SEC Filing | Apache Corporation

View:

Download DOC

Download PDF

Download XLS

Download XBRL

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, 2020



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

For the transition period from _________ to _________

Commission File Number: 1-4300

APACHE CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	41-0747868
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400

(Address of principal executive offices) (Zip Code)

(713) 296-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.625 par value	APA	Nasdaq Global Select Market

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

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

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



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒



Number of shares of registrant’s common stock outstanding as of July 29, 2020	377,458,656



	TABLE OF CONTENTS
	DESCRIPTION
Item		Page
	PART I - FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS	1
	STATEMENT OF CONSOLIDATED OPERATIONS	1
	STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2
	STATEMENT OF CONSOLIDATED CASH FLOWS	3
	CONSOLIDATED BALANCE SHEET	4
	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTEREST	5
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42
4.	CONTROLS AND PROCEDURES	44
	PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	44
1A.	RISK FACTORS	44
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45
6.	EXHIBITS	45

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 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, 2019, 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,” “should,” “would,” or similar terminology. 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 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 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;


•	the availability of capital resources;


•	capital expenditures and other contractual obligations;


•	currency exchange rates;


•	weather conditions;


•	inflation rates;


•	the availability of goods and services;


•	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;


•	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 most recently filed Annual Report on Form 10-K;


•	other risks and uncertainties disclosed in the Company’s second-quarter 2020 earnings release;


•	other factors disclosed under Part II, Item 1A—Risk Factors in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020;


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


•	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 may emerge from time to time, and it is not possible for the Company to predict all of them. 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. Except as required by law, the Company assumes no duty to update or revise its forward-looking statements, whether based on changes in internal estimates or expectations, new information, future developments, or otherwise.

DEFINITIONS

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

“3-D” means three-dimensional.

“4-D” means four-dimensional.

“b/d” means barrels of oil or natural gas liquids per day.

“bbl” or “bbls” means barrel or barrels of oil or natural gas liquids.

“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 natural gas liquids.

“LNG” means liquefied natural gas.

“Mb/d” means Mbbls per day.

“Mbbls” means thousand barrels of oil or natural gas liquids.

“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 natural gas liquids.

“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 United States Securities and Exchange Commission.

“Tcf” means trillion cubic feet of natural gas.

“U.K.” means United Kingdom.

“U.S.” means United States.

References to “Apache,” the “Company,” “we,” “us,” and “our” include Apache Corporation and its consolidated subsidiaries unless otherwise specifically stated.

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

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,
	2020			2019			2020			2019
	(In millions, except per common share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues	$	697		$	1,598		$	1,933		$	3,252
Purchased oil and gas sales	55			18			163			42
Total revenues	752			1,616			2,096			3,294
Derivative instrument losses, net	(175		)	(8		)	(278		)	(38		)
Gain on divestitures, net	—			17			25			20
Other, net	19			(7		)	32			(1		)
	596			1,618			1,875			3,275
OPERATING EXPENSES:
Lease operating expenses	264			389			599			754
Gathering, processing, and transmission	72			76			143			164
Purchased oil and gas costs	46			15			132			37
Taxes other than income	23			46			56			97
Exploration	72			95			129			164
General and administrative	94			102			162			225
Transaction, reorganization, and separation	10			6			37			10
Depreciation, depletion, and amortization	418			602			984			1,248
Asset retirement obligation accretion	27			26			54			53
Impairments	20			240			4,492			240
Financing costs, net	(34		)	173			69			270
	1,012			1,770			6,857			3,262
NET INCOME (LOSS) BEFORE INCOME TAXES	(416		)	(152		)	(4,982		)	13
Current income tax provision (benefit)	(27		)	187			62			373
Deferred income tax benefit	(11		)	(23		)	(44		)	(42		)
NET LOSS INCLUDING NONCONTROLLING INTERESTS	(378		)	(316		)	(5,000		)	(318		)
Net income (loss) attributable to noncontrolling interest - Egypt	(11		)	43			(162		)	87
Net loss attributable to noncontrolling interest - Altus	—			(3		)	(9		)	(2		)
Net income attributable to Altus Preferred Unit limited partners	19			4			37			4
NET LOSS ATTRIBUTABLE TO COMMON STOCK	$	(386	)	$	(360	)	$	(4,866	)	$	(407	)

