altus’ equity method interests during the nine months ended September 30, 2019:

	Gulf Coast Express Pipeline LLC			EPIC Crude Holdings, LP			Permian Highway Pipeline LLC		Breviloba, LLC		Total
	(In millions)
Balance at December 31, 2018	$	91		$	—		$	—	$	—	$	91
Acquisitions	15			52			161		442		670
Capital contributions	169			83			63		23		338
Distributions	(3		)	—			—		—		(3		)
Equity income (loss), net	3			(5		)	—		3		1
Accumulated other comprehensive loss	—			(2		)	—		—		(2		)
Balance at September 30, 2019	$	275		$	128		$	224	$	468	$	1,095

As of December 31, 2018, Apache also held an investment in Marine Well Containment Company. This investment was sold in the first quarter of 2019 for $30 million, with no gain or loss recorded on the sale.

XML

DEBT AND FINANCING COSTS

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

DEBT AND FINANCING COSTS

DEBT AND FINANCING COSTS

The following table presents the carrying value of the Company’s debt as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs(1)	$	8,217		$	8,299
Altus credit facility(2)	235			—
Finance lease obligations	57			40
Unamortized discount	(43		)	(44		)
Debt issuance costs	(54		)	(51		)
Total debt	8,412			8,244
Current maturities	(19		)	(151		)
Long-term debt	$	8,393		$	8,093

(1) The fair value of the Company’s notes and debentures was $8.2 billion and $7.8 billion as of September 30, 2019 and December 31, 2018, respectively. Apache uses a market approach to determine the fair value of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

(2) The carrying amount of borrowings by Altus Midstream LP on its credit facility approximate fair value because the interest rates are variable and reflective of market rates.

As of September 30, 2019, current debt included $19 million of finance lease obligations. As of December 31, 2018, current debt included $150 million of 7.625% senior notes due July 1, 2019 and $1 million of finance lease obligations. On July 1, 2019, Apache’s 7.625% senior notes in original principal amount of $150 million matured and were repaid.

On June 19, 2019, Apache closed offerings of $1.0 billion in aggregate principal amount of senior unsecured notes, comprised of $600 million in aggregate principal amount of 4.250% notes due January 15, 2030 and $400 million in aggregate principal amount of 5.350% notes due July 1, 2049. The notes are redeemable at any time, in whole or in part, at Apache’s option, subject to a make-whole premium. The net proceeds from the sale of the notes were used to purchase certain outstanding notes in cash tender offers and for general corporate purposes.

On June 21, 2019, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $932 million aggregate principal amount of certain notes covered by the tender offers. Apache paid holders an aggregate of approximately $1.0 billion reflecting principal, the net premium to par, early tender premium, and accrued and unpaid interest. The Company recorded a net loss of $75 million on extinguishment of debt, including $7 million of unamortized debt issuance costs and discount, in connection with the note purchases.

In March 2018, the Company entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0

billion, of which $2.08 billion was committed as of September 30, 2019. The facility is for general corporate purposes, and committed borrowing capacity fully supports Apache’s commercial paper program. As of September 30, 2019, a letter of credit for approximately £3.1 million and no borrowings were outstanding under this facility.

The Company’s $3.5 billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days at competitive interest rates. As of September 30, 2019, the Company had no commercial paper outstanding.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s two, one-year extension options). The agreement for this facility, as amended, provides aggregate commitments from a syndicate of banks of $650 million until the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the agreement, for the immediately preceding fiscal quarter equals or exceeds $175 million on an annualized basis (such period, the Initial Period). Following the Initial Period, the aggregate commitments equal $800 million. All aggregate commitments include a letter of credit subfacility of up to $100 million and a swingline loan subfacility of up to $100 million. After the Initial Period, Altus Midstream LP may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2019, there were $235 million of borrowings and no letters of credit outstanding under this facility. As of December 31, 2018, no borrowings or letters of credit were outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.

Financing Costs, Net

The following table presents the components of Apache’s financing costs, net:

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	(In millions)
Interest expense	$	107		$	113		$	323		$	335
Amortization of deferred loan costs	2			2			5			8
Capitalized interest	(9		)	(11		)	(26		)	(36		)
Loss on extinguishment of debt	—			94			75			94
Interest income	(5		)	(6		)	(12		)	(16		)
Financing costs, net	$	95		$	192		$	365		$	385

XML

BUSINESS SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

As of September 30, 2019, Apache is engaged in exploration and production (Upstream) activities across three operating segments: Egypt, the North Sea, and the U.S. Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Apache’s Upstream business explores for, develops, and produces natural gas, crude oil and natural gas liquids. During the fourth quarter of 2018, Apache established a new reporting segment for its U.S. midstream business separate from its upstream oil and gas development activities. The midstream business is operated by Altus, which owns, develops, and operates a midstream energy asset network in the Permian Basin of West Texas, anchored by midstream service contracts to Apache’s production from its Alpine High resource play. Altus primarily generates revenue by providing fee-based natural gas gathering, compression, processing, and transportation services. Financial information for each segment is presented below:

