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 30, ~~2022~~2023


☐			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: 1-4300

APACHE CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			41-0747868
(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)

(713) 296-6000

(Registrant’s telephone number, including area code)

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 ☐

Note: The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934.

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

☐

Non-accelerated filer

☐ ☒

Smaller reporting company

☐

Emerging growth 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 shares of registrant’s common stock outstanding as of July 31, ~~2022~~2023 (100% owned by APA Corporation)			1,000

OMISSION OF CERTAIN INFORMATION

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format.

TABLE OF CONTENTS


Item	Item		Page	Item		Page

		PART I - FINANCIAL INFORMATION			PART I - FINANCIAL INFORMATION
1.	1.	FINANCIAL STATEMENTS	1	1.	FINANCIAL STATEMENTS	1
		STATEMENT OF CONSOLIDATED OPERATIONS	1		STATEMENT OF CONSOLIDATED OPERATIONS	1
		STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2		STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2
		STATEMENT OF CONSOLIDATED CASH FLOWS	3		STATEMENT OF CONSOLIDATED CASH FLOWS	3
		CONSOLIDATED BALANCE SHEET	4		CONSOLIDATED BALANCE SHEET	4
		STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS	5		STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS	5
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
2.	2.	MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS	31	2.	MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS	27
3.	3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40	3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
4.	4.	CONTROLS AND PROCEDURES	40	4.	CONTROLS AND PROCEDURES	36

		PART II - OTHER INFORMATION			PART II - OTHER INFORMATION
1.	1.	LEGAL PROCEEDINGS	42	1.	LEGAL PROCEEDINGS	37
1A.	1A.	RISK FACTORS	42	1A.	RISK FACTORS	37
6.	6.	EXHIBITS	43	6.	EXHIBITS	38

FORWARD-LOOKING STATEMENTS AND RISKS

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company’s 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 the Company’s examination of historical operating trends, the information that was used to prepare its estimate of proved reserves as of December 31, ~~2021,~~2022, and other data in the Company’s 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,” “continue,” “seek,” “guidance,” “goal,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under 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 the Company’s expectations include, but are not limited to, its assumptions about:

•~~the scope, duration,~~changes in local, regional, national, and ~~reoccurrence~~international economic conditions, including as a result of any epidemics or pandemics, ~~(including, specifically,~~such as the coronavirus disease ~~2019~~ (COVID-19) pandemic and any related ~~variants) and the actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to such epidemics or pandemics;~~

•~~the mandate, availability, and effectiveness of vaccine programs and therapeutics related to the treatment of COVID-19;~~variants;

•the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or ~~services;~~services, including the prices received for natural gas purchased from third parties to sell and deliver to a U.S. LNG export facility;

•the Company’s commodity hedging arrangements;

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

•production and reserve levels;

•drilling risks;

•economic and competitive conditions, including market and macro-economic disruptions resulting from the Russian war in ~~Ukraine;~~Ukraine and from actions taken by foreign oil and gas producing nations, including the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members that participate in OPEC initiatives (OPEC+);

•the availability of capital resources;

•capital expenditures and other contractual obligations;

•currency exchange rates;

•weather conditions;

•inflation rates;

•the impact of changes in tax legislation;

•the availability of goods and services;

•the impact of political pressure and the influence of environmental groups and other stakeholders on decisions and policies related to the industries in which the Company and its affiliates operate;

•legislative, regulatory, or policy changes, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, or water disposal;

•the Company’s performance on environmental, social, and governance measures;

•terrorism or cyberattacks;

•the occurrence of property acquisitions or divestitures;

•the integration of acquisitions;

•the Company’s ability to access the capital markets;

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

•the ~~Company’s expectations with respect to~~benefits derived from the ~~new~~ operating structure implemented pursuant to the Holding Company Reorganization (as defined in the Notes to the Company’s Consolidated Financial Statements ~~set forth~~contained in ~~Part I,~~ ~~Item 1—Financial Statements~~ ~~of this Quarterly~~the Company’s Annual Report on Form ~~10-Q) and~~10-K for the ~~associated disclosure implications;~~fiscal year ended December 31, 2022);

•other factors disclosed under Items 1 and 2—Business and Properties—Estimated Proved Reserves and Future Net Cash Flows, Item 1A—Risk Factors, Item 7—Management’s ~~Discussion and~~Narrative Analysis of ~~Financial Condition and~~ Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021;~~2022;

•other risks and uncertainties disclosed in APA Corporation’s second-quarter ~~2022~~2023 earnings release;

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

•other factors disclosed in the other filings that the Company makes with the Securities and Exchange Commission.

Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise these statements, whether based on changes in internal estimates or expectations, new information, future developments, or otherwise.

DEFINITIONS

All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this Quarterly Report on Form 10-Q. As used herein:

“3-D” means three-dimensional.

“4-D” means four-dimensional.

“b/d” means barrels of oil or NGLs per day.

“bbl” or “bbls” means barrel or barrels of oil or NGLs.

“bcf” means billion cubic feet of natural gas.

“bcf/d” means one bcf per day.

“boe” means barrel of oil equivalent, determined by using the ratio of one barrel of oil or NGLs to six Mcf of gas.

“boe/d” means boe per day.

“Btu” means a British thermal unit, a measure of heating value.

“Liquids” means oil and NGLs.

“LNG” means liquefied natural gas.

“Mb/d” means Mbbls per day.

“Mbbls” means thousand barrels of oil or NGLs.

“Mboe” means thousand boe.

“Mboe/d” means Mboe per day.

“Mcf” means thousand cubic feet of natural gas.

“Mcf/d” means Mcf per day.

“MMbbls” means million barrels of oil or NGLs.

“MMboe” means million boe.

“MMBtu” means million Btu.

“MMBtu/d” means MMBtu per day.

“MMcf” means million cubic feet of natural gas.

“MMcf/d” means MMcf per day.

“NGL” or “NGLs” means natural gas liquids, which are expressed in barrels.

“NYMEX” means New York Mercantile Exchange.

“oil” includes crude oil and condensate.

“PUD” means proved undeveloped.

“SEC” means the United States Securities and Exchange Commission.

“Tcf” means trillion cubic feet of natural gas.

“U.K.” means United Kingdom.

“U.S.” means United States.

With respect to information relating to the Company’s working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by the Company’s working interest therein. Unless otherwise specified, all references to wells and acres are gross.

References to “Apache,” the “Company,” “we,” “us,” and “our” refer to Apache Corporation and its consolidated subsidiaries, unless otherwise specifically stated. References to “APA” refer to APA Corporation, the Company’s parent holding company, and its consolidated subsidiaries, including the Company, unless otherwise specifically stated.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)


		For the Quarter Ended June 30,				For the Six Months Ended June 30,					For the Quarter Ended June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In millions)									(In millions)
REVENUES AND OTHER:	REVENUES AND OTHER:									REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues(1)	Oil, natural gas, and natural gas liquids production revenues(1)	$	2,525	$	1,514	$	4,845	$	2,945	Oil, natural gas, and natural gas liquids production revenues(1)	$	1,600	$	2,525	$	3,306	$	4,845
Purchased oil and gas sales(1)	Purchased oil and gas sales(1)	522		242		871		682		Purchased oil and gas sales(1)	144		522		383		871
Total revenues	Total revenues	3,047		1,756		5,716		3,627		Total revenues	1,744		3,047		3,689		5,716
Derivative instrument gains (losses), net		(32)		(113)		(94)		45
Derivative instrument losses, net										Derivative instrument losses, net	—		(32)		—		(94)
Gain (loss) on divestitures, net	Gain (loss) on divestitures, net	(27)		65		1,149		67		Gain (loss) on divestitures, net	5		(27)		6		1,149

Other, net	Other, net	64		74		109		135		Other, net	109		64		77		109
		3,052		1,782		6,880		3,874			1,858		3,052		3,772		6,880
OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:
Lease operating expenses	Lease operating expenses	359		311		703		575		Lease operating expenses	352		359		666		703
Gathering, processing, and transmission(1)	Gathering, processing, and transmission(1)	94		61		175		119		Gathering, processing, and transmission(1)	75		94		148		175
Purchased oil and gas costs(1)	Purchased oil and gas costs(1)	528		262		879		756		Purchased oil and gas costs(1)	131		528		347		879
Taxes other than income	Taxes other than income	78		51		148		95		Taxes other than income	47		78		97		148
Exploration	Exploration	15		19		40		65		Exploration	37		15		81		40
General and administrative	General and administrative	83		79		234		162		General and administrative	66		83		124		234
Transaction, reorganization, and separation	Transaction, reorganization, and separation	3		4		17		4		Transaction, reorganization, and separation	2		3		6		17
Depreciation, depletion, and amortization	Depreciation, depletion, and amortization	278		351		569		693		Depreciation, depletion, and amortization	339		278		647		569
Asset retirement obligation accretion	Asset retirement obligation accretion	29		28		58		56		Asset retirement obligation accretion	29		29		57		58

Impairments										Impairments	46		—		46		—
Financing costs, net	Financing costs, net	62		94		202		201		Financing costs, net	42		62		91		202
		1,529		1,260		3,025		2,726			1,166		1,529		2,310		3,025
NET INCOME BEFORE INCOME TAXES	NET INCOME BEFORE INCOME TAXES	1,523		522		3,855		1,148		NET INCOME BEFORE INCOME TAXES	692		1,523		1,462		3,855
Current income tax provision	Current income tax provision	415		131		807		280		Current income tax provision	254		415		600		807
Deferred income tax benefit		(21)		(40)		(62)		(22)
Deferred income tax provision (benefit)										Deferred income tax provision (benefit)	(14)		(21)		105		(62)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	NET INCOME INCLUDING NONCONTROLLING INTERESTS	1,129		431		3,110		890		NET INCOME INCLUDING NONCONTROLLING INTERESTS	452		1,129		757		3,110
Net income attributable to noncontrolling interest - Sinopec		141		41		260		83
Net income attributable to noncontrolling interest - Altus		—		27		14		28
Net income attributable to noncontrolling interest - APA Corporation		85		—		156		—
Net income (loss) attributable to Altus Preferred Unit limited partners		—		24		(70)		43
NET INCOME ATTRIBUTABLE TO APA CORPORATION		$	903	$	339	$	2,750	$	736
Net income attributable to noncontrolling interest – Sinopec										Net income attributable to noncontrolling interest – Sinopec	81		141		165		260
Net income attributable to noncontrolling interest – Altus										Net income attributable to noncontrolling interest – Altus	—		—		—		14
Net income attributable to noncontrolling interest – APA Corporation										Net income attributable to noncontrolling interest – APA Corporation	81		85		165		156
Net loss attributable to Altus Preferred Unit limited partners										Net loss attributable to Altus Preferred Unit limited partners	—		—		—		(70)
NET INCOME ATTRIBUTABLE TO APACHE CORPORATION										NET INCOME ATTRIBUTABLE TO APACHE CORPORATION	$	290	$	903	$	427	$	2,750

(1) For ~~gathering, processing, and transmission costs~~transactions associated with Kinetik, refer to Note 7—Equity Method ~~Interest~~Interests for further detail.

The accompanying notes to consolidated financial statements are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

For the Quarter Ended
June 30,
For the Six Months Ended
June 30,
2022 2021 2022 2021
(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS $ 1,129 $ 431 $ 3,110 $ 890
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Share of equity method interests other comprehensive income — — — 1
Pension and postretirement benefit plan — — (1) —
COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS 1,129 431 3,109 891
Comprehensive income attributable to noncontrolling interest - Sinopec 141 41 260 83
Comprehensive income attributable to noncontrolling interest - Altus — 27 14 28
Comprehensive income attributable to noncontrolling interest - APA Corporation 85 — 156 0
Comprehensive income (loss) attributable to Altus Preferred Unit limited partners — 24 (70) 43
COMPREHENSIVE INCOME ATTRIBUTABLE TO APA CORPORATION $ 903 $ 339 $ 2,749 $ 737


	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS	$	452	$	1,129	$	757	$	3,110
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Pension and postretirement benefit plan	—		—		3		(1)
COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS	452		1,129		760		3,109
Comprehensive income attributable to noncontrolling interest – Sinopec	81		141		165		260
Comprehensive income attributable to noncontrolling interest – Altus	—		—		—		14
Comprehensive income attributable to noncontrolling interest – APA Corporation	81		85		165		156
Comprehensive loss attributable to Altus Preferred Unit limited partners	—		—		—		(70)
COMPREHENSIVE INCOME ATTRIBUTABLE TO APACHE CORPORATION	$	290	$	903	$	430	$	2,749

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 Six Months Ended June 30,					For the Six Months Ended June 30,
		2022		2021			2023		2022

		(In millions)					(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	Net income including noncontrolling interests	$	3,110	$	890	Net income including noncontrolling interests	$	757	$	3,110
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument losses, net	Unrealized derivative instrument losses, net	83		55		Unrealized derivative instrument losses, net	—		83
Gain on divestitures, net	Gain on divestitures, net	(1,149)		(67)		Gain on divestitures, net	(6)		(1,149)
Exploratory dry hole expense and unproved leasehold impairments	Exploratory dry hole expense and unproved leasehold impairments	15		46		Exploratory dry hole expense and unproved leasehold impairments	61		15
Depreciation, depletion, and amortization	Depreciation, depletion, and amortization	569		693		Depreciation, depletion, and amortization	647		569
Asset retirement obligation accretion	Asset retirement obligation accretion	58		56		Asset retirement obligation accretion	57		58

Benefit from deferred income taxes		(62)		(22)
Impairments						Impairments	46		—
Provision for (benefit from) deferred income taxes						Provision for (benefit from) deferred income taxes	105		(62)
(Gain) loss on extinguishment of debt	(Gain) loss on extinguishment of debt	67		(1)		(Gain) loss on extinguishment of debt	(9)		67

Other, net	Other, net	(119)		(34)		Other, net	(113)		(119)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	(501)		(173)		Receivables	92		(501)
Inventories	Inventories	(18)		20		Inventories	(45)		(18)
Drilling advances and other current assets	Drilling advances and other current assets	28		32		Drilling advances and other current assets	(106)		28
Deferred charges and other long-term assets	Deferred charges and other long-term assets	(11)		(18)		Deferred charges and other long-term assets	159		(11)
Accounts payable	Accounts payable	185		145		Accounts payable	(84)		185
Accounts payable to APA Corporation		(54)		13
Accounts receivable from/payable to APA Corporation						Accounts receivable from/payable to APA Corporation	126		(54)
Accrued expenses	Accrued expenses	201		17		Accrued expenses	(161)		201
Deferred credits and noncurrent liabilities	Deferred credits and noncurrent liabilities	(2)		(17)		Deferred credits and noncurrent liabilities	(221)		(2)
NET CASH PROVIDED BY OPERATING ACTIVITIES	NET CASH PROVIDED BY OPERATING ACTIVITIES	2,400		1,635		NET CASH PROVIDED BY OPERATING ACTIVITIES	1,305		2,400
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property	Additions to upstream oil and gas property	(635)		(488)		Additions to upstream oil and gas property	(962)		(635)

Leasehold and property acquisitions	Leasehold and property acquisitions	(26)		(3)		Leasehold and property acquisitions	(10)		(26)

Notes receivable from APA Corporation						Notes receivable from APA Corporation	(144)		—
Proceeds from sale of oil and gas properties	Proceeds from sale of oil and gas properties	751		181		Proceeds from sale of oil and gas properties	28		751
Proceeds from sale of Kinetik shares	Proceeds from sale of Kinetik shares	224		—		Proceeds from sale of Kinetik shares	—		224
Deconsolidation of Altus cash and cash equivalents	Deconsolidation of Altus cash and cash equivalents	(143)		—		Deconsolidation of Altus cash and cash equivalents	—		(143)
Other, net	Other, net	2		(13)		Other, net	(13)		2
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	173		(323)		NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(1,101)		173
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Apache credit facility, net	Proceeds from Apache credit facility, net	138		(150)		Proceeds from Apache credit facility, net	—		138
Proceeds from Altus credit facility, net		—		33

Payments on note payable to APA Corporation, net	Payments on note payable to APA Corporation, net	(486)		—		Payments on note payable to APA Corporation, net	—		(486)

Payments on fixed-rate debt	Payments on fixed-rate debt	(1,370)		(20)		Payments on fixed-rate debt	(65)		(1,370)
Distributions to noncontrolling interest - Sinopec		(159)		(60)
Distributions to Altus Preferred Unit limited partners		(11)		(23)
Distributions to noncontrolling interest – Sinopec						Distributions to noncontrolling interest – Sinopec	(100)		(159)
Distributions to APA Corporation	Distributions to APA Corporation	(733)		(302)		Distributions to APA Corporation	(100)		(733)
Dividends paid		—		(9)

Other, net	Other, net	(3)		(21)		Other, net	4		(14)
NET CASH USED IN FINANCING ACTIVITIES	NET CASH USED IN FINANCING ACTIVITIES	(2,624)		(552)		NET CASH USED IN FINANCING ACTIVITIES	(261)		(2,624)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(51)		760
NET DECREASE IN CASH AND CASH EQUIVALENTS						NET DECREASE IN CASH AND CASH EQUIVALENTS	(57)		(51)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	279		262		CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	185		279
CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	228	$	1,022	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	128	$	228

SUPPLEMENTARY CASH FLOW DATA:	SUPPLEMENTARY CASH FLOW DATA:					SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	Interest paid, net of capitalized interest	$	176	$	233	Interest paid, net of capitalized interest	$	151	$	176
Income taxes paid, net of refunds	Income taxes paid, net of refunds	637		231		Income taxes paid, net of refunds	476		637
Non-cash financing adjustment: APA’s assumption of Apache’s borrowings on its syndicated credit facility	Non-cash financing adjustment: APA’s assumption of Apache’s borrowings on its syndicated credit facility	680		—		Non-cash financing adjustment: APA’s assumption of Apache’s borrowings on its syndicated credit facility	—		680

The accompanying notes to consolidated financial statements are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

June 30,
2022(1)
December 31,
2021(1)
(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($132 related to Altus VIE) $ 228 $ 279
Receivables, net of allowance of $115 and $109 1,873 1,390
Other current assets (Note 6) ($9 related to Altus VIE)
871 649
Accounts receivable from APA Corporation 90 77
3,062 2,395
PROPERTY AND EQUIPMENT:
Oil and gas properties 40,548 40,474
Gathering, processing, and transmission facilities ($209 related to Altus VIE) 447 673
Other ($3 related to Altus VIE) 604 1,126
Less: Accumulated depreciation, depletion, and amortization ($25 related to Altus VIE) (33,756) (34,213)
7,843 8,060
OTHER ASSETS:
Equity method interests (Note 7) ($1,365 related to Altus VIE)
618 1,365
Decommissioning security for sold Gulf of Mexico properties (Note 12)
383 640
Deferred charges and other ($6 related to Altus VIE) 550 581
Note receivable from APA Corporation (Note 2)
1,383 1,352
$ 13,839 $ 14,393
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($12 related to Altus VIE) $ 827 $ 651
Note payable to APA Corporation 349 195
Current debt 125 215
Other current liabilities (Note 8) ($15 related to Altus VIE)
1,721 1,170
3,022 2,231
LONG-TERM DEBT (Note 10) ($657 related to Altus VIE)
4,885 7,295
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes 88 148
Asset retirement obligation (Note 9) ($68 related to Altus VIE)
2,061 2,089
Decommissioning contingency for sold Gulf of Mexico properties (Note 12)
825 1,086
Other ($67 related to Altus VIE) 468 572
3,442 3,895
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 13)
— 712
EQUITY (DEFICIT):
Common stock, $0.625 par, 1,000 and 1,000 shares authorized, respectively, 1,000 and 1,000 shares issued, respectively — —
Paid-in capital 8,054 8,677
Accumulated deficit (6,567) (9,317)
Accumulated other comprehensive income 21 22
EQUITY (DEFICIT) ATTRIBUTABLE TO APA CORPORATION 1,508 (618)
Noncontrolling interest - Sinopec 921 820
Noncontrolling interest - APA Corporation 61 —
Noncontrolling interest - Altus — 58
TOTAL EQUITY 2,490 260
$ 13,839 $ 14,393


