Item 16. FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

APA CORPORATION

/s/ John J. Christmann IV

John J. Christmann IV

Chief Executive Officer and President

Dated: February 23, 2023

POWER OF ATTORNEY

The officers and directors of APA Corporation, whose signatures appear below, hereby constitute and appoint John J. Christmann IV, Stephen J. Riney, and Rebecca A. Hoyt, and each of them (with full power to each of them to act alone), the true and lawful attorney-in-fact to sign and execute, on behalf of the undersigned, any amendment(s) to this report and each of the undersigned does hereby ratify and confirm all that said attorneys shall do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name						Title						Date
/s/ John J. Christmann IV John J. Christmann IV						Director, Chief Executive Officer, and President (principal executive officer)						February 23, 2023
/s/ Stephen J. Riney Stephen J. Riney						Executive Vice President and Chief Financial Officer (principal financial officer)						February 23, 2023
/s/ Rebecca A. Hoyt Rebecca A. Hoyt						Senior Vice President, Chief Accounting Officer, and Controller (principal accounting officer)						February 23, 2023
/s/ Annell R. Bay Annell R. Bay						Director						February 23, 2023
/s/ Juliet S. Ellis Juliet S. Ellis						Director						February 23, 2023
/s/ Charles W. Hooper Charles W. Hooper						Director						February 23, 2023
/s/ Chansoo Joung Chansoo Joung						Director						February 23, 2023
/s/ H. Lamar McKay H. Lamar McKay						Independent, Non-Executive Chairman of the Board and Director						February 23, 2023
/s/ Amy H. Nelson Amy H. Nelson						Director						February 23, 2023
/s/ Daniel W. Rabun Daniel W. Rabun						Director						February 23, 2023
/s/ Peter A. Ragauss Peter A. Ragauss						Director						February 23, 2023
/s/ David L. Stover David L. Stover						Director						February 23, 2023

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for the preparation and integrity of the consolidated financial statements appearing in this annual report on Form 10-K. The financial statements were prepared in conformity with accounting principles generally accepted in the United States and include amounts that are based on management’s best estimates and judgments.

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal control over financial reporting is supported by a program of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel and a written code of business conduct adopted by our Company’s board of directors, applicable to all Company directors and all officers and employees of our Company and subsidiaries.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2022.

The Company’s independent auditors, Ernst & Young LLP, a registered public accounting firm, are appointed by the Audit Committee of the Company’s board of directors. Ernst & Young LLP have audited and reported on the consolidated financial statements of APA Corporation and subsidiaries and the effectiveness of the Company’s internal control over financial reporting. The reports of the independent auditors follow this report on pages F-2 and F-3.

/s/ John J. Christmann IV
Chief Executive Officer and President
(principal executive officer)
/s/ Stephen J. Riney
Executive Vice President and Chief Financial Officer
(principal financial officer)
/s/ Rebecca A. Hoyt
Senior Vice President, Chief Accounting Officer and Controller
(principal accounting officer)

Houston, Texas

February 23, 2023

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of APA Corporation

Opinion on Internal Control Over Financial Reporting

We have audited APA Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, APA Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related statements of consolidated operations, comprehensive income (loss), cash flows and changes in equity (deficit) and noncontrolling interest for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 23, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Houston, Texas

February 23, 2023

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of APA Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of APA Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related statements of consolidated operations, comprehensive income (loss), cash flows and changes in equity (deficit) and noncontrolling interest for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-3

						Depreciation, depletion and amortization of property and equipment
Description of the Matter						At December 31, 2022, the carrying value of the Company’s property and equipment was $9,012 million, and depreciation, depletion and amortization (DD&A) expense was $1,233 million for the year then ended. As described in Note 1, the Company follows the successful efforts method of accounting for its oil and gas properties. DD&A of the cost of proved oil and gas properties is calculated using the unit-of-production method based on proved oil and gas reserves, as estimated by the Company’s internal reservoir engineers. Proved oil and gas reserves are those quantities of natural gas, crude oil, condensate, and natural gas liquids, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Significant judgment is required by the Company’s internal reservoir engineers in evaluating geological and engineering data when estimating oil and gas reserves. Estimating reserves also requires the selection of inputs, including oil and gas price assumptions, future operating and capital costs assumptions, and tax rates by jurisdiction, among others. Because of the complexity involved in estimating oil and gas reserves, management engaged independent petroleum engineers to audit the proved oil and gas reserve estimates prepared by the Company’s internal reservoir engineers for select properties as of December 31, 2022. Auditing the Company’s DD&A calculations is complex because of the use of the work of the internal reservoir engineers and the independent petroleum engineers and the evaluation of management’s determination of the inputs described above used by the engineers in estimating oil and gas reserves.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over its process to calculate DD&A, including management’s controls over the completeness and accuracy of the financial data provided to the engineers for use in estimating oil and gas reserves. Our audit procedures included, among others, evaluating the professional qualifications and objectivity of the Company’s internal reservoir engineers primarily responsible for overseeing the preparation of the reserve estimates and the independent petroleum engineers used to audit the proved oil and gas reserve estimates for select properties. In addition, in assessing whether we can use the work of the engineers, we evaluated the completeness and accuracy of the financial data and inputs described above used by the engineers in estimating oil and gas reserves by agreeing them to source documentation, and we identified and evaluated corroborative and contrary evidence. For proved undeveloped reserves, we evaluated management’s development plan for compliance with the SEC rule that undrilled locations are scheduled to be drilled within five years, unless specific circumstances justify a longer time, by assessing consistency of the development projections with the Company’s development plan and the availability of capital relative to the development plan. We also tested the mathematical accuracy of the DD&A calculation, including comparing the oil and gas reserve amounts used in the calculation to the Company’s reserve reports.

F-4

						Accounting for asset retirement obligation for the North Sea segment
Description of the Matter						At December 31, 2022, the asset retirement obligation (ARO) balance totaled $1,995 million. As further described in Note 8, the Company’s ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with the Company’s oil and gas properties and other long-lived assets. The estimation of the ARO related to the North Sea segment requires significant judgment given the magnitude of the expected retirement costs. Auditing the Company’s ARO for the North Sea segment is complex and highly judgmental because of the significant estimation required by management in determining the obligation. In particular, the estimate was sensitive to retirement cost estimates, which are affected by expectations about future market and economic conditions.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over its ARO estimation process, including management’s review of the significant assumptions that have a material effect on the determination of the obligations. We also tested management’s controls over the completeness and accuracy of financial data used in the valuation. To test the ARO for the North Sea segment, our audit procedures included, among others, assessing the significant assumptions and inputs used in the valuation, such as retirement cost estimates. For example, we evaluated retirement cost estimates by comparing the Company’s estimates to recent offshore activities and costs. We also involved our internal specialists in testing the underlying retirement cost estimates.
						Accounting for decommissioning contingency for sold Gulf of Mexico properties
Description of the Matter						At December 31, 2022, the decommissioning contingency for sold Gulf of Mexico properties (decommissioning contingency) balance totaled $1.2 billion. As further described in Note 11, the Company’s decommissioning contingency reflects the estimated undiscounted potential liability to fund decommissioning of the sold Gulf of Mexico properties. The estimation of the decommissioning contingency requires significant judgment given the magnitude and higher estimation uncertainty of the expected retirement costs. Auditing the Company’s decommissioning contingency is complex and highly judgmental because of the significant estimation required by management in determining the decommissioning contingency. In particular, the estimate was sensitive to retirement cost estimates, which are subjective assumptions affected by expectations about future market and economic conditions.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over its decommissioning contingency estimation process, including management’s review of the significant assumptions that have a material effect on the determination of the contingency. We also tested management’s controls over the completeness and accuracy of financial data used in the valuation. To test the decommissioning contingency, our audit procedures included, among others, assessing the significant assumptions and inputs used in the valuation, such as retirement cost estimates. For example, we evaluated retirement cost estimates by comparing the Company’s estimates to recent offshore activities and costs as well as current bids obtained from service providers. We also involved our internal specialists in testing the underlying retirement cost estimates.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Houston, Texas

February 23, 2023

F-5

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

						For the Year Ended December 31,
						2022						2021						2020
						(In millions, except per common share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues(1)						$	9,220					$	6,498					$	4,037
Purchased oil and gas sales						1,855						1,487						398
Total revenues						11,075						7,985						4,435
Derivative instrument gains (losses), net						(114)						94						(223)
Gain on divestitures, net						1,180						67						32
Losses on previously sold Gulf of Mexico properties						(157)						(446)						—
Other, net						148						228						64
						12,132						7,928						4,308
OPERATING EXPENSES:
Lease operating expenses						1,444						1,241						1,127
Gathering, processing, and transmission(1)						367						264						274
Purchased oil and gas costs						1,776						1,580						357
Taxes other than income						268						204						123
Exploration						305						155						274
General and administrative						483						376						290
Transaction, reorganization, and separation						26						22						54
Depreciation, depletion, and amortization						1,233						1,360						1,772
Asset retirement obligation accretion						117						113						109
Impairments						—						208						4,501
Financing costs, net						379						514						267
						6,398						6,037						9,148
NET INCOME (LOSS) BEFORE INCOME TAXES						5,734						1,891						(4,840)
Current income tax provision						1,507						652						176
Deferred income tax provision (benefit)						145						(74)						(112)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						4,082						1,313						(4,904)
Net income (loss) attributable to noncontrolling interest - Egypt						464						174						(121)
Net income attributable to noncontrolling interest - Altus						14						4						1
Net income (loss) attributable to Altus Preferred Unit limited partners						(70)						162						76
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK						$	3,674					$	973					$	(4,860)
NET INCOME (LOSS) PER COMMON SHARE:
Basic						$	11.05					$	2.60					$	(12.86)
Diluted						$	11.02					$	2.59					$	(12.86)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic						332						374						378
Diluted						333						375						378

(1) For revenues and gathering, processing, and transmission costs associated with Kinetik, refer to Note 6—Equity Method Interest for further detail.

The accompanying notes to consolidated financial statements are an integral part of this statement.

F-6

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						$	4,082					$	1,313					$	(4,904)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Pension and postretirement benefit plan						(8)						7						(2)
Share of equity method interests other comprehensive income						—						1						—
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						4,074						1,321						(4,906)
Comprehensive income (loss) attributable to noncontrolling interest - Egypt						464						174						(121)
Comprehensive income attributable to noncontrolling interest - Altus						14						4						1
Comprehensive income (loss) attributable to Altus Preferred Unit limited partners						(70)						162						76
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK						$	3,666					$	981					$	(4,862)

The accompanying notes to consolidated financial statements are an integral part of this statement.

F-7

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interests						$	4,082					$	1,313					$	(4,904)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized derivative instrument losses (gains), net						67						(69)						87
Gain on divestitures, net						(1,180)						(67)						(32)
Exploratory dry hole expense and unproved leasehold impairments						207						97						211
Depreciation, depletion, and amortization						1,233						1,360						1,772
Asset retirement obligation accretion						117						113						109
Impairments						—						208						4,501
Provision for (benefit from) deferred income taxes						145						(74)						(112)
Loss (gain) from extinguishment of debt						67						104						(160)
Losses on previously sold Gulf of Mexico properties						157						446						—
Other						(73)						28						102
Changes in operating assets and liabilities:
Receivables						(93)						(386)						149
Inventories						(1)						(9)						19
Drilling advances and other current assets						(15)						71						(29)
Deferred charges and other long-term assets						69						(42)						(13)
Accounts payable						(4)						245						(167)
Accrued expenses						303						127						(163)
Deferred credits and noncurrent liabilities						(138)						31						18
NET CASH PROVIDED BY OPERATING ACTIVITIES						4,943						3,496						1,388
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property						(1,770)						(1,101)						(1,270)
Acquisition of Delaware Basin properties						(591)						—						—
Leasehold and property acquisitions						(37)						(9)						(4)
Contributions to Altus equity method interests						—						(28)						(327)
Proceeds from asset divestitures						778						256						166
Proceeds from sale of Kinetik shares						224						—						—
Deconsolidation of Altus cash and cash equivalents						(143)						—						—
Other, net						28						49						(31)
NET CASH USED IN INVESTING ACTIVITIES						(1,511)						(833)						(1,466)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities, net						24						392						150
Proceeds from Altus credit facility						—						33						228
Fixed rate debt borrowings						—						—						1,238
Payments on Apache fixed-rate debt						(1,493)						(1,795)						(1,243)
Distributions to noncontrolling interest - Egypt						(362)						(279)						(91)
Distributions to Altus Preferred Unit limited partners						(11)						(46)						(23)
Dividends paid to APA common stockholders						(207)						(52)						(123)
Treasury stock activity, net						(1,423)						(847)						1
Other, net						(17)						(29)						(44)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES						(3,489)						(2,623)						93
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						(57)						40						15
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						302						262						247
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	245					$	302					$	262
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest						$	322					$	442					$	419
Income taxes paid, net of refunds						$	1,431					$	633					$	212

The accompanying notes to consolidated financial statements are an integral part of this statement.

F-8

APA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

						December 31,
						2022**(1)**						2021**(1)**
						(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($132 related to Altus VIE)						$	245					$	302
Receivables, net of allowance of $117 and $109						1,466						1,394
Other current assets (Note 5) ($9 related to Altus VIE)						997						684
						2,708						2,380
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of successful efforts accounting:						42,356						40,749
Gathering, processing, and transmission facilities ($209 related to Altus VIE)						449						673
Other ($3 related to Altus VIE)						613						1,126
Less: Accumulated depreciation, depletion, and amortization ($25 related to Altus VIE)						(34,406)						(34,213)
						9,012						8,335
OTHER ASSETS:
Equity method interests (Note 6) ($1,365 related to Altus VIE)						624						1,365
Decommissioning security for sold Gulf of Mexico properties (Note 11)						217						640
Deferred charges and other ($6 related to Altus VIE)						586						583
						$	13,147					$	13,303
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($12 related to Altus VIE)						$	771					$	731
Current debt						2						215
Other current liabilities (Note 7) ($15 related to Altus VIE)						2,143						1,171
						2,916						2,117
LONG-TERM DEBT (Note 9) ($657 related to Altus VIE)						5,451						7,295
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes						314						148
Asset retirement obligation ($68 related to Altus VIE)						1,940						2,089
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)						738						1,086
Other ($67 related to Altus VIE)						443						573
						3,435						3,896
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 13)						—						712
EQUITY (DEFICIT):
Common stock, $0.625 par, 860,000,000 shares authorized, 419,869,987 and 419,078,606 shares issued, respectively						262						262
Paid-in capital						11,420						11,645
Accumulated deficit						(5,814)						(9,488)
Treasury stock, at cost, 108,310,838 and 72,147,841 shares, respectively						(5,459)						(4,036)
Accumulated other comprehensive income						14						22
APA SHAREHOLDERS’ EQUITY (DEFICIT)						423						(1,595)
Noncontrolling interest - Egypt						922						820
Noncontrolling interest - Altus						—						58
TOTAL EQUITY (DEFICIT)						1,345						(717)
						$	13,147					$	13,303

(1) The Altus VIE amounts are disclosed as of December 31, 2021. All Altus balances were deconsolidated as of February 22, 2022. Refer to Note 1—Summary of Significant Accounting Policies and Note 2—Acquisitions and Divestitures for further detail.

The accompanying notes to consolidated financial statements are an integral part of this statement.

F-9

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTEREST

						Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners									Common Stock						Paid-In Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income (Loss)						APA SHAREHOLDERS’ EQUITY (DEFICIT)						Noncontrolling Interests						TOTAL EQUITY (DEFICIT)
						(In millions)
BALANCE AT DECEMBER 31, 2019						$	555								$	261					$	11,769					$	(5,601)					$	(3,190)					$	16					$	3,255					$	1,210					$	4,465
Net loss attributable to common stock						—									—						—						(4,860)						—						—						(4,860)						—						(4,860)
Net loss attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(121)						(121)
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						1						1
Net income attributable to Altus Preferred Unit limited partners						76									—						—						—						—						—						—						—						—
Distributions paid to Altus Preferred Unit limited partners						(23)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(91)						(91)
Common dividends ($0.10 per share)						—									—						(38)						—						—						—						(38)						—						(38)
Common stock activity, net						—									1						(18)						—						—						—						(17)						—						(17)
Compensation expense						—									—						23						—						—						—						23						—						23
Other						—									—						(1)						—						1						(2)						(2)						(5)						(7)
BALANCE AT DECEMBER 31, 2020						$	608								$	262					$	11,735					$	(10,461)					$	(3,189)					$	14					$	(1,639)					$	994					$	(645)
Net income attributable to common stock						—									—						—						973						—						—						973						—						973
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						174						174
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						4						4
Net income attributable to Altus Preferred Unit limited partners						162									—						—						—						—						—						—						—						—
Distributions payable to Altus Preferred Unit limited partners						(12)									—						—						—						—						—						—						—						—
Distributions paid to Altus Preferred Unit limited partners						(46)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(279)						(279)
Common dividends ($0.2375 per share)						—									—						(87)						—						—						—						(87)						—						(87)
Common stock activity, net						—									—						(6)						—						—						—						(6)						—						(6)
Treasury stock activity, net						—									—						—						—						(847)						—						(847)						—						(847)
Compensation expense						—									—						21						—						—						—						21						—						21
Other						—									—						(18)						—						—						8						(10)						(15)						(25)
BALANCE AT DECEMBER 31, 2021						$	712								$	262					$	11,645					$	(9,488)					$	(4,036)					$	22					$	(1,595)					$	878					$	(717)
Net income attributable to common stock						—									—						—						3,674						—						—						3,674						—						3,674
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						464						464
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						14						14
Net loss attributable to Altus Preferred Unit limited partners						(70)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(362)						(362)
Common dividends ($0.75 per share)						—									—						(245)						—						—						—						(245)						—						(245)
Common stock activity, net						—									—						(6)						—						—						—						(6)						—						(6)
Deconsolidation of Altus						(642)									—						—						—						—						—						—						(72)						(72)
Treasury stock activity, net						—									—						—						—						(1,423)						—						(1,423)						—						(1,423)
Compensation expense						—									—						26						—						—						—						26						—						26
Other						—									—						—						—						—						(8)						(8)						—						(8)
BALANCE AT DECEMBER 31, 2022						$	—								$	262					$	11,420					$	(5,814)					$	(5,459)					$	14					$	423					$	922					$	1,345

The accompanying notes to consolidated financial statements are an integral part of this statement.

F-10

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nature of Operations

APA Corporation (APA or the Company) is an independent energy company that owns consolidated subsidiaries that explore for, develop, and produce natural gas, crude oil, and natural gas liquids. The Company’s upstream business has exploration and production operations in three geographic areas: the United States (U.S.), Egypt, and offshore the U.K. in the North Sea (North Sea). APA also has active exploration and appraisal operations ongoing in Suriname, as well as interests in the Dominican Republic and other international locations that may, over time, result in reportable discoveries and development opportunities. Prior to the BCP Business Combination defined below, the Company’s midstream business was operated by Altus Midstream Company (ALTM) through its subsidiary Altus Midstream LP (collectively, Altus). Altus owned, developed, and operated a midstream energy asset network in the Permian Basin of West Texas.

