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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 27, 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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This Current Report on Form 8-K/A is being filed to replace in its
entirety Exhibit 99.3 with the exhibit attached hereto.
ITEM 5. OTHER EVENTS
On March 27, 1996, Apache Corporation ("Apache") entered into an
Agreement and Plan of Merger by and among Apache, YPY Acquisitions, Inc., and
The Phoenix Resource Companies, Inc. ("Phoenix"), which is listed below as
Exhibit 99.1 and incorporated herein by reference, pursuant to which each of
Phoenix's outstanding shares of common stock will be converted into the right
to receive .75 shares of Apache common stock and $4.00 in cash. Apache issued
a press release dated March 28, 1996, which is listed below as Exhibit 99.2 and
incorporated herein by reference. Attached hereto as Exhibit 99.3 and
incorporated herein by reference is additional information concerning factors
that could cause actual results to differ from certain forward-looking
statements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
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EXHIBIT DOCUMENT
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99.1 Agreement and Plan of Merger by and among Apache Corporation, YPY
Acquisitions, Inc., and The Phoenix Resource Companies, Inc. dated March 27,
1996 (incorporated by reference to Exhibit 99.1 to Apache's Current Report on
Form 8-K, dated March 27, 1996, Commission File No. 1-4300, filed March 28,
1996)
99.2 Press Release, dated March 28, 1996 (Apache and Phoenix to Merge)
(incorporated by reference to Exhibit 99.2 to Apache's Current Report on Form
8-K, dated March 27, 1996, Commission File No. 1-4300, filed March 28, 1996)
99.3 Cautionary Statement Regarding Important Factors Affecting
Forward-Looking Statements
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this Amendment No. 1 on Form 8-K/A to be
signed on its behalf by the undersigned thereunto duly authorized.
APACHE CORPORATION
Date: April 5, 1996 /s/ Z. S. Kobiashvili
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Z. S. Kobiashvili
Vice President and General Counsel
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EXHIBIT INDEX
EXHIBIT DOCUMENT
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99.3 Cautionary Statement Regarding Important Factors Affecting
Forward-Looking Statements
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EXHIBIT 99.3
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
Certain forward-looking statements regarding the proposed merger (the
"Merger") of The Phoenix Resources Companies, Inc. ("Phoenix") with a subsidiary
of Apache Corporation ("Apache") were made in the Press Release of Apache dated
March 27, 1996 filed as Exhibit 99.2 to this Current Report on Form 8-K dated
March 27, 1996, and in certain oral statements of officers of Apache and
Phoenix. These statements include, among other things, (i) an Apache analysis of
the allocation of the Merger consideration to various cost categories based on
various estimates, (ii) Apache estimates of oil and gas reserves by reserve
category, (iii) estimates of the value of future production available for cost
recovery of exploration and development activities, (iv) certain 1997 production
estimates, and (v) estimates of the impact of the Merger on Apache net income
per share and net cash provided by operating activities in 1997. Such statements
by their nature are subject to certain risks, uncertainties and assumptions and
will be influenced by various factors. Should one or more of the underlying
assumptions prove incorrect, actual results could vary materially. Several key
factors that have a direct bearing on Apache's ability to attain these estimates
and projections or achieve expectations are discussed below:
(a) Proved reserve estimates are based on Apache analysis of oil and
gas reserves which meet the definition of "proved" under Securities and
Exchange Commission (the "Commission") rules. Other reserve categories have
also been estimated by Apache. The estimates of future net cash flows and
the value thereof are based upon assumptions of future production levels,
prices and costs that may prove to be incorrect over time. Any significant
variance from these assumptions could result in the actual quantity of the
reserves and future net cash flows therefrom being materially different
from these estimates. Furthermore, such reserves may be subject to
revisions based on production history, results of future exploration and
development, prevailing oil and gas prices, operating and developmental
costs, and other factors.
(b) The initial oil and gas prices used in the estimates included
herein are $17 per barrel of oil and $2.40 per MMBtu for gas without
escalation. Prices for oil produced in the concessions in which Apache and
Phoenix participate in the Arab Republic of Egypt ("Egypt") are based on
oil sold on the world market and are subject to world oil price
fluctuations. Gas prices are based upon 85 percent of a benchmark oil price
and will be subject to fluctuations in such price. Fluctuations in oil
prices will impact estimates that are dependent upon future production
values, including cost recovery value and other revenue related matters.
