APA Corp [APA] Filings

10-Q 1 apa-20240930.htm 10-Q apa-20240930

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 September 30, 2024


☐			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: 1-40144

APA CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			86-1430562
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

2000 W. Sam Houston Pkwy. S., Suite 200, Houston, Texas 77042-3643

(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:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.625 par value

APA

Nasdaq Global Select Market

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

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 October 31, 2024			369,947,453

TABLE OF CONTENTS


Item		Page

	PART I - FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS	1
	STATEMENT OF CONSOLIDATED OPERATIONS	1
	STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2
	STATEMENT OF CONSOLIDATED CASH FLOWS	3
	CONSOLIDATED BALANCE SHEET	4
	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS	5
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	47
4.	CONTROLS AND PROCEDURES	48

	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	49
1A.	RISK FACTORS	49
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	49
5.	OTHER INFORMATION	49
6.	EXHIBITS	50

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, plans and objectives of management for future operations and capital returns framework, the anticipated benefits of the merger (the Callon acquisition) between the Company and Callon Petroleum Company (Callon), the anticipated impact of the Callon acquisition on the combined company’s business and future financial and operating results, and the anticipated financial and operational impact and timing of the expected synergies from the Callon acquisition, 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, 2023, 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:

•changes in local, regional, national, and international economic conditions, including as a result of any epidemics or pandemics;

•the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or 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, the armed conflict in Israel and Gaza, and 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;

•cyberattacks and terrorism;

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

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

•the ability to retain and hire key personnel;

•property acquisitions or divestitures;

•the integration of acquisitions, including the diversion of management time on integration-related issues for the Callon acquisition and the risk that the Company may not integrate Callon’s operations in a successful manner or in the expected time period;

•the risk that the anticipated benefits, cost savings, synergies, and growth from the Callon acquisition may not be fully realized or may take longer to realize than expected;

•negative effects of the Callon acquisition on the Company’s business relationships and business generally, the market price of the Company’s common stock, and/or the Company’s operating results;

•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 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, 2023;

•other risks and uncertainties disclosed in the Company’s third-quarter 2024 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:

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

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)


	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues(1)	$	2,058	$	2,079	$	6,007	$	5,500
Purchased oil and gas sales(1)	473		229		1,018		612
Total revenues	2,531		2,308		7,025		6,112
Derivative instrument gains (losses), net	(10)		—		(17)		104
Gain on divestitures, net	1		1		284		7
Loss on previously sold Gulf of Mexico properties	—		—		(83)		—
Other, net	18		—		26		77
	2,540		2,309		7,235		6,300
OPERATING EXPENSES:
Lease operating expenses(1)	418		394		1,216		1,076
Gathering, processing, and transmission(1)	123		89		328		245
Purchased oil and gas costs(1)	292		211		665		558
Taxes other than income	70		61		205		163
Exploration	29		49		248		144
General and administrative	92		139		270		276
Transaction, reorganization, and separation	14		5		156		11
Depreciation, depletion, and amortization	595		418		1,613		1,117
Asset retirement obligation accretion	36		29		112		86
Impairments	1,111		—		1,111		46
Financing costs, net	100		81		276		235
	2,880		1,476		6,200		3,957
NET INCOME (LOSS) BEFORE INCOME TAXES	(340)		833		1,035		2,343
Current income tax provision	260		422		845		1,022
Deferred income tax benefit	(461)		(144)		(503)		(22)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(139)		555		693		1,343
Net income attributable to noncontrolling interest	84		96		243		261
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	(223)	$	459	$	450	$	1,082

NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	(0.60)	$	1.49	$	1.30	$	3.50
Diluted	$	(0.60)	$	1.49	$	1.29	$	3.50
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	370		308		348		309
Diluted	370		308		348		309

(1) For transactions with Kinetik prior to the Company’s sale of its remaining shares of Kinetik Class A Common Stock and the resignation of the Company’s designated director from the Kinetik board of directors, refer to Note 6—Equity Method Interests.

