oil/gas analyze financial information

ACCT 6375 – Oil and Gas Accounting

Fall 2018

Dr. Wei-Chih Chiang

Group Project

Apache Corporation

By:

Elizabeth Coupland

Jessica Gulizia

Erin Hanselka

Executive Summary

Table of Contents 1.0 Introduction 1 2.0 Numerical Analysis – Financial Statements and Ratios 2 2.1 Vertical Common-Size Analysis 2 2.1.1 Vertical Common-Size Analysis – Balance Sheet 2 2.1.2 Vertical Common-Size Analysis – Income Statement 3-4 2.2 Horizontal Common-Size Analysis 5 2.2.1 Horizontal Common-Size Analysis – Balance Sheet 5-6 2.2.2 Horizontal Common-Size Analysis – Income Statement 7-8 2.3 Financial Ratios 2 i. Liquidity Ratios 6 1. Current Ratio 6 2. Quick Ratio 6 3. Working Capital 6 ii. Profitability Ratios 6 4. Net Income to Sales Ratio 6 5. Return on Assets Ratio 6 6. Return on Equity Ratio 6 iii. Financial Strength Ratios 6 7. Times Interest Earned Ratio 6 8. Cash Flow from Operations to Sales Ratio 6 9. Long-Term Debt to Equity Ratio 6 10. Earnings before Interest, taxes, depreciation and Amortization 6 iv. Dividends Ratio 6 11. Dividend Yield Ratio 6 12. Dividend Payout Ratios 6 v. Valuation Ratios 6 13. Price/Earnings Ratio 6 14. Price to Cash Flow Ratio 6 15. Cash Flow per Share Ratio 6 16. Price to Book Value Ratio 6 vi. Energy Specific Ratios 6 17. Reserves Replacement Ratios 6 18. Reserve Life Ratio 6 19. Net to Gross Well Ratio 6 20. Average Reserves per Well Ratio 6 21. Average Daily Production per Well Ratio 6 22. Finding Cost per BOE Ratio 6 23. DD&A per BOE Ratio 6 24. Value of Proved Reserve Additions per BOE Ratio 6 4.0 Analytical Results 1 5.0 Conclusions & Recommendations 1 6.0 References 1 7.0 Appendices 1

Running Head: Apache Corporation

Apache Corporation Group 3

1.0 Introduction

Apache Corporation was founded in 1954 by Truman Anderson, Raymond Plank, and Charles Arnao, incorporated in Delaware but headquartered in Houston, Texas. The company is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. Apache currently operates in three geographic areas which include the U.S., Egypt, and offshore in the North Sea. “In 1956, Apache was one of the first firms to register a drilling program with the U.S. Securities and Exchange Commission, providing investors with the protections of SEC reporting requirements and distinguishing the young company from many of the oil patch promoters who peddled their opaque investments to less knowledgeable investors in the Twin Cities and elsewhere” (Apache, n.d.). Apache Corporation has been listed on the New York Stock Exchange (NYSE) since 1969, on the Chicago Stock Exchange (CHX) since 1960, and on the NASDAQ Global Select Market since 2004. Stock prices for Apache has been a roller coaster ride over the past few years. Closing price at the end of 2015 total $44.47 per share, $63.47 per share in 2016, and $44.30 per share closing in 2017. This year the stock seems to fluctuate between $35-36 per share. Apache Corporation, like all other oil companies, has had a difficult time since the start of the mid-2014 crash but the company looks well positioned to grow its earnings and cash flows in the coming years. Since the discovery of Alpine High in 2016 the company has been preparing for significant growth and expects more than a third of the volume of production from this region.

This report will start by analyzing the most current three years of financial statements and computations for financial and energy specific ratios for Apache Corporation. A vertical and horizontal analysis of the balance sheet and income statements for fiscal years 2015-2017 will first be analyzed followed by the computations of the ratios. The report will also provide analytical results and conclusions followed by recommendations for Apache Corporation to help improve their financial position within the industry.

2.0 Numerical Analysis – Financial Statements and Ratios

The following sections will examine the financial statements and ratios for Apache Corporation for the years 2015-2017. The data for the vertical and horizontal common-size analysis of the balance sheet and income statement being presented were compiled from the company’s annual 10-K reports obtained from the SEC website. The financial ratios and the energy specific ratios will also be calculated to determine the company’s performance over the same three years.

2.1 Vertical Common-Size Analysis

The vertical common-size balance sheet and income statement provide the amounts and percentages of the base amount for each line item per year being analyzed. The base amount on the balance sheet are the total assets for the assets sections and total liabilities and equity for the second section. The base for the income statement comes from the oil and gas production revenues. The vertical common-size analysis helps identify the changes in assets, liabilities, revenue and productions year to year by comparing the financial statements for Apache Corporation for the most current years.