	Egypt(1)		North Sea		U.S.			Altus			Intersegment Eliminations & Other			Total(2)
	Upstream							Midstream
	(In millions)
For the Quarter Ended September 30, 2019
Oil revenues	$	472	$	231	$	504		$	—		$	—		$	1,207
Natural gas revenues	72		14		50			—			—			136
Natural gas liquids revenues	2		5		88			—			—			95
Oil and gas production revenues	546		250		642			—			—			1,438
Midstream service affiliate revenues	—		—		—			34			(34		)	—
Operating Expenses:
Lease operating expenses	115		76		159			—			—			350
Gathering, processing, and transmission	9		9		69			13			(34		)	66
Taxes other than income	—		—		40			4			—			44
Exploration	27		—		25			—			4			56
Depreciation, depletion, and amortization	177		71		452			11			—			711
Asset retirement obligation accretion	—		19		8			—			—			27
Impairments	—		—		—			9			—			9
	328		175		753			37			(30		)	1,263
Operating Income (Loss)(3)	$	218	$	75	$	(111	)	$	(3	)	$	(4	)	175
Other Income (Expense):
Derivative instrument losses, net														(2		)
Other(4)														41
General and administrative														(98		)
Transaction, reorganization, and separation														(7		)
Financing costs, net														(95		)
Income Before Income Taxes														$	14

	Egypt(1)		North Sea		U.S.			Altus		Intersegment Eliminations & Other			Total(2)
	Upstream							Midstream
	(In millions)
For the Nine Months Ended September 30, 2019
Oil revenues	$	1,509	$	868	$	1,537		$	—	$	—		$	3,914
Natural gas revenues	223		64		203			—		—			490
Natural gas liquids revenues	9		16		261			—		—			286
Oil and gas production revenues	1,741		948		2,001			—		—			4,690
Midstream service affiliate revenues	—		—		—			92		(92		)	—
Operating Expenses:
Lease operating expenses	365		240		501			—		(2		)	1,104
Gathering, processing, and transmission	31		32		214			43		(90		)	230
Taxes other than income	—		—		131			10		—			141
Exploration	89		2		117			—		12			220
Depreciation, depletion, and amortization	538		269		1,125			27		—			1,959
Asset retirement obligation accretion	—		56		23			1		—			80
Impairments	—		—		240			9		—			249
	1,023		599		2,351			90		(80		)	3,983
Operating Income (Loss)(3)	$	718	$	349	$	(350	)	$	2	$	(12	)	707
Other Income (Expense):
Gain on divestitures													20
Derivative instrument losses, net													(40		)
Other(4)													45
General and administrative													(323		)
Transaction, reorganization, and separation													(17		)
Financing costs, net													(365		)
Income Before Income Taxes													$	27
Total Assets(5)	$	3,851	$	2,529	$	12,288		$	2,649	$	88		$	21,405
For the Quarter Ended September 30, 2018
Oil revenues	$	669	$	303	$	583		$	—	$	—		$	1,555
Natural gas revenues	86		30		125			—		—			241
Natural gas liquids revenues	4		5		171			—		—			180
Oil and gas production revenues	759		338		879			—		—			1,976
Midstream service affiliate revenues	—		—		—			25		(25		)	—
Operating Expenses:
Lease operating expenses	112		92		178			—		—			382
Gathering, processing, and transmission	12		12		76			17		(25		)	92
Taxes other than income	—		—		57			1		—			58
Exploration	10		2		86			—		1			99
Depreciation, depletion, and amortization	187		89		329			5		—			610
Asset retirement obligation accretion	—		19		8			—		—			27
Impairments	—		10		—			—		—			10
	321		224		734			23		(24		)	1,278
Operating Income (Loss)(3)	$	438	$	114	$	145		$	2	$	(1	)	698
Other Income (Expense):
Gain on divestitures													1
Derivative instrument losses, net													(23		)
Other(4)													29
General and administrative													(99		)
Transaction, reorganization, and separation													(8		)
Financing costs, net													(192		)
Income Before Income Taxes													$	406