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	$	(139)	$	555	$	693	$	1,343
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Pension and postretirement benefit plan	—		—		(1)		3
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(139)		555		692		1,346
Comprehensive income attributable to noncontrolling interest	84		96		243		261
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	(223)	$	459	$	449	$	1,085

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
	2024		2023

	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	$	693	$	1,343
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument (gains) losses, net	18		(61)
Gain on divestitures, net	(284)		(7)
Exploratory dry hole expense and unproved leasehold impairments	183		91
Depreciation, depletion, and amortization	1,613		1,117
Asset retirement obligation accretion	112		86
Impairments	1,111		46
Benefit from deferred income taxes	(503)		(22)
Gain on extinguishment of debt	—		(9)
Loss on previously sold Gulf of Mexico properties	83		—
Other, net	(14)		(45)
Changes in operating assets and liabilities:
Receivables	181		(289)
Inventories	(26)		19
Drilling advances and other current assets	37		40
Deferred charges and other long-term assets	(215)		227
Accounts payable	(191)		(2)
Accrued expenses	(271)		1
Deferred credits and noncurrent liabilities	57		(436)
NET CASH PROVIDED BY OPERATING ACTIVITIES	2,584		2,099
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property	(2,153)		(1,747)

Leasehold and property acquisitions	(64)		(11)
Proceeds from asset divestitures	724		29
Proceeds from sale of Kinetik Shares	428		—
Other, net	58		(53)
NET CASH USED IN INVESTING ACTIVITIES	(1,007)		(1,782)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from commercial paper and revolving credit facilities, net	190		202
Proceeds from term loan facility	1,500		—
Payments on term loan facility	(500)		—
Payment on Callon Credit Agreement	(472)		—


Payments on fixed-rate debt	(1,641)		(65)
Distributions to noncontrolling interest	(233)		(154)
Treasury stock activity, net	(146)		(208)
Dividends paid to APA common stockholders	(260)		(232)
Other, net	(38)		(10)
NET CASH USED IN FINANCING ACTIVITIES	(1,600)		(467)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(23)		(150)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	87		245
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	64	$	95

SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	306	$	278
Income taxes paid, net of refunds	876		867

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

APA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)


	September 30, 2024		December 31, 2023

	(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	64	$	87
Receivables, net of allowance of $120 and $114	1,652		1,610
Assets held for sale	1,091		—
Other current assets (Note 5)	813		765
	3,620		2,462
PROPERTY AND EQUIPMENT:
Oil and gas properties	44,026		44,860
Gathering, processing, and transmission facilities	446		448
Other	557		634
Less: Accumulated depreciation, depletion, and amortization	(32,428)		(35,904)
	12,601		10,038
OTHER ASSETS:
Equity method interests (Note 6)	—		437
Decommissioning security for sold Gulf of Mexico properties (Note 11)	21		21
Deferred tax asset (Note 10)	2,550		1,758
Deferred charges and other	584		528
	$	19,376	$	15,244

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	939	$	658
Current debt	2		2
Liabilities held for sale	224		—
Other current liabilities (Note 7)	1,760		1,744
	2,925		2,404
LONG-TERM DEBT (Note 9)	6,370		5,186
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Deferred tax liability (Note 10)	86		371
Asset retirement obligation (Note 8)	2,502		2,362
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)	759		764
Other	574		466
	3,921		3,963
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 491,531,484 and 420,595,901 shares issued, respectively	307		263
Paid-in capital	13,239		11,126
Accumulated deficit	(2,509)		(2,959)
Treasury stock, at cost, 121,613,494 and 117,020,000 shares, respectively	(5,937)		(5,790)
Accumulated other comprehensive income	14		15
APA SHAREHOLDERS’ EQUITY	5,114		2,655
Noncontrolling interest	1,046		1,036
TOTAL EQUITY	6,160		3,691
	$	19,376	$	15,244

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)


	Common Stock		Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		APA SHAREHOLDERS’ EQUITY		Noncontrolling Interest		TOTAL EQUITY

	(In millions)
For the Quarter Ended September 30, 2023
Balance at June 30, 2023	$	263	$	11,267	$	(5,191)	$	(5,647)	$	17	$	709	$	987	$	1,696
Net income attributable to common stock	—		—		459		—		—		459		—		459
Net income attributable to noncontrolling interest	—		—		—		—		—		—		96		96
Distributions to noncontrolling interest	—		—		—		—		—		—		(54)		(54)
Common dividends declared ($0.25 per share)	—		(77)		—		—		—		(77)		—		(77)
Treasury stock activity, net	—		—		—		(20)		—		(20)		—		(20)
Other	—		7		—		—		—		7		—		7
Balance at September 30, 2023	$	263	$	11,197	$	(4,732)	$	(5,667)	$	17	$	1,078	$	1,029	$	2,107

