UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2001
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 [ ]
<Table>
Number of shares of Registrant's common stock,
outstanding as of September 30, 2001.................................124,627,521
</Table>
We are filing this Amendment No. 1 to our Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 2001, in order to include the following
footnote number 10 to our unaudited consolidated financial statements. The
footnote provides certain consolidating information for our wholly-owned
subsidiaries. No restatement of the unaudited financial statements is required,
or being made, nor have any of the numbers in the unaudited financial statements
changed. The footnote merely sets forth some of the data used to prepare the
unaudited consolidated financial statements as required by Rule 3-10 of
Regulation S-X under the Securities Exchange Act of 1934.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, we are
including the complete text of our quarterly unaudited consolidated financial
statements, including the additional footnote.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<Table>
<Caption>
FOR THE QUARTER FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(In thousands, except per common share data)
REVENUES:
Oil and gas production revenues $ 658,995 $ 623,543 $ 2,256,638 $ 1,557,866
Equity in income of affiliates -- (446) -- 1,084
Other revenues (losses) (6,571) (4,584) (8,628) (5,833)
----------- ----------- ----------- -----------
652,424 618,513 2,248,010 1,553,117
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Depreciation, depletion and amortization 217,021 153,905 598,203 422,392
International impairments -- -- 65,000 --
Lease operating costs 103,301 66,510 294,828 186,463
Severance and other taxes 16,656 16,021 58,197 36,104
Administrative, selling and other 22,794 18,089 66,363 49,331
Financing costs:
Interest expense 44,140 43,775 138,106 126,958
Amortization of deferred loan costs 1,089 487 2,123 2,219
Capitalized interest (15,520) (16,011) (44,388) (44,852)
Interest income (1,988) (551) (4,240) (1,655)
----------- ----------- ----------- -----------
387,493 282,225 1,174,192 776,960
----------- ----------- ----------- -----------
Minority interest 3,189 -- 3,189 --
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 261,742 336,288 1,070,629 776,157
Provision for income taxes 104,909 134,040 425,850 312,681
----------- ----------- ----------- -----------
INCOME BEFORE CHANGE IN ACCOUNTING
PRINCIPLE 156,833 202,248 644,779 463,476
Cumulative effect of change in accounting principle,
net of income tax -- -- -- (7,539)
----------- ----------- ----------- -----------
NET INCOME 156,833 202,248 644,779 455,937
Preferred stock dividends 4,908 4,908 14,693 15,080
----------- ----------- ----------- -----------
INCOME ATTRIBUTABLE TO COMMON STOCK $ 151,925 $ 197,340 $ 630,086 $ 440,857
=========== =========== =========== ===========
BASIC NET INCOME PER COMMON SHARE:
Before change in accounting principle $ 1.22 $ 1.64 $ 5.05 $ 3.87
Cumulative effect of change in accounting principle -- -- -- (.07)
----------- ----------- ----------- -----------
$ 1.22 $ 1.64 $ 5.05 $ 3.80
=========== =========== =========== ===========
DILUTED NET INCOME PER COMMON SHARE:
Before change in accounting principle $ 1.19 $ 1.58 $ 4.88 $ 3.74
Cumulative effect of change in accounting principle -- -- -- (.06)
----------- ----------- ----------- -----------
$ 1.19 $ 1.58 $ 4.88 $ 3.68
=========== =========== =========== ===========
</Table>
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)
<Table>
<Caption>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2001 2000
----------- -----------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 644,779 $ 455,937
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 598,203 422,392
Provision for deferred income taxes 277,234 202,783
International impairments 65,000 --
Cumulative effect of change in accounting principle -- 7,539
Other (45,339) 6,562
Other non-cash items -- (1,087)
Changes in operating assets and liabilities:
(Increase) decrease in receivables 162,703 (157,081)
(Increase) decrease in advances to oil and gas ventures and other (40,789) (1,856)
(Increase) decrease in deferred charges and other (5,562) (5,139)
(Increase) decrease in product inventory 1,061 (17,290)
Increase (decrease) in payables (57,587) 55,842
Increase (decrease) in accrued expenses (4,671) 18,260
Increase (decrease) in advances from gas purchasers (9,336) (20,293)
Increase (decrease) in deferred credits and noncurrent liabilities (36,217) (5,448)
----------- -----------
Net cash provided by operating activities 1,549,479 961,121
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,175,892) (679,338)
Non-cash portion of net oil and gas property additions 40,053 10,586
Acquisition of Fletcher subsidiaries (465,018) --
Acquisition of Repsol properties (446,933) (119,278)
Acquisition of Collins & Ware properties -- (320,049)
Acquisition of Occidental properties (11,000) (332,020)
Proceeds from sales of oil and gas properties 233,281 20,124
Purchase of U.S. Government Agency Notes (116,737) --
Other, net (58,530) (10,834)
----------- -----------
Net cash used in investing activities (2,000,776) (1,430,809)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 2,278,414 619,849
Payments on long-term debt (2,185,160) (541,706)
Dividends paid (14,686) (30,741)
Payments to repurchase Series C Preferred Stock -- (2,613)
Common stock activity, net 7,404 457,475
Treasury stock activity, net (43,003) (17,727)
Cost of debt and equity transactions (1,648) (739)
Proceeds from minority interest, net of issuance cost 440,654 --
----------- -----------
Net cash provided by financing activities 481,975 483,798
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 30,678 14,110
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 37,173 13,171
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 67,851 $ 27,281
=========== ===========
</Table>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
2
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ ------------
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 67,851 $ 37,173
Receivables 436,605 506,723
Inventories 86,596 54,764
Advances to oil and gas ventures and other 76,582 31,360
Oil and gas derivative instruments 37,045 --
------------ ------------
704,679 630,020
------------ ------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties 11,073,940 9,423,922
Unproved properties and properties under
development, not being amortized 929,576 977,491
Gas gathering, transmission and processing facilities 705,636 573,621
Other 161,638 119,590
------------ ------------
12,870,790 11,094,624
Less: Accumulated depreciation, depletion and amortization (4,919,679) (4,282,162)
------------ ------------
7,951,111 6,812,462
------------ ------------
OTHER ASSETS:
Goodwill, net 192,155 --
Long-term investments 116,312 --
Oil and gas derivative instruments 62,791 --
Deferred charges and other 39,687 39,468
------------ ------------
$ 9,066,735 $ 7,481,950
============ ============
</Table>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
3
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- -------------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ -- $ 25,000
Oil and gas derivative instruments 22,003 --
Accounts payable 289,843 259,120
