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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 24, 1996
APACHE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-4300 41-0747868
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
2000 POST OAK BOULEVARD
SUITE 100
HOUSTON, TEXAS 77056-4400
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (713) 296-6000
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ITEM 5. OTHER EVENTS
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING INFORMATION
Apache Corporation and its subsidiaries and affiliates (collectively,
the "Company"), from time to time, issues written and/or oral statements that
may contain forward-looking information, including projections, estimates,
forecasts, plans and objectives. In considering such statements, the
investment community should be aware of the following risk factors to which the
Company has been subject in the past, is currently and may in the future be
subject and which could materially adversely affect the performance of the
Company. The Company also cautions the investment community that such
statements and information are based on management's beliefs as well as on
assumptions made by and information currently available to management. When
used in such statements, the words "project," "anticipate," "intend," "plan,"
"believe," "estimate" and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions.
As required by and in reliance upon the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 (the "Act"), as set forth
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, the Company identifies the
following factors that could cause the Company's future results (including net
earnings and cash flow and oil and gas reserves and production) and stockholder
values to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company.
1. Reserves; Rates of Production; Development Expenditures; Cash Flow.
(a) Generally. There are numerous uncertainties
inherent in estimating quantities of oil and natural gas reserves of
any category and in projecting future rates of production and timing
of development expenditures which underlie such reserve estimates,
including many factors beyond the control of the Company. Reserve
data represents only estimates. In addition, the estimates of future
net cash flows from proved reserves of the Company and the present
value thereof are based upon various assumptions about future
production levels, prices and costs that may prove to be incorrect
over time (see below). Any significant variance from the assumptions
could result in the actual quantity of the Company's reserves and
future net cash flows therefrom being materially different from the
estimates. In addition, the Company's estimated reserves may be
subject to downward or upward revision based upon production history,
results of future exploration and development, prevailing oil and gas
prices, operating and development costs and other factors. The rate
of production from oil and gas properties declines as reserves are
depleted. Except to the extent that the Company acquires additional
properties containing proved reserves, conducts successful exploration
and development activities or, through engineering studies, identifies
additional behind-pipe zones or secondary recovery reserves, the
proved reserves of the Company will decline materially as reserves are
produced. Future oil and gas production
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is, therefore, highly dependent upon the Company's level of success in
acquiring or finding additional reserves.
(b) Proved Reserves; Ceiling Test. The Company's
proved reserve estimates are based upon the Company's analysis of oil
and gas reserves which meet the definition of "proved" under the
Securities and Exchange Commission ("SEC") rules. The Company
periodically reviews the carrying value of its oil and gas properties
under the full cost accounting rules of the SEC. Under such rules,
capitalized costs of oil and gas properties on a country-by-country
basis may not exceed the present value of estimated future net cash
flows from proved reserves, discounted at 10%, plus the lower of cost
or fair market value of unproved properties as adjusted for related
tax effects. At the end of each fiscal quarter, the test is applied
using unescalated prices in effect at the applicable time and may
result in a write-down if the "ceiling" is exceeded, even if prices
decline for only a short period of time. A deterioration of oil or
gas prices could result in the Company recording a noncash charge to
earnings related to its oil and gas properties at the end of a fiscal
quarter or year. The SEC's rules permit the exclusion of capitalized
costs and present value of recently acquired properties in performing
ceiling test calculations. Pursuant to these rules, the Company
occasionally requests and receives from the SEC one-year waivers with
respect to recently acquired properties. Under these waivers, if the
ceiling is exceeded, the Company is permitted to perform an additional
ceiling test calculation excluding the capitalized costs and present
value of recently acquired properties and is only required to record a
write-down of carrying value if the ceiling is still exceeded. If a
write-down is required, it would result in a one-time charge to
earnings but would not impact net cash flow from operating activities.
2. Prices. The Company continually analyzes, forecasts
and updates its estimates of energy prices for its internal use in
planning, budgeting, and valuation and reserve estimates. The
Company's future financial condition and results of operations will
depend upon the prices received for the Company's oil and natural gas
production and the costs of acquiring, finding, developing and
producing reserves. Prices for oil and natural gas are subject to
fluctuations in response to relatively minor changes in supply, market
uncertainty and a variety of additional factors that are beyond the
control of the Company. These factors include worldwide political
instability (especially in the Middle East and other oil-producing
regions), the foreign supply of oil and gas, the price of foreign
imports, the level of consumer product demand, government regulations
and taxes, the price and availability of alternative fuels and the
overall economic environment. A substantial or extended decline in
oil and gas prices would have a material adverse effect on the
Company's financial position, results of operations, quantities of oil
and gas that may be economically produced and access to capital. In
addition, the sale of the Company's oil and gas production depends
upon a number of factors beyond the Company's control, including the
availability and capacity of transportation and processing facilities.
Oil and natural gas prices have historically been and are likely to
continue to be volatile. Such volatility makes it difficult to
estimate the value of producing properties in acquisitions and to
budget and project the return on exploration and development projects
involving the Company's oil and gas
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properties. In addition, unusually volatile prices often disrupt the
market for oil and gas properties, as buyers and sellers have more
difficulty agreeing on the purchase price of properties.
3. Hedging. The Company engages in hedging activities
with respect to some of its projected oil and gas production through a
variety of financial arrangements designed to protect against price
declines, including swaps, collars and futures agreements. To the
extent that the Company engages in such activities, it may be
prevented from realizing the benefits of price increases above the
levels of the hedges. In addition, the Company is subject to basis
risk when it engages in hedging transactions, particularly where
transportation constraints restrict the Company's ability to deliver
oil and gas volumes to the delivery point to which the hedging
transaction is indexed.
