Apache Corporation
APACHE CORP (Form: 10-Q, Received: 08/04/2016 17:29:00)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
  ________________________________________________________________
FORM 10-Q  
   ________________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
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 1-4300
   
APACHE CORPORATION
(exact name of registrant as specified in its charter)
      ________________________________________________________________
Delaware
41-0747868
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400
(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code: (713) 296-6000
________________________________________________________________
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   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
Accelerated filer
 
¨
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ¨     No   ý
Number of shares of registrant’s common stock outstanding as of July 31, 2016
379,423,069





 
TABLE OF CONTENTS
 
DESCRIPTION
Item
 
 
Page
 
PART I - FINANCIAL INFORMATION
 
 
1.
 
 
 
 
 
 
 
 
 
 
 
2.
 
3.
 
4.
 
 
PART II - OTHER INFORMATION
 
 
1.
 
1A.
 
2.
 
3.
 
4.
 
5.
 
6.
 



Forward-Looking Statements and Risk
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, the information that was used to prepare our estimate of proved reserves as of December 31, 2015, and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” or “continue” or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:
 
the market prices of oil, natural gas, NGLs, and other products or services;

our commodity hedging arrangements;

the integration of acquisitions;

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

production and reserve levels;

drilling risks;

economic and competitive conditions;

the availability of capital resources;

capital expenditure and other contractual obligations;

currency exchange rates;

weather conditions;

inflation rates;

the availability of goods and services;

legislative or regulatory changes;

the impact on our operations from changes in the Egyptian government;

terrorism or cyber attacks;

occurrence of property acquisitions or divestitures;

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

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 our most recently filed Annual Report on Form 10-K, other risks and uncertainties in our second -quarter 2016 earnings release, other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q, and other filings that we make with the Securities and Exchange Commission.
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 the cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.




PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
 
 
For the Quarter Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015*
 
2016
 
2015 *
 
 
(In millions, except per common share data)
REVENUES AND OTHER:
 
 
 
 
 
 
 
 
Oil and gas production revenues
 
 
 
 
 
 
 
 
Oil revenues
 
$
1,118

 
$
1,618

 
$
1,940

 
$
2,911

Gas revenues
 
209

 
315

 
432

 
623

Natural gas liquids revenues
 
59

 
58

 
101

 
116

 
 
1,386

 
1,991

 
2,473

 
3,650

Other
 
(21
)
 
28

 
(24
)
 
22

Gain on divestitures
 
17

 
227

 
16

 
209

 
 
1,382

 
2,246

 
2,465

 
3,881

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Lease operating expenses
 
359

 
467

 
737

 
948

Gathering and transportation
 
52

 
49

 
104

 
105

Taxes other than income
 
65

 
55

 
76

 
128

Exploration
 
91

 
225

 
186

 
483

General and administrative
 
103

 
111

 
196

 
195

Depreciation, depletion, and amortization:
 
 
 
 
 
 
 
 
Oil and gas property and equipment
 
629

 
711

 
1,265

 
1,454

Other assets
 
40

 
83

 
82

 
166

Asset retirement obligation accretion
 
38

 
36

 
76

 
72

Impairments
 
173

 
512

 
173

 
2,424

Transaction, reorganization, and separation
 
9

 
66

 
24

 
120

Financing costs, net
 
104

 
117

 
209

 
241

 
 
1,663

 
2,432

 
3,128

 
6,336

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
(281
)
 
(186
)
 
(663
)
 
(2,455
)
Current income tax provision
 
144

 
900

 
134

 
848

Deferred income tax benefit
 
(225
)
 
(169
)
 
(226
)
 
(1,318
)
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
 
(200
)
 
(917
)
 
(571
)
 
(1,985
)
Net income (loss) from discontinued operations, net of tax
 

 
120

 

 
(118
)
NET LOSS INCLUDING NONCONTROLLING INTEREST
 
(200
)
 
(797
)
 
(571
)
 
(2,103
)
Net income attributable to noncontrolling interest
 
44

 
63

 
45

 
91

NET LOSS ATTRIBUTABLE TO COMMON STOCK
 
$
(244
)
 
$
(860
)
 
$
(616
)
 
$
(2,194
)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
 
 
 
 
 
 
 
 
Net loss from continuing operations attributable to common shareholders
 
$
(244
)
 
$
(980
)
 
$
(616
)
 
$
(2,076
)
Net income (loss) from discontinued operations
 

 
120

 

 
(118
)
Net loss attributable to common shareholders
 
$
(244
)
 
$
(860
)
 
$
(616
)
 
$
(2,194
)
NET LOSS PER COMMON SHARE:
 
 
 
 
 
 
 
 
Basic net loss from continuing operations per share
 
$
(0.65
)
 
$
(2.60
)
 
$
(1.63
)
 
$
(5.50
)
Basic net income (loss) from discontinued operations per share
 

 
0.32

 

 
(0.31
)
Basic net loss per share
 
$
(0.65
)
 