Accrued operating expense 32,397 23,893
Accrued exploration and development 182,642 143,916
Accrued compensation and benefits 25,896 34,695
Accrued interest 39,164 25,947
Accrued income taxes 7,743 9,123
Other accrued expenses 16,777 31,653
------------- -------------
616,465 553,347
------------- -------------
LONG-TERM DEBT 2,311,512 2,193,258
------------- -------------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes 986,494 699,833
Advances from gas purchasers 143,770 153,106
Oil and gas derivative instruments 65,435 --
Other 104,192 127,766
------------- -------------
1,299,891 980,705
------------- -------------
MINORITY INTEREST 440,665 --
------------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares authorized -
Series B, 5.68% Cumulative Preferred Stock,
100,000 shares issued and outstanding 98,387 98,387
Series C, 6.5% Conversion Preferred Stock, 138,482 shares
issued and outstanding 208,207 208,207
Common stock, $1.25 par, 215,000,000 shares authorized,
128,328,059 and 126,500,776 shares issued, respectively 160,410 158,126
Paid-in capital 2,825,998 2,173,183
Retained earnings 1,276,673 1,226,531
Treasury stock, at cost, 3,700,538 and 2,866,028 shares,
respectively (111,938) (69,562)
Accumulated other comprehensive loss (59,535) (40,232)
------------- -------------
4,398,202 3,754,640
------------- -------------
$ 9,066,735 $ 7,481,950
============= =============
</Table>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
4
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(UNAUDITED)
<Table>
<Caption>
SERIES B SERIES C
COMPREHENSIVE PREFERRED PREFERRED COMMON PAID-IN RETAINED
(In thousands) INCOME STOCK STOCK STOCK CAPITAL EARNINGS
------------- ------------- ------------ ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1999 $ 98,387 $ 210,490 $ 145,504 $ 1,717,027 $ 558,721
Comprehensive income:
Net income $ 455,937 -- -- -- -- 455,937
Currency translation adjustments (35,344) -- -- -- -- --
Unrealized loss on marketable
securities, net of applicable income
tax benefit of $174 (304) -- -- -- -- --
-----------
Comprehensive income $ 420,289
===========
Cash dividends:
Preferred -- -- -- -- (14,750)
Common ($.21 per share) -- -- -- -- (25,252)
Common shares issued -- -- 12,468 443,889 --
Series C Preferred Stock purchased -- (2,283) -- -- (330)
Treasury shares purchased, net -- -- -- 414 --
----------- ----------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 2000 $ 98,387 $ 208,207 $ 157,972 $ 2,161,330 $ 974,326
=========== =========== =========== =========== ===========
BALANCE AT DECEMBER 31, 2000 $ 98,387 $ 208,207 $ 158,126 $ 2,173,183 $ 1,226,531
Comprehensive income:
Net income $ 644,779 -- -- -- -- 644,779
Currency translation adjustments (60,681) -- -- -- -- --
Unrealized loss on marketable
securities, net of applicable income
tax benefit of $278 (539) -- -- -- -- --
Unrealized gain on derivatives, net
of applicable income tax provision
of $30,115 41,917 -- -- -- -- --
-----------
Comprehensive income $ 625,476
===========
Cash dividends:
Preferred -- -- -- -- (14,693)
Common ($.28 per share) -- -- -- -- (34,894)
Ten percent common stock dividend -- -- -- 545,050 (545,050)
Common shares issued -- -- 2,284 106,554 --
Treasury shares purchased, net -- -- -- 1,211 --
----------- ----------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 2001 $ 98,387 $ 208,207 $ 160,410 $ 2,825,998 $ 1,276,673
=========== =========== =========== =========== ===========
<Caption>
ACCUMULATED
OTHER TOTAL
TREASURY COMPREHENSIVE SHAREHOLDERS'
(In thousands) STOCK INCOME (LOSS) EQUITY
----------- ----------- -----------
BALANCE AT DECEMBER 31, 1999 $ (52,256) $ (8,446) $ 2,669,427
Comprehensive income:
Net income -- -- 455,937
Currency translation adjustments -- (35,344) (35,344)
Unrealized loss on marketable
securities, net of applicable income
tax benefit of $174 -- (304) (304)
Comprehensive income
Cash dividends:
Preferred -- -- (14,750)
Common ($.21 per share) -- -- (25,252)
Common shares issued -- -- 456,357
Series C Preferred Stock purchased -- -- (2,613)
Treasury shares purchased, net (17,309) -- (16,895)
----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 2000 $ (69,565) $ (44,094) $ 3,486,563
=========== =========== ===========
BALANCE AT DECEMBER 31, 2000 $ (69,562) $ (40,232) $ 3,754,640
Comprehensive income:
Net income -- -- 644,779
Currency translation adjustments -- (60,681) (60,681)
Unrealized loss on marketable
securities, net of applicable income
tax benefit of $278 -- (539) (539)
Unrealized gain on derivatives, net
of applicable income tax provision
of $30,115 -- 41,917 41,917
Comprehensive income
Cash dividends:
Preferred -- -- (14,693)
Common ($.28 per share) -- -- (34,894)
Ten percent common stock dividend -- -- --
Common shares issued -- -- 108,838
Treasury shares purchased, net (42,376) -- (41,165)
----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 2001 $ (111,938) $ (59,535) $ 4,398,202
=========== =========== ===========
</Table>
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)
These financial statements 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 for a fair statement of the results for
the interim periods, on a basis consistent with the annual audited financial
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 most recent
annual report on Form 10-K.
Change in Accounting Principle - In December 2000, the staff of the SEC
announced that commodity inventories should be carried at cost, not market
value, despite longstanding industry practice. As a result, Apache changed its
accounting for crude oil inventories in the fourth quarter of 2000, retroactive
to the beginning of the year, and recognized a non-cash cumulative-effect charge
to earnings effective January 1, 2000. Quarterly results for 2000 have been
restated to reflect this change in accounting.
1. ACQUISITIONS AND DIVESTITURES
Acquisitions - In June 2000, Apache completed the acquisition of long-lived
producing properties in the Permian Basin and South Texas from Collins & Ware,
Inc. (Collins & Ware) for $320.7 million. The acquisition included estimated
proved reserves of 83.7 million barrels of oil equivalent (MMboe) as of the
acquisition date. One-third of the reserves are liquid hydrocarbons.
In August 2000, Apache completed the acquisition of a Delaware limited
liability company (LLC) owned by subsidiaries of Occidental Petroleum
Corporation (Occidental) and the related natural gas production for $321.2
million, plus future payments of approximately $44.0 million over four years.
The Occidental properties are located in 32 fields on 93 blocks on the Outer
Continental Shelf of the Gulf of Mexico. The acquisition included estimated
proved reserves of 53.1 MMboe as of the acquisition date.
In December 2000, Apache completed the acquisition of Canadian properties
from Canadian affiliates of Phillips Petroleum Company (Phillips) for $490.3
million. The acquisition included estimated proved reserves of approximately
70.0 MMboe as of the acquisition date. The properties comprise approximately
212,000 net developed acres and 275,000 net undeveloped acres, 786 square miles
of 3-D seismic and 4,155 miles of 2-D seismic located in the Zama area of
Northwest Alberta. The assets also include three sour gas plants with a total
capacity of 150 million cubic feet (MMcf) per day, 13 compressor stations and
150 miles of owned and operated gas gathering lines.
