UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2015

2016

OR

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

For the transition period fromto

Commission File Number 1-4300

LOGO

  
APACHE CORPORATION

(exact name of registrant as specified in its charter)

Delaware

41-0747868
(State or other jurisdiction of

incorporation or organization)

41-0747868

(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  xý    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  xý    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 xýAccelerated 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  xý

Number of shares of registrant’s common stock outstanding as of April 30, 2015

2016		378,533,597377,094,714



 TABLE OF CONTENTS
 DESCRIPTION
Item  Page
 PART I - FINANCIAL INFORMATION  
1.
FINANCIAL STATEMENTS
 
1
 
STATEMENT OF CONSOLIDATED OPERATIONS
 
1
 
STATEMENT OF CONSOLIDATED CASH FLOWS
 
2
 
CONSOLIDATED BALANCE SHEET
 
3
 
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
 
4
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
5
2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
21
3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
31
4.
CONTROLS AND PROCEDURES
 
31
 PART II - OTHER INFORMATION  
1.
LEGAL PROCEEDINGS
 
32
1A.
RISK FACTORS
 
32
2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
32
3.
DEFAULTS UPON SENIOR SECURITIES
 
32
4.
MINE SAFETY DISCLOSURES
 
32
5.
OTHER INFORMATION
 
32
6.
EXHIBITS
 
33


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 first-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 March 31, 
   2015  2014 
   (In millions, except per share data) 

REVENUES AND OTHER:

   

Oil and gas production revenues:

   

Oil revenues

  $1,362  $2,815 

Gas revenues

   387   646 

Natural gas liquids revenues

   57   186 
  

 

 

  

 

 

 
 1,806  3,647 

Other

 12  28 
  

 

 

  

 

 

 
 1,818  3,675 
  

 

 

  

 

 

 

OPERATING EXPENSES:

Depreciation, depletion, and amortization:

Oil and gas property and equipment

Recurring

 1,089  1,109 

Additional

 7,220  —   

Other assets

 98  97 

Asset retirement obligation accretion

 44  44 

Lease operating expenses

 538  597 

Gathering and transportation

 56  70 

Taxes other than income

 84  181 

General and administrative

 79  103 

Acquisition, divestiture, and separation costs

 54  18 

Financing costs, net

 46  27 
  

 

 

  

 

 

 
 9,308  2,246 
  

 

 

  

 

 

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 (7,490)  1,429 

Current income tax provision

 44  416 

Deferred income tax provision (benefit)

 (2,898)  162 
  

 

 

  

 

 

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST

 (4,636)  851 

Net income (loss) from discontinued operations, net of tax

 —    (517) 
  

 

 

  

 

 

 

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST

 (4,636)  334 

Net income attributable to noncontrolling interest

 15  98 
  

 

 

  

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK

$(4,651) $236 
  

 

 

  

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS:

Net income (loss) from continuing operations attributable to common shareholders

$(4,651) $753 

Net income (loss) from discontinued operations

 —    (517) 
  

 

 

  

 

 

 

Net income (loss) attributable to common shareholders

$(4,651) $236 
  

 

 

  

 

 

 

BASIC NET INCOME (LOSS) PER COMMON SHARE:

Basic net income (loss) from continuing operations per share

$(12.34) $1.92 

Basic net income (loss) from discontinued operations per share

 —    (1.32) 
  

 

 

  

 

 

 

Basic net income (loss) per share

$(12.34) $0.60 
  

 

 

  

 

 

 

DILUTED NET INCOME (LOSS) PER COMMON SHARE:

Diluted net income (loss) from continuing operations per share

$(12.34) $1.90 

Diluted net income (loss) from discontinued operations per share

 —    (1.30) 
  

 

 

  

 

 

 

Diluted net income (loss) per share

$(12.34) $0.60 
  

 

 

  

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

Basic

 377  394 

Diluted

 377  396 

DIVIDENDS DECLARED PER COMMON SHARE

$0.25 $0.25 

  For the Quarter Ended March 31,
  2016 2015
  (In millions, except per common share data)
REVENUES AND OTHER:    
Oil and gas production revenues    
Oil revenues $795
 $1,280
Gas revenues 223
 300
Natural gas liquids revenues 42
 58
  1,060
 1,638
Other (8) (8)
  1,052
 1,630
OPERATING EXPENSES:    
Depreciation, depletion, and amortization:    
Oil and gas property and equipment    
Recurring 552
 999
Additional 488
 7,220
Other assets 42
 83
Asset retirement obligation accretion 38
 36
Lease operating expenses 378
 481
Gathering and transportation 52
 56
Taxes other than income 11
 74
General and administrative 93
 82
Transaction, reorganization, and separation 15
 54
Financing costs, net 90
 69
  1,759
 9,154
NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (707) (7,524)
Current income tax provision (benefit) 35
 (85)
Deferred income tax benefit (181) (2,935)
NET LOSS FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST (561) (4,504)
Net loss from discontinued operations, net of tax —
 (132)
NET LOSS INCLUDING NONCONTROLLING INTEREST (561) (4,636)
Net income (loss) attributable to noncontrolling interest (72) 15
NET LOSS ATTRIBUTABLE TO COMMON STOCK $(489) $(4,651)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS:    
Net loss from continuing operations attributable to common shareholders $(489) $(4,519)
Net loss from discontinued operations —
 (132)
Net loss attributable to common shareholders $(489) $(4,651)
NET LOSS PER COMMON SHARE:    
Basic net loss from continuing operations per share $(1.29) $(11.99)
Basic net loss from discontinued operations per share —
 (0.35)
Basic net loss per share $(1.29) $(12.34)
DILUTED NET LOSS PER COMMON SHARE:    
Diluted net loss from continuing operations per share $(1.29) $(11.99)
Diluted net loss from discontinued operations per share —
 (0.35)
Diluted net loss per share $(1.29) $(12.34)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:    
Basic 378
 377
Diluted 378
 377
DIVIDENDS DECLARED PER COMMON SHARE $0.25
 $0.25
The accompanying notes to consolidated financial statements

are an integral part of this statement.

1



APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

CASH FLOWS

(Unaudited)

   For The Quarter Ended March 31, 
   2015  2014 
   (In millions) 

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST

  $(4,636)  $334 

OTHER COMPREHENSIVE INCOME (LOSS):

   

Commodity cash flow hedge activity, net of tax:

   

Change in fair value of derivative instruments

   —     (1) 
  

 

 

  

 

 

 
 —    (1) 
  

 

 

  

 

 

 

COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST

 (4,636)  333 

Comprehensive income attributable to noncontrolling interest

 15  98 
  

 

 

  

 

 

 

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK

$(4,651) $235 
  

 

 

  

 

 

 

  For the Three Months Ended March 31,
  2016 2015
  (In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss including noncontrolling interest $(561) $(4,636)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Loss from discontinued operations —
 132
Depreciation, depletion, and amortization 1,082
 8,302
Asset retirement obligation accretion 38
 36
Benefit from deferred income taxes (181) (2,935)
Other 57
 (3)
Changes in operating assets and liabilities:    
Receivables 135
 247
Inventories 10
 22
Drilling advances (17) (169)
Deferred charges and other (79) (102)
Accounts payable (75) (190)
Accrued expenses (106) (204)
Deferred credits and noncurrent liabilities (27) 77
NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 276
 577
NET CASH PROVIDED BY DISCONTINUED OPERATIONS —
 73
NET CASH PROVIDED BY OPERATING ACTIVITIES 276
 650
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Additions to oil and gas property (583) (1,627)
Leasehold and property acquisitions (19) (91)
Additions to gas gathering, transmission, and processing facilities —
 (63)
Other, net 10
 (72)
NET CASH USED IN CONTINUING INVESTING ACTIVITIES (592) (1,853)
NET CASH USED IN DISCONTINUED OPERATIONS —
 (265)
NET CASH USED IN INVESTING ACTIVITIES (592) (2,118)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Commercial paper and bank credit facilities, net —
 1,028
Distributions to noncontrolling interest (54) (21)
Dividends paid (95) (94)
Other 2
 15
NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES (147) 928
NET CASH PROVIDED BY DISCONTINUED OPERATIONS —
 —
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (147) 928
     
NET DECREASE IN CASH AND CASH EQUIVALENTS (463) (540)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,467
 769
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,004
 $229
     
SUPPLEMENTARY CASH FLOW DATA:    
Interest paid, net of capitalized interest $126
 $89
Income taxes paid, net of refunds 84
 142
The accompanying notes to consolidated financial statements

are an integral part of this statement.

2



APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF

CONSOLIDATED CASH FLOWS

BALANCE SHEET

(Unaudited)

   For The Quarter Ended March 31, 
   2015  2014 
   (In millions) 

CASH FLOWS FROM OPERATING ACTIVITIES:

   

Net income (loss) including noncontrolling interest

  $(4,636)  $334 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

   

Loss from discontinued operations

   —     517 

Depreciation, depletion, and amortization

   8,407   1,206 

Asset retirement obligation accretion

   44   44 

Provision for (benefit from) deferred income taxes

   (2,898)   162 

Other

   (17)   (41) 

Changes in operating assets and liabilities:

   

Receivables

   257   389 

Inventories

   48   85 

Drilling advances

   (85)   37 

Deferred charges and other

   (102)   (74) 

Accounts payable

   (199)   (170) 

Accrued expenses

   (199)   (286) 

Deferred credits and noncurrent liabilities

   30   8 
  

 

 

  

 

 

 

NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES

 650  2,211 

NET CASH PROVIDED BY DISCONTINUED OPERATIONS

 —    82 
  

 

 

  

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 650  2,293 

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to oil and gas property

 (1,768)  (2,318) 

Leasehold and property acquisitions

 (92)  (44) 

Additions to gas gathering, transmission, and processing facilities

 (223)  (344) 

Other, net

 (35)  9 
  

 

 

  

 

 

 

NET CASH USED IN CONTINUING INVESTING ACTIVITIES

 (2,118)  (2,697) 

NET CASH PROVIDED BY DISCONTINUED OPERATIONS

 —    748 
  

 

 

  

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

 (2,118)  (1,949) 

CASH FLOWS FROM FINANCING ACTIVITIES:

Commercial paper and bank credit facilities, net

 1,028  (2) 

Distributions to noncontrolling interest

 (21)  —   

Dividends paid

 (94)  (79) 

Treasury stock activity, net

 —    (484) 

Other

 15  —   
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES

 928  (565) 

NET CASH USED IN DISCONTINUED OPERATIONS

 —    (42) 
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 928  (607) 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 (540)  (263) 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 769  1,906 
  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$229 $1,643 
  

 

 

  

 

 

 

SUPPLEMENTARY CASH FLOW DATA:

Interest paid, net of capitalized interest

$89 $70 

Income taxes paid, net of refunds

 142  491 

  March 31, 2016 December 31, 2015
  (In millions)
ASSETS    
CURRENT ASSETS:    
Cash and cash equivalents $1,004
 $1,467
Receivables, net of allowance 1,120
 1,253
Inventories 547
 570
Drilling advances 190
 172
Prepaid assets and other 361
 290
  3,222
 3,752
PROPERTY AND EQUIPMENT:    
Oil and gas, on the basis of full-cost accounting:    
Proved properties 89,685
 89,069
Unproved properties and properties under development, not being amortized 2,499
 2,611
Gathering, transmission and processing facilities 1,048
 1,052
Other 1,094
 1,093
  94,326
 93,825
Less: Accumulated depreciation, depletion, and amortization (80,784) (79,706)
  13,542
 14,119
OTHER ASSETS:    
Deferred charges and other 915
 910
  $17,679
 $18,781
LIABILITIES AND SHAREHOLDERS’ EQUITY    
CURRENT LIABILITIES:    
Accounts payable $571
 $618
Other current liabilities (Note 3) 1,027
 1,223
  1,598
 1,841
LONG-TERM DEBT 8,718
 8,716
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:    
Income taxes 891
 1,072
Asset retirement obligation 2,586
 2,562
Other 332
 362
  3,809
 3,996
COMMITMENTS AND CONTINGENCIES (Note 7) 
 
EQUITY:    
Common stock, $0.625 par, 860,000,000 shares authorized, 411,708,123 and 411,218,105 shares issued, respectively 257
 257
Paid-in capital 12,407
 12,467
Accumulated deficit (7,642) (7,153)
Treasury stock, at cost, 33,175,728 and 33,183,930 shares, respectively (2,888) (2,889)
Accumulated other comprehensive loss (116) (116)
APACHE SHAREHOLDERS’ EQUITY 2,018
 2,566
Noncontrolling interest 1,536
 1,662
TOTAL EQUITY 3,554
 4,228
  $17,679
 $18,781
The accompanying notes to consolidated financial statements

are an integral part of this statement.

3




APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED BALANCE SHEET

CHANGES IN EQUITY

(Unaudited)

   March 31,
2015		  December 31,
2014		 
   (In millions) 
ASSETS   

CURRENT ASSETS:

   

Cash and cash equivalents

  $229  $769 

Receivables, net of allowance

   1,767   2,024 

Inventories

   666   708 

Drilling advances

   468   388 

Assets held for sale

   1,804   1,628 

Deferred tax asset

   769   769 

Prepaid assets and other

   203   129 
  

 

 

  

 

 

 
 5,906  6,415 
  

 

 

  

 

 

 

PROPERTY AND EQUIPMENT:

Oil and gas, on the basis of full-cost accounting:

Proved properties

 91,634  89,852 

Unproved properties and properties under development, not being amortized

 6,753  7,014 

Gathering, transmission and processing facilities

 5,472  5,440 

Other

 1,161  1,152 
  

 

 

  

 

 

 
 105,020  103,458 

Less: Accumulated depreciation, depletion and amortization

 (63,790)  (55,382) 
  

 

 

  

 

 

 
 41,230  48,076 
  

 

 

  

 

 

 

OTHER ASSETS:

Goodwill

 87  87 

Deferred charges and other

 1,427  1,374 
  

 

 

  

 

 

 
$48,650 $55,952 
  

 

 

  

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$1,010 $1,210 

Current debt

 2,598  —   

Current asset retirement obligation

 47  37 

Other current liabilities

 1,838  2,417 
  

 

 

  

 

 

 
 5,493  3,664 
  

 

 

  

 

 

 

LONG-TERM DEBT

 9,675  11,245 
  

 

 

  

 

 

 

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:

Income taxes

 6,611  9,499 

Asset retirement obligation

 3,094  3,048 

Other

 372  359 
  

 

 

  

 

 

 
 10,077  12,906 
  

 

 

  

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 7)

EQUITY:

Common stock, $0.625 par, 860,000,000 shares authorized, 410,110,362 and 409,706,347 shares issued, respectively

 256  256 

Paid-in capital

 12,456  12,438 

Retained earnings

 11,504  16,249 

Treasury stock, at cost, 33,192,567 and 33,201,455 shares, respectively

 (2,889)  (2,890) 

Accumulated other comprehensive loss

 (116)  (116) 
  

 

 

  

 

 

 

APACHE SHAREHOLDERS’ EQUITY

 21,211  25,937 

Noncontrolling interest

 2,194  2,200 
  

 

 

  

 

 

 

TOTAL EQUITY

 23,405  28,137 
  

 

 

  

 

 

 
$48,650 $55,952 
  

 

 

  

 

 

 

  
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 $256
 $12,438
 $16,249
 $(2,890) $(116) $25,937
 $2,200
 $28,137
Net income (loss) —
 —
 (4,651) —
 —
 (4,651) 15
 (4,636)
Distributions to noncontrolling interest —
 —
 —
 —
 —
 —
 (21) (21)
Common dividends ($0.25 per share) —
 —
 (94) —
 —
 (94) —
 (94)
Common stock activity, net —
 18
 —
 —
 —
 18
 —
 18
Treasury stock activity, net —
 —
 —
 1
 —
 1
 —
 1
BALANCE AT MARCH 31, 2015 $256
 $12,456
 $11,504
 $(2,889) $(116) $21,211
 $2,194
 $23,405
BALANCE AT DECEMBER 31, 2015 $257
 $12,467
 $(7,153) $(2,889) $(116) $2,566
 $1,662
 $4,228
Net loss —
 —
 (489) —
 —
 (489) (72) (561)
Distributions to noncontrolling interest —
 —
 —
 —
 —
 —
 (54) (54)
Common dividends ($0.25 per share) —
 (95) —
 —
 —
 (95) —
 (95)
Other —
 35
 —
 1
 —
 36
 —
 36
BALANCE AT MARCH 31, 2016 $257
 $12,407
 $(7,642) $(2,888) $(116) $2,018
 $1,536
 $3,554
The accompanying notes to consolidated financial statements

are an integral part of this statement.

