APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
In millions except share and per-share amounts
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents ($24 and $6 related to Altus VIE)
|
|
$
|
262
|
|
|
$
|
247
|
|
Receivables, net of allowance of $95 and $88
|
|
908
|
|
|
1,062
|
|
Other current assets (Note 5) ($5 and $5 related to Altus VIE)
|
|
676
|
|
|
652
|
|
|
|
1,846
|
|
|
1,961
|
|
PROPERTY AND EQUIPMENT:
|
|
|
|
|
Oil and gas, on the basis of successful efforts accounting:
|
|
|
|
|
Proved properties
|
|
41,217
|
|
|
40,540
|
|
Unproved properties and properties under development
|
|
602
|
|
|
666
|
|
Gathering, processing, and transmission facilities ($206 and $203 related to Altus VIE)
|
|
670
|
|
|
799
|
|
Other ($3 and $4 related to Altus VIE)
|
|
1,140
|
|
|
1,140
|
|
|
|
43,629
|
|
|
43,145
|
|
Less: Accumulated depreciation, depletion, and amortization ($13 and $1 related to Altus VIE)
|
|
(34,810)
|
|
|
(28,987)
|
|
|
|
8,819
|
|
|
14,158
|
|
OTHER ASSETS:
|
|
|
|
|
Equity method interests (Note 6) ($1,555 and $1,258 related to Altus VIE)
|
|
1,555
|
|
|
1,258
|
|
Deferred charges and other ($5 and $4 related to Altus VIE)
|
|
526
|
|
|
730
|
|
|
|
$
|
12,746
|
|
|
$
|
18,107
|
|
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY (DEFICIT)
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable
|
|
$
|
444
|
|
|
$
|
695
|
|
Current debt (nil and $10 related to Altus VIE)
|
|
2
|
|
|
11
|
|
Other current liabilities (Note 7) ($4 and $21 related to Altus VIE)
|
|
862
|
|
|
1,149
|
|
|
|
1,308
|
|
|
1,855
|
|
LONG-TERM DEBT (Note 9) ($624 and $396 related to Altus VIE)
|
|
8,770
|
|
|
8,555
|
|
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
|
|
|
|
|
Income taxes
|
|
215
|
|
|
346
|
|
Asset retirement obligation ($64 and $60 related to Altus VIE)
|
|
1,888
|
|
|
1,811
|
|
Other ($144 and $107 related to Altus VIE)
|
|
602
|
|
|
520
|
|
|
|
2,705
|
|
|
2,677
|
|
COMMITMENTS AND CONTINGENCIES (Note 11)
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 13)
|
|
608
|
|
|
555
|
|
|
|
|
|
|
EQUITY (DEFICIT):
|
|
|
|
|
Common stock, $0.625 par, 860,000,000 shares authorized, 418,429,375 and 417,026,863 shares issued, respectively
|
|
262
|
|
|
261
|
|
Paid-in capital
|
|
11,735
|
|
|
11,769
|
|
Accumulated deficit
|
|
(10,461)
|
|
|
(5,601)
|
|
Treasury stock, at cost, 40,946,745 and 40,964,193 shares, respectively
|
|
(3,189)
|
|
|
(3,190)
|
|
Accumulated other comprehensive income
|
|
14
|
|
|
16
|
|
APACHE SHAREHOLDERS’ EQUITY (DEFICIT)
|
|
(1,639)
|
|
|
3,255
|
|
Noncontrolling interest - Egypt
|
|
925
|
|
|
1,137
|
|
Noncontrolling interest - Altus
|
|
69
|
|
|
73
|
|
TOTAL EQUITY (DEFICIT)
|
|
(645)
|
|
|
4,465
|
|
|
|
$
|
12,746
|
|
|
$
|
18,107
|
|
The accompanying notes to consolidated financial statements are an integral part of this statement.
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTEREST
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners
|
|
|
Common
Stock
|
|
Paid-In
Capital
|
|
Accumulated Deficit
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
APACHE
SHAREHOLDERS’
EQUITY (DEFICIT)
|
|
Noncontrolling
Interests
|
|
TOTAL
EQUITY (DEFICIT)
|
|
|
(In millions)
|
|
|
(In millions)
|
BALANCE AT DECEMBER 31, 2017
|
|
$
|
—
|
|
|
|
$
|
259
|
|
|
$
|
12,128
|
|
|
$
|
(2,088)
|
|
|
$
|
(2,887)
|
|
|
$
|
4
|
|
|
$
|
7,416
|
|
|
$
|
1,375
|
|
|
$
|
8,791
|
|
Net income attributable to common stock
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
Net income attributable to noncontrolling interest - Egypt
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
245
|
|
|
245
|
|
Net income attributable to noncontrolling interest - Altus
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Distributions to noncontrolling interest - Egypt
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(345)
|
|
|
(345)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common dividends ($1.00 per share)
|
|
—
|
|
|
|
—
|
|
|
(380)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(380)
|
|
|
—
|
|
|
(380)
|
|
Common stock activity, net
|
|
—
|
|
|
|
1
|
|
|
(29)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28)
|
|
|
—
|
|
|
(28)
|
|
Treasury stock activity, net
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(305)
|
|
|
—
|
|
|
(305)
|
|
|
—
|
|
|
(305)
|
|
Proceeds from Altus transaction
|
|
—
|
|
|
|
—
|
|
|
222
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
222
|
|
|
406
|
|
|
628
|
|
Compensation expense
|
|
—
|
|
|
|
—
|
|
|
160
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
160
|
|
|
—
|
|
|
160
|
|
Other
|
|
—
|
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
BALANCE AT DECEMBER 31, 2018
|
|
$
|
—
|
|
|
|
$
|
260
|
|
|
$
|
12,106
|
|
|
$
|
(2,048)
|
|
|
$
|
(3,192)
|
|
|
$
|
4
|
|
|
$
|
7,130
|
|
|
$
|
1,682
|
|
|
$
|
8,812
|
|
Net loss attributable to common stock
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(3,553)
|
|
|
—
|
|
|
—
|
|
|
(3,553)
|
|
|
—
|
|
|
(3,553)
|
|
Net income attributable to noncontrolling interest - Egypt
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
167
|
|
|
167
|
|
Net loss attributable to noncontrolling interest - Altus
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(334)
|
|
|
(334)
|
|
Issuance of Altus Preferred Units
|
|
517
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to Altus Preferred Unit limited partners
|
|
38
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Distributions to noncontrolling interest - Egypt
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(305)
|
|
|
(305)
|
|
Pension & Postretirement benefit plans, net of tax
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|
—
|
|
|
13
|
|
Common dividends ($1.00 per share)
|
|
—
|
|
|
|
—
|
|
|
(376)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(376)
|
|
|
—
|
|
|
(376)
|
|
Common stock activity, net
|
|
—
|
|
|
|
1
|
|
|
(22)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21)
|
|
|
—
|
|
|
(21)
|
|
Compensation expense
|
|
—
|
|
|
|
—
|
|
|
61
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61
|
|
|
—
|
|
|
61
|
|
Other
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
|
1
|
|
BALANCE AT DECEMBER 31, 2019
|
|
$
|
555
|
|
|
|
$
|
261
|
|
|
$
|
11,769
|
|
|
$
|
(5,601)
|
|
|
$
|
(3,190)
|
|
|
$
|
16
|
|
|
$
|
3,255
|
|
|
$
|
1,210
|
|
|
$
|
4,465
|
|
Net loss attributable to common stock
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(4,860)
|
|
|
—
|
|
|
—
|
|
|
(4,860)
|
|
|
—
|
|
|
(4,860)
|
|
Net loss attributable to noncontrolling interest - Egypt
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(121)
|
|
|
(121)
|
|
Net income attributable to noncontrolling interest - Altus
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Distributions to Altus Preferred Unit limited partners
|
|
(23)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to Altus Preferred Unit limited partners
|
|
76
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Distributions to noncontrolling interest - Egypt
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(91)
|
|
|
(91)
|
|
Altus dividends
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(5)
|
|
Pension & Postretirement benefit plans, net of tax
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
Common dividends ($0.10 per share)
|
|
—
|
|
|
|
—
|
|
|
(38)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38)
|
|
|
—
|
|
|
(38)
|
|
Common stock activity, net
|
|
—
|
|
|
|
1
|
|
|
(18)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17)
|
|
|
—
|
|
|
(17)
|
|
Compensation expense
|
|
—
|
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
Other
|
|
—
|
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
BALANCE AT DECEMBER 31, 2020
|
|
$
|
608
|
|
|
|
$
|
262
|
|
|
$
|
11,735
|
|
|
$
|
(10,461)
|
|
|
$
|
(3,189)
|
|
|
$
|
14
|
|
|
$
|
(1,639)
|
|
|
$
|
994
|
|
|
$
|
(645)
|
|
The accompanying notes to consolidated financial statements are an integral part of this statement.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nature of Operations
Apache Corporation (Apache or the Company) is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. The Company’s upstream business has exploration and production operations in three geographic areas: the United States (U.S.), Egypt, and offshore the U.K. in the North Sea (North Sea). Apache also has active exploration and planned appraisal operations ongoing in Suriname, as well as interests in other international locations that may, over time, result in reportable discoveries and development opportunities. Apache’s midstream business is operated by Altus Midstream Company (Nasdaq: ALTM) through its subsidiary Altus Midstream LP (collectively, Altus). Altus owns, develops, and operates a midstream energy asset network in the Permian Basin of West Texas.
On January 4, 2021, Apache announced that its Board of Directors authorized the Company to proceed with the implementation of a holding company reorganization, in connection with which, Apache will create APA Corporation, a new holding company (APA). Upon completion of the holding company reorganization, Apache will be a wholly-owned subsidiary of APA, APA will be the successor issuer to Apache pursuant to Rule 12g-3(a) under the Exchange, and APA will replace Apache as the public company trading on the Nasdaq Global Select Market under the ticker symbol “APA” (the Holding Company Reorganization). The Holding Company Reorganization has not yet been implemented, but it is expected to be completed during the first half of 2021.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies used by Apache and its subsidiaries reflect industry practices and conform to accounting principles generally accepted in the U.S. (GAAP). The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-year presentation. Significant accounting policies are discussed 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, it 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 subsidiary of Apache 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 the Company’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. ALTM qualifies as a variable interest entity (VIE) under GAAP. Apache consolidates the activities of ALTM because it has concluded that it has a controlling financial interest in ALTM and is the primary beneficiary of the VIE. 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. Refer to Note 13—Redeemable Noncontrolling Interest - Altus for further detail.
Investments in which the Company 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 the Company’s consolidated balance sheet and 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 further detail.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Use of Estimates
Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities 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. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of the Company’s financial statements and changes in these estimates are recorded when known. Significant estimates with regard to these financial statements include the estimates of fair value for long-lived assets (see “Fair Value Measurements” and “Property and Equipment” sections in this Note 1 below), the fair value determination of acquired assets and liabilities (see Note 2—Acquisitions and Divestitures), the assessment of asset retirement obligations (see Note 8—Asset Retirement Obligation), the estimate of income taxes (see Note 10—Income Taxes), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom (see Note 18—Supplemental Oil and Gas Disclosures (Unaudited)).
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).
The Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. The following table presents a summary of asset impairments recorded in connection with fair value assessments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Oil and gas proved property
|
|
$
|
4,319
|
|
|
$
|
1,484
|
|
|
$
|
328
|
|
Gathering, processing, and transmission facilities
|
|
68
|
|
|
1,295
|
|
|
56
|
|
Equity method investment
|
|
—
|
|
|
—
|
|
|
113
|
|
Divested unproved properties and leasehold
|
|
—
|
|
|
149
|
|
|
10
|
|
Goodwill
|
|
87
|
|
|
—
|
|
|
—
|
|
Inventory and other
|
|
27
|
|
|
21
|
|
|
4
|
|
Total Impairments
|
|
$
|
4,501
|
|
|
$
|
2,949
|
|
|
$
|
511
|
|
For the year ended December 31, 2020, the Company recorded asset impairments totaling $4.5 billion in connection with fair value assessments.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Given the crude oil price collapse on lower demand and economic activity resulting from the coronavirus disease 2019 (COVID-19) global pandemic and related governmental actions, the Company assessed its oil and gas property and gathering, processing, and transmission (GPT) facilities for impairment based on the net book value of its assets as of March 31, 2020. The Company recorded proved property impairments totaling $3.9 billion, $354 million, and $7 million in the U.S., Egypt, and North Sea, respectively, all of which were impaired to their estimated fair values as a result of lower forecasted commodity prices, changes to planned development activity, and increasing market uncertainty. Impairments totaling $68 million were similarly recorded for GPT facilities in Egypt. These impairments are discussed in further detail below in “Property and Equipment - Oil and Gas Property” and “Property and Equipment - Gathering, Processing, and Transmission Facilities.”
The Company also performed an interim impairment analysis of the goodwill related to its Egypt reporting unit. Reductions in estimated net present value of expected future cash flows from oil and gas properties resulted in implied fair values below the carrying values of the Company’s Egypt reporting unit. As a result of these assessments, the Company recognized non-cash impairments of the entire amount of recorded goodwill in the Egypt reporting unit of $87 million in the first quarter of 2020.
During the remainder of 2020, the Company recorded additional proved property impairments totaling $20 million in Egypt, as well as $13 million for the early termination of drilling rig leases, $5 million for inventory revaluations, and $9 million of other asset impairments, all in the U.S.
During the fourth quarter of 2019, following a material reduction to planned investment in Apache’s Alpine High development, the Company recorded impairments totaling $1.4 billion for its Alpine High proved properties and upstream infrastructure which were written down to their fair values. Altus separately assessed its long-lived infrastructure assets for impairment based on expected reductions to future throughput volumes from Alpine High. Altus subsequently recorded impairments totaling $1.3 billion on its GPT facilities. These impairments are discussed in further detail below in “Property and Equipment - Oil and Gas Property” and “Property and Equipment - Gathering, Processing, and Transmission Facilities.”
Separate from the Company’s Alpine High and Altus impairments, Apache entered into agreements to sell certain of its assets in the western Anadarko Basin in Oklahoma and Texas. As a result of these agreements, a separate impairment analysis was performed for each of the assets within the disposal groups. 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 in the second and fourth quarters of 2019 totaling $255 million, including $101 million on the Company’s proved properties, $149 million on its unproved properties, and $5 million on other working capital. For more information regarding this transaction, refer to Note 2—Acquisitions and Divestitures.
For the year ended December 31, 2018, the Company recorded asset impairments totaling $511 million in connection with fair value assessments. Impairments totaling $328 million and $56 million were recorded for proved properties, and a gathering and processing facility in Oklahoma, respectively, which were written down to their fair values associated with U.S. assets to be divested. During the third quarter of 2018, Apache agreed to sell certain of its unproved properties offshore the U.K. in the 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. The fair value of the impaired assets was determined using the negotiated sales price, a Level 1 fair value measurement. Also in 2018, the Company recorded $113 million for the impairment of an equity method investment in the U.S. based on a negotiated sales price and $4 million for inventory write-downs in the U.S. for obsolescence.
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value. As of December 31, 2020 and 2019, the Company had $262 million and $247 million, respectively, of cash and cash equivalents, of which approximately $24 million and $6 million, respectively, was held by Altus. The Company had no restricted cash as of December 31, 2020 and 2019.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are stated at amortized cost net of an allowance for credit losses. The Company routinely assesses the collectability of its financial assets measured at amortized cost. In June 2016, the Financial Accounting Standards Board (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. This ASU requires the use of a new forward-looking “expected loss” model compared to the previous “incurred loss” model, resulting in accelerated recognition of credit losses. Apache adopted this update in the first quarter of 2020. This ASU primarily applies to the Company’s accounts receivable balances, of which the majority are received within a short-term period of one year or less. The Company monitors the credit quality of its counterparties through review of collections, credit ratings, and other analyses. The Company develops its estimated allowance for credit losses primarily using an aging method and analyses of historical loss rates as well as consideration of current and future conditions that could impact its counterparties’ credit quality and liquidity. The adoption and implementation of this ASU did not have a material impact on the Company’s financial statements.
The following table presents changes to the Company’s allowance for credit loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Allowance for credit loss at beginning of year
|
|
$
|
88
|
|
|
$
|
92
|
|
|
$
|
84
|
|
Additional provisions for the year
|
|
7
|
|
|
3
|
|
|
9
|
|
Uncollectible accounts written off, net of recoveries
|
|
—
|
|
|
(7)
|
|
|
(1)
|
|
Allowance for credit loss at end of year
|
|
$
|
95
|
|
|
$
|
88
|
|
|
$
|
92
|
|
Inventories
Inventories consist principally of tubular goods and equipment and are stated at the lower of weighted-average cost or net realizable value. Oil produced but not sold, primarily in the North Sea, is also recorded to inventory and is stated at the lower of the cost to produce or net realizable value.
Property and Equipment
The carrying value of the Company’s property and equipment represents the cost incurred to acquire the property and equipment, including capitalized interest, net of any impairments. For business combinations, property and equipment cost is based on the fair values at the acquisition date.
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.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments, a Level 3 fair value measurement.
The significant decline in crude oil and natural gas prices, as well as longer-term commodity price outlooks, related to reduced demand for oil and natural gas as a result of the COVID-19 pandemic and related governmental actions indicated possible impairment of the Company’s proved and unproved oil and gas properties in early 2020. In addition to estimating risk-adjusted reserves and future production volumes, estimated future commodity prices are the largest driver in variability of undiscounted pre-tax cash flows. Expected cash flows were estimated based on management’s views of published West Texas Intermediate (WTI), Brent, and Henry Hub forward pricing as of the balance sheet dates. Other significant assumptions and inputs used to calculate estimated future cash flows include estimates for future development activity, exploration plans and remaining lease terms. A 10 percent discount rate, based on a market-based weighted-average cost of capital estimate, was applied to the undiscounted cash flow estimate to value all of the Company’s asset groups that were subject to impairment charges in 2020. Similar assumptions were applied to impairments recorded in 2019 and 2018.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table represents non-cash impairments charges of the carrying value of the Company’s proved and unproved properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Proved properties:
|
|
|
|
|
|
|
U.S.
|
|
$
|
3,938
|
|
|
$
|
1,484
|
|
|
$
|
265
|
|
Egypt
|
|
374
|
|
|
—
|
|
|
63
|
|
North Sea
|
|
7
|
|
|
—
|
|
|
—
|
|
Total proved properties
|
|
$
|
4,319
|
|
|
$
|
1,484
|
|
|
$
|
328
|
|
|
|
|
|
|
|
|
Unproved properties:
|
|
|
|
|
|
|
U.S.
|
|
$
|
92
|
|
|
$
|
760
|
|
|
$
|
96
|
|
Egypt
|
|
8
|
|
|
8
|
|
|
—
|
|
North Sea
|
|
1
|
|
|
—
|
|
|
128
|
|
Total unproved properties
|
|
$
|
101
|
|
|
$
|
768
|
|
|
$
|
224
|
|
Proved properties impaired had aggregate fair values as of the most recent date of impairment of $1.9 billion and $628 million for 2020 and 2019, respectively.
Unproved leasehold impairments are typically recorded as a component of “Exploration” expense in the Company’s statement of consolidated operations. However, in 2019, unproved impairments of $149 million were recorded as a component of “Impairments” in connection with an agreement to sell certain non-core leasehold properties in Oklahoma and Texas. In addition, in 2018, unproved impairments of $10 million were recorded as a component of “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. Refer to Note 2—Acquisitions and Divestitures for more detail.
Gathering, Processing, and Transmission Facilities
GPT facilities totaled $670 million and $799 million at December 31, 2020 and 2019, respectively, with accumulated depreciation for these assets totaling $323 million and $310 million for the respective periods. GPT facilities are depreciated on a straight-line basis over the estimated useful lives of the assets. The estimation of useful life takes into consideration anticipated production lives from the fields serviced by the GPT assets, whether Apache-operated or third party-operated, as well as potential development plans by the Company for undeveloped acreage within or in close proximity to those fields.
The Company assesses the carrying amount of its GPT facilities whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of these facilities is more than the sum of the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying value over its fair value.
