UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________________

FORM 10-Q

________________________________________________________________

(Mark One)



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

For the quarterly period ended ~~June~~September 30, 2019



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

For the transition period from to

Commission File Number: 0-13546

APACHE OFFSHORE INVESTMENT PARTNERSHIP

(Exact name of registrant as specified in its charter)



Delaware		41-1464066
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (713) 296-6000

Securities registered pursuant to Section 12(b) of the Act: None

________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐	Smaller reporting company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒



Number of registrant's units outstanding as of ~~June~~September 30, 2019	1,022



	TABLE OF CONTENTS

Item	Description	Page
	PART I - FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS	1
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	5
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	8
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	12
4.	CONTROLS AND PROCEDURES	12
	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	13
1A.	RISK FACTORS	13
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
3.	DEFAULTS UPON SENIOR SECURITIES	13
4.	MINE SAFETY DISCLOSURES	13
5.	OTHER INFORMATION	13
6.	EXHIBITS	13

Forward-Looking Statements and Risk

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, the information that was used to prepare our estimate of proved reserves as of December 31, 2018, and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” or “continue” or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:

the market prices of oil, natural gas, NGLs and other products or services;

the supply and demand for oil, natural gas, NGLs and other products or services;

pipeline and gathering system capacity;

production and reserve levels;

drilling risks;

economic and competitive conditions;

the availability of capital resources;

capital expenditure and other contractual obligations;

weather conditions;

inflation rates;

the availability of goods and services;

legislative or regulatory changes, including environmental regulation;

terrorism and cyber-attacks;

capital markets and related risks such as general credit, liquidity, market, and interest-rate risks; and

other factors disclosed under Item 1A – “Risk Factors,” Item 2 – “Properties — Estimated Proved Reserves and Future Net Cash Flows,” Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 7A – “Quantitative and Qualitative Disclosures About Market Risk” and elsewhere in our most recently filed Form 10-K.

All subsequent written and oral forward-looking statements attributable to the Partnership, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APACHE OFFSHORE INVESTMENT PARTNERSHIP

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)


	For the Quarter Ended June 30,				For the Six Months Ended June 30,				For the Quarter Ended September 30,					For the Nine Months Ended September 30,
	2019		2018		2019		2018		2019			2018		2019		2018
REVENUES:
Oil and gas sales	$	302,027	$	357,112	$	601,538	$	711,520	$	227,791		$	383,112	$	829,329	$	1,094,632
Interest income	29,099		19,045		56,957		32,944		27,420			22,843		84,377		55,787
	331,126		376,157		658,495		744,464		255,211			405,955		913,706		1,150,419
EXPENSES:
Depreciation, depletion and amortization	73,540		77,485		144,553		159,107		59,063			75,787		203,616		234,894
Asset retirement obligation accretion	19,699		26,637		39,150		52,886		19,252			23,050		58,402		75,936
Lease operating expenses	93,115		120,602		208,722		247,336		115,023			105,772		323,745		353,108
Gathering and transportation costs	3,928		4,277		8,698		9,260		3,902			4,270		12,600		13,530
Administrative	82,134		80,799		164,268		161,602		82,134			80,799		246,402		242,401
	272,416		309,800		565,391		630,191		279,374			289,678		844,765		919,869
NET INCOME	$	58,710	$	66,357	$	93,104	$	114,273
NET INCOME ALLOCATED TO:
NET INCOME (LOSS)									$	(24,163	)	$	116,277	$	68,941	$	230,550
NET INCOME (LOSS) ALLOCATED TO:
Managing Partner	$	20,614	$	24,948	$	36,130	$	47,454	$	2,079		$	33,373	$	38,209	$	80,827
Investing Partners	38,096		41,409		56,974		66,819		(26,242		)	82,904		30,732		149,723
	$	58,710	$	66,357	$	93,104	$	114,273	$	(24,163	)	$	116,277	$	68,941	$	230,550
NET INCOME PER INVESTING PARTNER UNIT	$	37	$	41	$	56	$	65
NET INCOME (LOSS) PER INVESTING PARTNER UNIT									$	(26	)	$	81	$	30	$	147
WEIGHTED AVERAGE INVESTING PARTNER UNITS OUTSTANDING	1,021.5		1,021.5		1,021.5		1,021.5		1,021.5			1,021.5		1,021.5		1,021.5

