<PAGE> 1
FILED PURSUANT TO RULE 424(b)(5) AND 424(c)
REGISTRATION STATEMENT NO. 333-32580
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES
AND ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JULY 21, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 28, 2000)
7,000,000 SHARES
[APACHE CORPORATION LOGO]
COMMON STOCK
----------------------
Apache Corporation is selling all of the shares. The international managers
are offering 1,400,000 shares outside the U.S. and Canada and the U.S.
underwriters are offering 5,600,000 shares in the U.S. and Canada.
The shares trade on the New York Stock Exchange and the Chicago Stock
Exchange under the symbol "APA." On July 21, 2000, the last sale price of the
shares as reported on the New York Stock Exchange was $48 11/16 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE S-11 OF THIS PROSPECTUS SUPPLEMENT.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Apache........................ $ $
</TABLE>
The international managers may also purchase up to an additional 210,000
shares from Apache at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus supplement to cover
over-allotments. The U.S. underwriters may similarly purchase up to an
additional 840,000 shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about , 2000.
----------------------
MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL
CREDIT SUISSE FIRST BOSTON SCHRODER SALOMON SMITH BARNEY
----------------------
The date of this prospectus supplement is , 2000.
<PAGE> 2
[MAP OF WORLDWIDE DISTRIBUTION OF PROVED RESERVES]
Percentages are calculated by combining Apache's December 31, 1999 proved
reserves with the proved reserves attributable to the properties acquired during
2000 and those Gulf of Mexico proved reserves anticipated to be acquired in the
pending Occidental transactions as of August 15, 2000.
Apache also has active exploration programs in Poland and offshore China.
OIL AND GAS TERMS
<TABLE>
<S> <C> <C>
When describing natural gas: Mcf = thousand cubic feet
MMcf = million cubic feet
Bcf = billion cubic feet
When describing oil: Bbl = barrel
Mbbls = thousand barrels
MMbbls = million barrels
When comparing natural gas to oil: 6 Mcf of gas = 1 bbl of oil equivalent
Boe = barrel of oil equivalent
Mboe = thousand barrels of oil equivalent
MMboe = million barrels of oil equivalent
</TABLE>
S-2
<PAGE> 3
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Oil and Gas Terms........................................... S-2
Prospectus Supplement Summary............................... S-4
Special Note Regarding Forward-Looking Statements........... S-10
Risk Factors................................................ S-11
Use of Proceeds............................................. S-14
Capitalization.............................................. S-15
Price Range of Common Stock................................. S-16
Dividend Policy............................................. S-16
Material United States Federal Tax Consequences to
Non-United States Holders of Common Stock................. S-16
Underwriting................................................ S-19
Validity of Securities...................................... S-22
Legal Matters............................................... S-22
Experts..................................................... S-22
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Cautionary Statements Regarding Forward-Looking
Statements................................................ 3
Apache Corporation.......................................... 3
Apache Trusts............................................... 3
Ratios of Earnings to Fixed Charges and to Combined Fixed
Charges and Preferred Stock Dividends..................... 4
Use of Proceeds............................................. 5
The Securities Apache and the Apache Trusts May Offer....... 5
Description of Capital Stock................................ 7
Description of Depositary Shares............................ 15
Description of Debt Securities.............................. 18
Description of Trust Preferred Securities................... 32
Description of Trust Preferred Securities Guarantees........ 38
Description of Common Stock Purchase Contracts and Units.... 41
Book-Entry Securities....................................... 41
Plan of Distribution........................................ 43
Legal Matters............................................... 44
Experts..................................................... 44
</TABLE>
----------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the U.S. underwriters and the international managers have not,
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not, and the U.S. underwriters and the international managers are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus supplement, the accompanying prospectus and the documents
incorporated by reference is accurate only as of their respective dates. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
S-3
<PAGE> 4
PROSPECTUS SUPPLEMENT SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus supplement and the accompanying
prospectus and the documents incorporated and deemed to be incorporated by
reference therein, including the financial data and related notes, before making
an investment decision.
