NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These consolidated financial statements have been prepared by Apache Corporation (Apache 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. 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 (U.S. GAAP) have been 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 Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
, which contains a summary of the Company’s significant accounting policies and other disclosures.
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1.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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As of
September 30, 2017
, Apache’s significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of its consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
, with the exception of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-09, “Improvements to Employee Share-Based Payment Accounting” and ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (see “Recently Adopted Accounting Pronouncements” in this Note 1 below).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP 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. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities, the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom, the assessment of asset retirement obligations, the estimates of fair value for long-lived assets and goodwill, and the estimate of income taxes. Actual results could differ from those estimates.
Fair Value Measurements
Certain assets and liabilities are reported at fair value on a recurring basis in Apache’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).
Apache also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. The Company recorded
no
asset impairments in connection with fair value assessments in the
third
quarter of
2017
. For the
nine
-month period ended
September 30, 2017
, the Company recorded asset impairments totaling
$8 million
in connection with fair value assessments.
In 2016, the U.K. government enacted Finance Bill 2016, providing tax relief to exploration and production (E&P) companies operating in the U.K. North Sea. Under the enacted legislation, the U.K. Petroleum Revenue Tax (PRT) rate was reduced to
zero
from the previously enacted
35 percent
rate in effect from January 1, 2016. PRT expense ceased prospectively from that date. During the first quarter of 2017, the Company fully impaired the aggregate remaining value of the recoverable PRT decommissioning asset of
$8 million
that would have been realized from future abandonment activities. The recoverable value of the PRT decommissioning asset was estimated using the income approach. The expected future cash flows used in the determination were based on anticipated spending and timing of planned future abandonment activities for applicable fields, considering all available information at the date of review. Apache has classified this fair value measurement as Level 3 in the fair value hierarchy.
For the quarter ended
September 30, 2016
, the Company recorded asset impairments totaling
$836 million
in connection with fair value assessments including
$355 million
for proved oil and gas properties in Canada and
$481 million
for the impairment of the recoverable value of the PRT decommissioning asset. For the
nine
-month period ended
September 30, 2016
, the Company recorded asset impairments totaling
$1.0 billion
in connection with fair value assessments including
$423 million
for proved oil and gas properties in the U.S. and Canada,
$481 million
for the impairment of the recoverable value of the PRT decommissioning asset, and
$105 million
for the impairment of certain gas gathering, transmission, and processing (GTP) assets, which were written down to their fair values of
$175 million
.
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.
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 those reserves. 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 costs of exploratory wells and development 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 proved oil and gas properties may be impaired, 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 Apache’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 the ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. Apache has classified these fair value measurements as Level 3 in the fair value hierarchy.
The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the
third
quarters and first
nine
months of
2017
and
2016
:
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Quarter Ended September 30,
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Nine Months Ended September 30,
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2017
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2016
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2017
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2016
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(In millions)
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Oil and Gas Property:
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Proved
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$
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—
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$
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355
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|
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$
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—
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|
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$
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423
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Unproved
|
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160
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114
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214
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|
222
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Proved properties impaired during the second and third quarters of 2016 had aggregate fair values of
$143 million
and
$163 million
, respectively.
On the statement of consolidated operations, unproved impairments are recorded in exploration expense, and proved impairments are recorded in impairments.
Recently Adopted Accounting Pronouncements
Stock Compensation
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The guidance was effective for fiscal years beginning after December 15, 2016. The Company adopted ASU 2016-09 effective January 1, 2017.
Upon adoption, the Company elected to account for forfeitures as they occur rather than estimate expected forfeitures using a modified retrospective transition method. As a result of this election, the Company recorded a cumulative-effect adjustment of
$11 million
, representing an increase in accumulated deficit, with the offset to paid-in capital. During the first quarter of 2017, the Company recorded a
$4 million
deferred tax asset related to this adjustment, with the offset to accumulated deficit.
ASU 2016-09 requires excess tax benefits and deficiencies to be recognized prospectively as part of the provision for income taxes rather than paid-in capital. The adoption did not have a material impact on the Company’s accounting of provision for income taxes. ASU 2016-09 also requires excess tax benefits to be presented as a component of operating cash flows rather than financing cash flows. The Company has adopted this requirement prospectively and accordingly, prior periods have not been adjusted. Excess tax benefits were not material for all periods presented.
Additionally, ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows, which is how the Company has historically classified these amounts.
Restricted Cash
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The guidance is effective for annual and interim periods beginning after December 15, 2017, and is required to be adopted using a retrospective approach, with early adoption permitted. The Company adopted ASU 2016-18 in the third quarter of 2017. Other than the change in presentation within the statement of consolidated cash flows, the adoption of ASU 2016-18 did not have an impact on the Company’s consolidated financial statements.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet to the amounts shown in the statement of consolidated cash flows:
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September 30, 2017
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December 31, 2016
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(In millions)
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Cash and cash equivalents
|
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$
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1,846
|
|
|
$
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1,377
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Restricted cash
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|
96
|
|
|
—
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|
Total cash, cash equivalents, and restricted cash shown in the statement of consolidated cash flows
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$
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1,942
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|
|
$
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1,377
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For information regarding the restricted cash balance, please refer to Note 2—Acquisitions and Divestitures.
