UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, ~~2017~~2018



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

For the transition period from to

Commission File Number 1-4300

APACHE CORPORATION

(exact name of registrant as specified in its charter)

_______________________________________________________________________



Delaware	41-0747868
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

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

(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code: (713) 296-6000

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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



Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

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

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



Number of shares of registrant’s common stock outstanding as of July 31, ~~2017~~2018	~~380,934,131~~382,485,953


	TABLE OF CONTENTS		TABLE OF CONTENTS
	DESCRIPTION		DESCRIPTION
Item		Page		Page
	PART I - FINANCIAL INFORMATION		PART I - FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS	1	FINANCIAL STATEMENTS	1
	STATEMENT OF CONSOLIDATED OPERATIONS	1	STATEMENT OF CONSOLIDATED OPERATIONS	1
	STATEMENT OF CONSOLIDATED CASH FLOWS	2	STATEMENT OF CONSOLIDATED CASH FLOWS	2
	CONSOLIDATED BALANCE SHEET	3	CONSOLIDATED BALANCE SHEET	3
	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY	4	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY	4
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	5	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	5
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
4.	CONTROLS AND PROCEDURES	41	CONTROLS AND PROCEDURES	31
	PART II - OTHER INFORMATION		PART II - OTHER INFORMATION
1.	LEGAL PROCEEDINGS	42	LEGAL PROCEEDINGS	32
1A.	RISK FACTORS	42	RISK FACTORS	32
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32
3.	DEFAULTS UPON SENIOR SECURITIES	42	DEFAULTS UPON SENIOR SECURITIES	32
4.	MINE SAFETY DISCLOSURES	42	MINE SAFETY DISCLOSURES	32
5.	OTHER INFORMATION	42	OTHER INFORMATION	32
6.	EXHIBITS	42	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, ~~2016,~~2017, 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, natural gas liquids (NGLs), and other products or services;

our commodity hedging arrangements;

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

production and reserve levels;

drilling risks;

economic and competitive conditions;

the availability of capital resources;

capital expenditure and other contractual obligations;

currency exchange rates;

weather conditions;

inflation rates;

the availability of goods and services;

legislative, regulatory, or policy changes;

terrorism or ~~cyber-attacks;~~cyber attacks;

occurrence of property acquisitions or divestitures;

the integration of acquisitions;

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

other factors disclosed under Items 1 and 2—Business and Properties—Estimated Proved Reserves and Future Net Cash Flows, Item 1A—Risk Factors, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in our most recently filed Annual Report on Form 10-K, other risks and uncertainties in our second-quarter ~~2017~~2018 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 –~~I. FINANCIAL INFORMATION

ITEM ~~1 –~~1. FINANCIAL STATEMENTS

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)


	For the Quarter Ended June 30,						For the Six Months Ended June 30,						For the Quarter Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
	(In millions, except per common share data)												(In millions, except per common share data)
REVENUES AND OTHER:
Oil and gas production revenues
Oil revenues	$	1,050		$	1,118		$	2,222		$	1,940		$	1,576		$	1,050		$	2,969		$	2,222
Gas revenues	233			209			488			432
Natural gas revenues													212			233			434			488
Natural gas liquids revenues	63			59			148			101			148			63			266			148
	1,346			1,386			2,858			2,473			1,936			1,346			3,669			2,858
Gain (loss) on divestitures													2			(21		)	9			320
Other	59			(21		)	84			(24		)	(9		)	59			(2		)	84
Gain (loss) on divestitures	(21		)	17			320			16
	1,384			1,382			3,262			2,465			1,929			1,384			3,676			3,262
OPERATING EXPENSES:
Lease operating expenses	372			359			708			737			356			372			705			708
Gathering and transportation	48			52			105			104
Gathering, transmission, and processing													82			48			168			105
Taxes other than income	29			65			71			76			49			29			104			71
Exploration	108			91			200			186			76			108			152			200
General and administrative	106			103			209			196			117			106			231			209
Transaction, reorganization, and separation	4			9			(6		)	24			12			4			12			(6		)
Depreciation, depletion, and amortization:
Oil and gas property and equipment	536			629			1,074			1,265			573			536			1,091			1,074
Other assets	36			40			74			82			35			36			70			74
Asset retirement obligation accretion	37			38			73			76			27			37			54			73
Impairments	—			173			8			173			—			—			—			8
Financing costs, net	99			104			199			209			94			99			193			199
	1,375			1,663			2,715			3,128			1,421			1,375			2,780			2,715
NET INCOME (LOSS) BEFORE INCOME TAXES	9			(281		)	547			(663		)
NET INCOME BEFORE INCOME TAXES													508			9			896			547
Current income tax provision	126			144			314			134			249			126			447			314
Deferred income tax benefit	(730		)	(225		)	(647		)	(226		)	(10		)	(730		)	(26		)	(647		)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST	613			(200		)	880			(571		)
NET INCOME INCLUDING NONCONTROLLING INTEREST													269			613			475			880
Net income attributable to noncontrolling interest	41			44			95			45			74			41			135			95
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	572		$	(244	)	$	785		$	(616	)
NET INCOME ATTRIBUTABLE TO COMMON STOCK													$	195		$	572		$	340		$	785

NET INCOME (LOSS) PER COMMON SHARE:
NET INCOME PER COMMON SHARE:
Basic	$	1.50		$	(0.65	)	$	2.06		$	(1.63	)	$	0.51		$	1.50		$	0.89		$	2.06
Diluted	$	1.50		$	(0.65	)	$	2.05		$	(1.63	)	$	0.51		$	1.50		$	0.88		$	2.05
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	381			379			380			379			382			381			382			380
Diluted	383			379			383			379			385			383			384			383
DIVIDENDS DECLARED PER COMMON SHARE	$	0.25		$	0.25		$	0.50		$	0.50		$	0.25		$	0.25		$	0.50		$	0.50

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2018			2017
	(In millions)						(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interest	$	880		$	(571	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income including noncontrolling interest							$	475		$	880
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument gain, net							(104		)	(41		)
Gain on divestitures	(320		)	(16		)	(9		)	(320		)
Exploratory dry hole expense and unproved leasehold impairments	152			139			73			152
Depreciation, depletion, and amortization	1,148			1,347			1,161			1,148
Asset retirement obligation accretion	73			76			54			73
Impairments	8			173			—			8
Deferred income tax benefit	(647		)	(226		)	(26		)	(647		)
Other	39			91			107			80
Changes in operating assets and liabilities:
Receivables	62			237			(101		)	62
Inventories	20			1			(9		)	20
Drilling advances	(20		)	(30		)	30			(20		)
Deferred charges and other	(90		)	(65		)	69			(90		)
Accounts payable	(37		)	(118		)	46			(37		)
Accrued expenses	(86		)	(57		)	(45		)	(86		)
Deferred credits and noncurrent liabilities	24			2			7			24
NET CASH PROVIDED BY OPERATING ACTIVITIES	1,206			983			1,728			1,206

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property	(883		)	(925		)	(1,572		)	(883		)
Leasehold and property acquisitions	(67		)	(118		)	(38		)	(67		)
Additions to gas gathering, transmission, and processing facilities	(274		)	—			(284		)	(274		)
Proceeds from sale of Midale and House Mountain	228			—			—			228
Proceeds from sale of oil and gas properties	483			48			13			483
Other, net	(16		)	29			(33		)	(16		)
NET CASH USED IN INVESTING ACTIVITIES	(529		)	(966		)	(1,914		)	(529		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on fixed-rate debt	(70		)	—			(150		)	(70		)
Distributions to noncontrolling interest	(170		)	(93		)	(155		)	(170		)
Dividends paid	(190		)	(189		)	(191		)	(190		)
Other	43			(1		)	(14		)	43
NET CASH USED IN FINANCING ACTIVITIES	(387		)	(283		)	(510		)	(387		)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	290			(266		)	(696		)	290
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	1,377			1,467			1,668			1,377
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,667		$	1,201		$	972		$	1,667

SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	202		$	206		$	200		$	202
Income taxes paid, net of refunds	163			201			374			163

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)


	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
	(In millions)						(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,667		$	1,377		$	972		$	1,668
Receivables, net of allowance	1,015			1,128			1,446			1,345
Inventories	416			476			361			368
Drilling advances	99			81			177			207
Assets held for sale	1,231			—
Prepaid assets and other	219			179			183			137
	4,647			3,241			3,139			3,725
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of successful efforts accounting:
Proved properties	38,118			42,693			40,644			39,197
Unproved properties and properties under development	1,796			1,969			1,807			1,783
Gathering, transmission and processing facilities	1,254			976			1,619			1,376
Other	998			1,111			1,062			1,046
	42,166			46,749			45,132			43,402
Less: Accumulated depreciation, depletion, and amortization	(24,615		)	(27,882		)	(26,796		)	(25,643		)
	17,551			18,867			18,336			17,759
OTHER ASSETS:
Deferred charges and other	404			411			435			438
	$	22,602		$	22,519		$	21,910		$	21,922
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	533		$	585		$	682		$	641
Liabilities held for sale	939			—
Current debt							400			550
Other current liabilities (Note 5)	1,401			1,258			1,230			1,373
	2,873			1,843			2,312			2,564
LONG-TERM DEBT	8,329			8,544			7,937			7,934
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes	1,058			1,710			518			545
Asset retirement obligation	1,811			2,432			1,845			1,792
Other	266			311			303			296
	3,135			4,453			2,666			2,633
COMMITMENTS AND CONTINGENCIES (Note 9)
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 414,099,033 and 412,612,102 shares issued, respectively	259			258
Common stock, $0.625 par, 860,000,000 shares authorized, 415,627,712 and 414,125,879 shares issued, respectively							260			259
Paid-in capital	12,246			12,364			12,011			12,128
Accumulated deficit	(2,607		)	(3,385		)	(1,748		)	(2,088		)
Treasury stock, at cost, 33,171,015 and 33,172,426 shares, respectively	(2,887		)	(2,887		)
Accumulated other comprehensive loss	(112		)	(112		)
Treasury stock, at cost, 33,168,561 and 33,171,015 shares, respectively							(2,887		)	(2,887		)
Accumulated other comprehensive income							4			4
APACHE SHAREHOLDERS’ EQUITY	6,899			6,238			7,640			7,416
Noncontrolling interest	1,366			1,441			1,355			1,375
TOTAL EQUITY	8,265			7,679			8,995			8,791
	$	22,602		$	22,519		$	21,910		$	21,922

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Common Stock		Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			APACHE SHAREHOLDERS’ EQUITY			Noncontrolling Interest			TOTAL EQUITY			Common Stock		Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			APACHE SHAREHOLDERS’ EQUITY			Noncontrolling Interest			TOTAL EQUITY
	(In millions)
BALANCE AT DECEMBER 31, 2015	$	257	$	12,619		$	(1,980	)	$	(2,889	)	$	(119	)	$	7,888		$	1,602		$	9,490
Net income (loss)	—		—			(616		)	—			—			(616		)	45			(571		)
Distributions to noncontrolling interest	—		—			—			—			—			—			(93		)	(93		)
Common dividends ($0.50 per share)	—		(189		)	—			—			—			(189		)	—			(189		)
Other	1		57			—			1			—			59			—			59
BALANCE AT JUNE 30, 2016	$	258	$	12,487		$	(2,596	)	$	(2,888	)	$	(119	)	$	7,142		$	1,554		$	8,696
																								(In millions)
BALANCE AT DECEMBER 31, 2016	$	258	$	12,364		$	(3,385	)	$	(2,887	)	$	(112	)	$	6,238		$	1,441		$	7,679		$	258	$	12,364		$	(3,385	)	$	(2,887	)	$	(112	)	$	6,238		$	1,441		$	7,679
Net income	—		—			785			—			—			785			95			880			—		—			785			—			—			785			95			880
Distributions to noncontrolling interest	—		—			—			—			—			—			(170		)	(170		)	—		—			—			—			—			—			(170		)	(170		)
Common dividends ($0.50 per share)	—		(190		)	—			—			—			(190		)	—			(190		)	—		(190		)	—			—			—			(190		)	—			(190		)
Other	1		72			(7		)	—			—			66			—			66			1		72			(7		)	—			—			66			—			66
BALANCE AT JUNE 30, 2017	$	259	$	12,246		$	(2,607	)	$	(2,887	)	$	(112	)	$	6,899		$	1,366		$	8,265		$	259	$	12,246		$	(2,607	)	$	(2,887	)	$	(112	)	$	6,899		$	1,366		$	8,265

BALANCE AT DECEMBER 31, 2017																								$	259	$	12,128		$	(2,088	)	$	(2,887	)	$	4		$	7,416		$	1,375		$	8,791
Net income																								—		—			340			—			—			340			135			475
Distributions to noncontrolling interest																								—		—			—			—			—			—			(155		)	(155		)
Common dividends ($0.50 per share)																								—		(191		)	—			—			—			(191		)	—			(191		)
Other																								1		74			—			—			—			75			—			75
BALANCE AT JUNE 30, 2018																								$	260	$	12,011		$	(1,748	)	$	(2,887	)	$	4		$	7,640		$	1,355		$	8,995

The accompanying notes to consolidated financial statements

are an integral part of this statement.

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These consolidated financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial ~~statements.~~statements, with the exception of recently adopted accounting pronouncements discussed below. 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)~~(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, ~~2016,~~2017, which contains a summary of the Company’s significant accounting policies and other disclosures.


1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of June 30, ~~2017,~~2018, Apache’s significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of its consolidated financial statements contained in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2017, with the exception of Accounting Standards Update (ASU) ~~2016-09, “Improvements to Employee Share-Based Payment Accounting”~~2014-09, “Revenue from Contracts with Customers (Topic 606)” (see ~~“Recently Adopted Accounting Pronouncement”~~“Revenue Recognition” section in this Note 1 below).

Use of Estimates

~~The preparation~~Preparation of financial statements in conformity with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates with regard to these financial statements include the fair value determination of acquired assets and liabilities, the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom, the assessment of asset retirement obligations, the estimates of fair value for long-lived assets, ~~and goodwill,~~ and the estimate of income taxes. Actual results could differ from those estimates.

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.

The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Recurring fair value measurements are presented in further detail in Note 4—Derivative Instruments and Hedging Activities and Note 8—Debt and Financing Costs.

Apache also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. For the second quarter and six-month periods ended June 30, 2018, the Company recorded no asset impairments in connection with fair value assessments.

The Company recorded no asset impairments in connection with fair value assessments in the second quarter of 2017. For the six-month period ended June 30, 2017, the Company recorded asset impairments ~~totaling $8 million~~ in connection with fair value ~~assessments.~~assessments totaling $8 million for a United Kingdom (U.K.) Petroleum Revenue Tax (PRT) decommissioning asset that is no longer expected to be realizable from future abandonment activities in the North Sea.

In 2016, the U.K. government enacted Finance Bill 2016, providing tax relief to exploration and production (E&P) companies operating in the U.K. North Sea. Under the enacted legislation, the U.K. PRT rate was reduced to zero from the previously enacted 35 percent rate in effect from January 1, 2016. PRT expense ceased prospectively from that date. During the first quarter of 2017, the Company fully impaired the aggregate remaining value of the recoverable PRT decommissioning asset of $8 million that would have been realized from future abandonment activities. The recoverable value of the PRT decommissioning asset was estimated using the income approach. The expected future cash flows used in the determination were based on anticipated spending and timing of planned future abandonment activities for applicable fields, considering all available information at the date of review. Apache has classified this fair value measurement as Level 3 in the fair value hierarchy.

For the second quarter and six-month periods ended June 30, 2016, the Company recorded asset impairments totaling $173 million in connection with fair value assessments. Impairments totaling $68 million were recorded for proved oil and gas properties in the U.S. and Canada, as discussed in further detail below in “Oil and Gas Property.” Also, for the second quarter and six-month periods ended June 30, 2016, the Company recorded $105 million for the impairment of certain gas gathering, transmission, and processing (GTP) assets, which were written down to their fair values of $175 million.

