APA 10-Q 2022-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 1-40144

APA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware			86-1430562
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400

(Address of principal executive offices) (Zip Code)

(713) 296-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Common Stock, $0.625 par value						APA						Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer						☒						Accelerated filer						☐
Non-accelerated filer						☐						Smaller reporting company						☐
												Emerging growth company						☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant’s common stock outstanding as of October 31, 2022			321,511,801

TABLE OF CONTENTS

Item									Page
			PART I - FINANCIAL INFORMATION
1.			FINANCIAL STATEMENTS						1
			STATEMENT OF CONSOLIDATED OPERATIONS						1
			STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)						2
			STATEMENT OF CONSOLIDATED CASH FLOWS						3
			CONSOLIDATED BALANCE SHEET						4
			STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (DEFICIT) AND NONCONTROLLING INTERESTS						5
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS						7
2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS						31
3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK						45
4.			CONTROLS AND PROCEDURES						47
			PART II - OTHER INFORMATION
1.			LEGAL PROCEEDINGS						48
1A.			RISK FACTORS						48
2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS						49
6.			EXHIBITS						50

FORWARD-LOOKING STATEMENTS AND RISKS

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company’s future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on the Company’s examination of historical operating trends, the information that was used to prepare its estimate of proved reserves as of December 31, 2021, and other data in the Company’s possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “continue,” “seek,” “guidance,” “goal,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under the circumstances, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, its assumptions about:

• the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (COVID-19) pandemic and any related variants) and the actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to such epidemics or pandemics;

• the mandate, availability, and effectiveness of vaccine programs and therapeutics related to the treatment of COVID-19;

• the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services;

• the Company’s commodity hedging arrangements;

• the supply and demand for oil, natural gas, NGLs, and other products or services;

• production and reserve levels;

• drilling risks;

• economic and competitive conditions, including market and macro-economic disruptions resulting from the Russian war in Ukraine;

• the availability of capital resources;

• capital expenditures and other contractual obligations;

• currency exchange rates;

• weather conditions;

• inflation rates;

• the impact of changes in tax legislation;

• the availability of goods and services;

• the impact of political pressure and the influence of environmental groups and other stakeholders on decisions and policies related to the industries in which the Company and its affiliates operate;

• legislative, regulatory, or policy changes, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, or water disposal;

• the Company’s performance on environmental, social, and governance measures;

• terrorism or cyberattacks;

• the occurrence of property acquisitions or divestitures;

• the integration of acquisitions;

• the Company’s ability to access the capital markets;

• market-related risks, such as general credit, liquidity, and interest-rate risks;

• the Company’s expectations with respect to the new operating structure implemented pursuant to the Holding Company Reorganization (as defined in the Notes to the Company’s Consolidated Financial Statements set forth in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q) and the associated disclosure implications;

• other factors disclosed under Items 1 and 2—Business and Properties—Estimated Proved Reserves and Future Net Cash Flows, Item 1A—Risk Factors, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021;

• other risks and uncertainties disclosed in the Company’s third-quarter 2022 earnings release;

• other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q; and

• other factors disclosed in the other filings that the Company makes with the Securities and Exchange Commission.

Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise these statements, whether based on changes in internal estimates or expectations, new information, future developments, or otherwise.

DEFINITIONS

All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this Quarterly Report on Form 10-Q. As used herein:

“3-D” means three-dimensional.

“4-D” means four-dimensional.

“b/d” means barrels of oil or NGLs per day.

“bbl” or “bbls” means barrel or barrels of oil or NGLs.

“bcf” means billion cubic feet of natural gas.

“bcf/d” means one bcf per day.

“boe” means barrel of oil equivalent, determined by using the ratio of one barrel of oil or NGLs to six Mcf of gas.

“boe/d” means boe per day.

“Btu” means a British thermal unit, a measure of heating value.

“Liquids” means oil and NGLs.

“LNG” means liquefied natural gas.

“Mb/d” means Mbbls per day.

“Mbbls” means thousand barrels of oil or NGLs.

