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, with the exception of recently adopted accounting pronouncements discussed below. 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 (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, 2018, 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, 2019, 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, 2018, with the exception of Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” (see “Leases” section in this Note 1 below).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated.
The Company consolidates all other investments in which, either through direct or indirect ownership, Apache has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated Apache subsidiary and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in Apache’s Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate component of equity in Apache’s consolidated balance sheet.
Additionally, third-party investors own a minority interest of approximately 21 percent of Altus Midstream Company (ALTM), which is reflected as a separate noncontrolling interest component of equity in Apache’s consolidated balance sheet. Apache consolidates the activities of ALTM, which qualifies as a variable interest entity (VIE) under GAAP. Apache has concluded that it is the primary beneficiary of the VIE, as defined in the accounting standards, since Apache has the power, through its ownership, to direct those activities that most significantly impact the economic performance of ALTM and the obligation to absorb losses or the right to receive benefits that could be potentially significant to ALTM. This conclusion was based on a qualitative analysis that considered ALTM’s governance structure, the commercial agreements between ALTM, Altus Midstream LP (collectively with ALTM, Altus), and Apache, and the voting rights established between the members, which provide Apache with the ability to control the operations of Altus. On June 12, 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) through a private offering that admitted additional limited partners with separate rights for the Preferred Unit holders. For further details on the terms of the Preferred Units and rights of the holders, refer to Note 12—Redeemable Noncontrolling Interest - Altus.
Investments in which Apache holds less than 50 percent of the voting interest are typically accounted for under the equity method of accounting, with the balance recorded separately as “Equity method interests” in Apache’s consolidated balance sheet and results of operations recorded as a component of “Other” under “Revenues and Other” in the Company’s statement of consolidated operations. Refer to Note 6—Equity Method Interests for more detail.
Use of Estimates
Preparation of financial statements in conformity with 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 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. For the third quarter and nine-month period ended September 30, 2019, the Company recorded asset impairments totaling $9 million and $249 million, respectively, in connection with fair value assessments.
During the third quarter of 2019, Apache recorded an impairment of $9 million on gathering, processing, and transmission (GPT) assets held for sale by the Company’s Altus Midstream reporting segment. The estimated fair value of the assets held for sale was approximately $18 million and was determined using a market approach based on proceeds expected to be received in the fourth quarter, a Level 1 fair value measurement. The Company reflects held for sale assets as a component of “Other current assets” on its consolidated balance sheet.
In the second quarter of 2019, the Company entered into an agreement to sell certain of its assets in the Western Anadarko Basin in Oklahoma and Texas. As a result of this agreement, a separate impairment analysis was performed for each of the assets within the disposal group. The analyses were based on the agreed-upon proceeds less costs to sell for the transaction, a Level 1 fair value measurement. The carrying value of the net assets to be divested exceeded the fair value implied by the expected net proceeds, resulting in impairments totaling $240 million, including $86 million on the Company’s proved properties, $149 million on its unproved properties, and $5 million on other working capital. See Note 2—Acquisitions and Divestitures for more detail.
In the third quarter of 2018, Apache agreed to sell certain of its unproved properties offshore the U.K. in the North Sea (North Sea). As a result, the Company performed a fair value assessment of the properties and recorded a $10 million impairment on the carrying values of the associated capitalized exploratory well costs in the third quarter and first nine months of 2018. The fair value of the impaired assets was determined using the negotiated sales price, a Level 1 fair value measurement.
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 associated proved oil and gas properties. 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 well 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 the carrying value of proved oil and gas properties may not be recoverable, 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 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.
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 2019 and 2018:
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For the Quarter Ended September 30,
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For the Nine Months Ended September 30,
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2019
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2018
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2019
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2018
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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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—
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$
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86
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$
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—
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Unproved
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12
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49
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223
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86
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Proved properties impaired during the first nine months of 2019 related to assets held for sale at June 30, 2019 with an aggregate fair value of $379 million.
On the statement of consolidated operations, unproved leasehold impairments are typically recorded as a component of “Exploration” expense; however, in the first nine months of 2019, unproved impairments of $149 million were recorded in “Impairments” in connection with an agreement to sell certain non-core leasehold properties in Oklahoma and Texas. In the third quarter and first nine months of 2018, unproved impairments of $10 million were recorded in “Impairments” in connection with an agreement to sell certain unproved properties in the North Sea.
Gains and losses on divestitures of the Company’s oil and gas properties are recognized in the statement of consolidated operations upon closing of the transaction. See Note 2—Acquisitions and Divestitures for more detail.
Revenue Recognition
There have been no significant changes to the Company’s contracts with customers during the nine months ended September 30, 2019. Apache recognizes revenue from its contracts with customers from the sale of its crude oil, natural gas, and natural gas liquids (NGLs) production as well as volumes purchased from third parties. Each unit of quantity represents a single performance obligation that is satisfied at a point in time as control of the product has been transferred to the customer.
The contracted price is variable and is determined based on market-indexed prices adjusted for quality, transportation, and other market-reflective differentials. Sales proceeds related to third-party purchased volumes are considered revenue from a contract with a customer. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively. Associated purchase costs for these volumes totaled $23 million and $109 million for the third quarters of 2019 and 2018, respectively, and $60 million and $308 million for the first nine months of 2019 and 2018, respectively. Proceeds and costs are both recorded as “Other” under “Revenues and Other” in the Company’s statement of consolidated operations.
The following table represents revenues from customers and non-customers for the third quarters and first nine months of 2019 and 2018:
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For the Quarter Ended September 30,
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For the Nine Months Ended September 30,
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2019
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2018
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2019
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2018
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(In millions)
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Revenues from customers
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$
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1,361
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$
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1,902
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$
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4,414
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$
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5,437
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Revenues from non-customers
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107
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198
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347
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534
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Payment from contracts with customers is typically received on a short-term basis after physical delivery of the product. Receivables from contracts with customers, net of allowance for doubtful accounts, totaled $919 million and $1.0 billion as of September 30, 2019 and December 31, 2018, respectively.