	Egypt(1)		North Sea		U.S.		Altus			Intersegment Eliminations & Other			Total(2)
	Upstream						Midstream
	(In millions)
For the Nine Months Ended September 30, 2018
Oil revenues	$	1,887	$	894	$	1,743	$	—		$	—		$	4,524
Natural gas revenues	263		81		331		—			—			675
Natural gas liquids revenues	11		14		421		—			—			446
Oil and gas production revenues	2,161		989		2,495		—			—			5,645
Midstream service affiliate revenues	—		—		—		50			(50		)	—
Operating Expenses:
Lease operating expenses	316		264		507		—			—			1,087
Gathering, processing, and transmission	35		32		204		39			(50		)	260
Taxes other than income	—		—		156		6			—			162
Exploration	70		19		159		—			3			251
Depreciation, depletion, and amortization	564		281		913		13			—			1,771
Asset retirement obligation accretion	—		56		24		1			—			81
Impairments	—		10		—		—			—			10
	985		662		1,963		59			(47		)	3,622
Operating Income (Loss)(3)	$	1,176	$	327	$	532	$	(9	)	$	(3	)	2,023
Other Income (Expense):
Gain on divestitures													10
Derivative instrument losses, net													(46		)
Other(4)													50
General and administrative													(330		)
Transaction, reorganization, and separation													(20		)
Financing costs, net													(385		)
Income Before Income Taxes													$	1,302
Total Assets(5)	$	4,404	$	3,033	$	13,335	$	1,054		$	44		$	21,870

(1) Includes revenue from non-customers for the third quarters and nine-month periods of 2019 and 2018 of:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil	$	98	$	181	$	316	$	485
Natural gas	9		16		30		47
Natural gas liquids	—		1		1		2

(2) Includes a noncontrolling interest in Egypt for the 2019 and 2018 periods, and Altus for the 2019 period.

(3) The operating income (loss) of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $10 million, and $2 million, respectively, for the third quarter of 2019. The operating income of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $308 million, and $6 million, respectively, for the first nine months of 2019. The operating income (loss) of U.S. and North Sea includes leasehold and unproved impairments totaling $39 million and $10 million, respectively, for the third quarter of 2018. The operating income of U.S. and North Sea includes leasehold and unproved impairments totaling $76 million and $10 million, respectively, for the first nine months of 2018.

(4) Included in Other are sales proceeds related to U.S. third-party purchased oil and gas volumes which are determined to be revenue from customers. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively.

(5)

Intercompany balances are excluded from total assets.

XML

OTHER CURRENT ASSETS (Tables)

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Current Assets

The following table provides detail of the Company’s other current assets as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
	(In millions)
Inventories	$	475	$	401
Drilling advances	161		218
Assets held for sale	18		—
Prepaid assets and other	84		160
Total other current assets	$	738	$	779

XML

STATEMENT OF CONSOLIDATED OPERATIONS (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
REVENUES AND OTHER:
Oil and gas production revenues	$ 1,438	$ 1,976	$ 4,690	$ 5,645
Derivative instrument losses, net	(2)	(23)	(40)	(46)
Gain on divestitures	0	1	20	10
Other	41	29	45	50
Total revenues and other	1,477	1,983	4,715	5,659
OPERATING EXPENSES:
Lease operating expenses	350	382	1,104	1,087
Gathering, processing, and transmission	66	92	230	260
Taxes other than income	44	58	141	162
Exploration	56	99	220	251
General and administrative	98	99	323	330
Transaction, reorganization, and separation	7	8	17	20
Depreciation, depletion, and amortization	711	610	1,959	1,771
Asset retirement obligation accretion	27	27	80	81
Impairments	9	10	249	10
Financing costs, net	95	192	365	385
Total operating expenses	1,463	1,577	4,688	4,357
NET INCOME BEFORE INCOME TAXES	14	406	27	1,302
Current income tax provision	141	262	514	709
Deferred income tax benefit	(10)	(17)	(52)	(43)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(117)	161	(435)	636
Net income (loss) attributable to noncontrolling interest				215
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$ (170)	$ 81	$ (577)	$ 421
NET INCOME (LOSS) PER COMMON SHARE:
Basic (in USD per share)	$ (0.45)	$ 0.21	$ (1.53)	$ 1.10
Diluted (in USD per share)	$ (0.45)	$ 0.21	$ (1.53)	$ 1.09
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic (in shares)	377	383	377	383
Diluted (in shares)	377	385	377	385
Oil
REVENUES AND OTHER:
Oil and gas production revenues	$ 1,207	$ 1,555	$ 3,914	$ 4,524
Natural Gas
REVENUES AND OTHER:
Oil and gas production revenues	136	241	490	675
Natural Gas liquids
REVENUES AND OTHER:
Oil and gas production revenues	95	180	286	446
Noncontrolling interests, Egypt
OPERATING EXPENSES:
Net income (loss) attributable to noncontrolling interest	38	80	125	215
Noncontrolling interests, Altus
OPERATING EXPENSES:
Net income (loss) attributable to noncontrolling interest	(3)	0	(5)	0
Altus Preferred Unit limited partners
OPERATING EXPENSES:
Net income (loss) attributable to noncontrolling interest	$ 18	$ 0	$ 22	$ 0