$
(2.28
)
 
$
(1.63
)
 
$
(5.81
)
DILUTED NET LOSS PER COMMON SHARE:
 
 
 
 
 
 
 
 
Diluted net loss from continuing operations per share
 
$
(0.65
)
 
$
(2.60
)
 
$
(1.63
)
 
$
(5.50
)
Diluted net income (loss) from discontinued operations per share
 

 
0.32

 

 
(0.31
)
Diluted net loss per share
 
$
(0.65
)
 
$
(2.28
)
 
$
(1.63
)
 
$
(5.81
)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
Basic
 
379

 
378

 
379

 
377

Diluted
 
379

 
378

 
379

 
377

DIVIDENDS DECLARED PER COMMON SHARE
 
$
0.25

 
$
0.25

 
$
0.50

 
$
0.50

*Financial information for 2015 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements
are an integral part of this statement.

1



APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
 
 
For the Six Months Ended June 30,
 
 
2016
 
2015*
 
 
(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss including noncontrolling interest
 
$
(571
)
 
$
(2,103
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Loss from discontinued operations
 

 
118

Gain on divestitures
 
(16
)
 
(209
)
Exploratory dry hole expense and unproved leasehold impairments
 
139

 
385

Depreciation, depletion, and amortization
 
1,347

 
1,620

Asset retirement obligation accretion
 
76

 
72

Impairments
 
173

 
2,424

Provision (benefit) from deferred income taxes
 
(226
)
 
(1,318
)
Other
 
91

 
26

Changes in operating assets and liabilities:
 
 
 
 
Receivables
 
237

 
333

Inventories
 
1

 
74

Drilling advances
 
(30
)
 
118

Deferred charges and other
 
(65
)
 
(81
)
Accounts payable
 
(118
)
 
(410
)
Accrued expenses
 
(57
)
 
505

Deferred credits and noncurrent liabilities
 
2

 
69

NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES
 
983

 
1,623

NET CASH PROVIDED BY DISCONTINUED OPERATIONS
 

 
159

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
983

 
1,782

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Additions to oil and gas property
 
(925
)
 
(2,783
)
Leasehold and property acquisitions
 
(118
)
 
(128
)
Additions to gas gathering, transmission, and processing facilities
 

 
(94
)
Proceeds from sale of Kitimat LNG
 

 
854

Proceeds from sale of other oil and gas properties
 
48

 
119

Other, net
 
29

 
(67
)
NET CASH USED IN CONTINUING INVESTING ACTIVITIES
 
(966
)
 
(2,099
)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS
 

 
4,372

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(966
)
 
2,273

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Commercial paper and bank credit facilities, net
 

 
(1,570
)
Distributions to noncontrolling interest
 
(93
)
 
(40
)
Dividends paid
 
(189
)
 
(189
)
Other
 
(1
)
 
15

NET CASH USED IN FINANCING ACTIVITIES
 
(283
)
 
(1,784
)
 
 
 
 
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(266
)
 
2,271

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
 
1,467

 
679

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
1,201

 
$
2,950

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Interest paid, net of capitalized interest
 
$
206

 
$
218

Income taxes paid, net of refunds
 
201

 
278

*Financial information for 2015 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements
are an integral part of this statement.

2



APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
 
June 30, 2016
 
December 31, 2015*
 
 
(In millions)
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
1,201

 
$
1,467

Receivables, net of allowance
 
1,016

 
1,253

Inventories
 
530

 
570

Drilling advances
 
202

 
172

Prepaid assets and other
 
343

 
290

 
 
3,292

 
3,752

PROPERTY AND EQUIPMENT:
 
 
 
 
Oil and gas, on the basis of successful efforts accounting:
 
 
 
 
Proved properties
 
42,469

 
41,728

Unproved properties and properties under development, not being amortized
 
2,285

 
2,277

Gathering, transmission and processing facilities
 
862

 
1,052

Other
 
1,098

 
1,093

 
 
46,714

 
46,150

Less: Accumulated depreciation, depletion, and amortization
 
(26,571
)
 
(25,312
)
 
 
20,143

 
20,838

OTHER ASSETS:
 
 
 
 
Deferred charges and other
 
911

 
910

 
 
$
24,346

 
$
25,500

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts payable
 
$
544

 
$
618

Other current liabilities (Note 5)
 
1,026

 
1,223

 
 
1,570

 
1,841

LONG-TERM DEBT
 
8,719

 
8,716

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
 
 
 
 
Income taxes
 
2,308

 
2,529

Asset retirement obligation
 
2,706

 
2,562

Other
 
347

 
362

 
 
5,361

 
5,453

COMMITMENTS AND CONTINGENCIES (Note 9)
 
 
 
 
EQUITY:
 
 
 
 
Common stock, $0.625 par, 860,000,000 shares authorized, 412,532,393 and 411,218,105 shares issued, respectively
 
258

 
257

Paid-in capital
 
12,487

 
12,619

Accumulated deficit
 
(2,596
)
 
(1,980
)
Treasury stock, at cost, 33,174,414 and 33,183,930 shares, respectively
 
(2,888
)
 
(2,889
)
Accumulated other comprehensive loss
 
(119
)
 
(119
)
APACHE SHAREHOLDERS’ EQUITY
 
7,142

 
7,888

Noncontrolling interest
 
1,554

 
1,602

TOTAL EQUITY
 
8,696

 
9,490

 
 
$
24,346

 
$
25,500

*Financial information for 2015 has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements
are an integral part of this statement.