Apache assessed its long-lived infrastructure assets for impairment at March 31, 2020, and recorded an impairment of $68 million on its GPT facilities in Egypt during the first quarter of 2020. The fair values of the impaired assets, which were determined to be $46 million, were estimated using the income approach, which considers internal estimates based on future throughput volumes from applicable development concessions in Egypt and estimated costs to operate. These assumptions were applied based on throughput assumptions developed in relation to the oil and gas proved property impairment assessment as discussed above to develop future cash flow projections that were then discounted to estimated fair value, using a 10 percent discount rate, based on a market-based weighted-average cost of capital estimate. Apache has classified these non-recurring fair value measurements as Level 3 in the fair value hierarchy.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As discussed under “Fair Value Measurements” above, the Company decided to materially reduce its planned investment in the Alpine High play during its fourth-quarter 2019 capital planning review. Altus management subsequently assessed its long-lived infrastructure assets for impairment given the expected reduction to future throughput volumes and recorded impairments of $1.3 billion on its gathering, processing, and transmission assets. The fair values of the impaired assets were determined to be $203 million as of the time of the impairment and were estimated using the income approach. The income approach considered internal estimates of future throughput volumes, processing rates, and costs. These assumptions were applied to develop future cash flow projections that were then discounted to estimated fair value, using discount rates believed to be consistent with those applied by market participants. Apache has classified these non-recurring fair value measurements as Level 3 in the fair value hierarchy.
During 2018, the Company recorded impairments of the entire net book value of certain GPT assets in the U.S. in the amount of $56 million associated with a proposed divestiture package.
The costs of GPT assets sold or otherwise disposed of and associated accumulated depreciation are removed from Apache’s consolidated financial statements, and the resulting gain or loss is reflected in “Gain on divestitures” under “Revenues and Other” in the Company’s statement of consolidated operations. A $2 million loss was recorded on the sale of power generators during 2020, and no gain or loss on the sales of GPT facilities was recognized during 2019 or 2018.
Other Property and Equipment
Other property and equipment includes computer software and equipment, buildings, vehicles, furniture and fixtures, land, and other equipment. These assets are depreciated on a straight-line basis over the estimated useful lives of the assets, which range from 3 to 20 years. Other property and equipment totaled $1.1 billion at each of December 31, 2020 and 2019, with accumulated depreciation for these assets totaling $864 million and $817 million at December 31, 2020 and 2019, respectively.
Asset Retirement Costs and Obligations
The initial estimated asset retirement obligation related to property and equipment and subsequent revisions are recorded as a liability at fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. Revisions in estimated liabilities can result from changes in estimated inflation rates, changes in service and equipment costs and changes in the estimated timing of an asset’s retirement. Asset retirement costs are depreciated using a systematic and rational method similar to that used for the associated property and equipment. Accretion expense on the liability is recognized over the estimated productive life of the related assets.
Capitalized Interest
For significant projects, interest is capitalized as part of the historical cost of developing and constructing assets. Significant oil and gas investments in unproved properties actively being explored, significant exploration and development projects that have not commenced production, significant midstream development activities that are in progress, and investments in equity method affiliates that are undergoing the construction of assets that have not commenced principal operations qualify for interest capitalization. Interest is capitalized until the asset is ready for service. Capitalized interest is determined by multiplying the Company’s weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation.
Goodwill
Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed, and it is recorded in “Deferred charges and other” in the Company’s consolidated balance sheet. The Company assesses the carrying amount of goodwill by testing for impairment annually and when impairment indicators arise. The impairment test requires allocating goodwill and all other assets and liabilities to assigned reporting units. Apache assesses each country as a reporting unit, with Egypt being the only reporting unit to have associated goodwill. The fair value of the reporting unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, including goodwill, then goodwill is written down to its implied fair value through a charge to expense.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
When there is a disposal of a reporting unit or a portion of a reporting unit that constitutes a business, goodwill associated with that business is included in the carrying amount to determine the gain or loss on disposal. The amount of goodwill allocated to the carrying amount of a business can significantly impact the amount of gain or loss recognized on the sale of that business. The amount of goodwill to be included in that carrying amount is based on the relative fair value of the business to be disposed of and the portion of the reporting unit that will be retained.
The following presents the changes to goodwill for the years ended 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
Total
|
|
|
(In millions)
|
Goodwill at December 31, 2017
|
|
$
|
87
|
|
|
$
|
87
|
|
Impairments
|
|
—
|
|
|
—
|
|
Goodwill at December 31, 2018
|
|
87
|
|
|
87
|
|
Impairments
|
|
—
|
|
|
—
|
|
Goodwill at December 31, 2019
|
|
87
|
|
|
87
|
|
Impairments
|
|
(87)
|
|
|
(87)
|
|
Goodwill at December 31, 2020
|
|
$
|
—
|
|
|
$
|
—
|
|
Reductions in estimated net present value of expected future cash flows from oil and gas properties resulted in implied fair values below the carrying values of the Company’s Egypt reporting unit. As a result of these assessments, the Company recognized non-cash impairments of the entire amount of recorded goodwill in the Egypt reporting unit of $87 million. This goodwill impairment has been recorded in “Impairments” in the Company’s statement of consolidated operations.
Commitments and Contingencies
Accruals for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. For more information regarding loss contingencies, refer to Note 11—Commitments and Contingencies.
Revenue Recognition
The years ended 2019 and 2018 include the reclassification of $176 million and $357 million, respectively, from “Other” to “Purchased oil and gas sales,” both within “Revenues and Other” and the respective associated $142 million and $340 million purchased oil and gas costs from “Other” within “Revenues and Other” to “Purchased oil and gas costs” within “Operating Expenses” on the Company’s consolidated statement of operations to conform to the current-year presentation.
Upstream
The Company’s upstream oil and gas segments primarily generate revenue from contracts with customers from the sale of its crude oil, natural gas, and natural gas liquids production volumes. In addition to Apache-related production volumes, the Company also sells commodity volumes purchased from third-parties to fulfill sales obligations and commitments as the Company’s production fluctuates with potential operational issues and changes to development plans. Under these short-term commodity sales contracts, the physical delivery of each unit of quantity represents a single, distinct performance obligation on behalf of the Company. Contract prices are determined based on market-indexed prices, adjusted for quality, transportation, and other market-reflective differentials. Revenue is measured by allocating an entirely variable market price to each performance obligation and recognized at a point in time when control is transferred to the customer. The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, and the Company’s right to payment. Control typically transfers to customers upon the physical delivery at specified locations within each contract and the transfer of title.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Company’s Egypt operations are conducted pursuant to production sharing contracts under which the contractor partners (Contractors) pay all operating and capital costs for exploring and developing defined concessions. A percentage of the production, generally up to 40 percent, is available to Contractors to recover these operating and capital costs over contractually defined periods. The balance of the production is split among the Contractors and the Egyptian General Petroleum Corporation (EGPC) on a contractually defined basis. Additionally, the Contractors’ income taxes, which remain the liability of the Contractors under domestic law, are paid by EGPC on behalf of the Contractors out of EGPC’s production entitlement. Income taxes paid to the Arab Republic of Egypt on behalf of Apache as Contractor are recognized as oil and gas sales revenue and income tax expense and reflected as production and estimated reserves. Revenues related to Egypt’s tax volumes are considered revenue from a non-customer.
Altus Midstream
The Company’s Altus Midstream segment is operated by ALTM, through its subsidiary, Altus Midstream LP (collectively, Altus). Altus generates revenue from contracts with customers from its gathering, compression, processing, and transmission services provided on Apache’s natural gas and natural gas liquid production volumes. Under these long-term commercial service contracts, providing the related service represents a single, distinct performance obligation on behalf of Altus that is satisfied over time. In accordance with the terms of these agreements, Altus receives a fixed fee for each contract year, subject to yearly fee escalation recalculations. Revenue is measured using the output method and recognized in the amount to which Altus has the right to invoice, as performance completed to date corresponds directly with the value to its customers. For the periods presented, Altus Midstream segment revenues were primarily attributable to sales between Altus and Apache, which are fully eliminated upon consolidation.
Payment Terms and Contract Balances
Payments under all contracts with customers are typically due and received within a short-term period of one year or less, after physical delivery of the product or service has been rendered. Receivables from contracts with customers, net of allowance for credit losses, totaled $670 million and $945 million as of December 31, 2020 and 2019, respectively.
In accordance with the provisions of ASC 606, “Revenue from Contracts with Customers,” variable market prices for each short-term commodity sale are allocated entirely to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations. As such, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations as of the end of the reporting period.
Derivative Instruments and Hedging Activities
Apache periodically enters into derivative contracts to manage its exposure to commodity price, interest rate, and/or foreign exchange risk. These derivative contracts, which are generally placed with major financial institutions, may take the form of forward contracts, futures contracts, swaps, or options.
All derivative instruments, other than those that meet the normal purchases and sales exception, are recorded on the Company’s consolidated balance sheet as either an asset or liability measured at fair value. The Company does not apply hedge accounting to any of its derivative instruments. As a result, gains and losses from the change in fair value of derivative instruments are reported in current-period income as “Derivative instrument losses, net” under “Revenues and Other” in the statement of consolidated operations. Refer to Note 4—Derivative Instruments and Hedging Activities for further information.
Income Taxes
Apache records deferred tax assets and liabilities to account for the expected future tax consequences of events that have been recognized in the financial statements and tax returns. The Company routinely assesses the ability to realize its deferred tax assets. If the Company concludes that it is more likely than not that some or all of the deferred tax assets will not be realized, the tax asset is reduced by a valuation allowance. Numerous judgments and assumptions are inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil and gas prices) and changing tax laws.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Earnings Per Share
The Company’s basic earnings per share (EPS) amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects potential dilution, using the treasury stock method, which assumes that options were exercised and restricted stock was fully vested. The Company uses the “if-converted method” to determine the potential dilutive effect of an assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Altus’ common stock. The impact to net income (loss) attributable to common stock on an assumed conversion of the redeemable noncontrolling Preferred Units interest in Altus Midstream LP were anti-dilutive for the years ended December 31, 2020 and 2019.
Stock-Based Compensation
Apache grants various types of stock-based awards including stock options, restricted stock, cash-settled restricted stock units, and performance-based awards. Stock compensation equity awards granted are valued on the date of grant and are expensed over the required vesting service period. Cash-settled awards are recorded as a liability based on the Company’s stock price and remeasured at the end of each reporting period over the vesting terms. The Company has elected to account for forfeitures as they occur rather than estimate expected forfeitures. The Company’s stock-based compensation plans and related accounting policies are defined and described more fully in Note 14—Capital Stock.
Treasury Stock
The Company follows the weighted-average-cost method of accounting for treasury stock transactions.
Transaction, Reorganization, and Separation (TRS)
In recent years, the Company streamlined its portfolio through strategic divestitures and centralized certain operational activities in an effort to capture greater efficiencies and cost savings through shared services. In light of the continued streamlining of the Company’s asset portfolio through divestitures and strategic transactions, in late 2019 management initiated a comprehensive redesign of Apache’s organizational structure and operations. Reorganization efforts were substantially completed during 2020. Apache has incurred a cumulative total of $79 million of reorganization costs through December 31, 2020, all of which were paid in 2020.
The Company recorded $54 million, $50 million, and $28 million of TRS costs in 2020, 2019, and 2018, respectively. TRS costs incurred in 2020 relate to $51 million of separation costs associated with the reorganization, $2 million for transaction consulting fees, and $1 million of office closure costs. TRS costs incurred in 2019 associated with the reorganization include $26 million and $2 million for employee termination benefits and consulting fees related to the reorganization, respectively. The Company also incurred $15 million of expenses for employee termination benefits and office closures associated with other reorganization efforts and $7 million for consulting and legal fees on various transactions throughout 2019. Charges for 2018 include $22 million for consulting and legal fees related to divestitures and the Altus transaction, and $6 million related to employee separations.
New Pronouncements Issued But Not Yet Adopted
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” which clarifies or improves disclosure requirements for various topics to align with Securities and Exchange Commission (SEC) regulations. This update is effective for the Company beginning in the first quarter of 2021 and will be applied retrospectively. The adoption and implementation of this ASU will not have a material impact on the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)” to improve financial reporting associated with the accounting for convertible instruments and contracts in an entity’s own equity. This update is effective for the Company beginning in the first quarter of 2022, with early adoption permitted, using either the modified or fully retrospective method with a cumulative effect adjustment to the opening balance of retained earnings. The Company is evaluating the effect of adoption of the ASU and does not believe it will have a material impact on its financial statements.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, which clarified the scope and application of the original guidance. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. The Company is evaluating whether to apply any of these expedients and, if elected, will adopt these standards when LIBOR is discontinued.
2. ACQUISITIONS AND DIVESTITURES
2020 Activity
During 2020, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $4 million. Also during 2020, the Company completed the sale of certain non-core assets and leasehold, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $87 million, and recognized a gain of $13 million.
2019 Activity
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 $322 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 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 $7 million loss in connection 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 connection with the sale.
During 2019, the Company also completed the sale of certain other non-core producing assets, GPT assets, and leasehold acreage, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $73 million. The Company recognized a net gain of approximately $33 million upon closing of these transactions.
Suriname Joint Venture Agreement
In December 2019, Apache entered into a joint venture agreement with Total S.A. to explore and develop Block 58 offshore Suriname. Under the terms of the agreement, Apache and Total S.A. each hold a 50 percent working interest in Block 58. Pursuant to the agreement, Apache operated the drilling of the first four wells, the Maka Central-1, Sapakara West-1, Kwaskwasi-1, and Keskesi East-1, and subsequently transferred operatorship of Block 58 to Total S.A. on January 1, 2021. Apache will continue to operate the Keskesi exploration well until completion of drilling operations.
In connection with the agreement, Apache received $100 million from Total S.A. upon closing in the fourth quarter of 2019 and $79 million upon satisfying certain closing conditions in the first quarter of 2020 for reimbursement of 50 percent of all costs incurred on Block 58 as of December 31, 2019. All proceeds were applied against the carrying value of the Company’s Suriname properties and associated inventory. The Company recognized a $19 million gain in the first quarter of 2020 associated with the transaction.
Apache will also receive various other forms of consideration, including $5.0 billion of cash carry on Apache’s first $7.5 billion of appraisal and development capital, 25 percent cash carry on all of Apache’s appraisal and development capital beyond the first $7.5 billion, a $75 million cash payment upon achieving first oil production, and future contingent royalty payments from successful joint development projects.
Leasehold, Property, and Other Acquisitions
During 2019, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $40 million.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As part of the Altus transaction described below, Apache contributed options (Pipeline Options) to acquire equity interests in five separate third-party pipeline projects (the Equity Method Interest Pipelines) to Altus Midstream and/or its subsidiaries. As of December 31, 2019, four of the five Pipeline Options had been exercised to acquire various ownership interests in the associated Equity Method Interest Pipelines. The fifth Pipeline Option to acquire an equity interest in a separate intra-basin NGL pipeline was not exercised and expired on March 2, 2020. For discussion of the Equity Method Interest Pipelines, refer to Note 6—Equity Method Interests.
2018 Activity
Altus Transaction
In November 2018, Apache completed a transaction with Altus Midstream Company to create a pure-play, Permian Basin midstream C-corporation anchored by the Company’s GPT assets at Alpine High. Pursuant to the agreement, the Company contributed certain Alpine High midstream assets and the Pipeline Options to Altus and/or its subsidiaries. Altus Midstream Company contributed approximately $628 million of cash, net of transaction expenses. The transaction was accounted for by Altus as a reverse recapitalization. Under this method of accounting, Altus Midstream Company was treated as the “acquired” company, and Apache’s contributed assets of approximately $1.1 billion remained at historical cost, with no goodwill or other intangible assets recorded. Apache owns an approximate 79 percent ownership interest in Altus.
Apache fully consolidates the assets and liabilities of Altus in its consolidated financial statements, with a corresponding noncontrolling interest reflected separately. Apache recorded a noncontrolling interest of $406 million upon closing, which is reflected as a separate component of equity in the Company’s consolidated balance sheet. This represents approximately 21 percent third party ownership of the net assets in Altus at the time of the transaction. The cash contributions in excess of the noncontrolling interest were recognized as additional paid-in capital.
Other Activity
During 2018, the Company completed the sale of certain non-core assets and leasehold, primarily in the North Sea and Permian Basin, in multiple transactions for total cash proceeds of $138 million. The Company recognized gains of approximately $23 million during 2018 upon the closing of these transactions.
During 2018, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for cash proceeds of $133 million.
3. CAPITALIZED EXPLORATORY WELL COSTS
The following summarizes the changes in capitalized exploratory well costs for the years ended December 31, 2020, 2019, and 2018. Additions pending the determination of proved reserves excludes amounts capitalized and subsequently charged to expense within the same year.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Capitalized well costs at beginning of year
|
|
$
|
141
|
|
|
$
|
159
|
|
|
$
|
350
|
|
Additions pending determination of proved reserves
|
|
226
|
|
|
286
|
|
|
602
|
|
Divestitures and other
|
|
(38)
|
|
|
(100)
|
|
|
(82)
|
|
Reclassifications to proved properties
|
|
(56)
|
|
|
(179)
|
|
|
(647)
|
|
Charged to exploration expense
|
|
(76)
|
|
|
(25)
|
|
|
(64)
|
|
Capitalized well costs at end of year
|
|
$
|
197
|
|
|
$
|
141
|
|
|
$
|
159
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following provides an aging of capitalized exploratory well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling as of December 31:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Exploratory well costs capitalized for a period of one year or less
|
|
$
|
184
|
|
|
$
|
108
|
|
|
$
|
126
|
|
Exploratory well costs capitalized for a period greater than one year
|
|
13
|
|
|
33
|
|
|
33
|
|
Capitalized well costs at end of year
|
|
$
|
197
|
|
|
$
|
141
|
|
|
$
|
159
|
|
|
|
|
|
|
|
|
Number of projects with exploratory well costs capitalized for a period greater than one year
|
|
5
|
|
|
2
|
|
|
2
|
|
Suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling at December 31, 2020, relate to onshore projects in Egypt. Drilling activity and testing has continued for these projects throughout 2020, and these projects are currently being evaluated for potential development.
Suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling at December 31, 2019, relate to separate onshore projects in the United States and Egypt. The costs related to the U.S. projects were charged to exploration expense in the current year based on management’s assessment and development efforts through year end.
Suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling at December 31, 2018, included $28 million related to exploratory drilling in Suriname. In December 2019, Apache entered into the joint venture agreement with Total S.A., pursuant to which Apache sold 50 percent of its ownership interest in Block 58 to Total S.A. Proceeds received from Total S.A. upon closing were applied against the carrying value of its Suriname properties.
The following table summarizes aging by geographic area of those exploratory well costs that, as of December 31, 2020, have been capitalized for a period greater than one year, categorized by the year in which drilling was completed:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2019
|
|
2018
|
|
2017 and Prior
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
$
|
13
|
|
|
$
|
4
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
|
$
|
13
|
|
|
$
|
4
|
|
|
$
|
9
|
|
|
$
|
—
|
|
4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Strategies
Apache is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production, as well as transactions denominated in foreign currencies. The Company manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production and foreign currency transactions. The Company utilizes various types of derivative financial instruments, including forward contracts, futures contracts, swaps, and options, to manage fluctuations in cash flows resulting from changes in commodity prices or foreign currency values.
