PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
(In thousands, except per share data) For the Three Months
Ended March 31,
----------------------------
1994 1993
---------- ----------
REVENUES:
Oil and gas production revenues $ 114,207 $ 101,750
Gathering, processing and marketing revenues 6,764 6,070
Equity in income of affiliates 95 270
Other revenues 525 502
---------- ----------
121,591 108,592
---------- ----------
OPERATING EXPENSES:
Depreciation, depletion and amortization 51,297 38,779
International impairments 3,500 3,600
Operating costs 33,149 29,272
Gathering, processing and marketing costs 5,583 4,371
Administrative, selling and other 8,555 8,758
Financing costs:
Interest expense 6,531 7,927
Amortization of deferred loan costs 763 1,041
Capitalized interest (1,021) (1,365)
Interest income (43) (140)
---------- ----------
108,314 92,243
---------- ----------
INCOME BEFORE INCOME TAXES 13,277 16,349
Provision for income taxes 3,870 4,757
---------- ----------
NET INCOME $ 9,407 $ 11,592
========== ==========
NET INCOME PER COMMON SHARE $ .15 $ .24
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 61,164 47,525
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of this statement.<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands) For the Three Months
Ended March 31,
---------------------------
1994 1993
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,407 $ 11,592
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 51,297 38,779
International impairments 3,500 3,600
Amortization of deferred loan costs 763 1,041
Provision for deferred income taxes 5,370 4,757
--------- ---------
70,337 59,769
Cash distributions less than earnings
of affiliates (95) (282)
Changes in operating assets and liabilities:
Increase in receivables (5,677) (8,918)
(Increase) decrease in advances to oil and
gas ventures and other 598 (401)
Increase in deferred charges and other (384) (596)
Decrease in payables (2,051) (20,528)
Decrease in accrued operating costs (7,288) (15,936)
Increase in deferred credits and
other noncurrent liabilities 974 535
--------- ---------
Net cash provided by operating activities 56,414 13,643
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures (68,661) (42,468)
Acquisition of oil and gas properties (4,489) (13,888)
Non-cash portion of net oil and gas property
additions (2,533) 2,288
Purchase of HERC stock and other (14,885) -
Proceeds from sale of oil and gas properties - 2,398
Proceeds from sale of gas gathering system - 32,201
Increase in inventory, net (158) (477)
Other capital expenditures (1,547) (18,831)
--------- ---------
Net cash used in investing activities (92,273) (38,777)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 44,456 30,652
Payments on long-term debt (5,260) (86,858)
Proceeds from issuance of common stock, net 1,124 131,893
Dividends paid (4,268) (3,286)
--------- ---------
Net cash provided by financing activities 36,052 72,401
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 193 47,267
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 17,064 26,127
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,257 $ 73,394
========= =========
The accompanying notes to consolidated financial statements
are an integral part of this statement.<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands) March 31, December 31,
1994 1993
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,257 $ 17,064
Receivables 97,517 91,840
Inventories 7,310 7,152
Advances to oil and gas ventures and other 6,286 6,884
------------ ------------
128,370 122,940
------------ ------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full
cost accounting:
Proved properties 2,582,030 2,516,801
Unproved properties and properties
under development, not being amortized 113,517 105,597
Gas gathering, transmission and
processing facilities 25,809 25,809
Other 38,214 36,938
------------ ------------
2,759,570 2,685,145
Less: Accumulated depreciation,
depletion and amortization (1,302,982) (1,248,685)
------------ ------------
1,456,588 1,436,460
------------ ------------
OTHER ASSETS:
Investment in affiliate 5,772 5,677
Deferred charges and other 27,723 27,330
------------ ------------
33,495 33,007
------------ ------------
$ 1,618,453 $ 1,592,407
============ ============
The accompanying notes to consolidated financial statements
are an integral part of this statement.<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands) March 31, December 31,
1994 1993
----------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 8,858 $ 9,017
Accounts payable 102,453 118,447
Accrued operating expense 14,448 17,371
Accrued exploration and development 12,550 15,083
Accrued interest 5,153 2,010
Accrued income taxes 4,543 6,048
Accrued compensation and benefits 3,721 9,170
Other accrued expenses 7,820 8,244
------------ ------------
159,546 185,390
------------ ------------
LONG-TERM DEBT 492,364 453,009
------------ ------------
DEFERRED CREDITS AND OTHER NONCURRENT
LIABILITIES:
Income taxes 133,794 128,554
Advances on gas contracts 3,914 3,914
Future operating costs for royalty
interest sold 9,680 10,389
Other 26,980 25,297
------------ ------------
174,368 168,154
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000
shares authorized, 62,352,490 and
62,334,241 shares issued, respectively 77,941 77,918
Paid-in capital 540,490 540,155
Retained earnings 187,316 182,195
Treasury stock, at cost, 1,128,937 and
1,248,827 shares, respectively (13,572) (14,414)
------------ ------------
792,175 785,854
------------ ------------
$ 1,618,453 $ 1,592,407
============ ============
The accompanying notes to consolidated financial statements
are an integral part of this statement.<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF RETAINED EARNINGS
(Unaudited)
(In thousands) For the Three Months
Ended March 31,
---------------------------
1994 1993
--------- ---------
Retained earnings, beginning of period $ 182,195 $ 160,763
Net income 9,407 11,592
Dividends declared:
Common stock, $.07 per share (4,286) (3,694)
--------- ---------
Retained earnings, end of period $ 187,316 $ 168,661
========= =========
The accompanying notes to consolidated financial statements
are an integral part of this statement.<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments
which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods, on a basis
consistent with the annual audited statements. All such adjustments
are of a normal recurring nature. Certain information, accounting
policies, and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial
statements should be read in conjunction with the financial
statements and the summary of significant accounting policies and
notes thereto included in the Company's latest annual report on Form
10-K.