For the Quarter Ended September 30, 2024
Balance at June 30, 2024	$	307	$	13,322	$	(2,286)	$	(5,934)	$	14	$	5,423	$	1,072	$	6,495
Net loss attributable to common stock	—		—		(223)		—		—		(223)		—		(223)
Net income attributable to noncontrolling interest	—		—		—		—		—		—		84		84
Distributions to noncontrolling interest	—		—		—		—		—		—		(110)		(110)
Common dividends declared ($0.25 per share)	—		(92)		—		—		—		(92)		—		(92)

Treasury stock activity, net	—		—		—		(3)		—		(3)		—		(3)
Other	—		9		—		—		—		9		—		9
Balance at September 30, 2024	$	307	$	13,239	$	(2,509)	$	(5,937)	$	14	$	5,114	$	1,046	$	6,160

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - Continued

(Unaudited)


	Common Stock		Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		APA SHAREHOLDERS’ EQUITY		Noncontrolling Interest		TOTAL EQUITY

	(In millions)
For the Nine Months Ended September 30, 2023
Balance at December 31, 2022	$	262	$	11,420	$	(5,814)	$	(5,459)	$	14	$	423	$	922	$	1,345
Net income attributable to common stock	—		—		1,082		—		—		1,082		—		1,082
Net income attributable to noncontrolling interest – Egypt	—		—		—		—		—		—		261		261
Distributions to noncontrolling interest – Egypt	—		—		—		—		—		—		(154)		(154)
Common dividends declared ($0.75 per share)	—		(232)		—		—		—		(232)		—		(232)
Treasury stock activity, net	—		—		—		(208)		—		(208)		—		(208)
Other	1		9		—		—		3		13		—		13
Balance at September 30, 2023	$	263	$	11,197	$	(4,732)	$	(5,667)	$	17	$	1,078	$	1,029	$	2,107

For the Nine Months Ended September 30, 2024
Balance at December 31, 2023	$	263	$	11,126	$	(2,959)	$	(5,790)	$	15	$	2,655	$	1,036	$	3,691
Net income attributable to common stock	—		—		450		—		—		450		—		450
Net income attributable to noncontrolling interest – Egypt	—		—		—		—		—		—		243		243
Distributions to noncontrolling interest – Egypt	—		—		—		—		—		—		(233)		(233)
Common dividends declared ($0.75 per share)	—		(260)		—		—		—		(260)		—		(260)
Issuance of common stock	44		2,370		—		—		—		2,414		—		2,414
Treasury stock activity, net	—		—		—		(147)		—		(147)		—		(147)
Other	—		3		—		—		(1)		2		—		2
Balance at September 30, 2024	$	307	$	13,239	$	(2,509)	$	(5,937)	$	14	$	5,114	$	1,046	$	6,160

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

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These consolidated financial statements have been prepared by APA Corporation (APA or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, 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, 2023, which contains a summary of the Company’s significant accounting policies and other disclosures.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 30, 2024, 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, 2023. The Company’s financial statements for prior periods may include reclassifications that were made to conform to the current-year presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of APA and its subsidiaries after elimination of intercompany balances and transactions.

The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated. The Company consolidates all other investments in which, either through direct or indirect ownership, it has more than a 50 percent voting interest or controls the financial and operating decisions.

Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. The Company has determined that a limited partnership and APA subsidiary, which has control over APA’s Egyptian operations, qualifies as a variable interest entity (VIE) under GAAP. Apache consolidates the activities of APA’s Egyptian operations because it has concluded that a wholly owned subsidiary has a controlling financial interest in APA’s Egyptian operations and was determined to be the primary beneficiary of the VIE.

Investments in which the Company has significant influence, but not control, are accounted for under the equity method of accounting. During the nine months ended September 30, 2023 and the quarter ended March 31, 2024, the Company had a designated director on the Kinetik Holdings Inc. (Kinetik) board of directors. The Company’s designated director resigned from the Kinetik board of directors on April 3, 2024. As a result, the Company is considered to have had significant influence over Kinetik during the periods presented prior to the designated director’s resignation from the Kinetik board of directors.

