<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 September 30, 1998
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 Registrant's common stock, outstanding as of September 30,
1998......................97,757,070
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands, except per common share data)
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas production revenues $ 182,801 $ 233,068 $ 590,606 $ 714,196
Gathering, processing and marketing revenues 29,756 45,181 88,872 144,600
Equity in income (loss) of affiliates -- (1,412) (1,558) (1,423)
Other revenues (874) (89) (164) 44
---------- ---------- ---------- ----------
211,683 276,748 677,756 857,417
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Depreciation, depletion and amortization 94,818 98,170 290,604 280,969
Operating costs 49,344 54,866 158,511 172,577
Gathering, processing and marketing costs 28,970 44,542 86,590 142,806
Administrative, selling and other 13,860 8,707 34,026 26,790
Financing costs:
Interest expense 30,167 26,551 90,498 75,014
Amortization of deferred loan costs 1,107 1,919 3,415 4,497
Capitalized interest (12,883) (9,103) (36,271) (26,901)
Interest income (1,090) (420) (3,560) (1,562)
---------- ---------- ---------- ----------
204,293 225,232 623,813 674,190
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 7,390 51,516 53,943 183,227
Provision for income taxes 4,189 20,731 24,150 73,819
---------- ---------- ---------- ----------
NET INCOME 3,201 30,785 29,793 109,408
Preferred stock dividends 584 -- 584 --
---------- ---------- ---------- ----------
INCOME ATTRIBUTABLE TO COMMON STOCK $ 2,617 $ 30,785 $ 29,209 $ 109,408
========== ========== ========== ==========
NET INCOME PER COMMON SHARE:
Basic $ .03 $ .34 $ .30 $ 1.21
========== ========== ========== ==========
Diluted $ .03 $ .33 $ .30 $ 1.17
========== ========== ========== ==========
</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>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1998 1997
------------- -------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,793 $ 109,408
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 290,604 280,969
Amortization of deferred loan costs 3,415 4,497
Provision for deferred income taxes 2,771 47,912
Loss on sale of stock held for investment and other 364 --
Cash distributions in excess of earnings of affiliates 1,523 1,565
Changes in operating assets and liabilities:
Decrease in receivables 54,338 13,660
Increase in advances to oil and gas ventures and other (3,510) (4,794)
Decrease in deferred charges and other 16,276 740
Decrease in payables (62,585) (26,710)
Increase (decrease) in accrued expenses (3,988) 13,609
Increase in advance from gas purchaser 56,891 107,144
Decrease in deferred credits and noncurrent liabilities (4,486) (8,344)
------------- -------------
Net cash provided by operating activities 381,406 539,656
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (512,515) (561,697)
Non-cash portion of net oil and gas property additions (29,130) (12,579)
Proceeds received from sales of property and equipment 130,753 5,789
Proceeds from sale of assets held for resale 62,998 --
Proceeds from sale of stock held for investment 26,147 1,183
Purchase of stock held for investment -- (1,170)
Other, net (15,418) (21,722)
------------- -------------
Net cash used in investing activities (337,165) (590,196)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 446,248 577,066
Payments on long-term debt (498,420) (501,177)
Dividends paid (20,335) (18,944)
Proceeds from issuance of preferred stock 98,630 --
Common stock activity, net 1,085 8,949
Treasury stock activity, net (21,430) (365)
Cost of debt and equity transactions (420) (2,554)
------------- -------------
Net cash provided by financing activities 5,358 62,975
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 49,599 12,435
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,686 13,161
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 59,285 $ 25,596
============= =============
</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
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 59,285 $ 9,686
Receivables 168,974 224,025
Inventories 35,562 36,041
Advances to oil and gas ventures and other 19,032 15,579
Assets held for resale -- 62,998
------------ ------------
282,853 348,329
------------ ------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties 5,717,038 5,530,991
Unproved properties and properties under
development, not being amortized 553,535 453,556
International concession rights, not being amortized 79,000 79,000
Gas gathering, transmission and processing facilities 305,881 246,049
Other 85,476 71,067
------------ ------------
6,740,930 6,380,663
Less: Accumulated depreciation, depletion and amortization (2,922,640) (2,647,478)
------------ ------------
3,818,290 3,733,185
------------ ------------
OTHER ASSETS:
Deferred charges and other 43,151 57,119
------------ ------------
$ 4,144,294 $ 4,138,633
============ ============
</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
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,000 $ 17,200
Accounts payable 117,335 178,361
Accrued operating expense 20,823 20,153
Accrued exploration and development 53,077 82,392
Accrued compensation and benefits 12,290 17,600
Accrued interest 22,730 20,598
Other accrued expenses 6,638 7,479
------------ ------------
238,893 343,783
------------ ------------
LONG-TERM DEBT 1,304,830 1,501,380
------------ ------------
DEFERRED CREDITS AND OTHER NONCURRENT
LIABILITIES:
Income taxes 355,697 355,619
Advances from gas purchaser 211,437 154,546
Other 70,776 54,128
------------ ------------
637,910 564,293
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares authorized,
100,000 shares of 5.68% Cumulative Series B
issued and outstanding in 1998 98,515 --
Common stock, $1.25 par, 215,000,000 shares authorized,
99,778,978 and 94,478,788 shares issued, respectively 124,724 118,098
Paid-in capital 1,238,187 1,085,063
Retained earnings 570,543 561,981
Treasury stock, at cost, 2,021,908 and 1,174,247 shares,
respectively (36,936) (15,506)
Accumulated other comprehensive income (32,372) (20,459)
------------ ------------
1,962,661 1,729,177
------------ ------------
$ 4,144,294 $ 4,138,633
============ ============
</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 SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE PREFERRED COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE SHAREHOLDERS'
(In thousands) INCOME STOCK STOCK CAPITAL EARNINGS STOCK INCOME EQUITY
------------- --------- --------- ---------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ -- $114,030 $1,002,540 $432,588 $(15,152) $ (15,490) $ 1,518,516
Comprehensive income:
Net income $ 109,408 -- -- -- 109,408 -- -- 109,408
Currency translation
adjustments, net of
applicable income tax
benefit of $795 (1,476) -- -- -- -- -- (1,476) (1,476)
-----------
Comprehensive income $ 107,932
===========
Dividends ($.21 per common
share) -- -- -- (18,971) -- -- (18,971)
Common shares issued -- 492 8,457 -- -- -- 8,949
Treasury shares purchased -- -- -- -- (365) -- (365)
-------- -------- ---------- -------- -------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1997 $ -- $114,522 $1,010,997 $523,025 $(15,517) $ (16,966) $ 1,616,061
======== ======== ========== ======== ======== =========== ===========
BALANCE AT DECEMBER 31, 1997 $ -- $118,098 $1,085,063 $561,981 $(15,506) $ (20,459) $ 1,729,177
Comprehensive income:
Net income $ 29,793 -- -- -- 29,793 -- -- 29,793
Currency translation
adjustments, net of
applicable income tax
benefit of $6,415 (11,913) -- -- -- -- -- (11,913) (11,913)
-----------
Comprehensive income $ 17,880
===========
Dividends:
Preferred -- -- -- (584) -- -- (584)
Common ($.21 per share) -- -- -- (20,647) -- -- (20,647)
Preferred shares issued 98,515 -- -- -- -- -- 98,515
Common shares issued -- 6,626 153,124 -- -- -- 159,750
Treasury shares purchased,
net -- -- -- -- (21,430) -- (21,430)
-------- -------- ---------- -------- -------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1998 $ 98,515 $124,724 $1,238,187 $570,543 $(36,936) $ (32,372) $ 1,962,661
======== ======== ========== ======== ======== =========== ===========
</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)
These financial statements have been prepared by Apache Corporation (Apache
or 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 for 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 most recent
annual report on Form 10-K.
1. DIVESTITURES
During the nine months ended September 30, 1998, Apache sold largely
marginal North American properties containing 29.3 million equivalent barrels of
proved reserves for $129.2 million. In addition, the Company completed the sale
of a 10 percent interest in the East Spar gas field and related production
facilities in Western Australia for a total sales price of $63.0 million in
cash.
2. STRATEGIC ALLIANCE WITH CINERGY
In June 1998, Apache formed a strategic alliance with Cinergy Corporation
(Cinergy) to market substantially all the Company's natural gas production from
North America and sold its 57 percent interest in Producers Energy Marketing LLC
(ProEnergy) for 771,258 shares of Cinergy common stock valued at $26.5 million,
subject to adjustment. ProEnergy will continue to market Apache's North American
natural gas production for 10 years, with an option to terminate after six
years, under an amended and restated gas purchase agreement effective July 1,
1998. During this period, Apache is generally obligated to deliver most of its
North American gas production to Cinergy and, under certain circumstances, may
have to make payments to Cinergy if certain production quotas are not met.
Accordingly, Apache recorded a deferred gain of $20.0 million on the sale of
ProEnergy that is being amortized over six years. In September 1998, Apache sold
its shares of Cinergy common stock for $26.1 million and recorded a loss of $.4
million.
3. NON-CASH INVESTING AND FINANCING ACTIVITIES
A summary of non-cash investing and financing activities is presented
below:
In March 1998, Apache acquired certain oil and gas property interests for
approximately 177,000 shares of Apache common stock.
In January 1998, approximately 90 percent, or $155.6 million principal
amount, of the Company's 6-percent convertible subordinated debentures was
converted into approximately 5.1 million shares of Apache common stock at a
conversion price of $30.68 per share.
6
<PAGE> 8
The following table provides supplemental disclosure of cash flow
information:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized) $ 52,095 $ 41,610
Income taxes (net of refunds) 21,379 25,902
</TABLE>
4. DEBT
In February 1998, Apache issued $150 million principal amount, $148.2
million net of discount, of senior unsecured 7-percent notes maturing on
February 1, 2018. The notes are not redeemable prior to maturity.
In January 1998, approximately 90 percent, or $155.6 million principal
amount, of the Company's 6-percent convertible subordinated debentures was
converted into approximately 5.1 million shares of Apache common stock at a
conversion price of $30.68 per share. The remaining $16.9 million principal
amount of the 6-percent debentures was redeemed for $17.4 million in cash, plus
accrued and unpaid interest. The Company recorded an $.8 million loss on the
early extinguishment of debt in January 1998.
5. COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
requires companies to report the components of comprehensive income in a
financial statement with the same prominence as other financial statements. The
Company has chosen to disclose comprehensive income, which is comprised of net
income and foreign currency translation adjustments, in the accompanying
statement of consolidated shareholders' equity. This information is shown for
all periods presented.
6. PREFERRED STOCK
In August 1998, Apache issued $100 million of 5.68 percent Series B
Cumulative Preferred Stock (the Preferred Stock) in the form of one million
depositary shares each representing 1/10th of a share of Preferred Stock. The
Preferred Stock has no stated maturity and is not subject to a sinking fund or
mandatory redemption. The shares are not convertible into other securities of
the Company.
Apache has the option to redeem the shares at $100 per depositary share on
or after August 25, 2008. Holders of the shares are entitled to receive
cumulative cash dividends at an annual rate of $5.68 per depositary share when,
and if, declared by Apache's board of directors. The net proceeds of
approximately $98.5 million were used to repay debt outstanding under money
market lines of credit and to reduce outstanding borrowings under the Canadian
portion of the Company's global credit facility.
