DEBT AND FINANCING COSTS

3 Months Ended

Mar. 31, 2024

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, 2024		December 31, 2023
	(In millions)
Notes and debentures before unamortized discount and debt issuance costs(1)	$	4,835	$	4,835
Finance lease obligations	31		32
Unamortized discount	(26)		(26)
Debt issuance costs	(25)		(25)
Total debt	4,815		4,816
Current maturities	(2)		(2)
Long-term debt	$	4,813	$	4,814

(1)    The fair values of the Company’s notes and debentures were $4.3 billion at each of March 31, 2024 and December 31, 2023.

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).

At each of March 31, 2024 and December 31, 2023, current debt included $2 million of finance lease obligations.

Financing Costs, Net

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

	For the Quarter Ended March 31,
	2024		2023
	(In millions)
Interest expense	$	72	$	75
Amortization of debt issuance costs	1		1
Gain on extinguishment of debt	—		(9)
Interest income	(4)		(2)
Interest income from APA Corporation, net (Note 2)	(36)		(16)
Financing costs, net	$	33	$	49

During the quarter ended March 31, 2023, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $74 million for an aggregate purchase price of $65 million in cash. The Company recognized a $9 million gain on these repurchases.

APA Unsecured 2022 Committed Bank Credit Facilities

On April 29, 2022, Apache entered into two unsecured guaranties of obligations under two unsecured syndicated credit agreements then entered into by APA, of which Apache is a wholly owned subsidiary. These APA credit agreements are for general corporate purposes.

•One 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.

•The second 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.

Apache may borrow under APA’s USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time. As of March 31, 2024 and December 31, 2023, there were no borrowings by Apache outstanding under the USD Agreement. Apache has guaranteed obligations under each of the USD Agreement and GBP Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures first is less than US$1.0 billion.

As of March 31, 2024, there were $30 million of borrowings under the USD Agreement and an aggregate £348 million in letters of credit outstanding under the GBP Agreement. As of March 31, 2024, there were no letters of credit outstanding under the USD Agreement. As of December 31, 2023, there were $372 million of borrowings under the USD Agreement and an aggregate £348 million in letters of credit outstanding under the GBP Agreement. As of December 31, 2023, there were no letters of credit outstanding under the USD Agreement. The letters of credit denominated in pounds were issued to support North Sea decommissioning obligations, the terms of which require such support while Apache’s credit rating by Standard & Poor’s remains below BBB; on March 26, 2020, Standard & Poor’s reduced Apache’s rating from BBB to BB+, which was affirmed in 2023.

Uncommitted Lines of Credit

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, 2024 and December 31, 2023, there were no outstanding borrowings under these facilities. At each of March 31, 2024 and December 31, 2023, there were £296 million and $2 million in letters of credit outstanding under these facilities.

APA Commercial Paper Program

In December 2023, APA established a commercial paper program under which it from time to time may issue in private placements exempt from registration under the Securities Act short-term unsecured promissory notes (CP Notes) up to a maximum aggregate face amount of $1.8 billion outstanding at any time. The maturities of CP Notes may vary but may not exceed 397 days from the date of issuance.

Payment of CP Notes has been unconditionally guaranteed on an unsecured basis by Apache, such guarantee effective until the first time that the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$1.0 billion.

As of March 31, 2024, there was $340 million in aggregate face amount of CP Notes outstanding, which is classified as long-term debt. As of December 31, 2023, there were no CP Notes outstanding.

APA Unsecured Committed Term Loan Facility

On January 30, 2024, Apache entered into an unsecured guaranty of obligations under an unsecured syndicated credit agreement then entered into by APA under which the lenders have committed an aggregate $2.0 billion for senior unsecured delayed-draw term loans to APA (Term Loan Credit Agreement), the proceeds of which could be used to refinance certain indebtedness of Callon Petroleum Company, a Delaware corporation (Callon), only on the date of closing of transactions under the Merger Agreement. Refer to “Subsequent Event” for further detail. Apache has guaranteed obligations under the Term Loan Credit Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures first is less than $1.0 billion.

Subsequent Event

On April 1, 2024, APA closed the transactions under the Term Loan Credit Agreement. APA borrowed an aggregate $1.5 billion in senior unsecured term loans that mature April 1, 2027. Loan proceeds were used to refinance certain indebtedness of Callon upon the substantially simultaneous closing of APA’s acquisition of Callon pursuant to the Merger Agreement and to pay related fees and expenses. APA may at any time prepay loans under the Term Loan Credit Agreement.

The lenders under the Term Loan Credit Agreement committed an aggregate $2.0 billion for senior unsecured delayed-draw term loans to APA available for borrowing only once upon the date of the closings under the Merger Agreement and Term Loan Credit Agreement, of which $1.5 billion was for term loans that would mature three years after the date of such closings (3-Year Tranche Loans) and $500 million was for term loans that would mature 364 days after the date of such closings (364-Day Tranche Loans). APA elected to borrow only under the 3-Year Tranche Loans and to allow the lender commitments for the 364-Day Tranche Loans to expire.