New Pronouncements Issued But Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, and the Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Early adoption is permitted; however, the Company does not intend to early adopt. As part of the assessment to date, the Company has formed an implementation work team and is continuing to evaluate contracts to determine the impact this ASU will have on its consolidated financial statements. At this time, the Company cannot reasonably estimate the financial impact this will have on its consolidated financial statements; however, the Company believes adoption and implementation of this ASU will significantly impact its balance sheet, resulting in an increase in both assets and liabilities relating to its leasing activities.
In May 2014, the FASB and the International Accounting Standards Board (IASB) issued a joint revenue recognition standard, ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new standard removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers, and increases disclosure requirements. The codification was amended through additional ASUs and, as amended, requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. The Company continues to make progress on evaluating the accounting implications of this ASU and its assessment of contracts with customers is largely complete. Based on the Company’s evaluation to date, it does not expect the adoption of this ASU to have a material impact on net earnings, however, the Company is analyzing whether the classification of certain items in revenue and expense will be impacted. The Company continues to evaluate the disclosure requirements, develop accounting policies, and assess changes to the relevant business processes and the control activities within them as a result of the provisions of this ASU. The Company will adopt the new standard on January 1, 2018, utilizing the modified retrospective approach.
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2.
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ACQUISITIONS AND DIVESTITURES
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2017 Activity
Canada Divestitures
During the third quarter, Apache announced the sale of its subsidiary Apache Canada Ltd. (ACL) and complete exit of its Canadian operations. On June 30, 2017, Apache completed the sale of its Canadian assets at Midale and House Mountain, located in Saskatchewan and Alberta, for aggregate cash proceeds of approximately
$228 million
. The Company recognized a
$52 million
loss during the second quarter of 2017 in association with this sale.
In August of 2017, Apache completed the sale of its remaining Canadian operations for aggregate cash proceeds of approximately
$478 million
. The Company recognized a
$74 million
gain upon closing of these transactions in the third quarter of 2017. The Company has classified
$96 million
of proceeds as “Restricted cash” on the Company’s consolidated balance sheet, pending the Alberta Energy Regulator’s clearance of the transfer of Provost area licenses from ACL to the buyer.
A summary of the assets and liabilities at closing of the August transactions is detailed below:
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(In millions)
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ASSETS
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Current assets
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$
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110
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Property, plant & equipment
|
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1,132
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Total Assets
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$
|
1,242
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LIABILITIES
|
|
|
Current liabilities, excluding asset retirement obligation
|
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$
|
120
|
|
Asset retirement obligation
|
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780
|
|
Other long-term liabilities
|
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46
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|
Total Liabilities
|
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$
|
946
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The net carrying value of the assets disposed included a currency translation loss of
$109 million
, which was recorded in “Accumulated Other Comprehensive Loss” on the Company’s consolidated balance sheet at December 31, 2016. The currency translation loss was recognized as a reduction of the net gain on sale during the third quarter of 2017 upon closing of the transactions.
Apache’s Canadian operations recorded pretax losses of
$12 million
and
$141 million
for the
third
quarter and first
nine
months of
2017
, respectively, compared to pretax losses of
$483 million
and
$644 million
, respectively, for the comparable periods in
2016
.
U.S. Divestitures
During the first
nine
months of 2017, Apache completed the sale of certain non-core assets, primarily leasehold acreage in the Permian and Midcontinent/Gulf Coast regions, in multiple transactions for cash proceeds of
$783 million
, subject to customary closing adjustments. A refundable deposit of
$40 million
was received in the fourth quarter of 2016 in connection with certain of these transactions. The Company recognized gains of approximately
$594 million
during the first
nine
months of 2017 in connection with these transactions.
North Sea GTP Divestiture
During the fourth quarter of 2016, Apache entered into an agreement to sell its
30.28 percent
interest in the Scottish Area Gas Evacuation system (SAGE) and its
60.56 percent
interest in the Beryl pipeline in the North Sea to Ancala Midstream Acquisitions Limited (Ancala). The transaction is subject to regulatory and third-party approvals, which are ongoing in 2017. The Company received a refundable deposit in connection with this transaction, which is recorded in “Other current liabilities” on the consolidated balance sheet. The refundable deposit was
$149 million
as of
September 30, 2017
.
Leasehold and Property Acquisitions
During the
third
quarter and first
nine
months of
2017
, Apache purchased
$75 million
and
$142 million
, respectively, of leasehold and property acquisitions primarily in its North America onshore regions.
2016 Activity
Leasehold and Property Acquisitions
During the
third
quarter and first
nine
months of
2016
, Apache purchased
$51 million
and
$169 million
, respectively, of leasehold and property acquisitions primarily in its North America onshore regions and Egypt.