As of December 31, 2023, the Company held shares of Kinetik Class A Common Stock (Kinetik Shares), which were recorded separately as “Equity method interests” in the Company’s consolidated balance sheet. On March 18, 2024, the Company sold its remaining Kinetik Shares. Refer to Note 6—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 2—Acquisitions and Divestitures), the assessment of asset retirement obligations (refer to Note 8—Asset Retirement Obligation), the estimate of income taxes (refer to Note 10—Income Taxes), the estimation of the contingent liability representing Apache’s potential decommissioning obligations on sold properties in the Gulf of Mexico (refer to Note 11—Commitments and Contingencies), 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 4—Derivative Instruments and Hedging Activities, Note 6—Equity Method Interests, and Note 9—Debt and Financing Costs for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

The Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment.

During the third quarter of 2024, the Company continued its economic assessment of its North Sea assets in light of several new regulatory guidelines and obligations surrounding significant tax levies and modernization of aging infrastructure. The Company determined the expected returns do not economically support making investments required under the combined impact of the regulations, and it will cease production at its facilities in the North Sea prior to 2030. As a result, the Company performed a fair value assessment of the present value of its oil and gas assets in the North Sea as of September 30, 2024. Accordingly, in the third quarter of 2024, the Company recognized impairments of $793 million on certain proved properties in the North Sea, which were written down to their estimated fair values. This impairment is discussed in further detail below in “Property and Equipment — Oil and Gas Property.”

Additionally, in the third quarter of 2024, the Company entered into an agreement to sell certain non-core U.S. oil and gas producing properties in the Permian Basin. As a result of this agreement, a separate impairment analysis was performed for each of the assets within the disposal group. The analyses were based on the agreed-upon proceeds less costs to sell for the transaction, a Level 1 fair value measurement. The historical carrying value of the net assets to be divested exceeded the fair value implied by the expected net proceeds, resulting in an impairment totaling $315 million on the Company’s proved properties in the U.S. Refer to Note 2—Acquisitions and Divestitures for more detail.

During the three and nine months ended September 30, 2023, the Company recorded no asset impairments in connection with fair value assessments.

Revenue Recognition

Receivables from contracts with customers, including receivables for purchased oil and gas sales and net of allowance for credit losses, were $1.5 billion at each of September 30, 2024 and December 31, 2023. 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. In the past year, the Company’s receivable balance from the Egyptian General Petroleum Corporation (EGPC) has gradually increased as payments for the Company’s Egyptian oil and gas sales have been delayed for periods longer than historically experienced. The Company is actively engaged in discussions with the Government of Egypt to resolve the delay in EGPC payments. The Company has received payments throughout the period, and management believes that the Company will be able to collect the total balance of its receivables from this customer.

Oil and gas production revenues include income taxes that will be paid to the Arab Republic of Egypt by EGPC 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 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. The Company recorded impairments to inventory of $3 million in the third quarter and the nine months ended September 30, 2024 and $46 million in the nine months ended September 30, 2023.

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, production costs, 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. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities, and if management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

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.

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.

The change in cessation-of-production dates in the North Sea discussed above in “Fair Value Measurements” significantly altered the Company’s remaining oil and gas reserves in the North Sea and triggered an impairment assessment of the Company’s proved oil and gas properties at the end of the third quarter of 2024. Future production volumes and estimated future commodity prices are the largest drivers in variability of future cash flows. Expected cash flows were estimated based on management’s views of forward pricing as of the balance sheet dates. A discount rate based on a market-based weighted-average cost of capital estimate was applied to the undiscounted cash flow estimate to value the Company’s North Sea assets. In connection with this assessment, the Company recorded impairments totaling $793 million on certain of the Company’s North Sea proved properties to an aggregate fair value of $263 million.

Additionally, in the third quarter of 2024, the Company recorded impairments totaling $315 million in connection with an agreement to sell certain non-core producing properties in the Permian Basin. These impairments are discussed in further detail above in “Fair Value Measurements” and in Note 2—Acquisitions and Divestitures. The associated U.S. properties had an aggregate fair value of $1.1 billion as of September 30, 2024.

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 2—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 APA-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.

