<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 June 30, 1995 . . . . . . . . . 69,914,519
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data) For the Quarter For the Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas production revenues $174,519 $134,440 $ 317,708 $259,418
Gathering, processing and marketing revenues 28,356 10,530 51,225 17,294
Equity in income of affiliates - 196 - 291
Other revenues 3,177 1,888 4,837 2,772
-------- -------- -------- ---------
206,052 147,054 373,770 279,775
-------- -------- -------- ---------
OPERATING EXPENSES:
Depreciation, depletion and amortization 78,830 61,969 148,625 122,226
International impairments - 2,800 - 6,300
Operating costs 55,538 35,563 100,517 71,202
Gathering, processing and marketing costs 26,666 9,185 48,127 14,768
Administrative, selling and other 10,421 10,236 20,110 19,523
Merger costs 9,977 - 9,977 -
Financing costs:
Interest expense 25,048 8,984 43,609 16,832
Amortization of deferred loan costs 1,150 965 2,373 1,744
Capitalized interest (4,853) (1,424) (8,435) (2,683)
Interest income (1,020) (352) (1,926) (521)
-------- -------- -------- ---------
201,757 127,926 362,977 249,391
-------- -------- -------- ---------
INCOME BEFORE INCOME TAXES 4,295 19,128 10,793 30,384
Provision for income taxes 3,758 6,221 6,173 9,252
--------- --------- -------- --------
NET INCOME $ 537 $ 12,907 $ 4,620 $ 21,132
========= ========= ======== ========
NET INCOME PER COMMON SHARE $ .01 $ .19 $ .07 $ .30
========= ========= ======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 69,809 69,635 69,741 69,663
========= ========= ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
1
<PAGE> 3
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) For the Six Months
Ended June 30,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,620 $ 21,132
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 148,625 122,226
International impairments - 6,300
Amortization of deferred loan costs 2,373 1,744
Provision for deferred income taxes 19,773 12,252
Cash distributions less than earnings of affiliates - (291)
Gain on sale of stock held for investment (350) (1,464)
Other 77 (234)
Changes in operating assets and liabilities:
Increase in receivables (45,373) (11,572)
Increase in advances to oil and gas ventures and other (969) (3,511)
(Increase) decrease in other assets 941 (2,702)
Increase in accounts payable 5,754 7,551
Increase (decrease) in accrued expenses 9,037 (6,335)
Decrease in advance from gas purchaser (3,316) -
Increase (decrease) in deferred credits and other noncurrent liabilities 47 (4,406)
---------- ----------
Net cash provided by operating activities 141,239 140,690
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures (142,129) (162,781)
Acquisition of oil and gas properties (573,856) (26,965)
Non-cash portion of oil and gas property additions (9,882) 3,047
Proceeds from sale of oil and gas properties 73,196 4,114
Purchase of stock held for investment (305) (14,885)
Prepaid acquisition costs 25,377 -
Proceeds from sale of stock held for investment 5,428 -
Increase in inventory, net (4,121) (613)
Other capital expenditures, net (4,233) (4,156)
--------- ---------
Net cash used by investing activities (630,525) (202,239)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 745,605 92,462
Payments on long-term debt (250,141) (32,338)
Proceeds from issuance of common stock 1,286 2,201
Treasury stock activity (2) (857)
Dividends paid (8,604) (8,536)
Costs of debt transactions (11,582) (875)
--------- ---------
Net cash provided by financing activities 476,562 52,057
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (12,724) (9,492)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 30,043 39,728
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,319 $ 30,236
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
<PAGE> 4
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) June 30, December 31,
1995 1994
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,319 $ 30,043
Receivables 156,848 111,310
Inventories 12,989 8,868
Advances to oil and gas ventures and other 10,366 10,093
---------- ----------
197,522 160,314
---------- ----------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties 3,798,037 3,265,770
Unproved properties and properties
under development, not being amortized 274,164 157,379
Gas gathering, transmission and processing facilities 25,809 25,809
Other 54,014 49,912
---------- ----------
4,152,024 3,498,870
---------- ----------
Less: Accumulated depreciation, depletion and amortization (1,832,946) (1,682,039)
