Item 1. FINANCIAL STATEMENTS

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

						For the Quarter Ended March 31,
						2024						2023
						(In millions, except share data)
REVENUES AND OTHER:
Oil, natural gas, and natural gas liquids production revenues(1)						$	1,748					$	1,769
Purchased oil and gas sales(1)						203						239
Total revenues						1,951						2,008
Derivative instrument gains (losses), net						(4)						53
Gain on divestitures, net						7						1
Loss on previously sold Gulf of Mexico properties						(66)						—
Other, net						15						(32)
						1,903						2,030
OPERATING EXPENSES:
Lease operating expenses(1)						338						321
Gathering, processing, and transmission(1)						84						78
Purchased oil and gas costs(1)						163						216
Taxes other than income						57						52
Exploration						148						52
General and administrative						93						65
Transaction, reorganization, and separation						27						4
Depreciation, depletion, and amortization						430						332
Asset retirement obligation accretion						40						28
Financing costs, net						76						72
						1,456						1,220
NET INCOME BEFORE INCOME TAXES						447						810
Current income tax provision						300						346
Deferred income tax provision (benefit)						(65)						138
NET INCOME INCLUDING NONCONTROLLING INTERESTS						212						326
Net income attributable to noncontrolling interest						80						84
NET INCOME ATTRIBUTABLE TO COMMON STOCK						$	132					$	242
NET INCOME PER COMMON SHARE:
Basic						$	0.44					$	0.78
Diluted						$	0.44					$	0.78
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic						302						311
Diluted						302						312

(1) For transactions with Kinetik prior to the Company’s sale of its remaining shares of Kinetik Class A Common Stock and the resignation of the Company’s designated director from the Kinetik board of directors, refer to Note 6—Equity Method Interests.

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)

						For the Quarter Ended March 31,
						2024						2023
						(In millions)
NET INCOME INCLUDING NONCONTROLLING INTERESTS						$	212					$	326
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Pension and postretirement benefit plan						—						3
COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS						212						329
Comprehensive income attributable to noncontrolling interest						80						84
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCK						$	132					$	245

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 Three Months Ended March 31,
						2024						2023
						(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests						$	212					$	326
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument (gains) losses, net						8						(33)
Gain on divestitures, net						(7)						(1)
Exploratory dry hole expense and unproved leasehold impairments						133						35
Depreciation, depletion, and amortization						430						332
Asset retirement obligation accretion						40						28
Provision for (benefit from) deferred income taxes						(65)						138
Gain on extinguishment of debt						—						(9)
Loss on previously sold Gulf of Mexico properties						66						—
Other, net						10						30
Changes in operating assets and liabilities:
Receivables						18						(53)
Inventories						(17)						(31)
Drilling advances and other current assets						(26)						1
Deferred charges and other long-term assets						6						79
Accounts payable						37						(110)
Accrued expenses						(432)						(319)
Deferred credits and noncurrent liabilities						(45)						(78)
NET CASH PROVIDED BY OPERATING ACTIVITIES						368						335
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to upstream oil and gas property						(467)						(543)
Leasehold and property acquisitions						(63)						(6)
Proceeds from asset divestitures						27						21
Proceeds from sale of Kinetik Shares						428						—
Other, net						(13)						(4)
NET CASH USED IN INVESTING ACTIVITIES						(88)						(532)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) commercial paper and revolving credit facilities, net						(2)						417
Payments on Apache fixed-rate debt						—						(65)
Distributions to noncontrolling interest						(70)						(17)
Treasury stock activity, net						(101)						(142)
Dividends paid to APA common stockholders						(76)						(78)
Other, net						(16)						(9)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES						(265)						106
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						15						(91)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						87						245
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	102					$	154
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest						$	104					$	112
Income taxes paid, net of refunds						366						286

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

APA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

						March 31, 2024						December 31, 2023
						(In millions, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents						$	102					$	87
Receivables, net of allowance of $110 and $114						1,597						1,610
Other current assets (Note 5)						807						765
						2,506						2,462
PROPERTY AND EQUIPMENT:
Oil and gas properties						45,406						44,860
Gathering, processing, and transmission facilities						448						448
Other						625						634
Less: Accumulated depreciation, depletion, and amortization						(36,336)						(35,904)
						10,143						10,038
OTHER ASSETS:
Equity method interests (Note 6)						—						437
Decommissioning security for sold Gulf of Mexico properties (Note 11)						21						21
Deferred tax asset (Note 10)						1,752						1,758
Deferred charges and other						530						528
						$	14,952					$	15,244
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Accounts payable						$	694					$	658
Current debt						2						2
Other current liabilities (Note 7)						1,456						1,744
						2,152						2,404
LONG-TERM DEBT (Note 9)						5,178						5,186
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Deferred tax liability (Note 10)						300						371
Asset retirement obligation (Note 8)						2,400						2,362
Decommissioning contingency for sold Gulf of Mexico properties (Note 11)						807						764
Other						462						466
						3,969						3,963
EQUITY:
Common stock, $0.625 par, 860,000,000 shares authorized, 421,137,927 and 420,595,901 shares issued, respectively						263						263
Paid-in capital						11,047						11,126
Accumulated deficit						(2,827)						(2,959)
Treasury stock, at cost, 120,031,117 and 117,020,000 shares, respectively						(5,891)						(5,790)
Accumulated other comprehensive income						15						15
APA SHAREHOLDERS’ EQUITY						2,607						2,655
Noncontrolling interest						1,046						1,036
TOTAL EQUITY						3,653						3,691
						$	14,952					$	15,244