4. Acquisition Risks. The Company intends to continue
acquiring oil and gas properties. Although the Company performs a
review of the acquired properties that it believes is consistent with
industry practices, such reviews are inherently incomplete. It
generally is not feasible to review in depth every individual property
involved in each acquisition. Ordinarily, the Company will focus its
review efforts on the higher-value properties and will sample the
remainder. However, even a detailed review of records and properties
may not necessarily reveal existing or potential problems, nor will it
permit a buyer to become sufficiently familiar with the properties to
assess fully their deficiencies and potential. Inspections may not
always be performed on every well, and environmental problems, such as
ground water contamination, are not necessarily observable even when
an inspection is undertaken. Even when problems are identified, the
Company often assumes certain environmental and other risks and
liabilities in connection with acquired properties. There are
numerous uncertainties inherent in estimating quantities of proved oil
and gas reserves and actual future production rates and associated
costs with respect to acquired properties, and actual results may vary
substantially from those assumed in the estimates (see above). In
addition, there can be no assurance that acquisitions will not have an
adverse effect upon the Company's operating results, particularly
during the periods in which the operations of acquired businesses are
being integrated into the Company's ongoing operations.
5. Operating Risks; Insurance. Exploration for and
production of oil and natural gas can be hazardous, involving
unforeseen occurrences such as blowouts, cratering, fires and loss of
well control, which can result in damage to or destruction of wells or
production facilities, injury to persons, loss of life or damage to
property or the environment. The Company maintains insurance against
certain losses or liabilities arising from its operations in
accordance with customary industry practices and in amounts that
management believes to be prudent. However, insurance is not
available to the Company against all operational risks, and the
occurrence of a significant event that is not fully insured could have
a material adverse effect on the Company's financial position and
results of operations.
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6. Competition. The oil and gas industry is highly
competitive. As an independent oil and gas company, the Company
frequently competes for reserve acquisitions, exploration leases,
licenses, concessions and marketing agreements against companies
having substantially larger financial and other resources than the
Company possesses. To the extent the Company's capital budget is
lower than that of certain of its competitors, the Company may be
disadvantaged in effectively competing for certain reserves, leases,
licenses and concessions.
7. Government Regulations.
(a) Generally. The Company's oil and gas
exploration, development production and marketing operations are
regulated extensively at U.S. federal, state and local levels, as well
as by other countries in which the Company does business. Such laws
and regulations govern a wide variety of matters. For example, most
states in which the Company operates regulate the quantities of
natural gas that may be produced from wells within their borders to
prevent waste in the production of natural gas and to protect the
correlative rights of competing interest owners. It is impossible at
this time to determine what changes may occur with respect to such
regulations and what effect, if any, such changes may have on the
Company and the natural gas industry as a whole.
(b) Environmental. As an owner and operator of
oil and gas properties, the Company is also subject to various
federal, state, local and foreign country environmental regulations,
including air and water quality control laws. These laws and
regulations may, among other things, impose liability on the lessee
under an oil and gas lease for the cost of pollution cleanup 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. Although the
Company believes that it is in substantial compliance with existing
applicable environmental laws and regulations, there can be no
assurance that substantial costs for compliance will not be incurred
in the future. Moreover, it is possible that other developments, such
as stricter environmental laws, regulations and enforcement policies
thereunder, could result in additional, presently unquantifiable,
costs or liabilities to the Company.
8. Title to Interests. The Company believes that its
title to various oil and gas interests is satisfactory and consistent
with standards generally accepted in the oil and gas industry, subject
only to 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 obligations or duties under applicable
laws, ordinances, rules, regulations and orders of arbitral or
governmental authorities. In addition, the interests may 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 currently detract substantially
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from the value of the interests or materially interfere with their
use in the Company's operations.
9. General Economic Conditions. Virtually all of the
Company's operations are subject to the risks and uncertainties of
general economic conditions (domestically, in specific regions of the
United States and Canada, and internationally), the outcome of pending
and/or potential legal or regulatory proceedings, changes in
environmental, tax, labor and other laws and regulations to which the
Company is subject, and the condition of the capital markets utilized
by the Company to finance its operations.
10. Risks of Non-U.S. Operations. The Company's non-U.S.
oil and natural gas exploration, development and production activities
are subject to political and economic uncertainties (including but not
limited to changes, sometimes frequent or marked, in governmental
energy policies or the personnel administering them), expropriation of
property, cancellation or modification of contract rights, foreign
exchange restrictions, currency fluctuations, royalty and tax
increases and other risks arising out of foreign governmental
sovereignty over the areas in which the Company's operations are
conducted, as well as risks of loss due to civil strife, acts of war,
guerrilla activities and insurrection. These risks may be higher in
the developing countries in which the Company conducts such
activities. Consequently, the Company's non-U.S. exploration,
development and production activities may be substantially affected by
factors beyond the Company's control, any of which could materially
adversely affect the Company's performance. Furthermore, in the event
of a dispute arising from non-U.S. operations, the Company may be
subject to the exclusive jurisdiction of courts outside the U.S. or
may not be successful in subjecting non-U.S. persons to the
jurisdiction of courts in the U.S., which could adversely affect the
outcome of such dispute.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this Form 8-K to be signed on its behalf
by the undersigned thereunto duly authorized.
APACHE CORPORATION
Date: September 24, 1996 /s/ Z. S. KOBIASHVILI
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Z. S. Kobiashvili
Vice President and General Counsel