On March 22, 2001, Apache completed the acquisition of substantially all of
Repsol YPF's (Repsol) oil and gas concession interests in Egypt for
approximately $446.9 million in cash, subject to normal post closing
adjustments. The properties include interests in seven Western Desert
concessions and have estimated proved reserves of 66 MMboe as of the acquisition
date. The Company already holds interests in five of the seven concessions.
On March 27, 2001, Apache completed the acquisition of subsidiaries of
Fletcher Challenge Energy (Fletcher) for approximately $465.0 million in cash
and 1.64 million restricted shares of Apache common stock issued to Shell
Overseas Holdings (valued at $61.04 per share), subject to normal post closing
adjustments. The transaction included properties located in Canada's Western
Sedimentary Basin and in Argentina and estimated proved reserves of 120.8 MMboe
as of the acquisition date. Apache assumed a liability of $103.5 million
representing the fair value of derivative instruments and fixed-price commodity
contracts entered into by Fletcher.
6
The Fletcher and Repsol purchase prices were allocated to the assets
acquired and liabilities assumed based upon their fair values on the date of
acquisition, as follows:
<Table>
<Caption>
FLETCHER REPSOL
------------ ------------
(In thousands)
Value of properties acquired, including gathering and
transportation facilities $ 571,718 $ 299,933
Goodwill 107,200 90,000
Derivative instruments and fixed-price contracts (103,486) --
Common stock issued (100,325) --
Working capital acquired, net (8,202) 57,000
Deferred income tax liability (1,887) --
------------ ------------
Cash paid, net of cash acquired $ 465,018 $ 446,933
============ ============
</Table>
The following unaudited pro forma information shows the effect on the
Company's consolidated results of operations as if the Fletcher, Repsol, Collins
& Ware, Occidental and Phillips acquisitions occurred on January 1, 2000. The
pro forma information is based on numerous assumptions and is not necessarily
indicative of future results of operations.
<Table>
<Caption>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
---------------------------- ----------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
------------ ------------ ------------ ------------
(In thousands, except per share data)
Revenues $ 2,248,010 $ 2,354,965 $ 1,553,117 $ 2,201,608
Net income 644,779 670,356 455,937 621,444
Preferred stock dividends 14,693 14,693 15,080 15,080
Income attributable to common stock 630,086 655,663 440,857 606,364
Net income per common share:
Basic $ 5.05 $ 5.24 $ 3.80 $ 4.86
Diluted 4.88 5.05 3.68 4.69
Average common shares outstanding 124,684 125,196 116,009 124,838
</Table>
On August 23, 2001, Apache completed the acquisition of properties located
in Texas, Oklahoma and New Mexico with estimated proved reserves of 9.2 MMboe as
of the acquisition date for approximately $42.5 million in cash and the
assumption of certain liabilities, representing the fair value of derivative
instruments of $9.2 million, subject to normal post closing adjustments.
Divestitures - During the nine months ended September 30, 2001, Apache sold
66.4 MMboe of proved reserves from largely marginal United States and Canadian
properties, collecting cash of $233.3 million.
2. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Apache periodically enters into commodity derivatives contracts to manage
its exposure to oil and gas price volatility. Commodity derivatives contracts,
which are usually placed with major financial institutions that the Company
believes are minimal credit risks, may take the form of futures contracts, swaps
or options. The oil and gas reference prices upon which these commodity
derivatives contracts are based, reflect various market indices that have a high
degree of historical correlation with actual prices received by the Company.
Realized gains and losses from the Company's price risk management activities
are recognized in oil and gas production revenues when the associated production
occurs and the resulting cash flows are reported as cash flows from operating
activities.
Effective January 1, 2001, Apache adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 establishes accounting and reporting standards
requiring that all derivative instruments (including derivative instruments
embedded in other contracts), as defined, be recorded in the balance sheet as
either an asset or liability measured at fair value and
7
requires that changes in fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Hedge accounting treatment allows
unrealized gains and losses to be deferred in other comprehensive income (for
the effective portion of the hedge) until such time as the forecasted
transaction occurs, and requires that a company formally document, designate,
and assess the effectiveness of derivative instruments that receive hedge
accounting treatment. Upon adoption, Apache formally documented and designated
all hedging relationships and verified that its hedging instruments are
effective in offsetting changes in actual prices received by the Company. Such
effectiveness is monitored at least quarterly and any ineffectiveness is
reported in other revenues (losses) in the statement of consolidated operations.
Apache's derivative positions break down into three general categories:
advances from gas purchasers, Apache hedging activity and derivatives inherited
as part of the Fletcher and August 23, 2001 acquisitions. The carrying values at
transition and September 30, 2001 are summarized below:
<Table>
<Caption>
TRANSITION SEPTEMBER 30,
JANUARY 1, 2001 2001
--------------- --------------
(In thousands)
Advances from Gas Purchasers:
Derivatives - asset $ 121,453 $ 53,165
Embedded derivatives - liability (121,453) (53,165)
Apache Hedging Activity:
Fixed-price swaps $ (30,872) $ (11,548)
Zero-cost collars - time value (35,083) 23,884
Zero-cost collars - intrinsic value (50,274) 22,787
-------------- --------------
$ (116,229) $ 35,123
============== ==============
</Table>
<Table>
<Caption>
ACQUISITION
CLOSING DATE SEPTEMBER 30,
MARCH 27, 2001 2001
-------------- --------------
(In thousands)
Fletcher Acquisition:
Derivatives $ (89,401) $ (16,096)
Fixed-price physical contracts (14,085) (2,109)
-------------- --------------
$ (103,486) $ (18,205)
============== ==============
</Table>
<Table>
<Caption>
ACQUISITION
CLOSING DATE SEPTEMBER 30,
AUGUST 23 ,2001 2001
--------------- --------------
(In thousands)
August 23, 2001 Acquisition:
Derivatives $ (9,156) $ (4,520)
============== ==============
</Table>
On the transition date, January 1, 2001, Apache recognized a derivative
asset of $121.5 million reflecting the fair value of gas price swaps entered
into in connection with certain advance payments received from gas purchasers in
1998 and 1997. Apache also recognized a derivative liability of $121.5 million
as an embedded derivative in the contracts under which the advance payments were
received. The liability reflects the obligation to deliver gas at market prices
in excess of the contractual prices determined at the inception of these
transactions.
The balance of Apache's derivative instruments relate to cash flow hedges
on forecasted oil and gas sales, primarily entered into as the result of
Apache's acquisition hedging strategy. On the transition date, the fair value of
these derivative instruments represented a net liability of $116.2 million. The
time value of zero-cost collars at September 30, 2001 was $23.9 million.