Apache has concluded that disaggregating revenue by geographic area and by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14—Business Segment Information for a disaggregation of revenue by each product sold.
Leases
On January 1, 2019, Apache adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize separate right-of-use (ROU) assets and lease liabilities for most leases classified as operating leases under previous GAAP. Prior to adoption, the Financial Accounting Standards Board (FASB) issued transition guidance permitting an entity the option to not evaluate under ASU 2016-02 those existing or expired land easements that were not previously accounted for as leases, as well as an option to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the financial statements. Apache elected both transitional practical expedients. Under these transition options, comparative reporting was not required, and the provisions of the standard were applied prospectively to leases in effect at the date of adoption.
As allowed under the standard, the Company also applied practical expedients to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. Apache also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes. Short-term lease expense was not material for the third quarter and first nine months of 2019.
The Company determines if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, Apache records an ROU asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental borrowing rate when calculating the present value. In the normal course of business, Apache enters into various lease agreements for real estate, drilling rigs, vessels, aircraft, and equipment related to its exploration and development activities, which are typically classified as operating leases under the provisions of the standard. ROU assets are reflected within “Deferred charges and other” within “Other” assets on the Company’s consolidated balance sheet, and the associated operating lease liabilities are reflected within “Other current liabilities” and “Other” within “Deferred Credits and Other Noncurrent Liabilities,” as applicable.
Operating lease expense associated with ROU assets is recognized on a straight-line basis over the lease term. Lease expense is reflected on the statement of consolidated operations commensurate with the leased activities and nature of the services performed. Gross fixed operating lease expense, inclusive of amounts billable to partners and other working interest owners, was $53 million and $167 million for the third quarter and first nine months of 2019, respectively.
In addition, the Company periodically enters into finance leases that are similar to those leases classified as capital leases under previous GAAP. Finance lease assets are included in “Other” within “Property and Equipment” on the consolidated balance sheet, and the associated finance lease liabilities are reflected within “Current debt” and “Long-term debt,” as applicable. Prior periods include the reclassification of $39 million finance lease obligations from “Other” within “Deferred Credits and Other Noncurrent Liabilities” to “Long-term debt” on the Company’s consolidated balance sheet to conform with this presentation. There was no material impact to the Company’s statement of consolidated operations and statement of consolidated cash flows for its treatment of finance leases. Depreciation on the Company’s finance lease assets was $2 million and $6 million for the third quarter and first nine months of 2019, respectively. Interest on the Company’s finance lease assets was $1 million and $2 million for the third quarter and first nine months of 2019, respectively.
The following table represents the Company’s weighted average lease term and discount rate as of September 30, 2019:
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Operating Leases
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Finance Leases
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Weighted average remaining lease term
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3.3 years
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9.7 years
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Weighted average discount rate
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4.4
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%
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4.3
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%
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The undiscounted future minimum lease payments reconciled to the carrying value of the lease liabilities as of September 30, 2019 were as follows:
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Net Minimum Commitments
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Operating Leases(1)
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Finance Leases(2)
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(In millions)
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2019
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$
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48
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$
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9
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2020
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124
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13
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2021
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50
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3
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2022
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41
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3
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2023
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24
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3
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Thereafter
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40
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40
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Total future minimum lease payments
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327
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71
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Less: imputed interest
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(26
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)
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(14
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)
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Total lease liabilities
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301
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57
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Current portion
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(149
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)
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(19
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)
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Non-current portion
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$
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152
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$
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38
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(1)
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Amounts included for drilling rig and related operational equipment obligations represent future payments associated with oil and gas operations inclusive of amounts billable to partners and other working interest owners. Such payments may be capitalized as a component of oil and gas properties and subsequently depreciated, impaired, or written off as exploration expense.
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(2)
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Amounts represent the Company’s finance lease obligation related to physical power generators being leased on a one-year term with the right to purchase and a separate lease for the Company’s Midland, Texas regional office building.
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The lease liability reflected in the table above represents the Company’s fixed minimum payments that are settled in accordance with the lease terms. Actual lease payments during the period may also include variable lease components such as common area maintenance, usage-based sales taxes and rate differentials, or other similar costs that are not determinable at the inception of the lease. Gross variable lease payments, inclusive of amounts billable to partners and other working interest owners, for the third quarter and first nine months of 2019 were $3 million and $44 million, respectively.
New Pronouncements Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses.” The standard changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans, and other financial assets measured at amortized cost. The ASU requires the use of a new forward-looking “expected loss” model compared to the current “incurred loss” model, resulting in accelerated recognition of credit losses. This update is effective for the Company beginning in the first quarter of 2020, with early adoption permitted. The Company is in the process of finalizing its project plan for the implementation of the ASU and continues to evaluate and monitor standard setting activity. The Company does not believe the adoption and implementation of this ASU will have a material impact on its financial statements.
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement,” which changes the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures. ASU 2018-13 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.
In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans,” which eliminates, modifies, and adds disclosure requirements for defined benefit plans. The ASU is effective for financial statements issued for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its financial statements.
In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This pronouncement clarifies the requirements for capitalizing implementation costs in cloud computing arrangements and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements and does not expect it to have a material impact.
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2.
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ACQUISITIONS AND DIVESTITURES
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2019 Activity
Leasehold and Property Acquisitions
During the third quarter and first nine months of 2019, Apache completed leasehold and property acquisitions for total cash consideration of $5 million and $39 million, respectively, primarily in its U.S. onshore regions. For discussion on the Company’s acquisition of equity method interests during the period, refer to Note 6—Equity Method Interests.
U.S. Divestitures
In the third quarter of 2019, Apache completed the sale of non-core assets in the Western Anadarko Basin of Oklahoma and Texas for aggregate cash proceeds of approximately $325 million and the assumption of asset retirement obligations of $49 million. These assets met the criteria to be classified as held for sale in the second quarter of 2019. Accordingly, the Company performed a fair value assessment of the assets and recorded impairments of $240 million in the second quarter of 2019 to the carrying value of proved and unproved oil and gas properties, other fixed assets, and working capital. The transaction closed in the third quarter of 2019, and the Company recognized a $9 million loss in association with the sale.