4




APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)

  Common
Stock		  Paid-In
Capital		  Retained
Earnings		  Treasury
Stock		  Accumulated
Other
Comprehensive
Loss		  APACHE
SHAREHOLDERS’
EQUITY		  Non
Controlling
Interest		  TOTAL
EQUITY		 

BALANCE AT DECEMBER 31, 2013

 $255  $12,251  $22,032  $(1,027)  $(115)  $33,396  $1,997  $35,393 

Net income

  —     —     236   —     —     236   98   334 

Commodity hedges, net of tax

  —     —     —     —     (1)   (1)   —     (1) 

Common dividends ($0.25 per share)

  —     —     (98)   —     —     (98)   —     (98) 

Common stock activity, net

  —     33   —     —     —     33   —     33 

Treasury stock activity, net

  —     —     —     (484)   —     (484)   —     (484) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

BALANCE AT MARCH 31, 2014

$255 $12,284 $22,170 $(1,511) $(116) $33,082 $2,095 $35,177 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

BALANCE AT DECEMBER 31, 2014

$256 $12,438 $16,249 $(2,890) $(116) $25,937 $2,200 $28,137 

Net income (loss)

 —    —    (4,651)  —    —    (4,651)  15  (4,636) 

Distributions to noncontrolling interest

 —    —    —    —    —    —    (21)  (21) 

Common dividends ($0.25 per share)

 —    —    (94)  —    —    (94)  —    (94) 

Common stock activity, net

 —    18  —    —    —    18  —    18 

Treasury stock activity, net

 —    —    —    1  —  �� 1  —    1 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

BALANCE AT MARCH 31, 2015

$256 $12,456 $11,504 $(2,889) $(116) $21,211 $2,194 $23,405 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes to consolidated financial statements

are an integral part of this statement.

5

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These 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, on a basis consistent with the annual audited financial statements. 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 (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 should be read along with Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2015, which contains a summary of the Company’s significant accounting policies and other disclosures.

The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-period presentation. In March 2014,During the second quarter of 2015, Apache completed the sale of all of its operations in Argentina.Australian LNG business and oil and gas assets. Results of operations and consolidated cash flows for Argentina operationsthe divested Australia assets are reflected as discontinued operations in the Company’s financial statements for all periods presented. For more information regarding this divestiture,these divestitures, please refer to Note 2–2—Acquisitions and Divestitures.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the first quarter of 2016, the Company retrospectively adopted a new accounting standard update for all periods presented 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 5—Debt and Financing Costs.

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of March 31, 2015,2016, Apache’s significant accounting policies 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, 2014.

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, and assets held for sale, the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom, assessingthe assessment of asset retirement obligations, and the estimate of income taxes. Actual results could differ from those estimates.

Oil and Gas Property

The Company follows the full-cost method of accounting for its oil and gas property. Under this method of accounting, all costs incurred for both successful and unsuccessful exploration and development activities, including salaries, benefits and other internal costs directly identified with these activities, and oil and gas property acquisitions are capitalized. The net book value of oil and gas properties, less related deferred income taxes, may not exceed a calculated “ceiling.” The ceiling limitation is the estimated after-tax future net cash flows from proved oil and gas reserves, discounted at 10 percent per annum and adjusted for designated cash flow hedges. Estimated future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements. For a discussion of the calculation of estimated future net cash flows, please refer to Note 14—Supplemental Oil and Gas Disclosures to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

2015.

Any excess of the net book value of proved oil and gas properties, less related deferred income taxes, over the ceiling is charged to expense and reflected as “Additional depreciation, depletion, and amortization” (DD&A) in the accompanying statement of consolidated operations. Such limitations are imposed separately on a country-by-country basis and are tested quarterly. In the first quarter of 2015, the Company recorded $5.2 billion ($3.4 billion net of tax), $1.4 billion ($1.0 billion net of tax), and $632 million ($316 million net of tax) inThe following tables present non-cash write-downs of the carrying value of the Company’s U.S., Canada, and North Sea proved oil and gas properties respectively.

6

by country for the first quarters of 2016 and 2015:



  For the Quarter Ended March 31, 2016 For the Quarter Ended March 31, 2015
  Before tax After tax Before tax After tax
  (In millions)
U.S. $—
 $—
 $5,235
 $3,377
Canada —
 —
 1,353
 1,011
North Sea 325
 162
 632
 316
Egypt 163
 163
 —
 —
Total write-downs $488
 $325
 $7,220
 $4,704
New Pronouncements Issued But Not Yet Adopted

On April 7, 2015,

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03,2016-09, which simplifiesseeks to simplify accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the presentationclassification on the statement of debt issuance costs.cash flows. The new standard requires debt issuance coststhe Company to be presented as a direct deduction fromrecognize the carrying valueincome tax effects of the associated debt liability, whereas they are currently being presented as a component of “deferred charges and other” on the balance sheet. The new standard creates consistencyawards in the way debt issuance costs and debt discountsincome statement when the awards vest or are presented on the balance sheet and better aligns U.S. GAAP with International Financial Reporting Standards (IFRS). ASU 2015-03settled. The guidance is effective for annual and interim reporting periodsfiscal years beginning after December 15, 2015.2016.  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 will applyis currently evaluating the change retrospectively and does not expect the adoptionimpact of adopting this amendment to have a material impactstandard 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.
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 2014-092016-08, which provides further clarification on the principal versus agent evaluation. The guidance is effective for annual and interim periods beginning after December 15, 2016, pending a one-year deferral currently under consideration.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. ACQUISITIONS AND DIVESTITURES



2.ACQUISITIONS AND DIVESTITURES
2015 Activity

LNG Projects

Yara Pilbara Holdings Pty Limited Sale
In October 2015, Apache's subsidiaries sold its 49 percent interest in Yara Pilbara Holdings Pty Limited (YPHPL) for total cash proceeds of $391 million. The investment in YPHPL was accounted for under the equity method of accounting, with the balance recorded as a component of “Deferred charges and other” in the Company's consolidated balance sheet and the results of operations recorded as a component of “Other” under “Revenue and other” in the Company’s statement of consolidated operations. As of September 30, 2015, Apache recognized an impairment of $148 million on the YPHPL equity investment based on negotiated sales proceeds. No additional gain or loss was recorded upon completion of the sale.
Canada Divestiture

In April 2015, ApacheApache's subsidiaries completed the previously disclosed sale of its 50 percent interest in two LNG projects, Wheatstone LNG in Australia andthe Kitimat LNG project and related upstream acreage in Canada, along with the associated upstream oilHorn River and Liard natural gas assets,basins to Woodside Petroleum Limited (Woodside). TotalProceeds 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 for the sale were $3.7 billion, which includes reimbursement of Apache’s net expenditure in the Wheatstoneare subject to post-closing adjustments. For additional details related to post-closing adjustments, please see Note 7—Commitments and Contingencies.
The Kitimat LNG projects, changesassets were impaired in working capital and other contractual adjustments between the effective date, July 1, 2014, and closing.

As a result of the sale of these projects, the LNG facilities on Apache’s consolidated balance sheet and Apache’s investment in Pacific Trail Pipelines Limited Partnership qualify as held for sale as of March 31, 2015. A summary of the associated assets and liabilities classified as held for sale on our consolidated balance sheet as of March 31, 2015, and December 31, 2014, is detailed below:

   March 31, 2015   December 31, 2014 
   Canada   Australia   Total   Canada   Australia   Total 
   (In millions) 

ASSETS

            

Current assets

  $15   $—     $15   $30   $—     $30 

GTP assets

   229    1,459    1,688    200    1,297    1,497 

Other long-term assets

   101    —      101    101    —      101 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets held for sale(1)

$345 $1,459 $1,804 $331 $1,297 $1,628 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES

Current liabilities

$1 $—   $1 $12 $—   $12 

Other long-term liabilities

 6  —    6  7  —    7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities held for sale(1)

$7 $—   $7 $19 $—   $19 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)Assets held for sale are classified as current assets in the Consolidated Balance Sheet. Liabilities held for sale are recorded in “Other current liabilities” in the Consolidated Balance Sheet.

7

In connection with classifying these assets to held for sale, a separate impairment analysis was performed for each long-lived asset within the disposal group. The analysis was based on the estimated fair value of the assets in the disposal group, which was equivalent to the allocated purchase price associated with the transaction. The transaction’s purchase price was allocated based on the fair value of each asset in the disposal group. Each asset’s fair value was determined using a combination of the income approach, specifically discounted cash flows, and the cost approach. The income approach considered management views on current operating measures as well as assumptions pertaining to market forces in the oil and gas industry, such as future production, future commodity prices, and costs. These assumptions were applied to develop future cash flow projections that were then discounted to estimate fair value, using a discount rate believed to be consistent with those used by principal market participants. The cost approach reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost) and is typically used to measure the fair value of tangible assets that are used in combination with other assets. Apache has classified these non-recurring fair value measurements as Level 3 in the fair value hierarchy.

In the fourth quarter of 2014, Apacheand no material gain or loss was recognized an impairmentfor the LNG assets upon completion of the sale. No gain or loss was recognized on held for sale assets totaling $1.0 billion ($753 million net of tax). As the sale and purchase agreements provide for Apache’s net expenditures incurred in connection with these projects subsequent to the effective date to be reimbursed by Woodside, the Company has recorded no further loss during the first quarter of 2015.

The upstream oil and natural gas properties associated with this sale are not presented as held for sale pursuant to the rules governing full-cost accounting for oil and gas properties. Approximately $1.4 billion and $500 million of the sale proceeds have been allocated to the Australia and Canada upstream assets, respectively. Proceeds from the dispositionassets. In accordance with full cost accounting rules, sales of oil and gas properties are accounted for as a reduction toadjustments of capitalized costs, unless a significant portion (greater than 25 percent) of the Company’s reserve quantities in a particular country are sold, in which case awith no gain or loss is recognized in income. Upon closingunless such adjustment would significantly alter the transactionrelationship between capitalized costs and proved reserves.

Australia Divestitures
Woodside Sale In April 2015, Apache's subsidiaries completed the sale of its interest in the secondWheatstone 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 7—Commitments and Contingencies.
The Wheatstone LNG assets were impaired in the fourth quarter of 2015, a2014 and no material gain or loss was recognized on the disposal of the LNG project. A loss of approximately $900$922 million ($600 million net of tax) will bewas recognized foron the sale of the Australian upstream assets that represented approximately 50 percentassets.
Consortium Sale In June 2015, Apache's subsidiaries completed the sale of the region’s total reserves. Reserves divested in Canada were not a significant portion of the region total.

Australia Divestiture

On April 8, 2015, Apache Corporation announced an agreement to sell itsCompany'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 cash consideration of $2.1 billion. The Company estimates athe period between the effective date, October 1, 2014, and closing. A loss of approximately $1$1.3 billion uponwas recognized for the sale of AEL.


Upon closing the transaction. The ultimate amount of loss will be determined by date of completion, impact of customary post-closing adjustments and finalization of various estimates. The transaction is expected to close mid-year 2015 and is subject to necessary government and regulatory approvals. The effective date of the sale is October 1, 2014.

Upon closing, Apache will have exited essentiallyof substantially all ofAustralian operations, the Company’s Australian operations. The associated results of operations for Australiathe divested Australian assets and the losslosses on disposals will bedisposal were classified as discontinued operations forin all periods presented in subsequent SEC filings.

Leasehold Acquisitions

During the first quarter of 2015, Apache completed $92 million of leasehold acquisitions primarily in our North America onshore regions.

2014 Activity

Anadarko Basin and Southern Louisiana Divestitures

In December 2014, Apache completed the sale of certain Anadarko basin and non-core southern Louisiana oil and gas assets for approximately $1.3 billion in two separate transactions. In the Anadarko basin, Apache sold approximately 115,000 net acres in Wheeler County, Texas, and western Oklahoma. In southern Louisiana, Apache sold its working interest in approximately 90,000 net acres. The effective date of both of these transactions was October 1, 2014.

Gulf of Mexico Divestiture

On June 30, 2014, Apache completed the sale of non-operated interests in the Lucius and Heidelberg development projects and 11 primary-term deepwater exploration blocks in the Gulf of Mexico for $1.4 billion. The effective date of the transaction was May 1, 2014.

Canada Divestiture

On April 30, 2014, Apache completed the sale of producing oil and gas assets in the Deep Basin area of western Alberta and British Columbia, Canada, for $374 million. Apache sold primarily dry-gas producing properties comprising 328,400 net acres in the Ojay, Noel, and Wapiti areas. In the Wapiti area, Apache retained 100 percent of its working interest in horizons below the Cretaceous, including rights to the liquids-rich Montney and other deeper horizons. The effective date of the transaction was January 1, 2014.

8

Argentina Divestiture

On March 12, 2014, Apache’s subsidiaries completed the sale of all of the Company’s operations in Argentina to YPF Sociedad Anónima for cash consideration of $800 million plus the assumption of $52 million of bank debt as of June 30, 2013. The results of operations during 2014 related to Argentina have been classified as discontinued operations in this Quarterly Report on Form 10-Q. Sales and other operating revenues and the loss from discontinued operations related to the Argentina dispositionAustralia dispositions were as follows:

   For the Quarter Ended
March 31,		 
   2015   2014 
   (In millions) 

Revenues and other from discontinued operations

  $—     $87 
  

 

 

   

 

 

 

Loss from Argentina divestiture

 —    (539) 

Loss from operations in Argentina

 —    (1) 

Income tax benefit

 —    23 
  

 

 

   

 

 

 

Loss from discontinued operations, net of tax

$—   $(517) 
  

 

 

   

 

 

 

  For the Quarter Ended March 31,
  2016 2015
  (In millions)
Revenues and other from discontinued operations $—
 $187
Income from divested Australian operations $—
 $35
Income tax expense —
 (167)
Loss from Australian discontinued operations, net of tax $—
 $(132)


Leasehold and Property Acquisitions

During the first quarter of 2014,2015, Apache completed $44$91 million of leasehold and property acquisitions primarily in our North America onshore regions.

3. OTHER CURRENT LIABILITIES

Transaction, Reorganization, and Separation
During the first quarter of 2015, Apache recorded $54 million in expense related to various asset transactions, company reorganization, and employee separation.

3.OTHER CURRENT LIABILITIES
The following table provides detail of our other current liabilities:

   March 31,
2015		   December 31,
2014		 
   (In millions) 

Accrued operating expenses

  $137   $163 

Accrued exploration and development

   1,194    1,606 

Accrued compensation and benefits

   127    204 

Accrued interest

   118    160 

Accrued income taxes

   27    54 

Other

   235    230 
  

 

 

   

 

 

 

Total Other current liabilities

$1,838 $2,417 
  

 

 

   

 

 

 

4. ASSET RETIREMENT OBLIGATION

liabilities as of March 31, 2016 and December 31, 2015:

  March 31, 2016 December 31, 2015
  (In millions)
Accrued operating expenses $125
 $139
Accrued exploration and development 537
 637
Accrued compensation and benefits 75
 166
Accrued interest 108
 144
Accrued income taxes 81
 47
Current debt 1
 1
Current asset retirement obligation 36
 36
Other 64
 53
Total Other current liabilities $1,027
 $1,223
4.ASSET RETIREMENT OBLIGATION
The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the three-month period ended March 31, 2015:

   (In millions) 

Asset retirement obligation at December 31, 2014

  $3,085 

Liabilities incurred

   41 

Liabilities settled

   (58) 

Accretion expense

   44 

Revisions in estimated liabilities

   29 
  

 

 

 

Asset retirement obligation at March 31, 2015

 3,141 

Less current portion

 (47) 
  

 

 

 

Asset retirement obligation, long-term

$3,094 
  

 

 

 

9

5. DEBT AND FINANCING COSTS

2016:

   
  (In millions)
Asset retirement obligation at December 31, 2015 $2,598
Liabilities incurred 1
Liabilities settled (15)
Accretion expense 38
Asset retirement obligation at March 31, 2016 2,622
Less current portion 36
Asset retirement obligation, long-term $2,586

5.DEBT AND FINANCING COSTS
The following table presents the carrying amounts and estimated fair values of the Company’s outstanding debt:

   March 31, 2015   December 31, 2014 
   Carrying
Amount		   Fair
Value		   Carrying
Amount		   Fair
Value		 
   (In millions) 

Uncommitted bank lines

  $21   $21   $—     $—   

Commercial paper and committed bank facilities

   2,577    2,577    1,570    1,570 

Notes and debentures

   9,675    10,658    9,675    9,944 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Debt

$12,273 $13,256 $11,245 $11,514 
  

 

 

   

 

 

   

 

 

   

 

 

 

debt as of March 31, 2016 and December 31, 2015:

  March 31, 2016 December 31, 2015
  
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
  (In millions)
Commercial paper and committed bank facilities $—
 $—
 $—
 $—
Notes and debentures 8,719
 8,561
 8,717
 8,330
Total Debt $8,719
 $8,561
 $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, and overdraft 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 March 31, 2015,2016, the Company had unsecured committeda $3.5 billion five-year revolving credit facilities totaling $5.3 billion, offacility which $2.0 billion matures in December 2015, $1.0 billion matures in August 2016, and $2.3 billion matures in June 2018. Apache has $2.0 billion, $1.7 billion, and $1.0 billion U.S. facilities, a $300 million Australian facility, and a $300 million Canadian facility. As of March 31, 2015, aggregate2020. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under the Company’s credit facilities was $2.7 billion. The Company’s committed bank facilities are used to support Apache’sthis facility supports its $3.5 billion commercial paper program.

