APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

For the Quarter Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST $ 105
$ (559 ) $ 985
$ (1,130 )
OTHER COMPREHENSIVE INCOME:
Currency translation adjustment 109
—
109
—
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST 214
(559 ) 1,094
(1,130 )
Comprehensive income attributable to noncontrolling interest 42
48
137
93
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $ 172
$ (607 ) $ 957
$ (1,223 )



	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
	(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	$	41		$	(117	)	$	(4,959	)	$	(435	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Share of equity method interests other comprehensive income (loss)	1			(1		)	0			(1		)
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	42			(118		)	(4,959		)	(436		)
Comprehensive income (loss) attributable to noncontrolling interest - Egypt	24			38			(138		)	125
Comprehensive income (loss) attributable to noncontrolling interest - Altus	2			(3		)	(7		)	(5		)
Comprehensive income attributable to Altus Preferred Unit limited partners	19			18			56			22
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCK	$	(3	)	$	(171	)	$	(4,870	)	$	(578	)

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)



	For the Nine Months Ended September 30,
	2020			2019
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss including noncontrolling interests	$	(4,959	)	$	(435	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Unrealized derivative instrument losses, net	142			52
Gain on divestitures	(24		)	(20		)
Exploratory dry hole expense and unproved leasehold impairments	138			107
Depreciation, depletion, and amortization	1,382			1,959
Asset retirement obligation accretion	81			80
Impairments	4,492			249
Deferred income tax benefit	(71		)	(52		)
Loss (gain) on extinguishment of debt	(152		)	75
Other	45			35
Changes in operating assets and liabilities:
Receivables	202			124
Inventories	16			(16		)
Drilling advances	(10		)	(2		)
Deferred charges and other	(7		)	(1		)
Accounts payable	(211		)	(82		)
Accrued expenses	(211		)	(1		)
Deferred credits and noncurrent liabilities	37			17
NET CASH PROVIDED BY OPERATING ACTIVITIES	890			2,089

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property	(1,075		)	(2,015		)
Additions to Altus gathering, processing, and transmission facilities	(27		)	(294		)
Leasehold and property acquisitions	(3		)	(39		)
Contributions to Altus equity method interests	(286		)	(338		)
Acquisition of Altus equity method interests	0			(670		)
Proceeds from sale of oil and gas properties	132			590
Other, net	(17		)	(17		)
NET CASH USED IN INVESTING ACTIVITIES	(1,276		)	(2,783		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Apache credit facility, net	87			0
Proceeds from Altus credit facility, net	184			235
Fixed-rate debt borrowings	1,238			989
Payments on fixed-rate debt	(980		)	(1,150		)
Distributions to noncontrolling interest - Egypt	(61		)	(235		)
Distributions to Altus Preferred Unit limited partners	(11		)	0
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	0			611
Dividends paid	(113		)	(282		)
Other	(43		)	(25		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	301			143

NET DECREASE IN CASH AND CASH EQUIVALENTS	(85		)	(551		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	247			714
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	162		$	163

SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	341		$	318
Income taxes paid, net of refunds	153			473

The accompanying notes to consolidated financial statements

are an integral part of this statement.

For the Nine Months Ended September 30,
2017 2016
(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interest $ 985
$ (1,130 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations —
33
Unrealized derivative instrument losses, net 42
—
Gain on divestitures (616 ) (21 )
Exploratory dry hole expense and unproved leasehold impairments 350
260
Depreciation, depletion, and amortization 1,707
1,995
Asset retirement obligation accretion 103
116
Impairments 8
1,009
Deferred income tax benefit (758 ) (755 )
Other 167
126
Changes in operating assets and liabilities:
Receivables (70 ) 192
Inventories 17
(2 )
Drilling advances (72 ) (36 )
Deferred charges and other (60 ) 40
Accounts payable 2
(93 )
Accrued expenses (65 ) (67 )
Deferred credits and noncurrent liabilities 20
(33 )
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,760
1,634

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property (1,471 ) (1,281 )
Leasehold and property acquisitions (142 ) (169 )
Additions to gas gathering, transmission, and processing facilities (384 ) (33 )
Proceeds from sale of Canadian assets, net of cash divested 661
—
Proceeds from sale of oil and gas properties 743
74
Other, net (30 ) 47
NET CASH USED IN INVESTING ACTIVITIES (623 ) (1,362 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on fixed-rate debt (70 ) (1 )
Distributions to noncontrolling interest (212 ) (215 )
Dividends paid (285 ) (284 )
Other (5 ) (9 )
NET CASH USED IN FINANCING ACTIVITIES (572 ) (509 )

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 565
(237 )
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF YEAR 1,377
1,467
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 1,942
$ 1,230

SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest $ 341
$ 345
Income taxes paid, net of refunds 315
256

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)



In millions except share and per-share amounts	September 30, 2020			December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($2 and $6 related to Altus VIE)	$	162		$	247
Receivables, net of allowance of $95 and $88	899			1,062
Other current assets (Note 5) ($5 and $5 related to Altus VIE)	658			652
	1,719			1,961
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of successful efforts accounting:
Proved properties	41,119			40,540
Unproved properties and properties under development	619			666
Gathering, processing, and transmission facilities ($212 and $203 related to Altus VIE)	677			799
Other ($3 and $4 related to Altus VIE)	1,138			1,140
	43,553			43,145
Less: Accumulated depreciation, depletion, and amortization ($10 and $1 related to Altus VIE)	(34,486		)	(28,987		)
	9,067			14,158
OTHER ASSETS:
Equity method interests (Note 6) ($1,524 and $1,258 related to Altus VIE)	1,524			1,258
Deferred charges and other ($5 and $4 related to Altus VIE)	565			730
	$	12,875		$	18,107
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	395		$	695
Current debt (nil and $10 related to Altus VIE)	184			11
Other current liabilities (Note 7) ($15 and $21 related to Altus VIE)	803			1,149
	1,382			1,855
LONG-TERM DEBT (Note 10) ($580 and $396 related to Altus VIE)	8,750			8,555
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	271			346
Asset retirement obligation (Note 8) ($63 and $60 related to Altus VIE)	1,859			1,811
Other ($184 and $107 related to Altus VIE)	650			520
	2,780			2,677
COMMITMENTS AND CONTINGENCIES (Note 11)
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)	600			555
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 418,409,054 and 417,026,863 shares issued, respectively	262			261
Paid-in capital	11,741			11,769
Accumulated deficit	(10,471		)	(5,601		)
Treasury stock, at cost, 40,948,811 and 40,964,193 shares, respectively	(3,189		)	(3,190		)
Accumulated other comprehensive income	16			16
APACHE SHAREHOLDERS’ EQUITY (DEFICIT)	(1,641		)	3,255
Noncontrolling interest - Egypt	938			1,137
Noncontrolling interest - Altus	66			73
TOTAL EQUITY (DEFICIT)	(637		)	4,465
	$	12,875		$	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

(Unaudited)



	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)
For the Quarter Ended September 30, 2019
BALANCE AT JUNE 30, 2019	$	521		$	261	$	11,931		$	(2,455	)	$	(3,190	)	$	4		$	6,551		$	1,603		$	8,154
Net loss attributable to common stock	—			—		—			(170		)	—			—			(170		)	—			(170		)
Net income attributable to noncontrolling interest - Egypt	—			—		—			—			—			—			—			38			38
Net loss attributable to noncontrolling interest - Altus	—			—		—			—			—			—			—			(3		)	(3		)
Net income attributable to Altus Preferred Unit holders	18			—		—			—			—			—			—			—			—
Distributions to noncontrolling interest - Egypt	—			—		—			—			—			—			—			(71		)	(71		)
Common dividends ($0.25 per share)	—			—		(94		)	—			—			—			(94		)	—			(94		)
Other	—			—		15			—			—			(1		)	14			—			14
BALANCE AT SEPTEMBER 30, 2019	$	539		$	261	$	11,852		$	(2,625	)	$	(3,190	)	$	3		$	6,301		$	1,567		$	7,868

For the Quarter Ended September 30, 2020
BALANCE AT JUNE 30, 2020	$	592		$	262	$	11,744		$	(10,467	)	$	(3,189	)	$	15		$	(1,635	)	$	999		$	(636	)
Net loss attributable to common stock	—			—		—			(4		)	—			—			(4		)	—			(4		)
Net income attributable to noncontrolling interest - Egypt	—			—		—			—			—			—			—			24			24
Net income attributable to noncontrolling interest - Altus	—			—		—			—			—			—			—			2			2
Net income attributable to Altus Preferred Unit limited partners	19			—		—			—			—			—			—			—			—
Distributions to Altus Preferred Unit limited partners	(11		)	—		—			—			—			—			—			—			—
Distributions to noncontrolling interest - Egypt	—			—		—			—			—			—			—			(21		)	(21		)
Common dividends ($0.025 per share)	—			—		(10		)	—			—			—			(10		)	—			(10		)
Other	—			—		7			—			—			1			8			—			8
BALANCE AT SEPTEMBER 30, 2020	$	600		$	262	$	11,741		$	(10,471	)	$	(3,189	)	$	16		$	(1,641	)	$	1,004		$	(637	)

The accompanying notes to consolidated financial statements

are an integral part of this statement.

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEET~~

~~(Unaudited)~~

September 30, 2017 December 31, 2016
(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,846
$ 1,377
Restricted cash 96
—
Receivables, net of allowance 1,145
1,128
Inventories 396
476
Drilling advances 151
81
Prepaid assets and other 135
179
3,769
3,241
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of successful efforts accounting:
Proved properties 38,569
42,693
Unproved properties and properties under development 1,810
1,969
Gathering, transmission, and processing facilities 1,363
976
Other 1,012
1,111
42,754
46,749
Less: Accumulated depreciation, depletion, and amortization (25,099 ) (27,882 )
17,655
18,867
OTHER ASSETS:
Deferred charges and other 411
411
$ 21,835
$ 22,519
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 583
$ 585
Current debt 550
—
Other current liabilities (Note 5) 1,332
1,258
2,465
1,843
LONG-TERM DEBT 7,933
8,544
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes 948
1,710
Asset retirement obligation 1,831
2,432
Other 281
311
3,060
4,453
COMMITMENTS AND CONTINGENCIES (Note 9)

EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 414,108,944 and 412,612,102 shares issued, respectively 259
258
Paid-in capital 12,186
12,364
Accumulated deficit (2,544 ) (3,385 )
Treasury stock, at cost, 33,171,015 and 33,172,426 shares, respectively (2,887 ) (2,887 )
Accumulated other comprehensive loss (3 ) (112 )
APACHE SHAREHOLDERS’ EQUITY 7,011
6,238
Noncontrolling interest 1,366
1,441
TOTAL EQUITY 8,377
7,679
$ 21,835
$ 22,519

~~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 – (Continued)

(Unaudited)

Common
Stock

Paid-In
Capital
Accumulated Deficit
Treasury
Stock

Accumulated
Other
Comprehensive
Loss

APACHE
SHAREHOLDERS’
EQUITY

Noncontrolling
Interest

TOTAL
EQUITY
(In millions)
BALANCE AT DECEMBER 31, 2015 $ 257
$ 12,619
$ (1,980 ) $ (2,889 ) $ (119 ) $ 7,888
$ 1,602
$ 9,490
Net income (loss) —
—
(1,223 ) —
—
(1,223 ) 93
(1,130 )
Distributions to noncontrolling interest —
—
—
—
—
—
(215 ) (215 )
Common dividends ($0.75 per share) —
(284 ) —
—
—
(284 ) —
(284 )
Other 1
86
—
1
—
88
—
88
BALANCE AT SEPTEMBER 30, 2016 $ 258
$ 12,421
$ (3,203 ) $ (2,888 ) $ (119 ) $ 6,469
$ 1,480
$ 7,949

BALANCE AT DECEMBER 31, 2016 $ 258
$ 12,364
$ (3,385 ) $ (2,887 ) $ (112 ) $ 6,238
$ 1,441
$ 7,679
Net income —
—
848
—
—
848
137
985
Distributions to noncontrolling interest —
—
—
—
—
—
(212 ) (212 )
Common dividends ($0.75 per share) —
(286 ) —
—
—
(286 ) —
(286 )
Other 1
108
(7 ) —
109
211
—
211
BALANCE AT SEPTEMBER 30, 2017 $ 259
$ 12,186
$ (2,544 ) $ (2,887 ) $ (3 ) $ 7,011
$ 1,366
$ 8,377



	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)
For the Nine Months Ended September 30, 2019
BALANCE AT DECEMBER 31, 2018	$	0		$	260	$	12,106		$	(2,048	)	$	(3,192	)	$	4		$	7,130		$	1,682		$	8,812
Net loss attributable to common stock	—			—		—			(577		)	—			—			(577		)	—			(577		)
Net income attributable to noncontrolling interest - Egypt	—			—		—			—			—			—			—			125			125
Net loss attributable to noncontrolling interest - Altus	—			—		—			—			—			—			—			(5		)	(5		)
Issuance of Altus Preferred Units	517			—		—			—			—			—			—			—			—
Net income attributable to Altus Preferred Unit holders	22			—		—			—			—			—			—			—			—
Distributions to noncontrolling interest - Egypt	—			—		—			—			—			—			—			(235		)	(235		)
Common dividends ($0.75 per share)	—			—		(282		)	—			—			—			(282		)	—			(282		)
Other	—			1		28			—			2			(1		)	30			—			30
BALANCE AT SEPTEMBER 30, 2019	$	539		$	261	$	11,852		$	(2,625	)	$	(3,190	)	$	3		$	6,301		$	1,567		$	7,868

For the Nine Months Ended September 30, 2020
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	—			—		—			(4,870		)	—			—			(4,870		)	—			(4,870		)
Net loss attributable to noncontrolling interest - Egypt	—			—		—			—			—			—			—			(138		)	(138		)
Net loss attributable to noncontrolling interest - Altus	—			—		—			—			—			—			—			(7		)	(7		)
Net income attributable to Altus Preferred Unit limited partners	56			—		—			—			—			—			—			—			—
Distributions to Altus Preferred Unit limited partners	(11		)	—		—			—			—			—			—			—			—
Distributions to noncontrolling interest - Egypt	—			—		—			—			—			—			—			(61		)	(61		)
Common dividends ($0.075 per share)	—			—		(29		)	—			—			—			(29		)	—			(29		)
Other	—			1		1			—			1			0			3			—			3
BALANCE AT SEPTEMBER 30, 2020	$	600		$	262	$	11,741		$	(10,471	)	$	(3,189	)	$	16		$	(1,641	)	$	1,004		$	(637	)

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These consolidated financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial ~~statements.~~statements, with the exception of recently adopted accounting pronouncements discussed below. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ~~(U.S. GAAP)~~(GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019, which contains a summary of the Company’s significant accounting policies and other disclosures.


1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 30, ~~2017,~~2020, Apache’s significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of ~~its consolidated financial statements~~the Notes to Consolidated Financial Statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019, with the exception of ~~Financial Accounting Standards Board (FASB)~~ Accounting Standards Update (ASU) ~~2016-09, “Improvements to Employee Share-Based Payment Accounting”~~2016-13, “Financial Instruments-Credit Losses” (see “Accounts Receivable and ~~ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (see “Recently Adopted Accounting Pronouncements”~~Allowance for Credit Losses” section in this Note 1 below). The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-year presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated.

The Company consolidates all other investments in which, either through direct or indirect ownership, Apache has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated Apache subsidiary and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in Apache’s Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate component of equity in Apache’s consolidated balance sheet.

Additionally, third-party investors own a minority interest of approximately 21 percent of Altus Midstream Company (ALTM), which is reflected as a separate noncontrolling interest component of equity in Apache’s consolidated balance sheet. 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 12—Redeemable Noncontrolling Interest - Altus for more detail.

Investments in which Apache holds less than 50 percent of the voting interest are typically accounted for under the equity method of accounting, with the balance recorded separately as “Equity method interests” in Apache’s consolidated balance sheet and results of operations recorded as a component of “Other, net” under “Revenues and Other” in the Company’s statement of consolidated operations. Refer to Note 6—Equity Method Interests for more detail.

Use of Estimates

~~The preparation~~Preparation of financial statements in conformity with ~~U.S.~~ 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. Apache evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its financial statements and changes in these estimates are recorded when known. Significant estimates with regard to these financial statements include ~~the fair value determination of acquired assets and liabilities,~~ the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom, the assessment of asset retirement obligations (see Note 8—Asset Retirement Obligation), the estimates of fair value for long-lived assets (see “Fair Value Measurements,” “Oil and ~~goodwill,~~Gas Property,” and “Gathering, Processing, and Transmission Facilities” sections in this Note 1 below), and the estimate of income ~~taxes.~~taxes (see Note 9—Income Taxes). Actual results could differ from those estimates.

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.

~~The valuation techniques that may be used to measure~~Recurring fair value ~~include a market approach, an income approach,~~measurements are presented in further detail in Note 4—Derivative Instruments and ~~a cost approach. A market approach uses prices~~Hedging Activities 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,Note 10—Debt 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)~~Financing Costs.

Apache 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 Quarter Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(In millions)
Oil and gas proved property	$	0	$	0	$	4,319	$	86
Gathering, processing, and transmission facilities	0		9		68		9
Goodwill	0		0		87		0
Divested unproved properties and leasehold	0		0		0		149
Inventory and other	0		0		18		5
Total Impairments	$	0	$	9	$	4,492	$	249

The Company recorded no0 asset impairments in connection with fair value assessments in the third quarter of ~~2017. For~~2020.

During the ~~nine-month period ended September 30, 2017,~~second quarter of 2020, the Company recorded asset impairments totaling ~~$8 million in connection with fair value assessments.~~

In 2016, the U.K. government enacted Finance Bill 2016, providing tax relief to exploration and production (E&P) companies operating in the U.K. North Sea. Under the enacted legislation, the U.K. Petroleum Revenue Tax (PRT) rate was reduced to zero from the previously enacted 35 percent rate in effect from January 1, 2016. PRT expense ceased prospectively from that date. During the first quarter of 2017, the Company fully impaired the aggregate remaining value of the recoverable PRT decommissioning asset of $8 million that would have been realized from future abandonment activities. The recoverable value of the PRT decommissioning asset was estimated using the income approach. The expected future cash flows used in the determination were based on anticipated spending and timing of planned future abandonment activities for applicable fields, considering all available information at the date of review. Apache has classified this fair value measurement as Level 3 in the fair value hierarchy.

~~For the quarter ended September 30, 2016, the Company recorded asset impairments totaling $836~~$20 million in connection with fair value assessments ~~including $355 million for~~on proved ~~oil and gas~~property in Egypt. These properties ~~in Canada and $481 million for~~were impaired to their estimated fair values as a result of changes to planned development activity.

During the ~~impairment~~first quarter of ~~the recoverable value of the PRT decommissioning asset. For the nine-month period ended September 30, 2016,~~2020, the Company recorded asset impairments totaling ~~$1.0~~$4.5 billion in connection with fair value ~~assessments including $423~~assessments. 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) assets 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 offshore the United Kingdom in the North Sea (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. The first and second quarter property impairments are discussed in further detail below in “Oil and Gas Property.” Impairments totaling $68 million were similarly recorded for ~~proved~~GPT facilities in Egypt. This impairment is discussed in further detail below in “Gathering, Processing, and Transmission Facilities.”

During the first quarter of 2020, the Company performed an interim impairment analysis of the goodwill related to its Egypt reporting unit under ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which was adopted during the quarter. 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 ~~U.S. and Canada, $481~~Egypt reporting unit of $87 million. During the first quarter of 2020, the Company also recorded impairments of $13 million for the early termination of drilling rig leases and $5 million for inventory revaluations, both in the U.S.

During the third quarter of 2019, the Company’s Altus Midstream reporting segment recorded an impairment charge of $9 million related to the ~~recoverable~~cancellation of construction on a previously planned compressor station based on estimated sales proceeds for the associated equipment. The estimated fair value of the ~~PRT decommissioning asset,~~assets held for sale was approximately $18 million and ~~$105 million~~was determined using a market approach based on proceeds expected to be received, a Level 1 fair value measurement.

In the second quarter of 2019, the Company entered into an agreement to sell certain of its assets in the Western Anadarko Basin in Oklahoma and Texas. As a result of this agreement, a separate impairment analysis was performed for each of the assets within the disposal group. The analyses were based on the agreed-upon proceeds less costs to sell for the ~~impairment~~transaction, a Level 1 fair value measurement. The carrying value of ~~certain gas gathering, transmission,~~the net assets to be divested exceeded the fair value implied by the expected net proceeds, resulting in impairments totaling $240 million, including $86 million on the Company’s proved properties, $149 million on its unproved properties, and ~~processing (GTP) assets, which were written down to their fair values of $175 million.~~$5 million on other working capital. See Note 2—Acquisitions and Divestitures for more detail.

