Item 1. FINANCIAL STATEMENTS

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2021						2020						2021						2020
						(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues						$	1,685					$	1,046					$	4,630					$	2,979
Purchased oil and gas sales						374						74						1,056						237
Total revenues						2,059						1,120						5,686						3,216
Derivative instrument gains (losses), net						—						16						45						(262)
Gain (loss) on divestitures, net						(2)						(1)						65						24
Loss on previously sold Gulf of Mexico properties						(446)						—						(446)						—
Other, net						40						9						175						41
						1,651						1,144						5,525						3,019
OPERATING EXPENSES:
Lease operating expenses						316						259						891						858
Gathering, processing, and transmission						68						63						187						206
Purchased oil and gas costs						396						75						1,152						207
Taxes other than income						54						34						149						90
Exploration						34						58						109						187
General and administrative						70						52						239						214
Transaction, reorganization, and separation						4						7						8						44
Depreciation, depletion, and amortization						335						398						1,028						1,382
Asset retirement obligation accretion						29						27						85						81
Impairments						18						—						18						4,492
Financing costs, net						205						99						422						168
						1,529						1,072						4,288						7,929
NET INCOME (LOSS) BEFORE INCOME TAXES						122						72						1,237						(4,910)
Current income tax provision						183						58						463						120
Deferred income tax benefit						(31)						(27)						(54)						(71)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						(30)						41						828						(4,959)
Net income (loss) attributable to noncontrolling interest - Egypt						49						24						132						(138)
Net income (loss) attributable to noncontrolling interest - Altus						4						2						32						(7)
Net income attributable to Altus Preferred Unit limited partners						30						19						73						56
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK						$	(113)					$	(4)					$	591					$	(4,870)
NET INCOME (LOSS) PER COMMON SHARE:
Basic						$	(0.30)					$	(0.01)					$	1.56					$	(12.89)
Diluted						$	(0.30)					$	(0.02)					$	1.53					$	(12.89)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic						379						378						378						378
Diluted						379						378						379						378

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2021						2020						2021						2020
						(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						$	(30)					$	41					$	828					$	(4,959)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Share of equity method interests other comprehensive income						—						1						1						—
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						(30)						42						829						(4,959)
Comprehensive income (loss) attributable to noncontrolling interest - Egypt						49						24						132						(138)
Comprehensive income (loss) attributable to noncontrolling interest - Altus						4						2						32						(7)
Comprehensive income attributable to Altus Preferred Unit limited partners						30						19						73						56
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK						$	(113)					$	(3)					$	592					$	(4,870)

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(Unaudited)

						For the Nine Months Ended September 30,
						2021						2020
						(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interests						$	828					$	(4,959)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized derivative instrument losses, net						18						142
Gain on divestitures, net						(65)						(24)
Exploratory dry hole expense and unproved leasehold impairments						67						138
Depreciation, depletion, and amortization						1,028						1,382
Asset retirement obligation accretion						85						81
Impairments						18						4,492
Deferred income tax benefit						(54)						(71)
Loss (gain) on extinguishment of debt						104						(152)
Loss on previously sold Gulf of Mexico properties						446						—
Other, net						(6)						45
Changes in operating assets and liabilities:
Receivables						(265)						202
Inventories						(19)						16
Drilling advances and other current assets						32						(5)
Deferred charges and other long-term assets						(46)						(12)
Accounts payable						219						(211)
Accrued expenses						29						(211)
Deferred credits and noncurrent liabilities						(8)						37
NET CASH PROVIDED BY OPERATING ACTIVITIES						2,411						890
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property						(790)						(1,075)
Additions to Altus gathering, processing, and transmission (GPT) facilities						(2)						(27)
Leasehold and property acquisitions						(6)						(3)
Contributions to Altus equity method interests						(27)						(286)
Proceeds from sale of oil and gas properties						239						132
Other, net						44						(17)
NET CASH USED IN INVESTING ACTIVITIES						(542)						(1,276)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Apache credit facility, net						290						87
Proceeds from Altus credit facility, net						33						184
Fixed-rate debt borrowings						—						1,238
Payments on Apache fixed-rate debt						(1,795)						(980)
Distributions to noncontrolling interest - Egypt						(203)						(61)
Distributions to Altus Preferred Unit limited partners						(34)						(11)
Dividends paid to APA common stockholders						(28)						(113)
Other, net						(17)						(43)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES						(1,754)						301
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						115						(85)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						262						247
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	377					$	162
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest						$	365					$	341
Income taxes paid, net of refunds						415						153

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

APA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

						September 30, 2021						December 31, 2020
						(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($109 and $24 related to Altus VIE)						$	377					$	262
Receivables, net of allowance of $99 and $95						1,170						908
Other current assets (Note 5) ($9 and $5 related to Altus VIE)						634						676
						2,181						1,846
PROPERTY AND EQUIPMENT:
Oil and gas properties						40,428						41,819
Gathering, processing, and transmission facilities ($207 and $206 related to Altus VIE)						673						670
Other ($4 and $3 related to Altus VIE)						1,124						1,140
Less: Accumulated depreciation, depletion, and amortization ($22 and $13 related to Altus VIE)						(33,889)						(34,810)
						8,336						8,819
OTHER ASSETS:
Equity method interests (Note 6) ($1,538 and $1,555 related to Altus VIE)						1,538						1,555
Decommissioning security for sold Gulf of Mexico properties (Note 11)						740						—
Deferred charges and other ($8 and $5 related to Altus VIE)						515						526
						$	13,310					$	12,746
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY
CURRENT LIABILITIES:
Accounts payable ($9 and $6 related to Altus VIE)						$	687					$	444
Current debt						215						2
Other current liabilities (Note 7) ($15 and $4 related to Altus VIE)						937						862
						1,839						1,308
LONG-TERM DEBT (Note 9) ($657 and $624 related to Altus VIE)						7,193						8,770
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes						166						215
Asset retirement obligation (Note 8) ($67 and $64 related to Altus VIE)						1,912						1,888
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)						1,186						—
Other ($126 and $144 related to Altus VIE)						529						602
						3,793						2,705
REDEEMABLE NONCONTROLLING INTEREST - ALTUS PREFERRED UNIT LIMITED PARTNERS (Note 12)						635						608
EQUITY (DEFICIT):
Common stock, $0.625 par, 860,000,000 shares authorized, 418,965,522 and 418,429,375 shares issued, respectively						262						262
Paid-in capital						11,686						11,735
Accumulated deficit						(9,870)						(10,461)
Treasury stock, at cost, 40,943,612 and 40,946,745 shares, respectively						(3,188)						(3,189)
Accumulated other comprehensive income						15						14
APA SHAREHOLDERS’ DEFICIT						(1,095)						(1,639)
Noncontrolling interest - Egypt						854						925
Noncontrolling interest - Altus						91						69
TOTAL EQUITY (DEFICIT)						(150)						(645)
						$	13,310					$	12,746