The Company has a $5.0 billion commercial paper program, which allowsis subject to market availability, facilitates Apache to borrowborrowing funds for up to 270 days at competitive interest rates. As of March 31, 2015,2016, the Company had $2.6 billion in currentno debt outstanding under commercial paper, committed bank facilities, and uncommitted bank lines. This amount was


As of March 31, 2016, the Company had a £900 million three-year letter of credit facility which matures in February 2019. The facility is available for letters of credit and loans to cash collateralize letter of credit obligations to the extent letters of credit are unavailable under the facility.

In April 2015, the FASB issued 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. The Company adopted this update in the first quarter of 2016 and applied the changes retrospectively for all periods presented. At December 31, 2015, the Company had debt issuance costs of $61 million classified as currenta long-term asset as a component of "deferred charges and other" on Apache’s consolidatedthe balance sheet based on an intent to repay the obligations with the proceeds from the LNG project divestitures. All currentthat have been netted against "long-term debt" in these unaudited interim financial statements. As of March 31, 2016, long-term debt was repaid in April 2015 upon closingis presented net of those divestitures.

debt issuance costs of $59 million.

Financing Costs, Net

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

   For the Quarter Ended
March 31,		 
   2015   2014 
   (In millions) 

Interest expense

  $128   $124 

Amortization of deferred loan costs

   2    2 

Capitalized interest

   (80)    (95) 

Interest income

   (4)    (4) 
  

 

 

   

 

 

 

Financing costs, net

$46 $27 
  

 

 

   

 

 

 

10

6. INCOME TAXES

  For the Quarter Ended March 31,
  2016 2015
  (In millions)
Interest expense $116
 $128
Amortization of deferred loan costs 1
 2
Capitalized interest (26) (58)
Interest income (1) (3)
Financing costs, net $90
 $69

6.INCOME TAXES
The Company estimates its annual effective income tax rate for continuing operations in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. StatutoryNon-cash write-downs of the carrying value of the Company’s proved oil and gas properties, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur. Accordingly,
During the first quarter of 2016, Apache’s effective income tax rate was primarily impacted by an increase in the valuation allowances on U.S. and Canadian deferred tax assets. During the first quarter of 2015, Apache’s effective tax rate was primarily impacted by a $619 million discrete deferred tax benefit associated with a reduction in the Company recorded theU.K. statutory income tax effect of the $7.2 billion non-cash write-downs of its U.S., Canada, and North Sea proved oil and gas properties, respectively, offset by an increase in the Canadian valuation allowance, as discrete items.

On March 26, 2015, U.K. Finance Bill 2015 received Royal Assent. Under the enacted legislation, the corporate income tax rate on North Sea oil and gas profits was reduced from 62 percent to 50 percent effective January 1, 2015. As a result of the enacted legislation in the first quarter of 2015, the Company recorded a deferred tax benefit of $619 million related to the remeasurement of the Company’s December 31, 2014 U.K. deferred income tax liability.

Apache and its subsidiaries are 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 under audit in various states and in most of the Company’s foreign jurisdictions as part of its normal course of business.

7. COMMITMENTS AND CONTINGENCIES

percent.



7.COMMITMENTS AND CONTINGENCIES
Legal Matters

Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. As of March 31, 2015,2016, the Company has an accrued liability of approximately $23$14 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’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 Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache 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 each of the Legal Matters described below, please see Note 8—Commitments and Contingencies to the consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

2015.

Argentine Environmental Claims and Argentina Tariff

No material change in the status of the YPF Sociedad AnonimaAnónima and Pioneer Natural Resources Company indemnities matters has occurred since the filing of Apache’s Annual Report on Form 10-K for its 20142015 fiscal year.

Louisiana Restoration

As more fully described in Apache’s Annual Report on Form 10-K for its 20142015 fiscal year, numerous surface owners have filed claims or sent demand letters to various oil and gas companies, including Apache, claiming that, under either expressedexpress or implied lease terms or Louisiana law, theythe companies are liable for damage measured by the cost of restoration of leased premises to their original condition as well as damages for contamination and cleanup.

In a case captionedrespect of three lawsuits filed by the Parish of Plaquemines against the Company and other oil and gas producers in the 25th Judicial District Court for the Parish of Plaquemines, State of Louisiana (captioned Parish of Plaquemines v. Rozel Operating Company et al., Docket No. 60-996; Parish of Plaquemines v. Apache Oil Corporation et al., Docket No. 61-000; andParish of Plaquemines v. HHE Energy Company et al., Docket No. 60-983), in April 2016 the Plaquemines Parish Council reversed course and decided not to dismiss the lawsuits. The Louisiana Attorney General has announced his intention to intervene in the three Plaquemines Parish proceedings and in the Cameron Parish School Boardproceedings in the Parish’s 38th Judicial District Court, captioned Parish of Cameron v. BEPCO, L.P., et al., Docket No. 10-19572; Parish of Cameron v. BP America Production Company et al., Docket No. 10-19576; Parish of Cameron v. Apache Corporation (of Delaware) et al., Docket No. 10-18672, in the 38th Judicial District Court, 10-19579; Parish of Cameron Statev. Atlantic Richfield Company et al., Docket No. 10-19577; Parish of Louisiana, plaintiffs allege that defendants’ oilCameron v. Alpine Exploration Companies, Inc., et al., Docket No. 19580; and gas explorationParish of Cameron v. Auster Oil and production activities contaminated plaintiffs’ property, and claim an unspecified amount of damages. Apache, a defendant in the case, acquired its interest in the oil and gas operations on plaintiffs’ property from the former operator, defendant Davis Oil Company, and subsequently sold the interest to defendant Wagner Oil Company (Wagner). Apache claims indemnity from Wagner. The case is set for trial in November 2015. While an adverse judgment against Apache might be possible, Apache intends to vigorously oppose the claims.

Gas, Inc., et al, Docket No. 10-19582.

No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for its 20142015 fiscal year.

11

Australia Gas Pipeline Force Majeure

In 2008, Company subsidiaries reported a pipeline explosion that interrupted deliveries of natural gas in Australia to customers under various long-term contracts. The civil lawsuits concerning the pipeline explosion, all of which were filed in the Supreme Court of Western Australia, have been resolved fully and dismissed on confidential terms, including for an exchange of consideration that is not material to Apache. The lawsuits are described in Apache’s Annual Report on Form 10-K dated February 27, 2015 for its 2014 fiscal year. On April 10, 2015, the court dismissed the lawsuits filed by plaintiffs Alcoa (Civ. 1481 of 2011), Barrick (Civ. 2656 of 2013), EDL LNG (Civ. 1751 of 2014), and Yara (Civ. 1742 of 2014). On April 9, 2015, plaintiffs Harvey (Civ. 1749 of 2014), Iluka (Civ. 1748 of 2014), Newmont (Civ. 1727 of 2014), and Wesfarmers (Civ. 1740 of 2014) discontinued their lawsuits, which were never served on the Apache defendants. All matters relating to the Australia gas pipeline force majeure are concluded.


Apollo Exploration Lawsuit

In a secondfourth amended petition filed on February 27, 2015March 21, 2016, in a case captionedApollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, plaintiffs allegehave reduced their alleged damages to approximately $500 million (having previously claimed in excess of $1.1 billionbillion) relating to certain purchase and sale agreements, mineral leases, and areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. Apache believes thethat plaintiffs’ claims lack merit, and further that plaintiffs’ alleged damages, even as amended, are grossly inflated. Apache will vigorously oppose them.

the claims. No other material change in the status of these matters has occurred since the filing of Apache's Annual Report on Form 10-K for its 2015 fiscal year.





Escheat Audits

There has been no other material change with respect to the review of the books and records of the Company and its subsidiaries and related entities by the State of Delaware, Department of Finance Division of Revenue (Unclaimed Property), to determine compliance with the Delaware Escheat Laws, since the filing of Apache’s Annual Report on Form 10-K for its 20142015 fiscal year.

Burrup-Related Gas Supply Lawsuits

In the lawsuit captionedPankaj Oswal v. Apache Corporation, No. WAD 389/2013, in the Federal Court of Australia, District of Western Australia, General Division, on the eve of a trial that was to commence on February 9, 2015, plaintiff decided to discontinue his claim. On March 18, 2015, the court entered an order dismissing the case. The lawsuit is concluded in the Company’s favor.

In the cases captionedRadhika Oswal v. Australia and New Zealand Banking Group Limited(ANZ)et al., No. SCI 2011 4653 andPankaj Oswal v. Australia and New Zealand Banking Group Limited(ANZ)et al., No. SCI 2012 01995, in the Supreme Court of Victoria, the cross-vesting of certain related proceedings (in which neither the Company nor its subsidiaries are parties) has caused the courttrial is set to consider new scheduling orders. The Company and its subsidiaries believe the plaintiffs’ claims lack merit and will vigorously oppose them.commence on May 30, 2016. No other material change in the status of this matter has occurred since the filing of Apache’s Annual Report onForm 10-K for its 20142015 fiscal year.

Environmental Matters

As of March 31, 2015,2016, the Company had an undiscounted reserve for environmental remediation of approximately $63$56 million. The Company is not aware of any environmental claims existing as of March 31, 20152016, 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.


With respect to the summons and information containing charges relating to a leak of produced water in the Zama area that occurred on or between October 3 and October 25, 2013, and the summons and information containing charges relating to a leak of produced water in the Belloy Field operating area that occurred on or about January 20, 2014, the Company does not expect the economic impact of these incidents to have a material effect on the Company’s financial position, results of operations, or liquidity. No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for its 20142015 fiscal year.

12

8. CAPITAL STOCK

LNG Divestiture Dispute

In respect of the purchase by Woodside of the Wheatstone and Kitimat LNG projects and accompanying upstream oil and gas reserves from the Company and its subsidiaries, several court proceedings are pending in the Supreme Court of Western Australia (Case Nos. 2315 of 2015, 2798 of 2015, 1504 of 2016, 1520 of 2016, and 1521 of 2016) concerning or arising out of the Wheatstone sale and purchase agreement, including whether certain amounts are due and owing Apache from Woodside and whether certain of Woodside’s purchase price adjustment claims are time-barred. In addition, Woodside is attempting to commence third party expert determination proceedings at the ICC International Centre for ADR in respect of certain aspects of its purchase price adjustment claims. The Company believes that under the terms of the sale and purchase agreements, Woodside’s requests for payment of purchase price adjustments lack merit and further that Woodside must reimburse Apache certain costs relating to Wheatstone and Kitimat; therefore, the Company has not recorded a liability associated with this dispute. No other material change in the status of these matters has occurred since the filing of Apache’s Annual Report on Form 10-K for its 2015 fiscal year.




8.CAPITAL STOCK
Net Income (Loss)Loss per Common Share

A reconciliation of the components of basic and diluted net income (loss)loss per common share for the quarters ended March 31, 20152016 and 20142015 is presented in the table below.

   For the Quarter Ended March 31, 
   2015  2014 
   Income  Shares   Per Share  Income  Shares   Per Share 
   (In millions, except per share amounts) 

Basic:

         

Income (loss) from continuing operations

  $(4,651)   377   $(12.34)  $753   394   $1.92 

Loss from discontinued operations

   —     377    —     (517)   394    (1.32) 
  

 

 

    

 

 

  

 

 

    

 

 

 

Income (loss) attributable to common stock

$(4,651)  377 $(12.34) $236  394 $0.60 
  

 

 

    

 

 

  

 

 

    

 

 

 

Effect of Dilutive Securities:

Stock options and other

$—    —   $—    2 

Diluted:

Income (loss) from continuing operations

$(4,651)  377 $(12.34) $753  396 $1.90 

Loss from discontinued operations

 —    377  —    (517)  396  (1.30) 
  

 

 

    

 

 

  

 

 

    

 

 

 

Income (loss) attributable to common stock

$(4,651)  377 $(12.34) $236  396 $0.60 
  

 

 

    

 

 

  

 

 

    

 

 

 

  For the Quarter Ended March 31,
  2016 2015
  Loss Shares Per Share Loss Shares Per Share
  (In millions, except per share amounts)
Basic:            
Loss from continuing operations $(489) 378
 $(1.29) $(4,519) 377
 $(11.99)
Loss from discontinued operations —
 378
 —
 (132) 377
 (0.35)
Loss attributable to common stock $(489) 378
 $(1.29) $(4,651) 377
 $(12.34)
Effect of Dilutive Securities:            
Stock options and other $—
 —
 $—
 $—
 —
 $—
Diluted:            
Loss from continuing operations $(489) 378
 $(1.29) $(4,519) 377
 $(11.99)
Loss from discontinued operations —
 378
 —
 (132) 377
 (0.35)
Loss attributable to common stock $(489) 378
 $(1.29) $(4,651) 377
 $(12.34)
The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling 9.17.1 million and 5.89.1 million for the quarters endingended March 31, 2016 and 2015, and 2014, respectively.

Common Stock Dividends

For the quarters ended March 31, 20152016, and 2014,2015, Apache paid $94$95 million and $79$94 million, respectively, in dividends on its common stock.

Stock Repurchase Program

Apache’s Board of Directors has authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through December 31, 2014,2015, had repurchased a total of 32.2 million shares at an average price of $88.96 per share. The Company has not purchased any additional shares during 2015, and is not obligated to acquire any specific number of shares.

13

9. BUSINESS SEGMENT INFORMATION

shares and has not purchased any shares during 2016.