	June 30, 2023		December 31, 2022

	(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	128	$	185
Receivables, net of allowance of $103 and $117	1,331		1,424
Other current assets (Note 6)	1,161		993

	2,620		2,602
PROPERTY AND EQUIPMENT:
Oil and gas properties	42,117		41,245
Gathering, processing, and transmission facilities	447		449
Other	598		613
Less: Accumulated depreciation, depletion, and amortization	(34,952)		(34,350)
	8,210		7,957
OTHER ASSETS:
Equity method interests (Note 7)	695		624
Decommissioning security for sold Gulf of Mexico properties (Note 12)	57		217
Deferred charges and other	517		571
Noncurrent receivable from APA Corporation (Note 2)	—		869
Notes receivable from APA Corporation (Note 2)	2,473		1,415
	$	14,572	$	14,255

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	562	$	646
Accounts payable to APA Corporation (Note 2)	126		—
Current debt	2		2
Other current liabilities (Note 8)	1,935		2,049
	2,625		2,697
LONG-TERM DEBT (Note 10)	4,812		4,885
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	431		314
Asset retirement obligation (Note 9)	1,978		1,936
Decommissioning contingency for sold Gulf of Mexico properties (Note 12)	472		738
Other	440		443
	3,321		3,431

EQUITY (DEFICIT):
Common stock, $0.625 par, 1,000 and 1,000 shares authorized, respectively, 1,000 and 1,000 shares issued, respectively	—		—
Paid-in capital	8,037		8,025
Accumulated deficit	(5,354)		(5,781)

Accumulated other comprehensive income	17		14
EQUITY ATTRIBUTABLE TO APACHE CORPORATION	2,700		2,258
Noncontrolling interest – Sinopec	987		922
Noncontrolling interest – APA Corporation	127		62
TOTAL EQUITY	3,814		3,242
	$	14,572	$	14,255

~~(1) The Altus VIE amounts are disclosed as of December 31, 2021. All Altus balances were deconsolidated as of February 22, 2022. Refer to~~ ~~Note 1—Summary of Significant Accounting Policies~~ ~~and~~ ~~Note 3—Acquisitions and Divestitures~~ ~~for further detail.~~

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 INTERESTS

(Unaudited)

Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)
Common
Stock Paid-In
Capital Accumulated Deficit Treasury
Stock Accumulated
Other
Comprehensive
Income PARENT COMPANY
EQUITY (DEFICIT)
Noncontrolling
Interests(1)
TOTAL
EQUITY (DEFICIT)
(In millions)
For the Quarter Ended June 30, 2021
Balance at March 31, 2021 $ 605 $ — $ 9,557 $ (9,982) $ — $ 15 $ (410) $ 997 $ 587
Net income attributable to APA Corporation — — — 339 — — 339 — 339
Net income attributable to noncontrolling interest - Sinopec — — — — — — — 41 41
Net income attributable to noncontrolling interest - Altus — — — — — — — 27 27
Net income attributable to Altus Preferred Unit holders 24 — — — — — — — —
Distributions payable to Altus Preferred Unit limited partners (12) — — — — — — — —
Distributions to noncontrolling interest - Sinopec — — — — — — — (20) (20)
Distributions to APA Corporation — — (10) — — — (10) — (10)
Other — — (12) 1 — — (11) (5) (16)
Balance at June 30, 2021 $ 617 $ — $ 9,535 $ (9,642) $ — $ 15 $ (92) $ 1,040 $ 948
For the Quarter Ended June 30, 2022
Balance at March 31, 2022 $ — $ — $ 8,381 $ (7,470) $ — $ 21 $ 932 $ 900 $ 1,832
Net income attributable to APA Corporation — — — 903 — — 903 — 903
Net income attributable to noncontrolling interest - APA — — — — — — — 85 85
Net income attributable to noncontrolling interest - Sinopec — — — — — — — 141 141
Distributions to noncontrolling interest - Sinopec — — — — — — — (90) (90)
Distributions to APA Corporation — — (333) — — — (333) (54) (387)
Other — — 6 — — — 6 — 6
Balance at June 30, 2022 $ — $ — $ 8,054 $ (6,567) $ — $ 21 $ 1,508 $ 982 $ 2,490


	Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)		Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		EQUITY (DEFICIT) ATTRIBUTABLE TO APACHE CORPORATION		Noncontrolling Interests(1)		TOTAL EQUITY

	(In millions)
For the Quarter Ended June 30, 2022
Balance at March 31, 2022	$	—	$	8,381	$	(7,470)	$	21	$	932	$	900	$	1,832
Net income attributable to Apache Corporation	—		—		903		—		903		—		903
Net income attributable to noncontrolling interest – APA	—		—		—		—		—		85		85
Net income attributable to noncontrolling interest – Sinopec	—		—		—		—		—		141		141



Distributions to noncontrolling interest – Sinopec	—		—		—		—		—		(90)		(90)



Distributions to APA Corporation	—		(333)		—		—		(333)		(54)		(387)

Other	—		6		—		—		6		—		6
Balance at June 30, 2022	$	—	$	8,054	$	(6,567)	$	21	$	1,508	$	982	$	2,490

For the Quarter Ended June 30, 2023
Balance at March 31, 2023	$	—	$	8,031	$	(5,644)	$	17	$	2,404	$	1,118	$	3,522
Net income attributable to Apache Corporation	—		—		290		—		290		—		290
Net income attributable to noncontrolling interest – APA	—		—		—		—		—		81		81
Net income attributable to noncontrolling interest – Sinopec	—		—		—		—		—		81		81




Distributions to noncontrolling interest – Sinopec	—		—		—		—		—		(83)		(83)
Distributions to APA Corporation	—		—		—		—		—		(83)		(83)



Other	—		6		—		—		6		—		6
Balance at June 30, 2023	$	—	$	8,037	$	(5,354)	$	17	$	2,700	$	1,114	$	3,814

(1) As a result of the BCP Business Combination (as defined herein), the Company deconsolidated Altus (as defined herein) on February 22, 2022. Refer to Note 1—Summary of Significant Accounting Policies and Note 3—Acquisitions and Divestitures for further detail.

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 INTERESTS - Continued

(Unaudited)

Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)
Common
Stock Paid-In
Capital Accumulated Deficit Treasury
Stock Accumulated
Other
Comprehensive
Income PARENT
COMPANY
EQUITY (DEFICIT)
Noncontrolling
Interests(1)
TOTAL
EQUITY (DEFICIT)
(In millions)
For the Six Months Ended June 30, 2021
Balance at December 31, 2020 $ 608 $ 262 $ 11,735 $ (10,461) $ (3,189) $ 14 $ (1,639) $ 994 $ (645)
Net income attributable to APA Corporation — — — 736 — — 736 — 736
Net income attributable to noncontrolling interest - Sinopec — — — — — — — 83 83
Net income attributable to noncontrolling interest - Altus — — — — — — — 28 28
Net income attributable to Altus Preferred Unit holders 43 — — — — — — — —
Distributions payable to Altus Preferred Unit limited partners (11) — — — — — — — —
Distributions paid to Altus Preferred Unit limited partners (23) — — — — — — — —
Distributions to noncontrolling interest - Sinopec — — — — — — — (60) (60)
Distributions to APA Corporation — — (10) — — — (10) — (10)
Common dividends declared ($0.025 per share) — — (9) — — — (9) — (9)
APA Corporation share exchange — (262) (2,927) — 3,189 — — — —
Holding Company Reorganization — — 757 82 — — 839 — 839
Other — — (11) 1 — 1 (9) (5) (14)
Balance at June 30, 2021 $ 617 $ — $ 9,535 $ (9,642) $ — $ 15 $ (92) $ 1,040 $ 948
For the Six Months Ended June 30, 2022
Balance at December 31, 2021 $ 712 $ — $ 8,677 $ (9,317) $ — $ 22 $ (618) $ 878 $ 260
Net income attributable to APA Corporation — — 2,750 — — 2,750 — 2,750
Net income attributable to noncontrolling interest - APA — — — — — — — 156 156
Net income attributable to noncontrolling interest - Sinopec — — — — — — — 260 260
Net income attributable to noncontrolling interest - Altus — — — — — — — 14 14
Net loss attributable to Altus Preferred Unit limited partners (70) — — — — — — — —
Distributions to noncontrolling interest - Sinopec — — — — — — — (159) (159)
Distributions to APA Corporation — — (638) — — — (638) (95) (733)
Deconsolidation of Altus (642) — — — — — — (72) (72)
Other — — 15 — — (1) 14 — 14
Balance at June 30, 2022 $ — $ — $ 8,054 $ (6,567) $ — $ 21 $ 1,508 $ 982 $ 2,490


	Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)		Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		EQUITY (DEFICIT) ATTRIBUTABLE TO APACHE CORPORATION		Noncontrolling Interests(1)		TOTAL EQUITY

	(In millions)
For the Six Months Ended June 30, 2022
Balance at December 31, 2021	$	712	$	8,677	$	(9,317)	$	22	$	(618)	$	878	$	260
Net income attributable to APA Corporation	—				2,750		—		2,750		—		2,750
Net income attributable to noncontrolling interest – APA	—		—		—		—		—		156		156
Net income attributable to noncontrolling interest – Sinopec	—		—		—		—		—		260		260
Net income attributable to noncontrolling interest – Altus	—		—		—		—		—		14		14
Net loss attributable to Altus Preferred Unit limited partners	(70)		—		—		—		—		—		—
Distributions to noncontrolling interest – Sinopec	—		—		—		—		—		(159)		(159)
Distributions to APA Corporation	—		(638)		—		—		(638)		(95)		(733)
Deconsolidation of Altus	(642)		—		—		—		—		(72)		(72)
Other	—		15		—		(1)		14		—		14
Balance at June 30, 2022	$	—	$	8,054	$	(6,567)	$	21	$	1,508	$	982	$	2,490

For the Six Months Ended June 30, 2023
Balance at December 31, 2022	$	—	$	8,025	$	(5,781)	$	14	$	2,258	$	984	$	3,242
Net income attributable to APA Corporation	—		—		427		—		427		—		427
Net income attributable to noncontrolling interest – APA	—		—		—		—		—		165		165
Net income attributable to noncontrolling interest – Sinopec	—		—		—		—		—		165		165




Distributions to noncontrolling interest – Sinopec	—		—		—		—		—		(100)		(100)
Distributions to APA Corporation	—		—		—		—		—		(100)		(100)




Other	—		12		—		3		15		—		15
Balance at June 30, 2023	$	—	$	8,037	$	(5,354)	$	17	$	2,700	$	1,114	$	3,814

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). The Company files these consolidated financial statements with the SEC as a voluntary filer to comply with the terms of certain of the Company’s outstanding debt instruments. They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of any recently adopted accounting pronouncements. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, which contains a summary of the Company’s significant accounting policies and other disclosures.

On March 1, 2021, Apache Corporation, the Company’s predecessor registrant, consummated a holding company reorganization (the Holding Company Reorganization), pursuant to which Apache became a direct, wholly owned subsidiary of APA Corporation (APA), and all of Apache’s outstanding shares automatically converted into equivalent corresponding shares of APA. Pursuant to the Holding Company Reorganization, APA became the successor issuer to Apache pursuant to Rule 12g-3(a) under the Exchange Act and replaced Apache as the public company trading on the Nasdaq Global Select Market under the ticker symbol “APA.” The Holding Company Reorganization modernized the Company’s operating and legal structure, making it more consistent with other companies that have affiliates operating around the globe. Refer to ~~Note 2—Transactions with Parent Affiliate~~ ~~for more detail.~~

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of June 30, ~~2022,~~2023, the Company's significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. The Company’s financial statements for prior periods may include reclassifications that were made to conform to the current-year ~~presentation, if applicable.~~presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. Apache’s consolidated financial statements reflect the impacts of the Holding Company Reorganization on a prospective basis, and results prior to completion of the Holding Company Reorganization have not been restated. Refer to ~~Note 2—Transactions with Parent Affiliate~~ ~~for more detail.~~

The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated. The Company consolidates all other investments in which, either through direct or indirect ownership, it has more than a 50 percent voting interest or controls the financial and operating decisions. Noncontrolling interests represent third-party ownership in the net assets of a consolidated subsidiary of Apache and are reflected separately in the Company’s financial statements.

~~In conjunction with the ratification of a new merged concession agreement with the Egyptian General Petroleum Corporation (EGPC) in December 2021,~~ Apache ~~modified partnership agreements for certain consolidated subsidiaries. Apache subsequently~~has determined that one of its limited partnership subsidiaries, which has control over Apache’s Egyptian operations, qualified as a variable interest entity (VIE) under GAAP. Apache continues to consolidate this limited partnership subsidiary because the Company has concluded that it has a controlling financial interest in the Egyptian operations and was determined to be the primary beneficiary of the VIE. ~~For all periods presented,~~ Sinopec International Petroleum Exploration and Production Corporation (Sinopec) ~~has owned~~owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business as a noncontrolling interest. ~~Under the modified partnership agreements,~~ APA Corporation (APA) also owns a ~~minority participation~~noncontrolling interest in ~~the remaining two-thirds of its~~Apache’s consolidated Egypt oil and gas ~~business as a noncontrolling interest.~~business. Refer to Note 2—Transactions with Parent Affiliate for detail regarding APA’s noncontrolling interest. All noncontrolling interests are reflected as a separate component of equity in the Company’s consolidated balance sheet.

Additionally, prior to the BCP Business Combination defined below, third-party investors owned a minority interest of approximately 21 percent of Altus Midstream Company (ALTM or Altus), which was reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. ALTM qualified as a VIE under GAAP, which Apache consolidated because a wholly owned subsidiary of Apache had a controlling financial interest and was determined to be the primary beneficiary. ~~Additionally, the assets of ALTM could only be used to settle obligations of ALTM. There was no recourse to the Company for ALTM’s liabilities.~~

On February 22, 2022, ALTM closed a previously announced transaction to combine with privately owned BCP Raptor Holdco LP (BCP and, together with BCP Raptor Holdco GP, LLC, the Contributed Entities) in an all-stock transaction, pursuant to the Contribution Agreement entered into by and among ALTM, Altus Midstream LP, New BCP Raptor Holdco, LLC (the Contributor), and BCP (the BCP Contribution Agreement). Pursuant to the BCP Contribution Agreement, the Contributor contributed all of the equity interests of the Contributed Entities (the Contributed Interests) to Altus Midstream LP, with each Contributed Entity becoming a wholly owned subsidiary of Altus Midstream LP (the BCP Business Combination). Upon closing the transaction, the combined entity was renamed Kinetik Holdings Inc. (Kinetik), and the Company determined that it was no longer the primary beneficiary of ~~ALTM.~~Kinetik. The Company further determined that ~~ALTM~~Kinetik no longer qualified as a VIE under GAAP. As a result, the Company deconsolidated ALTM on February 22, 2022. Refer to Note 3—Acquisitions and Divestitures for further detail.

The stockholders agreement entered into by and among the Company, ALTM, BCP, and other related and affiliated entities provides that the Company, through one of its wholly owned subsidiaries, retains the ability to designate a director to the board of directors of Kinetik for so long as the Company and its affiliates beneficially own 10 percent or more of Kinetik’s outstanding common stock. Based on this board representation, combined with the Company’s stock ownership, management determined it has significant influence over ~~Kinetik.~~Kinetik, which is considered a related party of the Company. Investments in which the Company has significant influence, but not control, are accounted for under the equity method of accounting. These investments are recorded separately as “Equity method interests” in the Company’s consolidated balance sheet. The Company elected the fair value option to account for its equity method interest in Kinetik. Refer to Note 7—Equity Method Interests for further detail.

Use of Estimates

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of the Company’s financial statements, and changes in these estimates are recorded when known.

Significant estimates with regard to these financial statements include the estimates of fair value for long-lived assets (refer to “Fair Value Measurements” and “Property and Equipment” sections in this Note 1 below), the fair value determination of acquired assets and liabilities (refer to Note 3—Acquisitions and Divestitures), the fair value of equity method interests (refer to “Equity Method Interests” within this Note 1 below and Note 7—Equity Method Interests), the assessment of asset retirement obligations (refer to Note 9—Asset Retirement Obligation), the estimate of income taxes (refer to Note 11—Income Taxes), the estimation of the contingent liability representing Apache’s potential ~~obligation to decommission~~decommissioning obligations on sold properties in the Gulf of Mexico (refer to Note 12—Commitments and Contingencies~~), the estimate of income taxes (refer to~~ ~~Note 11—Income Taxes~~), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom.

Fair Value Measurements

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

The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Refer to Note 5—Derivative Instruments and Hedging Activities, Note ~~10—Debt and Financing Costs~~7—Equity Method Interests, and Note ~~13—Redeemable Noncontrolling Interest - Altus~~10—Debt and Financing Costs for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

During the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded no asset impairments in connection with fair value assessments.

Accounts Receivable from / Accounts Payable to APA

Accounts receivable from or payable to APA represents the net result of Apache’s administrative and support services provided to APA and other miscellaneous cash management transactions to be settled between the two affiliated entities. Generally, cash in this amount will be transferred to Apache or paid to APA in subsequent periods, after current period transactions are processed and net results of operations are determined. However, from time to time, Apache may estimate and transfer the cash settlement amount in the month the transactions are processed in order to minimize affiliate working capital ~~balances.~~balances or retain affiliate balances for cash management purposes. Refer to Note 2—Transactions with Parent Affiliate for more detail.

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

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, including receivables for purchased oil and gas sales, ~~and~~in each case, net of allowance for credit losses, were ~~$1.8~~$1.2 billion and $1.3 billion as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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 ~~15—~~13—Business Segment Information for a disaggregation of oil, gas, and natural gas production revenue by product and reporting segment.

In accordance with the provisions of ASC 606, “Revenue from Contracts with Customers,” variable market prices for each short-term commodity sale are allocated entirely to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations. As such, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations as of the end of the reporting period.

Inventories

Inventories consist principally of tubular goods and equipment and are stated at the lower of weighted-average cost or net realizable value. Oil produced but not sold, primarily in the North Sea, is also recorded to inventory and is stated at the lower of the cost to produce or net realizable value.

During the three and six months ended June 30, 2023, the Company recorded $46 million of impairments in connection with valuations of drilling and operations equipment inventory upon the Company’s decision to suspend drilling operations in the North Sea.

Property and Equipment

The carrying value of the Company’s property and equipment represents the cost incurred to acquire the property and equipment, including capitalized interest, net of any impairments. For business combinations and acquisitions, property and equipment cost is based on the fair values at the acquisition date.

Oil and Gas Property

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

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

Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of crude oil and natural gas, are capitalized. Depreciation of the cost of proved oil and gas properties is calculated using the unit-of-production (UOP) method. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the carrying value of associated proved oil and gas properties. The reserve base used to calculate depreciation for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. The reserve base used to calculate the depreciation for capitalized well costs is the sum of proved developed reserves only. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are included in the depreciable cost.

Oil and gas properties are grouped for depreciation in accordance with ASC 932, “Extractive Activities—Oil and Gas.” The basis for grouping is a reasonable aggregation of properties with a common geological structural feature or stratigraphic condition, such as a reservoir or field.

When circumstances indicate that the carrying value of proved oil and gas properties may not be recoverable, the Company compares unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on the Company’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ASC 820. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments, a Level 3 fair value measurement.

Unproved leasehold impairments are typically recorded as a component of “Exploration” expense in the Company’s statement of consolidated operations. Gains and losses on divestitures of the Company’s oil and gas properties are recognized in the statement of consolidated operations upon closing of the transaction. Refer to Note 3—Acquisitions and Divestitures for more detail.

Gathering, Processing, and Transmission (GPT) Facilities

GPT facilities are depreciated on a straight-line basis over the estimated useful lives of the assets. The estimation of useful life takes into consideration anticipated production lives from the fields serviced by the GPT assets, whether Apache-operated or third party-operated, as well as potential development plans by the Company for undeveloped acreage within, or close to, those fields.