Oil and Gas Property

The Company follows the successful efforts method of accounting for its oil and gas property. Under this method of accounting, exploration costs, such as exploratory geological and geophysical costs, delay rentals, and exploration overhead, are expensed as incurred. All costs related to production, general corporate overhead, and similar activities are expensed as incurred. If an exploratory well provides evidence to justify potential development of reserves, drilling costs associated with the well are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. This determination may take longer than one year in certain areas depending on, among other things, the amount of hydrocarbons discovered, the outcome of planned geological and engineering studies, the need for additional appraisal drilling activities to determine whether the discovery is sufficient to support an economic development plan, and government sanctioning of development activities in certain international locations. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities; in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

Acquisition costs of unproved properties are assessed for impairment at least annually and are transferred to proved oil and gas properties to the extent the costs are associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment based on the Company’s current exploration plans. Unproved oil and gas properties with individually insignificant lease acquisition costs are amortized on a group basis over the average lease term at rates that provide for full amortization of unsuccessful leases upon lease expiration or abandonment. Costs of expired or abandoned leases are charged to exploration expense, while costs of productive leases are transferred to proved oil and gas properties. Costs of maintaining and retaining unproved properties, as well as amortization of individually insignificant leases and impairment of unsuccessful leases, are included in exploration costs in the statement of consolidated operations.

Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of crude oil and natural gas, are capitalized. Depreciation of the cost of proved oil and gas properties is calculated using the unit-of-production (UOP) method. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the carrying value of ~~those reserves.~~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 ~~costs of exploratory wells and development~~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 -~~ 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 ~~impaired,~~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 ~~the~~ ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments, a Level 3 fair value measurement.

The significant decline in 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 addition to estimating risk-adjusted reserves and future production volumes, estimated future commodity prices ~~operating costs,~~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 ~~investment plans, considering all available information at the date of review. These assumptions are~~estimate, was applied to ~~develop future~~the undiscounted cash flow ~~projections~~estimate to value all of Apache’s asset groups that ~~are then discounted~~were subject to ~~estimated fair value, using a discount rate believed to be consistent with those applied by market participants. Apache has classified these fair value measurements as Level 3~~impairment charges in the ~~fair value hierarchy.~~

first and second quarters of 2020.

The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved ~~property and equipment for the third quarters and first nine months of 2017 and 2016:~~properties:



	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(In millions)
Proved Properties:
U.S.	$	0	$	0	$	3,938	$	86
Egypt	0		0		374		0
North Sea	0		0		7		0
Total Proved	$	0	$	0	$	4,319	$	86
Unproved Properties:
U.S.	$	34	$	10	$	80	$	217
Egypt	2		2		6		6
Total Unproved	$	36	$	12	$	86	$	223

Quarter Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Oil and Gas Property:
Proved $ —
$ 355
$ —
$ 423
Unproved 160
114
214
222

Proved properties impaired during the second and ~~third~~first quarters of ~~2016~~2020 had aggregate fair values of ~~$143~~$32 million and ~~$163 million,~~$1.9 billion, respectively.

On the statement of consolidated operations, unproved leasehold impairments are typically recorded as a component of “Exploration” expense; however, in the second quarter of 2019, unproved impairments of $149 million were recorded in ~~exploration expense,~~“Impairments” in connection with the Company’s agreement to sell certain non-core leasehold properties in Oklahoma and ~~proved impairments~~Texas. Gains and losses on divestitures of the Company’s oil and gas properties are ~~recorded~~recognized in ~~impairments.~~

~~Recently Adopted Accounting Pronouncements~~

~~Stock Compensation~~

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of ~~cash flows. The guidance was effective~~consolidated operations upon closing of the transaction. See Note 2—Acquisitions and Divestitures for ~~fiscal years beginning after December 15, 2016.~~ more detail.

Gathering, Processing, and Transmission Facilities

The Company ~~adopted ASU 2016-09 effective January 1, 2017.~~assesses the carrying amount of its GPT facilities whenever events or changes in circumstances indicate that their 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.

~~Upon adoption, the Company elected to account~~

As discussed under “Fair Value Measurements” above, Apache assessed its long-lived infrastructure assets for ~~forfeitures as they occur rather than estimate expected forfeitures using a modified retrospective transition method. As a result~~impairment at March 31, 2020, and recorded an impairment of ~~this election, the Company recorded a cumulative-effect adjustment of $11~~$68 million ~~representing an increase~~on its GPT assets in ~~accumulated deficit, with the offset to paid-in capital. During~~Egypt during the first quarter of ~~2017,~~2020. The fair values of the impaired assets were determined to be $46 million and were estimated using the income approach. The income approach considered 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.

As discussed under “Fair Value Measurements” above, in the third quarter of 2019 Altus recorded an impairment charge of $9 million related to the cancellation of construction on a previously planned compressor station based on estimated sales proceeds for the associated equipment. The estimated fair value of the assets held for sale was approximately $18 million and was determined using a market approach based on proceeds expected to be received, a Level 1 fair value measurement.

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the nine months ended September 30, 2020 and 2019. The third quarter and first nine months of 2019 include the reclassification of $30 million and $72 million, respectively, from “Other, net” to “Purchased oil and gas sales,” both within “Revenues and Other” and the respective associated $23 million and $60 million purchased oil and gas costs from “Other, net” 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 (NGLs) production volumes. Because the Company’s production fluctuates with potential operational issues and changes to development plans, Apache purchases third-party oil and gas to fulfill sales obligations and commitments. Sales proceeds related to third-party oil and gas purchases are also classified as revenue from customers. 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.

Oil and gas production revenues from non-customers represent income taxes paid to the Arab Republic of Egypt by Egyptian General Petroleum Corporation on behalf of the Company. Revenue and associated expenses related to such tax volumes are recorded as “Oil, natural gas, and natural gas liquids production revenues” and “Current income tax provision,” respectively, in the Company’s statement of consolidated operations.

Refer to Note 14—Business Segment Information for a disaggregation of revenue by product and reporting segment.

Altus Midstream

The Company’s Altus Midstream segment is operated by ALTM, through its subsidiary, Altus Midstream LP (collectively, Altus), and generates revenue from contracts with its customers from its gathering, compression, processing, and transmission services. These services are primarily 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, midstream segment revenues were primarily attributable to sales between Altus and Apache. All midstream revenues between Apache and Altus 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 $770 million and $945 million as of September 30, 2020 and December 31, 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 ~~recorded a $4 million deferred tax asset related~~has elected the practical expedients available under the standard to ~~this adjustment, with~~not disclose the ~~offset~~aggregate transaction price allocated to ~~accumulated deficit.~~

~~ASU 2016-09 requires excess tax benefits and deficiencies to be recognized prospectively~~unsatisfied, or partially unsatisfied, performance obligations as ~~part~~ of the ~~provision~~end of the reporting period.

Accounts Receivable and Allowance for ~~income taxes rather than paid-in capital.~~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 due within 30 days. 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 ~~accounting~~financial statements.

Transaction, Reorganization, and Separation (TRS)

Apache recorded $7 million of ~~provision for income taxes. ASU 2016-09 also requires excess tax benefits to be presented as a component~~TRS costs during each of ~~operating cash flows rather than financing cash flows. The Company has adopted this requirement prospectively~~the third quarters of 2020 and ~~accordingly, prior periods have not been adjusted. Excess tax benefits were not material for all periods presented.~~

~~Additionally, ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in~~2019 and $44 million and $17 million during the ~~consolidated statements~~first nine months of ~~cash flows, which is how the Company has historically classified these amounts.~~

~~Restricted Cash~~

~~In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires amounts generally described as restricted cash~~2020 and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The guidance is effective for annual and interim periods beginning after December 15, 2017, and is required to be adopted using a retrospective approach, with early adoption permitted. The Company adopted ASU 2016-182019, respectively. TRS costs incurred in the third quarter of ~~2017. Other than the change in presentation within the statement of consolidated cash flows, the adoption of ASU 2016-18 did not have an impact on~~2020 relate to separation costs associated with the Company’s ~~consolidated financial statements.~~

~~The following table provides a reconciliation~~reorganization. TRS costs incurred in the first nine months of ~~cash, cash equivalents, and restricted cash reported within the consolidated balance sheet~~2020 relate to $41 million of separation costs related to the ~~amounts shown~~reorganization, $2 million for transaction consulting fees, and $1 million of office closure costs. TRS costs incurred in the ~~statement~~third quarter and first nine months of ~~consolidated cash flows:~~2019 were primarily related to separation costs and consulting fees on various transactions.

September 30, 2017 December 31, 2016
(In millions)
Cash and cash equivalents $ 1,846
$ 1,377
Restricted cash 96
—
Total cash, cash equivalents, and restricted cash shown in the statement of consolidated cash flows $ 1,942
$ 1,377

~~For information regarding~~In recent years, the ~~restricted cash balance, please refer~~Company has streamlined its portfolio through strategic divestitures and began centralizing certain operational activities in an effort to ~~Note 2—Acquisitions~~capture greater efficiencies and ~~Divestitures.~~cost savings through shared services. During the second half of 2019, management initiated a comprehensive redesign of Apache’s organizational structure and operations. Reorganization efforts were substantially completed during the first half of 2020. Apache has incurred a cumulative total of $69 million of reorganization costs through September 30, 2020, all of which was paid in the first nine months of 2020.

New Pronouncements Issued ~~But~~but Not Yet Adopted

In ~~February 2016,~~August 2020, the FASB issued ASU ~~2016-02, “Leases (Topic 842),~~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)” ~~requiring lessees~~ to ~~recognize lease assets~~improve financial reporting associated with accounting for convertible instruments and ~~lease liabilities for most leases classified as operating leases under previous U.S. GAAP. The guidance~~contracts in an entity’s own equity. This update is effective for ~~fiscal years~~Apache beginning ~~after December 15, 2018, and the Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period~~ in the ~~financial statements. Early~~first quarter of 2022, with early adoption is permitted; however, the Company does not intend to early adopt. As part of the assessment to date, the Company has formed an implementation work team and is continuing to evaluate contracts to determine the impact this ASU will have on its consolidated financial statements. At this time, the Company cannot reasonably estimate the financial impact this will have on its consolidated financial statements; however, the Company believes adoption and implementation of this ASU will significantly impact its balance sheet, resulting in an increase in both assets and liabilities relating to its leasing activities.

In May 2014, the FASB and the International Accounting Standards Board (IASB) issued a joint revenue recognition standard, ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new standard removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers, and increases disclosure requirements. The codification was amended through additional ASUs and, as amended, requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to be adoptedpermitted, using either the ~~full~~modified or fully retrospective ~~approach, with all prior periods presented adjusted, or the modified retrospective approach,~~method with a cumulative effect adjustment to ~~retained earnings on~~ the opening balance ~~sheet.~~of retained earnings. The Company ~~continues to make progress on~~is evaluating the ~~accounting implications~~effect of ~~this~~adoption of the ASU and ~~its assessment of contracts with customers is largely complete. Based on the Company’s evaluation to date, it~~ does not ~~expect the adoption of this ASU to~~believe it will have a material impact on net earnings, however, the Company is analyzing whether the classification of certain items in revenue and expense will be impacted. The Company continues to evaluate the disclosure requirements, develop accounting policies, and assess changes to the relevant business processes and the control activities within them as a result of the provisions of this ASU. The Company will adopt the new standard on January 1, 2018, utilizing the modified retrospective approach.its financial statements.


2.	ACQUISITIONS AND DIVESTITURES

~~2017~~2020 Activity

~~Canada Divestitures~~

~~During~~The Company had 0 leasehold or property acquisitions during the third quarter of 2020. During the first nine months of 2020, Apache ~~announced~~completed leasehold and property acquisitions for total cash consideration of $3 million that were primarily in the Permian Basin. During the first nine months of 2020, the Company also completed the sale of ~~its subsidiary~~certain non-core assets and leasehold, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $53 million. The Company recognized a gain of approximately $5 million upon closing of these transactions.

Suriname Joint Venture Agreement

In December 2019, Apache ~~Canada Ltd. (ACL)~~entered into a joint venture agreement with Total S.A. to explore and ~~complete exit~~develop Block 58 offshore Suriname. Under the terms of ~~its Canadian operations. On June 30, 2017,~~the agreement, Apache and Total S.A. each hold a 50 percent working interest in Block 58. Apache operated the drilling of the first four wells, the Maka Central-1, Sapakara West-1, Kwaskwasi-1, and Keskesi East-1. Operatorship will subsequently transfer to Total. 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 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.

2019 Activity

In the third quarter of 2019, Apache completed the sale of ~~its Canadian~~non-core assets ~~at Midale~~in the western Anadarko Basin of Oklahoma and ~~House Mountain, located in Saskatchewan and Alberta,~~Texas for aggregate cash proceeds of approximately ~~$228~~$322 million and the assumption of asset retirement obligations of $49 million. ~~The Company recognized a $52 million loss during~~These assets met the criteria to be classified as held for sale in the second quarter of ~~2017 in association with this sale.~~

~~In August~~2019. Accordingly, the Company performed a fair value assessment of ~~2017, Apache completed~~ the ~~sale~~assets and recorded impairments of ~~its remaining Canadian operations for aggregate cash proceeds~~$240 million to the carrying value of ~~approximately $478 million.~~proved and unproved oil and gas properties, other fixed assets, and working capital. The ~~Company recognized a $74 million gain upon closing of these transactions~~transaction closed in the third quarter of ~~2017. The~~2019, and the Company ~~has classified $96~~recognized a $7 million ~~of proceeds as “Restricted cash” on~~loss in connection with the ~~Company’s consolidated balance sheet, pending~~sale.

In the ~~Alberta Energy Regulator’s clearance of the transfer of Provost area licenses from ACL to the buyer.~~

~~A summary of the assets and liabilities at closing of the August transactions is detailed below:~~

(In millions)
ASSETS
Current assets $ 110
Property, plant & equipment 1,132
Total Assets $ 1,242
LIABILITIES
Current liabilities, excluding asset retirement obligation $ 120
Asset retirement obligation 780
Other long-term liabilities 46
Total Liabilities $ 946

The net carrying value of the assets disposed included a currency translation loss of $109 million, which was recorded in “Accumulated Other Comprehensive Loss” on the Company’s consolidated balance sheet at December 31, 2016. The currency translation loss was recognized as a reduction of the net gain on sale during the thirdsecond quarter of ~~2017 upon closing of the transactions.~~

Apache’s Canadian operations recorded pretax losses of $12 million and $141 million for the third quarter and first nine months of 2017, respectively, compared to pretax losses of $483 million and $644 million, respectively, for the comparable periods in 2016.

~~U.S. Divestitures~~

~~During the first nine months of 2017,~~2019, Apache completed the sale of certain non-core assets ~~primarily leasehold acreage~~ in ~~the Permian and Midcontinent/Gulf Coast regions, in multiple transactions~~Oklahoma that had a net carrying value of $206 million for aggregate cash proceeds of ~~$783~~approximately $223 million. The Company recognized a $17 million ~~subject to customary closing adjustments. A refundable deposit of $40 million was received in the fourth quarter of 2016~~gain in connection with ~~certain of these transactions. The Company recognized gains of approximately $594 million during~~the sale.

During the first nine months of ~~2017 in connection with these transactions.~~

~~North Sea GTP Divestiture~~

~~During~~2019, the ~~fourth quarter~~Company also completed the sale of ~~2016, Apache entered into an agreement to sell its 30.28 percent interest~~certain other non-core producing assets and leasehold, primarily in the ~~Scottish Area Gas Evacuation system (SAGE) and its 60.56 percent interest~~Permian region, in ~~the Beryl pipeline in the North Sea to Ancala Midstream Acquisitions Limited (Ancala). The transaction is subject to regulatory and third-party approvals, which are ongoing in 2017.~~multiple transactions for total cash proceeds of $21 million. The Company ~~received~~recognized a ~~refundable deposit in connection with this transaction, which is recorded in “Other current liabilities” on the consolidated balance sheet. The refundable deposit was $149~~net gain of approximately $12 million asupon closing of ~~September 30, 2017.~~

~~Leasehold and Property Acquisitions~~these transactions.

During the third quarter and first nine months of ~~2017,~~2019, Apache ~~purchased $75 million and $142 million, respectively, of~~completed leasehold and property acquisitions for total cash consideration of $5 million and $39 million, respectively, primarily in ~~its North America onshore regions.~~the Permian Basin.

For discussion on the Company’s acquisition of equity method interests during the period, refer to Note 6—Equity Method Interests.

~~2016 Activity~~3. CAPITALIZED EXPLORATORY WELL COSTS

~~Leasehold~~The Company’s capitalized exploratory well costs were $195 million and ~~Property Acquisitions~~

~~During~~$141 million at September 30, 2020 and December 31, 2019, respectively. The increase is primarily attributable to additional drilling activity, partially offset by transfer of successful well costs and dry hole write-offs. Dry hole expenses from suspended exploratory well costs previously capitalized for greater than one year at December 31, 2019 totaled $14 million during the ~~third quarter and first~~ nine months ended September 30, 2020. Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of ~~2016, Apache purchased $51 million and $169 million, respectively,~~drilling are those identified by management as exhibiting sufficient quantities of ~~leasehold and property acquisitions primarily in its North America onshore regions and Egypt.~~hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether proved reserves can be attributed to these projects.

~~Discontinued Operations~~

Apache sold its operations in Argentina and Australia in 2014 and 2015, respectively. The results of operations related to the Argentina and Australia dispositions and the losses on disposals were classified as discontinued operations in the Company’s financial statements. During 2016, the Company incurred additional losses on these dispositions. The components of the Company’s loss from discontinued operations were as follows:

For the Quarter Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Loss from Australia divestiture $ —
$ (23 ) $ —
$ (23 )
Loss from Argentina divestiture —
(10 ) —
(10 )
Loss from discontinued operations, net of tax $ —
$ (33 ) $ —
$ (33 )

~~Transaction, Reorganization, and Separation~~

During the third quarter and first nine months of 2017, Apache recorded $20 million and $14 million, respectively, in expense related to asset divestitures in the U.S. and Canada and employee separation. During the third quarter and first nine months of 2016, Apache recorded $12 million and $36 million, respectively, in expense related to various asset divestitures, company reorganization, and employee separation.

3.4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies

The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide ~~production. Apache~~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.~~production and foreign currency transactions. The Company also utilizes various types of derivative financial instruments to manage fluctuations in cash flows resulting from changes in commodity ~~prices. The Company’s derivatives are not designated as cash flow hedges, therefore, changes in fair value are recognized currently in earnings.~~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 September 30, ~~2017,~~2020, Apache had derivative positions with 1412 counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, Apache may not realize the benefit of some of its derivative instruments resulting from ~~lower~~changes in commodity ~~prices.~~prices, currency exchange rates, or interest rates.

Derivative Instruments

Commodity Derivative Instruments

As of September 30, ~~2017,~~2020, Apache had the following open crude oil derivative positions:

Put Options⁽¹⁾⁽²⁾
Production Period Settlement Index Mbbls Weighted Average Strike Price
October—December 2017 NYMEX WTI 8,464 $50.00
October—December 2017 Dated Brent 7,636 $51.00


~~(1)~~	~~The remaining unamortized premium paid as of September 30, 2017, was $50 million.~~


~~(2)~~	~~Subsequent to September 30, 2017, Apache entered into put option contracts settling against Dated Brent totaling 3,650 Mbbls with a strike price of $50 for the calendar year 2018.~~

Fixed-Price Swaps
Collars⁽³⁾

Call Options⁽⁴⁾
Production Period Settlement Index Mbbls Weighted Average Fixed Price Mbbls Weighted Average Floor Price Weighted Average Ceiling Price Mbbls Strike Price
January—June 2018 NYMEX WTI 2,715 $51.23 2,715 $45.00 $56.45 — —
January—June 2018 Dated Brent 2,172 $54.57 2,172 $50.00 $58.77 — —
January—December 2018 NYMEX WTI — — 6,023 $45.00 $57.02 6,023 $60.00


~~(3)~~	Subsequent to September 30, 2017, Apache entered into crude oil contracts settling against NYMEX WTI totaling 730 Mbbls with a floor and ceiling of $45.00 and $56.90, respectively, for the calendar year 2018.


~~(4)~~	~~The remaining unamortized premium paid as of September 30, 2017, was $9 million.~~



		Collars
Production Period	Settlement Index	Mbbls	Weighted Average Floor Sold Price	Weighted Average Floor Purchased Price	Weighted Average Ceiling Price
October—December 2020	NYMEX WTI	1,748	$15.00	$20.00	$45.55
October—December 2020	Dated Brent	1,518	$15.00	$20.00	$51.63

As of September 30, ~~2017,~~2020, Apache had the following open ~~natural gas derivative positions:~~crude oil financial basis swap contracts:

Fixed-Price Swaps⁽¹⁾
Production Period Settlement Index
MMBtu
(in 000’s)
Weighted Average Fixed Price
October—December 2017 NYMEX Henry Hub 4,370 $3.32
January—March 2018 NYMEX Henry Hub 13,500 $3.39
January—June 2018 NYMEX Henry Hub 22,625 $3.17
April—June 2018 NYMEX Henry Hub 16,835 $2.92
July—December 2018 NYMEX Henry Hub 18,400 $2.97



		Basis Swap Purchased		Basis Swap Sold
Production Period	Settlement Index	Mbbls	Weighted Average Price Differential	Mbbls	Weighted Average Price Differential
October—December 2020	Midland-WTI/Cushing-WTI	—	—	6,716	$(2.15)
October—December 2020	Midland-WTI/Cushing-WTI	828	$0.20	—	—


~~(1)~~	Subsequent to September 30, 2017, Apache entered into fixed-price natural gas swaps settling against NYMEX Henry Hub totaling 15,180,000 MMBtu with a weighted average fixed-price of $2.95 for the second half of 2018.

