Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

9. FAIR VALUE MEASUREMENTS

     Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. The following methods and assumptions were used to estimate the fair values:

   Cash, Cash Equivalents, Accounts Receivable and Accounts Payable

     The carrying amounts approximate fair value because of the short-term nature or maturity of the instruments.

   Commodity Derivative Instruments

     Apache’s commodity derivative instruments consist of variable-to-fixed price commodity swaps and options. The Company uses a market approach to estimate the fair values of its derivative instruments. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company’s derivatives are not actively quoted in the open market but are valued utilizing commodity futures price strips for the underlying commodities, which are provided by a reputable third party. For further information regarding Apache’s derivative instruments and hedging activities, please see Note 3 — Derivative Instruments and Hedging Activities of this Form 10-Q.

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

	Fair Value Measurements Using
	Quoted
	Price in		Significant		Significant
	Active		Other		Unobservable		Total
	Markets		Inputs		Inputs		Fair					Carrying
	(Level 1)		(Level 2)		(Level 3)		Value		Netting(1)			Amount
	(In millions)
September 30, 2011
Assets:
Commodity Derivative Instruments	$	—	$	432	$	—	$	432	$	(33	)	$	399
Liabilities:
Commodity Derivative Instruments		—		108		—		108		(33	)		75
December 31, 2010
Assets:
Commodity Derivative Instruments	$	—	$	454	$	—	$	454	$	(148	)	$	306
Liabilities:
Commodity Derivative Instruments		—		466		—		466		(148	)		318

(1) The derivative fair values above are based on analysis of each contract on a gross basis, even where the legal right of offset exits, as required by ASC Topic 820. The carrying amounts of derivative assets and liabilities reported on the consolidated balance sheet are determined by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. See Note 3 — Derivative Instruments and Hedging Activities of this Form 10-Q for a discussion of amounts recorded on the consolidated balance sheet at September 30, 2011, and December 31, 2010.