9.BUSINESS SEGMENT INFORMATION
Apache is engaged in a single line of business. Both domestically and internationally, the Company explores for, develops, and produces natural gas, crude oil, and natural gas liquids. At March 31, 2015,2016, the Company had production in five countries:four geographic areas: the United States, Canada, Egypt, Australia, and offshore the United Kingdom (U.K.)in the North Sea.Sea (North Sea). Apache also pursues exploration interests in other countriesareas that may, over time, result in reportable discoveries and development opportunities. Financial information for each country is presented below:

   United
States		  Canada  Egypt (1)   Australia  North Sea  Other
International		   Total 
   (In millions) 

For the Quarter Ended March 31, 2015

          

Oil and Gas Production Revenues

  $660  $133  $532   $168  $313  $—     $1,806 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Operating Income (Loss)(2)

$(5,320) $(1,430) $102 $(12) $(663) $—   $(7,323) 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

Other Income (Expense):

Other

 12 

General and administrative

 (79) 

Acquisition, divestiture, and separation costs

 (54) 

Financing costs, net

 (46) 

Net Loss From Continuing Operations

          

 

 

 

Before Income Taxes

$(7,490) 
          

 

 

 

Total Assets

$21,577 $5,288 $7,247 $9,044 $5,376 $118 $48,650 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

For the Quarter Ended March 31, 2014

Oil and Gas Production Revenues

$1,505 $318 $950 $256 $618 $—   $3,647 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Operating Income(2)

$663 $71 $536 $96 $183 $—   $1,549 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

Other Income (Expense):

Other

 28 

General and administrative

 (103) 

Acquisition, divestiture, and separation costs

 (18) 

Financing costs, net

 (27) 

Net Income From Continuing Operations

          

 

 

 

Before Income Taxes

$1,429 
          

 

 

 

Total Assets

$30,618 $7,102 $7,350 $8,403 $7,599 $49 $61,121 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

  
United
States
 Canada 
Egypt(1)
 North Sea 
Other
International
 
Total(3)
  (In millions)
For the Quarter Ended March 31, 2016            
Oil and Gas Production Revenues $409
 $83
 $365
 $203
 $—
 $1,060
Operating Income (Loss)(2)
 $58
 $(41) $(206) $(312) $—
 $(501)
Other Income (Expense):            
Other           (8)
General and administrative           (93)
Transaction, reorganization, and separation           (15)
Financing costs, net           (90)
Loss From Continuing Operations Before Income Taxes           $(707)
Total Assets $6,990
 $1,380
 $5,592
 $3,653
 $64
 $17,679
             
For the Quarter Ended March 31, 2015            
Oil and Gas Production Revenues $660
 $133
 $532
 $313
 $—
 $1,638
Operating Income (Loss)(2)
 $(5,320) $(1,430) $102
 $(663) $—
 $(7,311)
Other Income (Expense):            
Other           (8)
General and administrative           (82)
Transaction, reorganization, and separation           (54)
Financing costs, net           (69)
Loss From Continuing Operations Before Income Taxes           $(7,524)
Total Assets $21,577
 $5,288
 $7,247
 $5,376
 $118
 $39,606
(1)Includes a noncontrolling interest in Egypt.
(2)Operating Income (Loss) consists of oil and gas production revenues less depreciation, depletion, and amortization, asset retirement obligation accretion, lease operating expenses, gathering and transportation costs, and taxes other than income. The first quarter 2015 operating income (loss) of U.S., Canada, and North Sea includes $5.2 billion, $1.4 billion, and $632 million, respectively, inEgypt for the first quarter of 2016 includes non-cash write-downs of each region’s carrying value of oil and gas properties.properties of $325 million and $163 million, respectively. The operating income (loss) of U.S., Canada, and North Sea for the first quarter of 2015 includes non-cash write-downs of each region’s carrying value of oil and gas properties of $5.2 billion, $1.4 billion, and $632 million, respectively.

14

10. SUPPLEMENTAL GUARANTOR INFORMATION

(3)Amounts for 2015 have been restated to exclude Australia discontinued operations.




10.SUPPLEMENTAL GUARANTOR INFORMATION
In December 1999, Apache Finance Canada issued approximately $300 million of publicly-traded notes due in 2029. The notes are fully and unconditionally guaranteed by Apache. The following condensed consolidating financial statements are provided as an alternative to filing separate financial statements.

Apache Finance Canada is 100 percent owned by Apache Corporation. As such, these condensed consolidating financial statements should be read in conjunction with Apache’s consolidated financial statements and the notes thereto, of which this note is an integral part.

15



APACHE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Quarter Ended March 31, 2016
  
Apache
Corporation
 
Apache
Finance
Canada
 
All Other
Subsidiaries
of Apache
Corporation
 
Reclassifications
& Eliminations
 Consolidated
  (In millions)
REVENUES AND OTHER:          
Oil and gas production revenues $217
 $—
 $843
 $—
 $1,060
Equity in net income of affiliates (414) (47) —
 461
 —
Other 151
 12
 (171) —
 (8)
  (46) (35) 672
 461
 1,052
OPERATING EXPENSES:          
Depreciation, depletion, and amortization 428
 —
 654
 —
 1,082
Asset retirement obligation accretion 4
 —
 34
 —
 38
Lease operating expenses 78
 —
 300
 —
 378
Gathering and transportation 8
 —
 44
 —
 52
Taxes other than income 21
 —
 (10) —
 11
General and administrative 77
 —
 16
 —
 93
Transaction, reorganization, and separation 15
 —
 —
 —
 15
Financing costs, net 67
 10
 13
 —
 90
  698
 10
 1,051
 —
 1,759
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (744) (45) (379) 461
 (707)
Provision (benefit) for income taxes (12) 2
 (136) —
 (146)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST (732) (47) (243) 461
 (561)
Net income (loss) from discontinued operations, net of tax —
 —
 —
 —
 —
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST (732) (47) (243) 461
 (561)
Net loss attributable to noncontrolling interest —
 —
 (72) —
 (72)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $(732) $(47) $(171) $461
 $(489)



APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 2015

        All Other       
     Apache  Subsidiaries       
  Apache  Finance  of Apache  Reclassifications    
  Corporation  Canada  Corporation  & Eliminations  Consolidated 
  (In millions) 

REVENUES AND OTHER:

     

Oil and gas production revenues

 $365  $—    $1,441  $—    $1,806 

Equity in net income (loss) of affiliates

  (1,085)   (654)   1   1,738   —   

Other

  (40)   14   38   —     12 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (760)  (640)  1,480  1,738  1,818 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OPERATING EXPENSES:

Depreciation, depletion and amortization

 5,499  —    2,908  —    8,407 

Asset retirement obligation accretion

 4  —    40  —    44 

Lease operating expenses

 124  —    414  —    538 

Gathering and transportation

 9  —    47  —    56 

Taxes other than income

 34  —    50  —    84 

General and administrative

 64  —    15  —    79 

Acquisition, divestiture, and separation costs

 54  —    —    —    54 

Financing costs, net

 52  10  (16)  —    46 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 5,840  10  3,458  —    9,308 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 (6,600)  (650)  (1,978)  1,738  (7,490) 

Provision (benefit) for income taxes

 (1,949)  3  (908)  —    (2,854) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST

 (4,651)  (653)  (1,070)  1,738  (4,636) 

Net income (loss) from discontinued operations, net of tax

 —    —    —    —    —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST

 (4,651)  (653)  (1,070)  1,738  (4,636) 

Net income attributable to noncontrolling interest

 —    —    15  —    15 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK

$(4,651) $(653) $(1,085) $1,738 $(4,651) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK(1)

$(4,651) $(653) $(1,085) $1,738 $(4,651) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Comprehensive income (loss) activity is recorded on the Apache Corporation entity and consists of derivative instrument reclassifications and changes in fair value as reflected on our Statement of Consolidated Comprehensive Income.

16

  
Apache
Corporation
 
Apache
Finance
Canada
 
All Other
Subsidiaries
of Apache
Corporation
 
Reclassifications
& Eliminations
 Consolidated
  (In millions)
REVENUES AND OTHER:          
Oil and gas production revenues $365
 $—
 $1,273
 $—
 $1,638
Equity in net income (loss) of affiliates (1,085) (654) 1
 1,738
 —
Other (40) 14
 18
 —
 (8)
  (760) (640) 1,292
 1,738
 1,630
OPERATING EXPENSES:          
Depreciation, depletion, and amortization 5,499
 —
 2,803
 —
 8,302
Asset retirement obligation accretion 4
 —
 32
 —
 36
Lease operating expenses 124
 —
 357
 —
 481
Gathering and transportation 9
 —
 47
 —
 56
Taxes other than income 34
 —
 40
 —
 74
General and administrative 64
 —
 18
 —
 82
Transaction, reorganization, and separation 54
 —
 —
 —
 54
Financing costs, net 52
 10
 7
 —
 69
  5,840
 10
 3,304
 —
 9,154
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (6,600) (650) (2,012) 1,738
 (7,524)
Provision (benefit) for income taxes (1,949) 3
 (1,074) —
 (3,020)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST (4,651) (653) (938) 1,738
 (4,504)
Net loss from discontinued operations, net of tax —
 —
 (132) —
 (132)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST (4,651) (653) (1,070) 1,738
 (4,636)
Net income attributable to noncontrolling interest —
 —
 15
 —
 15
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $(4,651) $(653) $(1,085) $1,738
 $(4,651)



APACHE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Quarter Ended March 31, 2014

        All Other       
     Apache  Subsidiaries       
  Apache  Finance  of Apache  Reclassifications    
  Corporation  Canada  Corporation  & Eliminations  Consolidated 
  (In millions) 

REVENUES AND OTHER:

     

Oil and gas production revenues

 $892  $—    $2,755  $—    $3,647 

Equity in net income (loss) of affiliates

  253   29   (6)   (276)   —   

Other

  (23)   14   38   (1)   28 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 1,122  43  2,787  (277)  3,675 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OPERATING EXPENSES:

Depreciation, depletion and amortization

 328  —    878  —    1,206 

Asset retirement obligation accretion

 7  —    37  —    44 

Lease operating expenses

 128  —    469  —    597 

Gathering and transportation

 14  —    56  —    70 

Taxes other than income

 79  —    102  —    181 

General and administrative

 91  —    13  (1)  103 

Acquisition, divestiture, and separation costs

 18  —    —    —    18 

Financing costs, net

 32  10  (15)  —    27 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 697  10  1,540  (1)  2,246 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 425  33  1,247  (276)  1,429 

Provision for income taxes

 62  10  506  —    578 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING NONCONTROLLING INTEREST

 363  23  741  (276)  851 

Net loss from discontinued operations, net of tax

 (127)  —    (390)  —    (517) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST

 236  23  351  (276)  334 

Net income attributable to noncontrolling interest

 —    —    98  —    98 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK

$236 $23 $253 $(276) $236 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK(1)

$235 $23 $253 $(276) $235 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Comprehensive income (loss) activity is recorded on the Apache Corporation entity and consists of derivative instrument reclassifications and changes in fair value as reflected on our Statement of Consolidated Comprehensive Income.

17

APACHE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the QuarterThree Months Ended March 31, 2015

         All Other       
      Apache  Subsidiaries    
   Apache  Finance  of Apache  Reclassifications    
   Corporation  Canada  Corporation  & Eliminations  Consolidated 
   (In millions) 

CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES

  $(396)  $(3)  $1,049  $—    $650 

CASH PROVIDED BY DISCONTINUED OPERATIONS

   —     —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 (396)  (3)  1,049  —    650 

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to oil and gas property

 (771)  —    (997)  —    (1,768) 

Leasehold and property acquisition

 (92)  —    —    —    (92) 

Additions to gas gathering, transmission and processing facilities

 (22)  —    (201)  —    (223) 

Investment in subsidiaries, net

 105  —    —    (105)  —   

Other

 (18)  —    (17)  —    (35) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) CONTINUING INVESTING ACTIVITIES

 (798)  —    (1,215)  (105)  (2,118) 

NET CASH PROVIDED BY DISCONTINUED OPERATIONS

 —    —    —    —    —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 (798)  —    (1,215)  (105)  (2,118) 

CASH FLOWS FROM FINANCING ACTIVITIES:

Commercial paper and bank credit facilities, net

 1,028  —    —    —    1,028 

Intercompany borrowings

 —    (1)  (104)  105  —   

Distributions to noncontrolling interest

 —    —    (21)  —    (21) 

Dividends paid

 (94)  —    —    —    (94) 

Common stock activity

 —    4  (4)  —    —   

Other

 2  —    13  —    15 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES

 936  3  (116)  105   928  

NET CASH USED IN DISCONTINUED OPERATIONS

 —    —    —    —    —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 936  3  (116)  105  928 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 (258)  —    (282)  —    (540) 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 267  —    502  —    769 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$9 $—   $220 $—   $229 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

18

2016

  
Apache
Corporation
 
Apache
Finance
Canada
 
All Other
Subsidiaries
of Apache
Corporation
 
Reclassifications
& Eliminations
 Consolidated
  (In millions)
CASH PROVIDED BY OPERATING ACTIVITIES 81
 11
 184
 —
 276
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additions to oil and gas property (118) —
 (465) —
 (583)
Leasehold and property acquisitions (19) —
 —
 —
 (19)
Additions to gas gathering, transmission, and processing facilities 1
 —
 (1) —
 —
Investment in subsidiaries, net (6) —
 —
 6
 —
Other (34) —
 44
 —
 10
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (176) —
 (422) 6
 (592)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Intercompany borrowings —
 (7) 13
 (6) —
Distributions to noncontrolling interest —
 —
 (54) —
 (54)
Dividends paid (95) —
 —
 —
 (95)
Other 1
 (4) 5
 —
 2
NET CASH USED IN FINANCING ACTIVITIES (94) (11) (36) (6) (147)
           
NET DECREASE IN CASH AND CASH EQUIVALENTS (189) —
 (274) —
 (463)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 378
 —
 1,089
 —
 1,467
CASH AND CASH EQUIVALENTS AT END OF PERIOD $189
 $—
 $815
 $—
 $1,004


APACHE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the QuarterThree Months Ended March 31, 2014

         All Other       
      Apache  Subsidiaries    
   Apache  Finance  of Apache  Reclassifications    
   Corporation  Canada  Corporation  & Eliminations  Consolidated 
   (In millions) 

CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES

  $(186)  $(15)  $2,412  $—    $2,211 

CASH PROVIDED BY DISCONTINUED OPERATIONS

   —     —     82   —     82 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 (186)  (15)  2,494  —    2,293 

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to oil and gas property

 (704)  —    (1,614)  —    (2,318) 

Leasehold and property acquisitions

 (36)  —    (8)  —    (44) 

Additions to gas gathering, transmission and processing facilities

 (19)  —    (325)  —    (344) 

Investment in subsidiaries, net

 1,320  —    —    (1,320)  —   

Other

 (7)  —    16  —    9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) CONTINUING INVESTING ACTIVITIES

 554  —    (1,931)  (1,320)  (2,697) 

NET CASH PROVIDED BY DISCONTINUED OPERATIONS

 —    —    748  —    748 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 554  —    (1,183)  (1,320)  (1,949) 

CASH FLOWS FROM FINANCING ACTIVITIES:

Commercial paper and bank credit facilities, net

 42  —    (44)  —    (2) 

Intercompany borrowings

 —    10  (1,329)  1,319  —   

Dividends paid

 (79)  —    —    —    (79) 

Payments on fixed rate debt

 (484)  —    —    —    (484) 

Other common stock activity, net

 —    5  (6)  1  —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES

 (521)  15  (1,379)  1,320  (565) 

NET CASH USED IN DISCONTINUED OPERATIONS

 —    —    (42)  —    (42) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 (521)  15  (1,421)  1,320  (607) 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 (153)  —    (110)  —    (263) 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 155  3  1,748  —    1,906 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$2 $3 $1,638 $—   $1,643 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

19

2015

  
Apache
Corporation
 
Apache
Finance
Canada
 
All Other
Subsidiaries
of Apache
Corporation
 
Reclassifications
& Eliminations
 Consolidated
  (In millions)
CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES $(396) $(3) $976
 $—
 $577
CASH PROVIDED BY DISCONTINUED OPERATIONS —
 —
 73
 —
 73
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (396) (3) 1,049
 —
 650
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additions to oil and gas property (771) —
 (856) —
 (1,627)
Leasehold and property acquisitions (92) —
 1
 —
 (91)
Additions to gas gathering, transmission, and processing facilities (22) —
 (41) —
 (63)
Investment in subsidiaries, net 105
 —
 —
 (105) —
Other (18) —
 (54) —
 (72)
NET CASH USED IN CONTINUING INVESTING ACTIVITIES (798) —
 (950) (105) (1,853)
NET CASH USED IN DISCONTINUED OPERATIONS —
 —
 (265) —
 (265)
NET CASH USED IN INVESTING ACTIVITIES (798) —
 (1,215) (105) (2,118)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Commercial paper and bank credit facilities, net 1,028
 —
 —
 —
 1,028
Intercompany borrowings —
 (1) (104) 105
 —
Distributions to noncontrolling interest —
 —
 (21) —
 (21)
Dividends paid (94) —
 —
 —
 (94)
Other 2
 4
 9
 —
 15
NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES 936
 3
 (116) 105
 928
NET CASH USED IN DISCONTINUED OPERATIONS —
 —
 —
 —
 —
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 936
 3
 (116) 105
 928
NET DECREASE IN CASH AND CASH EQUIVALENTS (258) —
 (282) —
 (540)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 267
 —
 502
 —
 769
CASH AND CASH EQUIVALENTS AT END OF PERIOD $9
 $—
 $220
 $—
 $229


APACHE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2015

           All Other       
       Apache   Subsidiaries       
   Apache   Finance   of Apache  Reclassifications    
   Corporation   Canada   Corporation  & Eliminations  Consolidated 
   (In millions) 
ASSETS        

