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

For the quarterly period ended March 31, 2022

or

☐			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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.625 par value

APA

Nasdaq Global Select Market

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 ☐

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 April 30, 2022			338,232,412

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 (DEFICIT) AND NONCONTROLLING INTERESTS						5
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS						6
2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS						28
3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK						43
4.			CONTROLS AND PROCEDURES						44
			PART II - OTHER INFORMATION
1.			LEGAL PROCEEDINGS						45
1A.			RISK FACTORS						45
2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS						45
6.			EXHIBITS						46

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, 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,” “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, and reoccurrence of any epidemics or pandemics (including, specifically, 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;

•the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services;

•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 availability of capital resources;

•capital expenditures and other contractual obligations;

•currency exchange rates;

•weather conditions;

•inflation rates;

•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 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 in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q) and the associated disclosure implications;

•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, 2021;

•other risks and uncertainties disclosed in the Company’s first-quarter 2022 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.

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 “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.

ITEM 1.    FINANCIAL STATEMENTS

						For the Quarter Ended March 31,
						2022						2021
						(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues						$	2,320					$	1,431
Purchased oil and gas sales						349						440
Total revenues						2,669						1,871
Derivative instrument gains (losses), net						(62)						158
Gain on divestitures, net						1,176						2
Other, net						45						61
						3,828						2,092
OPERATING EXPENSES:
Lease operating expenses						344						264
Gathering, processing, and transmission						81						58
Purchased oil and gas costs						351						494
Taxes other than income						70						44
Exploration						42						49
General and administrative						156						83
Transaction, reorganization, and separation						14						—
Depreciation, depletion, and amortization						291						342
Asset retirement obligation accretion						29						28
Financing costs, net						152						110
						1,530						1,472
NET INCOME BEFORE INCOME TAXES						2,298						620
Current income tax provision						392						149
Deferred income tax provision (benefit)						(40)						21
NET INCOME INCLUDING NONCONTROLLING INTERESTS						1,946						450
Net income attributable to noncontrolling interest - Egypt						119						42
Net income attributable to noncontrolling interest - Altus						14						1
Net income (loss) attributable to Altus Preferred Unit limited partners						(70)						19
NET INCOME ATTRIBUTABLE TO COMMON STOCK						$	1,883					$	388
NET INCOME PER COMMON SHARE:
Basic						$	5.44					$	1.02
Diluted						$	5.43					$	1.02
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic						346						378
Diluted						347						379

						For the Quarter Ended March 31,
						2022						2021
						(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS						$	1,946					$	450
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						1,945						451
Comprehensive income attributable to noncontrolling interest - Egypt						119						42
Comprehensive income attributable to noncontrolling interest - Altus						14						1
Comprehensive income (loss) attributable to Altus Preferred Unit limited partners						(70)						19
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCK						$	1,882					$	389

						For the Three Months Ended March 31,
						2022						2021
						(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests						$	1,946					$	450
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument losses (gains), net						57						(10)
Gain on divestitures, net						(1,176)						(2)
Exploratory dry hole expense and unproved leasehold impairments						9						37
Depreciation, depletion, and amortization						291						342
Asset retirement obligation accretion						29						28
Provision for (benefit from) deferred income taxes						(40)						21
Loss on extinguishment of debt						67						—
Other, net						(29)						(20)
Changes in operating assets and liabilities:
Receivables						(255)						(168)
Inventories						(43)						(3)
Drilling advances and other current assets						9						10
Deferred charges and other long-term assets						(13)						(10)
Accounts payable						18						75
Accrued expenses						18						(66)
Deferred credits and noncurrent liabilities						3						(13)
NET CASH PROVIDED BY OPERATING ACTIVITIES						891						671
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property						(358)						(253)
Additions to Altus gathering, processing, and transmission (GPT) facilities						(1)						(1)
Leasehold and property acquisitions						(20)						(2)
Contributions to Altus equity method interests						(2)						(21)
Proceeds from sale of oil and gas properties						767						3
Proceeds from sale of Kinetik shares						224						—
Deconsolidation of Altus cash and cash equivalents						(143)						—
Other, net						(1)						7
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES						466						(267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) Apache credit facility, net						338						(85)
Proceeds from Altus credit facility, net						—						33
Payments on Apache fixed-rate debt						(1,370)						(6)
Distributions to noncontrolling interest - Egypt						(69)						(40)
Distributions to Altus Preferred Unit limited partners						(11)						(11)
Treasury stock activity, net						(261)						—
Dividends paid to APA common stockholders						(43)						(9)
Other, net						(9)						(10)
NET CASH USED IN FINANCING ACTIVITIES						(1,425)						(128)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						(68)						276
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						302						262
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	234					$	538
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest						$	125					$	113
Income taxes paid, net of refunds						305						124