Actual future results will be affected by the factors described below under
"Effect of Volatile Production Prices."
(c) The future cost recovery dollars included herein are based on
estimated future production from proved and probable oil and gas reserves
and assume the implementation of a two-year capital expenditure program of
approximately $125 million attributable to Phoenix's interest in the Qarun
and Khalda concessions in the Western Desert of Egypt (which will require
the approval of the other parties to the concession agreements).
Substantially all of the proved and probable reserves except for those
described in (d) below are associated with additional recoveries from
existing wellbores or additional recovery from waterflood projects.
(d) Approximately 10 MMboe of reserves are attributable to gas
discoveries on the Khalda concession which, to be deemed "proved," require
the construction and completion of gas pipelines presently in the planning
stages and the negotiation and execution of a gas contract. Allocated value
placed on these reserves assumes market availability through a planned
natural gas pipeline projected for completion in 1999. Factors such as
market availability and competition from alternative fuels may affect the
timing of the pipeline project.
(e) Estimates of 1997 production assume oil production levels from the
Qarun concession at 35,000 barrels per day (gross). If unanticipated
start-up problems occur with the Qarun production system, full production
at projected rates could be delayed. Thus, 1997 estimates of production,
net income and cash flow would be affected.
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(f) Forward-looking statements regarding Phoenix's operations and
reserves are dependent upon the continued economic and political stability
of Egypt and the surrounding region. Adverse developments in Egypt and
future changes in Egyptian governmental regulations and policies could
adversely affect Phoenix's results of operations. The Phoenix Egyptian
concessions are subject to cancellation upon the occurrence of specific
extraordinary events, including national emergency, unauthorized assignment
of undivided interests in the concessions by the contracting subsidiaries,
the bankruptcy of the contractor and intentional extraction of any mineral
not authorized by the concession agreements. Phoenix's share of crude oil
from its Egyptian concessions is currently being sold exclusively to the
Egyptian General Petroleum Corporation ("EGPC"). Although Phoenix believes
that in the event of the loss of EGPC as a purchaser or adverse
developments in the business practices of EGPC, production from Phoenix's
Egyptian concessions could be sold at comparable prices on the
international market, there can be no assurances concerning such sales.
Effect of Volatile Product Prices. The future financial condition and
results of operations of Apache and Phoenix will depend upon the prices received
for 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
Apache and Phoenix. 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
Apache's and Phoenix'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 oil and gas production of Apache and Phoenix depends upon
a number of factors beyond the control of the companies, including the
availability and capacity of transportation and processing facilities.
Oil and natural gas prices have historically been volatile and are likely
to continue to be volatile in the future. Such volatility makes it difficult to
estimate the value of producing properties for acquisition and to budget and
project the return on exploration and development projects involving producing
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.
Apache 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 Apache engages in such activities, it may be prevented from
realizing the benefits of price increases above the levels of the hedges.
Phoenix does not engage in such activities.
Phoenix's proved reserve base was approximately 85 percent oil on an energy
equivalent basis as of December 31, 1995. By comparison, Apache's proved reserve
base was approximately 60 percent natural gas on an energy equivalent basis as
of December 31, 1995, and 95 percent of Apache's natural gas reserves are
located in the United States and Canada. Accordingly, Apache is more sensitive
to fluctuations in United States natural gas prices than to fluctuations in the
price of oil.
Apache periodically reviews the carrying value of its oil and gas
properties under the full-cost accounting rules of the Commission. Under the
full-cost accounting 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 ten percent, 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 at the
unescalated prices in effect at the applicable time and results in a write-down
if the "ceiling" is exceeded, even if prices decline for only a short period of
time.
Reliance on Estimates of Proved Reserves and Future Net Cash Flows;
Depletion of Reserves. There are numerous uncertainties inherent in estimating
quantities of proved oil and gas reserves and in projecting future rates of
production and timing of development expenditures, including many factors beyond
the control of the producer. The reserve data presented in connection with
statements concerning the estimates represent only estimates. In addition, the
estimates of future net cash flows from proved reserves of Apache and Phoenix
and
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the present value thereof are based upon various assumptions about future
production levels, prices and costs that may prove to be incorrect over time.
Any significant variance from the assumptions could result in the actual
quantity of reserves of Apache and Phoenix and future net cash flows therefrom
being materially different from the estimates presented in connection with the
Merger. In addition, estimated reserves of Apache and Phoenix 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.
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