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 December 31, 2020, the Company had derivative positions with six 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.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Derivative Instruments
Commodity Derivative Instruments
As of December 31, 2020, the Company had the following open natural gas financial basis swap contracts:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swap Purchased
|
|
Basis Swap Sold
|
Production Period
|
|
Settlement Index
|
|
MMBtu
(in 000’s)
|
|
Weighted Average Price Differential
|
|
MMBtu
(in 000’s)
|
|
Weighted Average Price Differential
|
April—December 2021
|
|
NYMEX Henry Hub/IF Waha
|
|
37,580
|
|
|
$(0.43)
|
|
—
|
|
|
—
|
April—December 2021
|
|
NYMEX Henry Hub/IF HSC
|
|
—
|
|
|
—
|
|
37,580
|
|
|
$(0.07)
|
January—December 2022
|
|
NYMEX Henry Hub/IF Waha
|
|
43,800
|
|
|
$(0.45)
|
|
—
|
|
|
—
|
January—December 2022
|
|
NYMEX Henry Hub/IF HSC
|
|
—
|
|
|
—
|
|
43,800
|
|
|
$(0.08)
|
Embedded Derivatives
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 embedded within the Preferred Units require bifurcation and measurement at fair value. For further discussion of this derivative, see “Fair Value Measurements” below and Note 13—Redeemable Noncontrolling Interest - Altus.
Pipeline Capacity Embedded Derivatives
During the fourth quarter of 2019 and first quarter of 2020, Apache entered into separate agreements to assign a portion of its contracted capacity under an existing transportation agreement to third parties. Embedded in these agreements are arrangements under which Apache has the potential to receive payments calculated based on pricing differentials between Houston Ship Channel and Waha during calendar years 2020 and 2021. These features require bifurcation and measurement of the change in market values for each period. Unrealized gains or losses in the fair value of these features are recorded as “Derivative instrument losses, net” under “Revenues and Other” in the statement of consolidated operations. Any proceeds received will be deferred and reflected in income over the original tenure of the transportation agreement.
Fair Value Measurements
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)
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative instruments
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline capacity embedded derivatives
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
Preferred Units embedded derivative
|
|
—
|
|
|
—
|
|
|
139
|
|
|
139
|
|
|
—
|
|
|
139
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline capacity embedded derivative
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Foreign currency derivative instruments
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Units embedded derivative
|
|
—
|
|
|
—
|
|
|
103
|
|
|
103
|
|
|
—
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The fair values of the Company’s derivative instruments and pipeline capacity embedded derivatives are not actively quoted in the open market. The Company primarily uses a market approach to estimate the fair values of these derivatives 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 Preferred Units embedded derivative is calculated using an income approach, a Level 3 fair value measurement. The fair value determination is based on a range of factors, including expected future interest rates using the Black-Karasinski model, Altus’ imputed interest rate, interest rate volatility, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option, and anticipated dividend yields of the Preferred Units. As of the December 31, 2020 valuation date, the Company used the forward B-rated Energy Bond Yield curve to develop the following key unobservable inputs used to value this embedded derivative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative Information About Level 3 Fair Value Measurements
|
|
|
Fair Value at December 31, 2020
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Range/Value
|
|
|
(In millions)
|
|
|
|
|
|
|
Preferred Units embedded derivative
|
|
$
|
139
|
|
|
Option Model
|
|
Altus’ Imputed Interest Rate
|
|
7.32-11.73%
|
|
|
|
|
|
|
Interest Rate Volatility
|
|
37.08%
|
A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative as of December 31, 2020, while a one percent decrease would lead to a similar decrease in value as of December 31, 2020. The assumed expected timing until exercise of the exchange option at December 31, 2020 was 5.45 years.
Derivative Activity Recorded in the Consolidated Balance Sheet
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Current Assets: Other current assets
|
|
$
|
6
|
|
|
$
|
2
|
|
Noncurrent Assets: Deferred charges and other
|
|
5
|
|
|
7
|
|
Total derivative assets
|
|
$
|
11
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Credits and Other Noncurrent Liabilities: Other
|
|
$
|
192
|
|
|
$
|
103
|
|
Total derivative liabilities
|
|
$
|
192
|
|
|
$
|
103
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Realized:
|
|
|
|
|
|
|
Commodity derivative instruments
|
|
$
|
(135)
|
|
|
$
|
27
|
|
|
$
|
(81)
|
|
Amortization of put premium, realized loss
|
|
—
|
|
|
—
|
|
|
(39)
|
|
Foreign currency derivative instruments
|
|
(1)
|
|
|
—
|
|
|
—
|
|
Treasury-lock
|
|
—
|
|
|
(18)
|
|
|
—
|
|
Realized gain (loss), net
|
|
(136)
|
|
|
9
|
|
|
(120)
|
|
Unrealized:
|
|
|
|
|
|
|
Commodity derivative instruments
|
|
11
|
|
|
(44)
|
|
|
103
|
|
Pipeline capacity embedded derivatives
|
|
(61)
|
|
|
8
|
|
|
—
|
|
Foreign currency derivative instruments
|
|
(1)
|
|
|
1
|
|
|
—
|
|
Preferred Units embedded derivative
|
|
(36)
|
|
|
(9)
|
|
|
—
|
|
Unrealized gain (loss), net
|
|
(87)
|
|
|
(44)
|
|
|
103
|
|
Derivative instrument losses, net
|
|
$
|
(223)
|
|
|
$
|
(35)
|
|
|
$
|
(17)
|
|
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 (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 loss to net cash provided by operating activities.”
5. OTHER CURRENT ASSETS
The following table provides detail of the Company’s other current assets as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Inventories
|
|
$
|
492
|
|
|
$
|
502
|
|
Drilling advances
|
|
113
|
|
|
92
|
|
Prepaid assets and other
|
|
71
|
|
|
58
|
|
Total Other current assets
|
|
$
|
676
|
|
|
$
|
652
|
|
6. EQUITY METHOD INTERESTS
As of December 31, 2020 and 2019, Apache, through its ownership of Altus, has the following equity method interests in four 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
2020
|
|
2019
|
|
|
|
|
(In millions)
|
Gulf Coast Express Pipeline LLC
|
|
16.0
|
%
|
|
$
|
284
|
|
|
$
|
291
|
|
EPIC Crude Holdings, LP
|
|
15.0
|
%
|
|
176
|
|
|
163
|
|
Permian Highway Pipeline LLC
|
|
26.7
|
%
|
|
615
|
|
|
311
|
|
Shin Oak Pipeline (Breviloba, LLC)
|
|
33.0
|
%
|
|
480
|
|
|
493
|
|
Total Altus equity method interests
|
|
|
|
$
|
1,555
|
|
|
$
|
1,258
|
|
As of December 31, 2020 and 2019, unamortized basis differences included in the equity method interest balances were $38 million and $30 million, respectively. These amounts represent differences in Altus’ initial costs paid to acquire the equity method interests and its initial underlying equity in the respective entities, as well as capitalized interest related to Permian Highway Pipeline (PHP) construction costs. Unamortized basis differences are amortized into equity income (loss) over the useful lives of the underlying pipeline assets when they are placed into service.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents the activity in Altus’ equity method interests for the years ended December 31, 2020 and 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
|
|
|
162
|
|
|
442
|
|
|
671
|
|
Capital contributions
|
|
184
|
|
|
123
|
|
|
147
|
|
|
47
|
|
|
501
|
|
Distributions
|
|
(16)
|
|
|
|
|
|
|
(9)
|
|
|
(25)
|
|
Capitalized interest(1)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Equity income (loss), net
|
|
17
|
|
|
(11)
|
|
|
—
|
|
|
13
|
|
|
19
|
|
Accumulated other comprehensive loss
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Balance at December 31, 2019
|
|
291
|
|
|
163
|
|
|
311
|
|
|
493
|
|
|
1,258
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
2
|
|
|
29
|
|
|
296
|
|
|
—
|
|
|
327
|
|
Distributions
|
|
(51)
|
|
|
—
|
|
|
—
|
|
|
(46)
|
|
|
(97)
|
|
Capitalized interest(1)
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Equity income (loss), net
|
|
42
|
|
|
(16)
|
|
|
—
|
|
|
33
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$
|
284
|
|
|
$
|
176
|
|
|
$
|
615
|
|
|
$
|
480
|
|
|
$
|
1,555
|
|
(1)Altus’ proportionate share of the PHP construction costs is funded with Altus’ revolving credit facility. Accordingly, Altus capitalized $8 million and $2 million of related interest expense during 2020 and 2019, respectively, which are included in the basis of the PHP equity interest.
Summarized Combined Financial Information
The following presents summarized information of combined statement of operations for Altus’ equity method interests (on a 100 percent basis):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019(1)
|
|
2018(2)
|
|
|
(In millions)
|
Operating revenues
|
|
$
|
707
|
|
|
$
|
302
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
331
|
|
|
121
|
|
|
(6)
|
|
Net income (loss)
|
|
256
|
|
|
120
|
|
|
(6)
|
|
Other comprehensive loss
|
|
3
|
|
|
(8)
|
|
|
—
|
|
(1)Although Altus’ interests in EPIC Crude Holdings, LP, Permian Highway Pipeline LLC, and Breviloba, LLC were acquired in March, May, and July 2019, respectively, the combined financial results are presented for the year ended December 31, 2019 for comparability.
(2)Although Altus’ interest in Gulf Coast Express Pipeline LLC was acquired in December 2018, the combined financial results are presented for the year ended December 31, 2018 for comparability.
The following presents summarized combined balance sheet information for Altus’ equity method interests (on a 100 percent basis) as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Current assets
|
|
$
|
260
|
|
|
$
|
441
|
|
Noncurrent assets
|
|
7,678
|
|
|
6,435
|
|
Total assets
|
|
$
|
7,938
|
|
|
$
|
6,876
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
206
|
|
|
$
|
478
|
|
Noncurrent liabilities
|
|
1,191
|
|
|
958
|
|
Equity
|
|
6,541
|
|
|
5,440
|
|
Total liabilities and equity
|
|
$
|
7,938
|
|
|
$
|
6,876
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
7. OTHER CURRENT LIABILITIES
The following table provides detail of the Company’s other current liabilities as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Accrued operating expenses
|
|
$
|
91
|
|
|
$
|
143
|
|
Accrued exploration and development
|
|
167
|
|
|
319
|
|
Accrued gathering, processing, and transmission - Altus
|
|
—
|
|
|
17
|
|
Accrued compensation and benefits
|
|
170
|
|
|
212
|
|
Accrued interest
|
|
140
|
|
|
135
|
|
Accrued income taxes
|
|
25
|
|
|
51
|
|
Current asset retirement obligation
|
|
56
|
|
|
47
|
|
Current operating lease liability
|
|
116
|
|
|
169
|
|
Other
|
|
97
|
|
|
56
|
|
Total Other current liabilities
|
|
$
|
862
|
|
|
$
|
1,149
|
|
8. ASSET RETIREMENT OBLIGATION
The following table describes changes to the Company’s asset retirement obligation (ARO) liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Asset retirement obligation at beginning of year
|
|
$
|
1,858
|
|
|
$
|
1,932
|
|
Liabilities incurred
|
|
10
|
|
|
41
|
|
|
|
|
|
|
Liabilities divested
|
|
(26)
|
|
|
(56)
|
|
Liabilities settled
|
|
(30)
|
|
|
(56)
|
|
Accretion expense
|
|
109
|
|
|
107
|
|
Revisions in estimated liabilities
|
|
23
|
|
|
(110)
|
|
|
|
|
|
|
Asset retirement obligation at end of year
|
|
1,944
|
|
|
1,858
|
|
Less current portion
|
|
(56)
|
|
|
(47)
|
|
Asset retirement obligation, long-term
|
|
$
|
1,888
|
|
|
$
|
1,811
|
|
The ARO liability reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with Apache’s oil and gas properties and other long-lived assets. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. The Company estimates the ultimate productive life of the properties, a risk-adjusted discount rate, and an inflation factor in order to determine the current present value of this obligation. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property or other long-lived asset balance.
During 2020 and 2019, the Company recorded $10 million and $41 million, respectively, in abandonment liabilities resulting from Apache’s exploration and development capital program. Liabilities settled primarily relate to individual properties, platforms, and facilities plugged and abandoned during the period. During 2020, approximately $23 million net abandonment costs were revised upward to reflect changes in estimates of timing and costs, primarily in the North Sea. During 2019, approximately $110 million net abandonment costs were revised downward to reflect changes in estimates of timing and costs, primarily in the North Sea.
9. DEBT AND FINANCING COSTS
Overview
All of the Company’s debt is senior unsecured debt and has equal priority with respect to the payment of both principal and interest. All indentures for the notes and debentures described below place certain restrictions on the Company, including limits on Apache’s ability to incur debt secured by certain liens. Certain of these indentures also restrict the Company’s ability to enter into certain sale and leaseback transactions and give holders the option to require the Company to repurchase outstanding notes and debentures upon certain changes in control. None of the indentures contain prepayment obligations in the event of a decline in credit ratings.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In August 2018, Apache closed an offering of $1.0 billion in aggregate principal amount of senior unsecured 4.375% notes due October 15, 2028. 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, repay notes that matured in September 2018, and for general corporate purposes.
Also in August 2018, Apache closed cash tender offers for certain outstanding notes. Apache accepted for purchase $731 million aggregate principal amount of certain notes covered by the tender offers. Apache paid holders an aggregate of approximately $828 million reflecting principal, the discount to par, early tender premium, and accrued and unpaid interest. The Company recorded a net loss of $94 million on extinguishment of debt, including $5 million of unamortized debt issuance costs and discount, in connection with the note purchases.
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.
On August 17, 2020, the Company closed offerings of $1.25 billion in aggregate principal amount of senior unsecured notes, comprised of $500 million in aggregate principal amount of 4.625% notes due 2025 and $750 million in aggregate principal amount of 4.875% notes due 2027. The senior unsecured notes are redeemable at any time, in whole or in part, at Apache’s option, at the applicable redemption price. The net proceeds from the sale of the notes were used to purchase certain outstanding notes in cash tender offers, repay a portion of outstanding borrowings under the Company’s senior revolving credit facility, and for general corporate purposes.
On August 18, 2020, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $644 million aggregate principal amount of certain notes covered by the tender offers. Apache paid holders an aggregate $644 million, reflecting principal, aggregate discount to par of $38 million, early tender premium of $32 million, and accrued and unpaid interest of $6 million. The Company recorded a net gain of $2 million on extinguishment of debt, including an acceleration of unamortized debt discount and issuance costs, in connection with the note purchases.
During 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $588 million for an aggregate purchase price of $428 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $168 million. These repurchases resulted in a $158 million net gain on extinguishment of debt. The net gain includes an acceleration of related discount and debt issuance costs. The repurchases were financed by borrowings under the Company’s revolving credit facility.
The Company records gains and losses on extinguishment of debt in “Financing costs, net” in the Company’s statement of consolidated operations.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents the carrying value of the Company’s debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
|
|
|
|
|
3.625% notes due 2021(1)
|
|
$
|
—
|
|
|
$
|
293
|
|
3.25% notes due 2022(2)
|
|
213
|
|
|
463
|
|
2.625% notes due 2023(2)
|
|
123
|
|
|
181
|
|
4.625% notes due 2025(2)
|
|
500
|
|
|
—
|
|
7.7% notes due 2026
|
|
79
|
|
|
79
|
|
7.95% notes due 2026
|
|
133
|
|
|
133
|
|
4.875% due 2027(2)
|
|
750
|
|
|
—
|
|
4.375% notes due 2028(2)
|
|
993
|
|
|
1,000
|
|
7.75% notes due 2029(2)(3)
|
|
235
|
|
|
247
|
|
4.25% notes due 2030(2)
|
|
580
|
|
|
600
|
|
6.0% notes due 2037(2)
|
|
443
|
|
|
467
|
|
5.1% notes due 2040(2)
|
|
1,333
|
|
|
1,499
|
|
5.25% notes due 2042(2)
|
|
399
|
|
|
500
|
|
4.75% notes due 2043(2)
|
|
1,133
|
|
|
1,413
|
|
4.25% notes due 2044(2)
|
|
559
|
|
|
753
|
|
7.375% debentures due 2047
|
|
150
|
|
|
150
|
|
5.35% notes due 2049(2)
|
|
390
|
|
|
400
|
|
7.625% debentures due 2096
|
|
39
|
|
|
39
|
|
Notes and debentures before unamortized discount and debt issuance costs(4)
|
|
8,052
|
|
|
8,217
|
|
Commercial paper
|
|
—
|
|
|
—
|
|
Altus credit facility(5)
|
|
624
|
|
|
396
|
|
Apache credit facility(5)
|
|
150
|
|
|
—
|
|
Finance lease obligations
|
|
38
|
|
|
48
|
|
Unamortized discount
|
|
(35)
|
|
|
(42)
|
|
Debt issuance costs
|
|
(57)
|
|
|
(53)
|
|
Total debt
|
|
8,772
|
|
|
8,566
|
|
Current maturities
|
|
(2)
|
|
|
(11)
|
|
Long-term debt
|
|
$
|
8,770
|
|
|
$
|
8,555
|
|
(1)On November 3, 2020, Apache redeemed the 3.625% senior notes due February 1, 2021, at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date.
(2)These notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium, except that the 7.75% notes due 2029 are only redeemable as whole for principal and accrued interest in the event of certain Canadian tax law changes. The remaining notes and debentures are not redeemable.
(3)Assumed by Apache in August 2017 as permitted by terms of these notes originally issued by a subsidiary and guaranteed by Apache.
(4)The fair values of the Company’s notes and debentures were $8.5 billion and $8.4 billion as of December 31, 2020 and 2019, 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).
(5)The carrying amount of borrowings on credit facilities approximates fair value because the interest rates are variable and reflective of market rates.
Maturities for the Company’s notes and debentures excluding discount and debt issuance costs as of December 31, 2020 are as follows:
|
|
|
|
|
|
|
(In millions)
|
2021
|
$
|
—
|
|
2022
|
213
|
|
2023
|
123
|
|
2024
|
—
|
|
2025
|
500
|
|
Thereafter
|
7,216
|
|
Notes and debentures, excluding discounts and debt issuance costs
|
$
|
8,052
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Uncommitted Lines of Credit
The Company from time to time has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of December 31, 2020 and 2019, there were no outstanding borrowings under these facilities. As of December 31, 2020, there were £34 million and $17 million in letters of credit outstanding under these facilities. As of December 31, 2019, there were £22 million and $3 million in letters of credit outstanding under these facilities.
Unsecured Committed Bank Credit Facilities
In March 2018, Apache 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 December 31, 2020. The facility is for general corporate purposes and available committed borrowing capacity supports Apache’s commercial paper program. As of December 31, 2020, there were $150 million of borrowings and an aggregate of £633 million and $40 million in letters of credit outstanding under this facility. As of December 31, 2019, there were no borrowings or letters of credit outstanding under this facility. The £633 million in outstanding letters of credit were issued to support North Sea decommissioning obligations, the terms of which required such support after Standard & Poor’s reduced the Company’s credit rating from BBB to BB+ on March 26, 2020.
At Apache’s option, the interest rate per annum for borrowings under the 2018 facility is either a base rate, as defined, plus a margin, or the London Inter-bank Offered Rate (LIBOR), plus a margin. The Company also pays quarterly a facility fee at a per annum rate on total commitments. The margins and the facility fee vary based upon the Company’s senior long-term debt rating. At December 31, 2020, the base rate margin was 0.5 percent, the LIBOR margin was 1.50 percent, and the facility fee was 0.25 percent. A commission is payable quarterly to lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Customary letter of credit fronting fees and other charges are payable to issuing banks.
The financial covenants of the 2018 credit facility require the Company to maintain an adjusted debt-to-capital ratio of not greater than 60 percent at the end of any fiscal quarter. For purposes of this calculation, capital excludes the effects of non-cash write-downs, impairments, and related charges occurring after June 30, 2015.
The 2018 facility’s negative covenants restrict the ability of the Company and its subsidiaries to create liens securing debt on its hydrocarbon-related assets, with exceptions for liens typically arising in the oil and gas industry; liens securing debt incurred to finance the acquisition, construction, improvement, or capital lease of assets, provided that such debt, when incurred, does not exceed the subject purchase price and costs, as applicable, and related expenses; liens on subsidiary assets located outside of the United States and Canada; and liens arising as a matter of law, such as tax and mechanics’ liens. Apache also may incur liens on assets if debt secured thereby does not exceed 15 percent of Apache’s consolidated net tangible assets, or approximately $1.7 billion as of December 31, 2020. Negative covenants also restrict Apache’s ability to merge with another entity unless it is the surviving entity, dispose of substantially all of its assets, and guarantee debt of non-consolidated entities in excess of the stated threshold.