7
<PAGE> 9
7. NET INCOME PER COMMON SHARE
A reconciliation of the components of basic and diluted net income per
common share is presented in the table below:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1998 1997
-------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
--------- --------- --------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
BASIC:
Net income $ 3,201 $ 30,785
Less: Preferred stock dividends (584) --
--------- ---------
Income attributable to common stock 2,617 98,205 $ .03 30,785 90,396 $ .34
========= =========
EFFECT OF DILUTIVE SECURITIES:
Stock option plans -- 132 -- 585
3.93% convertible notes -- -- 535 2,778
6% convertible subordinated debentures -- -- 1,752 5,623
--------- --------- --------- ---------
DILUTED:
Income attributable to common stock
after assumed conversions $ 2,617 98,337 $ .03 $ 33,072 99,382 $ .33
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1998 1997
-------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
--------- --------- --------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
BASIC:
Net income $ 29,793 $ 109,408
Less: Preferred stock dividends (584) --
--------- ---------
Income attributable to common stock 29,209 98,131 $ .30 109,408 90,276 $ 1.21
========= =========
EFFECT OF DILUTIVE SECURITIES:
Stock option plans -- 299 -- 484
3.93% convertible notes -- -- 1,581 2,778
6% convertible subordinated debentures -- -- 5,166 5,623
--------- --------- --------- ---------
DILUTED:
Income attributable to common stock
after assumed conversions $ 29,209 98,430 $ .30 $ 116,155 99,161 $ 1.17
========= ========= ========= ========= ========= =========
</TABLE>
The 6-percent convertible subordinated debentures, which were converted
into shares of Apache common stock or redeemed in January 1998, are not included
in the computation of diluted earnings available per common share for the nine
months ended September 30, 1998, because to do so would have been antidilutive.
8
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Apache's results of operations and financial position for the first nine
months of 1998 were significantly impacted by the following factors:
Commodity Prices - Apache's average realized oil price decreased $6.22 per
barrel from $19.42 per barrel in the first nine months of 1997 to $13.20 per
barrel in the comparable 1998 period, reducing revenues by $109.7 million. The
average realized price for natural gas decreased $.24 per thousand cubic feet
(Mcf) from $2.19 per Mcf in the first nine months of 1997 to $1.95 per Mcf in
1998, negatively impacting revenues by $39.6 million.
Operations - Oil production increased 15 percent for the first nine months
of 1998 when compared to the same period last year, while gas production
decreased two percent for the same period. The increase in oil production
favorably impacted revenues by $35.8 million. Earnings for the first nine months
of 1998 were also positively impacted by a $14.1 million, or eight percent,
decrease in operating costs compared to the same period of 1997.
RESULTS OF OPERATIONS
Apache reported 1998 third quarter income attributable to common stock of
$2.6 million versus $30.8 million in the prior year. Basic net income per common
share of $.03 for the third quarter of 1998 was significantly lower than in
1997. Higher oil production and lower operating costs were offset by a sharp
decline in oil and gas prices, decreased gas production and higher
administrative, selling and other (G&A) expense. The increase in G&A expense was
primarily the result of employee separation payments associated with the sale of
largely marginal North American properties.
For the first nine months of 1998, income attributable to common stock of
$29.2 million, or $.30 per basic common share, decreased from $109.4 million, or
$1.21 per basic common share, in the comparable 1997 period. This decrease is
primarily the result of a 32 percent decrease in oil prices, an 11 percent
decrease in gas prices, a two percent decrease in gas production and higher
depreciation, depletion and amortization (DD&A) expense partially offset by a 15
percent increase in oil production and lower operating costs, compared to a year
ago.
For the third quarter of 1998, revenues decreased 24 percent to $211.7
million compared to $276.7 million in 1997, driven by a 22 percent decrease in
oil and gas production revenues. The decrease in oil and gas production revenues
is primarily the result of a 32 percent decrease in the average realized oil
price, a nine percent decrease in the average realized price for natural gas and
a seven percent decrease in gas production. Crude oil, including natural gas
liquids, contributed 46 percent and natural gas contributed 54 percent of oil
and gas production revenues.
For the first nine months of 1998, revenues decreased 21 percent to $677.8
million as compared to $857.4 million for the same period in 1997. Revenues from
oil and gas production decreased 17 percent from the same period in 1997, with
crude oil, including natural gas liquids, contributing 46 percent and natural
gas contributing 54 percent of oil and gas production revenues.
9
<PAGE> 11
Volume and price information for the Company's oil and gas production is
summarized in the following table:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED SEPTEMBER 30, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------- ------------------------------------------
INCREASE INCREASE
1998 1997 (DECREASE) 1998 1997 (DECREASE)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas Volume - Mcf per day:
United States 413,818 505,981 (18%) 443,546 497,043 (11%)
Canada 107,651 93,310 15% 101,102 86,368 17%
Egypt 2,044 726 182% 986 547 80%
Australia 52,544 20,238 160% 48,988 21,137 132%
---------- ---------- ---------- ----------
Total 576,057 620,255 (7%) 594,622 605,095 (2%)
========== ========== ========== ==========
Average Natural Gas price - Per Mcf:
United States $ 2.07 $ 2.23 (7%) $ 2.14 $ 2.37 (10%)
Canada 1.28 1.12 14% 1.30 1.28 2%
Egypt 1.68 2.76 (39%) 1.78 2.79 (36%)
Australia 1.43 1.80 (21%) 1.52 1.84 (17%)
Total 1.86 2.05 (9%) 1.95 2.19 (11%)
Oil Volume - Barrels per day:
United States 31,691 40,746 (22%) 35,330 40,664 (13%)
Canada 2,107 2,289 (8%) 2,067 2,032 2%
Egypt 27,892 20,223 38% 28,801 18,728 54%
Australia 9,717 3,786 157% 8,359 3,205 161%
---------- ---------- ---------- ----------
Total 71,407 67,044 7% 74,557 64,629 15%
========== ========== ========== ==========
Average Oil price - Per barrel:
United States $ 12.19 $ 18.43 (34%) $ 13.14 $ 19.60 (33%)
Canada 11.70 18.36 (36%) 13.12 19.38 (32%)
Egypt 12.60 18.39 (31%) 13.13 18.76 (30%)
Australia 13.29 19.66 (32%) 13.75 21.08 (35%)
Total 12.49 18.48 (32%) 13.20 19.42 (32%)
Natural Gas Liquids (NGL)
Volume - Barrels per day:
United States 2,025 1,347 50% 2,010 1,677 20%
Canada 577 546 6% 613 607 1%
---------- ---------- ---------- ----------
Total 2,602 1,893 37% 2,623 2,284 15%
========== ========== ========== ==========
Average NGL Price - Per barrel:
United States $ 9.09 $ 11.66 (22%) $ 8.58 $ 15.23 (44%)
Canada 6.09 10.82 (44%) 6.52 13.63 (52%)
Total 8.43 11.42 (26%) 8.10 14.80 (45%)
</TABLE>
THIRD QUARTER 1998 COMPARED TO THIRD QUARTER 1997
Natural gas sales for the third quarter of 1998 totaled $98.8 million, 16
percent lower than the third quarter of 1997. Average realized natural gas
prices decreased nine percent, negatively affecting revenue by $10.8 million.
The weakening of the Australian currency relative to the U.S. dollar contributed
to the 21 percent decline in the Australian average natural gas price. The
Company periodically engages in hedging activities, including fixed price
physical and financial contracts. The net result of these activities increased
the Company's realized gas price by $.06 per Mcf during the third quarter of
1998 and had no impact on the Company's realized price during the third quarter
of 1997.
Natural gas production decreased 44.2 million cubic feet per day (MMcf/d),
or seven percent, on a worldwide basis, unfavorably impacting revenue by $7.6
million. U.S. natural gas production decreased 18 percent due to sales of
largely marginal properties in the first half of 1998 and natural reservoir
depletion. Increases in natural gas production in Egypt, Canada and Australia
were principally due to development activities and the impact of producing
property acquisitions in Australia during late 1997.
10
<PAGE> 12
The Company's crude oil sales for the third quarter of 1998 totaled $82.0
million, a 28 percent decrease from the third quarter of 1997, due to lower
average realized prices, which were partially offset by production increases in
Egypt and Australia.
Third quarter 1998 oil production increased seven percent compared to the
prior year primarily as a result of increases in Egyptian and Australian
production. Egyptian oil production accounted for 39 percent of the Company's
worldwide oil production, compared to 30 percent in the third quarter of 1997,
resulting in an increase in revenues of $8.9 million. The increase in Egyptian
production was primarily a result of drilling and development activity and the
price-driven dynamics of certain production sharing contracts. In addition,
Australian oil production increased 157 percent in the third quarter of 1998
primarily due to initial production from the Stag field and the acquisition on
November 20, 1997, of all the capital stock of three companies (subsidiaries of
Mobil Exploration & Producing Australia Pty Ltd) owning interests in certain oil
and gas properties and production facilities offshore Western Australia. U.S.
oil production decreased 22 percent in the third quarter of 1998 primarily due
to sales of largely marginal properties in the first half of 1998 and natural
reservoir depletion.
The Company's realized price for sales of crude oil in the third quarter of
1998 decreased $5.99 per barrel, or 32 percent, resulting in a decrease in
revenue of $36.9 million compared to the same period in 1997.
Revenue from the sale of natural gas liquids totaled $2.0 million for the
third quarters of 1998 and 1997. A 37 percent increase in natural gas liquids
production was offset by a 26 percent decline in realized prices.
YEAR-TO-DATE 1998 COMPARED TO YEAR-TO-DATE 1997
Natural gas sales for the first nine months of 1998 of $316.1 million
decreased $46.2 million, or 13 percent, from those recorded in the same period
of 1997 as a result of lower natural gas prices and a decline in production.
Average realized natural gas prices decreased 11 percent, negatively affecting
revenue by $39.6 million. U.S. natural gas production, which comprised 75
percent of the Company's worldwide gas production, sold at an average price of
$2.14 per Mcf, 10 percent lower than in 1997. Natural gas production decreased
10.5 MMcf/d, or two percent, on a worldwide basis, negatively impacting revenue
by $5.6 million. Development activities and the impact of producing property
acquisitions in Australia during late 1997 increased natural gas production in
Australia and Canada by 27.9 MMcf/d and 14.7 MMcf/d, respectively. U.S. natural
gas production declined 53.5 MMcf/d due to sales of largely marginal properties
in the first half of 1998 and natural reservoir depletion. The weakening of the
Australian currency relative to the U.S. dollar contributed to the 17 percent
decrease in the Australian average natural gas price. The Company periodically
engages in hedging activities, including fixed price physical and financial
contracts. The net result of these activities increased the Company's realized
gas price by $.06 per Mcf during the first nine months of 1998 and by $.02 per
Mcf during the first nine months of 1997.
For the first nine months of 1998, oil revenues of $268.7 million decreased
$73.9 million, or 22 percent, from the same period in 1997 due to lower oil
prices, which were partially offset by production increases. On a worldwide
basis, average oil prices decreased 32 percent to $13.20 per barrel negatively
impacting oil sales by $109.7 million. Oil production increased 9,928 barrels
per day, or 15 percent, for the first nine months of 1998 primarily due to
increases in Egypt and Australia. Egyptian oil production increased by 10,073
barrels per day, or 54 percent, as a result of drilling and development activity
and the price-driven dynamics of certain production sharing contracts.