2.1.1 Vertical Common-Size Analysis – Balance Sheet (2015-2017)

The following table is a vertical common-size analysis of the balance sheets for the fiscal year ending December 31st 2015 through 2017 for Apache Corporation. The value shown represent the percentage of total assets for each year then a three year overall average.

Table 1

2.1.2 Vertical Common-Size Analysis – Income Statement (2015-2017)

The following table is a vertical common-size analysis of the income statements for the fiscal year ending December 31, 2015 through December 31, 2017 for Apache Corporation. The value shown represent the percentage of total revenues for each year then a three year overall average.

Table 2

By analyzing the vertical-common size balance sheet for Apache Corporation for fiscal years 2015-2017 it can be determined that the firms total in assets have gone down over the years but so has the company’s total liabilities. The firms cash and cash equivalents took a nice jump since 2015 which could be contributed to the discovery of the Alpine High in 2016 for which they are just now reaping some of the benefits as predicted. This also falls in line with the percentages of the gross profit, total revenue and profit after tax outline in the vertical common-size analysis of the income statement. Following the oil and gas crash of 2014 Apache Corporation took a hard hit in 2015 and 2016 but things turned around in the 2017 bringing them back into the black which can be clearing seen by a quick view of the years percentages. The 2015 total revenue percentage was 105.82% jumping to 109.10% in 2017 and the profit after tax for 2015 was -166.57% then took a huge turn around in 2017 pulling in a profit of 22.15%.

2.2 Horizontal Common-Size Analysis

The horizontal common-size analysis of the balance sheet and income statements compare amounts to figures from the base year. In the following two tables we will be analyzing years 2015-2017 as a percentage using the base year 2015. These percentages allow one to read, compare, and analyze outcomes more easily over a period of time.

2.2.1 Horizontal Common-Size Analysis – Balance Sheet

The following table shows values as a percentage of base year 2015 for Apache Corporation for the fiscal year ending December 31, 2015 through December 31, 2017. The last columns will provide an average over the three-year period.

Table 3

Analyzing the horizontal common-size analysis of the balance sheet clearly shows the decrease in assets from 2016 to 2017 by 9.35% with a 3-year average of 28.7%. While the current liabilities have jump up since 2016 from .11% to 39.16% as well as the long-term debt from -1.97% to -7.00%. The three-year average shows an overall increase of 7.24%. These increases are not surprising with the discovery of Alpine High in 2016. But the overall total liabilities have significantly decreased over the years. In the year 2015 Apache Corporation ended with a little over 16 million in total liabilities and at the end of year 2017 this number jumped down almost by 3 million to a little over 13 million.

2.2.2 Horizontal Common-Size Analysis – Income Statement

The following table shows values as a percentage of base year 2015 for Apache Corporation for the fiscal year ending December 31, 2015 through December 31, 2017. The last columns will provide an average over the three-year period.

Table 4

Analyzing the horizontal common-size analysis of the income statement reveals that the gross profit is down from 2015 due to the losses in derivative instruments of -135.000. Although the revenue was higher in 2015 their expenses were astronomically high causing a huge loss of -10,844,000 profits after tax. 2016 was not a good year for Apache Corporation either mainly because of the huge amount of money they were putting into the new Alpine High project. With such large losses in 2015 and 2016 the overall 3-year average came to -92.87%. It is apparent that the predictions of increase profits due to Alpine High would be a game changer for Apache Corporation which is evident by comparing the Net Income of 2017 bringing in a profit of 1.3 million to the huge losses suffered in 2015 and 2016.

3.0 Financial Ratios

Table 5

	2017	2016	2015
i. Liquidity Ratios
1. Current Ratio	1.453	1.759	2.038
2. Quick Ratio	1.309	1.500	1.728
3. Working Capital	1,161,000	1,398,000	1,911,000
ii. Profitability Ratios
4. Net Income to Sales Ratio	0.203	(0.262)	(1.503)
5. Return on Assets Ratio	0.059	(0.062)	(0.406)
6. Return on Equity Ratio	0.148	(0.183)	(1.091)
iii. Financial Strength Ratios
7. Times Interest Earned Ratio	3.758	0	0
8. Cash Flow from Operations to Sales Ratio	0.378	0.454	0.387
9. Long-Term Debt to Equity Ratio	1.169	1.429	1.188
10. Earnings before Interest, taxes, depreciation and Amortization	918,000	(1,682,000)	(12,169,000)
iv. Dividends Ratio
11. Dividend Yield Ratio	0.024	0.016	0.023
12. Dividend Payout Ratios	0.291	(0.270)	(0.036)
v. Valuation Ratios
13. Price/Earnings Ratio	12.380	0	0
14. Price to Cash Flow Ratio	6.660	9.900	6.300
15. Cash Flow per Share Ratio	0.764	(0.237)	2.085
16. Price to Book Value Ratio	2.170	3.860	2.130
vi. Energy Specific Ratios
17. Reserve Ratios
a. Reserves Replacement Ratio (Crude)	1.206	0.041	0.570
b. Reserves Replacement Ratio with revisions (Crude)	0.662	-0.454	-0.577
c. Reserves Replacement Ratio (Gas)	0.004	-1.131	-1.719
d. Reserves Replacement Ratio with revisions (Gas)	0.009	-2.128	-0.654
18. Reserve Life Ratios
a. Reserve life ratio (Crude)	6.550	6.380	7.310
b. Reserve life ratio (Gas)	6.660	7.090	7.560
19. Net to Gross Well Ratio	0.010	0.010	0.030
20. Average Reserves per Well Ratio	3.900	6.140	2.920
21. Average Daily Production per Well Ratio	1.620	2.530	1.080
22. Finding Cost per BOE Ratio	1.431	1.190	0.972
23. DD&A per BOE Ratio
24. Value of Proved Reserve Additions per BOE Ratio