XML

CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Cash and cash equivalents	$ 163	$ 714
Receivables	1,070	1,194
Other current assets (Note 5) ($35 and $7 related to Altus VIE)	738	779
Gathering, transmission and processing facilities	2,061	1,856
Other	1,177	1,120
Less: Accumulated depreciation, depletion, and amortization	(26,953)	(28,335)
Equity method interests	1,095	121
Deferred charges and other	684	353
Current debt	19	151
Other current liabilities	1,241	1,341
LONG-TERM DEBT (Note 10) ($235 and nil related to Altus VIE)	8,393	8,093
Asset retirement obligation	1,853	1,866
Other	$ 491	$ 219
Common stock, par value (in USD per share)	$ 0.625	$ 0.625
Common stock, shares authorized (in shares)	860,000,000	860,000,000
Common stock, shares issued (in shares)	416,986,332	415,692,116
Treasury stock, shares (in shares)	40,964,193	40,995,894
Altus VIE
Cash and cash equivalents	$ 3	$ 450
Receivables	86	92
Other current assets (Note 5) ($35 and $7 related to Altus VIE)	35	7
Gathering, transmission and processing facilities	1,457	1,251
Other	38	0
Less: Accumulated depreciation, depletion, and amortization	(52)	(24)
Equity method interests	1,095	91
Deferred charges and other	73	71
Current debt	18	0
Other current liabilities	38	85
LONG-TERM DEBT (Note 10) ($235 and nil related to Altus VIE)	235	0
Asset retirement obligation	34	29
Other	$ 98	$ 0

XML

EQUITY METHOD INTERESTS - Rollforward Activity (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Movement In Equity Method Interests [Roll Forward]
Equity method interest, beginning balance	$ 121
Acquisitions	1,008	$ 0
Equity method interest, ending balance	1,095
Breviloba, LLC
Movement In Equity Method Interests [Roll Forward]
Equity method interest, beginning balance	0
Distributions	0
Equity income (loss), net	3
Accumulated other comprehensive loss	0
Equity method interest, ending balance	468
Altus Midstream Company
Movement In Equity Method Interests [Roll Forward]
Equity method interest, beginning balance	91
Acquisitions	670
Capital contributions	338
Distributions	(3)
Equity income (loss), net	1
Accumulated other comprehensive loss	(2)
Equity method interest, ending balance	1,095
Altus Midstream Company | Gulf Coast Express Pipeline LLC
Movement In Equity Method Interests [Roll Forward]
Equity method interest, beginning balance	91
Acquisitions	15
Capital contributions	169
Distributions	(3)
Equity income (loss), net	3
Accumulated other comprehensive loss	0
Equity method interest, ending balance	275
Altus Midstream Company | EPIC Crude Holdings, LP
Movement In Equity Method Interests [Roll Forward]
Equity method interest, beginning balance	0
Acquisitions	52
Capital contributions	83
Distributions	0
Equity income (loss), net	(5)
Accumulated other comprehensive loss	(2)
Equity method interest, ending balance	128
Altus Midstream Company | Permian Highway Pipeline LLC
Movement In Equity Method Interests [Roll Forward]
Equity method interest, beginning balance	0
Acquisitions	161
Capital contributions	63
Distributions	0
Equity income (loss), net	0
Accumulated other comprehensive loss	0
Equity method interest, ending balance	224
Altus Midstream Company | Breviloba, LLC
Movement In Equity Method Interests [Roll Forward]
Acquisitions	442
Capital contributions	23
Equity method interest, ending balance	$ 0

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Schedule of Derivative Activities Recorded in the Statement of Consolidated Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Realized gain (loss):
Unrealized gain (loss)			$ (52)	$ 88
Not Designated as Hedging Instrument
Realized gain (loss):
Derivative settlements, realized gain (loss)	$ (16)	$ 7	12	(110)
Amortization of put premium, realized loss	0	(14)	0	(24)
Unrealized gain (loss)	14	(16)	(52)	88
Derivative instrument losses, net	$ (2)	$ (23)	$ (40)	$ (46)

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated.

The Company consolidates all other investments in which, either through direct or indirect ownership, Apache has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated Apache subsidiary and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in Apache’s Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate component of equity in Apache’s consolidated balance sheet.

Additionally, third-party investors own a minority interest of approximately 21 percent of Altus Midstream Company (ALTM), which is reflected as a separate noncontrolling interest component of equity in Apache’s consolidated balance sheet. Apache consolidates the activities of ALTM, which qualifies as a variable interest entity (VIE) under GAAP. Apache has concluded that it is the primary beneficiary of the VIE, as defined in the accounting standards, since Apache has the power, through its ownership, to direct those activities that most significantly impact the economic performance of ALTM and the obligation to absorb losses or the right to receive benefits that could be potentially significant to ALTM. This conclusion was based on a qualitative analysis that considered ALTM’s governance structure, the commercial agreements between ALTM, Altus Midstream LP (collectively with ALTM, Altus), and Apache, and the voting rights established between the members, which provide Apache with the ability to control the operations of Altus. On June 12, 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) through a private offering that admitted additional limited partners with separate rights for the Preferred Unit holders. For further details on the terms of the Preferred Units and rights of the holders, refer to Note 12—Redeemable Noncontrolling Interest - Altus.