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

APA CORPORATION AND SUBSIDIARIES

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

(Unaudited)

						Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners									Common Stock						Paid-In Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income						APA SHAREHOLDERS’ DEFICIT						Noncontrolling Interests						TOTAL DEFICIT
						(In millions)
For the Quarter Ended September 30, 2020
Balance at June 30, 2020						$	592								$	262					$	11,744					$	(10,467)					$	(3,189)					$	15					$	(1,635)					$	999					$	(636)
Net loss attributable to common stock						—									—						—						(4)						—						—						(4)						—						(4)
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						24						24
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						2						2
Net income attributable to Altus Preferred Unit holders						19									—						—						—						—						—						—						—						—
Distributions payable to Altus Preferred Unit limited partners						(11)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(21)						(21)
Common dividends declared ($0.025 per share)						—									—						(10)						—						—						—						(10)						—						(10)
Other						—									—						7						—						—						1						8						—						8
Balance at September 30, 2020						$	600								$	262					$	11,741					$	(10,471)					$	(3,189)					$	16					$	(1,641)					$	1,004					$	(637)
For the Quarter Ended September 30, 2021
Balance at June 30, 2021						$	617								$	262					$	11,704					$	(9,757)					$	(3,188)					$	15					$	(964)					$	1,040					$	76
Net loss attributable to common stock						—									—						—						(113)						—						—						(113)						—						(113)
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						49						49
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						4						4
Net income attributable to Altus Preferred Unit limited partners						30									—						—						—						—						—						—						—						—
Distributions payable to Altus Preferred Unit limited partners						(12)									—						—						—						—						—						—						—						—
Distributions paid to Altus Preferred Unit limited partners						—									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(143)						(143)
Common dividends declared ($0.0625 per share)						—									—						(24)						—						—						—						(24)						—						(24)
Other						—									—						6						—						—						—						6						(5)						1
Balance at September 30, 2021						$	635								$	262					$	11,686					$	(9,870)					$	(3,188)					$	15					$	(1,095)					$	945					$	(150)

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

APA CORPORATION AND SUBSIDIARIES

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

(Unaudited)

						Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners									Common Stock						Paid-In Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income						APA SHAREHOLDERS’ DEFICIT						Noncontrolling Interests						TOTAL DEFICIT
						(In millions)
For the Nine Months Ended September 30, 2020
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						—									—						—						(4,870)						—						—						(4,870)						—						(4,870)
Net loss attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(138)						(138)
Net loss attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						(7)						(7)
Net income attributable to Altus Preferred Unit holders						56									—						—						—						—						—						—						—						—
Distributions to Altus Preferred Unit limited partners						(11)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(61)						(61)
Common dividends declared ($0.075 per share)						—									—						(29)						—						—						—						(29)						—						(29)
Other						—									1						1						—						1						—						3						—						3
Balance at September 30, 2020						$	600								$	262					$	11,741					$	(10,471)					$	(3,189)					$	16					$	(1,641)					$	1,004					$	(637)
For the Nine Months Ended September 30, 2021
Balance at December 31, 2020						$	608								$	262					$	11,735					$	(10,461)					$	(3,189)					$	14					$	(1,639)					$	994					$	(645)
Net income attributable to common stock						—									—						—						591						—						—						591						—						591
Net income attributable to noncontrolling interest - Egypt						—									—						—						—						—						—						—						132						132
Net income attributable to noncontrolling interest - Altus						—									—						—						—						—						—						—						32						32
Net income attributable to Altus Preferred Unit limited partners						73									—						—						—						—						—						—						—						—
Distributions payable to Altus Preferred Unit limited partners						(12)									—						—						—						—						—						—						—						—
Distributions paid to Altus Preferred Unit limited partners						(34)									—						—						—						—						—						—						—						—
Distributions to noncontrolling interest - Egypt						—									—						—						—						—						—						—						(203)						(203)
Common dividends declared ($0.1125 per share)						—									—						(43)						—						—						—						(43)						—						(43)
Other						—									—						(6)						—						1						1						(4)						(10)						(14)
Balance at September 30, 2021						$	635								$	262					$	11,686					$	(9,870)					$	(3,188)					$	15					$	(1,095)					$	945					$	(150)

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

APA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These consolidated financial statements have been prepared by APA Corporation (APA or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with the Annual Report on Form 10-K of Apache Corporation, the Company’s predecessor registrant, for the fiscal year ended December 31, 2020, which contains a summary of the Company’s significant accounting policies and other disclosures.

On January 4, 2021, Apache Corporation announced plans to implement a holding company reorganization (the Holding Company Reorganization), which was thereafter completed on March 1, 2021. In connection with the Holding Company Reorganization, Apache Corporation became a direct, wholly-owned subsidiary of APA Corporation, and all of Apache Corporation’s outstanding shares were 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.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 30, 2021, the Company's significant accounting policies are consistent with those discussed in Note 1—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in Apache Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The Company’s financial statements for prior periods include reclassifications that were made to conform to the current-year presentation.

Principles of Consolidation

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

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. 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 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, third-party investors own a minority interest of approximately 21 percent of Altus Midstream Company (ALTM), which is reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. ALTM qualifies as a variable interest entity under GAAP, for which APA consolidates because a wholly-owned subsidiary of APA has a controlling financial interest and was determined to be the primary beneficiary.