“Mboe” means thousand boe.

“Mboe/d” means Mboe per day.

“Mcf” means thousand cubic feet of natural gas.

“Mcf/d” means Mcf per day.

“MMbbls” means million barrels of oil or NGLs.

“MMboe” means million boe.

“MMBtu” means million Btu.

“MMBtu/d” means MMBtu per day.

“MMcf” means million cubic feet of natural gas.

“MMcf/d” means MMcf per day.

“NGL” or “NGLs” means natural gas liquids, which are expressed in barrels.

“NYMEX” means New York Mercantile Exchange.

“oil” includes crude oil and condensate.

“PUD” means proved undeveloped.

“SEC” means the United States Securities and Exchange Commission.

“Tcf” means trillion cubic feet of natural gas.

“U.K.” means United Kingdom.

“U.S.” means United States.

With respect to information relating to the Company’s working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by the Company’s working interest therein. Unless otherwise specified, all references to wells and acres are gross.

References to “APA,” the “Company,” “we,” “us,” and “our” refer to APA Corporation and its consolidated subsidiaries, including Apache Corporation, unless otherwise specifically stated. References to “Apache” refer to Apache Corporation, the Company’s wholly owned subsidiary, and its consolidated subsidiaries, unless otherwise specifically stated.

PART I – FINANCIAL INFORMATION

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2022						2021						2022						2021
						(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues						$	2,302					$	1,685					$	7,147					$	4,630
Purchased oil and gas sales						585						374						1,456						1,056
Total revenues						2,887						2,059						8,603						5,686
Derivative instrument gains (losses), net						(44)						—						(138)						45
Gain (loss) on divestitures, net						31						(2)						1,180						65
Loss on previously sold Gulf of Mexico properties						—						(446)						—						(446)
Other, net						(2)						40						107						175
						2,872						1,651						9,752						5,525
OPERATING EXPENSES:
Lease operating expenses						364						316						1,067						891
Gathering, processing, and transmission(1)						99						68						274						187
Purchased oil and gas costs						573						396						1,452						1,152
Taxes other than income						82						54						230						149
Exploration						95						34						193						109
General and administrative						69						70						314						239
Transaction, reorganization, and separation						4						4						21						8
Depreciation, depletion, and amortization						310						335						879						1,028
Asset retirement obligation accretion						29						29						87						85
Impairments						—						18						—						18
Financing costs, net						75						205						303						422
						1,700						1,529						4,820						4,288
NET INCOME BEFORE INCOME TAXES						1,172						122						4,932						1,237
Current income tax provision						357						183						1,164						463
Deferred income tax provision (benefit)						285						(31)						225						(54)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						530						(30)						3,543						828
Net income attributable to noncontrolling interest - Egypt						108						49						368						132
Net income attributable to noncontrolling interest - Altus						—						4						14						32
Net income (loss) attributable to Altus Preferred Unit limited partners						—						30						(70)						73
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK						$	422					$	(113)					$	3,231					$	591
NET INCOME (LOSS) PER COMMON SHARE:
Basic						$	1.28					$	(0.30)					$	9.54					$	1.56
Diluted						$	1.28					$	(0.30)					$	9.51					$	1.53
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic						329						379						339						378
Diluted						330						379						340						379

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

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

						For the Quarter Ended September 30,												For the Nine Months Ended September 30,
						2022						2021						2022						2021
						(In millions)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						$	530					$	(30)					$	3,543					$	828
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Share of equity method interests other comprehensive income						—						—						—						1
Pension and postretirement benefit plan						—						—						(1)						—
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS						530						(30)						3,542						829
Comprehensive income attributable to noncontrolling interest - Egypt						108						49						368						132
Comprehensive income attributable to noncontrolling interest - Altus						—						4						14						32
Comprehensive income (loss) attributable to Altus Preferred Unit limited partners						—						30						(70)						73
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK						$	422					$	(113)					$	3,230					$	592