						March 31, 2022(1)						December 31, 2021(1)
						(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($132 related to Altus VIE)						$	234					$	302
Receivables, net of allowance of $111 and $109						1,630						1,394
Other current assets (Note 5) ($9 related to Altus VIE)						729						684
						2,593						2,380
PROPERTY AND EQUIPMENT:
Oil and gas properties						40,553						40,749
Gathering, processing, and transmission facilities ($209 related to Altus VIE)						464						673
Other ($3 related to Altus VIE)						1,123						1,126
Less: Accumulated depreciation, depletion, and amortization ($25 related to Altus VIE)						(34,058)						(34,213)
						8,082						8,335
OTHER ASSETS:
Equity method interests (Note 6) ($1,365 related to Altus VIE)						576						1,365
Decommissioning security for sold Gulf of Mexico properties (Note 11)						640						640
Deferred charges and other ($6 related to Altus VIE)						585						583
						$	12,476					$	13,303
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($12 related to Altus VIE)						$	735					$	731
Current debt						125						215
Other current liabilities (Note 7) ($15 related to Altus VIE)						1,254						1,171
						2,114						2,117
LONG-TERM DEBT (Note 9) ($657 related to Altus VIE)						5,764						7,295
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes						106						148
Asset retirement obligation (Note 8) ($68 related to Altus VIE)						2,043						2,089
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)						1,086						1,086
Other ($67 related to Altus VIE)						511						573
						3,746						3,896
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)						—						712
EQUITY (DEFICIT):
Common stock, $0.625 par, 860,000,000 shares authorized, 419,678,357 and 419,078,606 shares issued, respectively						262						262
Paid-in capital						11,600						11,645
Accumulated deficit						(7,605)						(9,488)
Treasury stock, at cost, 79,375,295 and 72,147,841 shares, respectively						(4,296)						(4,036)
Accumulated other comprehensive income						21						22
APA SHAREHOLDERS’ DEFICIT						(18)						(1,595)
Noncontrolling interest - Egypt						870						820
Noncontrolling interest - Altus						—						58
TOTAL EQUITY (DEFICIT)						852						(717)
						$	12,476					$	13,303

(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 2—Acquisitions and Divestitures for further detail.

						Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners(1)									Common Stock						Paid-In Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income						APA SHAREHOLDERS’ DEFICIT						Noncontrolling Interests(1)						TOTAL EQUITY (DEFICIT)
						(In millions)
For the Quarter Ended March 31, 2021
Balance at December 31, 2020						$	608								$	262					$	11,735					$	(10,461)					$	(3,189)					$	14					$	(1,639)					$	994					$	(645)
Net income attributable to common stock						—									—						—						388						—						—						388						—						388
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						42						42
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						1						1
Net income attributable to Altus Preferred Unit holders						19									—						—						—						—						—						—						—						—
Distributions paid to Altus Preferred Unit limited partners						(11)									—						—						—						—						—						—						—						—
Distributions payable to Altus Preferred Unit limited partners						(11)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(40)						(40)
Common dividends declared ($0.025 per share)						—									—						(9)						—						—						—						(9)						—						(9)
Other						—									—						1						—						—						1						2						—						2
Balance at March 31, 2021						$	605								$	262					$	11,727					$	(10,073)					$	(3,189)					$	15					$	(1,258)					$	997					$	(261)
For the Quarter Ended March 31, 2022
Balance at December 31, 2021						$	712								$	262					$	11,645					$	(9,488)					$	(4,036)					$	22					$	(1,595)					$	878					$	(717)
Net income attributable to common stock						—									—						—						1,883						—						—						1,883						—						1,883
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						119						119
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						14						14
Net loss attributable to Altus Preferred Unit limited partners						(70)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(69)						(69)
Common dividends declared ($0.125 per share)						—									—						(43)						—						—						—						(43)						—						(43)
Treasury stock activity, net						—									—						—						—						(260)						—						(260)						—						(260)
Deconsolidation of Altus						(642)									—						—						—						—						—						—						(72)						(72)
Other						—									—						(2)						—						—						(1)						(3)						—						(3)
Balance at March 31, 2022						$	—								$	262					$	11,600					$	(7,605)					$	(4,296)					$	21					$	(18)					$	870					$	852