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

APA CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)

						Common Stock						Paid-In Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income						APA SHAREHOLDERS’ EQUITY						Noncontrolling Interest						TOTAL EQUITY
						(In millions)
For the Quarter Ended March 31, 2023
Balance at December 31, 2022						$	262					$	11,420					$	(5,814)					$	(5,459)					$	14					$	423					$	922					$	1,345
Net income attributable to common stock						—						—						242						—						—						242						—						242
Net income attributable to noncontrolling interest						—						—						—						—						—						—						84						84
Distributions to noncontrolling interest						—						—						—						—						—						—						(17)						(17)
Common dividends declared ($0.25 per share)						—						(78)						—						—						—						(78)						—						(78)
Treasury stock activity, net						—						—						—						(142)						—						(142)						—						(142)
Other						1						(5)						—						—						3						(1)						—						(1)
Balance at March 31, 2023						$	263					$	11,337					$	(5,572)					$	(5,601)					$	17					$	444					$	989					$	1,433
For the Quarter Ended March 31, 2024
Balance at December 31, 2023						$	263					$	11,126					$	(2,959)					$	(5,790)					$	15					$	2,655					$	1,036					$	3,691
Net income attributable to common stock						—						—						132						—						—						132						—						132
Net income attributable to noncontrolling interest						—						—						—						—						—						—						80						80
Distributions to noncontrolling interest						—						—						—						—						—						—						(70)						(70)
Common dividends declared ($0.25 per share)						—						(75)						—						—						—						(75)						—						(75)
Treasury stock activity, net						—						—						—						(101)						—						(101)						—						(101)
Other						—						(4)						—						—						—						(4)						—						(4)
Balance at March 31, 2024						$	263					$	11,047					$	(2,827)					$	(5,891)					$	15					$	2,607					$	1,046					$	3,653

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 any 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which contains a summary of the Company’s significant accounting policies and other disclosures.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of March 31, 2024, 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The Company’s financial statements for prior periods may include reclassifications that were made to conform to the current-year presentation.

Principles of Consolidation

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.

Sinopec International Petroleum Exploration and Production Corporation (Sinopec) owns a one-third minority participation in the Company’s consolidated Egypt oil and gas business as a noncontrolling interest, which is reflected as a separate noncontrolling interest component of equity in the Company’s consolidated balance sheet. The Company has determined that a limited partnership and APA subsidiary, which has control over APA’s Egyptian operations, qualifies as a variable interest entity (VIE) under GAAP. Apache consolidates the activities of APA’s Egyptian operations because it has concluded that a wholly owned subsidiary has a controlling financial interest in APA’s Egyptian operations and was determined to be the primary beneficiary of the VIE.

Investments in which the Company has significant influence, but not control, are accounted for under the equity method of accounting. During each of the periods ended March 31, 2024 and 2023, the Company had a designated director on the Kinetik Holdings Inc. (Kinetik) board of directors. As a result, the Company is considered to have had significant influence over Kinetik for all periods presented. The Company’s designated director resigned from the Kinetik board of directors on April 3, 2024.

As of December 31, 2023, the Company held shares of Kinetik Class A Common Stock (Kinetik Shares), which were recorded separately as “Equity method interests” in the Company’s consolidated balance sheet. On March 18, 2024, the Company sold its remaining Kinetik Shares. Refer to Note 6—Equity Method Interests for further detail.

Use of Estimates

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

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

Fair Value Measurements

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

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

Refer to Note 4—Derivative Instruments and Hedging Activities, Note 6—Equity Method Interests, and Note 9—Debt and Financing Costs for further detail regarding the Company’s fair value measurements recorded on a recurring basis.

During the three months ended March 31, 2024 and 2023, the Company recorded no asset impairments in connection with fair value assessments.