Unless this prospectus supplement otherwise indicates or the context
otherwise requires, the terms "we," "our," "us" or "Apache" as used in this
prospectus supplement refer to Apache Corporation.
APACHE CORPORATION
Apache Corporation is a Delaware corporation formed in 1954. We are an
independent energy company that explores for, acquires and develops oil and gas
reserves and produces natural gas, crude oil, condensate and natural gas
liquids.
In North America, our exploration and production interests are focused on
the Gulf of Mexico, the Anadarko Basin, the Permian Basin, the Gulf Coast and
the Western Sedimentary Basin of Canada. Outside North America, we have
exploration and production interests offshore Western Australia and in Egypt and
exploration interests in Poland and offshore The People's Republic of China.
In 1999, we achieved our 22nd consecutive year of production growth (up 17
percent) and our 12th consecutive year of oil and gas reserves growth (up 32
percent). Our 1999 average daily production was:
- 95 Mbbls of crude oil, condensate and natural gas liquids; and
- 656 MMcf of natural gas.
As of December 31, 1999, our estimated worldwide proved reserves totaled
807 MMboe, including:
- 415 MMbbls of crude oil, condensate and natural gas liquids; and
- 2,352 Bcf of natural gas.
STRATEGY
Our strategy is to increase oil and gas reserves, production, cash flow and
earnings through a balanced growth program that involves:
- exploiting our existing asset base;
- acquiring properties to which we can add incremental value; and
- investing in high-potential exploration prospects.
Exploiting Existing Asset Base. We seek to maximize the value of our
existing asset base by reducing operating costs per unit and increasing the
amount of recoverable reserves. In order to achieve these objectives, we
rigorously examine operations to reduce costs, identify production enhancement
initiatives such as workovers and recompletions employing new technology, and
divest marginal and non-strategic properties.
Acquiring Properties To Which We Can Add Incremental Value. We seek to
purchase reserves in our core areas at attractive prices by avoiding auction
processes and focusing on negotiated transactions with a higher probability of
completion. Our aim is to follow each acquisition with a cycle of reserve
enhancement, acquisition of additional interests and cash flow acceleration,
facilitating asset growth and debt reduction. During the past decade, we have
consistently succeeded in adding value to acquired properties through this
strategy.
S-4
<PAGE> 5
Investing In High-Potential Exploration Prospects. We seek to concentrate
our exploratory investments in a select number of international areas and to
become the dominant operator in those regions. We believe that these
investments, although higher-risk, offer the potential for significant reserve
additions. Our international investments and exploration activities are a
significant component of our long-term growth strategy. They complement our
North American operations, which are more development oriented.
A critical component in implementing our three-pronged growth strategy is
maintenance of significant financial flexibility. We are committed to preserving
a strong balance sheet and credit position to give us the foundation required to
pursue our growth initiatives.
RECENT DEVELOPMENTS
COMPLETED ACQUISITIONS
A significant part of our growth strategy is to increase oil and gas
reserves, production and cash flow through an active acquisition program. Apache
has consummated numerous acquisitions since January 1, 2000.
On January 24, 2000, Apache completed the acquisition of producing
properties located in Western Oklahoma and the Texas Panhandle, formerly owned
by a subsidiary of Repsol YPF and by its affiliate Crescendo Resources, LP, for
approximately $117 million, plus assumed liabilities of approximately $30
million. The acquisition included estimated proved reserves of 34 MMboe,
consisting of 1.8 MMbbls of crude oil and 196 Bcf of natural gas.
On June 30, 2000, Apache completed the acquisition of long-lived producing
properties in the Permian Basin and South Texas from Collins & Ware, Inc., for
approximately $317 million, subject to normal post-closing adjustments. The
properties have proved reserves of 83 MMboe, of which one-third is liquid
hydrocarbons, consisting of 29 MMbbls of crude oil and 327 Bcf of natural gas.