(1)    As a result of the BCP Business Combination, the Company deconsolidated Altus on February 22, 2022. Refer to Note 1—Summary of Significant Accounting Policies and Note 2—Acquisitions and Divestitures for further detail.

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, 2021, 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 Corporation became a direct, wholly owned subsidiary of APA Corporation, and all of Apache Corporation’s outstanding shares automatically converted into equivalent corresponding shares of APA. Pursuant to the Holding Company Reorganization, APA became the successor issuer to Apache Corporation pursuant to Rule 12g-3(a) under the Exchange Act and replaced Apache Corporation 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 to more closely align with its growing international presence, making it more consistent with other companies that have subsidiaries operating around the globe.

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of March 31, 2022, 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. The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-year presentation, if applicable.

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

The implementation of the Holding Company Reorganization was accounted for as a merger under common control. APA recognized the assets and liabilities of Apache at carryover basis. The consolidated financial statements of APA present comparative information for prior years on a combined basis, as if both APA and Apache were under common control for all periods presented.

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 APA and are reflected separately in the Company’s financial statements.

Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in 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. 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 variable interest entity under GAAP, which APA consolidated because a wholly owned subsidiary of APA 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. The Company further determined that ALTM no longer qualified as a variable interest entity under GAAP. As a result, the Company deconsolidated ALTM on February 22, 2022. Refer to Note 2—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. 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 6—Equity Method Interests for further detail.

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 fair value of equity method interests (refer to “Equity Method Interests” within this Note 1 below and Note 6—Equity Method Interests), the assessment of asset retirement obligations (refer to Note 8—Asset Retirement Obligation), the estimation of the contingent liability representing Apache’s potential obligation to decommission sold properties in the Gulf of Mexico (refer to Note 11—Commitments and Contingencies), the estimate of income taxes (refer to Note 10—Income Taxes), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom.

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, Note 9—Debt and Financing Costs, and Note 12—Redeemable Noncontrolling Interest - Altus for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

During the quarters ended March 31, 2022 and 2021, the Company recorded no asset impairments in connection with fair value assessments.

There have been no significant changes to the Company’s contracts with customers during the three months ended March 31, 2022 and 2021.

Payments under all contracts with customers are typically due and received within a short-term period of one year or less after physical delivery of the product or service has been rendered. Receivables from contracts with customers, net of allowance for credit losses, were $1.5 billion and $956 million as of March 31, 2022 and December 31, 2021, respectively. Refer to Note 14—Business Segment Information for a disaggregation of oil, gas, and natural gas production revenue by product and reporting segment.

Oil and gas production revenues from non-customers represent income taxes paid to the Arab Republic of Egypt by Egyptian General Petroleum Corporation on behalf of the Company. Revenue and associated expenses related to such tax volumes are recorded as “Oil, natural gas, and natural gas liquids production revenues” and “Current income tax provision,” respectively, in the Company’s statement of consolidated operations. Refer to Note 14—Business Segment Information for a disaggregation of revenue by product and reporting segment.

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.

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, property and equipment cost is based on the fair values at the acquisition date.

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 2—Acquisitions and Divestitures for more detail.

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.

2.    ACQUISITIONS AND DIVESTITURES

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. 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. Apache Midstream LLC, a wholly owned subsidiary of APA, which owned approximately 79 percent of the issued and outstanding shares of ALTM Common Stock prior to the BCP Business Combination, owned approximately 20 percent of the issued and outstanding shares of ALTM 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 of the Company’s share of ALTM’s deconsolidated balance sheet and the fair value 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

In March 2022, the Company sold four million of its shares in Kinetik for cash proceeds of $224 million and recognized a loss of $25 million, including transaction fees. Refer to Note 6—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.