4.0 Analytical Results

Financial ratios are used by investors to measure a company’s performance. Investors compare how a company performs over periods of time and they compare ratio results with competitors. They use the information from various ratios to determine the financial risk, stability, growth, and profitability of a company. The types of financial ratios used when analyzing Apache Corporations financials include liquidity, profitability, financial strength, dividend, valuation, and energy industry specific ratios. Those key ratios are discussed further below.

Liquidity ratios are used to determine how easily a firm can pay off their debts (see Table 5). The current ratio measures total current assets in relation to total current liabilities. This ratio is expected to be greater than 1. If this ratio is lower than 1, a firm is considered a considerable risk. Apache Corporation’s current ratios are greater than 1 for all years reviewed showing strong ability to pay their short-term debts. One thing to note is the ratio has gotten smaller each year with 2015 showing a ratio over 2 and 2017 falling to 1.453. The quick ratio is similar to the current ratio but shows how likely a company can quickly pay their current liabilities should the need arise. This ratio subtracts out inventory from current assets and compared that to current liabilities. Again, a ratio over 1 is considered good and Apache Corporation shows ratios over 1 for each year. Working capital is the difference between current assets and current liabilities. This represents the amount of easily convertible assets that can be used towards capital expenditures and investments. Apache Corporation has over a million in working capital giving the company the option to invest in their future.

Profitability ratios are used to determine how well a company can generate income. The net income to sales ratio compares net income to total revenue. Apache Corporation’s ratios for 2015 and 2016 were negative due to a loss in net income. This means Apache Corporation spent more than they earned in those years. In 2017, Apache’s net income to sales ratio was positive due to positive net income and that net income was about 20% of total revenues. The return on assets ratio measures how much a company earns using the assets they had during the period by looking at net income in relation to total assets. Apache Corporation showed an estimated 6% return on the assets for 2017 and did not have a return in 2015 or 2016 due to the net loss the company recognized. Lower returns on assets are not uncommon for exploration and production oil and gas companies due to the relatively high amount of assets needed to drill, complete, and operate wells. The return on equity ratio is used measure a company’s equity in comparison to the net income or how a company uses equity to produce earnings. Apache Corporation had a 14.8% return on equity in 2017 and no return in 2015 and 2016. In comparison to peers, Apache has a higher return on equity than most peers in 2017. Noble Energy and Marathon Oil both show no earnings. Devon Energy shows about 10% in return on equity. Overall, Apache Corporation performed well in 2017 when compared to previous years financial statements and Apache’s competitors.

Financial strength ratios are used to determine how well a company is performing and the amount of risk related to the company. The times interest earned ratio is used to determine if a company can pay off their debts without problems and is calculated by dividing income before interest and tax by the total interest expense. Apache Corporation’s ratio for 2017 when calculated is 3.758 which is considered healthy since it’s above 2.5. The cash flow from operations to sales ratio looks at cash flow from operations and compares that to sales. This allows an investor to see how easily a company converts sales into cash. Apache Corporation shows almost 38% of total sales was converted to operating cash. When comparing this to competitors, Apache outperforms both Marathon Oil (9%) and Devon Energy (21%). The long-term debt to equity ratio is used to determine the leverage a business has assumed. An investor would look at long-term debt in relation to the company’s equity. Apache Corporation’s long-term debt to equity ratio was 1.169 in 2017. Marathon Oil’s debt to equity ratio was .46 in comparison and Devon Energy was .7378. The higher the ratio, the riskier the company, so Apache Corporation has higher risk in this area than both Marathon Oil and Devon Energy. Analyzing earnings less interest, taxes, depreciation, and amortization helps an investor see how well a company is performing in regards to their operations by removing all non-operation related items on the income statement. Apache Corporation’s EBITDA was a loss of over $12 million in 2015, a loss of about $1.7 million in 2016, and a positive $918 thousand in 2017. This shows Apache has improved over the three years being reviewed. Apache has overall good financial strength but needs to lower their long-term debt to make themselves even more desirable on the market.

