28.11.2012 16:10
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Apache Corporation -- Moody's rates new Apache senior notes A3

Proposed offering of senior notes due 2023 and 2044

New York, November 28, 2012 -- Moody's Investors Service assigned A3 ratings to the senior notes due 2023 and 2044 being offered by Apache Corporation (Apache). The proceeds from the notes offering will be used to repay commercial paper borrowings and for general corporate purposes. The outlook remains stable.

RATINGS RATIONALE

"Apache's debt levels have continued to rise this year with heavy capital expenditures in its Permian and Anadarko basin properties," commented Pete Speer, Moody's Vice-President. "Our stable outlook is based on the expectation that production and reserves growth combined with relatively flat debt levels going forward will reduce the company's leverage metrics in 2013."

Apache's A3 senior unsecured and Prime-2 commercial paper ratings reflect its large proved reserves and production scale and the company's global diversification, balanced overall exposure to oil and natural gas, strong capital discipline and solid production trend over time. The company has a long track record of conservative financial policies, including maintaining ample liquidity and using substantial equity in major acquisitions, and the successful execution of its acquisition and exploitation strategy. The company's high proportion of oil in its production has strengthened its cash margins and enabled Apache to fund large ongoing capital expenditures. The company has generally maintained low financial leverage, although the leverage metrics tend to rise with acquisitions and then trend back down with subsequent reserves and production growth.

The acquisition of Cordillera Energy Partners III (Cordillera) earlier this year combined with a significant outspending of cash flow in the third quarter has increased Apache's debt levels and correspondingly raised its financial leverage relative to production volumes and proved developed (PD) reserves. Some third quarter specific events, including Hurricane Irene, subdued the company's production and cash flow while capital expenditures were elevated by further acreage purchases to consolidate Apache's footprint in multiple Anadarko basin plays. Therefore we expect the company's capital expenditures to be largely internally funded going forward to avoid further meaningful increases in long-term debt.

The organic production and reserves growth visibility in the Permian and Anadarko basins should result in declines in leverage on production and PD reserves through 2013. In addition, Apache's A3 rating and stable outlook are supported by its still strong cash flow coverage of interest costs and debt relative to its A3 and Baa1-rated peers. About half of the company's production is liquids, with oil approaching 45% of total production. This provides Apache with strong cash margins on production and ample cash flow coverage of debt.

Further increases in leverage metrics caused by acquisitions or outspending of cash flows could result in a ratings downgrade. A significant disruption in the company's Egyptian operations could also pressure the ratings. Debt/average daily production above $16,000/boe and debt/PD reserves above $6/boe on a sustained basis could result in a downgrade of the ratings. Apache's current elevated leverage metrics and the event risk regarding its Egyptian assets makes an upgrade unlikely in 2013.

Apache Corporation is among the world's largest independent exploration and production companies and is based in Houston, Texas.

The principal methodology used in rating Apache Corporation was the Global Independent Exploration and Production Industry Methodology published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Peter Speer VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Steven Wood MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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