On June 12, 2019, Altus Midstream LP issued and sold Preferred Units for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the Closing). Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. Pursuant to the partnership agreement of Altus Midstream LP:

•The Preferred Units bear quarterly distributions at a rate of 7 percent per annum, increasing to 10 percent per annum after the fifth anniversary of Closing and upon the occurrence of specified events. Altus Midstream LP may pay distributions in-kind for the first six quarters after the Preferred Units are issued.

•The Preferred Units are redeemable at Altus Midstream LP’s option at any time in cash at a redemption price (the Redemption Price) equal to the greater of an 11.5 percent internal rate of return (increasing after the fifth anniversary of Closing to 13.75 percent) and a 1.3x multiple of invested capital. The Preferred Units will be redeemable at the holder’s option upon a change of control or liquidation of Altus Midstream LP and certain other events, including certain asset dispositions.

•The Preferred Units will be exchangeable for shares of ALTM’s Class A common stock at the holder’s election after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be exchangeable for a number of shares of ALTM’s Class A common stock equal to the Redemption Price divided by the volume-weighted average trading price of ALTM’s Class A common stock on the Nasdaq Capital Market for the 20 trading days immediately preceding the second trading day prior to the applicable exchange date, less a 6 percent discount.

•Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream LP’s common units and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

•Altus Midstream LP is restricted from declaring or making cash distributions on its common units until all required distributions on the Preferred Units have been paid. In addition, before the fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Altus Midstream LP’s common units are limited to $650 million of cash from ordinary course operations if permitted under its credit facility. Cash distributions on, and redemptions of, Altus Midstream LP’s common units also are subject to satisfaction of leverage ratio requirements specified in its partnership agreement.

The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Altus bifurcated and recognized at fair value an embedded derivative related to the Preferred Units at inception of $94 million for a redemption option of the Preferred Unit holders. The derivative is reflected in “Other” within “Deferred Credits and Other Noncurrent Liabilities” on the Company’s consolidated balance sheet at its current fair value of $139 million as of December 31, 2020. The fair value of the embedded derivative, a Level 3 fair value measurement, was based on numerous factors including expected future interest rates using the Black-Karasinski model, Altus’ imputed interest rate, the timing of periodic cash distributions, and dividend yields of the Preferred Units. See Note 4—Derivative Instruments and Hedging Activities for more detail.

Altus applies a two-step approach to subsequent measurement of the redeemable noncontrolling interest related to the Preferred Units by first allocating a portion of the net income of Altus Midstream LP in accordance with the terms of the partnership agreement. An additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end may be recorded, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of the Closing. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price.


	Units Outstanding	Financial Position(1)
	(In millions, except unit data)
Redeemable noncontrolling interest — Preferred Units: at December 31, 2018	—	$	—
Issuance of Preferred Units, net	625,000	517
Distribution of in-kind additional Preferred Units	13,163	—
Allocation of Altus Midstream net income	N/A	38
Redeemable noncontrolling interest - Altus Preferred Unit limited partners: at December 31, 2019	638,163	555

Distribution of in-kind additional Preferred Units	22,531	—
Cash distributions to Altus Preferred Unit limited partners	—	(23)
Allocation of Altus Midstream LP net income	N/A	76
Redeemable noncontrolling interest - Altus Preferred Unit limited partners: at December 31, 2020	660,694	608
Preferred Units embedded derivative		139
		$	747

(1)The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of December 31, 2020 was the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital. As of December 31, 2020, the Redemption Price would have been based on 1.3 times multiple of invested capital, which was $813 million and greater than using an 11.5 percent internal rate of return, which was $717 million.


	For the Year Ended December 31,
	2020	2019	2018
Balance, beginning of year	376,062,670	374,696,222	380,954,864
Shares issued for stock-based compensation plans:
Treasury shares issued	17,448	31,701	2,454
Common shares issued	1,402,512	1,334,747	1,566,237
Treasury shares acquired	—	—	(7,827,333)
Balance, end of year	377,482,630	376,062,670	374,696,222


	2020					2019					2018
	Loss		Shares	Per Share		Loss		Shares	Per Share		Income		Shares	Per Share
	(In millions, except per share amounts)
Basic:


Income (loss) attributable to common stock	$	(4,860)	378	$	(12.86)	$	(3,553)	377	$	(9.43)	$	40	382	$	0.11
Effect of Dilutive Securities:
Stock options and other	$	—	—	$	—	$	—	—	$	—	$	—	2	$	—
Diluted:


Income (loss) attributable to common stock	$	(4,860)	378	$	(12.86)	$	(3,553)	377	$	(9.43)	$	40	384	$	0.11

The diluted EPS calculation excludes options and restricted shares that were anti-dilutive totaling 4.5 million, 5.0 million, and 5.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. The impact to net income (loss) attributable to common stock on an assumed conversion of the redeemable noncontrolling Preferred Units interest in Altus Midstream LP was anti-dilutive for the years ended December 31, 2020 and 2019.