Investments in which Apache holds less than 50 percent of the voting interest are typically accounted for under the equity method of accounting, with the balance recorded separately as “Equity method interests” in Apache’s consolidated balance sheet and results of operations recorded as a component of “Other” under “Revenues and Other” in the Company’s statement of consolidated operations.

Use of Estimates

Use of Estimates

Preparation of financial statements in conformity with GAAP 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. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities, the estimate of proved oil and gas reserves and related present value estimates of

future net cash flows therefrom, the assessment of asset retirement obligations, the estimates of fair value for long-lived assets, and the estimate of income taxes. Actual results could differ from those estimates.

Fair Value Measurements

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in Apache’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).

Oil and Gas Property

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 Apache’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review.

The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Oil and Gas Property:
Proved	$	—	$	—	$	86	$	—
Unproved	12		49		223		86

Proved properties impaired during the first nine months of 2019 related to assets held for sale at June 30, 2019 with an aggregate fair value of $379 million.

On the statement of consolidated operations, unproved leasehold impairments are typically recorded as a component of “Exploration” expense; however, in the first nine months of 2019, unproved impairments of $149 million were recorded in “Impairments” in connection with an agreement to sell certain non-core leasehold properties in Oklahoma and Texas. In the third quarter and first nine months of 2018, unproved impairments of $10 million were recorded in “Impairments” in connection with an agreement to sell certain unproved properties in the North Sea.

Gains and losses on divestitures of the Company’s oil and gas properties are recognized in the statement of consolidated operations

Revenue Recognition

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the nine months ended September 30, 2019. Apache recognizes revenue from its contracts with customers from the sale of its crude oil, natural gas, and natural gas liquids (NGLs) production as well as volumes purchased from third parties. Each unit of quantity represents a single performance obligation that is satisfied at a point in time as control of the product has been transferred to the customer.

The contracted price is variable and is determined based on market-indexed prices adjusted for quality, transportation, and other market-reflective differentials. Sales proceeds related to third-party purchased volumes are considered revenue from a contract with a customer. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively. Associated purchase costs for these volumes totaled $23 million and $109 million for the third quarters of 2019 and 2018, respectively, and $60 million and $308 million for the first nine months of 2019 and 2018, respectively. Proceeds and costs are both recorded as “Other” under “Revenues and Other” in the Company’s statement of consolidated operations.

The following table represents revenues from customers and non-customers for the third quarters and first nine months of 2019 and 2018:

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In millions)
Revenues from customers	$	1,361	$	1,902	$	4,414	$	5,437
Revenues from non-customers	107		198		347		534

Payment from contracts with customers is typically received on a short-term basis after physical delivery of the product. Receivables from contracts with customers, net of allowance for doubtful accounts, totaled $919 million and $1.0 billion as of September 30, 2019 and December 31, 2018, respectively.

Apache has concluded that disaggregating revenue by geographic area and by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors

Leases

The lease liability reflected in the table above represents the Company’s fixed minimum payments that are settled in accordance with the lease terms. Actual lease payments during the period may also include variable lease components such as common area maintenance, usage-based sales taxes and rate differentials, or other similar costs that are not determinable at the inception of the lease.

Leases

On January 1, 2019, Apache adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize separate right-of-use (ROU) assets and lease liabilities for most leases classified as operating leases under previous GAAP. Prior to adoption, the Financial Accounting Standards Board (FASB) issued transition guidance permitting an entity the option to not evaluate under ASU 2016-02 those existing or expired land easements that were not previously accounted for as leases, as well as an option to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the financial statements. Apache elected both transitional practical expedients. Under these transition options, comparative reporting was not required, and the provisions of the standard were applied prospectively to leases in effect at the date of adoption.

As allowed under the standard, the Company also applied practical expedients to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. Apache also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes. Short-term lease expense was not material for the third quarter and first nine months of 2019.

The Company determines if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, Apache records an ROU asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental borrowing rate when calculating the present value. In the normal course of business, Apache enters into various lease agreements for real estate, drilling rigs, vessels, aircraft, and equipment related to its exploration and development activities, which are typically classified as operating leases under the provisions of the standard. ROU assets are reflected within “Deferred charges and other” within “Other” assets on the Company’s consolidated balance sheet, and the associated operating lease liabilities are reflected within “Other current liabilities” and “Other” within “Deferred Credits and Other Noncurrent Liabilities,” as applicable.