In the second quarter of 2019, Apache completed the sale of certain non-core assets in Oklahoma that had a net carrying value of $206 million for aggregate cash proceeds of approximately $223 million. The Company recognized a $17 million gain in association with the sale.
During the first nine months of 2019, the Company also completed the sale of certain other non-core producing assets and leasehold, primarily in the Permian region, in multiple transactions for total cash proceeds of $21 million. The Company recognized a net gain of approximately $12 million upon closing of these transactions.
2018 Activity
During the third quarter and first nine months of 2018, Apache completed $48 million and $86 million, respectively, of leasehold and property acquisitions primarily in its U.S. onshore and Egypt regions. During the first nine months of 2018, the Company also completed the sale of certain non-core assets, primarily in the Permian region, in multiple transactions for total cash proceeds of $51 million. The Company recognized a total net gain of approximately $10 million during the first nine months upon closing of these transactions.
3. CAPITALIZED EXPLORATORY WELL COSTS
The Company’s capitalized exploratory well costs were $193 million and $159 million at September 30, 2019 and December 31, 2018, respectively. The increase is primarily attributable to drilling activities in Suriname and the North Sea during the period, partially offset by successful transfers of well costs and dry hole write-offs. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2018 were charged to dry hole expense during the nine months ended September 30, 2019. 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 proved reserves can be attributed to these projects.
4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Strategies
The Company is exposed to fluctuations in crude oil and natural gas prices, foreign currency exchange rates, and interest rates. The Company utilizes various types of derivative financial instruments to manage fluctuations in cash flows resulting from these fluctuations. Apache has elected not to designate any of its derivative contracts as cash flow hedges.
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, 2019, Apache had derivative positions with 5 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 changes in commodity prices, currency exchange rates, or interest rates.
Derivative Instruments
Commodity Derivative Instruments
As of September 30, 2019, Apache had the following open crude oil financial basis swap contracts:
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Production Period
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|
Settlement Index
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Mbbls
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Weighted Average Price Differential
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October—December 2019
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Midland-WTI/Cushing-WTI
|
|
1,380
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|
|
$(3.72)
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As of September 30, 2019, Apache had the following open natural gas financial basis swap contracts:
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Production Period
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Settlement Index
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MMBtu
(in 000’s)
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Weighted Average Price Differential
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|
October—December 2019
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NYMEX Henry Hub/Waha
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|
3,680
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|
|
$(0.45)
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Foreign Currency Derivative Instruments
Apache has open foreign currency costless collar contracts in GBP/USD for £12.5 million per each calendar month for 2019 with a weighted average floor and ceiling price of $1.20 and $1.35, respectively.
Altus Preferred Units Embedded Derivative
During the second quarter of 2019, Altus Midstream LP issued and sold Series A Cumulative Redeemable Preferred Units. Certain redemption features (the Redemption Option) embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. For further discussion of this derivative, see “Fair Value Measurements” below and Note 12—Redeemable Noncontrolling Interest - Altus.
Fair Value Measurements
The fair values of the Company’s derivative contracts are not actively quoted in the open market. The Company primarily uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing futures pricing for the underlying positions provided by a reputable third party, a Level 2 fair value measurement.
The fair value of the Redemption Option, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units.
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
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Quoted Price in Active Markets (Level 1)
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Significant Other Inputs (Level 2)
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Significant Unobservable Inputs
(Level 3)
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Total Fair Value
|
|
Netting(1)
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Carrying Amount
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(In millions)
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|
September 30, 2019
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Assets:
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|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
Foreign Currency Derivative Instruments
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Preferred Units Embedded Derivative
|
|
—
|
|
|
—
|
|
|
98
|
|
|
98
|
|
|
—
|
|
|
98
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
$
|
—
|
|
|
$
|
69
|
|
|
$
|
—
|
|
|
$
|
69
|
|
|
$
|
(14
|
)
|
|
$
|
55
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
|
(14
|
)
|
|
11
|
|
|
|
|
|
(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, 2019
|
|
December 31, 2018
|
|
|
|
(In millions)
|
|
Current Assets: Other current assets
|
|
$
|
2
|
|
|
$
|
55
|
|
|
Total Assets
|
|
$
|
2
|
|
|
$
|
55
|
|
|
|
|
|
|
|
|
Current Liabilities: Other current liabilities
|
|
$
|
7
|
|
|
$
|
11
|
|
|
Deferred Credits and Other Noncurrent Liabilities: Other
|
|
98
|
|
|
—
|
|
|
Total Liabilities
|
|
$
|
105
|
|
|
$
|
11
|
|
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,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
(In millions)
|
|
Realized gain (loss):
|
|
|
|
|
|
|
|
|
|
Derivative settlements, realized gain (loss)
|
|
$
|
(16
|
)
|
|
$
|
7
|
|
|
$
|
12
|
|
|
$
|
(110
|
)
|
|
Amortization of put premium, realized loss
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(24
|
)
|
|
Unrealized gain (loss)
|
|
14
|
|
|
(16
|
)
|
|
(52
|
)
|
|
88
|
|
|
Derivative instrument losses, net
|
|
$
|
(2
|
)
|
|
$
|
(23
|
)
|
|
$
|
(40
|
)
|
|
$
|
(46
|
)
|
Derivative instrument gains and losses are recorded in “Derivative instrument losses, net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized gains and losses for derivative activity recorded in the statement of consolidated operations are reflected in the statement of consolidated cash flows separately as “Unrealized derivative instrument losses (gains), net” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.”