On March 1, 2021, Apache Corporation, the Company’s predecessor registrant, consummated a holding company reorganization (the Holding Company Reorganization), pursuant to which Apache Corporation became a direct, wholly owned subsidiary of APA Corporation, and all of Apache Corporation’s outstanding shares automatically converted into equivalent corresponding shares of APA. Pursuant to the Holding Company Reorganization, APA became the successor issuer to Apache Corporation pursuant to Rule 12g-3(a) under the Exchange Act and replaced Apache Corporation as the public company trading on the Nasdaq Global Select Market under the ticker symbol “APA.” The Holding Company Reorganization modernized the Company’s operating and legal structure to more closely align with its growing international presence, making it more consistent with other companies that have subsidiaries operating around the globe. As a holding company, APA Corporation’s primary assets are its ownership interests in its subsidiaries.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting policies used by APA and its subsidiaries reflect industry practices and conform to accounting principles generally accepted in the U.S. (GAAP). The Company’s financial statements for prior periods may include reclassifications that were made to conform to the current-year presentation. Significant accounting policies are discussed below.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of APA and its subsidiaries after elimination of intercompany balances and transactions.

The implementation of the Holding Company Reorganization was accounted for as a merger under common control. APA recognized the assets and liabilities of Apache at carryover basis. The consolidated financial statements of APA present comparative information for prior years on a combined basis, as if both APA and Apache were under common control for all periods presented.

The Company’s undivided interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated. The Company consolidates all other investments in which, either through direct or indirect ownership, it has more than a 50 percent voting interest or controls the financial and operating decisions. During 2021, the Company determined that a limited partnership and APA subsidiary, which has control over APA’s Egyptian operations, qualifies as a variable interest entity (VIE) under GAAP. Apache consolidates the activities of APA’s Egyptian operations because it has concluded that a wholly owned subsidiary has a controlling financial interest in APA’s Egyptian operations and was determined to be the primary beneficiary of the VIE.

Noncontrolling interests represent third-party ownership in the net assets of a consolidated subsidiary of APA and are reflected separately in the Company’s financial statements. Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. Additionally, prior to the BCP Business Combination defined below, third-party investors owned a minority interest of approximately 21 percent of Altus, which was reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. ALTM qualified as a VIE under GAAP, which APA consolidated because a wholly owned subsidiary of APA had a controlling financial interest and was determined to be the primary beneficiary. Additionally, the assets of ALTM could only be used to settle obligations of ALTM. There was no recourse to the Company for ALTM’s liabilities.

F-11

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

On February 22, 2022, ALTM closed a previously announced transaction to combine with privately owned BCP Raptor Holdco LP (BCP and, together with BCP Raptor Holdco GP, LLC, the Contributed Entities) in an all-stock transaction, pursuant to the Contribution Agreement entered into by and among ALTM, Altus Midstream LP, New BCP Raptor Holdco, LLC (the Contributor), and BCP (the BCP Contribution Agreement). Pursuant to the BCP Contribution Agreement, the Contributor contributed all of the equity interests of the Contributed Entities (the Contributed Interests) to Altus Midstream LP, with each Contributed Entity becoming a wholly owned subsidiary of Altus Midstream LP (the BCP Business Combination). Upon closing the transaction, the combined entity was renamed Kinetik Holdings Inc. (Kinetik), and the Company determined that it was no longer the primary beneficiary of Kinetik. The Company further determined that Kinetik no longer qualified as a VIE under GAAP. As a result, the Company deconsolidated ALTM on February 22, 2022. Refer to Note 2—Acquisitions and Divestitures for further detail.

The stockholders agreement entered into by and among the Company, ALTM, BCP, and other related and affiliated entities provides that the Company, through one of its wholly owned subsidiaries, retains the ability to designate a director to the board of directors of Kinetik for so long as the Company and its affiliates beneficially own 10 percent or more of Kinetik’s outstanding common stock. Based on this board representation, combined with the Company’s stock ownership, management determined it has significant influence over Kinetik. Investments in which the Company has significant influence, but not control, are accounted for under the equity method of accounting. These investments are recorded separately as “Equity method interests” in the Company’s consolidated balance sheet. The Company elected the fair value option to account for its equity method interest in Kinetik. Refer to Note 6—Equity Method Interests for further detail.

Use of Estimates

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of the Company’s financial statements and changes in these estimates are recorded when known.

Significant estimates with regard to these financial statements include the estimates of fair value for long-lived assets (refer to “Fair Value Measurements” and “Property and Equipment” sections in this Note 1 below), the fair value determination of acquired assets and liabilities (refer to Note 2—Acquisitions and Divestitures), the fair value of equity method interests (refer to “Equity Method Interests” within this Note 1 below and Note 6—Equity Method Interests), the assessment of asset retirement obligations (refer to Note 8—Asset Retirement Obligation), the estimate of income taxes (refer to Note 10—Income Taxes), the estimation of the contingent liability representing Apache’s potential decommissioning obligations on sold properties in the Gulf of Mexico (refer to Note 11—Commitments and Contingencies), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom (refer to Note 18—Supplemental Oil and Gas Disclosures (Unaudited)).

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in the Company’s consolidated balance sheet. Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.

The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

F-12

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Refer to Note 4—Derivative Instruments and Hedging Activities, Note 6—Equity Method Interests, Note 9—Debt and Financing Costs, Note 12—Retirement and Deferred Compensation Plans, and Note 13—Redeemable Noncontrolling Interest — Altus for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

The Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. The following table presents a summary of asset impairments recorded in connection with fair value assessments:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Oil and gas proved property						$	—					$	—					$	4,319
Gathering, processing, and transmission facilities						—						—						68
Equity method interests						—						160						—
Goodwill						—						—						87
Inventory and other						—						48						27
Total Impairments						$	—					$	208					$	4,501

For the year ended December 31, 2021, the Company recorded asset impairments totaling $208 million. These charges include a $160 million impairment on the Company’s equity method interest in the EPIC crude oil pipeline (EPIC) as part of Altus’ review of the fair value of its assets in relation to the BCP Business Combination. Refer to “Equity Method Interests” within this Note 1 below and Note 2—Acquisitions and Divestitures for further detail on the BCP Business Combination. The Company also recorded other impairments during 2021 of approximately $26 million in connection with inventory valuations in Egypt and $22 million in connection with inventory valuations and expected equipment dispositions in the North Sea.

For the year ended December 31, 2020, the Company recorded asset impairments totaling $4.5 billion in connection with non-recurring fair value assessments. Given the crude oil price collapse on lower demand and economic activity resulting from the coronavirus disease 2019 (COVID-19) global pandemic and related governmental actions, the Company assessed its oil and gas property and gathering, processing, and transmission (GPT) facilities for impairment based on the net book value of its assets as of March 31, 2020. The Company recognized proved property impairments of $3.9 billion, $354 million, and $7 million in the U.S., Egypt, and North Sea, respectively, all of which were impaired to their estimated fair values as a result of lower forecasted commodity prices, changes to planned development activity, and increasing market uncertainty. Similarly, the Company recognized GPT facility impairments of $68 million in Egypt. These impairments are discussed in further detail below in “Property and Equipment - Oil and Gas Property” and “Property and Equipment - Gathering, Processing, and Transmission Facilities.”

The Company also performed an interim impairment analysis of the goodwill related to its Egypt reporting unit. Reductions in estimated net present value of expected future cash flows from oil and gas properties resulted in implied fair values below the carrying values of the Company’s Egypt reporting unit. As a result of these assessments, the Company recognized non-cash impairments of the entire amount of recorded goodwill in the Egypt reporting unit of $87 million in the first quarter of 2020.

During the remainder of 2020, the Company recorded additional proved property impairments totaling $20 million in Egypt, as well as $13 million for the early termination of drilling rig leases, $5 million for inventory revaluations, and $9 million of other asset impairments, all in the U.S.

Revenue Recognition

F-13

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Upstream

The Company’s upstream oil and gas segments primarily generate revenue from contracts with customers from the sale of its crude oil, natural gas, and natural gas liquids production volumes. In addition to APA-related production volumes, the Company also sells commodity volumes purchased from third-parties to provide flexibility to fulfill sales obligations and commitments. Under these short-term commodity sales contracts, the physical delivery of each unit of quantity represents a single, distinct performance obligation on behalf of the Company. Contract prices are determined based on market-indexed prices, adjusted for quality, transportation, and other market-reflective differentials. Revenue is measured by allocating an entirely variable market price to each performance obligation and recognized at a point in time when control is transferred to the customer. The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, and the Company’s right to payment. Control typically transfers to customers upon the physical delivery at specified locations within each contract and the transfer of title.

APA’s Egypt operations are conducted pursuant to production-sharing contracts (PSCs). Under the terms of the Company’s PSCs, the Company is the contractor partner (Contractor) with the Egyptian General Petroleum Corporation (EGPC) and bears the risk and cost of exploration, development, and production activities. In return, if exploration is successful, the Contractor receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of production after cost recovery. Additionally, the Contractor’s income taxes, which remain the liability of the Contractor under domestic law, are paid by EGPC on behalf of the Contractor out of EGPC’s production entitlement. Income taxes paid to the Arab Republic of Egypt on behalf of the Contractor are recognized as oil and gas sales revenue and income tax expense and reflected as production and estimated reserves. Because Contractor cost recovery entitlement and income taxes paid on its behalf are determined as a monetary amount, the quantities of production entitlement and estimated reserves attributable to these monetary amounts will fluctuate with commodity prices. In addition, because the Contractor income taxes are paid by EGPC, the amount of the income tax has no economic impact on the Company’s Egypt operations despite impacting the Company’s production and reserves. Revenues related to Egypt’s tax volumes are considered revenue from a non-customer.

On December 27, 2021, the Company announced the ratification of a new merged concession agreement (MCA) with the Egyptian Ministry of Petroleum and the EGPC, having an effective date of April 1, 2021. The MCA consolidated 98 percent of gross acreage and 90 percent of gross production under one concession agreement and refreshed the existing development lease terms for 20 years and exploration leases for 5 years. The consolidated concession has a single cost recovery pool to provide improved access to cost recovery, a fixed 40 percent cost recovery limit, and a fixed profit-sharing rate of 30 percent for all the Company’s production covered under the new concession. The APA subsidiary that became the sole Contractor under the MCA is owned by an APA-operated joint venture owned two-thirds by APA and one-third by Sinopec.

Refer to Note 17—Business Segment Information for a disaggregation of revenue by product and reporting segment.

Altus Midstream

Prior to the deconsolidation of Altus on February 22, 2022, the Company’s Altus Midstream segment was operated by ALTM, through its subsidiary, Altus Midstream LP. Altus generated revenue from contracts with customers from its gathering, compression, processing, and transmission services provided on the Company’s natural gas and natural gas liquid production volumes. Under these long-term commercial service contracts, providing the related service represented a single, distinct performance obligation on behalf of Altus that was satisfied over time. In accordance with the terms of these agreements, Altus primarily received a fixed fee for each contract year, subject to yearly fee escalation recalculations. Revenue was primarily measured using the output method and recognized in the amount to which Altus had the right to invoice, as performance completed to date corresponded directly with the value to its customers. For the periods prior to the BCP Business Combination, Altus Midstream segment revenues were primarily attributable to sales between Altus and Apache, which were fully eliminated upon consolidation.

Payment Terms and Contract Balances

Payments under all contracts with customers are typically due and received within a short-term period of one year or less, after physical delivery of the product or service has been rendered. Receivables from contracts with customers, including receivables for purchased oil and gas sales and net of allowance for credit losses, were $1.3 billion at each of December 31, 2022 and 2021.

F-14

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In accordance with the provisions of ASC 606, “Revenue from Contracts with Customers,” variable market prices for each short-term commodity sale are allocated entirely to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations. As such, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations as of the end of the reporting period.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value. As of December 31, 2022 and 2021, the Company had $245 million and $302 million, respectively, of cash and cash equivalents. As of December 31, 2021, approximately $132 million of cash was held by Altus, which was deconsolidated on February 22, 2022. The Company had no restricted cash as of December 31, 2022 and 2021.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are stated at amortized cost net of an allowance for credit losses. The Company routinely assesses the collectability of its financial assets measured at amortized cost. The Company monitors the credit quality of its counterparties through review of collections, credit ratings, and other analyses. The Company develops its estimated allowance for expected credit losses primarily using an aging method and analyses of historical loss rates as well as consideration of current and future conditions that could impact its counterparties’ credit quality and liquidity.

The following table presents changes to the Company’s allowance for credit loss:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Allowance for credit loss at beginning of year						$	109					$	95					$	88
Additional provisions for the year						9						19						7
Uncollectible accounts written off, net of recoveries						(1)						(5)						—
Allowance for credit loss at end of year						$	117					$	109					$	95

Inventories

Inventories consist principally of tubular goods and equipment and are stated at the lower of weighted-average cost or net realizable value. Oil produced but not sold, primarily in the North Sea, is also recorded to inventory and is stated at the lower of the cost to produce or net realizable value.

Property and Equipment

The carrying value of the Company’s property and equipment represents the cost incurred to acquire the property and equipment, including capitalized interest, net of any impairments. For business combinations and acquisitions, property and equipment cost is based on the fair values at the acquisition date.

F-15

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Oil and Gas Property

The Company follows the successful efforts method of accounting for its oil and gas property. Under this method of accounting, exploration costs such as exploratory geological and geophysical costs, delay rentals, and exploration overhead are expensed as incurred. All costs related to production, general corporate overhead, and similar activities are expensed as incurred. If an exploratory well provides evidence to justify potential development of reserves, drilling costs associated with the well are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. This determination may take longer than one year in certain areas depending on, among other things, the amount of hydrocarbons discovered, the outcome of planned geological and engineering studies, the need for additional appraisal drilling activities to determine whether the discovery is sufficient to support an economic development plan, and government sanctioning of development activities in certain international locations. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities; in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

Acquisition costs of unproved properties are assessed for impairment at least annually and are transferred to proved oil and gas properties to the extent the costs are associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment based on the Company’s current exploration plans. Unproved oil and gas properties with individually insignificant lease acquisition costs are amortized on a group basis over the average lease term at rates that provide for full amortization of unsuccessful leases upon lease expiration or abandonment. Costs of expired or abandoned leases are charged to exploration expense, while costs of productive leases are transferred to proved oil and gas properties. Costs of maintaining and retaining unproved properties, as well as amortization of individually insignificant leases and impairment of unsuccessful leases, are included in exploration costs in the statement of consolidated operations.

Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of crude oil and natural gas, are capitalized. Depreciation of the cost of proved oil and gas properties is calculated using the unit-of-production (UOP) method. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the carrying value of associated proved oil and gas properties. The reserve base used to calculate depreciation for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. The reserve base used to calculate the depreciation for capitalized well costs is the sum of proved developed reserves only. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are included in the depreciable cost.

Oil and gas properties are grouped for depreciation in accordance with ASC 932, “Extractive Activities—Oil and Gas.” The basis for grouping is a reasonable aggregation of properties with a common geological structural feature or stratigraphic condition, such as a reservoir or field.

When circumstances indicate that the carrying value of proved oil and gas properties may not be recoverable, the Company compares unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on the Company’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally estimated using the income approach described in ASC 820. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments, a Level 3 fair value measurement.

The significant decline in crude oil and natural gas prices, as well as longer-term commodity price outlooks, related to reduced demand for oil and natural gas as a result of the COVID-19 pandemic and related governmental actions indicated possible impairment of the Company’s proved and unproved oil and gas properties in early 2020. In addition to estimating risk-adjusted reserves and future production volumes, estimated future commodity prices are the largest driver in variability of undiscounted pre-tax cash flows. Expected cash flows were estimated based on management’s views of published West Texas Intermediate (WTI), Brent, and Henry Hub forward pricing as of the balance sheet dates. Other significant assumptions and inputs used to calculate estimated future cash flows include estimates for future development activity, exploration plans and remaining lease terms. A 10 percent discount rate, based on a market-based weighted-average cost of capital estimate, was applied to the undiscounted cash flow estimate to value all of the Company’s asset groups that were subject to impairment charges in 2020.

F-16

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table represents non-cash impairments charges of the carrying value of the Company’s proved and unproved properties:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Proved properties:
U.S.						$	—					$	—					$	3,938
Egypt						—						—						374
North Sea						—						—						7
Total proved properties						$	—					$	—					$	4,319
Unproved properties:
U.S.						$	20					$	22					$	92
Egypt						4						8						8
North Sea						—						1						1
Total unproved properties						$	24					$	31					$	101

Proved properties impaired had an aggregate fair value as of the most recent date of impairment of $1.9 billion for 2020.

Gains and losses on divestitures of the Company’s oil and gas properties are recognized in the statement of consolidated operations upon closing of the transaction. Refer to Note 2—Acquisitions and Divestitures for more detail.

Gathering, Processing, and Transmission (GPT) Facilities

GPT facilities totaled $449 million and $673 million at December 31, 2022 and 2021, respectively, with accumulated depreciation for these assets totaling $367 million and $386 million for the respective periods. As a result of the BCP Business Combination, the Company deconsolidated $183 million of Altus GPT net assets on February 22, 2022. GPT facilities are depreciated on a straight-line basis over the estimated useful lives of the assets. The estimation of useful life takes into consideration anticipated production lives from the fields serviced by the GPT assets, whether APA-operated or third party-operated, as well as potential development plans by the Company for undeveloped acreage within, or close to, those fields.

The Company assesses the carrying amount of its GPT facilities whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of these facilities is more than the sum of the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying value over its fair value.

The Company assessed its long-lived infrastructure assets for impairment as of March 31, 2020, and recorded an impairment of $68 million on its GPT facilities in Egypt during the first quarter of 2020. The fair values of the impaired assets, which were determined to be $46 million, were estimated using the income approach, which considers internal estimates based on future throughput volumes from applicable development concessions in Egypt and estimated costs to operate. These assumptions were applied based on throughput assumptions developed in relation to the oil and gas proved property impairment assessment, as discussed above, to develop future cash flow projections that were then discounted to estimated fair value, using a 10 percent discount rate, based on a market-based weighted-average cost of capital estimate. The Company has classified these non-recurring fair value measurements as Level 3 in the fair value hierarchy.

Other Property and Equipment

Other property and equipment includes computer software and equipment, buildings, vehicles, furniture and fixtures, land, and other equipment. These assets are depreciated on a straight-line basis over the estimated useful lives of the assets, which range from 3 to 20 years. Other property and equipment, net of accumulated depreciation totaled $206 million and $225 million at December 31, 2022 and 2021, respectively.

F-17

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Asset Retirement Costs and Obligations

The initial estimated asset retirement obligation related to property and equipment and subsequent revisions are recorded as a liability at fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. Revisions in estimated liabilities can result from changes in estimated inflation rates, changes in service and equipment costs and changes in the estimated timing of an asset’s retirement. Asset retirement costs are depreciated using a systematic and rational method similar to that used for the associated property and equipment. Accretion expense on the liability is recognized over the estimated productive life of the related assets.

Capitalized Interest

For significant projects, interest is capitalized as part of the historical cost of developing and constructing assets. Significant oil and gas investments in unproved properties actively being explored, significant exploration and development projects that have not commenced production, significant midstream development activities that are in progress, and investments in equity method affiliates that are undergoing the construction of assets that have not commenced principal operations qualify for interest capitalization. Interest is capitalized until the asset is ready for service. Capitalized interest is determined by multiplying the Company’s weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation.

Goodwill

Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. The Company currently carries no goodwill, but, in comparative periods, it was recorded in “Deferred charges and other” in the Company’s consolidated balance sheet. The Company assessed the carrying amount of goodwill by testing for impairment annually and when impairment indicators arose. The impairment test requires allocating goodwill and all other assets and liabilities to assigned reporting units. The Company assessed each country as a reporting unit, with Egypt being the only reporting unit to have associated goodwill during the periods presented. The fair value of the reporting unit was determined and compared to the book value of the reporting unit. If the fair value of the reporting unit was less than the book value, including goodwill, then goodwill was written down to its implied fair value through a charge to expense.