Dividend ratios are used to compare the dividends a company paid to stockholders and key financial information related to the market and income statement. The dividend yield ratio compares the cash dividend to the market value of the company during a period and helps an investor determine their return on the stock they’ve invested in. Apache Corporation’s dividend yield ratio was close to 2% in all three years reviewed. More specifically, it was 2.3% in 2015, 1.6% in 2016, and 2.4% in 2017 with 2017 being the best year reviewed. The dividend payout ratio compares dividends in relation to net income. The difference between dividends paid and net income would be retained earnings used for investment purposes back into the company. Apache Corporation’s dividend payout ratio was negative in 2015 and 2016 due to a net loss in earnings and increased to 29% in 2017. The dividends Apache pays to investors keeps the market value of the company high compared to competitors.

Valuation ratios give investors information on what a company is worth. The price/earnings ratio gives an investor the amount of investment needed in order to receive a dollar of earnings. When there are negative earnings, the price/earnings ratio is considered 0 or not applicable. Apache Corporation’s price earnings ratio for 2015 and 2016 were zero due to a loss in net income for those years but was 12.38 in 2017 so, as seen in several other ratios, Apache has improved in the last year. The price to cash flow ratio is used to compare the market value of a company to the operating cash flow of a company for the period being reviewed. Apache’s price to cash flow ratio was 6.3 in 2015, 9.9 in 2016, and 6.6 in 2017. The lower ratio means more cash flow so Apache did improve from 2016 to 2017. Using the cash flow per share ratio, investors review net cash flow related to the number of shares outstanding. This allows investors to see the cash side of the business as it related to the value of the company. It removes all non-cash measures such as depreciation, depletion, and amortization. Apache Corporation’s cash flow per share ratio was 2.085 in 2015, which was the highest of the three periods, a negative value in 2016 due to negative overall net cash flow, and increased to .764 in 2017. The price to book value ratio is looks at the market price compared to the book value per share. If the market price is a lot lower than the book value per share (less than 1), the stock is under value which could be due to a multitude of reasons such as elevated risk or underperformance. Apache Corporation’s price to book value ratio was 2.13 in 2015, 3.86 in 2016, and 2.17 in 2017. All three years were over 1 showing the market value has consistently been greater than the book value.

Energy specific ratios were created using key financial information specifically for energy related companies. Oil and gas reserves are a large part of an energy company’s balance sheet so investors find understanding this information a high priority. Apache Corporation’s energy specific ratios are analyzed below.

Reserve replacement ratio is a key measurement in the oil and gas financial statements. The ratio indicates how a company is able to effectively replace production and hence measure a company’s ability to operate in long run. A company that is not able to replace its reserves will deplete its natural resources in the near future and may have to get out of business. Table 5 above shows the reserve replacement ratio for Apache in the production of crude oil. We see that the replacement ratio has been rising. In the year 2015, 2016 and 2017 the reserve replacement ratio was 0.57, 0.41 and 1.21 respectively. The reserve replacement ratio for 2017 is desirable since it is greater than one and thus shows that during that financial period the company was able add to its reserves at a rate higher than its production.

The replacement ratio for gas is also shown in Table 5 above. Apache has registered a considerably low reserve replacement ratio over the last three years. The company is not adopting more resources on the replacement of gas reserves.

The reserve life ratio measures the productive life of a current company if no reserves are added. Higher reserve life ratio shows that the company would earn cash inflows from the reserve on a longer term. The reserve life ratio for both crude oil and gas is higher than 6.5 throughout the three-year period. However, this is slightly lower than the average reserve ratio for large companies in the oil and gas industry.

Net wells to gross wells ratio is a measurement that can be used to assess the future profit performance of a company. The argument is that a company owning large interest in wells is likely to earn more benefits to the well hence gain more profits. A high net wells to gross wells ratio is preferable since it indicates that a company has huge interest in wells. The ratio decreased from 0.03 in 2015 to 0.01 in 2017. This ratio is low and indicates that the company has some working interest on the wells.

Table 5 above shows the average reserves per wells ratio and the average daily production per well. Higher average reserves per well is preferable as it indicates that a given reserve quantity can be produced using fewer wells. Therefore, high average reserves per wells ratio shows the company’s production is more efficient and thus profitable. Apache has been able to maintain higher average reserves per wells ratio over the last three years.

21. Average Daily Production per Well Ratio need short paragraph explaining

The table below shows the average reserves per wells ratio and the average daily production per well. A average reserves per well is preferable as it indicates that a given reserve quantity can be produced using fewer wells. Therefore high average reserves per wells ratio shows the company’s production is more efficient and thus profitable. Apache has been able to maintain higher average reserves per wells ratio over the last three years as we see in the table below.