The following table provides detail of the Company’s other current assets as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
(In millions)
|
|
Inventories
|
|
$
|
475
|
|
|
$
|
401
|
|
|
Drilling advances
|
|
161
|
|
|
218
|
|
|
Assets held for sale
|
|
18
|
|
|
—
|
|
|
Prepaid assets and other
|
|
84
|
|
|
160
|
|
|
Total other current assets
|
|
$
|
738
|
|
|
$
|
779
|
|
|
|
|
|
6.
|
EQUITY METHOD INTERESTS
|
Apache, through its ownership of Altus, has the following equity method interests in Permian Basin long-haul pipeline entities which are accounted for under the equity method of accounting. For each of the equity method interests, Altus has the ability to exercise significant influence based on certain governance provisions and its participation in activities and decisions that impact the management and economic performance of the equity method interests.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
Interest
|
|
Amount
|
|
Interest
|
|
Amount
|
|
|
|
($ in millions)
|
|
Gulf Coast Express Pipeline LLC
|
|
16.0
|
%
|
|
$
|
275
|
|
|
15.0
|
%
|
|
$
|
91
|
|
|
EPIC Crude Holdings, LP
|
|
15.0
|
%
|
|
128
|
|
|
—
|
|
|
—
|
|
|
Permian Highway Pipeline LLC
|
|
26.7
|
%
|
|
224
|
|
|
—
|
|
|
—
|
|
|
Shin Oak Pipeline (Breviloba, LLC)
|
|
33.0
|
%
|
|
468
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
$
|
1,095
|
|
|
|
|
$
|
91
|
|
As of September 30, 2019 and December 31, 2018, unamortized basis differences included in the equity method interest balances were $26 million and $6 million, respectively. These amounts represent differences in contributions to date and Altus’ underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into net income over the useful lives of the underlying pipeline assets when they are placed into service.
The following table presents the activity in Altus’ equity method interests during the nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Coast Express Pipeline LLC
|
|
EPIC Crude Holdings, LP
|
|
Permian Highway Pipeline LLC
|
|
Breviloba, LLC
|
|
Total
|
|
|
|
(In millions)
|
|
Balance at December 31, 2018
|
|
$
|
91
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
91
|
|
|
Acquisitions
|
|
15
|
|
|
52
|
|
|
161
|
|
|
442
|
|
|
670
|
|
|
Capital contributions
|
|
169
|
|
|
83
|
|
|
63
|
|
|
23
|
|
|
338
|
|
|
Distributions
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
Equity income (loss), net
|
|
3
|
|
|
(5
|
)
|
|
—
|
|
|
3
|
|
|
1
|
|
|
Accumulated other comprehensive loss
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
Balance at September 30, 2019
|
|
$
|
275
|
|
|
$
|
128
|
|
|
$
|
224
|
|
|
$
|
468
|
|
|
$
|
1,095
|
|
As of December 31, 2018, Apache also held an investment in Marine Well Containment Company. This investment was sold in the first quarter of 2019 for $30 million, with no gain or loss recorded on the sale.
|
|
|
|
7.
|
OTHER CURRENT LIABILITIES
|
The following table provides detail of the Company’s other current liabilities as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
(In millions)
|
|
Accrued operating expenses
|
|
$
|
187
|
|
|
$
|
65
|
|
|
Accrued exploration and development
|
|
355
|
|
|
667
|
|
|
Accrued gathering, processing, and transmission - Altus
|
|
25
|
|
|
81
|
|
|
Accrued compensation and benefits
|
|
171
|
|
|
177
|
|
|
Accrued interest
|
|
114
|
|
|
137
|
|
|
Accrued income taxes
|
|
80
|
|
|
58
|
|
|
Current asset retirement obligation
|
|
66
|
|
|
66
|
|
|
Current operating lease liability
|
|
149
|
|
|
—
|
|
|
Other
|
|
94
|
|
|
90
|
|
|
Total other current liabilities
|
|
$
|
1,241
|
|
|
$
|
1,341
|
|
|
|
|
|
8.
|
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, 2019:
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Asset retirement obligation at December 31, 2018
|
|
$
|
1,932
|
|
|
Liabilities incurred
|
|
11
|
|
|
Liabilities settled
|
|
(49
|
)
|
|
Liabilities divested
|
|
(55
|
)
|
|
Accretion expense
|
|
80
|
|
|
Asset retirement obligation at September 30, 2019
|
|
1,919
|
|
|
Less current portion
|
|
(66
|
)
|
|
Asset retirement obligation, long-term
|
|
$
|
1,853
|
|
The Company estimates its annual effective income tax rate 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.
During the third quarters of 2019 and 2018, Apache’s effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets.
Apache’s 2019 and 2018 year-to-date effective income tax rates were primarily impacted by an increase in the amount of valuation allowance against its U.S. 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. The Company is currently under IRS audit for the 2014-2017 tax years and is also under audit in various states and foreign jurisdictions as part of its normal course of business.
|
|
|
|
10.
|
DEBT AND FINANCING COSTS
|
The following table presents the carrying value of the Company’s debt as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
(In millions)
|
|
Notes and debentures before unamortized discount and debt issuance costs(1)
|
|
$
|
8,217
|
|
|
$
|
8,299
|
|
|
Altus credit facility(2)
|
|
235
|
|
|
—
|
|
|
Finance lease obligations
|
|
57
|
|
|
40
|
|
|
Unamortized discount
|
|
(43
|
)
|
|
(44
|
)
|
|
Debt issuance costs
|
|
(54
|
)
|
|
(51
|
)
|
|
Total debt
|
|
8,412
|
|
|
8,244
|
|
|
Current maturities
|
|
(19
|
)
|
|
(151
|
)
|
|
Long-term debt
|
|
$
|
8,393
|
|
|
$
|
8,093
|
|
|
|
|
|
(1)
|
The fair value of the Company’s notes and debentures was $8.2 billion and $7.8 billion as of September 30, 2019 and December 31, 2018, respectively. 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).
|
|
|
|
|
(2)
|
The carrying amount of borrowings by Altus Midstream LP on its credit facility approximate fair value because the interest rates are variable and reflective of market rates.
|
As of September 30, 2019, current debt included $19 million of finance lease obligations. As of December 31, 2018, current debt included $150 million of 7.625% senior notes due July 1, 2019 and $1 million of finance lease obligations. On July 1, 2019, Apache’s 7.625% senior notes in original principal amount of $150 million matured and were repaid.