---------- ----------
2,319,078 1,816,831
---------- ----------
OTHER ASSETS:
Deferred charges and other 37,957 59,482
---------- ----------
$2,554,557 $2,036,627
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
<PAGE> 5
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,000 $ 100
Accounts payable 99,365 92,861
Accrued operating expense 20,588 16,722
Accrued exploration and development 15,199 25,077
Accrued interest 10,819 4,983
Accrued compensation and benefits 6,409 10,794
Other accrued expenses 16,631 12,980
---------- ----------
176,011 163,517
---------- ----------
LONG-TERM DEBT 1,207,913 719,033
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT
LIABILITIES:
Income taxes 172,434 151,216
Advances on gas contracts 64,060 67,376
Other 43,597 44,398
---------- ----------
280,091 262,990
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000
shares authorized, 71,033,559 and
70,085,067 shares issued, respectively 88,792 88,482
Paid-in capital 501,033 500,101
Retained earnings 330,715 335,293
Currency translation adjustment (16,544) (19,337)
Treasury stock, at cost, 1,119,040 and
1,118,975 shares, respectively (13,454) (13,452)
--------- ---------
890,542 891,087
---------- ----------
$2,554,557 $2,036,627
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
<PAGE> 6
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) For the Quarter
Ended June 30,
-------------------------------------------
1995 1994
------------ -------------
<S> <C> <C>
RETAINED EARNINGS, beginning of period $ 335,073 $ 310,831
Net income 537 12,907
Dividends declared:
Common stock, $.07 per share (4,895) (4,294)
----------- -----------
RETAINED EARNINGS, end of period $ 330,715 $ 319,444
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
RETAINED EARNINGS, beginning of year $ 335,293 $ 306,892
Net income 4,620 21,132
Dividends declared:
Common stock, $.14 per share (9,198) (8,580)
---------- ----------
RETAINED EARNINGS, end of period $ 330,715 $ 319,444
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
5
<PAGE> 7
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 financial statements.
All such adjustments are of a normal recurring nature. Certain information,
accounting policies, and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented
not misleading. These financial statements should be read in conjunction with
the financial statements and the summary of significant accounting policies
and notes thereto included in the Company's latest annual report on Form 10-K/A.
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
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.
The following table provides additional disclosure of cash payments (in
thousands):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
----------------------------------------
1995 1994
------------------- -------------------
<S> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized) $ 29,433 $ 14,016
Income taxes (net of refunds) 439 429
</TABLE>
6
<PAGE> 8
ACQUISITIONS
On May 17, 1995, Apache acquired DEKALB Energy Company (DEKALB, now known as
DEK Energy Company), an oil and gas company engaged in the exploration for, and
the development of, crude oil and natural gas in Canada, through a merger which
resulted in DEKALB becoming a wholly owned subsidiary of Apache. Pursuant to
the merger agreement, DEKALB shareholders received .8764 shares of Apache
common stock in exchange for each share of DEKALB Class A stock and Class B
stock. As a result, 8.4 million shares of Apache common stock were issued in
exchange for outstanding DEKALB stock and for DEKALB employee stock options.
In connection with the merger, nonrecurring transaction costs totaling
approximately $10 million were charged to expense in the second quarter of
1995.
The merger was accounted for as a "pooling of interests". As a result, the
Company's financial statements for 1995 and prior periods have been restated to
include combined results with DEKALB.
In connection with the DEKALB merger, the methods used by Apache and DEKALB in
computing depreciation, depletion and amortization (DD&A) of proved oil and gas
properties were conformed to the units-of-production method using physical
units. This method was previously used by DEKALB and in conforming the method
used, Apache adopted the units-of-production method in lieu of the future
gross revenue method. The conforming adjustments for DD&A have been reflected
retroactively in the combined financial statements along with an adjustment to
DEKALB's previously recorded deferred tax valuation allowance for U.S.
