ACQUISITIONS AND DIVESTITURES

12 Months Ended

Dec. 31, 2019

2019 Activity

U.S. Divestitures

In the third quarter of 2019, Apache completed the sale of non-core assets in the western Anadarko Basin of Oklahoma and Texas for aggregate cash proceeds of approximately $322 million and the assumption of asset retirement obligations of $49 million. These assets met the criteria to be classified as held for sale in the second quarter of 2019. Accordingly, the Company performed a fair value assessment of the assets and recorded impairments of $240 million to the carrying value of proved and unproved oil and gas properties, other fixed assets, and working capital. The transaction closed in the third quarter of 2019, and the Company recognized a $7 million loss in association with the sale.

In the second quarter of 2019, Apache completed the sale of certain non-core assets in Oklahoma that had a net carrying value of $206 million for aggregate cash proceeds of approximately $223 million. The Company recognized a $17 million gain in association with the sale.

During 2019, the Company also completed the sale of certain other non-core producing assets, GPT assets, and leasehold acreage, primarily in the Permian region, in multiple transactions for total cash proceeds of $73 million. The Company recognized a net gain of approximately $33 million upon closing of these transactions.

Suriname Joint Venture Agreement

In December 2019, Apache entered into a joint venture agreement with Total S.A. to explore and develop Block 58 offshore Suriname. Under the terms of the agreement, Apache and Total S.A. will each hold a 50 percent working interest in Block 58. Apache will operate the drilling of the first three exploration wells in the block (and may operate a fourth), including the Maka Central-1 well, and subsequently transfer operatorship to Total. In connection with the agreement, Apache received $100 million from Total S.A. upon closing, which was applied against the carrying value of its Suriname properties, and $75 million upon satisfying certain closing conditions in the first quarter of 2020 for reimbursement of 50 percent of all costs incurred on Block 58 to date.

Apache will also receive various other forms of consideration, including $5 billion of cash carry on Apache’s first $7.5 billion of appraisal and development capital, 25 percent cash carry on all of Apache’s appraisal and development capital beyond the first $7.5 billion, a $75 million cash payment upon achieving first oil production, and future contingent royalty payments from successful joint development projects.

Leasehold, Property, and Other Acquisitions

During 2019, Apache completed leasehold and property acquisitions for total cash consideration of $40 million, primarily in its U.S. onshore regions.

As part of the Altus transaction described below, Apache contributed options to acquire equity interests in five separate third-party pipeline projects to Altus Midstream LP and/or its subsidiaries. As of December 31, 2019, four of the five joint venture equity options had been exercised to acquire various ownership interests in the associated third-party pipeline limited liability entities. For discussion on the Company’s acquisition of equity method interests during the period, refer to Note 6—Equity Method Interests.

2018 Activity

Altus Transaction

In November 2018, Apache completed a transaction with Altus Midstream Company to create a pure-play, Permian Basin to Gulf Coast midstream C-corporation anchored by Apache’s gathering, processing, and transmission assets at Alpine High. Pursuant to the agreement, Apache contributed certain Alpine High midstream assets and options to acquire equity interests in five

separate third-party pipeline projects (the Pipeline Options) to Altus and/or its subsidiaries. Altus Midstream Company contributed approximately $628 million of cash, net of transaction expenses. The transaction was accounted for by Altus as a reverse recapitalization. Under this method of accounting, Altus Midstream Company was treated as the “acquired” company, and Apache’s contributed assets of approximately $1.1 billion remained at historical cost, with no goodwill or other intangible assets recorded. Apache owns an approximate 79 percent ownership interest in Altus.

Apache fully consolidates the assets and liabilities of Altus in its consolidated financial statements, with a corresponding noncontrolling interest reflected separately. Apache recorded a noncontrolling interest of $406 million upon closing, which is reflected as a separate component of equity in the Company’s consolidated balance sheet. This represents approximately 21 percent third party ownership of the net assets in Altus at the time of the transaction. The cash contributions in excess of the noncontrolling interest were recognized as additional paid-in capital.

Other Activity

During 2018, Apache completed the sale of certain non-core assets and leasehold, primarily in the North Sea and Permian regions, in multiple transactions for total cash proceeds of $138 million. The Company recognized gains of approximately $23 million during 2018 upon the closing of these transactions.

Apache completed $133 million of leasehold and property acquisitions during 2018, primarily in its U.S. onshore regions.

2017 Activity

Canada Divestitures

During 2017, Apache announced the sale of its subsidiary Apache Canada Ltd. (ACL) and complete exit of its Canadian operations. On June 30, 2017, Apache completed the sale of its Canadian assets at Midale and House Mountain, located in Saskatchewan and Alberta, for aggregate cash proceeds of approximately $228 million. The Company recognized a $52 million loss during the second quarter of 2017 in association with this sale.

In August of 2017, Apache completed the sale of its remaining Canadian operations for aggregate cash proceeds of approximately $478 million. The Company recognized a $74 million gain upon closing of these transactions in the third quarter of 2017. A summary of the Company’s Canadian assets and liabilities at the time of close is detailed below:



	(In millions)
ASSETS:
Cash	$	46
Other current assets	64
Property, plant & equipment	1,132
Total assets	$	1,242
LIABILITIES:
Current liabilities, excluding asset retirement obligation	$	120
Asset retirement obligation	780
Other long-term liabilities	46
Total liabilities	$	946

The net carrying value of the assets disposed included a currency translation loss of $109 million, which was recorded in “Accumulated other comprehensive income (loss)” on the Company’s consolidated balance sheet at December 31, 2016. The currency translation loss was recognized as a reduction of the net gain on sale during the third quarter of 2017 upon closing of the transactions.

Apache’s Canadian operations recorded a pretax loss of $141 million for the year ended 2017.

Other Activity

During 2017, Apache completed the sale of certain non-core assets, primarily leasehold acreage in the Permian and Midcontinent/Gulf Coast regions, in multiple transactions for cash proceeds of $798 million. The Company recognized gains of approximately $605 million during 2017 in connection with these transactions.

Apache completed $188 million of leasehold and property acquisitions during 2017, primarily in its North America onshore regions.

Transaction, Reorganization, and Separation (TRS)

Apache recorded $50 million, $28 million, and $16 million of expenses during 2019, 2018, and 2017, respectively, primarily related to company reorganization, including separation costs, investment banking fees on various divestiture transactions, and other associated costs.

In recent years, the Company has centralized certain operational activities in an effort to capture greater efficiencies through shared services. In light of the continued streamlining of the Company’s asset portfolio through divestitures and strategic transactions, in late 2019 management initiated a comprehensive redesign of Apache’s organizational structure and operations, which is expected to be substantially completed for the technical functions by the end of the first quarter of 2020. Changes for the corporate support functions will be ongoing through most of 2020. TRS costs incurred in 2019 associated with this reorganization include $26 million and $2 million for employee termination benefits and consulting fees, respectively, which will be paid throughout 2020. Apache expects to incur additional expenses associated with this reorganization throughout 2020; however, reorganization efforts are ongoing, and the Company is unable to reasonably estimate additional costs at this time. The Company also incurred $15 million of expenses for employee termination benefits and office closures associated with other reorganization efforts and $7 million for consulting and legal fees on various transactions throughout 2019.

Charges for 2018 include $22 million for consulting and legal fees related to divestitures and the Altus transaction, and $6 million related to employee separation and other reorganization efforts. Charges for 2017 include $11 million for consulting fees related to divestitures and $5 million related to employee separation, consolidation of office space, and other reorganization efforts.