Reductions in estimated net present value of expected future cash flows from oil and gas properties during 2020 resulted in implied fair values below the carrying values of the Company’s Egypt reporting unit. As a result of this assessment, the Company recognized non-cash impairments of the entire amount of recorded goodwill in the Egypt reporting unit of $87 million in 2020. This goodwill impairment was recorded in “Impairments” in the Company’s statement of consolidated operations. The Company has no goodwill recognized as of December 31, 2022, 2021, or 2020.

Equity Method Interests

The Company follows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity. Under this method, the equity interests are carried originally at acquisition cost, increased by the Company’s proportionate share of the equity interest’s net income and contributions made by the Company, and decreased by the Company’s proportionate share of the equity interest’s net losses and distributions received by the Company.

Equity method interests are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred, if the loss is deemed to be other than temporary. When the loss is deemed to be other than temporary, the carrying value of the equity method investment is written down to fair value, and the amount of the write-down is included in income. Prior to the deconsolidation of Altus on February 22, 2022, in the fourth quarter of 2021, Altus, as part of its review of the fair value of its assets in relation to the BCP Business Combination, determined the current fair value of its investment in EPIC was below carrying value. Altus subsequently determined that this loss in value to be other than temporary. As such, in the fourth quarter of 2021, Altus recorded an impairment charge of $160 million on its equity method interest in EPIC. The fair value of the impaired interest was determined using the income approach. The income approach considered estimates of future throughput volumes, tariff rates, and costs. These assumptions were applied to develop future cash flow projections that were then discounted to estimated fair value, using a discount rate believed to be consistent with that which would be applied by market participants. Altus classified this nonrecurring fair value measurement as Level 3 in the fair value hierarchy. Refer to Note 6—Equity Method Interests for further details of the Company’s equity method interests.

F-18

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Commitments and Contingencies

Accruals for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. For more information regarding loss contingencies, refer to Note 11—Commitments and Contingencies.

Derivative Instruments and Hedging Activities

The Company periodically enters into derivative contracts to manage its exposure to commodity price, interest rate, and/or foreign exchange risk. These derivative contracts, which are generally placed with major financial institutions, may take the form of forward contracts, futures contracts, swaps, or options.

All derivative instruments, other than those that meet the normal purchases and sales exception, are recorded on the Company’s consolidated balance sheet as either an asset or liability measured at fair value. The Company does not apply hedge accounting to any of its derivative instruments. As a result, gains and losses from the change in fair value of derivative instruments are reported in current-period income as “Derivative instrument gains (losses), net” under “Revenues and Other” in the statement of consolidated operations. Refer to Note 4—Derivative Instruments and Hedging Activities for further information.

Income Taxes

The Company records deferred tax assets and liabilities to account for the expected future tax consequences of events that have been recognized in the financial statements and tax returns. The Company routinely assesses the ability to realize its deferred tax assets. If the Company concludes that it is more likely than not that some or all of the deferred tax assets will not be realized, the tax asset is reduced by a valuation allowance. Numerous judgments and assumptions are inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil and gas prices) and changing tax laws.

Earnings Per Share

The Company’s basic earnings per share (EPS) amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects potential dilution, using the treasury stock method, which assumes that options were exercised and restricted stock was fully vested. Prior to the deconsolidation of Altus on February 22, 2022, the Company used the “if-converted method” to determine the potential dilutive effect of an assumed exchange of the outstanding Preferred Units of Altus Midstream LP for shares of ALTM’s common stock. The impact to net income (loss) attributable to common stock on an assumed conversion of the redeemable noncontrolling Preferred Units interest in Altus Midstream LP was anti-dilutive for the years ended December 31, 2021 and 2020.

Stock-Based Compensation

The Company grants various types of stock-based awards including stock options, restricted stock, cash-settled restricted stock units, and performance-based awards. Stock compensation equity awards granted are valued on the date of grant and are expensed over the required vesting service period. Cash-settled awards are recorded as a liability based on the Company’s stock price and remeasured at the end of each reporting period over the vesting terms. The Company has elected to account for forfeitures as they occur rather than estimate expected forfeitures. The Company’s stock-based compensation plans and related accounting policies are defined and described more fully in Note 14—Capital Stock.

Treasury Stock

The Company follows the weighted-average-cost method of accounting for treasury stock transactions.

F-19

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Transaction, Reorganization, and Separation (TRS)

In recent years, the Company streamlined its portfolio through strategic divestitures and centralized certain operational activities in an effort to capture greater efficiencies and cost savings 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 the Company’s organizational structure and operations. Efforts related to this organization were substantially completed during 2020. The Company incurred and paid a cumulative total of $79 million of reorganization costs through December 31, 2020. An additional $15 million and $17 million of reorganization costs were incurred during the years ended December 31, 2022 and 2021, respectively, primarily related to ongoing consulting and separation activities in the Company’s international operations.

The Company recorded $26 million, $22 million, and $54 million of TRS costs in 2022, 2021, and 2020, respectively. TRS costs incurred in 2022 comprised $15 million related to the reorganization, including $9 million for consulting costs and $6 million of separation costs, and $11 million for costs associated with the BCP Business Combination. TRS costs incurred in 2021 comprised $17 million related to the reorganization, including $11 million for consulting costs and $6 million of separation costs, and $5 million for costs associated with the BCP Business Combination. TRS costs incurred in 2020 relate to $51 million of separation costs associated with the reorganization, $2 million for transaction consulting fees, and $1 million of office closure costs.

2. ACQUISITIONS AND DIVESTITURES

2022 Activity

During the third quarter of 2022, the Company closed on the acquisition of oil and gas assets in the Delaware Basin for approximately $615 million after post-closing adjustments. The Company paid $591 million in connection with this acquisition during 2022, with final cash settlement anticipated to be completed during the first quarter of 2023. The Company recorded $581 million for proved properties, $38 million for unproved leasehold, and $4 million for abandonment obligations.

During 2022, the Company completed other leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of approximately $37 million.

During 2022, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $52 million, recognizing a gain of approximately $36 million, upon closing of these transactions.

During the first quarter of 2022, the Company completed a previously announced transaction to sell certain non-core mineral rights in the Delaware Basin. The Company received total cash proceeds of approximately $726 million after certain post-closing adjustments and recognized an associated gain of approximately $560 million.

The BCP Business Combination was completed on February 22, 2022. As consideration for the contribution of the Contributed Interests, ALTM issued 50 million shares of Class C Common Stock (and Altus Midstream LP issued a corresponding number of common units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. ALTM’s stockholders continued to hold their existing shares of common stock. As a result of the transaction, the Contributor, or its designees, collectively owned approximately 75 percent of the issued and outstanding shares of ALTM common stock. Apache Midstream LLC, a wholly owned subsidiary of APA, which owned approximately 79 percent of the issued and outstanding shares of ALTM common stock prior to the BCP Business Combination, owned approximately 20 percent of the issued and outstanding shares of Kinetik common stock after the transaction closed.

As a result of the BCP Business Combination, the Company deconsolidated ALTM on February 22, 2022 and recognized a gain of approximately $609 million that reflects the difference between the Company’s share of ALTM’s deconsolidated balance sheet and the fair value of its approximate 20 percent retained ownership in the combined entity. A summary of components of the gain, including the ALTM balance sheet amounts deconsolidated at the time of close, is included below:

F-20

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						As of February 22, 2022
						(In millions)
Fair value of Kinetik Class A Common Stock held by Company						$	802
ASSETS:
Cash and cash equivalents						$	143
Other current assets						29
Property and equipment, net						184
Equity method interests						1,367
Other noncurrent assets						12
Total assets deconsolidated						$	1,735
LIABILITIES:
Current liabilities						$	3
Long-term debt						657
Other noncurrent liabilities						168
Total liabilities deconsolidated						$	828
NONCONTROLLING INTERESTS:
Redeemable noncontrolling interest preferred unit limited partners						$	642
Noncontrolling interest-Altus						72
Total noncontrolling interests deconsolidated						$	714
Net effect of deconsolidating balance sheet						$	(193)
Gain on deconsolidation of ALTM						$	609

During the first quarter of 2022, the Company sold four million of its shares of Kinetik Class A Common Stock for cash proceeds of $224 million and recognized a loss of $25 million, including transaction fees. Refer to Note 6—Equity Method Interests for further detail. In connection with this secondary offering, the Company agreed that, within 24 months of closing the offering, it will invest a minimum of $100 million of the proceeds of the offering for new well drilling and completion activity at the Alpine High play in the Delaware Basin, where Kinetik has exclusive gas and NGL gathering and processing rights. The Company has invested approximately half of this commitment as of year-end 2022.

2021 Activity

During the second quarter of 2021, the Company completed the sale of certain non-core assets in the Permian Basin with a net carrying value of $157 million for cash proceeds of $176 million and the assumption of asset retirement obligations of $44 million. The Company recognized a gain of approximately $63 million in connection with the sale.

During 2021, the Company also completed the sale of other non-core assets and leasehold, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $80 million. The Company recognized a gain of approximately $4 million upon closing of these transactions.

During 2021, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $9 million.

F-21

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2020 Activity

During 2020, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $4 million. Also during 2020, the Company completed the sale of certain non-core assets and leasehold, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $87 million, and recognized a gain of $13 million. The Company also recognized a gain of $19 million during 2020 in connection with a joint venture agreement with TotalEnergies (formerly Total S.A.) to explore and develop Block 58 offshore Suriname.

3. CAPITALIZED EXPLORATORY WELL COSTS

The following summarizes the changes in capitalized exploratory well costs for the years ended December 31, 2022, 2021, and 2020. Additions pending the determination of proved reserves excludes amounts capitalized and subsequently charged to expense within the same year.

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Capitalized well costs at beginning of year						$	321					$	197					$	141
Additions pending determination of proved reserves						287						174						226
Divestitures and other						—						—						(38)
Reclassifications to proved properties						(110)						(40)						(56)
Charged to exploration expense						(24)						(10)						(76)
Capitalized well costs at end of year						$	474					$	321					$	197

The following provides an aging of capitalized exploratory well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling as of December 31:

						2022						2021						2020
						(In millions)
Exploratory well costs capitalized for a period of one year or less						$	215					$	198					$	184
Exploratory well costs capitalized for a period greater than one year						259						123						13
Capitalized well costs at end of year						$	474					$	321					$	197
Number of projects with exploratory well costs capitalized for a period greater than one year						21						13						5

Projects with suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling are those identified by management as exhibiting sufficient quantities of hydrocarbons to justify potential development. Management is actively pursuing efforts to assess whether reserves can be attributed to these projects. Suspended exploratory well costs capitalized for a period greater than one year since the completion of drilling were $259 million at December 31, 2022, with $243 million related to Suriname. Analysis of well results is ongoing as is additional exploration and appraisal activity. The remaining projects pertain to onshore drilling activity in Egypt for which continued testing and evaluation is ongoing.

Dry hole expenses from suspended exploratory well costs previously capitalized for greater than one year at December 31, 2021 totaled $24 million. These expenses pertain to projects in the North Sea where development is no longer progressing.

The following table summarizes aging by geographic area of those exploratory well costs that, as of December 31, 2022, have been capitalized for a period greater than one year, categorized by the year in which drilling was completed:

						Total						2021						2020						2019 and Prior
						(In millions)
Suriname						$	243					$	153					$	90					$	—
Egypt						14						5						—						9
North Sea						2						2						—						—
						$	259					$	160					$	90					$	9

F-22

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies

The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production, as well as fluctuations in exchange rates in connection with transactions denominated in foreign currencies. The Company manages the variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production and foreign currency transactions. The Company utilizes various types of derivative financial instruments, including forward contracts, futures contracts, swaps, and options, to manage fluctuations in cash flows resulting from changes in commodity prices or foreign currency values.

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, the Company utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of December 31, 2022, the Company had derivative positions with eight counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, the Company may not realize the benefit of some of its derivative instruments resulting from lower commodity prices or changes in currency exchange rates.

Derivative Instruments

Commodity Derivative Instruments

As of December 31, 2022, the Company had the following open natural gas financial basis swap contracts:

												Basis Swap Purchased												Basis Swap Sold
Production Period						Settlement Index						MMBtu (in 000’s)						Weighted Average Price Differential						MMBtu (in 000’s)						Weighted Average Price Differential
January—March 2023						NYMEX Henry Hub/IF Waha						3,150						$(1.06)						—						—
January—March 2023						NYMEX Henry Hub/IF HSC						—						—						3,150						$(0.03)
January—June 2023						NYMEX Henry Hub/IF Waha						4,525						$(1.54)						—						—
January—June 2023						NYMEX Henry Hub/IF HSC						—						—						4,525						$(0.11)
July—September 2023						NYMEX Henry Hub/IF Waha						1,840						$(1.62)						—						—
July—September 2023						NYMEX Henry Hub/IF HSC						—						—						1,840						$(0.19)
January—December 2023						NYMEX Henry Hub/IF Waha						73,000						$(1.15)						—						—
January—December 2023						NYMEX Henry Hub/IF HSC						—						—						73,000						$(0.08)
January—June 2024						NYMEX Henry Hub/IF Waha						16,380						$(1.15)						—						—
January—June 2024						NYMEX Henry Hub/IF HSC						—						—						16,380						$(0.10)

Embedded Derivatives

Altus Preferred Units Embedded Derivative

The Altus Preferred Units embedded derivative was deconsolidated as of March 31, 2022 as part of the BCP Business Combination. Refer to Note 2—Acquisitions and Divestitures for discussion of the BCP Business Combination and Note 12—Redeemable Noncontrolling Interest - Altus for a description of the Altus Preferred Units and associated embedded derivative.

Pipeline Capacity Embedded Derivatives

During the fourth quarter of 2019 and first quarter of 2020, the Company entered into agreements to assign a portion of its contracted capacity under an existing transportation agreement to third parties. Embedded in these agreements were arrangements under which the Company received payments calculated based on pricing differentials between Houston Ship Channel and Waha during the calendar years 2020 and 2021. This feature required bifurcation and measurement of the change in market value throughout 2020 and 2021. Unrealized gains and losses in the fair value of this feature were recorded as “Derivative instrument gains (losses), net” under “Revenues and Other” in the statement of consolidated operations, and the balance at the end of December 31, 2021 will be amortized into income over the original tenure of the host contract.

F-23

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Fair Value Measurements

The following table presents the Company’s derivative assets and liabilities measured at fair value on a recurring basis:

						Fair Value Measurements Using
						Quoted Price in Active Markets (Level 1)						Significant Other Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total Fair Value						Netting**(1)**						Carrying Amount
						(In millions)
December 31, 2022
Assets:
Commodity derivative instruments						$	—					$	5					$	—					$	5					$	—					$	5
Liabilities:
Commodity derivative instruments						$	—					$	50					$	—					$	50					$	—					$	50
December 31, 2021
Liabilities:
Commodity derivative instruments						$	—					$	10					$	—					$	10					$	—					$	10
Pipeline capacity embedded derivatives						—						46						—						46						—						46
Preferred Units embedded derivative						—						—						57						57						—						57

(1)Derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties and reclassifications between long-term and short-term balances.

The fair values of the Company’s derivative instruments are not actively quoted in the open market. The Company primarily uses a market approach to estimate the fair values of these derivatives on a recurring basis, utilizing futures pricing for the underlying positions provided by a reputable third party, a Level 2 fair value measurement.

Derivative Activity Recorded in the Consolidated Balance Sheet

All derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The carrying value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

						For the Year Ended December 31,
						2022						2021
						(In millions)
Current Assets: Other current assets						$	—					$	—
Other Assets: Deferred charges and other						5						—
Total derivative assets						$	5					$	—
Current Liabilities: Other current liabilities						$	50					$	4
Deferred Credits and Other Noncurrent Liabilities: Other						—						109
Total derivative liabilities						$	50					$	113

F-24

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Derivative Activity Recorded in the Statement of Consolidated Operations

The following table summarizes the effect of derivative instruments on the Company’s statement of consolidated operations:

						For the Year Ended December 31,
2022						2021						2020
						(In millions)
Realized:
Commodity derivative instruments						$	(34)					$	25					$	(135)
Foreign currency derivative instruments						(13)						—						(1)
Realized gain (loss), net						(47)						25						(136)
Unrealized:
Commodity derivative instruments						(36)						(20)						11
Pipeline capacity embedded derivatives						—						7						(61)
Foreign currency derivative instruments						—						—						(1)
Preferred Units embedded derivative						(31)						82						(36)
Unrealized gain (loss), net						(67)						69						(87)
Derivative instrument gains (losses), net						$	(114)					$	94					$	(223)

Derivative instrument gains and losses are recorded in “Derivative instrument gains (losses), net” under “Revenues and Other” in the Company’s statement of consolidated operations. Unrealized gains (losses) for derivative activity recorded in the statement of consolidated operations are reflected in the statement of consolidated cash flows separately as “Unrealized derivative instrument losses (gains), net” in “Adjustments to reconcile net income (loss) to net cash provided by operating activities.”

The Company seeks to maintain a balance between “first of month” and “gas daily pricing” for its U.S. natural gas portfolio and sales activities in a given month as part of its ordinary course of business. This is typically implemented through a combination of physical and financial contracts that settle monthly.

5. OTHER CURRENT ASSETS

The following table provides detail of the Company’s other current assets as of December 31:

						2022						2021
						(In millions)
Inventories						$	427					$	473
Drilling advances						89						55
Prepaid assets and other						31						56
Current decommissioning security for sold Gulf of Mexico assets						450						100
Total Other current assets						$	997					$	684

6. EQUITY METHOD INTERESTS

The Kinetik Class A Common Stock held by the Company is treated as an interest in equity securities measured at fair value. The Company elected the fair value option for measuring its equity method interest in Kinetik based on practical expedience, variances in reporting timelines, and cost-benefit considerations. The fair value of the Company’s interest in Kinetik is determined using observable share prices on a major exchange, a Level 1 fair value measurement. Fair value adjustments and dividends received are recorded as a component of “Other, net” under “Revenues and other” in the Company’s statement of consolidated operations.

The initial interest in Kinetik was measured at fair value based on the Company’s ownership of approximately 12.9 million shares of Kinetik Class A Common stock as of February 22, 2022. In March 2022, the Company sold four million of its shares of Kinetik Class A Common Stock for a loss, including underwriters fees, of $25 million, which was recorded as a component of “Gain on divestitures, net” under “Revenues and other” in the Company’s statement of consolidated operations. Refer to Note 2–Acquisitions and Divestitures for further detail.

F-25

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

During the second quarter of 2022, Kinetik issued a two-for-one split of its Common Stock. Also, during 2022, the Company received approximately 1.1 million shares of Kinetik’s Class A Common Stock as paid-in-kind dividends. Finally, in 2022, the Company recorded fair value adjustments on its ownership in Kinetik totaling a gain of approximately $32 million. The Company’s ownership of 18.9 million shares represented approximately 13 percent of Kinetik’s outstanding Class A Common Stock as of December 31, 2022.

