SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- -----------------
Commission file number 1-4300
-------------
APACHE CORPORATION
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-0747868
- -------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 100, One Post Oak Central
2000 Post Oak Boulevard, Houston, TX 77056-4400
- ---------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 296-6000
-------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
---- ----
Number of share of Apache Corporation common stock, $1.25 par value,
outstanding as of March 31, 1996..............................77,499,427
THIS AMENDMENT NO. 1 ON FORM 10-Q/A TO THE REGISTRANT'S FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1996 IS BEING FILED TO RESOLVE A TECHNICAL EDGAR
PROBLEM. THE REGISTRANT'S ORIGINAL FORM 10-Q, TIMELY FILED ON MAY 15, 1996
VIA EDGAR, WAS COMPLETE AND THE CONTENT OF SUCH FILING IS NOT CHANGED
IN SUBSTANCE HEREBY; HOWEVER, THE FACING PAGE WAS MISCODED IN THE ORIGINAL
FILING AND HAS BEEN CORRECTLY CODED IN THIS AMENDMENT.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
(In thousands, except per common share data) For the Three Months
Ended March 31,
-------------------------
1996 1995
---------- -----------
REVENUES:
Oil and gas production revenues $ 171,921 $ 143,189
Gathering, processing and marketing revenues 33,949 22,869
Other revenues 600 1,660
---------- ----------
206,470 167,718
---------- ----------
OPERATING EXPENSES:
Depreciation, depletion and amortization 71,861 69,795
Operating costs 52,512 44,979
Gathering, processing and marketing costs 32,410 21,461
Administrative, selling and other 8,858 9,689
Financing costs:
Interest expense 20,248 18,561
Amortization of deferred loan costs 1,155 1,223
Capitalized interest (5,301) (3,582)
Interest income (679) (906)
---------- ----------
181,064 161,220
---------- ----------
INCOME BEFORE INCOME TAXES 25,406 6,498
Provision for income taxes 9,751 2,415
---------- ----------
NET INCOME $ 15,655 $ 4,083
========== ==========
NET INCOME PER COMMON SHARE $ .20 $ .06
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 77,422 69,673
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
1
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands) For the Three Months
Ended March 31,
--------------------------
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,655 $ 4,083
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 71,861 69,795
Amortization of deferred loan costs 1,155 1,223
Provision for deferred income taxes 9,114 2,415
Gain on sale of stock held for investment -- (350)
Changes in operating assets and liabilities:
Increase in receivables (3,354) (5,956)
Increase in advances to oil
and gas ventures and other (2,178) (328)
(Increase) decrease in deferred charges and other (1,537) 612
Decrease in payables (2,974) (9,785)
Increase (decrease) in accrued operating costs (12,553) 2,865
Decrease in advance from gas purchaser (2,041) (1,653)
Increase (decrease) in deferred credits and
noncurrent liabilities (5,089) 1,608
---------- ----------
Net cash provided by operating activities 68,059 64,529
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures (116,482) (79,431)
Acquisition of oil and gas properties (643) (573,137)
Non-cash portion of net oil and gas property
additions 6,426 (7,846)
Investment in Producers Energy Marketing, LLC (5,785) --
Purchase of stock held for investment -- (305)
Proceeds from sale of oil and gas properties -- 20,401
Proceeds from sale of investments -- 5,383
Prepaid acquisition cost -- 25,377
Increase in inventory, net (2,089) (3,550)
Other capital expenditures, net (5,603) (1,751)
---------- ----------
Net cash used by investing activities (124,176) (614,859)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 183,889 720,859
Payments on long-term debt (119,268) (165,241)
Proceeds from issuance of common stock, net 2,873 600
Treasury stock activity, net (2) --
Costs of debt and equity transactions -- (11,224)
Dividends paid (5,417) (4,301)
--------- ----------
Net cash provided by financing activities 62,075 540,693
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,958 (9,637)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,633 30,043
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,591 $ 20,406
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands) March 31, December 31,
1996 1995
---------- ----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 19,591 $ 13,633
Receivables 179,323 175,949
Inventories 11,853 9,764
Advances to oil and gas ventures and other 11,110 8,990
------------ ------------
221,877 208,336
------------ ------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full
cost accounting:
Proved properties 4,089,721 3,956,833
Unproved properties and properties
under development, not being amortized 320,709 335,842
Gas gathering, transmission and