3



APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
 
 
 
Common
Stock
 
Paid-In
Capital
 
Retained Earnings (Accumulated Deficit)
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Loss
 
APACHE
SHAREHOLDERS’
EQUITY
 
Non
Controlling
Interest
 
TOTAL
EQUITY
 
 
(In millions)
BALANCE AT DECEMBER 31, 2014 previously reported
 
$
256

 
$
12,438

 
$
16,249

 
$
(2,890
)
 
$
(116
)
 
$
25,937

 
$
2,200

 
$
28,137

Effect of change in accounting principle
 

 
152

 
(7,594
)
 

 

 
(7,442
)
 
(154
)
 
(7,596
)
BALANCE AT DECEMBER 31, 2014 as recast
 
$
256

 
$
12,590

 
$
8,655

 
$
(2,890
)
 
$
(116
)
 
$
18,495

 
$
2,046

 
$
20,541

Net income (loss)
 

 

 
(2,194
)
 

 

 
(2,194
)
 
91

 
(2,103
)
Distributions to noncontrolling interest
 

 

 

 

 

 

 
(40
)
 
(40
)
Common dividends ($0.50 per share)
 

 

 
(189
)
 

 

 
(189
)
 

 
(189
)
Other
 
1

 
45

 

 
1

 

 
47

 

 
47

BALANCE AT JUNE 30, 2015
 
$
257

 
$
12,635

 
$
6,272

 
$
(2,889
)
 
$
(116
)
 
$
16,159

 
$
2,097

 
$
18,256

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE AT DECEMBER 31, 2015 previously reported
 
$
257

 
$
12,467

 
$
(7,153
)
 
$
(2,889
)
 
$
(116
)
 
$
2,566

 
$
1,662

 
$
4,228

Effect of change in accounting principle
 

 
152

 
5,173

 

 
(3
)
 
5,322

 
(60
)
 
5,262

BALANCE AT DECEMBER 31, 2015 as recast
 
$
257

 
$
12,619

 
$
(1,980
)
 
$
(2,889
)
 
$
(119
)
 
$
7,888

 
$
1,602

 
$
9,490

Net income (loss)
 

 

 
(616
)
 

 

 
(616
)
 
45

 
(571
)
Distributions to noncontrolling interest
 

 

 

 

 

 

 
(93
)
 
(93
)
Common dividends ($0.50 per share)
 

 
(189
)
 

 

 

 
(189
)
 

 
(189
)
Other
 
1

 
57

 

 
1

 

 
59

 

 
59

BALANCE AT JUNE 30, 2016
 
$
258

 
$
12,487

 
$
(2,596
)
 
$
(2,888
)
 
$
(119
)
 
$
7,142

 
$
1,554

 
$
8,696

Financial information for prior periods has been recast to reflect retrospective application of the successful efforts method of accounting. See Note 1.
The accompanying notes to consolidated financial statements
are an integral part of this statement.


4



APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These consolidated financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods. All such adjustments are of a normal recurring nature and are on a basis consistent with the annual audited consolidated financial statements, except as described in Note 1 below. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, should be read along with Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 , which contains a summary of the Company’s significant accounting policies and other disclosures.
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-period presentation. During the second quarter of 2015, Apache completed the sale of its Australian LNG business and oil and gas assets. Results of operations and consolidated cash flows for the divested Australia assets are reflected as discontinued operations in the Company’s financial statements for all periods presented. For more information regarding these divestitures, please refer to Note 3—Acquisitions and Divestitures.
Recast Financial Information for Change in Accounting Principle
In the second quarter of 2016, Apache voluntarily changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method of accounting. The financial information for prior periods has been recast to reflect retrospective application of the successful efforts method, as prescribed by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 932 “Extractive Activities—Oil and Gas.” Although the full cost method of accounting for oil and gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the generally preferred method of the U.S. Securities and Exchange Commission (SEC) and is more widely used in the industry such that the change will improve comparability of the Company's financial statements to its peers. The Company believes the successful efforts method provides a more representational depiction of assets and operating results. The successful efforts method also provides for the Company's investments in oil and gas properties to be assessed for impairment in accordance with ASC 360 "Property, Plant, and Equipment" rather than valuations based on prices and costs prescribed under the full cost method as of the balance sheet date. For more detailed information regarding the effects of the change to the successful efforts method, please refer to Note 2—Change in Accounting Principle. The Company has recast certain historical information for all periods presented, including the Statement of Consolidated Operations, Statement of Consolidated Cash Flows, Consolidated Balance Sheet, Statement of Consolidated Changes in Equity, and related information in Notes 1, 2, 3, 4, 5, 7, 8, 10, 11, and 12.
In the first quarter of 2016 , the Company retrospectively adopted a new accounting standard update ASU 2015-03 "Simplifying the Presentation of Debt Issuance Costs," which requires debt issuance costs to be presented as a direct deduction from the carrying value of the associated debt liability, consistent with debt discounts. For more information regarding this update, please refer to Note 7—Debt and Financing Costs.
As of June 30, 2016 , Apache’s significant accounting policies, other than those discussed above, are consistent with those discussed in Note 1—Summary of Significant Accounting Policies to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 .
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities, the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom, the assessment of asset retirement obligations, the estimates of fair value for long-lived assets and goodwill, and the estimate of income taxes. Actual results could differ from those estimates.

