DEBT AND FINANCING COSTS

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

DEBT AND FINANCING COSTS

DEBT AND FINANCING COSTS

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

	March 31, 2022		December 31, 2021
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs(1)	$	5,032	$	6,344
Altus credit facility(2)	—		657
Apache credit facility(2)	880		542
Finance lease obligations	35		36
Unamortized discount	(28)		(30)
Debt issuance costs	(30)		(39)
Total debt	5,889		7,510
Current maturities	(125)		(215)
Long-term debt	$	5,764	$	7,295

(1)    The fair values of the Company’s notes and debentures were $5.1 billion and $7.1 billion as of March 31, 2022 and December 31, 2021, 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 value of borrowings on credit facilities approximates fair value because interest rates are variable and reflective of market rates.

As of March 31, 2022, current debt included $123 million carrying value of 2.63% senior notes due January 15, 2023 and $2 million of finance lease obligations. As of December 31, 2021, current debt included $213 million carrying value of 3.25% senior notes due April 15, 2022 and $2 million of finance lease obligations.

During the quarter ended March 31, 2022, Apache closed cash tender offers for certain outstanding notes issued under its indentures, accepting for purchase $1.1 billion aggregate principal amount of notes. Apache paid holders an aggregate $1.2 billion in cash, reflecting principal, premium to par, and accrued and unpaid interest. The Company recognized a $66 million loss on extinguishment of debt, including $11 million of unamortized debt discount and issuance costs in connection with the note purchases.

During the quarter ended March 31, 2022, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $15 million for an aggregate purchase price of $16 million in cash, including accrued interest and broker fees, reflecting a premium to par of $1 million. The Company recognized a $1 million loss on these repurchases.

During the quarter ended March 31, 2022, Apache redeemed the outstanding $213 million principal amount of 3.25% senior notes due April 15, 2022, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed by borrowing under Apache’s revolving credit facility.

During the quarter ended March 31, 2021, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $7 million for an aggregate purchase price of $6 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $1 million. No gain or loss was recognized on these repurchases.

Apache intends to reduce debt outstanding under its indentures from time to time.

In March 2018, Apache entered into a revolving credit facility with commitments totaling $4.0 billion, that Apache terminated in April 2022 when its parent corporation entered into two new syndicated credit facilities described in “Subsequent Event” below. As of March 31, 2022, there were $880 million of borrowings and an aggregate £748 million and $20 million in letters of credit outstanding under Apache’s 2018 facility. As of December 31, 2021, there were $542 million of borrowings and an aggregate £748 million and $20 million in letters of credit outstanding under Apache’s 2018 facility. The outstanding letters of credit denominated in pounds were issued to support North Sea decommissioning obligations, the terms of which required such support after Standard & Poor’s reduced Apache’s credit rating from BBB to BB+ on March 26, 2020.

Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of March 31, 2022 and December 31, 2021, there were no outstanding borrowings under these facilities. As of March 31, 2022, there were £117 million and $17 million in letters of credit outstanding under these facilities. As of December 31, 2021, there were £117 million and $17 million in letters of credit outstanding under these facilities.

Financing Costs, Net

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

	For the Quarter Ended March 31,
	2022		2021
	(In millions)
Interest expense	$	90	$	112
Amortization of debt issuance costs	2		2
Loss on extinguishment of debt	67		—
Interest income	(4)		(2)
Interest income from APA Corporation, net	(15)		(5)
Financing costs, net	$	140	$	107

Subsequent Event

On April 29, 2022, Apache entered into two unsecured guaranties of obligations under two unsecured syndicated credit agreements then entered into by APA Corporation (APA), of which Apache is a wholly owned subsidiary. APA’s new credit agreements are for general corporate purposes and replaced and refinanced Apache’s 2018 syndicated credit agreement (the Former Facility). Apache and certain other subsidiaries of APA may borrow and obtain letters of credit under APA’s new credit agreements, as further described below.

APA’s first new credit agreement is denominated in US dollars (the USD Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of US$1.8 billion (including a letter of credit subfacility of up to US$750 million, of which US$150 million currently is committed). APA may increase commitments up to an aggregate US$2.3 billion by adding new lenders or obtaining the consent of any increasing existing lenders. This facility matures in April 2027, subject to APA’s two, one-year extension options.

APA’s second new credit agreement is denominated in pounds sterling (the GBP Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of £1.5 billion for loans and letters of credit. This facility matures in April 2027, subject to APA’s two, one-year extension options.

In connection with APA’s entry into the USD Agreement and the GBP Agreement (each, a New Agreement), Apache terminated US$4.0 billion of commitments under the Former Facility. Apache has guaranteed obligations under each New Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$1.0 billion.

Borrowers under each New Agreement may include APA and certain subsidiaries organized under the laws of, resident of, or domiciled in, the United States, Canada, England and Wales, the United Kingdom, or the Cayman Islands. Apache may borrow under the USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time.

Letters of credit are available under each New Agreement for credit support needs of APA and its subsidiaries, including in respect of North Sea decommissioning obligations. Letters of credit under each New Agreement may be denominated in US dollars, pounds sterling, Canadian dollars, and any other foreign currency consented to by an issuing bank.

As of April 29, 2022, an aggregate US$680 million in borrowings under the Former Facility were deemed borrowings by APA outstanding under the USD Agreement. As of April 29, 2022, (i) a letter of credit for US$20 million originally issued under the Former Facility is deemed issued and outstanding under the USD Agreement and (ii) letters of credit aggregating £748 million originally issued under the Former Facility are deemed issued and outstanding under the GBP Agreement.

Borrowers under each New Agreement may borrow, prepay, and reborrow loans and obtain letters of credit, and APA may obtain letters of credit for the account of its subsidiaries, in each case subject to representations and warranties, covenants, and events of default substantially similar to those in the Former Facility. The New Agreements do not permit lenders to accelerate maturity or refuse to lend based on unspecified material adverse changes and do not have borrowing restrictions or prepayment obligations in the event of a decline in credit ratings.