The following table presents the activity in the Company’s equity method interest in Kinetik for the year ended December 31, 2022:

						Kinetik Holdings Inc
			(In millions)
Balance at December 31, 2021						$	—
Initial interest upon closing the BCP Business Combination						802
Sale of Class A shares						(250)
Paid-in-kind dividend						40
Fair value adjustments						32
Balance at December 31, 2022						$	624

During the year ending December 31, 2022, the Company recorded GPT costs for midstream services provided by Kinetik subsequent to the close of the BCP Business Combination transaction totaling $93 million. As of December 31, 2022, the Company has recorded accrued GPT costs payable to Kinetik of approximately $18 million. In addition, the Company sold natural gas and NGLs to Kinetik during 2022 totaling $18 million. As of December 31, 2022, the Company has recorded accrued receivables from Kinetik of approximately $13 million.

Prior to the deconsolidation of Altus on February 22, 2022, the Company, through its ownership of Altus, had the following equity method interests in four Permian Basin long-haul pipeline entities, which were accounted for under the equity method of accounting at December 31, 2021. For each of the equity method interests, Altus had the ability to exercise significant influence based on certain governance provisions and its participation in activities and decisions that impact the management and economic performance of the equity method interests. The table below presents the ownership percentages held by the Company and associated carrying values for each entity:

						Interest												December 31, 2021
															(In millions)
Gulf Coast Express Pipeline LLC						16.0		%										$	274
EPIC Crude Holdings, LP						15.0		%										—
Permian Highway Pipeline LLC						26.7		%										630
Shin Oak Pipeline (Breviloba, LLC)						33.0		%										461
Total Altus equity method interests																		$	1,365

F-26

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents the activity in Altus’ equity method interests for the years ended December 31, 2022 and 2021:

						Gulf Coast Express Pipeline LLC						EPIC Crude Holdings, LP						Permian Highway Pipeline LLC						Breviloba, LLC						Total
						(In millions)
Balance at December 31, 2020						$	284					$	176					$	615					$	480					$	1,555
Capital contributions						—						2						26						—						28
Distributions						(50)						—						(74)						(49)						(173)
Equity income (loss), net						40						(19)						63						30						114
Accumulated other comprehensive loss						—						1						—						—						1
Impairment(1)						—						(160)						—						—						(160)
Balance at December 31, 2021						274						—						630						461						1,365
Capital contributions						—						2						—						—						2
Distributions						(5)						—						(9)						(7)						(21)
Equity income (loss), net						8						(2)						10						5						21
Deconsolidation of Altus						(277)						—						(631)						(459)						(1,367)
Balance at December 31, 2022						$	—					$	—					$	—					$	—					$	—

(1)Prior to the deconsolidation of Altus on February 22, 2022, the Company impaired its investment in EPIC in the fourth quarter of 2021. Refer to Note 1—Summary of Significant Accounting Policies for further details on this impairment charge.

For discussion of the financial statement impacts related to the deconsolidation of ALTM, refer to Note 2—Acquisitions and Divestitures.

7. OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities as of December 31:

						2022						2021
						(In millions)
Accrued operating expenses						$	145					$	129
Accrued exploration and development						333						207
Accrued compensation and benefits						514						292
Accrued interest						97						107
Accrued income taxes						90						28
Current asset retirement obligation						55						41
Current operating lease liability						167						99
Current decommissioning contingency for sold Gulf of Mexico properties						450						100
Other						292						168
Total Other current liabilities						$	2,143					$	1,171

F-27

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

8. ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the years ended December 31, 2022 and 2021:

						For the Year Ended December 31,
						2022						2021
						(In millions)
Asset retirement obligation at beginning of the year						$	2,130					$	1,944
Liabilities incurred						4						3
Liabilities acquired						4						—
Liabilities divested						(73)						(44)
Liabilities settled						(39)						(32)
Accretion expense						117						113
Revisions in estimated liabilities						(148)						146
Asset retirement obligation at end of the year						1,995						2,130
Less current portion						(55)						(41)
Asset retirement obligation, long-term						$	1,940					$	2,089

The ARO liability reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with the Company’s oil and gas properties and other long-lived assets. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. The Company estimates the ultimate productive life of the properties, a risk-adjusted discount rate, and an inflation factor in order to determine the current present value of this obligation. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property or other long-lived asset balance.

During 2022 and 2021, the Company recorded $4 million and $3 million, respectively, in abandonment liabilities resulting from the Company’s exploration and development capital program. Liabilities settled primarily relate to individual properties, platforms, and facilities plugged and abandoned during the period. During 2022, net abandonment costs were revised downward approximately $148 million to reflect changes in estimates of timing, activity costs, and foreign currency exchange rates on service costs, primarily in the North Sea. This downward revision was partially offset by an upward revision in the U.S. During 2021, approximately $146 million net abandonment costs were revised upward to reflect changes in estimates of higher activity costs and long-term inflation assumptions, primarily in the U.S.

9. DEBT AND FINANCING COSTS

Overview

The debt of APA and Apache is senior unsecured debt and has equal priority with respect to the payment of both principal and interest. All indentures of Apache for the notes and debentures described below place certain restrictions on Apache, including limits on Apache’s ability to incur debt secured by certain liens. Certain of these indentures also restrict Apache’s ability to enter into certain sale and leaseback transactions and give holders the option to require Apache to repurchase outstanding notes and debentures upon certain changes in control. None of the indentures contain prepayment obligations in the event of a decline in credit ratings.

On August 17, 2020, Apache 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 Apache’s former senior revolving credit facility, and for general corporate purposes.

On August 18, 2020, Apache 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 cash purchase price of $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.

F-28

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

During 2020, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $588 million for an aggregate purchase price of $428 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $168 million. These repurchases resulted in a $158 million net gain on extinguishment of debt. The net gain includes an acceleration of related discount and debt issuance costs. Additionally, on November 3, 2020, Apache redeemed the remaining $183 million of outstanding 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. The repurchases were financed by borrowings under Apache’s former revolving credit facility.

During the quarter ended September 30, 2021, Apache closed cash tender offers for certain outstanding notes, accepting for purchase $1.7 billion aggregate principal amount of notes covered by the tender offers. Apache paid holders an aggregate cash purchase price of $1.8 billion, reflecting principal, premium to par, and accrued and unpaid interest. The Company recognized a $105 million loss on extinguishment of debt, including $11 million of unamortized debt discount and issuance costs, in connection with the note purchases.

During 2021, Apache purchased in the open market and canceled senior notes issued under its indentures in an aggregate principal amount of $22 million for an aggregate purchase price of $20 million in cash, including accrued interest and broker fees, reflecting a discount to par of an aggregate $2 million. The Company recognized a $1 million net gain on extinguishment of debt as part of these transactions.

On January 18, 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 percent of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed by borrowing under Apache’s former revolving credit facility.

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. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.

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 an aggregate $1 million. The Company recognized a $1 million loss on these repurchases. The repurchases were partially financed by borrowing under Apache’s former revolving credit facility.

On October 17, 2022, Apache redeemed the outstanding $123 million outstanding principal amount of 2.625% notes due January 15, 2023, at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date. The redemption was financed in part by Apache’s borrowing under the Company’s U.S. dollar-denominated 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.

F-29

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents the carrying value of the Company’s debt as of December 31, 2022 and 2021:

						December 31,
						2022						2021
						(In millions)
3.25% notes due 2022(1)						$	—					$	213
2.625% notes due 2023(2)						—						123
4.625% notes due 2025(3)						51						500
7.7% notes due 2026						78						79
7.95% notes due 2026						132						133
4.875% due 2027(3)						108						378
4.375% notes due 2028(3)						325						703
7.75% notes due 2029(3)(4)						235						235
4.25% notes due 2030(3)						579						580
6.0% notes due 2037(3)						443						443
5.1% notes due 2040(3)						1,333						1,333
5.25% notes due 2042(3)						399						399
4.75% notes due 2043(3)						428						428
4.25% notes due 2044(3)						221						221
7.375% debentures due 2047						150						150
5.35% notes due 2049(3)						387						387
7.625% debentures due 2096						39						39
Apache notes and debentures before unamortized discount and debt issuance costs(5)						4,908						6,344
Altus credit facility(6)						—						657
Syndicated credit facilities(6)						566						542
Apache finance lease obligations						34						36
Unamortized discount						(27)						(30)
Debt issuance costs						(28)						(39)
Total debt						5,453						7,510
Current maturities						(2)						(215)
Long-term debt						$	5,451					$	7,295

(1)On January 18, 2022, Apache redeemed the 3.25% senior notes due April 15, 2022, at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date.

(2)On October 17, 2022, Apache redeemed the 2.625% notes due January 15, 2023, at a redemption price equal to 100 percent of their principal amount, plus accrued and unpaid interest to the redemption date.

(3)These notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium, except that the 7.75% notes due 2029 are only redeemable as whole for principal and accrued interest in the event of certain Canadian tax law changes. The remaining notes and debentures are not redeemable.

(4)Assumed by Apache in August 2017 as permitted by terms of these notes originally issued by a subsidiary and guaranteed by Apache.

(5)The fair values of Apache’s notes and debentures were $4.2 billion and $7.1 billion as of December 31, 2022 and 2021, respectively. The Company uses a market approach to determine the fair value of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

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

Maturities for the Company’s notes and debentures excluding discount and debt issuance costs as of December 31, 2022 are as follows:

			(In millions)
2023			$	—
2024			—
2025			51
2026			210
2027			108
Thereafter			4,539
Notes and debentures, excluding discounts and debt issuance costs			$	4,908

F-30

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Uncommitted Lines of Credit

The Company from time to time has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of December 31, 2022 and 2021, there were no outstanding borrowings under these facilities. As of December 31, 2022, there were £199 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.

Unsecured Committed Bank Credit Facilities

On April 29, 2022, the Company entered into two unsecured syndicated credit agreements for general corporate purposes that replaced and refinanced Apache’s 2018 unsecured syndicated credit agreement (the Former Facility).

• 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). The Company 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 the Company’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 the Company’s two, one-year extension options.

In connection with the Company’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, borrowings then outstanding under the Former Facility were deemed outstanding under the USD Agreement, and letters of credit then outstanding under the Former Facility were deemed outstanding under a New Agreement, depending upon whether denominated in US dollars or pounds sterling. Apache may borrow under the USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time. 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.

As of December 31, 2022, there were $566 million of borrowings and a $20 million letter of credit outstanding under the USD Agreement, and an aggregate £652 million in letters of credit outstanding under the GBP Agreement. 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 the Former Facility. The 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.

All borrowings under the USD Agreement bear interest at one of two per annum rate options selected by the borrower, being either an alternate base rate (as defined), plus a margin ranging from 0.10% to 0.675% (Base Rate Margin), or an adjusted term SOFR rate (as defined), plus a margin varying from 1.10% to 1.675% (Applicable Margin). All borrowings under the GBP Agreement bear interest at an adjusted rate per annum determined by reference to the Sterling Overnight Index Average published by the Bank of England, plus the Applicable Margin. Each New Agreement also requires the borrower to pay quarterly a facility fee on total commitments. Margins and facility fees are at varying rates per annum determined by reference to the senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of APA, or if such indebtedness is not rated and the Apache guaranty is in effect, of Apache (Long-Term Debt Rating). As of December 31, 2022, Apache’s Long-Term Debt Rating applied, and the Base Rate Margin was 0.60%, the Applicable Margin was 1.60%, and the facility fee was 0.275%.

A commission is payable quarterly to lenders under each New Agreement on the face amount of each outstanding letter of credit at a per annum rate equal to the Applicable Margin then in effect. Customary letter of credit fronting fees and other charges are payable to issuing banks.

Borrowers under each New Agreement, which may include certain subsidiaries of APA, 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, such as:

F-31

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

• A financial covenant requires APA to maintain an adjusted debt-to-capital ratio of not greater than 60 percent at the end of any fiscal quarter. For purposes of this calculation, capital continues to exclude the effects of non-cash write-downs, impairments, and related charges occurring after June 30, 2015. At December 31, 2022, APA’s debt-to-capital ratio as calculated under each New Agreement was 21 percent.

• A negative covenant restricts the ability of APA and its subsidiaries to create liens securing debt on their hydrocarbon-related assets, with exceptions for liens typically arising in the oil and gas industry; liens securing debt incurred to finance the acquisition, construction, improvement, or capital lease of assets, provided that such debt, when incurred, does not exceed the subject purchase price and costs, as applicable, and related expenses; liens on subsidiary assets located outside of the U. S. and Canada; and liens arising as a matter of law, such as tax and mechanics’ liens. Liens on assets also are permitted if debt secured thereby does not exceed 15 percent of APA’s consolidated net tangible assets or approximately $1.5 billion as of December 31, 2022.

• Negative covenants restrict APA’s ability to merge with another entity unless it is the surviving entity, a borrower’s disposition of substantially all of its assets, prohibitions on the ability of certain subsidiaries to make payments to borrowers, and guarantees by APA or certain subsidiaries of debt of non-consolidated entities in excess of the stated threshold.

• Lenders may accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches; if a borrower or certain subsidiaries defaults on other indebtedness in excess of the stated threshold, has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold, or has specified pension plan liabilities in excess of the stated threshold; or APA undergoes a specified change in control. Such acceleration and termination are automatic upon specified insolvency events of a borrower or certain subsidiaries.

Consistent with the Former Facility, the New Agreements do not require collateral, do not have a borrowing base, 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.

The Company was in compliance with the terms of each New Agreement as of December 31, 2022.

In November 2018, Altus and its subsidiary, Altus Midstream LP (Altus LP), were subsidiaries of Apache, and Altus LP entered into an unsecured revolving credit facility for general corporate purposes. The agreement for the facility, as amended, provided aggregate commitments from a syndicate of banks of $800 million, including a letter of credit subfacility. The credit facility was not guaranteed by APA, Apache, or any of APA’s other subsidiaries. On February 22, 2022, Altus was deconsolidated from APA and Apache. As of December 31, 2021, there were $657 million of borrowings and $2 million letters of credit outstanding under the facility.

Financing Costs, Net

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

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Interest expense						$	332					$	419					$	438
Amortization of debt issuance costs						8						8						8
Capitalized interest						(18)						(9)						(12)
Loss (gain) on extinguishment of debt						67						104						(160)
Interest income						(10)						(8)						(7)
Financing costs, net						$	379					$	514					$	267

As of December 31, 2022, the Company had $28 million of debt issuance costs, which will be charged to financing costs over the life of the related debt issuances. Discount amortization of $2 million, $6 million, and $7 million was recorded as interest expense in 2022, 2021, and 2020, respectively.

F-32

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

10. INCOME TAXES

Income (loss) before income taxes was composed of the following:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
U.S.						$	2,675					$	629					$	(4,581)
Foreign						3,059						1,262						(259)
Total						$	5,734					$	1,891					$	(4,840)

The total income tax provision consisted of the following:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Current income taxes:
Federal						$	1					$	16					$	(2)
State						11						—						—
Foreign						1,495						636						178
						1,507						652						176
Deferred income taxes:
Federal						—						—						—
Foreign						145						(74)						(112)
						145						(74)						(112)
Total						$	1,652					$	578					$	64

The total income tax provision differs from the amounts computed by applying the U.S. statutory income tax rate to income (loss) before income taxes. A reconciliation of the tax on the Company’s income (loss) before income taxes and total tax expense is shown below:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Income tax expense (benefit) at U.S. statutory rate						$	1,204					$	397					$	(1,016)
State income tax, less federal effect(1)						9						—						—
Taxes related to foreign operations						745						298						97
Tax credits						(4)						(10)						(13)
Net change in tax contingencies						1						16						1
Goodwill impairment						—						—						35
Valuation allowances(1)						(646)						(90)						965
Tax adjustments attributable to BCP Business Combination						126						—						—
Remeasurement of U.K. deferred tax liability						208						—						—
Tax attributable to Altus Preferred Unit limited partners						—						(34)						(16)
All other, net						9						1						11
						$	1,652					$	578					$	64

(1)The change in state valuation allowance is included as a component of state income tax.

F-33

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The net deferred income tax liability reflects the net tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under GAAP and amounts utilized for income tax purposes. The net deferred income tax liability consisted of the following as of December 31:

						2022						2021
						(In millions)
Deferred tax assets:
U.S. and state net operating losses						$	2,029					$	2,497
Capital losses						357						647
Foreign net operating losses						27						4
Tax credits and other tax incentives						26						24
Foreign tax credits						2,241						2,241
Accrued expenses and liabilities						156						152
Asset retirement obligation						672						712
Property and equipment						44						12
Investment in Altus Midstream LP						—						64
Net interest expense limitation						74						146
Lease liability						114						81
Decommissioning contingency for sold Gulf of Mexico properties						275						263
Other						—						1
Total deferred tax assets						6,015						6,844
Valuation allowance						(4,918)						(5,902)
Net deferred tax assets						1,097						942
Deferred tax liabilities:
Equity investments						1						2
Property and equipment						1,023						748
Right-of-use asset						110						77
Decommissioning security for sold Gulf of Mexico properties						148						164
Other						90						86
Total deferred tax liabilities						1,372						1,077
Net deferred income tax liability						$	275					$	135

Net deferred tax assets and liabilities are included in the consolidated balance sheet as of December 31 as follows:

						2022						2021
						(In millions)
Assets:
Deferred charges and other						$	39					$	13
Liabilities:
Income taxes						314						148
Net deferred income tax liability						$	275					$	135

On January 14, 2022, Apache Midstream LLC, a wholly owned subsidiary of Apache, exchanged 12.5 million Common Units in Altus Midstream LP for 12.5 million shares of ALTM Class A Common Stock, in a taxable exchange. On February 22, 2022, as a result of the BCP Business Combination, the Company deconsolidated ALTM. On March 11, 2022, the Company sold four million of its shares of Kinetik Class A Common Stock. The Company recorded tax expense of $126 million associated with the BCP Business Combination. The tax impact of the BCP Business Combination was fully offset by a change in valuation allowance. Refer to Note 2— Acquisitions and Divestitures for further detail.

F-34

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

On May 26, 2022, the U.K. Chancellor of the Exchequer announced a new tax (the Energy Profits Levy) on the profits of oil and gas companies operating in the U.K. and the U.K. Continental Shelf. Under the new law, an additional levy is assessed at a 25 percent rate and is effective for the period of May 26, 2022, through December 31, 2025. The Company recorded a deferred tax expense of $208 million associated with the remeasurement of the U.K. deferred tax liability. On November 17, 2022, the U.K. Chancellor of the Exchequer announced in the Autumn Statement 2022 further changes to the Energy Profits Levy, increasing the levy assessed from a 25 percent rate to a 35 percent rate, effective for the period of January 1, 2023, through March 31, 2028. On November 22, 2022, the U.K. Government published draft legislation to implement this change, among other provisions, and on January 10, 2023, the Finance Act 2023 was enacted, receiving Royal Assent. Under U.S. GAAP, the financial statement impact of new legislation is recorded in the period of enactment. Therefore, in the first quarter of 2023, the Company expects to record a deferred tax expense of approximately $170 million to $190 million related to the remeasurement of the December 31, 2022 U.K. deferred tax liability.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA). The IRA includes a new 15 percent corporate alternative minimum tax (Corporate AMT) on applicable corporations with an average annual adjusted financial statement income that exceeds $1 billion for any three consecutive years preceding the tax year at issue. The Corporate AMT is effective for tax years beginning after December 31, 2022. The Company is continuing to evaluate the provisions of the IRA and awaits further guidance from the U.S. Treasury Department to properly assess the impact of these provisions on the Company.

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize the existing deferred tax assets. A significant piece of negative evidence evaluated was the U.S. pre-tax book cumulative loss incurred over the three-year period ended December 31, 2022. This cumulative loss was primarily the result of low commodity prices and oil and gas impairments during this period. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth.

