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 June 30, 2022

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: 1-40144

APA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	86-1430562
(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	Nasdaq Global Select Market

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 July 31, 2022 326,530,252 

TABLE OF CONTENTS

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 (DEFICIT) AND NONCONTROLLING INTERESTS	5
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
4.	CONTROLS AND PROCEDURES	46
	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	48
1A.	RISK FACTORS	48
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	48
6.	EXHIBITS	49

FORWARD-LOOKING STATEMENTS AND RISKS

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company’s future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on the Company’s examination of historical operating trends, the information that was used to prepare its estimate of proved reserves as of December 31, 2021, and other data in the Company’s possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “continue,” “seek,” “guidance,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under the circumstances, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, its assumptions about:

•the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (COVID-19) pandemic and any related variants) and the actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to such epidemics or pandemics;

•the mandate, availability, and effectiveness of vaccine programs and therapeutics related to the treatment of COVID-19;

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

•the Company’s commodity hedging arrangements;

•the supply and demand for oil, natural gas, NGLs, and other products or services;

•production and reserve levels;

•drilling risks;

•economic and competitive conditions, including market and macro-economic disruptions resulting from the Russian war in Ukraine;

•the availability of capital resources;

•capital expenditures and other contractual obligations;

•currency exchange rates;

•weather conditions;

•inflation rates;

•the availability of goods and services;

•the impact of political pressure and the influence of environmental groups and other stakeholders on decisions and policies related to the industries in which the Company and its affiliates operate;

•legislative, regulatory, or policy changes, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, or water disposal;

•the Company’s performance on environmental, social, and governance measures;

•terrorism or cyberattacks;

•the occurrence of property acquisitions or divestitures;

•the integration of acquisitions;

•the Company’s ability to access the capital markets;

•market-related risks, such as general credit, liquidity, and interest-rate risks;

•the Company’s expectations with respect to the new operating structure implemented pursuant to the Holding Company Reorganization (as defined in the Notes to the Company’s Consolidated Financial Statements set forth in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q) and the associated disclosure implications;

•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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021;

•other risks and uncertainties disclosed in the Company’s second-quarter 2022 earnings release;

•other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q; and

•other factors disclosed in the other filings that the Company makes with the Securities and Exchange Commission.

Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise these statements, whether based on changes in internal estimates or expectations, new information, future developments, or otherwise.

DEFINITIONS

All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this Quarterly Report on Form 10-Q. As used herein:

“3-D” means three-dimensional.

“4-D” means four-dimensional.

“b/d” means barrels of oil or NGLs per day.

“bbl” or “bbls” means barrel or barrels of oil or NGLs.

“bcf” means billion cubic feet of natural gas.

“bcf/d” means one bcf per day.

“boe” means barrel of oil equivalent, determined by using the ratio of one barrel of oil or NGLs to six Mcf of gas.

“boe/d” means boe per day.

“Btu” means a British thermal unit, a measure of heating value.

“Liquids” means oil and NGLs.

“LNG” means liquefied natural gas.

“Mb/d” means Mbbls per day.

“Mbbls” means thousand barrels of oil or NGLs.

“Mboe” means thousand boe.

“Mboe/d” means Mboe per day.

“Mcf” means thousand cubic feet of natural gas.

“Mcf/d” means Mcf per day.

“MMbbls” means million barrels of oil or NGLs.

“MMboe” means million boe.

“MMBtu” means million Btu.

“MMBtu/d” means MMBtu per day.

“MMcf” means million cubic feet of natural gas.

“MMcf/d” means MMcf per day.

“NGL” or “NGLs” means natural gas liquids, which are expressed in barrels.

“NYMEX” means New York Mercantile Exchange.

“oil” includes crude oil and condensate.

“PUD” means proved undeveloped.

“SEC” means the United States Securities and Exchange Commission.

“Tcf” means trillion cubic feet of natural gas.

“U.K.” means United Kingdom.

“U.S.” means United States.

