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, 2023

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, 2023 307,265,404 

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	27
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
4.	CONTROLS AND PROCEDURES	42
	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	44
1A.	RISK FACTORS	44
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	44
6.	EXHIBITS	46

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 and capital returns framework, are forward-looking statements. Such forward-looking statements are based on the Company’s examination of historical operating trends, the information that was used to prepare its estimate of proved reserves as of December 31, 2022, and other data in the Company’s possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “continue,” “seek,” “guidance,” “goal,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under the circumstances, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, its assumptions about:

•changes in local, regional, national, and international economic conditions, including as a result of any epidemics or pandemics, such as the coronavirus disease (COVID-19) pandemic and any related variants;

•the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services, including the prices received for natural gas purchased from third parties to sell and deliver to a U.S. LNG export facility;

•the Company’s commodity hedging arrangements;

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

•production and reserve levels;

•drilling risks;

•economic and competitive conditions, including market and macro-economic disruptions resulting from the Russian war in Ukraine and from actions taken by foreign oil and gas producing nations, including the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members that participate in OPEC initiatives (OPEC+);

•the availability of capital resources;

•capital expenditures and other contractual obligations;

•currency exchange rates;

•weather conditions;

•inflation rates;

•the impact of changes in tax legislation;

•the availability of goods and services;

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

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

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

•terrorism or cyberattacks;

•the occurrence of property acquisitions or divestitures;

•the integration of acquisitions;

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

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

•the benefits derived from the operating structure implemented pursuant to the Holding Company Reorganization (as defined in the Notes to the Company’s Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022);

•other factors disclosed under Items 1 and 2—Business and Properties—Estimated Proved Reserves and Future Net Cash Flows, Item 1A—Risk Factors, Item 7—Management’s 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, 2022;

•other risks and uncertainties disclosed in the Company’s second-quarter 2023 earnings release;

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

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

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

DEFINITIONS

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

“3-D” means three-dimensional.

“4-D” means four-dimensional.

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

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

“bcf” means billion cubic feet of natural gas.

“bcf/d” means one bcf per day.

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

“boe/d” means boe per day.

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

“Liquids” means oil and NGLs.

“LNG” means liquefied natural gas.

“Mb/d” means Mbbls per day.

“Mbbls” means thousand barrels of oil or NGLs.

“Mboe” means thousand boe.

“Mboe/d” means Mboe per day.

“Mcf” means thousand cubic feet of natural gas.

“Mcf/d” means Mcf per day.

“MMbbls” means million barrels of oil or NGLs.

“MMboe” means million boe.

“MMBtu” means million Btu.

“MMBtu/d” means MMBtu per day.

“MMcf” means million cubic feet of natural gas.

“MMcf/d” means MMcf per day.

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

“NYMEX” means New York Mercantile Exchange.

“oil” includes crude oil and condensate.

“PUD” means proved undeveloped.

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

“Tcf” means trillion cubic feet of natural gas.

“U.K.” means United Kingdom.

“U.S.” means United States.

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

References to “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,
	2023		2022		2023		2022
	(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues(1)	$	1,652	$	2,525	$	3,421	$	4,845
Purchased oil and gas sales(1)	144		522		383		871
Total revenues	1,796		3,047		3,804		5,716
Derivative instrument gains (losses), net	51		(32)		104		(94)
Gain (loss) on divestitures, net	5		(27)		6		1,149
Other, net	109		64		77		109
	1,961		3,052		3,991		6,880
OPERATING EXPENSES:
Lease operating expenses	361		359		682		703
Gathering, processing, and transmission(1)	78		94		156		175
Purchased oil and gas costs(1)	131		528		347		879
Taxes other than income	50		78		102		148
Exploration	43		56		95		98
General and administrative	72		89		137		245
Transaction, reorganization, and separation	2		3		6		17
Depreciation, depletion, and amortization	367		278		699		569
Asset retirement obligation accretion	29		29		57		58
Impairments	46		—		46		—
Financing costs, net	82		76		154		228
	1,261		1,590		2,481		3,120
NET INCOME BEFORE INCOME TAXES	700		1,462		1,510		3,760
Current income tax provision	254		415		600		807
Deferred income tax provision (benefit)	(16)		(20)		122		(60)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	462		1,067		788		3,013
Net income attributable to noncontrolling interest – Egypt	81		141		165		260
Net income attributable to noncontrolling interest – Altus	—		—		—		14
Net loss attributable to Altus Preferred Unit limited partners	—		—		—		(70)
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	381	$	926	$	623	$	2,809
NET INCOME PER COMMON SHARE:
Basic	$	1.24	$	2.72	$	2.01	$	8.18
Diluted	$	1.23	$	2.71	$	2.01	$	8.15
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	308		341		310		344
Diluted	309		342		310		344

