DEBT AND FINANCING COSTS

9 Months Ended

Sep. 30, 2020

The following table presents the carrying value of the Company’s debt:



	September 30, 2020			December 31, 2019
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs⁽¹⁾	$	8,324		$	8,217
Altus credit facility⁽²⁾	580			396
Apache credit facility⁽²⁾	87			—
Finance lease obligations	37			48
Unamortized discount	(35		)	(42		)
Debt issuance costs	(59		)	(53		)
Total debt	8,934			8,566
Current maturities	(184		)	(11		)
Long-term debt	$	8,750		$	8,555


(1)	The fair values of the Company’s notes and debentures were $7.6 billion and $8.4 billion as of September 30, 2020 and December 31, 2019, respectively. Apache uses a market approach to determine the fair values of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).


(2)	The carrying amount of borrowings on credit facilities approximates fair value because the interest rates are variable and reflective of market rates.

As of September 30, 2020, current debt included $183 million, net of discount, of 3.625% senior notes due February 1, 2021 and $1 million of finance lease obligations. On November 3, 2020, the Company redeemed the 3.625% senior notes due February 1, 2021 at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date. As of December 31, 2019, current debt included $11 million of finance lease obligations.

On August 17, 2020, the Company closed offerings of $1.25 billion in aggregate principal amount of senior unsecured notes, comprised of $500 million in aggregate principal amount of 4.625% notes due 2025 and $750 million in aggregate principal amount of 4.875% notes due 2027. The senior unsecured notes are redeemable at any time, in whole or in part, at Apache’s option, at the applicable redemption price. The net proceeds from the sale of the notes were used to purchase certain outstanding notes in cash tender offers, repay a portion of outstanding borrowings under the Company’s senior revolving credit facility, and for general corporate purposes.

On August 18, 2020, the Company closed cash tender offers for certain outstanding notes. Apache accepted for purchase $644 million aggregate principal amount of certain notes covered by the tender offers. Apache paid holders an aggregate $644 million, reflecting principal, aggregate discount to par of $38 million, early tender premium of $32 million, and accrued and unpaid interest of $6 million. The Company recorded a net gain of $2 million on extinguishment of debt, including an acceleration of unamortized debt discount and issuance costs, in connection with the note purchases.

During the quarter ended September 30, 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $89 million for an aggregate purchase price of $79 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $11 million. These repurchases resulted in a $10 million net gain on extinguishment of debt. The net gain includes an acceleration of related discount and debt issuance costs. The repurchases were financed by borrowings under the Company’s revolving credit facility.

During the quarter ended June 30, 2020, the Company purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $410 million for an aggregate purchase price of $267 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $147 million. These repurchases resulted in a $140 million net gain on extinguishment of debt. The net gain includes an acceleration of related discount and debt issuance costs. The repurchases were financed by borrowings under the Company’s revolving credit facility.

The Company records gains and losses on extinguishment of debt in “Financing costs, net” in the Company’s statement of consolidated operations.

In March 2018, the Company entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. The Company can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of September 30, 2020. The facility is for general corporate purposes, and available committed borrowing capacity supports Apache’s commercial paper program. As of September 30, 2020, there were $87 million of borrowings and an aggregate £637 million in letters of credit outstanding under this facility. As of December 31, 2019, there were no borrowings or letters of credit outstanding under this facility. The outstanding letters of credit were issued to support North Sea decommissioning obligations, the terms of which required such support after Standard & Poor’s reduced the Company’s credit rating from BBB to BB+ on March 26, 2020.

The Company’s $3.5 billion commercial paper program, which is subject to market availability, facilitates Apache borrowing funds for up to 270 days. As a result of downgrades in Apache’s credit ratings during 2020, the Company does not expect that its commercial paper program will be cost competitive with its other financing alternatives and does not anticipate using it under such circumstances. As of September 30, 2020 and December 31, 2019, the Company had no commercial paper outstanding.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s two, one-year extension options). The agreement for this facility, as amended, provides aggregate commitments from a syndicate of banks of $800 million. All aggregate commitments include a letter of credit subfacility of up to $100 million and a swingline loan subfacility of up to $100 million. Altus Midstream LP may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2020 and December 31, 2019, there were $580 million and $396 million, respectively, of borrowings outstanding under this facility. As of September 30, 2020 and December 31, 2019, there were no letters of credit outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache or any of Apache’s other subsidiaries.

Financing Costs, Net

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



	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
	(In millions)
Interest expense	$	113		$	107		$	327		$	323
Amortization of debt issuance costs	2			2			6			5
Capitalized interest	(3		)	(9		)	(9		)	(26		)
Loss (gain) on extinguishment of debt	(12		)	—			(152		)	75
Interest income	(1		)	(5		)	(4		)	(12		)
Financing costs, net	$	99		$	95		$	168		$	365