Revenue Recognition

Receivables from contracts with customers, including receivables for purchased oil and gas sales and net of allowance for credit losses, were $1.4 billion and $1.5 billion as of March 31, 2024 and December 31, 2023, respectively. 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. Over the past year, the Company experienced a gradual decline in the timeliness of receipts from the Egyptian General Petroleum Corporation (EGPC) for the Company’s Egyptian oil and gas sales. Although the Company continues to receive periodic payments from EGPC, economic conditions in Egypt have lessened the availability of U.S. dollars in Egypt, resulting in a delay in receipts from EGPC. Continuation of the currency shortage in Egypt could lead to further delays, deferrals of payment, or non-payment in the future; however, the Company currently anticipates that it will ultimately be able to collect its receivable from EGPC.

Oil and gas production revenues include income taxes that will be paid to the Arab Republic of Egypt by EGPC 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.

Refer to Note 13—Business Segment Information for a disaggregation of oil, gas, and natural gas production revenue by product and reporting segment.

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.

Inventories

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

Property and Equipment

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

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, production costs, 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. At the end of each quarter, management reviews the status of all suspended exploratory well costs in light of ongoing exploration activities, and if management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

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.

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.

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 (GPT) 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.

New Pronouncements Issued But Not Yet Adopted

There were no material changes in recently issued or adopted accounting standards from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

2. ACQUISITIONS AND DIVESTITURES

2024 Activity

Callon Petroleum Company Acquisition

On April 1, 2024, APA completed its acquisition of Callon Petroleum Company (Callon) in an all-stock transaction valued at approximately $4.5 billion, inclusive of Callon’s debt (the Callon acquisition). The transaction was approved by APA and Callon shareholders at special meetings held on March 27, 2024.

Subject to the terms of the merger agreement, each share of Callon common stock was converted into the right to receive 1.0425 shares of APA common stock, with cash in lieu of fractional shares. As a result, APA issued approximately 70 million shares of APA common stock in connection with the transaction, and following the acquisition, Callon common stock is no longer listed for trading on the NYSE.

Upon completing the acquisition, APA refinanced substantially all of Callon’s debt by borrowing under APA’s US dollar denominated syndicated credit facilities. Refer to Note 9—Debt and Financing Costs for further detail.

Sale of Kinetik Shares

On March 18, 2024, the Company sold its remaining Kinetik Shares for cash proceeds of $428 million. Refer to Note 6—Equity Method Interests for further detail.

Leasehold and Property Acquisitions

During the first quarter of 2024, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of approximately $63 million.

U.S. Divestitures

During the first quarter of 2024, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $27 million, recognizing a gain of approximately $7 million upon closing of these transactions.

2023 Activity

Leasehold and Property Acquisitions

During the first quarter of 2023, the Company completed leasehold and property acquisitions, primarily in the Permian Basin, for total cash consideration of approximately $6 million.

U.S. Divestitures

During the first quarter of 2023, the Company completed the sale of non-core assets and leasehold in multiple transactions for total cash proceeds of $21 million, recognizing a gain of approximately $1 million upon closing of these transactions.

3. CAPITALIZED EXPLORATORY WELL COSTS

The Company’s capitalized exploratory well costs were $587 million and $586 million as of March 31, 2024 and December 31, 2023, respectively. Approximately $51 million of suspended well costs previously capitalized for greater than one year at December 31, 2023 were charged to dry hole expense during the first quarter of 2024. This was offset by increased capital exploratory well costs attributable to additional drilling activity in Egypt and in the U.S. in the first quarter of 2024.

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

Counterparty Risk

The use of derivative instruments exposes the Company to credit loss in the event of nonperformance by the counterparty. To reduce the concentration of exposure to any individual counterparty, the Company utilizes a diversified group of investment-grade rated counterparties, primarily financial institutions, for its derivative transactions. As of March 31, 2024, the Company had derivative positions with four counterparties. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, the Company may not realize the benefit of some of its derivative instruments resulting from lower commodity prices or changes in currency exchange rates.

Derivative Instruments

Commodity Derivative Instruments

As of March 31, 2024, 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
April—June 2024						NYMEX Henry Hub/IF Waha						8,190						$(1.15)						—						—
April—June 2024						NYMEX Henry Hub/IF HSC						—						—						8,190						$(0.10)

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)
March 31, 2024
Liabilities:
Commodity derivative instruments						$	—					$	2					$	—					$	2					$	—					$	2
December 31, 2023
Assets:
Commodity derivative instruments						$	—					$	6					$	—					$	6					$	—					$	6

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

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

Derivative Activity Recorded in the Consolidated Balance Sheet

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

						March 31, 2024						December 31, 2023
						(In millions)
Current Assets: Other current assets						$	—					$	6
Total derivative assets						$	—					$	6
Current Liabilities: Other current liabilities						$	2					$	—
Total derivative liabilities						$	2					$	—

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 March 31,
			2024						2023
						(In millions)
Realized:
Commodity derivative instruments						$	4					$	20
Realized gains, net						4						20
Unrealized:
Commodity derivative instruments						(8)						33
Unrealized gains (losses), net						(8)						33
Derivative instrument gains (losses), net						$	(4)					$	53

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 (gains) losses, net” under “Adjustments to reconcile net income to net cash provided by operating activities.”