operating loss carryforwards expected to be utilized by Apache in future
periods. All other adjustments are reclassifications to conform financial
statement presentation. A reconciliation of the previously reported separate
results as compared to the restated combined results is set forth below:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, 1994 June 30, 1994
--------------- -----------------
<S> <C> <C>
(In thousands, except per share data)
Revenues:
Apache $134,947 $256,538
DEKALB 12,107 23,237
-------- --------
$147,054 $279,775
======== ========
Net income (loss):
Apache $ 10,196 $ 19,603
DEKALB 2,416 4,166
Conforming adjustments 295 (2,637)
-------- --------
$ 12,907 $ 21,132
======== ========
Net income (loss) per common share:
Apache $ .17 $ .32
======== ========
DEKALB $ .25 $ .43
======== ========
As combined $ .19 $ .34
Conforming adjustments -- (.04)
======== ========
$ .19 $ .30
======== ========
</TABLE>
7
<PAGE> 9
On March 1, 1995, Apache completed the acquisition of 315 oil and gas fields
from Texaco Exploration and Production Inc. (Texaco) for an adjusted purchase
price of $564 million. The acquisition of the Texaco properties was accounted
for using the purchase method of accounting and was included in the financial
statements of the Company since the date of the acquisition. The following
unaudited pro forma financial information shows the pro forma effect on the
Company's consolidated results of operations as if the acquisition were
effective on January 1, 1994. The pro forma data presented is based on
numerous assumptions and should not necessarily be viewed as being indicative
of future operations.
<TABLE>
<CAPTION>
(In thousands, except per share data)
For the Six Months For the Six Months
Ended June 30, 1995 Ended June 30, 1994
------------------------- -------------------------
As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $373,770 $397,545 $279,775 $361,739
Net income $ 4,620 $ 3,327 $ 21,132 $ 16,417
Net income per common share $ .07 $ .05 $ .30 $ .24
Weighted average common shares
outstanding 69,741 69,741 69,663 69,663
</TABLE>
8
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL RESULTS
Apache reported net income of $.5 million, or $.01 per share, for the second
quarter of 1995 compared to $12.9 million, or $.19 per share, for the same
period last year. Current quarter earnings were reduced by a nonrecurring pre-
tax charge of approximately $10 million associated with Apache's acquisition of
DEKALB Energy Company (DEKALB, now known as DEK Energy Company). The merger
costs reduced 1995 net income by $8.7 million, or $.12 per share. Apache's
results of operations for the quarter were negatively impacted by a 19-percent
decline in gas prices which reduced revenues by $19 million and net income
by $.16 per share.
Earnings for the first six months of 1995 totaled $4.6 million, or $.07 per
share, compared to $21.1 million, or $.30 per share, during the first half of
1994. Lower gas prices compared to a year ago negatively impacted revenues by
$48 million and partially offset the impact of increased oil and gas production
from acquisitions and drilling.
RESULTS OF OPERATIONS
Volume and price information for the Company's 1995 and 1994 second quarter and
first six months oil and gas production is summarized in the followingtables:
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
------------------------- Increase ------------------------- Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gas Volume - Mcf per day:
U.S. 519,147 402,765 29% 502,679 392,820 28%
Canada 73,683 53,057 39% 67,458 52,472 29%
Australia 4,542 3,850 18% 5,329 3,994 33%
-------- -------- -------- -------
Total 597,372 459,672 30% 575,466 449,286 28%
======== ======== ======== ========
Average Gas Price - Per Mcf:
U.S. $ 1.59 $ 1.89 (16%) $ 1.56 $ 1.99 (22%)
Canada 1.02 1.71 (40%) 1.00 1.70 (41%)
Australia 1.87 1.96 (5%) 1.94 1.93 1%
Total 1.52 1.87 (19%) 1.50 1.96 (23%)
Oil Volume - Barrels per day:
U.S. 50,869 32,461 57% 45,334 32,233 41%
Canada 2,061 1,952 6% 2,014 2,035 (1%)
Australia 3,360 2,741 23% 3,217 2,693 19%
-------- -------- -------- -------
Total 56,290 37,154 52% 50,565 36,961 37%
======== ======== ======== ========
Average Oil Price - Per barrel:
U.S. $ 17.36 $ 15.82 10% $ 17.07 $ 14.21 20%
Canada 17.81 16.63 7% 17.26 14.36 20%
Australia 19.16 17.42 10% 19.05 16.91 13%
Total 17.48 15.98 9% 17.20 14.42 19%
NGL Volume - Barrels per day:
U.S. 1,378 1,356 2% 1,470 1,340 10%
Canada 539 687 (22%) 549 669 (18%)
-------- -------- -------- -------
Total 1,917 2,043 (6%) 2,019 2,009 0%
======== ======== ======== ========
NGL Price - Per barrel:
U.S. $ 13.29 $ 12.60 5% $ 13.01 $ 11.83 10%
Canada 9.39 8.10 16% 9.80 8.16 20%
Total 12.19 11.09 10% 12.14 10.61 14%
</TABLE>
9
<PAGE> 11
RESULTS OF OPERATIONS - (CONTINUED)
Oil and gas production revenues for the second quarter and first half of 1995
increased over the prior year by 30 percent and 22 percent, respectively, due to
the March 1, 1995 acquisition of properties from Texaco Exploration and
Production Inc. (Texaco), acquisitions completed by Apache during the fourth
quarter of 1994, and favorable drilling results. The declines in Apache's
second quarter and first half average realized gas price, reflecting
significantly lower spot prices from a year ago, offset further increases in
revenue.