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE OFFSHORE INVESTMENT PARTNERSHIP

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	93,104		$	114,273		$	68,941		$	230,550
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	144,553			159,107			203,616			234,894
Asset retirement obligation accretion	39,150			52,886			58,402			75,936
Changes in operating assets and liabilities:
Accrued receivables	21,180			(37,426		)	34,991			(36,255		)
Receivable from/payable to Apache Corporation	(842		)	837			(934		)	2,128
Accrued operating expenses	(14,414		)	(9,441		)	(14,414		)	(9,441		)
Asset retirement obligations	(129,215		)	(8,444		)	(202,515		)	(268,212		)
Net cash provided by operating activities	153,516			271,792			148,087			229,600
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties	(18,368		)	(158,404		)	(18,418		)	(158,445		)
Net cash used in investing activities	(18,368		)	(158,404		)	(18,418		)	(158,445		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Managing Partner	(30,565		)	(34,120		)	(31,344		)	(46,831		)
Net cash used in financing activities	(30,565		)	(34,120		)	(31,344		)	(46,831		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	104,583			79,268			98,325			24,324
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	5,103,336			5,117,485			5,103,336			5,117,485
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,207,919		$	5,196,753		$	5,201,661		$	5,141,809

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE OFFSHORE INVESTMENT PARTNERSHIP

CONSOLIDATED BALANCE SHEET

(Unaudited)


	June 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,207,919		$	5,103,336		$	5,201,661		$	5,103,336
Accrued revenues receivable	98,936			120,116			85,125			120,116
	5,306,855			5,223,452			5,286,786			5,223,452
OIL AND GAS PROPERTIES, on the basis of full cost accounting:
Proved properties	195,425,657			195,327,296			195,425,706			195,327,296
Less – Accumulated depreciation, depletion and amortization	(191,339,737		)	(191,195,184		)	(191,398,800		)	(191,195,184		)
	4,085,920			4,132,112			4,026,906			4,132,112
	$	9,392,775		$	9,355,564		$	9,313,692		$	9,355,564
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES:
Payable to Apache Corporation	$	230		$	1,072		$	138		$	1,072
Asset retirement obligation	402,582			390,000			624,787			390,000
Accrued operating expenses	77,000			91,414			77,000			91,414
Accrued development costs	49,542			125,999			1,446			125,999
	529,354			608,485			703,371			608,485
ASSET RETIREMENT OBLIGATION	1,299,615			1,245,812			1,071,457			1,245,812
PARTNERS’ CAPITAL:
Managing Partner	469,751			464,186			471,051			464,186
Investing Partners (1,021.5 units outstanding)	7,094,055			7,037,081			7,067,813			7,037,081
	7,563,806			7,501,267			7,538,864			7,501,267
	$	9,392,775		$	9,355,564		$	9,313,692		$	9,355,564

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE OFFSHORE INVESTMENT PARTNERSHIP

STATEMENT OF CONSOLIDATED CHANGES IN PARTNERS’ CAPITAL

(Unaudited)


	Managing Partner			Investing Partners		Total			Managing Partner			Investing Partners			Total
For the Quarter Ended June 30, 2018
BALANCE, MARCH 31, 2018	$	436,417		$	6,888,459	$	7,324,876
For the Quarter Ended September 30, 2018
BALANCE, JUNE 30, 2018									$	432,910		$	6,929,868		$	7,362,778
Distributions	(28,455		)	—		(28,455		)	(12,711		)	—			(12,711		)
Net income	24,948			41,409		66,357			33,373			82,904			116,277
BALANCE, JUNE 30, 2018	$	432,910		$	6,929,868	$	7,362,778
BALANCE, SEPTEMBER 30, 2018									$	453,572		$	7,012,772		$	7,466,344

For the Quarter Ended June 30, 2019
BALANCE, MARCH 31, 2019	$	474,636		$	7,055,959	$	7,530,595
For the Quarter Ended September 30, 2019
BALANCE, JUNE 30, 2019									$	469,751		$	7,094,055		$	7,563,806
Distributions	(25,499		)	—		(25,499		)	(779		)	—			(779		)
Net income	20,614			38,096		58,710
BALANCE, JUNE 30, 2019	$	469,751		$	7,094,055	$	7,563,806
Net income (loss)									2,079			(26,242		)	(24,163		)
BALANCE, SEPTEMBER 30, 2019									$	471,051		$	7,067,813		$	7,538,864