As of September 30, ~~2017,~~2020, Apache had the following open natural gas financial basis swap contracts:



		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)

Production Period Settlement Index
MMBtu
(in 000’s)
Weighted Average Price Differential
January—March 2018 NYMEX Henry Hub/Waha 9,450 $(0.43)
July—December 2018 NYMEX Henry Hub/Waha 33,120 $(0.53)
October—December 2018 NYMEX Henry Hub/Waha 1,380 $(0.51)
January—March 2019 NYMEX Henry Hub/Waha 1,350 $(0.54)
January—June 2019 NYMEX Henry Hub/Waha 32,580 $(0.53)
January—December 2019 NYMEX Henry Hub/Waha 14,600 $(0.45)
Foreign Currency Derivative Instruments

Apache has open foreign currency costless collar contracts in GBP/USD for £13.5 million per month for the calendar year 2020 with a weighted average floor and ceiling price of $1.26 and $1.38, respectively.

Embedded Derivatives

Altus Preferred Units Embedded Derivative

During the second quarter of 2019, Altus Midstream LP issued and sold 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 12—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

Apache’s commodity derivative instruments consist of variable-to-fixed price commodity swaps, options, and collars. The fair values of the Company’s derivatives are not actively quoted in the open market. The Company uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing commodity futures pricing for the underlying commodities provided by a reputable third party, a Level 2 fair value measurement.

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


	Fair Value Measurements Using													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		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)													(In millions)
September 30, 2017
September 30, 2020
Assets:
Commodity Derivative Instruments	$	—	$	24	$	—	$	24	$	(7	)	$	17	$	0	$	12	$	0	$	12	$	(2	)	$	10
Liabilities:
Commodity Derivative Instruments	—		7		—		7		(7		)	—		$	0	$	15	$	0	$	15	$	(2	)	$	13
December 31, 2016
Pipeline Capacity Embedded Derivatives														0		54		0		54		0			54
Foreign Currency Derivative Instruments														0		1		0		1		0			1
Preferred Units Embedded Derivative														0		0		179		179		0			179
December 31, 2019
Assets:
Commodity Derivative Instruments	$	—	$	—	$	—	$	—	$	—		$	—
Pipeline Capacity Embedded Derivative														$	0	$	8	$	0	$	8	$	0		$	8
Foreign Currency Derivative Instruments														0		1		0		1		0			1
Liabilities:
Commodity Derivative Instruments	—		—		—		—		—			—
Preferred Units Embedded Derivative														0		0		103		103		0			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.

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, 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. Increases or decreases in interest rates would result in a higher/lower fair value measurement. As of the September 30, 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 September 30, 2020		Valuation Technique	Significant Unobservable Inputs	Range/Value
	(In millions)
Preferred Units Embedded Derivative	$	179	Option Model	Altus’ Imputed Interest Rate	14.54-16.18%
				Interest Rate Volatility	35.32%

Altus’ comparative imputed interest rate at December 31, 2019 ranged from 9.60 percent to 12.68 percent, with an interest rate volatility assumption of 21.89 percent. A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative as of September 30, 2020, while a one percent decrease would have the directionally inverse affect as of September 30, 2020.

All derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:


	September 30, 2017		December 31, 2016		September 30, 2020		December 31, 2019
	(In millions)				(In millions)
Current Assets: Prepaid assets and other	$	13	$	—
Current Assets: Other current assets					$	1	$	2
Other Assets: Deferred charges and other	4		—		9		7
Total Assets	$	17	$	—	$	10	$	9

Current Liabilities: Other current liabilities					$	14	$	0
Deferred Credits and Other Noncurrent Liabilities: Other					233		103
Total Liabilities					$	247	$	103

~~4. CAPITALIZED EXPLORATORY WELL COSTS~~


5.	OTHER CURRENT ASSETS

The following table provides detail of the Company’s ~~capitalized exploratory well costs were $369 million and $264 million at~~other current assets as of September 30, ~~2017~~2020 and December 31, 2016, respectively. The increase is primarily attributable to additional drilling activities in the U.S. during the period, partially offset by successful transfers and dry hole write-offs. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2016 were charged to dry hole expense during the nine months ended September 30, 2017. Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling are those identified by management as exhibiting sufficient quantities of hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether reserves can be attributed to these projects.2019:



	September 30, 2020		December 31, 2019
	(In millions)
Inventories	$	503	$	502
Drilling advances	102		92
Prepaid assets and other	53		58
Total Other current assets	$	658	$	652


5.6.	EQUITY METHOD INTERESTS

Apache, through its ownership of Altus, has the following equity method interests in 4 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		September 30, 2020		December 31, 2019
			(In millions)
Gulf Coast Express Pipeline LLC	16.0	%	$	284	$	291
EPIC Crude Holdings, LP	15.0	%	182		163
Permian Highway Pipeline LLC	26.7	%	576		311
Breviloba, LLC (Shin Oak Pipeline)	33.0	%	482		493
			$	1,524	$	1,258

As of September 30, 2020 and December 31, 2019, unamortized basis differences included in the equity method interest balances were $37 million and $30 million, respectively. These amounts represent differences in contributions to date and Altus’ underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences are amortized into net income over the useful lives of the underlying pipeline assets when they are placed into service.

The following table presents the activity in Altus’ equity method interests for the nine months ended September 30, 2020:



	Gulf Coast Express Pipeline LLC			EPIC Crude Holdings, LP			Permian Highway Pipeline LLC		Breviloba, LLC			Total
	(In millions)
Balance at December 31, 2019	$	291		$	163		$	311	$	493		$	1,258
Capital contributions	1			27			258		0			286
Distributions	(39		)	0			0		(35		)	(74		)
Capitalized interest	0			0			7		0			7
Equity income (loss), net	31			(8		)	0		24			47
Balance at September 30, 2020	$	284		$	182		$	576	$	482		$	1,524

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 Nine Months Ended September 30,
	2020			2019⁽¹⁾
	(In millions)
Operating revenues	$	531		$	103
Operating expenses	264			62
Operating income	267			41
Net income	217			34
Other comprehensive loss	(1		)	(11		)


(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 nine months ended September 30, 2019 for comparability.


7.	OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities as of September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:



	September 30, 2020		December 31, 2019
	(In millions)
Accrued operating expenses	$	99	$	143
Accrued exploration and development	158		319
Accrued gathering, processing, and transmission - Altus	1		17
Accrued compensation and benefits	116		212
Accrued interest	111		135
Accrued income taxes	18		51
Current asset retirement obligation	47		47
Current operating lease liability	110		169
Current derivative liability	14		0
Other	129		56
Total Other current liabilities	$	803	$	1,149

September 30, 2017 December 31, 2016
(In millions)
Accrued operating expenses $ 73
$ 110
Accrued exploration and development 691
463
Accrued compensation and benefits 99
201
Accrued interest 108
145
Accrued income taxes 68
22
Current asset retirement obligation 35
66
Refundable deposits 149
174
Other 109
77
Total other current liabilities $ 1,332
$ 1,258


6.8.	ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the nine-month period ended September 30, ~~2017:~~2020:



	(In millions)
Asset retirement obligation at December 31, 2019	$	1,858
Liabilities incurred	10
Liabilities settled	(23		)
Liabilities divested	(20		)
Accretion expense	81
Asset retirement obligation at September 30, 2020	1,906
Less current portion	(47		)
Asset retirement obligation, long-term	$	1,859

(In millions)
Asset retirement obligation at December 31, 2016 $ 2,498
Liabilities incurred 39
Liabilities divested (810 )
Liabilities settled (30 )
Accretion expense 103
Revisions in estimated liabilities 66
Asset retirement obligation at September 30, 2017 1,866
Less current portion 35
Asset retirement obligation, long-term $ 1,831


7.9.	INCOME TAXES

The Company estimates its annual effective income tax rate ~~for continuing operations~~ in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments of the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

In August 2017, Apache completed the sale of ACL. For more information regarding this transaction, please refer to Note 2—Acquisitions and Divestitures. As a result of this transaction, Apache recorded a deferred tax asset associated with its realizable capital loss on the sale of ACL, and a decrease in the Company’s deferred tax liability associated with its investment in foreign subsidiaries. InDuring the third ~~and second~~ quarters of ~~2017, the Company recorded a $2 million deferred income tax expense~~2020 and ~~a $674 million deferred income tax benefit, respectively, in connection with these transactions.~~

2019, Apache’s ~~third quarter of 2017~~ effective income tax rate was primarily impacted by gains on the sale of oil and gas properties and a $30 million current tax benefit associated with U.S. federal income tax credits. On September 15, 2016, U.K. Finance Act 2016 received Royal Assent. Under the enacted legislation, the corporate income tax rate on North Sea oil and gas profits was reduced from 50 percent to 40 percent effective January 1, 2016. As a result of the enacted legislation,an increase in the ~~third quarter~~amount of ~~2016 the Company recorded a~~valuation allowance against its U.S. deferred tax ~~benefit of $235 million related to the remeasurement of the Company’s December 31, 2015 U.K. deferred income tax liability.~~

assets. Apache’s 2017 year-to-date effective income tax rate is primarily impacted by the decrease in deferred taxes associated with its investments in foreign subsidiaries, gains on the sale of oil and gas properties, non-cash impairments of the Company’s PRT decommissioning asset, and the current tax benefit associated with U.S. federal income tax credits. Apache’s 20162020 year-to-date effective income tax rate was primarily impacted by ~~non-cash impairments of the carrying value of the Company’s~~ oil and gas ~~properties, non-cash~~asset impairments, ~~of the Company’s PRT decommissioning asset, the impact of the change in U.K. statutory income tax rate,~~a goodwill impairment, and an increase in the amount of valuation ~~allowances on~~allowance against its U.S. ~~and Canadian~~ deferred tax assets. Apache’s 2019 year-to-date effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against the Company’s U.S. deferred tax assets.

In the first quarter of 2020, the Company early adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The Company’s early adoption of ASU 2019-12 during the quarter ended March 31, 2020 using the prospective transition approach did not result in a material impact on the consolidated financial statements.

Apache and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. ~~In April 2017,~~The Company is currently under audit by the Internal Revenue Service (IRS) ~~began their audit of~~for the ~~Company’s 2014 income~~2014-2017 tax ~~year. The Company~~years and is also under audit in various states and ~~in most of the Company’s~~ foreign jurisdictions as part of its normal course of business.


8.10.	DEBT AND FINANCING COSTS

The following table presents the carrying ~~amounts and estimated fair values of the Company’s outstanding debt as of September 30, 2017 and December 31, 2016:~~

September 30, 2017 December 31, 2016

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value
(In millions)
Commercial paper and committed bank facilities $ —
$ —
$ —
$ —
Notes and debentures 8,483
9,094
8,544
9,183
Total Debt $ 8,483
$ 9,094
$ 8,544
$ 9,183

The Company’s debt is recorded at the carrying amount, net of related unamortized discount and debt issuance costs, on its consolidated balance sheet. When recorded, the carrying amount of the Company’s commercial paper, committed bank facilities, and uncommitted bank lines approximates fair value because the interest rates are variable and reflective of market rates. Apache uses a market approach to determine the fair value of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

~~The following table presents the carrying~~ value of the Company’s ~~debt as of September 30, 2017 and December 31, 2016:~~debt:



	September 30, 2020			December 31, 2019
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs⁽¹⁾	$	8,324		$	8,217
Altus credit facility⁽²⁾	580			396
Apache credit facility⁽²⁾	87			0
Finance lease obligations	37			48
Unamortized discount	(35		)	(42		)
Debt issuance costs	(59		)	(53		)
Total debt	8,934			8,566
Current maturities	(184		)	(11		)
Long-term debt	$	8,750		$	8,555

September 30, 2017 December 31, 2016
(In millions)
Debt before unamortized discount and debt issuance costs $ 8,580
$ 8,650
Unamortized discount (48 ) (50 )
Debt issuance costs (49 ) (56 )
Total debt 8,483
8,544
Current maturities (550 ) —
Long-term debt $ 7,933
$ 8,544


(1)	The fair values of the Company’s notes and debentures were $7.6 billion and $8.4 billion as of September 30, 2020 and December 31, 2019, respectively. Apache uses a market approach to determine the fair values of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).


(2)	The carrying amount of borrowings on credit facilities approximates fair value because the interest rates are variable and reflective of market rates.

As of September 30, ~~2017,~~2020, current debt included ~~$150~~$183 million, net of ~~7.0%~~discount, of 3.625% senior notes due February 1, ~~2018~~2021 and ~~$400~~$1 million of ~~6.9%~~finance lease obligations. On November 3, 2020, the Company redeemed the 3.625% senior notes due ~~September 15, 2018.~~February 1, 2021 at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date. As of December 31, 2019, current debt included $11 million of finance lease obligations.

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 the quarter ended September 30, 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $89 million for an aggregate purchase price of $79 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $11 million. These repurchases resulted in a $10 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.

During the quarter ended June 30, 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $410 million for an aggregate purchase price of $267 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $147 million. These repurchases resulted in a $140 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.

In March 2018, the Company entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of September 30, 2020. The facility is for general corporate purposes, and available committed borrowing capacity supports Apache’s commercial paper program. As of September 30, ~~2017, the Company had a revolving credit facility that matures~~2020, there were $87 million of borrowings and an aggregate £637 million in ~~June 2020, subject to Apache’s two one-year extension options. The facility provides for aggregate commitments of $3.5 billion (including a $750 million letter~~letters of credit ~~subfacility), with rights to increase commitments up to an aggregate $4.5 billion. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity~~outstanding under this ~~facility supports its~~facility. As of December 31, 2019, there were 0 borrowings or letters of credit outstanding under this facility. The 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.

The Company’s $3.5 billion ~~commercial paper program. The~~ commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 ~~days at~~days. As a result of downgrades in Apache’s credit ratings during 2020, the Company does not expect that its commercial paper program will be cost competitive ~~interest rates.~~with its other financing alternatives and does not anticipate using it under such circumstances. As of September 30, ~~2017,~~2020 and December 31, 2019, the Company had no0 commercial paper ~~or borrowings under committed bank facilities or uncommitted bank lines~~ outstanding.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s 2, 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 September 30, ~~2017, the Company had a letter~~2020 and December 31, 2019, there were $580 million and $396 million, respectively, of credit facility, which provides for £900 million in commitments and rights to increase commitments to £1.075 billion. This facility matures in February 2020. The facility is available for letters of credit and loans to cash collateralize letters of credit or obligations to provide letters of credit, in each case, to the extent letters of credit are unavailableborrowings outstanding under ~~the~~this facility. As of September 30, ~~2017, three~~2020 and December 31, 2019, there were 0 letters of credit ~~aggregating approximately £147.5 million and no borrowings were~~ outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.

In November 2016, the Company initiated a program to purchase in the open market up to $250 million in aggregate principal amount of senior notes issued under its indentures. In the fourth quarter of 2016, the Company purchased and canceled $181 million aggregate principal amount of its senior notes through open market repurchases for $182 million in cash, including accrued interest and $0.5 million of premium.

In January 2017, the Company purchased and canceled an additional $69 million aggregate principal amount of senior notes for $71 million in cash, including accrued interest and $1 million of premium, which completed the open market repurchase program. These repurchases resulted in a $1 million net loss on extinguishment of debt, which is included in “Financing costs, net” in the Company’s consolidated statement of operations. The net loss includes an acceleration of related discount and deferred financing costs.

In August 2017, the Company assumed the obligations of Apache Finance Canada Corporation (AFCC) in respect of $300 million 7.75% notes due in 2029 which AFCC issued and the Company guaranteed pursuant to the governing indenture. The assumption was permitted by the indenture and effected pursuant to a supplemental indenture thereto. As a result of the assumption, the Company is the obligor under the notes and indenture, and AFCC is released from its obligations thereunder. The $300 million 7.75% notes historically have been included in the Company’s long-term debt; accordingly, the assumption did not change the Company’s long-term debt or total debt.

Financing Costs, Net

The following table presents the components of Apache’s financing costs, net:



	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
	(In millions)
Interest expense	$	113		$	107		$	327		$	323
Amortization of debt issuance costs	2			2			6			5
Capitalized interest	(3		)	(9		)	(9		)	(26		)
Loss (gain) on extinguishment of debt	(12		)	0			(152		)	75
Interest income	(1		)	(5		)	(4		)	(12		)
Financing costs, net	$	99		$	95		$	168		$	365

For the Quarter Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Interest expense $ 113
$ 116
$ 344
$ 348
Amortization of deferred loan costs 3
2
7
5
Capitalized interest (12 ) (13 ) (39 ) (36 )
Loss on extinguishment of debt —
—
1
—
Interest income (3 ) (3 ) (13 ) (6 )
Financing costs, net $ 101
$ 102
$ 300
$ 311


9.11.	COMMITMENTS AND CONTINGENCIES

Legal Matters

Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. As of September 30, ~~2017,~~2020, the Company has an accrued liability of approximately ~~$37~~$69 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

For additional information on ~~each of the~~ Legal Matters described below, please see Note ~~10—~~11—Commitments and Contingencies to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019.

Argentine Environmental Claims and Argentina Tariff

No material change in the status of the YPF Sociedad Anónima and Pioneer Natural Resources Company indemnities ~~matters~~matter has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019.

Louisiana Restoration

As more fully described in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, numerous~~2019, Louisiana surface owners ~~have filed~~often file lawsuits or assert claims ~~or sent demand letters to various~~against oil and gas companies, including Apache, claiming that ~~under either express or implied lease terms or Louisiana law,~~operators and working interest owners in the ~~companies~~chain of title are liable for ~~damage~~environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to ~~their~~its original condition, ~~as well as damages for contamination and cleanup.~~

~~On July 24, 2013, a lawsuit captioned~~ ~~Board of Commissioners~~regardless of the ~~Southeast Louisiana Flood Protection Authority – East v. Tennessee Gas Pipeline~~value of the underlying property. From time to time, restoration lawsuits and claims are resolved by the Company ~~et al., Case No. 2013-6911 was filed in the Civil District Court~~ for ~~the Parish of Orleans, State of Louisiana, in which plaintiff on behalf of itself and as the board governing the levee districts of Orleans, Lake Borgne Basin, and East Jefferson alleged~~amounts that Louisiana coastal lands have been damaged as a result of oil and gas industry activity, including a network of canals for access and pipelines. The defendants removed the case from state court to federal court and, on February 13, 2015, the federal court entered judgment in favor of defendants dismissing all of plaintiff’s claims with prejudice. Plaintiff appealed the lower court’s dismissalare not material to the 5^th ~~Circuit Court of Appeals~~Company, while new lawsuits and ~~additionally challenged~~claims are asserted against the ~~defendants’ right~~Company. With respect to ~~remove the case to federal court. On March 3, 2017, the 5~~^th Circuit Court of Appeals affirmed the propriety of federal jurisdiction based in part on Apache’s argument that plaintiff’s state-based claims required a resolution of substantial questions of federal law and also affirmed the dismissaleach of the ~~action. The Plaintiff filed a Petition for a Writ of Certiorari with~~pending lawsuits and claims, the ~~United States Supreme Court. On October 30, 2017,~~amount claimed is not currently determinable or is not material. Further, the ~~United States Supreme Court denied review~~overall exposure related to these lawsuits and ~~declined~~claims is not currently determinable. While adverse judgments against the Company are possible, the Company intends to ~~consider the plaintiff’s Petition of Certiorari.~~actively defend these lawsuits and claims.

Starting in November of 2013 and continuing into ~~2017,~~2020, several ~~Parishes~~parishes in Louisiana have pending lawsuits against many oil and gas producers, including Apache. These cases ~~are pending in~~were all removed to federal ~~and state~~ 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 ~~state~~ law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and

otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While an adverse ~~judgment~~judgments against ~~Apache~~the Company might be possible, ~~Apache~~the Company intends to vigorously oppose these claims.

No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~

2019.

Apollo Exploration Lawsuit

In ~~a fourth amended petition filed on March 21, 2016, in~~ a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, plaintiffs ~~have reduced their~~ alleged damages ~~to approximately $500~~in excess of $200 million (having previously claimed in excess of $1.1 billion) relating to ~~certain~~ purchase and sale agreements, mineral leases, and areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The Court ~~recently granted two~~entered final judgment in favor of ~~Apache’s motions for summary judgment further limiting~~ the ~~plaintiffs’ theories~~Company, ruling that the plaintiffs take nothing by their claims and ~~potential damages. Apache believes that plaintiffs’ claims lack merit,~~awarding the Company its attorneys’ fees and ~~further that plaintiffs’ alleged damages, even as amended, are grossly inflated. Apache will vigorously oppose~~costs incurred in defending the ~~claims.~~lawsuit. The plaintiffs have appealed. No other material change in the status of ~~these matters~~this matter has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019.