Oil and Gas Property

The Company follows the successful efforts method of accounting for its oil and gas property. Under this method of accounting, exploration costs such as exploratory geological and geophysical costs, delay rentals, and exploration overhead ~~are expensed as incurred. All costs related to production, general corporate overhead, and similar activities~~ are expensed as incurred. If an exploratory well provides evidence to justify potential development of reserves, drilling costs associated with the well are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. This determination may take longer than one year in certain areas depending on, among other things, the amount of hydrocarbons discovered, the outcome of planned geological and engineering studies, the need for additional appraisal drilling activities to determine whether the discovery is sufficient to support an economic development plan, and government sanctioning of development activities in certain international locations. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities; in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

Acquisition costs of unproved properties are assessed for impairment at least annually and are transferred to proved oil and gas properties to the extent the costs are associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment based on the Company’s current exploration plans. Unproved oil and gas properties with individually insignificant lease acquisition costs are amortized on a group basis over the average lease term at rates that provide for full amortization of unsuccessful leases upon lease expiration or abandonment. Costs of expired or abandoned leases are charged to exploration expense, while costs of productive leases are transferred to proved oil and gas properties. Costs of maintaining and retaining unproved properties, as well as amortization of individually insignificant leases and impairment of unsuccessful leases, are included in exploration costs in the statement of consolidated operations.

Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of crude oil and natural gas, are capitalized. Depreciation of the cost of proved oil and gas properties is calculated using the unit-of-production (UOP) method. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the carrying value of those reserves. The reserve base used to calculate depreciation for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. The reserve base used to calculate the depreciation for capitalized costs offor exploratory ~~wells~~ and development ~~costs~~wells is the sum of proved developed reserves only. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are included in the depreciable cost.

Oil and gas properties are grouped for depreciation in accordance with ASC 932 “Extractive ~~Activities -~~ Activities—Oil and Gas.” The basis for grouping is a reasonable aggregation of properties with a common geological structural feature or stratigraphic condition, such as a reservoir or field.

When circumstances indicate that proved oil and gas properties may be impaired, the Company compares unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on Apache’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ~~the~~ ASC 820. If applicable, the Company utilizes prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. Apache has classified these fair value measurements as Level 3 in the fair value hierarchy.

The following table represents non-cash impairments of the carrying value of the Company’s proved and unproved property and equipment for the second quarters and first six months of ~~2017~~2018 and ~~2016:~~2017:

Quarter Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(In millions)
Oil and Gas Property:
Proved $ —
$ 68
$ —
$ 68
Unproved 39
66
54
108

~~Proved properties impaired during the quarter ended June 30, 2016 had an aggregate fair value of $143 million.~~



	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
	(In millions)
Oil and Gas Property:
Proved	$	—	$	—	$	—	$	—
Unproved	21		39		37		54

On the statement of consolidated operations, unproved impairments are recorded in exploration expense, and proved impairments are recorded in impairments.

~~Recently Adopted Accounting Pronouncement~~Revenue Recognition

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The guidance was effective for fiscal years beginning after December 15, 2016. The CompanyOn January 1, 2018, Apache adopted ASU ~~2016-09 effective January 1, 2017.~~

~~Upon adoption,~~2014-09, “Revenue from Contracts with Customers (ASC 606),” using the modified retrospective method. The Company elected to ~~account for forfeitures~~evaluate all contracts at the date of initial application. While there was no impact to the opening balance of retained earnings as ~~they occur rather than estimate expected forfeitures using a modified retrospective transition method. As~~ a result of ~~this election,~~ the ~~Company recorded a cumulative-effect adjustment~~adoption, certain items previously netted in revenue are now recognized as “Gathering, transmission, and processing” in the Company’s statement of ~~$11 million, representing an increase in accumulated deficit, with~~consolidated operations. The amounts reclassified are immaterial to the ~~offset to paid-in capital. During the first quarter of 2017, the Company recorded a $4 million deferred tax asset related to this adjustment, with the offset to accumulated deficit.~~

~~ASU 2016-09 requires excess tax benefits~~financial statements, and ~~deficiencies~~prior comparative periods have not been restated and continue to be ~~recognized prospectively as part~~reported under the accounting standards in effect for those periods. Adoption of the ~~provision for income taxes rather than paid-in capital. The adoption did~~new standard is not anticipated to have a material impact on the Company’s ~~accounting~~net earnings on an ongoing basis.

The Company applies the provisions of ~~provision~~ASC 606 for ~~income taxes. ASU 2016-09 also requires excess tax benefits~~revenue recognition to contracts with customers. Sales of crude oil, natural gas, and NGLs are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts. Performance obligations primarily comprise delivery of oil, gas, or NGLs at a delivery point, as negotiated within each contract. Each barrel of oil, million Btu (MMBtu) of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer. The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Company’s right to payment, and transfer of legal title. In each case, the term between delivery and when payments are due is not significant.

Apache markets its own United States (U.S.) natural gas and crude oil production based on market-priced contracts. Typically, these contracts are adjusted for quality, transportation, and other market-reflective differentials. Since the Company’s production may fluctuate as a result of operational issues, it is occasionally necessary to purchase third-party oil and gas to fulfill sales obligations and commitments. Sales proceeds related to third-party purchased oil and gas are determined to be ~~presented~~revenue from a customer. Proceeds for these volumes, which offset the associated purchase costs, totaled $98 million and $202 million for the second quarter and first six months of 2018, respectively. Proceeds and costs are both recorded as “Other” under “Revenues and Other” in the statement of consolidated operations.

Internationally, Apache sells its North Sea crude oil under contracts with a ~~component~~market-based index price. Natural gas from the North Sea Beryl field is processed through the SAGE gas plant. The gas is sold to a third party at the St. Fergus entry point of the national grid on a National Balancing Point index price basis. Apache’s gas production in Egypt is sold primarily under an industry-pricing formula, a sliding scale based on Dated Brent crude oil with a minimum of $1.50 per MMBtu and a maximum of $2.65 per MMBtu, plus an upward adjustment for liquids content. The Company’s Egypt oil production is sold at prices equivalent to the export market.

The Company’s Egyptian operations are conducted pursuant to production sharing contracts under which contractor partners pay all operating and capital costs for exploring and developing the concessions. A percentage of the production, generally up to 40 percent, is available to contractor partners to recover these operating and capital costs over contractually defined periods. The balance of the production is split among the contractor partners and the Egyptian General Petroleum Corporation (EGPC) on a contractually defined basis. Additionally, the contractor partner’s income taxes, which remain the liability of the contractor partners under domestic law, are paid by EGPC on behalf of the contractor partners out of EGPC’s production entitlement. Income taxes paid to the Arab Republic of Egypt on behalf of Apache as contract partner are recognized as oil and gas sales revenue and income tax expense and reflected as production and estimated reserves. Revenues related to Egypt’s tax volumes are considered revenue from a non-customer.

For the second quarter of 2018, revenues from customers and revenues from non-customers were $1.9 billion and $181 million, respectively. For the first six months of 2018, revenues from customers and revenues from non-customers were $3.5 billion and $336 million, respectively.

Apache records trade accounts receivable for its unconditional rights to consideration arising under sales contracts with customers. The carrying value of such receivables, net of the allowance for doubtful accounts, represents estimated net realizable value. The Company routinely assesses the collectability of all material trade and other receivables. The Company accrues a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. Receivables from contracts with customers, net of allowance for doubtful accounts, totaled $1.3 billion and $1.1 billion as of June 30, 2018 and December 31, 2017, respectively.

Apache has concluded that disaggregating revenue by geographic area and by product appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows ~~rather~~are affected by economic factors. Refer to Note 11—Business Segment Information for a disaggregation of revenue by each product sold.

Practical Expedients and Exemptions

Apache does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less or contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Apache will utilize the practical expedient to expense incremental costs of obtaining a contract if the expected amortization period is one year or less. Costs to obtain a contract with expected amortization periods of greater than ~~financing cash flows. The Company has adopted this requirement prospectively~~one year will be recorded as an asset and ~~accordingly, prior periods have not been adjusted. Excess tax benefits were not material for all periods presented.~~

~~Additionally, ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes~~will be ~~reported as financing activities~~recognized in ~~the consolidated statements of cash flows, which is how~~accordance with ASC 340, “Other Assets and Deferred Costs.” Currently, the Company ~~has historically classified these amounts.~~does not have contract assets related to incremental costs to obtain a contract.

New Pronouncements Issued But Not Yet Adopted

In February 2016, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ASU 2016-02, “Leases (Topic 842),” 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. Early adoption is permitted; however, the Company does not intend to early adopt. In July 2018, ~~with early~~the FASB issued ASU 2018-11, which adds a transition option permitting entities to apply the provisions of the new standard at its adoption ~~permitted. The Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning~~date instead of the earliest comparative period presented in the consolidated financial statements. ~~As part~~Under this transition option, comparative reporting would not be required and the provisions of the ~~assessment~~standard would be applied prospectively to leases in effect at the date of adoption. In the normal course of business, the Company ~~has formed an implementation work team,~~enters into various lease agreements for real estate, aircraft, and equipment related to its exploration and development activities that are currently accounted for as operating leases. To track these lease arrangements and facilitate compliance with this ASU, the Company is ~~reviewing software solutions, and began~~in the process of ~~evaluating~~implementing a third-party lease accounting software solution and designing processes and internal controls. The Company continues to evaluate contracts, train departments affected by the standard, and monitor updates to the standard to determine the impact this ASU will have on its consolidated financial statements. At this time, the Company cannot reasonably estimate the financial impact this will have on its consolidated financial statements; however, the Company believes adoption and implementation of this ASU will significantly impact its balance sheet, resulting in an increase in both assets and liabilities relating to its leasing activities.

In May 2014, the FASB and the International Accounting Standards Board (IASB) issued a joint revenue recognition standard, ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new standard removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers, and increases disclosure requirements. The codification was amended through additional ASUs and, as amended, 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. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. Upon preliminary evaluation of contracts in each of the Company’s revenue streams, the Company does not expect the adoption of this

ASU to have a material impact on net earnings, however, the Company is analyzing whether the classification of certain items in revenue and expense will be impacted. The Company continues to evaluate the disclosure requirements, develop accounting policies, and assess changes to the relevant business processes and the control activities within them as a result of the provisions of this ASU. The Company will adopt the new standard on January 1, 2018, utilizing the modified retrospective approach.


2.	ACQUISITIONS AND DIVESTITURES

2018 Activity

Divestitures

During the first six months of 2018, Apache completed the sale of certain non-core assets, primarily in the Permian region, in multiple transactions for cash proceeds of $13 million. The Company recognized gains of approximately $9 million during the first six months of 2018 upon the closing of these transactions.

Leasehold and Property Acquisitions

During the second quarter and first six months of 2018, Apache completed $26 million and $38 million, respectively, of leasehold and property acquisitions primarily in its U.S. onshore and Egypt regions.

2017 Activity

Canada Divestitures

~~In July~~On June 30, 2017, Apache ~~announced three separate transactions to sell~~completed the sale of its ~~subsidiary Apache Canada Ltd. (ACL) and its~~ Canadian ~~operations for aggregate cash proceeds of approximately $713 million, subject to foreign exchange movements and customary closing adjustments. The sale of~~ assets at Midale and House Mountain, located in Saskatchewan and Alberta, ~~closed on June 30, 2017.~~for aggregate cash proceeds of approximately $228 million. The Company recognized a $52 million loss during the second quarter of 2017 in association with this sale. The ~~two~~Company completed the sale and complete exit of its remaining ~~transactions to sell ACL and Provost assets~~Canadian operations in ~~Alberta are expected to close in August 2017.~~

As a result of the agreements to sell these assets, the remaining ACL assets and liabilities qualified as held for sale as of June 30, 2017. A summary of the associated assets and liabilities classified as held for sale on Apache’s consolidated balance sheet as of June 30, 2017, is detailed below:

June 30, 2017
(In millions)
ASSETS
Current assets $ 105
Property, plant & equipment 1,126
Assets held for sale $ 1,231
LIABILITIES
Current liabilities, excluding asset retirement obligation $ 112
Asset retirement obligation 779
Other long-term liabilities 48
Liabilities held for sale $ 939

In connection with classifying these assets as held for sale, a separate impairment analysis was performed for each of the assets within the disposal group. The analyses were based on the agreed-upon proceeds less costs to sell for the two transactions related to ACL and Provost assets, a Level 1 fair value measurement. The net carrying value of the assets held for sale in the impairment calculation included consideration of the currency translation loss of $109 million, which is recorded in “Accumulated Other Comprehensive Loss” on the Company’s consolidated balance sheet. The currency translation loss will be recognized as a component of the expected net gain on sale during the third quarter of 2017 upon closing of the transactions. The fair value of the net assets held for sale exceeded the underlying equity value of ACL and the carrying amount of Provost assets at the balance sheet date, and no impairment was recognized. ACL recorded pretax losses of $93 million and $129 million for the second quarter and first six months of 2017, respectively, compared to pretax losses of $62 million and $161 million, respectively, for the comparable periods in 2016. The Company expects to recognize a small gain upon closing of the transactions during the third quarter of 2017.

U.S. Divestitures

During the first ~~half~~six months of 2017, Apache completed the sale of certain non-core assets, primarily in the Permian and Midcontinent/Gulf Coast regions, in multiple transactions for cash proceeds of $522 million, subject to customary closing adjustments. A refundable deposit of $40 million was received in the fourth quarter of 2016 in connection with certain of these transactions. The Company recognized gains of approximately $372 million during the first ~~half~~six months of 2017 in connection with these transactions.

~~North Sea GTP Divestiture~~

During the fourth quarter of 2016, Apache entered into an agreement to sell its 30.28 percent interest in the Scottish Area Gas Evacuation system (SAGE) and its 60.56 percent interest in the Beryl pipeline in the North Sea to Ancala Midstream Acquisitions Limited (Ancala). The transaction is subject to regulatory and third-party approvals, which are ongoing in 2017. The Company received a refundable deposit in connection with this transaction, which is recorded in “Other current liabilities” on the consolidated balance sheet. The refundable deposit was $142 million as of June 30, 2017.

Leasehold and Property Acquisitions

During the second quarter and first six months of 2017, Apache completed $18 million and $67 million, respectively, of leasehold and property acquisitions primarily in its ~~North America~~U.S. onshore regions.

~~2016 Activity~~

~~Leasehold~~3. CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $389 million and ~~Property Acquisitions~~

~~During~~$350 million at June 30, 2018 and December 31, 2017, respectively. The increase is primarily attributable to additional drilling activities during the ~~second quarter~~period, partially offset by successful transfers and ~~first~~dry hole write-offs. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2017 were charged to dry hole expense during the six months ended June 30, 2018. Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of ~~2016, Apache completed $99 million and $118 million, respectively,~~drilling are those identified by management as exhibiting sufficient quantities of ~~leasehold and property acquisitions primarily in its North America onshore regions and Egypt.~~

hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether reserves can be attributed to these projects.

4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies

The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production. Apache manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production. The Company utilizes various types of derivative financial instruments to manage fluctuations in cash flows resulting from changes in commodity prices. Apache has elected not to designate any of its derivative contracts as cash flow hedges.

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, Apache utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of June 30, ~~2017,~~2018, Apache had derivative positions with 1215 counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, Apache may not realize the benefit of some of its derivative instruments resulting from lower commodity prices.

Derivative Instruments

As of June 30, ~~2017,~~2018, Apache had the following open crude oil derivative positions:

Put Options ⁽¹⁾
Production Period Settlement Index Mbbls Weighted Average Strike Price
July - December 2017 NYMEX WTI 16,928 $50.00
July - December 2017 Dated Brent 15,272 $51.00



		Put Options⁽¹⁾
Production Period	Settlement Index	Mbbls	Weighted Average Strike Price
July—December 2018	Dated Brent	7,360	$56.00
July—December 2018	NYMEX WTI	5,520	$53.00


(1)	The remaining unamortized premium paid as of June 30, 2018, was $25 million.

~~(1)~~

Collars

Call Options⁽²⁾

Production Period

Settlement Index

Mbbls

Weighted Average Floor Price

Weighted Average Ceiling Price

Mbbls

Strike Price

July—December 2018

NYMEX WTI

3,404

$45.00

$57.00

3,404

$60.03


(2)	The remaining unamortized premium paid as of June 30, 2018, was $5 million.