5



Fair Value Measurements
Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. ASC 820-10-35 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).
Apache also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. For the six-month period ended June 30, 2016, the Company recorded asset impairments totaling $281 million in connection with fair value assessments in the current low commodity price environment. Impairments totaling $176 million were recorded for oil and gas properties in the U.S. and Canada and $105 million was recorded for GTP assets, which were written down to their fair values. The oil and gas property impairments are discussed in further detail below in “Oil and Gas Property.”
For the six-month period ended June 30, 2015, the Company recorded asset impairments totaling $2.7 billion in connection with fair value assessments in the current low commodity price environment. Impairments totaling $2.6 billion were recorded for oil and gas properties, which were written down to their fair values. Also, for the six-month period ended June 30, 2015, the Company recorded $163 million for the impairment of goodwill. As of June 30, 2016 and December 31, 2015, remaining goodwill in the consolidated balance sheet totaled $87 million for our Egypt reporting unit.
Oil and Gas Property
The Company follows the successful efforts method of accounting for its oil and gas property. Under this method of accounting, exploration costs such as exploratory dry holes, exploratory geological and geophysical costs, delay rentals, unproved impairments, 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.

6



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 cost of those reserves. 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. With respect to lease and well equipment costs, which include development costs and successful exploration drilling costs, the reserve base includes only proved developed reserves. 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 proved oil and gas properties may be impaired, 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 Apache’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 the ASC 820 “Fair Value Measurement.” If applicable, the Company utilizes accepted bids as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. Apache has classified these fair value measurements as Level 3 in the fair value hierarchy.
The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the second quarters and first six months of 2016 and 2015 :
 
 
Quarter Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(In millions)
Oil and Gas Property:
 
 
 
 
 
 
 
 
Proved
 
$
68

 
$
349

 
$
68

 
$
2,261

Unproved
 
66

 
148

 
108

 
316

Proved properties impaired during the quarter ended June 30, 2016 had an aggregate fair value of $143 million . Proved properties impaired during the quarter ended March 31, 2015 had an aggregate fair value of $1.2 billion , and properties impaired during the quarter ended June 30, 2015 had an aggregate fair value of $516 million .
On the statement of consolidated operations, unproved impairments are recorded in exploration expense, and proved impairments are recorded in impairments. Gains and losses on significant divestitures are recognized in the statement of consolidated operations. See Note 3—Acquisitions and Divestitures for more detail.
New Pronouncements Issued But Not Yet Adopted
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, which seeks to simplify accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard requires the Company to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted and if an entity early adopts the guidance in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, a new lease standard requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

7



In May 2014, the FASB and the International Accounting Standards Board (IASB) issued a joint revenue recognition standard, ASU 2014-09. The new standard removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers, and increases disclosure requirements. The guidance requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, which provides further clarification on the principal versus agent evaluation. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. The Company is currently evaluating the level of effort needed to implement the standard, the impact of adopting this standard on its consolidated financial statements, and whether to use the full retrospective approach or the modified retrospective approach.
2.
CHANGE IN ACCOUNTING PRINCIPLE
During the second quarter of 2016, the Company voluntarily changed its method of accounting for oil and gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods has been recast to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration expenditures such as exploratory dry holes, exploratory geological and geophysical costs, delay rentals, unproved impairments, and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. Successful efforts also provides for the assessment of potential property impairments under ASC 360 by comparing the net carrying value of oil and gas properties with associated projected undiscounted pre-tax future net cash flows. If the expected undiscounted pre-tax future net cash flows are lower than the unamortized capitalized costs, the capitalized cost is reduced to fair value. Under the full cost method of accounting, a write-down would be required if the net carrying value of oil and gas properties exceeds a full cost “ceiling,” using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are generally recognized on the dispositions of oil and gas property and equipment under the successful efforts method, as opposed to an adjustment to the net carrying value of the remaining assets under the full cost method. Apache’s consolidated financial statements have been recast to reflect these differences.
The following tables present the effects of the change to the successful efforts method in the statement of consolidated operations:
 