Transaction, Reorganization, and Separation (TRS)

The Company recorded $14 million and $156 million of TRS costs during the third quarter and the first nine months of 2024, respectively, and $5 million and $11 million of TRS costs during the third quarter and the first nine months of 2023, respectively. TRS costs incurred in the first nine months of 2024 comprised primarily $139 million associated with the Callon acquisition, including $71 million of separation costs and $68 million of transaction and integration costs.

New Pronouncements Issued But Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40),” which expands disclosures around a public entity’s costs and expenses of specific items (i.e. employee compensation, DD&A), requires the inclusion of amounts that are required to be disclosed under GAAP in the same disclosure as other disaggregation requirements, requires qualitative descriptions of amounts remaining in expense captions that are not separately disaggregated quantitatively, and requires disclosure of total selling expenses, and in annual periods, the definition of selling expenses. The amendment does not change or remove existing disclosure requirements. The amendment is effective for fiscal years beginning after December 15, 2026, and interim periods with fiscal years beginning after December 15, 2027. Early adoption is permitted, and the amendment can be adopted prospectively or retrospectively to any or all periods presented in the financial statements. The Company is currently assessing the impact of adopting this standard.

2. ACQUISITIONS AND DIVESTITURES

2024 Activity

Sale of Non-core Properties in the Permian Basin

On September 10, 2024, APA announced it entered into an agreement to sell non-core producing properties in the Permian Basin to an undisclosed buyer for cash proceeds of $950 million, prior to customary closing adjustments. The properties are located in the Central Basin Platform, Texas and New Mexico Shelf, and Northwest Shelf and currently represent estimated net production of 21,000 barrels of oil equivalent per day, of which approximately 57 percent is oil. Proceeds from this sale are expected to be used primarily to reduce debt. The effective date of the transaction is July 1, 2024, and the transaction is expected to close during the fourth quarter of 2024. The Company received a deposit of $95 million in connection with the sale during the third quarter of 2024.

As a result of the agreement, the Company performed a fair value assessment of the associated assets and liabilities and recorded an impairment of $315 million to the carrying value of associated oil and gas properties. These assets met the criteria of held for sale classification as of September 30, 2024. U.S. oil and gas properties totaling $1.1 billion and the associated asset retirement obligation of $224 million were classified as current assets held for sale and current liabilities held for sale, respectively, as of September 30, 2024.

Callon Petroleum Company Acquisition

On April 1, 2024, APA completed its acquisition of Callon Petroleum Company (Callon) in an all-stock transaction valued at approximately $4.5 billion, inclusive of Callon’s debt (the Callon acquisition). The transaction was approved by APA and Callon shareholders at special meetings held on March 27, 2024. The acquired assets include approximately 120,000 net acres in the Delaware Basin and 25,000 net acres in the Midland Basin.

Subject to the terms of the merger agreement (Merger Agreement), each share of Callon common stock was converted into the right to receive 1.0425 shares of APA common stock, with cash in lieu of fractional shares. As a result, APA issued approximately 70 million shares of APA common stock in connection with the transaction based on the value of APA common stock on the day of closing, and following the acquisition, Callon common stock is no longer listed for trading on the NYSE. In addition to the equity consideration provided, APA transferred approximately $24 million in other consideration upon close of the transaction.

Upon completing the acquisition, APA repaid all of Callon’s debt, refinancing a portion by borrowing $1.5 billion under its unsecured committed term loan facility. Refer to Note 9—Debt and Financing Costs for further detail.

Recording of Assets Acquired and Liabilities Assumed

The transaction was accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The final determination of fair value for certain assets and liabilities will be completed as soon as the information necessary to complete the analysis is obtained. These amounts will be finalized as soon as possible, but no later than one year from the acquisition date.

The following table summarizes the preliminary estimates of the assets acquired and liabilities assumed in the merger:


	(In millions)
Current assets	$	282
Property, plant, and equipment	4,493
Deferred tax asset	575
Other assets	11
Total assets acquired	$	5,361
Current liabilities	$	616
Long-term debt	2,113
Asset retirement obligation	136

Other long-term obligations	58
Total liabilities assumed	$	2,923
Net assets acquired	$	2,438

The following unaudited pro forma combined results for the three and nine months ended September 30, 2024 and 2023 reflect the consolidated results of operations of the Company as if the Callon acquisition had occurred on January 1, 2023. The unaudited pro forma information includes certain accounting adjustments for transaction costs, depreciation, depletion, and amortization expense, interest expense, gain on derivatives related to a previous Callon acquisition, and estimated tax impacts of the pro forma adjustments.