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 $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. 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 December 31, 2020 and December 31, 2019, there were $624 million and $396 million, respectively, of borrowings, and no letters of credit outstanding under this facility.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The agreement for Altus Midstream LP’s credit facility, as amended, restricts distributions in respect of capital to Apache and other unit holders in certain circumstances. Unless the Leverage Ratio is less than or equal to 4.00:1.00, the agreement limits such distributions to $30 million per calendar year until either (i) the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the agreement, for three consecutive calendar months equals or exceeds $350 million on an annualized basis or (ii) Altus Midstream LP has a specified senior long-term debt rating; in addition, before the occurrence of one of those two events, the Leverage Ratio must be less than or equal to 5.00:1.00. In no event can any distribution be made that would, after giving effect to it on a pro forma basis, result in a Leverage Ratio greater than (i) 5.00:1.00 or (ii) for a specified period after a qualifying acquisition, 5.50:1.00. The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream LP and its restricted subsidiaries to (2) EBITDA (as defined in the agreement) of Altus Midstream LP and its restricted subsidiaries for the 12-month period ending immediately before the determination date. The Leverage Ratio as of December 31, 2020 was less than 4.00:1.00.
The terms of Altus Midstream LP’s Series A Cumulative Redeemable Preferred Units also contain certain restrictions on distributions in respect of capital, including the common units held by Apache and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation. Refer to Note 13—Redeemable Noncontrolling Interest - Altus for further information. In addition, the amount of any cash distributions to Altus Midstream LP by any entity in which it has an interest accounted for by the equity method is subject to such entity’s compliance with the terms of any debt or other agreements by which it may be bound, which in turn may impact the amount of funds available for distribution by Altus Midstream LP to its partners.
The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.
There are no clauses in either the agreement for Apache’s 2018 credit facility or for Altus Midstream LP’s 2018 credit facility that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. These agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, each agreement allows the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if a borrower or any of its subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments under the applicable agreement if Apache or Altus Midstream LP, as applicable, undergoes a specified change in control or any borrower has specified pension plan liabilities in excess of the stated threshold. Each of Apache and Altus Midstream LP was in compliance with the terms of its 2018 credit facility as of December 31, 2020.
Commercial Paper Program
Apache’s $3.5 billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days. As a result of downgrades in the Company’s credit ratings during 2020, the Company does not expect that its commercial paper program will be cost competitive with its other financing alternatives and does not anticipate using it under such circumstances. As of December 31, 2020 and 2019, the Company had no commercial paper outstanding.
Financing Costs, Net
The following table presents the components of Apache’s financing costs, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Interest expense
|
|
$
|
438
|
|
|
$
|
430
|
|
|
$
|
441
|
|
Amortization of debt issuance costs
|
|
8
|
|
|
7
|
|
|
9
|
|
Capitalized interest
|
|
(12)
|
|
|
(37)
|
|
|
(44)
|
|
Loss (gain) on extinguishment of debt
|
|
(160)
|
|
|
75
|
|
|
94
|
|
Interest income
|
|
(7)
|
|
|
(13)
|
|
|
(22)
|
|
Financing costs, net
|
|
$
|
267
|
|
|
$
|
462
|
|
|
$
|
478
|
|
As of December 31, 2020, the Company had $57 million of debt issuance costs, which will be charged to interest expense over the life of the related debt issuances. Discount amortization of $7 million, $2 million, and $3 million was recorded as interest expense in 2020, 2019, and 2018, respectively.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
10. INCOME TAXES
Income (loss) before income taxes is composed of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
U.S.
|
|
$
|
(4,581)
|
|
|
$
|
(4,397)
|
|
|
$
|
(723)
|
|
Foreign
|
|
(259)
|
|
|
1,389
|
|
|
1,681
|
|
Total
|
|
$
|
(4,840)
|
|
|
$
|
(3,008)
|
|
|
$
|
958
|
|
The total income tax provision consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Current income taxes:
|
|
|
|
|
|
|
Federal
|
|
$
|
(2)
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
State
|
|
—
|
|
|
—
|
|
|
—
|
|
Foreign
|
|
178
|
|
|
659
|
|
|
895
|
|
|
|
176
|
|
|
660
|
|
|
894
|
|
Deferred income taxes:
|
|
|
|
|
|
|
Federal
|
|
—
|
|
|
67
|
|
|
(65)
|
|
State
|
|
—
|
|
|
—
|
|
|
2
|
|
Foreign
|
|
(112)
|
|
|
(53)
|
|
|
(159)
|
|
|
|
(112)
|
|
|
14
|
|
|
(222)
|
|
Total
|
|
$
|
64
|
|
|
$
|
674
|
|
|
$
|
672
|
|
The total income tax provision differs from the amounts computed by applying the U.S. statutory income tax rate to income (loss) before income taxes. A reconciliation of the tax on the Company’s income (loss) before income taxes and total tax expense is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Income tax expense (benefit) at U.S. statutory rate
|
|
$
|
(1,016)
|
|
|
$
|
(631)
|
|
|
$
|
201
|
|
State income tax, less federal effect(1)
|
|
—
|
|
|
1
|
|
|
2
|
|
Taxes related to foreign operations
|
|
97
|
|
|
328
|
|
|
436
|
|
Tax credits
|
|
(13)
|
|
|
(6)
|
|
|
(13)
|
|
|
|
|
|
|
|
|
Tax on deemed repatriation of foreign earnings
|
|
—
|
|
|
—
|
|
|
103
|
|
Foreign tax credits
|
|
—
|
|
|
—
|
|
|
(336)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in U.S. tax rate
|
|
—
|
|
|
—
|
|
|
161
|
|
Net change in tax contingencies
|
|
1
|
|
|
1
|
|
|
(2)
|
|
Goodwill impairment
|
|
35
|
|
|
—
|
|
|
—
|
|
Sale of North Sea assets
|
|
—
|
|
|
—
|
|
|
(30)
|
|
Valuation allowances(1)
|
|
965
|
|
|
972
|
|
|
118
|
|
All other, net
|
|
(5)
|
|
|
9
|
|
|
32
|
|
|
|
$
|
64
|
|
|
$
|
674
|
|
|
$
|
672
|
|
(1)The change in state valuation allowance is included as a component of state income tax.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The net deferred income tax liability reflects the net tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under GAAP and amounts utilized for income tax purposes. The net deferred income tax liability consists of the following as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
U.S. and state net operating losses
|
|
$
|
2,306
|
|
|
$
|
2,108
|
|
Capital losses
|
|
633
|
|
|
626
|
|
|
|
|
|
|
Tax credits and other tax incentives
|
|
33
|
|
|
32
|
|
Foreign tax credits
|
|
2,241
|
|
|
2,241
|
|
Accrued expenses and liabilities
|
|
93
|
|
|
97
|
|
Asset retirement obligation
|
|
654
|
|
|
618
|
|
Property & equipment
|
|
261
|
|
|
—
|
|
Investment in Altus Midstream LP
|
|
76
|
|
|
107
|
|
Net interest expense limitation
|
|
252
|
|
|
162
|
|
Lease liability
|
|
79
|
|
|
108
|
|
Other
|
|
1
|
|
|
88
|
|
Total deferred tax assets
|
|
6,629
|
|
|
6,187
|
|
Valuation allowance
|
|
(5,991)
|
|
|
(4,959)
|
|
Net deferred tax assets
|
|
638
|
|
|
1,228
|
|
Deferred tax liabilities:
|
|
|
|
|
Deferred income
|
|
—
|
|
|
1
|
|
|
|
|
|
|
Equity investments
|
|
4
|
|
|
—
|
|
|
|
|
|
|
Property and equipment
|
|
750
|
|
|
1,432
|
|
Right-of-use asset
|
|
74
|
|
|
106
|
|
Other
|
|
13
|
|
|
6
|
|
Total deferred tax liabilities
|
|
841
|
|
|
1,545
|
|
Net deferred income tax liability
|
|
$
|
203
|
|
|
$
|
317
|
|
Net deferred tax assets and liabilities are included in the consolidated balance sheet as of December 31 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Deferred charges and other
|
|
$
|
12
|
|
|
$
|
29
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
215
|
|
|
346
|
|
Net deferred income tax liability
|
|
$
|
203
|
|
|
$
|
317
|
|
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) which provides guidance for the application of ASC Topic 740, Income Taxes, for the income tax effects of the Tax Cuts and Jobs Act (the TCJA). SAB 118 provides a measurement period which should not extend beyond 1 year of the enactment date of the TCJA. In 2018, the Company recorded an additional $103 million deferred tax expense attributable to the deemed repatriation of foreign earnings. This deferred tax expense combined with the provisional amount recorded in 2017 were fully offset by available foreign tax credits. The Company completed its analysis of the income tax effects of the TCJA in the fourth quarter of 2018.
The Company has recorded an increase in valuation allowance against certain deferred tax assets, primarily driven by asset impairments. The Company has assessed the future potential to realize these deferred tax assets and has concluded that it is more likely than not that these deferred tax assets will not be realized based on current economic conditions and expectations for the future.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In 2020, 2019, and 2018, the Company’s valuation allowance increased by $1.0 billion, $1.0 billion, and $131 million, respectively, as detailed in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Balance at beginning of year
|
|
$
|
4,959
|
|
|
$
|
3,947
|
|
|
$
|
3,816
|
|
State(1)
|
|
67
|
|
|
41
|
|
|
15
|
|
U.S.
|
|
960
|
|
|
971
|
|
|
124
|
|
Foreign
|
|
5
|
|
|
—
|
|
|
(8)
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
5,991
|
|
|
$
|
4,959
|
|
|
$
|
3,947
|
|
(1)Reported as a component of state income taxes.
On December 31, 2020, the Company had net operating losses as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Expiration
|
|
|
(In millions)
|
|
|
U.S.
|
|
$
|
8,859
|
|
|
2020 - Indefinite
|
State
|
|
6,566
|
|
|
Various
|
|
|
|
|
|
The Company has a U.S. net operating loss carryforward of $8.9 billion, which includes $186 million of net operating loss subject to annual limitation under Section 382 of the Internal Revenue Code (Code). Net operating losses generated in tax years beginning after 2017 are subject to an 80 percent taxable income limitation with indefinite carryover under the TCJA. The Company also has a net interest expense carryover of $1.1 billion under Section 163(j) of the Code subject to indefinite carryover, a U.S. capital loss carryforward of $1.8 billion, which has a five year carryover period expiring in 2023 and a Canadian capital loss carryforward of $836 million which has an indefinite carryover. The Company has recorded a full valuation allowance against the U.S. net operating losses, the state net operating losses, the net interest expense carryover, the U.S. capital loss, and the Canadian capital loss carryforward because it is more likely than not that these attributes will not be realized.
On December 31, 2020, the Company had foreign tax credits as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Expiration
|
|
|
(In millions)
|
|
|
Foreign tax credits
|
|
$
|
2,241
|
|
|
2025-2026
|
The Company has a $2.2 billion U.S. foreign tax credit carryforward. The Company has recorded a full valuation allowance against the U.S. foreign tax credits listed above because it is more likely than not that these attributes will expire unutilized.
The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Balance at beginning of year
|
|
$
|
82
|
|
|
$
|
24
|
|
|
$
|
26
|
|
Additions based on tax positions related to prior year
|
|
—
|
|
|
49
|
|
|
—
|
|
Additions based on tax positions related to the current year
|
|
11
|
|
|
9
|
|
|
—
|
|
Reductions for tax positions of prior years
|
|
—
|
|
|
—
|
|
|
(2)
|
|
Balance at end of year
|
|
$
|
93
|
|
|
$
|
82
|
|
|
$
|
24
|
|
The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Each quarter, the Company assesses the amounts provided for and, as a result, may increase or reduce the amount of interest and penalties. During each of the years ended December 31, 2020, 2019, and 2018, the Company recorded tax expense of $1 million for interest and penalties. At December 31, 2020, 2019, and 2018, the Company had an accrued liability for interest and penalties of $3 million, $2 million, and $1 million, respectively.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In 2020, 2019, and 2018, the Company recorded an $11 million net increase, $58 million net increase, and a $2 million net reduction, respectively, in its reserve for uncertain tax positions. The Company is currently under IRS audit for the 2014 through 2017 tax years.
Apache and its subsidiaries are subject to U.S. federal income tax as well as income tax in various states and foreign jurisdictions. The Company’s uncertain tax positions are related to tax years that may be subject to examination by the relevant taxing authority. Apache’s earliest open tax years in its key jurisdictions are as follows:
Jurisdiction
|
|
|
|
|
|
U.S.
|
2014
|
Egypt
|
2005
|
U.K.
|
2019
|
In 2020, the Company early adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The Company’s early adoption of ASU 2019-12 using the prospective transition approach did not result in a material impact on the consolidated financial statements.
11. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. As of December 31, 2020, the Company has an accrued liability of approximately $70 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. The Company’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 the Company’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that the Company 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.
Argentine Environmental Claims
On March 12, 2014, the Company and its subsidiaries completed the sale of all of the Company’s subsidiaries’ operations and properties in Argentina to YPF Sociedad Anonima (YPF). As part of that sale, YPF assumed responsibility for all of the past, present, and future litigation in Argentina involving Company subsidiaries, except that Company subsidiaries have agreed to indemnify YPF for certain environmental, tax, and royalty obligations capped at an aggregate of $100 million. The indemnity is subject to specific agreed conditions precedent, thresholds, contingencies, limitations, claim deadlines, loss sharing, and other terms and conditions. On April 11, 2014, YPF provided its first notice of claims pursuant to the indemnity. Company subsidiaries have not paid any amounts under the indemnity but will continue to review and consider claims presented by YPF. Further, Company subsidiaries retain the right to enforce certain Argentina-related indemnification obligations against Pioneer Natural Resources Company (Pioneer) in an amount up to $45 million pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.
Louisiana Restoration
Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including the Company, 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. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While adverse judgments against the Company are possible, the Company intends to actively defend these lawsuits and claims.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Starting in November of 2013 and continuing into 2020, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including the Company. 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. 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 adverse judgments against the Company might be possible, the Company intends to vigorously oppose these claims.
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 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’ appeal is pending.
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, the Company filed suit against Quadrant for breach of the Quadrant SPA. In its suit, the Company seeks approximately AUD $80 million. In December 2017, Quadrant filed a defense of equitable set-off to the Company’s claim and a counterclaim seeking approximately AUD $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 and Delaware 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 and gas 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. After removal of all such lawsuits to federal court, the district court remanded them back to state court. The remand decision, and further activity in the cases, has been stayed pending further appellate review.
On September 10, 2020, the State of Delaware filed suit, individually and on behalf of the people of the State of Delaware, against over 25 oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Company believes that it is not subject to jurisdiction of the California courts and that claims made against it in the Delaware litigation are baseless. The Company intends to challenge jurisdiction in California and to vigorously defend the Delaware lawsuit.
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 of 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’s appeal is pending.
Oklahoma Class Actions
The Company is a party to two purported class actions in Oklahoma styled Bigie Lee Rhea v. Apache Corporation, Case No. 6:14-cv-00433-JH, and Albert Steven Allen v. Apache Corporation, Case No. CJ-2019-00219. The Rhea case has been certified and includes a class of royalty owners seeking damages in excess of $250 million for alleged breach of the implied covenant to market relating to post-production deductions and alleged NGL uplift value. The Allen case has not been certified and seeks to represent a group of owners who have allegedly received late royalty and other payments under Oklahoma statutes. The amount of this claim is not yet reasonably determinable. While adverse judgments against the Company are possible, the Company intends to vigorously defend these lawsuits and claims.
Stockholder Lawsuits
On February 23, 2021, a case captioned Plymouth County Retirement System v. Apache Corporation, et al. was filed in the United States District Court for the Southern District of Texas (Houston Division) against the Company and certain current and former officers. The complaint, which is a shareholder lawsuit styled as a class action (1) alleges that the Company intentionally used unrealistic assumptions regarding the amount and composition of available oil and gas in Alpine High; (2) alleges that the Company did not have the proper infrastructure in place to safely and/or economically drill and/or transport those resources even if they existed in the amounts purported; (3) alleges that these statements and omissions artificially inflated the value of the Company’s operations in the Permian Basin; and (4) alleges that, as a result, the Company’s public statements were materially false and misleading. Other lawsuits have followed with similar allegations. The Company believes that all plaintiffs’ claims lack merit and intends to vigorously defend these lawsuits.
Environmental Matters
The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, state, local, and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks.
The Company manages its exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. The Company also conducts periodic reviews, on a Company-wide basis, to identify changes in its environmental risk profile. These reviews evaluate whether there is a probable liability, the amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees who are expected to devote a significant amount of time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, the Company may exclude a property from the acquisition, require the seller to remediate the property to the Company’s satisfaction, or agree to assume liability for the remediation of the property. The Company’s general policy is to limit any reserve additions to any incidents or sites that are considered probable to result in an expected remediation cost exceeding $300,000. Any environmental costs and liabilities that are not reserved for are treated as an expense when actually incurred. In the Company’s estimation, neither these expenses nor expenses related to training and compliance programs are likely to have a material impact on its financial condition.
As of December 31, 2020, the Company had an undiscounted reserve for environmental remediation of approximately $2 million.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
On September 11, 2020, the Company received a Notice of Violation and Finding of Violation, and accompanying Clean Air Act Information Request, from the U.S. Environmental Protection Agency (EPA) following site inspections in April 2019 at several of the Company’s oil and natural gas production facilities in Lea and Eddy Counties, New Mexico. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and responding to the information request. The EPA has not commenced enforcement proceedings, and at this time the Company is unable to reasonably estimate whether such proceedings will result in monetary sanctions and, if so, whether they would be more or less than $100,000, exclusive of interest and costs.
Additionally, on December 29, 2020, the Company received a Notice of Violation and Opportunity to Confer, and accompanying Clean Air Act Information Request, from the EPA relating to several of the Company’s oil and natural gas production facilities in Reeves County, Texas. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and responding to the information request. The EPA has not commenced enforcement proceedings, and at this time the Company is unable to reasonably estimate whether such proceedings will result in monetary sanctions and, if so, whether they would be more or less than $100,000, exclusive of interest and costs.
The Company is not aware of any environmental claims existing as of December 31, 2020 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.
Potential Asset Retirement Obligations
In 2013, the Company sold its Gulf of Mexico Shelf operations and properties (Transferred Assets) to Fieldwood Energy LLC (Fieldwood). Under the terms of the purchase agreement, the Company received cash consideration of $3.75 billion and Fieldwood assumed $1.5 billion of discounted asset abandonment liabilities as of the disposition date. In respect of such abandonment liabilities, Fieldwood posted letters of credit in favor of the Company (Letters of Credit) and established a trust account (Trust A), which is funded by a 10 percent net profits interest depending on future oil prices and of which the Company is the beneficiary. On February 14, 2018, Fieldwood filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In connection with the 2018 bankruptcy, Fieldwood confirmed a plan under which the Company agreed, inter alia, to accept bonds in exchange for certain of the Letters of Credit. Currently, the Company holds two bonds (Bonds) and the remaining Letters of Credit to secure Fieldwood’s asset retirement obligations (AROs) on the Transferred Assets as and when such abandonment and decommissioning obligations are required to be performed over the remaining life of the Transferred Assets.
On August 3, 2020, Fieldwood again filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Fieldwood has submitted a plan of reorganization, and the Company has been engaged in discussions with Fieldwood and other interested parties regarding such plan. If approved by the bankruptcy court, the submitted plan would separate the Transferred Assets into a standalone company, and proceeds of production of the Transferred Assets will be used for the AROs. If the proceeds of production are insufficient for such AROs, then Apache expects that it may be required by the relevant governmental authorities to perform such AROs, in which case it will apply the Bonds, remaining Letters of Credit, and Trust A to pay for the AROs. In addition, after such sources have been exhausted, Apache has agreed to provide a standby loan of up to $400 million for the new company to perform decommissioning, with such standby loan secured by a first and prior lien on the Transferred Assets. If the foregoing is insufficient, the Company may be forced to use available cash to cover any additional costs it incurs for performing such AROs.