On June 19, 2019, Apache closed offerings of $1.0 billion in aggregate principal amount of senior unsecured notes, comprised of $600 million in aggregate principal amount of 4.250% notes due January 15, 2030 and $400 million in aggregate principal amount of 5.350% notes due July 1, 2049. The notes are redeemable at any time, in whole or in part, at Apache’s option, subject to a make-whole premium. The net proceeds from the sale of the notes were used to purchase certain outstanding notes in cash tender offers and for general corporate purposes.
On June 21, 2019, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $932 million aggregate principal amount of certain notes covered by the tender offers. Apache paid holders an aggregate of approximately $1.0 billion reflecting principal, the net premium to par, early tender premium, and accrued and unpaid interest. The Company recorded a net loss of $75 million on extinguishment of debt, including $7 million of unamortized debt issuance costs and discount, in connection with the note purchases.
In March 2018, the Company entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0
billion, of which $2.08 billion was committed as of September 30, 2019. The facility is for general corporate purposes, and committed borrowing capacity fully supports Apache’s commercial paper program. As of September 30, 2019, a letter of credit for approximately £3.1 million and no borrowings were outstanding under this facility.
The Company’s $3.5 billion 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, 2019, the Company had no commercial paper outstanding.
In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s two, one-year extension options). The agreement for this facility, as amended, provides aggregate commitments from a syndicate of banks of $650 million until the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the agreement, for the immediately preceding fiscal quarter equals or exceeds $175 million on an annualized basis (such period, the Initial Period). Following the Initial Period, the aggregate commitments equal $800 million. All aggregate commitments include a letter of credit subfacility of up to $100 million and a swingline loan subfacility of up to $100 million. After the Initial Period, Altus Midstream LP may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2019, there were $235 million of borrowings and no letters of credit outstanding under this facility. As of December 31, 2018, no borrowings or letters of credit were outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.
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,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
(In millions)
|
|
Interest expense
|
|
$
|
107
|
|
|
$
|
113
|
|
|
$
|
323
|
|
|
$
|
335
|
|
|
Amortization of deferred loan costs
|
|
2
|
|
|
2
|
|
|
5
|
|
|
8
|
|
|
Capitalized interest
|
|
(9
|
)
|
|
(11
|
)
|
|
(26
|
)
|
|
(36
|
)
|
|
Loss on extinguishment of debt
|
|
—
|
|
|
94
|
|
|
75
|
|
|
94
|
|
|
Interest income
|
|
(5
|
)
|
|
(6
|
)
|
|
(12
|
)
|
|
(16
|
)
|
|
Financing costs, net
|
|
$
|
95
|
|
|
$
|
192
|
|
|
$
|
365
|
|
|
$
|
385
|
|
|
|
|
|
11.
|
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, 2019, the Company has an accrued liability of approximately $19 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 Legal Matters described below, please see Note 9—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, 2018.
Argentine Environmental Claims and Argentina Tariff
No material change in the status of the YPF Sociedad Anónima indemnities matter has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Regarding the Pioneer Natural Resources Company indemnities matter, Company subsidiaries, on one hand, and Pioneer Natural Resources Company and TDF Holdings Company LDC, on the other, have settled and voluntarily dismissed certain indemnity-related claims against each other in a case captioned
Apache Corporation, et al. v. Pioneer Natural Resources Co., et al., Cause No. 2014-64407, pending in the 189th Judicial District of Harris County, Texas. Company subsidiaries retain certain rights to enforce certain Argentina-related indemnification obligations against Pioneer pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.
Louisiana Restoration
As more fully described in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including Apache, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to its original condition, regardless of the value of the underlying property. From time to time restoration lawsuits and claims are resolved by the Company for amounts that are not material to the Company, while new lawsuits and claims are asserted against the Company. With respect to each of the pending lawsuits and claims, the amount claimed is not currently determinable or is not material, except as noted. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While an adverse judgment against the Company is possible, the Company intends to actively defend these lawsuits and claims.
Starting in November of 2013 and continuing into 2019, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including Apache. These cases were all removed to federal courts in Louisiana. Some of the cases have been remanded to state court with the remand orders being appealed. Other of the cases have been stayed pending appeal. 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 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 the Company is possible, the Company 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, 2018.
Apollo Exploration Lawsuit
In a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, plaintiffs alleged damages in excess of $200 million (having previously claimed in excess of $1.1 billion) relating to 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 entered final judgment in favor of the Company, ruling that the plaintiffs take nothing by their claims and awarding the Company its attorneys’ fees and costs incurred in defending the lawsuit. The plaintiffs have appealed. 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, 2018.
Australian Operations Divestiture Dispute
Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, Apache filed suit against Quadrant for breach of the Quadrant SPA. In its suit, Apache seeks approximately $80 million. In December 2017, Quadrant filed a defense of equitable set-off to Apache’s claim and a counterclaim seeking approximately $200 million in the aggregate. The Company believes that Quadrant’s claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.
Canadian Operations Divestiture Dispute
Pursuant to a Sale and Purchase Agreement dated July 6, 2017 (Paramount SPA), the Company and its subsidiaries divested their remaining Canadian operations to Paramount Resources LTD (Paramount). Closing occurred on August 16, 2017. On September 11, 2019, four ex-employees of Apache Canada on behalf of themselves and individuals employed by Apache Canada LTD on July 6, 2017, filed an Amended Statement of Claim in a matter styled Stephen Flesch et. al. v Apache Corporation et. al. No. 1901-09160 Court of Queen’s Bench of Alberta against the Company and others seeking class certification and a finding that the Paramount SPA amounted to a Change of Control of the Company, entitling them to accelerated vesting under the Company’s
equity plans. In the suit, the purported class seeks approximately $60 million USD and punitive damages. The Company believes that Plaintiffs’ claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.
California Litigation
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. On December 20, 2017, in two separate actions, the City of Santa Cruz and Santa Cruz County and in a separate action on January 22, 2018, the City of Richmond, filed similar lawsuits against many of the same defendants. On November 14, 2018, the Pacific Coast Federation of Fishermen’s Associations, Inc. also filed a similar lawsuit against many of the same defendants. The Company believes that the claims made against it are baseless and intends to vigorously defend these lawsuits.