	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions, except share data)
Revenues	$	2,531	$	2,927	$	7,589	$	7,810
Net income (loss) attributable to common stock	(223)		737		556		1,527
Net income (loss) per common share – basic	(0.60)		1.95		1.50		4.04
Net income (loss) per common share – diluted	(0.60)		1.95		1.50		4.04

From the date of the acquisition through September 30, 2024, revenues and net income attributable to common stockholders associated with Callon assets totaled $840 million and $192 million, respectively.

The unaudited pro forma condensed consolidated financial information has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the transactions taken place on the dates indicated. The unaudited pro forma results are also not intended to be a projection of future results and do not include any future cost savings or other synergies that may result from the Callon acquisition or any estimated costs that have not yet been incurred.

U.S. Divestitures

In the first nine months of 2024, the Company completed the sale of non-core acreage in the East Texas Austin Chalk and Eagle Ford plays that had a carrying value of $347 million for aggregate cash proceeds of $253 million and the assumption of asset retirement obligations of $48 million. The Company recognized a $46 million loss during the first nine months of 2024 in association with this sale.

In the first nine months of 2024, the Company also completed the sale of non-core mineral and royalty interests in the Permian Basin that had a carrying value of $71 million for approximately $392 million after post-closing adjustments. The Company recognized a gain of $321 million during the first nine months of 2024 in association with this sale.

Additionally, during the third quarter and first nine months of 2024, the Company completed the sale of non-core assets and leasehold in multiple transactions for aggregate cash proceeds of $1 million and $73 million, respectively, recognizing a gain of approximately $1 million and $9 million, respectively, upon closing of these transactions.

Sale of Kinetik Shares

On March 18, 2024, the Company sold its remaining Kinetik Shares for cash proceeds of $428 million. Refer to Note 6—Equity Method Interests for further detail.

Leasehold and Property Acquisitions

During the third quarter and the first nine months of 2024, in addition to the Callon acquisition, the Company completed other leasehold and property acquisitions, primarily in the Permian Basin, for aggregate cash consideration of approximately $1 million and $64 million, respectively.

2023 Activity

Leasehold and Property Acquisitions

During the third quarter and first nine months of 2023, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for aggregate cash consideration of approximately $1 million and $11 million, respectively.

U.S. Divestitures

During the third quarter and first nine months of 2023, the Company completed the sale of non-core assets and leasehold in multiple transactions for aggregate cash proceeds of $1 million and $29 million, respectively, recognizing a gain of approximately $1 million and $7 million, respectively, upon closing of these transactions.

3. CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $611 million and $586 million as of September 30, 2024 and December 31, 2023, respectively. The increase is primarily attributable to additional drilling activity in Egypt and in the U.S. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2023 were charged to dry hole expense during the third quarter of 2024. During the first nine months of 2024, approximately $51 million of suspended well costs previously capitalized for greater than one year at December 31, 2023 were charged to dry hole expense.

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.

4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies

The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production, 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 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. The Company has elected not to designate any of its derivative contracts as cash flow hedges.

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, the Company utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of September 30, 2024, the Company had derivative positions with one counterparty. 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 prices.

Derivative Instruments

Commodity Derivative Instruments

As of September 30, 2024, the Company had the following open natural gas financial collar contracts:

Production Period

Settlement Index

MMBtu
(in 000’s)

Weighted Average Floor Price

Weighted Average Ceiling Price

October—December 2024

NYMEX Henry Hub

1,654

$3.00

$3.33

As of September 30, 2024, 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
October—December 2024	NYMEX Henry Hub/IF Waha	—	—	1,840	$(1.06)
October—December 2024	NYMEX Henry Hub/IF HSC	—	—	3,680	$(0.42)

As of September 30, 2024, the Company had the following open NGL fixed swap contracts:

Production Period

Settlement Index

MBbls

(in 000’s)

Weighted Average Price Differential

October—December 2024

OPIS IsoButane Mt Belvieu Non TET

$33.18

October—December 2024

OPIS NButane Mt Belvieu Non TET

$33.18

Embedded Derivatives

As a result of the Callon acquisition, the Company assumed an earn-out obligation from Callon, where the Company could be required to pay up to $50 million in the aggregate if the average daily settlement price of WTI crude oil exceeds $60.00 per barrel for the 2024 and 2025 calendar years. Additionally, in connection with the Callon acquisition, the Company assumed a contingent consideration arrangement, whereby the Company could receive up to $45 million if the average daily settlement price of WTI crude oil for 2024 is at least $80.00 per barrel. If the average daily settlement price of WTI crude oil for 2024 is less than $80.00 per barrel but at least $75.00 per barrel, then the Company would receive $20 million.