~~Escheat Audits~~Australian Operations Divestiture Dispute

~~There has been no material change with respect~~Pursuant to ~~the review of the books~~a Sale and ~~records of~~Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, Apache filed suit against Quadrant for breach of the Quadrant SPA. In its suit, Apache seeks approximately AUD $80 million. In December 2017, Quadrant filed a defense of equitable set-off to Apache’s claim and ~~related entities~~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, 4 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 ~~State~~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 3 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 2 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 ~~Department~~filed suit, individually and on behalf of ~~Finance (Unclaimed Property)~~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.

The Company believes that the claims made against it in the California and Delaware litigation are baseless and intends to vigorously defend these lawsuits.

Castex Lawsuit

In a case styled Apache Corporation v. Castex Offshore, Inc, et. al., Cause No. 2015-48580, in the 113th Judicial District Court of Harris County, Texas, Castex filed claims for alleged damages of approximately $200 million, relating to ~~determine compliance with~~overspend on the ~~Delaware Escheat Laws, since~~Belle Isle Gas Facility upgrade, and the ~~filing~~drilling of five sidetracks on the Potomac #3 well. After a jury trial, a verdict of approximately $60 million, plus fees, costs, and interest was entered against the Company. The Company is appealing.

Oklahoma Class Actions

Apache 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 Apache’s ~~Annual Report on Form 10-K~~appeal of the certification was recently denied. The case includes a class of royalty owners seeking damages in excess of $250 million for alleged breach of the ~~fiscal year ended December 31, 2016.~~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 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.

Environmental Matters

As of September 30, ~~2017,~~2020, the Company had an undiscounted reserve for environmental remediation of approximately $4$2 million.

On September 11, 2020, Apache 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 Apache’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. Apache is cooperating with the EPA and responding to its information requests. 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 September 30, ~~2017,~~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.

~~ACL, a former subsidiary~~Potential Asset Retirement Obligations

In 2013, Apache sold its Gulf of Mexico Shelf operations and properties (Transferred Assets) to Fieldwood Energy LLC (Fieldwood). Under the terms of the ~~Company, previously reported produced water spills~~purchase agreement (Agreement), Apache received cash consideration of $3.75 billion and Fieldwood assumed $1.5 billion of discounted asset abandonment liabilities. In respect of such abandonment liabilities, Fieldwood posted letters of credit in favor of Apache (Letters of Credit) and established a ~~remote area~~trust account (Trust A), which is funded by a 10 percent net profits interest depending on future oil prices and of which Apache is the beneficiary. On February 14, 2018, Fieldwood filed for protection under Chapter 11 of the ~~Bellow Field and~~U.S. Bankruptcy Code. In connection with the 2018 bankruptcy, Fieldwood confirmed a ~~hydrogen sulfide and oil emulsion leak~~plan under which Apache agreed, inter alia, to accept bonds in the Zama area. The Company sold ACL in a transaction that was completed in the third quarter of 2017. The Canadian environmental litigation and liabilities remained with ACL and are now the responsibilityexchange for certain of the ~~acquirer.~~Letters of Credit. Currently, Apache 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.

~~In addition~~On August 3, 2020, Fieldwood filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Apache has been engaged with Fieldwood and other interested parties to discuss Fieldwood’s plan of reorganization. However, as of the date of this report, Apache does not know if, or to what extent, Fieldwood will be able to continue to perform its AROs with respect to the ~~matters~~Transferred Assets. If Fieldwood fails to perform any of its AROs with respect to the Transferred Assets, then Apache’s remedy would be a claim for ~~which~~damages against Fieldwood for breach of its contractual obligations under the ~~Company has already accrued,~~Agreement.

If Fieldwood fails to perform any of its AROs on ~~July 17, 2017, in three separate actions, San Mateo County, California, Marin County, California,~~the Transferred Assets, then Apache would expect the relevant governmental authorities to require Apache to perform, and hold Apache financially responsible for, such AROs to the ~~City~~extent not performed by Fieldwood. Pending resolution of ~~Imperial Beach, California, all filed suit individually and on behalf~~any claim by Apache for breach of the ~~people~~Agreement, Apache may be forced to use available cash to cover the costs it incurs for performing such AROs. While Apache anticipates that all, or a portion, of such costs would be reimbursable to Apache under the remaining Letters of Credit, the Bonds and Trust A, it is possible that such decommissioning security may not be sufficient to cover all of the ~~state of California against over 30 oil, gas,~~costs and ~~coal companies alleging damages~~expenses incurred by Apache in performing such AROs or such decommissioning security may be reduced, restricted, or otherwise eliminated, in whole or in part, as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. Apache believes that the claims made against it are baseless and intends to vigorously defend these lawsuits.Fieldwood’s current bankruptcy proceedings.

~~Australian Operations Divestiture Dispute~~

By a Sale and Purchase Agreement dated April 9, 2015 (SPA), the Company and its subsidiaries divested their remaining Australian operations to Viraciti Energy Pty Ltd, which has since been renamed Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. By letter dated June 6, 2016, Quadrant provided the Company with a placeholder notice of claim under the SPA concerning tax and other issues totaling approximately $200 million in the aggregate. The Company believes that these claims lack merit and intends to vigorously defend against them. Moreover, on September 22, 2017, subsidiaries of the Company filed suit against Quadrant for breaching the SPA and wrongfully withholding tax refunds owed under the SPA. This claim totals approximately $80 million AUD.


~~10.~~12.	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.

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 $179 million. The fair value of the embedded derivative, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, 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.

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 during the nine months ended September 30, 2020 is as follows:



	Units Outstanding	Financial Position⁽¹⁾
	(In millions, except unit data)
Redeemable noncontrolling interest - Altus Preferred Unit limited partners: at December 31, 2019	638,163	$	555
Distribution of in-kind additional Preferred Units	22,531	0
Cash distributions to Altus Preferred Unit limited partners	—	(11		)
Allocation of Altus Midstream LP net income	N/A	56
Redeemable noncontrolling interest - Altus Preferred Unit limited partners: at September 30, 2020	660,694	600
Preferred Units embedded derivative		179
		$	779

(1)

The Preferred Units are redeemable at Altus Midstream LP’s option at September 30, 2020 at a price (the Redemption Price) equal to (a) the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital. As of September 30, 2020, the greater of these two amounts was a 1.3 times multiple of invested capital which equaled $813 million. As of September 30, 2020, the aggregate Redemption Price using an 11.5 percent internal rate of return was $709 million.

N/A - not applicable.


13.	CAPITAL STOCK

Net ~~Income (Loss)~~Loss per Common Share

A reconciliation of the components of basic and diluted net ~~income (loss)~~loss per common share for the ~~quarters~~periods presented in the consolidated financial statements is shown in the tables below.



	For the Quarter Ended September 30,
	2020							2019
	Loss			Shares	Per Share			Loss			Shares	Per Share
	(In millions, except per share amounts)
Basic:
Loss attributable to common stock	$	(4	)	378	$	(0.01	)	$	(170	)	377	$	(0.45	)
Effect of Dilutive Securities:
Stock options and other	$	0		0	$	0		$	0		0	$	0
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	$	(4	)	0	$	(0.01	)	$	0		0	$	0
Diluted:
Loss attributable to common stock	$	(8	)	378	$	(0.02	)	$	(170	)	377	$	(0.45	)



	For the Nine Months Ended September 30,
	2020							2019
	Loss			Shares	Per Share			Loss			Shares	Per Share
	(In millions, except per share amounts)
Basic:
Loss attributable to common stock	$	(4,870	)	378	$	(12.89	)	$	(577	)	377	$	(1.53	)
Effect of Dilutive Securities:
Stock options and other	$	0		0	$	0		$	0		0	$	0
Diluted:
Loss attributable to common stock	$	(4,870	)	378	$	(12.89	)	$	(577	)	377	$	(1.53	)

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 loss attributable to common stock on an assumed conversion of the Preferred Units was anti-dilutive for the quarter ended September 30, 2019 and for each of the nine months ended September 30, ~~2017~~2020 and ~~2016, is presented in the table below.~~

For the Quarter Ended September 30,
2017 2016
Income Shares Per Share Loss Shares Per Share
(In millions, except per share amounts)
Basic:
Income (loss) from continuing operations $ 63
381
$ 0.16
$ (574 ) 380
$ (1.51 )
Loss from discontinued operations —
381
—
(33 ) 380
(0.09 )
Income (loss) attributable to common stock $ 63
381
$ 0.16
$ (607 ) 380
$ (1.60 )
Effect of Dilutive Securities:
Stock options and other $ —
2
$ —
$ —
—
$ —
Diluted:
Income (loss) from continuing operations $ 63
383
$ 0.16
$ (574 ) 380
$ (1.51 )
Loss from discontinued operations —
383
—
(33 ) 380
(0.09 )
Income (loss) attributable to common stock $ 63
383
$ 0.16
$ (607 ) 380
$ (1.60 )

For the Nine Months Ended September 30,
2017 2016
Income Shares Per Share Loss Shares Per Share
(In millions, except per share amounts)
Basic:
Income (loss) from continuing operations $ 848
381
$ 2.23
$ (1,190 ) 379
$ (3.14 )
Loss from discontinued operations —
381
—
(33 ) 379
(0.08 )
Income (loss) attributable to common stock $ 848
381
$ 2.23
$ (1,223 ) 379
$ (3.22 )
Effect of Dilutive Securities:
Stock options and other $ —
2
$ (0.01 ) $ —
—
$ —
Diluted:
Income (loss) from continuing operations $ 848
383
$ 2.22
$ (1,190 ) 379
$ (3.14 )
Loss from discontinued operations —
383
—
(33 ) 379
(0.08 )
Income (loss) attributable to common stock $ 848
383
$ 2.22
$ (1,223 ) 379
$ (3.22 )

2019. The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling ~~8.4~~4.2 million and ~~4.7~~5.2 million for the quarters ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~7.5~~5.1 million ~~and 6.5 million~~ for each of the nine months ended September 30, ~~2017~~2020 and ~~2016, respectively.~~2019.

Common Stock Dividends

For ~~each of~~ the quarters ended September 30, ~~2017,~~2020 and ~~2016,~~2019, Apache paid ~~$95~~$9 million and $94 million, respectively, in dividends on its common stock. For the nine months ended September 30, ~~2017~~2020 and ~~2016, the Company~~2019, Apache paid ~~$285~~$113 million and ~~$284~~$282 million, respectively. In the first quarter of 2020, Apache’s Board of Directors approved a reduction in the Company’s quarterly dividend per share from $0.25 to $0.025, effective for all dividends payable after March 12, 2020.

Stock Repurchase Program

In 2013 and 2014, Apache’s Board of Directors ~~has~~ authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, ~~2017,~~2020, had repurchased a total of ~~32.2~~40 million shares at an average price of ~~$88.96~~$79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and ~~has not purchased~~did 0t purchase any shares during ~~2017.~~


~~11.~~	~~ACCUMULATED OTHER COMPREHENSIVE LOSS~~

~~The following table describes changes to~~ the ~~Company’s accumulated other comprehensive loss by component for the nine-month period~~nine months ended September 30, ~~2017:~~2020.

Currency Translation Adjustment Pension and Postretirement Benefit Plan Total
(In millions)
Accumulated other comprehensive loss at December 31, 2016 $ (109 ) $ (3 ) $ (112 )
Currency translation adjustment divested⁽¹⁾
109
—
109
Accumulated other comprehensive loss at September 30, 2017 $ —
$ (3 ) $ (3 )

~~(1)~~

Currency translation adjustments resulting from translating the Canadian subsidiaries’ financial statements into U.S. dollar equivalents, prior to adoption of the U.S. dollar as their functional currency, were reported separately and accumulated in other comprehensive loss. This currency translation loss was recognized as a reduction of the net gain on divestiture during the third quarter of 2017 in connection with the Canada divestitures. For more information regarding these divestitures, please refer to Note 2—Acquisitions and Divestitures.


~~12.~~14.	BUSINESS SEGMENT INFORMATION

As of September 30, 2020, Apache is engaged in ~~a single line of business. Both domestically~~exploration and ~~internationally,~~production (Upstream) activities across 3 operating segments: Egypt, North Sea, and the ~~Company~~U.S. Apache also has exploration interests in Suriname and 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. ~~At September 30, 2017, the Company had production in three reporting segments: the United States, Egypt,~~Apache’s midstream business is operated by Altus, which owns, develops, and ~~offshore the United Kingdom~~operates a midstream energy asset network in the ~~North Sea (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity.~~Permian Basin of West Texas, anchored by midstream service contracts to Apache’s production from its Alpine High resource play. Financial information for each ~~area~~segment is presented below:


	United States			Canada⁽¹⁾			Egypt⁽²⁾		North Sea		Other International			Total			Egypt⁽¹⁾		North Sea			U.S.		Altus		Intersegment Eliminations & Other			Total⁽²⁾
	(In millions)																Upstream							Midstream
For the Quarter Ended September 30, 2017
Oil and Gas Production Revenues	$	550		$	36		$	543	$	260	$	—		$	1,389
																	(In millions)
For the Quarter Ended September 30, 2020
Revenues:
Oil revenues																	$	303	$	179		$	303	$	0	$	0		$	785
Natural gas revenues																	74		13			77		0		0			164
Natural gas liquids revenues																	2		5			90		0		0			97
Oil, natural gas, and natural gas liquids production revenues																	379		197			470		0		—			1,046
Purchased oil and gas sales																	0		0			73		1		0			74
Midstream service affiliate revenues																	—		—			—		39		(39		)	—
																	379		197			543		40		(39		)	1,120
Operating Expenses:
Lease operating expenses																	102		79			79		0		(1		)	259
Gathering, processing, and transmission																	8		10			74		9		(38		)	63
Purchased oil and gas costs																	0		0			74		1		0			75
Taxes other than income																	0		0			30		4		0			34
Exploration																	10		10			34		0		4			58
Depreciation, depletion, and amortization																	144		90			161		3		0			398
Asset retirement obligation accretion																	0		18			8		1		0			27
																	264		207			460		18		(35		)	914
Operating Income (Loss)⁽³⁾	$	(114	)	$	(1	)	$	226	$	16	$	(1	)	$	126		$	115	$	(10	)	$	83	$	22	$	(4	)	206
Other Income (Expense):
Gain on divestitures, net														296
Derivative instrument losses, net														(110		)
Derivative instrument gains, net																													16
Loss on divestitures, net																													(1		)
Other, net																													9
General and administrative														(98		)													(52		)
Transaction, reorganization, and separation														(20		)													(7		)
Financing costs, net														(101		)													(99		)
Income Before Income Taxes														$	93														$	72

For the Nine Months Ended September 30, 2017
Oil and Gas Production Revenues	$	1,593		$	231		$	1,655	$	768	$	—		$	4,247
Operating Income (Loss)⁽³⁾	$	(71	)	$	(33	)	$	740	$	59	$	(24	)	$	671
Other Income (Expense):
Gain on divestitures, net														616
Derivative instrument losses, net														(69		)
Other														43
General and administrative														(307		)
Transaction, reorganization, and separation														(14		)
Financing costs, net														(300		)
Income Before Income Taxes														$	640
Total Assets	$	13,105		$	—		$	4,906	$	3,770	$	54		$	21,835

United
States

Canada⁽¹⁾

Egypt⁽²⁾
North Sea
Other
International
Total
(In millions)
For the Quarter Ended September 30, 2016
Oil and Gas Production Revenues $ 524
$ 87
$ 581
$ 247
$ —
$ 1,439
Operating Income (Loss)⁽⁴⁾
$ (17 ) $ (466 ) $ 263
$ (455 ) $ (13 ) $ (688 )
Other Income (Expense):
Gain on divestitures, net 5
Other (6 )
General and administrative (102 )
Transaction, reorganization, and separation (12 )
Financing costs, net (102 )
Loss From Continuing Operations Before Income Taxes $ (905 )

For the Nine Months Ended September 30, 2016
Oil and Gas Production Revenues $ 1,453
$ 243
$ 1,515
$ 701
$ —
$ 3,912
Operating Income (Loss)⁽⁴⁾
$ (283 ) $ (586 ) $ 525
$ (557 ) $ (13 ) $ (914 )
Other Income (Expense):
Gain on divestitures, net 21
Other (30 )
General and administrative (298 )
Transaction, reorganization, and separation (36 )
Financing costs, net (311 )
Loss From Continuing Operations Before Income Taxes $ (1,568 )
Total Assets $ 12,299
$ 1,630
$ 5,320
$ 3,851
$ 49
$ 23,149



	Egypt⁽¹⁾			North Sea			U.S.			Altus		Intersegment Eliminations & Other			Total⁽²⁾
	Upstream									Midstream
	(In millions)
For the Nine Months Ended September 30, 2020
Revenues:
Oil revenues	$	823		$	578		$	929		$	0	$	0		$	2,330
Natural gas revenues	209			39			169			0		0			417
Natural gas liquids revenues	6			15			211			0		0			232
Oil, natural gas, and natural gas liquids production revenues	1,038			632			1,309			0		—			2,979
Purchased oil and gas sales	0			0			235			2		0			237
Midstream service affiliate revenues	—			—			—			111		(111		)	—
	1,038			632			1,544			113		(111		)	3,216

Operating Expenses:
Lease operating expenses	312			234			313			0		(1		)	858
Gathering, processing, and transmission	31			37			219			29		(110		)	206
Purchased oil and gas costs	0			0			205			2		0			207
Taxes other than income	0			0			79			11		0			90
Exploration	51			26			100			0		10			187
Depreciation, depletion, and amortization	463			278			632			9		0			1,382
Asset retirement obligation accretion	0			54			24			3		0			81
Impairments	529			7			3,956			0		0			4,492
	1,386			636			5,528			54		(101		)	7,503
Operating Income (Loss)⁽³⁾	$	(348	)	$	(4	)	$	(3,984	)	$	59	$	(10	)	(4,287		)
Other Income (Expense):
Derivative instrument losses, net															(262		)
Gain on divestitures															24
Other															41
General and administrative															(214		)
Transaction, reorganization, and separation															(44		)
Financing costs, net															(168		)
Loss Before Income Taxes															$	(4,910	)

Total Assets⁽⁴⁾	$	3,052		$	2,238		$	5,708		$	1,741	$	136		$	12,875



	Egypt⁽¹⁾		North Sea		U.S.			Altus			Intersegment Eliminations & Other			Total⁽²⁾
	Upstream							Midstream
	(In millions)
For the Quarter Ended September 30, 2019
Revenues:
Oil revenues	$	472	$	231	$	504		$	0		$	0		$	1,207
Natural gas revenues	72		14		50			0			0			136
Natural gas liquids revenues	2		5		88			0			0			95
Oil, natural gas, and natural gas liquids production revenues	546		250		642			0			—			1,438
Purchased oil and gas sales	0		0		30			0			0			30
Midstream service affiliate revenues	—		—		—			34			(34		)	—
	546		250		672			34			(34		)	1,468

Operating Expenses:
Lease operating expenses	115		76		159			0			0			350
Gathering, processing, and transmission	9		9		69			13			(34		)	66
Purchased oil and gas costs	0		0		23			0			0			23
Taxes other than income	0		0		41			3			0			44
Exploration	27		0		25			0			4			56
Depreciation, depletion, and amortization	177		71		452			11			0			711
Asset retirement obligation accretion	0		19		8			0			0			27
Impairments	0		0		0			9			0			9
	328		175		777			36			(30		)	1,286
Operating Income (Loss)⁽³⁾	$	218	$	75	$	(105	)	$	(2	)	$	(4	)	182
Other Income (Expense):
Derivative instrument losses, net														(2		)
Other														34
General and administrative														(98		)
Transaction, reorganization, and separation														(7		)
Financing costs, net														(95		)
Income Before Income Taxes														$	14



	Egypt⁽¹⁾		North Sea		U.S.			Altus		Intersegment Eliminations & Other			Total⁽²⁾
	Upstream							Midstream
	(In millions)
For the Nine Months Ended September 30, 2019
Revenues:
Oil revenues	$	1,509	$	868	$	1,537		$	0	$	0		$	3,914
Natural gas revenues	223		64		203			0		0			490
Natural gas liquids revenues	9		16		261			0		0			286
Oil, natural gas, and natural gas liquids production revenues	1,741		948		2,001			0		—			4,690
Purchased oil and gas sales	0		0		72			0		0			72
Midstream service affiliate revenues	—		—		—			92		(92		)	—
	1,741		948		2,073			92		(92		)	4,762
Operating Expenses:
Lease operating expenses	365		240		501			0		(2		)	1,104
Gathering, processing, and transmission	31		32		214			43		(90		)	230
Purchased oil and gas costs	0		0		60			0		0			60
Taxes other than income	0		0		131			10		0			141
Exploration	89		2		117			0		12			220
Depreciation, depletion, and amortization	538		269		1,125			27		0			1,959
Asset retirement obligation accretion	0		56		23			1		0			80
Impairments	0		0		240			9		0			249
	1,023		599		2,411			90		(80		)	4,043
Operating Income (Loss)⁽³⁾	$	718	$	349	$	(338	)	$	2	$	(12	)	719
Other Income (Expense):
Derivative instrument losses, net													(40		)
Gain on divestitures, net													20
Other, net													33
General and administrative													(323		)
Transaction, reorganization, and separation													(17		)
Financing costs, net													(365		)
Income Before Income Taxes													$	27

Total Assets⁽⁴⁾	$	3,851	$	2,529	$	12,289		$	2,648	$	88		$	21,405


(1)	~~During the third quarter of 2017, Apache completed the sale of its Canadian operations. For more information regarding this divestiture, please refer to Note 2—Acquisitions and Divestitures.~~Includes revenue from non-customers of:



	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(In millions)
Oil	$	38	$	98	$	65	$	316
Natural gas	6		9		9		30
Natural gas liquids	0		0		0		1


(2)	Includes a noncontrolling interest in ~~Egypt.~~Egypt and Altus.