(1)    For transactions associated with Kinetik, refer to Note 6—Equity Method Interests 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,
	2023		2022		2023		2022
	(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	$	462	$	1,067	$	788	$	3,013
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Pension and postretirement benefit plan	—		—		3		(1)
COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS	462		1,067		791		3,012
Comprehensive income attributable to noncontrolling interest – Egypt	81		141		165		260
Comprehensive income attributable to noncontrolling interest – Altus	—		—		—		14
Comprehensive loss attributable to Altus Preferred Unit limited partners	—		—		—		(70)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCK	$	381	$	926	$	626	$	2,808

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,
	2023		2022
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	$	788	$	3,013
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument (gains) losses, net	(80)		83
Gain on divestitures, net	(6)		(1,149)
Exploratory dry hole expense and unproved leasehold impairments	64		47
Depreciation, depletion, and amortization	699		569
Asset retirement obligation accretion	57		58
Impairments	46		—
Provision for (benefit from) deferred income taxes	122		(60)
(Gain) loss on extinguishment of debt	(9)		67
Other, net	(67)		(88)
Changes in operating assets and liabilities:
Receivables	100		(519)
Inventories	(45)		(18)
Drilling advances and other current assets	2		28
Deferred charges and other long-term assets	160		(11)
Accounts payable	(112)		206
Accrued expenses	(163)		202
Deferred credits and noncurrent liabilities	(221)		(2)
NET CASH PROVIDED BY OPERATING ACTIVITIES	1,335		2,426
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property	(1,119)		(741)
Leasehold and property acquisitions	(10)		(26)
Proceeds from sale of oil and gas properties	28		751
Proceeds from sale of Kinetik shares	—		224
Deconsolidation of Altus cash and cash equivalents	—		(143)
Other, net	(14)		(49)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(1,115)		16
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) revolving credit facilities, net	196		(267)
Payments on Apache fixed-rate debt	(65)		(1,370)
Distributions to noncontrolling interest – Egypt	(100)		(159)
Treasury stock activity, net	(188)		(552)
Dividends paid to APA common stockholders	(155)		(86)
Other, net	(11)		(28)
NET CASH USED IN FINANCING ACTIVITIES	(323)		(2,462)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(103)		(20)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	245		302
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	142	$	282
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	168	$	172
Income taxes paid, net of refunds	476		637

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, 2023		December 31, 2022
	(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	142	$	245
Receivables, net of allowance of $103 and $117	1,364		1,466
Other current assets (Note 5)	1,093		997
	2,599		2,708
PROPERTY AND EQUIPMENT:
Oil and gas properties	43,384		42,356
Gathering, processing, and transmission facilities	447		449
Other	598		613
Less: Accumulated depreciation, depletion, and amortization	(35,061)		(34,406)
	9,368		9,012
OTHER ASSETS:
Equity method interests (Note 6)	695		624
Decommissioning security for sold Gulf of Mexico properties (Note 11)	57		217
Deferred charges and other	525		586
	$	13,244	$	13,147
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	656	$	771
Current debt	2		2
Other current liabilities (Note 7)	1,972		2,143
	2,630		2,916
LONG-TERM DEBT (Note 9)	5,574		5,451
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	449		314
Asset retirement obligation (Note 8)	1,984		1,940
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)	472		738
Other	439		443
	3,344		3,435
EQUITY (DEFICIT):
Common stock, $0.625 par, 860,000,000 shares authorized, 420,584,819 and 419,869,987 shares issued, respectively	263		262
Paid-in capital	11,267		11,420
Accumulated deficit	(5,191)		(5,814)
Treasury stock, at cost, 113,319,877 and 108,310,838 shares, respectively	(5,647)		(5,459)
Accumulated other comprehensive income	17		14
APA SHAREHOLDERS’ EQUITY	709		423
Noncontrolling interest – Egypt	987		922
TOTAL EQUITY	1,696		1,345
	$	13,244	$	13,147