The Company assesses the carrying amount of its GPT facilities whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of these facilities is more than the sum of the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying value over its fair value.

2. TRANSACTIONS WITH PARENT AFFILIATE

~~The Company completed~~Apache is a direct, wholly owned subsidiary of APA. Apache holds assets in the ~~Holding Company Reorganization on~~U.S., Egypt, and the U.K. and provides administrative and support operations for certain APA subsidiaries with interests in the U.S., Suriname, and the Dominican Republic.

Notes Receivable from APA Corporation

On March 1, 2021, ~~and~~Apache sold to APA all of the equity in the 3three Apache subsidiaries through which Apache’s interests in Suriname and the Dominican Republic were held. The Company accounted for the divestiture of its subsidiaries as a transfer to an affiliate entity under common control and no longer consolidates the subsidiaries for periods subsequent to the Holding Company Reorganization. The carrying value of the net assets transferred was $483 million, which included approximately $292 million of cash and cash equivalents, $163 million of oil and gas properties, and working capital items. The Company continues to hold its existing assets in the U.S., Egypt, and the U.K.

~~The Holding Company Reorganization gave rise~~purchase price is payable pursuant to a senior promissory note ~~payable~~made by APA payable to ~~Apache.~~Apache, dated March 1, 2021. The note has a seven-year term, maturing on February 29, 2028, and bears interest at a rate of 4.5 percent per annum, payable semi-annually, subject to APA’s option to allow accrued interest to convert to principal (PIK) during the first 5.5 years of the note’s term (to August 31, 2026). The note is guaranteed by each of the 3three subsidiaries sold by Apache to APA. APA allowed interest accrued from March 1, 2021 through February 28, 2023, totaling $125 million, to PIK pursuant to the note. As of June 30, 2023 and December 31, 2022, there was $1.4 billion in principal outstanding under this note.

APA also made a senior promissory note payable to Apache, dated March 31, 2023, pursuant to which Apache may loan and APA may borrow, repay, and reborrow up to $1.5 billion in aggregate principal amount outstanding at any time. The note has a five-year term, maturing March 31, 2028. The note bears interest at a rate per annum of 6.0 percent, payable semi-annually; however, APA may allow accrued interest to convert to principal, subject to the aggregate maximum principal amount of the note. APA allowed interest accrued from March 31, 2023 through May 15, 2023, totaling approximately $6 million, to PIK pursuant to the note. As of June 30, 2023, there were $994 million in borrowings outstanding under this note. The note is intended to facilitate cash management of APA and Apache.

These notes are both reflected in “Notes receivable from APA Corporation” on the Company’s consolidated balance sheet. The Company recognized interest income on ~~this note of $16~~these notes totaling $29 million and ~~$15~~$16 million during the second quarters of ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$31~~$45 million and ~~$20~~$31 million during the first six months of ~~2022~~2023 and ~~2021,~~2022, respectively. The interest income related to ~~this note~~these notes is reflected in “Financing costs, net” on the Company’s statement of consolidated operations. ~~Apache has allowed interest accrued from March 1, 2021 through February 28, 2022, totaling $61 million, to PIK pursuant to the note.~~

Noncontrolling Interest – APA Corporation

In the fourth quarter of 2021, in conjunction with the ratification of a new merged concession agreement (MCA) with ~~EGPC,~~the Egyptian General Petroleum Corporation, Apache entered into an agreement with APA under which the historical value of existing concessions prior to ratifying the MCA was retained by Apache, with any excess value from the MCA terms being allocated to APA. Sinopec owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business, and approximately 3050 percent of the remaining net income and distributable cash flow for the Company’s Egyptian operations is being allocated to APA in ~~2022.~~2023. Apache consolidates its Egyptian operations, with APA’s noncontrolling interest reflected as a separate component in the Company’s consolidated balance sheet. ~~In the second quarter and the first six months of 2022, the~~The Company recorded net income attributable to APA’s noncontrolling interest of $81 million and $85 million in the second quarters of 2023 and 2022, respectively, and $165 million and $156 million ~~respectively,~~in the first six months of 2023 and 2022, respectively. The Company also distributed $100 million and $95 million in the first six months of 2023 and 2022, respectively, of cash to APA in association with its noncontrolling interest.

~~The Company continues~~

Accounts Receivable from / Accounts Payable to ~~provide administrative and support operations to~~ APA ~~related to activities performed for~~

In connection with the ~~Suriname and Dominican Republic subsidiaries. The Company~~Company’s role as service provider, Apache is reimbursed by APA for employee costs, certain internal costs, and third-party costs paid by the Company ~~in connection with its role as service provider.~~on behalf of APA. All reimbursements are based on actual costs incurred, and no market premium is applied by the Company to APA. The Company incurred $6 million and $5 million in the second quarters of 2023 and 2022, respectively, and $11 million and $9 million in ~~reimbursable corporate overhead charges in the second quarter and~~ the first six months of 2023 and 2022, ~~respectively.~~

~~In August 2021, Apache entered into a promissory note with APA under which Apache may borrow up to $250 million from APA at APA’s discretion.~~respectively, in reimbursable corporate overhead charges. The ~~note has a term~~Company also collects third-party receivables on behalf of ~~one year, maturing on August 4, 2022, and bears interest at a variable rate per annum equal to the monthly, short-term applicable federal rate, payable semi-annually.~~APA. As of June 30, ~~2022, there were no borrowings outstanding under this note. As of December 31, 2021, there was $195~~2023, the Company had accounts payable to APA in connection with these services totaling $126 million, ~~outstanding under this note,~~ which ~~was~~is reflected ~~as “Note~~in “Accounts payable to APA Corporation” on the Company’s consolidated balance sheet.

~~In April~~ As of December 31, 2022, ~~Apache made~~the Company had a receivable from APA totaling $869 million, which is reflected in “Noncurrent receivable from APA Corporation.” This balance was incorporated into the senior promissory note payable to APA in the original principal amount of $680 million. Apache made the note in consideration for APA’s assumption under its U.S. dollar denominated syndicated facility on April, 29, 2022 of Apache’s borrowings outstanding upon the simultaneous termination of its 2018 syndicated facility, as described in No ~~te 10—Debt and Financing Costs. The non-interest-bearing note has a term of one year, maturing on April 28, 2023. Apache repaid $331 million on the note~~dated March 31, 2023, discussed above during the ~~second quarter, and the outstanding balance~~first six months of ~~$349 million as of June 30, 2022 is reflected as “Note payable to~~2023.

Other Transactions with APA ~~Corporation” on the Company’s consolidated balance sheet.~~Corporation

From time to time, the Company may, at its discretion, make distributions of capital to ~~APA Corporation.~~APA. No capital distributions were made during the first six months of 2023. During the first six months of 2022, the Company made capital distributions totaling ~~$733~~$638 million primarily in support of ~~APA Corporation’s share repurchase program,~~ dividend payments ~~made~~and capital transactions completed by APA ~~and distributions for APA’s noncontrolling interest~~ during the period. ~~No capital distributions were made in~~

3. ACQUISITIONS AND DIVESTITURES

2023 Activity

During the second quarter and first six months of ~~2021.~~2023, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of approximately $5 million and $10 million, respectively.

~~3. ACQUISITIONS AND DIVESTITURES~~During the second quarter and first six months of 2023, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $7 million and $28 million, respectively, recognizing a gain of approximately $5 million and $6 million, respectively, upon closing of these transactions.

2022 Activity

During the second quarter and first six months of 2022, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $26 million.

During the second quarter and first six months of 2022, the Company ~~also~~ completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $7 million and $15 million, respectively, recognizing a gain of approximately $1 million and $2 million, respectively, upon closing of these transactions.

During the first ~~quarter~~six months of 2022, the Company completed a ~~previously announced~~ transaction to sell certain non-core mineral rights in the Delaware Basin. The Company received total cash proceeds of approximately ~~$736~~$726 million after certain post-closing adjustments and recognized an associated gain of approximately ~~$563~~$560 million. The Company also completed the sale of other non-core assets and leasehold in multiple transactions for total cash proceeds of $8 million. The Company recognized a gain of approximately $1 million upon closing of these transactions during the first quarter of 2022.

The BCP Business Combination was completed on February 22, 2022. As consideration for the contribution of the Contributed Interests, ALTM issued 50 million shares of Class C Common Stock (and Altus Midstream LP issued a corresponding number of common units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. ALTM’s stockholders continued to hold their existing shares of ~~Common Stock.~~common stock. As a result of the transaction, the Contributor, or its designees, collectively owned approximately 75 percent of the issued and outstanding shares of ALTM ~~Common Stock.~~common stock. Apache Midstream LLC, a wholly owned subsidiary of APA, which owned approximately 79 percent of the issued and outstanding shares of ALTM ~~Common Stock~~common stock prior to the BCP Business Combination, owned approximately 20 percent of the issued and outstanding shares of ~~ALTM Common Stock~~Kinetik common stock after the transaction closed.

As a result of the BCP Business Combination, the Company deconsolidated ALTM on February 22, 2022 and recognized a gain of approximately $609 million that reflects the difference ofbetween the Company’s share of ALTM’s deconsolidated balance sheet of $193 million and the fair value of $802 million of its approximate 20 percent retained ownership in the combined entity. ~~A summary of components of the gain, including the ALTM balance sheet amounts deconsolidated at the time of close, is included below:~~


	~~As of February 22, 2022~~
	~~(In millions)~~

~~Fair value of Kinetik Class A Common Stock held by Company~~	$	~~802~~

~~ASSETS:~~
~~Cash and cash equivalents~~	$	~~143~~
~~Other current assets~~	29
~~Property and equipment, net~~	~~184~~
~~Equity method interests~~	~~1,367~~
~~Other noncurrent assets~~	12
~~Total assets deconsolidated~~	$	~~1,735~~

~~LIABILITIES:~~
~~Current liabilities~~	$	3
~~Long-term debt~~	~~657~~
~~Other noncurrent liabilities~~	~~168~~
~~Total liabilities deconsolidated~~	$	~~828~~

~~NONCONTROLLING INTERESTS:~~
~~Redeemable noncontrolling interest preferred unit limited partners~~	$	~~642~~
~~Noncontrolling interest-Altus~~	72
~~Total noncontrolling interests deconsolidated~~	$	~~714~~

~~Net effect of deconsolidating balance sheet~~	$	~~(193)~~

~~Gain on deconsolidation of ALTM~~	$	~~609~~

During the first quarter of 2022, the Company sold ~~4000000~~four million of its shares inof Kinetik Class A Common Stock for cash proceeds of $224 million and recognized a loss of $25 million, including transaction fees. Refer to Note 7—Equity Method Interests for further detail. In connection with this secondary offering, the Company has agreed that within the next 24 months, it will invest a minimum of $100 million of these proceeds for new well drilling and completion activity at the Alpine High play in the Delaware Basin, where Kinetik has exclusive gas and NGL gathering and processing rights.

~~2021 Activity~~

During the second quarter of 2021, the Company completed the sale of certain non-core assets in the Permian Basin with a net carrying value of $157 million, for cash proceeds of $178 million and the assumption of asset retirement obligations of $44 million. The Company recognized a gain of approximately $65 million in connection with the sale.

During the first quarter of 2021, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $2 million. The Company also completed the sale of certain non-core assets and leasehold, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $3 million. The Company recognized a gain of approximately $2 million upon closing of these transactions during the first quarter of 2021.

1312

4. CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were ~~$78~~$71 million and ~~$46~~$50 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The increase is primarily attributable to additional drilling activity in Egypt, partially offset by successful transfer of well ~~costs. No suspended exploratory well~~ costs ~~previously capitalized for greater than one year at December 31, 2021 were charged to dry hole expense~~ during the ~~six months ended June 30, 2022.~~quarter.

Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling are those identified by management as exhibiting sufficient quantities of hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether proved reserves can be attributed to these projects.

5. 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, as well as fluctuations in exchange rates in connection with transactions denominated in foreign currencies. The Company manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production and foreign currency transactions. The Company ~~utilizes~~may utilize various types of derivative financial instruments, including forward contracts, futures contracts, swaps, and options, to manage fluctuations in cash flows resulting from changes in commodity prices or foreign currency values.

~~Counterparty Risk~~

~~The use of~~In December 2022, counterparty agreements for Apache’s commodity derivative instruments ~~exposes the Company~~were transferred from Apache to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, the Company utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for itsAPA Corporation. Apache had no outstanding derivative ~~transactions. As~~positions as of June 30, 2022, the Company had derivative positions with 12 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, the Company may not realize the benefit of some of its derivative instruments resulting from lower commodity prices2023 or ~~changes in currency exchange rates.~~

~~Derivative Instruments~~

~~Commodity Derivative Instruments~~

~~As of June 30, 2022, the Company 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
July—December 2022 NYMEX Henry Hub/IF Waha 42,320 $(0.70) — —
July—December 2022 NYMEX Henry Hub/IF HSC — — 42,320 $(0.12)
October—December 2022 NYMEX Henry Hub/IF Waha 920 $(1.19) — —
October—December 2022 NYMEX Henry Hub/IF HSC — — 920 $(0.19)
January—March 2023 NYMEX Henry Hub/IF Waha 3,150 $(1.06) — —
January—March 2023 NYMEX Henry Hub/IF HSC — — 3,150 $(0.03)
January—June 2023 NYMEX Henry Hub/IF Waha 4,525 $(1.54) — —
January—June 2023 NYMEX Henry Hub/IF HSC — — 4,525 $(0.11)
July—September 2023 NYMEX Henry Hub/IF Waha 1,840 $(1.62) — —
July—September 2023 NYMEX Henry Hub/IF HSC — — 1,840 $(0.19)
January—December 2023 NYMEX Henry Hub/IF Waha 73,000 $(1.15) — —
January—December 2023 NYMEX Henry Hub/IF HSC — — 73,000 $(0.08)
January—June 2024 NYMEX Henry Hub/IF Waha 3,640 $(1.25) — —
January—June 2024 NYMEX Henry Hub/IF HSC — — 3,640 $(0.10)

~~Foreign Currency Derivative Instruments~~

The Company has open foreign currency costless collar contracts in GBP/USD for £15 million per month for the calendar year 2022 with a weighted average floor and ceiling price of $1.29 and $1.39, respectively.

~~Embedded Derivatives~~

~~Altus Preferred Units Embedded Derivative~~

~~The Altus Preferred Units embedded derivative was deconsolidated as of March 31, 2022 as part of the BCP Business Combination. Refer to~~ ~~Note 3—Acquisitions and Divestitures~~ ~~for discussion of the BCP Business Combination and~~ ~~Note 13—Redeemable Noncontrolling Interest - Altus~~ ~~for a description of the Altus Preferred Units and associated embedded derivative.~~

~~Pipeline Capacity Embedded Derivatives~~

During the fourth quarter of 2019 and first quarter of 2020, the Company entered into agreements to assign a portion of its contracted capacity under an existing transportation agreement to third parties. Embedded in these agreements were arrangements under which the Company received payments calculated based on pricing differentials between Houston Ship Channel and Waha during the calendar years 2020 and 2021. This feature required bifurcation and measurement of the change in market value throughout 2020 and 2021. Unrealized gains and losses in the fair value of this feature were recorded as “Derivative instrument gains (losses), net” under “Revenues and Other” in the statement of consolidated operations, and the balance at the end of December 31, ~~2021 will be amortized into income over the original tenure of the host contract.~~

~~Fair Value Measurements~~

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

Fair Value Measurements Using
Quoted Price in Active Markets
(Level 1) Significant Other Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
Fair Value
Netting(1)
Carrying Amount
(In millions)
June 30, 2022
Assets:
Commodity derivative instruments $ — $ — $ — $ — $ 1 $ 1
Liabilities:
Commodity derivative instruments — 54 — 54 1 55
Foreign currency derivative instruments — 7 — 7 — 7��
December 31, 2021
Liabilities:
Commodity derivative instruments $ — $ 10 $ — $ 10 $ — $ 10
Pipeline capacity embedded derivative — 46 — 46 — 46
Preferred Units embedded derivative — — 57 57 — 57

~~(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 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.

~~Derivative Activity Recorded in the Consolidated Balance Sheet~~

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

June 30,
2022
December 31,
2021
(In millions)
Current Assets: Other current assets $ — $ —
Other Assets: Deferred charges and other 1 —
Total derivative assets $ 1 $ —
Current Liabilities: Other current liabilities $ 41 $ 4
Deferred Credits and Other Noncurrent Liabilities: Other 21 109
Total derivative liabilities $ 62 $ 113
2022.

Derivative Activity Recorded in the Statement of Consolidated Operations

The following table summarizes the effect of derivative instruments on the Company’s statement of consolidated operations:


		For the Quarter Ended June 30,				For the Six Months Ended June 30,					For the Quarter Ended June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In millions)									(In millions)
Realized:	Realized:									Realized:
Commodity derivative instruments	Commodity derivative instruments	$	(4)	$	(48)	$	(9)	$	100	Commodity derivative instruments	$	—	$	(4)	$	—	$	(9)
Foreign currency derivative instruments	Foreign currency derivative instruments	(2)		—		(2)		—		Foreign currency derivative instruments	—		(2)		—		(2)
Realized gain (loss), net		(6)		(48)		(11)		100
Realized losses, net										Realized losses, net	—		(6)		—		(11)
Unrealized:	Unrealized:									Unrealized:
Commodity derivative instruments	Commodity derivative instruments	(20)		(98)		(44)		(72)		Commodity derivative instruments	—		(20)		—		(44)
Pipeline capacity embedded derivatives		—		2		—		3

Foreign currency derivative instruments	Foreign currency derivative instruments	(6)		—		(8)		—		Foreign currency derivative instruments	—		(6)		—		(8)
Preferred Units embedded derivative	Preferred Units embedded derivative	—		31		(31)		14		Preferred Units embedded derivative	—		—		—		(31)
Unrealized loss, net		(26)		(65)		(83)		(55)
Derivative instrument gains (losses), net		$	(32)	$	(113)	$	(94)	$	45
Unrealized losses, net										Unrealized losses, net	—		(26)		—		(83)
Derivative instrument losses, net										Derivative instrument losses, net	$	—	$	(32)	$	—	$	(94)

Derivative instrument gains and losses ~~are~~were recorded in “Derivative instrument ~~gains (losses),~~losses, net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized ~~gains (losses)~~losses for derivative activity recorded in the statement of consolidated operations are reflected in the statement of consolidated cash flows separately as “Unrealized derivative instrument losses, ~~(gains),~~ net” inunder “Adjustments to reconcile net income ~~(loss)~~ to net cash provided by operating activities.”

The Company seeks to maintain a balance between “first of month” and “gas daily pricing” for its U.S. natural gas portfolio and sales activities in a given month as part of its ordinary course of business. This is typically implemented through a combination of physical and financial contracts that settle monthly. In January 2021, the Company entered into financial contracts that increased its exposure to “gas daily pricing” and reduced its exposure to “first of month” pricing for February 2021. The Company realized a gain of $147 million in connection with these contracts in the first quarter of 2021 as a result of extreme daily gas price volatility across Texas in February resulting from Winter Storm Uri.

1613

6. OTHER CURRENT ASSETS

The following table provides detail of the Company’s other current assets:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

		(In millions)					(In millions)
Inventories	Inventories	$	437	$	438	Inventories	$	487	$	425
Drilling advances	Drilling advances	57		55		Drilling advances	66		64

Prepaid assets and other	Prepaid assets and other	27		56		Prepaid assets and other	158		54
Current decommissioning security for sold Gulf of Mexico assets	Current decommissioning security for sold Gulf of Mexico assets	350		100		Current decommissioning security for sold Gulf of Mexico assets	450		450
Total Other current assets	Total Other current assets	$	871	$	649	Total Other current assets	$	1,161	$	993

7. EQUITY METHOD INTERESTS

The Kinetik Class A Common Stock held by the Company is treated as an interest in equity securities measured at fair value. The Company elected the fair value option for measuring its equity method interest in Kinetik based on practical expedience, variances in reporting timelines, and cost-benefit considerations. The fair value of the Company’s interest in Kinetik is determined using observable share prices on a major exchange, a Level 1 fair value measurement. Fair value adjustments ~~and dividends received~~ are recorded as a component of “Other, net” under “Revenues and other” in the Company’s statement of consolidated operations.

