Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

3.    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. When appropriate, the Company utilizes various types of derivative financial instruments, including swaps and options, to manage fluctuations in cash flows resulting from changes in commodity prices. As of December 31, 2014, Apache had no open commodity derivative positions.

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. As such, the Company executes commodity derivative transactions under master agreements that have netting provisions that provide for offsetting payables against receivables. Additionally, if a party incurs a material deterioration in its credit ratings, as defined in the applicable agreement, the other party has the right to demand the posting of collateral, demand a transfer, or terminate the arrangement. The Company’s net derivative liability position at December 31, 2013, represented the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position.

Derivative Activity Recorded in the Consolidated Balance Sheet

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 fair market value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

	December 31, 2014		December 31, 2013
	(In millions)
Current Assets: Prepaid assets and other	$	—	$	1
Total Assets	$	—	$	1
Current Liabilities: Derivative instruments	$	—	$	299
Total Liabilities	$	—	$	299

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:

	Gain (Loss) on Derivatives Recognized in Income	For the Year Ended December 31,
		2014			2013			2012
		(In millions)
Gain (loss) on cash flow hedges reclassified from accumulated other comprehensive income (loss)	Oil and Gas Production Revenues	$	—		$	(16	)	$	268
Loss for ineffectiveness on cash flow hedges	Revenues and Other: Other	$	—		$	(1	)	$	—
Derivatives not designated as cash flow hedges: Realized Loss		$	(16	)	$	(178	)	$	—
Unrealized Gain (loss)			300			(221	)		(79	)
Gain (loss) on derivatives not designated as cash flow hedges	Derivative instrument gains (losses), net	$	284		$	(399	)	$	(79	)

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.”

Derivative Activity in Accumulated Other Comprehensive Income (Loss)

A reconciliation of the components of accumulated other comprehensive income (loss) in the statement of consolidated changes in equity related to Apache’s derivatives designated as cash flow hedges is presented in the table below:

	For the Year Ended December 31,
	2014						2013						2012
	Before tax			After tax			Before tax			After tax			Before tax			After tax
	(In millions)
Unrealized gain (loss) on derivatives at beginning of year	$	1		$	1		$	(10	)	$	(6	)	$	145		$	114
Realized amounts reclassified into earnings		—			—			16			11			(268	)		(199	)
Net change in derivative fair value		(1	)		(1	)		(6	)		(5	)		113			79
Ineffectiveness reclassified into earnings		—			—			1			1			—			—
Unrealized gain (loss) on derivatives at end of period	$	—		$	—		$	1		$	1		$	(10	)	$	(6	)