Castex Lawsuit
In a case styled Apache Corporation v. Castex Offshore, Inc, et. al., Cause No. 2015-48580, in the 113th Judicial District Court of Harris County, Texas, Castex filed claims for alleged damages which they recently disclosed to be approximately $200 million, relating to overspend on the Belle Isle Gas Facility upgrade, and the drilling of five sidetracks on the Potomac #3 Well. After a jury trial, a verdict of approximately $60 million, plus fees, costs and interest was entered against the Company. The Company is appealing.
Environmental Matters
As of September 30, 2019, the Company had an undiscounted reserve for environmental remediation of approximately $3 million. The Company is not aware of any environmental claims existing as of September 30, 2019 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.
|
|
|
|
12.
|
REDEEMABLE NONCONTROLLING INTEREST - ALTUS
|
Preferred Units Issuance
On June 12, 2019, Altus Midstream LP, an indirectly controlled subsidiary of Apache, issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act of 1933 (the Closing). Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. Pursuant to the partnership agreement of Altus Midstream LP:
|
|
|
|
•
|
The Preferred Units bear quarterly distributions at a rate of 7 percent per annum, increasing after the fifth anniversary of Closing and upon the occurrence of specified events. Altus Midstream LP may pay distributions in-kind for the first six quarters after the Preferred Units are issued.
|
|
|
|
|
•
|
The Preferred Units are redeemable at Altus Midstream LP’s option at any time in cash at a redemption price (the Redemption Price) equal to the greater of an 11.5 percent internal rate of return (increasing after the fifth anniversary of Closing to 13.75 percent) and a 1.3x multiple of invested capital. The Preferred Units will be redeemable at the holder’s option upon a change of control or liquidation of Altus Midstream LP and certain other events, including certain asset dispositions.
|
|
|
|
|
•
|
The Preferred Units will be exchangeable for shares of ALTM’s Class A common stock at the holder’s election after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be exchangeable for a number of shares of ALTM’s Class A common stock equal to the Redemption Price divided by the volume-weighted average trading price of ALTM’s Class A common stock on the NASDAQ Capital Market for the 20 trading days immediately preceding the second trading day prior to the applicable exchange date, less a 6 percent discount.
|
|
|
|
|
•
|
Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream LP’s common units and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.
|
|
|
|
|
•
|
Preferred Units holders have rights to approve certain partnership business, financial, and governance-related matters.
|
|
|
|
|
•
|
Altus Midstream LP is restricted from declaring or making cash distributions on its common units until all required distributions on the Preferred Units have been paid. In addition, before the fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Altus Midstream LP’s common units are limited to $650 million of cash from ordinary course operations if permitted under its credit facility. Cash distributions on, and redemptions of, Altus Midstream LP’s common units also are subject to satisfaction of leverage ratio requirements specified in its partnership agreement.
|
Classification
The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.
Initial Measurement
Altus recorded the net transaction price of $611 million, calculated as the negotiated transaction price of $625 million, less issue discounts of $4 million and transaction costs totaling $10 million.
Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Altus bifurcated and recognized at fair value an embedded derivative related to the Preferred Units of $94 million for a redemption option of the Preferred Unit holders. The derivative is reflected in “Other” within “Deferred Credits and Other Noncurrent Liabilities” on the Company’s consolidated balance sheet at its current fair value of $98 million. The fair value of the embedded derivative, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, imputed interest rate of Altus, the timing of periodic cash distributions, and dividend yields of the Preferred Units. See Note 4—Derivative Instruments and Hedging Activities for more detail.
The net transaction price was allocated to the preferred redeemable noncontrolling interest and the embedded features according to the associated initial fair value measurements as follows:
|
|
|
|
|
|
|
|
|
|
|
June 12, 2019
|
|
|
|
(In millions)
|
|
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners
|
|
$
|
517
|
|
|
Preferred Units embedded derivative
|
|
94
|
|
|
|
|
$
|
611
|
|
Subsequent Measurement
Altus applies a two-step approach to subsequent measurement of the redeemable noncontrolling interest related to the Preferred Units by first allocating a portion of the net income of Altus Midstream LP in accordance with the terms of the partnership agreement. An additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end may be recorded, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of Closing. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a)(i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability or (b) the accreted value of the net transaction price.
Activity related to the Preferred Units during the nine months ended September 30, 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units Outstanding
|
|
Financial Position(2)
|
|
|
|
(In millions, except unit data)
|
|
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: beginning of period
|
|
—
|
|
|
$
|
—
|
|
|
Issuance of Preferred Units, net
|
|
625,000
|
|
|
517
|
|
|
Distribution of in-kind additional Preferred Units(1)
|
|
2,188
|
|
|
—
|
|
|
Allocation of Altus Midstream LP net income
|
|
N/A
|
|
|
21
|
|
|
Accreted value adjustment
|
|
N/A
|
|
|
1
|
|
|
Redeemable noncontrolling interest - Altus Preferred Unit Limited Partners: end of period
|
|
627,188
|
|
|
539
|
|
|
Preferred Units embedded derivative
|
|
|
|
98
|
|
|
|
|
|
|
$
|
637
|
|
|
|
|
|
(1)
|
Subsequent to the balance sheet date, Altus Midstream LP provided notice to the Preferred Unit holders of record at September 30, 2019 of the amount of the distribution on the Preferred Units for the quarter ended September 30, 2019. The holders also were notified that Altus Midstream LP elected to pay the entire amount of the approximate $11 million distribution in-kind in additional Preferred Units (PIK Units) on November 14, 2019. In total, 10,975.8 PIK Units will be issued in satisfaction of the required distribution.
|
|
|
|
|
(2)
|
As at September 30, 2019, the aggregate Redemption Price was $646 million, based on an internal rate of return of 11.5 percent.
|
N/A - not applicable.