The Company determined that the earn-out obligation and contingent consideration receipt were not clearly and closely related to the underlying agreements and therefore bifurcated these embedded features and recorded these derivatives at fair value. For further discussion of these derivatives, refer to “Fair Value Measurements” below.

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)
September 30, 2024
Assets:
Commodity derivative instruments	$	—	$	1	$	—	$	1	$	(1)	$	—
Contingent consideration arrangements	—		10		—		10		—		10
Liabilities:
Commodity derivative instruments	$	—	$	1	$	—	$	1	$	(1)	$	—


Contingent consideration arrangements	—		39		—		39		—		39
December 31, 2023
Assets:
Commodity derivative instruments	$	—	$	6	$	—	$	6	$	—	$	6

(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 embedded options within the earn-out obligation and contingent consideration arrangements discussed above are considered financial instruments under ASC 815. The Company uses a market approach to estimate the fair values of these derivatives on a recurring basis, utilizing an option pricing model method provided by a reputable third party. The valuation includes significant inputs such as forward oil price curves, time to expiration, and implied volatility. As these inputs are substantially observable for the full term of the contingent consideration arrangements, the inputs are considered a Level 2 fair value measurement. As of September 30, 2024, the estimated fair values of the earn-out obligation and contingent consideration receipt were $39 million and $10 million, respectively.

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:


	September 30, 2024		December 31, 2023

	(In millions)
Current Assets: Other current assets	$	10	$	6

Total derivative assets	$	10	$	6

Current Liabilities: Other current liabilities	$	25	$	—
Deferred Credit and Other Noncurrent Liabilities: Other	14		—
Total derivative liabilities	$	39	$	—

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 September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions)
Realized:
Commodity derivative instruments	$	3	$	19	$	1	$	43

Realized gains, net	3		19		1		43
Unrealized:
Commodity derivative instruments	(1)		(19)		(6)		61
Contingent consideration arrangements	(12)		—		(12)		—



Unrealized gains (losses), net	(13)		(19)		(18)		61
Derivative instrument gains (losses), net	$	(10)	$	—	$	(17)	$	104

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

5. OTHER CURRENT ASSETS

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


	September 30, 2024		December 31, 2023

	(In millions)
Inventories	$	501	$	453
Drilling advances	60		88

Current decommissioning security for sold Gulf of Mexico assets	167		178
Prepaid assets and other	85		46
Total Other current assets	$	813	$	765

6. EQUITY METHOD INTERESTS

As of December 31, 2023, the Company held 13.1 million Kinetik Shares, which were recorded at fair value of $437 million and reflected separately as “Equity method interests” in the Company’s consolidated balance sheet. 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 was determined using observable share prices on a major exchange, a Level 1 fair value measurement. On March 18, 2024, the Company sold its remaining Kinetik Shares for cash proceeds of $428 million.

Prior to the Company’s sale of its remaining Kinetik Shares and the resignation of the Company’s designated director from the Kinetik board of directors, the Company recorded changes in the fair value of its equity method interest in Kinetik totaling a loss of $9 million in the first quarter of 2024, and a loss of $14 million and a gain of $57 million in the third quarter and the first nine months of 2023, respectively. These changes in fair value were recorded as a component of “Revenues and Other” in the Company’s statement of consolidated operations.