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

**AP

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The following discussion relates to APA Corporation (APA or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q, as well as related information set forth in the Company’s Consolidated Financial Statements, accompanying Notes to Consolidated Financial Statements, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

Overview

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

Today, the world faces a dual challenge: To meet growing demand for energy and to do so in a cleaner, more sustainable way. APA believes society can accomplish both and strives to meet those challenges while creating value for all its stakeholders. The global economy and the energy industry have been deeply impacted by the effects of the conflict in Ukraine and coronavirus disease 2019 (COVID-19) pandemic and related governmental actions. Uncertainties in the global supply chain, commodity prices, and financial markets, including the impact of inflation and rising interest rates, continue to impact oil supply and demand. Despite these uncertainties, the Company remains committed to its longer-term objectives: (1) to maintain a balanced asset portfolio, including advancement of ongoing exploration and appraisal activities offshore Suriname; (2) to invest for long-term returns over production growth; and (3) to budget conservatively to generate cash flow in excess of its upstream exploration, appraisal, and development capital program that can be directed to debt reduction, share repurchases, and other return of capital to its stakeholders. The Company continues to aggressively manage its cost structure regardless of the oil price environment and closely monitors hydrocarbon pricing fundamentals to reallocate capital as part of its ongoing planning process. For additional detail on the Company’s forward capital investment outlook, refer to “Capital Resources and Liquidity” below.

In the third quarter of 2022, the Company reported net income attributable to common stock of $422 million, or $1.28 per diluted share, compared to a net loss of $113 million, or $0.30 per diluted share, in the third quarter of 2021. Net income for the third quarter of 2022 benefited from higher revenues attributable to a new merged concession agreement in Egypt and higher commodity prices. The increase in realized prices was primarily driven by the effects of global inflation, the conflict in Ukraine on global commodity prices, and uncertainties around spare capacity and energy security globally.

The Company generated $3.5 billion of cash from operating activities during the first nine months of 2022, a 46 percent increase from the first nine months of 2021, driven by higher oil and gas revenues. Since year-end 2021, the Company has reduced its total outstanding debt and redeemable preferred interests by $2.0 billion and $712 million, respectively, through the deconsolidation of ALTM and the retirement of outstanding notes and debentures. The Company also repurchased 24.0 million shares of its common stock for $884 million during the first nine months of 2022. The Company had $268 million of cash on hand at September 30, 2022.

The Company remains committed to its capital return framework established in the prior year for equity holders to participate more directly and materially in cash returns.

• The Company believes returning 60 percent of cash flow over capital investment creates a good balance for providing near-term cash returns to shareholders while still recognizing the importance of longer-term balance sheet strengthening.

• The Company’s quarterly dividend was increased in the fourth quarter of 2021 from $0.0625 per share to $0.125 per share. The dividend was further increased in the third quarter of 2022 to $0.25 per share, representing a return to pre-COVID-19 dividend levels.

• Beginning in the fourth quarter of 2021 and through the end of the third quarter of 2022, the Company has repurchased 55.2 million shares of the Company’s common stock. As of September 30, 2022, the Company had remaining authorization to repurchase up to 64.8 million shares under the Company’s share repurchase programs.

The Company does not anticipate any significant changes to the activity levels set forth earlier this year in its three-year capital investment program or capital return framework in the context of higher strip oil and gas prices, remaining committed to safe, steady, and efficient operations across all assets and returning free cash flow to shareholders through dividends and share repurchases.

Operational Highlights

Key operational highlights for the quarter include:

United States

• During the quarter, the Company closed a transaction to acquire properties in the Texas Delaware Basin near existing operations, primarily in Loving and Reeves counties, with net proved reserves of approximately 37 MMboe. The acquired properties have a combination of producing wells, wells in the process of drilling and completion, and an inventory of undrilled locations. The transaction closed on July 29, 2022 for approximately $593 million, subject to further post-closing adjustments. Final cash settlement is anticipated to be completed during the fourth quarter of 2022.

• Daily boe production from the Company’s U.S. assets accounted for 57 percent of its total production during the third quarter of 2022. The Company’s core Midland Basin development program and newly acquired properties in the Texas Delaware Basin are expected to represent key growth areas for the U.S. assets.

