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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[MARK ONE]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________ TO ___________
COMMISSION FILE NUMBER 1-4300
APACHE CORPORATION
A DELAWARE IRS EMPLOYER
CORPORATION NO. 41-0747868
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
Telephone Number (713) 296-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.25 Par Value New York Stock Exchange
Chicago Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
9.25% Notes due 2002 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
Aggregate market value of the voting stock held by non-affiliates
of registrant as of March 17, 1994 $1,599,465,322
Number of shares of registrant's common stock outstanding
as of March 17, 1994 61,223,553
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of registrant's proxy statement relating to registrant's 1994
annual meeting of shareholders have been incorporated by reference into Part III
hereof.
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TABLE OF CONTENTS
DESCRIPTION
ITEM PAGE
PART I
1. BUSINESS.......................................................................... 1
2. PROPERTIES........................................................................ 8
3. LEGAL PROCEEDINGS................................................................. 12
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................... 12
PART II
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......... 12
6. SELECTED FINANCIAL DATA........................................................... 13
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................ 14
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................... 20
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE........................................................................ 20
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................................ 20
11. EXECUTIVE COMPENSATION............................................................ 20
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................... 20
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................... 20
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.......................................................................... 21
ALL DEFINED TERMS UNDER RULE 4-10(A) OF REGULATION S-X SHALL HAVE THEIR
STATUTORILY-PRESCRIBED MEANINGS WHEN USED IN THIS REPORT. QUANTITIES OF NATURAL
GAS ARE EXPRESSED IN THIS REPORT IN TERMS OF THOUSAND CUBIC FEET (MCF), MILLION
CUBIC FEET (MMCF) OR BILLION CUBIC FEET (BCF). OIL IS QUANTIFIED IN TERMS OF
BARRELS (BBLS), THOUSANDS OF BARRELS (MBBLS) AND MILLIONS OF BARRELS (MMBBLS).
NATURAL GAS IS COMPARED TO OIL IN TERMS OF BARRELS OF OIL EQUIVALENT (BOE) OR
MILLION BARRELS OF OIL EQUIVALENT (MMBOE). OIL AND NATURAL GAS LIQUIDS ARE
COMPARED WITH NATURAL GAS IN TERMS OF MILLION CUBIC FEET EQUIVALENT (MMCFE) AND
BILLION CUBIC FEET EQUIVALENT (BCFE). ONE BARREL OF OIL IS THE ENERGY EQUIVALENT
OF SIX MCF OF NATURAL GAS. DAILY OIL AND GAS PRODUCTION IS EXPRESSED IN TERMS OF
BARRELS OF OIL PER DAY (BOPD) AND THOUSANDS OF CUBIC FEET OF GAS PER DAY (MCFD),
RESPECTIVELY. WITH RESPECT TO INFORMATION RELATING TO THE COMPANY'S WORKING
INTEREST IN WELLS OR ACREAGE, "NET" OIL AND GAS WELLS OR ACREAGE IS DETERMINED
BY MULTIPLYING GROSS WELLS OR ACREAGE BY THE COMPANY'S WORKING INTEREST THEREIN.
UNLESS OTHERWISE SPECIFIED, ALL REFERENCES TO WELLS AND ACRES ARE GROSS.
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PART I
ITEM 1. BUSINESS
GENERAL
Apache Corporation (Apache or the Company), a Delaware corporation formed
in 1954, is an independent energy company that explores for, develops, produces,
gathers, processes and markets natural gas and crude oil. Domestically, Apache's
exploration and production interests are spread over 18 states, focusing on the
Gulf of Mexico, the Anadarko Basin of Oklahoma, the Permian Basin of West Texas
and New Mexico, the Gulf Coast and the Rocky Mountain region. Internationally,
Apache has production interests in Australia and is currently focusing its
international exploration efforts offshore Western Australia and along the
Pacific Rim. Apache's common stock has been listed on the New York Stock
Exchange since 1969.
Apache holds interests in many of its domestic and international properties
through operating subsidiaries, such as MW Petroleum Corporation, Hadson Energy
Resources Corporation, Hadson Energy Limited and Apache International, Inc.
Properties referred to in this document may be held by those subsidiaries.
Apache treats all operations as one segment of business.
1993 RESULTS
In 1993, Apache had net income of $37.3 million, or $.70 per share, on
total revenues of $466.6 million. Net cash provided by operating activities
during 1993 was $225.1 million.
The year represents Apache's sixteenth consecutive year of production
growth and sixth consecutive year of oil and gas reserves growth. Apache's
average daily production was approximately 34 Mbbls of oil and 303 MMcf of
natural gas for the year. The Company's estimated proved reserves at December
31, 1993, were 231 MMboe, of which 61 percent was natural gas. Apache's growth
in reserves during the year reflects the replacement of 238 percent of the
Company's 1993 production. Over half of the newly added reserves were acquired
through Apache's ongoing acquisition efforts. The remainder was attributable to
Apache's active drilling and workover program, which yielded 210 new producing
domestic wells out of 266 attempts, and involved 368 workover and recompletion
projects during the year.
At December 31, 1993, Apache had interests in approximately 3,184 net oil
and gas wells and 680,893 net developed acres of oil and gas properties. In
addition, the Company had interests in 549,833 net undeveloped acres under
domestic leases and 7,532,102 net undeveloped acres under international
exploration and production rights.
APACHE'S GROWTH STRATEGY
Apache grows production, reserves and cash flow through a combination of
acquisitions, moderate-risk drilling and development of its inventory of
existing projects. The Company also emphasizes reducing operating costs per unit
produced and selling marginal and non-strategic properties in order to increase
its profit margins.
For Apache, property acquisition is only one phase in a continuing cycle of
business growth. Apache's aim is to follow each acquisition cycle with a cycle
of reserve enhancement, property consolidation and cash flow acceleration,
facilitating asset growth and debt reduction. This approach requires
well-planned and carefully executed property development and a commitment to a
selective program of ongoing property dispositions. It motivates Apache to
target acquisitions that have ascertainable additional reserve potential and to
apply an active drilling, workover and recompletion program to realize the
potential of the acquired undeveloped and partially developed properties. Apache
prefers to operate its properties so that it can best influence their
development, and the Company therefore operates properties constituting over 75
percent of its production.
Pursuing its acquire-and-develop strategy, Apache increased its total
reserves more than four-fold and production almost three-fold during the six
years ended 1993. In addition to its acquisition strategy, Apache continues to
develop and exploit its existing inventory of workover, recompletion and other
development
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projects to increase reserves and production. During 1993, Apache acquired
$324.6 million of additional properties and replaced over 100 percent of its
domestic production through its drilling, workover and recompletion program.
Apache's international investments supplement its long-term growth
strategy. Although international exploration is recognized as higher-risk than
most of Apache's domestic activities, it offers potential for higher rewards and
significant reserve additions. Apache refocused its international efforts in
1993 on the acquisition and development of properties in Western Australia and
the Pacific Rim, where it believes that reserve additions may be made through
higher-risk exploration and through improved production practices and recovery
techniques.
RECENT ACQUISITIONS AND DISPOSITIONS
In late 1992, Apache purchased a 93-percent working interest in
Matagorda Island Blocks 681 and 682, located off the Texas Gulf Coast, for
$57.4 million, including $1.8 million for a 14-mile gathering line. This
transaction approximately doubled Apache's offshore gas production, adding six
producing wells, and reserves of an estimated 73.5 Bcf of gas and 158 Mbbls of
condensate. Apache and an affiliate now own all of the working interest in the
blocks.
In 1993, Apache entered into two agreements to purchase a combined 103.7
Bcfe of proved reserves in the Gulf of Mexico from Hall-Houston Oil Company
(Hall-Houston) for an aggregate consideration of $113.7 million. In June 1993,
Apache closed the first of the two transactions, paying $29.3 million for Hall-
Houston's interest in Mustang Island Blocks 787 and 805. Apache acquired
substantially all of Hall-Houston's other producing properties in the Gulf of
Mexico for an additional $84.4 million in the second transaction which closed on
August 31, 1993. With the Hall-Houston acquisitions, Apache again more than
doubled its interest in offshore gas production, acquiring interests in 63
producing fields and 12 fields under development or awaiting pipeline
connections.
Apache acquired Hadson Energy Resources Corporation (HERC) through a series
of private transactions and subsequent merger, effective November 12, 1993. The
aggregate consideration paid for the acquisition was $98.0 million, including
the issuance of 307,977 shares of Apache common stock. Apache acquired HERC and
its subsidiaries subject to approximately $67.6 million of net liabilities at
the time of the merger. Through the acquisition of HERC, Apache added proved
reserves of 66 Bcfe domestically and 64 Bcfe in Australia.
The HERC and Hall-Houston acquisitions complement Apache's existing
operations, and represent the Company's emphasis on the acquisition of natural
gas properties and an increased commitment to the Gulf of Mexico and Australian
regions. The addition of the Hall-Houston properties makes the Gulf of Mexico
the Company's largest producing region. HERC's reserves fit well with Apache's
existing interests in Oklahoma and the Carnarvon Basin offshore Western
Australia. Domestically, nearly two-thirds of the value of HERC's properties are
concentrated in Oklahoma, where Apache is already the largest independent gas
producer. HERC's operations in Western Australia, including the Harriet complex
of oil and natural gas fields, provide Apache with the reserves and
infrastructure required for the commercial development of its other Australian
interests.
During 1993, Apache also acquired 11 MMboe of proved reserves through 71
smaller, non-strategic acquisitions for an aggregate consideration of $76.5
million. Apache also sold $3.3 million of its non-strategic properties during
1993.
EXPLORATION AND PRODUCTION
The Company's domestic exploration and production activities are divided
into five operating regions, the Gulf of Mexico, Midcontinent, Permian Basin,
Gulf Coast and Rocky Mountain regions. Approximately 95 percent of the Company's
proved reserves are located in its five domestic operating regions.
Internationally, the Company conducts its Australian exploration and production
and its Indonesian exploration through its
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Australian region. Apache's other international interests are directed by the
Company and its subsidiaries through the Company's principal offices located in
Houston, Texas.
GULF OF MEXICO. As a result of Apache's acquisitions of Matagorda Island
Blocks 681 and 682 in late 1992 and the Hall-Houston acquisition in 1993, the
Gulf of Mexico has become Apache's largest producing region. Because of the
growth resulting from these acquisitions, Apache divided its former Gulf Coast
region into two regions: Gulf of Mexico and Gulf Coast. The Gulf of Mexico
region encompasses all of Apache's interests in properties offshore Texas,
Louisiana and Alabama. As a result of acquisitions, Apache's reserves in the
region increased 77 percent during 1993. Apache increased its production in the
Gulf of Mexico to 150 MMcf of gas per day by year end, double that of a year
earlier.
The Gulf of Mexico region encompasses 219,009 net acres, located in both
state and federal waters, and accounts for 47.9 MMboe, or 21 percent, of the
Company's year-end 1993 reserves. Apache participated in 23 wells which were
drilled in the region during the year, 15 of which were completed as producers.
The Company performed 11 workover and recompletion operations in the region
during 1993.
MIDCONTINENT. Apache's Midcontinent region is known for its sizeable
position in the Anadarko Basin. Apache has drilled and operated in the
Anadarko Basin for over three decades, developing an extensive database of
geologic information and a substantial acreage position. In 1993, Apache
enhanced its position through the acquisition of HERC, a company with
significant acreage and producing interests in the Anadarko Basin.
At December 31, 1993, Apache held an interest in 236,063 net acres in the
region, which accounted for approximately 62 MMboe, or 27 percent, of Apache's
total proved reserves. Apache participated in 101 wells which were drilled in
the Midcontinent region during the year, 91 of which were completed as producing
wells. The Company performed 26 workover and recompletion operations in the
region during 1993.
PERMIAN BASIN. The Permian Basin of West Texas and New Mexico remained an
important region to Apache in 1993, generating 19 percent of the Company's
production revenues for the year. As of December 31, 1993, Apache held an
interest in 167,529 net acres in the region, which accounted for 49.1 MMboe, or
21 percent, of the Company's total proved reserves. Apache operations in the
Permian Basin focused primarily on workovers and recompletions, which totaled 76
for the year. Compared with 1992, Apache nearly doubled its drilling activity in
the region during 1993, with 14 of the 19 wells drilled in the region completed
as producers.
GULF COAST. The Gulf Coast region encompasses the Texas and Louisiana
coasts and central Texas. In 1993, the region was one of the most prominent in
the Company in the number of workover and recompletion projects completed and
the number of wells drilled. Apache participated in 77 wells drilled in the Gulf
Coast region during the year, 64 of which were completed as producers, including
40 Austin Chalk wells in central Texas, 38 of which were productive. The Company
performed 140 workover and recompletion operations during 1993 in the Gulf Coast
region. The region encompasses approximately 126,485 net acres, and accounts for
33.5 MMboe, or 14 percent, of the Company's year-end 1993 total proved reserves.
ROCKY MOUNTAIN. In the Rocky Mountain region, Apache currently emphasizes
oil enhancement opportunities, having conducted 115 development projects in
1993. At year-end 1993, Apache held an interest in 429,090 net acres in the
region, which accounted for approximately 26.9 MMboe, or 12 percent, of the
Company's total proved reserves. Apache participated in 46 wells in the region
during the year, 26 of which were productive.
AUSTRALIA. The state of Western Australia has become an important region to
Apache following the successful completion of the HERC acquisition. For
additional operating efficiencies, Apache consolidated its Australian
properties, acquired in 1991, with HERC's operations, which are headquartered in
Perth, Western Australia, during the fourth quarter of 1993.
As of December 31, 1993, Apache held 3,297,310 net developed and
undeveloped acres in Western Australia. Australian reserves accounted for 11.6
MMboe, or five percent, of the Company's total proved reserves at year end.
Through HERC and its subsidiaries, Apache also owns a 22.5-percent interest in
and
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operates the Harriet Gas Gathering Project, a gas processing and compression
facility with a throughput capacity of 80 MMcfd, and a 60-mile, 12-inch offshore
pipeline with a throughput capacity of 175 MMcfd. The facilities are located in
close proximity to HERC's producing properties offshore in the Carnarvon Basin.
HERC acts as operator for most of its properties in Western Australia through
its Australian subsidiary, Hadson Energy Limited.
During 1993, Apache's international subsidiary, Apache International, Inc.,
focused primarily on exploratory drilling in Western Australia, participating in
three wells for the year, two of which were productive. Although the wells
indicated the presence of a new natural gas and gas condensate field, the
economic potential of the field cannot be determined until completion of a
feasibility study currently in progress.
OTHER INTERNATIONAL OPERATIONS. Outside of Australia, Apache's
international interests currently consist only of exploration interests. In
1993, Apache continued to emphasize activities in Indonesia, expanded into
Egypt, and continued to reduce its focus on France, Angola, and The Congo, while
retaining an interest in the Foxtrot project offshore the Ivory Coast.
In early 1993, Apache took over as operator and increased its interest in
the Java Sea IV block offshore Indonesia and the Padang Panjang block on the
island of Sumatra, Indonesia. Following the HERC merger, operations for both
blocks were consolidated with those for the Bentu block on Sumatra which are
conducted by a subsidiary of HERC. Three exploratory wells are expected to be
drilled in Indonesia in 1994.
In May 1993, Apache acquired a 50-percent interest in the two-million acre
Qarun block in the western desert of Egypt which is operated by Phoenix
Resources Company of Qarun. The acquisition of seismic data has concluded and an
exploratory well is scheduled to be drilled in 1994.
In January 1994, Apache entered into an agreement with XCL-China, Ltd., a
subsidiary of The Exploration Company of Louisiana, to acquire a one-third
interest in the Zhao Dong block located in the Bohai Bay shallow water area
offshore the People's Republic of China. The contract area contains
approximately 48,670 undeveloped acres (16,200 acres net to Apache) and involves
a work commitment to acquire new seismic data and drill three exploratory wells
during the exploratory phase which began in May 1993. Under the contract, the
first exploratory well must be spudded within 15 months of May 1993 and is
planned for the second quarter of 1994.
OIL AND NATURAL GAS MARKETING
Apache markets approximately 85 percent of its domestic natural gas on the
spot market through Natural Gas Clearinghouse (NGC) or through market responsive
contracts with other parties; the remaining 15 percent is sold into long-term,
premium-priced contracts. Sales to NGC accounted for 36 percent of the Company's
oil and gas revenues in 1993. Effective April 1, 1993, Apache and NGC agreed to
extend the term of their existing natural gas marketing agreement under which
NGC will continue to market substantially all of Apache's domestic spot market
gas production. The Company believes that if the NGC contract were terminated,
it would not have a material adverse effect on the Company due to the existence
of alternative purchasers.
In 1992, Apache assumed its own domestic crude oil marketing operations.
Most of Apache's crude oil production is sold through lease-level marketing to
refiners, traders and transporters, generally under 30-day contracts that renew
automatically until canceled. Although effective January 1, 1993, Apache ended
its prior arrangement to sell to Amoco Production Company (Amoco) substantially
all of the oil produced from the MW Petroleum Corporation (MW) properties, sales
to Amoco constituted 11-percent of the Company's oil and gas revenues during the
year. Oil production from the MW properties is now marketed through Apache's
internal crude oil marketing group.