Leases and Contractual Obligations
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. As allowed under the standard, the Company applied practical expedients 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 permitting an entity the option 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 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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, aircrafts, 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 $149 million and $222 million in 2020 and 2019, respectively. Apache elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation. Costs incurred for short-term leases, which is primarily related to drilling activities in Block 58 offshore Suriname, was $80 million and $18 million in 2020 and 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. Depreciation on the Company’s finance lease asset was $2 million and $7 million in 2020 and 2019, respectively. Interest on the Company’s finance lease assets was $2 million and $3 million in 2020 and 2019, respectively.
The following table represents the Company’s weighted average lease term and discount rate as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
Weighted average remaining lease term
|
|
3.7 years
|
|
12.7 years
|
Weighted average discount rate
|
|
4.2
|
%
|
|
4.4
|
%
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
At December 31, 2020, contractual obligations for long-term operating leases, finance leases, and purchase obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Minimum Commitments(1)
|
|
Operating Leases(2)
|
|
Finance Leases(3)
|
|
Purchase Obligations(4)
|
|
|
(In millions)
|
2021
|
|
$
|
120
|
|
|
$
|
3
|
|
|
$
|
236
|
|
2022
|
|
70
|
|
|
3
|
|
|
203
|
|
2023
|
|
33
|
|
|
3
|
|
|
203
|
|
2024
|
|
27
|
|
|
4
|
|
|
160
|
|
2025
|
|
7
|
|
|
4
|
|
|
159
|
|
Thereafter
|
|
25
|
|
|
29
|
|
|
600
|
|
Total future minimum payments
|
|
282
|
|
|
46
|
|
|
$
|
1,561
|
|
Less: imputed interest
|
|
(21)
|
|
|
(8)
|
|
|
N/A
|
Total lease liabilities
|
|
261
|
|
|
38
|
|
|
N/A
|
Current portion
|
|
116
|
|
|
2
|
|
|
N/A
|
Non-current portion
|
|
$
|
145
|
|
|
$
|
36
|
|
|
N/A
|
(1)Excludes commitments for jointly owned fields and facilities for which the Company is not the operator.
(2)Amounts 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.
(3)Amounts represent the Company’s finance lease obligation related to the Company’s Midland, Texas regional office building.
(4)Amounts represent any agreement to purchase goods or services that are enforceable and legally binding and that specify all significant terms. These include minimum commitments associated with take-or-pay contracts, NGL processing agreements, drilling work program commitments, and agreements to secure capacity rights on third-party pipelines. Amounts exclude certain product purchase obligations related to marketing and trading activities for which there are no minimum purchase requirements or the amounts are not fixed or determinable. Total costs incurred under take-or-pay and throughput obligations were $120 million, $111 million, and $132 million in 2020, 2019, and 2018, respectively.
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 was $41 million and $78 million in 2020 and 2019, respectively.
As a result of electing the transitional practical expedient to apply the provisions of the standard at its adoption date instead of the earliest comparative period presented, below are the required ASU Leases (Topic 840) disclosures for prior periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases(1)
|
|
Finance Leases(2)
|
|
|
(In millions)
|
Year ended December 31, 2018
|
|
|
|
|
2019
|
|
$
|
61
|
|
|
$
|
1
|
|
2020-2021
|
|
64
|
|
|
3
|
|
2022-2023
|
|
53
|
|
|
4
|
|
2024 & Beyond
|
|
42
|
|
|
32
|
|
Total
|
|
$
|
220
|
|
|
$
|
40
|
|
(1)Includes leases for buildings, facilities, and related equipment with varying expiration dates through 2042. Total rent expense, net of amounts capitalized and sublease income was $76 million in 2018.
(2)This represents the Company’s capital lease obligation related to its Midland, Texas office building. The imputed interest rate necessary to reduce the net minimum lease payments to present value of the lease term is 4.4 percent, or $16 million as of December 31, 2018.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
12. RETIREMENT AND DEFERRED COMPENSATION PLANS
Apache Corporation provides retirement benefits to its U.S. employees through the use of multiple plans: a 401(k) savings plan, a money purchase retirement plan, a non-qualified retirement savings plan, and a non-qualified restorative retirement savings plan. The 401(k) savings plan provides participating employees the ability to elect to contribute up to 50 percent of eligible compensation, as defined, to the plan with the Company making matching contributions up to a maximum of 8 percent of each employee’s annual eligible compensation. In addition, the Company contributes 6 percent of each participating employee’s annual eligible compensation to a money purchase retirement plan. The 401(k) savings plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions that limit the amount of employee and Company contributions. For certain eligible employees, the Company also provides a non-qualified retirement savings plan or a non-qualified restorative retirement savings plan. These plans allow the deferral of up to 50 percent of eligible employee’s base salary, up to 75 percent of each employee’s annual bonus (that accepts employee contributions) and the Company’s matching contributions in excess of the government mandated limitations imposed in the 401(k) savings plan and money purchase retirement plan.
Vesting in the Company’s contributions in the 401(k) savings plan, the money purchase retirement plan, the non-qualified retirement savings plan and the non-qualified restorative retirement savings plan occurs at the rate of 20 percent for every completed year of employment. Upon a change in control of ownership of Apache Corporation, immediate and full vesting occurs.
Additionally, Apache North Sea Limited maintains a separate retirement plan, as required under the laws of the U.K.
The aggregate annual cost to Apache of all U.S. and international savings plans, the money purchase retirement plan, non-qualified retirement savings plan, and non-qualified restorative retirement savings plan was $43 million, $52 million, and $52 million for 2020, 2019, and 2018, respectively.
Apache also provides a funded noncontributory defined benefit pension plan (U.K. Pension Plan) covering certain employees of the Company’s North Sea operations in the U.K. The plan provides defined pension benefits based on years of service and final salary. The plan applies only to employees who were part of BP North Sea’s pension plan as of April 2, 2003, prior to the acquisition of BP North Sea by the Company effective July 1, 2003.
Additionally, the Company offers postretirement medical benefits to U.S. employees who meet certain eligibility requirements. Eligible participants receive medical benefits up until the age of 65 or at the date they become eligible for Medicare, provided the participant remits the required portion of the cost of coverage. The plan is contributory with participants’ contributions adjusted annually. The postretirement benefit plan does not cover benefit expenses once a covered participant becomes eligible for Medicare.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables set forth the benefit obligation, fair value of plan assets and funded status as of December 31, 2020, 2019, and 2018, and the underlying weighted average actuarial assumptions used for the U.K. Pension Plan and U.S. postretirement benefit plan. Apache uses a measurement date of December 31 for its pension and postretirement benefit plans.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
|
(In millions)
|
Change in Projected Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
199
|
|
|
$
|
20
|
|
|
$
|
187
|
|
|
$
|
27
|
|
|
$
|
216
|
|
|
$
|
27
|
|
Service cost
|
|
3
|
|
|
1
|
|
|
3
|
|
|
2
|
|
|
4
|
|
|
2
|
|
Interest cost
|
|
4
|
|
|
—
|
|
|
5
|
|
|
1
|
|
|
5
|
|
|
1
|
|
Foreign currency exchange rates
|
|
8
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
(11)
|
|
|
—
|
|
Actuarial losses (gains)
|
|
30
|
|
|
1
|
|
|
15
|
|
|
(9)
|
|
|
(11)
|
|
|
(2)
|
|
Plan settlements
|
|
—
|
|
|
—
|
|
|
(14)
|
|
|
—
|
|
|
(11)
|
|
|
—
|
|
Benefits paid
|
|
(11)
|
|
|
(4)
|
|
|
(4)
|
|
|
(2)
|
|
|
(5)
|
|
|
(3)
|
|
Retiree contributions
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Projected benefit obligation at end of year
|
|
233
|
|
|
20
|
|
|
199
|
|
|
20
|
|
|
187
|
|
|
27
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
228
|
|
|
—
|
|
|
208
|
|
|
—
|
|
|
238
|
|
|
—
|
|
Actual return on plan assets
|
|
31
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
(6)
|
|
|
—
|
|
Foreign currency exchange rates
|
|
9
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
Employer contributions
|
|
5
|
|
|
2
|
|
|
5
|
|
|
1
|
|
|
5
|
|
|
2
|
|
Plan settlements
|
|
—
|
|
|
—
|
|
|
(14)
|
|
|
—
|
|
|
(11)
|
|
|
—
|
|
Benefits paid
|
|
(11)
|
|
|
(4)
|
|
|
(4)
|
|
|
(2)
|
|
|
(5)
|
|
|
(4)
|
|
Retiree contributions
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Fair value of plan assets at end of year
|
|
262
|
|
|
—
|
|
|
228
|
|
|
—
|
|
|
208
|
|
|
—
|
|
Funded status at end of year
|
|
$
|
29
|
|
|
$
|
(20)
|
|
|
$
|
29
|
|
|
$
|
(20)
|
|
|
$
|
21
|
|
|
$
|
(27)
|
|
Amounts recognized in Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liability
|
|
$
|
—
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(2)
|
|
Non-current asset (liability)
|
|
29
|
|
|
(18)
|
|
|
29
|
|
|
(18)
|
|
|
21
|
|
|
(25)
|
|
|
|
$
|
29
|
|
|
$
|
(20)
|
|
|
$
|
29
|
|
|
$
|
(20)
|
|
|
$
|
21
|
|
|
$
|
(27)
|
|
Pre-tax Amounts Recognized in Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated gain (loss)
|
|
$
|
(11)
|
|
|
$
|
16
|
|
|
$
|
(7)
|
|
|
$
|
19
|
|
|
$
|
(13)
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Assumptions used as of December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
1.40
|
%
|
|
2.06
|
%
|
|
2.10
|
%
|
|
3.00
|
%
|
|
2.90
|
%
|
|
4.13
|
%
|
Salary increases
|
|
4.50
|
%
|
|
N/A
|
|
4.30
|
%
|
|
N/A
|
|
4.70
|
%
|
|
N/A
|
Expected return on assets
|
|
2.20
|
%
|
|
N/A
|
|
2.20
|
%
|
|
N/A
|
|
2.80
|
%
|
|
N/A
|
Healthcare cost trend
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
|
|
N/A
|
|
6.00
|
%
|
|
N/A
|
|
6.25
|
%
|
|
N/A
|
|
6.50
|
%
|
Ultimate in 2025
|
|
N/A
|
|
5.00
|
%
|
|
N/A
|
|
5.00
|
%
|
|
N/A
|
|
5.00
|
%
|
As of December 31, 2020, 2019, and 2018, the accumulated benefit obligation for the U.K. Pension Plan was $207 million, $181 million, and $167 million, respectively.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Apache’s defined benefit pension plan assets are held by a non-related trustee who has been instructed to invest the assets in a blend of equity securities and low-risk debt securities. The Company intends that this blend of investments will provide a reasonable rate of return such that the benefits promised to members are provided. The U.K. Pension Plan policy is to target an ongoing funding level of 100 percent through prudent investments and includes policies and strategies such as investment goals, risk management practices, and permitted and prohibited investments. A breakout of previous allocations for plan asset holdings and the target allocation for the Company’s plan assets are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
Allocation
|
|
Percentage of
Plan Assets at
Year-End
|
|
|
2020
|
|
2020
|
|
2019
|
Asset Category
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overseas quoted equities
|
|
19
|
%
|
|
19
|
%
|
|
23
|
%
|
Total equity securities
|
|
19
|
%
|
|
19
|
%
|
|
23
|
%
|
Debt securities:
|
|
|
|
|
|
|
U.K. government bonds
|
|
65
|
%
|
|
64
|
%
|
|
62
|
%
|
U.K. corporate bonds
|
|
16
|
%
|
|
16
|
%
|
|
15
|
%
|
Total debt securities
|
|
81
|
%
|
|
80
|
%
|
|
77
|
%
|
Cash
|
|
—
|
|
|
1
|
%
|
|
—
|
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
The plan’s assets do not include any direct ownership of equity or debt securities of Apache. The fair value of plan assets at December 31, 2020 and 2019 are based upon unadjusted quoted prices for identical instruments in active markets, which is a Level 1 fair value measurement. The following tables present the fair values of plan assets for each major asset category based on the nature and significant concentration of risks in plan assets at December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
(In millions)
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
Overseas quoted equities
|
|
$
|
49
|
|
|
$
|
52
|
|
Total equity securities
|
|
49
|
|
|
52
|
|
Debt securities:
|
|
|
|
|
U.K. government bonds
|
|
168
|
|
|
140
|
|
U.K. corporate bonds
|
|
43
|
|
|
35
|
|
Total debt securities
|
|
211
|
|
|
175
|
|
Cash
|
|
2
|
|
|
1
|
|
Fair value of plan assets
|
|
$
|
262
|
|
|
$
|
228
|
|
The expected long-term rate of return on assets assumptions are derived relative to the yield on long-dated fixed-interest bonds issued by the U.K. government (gilts). For equities, outperformance relative to gilts is assumed to be 3.5 percent per year.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions used for the pension and postretirement benefit plans as of December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
|
(In millions)
|
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
2
|
|
Interest cost
|
|
4
|
|
|
—
|
|
|
5
|
|
|
1
|
|
|
5
|
|
|
1
|
|
Expected return on assets
|
|
(5)
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(7)
|
|
|
—
|
|
Amortization of gain
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
Settlement loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Net periodic benefit cost
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
2.10
|
%
|
|
3.00
|
%
|
|
2.90
|
%
|
|
4.13
|
%
|
|
2.60
|
%
|
|
3.44
|
%
|
Salary increases
|
|
4.30
|
%
|
|
N/A
|
|
4.70
|
%
|
|
N/A
|
|
4.70
|
%
|
|
N/A
|
Expected return on assets
|
|
2.20
|
%
|
|
N/A
|
|
2.80
|
%
|
|
N/A
|
|
2.90
|
%
|
|
N/A
|
Healthcare cost trend
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
|
|
N/A
|
|
6.25
|
%
|
|
N/A
|
|
6.50
|
%
|
|
N/A
|
|
6.75
|
%
|
Ultimate in 2025
|
|
N/A
|
|
5.00
|
%
|
|
N/A
|
|
5.00
|
%
|
|
N/A
|
|
5.00
|
%
|
Apache expects to contribute approximately $5 million to its pension plan and $2 million to its postretirement benefit plan in 2021. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
|
(In millions)
|
2021
|
|
$
|
5
|
|
|
$
|
2
|
|
2022
|
|
6
|
|
|
2
|
|
2023
|
|
7
|
|
|
2
|
|
2024
|
|
6
|
|
|
2
|
|
2025
|
|
6
|
|
|
2
|
|
Years 2026-2030
|
|
36
|
|
|
6
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13. REDEEMABLE NONCONTROLLING INTEREST - ALTUS
Preferred Units Issuance
On June 12, 2019, Altus Midstream LP issued and sold 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, as amended (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 to 10 percent per annum 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 at inception 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 $139 million as of December 31, 2020. 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, Altus’ imputed interest rate, the timing of periodic cash distributions, and dividend yields of the Preferred Units. See Note 4—Derivative Instruments and Hedging Activities for more detail.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 the 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) the sum of (i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price.
Activity related to the Preferred Units for the years ended December 31, 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units Outstanding
|
|
Financial Position(1)
|
|
|
|
(In millions, except unit data)
|
|
Redeemable noncontrolling interest — Preferred Units: at December 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
Issuance of Preferred Units, net
|
|
625,000
|
|
|
517
|
|
|
Distribution of in-kind additional Preferred Units
|
|
13,163
|
|
|
—
|
|
|
Allocation of Altus Midstream net income
|
|
N/A
|
|
38
|
|
|
Redeemable noncontrolling interest - Altus Preferred Unit limited partners: at December 31, 2019
|
|
638,163
|
|
|
555
|
|
|
|
|
|
|
|
|
Distribution of in-kind additional Preferred Units
|
|
22,531
|
|
|
—
|
|
|
Cash distributions to Altus Preferred Unit limited partners
|
|
—
|
|
|
(23)
|
|
|
Allocation of Altus Midstream LP net income
|
|
N/A
|
|
76
|
|
|
Redeemable noncontrolling interest - Altus Preferred Unit limited partners: at December 31, 2020
|
|
660,694
|
|
|
608
|
|
|
Preferred Units embedded derivative
|
|
|
|
139
|
|
|
|
|
|
|
$
|
747
|
|
|
(1)The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of December 31, 2020 was the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital. As of December 31, 2020, the Redemption Price would have been based on 1.3 times multiple of invested capital, which was $813 million and greater than using an 11.5 percent internal rate of return, which was $717 million.
N/A - not applicable.
14. CAPITAL STOCK
Common Stock Outstanding
The following table provides changes to the Company’s common shares outstanding for the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Balance, beginning of year
|
|
376,062,670
|
|
|
374,696,222
|
|
|
380,954,864
|
|
Shares issued for stock-based compensation plans:
|
|
|
|
|
|
|
Treasury shares issued
|
|
17,448
|
|
|
31,701
|
|
|
2,454
|
|
Common shares issued
|
|
1,402,512
|
|
|
1,334,747
|
|
|
1,566,237
|
|
Treasury shares acquired
|
|
—
|
|
|
—
|
|
|
(7,827,333)
|
|
Balance, end of year
|
|
377,482,630
|
|
|
376,062,670
|
|
|
374,696,222
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Net Income (Loss) per Common Share
The following table provides a reconciliation of the components of basic and diluted net income (loss) per common share for the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Loss
|
|
Shares
|
|
Per Share
|
|
Loss
|
|
Shares
|
|
Per Share
|
|
Income
|
|
Shares
|
|
Per Share
|
|
|
(In millions, except per share amounts)
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common stock
|
|
$
|
(4,860)
|
|
|
378
|
|
|
$
|
(12.86)
|
|
|
$
|
(3,553)
|
|
|
377
|
|
|
$
|
(9.43)
|
|
|
$
|
40
|
|
|
382
|
|
|
$
|
0.11
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
—
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common stock
|
|
$
|
(4,860)
|
|
|
378
|
|
|
$
|
(12.86)
|
|
|
$
|
(3,553)
|
|
|
377
|
|
|
$
|
(9.43)
|
|
|
$
|
40
|
|
|
384
|
|
|
$
|
0.11
|
|
The diluted EPS calculation excludes options and restricted shares that were anti-dilutive totaling 4.5 million, 5.0 million, and 5.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. The impact to net income (loss) attributable to common stock on an assumed conversion of the redeemable noncontrolling Preferred Units interest in Altus Midstream LP was anti-dilutive for the years ended December 31, 2020 and 2019.
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 either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and, through December 31, 2020, 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 did not purchase any shares during the year ended December 31, 2020.
Common Stock Dividend
In the first quarter of 2020, the Board of Directors approved a reduction in the Company’s quarterly dividends from $0.25 per share to $0.025 per share, effective for all dividends payable after March 12, 2020. For the year ended December 31, 2020, the Company declared common stock dividends of $0.10 per share. For each of the years ended December 31, 2019 and 2018, the Company declared common stock dividends of $1.00 per share.