Second quarter gas sales increased to $82.8 million, up six percent from the
same period last year. Apache's second quarter gas production was a record
597.4 MMcfd, an increase of 30 percent from last year. Of the 137.7 MMcfd
increase in U.S. gas production in the second quarter of 1995, 68 MMcfd was a
result of the acquisition of properties from Texaco and 22 MMcfd resulted from
the acquisition of properties from Crystal Oil Company (Crystal) in December
1994. Apache's average natural gas price declined 19 percent from second
quarter 1994 to $1.52 per Mcf, negatively impacting revenues by $19 million.
Gas sales for the first six months of 1995 of $155.8 million declined two
percent compared to the six month period in 1994 as the impact of lower gas
prices more than offset production gains. Apache's production increased 126.2
MMcfd during the first half of 1995 as compared to the same period in 1994. The
28-percent increase in U.S. gas production in the first six month of 1995
resulted largely from the acquisition of properties from Texaco and Crystal. The
volume increase resulted in additional sales of $44.7 million. The Company's
realized gas price of $1.50 per Mcf during the first half of 1995 was $.46 per
Mcf lower than last year's price of $1.96 per Mcf during the same period. The
23-percent drop in the average realized price of gas negatively impacted
sales by $48 million.
Oil sales of $89.6 million for the 1995 second quarter were $35.5 million, or 66
percent, above the previous year as a result of higher production volumes. The
52-percent increase in oil production was primarily due to the acquisition of
Texaco properties, which added 17.7 Mbopd to Apache's second quarter sales. The
total increase in production favorably impacted sales by $27.8 million, while a
$1.50 per barrel increase in realized oil prices compared to 1994 positively
impacted 1995 sales by $7.7 million.
For the first six months of 1995, oil sales increased 63 percent to $157.4
million, compared to $96.4 million for the same period a year ago. In the first
half of 1995, oil production rose 13.6 Mbopd, or 37 percent. Oil revenues were
positively impacted by $25.5 million as a result of a $2.78 per barrel increase
in realized oil prices.
Revenues from the sale of natural gas liquids totaled $2.1 million for the
second quarter and $4.4 million for first half of 1995. Higher natural gas
liquids prices contributed to the $.1 million quarter-to-quarter and $.6
million year-to-year increases in sales as compared to a year ago.
Gathering, processing and marketing revenues of $28.4 million for the second
quarter and $51.2 million for the first half of 1995 were 169 percent and 196
percent, respectively, higher than last year's revenues. Operating margins
increased $.3 million from the second quarter of 1994 and $.6 million from the
first six months of 1994, respectively. The activity reflects increased volumes
of purchase and resale transactions by Apache's oil and gas marketing
subsidiaries. These transactions generally carry a low margin.
Depreciation, depletion and amortization (DD&A) expense of $78.8 million for the
second quarter of 1995 and $148.6 million for the first half of the year,
increased 27 percent and 22 percent, respectively, over the comparable 1994
periods due to increased oil and gas production. Apache's domestic DD&A rate
for the second quarter declined from $5.60 per barrel of oil equivalent (Boe) in
1994 to $5.32 per Boe in 1995 due to the impact of the Texaco acquisition.
Operating costs rose $20 million, or 56 percent, to $55.5 million for the
quarter and $29.3 million, or 41 percent, to $100.5 million year-to-date from
the comparable periods last year due primarily to the impact of Apache's
acquisitions. Operating costs include lifting costs, workover expense,
production taxes and severance taxes. Based on an equivalent unit of
production, operating costs increased 15 percent in the second quarter of 1995
to $3.87 per Boe and eight percent in the first half period to $3.74 per Boe,
respectively. The increase in unit cost reflects the high percentage of oil
properties included in the Texaco transaction, as oil properties typically have
a higher per unit expense than gas properties.