As of June 30, 2018, Apache ~~paid a total premium of $100 million for these put option contracts, averaging $3.09 per barrel.~~had the following open crude oil financial basis swap contracts:



Production Period	Settlement Index	Mbbls	Weighted Average Price Differential
October—December 2018	Midland-WTI/Cushing-WTI	1,380	$(9.23)
January—September 2019	Midland-WTI/Cushing-WTI	4,095	$(9.23)
October—December 2019	Midland-WTI/Cushing-WTI	1,380	$(3.72)

As of June 30, ~~2017,~~2018, Apache had the following open natural gas derivative positions:

Fixed-Price Swaps
Production Period
MMBtu
(in 000’s)

Weighted Average Fixed Price⁽¹⁾⁽²⁾
July - December 2017 4,370 $3.46
January - March 2018 2,700 $3.60



		Fixed-Price Swaps
Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Fixed Price
July—December 2018	NYMEX Henry Hub	33,580	$2.96


~~(1)~~	~~U.S. natural gas prices represent a weighted-average of several contracts entered into on a per-million British thermal units (MMBtu) basis and are settled primarily against NYMEX Henry Hub.~~


~~(2)~~	Subsequent to June 30, 2017, Apache entered into fixed-price natural gas contracts settling against Nymex Henry Hub totaling 20,000 MMBtu/d at a weighted average price of $3.13 for the fourth quarter of 2017 and 120,000 MMBtu/d at a weighted average price of $3.33 for the first quarter of 2018.

As of June 30, 2018, Apache ~~elected not to designate any of these derivatives as cash flow hedges. Changes in~~had the fair value of these derivatives are recorded in “Other” under “Revenues and Other” in the Company’s statement of consolidated operations. Total unrealized gain in the second quarter and first six months of 2017 was $41 million.following open natural gas financial basis swap contracts:

Unrealized gains and losses for derivative activity recorded in the statement of consolidated operations is reflected in the statement of consolidated cash flows as a component of “Other” in “Adjustments to reconcile net income to net cash provided by operating activities.”



Production Period	Settlement Index	MMBtu (in 000’s)	Weighted Average Price Differential
July—December 2018	NYMEX Henry Hub/Waha	33,120	$(0.53)
October—December 2018	NYMEX Henry Hub/Waha	1,380	$(0.51)
January—March 2019	NYMEX Henry Hub/Waha	1,350	$(0.54)
January—June 2019	NYMEX Henry Hub/Waha	32,580	$(0.53)
January—December 2019	NYMEX Henry Hub/Waha	14,600	$(0.45)

Fair Value Measurements

Apache’s commodity derivative instruments consist of ~~put~~variable-to-fixed price commodity swaps, options, and ~~fixed-price swaps.~~collars. The fair values of the Company’s derivatives are not actively quoted in the open market. The Company uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing commodity futures pricing for the underlying commodities provided by a reputable third party, a Level 2 fair value measurement.

The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:



	Fair Value Measurements Using
	Quoted Price in Active Markets (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Netting⁽¹⁾			Carrying Amount
	(In millions)
June 30, 2018
Assets:
Commodity Derivative Instruments	$	—	$	124	$	—	$	124	$	(46	)	$	78
Liabilities:
Commodity Derivative Instruments	—		50		—		50		(46		)	4
December 31, 2017
Assets:
Commodity Derivative Instruments	$	—	$	67	$	—	$	67	$	(43	)	$	24
Liabilities:
Commodity Derivative Instruments	—		107		—		107		(43		)	64


(1)	The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.

All derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets ~~at June 30, 2017, was $141 million~~ and liabilities and their locations on the consolidated balance sheet are as follows:



	June 30, 2018		December 31, 2017
	(In millions)
Current Assets: Prepaid assets and other	$	74	$	8
Other Assets: Deferred charges and other	4		16
Total Assets	$	78	$	24

Current Liabilities: Other current liabilities	$	2	$	64
Noncurrent Liabilities: Other	2		—
Total Liabilities	$	4	$	64

Derivative Activity Recorded in the Statement of Consolidated Operations

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



	For the Quarter Ended June 30,					For the Six Months Ended June 30,
	2018			2017		2018			2017
	(In millions)
Realized loss:
Derivative settlements	$	(75	)	$	—	$	(117	)	$	—
Amortization of call and put premium	(5		)	—		(10		)	—
Unrealized gain	55			41		104			41
Derivative instrument gain (losses), net	$	(25	)	$	41	$	(23	)	$	41

Derivative instrument gains and losses are recorded in “Other” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized gains and losses for derivative activity recorded in the statement of consolidated operations is reflected in ~~“Prepaid assets and other”~~the statement of consolidated cash flows separately as “Unrealized derivative instrument gain, net” in ~~the Company’s consolidated balance sheet.~~

~~4. CAPITALIZED EXPLORATORY WELL COSTS~~

~~The Company’s capitalized exploratory well costs were $274 million and $264 million at June 30, 2017 and December 31, 2016, respectively. The increase is primarily attributable~~“Adjustments to ~~additional drilling activities during the period, partially offset~~reconcile net income to net cash provided by successful transfers and dry hole write-offs. No suspended exploratory well costs previously capitalized for greater than one year at December 31, 2016 were charged to dry hole expense during the six months ended June 30, 2017. Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling are those identified by management as exhibiting sufficient quantities of hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether reserves can be attributed to these projects.operating activities.”


5.	OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities as of June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
	(In millions)				(In millions)
Accrued operating expenses	$	76	$	110	$	76	$	72
Accrued exploration and development	608		463		603		680
Accrued gathering, transmission, and processing					70		122
Accrued compensation and benefits	76		201		90		115
Accrued interest	146		145		141		145
Accrued income taxes	77		22		110		55
Current debt	150		—
Current asset retirement obligation	35		66		38		43
Refundable deposits	142		174
Other	91		77		102		141
Total other current liabilities	$	1,401	$	1,258	$	1,230	$	1,373


6.	ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the six-month period ended June 30, ~~2017:~~2018:


	(In millions)			(In millions)
Asset retirement obligation at December 31, 2016	$	2,498
Asset retirement obligation at December 31, 2017				$	1,835
Liabilities incurred	38			18
Liabilities divested	(29		)
Liabilities settled	(21		)	(24		)
Accretion expense	73			54
Revisions in estimated liabilities	66
Liabilities held for sale	(779		)
Asset retirement obligation at June 30, 2017	1,846
Asset retirement obligation at June 30, 2018				1,883
Less current portion	35			(38		)
Asset retirement obligation, long-term	$	1,811		$	1,845


7.	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. Non-cash impairments of the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

In July 2017, Apache announced the sale of ACL and classified its investment in the subsidiary as held for sale as of June 30, 2017. For more information regarding this transaction, please refer to Note 2—Acquisitions and Divestitures. As a result of this transaction, Apache recorded a deferred tax asset associated with its investment in ACL and decreased its deferred tax liability associated with its investment in other foreign subsidiaries. This resulted in the Company recording a $674 million deferred income tax benefit in

During the second quarter of ~~2017.~~

~~Also during~~2018, Apache’s effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets. During the second quarter of 2017, Apache’s effective income tax rate was primarily impacted by the decrease in deferred taxes associated with its investments in foreign subsidiaries, gains on the sale of oil and gas properties and an increase in the amount of valuation allowance on Canadian deferred tax assets. ~~During the second quarter of 2016,~~

Apache’s 2018 year-to-date effective income tax rate was primarily impacted by an increase in the amount of valuation allowance ~~on Canadian~~against its U.S. deferred tax assets.

Apache’s 2017 year-to-date effective income tax rate iswas primarily impacted by the decrease in deferred taxes associated with its investments in foreign subsidiaries, gains on the sale of oil and gas properties, non-cash impairments of the Company’s PRT decommissioning asset, and an increase in the amount of valuation allowance on Canadian deferred tax assets. ~~Apache’s 2016 year-to-date effective~~

On December 22, 2017, the Tax Cuts and Jobs Act (the Act) was signed into law. In 2018, the Internal Revenue Service (IRS) issued additional guidance related to the Act’s deemed repatriation of foreign earnings (i.e., transition inclusion). In light of this new guidance, the Company continues to reevaluate the tax ~~rate was primarily impacted~~impact of the transition inclusion in 2017. Tax benefit associated with the change in transition inclusion is likely to be fully offset by ~~an increase~~a change in the Company’s valuation allowance ~~on Canadian~~against its U.S. deferred tax assets. The Company has not revised any other 2017 provisional estimates under Staff Accounting Bulletin No. 118, but is continuing to gather information and awaits further guidance from the IRS, SEC and FASB on the Act.

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. ~~In April 2017,~~The Company is currently under IRS audit for the ~~Internal Revenue Service (IRS) began their audit of the Company’s 2014 income~~2014-2016 tax ~~year. The Company~~years and is also under audit in various states and ~~in most of the Company’s~~ foreign jurisdictions as part of its normal course of business.


8.	DEBT AND FINANCING COSTS

The following table presents the carrying amounts and estimated fair values of the Company’s outstanding debt as of June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	June 30, 2017				December 31, 2016				June 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)								(In millions)
Commercial paper and committed bank facilities	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Notes and debentures	8,479		9,094		8,544		9,183		8,337		8,507		8,484		9,244
Total Debt	$	8,479	$	9,094	$	8,544	$	9,183	$	8,337	$	8,507	$	8,484	$	9,244

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

The following table presents the carrying value of the Company’s debt as of June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
	(In millions)						(In millions)
Debt before unamortized discount and debt issuance costs	$	8,580		$	8,650
Debt before unamortized discount and deferred loan costs							$	8,430		$	8,580
Unamortized discount	(49		)	(50		)	(46		)	(47		)
Debt issuance costs	(52		)	(56		)
Deferred loan costs							(47		)	(49		)
Total debt	8,479			8,544			8,337			8,484
Current maturities	(150		)	—			(400		)	(550		)
Long-term debt	$	8,329		$	8,544		$	7,937		$	7,934

As of June 30, 2018, current debt included $400 million of 6.9% senior notes due September 15, 2018. As of December 31, 2017, current debt also included $150 million of 7.0% senior notes due February 1, 2018 that matured and were repaid on February 1, 2018.

~~As of June 30, 2017,~~In March 2018, the Company ~~had~~entered into a revolving credit facility that matures in ~~June 2020, subject~~March 2023 (subject to Apache’s two, one-year extension ~~options.~~options) with commitments totaling $4.0 billion. The ~~facility provides for aggregate commitments of $3.5 billion (including a $750 million letter of credit subfacility), with rights to~~Company can increase commitments up to ~~an aggregate $4.5 billion. Proceeds from borrowings may be used~~$5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of June 30, 2018. The facility is for general corporate ~~purposes. Apache’s available~~purposes and committed borrowing capacity ~~under this facility~~fully supports ~~its $3.5 billion~~Apache’s commercial paper program. As of June 30, 2018, letters of credit aggregating approximately £129.1 million and no borrowings were outstanding under this facility. In connection with entry into this facility, Apache terminated $3.5 billion and £900 million in commitments under two former credit facilities and wrote off $4 million of associated deferred loan costs, which is included in “Financing costs, net” in the Company’s consolidated statement of operations.

The Company’s $3.5 billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days at competitive interest rates. As of June 30, ~~2017,~~2018, the Company had no commercial paper ~~or borrowings under committed bank facilities or uncommitted bank lines~~ outstanding.

As of June 30, 2017, the Company had a letter of credit facility, which provides for £900 million in commitments and rights to increase commitments to £1.075 billion. This facility matures in February 2020. The facility is available for letters of credit and loans to cash collateralize letters of credit or obligations to provide letters of credit, in each case, to the extent letters of credit are unavailable under the facility. As of June 30, 2017, three letters of credit aggregating approximately £147.5 million and no borrowings were outstanding under this facility.

In November 2016, the Company initiated a program to purchase in the open market up to $250 million in aggregate principal amount of senior notes issued under its indentures. In the fourth quarter of 2016, the Company purchased and canceled $181 million aggregate principal amount of its senior notes through open market repurchases for $182 million in cash, including accrued interest and $0.5 million of premium.

In January 2017, the Company purchased and canceled an additional $69 million aggregate principal amount of senior notes for $71 million in cash, including accrued interest and $1 million of premium, which completed the open market repurchase program. These repurchases resulted in a $1 million net loss on extinguishment of debt, which is included in “Financing costs, net” in the Company’s consolidated statement of operations. The net loss includes an acceleration of related discount and deferred financing costs.

Financing Costs, Net

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


	For the Quarter Ended June 30,						For the Six Months Ended June 30,						For the Quarter Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
	(In millions)												(In millions)
Interest expense	$	115		$	116		$	231		$	232		$	110		$	115		$	222		$	231
Amortization of deferred loan costs	2			2			4			3			1			2			6			4
Capitalized interest	(13		)	(12		)	(27		)	(23		)	(13		)	(13		)	(25		)	(27		)
Loss on extinguishment of debt	—			—			1			—			—			—			—			1
Interest income	(5		)	(2		)	(10		)	(3		)	(4		)	(5		)	(10		)	(10		)
Financing costs, net	$	99		$	104		$	199		$	209		$	94		$	99		$	193		$	199


9.	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 June 30, ~~2017,~~2018, the Company has an accrued liability of approximately ~~$26~~$35 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 10—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, ~~2016.~~2017.

Argentine Environmental Claims and Argentina Tariff

No material change in the status of the YPF Sociedad Anónima and Pioneer Natural Resources Company indemnities matters has occurred since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017.

Louisiana Restoration

As more fully described in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, numerous~~2017, Louisiana surface owners ~~have filed~~often file lawsuits or assert claims ~~or sent demand letters to various~~against oil and gas companies, including Apache, claiming that ~~under either express or implied lease terms or Louisiana law,~~operators and working interest owners in the ~~companies~~chain of title are liable for ~~damage~~environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to ~~their~~its original condition, ~~as well as damages for contamination and cleanup.~~

~~On July 24, 2013, a lawsuit captioned~~ ~~Board of Commissioners~~regardless of the ~~Southeast Louisiana Flood Protection Authority – East v. Tennessee Gas Pipeline~~value of the underlying property. From time to time restoration lawsuits and claims are resolved by the Company ~~et al., Case No. 2013-6911 was filed in the Civil District Court~~ for ~~the Parish of Orleans, State of Louisiana, in which plaintiff on behalf of itself and as the board governing the levee districts of Orleans, Lake Borgne Basin, and East Jefferson alleged~~amounts that Louisiana coastal lands have been damaged as a result of oil and gas industry activity, including a network of canals for access and pipelines. The defendants removed the case from state court to federal court and, on February 13, 2015, the federal court entered judgment in favor of defendants dismissing all of plaintiff’s claims with prejudice. Plaintiff appealed the lower court’s dismissalare not material to the 5^th ~~Circuit Court of Appeals~~Company, while new lawsuits and ~~additionally challenged~~claims are asserted against the ~~defendants’ right~~Company. With respect to ~~remove the case to federal court. On March 3, 2017, the 5~~^th Circuit Court of Appeals affirmed the propriety of federal jurisdiction based in part on Apache’s argument that plaintiff’s state-based claims required a resolution of substantial questions of federal law and also affirmed the dismissaleach of the ~~action. The Plaintiff has now filed a Petition for a Writ of Certiorari with~~pending lawsuits and claims, the ~~United States Supreme Court.~~amount claimed is not currently determinable or is not material, except as noted. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While an adverse judgment against Apache is possible, Apache intends to actively defend these lawsuits and claims.

Starting in November of 2013 and continuing into ~~2017,~~2018, several ~~Parishes~~parishes in Louisiana have pending lawsuits against many oil and gas producers, including Apache. These cases ~~are pending in~~have all been removed to federal ~~and~~court after having once been remanded back to state ~~courts in Louisiana.~~court. In these cases, the Parishes, as plaintiffs, allege that defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable ~~state~~ law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While an adverse judgment against Apache might be possible, Apache intends to vigorously oppose these 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 the fiscal year ended December 31, ~~2016.~~

2017.