In 2013 and 2014, Apache’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and, through December 31, 2020, had repurchased a total of 40 million shares at an average price of $79.18 per share. During the fourth quarter of 2018, the Company’s Board of Directors authorized the purchase of up to 40 million additional shares of the Company’s common stock. The Company is not obligated to acquire any specific number of shares and did not purchase any shares during the year ended December 31, 2020.

In the first quarter of 2020, the Board of Directors approved a reduction in the Company’s quarterly dividends from $0.25 per share to $0.025 per share, effective for all dividends payable after March 12, 2020. For the year ended December 31, 2020, the Company declared common stock dividends of $0.10 per share. For each of the years ended December 31, 2019 and 2018, the Company declared common stock dividends of $1.00 per share.

The Company maintains several stock-based compensation plans, which include stock options, restricted stock, and conditional restricted stock unit plans. On May 12, 2016, the Company’s shareholders approved the 2016 Omnibus Compensation Plan (the 2016 Plan), which is used to provide eligible employees with equity-based incentives by granting incentive stock options, non-qualified stock options, performance awards, restricted stock awards, restricted stock units, stock appreciation rights, cash awards, or any combination of the foregoing. As of December 31, 2020, 14.1 million shares were authorized and available for grant under the 2016 Plan. Previously approved plans remain in effect solely for the purpose of governing grants still outstanding that were issued prior to approval of the 2016 Plan. All new grants are issued from the 2016 Plan. In 2018, the Company began issuing cash-settled awards (phantom units) under the restricted stock and conditional restricted stock unit plans. The phantom units represent a hypothetical interest in the Company’s stock and, once vested, are settled in cash.

Costs related to the plans are capitalized or expensed to “Lease operating expenses,” “Exploration,” or “General and administrative” in the Company’s statement of consolidated operations based on the nature of each employee’s activities. The following table summarizes the Company’s stock-settled and cash-settled compensation costs:


	For the Year Ended December 31,
	2020		2019		2018
	(In millions)
Stock-settled and cash-settled compensation expensed	$	40	$	110	$	157
Stock-settled and cash-settled compensation capitalized	7		28		37
Total stock-settled and cash-settled compensation costs	$	47	$	138	$	194

As of December 31, 2020, the Company had outstanding options to purchase shares of its common stock under the 2016 Plan, the 2011 Omnibus Equity Compensation Plan (the 2011 Plan), and the 2007 Omnibus Equity Compensation Plan (the 2007 Plan), (collectively, the Omnibus Plans). The Omnibus Plans were submitted to and approved by the Company’s shareholders. New shares of common stock will be issued for employee stock option exercises. Under the Omnibus Plans, the exercise price of each option equals the closing price of Apache’s common stock on the date of grant. Options granted become exercisable ratably over a three-year period and expire 10 years after granted.


	2020			2019			2018
	Shares Under Option	Weighted Average Exercise Price		Shares Under Option	Weighted Average Exercise Price		Shares Under Option	Weighted Average Exercise Price
	(In thousands, except exercise price amounts)
Outstanding, beginning of year	4,298	$	75.24	4,872	$	75.95	4,593	$	83.36
Granted	—	—		—	—		812	45.93
Exercised	—	—		—	—		(29)	41.79
Forfeited	(37)	44.98		(80)	34.58		(121)	74.58
Expired	(724)	92.14		(494)	88.82		(383)	104.21
Outstanding, end of year(1)	3,537	72.10		4,298	75.24		4,872	75.95
Expected to vest(2)	150	45.77		495	49.11		1,274	48.74
Exercisable, end of year(3)	3,387	73.26		3,803	78.64		3,598	85.59

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model, a Level 2 fair value measurement. The following table summarizes specific assumptions used in the Company’s valuation:

Assumptions related to the expected volatilities are based on the Company’s historical volatility of its common stock and other factors. The expected dividend yield is based on historical yields on the date of grant. The expected term of stock options granted represents the period of time that the stock options are expected to be outstanding and is derived from historical exercise behavior, current trends, and values derived from lattice-based models. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

There were no options issued and no options exercised during the years ended December 31, 2020 and 2019. The intrinsic values of options exercised during the year ended December 31, 2018 was approximately $0.1 million. As of December 31, 2020, total compensation cost related to non-vested options not yet recognized was nil because they fully vest on January 5, 2021.

The Company has restricted stock unit and restricted stock phantom unit plans for eligible employees, including officers. The value of the stock-settled restricted stock unit awards is established by the market price on the date of grant and is recorded as compensation expense ratably over the vesting terms. The restricted stock phantom unit awards represent a hypothetical interest in either the Company’s stock or in ALTM’s common stock, as applicable, and, once vested, are settled in cash. Compensation expense related to the cash-settled awards is recorded as a liability and remeasured at the end of each reporting period over the applicable vesting term. The cash-settled awards compensation expense is recorded as a liability and remeasured at the end of each reporting period over the applicable vesting term.

For the years ended December 31, 2020, 2019, and 2018, compensation costs charged to expense for the restricted stock units and restricted stock phantom units was $39 million, $104 million, and $101 million, respectively. As of December 31, 2020, 2019, and 2018, capitalized compensation costs for the restricted stock units and restricted stock phantom units were $6 million, $24 million, and $29 million, respectively.