NET LOSS PER COMMON SHARE:
Basic	$	(1.02	)	$	(0.96	)	$	(12.88	)	$	(1.08	)
Diluted	$	(1.02	)	$	(0.96	)	$	(12.88	)	$	(1.08	)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	378			377			378			376
Diluted	378			377			378			376

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	For the Quarter Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
	(In millions)
NET LOSS INCLUDING NONCONTROLLING INTERESTS	$	(378	)	$	(316	)	$	(5,000	)	$	(318	)
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Share of equity method interests other comprehensive loss	—			—			(1		)	—
COMPREHENSIVE LOSS INCLUDING NONCONTROLLING INTERESTS	(378		)	(316		)	(5,001		)	(318		)
Comprehensive income (loss) attributable to noncontrolling interest - Egypt	(11		)	43			(162		)	87
Comprehensive loss attributable to noncontrolling interest - Altus	—			(3		)	(9		)	(2		)
Comprehensive income attributable to Altus Preferred Unit limited partners	19			4			37			4
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCK	$	(386	)	$	(360	)	$	(4,867	)	$	(407	)

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)



	For the Six Months Ended June 30,
	2020			2019
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss including noncontrolling interests	$	(5,000	)	$	(318	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Unrealized derivative instrument losses, net	241			66
Gain on divestitures	(25		)	(20		)
Exploratory dry hole expense and unproved leasehold impairments	97			90
Depreciation, depletion, and amortization	984			1,248
Asset retirement obligation accretion	54			53
Impairments	4,492			240
Deferred income tax benefit	(44		)	(42		)
Loss (gain) on extinguishment of debt	(140		)	75
Other	14			22
Changes in operating assets and liabilities:
Receivables	183			96
Inventories	25			(16		)
Drilling advances	(28		)	(8		)
Deferred charges and other	(14		)	(3		)
Accounts payable	(147		)	(66		)
Accrued expenses	(148		)	21
Deferred credits and noncurrent liabilities	42			16
NET CASH PROVIDED BY OPERATING ACTIVITIES	586			1,454

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property	(838		)	(1,386		)
Additions to Altus gathering, processing, and transmission facilities	(25		)	(246		)
Leasehold and property acquisitions	(3		)	(34		)
Altus equity method interests	(154		)	(438		)
Proceeds from sale of oil and gas properties	126			247
Other, net	(23		)	25
NET CASH USED IN INVESTING ACTIVITIES	(917		)	(1,832		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Apache credit facility, net	565			—
Proceeds from Altus credit facility, net	97			—
Fixed-rate debt borrowings	—			989
Payments on fixed-rate debt	(264		)	(1,000		)
Distributions to noncontrolling interest - Egypt	(40		)	(164		)
Redeemable noncontrolling interest - Altus Preferred Unit limited partners	—			611
Dividends paid	(104		)	(188		)
Other	(35		)	(35		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	219			213

NET DECREASE IN CASH AND CASH EQUIVALENTS	(112		)	(165		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	247			714
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	135		$	549

SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	212		$	219
Income taxes paid, net of refunds	80			285

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)