(3)

Operating income (loss) consists of oil and gas production revenues less lease operating expenses, gathering and transportation costs, taxes other than income, exploration costs, depreciation, depletion, and amortization, asset retirement obligation accretion, and impairments. The operating income ~~(loss)~~ of U.S. and Egypt includes leasehold and other asset impairments totaling ~~$160~~$34 million and $2 million, respectively, for the third quarter of ~~2017.~~2020. The operating ~~income (loss)~~loss of U.S., ~~Canada,~~Egypt, and North Sea includes leasehold and other asset impairments totaling ~~$212 million, $2~~$4.0 billion, $535 million, and $8$7 million, respectively, for the first nine months of ~~2017.~~

~~(4)~~

2020. The operating income (loss) of U.S., ~~Canada,~~Altus Midstream, and ~~North Sea~~Egypt includes leasehold ~~property,~~ and other asset impairments totaling ~~$46~~$10 million, ~~$423~~$9 million and ~~$481~~$2 million, respectively, for the third quarter of ~~2016.~~2019. The operating income (loss) of U.S., ~~Canada,~~Altus Midstream, and ~~North Sea~~Egypt includes leasehold ~~property,~~ and other asset impairments totaling ~~$212~~$308 million, ~~$433~~$9 million, and ~~$586~~$6 million, respectively, for the first nine months of ~~2016.~~2019.


(4)	Intercompany balances are excluded from total assets.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion relates to Apache Corporation (Apache or the Company) and its consolidated subsidiaries and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included under Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q, as well as the Company’s consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019.

Overview

Apache Corporation, a Delaware corporation formed in 1954, is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas ~~liquids.~~liquids (NGLs). The ~~Company~~Company’s upstream business currently has exploration and production operations in three geographic areas: the United States (U.S.), Egypt, and offshore the United Kingdom (U.K.) in the North Sea (North Sea). Apache also has exploration interests in Suriname and other international locations that may, over time, result in a reportable ~~discovery~~discoveries and development ~~opportunity.~~opportunities. Apache’s midstream business is operated by Altus Midstream Company 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.

~~During~~Apache’s mission is to grow in an innovative, safe, environmentally responsible, and profitable manner for the ~~quarter,~~long-term benefit of its stakeholders. Apache ~~completed its strategic exit from Canada that was enabled~~is focused on rigorous portfolio management, disciplined financial structure, and optimization of returns.

The global economy and the energy industry have been deeply impacted by ~~its Alpine High discovery. We believe this portfolio shift is~~the effects of the coronavirus disease 2019 (COVID-19) pandemic and related governmental actions. Uncertainty in the oil markets and the negative demand implications of the COVID-19 pandemic continue to impact oil supply and demand. As with previous changes in a ~~significant upgrade~~volatile price environment, Apache has continued to respond quickly and decisively, taking the following actions:

Establishing and implementing a wide range of fit-for-purpose protocols and procedures to ensure a safe and productive work environment across the Company’s ~~portfolio of assets, as~~diversified global onshore and offshore operations.

Reducing upstream capital investments by over 50 percent from the ~~Alpine High discovery offers higher returns~~comparative prior-year period. This reduction included eliminating nearly all U.S. drilling and ~~significantly more long-term growth potential. Apache’s U.S. assets are complemented~~completion activity by ~~its international assets~~May 2020 and reducing planned activity in Egypt and the North ~~Sea, each of which adds to~~Sea.

Decreasing the Company’s ~~deep inventory~~dividend by 90 percent beginning in the first quarter of ~~exploration~~2020, preserving approximately $340 million of cash flow on an annualized basis and ~~development opportunities~~strengthening liquidity.

Completing an organizational redesign and ~~generate~~achieving an estimated cost savings of $400 million annually.

Further protecting cash flows from downside price dislocation by entering into commodity hedging positions, as the Company believes there will be higher volatility risk over the near term.

Conducting, on a continuous basis, price sensitivity analyses and operational evaluations of producing wells across the Company’s portfolio that allow for a methodical and integrated approach to production shut-ins and curtailments with a focus on preserving cash flows in ~~excess of current capital investments, facilitating~~a distressed price environment and protecting the Company’s ~~ability~~assets.

The Company remains committed to ~~develop Alpine High while maintaining financial flexibility.~~its longer-term objectives, which still hold true despite the current environment, to maintain a balanced asset portfolio, invest for long-term returns over production growth, and budget conservatively to generate free cash flow that can be directed on a priority basis to debt reduction. Apache closely monitors hydrocarbon pricing fundamentals and will reallocate capital as part of its ongoing planning process. For additional detail on the Company’s forward capital investment outlook, refer to “Capital and Operational Outlook” below.

Apache reported ~~third-quarter net income~~a third quarter loss of ~~$63~~$4 million, or ~~$0.16~~$0.02 per diluted common share, compared to a loss of ~~$607~~$170 million, or ~~$1.60~~$0.45 per common share, in the third quarter of 2016. The increase in net income compared to the prior-year quarter is primarily the result of gains on divestitures in the current-year quarter, as well as lower impairment charges in the current period. Revenue gains from significant increases in realized commodity prices partially mitigated the impact of production declines.

2019. Daily production in the third quarter of ~~2017~~2020 averaged ~~448 thousand barrels of oil equivalent per day (Mboe/d),~~445 Mboe/d, a decrease of 14only one percent from the comparative prior-year ~~quarter driven by the sale~~quarter. The Company generated $890 million of ~~the Company’s Canadian operations. Excluding production~~cash from Canada, Apache’s worldwide equivalent daily production decreased 8 percent due to natural decline. The production decline was driven by strategic decisions to curtail capital investments in the two preceding years in order to allow costs to re-align with the lower commodity price environment and to allocate a significant portion of this year’s capital investments to the development of the Alpine High field and infrastructure.

~~During~~operating activities during the first nine months of ~~2017, the Company generated $1.8 billion in cash from operating activities, an 8~~2020, a decrease of 57 percent ~~increase~~ from the ~~comparative prior-year period,~~first nine months of 2019 driven by lower crude oil prices and ~~$1.4 billion of cash proceeds from non-core asset divestments.~~associated revenues. Apache ~~exited~~ended the quarter with ~~$1.9 billion~~$162 million of cash, cash equivalents, and restricted cash, an increase of $565 million from year-end 2016. In addition, the Company reduced debt from year-end levels and has $3.5 billion of available committed borrowing capacity. In response to continued commodity price volatility, the Company entered commodity derivatives to secure deployment of high priority investments without compromising its financial strength or flexibility. We continuously monitor changes in our operating environment and have the ability, due to our dynamic capital allocation process, to adjust our capital investment program to levels that maximize value for our shareholders over the long-term.cash.

~~Operating~~

Operational Highlights

~~Significant operating activities~~Key operational highlights for the quarter ~~include the following:~~include:

~~North America~~United States

~~North America equivalent production decreased 17 percent for the~~Third quarter relative to the 2016 period, reflecting Apache’s exit from Canada. Excluding Canada, Apache’s North America equivalent production decreased 6 percent, in line with the Company’s expectations given the significant reduction in capital investments over the preceding two years and the allocation of a significant portion of our 2017 capital investments to infrastructure at Alpine High.

~~Third-quarter~~ equivalent production from ~~the Permian Basin region, which accounts for more than half of~~ Apache’s ~~total North American production, increased 1~~U.S. assets decreased three percent from the third quarter of ~~2016, which was driven by our Alpine High discovery and strong performance~~2019 as a result of reduced activity in response to commodity price weakness. The Company had no rigs or drilling activity in the ~~Midland Basin. Third-quarter~~U.S. during the third quarter of 2020, compared to 10 average rigs in the prior-year quarter.

International

Egypt gross production ~~increased~~decreased 11 percent, ~~from the prior sequential quarter, a reflection of increased activity~~ and ~~the startup of Alpine High production.~~

~~Drilling and infrastructure development activities continue at Alpine High; specifically:~~


◦	First production from the Alpine High play was achieved in early May 2017. Net production averaged approximately 13.3 Mboe/d during the third quarter, and we anticipate production of 25 Mboe/d by the end of the year.


◦	~~During the first nine months of 2017, Apache invested $389 million in midstream facilities at Alpine High, with development ongoing.~~


◦	Three processing facilities are currently operating with a combined gross inlet capacity of 200 million cubic feet of natural gas per day (MMcf/d). Infrastructure buildout for two additional central processing facilities has been slightly delayed by a quarter as a result of Hurricane Harvey-related damage to Houston-area manufacturing facilities that are providing key infrastructure equipment.

In 2017, Apache announced three separate transactions to sell its subsidiary Apache Canada Ltd. (ACL) and exit its Canadian operations. The sale of assets at Midale and House Mountain, located in Saskatchewan and Alberta, closed on June 30, 2017 for approximately $228 million of cash proceeds. The two remaining transactions to sell ACL and Provost assets in Alberta closed in August 2017 for approximately $478 million of cash proceeds. The sale of Apache’s Canadian operations further streamlines its portfolio, enabling the Company to allocate a higher percentage of capital to the Permian Basin.

~~International~~

~~The Egypt region~~ net ~~equivalent~~ production decreased 123 percent from the third quarter of ~~2016 despite~~2019, primarily a result of natural decline ~~of only 3 percent in gross production, a function of the Company’s production-sharing contracts. In August 2017, the~~and reduced drilling activity. The Company ~~received final award of two new concessions totaling 1.6 million net acres. At the end of September 2017, the Company began acquiring high resolution 3D seismic~~continues to build and enhance its robust drilling inventory in the ~~West Kalabsha concession~~country, supplemented with recent seismic acquisitions and ~~plans to expand this seismic activity to cover the majority of its~~new play concept evaluations on both new and existing acreage.

The North Sea ~~region average~~averaged two rigs and completed three gross wells, of which two were productive, during the third quarter of 2020. The Company’s daily production ~~decreased 5~~in the North Sea increased 11 percent from the third quarter ~~of 2016,~~2019, primarily the result of ~~extended turnaround activities~~its second well at the Garten field, which came on-line in the ~~third~~first quarter of ~~2017~~2020.

In July 2020, Apache announced a major oil discovery at the Kwaskwasi-1 well drilled offshore Suriname on Block 58. Kwaskwasi-1 was drilled to a depth of approximately 6,645 meters (21,800 feet) and ~~natural well decline. The Callater discovery, which came online~~successfully tested for the presence of hydrocarbons in ~~late May 2017, has two wells producing with a third offset well expected to commence production later~~multiple stacked targets in the upper Cretaceous-aged Campanian and Santonian intervals. Fluid samples and test results indicate at least 278 meters (912 feet) of net oil and oil/gas condensate pay in two intervals. This is the third consecutive oil discovery offshore Suriname.

In September 2020, the Company commenced drilling a fourth ~~quarter~~exploration well in the block at the Keskesi prospect. Apache is in the process of ~~2017.~~transitioning operatorship of Block 58 to its partner, Total S.A, which will conduct all exploration and appraisal activities subsequent to Keskesi.

Results of Operations

Oil and Gas Production Revenues

~~The table below presents~~Apache’s oil and gas production revenues ~~by geographic region~~ and ~~each region’s percent~~respective contribution to revenues ~~for 2017 and 2016.~~by country are as follows:

For the Quarter Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016

$
Value

%
Contribution

$
Value

%
Contribution

$
Value

%
Contribution

$
Value

%
Contribution
($ in millions)
Total Oil Revenues:
United States $ 381
36 % $ 377
34 % $ 1,133
35 % $ 1,099
36 %
Canada 14
1 % 47
4 % 110
3 % 132
4 %
North America 395
37 % 424
38 % 1,243
38 % 1,231
40 %
Egypt⁽¹⁾
442
41 % 476
43 % 1,351
41 % 1,209
40 %
North Sea 233
22 % 217
19 % 698
21 % 617
20 %
International ⁽¹⁾
675
63 % 693
62 % 2,049
62 % 1,826
60 %
Total ⁽¹⁾
$ 1,070
100 % $ 1,117
100 % $ 3,292
100 % $ 3,057
100 %
Total Natural Gas Revenues:
United States $ 97
41 % $ 98
37 % $ 266
37 % $ 222
32 %
Canada 19
8 % 36
14 % 104
14 % 100
14 %
North America 116
49 % 134
51 % 370
51 % 322
46 %
Egypt ⁽¹⁾
98
41 % 103
39 % 295
41 % 298
43 %
North Sea 24
10 % 26
10 % 61
8 % 75
11 %
International ⁽¹⁾
122
51 % 129
49 % 356
49 % 373
54 %
Total ⁽¹⁾
$ 238
100 % $ 263
100 % $ 726
100 % $ 695
100 %
Total Natural Gas Liquids (NGL) Revenues:
United States $ 72
89 % $ 49
83 % $ 194
85 % $ 132
82 %
Canada 3
4 % 4
7 % 17
7 % 11
7 %
North America 75
93 % 53
90 % 211
92 % 143
89 %
Egypt ⁽¹⁾
3
4 % 2
3 % 9
4 % 8
5 %
North Sea 3
3 % 4
7 % 9
4 % 9
6 %
International ⁽¹⁾
6
7 % 6
10 % 18
8 % 17
11 %
Total ⁽¹⁾
$ 81
100 % $ 59
100 % $ 229
100 % $ 160
100 %
Total Oil and Gas Revenues:
United States $ 550
40 % $ 524
36 % $ 1,593
38 % $ 1,453
37 %
Canada 36
2 % 87
6 % 231
5 % 243
6 %
North America 586
42 % 611
42 % 1,824
43 % 1,696
43 %
Egypt ⁽¹⁾
543
39 % 581
41 % 1,655
39 % 1,515
39 %
North Sea 260
19 % 247
17 % 768
18 % 701
18 %
International ⁽¹⁾
803
58 % 828
58 % 2,423
57 % 2,216
57 %
Total ⁽¹⁾
$ 1,389
100 % $ 1,439
100 % $ 4,247
100 % $ 3,912
100 %



	For the Quarter Ended September 30,								For the Nine Months Ended September 30,
	2020				2019				2020				2019
	$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution
	($ in millions)
Oil Revenues:
United States	$	303	39	%	$	504	42	%	$	929	40	%	$	1,537	39	%
Egypt⁽¹⁾	303		38	%	472		39	%	823		35	%	1,509		39	%
North Sea	179		23	%	231		19	%	578		25	%	868		22	%
Total⁽¹⁾	$	785	100	%	$	1,207	100	%	$	2,330	100	%	$	3,914	100	%
Natural Gas Revenues:
United States	$	77	47	%	$	50	37	%	$	169	41	%	$	203	41	%
Egypt⁽¹⁾	74		45	%	72		53	%	209		50	%	223		46	%
North Sea	13		8	%	14		10	%	39		9	%	64		13	%
Total⁽¹⁾	$	164	100	%	$	136	100	%	$	417	100	%	$	490	100	%
Natural Gas Liquids (NGL) Revenues:
United States	$	90	93	%	$	88	93	%	$	211	91	%	$	261	91	%
Egypt⁽¹⁾	2		2	%	2		2	%	6		3	%	9		3	%
North Sea	5		5	%	5		5	%	15		6	%	16		6	%
Total⁽¹⁾	$	97	100	%	$	95	100	%	$	232	100	%	$	286	100	%
Oil and Gas Revenues:
United States	$	470	45	%	$	642	45	%	$	1,309	44	%	$	2,001	43	%
Egypt⁽¹⁾	379		36	%	546		38	%	1,038		35	%	1,741		37	%
North Sea	197		19	%	250		17	%	632		21	%	948		20	%
Total⁽¹⁾	$	1,046	100	%	$	1,438	100	%	$	2,979	100	%	$	4,690	100	%


(1)	Includes revenues attributable to a noncontrolling interest in Egypt.

Production

The following table ~~below~~ presents ~~the third-quarter and year-to-date 2017 and 2016~~ production ~~and the relative increase or decrease from the prior period.~~volumes by country:


	For the Quarter Ended September 30,				For the Nine Months Ended September 30,				For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2017	Increase (Decrease)		2016	2017	Increase (Decrease)		2016	2020	Increase (Decrease)		2019	2020	Increase (Decrease)		2019
Oil Volume – b/d
United States	90,883	(8	)%	98,269	89,228	(17	)%	106,924	83,178	(17	)%	100,045	93,051	(10	)%	103,912
Canada	3,441	(73	)%	12,619	8,881	(33	)%	13,331
North America	94,324	(15	)%	110,888	98,109	(18	)%	120,255
Egypt⁽¹⁾⁽²⁾	93,749	(15	)%	110,809	97,447	(7	)%	105,118	79,194	(6	)%	84,114	77,410	(10	)%	86,470
North Sea	49,945	2	%	49,192	49,274	(11	)%	55,071	48,755	10	%	44,281	50,339	2	%	49,584
International	143,694	(10	)%	160,001	146,721	(8	)%	160,189
Total	238,018	(12	)%	270,889	244,830	(13	)%	280,444	211,127	(8	)%	228,440	220,800	(8	)%	239,966
Natural Gas Volume – Mcf/d
United States	404,486	2	%	395,062	378,625	(6	)%	404,282	597,686	6	%	563,162	571,325	(10	)%	633,239
Canada	107,524	(54	)%	233,635	175,787	(29	)%	248,912
North America	512,010	(19	)%	628,697	554,412	(15	)%	653,194
Egypt⁽¹⁾⁽²⁾	378,426	(7	)%	405,863	389,533	(4	)%	403,832	286,744	4	%	275,569	273,676	(5	)%	289,397
North Sea	50,057	(28	)%	69,509	42,800	(36	)%	66,884	53,137	11	%	47,875	57,659	12	%	51,596
International	428,483	(10	)%	475,372	432,333	(8	)%	470,716
Total	940,493	(15	)%	1,104,069	986,745	(12	)%	1,123,910	937,567	6	%	886,606	902,660	(7	)%	974,232
NGL Volume – b/d
United States	49,149	(13	)%	56,355	48,063	(14	)%	55,897	75,266	5	%	72,005	75,468	17	%	64,329
Canada	2,183	(64	)%	6,039	3,780	(36	)%	5,879
North America	51,332	(18	)%	62,394	51,843	(16	)%	61,776
Egypt⁽¹⁾⁽²⁾	916	(19	)%	1,124	917	(18	)%	1,120	611	(31	)%	891	812	(17	)%	979
North Sea	1,219	(28	)%	1,697	1,044	(33	)%	1,557	1,976	28	%	1,540	1,948	16	%	1,678
International	2,135	(24	)%	2,821	1,961	(27	)%	2,677
Total	53,467	(18	)%	65,215	53,804	(17	)%	64,453	77,853	5	%	74,436	78,228	17	%	66,986
BOE per day⁽³⁾
United States	207,447	(6	)%	220,468	200,396	(13	)%	230,202	258,058	(3	)%	265,910	263,740	(4	)%	273,781
Canada	23,544	(59	)%	57,597	41,959	(31	)%	60,695
North America	230,991	(17	)%	278,065	242,355	(17	)%	290,897
Egypt⁽²⁾	157,737	(12	)%	179,575	163,286	(6	)%	173,544
Egypt⁽¹⁾⁽²⁾									127,595	(3	)%	130,934	123,834	(9	)%	135,681
North Sea⁽⁴⁾	59,507	(5	)%	62,475	57,451	(15	)%	67,775	59,588	11	%	53,800	61,897	3	%	59,861
International	217,244	(10	)%	242,050	220,737	(9	)%	241,319
Total	448,235	(14	)%	520,115	463,092	(13	)%	532,216	445,241	(1	)%	450,644	449,471	(4	)%	469,323


(1)	Gross oil, natural gas, and NGL production in Egypt ~~for the third quarter and nine-month period of 2017 and 2016~~ were as follows:



	For the Quarter Ended September 30,		For the Nine Months Ended September 30,
	2020	2019	2020	2019
Oil (b/d)	159,941	187,589	171,778	196,643
Natural Gas (Mcf/d)	649,566	673,065	648,995	719,083
NGL (b/d)	1,175	1,529	1,534	1,810

For the Quarter Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Oil (b/d) 201,151
210,755
196,781
210,939
Natural Gas (Mcf/d) 818,350
826,548
813,880
828,950
NGL (b/d) 1,526
1,853
1,514
1,918


(2)	Includes net production volumes per day attributable to a noncontrolling interest in Egypt ~~for the third quarter and nine-month period of 2017 and 2016~~ of:


	For the Quarter Ended September 30,		For the Nine Months Ended September 30,		For the Quarter Ended September 30,		For the Nine Months Ended September 30,
	2017	2016	2017	2016	2020	2019	2020	2019
Oil (b/d)	31,275	36,839	32,573	34,964	26,459	28,052	25,891	28,839
Natural Gas (Mcf/d)	126,459	135,233	130,263	134,591	95,776	92,212	91,374	96,706
NGL (b/d)	305	374	306	373	204	297	271	326


(3)	The table shows production on a ~~barrel of oil equivalent~~boe basis ~~(boe)~~ in which natural gas is converted to an equivalent barrel of oil based on a 6:1 energy equivalent ratio. This ratio is not reflective of the price ratio between the two products.