Australian oil production increased by 5,154 barrels per day, or 161 percent,
primarily due to initial production from the Stag field and the acquisition, on
November 20, 1997, of all the capital stock of three companies (subsidiaries of
Mobil Exploration & Producing Australia Pty Ltd) owning interests in certain oil
and gas properties and production facilities offshore Western Australia. U.S.
oil production decreased by 5,334 barrels per day, or 13 percent, primarily due
to sales of largely marginal properties in the first half of 1998 and natural
reservoir depletion.
Natural gas liquid revenues for the first nine months of 1998 of $5.8
million decreased 37 percent from the same period in 1997. Natural gas liquid
production increased 339 barrels per day, or 15 percent, while natural gas
liquid prices declined by $6.70 per barrel, or 45 percent.
11
<PAGE> 13
OTHER REVENUES AND OPERATING EXPENSES
During the third quarter and first nine months of 1998, Apache's gas
gathering, processing and marketing revenues decreased 34 percent and 39
percent, respectively, to $29.8 million and $88.9 million, as a result of lower
prices and volumes compared to the prior year periods. Although revenues
decreased with respect to these activities, there was a greater decrease in gas
gathering, processing and marketing costs, thus higher margins were realized for
both periods of 1998 compared to 1997.
The Company's DD&A expense for the third quarter and first nine months of
1998 totaled $94.8 million and $290.6 million, respectively, compared to $98.2
million and $281.0 million for the same periods in 1997. On an equivalent barrel
basis, full cost DD&A expense decreased $.20 per barrel of oil equivalent (boe),
from $5.84 per boe in the third quarter of 1998 to $5.64 per boe in the same
period in 1997. For the nine months ended September 30, 1998, the full cost DD&A
rate was $5.62 per boe compared to $5.78 per boe in 1997. Production increases
in Canada, Australia and Egypt, countries which have a lower DD&A rate per boe
than the U.S., contributed to the decrease in the overall rate. The U.S. DD&A
rate has remained relatively constant at $6.11 per boe in the first nine months
of 1997 compared to $6.12 per boe in the first nine months of 1998. U.S.
production accounted for 63 percent of worldwide production in the first nine
months of 1998 compared to 75 percent in the same period of 1997.
Operating costs, including lease operating expense and severance taxes,
decreased 10 percent from $54.9 million in the third quarter of 1997 to $49.3
million for the same period in 1998. For the first nine months of 1998,
operating costs totaled $158.5 million, a decrease of $14.1 million, or eight
percent, compared to the same period in 1997. For the third quarter and first
nine months of 1998, lease operating expense, excluding severance taxes, totaled
$43.3 million and $136.5 million, respectively, compared to $45.2 million and
$143.1 million for the comparable periods in 1997. On an equivalent barrel
basis, lease operating expense declined from $2.85 per boe in the third quarter
of 1997 to $2.77 per boe in the third quarter of 1998. For the first nine months
of 1998, lease operating expense averaged $2.84 per boe, a nine percent decrease
from $3.12 per boe, for the same period in 1997. Domestic per unit costs were
significantly reduced due to lower Gulf Coast region repairs, maintenance, power
and fuel costs resulting from the sale of largely marginal properties, and by
lower Western and Offshore region repairs and maintenance costs.
G&A expense in the third quarter of 1998 and first nine months of 1998
increased $5.2 million or 59 percent, and $7.2 million or 27 percent,
respectively, from a year ago. On an equivalent barrel basis, G&A expense for
the first nine months of 1998 increased to $.71 per boe compared to $.58 per boe
for the same period in 1997. The increase in G&A expense per boe in the first
nine months of 1998 was primarily the result of employee separation payments
associated with the sale of largely marginal North American properties.
Net financing costs for the third quarter of 1998 decreased $1.6 million,
or nine percent, from the prior year primarily due to higher capitalized
interest. Gross interest expense increased $3.6 million due to a higher average
outstanding debt balance and a higher weighted average interest rate. Net
financing costs increased six percent from $51.0 million in the first nine
months of 1997 to $54.1 million in the comparable 1998 period, due to higher
average debt outstanding and a higher weighted average interest rate, partially
offset by an increase in capitalized interest, interest income and lower
amortization of deferred loan costs. Additional capitalized interest associated
with Egyptian pipeline projects under construction contributed to the increase.
The increase in interest income was due to a higher cash balance in the first
nine months of 1998.
The provision for income taxes for the third quarter of 1998, as a
percentage of income before income taxes, increased to 57 percent compared to 40
percent in the same period last year. The increase is attributable to higher tax
rates associated with the Company's Egyptian operations which generated a larger
percentage of income during 1998.
12
<PAGE> 14
MARKET RISK
COMMODITY RISK
The Company's major market risk exposure continues to be the pricing
applicable to its oil and gas production. Realized pricing is primarily driven
by the prevailing worldwide price for crude oil and spot prices applicable to
its United States and Canadian natural gas production. Historically, prices
received for oil and gas production have been volatile and unpredictable. Price
volatility is expected to continue. See "Results of Operations" above.
The information set forth under "Market Risk - Interest Rate Risk and -
Foreign Currency Risk" in Item 7 of the Company's annual report on Form 10-K for
the year ended December 31, 1997, is incorporated herein by reference.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
CAPITAL COMMITMENTS
Apache's primary cash needs are for exploration, development and
acquisition of oil and gas properties, repayment of principal and interest on
outstanding debt, and payment of dividends. During the first nine months of
1998, the Company repurchased 850,000 shares of its own common stock on the open
market and may, from time to time, purchase additional shares. Apache budgets
capital expenditures based upon projected cash flow and routinely adjusts its
capital expenditures in response to changes in oil and natural gas prices and
corresponding changes in cash flow. The Company is not in a position to predict
future product prices. Capital expenditures for 1998 are expected to exceed
internally generated cash flow.
Capital Expenditures - A summary of oil and gas capital expenditures during
the first nine months of 1998 and 1997 is presented below (in millions):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Exploration and development:
United States $ 173.4 $ 276.1
Canada 55.1 41.2
Egypt 80.3 93.9
Australia 60.3 41.7
Other international 35.1 16.9
---------- ----------
404.2 469.8
Capitalized Interest 36.3 26.9
---------- ----------
Total $ 440.5 $ 496.7
========== ==========
Acquisition of oil and gas properties $ 18.2 $ 32.8
========== ==========
</TABLE>
In North America, Apache completed 157 producing wells out of 212 wells
drilled during the first nine months of 1998, while internationally the Company
discovered 32 new producers out of 60 wells drilled. Worldwide, the Company was
drilling or completing an additional 74 wells as of September 30, 1998. In
addition, Apache completed 402 production enhancement projects, including 157
recompletions, during the first nine months of 1998.
Property acquisitions in the first nine months of 1998, primarily
represented acquisitions of additional interests in producing properties in the
Company's existing focus areas.
13
<PAGE> 15
CAPITAL RESOURCES AND LIQUIDITY
Net Cash Provided by Operating Activities - Apache's net cash provided by
operating activities during the first nine months of 1998 totaled $381.4
million, a decrease of 29 percent from $539.7 million in the first nine months
of 1997. This decrease was primarily due to lower product prices, partially
offset by higher oil production, as compared to last year.
Preferred Stock Issuance - In August 1998, Apache issued $100 million of
5.68 percent Series B Cumulative Preferred Stock. The net proceeds of
approximately $98.5 million were used to repay debt outstanding under money
market lines of credit and to reduce outstanding borrowings under the Canadian
portion of the Company's global credit facility. The preferred stock has no
stated maturity and is not subject to a sinking fund or mandatory redemption.
The shares are not convertible into other securities of the Company.
Long-Term Borrowings - In January 1998, approximately 90 percent, or $155.6
million principal amount, of the Company's 6-percent convertible subordinated
debentures was converted into approximately 5.1 million shares of Apache common
stock at a conversion price of $30.68 per share. The remaining $16.9 million
principal amount of the 6-percent debentures was redeemed for $17.4 million in
cash, plus accrued and unpaid interest. The Company recorded an $.8 million loss
on the early extinguishment of debt in January 1998.
In February 1998, Apache issued $150 million principal amount, $148.2
million net of discount, of senior unsecured 7-percent notes maturing on
February 1, 2018. The notes are not redeemable prior to maturity.
Liquidity - The Company had $59.3 million in cash and cash equivalents on
hand at September 30, 1998, up from $9.7 million at December 31, 1997. Apache's
ratio of current assets to current liabilities at September 30, 1998 was 1.18:1
compared to 1.01:1 at December 31, 1997.
Apache believes that cash on hand, net cash generated from operations, and
unused committed borrowing capacity under its global credit facility will be
adequate to satisfy the Company's financial obligations to meet future liquidity
needs for at least the next two fiscal years. As of September 30, 1998, Apache's
available borrowing capacity under its global credit facility was $851 million.
14
<PAGE> 16
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue poses a serious threat of business disruption to
any organization that utilizes computer technology and computer chip technology
in their business systems or equipment. Apache has formed a Year 2000 Task Force
with representation from major business units to inventory and assess the risk
of hardware, software, telecommunications systems, office equipment, embedded
chip controls and systems, process control systems, facility control systems and
dependencies on external trading partners. The project phases, expected
completion dates and percentage complete are as follows:
<TABLE>
<CAPTION>
PHASE COMPLETION DATE % COMPLETE
--------------------------------------- ------------------- ---------------
<S> <C> <C>
Organization July 1998 100%
Assessment November 1998 70%
Desktop Computers
Network Hardware
Software
Embedded Systems
External Trading Partners
Building/Infrastructure Systems
Telecommunications Systems
Implementation/Replacement July 1999 40%
Computer Hardware
Core Business Software
Desktop Software
Embedded Systems
Building Systems
Contact External Trading Partners February 1999 10%
Contingency Planning March 1999 20%
</TABLE>
To date, the Company is not aware of any significant issues that would
cause problems in the area of safety, environmental or business interruption in
the Year 2000. The Company will assess the risk associated with hardware,
software, infrastructure, embedded chips and external trading partners that are
not Year 2000 compliant. While Apache is confident that Year 2000 remediation
efforts will succeed in minimizing exposure to business disruption, plans are
being developed which will allow continuation of business in all but the worst
case scenarios. All remediation and replacement efforts and contingency planning
are expected to be complete by July 1999. All critical external trading partners
will be contacted to determine Year 2000 readiness and contingency plans will be
developed where assurance of Year 2000 compliance is not received by February
28, 1999.
In 1997, the Company initiated a project to replace existing business
software as it relates to Apache's production, land, marketing, accounting and
financial systems to more effectively and efficiently meet its business needs.
Replacement computer systems selected by the Company from SAP America, Inc.,
PricewaterhouseCoopers LLP, Innovative Business Solutions and Landmark Graphics
will properly recognize dates beyond December 31, 1999. The Company plans to
implement the replacement software by March 31, 1999. The business system
replacement project is 60 percent complete and the Company believes that the
March 31, 1999 deadline is attainable.
The Company expects the cost to achieve Year 2000 compliance will not
exceed $4 million. The cost of implementing business replacement systems is not
included in these cost estimates.
15
<PAGE> 17
The Company presently believes that with conversions to new software and
completion of efforts planned by the Year 2000 Task Force, the risk associated
with Year 2000 will be significantly reduced. However, the Company is unable to
assure that the consequences of Year 2000 failures of systems maintained by the
Company or by third parties will not materially adversely impact the Company's
results of operations, liquidity or financial condition.