5. OTHER CURRENT ASSETS

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

						March 31, 2024						December 31, 2023
						(In millions)
Inventories						$	472					$	453
Drilling advances						116						88
Prepaid assets and other						54						46
Current decommissioning security for sold Gulf of Mexico assets						165						178
Total Other current assets						$	807					$	765

6. EQUITY METHOD INTERESTS

As of December 31, 2023, the Company held 13.1 million Kinetik Shares, which were recorded at fair value of $437 million and reflected separately as “Equity method interests” in the Company’s consolidated balance sheet. The Company elected the fair value option for measuring its equity method interest in Kinetik based on practical expedience, variances in reporting timelines, and cost-benefit considerations. The fair value of the Company’s interest in Kinetik was determined using observable share prices on a major exchange, a Level 1 fair value measurement. On March 18, 2024, the Company sold its remaining Kinetik Shares for cash proceeds of $428 million.

Prior to the Company’s sale of its remaining Kinetik Shares and the resignation of the Company’s designated director from the Kinetik board of directors, the Company recorded changes in the fair value of its equity method interest in Kinetik totaling losses of $9 million and $19 million in the first quarters of 2024 and 2023, respectively. These losses were recorded as a component of “Revenues and Other” in the Company’s statement of consolidated operations.

The following table represents related party sales and costs associated with Kinetik prior to the Company’s sale of its remaining Kinetik Shares and the resignation of the Company’s designated director from the Kinetik board of directors:

						For the Quarter Ended March 31,
						2024						2023
						(In millions)
Natural gas and NGLs sales						$	13					$	14
Purchased oil and gas sales						22						—
						$	35					$	14
Gathering, processing, and transmission costs						$	23					$	26
Purchased oil and gas costs						23						—
Lease operating expenses						2						—
						$	48					$	26

7. OTHER CURRENT LIABILITIES

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

						March 31, 2024						December 31, 2023
						(In millions)
Accrued operating expenses						$	165					$	162
Accrued exploration and development						530						371
Accrued compensation and benefits						136						390
Accrued interest						67						93
Accrued income taxes						86						138
Current asset retirement obligation						75						76
Current operating lease liability						119						116
Current decommissioning contingency for sold Gulf of Mexico properties						40						60
Other						238						338
Total Other current liabilities						$	1,456					$	1,744

8. ASSET RETIREMENT OBLIGATION

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

						March 31, 2024
						(In millions)
Asset retirement obligation, December 31, 2023						$	2,438
Liabilities incurred						1
Liabilities acquired						4
Liabilities settled						(9)
Accretion expense						40
Revisions in estimated liabilities						1
Asset retirement obligation, March 31, 2024						2,475
Less current portion						(75)
Asset retirement obligation, long-term						$	2,400

9. DEBT AND FINANCING COSTS

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

						March 31, 2024						December 31, 2023
						(In millions)
Apache notes and debentures before unamortized discount and debt issuance costs(1)						$	4,835					$	4,835
Commercial paper and syndicated credit facilities(2)						370						372
Apache finance lease obligations						31						32
Unamortized discount						(26)						(26)
Debt issuance costs						(30)						(25)
Total debt						5,180						5,188
Current maturities						(2)						(2)
Long-term debt						$	5,178					$	5,186

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

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 commercial paper and credit facilities approximates fair value because interest rates are variable and reflective of market rates.

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

Financing Costs, Net

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

						For the Quarter Ended March 31,
						2024						2023
						(In millions)
Interest expense						$	85					$	88
Amortization of debt issuance costs						1						1
Capitalized interest						(7)						(6)
Gain on extinguishment of debt						—						(9)
Interest income						(3)						(2)
Financing costs, net						$	76					$	72

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

Unsecured 2022 Committed Bank Credit Facilities

On April 29, 2022, the Company entered into two unsecured syndicated credit agreements for general corporate purposes.

• One agreement is denominated in US dollars (the USD Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of US$1.8 billion (including a letter of credit subfacility of up to US$750 million, of which US$150 million currently is committed). The Company may increase commitments up to an aggregate US$2.3 billion by adding new lenders or obtaining the consent of any increasing existing lenders. This facility matures in April 2027, subject to the Company’s two, one-year extension options.

• The second agreement is denominated in pounds sterling (the GBP Agreement) and provides for an unsecured five-year revolving credit facility, with aggregate commitments of £1.5 billion for loans and letters of credit. This facility matures in April 2027, subject to the Company’s two, one-year extension options.