Apache has also completed several smaller acquisitions since January 1,
2000, for an aggregate of approximately $37 million. Together, these
acquisitions include proved reserves of approximately 9.6 MMboe.
Our acquisitions thus far in 2000, when combined with the Occidental
transactions described below, have added estimated proved reserves of 184 MMboe
at an aggregate cost of approximately $856 million, plus assumed liabilities of
approximately $30 million.
PENDING TRANSACTIONS WITH OCCIDENTAL
On July 14, 2000, Apache signed a definitive agreement relating to a
multi-step transaction to acquire a Delaware limited liability company ("LLC")
owned by subsidiaries of Occidental Petroleum Corporation and the LLC's natural
gas production for a total purchase price of $385 million, a portion of which
will be paid in future years, subject to normal closing adjustments.
These transactions are a continuation of Apache's desire to build a strong
presence on the Outer Continental Shelf of the Gulf of Mexico and were made
available as a result of Occidental's desire to exit the area. We have estimated
that four of the LLC properties make up 65% of the net reserves. Management
believes that the complexity of the LLC's properties makes them good candidates
for Apache's exploitation strategy as many have not had significant capital
investment in recent years.
The LLC properties are located in 32 fields on 93 blocks on the Outer
Continental Shelf, and we expect half of the fields to be operated by Apache as
the managing member of the LLC. The estimated proved reserves attributed to the
interests we are acquiring are 56.8 MMboe, consisting of 18.8 MMbbls of crude
oil and 228 Bcf of natural gas. Apache estimates net production from the
Occidental properties through year-end to average 107 MMcf of natural gas and
7,800 Bbls of oil per day. The LLC also owns proprietary 3-D seismic data on 113
blocks covering 1,022 square miles.
S-5
<PAGE> 6
The Occidental transactions have received all necessary board approvals and
are not subject to financing. While we expect that the Occidental transactions
will be closed and funded in August 2000, we cannot be sure that the
transactions will be completed.
FUTURE POSSIBLE ACQUISITIONS
Apache is currently evaluating and discussing with third parties possible
additional acquisition opportunities, including acquisitions that might be
material to us. However, no agreement on the terms and conditions of any such
acquisition has yet been reached or publicly announced. Any such acquisition
would be subject to a number of conditions, including conditions beyond the
control of Apache. Consequently, there can be no assurance that Apache will
enter into or actually consummate any such transaction.
ESTIMATE OF SECOND QUARTER 2000 EARNINGS
We expect our second-quarter 2000 income attributable to common stock will
be approximately $1.22 per share. These estimates are based upon our preliminary
review of our quarterly results and may be subject to some revision. In the same
quarter a year ago, we reported income attributable to common stock of $0.28 per
share. We believe this year's improved performance results from higher oil and
gas production volumes and prices.
EXPANSION OF COMMERCIAL PAPER PROGRAM
On July 14, 2000, we entered into a new $500 million, 364-day revolving
credit agreement with a group of lenders led by Citibank, N.A. as administrative
agent and Salomon Smith Barney as arranger. The terms of the facility are
substantially the same as those of the U.S. portion of our global credit
facility. The new facility will be used to support an increase in our commercial
paper program to $1.2 billion, which is expected to go into effect July 24,
2000.
OTHER MATTERS
In June 2000, our subsidiary, Apache China Corporation LDC, filed a lawsuit
against PetroChina Company Limited, China National Petroleum Corporation and
China National Oil and Gas Exploration and Development Corporation in connection
with some of our Chinese investment and operations. We filed seeking damages and
injunctive relief to prevent the Chinese parties from declaring that we had
relinquished some of our Chinese exploratory acreage. The lawsuit was filed in
the U.S. Bankruptcy Court in Opelousas, Louisiana, in connection with bankruptcy
proceedings of XCL-China, Ltd., the co-owner of some of our Chinese interests.