The Company’s initial interest in Kinetik was measured at fair value based on the Company’s ownership of approximately 12.9 million shares of Kinetik Class A Common stock as of February 22, 2022. In March 2022, the Company sold ~~4000000~~four million of its shares of Kinetik Class A Common Stock for a loss, including underwriters fees, of $25 million, which was recorded as a component of “Gain on divestitures, net” under “Revenues and other” in the Company’s statement of consolidated operations. Refer to Note 3 —3—Acquisitions and Divestitures for further detail. ~~A fair value adjustment gain of $24 million was recorded during the first quarter of 2022 based on the Company’s remaining 8.9 million shares of Kinetik Class A Common Stock as of March 31, 2022.~~

During the second quarter of 2022, Kinetik issued a ~~2-for-one~~two-for-one split of its ~~Common Stock. Also during the second quarter,~~common stock, resulting in the Company owning approximately 17.7 million shares.

The Company has received approximately ~~0.4~~2.1 million shares of Kinetik’s Class A Common Stock as a paid-in-kind ~~dividend. A fair value adjustment gain~~dividends through June 30, 2023. As of ~~$29 million was recorded during the second quarter based on~~June 30, 2023, the Company’s ownership of ~~18.1~~19.8 million shares ~~of Kinetik Class A Common Stock on June 30, 2022.~~

~~The Company’s ownership~~ represented approximately 13 percent of Kinetik’s outstanding Class A Common ~~Stock, as of March 31, 2022 and June 30, 2022.~~Stock.

The ~~following table presents the activity~~Company recorded changes in the ~~Company’s~~fair value of its equity method interest in Kinetik ~~for~~totaling gains of $90 million and $42 million in the second quarters of 2023 and 2022, respectively, and gains of $71 million and $66 million in the first six months ~~ended June 30, 2022:~~of 2023 and 2022, respectively. These gains were recorded as a component of “Revenues and other” in the Company’s statement of consolidated operations.


		~~Kinetik Holdings Inc~~

	~~(In millions)~~
~~Balance at December 31, 2021~~		$	—
~~Initial interest upon closing the BCP Business Combination~~		~~802~~
~~Sale of Class A shares~~		~~(250)~~
~~Paid-in-kind dividend~~		13
~~Fair value adjustments~~		53
~~Balance at June 30, 2022~~		$	~~618~~

The following table represents sales and costs associated with Kinetik:

During the three and six months ending June 30, 2022, the Company recorded GPT costs for midstream services provided by Kinetik subsequent to the close of the transaction totaling $26 million and $36 million, respectively.


	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions)
Natural gas and NGLs sales	$	22	$	—	$	29	$	—
Purchased oil and gas sales	7		—		7		—
	$	29	$	—	$	36	$	—

Gathering, processing, and transmission costs	$	26	$	26	$	50	$	36
Purchased oil and gas costs	26		—		28		—
	$	52	$	26	$	78	$	36

As of June 30, ~~2022,~~2023, the Company has recorded accrued ~~GPT~~ costs payable to Kinetik of approximately $8$37 million and receivables from Kinetik of approximately $19 million.

1714

Prior to the deconsolidation of Altus on February 22, 2022, the Company, through its ownership of Altus, had the following equity method interests in 4 Permian Basin long-haul pipeline entities, which were accounted for under the equity method of accounting at December 31, 2021. For each of the equity method interests, Altus had 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. The table below presents the ownership percentages held by the Company and associated carrying values for each entity:

Interest
December 31,
2021
(In millions)
Gulf Coast Express Pipeline, LLC 16.0% $ 274
EPIC Crude Holdings, LP 15.0% —
Permian Highway Pipeline, LLC 26.7% 630
Shin Oak Pipeline (Breviloba, LLC) 33.0% 461
Total Altus equity method interests $ 1,365

~~The following table presents the activity in Altus’ equity method interests for the six months ended June 30, 2022:~~

Gulf Coast Express
Pipeline LLC EPIC Crude
Holdings, LP Permian Highway
Pipeline LLC Breviloba, LLC Total
(In millions)
Balance at December 31, 2021 $ 274 $ — $ 630 $ 461 $ 1,365
Capital contributions — 2 — — 2
Distributions (5) — (9) (7) (21)
Equity income (loss), net 8 (2) 10 5 21
Deconsolidation of Altus (277) — (631) (459) (1,367)
Balance at June 30, 2022 $ — $ — $ — $ — $ —

8. OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

		(In millions)					(In millions)
Accrued operating expenses	Accrued operating expenses	$	145	$	129	Accrued operating expenses	$	172	$	139
Accrued exploration and development	Accrued exploration and development	263		206		Accrued exploration and development	352		300
Accrued compensation and benefits	Accrued compensation and benefits	281		292		Accrued compensation and benefits	247		514
Accrued interest	Accrued interest	95		107		Accrued interest	93		96
Accrued income taxes	Accrued income taxes	180		28		Accrued income taxes	193		90
Current asset retirement obligation	Current asset retirement obligation	40		41		Current asset retirement obligation	55		55
Current operating lease liability	Current operating lease liability	120		99		Current operating lease liability	102		167
Current portion of derivatives at fair value		41		4

Current decommissioning contingency for sold Gulf of Mexico properties	Current decommissioning contingency for sold Gulf of Mexico properties	350		100		Current decommissioning contingency for sold Gulf of Mexico properties	450		450
Other	Other	206		164		Other	271		238
Total Other current liabilities	Total Other current liabilities	$	1,721	$	1,170	Total Other current liabilities	$	1,935	$	2,049

9. ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability:


	June 30, ~~2022~~2023
	(In millions)
Asset retirement obligation, December 31, ~~2021~~2022	$	~~2,130~~1,991
Liabilities incurred	26
Liabilities settled	~~(16)~~(21)
~~Liabilities divested~~	~~(4)~~
~~Deconsolidation of Altus~~	~~(69)~~

Accretion expense	5857

Asset retirement obligation, June 30, ~~2022~~2023	~~2,101~~2,033
Less current portion	~~(40)~~(55)
Asset retirement obligation, long-term	$	~~2,061~~1,978

10. DEBT AND FINANCING COSTS

The following table presents the carrying values of the Company’s debt:


							June 30, 2023		December 31, 2022
		June 30, 2022		December 31, 2021
		(In millions)					(In millions)
Notes and debentures before unamortized discount and debt issuance costs(1)	Notes and debentures before unamortized discount and debt issuance costs(1)	$	5,032	$	6,344	Notes and debentures before unamortized discount and debt issuance costs(1)	$	4,835	$	4,908
Altus credit facility(2)		—		657
Syndicated credit facility(2)		—		542

Finance lease obligations	Finance lease obligations	35		36		Finance lease obligations	33		34
Unamortized discount	Unamortized discount	(28)		(30)		Unamortized discount	(27)		(27)
Debt issuance costs	Debt issuance costs	(29)		(39)		Debt issuance costs	(27)		(28)
Total debt	Total debt	5,010		7,510		Total debt	4,814		4,887
Current maturities	Current maturities	(125)		(215)		Current maturities	(2)		(2)
Long-term debt	Long-term debt	$	4,885	$	7,295	Long-term debt	$	4,812	$	4,885

(1) The fair values of the Company’s notes and debentures were ~~$4.4~~$4.1 billion and ~~$7.1~~$4.2 billion as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 value of borrowings on credit facilities approximates fair value because interest rates are variable and reflective of market rates.~~

AsAt each of June 30, 2023 and December 31, 2022, current debt included $123 million carrying value of 2.625% senior notes due January 15, 2023 and $2 million of finance lease obligations. As of December 31, 2021, current debt included $213 million carrying value of 3.25% senior notes due April 15, 2022 and $2 million of finance lease obligations.

During the ~~quarter~~six months ended ~~March 31,~~June 30, 2023, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $74 million for an aggregate purchase price of $65 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $10 million. The Company recognized a $9 million gain on these repurchases. The repurchases were partially financed by Apache’s borrowing under the US dollar-denominated revolving credit facility of APA Corporation described below.

During the six months ended June 30, 2022, Apache closed cash tender offers for certain outstanding notes issued under its indentures, accepting for purchase $1.1 billion aggregate principal amount of notes. Apache paid holders an aggregate $1.2 billion in cash, reflecting principal, premium to par, and accrued and unpaid interest. The Company recognized a $66 million loss on extinguishment of debt, including $11 million of unamortized debt discount and issuance costs in connection with the note purchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.

During the ~~quarter~~six months ended ~~March 31,~~June 30, 2022, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $15 million for an aggregate purchase price of $16 million in cash, including accrued interest and broker fees, reflecting a premium to par of $1 million. The Company recognized a $1 million loss on these repurchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.

~~During the quarter ended March 31,~~On January 18, 2022, Apache redeemed the outstanding $213 million principal amount of 3.25% senior notes due April 15, 2022, at a redemption price equal to ~~100%~~100 percent of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed by borrowing under Apache’s former revolving credit facility.

Apache intends to reduce debt outstanding under its indentures from time to time.

On April 29, 2022, Apache entered into 2two unsecured guaranties of obligations under 2two unsecured syndicated credit agreements then entered into by APA, ~~Corporation (APA),~~ of which Apache is a wholly owned subsidiary. APA’s new credit agreements are for general corporate purposes and replaced and refinanced Apache’s 2018 unsecured syndicated credit agreement (the Former Facility).

•~~APA’s first new~~One credit agreement is denominated in US dollars (the USD Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of US$1.8 billion (including a letter of credit subfacility of up to US$750 million, of which US$150 million currently is committed). APA may increase commitments up to an aggregate US$2.3 billion by adding new lenders or obtaining the consent of any increasing existing lenders. This facility matures in April 2027, subject to APA’s 2,two, one-year extension options.

•~~APA’s~~The second ~~new~~ credit agreement is denominated in pounds sterling (the GBP Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of £1.5 billion for loans and letters of credit. This facility matures in April 2027, subject to APA’s 2,two, one-year extension options.

In connection with APA’s entry into the USD Agreement and the GBP Agreement (each, a New Agreement), Apache terminated US$4.0 billion of commitments under the Former Facility, borrowings then outstanding under the Former Facility were deemed outstanding under APA’s USD Agreement, and letters of credit then outstanding under the Former Facility were deemed outstanding under a New Agreement, depending upon whether denominated in US dollars or pounds sterling. Apache has guaranteed obligations under each New Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$1.0 billion.

Apache may borrow under APA’s USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time.As of June 30, 2023 and December 31, 2022, there were no borrowings by Apache outstanding under the USD Agreement.~~As of December 31, 2021, there were $542 million of borrowings and an aggregate £748 million and $20 million in letters of credit outstanding under the Former Facility.~~

Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no outstanding borrowings under these facilities. As of June 30, ~~2022,~~2023, there were ~~£117~~£185 million and ~~$17~~$3 million in letters of credit outstanding under these facilities. As of December 31, ~~2021,~~2022, there were ~~£117~~£199 million and $17 million in letters of credit outstanding under these facilities.

Financing Costs, Net

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


											For the Quarter Ended June 30,				For the Six Months Ended June 30,
		For the Quarter Ended June 30,				For the Six Months Ended June 30,					2023		2022		2023		2022
		2022		2021		2022		2021
		(In millions)									(In millions)
Interest expense	Interest expense	$	75	$	110	$	165	$	222	Interest expense	$	74	$	75	$	149	$	165
Amortization of debt issuance costs	Amortization of debt issuance costs	4		3		6		5		Amortization of debt issuance costs	—		4		1		6
Capitalized interest	Capitalized interest	(1)		—		(1)		—		Capitalized interest	—		(1)		—		(1)
(Gain) loss on extinguishment of debt	(Gain) loss on extinguishment of debt	—		(1)		67		(1)		(Gain) loss on extinguishment of debt	—		—		(9)		67
Interest income	Interest income	(1)		(3)		(5)		(5)		Interest income	(3)		(1)		(5)		(5)
Interest income from APA Corporation, net		(15)		(15)		(30)		(20)
Interest income from APA Corporation, net (Note 2)										Interest income from APA Corporation, net (Note 2)	(29)		(15)		(45)		(30)
Financing costs, net	Financing costs, net	$	62	$	94	$	202	$	201	Financing costs, net	$	42	$	62	$	91	$	202

11. INCOME TAXES

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

During the second quarter of 2023, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2023 year-to-date effective income tax rate was primarily impacted by a deferred tax expense related to the remeasurement of taxes in the U.K. as a result of the enactment of Finance Act 2023 on January 10, 2023, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets. During the second quarter of 2022, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2022 year-to-date effective income tax rate was primarily impacted by the gain associated with deconsolidation of Altus, the gain on sale of certain non-core mineral rights in the Delaware Basin, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets. During the second quarter and the first six months of 2021, the Company’s effective income tax rate was primarily impacted by a decrease in the amount of valuation allowance against its U.S. deferred tax assets.

On ~~May 26, 2022, the U.K. Chancellor announced a new tax on the profits of oil~~January 10, 2023, Finance Act 2023 was enacted, receiving Royal Assent, and ~~gas companies operating in the U.K. and the U.K. Continental Shelf. On June 21, 2022, the U.K. Government published draft legislation concerning this new tax and on July 14, 2022,~~included amendments to the Energy (Oil and Gas) Profits Levy Act of 2022, ~~was enacted, receiving Royal Assent. Under~~increasing the ~~new law, an additional~~ levy ~~is assessed at~~from a 25 percent ~~tax~~ rate ~~and will be~~to a 35 percent rate, effective for the period of ~~May 26, 2022,~~January 1, 2023 through ~~December~~March 31, ~~2025.~~2028. Under U.S. GAAP, the financial statement impact of new legislation ~~will be~~is recorded in the period of enactment. Therefore, in the ~~third~~first quarter of ~~2022,~~2023, the Company ~~expects to record~~recorded a deferred tax expense of ~~approximately $230 million to $250~~$174 million related to the remeasurement of the ~~June 30,~~December 31, 2022 U.K. deferred tax liability.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA). The IRA includes a new 15 percent corporate alternative minimum tax (Corporate AMT) on applicable corporations with an average annual financial statement income that exceeds $1 billion for any three consecutive years preceding the tax year at issue. The Corporate AMT is effective for tax years beginning after December 31, 2022. The Company is continuing to evaluate the provisions of the IRA and awaits further guidance from the U.S. Treasury Department to properly assess the impact of these provisions on the Company. Under the existing guidance, the Company does not believe the IRA will have a material impact for 2023.

The Company has a full valuation allowance against its U.S. net deferred tax assets. The Company 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. However, given the Company’s current and anticipated future domestic earnings, the Company believes that there is a reasonable possibility that within the next 12 months sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the U.S. valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense, which could be material, for the period the release is recorded.

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

12. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls, which also may include controls related to the potential impacts of climate change. As of June 30, ~~2022,~~2023, the Company has an accrued liability of approximately ~~$48~~$52 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. The Company’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to the Company’s financial position, results of operations, or liquidity after consideration of recorded accruals. ~~For~~With respect to material matters ~~that~~for which the Company believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

For additional information on Legal Matters described below, refer to Note 11—Commitments and Contingencies to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Argentine Environmental Claims

On March 12, 2014, the Company and its subsidiaries completed the sale of all of the Company’s subsidiaries’ operations and properties in Argentina to YPF Sociedad Anonima (YPF). As part of that sale, YPF assumed responsibility for all of the past, present, and future litigation in Argentina involving Company subsidiaries, except that Company subsidiaries have agreed to indemnify YPF for certain environmental, tax, and royalty obligations capped at an aggregate of $100 million. The indemnity is subject to specific agreed conditions precedent, thresholds, contingencies, limitations, claim deadlines, loss sharing, and other terms and conditions. On April 11, 2014, YPF provided its first notice of claims pursuant to the indemnity. Company subsidiaries have not paid any amounts under the indemnity but will continue to review and consider claims presented by YPF. Further, Company subsidiaries retain the right to enforce certain Argentina-related indemnification obligations against Pioneer Natural Resources Company (Pioneer) in an amount up to $45 million pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.

Louisiana Restoration

As more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including the Company, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to its original condition, regardless of the value of the underlying property. From time to time, restoration lawsuits and claims are resolved by the Company for amounts that are not material to the Company, while new lawsuits and claims are asserted against the Company. With respect to each of the pending lawsuits and claims, the amount claimed is not currently determinable or is not material. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While adverse judgments against the Company are possible, the Company intends to actively defend these lawsuits and claims.

Starting in November of 2013 and continuing into ~~2022,~~2023, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including the Company. ~~These cases were all removed to federal courts in Louisiana.~~ In these cases, the Parishes, as plaintiffs, allege that defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While adverse judgments against the Company might be possible, the Company intends to vigorously oppose these claims.

Apollo Exploration Lawsuit

In a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, plaintiffs alleged damages in excess of $200 million (having previously claimed in excess of $1.1 billion) relating to purchase and sale agreements, mineral leases, and area of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The trial court entered final judgment in favor of the Company, ruling that the plaintiffs take nothing by their claims and awarding the Company its attorneys’ fees and costs incurred in defending the lawsuit. The court of appeals affirmed in part and reversed in part the trial court’s judgment thereby reinstating some of ~~plaintiff’s~~plaintiffs’ claims. ~~Further appeal is pending.~~The Texas Supreme Court granted the Company’s petition for review and heard oral argument in October 2022. On April 28, 2023, the Texas Supreme Court reversed the court of appeals’ decision and remanded the case back to the court of appeals for further proceedings. After plaintiffs’ request for rehearing, on July 21, 2023, the Texas Supreme Court reaffirmed its reversal of the court of appeals’ decision and remand of the case back to the court of appeals for further proceedings.

Australian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, the Company filed suit against Quadrant for breach of the Quadrant SPA. In its suit, the Company seeks approximately AUD $80 million. In December 2017, Quadrant filed a defense of equitable set-off to the Company’s claim and a counterclaim seeking approximately AUD $200 million in the aggregate. The Company believes that Quadrant’s claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

Canadian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated July 6, 2017 (Paramount SPA), the Company and its subsidiaries divested their remaining Canadian operations to Paramount Resources LTD (Paramount). Closing occurred on August 16, 2017. On September 11, 2019, 4four ex-employees of Apache Canada LTD on behalf of themselves and individuals employed by Apache Canada LTD on July 6, 2017, filed an Amended Statement of Claim in a matter styled Stephen Flesch et. al. v Apache Corporation et. al., No. 1901-09160 Court of Queen’s Bench of Alberta against the Company and others seeking class certification and a finding that the Paramount SPA amounted to a Change of Control of the Company, entitling them to accelerated vesting under the Company’s equity plans. In the suit, the class seeks approximately $60 million USD and punitive damages. Without acknowledging or admitting any liability and solely to avoid the expense and uncertainty of future litigation, Apache has agreed to a settlement in the Flesch class action matter under which Apache will pay $7 million USD to resolve all claims against the Company asserted by the class. The ~~Company believes that Plaintiffs’ claims lack merit~~settlement is subject to court approval and ~~will not have a material adverse effect on~~is expected to be finalized by the ~~Company’s financial position, results~~end of ~~operation, or liquidity.~~2023.

California and Delaware Litigation

On July 17, 2017, in 3three separate actions, San Mateo ~~County, California,~~and Marin ~~County, California,~~Counties, 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 2two separate actions, the City of Santa Cruz and Santa Cruz County ~~and in a separate action on~~filed similar lawsuits against many of the same defendants. On January 22, 2018, the City of Richmond filed a similar ~~lawsuits against many of the same defendants.~~lawsuit. 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 9th Circuit Court of Appeals’ affirmance of this remand decision was appealed to the U.S. Supreme Court. That appeal was decided by the U.S. Supreme Court ruling in a similar case, ~~BP p.l.c. v. Mayor and City Council of Baltimore. As a result, the California cases were sent back to the 9th Circuit for further appellate review of the decision to remand the cases to state court. The 9~~th ~~Circuit has since, once again, affirmed the district court’s remand to state court.The defendants are appealing this latest remand decision to the U.S. Supreme Court. Further activity in the cases has been stayed pending further appellate review.~~

On September 10, 2020, the State of Delaware filed suit, individually and on behalf of the people of the State of Delaware, against over 25 oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. After removal of this lawsuit to federal court, the district court remanded it back to state court. The remand order is being appealed to the 3rd Circuit Court of Appeals. Further activity in the case has been stayed pending this appellate review.