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, 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
For the Quarter Ended June 30, 2023
Balance at March 31, 2023	$	—	$	263	$	11,337	$	(5,572)	$	(5,601)	$	17	$	444	$	989	$	1,433
Net income attributable to common stock	—		—		—		381		—		—		381		—		381
Net income attributable to noncontrolling interest – Egypt	—		—		—		—		—		—		—		81		81
Distributions to noncontrolling interest – Egypt	—		—		—		—		—		—		—		(83)		(83)
Common dividends declared ($0.25 per share)	—		—		(77)		—		—		—		(77)		—		(77)
Treasury stock activity, net	—		—		—		—		(46)		—		(46)		—		(46)
Other	—		—		7		—		—		—		7		—		7
Balance at June 30, 2023	$	—	$	263	$	11,267	$	(5,191)	$	(5,647)	$	17	$	709	$	987	$	1,696

(1)    As a result of the BCP Business Combination (as defined herein), the Company deconsolidated Altus (as defined herein) on February 22, 2022. Refer to Note 1—Summary of Significant Accounting Policies and Note 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, 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)		—		—		—		—		—		—		—		—
Distributions to noncontrolling interest – Egypt	—		—		—		—		—		—		—		(159)		(159)
Common dividends declared ($0.25 per share)	—		—		(85)		—		—		—		(85)		—		(85)
Deconsolidation of Altus	(642)		—		—		—		—		—		—		(72)		(72)
Treasury stock activity, net	—		—		—		—		(551)		—		(551)		—		(551)
Other	—		—		7		—		—		(1)		6		—		6
Balance at June 30, 2022	$	—	$	262	$	11,567	$	(6,679)	$	(4,587)	$	21	$	584	$	921	$	1,505
For the Six Months Ended June 30, 2023
Balance at December 31, 2022	$	—	$	262	$	11,420	$	(5,814)	$	(5,459)	$	14	$	423	$	922	$	1,345
Net income attributable to common stock	—		—		—		623		—		—		623		—		623
Net income attributable to noncontrolling interest – Egypt	—		—		—		—		—		—		—		165		165
Distributions to noncontrolling interest – Egypt	—		—		—		—		—		—		—		(100)		(100)
Common dividends declared ($0.50 per share)	—		—		(155)		—		—		—		(155)		—		(155)
Treasury stock activity, net	—		—		—		—		(188)		—		(188)		—		(188)
Other	—		1		2		—		—		3		6		—		6
Balance at June 30, 2023	$	—	$	263	$	11,267	$	(5,191)	$	(5,647)	$	17	$	709	$	987	$	1,696

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

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

6

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These consolidated financial statements have been prepared by APA Corporation (APA 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 any recently adopted accounting pronouncements. 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 condensed or 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which contains a summary of the Company’s significant accounting policies and other disclosures.

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of June 30, 2023, the Company's significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The Company’s financial statements for prior periods may include reclassifications that were made to conform to the current-year presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of APA and its subsidiaries after elimination of intercompany balances and transactions.

The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated. The Company consolidates all other investments in which, either through direct or indirect ownership, it has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated subsidiary of APA 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 the Company’s consolidated Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. Additionally, prior to the BCP Business Combination defined below, third-party investors owned a minority interest of approximately 21 percent of Altus Midstream Company (ALTM or Altus), which was reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. ALTM qualified as a variable interest entity under GAAP, which APA consolidated because a wholly owned subsidiary of APA had a controlling financial interest and was determined to be the primary beneficiary.