However, given the Company’s current and anticipated future domestic earnings, the Company believes that there is a reasonable possibility that within the next 12 months the U.S. will exit its cumulative loss, allowing the Company to reach a conclusion that a material portion of the U.S. valuation allowance may no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense, which could be material for the period the release is recorded.

In 2022, 2021, and 2020, the Company’s valuation allowance decreased by $1.0 billion, decreased by $89 million, and increased by $1.0 billion, respectively, as detailed in the table below:

						2022						2021						2020
						(In millions)
Balance at beginning of year						$	5,902					$	5,991					$	4,959
State(1)						(111)						1						67
U.S.						(706)						(97)						960
Foreign						(167)						7						5
Balance at end of year						$	4,918					$	5,902					$	5,991

(1)Reported as a component of state income taxes.

On December 31, 2022, the Company had net operating losses as follows:

						Amount						Expiration
						(In millions)
U.S.						$	7,942					2027 - Indefinite
State						6,505						Various
Foreign						75						2028 - Indefinite

F-35

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company has a U.S. net operating loss carryforward of $7.9 billion, which includes $82 million of net operating loss subject to annual limitation under Section 382 of the Internal Revenue Code (Code). Net operating losses generated in tax years beginning after 2017 are subject to an 80 percent taxable income limitation with indefinite carryover under the 2017 Tax Cuts and Jobs Act. The Company also has state net operating losses of $6.5 billion, foreign net operating losses of $75 million, a net interest expense carryover of $334 million under Section 163(j) of the Code subject to indefinite carryover, and a U.S. capital loss carryforward of $1.6 billion, which has a five year carryover period expiring between 2023-2027. The Company has recorded a full valuation allowance against the U.S. net operating losses, the state net operating losses, the foreign net operating losses, the net interest expense carryover, and the U.S. capital loss because it is more likely than not that these attributes will not be realized.

On December 31, 2022, the Company had foreign tax credits as follows:

						Amount						Expiration
						(In millions)
Foreign tax credits						$	2,241					2025-2026

The Company has a $2.2 billion U.S. foreign tax credit carryforward. The Company has recorded a full valuation allowance against the U.S. foreign tax credits listed above because it is more likely than not that these attributes will expire unutilized.

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

						2022						2021						2020
						(In millions)
Balance at beginning of year						$	116					$	93					$	82
Additions based on tax positions related to prior year						—						16						—
Additions based on tax positions related to the current year						—						7						11
Reductions for tax positions of prior years						(27)						—						—
Balance at end of year						$	89					$	116					$	93

The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Each quarter, the Company assesses the amounts provided for and, as a result, may increase or reduce the amount of interest and penalties. During each of the years ended December 31, 2022, 2021, and 2020, the Company recorded tax expense of $1 million for interest and penalties. At December 31, 2022, 2021, and 2020, the Company had an accrued liability for interest and penalties of $5 million, $4 million, and $3 million, respectively.

In 2022, 2021, and 2020, the Company recorded a $27 million net decrease, a $23 million net increase, and an $11 million net increase, respectively, in its reserve for uncertain tax positions.

On September 26, 2022, the Company received a Statutory Notice of Deficiency from the IRS disallowing certain net operating loss carryback and research and development credit refund claims. As a result of the disallowance, on December 14, 2022, the Company filed a petition with the U.S. Tax Court challenging the tax adjustments and requesting a redetermination of the deficiencies stated in the notice.

Apache and its subsidiaries are subject to U.S. federal income tax as well as income tax in various states and foreign jurisdictions. The Company’s uncertain tax positions are related to tax years that may be subject to examination by the relevant taxing authority. Apache’s earliest open tax years in its key jurisdictions are as follows:

Jurisdiction

U.S.			2014
Egypt			2005
U.K.			2021

F-36

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

11. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls, which also may include controls related to the potential impacts of climate change. As of December 31, 2022, the Company has an accrued liability of approximately $64 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. The Company’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to the Company’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that the Company believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

Argentine Environmental Claims

On March 12, 2014, the Company and its subsidiaries completed the sale of all of the Company’s subsidiaries’ operations and properties in Argentina to YPF Sociedad Anonima (YPF). As part of that sale, YPF assumed responsibility for all of the past, present, and future litigation in Argentina involving Company subsidiaries, except that Company subsidiaries have agreed to indemnify YPF for certain environmental, tax, and royalty obligations capped at an aggregate of $100 million. The indemnity is subject to specific agreed conditions precedent, thresholds, contingencies, limitations, claim deadlines, loss sharing, and other terms and conditions. On April 11, 2014, YPF provided its first notice of claims pursuant to the indemnity. Company subsidiaries have not paid any amounts under the indemnity but will continue to review and consider claims presented by YPF. Further, Company subsidiaries retain the right to enforce certain Argentina-related indemnification obligations against Pioneer Natural Resources Company (Pioneer) in an amount up to $45 million pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.

Louisiana Restoration

Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including the Company, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to its original condition, regardless of the value of the underlying property. From time to time, restoration lawsuits and claims are resolved by the Company for amounts that are not material to the Company, while new lawsuits and claims are asserted against the Company. With respect to each of the pending lawsuits and claims, the amount claimed is not currently determinable or is not material. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While adverse judgments against the Company are possible, the Company intends to actively defend these lawsuits and claims.

Starting in November of 2013 and continuing into 2022, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including the Company. In these cases, the Parishes, as plaintiffs, allege that defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While adverse judgments against the Company might be possible, the Company intends to vigorously oppose these claims.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Apollo Exploration Lawsuit

In a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, plaintiffs alleged damages in excess of $200 million (having previously claimed in excess of $1.1 billion) relating to purchase and sale agreements, mineral leases, and area of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. The trial court entered final judgment in favor of the Company, ruling that the plaintiffs take nothing by their claims and awarding the Company its attorneys’ fees and costs incurred in defending the lawsuit. The court of appeals affirmed in part and reversed in part the trial court’s judgment thereby reinstating some of plaintiff’s claims. The Texas Supreme Court granted the Company’s petition for review and heard oral argument in October 2022.

Australian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, the Company filed suit against Quadrant for breach of the Quadrant SPA. In its suit, the Company seeks approximately AUD $80 million. In December 2017, Quadrant filed a defense of equitable set-off to the Company’s claim and a counterclaim seeking approximately AUD $200 million in the aggregate. The Company believes that Quadrant’s claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

Canadian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated July 6, 2017 (Paramount SPA), the Company and its subsidiaries divested their remaining Canadian operations to Paramount Resources LTD (Paramount). Closing occurred on August 16, 2017. On September 11, 2019, four ex-employees of Apache Canada LTD on behalf of themselves and individuals employed by Apache Canada LTD on July 6, 2017, filed an Amended Statement of Claim in a matter styled Stephen Flesch et. al. v Apache Corporation et. al., No. 1901-09160 Court of Queen’s Bench of Alberta against the Company and others seeking class certification and a finding that the Paramount SPA amounted to a Change of Control of the Company, entitling them to accelerated vesting under the Company’s equity plans. In the suit, the class seeks approximately $60 million USD and punitive damages. The Company believes that plaintiffs’ claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

California and Delaware Litigation

On July 17, 2017, in three separate actions, San Mateo and Marin Counties, and the City of Imperial Beach, California, all filed suit individually and on behalf of the people of the state of California against over 30 oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. On December 20, 2017, in two separate actions, the City of Santa Cruz and Santa Cruz County filed similar lawsuits against many of the same defendants. On January 22, 2018, the City of Richmond filed a similar lawsuit. On November 14, 2018, the Pacific Coast Federation of Fishermen’s Associations, Inc. also filed a similar lawsuit against many of the same defendants. After removal of all such lawsuits to federal court, the district court remanded them back to state court. The 9th Circuit Court of Appeals’ affirmance of this remand decision was appealed to the U.S. Supreme Court. That appeal was decided by the U.S. Supreme Court ruling in a similar case, BP p.l.c. v. Mayor and City Council of Baltimore. As a result, the California cases were sent back to the 9th Circuit for further appellate review of the decision to remand the cases to state court. The 9th Circuit has since, once again, affirmed the district court’s remand to state court. The defendants are appealing this latest remand decision to the U.S. Supreme Court.

On September 10, 2020, the State of Delaware filed suit, individually and on behalf of the people of the State of Delaware, against over 25 oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. After removal of this lawsuit to federal court, the district court remanded it back to state court. The 3rd Circuit has since, once again, affirmed the district court’s remand to state court. The defendants are appealing this latest remand decision to the U.S. Supreme Court.

The Company believes that it is not subject to jurisdiction of the California courts and that claims made against it in the California and Delaware litigation are baseless. The Company intends to challenge jurisdiction in California and to vigorously defend the Delaware lawsuit.

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APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Castex Lawsuit

In a case styled Apache Corporation v. Castex Offshore, Inc., et. al., Cause No. 2015-48580, in the 113th Judicial District Court of Harris County, Texas, Castex filed claims for alleged damages of approximately $200 million, relating to overspend on the Belle Isle Gas Facility upgrade, and the drilling of five sidetracks on the Potomac #3 well. After a jury trial, a verdict of approximately $60 million, plus fees, costs, and interest was entered against the Company. The Fourteenth Court of Appeals of Texas reversed the judgment, in part, reducing the judgment to approximately $13.5 million, plus fees, costs, and interest against the Company. Further appeal is pending.

Shareholder and Derivative Lawsuits

On February 23, 2021, a case captioned Plymouth County Retirement System v. Apache Corporation, et al. was filed in the United States District Court for the Southern District of Texas (Houston Division) against the Company and certain current and former officers. The complaint, which is a shareholder lawsuit styled as a class action, alleges that (1) the Company intentionally used unrealistic assumptions regarding the amount and composition of available oil and gas in Alpine High; (2) the Company did not have the proper infrastructure in place to safely and/or economically drill and/or transport those resources even if they existed in the amounts purported; (3) certain statements and omissions artificially inflated the value of the Company’s operations in the Permian Basin; and (4) as a result, the Company’s public statements were materially false and misleading. The Company believes that plaintiffs’ claims lack merit and intends to vigorously defend this lawsuit.

On January 18, 2023, a case captioned Jerry Hight, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al. was filed in the 61st District Court of Harris County, Texas. The case purports to be a derivative action brought against senior management and Company directors over many of the same allegations included in the Plymouth County Retirement System matter and asserts claims of (1) breach of fiduciary duty; (2) waste of corporate assets; and (3) unjust enrichment. The defendants believe that plaintiff’s claims lack merit and intend to vigorously defend this lawsuit.

Environmental Matters

The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, state, local, and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks.

The Company manages its exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. The Company also conducts periodic reviews, on a Company-wide basis, to identify changes in its environmental risk profile. These reviews evaluate whether there is a probable liability, the amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees who are expected to devote a significant amount of time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, the Company may exclude a property from the acquisition, require the seller to remediate the property to the Company’s satisfaction, or agree to assume liability for the remediation of the property. The Company’s general policy is to limit any reserve additions to any incidents or sites that are considered probable to result in an expected remediation cost exceeding $300,000. Any environmental costs and liabilities that are not reserved for are treated as an expense when actually incurred. In the Company’s estimation, neither these expenses nor expenses related to training and compliance programs are likely to have a material impact on its financial condition.

As of December 31, 2022, the Company had an undiscounted reserve for environmental remediation of approximately $1 million.

On September 11, 2020, the Company received a Notice of Violation and Finding of Violation, and accompanying Clean Air Act Information Request, from the U.S. Environmental Protection Agency (EPA) following site inspections in April 2019 at several of the Company’s oil and natural gas production facilities in Lea and Eddy Counties, New Mexico. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and has responded to the information request. The EPA has referred the notice for civil enforcement proceedings; however, at this time the Company is unable to reasonably estimate whether such proceedings will result in monetary sanctions and, if so, whether they would be more or less than $100,000, exclusive of interest and costs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

On December 29, 2020, the Company received a Notice of Violation and Opportunity to Confer, and accompanying Clean Air Act Information Request, from the EPA following helicopter flyovers in September 2019 of several of the Company’s oil and natural gas production facilities in Reeves County, Texas. The notice and information request involve alleged emissions control and reporting violations. The Company is cooperating with the EPA and has responded to the information request. The EPA has referred the notice for civil enforcement proceedings; however, at this time the Company is unable to reasonably estimate whether such proceedings will result in monetary sanctions and, if so, whether they would be more or less than $100,000, exclusive of interest and costs.

The Company is not aware of any environmental claims existing as of December 31, 2022 that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity. There can be no assurance, however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.

Potential Decommissioning Obligations on Sold Properties

In 2013, Apache sold its Gulf of Mexico (GOM) Shelf operations and properties and its GOM operating subsidiary, GOM Shelf LLC (GOM Shelf) to Fieldwood Energy LLC (Fieldwood). Under the terms of the purchase agreement, Apache received cash consideration of $3.75 billion and Fieldwood assumed the obligation to decommission the properties held by GOM Shelf and the properties acquired from Apache and its other subsidiaries (collectively, the Legacy GOM Assets). In respect of such abandonment obligations, Fieldwood posted letters of credit in favor of Apache (Letters of Credit) and established trust accounts (Trust A and Trust B) of which Apache was a beneficiary and which were funded by two net profits interests (NPIs) depending on future oil prices. On February 14, 2018, Fieldwood filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In connection with the 2018 bankruptcy, Fieldwood confirmed a plan under which Apache agreed, inter alia, to (i) accept bonds in exchange for certain of the Letters of Credit and (ii) amend the Trust A trust agreement and one of the NPIs to consolidate the trusts into a single Trust (Trust A) funded by both remaining NPIs. Currently, Apache holds two bonds (Bonds) and five Letters of Credit to secure Fieldwood’s asset retirement obligations on the Legacy GOM Assets as and when Apache is required to perform or pay for decommissioning any Legacy GOM Asset over the remaining life of the Legacy GOM Assets.

On August 3, 2020, Fieldwood again filed for protection under Chapter 11 of the U.S. Bankruptcy Code. On June 25, 2021, the United States Bankruptcy Court for the Southern District of Texas (Houston Division) entered an order confirming Fieldwood’s bankruptcy plan. On August 27, 2021, Fieldwood’s bankruptcy plan became effective. Pursuant to the plan, the Legacy GOM Assets were separated into a standalone company, which was subsequently merged into GOM Shelf. Under GOM Shelf’s limited liability company agreement, the proceeds of production of the Legacy GOM Assets will be used to fund decommissioning of Legacy GOM Assets.

By letter dated April 5, 2022, replacing two prior letters dated September 8, 2021 and February 22, 2022, GOM Shelf notified the Bureau of Safety and Environmental Enforcement (BSEE) that it was unable to fund the decommissioning obligations that it is currently obligated to perform on certain of the Legacy GOM Assets. As a result, Apache and other current and former owners in these assets have received orders from BSEE to decommission certain of the Legacy GOM Assets included in GOM Shelf’s notification to BSEE. Apache expects to receive such orders on the other Legacy GOM Assets included in GOM Shelf’s notification letter. Further, Apache anticipates that GOM Shelf may send additional such notices to BSEE in the future and that it may receive additional orders from BSEE requiring it to decommission other Legacy GOM Assets.

If Apache incurs costs to decommission any Legacy GOM Asset and GOM Shelf does not reimburse Apache for such costs, then Apache expects to obtain reimbursement from Trust A, the Bonds, and the Letters of Credit until such funds and securities are fully utilized. In addition, after such sources have been exhausted, Apache has agreed to provide a standby loan to GOM Shelf of up to $400 million to perform decommissioning (Standby Loan Agreement), with such standby loan secured by a first and prior lien on the Legacy GOM Assets.

If the combination of GOM Shelf’s net cash flow from its producing properties, the Trust A funds, the Bonds, and the remaining Letters of Credit are insufficient to fully fund decommissioning of any Legacy GOM Assets that Apache may be ordered by BSEE to perform, or if GOM Shelf’s net cash flow from its remaining producing properties after the Trust A funds, Bonds, and Letters of Credit are exhausted is insufficient to repay any loans made by Apache under the Standby Loan Agreement, then Apache may be forced to effectively use its available cash to fund the deficit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of December 31, 2022, Apache estimates that its potential liability to fund decommissioning of Legacy GOM Assets it may be ordered to perform ranges from $1.2 billion to $1.4 billion on an undiscounted basis. Management does not believe any specific estimate within this range is a better estimate than any other. Accordingly, the Company has recorded a contingent liability of $1.2 billion as of December 31, 2022, representing the estimated costs of decommissioning it may be required to perform on Legacy GOM Assets. Of the total liability recorded, $738 million is reflected under the caption “Decommissioning contingency for sold Gulf of Mexico properties,” and $450 million is reflected under “Other current liabilities” in the Company’s consolidated balance sheet. Changes in significant assumptions impacting Apache’s estimated liability, including expected decommissioning rig spread rates, lift boat rates, and planned abandonment logistics could result in a liability in excess of the amount accrued.

As of December 31, 2022, the Company has also recorded a $667 million asset, which represents the amount the Company expects to be reimbursed from the Trust A funds, the Bonds, and the Letters of Credit for decommissioning it may be required to perform on Legacy GOM Assets. Of the total asset recorded, $217 million is reflected under the caption “Decommissioning security for sold Gulf of Mexico properties,” and $450 million is reflected under “Other current assets.” The Company recognized $157 million and $446 million during 2022 and 2021, respectively, of “Losses on previously sold Gulf of Mexico properties” to reflect the net impact of changes to the estimated decommissioning liability and decommissioning asset to the Company’s statement of consolidated operations.

Leases and Contractual Obligations

The Company determines if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, the Company records an ROU asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental borrowing rate when calculating the present value. In the normal course of business, the Company enters into various lease agreements for real estate, drilling rigs, vessels, aircrafts, and equipment related to its exploration and development activities, which are typically classified as operating leases under the provisions of the standard. ROU assets are reflected within “Deferred charges and other assets” on the Company’s consolidated balance sheet, and the associated operating lease liabilities are reflected within “Other current liabilities” and “Other” within “Deferred Credits and Other Noncurrent Liabilities,” as applicable. As allowed under ASU 2016-02, “Leases (Topic 842),” the Company applied practical expedients permitting an entity the option to not evaluate under such standard those existing or expired land easements that were not previously accounted for as leases as well as permitting an entity the option to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs.

Operating lease expense associated with ROU assets is recognized on a straight-line basis over the lease term. Lease expense is reflected on the statement of consolidated operations commensurate with the leased activities and nature of the services performed. Gross fixed operating lease expense, inclusive of amounts billable to partners and other working interest owners, was $145 million, $128 million, and $149 million for the years ended 2022, 2021, and 2020, respectively. As allowed under the standard, the Company elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation. Costs incurred for short-term leases, which are primarily related to drilling activities in Block 58 offshore Suriname, were $62 million, $20 million and $80 million in 2022, 2021, and 2020, respectively.

In addition, the Company periodically enters into finance leases that are similar to those leases classified as capital leases under previous GAAP. Finance lease assets are included in “Property, Plant, and Equipment” on the consolidated balance sheet, and the associated finance lease liabilities are reflected within “Current debt” and “Long-term debt,” as applicable. Depreciation on the Company’s finance lease asset was $2 million in each of the years 2022, 2021, and 2020. Interest on the Company’s finance lease liability was $2 million in each of the years 2022, 2021, and 2020.