In Australia, HERC's existing proved gas reserves are dedicated to the
State Energy Commission of Western Australia (SECWA) under a long-term contract
that provides for the sale of 123 Bcf (approximately 28 Bcf net to HERC) over an
initial period of up to 10 years. The agreement contains take-or-pay provisions
that require SECWA to purchase a minimum of 26 MMcfd (approximately 6 MMcfd net
to HERC) through
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July 1994, and 35 MMcfd through the remainder of the contract term at a stated
minimum price that escalates with the Western Australia consumer price index. If
for any reason the SECWA contract were canceled, HERC might not be able to find
other markets for its Carnarvon Basin gas.
HERC markets all oil and natural gas liquids produced from its interests in
the Harriet field through a contract with Marubeni International Petroleum
(Singapore) Pte Limited (Marubeni), which was extended in 1993. Pricing under
the contract represents a fixed premium to the average of the quoted spot market
prices of Tapis and Dubai crude oil, with payment made in U.S. dollars.
Production sold under this contract in 1993 realized an average price of $18.53
per barrel (exclusive of the impact of hedging activities). The Company believes
that if this contract were terminated, it would not have a material adverse
effect on the Company due to the demand for Australian crude oil and the
existence of alternative purchasers.
OIL AND NATURAL GAS PRICES
Natural gas prices remained volatile and continued to behave independently
of historical seasonal patterns in 1993. Until recently, demand for natural gas
has tended to be seasonal in nature, with peak demand and higher prices
occurring in the colder winter months. In 1992, this linkage was lost: after
plummeting to a 13-year low near the peak of the winter heating season, prices
defied normal summer and fall seasonal patterns, climbing to a seven-year high.
Although natural gas prices remained volatile in 1993, Apache's average realized
gas price of $2.03 per Mcf for the year was 15 percent above the prior-year
average of $1.76 per Mcf.
Due to the escalating price contract with SECWA, HERC's natural gas
production in Western Australia is not subject to the same degree of price
volatility as is its domestic gas production, however, natural gas sales under
the SECWA contract represented only about two percent of the Company's total
natural gas sales at year end. In 1993, the price received for production under
the contract averaged $1.79 per Mcf.
Oil prices, especially vulnerable to unpredictable political and economic
forces, remained volatile in 1993 and declined steeply in the fourth quarter of
1993. Management believes that, absent a comprehensive U.S. energy policy, oil
prices will continue to fluctuate in response to changes in the policies of the
Organization of Petroleum Exporting Countries (OPEC) and events in the Middle
East. Although levels of production maintained by OPEC member countries and
other major oil producing countries continue to impede crude oil price
improvements in the near term, management is unable to determine whether the
sharply lower oil prices prevailing in the fourth quarter of 1993 will be a
relatively short-term experience or if such prices represent a longer-term shift
in the crude oil market.
Apache's worldwide crude oil price averaged $16.78 per barrel in 1993,
eight percent lower than the average price of $18.16 per bbl in 1992. Apache's
average crude oil price for its Australian production, including production sold
under the Marubeni contract, was $19.24 per barrel in 1993.
Terms of the acquisition of MW from Amoco included a crude oil price
support mechanism that expired in mid-1993 and that buffered the Company from
price volatility during the peak debt exposure from the acquisition financing.
The transaction also created an oil and gas price sharing provision under which
certain price sharing payments are due to Amoco. Pursuant to this provision, to
the extent that oil prices exceed specified reference prices that rise to $33.13
per barrel over the eight-year period ending June 30, 1999, and to the extent
that gas prices exceed specified reference prices that rise to $2.68 per Mcf
over the five-year period ending June 30, 1996, Apache will share the excess
price realization with Amoco on a portion of the MW production.
From time to time, Apache buys or sells contracts for the future delivery
of oil or gas to hedge a limited portion of its production against exposure to
spot market price changes. See Note 8 to the Company's financial statements
under Item 8 below.
The Company's business will be affected by future worldwide changes in oil
and gas prices and the relationship between the prices of oil and gas. No
assurance can be given as to the trend in, or level of, future oil and gas
prices.
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RESERVE VALUE CEILING TEST
Under the Securities and Exchange Commission's full cost accounting rules,
the Company reviews the carrying value of its oil and gas properties each
quarter on a country-by-country basis. Under full cost accounting rules,
capitalized costs of oil and gas properties may not exceed the present value of
estimated future net revenues from proved reserves, discounted at 10 percent,
plus the lower of cost or fair market value of unproved properties, as adjusted
for related tax effects and deferred tax reserves. Application of this rule
generally requires pricing future production at the unescalated oil and gas
prices in effect at the end of each fiscal quarter and requires a write-down if
the "ceiling" is exceeded, even if prices declined for only a short period of
time. If a write-down is required, the one-time charge to earnings would not
impact cash flow from operating activities. The Company had no write-downs
because of ceiling test limitations during 1993.
GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY
The Company's exploration, production and marketing operations are
regulated extensively at the federal, state and local levels, as well as by
other countries in which the Company does business. Oil and gas exploration,
development and production activities are subject to various laws and
regulations governing a wide variety of matters. For example,
hydrocarbon-producing states have statutes or regulations addressing
conservation practices and the protection of correlative rights, and such
regulations may affect Apache's operations and limit the quantity of
hydrocarbons Apache may produce and sell. Other regulated matters include
marketing, pricing, transportation, and valuation of royalty payments.
Among other regulated matters on the federal level, the Federal Energy
Regulatory Commission (FERC) regulates interstate transportation of natural gas
under the Natural Gas Act and regulates the maximum selling prices of certain
categories of gas sold in "first sales" in interstate and intrastate commerce
under the Natural Gas Policy Act (NGPA). Apache, as a producer and seller of
gas, remains subject to FERC's jurisdiction only to a limited extent as a result
of a few remaining regulated gas sales. Apache's other gas sales are deregulated
under the NGPA or Natural Gas Wellhead Decontrol Act.
Apache's gas sales are affected by regulation of intrastate and interstate
gas transportation. In an attempt to promote competition, the FERC has issued a
series of orders which have altered significantly the marketing and
transportation of natural gas. The effect of these orders has been to enable the
Company to market its natural gas production to purchasers other than the
interstate pipelines located in the vicinity of its producing properties. The
Company is not able to fully determine what impact the new regulations will have
on its operations, but it generally believes that the changes will improve the
Company's access to transportation and enhance the marketability of its natural
gas production. To date, Apache has not experienced any material adverse effect
on gas marketing as a result of these FERC orders; however, the Company cannot
predict what new regulations may be adopted by the FERC and other regulatory
authorities, or what effect subsequent regulations may have on its future gas
marketing.
ENVIRONMENTAL MATTERS
Apache, as an owner or lessee and operator of oil and gas properties, is
subject to various federal, state, local and foreign country laws and
regulations relating to discharge of materials into, and protection of, the
environment. These laws and regulations may, among other things, impose
liability on the lessee under an oil and gas lease for the cost of pollution
clean-up resulting from operations, subject the lessee to liability for
pollution damages, require suspension or cessation of operations in affected
areas and impose restrictions on the injection of liquids into subsurface
aquifers that may contaminate groundwater.
Apache maintains insurance coverages which it believes are customary in the
industry, although it is not fully insured against all environmental risks. The
Company is not aware of any environmental claims existing as of December 31,
1993, which would have a material impact upon the Company's financial position
or results of operations.
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Apache has made and will continue to make expenditures in its efforts to
comply with these requirements, which it believes are necessary business costs
in the oil and gas industry. Apache has established policies for continuing
compliance with environmental laws and regulations, including regulations
applicable to its operations in Australia and other countries. Apache has also
established operational procedures designed to limit the environmental impact of
its field facilities. The costs incurred by these policies and procedures are
inextricably connected to normal operating expenses such that the Company is
unable to separate the expenses related to environmental matters; however, the
Company does not believe any such additional expenses are material to its
financial position or results of operations.
Although environmental requirements do have a substantial impact upon the
energy industry, generally these requirements do not appear to affect Apache any
differently, or to any greater or lesser extent, than other companies in the
industry. Apache does not believe that compliance with federal, state, local or
foreign country provisions regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, will
have a material adverse effect upon the capital expenditures, earnings or
competitive position of the Company or its subsidiaries, but there is no
assurance that changes in or additions to laws or regulations regarding the
protection of the environment will not have such an impact.
COMPETITION
The oil and gas industry is highly competitive. Because oil and gas are
fungible commodities, the principal form of competition with respect to product
sales is price competition. Apache strives to maintain the lowest finding and
production costs possible to maximize profits.
As an independent oil and gas company, Apache frequently competes for
reserve acquisitions, exploration leases, licenses, concessions and marketing
agreements against companies with substantially larger financial and other
resources than Apache possesses. Moreover, many competitors have established
strategic long-term positions and maintain strong governmental relationships in
countries in which the Company may seek new entry. Apache expects this high
degree of competition to continue.
EMPLOYEES
On December 31, 1993, Apache had 984 full-time employees.
OFFICES
Apache's principal executive office is located at One Post Oak Central,
2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. The Company
maintains regional exploration and production offices in Tulsa, Oklahoma;
Houston, Texas; Denver, Colorado; and Perth, Western Australia.
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ITEM 2. PROPERTIES
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
ACREAGE
The developed and undeveloped acreage, including both domestic leases and
international production and exploration rights that Apache held as of December
31, 1993, are as follows:
UNDEVELOPED ACREAGE DEVELOPED ACREAGE
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GROSS NET GROSS NET
ACRES ACRES ACRES ACRES
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GULF OF MEXICO
Alabama.................................... -- -- 37,469 7,704
Louisiana.................................. 45,095 26,739 278,678 81,263
Texas...................................... 86,463 41,808 233,934 61,495
---------- --------- --------- -------
Total...................................... 131,558 68,547 550,081 150,462
---------- --------- --------- -------
MIDCONTINENT
Arkansas................................... 40 10 2,549 9
Louisiana.................................. 1,711 1,126 14,648 10,681
Oklahoma................................... 56,376 20,182 424,260 158,389
Texas...................................... 24,808 13,401 54,031 32,265
---------- --------- --------- -------
Total...................................... 82,935 34,719 495,488 201,344
---------- --------- --------- -------
PERMIAN BASIN
New Mexico................................. 14,830 7,188 78,175 25,278
Texas...................................... 103,584 53,601 104,039 81,462
---------- --------- --------- -------
Total...................................... 118,414 60,789 182,214 106,740
---------- --------- --------- -------
GULF COAST
Alabama.................................... 780 167 483 204
Florida.................................... 1,810 240 -- --
Louisiana.................................. 10,759 6,656 49,658 21,059
Mississippi................................ 7,470 1,324 9,945 1,992
New Mexico................................. 640 640 3,632 1,510
Texas...................................... 47,925 21,229 189,441 71,464
---------- --------- --------- -------
Total...................................... 69,384 30,256 253,159 96,229
---------- --------- --------- -------
ROCKY MOUNTAIN
California................................. 968 575 480 178
Colorado................................... 48,619 22,127 1,040 920
Kansas..................................... 14,515 5,351 750 713
Michigan................................... 160 22 40 6
Montana.................................... 46,539 19,286 6,064 2,350
Nebraska................................... 11,699 4,787 80 10
Nevada..................................... 145,099 64,979 1,720 913
New Mexico................................. 72,391 47,527 34,671 27,037
North Dakota............................... 155,443 62,613 53,890 21,784
South Dakota............................... 4,639 1,196 3,480 2,330
Utah....................................... 6,997 1,763 1,680 1,018
Wyoming.................................... 276,990 125,296 31,101 16,309
---------- --------- --------- -------
Total...................................... 784,059 355,522 134,996 73,568
---------- --------- --------- -------
TOTAL DOMESTIC............................... 1,186,350 549,833 1,615,938 628,343
---------- --------- --------- -------
INTERNATIONAL
Australia.................................. 6,613,500 3,244,760 280,460 52,550
The Congo.................................. 236,228 47,245 -- --
Indonesia.................................. 5,250,258 3,276,407 -- --
Egypt...................................... 1,927,380 963,690 -- --
---------- --------- --------- -------
TOTAL INTERNATIONAL.......................... 14,027,366 7,532,102 280,460 52,550
---------- --------- --------- -------
TOTAL COMPANY................................ 15,213,716 8,081,935 1,896,398 680,893
---------- --------- --------- -------
---------- --------- --------- -------
8
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PRODUCTIVE OIL AND GAS WELLS
The number of productive oil and gas wells, operated and non-operated, in
which Apache had an interest as of December 31, 1993, is set forth below.
GAS OIL
----------------- -----------------
GROSS NET GROSS NET
----- ----- ----- -----
Gulf of Mexico...................................... 430 85 40 14
Midcontinent........................................ 1,511 447 275 82
Permian Basin....................................... 455 131 2,240 782
Gulf Coast.......................................... 626 289 1,088 832
Rocky Mountain...................................... 113 83 782 434
International....................................... 5 1 25 4
----- ----- ----- -----
Total............................................... 3,140 1,036 4,450 2,148
===== ===== ===== =====
GROSS WELLS DRILLED
The following table sets forth the number of gross exploratory and gross
development wells drilled in the last three fiscal years in which the Company
participated. The number of wells drilled refers to the number of wells
commenced at any time during the respective fiscal year. "Productive" wells are
either producing wells or wells capable of commercial production. At December
31, 1993, the Company was participating in 26 wells in the process of drilling.
EXPLORATORY DEVELOPMENTAL
----------------------------- -----------------------------
1993 PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
- ---------------------------------------- ---------- ---- ----- ---------- ---- -----
Domestic................................ 12 19 31 198 37 235
International........................... 3 5 8 -- -- --
--- ---- ----- ----- ---- -----
Total................................... 15 24 39 198 37 235
=== === === ===== ==== =====
1992
- ----------------------------------------
Domestic................................ 10 32 42 145 16 161
International........................... -- 6 6 -- -- --
--- ---- ----- ----- ---- -----
Total................................... 10 38 48 145 16 161
=== === === ===== ==== =====
1991
- ----------------------------------------
Domestic................................ 18 11 29 73 18 91
International........................... 1 1 2 2 -- 2
--- ---- ----- ----- ---- -----
Total................................... 19 12 31 75 18 93
=== === === ===== ==== =====
NET WELLS DRILLED
The following table sets forth, for each of the last three fiscal years,
the number of net exploratory and net developmental wells drilled by Apache.
EXPLORATORY DEVELOPMENTAL
----------------------------- -----------------------------
1993 PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
- ---------------------------------------- ---------- ---- ----- ---------- ---- -----
Domestic................................ 4.2 10.4 14.6 90.4 22.2 112.6
International........................... 0.6 1.3 1.9 -- -- --
--- ---- ----- ----- ---- -----
Total................................... 4.8 11.7 16.5 90.4 22.2 112.6
=== === === ===== ==== =====
1992
- ----------------------------------------
Domestic................................ 3.2 16.6 19.8 60.1 8.0 68.1
International........................... -- 1.1 1.1 -- -- --
--- ---- ----- ----- ---- -----
Total................................... 3.2 17.7 20.9 60.1 8.0 68.1
=== === === ===== ==== =====
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EXPLORATORY DEVELOPMENTAL
----------------------------- -----------------------------
1991 PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
- ---------------------------------------- ---------- ---- ----- ---------- ---- -----
Domestic................................ 9.3 7.5 16.8 32.0 10.1 42.1
International........................... 0.1 0.2 0.3 0.2 -- 0.2
--- ---- ----- ----- ---- -----
Total................................... 9.4 7.7 17.1 32.2 10.1 42.3
==== ==== ===== ===== ==== =====
PRODUCTION AND PRICING DATA
The following table describes, for each of the last three fiscal years,
oil, natural gas liquids (NGLs) and gas production for the Company, average
production costs and average sales prices.
PRODUCTION AVERAGE SALES PRICE
---------------------------- AVG. -----------------------------------------
YEAR ENDED OIL NGLS GAS PRODUCTION OIL NGLS GAS
DECEMBER 31, (MBBLS) (MBBLS) (MMCF) COST PER BOE (PER BBL) (PER BBL) (PER MCF)
- ------------ ------ ------- ------- ------------ ------------ ------------ ---------
1993........................ 12,294 486 110,622 $ 4.10 $ 16.78 $ 12.35 $2.03
1992........................ 12,056 533 95,982 4.38 18.16 12.34 1.76
1991........................ 7,764 630 104,621 3.54 18.40 11.23 1.58
ESTIMATED RESERVES AND RESERVE VALUE INFORMATION
The following information relating to estimated reserve quantities, reserve
values and discounted future net revenues is derived from, and qualified in its
entirety by reference to, the more complete reserve and revenue information and
assumptions included in the Company's financial statements under Item 8 below.
The Company's estimates of proved reserve quantities of its domestic properties
and certain international properties have been subject to review by Ryder Scott
Company Petroleum Engineers. The Company's estimates of proved reserve
quantities of its Western Australia properties held through Hadson Energy
Limited have been subject to review by Intera Information Technologies Inc.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and projecting future rates of production and timing of development
expenditures. The following reserve information represents estimates only and
should not be construed as being exact. See Supplemental Oil and Gas Disclosures
under Item 8 below.
The following table sets forth the Company's estimated proved developed and
undeveloped reserves as of December 31, 1993, 1992 and 1991.