In March 2022, the Company completed the previously announced transaction to sell certain non-core mineral rights in the Delaware Basin for total cash proceeds of approximately $759 million after certain post-closing adjustments. The Company recognized a gain of approximately $590 million from the transaction. 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 $2 million upon closing of these transactions during the first quarter of 2022.

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.

The Company’s capitalized exploratory well costs were $389 million and $321 million as of March 31, 2022 and December 31, 2021, respectively. The increase is primarily attributable to additional drilling activity in Suriname and Egypt.

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

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 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 March 31, 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 prices or changes in currency exchange rates.

Commodity Derivative Instruments

As of March 31, 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
January—December 2022						NYMEX Henry Hub/IF Waha						33,000						$(0.45)						—						—
January—December 2022						NYMEX Henry Hub/IF HSC						—						—						33,000						$(0.08)
July—December 2022						NYMEX Henry Hub/IF Waha						20,240						$(0.97)						—						—
July—December 2022						NYMEX Henry Hub/IF HSC						—						—						20,240						$(0.17)
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)
January—December 2023						NYMEX Henry Hub/IF Waha						73,000						$(1.15)						—						—
January—December 2023						NYMEX Henry Hub/IF HSC						—						—						73,000						$(0.08)

Subsequent to March 31, 2022, the Company entered into basis swap contracts purchasing Nymex Henry Hub/Waha totaling 1,840,000 MMBtu with a weighted average strike price of $(1.62) and selling Nymex Henry Hub/HSC totaling 1,840,000 MMBtu with a weighted average strike price of $(0.19) for July to September 2023.

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 $1.39 and $1.29, respectively.

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 2—Acquisitions and Divestitures for discussion of the BCP Business Combination and Note 12—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.

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)
March 31, 2022
Assets:
Commodity derivative instruments						$	—					$	—					$	—					$	—					$	5					$	5
Liabilities:
Commodity derivative instruments						—						34						—						34						5						39
Foreign currency derivative instruments						—						2						—						2						—						2
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.

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:

						March 31, 2022						December 31, 2021
						(In millions)
Current Assets: Other current assets						$	4					$	—
Other Assets: Deferred charges and other						1						—
Total derivative assets						$	5					$	—
Current Liabilities: Other current liabilities						$	20					$	4
Deferred Credits and Other Noncurrent Liabilities: Other						21						109
Total derivative liabilities						$	41					$	113

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

						For the Quarter Ended March 31,
						2022						2021
						(In millions)
Realized:
Commodity derivative instruments						$	(5)					$	148
Realized gain (loss), net						(5)						148
Unrealized:
Commodity derivative instruments						(24)						26
Pipeline capacity embedded derivatives						—						1
Foreign currency derivative instruments						(2)						—
Preferred Units embedded derivative						(31)						(17)
Unrealized gain (loss), net						(57)						10
Derivative instrument gains (losses), net						$	(62)					$	158

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 losses (gains), net” in “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.

5.    OTHER CURRENT ASSETS

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

						March 31, 2022						December 31, 2021
						(In millions)
Inventories						$	529					$	473
Drilling advances						70						55
Prepaid assets and other						30						56
Current decommissioning security for sold Gulf of Mexico assets						100						100
Total Other current assets						$	729					$	684

6.    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 based on practical expedience, variances in reporting timelines, and cost-benefit considerations for measuring its equity method interest in Kinetik. The fair value of the Company’s interest in Kinetik is determined using Level 1 inputs based on observable prices on a major exchange. The 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 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 2–Acquisitions and Divestitures for further detail.

As of March 31, 2022, the Company holds approximately 8.9 million shares of Kinetik Class A Common Stock, or approximately 13 percent of Kinetik’s outstanding ALTM Common Stock. At March 31, 2022, a fair value adjustment gain of $24 million was recorded based on the Company’s remaining Class A share ownership. The fair value adjustment was recorded as a component of “Other, net” under “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)
Fair value adjustment as of March 31, 2022						24
Balance at March 31, 2022						$	576

As of March 31, 2022, the Company has recorded gathering, processing and transportation costs payable to Kinetik of approximately $10 million related to midstream services provided by Kinetik to the Company since the close of the transaction on February 22, 2022.