8
In connection with the Fletcher acquisition, Apache assumed liabilities for
derivative instruments (fixed-price swaps and put options) and fixed-price
physical contracts entered into by Fletcher. The $103.5 million fair value on
the closing date was recorded as a cost of the Fletcher acquisition (see Note
1).
In connection with the acquisition completed August 23, 2001, Apache
assumed liabilities for derivative instruments (fixed-price swaps and put
options) with a fair value of $9.2 million on the closing date, which was
recorded as a cost of the acquisition (see Note 1).
A reconciliation of the components of accumulated other comprehensive
income (loss) in the statement of consolidated shareholders' equity related to
Apache's derivative activities is presented in the table below:
<Table>
<Caption>
GROSS AFTER-TAX
------------ ------------
(In thousands)
Cumulative effect of change in accounting principle $ (116,229) $ (71,286)
Reclassification of net realized losses into earnings 70,288 42,304
Net change in derivative fair value 117,973 70,899
------------ ------------
Accumulated other comprehensive income related
to derivatives at September 30, 2001 $ 72,032 $ 41,917
============ ============
</Table>
In early November 2001, due to credit issues surrounding the derivative
market, Apache began to close out substantially all of its hedging positions.
The Company does not expect to recognize a material gain or loss from the
expected proceeds received in connection with termination of these positions.
3. NET INCOME PER COMMON SHARE
A reconciliation of the components of basic and diluted net income per
common share is presented in the table below:
<Table>
<Caption>
FOR THE QUARTER ENDED SEPTEMBER 30,
-------------------------------------------------------------------------
2001 2000
---------------------------------- -----------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
--------- ------- --------- --------- ------- ---------
(In thousands, except per share amounts)
BASIC:
Income attributable to common stock $ 151,925 124,719 $ 1.22 $ 197,340 120,197 $ 1.64
========= =========
EFFECT OF DILUTIVE SECURITIES:
Stock options and other -- 721 --
1,221
Series C Preferred Stock 3,488 5,676 3,488 5,676
--------- ------- --------- -------
DILUTED:
Income attributable to common stock,
including assumed conversions $ 155,413 131,116 $ 1.19 $ 200,828 127,094 $ 1.58
========= ======= ========= ========= ======= =========
</Table>
<Table>
<Caption>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------
2001 2000
---------------------------------- -----------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
--------- ------- --------- --------- ------- ---------
(In thousands, except per share amounts)
BASIC:
Income attributable to common stock $ 630,086 124,684 $ 5.05 $ 440,857 116,009 $ 3.80
========= =========
EFFECT OF DILUTIVE SECURITIES:
Stock options and other -- 981 -- 943
Series C Preferred Stock 10,464 5,676 10,820 5,676
--------- ------- --------- -------
DILUTED:
Income attributable to common stock,
including assumed conversions $ 640,550 131,341 $ 4.88 $ 451,677 122,628 $ 3.68
========= ======= ========= ========= ======= =========
</Table>
9
4. DEBT
The Company's 9.25 percent notes due June 2002 are classified as long-term
debt in the accompanying consolidated balance sheet as the Company has the
ability and intent to refinance such amount on a long-term basis through either
the issuance of commercial paper or borrowing under the U.S. portion of the
global credit facility and the 364-day revolving credit facility.
5. STOCK DIVIDEND
On September 13, 2001, the Company's Board of Directors declared a 10
percent stock dividend payable on January 21, 2002 to shareholders of record on
December 31, 2001. No fractional shares will be issued and payments will be made
in lieu of fractional shares. In connection with the dividend, a
reclassification was made to transfer $545 million from retained earnings to
additional paid-in-capital in the accompanying consolidated balance sheet as of
September 30, 2001. The following pro forma information shows the effect on the
Company's consolidated results of operations as if the stock dividend were made
on January 1, 2000.
<Table>
<Caption>
FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2001 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------- ------------------------- ------------------------- -------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(In thousands, except per share data)
Weighted
average
shares
outstanding:
Basic 124,719 137,190 124,684 137,152 120,197 132,217 116,009 127,610
Diluted 131,116 144,228 131,341 144,475 127,094 139,804 122,628 134,890
Net income per
common share:
Basic $ 1.22 $ 1.11 $ 5.05 $ 4.59 $ 1.64 $ 1.49 $ 3.80 $ 3.45
Diluted 1.19 1.08 4.88 4.43 1.58 1.44 3.68 3.35
</Table>
6. MINORITY INTEREST
In August 2001, Apache entered into a series of financing transactions,
described below, to raise a total of $440.7 million for investments, to pay down
existing debt and increase financial flexibility.
Apache contributed interests in various fields valued at $923 million to
new subsidiaries in connection with the financing transactions. Additionally, on
August 7, 2001, Apache purchased $116.7 million in U.S. Government Agency Notes,
maturing in October 2002, which were contributed to the subsidiaries. Unrelated
institutional investors contributed $443 million ($440.7 million, net of
issuance costs) to the various subsidiaries in exchange for preferred stock of
the subsidiaries and a limited partner interest in one of the entities. The
third party investors are entitled to receive a weighted average return of 123
basis points above the prevailing LIBOR interest rate. The preferred and limited
partner interests are repayable from the assets of the subsidiaries with limited
recourse to Apache.
The assets, liabilities and operations of the subsidiaries are included in
Apache's consolidated financial statements at historical costs, with the
preferred and limited partner interests of the subsidiaries reflected as a
minority interest. The U.S. Government Agency Notes are accounted for as
"held-to-maturity" securities shown as long-term investments in the accompanying
balance sheet.
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 establishes
accounting and reporting standards discontinuing goodwill amortization and
requiring a periodic review for impairments. Apache's goodwill represents the
excess of the purchase price over the estimated fair value of the assets
acquired and liabilities assumed in the Fletcher and Repsol acquisitions (see
Note 1). The goodwill currently is being amortized on a straight-line basis over
20 years. Apache will continue to record amortization of approximately $2.5
million per quarter through December 31, 2001. The
10
Company will adopt SFAS No. 142 on January 1, 2002. No impairment of goodwill is
currently anticipated; however, the Company will continue to assess
recoverability of goodwill on an ongoing basis.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." The statement requires entities to record the fair value of legal
obligations associated with the retirement of tangible long-lived assets in the
period in which it is incurred. When the liability is initially recorded, the
entity increases the carrying amount of the related long-lived asset. Over time,
accretion of the liability is recognized each period, and the capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, the entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002, with earlier adoption encouraged. The
Company is currently assessing the impact of adopting SFAS No. 143 on its
financial condition and results of operations and has not determined the timing
of adoption.
8. SUPPLEMENTAL CASH FLOW INFORMATION
NON-CASH INVESTING AND FINANCING ACTIVITIES
In January 2000, the Company acquired producing properties formerly owned
by a subsidiary of Repsol for cash, plus assumed liabilities of $29.8 million.