Discontinued Operations
Apache sold its operations in Argentina and Australia in 2014 and 2015, respectively. The results of operations related to the Argentina and Australia dispositions and the losses on disposals were classified as discontinued operations in the Company’s financial statements. During 2016, the Company incurred additional losses on these dispositions. The components of the Company’s loss from discontinued operations were as follows:
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For the Quarter Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2017
|
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2016
|
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2017
|
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2016
|
|
|
(In millions)
|
Loss from Australia divestiture
|
|
$
|
—
|
|
|
$
|
(23
|
)
|
|
$
|
—
|
|
|
$
|
(23
|
)
|
Loss from Argentina divestiture
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
Loss from discontinued operations, net of tax
|
|
$
|
—
|
|
|
$
|
(33
|
)
|
|
$
|
—
|
|
|
$
|
(33
|
)
|
Transaction, Reorganization, and Separation
During the
third
quarter and first
nine
months of
2017
, Apache recorded
$20 million
and
$14 million
, respectively, in expense related to asset divestitures in the U.S. and Canada and employee separation. During the
third
quarter and first
nine
months of
2016
, Apache recorded
$12 million
and
$36 million
, respectively, in expense related to various asset divestitures, company reorganization, and employee separation.
3. 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. Apache manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production. The Company utilizes various types of derivative financial instruments to manage fluctuations in cash flows resulting from changes in commodity prices. The Company’s derivatives are not designated as cash flow hedges, therefore, changes in fair value are recognized currently in earnings.
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, Apache utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of
September 30, 2017
, Apache had derivative positions with
14
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, Apache may not realize the benefit of some of its derivative instruments resulting from lower commodity prices.
Derivative Instruments
As of
September 30, 2017
, Apache had the following open crude oil derivative positions:
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Put Options
(1)(2)
|
Production Period
|
|
Settlement Index
|
|
Mbbls
|
|
Weighted Average Strike Price
|
October—December 2017
|
|
NYMEX WTI
|
|
8,464
|
|
$50.00
|
October—December 2017
|
|
Dated Brent
|
|
7,636
|
|
$51.00
|
|
|
(1)
|
The remaining unamortized premium paid as of
September 30, 2017
, was
$50 million
.
|
|
|
(2)
|
Subsequent to
September 30, 2017
, Apache entered into put option contracts settling against Dated Brent totaling
3,650
Mbbls with a strike price of
$50
for the calendar year 2018.
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Fixed-Price Swaps
|
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Collars
(3)
|
|
Call Options
(4)
|
Production Period
|
|
Settlement Index
|
|
Mbbls
|
|
Weighted Average Fixed Price
|
|
Mbbls
|
|
Weighted Average Floor Price
|
|
Weighted Average Ceiling Price
|
|
Mbbls
|
|
Strike Price
|
January—June 2018
|
|
NYMEX WTI
|
|
2,715
|
|
$51.23
|
|
2,715
|
|
$45.00
|
|
$56.45
|
|
—
|
|
—
|
January—June 2018
|
|
Dated Brent
|
|
2,172
|
|
$54.57
|
|
2,172
|
|
$50.00
|
|
$58.77
|
|
—
|
|
—
|
January—December 2018
|
|
NYMEX WTI
|
|
—
|
|
—
|
|
6,023
|
|
$45.00
|
|
$57.02
|
|
6,023
|
|
$60.00
|
|
|
(3)
|
Subsequent to
September 30, 2017
, Apache entered into crude oil contracts settling against NYMEX WTI totaling
730
Mbbls with a floor and ceiling of
$45.00
and
$56.90
, respectively, for the calendar year 2018.
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(4)
|
The remaining unamortized premium paid as of
September 30, 2017
, was
$9 million
.
|
As of
September 30, 2017
, Apache had the following open natural gas derivative positions:
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|
|
|
|
|
|
|
|
|
Fixed-Price Swaps
(1)
|
Production Period
|
|
Settlement Index
|
|
MMBtu
(in 000’s)
|
|
Weighted Average Fixed Price
|
October—December 2017
|
|
NYMEX Henry Hub
|
|
4,370
|
|
$3.32
|
January—March 2018
|
|
NYMEX Henry Hub
|
|
13,500
|
|
$3.39
|
January—June 2018
|
|
NYMEX Henry Hub
|
|
22,625
|
|
$3.17
|
April—June 2018
|
|
NYMEX Henry Hub
|
|
16,835
|
|
$2.92
|
July—December 2018
|
|
NYMEX Henry Hub
|
|
18,400
|
|
$2.97
|
|
|
(1)
|
Subsequent to
September 30, 2017
, Apache entered into fixed-price natural gas swaps settling against NYMEX Henry Hub totaling
15,180,000
MMBtu with a weighted average fixed-price of
$2.95
for the second half of 2018.