For the Six Months Ended June 30, 2018
For the Nine Months Ended September 30, 2018
BALANCE, DECEMBER 31, 2017	$	419,576		$	6,863,049	$	7,282,625		$	419,576		$	6,863,049		$	7,282,625
Distributions	(34,120		)	—		(34,120		)	(46,831		)	—			(46,831		)
Net income	47,454			66,819		114,273			80,827			149,723			230,550
BALANCE, JUNE 30, 2018	$	432,910		$	6,929,868	$	7,362,778
BALANCE, SEPTEMBER 30, 2018									$	453,572		$	7,012,772		$	7,466,344

For the Six Months Ended June 30, 2019
For the Nine Months Ended September 30, 2019
BALANCE, DECEMBER 31, 2018	$	464,186		$	7,037,081	$	7,501,267		$	464,186		$	7,037,081		$	7,501,267
Distributions	(30,565		)	—		(30,565		)	(31,344		)	—			(31,344		)
Net income	36,130			56,974		93,104			38,209			30,732			68,941
BALANCE, JUNE 30, 2019	$	469,751		$	7,094,055	$	7,563,806
BALANCE, SEPTEMBER 30, 2019									$	471,051		$	7,067,813		$	7,538,864

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE OFFSHORE INVESTMENT PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Apache Offshore Investment Partnership, a Delaware general partnership (the Investment Partnership), was formed on October 31, 1983, consisting of Apache Corporation, a Delaware corporation (Apache or the Managing Partner), as Managing Partner and public investors (the Investing Partners). The Investment Partnership invested its entire capital in Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership (the Operating Partnership). The primary business of the Investment Partnership is to serve as the sole limited partner of the Operating Partnership. The accompanying financial statements include the accounts of both the Investment Partnership and the Operating Partnership. The term “Partnership,” as used herein, refers to the Investment Partnership or the Operating Partnership, as the case may be.

These financial statements have been prepared by the Partnership, 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 statement of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements discussed below. All such adjustments are of a normal, recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which contains a summary of the Partnership’s significant accounting policies and other disclosures.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of ~~June~~September 30, 2019, the Partnership’s significant accounting policies are consistent with those discussed in Note 2 of its consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 with the exception of Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” (see “Recently Adopted Accounting Pronouncement” section in this Note 1 below).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates with regard to these financial statements include the estimate of proved oil and gas reserve quantities and the related present value of estimated future net cash flows therefrom and the assessment of asset retirement obligations. Actual results could differ from those estimates.

Oil and Gas Property

The Partnership follows the full-cost method of accounting for its oil and gas property. Under this method of accounting, all costs incurred for both successful and unsuccessful exploration and development activities, and oil and gas property acquisitions are capitalized. The net book value of oil and gas properties may not exceed a calculated “ceiling.” The ceiling limitation is the estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent per annum. Estimated future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements. For a discussion of the calculation of estimated future net cash flows, please refer to Note 10—Supplemental Oil and Gas Disclosures (Unaudited) to the consolidated financial statements contained in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Any excess of the net book value of proved oil and gas properties over the ceiling is charged to expense and reflected as “Additional depreciation, depletion and amortization” in the accompanying statement of consolidated operations. Such limitations are tested quarterly. The Partnership had no0 write-downs of the carrying value of its proved oil and gas properties during the first ~~six~~nine months of 2019 and 2018.

Revenue Recognition

The Partnership applies the provisions of ~~ASC~~Accounting Standards Codification 606 for revenue recognition to contracts with customers. Sales of crude oil, natural gas, and natural gas liquids (NGLs) are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts. Performance obligations primarily comprise delivery of oil, gas, or NGLs at a delivery point, as negotiated within each contract. Each barrel of oil, MMBtu of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer. The Partnership 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, the Partnership’s right to payment, and transfer of legal title. In each case, the term between delivery and when payments are due is not significant. For the three and ~~six~~nine months ended ~~June~~September 30, 2019, revenues from customers totaled ~~$302,027~~$227,791 and ~~$601,538,~~$829,329, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, revenues from customers totaled ~~$357,112~~$383,112 and ~~$711,520,~~$1,094,632, respectively.