processing facilities 36,181 33,088
Other 52,139 51,341
----------- ------------
4,498,750 4,377,104
Less: Accumulated depreciation,
depletion and amortization (2,044,415) (1,975,543)
------------ ------------
2,454,335 2,401,561
------------ ------------
OTHER ASSETS:
Deferred charges and other 69,795 71,553
------------ ------------
$ 2,746,007 $ 2,681,450
============ ============
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands) March 31, December 31,
1996 1995
------------ -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,000 $ 3,000
Accounts payable 129,340 138,269
Accrued operating expense 21,383 26,863
Accrued exploration and development 36,684 30,251
Accrued interest 10,439 9,687
Accrued compensation and benefits 3,737 9,733
Other accrued expenses 10,365 12,546
------------ ------------
213,948 230,349
------------ ------------
LONG-TERM DEBT 1,137,697 1,072,076
------------ ------------
DEFERRED CREDITS AND OTHER NONCURRENT
LIABILITIES:
Income taxes 190,349 181,575
Advance from gas purchaser 58,297 60,338
Other 40,599 45,307
------------ ------------
289,245 287,220
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000
shares authorized, 78,619,418 and
78,498,892 shares issued, respectively 98,274 98,124
Paid-in capital 690,188 687,465
Retained earnings 345,700 335,470
Treasury stock, at cost, 1,119,991 and
1,119,934 shares, respectively (13,480) (13,478)
Currency translation adjustment (15,565) (15,776)
------------ ------------
1,105,117 1,091,805
------------ ------------
$ 2,746,007 $ 2,681,450
============ ============
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF RETAINED EARNINGS
(Unaudited)
(In thousands) For the Three Months
Ended March 31,
---------------------------
1996 1995
----------- -----------
Retained earnings, beginning of period $ 335,470 $ 335,293
Net income 15,655 4,083
Dividends declared:
Common stock, $.07 per share (5,425) (4,303)
---------- ----------
Retained earnings, end of period $ 345,700 $ 335,073
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
5
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The financial statements included herein have been prepared by Apache
Corporation (Apache or the Company), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC), and
reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim periods, on a basis
consistent with the annual audited statements. 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 generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with
the financial statements and the summary of significant accounting policies
and notes thereto included in the Company's latest annual report on Form
10-K.
INCOME TAXES
Under the liability method specified by Statement of Financial
Accounting Standards (SFAS) No. 109, deferred taxes are determined based on
the estimated future tax effect of differences between the financial
statement and tax bases of assets and liabilities given the provisions of
enacted laws.
INCOME PER COMMON SHARE
Primary income per common share was calculated by dividing net income
by the weighted average common shares outstanding. The effect of common
stock equivalents, including shares issuable upon the exercise of employee
stock options (calculated using the treasury stock method) and upon the
assumed conversion of the Company's 3.93-percent convertible notes was not
significant, and the assumed conversion of the 6-percent convertible
debentures was anti-dilutive, for all periods presented.
STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
the adoption of SFAS No. 123, "Accounting for Stock-Based Compensation" in
1996 will have no effect on the Company's results of operations.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents. These
investments are carried at cost which approximates market.
For the Three Months
Ended March 31,
---------------------------
(In thousands) 1996 1995
----------- ------------
Cash paid during the period for:
Interest (net of amounts capitalized) $ 14,068 $ 8,485
Income taxes (net of refunds) 740 342
6
ACQUISITIONS
On March 1, 1995, Apache completed the acquisition of 315 oil and gas
fields from Texaco Exploration and Production Inc. (Texaco) for an adjusted
purchase price of $567 million. The acquisition of the Texaco properties
was accounted for using the purchase method of accounting and is included
in the financial statements of the Company since the date of the
acquisition. The following unaudited pro forma financial information shows
the pro forma effect on the Company's consolidated results of operations as
if the acquisition were effective on January 1, 1995. Apache's
consolidated results of operations for the first quarter of 1996 fully
reflect the effect of the Texaco acquisition. The pro forma data presented
is based on numerous assumptions and should not necessarily be viewed as
being indicative of future operations.