With respect to information relating to the Company’s working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by the Company’s working interest therein. Unless otherwise specified, all references to wells and acres are gross.

References to “APA,” the “Company,” “we,” “us,” and “our” refer to APA Corporation and its consolidated subsidiaries, including Apache Corporation, unless otherwise specifically stated. References to “Apache” refer to Apache Corporation, the Company’s wholly owned subsidiary, and its consolidated subsidiaries, unless otherwise specifically stated.

PART I – FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
	(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues	$	2,525	$	1,514	$	4,845	$	2,945
Purchased oil and gas sales	522		242		871		682
Total revenues	3,047		1,756		5,716		3,627
Derivative instrument gains (losses), net	(32)		(113)		(94)		45
Gain (loss) on divestitures, net	(27)		65		1,149		67
Other, net	64		74		109		135
	3,052		1,782		6,880		3,874
OPERATING EXPENSES:
Lease operating expenses	359		311		703		575
Gathering, processing, and transmission(1)	94		61		175		119
Purchased oil and gas costs	528		262		879		756
Taxes other than income	78		51		148		95
Exploration	56		26		98		75
General and administrative	89		86		245		169
Transaction, reorganization, and separation	3		4		17		4
Depreciation, depletion, and amortization	278		351		569		693
Asset retirement obligation accretion	29		28		58		56
Financing costs, net	76		107		228		217
	1,590		1,287		3,120		2,759
NET INCOME BEFORE INCOME TAXES	1,462		495		3,760		1,115
Current income tax provision	415		131		807		280
Deferred income tax benefit	(20)		(44)		(60)		(23)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	1,067		408		3,013		858
Net income attributable to noncontrolling interest - Egypt	141		41		260		83
Net income attributable to noncontrolling interest - Altus	—		27		14		28
Net income (loss) attributable to Altus Preferred Unit limited partners	—		24		(70)		43
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	926	$	316	$	2,809	$	704
NET INCOME PER COMMON SHARE:
Basic	$	2.72	$	0.83	$	8.18	$	1.86
Diluted	$	2.71	$	0.82	$	8.15	$	1.86
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	341		378		344		378
Diluted	342		379		344		379

(1)    For gathering, processing, and transmission costs associated with Kinetik, refer to Note 6—Equity Method Interest for further detail.

The accompanying notes to consolidated financial statements are an integral part of this statement.

1

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
	(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	$	1,067	$	408	$	3,013	$	858
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Share of equity method interests other comprehensive income	—		—		—		1
Pension and postretirement benefit plan	—		—		(1)		—
COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS	1,067		408		3,012		859
Comprehensive income attributable to noncontrolling interest - Egypt	141		41		260		83
Comprehensive income attributable to noncontrolling interest - Altus	—		27		14		28
Comprehensive income (loss) attributable to Altus Preferred Unit limited partners	—		24		(70)		43
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCK	$	926	$	316	$	2,808	$	705

The accompanying notes to consolidated financial statements are an integral part of this statement.

2

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2022		2021
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	$	3,013	$	858
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument losses, net	83		55
Gain on divestitures, net	(1,149)		(67)
Exploratory dry hole expense and unproved leasehold impairments	47		46
Depreciation, depletion, and amortization	569		693
Asset retirement obligation accretion	58		56
Benefit from deferred income taxes	(60)		(23)
(Gain) loss on extinguishment of debt	67		(1)
Other, net	(88)		(14)
Changes in operating assets and liabilities:
Receivables	(519)		(165)
Inventories	(18)		20
Drilling advances and other current assets	28		43
Deferred charges and other long-term assets	(11)		(18)
Accounts payable	206		157
Accrued expenses	202		17
Deferred credits and noncurrent liabilities	(2)		(17)
NET CASH PROVIDED BY OPERATING ACTIVITIES	2,426		1,640
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property	(741)		(558)
Leasehold and property acquisitions	(26)		(3)
Proceeds from sale of oil and gas properties	751		181
Proceeds from sale of Kinetik shares	224		—
Deconsolidation of Altus cash and cash equivalents	(143)		—
Other, net	(49)		(13)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	16		(393)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving credit facilities, net	(267)		(150)
Proceeds from Altus credit facility, net	—		33
Payments on Apache fixed-rate debt	(1,370)		(20)
Distributions to noncontrolling interest - Egypt	(159)		(60)
Distributions to Altus Preferred Unit limited partners	(11)		(23)
Treasury stock activity, net	(552)		—
Dividends paid to APA common stockholders	(86)		(19)
Other, net	(17)		(21)
NET CASH USED IN FINANCING ACTIVITIES	(2,462)		(260)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(20)		987
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	302		262
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	282	$	1,249
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	172	$	233
Income taxes paid, net of refunds	637		231