INCOME TAXES
Under the liability method specified by Statement of Financial
Accounting Standards No. 109, deferred taxes are determined based on
the estimated future tax effect of differences between the financial
statement and tax bases of assets and liabilities given the
provisions of enacted laws.
INCOME PER SHARE
Primary income per common share was calculated by dividing net
income by the weighted average common shares outstanding. The
effect of common stock equivalents, including shares issuable upon
the exercise of stock options (calculated using the treasury stock
method) and upon the assumed conversion of the Company's 3.93
percent convertible notes, was not significant or was anti-dilutive
for all periods presented.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the Three Months
Ended March 31,
--------------------
(In thousands) 1994 1993
-------- --------
Cash paid during the period for:
Interest (net of amounts capitalized) $ 2,632 $ 10,154
Income taxes (net of refunds) $ (53) $ 325
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
These investments are carried at cost which approximates market.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------
Financial Results
- - -----------------
Apache reported first quarter 1994 earnings of $9.4 million, or $.15
per share, on total revenues of $121.6 million. During the
comparable 1993 period, Apache realized net income of $11.6 million,
or $.24 per share, on total revenues of $108.6 million. The
significant factor that contributed to lower earnings was a 30-
percent decline in oil prices from a year ago. The first quarter's
1994 financial performance was impacted by the following items:
Acquisitions:
During the second half of 1993, Apache completed acquisitions which
impacted most aspects of the Company's financial statements.
Hall-Houston - Apache acquired substantially all of Hall-
Houston Oil Company's (Hall-Houston) producing properties in
the Gulf of Mexico for $84.4 million and Hall-Houston's
interest in Mustang Island 787 and 805 for $29.3 million. The
two transactions included interests in 63 producing fields and
12 fields under development or awaiting pipeline connections.
HERC - Apache purchased Hadson Energy Resources Corporation
(HERC) for approximately $98 million through a series of
privately negotiated transactions and a merger approved with
an affirmative vote by 66 2/3 percent of the HERC stockholders
other than Apache. In addition to its domestic and foreign
proved properties, HERC held a 22.5 percent interest in a 60-
mile, offshore pipeline and an interest in over 6 million
gross (2.5 million, net) acres in the Carnarvon Basin located
offshore Western Australia.
Oil and Gas Production and Pricing:
With posted oil prices declining since mid-1993 in response to
OPEC's failure to reduce its production quotas, Apache's average
realized oil price dropped by $5.58 per barrel from the first
quarter of 1993. The 30-percent decline in price, after considering
amortization expense and income taxes, negatively impacted Apache's
first quarter earnings by approximately $.11 per share.
A five percent increase in the average gas prices combined with an
increase in production, due mainly to the acquisition of the Hall-
Houston and HERC properties, contributed to a 50-percent increase in
gas revenues.
<PAGE>
Results of Operations
- - --------------------- For the Three Months
Ended March 31,
Selected Oil and Gas --------------------
Operating Statistics 1994 1993
- - -------------------- -------- --------
Oil Volume - Barrels per day:
Domestic 32,003 30,844
Foreign 2,644 374
-------- --------
Total 34,647 31,218
Average Oil Price - Per barrel $ 12.85 $ 18.43
Gas Volume - Mcf per day:
Domestic 382,764 271,004
Foreign 4,139 -
-------- --------
Total 386,903 271,004
Average Gas Price - Per Mcf $ 2.09 $ 1.99
Natural Gas Liquids (NGL) - Barrels per day 1,323 1,269
NGL Price - Per barrel $ 11.03 $ 12.71
Domestic Full Cost Amortization Rate 43.1% 36.9%
Oil and gas production revenues for the first quarter of 1994
totaled $114.2 million, up 12 percent from the same period last
year. A 30-percent increase in equivalent production and five-
percent improvement in gas prices more than offset the impact of
lower oil prices on revenues from a year ago.