Stock Compensation Plans
The Company maintains several stock-based compensation plans, which include stock options, restricted stock, and conditional restricted stock unit plans. On May 12, 2016, the Company’s shareholders approved the 2016 Omnibus Compensation Plan (the 2016 Plan), which is used to provide eligible employees with equity-based incentives by granting incentive stock options, non-qualified stock options, performance awards, restricted stock awards, restricted stock units, stock appreciation rights, cash awards, or any combination of the foregoing. As of December 31, 2020, 14.1 million shares were authorized and available for grant under the 2016 Plan. Previously approved plans remain in effect solely for the purpose of governing grants still outstanding that were issued prior to approval of the 2016 Plan. All new grants are issued from the 2016 Plan. In 2018, the Company began issuing cash-settled awards (phantom units) under the restricted stock and conditional restricted stock unit plans. The phantom units represent a hypothetical interest in the Company’s stock and, once vested, are settled in cash.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Costs related to the plans are capitalized or expensed to “Lease operating expenses,” “Exploration,” or “General and administrative” in the Company’s statement of consolidated operations based on the nature of each employee’s activities. The following table summarizes the Company’s stock-settled and cash-settled compensation costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Stock-settled and cash-settled compensation expensed
|
|
$
|
40
|
|
|
$
|
110
|
|
|
$
|
157
|
|
Stock-settled and cash-settled compensation capitalized
|
|
7
|
|
|
28
|
|
|
37
|
|
Total stock-settled and cash-settled compensation costs
|
|
$
|
47
|
|
|
$
|
138
|
|
|
$
|
194
|
|
Stock Options
As of December 31, 2020, the Company had outstanding options to purchase shares of its common stock under the 2016 Plan, the 2011 Omnibus Equity Compensation Plan (the 2011 Plan), and the 2007 Omnibus Equity Compensation Plan (the 2007 Plan), (collectively, the Omnibus Plans). The Omnibus Plans were submitted to and approved by the Company’s shareholders. New shares of common stock will be issued for employee stock option exercises. Under the Omnibus Plans, the exercise price of each option equals the closing price of Apache’s common stock on the date of grant. Options granted become exercisable ratably over a three-year period and expire 10 years after granted.
The following table summarizes stock option activity for the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Shares
Under Option
|
|
Weighted Average
Exercise Price
|
|
Shares
Under Option
|
|
Weighted Average
Exercise Price
|
|
Shares
Under Option
|
|
Weighted Average
Exercise Price
|
|
|
(In thousands, except exercise price amounts)
|
Outstanding, beginning of year
|
|
4,298
|
|
|
$
|
75.24
|
|
|
4,872
|
|
|
$
|
75.95
|
|
|
4,593
|
|
|
$
|
83.36
|
|
Granted
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
812
|
|
|
45.93
|
|
Exercised
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29)
|
|
|
41.79
|
|
Forfeited
|
|
(37)
|
|
|
44.98
|
|
|
(80)
|
|
|
34.58
|
|
|
(121)
|
|
|
74.58
|
|
Expired
|
|
(724)
|
|
|
92.14
|
|
|
(494)
|
|
|
88.82
|
|
|
(383)
|
|
|
104.21
|
|
Outstanding, end of year(1)
|
|
3,537
|
|
|
72.10
|
|
|
4,298
|
|
|
75.24
|
|
|
4,872
|
|
|
75.95
|
|
Expected to vest(2)
|
|
150
|
|
|
45.77
|
|
|
495
|
|
|
49.11
|
|
|
1,274
|
|
|
48.74
|
|
Exercisable, end of year(3)
|
|
3,387
|
|
|
73.26
|
|
|
3,803
|
|
|
78.64
|
|
|
3,598
|
|
|
85.59
|
|
(1)As of December 31, 2020, options outstanding had a weighted average remaining contractual life of 3.6 years and no intrinsic value.
(2)As of December 31, 2020, options expected to vest had a weighted average remaining contractual life of 7.0 years and no intrinsic value.
(3)As of December 31, 2020, options exercisable had a weighted average remaining contractual life of 3.4 years and no intrinsic value.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model, a Level 2 fair value measurement. The following table summarizes specific assumptions used in the Company’s valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Expected volatility
|
|
N/A
|
|
N/A
|
|
33.74%
|
Expected dividend yields
|
|
N/A
|
|
N/A
|
|
2.16%
|
Expected term (in years)
|
|
N/A
|
|
N/A
|
|
6
|
Risk-free rate
|
|
N/A
|
|
N/A
|
|
2.42%
|
Weighted-average grant-date fair value
|
|
N/A
|
|
N/A
|
|
$
|
13.15
|
N/A - not applicable.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Assumptions related to the expected volatilities are based on the Company’s historical volatility of its common stock and other factors. The expected dividend yield is based on historical yields on the date of grant. The expected term of stock options granted represents the period of time that the stock options are expected to be outstanding and is derived from historical exercise behavior, current trends, and values derived from lattice-based models. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.
There were no options issued and no options exercised during the years ended December 31, 2020 and 2019. The intrinsic values of options exercised during the year ended December 31, 2018 was approximately $0.1 million. As of December 31, 2020, total compensation cost related to non-vested options not yet recognized was nil because they fully vest on January 5, 2021.
Restricted Stock Units and Restricted Stock Phantom Units
The Company has restricted stock unit and restricted stock phantom unit plans for eligible employees, including officers. The value of the stock-settled restricted stock unit awards is established by the market price on the date of grant and is recorded as compensation expense ratably over the vesting terms. The restricted stock phantom unit awards represent a hypothetical interest in either the Company’s stock or in ALTM’s common stock, as applicable, and, once vested, are settled in cash. Compensation expense related to the cash-settled awards is recorded as a liability and remeasured at the end of each reporting period over the applicable vesting term. The cash-settled awards compensation expense is recorded as a liability and remeasured at the end of each reporting period over the applicable vesting term.
For the years ended December 31, 2020, 2019, and 2018, compensation costs charged to expense for the restricted stock units and restricted stock phantom units was $39 million, $104 million, and $101 million, respectively. As of December 31, 2020, 2019, and 2018, capitalized compensation costs for the restricted stock units and restricted stock phantom units were $6 million, $24 million, and $29 million, respectively.
The following table summarizes stock-settled restricted stock unit activity for the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Units
|
|
Weighted
Average Grant-Date Fair Value
|
|
Units
|
|
Weighted
Average Grant-Date Fair Value
|
|
Units
|
|
Weighted
Average Grant-Date Fair Value
|
|
|
(In thousands, except per share amounts)
|
Non-vested, beginning of year
|
|
2,448
|
|
|
$
|
46.65
|
|
|
3,153
|
|
|
$
|
55.54
|
|
|
4,920
|
|
|
$
|
56.67
|
|
Granted
|
|
1,352
|
|
|
24.60
|
|
|
1,479
|
|
|
36.81
|
|
|
608
|
|
|
45.59
|
|
Vested(3)
|
|
(1,933)
|
|
|
48.65
|
|
|
(1,899)
|
|
|
53.99
|
|
|
(2,023)
|
|
|
55.10
|
|
Forfeited
|
|
(315)
|
|
|
30.09
|
|
|
(285)
|
|
|
45.06
|
|
|
(352)
|
|
|
56.69
|
|
Non-vested, end of year(1)(2)
|
|
1,552
|
|
|
28.43
|
|
|
2,448
|
|
|
46.65
|
|
|
3,153
|
|
|
55.54
|
|
(1)As of December 31, 2020, there was $14 million of total unrecognized compensation cost related to 1,551,807 unvested stock-settled restricted stock units.
(2)As of December 31, 2020, the weighted-average remaining life of unvested stock-settled restricted stock units is approximately 0.7 years.
(3)The grant date fair values of the stock-settled awards vested during 2020, 2019, and 2018 were approximately $94 million, $103 million, and $111 million, respectively.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes cash-settled restricted stock phantom unit activity for the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Non-vested, beginning of year
|
|
5,384
|
|
|
1,818
|
|
|
59
|
|
Adjustment for ALTM reverse stock split(1)
|
|
(1,246)
|
|
|
—
|
|
|
—
|
|
Granted(2)
|
|
3,462
|
|
|
4,831
|
|
|
1,973
|
|
Vested
|
|
(1,618)
|
|
|
(616)
|
|
|
(38)
|
|
Forfeited
|
|
(1,559)
|
|
|
(649)
|
|
|
(176)
|
|
Non-vested, end of year(3)
|
|
4,423
|
|
|
5,384
|
|
|
1,818
|
|
(1)On June 30, 2020, Altus executed a 1-for-20 reverse stock split of its outstanding common stock. Outstanding cash-settled awards are based on the per-share market price of ALTM stock.
(2)Restricted stock phantom units granted during 2020 and 2019 included 3,378,486 and 3,401,477 awards, respectively, based on the per-share market price of Apache common stock and 83,239 and 1,429,135 awards, respectively, based on the per-share market price of ALTM common stock. The restricted stock phantom units granted during 2020 based on ALTM’s per-share market price reflect the 1-for-20 reverse stock split described above.
(3)The outstanding liability for the unvested cash-settled restricted stock phantom units that had not been recognized as of December 31, 2020 was approximately $28 million.
In January 2021, the Company awarded 1,354,349 restricted stock units and 4,360,656 restricted stock phantom units based on Apache’s weighted-average per-share market price of $16.18 under the 2016 Plan to eligible employees. Total compensation cost for the restricted stock units and the restricted stock phantom units, absent any forfeitures, is estimated to be $22 million and $71 million, respectively, and was calculated based on the per-share fair market value of a share of the Company’s common stock as of the grant date. Compensation cost will be recognized over a three-year vesting period for both plans. The phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock.
Also during January 2021, the Company awarded 56,836 restricted stock phantom units based on ALTM’s weighted-average per-share market price of $48.84. The restricted stock phantom units represent a hypothetical interest in ALTM’s common stock and, once vested, are settled in cash. Total compensation cost for these restricted stock phantom units, absent any forfeitures, is estimated to be $3 million and was calculated based on the fair market value of ALTM’s common stock as of the grant date. The restricted stock phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of ALTM’s common stock.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Performance Program
To provide long-term incentives for the Company’s employees to deliver competitive shareholder returns, the Company makes annual grants of conditional restricted stock units to eligible employees. Apache has a performance program for certain eligible employees with payout for 50 percent of the shares based upon measurement of total shareholder return (TSR) of Apache common stock as compared to a designated peer group during a three-year performance period. Payout for the remaining 50 percent of the shares is based on performance and financial objectives as defined in the plan. The overall results of the objectives are calculated at the end of the award’s stated performance period and, if a payout is warranted, applied to the target number of restricted stock units awarded. The performance shares will immediately vest 50 percent at the end of the three-year performance period, with the remaining 50 percent vesting at the end of the following year. Grants from the performance programs outstanding at December 31, 2020, are as described below:
•In January 2017, the Company’s Board of Directors approved the 2017 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial stock-settled conditional restricted stock unit awards totaling 620,885 units. A total of 111,126 restricted stock units were outstanding as of December 31, 2020. The results for the performance period yielded a payout of 54 percent of target.
•In January 2018, the Company’s Board of Directors approved the 2018 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 931,049 units. A total of 704,483 phantom units were outstanding as of December 31, 2020. The results for the performance period yielded a payout of 23 percent of target.
•In January 2019, the Company’s Board of Directors approved the 2019 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 1,679,832 units. The actual amount of phantom units awarded will be between zero and 200 percent of target. A total of 1,301,893 phantom units were outstanding as of December 31, 2020, from which a minimum of zero to a maximum of 2,603,786 phantom units could be awarded.
•In January 2020, the Company’s Board of Directors approved the 2020 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 1,687,307 units. The actual amount of phantom units awarded will be between zero and 200 percent of target. A total of 1,410,404 phantom units were outstanding as of December 31, 2020, from which a minimum of zero to a maximum of 2,820,808 phantom units could be awarded.
The fair value cost of the stock-settled awards was estimated on the date of grant and is recorded as compensation expense ratably over the applicable vesting term. The fair value of the cash-settled awards is remeasured at the end of each reporting period over the applicable vesting term. Compensation cost charged to expense under the performance programs was a credit of $8 million during 2020 and expenses of $24 million and $38 million during 2019 and 2018, respectively. Capitalized compensation costs under the performance programs was a credit of $1 million during 2020 and expenses of $3 million and $7 million during 2019 and 2018, respectively.
The following table summarizes stock-settled conditional restricted stock unit activity for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
|
|
Weighted
Average Grant-
Date Fair
Value(1)
|
|
|
(In thousands)
|
|
|
Non-vested, beginning of year
|
|
781
|
|
|
$
|
52.69
|
|
Granted
|
|
18
|
|
|
62.31
|
|
Vested
|
|
(445)
|
|
|
41.10
|
|
Forfeited
|
|
(16)
|
|
|
56.66
|
|
Expired
|
|
(227)
|
|
|
70.70
|
|
Non-vested, end of year(2)(3)
|
|
111
|
|
|
63.15
|
|
(1)The fair value of each conditional restricted stock unit award is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a three-year continuous risk-free interest rate; (ii) a constant volatility assumption based on the historical realized stock price volatility of the Company and the designated peer group; and (iii) the historical stock prices and expected dividends of the common stock of the Company and its designated peer group.
(2)As of December 31, 2020, there was no unrecognized compensation cost related to 111,126 unvested stock-settled conditional restricted stock units.
(3)As of December 31, 2020, the weighted-average remaining life of the unvested stock-settled conditional restricted stock units is approximately 0.0 years.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes cash-settled conditional restricted stock unit activity for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
Units
|
|
|
(In thousands)
|
Non-vested, beginning of year
|
|
2,320
|
|
Granted
|
|
1,687
|
|
Vested
|
|
(2)
|
|
Forfeited
|
|
(542)
|
|
Expired
|
|
(46)
|
|
Non-vested, end of year(1)
|
|
3,417
|
|
(1)As of December 31, 2020, the outstanding liability for the unvested cash-settled conditional restricted stock units that had not been recognized was approximately $14 million.
In January 2021, the Company’s Board of Directors approved the 2021 Performance Program, pursuant to the 2016 Plan. Payout for 50 percent of the shares is based upon measurement of TSR of Apache common stock as compared to a designated peer group and the S&P 500 Index during a three-year performance period. Payout for the remaining 50 percent of the shares is based on performance and financial objectives as defined in the plan. Eligible employees received the initial cash-settled conditional phantom units totaling 1,911,517 units, with the ultimate number of phantom units to be awarded ranging from zero to a maximum of 3,823,034 units. These phantom units represent a hypothetical interest in the Company’s stock, and, once vested, are settled in cash. The TSR component of the award had a grant date fair value per award of $23.73 based on a Monte Carlo simulation. The grant date fair value per award for the remaining 50 percent was $16.18 based on the weighted-average fair market value of a share of common stock of the Company as of the grant date. These phantom units will be classified as a liability and remeasured at the end of each reporting period.
15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Components of accumulated other comprehensive income (loss) include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Share of equity method interests other comprehensive loss
|
|
$
|
(1)
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
Pension and postretirement benefit plan (Note 12)
|
|
15
|
|
|
17
|
|
|
4
|
|
Accumulated other comprehensive income
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
4
|
|
16. MAJOR CUSTOMERS
The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy-related industries. The creditworthiness of customers and other counterparties is subject to continuing review, including the use of master netting agreements, where appropriate. During 2020, sales to EGPC and Vitol accounted for approximately 17 percent and 14 percent, respectively, of the Company’s worldwide crude oil, natural gas, and NGLs production revenues. During 2019, sales to BP and Sinopec, and their respective affiliates, each accounted for approximately 10 percent and 11 percent, respectively, of the Company’s worldwide crude oil, natural gas, and NGLs production revenues. During 2018, sales to BP, Sinopec, and EGPC, and their respective affiliates, each accounted for approximately 17 percent, 15 percent, and 10 percent, respectively, of the Company’s worldwide crude oil, natural gas, and NGLs production revenues.
Management does not believe that the loss of any one of these customers would have a material adverse effect on the results of operations.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17. BUSINESS SEGMENT INFORMATION
As of December 31, 2020, Apache is engaged in exploration and production (Upstream) activities across three operating segments: Egypt, North Sea, and the U.S. Apache also has active exploration and planned appraisal operations ongoing in Suriname, as well as interests in other international locations that may, over time, result in reportable discoveries and development opportunities. Apache’s Upstream business explores for, develops, and produces natural gas, crude oil and natural gas liquids. During 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. Financial information for each segment is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt(1)
|
|
North Sea
|
|
U.S.
|
|
Altus Midstream
|
|
Intersegment Eliminations & Other
|
|
Total(2)
|
|
|
Upstream
|
|
|
|
|
|
(In millions)
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
1,102
|
|
|
$
|
795
|
|
|
$
|
1,209
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,106
|
|
Natural gas revenues
|
|
280
|
|
|
67
|
|
|
251
|
|
|
—
|
|
|
—
|
|
|
598
|
|
Natural gas liquids revenues
|
|
8
|
|
|
21
|
|
|
304
|
|
|
—
|
|
|
—
|
|
|
333
|
|
Oil, natural gas, and natural gas liquids production revenues
|
|
1,390
|
|
|
883
|
|
|
1,764
|
|
|
—
|
|
|
—
|
|
|
4,037
|
|
Purchased oil and gas sales
|
|
—
|
|
|
—
|
|
|
394
|
|
|
4
|
|
|
—
|
|
|
398
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
(145)
|
|
|
—
|
|
|
|
1,390
|
|
|
883
|
|
|
2,158
|
|
|
149
|
|
|
(145)
|
|
|
4,435
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
424
|
|
|
305
|
|
|
400
|
|
|
—
|
|
|
(2)
|
|
|
1,127
|
|
Gathering, processing, and transmission
|
|
38
|
|
|
50
|
|
|
291
|
|
|
38
|
|
|
(143)
|
|
|
274
|
|
Purchased oil and gas costs
|
|
—
|
|
|
—
|
|
|
354
|
|
|
3
|
|
|
—
|
|
|
357
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
108
|
|
|
15
|
|
|
—
|
|
|
123
|
|
Exploration
|
|
63
|
|
|
28
|
|
|
168
|
|
|
—
|
|
|
15
|
|
|
274
|
|
Depreciation, depletion, and amortization
|
|
601
|
|
|
380
|
|
|
779
|
|
|
12
|
|
|
—
|
|
|
1,772
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
73
|
|
|
32
|
|
|
4
|
|
|
—
|
|
|
109
|
|
Impairments
|
|
529
|
|
|
7
|
|
|
3,963
|
|
|
2
|
|
|
—
|
|
|
4,501
|
|
|
|
1,655
|
|
|
843
|
|
|
6,095
|
|
|
74
|
|
|
(130)
|
|
|
8,537
|
|
Operating Income (Loss)
|
|
$
|
(265)
|
|
|
$
|
40
|
|
|
$
|
(3,937)
|
|
|
$
|
75
|
|
|
$
|
(15)
|
|
|
(4,102)
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(223)
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
64
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(290)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(54)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(267)
|
|
Loss Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(4,840)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets(3)
|
|
$
|
3,003
|
|
|
$
|
2,220
|
|
|
$
|
5,540
|
|
|
$
|
1,786
|
|
|
$
|
197
|
|
|
$
|
12,746
|
|
Net Property and Equipment
|
|
$
|
1,955
|
|
|
$
|
1,773
|
|
|
$
|
4,760
|
|
|
$
|
196
|
|
|
$
|
135
|
|
|
$
|
8,819
|
|
Additions to Net Property and Equipment
|
|
$
|
454
|
|
|
$
|
215
|
|
|
$
|
345
|
|
|
$
|
12
|
|
|
$
|
136
|
|
|
$
|
1,162
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt(1)
|
|
North Sea
|
|
U.S.