(In thousands, except per share data)
For the Three Months
Ended March 31, 1995
-----------------------------
As Reported Pro Forma
----------- ---------
Revenues and other income $ 167,718 $ 191,493
Net income $ 4,083 $ 2,790
Net income per common share $ .06 $ .04
Weighted average common shares outstanding 69,673 69,673
DEBT
During February 1996, Apache completed its offering of $100 million
principal amount, $99.6 million net of discount, of senior unsecured 7.7-
percent notes due March 15, 2026. Subsequently, during April 1996, Apache
issued an additional $180 million principal amount, $178.5 million net of
discount, of senior unsecured 7.95-percent notes maturing on April 15,
2026. Neither issue is redeemable prior to maturity and the same indenture
governs both notes and imposes certain obligations on the Company,
including limits on the Company's ability to incur debt secured by certain
liens and its ability to enter into certain sale and leaseback
transactions.
7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Income and Revenue
Apache reported 1996 first quarter net income of $15.7 million, or
$.20 per share, which was 283 percent higher than the $4.1 million, or
$.06 per share, reported in the first quarter of 1995. This increase was
primarily attributable to higher product prices, partially offset by
higher operating costs.
Revenues increased 23 percent, from $167.7 million in 1995 to $206.5
million in 1996. Production, on a barrel of oil equivalent (Boe) basis
remained relatively constant (140,000 Boe per day), while a 25-percent
increase in realized natural gas prices and a 10-percent increase in
realized crude oil and natural gas liquid prices contributed $18.9
million and $7.0 million, respectively, to total revenues. Also, during
the first quarter of 1996, Apache's gas gathering, processing and
marketing revenues increased almost 49 percent, to $33.9 million, driven
primarily by increased gas prices. Apache is actively involved in
purchasing and reselling both crude oil and natural gas. The increase in
revenues with respect to these activities is essentially offset by
increased costs to purchase the gas sold, leaving margins relatively flat
at approximately $1.5 million in each quarter.
The Company's 1996 other revenue reflects, primarily, Canadian royalty
credits. First quarter 1995 other revenue included not only the Canadian
royalty credits, but also non-recurring gains from the sales of
miscellaneous investments.
Volume and price information concerning the Company's oil and gas
production is summarized below:
For the Three Months
Ended March 31
----------------------- Increase
1996 1995 (Decrease)
Selected Oil and Gas ---------- -------- ----------
Operating Statistics
- --------------------
Gas Volume - Mcf per day:
U.S. 475,936 486,028 (2%)
Canada 64,727 61,165 6%
International 13,127 6,125 114%
---------- ----------
Total 553,790 553,318 --
========== ==========
Average Gas Price - Per Mcf: $ 1.84 $ 1.47 25%
Oil Volume - Barrels per day:
U.S. 39,840 39,738 --
Canada 1,967 1,966 --
International 3,750 3,072 22%
---------- ----------
Total 45,557 44,776 2%
========== ==========
Average Oil Price - Per barrel: $ 18.45 $ 16.84 10%
Natural Gas Liquids (NGL) - Barrels per day:
U.S. 1,346 1,562 (14%)
Canada 670 559 20%
---------- ----------
Total 2,016 2,121 (5%)
========== ==========
Average NGL Price - Per barrel: $ 14.39 $ 12.10 19%
8
Natural gas sales of $92.8 million, which were 27 percent higher than
those recorded in 1995, accounted for 54 percent of the Company's total
oil and gas production revenue in the first quarter of 1996. While
production totaled approximately 554,000 thousand cubic feet per day
(Mcf/d) during both periods, the Company's average realized price
increased $.37 per thousand cubic feet (Mcf) in 1996. The Company's
hedging activities reduced realized prices by $.13 per Mcf in the first
quarter of 1996, as compared to a $.06 per Mcf gain in 1995.
The Company's realized price for sales of crude oil increased 10
percent, to $18.45 per barrel, in the first quarter. This increase,
combined with a two-percent increase in crude oil production, from 44.8
thousand barrels per day (Mb/d) in the first quarter of 1995 to 45.6 Mb/d
in 1996, accounted for approximately $8.7 million of additional oil and
gas revenues. Crude oil sales accounted for approximately 45 percent of
total oil and gas production revenue in 1996, as compared to 47 percent
in 1995.
With respect to both crude oil and natural gas production, Apache's
current production rate increases from acquisitions and exploration and
development activities in 1995, and the first quarter of 1996, have been,
to date, essentially offset by property divestitures during 1995 and
natural depletion. These expenditures were, in large part, made on
properties with longer production curves which do not immediately offset
production lost from properties reaching the end of their productive
lives, primarily those in the offshore region.