Operating lease expense associated with ROU assets is recognized on a straight-line basis over the lease term. Lease expense is reflected on the statement of consolidated operations commensurate with the leased activities and nature of the services performed. Gross fixed operating lease expense, inclusive of amounts billable to partners and other working interest owners, was $53 million and $167 million for the third quarter and first nine months of 2019, respectively.

In addition, the Company periodically enters into finance leases that are similar to those leases classified as capital leases under previous GAAP. Finance lease assets are included in “Other” within “Property and Equipment” on the consolidated balance sheet, and the associated finance lease liabilities are reflected within “Current debt” and “Long-term debt,” as applicable. Prior periods include the reclassification of $39 million finance lease obligations from “Other” within “Deferred Credits and Other Noncurrent Liabilities” to “Long-term debt” on the Company’s consolidated balance sheet to conform with this presentation. There was no material impact to the Company’s statement of consolidated operations and statement of consolidated cash flows for its treatment of finance leases

New Pronouncements Issued But Not Yet Adopted

New Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses.” The standard changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans, and other financial assets measured at amortized cost. The ASU requires the use of a new forward-looking “expected loss” model compared to the current “incurred loss” model, resulting in accelerated recognition of credit losses. This update is effective for the Company beginning in the first quarter of 2020, with early adoption permitted. The Company is in the process of finalizing its project plan for the implementation of the ASU and continues to evaluate and monitor standard setting activity. The Company does not believe the adoption and implementation of this ASU will have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement,” which changes the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures. ASU 2018-13 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans,” which eliminates, modifies, and adds disclosure requirements for defined benefit plans. The ASU is effective for financial statements issued for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This pronouncement clarifies the requirements for capitalizing implementation costs in cloud computing arrangements and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements and does not expect it to have a material impact.

XML

EQUITY METHOD INTERESTS (Tables)

9 Months Ended

Sep. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Summary of equity method investment information

The following table presents the activity in Altus’ equity method interests during the nine months ended September 30, 2019:

	Gulf Coast Express Pipeline LLC			EPIC Crude Holdings, LP			Permian Highway Pipeline LLC		Breviloba, LLC		Total
	(In millions)
Balance at December 31, 2018	$	91		$	—		$	—	$	—	$	91
Acquisitions	15			52			161		442		670
Capital contributions	169			83			63		23		338
Distributions	(3		)	—			—		—		(3		)
Equity income (loss), net	3			(5		)	—		3		1
Accumulated other comprehensive loss	—			(2		)	—		—		(2		)
Balance at September 30, 2019	$	275		$	128		$	224	$	468	$	1,095

	September 30, 2019				December 31, 2018
	Interest		Amount		Interest		Amount
	($ in millions)
Gulf Coast Express Pipeline LLC	16.0	%	$	275	15.0	%	$	91
EPIC Crude Holdings, LP	15.0	%	128		—		—
Permian Highway Pipeline LLC	26.7	%	224		—		—
Shin Oak Pipeline (Breviloba, LLC)	33.0	%	468		—		—
			$	1,095			$	91

XML

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	$ (117)	$ 161	$ (435)	$ 636
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Share of equity method interests other comprehensive loss	(1)	0	(1)	0
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(118)	161	(436)	636
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	(171)	81	(578)	421
Noncontrolling interests, Egypt
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Comprehensive income attributable to noncontrolling interest	38	80	125	215
Noncontrolling interests, Altus
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Comprehensive income attributable to noncontrolling interest	(3)	0	(5)	0
Altus Preferred Unit limited partners
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Comprehensive income attributable to noncontrolling interest	$ 18	$ 0	$ 22	$ 0