Apache may borrow under the USD Agreement up to an aggregate principal amount of US$300 million outstanding at any given time. Apache has guaranteed obligations under each of the USD Agreement and GBP Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures first is less than US$1.0 billion.

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

Uncommitted Lines of Credit

Each of the Company and Apache, from time to time, has and uses uncommitted credit and letter of credit facilities for working capital and credit support purposes. As of March 31, 2024 and December 31, 2023, there were no outstanding borrowings under these facilities. At each of March 31, 2024 and December 31, 2023, there were £416 million and $2 million in letters of credit outstanding under these facilities.

Commercial Paper Program

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

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

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

Unsecured Committed Term Loan Facility

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

Subsequent Events

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

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

Indebtedness of Callon that APA could refinance by borrowing under the Term Loan Credit Agreement included indebtedness outstanding under (i) the Amended and Restated Credit Agreement, dated October 19, 2022, among Callon, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (Callon Credit Agreement), (ii) Callon’s 6.375% Senior Notes due 2026 (Callon’s 2026 Notes), (iii) Callon’s 8.00% Senior Notes due 2028 (Callon’s 2028 Notes), and (iv) Callon’s 7.500% Senior Notes due 2030 (Callon’s 2030 Notes). On April 1, 2024, all indebtedness under the Callon Credit Agreement and Callon’s 2026 Notes was repaid, and the aggregate principal balance remaining outstanding under Callon’s 2028 Notes and Callon’s 2030 Notes was reduced to $24 million. Given the aggregate principal balance remaining outstanding under Callon’s 2028 Notes and Callon’s 2030 Notes, no guarantee by Callon of APA’s obligations under the Term Loan Credit Agreement is required.

On April 1, 2024, the following Callon indebtedness was repaid by borrowings under the Term Loan Credit Agreement and USD Agreement:

• Callon closed cash tender offers for Callon’s 2028 Notes and Callon’s 2030 Notes, accepting for purchase $1.2 billion aggregate principal amount of notes. Callon paid holders an aggregate $1.3 billion in cash, reflecting principal, premium to par, early tender consent fee, and accrued and unpaid interest.

• Callon redeemed the outstanding $321 million principal amount of Callon’s 2026 Notes at a redemption price equal to 101.063% of their principal amount, plus accrued and unpaid interest to the redemption date.

• Callon repaid the aggregate $472 million owed under the Callon Credit Agreement, including principal, accrued and unpaid interest, and certain fees.

On April 26, 2024, Callon notified holders of its election to fully redeem on May 6, 2024 the outstanding $8.3 million principal amount of Callon’s 2028 Notes at a redemption price equal to 101.588% of their principal amount and $15.6 million principal amount of Callon’s 2030 Notes at a redemption price equal to 102.803% of their principal amount, in each case, plus accrued and unpaid interest to the redemption date.

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.

The Company’s effective income tax rate for the three months ended March 31, 2024 differed from the U.S. federal statutory income tax rate of 21 percent due to taxes on foreign operations. The Company’s effective income tax rate for the three months ended March 31, 2023 differed from the U.S. federal statutory income tax rate of 21 percent due to taxes on foreign operations, a deferred tax expense related to the remeasurement of taxes in the U.K. as a result of the enactment of Finance Act 2023, and a decrease in the amount of valuation allowance against its U.S. deferred tax assets.

In December 2021, the Organisation for Economic Co-operation and Development issued Pillar Two Model Rules introducing a new global minimum tax of 15 percent on a country-by-country basis, with certain aspects effective in certain jurisdictions on January 1, 2024. Although the Company continues to monitor enacted legislation to implement these rules in countries where the Company could be impacted, APA does not expect that the Pillar Two framework will have a material impact on its consolidated financial statements.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various states and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority.

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 March 31, 2024, the Company has an accrued liability of approximately $84 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. With respect to material matters for which 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Argentine Environmental Claims

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

Louisiana Restoration

As more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, 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 2023, several parishes in Louisiana have pending lawsuits against many oil and gas producers, including the Company. In these cases, the Parishes, as plaintiffs, allege that defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. Without acknowledging or admitting any liability and solely to avoid the expense and uncertainty of future litigation, the Company agreed to settle with the State of Louisiana and Louisiana coastal Parishes to resolve any potential liability on the part of the Company for claims that were or could have been asserted by the coastal Parishes and/or the State of Louisiana in the pending litigation. The settlement is subject to court approval, which the parties hope to receive at some point in the first half of 2024. The consideration to be provided by the Company in the settlement will not have a material impact on the Company’s financial position. Following settlement of these various lawsuits, the Company will be a defendant in only two remaining coastal zone lawsuits, one filed by the City of New Orleans against the Company and a number of oil and gas operators and the other filed against Callon Offshore Production, Inc., among many other oil and gas operators, and pending in St. Bernard Parish, Louisiana. The Company will now oversee the latter lawsuit as a result of the merger with Callon Petroleum Company.