|
As of
September 30, 2017
, Apache had the following open natural gas financial basis swap contracts:
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|
|
|
|
|
|
|
Production Period
|
|
Settlement Index
|
|
MMBtu
(in 000’s)
|
|
Weighted Average Price Differential
|
January—March 2018
|
|
NYMEX Henry Hub/Waha
|
|
9,450
|
|
$(0.43)
|
July—December 2018
|
|
NYMEX Henry Hub/Waha
|
|
33,120
|
|
$(0.53)
|
October—December 2018
|
|
NYMEX Henry Hub/Waha
|
|
1,380
|
|
$(0.51)
|
January—March 2019
|
|
NYMEX Henry Hub/Waha
|
|
1,350
|
|
$(0.54)
|
January—June 2019
|
|
NYMEX Henry Hub/Waha
|
|
32,580
|
|
$(0.53)
|
January—December 2019
|
|
NYMEX Henry Hub/Waha
|
|
14,600
|
|
$(0.45)
|
Fair Value Measurements
Apache’s commodity derivative instruments consist of variable-to-fixed price commodity swaps, options, and collars. The fair values of the Company’s derivatives are not actively quoted in the open market. The Company uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing commodity futures pricing for the underlying commodities provided by a reputable third party, a Level 2 fair value measurement.
The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:
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|
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, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
(7
|
)
|
|
$
|
17
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
(7
|
)
|
|
—
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(1)
|
The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
(In millions)
|
Current Assets: Prepaid assets and other
|
|
$
|
13
|
|
|
$
|
—
|
|
Other Assets: Deferred charges and other
|
|
4
|
|
|
—
|
|
Total Assets
|
|
$
|
17
|
|
|
$
|
—
|
|
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 September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(In millions)
|
Realized gain (loss):
|
|
|
|
|
|
|
|
|
Derivative settlements, realized gain
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
Amortization of put premium, realized loss
|
|
(50
|
)
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
Unrealized loss
|
|
(83
|
)
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
Derivative instrument losses, net
|
|
$
|
(110
|
)
|
|
$
|
—
|
|
|
$
|
(69
|
)
|
|
$
|
—
|
|
Unrealized gains and losses for derivative activity recorded in the statement of consolidated operations is reflected in the statement of consolidated cash flows separately as a component of “Unrealized derivative instrument losses, net” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.”
4. CAPITALIZED EXPLORATORY WELL COSTS
The Company’s capitalized exploratory well costs were
$369 million
and
$264 million
at
September 30, 2017
and
December 31, 2016
, respectively. The increase is primarily attributable to additional drilling activities in the U.S. during the period, partially offset by successful transfers and dry hole write-offs.
No
suspended exploratory well costs previously capitalized for greater than one year at
December 31, 2016
were charged to dry hole expense during the
nine
months ended
September 30, 2017
. 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 reserves can be attributed to these projects.
|
|
5.
|
OTHER CURRENT LIABILITIES
|
The following table provides detail of the Company’s other current liabilities as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
(In millions)
|
Accrued operating expenses
|
|
$
|
73
|
|
|
$
|
110
|
|
Accrued exploration and development
|
|
691
|
|
|
463
|
|
Accrued compensation and benefits
|
|
99
|
|
|
201
|
|
Accrued interest
|
|
108
|
|
|
145
|
|
Accrued income taxes
|
|
68
|
|
|
22
|
|
Current asset retirement obligation
|
|
35
|
|
|
66
|
|
Refundable deposits
|
|
149
|
|
|
174
|
|
Other
|
|
109
|
|
|
77
|
|
Total other current liabilities
|
|
$
|
1,332
|
|
|
$
|
1,258
|
|
|
|
6.
|
ASSET RETIREMENT OBLIGATION
|
The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the
nine
-month period ended
September 30, 2017
:
|
|
|
|
|
|
|
|
(In millions)
|
Asset retirement obligation at December 31, 2016
|
|
$
|
2,498
|
|
Liabilities incurred
|
|
39
|
|
Liabilities divested
|
|
(810
|
)
|
Liabilities settled
|
|
(30
|
)
|
Accretion expense
|
|
103
|
|
Revisions in estimated liabilities
|
|
66
|
|
Asset retirement obligation at September 30, 2017
|
|
1,866
|
|
Less current portion
|
|
35
|
|
Asset retirement obligation, long-term
|
|
$
|
1,831
|
|
The Company estimates its annual effective income tax rate for continuing operations in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments of the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.
In August 2017, Apache completed the sale of ACL. For more information regarding this transaction, please refer to Note 2—Acquisitions and Divestitures. As a result of this transaction, Apache recorded a deferred tax asset associated with its realizable capital loss on the sale of ACL, and a decrease in the Company’s deferred tax liability associated with its investment in foreign subsidiaries. In the third and second quarters of 2017, the Company recorded a
$2 million
deferred income tax expense and a
$674 million
deferred income tax benefit, respectively, in connection with these transactions.