Apollo Exploration Lawsuit

In ~~a fourth amended petition filed on March 21, 2016, in~~ a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, plaintiffs ~~have reduced their~~ alleged damages ~~to approximately $500~~in excess of $200 million (having previously claimed in excess of $1.1 billion) 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. The Court granted motions filed by Apache reducing the plaintiffs’ alleged damages to an amount that is not material to the Company. Apache believes that plaintiffs’ claims lack merit and ~~further that plaintiffs’ alleged damages, even as amended, are grossly inflated. Apache~~ will vigorously oppose 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 the fiscal year ended December 31, ~~2016.~~2017.

~~Escheat Audits~~Australian Operations Divestiture Dispute

~~There has been no material change with respect to the review of the books~~By a Sale and ~~records of~~Purchase Agreement dated April 9, 2015 (SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, Apache filed suit against Quadrant for breach of the SPA. In its suit, Apache seeks approximately $80 million. In December 2017, Quadrant filed a defense of equitable set-off to Apache’s claim and ~~related entities by~~a counterclaim seeking approximately $200 million in the State of Delaware, Department of Finance (Unclaimed Property), to determine compliance with the Delaware Escheat Laws, since the filing of Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

~~Environmental Matters~~

As of June 30, 2017, the Company had an undiscounted reserve for environmental remediation of approximately $45 million, of which $41 million relates to Canadian operations classified as held for sale.aggregate. The Company isbelieves that Quadrant’s claims lack merit and will not ~~aware of any environmental claims existing as of June 30, 2017, 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.

ACL reported a produced water release from a water injection pipeline in a remote area of the Belloy Field that occurred on or about May 4, 2016 and a hydrogen sulfide and oil emulsion leak in the Zama area on or about September 17, 2016. The affected areas have been or are currently being remediated. The Company does not expect the economic impact of any of these incidents to have a materialadverse effect on the Company’s financial position, results of ~~operations,~~operation, 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 the fiscal year ended December 31, 2016.~~

~~In addition to the matters for which we have already accrued, on~~California Litigation

On July 17, 2017, in three separate actions, San Mateo County, California, Marin County, California, and the City of Imperial Beach, California, all filed suit individually and on behalf of the people of the state of California against over 30 oil, gas, and coal companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. On December 20, 2017, in two separate actions, the City of Santa Cruz, California and Santa Cruz County, California and in a separate action on January 22, 2018, the City of Richmond, California, filed similar lawsuits against many of the same defendants. The lawsuits were removed to federal court and then consolidated. Although the federal court remanded the lawsuits back to state court, it stayed its order of remand and certified the jurisdictional inquiry for appeal to the 9^th Circuit Court of Appeals. Apache believes that the claims made against it are baseless and intends to vigorously defend these lawsuits.

~~Australian Operations Divestiture Dispute~~

~~By a Sale and Purchase Agreement dated April 9, 2015 (SPA),~~

Environmental Matters

As of June 30, 2018, the Company and its subsidiaries divested their remaining Australian operations to Viraciti Energy Pty Ltd, which has since been renamed Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. By letter dated June 6, 2016, Quadrant provided the Company with a one-year placeholder noticehad an undiscounted reserve for environmental remediation of ~~claim under the SPA concerning tax and other issues totaling~~ approximately ~~$200 million in the aggregate.~~$4 million. The Company is ~~in the process~~not aware of ~~reviewing the issues raised by Quadrant and believes at this time~~any environmental claims existing as of June 30, 2018, that ~~these matters will~~have not been provided for or that would otherwise have a material ~~adverse effect~~impact on ~~the Company’s~~its financial position, results of ~~operation,~~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.


10.	CAPITAL STOCK

Net Income ~~(Loss)~~ per Common Share

A reconciliation of the components of basic and diluted net income ~~(loss)~~ per common share for the quarters and six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, is presented in the table below.

For the Quarter Ended June 30,
2017 2016
Income Shares Per Share Loss Shares Per Share
(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock $ 572
381
$ 1.50
$ (244 ) 379
$ (0.65 )
Effect of Dilutive Securities:
Stock options and other $ —
2
$ —
$ —
—
$ —
Diluted:
Income (loss) attributable to common stock $ 572
383
$ 1.50
$ (244 ) 379
$ (0.65 )

For the Six Months Ended June 30,
2017 2016
Income Shares Per Share Loss Shares Per Share
(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock $ 785
380
$ 2.06
$ (616 ) 379
$ (1.63 )
Effect of Dilutive Securities:
Stock options and other $ —
3
$ (0.01 ) $ —
—
$ —
Diluted:
Income (loss) attributable to common stock $ 785
383
$ 2.05
$ (616 ) 379
$ (1.63 )



	For the Quarter Ended June 30,
	2018					2017
	Income		Shares	Per Share		Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income attributable to common stock	$	195	382	$	0.51	$	572	381	$	1.50
Effect of Dilutive Securities:
Stock options and other	$	—	3	$	—	$	—	2	$	—
Diluted:
Income attributable to common stock	$	195	385	$	0.51	$	572	383	$	1.50



	For the Six Months Ended June 30,
	2018						2017
	Income		Shares	Per Share			Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:
Income attributable to common stock	$	340	382	$	0.89		$	785	380	$	2.06
Effect of Dilutive Securities:
Stock options and other	$	—	2	$	(0.01	)	$	—	3	$	(0.01	)
Diluted:
Income attributable to common stock	$	340	384	$	0.88		$	785	383	$	2.05

The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling ~~8.5~~5.9 million and ~~6.3~~8.5 million for the quarters ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~8.6~~6.4 million and ~~7.4~~8.6 million for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

Common Stock Dividends

For ~~each of~~ the quarters ended June 30, ~~2017,~~2018 and ~~2016,~~2017, Apache paid $96 million and $95 million, respectively, in dividends on its common stock. For the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, the Company paid ~~$190~~$191 million and ~~$189~~$190 million, respectively.

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 negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through June 30, ~~2017,~~2018, had repurchased a total of 32.2 million shares at an average price of $88.96 per share. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during ~~2017.~~2018.


11.	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 June 30, ~~2017,~~2018, the Company had production in ~~four~~three reporting segments: the ~~United States, Canada,~~U.S., Egypt, and offshore the ~~United Kingdom~~U.K. in the North Sea (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity. Financial information for each area is presented below:


	United States			Canada			Egypt⁽¹⁾		North Sea		Other International			Total			United States		Canada⁽¹⁾		Egypt^(2,3)		North Sea		Other International			Total
	(In millions)																(In millions)
For the Quarter Ended June 30, 2017
Oil and Gas Production Revenues	$	491		$	93		$	521	$	241	$	—		$	1,346
Operating Income (Loss)⁽²⁾	$	(17	)	$	(18	)	$	213	$	4	$	(2	)	$	180
For the Quarter Ended June 30, 2018
Oil revenues																	$	607	$	—	$	649	$	320	$	—		$	1,576
Natural gas revenues																	96		—		89		27		—			212
Natural gas liquids revenues																	139		—		4		5		—			148
Total Oil and Gas Production Revenues																	$	842	$	—	$	742	$	352	$	—		$	1,936
Operating Income (Loss)⁽⁴⁾																	$	192	$	—	$	401	$	146	$	(1	)	$	738
Other Income (Expense):
Loss on divestitures, net														(21		)
Other														59
Gain on divestitures, net																												2
Other⁽⁵⁾																												(9		)
General and administrative														(106		)												(117		)
Transaction, reorganization, and separation														(4		)												(12		)
Financing costs, net														(99		)												(94		)
Income Before Income Taxes														$	9													$	508

For the Six Months Ended June 30, 2017
Oil and Gas Production Revenues	$	1,043		$	195		$	1,112	$	508	$	—		$	2,858
Operating Income (Loss)⁽²⁾	$	43		$	(31	)	$	514	$	42	$	(23	)	$	545
For the Six Months Ended June 30, 2018
Oil revenues																	$	1,160	$	—	$	1,218	$	591	$	—		$	2,969
Natural gas revenues																	206		—		177		51		—			434
Natural gas liquids revenues																	250		—		7		9		—			266
Total Oil and Gas Production Revenues																	$	1,616	$	—	$	1,402	$	651	$	—		$	3,669
Operating Income (Loss)⁽⁴⁾																	$	376	$	—	$	737	$	214	$	(2	)	$	1,325
Other Income (Expense):
Gain on divestitures, net														320														9
Other														84
Other⁽⁵⁾																												(2		)
General and administrative														(209		)												(231		)
Transaction, reorganization, and separation														6														(12		)
Financing costs, net														(199		)												(193		)
Income Before Income Taxes														$	547													$	896
Total Assets	$	12,530		$	1,476		$	4,778	$	3,772	$	46		$	22,602		$	14,250	$	—	$	4,471	$	3,148	$	41		$	21,910


	United States			Canada			Egypt⁽¹⁾		North Sea			Other International			Total			United States			Canada⁽¹⁾			Egypt^(2,3)		North Sea		Other International			Total
	(In millions)																	(In millions)
For the Quarter Ended June 30, 2016
Oil and Gas Production Revenues	$	520		$	73		$	542	$	251		$	—		$	1,386
Operating Income (Loss)⁽³⁾	$	(109	)	$	(57	)	$	220	$	(115	)	$	—		$	(61	)
For the Quarter Ended June 30, 2017
Oil revenues																		$	355		$	47		$	423	$	225	$	—		$	1,050
Natural gas revenues																		84			40			95		14		—			233
Natural gas liquids revenues																		52			6			3		2		—			63
Total Oil and Gas Production Revenues																		$	491		$	93		$	521	$	241	$	—		$	1,346
Operating Income (Loss)⁽⁶⁾																		$	(17	)	$	(18	)	$	213	$	4	$	(2	)	$	180
Other Income (Expense):
Loss on divestitures, net																															(21		)
Other																															59
General and administrative																															(106		)
Transaction, reorganization, and separation																															(4		)
Financing costs, net																															(99		)
Income Before Income Taxes																															$	9

For the Six Months Ended June 30, 2017
Oil revenues																		$	752		$	96		$	909	$	465	$	—		$	2,222
Natural gas revenues																		169			85			197		37		—			488
Natural gas liquids revenues																		122			14			6		6		—			148
Total Oil and Gas Production Revenues																		$	1,043		$	195		$	1,112	$	508	$	—		$	2,858
Operating Income (Loss)⁽⁶⁾																		$	43		$	(31	)	$	514	$	42	$	(23	)	$	545
Other Income (Expense):
Gain on divestitures, net															17																320
Other															(21		)														84
General and administrative															(103		)														(209		)
Transaction, reorganization, and separation															(9		)														6
Financing costs, net															(104		)														(199		)
Loss Before Income Taxes															$	(281	)

For the Six Months Ended June 30, 2016
Oil and Gas Production Revenues	$	929		$	156		$	934	$	454		$	—		$	2,473
Operating Income (Loss)⁽³⁾	$	(267	)	$	(118	)	$	261	$	(101	)	$	(1	)	$	(226	)
Other Income (Expense):
Gain on divestitures, net															16
Other															(24		)
General and administrative															(196		)
Transaction, reorganization, and separation															(24		)
Financing costs, net															(209		)
Loss Before Income Taxes															$	(663	)
Income Before Income Taxes																															$	547
Total Assets	$	12,383		$	2,070		$	5,520	$	4,326		$	47		$	24,346		$	12,530		$	1,476		$	4,778	$	3,772	$	46		$	22,602


(1)	Apache exited its Canadian operations in the third quarter of 2017.


(2)	Includes a noncontrolling interest in Egypt.


~~(2)~~(3)	Includes revenue from non-customer of $165 million, $15 million, and $1 million for oil, natural gas, and natural gas liquids, respectively, for the second quarter of 2018, and $304 million, $30 million, and $2 million, for oil, natural gas, and natural gas liquids, respectively, for the first six months of 2018.

(4)

Operating income (loss) consists of oil and gas production revenues less lease operating expenses, gathering, transmission, and ~~transportation~~processing costs, taxes other than income, exploration costs, depreciation, depletion, and amortization, asset retirement obligation accretion, and impairments. The operating income of U.S. includes leasehold impairments totaling $21 million for the second quarter of 2018. The operating income of U.S. includes leasehold impairments totaling $37 million for the first six months of 2018.


(5)	Included in Other are sales proceeds related to U.S. third-party purchased oil and gas totaling $98 million and $202 million for the second quarter and first six months of 2018, respectively, which are determined to be revenue from customers.


(6)	The operating income (loss) of U.S. and Canada includes leasehold impairments totaling $38 million and $1 million, respectively, for the second quarter of 2017. The operating income (loss) of U.S., Canada and North Sea includes leasehold and other asset impairments totaling ~~$52~~$52 million $2, $2 million, and $8$8 million, respectively, for the first six months of 2017.

~~(3)~~

The operating income (loss) of U.S., Canada, and North Sea includes leasehold, property, and other asset impairments totaling $125 million, $9 million, and $105 million, respectively, for the second quarter of 2016. The operating income (loss) of U.S., Canada, and North Sea includes leasehold, property, and other asset impairments totaling $166 million, $10 million, and $105 million, respectively, for the first six months of 2016.


~~12.~~	~~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.

~~APACHE CORPORATION~~ITEM 2. MANAGEMENT’S DISCUSSION AND ~~SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENT~~ANALYSIS OF ~~OPERATIONS~~

~~For the Quarter Ended June 30, 2017~~

Apache
Corporation

Apache
Finance
Canada

All Other
Subsidiaries
of Apache
Corporation

Reclassifications
& Eliminations
Consolidated
(In millions)
REVENUES AND OTHER:
Oil and gas production revenues $ 248
$ —
$ 1,098
$ —
$ 1,346
Equity in net income (loss) of affiliates (34 ) (26 ) —
60
—
Other 62
8
(11 ) —
59
Gain (loss) on divestiture 34
—
(55 ) —
(21 )
310
(18 ) 1,032
60
1,384
OPERATING EXPENSES:
Lease operating expenses 79
—
293
—
372
Gathering and transportation 7
—
41
—
48
Taxes other than income 24
—
5
—
29
Exploration 54
—
54
—
108
General and administrative 91
—
15
—
106
Transaction, reorganization, and separation 4
—
—
—
4
Depreciation, depletion, and amortization 130
—
442
—
572
Asset retirement obligation accretion 5
—
32
—
37
Financing costs, net 60
6
33
—
99
454
6
915
—
1,375
NET INCOME (LOSS) BEFORE INCOME TAXES (144 ) (24 ) 117
60
9
Provision (benefit) for income taxes (716 ) 2
110
—
(604 )
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST 572
(26 ) 7
60
613
Net income attributable to noncontrolling interest —
—
41
—
41
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $ 572
$ (26 ) $ (34 ) $ 60
$ 572

~~APACHE CORPORATION~~FINANCIAL CONDITION AND ~~SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENT~~RESULTS OF OPERATIONS

~~For the Quarter Ended June 30, 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 $ 270
$ —
$ 1,116
$ —
$ 1,386
Equity in net income (loss) of affiliates (76 ) 6
—
70
—
Other (22 ) 9
(8 ) —
(21 )
Gain (loss) on divestiture (1 ) —
18
—
17
171
15
1,126
70
1,382
OPERATING EXPENSES:
Lease operating expenses 66
—
293
—
359
Gathering and transportation 10
—
42
—
52
Taxes other than income 22
—
43
—
65
Exploration 76
—
15
—
91
General and administrative 86
—
17
—
103
Transaction, reorganization, and separation 9
—
—
—
9
Depreciation, depletion, and amortization 159
—
510
—
669
Asset retirement obligation accretion 5
—
33
—
38
Impairments 61
—
112
—
173
Financing costs, net 64
7
33
—
104
558
7
1,098
—
1,663
NET INCOME (LOSS) BEFORE INCOME TAXES (387 ) 8
28
70
(281 )
Provision (benefit) for income taxes (143 ) 2
60
—
(81 )
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST (244 ) 6
(32 ) 70
(200 )
Net income attributable to noncontrolling interest —
—
44
—
44
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $ (244 ) $ 6
$ (76 ) $ 70
$ (244 )