Apache, as Managing Partner of the Partnership, markets the Partnership's share of oil production from South Timbalier 295, the Partnership's largest source of revenue. Apache primarily markets to major oil companies, marketing and transportation companies, and refiners at current index prices, adjusted for quality, transportation, and market reflective differentials. The Partnership markets all other production under the joint operating agreements with the operator of its properties. The operator seeks and negotiates oil and gas marketing arrangements with various marketers and purchasers. These contracts provide for sales that are priced at prevailing market prices.

The Partnership records trade accounts receivable for its unconditional rights to consideration arising under sales contracts with customers. The carrying value of such receivables, net of the allowance for doubtful accounts, represents estimated net realizable value. The Partnership routinely assesses the collectability of all material trade and other receivables. The Partnership accrues a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. As of ~~June~~September 30, 2019, the carrying amounts of trade accounts receivables approximate fair value because of the short-term nature of these instruments. Receivables from contracts with customers totaled ~~$98,936~~$85,125 and $120,116 as of ~~June~~September 30, 2019 and December 31, 2018, respectively. The Partnership had no0 allowance for doubtful accounts recorded for all comparative periods presented.

The Partnership has concluded that disaggregating revenue by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The table below presents the total oil, gas, and NGLs revenues of the Partnership for the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	For the Quarter Ended June 30,				For the Six Months Ended June 30,				For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Oil	$	272,263	$	323,015	$	535,146	$	637,501	$	211,316	$	340,907	$	746,462	$	978,408
Gas	22,297		24,209		53,858		55,334		15,248		29,635		69,106		84,969
NGLs	7,467		9,888		12,534		18,685		1,227		12,570		13,761		31,255
Total Oil and Gas Revenue	$	302,027	$	357,112	$	601,538	$	711,520	$	227,791	$	383,112	$	829,329	$	1,094,632

Recently Adopted Accounting Pronouncement

On January 1, 2019, the Partnership adopted ASU 2016-02, "Leases (Topic 842)" on a prospective basis. The Partnership elected to adopt two transitional expedients issued by the FASB during 2018: (i) ASU 2018-01, which permits an entity an optional election to not evaluate under ASU 2016-02 those existing or expired land easements that were not previously accounted for as leases prior to the adoption of ASU 2016-02 and (ii) ASU 2018-11, which adds a transition option permitting entities to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the consolidated financial statements. Under this transition option, comparative reporting would not be required and the provisions of the standard would be applied prospectively to leases in effect at the date of adoption. The adoption of ASU 2016-02 did not have a material impact on the Partnership's consolidated financial statements.

2. RECEIVABLE FROM / PAYABLE TO APACHE CORPORATION

The receivable from/payable to Apache represents the net result of the Investing Partners’ revenue received and expenditures paid in the current month. Generally, cash in this amount will be paid by Apache to the Partnership or transferred to Apache in the month after the Partnership’s transactions are processed and the net results of operations are determined.

3. ASSET RETIREMENT OBLIGATIONS

The following table describes the changes to the Partnership’s asset retirement obligation liability for the first ~~six~~nine months of 2019:


Asset retirement obligation at December 31, 2018	$	1,635,812		$	1,635,812
Accretion expense	39,150			58,402
Liabilities settled	(52,758		)	(77,963		)
Revisions in estimated liabilities	79,993			79,993
Asset retirement obligation at June 30, 2019	1,702,197
Asset retirement obligation at September 30, 2019				1,696,244
Less current portion	(402,582		)	(624,787		)
Asset retirement obligation, long-term	$	1,299,615		$	1,071,457

4. FAIR VALUE MEASUREMENTS

Certain assets and liabilities are reported at fair value on a recurring basis in the Partnership’s consolidated balance sheet. As of ~~June~~September 30, 2019 and December 31, 2018, the carrying amounts of the Partnership’s current assets and current liabilities approximated fair value because of the short-term nature or maturity of these instruments.

The Partnership did not use derivative financial instruments or otherwise engage in hedging activities during the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018.