Apache’s
third
quarter of
2017
effective income tax rate was primarily impacted by gains on the sale of oil and gas properties and a
$30 million
current tax benefit associated with U.S. federal income tax credits. On September 15, 2016, U.K. Finance Act 2016 received Royal Assent. Under the enacted legislation, the corporate income tax rate on North Sea oil and gas profits was reduced from
50 percent
to
40 percent
effective January 1, 2016. As a result of the enacted legislation, in the third quarter of 2016 the Company recorded a deferred tax benefit of
$235 million
related to the remeasurement of the Company’s December 31, 2015 U.K. deferred income tax liability.
Apache’s
2017
year-to-date effective income tax rate is primarily impacted by the decrease in deferred taxes associated with its investments in foreign subsidiaries, gains on the sale of oil and gas properties, non-cash impairments of the Company’s PRT decommissioning asset, and the current tax benefit associated with U.S. federal income tax credits. Apache’s
2016
year-to-date effective income tax rate was primarily impacted by non-cash impairments of the carrying value of the Company’s oil and gas properties, non-cash impairments of the Company’s PRT decommissioning asset, the impact of the change in U.K. statutory income tax rate, and an increase in the amount of valuation allowances on U.S. and Canadian deferred tax assets.
Apache and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. In April 2017, the Internal Revenue Service (IRS) began their audit of the Company’s 2014 income tax year. The Company is also under audit in various states and in most of the Company’s foreign jurisdictions as part of its normal course of business.
|
|
8.
|
DEBT AND FINANCING COSTS
|
The following table presents the carrying amounts and estimated fair values of the Company’s outstanding debt as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
|
(In millions)
|
Commercial paper and committed bank facilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Notes and debentures
|
|
8,483
|
|
|
9,094
|
|
|
8,544
|
|
|
9,183
|
|
Total Debt
|
|
$
|
8,483
|
|
|
$
|
9,094
|
|
|
$
|
8,544
|
|
|
$
|
9,183
|
|
The Company’s debt is recorded at the carrying amount, net of related unamortized discount and debt issuance costs, on its consolidated balance sheet. When recorded, the carrying amount of the Company’s commercial paper, committed bank facilities, and uncommitted bank lines 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).
The following table presents the carrying value of the Company’s debt as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
(In millions)
|
Debt before unamortized discount and debt issuance costs
|
|
$
|
8,580
|
|
|
$
|
8,650
|
|
Unamortized discount
|
|
(48
|
)
|
|
(50
|
)
|
Debt issuance costs
|
|
(49
|
)
|
|
(56
|
)
|
Total debt
|
|
8,483
|
|
|
8,544
|
|
Current maturities
|
|
(550
|
)
|
|
—
|
|
Long-term debt
|
|
$
|
7,933
|
|
|
$
|
8,544
|
|
As of
September 30, 2017
, current debt included
$150 million
of
7.0%
senior notes due February 1, 2018 and
$400 million
of
6.9%
senior notes due September 15, 2018.
As of
September 30, 2017
, the Company had a revolving credit facility that matures in
June 2020
, subject to Apache’s
two
one
-year extension options. The facility provides for aggregate commitments of
$3.5 billion
(including a
$750 million
letter of credit subfacility), with rights to increase commitments up to an aggregate
$4.5 billion
. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under this facility supports its
$3.5 billion
commercial paper program. The commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to
270
days at competitive interest rates. As of
September 30, 2017
, the Company had no commercial paper or borrowings under committed bank facilities or uncommitted bank lines outstanding.
As of
September 30, 2017
, the Company had a letter of credit facility, which provides for
£900 million
in commitments and rights to increase commitments to
£1.075 billion
. This facility matures in
February 2020
. The facility is available for letters of credit and loans to cash collateralize letters of credit or obligations to provide letters of credit, in each case, to the extent letters of credit are unavailable under the facility. As of
September 30, 2017
,
three
letters of credit aggregating approximately
£147.5 million
and
no
borrowings were outstanding under this facility.
In November 2016, the Company initiated a program to purchase in the open market up to
$250 million
in aggregate principal amount of senior notes issued under its indentures. In the fourth quarter of 2016, the Company purchased and canceled
$181 million
aggregate principal amount of its senior notes through open market repurchases for
$182 million
in cash, including accrued interest and
$0.5 million
of premium.
In January 2017, the Company purchased and canceled an additional
$69 million
aggregate principal amount of senior notes for
$71 million
in cash, including accrued interest and
$1 million
of premium, which completed the open market repurchase program. These repurchases resulted in a
$1 million
net loss on extinguishment of debt, which is included in “Financing costs, net” in the Company’s consolidated statement of operations. The net loss includes an acceleration of related discount and deferred financing costs.
In August 2017, the Company assumed the obligations of Apache Finance Canada Corporation (AFCC) in respect of
$300 million
7.75%
notes due in 2029 which AFCC issued and the Company guaranteed pursuant to the governing indenture. The assumption was permitted by the indenture and effected pursuant to a supplemental indenture thereto. As a result of the assumption, the Company is the obligor under the notes and indenture, and AFCC is released from its obligations thereunder. The
$300 million
7.75%
notes historically have been included in the Company’s long-term debt; accordingly, the assumption did not change the Company’s long-term debt or total debt.