The Company believes that it is not subject to jurisdiction of the California courts and that claims made against it in the California and Delaware litigation are baseless. The Company intends to challenge jurisdiction in California and to vigorously defend the Delaware lawsuit.

Castex Lawsuit

In a case styled Apache Corporation v. Castex Offshore, Inc., et. al., Cause No. 2015-48580, in the 113th Judicial District Court of Harris County, Texas, Castex filed claims for alleged damages of approximately $200 million, relating to overspend on the Belle Isle Gas Facility upgrade, and the drilling of 5five 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 Fourteenth Court of Appeals of Texas reversed the judgment, in part, reducing the judgment to approximately $13.5 million, plus fees, costs, and interest against the Company. ~~Further appeal is pending.~~

~~Oklahoma Class Action~~Kulp Minerals Lawsuit

~~The Company is a party to~~On or about April 7, 2023, Apache was sued in a purported class action in ~~Oklahoma~~New Mexico styled ~~Albert Steven Allen~~Kulp Minerals LLC v. Apache Corporation, Case No. ~~CJ-2019-00219.~~

D-506-CV-2023-00352 in the Fifth Judicial District. The ~~Allen~~Kulp Minerals case has not been certified and seeks to represent a group of owners ~~who have~~ allegedly ~~received~~owed statutory interest under New Mexico law as a result of purported late ~~royalty~~oil and ~~other payments under Oklahoma statutes. With no admission~~gas payments. The amount of ~~liability or wrongdoing, but only~~this claim is not yet reasonably determinable. The Company intends to ~~avoid~~vigorously defend against the ~~expense and uncertainty of future litigation, Apache has entered into a settlement agreement~~claims asserted in ~~the~~ ~~Allen~~ case to resolve all claims made against it by the class. The settlement agreement is subject to court approval and a full fairness hearing will be held in the coming months. The settlement will not have a material effect on the Company’s financial position, results of operations, or liquidity.this lawsuit.

Shareholder and Derivative Lawsuits

On February 23, 2021, a case captioned Plymouth County Retirement System v. Apache Corporation, et al. was filed in the United States District Court for the Southern District of Texas (Houston Division) against the Company and certain current and former officers. The complaint, which is a shareholder lawsuit styled as a class action, ~~(1)~~ alleges that (1) the Company intentionally used unrealistic assumptions regarding the amount and composition of available oil and gas in Alpine High; (2) ~~alleges that~~ the Company did not have the proper infrastructure in place to safely and/or economically drill and/or transport those resources even if they existed in the amounts purported; (3) ~~alleges that these~~certain statements and omissions artificially inflated the value of the Company’s operations in the Permian Basin; and (4) ~~alleges that,~~ as a result, the Company’s public statements were materially false and misleading. The Company believes that plaintiffs’ claims lack merit and intends to vigorously defend this lawsuit.

On ~~March 16, 2021,~~January 18, 2023, a case captioned Jerry Hight, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al. was filed in the 61st District Court of Harris County, Texas. Then, on February 21, 2023, a case captioned Steve Silverman, Derivatively and on behalf of Nominal Defendant APA Corp. v. John J. Christmann IV, et al. was filed in federal district court for the Southern District of Texas. Then, on April 20, 2023, a case captioned William Wessels, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al. was filed in the ~~334th~~151st District Court of Harris County, Texas. ~~The~~Then, on July 21, 2023, a case ~~purports~~captioned Yang-Li-Yu, Derivatively and on behalf of Nominal Defendant APA Corp. v. John J. Christmann IV, et al. was filed in federal district court for the Southern District of Texas. These cases purport to be a derivative ~~action~~actions brought against senior management and Company directors over many of the same allegations included in the Plymouth County Retirement System matter and asserts claims of (1) breach of fiduciary duty; (2) waste of corporate assets; and (3) unjust enrichment. ~~On March 17, 2022, the trial court granted Defendants’ Special Exceptions~~The defendants believe that plaintiffs’ claims lack merit and ~~dismissed the claim with prejudice.~~intend to vigorously defend these lawsuits.

Environmental Matters

As of June 30, ~~2022,~~2023, the Company had an undiscounted reserve for environmental remediation of approximately $2$1 million.

On September 11, 2020, the Company received a Notice of Violation and Finding of Violation, and accompanying Clean Air Act Information Request, from the U.S. Environmental Protection Agency (EPA) following site inspections in April 2019 at several of the Company’s oil and natural gas production facilities in Lea and Eddy Counties, New Mexico. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and has responded to the information request. The EPA has referred the notice for civil enforcement proceedings; however, 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.

On December 29, 2020, the Company received a Notice of Violation and Opportunity to Confer, and accompanying Clean Air Act Information Request, from the EPA following helicopter flyovers in September 2019 of several of the Company’s oil and natural gas production facilities in Reeves County, Texas. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and has responded to the information request. The EPA has referred the notice for civil enforcement proceedings; however, 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 was recently served with two lawsuits filed in Lea County, New Mexico: William O. Stephens v. Apache Corporation; No. D-506-CV-2023-00632, in the Fifth Judicial District and Merchant Livestock Company v. Apache Corporation, Exxon Corporation, et al.; No. D-506-CV-2023-00664, in the Fifth Judicial District. Each lawsuit alleges property damage and environmental impacts from previous oil and gas operations that require remediation. The Company disputes that it is responsible for the damages claimed and/or relief sought and intends to vigorously defend each lawsuit. At this time, the Company is unable to reasonably estimate whether either lawsuit, individually, will result in damages that are more or less than $100,000, exclusive of interest and costs.

The Company is not aware of any environmental claims existing as of June 30, ~~2022~~2023 that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity. There can be no assurance, however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.

Potential Decommissioning Obligations on Sold Properties

In 2013, Apache sold its Gulf of Mexico (GOM) Shelf operations and properties and its GOM operating subsidiary, GOM Shelf LLC (GOM Shelf) to Fieldwood Energy LLC (Fieldwood). Under the terms of the purchase agreement, Apache received cash consideration of $3.75 billion and Fieldwood assumed the obligation to decommission the properties held by GOM Shelf and the properties acquired from Apache and its other subsidiaries (collectively, the Legacy GOM Assets). In respect of such abandonment obligations, Fieldwood posted letters of credit in favor of Apache (Letters of Credit) and established trust accounts (Trust A and Trust B) of which Apache was a beneficiary and which were funded by 2two net profits interests (NPIs) depending on future oil prices. 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 (i) accept bonds in exchange for certain of the Letters of Credit and (ii) amend the Trust A trust agreement and one of the NPIs to consolidate the trusts into a single Trust (Trust A) funded by both remaining NPIs. Currently, Apache holds 2two bonds (Bonds) and 5five Letters of Credit to secure Fieldwood’s asset retirement obligations on the Legacy GOM Assets as and when Apache is required to perform or pay for decommissioning any Legacy GOM Asset over the remaining life of the Legacy GOM Assets.

On August 3, 2020, Fieldwood again filed for protection under Chapter 11 of the U.S. Bankruptcy Code. On June 25, 2021, the United States Bankruptcy Court for the Southern District of Texas (Houston Division) entered an order confirming Fieldwood’s bankruptcy plan. On August 27, 2021, Fieldwood’s bankruptcy plan became effective. Pursuant to the plan, the Legacy GOM Assets were separated into a standalone company, which was subsequently merged into GOM Shelf. Under GOM Shelf’s limited liability company agreement, the proceeds of production of the Legacy GOM Assets will be used to fund decommissioning of Legacy GOM Assets.

By letter dated April 5, 2022, replacing two prior letters dated September 8, 2021 and February 22, 2022, ~~respectively,~~and by subsequent letter dated March 1, 2023, GOM Shelf notified the Bureau of Safety and Environmental Enforcement (BSEE) that it was unable to fund the decommissioning obligations that it is currently obligated to perform on certain of the Legacy GOM Assets. As a result, Apache and other current and former owners in these assets have received orders from BSEE to decommission certain of the Legacy GOM Assets included in GOM Shelf’s ~~notification~~notifications to BSEE. Apache expects to receive ~~such~~similar orders on the other Legacy GOM Assets included in GOM Shelf’s notification ~~letter.~~letters. Apache has also received orders to decommission other Legacy GOM Assets that were not included in GOM Shelf’s notification letters. Further, Apache anticipates that GOM Shelf may send additional such notices to BSEE in the future and that it may receive additional orders from BSEE requiring it to decommission other Legacy GOM Assets.

IfAs of June 30, 2023, Apache ~~incurs~~has incurred $464 million in decommissioning costs related to ~~decommission any~~several Legacy GOM ~~Asset~~Assets. GOM Shelf did not, and has confirmed that it will not, reimburse Apache for these decommissioning costs. As a result, Apache has sought and will continue to seek reimbursement from its security for these costs, of which $276 million had been reimbursed from Trust A as of June 30, 2023. If GOM Shelf does not reimburse Apache for ~~such~~further decommissioning costs incurred with respect to Legacy GOM Assets, then Apache ~~expects~~will continue to ~~obtain~~seek reimbursement from Trust A, to the extent of available funds, and thereafter, will seek reimbursement from the Bonds and the Letters of Credit until all such funds and securities are fully utilized. In addition, after such sources have been exhausted, Apache has agreed to provide a standby loan to GOM Shelf of up to $400 million to perform decommissioning (Standby Loan Agreement), with such standby loan secured by a first and prior lien on the Legacy GOM Assets.

If the combination of GOM Shelf’s net cash flow from its producing properties, the Trust A funds, the Bonds, and the remaining Letters of Credit are insufficient to fully fund decommissioning of any Legacy GOM Assets that Apache may be ~~ordered by BSEE~~required to perform or fund, or if GOM Shelf’s net cash flow from its remaining producing properties after the Trust A funds, Bonds, and Letters of Credit are exhausted is insufficient to repay any loans made by Apache under the Standby Loan Agreement, then Apache may be forced to effectively use its available cash to fund the deficit.

As of June 30, ~~2022,~~2023, Apache estimates that its potential liability to fund the remaining decommissioning of Legacy GOM Assets it may be ordered to perform or fund ranges from ~~$1.2 billion~~$922 million to ~~$1.4~~$1.1 billion on an undiscounted basis. Management does not believe any specific estimate within this range is a better estimate than any other. Accordingly, the Company has recorded a contingent liability of ~~$1.2 billion~~$922 million as of June 30, ~~2022,~~2023, representing the estimated costs of decommissioning it may be required to perform or fund on Legacy GOM Assets. Of the total liability recorded, ~~$825~~$472 million is reflected under the caption “Decommissioning contingency for sold Gulf of Mexico properties,” and ~~$350~~$450 million is reflected under “Other current liabilities” in the Company’s consolidated balance sheet. ~~The~~Changes in significant assumptions impacting Apache’s estimated liability, including expected decommissioning rig spread rates, lift boat rates, and planned abandonment logistics could result in a liability in excess of the amount accrued.

As of June 30, 2023, the Company has also recorded a ~~$733~~$507 million asset, which represents the amount the Company expects to be reimbursed from the Trust A funds, the Bonds, and the Letters of Credit for decommissioning it may be required to perform on Legacy GOM Assets. Of the total asset recorded, ~~$383~~$57 million is reflected under the caption “Decommissioning security for sold Gulf of Mexico properties,” and ~~$350~~$450 million is reflected under “Other current assets.” ~~Changes in significant assumptions impacting Apache’s estimated liability, including expected decommissioning rig spread rates, lift boat rates,~~

On June 21, 2023, the two sureties that issued bonds directly to Apache and ~~planned abandonment logistics could result~~two sureties that issued bonds to the issuing bank on the Letters of Credit filed suit against Apache in a ~~liability in excess of the amount accrued. In addition, significant changes~~case styled Zurich American Insurance Company, HCC International Insurance Company PLC, Philadelphia Indemnity Insurance Company and Everest Reinsurance Company (Insurers) v. Apache Corporation, Cause No. 2023-38238 in the ~~market price~~281st Judicial District Court, Harris County Texas. Insurers are seeking to prevent Apache from drawing on the Bonds and Letters of ~~oil, gas,~~Credit and ~~NGLs could~~ further ~~impact Apache’s estimate of its contingent liability~~allege that they are discharged from their reimbursement obligations related to ~~decommission Legacy GOM Assets.~~decommissioning costs and are entitled to other relief. On July 20, 2023, the 281st Judicial District Court denied the Insurers’ request for a temporary injunction. Apache believes that Insurers’ claims lack merit, intends to vigorously defend these claims, and will vigorously pursue counterclaims.

~~13. REDEEMABLE NONCONTROLLING INTEREST — ALTUS~~

~~Preferred Units Issuance~~

On June 12, 2019, Altus Midstream LP issued and sold Preferred Units for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act (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~~

Prior to the deconsolidation of Altus on February 22, 2022, at December 31, 2021, the carrying amount of the Preferred Units was recorded as “Redeemable Noncontrolling Interest — Altus Preferred Unit Limited Partners” classified as temporary equity on the Company’s consolidated balance sheet based on the terms of the Preferred Units, including the redemption rights with respect thereto.

2522

~~Measurement~~

Altus applied 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 was recorded, if applicable. The amount of such adjustment was determined based upon the accreted value method to reflect the passage of time until the Preferred Units were exchangeable at the option of the holder. Pursuant to this method, the net transaction price was accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of the Closing. The total adjustment was limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end was 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 is as follows:~~

Units
Outstanding
Financial
Position
(In millions, except unit data)
Redeemable noncontrolling interest — Preferred Units at: December 31, 2020 660,694 $ 608
Cash distributions to Altus Preferred Unit limited partners — (46)
Distributions payable to Altus Preferred Unit limited partners — (12)
Allocation of Altus Midstream LP net income N/A 80
Accreted value adjustment N/A 82
Redeemable noncontrolling interest — Preferred Units at: December 31, 2021 660,694 712
Allocation of Altus Midstream LP net income N/A 12
Accreted value adjustment(1)
N/A (82)
Redeemable noncontrolling interest — Preferred Units at: February 22, 2022 660,694 642
Preferred Units embedded derivative 89
Deconsolidation of Altus (731)
$ —

~~(1) Includes the reversal of previously recorded accreted value adjustments of $53 million due to the deconsolidation of Altus.~~

~~N/A - not applicable.~~

~~14. CAPITAL STOCK AND EQUITY~~

Upon consummation of the Holding Company Reorganization, each outstanding share of Apache common stock automatically converted into a share of APA common stock on a 1-for-one basis. As a result, each stockholder of Apache now owns the same number of shares of APA common stock that such stockholder owned of Apache common stock immediately prior to the Holding Company Reorganization. As a result of the Holding Company Reorganization and subsequent activity, Apache recorded various intercompany activities during the first quarter ended March 31, 2021 as capital transactions, which are reflected in Apache’s Statement of Consolidated Changes in Equity (Deficit) and Noncontrolling Interests. Refer to ~~Note 2—Transactions with Parent Affiliate~~ ~~for more detail.~~

Additionally, in connection with the Holding Company Reorganization, Apache transferred to APA, and APA assumed, sponsorship of all of Apache’s stock plans along with all of Apache’s rights and obligations under each plan. Subsequent to the Holding Company Reorganization, stock-based compensation associated with APA equity awards granted and outstanding to Apache employees are reflected as capital contributions from APA to Apache.

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

~~Net income (loss) per share for Apache is no longer required, as its shares are not publicly traded, and Apache is now a direct, wholly owned subsidiary of APA.~~

~~Distributions to APA Corporation and Common Stock Dividends~~

During the six months ended June 30, 2022 and 2021, the Company paid $733 million and $10 million, respectively, in capital distributions to its parent, APA, which is included as “Distributions to APA Corporation” on the Company’s statement of consolidated cash flows. During the quarter ended March 31, 2021, prior to completion of the Holding Company Reorganization, the Company paid $9 million in dividends on its common stock.

~~15.~~13. BUSINESS SEGMENT INFORMATION

As of June 30, ~~2022,~~2023, the Company is engaged in exploration and production (Upstream) activities across 3three operating segments: Egypt, North Sea, and the U.S. The Company’s Upstream business explores for, develops, and produces crude oil, natural gas, and natural gas liquids. Prior to the deconsolidation of Altus on February 22, 2022, the Company’s Midstream business was operated by ~~Altus Midstream Company,~~ALTM, which owned, developed, and operated a midstream energy asset network in the Permian Basin of West Texas. Financial information for each segment is presented below:


		Egypt(1)		North Sea		U.S.		Altus Midstream				Intersegment Eliminations & Other				Total(4)					Egypt(1)			North Sea			U.S.			Altus Midstream		Intersegment Eliminations & Other		Total(4)
		Upstream																Upstream

For the Quarter Ended June 30, 2022		(In millions)
For the Quarter Ended June 30, 2023																		For the Quarter Ended June 30, 2023			(In millions)
Revenues:	Revenues:																	Revenues:
Oil revenues	Oil revenues	$	902	$	307	$	654			$	—			$	—				$	1,863	Oil revenues		$	618		$	235		$		473	$	—	$	—	$	1,326
Natural gas revenues	Natural gas revenues	88		64		281		—				—				433		Natural gas revenues			90			39			46			—		—		175
Natural gas liquids revenues	Natural gas liquids revenues	3		12		214		—				—				229		Natural gas liquids revenues			—			4			95			—		—		99
Oil, natural gas, and natural gas liquids production revenues	Oil, natural gas, and natural gas liquids production revenues	993		383		1,149		—				—				2,525		Oil, natural gas, and natural gas liquids production revenues			708			278			614			—		—		1,600
Purchased oil and gas sales	Purchased oil and gas sales	—		—		522		—				—				522		Purchased oil and gas sales			—			—			144			—		—		144

		993		383		1,671		—				—				3,047					708			278			758			—		—		1,744
Operating Expenses:	Operating Expenses:																	Operating Expenses:
Lease operating expenses	Lease operating expenses	131		118		110		—				—				359		Lease operating expenses			121			99			132			—		—		352
Gathering, processing, and transmission	Gathering, processing, and transmission	5		12		77		—				—				94		Gathering, processing, and transmission			6			12			57			—		—		75
Purchased oil and gas costs	Purchased oil and gas costs	—		—		528		—				—				528		Purchased oil and gas costs			—			—			131			—		—		131
Taxes other than income	Taxes other than income	—		—		78		—				—				78		Taxes other than income			—			—			47			—		—		47
Exploration	Exploration	12		2		1		—				—				15		Exploration			30			4			3			—		—		37
Depreciation, depletion, and amortization	Depreciation, depletion, and amortization	91		54		133		—				—				278		Depreciation, depletion, and amortization			126			61			152			—		—		339
Asset retirement obligation accretion	Asset retirement obligation accretion	—		20		9		—				—				29		Asset retirement obligation accretion			—			19			10			—		—		29
Impairments																		Impairments			—			46			—			—		—		46
																					283			241			532			—		—		1,056
Operating Income(2)																		Operating Income(2)			$	425		$	37		$	226		$	—	$	—	688

Other Income (Expense):																		Other Income (Expense):

		239		206		936		—				—				1,381
Operating Income (Loss)(2)		$	754	$	177	$	735	$	—			$	—			1,666

Other Income (Expense):
Derivative instrument losses, net																(32)

Loss on divestitures, net																(27)
Gain on divestitures, net																		Gain on divestitures, net																5
Other, net	Other, net															64		Other, net																109
General and administrative	General and administrative															(83)		General and administrative																(66)
Transaction, reorganization, and separation	Transaction, reorganization, and separation															(3)		Transaction, reorganization, and separation																(2)
Financing costs, net	Financing costs, net															(62)		Financing costs, net																(42)
Income Before Income Taxes	Income Before Income Taxes															$	1,523	Income Before Income Taxes																$	692