Prior to the deconsolidation of Altus on February 22, 2022, the Company, through its ownership of Altus, had the following equity method interests in four 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 three months ended March 31, 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 March 31, 2022						$	—					$	—					$	—					$	—					$	—

Summarized Combined Financial Information

The following table presents summarized selected income statement data for Altus’ equity method interests (on a 100 percent basis):

						For the Three Months Ended March 31,
						2021
			(In millions)
Operating revenues						$	254
Operating income						112
Net income						89
Other comprehensive income						4

7.    OTHER CURRENT LIABILITIES

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

						March 31, 2022						December 31, 2021
						(In millions)
Accrued operating expenses						$	127					$	129
Accrued exploration and development						253						207
Accrued compensation and benefits						242						292
Accrued interest						69						107
Accrued income taxes						103						28
Current asset retirement obligation						40						41
Current operating lease liability						110						99
Current portion of derivatives at fair value						20						4
Current decommissioning contingency for sold Gulf of Mexico properties						100						100
Other						190						164
Total Other current liabilities						$	1,254					$	1,171

8.    ASSET RETIREMENT OBLIGATION

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

						March 31, 2022
						(In millions)
Asset retirement obligation, December 31, 2021						$	2,130
Liabilities settled						(7)
Deconsolidation of Altus						(69)
Accretion expense						29
Asset retirement obligation, March 31, 2022						2,083
Less current portion						(40)
Asset retirement obligation, long-term						$	2,043

9.    DEBT AND FINANCING COSTS

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

						March 31, 2022						December 31, 2021
						(In millions)
Apache notes and debentures before unamortized discount and debt issuance costs(1)						$	5,032					$	6,344
Altus credit facility(2)						—						657
Apache credit facility(2)						880						542
Apache finance lease obligations						35						36
Unamortized discount						(28)						(30)
Debt issuance costs						(30)						(39)
Total debt						5,889						7,510
Current maturities						(125)						(215)
Long-term debt						$	5,764					$	7,295

(1)    The fair values of the Apache notes and debentures were $5.1 billion and $7.1 billion as of March 31, 2022 and December 31, 2021, 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 credit facilities approximates fair value because interest rates are variable and reflective of market rates.

As of March 31, 2022, current debt included $123 million carrying value of 2.63% 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 ended March 31, 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.

During the quarter ended March 31, 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.

During the quarter ended March 31, 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% of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed by borrowing under Apache’s revolving credit facility.

During the quarter ended March 31, 2021, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $7 million for an aggregate purchase price of $6 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $1 million. No gain or loss was recognized on these repurchases.

In March 2018, Apache entered into a revolving credit facility with commitments totaling $4.0 billion that Apache terminated in April 2022 when the Company entered into two new syndicated credit facilities described in “Subsequent Event” below. As of March 31, 2022, there were $880 million of borrowings and an aggregate £748 million and $20 million in letters of credit outstanding under Apache’s 2018 facility. 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 Apache’s 2018 facility. The outstanding letters of credit denominated in pounds were issued to support North Sea decommissioning obligations, the terms of which required such support after Standard & Poor’s reduced Apache’s credit rating from BBB to BB+ on March 26, 2020.

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

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

						For the Quarter Ended March 31,
						2022						2021
						(In millions)
Interest expense						$	90					$	112
Amortization of debt issuance costs						2						2
Capitalized interest						(3)						(2)
Loss on extinguishment of debt						67						—
Interest income						(4)						(2)
Financing costs, net						$	152					$	110

On April 29, 2022, the Company entered into two syndicated credit agreements for general corporate purposes that replaced and refinanced Apache’s 2018 syndicated credit agreement (the Former Facility).

One new 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 new 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.

In connection with the Company’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. 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.

Borrowers under each New Agreement may include the Company and certain subsidiaries organized under the laws of, resident of, or domiciled in, the United States, Canada, England and Wales, the United Kingdom, or the Cayman Islands. Apache may borrow under the USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time.

Letters of credit are available under each New Agreement for credit support needs of the Company and its subsidiaries, including in respect of North Sea decommissioning obligations. Letters of credit under each New Agreement may be denominated in US dollars, pounds sterling, Canadian dollars, and any other foreign currency consented to by an issuing bank.