Financing Costs, Net
The following table presents the components of Apache’s financing costs, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(In millions)
|
Interest expense
|
|
$
|
113
|
|
|
$
|
116
|
|
|
$
|
344
|
|
|
$
|
348
|
|
Amortization of deferred loan costs
|
|
3
|
|
|
2
|
|
|
7
|
|
|
5
|
|
Capitalized interest
|
|
(12
|
)
|
|
(13
|
)
|
|
(39
|
)
|
|
(36
|
)
|
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Interest income
|
|
(3
|
)
|
|
(3
|
)
|
|
(13
|
)
|
|
(6
|
)
|
Financing costs, net
|
|
$
|
101
|
|
|
$
|
102
|
|
|
$
|
300
|
|
|
$
|
311
|
|
|
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
Legal Matters
Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. As of
September 30, 2017
, the Company has an accrued liability of approximately
$37 million
for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.
For additional information on each of the Legal Matters described below, please see Note 10—Commitments and Contingencies to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
.
Argentine Environmental Claims and Argentina Tariff
No material change in the status of the YPF Sociedad Anónima and Pioneer Natural Resources Company indemnities matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
.
Louisiana Restoration
As more fully described in Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
, numerous surface owners have filed claims or sent demand letters to various oil and gas companies, including Apache, claiming that, under either express or implied lease terms or Louisiana law, the companies are liable for damage measured by the cost of restoration of leased premises to their original condition as well as damages for contamination and cleanup.
On July 24, 2013, a lawsuit captioned
Board of Commissioners of the Southeast Louisiana Flood Protection Authority – East v. Tennessee Gas Pipeline Company et al.
, Case No. 2013-6911 was filed in the Civil District Court for the Parish of Orleans, State of Louisiana, in which plaintiff on behalf of itself and as the board governing the levee districts of Orleans, Lake Borgne Basin, and East Jefferson alleged that Louisiana coastal lands have been damaged as a result of oil and gas industry activity, including a network of canals for access and pipelines. The defendants removed the case from state court to federal court and, on February 13, 2015, the federal court entered judgment in favor of defendants dismissing all of plaintiff’s claims with prejudice. Plaintiff appealed the lower court’s dismissal to the 5
th
Circuit Court of Appeals and additionally challenged the defendants’ right to remove the case to federal court. On March 3, 2017, the 5
th
Circuit Court of Appeals affirmed the propriety of federal jurisdiction based in part on Apache’s argument that plaintiff’s state-based claims required a resolution of substantial questions of federal law and also affirmed the dismissal of the action. The Plaintiff filed a Petition for a Writ of Certiorari with the United States Supreme Court. On October 30, 2017, the United States Supreme Court denied review and declined to consider the plaintiff’s Petition of Certiorari.
Starting in November of 2013 and continuing into 2017, several Parishes in Louisiana have pending lawsuits against many oil and gas producers, including Apache. These cases are pending in federal and state courts in Louisiana. In these cases, the Parishes, as plaintiffs, allege that defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable state law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While an adverse judgment against Apache might be possible, Apache intends to vigorously oppose these claims.
No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
.
Apollo Exploration Lawsuit
In a fourth amended petition filed on March 21, 2016, in a case captioned
Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation
, Cause No. CV50538 in the 385
th
Judicial District Court, Midland County, Texas, plaintiffs have reduced their alleged damages to approximately
$500 million
(having previously claimed in excess of
$1.1 billion
) relating to certain purchase and sale agreements, mineral leases, and areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The Court recently granted two of Apache’s motions for summary judgment further limiting the plaintiffs’ theories and potential damages. Apache believes that plaintiffs’ claims lack merit, and further that plaintiffs’ alleged damages, even as amended, are grossly inflated. Apache will vigorously oppose the claims. No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
.
Escheat Audits
There has been no material change with respect to the review of the books and records of the Company and its subsidiaries and related entities by the State of Delaware, Department of Finance (Unclaimed Property), to determine compliance with the Delaware Escheat Laws, since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
.
Environmental Matters
As of
September 30, 2017
, the Company had an undiscounted reserve for environmental remediation of approximately
$4 million
. The Company is not aware of any environmental claims existing as of
September 30, 2017
, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity. There can be no assurance, however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.
ACL, a former subsidiary of the Company, previously reported produced water spills in a remote area of the Bellow Field and a hydrogen sulfide and oil emulsion leak in the Zama area. The Company sold ACL in a transaction that was completed in the third quarter of 2017. The Canadian environmental litigation and liabilities remained with ACL and are now the responsibility of the acquirer.
In addition to the matters for which the Company has already accrued, on July 17, 2017, in
three
separate actions, San Mateo County, California, Marin County, California, and the City of Imperial Beach, California, all filed suit individually and on behalf of the people of the state of California against over
30
oil, gas, and coal companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. Apache believes that the claims made against it are baseless and intends to vigorously defend these lawsuits.