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~For the Six Months Ended June 30, 2017~~

Apache
Corporation

Apache
Finance
Canada

All Other
Subsidiaries
of Apache
Corporation

Reclassifications
& Eliminations
Consolidated
(In millions)
REVENUES AND OTHER:
Oil and gas production revenues $ 532
$ —
$ 2,326
$ —
$ 2,858
Equity in net income (loss) of affiliates 188
(27 ) —
(161 ) —
Other 70
16
(2 ) —
84
Gain on divestitures 175
—
145
—
320
965
(11 ) 2,469
(161 ) 3,262
OPERATING EXPENSES:
Lease operating expenses 160
—
548
—
708
Gathering and transportation 14
—
91
—
105
Taxes other than income 47
—
24
—
71
Exploration 82
—
118
—
200
General and administrative 181
—
28
—
209
Transaction, reorganization, and separation (6 ) —
—
—
(6 )
Depreciation, depletion, and amortization 265
—
883
—
1,148
Asset retirement obligation accretion 11
—
62
—
73
Impairments —
—
8
—
8
Financing costs, net 120
12
67
—
199
874
12
1,829
—
2,715
NET INCOME (LOSS) BEFORE INCOME TAXES 91
(23 ) 640
(161 ) 547
Provision (benefit) for income taxes (694 ) 4
357
—
(333 )
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST 785
(27 ) 283
(161 ) 880
Net income attributable to noncontrolling interest —
—
95
—
95
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $ 785
$ (27 ) $ 188
$ (161 ) $ 785

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~For the Six Months Ended June 30, 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 $ 487
$ —
$ 1,986
$ —
$ 2,473
Equity in net income (loss) of affiliates (184 ) (20 ) —
204
—
Other 6
21
(51 ) —
(24 )
Gain (loss) on divestitures (2 ) —
18
—
16
307
1
1,953
204
2,465
OPERATING EXPENSES:
Lease operating expenses 144
—
593
—
737
Gathering and transportation 19
—
85
—
104
Taxes other than income 43
—
33
—
76
Exploration 126
—
60
—
186
General and administrative 163
—
33
—
196
Transaction, reorganization, and separation 24
—
—
—
24
Depreciation, depletion, and amortization 315
—
1,032
—
1,347
Asset retirement obligation accretion 9
—
67
—
76
Impairments 61
—
112
—
173
Financing costs, net 125
17
67
—
209
1,029
17
2,082
—
3,128
NET INCOME (LOSS) BEFORE INCOME TAXES (722 ) (16 ) (129 ) 204
(663 )
Provision (benefit) for income taxes (106 ) 4
10
—
(92 )
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST (616 ) (20 ) (139 ) 204
(571 )
Net income attributable to noncontrolling interest —
—
45
—
45
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $ (616 ) $ (20 ) $ (184 ) $ 204
$ (616 )

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~For the Six Months Ended June 30, 2017~~

Apache
Corporation

Apache
Finance
Canada

All Other
Subsidiaries
of Apache
Corporation

Reclassifications
& Eliminations
Consolidated
(In millions)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (280 ) $ (13 ) $ 1,499
$ —
$ 1,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property (235 ) —
(648 ) —
(883 )
Leasehold and property acquisitions (58 ) —
(9 ) —
(67 )
Additions to gas gathering, transmission, and processing facilities —
—
(274 ) —
(274 )
Proceeds from sale of Midale and House Mountain —
—
228
—
228
Proceeds from sale of oil and gas properties —
—
483
—
483
Investment in subsidiaries, net 668
—
—
(668 ) —
Other (9 ) —
(7 ) —
(16 )
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 366
—
(227 ) (668 ) (529 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany borrowings —
259
(927 ) 668
—
Payment of fixed-rate debt (70 ) —
—
—
(70 )
Distributions to noncontrolling interest —
—
(170 ) —
(170 )
Common stock activity, net —
—
—
—
—
Dividends paid (190 ) —
—
—
(190 )
Other —
—
43
—
43
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (260 ) 259
(1,054 ) 668
(387 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (174 ) 246
218
—
290
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 344
—
1,033
—
1,377
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 170
$ 246
$ 1,251
$ —
$ 1,667

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~For the Six Months Ended June 30, 2016~~

Apache
Corporation

Apache
Finance
Canada

All Other
Subsidiaries
of Apache
Corporation

Reclassifications
& Eliminations
Consolidated
(In millions)
CASH PROVIDED BY OPERATING ACTIVITIES $ 110
$ —
$ 873
$ —
$ 983
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property (53 ) —
(872 ) —
(925 )
Leasehold and property acquisitions (53 ) —
(65 ) —
(118 )
Investment in subsidiaries, net (39 ) —
—
39
—
Other (3 ) —
80
—
77
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (148 ) —
(857 ) 39
(966 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany borrowings —
1
38
(39 ) —
Distributions to noncontrolling interest —
—
(93 ) —
(93 )
Dividends paid (189 ) —
—
—
(189 )
Other 1
(1 ) (1 ) —
(1 )
NET CASH USED IN FINANCING ACTIVITIES (188 ) —
(56 ) (39 ) (283 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (226 ) —
(40 ) —
(266 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 378
—
1,089
—
1,467
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 152
$ —
$ 1,049
$ —
$ 1,201

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~June 30, 2017~~

Apache
Corporation

Apache
Finance
Canada

All Other
Subsidiaries
of Apache
Corporation

Reclassifications
& Eliminations
Consolidated
(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 170
$ 246
$ 1,251
$ —
$ 1,667
Receivables, net of allowance 300
—
715
—
1,015
Inventories 24
—
392
—
416
Drilling advances 5
—
94
—
99
Assets held for sale —
—
1,231
—
1,231
Prepaid assets and other 178
—
41
—
219
Intercompany receivable 5,453
—
—
(5,453 ) —
6,130
246
3,724
(5,453 ) 4,647
PROPERTY AND EQUIPMENT, NET 7,232
—
10,319
—
17,551
OTHER ASSETS:
Intercompany receivable —
—
12,876
(12,876 ) —
Equity in affiliates 15,705
(1,252 ) 691
(15,144 ) —
Deferred charges and other 105
1,000
299
(1,000 ) 404
$ 29,172
$ (6 ) $ 27,909
$ (34,473 ) $ 22,602
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 371
$ —
$ 162
$ —
$ 533
Liabilities held for sale —
—
939
—
939
Other current liabilities 699
4
698
—
1,401
Intercompany payable —
247
5,206
(5,453 ) —
1,070
251
7,005
(5,453 ) 2,873
LONG-TERM DEBT 8,032
297
—
—
8,329
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Intercompany payable 12,876
—
—
(12,876 ) —
Income taxes (968 ) 5
2,021
—
1,058
Asset retirement obligation 355
—
1,456
—
1,811
Other 908
2
356
(1,000 ) 266
13,171
7
3,833
(13,876 ) 3,135
COMMITMENTS AND CONTINGENCIES

APACHE SHAREHOLDERS’ EQUITY 6,899
(561 ) 15,705
(15,144 ) 6,899
Noncontrolling interest —
—
1,366
—
1,366
TOTAL EQUITY 6,899
(561 ) 17,071
(15,144 ) 8,265
$ 29,172
$ (6 ) $ 27,909
$ (34,473 ) $ 22,602

~~APACHE CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~December 31, 2016~~

Apache
Corporation

Apache
Finance
Canada

All Other
Subsidiaries
of Apache
Corporation

Reclassifications
& Eliminations
Consolidated
(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 344
$ —
$ 1,033
$ —
$ 1,377
Receivables, net of allowance 358
—
770
—
1,128
Inventories 29
—
447
—
476
Drilling advances 4
—
77
—
81
Prepaid assets and other 134
—
45
—
179
Intercompany receivable 5,038
—
—
(5,038 ) —
5,907
—
2,372
(5,038 ) 3,241
PROPERTY AND EQUIPMENT, NET 7,014
—
11,853
—
18,867
OTHER ASSETS:
Intercompany receivable —
—
12,152
(12,152 ) —
Equity in affiliates 15,517
(1,240 ) 706
(14,983 ) —
Deferred charges and other 97
1,000
314
(1,000 ) 411
$ 28,535
$ (240 ) $ 27,397
$ (33,173 ) $ 22,519
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 371
$ (12 ) $ 226
$ —
$ 585
Other current liabilities 653
3
602
—
1,258
Intercompany payable —
—
5,038
(5,038 ) —
1,024
(9 ) 5,866
(5,038 ) 1,843
LONG-TERM DEBT 8,247
297
—
—
8,544
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Intercompany payable 12,152
—
—
(12,152 ) —
Income taxes (271 ) 5
1,976
—
1,710
Asset retirement obligation 257
—
2,175
—
2,432
Other 888
1
422
(1,000 ) 311
13,026
6
4,573
(13,152 ) 4,453
COMMITMENTS AND CONTINGENCIES

APACHE SHAREHOLDERS’ EQUITY 6,238
(534 ) 15,517
(14,983 ) 6,238
Noncontrolling interest —
—
1,441
—
1,441
TOTAL EQUITY 6,238
(534 ) 16,958
(14,983 ) 7,679
$ 28,535
$ (240 ) $ 27,397
$ (33,173 ) $ 22,519


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

The following discussion relates to Apache Corporation and its consolidated subsidiaries and should be read in conjunction with the Company’s 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 the Company’s consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017.

Overview

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. ~~The Company~~Apache currently has exploration and production operations in ~~four~~three geographic areas: the United States (U.S.), ~~Canada,~~ Egypt, and offshore the United Kingdom (U.K.) in the North Sea (North Sea). Apache also has exploration interests in Suriname that may, over time, result in a reportable discovery and development opportunity.

~~Over~~ In the past several years, Apache has structured its business to adapt and thrive in a lower-for-longer price environment. The Company reacted quickly to the changing dynamics in commodity markets, stressing the importancethird quarter of ~~properly aligning cost structure with commodity prices, as well as achieving and maintaining cash flow neutrality.~~2017, Apache completed ~~a series~~the sale of ~~transactions that simplified~~ its portfolio, reduced operating costs, overhead, and capital commitments, and strengthened its balance sheet. Apache entered 2017 with an asset base, an organization, and a strategic focus expected to deliver highly competitive, returns-focused organic growth for many years to come.

Apache has transitioned away from a longer-cycle, internationally focused investment program and expanded and enhanced its organic, unconventional acreage footprint and technical capabilities. This positioned the Company to execute its strategy of driving returns-focused growth in the U.S. while delivering strong and sustainable cash flow from its core businesses in Egypt and the North Sea.Canadian operations.

Apache reported second quarter net income of $195 million, or $0.51 per common share, compared to net income of $572 million, or $1.50 per common share, ~~compared to a loss of $244 million, or $0.65 per common share,~~ in the second quarter of ~~2016.~~2017. The ~~increase~~decrease in net income compared to the prior-year quarter is primarily the result of a $674 million deferred income tax ~~benefits related to~~benefit recorded in the second quarter of 2017 associated with the sale of ~~our operations in Canada, as well as impairment charges incurred in~~Apache’s Canadian operations. Income before taxes increased $499 million between the ~~prior period. Revenue gains from significant increases in realized commodity prices mitigated the impact of production declines.~~periods. Daily production in the second quarter of ~~2017~~2018 averaged ~~460 thousand barrels~~464 Mboe/d, an increase of ~~oil equivalent per day (Mboe/d), a decrease of 14~~1 percent from the comparative prior-year ~~quarter due to natural decline. This decline is a result~~quarter. Excluding Canada, Apache’s daily production increased 13 percent driven by the continued development of ~~Apache’s decision to curtail drilling activity over the past two years until costs aligned with lower commodity prices, as well as~~ the Company’s ~~significant allocation of capital investments toward the~~ Alpine High ~~development~~field and ~~associated infrastructure, which achieved first production in May 2017.~~infrastructure.

The Company generated ~~$1.2~~$1.7 billion in cash from operating activities during the first six months of ~~2017,~~2018, a 2343 percent increase from the ~~comparative~~comparable prior-year ~~period. In addition, the Company generated $711 million of cash proceeds~~period driven by higher revenues from ~~non-core asset divestments, with an additional $485 million of proceeds from our announced Canadian divestitures expected in the third quarter.~~increased Permian production and stronger realized commodity prices. Apache ended the quarter with ~~$1.7~~$1.0 billion of cash, while continuing its midstream infrastructure build-out and paying down $150 million of debt.

During the first half of 2018, Apache invested approximately $1.5 billion in its upstream operations, excluding noncontrolling interest, and $243 million in Alpine High midstream. The Company anticipates maintaining this investment pace in the second half of the year, bringing full-year 2018 capital investment outlook to approximately $3.4 billion, an increase of ~~$290~~$400 million from ~~year-end 2016.~~prior guidance. The majority of this incremental capital is being directed to the Permian, where Apache ~~also~~is increasing investment to align and optimize its drilling and completion program.

Realized oil prices have been considerably higher than budgeted this year, particularly Dated Brent, which has ~~$3.5 billion~~provided the cash flow to reinvest in ~~available committed borrowing capacity. This financial capacity provides for~~the Company’s core assets and generate high rates of return without a ~~capital program commensurate with prevailing commodity prices and a focus~~material impact on ~~long-term returns without stressing the~~its balance ~~sheet or diluting shareholders.~~sheet.

Operating Highlights

~~Significant operating activities~~Key operational highlights for the quarter ~~include the following:~~include:

~~North America~~United States

~~North America~~U.S. onshore equivalent production ~~was down 16~~increased 33 percent ~~for~~from the second quarter ~~relative to~~of 2017, a reflection of the ~~2016 period, in line with our expectations given~~success of the ~~significant reduction in capital investments over~~Midland Basin drilling program and the ~~past two years.~~commencement and continued production ramp-up of the Company’s Alpine High development.

Second-quarter equivalent production from the Permian ~~Basin~~ region, which accounts for ~~more than half~~79 percent of Apache’s total ~~North American~~U.S. production, ~~decreased 12~~increased 39 percent from the second quarter of ~~2016 as a result of fewer wells placed on~~2017, driven by the Alpine High discovery and strong performance in the Midland Basin. Crude oil production ~~during~~in the ~~previous two years. Second-quarter production was relatively flat with~~region increased 25 percent between the ~~prior sequential quarter, a reflection of increased activity during 2017.~~comparative quarters.

Drilling and infrastructure development activities continue at Alpine High; specifically:


◦	First production from the Alpine High play was achieved in early May ~~2017, with net gas~~2017. Net production ~~now exceeding 60 million cubic feet~~for the second quarter of ~~natural gas per day (MMcf/d), which is projected to increase to more than 100 MMcf/d by the end of September.~~2018 averaged approximately 32.1 Mboe/d.


◦	Development continues to ramp-up steadily as the Company drills more development wells in the overall mix of its drilling program at Alpine High. Apache is now conducting key spacing and pattern tests in addition to its ongoing retention drilling program.


◦	During the ~~first half~~second quarter of ~~2017,~~2018, Apache invested ~~$270~~$123 million in ~~midstream facilities at~~ Alpine High infrastructure, with development ongoing. Inception-to-date investment in Alpine High infrastructure as of quarter-end was $949 million.

◦

~~Well optimization work and appraisal drilling continued during the quarter.~~ The Company ~~drilled 4 appraisal wells~~is in the ~~oil window~~process of evaluating opportunities for monetizing its Alpine High midstream assets, including options for minority interests in transportation projects from the ~~Wolfcamp/Bone Springs formations, where we continue~~Permian Basin to ~~expand our inventory of drilling locations.~~the Gulf Coast.

In July 2017, Apache announced three separate transactions to sell its subsidiary Apache Canada Ltd. (ACL) and its Canadian operations for aggregate cash proceeds of approximately $713 million, subject to foreign exchange movements and customary closing adjustments. The sale of assets at Midale and House Mountain, located in Saskatchewan and Alberta, closed on June 30, 2017 for $228 million of cash proceeds, with the two remaining transactions to sell ACL and Provost assets in Alberta expected to close in August 2017. The sale of Apache’s Canadian operations further streamlines our portfolio, enables us to allocate a higher percentage of capital to the Permian Basin, and eliminates approximately $800 million of asset retirement obligations from the Company’s balance sheet.