XML

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTEREST(Unaudited) - USD ($) $ in Millions	Total	Common Stock	Paid-In Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	APACHE SHAREHOLDERS’ EQUITY	Noncontrolling Interests	Noncontrolling interests, Egypt	Noncontrolling interests, Altus	Altus Preferred Unit limited partners
Beginning balance at Dec. 31, 2017	$ 8,791	$ 259	$ 12,128	$ (2,088)	$ (2,887)	$ 4	$ 7,416	$ 1,375
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) attributable to common stock	421			421			421
Net income (loss) attributable to noncontrolling interest	215								$ 215	$ 0	$ 0
Distributions to noncontrolling interest - Egypt	(256)							(256)
Common dividends	(287)		(287)				(287)
Other	62	1	104		(43)		62
Ending balance at Sep. 30, 2018	8,946	260	11,945	(1,667)	(2,930)	4	7,612	1,334
Beginning balance at Dec. 31, 2017											0
Ending balance at Sep. 30, 2018											0
Beginning balance at Jun. 30, 2018	8,995	260	12,011	(1,748)	(2,887)	4	7,640	1,355
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) attributable to common stock	81			81			81
Net income (loss) attributable to noncontrolling interest									80	0	0
Distributions to noncontrolling interest - Egypt	(101)							(101)
Common dividends	(96)		(96)				(96)
Other	(13)		30		(43)		(13)
Ending balance at Sep. 30, 2018	8,946	260	11,945	(1,667)	(2,930)	4	7,612	1,334
Beginning balance at Jun. 30, 2018											0
Ending balance at Sep. 30, 2018											0
Beginning balance at Dec. 31, 2018	8,812	260	12,106	(2,048)	(3,192)	4	7,130	1,682
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) attributable to common stock	(577)			(577)			(577)
Net income (loss) attributable to noncontrolling interest									125	(5)	22
Distributions to noncontrolling interest - Egypt	(235)							(235)
Common dividends	(282)		(282)				(282)
Other	30	1	28		2	(1)	30
Ending balance at Sep. 30, 2019	7,868	261	11,852	(2,625)	(3,190)	3	6,301	1,567
Beginning balance at Dec. 31, 2018	0										0
Increase (Decrease) in Temporary Equity [Roll Forward]
Issuance of Altus Preferred Units											517
Net income attributable to Altus Preferred Unit limited partners											22
Ending balance at Sep. 30, 2019	539										539
Beginning balance at Jun. 30, 2019	8,154	261	11,931	(2,455)	(3,190)	4	6,551	1,603
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) attributable to common stock	(170)			(170)			(170)
Net income (loss) attributable to noncontrolling interest									$ 38	$ (3)	18
Distributions to noncontrolling interest - Egypt	(71)							(71)
Common dividends	(94)		(94)				(94)
Other	14		15			(1)	14
Ending balance at Sep. 30, 2019	7,868	$ 261	$ 11,852	$ (2,625)	$ (3,190)	$ 3	$ 6,301	$ 1,567
Beginning balance at Jun. 30, 2019											521
Increase (Decrease) in Temporary Equity [Roll Forward]
Net income attributable to Altus Preferred Unit limited partners											18
Ending balance at Sep. 30, 2019	$ 539										$ 539

XML

EQUITY METHOD INTERESTS - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Equity method interests		$ 1,095,000,000	$ 121,000,000
Marine Well Containment Company
Schedule of Equity Method Investments [Line Items]
Equity method interests	$ 30,000,000
Gain (loss) on disposal of investment	$ 0
Altus Midstream Company
Schedule of Equity Method Investments [Line Items]
Difference between carrying amount and underlying equity amount		26,000,000	6,000,000
Equity method interests		$ 1,095,000,000	$ 91,000,000

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Schedule of Derivative Assets and Liabilities and Locations on Consolidated Balance Sheet (Details) - Recurring - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Derivatives, Fair Value [Line Items]
Derivative asset	$ 2	$ 55
Derivative liability	105	11
Current Assets: Other current assets
Derivatives, Fair Value [Line Items]
Derivative asset	2	55
Current Liabilities: Other current liabilities
Derivatives, Fair Value [Line Items]
Derivative liability	7	11
Deferred Credits and Other Noncurrent Liabilities: Other
Derivatives, Fair Value [Line Items]
Derivative liability	$ 98	$ 0

XML

COMMITMENTS AND CONTINGENCIES (Detail) $ in Millions, $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Apr. 30, 2017 AUD ($)
Commitment And Contingencies [Line Items]
Accrued liability for legal contingencies	$ 19
Loss Contingency, punitive damages	60
Undiscounted reserve for environmental remediation	3
Apollo Exploration Lawsuit
Commitment And Contingencies [Line Items]
Plaintiffs alleged damages	200
Apollo Exploration Lawsuit | Minimum
Commitment And Contingencies [Line Items]
Plaintiffs alleged damages		$ 1,100
Australian Operations Divestiture Dispute | Apache Australia Operation
Commitment And Contingencies [Line Items]
Gain contingency, unrecorded amount				$ 80
Loss contingency, estimated of possible loss amount			$ 200
Castex Lawsuit
Commitment And Contingencies [Line Items]
Plaintiffs alleged damages	60
Loss contingency, estimated of possible loss amount	$ 200

XML

CAPITAL STOCK - Net Income (loss) Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic:
Income (loss) attributable to common stock	$ (170)	$ 81	$ (577)	$ 421
Income (loss) attributable to common stock, shares	377	383	377	383
Basic net income (loss) per share (in USD per share)	$ (0.45)	$ 0.21	$ (1.53)	$ 1.10
Effect of Dilutive Securities:
Stock options and other (in shares)	0	2	0	2
Stock options and other (in USD per share)				$ (0.01)
Diluted:
Income (loss) attributable to common stock	$ (170)	$ 81	$ (577)	$ 421
Income (loss) attributable to common stock, shares	377	385	377	385
Diluted net income (loss) per share (in USD per share)	$ (0.45)	$ 0.21	$ (1.53)	$ 1.09