Australian Operations Divestiture Dispute
By a Sale and Purchase Agreement dated April 9, 2015 (SPA), the Company and its subsidiaries divested their remaining Australian operations to Viraciti Energy Pty Ltd, which has since been renamed Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. By letter dated June 6, 2016, Quadrant provided the Company with a placeholder notice of claim under the SPA concerning tax and other issues totaling approximately
$200 million
in the aggregate. The Company believes that these claims lack merit and intends to vigorously defend against them. Moreover, on September 22, 2017, subsidiaries of the Company filed suit against Quadrant for breaching the SPA and wrongfully withholding tax refunds owed under the SPA. This claim totals approximately
$80 million
AUD.
Net Income (Loss) per Common Share
A reconciliation of the components of basic and diluted net income (loss) per common share for the quarters and nine months ended
September 30, 2017
and
2016
, is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30,
|
|
|
2017
|
|
2016
|
|
|
Income
|
|
Shares
|
|
Per Share
|
|
Loss
|
|
Shares
|
|
Per Share
|
|
|
(In millions, except per share amounts)
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
63
|
|
|
381
|
|
|
$
|
0.16
|
|
|
$
|
(574
|
)
|
|
380
|
|
|
$
|
(1.51
|
)
|
Loss from discontinued operations
|
|
—
|
|
|
381
|
|
|
—
|
|
|
(33
|
)
|
|
380
|
|
|
(0.09
|
)
|
Income (loss) attributable to common stock
|
|
$
|
63
|
|
|
381
|
|
|
$
|
0.16
|
|
|
$
|
(607
|
)
|
|
380
|
|
|
$
|
(1.60
|
)
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other
|
|
$
|
—
|
|
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
63
|
|
|
383
|
|
|
$
|
0.16
|
|
|
$
|
(574
|
)
|
|
380
|
|
|
$
|
(1.51
|
)
|
Loss from discontinued operations
|
|
—
|
|
|
383
|
|
|
—
|
|
|
(33
|
)
|
|
380
|
|
|
(0.09
|
)
|
Income (loss) attributable to common stock
|
|
$
|
63
|
|
|
383
|
|
|
$
|
0.16
|
|
|
$
|
(607
|
)
|
|
380
|
|
|
$
|
(1.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
2017
|
|
2016
|
|
|
Income
|
|
Shares
|
|
Per Share
|
|
Loss
|
|
Shares
|
|
Per Share
|
|
|
(In millions, except per share amounts)
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
848
|
|
|
381
|
|
|
$
|
2.23
|
|
|
$
|
(1,190
|
)
|
|
379
|
|
|
$
|
(3.14
|
)
|
Loss from discontinued operations
|
|
—
|
|
|
381
|
|
|
—
|
|
|
(33
|
)
|
|
379
|
|
|
(0.08
|
)
|
Income (loss) attributable to common stock
|
|
$
|
848
|
|
|
381
|
|
|
$
|
2.23
|
|
|
$
|
(1,223
|
)
|
|
379
|
|
|
$
|
(3.22
|
)
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other
|
|
$
|
—
|
|
|
2
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
848
|
|
|
383
|
|
|
$
|
2.22
|
|
|
$
|
(1,190
|
)
|
|
379
|
|
|
$
|
(3.14
|
)
|
Loss from discontinued operations
|
|
—
|
|
|
383
|
|
|
—
|
|
|
(33
|
)
|
|
379
|
|
|
(0.08
|
)
|
Income (loss) attributable to common stock
|
|
$
|
848
|
|
|
383
|
|
|
$
|
2.22
|
|
|
$
|
(1,223
|
)
|
|
379
|
|
|
$
|
(3.22
|
)
|
The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling
8.4 million
and
4.7 million
for the quarters ended
September 30, 2017
and
2016
, respectively, and
7.5 million
and
6.5 million
for the
nine
months ended
September 30, 2017
and
2016
, respectively.
Common Stock Dividends
For each of the quarters ended
September 30, 2017
, and
2016
, Apache paid
$95 million
in dividends on its common stock. For the
nine
months ended
September 30, 2017
and
2016
, the Company paid
$285 million
and
$284 million
, respectively.
Stock Repurchase Program
Apache’s Board of Directors has authorized the purchase of up to
40 million
shares of the Company’s common stock. Shares may be purchased either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through
September 30, 2017
, had repurchased a total of
32.2 million
shares at an average price of
$88.96
per share. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during
2017
.
|
|
11.