In March 2001, the Company acquired substantially all of Repsol's oil and
gas concession interests in Egypt for cash and the assumption of certain
non-cash liabilities. The accompanying financial statements include the non-cash
amounts detailed in Note 1.
In March 2001, the Company acquired subsidiaries of Fletcher for cash, 1.64
million restricted shares of common stock and the assumption of certain non-cash
liabilities. The accompanying financial statements include the non-cash amounts
detailed in Note 1.
In August 2001, the Company acquired properties located in Texas, Oklahoma
and New Mexico for cash and the assumption of certain non-cash liabilities. The
accompanying financial statements include the non-cash amounts detailed in Note
1.
CASH PAID FOR INTEREST AND TAXES
The following table provides supplemental disclosure of cash flow
information:
<Table>
<Caption>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
2001 2000
------------- -------------
(In thousands)
Cash paid during the period for:
Interest (net of amounts capitalized) $ 80,501 $ 78,643
Income taxes (net of refunds) 149,996 95,358
</Table>
11
9. BUSINESS SEGMENT INFORMATION
Apache has five reportable segments which are primarily in the business of
natural gas and crude oil exploration and production. The Company evaluates
performance based on profit or loss from oil and gas operations before income
and expense items incidental to oil and gas operations and income taxes.
Apache's reportable segments are managed separately because of their geographic
locations. Financial information by operating segment is presented below:
<Table>
<Caption>
OTHER
UNITED STATES CANADA EGYPT AUSTRALIA INTERNATIONAL TOTAL
----------- ----------- ----------- ----------- ------------- ----------
(In thousands)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
Oil and Gas Production Revenues...... $ 1,211,714 $ 492,050 $ 357,786 $ 195,088 $ -- $2,256,638
=========== =========== =========== =========== ========== ==========
Operating Income (Loss) (1) (2)...... $ 689,412 $ 279,710 $ 230,351 $ 105,968 $ (65,031) $1,240,410
=========== =========== =========== =========== ==========
Other Income (Expense):
Other revenues (losses)........... (8,628)
Administrative, selling and other. (66,363)
Minority interest................. (3,189)
Financing costs, net.............. (91,601)
----------
Income Before Income Taxes........... $1,070,629
==========
Total Assets......................... $ 4,372,952 $ 2,183,618 $ 1,505,507 $ 878,381 $ 126,277 $9,066,735
=========== =========== =========== =========== ========== ==========
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
Oil and Gas Production Revenues...... $ 893,563 $ 217,611 $ 277,646 $ 169,046 $ -- $1,557,866
=========== =========== =========== =========== ========== ==========
Operating Income (Loss) (1).......... $ 490,044 $ 128,846 $ 195,042 $ 99,011 $ (36) $ 912,907
=========== =========== =========== =========== ==========
Other Income (Expense):
Equity in income of affiliates.... 1,084
Other revenues (losses)........... (5,833)
Administrative, selling and other. (49,331)
Financing costs, net.............. (82,670)
----------
Income Before Income Taxes........... $ 776,157
==========
Total Assets......................... $ 3,848,036 $ 923,975 $ 956,424 $ 833,427 $ 170,697 $6,732,559
=========== =========== =========== =========== ========== ==========
</Table>
(1) Operating income consists of oil and gas production revenues less
depreciation, depletion and amortization (DD&A) expense, international
impairments, lease operating costs, and severance and other taxes.
(2) During the second quarter of 2001, the Company recorded a nonrecurring
$65 million impairment ($41 million after-tax) of unproved property
costs in Poland and China.
12
10. SUPPLEMENTAL GUARANTOR INFORMATION
Prior to 2001, Apache Finance Pty Ltd. (Apache Finance Australia) was a
finance subsidiary of Apache with no independent operations. In this capacity,
it issued approximately $270 million of publicly traded notes that are fully and
unconditionally guaranteed by Apache and, beginning in 2001, Apache North
America, Inc. The guarantors of Apache Finance Australia have joint and
severable liability. Similarly, Apache Finance Canada Corporation (Apache
Finance Canada) was also a finance subsidiary of Apache and had issued
approximately $300 million of publicly traded notes that were fully and
unconditionally guaranteed by Apache.
Generally, the issuance of publicly traded securities would subject those
subsidiaries to the reporting requirements of the Securities and Exchange
Commission (SEC). Since these subsidiaries had no independent operations and
qualified as "finance subsidiaries", they were exempted from these requirements.
During 2001, Apache contributed stock of its Australian and Canadian
operating subsidiaries to Apache Finance Australia and Apache Finance Canada,
respectively. As a result of these contributions, they no longer qualify as
finance subsidiaries. As allowed by the SEC rules, the following condensed
consolidating financial statements are provided as an alternative to filing
separate financial statements.
Each of the Company's presented in the condensed consolidating financial
statements has been fully consolidated in Apache Corporation's consolidated
financial statements. As such, the condensed consolidating financial statements
should be read in conjunction with the financial statements of Apache
Corporation and subsidiaries and notes thereto of which this note is an integral
part.