International

• In Egypt, the Company averaged 15 drilling rigs and drilled 25 new productive wells during the third quarter of 2022. Third quarter 2022 gross equivalent production in the Company’s Egypt assets decreased 5 percent from the third quarter of 2021, while net production in

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Commodity Price Risk

The Company’s revenues, earnings, cash flow, capital investments and, ultimately, future rate of growth are highly dependent on the prices the Company receives for its crude oil, natural gas, and NGLs, which have historically been very volatile because of unpredictable events such as economic growth or retraction, weather, political climate, and global supply and demand. These factors have only been heightened as uncertainties in the commodity and financial markets associated with the COVID-19 pandemic, the conflict in Ukraine, global inflation, and other current events continue to impact oil and gas supply and demand. The Company continually monitors its market risk exposure.

The Company’s average crude oil price realizations increased 36 percent from $71.72 per barrel to $97.81 per barrel during the third quarters of 2021 and 2022, respectively. The Company’s average natural gas price realizations increased 45 percent from $3.87 per Mcf to $5.62 per Mcf during the third quarters of 2021 and 2022, respectively. The Company’s average NGL price realizations increased 6 percent from $31.42 per barrel to $33.39 per barrel during the third quarters of 2021 and 2022, respectively. Based on average daily production for the third quarter of 2022, a $1.00 per barrel change in the weighted average realized oil price would have increased or decreased revenues for the quarter by approximately $16 million, a $0.10 per Mcf change in the weighted average realized natural gas price would have increased or decreased revenues for the quarter by approximately $8 million, and a $1.00 per barrel change in the weighted average realized NGL price would have increased or decreased revenues for the quarter by approximately $6 million.

The Company periodically enters into derivative positions on a portion of its projected crude oil and natural gas production through a variety of financial and physical arrangements intended to manage fluctuations in cash flows resulting from changes in commodity prices. Such derivative positions may include the use of futures contracts, swaps, and/or options. The Company does not hold or issue derivative instruments for trading purposes. As of September 30, 2022, the Company had open natural gas derivatives not designated as cash flow hedges in a liability position with a fair value of $88 million. A 10 percent increase in gas prices would increase the liability by approximately $24 million, while a 10 percent decrease in prices would decrease the liability by approximately $24 million. These fair value changes assume volatility based on prevailing market parameters as of September 30, 2022. Refer to Note 4—Derivative Instruments and Hedging Activities in the Notes to Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q for notional volumes and terms with the Company’s derivative contracts.

Interest Rate Risk

As of September 30, 2022, the Company had $5.0 billion, net, in outstanding notes and debentures, all of which was fixed-rate debt, with a weighted average interest rate of 5.25 percent. Although near-term changes in interest rates may affect the fair value of fixed-rate debt, such changes do not expose the Company to the risk of earnings or cash flow loss associated with that debt.

The Company is also exposed to interest rate risk related to its interest-bearing cash and cash equivalents balances and amounts outstanding under the indentures and credit facilities. As of September 30, 2022, the Company had approximately $268 million in cash and cash equivalents, approximately 39 percent of which was invested in money market funds and short-term investments with major financial institutions. As of September 30, 2022, there were $520 million of borrowings outstanding under the Company’s syndicated revolving credit facilities. A change in the interest rate applicable to short-term investments and credit facility borrowings would have an immaterial impact on earnings and cash flows but could impact interest costs associated with future debt issuances or any future borrowings.

Foreign Currency Exchange Rate Risk

The Company’s cash activities relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. The Company’s North Sea production is sold under U.S. dollar contracts, while the majority of costs incurred are paid in British pounds. The Company’s Egypt production is primarily sold under U.S. dollar contracts, and the majority of costs incurred are denominated in U.S. dollars. Transactions denominated in British pounds are converted to U.S. dollar equivalents based on the average exchange rates during the period.