Administrative, selling and other costs in the second quarter of 1995 rose $.2
million, or two percent, from a year ago, while costs for the first half
increased $.6 million, or three percent, due to costs of integrating the Texaco
properties. On a Boe basis, costs for the quarter and first six months dropped
25 percent and 21 percent, respectively, due to increased production from
acquisitions and drilling. In connection with the DEKALB merger, nonrecurring
transaction costs totaling approximately $10 million were charged to expense
in the second quarter of 1995.
10
<PAGE> 12
Net financing costs increased 149 percent for the second quarter of 1995 to
$20.3 million, and 132 percent for the first half of the year to $35.6 million.
The increase in financing costs reflects an increase in debt outstanding and
higher interest rates as compared to last year. Debt increased $496 million
since December 31, 1994 and $687 million since December 31, 1993 as a result of
increased borrowings to fund acquisitions. The increase in interest rates
primarily reflects higher market rates.
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. 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 totaled $142.1 million during the
first half of 1995 compared to $162.8 million during the same period last year.
In the first six months of 1995, Apache completed 68 of 102 gross wells as
producers, while the Company completed 149 of 183 gross wells as producers in
the first half of 1994. While the Company reduced its exploration and
development expenditures from a year ago so that additional cash from operating
activities could be applied to reduce debt, Apache continued to drill in the
Midcontinent, Permian Basin and Gulf of Mexico regions of the United States.
Internationally, the Company continued developmental drilling on the Harriet
prospect in Australia and on the Zhao Dong prospect in the Bohai Bay, People's
Republic of China. Further evaluation is necessary to determine commercial
potential of the discovery offshore China. In Egypt, a third discovery was made
on the Qarun prospect. This discovery, combined with the results of the first
two discoveries, establishes the commerciality of this area of the Qarun
Concession. International exploration and development expenditures totaled
$36.3 million in the first half of 1995 compared to $36.7 million in 1994.
Apache's annual expenditures for exploration and development are expected to
total approximately $275 million for 1995.
Acquisitions for cash during the first half of 1995 totaled $573.9 million as
compared to $27 million for the same period of 1994. On March 1, 1995, Apache
purchased certain oil and gas assets from Texaco for an adjusted purchase price
of $564 million. In addition to the properties acquired for cash during the
first six months of 1995, Apache issued 8.4 million shares of its common stock
to acquire DEKALB in a transaction accounted for as a pooling of interests. See
"Acquisitions" in the Notes to the Consolidated Financial Statements.
CAPITAL RESOURCES AND LIQUIDITY
Apache's primary capital resources are net cash provided by operating
activities, unused borrowing capacity under the Company's revolving bank credit
facility and proceeds from the sale of non-strategic assets. Net cash provided
by operating activities totaled $141 million for the first half of 1995
and 1994.
On January 4, 1995, Apache completed the issuance of $172.5 million principal
amount of its 6-percent Convertible Subordinated Debentures due 2002, which are
convertible into Apache common stock at a conversion price of $30.68 per share.
Net proceeds were used to reduce bank debt, provide finds for acquisition and
general corporate purposes. The 6-percent debentures have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from such registration
requirements. Costs associated with the issue of the 6-percent debentures
totaled $4.1 million.
On March 1, 1995, the Company's revolving bank credit facility was amended and
restated, increasing it from $700 million to $1 billion. The facility matures
on March 1, 2000, and may be extended in one-year increments with the lenders'
consent. Based on the Company's ratio of debt to total capital, the interest
rate margin over LIBOR at June 30, 1995 was 1.125 percent. The Company also
pays a facility fee based on its ratio of debt to total capital. The facility
fee at June 30, 1995 was .375 percent of the available portion of the commitment
and .1875 percent of the unavailable portion of the commitment. As of June 30,
1995, the available portion of the commitment was $831 million, of which $764
million was outstanding. Costs associated with the amendment of the credit
facility totaled $7.2 million. At June 30, 1995, Apache had a total of $1.2
billion in long-term debt outstanding, up $496 million from the end of 1994.