CURRENT ASSETS:

        

Cash and cash equivalents

  $9   $—     $220  $—    $229 

Receivables, net of allowance

   512    —      1,255   —     1,767 

Inventories

   53    —      613   —     666 

Drilling advances

   20    —      448   —     468 

Assets held for sale

   —      —      1,804   —     1,804 

Deferred tax asset

   612    —      157   —     769 

Prepaid assets and other

   114    —      89   —     203 

Intercompany receivable

   5,250    —      —     (5,250)   —   
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
 6,570  —    4,586  (5,250)  5,906 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

PROPERTY AND EQUIPMENT, NET

 9,127  —    32,103  —    41,230 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

OTHER ASSETS:

Intercompany receivable

 —    —    713  (713)  —   

Equity in affiliates

 24,707  213  437  (25,357)  —   

Goodwill

 —    —    87  —    87 

Deferred charges and other

 173  1,001  1,253  (1,000)  1,427 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
$40,577 $1,214 $39,179 $(32,320) $48,650 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$564 $9 $437 $—   $1,010 

Current debt

 2,598  —    —    —    2,598 

Asset retirement obligation

 28  —    19  —    47 

Other current liabilities

 663  7  1,168  —    1,838 

Intercompany payable

 —    —    5,250  (5,250)  —   
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
 3,853  16  6,874  (5,250)  5,493 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

LONG-TERM DEBT

 9,377  298  —    —    9,675 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

DEFERRED CREDITS AND OTHER

NONCURRENT LIABILITIES:

Intercompany payable

 713  —    —    (713)  —   

Income taxes

 3,220  —    3,391  —    6,611 

Asset retirement obligation

 216  —    2,878  —    3,094 

Other

 1,987  250  (865)  (1,000)  372 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
 6,136  250  5,404  (1,713)  10,077 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

COMMITMENTS AND CONTINGENCIES

APACHE SHAREHOLDERS’ EQUITY

 21,211  650  24,707  (25,357)  21,211 

Noncontrolling interest

 —    —    2,194  —    2,194 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

TOTAL EQUITY

 21,211  650  26,901  (25,357)  23,405 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
$40,577 $1,214 $39,179 $(32,320) $48,650 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

20

2016

  
Apache
Corporation
 
Apache
Finance
Canada
 
All Other
Subsidiaries
of Apache
Corporation
 
Reclassifications
& Eliminations
 Consolidated
  (In millions)
ASSETS  
CURRENT ASSETS:          
Cash and cash equivalents $189
 $—
 $815
 $—
 $1,004
Receivables, net of allowance 314
 —
 806
 —
 1,120
Inventories 34
 —
 513
 —
 547
Drilling advances 15
 —
 175
 —
 190
Deferred tax asset (28) —
 28
 —
 —
Prepaid assets and other 199
 —
 162
 —
 361
Intercompany receivable 5,330
 —
 —
 (5,330) —
  6,053
 —
 2,499
 (5,330) 3,222
PROPERTY AND EQUIPMENT, NET —
 —
 13,542
 —
 13,542
OTHER ASSETS:          
Intercompany receivable —
 —
 9,385
 (9,385) —
Equity in affiliates 15,530
 (1,205) 438
 (14,763) —
Deferred charges and other 99
 1,000
 816
 (1,000) 915
  $21,682
 $(205) $26,680
 $(30,478) $17,679
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable $330
 $3
 $238
 $—
 $571
Other current liabilities 353
 7
 667
 —
 1,027
Intercompany payable —
 —
 5,330
 (5,330) —
  683
 10
 6,235
 (5,330) 1,598
LONG-TERM DEBT 8,421
 297
 —
 —
 8,718
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:          
Intercompany payable 9,385
 —
 —
 (9,385) —
Income taxes —
 5
 886
 —
 891
Asset retirement obligation 274
 —
 2,312
 —
 2,586
Other 901
 250
 181
 (1,000) 332
  10,560
 255
 3,379
 (10,385) 3,809
COMMITMENTS AND CONTINGENCIES 
 
 
 
 
APACHE SHAREHOLDERS’ EQUITY 2,018
 (767) 15,530
 (14,763) 2,018
Noncontrolling interest —
 —
 1,536
 —
 1,536
TOTAL EQUITY 2,018
 (767) 17,066
 (14,763) 3,554
  $21,682
 $(205) $26,680
 $(30,478) $17,679



APACHE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2014

           All Other       
       Apache   Subsidiaries       
   Apache   Finance   of Apache  Reclassifications    
   Corporation   Canada   Corporation  & Eliminations  Consolidated 
   (In millions) 
ASSETS        

CURRENT ASSETS:

        

Cash and cash equivalents

  $267   $—     $502  $—    $769 

Receivables, net of allowance

   837    —      1,187   —     2,024 

Inventories

   24    —      684   —     708 

Drilling advances

   34    1    353   —     388 

Assets held for sale

   —      —      1,628   —     1,628 

Deferred tax asset

   612    —      157   —     769 

Prepaid assets and other

   32    —      97   —     129 

Intercompany receivable

   4,939    —      —     (4,939)   —   
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
 6,745  1  4,608  (4,939)  6,415 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

PROPERTY AND EQUIPMENT, NET

 13,940  —    34,136  —    48,076 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

OTHER ASSETS:

Intercompany receivable

 —    —    608  (608)  —   

Equity in affiliates

 25,791  869  444  (27,104)  —   

Goodwill

 —    —    87  —    87 

Deferred charges and other

 175  1,002  1,197  (1,000)  1,374 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
$46,651 $1,872 $41,080 $(33,651) $55,952 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$748 $10 $452 $—   $1,210 

Asset retirement obligation

 28  —    9  —    37 

Other current liabilities

 1,014  1  1,402  —    2,417 

Intercompany payable

 —    —    4,939  (4,939)  —   
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
 1,790  11  6,802  (4,939)  3,664 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

LONG-TERM DEBT

 10,947  298  —    —    11,245 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

DEFERRED CREDITS AND OTHER

NONCURRENT LIABILITIES:

Intercompany payable

 608  —    —    (608)  —   

Income taxes

 5,076  —    4,423  —    9,499 

Asset retirement obligation

 211  —    2,837  —    3,048 

Other

 2,082  250  (973)  (1,000)  359 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
 7,977  250  6,287  (1,608)  12,906 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

COMMITMENTS AND CONTINGENCIES

APACHE SHAREHOLDERS’ EQUITY

 25,937  1,313  25,791  (27,104)  25,937 

Noncontrolling interest

 —    —    2,200  —    2,200 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

TOTAL EQUITY

 25,937  1,313  27,991  (27,104)  28,137 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
$46,651 $1,872 $41,080 $(33,651) $55,952 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

21

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Apache Corporation, a Delaware corporation formed in 1954, is an independent energy company that explores for, develops and produces natural gas, crude oil, and natural gas liquids. 2015

  
Apache
Corporation
 
Apache
Finance
Canada
 
All Other
Subsidiaries
of Apache
Corporation
 
Reclassifications
& Eliminations
 Consolidated
  (In millions)
ASSETS  
CURRENT ASSETS:          
Cash and cash equivalents $378
 $—
 $1,089
 $—
 $1,467
Receivables, net of allowance 314
 —
 939
 —
 1,253
Inventories 34
 —
 536
 —
 570
Drilling advances 16
 —
 156
 —
 172
Prepaid assets and other 102
 —
 188
 —
 290
Intercompany receivable 5,212
 —
 —
 (5,212) —
  6,056
 —
 2,908
 (5,212) 3,752
PROPERTY AND EQUIPMENT, NET —
 —
 14,119
 —
 14,119
OTHER ASSETS:          
Intercompany receivable —
 —
 9,459
 (9,459) —
Equity in affiliates 16,443
 (1,154) 446
 (15,735) —
Deferred charges and other 96
 1,001
 813
 (1,000) 910
  $22,595
 $(153) $27,745
 $(31,406) $18,781
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable $409
 $—
 $209
 $—
 $618
Other current liabilities 539
 3
 681
 —
 1,223
Intercompany payable —
 —
 5,212
 (5,212) —
  948
 3
 6,102
 (5,212) 1,841
LONG-TERM DEBT 8,418
 298
 —
 —
 8,716
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:          
Intercompany payable 9,459
 —
 —
 (9,459) —
Income taxes —
 4
 1,068
 —
 1,072
Asset retirement obligation 271
 —
 2,291
 —
 2,562
Other 933
 250
 179
 (1,000) 362
  10,663
 254
 3,538
 (10,459) 3,996
COMMITMENTS AND CONTINGENCIES 
 
 
 
 
APACHE SHAREHOLDERS’ EQUITY 2,566
 (708) 16,443
 (15,735) 2,566
Noncontrolling interest —
 —
 1,662
 —
 1,662
TOTAL EQUITY 2,566
 (708) 18,105
 (15,735) 4,228
  $22,595
 $(153) $27,745
 $(31,406) $18,781


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has exploration and production interests in five countries: the United States (U.S.), Canada, Egypt, Australia, and the United Kingdom (U.K.) North Sea. Apache also pursues exploration interests in other countries that may over time result in reportable discoveries and development opportunities.

Thisfollowing discussion relates to Apache Corporation and its consolidated subsidiaries and should be read in conjunction with our consolidated financial statements and accompanying notes included under Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q, as well as our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for our 20142015 fiscal year.

Strategic Overview

The Company’s foundation for future growth is driven by our significant producing asset base Results of operations and large undeveloped acreage positions. This allows for growth through sustainable lower-risk drilling opportunities, balanced by higher-risk, higher-reward exploration. We closely monitor drilling and acquisition cost trends in each of our core areas relative to product prices and, when appropriate, adjust our capital budgets accordingly and allocate funds to projects based on expected value. We do this through a disciplined and focused process that includes analyzing current economic conditions, projected rate of return on internally generated drilling inventories, and opportunities for tactical acquisitions or leasehold purchases that add substantial drilling prospects or, occasionally, provide access to new core areas that could enhance our portfolio.

Over the last five years, Apache has increasingly focused on its North American onshore resource base. Recent drilling successes and acquisitions of acreage positions across North America have built a robust drilling inventoryconsolidated cash flows for our Permian, Gulf Coast, and other onshore regions. We believe that this area is capable of driving our growth and performance over the next several years. As part of this strategy, we also conducted a company-wide review of our portfolio and ourdivested Australia assets are reflected as discontinued operations in all periods presented in this Quarterly Report on Form 10-Q.


Overview
Apache Corporation, a Delaware corporation formed in 1954, is an effort to best position Apacheindependent energy company that explores for, the long-term benefit of our shareholders. This review has resulted in several key divestitures during the last eighteen months including the recently completed sale of our Kitimatdevelops, and Wheatstone LNG projectsproduces natural gas, crude oil, and the announcement of the sale of substantially all of our operations in Australia, which is expected to close in mid-2015.natural gas liquids. The Company believeshas exploration and production interests in four geographic areas: the resulting portfolio, which includes a significant onshore North America resource base coupled with Brent-linked, free cash flow generating assetsUnited States (U.S.), Canada, Egypt, and offshore the United Kingdom (U.K.) in the North Sea (North Sea). Apache also pursues exploration interests in other areas that may over time result in reportable discoveries and Egypt, provides flexibilitydevelopment opportunities.
The downward pressure on crude oil prices that began in capital allocation and a platform for sustainable growth in a volatile commodity price environment.

The decline in the prices of oil and natural gas at the end oflate 2014 and duringextended throughout 2015 continues to impact 2016 results. Apache’s average realized crude oil prices decreased 34 percent for the quarter from the first quarter of 2015. Additionally, natural gas and natural gas liquids prices are significantly lower than the comparable 2015 was dramatic; however, we believe this environment will provide future growth opportunities for companies that have moved aggressively inperiod. In response to thethese price drop. As we cannot predict the length or depth of this commodity price correction, or the timing and extent of any potential rebound, we moved quickly and decisively regarding certaindeclines, Apache continues to focus on matters within our control: the timing and levels of capital spending, overhead, and lease operating costs.

We significantly reduced capital spending in 2016, with first quarter capital spending decreasing approximately 65 percent from the comparable 2015 period. We will continue to adjust our capital spending in response to future commodity price fluctuations, cost structure. realignments, and forecasted operating cash flows.
We are currently operating only 15 rigs onshorerealizing improved drilling efficiencies and cost reductions in our drilling and completion well costs. For example, in areas in North America butwhere we are preparedactively drilling, average drilling and completion costs on recent wells are down 45 percent compared to ramp-upaverage 2014 well costs.
We continue to monitor total overhead costs with a focus on balancing our operating cost structure with current and expected activity when we believe servicelevels. Last year's organizational changes and steps to streamline our operational structure are allowing us to manage overhead levels and respond appropriately. We continue to make progress on our internal initiatives with a focus on reducing annualized rates.
We have made significant progress reducing lease operating costs, are aligned with the current commodity price environment. We closely monitor commodity prices, service cost levels, regulatory impacts, and numerous other industry factors and routinely adjust our budgets in response to changing market conditions and operating cash flow forecasts.

Financial Highlights

Results for the quarter ended March 31, 2015 include:

Average daily production inwhich on a per-unit basis were 21 percent lower than the first quarter of 2015.
We exited the quarter with $1.0 billion in cash and $3.5 billion in available committed borrowing capacity.
2016 Outlook
Apache remains committed to achieving "cash flow neutrality" in 2016 under our current budget. As planned, we were not cash flow neutral in the first quarter; however, we expect to generate a surplus for the balance of the year. As such, we believe we are on track to exit the year with no significant change in net debt (debt less cash) relative to year-end 2015. In addition, in response to strong performance from our North American assets, we expect less of a production decline from 2015 totaled 601levels than originally expected and have updated our outlook to a decline in the 6 percent to 10 percent range, after adjusting for divestitures and volumes associated with Egypt's noncontrolling interest and taxes.
Operating Highlights
Significant operating activities for the quarter include the following:
Overall
Equivalent production decline from first quarter of 2015 levels was 2 percent, despite a significant reduction in capital investments in 2015 and the first quarter of 2016 when compared to historical levels.
Liquids production for the first quarter of 2016 averaged 342 thousand barrels of oil equivalent (Mboe) compared to 640 Mboe from the comparative 2014 quarter, reflecting divestiture activity during the prior year.

Liquids production for the quarter averaged 373 Mboe/d,per day (Mboe/d), with crude oil representing 8581 percent of total liquids production. Liquids production increased slightlydecreased 3 percent from the prior-yearfirst quarter despiteof 2015.


North America
Onshore equivalent production was down 3 percent for the quarter relative to the 2015 period. This production performance is notable given a significant divestiture activityreduction in North American onshore exploration and development capital spending during 2014.

Oil2015 and gasthe first quarter of 2016.
First quarter equivalent production revenues totaled $1.8 billion, down 50from the Permian Basin region, which accounts for more than half of our total onshore North American production, increased 8 percent from $3.6 billion in the prior-year quarter, reflecting the significant decrease in realized commodity prices and lower production.

For the first quarter of 2015 Apache reported a lossdespite significantly fewer wells placed on production during the first quarter of $4.7 billion, or $12.34 per diluted common share, compared with earnings of $236 million, or $0.60 per diluted share, for2016.
International and Offshore
In Egypt, we averaged 10 rigs and placed 23 wells on production during the prior-year quarter. The loss for the quarter reflects after-tax write-downs of oil and gas properties in the U.S., Canada, and U.K. North Sea totaling $4.7 billion.

22

Operational Developments

Our internally generated exploration and drilling opportunities provide the foundation for our growth. Highlights of our 2015 drilling successes and other operational developments are discussed below.

North America

North America onshoreGross equivalent production of 307 Mboe/d inincreased 3 percent over the first quarter of 2015, represents 51 percentdriven by an increase of Apache’s total worldwide production for the period.

Apache’s Permian Basin region increased production 6 percent relative to the first quarter of 2014 despite only operating an average of 15 rigs during the current period compared to 39 rigs in the first quarter of 2014. Apache plans to complete the wells drilled during 2015higher margin oil production, which was partially offset by a decline in the normal course of business and continues to work through completing prior-year wells in backlog as service costs are reduced. The Permian represents almostlower margin natural gas production. On a third of Apache’s total liquidsnet basis, equivalent production forgrew 2 percent from the first quarter of 2015.

