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Rating Action:

Moody's changes Apache's rating outlook to stable

11 Nov 2016

Approximately $8.7 billion of rated debt affected

New York, November 11, 2016 -- Moody's Investors Service (Moody's) changed the rating outlook for Apache Corporation (Apache) and its guaranteed subsidiaries to stable from negative. Moody's affirmed Apache's and its guaranteed subsidiaries' Baa3 senior unsecured ratings and its P-3 commercial paper rating.

"Apache's demonstrated commitment to limit capital investment to within cash flow and maintain a sizable cash balance led to our changing its rating outlook to stable," commented Pete Speer, Moody's Senior Vice President. "Ongoing operational improvements and rising commodity prices will improve its credit metrics in 2017, while the company works to lower its organic reserves replacement costs to generate more competitive returns and stem production declines."

Outlook Actions:

..Issuer: Apache Corporation

....Outlook, Changed To Stable From Negative

..Issuer: Apache Finance Canada Corporation

....Outlook, Changed To Stable From Negative

..Issuer: Apache Finance Canada II Corporation

....Outlook, Changed To Stable From Negative

Affirmations:

..Issuer: Apache Corporation

....Senior Unsecured Commercial Paper, Affirmed P-3

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: Apache Finance Canada Corporation

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: Apache Finance Canada II Corporation

....Backed Subordinare Shelf, Affirmed (P)Ba1

....Backed Senior Unsecured Shelf, Affirmed (P)Baa3

RATINGS RATIONALE

Apache's Baa3 senior unsecured rating and Prime-3 short-term rating incorporate Moody's expectation of gradually improving cash flow generation and cash flow based credit metrics in 2017. The Baa3 rating is supported by Apache's large and diversified asset base, aggressive reductions in capital spending which has limited anticipated negative free cash flow in 2016 and 2017, and manageable debt maturities through 2020. The company's asset portfolio benefits from the ownership of producing properties in the North Sea and Egypt that generate meaningful cash flow even in a low oil price environment, adding diversification to its high quality large acreage positions in multiple basins in North America, including the Permian Basin. The company also has stronger asset value coverage of debt than most Baa3 peers. The rating is restrained by the company's historically higher finding and development costs (F&D) and correspondingly weaker investment returns than peers.

Apache's rating outlook is stable reflecting Moody's expectation that the company's financial leverage metrics will improve in 2017 in line with the company's improving operational performance and Moody's commodity price estimates, and that the company will avoid negative free cash flow and maintain its sizable cash balance.

Apache's P-3 short-term liquidity rating is supported by its excellent liquidity profile reflecting its cash and available borrowing capacity under its committed revolving credit facility. At September 30, 2016, the company had $1.2 billion of cash, no commercial paper (CP) outstanding and full availability under its $3.5 billion committed revolving credit facility that matures in June 2020. The company's $3.5 billion commercial paper program is fully backed by the revolving credit facility. The credit facility has a financial covenant restricting debt-to-capitalization to a maximum of 60%, for which the company has ample headroom that Moody's expect to continue through 2017. Apache has no secured debt so its assets are unencumbered providing it with the flexibility to sell oil and gas properties to raise cash.

In order for Apache's rating to be considered for an upgrade, the company will have to achieve modest production and reserves growth funded within cash flow and at competitive returns compared to peers. Moody's expects oil prices to remain in a range of $40 to $60 per barrel for the medium term with significant volatility both within and outside that band. The rating could be upgraded if Apache can sustain RCF/Debt above 25% and an LFCR approaching 1.5x at the low end of that commodity price range.

Apache's ratings could be downgraded if RCF/debt falls below 15% on a sustained basis.

The principal methodology used in these ratings was "Global Independent Exploration and Production Industry" published in December 2011. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Apache Corporation (Apache) is headquartered in Houston, Texas and is amongst the largest independent exploration and production (E&P) companies in the world. The company operates in multiple basins across the US, including large positions in the Permian and Anadarko Basins. Core international operating areas include Canada, Egypt and the North Sea.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Speer
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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