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 AND OTHER
Oil and gas production revenues ............... $ 2,559,748 $ 930,549 $ -- $ 3,490,297
Other ......................................... 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 -- -- 104,588
Financing costs, net .......................... 112,833 -- 11,211(b) 115,944
(8,100)(c)
----------- ----------- ----------- -----------
1,644,679 397,174 325,338 2,367,191
----------- ----------- ----------- -----------
PREFERRED INTERESTS OF SUBSIDIARIES .............. 16,224 -- -- 16,224
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES ....................... 898,970 533,442 (325,338) 1,107,074
Provision (benefit) for income taxes .......... 344,641 -- 75,789(d) 420,430
----------- ----------- ----------- -----------
NET INCOME ....................................... 554,329 533,442 (401,127) 686,644
Preferred stock dividends ..................... 10,815 -- -- 10,815
----------- ----------- ----------- -----------
INCOME ATTRIBUTABLE TO COMMON STOCK .............. $ 543,514 $ 533,442 $ (401,127) $ 675,829
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic ......................................... $ 1.83 $ 2.13
Diluted ....................................... $ 1.80 $ 2.10
Average common shares outstanding ................ 297,233 19,802(e) 317,035
Diluted common shares outstanding ................ 304,612 19,802(e) 324,414
</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 AND OTHER
Oil and gas production revenues......................... $ 975,162 $ 193,141 $ -- $ 1,168,303
Other .................................................. (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(f) 10,028
Operating costs ........................................ 170,550 93,825 -- 264,375
General and administrative ............................. 27,831 -- -- 27,831
Financing costs, net ................................... 25,921 -- 2,351(b) 26,070
(2,202)(c)
----------- ----------- ----------- -----------
443,964 93,825 54,021 591,810
----------- ----------- ----------- -----------
PREFERRED INTERESTS OF SUBSIDIARIES ....................... 3,362 -- -- 3,362
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES ................................ 519,283 99,319 (54,021) 564,581
Provision for income taxes ............................. 206,986 (14,552) 15,785(d) 208,219
----------- ----------- ----------- -----------
INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE .............. 312,297 113,871 (69,806) 356,362
Cumulative effect of change in accounting
principle, net of income tax ......................... 26,632 -- -- 26,632
----------- ----------- ----------- -----------
NET INCOME (LOSS) ......................................... 338,929 113,871 (69,806) 382,994
Preferred stock dividends .............................. 1,420 -- -- 1,420
----------- ----------- ----------- -----------
INCOME ATTRIBUTABLE TO COMMON STOCK........................ $ 337,509 $ 113,871 $ (69,806) $ 381,574
=========== =========== =========== ===========
BASIC NET INCOME PER COMMON SHARE:
Before change in accounting principle................... $ .98 $ 1.10
Cumulative effect of change in accounting principle .... $ .08 $ 0.08
----------- -----------
$ 1.06 $ 1.18
=========== ===========
DILUTED NET INCOME PER COMMON SHARE:
Before change in accounting principle................... $ .97 $ 1.09
Cumulative effect of change in accounting principle .... .08 .08
----------- -----------
$ 1.05 $ 1.17
=========== ===========
Average common shares outstanding ......................... 318,509 4,400(g) 322,909
Diluted common shares outstanding ......................... 321,159 4,400(g) 325,559
</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. Direct
operating expenses include all costs associated with lifting, field processing
and transportation, and associated marketing costs, including cost to sell and
direct overhead.
Both the Gulf of Mexico and North Sea assets acquired from BP were funded
on March 13 and April 2, 2003, respectively, with net proceeds of approximately
$554 million from the issuance of 19.8 million shares of common stock, adjusted
for the two-for-one common stock split, in January 2003, and proceeds from
additional debt of approximately $604 million borrowed under existing lines of
credit and commercial paper.
The purchase price allocation on the date of closing the BP transaction is
preliminary pending actualization of estimated revenues and costs between the
effective and closing dates. These revenues and expenses were estimated on the
accrual basis for purposes of closing, and the purchase and sale agreements
require a post-closing period to permit actual cash receipts and cash payments
to replace estimated balances. There have been no material adjustments to date,
and we do not anticipate that any remaining adjustments will be material.
<Table>
<Caption>
U.S. - U.K. -
IN THOUSANDS GULF OF MEXICO NORTH SEA TOTAL*
----------------------------- -------------- ----------- -----------
Proved Property $ 539,110 $ 854,835 $ 1,393,945
Unproved Property 57,500 65,000 122,500
Working Capital acquired, net -- 10,957 10,957
Asset Retirement Obligation (69,000) (250,887) (319,887)
Deferred Tax Liability -- (50,381) (50,381)
----------- ----------- -----------
Cash consideration $ 527,610 $ 629,524 $ 1,157,134
=========== =========== ===========
</Table>
* Property balance includes $12 million of transaction costs (U.S. - $4
million; North Sea - $8 million).
B-5
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - (CONTINUED)
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 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. The rate of interest varies
daily and is market driven. A 1/8th percent increase or decrease in the
interest rate would increase or decrease interest expense by approximately
$775,000 in 2002 and $189,000 in the first three months of 2003.
c. 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.
d. Record a pro forma income tax provision, reflecting statutory income tax
rates in effect for the periods shown; a 35 percent rate for the Gulf of
Mexico portion and a blended 43 percent for the North Sea portion.
e. Record the issuance of 19.8 million shares of Apache common stock, adjusted
for the two-for-one common stock split, to finance the acquisition.
f. Record asset retirement obligation on properties acquired from BP.
g. Record adjustment to reflect issuance of 19.8 million shares, adjusted for
the two-for-one common stock split, as of January 1, 2003.
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
============== ============== ==============
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