(4)

Average sales volumes from the North Sea ~~were 57,207 boe/d and 65,171 boe/d~~ for the third quarter of ~~2017~~2020 and ~~2016,~~2019 were 57,099 boe/d and 49,349 boe/d, respectively, and ~~57,963~~61,771 boe/d and ~~67,222~~58,843 boe/d for the first nine months of ~~2017~~2020 and ~~2016,~~2019, respectively. Sales volumes may vary from production volumes as a result of the timing of liftings in the Beryl field.

Pricing

The following table presents pricing information by country:

~~The table below presents third-quarter and year-to-date 2017 and 2016 pricing and the relative increase or decrease from the prior period.~~


	For the Quarter Ended September 30,						For the Nine Months Ended September 30,						For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2017		Increase (Decrease)		2016		2017		Increase (Decrease)		2016		2020		Increase (Decrease)		2019		2020		Increase (Decrease)		2019
Average Oil Price - Per barrel
United States	$	45.68	9	%	$	41.83	$	46.54	24	%	$	37.53	$	39.60	(28	)%	$	54.70	$	36.45	(33	)%	$	54.16
Canada	42.23		5	%	40.17		45.25		26	%	36.04
North America	45.56		9	%	41.65		46.42		24	%	37.36
Egypt	51.23		10	%	46.54		50.78		21	%	41.97		41.51		(32	)%	61.10		38.79		(39	)%	63.96
North Sea	53.11		17	%	45.47		51.35		24	%	41.28		42.10		(33	)%	63.12		41.99		(36	)%	65.45
International	51.87		12	%	46.20		50.97		22	%	41.74
Total	49.34		11	%	44.35		49.15		23	%	39.86		40.88		(30	)%	58.60		38.53		(36	)%	60.00
Average Natural Gas Price - Per Mcf
United States	$	2.62	(2	)%	$	2.66	$	2.58	29	%	$	2.00	$	1.40	44	%	$	0.97	$	1.08	(8	)%	$	1.17
Canada	1.90		11	%	1.71		2.17		48	%	1.47
North America	2.47		7	%	2.31		2.45		36	%	1.80
Egypt	2.81		2	%	2.75		2.77		3	%	2.69		2.82		—	%	2.81		2.79		(1	)%	2.82
North Sea	5.27		27	%	4.14		5.27		28	%	4.12		2.58		(19	)%	3.20		2.46		(46	)%	4.56
International	3.10		5	%	2.96		3.02		4	%	2.89
Total	2.75		6	%	2.59		2.70		19	%	2.26		1.90		14	%	1.66		1.69		(8	)%	1.84
Average NGL Price - Per barrel
United States	$	15.77	64	%	$	9.59	$	14.75	71	%	$	8.65	$	13.06	(2	)%	$	13.26	$	10.20	(32	)%	$	14.93
Canada	15.80		159	%	6.10		16.39		148	%	6.61
North America	15.77		70	%	9.25		14.87		76	%	8.46
Egypt	36.47		30	%	28.12		35.98		31	%	27.54		25.88		(7	)%	27.76		26.24		(21	)%	33.17
North Sea	26.92		10	%	24.45		30.51		40	%	21.82		27.08		2	%	26.63		28.54		(16	)%	33.98
International	31.02		20	%	25.91		33.07		37	%	24.21
Total	16.38		64	%	9.97		15.53		70	%	9.11		13.51		(1	)%	13.71		10.83		(31	)%	15.68

Third-Quarter ~~2017~~2020 compared to Third-Quarter ~~2016~~2019

Crude Oil Revenues Crude oil revenues for the third quarter of ~~2017~~2020 totaled ~~$1.1 billion,~~$785 million, a ~~$47~~$422 million decrease from the comparative ~~2016~~2019 quarter. A 1230 percent decrease in average ~~daily production~~realized prices reduced third-quarter ~~2017~~2020 revenues by ~~$172~~$365 million compared to the prior-year quarter, while 118 percent ~~higher~~lower average ~~realized prices increased~~daily production decreased revenues by ~~$125~~$57 million. Crude oil accounted for 7775 percent of ~~Apache’s~~ oil and gas production revenues and 5347 percent of ~~its equivalent~~the Company’s worldwide production in the third quarter of ~~2017.~~2020. Crude oil prices realized in the third quarter of ~~2017~~2020 averaged ~~$49.34~~$40.88 per barrel, compared with ~~$44.35~~$58.60 per barrel in the comparative prior-year quarter.

~~Worldwide~~The Company’s worldwide oil production decreased ~~32.9~~17.3 Mb/d to ~~238.0~~211.1 Mb/d in the third quarter of ~~2017~~2020 from the comparative prior-year period, primarily ~~the result of the Canada divestitures and natural decline. Decreases were slightly offset by a 2 percent increase in the North Sea region,~~ a result of production decline in the ~~Callater field coming online in late May 2017.~~U.S.

Natural Gas Revenues Gas revenues for the third quarter of ~~2017~~2020 totaled ~~$238~~$164 million, a ~~$25~~$28 million ~~decrease~~increase from the comparative ~~2016~~2019 quarter. A 1514 percent ~~decrease~~increase in average ~~daily production reduced~~realized prices increased third-quarter 2020 revenues by ~~$42~~$19 million compared to the prior-year quarter, while 6 percent higher average ~~realized prices~~daily production increased revenues by ~~$17~~$9 million. Natural gas accounted for 1716 percent of Apache’s oil and gas production revenues and 35 percent of its equivalent production during the third quarter of ~~2017.~~2020.

~~Worldwide~~The Company’s worldwide natural gas production ~~decreased 164~~increased 51 MMcf/d to ~~940~~938 MMcf/d in the third quarter of ~~2017~~2020 from the comparative prior-year period, primarily ~~the~~a result of ~~the Canada divestitures and maintenance activity in the North Sea. Decreases were slightly offset by a 2 percent increase in the U.S., primarily on~~Permian Basin drilling activity ~~at Alpine High.~~and the timing of well completions in late 2019.

NGL Revenues NGL revenues for the third quarter of ~~2017~~2020 totaled ~~$81~~$97 million, a ~~$22~~$2 million increase from the comparative ~~2016~~2019 quarter. ~~An 18~~A 1 percent decrease in average ~~daily production~~realized prices reduced third-quarter ~~2017~~2020 revenues by ~~approximately $17~~$2 million compared to the prior-year quarter, while 645 percent higher average ~~realized prices~~daily production increased revenues by ~~$39~~$4 million. NGLs accounted for 69 percent of Apache’s oil and gas production revenues and 1218 percent of its equivalent production during the third quarter of ~~2017.~~2020.

~~Worldwide~~The Company’s worldwide production of NGLs ~~decreased 11.7~~increased 3.4 Mb/d to ~~53.5~~77.9 Mb/d in the third quarter of ~~2017~~2020 from the comparative prior-year period, primarily ~~the~~a result of the ~~Canada divestitures~~Alpine High development and ~~natural decline in all regions.~~cryogenic processing capacity commencing during the second half of 2019.

Year-to-Date ~~2017~~2020 compared to Year-to-Date ~~2016~~2019

Crude Oil Revenues Crude oil revenues for the first nine months of ~~2017~~2020 totaled ~~$3.3~~$2.3 billion, a ~~$235 million increase~~$1.6 billion decrease from the comparative ~~2016~~2019 period. A 1336 percent decrease in average realized prices reduced 2020 oil revenues by $1.4 billion compared to the prior-year period, while 8 percent lower average daily production reduced ~~2017 oil~~ revenues by ~~$478~~$183 million. Crude oil accounted for 78 percent of oil and gas production revenues and 49 percent of worldwide production for the first nine months of 2020, compared to 83 percent and 51 percent, respectively, for the 2019 period. Crude oil prices realized in the first nine months of 2020 averaged $38.53 per barrel, compared with $60.00 per barrel in the comparative prior-year period.

The Company’s worldwide oil production decreased 19.2 Mb/d to 220.8 Mb/d in the first nine months of 2020 from the comparative prior-year period, primarily a result of the sale of the Company’s Woodford-SCOOP and STACK plays and western Anadarko Basin assets and natural decline in the U.S., as well as lower gross production in Egypt due to natural decline.

Natural Gas Revenues Gas revenues for the first nine months of 2020 totaled $417 million, a $73 million decrease from the comparative 2019 period. An 8 percent decrease in average realized prices reduced 2020 natural gas revenues by $41 million compared to the prior-year period, while 237 percent ~~higher~~lower average ~~realized prices increased~~daily production decreased revenues by ~~$713~~$32 million. ~~Crude oil~~Natural gas accounted for 7814 percent of Apache’s oil and gas production revenues and 5333 percent of its equivalent production for the first nine months of ~~2017. Crude oil prices realized in the first nine months of 2017 averaged $49.15 per barrel,~~2020, compared ~~with $39.86 per barrel in the comparative prior-year period.~~

~~Worldwide production decreased 35.6 Mb/d~~ to ~~244.8 Mb/d in the first nine months of 2017 from the comparative prior-year period, primarily the result of the Canada divestitures~~10 percent and ~~natural decline in all regions.~~

~~Natural Gas Revenues~~ ~~Gas revenues~~35 percent, respectively, for the ~~first nine months of 2017 totaled $726 million, a $31 million increase from the comparative 2016~~2019 period. A 12 percent decrease in average daily production reduced 2017 natural gas revenues by $104 million compared to the prior-year period, while 19 percent higher average realized prices increased revenues by $135 million. Natural gas accounted for 17 percent of Apache’s oil and gas production revenues and 36 percent of its equivalent production during the first nine months of 2017.

~~Worldwide~~The Company’s worldwide natural gas production decreased ~~137~~71.6 MMcf/d to ~~987~~902.7 MMcf/d in the first nine months of ~~2017~~2020 from the comparative prior-year period, primarily ~~the~~a result of the ~~Canada divestitures, maintenance activities~~sale of the Company’s Woodford-SCOOP and STACK plays and western Anadarko Basin assets, as well as lower gross production in ~~the North Sea, and~~Egypt due to natural ~~decline in all regions.~~decline.

NGL RevenuesNGL revenues for the first nine months of ~~2017~~2020 totaled ~~$229~~$232 million, a ~~$69~~$54 million ~~increase~~decrease from the comparative ~~2016~~2019 period. A 1731 percent decrease in average ~~production reduced 2017~~realized prices decreased 2020 NGL revenues by ~~$45~~$88 million compared to the prior-year period, while 7017 percent higher average ~~realized prices~~daily production increased revenues by ~~$114~~$34 million. NGLs accounted for 5nearly 8 percent of ~~Apache’s~~ oil and gas production revenues and 1118 percent of its equivalent production for the first nine months of ~~2017.~~2020, compared to 7 percent and 14 percent, respectively, for the 2019 period.

~~Worldwide~~The Company’s worldwide production of NGLs ~~decreased 10.6~~increased 11.2 Mb/d to ~~53.8~~78.2 Mb/d in the first nine months of ~~2017~~2020 from the comparative prior-year period, primarily ~~the~~a result of the ~~Canada divestitures~~Alpine High development partially offset by the sale of the Company’s Woodford-SCOOP and STACK plays and western Anadarko Basin assets in the U.S.

Altus Midstream Revenues

Altus Midstream services revenues generated through Altus’ fee-based contractual arrangements with Apache totaled $39 million and $34 million during the third quarters of 2020 and 2019, respectively, and $111 million and $92 million during the first nine months of 2020 and 2019, respectively. These affiliated revenues are eliminated upon consolidation. The increases compared to the prior-year periods were primarily driven by higher throughput of rich natural ~~decline~~gas volumes at Alpine High due to increased capacity at Altus’ Diamond cryogenic processing facilities.

Purchased Oil and Gas Sales

Purchased oil and gas sales for the third quarter and first nine months of 2020 totaled $74 million and $237 million, respectively, a $44 million and $165 million increase from the prior-year periods, respectively, and were primarily offset by associated costs totaling $75 million and $207 million in ~~all regions.~~the third quarter and first nine months of 2020, respectively.

Operating Expenses

The table below presents a comparison of Apache’s expenses on an absolute dollar basis and a boe basis. Apache’s discussion may reference expenses on a boe basis, on an absolute dollar basis or both, depending on their relevance. Operatingthe Company’s operating expenses. All operating expenses include costs attributable to a noncontrolling interest in ~~Egypt.~~

Egypt and Altus.


	For the Quarter Ended September 30,								For the Nine Months Ended September 30,								For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016		2017		2016		2017		2016		2020		2019		2020		2019
	(In millions)				(Per boe)				(In millions)				(Per boe)				(In millions)
Lease operating expenses⁽¹⁾	$	358	$	382	$	8.74	$	7.94	$	1,066	$	1,119	$	8.42	$	7.68	$	259	$	350	$	858	$	1,104
Gathering and transportation⁽¹⁾	39		51		0.91		1.08		144		155		1.13		1.06
Gathering, processing, and transmission																	63		66		206		230
Purchased oil and gas costs																	75		23		207		60
Taxes other than income	46		9		1.12		0.19		117		85		0.93		0.58		34		44		90		141
Exploration	231		161		5.60		3.36		431		347		3.41		2.38		58		56		187		220
General and administrative	98		102		2.39		2.13		307		298		2.43		2.04		52		98		214		323
Transaction, reorganization, and separation	20		12		0.48		0.25		14		36		0.11		0.24		7		7		44		17
Depreciation, depletion, and amortization:
Oil and gas property and equipment⁽¹⁾	524		610		12.76		12.67		1,598		1,875		12.63		12.87
Oil and gas property and equipment																	366		667		1,284		1,836
GPT assets																	19		28		58		76
Other assets	35		38		0.83		0.79		109		120		0.86		0.82		13		16		40		47
Asset retirement obligation accretion	30		40		0.75		0.83		103		116		0.82		0.79		27		27		81		80
Impairments	—		836		—		17.47		8		1,009		0.06		6.92		—		9		4,492		249
Financing costs, net	101		102		2.45		2.13		300		311		2.38		2.13		99		95		168		365

~~(1) For expenses impacted by the timing of 2017 liftings in the North Sea, per-boe calculations are based on sales volumes rather than production volumes.~~

Lease Operating Expenses (LOE) LOE decreased ~~$24~~$91 million, or 626 percent, and $246 million, or 22 percent, for the third quarter ~~of 2017,~~ and ~~decreased $53 million, or 5 percent for the~~ first nine months of ~~2017,~~2020, respectively, on an absolute dollar basis relative to the comparable periods of ~~2016.~~2019. On a per-unit basis, LOE ~~increased 10~~decreased 25 percent ~~to $8.74 per boe~~and 19 percent for the third quarter ~~of 2017,~~ and ~~10 percent to $8.42 per boe for the~~ first nine months of ~~2017, as~~2020, respectively, compared to the prior-year periods. The ~~per-barrel increase~~decrease in absolute dollar costs was driven by reduced activity, labor costs, and fuel costs associated with lower commodity prices, the Company’s organizational redesign, and other cost cutting efforts. In addition, absolute dollar costs are lower in the current year as a result of the divestitures of the Company’s Woodford-SCOOP and STACK plays and western Anadarko Basin assets in the U.S. in the third quarter of 2019.

Gathering, Processing, and Transmission (GPT) GPT expenses include processing and transmission costs paid to third-party carriers and to Altus for ~~both comparative periods~~Apache’s upstream natural gas production associated with its Alpine High play. GPT expenses also include midstream operating costs incurred by Altus. The following table presents a summary of these expenses:



	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
	(In millions)
Third-party processing and transmission costs	$	54		$	53		$	177		$	187
Midstream service affiliate costs	38			34			110			90
Upstream processing and transmission costs	92			87			287			277
Midstream operating expenses	9			13			29			43
Intersegment eliminations	(38		)	(34		)	(110		)	(90		)
Total Gathering, processing, and transmission	$	63		$	66		$	206		$	230

GPT costs decreased $3 million and $24 million from the third quarter and first nine months of 2019, respectively. Third-party processing and transmission costs increased $1 million compared to the third quarter of 2019 and decreased $10 million compared to the first nine months of 2019. The year-to-date decrease is primarily driven by a decrease in contracted pricing and the Company’s sale of non-core assets in Oklahoma and Texas. Midstream operating expenses decreased $4 million and $14 million from the third quarter and first nine months of 2019, respectively, primarily driven by increased operational efficiency as a result of ~~a decline~~transitioning from mechanical refrigeration units to Altus’ centralized Diamond cryogenic complex starting in ~~production~~the second

quarter of 2019. The transition resulted in ~~all regions~~decreases in employee-related costs, contract labor, lower supplies expenses, and ~~generally rising~~lower equipment rentals.

Midstream service affiliate costs ~~commensurate with higher commodity prices.~~

~~Gathering and Transportation~~ ~~Gathering and transportation costs totaled $39~~increased $4 million and ~~$144~~$20 million from the third quarter and first nine months of 2019, primarily driven by higher throughput of rich natural gas volumes at Alpine High.

Purchased Oil and Gas Costs Purchased oil and gas costs for the third quarter and first nine months of 2020 totaled $75 million and $207 million, respectively, an increase of $52 million and $147 million, respectively, from the prior-year periods, and were offset by associated sales totaling $74 million and $237 million in the third quarter and first nine months of 2017, respectively, a decrease of $12 million from the third quarter of 2016 and a decrease of $11 million from the first nine months of 2016. The decrease was directly related to the Canadian divestitures.2020, respectively.

Taxes other than Income Taxes other than income ~~totaled $46~~decreased $10 million and ~~$117 million for the third quarter and first nine months of 2017, respectively, an increase of $37 million and $32~~$51 million from the third quarter and first nine months of ~~2016, respectively. Third-quarter 2017 expense consists~~2019, respectively, primarily the result of a decrease in severance ~~and ad valorem~~ taxes ~~which combined increased $4 million~~ on ~~higher~~lower commodity prices ~~during~~and the ~~third quarter compared to~~divestiture of the ~~prior year quarter. For the first nine months of 2017, severance tax expense~~Company’s non-core assets in Oklahoma and ad valorem tax expense increased $12 million and $5 million, respectively, compared to the first nine months of 2016. In addition, in the third quarter and first nine months of 2016, Apache recognized a $33 million benefit related to the U.K. Petroleum Revenue Tax (PRT). The U.K. PRT rate, historically assessed on qualifying fields in the U.K. North Sea, was reduced to zero during 2016.Texas.

Exploration ~~Expense~~ Expenses Exploration ~~expense includes~~expenses include unproved leasehold impairments, exploration dry hole expense, geological and geophysical expenses, and the costs of maintaining and retaining unproved leasehold properties. The following table presents a summary of exploration expenses:



	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(In millions)
Unproved leasehold impairments	$	36	$	12	$	86	$	74
Dry hole expense	5		5		52		33
Geological and geophysical expense	7		18		14		54
Exploration overhead and other	10		21		35		59
Total Exploration	$	58	$	56	$	187	$	220

Exploration expenses in the third quarter and first nine months of ~~2017~~2020 increased ~~$70~~$2 million and ~~$84~~decreased $33 million, respectively, compared to the prior-year periods.

~~The following table presents a summary of exploration expense:~~

For the Quarter Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(In millions)
Unproved leasehold impairments $ 160
$ 114
$ 214
$ 222
Dry hole expense 38
7
136
38
Geological and geophysical expense 12
21
24
30
Exploration overhead and other 21
19
57
57
$ 231
$ 161
$ 431
$ 347

~~Unproved leasehold impairments in the third quarter of 2017 increased $46 million compared to the third quarter of 2016, primarily relate to legacy acreage~~ Geological and ~~a reallocation of capital budgets in the U.S. For the first nine months of 2017, unproved leasehold impairments~~geophysical expense decreased ~~$8 million compared to the prior-year period, primarily a result of stabilizing commodity and leasehold prices. Dry hole expense increased $31~~$11 million and ~~$98 million for the third quarter and first nine months of 2017, respectively, from the comparative prior-year periods primarily related to unsuccessful international offshore exploration.~~

~~General and Administrative (G&A) Expenses~~ G&A expense for the third quarter of 2017 was $4 million lower than the third quarter of 2016. For the first nine months of 2017, G&A expense increased $9 million compared to the prior-year period, primarily related to non-cash stock-based compensation expense and other corporate costs.

~~Transaction, Reorganization, and Separation (TRS) Costs~~ The Company recorded TRS expense of $20 million and $14 million for the third quarter and first nine months of 2017, respectively, related to asset divestitures in the U.S. and Canada and employee separation. The Company recorded TRS expense of $12 million and $36$40 million in the third quarter and first nine months of ~~2016,~~2020, respectively, and exploration overhead and other decreased $11 million and $24 million in the third quarter and first nine months of 2020, respectively. The 2019 periods reflect large-scale seismic surveys in Egypt and higher delay rentals in the U.S. Dry hole expense remained flat compared to the third quarter of 2019 and increased $19 million in the first nine months of 2020 compared to the prior-year period. The year-to-date increase is primarily related to ~~various asset~~onshore exploration wells in the U.S. and Egypt and a Beryl exploration well in the North Sea. Unproved leasehold impairments increased $24 million and $12 million in the third quarter and first nine months of 2020, respectively. Higher leasehold impairments in the 2020 period were associated with U.S. leasehold acreage.