On February 22, 2022, ALTM closed a previously announced transaction to combine with privately owned BCP Raptor Holdco LP (BCP and, together with BCP Raptor Holdco GP, LLC, the Contributed Entities) in an all-stock transaction, pursuant to the Contribution Agreement entered into by and among ALTM, Altus Midstream LP, New BCP Raptor Holdco, LLC (the Contributor), and BCP (the BCP Contribution Agreement). Pursuant to the BCP Contribution Agreement, the Contributor contributed all of the equity interests of the Contributed Entities (the Contributed Interests) to Altus Midstream LP, with each Contributed Entity becoming a wholly owned subsidiary of Altus Midstream LP (the BCP Business Combination). Upon closing the transaction, the combined entity was renamed Kinetik Holdings Inc. (Kinetik), and the Company determined that it was no longer the primary beneficiary of Kinetik. The Company further determined that Kinetik no longer qualified as a variable interest entity under GAAP. As a result, the Company deconsolidated ALTM on February 22, 2022. Refer to Note 2—Acquisitions and Divestitures for further detail.

7

The stockholders agreement entered into by and among the Company, ALTM, BCP, and other related and affiliated entities provides that the Company, through one of its wholly owned subsidiaries, retains the ability to designate a director to the board of directors of Kinetik for so long as the Company and its affiliates beneficially own 10 percent or more of Kinetik’s outstanding common stock. Based on this board representation, combined with the Company’s stock ownership, management determined it has significant influence over Kinetik, which is considered a related party of the Company. Investments in which the Company has significant influence, but not control, are accounted for under the equity method of accounting. These investments are recorded separately as “Equity method interests” in the Company’s consolidated balance sheet. The Company elected the fair value option to account for its equity method interest in Kinetik. Refer to Note 6—Equity Method Interests for further detail.

Use of Estimates

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of the Company’s financial statements, and changes in these estimates are recorded when known.

Significant estimates with regard to these financial statements include the estimates of fair value for long-lived assets (refer to “Fair Value Measurements” and “Property and Equipment” sections in this Note 1 below), the fair value determination of acquired assets and liabilities (refer to Note 2—Acquisitions and Divestitures), the fair value of equity method interests (refer to “Equity Method Interests” within this Note 1 below and Note 6—Equity Method Interests), the assessment of asset retirement obligations (refer to Note 8—Asset Retirement Obligation), the estimate of income taxes (refer to Note 10—Income Taxes), the estimation of the contingent liability representing Apache’s potential decommissioning obligations on sold properties in the Gulf of Mexico (refer to Note 11—Commitments and Contingencies), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom.

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in the Company’s consolidated balance sheet. Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.

The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Refer to Note 4—Derivative Instruments and Hedging Activities, Note 6—Equity Method Interests, and Note 9—Debt and Financing Costs for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

During the three and six months ended June 30, 2023 and 2022, the Company recorded no asset impairments in connection with fair value assessments.

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the six months ended June 30, 2023 and 2022.

8

Payments under all contracts with customers are typically due and received within a short-term period of one year or less after physical delivery of the product or service has been rendered. Receivables from contracts with customers, including receivables for purchased oil and gas sales, in each case, net of allowance for credit losses, were $1.2 billion and $1.3 billion as of June 30, 2023 and December 31, 2022, respectively.

Oil and gas production revenues from non-customers represent income taxes paid to the Arab Republic of Egypt by Egyptian General Petroleum Corporation on behalf of the Company. Revenue and associated expenses related to such tax volumes are recorded as “Oil, natural gas, and natural gas liquids production revenues” and “Current income tax provision,” respectively, in the Company’s statement of consolidated operations.

Refer to Note 13—Business Segment Information for a disaggregation of oil, gas, and natural gas production revenue by product and reporting segment.