5. NOTICE OF WITHDRAWAL AND RIGHT OF PRESENTMENT

As previously announced, Apache, as the Managing Partner of the Investment Partnership gave notice on March 22, 2019 of its intention to withdraw as Managing Partner of the Investment Partnership. The notice described the withdrawal process and certain notice periods required by that process. No party assumed the role of Managing Partner within the 120 day notice period specified by the notice of intention to withdraw. Consequently, Apache will oversee the process of winding up and liquidating the business and affairs of the Investment Partnership.

The Managing Partner determined that, during the withdrawal and dissolution process, it would be inconsistent with the Managing Partner’s fiduciary duties to purchase (or to cause the Investment Partnership to purchase) outstanding units of partnership interests (“Units”) from the holders thereof pursuant to the right of presentment provided for in Sections 6.9 through 6.14 of the Partnership Agreement of the Investment Partnership (the “Partnership Agreement”). As a result of this determination by the Managing Partner, pursuant to Section 6.12 of the Partnership Agreement, the right of presentment has been terminated and Sections 6.9 through 6.14 have “become null and void and of no further force or effect” as provided in Section 6.12.

The Investment Partnership has not made a repurchase under the right of presentment since 2008.

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

The following discussion relates to Apache Offshore Investment Partnership (the Partnership) and should be read in conjunction with the Partnership’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 its consolidated financial statements, accompanying notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

The Partnership’s business is participation in oil and gas development and production activities on federal lease tracts in the Gulf of Mexico, offshore Louisiana.

Results of Operations

Net Income and Revenue

The Partnership reported a net ~~income~~loss of ~~$58,710~~$24,163 ($3726 per Investing Partner Unit) for the ~~second~~third quarter of 2019 compared to a net income of ~~$66,357~~$116,277 ($4181 per Investing Partner Unit) in the ~~second~~third quarter of 2018. For the first ~~six~~nine months of 2019, the Partnership reported net income of ~~$93,104~~$68,941 ($5630 per Investing Partner Unit) compared to a net income of ~~$114,273~~$230,550 ($65147 per Investing Partner Unit) in the first ~~six~~nine months of 2018.

Total revenues in the ~~second~~third quarter of 2019 decreased 1237 percent from the ~~second~~third quarter of 2018 primarily ona result of lower crude oil and gas production and prices. Total revenues in the first ~~six~~nine months of 2019 also decreased 1221 percent from the first ~~six~~nine months of 2018 on lower crude oil production and prices. The Partnership’s crude oil, natural gas, and natural gas liquids (NGL) production volume and price information is summarized in the following table (gas volumes are presented in thousand cubic feet (Mcf) per day):


	For the Quarter Ended June 30,						For the Six Months Ended June 30,						For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
Gas volume – Mcf per day	92		102		(10	)%	103		101		2	%	72		107		(33	)%	92		103		(11	)%
Average gas price – per Mcf	$	2.65	$	2.61	2	%	$	2.90	$	3.04	(5	)%	$	2.29	$	3.01	(24	)%	$	2.74	$	3.03	(10	)%
Oil volume – barrels per day	49		53		(8	)%	50		55		(9	)%	41		53		(23	)%	47		54		(13	)%
Average oil price – per barrel	$	61.67	$	66.60	(7	)%	$	58.74	$	64.45	(9	)%	$	55.68	$	70.45	(21	)%	$	57.84	$	66.42	(13	)%
NGL volume – barrels per day	4		5		(20	)%	4		4		—	%	2		4		(50	)%	3		4		(25	)%
Average NGL price – per barrel	$	20.90	$	22.87	(9	)%	$	18.93	$	23.43	(19	)%	$	5.77	$	34.65	(83	)%	$	15.73	$	26.94	(42	)%

Oil and Gas Sales

The Partnership’s crude oil sales for the ~~second~~third quarter of 2019 totaled ~~$272,263~~$211,316 compared to ~~$323,015~~$340,907 in the ~~second~~third quarter of 2018. The Partnership’s average realized oil price in the ~~second~~third quarter of 2019 decreased ~~$4.93~~$14.77 per barrel from the ~~second~~third quarter of 2018, reducing sales by ~~$23,901.~~$71,470. Crude oil volumes decreased to 4941 barrels per day in the ~~second~~third quarter of 2019, compared to 53 barrels per day in the prior year period as a result of natural ~~depletion.~~depletion and shut-in of two wells at South Timbalier 276 for repairs that began during the third quarter. The decrease in production reduced oil sales by ~~$26,851.~~$58,121.