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Company's Weighted Average Lease Term and Discount Rate related to Leases (Details)	Sep. 30, 2019
Accounting Policies [Abstract]
Operating leases, weighted average remaining lease term	3 years 3 months 18 days
Finance leases, weighted average remaining lease term	9 years 8 months 12 days
Operating leases, weighted average discount rate	4.40%
Finance leases, weighted average discount rate	4.30%

XML

CAPITAL STOCK (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Reconciliation of the components of basic and diluted net loss per common share

A reconciliation of the components of basic and diluted net income (loss) per common share for the quarters and nine months ended September 30, 2019 and 2018, is presented in the table below.

 

	For the Quarter Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	383	$	0.21
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	—
Diluted:
Income (loss) attributable to common stock	$	(170	)	377	$	(0.45	)	$	81	385	$	0.21

	For the Nine Months Ended September 30,
	2019							2018
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	383	$	1.10
Effect of Dilutive Securities:
Stock options and other	$	—		—	$	—		$	—	2	$	(0.01	)
Diluted:
Income (loss) attributable to common stock	$	(577	)	377	$	(1.53	)	$	421	385	$	1.09

XML

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Legal Matters

Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. As of September 30, 2019, the Company has an accrued liability of approximately $19 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

For additional information on Legal Matters described below, please see Note 9—Commitments and Contingencies to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Argentine Environmental Claims and Argentina Tariff

No material change in the status of the YPF Sociedad Anónima indemnities matter has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Regarding the Pioneer Natural Resources Company indemnities matter, Company subsidiaries, on one hand, and Pioneer Natural Resources Company and TDF Holdings Company LDC, on the other, have settled and voluntarily dismissed certain indemnity-related claims against each other in a case captioned

Apache Corporation, et al. v. Pioneer Natural Resources Co., et al., Cause No. 2014-64407, pending in the 189^th Judicial District of Harris County, Texas. Company subsidiaries retain certain rights to enforce certain Argentina-related indemnification obligations against Pioneer 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 Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including Apache, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to 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, except as noted. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While an adverse judgment against the Company is possible, the Company intends to actively defend these lawsuits and claims.

Starting in November of 2013 and continuing into 2019, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including Apache. These cases were all removed to federal courts in Louisiana. Some of the cases have been remanded to state court with the remand orders being appealed. Other of the cases have been stayed pending appeal. 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 an adverse judgment against the Company is possible, the Company intends to vigorously oppose these claims.

No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Apollo Exploration Lawsuit

In a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th 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 areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The Court recently 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 plaintiffs have appealed. No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Australian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, Apache filed suit against Quadrant for breach of the Quadrant SPA. In its suit, Apache seeks approximately $80 million. In December 2017, Quadrant filed a defense of equitable set-off to Apache’s claim and a counterclaim seeking approximately $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 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 purported class seeks approximately $60 million USD and punitive damages. The Company believes that Plaintiffs’ claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

California Litigation

On July 17, 2017, in three separate actions, San Mateo County, California, Marin County, California, 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, gas, and coal 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 and in a separate action on January 22, 2018, the City of Richmond, filed similar lawsuits against many of the same defendants. On November 14, 2018, the Pacific Coast Federation of Fishermen’s Associations, Inc. also filed a similar lawsuit against many of the same defendants. The Company believes that the claims made against it are baseless and intends to vigorously defend these lawsuits.

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 which they recently disclosed to be 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 Company is appealing.

Environmental Matters

As of September 30, 2019, the Company had an undiscounted reserve for environmental remediation of approximately $3 million. The Company is not aware of any environmental claims existing as of September 30, 2019 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.

XML

CAPITALIZED EXPLORATORY WELL COSTS

9 Months Ended

Sep. 30, 2019

Extractive Industries [Abstract]

CAPITALIZED EXPLORATORY WELL COSTS

CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $193 million and $159 million at September 30, 2019 and December 31, 2018, respectively. The increase is primarily attributable to drilling activities in Suriname and the North Sea during the period, partially offset by successful transfers of well costs and dry hole write-offs. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2018 were charged to dry hole expense during the nine months ended September 30, 2019. 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.

XML

OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

OTHER CURRENT LIABILITIES

OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
	(In millions)
Accrued operating expenses	$	187	$	65
Accrued exploration and development	355		667
Accrued gathering, processing, and transmission - Altus	25		81
Accrued compensation and benefits	171		177
Accrued interest	114		137
Accrued income taxes	80		58
Current asset retirement obligation	66		66
Current operating lease liability	149		—
Other	94		90
Total other current liabilities	$	1,241	$	1,341