The following table represents the Company’s weighted average lease term and discount rate as of December 31, 2022:

						Operating Leases						Finance Lease
Weighted average remaining lease term						2.5 years						10.7 years
Weighted average discount rate						3.7		%				4.4		%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

At December 31, 2022, contractual obligations for long-term operating leases, finance leases, and purchase obligations are as follows:

Net Minimum Commitments**(1)**						Operating Leases**(2)**						Finance Lease**(3)**						Purchase Obligations**(4)(5)**
						(In millions)
2023						$	175					$	3					$	222
2024						103						3						183
2025						14						4						163
2026						6						4						1,951
2027						6						4						133
Thereafter						11						27						333
Total future minimum payments						315						45						$	2,985
Less: imputed interest						(15)						(11)						N/A
Total lease liabilities						300						34						N/A
Current portion						167						2						N/A
Non-current portion						$	133					$	32					N/A

(1)Excludes commitments for jointly owned fields and facilities for which the Company is not the operator.

(2)Amounts represent future payments associated with oil and gas operations inclusive of amounts billable to partners and other working interest owners. Such payments may be capitalized as a component of oil and gas properties and subsequently depreciated, impaired, or written off as exploration expense.

(3)Amounts represent the Company’s finance lease obligation related to the Company’s Midland, Texas regional office building.

(4)Amounts represent any agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. These include minimum commitments associated with take-or-pay contracts, NGL processing agreements, drilling work program commitments, and agreements to secure capacity rights on third-party pipelines. Amounts exclude certain product purchase obligations related to marketing and trading activities for which there are no minimum purchase requirements or the amounts are not fixed or determinable. Total costs incurred under take-or-pay and throughput obligations were $183 million, $198 million, and $120 million in 2022, 2021, and 2020, respectively.

(5)Under terms agreed to in the new Egypt merged concession agreement, the Company committed to spend a minimum of $3.5 billion on exploration, development, and operating activities by March 31, 2026. As of December 31, 2022, the Company has spent $1.7 billion and believes it will be able to satisfy the remaining obligation within its current exploration and development program.

The lease liability reflected in the table above represents the Company’s fixed minimum payments that are settled in accordance with the lease terms. Actual lease payments during the period may also include variable lease components such as common area maintenance, usage-based sales taxes and rate differentials, or other similar costs that are not determinable at the inception of the lease. Gross variable lease payments, inclusive of amounts billable to partners and other working interest owners were $90 million, $64 million, and $41 million in 2022, 2021, and 2020, respectively.

In addition to the lease liabilities in the table above, at December 31, 2022, undiscounted fixed minimum payments for operating leases not yet commenced totaled $207 million. The leases primarily relate to office leases in Houston and Egypt, and estimated cash payments for 2023 are not expected to be material. The underlying assets for these leases were primarily designed by the lessors, and the Company is in the process of designing leasehold improvements for both leases.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

12. RETIREMENT AND DEFERRED COMPENSATION PLANS

The Company provides retirement benefits to its U.S. employees through the use of multiple plans: a 401(k) savings plan, a money purchase retirement plan, a non-qualified retirement savings plan, and a non-qualified restorative retirement savings plan. The 401(k) savings plan provides participating employees the ability to elect to contribute to the plan up to 50 percent of eligible compensation, as defined in the plan, with the Company making matching contributions up to a maximum of 8 percent of each employee’s annual eligible compensation. In addition, the Company contributes 6 percent of each participating employee’s annual eligible compensation to a money purchase retirement plan. The 401(k) savings plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions that limit the amount of employee and Company contributions. For certain eligible employees, the Company also provides a non-qualified retirement savings plan or a non-qualified restorative retirement savings plan. These plans allow the deferral of up to 50 percent of each employee’s base salary, up to 75 percent of each employee’s annual bonus (that accepts employee contributions) and the Company’s matching contributions in excess of the government mandated limitations imposed in the 401(k) savings plan and money purchase retirement plan.

Vesting in the Company’s contributions in the 401(k) savings plan, the money purchase retirement plan, the non-qualified retirement savings plan and the non-qualified restorative retirement savings plan occurs at the rate of 20 percent for every completed year of employment. Upon a qualifying change in control of ownership of APA Corporation, as defined in the applicable plan, immediate and full vesting occurs.

The aggregate annual cost to the Company of all U.S. and international savings plans, the money purchase retirement plan, non-qualified retirement savings plan, and non-qualified restorative retirement savings plan was $40 million, $31 million, and $43 million for 2022, 2021, and 2020, respectively.

The Company also provides a funded noncontributory defined benefit pension plan (U.K. Pension Plan) covering certain employees of the Company’s North Sea operations in the U.K. The plan provides defined pension benefits based on years of service and final salary. The plan applies only to employees who were part of BP North Sea’s pension plan as of April 2, 2003, prior to the acquisition of BP North Sea by the Company effective July 1, 2003.

Additionally, the Company offers postretirement medical benefits to U.S. employees who meet certain eligibility requirements. Eligible participants receive medical benefits up until the age of 65 or at the date they become eligible for Medicare, provided the participant remits the required portion of the cost of coverage. The plan is contributory with participants’ contributions adjusted annually. The postretirement benefit plan does not cover benefit expenses once a covered participant becomes eligible for Medicare.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following tables set forth the benefit obligation, fair value of plan assets and funded status as of December 31, 2022, 2021, and 2020, and the underlying weighted average actuarial assumptions used for the U.K. Pension Plan and U.S. postretirement benefit plan. The Company uses a measurement date of December 31 for its pension and postretirement benefit plans.

						2022												2021												2020
						Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
						(In millions)
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year						$	211					$	20					$	233					$	20					$	199					$	20
Service cost						2						1						3						1						3						1
Interest cost						3						—						3						—						4						—
Foreign currency exchange rates						(21)						—						(2)						—						8						—
Actuarial losses (gains)						(79)						(5)						(5)						1						30						1
Plan settlements						—						—						(17)						—						—						—
Benefits paid						(8)						(3)						(4)						(4)						(11)						(4)
Retiree contributions						—						2						—						2						—						2
Projected benefit obligation at end of year						108						15						211						20						233						20
Change in Plan Assets
Fair value of plan assets at beginning of year						254						—						262						—						228						—
Actual return (loss) on plan assets						(87)						—						11						—						31						—
Foreign currency exchange rates						(26)						—						(3)						—						9						—
Employer contributions						4						2						5						2						5						2
Plan settlements						—						—						(17)						—						—						—
Benefits paid						(8)						(4)						(4)						(4)						(11)						(4)
Retiree contributions						—						2						—						2						—						2
Fair value of plan assets at end of year						137						—						254						—						262						—
Funded status at end of year						$	29					$	(15)					$	43					$	(20)					$	29					$	(20)
Amounts recognized in Consolidated Balance Sheet
Current liability						$	—					$	(2)					$	—					$	(2)					$	—					$	(2)
Non-current asset (liability)						29						(13)						43						(18)						29						(18)
						$	29					$	(15)					$	43					$	(20)					$	29					$	(20)
Pre-tax Amounts Recognized in Accumulated Other Comprehensive Income (Loss)
Accumulated gain (loss)						$	(10)					$	18					$	1					$	14					$	(11)					$	16
Weighted Average Assumptions used as of December 31
Discount rate						5.00		%				5.29		%				1.80		%				2.57		%				1.40		%				2.06		%
Salary increases						4.70		%				N/A						4.90		%				N/A						4.50		%				N/A
Expected return on assets						4.70		%				N/A						1.90		%				N/A						1.50		%				N/A
Healthcare cost trend
Initial						N/A						6.50		%				N/A						6.25		%				N/A						6.00		%
Ultimate in 2028						N/A						5.25		%				N/A						5.00		%				N/A						5.00		%

As of December 31, 2022, 2021, and 2020, the accumulated benefit obligation for the U.K. Pension Plan was $89 million, $205 million, and $207 million, respectively.

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APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company’s defined benefit pension plan assets are held by a non-related trustee who has been instructed to invest the assets in a blend of equity securities and low-risk debt securities. The Company intends that this blend of investments will provide a reasonable rate of return such that the benefits promised to members are provided. The U.K. Pension Plan policy is to target an ongoing funding level of 100 percent through prudent investments and includes policies and strategies such as investment goals, risk management practices, and permitted and prohibited investments. A breakout of previous allocations for plan asset holdings and the target allocation for the Company’s plan assets are summarized below:

						Target Allocation						Percentage of Plan Assets at Year-End
						2022						2022						2021
Asset Category
Equity securities:
Overseas quoted equities						14		%				15		%				15		%
Total equity securities						14		%				15		%				15		%
Debt securities:
U.K. government bonds						52		%				52		%				54		%
U.K. corporate bonds						32		%				32		%				25		%
Total debt securities						84		%				84		%				79		%
Cash						2		%				1		%				6		%
Total						100		%				100		%				100		%

The plan’s assets do not include any direct ownership of equity or debt securities of the Company. The fair value of plan assets at December 31, 2022 and 2021 are based upon unadjusted quoted prices for identical instruments in active markets, which is a Level 1 fair value measurement. The following tables present the fair values of plan assets for each major asset category based on the nature and significant concentration of risks in plan assets at December 31, 2022 and 2021:

						December 31,
						2022						2021
						(In millions)
Equity securities:
Overseas quoted equities						$	20					$	38
Total equity securities						20						38
Debt securities:
U.K. government bonds						71						138
U.K. corporate bonds						44						62
Total debt securities						115						200
Cash						2						16
Fair value of plan assets						$	137					$	254

The expected long-term rate of return on assets assumptions are derived relative to the yield on long-dated fixed-interest bonds issued by the U.K. government (gilts). For equities, outperformance relative to gilts is assumed to be 3.5 percent per year.

F-45

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions used for the pension and postretirement benefit plans as of December 31, 2022, 2021, and 2020:

						2022												2021												2020
						Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
						(In millions)
Components of Net Periodic Benefit Cost
Service cost						$	2					$	1					$	3					$	1					$	3					$	1
Interest cost						3						—						3						—						4						—
Expected return on assets						(4)						—						(4)						—						(5)						—
Amortization of loss						—						(1)						—						(1)						—						(1)
Settlement loss						—						—						—						—						—						—
Net periodic benefit cost						$	1					$	—					$	2					$	—					$	2					$	—
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December 31
Discount rate						1.80		%				2.57		%				1.40		%				2.06		%				2.10		%				3.00		%
Salary increases						4.90		%				N/A						4.50		%				N/A						4.30		%				N/A
Expected return on assets						1.90		%				N/A						1.50		%				N/A						2.20		%				N/A
Healthcare cost trend
Initial						N/A						6.25		%				N/A						6.00		%				N/A						6.25		%
Ultimate in 2028						N/A						5.00		%				N/A						5.00		%				N/A						5.00		%

The Company expects to contribute approximately $2 million to its pension plan and $3 million to its postretirement benefit plan in 2023. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

						Pension Benefits						Postretirement Benefits
						(In millions)
2023						$	5					$	2
2024						5						2
2025						5						2
2026						5						1
2027						5						1
Years 2028-2032						28						6

F-46

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. REDEEMABLE NONCONTROLLING INTEREST — ALTUS

Preferred Units Issuance

On June 12, 2019, Altus Midstream LP issued and sold Preferred Units for an aggregate issue price of $625 million in a private offering exempt from the registration requirements of the Securities Act (the Closing). Altus Midstream LP received approximately $611 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers.

Classification

Prior to the deconsolidation of Altus on February 22, 2022, at December 31, 2021, the carrying amount of the Preferred Units was recorded as “Redeemable Noncontrolling Interest — Altus Preferred Unit Limited Partners” and classified as temporary equity on the Company’s consolidated balance sheet based on the terms of the Preferred Units, including the redemption rights with respect thereto.

Measurement

Altus applied a two-step approach to subsequent measurement of the redeemable noncontrolling interest related to the Preferred Units by first allocating a portion of the net income of Altus Midstream LP in accordance with the terms of the partnership agreement. An additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end was recorded, if applicable. The amount of such adjustment was determined based upon the accreted value method to reflect the passage of time until the Preferred Units were exchangeable at the option of the holder. Pursuant to this method, the net transaction price was accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of the Closing. The total adjustment was limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end was equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price.

Activity related to the Preferred Units for the 2022 and 2021 periods is as follows:

						Units Outstanding						Financial Position**(1)**
						(In millions, except unit data)
Redeemable noncontrolling interest — Altus Preferred Unit limited partners: at December 31, 2020						660,694						$	608
Cash distributions to Altus Preferred Unit limited partners						—						(46)
Distributions payable to Altus Preferred Unit limited partners						—						(12)
Allocation of Altus Midstream net income						N/A						80
Accreted value adjustment						N/A						82
Redeemable noncontrolling interest — Altus Preferred Unit limited partners: at December 31, 2021						660,694						712
Allocation of Altus Midstream LP net income						N/A						12
Accreted value adjustment(1)						N/A						(82)
Redeemable noncontrolling interest — Altus Preferred Unit limited partners: at February 22, 2022						660,694						642
Preferred Units embedded derivative												89
Deconsolidation of Altus												(731)
												$	—

(1) Includes the reversal of previously recorded accreted value adjustments due to the deconsolidation of Altus.

N/A - not applicable.

F-47

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

14. CAPITAL STOCK

Common Stock Outstanding

The following table provides changes to the Company’s common shares outstanding for the years ended December 31, 2022, 2021, and 2020:

						For the Year Ended December 31,
						2022						2021						2020
Balance, beginning of year						346,930,765						377,482,630						376,062,670
Shares issued for stock-based compensation plans:
Treasury shares issued						1,996						3,133						17,448
Common shares issued						791,381						649,231						1,402,512
Treasury shares acquired						(36,164,993)						(31,204,229)						—
Balance, end of year						311,559,149						346,930,765						377,482,630

Net Income (Loss) per Common Share

The following table provides a reconciliation of the components of basic and diluted net income (loss) per common share for the years ended December 31, 2022, 2021, and 2020:

						2022																		2021																		2020
						Income						Shares						Per Share						Income						Shares						Per Share						Loss						Shares						Per Share
						(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock						$	3,674					332						$	11.05					$	973					374						$	2.60					$	(4,860)					378						$	(12.86)
Effect of Dilutive Securities:
Stock options and other						$	—					1						$	(0.03)					$	—					1						$	(0.01)					$	—					—						$	—
Diluted:
Income (loss) attributable to common stock						$	3,674					333						$	11.02					$	973					375						$	2.59					$	(4,860)					378						$	(12.86)

The diluted EPS calculation excludes options and restricted shares that were anti-dilutive totaling 2.4 million, 3.3 million, and 4.5 million for the years ended December 31, 2022, 2021, and 2020, respectively. Prior to the deconsolidation of Altus on February 22, 2022, the impact to net income (loss) attributable to common stock on an assumed conversion of the redeemable noncontrolling Preferred Units interest in Altus Midstream LP was anti-dilutive for the years ended December 31, 2021 and 2020.

Stock Repurchase Program

During 2018, the Company’s Board of Directors authorized the purchase of up to 40 million shares of the Company’s common stock. No shares were purchased under this authorization through December 31, 2020. During 2021, the Company’s Board of Directors authorized the purchase of an additional 40 million shares of the Company’s common stock. During the third quarter of 2022, the Company's Board of Directors further authorized the purchase of an additional 40 million shares of the Company's common stock. Shares may be purchased either in the open market or through privately held negotiated transactions.

During 2021, the Company repurchased 31.2 million shares at an average price of $27.14 per share. During 2022, the Company repurchased 36.2 million shares at an average price of $39.34 per share, and as of December 31, 2022, the Company had remaining authorization to repurchase 52.6 million shares. The Company is not obligated to acquire any additional shares.

F-48

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Common Stock Dividend

In the first quarter of 2020, the Company’s Board of Directors approved a reduction in the Company’s quarterly dividends from $0.25 per share to $0.025 per share, effective for all dividends payable after March 12, 2020. During the third quarter of 2021, the Company’s Board of Directors approved an increase in its quarterly dividend from $0.025 per share to $0.0625 per share, and in the fourth quarter of 2021, approved a further increase in its quarterly dividend to $0.125 per share. During the third quarter of 2022, the Company’s Board of Directors approved another increase to its quarterly dividend to $0.25 per share. For the years ended December 31, 2022, 2021, and 2020, the Company declared common stock dividends totaling $0.75 per share, $0.2375 per share, and $0.10 per share, respectively.

Stock Compensation Plans

The Company maintains several stock-based compensation plans, which include stock options, restricted stock, and conditional restricted stock unit plans. In 2021, pursuant to the Holding Company Reorganization, Apache’s outstanding common shares were converted into equivalent corresponding shares of APA. APA assumed sponsorship of all stock compensation plans. All cash-settled awards previously indexed to Apache’s stock price were subsequently indexed to APA’s stock price, and all unvested stock-settled awards will be settled in APA stock upon vesting.

On May 12, 2016, the Company’s shareholders approved the 2016 Omnibus Compensation Plan (the 2016 Plan), which is used to provide eligible employees with equity-based incentives by granting incentive stock options, non-qualified stock options, performance awards, restricted stock awards, restricted stock units, stock appreciation rights, cash awards, or any combination of the foregoing. As of December 31, 2022, 10.1 million shares were authorized and available for grant under the 2016 Plan. Previously approved plans remain in effect solely for the purpose of governing grants still outstanding that were issued prior to approval of the 2016 Plan. All new grants are issued from the 2016 Plan. In 2018, the Company began issuing cash-settled awards (phantom units) under the restricted stock and conditional restricted stock unit plans. The phantom units represent a hypothetical interest in the Company’s stock and, once vested, are settled in cash.

Costs related to the plans are capitalized or expensed to “Lease operating expenses,” “Exploration,” or “General and administrative” in the Company’s statement of consolidated operations based on the nature of each employee’s activities. The following table summarizes the Company’s stock-settled and cash-settled compensation costs:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Stock-settled and cash-settled compensation expensed						$	304					$	157					$	40
Stock-settled and cash-settled compensation capitalized						44						18						7
Total stock-settled and cash-settled compensation costs						$	348					$	175					$	47

Stock Options

As of December 31, 2022, the Company had outstanding options to purchase shares of its common stock under the 2016 Plan and the 2011 Omnibus Equity Compensation Plan (the 2011 Plan and, with the 2016 Plan, the Omnibus Plans). The Omnibus Plans were submitted to and approved by the Company’s shareholders. New shares of common stock will be issued for employee stock option exercises. Under the Omnibus Plans, the exercise price of each option equals the closing price of APA’s common stock on the date of grant. Options granted become exercisable ratably over a three-year period and expire 10 years after granted.

F-49

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes stock option activity for the years ended December 31, 2022, 2021, and 2020:

						2022												2021												2020
						Shares Under Option						Weighted Average Exercise Price						Shares Under Option						Weighted Average Exercise Price						Shares Under Option						Weighted Average Exercise Price
						(In thousands, except exercise price amounts)
Outstanding, beginning of year						3,012						$	63.79					3,537						$	72.10					4,298						$	75.24
Exercised						(99)						42.09						—						—						—						—
Forfeited						(2)						49.10						—						—						(37)						44.98
Expired						(833)						81.56						(525)						119.83						(724)						92.14
Outstanding, end of year(1)						2,078						57.71						3,012						63.79						3,537						72.10
Expected to vest						—						—						—						—						150						45.77
Exercisable, end of year(1)						2,078						57.71						3,012						63.79						3,387						73.26

(1)As of December 31, 2022, options exercisable and outstanding had a weighted average remaining contractual life of 3.1 years and aggregate intrinsic value of $3.5 million.

There were no options issued and 98,646 options exercised during the year ended December 31, 2022. There were no options issued and no options exercised during the years ended December 31, 2021, and 2020.