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 plaintiffs’ claims. The Texas Supreme Court granted the Company’s petition for review and heard oral argument in October 2022. On April 28, 2023, the Texas Supreme Court reversed the court of appeals’ decision and remanded the case back to the court of appeals for further proceedings. After plaintiffs’ request for rehearing, on July 21, 2023, the Texas Supreme Court reaffirmed its reversal of the court of appeals’ decision and remand of the case back to the court of appeals for further proceedings.

Australian Operations Divestiture Dispute

Pursuant to a Sale and Purchase Agreement dated April 9, 2015 (Quadrant SPA), the Company and its subsidiaries divested Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. In April 2017, the Company filed suit against Quadrant for breach of the Quadrant SPA. In its suit, the Company seeks approximately AUD $80 million. In December 2017, Quadrant filed a defense of equitable set-off to the Company’s claim and a counterclaim seeking approximately AUD $200 million in the aggregate. The Company will vigorously prosecute its claim while vigorously defending against Quadrant’s counter claims.

California and Delaware Litigation

On July 17, 2017, in three separate actions, San Mateo and Marin Counties, and the City of Imperial Beach, California, all filed suit individually and on behalf of the people of the state of California against over 30 oil and gas companies alleging damages as a result of global warming. Plaintiffs seek unspecified damages and abatement under various tort theories. On December 20, 2017, in two separate actions, the City of Santa Cruz and Santa Cruz County filed similar lawsuits against many of the same defendants. On January 22, 2018, the City of Richmond filed a similar lawsuit.

On 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 intends to challenge personal jurisdiction in California and to vigorously defend the Delaware lawsuit.

Kulp Minerals Lawsuit

On or about April 7, 2023, Apache was sued in a purported class action in New Mexico styled Kulp Minerals LLC v. Apache Corporation, Case No. D-506-CV-2023-00352 in the Fifth Judicial District. The Kulp Minerals case has not been certified and seeks to represent a group of owners allegedly owed statutory interest under New Mexico law as a result of purported late oil and gas payments. The amount of this claim is not yet reasonably determinable. The Company intends to vigorously defend against the claims asserted in this lawsuit.

Shareholder and Derivative Lawsuits

On February 23, 2021, a case captioned Plymouth County Retirement System v. Apache Corporation, et al. was filed in the United States District Court for the Southern District of Texas (Houston Division) against the Company and certain current and former officers. The complaint, which is a shareholder lawsuit styled as a class action, alleges, among other things, that (1) the Company intentionally used unrealistic assumptions regarding the amount and composition of available oil and gas in Alpine High; (2) the Company did not have the proper infrastructure in place to safely and/or economically drill and/or transport those resources even if they existed in the amounts purported; (3) certain statements and omissions artificially inflated the value of the Company’s operations in the Permian Basin; and (4) as a result, the Company’s public statements were materially false and misleading. With no admission, concession, or finding of any fault, liability, or wrongdoing, but only to avoid the expense and uncertainty of litigation, the parties have agreed to a settlement resolving all claims made against the defendants by the class. The settlement agreement will be subject to court approval, and a hearing is expected to be held in the coming months. The settlement will not have a material effect on the Company’s financial position, results of operations, or liquidity and is subject to insurance coverage that companies have for these types of claims.

On February 21, 2023, a case captioned Steve Silverman, Derivatively and on behalf of Nominal Defendant APA Corp. v. John J. Christmann IV, et al. was filed in federal district court for the Southern District of Texas. Then, on July 21, 2023, a case captioned Yang-Li-Yu, Derivatively and on behalf of Nominal Defendant APA Corp. v. John J. Christmann IV, et al. was filed in federal district court for the Southern District of Texas. These cases have now been consolidated as In Re APA Corporation Derivative Litigation, Case No. 4:23-cv-00636 in the Southern District of Texas and purport to be derivative actions 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 filed a motion to dismiss the consolidated lawsuits, which is fully briefed and will remain pending following settlement of the Plymouth County Retirement System case noted above.

Environmental Matters

As of March 31, 2024, the Company had an undiscounted reserve for environmental remediation of approximately $5 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. Then 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 notices and information requests involved alleged emissions control and reporting violations. The Company cooperated with the EPA, responded to the information requests, and negotiated and entered into a consent decree to resolve the alleged violations in both New Mexico and Texas, which has been approved and entered by the Court. The consideration provided by the Company in connection with the consent decree, which includes a $4 million payment, will not have a material impact on the Company’s financial position.

