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. Apache has elected not to designate any of its derivative contracts as cash flow hedges.

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, 2024, the Company had derivative positions with one counterparty. 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.

As of June 30, 2024, the Company had the following open natural gas financial collar contracts:

Production Period

Settlement Index

MMBtu
(in 000’s)

Weighted Average Floor Price

Weighted Average Ceiling Price

July—December 2024

NYMEX Henry Hub

3,398

$3.00

$3.33


		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—December 2024	NYMEX Henry Hub/IF Waha	—	—	3,680	$(1.06)
July—December 2024	NYMEX Henry Hub/IF HSC	—	—	7,360	$(0.42)

As of June 30, 2024, the Company had the following open NGL fixed swap contracts:

Production Period

Settlement Index

MBbls

(in 000’s)

Weighted Average Price Differential

July—December 2024

OPIS IsoButane Mt Belvieu Non TET

$33.18

July—December 2024

OPIS NButane Mt Belvieu Non TET

$33.18

As a result of the Callon acquisition, the Company assumed an earn-out obligation from Callon, where the Company could be required to pay up to $50 million in the aggregate if the average daily settlement price of WTI crude oil exceeds $60.00 per barrel for the 2024 and 2025 calendar years. Additionally, in connection with the Callon acquisition, the Company assumed a contingent consideration arrangement. Whereby the Company could receive up to $45 million if the average daily settlement price of WTI crude oil for 2024 is at least $80.00 per barrel. If the average daily settlement price of WTI crude oil for 2024 is less than $80.00 per barrel but at least $75.00 per barrel, then the Company would receive $20 million.

The Company determined that the earn-out obligation and contingent consideration receipt were not clearly and closely related to the underlying agreements and therefore bifurcated these embedded features and recorded these derivatives at fair value. For further discussion of these derivatives, refer to “Fair Value Measurements” below.


	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, 2024
Assets:
Commodity derivative instruments	$	—	$	2	$	—	$	2	$	(1)	$	1
Contingent consideration arrangements	—		25		—		25		—		25
Liabilities:
Commodity derivative instruments	$	—	$	1	$	—	$	1	$	(1)	$	—


Contingent consideration arrangements	—		42		—		42		—		42
December 31, 2023
Assets:
Commodity derivative instruments	$	—	$	6	$	—	$	6	$	—	$	6

The embedded options within the earn-out obligation and contingent consideration arrangements discussed above are considered financial instruments under ASC 815. The Company uses a market approach to estimate the fair values of these derivatives on a recurring basis, utilizing an option pricing model method provided by a reputable third party. The valuation includes significant inputs such as forward oil price curves, time to expiration, and implied volatility. As these inputs are substantially observable for the full term of the contingent consideration arrangements, the inputs are considered a Level 2 fair value measurement. As of June 30, 2024, the estimated fair values of the earn-out obligation and contingent consideration receipt were $42 million and $25 million, respectively.

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, 2024		December 31, 2023

	(In millions)
Current Assets: Other current assets	$	26	$	6

Total derivative assets	$	26	$	6

Current Liabilities: Other current liabilities	$	24	$	—
Deferred Credit and Other Noncurrent Liabilities: Other	18		—
Total derivative liabilities	$	42	$	—


	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions)
Realized:
Commodity derivative instruments	$	(6)	$	4	$	(2)	$	24

Realized gains (losses), net	(6)		4		(2)		24
Unrealized:
Commodity derivative instruments	3		47		(5)		80



Unrealized gains (losses), net	3		47		(5)		80
Derivative instrument gains (losses), net	$	(3)	$	51	$	(7)	$	104

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.”