Natural gas sales of ~~$22,297~~$15,248 were recognized in the ~~second~~third quarter of 2019, down 849 percent from the amount realized for the equivalent 2018 period. The Partnership’s average realized natural gas price for the quarter ~~increased $0.04~~decreased $0.72 per Mcf, or 224 percent, from the ~~second quarter of 2018, slightly increasing sales by $333. The increase in price was more than offset by a decrease in natural gas volumes of 10 percent from the second~~third quarter of 2018, reducing sales by ~~$2,245.~~$7,119. Natural gas volumes also decreased 33 percent from the third quarter of 2018, reducing sales by $7,268. The decrease in production is primarily the result of natural depletion.

Crude oil sales for the first ~~six~~nine months of 2019 totaled ~~$535,146~~$746,462 compared to ~~$637,501~~$978,408 from the first ~~six~~nine months of 2018. The Partnership’s average realized oil price for the first ~~six~~nine months of 2019 decreased ~~$5.71~~$8.58 per barrel from the first ~~six~~nine months of 2018, ~~decreasing~~reducing sales by ~~$56,478.~~$126,383. The Partnership’s crude oil volumes decreased to 5047 barrels per day during the first ~~six~~nine months of 2019, compared to 5554 barrels per day in the prior year period as a result of natural ~~depletion.~~depletion and shut-in of two wells at South Timbalier 276 for repairs that began during the third quarter. The decrease in production reduced oil sales by ~~$45,877.~~$105,563.

Natural gas sales of ~~$53,858~~$69,106 were recognized in the first ~~six~~nine months of 2019, down 319 percent from the amount realized for the equivalent 2018 period. The Partnership’s average realized natural gas price for the first ~~six~~nine months of 2019 decreased ~~$0.14,~~$0.29, or 510 percent, from the first ~~six~~nine months of 2018, reducing sales by ~~$2,552.~~$8,137. A ~~slight increase~~decrease in natural gas volumes of 211 Mcf per day, or 211 percent, during the first ~~six~~nine months of 2019 compared to the same period a year ago ~~increased~~reduced sales by ~~$1,076.~~$7,726.

The Partnership sold 43 barrels per day of NGL in the first ~~six~~nine months of 2019, ~~no change~~essentially flat from 4 barrels per day in the first ~~six~~nine months of 2018. NGL revenues decreased as a result of 1942 percent lower average realized NGL prices during the first ~~six~~nine months of 2019 compared to the same prior year period.

Since the Partnership does not anticipate acquiring additional acreage or conducting exploratory drilling on leases in which it currently holds an interest, declines in oil and gas production can be expected in future periods as a result of natural depletion. Also, given the small number of producing wells owned by the Partnership and exposure to inclement weather and pipeline interruptions in the Gulf of Mexico, the Partnership’s production may be subject to more volatility than those companies with a larger or more diversified property portfolio.

Operating Expenses

The Partnership’s recurring depreciation, depletion and amortization (DD&A), expressed as a percentage of oil and gas sales, was approximately 2426 percent and 25 percent for the ~~second~~third quarter and first ~~six~~nine months of 2019, respectively, and 2220 percent and 21 percent for the ~~second~~third quarter and first ~~six~~nine months of ~~2018.~~2018, respectively. The dollar amount of recurring DD&A expense for the first ~~six~~nine months and ~~second~~third quarter of 2019 decreased from the comparable periods a year ago as a result of lower sales volumes.

Under the full cost method of accounting, the Partnership is required to review the carrying value of its proved oil and gas properties each quarter. Under these rules, capitalized costs of oil and gas properties, net of accumulated DD&A, may not exceed the present value of estimated future net cash flows from proved oil and gas reserves discounted at 10 percent per annum. Estimated future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements. The Partnership had no write-downs of the carrying value of its oil and gas properties during the first ~~six~~nine months of 2019 and 2018. If commodity prices experience declines to levels lower than prices realized in the previous 12 months, the Partnership may be required to recognize non-cash write-downs of the carrying value of its oil and gas properties in future periods, which would be reflected as additional DD&A expense on the statement of consolidated operations.