	2020			2019			2018
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
	(In thousands, except per share amounts)
Non-vested, beginning of year	2,448	$	46.65	3,153	$	55.54	4,920	$	56.67
Granted	1,352	24.60		1,479	36.81		608	45.59
Vested(3)	(1,933)	48.65		(1,899)	53.99		(2,023)	55.10
Forfeited	(315)	30.09		(285)	45.06		(352)	56.69
Non-vested, end of year(1)(2)	1,552	28.43		2,448	46.65		3,153	55.54


	For the Year Ended December 31,
	2020	2019	2018
	(In thousands)
Non-vested, beginning of year	5,384	1,818	59
Adjustment for ALTM reverse stock split(1)	(1,246)	—	—
Granted(2)	3,462	4,831	1,973
Vested	(1,618)	(616)	(38)
Forfeited	(1,559)	(649)	(176)
Non-vested, end of year(3)	4,423	5,384	1,818

(2)Restricted stock phantom units granted during 2020 and 2019 included 3,378,486 and 3,401,477 awards, respectively, based on the per-share market price of Apache common stock and 83,239 and 1,429,135 awards, respectively, based on the per-share market price of ALTM common stock. The restricted stock phantom units granted during 2020 based on ALTM’s per-share market price reflect the 1-for-20 reverse stock split described above.

In January 2021, the Company awarded 1,354,349 restricted stock units and 4,360,656 restricted stock phantom units based on Apache’s weighted-average per-share market price of $16.18 under the 2016 Plan to eligible employees. Total compensation cost for the restricted stock units and the restricted stock phantom units, absent any forfeitures, is estimated to be $22 million and $71 million, respectively, and was calculated based on the per-share fair market value of a share of the Company’s common stock as of the grant date. Compensation cost will be recognized over a three-year vesting period for both plans. The phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock.

Also during January 2021, the Company awarded 56,836 restricted stock phantom units based on ALTM’s weighted-average per-share market price of $48.84. The restricted stock phantom units represent a hypothetical interest in ALTM’s common stock and, once vested, are settled in cash. Total compensation cost for these restricted stock phantom units, absent any forfeitures, is estimated to be $3 million and was calculated based on the fair market value of ALTM’s common stock as of the grant date. The restricted stock phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of ALTM’s common stock.

To provide long-term incentives for the Company’s employees to deliver competitive shareholder returns, the Company makes annual grants of conditional restricted stock units to eligible employees. Apache has a performance program for certain eligible employees with payout for 50 percent of the shares based upon measurement of total shareholder return (TSR) of Apache common stock as compared to a designated peer group during a three-year performance period. Payout for the remaining 50 percent of the shares is based on performance and financial objectives as defined in the plan. The overall results of the objectives are calculated at the end of the award’s stated performance period and, if a payout is warranted, applied to the target number of restricted stock units awarded. The performance shares will immediately vest 50 percent at the end of the three-year performance period, with the remaining 50 percent vesting at the end of the following year. Grants from the performance programs outstanding at December 31, 2020, are as described below:

•In January 2017, the Company’s Board of Directors approved the 2017 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial stock-settled conditional restricted stock unit awards totaling 620,885 units. A total of 111,126 restricted stock units were outstanding as of December 31, 2020. The results for the performance period yielded a payout of 54 percent of target.

•In January 2018, the Company’s Board of Directors approved the 2018 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 931,049 units. A total of 704,483 phantom units were outstanding as of December 31, 2020. The results for the performance period yielded a payout of 23 percent of target.

•In January 2019, the Company’s Board of Directors approved the 2019 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 1,679,832 units. The actual amount of phantom units awarded will be between zero and 200 percent of target. A total of 1,301,893 phantom units were outstanding as of December 31, 2020, from which a minimum of zero to a maximum of 2,603,786 phantom units could be awarded.

•In January 2020, the Company’s Board of Directors approved the 2020 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 1,687,307 units. The actual amount of phantom units awarded will be between zero and 200 percent of target. A total of 1,410,404 phantom units were outstanding as of December 31, 2020, from which a minimum of zero to a maximum of 2,820,808 phantom units could be awarded.

The fair value cost of the stock-settled awards was estimated on the date of grant and is recorded as compensation expense ratably over the applicable vesting term. The fair value of the cash-settled awards is remeasured at the end of each reporting period over the applicable vesting term. Compensation cost charged to expense under the performance programs was a credit of $8 million during 2020 and expenses of $24 million and $38 million during 2019 and 2018, respectively. Capitalized compensation costs under the performance programs was a credit of $1 million during 2020 and expenses of $3 million and $7 million during 2019 and 2018, respectively.

(1)The fair value of each conditional restricted stock unit award is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a three-year continuous risk-free interest rate; (ii) a constant volatility assumption based on the historical realized stock price volatility of the Company and the designated peer group; and (iii) the historical stock prices and expected dividends of the common stock of the Company and its designated peer group.