The lifting costs per BOE shown in Table 5 above indicates that the company has experienced consistently increasing lifting costs over the last three years. Lifting costs per BOE evaluates the level at which a company controls its operation costs. Particularly it assesses the efficiency with which a company drills its reserves from the ground. Increasing lifting costs per BOE may not be desirable and can point towards some level of production inefficiency.

23. DD&A per BOE Ratio – need paragraph explaining

Lifting costs per BOE & DD&A per BOE

2015	$ 0.972	/BOE
2016	$ 1.190	/BOE
2017	$ 1.431	/BOE

The table above indicates that the company has experienced consistently increasing lifting costs over the last three years. Lifting costs per BOE evaluates the level at which a company controls its operation costs. Particularly it assesses the efficiency with which a company drills its reserves from the ground. Increasing lifting costs per BOE may not be desirable and can point towards some level of production inefficiency.

24. Value of Proved Reserve Additions per BOE Ratio – need paragraph explaining

5.0 Conclusions & Recommendations

In conclusion we find that Apache Corporation is performing well in the oil and gas industry. This conclusion is arrived given the favorable performance indicators that are identified as a result of the financial statement analysis of the company’s reserve ratios. Specifically, Apache Corporation had a small decrease in net revenues while decreasing overall expenses at a higher rate. The company’s financials show they determined it was best to scale down a little and that effort resulted in a positive net income instead of the losses in the prior 2 years. Apache’s total assets and total liabilities decreased over the years but Apache shows strong performance with current assets and current liabilities. While they did increase long-term debt over the last two years, they also decreased equity and remain a higher risk when looking at long-term debt in relation to equity. Apache Corporation has improved on reserve related measures in 2017 for the most part, with the reserve replacement rate drastically improving in 2017, but rising lifting costs per BOE is an issue that should be addressed as soon as possible. It could indicate that the company will struggle in the future if these continue to rise. The reserve life ratio for both gas and oil has been 7 on average over the last three years. The reserve life ratio is not significantly different from the average reserve life ratio for large companies in the industry. Given all of the financial indicators, Apache Corporation would overall be a good investment when comparing with previous years and with their competitors.

6.0 References

Apache Corporation (n.d.) Exploring What’s Possible. Retrieved November 13, 2018 from http://www.apachecorp.com/About_Apache/History/1954-1979.aspx

Apache Corporation. (2017, December 31). Form 10-K Apache Corporation. Retrieved from

www.sec.gov: https://www.sec.gov/Archives/edgar/data/6769/000167337918000008/apa10-

k2017.htm

7.0 Appendices

Table 1

Table 2

Table 3

Table 4

Table 5

	2017	2016	2015
i. Liquidity Ratios
1. Current Ratio	1.453	1.759	2.038
2. Quick Ratio	1.309	1.500	1.728
3. Working Capital	1,161,000	1,398,000	1,911,000
ii. Profitability Ratios
4. Net Income to Sales Ratio	0.203	(0.262)	(1.503)
5. Return on Assets Ratio	0.059	(0.062)	(0.406)
6. Return on Equity Ratio	0.148	(0.183)	(1.091)
iii. Financial Strength Ratios
7. Times Interest Earned Ratio	3.758	0	0
8. Cash Flow from Operations to Sales Ratio	0.378	0.454	0.387
9. Long-Term Debt to Equity Ratio	1.169	1.429	1.188
10. Earnings before Interest, taxes, depreciation and Amortization	918,000	(1,682,000)	(12,169,000)
iv. Dividends Ratio
11. Dividend Yield Ratio	0.024	0.016	0.023
12. Dividend Payout Ratios	0.291	(0.270)	(0.036)
v. Valuation Ratios
13. Price/Earnings Ratio	12.380	0	0
14. Price to Cash Flow Ratio	6.660	9.900	6.300
15. Cash Flow per Share Ratio	0.764	(0.237)	2.085
16. Price to Book Value Ratio	2.170	3.860	2.130
vi. Energy Specific Ratios
17. Reserve Ratios
a. Reserves Replacement Ratio (Crude)	1.206	0.041	0.570
b. Reserves Replacement Ratio with revisions (Crude)	0.662	-0.454	-0.577
c. Reserves Replacement Ratio (Gas)	0.004	-1.131	-1.719
d. Reserves Replacement Ratio with revisions (Gas)	0.009	-2.128	-0.654
18. Reserve Life Ratios
a. Reserve life ratio (Crude)	6.550	6.380	7.310
b. Reserve life ratio (Gas)	6.660	7.090	7.560
19. Net to Gross Well Ratio	0.010	0.010	0.030
20. Average Reserves per Well Ratio	3.900	6.140	2.920
21. Average Daily Production per Well Ratio	1.620	2.530	1.080
22. Finding Cost per BOE Ratio	1.431	1.190	0.972
23. DD&A per BOE Ratio
24. Value of Proved Reserve Additions per BOE Ratio