International

In April 2015, Apache announcedNorth Sea average daily production decreased by 1 percent for the agreement to sell its Australian subsidiary Apache Energy Limited to a consortiumfirst three months of private equity funds managed by Macquarie Capital Group Limited and Brookfield Asset Management Inc. for cash consideration of $2.1 billion. The transaction is expected to close mid-year 2015 and is subject to necessary government and regulatory approvals and customary post-closing adjustments. The effective date of the sale is October 1, 2014.

Also during April 2015, Apache completed the previously disclosed sale of its interest in two LNG projects, Wheatstone LNG in Australia and Kitimat LNG in Canada, along with the associated upstream oil and gas assets, to Woodside Petroleum Limited for total proceeds of approximately $3.7 billion, which includes reimbursement of Apache’s net expenditure in the Wheatstone and Kitimat LNG projects, changes in working capital and other contractual adjustments between the effective date, July 1, 2014, and closing.

During2016 from the first quarter of 2015, Apache reported strong appraisal- and development-drilling resultslast year. This quarter’s production was negatively impacted by downtime from Egypt’s recentunexpected outages on third-party infrastructure, temporarily offsetting the impact of  four successful new oil fields, Berenice and Ptah,wells placed on production in the Western Desert. Three wellsquarter.
Despite the impact of the unplanned third party facility downtime in the Berenice fieldNorth Sea, we believe we are currently producing more than 9,500 barrelson track to achieve our full year International and Offshore production outlook of oil per day (b/d). Up170 to four additional wells are planned during the first phase of development in the Berenice field. In the Ptah field, the discovery well is currently producing 2,350 b/d. A second well started production in March 2015 at a rate of 2,000 b/190 Mboe/d.

23



Results of Operations

Oil and Gas Revenues

Oil and gas production revenues for the first quarter of 2015 totaled $1.8 billion, a 50 percent decrease from the comparative 2014 quarter.

The table below presents revenues by geographic region and each region’s percent contribution to revenues for the first quarterquarters of 20152016 and 2014, respectively.

   For the Quarter Ended March 31, 
   2015  2014 
   $ Value   % Contribution  $ Value   % Contribution 
   ($ in millions) 

Total Oil Revenues:

       

United States

  $510    38%  $1,092    39% 

Canada

   60    4%   140    5% 
  

 

 

   

 

 

  

 

 

   

 

 

 

North America

 570  42%  1,232  44% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Egypt(1)

 433  32%  846  30% 

Australia

 81  6%  170  6% 

North Sea

 278  20%  567  20% 
  

 

 

   

 

 

  

 

 

   

 

 

 

International(1)

 792  58%  1,583  56% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total(1)

$1,362  100% $2,815  100% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total Gas Revenues:

United States

$103  27% $266  41% 

Canada

 67  17%  148  23% 
  

 

 

   

 

 

  

 

 

   

 

 

 

North America

 170  44%  414  64% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Egypt(1)

 96  25%  103  16% 

Australia

 87  22%  86  13% 

North Sea

 34  9%  43  7% 
  

 

 

   

 

 

  

 

 

   

 

 

 

International(1)

 217  56%  232  36% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total(1)

$387  100% $646  100% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total Natural Gas Liquids (NGL) Revenues:

United States

$47  82% $147  79% 

Canada

 6  11%  30  16% 
  

 

 

   

 

 

  

 

 

   

 

 

 

North America

 53  93%  177  95% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Egypt(1)

 3  5%  1  1% 

North Sea

 1  2%  8  4% 
  

 

 

   

 

 

  

 

 

   

 

 

 

International(1)

 4  7%  9  5% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total(1)

$57  100% $186  100% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total Oil and Gas Revenues:

United States

$660  37% $1,505  41% 

Canada

 133  7%  318  9% 
  

 

 

   

 

 

  

 

 

   

 

 

 

North America

 793  44%  1,823  50% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Egypt(1)

 532  29%  950  26% 

Australia

 168  9%  256  7% 

North Sea

 313  18%  618  17% 
  

 

 

   

 

 

  

 

 

   

 

 

 

International(1)

 1,013  56%  1,824  50% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total(1)

$1,806  100% $3,647  100% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Discontinued Operations – Argentina

Oil Revenue

$—   $45 

Gas Revenue

 —    39 

NGL Revenue

 —    3 
  

 

 

    

 

 

   

Total

$—   $87 
  

 

 

    

 

 

   

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

24

2015.

  For the Quarter Ended March 31,
  2016 2015
  
$
Value
 
%
Contribution
 
$
Value
 
%
Contribution
  ($ in millions)
Total Oil Revenues:        
United States $313
 39% $510
 40%
Canada 39
 5% 60
 5%
North America 352
 44% 570
 45%
Egypt (1)
 269
 34% 433
 34%
North Sea 174
 22% 277
 21%
International (1)
 443
 56% 710
 55%
Total (1)
 $795
 100% $1,280
 100%
Total Natural Gas Revenues:        
United States $62
 28% $103
 35%
Canada 41
 18% 67
 22%
North America 103
 46% 170
 57%
Egypt (1)
 93
 42% 96
 32%
North Sea 27
 12% 34
 11%
International (1)
 120
 54% 130
 43%
Total (1)
 $223
 100% $300
 100%
Total Natural Gas Liquids (NGL)        
Revenues:        
United States $34
 81% $47
 81%
Canada 3
 7% 6
 10%
North America 37
 88% 53
 91%
Egypt (1)
 3
 7% 3
 5%
North Sea 2
 5% 2
 4%
International (1)
 5
 12% 5
 9%
Total (1)
 $42
 100% $58
 100%
Total Oil and Gas Revenues:        
United States $409
 38% $660
 40%
Canada 83
 8% 133
 8%
North America 492
 46% 793
 48%
Egypt (1)
 365
 35% 532
 32%
North Sea 203
 19% 313
 20%
International (1)
 568
 54% 845
 52%
Total (1)
 $1,060
 100% $1,638
 100%
Discontinued Operations:        
Oil Revenues $—
   $81
  
Natural Gas Revenues —
   87
  
NGL Revenues —
   —
  
Total $—
   $168
  

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






Production

The table below presents first quarterthe first-quarter 2016 and 2015 and 2014 production and the relative increase or decrease from the prior period.

   For the Quarter Ended March 31, 
   2015   Increase
(Decrease)		  2014 

Oil Volume – b/d

     

United States

   126,639    (1%)   127,951 

Canada

   16,875    (4%)   17,589 
  

 

 

    

 

 

 

North America

 143,514  (1%)  145,540 
  

 

 

    

 

 

 

Egypt(1)(2)

 91,971  4%  88,093 

Australia

 20,905  24%  16,825 

North Sea

 61,699  4%  59,092 
  

 

 

    

 

 

 

International

 174,575  6%  164,010 
  

 

 

    

 

 

 

Total

 318,089  3%  309,550 
  

 

 

    

 

 

 

Natural Gas Volume – Mcf/d

United States

 435,818  (26%)  592,685 

Canada

 287,556  (24%)  377,712 
  

 

 

    

 

 

 

North America

 723,374  (25%)  970,397 
  

 

 

    

 

 

 

Egypt(1)(2)

 363,989  (4%)  377,357 

Australia

 230,691  7%  215,792 

North Sea

 50,445  12%  45,071 
  

 

 

    

 

 

 

International

 645,125  1%  638,220 
  

 

 

    

 

 

 

Total

 1,368,499  (15%)  1,608,617 
  

 

 

    

 

 

 

NGL Volume – b/d

United States

 47,221  (11%)  53,058 

Canada

 5,853  (25%)  7,769 
  

 

 

    

 

 

 

North America

 53,074  (13%)  60,827 
  

 

 

    

 

 

 

Egypt(1)(2)

 1,031  342%  233 

North Sea

 886  (19%)  1,091 
  

 

 

    

 

 

 

International

 1,917  45%  1,324 
  

 

 

    

 

 

 

Total

 54,991  (12%)  62,151 
  

 

 

    

 

 

 

BOE per day(3)

United States

 246,497  (12%)  279,790 

Canada

 70,653  (20%)  88,310 
  

 

 

    

 

 

 

North America

 317,150  (14%)  368,100 
  

 

 

    

 

 

 

Egypt(2)

 153,667  2%  151,219 

Australia

 59,353  12%  52,790 

North Sea

 70,993  5%  67,695 
  

 

 

    

 

 

 

International

 284,013  5%  271,704 
  

 

 

    

 

 

 

Total

 601,163  (6%)  639,804 
  

 

 

    

 

 

 

Discontinued Operations – Argentina

Oil (b/d)

 —    6,885 

Gas (Mcf/d)

 —    141,352 

NGL (b/d)

 —    1,287 

BOE/d

 —    31,731 

  For the Quarter Ended March 31,
  2016 
Increase
(Decrease)
 2015
Oil Volume – b/d      
United States 115,859
 (9)% 126,639
Canada 14,463
 (14)% 16,875
North America 130,322
 (9)% 143,514
Egypt(1)(2)
 90,006
 (2)% 91,971
North Sea 56,962
 (8)% 61,699
International 146,968
 (4)% 153,670
Total 277,290
 (7)% 297,184
Natural Gas Volume – Mcf/d      
United States 409,761
 (6)% 435,818
Canada 266,438
 (7)% 287,556
North America 676,199
 (7)% 723,374
Egypt(1)(2)
 388,583
 7 % 363,989
North Sea 70,795
 40 % 50,445
International 459,378
 11 % 414,434
Total 1,135,577
 — % 1,137,808
NGL Volume – b/d      
United States 55,700
 18 % 47,221
Canada 6,503
 11 % 5,853
North America 62,203
 17 % 53,074
Egypt(1)(2)
 1,288
 25 % 1,031
North Sea 1,409
 59 % 886
International 2,697
 41 % 1,917
Total 64,900
 18 % 54,991
BOE per day(3)
      
United States 239,853
 (3)% 246,497
Canada 65,372
 (7)% 70,653
North America 305,225
 (4)% 317,150
Egypt(2)
 156,058
 2 % 153,667
North Sea 70,170
 (1)% 70,993
International 226,228
 1 % 224,660
Total 531,453
 (2)% 541,810
Discontinued Operations:      
Oil (b/d) —
   20,905
Natural Gas (Mcf/d) —
   230,691
NGL (b/d) —
   —
BOE/d —
   59,353
(1)
(1)Gross oil, natural gas, and NGL production in Egypt for the first quarterquarters of 20152016 and 20142015 were as follows:

   2015   2014 

Oil (b/d)

   197,785    198,619 

Gas (Mcf/d)

   861,933    921,440 

NGL (b/d)

   2,321    649 

  For the Quarter Ended March 31,
  2016 2015
Oil (b/d) 209,847
 197,785
Natural Gas (Mcf/d) 846,047
 861,933
NGL (b/d) 2,145
 2,321
(2)
(2)Includes net production volumes per day attributable to a noncontrolling interest in Egypt:Egypt for the first quarters of 2016 and 2015 as follows:

   2015   2014 

Oil (b/d)

   30,671    29,066 

Gas (Mcf/d)

   121,408    124,799 

NGL (b/d)

   343    78 

  For the Quarter Ended March 31,
  2016 2015
Oil (b/d) 29,901
 30,671
Natural Gas (Mcf/d) 129,441
 121,408
NGL (b/d) 429
 343
(3)
(3)The table shows production on a barrel of oil equivalent basis (boe) in which natural gas is converted to an equivalent barrel of oil based on a 6:1 energy equivalent ratio. This ratio is not reflective of the price ratio between the two products.

25




Pricing


The table below presents first quarterfirst-quarter 2016 and 2015 and 2014 pricing and the relative increase or decrease from the prior periods.

   For the Quarter Ended March 31, 
   2015   Increase
(Decrease)		  2014 

Average Oil Price — Per barrel

     

United States

  $44.73    (53%)  $94.84 

Canada

   39.76    (55%)   88.19 

North America

   44.14    (53%)   94.03 

Egypt

   52.29    (51%)   106.70 

Australia

   43.17    (62%)   112.26 

North Sea

   49.95    (53%)   106.60 

International

   50.37    (53%)   107.24 

Total

   47.56    (53%)   101.03 

Average Natural Gas Price — Per Mcf

     

United States

  $2.63    (47%)  $4.98 

Canada

   2.58    (41%)   4.38 

North America

   2.61    (45%)   4.75 

Egypt

   2.92    (3%)   3.02 

Australia

   4.19    (5%)   4.42 

North Sea

   7.40    (31%)   10.69 

International

   3.73    (7%)   4.03 

Total

   3.14    (30%)   4.46 

Average NGL Price — Per barrel

     

United States

  $11.00    (64%)  $30.81 

Canada

   11.09    (74%)   42.09 

North America

   11.01    (66%)   32.25 

Egypt

   36.29    (44%)   64.34 

North Sea

   24.74    (69%)   79.84 

International

   30.95    (60%)   77.11 

Total

   11.71    (65%)   33.20 

Discontinued Operations — Argentina

     

Oil price ($/Bbl)

  $—      $72.70 

Gas price ($/Mcf)

   —       3.04 

NGL price ($/Bbl)

   —       24.57 

  For the Quarter Ended March 31,
  2016 Increase
(Decrease)		 2015
Average Oil Price - Per barrel      
United States $29.77
 (33)% $44.73
Canada 29.40
 (26)% 39.76
North America 29.73
 (33)% 44.14
Egypt 32.83
 (37)% 52.29
North Sea 33.50
 (33)% 49.95
International 33.09
 (36)% 51.35
Total 31.51
 (34)% 47.87
Average Natural Gas Price - Per Mcf      
United States $1.65
 (37)% $2.63
Canada 1.69
 (34)% 2.58
North America 1.67
 (36)% 2.61
Egypt 2.62
 (10)% 2.92
North Sea 4.24
 (43)% 7.40
International 2.87
 (17)% 3.47
Total 2.15
 (26)% 2.93
Average NGL Price - Per barrel      
United States $6.61
 (40)% $11.00
Canada 5.58
 (50)% 11.09
North America 6.50
 (41)% 11.01
Egypt 26.92
 (26)% 36.29
North Sea 18.13
 (27)% 24.74
International 22.33
 (28)% 30.95
Total 7.16
 (39)% 11.71
Discontinued Operations:      
Oil price ($/Bbl) $—
   $43.17
Natural Gas price ($/Mcf) —
   4.19
NGL price ($/Bbl) —
   —

Crude Oil Revenues

Crude oil revenues for the first quarter of 20152016 totaled $1.4 billion,$795 million, a $1.5 billion$485 million decrease from the comparative 20142015 quarter. The $1.5 billionA 7 percent decrease was a result of substantiallyin average daily production reduced first-quarter 2016 revenues by $48 million compared to the prior-year quarter, while 34 percent lower average realized prices slightly offset by higher production volumes which increaseddecreased revenues by $37$437 million. Crude oil prices realized in the first quarter of 2016 averaged $31.51 per barrel, compared with $47.87 per barrel in the comparative prior-year quarter. Crude oil accounted for 75 percent of oil and gas production revenues and 5352 percent of worldwide production in the first quarter of 2015.

2016.

Worldwide oil production increased 8.5 thousand barrels of oil per day (Mb/d) from the first quarter of 2014 to 318.1decreased 19.9 Mb/d in the first quarterto 277.3 Mb/d, primarily a result of 2015, primarily from our international operations andreduced drilling activity in response to low commodity prices. Decreases from natural decline were partially offset by new production in the North American onshore regions offsetting recent divestitures. Excluding production from North American assets divested between the periods, worldwide oil production increased 23.8 Mb/d.

Sea’s Beryl field and in Egypt.

Natural Gas Revenues

Natural gas Gas revenues for the first quarter of 20152016 totaled $387$223 million, down $259a $77 million decrease from the firstcomparative 2015 quarter, of 2014. A 30driven by 26 percent decrease inlower average realized prices decreased revenues by $191 million as compared to the prior-year quarter, while a 15 percent decrease in average production further reducedprices. Worldwide natural gas revenues by $68 million.production was essentially flat between the periods. Natural gas accounted for 21 percent of our oil and gas production revenues and 3836 percent of our equivalent production during the first quarter of 2015.

Worldwide production for the first quarter of 2015 decreased 240 MMcf/d from the comparative 2014 quarter, primarily as a result of divestitures made during 2014 and lower levels of drilling activity in the recent low commodity price environment. Excluding production from North American assets divested between the periods, gas production increased 36 MMcf/d.