2723


	Egypt(1)		North Sea		U.S.		Altus Midstream		Intersegment Eliminations & Other		Total(4)
	Upstream

For the Six Months Ended June 30, 2023	(In millions)
Revenues:
Oil revenues	$	1,247	$	517	$	912	$	—	$	—	$	2,676
Natural gas revenues	183		99		131		—		—		413
Natural gas liquids revenues	—		14		203		—		—		217
Oil, natural gas, and natural gas liquids production revenues	1,430		630		1,246		—		—		3,306
Purchased oil and gas sales	—		—		383		—		—		383
	1,430		630		1,629		—		—		3,689
Operating Expenses:
Lease operating expenses	218		176		272		—		—		666
Gathering, processing, and transmission	13		23		112		—		—		148
Purchased oil and gas costs	—		—		347		—		—		347
Taxes other than income	—		—		97		—		—		97
Exploration	66		9		6		—		—		81
Depreciation, depletion, and amortization	249		119		279		—		—		647
Asset retirement obligation accretion	—		37		20		—		—		57
Impairments	—		46		—		—		—		46
	546		410		1,133		—		—		2,089
Operating Income(2)	$	884	$	220	$	496	$	—	$	—	1,600

Other Income (Expense):


Gain on divestitures, net											6
Other, net											77
General and administrative											(124)
Transaction, reorganization, and separation											(6)
Financing costs, net											(91)
Income Before Income Taxes											$	1,462


Total Assets(3)	$	3,365	$	1,719	$	9,489	$	—	$	(1)	$	14,572


	Egypt(1)		North Sea		U.S.		Altus Midstream		Intersegment Eliminations & Other		Total(4)
	Upstream

For the Quarter Ended June 30, 2022	(In millions)
Revenues:
Oil revenues	$	902	$	307	$	654	$	—	$	—	$	1,863
Natural gas revenues	88		64		281		—		—		433
Natural gas liquids revenues	3		12		214		—		—		229
Oil, natural gas, and natural gas liquids production revenues	993		383		1,149		—		—		2,525
Purchased oil and gas sales	—		—		522		—		—		522

	993		383		1,671		—		—		3,047
Operating Expenses:
Lease operating expenses	131		118		110		—		—		359
Gathering, processing, and transmission	5		12		77		—		—		94
Purchased oil and gas costs	—		—		528		—		—		528
Taxes other than income	—		—		78		—		—		78
Exploration	12		2		1		—		—		15
Depreciation, depletion, and amortization	91		54		133		—		—		278
Asset retirement obligation accretion	—		20		9		—		—		29

	239		206		936		—		—		1,381
Operating Income(2)	$	754	$	177	$	735	$	—	$	—	1,666

Other Income (Expense):

Derivative instrument losses, net											(32)
Loss on divestitures, net											(27)
Other, net											64
General and administrative											(83)
Transaction, reorganization, and separation											(3)
Financing costs, net											(62)
Income Before Income Taxes											$	1,523


	Egypt(1)		North Sea		U.S.		Altus Midstream		Intersegment Eliminations & Other		Total(4)
	Upstream

For the Six Months Ended June 30, 2022	(In millions)
Revenues:
Oil revenues	$	1,692	$	635	$	1,253	$	—	$	—	$	3,580
Natural gas revenues	186		163		464		—		—		813
Natural gas liquids revenues	6		28		421		—		(3)		452
Oil, natural gas, and natural gas liquids production revenues	1,884		826		2,138		—		(3)		4,845
Purchased oil and gas sales	—		—		866		5		—		871
Midstream service affiliate revenues	—		—		—		16		(16)		—
	1,884		826		3,004		21		(19)		5,716
Operating Expenses:
Lease operating expenses	262		214		228		—		(1)		703
Gathering, processing, and transmission	10		24		154		5		(18)		175
Purchased oil and gas costs	—		—		879		—		—		879
Taxes other than income	—		—		145		3		—		148
Exploration	27		7		5		—		1		40
Depreciation, depletion, and amortization	188		116		263		2		—		569
Asset retirement obligation accretion	—		40		17		1		—		58

	487		401		1,691		11		(18)		2,572
Operating Income (Loss)(2)	$	1,397	$	425	$	1,313	$	10	$	(1)	3,144

Other Income (Expense):
Derivative instrument losses, net											(94)

Gain on divestitures, net											1,149
Other, net											109
General and administrative											(234)
Transaction, reorganization, and separation											(17)
Financing costs, net											(202)
Income Before Income Taxes											$	3,855


Total Assets(3)	$	3,107	$	2,103	$	8,629	$	—	$	—	$	13,839

Egypt(1)
North Sea U.S. Altus Midstream
Intersegment
Eliminations
& Other
Total(4)
Upstream
For the Quarter Ended June 30, 2021 (In millions)
Revenues:
Oil revenues $ 432 $ 216 $ 493 $ — $ — $ 1,141
Natural gas revenues 65 27 134 — — 226
Natural gas liquids revenues 2 4 141 — — 147
Oil, natural gas, and natural gas liquids production revenues 499 247 768 — — 1,514
Purchased oil and gas sales — — 239 3 — 242
Midstream service revenues — — — 32 (32) —
499 247 1,007 35 (32) 1,756
Operating Expenses:
Lease operating expenses 114 98 99 — — 311
Gathering, processing, and transmission 3 8 74 8 (32) 61
Purchased oil and gas costs — — 259 3 — 262
Taxes other than income — — 47 4 — 51
Exploration 14 3 2 — — 19
Depreciation, depletion, and amortization 137 63 148 3 — 351
Asset retirement obligation accretion — 20 7 1 — 28
268 192 636 19 (32) 1,083
Operating Income (Loss)(2)
$ 231 $ 55 $ 371 $ 16 $ — 673
Other Income (Expense):
Derivative instrument losses, net (113)
Gain on divestitures, net 65
Other, net 74
General and administrative (79)
Transaction, reorganization, and separation (4)
Financing costs, net (94)
Income Before Income Taxes $ 522

Egypt(1)
North Sea U.S. Altus Midstream
Intersegment
Eliminations
& Other
Total(4)
Upstream
For the Six Months Ended June 30, 2021 (In millions)
Revenues:
Oil revenues $ 834 $ 457 $ 841 $ — $ — $ 2,132
Natural gas revenues 135 58 345 — — 538
Natural gas liquids revenues 4 10 261 — — 275
Oil, natural gas, and natural gas liquids production revenues 973 525 1,447 — — 2,945
Purchased oil and gas sales — — 676 6 — 682
Midstream service affiliate revenues — — — 64 (64) —
973 525 2,123 70 (64) 3,627
Operating Expenses:
Lease operating expenses 218 173 185 — (1) 575
Gathering, processing, and transmission 4 20 143 15 (63) 119
Purchased oil and gas costs — — 751 5 — 756
Taxes other than income — — 87 8 — 95
Exploration 22 23 18 — 2 65
Depreciation, depletion, and amortization 267 147 273 6 — 693
Asset retirement obligation accretion — 39 15 2 — 56
511 402 1,472 36 (62) 2,359
Operating Income (Loss)(2)
$ 462 $ 123 $ 651 $ 34 $ (2) 1,268
Other Income (Expense):
Derivative instrument gains, net 45
Gain on divestitures, net 67
Other, net 135
General and administrative (162)
Transaction, reorganization, and separation (4)
Financing costs, net (201)
Income Before Income Taxes $ 1,148
Total Assets(3)
$ 3,116 $ 2,127 $ 7,305 $ 1,839 $ 1 $ 14,388

(1) Includes revenue from non-customers for the quarters and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 of:


		For the Quarter Ended June 30,				For the Six Months Ended June 30,					For the Quarter Ended June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In millions)									(In millions)
Oil	Oil	$	302	$	97	$	552	$	190	Oil	$	165	$	302	$	337	$	552
Natural gas	Natural gas	30		10		61		22		Natural gas	24		30		50		61
Natural gas liquids	Natural gas liquids	1		—		2		1		Natural gas liquids	—		1		—		2

(2)Operating income of U.S. and North Sea includes leasehold impairments of $3 million and $3 million, respectively, for the second quarter of 2023.
Operating income of U.S. and Egypt includes leasehold impairments of $1 million and $1 million, respectively, for the second quarter of 2022. Operating income of U.S. and North Sea includes leasehold impairments of $5 million and $6 million, respectively, for the first six months of 2023. Operating income of U.S. and Egypt includes leasehold impairments of $4 million and $2 million, respectively, for the first six months of 2022. Operating income of U.S. and Egypt includes leasehold and other asset impairments of $1 million and $2 million, respectively, for the second quarter of 2021. Operating income of U.S. and Egypt includes leasehold impairments of $17 million and $4 million, respectively, for the first six months of 2021.

(3)Intercompany balances are excluded from total assets.

(4)Includes noncontrolling interests of Sinopec, Altus prior to deconsolidation, and APA.

ITEM 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

The following discussion relates to Apache Corporation (Apache or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q, as well as related information set forth in the Company’s Consolidated Financial Statements, accompanying Notes to Consolidated Financial Statements, and Management’s ~~Discussion and~~Narrative 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, ~~2021.~~2022.

Overview

~~On March 1, 2021,~~ Apache, ~~Corporation consummated a holding company reorganization (the Holding Company Reorganization), pursuant to which Apache Corporation became~~ a direct, wholly owned subsidiary of APA Corporation (APA), and all of the Company’s outstanding shares automatically converted into equivalent corresponding shares of APA. Pursuant to the Holding Company Reorganization, APA became the successor issuer to the Company pursuant to Rule 12g-3(a) under the Exchange Act and replaced the Company as the public company trading on the Nasdaq Global Select Market under the ticker symbol “APA.” The Holding Company Reorganization modernized the Company’s operating and legal structure, making it more consistent with other companies that have affiliates operating around the globe. Refer to ~~Note 2—Transactions with Parent Affiliate~~ ~~for more detail.~~

~~Overview~~

~~Apache, a direct, wholly owned subsidiary of APA,~~ is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids (NGLs). The Company’s upstream business currently has exploration and production operations in three geographic areas: the U.S., Egypt, and offshore the U.K. in the North Sea (North Sea). Prior to the BCP Business Combination (as defined ~~below,~~in the Notes to the Company’s Consolidated Financial Statements set forth in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q), the Company’s midstream business was operated by Altus Midstream Company (ALTM) through its subsidiary Altus Midstream LP (collectively, Altus). ~~Altus owned, developed, and operated a midstream energy asset network in the Permian Basin of West Texas.~~

The Company’s mission is to grow in an innovative, safe, environmentally responsible, and profitable manner for the long-term benefit of its stakeholders. The Company is focused on rigorous portfolio management, disciplined financial structure, and optimization of returns.

The global economy and the energy industry ~~have been deeply~~continue to be impacted by the effects of the conflict in Ukraine and the coronavirus disease 2019 (COVID-19) ~~pandemic and related governmental actions.~~pandemic. Uncertainties in the global supply chain ~~commodity prices,~~ and financial markets, including the impact of inflation and rising interest rates, and actions taken by foreign oil and gas producing nations, including OPEC+, continue to impact oil supply and ~~demand.~~demand and contribute to commodity price volatility. Despite these uncertainties, the Company remains committed to its longer-term objectives: (1) to maintain a balanced asset portfolio; (2) to invest for long-term returns over production growth; and (3) to budget conservatively to generate cash flow in excess of its upstream exploration, appraisal, and development capital program that can be directed to debt reduction, share repurchases, and other return of capital to its ~~stakeholders.~~shareholders. The Company continues to aggressively manage its cost structure regardless of the oil price environment and closely monitors hydrocarbon pricing fundamentals to reallocate capital as part of its ongoing planning process.

In the second quarter of ~~2022,~~2023, the Company reported net income of ~~$903~~$290 million compared to net income of ~~$339~~$903 million in the second quarter of ~~2021.~~2022. Net income for the second quarter of ~~2022 benefited from higher~~2023 was impacted by lower revenues attributable to ~~a new merged concession agreement in Egypt and higher commodity prices. The increase in~~significantly lower realized ~~prices was primarily driven by the effects of global inflation, the conflict in Ukraine on global~~ commodity prices ~~and uncertainties around spare capacity and energy security globally.~~when compared to the prior-year period.

The Company generated ~~$2.4~~$1.3 billion of cash from operating activities during the first six months of ~~2022, a 47~~2023, 46 percent ~~increase from~~lower than the first six months of ~~2021,~~2022. The Company’s lower operating cash flows for the first six months of 2023 were driven by ~~higher oil~~lower commodity prices and gas revenues. Since year-end 2021, the Company has reduced its total outstanding debt and redeemable preferred interests by $2.3 billion and $712 million, respectively, through the deconsolidation of ALTMassociated revenues and the ~~retirement~~timing of ~~outstanding notes and debentures. The Company had $228 million of cash on hand at June 30, 2022.~~working capital items.

Operational Highlights

Key operational highlights for the quarter include:

United States

•Daily boe production from the Company’s U.S. assets accounted for 5251 percent of its total production during the second quarter of ~~2022.~~2023. The Company averaged four drilling rigs in the U.S. during the quarter, including two rigs in the Southern Midland Basin and two rigs in the Delaware Basin, and drilled and brought online 10 operated wells in the quarter. Two-thirds of those wells came online in June, so the full impact will be realized in the third quarter. The Company’s ~~initial delineation~~core Midland Basin development program ~~in its Austin Chalk~~continues to represent a key growth area ~~had mixed results, prompting a pause in planned drilling and completion activity.~~for the U.S. assets.

International

•In Egypt, the Company averaged 1217 drilling rigs and drilled 1119 new productive wells during the second quarter of ~~2022.~~2023. Second quarter ~~2022~~2023 gross equivalent production in the Company’s Egypt assets ~~increased 1~~decreased 3 percent from the second quarter of ~~2021, while~~2022, and net production ~~increased 25 percent, primarily a function of improved cost recovery under the new merged concession agreement ratified at the end of 2021.~~remained relatively flat. The Company continues to build and enhance its drilling inventory in Egypt, supplemented with recent seismic acquisitions and new play concept evaluations on both new and existing acreage. The Company continues to increasehas increased drilling and workover activity aswith a ~~result~~heavier focus on oil prospects and anticipates increases in gross oil production volumes throughout the remainder of the ~~merged concession agreement.~~year as it maintains a steady operational cadence.

•The Company ~~averaged two rigs~~suspended all new drilling activity in the North Sea during the second quarter of ~~2022. Production was impacted by downtime from maintenance turnaround at Forties during the first half~~2023. The Company will manage its base production and maximize economic recovery of ~~2022. North Sea production in the second half of 2022 is expected to benefit from completion of maintenance activities~~its oil and ~~production commencing on the Garten-3 development well.~~gas wells through well intervention activities.

3228

Results of Operations

Oil, Natural Gas, and Natural Gas Liquids Production Revenues

Revenue

The Company’s production revenues and respective contribution to total revenues by country were as follows:


		For the Quarter Ended June 30,								For the Six Months Ended June 30,									For the Quarter Ended June 30,								For the Six Months Ended June 30,
		2022				2021				2022				2021					2023				2022				2023				2022
		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution			$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution

		($ in millions)																	($ in millions)
Oil Revenues:	Oil Revenues:																	Oil Revenues:
United States	United States	$	654	35	%	$	493	43	%	$	1,253	35	%	$	841	39	%	United States	$	473	36	%	$	654	35	%	$	912	34	%	$	1,253	35	%
Egypt(1)	Egypt(1)	902		48	%	432		38	%	1,692		47	%	834		39	%	Egypt(1)	618		47	%	902		48	%	1,247		47	%	1,692		47	%
North Sea	North Sea	307		17	%	216		19	%	635		18	%	457		22	%	North Sea	235		17	%	307		17	%	517		19	%	635		18	%
Total(1)	Total(1)	$	1,863	100	%	$	1,141	100	%	$	3,580	100	%	$	2,132	100	%	Total(1)	$	1,326	100	%	$	1,863	100	%	$	2,676	100	%	$	3,580	100	%

Natural Gas Revenues:	Natural Gas Revenues:																	Natural Gas Revenues:
United States	United States	$	281	65	%	$	134	59	%	$	464	57	%	$	345	64	%	United States	$	46	26	%	$	281	65	%	$	131	32	%	$	464	57	%
Egypt(1)	Egypt(1)	88		20	%	65		29	%	186		23	%	135		25	%	Egypt(1)	90		52	%	88		20	%	183		44	%	186		23	%
North Sea	North Sea	64		15	%	27		12	%	163		20	%	58		11	%	North Sea	39		22	%	64		15	%	99		24	%	163		20	%
Total(1)	Total(1)	$	433	100	%	$	226	100	%	$	813	100	%	$	538	100	%	Total(1)	$	175	100	%	$	433	100	%	$	413	100	%	$	813	100	%

NGL Revenues:	NGL Revenues:																	NGL Revenues:
United States	United States	$	214	93	%	$	141	96	%	$	418	92	%	$	261	95	%	United States	$	95	96	%	$	214	93	%	$	203	94	%	$	418	92	%
Egypt(1)	Egypt(1)	3		1	%	2		1	%	6		2	%	4		1	%	Egypt(1)	—		0	%	3		1	%	—		0	%	6		2	%
North Sea	North Sea	12		6	%	4		3	%	28		6	%	10		4	%	North Sea	4		4	%	12		6	%	14		6	%	28		6	%
Total(1)	Total(1)	$	229	100	%	$	147	100	%	$	452	100	%	$	275	100	%	Total(1)	$	99	100	%	$	229	100	%	$	217	100	%	$	452	100	%

Oil and Gas Revenues:	Oil and Gas Revenues:																	Oil and Gas Revenues:
United States	United States	$	1,149	46	%	$	768	51	%	$	2,135	44	%	$	1,447	49	%	United States	$	614	38	%	$	1,149	46	%	$	1,246	38	%	$	2,135	44	%
Egypt(1)	Egypt(1)	993		39	%	499		33	%	1,884		39	%	973		33	%	Egypt(1)	708		44	%	993		39	%	1,430		43	%	1,884		39	%
North Sea	North Sea	383		15	%	247		16	%	826		17	%	525		18	%	North Sea	278		18	%	383		15	%	630		19	%	826		17	%
Total(1)	Total(1)	$	2,525	100	%	$	1,514	100	%	$	4,845	100	%	$	2,945	100	%	Total(1)	$	1,600	100	%	$	2,525	100	%	$	3,306	100	%	$	4,845	100	%

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

3329

Production

The Company’s production volumes by country were as follows:


		For the Quarter Ended June 30,			For the Six Months Ended, June 30,				For the Quarter Ended June 30,			For the Six Months Ended June 30,
		2022	Increase (Decrease)	2021	2022	Increase (Decrease)	2021		2023	Increase (Decrease)	2022	2023	Increase (Decrease)	2022
Oil Volume (b/d)	Oil Volume (b/d)							Oil Volume (b/d)
United States	United States	64,759	(22)%	82,852	67,184	(11)%	75,313	United States	70,087	8%	64,759	67,515	0%	67,184
Egypt(1)(2)	Egypt(1)(2)	85,502	20%	71,182	85,261	19%	71,673	Egypt(1)(2)	87,790	3%	85,502	87,792	3%	85,261
North Sea	North Sea	32,493	2%	31,992	33,860	(10)%	37,726	North Sea	35,048	8%	32,493	36,268	7%	33,860
Total	Total	182,754	(2)%	186,026	186,305	1%	184,712	Total	192,925	6%	182,754	191,575	3%	186,305

Natural Gas Volume (Mcf/d)	Natural Gas Volume (Mcf/d)							Natural Gas Volume (Mcf/d)
United States	United States	457,459	(15)%	541,088	467,493	(11)%	524,396	United States	422,325	(8)%	457,459	417,213	(11)%	467,493
Egypt(1)(2)	Egypt(1)(2)	346,424	35%	256,262	366,390	37%	267,145	Egypt(1)(2)	337,413	(3)%	346,424	346,829	(5)%	366,390
North Sea	North Sea	42,802	16%	36,769	40,645	(6)%	43,268	North Sea	37,194	(13)%	42,802	38,769	(5)%	40,645
Total	Total	846,685	2%	834,119	874,528	5%	834,809	Total	796,932	(6)%	846,685	802,811	(8)%	874,528