As of April 29, 2022, an aggregate US$680 million in borrowings under the Former Facility were deemed borrowings by the Company outstanding under the USD Agreement. As of April 29, 2022, (i) a letter of credit for US$20 million originally issued under the Former Facility is deemed issued and outstanding under the USD Agreement and (ii) letters of credit aggregating £748 million originally issued under the Former Facility are deemed issued and outstanding under the GBP Agreement.

Borrowers under each New Agreement may borrow, prepay, and reborrow loans and obtain letters of credit, and the Company may obtain letters of credit for the account of its subsidiaries, in each case subject to representations and warranties, covenants, and events of default substantially similar to those in the Former Facility. The New Agreements do not permit lenders to accelerate maturity or refuse to lend based on unspecified material adverse changes and do not have borrowing restrictions or prepayment obligations in the event of a decline in credit ratings.

10.    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 first quarter of 2022, the Company’s 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 first quarter 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.

The Company is subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. 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.

11.    COMMITMENTS AND CONTINGENCIES

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 March 31, 2022, the Company has an accrued liability of approximately $73 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 material matters that 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.

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.

As more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, 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, 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.

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 claims. Further appeal is pending.

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, 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.

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, four 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. The Company believes that Plaintiffs’ claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

On July 17, 2017, in three separate actions, San Mateo County, California, Marin County, California, and the City of Imperial Beach, California, all filed suit individually and on behalf of the people of the state of California against over 30 oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. On December 20, 2017, in two separate actions, the City of Santa Cruz and Santa Cruz County and in a separate action on January 22, 2018, the City of Richmond, filed similar lawsuits against many of the same defendants. On November 14, 2018, the Pacific Coast Federation of Fishermen’s Associations, Inc. also filed a similar lawsuit against many of the same defendants. After removal of all such lawsuits to federal court, the district court remanded them back to state court. The 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 9th 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.

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 five sidetracks on the Potomac #3 well. After a jury trial, a verdict of approximately $60 million, plus fees, costs, and interest was entered against the Company. The 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.

The Company is a party to two purported class actions in Oklahoma styled Bigie Lee Rhea v. Apache Corporation, Case No. 6:14-cv-00433-JH, and Albert Steven Allen v. Apache Corporation, Case No. CJ-2019-00219.

In the Rhea case, which was certified, a class of royalty owners sought damages of approximately $200 million for alleged breach of the implied covenant to market relating to post-production deductions and alleged NGL uplift value. With no admission of liability or wrongdoing, but only to avoid the expense and uncertainty of future litigation, Apache has entered into a settlement agreement in the Rhea 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.

The Allen case has not been certified and seeks to represent a group of owners who have allegedly received late royalty and other payments under Oklahoma statutes. The amount of this claim is not yet reasonably determinable. While adverse judgments against the Company are possible, the Company intends to vigorously defend these lawsuits and claims.

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 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 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, a case captioned William Wessels, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al. was filed in the 334th District Court of Harris County, Texas. The case purports to be a derivative action 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. The defendants believe the plaintiff’s claims lack merit and intend to vigorously defend this lawsuit.

As of March 31, 2022, the Company had an undiscounted reserve for environmental remediation of approximately $2 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 is not aware of any environmental claims existing as of March 31, 2022 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.

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 two 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 two bonds (Bonds) and five 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, 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 to BSEE. Apache expects to receive such orders on the other Legacy GOM Assets included in GOM Shelf’s notification letter. 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.

If Apache incurs costs to decommission any Legacy GOM Asset and GOM Shelf does not reimburse Apache for such costs, then Apache will obtain reimbursement from Trust A, the Bonds, and the Letters of Credit until 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 to perform, 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 March 31, 2022, Apache estimates that its potential liability to fund decommissioning of Legacy GOM Assets it may be ordered to perform ranges from $1.2 billion to $1.4 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 as of March 31, 2022, representing the estimated costs of decommissioning it may be required to perform on Legacy GOM Assets. Of the total liability recorded, $1.1 billion is reflected under the caption “Decommissioning contingency for sold Gulf of Mexico properties,” and $100 million is reflected under “Other current liabilities” in the Company’s consolidated balance sheet. The Company has also recorded a $740 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, $640 million is reflected under the caption “Decommissioning security for sold Gulf of Mexico properties,” and $100 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, and planned abandonment logistics could result in a liability in excess of the amount accrued. In addition, significant changes in the market price of oil, gas, and NGLs could further impact Apache’s estimate of its contingent liability to decommission Legacy GOM Assets.