1

17

3 Year

AmountPercentAmountPercentAmountPercentAverage

ASSETS

Cash and cash equivalents1,668,000 7.6%1,377,000 6.1%1,467,000 5.8%6.5%

Receivables, net of allowance1,345,000 6.1%1,128,000 5.0%1,253,000 4.9%5.4%

Inventories368,000 1.7%476,000 2.1%570,000 2.2%2.0%

Drilling advances207,000 0.9%81,000 0.4%172,000 0.7%0.7%

Prepaid assets and other137,000 0.6%179,000 0.8%290,000 1.1%0.9%

Total Current Assets3,725,000 17.0%3,241,000 14.4%3,752,000 14.7%15.4%

Proved Properties39,197,000 178.80%42,693,000 189.59%41,728,000 163.6%177.3%

Unproved Properties and

properties under development

1,783,000 8.13%1,969,000 8.74%2,277,000 8.9%8.6%

Gathering, transmission, and

processing facilities

1,376,000 6.28%976,000 4.33%1,052,000 4.1%4.9%

Other1,046,000 4.77%1,111,000 4.93%1,093,000 4.3%4.7%

Less: Accumulated depreciation,

depletion, and amortization

(25,643,000) -116.97%(27,882,000) -123.82%(25,312,000) -99.3%-113.4%

Deferred charges and other438,000 2.00%411,000 1.83%910,000 3.6%2.5%

Total Long-Term Assets18,197,000 83.0%19,278,000 85.6%21,748,000 85.3%84.6%

Total Assets21,922,000 100.0%22,519,000 100.0%25,500,000 100.0%100.0%

LIABILITIES & STOCKHOLDER'S

EQUITY

Current Liabilities

Accounts payable641,000 2.9%585,000 2.6%618,000 2.4%2.6%

Current Debt550,000 2.5%- 0.0%- 0.0%0.8%

Other Current liabilities1,373,000 6.3%1,258,000 5.6%1,223,000 4.8%5.5%

Total Current Liabilities2,564,000 11.7%1,843,000 8.2%1,841,000 7.2%9.0%

Long-Term Debt7,934,000 36.2%8,544,000 37.9%8,716,000 34.2%36.1%

Deferred Credit & other noncurrent

liabilities

Income Taxes545,000 2.5%1,710,000 7.6%2,529,000 9.9%6.7%

Asset retirement obligations1,792,000 8.2%2,432,000 10.8%2,562,000 10.0%9.7%

Other296,000 1.4%311,000 1.4%362,000 1.4%1.4%

Total Long-Term Debt2,633,000 12.0%4,453,000 19.8%5,453,000 21.4%17.7%

Total Liabilities13,131,000 59.9%14,840,000 65.9%16,010,000 62.8%62.9%

Equity

Common Stock259,000 1.2%258,000 1.1%257,000 1.0%1.1%

Paid-in-capital12,128,000 55.3%12,364,000 54.9%12,619,000 49.5%53.2%

Accumulated deficit(2,088,000) -9.5%(3,385,000) -15.0%(1,980,000) -7.8%-10.8%

Treasury stock(2,887,000) -13.2%(2,887,000) -12.8%(2,889,000) -11.3%-12.4%

Accumulated other comprehensive

income

4,000 0.0%(112,000) -0.5%(119,000) -0.5%-0.3%

Noncontrolling interest1,375,000 6.3%1,441,000 6.4%1,602,000 6.3%6.3%

Total Equity8,791,000 40.1%7,679,000 34.1%9,490,000 37.2%37.1%

Total Liabilities & Equity21,922,000 100.0%22,519,000 100.0%25,500,000 100.0%100.0%

201520172016

Balance Sheet

Vertical Common-Size Analysis - Apache Corp

For Years Ended December 31, 2017, 2016, and 2015

2017201620152017201620153 Year

AmountAmountAmountPercentagePercentagePercentageAverage

INCOME

Oil and gas production revenues5,887,000 5,367,000 6,510,000 100.00%100.00%100.00%100.00%

