TRANSACTIONS WITH PARENT AFFILIATE

9 Months Ended

Sep. 30, 2021

Related Party Transactions [Abstract]

TRANSACTIONS WITH PARENT AFFILIATE

TRANSACTIONS WITH PARENT AFFILIATE

The Company completed the Holding Company Reorganization on March 1, 2021 and sold to APA all of the equity in the three Apache subsidiaries through which Apache’s interests in Suriname and the Dominican Republic were held. The reorganization gave rise to a note payable by APA to Apache. The note has a seven-year term, maturing on February 29, 2028, and bears interest at a rate of 4.5 percent per annum, payable semi-annually, subject to APA’s option to allow accrued interest to convert to principal (PIK) during the first 5.5 years of the note’s term (to August 31, 2026). The note is guaranteed by each of the three subsidiaries sold by Apache to APA.

The Company recognized interest income of approximately $15 million and $35 million on this note during the third quarter and first nine months of 2021, respectively, which is reflected in “Financing costs, net” on the Company’s statement of consolidated operations. Apache allowed interest accrued from March 1, 2021 through August 31, 2021 to PIK pursuant to the note.

The Company accounted for the divestiture of its subsidiaries as a transfer to an affiliate entity under common control and no longer consolidates the subsidiaries for periods subsequent to the Holding Company Reorganization. The carrying value of the net assets transferred was $483 million, which included approximately $292 million of Cash and cash equivalents, $163 million of Oil and gas properties, and working capital items. The Company continues to hold its existing assets in the U.S., Egypt, and U.K., and its current economic interests in ALTM and its subsidiary, Altus Midstream LP.

The Company continues to provide administrative and support operations to APA related to activities performed for the Suriname and Dominican Republic subsidiaries. The Company is reimbursed by APA for employee costs, certain internal costs, and third-party costs paid by the Company in connection with its role as service provider. All reimbursements are based on actual costs incurred and no market premium is applied by the Company to APA. The Company incurred $5 million and $12 million in reimbursable corporate overhead charges for the third quarter and first nine months of 2021, respectively.

In August 2021, Apache entered into an promissory note with APA under which Apache may borrow up to $250 million from APA at APA’s discretion. The note has a term of one year, maturing on August 4, 2022, and bears interest at a variable rate per annum equal to the monthly, short-term applicable federal rate, payable semi-annually. As of September 30, 2021, there was $243 million outstanding under this note, which is reflected as “Note payable to APA Corporation” on the Company’s consolidated balance sheet.