In accordance with the provisions of ASC 606, “Revenue from Contracts with Customers,” variable market prices for each short-term commodity sale are allocated entirely to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations. As such, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations as of the end of the reporting period.

Inventories

Inventories consist principally of tubular goods and equipment and are stated at the lower of weighted-average cost or net realizable value. Oil produced but not sold, primarily in the North Sea, is also recorded to inventory and is stated at the lower of the cost to produce or net realizable value.

During the three and six months ended June 30, 2023, the Company recorded $46 million of impairments in connection with valuations of drilling and operations equipment inventory upon the Company’s decision to suspend drilling operations in the North Sea.

Property and Equipment

The carrying value of the Company’s property and equipment represents the cost incurred to acquire the property and equipment, including capitalized interest, net of any impairments. For business combinations and acquisitions, property and equipment cost is based on the fair values at the acquisition date.

Oil and Gas Property

The Company follows the successful efforts method of accounting for its oil and gas property. Under this method of accounting, exploration costs, such as exploratory geological and geophysical costs, delay rentals, and exploration overhead, are expensed as incurred. All costs related to production, general corporate overhead, and similar activities are expensed as incurred. If an exploratory well provides evidence to justify potential development of reserves, drilling costs associated with the well are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. This determination may take longer than one year in certain areas depending on, among other things, the amount of hydrocarbons discovered, the outcome of planned geological and engineering studies, the need for additional appraisal drilling activities to determine whether the discovery is sufficient to support an economic development plan, and government sanctioning of development activities in certain international locations. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities; in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

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.

9

Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of crude oil and natural gas, are capitalized. Depreciation of the cost of proved oil and gas properties is calculated using the unit-of-production (UOP) method. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the carrying value of associated proved oil and gas properties. The reserve base used to calculate depreciation for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. The reserve base used to calculate the depreciation for capitalized well costs is the sum of proved developed reserves only. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are included in the depreciable cost.

Oil and gas properties are grouped for depreciation in accordance with ASC 932, “Extractive Activities—Oil and Gas.” The basis for grouping is a reasonable aggregation of properties with a common geological structural feature or stratigraphic condition, such as a reservoir or field.

When circumstances indicate that the carrying value of proved oil and gas properties may not be recoverable, the Company compares unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on the Company’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ASC 820. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments, a Level 3 fair value measurement.

Unproved leasehold impairments are typically recorded as a component of “Exploration” expense in the Company’s statement of consolidated operations. 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. Refer to Note 2—Acquisitions and Divestitures for more detail.

Gathering, Processing, and Transmission (GPT) Facilities

GPT facilities are depreciated on a straight-line basis over the estimated useful lives of the assets. The estimation of useful life takes into consideration anticipated production lives from the fields serviced by the GPT assets, whether APA-operated or third party-operated, as well as potential development plans by the Company for undeveloped acreage within, or close to, those fields.

The Company assesses the carrying amount of its GPT facilities whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of these facilities is more than the sum of the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying value over its fair value.

2.    ACQUISITIONS AND DIVESTITURES

2023 Activity

During the second quarter and first six months of 2023, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of approximately $4 million and $10 million, respectively.

During the second quarter and first six months of 2023, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $7 million and $28 million, respectively, recognizing a gain of approximately $5 million and $6 million, respectively, upon closing of these transactions.

2022 Activity

During the second quarter and first six months of 2022, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $26 million.

During the second quarter and first six months of 2022, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $7 million and $15 million, respectively, recognizing a gain of approximately $1 million and $2 million, respectively, upon closing of these transactions.

During the first six months of 2022, the Company completed a transaction to sell certain non-core mineral rights in the Delaware Basin. The Company received total cash proceeds of approximately $726 million after certain post-closing adjustments and recognized an associated gain of approximately $560 million.

