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 September 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: 1-4300

APACHE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	41-0747868
(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: None

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 ☐

Note: The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934.

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 October 31, 2022 (100% owned by APA Corporation) 1,000 

OMISSION OF CERTAIN INFORMATION

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format.

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 NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS	31
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
4.	CONTROLS AND PROCEDURES	40
	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	41
1A.	RISK FACTORS	41
6.	EXHIBITS	43

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,” “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:

•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 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 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 Narrative Analysis of 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 APA Corporation’s third-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 “Apache,” the “Company,” “we,” “us,” and “our” refer to Apache Corporation and its consolidated subsidiaries, unless otherwise specifically stated. References to “APA” refer to APA Corporation, the Company’s parent holding company, and its consolidated subsidiaries, including the Company, unless otherwise specifically stated.

PART I – FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues	$	2,208	$	1,685	$	7,053	$	4,630
Purchased oil and gas sales	585		374		1,456		1,056
Total revenues	2,793		2,059		8,509		5,686
Derivative instrument gains (losses), net	(44)		—		(138)		45
Gain (loss) on divestitures, net	31		(2)		1,180		65
Loss on previously sold Gulf of Mexico properties	—		(446)		—		(446)
Other, net	(10)		40		99		175
	2,770		1,651		9,650		5,525
OPERATING EXPENSES:
Lease operating expenses	363		316		1,066		891
Gathering, processing, and transmission(1)	94		68		269		187
Purchased oil and gas costs	573		396		1,452		1,152
Taxes other than income	74		54		222		149
Exploration	46		21		86		86
General and administrative	64		64		298		226
Transaction, reorganization, and separation	4		4		21		8
Depreciation, depletion, and amortization	288		335		857		1,028
Asset retirement obligation accretion	29		29		87		85
Impairments	—		18		—		18
Financing costs, net	55		192		257		393
	1,590		1,497		4,615		4,223
NET INCOME BEFORE INCOME TAXES	1,180		154		5,035		1,302
Current income tax provision	357		183		1,164		463
Deferred income tax provision (benefit)	293		(29)		231		(51)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	530		—		3,640		890
Net income attributable to noncontrolling interest - Sinopec	108		49		368		132
Net income attributable to noncontrolling interest - Altus	—		4		14		32
Net income attributable to noncontrolling interest - APA Corporation	65		—		221		—
Net income (loss) attributable to Altus Preferred Unit limited partners	—		30		(70)		73
NET INCOME (LOSS) ATTRIBUTABLE TO APA CORPORATION	$	357	$	(83)	$	3,107	$	653

(1)    For gathering, processing, and transmission costs associated with Kinetik, refer to Note 7—Equity Method Interest for further detail.

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

1

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	$	530	$	—	$	3,640	$	890
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	530		—		3,639		891
Comprehensive income attributable to noncontrolling interest - Sinopec	108		49		368		132
Comprehensive income attributable to noncontrolling interest - Altus	—		4		14		32
Comprehensive income attributable to noncontrolling interest - APA Corporation	65		—		221		—
Comprehensive income (loss) attributable to Altus Preferred Unit limited partners	—		30		(70)		73
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO APA CORPORATION	$	357	$	(83)	$	3,106	$	654

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

2

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2022		2021
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	$	3,640	$	890
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument losses, net	119		18
Gain on divestitures, net	(1,180)		(65)
Exploratory dry hole expense and unproved leasehold impairments	52		57
Depreciation, depletion, and amortization	857		1,028
Asset retirement obligation accretion	87		85
Impairments	—		18
Provision (benefit) from deferred income taxes	231		(51)
Loss on extinguishment of debt	67		104
Loss on previously sold Gulf of Mexico properties	—		446
Other, net	(137)		(42)
Changes in operating assets and liabilities:
Receivables	(442)		(274)
Inventories	(81)		(19)
Drilling advances and other current assets	19		20
Deferred charges and other long-term assets	(3)		(46)
Accounts payable	171		195
Accounts receivable from/payable to APA Corporation	(417)		33
Accrued expenses	237		29
Deferred credits and noncurrent liabilities	(41)		(8)
NET CASH PROVIDED BY OPERATING ACTIVITIES	3,179		2,418
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property	(1,003)		(673)
Leasehold and property acquisitions	(30)		(6)
Proceeds from sale of oil and gas properties	778		239
Proceeds from sale of Kinetik shares	224		—
Deconsolidation of Altus cash and cash equivalents	(143)		—
Other, net	36		15
NET CASH USED IN INVESTING ACTIVITIES	(138)		(425)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Apache credit facility, net	138		290
Proceeds from Altus credit facility, net	—		33
Proceeds from (payments on) note payable to APA Corporation, net	(835)		139
Payments on fixed-rate debt	(1,370)		(1,795)
Distributions to noncontrolling interest - Sinopec	(237)		(203)
Distributions to Altus Preferred Unit limited partners	(11)		(34)
Distributions to APA Corporation	(819)		(311)
Dividends paid	—		(9)
Other, net	(3)		(17)
NET CASH USED IN FINANCING ACTIVITIES	(3,137)		(1,907)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(96)		86
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	279		262
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	183	$	348
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	277	$	365
Income taxes paid, net of refunds	1,029		415
Non-cash financing adjustment: APA’s assumption of Apache’s borrowings on its syndicated credit facility	680		—