The remainder of the Company's oil and gas production revenues comes
from the sale of natural gas liquids. Such amounts totaled approximately
$2.6 million in the first quarter of 1996, as compared to $2.3 million in
the first quarter of 1995. A five-percent decrease in production was
more than offset by a 19-percent increase in realized prices.
Costs and Expenses
The Company's depreciation, depletion and amortization (DD&A) expense
for the first quarter increased approximately three percent, to $71.9
million, compared to $69.8 million in the first quarter 1995. A $.02 per
barrel decline in the Company's oil and gas property DD&A rate was more
than offset by increases in amortization associated with non-oil and gas
property assets.
Operating costs, including lease operating expense and severance
taxes, increased $7.5 million, or 17 percent, in 1996. On an equivalent
barrel basis, operating costs increased 14 percent, to $4.12 per Boe,
primarily as a result of the Company's property mix shifting more to
longer lived onshore oil producing properties, which typically have a
higher per-unit cost, than higher producing, shorter lived offshore gas
producing properties. At December 31, 1994, the Company's oil properties
constituted approximately 63 percent of the Company's total net property
count, while at December 31, 1995 they totaled 72 percent. When compared
to the fourth quarter of 1995, which generally had a similar property mix
as the first quarter of 1996, lease operating costs on an equivalent
barrel basis decreased approximately $.09 per barrel, or three percent,
as a result of cost reduction efforts implemented in early 1996. This
decrease was partially offset by higher severance tax expense resulting
from increased revenues.
Administrative, selling and other expense (G&A) decreased $.8 million
in the three months ended March 31, 1996, as compared to the same period
in 1995, as a result of the Company's continuing efforts to control costs
and its ability to integrate the assets and operations acquired in 1995
with minimal increase in administrative staff. On an equivalent barrel
basis, G&A expense declined nine percent to $.70 per Boe.
9
Net financing costs of $15.4 million were essentially equal to the
$15.3 million recorded in the first quarter 1995, as increased interest
expense associated with higher debt levels was largely offset by
increased capitalized interest. Capitalized interest, which is based on
the carrying value of unproved property, increased from a year ago as a
result of the addition of unproved properties acquired from Texaco and
Aquila Energy Resources Corporation in 1995.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Capital Commitments
Apache's primary needs for cash are for exploration, development and
acquisition of oil and gas properties, repayment of principal and
interest on outstanding debt, payment of dividends, and capital
obligations for affiliated ventures. The Company generally funds its
exploration and development activities through internally generated cash
flows. Apache budgets its capital expenditures based upon projected cash
flows and routinely adjusts its capital expenditures in response to
changes in oil and natural gas prices and corresponding changes in cash
flow. The Company is not in a position to predict future product prices.
Capital Expenditures - A summary of oil and gas capital expenditures
in each of the first quarters is presented below (in millions):
1996 1995
------- -------
Exploration and Development:
North America $ 100.6 $ 69.6
International 15.9 9.8
------- ------
Total $ 116.5 $ 79.4
======= ======
Acquisitions of Oil and Gas Properties $ .6 $ 573.1
======= ======
Expenditures for exploration and development activities totaled $116.5
million in the first quarter of 1996, compared to $79.4 million in 1995.
North American expenditures totaled $100.6 million, compared to $69.6
million in 1995, and resulted in the replacement of 100 percent of
production in the first quarter of 1996, during which Apache successfully
completed 66 producing wells out of 90 wells drilled.
The Company's international expenditures totaled $15.9 million for the
first three months of 1996, compared to $9.8 million in the first quarter
of 1995. First quarter 1996 expenditures were concentrated in Australia,
$13.5 million, and Egypt, $2.4 million. Australian capital expenditures
related primarily to construction costs incurred on the Company's East
Spar production platform and the drilling of several wells in progress at
March 31, 1996. The Egyptian costs were incurred in drilling and
completing four wells in the Company's Qarun concession.
Worldwide, Apache was drilling or completing an additional 82 wells at
March 31, 1996. In addition, the Company completed 87 production
enhancement projects, including 45 recompletions, during the quarter.