OIL, NGLS AND
NATURAL GAS CONDENSATE
1993 (BCF) (MMBBLS)
------------------------------------------------- ----------- -------------
Developed........................................ 720.7 79.4
Undeveloped...................................... 127.5 10.3
----- ----
Total............................................ 848.2 89.7
===== ====
1992
-------------------------------------------------
Developed........................................ 585.4 73.1
Undeveloped...................................... 57.9 7.6
----- ----
Total............................................ 643.3 80.7
===== ====
1991
-------------------------------------------------
Developed........................................ 549.7 69.2
Undeveloped...................................... 52.3 10.6
----- ----
Total............................................ 602.0 79.8
===== ====
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The following table sets forth the estimated future value of all proved
reserves of the Company, and proved developed reserves of the Company, as of
December 31, 1993, 1992 and 1991. Future reserve values are based on year-end
prices except in those instances where the sale of gas and oil is covered by
contract terms providing for determinable escalations. Operating costs,
production and ad valorem taxes, and future development costs are based on
current costs with no escalations.
PRESENT VALUE OF
ESTIMATED
FUTURE NET REVENUES
BEFORE INCOME TAXES
ESTIMATED FUTURE (DISCOUNTED AT 10
NET REVENUES PERCENT)
------------------------- -------------------------
PROVED PROVED
DECEMBER 31, PROVED DEVELOPED PROVED DEVELOPED
- ------------ ---------- ---------- ---------- ----------
(IN THOUSANDS)
1993.............................. $2,074,505 $1,783,187 $1,359,117 $1,189,268
1992.............................. 1,747,113 1,581,853 1,062,558 987,497
1991.............................. 1,611,044 1,447,025 997,973 930,038
At December 31, 1993, estimated future net revenues expected to be received
from all proved reserves of the Company, and from proved developed reserves of
the Company, were as follows:
PROVED
DECEMBER 31, PROVED DEVELOPED
- ------------ ----------- -----------
(IN THOUSANDS)
1994...................................................... $ 321,507 $ 332,722
1995...................................................... 312,749 258,091
1996...................................................... 258,554 206,130
Thereafter................................................ 1,181,695 986,244
----------- -----------
Total..................................................... $ 2,074,505 $ 1,783,187
=========== ===========
The Company believes that no major discovery or other favorable or adverse
event has occurred since December 31, 1993, which would cause a significant
change in the estimated proved reserves reported herein. The estimates above are
based on year-end pricing in accordance with the Securities and Exchange
Commission (Commission) guidelines and do not reflect current prices. Since
January 1, 1993, no oil or gas reserve information has been filed with, or
included in any report to, any U.S. authority or agency other than the
Commission and the Energy Information Administration (EIA). The basis of
reporting reserves to the EIA for the Company's reserves is identical to that
set forth in the foregoing table.
TITLE TO INTERESTS
The Company believes that its title to the various interests set forth
above is satisfactory and consistent with the standards generally accepted in
the oil and gas industry, subject only to immaterial exceptions which do not
detract substantially from the value of the interests or materially interfere
with their use in the Company's operations. The interests owned by the Company
may be subject to one or more royalty, overriding royalty and other outstanding
interests customary in the industry. The interests may additionally be subject
to burdens such as net profits interests, liens incident to operating agreements
and current taxes, development obligations under oil and gas leases and other
encumbrances, easements and restrictions, none of which detract substantially
from the value of the interests or materially interfere with their use in the
Company's operations.
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14
ITEM 3. LEGAL PROCEEDINGS
The information set forth under the caption "Litigation" in Note 8 to the
Company's financial statements under Item 8 below is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of security holders during the fourth
quarter of 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Apache common stock, par value $1.25 per share, is traded on the New York
Stock Exchange and the Chicago Stock Exchange under the symbol APA. The table
below provides certain information regarding Apache common stock for 1993 and
1992. Prices shown are from the New York Stock Exchange Composite Transactions
Reporting System.
1993 1992
-------------------------- -------------------------
PRICE RANGE PRICE RANGE
-------------- DIVIDENDS ----------- DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- ---- --------- ---- ---- ---------
First Quarter............................... $26 1/4 $17 5/8 $0.07 $15 7/8 $ 12 $0.07
Second Quarter.............................. 30 1/4 24 3/8 0.07 18 1/8 13 7/8 0.07
Third Quarter............................... 33 1/2 26 3/8 0.07 22 1/8 15 1/2 0.07
Fourth Quarter.............................. 31 1/4 20 3/8 0.07 21 3/8 17 1/8 0.07
The closing price per share of Apache common stock as reported on the New
York Stock Exchange Composite Transactions Reporting System for March 17, 1994,
was $26 1/8. At December 31, 1993, there were 61,085,414 shares of Apache common
stock outstanding, held by 10,970 shareholders of record and approximately
30,000 beneficial owners.
Each share of Apache common stock also represents one common stock purchase
right which, under certain circumstances, would entitle the holder to acquire
additional shares of common stock. See Note 5 to the Company's financial
statements under Item 8 below.
The Company has paid cash dividends on its common stock for 108 consecutive
quarters and intends to continue the payment of dividends at current levels,
although future dividend payments will depend upon the Company's level of
earnings, financial requirements and other relevant factors.
12
15
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and
its consolidated subsidiaries for each of the years in the five-year period
ended December 31, 1993, which information has been derived from the Company's
audited financial statements. This information should be read in connection with
and is qualified in its entirety by the more detailed information and financial
statements under Item 8 below.
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1993(1) 1992 1991(2) 1990 1989
---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Total revenues....................... $ 466,638 $ 454,300 $ 356,930 $273,410 $246,850
Net income........................... 37,334 47,776 34,615 40,297 22,122
Net income per common share.......... .70 1.02 .76 .90 .64
Cash dividends per common share...... .28 .28 .28 .28 .28
BALANCE SHEET DATA
Working capital (deficit)............ $ (62,450) $ (43,775) $ (55,023) $ 15,678 $ 24,585
Total assets......................... 1,592,407 1,218,704 1,209,291 829,634 764,368
Long-term debt....................... 453,009 454,373 490,988 194,781 195,622
Shareholders' equity................. 785,854 475,209 439,941 386,780 350,263
Common shares outstanding at end of
year............................... 61,085 46,936 46,855 44,694 43,949
- ---------------
(1) Includes financial data for HERC after June 30, 1993, and for Hall-Houston
after July 31, 1993. See Note 1 to the Company's financial statements under
Item 8 below.
(2) Includes financial data for MW after June 30, 1991. See Note 1 to the
Company's financial statements under Item 8 below.
Reference is made to Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," for a discussion of significant
acquisitions and to the Summary of Significant Accounting Policies and Notes 1
and 2 to the Company's financial statements under Item 8 below.
13
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Apache's financial performance during 1993 is best understood in light of
the following factors:
GAIN FROM SALE IN PRIOR YEAR -- The Company's 1992 income reflects an $18.5
million after-tax gain on the sale of the Company's interest in NGC and $2.7
million attributable to the Company's equity in NGC's earnings.
NON-CASH CHARGES -- With a reduced probability of establishing commercial
operations on certain West African concessions, Apache took a $6.7 million
third-quarter write-down that reduced net income by $4.3 million, or $.08 per
share. Due to the third quarter enactment of tax legislation increasing the
federal corporate income tax rate, Apache also took a $3.5 million third-quarter
charge to income in restating deferred taxes as required under Statement of
Financial Accounting Standards No. 109. The one-time charge reduced net income
by $.07 per share.
COMMODITY PRICES -- As compared to 1992, the current year's performance
benefitted from generally higher natural gas prices but suffered from a steep
decline in oil prices during the fourth quarter. Although natural gas prices
remained volatile and continued to deviate from seasonal patterns, Apache's
average realized natural gas price for 1993 was up 15 percent over 1992.
Improved gas prices were significantly offset by a downturn in oil prices in the
fourth quarter, which caused Apache's 1993 average realized oil price to decline
to a five-year low of $16.78 per barrel.
PUBLIC STOCK OFFERING; DEBT CONVERSION -- In March 1993, the Company
received net proceeds of $131.8 million from its public offering of
approximately 5.8 million shares of Apache common stock, and applied proceeds to
repay all outstanding debt under its revolving bank credit facility. In
September 1993, holders converted approximately $150 million of Apache's
7 1/2-percent convertible subordinated debentures due 2000 into approximately
7.8 million shares of Apache common stock. These transactions increased the
weighted average shares of Apache common stock outstanding during the year by
6.6 million shares and reduced outstanding debt by $281.8 million, with a
corresponding reduction in interest expense. This debt reduction was offset,
however, by bank debt incurred to fund acquisitions during 1993.
ACQUISITIONS -- In 1993, Apache acquired HERC and substantially all of
Hall-Houston's producing properties in the Gulf of Mexico for an aggregate of
$211.7 million. Although the impact of these acquisitions on 1993 performance
was not as dramatic as the impact of the MW acquisition on 1992's performance,
the production, expenses and cash flow from the newly acquired properties
nonetheless contributed significantly to the year's outcome, combining to add
approximately $34 million to 1993 revenue. In addition, the Company's 1993
performance reflects a full 12 months of ownership of Apache's 93-percent
working interest in Matagorda Island Blocks 681 and 682 in the Gulf of Mexico
acquired from Shell Offshore Inc. during the fourth quarter of 1992.
RESULTS OF OPERATIONS
NET INCOME AND REVENUES
The Company reported net income for the year of $37.3 million, or $.70 per
share, a 22-percent decrease from 1992 earnings of $47.8 million, or $1.02 per
share. Significant factors contributing to the lower earnings were after-tax
charges to earnings of $7.8 million, or $.15 per share, taken in the third
quarter related to international impairments and changes in tax laws, the
decline in the Company's realized oil prices during 1993, and the gain
recognized during 1992 on the sale of NGC. Excluding only the gain on the 1992
NGC sale, the Company's 1993 earnings increased 28 percent over 1992.
Revenues for 1993 totaled $466.6 million, or three percent higher than a
year ago. Production revenues in 1993 totaled $437.3 million compared to $394.6
million in 1992. Oil and gas revenues were influenced by improved gas prices
over 1992, declining second-half oil prices, and the acquisition of HERC and the
Hall-
14
17
Houston properties in the second half of the year. Revenues from international
operations increased 93 percent to $15.5 million with six months of Australian
production from the HERC acquisition.
Natural gas sales contributed $225 million to revenues, up 33 percent from
1992, the result of sustained higher prices and higher production during 1993.
During 1992, Apache's average realized gas price ranged from $1.17 per Mcf in
February, the lowest price in 13 years, to a high of $2.40 per Mcf in October.
Apache's average realized price for 1992 was $1.76 per Mcf. In 1993, prices
remained in the higher range established in the latter half of 1992. Apache's
average realized price for 1993 was $2.03 per Mcf, up 15 percent over the 1992
average, positively affecting 1993 gas sales by $30.4 million.
The impact of higher gas prices was augmented by higher gas production in
1993 as compared with 1992. Gas production for the year averaged 303.1 MMcf per
day, up 16 percent from 1992, positively affecting gas sales by $25.8 million.
This increase is principally the result of production from newly acquired
properties, the most significant of which were the offshore properties acquired
from Hall-Houston, the additional 93-percent working interest in Matagorda
Island Blocks 681 and 682 acquired in 1992, and the properties acquired in the
merger with HERC. Combined, these three acquisitions comprised 332 Bcfe of
proved reserves at year end and contributed 68 MMcf of gas per day to Apache's
1993 average daily production.
The impact of increased oil production was offset by lower oil prices in
1993. Oil production contributed $206.3 million to revenues during 1993, six
percent below Apache's record $218.9 million in oil sales in 1992. Average daily
oil production of approximately 33.7 Mbbls barrels of oil increased two percent
over the prior year, positively affecting oil sales by $4.3 million, as
acquisitions, continuing workover and recompletion operations, and new drilling
in the Permian Basin and along the Austin Chalk trend offset the effects of
natural depletion. The Company's average realized oil price of $16.78 per barrel
declined eight percent from 1992, negatively affecting oil sales by $16.9
million. Oil sales represented 47 percent of total oil and gas sales in 1993
compared to 55 percent of total oil and gas sales in 1992.
Revenues from the sale of natural gas liquids and sulfur declined 12
percent from 1992 to $6.0 million, a result of lower prices for natural gas
liquids and the sale of the Whitney Canyon gas processing plant in 1992. The
sale of natural gas liquids declined from 1.5 Mbbls per day in 1992 to 1.3 Mbbls
per day in 1993.
Revenues from gas gathering, processing and marketing were $25.9 million in
1993, down 10 percent from 1992. The decline primarily reflects the sale of
Apache's interest in a gas gathering system in Western Oklahoma in March 1993.
As a result, gross margins from gathering, processing and marketing were $4.9
million in 1993, a decline of 32 percent from 1992.
COSTS AND EXPENSES
Operating costs were up two percent in 1993 to $128.1 million, as a decline
in operating costs per barrel of oil equivalent was offset by the impact of
increased production. Operating costs include lifting costs, workover expense,
and applicable domestic or foreign production taxes. On an equivalent unit of
production basis, operating costs declined six percent in 1993 to $4.10 per boe,
down from $4.38 per boe in 1992. Apache's declining costs per boe reflect
increasing natural gas production and lower production costs associated with the
operation of gas-bearing properties as compared with oil-bearing properties.
Apache's operating costs were also reduced by refunds of well-control insurance
totaling $.7 million and production tax refunds totaling $1.8 million during
1993.
Depreciation, depletion and amortization (DD&A) expense rose 12 percent
year-over-year to $176.3 million due to increased sales of natural gas and
increased Australian production. Although Apache's domestic amortization rate of
38.7 percent of sales for 1993 was down slightly from 1992, declining oil prices
and the higher costs associated with newly acquired offshore properties, which
reflect shorter reserve lives and faster expected payouts, combined to increase
Apache's domestic amortization rate in the second half of 1993. Recurring
international DD&A increased as a result of substantially increased Australian
production.
International impairments, which rose to $23.2 million in 1993 from $12
million in 1992, included $6.7 million of the Company's investments in West
Africa which the Company wrote off in the third quarter of 1993 when it
recognized a reduced probability of establishing commercial operations on two of
Apache's
15
18
concessions. The 1993 impairments also included provisions for Apache's
investment in the Java Sea (Indonesia) and Nanteau (France).
Administrative, selling and other costs were down five percent from those
incurred in 1992, despite the Company's acquisitions during 1993. The reduction
reflects the Company's sustained efforts to contain costs, the incremental
administrative costs incurred in the 1992 corporate relocation to Houston, and
the integration of MW. In 1993, Apache successfully assimilated the HERC and
Hall-Houston properties with minimal additions to its administrative staff.
Administrative cost reductions were partially offset, however, by expenses
associated with an employee benefit plan based on Apache common stock, which
increased in price by approximately 25 percent from year-end 1992 to year-end
1993.
Net financing costs declined 17 percent in 1993 despite the use of bank
debt to fund the HERC and Hall-Houston acquisitions. The decline is primarily
attributable to a decline of approximately 100 basis points in Apache's
effective interest rate in 1993 as compared with 1992, reflecting a general
decline in interest rates and the conversion of Apache's 7 1/2-percent
convertible subordinated debentures due 2000 into shares of Apache common stock
in September 1993. Interest expense also declined as a result of Apache's
repayment of bank debt from a portion of the $131.8 million in net proceeds of
its public offering of common stock in March 1993, the successful conversion of
approximately $150 million of its 7 1/2-percent convertible subordinated
debentures due 2000 and through the redemption of $7 million of 9-percent
convertible subordinated debentures due 2001. Debt reductions attributable to
the public offering and debt conversion in 1993 were offset by debt incurred in
connection with acquisitions. On December 31, 1993, Apache's outstanding debt
balance was $462 million, an increase of one percent from $455.5 million on
December 31, 1992.
PRIOR-YEAR COMPARATIVE INFORMATION
The Company's net income for 1992 increased 38 percent over 1991 to $47.8
million, or $1.02 per share. Revenues for 1992 totaled $454.3 million, or 27
percent higher than revenues for 1991. Production revenues for 1992 totaled
$394.6 million compared to $316.1 million in 1991. Oil and gas revenues in
1992 were influenced by strong second-half gas prices, a decrease in natural
gas production resulting from the disposition of largely gas-bearing properties
in 1991 and from curtailments in 1992, and the effect of a full year of oil
production from properties included in the MW acquisition.
Natural gas sales contributed $168.8 million to revenues in 1992, up two
percent from 1991, primarily the result of the surge in prices in the second
half of the year. For 1992, Apache's average realized gas price was $1.76 per
Mcf, up 11 percent over 1991, positively affecting 1992 revenues by $16.9
million.
Gas production for 1992 totaled 262.2 MMcf per day, down nine percent from
1991, negatively affecting 1992 revenues by $13.7 million. Production declined
for several reasons, the most significant of which was Apache's disposition of
approximately $187 million of largely gas-bearing properties during 1991 and
1992 following the MW acquisition. The net effect of Apache's compliance with
prorationing legislation enacted during 1992 accounted for an approximate
11-MMcf decrease in average daily gas production. Ordinary reserve depletion and
the voluntary curtailment of gas production in Oklahoma and the Gulf of Mexico
during the first quarter of 1992 due to low gas prices also reduced production.
