6. DEBT

Overview

All of the Company’s debt is senior unsecured debt and has equal priority with respect to the payment of both principal and interest. The indentures for the notes described below place certain restrictions on the Company, including limits on Apache’s ability to incur debt secured by certain liens and its ability to enter into certain sale and leaseback transactions. Upon certain changes in control, all of these debt instruments would be subject to mandatory repurchase, at the option of the holders. None of the indentures for the notes contain prepayment obligations in the event of a decline in credit ratings.

In April 2012 the Company issued $400 million principal amount of senior unsecured 1.75-percent notes maturing April 15, 2017, $1.1 billion principal amount of senior unsecured 3.25-percent notes maturing April 15, 2022, and $1.5 billion principal amount of senior unsecured 4.75-percent notes maturing April 15, 2043. The notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The Company used the proceeds to fund the cash portion of the purchase price paid to acquire Cordillera, repay the $400 million 6.25-percent notes that matured on April 15, 2012, and for general corporate purposes.

In December 2012 the Company issued $1.2 billion principal amount of senior unsecured 2.625-percent notes maturing January 15, 2023 and $800 million principal amount of senior unsecured 4.25-percent notes maturing January 15, 2044. The notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The Company used the proceeds to repay commercial paper borrowings and for general corporate purposes.

The following table presents the carrying value of the Company’s debt at December 31, 2012 and 2011:


	December 31,
	2012			2011
	(In millions)
U.S.:
Money market lines of credit	$	13		$	—
Commercial paper		489			—
6.25% notes due 2012(1)		—			400
5.25% notes due 2013(1)		500			500
6.0% notes due 2013(1)		400			400
5.625% notes due 2017(1)		500			500
1.75% notes due 2017(1)		400			—
6.9% notes due 2018(1)		400			400
7.0% notes due 2018		150			150
7.625% notes due 2019		150			150
3.625% notes due 2021(1)		500			500
3.25% notes due 2022(1)		1,100			—
2.625% notes due 2023(1)		1,200			—
7.7% notes due 2026		100			100
7.95% notes due 2026		180			180
6.0% notes due 2037(1)		1,000			1,000
5.1% notes due 2040(1)		1,500			1,500
5.25% notes due 2042(1)		500			500
4.75% notes due 2043(1)		1,500			—
4.25% notes due 2044(1)		800			—
7.375% debentures due 2047		150			150
7.625% debentures due 2096		150			150

		11,682			6,580

Subsidiary and other obligations:
Argentina overdraft lines of credit		69			31
Canada lines of credit		9			—
Apache Finance Canada 4.375% notes due 2015(1)		350			350
Notes due in 2016 and 2017		1			1
Apache Finance Canada 7.75% notes due 2029		300			300

		729			682

Debt before unamortized discount		12,411			7,262
Unamortized discount		(66	)		(46	)

Total debt	$	12,345		$	7,216

Current maturities	$	(990	)	$	(431	)

Long-term debt	$	11,355		$	6,785

(1)	These notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The remaining notes and debentures are not redeemable.

Debt maturities as of December 31, 2012, excluding discounts, are as follows:


	(In millions)
2013	$	991
2014		—
2015		350
2016		1
2017		1,389
Thereafter		9,680

Total Debt, excluding discounts	$	12,411

Fair Value

The Company’s debt is recorded at the carrying amount on its consolidated balance sheet. The carrying amount of the Company’s money market lines of credit and commercial paper approximate 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 fixed-rate debt using estimates provided by an independent investment financial data services firm, which is a Level 2 fair value measurement.


	December 31, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Money market lines of credit	$	91	$	91	$	31	$	31
Commercial paper		489		489		—		—
Notes and debentures		11,765		13,340		7,185		8,673

Total Debt	$	12,345	$	13,920	$	7,216	$	8,704

Money Market and Overdraft Lines of Credit

The Company has certain uncommitted money market and overdraft lines of credit that are used from time to time for working capital purposes. As of December 31, 2012, $91 million was drawn on facilities in the U.S., Argentina, and Canada. As of December 31, 2011, $31 million was drawn on facilities in Argentina.

Unsecured Committed Bank Credit Facilities

As of December 31, 2012, the Company had unsecured committed revolving syndicated bank credit facilities totaling $3.3 billion, of which $1.0 billion matures in August 2016 and $2.3 billion matures in June 2017. The facilities consist of a $1.7 billion facility and a $1.0 billion facility for the U.S., a $300 million facility in Australia, and a $300 million facility in Canada. As of December 31, 2012, available borrowing capacity under the Company’s credit facilities was $2.8 billion. The committed credit facilities are used to support Apache’s commercial paper program.