The accompanying notes to consolidated financial statements are an integral part of this statement.

3

APA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

	June 30, 2022(1)		December 31, 2021(1)
	(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($132 related to Altus VIE)	$	282	$	302
Receivables, net of allowance of $115 and $109	1,894		1,394
Other current assets (Note 5) ($9 related to Altus VIE)	907		684
	3,083		2,380
PROPERTY AND EQUIPMENT:
Oil and gas properties	40,936		40,749
Gathering, processing, and transmission facilities ($209 related to Altus VIE)	447		673
Other ($3 related to Altus VIE)	604		1,126
Less: Accumulated depreciation, depletion, and amortization ($25 related to Altus VIE)	(33,756)		(34,213)
	8,231		8,335
OTHER ASSETS:
Equity method interests (Note 6) ($1,365 related to Altus VIE)	618		1,365
Decommissioning security for sold Gulf of Mexico properties (Note 11)	383		640
Deferred charges and other ($6 related to Altus VIE)	609		583
	$	12,924	$	13,303
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($12 related to Altus VIE)	$	925	$	731
Current debt	125		215
Other current liabilities (Note 7) ($15 related to Altus VIE)	1,763		1,171
	2,813		2,117
LONG-TERM DEBT (Note 9) ($657 related to Altus VIE)	5,160		7,295
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	89		148
Asset retirement obligation (Note 8) ($68 related to Altus VIE)	2,061		2,089
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)	825		1,086
Other ($67 related to Altus VIE)	471		573
	3,446		3,896
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)	—		712
EQUITY (DEFICIT):
Common stock, $0.625 par, 860,000,000 shares authorized, 419,756,641 and 419,078,606 shares issued, respectively	262		262
Paid-in capital	11,567		11,645
Accumulated deficit	(6,679)		(9,488)
Treasury stock, at cost, 86,362,994 and 72,147,841 shares, respectively	(4,587)		(4,036)
Accumulated other comprehensive income	21		22
APA SHAREHOLDERS’ EQUITY (DEFICIT)	584		(1,595)
Noncontrolling interest - Egypt	921		820
Noncontrolling interest - Altus	—		58
TOTAL EQUITY (DEFICIT)	1,505		(717)
	$	12,924	$	13,303

(1)    The Altus VIE amounts are disclosed as of December 31, 2021. All Altus balances were deconsolidated as of February 22, 2022. Refer to Note 1—Summary of Significant Accounting Policies and Note 2—Acquisitions and Divestitures for further detail.

The accompanying notes to consolidated financial statements are an integral part of this statement.

4

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS

(Unaudited)

	Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)		Common Stock		Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		APA SHAREHOLDERS’ EQUITY (DEFICIT)		Noncontrolling Interests(1)		TOTAL EQUITY (DEFICIT)
	(In millions)
For the Quarter Ended June 30, 2021
Balance at March 31, 2021	$	605	$	262	$	11,727	$	(10,073)	$	(3,189)	$	15	$	(1,258)	$	997	$	(261)
Net income attributable to common stock	—		—		—		316		—		—		316		—		316
Net income attributable to noncontrolling interest - Egypt	—		—		—		—		—		—		—		41		41
Net income attributable to noncontrolling interest - Altus	—		—		—		—		—		—		—		27		27
Net income attributable to Altus Preferred Unit holders	24		—		—		—		—		—		—		—		—
Distributions payable to Altus Preferred Unit limited partners	(12)		—		—		—		—		—		—		—		—
Distributions to noncontrolling interest - Egypt	—		—		—		—		—		—		—		(20)		(20)
Common dividends declared ($0.025 per share)	—		—		(10)		—		—		—		(10)		—		(10)
Other	—		—		(13)		—		1		—		(12)		(5)		(17)
Balance at June 30, 2021	$	617	$	262	$	11,704	$	(9,757)	$	(3,188)	$	15	$	(964)	$	1,040	$	76
For the Quarter Ended June 30, 2022
Balance at March 31, 2022	$	—	$	262	$	11,600	$	(7,605)	$	(4,296)	$	21	$	(18)	$	870	$	852
Net income attributable to common stock	—		—		—		926		—		—		926		—		926
Net income attributable to noncontrolling interest - Egypt	—		—		—		—		—		—		—		141		141
Distributions to noncontrolling interest - Egypt	—		—		—		—		—		—		—		(90)		(90)
Common dividends declared ($0.125 per share)	—		—		(42)		—		—		—		(42)		—		(42)
Treasury stock activity, net	—		—		—		—		(291)		—		(291)		—		(291)
Other	—		—		9		—		—		—		9		—		9
Balance at June 30, 2022	$	—	$	262	$	11,567	$	(6,679)	$	(4,587)	$	21	$	584	$	921	$	1,505

(1)    As a result of the BCP Business Combination, the Company deconsolidated Altus on February 22, 2022. Refer to Note 1—Summary of Significant Accounting Policies and Note 2—Acquisitions and Divestitures for further detail.

The accompanying notes to consolidated financial statements are an integral part of this statement.

5

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS - Continued

(Unaudited)

	Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)		Common Stock		Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		APA SHAREHOLDERS’ EQUITY (DEFICIT)		Noncontrolling Interests(1)		TOTAL EQUITY (DEFICIT)
	(In millions)
For the Six Months Ended June 30, 2021
Balance at December 31, 2020	$	608	$	262	$	11,735	$	(10,461)	$	(3,189)	$	14	$	(1,639)	$	994	$	(645)
Net income attributable to common stock	—		—		—		704		—		—		704		—		704
Net income attributable to noncontrolling interest - Egypt	—		—		—		—		—		—		—		83		83
Net income attributable to noncontrolling interest - Altus	—		—		—		—		—		—		—		28		28
Net income attributable to Altus Preferred Unit holders	43		—		—		—		—		—		—		—		—
Distributions payable to Altus Preferred Unit limited partners	(11)		—		—		—		—		—		—		—		—
Distributions paid to Altus Preferred Unit limited partners	(23)		—		—		—		—		—		—		—		—
Distributions to noncontrolling interest - Egypt	—		—		—		—		—		—		—		(60)		(60)
Common dividends declared ($0.05 per share)	—		—		(19)		—		—		—		(19)		—		(19)
Other	—		—		(12)		—		1		1		(10)		(5)		(15)
Balance at June 30, 2021	$	617	$	262	$	11,704	$	(9,757)	$	(3,188)	$	15	$	(964)	$	1,040	$	76
For the Six Months Ended June 30, 2022
Balance at December 31, 2021	$	712	$	262	$	11,645	$	(9,488)	$	(4,036)	$	22	$	(1,595)	$	878	$	(717)
Net income attributable to common stock	—		—		—		2,809		—		—		2,809		—		2,809
Net income attributable to noncontrolling interest - Egypt	—		—		—		—		—		—		—		260		260
Net income attributable to noncontrolling interest - Altus	—		—		—		—		—		—		—		14		14
Net loss attributable to Altus Preferred Unit limited partners	(70)		—		—		—		—		—		—		—		—