Lease operating expenses (LOE) for the ~~second~~third quarter of 2019 ~~of $93,115 decreased 23 percent~~totaled $115,023, slightly higher from the ~~second~~third quarter of 2018 ~~reflecting lower operating activities from the previous period.~~total of $105,772. LOE for the first ~~six~~nine months of 2019 of ~~$208,722~~$323,745 decreased 168 percent from the same prior year ~~period.~~period as a result of overall lower operating activity. Gathering and transportation costs for the delivery of oil and gas ~~remained flat~~decreased slightly from comparable periods in 2018, totaling ~~$3,928~~$3,902 and ~~$8,698~~$12,600 in the ~~second~~third quarter and first ~~six~~nine months of 2019, respectively. Administrative expenses for the ~~second~~third quarter and first ~~six~~nine months of 2019 increased 2 percent compared to the same periods in 2018.

Capital Resources and Liquidity

The Partnership’s primary capital resource is net cash provided by operating activities. During the first ~~six~~nine months of 2019 and 2018, the Partnership ~~had $153,516~~provided $148,087 and ~~$271,792,~~$229,600, respectively, of positive cash flows from operating activities. The decrease primarily reflects ~~current period abandonment activities and~~ lower revenues.

At ~~June~~September 30, 2019, the Partnership had approximately $5.2 million in cash and cash equivalents, up slightly from December 31, 2018. The Partnership’s goal is to maintain cash and cash equivalents at least sufficient to cover the undiscounted value of its future asset retirement obligation liability. The Partnership also plans to reserve funds for repairs which may disrupt the Partnership’s production and for future recompletion operations.

The Partnership’s future financial condition, results of operations, and cash from operating activities will largely depend upon prices received for its oil and natural gas production. A substantial portion of the Partnership’s production is sold under market-sensitive contracts. Prices for oil and natural gas are subject to fluctuations in response to changes in supply, market uncertainty, and a variety of factors beyond the Partnership’s control. These factors include worldwide political and economic conditions, the foreign and domestic supply of oil and natural gas, the price of foreign imports, the level of consumer demand, weather, and the price and availability of alternative fuels.

The Partnership’s oil and gas reserves and production will also significantly impact future results of operations and cash from operating activities. The Partnership’s production is subject to fluctuations in response to remaining quantities of oil and gas reserves, weather, pipeline capacity, consumer demand, mechanical well performance and ~~workover,~~workovers, and recompletion activities. Declines in oil and gas production can be expected in future years as a result of normal depletion and the non-participation in acquisition or exploration activities by the Partnership. Based on production estimates from independent engineers and current market conditions, the Partnership forecasts it will be able to meet its liquidity needs for routine operations in 2019 and 2020. The Partnership will reduce capital expenditures and distributions to partners as cash from operating activities declines.

In the event that future short-term operating cash requirements are greater than the Partnership’s financial resources, the Partnership may seek short-term, interest-bearing advances from the Managing Partner as needed. The Managing Partner, however, is not obligated to make loans to the Partnership.

Capital Commitments

The Partnership’s primary needs for cash are for operating expenses, recompletion expenditures, and future dismantlement and abandonment costs. To the extent there is discretion, the Partnership allocates available capital to investment in the Partnership’s properties so as to maximize production and resultant cash flow. The Partnership had no outstanding debt or lease commitments at ~~June~~September 30, 2019. The Partnership did not have any contractual obligations as of ~~June~~September 30, 2019, other than the liability for dismantlement and abandonment costs of its oil and gas properties. The Partnership has recorded a separate liability for ~~the present value of~~ this asset retirement obligation as discussed in the notes to the financial statements included in the Partnership’s latest annual report on Form 10-K.

The Partnership anticipates minimal capital expenditures during the remainder of 2019. Approximately ~~$0.4~~$0.6 million is estimated to be spent ~~during 2019~~within the next year to abandon wells at Ship Shoal 258/259 and to remove idle platforms at North Padre Island 969/976. The abandonment activity at North Padre Island 969/976 was originally scheduled to commence prior to 2018, but ~~has been~~was deferred tountil 2019. The first phases of abandonment activity began during the third quarter of 2019 with more planned for late 2019 and ~~early 2020 pending approval from regulators.~~2020. Such estimates may change based on realized oil and gas prices, recompletion results, rates charged by contractors or changes by the operator to their development or abandonment plans.