12.    REDEEMABLE NONCONTROLLING INTEREST — ALTUS

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.

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.

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)
												$	—

13.    CAPITAL STOCK

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 one-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.

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.

The following table presents a reconciliation of the components of basic and diluted net income per common share in the consolidated financial statements:

						For the Quarter Ended March 31,
						2022																		2021
						Income						Shares						Per Share						Income						Shares						Per Share
						(In millions, except per share amounts)
Basic:
Income attributable to common stock						$	1,883					346						$	5.44					$	388					378						$	1.02
Effect of Dilutive Securities:
Stock options and other						$	—					1						$	(0.01)					$	—					1						$	—
Diluted:
Income attributable to common stock						$	1,883					347						$	5.43					$	388					379						$	1.02

Prior to the deconsolidation of Altus on February 22, 2022, the Company used the “if-converted method” to determine the potential dilutive effect of an assumed exchange of the outstanding Preferred Units of Altus Midstream LP for shares of Altus Midstream Company’s common stock. The impact to net income attributable to common stock on an assumed conversion of the Preferred Units was anti-dilutive for the quarter ended March 31, 2021. The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive of 2.9 million and 4.0 million during the first quarters of 2022 and 2021, respectively.

During 2018, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. No shares were purchased under this authorization through December 31, 2020. During the fourth quarter of 2021, the Company’s Board of Directors authorized the purchase of an additional 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions.

In the first quarter of 2022, the Company repurchased 7.2 million shares at an average price of $36.08 per share, and as of March 31, 2022, the Company had remaining authorization to repurchase up to 41.6 million shares. The Company is not obligated to acquire any additional shares. The Company did not repurchase any shares during the first quarter of 2021.

During the quarters ended March 31, 2022 and 2021, the Company paid $43 million and $9 million, respectively, in dividends on its common stock.

During the third quarter of 2021, the Company’s Board of Directors approved an increase in its quarterly dividend from $0.025 per share to $0.0625 per share and, in the fourth quarter of 2021, approved a further increase to $0.125 per share.

14.    BUSINESS SEGMENT INFORMATION

As of March 31, 2022, the Company is engaged in exploration and production (Upstream) activities across three 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, which owned, developed, and operated a midstream energy asset network in the Permian Basin of West Texas. The Company also has active exploration and planned appraisal operations ongoing in Suriname, as well as interests in other international locations that may, over time, result in reportable discoveries and development opportunities. Financial information for each segment is presented below:

						Egypt(1)						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total(4)
						Upstream
For the Quarter Ended March 31, 2022						(In millions)
Revenues:
Oil revenues						$	790					$	328					$	599					$	—					$	—					$	1,717
Natural gas revenues						98						99						183						—						—						380
Natural gas liquids revenues						3						16						207						—						(3)						223
Oil, natural gas, and natural gas liquids production revenues						891						443						989						—						(3)						2,320
Purchased oil and gas sales						—						—						344						5						—						349
Midstream service revenues						—						—						—						16						(16)						—
						891						443						1,333						21						(19)						2,669
Operating Expenses:
Lease operating expenses						131						96						118						—						(1)						344
Gathering, processing, and transmission						5						12						77						5						(18)						81
Purchased oil and gas costs						—						—						351						—						—						351
Taxes other than income						—						—						67						3						—						70
Exploration						15						5						4						—						18						42
Depreciation, depletion, and amortization						97						62						130						2						—						291
Asset retirement obligation accretion						—						20						8						1						—						29
						248						195						755						11						(1)						1,208
Operating Income (Loss)(2)						$	643					$	248					$	578					$	10					$	(18)					1,461
Other Income (Expense):
Derivative instrument loss, net																																				(62)
Gain on divestitures, net																																				1,176
Other, net																																				45
General and administrative																																				(156)
Transaction, reorganization, and separation																																				(14)
Financing costs, net																																				(152)
Income Before Income Taxes																																				$	2,298
Total Assets(3)						$	2,966					$	2,169					$	6,878					$	—					$	463					$	12,476