On June 4, 2012, the Company entered into a new Global Credit Facility consisting of a $1.7 billion revolving syndicated bank credit facility for the U.S., a $300 million revolving syndicated bank credit facility for Australia, and a $300 million revolving syndicated bank credit facility for Canada, which replaced the Company’s existing syndicated bank credit facilities that were scheduled to mature in May 2013. The new facilities are scheduled to mature on June 4, 2017. There were no changes to the Company’s $1.0 billion U.S. credit facility that matures on August 12, 2016.

At the Company’s option, the interest rate for the facilities is based on a base rate, as defined, or the London Inter-bank Offered Rate (LIBOR) plus a margin determined by the Company’s senior long-term debt rating. The $1.7 billion credit facility also allows the Company to borrow under competitive auctions.

At December 31, 2012, the margin over LIBOR for committed loans was 0.875 percent on the $1.0 billion U.S. credit facility and 0.90 percent on each of the $1.7 billion U.S. credit facility, the $300 million Australian credit facility, and the $300 million Canadian credit facility. The Company also pays quarterly facility fees of 0.125 percent on the total amount of the $1.0 billion U.S. facility and 0.10 percent on the total amount of the other three facilities. The facility fees vary based upon the Company’s senior long-term debt rating.

The financial covenants of the credit facilities require the Company to maintain a debt-to-capitalization ratio of not greater than 60 percent at the end of any fiscal quarter. At December 31, 2012, the Company’s debt-to-capitalization ratio was 28 percent.

The negative covenants include restrictions on the Company’s ability to create liens and security interests on its assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens, and liens arising as a matter of law, such as tax and mechanics’ liens. The Company may incur liens on assets located in the U.S. and Canada of up to 5 percent of the Company’s consolidated assets, or approximately $3.0 billion as of December 31, 2012. There are no restrictions on incurring liens in countries other than the U.S. and Canada. There are also restrictions on Apache’s ability to merge with another entity, unless the Company is the surviving entity, and a restriction on its ability to guarantee debt of entities not within its consolidated group.

There are no clauses in the facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The credit facility agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payments and terminate lending commitments if Apache Corporation, or any of its U.S. or Canadian subsidiaries, defaults on any direct payment obligation in excess of the stated thresholds noted in the agreements or has any unpaid, non-appealable judgment against it in excess of the stated thresholds noted in the agreements.

The Company was in compliance with the terms of the credit facilities as of December 31, 2012.

Commercial Paper Program

In June 2012, the Company increased the size of its commercial paper program from $2.95 billion to $3.0 billion. This program generally enables Apache to borrow funds for up to 270 days at competitive interest rates. Apache’s 2012 weighted-average interest rate for commercial paper was 0.43 percent. If the Company is unable to issue commercial paper following a significant credit downgrade or dislocation in the market, the Company’s committed credit facilities are available as a 100-percent backstop. The commercial paper program is fully supported by available borrowing capacity under committed credit facilities, which expire in 2016 and 2017. As of December 31, 2012, the Company had $489 million in commercial paper outstanding. There was no outstanding commercial paper at December 31, 2011.

Subsidiary Notes — Apache Finance Canada

Apache Finance Canada Corporation (Apache Finance Canada) has approximately $300 million of publicly-traded notes due in 2029 and an additional $350 million of publicly traded notes due in 2015 that are fully and unconditionally guaranteed by Apache.

For further discussion of subsidiary debt, please see Note 16 — Supplemental Guarantor Information.

Financing Costs, Net

Financing costs incurred during the periods are composed of the following:


	For the Year Ended December 31,
	2012			2011			2010
	(In millions)
Interest expense	$	509		$	433		$	345
Amortization of deferred loan costs		7			5			17
Capitalized interest		(334	)		(263	)		(120	)
Interest income		(17	)		(17	)		(13	)

Financing costs, net	$	165		$	158		$	229

The Company has $66 million of debt discounts as of December 31, 2012, which will be charged to interest expense over the life of the related debt issuances. Discount amortization of $3 million, $2 million, and $2 million were recorded as interest expense in 2012, 2011, and 2010, respectively.

As of December 31, 2012 and 2011, the Company had approximately $118 million and $48 million, respectively, of unamortized deferred loan costs associated with its various debt obligations. These costs are included in deferred charges and other in the accompanying consolidated balance sheet and are being charged to financing costs and expensed over the life of the related debt issuances.