Higher production, reflecting both acquisitions and drilling, and a
$.10 per thousand cubic feet (Mcf) increase in Apache's average gas
price from a year ago contributed to first quarter natural gas sales
rising to $72.8 million. Gas sales for the quarter were up $24.4
million, or 50 percent, from last year's sales. The HERC and Hall-
Houston acquisitions added a total of 79 million cubic feet per day
(MMcfd) to Apache's first quarter production for a total of 386.9
MMcfd. Developmental drilling and recompletions in Matagorda Island
properties in the Gulf of Mexico and the Permian Basin also
increased the Company's production by 41 MMcfd. Spot market gas
prices continued to rise as cold weather in the northeastern United
States and a reduction in volumes available from gas storage
facilities increased the demand for natural gas. The five-percent
increase over the prior year in Apache's average price of natural
gas to $2.09 per Mcf favorably impacted 1994 sales by $3.6 million.
First quarter oil sales of $40.1 million declined $11.7 million, or
23 percent, from the comparable period in 1993 as a result of lower
oil prices. With a decline in posted prices and the expiration of
a hedging agreement on certain oil production acquired from Amoco in
1991, Apache's average oil price declined from $18.43 in the first<PAGE>
quarter of 1993 to $12.85 in the current period. A 3,429 barrels
per day (Bopd) increase in Apache's daily oil production from a year
ago partially offset the $17.4 million revenue decrease attributable
to lower prices. Apache's first quarter oil production rose to
34,647 Bopd, with 4,600 Bopd coming from the HERC and Hall-Houston
acquisitions. These increases in production were partially offset
by Grant Canyon wells watering-out.
Revenues from the sale of natural gas liquids and sulfur for the
first quarter of 1994 totaled $1.3 million. Lower natural gas
liquid prices contributed to the $.2 million decline from a year ago
as lower crude oil prices depressed gas liquid prices.
First quarter gathering, processing and marketing revenues of $6.8
million were up 11 percent from the comparable period in 1993 while
the operating margin decreased by $.5 million. The first quarter of
1993 included results of operations from Apache's interest in a
western Oklahoma gathering system and processing plant which was
sold effective March 31, 1993. This gathering and processing
operation required a greater investment and generated a higher
operating margin relative to sales than Apache's current oil and gas
marketing activities.
Depreciation, depletion and amortization (DD&A) expense for the
first quarter of 1994 totaled $51.3 million compared to $38.8
million a year ago, a 32-percent increase. DD&A expense for
domestic oil and gas properties rose as a result of an increase in
oil and gas sales and an increase in Apache's domestic amortization
rate, expressed as a percentage of sales, from 36.9 percent in 1993
to 43.1 percent in 1994. Lower oil prices from a year ago and the
higher costs associated with the acquisition of offshore properties,
combined to increase Apache's domestic rate for the first quarter of
1994. Higher costs for offshore reserves reflect Apache's
expectations of more rapid payouts associated with generally shorter
reserve lives found in Gulf of Mexico properties.
Reflecting the impact of acquisitions, operating costs for the first
quarter of 1994 rose 13 percent from a year ago to $33.1 million.
Operating costs include lifting costs, workover expense, production
taxes and severance taxes. Based on an equivalent unit of
production, operating costs declined 13 percent in 1994 to $3.72 per
barrel of oil equivalent (boe). The unit cost decline reflects
continued cost savings efforts and the addition of offshore
properties which are not subject to production taxes and
traditionally have lower unit lifting costs.
First quarter administrative, selling and other costs declined two
percent in total from a year ago, while dropping 24 percent on a Boe
basis. Apache has assimilated the HERC and Hall-Houston
acquisitions with minimal increases in administrative staff.
Net financing costs for the quarter declined $1.2 million, or 17
percent, from the first quarter of 1993. The $1.2 million reduction
in net financing costs was largely attributable to replacing the
$150 million of 7 1/2 percent debentures with bank debt accruing
interest at approximately 4.2 percent. The $150 million of
debentures converted to equity was subsequently replaced with bank<PAGE>
debt drawn to fund acquisitions. Due to the replacement of the 7
1/2 percent debentures with bank debt, Apache's average interest
rate declined from approximately 6.1 percent in the first quarter of
1993 to approximately 5.1 percent in the current period.
Liquidity and Capital Resources
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. Apache budgets its capital
expenditures based upon projected cash flows and 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 $68.7
million for the first quarter of 1994 from $42.5 million during the
comparable period last year. Apache has completed 55 producing
wells out of 64 gross domestic wells drilled this year. This
compares to 35 wells completed out of 49 gross domestic wells
drilled during the first quarter of 1993. At the end of March 1994,
there were another 30 wells in various stages of drilling with
results expected by mid-year.