26

production.



NGL Revenues

NGL revenues for the first quarter of 20152016 totaled $57$42 million, down $129a $16 million decrease from the first quarter of 2014. A 65comparative 2015 quarter. An 18 percent decreaseincrease in average daily production increased first-quarter 2016 revenues by $7 million, while 39 percent lower average realized prices decreased revenues by $121 million compared to the prior-year quarter, while a 12 percent decrease in average production further decreased NGL revenues by $8$23 million. NGLs accounted for 34 percent of our oil and gas production revenues and 912 percent of our equivalent production during the first quarter of 2015.

production.

Worldwide production of NGLs decreased 7.2increased 9.9 Mb/d to 55.064.9 Mb/d in the first quarter of 2015,2016, primarily as athe result of divestitures made during 2014 and lower levels of drillingnew production from completion activity in the recent low commodity price environment. Excluding production fromour North American assets divested betweenonshore areas, gas processing plant downtime in the periods, NGL production increased 5.0 Mb/d.

prior year period, and changes to existing gas processing arrangements.


Operating Expenses

The table below presents a comparison of our expenses on an absolute dollar basis and a boe basis. Our discussion may reference expenses on a boe basis, on an absolute dollar basis or both, depending on their relevance. Operating expenses include costs attributable to a noncontrolling interest in Egypt but, for the quarter ended March 31, 2015, exclude discontinued operations in Argentina.

   For the Quarter Ended March 31, 
   2015   2014   2015   2014 
   (In millions)   (Per boe) 

Depreciation, depletion and amortization:

        

Oil and gas property and equipment

        

Recurring

  $1,089   $1,109   $20.13   $19.26 

Additional

   7,220    —      133.44    —   

Other assets

   98    97    1.81    1.68 

Asset retirement obligation accretion

   44    44    0.82    0.77 

Lease operating costs

   538    597    9.94    10.37 

Gathering and transportation costs

   56    70    1.02    1.19 

Taxes other than income

   84    181    1.54    3.15 

General and administrative expense

   79    103    1.46    1.79 

Acquisition, divestiture, and separation costs

   54    18    1.00    0.31 

Financing costs, net

   46    27    0.86    0.48 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

$9,308 $2,246 $172.02 $39.00 
  

 

 

   

 

 

   

 

 

   

 

 

 

Australia.

  For the Quarter Ended March 31,
  2016 2015 2016 2015
  (In millions) (Per boe)
Depreciation, depletion, and amortization:        
Oil and gas property and equipment        
Recurring $552
 $999
 $11.42
 $20.49
Additional 488
 7,220
 10.09
 148.06
Other assets 42
 83
 0.86
 1.71
Asset retirement obligation accretion 38
 36
 0.78
 0.75
Lease operating costs 378
 481
 7.81
 9.86
Gathering and transportation costs 52
 56
 1.10
 1.13
Taxes other than income 11
 74
 0.23
 1.50
General and administrative 93
 82
 1.93
 1.68
Transaction, reorganization, and separation 15
 54
 0.31
 1.11
Financing costs, net 90
 69
 1.85
 1.44
Total $1,759
 $9,154
 $36.38
 $187.73
Recurring Depreciation, Depletion, and Amortization (DD&A)The following table details the changes in DD&A of oil Oil and gas properties betweenproperty recurring DD&A expense of $552 million in the first quartersquarter of 2015 and 2014:

   For the Quarter
Ended
March 31,		 
   (In millions) 

2014 DD&A

  $1,109 

Volume change

   (46) 

DD&A Rate change

   26 
  

 

 

 

2015 DD&A

$1,089 
  

 

 

 

Recurring full-cost depletion expense2016 decreased $20$447 million compared to the prior-year quarter. The Company’s oil and gas property recurring DD&A rate decreased $9.07 per boe for the first quarter on anof 2016 compared to the prior-year period. The primary factor driving both lower absolute dollar basis: $46 million fromexpense and lower volumes, partially offset by an increase of $26 million from a higher average cost rate per boe. Our full-cost depletion rate increased $0.87 to $20.13DD&A per boe reflecting increased cost for explorationrates was the reduction in the Company’s oil and development activity over the past several years.

gas property carrying values resulting from significant property write-downs incurred in 2015.

Additional DD&A Under the full cost method of accounting, the Company is required to review the carrying value of its proved oil and gas properties each quarter on a country-by-country basis. Under these rules, capitalized costs of oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and gas reserves, net of related tax effects and discounted at 10 percent per annum. Estimated future net cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements.

27

During the first quarter



As a result of 2015, wea significant and sustained drop in commodity prices, Apache recorded $5.2 billion ($3.4 billion net of tax), $1.4 billion ($1.0 billion net of tax), and $632 million ($316 million net of tax) in non-cash after-tax write-downs of the carrying value of the Company’s U.S., Canada, and North Seaits proved oil and gas properties totaling $325 million and $4.7 billion in the first quarters of 2016 and 2015, respectively. If commodity prices do not recover significantly from the current prices, the Company expects furtherThe following table reflects write-downs of the carrying value of its oil and gas properties, which may be material to the Company’s consolidated financial statements, throughout the remainder of 2015.

by country:

  For the Quarter Ended March 31, 2016 For the Quarter Ended
March 31, 2015
  Before tax After tax Before tax After tax
  (In millions)
U.S. $—
 $—
 $5,235
 $3,377
Canada —
 —
 1,353
 1,011
North Sea 325
 162
 632
 316
Egypt 163
 163
 —
 —
Total write-downs $488
 $325
 $7,220
 $4,704
Lease Operating Expenses (LOE)LOE decreased $59$103 million, or 1021 percent for the quarter on an absolute dollar basis for the quarter ended March 31, 2015, relative to the comparable period of 2014.2015. On a per unitper-unit basis, LOE decreased 421 percent to $9.94$7.81 per boe for the first quarter of 2015,2016 as compared to the same prior-year period. The following table identifies changesThese reductions reflect the impact of our continued focus on costs, a decrease in Apache’s LOE rate betweencost types that trend downward in lower commodity price environments, the first quartertiming of 2015workovers and 2014.

   Per boe 

First-Quarter 2014 LOE

  $10.37 

Divestitures(1)

   0.35 

Equipment rental

   0.20 

Saltwater disposal

   0.10 

Workover costs

   (0.16) 

Labor and overhead costs

   (0.16) 

Power and fuel costs

   (0.32) 

FX impact

   (0.45) 

Other

   0.24 

Other increased production

   (0.23) 
  

 

 

 

First-Quarter 2015 LOE

$9.94 
  

 

 

 

(1)Per-unit impact of divestitures is shown net of associated production.

other expenditures in the Permian and North Sea, and the favorable impact of the strengthening U.S. dollar period over period.

Gathering and TransportationGathering and transportation costs totaled $56$52 million in the first quarter of 2015, down $142016, a decrease of $4 million from the first quarter of 20142015 on lower production volumes and rate changes primarily in our North American production. On a per-unit basis, gathering and transportation costs of $1.02 for the first quarter of 2015 were down 14 percent from the prior-year quarter. The following table presents gathering and transportation costs paid by Apache directly to third-party carriers for each of the periods presented:

   For the Quarter Ended
March 31,		 
   2015   2014 
   (In millions) 

Canada

  $26   $34 

U.S.

   16    22 

Egypt

   10    10 

North Sea

   4    4 
  

 

 

   

 

 

 

Total Gathering and transportation

$56 $70 
  

 

 

   

 

 

 

onshore properties.

Taxes other than IncomeTaxes other than income totaled $84$11 million for the first quarter of 2015,2016, a decrease of $97$63 million from the comparative prior-year period. The following table presents a comparison of these expenses:

   For the Quarter Ended
March 31,		 
   2015   2014 
   (In millions) 

Australia PRRT and U.K. PRT

  $24   $63 

Severance taxes

   30    73 

Ad valorem taxes

   24    40 

Other

   6    5 
  

 

 

   

 

 

 

Total Taxes other than income

$84 $181 
  

 

 

   

 

 

 

28

Australia Petroleum Resource Rent Tax (PRRT) is a levy assessed on the sale of hydrocarbons derived from specific developmental areas in Australia. The North Sea Petroleum Revenue Tax (PRT) is assessed on qualifying fields in the U.K. North Sea. For the first quarter of 2015, Australian PRRT and2016, U.K. PRT were $39was $41 million lower than the 20142015 period based onas a decrease inresult of lower revenues from qualifying fields during the first quarter.quarter of 2016, a lower PRT rate, and additional qualifying costs reducing prior-year PRT. Severance tax expense and ad valorem tax expense decreased $43$11 million and $16$8 million, respectively, on lower oil production and oilcommodity prices during the first quarter compared to the prior year period.

On March 24, 2016, the U.K. government released Finance Bill 2016, which provides tax relief to exploration and gas prices.

production (E&P) companies operating in the North Sea. The bill is expected to receive Royal Assent later this year. Under the bill, the U.K. PRT rate will be reduced to zero from the current 35 percent rate and will be effective January 1, 2016. Upon enactment, PRT expense ceases prospectively. As a further result of this change, the Company expects to record a charge of approximately $290 million (after-tax) for PRT benefits that are no longer expected to be realizable from future abandonment activities.

General and Administrative (G&A) Expenses General Despite our continued focus on cost reduction efforts, G&A expense for the quarter was $11 million higher than the first quarter of 2015, which included $14 million in reductions from lower than expected incentive compensation payouts and administrative expenses (G&A)lower stock based compensation expense. Absent these benefits to the first-quarter 2015 G&A, this quarter's G&A expense would have been $3 million lower.
Transaction, Reorganization, and Separation The Company incurred $15 million for the first quarter of 2015 decreased $24 million from the comparable 2014 period on lower incentive and stock-based compensation2016 related to company reorganization costs. The costs following a headcount reduction in January 2015, as well as other lower corporate costs and foreign exchange benefits.

Acquisition, Divestiture, and Separation CostsAcquisition, divestiture, and separation costsincurred for the first quarteryear includes approximately $11 million for employee separation and $4 million for consolidation of 2015 totaled $54 million, a $36 million increase as compared to the prior-year quarter, primarily driven by separation paymentsoffice space and other costs related to an overall headcount reduction of approximately 5 percent, as well as the retirement of our former Chairman and Chief Executive Officer during the quarter. Acquisition, divestiture, and separation costs for the period also include costs related to recent divestiture and leasehold acquisition activity.

reorganization efforts.




Financing Costs, NetFinancing costs incurred during the period comprised the following:

   For the Quarter Ended
March 31,		 
   2015   2014 
   (In millions) 

Interest expense

  $128   $124 

Amortization of deferred loan costs

   2    2 

Capitalized interest

   (80)    (95) 

Interest income

   (4)    (4) 
  

 

 

   

 

 

 

Financing costs, net

$46 $27 
  

 

 

   

 

 

 

  For the Quarter Ended March 31,
  2016 2015
  (In millions)
Interest expense $116
 $128
Amortization of deferred loan costs 1
 2
Capitalized interest (26) (58)
Interest income (1) (3)
Financing costs, net $90
 $69
Net financing costs increased $19$21 million in the first quarter of 20152016 compared to the same 2014prior-year period primarily from a $15 million decrease inon lower capitalized interest in the first quarter of 2016 as a result of divestitures made throughout 2014 and a $4 million increase inlower asset balances qualifying for capitalized interest expense during 2015.

more than offset lower interest expense.

Provision for Income TaxesThe Company estimates its annual effective income tax rate for continuing operations in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. StatutoryNon-cash write-downs of the carrying value of the Company’s proved oil and gas properties, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

On March 26, 2015, U.K. Finance Bill 2015 received Royal Assent. Under

During the enacted legislation, the corporatefirst quarter of 2016, Apache’s effective income tax rate was primarily impacted by an increase in the valuation allowances on North Sea oilU.S. and gas profits was reduced from 62 percent to 50 percent effective January 1, 2015. As a result of the enacted legislation inCanadian deferred tax assets. During the first quarter of 2015, the Company recordedApache’s effective tax rate was primarily impacted by a $619 million discrete deferred tax benefit of $619 million related toassociated with a reduction in the remeasurement of the Company’s December 31, 2014 U.K. deferred income tax liability.

The 2015 first-quarter income tax benefit was $2.9 billion, representing an effective income tax rate of 38 percent for the quarter compared to 40 percent during the 2014 period. The 2015 effective rates reflect the tax benefit from the $7.2 billion non-cash write-downs of our U.S., Canada, and North Sea proved oil and gas properties, the tax benefit related to the change in U.K.statutory income tax rate from 62 percent to 50 percent. Both periods were impacted by the respective non-cash write-downs of the carrying value of the Company’s proved oil and gas properties.

On March 24, 2016, the U.K. government released Finance Bill 2016. The bill is expected to receive Royal Assent later this year. Under the bill, the U.K. corporate income tax rate will be reduced from 50 percent andto 40 percent, effective January 1, 2016. Under U.S. GAAP, the Canadian valuation allowance. The 2014 effectiveeffect of a change in tax rate reflectswill be recognized at the Canadian valuation allowance anddate of enactment (i.e., the date when the bill receives Royal Assent). As such, the proposed rate change is not reflected in the current financial statements. Upon the bill receiving Royal Assent, the Company will record a deferred tax expensebenefit of approximately $199 million related to mark-to-market commodity derivatives. Excluding these items, the first-quarterremeasurement of the Company's December 31, 2015 and 2014 effective rates would have been 28 and 41 percent, respectively.

U.K. deferred income tax liability.


Capital Resources and Liquidity

Operating cash flows are the Company’s primary source of liquidity. We may also elect to utilize available committed borrowing capacity, access to both debt and equity capital markets, or proceeds from the sale of nonstrategic assets for all other liquidity and capital resource needs.

Apache’s operating cash flows, both in the short-term and the long-term, are impacted by highly volatile oil and natural gas prices.prices, as well as costs and sales volumes. Significant deteriorationchanges in commodity prices negatively impactsimpact our revenues, earnings, and cash flows, andflows. These changes potentially impact our liquidity if spending doescosts do not trend downward as well.with changes in commodity prices. Historically, costs have trended with commodity prices, albeit with a lag. Sales volumes and costs also impact cash flows; however, these historicallythey have not been asa less volatile and have less impact than commodity prices in the short-term.

29

Apache’s long-term operating cash flows are dependent on reserve replacement and the level of costs required for ongoing operations. Cash investments are required to fund activity necessary to offset the inherent declines in production and proved crude oil and natural gas reserves. Future success in maintaining and growing reserves and production is highly dependent on the success of our drilling program and our ability to add reserves economically. Deterioration in commodity prices also impacts estimated quantities of proved reserves. In the first quarter of 2016, we recognized negative reserve revisions of approximately 5 percent of our year-end 2015 estimated proved reserves as a result of lower prices. If realized prices for the remainder of 2016 approximate commodity future prices as of March 31, 2016, the Company is reasonably likely to report additional negative revisions, currently estimated at reasonable costs.

4 to 6 percent of year-end 2015 estimated proved reserves.



We believe the liquidity and capital resource alternatives available to Apache, combined with proactive measures to adjust our capital budget to reflect lower oilcommodity prices and anticipated operating cash flows, will be adequate to fund short-term and long-term operations, including our capital spending program, repayment of debt maturities, payment of dividends, and any amount that may ultimately be paid in connection with commitments and contingencies.

For additional information, please see Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q and Part I, Items 1 and 2, “Business and Properties,” and Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for our 20142015 fiscal year.

Sources and Uses of Cash

The following table presents the sources and uses of our cash and cash equivalents for the periods presented.

   For the Three Months Ended
March 31,		 
   2015   2014 
   (In millions) 

Sources of Cash and Cash Equivalents:

    

Net cash provided by continuing operating activities

  $650   $2,211 

Commercial paper and bank loan borrowings, net

   1,028    —   

Net cash provided by Argentina discontinued operations

   —      788 

Other

   15    9 
  

 

 

   

 

 

 
 1,693  3,008 
  

 

 

   

 

 

 

Uses of Cash and Cash Equivalents:

Capital expenditures(1)

$1,991 $2,706 

Leasehold and property acquisitions

 92  44 

Dividends paid

 94  79 

Treasury stock activity, net

 —    484 

Other

 56  2 
  

 

 

   

 

 

 
 2,233  3,315 
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

$(540) $(307) 
  

 

 

   

 

 

 

  For the Three months ended March 31,
  2016 2015
  (In millions)
Sources of Cash and Cash Equivalents:    
Net cash provided by continuing operating activities $276
 $577
Net commercial paper and bank loan borrowings —
 1,028
Other 12
 —
  288
 1,605
Uses of Cash and Cash Equivalents:    
Capital expenditures(1)
 $583
 $1,690
Leasehold and property acquisitions 19
 91
Net cash used by Australia discontinued operations —
 192
Dividends paid 95
 94
Distributions to noncontrolling interest 54
 21
Other —
 57
  751
 2,145
Increase (decrease) in cash and cash equivalents $(463) $(540)
(1)The table presents capital expenditures on a cash basis; therefore, the amounts may differ from those discussed elsewhere in this document, which include accruals.