Increased oil production contributed to a record $218.9 million in oil
sales during 1992, a 53-percent increase over 1991. Total oil production of 12.1
MMbbls increased 55 percent over the prior year due to the inclusion of a full
year's production volumes from the MW properties. The Company's average realized
oil price of $18.16 declined one percent from 1991.
Revenues from the sale of natural gas liquids and sulfur declined 11
percent from 1991 to $6.9 million in 1992, reflecting the sale of the Spindle
gas processing plant in late 1991 and the Whitney Canyon plant in 1992.
Apache's gross margin from gathering, processing and marketing, excluding
NGC, was $7.1 million in 1992, which was unchanged from 1991.
The major nonrecurring factor affecting 1992 revenues was Apache's mid-year
sale of its interest in NGC. The Company recognized a gain on the NGC sale of
$28.3 million, or $18.5 million after tax. Apache's
16
19
investment in NGC, which was accounted for using the equity method, contributed
$2.7 million to Apache's 1992 net income prior to the sale and $8.2 million to
Apache's net income in 1991.
In July 1991, Apache completed its acquisition of MW for $511.4 million in
cash, the assumption of $4.1 million in net liabilities and the issuance of two
million shares of Apache common stock. At closing, MW had net proved reserves of
63 MMbbls of oil and 288 Bcf of gas. With the MW acquisition and subsequent
disposition of non-strategic properties, Apache effectively doubled its proved
reserves and increased the proportion of oil in its total reserves from 21
percent to 44 percent. Also in 1991, the Company accrued the cost of relocating
its corporate headquarters to Houston, Texas, resulting in a one-time charge
that reduced net income by $7.1 million. Included in other revenues in 1991 was
$5.6 million related to a favorable take-or-pay settlement.
Operating costs, up 37 percent to $125.3 million, reflected 12 months of
ownership of the MW properties. On an equivalent unit of production basis,
production costs and production taxes rose to $4.38 per boe, up from $3.54 per
boe in 1991, reflecting the higher costs associated with MW's predominantly
oil-bearing properties.
In 1992, DD&A expense rose 19 percent from the previous year to $157.5
million due to higher domestic oil and gas sales while the Company's
international impairments rose to $12 million. The increase in amortization
expense due to higher sales was mitigated, however, by the favorable impact of
the MW acquisition, the effect of which decreased the domestic amortization rate
on oil and gas production revenues from 40.8 percent in 1991 to 38.8 percent in
1992.
Administrative, selling and general costs were down 15 percent in 1992 from
those incurred in 1991, which included an $11.1 million pre-tax provision for
the relocation of the Company's headquarters. Excluding the impact of the 1991
relocation provision, the Company's administrative, selling and other costs for
1992 increased 16 percent over 1991, reflecting the cost of administering MW's
properties for a full year, the continued cost of integrating the MW properties,
and the incurrence of $2.7 million in additional relocation expenses in 1992.
Although Apache reduced its outstanding debt from $495.7 million at
year-end 1991 to $455.5 million at year-end 1992, interest expense rose 15
percent in 1992 as compared with 1991, which included only six months of
interest on the MW acquisition debt. Debt reduction during the year and lower
interest rates contributed to a 22-percent decrease in average monthly interest
expense in 1992 as compared to the second half of 1991. Amortization of loan
costs nearly doubled in 1992, reflecting costs of the MW debt and the issuance
of additional senior debt in 1992.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
CAPITAL COMMITMENTS
Apache's primary needs for cash are for exploration, development and
acquisition of oil and gas properties, repayment of principal and interest on
outstanding debt, and payment of dividends. The Company generally funds its
exploration and development activities through internally generated cash flows
and budgets its capital expenditures based upon projected cash flows. Apache
routinely adjusts its capital expenditures in response to changes in oil and gas
prices and corresponding changes in cash flow.
Expenditures for exploration and development increased to $218.9 million in
1993 from $136.7 million in 1992. Apache completed 213 producing wells out of
274 wells drilled during the year compared with 209 wells drilled in 1992, of
which 155 were completed as producers. Expenditures for exploration and
development in 1994, including workover and recompletion operations, are
anticipated to be $240 million, including $25 million relating to international
operations, and will be reviewed quarterly in light of oil and gas prices.
Cash expenditures for acquisitions during 1993 were $260.9 million,
compared to $63 million in 1992, which included the $57.4-million acquisition of
an additional 93-percent working interest in Matagorda Island Blocks 681 and 682
from Shell Offshore Inc. in November 1992. The cost of acquisitions, including
the value of the shares issued and liabilities added through the merger of HERC,
totaled $324.6 million in 1993. Apache's most significant transactions during
1993 were its acquisitions of oil and gas properties from Hall-
17
20
Houston for $113.7 million in cash and the acquisition of HERC. Apache acquired
all of the outstanding stock of HERC for approximately $98 million, which
included the issuance of 307,977 shares of Apache common stock (305,003 shares
in 1993) and cash payments to HERC stockholders. Net cash outlays attributable
to the acquisition of HERC totaled $70.7 million in 1993. Apache also acquired
more than $76.5 million of other properties during 1993, primarily representing
purchases of additional working interests in existing Apache properties,
including the purchase of Key Production Company's interest in certain
properties held by Apache Operating Partnership L.P. prior to its dissolution
during the first quarter of 1993.
Other capital expenditures for 1993 include the purchase of NGC's interest
in a gas gathering system in western Oklahoma which was sold in March 1993, in a
transaction described under "Capital Resources" below.
Funds for the 1993 acquisitions were obtained principally from borrowings
under the Company's revolving bank credit agreement. The Company aggressively
pursues acquisition opportunities as part of its reserve growth strategy. The
amount and timing of future funding requirements for acquisitions are dependent
upon several factors, including the market for oil and gas properties, and
cannot be predicted for the upcoming year.
At December 31, 1993, Apache had outstanding $240.0 million under its
revolving bank credit facility, $41.6 million in additional bank debt
consolidated through the HERC acquisition, and an aggregate of $180.4 million in
principal amount of other long-term debt, comprised principally of notes and
debentures maturing in the years 1997 through 2002. The Company's overall debt
increased $6.6 million from December 31, 1992, as borrowing for acquisitions
offset the impact of Apache's 1993 equity offering and debenture conversion. In
1993, Apache made cash payments on long-term debt totaling $162 million, of
which $1.1 million was scheduled under these debt obligations. Interest payments
on the Company's outstanding debt obligations during 1994 are projected (using
weighted average balances for floating rate obligations) to be approximately $27
million, while scheduled principal payments for 1994 currently total $9 million.
Dividends paid during 1993 totaled $14.9 million, up 14 percent from 1992,
primarily due to the issuance of approximately 5.8 million shares of Apache
common stock in connection with the Company's March 1993 equity offering and the
issuance of approximately 7.8 million shares upon conversion of its outstanding
7 1/2-percent convertible subordinated debentures due 2000. The Company's
dividend policy currently provides for the payment of regular quarterly
dividends at the rate of $.28 per share annually. Although no change in the
dividend policy is contemplated for 1994, the declaration and amount of future
dividends is dependent upon the Company's cash requirements, applicable debt
covenants and other factors deemed relevant by the Board of Directors.
CAPITAL RESOURCES
The Company's primary capital resources are net cash provided by operating
activities, proceeds from financing activities and proceeds from sales of
non-strategic assets.
Net cash provided by operating activities during 1993 was $225.1 million,
up $30.7 million from 1992. The 16-percent improvement in cash flows primarily
reflects increased gas production, higher gas prices and reduced interest costs.
Future cash flows will be influenced by product prices and production volumes
and are not presently ascertainable.
In March 1993, Apache and NGC completed the sale of their respective
interests in a gathering system in western Oklahoma. Apache received gross cash
proceeds of approximately $32.2 million in the transaction, of which $16.4
million was attributable to NGC's interest in the system.
Also in March 1993, Apache completed the public offering of approximately
5.8 million shares of Apache common stock for net proceeds of $131.8 million. In
April 1993, Apache applied the proceeds to repay all outstanding debt under its
revolving bank credit facility. In October 1993, the borrowing base under
Apache's revolving bank credit facility was increased to $400 million. As of
December 31, 1993, the Company had reborrowed $240 million under the facility,
largely to fund the purchase of the Hall-Houston properties and the HERC
acquisition.
18
21
The availability of funds under Apache's $400-million revolving bank credit
facility is subject to the maintenance of certain financial covenants by the
Company and to periodic redetermination by its bank group based upon the
Company's estimated oil and gas reserve values and forecast rates of production.
The Company has complied with its financial covenants at all times since the
inception of the revolving credit facility in July 1991. The facility matures on
April 30, 1996, and, with the lenders' consent, may be extended in one-year
increments or converted into a term loan.
At December 31, 1993, HERC and its wholly-owned subsidiary, Hadson Energy
Limited (HEL), each had a credit facility with Bank of Montreal. At year end,
credit available under the HERC facility was $26 million, of which $19.6 million
was outstanding. The HEL facility had a total of $22 million outstanding at
year-end 1993 with repayment to be made in quarterly installments of $2 million
each plus interest until repaid in full in July 1996.
In September 1993, Apache completed the conversion of its 7 1/2-percent
convertible subordinated debentures due 2000, resulting in the issuance of
approximately 7.8 million shares of Apache common stock. Primarily as a result
of the conversion and Apache's March 1993 equity offering, Apache's debt as a
percentage of capital declined to 37 percent at December 31, 1993, despite
increased bank debt incurred for 1993 acquisitions.
In May 1992, Apache issued 9.25-percent notes due 2002 in the principal
amount of $100 million. Proceeds from the offering were used to reduce bank
debt, pay off the 9.5-percent convertible debentures due 1996 and for general
corporate purposes. In December 1992, the Company privately placed 3.93-percent
convertible notes due 1997 in the principal amount of $75 million. The
3.93-percent notes are not redeemable before maturity and are convertible into
Apache common stock at the option of the holders at any time prior to maturity
at a conversion price of $27.00 per share. Proceeds from the sale of the
3.93-percent notes were used to repay bank debt.
LIQUIDITY
The Company had $17.1 million in cash and cash equivalents on hand at
December 31, 1993, down from $26.1 million at the end of 1992. The Company's
ratio of current assets to current liabilities at year end of .7:1 was unchanged
from year-end 1992.
Management believes that cash on hand at year end, net cash generated from
operations and unused available borrowing capacity under the revolving credit
facility will be adequate to meet future liquidity needs for at least the next
two fiscal years, including satisfying the Company's financial obligations and
funding exploration and development operations and routine acquisitions.
FUTURE TRENDS
Apache intends to continue increasing production and reserves through
drilling and property acquisitions. Apache is considering increasing its current
borrowing capacity to enhance its ability to pursue additional growth
opportunities. Although the Company's future performance is difficult to
predict, the following factors are likely to impact its operating results and
financial condition in the future.
CONTINUING VOLATILITY OF PRODUCT PRICES
In 1993, spot market natural gas prices remained volatile and continued to
behave independently of historical seasonal patterns, although in a relatively
higher range of average monthly prices from approximately $1.79 per Mcf in
February to $2.26 per Mcf in December. Spot market oil prices, which are
especially vulnerable to complex and unpredictable political and economic
forces, also remained volatile in 1993, as Apache's average realized price
fluctuated from $18.97 per barrel in April to $12.88 per barrel in December. The
recent failure of OPEC to reduce production quotas and the addition of more than
one million barrels of oil per day of North Sea crude production suggest that
oil prices will not improve in the near term. Management believes that, absent a
comprehensive U.S. energy policy, oil prices will continue to fluctuate in
response to changes in the policies of OPEC, events in the Middle East and
events in certain non-OPEC
19
22
countries. Management also believes that gas prices will remain volatile and may
not necessarily conform to historical cycles based on heating seasons.
ENVIRONMENTAL REGULATION
The Company operates under numerous state and federal laws regulating the
discharge of materials into, and the protection of, the environment. In the
ordinary course of business, Apache conducts an ongoing review of the effects of
these various environmental laws on its business and operations. The estimated
cost of continued compliance with current environmental laws, based upon the
information currently available, is not material to the Company's financial
position or results of operations. It is impossible to determine whether and to
what extent Apache's future performance may be affected by environmental laws;
however, management does not believe that such laws will have a material adverse
effect on the Company's financial position or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information required
to be filed under this item are presented on pages F-1 through F-30 of this Form
10-K, and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Information About Nominees
for Election as Directors," "Continuing Directors," "Executive Officers of the
Company," and "Voting Securities and Principal Holders" in the Company's proxy
statement relating to the Company's 1994 annual meeting of shareholders (the
"Proxy Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table,"
"Option/SAR Grants Table," "Options/SAR Exercises and Year-End Value Table,"
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements," and "Director Compensation" in the Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and
Principal Holders" in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions with Officers and
Directors" in the Proxy Statement is incorporated herein by reference.
20
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS INCLUDED IN THIS REPORT:
1. FINANCIAL STATEMENTS
PAGE
----
Report of independent public accountants....................................... F-1
Report of management........................................................... F-2
Statement of consolidated income for each of the three years in the period
ended December 31, 1993....................................................... F-3
Statement of consolidated cash flows for each of the three years in the period
ended December 31, 1993....................................................... F-4
Consolidated balance sheet as of December 31, 1993 and 1992.................... F-5
Statement of consolidated shareholders' equity for each of the three years in
the period ended December 31, 1993............................................ F-7
Summary of significant accounting policies..................................... F-8
Notes to consolidated financial statements..................................... F-10
Supplemental oil and gas disclosures........................................... F-21
Supplemental quarterly financial data.......................................... F-27
2. FINANCIAL STATEMENT SCHEDULES
Schedules V, VI and X are included as pages F-28 through F-30 of this
Form 10-K. Schedules I, II, III, IV, VII, VIII, IX, XI, XII and XIII
have been omitted because they are either not required, not applicable
or the information required to be presented is included in the Company's
financial statements and related notes.
21
24
3. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 -- Stock Purchase Agreement, dated July 1, 1991, between the Registrant
and Amoco Production Company (incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K, dated July 1, 1991,
Commission File No. 1-4300, filed on July 19, 1991).
2.2 -- Form of Acquisition Agreement between Apache Corporation, HERC
Acquisition Corporation and Hadson Energy Resources Corporation,
dated August 26, 1993, and amended September 28, 1993 (incorporated
by reference to Exhibit 2.1 to Registrant's Registration Statement on
Form S-4, Registration No. 33-67954, filed on September 29, 1993).
2.3 -- Purchase and Sale Agreement between Hall-Houston Oil Company, as
seller, and Registrant, as buyer, dated as of June 2, 1993
(incorporated by reference to Exhibit 10.1 to Registrant's Current
Report on Form 8-K, dated August 31, 1993, Commission File No.
1-4300, filed on September 7, 1993).
2.4 -- Purchase and Sale Agreement between Hall-Houston Oil Company, as
seller, and Registrant, as buyer, dated as of August 13, 1993
(incorporated by reference to Exhibit 10.2 to Registrant's Current
Report on Form 8-K, dated August 31, 1993, Commission File No.
1-4300, filed on September 7, 1993).
2.5 -- Matagorda Island 681 Field Purchase and Sale Agreement with Option to
Exchange, dated November 24, 1992, between Shell Offshore Inc., SOI
Royalties Inc., and Registrant (incorporated by reference to Exhibit
10.7 to Apache Offshore Investment Partnership's Annual Report on
Form 10-K for the year ended December 31, 1992, Commission File No.
0-13546, filed March 31, 1993).
*3.1 -- Restated Certificate of Incorporation of the Registrant, dated
December 1, 1993, as filed with the Secretary of State of Delaware on
December 16, 1993.
3.2 -- Bylaws of the Registrant, dated as of December 9, 1992 (incorporated
by reference to Exhibit 3.3 of Registrant's Annual Report on Form
10-K for the year ended December 31, 1992, Commission file 1-4300,
filed on March 10, 1993).
4.1 -- Form of common stock certificate (incorporated by reference to the
Registrant's Registration Statement on Form S-3, Registration No.
33-5097, filed on April 23, 1986).
4.2 -- Rights Agreement, dated as of January 10, 1986, between the
Registrant and First Trust Company, Inc., rights agent, relating to
the declaration of Rights to the Registrant's common stockholders of
record on January 24, 1986 (incorporated by reference to Exhibit 4.9
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1985, Commission File No. 1-4300, filed on March 31,
1986).
10.1 -- Amended and Restated Credit Agreement, dated April 15, 1992, among
Registrant, the lenders named therein and The First National Bank of
Chicago and Chemical Bank, as agents (incorporated by reference to
Exhibit 10.01 to Registrant's Registration Statement on Form S-3,
Registration No. 33-47363, filed on April 21, 1992).
10.2 -- Third Amendment to Amended and Restated Credit Agreement, dated April
30, 1993, among Registrant, the lenders named therein and The First
National Bank of Chicago and Chemical Bank, as agents (incorporated
by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993, Commission File No. 1-4300,
filed August 16, 1993).
22
25
EXHIBIT NO. DESCRIPTION
----------- -----------
*10.3 -- Fourth Amendment to Amended and Restated Credit Agreement, dated July
13, 1993, among Registrant, the lenders named therein and The First
National Bank of Chicago and Chemical Bank, as agents.