International

The Egypt region averaged 13 rigs and drilled ~~and completed 25~~35 gross ~~operated~~ wells during the second quarter of ~~2017 including two high-rate exploration wells in the Matruh Basin, de-risking additional exploration prospects in the area.~~2018. Net equivalent production decreased 85 percent from the second quarter 2017 despite an increase of ~~2016 despite a decline of only 4~~2 percent in gross production, a result of ~~tax barrel impacts~~the impact of higher Brent oil prices on cost recovery volumes as a function of the Company’s production sharing contracts.

In Egypt, Apache completed the acquisition of 650,000 additional gross acres in the East Bahariya area. The contract provides a 6-year term for exploration on the concession, which is located close to existing production. Apache plans to commence exploration drilling in the third quarter of 2018.

The North Sea region average daily production ~~decreased 23 percent from the second quarter of 2016, primarily the result of scheduled maintenance activities commencing during~~remained relatively flat compared with the second quarter of 2017 ~~and~~primarily as a result of production from new wells offsetting natural well decline in the Forties and Bacchus fields. The Callater discovery came online in late May 2017, with facilities tieback ahead of schedule and additional drilling activities and well testing ongoing.decline.

Results of Operations

Oil and Gas Revenues

The table below presents the second-quarter and year-to-date 2018 and 2017 revenues by geographic region and each region’s percent contribution to ~~revenues for 2017 and 2016.~~revenues.


	For the Quarter Ended June 30,								For the Six Months Ended June 30,								For the Quarter Ended June 30,								For the Six Months Ended June 30,
	2017				2016				2017				2016				2018				2017				2018				2017
	$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution		$ Value		% Contribution
	($ in millions)																($ in millions)
Total Oil Revenues:
United States	$	355	34	%	$	409	37	%	$	752	34	%	$	722	37	%	$	607	39	%	$	355	34	%	$	1,160	39	%	$	752	34	%
Canada	47		4	%	46		4	%	96		4	%	85		5	%	—		—		47		4	%	—		—		96		4	%
North America	402		38	%	455		41	%	848		38	%	807		42	%	607		39	%	402		38	%	1,160		39	%	848		38	%
Egypt⁽¹⁾	423		40	%	437		39	%	909		41	%	733		38	%	649		41	%	423		40	%	1,218		41	%	909		41	%
North Sea	225		22	%	226		20	%	465		21	%	400		20	%	320		20	%	225		22	%	591		20	%	465		21	%
International ⁽¹⁾	648		62	%	663		59	%	1,374		62	%	1,133		58	%	969		61	%	648		62	%	1,809		61	%	1,374		62	%
Total ⁽¹⁾	$	1,050	100	%	$	1,118	100	%	$	2,222	100	%	$	1,940	100	%	$	1,576	100	%	$	1,050	100	%	$	2,969	100	%	$	2,222	100	%
Total Natural Gas Revenues:
United States	$	84	36	%	$	62	30	%	$	169	35	%	$	124	29	%	$	96	45	%	$	84	36	%	$	206	47	%	$	169	35	%
Canada	40		17	%	23		11	%	85		17	%	64		15	%	—		—		40		17	%	—		—		85		17	%
North America	124		53	%	85		41	%	254		52	%	188		44	%	96		45	%	124		53	%	206		47	%	254		52	%
Egypt ⁽¹⁾	95		41	%	102		49	%	197		40	%	195		45	%	89		42	%	95		41	%	177		41	%	197		40	%
North Sea	14		6	%	22		10	%	37		8	%	49		11	%	27		13	%	14		6	%	51		12	%	37		8	%
International ⁽¹⁾	109		47	%	124		59	%	234		48	%	244		56	%	116		55	%	109		47	%	228		53	%	234		48	%
Total ⁽¹⁾	$	233	100	%	$	209	100	%	$	488	100	%	$	432	100	%	$	212	100	%	$	233	100	%	$	434	100	%	$	488	100	%
Total Natural Gas Liquids (NGL) Revenues:
United States	$	52	83	%	$	49	83	%	$	122	82	%	$	83	82	%	$	139	94	%	$	52	83	%	$	250	94	%	$	122	82	%
Canada	6		9	%	4		7	%	14		10	%	7		7	%	—		—		6		9	%	—		—		14		10	%
North America	58		92	%	53		90	%	136		92	%	90		89	%	139		94	%	58		92	%	250		94	%	136		92	%
Egypt ⁽¹⁾	3		5	%	3		5	%	6		4	%	6		6	%	4		3	%	3		5	%	7		3	%	6		4	%
North Sea	2		3	%	3		5	%	6		4	%	5		5	%	5		3	%	2		3	%	9		3	%	6		4	%
International ⁽¹⁾	5		8	%	6		10	%	12		8	%	11		11	%	9		6	%	5		8	%	16		6	%	12		8	%
Total ⁽¹⁾	$	63	100	%	$	59	100	%	$	148	100	%	$	101	100	%	$	148	100	%	$	63	100	%	$	266	100	%	$	148	100	%
Total Oil and Gas Revenues:
United States	$	491	36	%	$	520	38	%	$	1,043	36	%	$	929	38	%	$	842	43	%	$	491	36	%	$	1,616	44	%	$	1,043	36	%
Canada	93		7	%	73		5	%	195		7	%	156		6	%	—		—		93		7	%	—		—		195		7	%
North America	584		43	%	593		43	%	1,238		43	%	1,085		44	%	842		43	%	584		43	%	1,616		44	%	1,238		43	%
Egypt ⁽¹⁾	521		39	%	542		39	%	1,112		39	%	934		38	%	742		39	%	521		39	%	1,402		38	%	1,112		39	%
North Sea	241		18	%	251		18	%	508		18	%	454		18	%	352		18	%	241		18	%	651		18	%	508		18	%
International ⁽¹⁾	762		57	%	793		57	%	1,620		57	%	1,388		56	%	1,094		57	%	762		57	%	2,053		56	%	1,620		57	%
Total ⁽¹⁾	$	1,346	100	%	$	1,386	100	%	$	2,858	100	%	$	2,473	100	%	$	1,936	100	%	$	1,346	100	%	$	3,669	100	%	$	2,858	100	%


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

Production

The table below presents the second-quarter and year-to-date ~~2017~~2018 and ~~2016~~2017 production and the relative increase or decrease from the prior period.


	For the Quarter Ended June 30,				For the Six Months Ended June 30,				For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2017	Increase (Decrease)		2016	2017	Increase (Decrease)		2016	2018	Increase (Decrease)		2017	2018	Increase (Decrease)		2017
Oil Volume – b/d
United States	86,071	(19	)%	106,741	88,386	(21	)%	111,300	105,163	22	%	86,071	102,470	16	%	88,386
Canada	11,638	(10	)%	12,917	11,647	(15	)%	13,690	—	NM		11,638	—	NM		11,647
North America	97,709	(18	)%	119,658	100,033	(20	)%	124,990	105,163	8	%	97,709	102,470	2	%	100,033
Egypt⁽¹⁾⁽²⁾	96,961	(9	)%	106,223	99,327	(3	)%	102,241	96,185	(1	)%	96,961	95,730	(4	)%	99,327
North Sea	48,091	(19	)%	59,124	48,933	(16	)%	58,043	46,150	(4	)%	48,091	46,249	(5	)%	48,933
International	145,052	(12	)%	165,347	148,260	(8	)%	160,284	142,335	(2	)%	145,052	141,979	(4	)%	148,260
Total	242,761	(15	)%	285,005	248,293	(13	)%	285,274	247,498	2	%	242,761	244,449	(2	)%	248,293
Natural Gas Volume – Mcf/d
United States	364,052	(11	)%	408,126	365,481	(11	)%	408,943	547,777	50	%	364,052	518,324	42	%	365,481
Canada	205,408	(17	)%	246,830	210,484	(18	)%	256,635	—	NM		205,408	—	NM		210,484
North America	569,460	(13	)%	654,956	575,965	(13	)%	665,578	547,777	(4	)%	569,460	518,324	(10	)%	575,965
Egypt⁽¹⁾⁽²⁾	383,296	(6	)%	408,013	395,179	(2	)%	402,806	340,991	(11	)%	383,296	342,438	(13	)%	395,179
North Sea	34,348	(43	)%	60,318	39,111	(40	)%	65,556	43,297	26	%	34,348	42,174	8	%	39,111
International	417,644	(11	)%	468,331	434,290	(7	)%	468,362	384,288	(8	)%	417,644	384,612	(11	)%	434,290
Total	987,104	(12	)%	1,123,287	1,010,255	(11	)%	1,133,940	932,065	(6	)%	987,104	902,936	(11	)%	1,010,255
NGL Volume – b/d
United States	47,029	(15	)%	55,632	47,511	(15	)%	55,666	59,036	26	%	47,029	55,182	16	%	47,511
Canada	4,365	(14	)%	5,092	4,592	(21	)%	5,797	—	NM		4,365	—	NM		4,592
North America	51,394	(15	)%	60,724	52,103	(15	)%	61,463	59,036	15	%	51,394	55,182	6	%	52,103
Egypt⁽¹⁾⁽²⁾	880	(7	)%	950	917	(18	)%	1,119	1,127	28	%	880	1,033	13	%	917
North Sea	741	(53	)%	1,563	955	(36	)%	1,486	1,104	49	%	741	1,135	19	%	955
International	1,621	(35	)%	2,513	1,872	(28	)%	2,605	2,231	38	%	1,621	2,168	16	%	1,872
Total	53,015	(16	)%	63,237	53,975	(16	)%	64,068	61,267	16	%	53,015	57,350	6	%	53,975
BOE per day⁽³⁾
United States	193,775	(16	)%	230,393	196,811	(16	)%	235,123	255,495	32	%	193,775	244,039	24	%	196,811
Canada	50,238	(15	)%	59,148	51,319	(18	)%	62,260	—	NM		50,238	—	NM		51,319
North America	244,013	(16	)%	289,541	248,130	(17	)%	297,383	255,495	5	%	244,013	244,039	(2	)%	248,130
Egypt⁽²⁾	161,724	(8	)%	175,175	166,107	(3	)%	170,494	154,144	(5	)%	161,724	153,836	(7	)%	166,107
North Sea⁽⁴⁾	54,556	(23	)%	70,740	56,407	(20	)%	70,455	54,470	—		54,556	54,413	(4	)%	56,407
International	216,280	(12	)%	245,915	222,514	(8	)%	240,949	208,614	(4	)%	216,280	208,249	(6	)%	222,514
Total	460,293	(14	)%	535,456	470,644	(13	)%	538,332	464,109	1	%	460,293	452,288	(4	)%	470,644


(1)	Gross oil, natural gas, and NGL production in Egypt for the second quarter and six-month period of ~~2017~~2018 and ~~2016~~2017 were as follows:


	For the Quarter Ended June 30,		For the Six Months Ended June 30,		For the Quarter Ended June 30,		For the Six Months Ended June 30,
	2017	2016	2017	2016	2018	2017	2018	2017
Oil (b/d)	195,293	212,218	194,559	211,032	206,296	195,293	204,264	194,559
Natural Gas (Mcf/d)	825,947	814,283	811,608	830,165	801,727	825,947	780,121	811,608
NGL (b/d)	1,545	1,757	1,509	1,951	1,719	1,545	1,598	1,509


(2)	Includes production volumes per day attributable to a noncontrolling interest in Egypt for the second quarter and six-month period of ~~2017~~2018 and ~~2016~~2017 of:


	For the Quarter Ended June 30,		For the Six Months Ended June 30,		For the Quarter Ended June 30,		For the Six Months Ended June 30,
	2017	2016	2017	2016	2018	2017	2018	2017
Oil (b/d)	32,562	35,357	33,232	34,017	32,066	32,562	31,921	33,232
Natural Gas (Mcf/d)	128,696	136,029	132,197	134,266	113,846	128,696	114,377	132,197
NGL (b/d)	293	317	306	373	376	293	344	306


(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.


(4)	Average sales volumes from the North Sea for the second quarter of 2018 and 2017 were 56,516 boe/d and 57,905 boe/d, respectively, and 55,113 boe/d and 58,347 boe/d for the first six months of ~~2017 was 57,905 boe/d~~2018 and ~~58,347 boe/d,~~2017, respectively. Sales volumes may vary from production volumes as a result of the timing of liftings in the Beryl field.

NM — Not meaningful

Pricing

The table below presents second-quarter and year-to-date ~~2017~~2018 and ~~2016~~2017 pricing and the relative increase or decrease from the prior period.


	For the Quarter Ended June 30,						For the Six Months Ended June 30,						For the Quarter Ended June 30,						For the Six Months Ended June 30,
	2017		Increase (Decrease)		2016		2017		Increase (Decrease)		2016		2018		Increase (Decrease)		2017		2018		Increase (Decrease)		2017
Average Oil Price - Per barrel
United States	$	45.18	8	%	$	41.95	$	46.99	32	%	$	35.61	$	63.27	40	%	$	45.18	$	62.54	33	%	$	46.99
Canada	44.52		13	%	39.39		45.70		34	%	34.11		—		NM		44.52		—		NM		45.70
North America	45.10		9	%	41.45		46.84		33	%	35.34		63.27		40	%	45.10		62.54		34	%	46.84
Egypt	47.98		6	%	45.42		50.57		28	%	39.47		74.14		55	%	47.98		70.26		39	%	50.57
North Sea	48.21		6	%	45.56		50.51		27	%	39.64		73.05		52	%	48.21		69.58		38	%	50.51
International	48.06		6	%	45.47		50.55		28	%	39.53		73.78		54	%	48.06		70.04		39	%	50.55
Total	46.89		9	%	43.14		49.06		31	%	37.37		69.35		48	%	46.89		66.90		36	%	49.06
Average Natural Gas Price - Per Mcf
United States	$	2.53	49	%	$	1.70	$	2.55	53	%	$	1.67	$	1.94	(23	)%	$	2.53	$	2.20	(14	)%	$	2.55
Canada	2.14		112	%	1.01		2.24		65	%	1.36		—		NM		2.14		—		NM		2.24
North America	2.39		66	%	1.44		2.44		57	%	1.55		1.94		(19	)%	2.39		2.20		(10	)%	2.44
Egypt	2.73		—		2.72		2.75		4	%	2.65		2.85		4	%	2.73		2.85		4	%	2.75
North Sea	4.54		15	%	3.95		5.27		28	%	4.11		6.82		50	%	4.54		6.71		27	%	5.27
International	2.88		—		2.88		2.98		4	%	2.86		3.29		14	%	2.88		3.27		10	%	2.98
Total	2.60		27	%	2.04		2.67		28	%	2.09		2.50		(4	)%	2.60		2.65		(1	)%	2.67
Average NGL Price - Per barrel
United States	$	12.26	26	%	$	9.74	$	14.21	74	%	$	8.17	$	26.03	112	%	$	12.26	$	25.10	77	%	$	14.21
Canada	15.99		87	%	8.54		16.53		140	%	6.88		—		NM		15.99		—		NM		16.53
North America	12.58		30	%	9.64		14.42		79	%	8.05		26.03		107	%	12.58		25.10		74	%	14.42
Egypt	31.11		12	%	27.68		35.74		31	%	27.24		40.80		31	%	31.11		38.72		8	%	35.74
North Sea	22.92		3	%	22.25		32.85		62	%	20.29		44.71		95	%	22.92		43.75		33	%	32.85
International	27.37		13	%	24.30		34.26		47	%	23.28		42.73		56	%	27.37		41.35		21	%	34.26
Total	13.03		27	%	10.22		15.10		74	%	8.67		26.64		104	%	13.03		25.72		70	%	15.10

NM — Not meaningful

~~Second-Quarter 2017 compared to Second-Quarter 2016~~

Crude Oil Revenues Crude oil revenues for the second quarter of ~~2017~~2018 totaled ~~$1.1~~$1.6 billion, a ~~$68~~$526 million ~~decrease~~increase from the comparative ~~2016~~2017 quarter. A 1548 percent ~~decrease~~increase in average ~~daily production reduced~~realized prices increased second-quarter ~~2017~~2018 revenues by ~~$147~~$504 million compared to the prior-year quarter, while 92 percent higher average ~~realized prices~~daily production increased revenues by ~~$79~~$22 million. Crude oil accounted for 7881 percent of oil and gas production revenues and 53 percent of worldwide production in the second quarter of ~~2017.~~2018. Crude oil prices realized in the second quarter of ~~2017~~2018 averaged ~~$46.89~~$69.35 per barrel, compared with ~~$43.14~~$46.89 per barrel in the comparative prior-year quarter.