Net Cash Provided by Continuing Operating ActivitiesOperating cash flows are our primary source of capital and liquidity and are impacted, both in the short-term and the long-term, by volatile oil and natural gas prices. The factors that determine operating cash flow are largely the same as those that affect net earnings, with the exception of non-cash expenses such as DD&A, asset retirement obligation (ARO) accretion, and deferred income tax expense, which affect earnings but do not affect cash flows.

Net cash provided by continuing operating activities for the first three months of 20152016 totaled $650$276 million, a decrease of $1.6 billion$301 million from the first three months of 2014.2015. The decrease is primarily a result of the loss from operations from low oil prices andreflects lower production during the first quarter of 2015 and changes in working capital.

commodity prices.

For a detailed discussion of commodity prices, production, and expenses, refer to the “Results of Operations” of this Item 2. For additional detail on the changes in operating assets and liabilities and the non-cash expenses that do not impact net cash provided by operating activities, please see the statement of consolidated cash flows in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q.

Commercial paper

Capital Expenditures Worldwide exploration and bank loan borrowings During the first quarter of 2015, Apache’s net borrowings on committed bank facilities, uncommitted bank lines, and commercial paper totaled $1.0 billion. Outstanding debt under these programs totaled $2.6 billion as of March 31, 2015, and was classified as current on Apache’s consolidated balance sheet based on an intent to repay the obligations with proceeds from the LNG project divestitures. All current debt was repaid in April 2015 upon closing of those divestitures.

30

Capital Expenditures Worldwide E&Ddevelopment (E&D) expenditures for the first three months of 20152016 totaled $1.8 billion,$583 million, compared to $2.3$1.6 billion for the first three months of 2014. Apache’s E&D capital spending was primarily focused on North American onshore assets. With the focused reduction of drilling rigs and activity occurring during the first quarter of 2015, we expect capital expenditures to be significantly reduced for the remainder of the year. In the North America onshore region,2015. Apache operated an average of 3224 drilling rigs during the first quarter of 2015.

2016.



Apache also completed leasehold and property acquisitions totaling $92$19 million and $44$91 million during the first quartersthree months of 20152016 and 2014,2015, respectively. Our 20152016 acquisition investments continue to focus on adding new leasehold positions to our North American onshore portfolio.

Apache’s investment in gas gathering, transmission, and processing (GTP) facilities totaled $223 million during the first quarter of 2015 compared to $344$63 million in the comparative prior-year period.

first three months of 2015. No meaningful expenses were incurred during 2016.

Dividends For the three-month periods ended March 31, 20152016 and 2014,2015, the Company paid $94$95 million and $79$94 million, respectively, in dividends on its common stock.

Liquidity

The following table presents a summary of our key financial indicators at the dates presented:

   March 31,
2015		  December 31,
2014		 
   (In millions of dollars, except as indicated) 

Cash and cash equivalents

  $229  $769 

Total debt

   12,273   11,245 

Equity

   23,405   28,137 

Available committed borrowing capacity

   2,702   3,730 

Percent of total debt-to-capitalization

   34%   29% 

  March 31, 2016 December 31, 2015
  (In millions)
Cash and cash equivalents $1,004
 $1,467
Total debt 8,719
 8,717
Equity 3,554
 4,228
Available committed borrowing capacity 3,500
 3,500
Cash and cash equivalents We The Company had $229 million$1.0 billion in cash and cash equivalents as of March 31, 2015,2016, compared to $769 million$1.5 billion at December 31, 2014.2015. At March 31, 2015,2016, approximately $210$810 million of the cash was held by foreign subsidiaries. The cash held by foreign subsidiaries isshould not be subject to additional U.S. income taxes if repatriated. The majority of the cash is invested in highly liquid, investment grade securities with maturities of three months or less at the time of purchase.

DebtAs of March 31, 2015,2016, outstanding debt, which consisted of notes and debentures, commercial paper, committed bank facilities, and uncommitted bank lines, totaled $12.3$8.7 billion. Current debt of $2.6 billion was outstanding as of March 31, 2015.

Available committed borrowing capacity As of March 31, 2016, Apache had $416,000 of notes due June 2016 and $483,000 of notes due March 2017 classified as short-term debt on the consolidated balance sheet.

Available committed borrowing capacity In June 2015, the Company had unsecured committedentered into a $3.5 billion five-year revolving syndicated bank credit facilities totaling $5.3 billion, offacility which $2.0 billion matures in December 2015, $1.0 billion matures in August 2016, and $2.3 billion matures in June 2018. Apache has $2.0 billion, $1.7 billion, and $1.0 billion U.S. facilities, a $300 million Australian facility, and a $300 million Canadian facility. As of March 31, 2015,2020. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under the Company’s credit facilities was $2.7 billion. The Company’s committed credit facilities are used to support Apache’sthis facility supports its $3.5 billion commercial paper program.

The Company has a $5.0 billion commercial paper program, which allowsis subject to market availability, facilitates Apache to borrowborrowing funds for up to 270 days at competitive interest rates. As of March 31, 2015,2016, the Company had $2.6 billion in currentno debt outstanding under commercial paper, committed bank facilities, and uncommitted bank lines.

In February 2016, the Company entered into a three-year letter of credit facility providing £900 million in commitments, with options to increase commitments to £1.075 billion and extend the term by one year. The facility is available for letters of credit and loans to cash collateralize letter of credit obligations to the extent letters of credit are unavailable under the facility. The facility’s representations and warranties, covenants, and events of default are substantially similar to those in the Company’s $3.5 billion revolving credit facility. Commissions are payable on outstanding letters of credit and borrowings bear interest (at a base rate or LIBOR), plus a margin. Letter of credit commissions, the interest margin, and the facility fee vary depending on the Company’s senior unsecured long-term debt rating. The Company has not requested any letters of credit or borrowings under this facility as of the date of this filing. This amount was classified as current on Apache’s consolidated balance sheet based on an intent to repayfacility is available for the Company’s letter of credit needs, particularly those which may arise in respect of abandonment obligations with the proceeds from the LNG project divestitures. All current debt was repaidassumed in April 2015 upon closing of those divestitures.

various North Sea acquisitions.

The Company was in compliance with the terms of all credit facilities as of March 31, 2015.

Percent of total debt-to-capitalization The Company’s debt-to-capitalization ratio at March 31, 2015 and December 31, 2014 was 34 percent and 29 percent, respectively.

31

2016.



ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk

The Company’s revenues, earnings, cash flow, capital investments and, ultimately, future rate of growth are highly dependent on the prices we receive for our crude oil, natural gas, and NGLs, which have historically been very volatile because of unpredictable events such as economic growth or retraction, weather, political climate, and political climate.global supply and demand. Our average crude oil realizations have decreased 5334 percent to $47.56$31.51 per barrel in the first quarter of 20152016 from $101.03$47.87 per barrel in the comparable period of 2014.2015. Our average natural gas price realizations have decreased 3026 percent to $3.14$2.15 per Mcf in the first quarter of 2016 from $4.46$2.93 per Mcf in the comparable period of 2014.

2015.

We periodically enter into derivative positions on a portion of our projected oil and natural gas production through a variety of financial and physical arrangements intended to manage fluctuations in cash flows resulting from changes in commodity prices. Apache periodically uses futures contracts, swaps, and options to mitigate commodity price risk. Apache does not hold or issue derivative instruments for trading purposes. As of March 31, 2015,2016, Apache had no open commodity derivative positions.

Interest Rate Risk

The Company considers its interest rate risk exposure to be minimal as a result of fixing interest rates on approximately 79 percent of the Company’s debt. At March 31, 2015, total debt included $2.6 billion of floating-rate debt. As a result, Apache’s annual interest costs will fluctuate based on short-term interest rates on approximately 21 percent of our total debt outstanding at March 31, 2015. The impact on cash flow of a 10 percent change in the floating interest rate based on debt balances at March 31, 2015, would be approximately $588,570 per quarter.

Foreign Currency Risk

The Company’s cash flow stream relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. In Australia, oil production is sold under U.S. dollar contracts, and gas production is sold under a mixture of fixed-price U.S. dollar and Australian dollar contracts. Approximately 40 percent of the costs incurred for Australian operations are paid in U.S. dollars. In Canada, oil and gas prices and costs, such as equipment rentals and services, are generally denominated in Canadian dollars but heavily influenced by U.S. markets. Our North Sea production is sold under U.S. dollar contracts, and the majority of costs incurred are paid in British pounds. In Egypt, all oil and gas production is sold under U.S. dollar contracts, and the majority of the costs incurred are denominated in U.S. dollars. Revenue and disbursement transactions denominated in Australian dollars, Canadian dollars and British pounds are converted to U.S. dollar equivalents based on average exchange rates during the period.

Foreign currency gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated at the end of each month. Currency gains and losses are included as either a component of “Other” under “Revenues and Other” or, as is the case when we re-measure our foreign tax liabilities, as a component of the Company’s provision for income tax expense on the statement of consolidated operations. A foreign currency net gain or loss of $133 million would result from a 10 percent weakening or strengthening, or weakening ofrespectively, in the Australian dollar, Canadian dollar and British pound as of March 31, 2015, would result in a foreign currency net loss or gain, respectively, of approximately $163 million.

32

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, 2014, 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:

2016.
the market prices of oil, natural gas, NGLs and other products or services;

our commodity derivative and 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 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 due to changes in the Egyptian government;

the integration of acquisitions;

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 first-quarter 2015 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.

33

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

John J. Christmann IV, the Company’s Chief Executive Officer and President, in his capacity as principal executive officer, and Stephen J. Riney, the Company’s Executive Vice President and Chief Financial Officer, in his capacity as principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2015,2016, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective, providing effective means to ensure that information we are required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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

Changes in Internal Control over Financial Reporting

There was no change in our internal controls over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



PART II—II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Please refer to both Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2015 (filed with the SEC on February 26, 2016) and Note 7—Commitments and Contingencies ofin the notes to the consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a description of material legal proceedings.

ITEM 1A.RISK FACTORS

Please refer to both Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2015, and as noted above in Part I, Item 3—Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Apache’s Board of Directors has authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through December 31, 2014,2015, had repurchased a total of 32.2 million shares at an average price of $88.96 per share. The Company has not purchased any additional shares during 2015, and is not obligated to acquire any specific number of shares.

shares and has not purchased any additional shares during 2016.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None


ITEM 4.MINE SAFETY DISCLOSURES

None


ITEM 5.OTHER INFORMATION

None

34




ITEM 6.EXHIBITS

3.1

–

Restated Certificate of Incorporation of Registrant, dated September 19, 2013, as filed with the

Secretary of State of Delaware on September 19, 2013 (incorporated by reference to Exhibit

3.2 to Registrant’s Current Report on Form 8-K filed September 20, 2013, SEC File

No. 001 -4300).

3.2

–

Bylaws of Registrant, as amended February 19, 2015 (incorporated by reference to Exhibit 3.1

to Registrant’s Current Report on Form 8-K filed February 23, 2015, SEC File No. 001-4300).

*10.1

–Form of 2015 Performance Share Program Award Notice and Agreement.

*10.2

–

2015 Long Term Cash Performance Program Award Notice and Agreement between

Registrant and Stephen J. Riney, dated April 8, 2015.

10.3

–

Retirement Agreement, dated January 19, 2015, between Registrant and G. Steven Farris

(incorporated by reference to Exhibit 10.39 to Registrant’s Annual Report on Form 10-K for

the year ended December 31, 2014, SEC File No. 001-4300).

10.4

–

Amendment of Stock Option Grants (2011 Omnibus Equity Compensation Plan), dated

January 20, 2015, between Registrant and G. Steven Farris (incorporated by reference to

Exhibit 10.63 to Registrant’s Annual Report on Form 10-K for the year ended December 31,

2014, SEC File No. 001-4300).

10.5

–

Amendment of Restricted Stock Unit Awards (2007 and 2011 Omnibus Equity Compensation

Plans), dated January 20, 2015, between Registrant and G. Steven Farris (incorporated by

reference to Exhibit 10.64 to Registrant’s Annual Report on Form 10-K for the year ended

December 31, 2014, SEC File No. 001-4300).

10.6

–

Amendment of 2014 Performance Program (Business Performance) Award (2011 Omnibus

Compensation Plan), dated January 20, 2015, between Registrant and G. Steven Farris

(incorporated by reference to Exhibit 10.65 to Registrant’s Annual Report on Form 10-K for

the year ended December 31, 2014, SEC File No. 001-4300).

*10.7

–

Restricted Stock Unit Award Agreement between Registrant and John J. Christmann, dated February 18, 2015.

*31.1

–

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

Executive Officer.

*31.2

–

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

Financial Officer.

*32.1

–

Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive

Officer and Principal Financial Officer.

*101.INS 

–XBRL Instance Document.

*101.SCH

–XBRL Taxonomy Schema Document.

*101.CAL

–XBRL Calculation Linkbase Document.

*101.LAB

–XBRL Label Linkbase Document.

*101.PRE 

–XBRL Presentation Linkbase Document.

*101.DEF 

–

XBRLDefinition Linkbase Document.

* Filed herewith

35

3.1–Restated Certificate of Incorporation of Registrant, dated September 19, 2013, as filed with the Secretary of State of Delaware on September 19, 2013 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed September 20, 2013, SEC File No. 001-4300).
3.2–Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated May 14, 2015, as filed with the Secretary of State of Delaware on May 14, 2015 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed May 20, 2015, SEC File No. 001-4300).
3.3–Bylaws of Registrant, as amended February 3, 2016 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed February 9, 2016, SEC File No. 001-4300).
10.1–Second Amendment to Credit Agreement, dated as of February 22, 2016, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto, amending Credit Agreement, dated as of June 4, 2015, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and Royal Bank of Canada, HSBC Bank USA, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Wells Fargo Bank, National Association, and Mizuho Bank, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.09 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
10.2–
Credit Agreement, dated as of February 22, 2016, among Apache Corporation, the lenders party thereto, the issuing banks party thereto, J.P. Morgan Europe Limited, as Administrative Agent, HSBC Bank USA, National Association, Royal Bank of Canada, The Bank of Nova Scotia, The Toronto-Dominion Bank, New York Branch, and Bank of Montreal, as Co-Syndication Agents, and Deutsche Bank AG New York Branch and Société Générale, as Co-Documentation Agents (incorporated by reference to Exhibit 10.10 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
10.3–Amendment to Apache Corporation 401(k) Savings Plan, effective February 3, 2016 (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
10.4–Form of 2016 Performance Share Program Award Notice and Agreement, dated January 7, 2016 (incorporated by reference to Exhibit 10.59 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
10.5–Form of Restricted Stock Unit Award Agreement, dated February 3, 2016 (incorporated by reference to Exhibit 10.60 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
10.6–Form of Stock Option Award Agreement, dated February 3, 2016 (incorporated by reference to Exhibit 10.61 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, SEC File No. 001-4300).
*31.1–Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
*31.2–Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
*32.1–Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
*101.INS–XBRL Instance Document.
*101.SCH–XBRL Taxonomy Schema Document.
*101.CAL–XBRL Calculation Linkbase Document.
*101.DEF–XBRL Definition Linkbase Document.
*101.LAB–XBRL Label Linkbase Document.
*101.PRE–XBRL Presentation Linkbase Document.
*Filed herewith


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

APACHE CORPORATION
Dated:May 7, 20155, 2016

/s/ STEPHEN J. RINEY

Stephen J. Riney

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Dated:May 7, 20155, 2016

/s/ REBECCA A. HOYT

Rebecca A. Hoyt

Senior Vice President, Chief Accounting Officer,

and Controller

(Principal Accounting Officer)

36



34