EXHIBIT 99.5
APACHE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements and related notes are presented to show the pro forma effects of the
acquisition of oil and gas producing properties from BP p.l.c. (BP) during the
first and second quarter of 2003.
The pro forma condensed consolidated statements of operations are
presented to show income from continuing operations as if the BP transaction
occurred as of the beginning of each period presented. The pro forma condensed
consolidated balance sheet is based on the assumption that the BP transaction
occurred effective March 31, 2003.
Pro forma data are based on assumptions and include adjustments as
explained in the notes to the unaudited pro forma condensed consolidated
financial statements. The pro forma data are not necessarily indicative of the
financial results that would have been attained had the BP transaction occurred
on the dates referenced above, and should not be viewed as indicative of
operations in future periods. The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the notes thereto,
Apache's Annual Report on Form 10-K for the year ended December 31, 2002 and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and the
Statement of Combined Revenues and Direct Operating Expenses included herein.
B-1
APACHE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(In thousands, except per share amounts)
<Table>
<Caption>
APACHE BP PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
--------------- --------------- --------------- ---------------
REVENUES
Oil and gas production revenues ........... $ 2,559,748 $ 930,549 $ -- $ 3,490,297
Other revenues (losses) ................... 125 67 -- 192
--------------- --------------- --------------- ---------------
2,559,873 930,616 -- 3,490,489
--------------- --------------- --------------- ---------------
OPERATING EXPENSES
Depreciation, depletion and amortization .. 843,879 -- 322,227 (a) 1,166,106
International impairments ................. 19,600 -- -- 19,600
Operating costs ........................... 563,779 397,174 -- 960,953
General and administrative ................ 104,588 -- 4,140 (b) 108,728
Financing costs, net ...................... 112,833 -- 11,211 (c) 115,944
(8,100)(d)
--------------- --------------- --------------- ---------------
1,644,679 397,174 329,478 2,371,331
--------------- --------------- --------------- ---------------
PREFERRED INTERESTS OF SUBSIDIARIES .......... 16,224 -- -- 16,224
--------------- --------------- --------------- ---------------
INCOME BEFORE INCOME TAXES ................... 898,970 533,442 (329,478) 1,102,934
Provision (benefit) for income taxes ...... 344,641 -- 74,052 (e) 418,693
--------------- --------------- --------------- ---------------
NET INCOME ................................... 554,329 533,442 (403,530) 684,241
Preferred stock dividends ................. 10,815 -- -- 10,815
--------------- --------------- --------------- ---------------
INCOME ATTRIBUTABLE TO COMMON STOCK .......... $ 543,514 $ 533,442 $ (403,530) $ 673,426
=============== =============== =============== ===============
NET INCOME PER COMMON SHARE:
Basic ..................................... $ 3.66 $ 4.25
Diluted ................................... $ 3.60 $ 4.18
Average common shares outstanding ............ 148,617 9,901 (f) 158,518
Diluted common shares outstanding ............ 152,306 9,901 (f) 162,207
</Table>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
B-2
APACHE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
(In thousands, except per share amounts)
<Table>
<Caption>
APACHE BP PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -------------
REVENUES
Oil and gas production revenues ....................... $ 975,162 $ 193,141 $ -- $ 1,168,303
Other revenues (losses) ............................... (8,553) 3 -- (8,550)
------------- ------------- ------------- -------------
966,609 193,144 -- 1,159,753
------------- ------------- ------------- -------------
OPERATING EXPENSES
Depreciation, depletion and amortization .............. 214,349 -- 49,157 (a) 263,506
Asset retirement obligation accretion ................. 5,313 -- 4,715 (g) 10,028
Operating costs ....................................... 170,550 93,825 -- 264,375
General and administrative ............................ 27,831 -- 1,035 (b) 28,866
Financing costs, net .................................. 25,921 -- 2,351 (c) 26,070
(2,202)(d)
------------- ------------- ------------- -------------
443,964 93,825 55,056 592,845
------------- ------------- ------------- -------------
PREFERRED INTERESTS OF SUBSIDIARIES ...................... 3,362 -- -- 3,362
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES ............................... 519,283 99,319 (55,056) 563,546
Provision for income taxes ............................ 206,986 (14,552) 15,350 (e) 207,784
------------- ------------- ------------- -------------
INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE ............. 312,297 113,871 (70,406) 355,762
Cumulative effect of change in accounting
principle, net of income tax ........................ 26,632 -- -- 26,632
------------- ------------- ------------- -------------
NET INCOME (LOSS) ........................................ 338,929 113,871 (70,406) 382,394
Preferred stock dividends ............................. 1,420 -- -- 1,420
------------- ------------- ------------- -------------
INCOME ATTRIBUTABLE TO COMMON STOCK ...................... $ 337,509 $ 113,871 $ (70,406) $ 380,974
============= ============= ============= =============
BASIC NET INCOME PER COMMON SHARE:
Before change in accounting principle ................. $ 1.95 $ 2.19