10.4 -- Credit Agreement, dated as of July 24, 1992, between Registrant, the
lenders named therein and The First National Bank of Chicago, as
agent (incorporated by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
Commission File No. 1-4300, filed on August 14, 1992).
10.5 -- Credit Agreement, dated as of December 18, 1990, by and between
Hadson Energy Resources Corporation, the lenders named therein and
Bank of Montreal, as agent (incorporated by reference to Exhibit 10.1
to Hadson Energy Resources Corporation's Annual Report on Form 10-K
for the year ended December 31, 1990, Commission File No. 0-18236,
filed March 11, 1991).
*10.6 -- Second Amendment to Credit Agreement, dated as of December 22, 1993,
by and between Hadson Energy Resources Corporation, the lenders named
therein and Bank of Montreal, as agent.
10.7 -- Acceptance Agreement, dated as of June 6, 1991, by and between Hadson
Energy Limited, the lenders named therein and Bank of Montreal, as
agent (incorporated by reference to Hadson Energy Resources
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1991, Commission File No. 0-18236, filed August 13, 1991).
*10.8 -- Second Amendment to Acceptance Agreement, dated as of December 22,
1993, by and between Hadson Energy Limited, the lenders named therein
and Bank of Montreal, as agent.
10.9 -- Stock Purchase Agreement, dated July 1, 1991, between the Registrant
and Amoco Production Company (incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K, dated July 1, 1991,
Commission File No. 1-4300, filed on July 19, 1991).
10.10 -- Oil and Gas Hedging Agreement, dated as of July 1, 1991, between the
Registrant and Amoco Production Company (incorporated by reference to
Exhibit 10.4 to Registrant's Current Report on Form 8-K, dated July
1, 1991, Commission File No. 1-4300, filed on July 19, 1991).
10.11 -- Geotechnical Data Agreement and License, dated July 1, 1991, between
the Registrant and Amoco Production Company (incorporated by
reference to Exhibit 10.5 to Registrant's Current Report on Form 8-K,
dated July 1, 1991, Commission File No. 1-4300, filed on July 19,
1991).
+10.12 -- 1982 Employee Stock Option Plan, as updated in January 1987 to
conform to the Tax Reform Act of 1986 (incorporated by reference to
Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990, Commission File No. 1-4300, filed on March
27, 1991).
+10.13 -- Apache Corporation Corporate Administrative Group Incentive Plan,
effective as of January 1, 1989 (incorporated by reference to Exhibit
10.8 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, Commission File No. 1-4300, filed on March 27,
1991).
*+10.14 -- First Amendment, dated October 22, 1990, to the Apache Corporation
Corporate Administrative Group Incentive Plan.
23
26
EXHIBIT NO. DESCRIPTION
- -------------------- ------------------------------------------------------------------------
+10.15 -- Apache Corporation 401(k) Retirement/Savings Plan, dated November 16,
1989, amended July 9, 1992, effective January 1, 1989 (incorporated
by reference to Exhibit 10.16 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No.
1-4300, filed on March 10, 1993).
*+10.16 -- Amendment to the Apache Corporation 401(k) Retirement/Savings Plan,
dated December 31, 1993.
+10.17 -- Apache International, Inc. Common Stock Award Plan, dated February
12, 1990 (incorporated by reference to Exhibit 10.13 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1989,
Commission File No. 1-4300, filed on April 2, 1990).
+10.18 -- Apache Corporation 1990 Phantom Stock Appreciation Plan, dated as of
September 28, 1990 (incorporated by reference to Exhibit 10.17 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990, Commission File No. 1-4300, filed on March 27, 1991).
+10.19 -- Apache Corporation 1990 Stock Incentive Plan, dated as of September
28, 1990 (incorporated by reference to Exhibit 10.18 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990,
Commission File No. 1-4300, filed on March 27, 1991).
+10.20 -- Amendment No. 1 to the Apache Corporation 1990 Stock Incentive Plan,
dated as of July 17, 1992 (incorporated by reference to Exhibit 4.4
to Registrant's Registration Statement on Form S-8, Registration No.
33-53442, filed on October 19, 1992).
+10.21 -- Apache Corporation Income Continuance Plan, including Amendment Nos.
1 and 2, restated as of February 24, 1988 (incorporated by reference
to Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4300, filed on
March 27, 1991).
+10.22 -- Apache Corporation 1986 Phantom Stock Appreciation Plan (incorporated
by reference to Exhibit 10.20 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No.
1-4300, filed on March 27, 1991).
+10.23 -- Apache Corporation Directors' Deferred Compensation Plan
(incorporated by reference to Exhibit 10.21 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990, Commission
File No. 1-4300, filed on March 27, 1991).
+10.24 -- Apache Corporation Phantom Stock Appreciation Plan for Directors,
effective as of May 4, 1989 (incorporated by reference to Exhibit
10.22 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, Commission File No. 1-4300, filed on March 27,
1991).
+10.25 -- Apache Corporation Outside Directors' Retirement Plan, effective
December 15, 1992 (incorporated by reference to Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1992, Commission File No. 1-4300, filed on March 10, 1993).
*+10.26 -- Apache Corporation Equity Compensation Plan for Non-Employee
Directors, adopted February 9, 1994, and form of Restricted Stock
Award Agreement.
+10.27 -- Amended and Restated Employment Agreement, dated December 5, 1990,
between the Registrant and Raymond Plank (incorporated by reference
to Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4300, filed on
March 27, 1991).
24
27
EXHIBIT NO. DESCRIPTION
----------- -----------
+10.28 -- Amended and Restated Employment Agreement, dated December 20, 1990,
between the Registrant and John A. Kocur (incorporated by reference
to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4300, filed on
March 27, 1991).
+10.29 -- Employment Agreement, dated March 20, 1991, between the Registrant
and William J. Johnson (incorporated by reference to Exhibit 10.15 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1992, Commission File No. 1-4300, filed on March 10, 1993).
*+10.30 -- Consulting Agreement, dated November 1, 1993, between the Registrant
and John A. Kocur.
*+10.31 -- Consulting Agreement, dated November 10, 1993, between the Registrant
and George J. Morgenthaler.
*+10.32 -- Consulting Agreement, dated March 15, 1994, between the Registrant
and Bijan Mossavar-Rahmani.
*11.1 -- Statement regarding computation of earnings per share of the
Registrant's common stock for the year ended December 31, 1993.
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Arthur Andersen & Co.
*23.2 -- Consent of Ryder Scott Company Petroleum Engineers.
*23.3 -- Consent of Intera Information Technologies Inc.
- ---------------
* Filed herewith.
+ Management contracts or compensatory plans or arrangements required to be
filed herewith pursuant to Item 14 hereof.
Note: Debt instruments of the Registrant defining the rights of long-term debt
holders in principal amounts not exceeding 10 percent of the Registrant's
consolidated assets have been omitted and will be provided to the
Commission upon request.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fiscal quarter ended December
31, 1993.
25
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
APACHE CORPORATION
By: /s/ RAYMOND PLANK
-------------------------------
Raymond Plank,
Date: March 21, 1994 Chairman and Chief Executive Officer
POWER OF ATTORNEY
The officers and directors of Apache Corporation, whose signatures appear
below, hereby constitute and appoint William J. Johnson, Mark A. Jackson and
Clyde E. McKenzie, and each of them (with full power to each of them to act
alone), the true and lawful attorney-in-fact to sign and execute, on behalf of
the undersigned, any amendment(s) to this report and each of the undersigned
does hereby ratify and confirm that all said attorneys shall do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.*
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
/s/ RAYMOND PLANK Chairman and Chief Executive March 21, 1994
- --------------------------------------------- Officer (Principal Executive
Raymond Plank Officer)
/s/ MARK A. JACKSON Vice President and Chief March 21, 1994
- --------------------------------------------- Accounting Officer
Mark A. Jackson (Principal Accounting
Officer)
/s/ FREDERICK M. BOHEN Director March 21, 1994
- ---------------------------------------------
Frederick M. Bohen
/s/ VIRGIL B. DAY Director March 21, 1994
- ---------------------------------------------
Virgil B. Day
/s/ RANDOLPH M. FERLIC Director March 21, 1994
- ---------------------------------------------
Randolph M. Ferlic
/s/ EUGENE C. FIEDOREK Director March 21, 1994
- ---------------------------------------------
Eugene C. Fiedorek
/s/ W. BROOKS FIELDS Director March 21, 1994
- ---------------------------------------------
W. Brooks Fields
/s/ ROBERT V. GISSELBECK Director March 21, 1994
- ---------------------------------------------
Robert V. Gisselbeck
/s/ STANLEY K. HATHAWAY Director March 21, 1994
- --------------------------------------------
Stanley K. Hathaway
/s/ WILLIAM J. JOHNSON Director March 21, 1994
- --------------------------------------------
William J. Johnson
/s/ JOHN A. KOCUR Director March 21, 1994
- --------------------------------------------
John A. Kocur
/s/ JAY A. PRECOURT Director March 21, 1994
- --------------------------------------------
Jay A. Precourt
/s/ JOSEPH A. RICE Director March 21, 1994
- --------------------------------------------
Joseph A. Rice
* Apache Corporation does not have a Principal Financial Officer.
29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders of Apache Corporation:
We have audited the accompanying consolidated balance sheet of Apache
Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1993
and 1992, and the related statements of consolidated income, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1993. These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Apache
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in Item
14(a)2 are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Houston, Texas
February 8, 1994
F-1
30
REPORT OF MANAGEMENT
The financial statements and related financial information of Apache
Corporation and Subsidiaries were prepared by and are the responsibility of
management. The statements have been prepared in conformity with generally
accepted accounting principles and include amounts that are based on
management's best estimates and judgments.
Management maintains and places reliance on systems of internal control
designed to provide reasonable assurance, weighing the costs with the benefits
sought, that all transactions are properly recorded in the Company's books and
records, that policies and procedures are adhered to and that assets are
safeguarded. The systems of internal controls are supported by written policies
and guidelines, internal audits and the selection and training of qualified
personnel.
The consolidated financial statements have been audited by Arthur Andersen
& Co., independent public accountants. Their audits included developing an
overall understanding of the Company's accounting systems, procedures and
internal controls and conducting tests and other auditing procedures sufficient
to support their opinion on the fairness of the consolidated financial
statements.
The Board of Directors exercises its oversight responsibility for the
financial statements through its Audit Committee, composed solely of directors
who are not employed by Apache. The Audit Committee meets periodically with
management, internal auditors and the independent public accountants to ensure
that they are successfully completing designated responsibilities. The internal
auditors and independent public accountants have open access to the Audit
Committee to discuss auditing and financial reporting issues.
Raymond Plank
Chairman of the Board
and Chief Executive Officer
Mark A. Jackson
Vice President and Chief Accounting Officer
F-2
31
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
REVENUES:
Oil and gas production revenues........................... $437,342 $394,552 $316,062
Gathering, processing and marketing revenues.............. 25,862 28,594 25,970
Equity in income of affiliates............................ 624 2,695 8,642
Gain on sale of investment in affiliate................... -- 28,345 --
Other revenues............................................ 2,810 114 6,256
-------- -------- --------
466,638 454,300 356,930
-------- -------- --------
OPERATING EXPENSES:
Depreciation, depletion and amortization.................. 176,335 157,508 132,230
International impairments................................. 23,200 12,000 3,600
Operating costs........................................... 128,113 125,337 91,514
Gathering, processing and marketing costs................. 21,010 21,452 18,909
Administrative, selling and other......................... 33,193 35,010 41,207
Financing costs:
Interest expense....................................... 28,102 35,314 30,737
Amortization of deferred loan costs.................... 3,896 3,888 1,988
Capitalized interest................................... (4,764) (6,035) (4,967)
Interest income........................................ (352) (652) (2,449)
-------- -------- --------
408,733 383,822 312,769
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 57,905 70,478 44,161
Provision for income taxes................................ 20,571 22,702 9,546
-------- -------- --------
NET INCOME.................................................. $ 37,334 $ 47,776 $ 34,615
-------- -------- --------
-------- -------- --------
NET INCOME PER COMMON SHARE................................. $ .70 $ 1.02 $ .76
-------- -------- --------
-------- -------- --------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................. 53,534 46,904 45,777
-------- -------- --------
-------- -------- --------
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-3
32
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
--------- --------- ---------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 37,334 $ 47,776 $ 34,615
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization............ 176,335 157,508 132,230
International impairments........................... 23,200 12,000 3,600
Amortization of deferred loan costs................. 3,896 3,888 1,988
Provision for deferred income taxes................. 20,571 14,034 4,234
--------- --------- ---------
261,336 235,206 176,667
Gain on sale of investment in affiliate................ -- (28,345) --
Cash distributions in excess of (less than) earnings of
affiliates.......................................... (662) 2,650 (2,435)
Changes in operating assets and liabilities, net of
effects of acquisitions:
(Increase) decrease in receivables.................. (9,590) 356 (12,596)
(Increase) decrease in advances to oil and
gas ventures and other............................ 137 (3,598) 2,881
(Increase) decrease in deferred charges and other... (3,904) (1,415) (710)
Increase (decrease) in payables..................... (4,152) 2,187 (32,328)
Increase (decrease) in accrued operating costs...... (8,177) (8,660) 13,370
Increase (decrease) in deferred credits and
noncurrent liabilities............................ (9,915) (3,983) 11,735
--------- --------- ---------
Net cash provided by operating activities...... 225,073 194,398 156,584
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures............... (218,930) (136,691) (111,566)
Acquisition of oil and gas properties.................. (190,181) (62,955) (568,345)
Noncash portion of net oil and gas property
additions........................................... 7,104 2,434 28,240
MW working capital and accrued acquisition costs....... -- 74 9,068
Purchase of HERC stock, net of cash acquired........... (70,692) -- --
Proceeds from sale of oil and gas properties........... 3,255 37,167 157,018
Future operating costs for royalty interest sold....... -- -- (17,000)
Proceeds from sale of gas gathering system............. 32,201 -- --
Other capital expenditures, net........................ (30,471) (7,495) (3,747)
Proceeds from sale of investment in affiliate.......... -- 50,700 --
Other, net............................................. 1,145 (1,247) 2,675
--------- --------- ---------
Net cash used by investing activities.......... (466,569) (118,013) (503,657)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings................................... 275,424 266,378 468,005
Payments on long-term debt............................. (162,000) (306,565) (172,275)
Dividends paid......................................... (14,919) (13,130) (12,671)
Proceeds from issuance of common stock................. 134,223 630 1,383
Payments to acquire treasury stock..................... (25) (3) (15)
Costs of debt and equity transactions.................. (270) (3,971) (16,136)
--------- --------- ---------
Net cash provided (used) by financing
activities................................... 232,433 (56,661) 268,291
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................................... (9,063) 19,724 (78,782)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR................................... 26,127 6,403 85,185
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR............... $ 17,064 $ 26,127 $ 6,403
--------- --------- ---------
--------- --------- ---------
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-4
33
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
-------------------------
1993 1992
---------- ----------
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 17,064 $ 26,127
Receivables...................................................... 91,840 75,777
Inventories...................................................... 7,152 6,202
Advances to oil and gas ventures and other....................... 6,884 5,749
---------- ----------
122,940 113,855
---------- ----------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties............................................. 2,516,801 1,996,590
Unproved properties and properties under development,
not being amortized......................................... 105,597 85,532
Gas gathering, transmission and processing facilities............ 25,809 23,357
Other............................................................ 36,938 24,045
---------- ----------
2,685,145 2,129,524
Less: Accumulated depreciation, depletion and amortization....... (1,248,685) (1,057,651)
---------- ----------
1,436,460 1,071,873
OTHER ASSETS:
Investments in affiliates........................................ 5,677 5,053
Deferred charges and other....................................... 27,330 27,923
---------- ----------
33,007 32,976
---------- ----------
$1,592,407 $1,218,704
---------- ----------
---------- ----------
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-5
34
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
-------------------------
1993 1992
---------- ----------
(IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................. $ 9,017 $ 1,103
Current portion of advances on gas contracts..................... -- 20,142
Accounts payable................................................. 118,447 82,064
Accrued operating expense........................................ 17,371 16,446
Accrued income taxes............................................. 6,048 5,158
Accrued interest................................................. 2,010 9,011
Accrued exploration and development.............................. 15,083 7,979
Accrued compensation and benefits................................ 9,170 7,405
Other accrued expenses........................................... 8,244 8,322
---------- ----------
185,390 157,630
---------- ----------
LONG-TERM DEBT..................................................... 453,009 454,373
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes..................................................... 128,554 83,220
Advances on gas contracts........................................ 3,914 3,039
Future operating costs for royalty interest sold................. 10,389 13,222
Other............................................................ 25,297 32,011
---------- ----------
168,154 131,492
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000 shares authorized,
62,334,241 and 48,304,154 shares issued, respectively......... 77,918 60,380
Paid-in capital.................................................. 540,155 269,296
Retained earnings................................................ 182,195 160,763
Treasury stock, at cost, 1,248,827 and 1,367,914 shares,
respectively.................................................. (14,414) (15,230)
---------- ----------
785,854 475,209
---------- ----------
$1,592,407 $1,218,704
---------- ----------
---------- ----------
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-6
35
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
TOTAL
COMMON PAID-IN RETAINED TREASURY SHAREHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------- -------- -------- -------- -------------
(IN THOUSANDS)
BALANCE, DECEMBER 31, 1990......... $57,727 $241,272 $104,329 $(16,548) $ 386,780
Net income....................... -- -- 34,615 -- 34,615
Dividends ($.28 per common
share)........................ -- -- (12,822) -- (12,822)
Common shares issued............. 2,576 27,945 -- -- 30,521
Treasury shares issued........... -- (251) -- 1,113 862
Treasury shares purchased........ -- -- -- (15) (15)
------- -------- -------- -------- -------------
BALANCE, DECEMBER 31, 1991......... 60,303 268,966 126,122 (15,450) 439,941
Net income....................... -- -- 47,776 -- 47,776
Dividends ($.28 per common
share)........................ -- -- (13,135) -- (13,135)
Common shares issued............. 77 382 -- -- 459
Treasury shares issued........... -- (52) -- 223 171
Treasury shares purchased........ -- -- -- (3) (3)
------- -------- -------- -------- -------------
BALANCE, DECEMBER 31, 1992......... 60,380 269,296 160,763 (15,230) 475,209
Net income....................... -- -- 37,334 -- 37,334
Dividends ($.28 per common
share)........................ -- -- (15,902) -- (15,902)
Common shares issued............. 17,538 270,859 -- -- 288,397
Treasury shares issued........... -- -- -- 841 841
Treasury shares purchased........ -- -- -- (25) (25)
------- -------- -------- -------- -------------
BALANCE, DECEMBER 31, 1993......... $77,918 $540,155 $182,195 $(14,414) $ 785,854
------- -------- -------- -------- -------------
------- -------- -------- -------- -------------
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-7
36
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Apache Corporation (Apache or the Company) and its subsidiaries after
elimination of intercompany balances and transactions. The Company's interests
in oil and gas ventures and partnerships are proportionately consolidated.