FUTURE TRENDS
Apache's strategy is to increase its oil and gas reserves, production, cash
flow and earnings by continuing to explore on and develop its inventory of
existing projects and making carefully targeted acquisitions of new assets.
Robust oil and gas prices early in 1997 gave way to weaker prices later in the
year and on into 1998. Crude oil prices have fallen near their lowest level of
the 1990's. While lower prices have negatively impacted Apache's earnings and
cash from operations for the first nine months of 1998 (see "Market
Risk-Commodity Risk" above), Apache anticipated lower prices and took steps
early in 1998 to expand its financial capacity. As a result, Apache is
positioned to take advantage of opportunities that might result from today's
industry adversity. Specific actions that have been or may be taken which should
impact the Company's activities in 1998 and beyond, include:
1. Selling and trading non-strategic properties to upgrade the Company's
property portfolio and enhance financial flexibility.
2. Curtailing projected exploration and development expenditures early in the
year; expanding them in the second half of the year after drilling costs
declined.
3. Calling for redemption of $172.5 million principal amount of debentures of
which 90 percent, or $155.6 million, was converted to equity in January
1998. Common shares were issued at $30.68 each.
4. Repurchasing 850,000 shares of its own common stock at an average market
price of $25.25 per share. Apache may, from time to time, purchase
additional shares on the open market.
5. Issuing $100 million of 5.68 percent Series B Cumulative Preferred Stock.
The above steps help strengthen Apache's financial position and generally
add liquidity. With property acquisition prices beginning to fall from the
premium prices commanded in 1997, Apache may seek to undertake a significant
acquisition. Apache will continue to review its level of capital expenditures
quarterly in light of financial results, product prices, drilling costs,
prevailing industry conditions and available opportunities. Even at a reduced
capital expenditure level, Apache expects to remain an active operator in North
America drilling moderate-risk wells.
Apache's international properties should continue to grow in importance
with respect to Apache's financial results and future growth prospects. Apache's
international efforts remain focused on development of its discoveries in Egypt,
offshore Western Australia, The People's Republic of China and the Ivory Coast,
and exploration efforts on the Company's concessions in Egypt and in Poland.
While international exploration is recognized as higher risk than Apache's North
American activities, the Company believes it offers potential for greater
rewards and significant reserve additions. Apache also believes that reserve
additions in these international areas may be made through higher risk
exploration and through improved production practices and recovery techniques.
Under the full cost accounting rules of the Securities and Exchange
Commission (SEC), the Company reviews the carrying value of its oil and gas
properties each quarter on a country-by-country basis. Under full cost
accounting rules, capitalized costs of oil and gas properties may not exceed the
present value of estimated future net revenues from proved reserves, discounted
at 10 percent, plus the lower of cost or fair market value of unproved
properties, as adjusted for related tax effects and deferred income taxes.
Application of these rules generally requires pricing future production at the
unescalated oil and gas prices in effect at the end of each fiscal quarter and
requires a write-down if the "ceiling" is exceeded, even if prices declined for
only a short period of time. The Company did not have a write-down due to
ceiling test limitations as of September 30, 1998. Given historical volatility
in oil and gas prices, there is the potential, while not a certainty, that a
write-down may occur. If a write-down is required, the one-time charge to
earnings would not impact cash flow from operating activities.
16
<PAGE> 18
CHANGES IN ACCOUNTING PRINCIPLES
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value, and requires that changes in a derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company formally document, designate, and assess
the effectiveness of transactions that receive hedge accounting treatment.
SFAS No. 133 is required to be adopted on January 1, 2000, although earlier
adoption is permitted. The Company is analyzing the effects of SFAS No. 133, but
has not yet quantified the potential financial statement impact, if any, or
determined the timing or method of adoption.
FORWARD-LOOKING STATEMENTS AND RISK
Certain statements in this report, including statements of the future
plans, objectives, and expected performance of the Company, are forward-looking
statements that are dependent on certain events, risks and uncertainties that
may be outside the Company's control and which could cause actual results to
differ materially from those anticipated. Some of these include, but are not
limited to, economic and competitive conditions, inflation rates, legislative
and regulatory changes, financial market conditions, political and economic
uncertainties of foreign governments, future business decisions, and other
uncertainties, all of which are difficult to predict.
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. The total amount or timing of actual future
production may vary significantly from reserves and production estimates. The
drilling of exploratory wells can involve significant risks, including those
related to timing, success rates and cost overruns. Lease and rig availability,
complex geology and other factors can affect these risks. Future oil and gas
prices also could affect results of operations and cash flows. Although Apache
makes use of futures contracts, swaps, options and fixed-price physical
contracts to mitigate risk, fluctuations in oil and gas prices may affect the
Company's financial position and results of operations.
17
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 10 to the Consolidated Financial
Statements contained in the Company's annual report on Form 10-K for
the year ended December 31, 1997 (filed with the SEC on March 20,
1998) is incorporated herein by reference.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None
(b) On August 15, 1998, Apache issued 100,000 shares of its 5.68%
Cumulative Preferred Stock Series B, no par value per share
(the Series B Preferred Stock). The Series B Preferred Stock
ranks prior and superior to all of Apache common stock,
outstanding on August 15, 1998 or thereafter, and to the
Series A Junior Participating Preferred Stock of the Company,
as to payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of the Company.
(c) None
(d) 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
18
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 - Form of Certificate of Designations, Preferences
and Rights of 5.68% Cumulative Preferred Stock,
Series B (incorporated by reference to Exhibit 4.1 to
Amendment No. 2 on Form 8-K/A to Apache's Current
Report on Form 8-K, dated August 18, 1998, SEC File
No. 1-4300).
3.2 - Apache's Bylaws, as amended September 17, 1998.
27.1 - Financial Data Table
99.1 - Statement of computation of ratio of earnings to
combined fixed charges and preferred stock dividends
(b) Reports filed on Form 8-K
The following current report on Form 8-K was filed during the
fiscal quarter ended September 30, 1998:
August 18, 1998 - Item 5. Other Events
Offering to the public of one million Depositary Shares each
representing 1/10th of a share of Apache's Series B Preferred
Stock, no par value, registered pursuant to Apache's
Registration Statement on Form S-3 (Registration No.
333-57785).
19
<PAGE> 21
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: November 12, 1998 /s/ Roger B. Plank
------------------------------------------
Roger B. Plank
Vice President and Chief Financial Officer
Dated: November 12, 1998 /s/ Thomas L. Mitchell
------------------------------------------
Thomas L. Mitchell
Vice President and Controller
(Chief Accounting Officer)
<PAGE> 1
Exhibit 3.2
BYLAWS OF
APACHE CORPORATION
(AS AMENDED SEPTEMBER 17, 1998)
ARTICLE I.
NAME OF CORPORATION
The name of the corporation is Apache Corporation.
ARTICLE II.
OFFICES
SECTION 1. The principal office of the corporation shall be in the City
of Wilmington, County of New Castle, State of Delaware, and the name of its
resident agent in charge thereof is The Corporation Trust Company.
SECTION 2. The corporation may have such other offices either within or
without the State of Delaware as the board of directors may designate or as the
business of the corporation may from time to time require.
ARTICLE III.
SEAL
The corporate seal shall have inscribed upon it the name of the
corporation and other designations as the board of directors from time to time
determine. There may be alternate seals of the corporation.
ARTICLE IV.
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders of the
corporation shall be held at the office of the corporation in the City of
Houston, Texas, or at any other place within or without the State of Delaware
that shall be stated in the notice of the meeting.
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<PAGE> 2
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of the
corporation shall be held at the place and time within or without the State of
Delaware that may be designated by the board of directors, on the last Thursday
in April in each year or on such other date as may be designated by the board of
directors, if not a legal holiday, and if a legal holiday, then at the same time
on the next succeeding business day for the purpose of electing directors and
for the transaction of any other business that may properly come before the
meeting.
SECTION 3. SPECIAL MEETINGS OF THE STOCKHOLDERS. Special meetings of
the stockholders of the corporation, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the chairman of the board and
shall be called by the chairman of the board or secretary at the request in
writing of a majority of the board of directors. The request shall state the
purpose or purposes of the proposed meeting.
SECTION 4. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting and in the case of special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than 50 days before the date of the meeting either personally,
by mail or other lawful means by or at the direction of the chairman of the
board or the secretary to each stockholder of record entitled to vote at the
meetings. If mailed, the notice shall be deemed to be delivered when deposited
in the United States Postal Service, addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation with postage
thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS FOR FIXING OF RECORD DATE. For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or adjournment thereof, the board of directors may close
the stock transfer books of the corporation for a period not exceeding 50 days
preceding the date of any meeting of stockholders. In lieu of closing the stock
transfer books, the board of directors may fix in advance a date, not exceeding
50 days preceding the date of any meeting of stockholders, as a record date for
the determination of the stockholders entitled to notice of and to vote at the
meeting and any adjournment thereof, and only the stockholders as shall be
stockholders of record on the date so fixed shall be entitled to the notice of
and to vote at the meeting and any adjournment thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the corporation shall prepare and make, at
least ten days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. The list shall be open to the examination of
any stockholder during ordinary business hours, for a period of at least ten
days prior to the meeting, either at a place within the city where the election
is to be held and which place shall be specified in the notice of the meeting,
or, if not so specified, at the place where the meeting is to be held, and the
list shall be produced and kept at the time and place of the meeting during the
whole time thereof, and subject to the inspection of any stockholder who may be
present. Upon the willful neglect or refusal of the board of directors of the
corporation to produce a list at any meeting of the stockholders at which an
election is to be held in accordance with this Section 6, they shall be
ineligible to hold any office at such election.
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<PAGE> 3
SECTION 7. VOTING RIGHTS. At each meeting of the stockholders of the
corporation, every stockholder having the right to vote thereat shall be
entitled to vote in person or by proxy, but no proxy shall be voted after three
years from its date unless the proxy provides for a longer period. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
shall have one vote for each share of stock having voting power registered in
his name. The vote at an election for directors, and upon the demand of any
stockholder, the vote upon any question before a meeting of the stockholders,
shall be by written ballot. All elections shall be had and all questions decided
by a plurality vote except where by statute, by provision in the Certificate of
Incorporation or these bylaws it is otherwise provided.
Prior to any meeting, but subsequent to the date fixed by the board of
directors pursuant to Section 5 of Article IV of these bylaws, any proxy may
submit his proxy to the secretary for examination. The certificate of the
secretary as to the regularity of the proxy and as to the number of shares held
by the persons who severally and respectively executed such proxies shall be
received as prima facie evidence of the number of shares represented by the
holder of the proxy for the purpose of establishing the presence of a quorum at
the meeting and of organizing the same.
SECTION 8. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, initially present in person or
represented by proxy, shall be requisite, and shall constitute a quorum of all
meetings of the stockholders for the transaction of business except as otherwise
provided by law, by the Certificate of Incorporation, or by these bylaws. If,
however, a majority shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or by
proxy, shall have power to adjourn the meeting from time to time, without
notice, other than announcement at the meeting, until the requisite amount of
voting stock shall be present. At the adjourned meeting at which the requisite
amount of voting stock shall be represented, any business may be transacted
which might have been transacted at the meeting as originally notified.
