DEBT AND FINANCING COSTS

9 Months Ended

Sep. 30, 2012

DEBT AND FINANCING COSTS

6. DEBT AND FINANCING COSTS

The following table presents the carrying amounts and estimated fair values of the Company’s outstanding debt:

	September 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Money market lines of credit	$	64	$	64	$	31	$	31
Commercial paper		1,792		1,792		—		—
Notes and debentures		9,778		11,705		7,185		8,673
Total Debt	$	11,634	$	13,561	$	7,216	$	8,704

The Company’s debt is recorded at the carrying amount, net of unamortized discount, on its consolidated balance sheet. The carrying amount of the Company’s money market lines of credit and commercial paper approximates fair value because the interest rates are variable and reflective of market rates. 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).

As of September 30, 2012, current debt included $500 million 5.25-percent notes and $400 million 6.00-percent notes due within the next 12 months and $64 million borrowed on uncommitted overdraft lines in Argentina. As of December 31, 2011, there was $31 million drawn on uncommitted overdraft lines in Argentina and $400 million 6.25-percent notes outstanding that were subsequently repaid in April 2012.

In April 2012 the Company issued $400 million principal amount of senior unsecured 1.75-percent notes maturing April 15, 2017, $1.1 billion principal amount of senior unsecured 3.25-percent notes maturing April 15, 2022, and $1.5 billion principal amount of senior unsecured 4.75-percent notes maturing April 15, 2043. The notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The Company used the proceeds to fund the cash portion of the purchase price paid to acquire Cordillera, repay the $400 million 6.25-percent notes that matured on April 15, 2012, and for general corporate purposes.

On June 4, 2012, the Company entered into a new Global Credit Facility consisting of a $1.7 billion revolving syndicated bank credit facility for the U.S., a $300 million revolving syndicated bank credit facility for Australia, and a $300 million revolving syndicated bank credit facility for Canada, which replaced the Company’s existing syndicated bank credit facilities that were scheduled to mature in May 2013. The new facilities are scheduled to mature on June 4, 2017. There were no changes to the Company’s $1.0 billion U.S. credit facility that matures on August 12, 2016.

The terms of the new credit facilities are substantially similar to those in Apache’s $1.0 billion revolving credit facility dated August 12, 2011. The facilities will be used for general corporate purposes.

In June 2012, the Company increased the size of its commercial paper program to $3.0 billion. The commercial paper program is fully supported by available borrowing capacity under committed credit facilities, which expire in 2016 and 2017. As of September 30, 2012, the Company had $1.8 billion in commercial paper outstanding, compared with no outstanding commercial paper as of December 31, 2011.

Financing Costs

Financing costs incurred during the periods comprised the following:

	For the Quarter  Ended September 30,						For the Nine Months  Ended September 30,
	2012			2011			2012			2011
	(In millions)
Interest expense	$	132		$	109		$	371		$	326
Amortization of deferred loan costs		2			1			5			4
Capitalized interest		(90	)		(69	)		(241	)		(193	)
Interest income		(4	)		(4	)		(10	)		(14	)
Financing costs, net	$	40		$	37		$	125		$	123