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 ourthe Partnership’s (as defined below in the Notes to Consolidated Financial Statements) 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 ourthe Partnership’s examination of historical operating trends, the information that was used to prepare ourthe Partnership’s estimate of proved reserves as of December 31, 2018,2019, and other data in ourits 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,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” or “continue”“continue,” “seek,” “guidance,” “might,” “outlook,” “possibly,” “potential,” “should,” “would,” or similar terminology. Although we believethe Partnership believes that the expectations reflected in such forward-looking statements are reasonable weunder the circumstances, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from ourthe Partnership’s expectations include, but are not limited to, ourthe Partnership’s assumptions about:

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.statements. 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, 2018,2019, which contains a summary of the Partnership’s significant accounting policies and other disclosures.

As of June 30, 2019,2020, 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).2019.

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.

The following table describes the changes to the Partnership’s asset retirement obligation liability for the first six months of 2019:2020:

The Partnership did not use derivative financial instruments or otherwise engage in hedging activities during the six months ended June 30, 20192020 and 2018.2019.

As previously announced,On March 22, 2019, 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 day120-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. Apache has not made a decision as to when it will complete the process to withdraw as Managing Partner.

TheOn 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”)(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”)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.

The Partnership reported a net loss of $128,766 ($106 per Investing Partner Unit) for the second quarter of 2020 compared to net income of $58,710 ($37 per Investing Partner Unit) for the second quarter of 2019 compared to a net income of $66,357 ($41 per Investing Partner Unit) in the second quarter of 2018.2019. For the first six months of 2019,2020, the Partnership reported a net incomeloss of $93,104$150,423 ($56131 per Investing Partner Unit) compared to a net income of $114,273$93,104 ($6556 per Investing Partner Unit) in the first six months of 2018.2019.

The Partnership’s crude oil sales for the second quarter of 20192020 totaled $272,263$78,665, down 71 percent compared to $323,015$272,263 in the second quarter of 2018.2019. The Partnership’s average realized oil price in the second quarter of 20192020 decreased $4.93$36.18 per barrel from the second quarter of 2018,2019, reducing sales by $23,901.$159,733. Crude oil volumes decreased to 4934 barrels per day in the second quarter of 2019,2020, compared to 5349 barrels per day in the prior year period, as a resultprimarily from curtailed production in response to the collapse of natural depletion.oil prices that occurred during the second quarter and continued oil demand uncertainty resulting from the coronavirus disease 2019 (COVID-19) pandemic. The decrease in production reduced oil sales by $26,851.

The Partnership’s recurring depreciation, depletion and amortization (DD&A), expressed as a percentage of oil and gas sales, waswere approximately 2434 percent and 30 percent for the second quarter and first six months of 2019 and 222020, respectively, compared to approximately 24 percent for both the second quarter and first six months of 2018.2019. The dollar amount of recurring DD&A expense forhigher depletion percentage was primarily the first six months and second quarter of 2019 decreased from the comparable periods a year ago as a result of declining sales revenue from lower sales volumes.realized commodity prices.

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 months of 20192020 and 2018. If2019. Given the recent crude oil price volatility on lower demand and economic activity resulting from the COVID-19 pandemic, if commodity prices experience declines to levels lower than prices realized in the previous 12 months,sustained decline, the Partnership may be requiredexpects to recognize non-cash write-downs of the carrying value of its oil and gas properties in future periods, whichperiods. Any such non-cash write-downs would be reflected as additional DD&A expense on the statement of consolidated operations.

Lease operating expenses (LOE) for the second quarter of 2019 of $93,115 decreased 232020 totaled $99,027, up 6 percent from the second quarter of 2018, reflecting lower operating activities from the previous period.2019 total of $93,115. LOE for the first six months of 2019 of $208,722 decreased 162020 totaled $206,923, down 1 percent from the same prior year period. Gathering and transportation costs for the delivery of oil and gas remained flat from comparable periods in 2018, totaling $3,928 and $8,698totaled $3,711 in the second quarter of 2020, a decrease of 6 percent from the second quarter of 2019. Gathering and transportation costs for the first six months of 2019, respectively.2020 were essentially flat compared to the same period in 2019. Administrative expenses for the second quarter and first six months of 2019 increased 2 percent2020 were slightly lower compared to the same periods in 2018.2019 based on recent cost reduction initiatives.

The Partnership’s primary capital resource is net cash provided by operating activities. During the first six months of 2019 and 2018,2020, the Partnership had $424,170 of net cash outflow from operating activities, compared to $153,516 and $271,792, respectively, of positivenet cash inflow in the first six months of 2019. The decrease in operating cash flows from operating activities. The decreasewas primarily reflects current periodthe result of plugging and abandonment activitiesspending at Ship Shoal 258/259 and lower revenues.revenues from decreased commodity prices.

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 30, 2019.2020. The Partnership did not have any contractual obligations as of June 30, 2019,2020, 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 notesNotes to the financial statementsFinancial Statements included in the Partnership’s latest annual reportAnnual Report on Form 10-K.

As previously announced,On March 22, 2019, 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. Apache has not made a decision as to when it will complete the process to withdraw as Managing Partner.

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 30, 2019,2020, 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 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’sSEC’s rules and forms and communicated to ourthe Partnership’s management, including the Managing Partner’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

There was no change in ourthe Partnership’s internal controls over financial reporting during the period covered by this quarterly reportQuarterly Report on Form 10-Q that materially affected, or is reasonably likely to materially affect, ourthe Partnership’s internal controls over financial reporting.reporting, including any changes related to the COVID-19 pandemic and the transition to a remote working environment.