SECTION 9. INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed. The proxies and the ballots shall be received and
taken in charge and all questions touching the qualifications of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided by
three inspectors. The inspectors shall be appointed by the board of directors
before or at the meeting, or if no appointment shall have been made, then by the
presiding officer at the meeting. If, for any reason any of the inspectors
previously appointed shall fail to attend or refuse or be unable to serve,
inspectors in place of any so failing to attend or refusing or unable to serve
shall be appointed in like manner.
SECTION 10. WAIVER OF NOTICE. Whenever any notice whatever is required
to be given pursuant to the provisions of a statute, the Certificate of
Incorporation or these bylaws of the corporation, a waiver thereof in writing
signed by the person or persons entitled to the notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
SECTION 11. STOCKHOLDER ACTION. Any action required or permitted to be
taken by the stockholders must be effected at a duly called annual or special
meeting of stockholders and may not be effected by any consent in writing by
stockholders.
SECTION 12. NOTICE OF STOCKHOLDER BUSINESS. At an annual meeting of the
stockholders, only business shall be conducted that has been properly brought
before the meeting. To be properly brought before an annual meeting, business
must be (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors, (b) otherwise properly brought
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before the meeting by or at the direction of the board of directors, or (c)
otherwise properly brought before the meeting by a stockholder, which
stockholder must have given timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation, not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely, must be so received not later than the close of
business on the tenth day following the day on which the notice of the date of
the annual meeting was mailed or public disclosure was made. A stockholder's
notice to the secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (w) a brief description of the
business desired to be brought before the annual meeting, (x) the name and
address, as they appear on the corporation's books, of the stockholder proposing
the business, (y) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (z) any material interest of the
stockholder in the business. Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 12. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this Section 12, and if he should so determine, he shall so
declare to the meeting and any business not properly brought before the meeting
shall not be transacted. This section sets forth only the procedure by which
business may be properly brought before an annual meeting of stockholders and
does not in any way grant additional rights to stockholders beyond those
currently afforded them by law.
SECTION 13. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 13 shall
be eligible for election as directors. Nominations of persons for election to
the board of directors of the corporation may be made at a meeting of
stockholders, by or at the direction of the board of directors or by any
stockholder of the corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
13. Any nominations, other than those made by or at the direction of the board
of directors, shall be made pursuant to timely notice in writing to the
secretary of the corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which the notice of the
date of the meeting was mailed or public disclosure was made. The stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of the
corporation which are beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation the person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of the stockholder and (ii)
the class and number of shares of the corporation which are beneficially owned
by the stockholder. At the request of the board of directors, any person
nominated by the board of directors for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for
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election as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 13. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by these bylaws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. This section sets forth only the procedure by
which nominations for directors may be made and does not in any way grant
additional rights to stockholders beyond those currently afforded them by law.
ARTICLE V.
DIRECTORS
SECTION 1. GENERAL POWERS. The property, business and affairs of the
corporation shall be managed by its board of directors which may exercise all
powers of the corporation and do all lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The board of directors
shall consist of not less than seven nor more than 13 members; however, if the
corporation has outstanding any shares of one or more series of stock with
conditional rights to elect a set number of directors, and if the conditions
precedent to the exercise of any such rights arise, the number of directors of
the corporation shall be automatically increased to permit the exercise of the
voting rights of each such series of stock. The directors shall be elected in
the manner set forth in Article Ninth of the Certificate of Incorporation of the
corporation. The term of office of directors shall be three years except as
provided in Article Ninth of the Certificate of Incorporation of the
corporation. Directors need not be stockholders or residents of the State of
Delaware.
SECTION 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancies on
the board of directors or any newly created directorships shall be filled by the
board of directors in the manner set forth in Article Ninth of the Certificate
of Incorporation of the corporation. If the directors then in office shall
constitute less than a majority of the whole board (as constituted immediately
prior to any increase therein), then upon application, any stockholder or
stockholders holding at least ten percent of the total number of shares of the
capital stock of the corporation at the time outstanding having the right to
vote for directors may require the board of directors to call a special meeting
of the stockholders for the purpose of electing directors to fill the vacancy or
vacancies or newly created directorships or to replace the director or directors
chosen by the directors then in office as aforesaid. The person or persons
elected at a special meeting of the stockholders shall serve as director or as
directors until the next annual meeting of stockholders and until their
successors are duly elected and qualified and shall displace any person or
persons who may theretofore have been appointed by the directors then in office
as aforesaid.
SECTION 4. CATASTROPHE. During any emergency period following a
national catastrophe due to enemy attack, or act of God, a majority of the
surviving members of the board who have not been rendered incapable of acting
due to physical or mental incapacity or due to the difficulty of transportation
to the place of the meeting shall constitute a quorum for the purpose of filling
vacancies on the board of directors and among the elected and appointed officers
of the corporation.
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SECTION 5. PLACE OF MEETINGS. The directors of the corporation may hold
their meetings, both regular and special, at a place or places within or without
the State of Delaware that the board of directors may from time to time
determine.
SECTION 6. FIRST MEETING. The first meeting of the board of directors
following the annual meeting of stockholders shall be held at the time and place
that shall be fixed by the chairman of the board and shall be called in the same
manner as a special meeting.
SECTION 7. REGULAR MEETINGS. Regular meetings of the board of directors
may be held without notice at the time and place that shall from time to time be
determined by the board of directors.
SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by the chairman of the board on three days notice to each
director, either personally or by mail, by telegram, or by facsimile or other
lawful means; special meetings of the board of directors shall be called by the
chairman of the board or secretary in like manner and upon like notice upon the
written request of two directors.
SECTION 9. QUORUM. At all meetings of the board of directors, a
majority of the directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting, at which there is a quorum present, shall be
the act of the board of directors, except as may be otherwise specifically
provided by statute, the Certificate of Incorporation or by these bylaws. If at
any meeting of the board of directors there shall be less than a quorum present,
a majority of those present may adjourn the meeting from time to time without
notice, other than by announcement at the meeting, until a sufficient number of
directors to constitute a quorum shall attend. At any adjourned meeting at which
a quorum shall be present, any business may be transacted which might have been
transacted at the original meeting as originally notified.
SECTION 10. BUSINESS TO BE CONDUCTED. Unless otherwise indicated in the
notice, any and all business may be transacted at a regular or special meeting
of the board of directors. In the event a special meeting of the board of
directors is held without notice, any and all business may be transacted at the
meeting provided all directors are present.
SECTION 11. ORDER OF BUSINESS. At all meetings of the board of
directors, business shall be transacted in the order that from time to time the
board may determine by resolution. At all meetings of the board of directors the
chairman of the board or in his absence the vice chairman shall preside. In the
absence of the chairman and vice chairman of the board, the directors present
shall elect any director as chairman of the meeting.
SECTION 12. COMPENSATION OF DIRECTORS. Directors of the corporation
shall receive the compensation for their services that the board of directors
may from time to time determine and all directors shall be reimbursed for their
expenses of attendance at each regular or special meeting of the board or any
committee thereof.
SECTION 13. COMMITTEES. The board of directors may by resolution passed
by a majority of the board, in addition to the executive committee, designate
one or more committees. Each such committee shall consist of one or more of the
directors of the corporation, such number to be set by resolution of the board
of directors, or as otherwise provided in Section 14 below. Any
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committee, to the extent provided in the resolution, shall have and may exercise
the powers of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it. Any committee or committees shall
have the name or names that may be determined from time to time by resolution
adopted by the board of directors. Other than for a committee of one director,
the chairman of the board shall be an ex officio member of any board committee
except the audit committee, the management development and compensation
committee, and the stock option plan committee.
SECTION 14. EXECUTIVE COMMITTEE.
A. MEMBERS. The executive committee shall consist of such number of
directors as set by resolution of the board of directors, with a minimum of four
members, and shall include the chairman and vice chairman of the board as ex
officio members, together with the other members of the board of directors, as
may be the case, designated by the board of directors.
B. TERM OF OFFICE. Each of the elected members of the executive
committee shall be elected for a one year term and shall serve until his
successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the executive committee shall
be held each year at the first meeting of the board of directors following the
annual meeting of stockholders. Should a member of the executive committee for
any reason be unable to serve for the term to which he was elected, the vacancy
shall be filled by the board of directors at its next meeting following the
occurrence of such vacancy.
D. COMPENSATION. Each member of the executive committee shall receive
the compensation that the board of directors shall from time to time determine
and shall be reimbursed for their expenses of attendance at regular or special
meetings.
E. CHAIRMAN AND SECRETARY OF THE EXECUTIVE COMMITTEE. The chairman and
secretary of the executive committee shall be elected by members of the
executive committee.
F. MEETINGS. Regular meetings of the executive committee may be held
without call or notice of the time and place that the executive committee
determines. Special meetings of the executive committee may be called by any
member, either personally or by mail, by telegram, by facsimile or other lawful
means forwarded not later than 48 hours prior to the date and time set forth for
the meeting. Upon request of any member, the secretary of the corporation shall
give the required notice calling the meeting.
G. QUORUM. At any meeting of the executive committee, a majority of the
committee members shall constitute a quorum. Any action of the executive
committee to be effective must be authorized by the affirmative votes of a
majority of committee members.
H. RULES. The executive committee shall fix its own rules of procedure,
provided the same do not contravene the provisions of the law, the Certificate
of Incorporation or these bylaws.
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I. AUTHORITY AND RESPONSIBILITY.
(a) The executive committee is vested with the authority to exercise
the full power of the board of directors, within the policies
established by the board of directors to govern the conduct of the
business of the corporation, in the intervals between meetings of the
board of directors.
(b) The executive committee, in addition to the general authority
vested in it, may be vested with other specific powers and authority by
resolution of the board of directors.
J. REPORTS. All action by the executive committee shall be reported to
the board of directors at its meeting next succeeding the action, and shall be
subject to revision or alteration by the board of directors; provided, however,
that no rights or acts of third parties shall be affected by any such revision
or alteration.
SECTION 15. AUDIT COMMITTEE.
A. MEMBERS. The audit committee shall include only outside directors of
the corporation.
B. TERM OF OFFICE. Each of the elected members of the audit committee
shall be elected for a one year term and shall serve until a successor shall
have been duly elected and qualified.
C. ELECTION. The election of members of the audit committee shall be
held each year at the first meeting of the board of directors following the
annual meeting of stockholders. Should a member of the audit committee for any
reason be unable to serve for the term to which he was elected, the vacancy
shall be filled by the board of directors at its next meeting.
D. COMPENSATION. Each member of the audit committee shall receive the
compensation the board of directors determines and shall be reimbursed for their
expenses for attendance at regular or special meetings.
E. CHAIRMAN AND SECRETARY OF THE AUDIT COMMITTEE. The chairman and
secretary of the audit committee shall be elected by the members of the audit
committee.
F. MEETINGS. Regular meetings of the audit committee may be held
without call or notice of the time and place that the audit committee
determines. Special meetings of the audit committee may be called by any member,
either personally or by mail, by telegram, by facsimile or other lawful means
forwarded not later than 48 hours prior to the date and time set forth for the
meeting. Upon request of any member, the secretary of the corporation shall give
the required notice calling the meeting.
G. QUORUM. At any meeting of the audit committee, a majority of
committee members shall constitute a quorum. Any action of the audit committee
to be effective must be authorized by the affirmative votes of a majority of
committee members.
H. RULES. The audit committee shall determine its own rules of
procedure, provided the rules do not contravene the provisions of the law, the
Certificate of Incorporation or these bylaws.