On June 30, 2000, Apache and PetroChina Company Limited announced an agreement
for a development plan that should permit all parties to proceed with
development of portions of the 49,000-acre Zhao Dong Block. The agreement calls
for PetroChina and the China National Petroleum Corporation to obtain final
governmental approval of the overall development plan. Implementation of the
agreement and the development plan is subject to these additional approvals. On
July 21, 2000, the bankruptcy court issued an order approving the agreement
reached between Apache and PetroChina, although XCL-China has ten days to appeal
the decision. If all necessary approvals are obtained, the agreement will
resolve the issues raised in our lawsuit and Apache, as operator, will proceed
with construction of production facilities and development drilling on the
shallow-water Zhao Dong Block.
S-6
<PAGE> 7
THE OFFERING
Common stock offered by Apache:
U.S. offering............... 5,600,000 shares
International offering...... 1,400,000 shares
Total............. 7,000,000 shares
Shares outstanding after the
offerings........................ 121,136,738 shares
Use of proceeds.................. We expect that our net proceeds from the
offerings without exercise of the
over-allotment options will be
approximately $ million. We intend
to use these net proceeds to add to working
capital and for general corporate purposes.
In particular, we expect to use the net
proceeds from the offerings to fund the
cash requirements of the pending Occidental
transactions discussed above under
"-- Recent Developments -- Pending
Transactions with Occidental." If we do not
complete the Occidental transactions, the
net proceeds of the offerings will be used
for general corporate purposes, which could
include repaying indebtedness under
commercial paper facilities in the ordinary
course of business.
Risk factors..................... See "Risk Factors" and other information
included in this prospectus supplement for
a discussion of factors you should
carefully consider before deciding to
invest in shares of the common stock.
NYSE symbol...................... APA
The number of shares outstanding after the offerings excludes 6,539,242
shares reserved for issuance under our stock option plans, of which options to
purchase 4,856,460 shares at an average option price of $35.72 are outstanding,
and 1,080,000 shares reserved for issuance under our deferred delivery plan and
for certain restricted stock grants. The numbers above assume that the
over-allotment options are not exercised. If the over-allotment options are
exercised in full, we will issue and sell an additional 1,050,000 shares.
S-7
<PAGE> 8
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
We have provided in the tables below our selected financial and operating
data. The financial information for each of the years in the five-year period
ended December 31, 1999 has been derived from our audited financial statements.
The financial information for the three-month periods ended March 31, 1999 and
2000 has been derived from our unaudited financial statements. You should read
the following financial information in conjunction with our consolidated
financial statements and related notes that we have incorporated by reference in
the accompanying prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995(1) 1996(2) 1997(3) 1998(4) 1999(5)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues(6)................ $ 657,817 $ 836,968 $ 980,979 $ 760,470 $1,146,554
Net income (loss)................ 20,207 121,427 154,896 (129,387) 200,855
Income (loss) attributable to
common stock................... 20,207 121,427 154,896 (131,391) 186,406
Net income (loss) per common
share:
Basic.......................... .28 1.42 1.71 (1.34) 1.73
Diluted........................ .28 1.38 1.65 (1.34) 1.72
Cash dividends per common
share.......................... .28 .28 .28 .28 .28
Net cash provided by operating
activities..................... 332,123 490,504 723,808 471,511 638,174
BALANCE SHEET DATA (AT YEAR END):
Working capital (deficit)........ $ (22,013) $ (41,501) $ 4,546 $ (78,804) $ 6,290
Total assets..................... 2,681,450 3,432,430 4,138,633 3,996,062 5,502,543
Long-term debt................... 1,072,076 1,235,706 1,501,380 1,343,258 1,879,650
Shareholders' equity............. 1,091,805 1,518,516 1,729,177 1,801,833 2,669,427
Common shares outstanding at end
of year........................ 77,379 90,059 93,305 97,769 113,996
</TABLE>
---------------
(1) Includes the results of the acquisitions of certain oil and gas properties
from Texaco Exploration and Production, Inc. and Aquila Energy Resources
Corporation after March 1, 1995 and September 1995, respectively, and the
sale of a substantial portion of our Rocky Mountain properties to Citation
Resources Inc. in September 1995.