Less: Cost of Revenue1,579,000 1,694,000 2,065,000 26.82%31.56%31.72%30.04%

Gross Profit4,308,000 3,673,000 4,445,000 73.18%68.44%68.28%69.96%

Derivative instrument gains (losses),

net

(135,000) - - -2.29%0.00%0.00%-0.76%

Other44,000 (34,000) 98,000 0.75%-0.63%1.51%0.54%

Gains on divestiture627,000 21,000 281,000 10.65%0.39%4.32%5.12%

Total Revenue (I)6,423,000 5,354,000 6,889,000 109.10%99.76%105.82%104.89%

EXPENSES

Operating Expenses1,400,000 1,494,000 1,854,000 23.78%27.84%28.48%26.70%

Gathering and transportation179,000 200,000 211,000 3.04%3.73%3.24%3.34%

Taxes other than income151,000 126,000 282,000 2.56%2.35%4.33%3.08%

Exploration549,000 473,000 2,771,000 9.33%8.81%42.57%20.23%

General and administrative395,000 410,000 380,000 6.71%7.64%5.84%6.73%

Transaction, reorganization, and

separation

16,000 39,000 132,000 0.27%0.73%2.03%1.01%

Oil and gas property & equipment2,136,000 2,460,000 2,976,000 36.28%45.84%45.71%42.61%

Other assets144,000 158,000 324,000 2.45%2.94%4.98%3.46%

Asset retirement obligation accretion130,000 156,000 145,000 2.21%2.91%2.23%2.45%

Impairments8,000 1,103,000 9,472,000 0.14%20.55%145.50%55.40%

Finance Costs, net397,000 417,000 511,000 6.74%7.77%7.85%7.45%

Total (II)5,505,000 7,036,000 19,058,000 93.51%131.10%292.75%172.45%

EARNINGS BEFORE INTEREST, TAX,

DEPRECIATION AND AMORTISATION

(EBITDA) (I) -(II)

918,000 (1,682,000) (12,169,000) 15.59%-31.34%-186.93%-67.56%

Current income tax provision595,000 391,000 435,000 10.11%7.29%6.68%8.02%

Deferred income tax benefit(1,180,000) (833,000) (1,445,000) -20.04%-15.52%-22.20%-19.25%

Net income (loss) from discontinued

operations net of tax

- (33,000) 492,000 0.00%-0.61%7.56%2.31%

Net Income including noncontrolling

interest

1,503,000 (1,240,000) (11,159,000) 25.53%-23.10%-171.41%-56.33%

Net income (loss) attributable to

noncontrolling interest

199,000 132,000 (315,000) 3.38%2.46%-4.84%0.33%

Weighted average number of common

shares outstanding

Basic381,000379,000 378,000 6.47%6.44%6.42%6.44%

Diluted383,000379,000 378,000 6.51%6.44%6.42%6.45%

199,000132,000-315,0003.38%2.46%-4.84%0.33%

PROFIT AFTER TAX 1,304,000-1,372,000-10,844,00022.15%-25.56%-166.57%-56.66%

Net income loss from discontinued

operations

- (33,000) 492,000

0.00%-0.56%8.36%2.60%

Net Income attributable to common

shareholders

1,304,000 (1,405,000) (10,352,000) 22.15%-26.18%-159.02%-54.35%

Income Statement

Vertical Common-Size Analysis - Apache Corp

For Years Ended December 31, 2017, 2016, and 2015

2017201620153 Year

AmountAmountAmount201720162015Average

Assets

Cash and cash equivalents1,668,000 1,377,000 1,467,000 19.84%-6.13%100.00%37.9%

Receivables, net of allowance1,345,000 1,128,000 1,253,000 17.32%-9.98%100.00%35.8%

Inventories368,000 476,000 570,000 -18.95%-16.49%100.00%21.5%

Drilling advances207,000 81,000 172,000 73.26%-52.91%100.00%40.1%

Prepaid assets and other137,000 179,000 290,000 -14.48%-38.28%100.00%15.7%

Current Assets3,725,000 3,241,000 3,752,000 12.90%-13.62%100.00%33.1%

Fixed Assets (Property, Plant, Equipment18,197,000 19,278,000 21,748,000 -4.97%-11.36%100.00%27.9%

Total Assets21,922,000 22,519,000 25,500,000 -2.34%-11.69%100.00%28.7%

Liabilities and Stockholder's Equity

Liabilities

Accounts payable641,000 585,000 618,000 9.06%-5.34%100.00%34.6%

Current Debt550,000 - - 100.00%33.3%

Other Current liabilities1,373,000 1,258,000 1,223,000 9.40%2.86%100.00%37.4%

Current Liabilities2,564,000 1,843,000 1,841,000 39.16%0.11%100.00%46.4%

Other long terms debt7,934,000 8,544,000 8,716,000 -7.00%-1.97%100.00%30.3%

Income Taxes545,000 1,710,000 2,529,000 -46.07%-32.38%100.00%7.2%

Asset retirement obligations1,792,000 2,432,000 2,562,000 -24.98%-5.07%100.00%23.3%