13
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues........... $ 248,788 $ -- $ -- $ --
Equity in net income of affiliates........ 99,285 5,761 8,738 23,454
Other revenues (losses)................... (1,424) -- -- --
----------------- ----------------- ----------------- -----------------
346,649 5,761 8,738 23,454
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization.. 68,481 -- -- --
Lease operating costs..................... 49,845 -- -- --
Severance and other taxes................. 10,392 -- -- --
Administrative, selling and other......... 21,207 -- -- --
Financing costs, net...................... 16,706 -- 4,513 10,302
----------------- ----------------- ----------------- -----------------
166,631 -- 4,513 10,302
----------------- ----------------- ----------------- -----------------
PREFERRED INTERESTS OF SUBSIDIARIES.......... -- -- -- --
----------------- ----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............ 180,018 5,761 4,225 13,152
Provision (benefit) for income taxes...... 23,185 -- (1,535) (4,492)
----------------- ----------------- ----------------- -----------------
NET INCOME................................... 156,833 5,761 5,760 17,644
Preferred stock dividends................. 4,908 -- -- --
----------------- ----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK.......... $ 151,925 $ 5,761 $ 5,760 $ 17,644
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues........... $ 514,796 $ (104,589) $ 658,995
Equity in net income of affiliates........ (8,788) (128,450) --
Other revenues (losses)................... (5,147) -- (6,571)
----------------- ----------------- -----------------
500,861 (233,039) 652,424
----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization.. 148,540 -- 217,021
Lease operating costs..................... 158,045 (104,589) 103,301
Severance and other taxes................. 6,264 -- 16,656
Administrative, selling and other......... 1,587 -- 22,794
Financing costs, net...................... (3,800) -- 27,721
----------------- ----------------- -----------------
310,636 (104,589) 387,493
----------------- ----------------- -----------------
PREFERRED INTERESTS OF SUBSIDIARIES.......... 3,189 -- 3,189
----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............ 187,036 (128,450) 261,742
Provision (benefit) for income taxes...... 87,751 -- 104,909
----------------- ----------------- -----------------
NET INCOME................................... 99,285 (128,450) 156,833
Preferred stock dividends................. -- -- 4,908
----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK.......... $ 99,285 $ (128,450) $ 151,925
================= ================= =================
</Table>
14
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues............ $ 386,789 $ -- $ -- $ --
Equity in net income of affiliates......... 76,543 -- -- 6,000
Other revenues (losses).................... (456) -- -- --
----------------- ----------------- ----------------- -----------------
462,876 -- -- 6,000
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization... 93,900 -- -- --
Lease operating costs...................... 45,661 -- -- --
Severance and other taxes.................. 13,230 -- -- --
Administrative, selling and other.......... 15,088 -- -- --
Financing costs, net....................... 20,386 -- -- 5,843
----------------- ----------------- ----------------- -----------------
188,265 -- -- 5,843
----------------- ----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............. 274,611 -- -- 157
Provision (benefit) for income taxes....... 72,363 -- -- (2,548)
----------------- ----------------- ----------------- -----------------
NET INCOME.................................... 202,248 -- -- 2,705
Preferred stock dividends.................. 4,908 -- -- --
----------------- ----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK........... $ 197,340 $ -- $ -- $ 2,705
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues............ $ 291,694 $ (54,940) $ 623,543
Equity in net income of affiliates......... (3,295) (79,694) (446)
Other revenues (losses).................... (4,128) -- (4,584)
----------------- ----------------- -----------------
284,271 (134,634) 618,513
----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization... 60,005 -- 153,905
Lease operating costs...................... 75,789 (54,940) 66,510
Severance and other taxes.................. 2,791 -- 16,021
Administrative, selling and other.......... 3,001 -- 18,089
Financing costs, net....................... 1,471 -- 27,700
----------------- ----------------- -----------------
143,057 (54,940) 282,225
----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............. 141,214 (79,694) 336,288
Provision (benefit) for income taxes....... 64,225 -- 134,040
----------------- ----------------- -----------------
NET INCOME.................................... 76,989 (79,694) 202,248
Preferred stock dividends.................. -- -- 4,908
----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK........... $ 76,989 $ (79,694) $ 197,340
================= ================= =================
</Table>
15
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues............ $ 1,192,773 $ -- $ -- $ --
Equity in net income of affiliates......... 250,656 13,407 20,356 70,851
Other revenues (losses).................... (1,926) -- 3,078 --
----------------- ----------------- ----------------- -----------------
1,441,503 13,407 23,434 70,851
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization... 274,309 -- -- --
International impairments.................. -- -- -- --
Lease operating costs...................... 160,808 -- -- --
Severance and other taxes.................. 43,252 -- -- --
Administrative, selling and other.......... 60,100 -- -- --
Financing costs, net....................... 53,664 -- 13,607 27,117
----------------- ----------------- ----------------- -----------------
592,133 -- 13,607 27,117
----------------- ----------------- ----------------- -----------------
PREFERRED INTERESTS OF SUBSIDIARIES........... -- -- -- --
----------------- ----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............. 849,370 13,407 9,827 43,734
Provision (benefit) for income taxes....... 204,591 -- (3,580) (11,823)
----------------- ----------------- ----------------- -----------------
NET INCOME.................................... 644,779 13,407 13,407 55,557
Preferred stock dividends.................. 14,693 -- -- --
----------------- ----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK........... $ 630,086 $ 13,407 $ 13,407 $ 55,557
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues............ $ 1,465,398 $ (401,533) $ 2,256,638
Equity in net income of affiliates......... (22,243) (333,027) --
Other revenues (losses).................... (9,780) -- (8,628)
----------------- ----------------- -----------------
1,433,375 (734,560) 2,248,010
----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization... 323,894 -- 598,203
International impairments.................. 65,000 -- 65,000
Lease operating costs...................... 535,553 (401,533) 294,828
Severance and other taxes.................. 14,945 -- 58,197
Administrative, selling and other.......... 6,263 -- 66,363
Financing costs, net....................... (2,787) -- 91,601
----------------- ----------------- -----------------
942,868 (401,533) 1,174,192
----------------- ----------------- -----------------
PREFERRED INTERESTS OF SUBSIDIARIES........... 3,189 -- 3,189
----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............. 487,318 (333,027) 1,070,629
Provision (benefit) for income taxes....... 236,662 -- 425,850
----------------- ----------------- -----------------
NET INCOME.................................... 250,656 (333,027) 644,779
Preferred stock dividends.................. -- -- 14,693
----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK........... $ 250,656 $ (333,027) $ 630,086
================= ================= =================
</Table>
16
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues............ $ 903,400 $ -- $ -- --
Equity in net income of affiliates......... 212,189 -- -- 15,250
Other revenues (losses).................... (1,275) -- -- --
----------------- ----------------- ----------------- -----------------
1,114,314 -- -- 15,250
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization... 253,103 -- -- --
Lease operating costs...................... 121,238 -- -- --
Severance and other taxes.................. 29,446 -- -- --
Administrative, selling and other.......... 41,093 -- -- --
Financing costs, net....................... 63,360 -- -- 13,481
----------------- ----------------- ----------------- -----------------
508,240 -- -- 13,481
----------------- ----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............. 606,074 -- -- 1,769
Provision (benefit) for income taxes....... 142,598 -- -- (5,878)
----------------- ----------------- ----------------- -----------------
INCOME (LOSS) BEFORE CHANGE IN
ACCOUNTING PRINCIPLE........................ 463,476 -- -- 7,647