Exploration and development expenditures exceeded cash from
operations, before changes in other assets and liabilities, by
approximately $18.7 million in the first quarter of 1996. This resulted
from Apache accelerating a portion of its 1996 drilling and recompletion
program to maximize production from newly acquired properties. In
addition, due to the limited drilling season in the Company's Canadian
region imposed by winter-access-only requirements, the Company had to
concentrate its annual Canadian drilling budget in the first quarter.
10
Property acquisitions totaled $.6 million in the first quarter of
1996, primarily focused on expanding the Company's ownership in
properties and fields in which it already holds an interest. First
quarter 1995 acquisitions included the Company's $567 million acquisition
of 315 oil and gas fields from Texaco. Apache also divested $20.4
million of non-core oil and gas properties in the first quarter of 1995.
The Company had no material dispositions in the first quarter of 1996.
Capital Resources and Liquidity
Net Cash Provided by Operating Activities - Apache's net cash provided
by operating activities during the first quarter of 1996 totaled $68.1
million, an increase of five percent from the $64.5 million in 1995.
This increase was due primarily to higher product prices, partially
offset by higher working capital requirements as compared to last year.
Long-Term Borrowings - During February 1996, Apache completed the
issuance of $100 million principal amount, $99.6 million after discount,
of senior unsecured 7.7 percent notes due March 15, 2026. Subsequently,
during April 1996, the Company issued an additional $180 million
principal amount, $178.5 million net of discount, of senior unsecured
7.95 percent notes due on April 15, 2026. The proceeds from both
issuances were used to repay a portion of the Company's revolving credit
facility and for general corporate purposes.
These two 30-year note offerings were placed during periods when 30-
year interest rates on Treasury bills were at, or near, historic 20-year
lows. In addition to the benefits of securing longer-term financing at
favorable interest rates and reducing Apache's exposure to future adverse
interest rate fluctuations, the issuance of these notes will improve the
Company's shorter-term liquidity due to the borrowing base under the
Company's shorter-term revolving bank credit facility being reduced by an
amount which will be less than the net proceeds obtained from issuing the
notes.
Liquidity - The Company had $19.6 million in cash and cash equivalents
on hand at March 31, 1996, up from the $13.6 million at December 31,
1995. Apache's ratio of current assets to current liabilities increased
from .90:1 at December 31, 1995, to 1.04:1 at March 31, 1996.
Management believes that cash on hand, net cash generated from
operations and available borrowing capacity under its revolving bank
credit facility will be adequate to satisfy the Company's financial
obligations to meet future liquidity needs for at least the next two
fiscal years.
FUTURE TRENDS
Apache's growth strategy has been to increase oil and gas reserves,
production and cash flow through a combination of acquisitions, moderate-
risk drilling and development of existing properties. In recent years,
however, Apache has focused primarily on a number of large property
acquisitions. Having obtained a sizable, balanced and diversified base
of core assets in six North American and two international arenas, the
Company expects to focus, in 1996, on reserve enhancement and cash flow
acceleration in these areas. Internationally, the Company projects
capital expenditures to nearly double from 1995, prior to the potential
impact of the merger with The Phoenix Resource Companies, Inc. (Phoenix),
as Apache continues to exploit its concessions in Western Australia,
Egypt, China and Indonesia. Exploration and development expenditures are
being reviewed quarterly in light of fluctuating product prices and
Apache's objective to fund operations through internally generated cash
flow.
11
Natural Gas Marketing
In October 1995, subsidiaries of Apache, Oryx Energy Company and
Parker & Parsley Petroleum Company announced their formation of Producers
Energy Marketing, LLC (ProEnergy), a natural gas marketing company
organized to create a direct link between natural gas producers and
purchasers. ProEnergy, beginning in April 1996, purchases and sells
producer-owned gas directly into the marketplace at index prices
substantially equivalent to spot market prices. In January 1996, Apache
contributed $5.8 million for its share of capital-funding obligations for
the start-up of ProEnergy. The Company intends to report its interest in
ProEnergy on the equity method of accounting.
Merger with Phoenix
In March 1996, Apache announced that it had entered into a merger
agreement with Phoenix, pursuant to which, upon consummation of the merger,
Phoenix will become a wholly-owned subsidiary of Apache and shareholders of
Phoenix will receive 75 shares of Apache common stock plus $4 cash in
exchange for each share of Phoenix common stock.
Total proved reserves of Phoenix at the time of the announcement
approximated 33 million Boe in 18 fields located in Egypt's western desert.