NGL Volume (b/d)	NGL Volume (b/d)							NGL Volume (b/d)
United States	United States	59,267	(13)%	68,492	60,482	(4)%	63,183	United States	56,973	(4)%	59,267	54,122	(11)%	60,482
Egypt(1)(2)	Egypt(1)(2)	297	(46)%	553	394	(31)%	568	Egypt(1)(2)	—	NM	297	—	NM	394
North Sea	North Sea	1,195	9%	1,095	1,345	9%	1,231	North Sea	872	(27)%	1,195	1,062	(21)%	1,345
Total	Total	60,759	(13)%	70,140	62,221	(4)%	64,982	Total	57,845	(5)%	60,759	55,184	(11)%	62,221

BOE per day(3)	BOE per day(3)							BOE per day(3)
United States	United States	200,269	(17)%	241,525	205,582	(9)%	225,895	United States	197,448	(1)%	200,269	191,172	(7)%	205,582
Egypt(1)(2)	Egypt(1)(2)	143,536	25%	114,445	146,720	26%	116,765	Egypt(1)(2)	144,026	0%	143,536	145,597	(1)%	146,720
North Sea(4)	North Sea(4)	40,822	4%	39,216	41,979	(9)%	46,169	North Sea(4)	42,118	3%	40,822	43,792	4%	41,979
Total	Total	384,627	(3)%	395,186	394,281	1%	388,829	Total	383,592	NM	384,627	380,561	(3)%	394,281

(1) Gross oil, natural gas, and NGL production in Egypt were as follows:


		For the Quarter Ended June 30,		For the Six Months Ended June 30,			For the Quarter Ended June 30,		For the Six Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Oil (b/d)	Oil (b/d)	141,432	135,494	137,934	135,408	Oil (b/d)	140,652	141,432	140,708	137,934
Natural Gas (Mcf/d)	Natural Gas (Mcf/d)	555,694	578,380	576,637	590,756	Natural Gas (Mcf/d)	517,291	555,694	531,093	576,637
NGL (b/d)	NGL (b/d)	464	866	599	881	NGL (b/d)	—	464	—	599

(2) Includes net production volumes per day attributable to noncontrolling interests in Egypt of:


		For the Quarter Ended June 30,		For the Six Months Ended June 30,			For the Quarter Ended June 30,		For the Six Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Oil (b/d)	Oil (b/d)	45,616	23,759	45,475	23,923	Oil (b/d)	58,561	45,616	58,560	45,475
Natural Gas (Mcf/d)	Natural Gas (Mcf/d)	184,819	85,574	195,390	89,235	Natural Gas (Mcf/d)	225,080	184,819	231,348	195,390
NGL (b/d)	NGL (b/d)	158	184	210	189	NGL (b/d)	—	158	—	210

(3) The table shows production on a boe basis 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 for the second quarters of 2023 and 2022 ~~and 2021~~ were ~~38,029~~40,099 boe/d and ~~41,941~~38,029 boe/d, respectively, and ~~40,833~~43,347 boe/d and ~~48,208~~40,833 boe/d for the first six months of ~~2022~~2023 and ~~2021,~~2022, respectively. Sales volumes may vary from production volumes as a result of the timing of liftings.

NM — Not Meaningful

3430

Pricing

The Company’s average selling prices by country were as follows:


		For the Quarter Ended June 30,					For the Six Months Ended, June 30,						For the Quarter Ended June 30,					For the Six Months Ended June 30,
		2022		Increase (Decrease)	2021		2022		Increase (Decrease)	2021			2023		Increase (Decrease)	2022		2023		Increase (Decrease)	2022
Average Oil Price - Per barrel
Average Oil Price – Per barrel												Average Oil Price – Per barrel
United States	United States	$	110.98	70%	$	65.32	$	103.05	67%	$	61.68	United States	$	74.04	(33)%	$	110.98	$	74.57	(28)%	$	103.05
Egypt	Egypt	115.97		74%	66.70		109.65		71%	64.30		Egypt	77.39		(33)%	115.97		78.48		(28)%	109.65
North Sea	North Sea	113.77		66%	68.34		107.47		69%	63.48		North Sea	79.27		(30)%	113.77		80.51		(25)%	107.47
Total	Total	113.79		71%	66.40		106.87		69%	63.06		Total	76.48		(33)%	113.79		77.47		(28)%	106.87

Average Natural Gas Price - Per Mcf
Average Natural Gas Price – Per Mcf												Average Natural Gas Price – Per Mcf
United States	United States	$	6.75	147%	$	2.73	$	5.48	51%	$	3.63	United States	$	1.21	(82)%	$	6.75	$	1.74	(68)%	$	5.48
Egypt	Egypt	2.78		(1)%	2.80		2.80		—	2.80		Egypt	2.95		6%	2.78		2.92		4%	2.80
North Sea	North Sea	18.15		124%	8.10		24.72		233%	7.43		North Sea	11.29		(38)%	18.15		14.47		(41)%	24.72
Total	Total	5.65		89%	2.99		5.16		45%	3.56		Total	2.42		(57)%	5.65		2.85		(45)%	5.16

Average NGL Price - Per barrel
Average NGL Price – Per barrel												Average NGL Price – Per barrel
United States	United States	$	39.79	75%	$	22.72	$	38.20	67%	$	22.84	United States	$	18.13	(54)%	$	39.79	$	20.71	(46)%	$	38.20
Egypt	Egypt	75.14		97%	38.10		76.80		85%	41.49		Egypt	—		NM	75.14		—		NM	76.80
North Sea	North Sea	71.71		85%	38.79		73.29		66%	44.21		North Sea	39.24		(45)%	71.71		49.52		(32)%	73.29
Total	Total	40.97		77%	23.10		39.63		69%	23.41		Total	18.61		(55)%	40.97		21.52		(46)%	39.63

NM — Not Meaningful

Second-Quarter ~~2022~~2023 compared to Second-Quarter ~~2021~~2022

Crude Oil Crude oil revenues for the second quarter of ~~2022~~2023 totaled ~~$1.9~~$1.3 billion, a ~~$722~~$537 million ~~increase~~decrease from the comparative ~~2021~~2022 quarter. A 7133 percent ~~increase~~decrease in average realized prices ~~increased~~decreased second-quarter ~~2022~~2023 oil revenues by ~~$814~~$611 million compared to the prior-year quarter, while 26 percent ~~lower~~higher average daily production ~~decreased~~increased revenues by ~~$92~~$74 million. Crude oil revenues accounted for 7483 percent of total oil and gas production revenues and 4850 percent of worldwide production in the second quarter of ~~2022.~~ 2023. Crude oil prices realized in the second quarter of 2023 averaged $76.48 per barrel, compared with $113.79 per barrel in the comparative prior-year quarter.

The Company’s worldwide oil production ~~decreased 3.3~~increased 10.2 Mb/d to ~~182.8~~192.9 Mb/d during the second quarter of 2023 from the comparative prior-year period, primarily a result of increased drilling activity and recompletions, partially offset by natural production decline across all assets.

Natural Gas Gas revenues for the second quarter of 2023 totaled $175 million, a $258 million decrease from the comparative 2022 quarter. A 57 percent decrease in average realized prices decreased second-quarter 2023 natural gas revenues by $248 million compared to the prior-year quarter, while 6 percent lower average daily production decreased revenues by $10 million. Natural gas revenues accounted for 11 percent of total oil and gas production revenues and 35 percent of worldwide production during the second quarter of 2023. The Company’s worldwide natural gas production decreased 49.8 MMcf/d to 796.9 MMcf/d during the second quarter of 2023 from the comparative prior-year period, primarily a result of natural production decline across all assets ~~offset by an increased net production in Egypt resulting from improved cost recovery under the merged concession agreement ratified at the end of 2021.~~

~~Natural Gas~~ Gas revenues for the second quarter of 2022 totaled $433 million, a $207 million increase from the comparative 2021 quarter. An 89 percent increase in average realized prices increased second-quarter 2022 natural gas revenues by $202 million compared to the prior-year quarter, while 2 percent higher average daily production increased revenues by $5 million. Natural gas revenues accounted for 17 percent of total oil and gas production revenues and 37 percent of worldwide production during the second quarter of 2022. The Company’s worldwide natural gas production increased 12.6 MMcf/d to 847 MMcf/d during the second quarter of 2022 from the comparative prior-year period, primarily a result of increased net production in Egypt resulting from improved cost recovery under the merged concession agreement ratified at the end of 2021 and increased production in the North Sea due to lower operational downtime as compared to the second quarter of 2021. These increases were partially offset by natural production decline across all assets and the Company’s divestituresale of non-core assets in the ~~Permian Basin during the first quarter of 2022.~~U.S., partially offset by increased drilling activity and recompletions.

NGL NGL revenues for the second quarter of ~~2022~~2023 totaled ~~$229~~$99 million, a ~~$82~~$130 million ~~increase~~decrease from the comparative ~~2021~~2022 quarter. A 7755 percent ~~increase~~decrease in average realized prices ~~increased~~decreased second-quarter ~~2022~~2023 NGL revenues by ~~$114~~$125 million compared to the prior-year quarter, while 135 percent lower average daily production decreased revenues by ~~$32~~$5 million. NGL revenues accounted for 96 percent of total oil and gas production revenues and 15 percent of worldwide production during the second quarter of ~~2022.~~2023. The Company’s worldwide NGL production decreased ~~9.4~~2.9 Mb/d to ~~60.8~~57.8 Mb/d during the second quarter of ~~2022~~2023 from the comparative prior-year period, primarily a result of natural production decline, ~~across all assets~~partially offset by increased drilling activity and ~~the Company’s divestiture of non-core assets in the Permian Basin during the first quarter of 2022.~~recompletions.

3531

Year-to-Date ~~2022~~2023 compared to Year-to-Date ~~2021~~2022

Crude Oil Crude oil revenues for the first six months of ~~2022~~2023 totaled ~~$3.6~~$2.7 billion, a ~~$1.4 billion increase~~$904 million decrease from the comparative ~~2021~~2022 period. A 6928 percent ~~increase~~decrease in average realized prices ~~increased~~decreased oil revenues for the ~~2022~~2023 period by ~~$1.4 billion~~$984 million compared to the prior-year period, while ~~the change in~~3 percent higher average daily production ~~was insignificant compared to the prior-year period.~~increased revenues by $80 million. Crude oil revenues accounted for 7481 percent of total oil and gas production revenues and 4750 percent of worldwide production for the first six months of ~~2022.~~2023. Crude oil prices realized during the first six months of ~~2022~~2023 averaged ~~$106.87~~$77.37 per barrel, compared to ~~$63.06~~$106.87 per barrel in the comparative prior-year period.

The Company’s worldwide oil production increased ~~1.6~~5.3 Mb/d to ~~186.3~~191.6 Mb/d in the first six months of ~~2022~~2023 compared to the prior-year period, primarily a ~~function~~result of ~~improved cost recovery under the merged concession agreement in Egypt ratified at the end of 2021,~~increased drilling activity and recompletions, partially offset by ~~operational downtime in the North Sea and~~ natural production decline across all assets.

Natural Gas Gas revenues for the first six months of ~~2022~~2023 totaled ~~$813~~$413 million, a ~~$275~~$400 million ~~increase~~decrease from the comparative ~~2021~~2022 period. A 45 percent ~~increase~~decrease in average realized prices ~~increased~~decreased natural gas revenues for the ~~2022~~2023 period by ~~$241~~$364 million compared to the prior-year period, while 58 percent ~~higher~~lower average daily production ~~increased~~decreased revenues by ~~$34~~$36 million compared to the prior-year period. Natural gas revenues accounted for 1712 percent of total oil and gas production revenues and 3735 percent of worldwide production for the first six months of ~~2022. Natural gas prices realized during the first six months of 2022 averaged $5.16 per Mcf, compared to $3.56 per Mcf in the comparative prior-year period.~~2023. The Company’s worldwide natural gas production ~~increased 40~~decreased 72 MMcf/d to ~~875~~802.8 MMcf/d in the first six months of 2022 compared to the prior-year period, primarily a result of increased net production in Egypt resulting from improved cost recovery under the merged concession agreement ratified at the end of 2021, offset by natural production decline across all assets.

~~NGL~~ NGL revenues for the first six months of 2022 totaled $452 million, a $177 million increase from the comparative 2021 period. A 69 percent increase in average realized prices increased NGL revenues for the 2022 period by $191 million compared to the prior-year period, while 4 percent lower average daily production decreased revenues by $14 million compared to the prior-year period. NGL revenues accounted for 9 percent of total oil and gas production revenues and 16 percent of worldwide production for the first six months of 2022. NGL prices realized during the first six months of 2022 averaged $39.63 per barrel, compared to $23.41 per barrel in the comparative prior-year period. The Company’s worldwide NGL production decreased 2.8 Mb/d to 62.2 Mb/d in the first six months of 20222023 compared to the prior-year period, primarily a result of natural production decline across all ~~countries.~~assets and sale of non-core assets in the U.S., partially offset by increased drilling activity and recompletions.

~~Altus Midstream Revenues~~

~~Prior to the deconsolidation of Altus on February 22, 2022, Altus Midstream services~~NGL NGL revenues ~~generated through its fee-based contractual arrangements with the Company totaled $32 million during the second quarter of 2021 and $16 million and $64 million during~~for the first six months of 2023 totaled $217 million, a $235 million decrease from the comparative 2022 period. A 46 percent decrease in average realized prices decreased NGL revenues for the 2023 period by $206 million compared to the prior-year period, while 11 percent lower average daily production decreased revenues by $29 million compared to the prior-year period. NGL revenues accounted for 7 percent of total oil and ~~2021, respectively. These~~gas production revenues ~~were eliminated upon consolidation.~~and 15 percent of worldwide production for the first six months of 2023. The Company’s worldwide NGL production decreased 7.0 Mb/d to 55.2 Mb/d in the first six months of 2023 compared to the prior-year period, primarily a result of natural production decline, partially offset by increased drilling activity and recompletions.

Purchased Oil and Gas Sales

Purchased oil and gas sales represent volumes primarily attributable to transport, fuel, and physical in-basin gas purchases that were sold by the Company to fulfill natural gas takeaway obligations. Sales related to these purchased volumes totaled ~~$522~~$144 million and ~~$242~~$522 million during the second quarters of ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$871~~$383 million and ~~$682~~$871 million during the first six months of ~~2022~~2023 and ~~2021,~~2022, respectively. Purchased oil and gas sales were offset by associated purchase costs of ~~$528~~$131 million and ~~$262~~$528 million during the second quarters of ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$879~~$347 million and ~~$756~~$879 million during the first six months of ~~2022~~2023 and ~~2021,~~2022, respectively. Gross purchased oil and gas sales values were ~~higher~~lower in the second quarter and the first six months of ~~2022~~2023, primarily due to ~~higher~~lower average natural gas prices during the ~~2022~~2023 periods.

3632

Operating Expenses

The Company’s operating expenses were as follows:


		For the Quarter Ended June 30,				For the Six Months Ended June 30,					For the Quarter Ended June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In millions)									(In millions)
Lease operating expenses	Lease operating expenses	$	359	$	311	$	703	$	575	Lease operating expenses	$	352	$	359	$	666	$	703
Gathering, processing, and transmission	Gathering, processing, and transmission	94		61		175		119		Gathering, processing, and transmission	75		94		148		175
Purchased oil and gas costs	Purchased oil and gas costs	528		262		879		756		Purchased oil and gas costs	131		528		347		879
Taxes other than income	Taxes other than income	78		51		148		95		Taxes other than income	47		78		97		148
Exploration	Exploration	15		19		40		65		Exploration	37		15		81		40
General and administrative	General and administrative	83		79		234		162		General and administrative	66		83		124		234
Transaction, reorganization, and separation	Transaction, reorganization, and separation	3		4		17		4		Transaction, reorganization, and separation	2		3		6		17
Depreciation, depletion, and amortization:	Depreciation, depletion, and amortization:									Depreciation, depletion, and amortization:
Oil and gas property and equipment	Oil and gas property and equipment	269		322		547		634		Oil and gas property and equipment	326		269		627		547
Gathering, processing, and transmission assets	Gathering, processing, and transmission assets	1		19		6		38		Gathering, processing, and transmission assets	1		1		3		6
Other assets	Other assets	8		10		16		21		Other assets	12		8		17		16
Asset retirement obligation accretion	Asset retirement obligation accretion	29		28		58		56		Asset retirement obligation accretion	29		29		57		58

Impairments										Impairments	46		—		46		—
Financing costs, net	Financing costs, net	62		94		202		201		Financing costs, net	42		62		91		202
Total Operating Expenses	Total Operating Expenses	$	1,529	$	1,260	$	3,025	$	2,726	Total Operating Expenses	$	1,166	$	1,529	$	2,310	$	3,025

Lease Operating Expenses (LOE)

LOE ~~increased $48 million and $128 million~~remained essentially flat in the second quarter of 2023 when compared to the second quarter of 2022 and decreased $37 million in the first six months of ~~2022, respectively, from~~2023 when compared to the ~~comparative prior-year periods.~~first six months of 2022. On a per-unit basis, LOE ~~increased 20~~decreased 5 percent and 226 percent in the second quarter and the first six months of ~~2022,~~2023, respectively, from the comparative prior-year ~~periods.~~period. The ~~increase~~decrease was primarily driven by ~~overall higher labor costs and operating costs trending with higher oil and gas prices and global inflation. These increases were coupled with higher~~the impact from changes in foreign currency exchange rates against the US dollar, decreased workover activity, ~~in the U.S. and~~primarily in the North Sea, ~~in the second quarter~~ and ~~the first six months of 2022. LOE costs for the first six months of 2022 were also impacted by~~ mark-to-market adjustments for cash-based stock compensation expense resulting from ~~an increase~~changes in ~~the Company’s~~APA’s stock ~~price~~price. These decreases were offset by overall higher labor costs and ~~anticipated achievement of performance~~chemical and ~~financial objectives as defined in the stock award plans.~~

other operating costs trending with global inflation.

Gathering, Processing, and Transmission (GPT)

The Company’s GPT expenses were as follows:


		For the Quarter Ended June 30,				For the Six Months Ended, June 30,					For the Quarter Ended June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In millions)									(In millions)
Third-party processing and transmission costs	Third-party processing and transmission costs	$	68	$	53	$	134	$	104	Third-party processing and transmission costs	$	49	$	68	$	98	$	134
Midstream service costs - ALTM		—		32		18		63
Midstream service costs - Kinetik		26		—		36		—
Midstream service costs – ALTM										Midstream service costs – ALTM	—		—		—		18
Midstream service costs – Kinetik										Midstream service costs – Kinetik	26		26		50		36
Upstream processing and transmission costs	Upstream processing and transmission costs	94		85		188		167		Upstream processing and transmission costs	75		94		148		188
Midstream operating expenses	Midstream operating expenses	—		8		5		15		Midstream operating expenses	—		—		—		5
Intersegment eliminations	Intersegment eliminations	—		(32)		(18)		(63)		Intersegment eliminations	—		—		—		(18)
Total Gathering, processing, and transmission	Total Gathering, processing, and transmission	$	94	$	61	$	175	$	119	Total Gathering, processing, and transmission	$	75	$	94	$	148	$	175

GPT costs ~~increased $33~~decreased $19 million and ~~$56~~$27 million in the second quarter and the first six months of ~~2022,~~2023, respectively, from the comparative prior-year ~~periods. Third-party~~period, primarily the result of lower upstream processing and transmission costs, ~~increased $15~~partially offset by impacts of the BCP Business Combination. Upstream processing and transmission costs decreased $19 million and ~~$30~~$40 million in the second quarter and the first six months of ~~2022,~~2023, respectively, from the comparative prior-year ~~periods. The increase in third-party costs for the second quarter and the first six months of 2022 was~~period, primarily driven by ~~an increase~~a decrease in ~~average transportation rates during~~natural gas production volumes when compared to the ~~year.~~prior-year period. Costs for services provided by ALTM in the first ~~quarter~~six months of 2022, ~~and~~ prior to the BCP Business Combination, ~~(as defined in the Notes to the Company’s Consolidated Financial Statements set forth in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q)~~ totaling $18 million were eliminated in the Company’s consolidated financial statements and reflected as “Intersegment eliminations” in the table above. Subsequent to the BCP Business Combination and the Company’s deconsolidation of Altus on February 22, 2022, these midstream services continue to be provided by Kinetik Holdings Inc. (Kinetik) but are no longer eliminated. ~~Midstream services provided by Kinetik totaled $26~~

Taxes Other Than Income

Taxes other than income decreased $31 million and ~~$36~~$51 million infrom the second quarter and the first six months of 2022, respectively, ~~and will continue to result in higher GPT costs in future periods as compared to periods preceding the ALTM deconsolidation.~~

~~Purchased Oil and Gas Costs~~

Purchased oil and gas costs totaled $528 million and $879 million during the second quarter and the first six months of 2022, respectively, compared to $262 million and $756 million during the second quarter and the first six months of 2021, respectively. Purchased oil and gas costs were offset by associated purchase sales of $522 million and $871 million during the second quarter and the first six months of 2022, respectively, compared to $242 million and $682 million during the second quarter and the first six months of 2021, respectively, as further discussed above.

