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CAPITAL STOCK
 12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
CAPITAL STOCK
CAPITAL STOCK
Common Stock Outstanding
A summary of the shares issued and outstanding for the years ended December 31, 2018, 2017, and 2016 is presented in the table below.

 
 
2018
 
2017
 
2016
Balance, beginning of year
 
380,954,864

 
379,439,676

 
378,034,175

Shares issued for stock-based compensation plans:
 
 
 
 
 
 
Treasury shares issued
 
2,454

 
1,411

 
11,504

Common shares issued
 
1,566,237

 
1,513,777

 
1,393,997

Treasury shares acquired
 
(7,827,333
)
 
—

 
—

Balance, end of year
 
374,696,222

 
380,954,864

 
379,439,676


Net Income (Loss) per Common Share
A reconciliation of the components of basic and diluted net income (loss) per common share for the years ended December 31, 2018, 2017, and 2016 is presented in the table below:
 
 
2018
 
2017
 
2016
 
 
Income
 
Shares
 
Per Share
 
Income
 
Shares
 
Per Share
 
Loss
 
Shares
 
Per Share
 
 
(In millions, except per share amounts)
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
40

 
382

 
$
0.11

 
$
1,304

 
381

 
$
3.42

 
$
(1,372
)
 
379

 
$
(3.62
)
Income (loss) from discontinued operations
 
—

 
382

 
—

 
—

 
381

 
—

 
(33
)
 
379

 
(0.09
)
Income (loss) attributable to common stock
 
$
40

 
382

 
$
0.11

 
$
1,304

 
381

 
$
3.42

 
$
(1,405
)
 
379

 
$
(3.71
)
Effect of Dilutive Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options and other
 
$
—

 
2

 
$
—

 
$
—

 
2

 
$
(0.01
)
 
$
—

 
—

 
$
—

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
40

 
384

 
$
0.11

 
$
1,304

 
383

 
$
3.41

 
$
(1,372
)
 
379

 
$
(3.62
)
Income (loss) from discontinued operations
 
—

 
384

 
—

 
—

 
383

 
—

 
(33
)
 
379

 
(0.09
)
Income (loss) attributable to common stock
 
$
40

 
384

 
$
0.11

 
$
1,304

 
383

 
$
3.41

 
$
(1,405
)
 
379

 
$
(3.71
)

The diluted EPS calculation excludes options and restricted shares that were anti-dilutive totaling 5.6 million, 7.3 million, and 4.7 million for the years ended December 31, 2018, 2017, and 2016, respectively.
Stock Repurchase Program
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, 2018, had repurchased a total of 40 million shares at an average price of $79.18 per share. During 2018, the Company repurchased a total of 7.8 million shares at an average price of $38.99 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.
Common Stock Dividend
For each of the years ended December 31, 2018, 2017, and 2016, the Company paid common stock dividends of $1.00 per share.
Stock Compensation Plans
The Company has 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 intended to provide eligible employees with equity-based incentives. The 2016 Plan provides for the granting of 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. A total of 16.2 million shares were authorized and available for grant under the 2016 Plan as of December 31, 2018. 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. The compensation expense related to the phantom stock units is 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 up to the settlement date.
Costs related to the plans are capitalized or expensed based on the nature of each employee’s activities. A description of the Company’s stock-settled and cash-settled units compensation plans and related costs follows:
 
 
For the Year Ended December 31,
 
 
2018
 
2017
 
2016
 
 
(In millions)
Stock-settled and cash-settled compensation expensed
 
$
157

 
$
142

 
$
131

Stock-settled and cash-settled compensation capitalized
 
37

 
41

 
40

Total stock-settled and cash-settled compensation costs
 
$
194

 
$
183

 
$
171


Stock Options
As of December 31, 2018, the Company had issued options to purchase shares of the Company’s common stock under the 2007 Omnibus Equity Compensation Plan, the 2011 Omnibus Equity Compensation Plan (2011 Plan), and the 2016 Plan (together, the Omnibus Plans). New shares of Company 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 issued prior to 2016 generally become exercisable ratably over a four-year period and expire 10 years after granted. Options granted in or after 2016 become exercisable ratably over a three-year period and expire 10 years after granted. The Omnibus Plans were submitted to and approved by the Company’s shareholders.
 