Investments in incorporated affiliates in which Apache owns less than a
50-percent interest are accounted for using the equity method.
INVENTORIES
Inventories consist principally of tubular goods and production equipment
stated at the lower of weighted average cost or market.
PROPERTY AND EQUIPMENT
The Company uses the full cost method of accounting for its investment in
oil and gas properties. Under this method, the Company capitalizes all
acquisition, exploration and development costs incurred for the purpose of
finding oil and gas reserves, including salaries, benefits and other internal
costs directly attributable to these activities. Apache capitalized $25.4
million, $24 million and $24.9 million of internal costs in 1993, 1992 and 1991,
respectively. Interest costs related to development projects in progress for an
extended period are also capitalized to oil and gas properties. Costs associated
with production and general corporate activities are expensed in the period
incurred. Unless significant reserves are involved, proceeds from the sale of
oil and gas properties are accounted for as reductions to capitalized costs and
gains or losses are not recognized.
Apache computes the provision for depreciation, depletion and amortization
(DD&A) of oil and gas properties on a quarterly basis using the future gross
revenue method. The quarterly provision is calculated on a country-by-country
basis by multiplying the quarter's oil and gas revenues by an overall rate which
is determined by dividing the unamortized cost of proved oil and gas properties
by the total estimated future oil and gas revenues from proved reserves. The
amortizable base includes estimated dismantlement, restoration and abandonment
costs, net of estimated salvage values. These costs are generally estimated by
engineers employed by Apache.
Apache limits, on a country-by-country basis, the capitalized costs of
proved oil and gas properties, net of accumulated DD&A, to the estimated future
net cash flows from proved oil and gas reserves, net of related tax effects,
discounted at 10 percent. If capitalized costs exceed this limit, the excess is
charged to DD&A expense. The Company has not recorded any write downs of
capitalized costs in any of the periods presented.
The costs of certain unevaluated domestic and foreign leasehold acreage and
wells in the process of being drilled are not being amortized. Costs not being
amortized are periodically assessed for possible impairments or reductions in
value. If a reduction in value has occurred, costs being amortized are increased
or a charge is made against earnings for those international operations where a
reserve base is not yet established.
Buildings, equipment, gas gathering, transmission and processing facilities
are depreciated on a straight-line basis over the estimated useful lives of the
assets which range from three to 20 years. Accumulated depreciation for these
assets totaled $17.2 million and $19.9 million at December 31, 1993 and 1992,
respectively.
ACCOUNTS PAYABLE
Included in accounts payable at December 31, 1993 and 1992, are liabilities
of approximately $38.6 million and $27.5 million, respectively, representing the
amount by which checks issued but not presented to the Company's banks for
collection exceeded balances in bank accounts.
F-8
37
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
ADVANCES ON GAS CONTRACTS
Advances represent payments received from purchasers of natural gas under
provisions of take-or-pay contracts. Such advances will be recognized as income
if gas production, under the terms of the contracts, is applied against the
advances. In the event advances are not reduced by gas production, the advances
will be repaid under the terms of the contracts.
REVENUE RECOGNITION
Apache uses the sales method of accounting for natural gas revenues. Under
this method, revenues are recognized based on actual volumes of gas sold to
purchasers. The volumes of gas sold may differ from the volumes to which Apache
is entitled based on its interests in the properties. Differences between
volumes sold and volumes based on entitlements create gas imbalances which are
generally reflected as adjustments to reported gas reserves and future cash
flows. Adjustments for gas imbalances totaled less than three percent of
Apache's proved gas reserves at December 31, 1993. Revenue is deferred and a
liability is recorded for those properties where the estimated remaining
reserves will not be sufficient to enable the underproduced owner to recoup
their entitled share through production.
HEDGING ACTIVITIES
The Company periodically may buy and sell commodity derivative contracts in
order to either fix or support oil and gas prices at targeted levels and to
minimize the impact of price fluctuations. Gains or losses on these hedging
activities are recognized in revenues for the periods production was hedged.
Estimates of future liabilities and receivables applicable to oil and gas
commodity hedges are reflected in future cash flows from proved reserves with
such estimates based on prices in effect as of the date of the reserve report.
The Company also purchases interest rate caps and enters into interest rate
swap transactions. Gains or losses on these activities are recognized in
interest expense in the period hedged by the agreements.
INCOME TAXES
The Company provides deferred income taxes for all temporary differences
between financial and income tax reporting. Effective January 1, 1993, the
Company implemented the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under the liability
method specified by SFAS No. 109, deferred taxes are determined based on the
estimated future tax effect of differences between the financial statement and
tax bases of assets and liabilities given the provisions of enacted tax laws.
The adoption of SFAS No. 109 did not have a material effect on the accompanying
financial statements.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is considered the functional currency for each of the
Company's international operations. Translation gains or losses are recognized
in current net income and were not material in any of the periods presented.
INCOME PER COMMON SHARE
Income per common share amounts are based on the weighted average number of
common shares outstanding. The effects of common equivalent shares, which would
include shares from the assumed conversion of the 3.93-percent notes, were
immaterial or were not dilutive for all of the periods presented. Furthermore,
fully diluted earnings per share, assuming conversion of certain of the
convertible debentures, was not significantly different than primary earnings
per share for all periods presented.
STATEMENT OF CONSOLIDATED CASH FLOWS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. These
investments are carried at cost which approximates market.
F-9
38
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS AND DIVESTITURES
In 1993, Apache purchased the stock of Hadson Energy Resources Corporation
(HERC) for approximately $98 million through a series of privately negotiated
transactions and a merger offer approved by a majority of HERC stockholders. In
July 1993, Apache completed the purchase of 4.2 million shares of HERC's
outstanding common stock, or approximately 68 percent of the HERC common stock
then outstanding, for $59.2 million. The Company agreed to pay an additional
$1.00 per share ($4.2 million) to the selling stockholders if the Company
increased its ownership in HERC to 80 percent or more. Pursuant to a merger
agreement approved by HERC stockholders on November 12, 1993, HERC stockholders
other than Apache could elect to receive, for each share of HERC common stock,
either $15 in cash or .574 share of Apache common stock. Through the end of
1993, Apache issued 305,003 shares of Apache common stock valued at $7.8 million
and paid a total of $76.1 million to former stockholders of HERC as
consideration for the merger. At December 31, 1993, Apache reflected a liability
of $13.9 million accrued for HERC shares which had not yet been surrendered to
Apache.
Also in 1993, Apache entered into two agreements to purchase 104 Bcfe of
proved reserves from Hall-Houston Oil Company (Hall-Houston) for an aggregate
consideration of $113.7 million. In June 1993, Apache closed the first of the
two transactions, paying $29.3 million for Hall-Houston's interest in Mustang
Island Blocks 787 and 805. The second transaction, encompassing substantially
all of Hall-Houston's producing properties in the Gulf of Mexico for an
additional $84.4 million, was completed in August 1993. The acquisitions
included interests in 63 producing fields and 12 fields under development or
awaiting pipeline connections.
Effective November 1, 1992, Apache completed the acquisition of Shell
Offshore Inc.'s 93-percent working interest in Matagorda Island Blocks 681 and
682 in the Gulf of Mexico. Apache paid $57.4 million for properties, which
included 14 miles of gathering lines and approximately 11,500 net acres of
leases.
Effective May 1, 1992, Apache sold its 31.67-percent general partnership
interest in Natural Gas Clearinghouse (NGC) for $50.7 million. The Company
recognized a gain on the sale of approximately $28.3 million or $18.5 million
after tax.
On July 1, 1991, Apache completed its acquisition of MW Petroleum
Corporation (MW), a wholly owned subsidiary of Amoco Production Company (Amoco).
Apache paid $511.4 million in cash, assumed net liabilities of approximately
$4.1 million and issued two million shares of Apache common stock valued at $30
million. At the time of closing, MW had estimated net proved reserves of
approximately 63 million barrels of oil and 288 Bcf of natural gas.
As part of a plan to reduce debt from the MW acquisition, Apache sold
approximately 1,700 oil and gas properties in 1991 for $157 million. Apache
recorded $17 million of these proceeds as a deferred credit on its balance sheet
for future operating costs associated with gas production relating to the sale
of an overriding royalty interest.
All of the above acquisitions have been accounted for using the purchase
method of accounting and have been included in the financial statements of
Apache since the dates of acquisition. The following unaudited pro forma summary
of the Company's consolidated results of operations for 1993 was prepared as if
the Hall-Houston and HERC acquisitions occurred as of January 1, 1993. The pro
forma data for 1992 assumes that
F-10
39
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Hall-Houston and HERC acquisitions and the NGC sale occurred as of or prior
to January 1, 1992. The pro forma data is based on numerous assumptions and is
not necessarily indicative of future operations.
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
(UNAUDITED) 1993 1992
----------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Oil and gas production revenues.............................. $481,754 $472,914
Total revenues............................................... 515,071 507,502
Net income................................................... 36,970 27,016
Income per share............................................. $ .69 $ .57
Weighted average shares outstanding.......................... 53,812 47,212
2. INVESTMENTS IN AFFILIATES
At December 31, 1993, Apache owned approximately 20 percent of the
outstanding common stock of Key Production Company (Key). Until May 1, 1992,
Apache also owned 31.67 percent of NGC. (See Note 1.) Apache's investments in
affiliates at December 31, 1993 and 1992 are presented below.
DECEMBER 31,
---------------------
1993 1992
------ ------
(IN THOUSANDS)
Investments:
Key Production Company............................................... $5,677 $5,053
The Company recorded dividends and distributions totaling $3.8 million and
$5 million from affiliates in 1992 and 1991, respectively. No dividends were
received in 1993. Earnings from affiliates for each of the last three years is
presented below.
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
---- ------ ------
(IN THOUSANDS)
Income from affiliates:
Key Production Company....................................... $624 $ 4 $ 486
Natural Gas Clearinghouse.................................... -- 2,691 8,156
---- ------ ------
$624 $2,695 $8,642
---- ------ ------
---- ------ ------
F-11
40
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
LONG-TERM DEBT
DECEMBER 31,
-----------------------
1993 1992
-------- --------
(IN THOUSANDS)
Senior debt:
Apache bank facility............................................... $240,000 $115,000
9.25-percent notes due 2002, net of discount....................... 99,688 99,665
3.93-percent convertible notes due 1997............................ 75,000 75,000
-------- --------
414,688 289,665
-------- --------
Subordinated debt:
7 1/2-percent convertible debentures due 2000...................... -- 150,000
9-percent convertible debentures due 2001, net of discount......... -- 6,431
-------- --------
-- 156,431
-------- --------
Other obligations:
HERC bank facility................................................. 19,550 --
HEL acceptance facility............................................ 22,000 --
Share of offshore partnership financing............................ 4,636 7,195
1986 limited recourse notes........................................ 1,115 1,650
Other notes payable................................................ 37 535
-------- --------
47,338 9,380
-------- --------
Total debt........................................................... 462,026 455,476
Less: Current maturities............................................. (9,017) (1,103)
-------- --------
Long-term debt....................................................... $453,009 $454,373
-------- --------
-------- --------
The Company's debt at December 31, 1993, was structured in two parts:
(1) Senior financing consisting of the Apache bank facility, the
9.25-percent notes and the 3.93-percent convertible notes;
(2) Credit facilities assumed in the HERC acquisition and other
amortizing obligations primarily related to partnership
activities.
Apache's senior arrangements are subject to an intercreditor agreement
under which each obligation is secured by the MW common stock held by the
Company. If the administrative agent under the bank facility elects to access
this collateral, lenders under these three obligations would participate prorata
in the proceeds of any liquidation. There is no other collateral.
The Apache Bank Facility is a $400-million revolving agreement funded by a
group of banks. The maximum amount available is subject to periodic
redetermination of a borrowing base, determined solely at the discretion of the
banks, predicated upon the Company's oil and gas reserve values and forecast
rate of production. As of December 31, 1993, the borrowing base was $400 million
and the principal amount outstanding was $240 million. The next redetermination
of the borrowing base is scheduled for April 1994. This bank facility matures on
April 30, 1996, and the agreement provides for perpetual one-year extensions as
requested year-by-year by the Company and subject to the approval of the banks.
Interest on amounts borrowed is charged at the First National Bank of Chicago's
base rate or at London Interbank Offered Rates (LIBOR) plus .75 percent, at the
Company's option. The Company pays a .25-percent fee on the average unused
portion of the borrowing base in return for the banks' obligation to maintain
the availability of those funds.
F-12
41
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 9.25-percent Notes were issued in May 1992 and will mature in June
2002. The notes are not redeemable prior to maturity.
The 3.93-percent Convertible Notes were issued in December 1992. They
mature in November 1997 and are not redeemable prior to maturity. They are
convertible into Apache common stock at $27 per share, subject to adjustment
under certain circumstances.
The indentures for the two note issues impose substantially similar
obligations on the Company including limits on the Company's ability to incur
debt secured by certain liens and on its ability to enter into certain sale and
leaseback transactions. Upon certain changes in control of the Company, both
issues are subject to mandatory repurchase (or conversion at the option of the
noteholders in the case of the 3.93-percent notes).
In addition, financial covenants of the bank facility and the 3.93-percent
notes require the Company to maintain minimum consolidated tangible net worth of
$555 million, as of December 31, 1993, which will be adjusted quarterly for
subsequent earnings and securities transactions and to maintain a ratio of (i)
earnings before interest expense, state and federal taxes and depreciation to
(ii) consolidated interest expense of not less than 3.7:1 for the banks and
3.5:1 for the lenders under the 3.93-percent notes. The banks also require the
Company to maintain a ratio of (i) consolidated current assets, plus the unused
portion of the facility to (ii) consolidated current liabilities, excluding
current maturities of the facility, of not less than 1:1.
In conjunction with the HERC acquisition, Apache assumed two bank credit
agreements outstanding at the time it acquired a majority interest in HERC.
Recourse under these credit facilities is limited to assets acquired from HERC.
The HERC Bank Facility is a $60 million revolving credit agreement with
Bank of Montreal (BMO). The agreement established a credit facility comprised of
a three-year revolving credit loan which matures October 31, 1995, and a term
loan equal to the balance outstanding on the revolving credit loan at maturity.
The term loan is repayable in five equal quarterly installments commencing
January 31, 1996, with any remaining balance due at maturity on January 31,
1997. Amounts available for borrowing are limited based on certain formulas
related to oil and gas reserves. Interest is payable at prime or certain other
fixed rate options (LIBOR plus one percent or certificate of deposit rate plus
1.25 percent). The interest rate in effect at December 31, 1993, was 4.875
percent. The Company pays a commitment fee of .375 percent per annum on the
unused portion of the borrowing base. At December 31, 1993, the amount available
for borrowing under the agreement was $26 million, of which $19.6 million was
outstanding.
The HEL Acceptance Facility is a separate credit facility with BMO which
provided funding for the construction of an offshore gas gathering project by
Hadson Energy Limited (HEL), a wholly-owned subsidiary of HERC, and the
refinancing of an existing HEL credit facility. A total of $32 million was
advanced under the agreement, of which $22 million was outstanding at December
31, 1993. The loan is repayable in 16 equal quarterly installments which
commenced October 12, 1992, and bears interest at the discount rate for U.S.
dollar bankers' acceptances plus a 1.3-percent stamping fee. The stamping fee
changes to 1.125 percent effective January 1, 1994.