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’s proportionate share of the results of operations generated by the equity method interests are recorded as a component of “Other, net” under “Revenues and Other” in the Company’s statement of consolidated operations. 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 require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of 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 assessment of asset retirement obligations (refer to Note 8—Asset Retirement Obligation), the estimation of the contingent liability representing Apache’s potential obligation to decommission sold properties in the Gulf of Mexico (refer to Note 11—Commitments and Contingencies), the estimate of income taxes (refer to Note 10—Income Taxes), and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom.

Fair Value Measurements

Certain assets and liabilities are reported at fair value on a recurring basis in the Company’s consolidated balance sheet. The Company determines fair value measurements in accordance with Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), which provides a hierarchy that prioritizes and defines the types of inputs used to base fair value measurements. 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).

Refer to Note 4—Derivative Instruments and Hedging Activities, Note 9—Debt and Financing Costs, and Note 12—Redeemable Noncontrolling Interest - Altus for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

Fair value measurements are recorded on a nonrecurring basis when certain qualitative assessments of the Company’s assets indicate potential impairment. Asset impairments recorded in connection with fair value assessments were as follows:

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2021						2020						2021						2020
						(In millions)
Oil and gas proved property						$	—					$	—					$	—					$	4,319
Gathering, processing, and transmission facilities						—						—						—						68
Goodwill						—						—						—						87
Inventory and other						18						—						18						18
Total Impairments						$	18					$	—					$	18					$	4,492

During the third quarter and first nine months of 2021, the Company recorded $18 million of asset impairments in connection with inventory valuations and expected equipment dispositions in the North Sea.

During the first nine months of 2020, the Company recognized total asset impairments of $4.5 billion in connection with 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. The Company recognized proved property impairments of $3.9 billion, $374 million, and $7 million in the U.S., Egypt, and North Sea, respectively, to reduce the carrying value of its oil and gas properties to the 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.”

During the first quarter of 2020, the Company separately recognized impairments of $13 million for the early termination of drilling rig leases and $5 million for inventory revaluations, both in the U.S.

The Company also performed an interim impairment analysis of the goodwill related to its Egypt reporting segment. Reductions in the estimated net present value of expected future cash flows from oil and gas properties resulted in 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.

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, property and equipment cost is based on the fair values at the acquisition date.

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 the first and second quarters of 2020.

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

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2021						2020						2021						2020
						(In millions)
Proved Properties:
U.S.						$	—					$	—					$	—					$	3,938
Egypt						—						—						—						374
North Sea						—						—						—						7
Total proved properties						$	—					$	—					$	—					$	4,319
Unproved Properties:
U.S.						$	2					$	34					$	19					$	80
Egypt						2						2						6						6
North Sea						1						—						1						—
Total unproved properties						$	5					$	36					$	26					$	86

Proved properties impaired during the first nine months of 2020 had an aggregate fair value of $1.9 billion.

Unproved leasehold impairments are typically recorded as a component of “Exploration” expense in the Company’s statement of consolidated operations. 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 Facilities

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.

Revenue Recognition

There have been no significant changes to the Company’s contracts with customers during the nine months ended September 30, 2021 and 2020.

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, net of allowance for credit losses, were $1.1 billion and $670 million as of September 30, 2021 and December 31, 2020, respectively. Refer to Note 14—Business Segment Information for a disaggregation of oil, gas, and natural gas production revenue by product and reporting segment.

Oil and gas production revenues from non-customers represent income taxes paid to the Arab Republic of Egypt by Egyptian General Petroleum Corporation on behalf of the Company. Revenue and associated expenses related to such tax volumes are recorded as “Oil, natural gas, and natural gas liquids production revenues” and “Current income tax provision,” respectively, in the Company’s statement of consolidated operations.

The following table presents the Company’s revenues generated from contracts with customers and non-customers:

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
			2021						2020						2021						2020
						(In millions)
Production revenues from customers						$	1,562					$	1,002					$	4,294					$	2,905
Production revenues from non-customers						123						44						336						74
Total production revenues						$	1,685					$	1,046					$	4,630					$	2,979

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.

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 reorganization 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 $4 million and $8 million of reorganization costs were incurred in the third quarter and first nine months of 2021, respectively, primarily related to ongoing consulting and separation activities in the Company’s international operations.

The Company recorded $7 million and $44 million of TRS costs during the third quarter and first nine months of 2020, respectively. TRS costs incurred in the first nine months of 2020 relate to $41 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

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 $174 million and the assumption of asset retirement obligations of $44 million. The Company has recognized a gain of approximately $63 million in connection with the sale. The transaction is subject to normal post-closing adjustments.

During the first nine months of 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 $65 million. The Company recognized a gain of approximately $2 million upon closing of these transactions.

During the first nine months of 2021, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $6 million.

On October 21, 2021, ALTM announced that it will combine with privately-owned BCP Raptor Holdco LP (BCP) in an all-stock transaction. BCP is the parent company of EagleClaw Midstream, which includes EagleClaw Midstream Ventures, the Caprock Midstream and Pinnacle Midstream businesses, and a 26.7 percent interest in the Permian Highway Pipeline.

As consideration for the transaction, ALTM will issue 50 million Class C common shares (and its subsidiary, Altus Midstream LP, will issue corresponding common units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. The transaction is expected to close during the first quarter of 2022, following completion of customary closing conditions, including ALTM shareholder approval and regulatory reviews. Upon closing of the transaction, management will reevaluate whether Apache has a controlling financial interest and is the primary beneficiary of ALTM such that consolidation would continue to be required under the VIE model.

2020 Activity

During the first nine months of 2020, the Company completed non-core asset and leasehold sales, primarily in the Permian Basin, in multiple transactions for total cash proceeds of $53 million. The Company recognized a gain of approximately $5 million upon closing of these transactions.

The Company also completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of $3 million.

Suriname Joint Venture Agreement

In December 2019, the Company entered into a joint venture agreement with TotalEnergies (formerly Total S.A.) to explore and develop Block 58 offshore Suriname. Under the terms of the agreement, the Company and TotalEnergies each hold a 50 percent working interest in Block 58. Pursuant to the agreement, the Company operated the drilling of the first four wells, the Maka Central-1, Sapakara West-1, Kwaskwasi-1, and Keskesi East-1, and subsequently transferred operatorship of Block 58 to TotalEnergies on January 1, 2021; however, the Company continued to operate the Keskesi exploration well until completion of drilling operations during the first half of 2021.