A summary of stock options issued and outstanding under the Omnibus Plans is presented in the table and narrative below:
 
 
2018
 
 
Shares
Under Option
 
Weighted Average
Exercise Price
 
 
(In thousands)
 
 
Outstanding, beginning of year
 
4,593

 
$
83.36

Granted
 
812

 
45.93

Exercised
 
(29
)
 
41.79

Forfeited
 
(121
)
 
74.58

Expired
 
(383
)
 
104.21

Outstanding, end of year(1)
 
4,872

 
75.95

Expected to vest(2)
 
1,274

 
48.74

Exercisable, end of year(3)
 
3,598

 
85.59

 
(1)
As of December 31, 2018, options outstanding had a weighted average remaining contractual life of 4.8 years and no intrinsic value.
(2)
As of December 31, 2018, options expected to vest had a weighted average remaining contractual life of 8.5 years and no intrinsic value.
(3)
As of December 31, 2018, options exercisable had a weighted average remaining contractual life of 3.5 years and no intrinsic value.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Assumptions used in the valuation are disclosed in the following table. Expected volatilities are based on historical volatility of the Company’s 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.
 
 
2018
 
2017
 
2016
Expected volatility
 
33.47
%
 
34.58
%
 
32.72
%
Expected dividend yields
 
2.16
%
 
1.58
%
 
2.42
%
Expected term (in years)
 
6

 
6

 
6

Risk-free rate
 
2.42
%
 
2.02
%
 
1.44
%
Weighted-average grant-date fair value
 
$
13.15

 
$
19.38

 
$
10.38


The intrinsic values of options exercised during 2018 and 2017 were approximately $0.1 million and $0.2 million, respectively. There were no options exercised during 2016. As of December 31, 2018, the total compensation cost related to non-vested options not yet recognized was $6 million, which will be recognized over the remaining vesting period of the options.
Restricted Stock and Restricted Stock Phantom Units
The Company has restricted stock and restricted stock unit plans for eligible employees including officers. The programs created under the Omnibus Plans have been approved by Apache’s Board of Directors. In 2018, the Company awarded 608,236 units of stock-settled awards at a weighted-average per-share market price of $45.59. In 2017 and 2016, the Company awarded 1,947,506 and 4,049,023 stock-based restricted stock units at a weighted-average per-share market price of $62.74 and $47.37, respectively. The value of the stock-settled awards issued was established by the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms. Also during 2018, the Company awarded 1,973,360 phantom units of cash-settled awards. The cash-settled awards compensation expense is recorded as a liability and remeasured at the end of each reporting period over the vesting terms based on the per-share market price of Apache’s common stock. During 2018, 2017, and 2016, compensation-expense related to restricted stock units and cash-based units was $101 million, $108 million, and $113 million, respectively. In 2018, 2017, and 2016, $29 million, $35 million, and $35 million were capitalized, respectively.
As of December 31, 2018, there was $47 million of total unrecognized compensation cost related to 3,152,801 unvested stock-settled restricted stock units. The weighted-average remaining life of unvested stock-settled restricted stock units is approximately 0.7 years. The fair values of the stock-settled awards vested during 2018, 2017, and 2016 were approximately $111 million, $135 million, and $151 million, respectively. A summary of stock-settled restricted stock unit activity for the year ended December 31, 2018, is presented below.
Stock-settled Restricted Stocks Units
 
Shares
 
Weighted-
Average Grant-
Date Fair Value
 
 
(In thousands)
 
 
Non-vested at January 1, 2018
 
4,920

 
$
56.67

Granted
 
608

 
45.59

Vested
 
(2,023
)
 
55.10

Forfeited
 
(352
)
 
56.69

Non-vested at December 31, 2018
 
3,153

 
55.54



The outstanding liability for the unvested cash-settled restricted stock phantom units as of December 31, 2018 was approximately $25 million. A summary of cash-settled restricted stock unit activity for the year ended December 31, 2018, is presented below.
Cash-settled Restricted Stock Phantom Units
 