Cumulative effect of change in accounting principle ... 0.17 0.17
------------- -------------
$ 2.12 $ 2.36
============= =============
DILUTED NET INCOME PER COMMON SHARE:
Before change in accounting principle ................. $ 1.94 $ 2.18
Cumulative effect of change in accounting principle ... 0.16 0.16
------------- -------------
$ 2.10 $ 2.34
============= =============
Average common shares outstanding ........................ 159,255 2,200 (h) 161,455
Diluted common shares outstanding ........................ 160,580 2,200 (h) 162,780
</Table>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
B-3
APACHE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2003
(In thousands)
<Table>
<Caption>
APACHE PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
--------------- ----------------- -----------------
ASSETS
Current assets..................................... $ 998,166 $ (25,255)(1,3) $ 972,911
Net property and equipment......................... 9,642,951 919,835 (1,4) 10,569,007
6,221 (2)
Other assets....................................... 231,165 16,181 (4) 247,346
--------------- ----------------- -----------------
$ 10,872,282 $ 916,982 $ 11,789,264
=============== ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities................................ $ 728,605 $ 11,365 (3) $ 739,970
Long-term debt..................................... 1,943,364 604,349 (1) 2,547,713
Deferred credits and other noncurrent liabilities.. 1,960,125 301,268 (4) 2,261,393
Preferred interests of subsidiaries................ 437,088 -- 437,088
--------------- ----------------- -----------------
Total Liabilities............................... 5,069,182 916,982 5,986,164
Shareholders' equity............................... 5,803,100 -- 5,803,100
--------------- ----------------- -----------------
$ 10,872,282 $ 916,982 $ 11,789,264
=============== ================= =================
</Table>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
B-4
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The unaudited pro forma statement of operations for the year ended
December 31, 2002, is based on the audited financial statements of Apache for
the year ended December 31, 2002, the audited statement of combined revenues and
direct operating expenses for the BP properties for the year ended December 31,
2002, and the adjustments and assumptions described below.
The unaudited pro forma statement of operations for the three months
ended March 31, 2003, and the unaudited pro forma balance sheet as of March 31,
2003, are based on the unaudited financial statements of Apache as of and for
the three months ended March 31, 2003, the unaudited statement of combined
revenues and direct operating expenses for the BP properties for the three
months ended March 31, 2003, and the adjustments and assumptions described
below.
PRO FORMA ADJUSTMENTS
THE UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS REFLECT THE FOLLOWING
ADJUSTMENTS:
a. Record incremental depreciation, depletion and amortization expense,
using the units-of-production method, resulting from the purchase of
the BP properties.
b. Record assumed increase in general and administrative expense as a
result of the purchase of the BP properties.
c. Record interest expense associated with debt of approximately $604
million incurred under Apache's global credit facility to fund a
portion of the purchase price before consideration of purchase price
adjustments. Applicable interest rates on the facility were 1.9 percent
for 2002 and 1.3 percent for the quarter ended March 31, 2003.
d. Record capitalized interest, assuming $123 million of the purchase
price is allocated to unproved oil and gas properties with the balance
of the purchase price allocated to proved properties. Capitalized
interest relating to unproved properties reflects a rate of 6.6 percent
for 2002 and 7.1 percent for the quarter ended March 31, 2003.
e. Record a pro forma income tax provision, assuming a 35 percent rate for
the Gulf of Mexico portion and 43 percent for the North Sea portion.
f. Record the issuance of 9.9 million shares of Apache common stock to
finance the acquisition.
g. Record asset retirement obligation on properties acquired from BP.
h. Record adjustment to reflect issuance of 9.9 million shares as of
January 1, 2003.
B-5
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - (CONTINUED)
THE UNAUDITED PRO FORMA BALANCE SHEET REFLECTS THE FOLLOWING ADJUSTMENTS
ASSOCIATED WITH THE BP ACQUISITION ACTIVITY SUBSEQUENT TO MARCH 31, 2003:
1. Record the purchase price for the BP properties, net of estimated
purchase price adjustments totaling $95 million, funded with:
o Cash and proceeds from additional borrowings of approximately
$604 million.
o Purchase price adjustments are subject to further review and
audit.
2. Record transaction costs, which are primarily investment banking fees.
3. Record acquired working capital items.
4. Record asset retirement obligation, additional deferred tax liabilities
and other miscellaneous long-term assets and liabilities.
B-6
APACHE CORPORATION AND SUBSIDIARIES
PRO FORMA SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
The following table sets forth certain unaudited pro forma information
concerning Apache's proved oil and gas reserves at December 31, 2002, giving
effect to the BP transaction as if it had occurred on January 1, 2002. There are
numerous uncertainties inherent in estimating the quantities of proved reserves
and projecting future rates of production and timing of development
expenditures. The following reserve data represents estimates only and should
not be construed as being exact.