Apache's acquisitions in the first quarter of 1994 were relatively
small at $4.5 million as compared to $13.9 million in 1993. The
acquisitions were primarily purchases of additional working interest
in existing Apache properties.
Other capital expenditures for 1994 were $1.5 million as compared to
$18.8 million in 1993. The 1993 expenditures included the purchase
of NGC's interest in the western Oklahoma gas gathering system which
was subsequently sold in a transaction discussed under Capital
Resources.
The purchase of HERC stock largely reflects cash payments for HERC
common stock which had not been tendered to Apache as of December
31, 1993. The shares were accrued as a cost of the HERC acquisition
in 1993.
Capital Resources
Apache's primary capital resources are net cash provided by
operating activities, unused borrowing capacity under the Company's
revolving bank credit facility, proceeds from other financing
activities and proceeds from the sale of non-strategic assets. Net
cash provided by operating activities totaled $56.4 million during
the first quarter of 1994 compared to $13.6 million for the same
period last year. The 314-percent improvement in cash flows
primarily reflects increased gas production, higher gas prices and
reduced interest costs from a year ago. In addition, 1993 net cash
provided by operating activities was reduced by $20.1 million for
the repayment of advances on gas contracts.
In March 1993, Apache and NGC completed the sale of their respective
interest in a gas gathering system in western Oklahoma. Apache<PAGE>
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. The sale price approximated the net book
value of the interests sold.
Also in March 1993, Apache completed the public offering of
approximately 5.8 million shares of common stock for net proceeds of
$131.8 million. In April 1993, Apache applied the proceeds of the
equity offering to repay all outstanding debt under the revolving
bank credit. As of March 31, 1994, the Company had reborrowed $282
million, largely to fund the purchase of Hall-Houston properties and
the HERC acquisition.
During the quarter, Apache increased its outstanding debt by $39.2
million to fund the purchase of the outstanding HERC common stock
and other working capital requirements.
Liquidity
The Company had $17.2 million in cash equivalents on hand at March
31, 1994, up slightly from the $17.1 million at the end of 1993.
The Company's ratio of current assets to current liabilities at
year-end of .8:1 was virtually unchanged from year-end 1993.
Management believes that cash on hand, net cash generated from
operations and unused available borrowing capacity under the
revolving credit facility of $118 million at March 31, 1994 will be
adequate to meet future liquidity needs for 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 in the
process of amending its bank credit facility. The size of the
facility is expected to increase from $400 million to $700 million,
subject to borrowing base availability. The current borrowing base
is expected to increase from $400 million to $450 million. These
increases will enhance Apache's ability to pursue growth
opportunities. Spot market natural gas prices remain volatile and
continue to behave independent of historical seasonal patterns.
Spot market oil prices, which are especially vulnerable to complex
and unpredictable political and economic forces, have improved since
the end of the first quarter 1994, but are expected to remain
volatile.
<PAGE>
PART II. - OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS
- - --------------------------
The information set forth in Note 8 to the Consolidated
Financial Statements contained in the registrant's 1993 Form
10-K filed March 28, 1994, is incorporated herein by
reference.
ITEM 2. CHANGES IN SECURITIES
- - ------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- - ----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- - --------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
a. Exhibits.
11.1 Computation of Earnings per Share.
b. Reports filed on Form 8-K.
None.
<PAGE>
EXHIBIT 11.1
APACHE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
For the Three Months Ended
March 31, 1994
--------------------------
Fully
Primary Diluted
-------- --------
Net income $ 9,407 $ 9,407
Assumed reduction of interest expense upon
conversion of $75 million 3.93% convertible
notes, net of tax 539 539
-------- --------
Net income, as adjusted $ 9,946 $ 9,946
======== ========
Weighted average common shares outstanding 61,164 61,164
Stock options: common stock equivalents
outstanding using the treasury stock method 662 662
Common shares issuable upon assumed conversion
of 3.93% notes 2,778 2,778
-------- --------
Common shares outstanding, as adjusted 64,604 64,604
======== ========
Earnings per share $ .15 $ .15
======== ========
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 1-4300
------------
APACHE CORPORATION
- - --------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-0747868
- - ------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 100, One Post Oak Central
2000 Post Oak Boulevard, Houston, TX 77056-4400
- - -----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 296-6000
----------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X . NO .
----- ------
Number of shares of Apache Corporation common stock, $1.25 par
value, outstanding as of March 31, 1994. . . .. . . . . . . .61,223,553
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereto
duly authorized.
APACHE CORPORATION
Dated: May 13, 1994 /S/ Mark A. Jackson
----------------------
Mark A. Jackson
Vice President and
Chief Accounting Officer
Dated: May 13, 1994 /S/ R. Kent Samuel
-----------------------
R. Kent Samuel
Controller