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, 2019 and 2018, is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
Loss
|
|
Shares
|
|
Per Share
|
|
Income
|
|
Shares
|
|
Per Share
|
|
|
|
(In millions, except per share amounts)
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common stock
|
|
$
|
(170
|
)
|
|
377
|
|
|
$
|
(0.45
|
)
|
|
$
|
81
|
|
|
383
|
|
|
$
|
0.21
|
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
—
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common stock
|
|
$
|
(170
|
)
|
|
377
|
|
|
$
|
(0.45
|
)
|
|
$
|
81
|
|
|
385
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
Loss
|
|
Shares
|
|
Per Share
|
|
Income
|
|
Shares
|
|
Per Share
|
|
|
|
(In millions, except per share amounts)
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common stock
|
|
$
|
(577
|
)
|
|
377
|
|
|
$
|
(1.53
|
)
|
|
$
|
421
|
|
|
383
|
|
|
$
|
1.10
|
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
(0.01
|
)
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common stock
|
|
$
|
(577
|
)
|
|
377
|
|
|
$
|
(1.53
|
)
|
|
$
|
421
|
|
|
385
|
|
|
$
|
1.09
|
|
The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling 5.2 million and 4.9 million for the quarters ended September 30, 2019 and 2018, respectively, and 5.1 million and 5.8 million for the nine months ended September 30, 2019 and 2018, respectively. The impact to net income (loss) attributable to common stock of an assumed conversion of the redeemable noncontrolling Preferred Units interests in Altus Midstream LP were anti-dilutive for the three- and nine-month periods ended September 30, 2019.
Common Stock Dividends
For the quarters ended September 30, 2019 and 2018, Apache paid $94 million and $96 million, respectively, in dividends on its common stock. For the nine months ended September 30, 2019 and 2018, the Company paid $282 million and $287 million, respectively.
Stock Repurchase Program
In 2013 and 2014, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased from time to time either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, 2019, had repurchased a total of 40 million shares at an average price of $79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during 2019.
|
|
|
|
14.
|
BUSINESS SEGMENT INFORMATION
|
As of September 30, 2019, Apache is engaged in exploration and production (Upstream) activities across three operating segments: Egypt, the North Sea, and the U.S. Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Apache’s Upstream business explores for, develops, and produces natural gas, crude oil and natural gas liquids. During the fourth quarter of 2018, Apache established a new reporting segment for its U.S. midstream business separate from its upstream oil and gas development activities. The midstream business is operated by Altus, which owns, develops, and operates a midstream energy asset network in the Permian Basin of West Texas, anchored by midstream service contracts to Apache’s production from its Alpine High resource play. Altus primarily generates revenue by providing fee-based natural gas gathering, compression, processing, and transportation services. Financial information for each segment is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt(1)
|
|
North Sea
|
|
U.S.
|
|
Altus
|
|
Intersegment Eliminations & Other
|
|
Total(2)
|
|
|
|
Upstream
|
|
Midstream
|
|
|
|
|
|
(In millions)
|
|
For the Quarter Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
472
|
|
|
$
|
231
|
|
|
$
|
504
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,207
|
|
|
Natural gas revenues
|
|
72
|
|
|
14
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
136
|
|
|
Natural gas liquids revenues
|
|
2
|
|
|
5
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
Oil and gas production revenues
|
|
546
|
|
|
250
|
|
|
642
|
|
|
—
|
|
|
—
|
|
|
1,438
|
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
(34
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
115
|
|
|
76
|
|
|
159
|
|
|
—
|
|
|
—
|
|
|
350
|
|
|
Gathering, processing, and transmission
|
|
9
|
|
|
9
|
|
|
69
|
|
|
13
|
|
|
(34
|
)
|
|
66
|
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
40
|
|
|
4
|
|
|
—
|
|
|
44
|
|
|
Exploration
|
|
27
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
4
|
|
|
56
|
|
|
Depreciation, depletion, and amortization
|
|
177
|
|
|
71
|
|
|
452
|
|
|
11
|
|
|
—
|
|
|
711
|
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
19
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|
|
|
328
|
|
|
175
|
|
|
753
|
|
|
37
|
|
|
(30
|
)
|
|
1,263
|
|
|
Operating Income (Loss)(3)
|
|
$
|
218
|
|
|
$
|
75
|
|
|
$
|
(111
|
)
|
|
$
|
(3
|
)
|
|
$
|
(4
|
)
|
|
175
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
Other(4)
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt(1)
|
|
North Sea
|
|
U.S.