10

The BCP Business Combination was completed on February 22, 2022. As consideration for the contribution of the Contributed Interests, ALTM issued 50 million shares of Class C Common Stock (and Altus Midstream LP issued a corresponding number of common units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. ALTM’s stockholders continued to hold their existing shares of common stock. As a result of the transaction, the Contributor, or its designees, collectively owned approximately 75 percent of the issued and outstanding shares of ALTM common stock. Apache Midstream LLC, a wholly owned subsidiary of APA, which owned approximately 79 percent of the issued and outstanding shares of ALTM common stock prior to the BCP Business Combination, owned approximately 20 percent of the issued and outstanding shares of Kinetik common stock after the transaction closed.

As a result of the BCP Business Combination, the Company deconsolidated ALTM on February 22, 2022 and recognized a gain of approximately $609 million that reflects the difference between the Company’s share of ALTM’s deconsolidated balance sheet of $193 million and the fair value of $802 million of its approximate 20 percent retained ownership in the combined entity.

During the first quarter of 2022, the Company sold four million of its shares of Kinetik Class A Common Stock for cash proceeds of $224 million and recognized a loss of $25 million, including transaction fees. Refer to Note 6—Equity Method Interests for further detail.

3.    CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $547 million and $474 million as of June 30, 2023 and December 31, 2022, respectively. The increase is attributable to additional drilling activity offshore Suriname and in Egypt.

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 on the majority of its worldwide production, as well as fluctuations in exchange rates in connection with transactions denominated in foreign currencies. The Company manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production and foreign currency transactions. The Company utilizes various types of derivative financial instruments, including forward contracts, futures contracts, swaps, and options, to manage fluctuations in cash flows resulting from changes in commodity prices or foreign currency values.

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, the Company utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of June 30, 2023, the Company had derivative positions with seven 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, the Company may not realize the benefit of some of its derivative instruments resulting from lower commodity prices or changes in currency exchange rates.

11

Derivative Instruments

Commodity Derivative Instruments

As of June 30, 2023, the Company had the following open natural gas financial basis swap contracts:

		Basis Swap Purchased		Basis Swap Sold
Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Price Differential	MMBtu (in 000’s)	Weighted Average Price Differential
July—September 2023	NYMEX Henry Hub/IF Waha	1,840	$(1.62)	—	—
July—September 2023	NYMEX Henry Hub/IF HSC	—	—	1,840	$(0.19)
July—December 2023	NYMEX Henry Hub/IF Waha	36,800	$(1.15)	—	—
July—December 2023	NYMEX Henry Hub/IF HSC	—	—	36,800	$(0.08)
January—June 2024	NYMEX Henry Hub/IF Waha	16,380	$(1.15)	—	—
January—June 2024	NYMEX Henry Hub/IF HSC	—	—	16,380	$(0.10)

Fair Value Measurements

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)
June 30, 2023
Assets:
Commodity derivative instruments	$	—	$	36	$	—	$	36	$	—	$	36
December 31, 2022
Assets:
Commodity derivative instruments	$	—	$	5	$	—	$	5	$	—	$	5
Liabilities:
Commodity derivative instruments	—		50		—		50		—		50

(1)    The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties and reclassifications between long-term and short-term balances.

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

Derivative Activity Recorded in the Consolidated Balance Sheet

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:

	June 30, 2023		December 31, 2022
	(In millions)
Current Assets: Other current assets	$	36	$	—
Other Assets: Deferred charges and other	—		5
Total derivative assets	$	36	$	5
Current Liabilities: Other current liabilities	$	—	$	50
Total derivative liabilities	$	—	$	50

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Derivative Activity Recorded in the Statement of Consolidated Operations

The following table summarizes the effect of derivative instruments on the Company’s statement of consolidated operations:

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Realized:
Commodity derivative instruments	$	4	$	(4)	$	24	$	(9)
Foreign currency derivative instruments	—		(2)		—		(2)
Realized gains (losses), net	4		(6)		24		(11)
Unrealized:
Commodity derivative instruments	47		(20)		80		(44)
Foreign currency derivative instruments	—		(6)		—		(8)
Preferred Units embedded derivative	—		—		—		(31)
Unrealized gains (losses), net	47		(26)		80		(83)
Derivative instrument gains (losses), net	$	51	$	(32)	$	104	$	(94)