Foreign currency gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated at the end of each month. Foreign currency gains and losses are included as either a component of “Other” under “Revenues and Other” or, as is the case when the Company re-measures its foreign tax liabilities, as a component of the Company’s provision for income tax expense on the statement of consolidated operations. Excluding the impacts of the foreign exchange contracts discussed below, foreign currency net gain or loss of $6 million would result from a 10 percent weakening or strengthening, respectively, in the British pound as of September 30, 2022.

The Company has periodically entered into foreign exchange contracts in order to minimize the impact of fluctuating exchange rates for the British pound on the Company’s operating expenses. As of September 30, 2022, the Company had outstanding foreign exchange contracts not designated as cash flow hedges with a total notional amount of £45 million in a liability position with a fair value of $8 million. A 10 percent strengthening of the British pound against the U.S. dollar would decrease the liability by approximately $4 million, while a 10 percent weakening of the British pound against the U.S. dollar would increase the liability by approximately $5 million.

Disclosure Controls and Procedures

John J. Christmann IV, the Company’s Chief Executive Officer and President, in his capacity as principal executive officer, and Stephen J. Riney, the Company’s Executive Vice President and Chief Financial Officer, in his capacity as principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2022, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective, providing effective means to ensure that the information the Company is required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

The Company periodically reviews the design and effectiveness of its disclosure controls, including compliance with various laws and regulations that apply to its operations, both inside and outside the United States. The Company makes modifications to improve the design and effectiveness of our disclosure controls, and may take other corrective action, if the Company’s reviews identify deficiencies or weaknesses in its controls.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Part I, Item 3—Legal Proceedings of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Note 11—Commitments and Contingencies in the Notes to the Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q (which is hereby incorporated by reference herein), for a description of material legal proceedings.

Except as set forth herein, there have been no material changes to the risk factors disclosed in Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Given the nature of its business, Apache Corporation may be subject to different or additional risks than those applicable to the Company. For a description of these risks, refer to the disclosures in Apache Corporation’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022, and September 30, 2022 and Apache Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

RISKS RELATED TO GOVERNMENTAL REGULATION AND POLITICAL RISKS

Newly enacted U.S. tax legislation may adversely affect the Company’s financial condition and cash flows.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA). Among other changes, the IRA introduced a new 15 percent corporate alternative minimum tax (Corporate AMT) for taxable years beginning after December 31, 2022 on applicable corporations with an average annual adjusted financial statement income (AFSI) that exceeds $1.0 billion for any three consecutive tax years preceding the tax year at issue. If the Company were to meet this average AFSI test, any resulting Corporate AMT liability could adversely affect the Company’s future financial results, including earnings and cash flows. Additionally, the IRA introduced a 1 percent excise tax on the fair market value of applicable stock repurchases after December 31, 2022. The impact of this provision will be dependent on the extent of any share repurchases made by the Company in future periods and could adversely affect the Company’s future financial condition and cash flows.

RISKS RELATED TO CLIMATE CHANGE

The impacts of energy transition could adversely affect the Company’s business, operating results, and financial condition.

In recent years, increasing attention has been given to corporate activities related to climate change and energy transition. This focus, together with shifting preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in:

• increased availability of, and demand for, energy sources other than oil and natural gas, including wind, solar, and hydroelectric power;

• technological advances with respect to the generation, transmission, storage, and consumption of alternative energy sources; and

• development of, and increased demand from consumers and industries for, lower-emission products and services, including electric vehicles and renewable residential and commercial power supplies, as well as more efficient products and services.

These developments could adversely impact the demand for products powered by or manufactured with hydrocarbons and the demand for the Company’s, and in turn the prices it receives for its, crude oil, natural gas, and NGL production, which could materially and adversely affect the Company’s business and financial performance.

The treatment and disposal of produced water is becoming more highly regulated and restricted and could expose the Company to additional costs or limit certain operations.