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I. AUTHORITY AND RESPONSIBILITY.
(a) The audit committee is vested with the authority to (i) review with
the independent and internal auditors of the corporation their
respective audit and review programs and procedures; (ii) review the
corporation's financial statements; (iii) review the adequacy of the
corporation's system of internal accounting controls and the scope and
results of internal audit engagements, special services provided by
them and related fees; and (iv) make recommendations to the board of
directors regarding the independence of the independent auditors and
their engagement or discharge.
(b) The audit committee, in addition to the authority vested in it
under subsection (a) above, may be vested with other specific powers
and authority by resolution of the board of directors.
J. REPORTS. All action by the audit committee shall be reported to the
board of directors at its next meeting, and shall be subject to revision or
alteration by the board of directors.
SECTION 16. MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
A. MEMBERS. The management development and compensation committee shall
include only outside directors of the corporation.
B. TERM OF OFFICE. Each of the elected members of the management
development and compensation committee shall be elected for a one year term and
shall serve until a successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the management development and
compensation committee shall be held each year at the first meeting of the board
of directors following the annual meeting of stockholders. Should a member of
the management development and compensation committee for any reason be unable
to serve for the term to which he was elected, the vacancy shall be filled by
the board of directors at its next meeting.
D. COMPENSATION. Each member of the management development and
compensation committee shall receive the compensation the board of directors
determines and shall be reimbursed for their expenses for attendance at regular
or special meetings.
E. CHAIRMAN AND SECRETARY OF THE MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE. The chairman and secretary of the management development
and compensation committee shall be elected by the members of the management
development and compensation committee.
F. MEETINGS. Regular meetings of the management development and
compensation committee may be held without call or notice of the time and place
that the management development and compensation committee determines. Special
meetings of the management development and compensation committee may be called
by any member, either personally or by mail, by telegram, by facsimile or other
lawful means forwarded not later than 48 hours prior to the date and time set
forth for the meeting. Upon request of any member, the secretary of the
corporation shall give the required notice calling the meeting.
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G. QUORUM. At any meeting of the management development and
compensation committee, a majority of committee members shall constitute a
quorum. Any action of the management development and compensation committee to
be effective must be authorized by the affirmative votes of a majority of
committee members.
H. RULES. The management development and compensation committee shall
determine its own rules of procedure, provided the rules do not contravene the
provisions of the law, the Certificate of Incorporation or these bylaws.
I. AUTHORITY AND RESPONSIBILITY. The management development and
compensation committee has three principal responsibilities:
(a) to monitor the corporation's management resources, structure,
succession planning, development, and selection process, and the
performance of key executives;
(b) to review and approve executive compensation and changes; and
(c) to make such reports on executive compensation as appropriate or
required.
The management development and compensation committee also serves as
the committee administering all incentive compensation plans other than the
corporation's stock option plans.
J. REPORTS. All action by the management development and compensation
committee shall be reported to the board of directors at its next meeting, and
shall be subject to revision or alteration by the board of directors.
SECTION 17. STOCK OPTION PLAN COMMITTEE
A. MEMBERS. The stock option plan committee shall include only
directors of the corporation who qualify as "outside directors" pursuant to
Section 162(m) or any successor section(s) of the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
B. TERM OF OFFICE. Each of the elected members of the stock option plan
committee shall be elected for a one year term and shall serve until a successor
shall have been duly elected and qualified.
C. ELECTION. The election of members of the stock option plan committee
shall be held each year at the first meeting of the board of directors following
the annual meeting of stockholders. Should a member of the stock option plan
committee for any reason be unable to serve for the term to which he was
elected, the vacancy shall be filled by the board of directors at its next
meeting.
D. COMPENSATION. Each member of the stock option plan committee shall
receive the compensation the board of directors determines and shall be
reimbursed for their expenses for attendance at regular or special meetings.
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E. CHAIRMAN AND SECRETARY OF THE STOCK OPTION PLAN COMMITTEE. The
chairman and secretary of the stock option plan committee shall be elected by
the members of the stock option plan committee.
F. MEETINGS. Regular meetings of the stock option plan committee may be
held without call or notice of the time and place that the stock option plan
committee determines. Special meetings of the stock option plan committee may be
called by any member, either personally or by mail, by telegram, by facsimile or
other lawful means forwarded not later than 48 hours prior to the date and time
set forth for the meeting. Upon request of any member, the secretary of the
corporation shall give the required notice calling the meeting.
G. QUORUM. At any meeting of the stock option plan committee, a
majority of committee members shall constitute a quorum, provided that such
quorum shall not be less than two members. Any action of the stock option plan
committee to be effective must be authorized by the affirmative votes of a
majority of committee members.
H. RULES. The stock option plan committee shall determine its own rules
of procedure, provided the rules do not contravene the provisions of the law,
the Certificate of Incorporation or these bylaws.
I. AUTHORITY AND RESPONSIBILITY. The stock option plan committee has
two principal responsibilities:
(a) to monitor and report on the corporation's stock option plans; and
(b) to establish any performance goals under which compensation in the
form of stock option grants is paid to employees of the corporation,
and to make such grants of stock options, in the discretion of the
stock option plan committee, on the terms and conditions set forth in
the option plans or otherwise established by the stock option plan
committee.
J. REPORTS. All action by the stock option plan committee shall be
reported to the board of directors at its next meeting, and is subject to
ratification by the board of directors.
SECTION 18. NOMINATING COMMITTEE.
A. MEMBERS. The nominating committee may consist of any of the members
of the board of directors.
B. TERM OF OFFICE. Each of the elected members of the nominating
committee shall be elected for a one year term and shall serve until a successor
shall have been duly elected and qualified.
C. ELECTION. The election of members of the nominating committee shall
be held each year at the first meeting of the board of directors following the
annual meeting of stockholders. Should a member of the nominating committee for
any reason be unable to serve for the term to which he was elected, the vacancy
shall be filled by the board of directors at its next meeting.
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D. COMPENSATION. Each member of the nominating committee shall receive
the compensation the board of directors determines and shall be reimbursed for
their expenses for attendance at regular or special meetings.
E. CHAIRMAN AND SECRETARY OF THE NOMINATING COMMITTEE. The chairman and
secretary of the nominating committee shall be elected by the members of the
nominating committee.
F. MEETINGS. Regular meetings of the nominating committee may be held
without call or notice of the time and place that the nominating committee
determines. Special meetings of the nominating committee may be called by any
member, either personally or by mail, by telegram, by facsimile or other lawful
means forwarded not later than 48 hours prior to the date and time set forth for
the meeting. Upon request of any member, the secretary of the corporation shall
give the required notice calling the meeting.
G. QUORUM. At any meeting of the nominating committee, a majority of
committee members shall constitute a quorum. Any action of the nominating
committee to be effective must be authorized by the affirmative votes of a
majority of committee members.
H. RULES. The nominating committee shall determine its own rules of
procedure, provided the rules do not contravene the provisions of the law, the
Certificate of Incorporation or these bylaws.
I. AUTHORITY AND RESPONSIBILITY.
(a) The nominating committee is vested with the authority and
responsibility to (i) recommend to the board of directors criteria for
selection of candidates to serve on the board of directors; (ii)
recommend to the board of directors qualified candidates to fill any
newly created directorships or vacancies on the board of directors
which occur between annual meetings of stockholders without regard to
race, sex, age, religion or physical disability; (iii) recommend
candidates for election to the committees of the board of directors;
(iv) periodically review, assess, and make recommendations to the board
of directors with regard to the size and composition of the board of
directors, and its evaluation of incumbent directors; (v) cause the
names of all director candidates that are approved by the board of
directors to be listed in the corporation's proxy materials and support
the election of all candidates so nominated by the board of directors
to the extent permitted by law; (vi) evaluate and recommend to the
board of directors potential candidates to serve in the future on the
board of directors to assure the continuity and succession of the board
of directors; and (vii) otherwise aid in attracting qualified
candidates to the board of directors.
(b) Only candidates recommended by the nominating committee shall be
eligible for nomination by the board of directors for election, or to
fill a vacancy or any newly created directorship, but if the board does
not approve one or more of the candidates recommended by the nominating
committee, the nominating committee shall submit a recommendation of
other candidates. If for any reason the nominating committee shall fail
to act or determines not to make a recommendation, the board of
directors shall fill any vacancy or newly created directorship in the
manner that it deems appropriate.
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(c) The nominating committee, in addition to the authority vested in it
under subsections (a) and (b) above, shall have all additional powers
necessary to carry out its responsibilities, and may be vested with
other specific powers and authority by resolution of the board of
directors.
J. REPORTS. All action by the nominating committee shall be reported to
the board of directors at its next meeting, and shall be subject to revision or
alteration by the board of directors.
K. RIGHTS OF STOCKHOLDERS. Nothing in this Section 18 shall affect or
restrict the right of any stockholder to nominate any person for election as a
director where such nomination is otherwise authorized by law and made in
accordance with Section 13 of Article IV of these bylaws.
SECTION 19. ELECTION OF OFFICERS. At the first meeting of the board of
directors in each year, at which a quorum shall be present, following the annual
meeting of the stockholders of the corporation, the board of directors shall
proceed to the election of the officers of the corporation, except regional
officers who are subject to appointment in accordance with Section 19 of Article
VI of these bylaws.
SECTION 20. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if prior to the action a written consent thereto
is signed by all members of the board of directors or of the committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the board of directors or committee.
SECTION 21. WAIVER OF NOTICE. Whenever any notice whatever is required
to be given pursuant to the provisions of a statute, the Certificate of
Incorporation or these bylaws of the corporation, a waiver thereof in writing
signed by the person or persons entitled to the notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI.
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
chairman of the board, vice chairman of the board, president, one or more
executive vice presidents, one or more senior vice presidents, one or more vice
presidents, secretary, treasurer, controller and such assistant vice presidents,
assistant secretaries, assistant treasurers and assistant controllers as the
board of directors may provide for and elect. The chairman of the board and the
vice chairman of the board shall be members of the board of directors. Any two
or more offices may be held by the same person. The board of directors may
appoint such other officers as they shall deem necessary, who shall have the
authority and shall perform the duties that from time to time may be prescribed
by the board of directors. In its discretion, the board of directors by a vote
of a majority thereof may leave unfilled for any period that it may fix by
resolution any office except those of president, treasurer and secretary.
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SECTION 2. ELECTION. The board of directors at their first meeting
after each annual meeting of the stockholders or at any regular or special
meeting shall elect, as may be required, a chairman of the board, vice chairman
of the board, president, and one or more executive vice presidents, senior vice
presidents, vice presidents, a secretary, treasurer, controller, and assistant
vice presidents, assistant secretaries, assistant treasurers, and assistant
controllers.
SECTION 3. TENURE. The officers of the corporation elected by the board
of directors shall hold office for one year and until their successors are
chosen and qualify in their stead. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors.
SECTION 4. SALARIES. The salaries of the officers of the corporation
shall be recommended by the management development and compensation committee
and approved by the board of directors.
SECTION 5. VACANCIES. If the office of any officer of the corporation
becomes vacant by reason of death, resignation, disqualification or otherwise,
the directors by a majority vote, may choose his successor or successors.
SECTION 6. RESIGNATION. Any officer may resign his office at any time,
such resignation to be made in writing and take effect at the time of receipt by
the corporation, unless some time be fixed in the resignation and then from that
time. The acceptance of a resignation shall not be required to make it
effective.