(2) Includes financial data after May 20, 1996 for Apache PHN Company, Inc.
(formerly known as The Phoenix Resource Companies, Inc.).
(3) Includes financial data after November 20, 1997 relating to the acquisition
from Mobil Exploration & Producing Australia Pty Ltd of three companies
owning interests in certain oil and gas properties and production facilities
offshore Western Australia.
(4) Includes the results of the acquisitions of certain subsidiaries and oil and
gas properties from Novus Petroleum Limited after December 18, 1998. Also
includes a $243.2 million pre-tax ($158.1 million net of tax) non-cash
write-down of the carrying value of our U.S. proved oil and gas properties
due to ceiling test limitations.
(5) Includes the results of the acquisitions of certain oil and gas properties
from Petsec Energy Inc., Shell Offshore Inc., British-Borneo Oil and Gas Plc
and Shell Canada Limited after February 1, 1999, May 18, 1999, June 18, 1999
and November 30, 1999, respectively.
(6) Beginning in the first quarter 2000, gathering, processing and marketing
margin has been reported as a net addition to oil and gas production
revenues and gathering fee income has been reported as a reduction to
operating costs in the statement of consolidated operations.
Reclassifications have been made to reflect this change in prior year
amounts.
S-8
<PAGE> 9
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 2000
----------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA:
Total revenues(6)........................................... $ 163,422 $ 447,142
Net income (loss)........................................... (2,168) 116,304
Income (loss) attributable to common stock.................. (3,588) 111,040
Net income (loss) per common share:
Basic..................................................... (.04) .98
Diluted................................................... (.04) .96
Net cash provided by operating activities................... 45,608 242,242
Cash dividends per common share............................. .07 .07
BALANCE SHEET DATA AT MARCH 31, 2000:
Working capital............................................. $ 63,270
Total assets................................................ 5,717,112
Long-term debt.............................................. 1,947,037
Shareholders' equity........................................ $2,754,214
Common shares outstanding at end of period.................. 113,716
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Proved reserves at December 31:
Oil (Mbbls)(1)........................ 170,329 235,294 273,778 251,008 415,242
Natural gas (Bcf)..................... 1,502 1,625 1,872 2,172 2,352
Total proved reserves (Mboe)(2).... 420,649 506,178 585,748 613,046 807,172
Reserves Outside North America
(% of Total)....................... 5% 18% 28% 38% 27%
Reserve replacement ratio(3).......... 267% 257% 228% 143% 360%
Reserve life index (years)(4)......... 7.8 9.3 9.4 9.6 10.8
Finding and development costs per
boe(2)(5).......................... $ 5.30 $ 6.09 $ 5.75 $ 4.98 $ 5.79
Average daily production:
Oil (Mbbls/day)(1).................... 52 55 69 76 95
Natural gas (MMcf/day)................ 577 561 609 590 656
Total production (Mboe/day)(2)..... 148 149 170 174 204
Average production costs per
boe(2)(6)............................. $ 3.31 $ 3.40 $ 3.05 $ 2.87 $ 2.56
</TABLE>
---------------
(1) Includes crude oil, condensate and natural gas liquids.
(2) 6 Mcf of natural gas = 1 boe.
(3) Total reserve additions for the year, including revisions and net of
property sales, divided by annual production.
(4) Total proved reserves at year end divided by annual production.
(5) Total capitalized costs incurred for the year, excluding capitalized
interest and property sales, divided by total reserve additions for the
year, including revisions.
(6) Beginning in the first quarter 2000, gathering, processing and marketing
margin has been reported as a net addition to oil and gas production
revenues and gathering fee income has been reported as a reduction to
operating costs in the statement of consolidated operations.
Reclassifications have been made to reflect this change in prior year
amounts.