The following table represents related party sales and costs associated with Kinetik prior to the Company’s sale of its remaining Kinetik Shares and the resignation of the Company’s designated director from the Kinetik board of directors:


	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions)
Natural gas and NGLs sales	$	—	$	35	$	13	$	78
Purchased oil and gas sales	—		11		22		18
	$	—	$	46	$	35	$	96

Gathering, processing, and transmission costs	$	—	$	26	$	23	$	81
Purchased oil and gas costs	—		37		23		65
Lease operating expenses	—		—		2		—
	$	—	$	63	$	48	$	146

7. OTHER CURRENT LIABILITIES

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


	September 30, 2024		December 31, 2023

	(In millions)
Accrued operating expenses	$	254	$	162
Accrued exploration and development	543		371
Accrued compensation and benefits	189		390
Accrued interest	66		93
Accrued income taxes	144		138
Current asset retirement obligation	75		76
Current operating lease liability	98		116

Current decommissioning contingency for sold Gulf of Mexico properties	94		60
Other	297		338
Total Other current liabilities	$	1,760	$	1,744

8. ASSET RETIREMENT OBLIGATION

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


	September 30, 2024
	(In millions)
Asset retirement obligation, December 31, 2023	$	2,438
Liabilities incurred	11
Liabilities acquired	140
Liabilities settled	(47)
Liabilities divested	(48)
Liabilities held for sale	(224)
Accretion expense	112
Revisions in estimated liabilities	195
Asset retirement obligation, September 30, 2024	2,577
Less current portion	(75)
Asset retirement obligation, long-term	$	2,502

9. DEBT AND FINANCING COSTS

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


	September 30, 2024		December 31, 2023

	(In millions)
Apache notes and debentures before unamortized discount and debt issuance costs(1)	$	4,835	$	4,835
Term loan facility, commercial paper, and syndicated credit facilities(2)	1,562		372

Apache finance lease obligations	30		32
Unamortized discount	(25)		(26)
Debt issuance costs	(30)		(25)
Total debt	6,372		5,188
Current maturities	(2)		(2)
Long-term debt	$	6,370	$	5,186

(1) The fair values of the Apache notes and debentures were $4.5 billion and $4.3 billion as of September 30, 2024 and December 31, 2023, respectively.

The Company 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 the term loan facility, commercial paper and credit facilities approximates fair value because interest rates are variable and reflective of market rates.

At each of September 30, 2024 and December 31, 2023, current debt included $2 million of finance lease obligations.

Financing Costs, Net

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


	For the Quarter Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

	(In millions)
Interest expense	$	109	$	89	$	302	$	266
Amortization of debt issuance costs	1		1		4		3
Capitalized interest	(8)		(7)		(22)		(18)
Gain on extinguishment of debt	—		—		—		(9)
Interest income	(2)		(2)		(8)		(7)
Financing costs, net	$	100	$	81	$	276	$	235

During the nine months ended September 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. The Company recognized a $9 million gain on these repurchases.

Unsecured 2022 Committed Credit Facilities

On April 29, 2022, the Company entered into two unsecured syndicated credit agreements for general corporate purposes.

•One 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). The Company 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 the Company’s two, one-year extension options.

•The second 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 the Company’s two, one-year extension options.

Apache may borrow under the USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time. Apache has guaranteed obligations under each of the USD Agreement and GBP Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures first is less than US$1.0 billion.

As of September 30, 2024, there were $232 million of borrowings under the USD Agreement and an aggregate £303 million in letters of credit outstanding under the GBP Agreement. As of September 30, 2024, there were no letters of credit outstanding under the USD Agreement. As of December 31, 2023, there were $372 million of borrowings under the USD Agreement and an aggregate £348 million in letters of credit outstanding under the GBP Agreement. As of December 31, 2023, there were no letters of credit outstanding under the USD Agreement.

Uncommitted Lines of Credit

Each of the Company and Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of September 30, 2024 and December 31, 2023, there were no outstanding borrowings under these facilities. As of September 30, 2024, there were £461 million and $11 million, respectively, in letters of credit outstanding under these facilities. As of December 31, 2023, there were £416 million and $2 million, respectively, in letters of credit outstanding under these facilities.

Commercial Paper Program

In December 2023, the Company established a commercial paper program under which it from time to time may issue in private placements exempt from registration under the Securities Act short-term unsecured promissory notes (CP Notes) up to a maximum aggregate face amount of $1.8 billion outstanding at any time. The maturities of CP Notes may vary but may not exceed 397 days from the date of issuance. Outstanding CP Notes are supported by available borrowing capacity under the Company’s committed $1.8 billion USD Agreement.

Payment of CP Notes has been unconditionally guaranteed on an unsecured basis by Apache, such guarantee effective until the first time that the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$