The treatment and disposal of produced water is becoming more highly regulated and restricted. The Company’s ability to accurately report and track its water use is necessary for its continued ability to reuse and recycle water, when possible. While the Company remains focused on reusing or recycling water over disposal of water, the Company’s costs for obtaining and disposing of water could increase significantly if reusing and recycling water becomes impractical. Further, compliance with reporting and environmental regulations governing the withdrawal, storage, use, and discharge of water may increase the Company’s operating costs, which could materially and adversely affect its business, results of operations, and financial conditions.

In response to concerns regarding induced seismicity, regulators in some states have imposed, or are considering imposing, additional requirements in the permitting of produced water disposal wells to assess any relationship between seismicity and the use of such wells. For example, the Railroad Commission of Texas (RRC) has been developing data associated with seismic activity, particularly such activity related to injection wells used for produced water disposal. In September 2021, the RRC began to limit saltwater disposal in the Midland Basin under what is known as a Seismic Response Action (or SAR) due to increased seismic activity.

Among other things, these rules require companies seeking permits for disposal wells to provide seismic activity data in permit applications, provide for more frequent monitoring and reporting for certain wells and allow the state to modify, suspend, or terminate permits on grounds that a disposal well is likely to be, or determined to be, causing seismic activity. States may issue orders to temporarily shut down or to curtail the injection depth of existing wells in the vicinity of seismic events. Increased regulation and attention given to induced seismicity could also lead to greater opposition, including litigation to limit or prohibit oil and natural gas activities utilizing injection wells for produced water disposal. These developments could result in restriction of disposal wells that could have a material effect on the Company’s capital expenses and operating costs or limit production in certain areas.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents information on shares of common stock repurchased by the Company during the quarter ended September 30, 2022:

Issuer Purchases of Equity Securities
Period						Total Number of Shares Purchased						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs**(1)**						Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs**(1)**
July 1 to July 31, 2022						6,863,858						$	33.88					6,863,858						27,714,783
August 1 to August 31, 2022						2,958,437						33.81						2,958,437						24,756,346
September 1 to September 30, 2022						—						—						—						64,756,346
Total						9,822,295						$	33.86

(1) During the fourth quarter of 2021, the Company's Board of Directors authorized the purchase of 40 million shares of the Company's common stock. During September of 2022, the Company's Board of Directors authorized the purchase of an additional 40 million shares of the Company's common stock. Shares may be purchased either in the open market or through privately negotiated transactions. The Company is not obligated to acquire any specific number of shares.

2.1			–			Agreement and Plan of Merger, dated as of March 1, 2021, by and among Apache Corporation, Registrant, and APA Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K12B filed March 1, 2021, SEC File No. 001-40144).
3.1			–			Amended and Restated Certificate of Incorporation of Registrant, dated March 1, 2021, as filed with the Secretary of State of the State of Delaware on March 1, 2021 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K12B filed March 1, 2021, SEC File No. 001-40144).
3.2			–			Amended and Restated Bylaws of Registrant, dated September 14, 2021 (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed September 20, 2021, SEC File No. 001-40144).
*31.1			–			Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
*31.2			–			Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
**32.1			–			Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
*101			–			The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Comprehensive Income (Loss), (iii) Statement of Consolidated Cash Flows, (iv) Consolidated Balance Sheet, (v) Statement of Consolidated Changes in Equity (Deficit) and Noncontrolling Interests and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
*101.SCH			–			Inline XBRL Taxonomy Schema Document.
*101.CAL			–			Inline XBRL Calculation Linkbase Document.
*101.DEF			–			Inline XBRL Definition Linkbase Document.
*101.LAB			–			Inline XBRL Label Linkbase Document.
*101.PRE			–			Inline XBRL Presentation Linkbase Document.
*104			–			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

• Filed herewith

** Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

									APA CORPORATION
Dated:			November 3, 2022						/s/ STEPHEN J. RINEY
									Stephen J. Riney
									Executive Vice President and Chief Financial Officer
									(Principal Financial Officer)
Dated:			November 3, 2022						/s/ REBECCA A. HOYT
									Rebecca A. Hoyt
									Senior Vice President, Chief Accounting Officer, and Controller
									(Principal Accounting Officer)