DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2012

Open Crude Oil and Natural Gas Derivative Instruments

As of September 30, 2012, Apache had the following open crude oil derivative positions:

	Fixed-Price Swaps				Collars
Production Period	Mbbls		Weighted Average Fixed Price (1)		Mbbls		Weighted Average Floor Price (1)		Weighted Average Ceiling Price (1)
2012		941	$	74.32		2,808	$	77.66	$	103.08
2013		1,972		74.29		5,701		82.84		111.63
2014		76		74.50		–		–		–

⁽¹⁾  Crude oil prices represent a weighted average of several contracts entered into on a per-barrel basis. Crude oil contracts are primarily settled against NYMEX WTI Cushing Index. Approximately 31 percent of 2012 collars and 58 percent of 2013 collars are settled against Dated Brent.

As of September 30, 2012, Apache had the following open natural gas derivative positions:

	Fixed-Price Swaps						Collars
Production Period	MMBtu (in 000’s)		GJ (in 000’s)		Weighted Average Fixed Price (1)		MMBtu (in  000’s)		GJ (in 000’s)		Weighted Average Floor  Price (1)		Weighted Average Ceiling  Price (1)
2012		11,386		—	$	6.24		5,520		—	$	5.54	$	7.30
2012		—		11,040	C$	6.61		—		1,840	C$	6.50	C$	7.27
2013		10,095		—	$	6.74		6,825		—	$	5.35	$	6.67
2014		1,295		—	$	6.72		—		—	$	—	$	—

⁽¹⁾  U.S. natural gas prices represent a weighted average of several contracts entered into on a per-million British thermal units (MMBtu) basis and are settled primarily against NYMEX Henry Hub and various Inside FERC indices. The Canadian gas contracts are entered into on a per-gigajoule (GJ) basis and are settled against AECO Index. The Canadian natural gas prices represent a weighted average of AECO Index prices and are shown in Canadian dollars.

Assets and Liabilities Measured at Fair Value on Recurring Basis

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

	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting (1)			Carrying Amount
	(In millions)
September 30, 2012
Assets:
Commodity Derivative Instruments	$	—	$	138	$	—	$	138	$	(28	)	$		110
Liabilities:
Commodity Derivative Instruments		—		87		—		87		(28	)		59
December 31, 2011
Assets:
Commodity Derivative Instruments	$	—	$	428	$	—	$	428	$	(96	)	$		332
Liabilities:
Commodity Derivative Instruments		—		250		—		250		(96	)		154

⁽¹⁾ The derivative fair values are based on analysis of each contract on a gross basis, even where the legal right of offset exists.

Fair Values of Derivative Instruments Recorded in Consolidated Balance Sheet

arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

	September 30, 2012		December 31, 2011
	(In millions)
Current Assets: Derivative instruments	$	104	$	304
Other Assets: Deferred charges and other		6		28
Total Assets	$	110	$	332
Current Liabilities: Derivative instruments	$	56	$	113
Noncurrent Liabilities: Other		3		41
Total Liabilities	$	59	$	154

Commodity Derivative Activity Recorded in Statement of Consolidated Operations

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

	Gain (Loss) on Derivatives Recognized in Income	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
		2012		2011		2012		2011
		(In millions)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into operations (effective portion)	Oil and Gas Production Revenues	$	83	$	11	$	202	$	(36	)
Gain on derivatives recognized in operations (ineffective portion and basis)	Revenues and Other: Other	$	1	$	15	$	1	$	16

Commodity Derivative Activity in Accumulated Other Comprehensive Income (Loss)

A reconciliation of the components of accumulated other comprehensive income (loss) in the statement of consolidated shareholders’ equity related to Apache’s cash flow hedges is presented in the table below:

	For the Nine Months Ended September 30,
	2012						2011
	Before tax			After tax			Before tax			After tax
	(In millions)
Unrealized gain (loss) on derivatives at beginning of period	$	145		$	113		$	(54	)	$	(19	)
Realized amounts reclassified into earnings		(202	)		(151	)		36			32
Net change in derivative fair value		97			71			304			181
Ineffectiveness reclassified into earnings		(1	)		—			(16	)		(10	)
Unrealized gain on derivatives at end of period	$	39		$	33		$	270		$	184