~~Taxes Other Than Income~~

~~Taxes other than income increased $27 million and $53 million from the second quarter and the first six months of 2021, respectively,~~ primarily from ~~higher~~lower severance taxes driven by ~~higher~~lower commodity prices as compared to the ~~same~~ prior-year periods.

Exploration Expenses

The Company’s exploration expenses were as follows:

For the Quarter Ended
June 30,
For the Six Months Ended,
June 30,
2022 2021 2022 2021
(In millions)
Unproved leasehold impairments $ 2 $ 3 $ 6 $ 21
Dry hole expense 4 6 9 25
Geological and geophysical expense 1 1 2 3
Exploration overhead and other 8 9 23 16
Total Exploration $ 15 $ 19 $ 40 $ 65


	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions)
Unproved leasehold impairments	$	6	$	2	$	11	$	6
Dry hole expense	22		4		50		9
Geological and geophysical expense	—		1		1		2
Exploration overhead and other	9		8		19		23
Total Exploration	$	37	$	15	$	81	$	40

Exploration expenses ~~decreased $4~~increased $22 million and ~~$25~~$41 million from the second quarter and the first six months of ~~2021,~~2022, respectively, primarily the result of ~~lower unproved leasehold impairments and lower~~higher dry hole ~~expenses as compared to the same prior-year periods. These decreases were offset by higher~~expense from increased Egypt exploration ~~activities and related labor costs compared to the prior year.~~activity during 2023.

General and Administrative (G&A) Expenses

G&A expenses ~~increased $4~~decreased $17 million and ~~$72~~$110 million ~~from~~compared to the second quarter and the first six months of ~~2021,~~2022, respectively. The ~~year-over-year increase~~decrease in expenses for the second quarter of 2023 and the first six months of 2023 compared to the prior-year period was primarily driven by ~~higher~~lower cash-based stock compensation expense resulting from ~~an increase~~changes in ~~the Company’s~~APA’s stock price and anticipated achievement of performance and financial objectives as defined in the stock award plans. Higher overall wages across the Company also impacted G&A expenses compared to the prior-year period.price.

Transaction, Reorganization, and Separation (TRS) Costs

TRS costs ~~decreased $1 million and increased $13 million from~~remained essentially flat compared to the second quarter of 2022 and decreased $11 million compared to the first six months of ~~2021, respectively.~~2022. The ~~increase~~decrease in costs during the first six months of ~~2022~~2023 compared to the ~~same~~ prior-year period was primarily a result of transaction costs from the BCP Business ~~Combination.~~Combination in the first quarter of 2022.

Depreciation, Depletion, and Amortization (DD&A)

DD&A expenses on the Company’s oil and gas properties ~~decreased $53~~increased $57 million and ~~$87~~$80 million from the second quarter and the first six months of ~~2021,~~2022, respectively. The Company’s DD&A rate on its oil and gas properties ~~decreased $1.16~~increased $1.29 per boe and ~~$1.28~~$1.06 per boe from the second quarter and the first six months of ~~2021, respectively.~~2022, respectively, driven by general cost inflation. The ~~decrease~~increase on an absolute basis was ~~driven~~also impacted by ~~lower depletion rates~~an increase in capital investment activity in Egypt ~~partially offset by higher production volumes.~~and acquisitions in the U.S. over the past year.

Impairments

Financing Costs, Net

The Company’s Financing costs were as follows:


											For the Quarter Ended June 30,				For the Six Months Ended June 30,
		For the Quarter Ended June 30,				For the Six Months Ended, June 30,					2023		2022		2023		2022
		2022		2021		2022		2021
		(In millions)									(In millions)
Interest expense	Interest expense	$	75	$	110	$	165	$	222	Interest expense	$	74	$	75	$	149	$	165
Amortization of debt issuance costs	Amortization of debt issuance costs	4		3		6		5		Amortization of debt issuance costs	—		4		1		6
Capitalized interest	Capitalized interest	(1)		—		(1)		—		Capitalized interest	—		(1)		—		(1)
(Gain) loss on extinguishment of debt	(Gain) loss on extinguishment of debt	—		(1)		67		(1)		(Gain) loss on extinguishment of debt	—		—		(9)		67
Interest income	Interest income	(1)		(3)		(5)		(5)		Interest income	(3)		(1)		(5)		(5)
Interest income from APA Corporation, net	Interest income from APA Corporation, net	(15)		(15)		(30)		(20)		Interest income from APA Corporation, net	(29)		(15)		(45)		(30)
Total Financing costs, net	Total Financing costs, net	$	62	$	94	$	202	$	201	Total Financing costs, net	$	42	$	62	$	91	$	202

Net financing costs decreased ~~$32~~$20 million and ~~increased $1~~$111 million from the second quarter and the first six months of ~~2021,~~2022, respectively. The lower overall interest expense was a result of the reduction of fixed-rate debt during ~~2021 and~~2023 coupled with losses incurred on the ~~first quarter~~extinguishment of ~~2022. During~~debt during the first six months of 2022 ~~the lower interest expense was more than offset by a $67 million loss~~and gains on extinguishment of debt ~~recognized~~ in the first ~~quarter~~six months of ~~2022.~~2023.

Provision for Income Taxes

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA). The IRA includes a new 15 percent corporate alternative minimum tax (Corporate AMT) on applicable corporations with an average annual financial statement income that exceeds $1 billion for any three consecutive years preceding the tax year at issue. The Corporate AMT is effective for tax years beginning after December 31, 2022. The Company ~~recorded~~is continuing to evaluate the provisions of the IRA and awaits further guidance from the U.S. Treasury Department to properly assess the impact of these provisions on the Company. Under the existing guidance, the Company does not believe the IRA will have a material impact for 2023.

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

Critical Accounting Estimates

The Company prepares its financial statements and accompanying notes in conformity with accounting principles generally accepted in the U.S., which require management to make estimates and assumptions about future events that affect reported amounts in the financial statements and the accompanying notes. The Company identifies certain accounting policies involving estimation as critical accounting estimates based on, among other things, their impact on the portrayal of the Company’s financial condition, results of operations, or liquidity, as well as the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting estimates address accounting matters that are inherently uncertain due to unknown future resolution of such matters. Management routinely discusses the development, selection, and disclosure of each critical accounting estimate. For a discussion of the Company’s most critical accounting estimates, please see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. Some of the more significant estimates include reserve estimates, oil and gas exploration costs, offshore decommissioning contingency, long-lived asset impairments, asset retirement obligations, and income taxes.

New Accounting Pronouncements

There were no material changes in recently issued or adopted accounting standards from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted.

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 the Company’s disclosure controls and procedures as of June 30, ~~2022,~~2023, 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 the information the Company is required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

4136

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Part I, Item 3—Legal Proceedings of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 and Note 12—Commitments and Contingencies in the Notes to the Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q (which is hereby incorporated by reference herein), for a description of material legal proceedings.

ITEM 1A. RISK FACTORS

~~Refer~~There have been no material changes to the risk factors disclosed in Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Given the nature of its business, APA Corporation may be subject to different or additional risks than those applicable to the Company. For a description of these risks, refer to the disclosures in APA Corporation’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, ~~2022~~2023 and June 30, ~~2022~~2023 and APA Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

4237

ITEM 6. EXHIBITS

2.1

–

Agreement and Plan of Merger, dated as of March 1, 2021, by and among Registrant, APA Corporation, and APA Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed March 1, 2021, SEC File No. 001-4300).

3.1

–

Amended and Restated Certificate of Incorporation of Registrant, dated March 1, 2021, as attached as Annex A to the Certificate of Merger of APA Merger Sub, Inc. with and into Registrant, filed with the Secretary of State of the State of Delaware on March 1, 2021 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed March 1, 2021, SEC File No. 001-4300).

3.1

–

3.2

–

Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant, dated June 7, 2021, filed with the Secretary of State of the State of Delaware on June 10, 2021 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed June 14, 2021, SEC File No. 001-4300).

3.2

–

3.3

–

Amended and Restated Bylaws of Registrant, dated March 1, 2021 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed March 1, 2021, SEC File No. 001-4300).

3.3

–

Amended and Restated Bylaws of Registrant, dated March 1, 2021 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed March 1, 2021, SEC File No. 001-4300).

10.1

–

Guaranty [USD Facility], dated as of April 29, 2022, made by Apache Corporation in favor of each of the lenders, issuing banks, and agents party to the Credit Agreement, dated as of April 29, 2022, among APA Corporation, the lenders party thereto, the issuing banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed May 2, 2022, SEC File No. 001-4300).

10.2

–

Credit Agreement [USD Facility], dated as of April 29, 2022, among APA Corporation, the lenders party thereto, the issuing banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent, Royal Bank of Canada, HSBC Bank USA, National Association, MUFG Bank, Ltd., Wells Fargo Bank, National Association, Goldman Sachs Bank USA, The Toronto-Dominion Bank, New York Branch, The Bank of Nova Scotia, Houston Branch, Truist Bank, and Mizuho Bank, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed May 2, 2022, SEC File No. 001-4300).

10.3

–

Guaranty [GBP Facility], dated as of April 29, 2022, made by Apache Corporation in favor of each of the lenders, issuing banks, and agents party to the Credit Agreement, dated as of April 29, 2022, among APA Corporation, the lenders party thereto, the issuing banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto (incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed May 2, 2022, SEC File No. 001-4300).

10.4

–

Credit Agreement [GBP Facility], dated as of April 29, 2022, among APA Corporation, the lenders party thereto, the issuing banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, The Toronto-Dominion Bank, London Branch, as Syndication Agent, Bank of America, N.A., Royal Bank of Canada, HSBC Bank USA, National Association, MUFG Bank, Ltd., Wells Fargo Bank, N.A. London Branch, Goldman Sachs Bank USA, The Bank of Nova Scotia, Houston Branch, Truist Bank, and Mizuho Bank, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed May 2, 2022, SEC File No. 001-4300).

*31.1

–

Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.

*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.

*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.

**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 June 30, 2022, 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 Interests and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

*101

–

The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, 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 Interests and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

*101.SCH

–

Inline XBRL Taxonomy Schema Document.

*101.SCH

–

Inline XBRL Taxonomy Schema Document.

*101.CAL

–

Inline XBRL Calculation Linkbase Document.

*101.CAL

–

Inline XBRL Calculation Linkbase Document.

*101.DEF

–

Inline XBRL Definition Linkbase Document.

*101.DEF

–

Inline XBRL Definition Linkbase Document.

*101.LAB

–

Inline XBRL Label Linkbase Document.

*101.LAB

–

Inline XBRL Label Linkbase Document.

*101.PRE

–

Inline XBRL Presentation Linkbase Document.

*101.PRE

–

Inline XBRL Presentation Linkbase Document.

*104

–

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*104

–

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

** Furnished 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:	August ~~4, 2022~~3, 2023	/s/ STEPHEN J. RINEY
		Stephen J. Riney
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Dated:	August ~~4, 2022~~3, 2023	/s/ REBECCA A. HOYT
		Rebecca A. Hoyt
		Senior Vice President, Chief Accounting Officer, and Controller
		(Principal Accounting Officer)

4439


	June 30, 2022(1)		December 31, 2021(1)

	(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($132 related to Altus VIE)	$	228	$	279
Receivables, net of allowance of $115 and $109	1,873		1,390
Other current assets (Note 6) ($9 related to Altus VIE)	871		649
Accounts receivable from APA Corporation	90		77
	3,062		2,395
PROPERTY AND EQUIPMENT:
Oil and gas properties	40,548		40,474
Gathering, processing, and transmission facilities ($209 related to Altus VIE)	447		673
Other ($3 related to Altus VIE)	604		1,126
Less: Accumulated depreciation, depletion, and amortization ($25 related to Altus VIE)	(33,756)		(34,213)
	7,843		8,060
OTHER ASSETS:
Equity method interests (Note 7) ($1,365 related to Altus VIE)	618		1,365
Decommissioning security for sold Gulf of Mexico properties (Note 12)	383		640
Deferred charges and other ($6 related to Altus VIE)	550		581
Note receivable from APA Corporation (Note 2)	1,383		1,352
	$	13,839	$	14,393

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($12 related to Altus VIE)	$	827	$	651
Note payable to APA Corporation	349		195
Current debt	125		215
Other current liabilities (Note 8) ($15 related to Altus VIE)	1,721		1,170
	3,022		2,231
LONG-TERM DEBT (Note 10) ($657 related to Altus VIE)	4,885		7,295
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	88		148
Asset retirement obligation (Note 9) ($68 related to Altus VIE)	2,061		2,089
Decommissioning contingency for sold Gulf of Mexico properties (Note 12)	825		1,086
Other ($67 related to Altus VIE)	468		572
	3,442		3,895
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 13)	—		712
EQUITY (DEFICIT):
Common stock, $0.625 par, 1,000 and 1,000 shares authorized, respectively, 1,000 and 1,000 shares issued, respectively	—		—
Paid-in capital	8,054		8,677
Accumulated deficit	(6,567)		(9,317)

Accumulated other comprehensive income	21		22
EQUITY (DEFICIT) ATTRIBUTABLE TO APA CORPORATION	1,508		(618)
Noncontrolling interest - Sinopec	921		820
Noncontrolling interest - APA Corporation	61		—
Noncontrolling interest - Altus	—		58
TOTAL EQUITY	2,490		260
	$	13,839	$	14,393


	Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)		Common Stock		Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		PARENT COMPANY EQUITY (DEFICIT)		Noncontrolling Interests(1)		TOTAL EQUITY (DEFICIT)
	(In millions)
For the Quarter Ended June 30, 2021
Balance at March 31, 2021	$	605	$	—	$	9,557	$	(9,982)	$	—	$	15	$	(410)	$	997	$	587
Net income attributable to APA Corporation	—		—		—		339		—		—		339		—		339
Net income attributable to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		41		41
Net income attributable to noncontrolling interest - Altus	—		—		—		—		—		—		—		27		27
Net income attributable to Altus Preferred Unit holders	24		—		—		—		—		—		—		—		—

Distributions payable to Altus Preferred Unit limited partners	(12)		—		—		—		—		—		—		—		—
Distributions to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		(20)		(20)



Distributions to APA Corporation	—		—		(10)		—		—		—		(10)		—		(10)
Other	—		—		(12)		1		—		—		(11)		(5)		(16)
Balance at June 30, 2021	$	617	$	—	$	9,535	$	(9,642)	$	—	$	15	$	(92)	$	1,040	$	948

For the Quarter Ended June 30, 2022
Balance at March 31, 2022	$	—	$	—	$	8,381	$	(7,470)	$	—	$	21	$	932	$	900	$	1,832
Net income attributable to APA Corporation	—		—		—		903		—		—		903		—		903
Net income attributable to noncontrolling interest - APA	—		—		—		—		—		—		—		85		85
Net income attributable to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		141		141




Distributions to noncontrolling interest - Sinopec	—		—		—		—		—		—		—		(90)		(90)
Distributions to APA Corporation	—		—		(333)		—		—		—		(333)		(54)		(387)



Other	—		—		6		—		—		—		6		—		6
Balance at June 30, 2022	$	—	$	—	$	8,054	$	(6,567)	$	—	$	21	$	1,508	$	982	$	2,490


		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
July—December 2022	NYMEX Henry Hub/IF Waha	42,320	$(0.70)	—	—
July—December 2022	NYMEX Henry Hub/IF HSC	—	—	42,320	$(0.12)
October—December 2022	NYMEX Henry Hub/IF Waha	920	$(1.19)	—	—
October—December 2022	NYMEX Henry Hub/IF HSC	—	—	920	$(0.19)
January—March 2023	NYMEX Henry Hub/IF Waha	3,150	$(1.06)	—	—
January—March 2023	NYMEX Henry Hub/IF HSC	—	—	3,150	$(0.03)
January—June 2023	NYMEX Henry Hub/IF Waha	4,525	$(1.54)	—	—
January—June 2023	NYMEX Henry Hub/IF HSC	—	—	4,525	$(0.11)
July—September 2023	NYMEX Henry Hub/IF Waha	1,840	$(1.62)	—	—
July—September 2023	NYMEX Henry Hub/IF HSC	—	—	1,840	$(0.19)
January—December 2023	NYMEX Henry Hub/IF Waha	73,000	$(1.15)	—	—
January—December 2023	NYMEX Henry Hub/IF HSC	—	—	73,000	$(0.08)
January—June 2024	NYMEX Henry Hub/IF Waha	3,640	$(1.25)	—	—
January—June 2024	NYMEX Henry Hub/IF HSC	—	—	3,640	$(0.10)


	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting(1)		Carrying Amount

	(In millions)
June 30, 2022
Assets:
Commodity derivative instruments	$	—	$	—	$	—	$	—	$	1	$	1
Liabilities:
Commodity derivative instruments	—		54		—		54		1		55
Foreign currency derivative instruments	—		7		—		7		—		7��



December 31, 2021


Liabilities:
Commodity derivative instruments	$	—	$	10	$	—	$	10	$	—	$	10
Pipeline capacity embedded derivative	—		46		—		46		—		46
Preferred Units embedded derivative	—		—		57		57		—		57


	Interest	December 31, 2021
		(In millions)
Gulf Coast Express Pipeline, LLC	16.0%	$	274
EPIC Crude Holdings, LP	15.0%	—
Permian Highway Pipeline, LLC	26.7%	630
Shin Oak Pipeline (Breviloba, LLC)	33.0%	461
Total Altus equity method interests		$	1,365


	Gulf Coast Express Pipeline LLC		EPIC Crude Holdings, LP		Permian Highway Pipeline LLC		Breviloba, LLC		Total

	(In millions)






Balance at December 31, 2021	$	274	$	—	$	630	$	461	$	1,365
Capital contributions	—		2		—		—		2
Distributions	(5)		—		(9)		(7)		(21)

Equity income (loss), net	8		(2)		10		5		21

Deconsolidation of Altus	(277)		—		(631)		(459)		(1,367)
Balance at June 30, 2022	$	—	$	—	$	—	$	—	$	—


	Units Outstanding	Financial Position
	(In millions, except unit data)
Redeemable noncontrolling interest — Preferred Units at: December 31, 2020	660,694	$	608
Cash distributions to Altus Preferred Unit limited partners	—	(46)
Distributions payable to Altus Preferred Unit limited partners	—	(12)
Allocation of Altus Midstream LP net income	N/A	80
Accreted value adjustment	N/A	82
Redeemable noncontrolling interest — Preferred Units at: December 31, 2021	660,694	712



Allocation of Altus Midstream LP net income	N/A	12
Accreted value adjustment(1)	N/A	(82)
Redeemable noncontrolling interest — Preferred Units at: February 22, 2022	660,694	642
Preferred Units embedded derivative		89
Deconsolidation of Altus		(731)
		$	—