Changes to the Statement of Consolidated Operations
For the Quarter Ended June 30, 2016
Under Full Cost
 
Changes
 
As Reported Under Successful Efforts
 
(In millions, except per share data)
Oil revenues
$
1,062

 
$
56

 
$
1,118

Natural gas revenues
218

 
(9
)
 
209

NGL revenues
59

 

 
59

Oil and gas production revenues
1,339

 
47

 
1,386

Other
(22
)
 
1

 
(21
)
Gain on divestiture
5

 
12

 
17

Exploration

 
91

 
91

Depreciation, depletion, and amortization:
 
 
 
 
 
Oil and Gas Property and Equipment
 
 
 
 
 
Recurring
507

 
122

 
629

Additional
671

 
(671
)
 

Impairments
105

 
68

 
173

Financing costs, net
90

 
14

 
104

Current income tax provision
25

 
119

 
144

Deferred income tax provision (benefit)
(120
)
 
(105
)
 
(225
)
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
(622
)
 
422

 
(200
)
   Net income (loss) attributable to noncontrolling interest
(21
)
 
65

 
44

NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(601
)
 
357

 
(244
)
   Net income (loss) from discontinued operations

 

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(601
)
 
357

 
(244
)
 
 
 
 
 
 
Per common share
 
 
 
 
 
Basic net loss from continuing operations per share
$
(1.58
)
 
$
0.93

 
$
(0.65
)
Basic net loss from discontinued operations per share

 

 

Basic net loss per share
$
(1.58
)
 
$
0.93

 
$
(0.65
)
 
 
 
 
 
 
Diluted net loss from continuing operations per share
$
(1.58
)
 
$
0.93

 
$
(0.65
)
Diluted net loss from discontinued operations per share

 

 

Diluted net loss per share
$
(1.58
)
 
$
0.93

 
$
(0.65
)

8



 
Changes to the Statement of Consolidated Operations
For the Quarter Ended June 30, 2015
Under Full Cost
 
Changes*
 
As Reported Under Successful Efforts
 
(In millions, except per share data)
Oil revenues
$
1,599

 
$
19

 
$
1,618

Natural gas revenues
295

 
20

 
315

NGL revenues
58

 

 
58

Oil and gas production revenues
1,952

 
39

 
1,991

Other
25

 
3

 
28

Gain on divestiture

 
227

 
227

Exploration

 
225

 
225

Depreciation, depletion, and amortization:
 
 
 
 
 
Oil and Gas Property and Equipment
 
 
 
 
 
Recurring
923

 
(212
)
 
711

Additional
5,816

 
(5,816
)
 

Impairments

 
512

 
512

Financing costs, net
63

 
54

 
117

Current income tax provision (benefit)
665

 
235

 
900

Deferred income tax provision (benefit)
(1,525
)
 
1,356

 
(169
)
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
(4,832
)
 
3,915

 
(917
)
   Net income attributable to noncontrolling interest
36

 
27

 
63

NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(4,868
)
 
3,888

 
(980
)
   Net loss from discontinued operations
(732
)
 
852

 
120

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(5,600
)
 
4,740

 
(860
)
 
 
 
 
 
 
Per common share
 
 
 
 
 
Basic net loss from continuing operations per share
$
(12.89
)
 
$
10.29

 
$
(2.60
)
Basic net loss from discontinued operations per share
(1.94
)
 
2.26

 
0.32

Basic net loss per share
$
(14.83
)
 
$
12.55

 
$
(2.28
)
 
 
 
 
 
 
Diluted net loss from continuing operations per share
$
(12.89
)
 
$
10.29

 
$
(2.60
)
Diluted net loss from discontinued operations per share
(1.94
)
 
2.26

 
0.32

Diluted net loss per share
$
(14.83
)
 
$
12.55

 
$
(2.28
)
 
Changes to the Statement of Consolidated Operations
For the Six Months Ended June 30, 2016
Under Full Cost
 
Changes*
 
As Reported Under Successful Efforts
 
(In millions, except per share data)
Oil revenues
$
1,857

 
$
83

 
$
1,940

Natural gas revenues
441

 
(9
)
 
432

NGL revenues
101

 

 
101

Oil and gas production revenues
2,399

 
74

 
2,473

Other
(27
)
 
3

 
(24
)
Gain on divestiture
3

 
13

 
16

Exploration

 
186

 
186

Depreciation, depletion, and amortization:
 
 
 
 
 
Oil and Gas Property and Equipment
 
 
 
 
 
Recurring
1,059

 
206

 
1,265

Additional
1,159

 
(1,159
)
 

Impairments
105

 
68

 
173

Financing costs, net
180

 
29

 
209

Current income tax provision
61

 
73

 
134

Deferred income tax provision (benefit)
(301
)
 