In connection with the agreement, the Company received $100 million from TotalEnergies upon closing in the fourth quarter of 2019 and $79 million upon satisfying certain closing conditions in the first quarter of 2020 for reimbursement of 50 percent of all costs incurred on Block 58 as of December 31, 2019. All proceeds were applied against the carrying value of the Company’s Suriname properties and associated inventory. The Company recognized a $19 million gain in the first quarter of 2020 associated with the transaction.

Key terms of the agreement provide for TotalEnergies to pay a proportionately larger share of appraisal and development costs, which would be recoverable through hydrocarbon participation. For the first $10 billion of gross capital expenditures, TotalEnergies pays 87.5 percent, and the Company pays 12.5 percent; for the next $5 billion in gross expenditures, TotalEnergies pays 75 percent and the Company pays 25 percent; and for all gross expenditures above $15 billion, TotalEnergies pays 62.5 percent and the Company pays 37.5 percent. The Company will also receive various other forms of consideration, including a $75 million cash payment upon achieving first oil production, and future contingent royalty payments from successful joint development projects.

3. CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $277 million and $197 million as of September 30, 2021 and December 31, 2020, respectively. The increase is primarily attributable to additional drilling activity in Suriname and Egypt, partially offset by dry hole write-offs during the period.

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 proved reserves can be attributed to these projects.

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. The Company manages variability in its cash flows by occasionally entering into derivative transactions on a portion of its crude oil and natural gas production by utilizing various types of financial instruments. The Company has elected not to designate any of its derivative contracts as cash flow hedges.

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 September 30, 2021, the Company had derivative positions with 11 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.

Derivative Instruments

Commodity Derivative Instruments

As of September 30, 2021, the Company had the following open crude oil derivative positions:

												Fixed-Price Swaps
Production Period						Settlement Index						Mbbls						Weighted Average Fixed Price
October—December 2021						NYMEX WTI						1,012						$58.59
October—December 2021						Dated Brent						828						$61.44

As of September 30, 2021, the Company had the following open crude oil financial basis swap contracts:

Production Period						Settlement Index						Mbbls						Weighted Average Price Differential
October—December 2021						Midland-WTI/Cushing-WTI						1,012						$0.70

As of September 30, 2021, 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
October—December 2021						NYMEX Henry Hub/IF Waha						11,050						$(0.42)						—						—
October—December 2021						NYMEX Henry Hub/IF HSC						—						—						11,050						$(0.07)
January—December 2022						NYMEX Henry Hub/IF Waha						43,800						$(0.45)						—						—
January—December 2022						NYMEX Henry Hub/IF HSC						—						—						43,800						$(0.08)
January—December 2023						NYMEX Henry Hub/IF Waha						29,200						$(0.40)						—						—
January—December 2023						NYMEX Henry Hub/IF HSC						—						—						29,200						$0.02

Embedded Derivatives

Altus Preferred Units Embedded Derivative

During the second quarter of 2019, Altus Midstream LP, a subsidiary of ALTM, issued and sold Series A Cumulative Redeemable Preferred Units (Preferred Units). Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value. For further discussion of this derivative, refer to “Fair Value Measurements” below and Note 12—Redeemable Noncontrolling Interest - Altus.

Pipeline Capacity Embedded Derivatives

During the fourth quarter of 2019 and first quarter of 2020, the Company entered into an agreement to assign a portion of its contracted capacity under an existing transportation agreement to a third party. Embedded in this agreement is an arrangement under which the Company has the potential to receive payments calculated based on pricing differentials between Houston Ship Channel and Waha during calendar years 2020 and 2021. This feature requires bifurcation and measurement of the change in market value for each period. Unrealized gains or losses in the fair value of this feature are recorded as “Derivative instrument gains (losses), net” under “Revenues and Other” in the statement of consolidated operations. Any proceeds received are deferred and reflected in income over the original tenure of the host contract.

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)
September 30, 2021
Liabilities:
Commodity derivative instruments						—						32						—						32						—						32
Pipeline capacity embedded derivatives						—						47						—						47						—						47
Preferred Units embedded derivative						—						—						120						120						—						120
December 31, 2020
Assets:
Commodity derivative instruments						$	—					$	11					$	—					$	11					$	—					$	11
Liabilities:
Pipeline capacity embedded derivative						—						53						—						53						—						53
Preferred Units embedded derivative						—						—						139						139						—						139

(1) The derivative fair values are based on analysis of each contract on a gross basis, excluding the impact of netting agreements with counterparties.

The fair values of the Company’s derivative instruments and pipeline capacity embedded derivatives 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.

The fair value of the Preferred Units embedded derivative is calculated using the income approach, a Level 3 fair value measurement, and based on a range of factors, including expected future interest rates using the Black-Karasinski model, Altus’ imputed interest rate, interest rate volatility, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange feature, and anticipated dividend yields of the Preferred Units. As of the September 30, 2021 valuation date, the Company used the forward B-rated Energy Bond Yield curve to develop the following key unobservable inputs used to value this embedded derivative:

						Quantitative Information About Level 3 Fair Value Measurements
						Fair Value as of September 30, 2021						Valuation Technique						Significant Unobservable Inputs						Range/Value
						(In millions)
Preferred Units embedded derivative						$	120					Option Model						Altus’ Imputed Interest Rate						5.53-11.54%
																		Interest Rate Volatility						38.03%

A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative as of September 30, 2021, while a one percent decrease would lead to a similar decrease in value as of September 30, 2021. The assumed expected timing until exercise of the exchange option as of September 30, 2021 was 4.70 years.