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
The following table describes changes to the Company’s accumulated other comprehensive loss by component for the
nine
-month period ended
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translation Adjustment
|
|
Pension and Postretirement Benefit Plan
|
|
Total
|
|
|
(In millions)
|
Accumulated other comprehensive loss at December 31, 2016
|
|
$
|
(109
|
)
|
|
$
|
(3
|
)
|
|
$
|
(112
|
)
|
Currency translation adjustment divested
(1)
|
|
109
|
|
|
—
|
|
|
109
|
|
Accumulated other comprehensive loss at September 30, 2017
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
|
(1)
|
Currency translation adjustments resulting from translating the Canadian subsidiaries’ financial statements into U.S. dollar equivalents, prior to adoption of the U.S. dollar as their functional currency, were reported separately and accumulated in other comprehensive loss. This currency translation loss was recognized as a reduction of the net gain on divestiture during the third quarter of 2017 in connection with the Canada divestitures. For more information regarding these divestitures, please refer to Note 2—Acquisitions and Divestitures.
|
|
|
12.
|
BUSINESS SEGMENT INFORMATION
|
Apache is engaged in a single line of business. Both domestically and internationally, the Company explores for, develops, and produces natural gas, crude oil, and natural gas liquids. At
September 30, 2017
, the Company had production in
three
reporting segments: the United States, Egypt, and offshore the United Kingdom in the North Sea (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Financial information for each area is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
Canada
(1)
|
|
Egypt
(2)
|
|
North Sea
|
|
Other
International
|
|
Total
|
|
|
(In millions)
|
For the Quarter Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production Revenues
|
|
$
|
550
|
|
|
$
|
36
|
|
|
$
|
543
|
|
|
$
|
260
|
|
|
$
|
—
|
|
|
$
|
1,389
|
|
Operating Income (Loss)
(3)
|
|
$
|
(114
|
)
|
|
$
|
(1
|
)
|
|
$
|
226
|
|
|
$
|
16
|
|
|
$
|
(1
|
)
|
|
$
|
126
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
296
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(110
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(101
|
)
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production Revenues
|
|
$
|
1,593
|
|
|
$
|
231
|
|
|
$
|
1,655
|
|
|
$
|
768
|
|
|
$
|
—
|
|
|
$
|
4,247
|
|
Operating Income (Loss)
(3)
|
|
$
|
(71
|
)
|
|
$
|
(33
|
)
|
|
$
|
740
|
|
|
$
|
59
|
|
|
$
|
(24
|
)
|
|
$
|
671
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
616
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(69
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(307
|
)
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(300
|
)
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
640
|
|
Total Assets
|
|
$
|
13,105
|
|
|
$
|
—
|
|
|
$
|
4,906
|
|
|
$
|
3,770
|
|
|
$
|
54
|
|
|
$
|
21,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
Canada
(1)
|
|
Egypt
(2)
|
|
North Sea
|
|
Other
International
|
|
Total
|
|
|
(In millions)
|
For the Quarter Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production Revenues
|
|
$
|
524
|
|
|
$
|
87
|
|
|
$
|
581
|
|
|
$
|
247
|
|
|
$
|
—
|
|
|
$
|
1,439
|
|
Operating Income (Loss)
(4)
|
|
$
|
(17
|
)
|
|
$
|
(466
|
)
|
|
$
|
263
|
|
|
$
|
(455
|
)
|
|
$
|
(13
|
)
|
|
$
|
(688
|
)
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
Loss From Continuing Operations Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production Revenues
|
|
$
|
1,453
|
|
|
$
|
243
|
|
|
$
|
1,515
|
|
|
$
|
701
|
|
|
$
|
—
|
|
|
$
|
3,912
|
|
Operating Income (Loss)
(4)
|
|
$
|
(283
|
)
|
|
$
|
(586
|
)
|
|
$
|
525
|
|
|
$
|
(557
|
)
|
|
$
|
(13
|
)
|
|
$
|
(914
|
)
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(298
|
)
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(311
|
)
|
Loss From Continuing Operations Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,568
|
)
|
Total Assets
|
|
$
|
12,299
|
|
|
$
|
1,630
|
|
|
$
|
5,320
|
|
|
$
|
3,851
|
|
|
$
|
49
|
|
|
$
|
23,149
|
|
|
|
(1)
|
During the third quarter of 2017, Apache completed the sale of its Canadian operations. For more information regarding this divestiture, please refer to Note 2—Acquisitions and Divestitures.
|
|
|
(2)
|
Includes a noncontrolling interest in Egypt.
|
|
|
(3)
|
Operating income (loss) consists of oil and gas production revenues less lease operating expenses, gathering and transportation costs, taxes other than income, exploration costs, depreciation, depletion, and amortization, asset retirement obligation accretion, and impairments. The operating income (loss) of U.S. includes leasehold impairments totaling
$160 million
for the
third
quarter of
2017
. The operating income (loss) of U.S., Canada, and North Sea includes leasehold and other asset impairments totaling
$212 million
,
$2 million
, and
$8 million
, respectively, for the first
nine
months of
2017
.
|
|
|
(4)
|
The operating income (loss) of U.S., Canada, and North Sea includes leasehold, property, and other asset impairments totaling
$46 million
,
$423 million
, and
$481 million
, respectively, for the
third
quarter of
2016
. The operating income (loss) of U.S., Canada, and North Sea includes leasehold, property, and other asset impairments totaling
$212 million
,
$433 million
, and
$586 million
, respectively, for the first
nine
months of
2016
.
|