PROVED OIL AND NATURAL GAS RESERVES
<Table>
<Caption>
NATURAL GAS
-----------------------------------------------------
APACHE BP PRO FORMA
--------------- --------------- ---------------
(MILLION CUBIC FEET)
December 31, 2001 ................................ 4,005,331 337,810 4,343,141
Extension, discoveries and other additions ....... 210,537 -- 210,537
Purchase of minerals in-place .................... 220,572 -- 220,572
Revisions of previous estimates .................. 21,423 -- 21,423
Production ....................................... (394,341) (89,205) (483,546)
Sales of properties .............................. (8,886) -- (8,886)
--------------- --------------- ---------------
December 31, 2002 ................................ 4,054,636 248,605 4,303,241
=============== =============== ===============
Proved developed reserves
December 31, 2001 ............................ 3,203,817 337,810 3,455,265
=============== =============== ===============
December 31, 2002 ............................ 3,206,533 248,605 3,455,138
=============== =============== ===============
</Table>
<Table>
<Caption>
OIL, CONDENSATE AND NATURAL GAS LIQUIDS
-----------------------------------------------------
APACHE BP PRO FORMA
--------------- --------------- ---------------
(THOUSANDS OF BARRELS)
December 31, 2001 ................................ 599,388 211,507 810,895
Extension, discoveries and other additions ....... 85,689 -- 85,689
Purchase of minerals in-place .................... 12,164 -- 12,164
Revisions of previous estimates .................. (1,205) -- (1,205)
Production ....................................... (58,920) (26,392) (85,312)
Sales of properties .............................. (351) -- (351)
--------------- --------------- ---------------
December 31, 2002 ................................ 636,765 185,115 821,880
=============== =============== ===============
Proved developed reserves
December 31, 2001 ............................ 411,782 211,507 623,289
=============== =============== ===============
December 31, 2002 ............................ 414,375 185,115 599,490
=============== =============== ===============
</Table>
B-7
APACHE CORPORATION AND SUBSIDIARIES
PRO FORMA SUPPLEMENTAL OIL AND GAS DISCLOSURES - (CONTINUED)
(UNAUDITED)
The following table sets forth unaudited pro forma information
concerning the discounted future net cash flows from proved oil and gas reserves
of Apache as of December 31, 2002, net of income tax expense, and giving effect
to the acquisition of the BP properties as if it had occurred on January 1,
2002. Income tax expense has been computed using assumptions relating to the
future tax rates and the permanent differences and credits under the tax laws
relating to oil and gas activities at December 31, 2002. Cash flows relating to
the BP properties are based on Apache's evaluation of reserves and on
information provided by BP. Future income tax expense on the BP properties is
based on Apache's purchase price allocation. The information should be viewed
only as a form of standardized disclosure concerning possible future cash flows
that would result under the assumptions used, but should not be viewed as
indicative of fair market value. Reference is made to Apache's financial
statements for the fiscal year ended December 31, 2002, and the Statement of
Combined Revenues and Direct Operating Expenses included herein, for a
discussion of the assumptions used in preparing the information presented.
<Table>
<Caption>
FUTURE NET CASH FLOWS APACHE BP PRO FORMA
- --------------------- --------------- --------------- ---------------
(IN THOUSANDS)
Cash inflows ..................................... $ 33,806,360 $ 6,670,231 $ 40,476,591
Production and development costs ................. (9,075,565) (3,977,203) (13,052,768)
Income tax expense ............................... (7,669,504) (615,304) (8,284,808)
--------------- --------------- ---------------
Net cash flows ................................... 17,061,291 2,077,724 19,139,015
10% discount rate ................................ (7,909,671) (436,705) (8,346,376)
--------------- --------------- ---------------
Discounted future net cash flows ................. $ 9,151,620 $ 1,641,019 $ 10,792,639
=============== =============== ===============
</Table>
The following table sets forth the principal sources of change in
discounted future net cash flows:
<Table>
<Caption>
APACHE BP PRO FORMA
--------------- --------------- ---------------
(IN THOUSANDS)
Sales, net of production costs ................... $ (1,994,631) $ (533,442) $ (2,528,073)
Net change in prices and production costs ........ 4,767,785 1,658,306 6,426,091
Discoveries and improved recovery, net of
related costs .................................. 1,885,266 -- 1,885,266
Change in future development costs ............... 222,160 -- 222,160
Revisions of quantities .......................... (15,400) -- (15,400)
Purchases of minerals in-place ................... 603,608 -- 603,608
Accretion of discount ............................ 737,112 91,168 828,280
Change in income taxes ........................... (2,200,925) (458,264) (2,659,189)
Sales of properties .............................. (14,502) -- (14,502)
Change in production rates and other ............. (382,314) -- (382,314)
--------------- --------------- ---------------
$ 3,608,159 $ 757,768 $ 4,365,927
=============== =============== ===============
</Table>
B-8