75

 
(226
)
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
(1,183
)
 
612

 
(571
)
   Net income (loss) attributable to noncontrolling interest
(93
)
 
138

 
45

NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(1,090
)
 
474

 
(616
)
   Net income (loss) from discontinued operations

 

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(1,090
)
 
474

 
(616
)
 
 
 
 
 
 
Per common share
 
 
 
 
 
Basic net loss from continuing operations per share
$
(2.88
)
 
$
1.25

 
$
(1.63
)
Basic net loss from discontinued operations per share

 

 

Basic net loss per share
$
(2.88
)
 
$
1.25

 
$
(1.63
)
 
 
 
 
 
 
Diluted net loss from continuing operations per share
$
(2.88
)
 
$
1.25

 
$
(1.63
)
Diluted net loss from discontinued operations per share

 

 

Diluted net loss per share
$
(2.88
)
 
$
1.25

 
$
(1.63
)

9



 
Changes to the Statement of Consolidated Operations
For the Six Months Ended June 30, 2015
Under Full Cost
 
Changes*
 
As Reported Under Successful Efforts
 
(In millions, except per share data)
Oil revenues
$
2,879

 
$
32

 
$
2,911

Natural gas revenues
595

 
28

 
623

NGL revenues
116

 

 
116

Oil and gas production revenues
3,590

 
60

 
3,650

Other
17

 
5

 
22

Gain on divestiture

 
209

 
209

Exploration

 
483

 
483

General and administrative
193

 
2

 
195

Depreciation, depletion, and amortization:
 
 
 
 
 
Oil and Gas Property and Equipment
 
 
 
 
 
Recurring
1,922

 
(468
)
 
1,454

Additional
13,036

 
(13,036
)
 

Impairments

 
2,424

 
2,424

Financing costs, net
133

 
108

 
241

Current income tax provision (benefit)
580

 
268

 
848

Deferred income tax provision (benefit)
(4,460
)
 
3,142

 
(1,318
)
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST
(9,336
)
 
7,351

 
(1,985
)
   Net income attributable to noncontrolling interest
51

 
40

 
91

NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(9,387
)
 
7,311

 
(2,076
)
   Net loss from discontinued operations
(864
)
 
746

 
(118
)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(10,251
)
 
8,057

 
(2,194
)
 
 
 
 
 
 
Per common share
 
 
 
 
 
Basic net loss from continuing operations per share
$
(24.88
)
 
$
19.38

 
$
(5.50
)
Basic net loss from discontinued operations per share
(2.29
)
 
1.98

 
(0.31
)
Basic net loss per share
$
(27.17
)
 
$
21.36

 
$
(5.81
)
 
 
 
 
 
 
Diluted net loss from continuing operations per share
$
(24.88
)
 
$
19.38

 
$
(5.50
)
Diluted net loss from discontinued operations per share
(2.29
)
 
1.98

 
(0.31
)
Diluted net loss per share
$
(27.17
)
 
$
21.36

 
$
(5.81
)


The following tables present the effects of the change to the successful efforts method in the statement of consolidated cash flows:
 
Changes to the Statement of Consolidated Cash Flows
For the Six Months Ended June 30, 2016
Under Full Cost
 
Changes*
 
As Reported Under Successful Efforts
 
(In millions)
Net loss including noncontrolling interest
$
(1,183
)
 
$
612

 
$
(571
)
Gain on divestitures, net
(3
)
 
(13
)
 
(16
)
Exploratory dry hole expense and unproved leasehold impairments

 
139

 
139

Depreciation, depletion, and amortization
2,300

 
(953
)
 
1,347

Impairments
105

 
68

 
173

Provision for (benefit from) deferred income taxes
(301
)
 
75

 
(226
)
Changes in operating assets and liabilities
(28
)
 
(2
)
 
(30
)
Net cash provided by operating activities
1,057

 
(74
)
 
983

Additions to oil and gas property
(999
)
 
74

 
(925
)
Net cash used in investing activities
(1,040
)
 
74

 
(966
)
NET INCREASE (DECREASE) IN CASH
(266
)
 

 
(266
)
BEGINNING CASH BALANCE
1,467

 

 
1,467

ENDING CASH BALANCE
1,201

 

 
1,201


10



 
Changes to the Statement of Consolidated Cash Flows
For the Six Months Ended June 30, 2015
Under Full Cost
 
Changes*
 
As Reported Under Successful Efforts
 
(In millions)
Net loss including noncontrolling interest
$
(10,200
)
 
$
8,097

 
$
(2,103
)
Loss from discontinued operations
864

 
(746
)
 
118

Gain on divestitures, net

 
(209
)
 
(209
)
Exploratory dry hole expense and unproved leasehold impairments

 
385

 
385

Depreciation, depletion, and amortization
15,124

 
(13,504
)
 
1,620

Impairments

 
2,424

 
2,424

Provision for (benefit from) deferred income taxes
(4,460
)
 