Phantom Units
 
 
(In thousands)
Non-vested at January 1, 2018
 
59

Granted
 
1,973

Vested
 
(38
)
Forfeited
 
(176
)
Non-vested at December 31, 2018
 
1,818


In January 2019, the Company awarded 920,043 restricted stock units and 3,393,772 phantom units at a weighted-average per-share market price of $27.21 under the 2016 Plan to eligible employees. The phantom units represent a hypothetical interest in the Company’s stock and, once vested, are settled in cash. Total compensation cost for restricted stock units and phantom units absent any forfeitures, is estimated to be $25 million and $92 million, respectively, and was calculated based on the 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 2019, the Company awarded 1,394,526 phantom units based on Altus Midstream Company’s weighted-average per-share market price of $7.51. The phantom units represent a hypothetical interest in ALTM’s common stock and, once vested, are settled in cash. Total compensation cost for restricted stock units and phantom units, absent any forfeitures, is estimated to be $10 million and was calculated based on the fair market value of ALTM’s common stock as of the grant date. 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 ALTM’s common stock.
Performance Program
To provide long-term incentives for Apache employees to deliver competitive returns to the Company’s stockholders, the Company has granted 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, 2018, are as described below:
•
In February 2015, the Company’s Board of Directors approved the 2015 Performance Program, pursuant to the 2011 Plan. Eligible employees received initial stock-settled conditional restricted stock unit awards totaling 602,304 units. The results for the performance period ending December 31, 2017, yielded a payout of 100 percent of target. A total of 179,229 units were outstanding as of December 31, 2018.
•
In January 2016, the Company’s Board of Directors approved the 2016 Performance Program, pursuant to the 2011 Plan. Eligible employees received initial stock-settled conditional restricted stock unit awards totaling 871,369. The results for the performance period ending December 31, 2018, yielded a payout of 100 percent of target. A total of 667,617 units were outstanding as of December 31, 2018.
•
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. The actual amount of shares awarded will be between zero and 200 percent of target. A total of 499,795 units were outstanding as of December 31, 2018, from which a minimum of zero to a maximum of 999,590 units could be awarded.
•
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 during 2018. A total of 890,171 phantom units were outstanding as of December 31, 2018, from which a minimum of zero to a maximum of 1,780,342 phantom units could be awarded.
The fair value cost of the stock-settled awards was estimated on the date of grant and is being recorded as compensation expense ratably over the vesting terms. The fair value of the cash-settled awards are remeasured at the end of each reporting period over the vesting terms. During 2018, 2017, and 2016, $38 million, $23 million, and $14 million, respectively, were charged to expense. During 2018, 2017, and 2016, $7 million, $4 million, and $2 million were capitalized, respectively.
As of December 31, 2018, there was $10 million of total unrecognized compensation cost related to 1,346,641 unvested stock-settled conditional restricted stock units. The weighted-average remaining life of the unvested stock-settled conditional restricted stock units is approximately 0.8 years. A summary of stock-settled conditional restricted stock unit activity for the year ended December 31, 2018, is presented below:
Stock-settled Conditional Restricted Stock Units
 
Shares
 
Weighted
Average Grant-
Date Fair
Value(1)
 
 
(In thousands)
 
 
Non-vested at January 1, 2018
 
1,694

 
$
52.39

Granted
 
19

 
34.78

Vested
 
(193
)
 
66.63

Forfeited
 
(173
)
 
48.01

Non-vested at December 31, 2018
 
1,347

 
50.68

 
(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.
The outstanding liability for the unvested cash-settled conditional restricted stock units as of December 31, 2018 was approximately $16 million. A summary of cash-settled conditional restricted stock unit activity for the year ended December 31, 2018, is presented below:
Cash-settled Conditional Restricted Stock Phantom Units
 
Phantom Units
 
 
(In thousands)
Non-vested at January 1, 2018
 
—

Granted
 
931

Vested
 
—

Forfeited
 
(41
)
Non-vested at December 31, 2018
 
890


In January 2019, the Company’s Board of Directors approved the 2019 Performance Program, pursuant to the 2016 Plan, with terms similar to the 2018 Performance Program described above. Eligible employees received the initial cash-settled conditional phantom units totaling 1,677,281 units, with the ultimate number of phantom units to be awarded ranging from zero to a maximum of 3,354,562 units. These phantom units represent a hypothetical interest in the Company’s stock, and, once vested, are settled in cash. The TSR component of the award had a grant date fair value per award of $30.72 based on a Monte Carlo simulation. The grant date fair value per award for the remaining 50 percent was $27.21 based on the weighted-average fair market value of a share of common stock of the Company as of the grant date. These phantom units will be classified as a liability and remeasured at the end of each reporting period.