SECTION 7. DELEGATION OF DUTIES. Duties of officers may be delegated in
case of the absence of any officer of the corporation or for any reason that the
board of directors may deem sufficient. The board of directors may delegate the
powers or duties of the officer to any other officer or to any director, except
as otherwise provided by statute, for the time being, provided a majority of the
entire board of directors concurs therein.
SECTION 8. CHAIRMAN OF THE BOARD. The chairman of the board shall be
the chief executive officer and shall have, subject to the direction of the
board of directors, general control and management of the corporation's business
and affairs and shall see that all the policies and resolutions of the board of
directors are carried into effect, subject, however, to the right of the board
of directors to delegate any specific powers, except such as may be by statute
exclusively conferred on the president, to any other officer or officers of the
corporation. He shall preside at all meetings of stockholders and the board of
directors at which he may be present.
SECTION 9. VICE CHAIRMAN OF THE BOARD. The vice chairman shall preside
at all meetings of the board of directors and stockholders from which the
chairman of the board may be absent, and shall perform such other duties that
shall be specifically assigned to him from time to time by the board of
directors or the chairman of the board.
SECTION 10. PRESIDENT. The president shall be the chief operating
officer and shall perform those duties that shall be specifically assigned to
him from time to time by the board of directors. In the absence of the chief
executive officer or in the event of his death, inability or refusal to act, the
president shall perform the duties of the chief executive officer, and when so
acting shall have the powers of and be subject to all the restrictions upon the
chief executive officer.
Page 14
<PAGE> 15
SECTION 11. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS, AND VICE
PRESIDENTS. In the absence of the president or in the event of his death,
inability or refusal to act, the senior executive vice president present shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. In the
absence of the president and all executive or senior vice presidents, or in the
event of their deaths, inability or refusal to act, a vice president designated
by the board of directors, or in case the board of directors has failed to act,
designated by the chief executive officer, shall perform the duties of the
president and when so acting shall have all the powers of and be subject to all
the restrictions upon the president. The executive vice presidents, the senior
vice presidents, and all other vice presidents shall perform those duties
consistent with these bylaws and that may be specifically designated by the
president or by the board of directors.
SECTION 12. ASSISTANT VICE PRESIDENTS. The assistant vice presidents
shall perform those duties, not inconsistent with these bylaws, the Certificate
of Incorporation or statute, that may be specifically designated by the board of
directors or the president. In the absence of the executive vice presidents,
senior vice presidents, or vice presidents, an assistant vice president (or in
the event there be more than one assistant vice president, the assistant vice
presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the executive vice presidents, senior vice presidents or vice
presidents, and when so acting, shall have all the powers of and be subject to
all restrictions upon the executive vice presidents, the senior vice presidents,
and vice presidents.
SECTION 13. SECRETARY. The secretary shall attend and keep all the
minutes of all meetings of the board of directors and all meetings of the
stockholders and, when requested by the board of directors, of any committees of
the board of directors. He shall give, or cause to be given, notice of all
meetings of the stockholders and board of directors and when so ordered by the
board of directors, shall affix the seal of the corporation thereto; he shall
have charge of all of those books and records that the board of directors may
direct, all of which shall, at all reasonable times, be open to the examination
of any director at the office of the corporation during business hours; he
shall, in general, perform all of the duties incident to the office of secretary
subject to the control of the board of directors or of the president, under
whose supervision he shall be, and shall do and perform any other duties that
may from time to time be assigned to him by the board of directors.
SECTION 14. ASSISTANT SECRETARIES. In the absence of the secretary or
in the event of his death, inability or refusal to act, the assistant secretary
(or in the event there be more than one assistant secretary, the assistant
secretaries in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the secretary, and when so acting shall have all the powers of and
be subject to all the restrictions upon the secretary and shall perform any
other duties that may from time to time be assigned to him by the board of
directors, the president or the secretary.
Page 15
<PAGE> 16
SECTION 15. TREASURER. The treasurer shall have custody of and be
responsible for all funds and securities of the corporation, receive and give
receipts for money due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in those
banks or depositories that shall be selected and designated by the board of
directors and shall in general perform all of the duties incident to the office
of treasurer and any other duties that may be assigned to him by the president
or by the board of directors. If required by the board of directors, the
treasurer shall give bond for the faithful discharge of his duties in the sum
and with the surety or sureties as the board of directors shall determine.
SECTION 16. ASSISTANT TREASURERS. In the absence of the treasurer or in
the event of his death, inability or refusal to act, the assistant treasurer (or
in the event there be more than one assistant treasurer, the assistant
treasurers in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the treasurer and when so acting shall have all the powers and be
subject to all the restrictions upon the treasurer, and shall perform any other
duties that from time to time may be assigned to him by the president, treasurer
or the board of directors. The assistant treasurers shall, if required by the
board of directors, give bonds for the faithful discharge of their duties in the
sums and with the surety or sureties that the board of directors shall
determine.
SECTION 17. CONTROLLER. The controller shall maintain adequate records
of all assets, liabilities and transactions of the corporation; see that
adequate audits thereof are currently and regularly made; and, in conjunction
with other officers and department heads, initiate and enforce measures and
procedures whereby the business of the corporation shall be conducted with the
maximum safety, efficiency and economy. Except as otherwise determined by the
board of directors, or lacking a determination by the board of directors, then
by the president, his duties and powers shall extend to all subsidiary
corporations and, so far as may be practicable, to all affiliate corporations.
He shall have any other powers and perform other duties that may be assigned to
him by the president or by the board of directors. If required by the board of
directors, the controller shall give bond for the faithful discharge of his
duties in the sum and with the surety or sureties as the board of directors
shall determine.
SECTION 18. ASSISTANT CONTROLLERS. In the absence of the controller or
in the event of his death, inability or refusal to act, the assistant controller
(or in the event there be more than one assistant controller, the assistant
controllers, in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the controller and when so acting shall have all the powers and be
subject to all the restrictions upon the controller, and shall perform any other
duties that from time to time may be assigned to him by the president,
controller or the board of directors. The assistant controllers shall, if
required by the board of directors, give bonds for the faithful discharge of
their duties in the sums and with the surety or sureties that the board of
directors shall determine.
SECTION 19. REGIONAL VICE PRESIDENTS.
A. ELECTION. One or more regional vice presidents may be appointed by
the chairman of the board, or the authority for such appointments may be
delegated by the chairman of the board to the president of the corporation.
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<PAGE> 17
B. TENURE. The regional vice presidents appointed by the chairman of
the board or the president of the corporation shall hold office for one year and
until their successors are chosen and qualify in their stead. Any regional vice
president so appointed may be removed at any time by the chairman of the board
or the president of the corporation.
C. DUTIES. The regional vice presidents shall do and perform those
duties that shall from time to time be specifically designated or assigned by
the chairman of the board or the president of the corporation; however, the
regional vice presidents shall not perform "policy-making functions" as defined
pursuant to Section 16 or any successor section(s) of the Securities Exchange
Act of 1934, as amended, and shall be deemed not to be subject to such Section
16 and the rules and regulations promulgated thereunder.
ARTICLE VII.
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
SECTION 1. The board of directors shall cause the corporation to
indemnify any person (and that person's heirs and personal representatives) who
was or is a party or is threatened or expected to be made a party to any
threatened, pending or completed action, suit, arbitration or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee, partner or
agent of another corporation, partnership (including a partnership in which the
corporation is a partner), joint venture, trust or other enterprise, against
expenses (including, but not limited to, attorneys' fees, expert fees, bonds,
prospective or retroactive insurance premiums or costs, litigation, appeal and
court costs and out-of-pocket expenses of such person during any investigation
hearing, arbitration, trial, or appeal of any such action, suit or proceeding,
including any interest payable thereon), judgments, damages, arbitration awards,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, arbitration or proceeding, including any
interest payable thereon, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. The board of directors shall indemnify any person (and that
person's heirs and personal representatives) who was or is a party or is
threatened or expected to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, partner or agent of
another corporation, partnership (including a partnership in which the
corporation is a partner), joint venture, trust or other enterprise against
expenses (including, but not limited to, attorneys' fees, expert fees, bonds,
prospective or retroactive insurance premiums or costs, litigation, appeal and
court costs, and
Page 17
<PAGE> 18
out-of-pocket expenses of such person during any investigation, hearing, trial
or appeal of any such action or suit, including any interest payable thereon),
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. To the extent that a present or past director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, arbitration or proceeding referred to
in Sections 1 and 2, or in defense of claim, issue or matter therein, he shall
be indemnified against expenses (including, but not limited to, attorneys' fees,
expert fees, bonds, prospective or retroactive insurance premiums or costs,
litigation, appeal, and court costs, and out-of-pocket expenses of such person
during any investigation, hearing, arbitration, trial or appeal of any such
action, suit or proceeding) actually and reasonably incurred by him in
connection therewith, including any interest payable thereon.
SECTION 4. The board of directors shall cause the corporation to
advance to any person covered by Sections 1 or 2 the expenses (including, but
not limited to, attorneys' fees, expert fees, bonds, prospective or retroactive
insurance premiums or costs, litigation, appeal, and court costs and
out-of-pocket expenses, of such person during any investigation, hearing,
arbitration, trial or appeal of any such action, suit, arbitration or
proceeding) incurred by that person in defending a threatened, pending, or
completed civil, criminal, administrative, or investigative action suit,
arbitration, or proceeding, including any interest payable thereon, in advance
of the final disposition of such action, suit or proceeding.
SECTION 5. Any advance by the board of directors under Section 4 above
to any employee or agent who is not a present or past director or officer of the
corporation shall be conditional upon evidence of compliance with the terms and
conditions, if any, deemed appropriate and specified by the board of directors
for such advance if such employee or agent is determined ultimately to be not
legally entitled to indemnification from the corporation.
SECTION 6. Any advance authorized by the board of directors under
Section 4 above to a present or past officer or director shall be conditional
upon prior receipt by the corporation of a written undertaking from that officer
or director to repay such advance if he is determined ultimately to be not
legally entitled to indemnification from the corporation. Such undertaking shall
be in the form of a simple agreement by the officer or director to repay
advances made to him in the event that it is determined ultimately that he is
not legally entitled to indemnification by the corporation. Such undertaking
shall specifically state that no bond, collateral or other security shall be
required by the officer or director to insure its performance and that no
interest on any amount advanced shall be required to be paid to the corporation
if the officer or director is determined ultimately to be not legally entitled
to indemnification from the corporation.
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<PAGE> 19
SECTION 7. The board of directors, in its sole discretion, may
establish and may fund in advance and from time to time, in whole or in part, a
separate provision or provisions, which may be in the form of a trust fund,
periodic or advance retainers to counsel, or otherwise as the board of directors
may determine in each instance, to be used as payment and/or advances of
indemnification obligations under this Article VII to officers, directors,
employees and agents of the corporation; provided, however, that any amount
which is contributed to such fund shall not in any way be construed to be a
limitation on the amount of indemnification and/or advances of the corporation.