Restricted Stock Units and Restricted Stock Phantom Units

The Company has restricted stock unit and restricted stock phantom unit plans for eligible employees, including officers. The value of the stock-settled restricted stock unit awards is established by the market price on the date of grant and is recorded as compensation expense ratably over the vesting terms. The restricted stock phantom unit awards represent a hypothetical interest in either the Company’s common stock or, prior to the BCP Business Combination, in ALTM’s common stock, as applicable, and, once vested, are settled in cash. Compensation expense related to the cash-settled awards is recorded as a liability and remeasured at the end of each reporting period over the applicable vesting term.

For the years ended December 31, 2022, 2021, and 2020, compensation costs charged to expense for the restricted stock units and restricted stock phantom units was $153 million, $95 million, and $39 million, respectively. As of December 31, 2022, 2021, and 2020, capitalized compensation costs for the restricted stock units and restricted stock phantom units were $22 million, $15 million, and $6 million, respectively.

The following table summarizes stock-settled restricted stock unit activity for the years ended December 31, 2022, 2021, and 2020:

						2022												2021												2020
						Units						Weighted Average Grant-Date Fair Value						Units						Weighted Average Grant-Date Fair Value						Units						Weighted Average Grant-Date Fair Value
						(In thousands, except per share amounts)
Non-vested, beginning of year						2,073						$	19.98					1,552						$	28.43					2,448						$	46.65
Granted						847						29.90						1,506						16.46						1,352						24.60
Vested(3)						(978)						22.39						(857)						29.13						(1,933)						48.65
Forfeited						(57)						23.49						(128)						19.78						(315)						30.09
Non-vested, end of year(1)(2)						1,885						23.08						2,073						19.98						1,552						28.43

(1)As of December 31, 2022, there was $14 million of total unrecognized compensation cost related to 1,885,491 unvested stock-settled restricted stock units.

(2)As of December 31, 2022, the weighted-average remaining life of unvested stock-settled restricted stock units is approximately 0.7 years.

(3)The grant date fair values of the stock-settled awards vested during 2022, 2021, and 2020 were approximately $22 million, $25 million, and $94 million, respectively.

F-50

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes cash-settled restricted stock phantom unit activity for the years ended December 31, 2022, 2021, and 2020:

						For the Year Ended December 31,
						2022						2021						2020
						(In thousands)
Non-vested, beginning of year						6,402						4,423						5,384
Adjustment for ALTM reverse stock split(1)						—						—						(1,246)
Adjustment from ALTM transaction(2)						143						—						—
Granted(3)						2,568						4,441						3,462
Vested						(2,970)						(2,049)						(1,618)
Forfeited						(434)						(413)						(1,559)
Non-vested, end of year(4)						5,709						6,402						4,423

(1)Prior to the deconsolidation of Altus on February 22, 2022, on June 30, 2020, ALTM executed a 1-for-20 reverse stock split of its outstanding common stock. Outstanding cash-settled awards were based on the per-share market price of ALTM common stock.

(2)Following the BCP Business Combination, certain employees were granted restricted stock phantom units based on APA’s common stock price to replace the equivalent value in restricted stock phantom units based on ALTM’s common stock price.

(3)Restricted stock phantom units granted during 2022, 2021, and 2020 included 2,512,602, 4,375,546, and 3,378,486 awards, respectively, based on the per-share market price of APA common stock and 55,546, 65,327, and 83,239 awards, respectively, based on the per-share market price of ALTM common stock prior to the deconsolidation of Altus on February 22, 2022. The restricted stock phantom units granted during 2020 based on ALTM’s per-share market price reflect the 1-for-20 reverse stock split described above.

(4)The outstanding liability for the unvested cash-settled restricted stock phantom units that had not been recognized as of December 31, 2022 was approximately $103 million.

In January 2023, the Company awarded 580,254 restricted stock units and 1,950,332 restricted stock phantom units based on APA’s weighted-average per-share market price of $42.15 under the 2016 Plan to eligible employees. Total compensation cost for the restricted stock units and the restricted stock phantom units, absent any forfeitures, is estimated to be $24 million and $85 million, respectively, and was calculated based on the per-share fair market value of a share of the Company’s common stock as of the grant date. Compensation cost will be recognized over a three-year vesting period for both plans. The restricted stock phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock, a Level 1 fair value measurement.

Performance Program

To provide long-term incentives for the Company’s employees to deliver competitive shareholder returns, the Company makes annual grants of conditional restricted stock units to eligible employees. APA has a performance program for certain eligible employees with payout for a portion of the shares based upon measurement of total shareholder return (TSR) of APA common stock as compared to a designated peer group during a three-year performance period. Payout for the remaining portion of the shares is based on performance and financial objectives as defined in the plan. The overall results of the objectives are calculated at the end of the award’s stated performance period and, if a payout is warranted, applied to the target number of restricted stock units awarded. The performance shares will immediately vest 50 percent at the end of the three-year performance period, with the remaining 50 percent vesting at the end of the following year. Grants from the performance programs outstanding at December 31, 2022, are as described below:

• In January 2018, the Company’s Board of Directors approved the 2018 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 931,049 units. A total of 23,633 phantom units were outstanding as of December 31, 2022. The results for the performance period yielded a payout of 23 percent of target.

• In January 2019, the Company’s Board of Directors approved the 2019 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 1,679,832 units. A total of 604,417 phantom units were outstanding as of December 31, 2022. The results for the performance period yielded a payout of 100 percent of target.

• In January 2020, the Company’s Board of Directors approved the 2020 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial cash-settled conditional phantom units totaling 1,687,307 units. A total of 1,311,715 phantom units were outstanding as of December 31, 2022. The results for the performance period yielded a payout of 155 percent of target.

F-51

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

• In January 2021, the Company’s Board of Directors approved the 2021 Performance Program, pursuant to the 2016 Plan. Eligible employees received the initial cash-settled conditional phantom units totaling 1,959,856 units. The actual amount of phantom units awarded will be between zero and 200 percent of target. A total of 1,826,890 phantom units were outstanding as of December 31, 2022, from which a minimum of zero to a maximum of 3,653,780 units could be awarded.

• In January 2022, the Company’s Board of Directors approved the 2022 Performance Program, pursuant to the 2016 Plan. Eligible employees received the initial cash-settled conditional phantom units totaling 1,093,034 units. The actual amount of phantom units awarded will be between zero and 200 percent of target. A total of 1,068,530 phantom units were outstanding as of December 31, 2022, from which a minimum of zero to a maximum of 2,137,060 units could be awarded.

Compensation costs charged to expense under the performance programs were an expense of $143 million, an expense of $57 million, and a credit of $8 million during 2022, 2021, and 2020, respectively. Capitalized compensation costs under the performance programs were an expense of $21 million, an expense of $3 million, and a credit of $1 million during 2022, 2021, and 2020, respectively.

The following table summarizes cash-settled conditional restricted stock unit activity for the year ended December 31, 2022:

						Units
						(In thousands)
Non-vested, beginning of year						4,531
Granted						1,676
Vested						(656)
Forfeited						(106)
Expired						(610)
Non-vested, end of year(1)						4,835

(1)As of December 31, 2022, the outstanding liability for the unvested cash-settled conditional restricted stock units that had not been recognized was approximately $53 million.

In January 2023, the Company’s board of directors approved the 2023 Performance Program, pursuant to the 2016 Plan. Payout for 40 percent of the shares is based upon measurement of TSR of APA common stock as compared to a designated peer group and the S&P 500 Index during a three-year performance period. Payout for the remaining 60 percent of the shares is based on the performance and financial objectives defined in the 2023 Performance Program. Eligible employees received the initial cash-settled conditional phantom units totaling 797,429 units, with the ultimate number of phantom units to be awarded ranging from zero to a maximum of 1,594,858 units. These phantom units represent a hypothetical interest in the Company’s common stock, and, once vested, are settled in cash. The TSR component of the award had a grant date fair value per award of $62.15 based on a Monte Carlo simulation. The grant date fair value per award for the remaining 60 percent was $44.06 based on the weighted-average fair market value of a share of common stock of the Company as of the grant date. These 2023 Performance Program phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock, a Level 1 fair value measurement.

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of accumulated other comprehensive income (loss) include the following:

						As of December 31,
						2022						2021						2020
						(In millions)
Share of equity method interests other comprehensive loss						$	—					$	—					$	(1)
Pension and postretirement benefit plan (Note 12)						14						22						15
Accumulated other comprehensive income						$	14					$	22					$	14

F-52

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

16. MAJOR CUSTOMERS

The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy-related industries. The creditworthiness of customers and other counterparties is subject to continuing review, including the use of master netting agreements, where appropriate. During 2022, sales to EGPC accounted for approximately 15 percent of the Company’s worldwide crude oil, natural gas, and NGLs revenues. During 2021, sales to EGPC and CFE International accounted for approximately 14 percent and 10 percent, respectively, of the Company’s worldwide crude oil, natural gas, and NGLs revenues. During 2020, sales to EGPC and Vitol accounted for approximately 17 percent and 14 percent, respectively, of the Company’s worldwide crude oil, natural gas, and NGLs revenues.

Management does not believe that the loss of any one of these customers would have a material adverse effect on the results of operations.

F-53

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

17. BUSINESS SEGMENT INFORMATION

As of December 31, 2022, the Company’s consolidated subsidiaries are engaged in exploration and production (Upstream) activities across three operating segments: Egypt, North Sea, and the U.S. The Company also has active exploration and appraisal operations ongoing in Suriname, as well as interests in the Dominican Republic and other international locations that may, over time, result in reportable discoveries and development opportunities. The Company’s Upstream business explores for, develops, and produces natural gas, crude oil and NGLs. Prior to the deconsolidation of Altus on February 22, 2022, the Company’s midstream business was operated by Altus, which owned, developed, and operated a midstream energy asset network in the Permian Basin of West Texas. Financial information for each segment is presented below:

						Egypt**(1)**						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(2)**
						Upstream
						(In millions)
2022
Oil revenues						$	3,145					$	1,232					$	2,458					$	—					$	—					$	6,835
Natural gas revenues						370						281						918						—						—						1,569
Natural gas liquids revenues						6						45						768						—						(3)						816
Oil, natural gas, and natural gas liquids production revenues						3,521						1,558						4,144						—						(3)						9,220
Purchased oil and gas sales						—						—						1,850						5						—						1,855
Midstream service affiliate revenues						—						—						—						16						(16)						—
						3,521						1,558						5,994						21						(19)						11,075
Operating Expenses:
Lease operating expenses						526						404						515						—						(1)						1,444
Gathering, processing, and transmission						22						43						315						5						(18)						367
Purchased oil and gas costs						—						—						1,776						—						—						1,776
Taxes other than income						—						—						265						3						—						268
Exploration(4)						84						35						24						—						162						305
Depreciation, depletion, and amortization						400						238						593						2						—						1,233
Asset retirement obligation accretion						—						82						34						1						—						117
						1,032						802						3,522						11						143						5,510
Operating Income (Loss)						$	2,489					$	756					$	2,472					$	10					$	(162)					5,565
Other Income (Expense):
Gain on divestitures, net																																				1,180
Losses on previously sold Gulf of Mexico properties																																				(157)
Derivative instrument losses, net																																				(114)
Other																																				148
General and administrative																																				(483)
Transaction, reorganization, and separation																																				(26)
Financing costs, net																																				(379)
Income Before Income Taxes																																				$	5,734
Total Assets(3)						$	3,148					$	1,911					$	7,574					$	—					$	514					$	13,147
Net Property and Equipment						$	1,976					$	1,386					$	5,226					$	—					$	424					$	9,012
Additions to Net Property and Equipment						$	695					$	210					$	1,439					$	—					$	263					$	2,607

F-54

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						Egypt**(1)**						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(2)**
						Upstream
						(In millions)
2021
Oil revenues						$	1,806					$	929					$	1,850					$	—					$	—					$	4,585
Natural gas revenues						270						183						754						—						—						1,207
Natural gas liquids revenues						9						24						676						—						(3)						706
Oil, natural gas, and natural gas liquids production revenues						2,085						1,136						3,280						—						(3)						6,498
Purchased oil and gas sales						—						—						1,476						11						—						1,487
Midstream service affiliate revenues						—						—						—						127						(127)						—
						2,085						1,136						4,756						138						(130)						7,985
Operating Expenses:
Lease operating expenses						469						383						391						—						(2)						1,241
Gathering, processing, and transmission						12						39						309						32						(128)						264
Purchased oil and gas costs						—						—						1,575						5						—						1,580
Taxes other than income						—						—						190						14						—						204
Exploration(4)						63						34						28						—						30						155
Depreciation, depletion, and amortization						524						270						554						12						—						1,360
Asset retirement obligation accretion						—						79						30						4						—						113
Impairments						26						22						—						160						—						208
						1,094						827						3,077						227						(100)						5,125
Operating Income (Loss)						$	991					$	309					$	1,679					$	(89)					$	(30)					2,860
Other Income (Expense):
Gain on divestitures, net																																				67
Losses on previously sold Gulf of Mexico properties																																				(446)
Derivative instrument gains, net																																				94
Other																																				228
General and administrative																																				(376)
Transaction, reorganization, and separation																																				(22)
Financing costs, net																																				(514)
Income Before Income Taxes																																				$	1,891
Total Assets(3)						$	2,796					$	2,199					$	6,269					$	1,698					$	341					$	13,303
Net Property and Equipment						$	1,720					$	1,646					$	4,507					$	187					$	275					$	8,335
Additions to Net Property and Equipment						$	319					$	159					$	523					$	3					$	151					$	1,155

F-55

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						Egypt**(1)**						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(2)**
						Upstream
						(In millions)
2020
Oil revenues						$	1,102					$	795					$	1,209					$	—					$	—					$	3,106
Natural gas revenues						280						67						251						—						—						598
Natural gas liquids revenues						8						21						304						—						—						333
Oil, natural gas, and natural gas liquids production revenues						1,390						883						1,764						—						—						4,037
Purchased oil and gas sales						—						—						394						4						—						398
Midstream service affiliate revenues						—						—						—						145						(145)						—
						1,390						883						2,158						149						(145)						4,435
Operating Expenses:
Lease operating expenses						424						305						400						—						(2)						1,127
Gathering, processing, and transmission						38						50						291						38						(143)						274
Purchased oil and gas costs						—						—						354						3						—						357
Taxes other than income						—						—						108						15						—						123
Exploration(4)						63						28						168						—						15						274
Depreciation, depletion, and amortization						601						380						779						12						—						1,772
Asset retirement obligation accretion						—						73						32						4						—						109
Impairments						529						7						3,963						2						—						4,501
						1,655						843						6,095						74						(130)						8,537
Operating Income (Loss)						$	(265)					$	40					$	(3,937)					$	75					$	(15)					(4,102)
Other Income (Expense):
Gain on divestitures, net																																				32
Derivative instrument losses, net																																				(223)
Other																																				64
General and administrative																																				(290)
Transaction, reorganization, and separation																																				(54)
Financing costs, net																																				(267)
Loss Before Income Taxes																																				$	(4,840)
Total Assets(3)						$	3,003					$	2,220					$	5,540					$	1,786					$	197					$	12,746
Net Property and Equipment						$	1,955					$	1,773					$	4,760					$	196					$	135					$	8,819
Additions to Net Property and Equipment						$	454					$	215					$	345					$	12					$	136					$	1,162

(1)Includes revenue from non-customers for the years ended December 31, 2022, 2021, and 2020 of:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Oil						$	989					$	420					$	95
Natural gas						117						47						14
Natural gas liquids						2						2						—

(2)Includes a noncontrolling interest in Egypt and Altus Midstream.

(3)Intercompany balances are excluded from total assets.

(4)Exploration expense under Intersegment Eliminations & Other primarily reflects the Company’s Suriname exploration activities.

F-56

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

18. SUPPLEMENTAL OIL AND GAS DISCLOSURES (Unaudited)

Oil and Gas Operations

The following table sets forth revenue and direct cost information relating to the Company’s oil and gas exploration and production activities. The Company has no long-term agreements to purchase oil or gas production from foreign governments or authorities.

						United States						Egypt**(1)**						North Sea						Other International						Total**(1)**
						(In millions, except per boe)
2022
Oil and gas production revenues						$	4,144					$	3,521					$	1,558					$	—					$	9,223
Operating cost:
Depreciation, depletion, and amortization(2)						564						390						232						—						1,186
Asset retirement obligation accretion						34						—						82						—						116
Lease operating expenses						515						526						404						—						1,445
Gathering, processing, and transmission						315						22						43						—						380
Exploration expenses						24						84						35						162						305
Production taxes(3)						263						—						—						—						263
Income tax						510						1,100						495						—						2,105
						2,225						2,122						1,291						162						5,800
Results of operations						$	1,919					$	1,399					$	267					$	(162)					$	3,423
2021
Oil and gas production revenues						$	3,280					$	2,085					$	1,136					$	—					$	6,501
Operating cost:
Depreciation, depletion, and amortization(2)						511						477						267						—						1,255
Asset retirement obligation accretion						30						—						79						—						109
Lease operating expenses						391						469						383						—						1,243
Gathering, processing, and transmission						309						12						39						—						360
Exploration expenses						28						63						34						30						155
Production taxes(3)						188						—						—						—						188
Income tax						383						479						134						—						996
						1,840						1,500						936						30						4,306
Results of operations						$	1,440					$	585					$	200					$	(30)					$	2,195
2020
Oil and gas production revenues						$	1,764					$	1,390					$	883					$	—					$	4,037
Operating cost:
Depreciation, depletion, and amortization(2)						726						540						377						—						1,643
Asset retirement obligation accretion						32						—						73						—						105
Lease operating expenses						400						424						305						—						1,129
Gathering, processing, and transmission						291						38						50						—						379
Exploration expenses						168						63						28						15						274
Impairments related to oil and gas properties						3,938						374						7						—						4,319
Production taxes(3)						106						—						—						—						106
Income tax						(818)						(22)						17						—						(823)
						4,843						1,417						857						15						7,132
Results of operations						$	(3,079)					$	(27)					$	26					$	(15)					$	(3,095)

(1)Includes a noncontrolling interest in Egypt.

(2)Reflects DD&A of capitalized costs of oil and gas properties and, therefore, does not agree with DD&A reflected on Note 17—Business Segment Information.

(3)Reflects only amounts directly related to oil and gas producing properties and, therefore, does not agree with taxes other than income reflected on Note 17—Business Segment Information.

F-57

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Costs Incurred in Oil and Gas Property Acquisitions, Exploration, and Development Activities

						United States						Egypt**(2)**						North Sea						Other International						Total**(2)**
						(In millions)
2022
Acquisitions:
Proved						$	596					$	3					$	—					$	—					$	599
Unproved						66						—						—						—						66
Exploration						4						169						61						311						545
Development						848						568						(57)						—						1,359
Costs incurred(1)						$	1,514					$	740					$	4					$	311					$	2,569
(1) Includes capitalized interest, asset retirement costs:
Capitalized interest						$	—					$	—					$	1					$	17					$	18
Asset retirement costs						79						—						(215)						—						(136)
2021
Acquisitions:
Proved						$	—					$	(157)					$	—					$	—					$	(157)
Unproved						9						20						—						—						29
Exploration						6						86						39						170						301
Development						545						404						135						2						1,086
Costs incurred(1)						$	560					$	353					$	174					$	172					$	1,259
(1) Includes capitalized interest and asset retirement costs, and Egypt modernization impacts as follows:
Capitalized interest						$	—					$	—					$	—					$	9					$	9
Asset retirement costs						130						—						19						—						149
Egypt PSC modernization impacts - Proved and Unproved						—						(145)						—						—						(145)
2020
Acquisitions:
Proved						$	—					$	7					$	—					$	—					$	7
Unproved						4						—						—						—						4
Exploration						8						102						68						150						328
Development						332						378						162						—						872
Costs incurred(1)						$	344					$	487					$	230					$	150					$	1,211
(1) Includes capitalized interest and asset retirement costs as follows:
Capitalized interest						$	—					$	—					$	—					$	3					$	3
Asset retirement costs						9						—						29						—						38
(2) Includes a noncontrolling interest in Egypt.