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

5.    OTHER CURRENT ASSETS

The following table provides detail of the Company’s other current assets:

	June 30, 2023		December 31, 2022
	(In millions)
Inventories	$	488	$	427
Drilling advances	90		89
Prepaid assets and other	65		31
Current decommissioning security for sold Gulf of Mexico assets	450		450
Total Other current assets	$	1,093	$	997

6.    EQUITY METHOD INTERESTS

The Kinetik Class A Common Stock held by the Company is treated as an interest in equity securities measured at fair value. The Company elected the fair value option for measuring its equity method interest in Kinetik based on practical expedience, variances in reporting timelines, and cost-benefit considerations. The fair value of the Company’s interest in Kinetik is determined using observable share prices on a major exchange, a Level 1 fair value measurement. Fair value adjustments are recorded as a component of “Other, net” under “Revenues and other” in the Company’s statement of consolidated operations.

The Company’s initial interest in Kinetik was measured at fair value based on the Company’s ownership of approximately 12.9 million shares of Kinetik Class A Common stock as of February 22, 2022. In March 2022, the Company sold four million of its shares of Kinetik Class A Common Stock for a loss, including underwriters fees, of $25 million, which was recorded as a component of “Gain on divestitures, net” under “Revenues and other” in the Company’s statement of consolidated operations. Refer to Note 2—Acquisitions and Divestitures for further detail. During the second quarter of 2022, Kinetik issued a two-for-one split of its common stock, resulting in the Company owning approximately 17.7 million shares.

The Company has received approximately 2.1 million shares of Kinetik’s Class A Common Stock as paid-in-kind dividends through June 30, 2023. As of June 30, 2023, the Company’s ownership of 19.8 million shares represented approximately 13 percent of Kinetik’s outstanding Class A Common Stock.

13

The Company recorded changes in the fair value of its equity method interest in Kinetik totaling gains of $90 million and $42 million in the second quarters of 2023 and 2022, respectively, and gains of $71 million and $66 million in the first six months of 2023 and 2022, respectively. These gains were recorded as a component of “Revenues and other” in the Company’s statement of consolidated operations.

The following table represents sales and costs associated with Kinetik:

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Natural gas and NGLs sales	$	29	$	—	$	43	$	—
Purchased oil and gas sales	7		—		7		—
	$	36	$	—	$	50	$	—
Gathering, processing, and transmission costs	$	29	$	26	$	55	$	36
Purchased oil and gas costs	26		—		28		—
	$	55	$	26	$	83	$	36

As of June 30, 2023, the Company has recorded accrued costs payable to Kinetik of approximately $39 million and receivables from Kinetik of approximately $22 million.

7.    OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities:

	June 30, 2023		December 31, 2022
	(In millions)
Accrued operating expenses	$	174	$	145
Accrued exploration and development	384		333
Accrued compensation and benefits	247		514
Accrued interest	95		97
Accrued income taxes	193		90
Current asset retirement obligation	55		55
Current operating lease liability	102		167
Current decommissioning contingency for sold Gulf of Mexico properties	450		450
Other	272		292
Total Other current liabilities	$	1,972	$	2,143

8.    ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability:

	June 30, 2023
	(In millions)
Asset retirement obligation, December 31, 2022	$	1,995
Liabilities incurred	8
Liabilities settled	(21)
Accretion expense	57
Asset retirement obligation, June 30, 2023	2,039
Less current portion	(55)
Asset retirement obligation, long-term	$	1,984

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9.    DEBT AND FINANCING COSTS

The following table presents the carrying values of the Company’s debt:

	June 30, 2023		December 31, 2022
	(In millions)
Apache notes and debentures before unamortized discount and debt issuance costs(1)	$	4,835	$	4,908
Syndicated credit facilities(2)	762		566
Apache finance lease obligations	33		34
Unamortized discount	(27)		(27)
Debt issuance costs	(27)		(28)
Total debt	5,576		5,453
Current maturities	(2)		(2)
Long-term debt	$	5,574	$	5,451

(1)    The fair values of the Apache notes and debentures were $4.1 billion and $4.2 billion as of June 30, 2023 and December 31, 2022, respectively.