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:

						September 30, 2021						December 31, 2020
						(In millions)
Current Assets: Other current assets						$	—					$	6
Other Assets: Deferred charges and other						—						5
Total derivative assets						$	—					$	11
Current Liabilities: Other current liabilities						$	31					$	—
Deferred Credits and Other Noncurrent Liabilities: Other						168						192
Total derivative liabilities						$	199					$	192

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 Quarter Ended September 30,												For the Nine Months Ended September 30,
			2021						2020						2021						2020
						(In millions)
Realized:
Commodity derivative instruments						$	(37)					$	(83)					$	63					$	(119)
Foreign currency derivative instruments						—						—						—						(1)
Realized gain (loss), net						(37)						(83)						63						(120)
Unrealized:
Commodity derivative instruments						29						91						(43)						(3)
Pipeline capacity embedded derivatives						3						8						6						(62)
Foreign currency derivative instruments						—						3						—						(1)
Preferred units embedded derivative						5						(3)						19						(76)
Unrealized loss, net						37						99						(18)						(142)
Derivative instrument gains (losses), net						$	—					$	16					$	45					$	(262)

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. In January 2021, the Company entered into financial contracts that increased its exposure to “gas daily pricing” and reduced its exposure to “first of month” pricing for February 2021. The Company realized a gain of $147 million in connection with these contracts in the first quarter of 2021 as a result of extreme daily gas price volatility across Texas in February resulting from Winter Storm Uri.

5. OTHER CURRENT ASSETS

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

						September 30, 2021						December 31, 2020
						(In millions)
Inventories						$	476					$	492
Drilling advances						102						113
Prepaid assets and other						56						71
Total Other current assets						$	634					$	676

6. EQUITY METHOD INTERESTS

As of September 30, 2021 and December 31, 2020, the Company, through its ownership of Altus, had the following equity method interests in four Permian Basin long-haul pipeline entities, which are accounted for under the equity method of accounting. For each of the equity method interests, Altus has 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						September 30, 2021						December 31, 2020
												(In millions)
Gulf Coast Express Pipeline, LLC						16.0%						$	277					$	284
EPIC Crude Holdings, LP						15.0%						165						176
Permian Highway Pipeline, LLC						26.7%						632						615
Shin Oak Pipeline (Breviloba, LLC)						33.0%						464						480
Total Altus equity method interests												$	1,538					$	1,555

As of September 30, 2021 and December 31, 2020, unamortized basis differences included in the equity method interest balances were $37 million and $38 million, respectively. These amounts represent differences in Altus’ contributions to date and Altus’ underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into net income over the useful lives of the underlying pipeline assets.

The following table presents the activity in Altus’ equity method interests for the nine months ended September 30, 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						25						—						27
Distributions						(37)						—						(52)						(39)						(128)
Equity income (loss), net						30						(14)						44						23						83
Accumulated other comprehensive income						—						1						—						—						1
Balance at September 30, 2021						$	277					$	165					$	632					$	464					$	1,538

Summarized Combined Financial Information

The following table presents summarized selected income statement data for Altus’ equity method interests (on a 100 percent basis):

						For the Nine Months Ended September 30,
						2021						2020
						(In millions)
Operating revenues						$	812					$	531
Operating income						401						267
Net income						340						217
Other comprehensive income (loss)						4						(1)

7. OTHER CURRENT LIABILITIES

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

						September 30, 2021						December 31, 2020
						(In millions)
Accrued operating expenses						$	135					$	91
Accrued exploration and development						167						167
Accrued compensation and benefits						180						170
Accrued interest						92						140
Accrued income taxes						54						25
Current asset retirement obligation						56						56
Current operating lease liability						87						116
Current portion of derivatives at fair value						31						—
Other						135						97
Total Other current liabilities						$	937					$	862

8. ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability:

						September 30, 2021
						(In millions)
Asset retirement obligation, December 31, 2020						$	1,944
Liabilities incurred						3
Liabilities settled						(20)
Liabilities divested						(44)
Accretion expense						85
Asset retirement obligation, September 30, 2021						1,968
Less current portion						(56)
Asset retirement obligation, long-term						$	1,912

9. DEBT AND FINANCING COSTS

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

						September 30, 2021						December 31, 2020
						(In millions)
Apache notes and debentures before unamortized discount and debt issuance costs(1)						$	6,344					$	8,052
Altus credit facility(2)						657						624
Apache credit facility(2)						440						150
Apache finance lease obligations						36						38
Unamortized discount						(29)						(35)
Debt issuance costs						(40)						(57)
Total debt						7,408						8,772
Current maturities						(215)						(2)
Long-term debt						$	7,193					$	8,770

(1) The fair values of the Apache notes and debentures were $7.0 billion and $8.5 billion as of September 30, 2021 and December 31, 2020, respectively.

The Company uses a market approach to determine the fair values of its notes and debentures using estimates provided by an independent investment financial data services firm (a Level 2 fair value measurement).

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

As of September 30, 2021, current debt included $213 million, net of discount, of 3.25% senior notes due April 15, 2022 and $2 million of finance lease obligations. As of December 31, 2020, current debt included $2 million of finance lease obligations.

During the quarter ended September 30, 2021, Apache closed cash tender offers for certain outstanding notes and accepted for purchase $1.7 billion aggregate principal amount of certain notes. Apache paid holders an aggregate $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 $98 million of unamortized debt discount and issuance costs, in connection with the note purchases.

During the nine months ended September 30, 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.

In March 2018, Apache entered into a revolving credit facility with commitments totaling $4.0 billion. In March 2019, the term of this facility was extended by one year to March 2024 (subject to Apache’s remaining one-year extension option) pursuant to Apache’s exercise of an extension option. Apache can increase commitments up to $5.0 billion by adding new lenders or obtaining the consent of any increasing existing lenders. The facility includes a letter of credit subfacility of up to $3.0 billion, of which $2.08 billion was committed as of September 30, 2021. The facility is for general corporate purposes. As of September 30, 2021, there were $440 million of borrowings and an aggregate £478 million and $20 million in letters of credit outstanding under this facility. As of December 31, 2020, there were $150 million of borrowings and an aggregate £633 million and $40 million in letters of credit outstanding under this facility. The outstanding letters of credit denominated in pounds were issued to support North Sea decommissioning obligations, the terms of which required such support after Standard & Poor’s reduced Apache’s credit rating from BBB to BB+ on March 26, 2020.

There were no borrowings outstanding under Apache’s commercial paper program as of September 30, 2021 and December 31, 2020. Apache did not use its commercial paper program during the first six months of 2021 and terminated the program during the third quarter of 2021.

Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of September 30, 2021, there were no borrowings and £118 million and $17 million in letters of credit outstanding under these facilities. As of December 31, 2020, there were no borrowings and £34 million and $17 million in letters of credit outstanding under these facilities.

In November 2018, Altus Midstream LP entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream LP’s two, one-year extension options). The agreement for this facility, as amended, provides aggregate commitments from a syndicate of banks of $800 million. All aggregate commitments include a letter of credit subfacility of up to $100 million and a swingline loan subfacility of up to $100 million. Altus Midstream LP may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2021, there were $657 million of borrowings and a $2 million letter of credit outstanding under this facility. As of December 31, 2020, there were $624 million of borrowings and no letters of credit outstanding under this facility. The Altus Midstream LP credit facility is unsecured and is not guaranteed by Apache, APA Corporation, or any of its subsidiaries.

Financing Costs, Net

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

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2021						2020						2021						2020
						(In millions)
Interest expense						$	102					$	113					$	324					$	327
Amortization of debt issuance costs						1						2						6						6
Capitalized interest						(2)						(3)						(6)						(9)
Loss (gain) on extinguishment of debt						105						(12)						104						(152)
Interest income						(1)						(1)						(6)						(4)
Financing costs, net						$	205					$	99					$	422					$	168

10. INCOME TAXES

The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Non-cash impairments on the carrying value of the Company’s oil and gas properties, gains and losses on the sale of assets, statutory tax rate changes, and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

During the third quarter of 2021, the Company’s effective income tax rate was primarily impacted by a loss on offshore decommissioning contingency and an increase in the amount of valuation allowance against its U.S. deferred tax assets. During the third quarter of 2020, the Company’s effective income tax rate was primarily impacted by an increase in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2021 year-to-date effective income tax rate was primarily impacted by a loss contingency in connection with decommissioning of previously sold Gulf of Mexico properties and a decrease in the amount of valuation allowance against its U.S. deferred tax assets. The Company’s 2020 year-to-date effective income tax rate was primarily impacted by oil and gas asset impairments, a goodwill impairment, and an increase in the amount of valuation allowance against its U.S. deferred tax assets.

The Company is subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. The Company is currently under audit by the Internal Revenue Service for the 2014-2017 tax years and is also under audit in various states and foreign jurisdictions as part of its normal course of business.

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 September 30, 2021, the Company has an accrued liability of approximately $68 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.

For additional information on Legal Matters described below, refer to Note 11—Commitments and Contingencies to the consolidated financial statements contained in Apache Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Argentine Environmental Claims and Argentina Tariff

No material change in the status of the YPF Sociedad Anónima and Pioneer Natural Resources Company indemnities matter has occurred since the filing of Apache Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Louisiana Restoration

As more fully described in Apache Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, 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 2021, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including the Company. These cases were all removed to federal courts in Louisiana. 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.

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. Further appeal is pending.

Australian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested their remaining 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 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 purported 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 County, California, Marin County, California, 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 and in a separate action on January 22, 2018, the City of Richmond, filed similar lawsuits against many of the same defendants. 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 have been sent back to the 9th Circuit for further appellate review of the decision to remand the cases to state court. Further activity in the cases, has been stayed pending further appellate review.

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.

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

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.

Oklahoma Class Actions

The Company is a party to two purported class actions in Oklahoma styled Bigie Lee Rhea v. Apache Corporation, Case No. 6:14-cv-00433-JH, and Albert Steven Allen v. Apache Corporation, Case No. CJ-2019-00219. The Rhea case has been certified and includes a class of royalty owners seeking damages of approximately $200 million for alleged breach of the implied covenant to market relating to post-production deductions and alleged NGL uplift value. The Allen case has not been certified and seeks to represent a group of owners who have allegedly received late royalty and other payments under Oklahoma statutes. The amount of this claim is not yet reasonably determinable. While adverse judgments against the Company are possible, the Company intends to vigorously defend these lawsuits and claims.

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, (1) alleges that the Company intentionally used unrealistic assumptions regarding the amount and composition of available oil and gas in Alpine High; (2) alleges that 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) alleges that these statements and omissions artificially inflated the value of the Company’s operations in the Permian Basin; and (4) alleges that, as a result, the Company’s public statements were materially false and misleading. On March 4, 2021, another lawsuit, captioned Brian Schwegel v. Apache Corporation, et al., was filed in the United States District Court for the Southern District of Texas (Houston Division) alleging identical allegations. The Company believes that all plaintiffs’ claims lack merit and intends to vigorously defend these lawsuits.

On March 16, 2021, a case captioned William Wessels, Derivatively and on behalf of APA Corporation v. John J. Christmann IV et al. was filed in the 334th 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 the plaintiff’s claims lack merit and intend to vigorously defend this lawsuit.

Environmental Matters

As of September 30, 2021, the Company had an undiscounted reserve for environmental remediation of approximately $2 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.

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 September 30, 2021 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 Obligation to Decommission 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.

In September 2021, GOM Shelf notified the Bureau of Safety and Environmental Enforcement (BSEE) that it was unable to fund its decommissioning obligations on certain of the Legacy GOM Assets that GOM Shelf is currently required to perform. 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 Properties 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.

As and when Apache incurs costs to decommission any Legacy GOM Asset and GOM Shelf does not reimburse Apache, Apache will 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, Apache may be forced to effectively use its available cash to fund the deficit.

As of September 30, 2021, Apache estimates that its potential liability to fund decommissioning of GOM Legacy 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, in the third quarter of 2021, the Company recorded a contingent liability of $1.2 billion, representing the estimated costs of decommissioning it may be required to perform on GOM Legacy Assets under the caption “Decommissioning contingency for sold Gulf of Mexico properties” in the Company’s consolidated balance sheet. The Company also recorded a $740 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 GOM Legacy Assets under the caption “Decommissioning security for sold Gulf of Mexico properties”. A “Loss on previously sold Gulf of Mexico properties” in the amount of $446 million was recognized in the third quarter of 2021 to reflect the net impact to the Company’s statement of consolidated operations. 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. In addition, significant changes in the market price of oil, gas, and natural gas liquids could further impact Apache’s estimate of its contingent liability to decommission GOM Legacy Assets.