The Company is not aware of any environmental claims existing as of March 31, 2024, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity. There can be no assurance, however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.

Potential Decommissioning Obligations on Sold Properties

In 2013, Apache sold its Gulf of Mexico (GOM) Shelf operations and properties and its GOM operating subsidiary, GOM Shelf LLC (GOM Shelf) to Fieldwood Energy LLC (Fieldwood). 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). On February 14, 2018, Fieldwood filed for (and subsequently emerged from) Chapter 11 bankruptcy protection. On August 3, 2020, Fieldwood filed for (and subsequently emerged from) Chapter 11 bankruptcy protection for a second time. Upon emergence from this second bankruptcy, 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 are to be used to fund the operation of GOM Shelf and the decommissioning of Legacy GOM Assets. Pursuant to the terms of the original transaction, as amended in the first bankruptcy, the securing of the asset retirement obligations for the Legacy GOM Assets as and when Apache is required to perform or pay for any such decommissioning was accomplished through the posting of letters of credit in favor of Apache (Letters of Credit), the provision of two bonds (Bonds) in favor of Apache, and the establishment of a trust account of which Apache was a beneficiary and which was funded by net profits interests (NPIs) depending on future oil prices. In addition, after such sources have been exhausted, Apache agreed upon resolution of GOM Shelf’s second bankruptcy to provide a standby loan to GOM Shelf of up to $400 million to perform decommissioning, with such standby loan secured by a first and prior lien on the Legacy GOM Assets.

By letter dated April 5, 2022 (replacing two earlier letters) and by subsequent letter dated March 1, 2023, GOM Shelf notified the Bureau of Safety and Environmental Enforcement (BSEE) that it was unable to fund the decommissioning obligations that it was obligated to perform on certain of the Legacy GOM Assets. As a result, Apache and other current and former owners in these assets have received orders from BSEE and demands from third parties to decommission certain of the Legacy GOM Assets included in GOM Shelf’s notifications to BSEE. Apache expects to receive similar orders and demands on the other Legacy GOM Assets included in GOM Shelf’s notification letters. Apache has also received orders to decommission other Legacy GOM Assets that were not included in GOM Shelf’s notification letters. 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.

On June 21, 2023, two sureties that issued Bonds directly to Apache and two sureties that issued bonds to the issuing bank on the Letters of Credit filed suit against Apache in a case styled Zurich American Insurance Company, HCC International Insurance Company PLC, Philadelphia Indemnity Insurance Company and Everest Reinsurance Company (Insurers) v. Apache Corporation, Cause No. 2023-38238 in the 281st Judicial District Court, Harris County Texas. The sureties sought to prevent Apache from drawing on the Bonds and Letters of Credit and further alleged that they are discharged from their reimbursement obligations related to decommissioning costs and are entitled to other relief. On July 20, 2023, the 281st Judicial District Court denied the Insurers’ request for a temporary injunction. On July 26, 2023, Apache removed the suit to the United States Bankruptcy Court for the Southern District of Texas (Houston Division) which subsequently held that the sureties’ state court lawsuit violated the terms of the Bankruptcy Confirmation Order and is void. Since the time the sureties filed their state court lawsuit, Apache has drawn down the entirety of the Letters of Credit. Apache has also sought to draw down on the Bonds; however, the sureties refuse to pay such Bond draws. Apache is vigorously pursuing its claims against the sureties.

As of March 31, 2024, the Company has recorded a $186 million asset, which represents the remaining amount the Company expects to be reimbursed from security related to these decommissioning costs.

The Company has recorded contingent liabilities in the amounts of $847 million and $824 million as of March 31, 2024 and December 31, 2023, respectively, representing the estimated costs of decommissioning it may be required to perform on legacy GOM properties previously sold to Fieldwood and other GOM operators. During the first quarter of 2024, the Company recognized $66 million of “Loss on previously sold Gulf of Mexico properties,” which includes increases of $33 million related to orders received during the period from BSEE to decommission properties previously sold to Cox Operating LLC. The Company recognized no losses for decommissioning previously sold properties during the first quarter of 2023. There have been no other changes in estimates from December 31, 2023 that would have a material impact on the Company’s financial position, results of operations, or liquidity.

12. CAPITAL STOCK

Net Income per Common Share

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

						For the Quarter Ended March 31,
						2024																		2023
						Income						Shares						Per Share						Income						Shares						Per Share
						(In millions, except per share amounts)
Basic:
Income attributable to common stock						$	132					302						$	0.44					$	242					311						$	0.78
Effect of Dilutive Securities:
Stock compensation awards						$	—					—						$	—					$	—					1						$	—
Diluted:
Income attributable to common stock						$	132					302						$	0.44					$	242					312						$	0.78

The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive of 2.1 million and 2.4 million during the first quarters of 2024 and 2023, respectively.