|
|
Altus Midstream
|
|
Intersegment Eliminations & Other
|
|
Total(2)
|
|
|
Upstream
|
|
|
|
|
|
(In millions)
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
1,969
|
|
|
$
|
1,163
|
|
|
$
|
2,098
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,230
|
|
Natural gas revenues
|
|
295
|
|
|
90
|
|
|
293
|
|
|
—
|
|
|
—
|
|
|
678
|
|
Natural gas liquids revenues
|
|
12
|
|
|
23
|
|
|
372
|
|
|
—
|
|
|
—
|
|
|
407
|
|
Oil, natural gas, and natural gas liquids production revenues
|
|
2,276
|
|
|
1,276
|
|
|
2,763
|
|
|
—
|
|
|
—
|
|
|
6,315
|
|
Purchased oil and gas sales
|
|
—
|
|
|
—
|
|
|
176
|
|
|
—
|
|
|
—
|
|
|
176
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
136
|
|
|
(136)
|
|
|
—
|
|
|
|
2,276
|
|
|
1,276
|
|
|
2,939
|
|
|
136
|
|
|
(136)
|
|
|
6,491
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
484
|
|
|
320
|
|
|
645
|
|
|
—
|
|
|
(2)
|
|
|
1,447
|
|
Gathering, processing, and transmission
|
|
40
|
|
|
45
|
|
|
299
|
|
|
56
|
|
|
(134)
|
|
|
306
|
|
Purchased oil and gas costs
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
—
|
|
|
142
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
194
|
|
|
13
|
|
|
—
|
|
|
207
|
|
Exploration
|
|
100
|
|
|
2
|
|
|
688
|
|
|
—
|
|
|
15
|
|
|
805
|
|
Depreciation, depletion, and amortization
|
|
708
|
|
|
366
|
|
|
1,566
|
|
|
40
|
|
|
—
|
|
|
2,680
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
76
|
|
|
29
|
|
|
2
|
|
|
—
|
|
|
107
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
1,648
|
|
|
1,301
|
|
|
—
|
|
|
2,949
|
|
|
|
1,332
|
|
|
809
|
|
|
5,211
|
|
|
1,412
|
|
|
(121)
|
|
|
8,643
|
|
Operating Income (Loss)
|
|
$
|
944
|
|
|
$
|
467
|
|
|
$
|
(2,272)
|
|
|
$
|
(1,276)
|
|
|
$
|
(15)
|
|
|
(2,152)
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(35)
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(406)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(50)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(462)
|
|
Loss Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets(3)
|
|
$
|
3,700
|
|
|
$
|
2,473
|
|
|
$
|
10,388
|
|
|
$
|
1,479
|
|
|
$
|
67
|
|
|
$
|
18,107
|
|
Net Property and Equipment
|
|
$
|
2,573
|
|
|
$
|
1,956
|
|
|
$
|
9,385
|
|
|
$
|
206
|
|
|
$
|
38
|
|
|
$
|
14,158
|
|
Additions to Net Property and Equipment
|
|
$
|
454
|
|
|
$
|
183
|
|
|
$
|
1,696
|
|
|
$
|
308
|
|
|
$
|
93
|
|
|
$
|
2,734
|
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt(1)
|
|
North Sea
|
|
U.S.
|
|
Altus Midstream
|
|
Intersegment Eliminations & Other
|
|
Total(2)
|
|
|
Upstream
|
|
|
|
|
|
(In millions)
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil revenues
|
|
$
|
2,396
|
|
|
$
|
1,179
|
|
|
$
|
2,271
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,846
|
|
Natural gas revenues
|
|
339
|
|
|
122
|
|
|
458
|
|
|
—
|
|
|
—
|
|
|
919
|
|
Natural gas liquids revenues
|
|
13
|
|
|
20
|
|
|
550
|
|
|
—
|
|
|
—
|
|
|
583
|
|
Oil, natural gas, and natural gas liquids production revenues
|
|
2,748
|
|
|
1,321
|
|
|
3,279
|
|
|
—
|
|
|
—
|
|
|
7,348
|
|
Purchased oil and gas sales
|
|
—
|
|
|
—
|
|
|
357
|
|
|
—
|
|
|
—
|
|
|
357
|
|
Midstream service affiliate revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
(77)
|
|
|
—
|
|
|
|
2,748
|
|
|
1,321
|
|
|
3,636
|
|
|
77
|
|
|
(77)
|
|
|
7,705
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
428
|
|
|
341
|
|
|
670
|
|
|
—
|
|
|
—
|
|
|
1,439
|
|
Gathering, processing, and transmission
|
|
47
|
|
|
42
|
|
|
282
|
|
|
54
|
|
|
(77)
|
|
|
348
|
|
Purchased oil and gas costs
|
|
—
|
|
|
—
|
|
|
340
|
|
|
—
|
|
|
—
|
|
|
340
|
|
Taxes other than income
|
|
—
|
|
|
—
|
|
|
207
|
|
|
8
|
|
|
—
|
|
|
215
|
|
Exploration
|
|
88
|
|
|
192
|
|
|
219
|
|
|
—
|
|
|
4
|
|
|
503
|
|
Depreciation, depletion, and amortization
|
|
745
|
|
|
375
|
|
|
1,266
|
|
|
19
|
|
|
—
|
|
|
2,405
|
|
Asset retirement obligation accretion
|
|
—
|
|
|
75
|
|
|
32
|
|
|
1
|
|
|
—
|
|
|
108
|
|
Impairments
|
|
63
|
|
|
10
|
|
|
438
|
|
|
—
|
|
|
—
|
|
|
511
|
|
|
|
1,371
|
|
|
1,035
|
|
|
3,454
|
|
|
82
|
|
|
(73)
|
|
|
5,869
|
|
Operating Income (Loss)
|
|
$
|
1,377
|
|
|
$
|
286
|
|
|
$
|
182
|
|
|
$
|
(5)
|
|
|
$
|
(4)
|
|
|
1,836
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Derivative instrument losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(17)
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(431)
|
|
Transaction, reorganization, and separation
|
|
|
|
|
|
|
|
|
|
|
|
(28)
|
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
(478)
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets(3)
|
|
$
|
4,260
|
|
|
$
|
2,456
|
|
|
$
|
12,962
|
|
|
$
|
1,857
|
|
|
$
|
47
|
|
|
$
|
21,582
|
|
Net Property and Equipment
|
|
$
|
2,856
|
|
|
$
|
2,148
|
|
|
$
|
12,145
|
|
|
$
|
1,227
|
|
|
$
|
45
|
|
|
$
|
18,421
|
|
Additions to Net Property and Equipment
|
|
$
|
594
|
|
|
$
|
223
|
|
|
$
|
2,544
|
|
|
$
|
545
|
|
|
$
|
8
|
|
|
$
|
3,914
|
|
(1)Includes revenue from non-customers for the years ended December 31, 2020, 2019, and 2018 of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Oil
|
|
$
|
95
|
|
|
$
|
410
|
|
|
$
|
592
|
|
Natural gas
|
|
14
|
|
|
40
|
|
|
58
|
|
Natural gas liquids
|
|
—
|
|
|
1
|
|
|
2
|
|
(2)Includes a noncontrolling interest in Egypt and Altus Midstream.
(3)Intercompany balances are excluded from total assets.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
18. SUPPLEMENTAL OIL AND GAS DISCLOSURES (Unaudited)
Oil and Gas Operations
The following table sets forth revenue and direct cost information relating to the Company’s oil and gas exploration and production activities. Apache has no long-term agreements to purchase oil or gas production from foreign governments or authorities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
Egypt(1)
|
|
North Sea
|
|
Other
International
|
|
Total(1)
|
|
|
(In millions, except per boe)
|
2020
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues
|
|
$
|
1,764
|
|
|
$
|
1,390
|
|
|
$
|
883
|
|
|
$
|
—
|
|
|
$
|
4,037
|
|
Operating cost:
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, and amortization(2)
|
|
726
|
|
|
540
|
|
|
377
|
|
|
—
|
|
|
1,643
|
|
Asset retirement obligation accretion
|
|
32
|
|
|
—
|
|
|
73
|
|
|
—
|
|
|
105
|
|
Lease operating expenses
|
|
400
|
|
|
424
|
|
|
305
|
|
|
—
|
|
|
1,129
|
|
Gathering, processing, and transmission
|
|
291
|
|
|
38
|
|
|
50
|
|
|
—
|
|
|
379
|
|
Exploration expenses
|
|
168
|
|
|
63
|
|
|
28
|
|
|
15
|
|
|
274
|
|
Impairments related to oil and gas properties
|
|
3,938
|
|
|
374
|
|
|
7
|
|
|
—
|
|
|
4,319
|
|
Production taxes(3)
|
|
106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
Income tax
|
|
(818)
|
|
|
(22)
|
|
|
17
|
|
|
—
|
|
|
(823)
|
|
|
|
4,843
|
|
|
1,417
|
|
|
857
|
|
|
15
|
|
|
7,132
|
|
Results of operations
|
|
$
|
(3,079)
|
|
|
$
|
(27)
|
|
|
$
|
26
|
|
|
$
|
(15)
|
|
|
$
|
(3,095)
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues
|
|
$
|
2,763
|
|
|
$
|
2,276
|
|
|
$
|
1,276
|
|
|
$
|
—
|
|
|
$
|
6,315
|
|
Operating cost:
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, and amortization(2)
|
|
1,508
|
|
|
641
|
|
|
363
|
|
|
—
|
|
|
2,512
|
|
Asset retirement obligation accretion
|
|
29
|
|
|
—
|
|
|
76
|
|
|
—
|
|
|
105
|
|
Lease operating expenses
|
|
645
|
|
|
484
|
|
|
320
|
|
|
—
|
|
|
1,449
|
|
Gathering, processing, and transmission
|
|
299
|
|
|
40
|
|
|
45
|
|
|
—
|
|
|
384
|
|
Exploration expenses
|
|
688
|
|
|
100
|
|
|
2
|
|
|
15
|
|
|
805
|
|
Impairments related to oil and gas properties
|
|
1,633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,633
|
|
Production taxes(3)
|
|
191
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
191
|
|
Income tax
|
|
(468)
|
|
|
455
|
|
|
188
|
|
|
—
|
|
|
175
|
|
|
|
4,525
|
|
|
1,720
|
|
|
994
|
|
|
15
|
|
|
7,254
|
|
Results of operations
|
|
$
|
(1,762)
|
|
|
$
|
556
|
|
|
$
|
282
|
|
|
$
|
(15)
|
|
|
$
|
(939)
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues
|
|
$
|
3,279
|
|
|
$
|
2,748
|
|
|
$
|
1,321
|
|
|
$
|
—
|
|
|
$
|
7,348
|
|
Operating cost:
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, and amortization(2)
|
|
1,206
|
|
|
688
|
|
|
371
|
|
|
—
|
|
|
2,265
|
|
Asset retirement obligation accretion
|
|
32
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
107
|
|
Lease operating expenses
|
|
670
|
|
|
428
|
|
|
341
|
|
|
—
|
|
|
1,439
|
|
Gathering, processing, and transmission
|
|
282
|
|
|
47
|
|
|
42
|
|
|
—
|
|
|
371
|
|
Exploration expenses
|
|
219
|
|
|
88
|
|
|
192
|
|
|
4
|
|
|
503
|
|
Impairments related to oil and gas properties
|
|
265
|
|
|
63
|
|
|
10
|
|
|
—
|
|
|
338
|
|
Production taxes(3)
|
|
203
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
203
|
|
Income tax
|
|
87
|
|
|
645
|
|
|
116
|
|
|
—
|
|
|
848
|
|
|
|
2,964
|
|
|
1,959
|
|
|
1,147
|
|
|
4
|
|
|
6,074
|
|
Results of operations
|
|
$
|
315
|
|
|
$
|
789
|
|
|
$
|
174
|
|
|
$
|
(4)
|
|
|
$
|
1,274
|
|
(1)Includes a noncontrolling interest in Egypt.
(3)Reflects only amounts directly related to oil and gas producing properties and, therefore, does not agree with taxes other than income reflected on Note 17—Business Segment Information.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Costs Incurred in Oil and Gas Property Acquisitions, Exploration, and Development Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
Egypt(2)
|
|
North Sea
|
|
Other
International
|
|
Total(2)
|
|
|
(In millions)
|
2020
|
|
|
|
|
|
|
|
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7
|
|
Unproved
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Exploration
|
|
8
|
|
|
102
|
|
|
68
|
|
|
150
|
|
|
328
|
|
Development
|
|
332
|
|
|
378
|
|
|
162
|
|
|
—
|
|
|
872
|
|
Costs incurred(1)
|
|
$
|
344
|
|
|
$
|
487
|
|
|
$
|
230
|
|
|
$
|
150
|
|
|
$
|
1,211
|
|
(1) Includes capitalized interest and asset retirement costs as follows:
|
|
|
|
|
|
|
|
|
Capitalized interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Asset retirement costs
|
|
9
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
38
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Unproved
|
|
47
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
57
|
|
Exploration
|
|
162
|
|
|
139
|
|
|
62
|
|
|
105
|
|
|
468
|
|
Development
|
|
1,500
|
|
|
374
|
|
|
119
|
|
|
3
|
|
|
1,996
|
|
Costs incurred(1)
|
|
$
|
1,712
|
|
|
$
|
528
|
|
|
$
|
181
|
|
|
$
|
108
|
|
|
$
|
2,529
|
|
(1) Includes capitalized interest and asset retirement costs as follows:
|
|
|
|
Capitalized interest
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
32
|
|
Asset retirement costs
|
|
14
|
|
|
—
|
|
|
(111)
|
|
|
—
|
|
|
(97)
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Unproved
|
|
111
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
127
|
|
Exploration
|
|
640
|
|
|
175
|
|
|
113
|
|
|
12
|
|
|
940
|
|
Development
|
|
1,791
|
|
|
457
|
|
|
133
|
|
|
—
|
|
|
2,381
|
|
Costs incurred(1)
|
|
$
|
2,542
|
|
|
$
|
654
|
|
|
$
|
246
|
|
|
$
|
12
|
|
|
$
|
3,454
|
|
(1) Includes capitalized interest and asset retirement costs as follows:
|
|
|
Capitalized interest
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
2
|
|
|
$
|
36
|
|
Asset retirement costs
|
|
93
|
|
|
—
|
|
|
(62)
|
|
|
—
|
|
|
31
|
|
(2) Includes a noncontrolling interest in Egypt.
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Capitalized Costs
The following table sets forth the capitalized costs and associated accumulated depreciation, depletion, and amortization relating to the Company’s oil and gas acquisition, exploration, and development activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
Egypt(1)
|
|
North
Sea
|
|
Other
International
|
|
Total(1)
|
|
|
(In millions)
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved properties
|
|
$
|
20,343
|
|
|
|
|
$
|
12,069
|
|
|
$
|
8,805
|
|
|
$
|
—
|
|
|
$
|
41,217
|
|
Unproved properties
|
|
348
|
|
|
|
|
77
|
|
|
42
|
|
|
135
|
|
|
602
|
|
|
|
20,691
|
|
|
|
|
12,146
|
|
|
8,847
|
|
|
135
|
|
|
41,819
|
|
Accumulated DD&A
|
|
(16,252)
|
|
|
|
|
(10,290)
|
|
|
(7,081)
|
|
|
—
|
|
|
(33,623)
|
|
|
|
$
|
4,439
|
|
|
|
|
$
|
1,856
|
|
|
$
|
1,766
|
|
|
$
|
135
|
|
|
$
|
8,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved properties
|
|
$
|
20,291
|
|
|
|
|
$
|
11,614
|
|
|
$
|
8,635
|
|
|
$
|
—
|
|
|
$
|
40,540
|
|
Unproved properties
|
|
509
|
|
|
|
|
109
|
|
|
10
|
|
|
38
|
|
|
666
|
|
|
|
20,800
|
|
|
|
|
11,723
|
|
|
8,645
|
|
|
38
|
|
|
41,206
|
|
Accumulated DD&A
|
|
(11,783)
|
|
|
|
|
(9,377)
|
|
|
(6,700)
|
|
|
—
|
|
|
(27,860)
|
|
|
|
$
|
9,017
|
|
|
|
|
$
|
2,346
|
|
|
$
|
1,945
|
|
|
$
|
38
|
|
|
$
|
13,346
|
|
(1)Includes a noncontrolling interest in Egypt..
Oil and Gas Reserve Information
Proved oil and gas reserves are those quantities of natural gas, crude oil, condensate, and NGLs, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Estimated proved developed oil and gas reserves can be expected to be recovered through existing wells with existing equipment and operating methods. The Company reports all estimated proved reserves held under production-sharing arrangements utilizing the “economic interest” method, which excludes the host country’s share of reserves.
Estimated reserves that can be produced economically through application of improved recovery techniques are included in the “proved” classification when successful testing by a pilot project or the operation of an active, improved recovery program using reliable technology establishes the reasonable certainty for the engineering analysis on which the project or program is based. Economically producible means a resource that generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. Reasonable certainty means a high degree of confidence that the quantities will be recovered. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field-tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. In estimating its proved reserves, Apache uses several different traditional methods that can be classified in three general categories: (1) performance-based methods; (2) volumetric-based methods; and (3) analogy with similar properties. Apache will, at times, utilize additional technical analysis such as computer reservoir models, petrophysical techniques, and proprietary 3-D seismic interpretation methods to provide additional support for more complex reservoirs. Information from this additional analysis is combined with traditional methods outlined above to enhance the certainty of the Company’s reserve estimates.