Other296,000 311,000 362,000 -4.14%-14.09%100.00%27.3%

Total Liabilities13,131,000 14,840,000 16,010,000 -10.67%-7.31%100.00%27.3%

Stockholder's Equity

Common Stock259,000 258,000 257,000 0.39%0.39%100.00%33.6%

Paid-in-capital12,128,000 12,364,000 12,619,000 -1.87%-2.02%100.00%32.0%

Accumulated deficit(2,088,000) (3,385,000) (1,980,000) -65.51%70.96%100.00%35.2%

Treasury stock(2,887,000) (2,887,000) (2,889,000) 0.00%-0.07%100.00%33.3%

Accumulated other comprehensive

income

4,000 (112,000) (119,000) -97.48%-5.88%100.00%-1.1%

Noncontrolling interest1,375,000 1,441,000 1,602,000 -4.12%-10.05%100.00%28.6%

Total Stockholder's Equity8,791,000 7,679,000 9,490,000 11.72%-19.08%100.00%30.9%

Total Liabilities and Stockholder's Equity21,922,000 22,519,000 25,500,000 -2.34%-11.69%100.00%28.7%

Horizontal Common-Size Analysis - Apache Corp

For Years Ended December 31, 2015, 2016, & 2017

Balance Sheet

Horizontal Variance

2017201620152017201620153 Year

AmountAmountAmountPercentagePercentagePercentageAverage

INCOME

Oil and gas production revenues5,887,000 5,367,000 6,510,000 7.99%-17.56%100.00%30.14%

Less: Cost of Revenue1,579,000 1,694,000 2,065,000 -5.57%-17.97%31.72%2.73%

Gross Profit4,308,000 3,673,000 4,445,000 14.29%-17.37%68.28%21.73%

Derivative instrument gains (losses),

net

(135,000) - - 0.00%0.00%0.00%0.00%

Other44,000 (34,000) 98,000 79.59%-134.69%1.51%-17.87%

Gains on divestiture627,000 21,000 281,000 215.66%-92.53%4.32%42.48%

Total Revenue (I)6,423,000 5,354,000 6,889,000 15.52%-22.28%105.82%33.02%

EXPENSES

Operating Expenses1,400,000 1,494,000 1,854,000 -5.07%-19.42%28.48%1.33%

Gathering and transportation179,000 200,000 211,000 -9.95%-5.21%3.24%-3.97%

Taxes other than income151,000 126,000 282,000 8.87%-55.32%4.33%-14.04%

Exploration549,000 473,000 2,771,000 2.74%-82.93%42.57%-12.54%

General and administrative395,000 410,000 380,000 -3.95%7.89%5.84%3.26%

Transaction, reorganization, and

separation

16,000 39,000 132,000 -17.42%-70.45%2.03%-28.62%

Oil and gas property & equipment2,136,000 2,460,000 2,976,000 -10.89%-17.34%45.71%5.83%

Other assets144,000 158,000 324,000 -4.32%-51.23%4.98%-16.86%

Asset retirement obligation accretion130,000 156,000 145,000 -17.93%7.59%2.23%-2.71%

Impairments8,000 1,103,000 9,472,000 -11.56%-88.36%145.50%15.19%

Finance Costs, net397,000 417,000 511,000 -3.91%-18.40%7.85%-4.82%

Total (II)5,505,000 7,036,000 19,058,000 -8.03%-63.08%292.75%73.88%

EARNINGS BEFORE INTEREST, TAX,

DEPRECIATION AND AMORTISATION

(EBITDA) (I) -(II)

918,000 (1,682,000) (12,169,000) -21.37%-86.18%-186.93%-98.16%

Current income tax provision595,000 391,000 435,000 46.90%-10.11%6.68%14.49%

Deferred income tax benefit(1,180,000) (833,000) (1,445,000) 24.01%-42.35%-22.20%-13.51%

Net income (loss) from discontinued

operations net of tax

- (33,000) 492,000 6.71%-106.71%7.56%-30.81%

Net Income including noncontrolling

interest

1,503,000 (1,240,000) (11,159,000) -24.58%-88.89%-171.41%-94.96%

Net income (loss) attributable to

noncontrolling interest

199,000 132,000 (315,000) -21.27%-141.90%-4.84%-56.00%

Weighted average number of common

shares outstanding

Basic381,000379,000 378,000 0.53%0.26%5.81%2.20%

Diluted383,000379,000 378,000 1.06%0.26%5.81%2.38%

199,000132,000-315,000-21.27%-141.90%-4.84%-56.00%

PROFIT AFTER TAX 1,304,000-1,372,000-10,844,000-24.68%-87.35%-166.57%-92.87%

Net income loss from discontinued

operations

- (33,000) 492,000

6.71%-106.71%7.56%-30.81%

Net Income attributable to common

shareholders

1,304,000 (1,405,000) (10,352,000)

-26.17%-86.43%-159.02%-90.54%

Horizontal Common-Size Analysis - Apache Corp

For Years Ended December 31, 2015, 2016, & 2017

Income Statement

Apache- Average reserves per wells201720162015

Average reserves per wells ratio3.906.142.92

Average daily production per well1.622.531.08