11
<PAGE> 13
During the first half of 1995, Apache received $73.2 million from the
disposition of oil and gas properties as part of its previously announced plans
to sell lower-margin and non-strategic properties. On July 18, 1995, Apache
entered into a purchase and sale agreement to sell certain of its Rocky Mountain
properties to Citation Oil and Gas Corporation for $155 million, subject to
adjustment. The assets being sold include Apache's interest in 138 fields with
approximately 1,600 active wells located in Colorado, Montana, North Dakota,
South Dakota, Utah and Wyoming.
The Company had $17.3 million in cash equivalents on hand at June 30, 1995, down
from $30 million at the end of 1994. The Company's ratio of current assets to
current liabilities at quarter-end 1995 of 1.1:1 was improved from year-end
1994 when the ratio was 1:1.
Management believes that cash on hand, net cash provided by operating
activities, and unused available borrowing capacity under the revolving bank
credit facility of $67 million at June 30, 1995, will be adequate to meet future
liquidity needs for the next two fiscal years, including satisfaction of the
Company's financial obligations and funding of exploration and development
operations and routine acquisitions.
FUTURE TRENDS
The Company plans to continue with implementation of several strategic
initiatives designed to accelerate the integration of acquired properties,
streamline operations and strengthen its balance sheet. As previously
announced, Apache plans to accelerate the disposition of non-strategic assets,
and to close the Denver, Colorado office in 1995. The proceeds from property
dispositions, including the sale of a substantial portion of Apache's Rocky
Mountain properties, will be used to reduce debt.
Apache has continually followed a practice of expanding and upgrading its
reserves through a combination of exploratory and development drilling,
workovers and recompletions and upgrading its production base by disposing of
lower-margin and non-strategic properties. Apache will continue to review
acquisition opportunities which are additive to earnings and cash flow, and
to review its capital structure to maximize shareholders' return and maintain
financial flexibility.
12
<PAGE> 14
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 Form 10-K/A for the year ended December 31, 1994
(filed with the Securities and Exchange Commission on August 2, 1995) 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
The Company's annual meeting of stockholders was held in Houston, Texas at
10:00 a.m. local time, on Thursday, May 4, 1995. Proxies for the meeting were
solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934,
as amended. There was no solicitation in opposition to the nominees for
election as directors as listed in the proxy statement, and all nominees were
elected.
Out of a total of 61,449,873 shares of the Company's common stock outstanding
and entitled to vote, 53,472,648 shares were present at the meeting in person
or by proxy, representing approximately 87 percent. Matters voted upon at
the meeting were as follows:
a) Election of five directors to serve on the Company's board of
directors until the 1998 annual meeting of stockholders. The vote
tabulation with respect to each nominee was as follows:
<TABLE>
<CAPTION>
Nominee For Authority Withheld
------------------------ ---------- ------------------
<S> <C> <C>
G. Steven Farris 53,229,658 242,990
Eugene C. Fiedorek 53,247,884 224,764
W. Brooks Fields 53,164,773 307,875
Raymond Plank 53,221,213 251,435
Jay A. Precourt 53,242,145 230,503
</TABLE>
b) Adoption of the Company's 1995 Stock Option Plan was approved by a
vote of 50,044,837 shares for, 3,063,525 shares against, 364,285
abstentions, and zero broker non-votes.
A special meeting of the stockholders of DEKALB Energy Company (DEKALB, now DEK
Energy Company) was held in Calgary, Alberta, Canada at 9:00 a.m. local time, on
Wednesday, May 17, 1995. Proxies for the meeting were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934, as amended.
Out of a total of 2,258,198 shares of DEKALB Class A stock outstanding and
entitled to vote, 1,943,671 were present at the meeting in person or by proxy,
representing approximately 86 percent.
At the meeting, the DEKALB stockholders approved the proposal to approve and
adopt the Amended and Restated Agreement and Plan of Merger, dated December 21,
1994, pursuant to which DEKALB would, upon consummation of the merger described
therein, be the survivor and become a wholly-owned subsidiary of Apache. The
vote tabulation with respect to the proposal was 1,938,933 shares for, 2,257
shares against, 2,481 abstentions, and zero broker non-votes. The merger was
consummated on May 17, 1995 following the special meeting of DEKALB
stockholders.