The HERC agreements contain certain covenants which restrict, with respect
to HERC, the amount of additional borrowings, the payment of dividends, and the
purchase and disposition of assets. The facility is secured by the stock of
certain wholly-owned subsidiaries of HERC.
The 7 1/2 percent Convertible Subordinated Debentures, issued in 1990 and
scheduled to mature in 2000, were converted to equity in September 1993 with the
issuance of approximately 7.8 million shares of Apache common stock at $19.18
per share.
The 9-percent Convertible Subordinated Debentures, scheduled to mature in
2001, were redeemed by Apache July 15, 1993, for $7 million.
F-13
42
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1992, the Company arranged a $35 million banking facility on behalf
of the Apache Offshore Investment Partnership. At December 31, 1993, $17.4
million was outstanding on the facility, of which Apache's share was $4.6
million. Availability under this facility is reduced quarterly by $1.5 million.
To finance property acquisitions made during 1986, Apache (through a former
partnership) placed certain Limited Recourse Notes due 2031. These notes are
secured by interests in the acquired properties and bear interest at eight
percent.
The Company has entered into various Interest Rate Swap Agreements. On
December 31, 1993, the Company's weighted average interest rate on its total
long-term debt was 5.2 percent. When all existing interest rate swaps are
factored in, the effective rate at December 31, 1993, was five percent. An open
interest rate swap agreement against the $100 million 9.25-percent notes was
terminated in February 1994.
As of December 31, 1993, the Company had approximately $14 million of
unamortized costs associated with its various debt obligations. These costs are
reflected as deferred charges and other in the accompanying balance sheet and
are being amortized over the life of the related debt.
AGGREGATE MATURITIES OF DEBT
(IN THOUSANDS)
1994............................................. $ 9,017
1995............................................. 27,653
1996............................................. 246,243
1997............................................. 76,602
1998............................................. 1,602
Thereafter....................................... 100,909
--------------
$462,026
--------------
--------------
4. INCOME TAXES
As discussed in the Summary of Significant Accounting Policies, effective
January 1, 1993, the Company adopted SFAS No. 109 "Accounting for Income Taxes."
The cumulative effect of adopting this statement was not material to the
accompanying financial statements.
The total provision for income taxes consists of the following:
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
Current taxes:
Federal................................. $ -- $ 8,949 $ 9,438
State................................... -- 856 85
Foreign................................. -- 110 377
Deferred taxes............................ 20,571 14,034 4,234
------- ------- -------
$20,571 $23,949 $14,134
------- ------- -------
------- ------- -------
The 1993 provision for income taxes includes a $3.5 million charge for the
change in federal statutory rates from 34 percent to 35 percent enacted under
the Omnibus Budget Reconciliation Act of 1993 (OBRA).
The 1992 and 1991 provision for income taxes included approximately $1.2
million and $4.6 million, respectively, for Apache's tax provision related to
its share of NGC's partnership income. This provision was reflected as a
reduction of equity in income of affiliates in the Statement of Consolidated
Income.
F-14
43
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the federal statutory income tax rates to the effective
rate is as follows:
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1993 1992 1991
---- ---- ----
Statutory income tax rate.......................................... 35.0% 34.0% 34.0%
State income tax, less federal benefit............................. 1.9 2.0 1.9
Tax benefit of state net operating loss carryforwards not
previously recognized............................................ -- -- (2.1)
Reversal of prior period timing differences at rates in excess of
current statutory rates.......................................... -- (1.8) (3.4)
Utilization of federal income tax credits.......................... (3.7) -- --
Increase in corporate income tax rate provided for in OBRA......... 6.0 -- --
All other, net..................................................... (3.3) (.8) (1.4)
---- ---- ----
35.9% 33.4% 29.0%
---- ---- ----
---- ---- ----
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities using the provisions of enacted tax laws. The net deferred tax
liability as of December 31, 1993, is comprised of the following:
DECEMBER 31,
1993
-------------
(IN
THOUSANDS)
Deferred tax assets:
Accrued expenses...................................................... $ (8,696)
Deferred income....................................................... (3,287)
Deferred compensation................................................. (2,380)
Net operating loss carryforwards...................................... (18,392)
Alternative minimum tax credits....................................... (20,734)
Other................................................................. (4,238)
-------------
Total deferred tax assets.......................................... $ (57,727)
-------------
Deferred tax liabilities:
Depreciation, depletion and amortization.............................. $ 181,981
Other................................................................. 4,300
-------------
Total deferred tax liabilities..................................... $ 186,281
-------------
Deferred income tax (asset) liability................................... $ 128,554
-------------
-------------
No valuation allowance has been recorded against deferred tax assets at
December 31, 1993.
U.S. deferred taxes have not been provided on foreign earnings totaling $29
million which are permanently reinvested abroad.
At December 31, 1993, the Company has U.S. federal net operating loss
carryforwards of $30 million and statutory depletion carryforwards of $6.6
million available to reduce future U.S. federal taxable income. The net
operating loss carryforwards will expire unless otherwise utilized, beginning in
1995. The statutory depletion may be carried forward indefinitely. The Company
has alternative minimum tax (AMT) credit carryforwards of $20.7 million. AMT
credits can be carried forward indefinitely and may only be used to reduce
regular tax liabilities in excess of AMT liabilities. The Company also has
foreign net operating loss carryforwards of $10.7 million and foreign capital
loss carryforwards of $2.4 million which may be carried forward indefinitely.
These may be utilized to reduce future foreign taxable income.
F-15
44
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. CAPITAL STOCK
COMMON STOCK OUTSTANDING
1993 1992 1991
--------- --------- ---------
Balance, beginning of year................. 46,936,240 46,854,794 44,694,410
Treasury shares issued (acquired), net..... 119,087 19,791 99,084
Shares issued:
Acquisition of MW........................ -- -- 2,000,000
Public offering.......................... 5,795,000 -- --
Acquisition of HERC...................... 305,003 -- --
Conversion of 7 1/2-percent debentures... 7,816,453 -- --
Stock options............................ 113,631 61,655 61,300
--------- --------- ---------
Balance, end of year....................... 61,085,414 46,936,240 46,854,794
--------- --------- ---------
--------- --------- ---------
Public Offering -- In March 1993, Apache completed the public offering of
approximately 5.8 million shares of Apache common stock for net proceeds of
$131.8 million.
Stock Option Plans -- At December 31, 1993, common shares totaling
2,031,650 were reserved for issuance under stock option plans for officers and
key employees. The outstanding options expire at various dates through 2003 and
are exercisable at prices ranging from $7.31 to $26.62 with an aggregate
exercise price of $17 million. The following table summarizes the changes in
stock options for the year and the number of common shares available for grant
at year end.
1993 1992 1991
-------- -------- --------
Outstanding, beginning of year................ 846,550 666,650 507,250
Exercised ($7.313 to $19.625)................. (115,200) (94,050) (161,300)
Granted ($13.375 to $26.625).................. 264,600 326,700 361,000
Cancelled or expired ($13.75 to $26.625)...... (86,075) (52,750) (40,300)
-------- -------- --------
Outstanding, end of year...................... 909,875 846,550 666,650
-------- -------- --------
-------- -------- --------
Available for grant, end of year.............. 1,121,775 1,300,300 84,050
-------- -------- --------
-------- -------- --------
Rights to Purchase Common Stock -- In 1986, the Company declared a dividend
of one right to purchase one share of common stock at $50 per share (subject to
adjustment) on each outstanding share of common stock (the Rights). The Rights
are exercisable only if certain persons or groups acquire 20 percent or more of
the common stock or commence a tender offer for 30 percent or more of the common
stock. If the Company engages in certain business combinations or a 20-percent
stockholder engages in certain transactions with the Company, the Rights become
exercisable for Apache common stock or common stock of the corporation acquiring
the Company (as the case may be) at 50 percent of the then-market price. Any
Rights that are or were beneficially owned by a person who has acquired 20
percent or more of the common stock and who engages in certain transactions or
realizes the benefits of certain transactions with the Company will become void.
The Company may redeem the Rights at a specified price at any time until 10
business days after public announcement that a person has acquired 20 percent or
more of the outstanding shares of common stock. The Rights will expire on
January 31, 1996, unless earlier redeemed by the Company. Unless the Rights have
been previously redeemed, all shares of common stock issued by the Company will
include Rights.
Preferred Stock -- The Company has authorized five million shares of no par
preferred stock. None are outstanding.
F-16
45
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. NONCASH INVESTING AND FINANCING ACTIVITIES
A summary of noncash investing and financing activities is presented below.
In 1993, Apache purchased HERC for approximately $98 million in cash and
Apache common stock. The accompanying financial statements included the
following attributable to the HERC acquisition:
(IN THOUSANDS)
Value of properties acquired, including gathering facilities....... $159,996
Common stock issued (305,003 shares)............................... (7,777)
Liability for HERC shares not surrendered as of December 31,
1993............................................................. (13,906)
Cash paid, net of cash acquired.................................... (70,692)
--------
Net HERC liabilities added through consolidation................. $ 67,621
========
In September 1993, Apache called for the redemption of its 7 1/2-percent
convertible subordinated debentures due 2000. Following receipt of the notice of
redemption, nearly all holders of the debentures elected to convert the
principal amount of their debentures into shares of Apache common stock. Holders
of less than one-tenth of one percent of the debentures elected to receive cash
($.1 million).
(IN THOUSANDS)
Long-term debt converted into common stock......................... $149,900
Unamortized debt issue costs charged to equity..................... (2,686)
--------
Increase to shareholders' equity (common stock issued, 7.8 million
shares).......................................................... $147,214
========
On July 1, 1991, Apache completed the acquisition of MW for cash and Apache
common stock. Net liabilities assumed and the value of properties acquired are
subject to adjustments as specified in the stock purchase agreement.
(IN THOUSANDS)
Value of properties acquired....................................... $545,515
Common stock issued (two million shares)........................... (30,000)
Cash paid.......................................................... (511,373)
--------
Net liabilities assumed............................................ $ 4,142
========
Cost incurred to complete the MW transaction and capitalized as part of the
acquisition totaled $13.1 million, of which $8.2 million had been paid in cash
and $4.9 million was accrued at December 31, 1991.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
Cash paid (received) during the year for:
Interest, net of amounts capitalized........................ $30,379 $27,373 $22,933
Income taxes, net of refunds................................ (780) 19,642 4,216
F-17
46
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, the table below sets forth the estimated
fair value of the Company's significant financial instruments.
DECEMBER 31, 1993
-----------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
(IN THOUSANDS)
Long-term debt:
Bank debt.................................................... $281,550 $281,550
9.25-percent notes due 2002.................................. 99,688 100,311
3.93-percent convertible notes due 1997...................... 75,000 87,323
The fair value of the 9.25-percent notes was based on the quoted market
price for that issue. The fair value of the 3.93-percent notes was estimated
based on quotes obtained from private investment firms. The difference between
the carrying amount and the fair value of the Company's other debt obligations
was not significant.
The fair value of the Amoco agreement discussed in Note 8 was not readily
determinable.
8. COMMITMENTS AND CONTINGENCIES
Investment in Program Operations -- Prior to 1989, the Company organized
numerous oil and gas limited partnerships. At December 31, 1993, Apache was
contingently liable for $12.8 million of bank financing arranged by the Company
on behalf of the Apache Offshore Investment Partnership (See Note 3).
As compensation for its services as general partner and operator, the
Company shares in oil and gas revenues, receives a management fee in accordance
with formulas described in each limited partnership agreement, and is reimbursed
for administrative, exploration and production expenses incurred on behalf of
the partnerships. These reimbursements ($.6 million, $4.8 million and $6 million
in the years 1993, 1992 and 1991, respectively) have been netted against
operating expenses in the accompanying financial statements.
Litigation -- The Company is involved in litigation and is subject to
governmental and regulatory controls arising in the ordinary course of business.
It is the opinion of the Company's management that all claims and litigation
involving the Company are not likely to have a material adverse effect on its
financial position or results of operations.
Environmental -- Apache, as an owner and operator of oil and gas
properties, is subject to various federal, state, local and foreign country laws
and regulations relating to discharge of materials into the environment. These
laws and regulations may, among other things, impose liability on the lessee
under an oil and gas lease for the cost of pollution clean-up resulting from
operations, subject the lessee to liability for pollution damages, require
suspension or cessation of operations in affected areas and impose restrictions
on the injection of liquids into subsurface aquifers that may contaminate ground
water. Apache maintains insurance coverages which it believes are customary in
the industry, although it is not fully insured against all environmental risks.
The Company is not aware of any environmental claims existing as of December 31,
1993, which would have a material impact on its financial position or results of
operations.
Hedging -- In connection with the MW purchase in mid-1991, the Company and
Amoco entered into a hedging agreement. Under the terms of this agreement,
Apache would receive support payments in the event oil prices fell below
specified reference prices for any year during the two-year period ended June
30, 1993, and Amoco will receive payments in the event oil prices rose above
specified reference prices for any year during the eight-year period ending June
30, 1999, or in the event gas prices exceeded specified reference prices for any
year during the five-year period ending June 30, 1996.
F-18
47
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Oil price sharing payments due Amoco for the contract years ending June 30,
1994 through June 30, 1999, would be based on per barrel oil prices starting at
$24.75 and increasing to $33.13, while annual oil volumes would decline from
approximately 3.3 million barrels to 1.4 million barrels over the remaining
term. Gas price sharing payments would be based on gas volumes starting from
approximately 13.4 Bcf for the contract year ended June 30, 1994, and declining
to 10.5 Bcf in 1996, while the referenced gas price would increase from $2.18
per Mcf in 1994 to $2.68 per Mcf in the final year of the gas agreement. In the
event price sharing payments are due to Amoco, the volumes listed above would be
doubled until Amoco recovers its net payments to Apache ($5.8 million through
the contract year ended June 30, 1993) plus interest.
International Commitments -- The Company, through its subsidiaries, has
acquired or has been conditionally or unconditionally granted exploration rights
in Australia, The Congo, Egypt and Indonesia. In order to comply with the
contracts and agreements granting these rights, the Company, through Apache
International, Inc., expects to expend approximately $15.8 million through 1997.
Concentration of Credit Risk -- The proved gas reserves in the Carnarvon
Basin of Western Australia acquired in the HERC acquisition are dedicated for
sale to the State Energy Commission of Western Australia (SECWA) pursuant to a
long-term, take-or-pay contract. If for some reason the SECWA contract were
terminated, the Company might not be able to find other markets for the gas
produced from these fields. Although the Company considers such an occurrence
highly unlikely, the loss of the SECWA contract might force the Company to
write-down the value of these fields.
Retirement and Deferred Compensation Plans -- The Company provides a 401(k)
retirement/savings plan and a non-qualified retirement/savings plan for
employees. These plans allow participating employees to elect to contribute up
to 10 percent of their salaries, with Apache making matching contributions up to
a maximum of six percent of each employee's salary. In addition, the Company
annually contributes a percentage of each participating employee's compensation,
as defined, to the plan. Vesting in the Company's contributions occurs at the
rate of 20 percent per year. Total expenses under these plans were $5 million,
$4.2 million and $3.8 million for 1993, 1992 and 1991, respectively.
Gas Settlement Contracts -- In March 1991, Apache agreed to modify the
terms of certain contracts for the sale of natural gas and repay interest-free
advances earlier than contractually obligated in exchange for a non-refundable
cash payment, of which Apache's share was $5.6 million. Under the terms of the
contract settlement, the Company repaid $20.1 million of advances in January
1993. Advances received from purchasers under provisions of take-or-pay
contracts, if not recouped from production, are scheduled to be repaid in 1995.
Apache's share of outstanding take-or-pay advances totaled $3.9 million at
December 31, 1993.
Lease Commitments -- The Company has leases for office space with varying
expiration dates through 2007. Net rental expense was $4.6 million, $5.7 million
and $4.1 million for 1993, 1992 and 1991, respectively.
As of December 31, 1993, minimum rental commitments under long-term
operating leases are as follows:
NET
MINIMUM
RENTAL SUBLEASE RENTAL
COMMITMENTS RENTALS COMMITMENTS
----------- -------- -----------
(IN THOUSANDS)
1994................................................ $ 8,024 $ (2,090) $ 5,934
1995................................................ 6,138 (1,311) 4,827
1996................................................ 5,907 (1,156) 4,751
1997................................................ 4,009 (482) 3,527
1998................................................ 3,705 -- 3,705
Thereafter.......................................... 37,635 -- 37,635
----------- -------- -----------
$65,418 $ (5,039) $60,379
----------- -------- -----------
----------- -------- -----------
F-19
48
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. CUSTOMER INFORMATION
NGC has been the sole purchaser of Apache's spot market gas production
since April 1990. Sales to NGC accounted for 36 percent, 27 percent and 36
percent of the Company's oil and gas revenues in 1993, 1992 and 1991,
respectively. Sales to Amoco represented 11 percent, 27 percent and 17 percent
of the Company's 1993, 1992 and 1991 oil and gas revenues, respectively.
The Company's revenues are derived principally from uncollateralized sales
to customers in the oil and gas industry; therefore, customers may be similarly
affected by changes in economic and other conditions within the industry. Apache
has not experienced significant credit losses on such sales.