12. 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

The carrying amount of the Preferred Units are recorded as “Redeemable Noncontrolling Interest - Altus Preferred Unit Limited Partners” 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 applies 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 may be recorded, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method to the Redemption Price calculated at the seventh anniversary of the Closing. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is 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 is as follows:

						Units Outstanding						Financial Position**(1)**
						(In millions, except unit data)
Redeemable noncontrolling interest — Preferred Unit at: December 31, 2019						638,163						$	555
Distribution of in-kind additional Preferred Units						22,531						—
Cash distributions to Altus Preferred Unit limited partners						—						(23)
Allocation of Altus Midstream LP net income						N/A						76
Redeemable noncontrolling interest — Preferred Unit at: December 31, 2020						660,694						608
Cash distributions to Altus Preferred Unit limited partners						—						(34)
Distributions payable to Altus Preferred Unit limited partners						—						(12)
Allocation of Altus Midstream LP net income						N/A						60
Accreted value adjustment						N/A						13
Redeemable noncontrolling interest — Preferred Unit at: September 30, 2021						660,694						635
Preferred Units embedded derivative(2)												120
												$	755

(1) The Preferred Units are redeemable at Altus Midstream LP’s option at a redemption price (the Redemption Price), which as of September 30, 2021 is calculated as the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital. As of September 30, 2021, the Redemption Price would have been based on a 1.3 times multiple of invested capital, which was $813 million, less certain cash distributions. This was greater than using an 11.5 percent internal rate of return, which would equate to a redemption value of $730 million.

(2) Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Refer to Note 4—Derivative Instruments and Hedging Activities for discussion of the fair value changes in the embedded derivative liability during the period.

N/A - not applicable.

13. CAPITAL STOCK

Upon consummation of the Holding Company Reorganization, each outstanding share of Apache common stock automatically converted into a share of APA common stock on a one-for-one basis. As a result, each stockholder of Apache now owns the same number of shares of APA common stock that such stockholder owned of Apache common stock immediately prior to the Holding Company Reorganization.

Additionally, in connection with the Holding Company Reorganization, Apache transferred to APA, and APA assumed, sponsorship of all of Apache’s stock plans along with all of Apache’s rights and obligations under each plan.

Net Income (Loss) per Common Share

The following table presents a reconciliation of the components of basic and diluted net income (loss) per common share in the consolidated financial statements:

						For the Quarter Ended September 30,
						2021																		2020
						Loss						Shares						Per Share						Loss						Shares						Per Share
						(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock						$	(113)					379						$	(0.30)					$	(4)					378						$	(0.01)
Effect of Dilutive Securities:
Redeemable noncontrolling interest - Altus Preferred Unit limited partners						$	—					—						$	—					$	(4)					—						$	(0.01)
Diluted:
Income (loss) attributable to common stock						$	(113)					379						$	(0.30)					$	(8)					378						$	(0.02)
						For the Nine Months Ended September 30,
						2021																		2020
						Income						Shares						Per Share						Loss						Shares						Per Share
						(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock						$	591					378						$	1.56					$	(4,870)					378						$	(12.89)
Effect of Dilutive Securities:
Stock options and other						$	—					1						$	—					$	—					—						$	—
Redeemable noncontrolling interest - Altus Preferred Unit limited partners						(10)						—						(0.03)						—						—						—
Diluted:
Income (loss) attributable to common stock						$	581					379						$	1.53					$	(4,870)					378						$	(12.89)

The Company uses 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 Altus Midstream Company’s common stock. The impact to net income and loss attributable to common stock on an assumed conversion of the Preferred Units was anti-dilutive for the quarter ended September 30, 2021 and for the nine months ended September 30, 2020. The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive of 3.2 million and 4.2 million during the third quarters of 2021 and 2020, respectively, and 3.4 million and 5.1 million during the first nine months of 2021 and 2020, respectively.

Stock Repurchase Program

During the fourth quarter of 2018, Apache’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 September 30, 2021. During the fourth quarter of 2021, the Company’s Board of Directors authorized the purchase of an additional 40 million shares of the Company’s common stock. In both cases, shares may be purchased either in the open market or through privately held negotiated transactions.

The Company repurchased 14.7 million shares at an average price of $26.50 per share in October 2021, and as of October 31, 2021, the Company had remaining authorization to repurchase up to 65.3 million shares. The Company is not obligated to acquire any additional shares.

Common Stock Dividends

During each of the quarters ended September 30, 2021 and 2020, the Company paid $9 million in dividends on its common stock. During the nine months ended September 30, 2021 and 2020, the Company paid $28 million and $113 million, respectively, in dividends on its common stock.

During the first quarter of 2020, Apache’s Board of Directors approved a reduction in its quarterly dividend 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 to $0.125 per share.

14. BUSINESS SEGMENT INFORMATION

As of September 30, 2021, the Company is engaged in exploration and production (Upstream) activities across three operating segments: Egypt, North Sea, and U.S. The Company’s Upstream business explores for, develops, and produces crude oil, natural gas, and natural gas liquids. The Company’s Midstream business is operated by Altus Midstream Company, which owns, develops, and operates a midstream energy asset network in the Permian Basin of West Texas. The Company also has active exploration and planned appraisal operations ongoing in Suriname, as well as interests in other international locations that may, over time, result in reportable discoveries and development opportunities. Financial information for each segment is presented below:

						Egypt						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(3)**
						Upstream
For the Quarter Ended September 30, 2021						(In millions)
Revenues:
Oil revenues						$	465					$	233					$	484					$	—					$	—					$	1,182
Natural gas revenues						63						42						188						—						—						293
Natural gas liquids revenues						2						6						202						—						—						210
Oil, natural gas, and natural gas liquids production revenues						530						281						874						—						—						1,685
Purchased oil and gas sales						—						—						374						—						—						374
Midstream service affiliate revenues						—						—						—						35						(35)						—
						530						281						1,248						35						(35)						2,059
Operating Expenses:
Lease operating expenses						117						101						98						—						—						316
Gathering, processing, and transmission						4						8						82						9						(35)						68
Purchased oil and gas costs						—						—						396						—						—						396
Taxes other than income						—						—						52						2						—						54
Exploration						14						4						3						—						13						34
Depreciation, depletion, and amortization						128						61						143						3						—						335
Asset retirement obligation accretion						—						20						8						1						—						29
Impairments						—						18						—						—						—						18
						263						212						782						15						(22)						1,250
Operating Income (Loss)(1)						$	267					$	69					$	466					$	20					$	(13)					809
Other Income (Expense):
Loss on offshore decommissioning contingency																																				(446)
Loss on divestitures, net																																				(2)
Other, net																																				40
General and administrative																																				(70)
Transaction, reorganization, and separation																																				(4)
Financing costs, net																																				(205)
Income Before Income Taxes																																				$	122

