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 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, Apache 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. These repurchases resulted in a $1 million net loss on extinguishment of debt, which is included in “Financing costs, net” in Apache’s consolidated statement of operations. The net loss includes an acceleration of related discount and deferred financing costs.

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.

In August 2017, Apache Corporation assumed the obligations of Apache Finance Canada Corporation (AFCC) in respect of $300 million 7.75% notes due in 2029 which AFCC issued and the Company guaranteed pursuant to the governing indenture. The assumption was permitted by the indenture and effected pursuant to a supplemental indenture thereto. As a result of the assumption, the Company is the obligor under the notes and indenture, and AFCC is released from its obligations thereunder. The $300 million 7.75% notes historically have been included in the Company’s long-term debt; accordingly, the assumption did not change the Company’s long-term debt or total debt.

The following table presents the carrying value of the Company’s debt at December 31, 2017 and 2016:



	December 31,
	2017			2016
	(In millions)
Commercial paper	$	—		$	—
6.9% notes due 2018⁽¹⁾	400			400
7.0% notes due 2018⁽²⁾	150			150
7.625% notes due 2019	150			150
3.625% notes due 2021⁽¹⁾	493			493
3.25% notes due 2022⁽¹⁾	814			857
2.625% notes due 2023⁽¹⁾	528			528
7.7% notes due 2026	100			100
7.95% notes due 2026	180			180
7.75% notes due 2029⁽³⁾	300			300
6.0% notes due 2037⁽¹⁾	1,000			1,000
5.1% notes due 2040⁽¹⁾	1,499			1,499
5.25% notes due 2042⁽¹⁾	500			500
4.75% notes due 2043⁽¹⁾	1,413			1,413
4.25% notes due 2044⁽¹⁾	753			780
7.375% debentures due 2047	150			150
7.625% debentures due 2096	150			150
Debt before unamortized discount and deferred loan costs	8,580			8,650
Unamortized discount	(47		)	(50		)
Deferred loan costs	(49		)	(56		)
Total debt	8,484			8,544
Current maturities	(550		)	—
Long-term debt	$	7,934		$	8,544


(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.


(2)	On February 1, 2018, Apache’s 7.0% notes due 2018 in original principal amount of $150 million matured and were repaid.


(3)	Assumed in August 2017 as permitted by terms of these notes originally issued by a subsidiary and guaranteed by Apache. Since these notes historically have been included in Apache’s long-term debt, the assumption did not change Apache’s long-term debt or total debt.

Debt maturities as of December 31, 2017, excluding discounts and deferred loan costs, are as follows:



	(In millions)
2018	$	550
2019	150
2020	—
2021	493
2022	814
Thereafter	6,573
Total Debt, excluding discounts and deferred loan costs	$	8,580

Fair Value

Apache’s debt is recorded at the carrying amount, net of unamortized discount and deferred loan costs, on the Company’s consolidated balance sheet. The carrying amount, if any, of the Company’s commercial paper and uncommitted credit facilities and overdraft lines 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 (a Level 2 fair value measurement).



	December 31, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Commercial paper	$	—	$	—	$	—	$	—
Notes and debentures	8,484		9,244		8,544		9,183
Total Debt	$	8,484	$	9,244	$	8,544	$	9,183

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, 2017 and 2016, there were no outstanding balances on Apache’s lines of credit.

Unsecured Committed Bank Credit Facilities

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 $3.5 billion (including a $750 million letter of credit subfacility), with rights to increase commitments up to an aggregate $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. As of December 31, 2017, there were no borrowings under this credit facility, leaving aggregate available borrowing capacity at $3.5 billion.

At the Company’s option, the interest rate per annum for borrowings under the 2015 facility is either a base rate, as defined, plus a margin or the London Inter-bank Offered Rate (LIBOR), plus a margin. The Company also pays quarterly a facility fee at a per annum rate on total commitments. The margins and the facility fee vary based upon the Company’s senior long-term debt rating. At December 31, 2017, the base rate margin was 0.075 percent, the LIBOR margin was 1.075 percent, and the facility fee was 0.175 percent.

The financial covenants of the 2015 credit facility require the Company to maintain an adjusted debt-to-capital ratio of not greater than 60 percent at the end of any fiscal quarter. For purposes of this calculation, capital excludes the effects of non-cash write-downs, impairments, and related charges occurring after June 30, 2015.

The 2015 facility’s negative covenants restrict the ability of the Company and its subsidiaries to create liens securing debt on its hydrocarbon-related assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens, liens on subsidiary assets located outside of the United States and Canada, and liens arising as a matter of law, such as tax and mechanics’ liens. The Company also may incur liens on assets if debt secured thereby does not exceed 5 percent of the Company’s consolidated assets, or approximately $1.1 billion as of December 31, 2017. Negative covenants also restrict Apache’s ability to merge with another entity unless it is the surviving entity, dispose of substantially all of its assets, and guarantee debt of non-consolidated entities in excess of the stated threshold.

In February 2016, Apache entered into a letter of credit facility providing £900 million in commitments and rights to increase commitments to £1.075 billion. The facility matures in February 2020 and is available for letters of credit denominated in pounds sterling, U.S. Dollars, Canadian Dollars, and any other foreign currency consented to by an issuing bank. The facility also is available for loans in pounds sterling, U.S. Dollars, and Canadian Dollars 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. The facility’s representations and warranties, covenants, and events of default are substantially similar to those in Apache’s 2015 $3.5 billion revolving credit facility.

Commissions are payable on letters of credit outstanding under the 2016 facility at a per annum rate equal to a LIBOR margin. Borrowings bear interest per annum at a base rate or LIBOR, plus a margin. A facility fee at a per annum rate on aggregate commitments also is payable. Letter of credit commissions, the interest margin, and the facility fee vary depending on Apache’s senior unsecured long-term debt rating. At December 31, 2017, the LIBOR margin was 1.075 percent, the base rate margin was 0.075 percent, and the facility fee was 0.175 percent.

The 2016 facility 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. As of December 31, 2017, three letters of credit aggregating approximately £129.1 million and no borrowings were outstanding under this facility.

There are no clauses in the 2015 $3.5 billion or 2016 £900 million credit facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The agreements for these facilities 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 payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if the Company or any of its subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if the Company undergoes a specified change in control or any borrower has specified pension plan liabilities in excess of the stated threshold. The Company was in compliance with the terms of these credit facilities as of December 31, 2017.

Commercial Paper Program

The Company has available a $3.5 billion commercial paper program which, subject to market availability, facilitates Apache borrowing funds for up to 270 days at competitive interest rates. The commercial paper program is fully supported by available borrowing capacity under the Company’s 2015 committed credit facility. At December 31, 2017 and 2016, the Company had no commercial paper outstanding.

Financing Costs, Net

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



	For the Year Ended December 31,
	2017			2016			2015
	(In millions)
Interest expense	$	457		$	464		$	486
Amortization of deferred loan costs	9			8			11
Capitalized interest	(51		)	(48		)	(15		)
Loss on extinguishment of debt	1			1			39
Interest income	(19		)	(8		)	(10		)
Financing costs, net	$	397		$	417		$	511

As of December 31, 2017, the Company has $47 million of debt discounts, which will be charged to interest expense over the life of the related debt issuances. Discount amortization of $3 million was recorded as interest expense in each of 2017, 2016, and 2015.