F-20
49
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
Oil and Gas Operations -- The following table sets forth revenue and direct
cost information relating to the Company's oil and gas exploration and
production activities. Apache has no long-term supply or purchase agreements
with governments or authorities under which it acts as producer.
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
UNITED STATES
Oil and gas revenues....................................... $421,845 $386,533 $311,487
-------- -------- --------
Operating costs:
Depreciation, depletion and amortization................. 163,285 149,909 127,156
Lease operating.......................................... 102,830 99,934 73,163
Production taxes......................................... 21,218 23,803 17,652
Income tax............................................... 50,035 39,045 30,312
-------- -------- --------
337,368 312,691 248,283
-------- -------- --------
Results of operations...................................... $ 84,477 $ 73,842 $ 63,204
-------- -------- --------
-------- -------- --------
Amortization rate.......................................... 38.7% 38.8% 40.8%
-------- -------- --------
-------- -------- --------
FOREIGN
Oil and gas revenues....................................... $ 15,497 $ 8,019 $ 4,575
-------- -------- --------
Operating costs:
Depreciation, depletion and amortization................. 7,214 3,883 1,992
Impairments.............................................. 23,200 12,000 3,600
Lease operating.......................................... 3,456 1,600 699
Production taxes......................................... 609 -- --
Income tax (benefit)..................................... (6,264) (3,181) (446)
-------- -------- --------
28,215 14,302 5,845
-------- -------- --------
Results of operations...................................... $(12,718) $ (6,283) $ (1,270)
-------- -------- --------
-------- -------- --------
Amortization rate-recurring................................ 46.6% 48.7% 43.1%
-------- -------- --------
-------- -------- --------
TOTAL
Oil and gas revenues....................................... $437,342 $394,552 $316,062
-------- -------- --------
Operating costs:
Depreciation, depletion and amortization................. 170,499 153,792 129,148
Impairments.............................................. 23,200 12,000 3,600
Lease operating.......................................... 106,286 101,534 73,862
Production taxes......................................... 21,827 23,803 17,652
Income tax............................................... 43,771 35,864 29,866
-------- -------- --------
365,583 326,993 254,128
-------- -------- --------
Results of operations...................................... $ 71,759 $ 67,559 $ 61,934
-------- -------- --------
-------- -------- --------
F-21
50
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Costs Not Being Amortized -- The following table sets forth a summary of
oil and gas property costs not being amortized at December 31, 1993, by the year
in which such costs were incurred.
1990 AND
TOTAL 1993 1992 1991 PRIOR
-------- ------- ------ ------- --------
(IN THOUSANDS)
Leasehold and seismic.................... $ 82,358 $34,472 $3,739 $37,935 $6,212
Exploration and development.............. 4,634 4,634 -- -- --
International............................ 18,605 18,593 12 -- --
-------- ------- ------ ------- --------
Total.......................... $105,597 $57,699 $3,751 $37,935 $6,212
-------- ------- ------ ------- --------
-------- ------- ------ ------- --------
Capitalized Costs Incurred -- The following table sets forth the
capitalized costs incurred in oil and gas producing activities.
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
-------- -------- ---------
(IN THOUSANDS)
UNITED STATES
Acquisition of proved properties.......................... $242,659 $ 62,955 $ 561,780
Acquisition of unproved properties........................ 14,342 8,226 6,294
Exploration............................................... 16,979 17,074 17,523
Development............................................... 164,839 93,277 74,469
Capitalized interest...................................... 4,764 6,035 4,967
Property sales............................................ (3,255) (37,167) (157,018)
Future operating costs for royalty interest sold.......... -- -- 17,000
-------- -------- ---------
$440,328 $150,400 $ 525,015
-------- -------- ---------
FOREIGN
Acquisition of proved properties.......................... $ 81,942 $ -- $ 6,565
Acquisition of unproved properties........................ -- -- --
Exploration............................................... 18,006 10,091 6,907
Development............................................... -- 1,988 1,406
-------- -------- ---------
$ 99,948 $ 12,079 $ 14,878
-------- -------- ---------
TOTAL
Acquisition of proved properties.......................... $324,601 $ 62,955 $ 568,345
Acquisition of unproved properties........................ 14,342 8,226 6,294
Exploration............................................... 34,985 27,165 24,430
Development............................................... 164,839 95,265 75,875
Capitalized interest...................................... 4,764 6,035 4,967
Property sales............................................ (3,255) (37,167) (157,018)
Future operating costs for royalty interest sold.......... -- -- 17,000
-------- -------- ---------
$540,276 $162,479 $ 539,893
-------- -------- ---------
-------- -------- ---------
- ---------------
Foreign acquisitions in 1993 included $16.8 million of unevaluated costs added
through the merger of HERC.
F-22
51
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Capitalized Costs -- The following table sets forth the capitalized costs
and related accumulated depreciation, depletion and amortization, including
impairments, relating to the Company's oil and gas production, exploration and
development activities.
DECEMBER 31,
--------------------------
1993 1992
----------- -----------
(IN THOUSANDS)
UNITED STATES
Proved properties.................................................. $ 2,390,644 $ 1,962,896
Unproved properties................................................ 86,992 74,413
----------- -----------
2,477,636 2,037,309
Accumulated depreciation, depletion and amortization............... (1,171,227) (1,007,942)
----------- -----------
$ 1,306,409 $ 1,029,367
----------- -----------
FOREIGN
Proved properties.................................................. $ 126,157 $ 33,694
Unproved properties................................................ 18,605 11,119
----------- -----------
144,762 44,813
Accumulated depreciation, depletion and amortization............... (60,216) (29,802)
----------- -----------
$ 84,546 $ 15,011
----------- -----------
TOTAL
Proved properties.................................................. $ 2,516,801 $ 1,996,590
Unproved properties................................................ 105,597 85,532
----------- -----------
2,622,398 2,082,122
Accumulated depreciation, depletion and amortization............... (1,231,443) (1,037,744)
----------- -----------
$ 1,390,955 $ 1,044,378
----------- -----------
----------- -----------
F-23
52
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Oil and Gas Reserve Information -- Proved oil and gas reserve quantities
are based on estimates prepared by the Company's engineers in accordance with
guidelines established by the Securities and Exchange Commission (SEC). The
Company's estimates of proved reserve quantities of its domestic properties and
certain international properties are subject to review by Ryder Scott Company
Petroleum Engineers, independent petroleum engineers. The Company's estimates of
proved reserve quantities of its Western Australia properties held through
Hadson Energy Limited are subject to review by Intera Information Technologies
Inc., independent petroleum engineers.
There are numerous uncertainties inherent in estimating 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.
1993 1992 1991
----------------------------- ----------------------------- -----------------------------
OIL, CONDENSATE AND UNITED UNITED UNITED
NATURAL GAS LIQUIDS STATES FOREIGN TOTAL STATES FOREIGN TOTAL STATES FOREIGN TOTAL
------------------- ------ ------- ------- ------ ------- ------- ------- ------- -------
(THOUSANDS OF BARRELS)
Total proved reserves:
Beginning of year.............. 80,195 464 80,659 79,166 648 79,814 22,740 -- 22,740
Extensions, discoveries and
other additions.............. 10,885 -- 10,885 7,112 -- 7,112 3,463 -- 3,463
Purchases of minerals
in-place..................... 9,871 5,095 14,966 226 -- 226 62,722 858 63,580
Revisions of previous
estimates.................... (3,215) 1,125 (2,090) 7,796 206 8,002 9,032 -- 9,032
Production..................... (12,096) (684) (12,780) (12,199) (390) (12,589) (8,184) (210) (8,394)
Sales of properties............ (1,917) -- (1,917) (1,906) -- (1,906) (10,607) -- (10,607)
------- ------- ------- ------- ------- ------- ------- ------- -------
End of year.................... 83,723 6,000 89,723 80,195 464 80,659 79,166 648 79,814
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
Proved developed reserves:
Beginning of year.............. 72,596 464 73,060 68,573 648 69,221 19,387 -- 19,387
End of year.................... 74,288 5,113 79,401 72,596 464 73,060 68,573 648 69,221
1993 1992 1991
----------------------------------- ------- -------
NATURAL GAS UNITED STATES FOREIGN TOTAL TOTAL TOTAL
----------- ------------- ------- -------- ------- -------
(MILLION CUBIC FEET)
Total proved reserves:
Beginning of year............................................... 643,299 -- 643,299 602,048 500,336
Extensions, discoveries and other additions..................... 119,210 -- 119,210 68,650 47,878
Purchases of minerals-in-place.................................. 174,115 33,343 207,458 68,685 289,760
Revisions of previous estimates................................. (7,335) 1,327 (6,008) 34,042 (20,163)
Production...................................................... (109,312) (1,310) (110,622) (95,982) (104,621)
Sales of properties............................................. (5,118) -- (5,118) (34,144) (111,142)
-------- ------- -------- ------ --------
End of year..................................................... 814,859 33,360 848,219 643,299 602,048
-------- ------- -------- ------ --------
-------- ------- -------- ------ --------
Proved developed reserves:
Beginning of year............................................... 585,424 -- 585,424 549,742 472,777
End of year..................................................... 696,421 24,251 720,672 585,424 549,742
- ---------------
Prior to 1993, all of Apache's natural gas reserves were located in the United
States.
F-24
53
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Future Net Cash Flows -- Future revenues are based on year-end prices
except in those instances where the sale of natural gas is covered by contract
terms providing for determinable escalations. Operating costs, production and ad
valorem taxes and future development costs are based on current costs with no
escalation.
The following table sets forth unaudited information concerning future net
cash flows for oil and gas reserves, net of income tax expense. Income tax
expense has been computed using expected future tax rates and giving effect to
permanent differences and credits which, under current laws, relate to oil and
gas producing activities. This information does not purport to present the fair
market value of the Company's oil and gas assets, but does present a
standardized disclosure concerning possible future net cash flows that would
result under the assumptions used.
DECEMBER 31,
-------------------------------------------
1993 1992 1991
---------- ---------- ---------
(IN THOUSANDS)
UNITED STATES
Cash inflows..................................... $3,062,525 $2,789,334 $2,573,631
Production and development costs................. (1,085,205) (1,045,549) (969,928)
Income tax expense............................... (362,353) (338,177) (302,331)
---------- ---------- ---------
Net cash flows................................... 1,614,967 1,405,608 1,301,372
10-percent annual discount rate.................. (550,887) (542,118) (488,495)
---------- ---------- ---------
Discounted future net cash flows................. 1,064,080 863,490 812,877
---------- ---------- ---------
FOREIGN
Cash inflows..................................... 154,466 9,231 13,656
Production and development costs................. (57,281) (5,903) (6,315)
Income tax expense............................... (24,680) (588) (754)
---------- ---------- ---------
Net cash flows................................... 72,505 2,740 6,587
10-percent annual discount rate.................. (21,209) (26) (261)
---------- ---------- ---------
Discounted future net cash flows................. 51,296 2,714 6,326
---------- ---------- ---------
TOTAL
Cash inflows..................................... 3,216,991 2,798,565 2,587,287
Production and development costs................. (1,142,486) (1,051,452) (976,243)
Income tax expense............................... (387,033) (338,765) (303,085)
---------- ---------- ---------
Net cash flows................................... 1,687,472 1,408,348 1,307,959
10-percent annual discount rate.................. (572,096) (542,144) (488,756)
---------- ---------- ---------
Discounted future net cash flows*................ $1,115,376 $ 866,204 $ 819,203
---------- ---------- ---------
---------- ---------- ---------
- ---------------
* Estimated future net cash flows before income tax expense, discounted 10
percent, totaled approximately $1.36 billion, $1.06 billion and $1.0 billion
as of December 31, 1993, 1992 and 1991, respectively.
F-25
54
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
The following table sets forth the principal sources of change in the
discounted future net cash flows:
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1992 1991
--------- --------- ---------
(IN THOUSANDS)
Sales, net of production costs...................... $(309,229) $(269,215) $(224,548)
Net change in prices and production costs........... (78,162) (23,318) (189,346)
Discoveries and improved recovery, net of related
costs............................................. 205,255 113,467 73,107
Change in future development costs.................. 450 16,913 6,329
Revision of quantities.............................. (29,360) 78,020 43,183
Purchases........................................... 347,860 99,228 528,204
Accretion of discount............................... 106,256 99,797 83,245
Change in income taxes.............................. (47,387) (17,609) 15,825
Sales of properties................................. (3,500) (40,413) (132,123)
Change in production rates and other................ 56,989 (9,869) (22,526)
--------- --------- ---------
$ 249,172 $ 47,001 $ 181,350
--------- --------- ---------
--------- --------- ---------
Impact of Pricing -- The estimates of cash flows and reserve quantities
shown above are based on year-end oil and gas prices, except in those cases
where future gas sales are covered by contracts at specified prices. Estimates
of future liabilities and receivables applicable to oil and gas commodity hedges
are reflected in future cash flows from proved reserves with such estimates
based on prices in effect as of the date of the reserve report. Fluctuations are
largely due to the seasonal pricing nature of natural gas, supply perceptions
for natural gas and significant worldwide volatility in oil prices.
Under SEC rules, companies that follow full cost accounting methods are
required to make quarterly "ceiling test" calculations. Under this test,
capitalized costs of oil and gas properties may not exceed the present value of
estimated future net revenues from proved reserves, discounted at 10 percent,
plus the lower of cost or fair market value of unproved properties, as adjusted
for related tax effects and deferred tax reserves. Application of these rules
during periods of relatively low oil and gas prices, even if of short-term
duration, may result in write-downs.
F-26
55
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL QUARTERLY FINANCIAL DATA
(UNAUDITED)
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1993
Revenues............................ $108,592 $111,270 $122,013 $124,763 $466,638
Expenses, net....................... 97,000 99,775 120,932 111,597 429,304
-------- -------- -------- -------- --------
Net income.......................... $ 11,592 $ 11,495 $ 1,081 $ 13,166 $ 37,334
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income per common share......... $ .24 $ .22 $ .02 $ .22 $ .70
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
1992
Revenues............................ $ 92,195 $131,230 $111,305 $119,570 $454,300
Expenses, net....................... 88,146 107,203 102,829 108,346 406,524
-------- -------- -------- -------- --------
Net income.......................... $ 4,049 $ 24,027 $ 8,476 $ 8,476 $ 47,776
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income per common share......... $ .09 $ .51 $ .18 $ .24 $ 1.02
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
F-27
56
SCHEDULE V
APACHE CORPORATION AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
OIL AND
GAS OTHER TOTAL
PROPERTIES PROPERTY PROPERTY
--------- ------- ---------
(IN THOUSANDS)
BALANCE, DECEMBER 31, 1990............................. $1,379,750 $36,408 $1,416,158
Additions, at cost..................................... 679,911 6,190 686,101
Deduct sales or retirements, at cost................... (140,018) (2,558) (142,576)
--------- ------- ---------
BALANCE, DECEMBER 31, 1991............................. 1,919,643 40,040 1,959,683
Additions, at cost..................................... 199,646 7,386 207,032
Deduct sales or retirements, at cost................... (37,167) (24) (37,191)
--------- ------- ---------
BALANCE, DECEMBER 31, 1992............................. 2,082,122 47,402 2,129,524
Additions, at cost..................................... 543,531 39,171 582,702
Deduct sales or retirements, at cost................... (3,255) (23,826) (27,081)
--------- ------- ---------
BALANCE, DECEMBER 31, 1993............................. $2,622,398 $62,747 $2,685,145
--------- ------- ---------
--------- ------- ---------
F-28
57
SCHEDULE VI
APACHE CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
TOTAL
OIL AND GAS OTHER ACCUMULATED
PROPERTIES -- PROPERTY -- DEPRECIATION
DEPLETION DEPRECIATION AND DEPLETION
----------- ------------ -------------
(IN THOUSANDS)
BALANCE, DECEMBER 31, 1990.............................. $ 739,204 $ 13,598 $ 752,802
Additions charged to income as depreciation and
depletion............................................. 132,748 2,830 135,578
Deduct retirements, renewals and replacements........... -- (73) (73)
----------- ------------ -------------
BALANCE, DECEMBER 31, 1991.............................. 871,952 16,355 888,307
Additions charged to income as depreciation and
depletion............................................. 165,792 3,576 169,368
Deduct retirements, renewals and replacements........... -- (24) (24)
----------- ------------ -------------
BALANCE, DECEMBER 31, 1992.............................. 1,037,744 19,907 1,057,651
Additions charged to income as depreciation and
depletion............................................. 193,699 5,596 199,295
Deduct retirements, renewals and replacements........... -- (8,261) (8,261)
----------- ------------ -------------
BALANCE, DECEMBER 31, 1993.............................. $1,231,443 $ 17,242 $1,248,685
----------- ------------ -------------
----------- ------------ -------------
F-29
58
SCHEDULE X
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
Repairs and maintenance................................... $ 3,937 $ 2,890 $ 3,525
Taxes other than payroll and income taxes:
Production taxes........................................ 21,827 23,803 17,652
Ad valorem taxes........................................ 7,716 10,042 3,631
The amounts of repairs and maintenance to oil and gas operations are
included in operating expenses and are not readily available nor are they
considered material in amount. Other repairs and maintenance are summarized
above. Advertising and royalty expenses and personal property taxes are each
less than one percent of total revenues as reported in the related income
statement.
F-30