Worldwide oil production ~~decreased 42.2~~increased 4.7 Mb/d to ~~242.8~~247.5 Mb/d in the second quarter of ~~2017~~2018 from the comparative prior-year period, primarily ~~the~~a result of ~~natural decline~~an increase in ~~all regions~~Apache’s Permian region on the success of the Midland and ~~reduced~~Delaware basin drilling ~~activity in response to commodity price weakness.~~programs.

Natural Gas Revenues Gas revenues for the second quarter of ~~2017~~2018 totaled ~~$233~~$212 million, a ~~$24~~$21 million ~~increase~~decrease from the comparative ~~2016~~2017 quarter. A 124 percent decrease in average ~~daily production reduced~~realized prices decreased second-quarter revenues by ~~$32~~$9 million compared to the prior-year quarter, while 276 percent ~~higher~~lower average ~~realized prices increased~~daily production decreased revenues by ~~$56~~$12 million. Natural gas accounted for 1711 percent of Apache’s oil and gas production revenues and 3633 percent of its equivalent production during the second quarter of ~~2017.~~2018.

Worldwide natural gas production decreased ~~136~~55 MMcf/d to ~~987~~932 MMcf/d in the second quarter of ~~2017~~2018 from the comparative prior-year period, primarily ~~the~~a result of Apache’s exit from Canada and natural decline in ~~all regions and maintenance~~Egypt due to lower drilling activity, ~~in the North Sea.~~partially offset by an increase from Alpine High production.

NGL Revenues NGL revenues for the second quarter of ~~2017~~2018 totaled ~~$63~~$148 million, ~~a $4~~an $85 million increase from the comparative ~~2016~~2017 quarter. A 16104 percent ~~decrease~~increase in ~~average daily production reduced second-quarter 2017 revenues by approximately $12 million, while 27 percent higher~~ average realized prices increased second-quarter 2018 revenues by ~~$16~~approximately $66 million compared to the prior-year quarter, while 16 percent higher average daily production increased revenues by approximately $19 million. The increase in realized prices is primarily the result of the reclassification of certain transportation charges from revenues to Gathering, Transmission, and Processing (GTP) expense as a result of the adoption of new revenue recognition rules effective January 1, 2018. NGLs accounted for 58 percent of Apache’s oil and gas production revenues and 1114 percent of its equivalent production during the second quarter of ~~2017.~~2018.

Worldwide production of NGLs ~~decreased 10.2~~increased 8.3 Mb/d to ~~53.0~~61.3 Mb/d in the second quarter of ~~2017~~2018 from the comparative prior-year period, primarily ~~the~~a result of ~~natural decline in all regions.~~the commencement of Alpine High production, partially offset by a decrease from Apache’s exit from Canada.

Year-to-Date ~~2017~~2018 compared to Year-to-Date ~~2016~~2017

Crude Oil RevenuesCrude oil revenues for the first six months of ~~2017~~2018 totaled ~~$2.2~~$3.0 billion, a ~~$282~~$747 million increase from the comparative ~~2016~~2017 period. A 1336 percent ~~decrease~~increase in average ~~daily production reduced 2017~~realized prices increased 2018 oil revenues by ~~$305~~$808 million compared to the prior-year period, while 312 percent ~~higher~~lower average ~~realized prices increased~~daily production decreased revenues by ~~$587~~$61 million. Crude oil accounted for 7881 percent of oil and gas production revenues and 5354 percent of worldwide production for the first six months of ~~2017,~~2018, compared to 7978 percent and 53 percent, respectively, for the ~~2016~~2017 period. Crude oil prices realized in the first six months of ~~2017~~2018 averaged ~~$49.06~~$66.90 per barrel, compared with ~~$37.37~~$49.06 per barrel in the comparative prior-year period.

Worldwide production decreased ~~37.0~~3.8 Mb/d to ~~248.3~~244.4 Mb/d in the first six months of ~~2017~~2018 from the comparative prior-year period, primarily ~~the~~a result of ~~natural decline~~a decrease from Apache’s exit from Canada, partially offset by an increase in ~~all regions~~its Permian region on the success of the Midland and ~~reduced~~Delaware basin drilling ~~activity in response to commodity price weakness.~~programs.

Natural Gas Revenues Gas revenues for the first six months of ~~2017~~2018 totaled ~~$488~~$434 million, a ~~$56~~$54 million ~~increase~~decrease from the comparative ~~2016~~2017 period. ~~An 11~~A 1 percent decrease in average ~~daily production reduced 2017~~realized prices decreased 2018 natural gas revenues by ~~$63~~$3 million compared to the prior-year period, while 2811 percent ~~higher~~lower average ~~realized prices increased~~daily production decreased revenues by ~~$119~~$51 million. Natural gas accounted for 1712 percent of ~~Apache’s~~the Company’s oil and gas production revenues and 3633 percent of ~~its~~Apache’s equivalent production ~~during~~for the first six months of ~~2017,~~2018, compared to 17 percent and 3536 percent, respectively, for the ~~2016~~2017 period.

~~Our worldwide~~Worldwide natural gas production decreased ~~124~~107.3 MMcf/d to ~~1,010~~903 MMcf/d in the first six months of ~~2017~~2018 from the comparative prior-year period, primarily ~~the~~a result of Apache’s exit from Canada and natural decline in ~~all regions.~~Egypt due to lower drilling activity, partially offset by an increase from Alpine High production.

NGL RevenuesNGL revenues for the first six months of ~~2017~~2018 totaled ~~$148~~$266 million, a ~~$47~~$118 million increase from the comparative ~~2016~~2017 period. A 1670 percent ~~decrease~~increase in average ~~production reduced 2017~~realized prices increased 2018 NGL revenues by ~~$28~~$103 million compared to the prior-year period, while 746 percent higher average ~~realized prices~~daily production increased revenues by ~~$75~~$15 million. The increase in realized prices is primarily the result of the reclassification of certain transportation charges from revenues to GTP expense as a result of the adoption of new revenue recognition rules effective January 1, 2018. NGLs accounted for 5nearly 7 percent of ~~Apache’s~~the Company’s oil and gas production revenues and 1113 percent of ~~its~~Apache’s equivalent production for the first six months of ~~2017,~~2018, compared to 45 percent and 1211 percent, respectively, for the ~~2016~~2017 period.

Worldwide production of NGLs ~~decreased 10.1~~increased 3.4 Mb/d to ~~54.0~~57.4 Mb/d in the first six months of ~~2017~~2018 from the comparative prior-year period, primarily ~~the~~as a result of ~~natural decline in all regions.~~the commencement of Alpine High production, partially offset by a decrease from Apache’s exit from Canada.

Operating Expenses

The table below presents a comparison of Apache’s expenses on an absolute dollar basis and a boe basis. Apache’s 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.


	For the Quarter Ended June 30,								For the Six Months Ended June 30,										For the Quarter Ended June 30,								For the Six Months Ended June 30,
	2017		2016		2017		2016		2017			2016		2017			2016		2018		2017		2018		2017		2018		2017			2018		2017
	(In millions)				(Per boe)				(In millions)					(Per boe)					(In millions)				(Per boe)				(In millions)					(Per boe)
Lease operating expenses⁽¹⁾	$	372	$	359	$	8.81	$	7.38	$	708		$	737	$	8.27		$	7.52	$	356	$	372	$	8.39	$	8.81	$	705	$	708		$	8.60	$	8.27
Gathering and transportation⁽¹⁾	48		52		1.19		1.05		105			104		1.24			1.06
Gathering, transmission, and processing⁽¹⁾																			82		48		1.95		1.19		168		105			2.04		1.24
Taxes other than income	29		65		0.68		1.33		71			76		0.83			0.78		49		29		1.16		0.68		104		71			1.27		0.83
Exploration	108		91		2.58		1.87		200			186		2.35			1.90		76		108		1.81		2.58		152		200			1.86		2.35
General and administrative	106		103		2.53		2.10		209			196		2.45			2.00		117		106		2.76		2.53		231		209			2.82		2.45
Transaction, reorganization, and separation	4		9		0.08		0.17		(6		)	24		(0.07		)	0.24		12		4		0.27		0.08		12		(6		)	0.14		(0.07		)
Depreciation, depletion, and amortization:
Oil and gas property and equipment⁽¹⁾	536		629		12.72		12.92		1,074			1,265		12.56			12.91		573		536		13.50		12.72		1,091		1,074			13.31		12.56
Other assets	36		40		0.86		0.83		74			82		0.87			0.84		35		36		0.82		0.86		70		74			0.85		0.87
Asset retirement obligation accretion	37		38		0.87		0.78		73			76		0.85			0.77		27		37		0.64		0.87		54		73			0.66		0.85
Impairments	—		173		—		3.56		8			173		0.09			1.77		—		—		—		—		—		8			—		0.09
Financing costs, net	99		104		2.37		2.15		199			209		2.34			2.13		94		99		2.24		2.37		193		199			2.36		2.34

~~(1) For expenses impacted by the timing of 2017 liftings in the North Sea, per-boe calculations are based on sales volumes rather than production volumes.~~


(1)	For expenses impacted by the timing of liftings in the North Sea, per-boe calculations are based on sales volumes rather than production volumes.

Lease Operating Expenses (LOE) LOE ~~increased $13~~decreased $16 million ~~or 4 percent,~~and $3 million for the second quarter ~~of 2017,~~ and ~~decreased $29 million, or 4 percent for the~~ first six months of ~~2017,~~2018, respectively, on an absolute dollar basis relative to the comparable periods of ~~2016.~~2017. On a per-unit basis, LOE ~~increased 19~~decreased 5 percent to ~~$8.81~~$8.39 per boe for the second quarter of ~~2017,~~2018, and 10increased 4 percent to ~~$8.27~~$8.60 per boe for the first six months of ~~2017,~~2018 as compared to the prior-year periods. The ~~per barrel increase~~decrease on an absolute dollar basis for both comparative periods is primarily the result of ~~workovers in North America and planned maintenance~~the sale of Apache’s Canadian operations in the ~~North Sea during the second~~third quarter of ~~2017.~~2017, partially offset by general cost increases in a higher commodity price environment.

Gathering, Transmission, and ~~Transportation~~Processing ~~Gathering and transportation~~GTP costs totaled ~~$48~~$82 million and ~~$105~~$168 million in the second quarter and first six months of ~~2017,~~2018, respectively, ~~a decrease~~an increase of $4$34 million from the second quarter of ~~2016~~2017 and ~~an increase of $1~~$63 million from the first six months of ~~2016.~~2017. The increase is primarily the result of the reclassification of certain transportation charges from revenues to GTP expense as a result of the adoption of new revenue recognition rules effective January 1, 2018, as well as the ramp-up of operations at Alpine High, partially offset by Apache’s exit from Canada.

Taxes other than Income Taxes other than income totaled ~~$29~~$49 million and ~~$71~~$104 million for the second quarter and first six months of ~~2017, respectively, a decrease~~2018, an increase of ~~$36~~$20 million and $5$33 million from the second quarter and first six months of ~~2016,~~2017, respectively. Second-quarter and year-to-date 2018 expense consists primarily of severance and ad valorem taxes, which combined increased $8 million and $18 million, respectively. The ~~North Sea~~increase for both comparative periods is primarily the result of an increase in severance taxes on higher commodity prices and increased U.S. production driven by the ramp-up of operations at Alpine High. In addition, in the second quarter and first six months of 2017, Apache recognized a $12 million and $14 million benefit, respectively, related to the U.K. Petroleum Revenue Tax (PRT). The U.K. PRT rate, historically assessed on qualifying fields in the U.K. North Sea, was reduced to zero during 2016, driving the reduction for the second quarter and first six months of 2017. Severance tax expense and ad valorem tax expense increased $1 million and $2 million, respectively, on higher commodity prices during the second quarter compared to the prior year quarter. For the first six months of 2017, severance tax expense and ad valorem tax expense increased $9 million and $3 million, respectively, compared to the first six months of 2016.

Exploration Expense Exploration expense includes unproved leasehold impairments, exploration dry hole expense, geological and geophysical expenses, and the costs of maintaining and retaining unproved leasehold properties. Exploration expenses in the second quarter and first six months of ~~2017 increased $17~~2018 decreased $32 million and ~~$14~~$48 million, respectively, compared to the prior-year ~~periods.~~period.

The following table presents a summary of exploration expense:


	For the Quarter Ended June 30,				For the Six Months Ended June 30,				For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
	(In millions)								(In millions)
Unproved leasehold impairments	$	39	$	66	$	54	$	108	$	21	$	39	$	37	$	54
Dry hole expense	46		2		98		31		16		46		36		98
Geological and geophysical expense	6		4		12		9		17		6		35		12
Exploration overhead and other	17		19		36		38		22		17		44		36
	$	108	$	91	$	200	$	186	$	76	$	108	$	152	$	200

Unproved leasehold impairments in the second quarter and first six months of ~~2017~~2018 decreased ~~$27~~$18 million and ~~$54~~$17 million, respectively, from the comparative prior-year periods, primarily a result of stabilizing commodity and leasehold prices. Dry hole expense ~~increased $44~~decreased $30 million and ~~$67~~$62 million ~~for~~in the second quarter and first six months of ~~2017,~~2018, respectively, from the comparative prior-year periods on activity primarily in the U.S., and North ~~Sea,~~Sea. Geological and ~~Suriname.~~geophysical expense increased $11 million and $23 million in the second quarter and first six months of 2018, respectively, from the comparative prior-year periods driven by 3-D seismic acquisition in Egypt for the Khalda Extension 3 and various other concessions.

General and Administrative (G&A) Expenses G&A expense for the second quarter and first six months of ~~2017~~2018 were $3$11 million and ~~$13~~$22 million higher ~~respectively,~~ than the comparative ~~2016 periods.~~2017 period. The increase in G&A expense was primarily related to non-cash stock-based compensation expense, ~~and other corporate costs.~~which was impacted by a change in vesting terms for certain retirement eligible employees.

Transaction, Reorganization, and Separation (TRS) Costs The Company recorded TRS ~~expense~~costs of $4$12 million ~~during~~for each of the second quarter and first six months of ~~2017, but recorded~~2018 compared to $4 million of expense and a ~~total net~~ benefit of $6 million for the second quarter and first six months of ~~2017. The net benefit was~~2017, respectively, primarily a result of ~~a decrease~~an increase in the market value of stock awards outstanding for former employees. During 2016, the Company recorded an expense of $9 million and $24 million in the second quarter and first six months of 2016, respectively, in connection with employee separation, the consolidation of office space, and other reorganization efforts.

Depreciation, Depletion, and Amortization (DD&A) Oil and gas property DD&A expense of ~~$536~~$573 million in the second quarter of ~~2017 decreased $93~~2018 increased $37 million compared to the second quarter of ~~2016.~~2017. For the first six months of ~~2017,~~2018, oil and gas property DD&A expense ~~decreased $191~~increased $17 million compared to the prior-year period. The Company’s oil and gas property DD&A rate ~~decreased $0.20~~increased $0.78 per boe and ~~$0.35~~$0.75 per boe in the second quarter and first six months of ~~2017, respectively,~~2018 compared to the comparable prior-year periods. The primary factor driving ~~lower~~higher absolute dollar expense was an increase in capital spending primarily in the Permian and Alpine High regions as a ~~decrease~~result of drilling and development activity. The increase on an absolute dollar basis was partially offset by the sale of Apache’s Canadian operations in ~~production volumes from~~ the ~~comparative prior-year periods.~~third quarter of 2017.