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

3

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

	September 30, 2022(1)		December 31, 2021(1)
	(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($132 related to Altus VIE)	$	183	$	279
Receivables, net of allowance of $115 and $109	1,812		1,390
Other current assets (Note 6) ($9 related to Altus VIE)	925		649
Accounts receivable from APA Corporation	437		77
	3,357		2,395
PROPERTY AND EQUIPMENT:
Oil and gas properties	40,939		40,474
Gathering, processing, and transmission facilities ($209 related to Altus VIE)	447		673
Other ($3 related to Altus VIE)	606		1,126
Less: Accumulated depreciation, depletion, and amortization ($25 related to Altus VIE)	(34,033)		(34,213)
	7,959		8,060
OTHER ASSETS:
Equity method interests (Note 7) ($1,365 related to Altus VIE)	602		1,365
Decommissioning security for sold Gulf of Mexico properties (Note 12)	376		640
Deferred charges and other ($6 related to Altus VIE)	483		581
Note receivable from APA Corporation (Note 2)	1,415		1,352
	$	14,192	$	14,393
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($12 related to Altus VIE)	$	804	$	651
Note payable to APA Corporation	—		195
Current debt	125		215
Other current liabilities (Note 8) ($15 related to Altus VIE)	1,825		1,170
	2,754		2,231
LONG-TERM DEBT (Note 10) ($657 related to Altus VIE)	4,884		7,295
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	389		148
Asset retirement obligation (Note 9) ($68 related to Altus VIE)	2,074		2,089
Decommissioning contingency for sold Gulf of Mexico properties (Note 12)	801		1,086
Other ($67 related to Altus VIE)	427		572
	3,691		3,895
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 13)	—		712
EQUITY (DEFICIT):
Common stock, $0.625 par, 1,000 and 1,000 shares authorized, respectively, 1,000 and 1,000 shares issued, respectively	—		—
Paid-in capital	8,020		8,677
Accumulated deficit	(6,210)		(9,317)
Accumulated other comprehensive income	21		22
EQUITY (DEFICIT) ATTRIBUTABLE TO APA CORPORATION	1,831		(618)
Noncontrolling interest - Sinopec	952		820
Noncontrolling interest - APA Corporation	80		—
Noncontrolling interest - Altus	—		58
TOTAL EQUITY	2,863		260
	$	14,192	$	14,393

(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 3—Acquisitions and Divestitures for further detail.

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

4

APACHE 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		PARENT COMPANY EQUITY (DEFICIT)		Noncontrolling Interests(1)		TOTAL EQUITY
	(In millions)
For the Quarter Ended September 30, 2021
Balance at June 30, 2021	$	617	$	—	$	9,535	$	(9,642)	$	—	$	15	$	(92)	$	1,040	$	948
Net loss attributable to APA Corporation	—		—		—		(83)		—		—		(83)		—		(83)
Net income attributable to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		49		49
Net income attributable to noncontrolling interest - Altus	—		—		—		—		—		—		—		4		4
Net income attributable to Altus Preferred Unit limited partners	30		—		—		—		—		—		—		—		—
Distributions payable to Altus Preferred Unit limited partners	(12)		—		—		—		—		—		—		—		—
Distributions to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		(143)		(143)
Distributions to APA Corporation	—		—		(9)		—		—		—		(9)		—		(9)
Other	—		—		6		(1)		—		—		5		(5)		—
Balance at September 30, 2021	$	635	$	—	$	9,532	$	(9,726)	$	—	$	15	$	(179)	$	945	$	766
For the Quarter Ended September 30, 2022
Balance at June 30, 2022	$	—	$	—	$	8,054	$	(6,567)	$	—	$	21	$	1,508	$	982	$	2,490
Net income attributable to APA Corporation	—		—		—		357		—		—		357		—		357
Net income attributable to noncontrolling interest - APA	—		—		—		—		—		—		—		65		65
Net income attributable to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		108		108
Distributions to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		(78)		(78)
Distributions to APA Corporation	—		—		(41)		—		—		—		(41)		(45)		(86)
Other	—		—		7		—		—		—		7		—		7
Balance at September 30, 2022	$	—	$	—	$	8,020	$	(6,210)	$	—	$	21	$	1,831	$	1,032	$	2,863

(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 3—Acquisitions and Divestitures for further detail.

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

5

APACHE 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		PARENT COMPANY EQUITY (DEFICIT)		Noncontrolling Interests(1)		TOTAL EQUITY
	(In millions)
For the Nine Months Ended September 30, 2021
Balance at December 31, 2020	$	608	$	262	$	11,735	$	(10,461)	$	(3,189)	$	14	$	(1,639)	$	994	$	(645)
Net income attributable to APA Corporation	—		—		—		653		—		—		653		—		653
Net income attributable to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		132		132
Net income attributable to noncontrolling interest - Altus	—		—		—		—		—		—		—		32		32
Net income attributable to Altus Preferred Unit limited partners	73		—		—		—		—		—		—		—		—
Distributions payable to Altus Preferred Unit limited partners	(12)		—		—		—		—		—		—		—		—
Distributions paid to Altus Preferred Unit limited partners	(34)		—		—		—		—		—		—		—		—
Distributions to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		(203)		(203)
Distributions to APA Corporation	—		—		(19)		—		—		—		(19)		—		(19)
Common dividends declared ($0.025 per share)	—		—		(9)		—		—		—		(9)		—		(9)
APA Corporation share exchange	—		(262)		(2,927)		—		3,189		—		—		—		—
Holding Company Reorganization	—		—		757		82		—		—		839		—		839
Other	—		—		(5)		—		—		1		(4)		(10)		(14)
Balance at September 30, 2021	$	635	$	—	$	9,532