General and Administrative (G&A) Expenses G&A expense for the third quarter and first nine months of 2020 decreased $46 million and $109 million, respectively, compared to the prior-year periods, primarily related to cost-cutting measures associated with the Company’s organizational redesign efforts, as well as lower cash-based stock compensation expense resulting from a decrease in the Company’s stock price and expected payout of performance awards.

Transaction, Reorganization, and Separation (TRS) Costs TRS costs for the third quarter and first nine months of 2020 totaled $7 million and $44 million, respectively. TRS costs remained flat compared to the third quarter of 2019 and increased $27 million in the first nine months of 2020 compared to the prior-year period. The year-to-date increase was related to severance costs associated with the Company’s reorganization efforts initiated in the second half of 2019.

In recent years, the Company has streamlined its portfolio through strategic divestitures ~~company reorganization,~~ and ~~employee separation.~~centralized certain operational activities in an effort to capture greater efficiencies and cost savings through shared services. During the second half of 2019, management initiated a comprehensive redesign of Apache’s organizational structure and operations that it believes will better position the Company to be competitive for the long-term and further reduce recurring costs. Apache has achieved an estimated cost savings of more than $400 million annually. Reorganization efforts were substantially completed during the first half of 2020.

Depreciation, Depletion, and Amortization (DD&A) Oil and gas property DD&A expense ~~of $524~~decreased $301 million ~~in the third quarter of 2017 decreased $86~~and $552 million compared to the third quarter ~~of 2016. For the~~and first nine months of ~~2017, oil and gas property DD&A expense decreased $277 million compared to the prior-year period.~~2019, respectively. The Company’s oil and gas property DD&A rate ~~increased $0.09~~decreased $7.25 per boe and ~~decreased $0.24~~$3.93 per boe in the third quarter and first nine months of ~~2017,~~2020, respectively, ~~compared to~~from the ~~comparable~~ prior-year periods. The ~~primary factor driving~~decreases are primarily the result of lower ~~absolute dollar expense was a decrease in~~ production volumes and lower asset property balances associated with proved property impairments recorded in the first quarter of 2020 and fourth quarter of 2019. GPT depreciation decreased $9 million and $18 million from the ~~comparative prior-year periods.~~third quarter and first nine months of 2019, respectively, primarily the result of impairments recorded to the carrying value of the Altus GPT facilities in the fourth quarter of 2019.

ImpairmentsThe Company ~~did not record any~~recorded no asset impairments in connection with fair value assessments in the third quarter of ~~2017. During~~2020 and $4.5 billion in the first nine months of 2020. The Company recorded a $20 million proved property impairment in Egypt in the second quarter of 2020. In the first quarter of ~~2017,~~2020, the Company recorded impairments of $4.3 billion for oil and gas proved properties in the U.S., Egypt, and North Sea, $68 million for GPT facilities in Egypt, $87 million for goodwill in Egypt, and $18 million for inventory and other miscellaneous assets, including charges for the early termination of drilling rig leases. The Company recorded asset impairments in connection with fair value assessments totaling ~~$8 million for a U.K. PRT decommissioning asset that is no longer expected to be realizable from future abandonment activities in the North Sea. The Company recorded $836~~$9 million and ~~$1.0 billion of impairments in connection with fair value assessments~~$249 million in the third quarter and first nine months of ~~2016,~~2019, respectively. The Company recorded a $9 million impairment in the third quarter of 2019 on certain Altus Midstream held-for-sale assets, as well as a $240 million impairment during the second quarter of 2019 on assets held-for-sale in the western Anadarko Basin in Oklahoma and Texas. For more information regarding asset impairments, please refer to “Fair Value ~~Measurements”~~Measurements,” “Oil and Gas Property,” and “Gathering, Processing, and Transmission Facilities” within Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Part 1,I, Item 1 of this Quarterly Report on Form 10-Q.

Financing Costs, Net Financing costs incurred during the ~~period~~periods comprised the following:


	For the Quarter Ended September 30,						For the Nine Months Ended September 30,						For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016			2020			2019			2020			2019
	(In millions)												(In millions)
Interest expense	$	113		$	116		$	344		$	348		$	113		$	107		$	327		$	323
Amortization of deferred loan costs	3			2			7			5
Amortization of debt issuance costs													2			2			6			5
Capitalized interest	(12		)	(13		)	(39		)	(36		)	(3		)	(9		)	(9		)	(26		)
Loss on extinguishment of debt	—			—			1			—
Loss (gain) on extinguishment of debt													(12		)	—			(152		)	75
Interest income	(3		)	(3		)	(13		)	(6		)	(1		)	(5		)	(4		)	(12		)
Financing costs, net	$	101		$	102		$	300		$	311		$	99		$	95		$	168		$	365

Net financing costs ~~decreased $1~~increased $4 million and ~~$11~~decreased $197 million incompared with the third quarter and first nine months of ~~2017,~~2019, respectively. The ~~$11~~year-to-date decrease is primarily a result of a $152 million ~~decrease~~gain on extinguishment of debt in the first nine months of ~~2017 was primarily~~2020, compared to a $75 million loss on extinguishment of debt in the first nine months of 2019. In addition, capitalized interest decreased in the current year as a result of ~~higher capitalized interest~~lower drilling activity and ~~interest income.~~construction activities at Alpine High.

Provision for Income Taxes The Company estimates its annual effective income tax rate ~~for continuing operations~~ in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments of the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

In August 2017, Apache completed the sale of ACL. For more information regarding this transaction, please refer to Note 2—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q. As a result of this transaction, Apache recorded a deferred tax asset associated with its realizable capital loss on the sale of ACL, and a decrease in the Company’s deferred tax liability associated with its investment in foreign subsidiaries. InDuring the third ~~and second~~ quarters of ~~2017, the Company recorded a $2 million deferred income tax expense~~2020 and ~~a $674 million deferred income tax benefit, respectively, in connection with these transactions.~~

Apache recorded a full valuation allowance against its U.S. net deferred tax assets. Apache will continue to maintain a full valuation allowance on its U.S. net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance.

Capital and Operational Outlook

The Company continues to prudently manage its capital program against a volatile price environment and the prolonged effects of the COVID-19 pandemic. In response to the current crises, Apache’s immediate course of action was to actively reduce its cost structure, protect its balance sheet, and manage operations to preserve cash flow. Under a reduced capital budget for 2020, these actions include:

continuing to advance exploratory and appraisal programs in Suriname under the terms of the Company’s joint venture with Total S.A.;

allocating a portion of the reduced capital spending to Egypt and the North Sea to maintain their capacity to generate cash flow and generally higher returns in lower price environments; and

eliminating virtually all U.S. drilling and completion activity by May 2020 until service costs and commodity prices provide for competitive returns. As a result of compelling service cost reductions in the Permian Basin, Apache has begun a limited program beginning in November to complete its backlog of drilled but uncompleted wells.

Apache’s diversified global portfolio provides the ability to quickly optimize capital allocation as market conditions change. The current crisis, however, is still evolving and may become more severe and complex. As a result, the COVID-19 pandemic may still materially and adversely affect Apache’s results in a manner that is either not currently known or that the Company does not currently consider to be a significant risk to its business. For additional information about the business risks relating to the COVID-19 pandemic and related governmental actions, please refer to Part II, Item 1A—Risk Factors of this Current Report on Form 10-Q.

Capital Resources and Liquidity

Operating cash flows are the Company’s primary source of liquidity. The Company may also elect to use available cash on hand, available committed borrowing capacity, access to both debt and equity capital markets, or proceeds from the sale of nonstrategic assets for all other liquidity and capital resource needs.

Apache’s operating cash flows, both in the ~~short term~~short-term and the ~~long term,~~long-term, are impacted by highly volatile oil and natural gas prices, as well as costs and sales volumes. Significant changes in commodity prices impact Apache’s revenues, earnings, and cash flows. These changes potentially impact Apache’s liquidity if costs do not trend with changes in commodity prices. Historically, costs have trended with commodity prices, albeit ~~with~~on a lag. Sales volumes also impact cash flows; however, they have a less volatile impact in the short term.

Apache’s long-term operating cash flows are dependent on reserve replacement and the level of costs required for ongoing operations. Cash investments are required to fund activity necessary to offset the inherent declines in production and proved crude oil and natural gas reserves. Future success in maintaining and growing reserves and production is highly dependent on the success of Apache’s drilling program and its ability to add reserves economically. Changes in commodity prices also impact estimated quantities of proved reserves. In the first nine months of ~~2017,~~2020, Apache recognized ~~positive~~negative reserve revisions of approximately 27 percent of its year-end ~~2016~~2019 estimated proved reserves as a result of ~~higher~~lower prices. If prices for the remainder of 2020 were to approximate commodity future prices as of September 30, 2020, Apache would likely report additional negative revisions when calculated on a basis consistent with previous reserve disclosures. However, as a result of the substantial uncertainty surrounding economic conditions, such as worldwide supply and demand, future service costs, and other prolonged effects of the COVID-19 pandemic, the Company is unable to estimate any future revisions at this time.

Combined with proactive measures to adjust its capital budget, decrease its dividend, protect further downside price risk through entering into new hedge positions, and reduce its operating cost structure in the current volatile commodity price environment, Apache believes the liquidity and capital resource alternatives available to the Company ~~combined with proactive measures to adjust its capital budget to reflect volatile commodity prices and anticipated operating cash flows,~~ will be adequate to fund ~~short-term~~its operations and ~~long-term operations, including~~provide flexibility until commodity prices and industry conditions improve. This includes supporting Apache’s capital ~~spending~~development program, repayment of debt maturities, payment of dividends, and any amount that may ultimately be paid in connection with commitments and contingencies.

The Company may also elect to utilize available cash on hand, committed borrowing capacity, access to both debt and equity capital markets, or proceeds from the sale of nonstrategic assets for all other liquidity and capital resource needs.

For additional information, please see Part I, Items 1 and 2, “Business and Properties,” and Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2016.~~2019.

Sources and Uses of Cash

The following table presents the sources and uses of the Company’s cash and cash equivalents ~~and restricted cash~~ for the periods presented.


	For the Nine Months Ended September 30,					For the Nine Months Ended September 30,
	2017		2016			2020			2019
	(In millions)					(In millions)
Sources of Cash, Cash Equivalents, and Restricted Cash:
Sources of Cash and Cash Equivalents:
Net cash provided by operating activities	$	1,760	$	1,634		$	890		$	2,089
Proceeds from Apache credit facility, net						87			—
Proceeds from Altus credit facility, net						184			235
Proceeds from sale of oil and gas properties	1,404		74			132			590
Fixed-rate debt borrowings						1,238			989
Redeemable noncontrolling interest - Altus Preferred Unit limited partners						—			611
						2,531			4,514
Uses of Cash and Cash Equivalents:
Additions to oil and gas property⁽¹⁾						$	1,075		$	2,015
Additions to Altus gathering, processing, and transmission facilities⁽¹⁾						27			294
Leasehold and property acquisitions						3			39
Contributions to Altus equity method interests						286			338
Acquisition of Altus equity method interests						—			670
Payments on fixed-rate debt						980			1,150
Dividends paid						113			282
Distributions to noncontrolling interest - Egypt						61			235
Distributions to Altus Preferred Unit limited partners						11			—
Other	—		38			60			42
	3,164		1,746			2,616			5,065
Uses of Cash and Cash Equivalents:
Capital expenditures⁽¹⁾	$	1,855	$	1,314
Leasehold and property acquisitions	142		169
Payments on fixed-rate debt	70		1
Dividends paid	285		284
Distributions to noncontrolling interest	212		215
Other	35		—
	2,599		1,983
Increase (decrease) in cash, cash equivalents, and restricted cash	$	565	$	(237	)
Decrease in cash and cash equivalents						$	(85	)	$	(551	)


(1)	The table presents capital expenditures on a cash basis; therefore, the amounts may differ from those discussed elsewhere in this ~~document,~~Quarterly Report on Form 10-Q, which include accruals.

Sources of Cash and Cash Equivalents

Net Cash Provided by Operating Activities Operating cash flows are Apache’s primary source of capital and liquidity and are impacted, both in the short term and the long term, by volatile oil and natural gas prices. The factors that determine operating cash ~~flow~~flows are largely the same as those that affect net earnings, with the exception of non-cash expenses such as DD&A, exploratory dry hole expense, asset impairments, asset retirement obligation (ARO) accretion, and deferred income tax ~~expense, which affect earnings but do not affect cash flows.~~expense.

Net cash provided by operating activities for the first nine months of ~~2017~~2020 totaled ~~$1.8~~$890 million, a decrease of $1.2 billion ~~an increase of $126 million~~ from the first nine months of ~~2016.~~2019. The ~~increase~~decrease primarily reflects ~~higher~~lower commodity prices compared to the prior-year period.

For a detailed discussion of commodity prices, production, and expenses, refer to the ~~“Results~~“Results of ~~Operations”~~Operations” of this Item 2. For additional detail on the changes in operating assets and liabilities and the non-cash expenses that do not impact net cash provided by operating activities, please see the ~~statement~~Statement of ~~consolidated cash flows~~Consolidated Cash Flows in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q.

Proceeds from Apache Credit Facility, Net As of September 30, 2020, Apache had outstanding borrowings of $87 million under its credit facility, which is classified as long-term debt. The Company had no borrowings under the revolver as of September 30, 2019.

Proceeds from Altus Credit Facility, Net The construction of Altus’ gathering and processing assets and the exercise of its options for equity interests in four Permian Basin long-haul pipeline entities required capital expenditures in excess of Altus’ cash on hand and operational cash flows. During the first nine months of 2020 and 2019, Altus Midstream LP borrowed $184 million and $235 million, respectively, under its revolving credit facility. With the Shin Oak NGL Pipeline, Gulf Coast Express Pipeline Project, and EPIC crude oil pipeline already in service, the Company anticipates Altus Midstream LP’s existing capital resources will be sufficient to fund Altus Midstream LP’s continuing obligations, primarily related to the remaining construction of the Permian Highway Pipeline.

Asset Divestitures The Company recorded proceeds from non-core asset divestitures totaling ~~$1.4 billion~~$132 million and ~~$74~~$590 million in the first nine months of ~~2017~~2020 and ~~2016,~~2019, respectively. For more information regarding the Company’s acquisitions and divestitures, please see Note 2—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Fixed-Rate Debt Borrowings 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 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 (2030 notes) and $400 million in aggregate principal amount of 5.350% notes due July 1, 2049 (2049 notes). The notes are redeemable at any time, in whole or in part, at Apache’s option, subject to a make-whole premium. The aggregate net proceeds of $989 million from the sale of the notes were used to purchase certain outstanding notes in cash tender offers and for general corporate purposes.

Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners On June 12, 2019, Altus Midstream LP, an indirectly controlled subsidiary of Apache, issued and sold Series A Cumulative Redeemable Preferred Units for an aggregate issue price of $625 million in a private offering. Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. For more information, please refer to Note 12—Redeemable Noncontrolling Interest - Altus in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

~~Capital Expenditures~~ ~~Worldwide exploration~~Uses of Cash and ~~development (E&D) cash expenditures for~~Cash Equivalents

Additions to Oil & Gas Property During the first nine months of ~~2017~~2020, exploration and development cash expenditures totaled ~~$1.5~~$1.1 billion, compared to ~~$1.3~~$2.0 billion for the first nine months of ~~2016.~~2019, a reflection of the Company’s reduced capital program. A majority of the expenditures shifted from Apache’s Permian Basin assets to its Egypt assets over the first half of 2020 as the Company eliminated nearly all drilling and completion activities in the U.S. by May 2020. Apache operated an average of 368 drilling rigs during the third quarter of ~~2017.~~2020 compared to 20 drilling rigs in the prior-year quarter.

~~Apache also completed leasehold and property acquisitions totaling $142~~Additions to Altus GPT Facilities Apache’s cash expenditures in GPT facilities totaled $27 million and ~~$169~~$294 million in the first nine months of 2020 and 2019, respectively, nearly all comprising midstream infrastructure expenditures incurred by Altus, which were substantially completed as of December 31, 2019. Altus management believes its existing gathering, processing, and transmission infrastructure capacity is capable of fulfilling its midstream contracts to service Apache’s production from Alpine High and any potential third-party customers. As such, Altus expects capital requirements for its existing infrastructure assets for the remainder of 2020 to be primarily related to maintenance of these assets.

Contributions to Altus Equity Method Interests Altus made contributions of $286 million and $338 million in the first nine months of 2020 and 2019, respectively, for equity interests in four Permian Basin long-haul pipeline entities. For more information regarding the Company’s equity method interests, please see Note 6—Equity Method Interests in the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Acquisition of Altus Equity Method Interests Altus made no acquisitions of equity method interests during the first nine months of 2020 and $670 million during the first nine months of ~~2017 and 2016, respectively.~~2019. For more information regarding the Company’s equity method interests, please see Note 6—Equity Method Interests in the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~Apache’s investment in gas gathering, transmission, and processing (GTP) facilities totaled $384~~

Payments on Fixed-Rate Debt 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 ~~$33~~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 the quarter ended September 30, 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $89 million for an aggregate purchase price of $79 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $11 million. These repurchases resulted in a $10 million net gain on extinguishment of debt, which is included in “Financing costs, net” in the Company’s statement of consolidated operations. The net gain includes an acceleration of related discount and debt issuance costs.

During the quarter ended June 30, 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $410 million for an aggregate purchase price of $267 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $147 million. These repurchases resulted in a $140 million net gain on extinguishment of debt, which is included in “Financing costs, net” in the Company’s statement of consolidated operations. The net gain includes an acceleration of related discount and debt issuance costs.

The open-market repurchases during the ~~first nine months~~quarters ended June 30, 2020 and September 30, 2020 were financed by borrowings under the Company’s revolving credit facility.

On June 21, 2019, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $932 million aggregate principal amount of ~~2017~~notes for approximately $1.0 billion, which included principal, the net premium to par, and ~~2016, respectively. Expenditures~~an early tender premium totaling $28 million, as well as accrued and unpaid interest of $14 million. The Company recorded a net loss of $75 million on extinguishment of debt, including $7 million of unamortized debt issuance costs and discounts, in ~~2017 primarily comprise investments in infrastructure for~~connection with the ~~Alpine High play.~~note purchases.

Dividends For each of the nine-month periods ended September 30, ~~2017~~2020 and ~~2016,~~2019, the Company paid ~~$285~~$113 million and ~~$284~~$282 million, respectively, in dividends on its common stock. In the first quarter of 2020, Apache’s Board of Directors approved a reduction in the Company’s quarterly dividend per share from $0.25 to $0.025, effective for all dividends payable after March 12, 2020.

Egypt Noncontrolling Interest Sinopec International Petroleum Exploration and Production Corporation (Sinopec) holds a one-third minority participation interest in Apache’s oil and gas business in Egypt. Apache made cash distributions totaling $61 million and $235 million to Sinopec in the first nine months of 2020 and 2019, respectively.

Distributions to Altus Preferred Units limited partners Altus Midstream LP made cash distributions totaling $11 million to Altus Preferred Unit limited partners in the first nine months of 2020. No cash distributions were made during the first nine months of 2019.

Liquidity

The following table presents a summary of the Company’s key financial indicators at the dates presented:

September 30, 2017 December 31, 2016
(In millions)
Cash and cash equivalents $ 1,846
$ 1,377
Total debt 8,483
8,544
Equity 8,377
7,679
Available committed borrowing capacity 3,500
3,500



	September 30, 2020			December 31, 2019
	(In millions)
Cash and cash equivalents	$	162		$	247
Total debt - Apache	8,354			8,170
Total debt - Altus	580			396
Equity (deficit)	(637		)	4,465
Available committed borrowing capacity - Apache	3,090			4,000
Available committed borrowing capacity - Altus	220			404

Cash and ~~cash equivalents~~Cash Equivalents The Company had ~~$1.8 billion~~$162 million in cash and cash equivalents as of September 30, ~~2017, compared to $1.4 billion at December 31, 2016. At September 30, 2017,~~2020, of which approximately ~~$1.3 billion of the cash~~$2 million was held by ~~foreign subsidiaries. The cash held by foreign subsidiaries should not be subject to additional U.S. income taxes if repatriated.~~Altus. The majority of the cash is invested in highly liquid, investment grade ~~securities~~instruments with maturities of three months or less at the time of purchase. ~~The Company also had $96 million of restricted cash at September 30, 2017, expected to be released in the fourth quarter of 2017.~~

Debt As of September 30, ~~2017,~~2020, outstanding debt, which consisted of notes, debentures, credit facility borrowings, and ~~debentures,~~finance lease obligations, totaled ~~$8.5~~$8.9 billion. ~~Current debt as~~As of September 30, ~~2017,~~2020, current debt included ~~$150~~$183 million, net of ~~7.0%~~discount, of 3.625% senior notes due February 1, ~~2018 and $400 million of 6.9% senior notes due September 15, 2018.~~

~~In January 2017, the Company purchased and canceled an additional $69 million aggregate principal amount of senior notes for $71 million in cash, including accrued interest~~2021 and $1 million of ~~premium, which completed~~finance lease obligations. On November 3, 2020, the ~~open market repurchase program. These repurchases resulted in~~Company redeemed the 3.625% senior notes due February 1, 2021 at a ~~$1 million net loss on extinguishment~~redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date. Apache intends to reduce debt ~~which is included in “Financing costs, net” in the Company’s consolidated statement of operations. The net loss includes an acceleration of related discount and deferred financing costs.~~

outstanding under its indentures from time to time.