SECTION 8. The board of directors shall cause the corporation to pay to
any director, officer, employee or agent all expenses (including, but not
limited to, attorneys' fees, expert fees, bonds, prospective or retroactive
insurance premiums or costs, litigation, appeal, and court costs, and
out-of-pocket expenses of such person during any investigation, hearing,
arbitration, trial or appeal of any such action, suit, arbitration or
proceeding, including any interest payable thereon), which may be incurred by
such director, officer, employee or agent in enforcing his rights to
indemnification (as set forth herein in Sections 1, 2 and 3) and/or advances (as
set forth herein in Section 4) whether or not such director, officer, employee
or agent is successful in enforcing such rights and whether or not suit or other
proceedings are commenced.
SECTION 9. Any amendment to this Article VII shall only apply
prospectively and shall in no way affect the corporation's obligations to
indemnify and make advances to officers, directors, employees and agents as set
forth in this Article VII for actions or events which occurred before any such
amendment, and provided that any amendment to this Article VII shall require
affirmative vote of four-fifths of the entire board of directors.
SECTION 10. Any indemnification granted under the provisions of
Sections 1, 2, 3 and 8 above shall be subject to the provisions of subsections
(d), (e), (f) and (g) of Section 145 of the General Corporation Law of the State
of Delaware.
ARTICLE VIII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation. Such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loan shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name, unless
authorized by resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other order or
other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents and in such manner that shall from time to time be
determined by resolution of the board of directors.
Page 19
<PAGE> 20
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in the bank or banks or other depositories that the board of directors may
elect.
ARTICLE IX.
VOTING OF STOCK OF OTHER CORPORATIONS
Unless otherwise ordered by the board of directors, the chairman of the
board shall have full power and authority on behalf of the corporation to act
and vote at any meeting of stockholders of any corporation in which the
corporation may hold stock, and at any such meeting, shall possess, and may
exercise, any and all of the rights and powers incident to the ownership of the
stock, which, as the owner thereof, the corporation might have possessed and
exercised if present. The board of directors by resolution from time to time,
may confer like powers upon any other person or persons.
ARTICLE X.
NOTICES
SECTION 1. FORM OF NOTICE. Whenever under the provisions of the
statutes, the Certificate of Incorporation, or these bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice, but the notice may be given in writing by mail, which shall
mean depositing same in a United States Postal Service post office or letter
box, in a postage paid, sealed envelope, addressed to the stockholder or
director at the address that appears on the books of the corporation or, in
default of other address, to such director or stockholder at the United States
Postal Service general post office in the City of Wilmington, Delaware, and the
notice shall be deemed to be given at the time when the same shall be thus
mailed or by any other means expressly provided for in these bylaws.
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provision of the statutes, the Certificate of Incorporation or
these bylaws, a waiver thereof in writing signed by the person or persons
entitled to the notice whether before or after the time stated therein shall be
deemed equivalent thereto.
ARTICLE XI.
STOCK CERTIFICATES
SECTION 1. CERTIFICATES FOR SHARES. The certificates for shares of the
capital stock of the corporation shall be in the form, not inconsistent with the
Certificate of Incorporation, that shall be approved by the board of directors.
The certificate shall be signed by the chairman of the board, president or a
vice president, and either the treasurer or an assistant treasurer, or the
secretary or an assistant secretary, but where the certificate is signed by a
transfer agent or an assistant transfer agent and a registrar, the signatures of
the chairman of the board, president, vice president, treasurer, assistant
treasurer, secretary or assistant secretary may be facsimiles. All certificates
shall be consecutively
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<PAGE> 21
numbered, and the name of the person owning the shares represented thereby, with
the number of shares and the date of issue shall be entered in the corporation's
books. No certificate shall be valid unless it is signed by the chairman of the
board, president, or a vice president, and either the treasurer or an assistant
treasurer, or the secretary or an assistant secretary, but where the certificate
is signed by a transfer agent or an assistant transfer agent and a registrar,
the signatures of the chairman of the board, president, vice president,
treasurer, assistant treasurer, secretary or assistant secretary may be
facsimiles. All certificates surrendered to the corporation shall be canceled,
and no new certificates shall be issued until the former certificate for the
same number of shares of the same class shall have been surrendered and
canceled.
SECTION 2. TRANSFER OF SHARES. Shares of the capital stock of the
corporation shall be transferred only on the books of the corporation by the
holder thereof in person or by his attorney upon surrender and cancellation of
certificates for the same number of shares.
SECTION 3. REGULATIONS. The board of directors shall have authority to
make any rules and regulations that they may deem expedient concerning the
issue, transfer and registration of certificates for shares of the capital stock
of the corporation. The board of directors may appoint one or more transfer
agents or assistant transfer agents and one or more registrars of transfers and
may require all certificates to bear the signature of the transfer agent or
assistant transfer agent and a registrar of transfers. The board of directors
may at any time terminate the appointment of any transfer agent or any assistant
transfer agent or any registrar of transfers by the vote of a majority of the
board of directors.
SECTION 4. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS' RIGHTS. The
board of directors may close the stock transfer books of the corporation for a
period not exceeding 50 days preceding the date of any meeting of stockholders,
or the date for payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or for a period not exceeding 50 days in connection with
obtaining the consent of stockholders for any purpose. In lieu of closing the
stock transfer books as aforesaid, the board of directors may fix a date not
exceeding 50 days preceding the date of any meeting of stockholders, or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent, as a record date
for the determination of the stockholders entitled to notice of, and to vote at,
any meeting and any adjournment thereof, or entitled to receive payment of any
dividend, or to any allotment of rights, or to exercise the rights in respect of
any change, conversion or exchange of capital stock, or to give such consent,
and in such case the stockholders and only the stockholders that shall be
stockholders of record on the date so fixed shall be entitled to the notice or
to receive payment of the dividend, or to receive the allotment of rights, or to
exercise the rights or to give such consent, as the case may be, notwithstanding
any transfer of any stock on the books of the corporation after any record date
fixed as aforesaid.
SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly shall not be bound to recognize any equitable or
other claim to or interest in the share or shares on the part of any other
person whether or not it shall have express or other notice thereof except as
otherwise provided by the laws of the State of Delaware.
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<PAGE> 22
SECTION 6. LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact with the person claiming
the certificate of stock to be lost or destroyed. When authorizing the issue of
a new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of the
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in a manner that it shall require for each share of stock
having voting power registered in his name and to give the corporation a bond in
the sum that it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
SECTION 7. DIVIDENDS. The board of directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Certificate of
Incorporation.
SECTION 8. RESERVE FUNDS. Before payment of any dividend there may be
set aside out of any funds of the corporation available for dividends the sum or
sums that the board of directors may from time to time in their absolute
discretion think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for any other purpose that the directors shall think conducive
to the interest of the corporation and the board of directors may modify or
abolish the reserve in the manner in which it was created.
ARTICLE XII.
GENERAL PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall begin
on the first day of January in each year.
SECTION 2. INSPECTION OF BOOKS. The board of directors shall determine
from time to time whether, and if allowed, when and under what conditions and
regulations, the accounts and books of the corporation (except as may be by
statute specifically open to inspection) or any of them, shall be open to the
inspection of the stockholders, and a stockholder's rights in this respect are,
and shall be, restricted and limited accordingly.
SECTION 3. GENDER. The use of the masculine gender in these bylaws
shall be deemed to include the feminine gender.
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<PAGE> 23
ARTICLE XIII.
AMENDMENTS TO AND SUSPENSION OF BYLAWS
SECTION 1. AMENDMENTS. Subject to the provisions of Section 12 of
Article IV, these bylaws may be altered or repealed at any regular meeting of
the stockholders or at any special meeting of the stockholders at which a quorum
is present or represented, provided notice of the proposed alteration or repeal
be contained in the notice of the special meeting, by the affirmative vote of a
majority of the stockholders entitled to vote at the meeting and present or
represented thereat, or by the affirmative vote of a majority of the board of
directors at any regular meeting of the board of directors or at any special
meeting of the board of directors, if notice of the proposed alteration or
repeal be contained in the notice of the special meeting.
SECTION 2. SUSPENSION. Any provision of these bylaws may be suspended
by vote of two-thirds of the votes cast upon the motion to suspend except that
the suspension of the bylaw provision might be in contravention of any provision
of any statute or of the Certificate of Incorporation.
* * *
Page 23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 59,285
<SECURITIES> 0
<RECEIVABLES> 168,974
<ALLOWANCES> 0
<INVENTORY> 35,562
<CURRENT-ASSETS> 282,853
<PP&E> 6,740,930
<DEPRECIATION> 2,922,640
<TOTAL-ASSETS> 4,144,294
<CURRENT-LIABILITIES> 238,893
<BONDS> 1,304,830
0
98,515
<COMMON> 124,724
<OTHER-SE> 1,739,422
<TOTAL-LIABILITY-AND-EQUITY> 4,144,294
<SALES> 679,478
<TOTAL-REVENUES> 677,756
<CGS> 535,705
<TOTAL-COSTS> 535,705
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,082
<INCOME-PRETAX> 53,943
<INCOME-TAX> 24,150
<INCOME-CONTINUING> 29,793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,793
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
<PAGE> 1
EXHIBIT 99.1
APACHE CORPORATION
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1998 1997 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EARNINGS
Pretax income from continuing operations(1) $ 53,943 $183,227 $258,640 $200,195
Add:Fixed charges excluding capitalized interest 60,430 54,801 78,531 68,091
-------- -------- -------- --------
Adjusted Earnings $114,373 $238,028 $337,171 $268,286
======== ======== ======== ========
FIXED CHARGES
Interest expense including capitalized interest(2) $ 90,498 $ 75,014 $105,148 $ 89,829
Amortization of debt expense 3,415 4,497 6,438 5,118
Interest component of lease rental expenditures(3) 2,788 2,191 3,438 3,856
Preferred stock requirements(4) 1,057 -- -- --
-------- -------- -------- --------
$ 97,758 $ 81,702 $115,024 $ 98,803
======== ======== ======== ========
Ratio of earnings to combined fixed charges and
preferred stock dividends 1.17 2.91 2.93 2.72
======== ======== ======== ========
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
EARNINGS
Pretax income from continuing operations(1) $ 33,143 $ 66,234 $ 62,067
Add:Fixed charges excluding capitalized interest 77,220 39,008 34,355
-------- -------- --------
Adjusted Earnings $110,363 $105,242 $ 96,422
======== ======== ========
FIXED CHARGES
Interest expense including capitalized interest(2) $ 88,057 $ 37,838 $ 34,205
Amortization of debt expense 4,665 3,987 3,896
Interest component of lease rental expenditures(3) 3,539 3,217 2,533
Preferred stock requirements (4) -- -- --
-------- -------- --------
$ 96,261 $ 45,042 $ 40,634
======== ======== ========
Ratio of earnings to combined fixed charges and
preferred stock dividends 1.15 2.34 2.37
======== ======== ========
</TABLE>
- ------------------
(1) Undistributed income of less-than-50%-owned affiliates is excluded.
(2) Apache guaranteed and was contingently liable for certain debt. This debt,
primarily associated with partnership operations, totaled $1.7 million at
December 31, 1996. The outstanding balance was repaid in January 1997 and
the facility was terminated. Fixed charges, relating to the debt for which
Apache was contingently liable, have not been included in the fixed
charges for any of the periods shown above.
(3) Represents the portion of rental expense assumed to be attributable to
interest factors of related rental obligations determined at interest
rates appropriate for the period during which the rental obligations were
incurred. Approximately 32% to 34% applies for all periods presented.
(4) Represents the amount of pre-tax earnings that would be required to cover
preferred stock dividends of $0.6 million for the nine months ended
September 30, 1998.