Stock Repurchase Program

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 the third quarter of 2022, the Company's Board of Directors authorized the purchase of an additional 40 million shares of the Company's common stock.

In the first quarter of 2024, the Company repurchased approximately 3.0 million shares at an average price of $33.27 per share, and as of March 31, 2024, the Company had remaining authorization to repurchase up to 40.9 million shares. In the first quarter of 2023, the Company repurchased 3.7 million shares at an average price of $38.93 per share.

The Company is not obligated to acquire any additional shares. Shares may be purchased either in the open market or through privately negotiated transactions.

Common Stock Dividend

For the quarters ended March 31, 2024 and 2023, the Company paid $76 million and $78 million, respectively, in dividends on its common stock.

13. BUSINESS SEGMENT INFORMATION

As of March 31, 2024, the Company’s consolidated subsidiaries are engaged in exploration and production (Upstream) activities across three operating segments: the U.S., Egypt, and North Sea. The Company’s Upstream business explores for, develops, and produces crude oil, natural gas, and natural gas liquids. The Company also has active exploration and planned appraisal operations ongoing in Suriname, as well as interests in Uruguay and other international locations that may, over time, result in reportable discoveries and development opportunities. Financial information for each segment is presented below:

						U.S.						Egypt**(1)**						North Sea						Intersegment Eliminations & Other						Total**(4)**
For the Quarter Ended March 31, 2024						(In millions)
Revenues:
Oil revenues						$	588					$	657					$	187					$	—					$	1,432
Natural gas revenues						57						77						42						—						176
Natural gas liquids revenues						131						—						9						—						140
Oil, natural gas, and natural gas liquids production revenues						776						734						238						—						1,748
Purchased oil and gas sales						203						—						—						—						203
						979						734						238						—						1,951
Operating Expenses:
Lease operating expenses						140						120						78						—						338
Gathering, processing, and transmission						64						6						14						—						84
Purchased oil and gas costs						163						—						—						—						163
Taxes other than income						57						—						—						—						57
Exploration						70						31						—						47						148
Depreciation, depletion, and amortization						214						145						71						—						430
Asset retirement obligation accretion						15						—						25						—						40
						723						302						188						47						1,260
Operating Income (Loss)(2)						$	256					$	432					$	50					$	(47)					691
Other Income (Expense):
Derivative instrument losses, net																														(4)
Loss on previously sold Gulf of Mexico properties																														(66)
Gain on divestitures, net																														7
Other, net																														15
General and administrative																														(93)
Transaction, reorganization, and separation																														(27)
Financing costs, net																														(76)
Income Before Income Taxes																														$	447
Total Assets(3)						$	8,887					$	3,651					$	1,897					$	517					$	14,952

						U.S.						Egypt**(1)**						North Sea						Intersegment Eliminations & Other						Total**(4)**
For the Quarter Ended March 31, 2023						(In millions)
Revenues:
Oil revenues						$	486					$	629					$	282					$	—					$	1,397
Natural gas revenues						89						93						60						—						242
Natural gas liquids revenues						120						—						10						—						130
Oil, natural gas, and natural gas liquids production revenues						695						722						352						—						1,769
Purchased oil and gas sales						239						—						—						—						239
						934						722						352						—						2,008
Operating Expenses:
Lease operating expenses						147						97						77						—						321
Gathering, processing, and transmission						60						7						11						—						78
Purchased oil and gas costs						216						—						—						—						216
Taxes other than income						52						—						—						—						52
Exploration						3						36						5						8						52
Depreciation, depletion, and amortization						151						123						58						—						332
Asset retirement obligation accretion						10						—						18						—						28
						639						263						169						8						1,079
Operating Income (Loss)(2)						$	295					$	459					$	183					$	(8)					929
Other Income (Expense):
Derivative instrument gains, net																														53
Gain on divestitures, net																														1
Other, net																														(32)
General and administrative																														(65)
Transaction, reorganization, and separation																														(4)
Financing costs, net																														(72)
Income Before Income Taxes																														$	810
Total Assets(3)						$	7,525					$	3,334					$	1,836					$	518					$	13,213

(1)Includes oil and gas production revenue that will be paid as taxes by EGPC on behalf of the Company for the quarters ended March 31, 2024 and 2023 of:

						For the Quarter Ended March 31,
						2024						2023
						(In millions)
Oil						$	174					$	172
Natural gas						21						26

(2)Operating income of U.S. includes leasehold impairments of $10 million for the first quarter of 2024. Operating income of U.S. and North Sea includes leasehold impairments of $2 million and $3 million, respectively, for the first quarter of 2023.

(3)Intercompany balances are excluded from total assets.

(4)Includes noncontrolling interests in Egypt.