13<PAGE> 15
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Computation of Earnings per Share.
27.1 Financial Data Table.
(b) Reports filed on Form 8-K.
The following current reports were filed during the fiscal
quarter ended June 30, 1995:
Form 8-K and Amendment No. 1 on Form 8-K/A, each dated May 17, 1995 -
Item 2. Acquisition or Disposition of Assets - Registrant
completed a merger through which DEKALB Energy Company
(DEKALB, now DEK Energy Company) became a wholly owned
subsidiary of Apache.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits - Relating to the DEKALB transaction, Apache
filed (i) the Consolidated Financial Statements of DEKALB, for
the years ended December 31, 1992, 1993 and 1994; (ii) the
Consolidated Financial Statements of DEKALB, for the quarters
ended March 31, 1995 and 1994; (iii) the Unaudited Pro Forma
Consolidated Condensed Statement of Operations of Apache
Corporation and Subsidiaries, for the years ended December 31,
1992, 1993 and 1994, and for the quarter ended March 31, 1995;
and (iv) the Unaudited Pro Forma Consolidated Condensed
Balance Sheet of Apache Corporation and Subsidiaries, as of
March 31, 1995.
Form 8-K, dated June 30, 1995 -
Item 5. Other Events - Registrant reported earnings for the
second quarter of 1995, and for the first six months of 1995,
which included post-merger (since May 17, 1995) results of
operations combined with DEKALB.
14<PAGE> 16
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
Dated: August 14, 1995 /s/ Mark A. Jackson
------------------------------
Mark A. Jackson
Vice President, Finance
Dated: August 14, 1995 /s/ R. Kent Samuel
------------------------------
R. Kent Samuel
Controller and Chief Accounting Officer
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
11.1 Computation of Earnings per Share
27.1 Financial Data Table
</TABLE>
<PAGE> 1
EXHIBIT 11.1
APACHE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
1995 1994 1995 1994
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted Average Calculation:
-----------------------------
Net income $ 537 $ 12,907 $ 4,620 $ 21,132
========== ========== =========== ===========
Weighted average common shares outstanding 69,809 69,635 69,741 69,663
========== ========== =========== ===========
Net income per share,
based on weight average common
shares outstanding $ .01 $ .19 $ .07 $ .30
========== ========== =========== ===========
Primary Calculation:
--------------------
Net income $ 537 12,907 $ 4,620 $ 21,132
Assumed conversion of
3.93-percent debentures 534 532 1,083 1,063
---------- ---------- ----------- -----------
Net income, as adjusted $ 1,071 $ 13,439 $ 5,703 $ 22,195
========== ========== =========== ===========
Common Stock Equivalents:
Weighted average common shares
outstanding 69,809 69,635 69,741 69,663
Stock options, using the treasury stock
method of accounting 116 236 116 236
Assumed conversion of 3.93-percent
debentures 2,778 2,778 2,778 2,778
---------- ---------- ----------- -----------
72,703 72,649 72,635 72,677
========== ========== =========== ===========
Net income per common share primary $ .01 $ .19 $ .07 $ .30
========== ========== =========== ===========
</TABLE>
The assumed conversion of the 6-percent convertible subordinated debentures due
2002 would be anti-dilutive for the second quarter and first six months of
1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
APACHE CORPORATION AND SUBSIDIARIES
FINANCIAL DATA TABLE
PURSUANT TO ARTICLE 5 OF REGULATION S-X
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 17,319
<SECURITIES> 0
<RECEIVABLES> 156,548
<ALLOWANCES> 0
<INVENTORY> 12,989
<CURRENT-ASSETS> 197,522
<PP&E> 4,152,024
<DEPRECIATION> (1,832,946)
<TOTAL-ASSETS> 2,554,557
<CURRENT-LIABILITIES> 176,011
<BONDS> 1,207,913
<COMMON> 88,792
0
0
<OTHER-SE> 801,750
<TOTAL-LIABILITY-AND-EQUITY> 2,554,557
<SALES> 317,708
<TOTAL-REVENUES> 373,770
<CGS> 244,507
<TOTAL-COSTS> 297,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,056
<INCOME-PRETAX> 10,793
<INCOME-TAX> 6,173
<INCOME-CONTINUING> 4,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,620
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