In millions except share and per-share amounts	June 30, 2020			December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($2 and $6 related to Altus VIE)	$	135		$	247
Receivables, net of allowance of $91 and $88	871			1,062
Other current assets (Note 5) ($5 and $5 related to Altus VIE)	652			652
	1,658			1,961
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of successful efforts accounting:
Proved properties	41,003			40,540
Unproved properties and properties under development	615			666
Gathering, processing, and transmission facilities ($211 and $203 related to Altus VIE)	676			799
Other ($3 and $4 related to Altus VIE)	1,140			1,140
	43,434			43,145
Less: Accumulated depreciation, depletion, and amortization ($7 and $1 related to Altus VIE)	(34,090		)	(28,987		)
	9,344			14,158
OTHER ASSETS:
Equity method interests (Note 6) ($1,408 and $1,258 related to Altus VIE)	1,408			1,258
Deferred charges and other ($4 and $4 related to Altus VIE)	589			730
	$	12,999		$	18,107
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	459		$	695
Current debt (nil and $10 related to Altus VIE)	294			11
Other current liabilities (Note 7) ($11 and $21 related to Altus VIE)	957			1,149
	1,710			1,855
LONG-TERM DEBT (Note 10) ($493 and $396 related to Altus VIE)	8,523			8,555
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	299			346
Asset retirement obligation (Note 8) ($62 and $60 related to Altus VIE)	1,836			1,811
Other ($181 and $107 related to Altus VIE)	675			520
	2,810			2,677
COMMITMENTS AND CONTINGENCIES (Note 11)
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)	592			555
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 418,407,164 and 417,026,863 shares issued, respectively	262			261
Paid-in capital	11,744			11,769
Accumulated deficit	(10,467		)	(5,601		)
Treasury stock, at cost, 40,948,811 and 40,964,193 shares, respectively	(3,189		)	(3,190		)
Accumulated other comprehensive income	15			16
APACHE SHAREHOLDERS’ EQUITY (DEFICIT)	(1,635		)	3,255
Noncontrolling interest - Egypt	935			1,137
Noncontrolling interest - Altus	64			73
TOTAL EQUITY (DEFICIT)	(636		)	4,465
	$	12,999		$	18,107

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

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTEREST

(Unaudited)



	Redeemable Noncontrolling Interest — Altus Preferred Unit Limited Partners		Common Stock		Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		APACHE SHAREHOLDERS’ EQUITY (DEFICIT)			Noncontrolling Interests			TOTAL EQUITY (DEFICIT)
			(In millions)
For the Quarter Ended June 30, 2019
BALANCE AT MARCH 31, 2019	$	—	$	261	$	12,009		$	(2,095	)	$	(3,190	)	$	4	$	6,989		$	1,620		$	8,609
Net loss attributable to common stock	—		—		—			(360		)	—			—		(360		)	—			(360		)
Net income attributable to noncontrolling interest - Egypt	—		—		—			—			—			—		—			43			43
Net loss attributable to noncontrolling interest - Altus	—		—		—			—			—			—		—			(3		)	(3		)
Issuance of Altus Preferred Units	517		—		—			—			—			—		—			—			—
Net income attributable to Altus Preferred Unit holders	4		—		—			—			—			—		—			—			—
Distributions to noncontrolling interest - Egypt	—		—		—			—			—			—		—			(57		)	(57		)
Common dividends ($0.25 per share)	—		—		(94		)	—			—			—		(94		)	—			(94		)
Other	—		—		16			—			—			—		16			—			16
BALANCE AT JUNE 30, 2019	$	521	$	261	$	11,931		$	(2,455	)	$	(3,190	)	$	4	$	6,551		$	1,603		$	8,154

For the Quarter Ended June 30, 2020
BALANCE AT MARCH 31, 2020	$	573	$	262	$	11,747		$	(10,081	)	$	(3,189	)	$	15	$	(1,246	)	$	1,018		$	(228	)
Net loss attributable to common stock	—		—		—			(386		)	—			—		(386		)	—			(386		)
Net loss attributable to noncontrolling interest - Egypt	—		—		—			—			—			—		—			(11		)	(11		)
Net income attributable to Altus Preferred Unit limited partners	19		—		—			—			—			—		—			—			—
Distributions to noncontrolling interest - Egypt	—		—		—			—			—			—		—			(8		)	(8		)
Common dividends ($0.025 per share)	—		—		(9		)	—			—			—		(9		)	—			(9		)
Other	—		—		6			—			—			—		6			—			6
BALANCE AT JUNE 30, 2020	$	592	$	262	$	11,744		$	(10,467	)	$	(3,189	)	$	15	$	(1,635	)	$	999		$	(636	)

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTEREST – (Continued)

(Unaudited)

Redeemable Noncontrolling Interest — Altus Preferred Unit Limited Partners

Common

Stock

Paid-In

Capital

Accumulated Deficit

Treasury

Stock

Accumulated

Other

Comprehensive

Income (Loss)

APACHE

SHAREHOLDERS’

EQUITY (DEFICIT)

Noncontrolling

Interests

TOTAL

EQUITY (DEFICIT)

(In millions)

For the Six Months Ended June 30, 2019

BALANCE AT DECEMBER 31, 2018

—