|
|
Altus
|
|
Intersegment Eliminations & Other
|
|
Total(2)
|
|
|
|
Upstream
|
|
Midstream
|
|
|
|
|
|
(In millions)
|
|
For the Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
1,509
|
|
|
$
|
868
|
|
|
$
|
1,537
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,914
|
|
|
Natural gas revenues
|
|
223
|
|
|
64
|
|
|
203
|
|
|
—
|
|
|
—
|
|
|
490
|
|
|
Natural gas liquids revenues
|
|
9
|
|
|
16
|
|
|
261
|
|
|
—
|
|
|
—
|
|
|
286
|
|
|
Oil and gas production revenues
|
|
1,741
|
|
|
948
|
|
|
2,001
|
|
|
—
|
|
|
—
|
|
|
4,690
|
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
(92
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
365
|
|
|
240
|
|
|
501
|
|
|
—
|
|
|
(2
|
)
|
|
1,104
|
|
|
Gathering, processing, and transmission
|
|
31
|
|
|
32
|
|
|
214
|
|
|
43
|
|
|
(90
|
)
|
|
230
|
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
131
|
|
|
10
|
|
|
—
|
|
|
141
|
|
|
Exploration
|
|
89
|
|
|
2
|
|
|
117
|
|
|
—
|
|
|
12
|
|
|
220
|
|
|
Depreciation, depletion, and amortization
|
|
538
|
|
|
269
|
|
|
1,125
|
|
|
27
|
|
|
—
|
|
|
1,959
|
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
56
|
|
|
23
|
|
|
1
|
|
|
—
|
|
|
80
|
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
240
|
|
|
9
|
|
|
—
|
|
|
249
|
|
|
|
|
1,023
|
|
|
599
|
|
|
2,351
|
|
|
90
|
|
|
(80
|
)
|
|
3,983
|
|
|
Operating Income (Loss)(3)
|
|
$
|
718
|
|
|
$
|
349
|
|
|
$
|
(350
|
)
|
|
$
|
2
|
|
|
$
|
(12
|
)
|
|
707
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(40
|
)
|
|
Other(4)
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(323
|
)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(365
|
)
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets(5)
|
|
$
|
3,851
|
|
|
$
|
2,529
|
|
|
$
|
12,288
|
|
|
$
|
2,649
|
|
|
$
|
88
|
|
|
$
|
21,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
669
|
|
|
$
|
303
|
|
|
$
|
583
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,555
|
|
|
Natural gas revenues
|
|
86
|
|
|
30
|
|
|
125
|
|
|
—
|
|
|
—
|
|
|
241
|
|
|
Natural gas liquids revenues
|
|
4
|
|
|
5
|
|
|
171
|
|
|
—
|
|
|
—
|
|
|
180
|
|
|
Oil and gas production revenues
|
|
759
|
|
|
338
|
|
|
879
|
|
|
—
|
|
|
—
|
|
|
1,976
|
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
(25
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
112
|
|
|
92
|
|
|
178
|
|
|
—
|
|
|
—
|
|
|
382
|
|
|
Gathering, processing, and transmission
|
|
12
|
|
|
12
|
|
|
76
|
|
|
17
|
|
|
(25
|
)
|
|
92
|
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
57
|
|
|
1
|
|
|
—
|
|
|
58
|
|
|
Exploration
|
|
10
|
|
|
2
|
|
|
86
|
|
|
—
|
|
|
1
|
|
|
99
|
|
|
Depreciation, depletion, and amortization
|
|
187
|
|
|
89
|
|
|
329
|
|
|
5
|
|
|
—
|
|
|
610
|
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
19
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
Impairments
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
|
|
321
|
|
|
224
|
|
|
734
|
|
|
23
|
|
|
(24
|
)
|
|
1,278
|
|
|
Operating Income (Loss)(3)
|
|
$
|
438
|
|
|
$
|
114
|
|
|
$
|
145
|
|
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
698
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
Other(4)
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(192
|
)
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt(1)
|
|
North Sea
|
|
U.S.
|
|
Altus
|
|
Intersegment Eliminations & Other
|
|
Total(2)
|
|
|
|
Upstream
|
|
Midstream
|
|
|
|
|
|
(In millions)
|
|
For the Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
1,887
|
|
|
$
|
894
|
|
|
$
|
1,743
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,524
|
|
|
Natural gas revenues
|
|
263
|
|
|
81
|
|
|
331
|
|
|
—
|
|
|
—
|
|
|
675
|
|
|
Natural gas liquids revenues
|
|
11
|
|
|
14
|
|
|
421
|
|
|
—
|
|
|
—
|
|
|
446
|
|
|
Oil and gas production revenues
|
|
2,161
|
|
|
989
|
|
|
2,495
|
|
|
—
|
|
|
—
|
|
|
5,645
|
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
(50
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
316
|
|
|
264
|
|
|
507
|
|
|
—
|
|
|
—
|
|
|
1,087
|
|
|
Gathering, processing, and transmission
|
|
35
|
|
|
32
|
|
|
204
|
|
|
39
|
|
|
(50
|
)
|
|
260
|
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
156
|
|
|
6
|
|
|
—
|
|
|
162
|
|
|
Exploration
|
|
70
|
|
|
19
|
|
|
159
|
|
|
—
|
|
|
3
|
|
|
251
|
|
|
Depreciation, depletion, and amortization
|
|
564
|
|
|
281
|
|
|
913
|
|
|
13
|
|
|
—
|
|
|
1,771
|
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
56
|
|
|
24
|
|
|
1
|
|
|
—
|
|
|
81
|
|
|
Impairments
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
|
|
985
|
|
|
662
|
|
|
1,963
|
|
|
59
|
|
|
(47
|
)
|
|
3,622
|
|
|
Operating Income (Loss)(3)
|
|
$
|
1,176
|
|
|
$
|
327
|
|
|
$
|
532
|
|
|
$
|
(9
|
)
|
|
$
|
(3
|
)
|
|
2,023
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
Other(4)
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(330
|
)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(385
|
)
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets(5)
|
|
$
|
4,404
|
|
|
$
|
3,033
|
|
|
$
|
13,335
|
|
|
$
|
1,054
|
|
|
$
|
44
|
|
|
$
|
21,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes revenue from non-customers for the third quarters and nine-month periods of 2019 and 2018 of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
(In millions)
|
|
Oil
|
|
$
|
98
|
|
|
$
|
181
|
|
|
$
|
316
|
|
|
$
|
485
|
|
|
Natural gas
|
|
9
|
|
|
16
|
|
|
30
|
|
|
47
|
|
|
Natural gas liquids
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
|
|
|
(2)
|
Includes a noncontrolling interest in Egypt for the 2019 and 2018 periods, and Altus for the 2019 period.
|
|
|
|
|
(3)
|
The operating income (loss) of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $10 million, and $2 million, respectively, for the third quarter of 2019. The operating income of Altus Midstream, U.S., and Egypt includes leasehold and other asset impairments totaling $9 million, $308 million, and $6 million, respectively, for the first nine months of 2019. The operating income (loss) of U.S. and North Sea includes leasehold and unproved impairments totaling $39 million and $10 million, respectively, for the third quarter of 2018. The operating income of U.S. and North Sea includes leasehold and unproved impairments totaling $76 million and $10 million, respectively, for the first nine months of 2018.
|
|
|
|
|
(4)
|
Included in Other are sales proceeds related to U.S. third-party purchased oil and gas volumes which are determined to be revenue from customers. Proceeds for these volumes totaled $30 million and $124 million for the third quarters of 2019 and 2018, respectively, and $71 million and $326 million for the first nine months of 2019 and 2018, respectively.
|
|
|
|
|
(5)
|
Intercompany balances are excluded from total assets.
|