The Company uses a market approach to determine the fair values of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

(2)    The carrying value of borrowings on credit facilities approximates fair value because interest rates are variable and reflective of market rates.

At each of June 30, 2023 and December 31, 2022, current debt included $2 million of finance lease obligations.

During the six months ended June 30, 2023, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $74 million for an aggregate purchase price of $65 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $10 million. The Company recognized a $9 million gain on these repurchases. The repurchases were partially financed by Apache’s borrowing under the Company’s US dollar-denominated revolving credit facility.

During the six months ended June 30, 2022, Apache closed cash tender offers for certain outstanding notes issued under its indentures, accepting for purchase $1.1 billion aggregate principal amount of notes. Apache paid holders an aggregate $1.2 billion in cash, reflecting principal, premium to par, and accrued and unpaid interest. The Company recognized a $66 million loss on extinguishment of debt, including $11 million of unamortized debt discount and issuance costs in connection with the note purchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.

During the six months ended June 30, 2022, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $15 million for an aggregate purchase price of $16 million in cash, including accrued interest and broker fees, reflecting a premium to par of $1 million. The Company recognized a $1 million loss on these repurchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.

On January 18, 2022, Apache redeemed the outstanding $213 million principal amount of 3.25% senior notes due April 15, 2022, at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed by borrowing under Apache’s former revolving credit facility.

On April 29, 2022, the Company entered into two unsecured syndicated credit agreements for general corporate purposes that replaced and refinanced Apache’s 2018 unsecured syndicated credit agreement (the Former Facility).

•One agreement is denominated in US dollars (the USD Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of US$1.8 billion (including a letter of credit subfacility of up to US$750 million, of which US$150 million currently is committed). The Company may increase commitments up to an aggregate US$2.3 billion by adding new lenders or obtaining the consent of any increasing existing lenders. This facility matures in April 2027, subject to the Company’s two, one-year extension options.

•The second agreement is denominated in pounds sterling (the GBP Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of £1.5 billion for loans and letters of credit. This facility matures in April 2027, subject to the Company’s two, one-year extension options.

15

In connection with the Company’s entry into the USD Agreement and the GBP Agreement (each, a New Agreement), Apache terminated US$4.0 billion of commitments under the Former Facility, borrowings then outstanding under the Former Facility were deemed outstanding under the USD Agreement, and letters of credit then outstanding under the Former Facility were deemed outstanding under a New Agreement, depending upon whether denominated in US dollars or pounds sterling. Apache may borrow under the USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time. Apache has guaranteed obligations under each New Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$1.0 billion.

As of June 30, 2023, there were $762 million of borrowings under the USD Agreement and an aggregate £590 million in letters of credit outstanding under the GBP Agreement. As of June 30, 2023, there were no letters of credit outstanding under the USD Agreement. As of December 31, 2022, there were $566 million of borrowings and a $20 million letter of credit outstanding under the USD Agreement, and an aggregate £652 million in letters of credit outstanding under the GBP Agreement. The letters of credit denominated in pounds were issued to support North Sea decommissioning obligations, the terms of which required such support after Standard & Poor’s reduced Apache’s credit rating from BBB to BB+ on March 26, 2020.

Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of June 30, 2023 and December 31, 2022, there were no outstanding borrowings under these facilities. As of June 30, 2023, there were £185 million and $3 million in letters of credit outstanding under these facilities. As of December 31, 2022, there were £199 million and $17 million in letters of credit outstanding under these facilities.

Financing Costs, Net

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

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Interest expense	$	89	$	79	$	177	$	169
Amortization of debt issuance costs	1		5		2		7
Capitalized interest	(5)		(5)		(11)		(8)
(Gain) loss on extinguishment of debt	—		—