3,142

 
(1,318
)
Changes in operating assets and liabilities
311

 
297

 
608

Net cash provided by operating activities - continuing operations
1,737

 
(114
)
 
1,623

Net cash provided by operating activities - discontinued operations
196

 
(37
)
 
159

Additions to oil and gas property
(2,987
)
 
204

 
(2,783
)
Net cash used in investing activities - continuing operations
(2,303
)
 
204

 
(2,099
)
Net cash provided by investing activities - discontinued operations
4,335

 
37

 
4,372

NET INCREASE (DECREASE) IN CASH
2,181

 
90

 
2,271

BEGINNING CASH BALANCE
769

 
(90
)
 
679

ENDING CASH BALANCE
2,950

 

 
2,950

The following tables present the effects of the change to the successful efforts method in the consolidated balance sheet:
 
Changes to the Consolidated Balance Sheet
June 30, 2016
Under Full Cost
 
Changes
 
As Reported Under Successful Efforts
 
(In millions)
PROPERTY AND EQUIPMENT:
 
 
 
 
 
Property and equipment - cost
$
94,657

 
$
(47,943
)
 
$
46,714

Less: Accumulated depreciation, depletion, and amortization
(81,920
)
 
55,349

 
(26,571
)
PROPERTY AND EQUIPMENT, NET
12,737

 
7,406

 
20,143

Deferred charges and other
937

 
(26
)
 
911

TOTAL ASSETS
16,966

 
7,380

 
24,346

Deferred income taxes
796

 
1,512

 
2,308

Paid-in capital
12,342

 
145

 
12,487

Accumulated deficit
(8,243
)
 
5,647

 
(2,596
)
Accumulated other comprehensive loss
(116
)
 
(3
)
 
(119
)
Noncontrolling interest
1,475

 
79

 
1,554

TOTAL EQUITY
2,828

 
5,868

 
8,696

 
Changes to the Consolidated Balance Sheet
December 31, 2015
Under Full Cost
 
Changes*
 
As Reported Under Successful Efforts
 
(In millions)
PROPERTY AND EQUIPMENT:
 
 
 
 
 
Property and equipment - cost
$
93,825

 
$
(47,675
)
 
$
46,150

Less: Accumulated depreciation, depletion, and amortization
(79,706
)
 
54,394

 
(25,312
)
PROPERTY AND EQUIPMENT, NET
14,119

 
6,719

 
20,838

TOTAL ASSETS
18,781

 
6,719

 
25,500

Deferred income taxes
1,072

 
1,457

 
2,529

Paid-in capital
12,467

 
152

 
12,619

Accumulated deficit (1)
(7,153
)
 
5,173

 
(1,980
)
Accumulated other comprehensive loss
(116
)
 
(3
)
 
(119
)
Noncontrolling interest
1,662

 
(60
)
 
1,602

TOTAL EQUITY
4,228

 
5,262

 
9,490

*In conjunction with recasting the financial information for the adoption of the successful efforts method of accounting, we corrected certain immaterial errors
in the North Sea pertaining to the improper calculation of deferred tax liabilities associated with capitalized interest under the full cost method.
(1) The cumulative effect of the change to the successful efforts method on retained earnings (accumulated deficit) as of January 1, 2015 was a decrease of $7.6 billion .


11



3.
ACQUISITIONS AND DIVESTITURES
2016 Activity
Leasehold and Property Acquisitions
During the second quarter and first six months of 2016 , Apache completed $99 million and $118 million , respectively, of leasehold and property acquisitions primarily in our North America onshore regions and Egypt.
Transaction, Reorganization, and Separation
During the second quarter and first six months of 2016 , Apache recorded $9 million and $24 million , respectively, in expense related to various asset transactions, company reorganization, and employee separation.
2015 Activity
Canada Divestiture
In April 2015, Apache's subsidiaries completed the sale of its 50 percent interest in the Kitimat LNG project and upstream acreage in the Horn River and Liard natural gas basins to Woodside Petroleum Limited (Woodside). Proceeds at closing were $854 million , of which approximately $344 million were associated with LNG assets and $510 million were associated with upstream assets. The proceeds are subject to post-closing adjustments. For additional details related to post-closing adjustments, please see Note 9—Commitments and Contingencies.
The Kitimat LNG assets classified as held for sale as of December 31, 2014 were impaired $655 million in the fourth quarter of 2014. Apache recognized a $146 million gain on the sale of the upstream assets upon completion of the sale.
Australia Divestitures
Woodside Sale In April 2015, Apache's subsidiaries completed the sale of its interest in the Wheatstone LNG project and associated upstream oil and gas assets to Woodside. Proceeds at closing were $2.8 billion , of which approximately $1.4 billion were associated with LNG assets and $1.4 billion were associated with the upstream assets. The proceeds are subject to post-closing adjustments. For additional details related to post-closing adjustments, please see Note 9—Commitments and Contingencies.
The Wheatstone LNG assets and associated upstream assets were impaired $833 million in the fourth quarter of 2014 and classified as held for sale on the consolidated balance sheet as of December 31, 2014. An additional impairment of approximately $49 million was recognized in the first quarter of 2015. No additional gain or loss was recognized on the ultimate disposal of the LNG project and upstream assets.
Consortium Sale In June 2015, Apache's subsidiaries completed the sale of the Company's Australian subsidiary Apache Energy Limited (AEL) to a consortium of private equity funds managed by Macquarie Capital Group Limited and Brookfield Asset Management Inc. Total proceeds of $1.9 billion included customary, post-closing adjustments for the period between the effective date, October 1, 2014, and closing. A loss of approximately $139 million was recognized for the sale of AEL.