In 2021, in connection with APA’s agreement to enter into a new merged concession agreement with EGPC, as referenced in Note 1—Summary of Significant Accounting Policies, the Company recorded a reduction in proved properties totaling $165 million and an increase in unproved properties of $20 million, reflecting $247 million of incremental value due to the Company for the period between the effective date of April 1, 2021 and closing, partially offset by a $100 million signing bonus and $2 million of other post-closing adjustments.

F-58

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Capitalized Costs

The following table sets forth the capitalized costs and associated accumulated depreciation, depletion, and amortization relating to the Company’s oil and gas acquisition, exploration, and development activities:

						United States												Egypt**(1)**						North Sea						Other International						Total**(1)**
						(In millions)
2022
Proved properties						$	19,638											$	13,014					$	8,945					$	—					$	41,597
Unproved properties						247												77						11						424						759
						19,885												13,091						8,956						424						42,356
Accumulated DD&A						(14,902)												(11,157)						(7,573)						—						(33,632)
						$	4,983											$	1,934					$	1,383					$	424					$	8,724
2021
Proved properties						$	18,732											$	12,373					$	8,954					$	—					$	40,059
Unproved properties						319												63						33						275						690
						19,051												12,436						8,987						275						40,749
Accumulated DD&A						(14,814)												(10,767)						(7,345)						—						(32,926)
						$	4,237											$	1,669					$	1,642					$	275					$	7,823

(1)Includes a noncontrolling interest in Egypt.

Oil and Gas Reserve Information

Proved oil and gas reserves are those quantities of natural gas, crude oil, condensate, and NGLs, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Estimated proved developed oil and gas reserves can be expected to be recovered through existing wells with existing equipment and operating methods. The Company reports all estimated proved reserves held under production-sharing arrangements utilizing the “economic interest” method, which excludes the host country’s share of reserves.

Estimated reserves that can be produced economically through application of improved recovery techniques are included in the “proved” classification when successful testing by a pilot project or the operation of an active, improved recovery program using reliable technology establishes the reasonable certainty for the engineering analysis on which the project or program is based. Economically producible means a resource that generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. Reasonable certainty means a high degree of confidence that the quantities will be recovered. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field-tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. In estimating its proved reserves, the Company uses several different traditional methods that can be classified in three general categories: (1) performance-based methods; (2) volumetric-based methods; and (3) analogy with similar properties. The Company will, at times, utilize additional technical analysis such as computer reservoir models, petrophysical techniques, and proprietary 3-D seismic interpretation methods to provide additional support for more complex reservoirs. Information from this additional analysis is combined with traditional methods outlined above to enhance the certainty of the Company’s reserve estimates.

There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The reserve data in the following tables only represent estimates and should not be construed as being exact.

F-59

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						Crude Oil and Condensate
						United States						Egypt**(1)**												North Sea												Total**(1)**
						(Thousands of barrels)
Proved developed reserves:
December 31, 2019						278,145						103,573												101,712												483,430
December 31, 2020						206,936						95,981												86,566												389,483
December 31, 2021						180,968						106,646												77,073												364,687
December 31, 2022						177,708						108,050												82,580												368,338
Proved undeveloped reserves:
December 31, 2019						46,716						10,831												10,049												67,596
December 31, 2020						25,516						11,228												7,273												44,017
December 31, 2021						18,168						11,003												5,757												34,928
December 31, 2022						22,239						8,557												2,873												33,669
Total proved reserves:
Balance December 31, 2019						324,861						114,404												111,761												551,026
Extensions, discoveries and other additions						17,858						17,855												5,275												40,988
Revisions of previous estimates						(69,247)						2,541												(4,756)												(71,462)
Production						(32,299)						(27,591)												(18,441)												(78,331)
Sales of minerals in-place						(8,721)						—												—												(8,721)
Balance December 31, 2020						232,452						107,209												93,839												433,500
Extensions, discoveries and other additions						17,869						13,390												2,288												33,547
Purchases of minerals in-place						126						—												—												126
Revisions of previous estimates						(4,479)						22,727												(60)												18,188
Production						(27,450)						(25,677)												(13,237)												(66,364)
Sales of minerals in-place						(19,382)						—												—												(19,382)
Balance December 31, 2021						199,136						117,649												82,830												399,615
Extensions, discoveries and other additions						9,776						7,580												2,616												19,972
Purchases of minerals in-place						16,362						—												—												16,362
Revisions of previous estimates						7,793						22,433												11,898												42,124
Production						(25,695)						(31,055)												(11,891)												(68,641)
Sales of minerals in-place						(7,425)						—												—												(7,425)
Balance December 31, 2022						199,947						116,607												85,453												402,007

(1)Includes proved reserves of 39 MMbbls, 39 MMbbls, 36 MMbbls, and 38 MMbbls as of December 31, 2022, 2021, 2020, and 2019, respectively, attributable to a noncontrolling interest in Egypt.

F-60

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						Natural Gas Liquids
						United States						Egypt**(1)**												North Sea												Total**(1)**
						(Thousands of barrels)
Proved developed reserves:
December 31, 2019						158,794						667												2,317												161,778
December 31, 2020						150,599						716												2,053												153,368
December 31, 2021						164,172						446												2,059												166,677
December 31, 2022						158,745						—												2,230												160,975
Proved undeveloped reserves:
December 31, 2019						23,569						90												660												24,319
December 31, 2020						15,141						126												320												15,587
December 31, 2021						16,380						30												275												16,685
December 31, 2022						19,004						—												76												19,080
Total proved reserves:
Balance December 31, 2019						182,363						757												2,977												186,097
Extensions, discoveries and other additions						11,435						97												312												11,844
Revisions of previous estimates						(469)						264												(207)												(412)
Production						(27,133)						(276)												(709)												(28,118)
Sales of minerals in-place						(456)						—												—												(456)
Balance December 31, 2020						165,740						842												2,373												168,955
Extensions, discoveries and other additions						21,055						7												81												21,143
Purchases of minerals in-place						191						—												—												191
Revisions of previous estimates						22,724						(180)												318												22,862
Production						(24,175)						(193)												(438)												(24,806)
Sales of minerals in-place						(4,983)						—												—												(4,983)
Balance December 31, 2021						180,552						476												2,334												183,362
Extensions, discoveries and other additions						5,456						—												45												5,501
Purchases of minerals in-place						10,985						—												—												10,985
Revisions of previous estimates						9,991						(407)												333												9,917
Production						(22,895)						(69)												(406)												(23,370)
Sales of minerals in-place						(6,340)						—												—												(6,340)
Balance December 31, 2022						177,749						—												2,306												180,055

(1) Includes proved reserves of 159 Mbbls, 281 Mbbls, and 252 Mbbls as of December 31, 2021, 2020, and 2019, respectively, attributable to a noncontrolling interest in Egypt.

F-61

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						Natural Gas
						United States						Egypt**(1)**												North Sea												Total**(1)**
						(Millions of cubic feet)
Proved developed reserves:
December 31, 2019						945,938						433,382												106,329												1,485,649
December 31, 2020						1,052,756						409,035												68,159												1,529,950
December 31, 2021						1,237,461						464,826												76,155												1,778,442
December 31, 2022						1,166,218						399,502												66,292												1,632,012
Proved undeveloped reserves:
December 31, 2019						115,040						24,704												16,604												156,348
December 31, 2020						76,504						12,572												8,341												97,417
December 31, 2021						184,441						9,899												7,124												201,464
December 31, 2022						210,862						1,068												2,304												214,234
Total proved reserves:
Balance December 31, 2019						1,060,978						458,086												122,933												1,641,997
Extensions, discoveries and other additions						60,965						83,718												8,140												152,823
Revisions of previous estimates						215,166						(19,849)												(33,541)												161,776
Production						(205,594)						(100,348)												(21,032)												(326,974)
Sales of minerals in-place						(2,255)						—												—												(2,255)
Balance December 31, 2020						1,129,260						421,607												76,500												1,627,367
Extensions, discoveries and other additions						227,684						50,209												3,684												281,577
Purchases of minerals in-place						839						—												—												839
Revisions of previous estimates						279,610						99,143												17,171												395,924
Production						(192,523)						(96,234)												(14,076)												(302,833)
Sales of minerals in-place						(22,968)						—												—												(22,968)
Balance December 31, 2021						1,421,902						474,725												83,279												1,979,906
Extensions, discoveries and other additions						38,157						10,191												1,643												49,991
Purchases of minerals in-place						70,584						—												—												70,584
Revisions of previous estimates						92,599						45,725												(3,431)												134,893
Production						(172,752)						(130,071)												(12,895)												(315,718)
Sales of minerals in-place						(73,410)						—												—												(73,410)
Balance December 31, 2022						1,377,080						400,570												68,596												1,846,246

(1) Includes proved reserves of 134 Bcf, 158 Bcf, 141 Bcf, and 153 Bcf as of December 31, 2022, 2021, 2020, and 2019, respectively, attributable to a noncontrolling interest in Egypt.

F-62

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

						Total Equivalent Reserves
						United States						Egypt**(1)**												North Sea												Total**(1)**
						(Thousands barrels of oil equivalent)
Proved developed reserves:
December 31, 2019						594,595						176,470												121,751												892,816
December 31, 2020						532,994						164,870												99,979												797,843
December 31, 2021						551,384						184,563												91,825												827,772
December 31, 2022						530,823						174,633												95,859												801,315
Proved undeveloped reserves:
December 31, 2019						89,458						15,038												13,476												117,972
December 31, 2020						53,408						13,449												8,983												75,840
December 31, 2021						65,288						12,683												7,219												85,190
December 31, 2022						76,386						8,735												3,333												88,454
Total proved reserves:
Balance December 31, 2019						684,053						191,508												135,227												1,010,788
Extensions, discoveries and other additions						39,454						31,905												6,944												78,303
Revisions of previous estimates						(33,854)						(502)												(10,554)												(44,910)
Production						(93,698)						(44,592)												(22,655)												(160,945)
Sales of minerals in-place						(9,553)						—												—												(9,553)
Balance December 31, 2020						586,402						178,319												108,962												873,683
Extensions, discoveries and other additions						76,871						21,765												2,983												101,619
Purchases of minerals in-place						457						—												—												457
Revisions of previous estimates						64,847						39,071												3,120												107,038
Production						(83,712)						(41,909)												(16,021)												(141,642)
Sales of minerals in-place						(28,193)						—												—												(28,193)
Balance December 31, 2021						616,672						197,246												99,044												912,962
Extensions, discoveries and other additions						21,592						9,278												2,935												33,805
Purchases of minerals in-place						39,110						—												—												39,110
Revisions of previous estimates						33,217						29,647												11,659												74,523
Production						(77,382)						(52,803)												(14,446)												(144,631)
Sales of minerals in-place						(26,000)						—												—												(26,000)
Balance December 31, 2022						607,209						183,368												99,192												889,769

(1) Includes total proved reserves of 61 MMboe, 66 MMboe, 59 MMboe, and 64 MMboe as of December 31, 2022, 2021, 2020, and 2019, respectively, attributable to a noncontrolling interest in Egypt.

During 2022, the Company added approximately 34 MMboe from extensions, discoveries, and other additions. The Company recorded 22 MMboe of exploration and development adds in the U.S., comprising 9 MMboe in the Permian Basin, 8 MMboe in the Texas Gulf Coast, and 5 MMboe in the Delaware Basin. Drilling programs for the Permian and Delaware Basins include the Wolfcamp, Bone Spring and Spraberry with the Austin Chalk as the primary focus for the Texas Gulf Coast. International operations contributed 12 MMboe of exploration and development adds, with Egypt contributing 9 MMboe from onshore exploration and appraisal activity primarily in the Khalda Area and 3 MMboe from the North Sea. The Company had combined upward revisions of previously estimated reserves of 75 MMboe. Upward revisions related to miscellaneous changes accounted for 5 MMboe. Engineering and performance upward revisions accounted for 70 MMboe, with Egypt accounting for an increase of 43 MMboe, primarily the result of PSC modernization in Egypt. The North Sea contributed 9 MMboe of upward revisions from well performance and reactivations in both the Beryl and Forties programs. In the United States, the Company experienced positive revisions of 18 MMboe. The Company acquired 39 MMboe of proved reserves during 2022, primarily in the Delaware Basin. The Company also sold 26 MMboe of proved reserves associated with U.S. divestitures, primarily related to Permian Basin assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

During 2021, the Company added approximately 102 MMboe from extensions, discoveries, and other additions. The Company recorded 77 MMboe of exploration and development adds in the U.S., comprising 59 MMboe in the Permian Basin with the remaining 18 MMboe in the Texas Gulf Coast. The Permian Basin drilling programs targeted the Woodford, Barnett, Bone Springs, and Spraberry, while the Texas Gulf Coast focused on the Austin Chalk. International operations contributed 25 MMboe of exploration and development adds, with Egypt contributing 22 MMboe from onshore exploration and appraisal activity primarily in the Khalda Area concession post-PSC modernization. The North Sea contributed 3 MMboe. The Company had combined upward revisions of previously estimated reserves of 107 MMboe. Upward revisions related to changes in product prices accounted for 85 MMboe. Engineering and performance upward revisions accounted for 22 MMboe, with the new merged concession agreement in Egypt resulting in an increase of 57 MMboe, partially offset by other downward revisions of 35 MMboe across all of the Company’s geographic areas of operation. The Company also sold 28 MMboe of proved reserves associated with U.S. divestitures, primarily related to Permian Basin assets.

As previously discussed, in December 2021, the Egyptian government signed into law an agreement to modernize and consolidate a majority of the Company’s Egypt PSCs. The impact of the consolidated PSC to proved reserves based on the modernized terms is an estimated increase of 53 MMboe and 4 MMboe in developed and undeveloped reserves, respectively, and approximately $750 million in discounted future net cash flows. Approximately 96 percent of the Company’s Egypt reserves are now consolidated within the modernized PSC. These estimates include Sinopec’s noncontrolling interest in Egypt.

During 2020, the Company added approximately 78 MMboe from extensions, discoveries, and other additions. The Company recorded 39 MMboe of exploration and development adds in the U.S., primarily in the Southern Midland Basin (26 MMboe) associated with the Wolfcamp and Spraberry drilling programs and the remainder in the Delaware Basin and Austin Chalk. The international operations contributed 39 MMboe of exploration and development adds during 2020, with Egypt contributing 32 MMboe from onshore exploration and appraisal activity primarily in the Khalda Area and Umbarka Area concessions. The North Sea contributed 7 MMboe from drilling success, primarily in the Beryl Field. The Company had combined downward revisions of previously estimated reserves of 45 MMboe. Downward revisions related to changes in product prices accounted for 70 MMboe, engineering and performance upward revisions accounted for 27 MMboe, and downward interest revisions accounted for 2 MMboe. The Company also sold 10 MMboe of proved reserves associated with U.S. divestitures, primarily related to Eastern Shelf and Magnet Withers/Pickett Ridge.

Approximately 10 percent of the Company’s year-end 2022 estimated proved developed reserves are classified as proved not producing. These reserves relate to zones that are either behind pipe, or that have been completed but not yet produced, or zones that have been produced in the past, but are not now producing because of mechanical reasons. These reserves are considered to be a lower tier of reserves than producing reserves because they are frequently based on volumetric calculations rather than performance data. Future production associated with behind pipe reserves is scheduled to follow depletion of the currently producing zones in the same wellbores. Additional capital may have to be spent to access these reserves. The capital and economic impact of production timing are reflected in this Note 18, under “Future Net Cash Flows.”

Future Net Cash Flows

Future cash inflows as of December 31, 2022, 2021, and 2020 were calculated using an unweighted arithmetic average of oil and gas prices in effect on the first day of each month in the respective year, except where prices are defined by contractual arrangements. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation. Future development costs include abandonment and dismantlement costs.

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APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table sets forth unaudited information concerning future net cash flows for proved oil and gas reserves, net of income tax expense. Income tax expense has been computed using expected future tax rates and giving effect to tax deductions and credits available, under laws in effect as of December 31, 2022, and which relate to oil and gas producing activities. This information does not purport to present the fair market value of the Company’s oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.

						United States						Egypt**(1)**						North Sea						Total**(1)**
						(In millions)
2022
Cash inflows						$	31,577					$	12,819					$	10,147					$	54,543
Production costs						(10,763)						(2,086)						(3,241)						(16,090)
Development costs						(1,733)						(1,471)						(2,297)						(5,501)
Income tax expense						(1,575)						(2,729)						(2,631)						(6,935)
Net cash flows						17,506						6,533						1,978						26,017
10 percent discount rate						(6,811)						(1,400)						(204)						(8,415)
Discounted future net cash flows(2)						$	10,695					$	5,133					$	1,774					$	17,602
2021
Cash inflows						$	22,852					$	9,337					$	6,832					$	39,021
Production costs						(8,323)						(1,712)						(2,343)						(12,378)
Development costs						(1,632)						(1,402)						(2,533)						(5,567)
Income tax expense						(134)						(1,887)						(768)						(2,789)
Net cash flows						12,763						4,336						1,188						18,287
10 percent discount rate						(5,294)						(983)						350						(5,927)
Discounted future net cash flows(2)						$	7,469					$	3,353					$	1,538					$	12,360
2020
Cash inflows						$	12,537					$	5,560					$	4,122					$	22,219
Production costs						(6,244)						(1,704)						(2,388)						(10,336)
Development costs						(1,555)						(633)						(2,448)						(4,636)
Income tax expense						—						(1,096)						316						(780)
Net cash flows						4,738						2,127						(398)						6,467
10 percent discount rate						(1,829)						(437)						1,111						(1,155)
Discounted future net cash flows(2)						$	2,909					$	1,690					$	713					$	5,312

(1)Includes discounted future net cash flows of approximately $1.7 billion, $1.1 billion, and $563 million as of December 31, 2022, 2021, and 2020, respectively, attributable to a noncontrolling interest in Egypt.

(2)Estimated future net cash flows before income tax expense, discounted at 10 percent per annum, totaled approximately $16.9 billion, $14.9 billion, and $7.1 billion as of December 31, 2022, 2021, and 2020, respectively.

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APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table sets forth the principal sources of change in the discounted future net cash flows:

						For the Year Ended December 31,
						2022						2021						2020
						(In millions)
Sales, net of production costs						$	(7,131)					$	(4,707)					$	(2,422)
Net change in prices and production costs						8,690						9,376						(5,753)
Discoveries and improved recovery, net of related costs						1,142						1,749						751
Change in future development costs						(343)						(839)						20
Previously estimated development costs incurred during the period						669						545						576
Revision of quantities						2,646						1,983						(418)
Purchases of minerals in-place						911						1						—
Accretion of discount						1,489						626						1,236
Change in income taxes						(2,467)						(1,583)						1,533
Sales of minerals in-place						(363)						(116)						(104)
Change in production rates and other						(1)						13						11
						$	5,242					$	7,048					$	(4,570)

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