There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The reserve data in the following tables only represent estimates and should not be construed as being exact.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil and Condensate
|
|
|
United
States
|
|
Egypt(1)
|
|
|
|
North
Sea
|
|
|
|
Total(1)
|
|
|
(Thousands of barrels)
|
Proved developed reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
304,279
|
|
|
124,568
|
|
|
|
|
92,598
|
|
|
|
|
521,445
|
|
December 31, 2018
|
|
300,484
|
|
|
110,014
|
|
|
|
|
104,491
|
|
|
|
|
514,989
|
|
December 31, 2019
|
|
278,145
|
|
|
103,573
|
|
|
|
|
101,712
|
|
|
|
|
483,430
|
|
December 31, 2020
|
|
206,936
|
|
|
95,981
|
|
|
|
|
86,566
|
|
|
|
|
389,483
|
|
Proved undeveloped reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
31,904
|
|
|
16,198
|
|
|
|
|
14,013
|
|
|
|
|
62,115
|
|
December 31, 2018
|
|
45,182
|
|
|
9,484
|
|
|
|
|
11,278
|
|
|
|
|
65,944
|
|
December 31, 2019
|
|
46,716
|
|
|
10,831
|
|
|
|
|
10,049
|
|
|
|
|
67,596
|
|
December 31, 2020
|
|
25,516
|
|
|
11,228
|
|
|
|
|
7,273
|
|
|
|
|
44,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total proved reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2017
|
|
336,183
|
|
|
140,766
|
|
|
|
|
106,611
|
|
|
|
|
583,560
|
|
Extensions, discoveries and other additions
|
|
61,976
|
|
|
22,473
|
|
|
|
|
15,682
|
|
|
|
|
100,131
|
|
Purchases of minerals in-place
|
|
140
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
140
|
|
Revisions of previous estimates
|
|
(14,334)
|
|
|
(9,556)
|
|
|
|
|
10,613
|
|
|
|
|
(13,277)
|
|
Production
|
|
(38,252)
|
|
|
(34,185)
|
|
|
|
|
(17,137)
|
|
|
|
|
(89,574)
|
|
Sales of minerals in-place
|
|
(47)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(47)
|
|
Balance December 31, 2018
|
|
345,666
|
|
|
119,498
|
|
|
|
|
115,769
|
|
|
|
|
580,933
|
|
Extensions, discoveries and other additions
|
|
52,297
|
|
|
21,039
|
|
|
|
|
9,017
|
|
|
|
|
82,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(16,446)
|
|
|
4,752
|
|
|
|
|
5,132
|
|
|
|
|
(6,562)
|
|
Production
|
|
(38,344)
|
|
|
(30,885)
|
|
|
|
|
(18,157)
|
|
|
|
|
(87,386)
|
|
Sales of minerals in-place
|
|
(18,312)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(18,312)
|
|
Balance December 31, 2019
|
|
324,861
|
|
|
114,404
|
|
|
|
|
111,761
|
|
|
|
|
551,026
|
|
Extensions, discoveries and other additions
|
|
17,858
|
|
|
17,855
|
|
|
|
|
5,275
|
|
|
|
|
40,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(69,247)
|
|
|
2,541
|
|
|
|
|
(4,756)
|
|
|
|
|
(71,462)
|
|
Production
|
|
(32,299)
|
|
|
(27,591)
|
|
|
|
|
(18,441)
|
|
|
|
|
(78,331)
|
|
Sales of minerals in-place
|
|
(8,721)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(8,721)
|
|
Balance December 31, 2020
|
|
232,452
|
|
|
107,209
|
|
|
|
|
93,839
|
|
|
|
|
433,500
|
|
(1)Includes proved reserves of 36 MMbbls, 38 MMbbls, 40 MMbbls, and 47 MMbbls as of December 31, 2020, 2019, 2018, and 2017, respectively, attributable to a noncontrolling interest in Egypt.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Liquids
|
|
|
United
States
|
|
Egypt(1)
|
|
|
|
North
Sea
|
|
|
|
Total(1)
|
|
|
(Thousands of barrels)
|
Proved developed reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
171,005
|
|
|
685
|
|
|
|
|
2,025
|
|
|
|
|
173,715
|
|
December 31, 2018
|
|
197,574
|
|
|
502
|
|
|
|
|
1,938
|
|
|
|
|
200,014
|
|
December 31, 2019
|
|
158,794
|
|
|
667
|
|
|
|
|
2,317
|
|
|
|
|
161,778
|
|
December 31, 2020
|
|
150,599
|
|
|
716
|
|
|
|
|
2,053
|
|
|
|
|
153,368
|
|
Proved undeveloped reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
29,559
|
|
|
39
|
|
|
|
|
353
|
|
|
|
|
29,951
|
|
December 31, 2018
|
|
33,796
|
|
|
60
|
|
|
|
|
631
|
|
|
|
|
34,487
|
|
December 31, 2019
|
|
23,569
|
|
|
90
|
|
|
|
|
660
|
|
|
|
|
24,319
|
|
December 31, 2020
|
|
15,141
|
|
|
126
|
|
|
|
|
320
|
|
|
|
|
15,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total proved reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2017
|
|
200,564
|
|
|
724
|
|
|
|
|
2,378
|
|
|
|
|
203,666
|
|
Extensions, discoveries and other additions
|
|
60,990
|
|
|
144
|
|
|
|
|
1,444
|
|
|
|
|
62,578
|
|
Purchases of minerals in-place
|
|
40
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
40
|
|
Revisions of previous estimates
|
|
(9,250)
|
|
|
31
|
|
|
|
|
(819)
|
|
|
|
|
(10,038)
|
|
Production
|
|
(20,969)
|
|
|
(337)
|
|
|
|
|
(434)
|
|
|
|
|
(21,740)
|
|
Sales of minerals in-place
|
|
(5)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(5)
|
|
Balance December 31, 2018
|
|
231,370
|
|
|
562
|
|
|
|
|
2,569
|
|
|
|
|
234,501
|
|
Extensions, discoveries and other additions
|
|
41,343
|
|
|
27
|
|
|
|
|
697
|
|
|
|
|
42,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(32,569)
|
|
|
508
|
|
|
|
|
345
|
|
|
|
|
(31,716)
|
|
Production
|
|
(24,959)
|
|
|
(340)
|
|
|
|
|
(634)
|
|
|
|
|
(25,933)
|
|
Sales of minerals in-place
|
|
(32,822)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(32,822)
|
|
Balance December 31, 2019
|
|
182,363
|
|
|
757
|
|
|
|
|
2,977
|
|
|
|
|
186,097
|
|
Extensions, discoveries and other additions
|
|
11,435
|
|
|
97
|
|
|
|
|
312
|
|
|
|
|
11,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(469)
|
|
|
264
|
|
|
|
|
(207)
|
|
|
|
|
(412)
|
|
Production
|
|
(27,133)
|
|
|
(276)
|
|
|
|
|
(709)
|
|
|
|
|
(28,118)
|
|
Sales of minerals in-place
|
|
(456)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(456)
|
|
Balance December 31, 2020
|
|
165,740
|
|
|
842
|
|
|
|
|
2,373
|
|
|
|
|
168,955
|
|
(1) Includes proved reserves of 281 Mbbls, 252 Mbbls, 187 Mbbls, and 241 Mbbls as of December 31, 2020, 2019, 2018, and 2017, respectively, attributable to a noncontrolling interest in Egypt.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas
|
|
|
United
States
|
|
Egypt(1)
|
|
|
|
North
Sea
|
|
|
|
Total(1)
|
|
|
(Millions of cubic feet)
|
Proved developed reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
1,347,009
|
|
|
540,667
|
|
|
|
|
83,342
|
|
|
|
|
1,971,018
|
|
December 31, 2018
|
|
1,626,403
|
|
|
476,132
|
|
|
|
|
95,347
|
|
|
|
|
2,197,882
|
|
December 31, 2019
|
|
945,938
|
|
|
433,382
|
|
|
|
|
106,329
|
|
|
|
|
1,485,649
|
|
December 31, 2020
|
|
1,052,756
|
|
|
409,035
|
|
|
|
|
68,159
|
|
|
|
|
1,529,950
|
|
Proved undeveloped reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
297,226
|
|
|
47,255
|
|
|
|
|
11,063
|
|
|
|
|
355,544
|
|
December 31, 2018
|
|
267,090
|
|
|
33,006
|
|
|
|
|
15,804
|
|
|
|
|
315,900
|
|
December 31, 2019
|
|
115,040
|
|
|
24,704
|
|
|
|
|
16,604
|
|
|
|
|
156,348
|
|
December 31, 2020
|
|
76,504
|
|
|
12,572
|
|
|
|
|
8,341
|
|
|
|
|
97,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total proved reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2017
|
|
1,644,235
|
|
|
587,922
|
|
|
|
|
94,405
|
|
|
|
|
2,326,562
|
|
Extensions, discoveries and other additions
|
|
704,135
|
|
|
79,394
|
|
|
|
|
55,274
|
|
|
|
|
838,803
|
|
Purchases of minerals in-place
|
|
906
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
906
|
|
Revisions of previous estimates
|
|
(239,204)
|
|
|
(38,892)
|
|
|
|
|
(21,933)
|
|
|
|
|
(300,029)
|
|
Production
|
|
(216,538)
|
|
|
(119,286)
|
|
|
|
|
(16,595)
|
|
|
|
|
(352,419)
|
|
Sales of minerals in-place
|
|
(41)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(41)
|
|
Balance December 31, 2018
|
|
1,893,493
|
|
|
509,138
|
|
|
|
|
111,151
|
|
|
|
|
2,513,782
|
|
Extensions, discoveries and other additions
|
|
249,205
|
|
|
34,758
|
|
|
|
|
27,711
|
|
|
|
|
311,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(509,753)
|
|
|
18,570
|
|
|
|
|
4,015
|
|
|
|
|
(487,168)
|
|
Production
|
|
(233,447)
|
|
|
(104,380)
|
|
|
|
|
(19,944)
|
|
|
|
|
(357,771)
|
|
Sales of minerals in-place
|
|
(338,520)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(338,520)
|
|
Balance December 31, 2019
|
|
1,060,978
|
|
|
458,086
|
|
|
|
|
122,933
|
|
|
|
|
1,641,997
|
|
Extensions, discoveries and other additions
|
|
60,965
|
|
|
83,718
|
|
|
|
|
8,140
|
|
|
|
|
152,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
215,166
|
|
|
(19,849)
|
|
|
|
|
(33,541)
|
|
|
|
|
161,776
|
|
Production
|
|
(205,594)
|
|
|
(100,348)
|
|
|
|
|
(21,032)
|
|
|
|
|
(326,974)
|
|
Sales of minerals in-place
|
|
(2,255)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(2,255)
|
|
Balance December 31, 2020
|
|
1,129,260
|
|
|
421,607
|
|
|
|
|
76,500
|
|
|
|
|
1,627,367
|
|
(1) Includes proved reserves of 141 Bcf, 153 Bcf, 170 Bcf, and 196 Bcf as of December 31, 2020, 2019, 2018, and 2017, respectively, attributable to a noncontrolling interest in Egypt.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equivalent Reserves
|
|
|
United
States
|
|
Egypt(1)
|
|
|
|
North
Sea
|
|
|
|
Total(1)
|
|
|
(Thousands barrels of oil equivalent)
|
Proved developed reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
699,786
|
|
|
215,364
|
|
|
|
|
108,513
|
|
|
|
|
1,023,663
|
|
December 31, 2018
|
|
769,125
|
|
|
189,871
|
|
|
|
|
122,320
|
|
|
|
|
1,081,316
|
|
December 31, 2019
|
|
594,595
|
|
|
176,470
|
|
|
|
|
121,751
|
|
|
|
|
892,816
|
|
December 31, 2020
|
|
532,994
|
|
|
164,870
|
|
|
|
|
99,979
|
|
|
|
|
797,843
|
|
Proved undeveloped reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
111,001
|
|
|
24,112
|
|
|
|
|
16,210
|
|
|
|
|
151,323
|
|
December 31, 2018
|
|
123,493
|
|
|
15,045
|
|
|
|
|
14,543
|
|
|
|
|
153,081
|
|
December 31, 2019
|
|
89,458
|
|
|
15,038
|
|
|
|
|
13,476
|
|
|
|
|
117,972
|
|
December 31, 2020
|
|
53,408
|
|
|
13,449
|
|
|
|
|
8,983
|
|
|
|
|
75,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total proved reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2017
|
|
810,787
|
|
|
239,476
|
|
|
|
|
124,723
|
|
|
|
|
1,174,986
|
|
Extensions, discoveries and other additions
|
|
240,322
|
|
|
35,849
|
|
|
|
|
26,338
|
|
|
|
|
302,509
|
|
Purchases of minerals in-place
|
|
331
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
331
|
|
Revisions of previous estimates
|
|
(63,451)
|
|
|
(16,007)
|
|
|
|
|
6,139
|
|
|
|
|
(73,319)
|
|
Production
|
|
(95,312)
|
|
|
(54,402)
|
|
|
|
|
(20,337)
|
|
|
|
|
(170,051)
|
|
Sales of minerals in-place
|
|
(59)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(59)
|
|
Balance December 31, 2018
|
|
892,618
|
|
|
204,916
|
|
|
|
|
136,863
|
|
|
|
|
1,234,397
|
|
Extensions, discoveries and other additions
|
|
135,174
|
|
|
26,859
|
|
|
|
|
14,333
|
|
|
|
|
176,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(133,974)
|
|
|
8,355
|
|
|
|
|
6,146
|
|
|
|
|
(119,473)
|
|
Production
|
|
(102,211)
|
|
|
(48,622)
|
|
|
|
|
(22,115)
|
|
|
|
|
(172,948)
|
|
Sales of minerals in-place
|
|
(107,554)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(107,554)
|
|
Balance December 31, 2019
|
|
684,053
|
|
|
191,508
|
|
|
|
|
135,227
|
|
|
|
|
1,010,788
|
|
Extensions, discoveries and other additions
|
|
39,454
|
|
|
31,905
|
|
|
|
|
6,944
|
|
|
|
|
78,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revisions of previous estimates
|
|
(33,854)
|
|
|
(502)
|
|
|
|
|
(10,554)
|
|
|
|
|
(44,910)
|
|
Production
|
|
(93,698)
|
|
|
(44,592)
|
|
|
|
|
(22,655)
|
|
|
|
|
(160,945)
|
|
Sales of minerals in-place
|
|
(9,553)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(9,553)
|
|
Balance December 31, 2020
|
|
586,402
|
|
|
178,319
|
|
|
|
|
108,962
|
|
|
|
|
873,683
|
|
(1) Includes include total proved reserves of 59 MMboe, 64 MMboe, 68 MMboe, and 80 MMboe as of December 31, 2020, 2019, 2018, and 2017, respectively, attributable to a noncontrolling interest in Egypt.
During 2020, Apache added approximately 78 MMboe from extensions, discoveries, and other additions. The Company recorded 39 MMboe of exploration and development adds in the U.S., primarily in the Southern Midland Basin (26 MMboe) associated with the Wolfcamp and Spraberry drilling programs and the remainder in the Delaware Basin and Austin Chalk. The international operations contributed 39 MMboe of exploration and development adds during 2020, with Egypt contributing 32 MMboe from onshore exploration and appraisal activity primarily in the Khalda Area and Umbarka Area concessions. The North Sea contributed 7 MMboe from drilling success, primarily in the Beryl Field. The Company had combined downward revisions of previously estimated reserves of 45 MMboe. Downward revisions related to changes in product prices accounted for 70 MMboe, engineering and performance upward revisions accounted for 27 MMboe, and downward interest revisions accounted for 2 MMboe. The Company also sold 10 MMboe of proved reserves associated with U.S. divestitures, primarily related to Eastern Shelf and Magnet Withers/Pickett Ridge.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
During 2019, Apache added approximately 176 MMboe from extensions, discoveries, and other additions. The Company recorded 135 MMboe of exploration and development adds in the U.S., primarily associated with Woodford, Bone Springs, Spraberry, Barnett, and Wolfcamp drilling programs in the Permian Basin (129 MMboe) and various offset drilling activity in the Midcontinent region (6 MMboe). The Company’s international assets contributed 41 MMboe of exploration and development adds during 2019. Egypt contributed 27 MMboe from onshore exploration and appraisal activity in the Khalda Extension 2, Khalda, Khalda Extension 3, East Bahariya Extension 3, and West Kanayis concessions. The North Sea contributed 14 MMboe from drilling success in the Beryl and Forties fields. The Company had combined downward revisions of previously estimated reserves of 119 MMboe. Downward revisions related to changes in product prices accounted for 139 MMboe and engineering and performance upward revisions accounted for 20 MMboe. The Company also sold 107 MMboe of proved reserves associated with U.S. divestitures, primarily related to the sale of the Company’s Woodford-SCOOP and STACK plays and western Anadarko Basin assets.
During 2018, Apache added approximately 303 MMboe from extensions, discoveries, and other additions. The Company recorded 240 MMboe of exploration and development adds in the U.S., primarily associated with Woodford, Bone Springs, Yeso, Barnett, and Wolfcamp drilling programs in the Permian Basin (217 MMboe) and Woodford and Austin Chalk drilling activity in the Midcontinent region (20 MMboe). The Company’s international assets contributed 62 MMboe of exploration and development adds during 2018. Egypt contributed 36 MMboe from onshore exploration and appraisal activity in the Khalda Extension 2, Khalda, Khalda Extension 3, Matruh, and West Kalabsha concessions. The North Sea contributed 26 MMboe from drilling success in the Beryl and Forties fields. The Company had combined downward revisions of previously estimated reserves of 73 MMboe. Downward revisions related to changes in product prices accounted for 24 MMboe, interest revisions accounted for 5 MMboe, and engineering and performance downward revisions accounted for 44 MMboe.
Approximately 10 percent of the Company’s year-end 2020 estimated proved developed reserves are classified as proved not producing. These reserves relate to zones that are either behind pipe, or that have been completed but not yet produced, or zones that have been produced in the past, but are not now producing because of mechanical reasons. These reserves are considered to be a lower tier of reserves than producing reserves because they are frequently based on volumetric calculations rather than performance data. Future production associated with behind pipe reserves is scheduled to follow depletion of the currently producing zones in the same wellbores. Additional capital may have to be spent to access these reserves. The capital and economic impact of production timing are reflected in this Note 18, under “Future Net Cash Flows.”
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Future Net Cash Flows
Future cash inflows as of December 31, 2020, 2019, and 2018 were calculated using an unweighted arithmetic average of oil and gas prices in effect on the first day of each month in the respective year, except where prices are defined by contractual arrangements. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation. Future development costs include abandonment and dismantlement costs.
The following table sets forth unaudited information concerning future net cash flows for proved oil and gas reserves, net of income tax expense. Income tax expense has been computed using expected future tax rates and giving effect to tax deductions and credits available, under current laws, and which relate to oil and gas producing activities. This information does not purport to present the fair market value of the Company’s oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
Egypt(1)
|
|
North
Sea
|
|
Total(1)
|
|
|
(In millions)
|
2020
|
|
|
|
|
|
|
|
|
Cash inflows
|
|
$
|
12,537
|
|
|
$
|
5,560
|
|
|
$
|
4,122
|
|
|
$
|
22,219
|
|
Production costs
|
|
(6,244)
|
|
|
(1,704)
|
|
|
(2,388)
|
|
|
(10,336)
|
|
Development costs
|
|
(1,555)
|
|
|
(633)
|
|
|
(2,448)
|
|
|
(4,636)
|
|
Income tax expense
|
|
—
|
|
|
(1,096)
|
|
|
316
|
|
|
(780)
|
|
Net cash flows
|
|
4,738
|
|
|
2,127
|
|
|
(398)
|
|
|
6,467
|
|
10 percent discount rate
|
|
(1,829)
|
|
|
(437)
|
|
|
1,111
|
|
|
(1,155)
|
|
Discounted future net cash flows(2)
|
|
$
|
2,909
|
|
|
$
|
1,690
|
|
|
$
|
713
|
|
|
$
|
5,312
|
|
2019
|
|
|
|
|
|
|
|
|
Cash inflows
|
|
$
|
21,694
|
|
|
$
|
8,306
|
|
|
$
|
7,454
|
|
|
$
|
37,454
|
|
Production costs
|
|
(10,642)
|
|
|
(1,847)
|
|
|
(2,730)
|
|
|
(15,219)
|
|
Development costs
|
|
(1,740)
|
|
|
(707)
|
|
|
(2,651)
|
|
|
(5,098)
|
|
Income tax expense
|
|
(27)
|
|
|
(1,930)
|
|
|
(784)
|
|
|
(2,741)
|
|
Net cash flows
|
|
9,285
|
|
|
3,822
|
|
|
1,289
|
|
|
14,396
|
|
10 percent discount rate
|
|
(4,003)
|
|
|
(808)
|
|
|
297
|
|
|
(4,514)
|
|
Discounted future net cash flows(2)
|
|
$
|
5,282
|
|
|
$
|
3,014
|
|
|
$
|
1,586
|
|
|
$
|
9,882
|
|
2018
|
|
|
|
|
|
|
|
|
Cash inflows
|
|
$
|
29,906
|
|
|
$
|
9,866
|
|
|
$
|
9,206
|
|
|
$
|
48,978
|
|
Production costs
|
|
(13,699)
|
|
|
(1,799)
|
|
|
(2,588)
|
|
|
(18,086)
|
|
Development costs
|
|
(2,150)
|
|
|
(792)
|
|
|
(2,714)
|
|
|
(5,656)
|
|
Income tax expense
|
|
(19)
|
|
|
(2,455)
|
|
|
(1,352)
|
|
|
(3,826)
|
|
Net cash flows
|
|
14,038
|
|
|
4,820
|
|
|
2,552
|
|
|
21,410
|
|
10 percent discount rate
|
|
(6,516)
|
|
|
(1,066)
|
|
|
(107)
|
|
|
(7,689)
|
|
Discounted future net cash flows(2)
|
|
$
|
7,522
|
|
|
$
|
3,754
|
|
|
$
|
2,445
|
|
|
$
|
13,721
|
|
(1)Includes discounted future net cash flows of approximately $563 million, $1.0 billion, and $1.3 billion as of December 31, 2020, 2019, and 2018, respectively, attributable to a noncontrolling interest in Egypt.
(2)Estimated future net cash flows before income tax expense, discounted at 10 percent per annum, totaled approximately $7.1 billion, $12.4 billion, and $16.9 billion as of December 31, 2020, 2019, and 2018, respectively.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table sets forth the principal sources of change in the discounted future net cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(In millions)
|
Sales, net of production costs
|
|
$
|
(2,422)
|
|
|
$
|
(4,291)
|
|
|
$
|
(5,335)
|
|
Net change in prices and production costs
|
|
(5,753)
|
|
|
(3,034)
|
|
|
3,902
|
|
Discoveries and improved recovery, net of related costs
|
|
751
|
|
|
2,042
|
|
|
3,889
|
|
Change in future development costs
|
|
20
|
|
|
(75)
|
|
|
47
|
|
Previously estimated development costs incurred during the period
|
|
576
|
|
|
983
|
|
|
910
|
|
Revision of quantities
|
|
(418)
|
|
|
(741)
|
|
|
(648)
|
|
Purchases of minerals in-place
|
|
—
|
|
|
—
|
|
|
6
|
|
Accretion of discount
|
|
1,236
|
|
|
1,693
|
|
|
1,216
|
|
Change in income taxes
|
|
1,533
|
|
|
720
|
|
|
(1,125)
|
|
Sales of minerals in-place
|
|
(104)
|
|
|
(817)
|
|
|
(1)
|
|
Change in production rates and other
|
|
11
|
|
|
(319)
|
|
|
777
|
|
|
|
$
|
(4,570)
|
|
|
$
|
(3,839)
|
|
|
$
|
3,638
|
|