Cumulative effect of change in accounting
principle, net of income tax............. (7,539) -- -- --
----------------- ----------------- ----------------- -----------------
NET INCOME.................................... 455,937 -- -- 7,647
Preferred stock dividends.................. 15,080 -- -- --
----------------- ----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK........... $ 440,857 $ -- $ -- $ 7,647
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
REVENUES:
Oil and gas production revenues............ $ 848,966 $ (194,500) $ 1,557,866
Equity in net income of affiliates......... (7,603) (218,752) 1,084
Other revenues (losses).................... (4,558) -- (5,833)
----------------- ----------------- -----------------
836,805 (413,252) 1,553,117
----------------- ----------------- -----------------
OPERATING EXPENSES:
Depreciation, depletion and amortization... 169,289 -- 422,392
Lease operating costs...................... 259,725 (194,500) 186,463
Severance and other taxes.................. 6,658 -- 36,104
Administrative, selling and other.......... 8,238 -- 49,331
Financing costs, net....................... 5,829 -- 82,670
----------------- ----------------- -----------------
449,739 (194,500) 776,960
----------------- ----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES............. 387,066 (218,752) 776,157
Provision (benefit) for income taxes....... 175,961 -- 312,681
----------------- ----------------- -----------------
INCOME (LOSS) BEFORE CHANGE IN
ACCOUNTING PRINCIPLE........................ 211,105 (218,752) 463,476
Cumulative effect of change in accounting
principle, net of income tax............. (4,831) 4,831 (7,539)
----------------- ----------------- -----------------
NET INCOME.................................... 206,274 (213,921) 455,937
Preferred stock dividends.................. -- -- 15,080
----------------- ----------------- -----------------
INCOME ATTRIBUTABLE TO COMMON STOCK........... $ 206,274 $ (213,921) $ 440,857
================= ================= =================
</Table>
17
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE
CORPORATION NORTH AMERICA AUSTRALIA
----------------- ----------------- -----------------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES.......................................... $ 1,262,802 $ -- $ (1,550)
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment................. (628,870) -- --
Acquisitions........................................ (11,000) -- --
Proceeds from sales of oil and gas properties....... 102,118 -- --
Purchase of U.S. Government Agency Notes............ -- -- --
Investment in subsidiaries.......................... (894,422) (5,568) (5,568)
Other, net.......................................... (16,324) -- --
----------------- ----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES................. (1,448,498) (5,568) (5,568)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt activity, net........................ 261,511 -- 1,552
Dividends paid...................................... (14,686) -- --
Common stock activity, net.......................... 7,404 5,568 5,568
Treasury stock activity, net........................ (43,003) -- --
Cost of debt and equity transactions................ (1,648) -- --
Proceeds from preferred interests of subsidiaries,
net of issuance costs............................ -- -- --
----------------- ----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............. 209,578 5,568 7,120
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................................... 23,882 -- 2
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR................................... 5,257 -- --
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD....................................... $ 29,139 $ -- $ 2
================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
APACHE OF APACHE RECLASSIFICATIONS
FINANCE CANADA CORPORATION & ELIMINATIONS CONSOLIDATED
--------------- --------------- ----------------- ---------------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES.......................................... $ (22) $ 288,249 $ -- $ 1,549,479
--------------- --------------- ----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment................. -- (506,969) -- (1,135,839)
Acquisitions........................................ -- (911,951) -- (922,951)
Proceeds from sales of oil and gas properties....... -- 131,163 -- 233,281
Purchase of U.S. Government Agency Notes............ -- (116,737) -- (116,737)
Investment in subsidiaries.......................... (250,819) (636,084) 1,792,461 --
Other, net.......................................... -- (42,206) -- (58,530)
--------------- --------------- ----------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES................. (250,819) (2,082,784) 1,792,461 (2,000,776)
--------------- --------------- ----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt activity, net........................ 250,841 850,235 (1,270,885) 93,254
Dividends paid...................................... -- -- -- (14,686)
Common stock activity, net.......................... -- 510,440 (521,576) 7,404
Treasury stock activity, net........................ -- -- -- (43,003)
Cost of debt and equity transactions................ -- -- -- (1,648)
Proceeds from preferred interests of subsidiaries,
net of issuance costs............................ -- 440,654 -- 440,654
--------------- --------------- ----------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............. 250,841 1,801,329 (1,792,461) 481,975
--------------- --------------- ----------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................................... -- 6,794 -- 30,678
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR................................... -- 31,916 -- 37,173
--------------- --------------- ----------------- ---------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD....................................... $ -- $ 38,710 $ -- $ 67,851
=============== =============== ================= ===============
</Table>
18
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 535,638 $ -- $ 1,203 $ 7,195
----------------- ----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (389,185) -- -- --
Acquisitions (771,347) -- -- --
Proceeds from sales of oil and gas properties 4,301 -- -- --
Investment in subsidiaries (44,190) -- (1,319) (20,908)
Other, net (5,332) -- -- --
----------------- ----------------- ----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (1,205,753) -- (1,319) (20,908)
----------------- ----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt activity, net 265,730 -- 116 175
Dividends paid (30,741) -- -- --
Issuance (repurchase) of preferred stock (2,613) -- -- --
Common stock activity, net 457,475 -- -- 13,538
Treasury stock activity, net (17,727) -- -- --
Cost of debt and equity transactions (739) -- -- --
----------------- ----------------- ----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 671,385 -- 116 13,713
----------------- ----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,270 -- -- --
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,542 -- -- --
----------------- ----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,812 $ -- $ -- $ --
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 417,085 $ -- $ 961,121
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (279,567) -- (668,752)
Acquisitions -- -- (771,347)
Proceeds from sales of oil and gas properties 15,823 -- 20,124
Investment in subsidiaries (13,693) 80,110 --
Other, net (5,502) -- (10,834)
----------------- ----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (282,939) 80,110 (1,430,809)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt activity, net (145,316) (42,562) 78,143
Dividends paid -- -- (30,741)
Issuance (repurchase) of preferred stock -- -- (2,613)
Common stock activity, net 24,010 (37,548) 457,475
Treasury stock activity, net -- -- (17,727)
Cost of debt and equity transactions -- -- (739)
----------------- ----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (121,306) (80,110) 483,798
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,840 -- 14,110
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 11,629 -- 13,171
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 24,469 $ -- $ 27,281
================= ================= =================
</Table>
19
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 29,139 $ -- $ 2 $ --
Receivables.................................... 92,993 -- -- --
Inventories.................................... 19,750 -- -- --
Advances to oil and gas ventures and others.... 23,268 -- -- --
Oil and gas derivative instruments............. 23,927 -- -- --
----------------- ----------------- ----------------- -----------------
189,077 -- 2 --
----------------- ----------------- ----------------- -----------------
PROPERTY AND EQUIPMENT, NET...................... 3,001,699 -- -- --
----------------- ----------------- ----------------- -----------------
OTHER ASSETS:
Intercompany receivable, net................... 1,342,032 -- -- (250,995)
Goodwill, net.................................. -- -- -- --
Equity in affiliates........................... 2,619,241 180,415 449,059 1,072,060
Long-term investments.......................... -- -- -- --
Oil and gas derivative instruments............. 57,409 -- -- --
Deferred charges and other..................... 28,843 -- -- 2,587
----------------- ----------------- ----------------- -----------------
$ 7,238,301 $ 180,415 $ 449,061 $ 823,652
================= ================= ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... $ 120,767 $ -- $ -- $ --
Other accrued expenses......................... 164,107 -- 3,611 7,006
Oil and gas derivative instruments............. -- -- -- --
----------------- ----------------- ----------------- -----------------
284,874 -- 3,611 7,006
----------------- ----------------- ----------------- -----------------
LONG-TERM DEBT................................... 1,630,863 -- 268,615 296,981
----------------- ----------------- ----------------- -----------------
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
Income taxes................................... 622,901 -- (3,580) (25)
Advances from gas purchasers................... 143,770 -- -- --
Oil and gas derivative instruments............. 69,233 -- -- --
Other.......................................... 88,458 -- -- --
----------------- ----------------- ----------------- -----------------
924,362 -- (3,580) (25)
----------------- ----------------- ----------------- -----------------
PREFERRED INTERESTS OF SUBSIDIARIES.............. -- -- -- --
----------------- ----------------- ----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY........................... 4,398,202 180,415 180,415 519,690
----------------- ----------------- ----------------- -----------------
$ 7,238,301 $ 180,415 $ 449,061 $ 823,652
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 38,710 $ -- $ 67,851
Receivables.................................... 343,612 -- 436,605
Inventories.................................... 66,846 -- 86,596
Advances to oil and gas ventures and others.... 53,314 -- 76,582
Oil and gas derivative instruments............. 13,118 -- 37,045
----------------- ----------------- -----------------
515,600 -- 704,679
----------------- ----------------- -----------------
PROPERTY AND EQUIPMENT, NET...................... 4,949,412 -- 7,951,111
----------------- ----------------- -----------------
OTHER ASSETS:
Intercompany receivable, net................... (1,091,037) -- --
Goodwill, net.................................. 192,155 -- 192,155
Equity in affiliates........................... (821,014) (3,499,761) --
Long-term investments.......................... 116,312 -- 116,312
Oil and gas derivative instruments............. 5,382 -- 62,791
Deferred charges and other..................... 8,257 -- 39,687
----------------- ----------------- -----------------
$ 3,875,067 $ (3,499,761) $ 9,066,735
================= ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... $ 169,076 $ -- $ 289,843
Other accrued expenses......................... 129,895 -- 304,619
Oil and gas derivative instruments............. 22,003 -- 22,003
----------------- ----------------- -----------------
320,974 -- 616,465
----------------- ----------------- -----------------
LONG-TERM DEBT................................... 115,053 -- 2,311,512
----------------- ----------------- -----------------
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
Income taxes................................... 367,198 -- 986,494
Advances from gas purchasers................... -- -- 143,770
Oil and gas derivative instruments............. (3,798) -- 65,435
Other.......................................... 15,734 -- 104,192
----------------- ----------------- -----------------
379,134 -- 1,299,891
----------------- ----------------- -----------------
PREFERRED INTERESTS OF SUBSIDIARIES.............. 440,665 -- 440,665
----------------- ----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY........................... 2,619,241 (3,499,761) 4,398,202
----------------- ----------------- -----------------
$ 3,875,067 $ (3,499,761) $ 9,066,735
================= ================= =================
</Table>
20
APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
(IN THOUSANDS)
<Table>
<Caption>
APACHE
APACHE APACHE FINANCE APACHE
CORPORATION NORTH AMERICA AUSTRALIA FINANCE CANADA
----------------- ----------------- ----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................... $ 5,257 $ -- $ -- $ --
Receivables................................... 267,514 -- -- --
Inventories................................... 13,481 -- -- --
Advances to oil and gas ventures and others... 18,840 -- -- --
----------------- ----------------- ----------------- -----------------
305,092 -- -- --
----------------- ----------------- ----------------- -----------------
PROPERTY AND EQUIPMENT, NET..................... 3,643,439 -- -- --
----------------- ----------------- ----------------- -----------------
OTHER ASSETS:
Intercompany receivable, net.................. 1,081,360 -- 269,177 (176)
Equity in affiliates.......................... 1,205,257 -- -- 321,417
Deferred charges and other.................... 26,565 -- 1,870 2,656
----------------- ----------------- ----------------- -----------------
$ 6,261,713 $ -- $ 271,047 $ 323,897
================= ================= ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt.......... $ 25,000 $ -- $ -- $ --
Accounts payable.............................. 102,766 -- -- --
Other accrued expenses........................ 181,968 -- 2,599 1,103
----------------- ----------------- ----------------- -----------------
309,734 -- 2,599 1,103
----------------- ----------------- ----------------- -----------------
LONG-TERM DEBT.................................. 1,482,850 -- 268,448 296,959
----------------- ----------------- ----------------- -----------------
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
Income taxes.................................. 451,380 -- -- (57)
Advances from gas purchasers.................. 153,106 -- -- --
Other......................................... 110,003 -- -- --
----------------- ----------------- ----------------- -----------------
714,489 -- -- (57)
----------------- ----------------- ----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY.......................... 3,754,640 -- -- 25,892
----------------- ----------------- ----------------- -----------------
$ 6,261,713 $ -- $ 271,047 $ 323,897
================= ================= ================= =================
<Caption>
ALL OTHER
SUBSIDIARIES
OF APACHE RECLASSIFICATIONS
CORPORATION & ELIMINATIONS CONSOLIDATED
----------------- ----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................... $ 31,916 $ -- $ 37,173
Receivables................................... 239,209 -- 506,723
Inventories................................... 41,283 -- 54,764
Advances to oil and gas ventures and others... 12,520 -- 31,360
----------------- ----------------- -----------------
324,928 -- 630,020
----------------- ----------------- -----------------
PROPERTY AND EQUIPMENT, NET..................... 3,169,023 -- 6,812,462
----------------- ----------------- -----------------
OTHER ASSETS:
Intercompany receivable, net.................. (1,350,361) -- --
Equity in affiliates.......................... (295,525) (1,231,149) --
Deferred charges and other.................... 8,377 -- 39,468
----------------- ----------------- -----------------
$ 1,856,442 $ (1,231,149) $ 7,481,950
================= ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt.......... $ -- $ -- $ 25,000
Accounts payable.............................. 156,354 -- 259,120
Other accrued expenses........................ 83,557 -- 269,227
----------------- ----------------- -----------------
239,911 -- 553,347
----------------- ----------------- -----------------
LONG-TERM DEBT.................................. 145,001 -- 2,193,258
----------------- ----------------- -----------------
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
Income taxes.................................. 248,510 -- 699,833
Advances from gas purchasers.................. -- -- 153,106
Other......................................... 17,763 -- 127,766
----------------- ----------------- -----------------
266,273 -- 980,705
----------------- ----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY.......................... 1,205,257 (1,231,149) 3,754,640
----------------- ----------------- -----------------
$ 1,856,442 $ (1,231,149) $ 7,481,950
================= ================= =================
</Table>
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
APACHE CORPORATION
Dated: March 21, 2002 /s/ Roger B. Plank
--------------------------------------------
Roger B. Plank
Executive Vice President and Chief Financial
Officer
Dated: March 21, 2002 /s/ Thomas L. Mitchell
--------------------------------------------
Thomas L. Mitchell
Vice President and Controller
(Chief Accounting Officer)