						Egypt						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(3)**
						Upstream
For the Nine Months Ended September 30, 2021						(In millions)
Revenues:
Oil revenues						$	1,299					$	690					$	1,325					$	—					$	—					$	3,314
Natural gas revenues						198						100						533						—						—						831
Natural gas liquids revenues						6						16						463						—						—						485
Oil, natural gas, and natural gas liquids production revenues						1,503						806						2,321						—						—						4,630
Purchased oil and gas sales						—						—						1,050						6						—						1,056
Midstream service affiliate revenues						—						—						—						99						(99)						—
						1,503						806						3,371						105						(99)						5,686
Operating Expenses:
Lease operating expenses						335						274						283						—						(1)						891
Gathering, processing, and transmission						8						28						225						24						(98)						187
Purchased oil and gas costs						—						—						1,147						5						—						1,152
Taxes other than income						—						—						139						10						—						149
Exploration						36						27						21						—						25						109
Depreciation, depletion, and amortization						395						208						416						9						—						1,028
Asset retirement obligation accretion						—						59						23						3						—						85
Impairments						—						18						—						—						—						18
						774						614						2,254						51						(74)						3,619
Operating Income (Loss)(1)						$	729					$	192					$	1,117					$	54					$	(25)					2,067
Other Income (Expense):
Derivative instrument gains, net																																				45
Loss on offshore decommissioning contingency																																				(446)
Gain on divestitures, net																																				65
Other, net																																				175
General and administrative																																				(239)
Transaction, reorganization, and separation																																				(8)
Financing costs, net																																				(422)
Income Before Income Taxes																																				$	1,237
Total Assets(2)						$	2,887					$	2,080					$	6,197					$	1,853					$	293					$	13,310

						Egypt						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(3)**
						Upstream
For the Quarter Ended September 30, 2020						(In millions)
Revenues:
Oil revenues						$	303					$	179					$	303					$	—					$	—					$	785
Natural gas revenues						74						13						77						—						—						164
Natural gas liquids revenues						2						5						90						—						—						97
Oil, natural gas, and natural gas liquids production revenues						379						197						470						—						—						1,046
Purchased oil and gas sales						—						—						73						1						—						74
Midstream service affiliate revenues						—						—						—						39						(39)						—
						379						197						543						40						(39)						1,120
Operating Expenses:
Lease operating expenses						102						79						79						—						(1)						259
Gathering, processing, and transmission						8						10						74						9						(38)						63
Purchased oil and gas costs						—						—						74						1						—						75
Taxes other than income						—						—						30						4						—						34
Exploration						10						10						34						—						4						58
Depreciation, depletion, and amortization						144						90						161						3						—						398
Asset retirement obligation accretion						—						18						8						1						—						27
						264						207						460						18						(35)						914
Operating Income (Loss)(1)						$	115					$	(10)					$	83					$	22					$	(4)					206
Other Income (Expense):
Derivative instrument gains, net																																				16
Loss on divestitures, net																																				(1)
Other, net																																				9
General and administrative																																				(52)
Transaction, reorganization, and separation																																				(7)
Financing costs, net																																				(99)
Income Before Income Taxes																																				$	72

						Egypt						North Sea						U.S.						Altus Midstream						Intersegment Eliminations & Other						Total**(3)**
						Upstream
For the Nine Months Ended September 30, 2020						(In millions)
Revenues:
Oil revenues						$	823					$	578					$	929					$	—					$	—					$	2,330
Natural gas revenues						209						39						169						—						—						417
Natural gas liquids revenues						6						15						211						—						—						232
Oil, natural gas, and natural gas liquids production revenues						1,038						632						1,309						—						—						2,979
Purchased oil and gas sales						—						—						235						2						—						237
Midstream service affiliate revenues						—						—						—						111						(111)						—
						1,038						632						1,544						113						(111)						3,216
Operating Expenses:
Lease operating expenses						312						234						313						—						(1)						858
Gathering, processing, and transmission						31						37						219						29						(110)						206
Purchased oil and gas costs						—						—						205						2						—						207
Taxes other than income						—						—						79						11						—						90
Exploration						51						26						100						—						10						187
Depreciation, depletion, and amortization						463						278						632						9						—						1,382
Asset retirement obligation accretion						—						54						24						3						—						81
Impairments						529						7						3,956						—						—						4,492
						1,386						636						5,528						54						(101)						7,503
Operating Income (Loss)(1)						$	(348)					$	(4)					$	(3,984)					$	59					$	(10)					(4,287)
Other Income (Expense):
Derivative instrument losses, net																																				(262)
Gain on divestitures																																				24
Other, net																																				41
General and administrative																																				(214)
Transaction, reorganization, and separation																																				(44)
Financing costs, net																																				(168)
Loss Before Income Taxes																																				$	(4,910)
Total Assets(2)						$	3,052					$	2,238					$	5,708					$	1,741					$	136					$	12,875

(1) Operating income of U.S., Egypt, and North Sea includes leasehold and other asset impairments of $2 million, $2 million, and $19 million, respectively, for the third quarter of 2021.

Operating income of U.S., Egypt, and North Sea includes leasehold and other asset impairments of $19 million, $6 million, and $19 million, respectively, for the first nine months of 2021.

Operating loss of U.S. and Egypt includes leasehold and other asset impairments of $34 million and $2 million, respectively, for the third quarter of 2020.

Operating loss of U.S., Egypt, and North Sea includes leasehold and other asset impairments of $4.0 billion, $535 million, and $7 million, respectively, for the first nine months of 2020.

(2) Intercompany balances are excluded from total assets.

(3) Includes noncontrolling interests in Egypt and Altus.