Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2011

Acquisitions [Abstract]

ACQUISITIONS

2.     ACQUISITIONS AND DIVESTITURES

2011 Activity

Mobil North Sea Limited Acquisition

On December 30, 2011, Apache completed the acquisition of Mobil North Sea Limited (Mobil North Sea). The assets acquired include: operated interests in the Beryl, Nevis, Nevis South, Skene and Buckland fields; operated interest in the Beryl/Brae gas pipeline and the SAGE gas plant; non-operated interests in the Maclure, Scott and Telford fields; and Benbecula (west of Shetlands) exploration acreage. This acquisition was funded with existing cash on hand.

The transaction was accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the preliminary estimates of the assets acquired and liabilities assumed in the acquisition. The final determination of fair value for certain assets and liabilities will be completed as soon as the information necessary to complete the analysis is obtained. These amounts will be finalized as soon as possible, but no later than one year from the acquisition date.

	(In millions)
Current assets	$	208
Oil and gas properties		2,817
Gathering, transmission and processing facilities		338
Goodwill (1)		82
Total assets acquired	$	3,445
Current liabilities		148
Asset retirement obligation		517
Deferred income tax liabilities		1,533
Other long-term obligations		1
Total liabilities assumed	$	2,199
Net assets acquired	$	1,246

(1) Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from assets acquired that could not be individually identified and separately recognized. Goodwill is not deductible for tax purposes.

2010 Activity

Gulf of Mexico Shelf Acquisition

In June 2010, Apache completed an acquisition of oil and gas assets on the Gulf of Mexico shelf from Devon Energy Corporation (Devon) for $1.05 billion, subject to normal post-closing adjustments. The acquisition was effective January 1, 2010, and was funded primarily from existing cash balances.

BP Acquisitions

In July 2010, Apache entered into three definitive purchase and sale agreements to acquire properties from subsidiaries of BP plc (collectively referred to as “BP”) for aggregate consideration of $7.0 billion. The effective date of the transactions was July 1, 2010. The acquisition of BP’s oil and gas operations, related infrastructure and acreage in the Permian Basin of west Texas and New Mexico was completed on August 10, 2010, for an agreed-upon purchase price of $3.1 billion. Apache completed the acquisition of substantially all of BP’s western Canadian upstream natural gas assets on October 8, 2010, for $3.25 billion. On November 4, 2010, the Company completed the acquisition of BP’s interests in four development licenses and one exploration concession in the Western Desert of Egypt for $650 million. Preferential purchase rights for $658 million of the value of the Permian Basin properties were exercised, and accordingly, the aggregate purchase price for all three transactions was reduced to approximately $6.4 billion, subject to normal post-closing adjustments.

The acquisitions were funded with a combination of common stock, mandatory convertible preferred shares, new term debt, commercial paper and existing cash balances.

Mariner Energy, Inc. Merger

In November 2010, Apache acquired Mariner Energy, Inc. (Mariner), an independent exploration and production company, in a stock and cash transaction totaling $2.7 billion and assumed approximately $1.7 billion of Mariner’s debt. Mariner’s oil and gas properties are primarily located in the Gulf of Mexico deepwater and shelf, the Permian Basin and onshore in the Gulf Coast region. The transaction was accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. There were no significant changes to the purchase price subsequent to completion of the acquisition.

Actual and Pro Forma Impact of Acquisitions (Unaudited)

Revenues attributable to the Devon acquisition, BP acquisitions, and Mariner merger included in Apache’s statement of consolidated operations for the year ended December 31, 2010, were $197 million, $308 million, and $95 million, respectively. Direct expenses attributable to the acquisitions and merger included in the statement of consolidated operations for the same period were $39 million, $78 million, and $26 million, respectively.

The following table presents pro forma information for Apache as if the acquisition of properties from Devon and BP and the Mariner merger occurred on January 1, 2009:

	For the Year Ended December 31,
	2010		2009
	(In millions, except per share amounts)
Revenues and Other	$	13,780	$	10,717
Net Income (Loss)	$	3,364	$	(477	)
Preferred Stock Dividends		76		83
Income (Loss) Attributable to Common Stock	$	3,288	$	(560	)
Net Income (Loss) per Common Share — Basic	$	8.62	$	(1.48	)
Net Income (Loss) per Common Share — Diluted	$	8.52	$	(1.48	)

The historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the acquisitions and merger and are factually supportable. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had the acquisitions and merger been completed on January 1, 2009. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company. The unaudited pro forma consolidated results reflect the following pro forma adjustments:

• Adjustment to recognize incremental DD&A expense, using the UOP method, resulting from the purchase of the properties;

• Adjustment to recognize adjusted general and administrative expense as a result of the purchase of the properties;

• Adjustment to recognize issuance of $1.5 billion principal amount of senior unsecured 5.1-percent notes maturing September 1, 2040, associated deferred financing cost amortization, and interest expense, net of amounts capitalized;

• Adjustment to recognize asset retirement obligation accretion on properties acquired;

• Adjustment to recognize a pro forma income tax provision;

• Adjustment to recognize the issuance of 26.45 million shares of Apache common stock to partially fund the BP acquisitions and 17.3 million shares to partially fund the Mariner merger;

• Adjustment to recognize the issuance of 25.3 million depositary shares each representing a 1/20th interest in a share of Apache’s 6.00-percent Mandatory Convertible Preferred Stock, Series D, issued to fund a portion of the BP acquisitions;

• Adjustment to recognize additional dividends associated with the issuance of 6.00-percent Mandatory Convertible Preferred Stock; and

• Elimination of transaction costs incurred in 2010 that are directly related to the transactions and do not have a continuing impact on the combined company’s operating results.

Merger, Acquisitions & Transition Expenses

In 2010, the Company recorded $183 million of expenses in connection with the acquisition of properties from BP and the Mariner merger: $114 million of separation and other costs; $42 million of investment banking fees; and $27 million of other expenses related to the transactions. In 2011, Apache recorded $20 million of expenses primarily for separation and other costs related to the Mariner merger and the acquisition of Mobil North Sea.

Subsequent Events

Cordillera Energy Partners

In January 2012, Apache agreed to acquire Cordillera Energy Partners III LLC, a privately-held company with approximately 254,000 net acres in the Granite Wash, Tonkawa, Cleveland, and Marmaton plays in western Oklahoma and the Texas Panhandle. Upon closing, the sellers will receive approximately 6.3 million shares of Apache common stock and $2.2 billion in cash, to be funded with cash on hand and debt. The effective date of the transaction is September 1, 2011, with closing projected to be in the second quarter of 2012, subject to customary closing conditions.

Burrup Holdings Limited

On January 31, 2012, a subsidiary of Apache Energy Limited acquired a 49-percent interest in Burrup Holdings Limited (BHL) for $439 million, including working capital adjustments. The transaction was funded with debt. BHL is the owner of an ammonia fertilizer plant on the Burrup Peninsula of Western Australia. Apache has supplied gas to the plant since operations commenced in 2006. Yara Australia Pty Ltd (Yara) owns the remaining 51 percent of BHL and will operate the plant. In addition, Apache also acquired an interest in a planned technical ammonia nitrate plant to be developed with Yara.