TRANSACTIONS WITH PARENT AFFILIATE

3 Months Ended

Mar. 31, 2024

Related Party Transactions [Abstract]

TRANSACTIONS WITH PARENT AFFILIATE

TRANSACTIONS WITH PARENT AFFILIATE

Apache is a direct, wholly owned subsidiary of APA. Apache holds assets in the U.S., Egypt, and the U.K. and provides administrative and support operations for certain APA subsidiaries with interests in the U.S., Suriname, and other international locations. The Company incurred $8 million and $6 million in the first quarters of 2024 and 2023, respectively, in reimbursable corporate overhead charges in connection with these administration and support operations.

Notes Receivable from APA Corporation

On March 1, 2021, Apache 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 purchase price is payable pursuant to a senior promissory note made by APA payable to Apache, dated March 1, 2021. 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. APA allowed interest accrued from August 31, 2023 through February 29, 2024, totaling $192 million, to PIK pursuant to the note. At each of March 31, 2024 and December 31, 2023, there was approximately $1.5 billion in principal outstanding under this note.

APA also made a senior promissory note payable to Apache, dated March 31, 2023, pursuant to which Apache may loan and APA may borrow, repay, and reborrow up to $1.5 billion in aggregate principal amount outstanding at any time. The note has a five-year term, maturing March 31, 2028. The note bears interest at a rate per annum of 6.0 percent, payable semi-annually; however, APA may allow accrued interest to convert to principal, subject to the aggregate maximum principal amount of the note. At each of March 31, 2024 and December 31, 2023, there were approximately $1.5 billion in borrowings outstanding under this note. The note is intended to facilitate cash management of APA and Apache.

These notes are both reflected in “Notes receivable from APA Corporation” on the Company’s consolidated balance sheet. The Company recognized interest income on these notes totaling $36 million and $16 million during the first quarters of 2024 and 2023, respectively. The interest income related to these notes is reflected in “Financing costs, net” on the Company’s statement of consolidated operations.

Noncontrolling Interest – APA Corporation

In the fourth quarter of 2021, in conjunction with the ratification of a new merged concession agreement (MCA) with the EGPC, Apache entered into an agreement with APA under which the historical value of existing concessions prior to ratifying the MCA was retained by Apache, with any excess value from the MCA terms being allocated to APA. Sinopec owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business, and 64 percent and 50 percent of the remaining net income and distributable cash flow for the Company’s Egyptian operations is allocated to APA in 2024 and 2023, respectively. Apache consolidates its Egyptian operations, with APA’s noncontrolling interest reflected as a separate component in the Company’s consolidated balance sheet. The Company recorded net income attributable to APA’s noncontrolling interest of $102 million and $84 million in the first quarters of 2024 and 2023, respectively. The Company also distributed $89 million and $17 million in the first three months of 2024 and 2023, respectively, of cash to APA in association with its noncontrolling interest.

Accounts Receivable from / Accounts Payable to APA

In connection with the Company’s role as service provider to APA, Apache is reimbursed by APA for employee costs, certain internal costs, and third-party costs paid by the Company on behalf of APA. All reimbursements are based on actual costs incurred, and no market premium is applied by the Company to APA. The Company also collects third-party receivables on behalf of APA. As of March 31, 2024 and December 31, 2023, the Company had accounts receivable from APA in connection with these services totaling $53 million and $52 million, respectively, which is reflected in “Accounts receivable from APA Corporation” on the Company’s consolidated balance sheet.

As of March 31, 2024 and December 31, 2023, the Company had receivables from APA totaling $229 million and $93 million, respectively. This balance is reflected in “Noncurrent receivable from APA Corporation” on the Company’s consolidated balance sheet.

Other Transactions with APA Corporation

From time to time, the Company may, at its discretion, make distributions of capital to APA. Capital distributions totaling $76 million were made during the first three months of 2024 primarily in support of dividend payments and capital transactions completed by APA during the period. No capital distributions were made during the first three months of 2023