ImpairmentsThe Company did not record any asset impairments in connection with fair value assessments in the second quarter or first six months of 2018, or in the second quarter of 2017. ~~During~~For the ~~first quarter of~~six-month period ended June 30, 2017, the Company recorded asset impairments ~~in connection with fair value assessments~~ totaling $8 million for a U.K. PRT decommissioning asset that is no longer expected to be realizable from future abandonment activities in the North Sea. ~~During each of the second quarter and first six months of 2016, the Company recorded $173 million of impairments in connection with fair value assessments.~~ For more information regarding asset impairments, please refer to “Fair Value Measurements” within Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

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


	For the Quarter Ended June 30,						For the Six Months Ended June 30,						For the Quarter Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
	(In millions)												(In millions)
Interest expense	$	115		$	116		$	231		$	232		$	110		$	115		$	222		$	231
Amortization of deferred loan costs	2			2			4			3			1			2			6			4
Capitalized interest	(13		)	(12		)	(27		)	(23		)	(13		)	(13		)	(25		)	(27		)
Loss on extinguishment of debt	—			—			1			—			—			—			—			1
Interest income	(5		)	(2		)	(10		)	(3		)	(4		)	(5		)	(10		)	(10		)
Financing costs, net	$	99		$	104		$	199		$	209		$	94		$	99		$	193		$	199

Net financing costs decreased $5 million and ~~$10~~$6 million in the second quarter and first six months of ~~2017,~~2018, respectively, compared to the same prior-year periods on ~~higher capitalized~~lower interest ~~and interest income.~~expense from the repayment of $150 million of 7.0% senior notes due February 1, 2018.

Provision for 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. Non-cash impairments of the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

In July 2017, Apache announced the sale of ACL and classified its investment in the subsidiary as held for sale as of June 30, 2017. For more information regarding this transaction, please refer to Note 2—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q. As a result of this transaction, Apache recorded a deferred tax asset associated with its investment in ACL and decreased its deferred tax liability associated with its investment in other foreign subsidiaries. This resulted in the Company recording a $674 million deferred income tax benefit inDuring the second quarter of ~~2017.~~

Apache’s 2018 year-to-date effective income tax rate was primarily impacted by an increase in the amount of valuation allowance ~~on Canadian~~against its U.S. deferred tax assets.

Capital Resources and Liquidity

Operating cash flows are the Company’s primary source of liquidity. The Company may also elect to ~~use~~utilize available cash on hand, ~~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~~short-term and the ~~long term,~~long-term, are impacted by highly volatile oil and natural gas prices, as well as costs and sales volumes. Significant changes in commodity prices impact Apache’s revenues, earnings, and cash flows. These changes potentially impact Apache’s liquidity if costs do not trend with changes in commodity prices. Historically, costs have trended with commodity prices, albeit ~~with~~on a lag. Sales volumes also impact cash flows; however, they have a less volatile impact in the short term.

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 Apache’s drilling program and its ability to add reserves economically. Changes in commodity prices also impact estimated quantities of proved reserves. ~~In the first six months of 2017, Apache recognized positive reserve revisions of approximately 2 percent of its year-end 2016 estimated proved reserves as a result of higher prices.~~

Apache believes the liquidity and capital resource alternatives available to ~~Apache,~~the Company, combined with proactive measures to adjust its capital budget to reflect volatile commodity prices and anticipated operating cash flows, will be adequate to fund short-term and long-term operations, including Apache’s 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 I, Items 1 and 2, “Business and Properties,” and Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Sources and Uses of Cash

The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented.


	For the Six Months Ended June 30,					For the Six Months Ended June 30,
	2017		2016			2018			2017
	(In millions)					(In millions)
Sources of Cash and Cash Equivalents:
Net cash provided by operating activities	$	1,206	$	983		$	1,728		$	1,206
Proceeds from sale of oil and gas properties	711		48			13			711
Other	27		28			—			27
	1,944		1,059			1,741			1,944
Uses of Cash and Cash Equivalents:
Capital expenditures⁽¹⁾	$	1,157	$	925		$	1,856		$	1,157
Leasehold and property acquisitions	67		118			38			67
Payments on fixed-rate debt	70		—			150			70
Dividends paid	190		189			191			190
Distributions to noncontrolling interest	170		93			155			170
Other						47			—
	1,654		1,325			2,437			1,654
Increase (decrease) in cash and cash equivalents	$	290	$	(266	)	$	(696	)	$	290


(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 Operating Activities Operating cash flows are Apache’s 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~~flows are largely the same as those that affect net earnings, with the exception of non-cash expenses such as DD&A, exploratory dry hole expense, asset impairments, asset retirement obligation (ARO) accretion, and deferred income tax ~~expense, which affect earnings but do not affect cash flows.~~expense.

Net cash provided by operating activities for the first six months of ~~2017~~2018 totaled ~~$1.2~~$1.7 billion, an increase of ~~$223~~$522 million from the first six months of ~~2016.~~2017. The increase primarily reflects higher commodity prices compared to the prior-year period.

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.

Asset Divestitures The Company recorded proceeds from asset divestitures totaling ~~$711~~$13 million and ~~$48~~$711 million in the first six months of ~~2017~~2018 and ~~2016,~~2017, respectively. For more information regarding the Company’s acquisitions and divestitures, please see Note 2—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Capital Expenditures Worldwide exploration and development (E&D) cash expenditures for the first six months of ~~2017~~2018 totaled ~~$883 million,~~$1.6 billion, compared to ~~$925~~$883 million for the first six months of ~~2016.~~2017. 2018 expenditures were primarily in the Permian region as Apache continues development of its Alpine High play. Apache operated an average of 3433 drilling rigs during the second quarter of ~~2017.~~2018.

~~Apache also completed leasehold and property acquisitions totaling $67 million and $118 million during the first six months of 2017 and 2016, respectively.~~

Apache’s ~~investment~~cash expenditures in ~~gas gathering, transmission, and processing (GTP)~~GTP facilities totaled $284 million and $274 million in the first six months of ~~2017. Expenditures in~~2018 and 2017, respectively, and primarily comprise investments in infrastructure for the Alpine High play. ~~No meaningful GTP expenses were incurred~~

Leasehold and Property Acquisitions Apache completed leasehold and property acquisitions for cash consideration totaling $38 million and $67 million during ~~2016.~~the first six months of 2018 and 2017, respectively.

Dividends ~~For~~The Company paid $191 million and $190 million in dividends on its common stock for the six-month periods ended June 30, 2018 and 2017, ~~and 2016, the Company paid $190 million and $189 million, respectively, in dividends on its common stock.~~respectively.

Liquidity

The following table presents a summary of the Company’s key financial indicators at the dates presented:


	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
	(In millions)				(In millions)
Cash and cash equivalents	$	1,667	$	1,377	$	972	$	1,668
Total debt	8,479		8,544		8,337		8,484
Equity	8,265		7,679		8,995		8,791
Available committed borrowing capacity	3,500		3,500		3,830		3,500

Cash and cash equivalents The Company had ~~$1.7~~$1.0 billion in cash and cash equivalents as of June 30, ~~2017,~~2018, compared to ~~$1.4~~$1.7 billion at December 31, 2016. At June 30, 2017, approximately $1.5 billion of the cash was held by foreign subsidiaries. The cash held by foreign subsidiaries should not be subject to additional U.S. income taxes if repatriated.2017. 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.

Debt As of June 30, ~~2017,~~2018, outstanding debt, which consisted of unsecured notes and debentures, totaled ~~$8.5~~$8.3 billion. Current debt as of June 30, ~~2017,~~2018, included ~~$150~~$400 million of ~~7.0%~~6.9% senior notes due ~~February 1,~~September 15, 2018.

In ~~January 2017,~~March 2018, the Company ~~purchased~~entered into a revolving credit facility that matures in March 2023 (subject to Apache’s two, one-year extension options) with commitments totaling $4.0 billion. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of June 30, 2018. The facility is for general corporate purposes and ~~canceled an additional $69~~committed borrowing capacity fully supports Apache’s commercial paper program. As of June 30, 2018, letters of credit aggregating approximately £129.1 million ~~aggregate principal amount of senior notes for $71~~and no borrowings were outstanding under this facility. In connection with entry into this facility, Apache terminated $3.5 billion and £900 million in ~~cash, including accrued interest~~commitments under two former credit facilities and $1wrote off $4 million of ~~premium, which completed the open market repurchase program. These repurchases resulted in a $1 million net loss on extinguishment of debt,~~associated deferred loan costs, which is included in “Financing costs, net” in the Company’s consolidated statement of operations. ~~The net loss includes an acceleration of related discount and deferred financing costs.~~

~~Available committed borrowing capacity~~ ~~In June 2015, the Company entered into a five-year revolving credit facility which matures in June 2020, subject to Apache’s two, one-year extension options.~~ The ~~facility provides for aggregate commitments of~~Company’s $3.5 billion (including a $750 million letter of credit subfacility) and rights to increase commitments to $4.5 billion. Proceeds from borrowings may be used for general corporate purposes. Apache’s available borrowing capacity under this facility supports its commercial paper program, currently $3.5 billion. The commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days at competitive interest rates. As of June 30, ~~2017,~~2018, the Company had no commercial paper ~~or borrowings under committed bank facilities or uncommitted bank lines~~ outstanding.

In February 2016, the Company entered into a letter of credit facility providing £900 million in commitments and rights to increase commitments to £1.075 billion. This facility matures in February 2020 and is available for the Company’s letter of credit needs, particularly those which may arise in respect of abandonment obligations assumed in various North Sea acquisitions. The facility also is available for loans to cash collateralize letters of credit or obligations to provide letters of credit, in each case, to the extent letters of credit are unavailable under the facility. As of June 30, 2017, three letters of credit aggregating approximately £147.5 million and no borrowings were outstanding under this facility.

The Company was in compliance with the terms of ~~these~~its credit facilities as of June 30, ~~2017.~~

2018.

ITEM ~~3 –~~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 the Company receives for its 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 global supply and demand. The Company’s average crude oil realizations have increased 948 percent to ~~$46.89~~$69.35 per barrel in the second quarter of ~~2017~~2018 from ~~$43.14~~$46.89 per barrel in the comparable period of ~~2016.~~2017. The Company’s average natural gas price realizations have ~~increased 27~~decreased 4 percent to ~~$2.60~~$2.50 per Mcf in the second quarter of ~~2017~~2018 from ~~$2.04~~$2.60 per Mcf in the comparable period of ~~2016.~~2017. Based on average daily production for the second quarter of ~~2017,~~2018, a $1.00 per barrel change in the weighted average realized oil price would have increased or decreased revenues for the quarter by approximately ~~$22~~$23 million, and a $0.10 per Mcf change in the weighted average realized price of natural gas would have increased or decreased revenues for the quarter by approximately $9$8 million.

Apache periodically enters into derivative positions on a portion of its 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 June 30, ~~2017,~~2018, the Company had open natural gas derivatives not designated as cash flow hedges in an asset position with a fair value of $72 million. A 10 percent increase in gas prices would decrease the asset by approximately $1 million, while a 10 percent decrease in prices would increase the asset by approximately $1 million. As of June 30, 2018, the Company had open oil derivatives not designated as cash flow hedges in an asset position with a fair value of $2 million. A 10 percent increase in ~~gas~~oil prices would ~~decrease~~move the ~~asset by approximately $2~~derivatives to a liability position with a fair value of $42 million, while a 10 percent decrease in prices would increase the asset by approximately $2 million. As of June 30, 2017, the Company had open oil derivatives not designated as cash flow hedges in an asset position with a fair value of $139 million. A 10 percent increase in oil prices would decrease the asset by approximately $76 million, while a 10 percent decrease in prices would increase the asset by approximately $117$47 million. These fair value changes assume volatility based on prevailing market parameters at June 30, ~~2017.~~2018. See Note 3—4—Derivative Instruments and Hedging Activities ofin the Notes to Consolidated Financial Statements set forth in Part 1,I, Item 1 of this Quarterly Report on Form 10-Q for notional volumes and terms ~~associated~~ with the Company’s derivative contracts.

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 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.~~ The Company’s 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 ~~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 the Company re-measures its 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 ~~$85~~$11 million would result from a 10 percent weakening or strengthening, respectively, in the ~~Canadian dollar and~~ British pound as of June 30, ~~2017.~~2018.

ITEM ~~4 –~~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 June 30, ~~2017,~~2018, 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 were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART ~~II -~~II. OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

Please refer to Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017 (filed with the SEC on February ~~24, 2017)~~23, 2018) and Note 9—Commitments and Contingencies in 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~~

ITEM 1A. RISK FACTORS

Please refer to Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2017, and Part I, Item 3—Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q. There have been no material changes to our risk factors since our annual report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017.


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

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


~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

None


~~ITEM 5.~~	~~OTHER INFORMATION~~

ITEM 5. OTHER INFORMATION

None


~~ITEM 6.~~	~~EXHIBITS~~

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).	–	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).	–	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 May 11, 2017 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 16, 2017, SEC File No. 001-4300).	–	Bylaws of Registrant, as amended May 11, 2017 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 16, 2017, SEC File No. 001-4300).
*10.1	–	Apache Corporation Non-Employee Directors’ Compensation Plan, as amended and restated July 13, 2017.
*†10.1			–	2018 Employee Release and Benefits Agreement between Registrant and W. Kregg Olson, effective August 1, 2018.
*31.1	–	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.	–	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.	–	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.	–	Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
*101.INS	–	XBRL Instance Document.	–	XBRL Instance Document.
*101.SCH	–	XBRL Taxonomy Schema Document.	–	XBRL Taxonomy Schema Document.
*101.CAL	–	XBRL Calculation Linkbase Document.	–	XBRL Calculation Linkbase Document.
*101.DEF	–	XBRL Definition Linkbase Document.	–	XBRL Definition Linkbase Document.
*101.LAB	–	XBRL Label Linkbase Document.	–	XBRL Label Linkbase Document.
*101.PRE	–	XBRL Presentation Linkbase Document.	–	XBRL Presentation Linkbase Document.



* Filed herewith.
*	~~Filed~~† Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 15 hereof.

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:	August ~~3, 2017~~2, 2018	/s/ STEPHEN J. RINEY
		Stephen J. Riney
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Dated:	August ~~3, 2017~~2, 2018	/s/ REBECCA A. HOYT
		Rebecca A. Hoyt
		Senior Vice President, Chief Accounting Officer, and Controller
		(Principal Accounting Officer)

4334



	Quarter Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(In millions)
Oil and Gas Property:
Proved	$	—	$	68	$	—	$	68
Unproved	39		66		54		108



		Put Options ⁽¹⁾
Production Period	Settlement Index	Mbbls	Weighted Average Strike Price
July - December 2017	NYMEX WTI	16,928	$50.00
July - December 2017	Dated Brent	15,272	$51.00



	Apache Corporation			Apache Finance Canada			All Other Subsidiaries of Apache Corporation			Reclassifications & Eliminations		Consolidated
	(In millions)
REVENUES AND OTHER:
Oil and gas production revenues	$	248		$	—		$	1,098		$	—	$	1,346
Equity in net income (loss) of affiliates	(34		)	(26		)	—			60		—
Other	62			8			(11		)	—		59
Gain (loss) on divestiture	34			—			(55		)	—		(21		)
	310			(18		)	1,032			60		1,384
OPERATING EXPENSES:
Lease operating expenses	79			—			293			—		372
Gathering and transportation	7			—			41			—		48
Taxes other than income	24			—			5			—		29
Exploration	54			—			54			—		108
General and administrative	91			—			15			—		106
Transaction, reorganization, and separation	4			—			—			—		4
Depreciation, depletion, and amortization	130			—			442			—		572
Asset retirement obligation accretion	5			—			32			—		37
Financing costs, net	60			6			33			—		99
	454			6			915			—		1,375
NET INCOME (LOSS) BEFORE INCOME TAXES	(144		)	(24		)	117			60		9
Provision (benefit) for income taxes	(716		)	2			110			—		(604		)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST	572			(26		)	7			60		613
Net income attributable to noncontrolling interest	—			—			41			—		41
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	572		$	(26	)	$	(34	)	$	60	$	572