~~Available committed borrowing capacity~~ ~~In June 2015,~~March 2018, the Company entered into a ~~five-year~~ revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of September 30, 2020. The facility is for general corporate purposes, and available committed borrowing capacity supports Apache’s commercial paper program. The facility has no collateral requirements, is not subject to borrowing base redetermination, and has no drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. As of September 30, 2020, there were $87 million of borrowings and aggregate £637 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 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.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in ~~June 2020, subject~~November 2023 (subject to ~~Apache’s~~Altus Midstream LP’s two, one-year extension ~~options.~~options). The agreement for this facility, as amended, provides ~~for~~ aggregate commitments from a syndicate of ~~$3.5 billion (including~~banks of $800 million. All aggregate commitments include a ~~$750 million~~ letter of credit ~~subfacility)~~subfacility of up to $100 million and ~~rights~~a swingline loan subfacility of up to $100 million. Altus Midstream LP may increase commitments up to ~~$4.5 billion. Proceeds from~~an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2020 and December 31, 2019, there were $580 million and $396 million, respectively, of borrowings ~~may be used for general corporate purposes. Apache’s available borrowing capacity~~outstanding under this facility. As of September 30, 2020 and December 31, 2019, there were no letters of credit outstanding under this facility. The Altus Midstream LP credit facility ~~supports~~is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.

The Company was in compliance with the terms of its ~~commercial paper program, currently~~credit facilities as of September 30, 2020.

The Company’s $3.5 ~~billion. The~~billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 ~~days at~~days. As a result of downgrades in Apache’s credit ratings during 2020, the Company does not expect that its commercial paper program will be cost competitive ~~interest rates.~~with its other financing alternatives and does not anticipate using it under such circumstances. As of September 30, ~~2017,~~2020 and December 31, 2019, the Company had no commercial paper ~~or borrowings under committed bank facilities or uncommitted bank lines~~ outstanding.

Off-Balance Sheet Arrangements Apache enters into customary agreements in the oil and gas industry for drilling rig commitments, firm transportation agreements, and other obligations as described in “Contractual Obligations” in Part II, Item 7 of the Form 10-K for the year ended December 31, 2019. There have been no material changes to the contractual obligations described therein.

Potential Asset Retirement Obligations

In ~~February 2016,~~2013, Apache sold its Gulf of Mexico Shelf operations and properties (Transferred Assets) to Fieldwood Energy LLC (Fieldwood). Under the ~~Company entered into a letter~~terms of ~~credit facility providing £900 million in commitments~~the purchase agreement (Agreement), Apache received cash consideration of $3.75 billion and ~~rights to increase commitments to £1.075 billion. This facility matures in February 2020 and is available for the Company’s letter~~Fieldwood assumed $1.5 billion of ~~credit needs, particularly those which may arise in~~discounted asset abandonment liabilities. In respect of such abandonment ~~obligations assumed in various North Sea acquisitions. The facility also is available for loans to cash collateralize letters of credit or obligations to provide~~liabilities, Fieldwood posted letters of credit in ~~each case,~~favor of Apache (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 Apache 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 Apache agreed, inter alia, to accept bonds in exchange for certain of the Letters of Credit. Currently, Apache 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 filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Apache has been engaged with Fieldwood and other interested parties to discuss Fieldwood’s plan of reorganization. However, as of the date of this report, Apache does not know if, or to what extent, Fieldwood will be able to continue to perform its AROs with respect to the Transferred Assets. If Fieldwood fails to perform any of its AROs with respect to the Transferred Assets, then Apache’s remedy would be a claim for damages against Fieldwood for breach of its contractual obligations under the Agreement.

If Fieldwood fails to perform any of its AROs on the Transferred Assets, then Apache would expect the relevant governmental authorities to require Apache to perform, and hold Apache financially responsible for, such AROs to the extent ~~letters~~not performed by Fieldwood. Pending resolution of ~~credit are unavailable~~any claim by Apache for breach of the Agreement, Apache may be forced to use available cash to cover the costs it incurs for performing such AROs. While Apache anticipates that all, or a portion, of such costs would be reimbursable to Apache under the ~~facility. As~~remaining Letters of ~~September 30, 2017, three letters~~Credit, the Bonds and Trust A, it is possible that such decommissioning security may not be sufficient to cover all of ~~credit aggregating approximately £147.5 million~~the costs and ~~no borrowings were outstanding under this facility.~~expenses incurred by Apache in performing such AROs or such decommissioning security may be reduced, restricted, or otherwise eliminated, in whole or in part, as a result of Fieldwood’s current bankruptcy proceedings.

~~The Company was in compliance with the terms of these credit facilities as of September 30, 2017.~~

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk

The Company’s revenues, earnings, cash flow, capital investments and, ultimately, future rate of growth are highly dependent on the prices the Company receives for its crude oil, natural gas, and NGLs, which have historically been very volatile because of unpredictable events such as economic growth or retraction, weather, political climate, and global supply and demand. These factors have only been heightened with uncertainty in oil markets being amplified late in the first quarter as the negative demand implications of the rapidly spreading COVID-19 pandemic became more apparent. The Company continually monitors its market risk exposure, including the impact and developments related to the COVID-19 pandemic, which introduced significant volatility in the financial markets subsequent to the year ended December 31, 2019.

For the third quarter of 2020, the Company’s average crude oil realizations ~~have increased 11~~decreased 30 percent to ~~$49.34~~$40.88 per barrel from $58.60 per barrel in the comparable period of 2019. The Company’s average natural gas price realizations increased 14 percent to $1.90 per Mcf in the third quarter of 2020 from $1.66 per Mcf in the comparable period of 2019. The Company’s average NGL realizations decreased 1 percent to $13.51 per barrel in the third quarter of ~~2017~~2020 from ~~$44.35~~$13.71 per barrel in the comparable period of ~~2016. The Company’s average natural gas price realizations have increased 6 percent to $2.75 per Mcf in the third quarter of 2017 from $2.59 per Mcf in the comparable period of 2016.~~2019. Based on average daily production for the third quarter of ~~2017,~~2020, a $1.00 per barrel change in the weighted average realized oil price would have increased or decreased revenues for the quarter by approximately ~~$22~~$19 million, ~~and~~ a $0.10 per Mcf change in the weighted average realized price of natural gas would have increased or decreased revenues for the quarter by approximately $9 million, and a $1.00 per barrel change in the weighted average realized NGL price would have increased or decreased revenues for the quarter by approximately $7 million.

Apache periodically enters into derivative positions on a portion of its projected oil and natural gas production through a variety of financial and physical arrangements intended to manage fluctuations in cash flows resulting from changes in commodity prices. Such derivative positions may include the use of futures contracts, swaps, and/or options. Apache does not hold or issue derivative instruments for trading purposes. As of September 30, ~~2017,~~2020, the Company had open natural gas derivatives not designated as cash flow hedges in an asset position with a fair value of $6$12 million. A 10 percent increase in gas prices would ~~move~~decrease the ~~derivatives to a liability position of $17~~asset by approximately $7 million, while a 10 percent decrease in prices would increase the asset by approximately ~~$17~~$7 million. As of September 30, ~~2017,~~2020, the Company had open oil derivatives not designated as cash flow hedges in ~~an asset~~a liability position with a fair value of ~~$11~~$15 million. A 10 percent increase in oil prices would ~~move~~increase the ~~derivatives to a~~ liability ~~position of $50~~by approximately $18 million, while a 10 percent decrease in prices would ~~increase~~decrease the ~~asset~~liability by approximately ~~$84~~$15 million. These fair value changes assume volatility based on prevailing market parameters at September 30, ~~2017.~~2020. See Note 3—4—Derivative Instruments and Hedging Activities of in the Notes to Consolidated Financial Statements set forth in Part 1,I, Item 1 of this Quarterly Report on Form 10-Q for notional volumes and terms ~~associated~~ with the Company’s derivative contracts.

Interest Rate Risk

At September 30, 2020, Apache had approximately $8.3 billion net carrying value of notes and debentures outstanding, all of which was fixed-rate debt, with a weighted average interest rate of 4.95 percent. Although near-term changes in interest rates may affect the fair value of Apache’s fixed-rate debt, they do not expose the Company to the risk of earnings or cash flow loss associated with that debt. Apache is also exposed to interest rate risk related to its interest-bearing cash and cash equivalents balances and amounts outstanding under its commercial paper program and credit facilities. As of September 30, 2020, the Company’s cash and cash equivalents totaled approximately $162 million, approximately 68 percent of which was invested in money market funds and short-term investments with major financial institutions. As of September 30, 2020, the Company had credit facility borrowings of $87 million and $580 million under its Apache and Altus credit facilities, respectively. A change in the interest rate applicable to the Company’s short-term investments and credit facility borrowings would have an immaterial impact on earnings and cash flows but could impact interest costs associated with future debt issuances or any future borrowings under its commercial paper program, revolving credit facilities, and money market lines of credit.

Foreign Currency Exchange Rate Risk

The Company’s cash ~~flow stream~~activities relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. The Company’s North Sea production is sold under U.S. dollar contracts, and the majority of costs incurred are paid in British pounds. In Egypt, substantially all oil and gas production is sold under U.S. dollar contracts, and the majority of the costs incurred are denominated in U.S. dollars. ~~Revenue and disbursement transactions~~Transactions denominated in British pounds are converted to U.S. dollar equivalents based on the average exchange rates during the period.

Foreign currency gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated at the end of each month. Currency gains and losses are included as either a component of “Other” under “Revenues and Other” or, as is the case when the Company re-measures its foreign tax liabilities, as a component of the Company’s provision for income tax expense on the statement of consolidated operations. A foreign currency net gain or loss of $6$5 million would result from a 10 percent weakening or strengthening, respectively, in the British pound as of September 30, ~~2017.~~2020.

The Company is subject to increased foreign currency risk associated with the effects of the U.K.’s withdrawal from the European Union. Apache has entered into foreign exchange contracts in order to minimize the impact of fluctuating exchange rates for the British pound on the Company’s operating expenses. As of September 30, 2020, the Company had outstanding foreign exchange contracts with a total notional amount of £41 million. A 10 percent strengthening of the British pound against the U.S. dollar would result in a foreign currency net gain of $3 million, while a 10 percent weakening of the British pound against the U.S. dollar would result in a loss of $4 million.

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

John J. Christmann IV, the Company’s Chief Executive Officer and President, in his capacity as principal executive officer, and Stephen J. Riney, the Company’s Executive Vice President and Chief Financial Officer, in his capacity as principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2017,~~2020, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective, providing effective means to ensure that information we are required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

We periodically review the design and effectiveness of our disclosure controls, including compliance with various laws and regulations that apply to our operations both inside and outside the United States. We make modifications to improve the design and effectiveness of our disclosure controls, and may take other corrective action, if our reviews identify deficiencies or weaknesses in our controls.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting including any changes related to the COVID-19 pandemic and the transition to our remote working environment.

PART II - OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

Please refer to Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016 (filed with the SEC on February 24, 2017)~~2019 and Note 9—11—Commitments and Contingencies in the ~~notes~~Notes to the ~~consolidated financial statements~~Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a description of material legal proceedings.


ITEM 1A.	RISK FACTORS

Please refer to Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019, Part II, Item 1A—Risk Factors of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, and Part I, Item 3—Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q. ~~There have been no material changes~~Given the nature of its business, Altus Midstream Company may be subject to ~~our risk factors since our annual report~~different and additional risks than those described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019, Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, and this Quarterly Report on Form 10-Q. For a description of these risks, please refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020 filed by Altus Midstream Company.

The global economy and the energy industry have been deeply impacted by the effects of the coronavirus disease 2019 (COVID-19) pandemic and related governmental actions. As of the date of this report, efforts to contain COVID-19 have not succeeded in many regions, and the global pandemic remains ongoing. Uncertainty in the oil markets and the negative demand implications of the COVID-19 pandemic continue to impact oil supply and demand. The COVID-19 pandemic and its unprecedented consequences have amplified, and may continue to amplify, certain risks identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, including, without limitation, risks related to: the market prices of and supply and demand for oil, natural gas, NGLs, and other products or services; economic and competitive conditions; the availability of capital resources; the Company’s commodity hedging arrangements; production and reserve levels; capital expenditures and other contractual obligations; currency exchange rates; inflation rates; the availability of goods and services; legislative, regulatory, or policy changes; terrorism or cyberattacks; the occurrence of property acquisitions or divestitures; the impact of health and safety and other governmental regulations; deterioration of the political, economic, and social conditions in Egypt; the ability to access the capital markets; market-related risks; the Company’s ability to declare and pay dividends; and the Company’s exposure to customer, partner, and counterparty credit risk. Given the uncertainty regarding the duration and scope of the COVID-19 pandemic and its prolonged impact on the global economy and the energy industry, there can be no assurance that the pandemic will not materially and adversely affect the Company’s business, financial condition, cash flows, and results of operations in the future.

Any discussion of the impact of the COVID-19 pandemic included in this Quarterly Report on Form 10-Q speaks only as of the filing date of this Quarterly Report on Form 10-Q and is subject to change without notice, as the Company cannot predict all risks related to this rapidly evolving event.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In 2013 and 2014, Apache’s Board of Directors ~~has~~ authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased from time to time either in the open market or through privately negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through September 30, ~~2017,~~2020, had repurchased a total of ~~32.2~~40 million shares at an average price of ~~$88.96~~$79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and ~~has~~did not ~~purchased~~purchase any ~~additional~~ shares during ~~2017.~~

the first nine months of 2020.


~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

~~None~~


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

~~None~~


~~ITEM 5.~~	~~OTHER INFORMATION~~

~~None~~


ITEM 6.	EXHIBITS


3.1	–	Restated Certificate of Incorporation of Registrant, dated September 19, 2013, as filed with the Secretary of State of Delaware on September 19, 2013 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed September 20, 2013, SEC File No. 001-4300).	–	Restated Certificate of Incorporation of Registrant, dated September 19, 2013, as filed with the Secretary of State of Delaware on September 19, 2013 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed September 20, 2013, SEC File No. 001-4300).
3.2	–	Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated May 14, 2015, as filed with the Secretary of State of Delaware on May 14, 2015 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed May 20, 2015, SEC File No. 001-4300).	–	Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated May 14, 2015, as filed with the Secretary of State of Delaware on May 14, 2015 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed May 20, 2015, SEC File No. 001-4300).
3.3	–	Bylaws of Registrant, as amended May 11, 2017 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 16, 2017, SEC File No. 001-4300).	–	Amended and Restated Bylaws of Registrant, dated October 31, 2019 (incorporated by reference to Exhibit 3.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, SEC File No. 001-4300).
*4.1	–	Supplemental Indenture, dated as of August 14, 2017, among Apache Finance Canada Corporation, Apache Corporation, and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., formerly The Chase Manhattan Bank), as trustee.
4.1			–	Form of 4.625% Notes due 2025 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed August 6, 2020, SEC File No. 001-04300).
4.2			–	Form of 4.875% Notes due 2027 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K filed August 6, 2020, SEC File No. 001-04300).
*10.1			–	Amendment to Non-Qualified Retirement/Savings Plan of Apache Corporation, dated August 12, 2020, effective August 1, 2020.
*31.1	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
*31.2	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
*32.1	–	Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.	–	Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
*101.INS	–	XBRL Instance Document.
*101			–	The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL: (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Comprehensive Income (Loss), (iii) Statement of Consolidated Cash Flows, (iv) Consolidated Balance Sheet, (v) Statement of Consolidated Changes in Equity (Deficit) and Noncontrolling Interest and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
*101.SCH	–	XBRL Taxonomy Schema Document.	–	Inline XBRL Taxonomy Schema Document.
*101.CAL	–	XBRL Calculation Linkbase Document.	–	Inline XBRL Calculation Linkbase Document.
*101.DEF	–	XBRL Definition Linkbase Document.	–	Inline XBRL Definition Linkbase Document.
*101.LAB	–	XBRL Label Linkbase Document.	–	Inline XBRL Label Linkbase Document.
*101.PRE	–	XBRL Presentation Linkbase Document.	–	Inline XBRL Presentation Linkbase Document.
*104			–	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



*	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



		APACHE CORPORATION

Dated:	November ~~2, 2017~~5, 2020	/s/ STEPHEN J. RINEY
		Stephen J. Riney
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Dated:	November ~~2, 2017~~5, 2020	/s/ REBECCA A. HOYT
		Rebecca A. Hoyt
		Senior Vice President, Chief Accounting Officer, and Controller
		(Principal Accounting Officer)

4048



Delaware	41-0747868
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification ~~Number)~~ No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.625 par value	APA	Nasdaq Global Select Market



Large accelerated filer	ý☒	Accelerated filer	¨☐
Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~☐	Smaller reporting company	¨☐
		Emerging growth company	¨ ☐



ý☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨ ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Number of shares of registrant’s common stock outstanding as of October 31, ~~2017~~2020	~~380,942,629~~377,478,182


	TABLE OF CONTENTS		TABLE OF CONTENTS
	DESCRIPTION		DESCRIPTION
Item		Page		Page
	PART I - FINANCIAL INFORMATION		PART I - FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS	1	FINANCIAL STATEMENTS	1
	STATEMENT OF CONSOLIDATED OPERATIONS	1	STATEMENT OF CONSOLIDATED OPERATIONS	1
	STATEMENT OF CONSOLIDATED CASH FLOWS	3	STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2
	CONSOLIDATED BALANCE SHEET	4	STATEMENT OF CONSOLIDATED CASH FLOWS	3
	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY	5	CONSOLIDATED BALANCE SHEET	4
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	6	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTEREST	5
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	44
4.	CONTROLS AND PROCEDURES	37	CONTROLS AND PROCEDURES	45
	PART II - OTHER INFORMATION		PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	38	LEGAL PROCEEDINGS	46
1A.	RISK FACTORS	38	RISK FACTORS	46
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	46
3.	DEFAULTS UPON SENIOR SECURITIES	38
4.	MINE SAFETY DISCLOSURES	38
5.	OTHER INFORMATION	38
6.	EXHIBITS	39	EXHIBITS	47


•	other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q; and



	Quarter Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In millions)
Oil and Gas Property:
Proved	$	—	$	355	$	—	$	423
Unproved	160		114		214		222



	(In millions)
ASSETS
Current assets	$	110
Property, plant & equipment	1,132
Total Assets	$	1,242
LIABILITIES
Current liabilities, excluding asset retirement obligation	$	120
Asset retirement obligation	780
Other long-term liabilities	46
Total Liabilities	$	946



		Put Options⁽¹⁾⁽²⁾
Production Period	Settlement Index	Mbbls	Weighted Average Strike Price
October—December 2017	NYMEX WTI	8,464	$50.00
October—December 2017	Dated Brent	7,636	$51.00



		Fixed-Price Swaps		Collars⁽³⁾			Call Options⁽⁴⁾
Production Period	Settlement Index	Mbbls	Weighted Average Fixed Price	Mbbls	Weighted Average Floor Price	Weighted Average Ceiling Price	Mbbls	Strike Price
January—June 2018	NYMEX WTI	2,715	$51.23	2,715	$45.00	$56.45	—	—
January—June 2018	Dated Brent	2,172	$54.57	2,172	$50.00	$58.77	—	—
January—December 2018	NYMEX WTI	—	—	6,023	$45.00	$57.02	6,023	$60.00



		Fixed-Price Swaps⁽¹⁾
Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Fixed Price
October—December 2017	NYMEX Henry Hub	4,370	$3.32
January—March 2018	NYMEX Henry Hub	13,500	$3.39
January—June 2018	NYMEX Henry Hub	22,625	$3.17
April—June 2018	NYMEX Henry Hub	16,835	$2.92
July—December 2018	NYMEX Henry Hub	18,400	$2.97



	(In millions)
Asset retirement obligation at December 31, 2016	$	2,498
Liabilities incurred	39
Liabilities divested	(810		)
Liabilities settled	(30		)
Accretion expense	103
Revisions in estimated liabilities	66
Asset retirement obligation at September 30, 2017	1,866
Less current portion	35
Asset retirement obligation, long-term	$	1,831



	September 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Commercial paper and committed bank facilities	$	—	$	—	$	—	$	—
Notes and debentures	8,483		9,094		8,544		9,183
Total Debt	$	8,483	$	9,094	$	8,544	$	9,183



	Currency Translation Adjustment			Pension and Postretirement Benefit Plan			Total
	(In millions)
Accumulated other comprehensive loss at December 31, 2016	$	(109	)	$	(3	)	$	(112	)
Currency translation adjustment divested⁽¹⁾	109			—			109
Accumulated other comprehensive loss at September 30, 2017	$	—		$	(3	)	$	(3	)