The acquired assets will also include 50 identified drilling prospects,
$30 million in working capital and pipelines and facilities valued at
approximately $50 million. In addition, the cost-recovery provisions in
the production-sharing contracts between Phoenix and the Egyptian
government provide for recovery by Apache of substantial future exploration
and development costs in the Qarun and Khalda concessions. Phoenix owns a
40-percent interest in the Khalda concession and a 50-percent interest in
the Qarun concession. Apache currently owns a 25-percent interest in the
Qarun concession. The merger is subject to certain conditions including a
majority vote by Phoenix stockholders scheduled for May 20, 1996.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 ("PSLRA")
The foregoing discussions contain certain "forward-looking statements"
as defined by the PSLRA including, without limitation, discussions as to
expectations, beliefs, plans, objectives and future financial performance,
and assumptions underlying or concerning matters discussed reflecting
management's current expectations of the manner in which the various
factors discussed therein may affect the Company's business in the future.
Any matters that are not historical facts are forward-looking and,
accordingly, involve estimates, assumptions and uncertainties which could
cause actual results or outcomes to differ materially from those expressed
in the forward-looking statements. There is no assurance that the
Company's expectations will be realized or that unexpected events will not
have an adverse impact on the Company's business.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 10 to the Consolidated Financial
Statements contained in the registrant's 1995 annual report on Form 10-K,
for the year ended December 31, 1995, filed March 27, 1996, is incorporated
herein by reference.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
11.1 Computation of Earnings per Share.
27.1 Financial Data Table.
b. Reports filed on Form 8-K.
The following current reports were filed during the fiscal
quarter ended March 31, 1996:
Form 8-K dated January 3, 1996 -
Item 5. Natural Gas Marketing - Registrant announced
that its fourth quarter 1995 profitability would be
reduced by $6 million, or $.08 per share, as a result of
the decoupling between NYMEX gas futures prices and the
substantially lower cash prices throughout most of the
country.
Form 8-K, dated January 31, 1996 -
Item 5. Preferred Stock Purchase Rights - Board of
Directors of Apache Corporation declared a dividend of
one right for each outstanding share of Apache common
stock, par value $1.25 per share.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits - Summary of Rights,
(incorporated by reference to Apache's Registration
Statement on Form 8-K, dated January 24, 1996, SEC File
No. 1-4300). Rights Agreement, dated as of January 31,
1996, between Apache and Norwest Bank Minnesota, N.A., as
Rights Agent (Incorporated by reference to Exhibit (a) to
Apache's Registration Statement on Form 8-K, dated
January 24, 1996, SEC File No. 1-4300).
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (Continued)
Form 8-K, dated February 22, 1996 -
Item 5. 7.70% Notes - Agreement between the
Registrant and First Chicago Capital Markets, Inc.,
Lehman Brothers Inc. and J.P. Morgan Securities, Inc. for
an offering to the public of 7.70% Notes due 2026 for a
$100,000,000 principal amount.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits - Underwriting Agreement, dated
February 22, 1996, Form of 7.70% Notes due 2026, Opinion
dated February 22, 1996, as to legality of the Notes,
Statement of Computation of Ratios of Earnings to Fixed
Charges and Consent.
Form 8-K, dated March 7, 1996 -
Item 5. Promotions - Mark A. Jackson to Vice
President and Chief Financial Officer and Matthew W.
Dundrea to Treasurer.
Item 7. Financial Statement Pro Forma Financial
Information and Exhibits - Press release dated March 7,
1996.
Form 8-K and 8-K/A, dated March 27, 1996 -
Item 5. Merger - Merger between Apache Corporation
and The Phoenix Resource Companies, Inc., pursuant to
which each of Phoenix's outstanding shares of common
stock will be converted into the right to receive .75
shares of Apache common stock and $4.00 in cash.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits - Agreement and Plan of Merger
between Apache Corporation and The Phoenix Resource
Companies, Inc., press release dated March 28, 1996, and
Cautionary Statement regarding Important Factors
Affecting Forward-Looking Statements.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereto duly authorized.
APACHE CORPORATION
Dated: May 28, 1996 /s/ Mark A. Jackson
-------------------------------
Mark A. Jackson
Vice President and Chief
Financial Officer
Dated: May 28, 1996 /s/ Thomas L. Mitchell
--------------------------------
Thomas L. Mitchell
Controller and Chief Accounting
Officer