Upon closing of the sale of substantially all Australian operations, the associated results of operations for the divested Australian assets and the losses on disposal were classified as discontinued operations in all periods presented in this Quarterly Report on Form 10-Q. Sales and other operating revenues and loss from discontinued operations related to the Australia dispositions were as follows:

12



 
 
 
For the Quarter Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(In millions)
Revenues and other from discontinued operations
 
$

 
$
101

 
$

 
$
288

Impairment on Woodside sale
 
$

 
$

 
$

 
$
(49
)
Loss on Consortium sale
 

 
(139
)
 

 
(139
)
Income from divested Australian operations
 

 
18

 

 
28

Income tax benefit
 

 
241

 

 
42

Income (loss) from Australian discontinued operations, net of tax
 
$

 
$
120

 
$

 
$
(118
)
Leasehold and Property Acquisitions
During the second quarter and first six months of 2015 , Apache completed $36 million and $128 million , respectively, of leasehold and property acquisitions primarily in our North America onshore regions.
Transaction, Reorganization, and Separation
During the second quarter and first six months of 2015 , Apache recorded $66 million and $120 million , respectively, in expense related to various asset transactions, company reorganization, and employee separation.

4.   CAPITALIZED EXPLORATORY WELL COSTS
The Company’s capitalized exploratory well costs were $262 million and $245 million at  June 30, 2016 and  December 31, 2015 , respectively. The increase is primarily attributable to drilling activities, partially offset by successful transfers and dry hole write-offs. Exploratory well costs that have been capitalized for a period greater than one year since the completion of drilling were $93 million and $61 million at June 30, 2016 and December 31, 2015, respectively. The exploratory well costs that had been capitalized for a period greater than one year at December 31, 2015 are associated with the Aviat discovery in the North Sea and comprise exploration and appraisal activities. The amount of exploratory well costs capitalized for a period greater than one year increased by  $32 million during the six months ended June 30, 2016 as a result of exploration drilling in Suriname. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2015 were charged to dry hole expense during the six months ended June 30, 2016. 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 reserves can be attributed to these projects.
5.
OTHER CURRENT LIABILITIES
The following table provides detail of our other current liabilities as of June 30, 2016 and December 31, 2015 :
 
 
June 30, 2016
 
December 31, 2015
 
 
(In millions)
Accrued operating expenses
 
$
120

 
$
139

Accrued exploration and development
 
475

 
637

Accrued compensation and benefits
 
99

 
166

Accrued interest
 
146

 
144

Accrued income taxes
 
54

 
47

Current debt
 
1

 
1

Current asset retirement obligation
 
36

 
36

Other
 
95

 
53

Total Other current liabilities
 
$
1,026

 
$
1,223


13



6.
ASSET RETIREMENT OBLIGATION
The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the six -month period ended June 30, 2016 :
 
 
(In millions)
Asset retirement obligation at December 31, 2015
 
$
2,598

Liabilities incurred
 
6

Liabilities acquired
 
34

Liabilities settled
 
(31
)
Accretion expense
 
76

Revisions in estimated liabilities
 
59

Asset retirement obligation at June 30, 2016
 
2,742

Less current portion
 
36

Asset retirement obligation, long-term
 
$
2,706

7.
DEBT AND FINANCING COSTS
The following table presents the carrying amounts and estimated fair values of the Company’s outstanding debt as of June 30, 2016 and December 31, 2015 :
 
 
 
June 30, 2016
 
December 31, 2015
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
 
(In millions)
Commercial paper and committed bank facilities
 
$

 
$

 
$

 
$

Notes and debentures
 
8,720

 
9,393

 
8,717

 
8,330

Total Debt
 
$
8,720

 
$
9,393

 
$
8,717

 
$
8,330

The Company’s debt is recorded at the carrying amount, net of related unamortized discount and debt issuance costs, on its consolidated balance sheet. The carrying amount of the Company’s commercial paper, committed bank facilities, and uncommitted bank lines approximates fair value because the interest rates are variable and reflective of market rates. Apache uses a market approach to determine the fair value of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

As of June 30, 2016 , the Company had a $3.5 billion five -year revolving credit facility which matures in June 2020 . Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under this facility supports its