Notice of Withdrawal and Right of Presentment

On April 26, 2019, the Managing Partner determined that, during the withdrawal and dissolution process, it would be inconsistent with the Managing Partner’s fiduciary duties to purchase (or to cause the Investment Partnership to purchase) outstanding units of partnership interests (“Units”) from the holders thereof pursuant to the right of presentment provided for in Sections 6.9 through 6.14 of the Partnership Agreement of the Investment Partnership (the “Partnership Agreement”). As a result of this determination by the Managing Partner, pursuant to Section 6.12 of the Partnership Agreement, the right of presentment has been terminated and Sections 6.9 through 6.14 have “become null and void and of no further force or effect” as provided in Section 6.12.

The Investment Partnership has not made a repurchase under the right of presentment since 2008.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk

The Partnership’s major market risk exposure is in the pricing applicable to its oil and gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to its natural gas production. Prices received for the Partnership’s crude oil, natural gas, and NGLs have historically been and continue to be very volatile because of unpredictable events such as worldwide economic growth or retraction, weather, political climate, and global supply and demand. The Partnership did not use derivative financial instruments or otherwise engage in hedging activities during the first ~~six~~nine months of 2019 or 2018.

The information set forth under “Commodity Risk” in Item 7A of the Partnership’s Form 10-K for the fiscal year ended December 31, 2018 is incorporated by reference. Information about market risks for the current quarter is not materially different.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

John J. Christmann IV, the Managing Partner’s Chief Executive Officer and President (in his capacity as principal executive officer), and Stephen J. Riney, the Managing Partner’s Executive Vice President and Chief Financial Officer (in his capacity as principal financial officer), evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of ~~June~~September 30, 2019, 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 Partnership’s disclosure controls and procedures were effective, providing effective means to ensure that the information it is required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified under the ~~Commission’s~~SEC's rules and forms and communicated to our management, including the Managing Partner’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control ~~over~~Over Financial Reporting

There was no change in our internal controls over financial reporting during the period covered by this quarterly report on Form 10-Q that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

During the ~~six~~nine months ended ~~June~~September 30, 2019, there were no material changes from the risk factors as previously disclosed in the Partnership’s Form 10-K for the fiscal year ended December 31, 2018.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



^p3.1		Partnership Agreement of Apache Offshore Investment Partnership (incorporated by reference to Exhibit (3)(i) to Form 10 filed by Partnership with the ~~Commission~~SEC on April 30, 1985, ~~Commission~~SEC File No. 0-13546).
^p3.2		Amendment No. 1, dated February 11, 1994, to the Partnership Agreement of Apache Offshore Investment Partnership (incorporated by reference to Exhibit 3.3 to Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993, ~~Commission~~SEC File No. 0-13546).
^p3.3		Limited Partnership Agreement of Apache Offshore Petroleum Limited Partnership (incorporated by reference to Exhibit (3)(ii) to Form 10 filed by Partnership with the ~~Commission~~SEC on April 30, 1985, ~~Commission~~SEC File No. 0-13546).
*31.1		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.
*32.1		Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
*101		The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL: (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Cash Flows, (iii) Consolidated Balance Sheet, (iv) Statement of Consolidated Changes in Partners' Capital and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
*101.SCH		Inline XBRL Taxonomy Schema Document.
*101.CAL		Inline XBRL Calculation Linkbase Document.
*101.DEF		Inline XBRL Definition Linkbase Document.
*101.LAB		Inline XBRL Label Linkbase Document.
*101.PRE		Inline XBRL Presentation Linkbase Document.
*104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

P Filed previously in paper format.

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 thereunto duly authorized.



		APACHE OFFSHORE INVESTMENT PARTNERSHIP
		By:	Apache Corporation, Managing Partner

Dated:	~~August 1,~~October 31, 2019	/s/ Stephen J. Riney
		Stephen J. Riney
		Executive Vice President and Chief Financial Officer
		(principal financial officer) of Apache Corporation,
		Managing Partner

Dated:	~~August 1,~~October 31, 2019	/s/ Rebecca A. Hoyt
		Rebecca A. Hoyt
		Senior Vice President, Chief Accounting Officer
		and Controller (principal accounting officer)
		of Apache Corporation, Managing Partner