S-9
<PAGE> 10
SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus, and the documents
incorporated herein and therein by reference contain statements that constitute
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
statements other than statements of historical facts, including, without
limitation, those relating to our future financial position, business strategy,
budgets, reserve information, projected levels of production, projected costs
and plans and objectives of management for future operations, are forward-
looking statements.
Words such as "expect," "anticipate," "estimate," "intend," "plan,"
"believe" and similar expressions are intended to identify forward-looking
statements.
Although we believe our expectations reflected in forward-looking
statements are based on reasonable assumptions, no assurance can be given that
these expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the expectations reflected in the
forward-looking statements include, among others:
- the market prices of oil and gas;
- economic and competitive conditions;
- inflation rates;
- legislative and regulatory changes;
- financial market conditions;
- political and economic uncertainties of foreign governments; and
- future business decisions.
Some of these factors are discussed under "Risk Factors" beginning on page S-11
of this prospectus supplement.
In light of these risks, uncertainties and assumptions, the events
anticipated by our forward-looking statements might not occur. We undertake no
obligation to update or revise our forward-looking statements, whether as a
result of new information, future events or otherwise.
S-10
<PAGE> 11
RISK FACTORS
You should carefully consider the risks described below, as well as the
information included or incorporated by reference in this prospectus supplement
and the accompanying prospectus, before making a decision to buy Apache stock.
In addition, please read "Special Note Regarding Forward-Looking Statements" on
page S-10 of this prospectus supplement, where we describe additional
uncertainties associated with our business and the forward-looking statements
included or incorporated by reference in this prospectus supplement and the
accompanying prospectus.
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL AND GAS PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
A substantial or extended decline in oil and gas prices would have a
material adverse effect on our financial position, results of operations,
quantities of oil and gas that may be economically produced, and access to
capital. Oil and natural gas prices have historically been and are likely to
continue to be volatile. This volatility makes it difficult to estimate with
precision the value of producing properties in acquisitions and to budget and
project the return on exploration and development projects involving our oil and
gas properties. In addition, unusually volatile prices often disrupt the market
for oil and gas properties, as buyers and sellers have more difficulty agreeing
on the purchase price of properties.
OUR ABILITY TO SELL OUR OIL AND GAS PRODUCTION COULD BE MATERIALLY HARMED IF WE
FAIL TO OBTAIN ADEQUATE SERVICES SUCH AS TRANSPORTATION AND PROCESSING.
The sale of our oil and gas production, particularly outside of North
America, depends on a number of factors beyond our control, including the
availability and capacity of transportation and processing facilities. Our
failure to obtain such services on acceptable terms could materially harm our
business.
WE HAVE RECORDED WRITE-DOWNS BECAUSE OF FULL COST ACCOUNTING RULES AND MAY BE
REQUIRED TO DO SO AGAIN IN THE FUTURE.
Under the full cost accounting rules of the Securities and Exchange
Commission, we review the carrying value of our proved oil and gas properties
each quarter on a country-by-country basis. Under these rules, capitalized costs
of proved oil and gas properties -- net of accumulated depreciation, depletion
and amortization, and deferred income taxes -- may not exceed the present value
of estimated future net cash flows from proved oil and gas reserves, discounted
at 10 percent, plus the lower of cost or fair value of unproved properties
included in the costs being amortized, net of related tax effects.
These rules generally require pricing future oil and gas production at the
unescalated oil and gas prices in effect at the end of each fiscal quarter. They
also require a write-down if the "ceiling" is exceeded, even if prices declined
for only a short period of time.
If oil and gas prices fall to the prices we realized at the end of 1998, it
is likely that additional write-downs will occur. Write-downs required by these
rules do not impact cash flow from operating activities.
THE OIL AND GAS RESERVES DATA WE REPORT ARE ONLY ESTIMATES AND MAY PROVE TO BE
INACCURATE.
There are numerous uncertainties inherent in estimating quantities of oil
and natural gas reserves of any category and in projecting future rates of
production and timing of development expenditures, which underlie the reserve
estimates, including many factors beyond our control. Reserve data represent
only estimates. In addition, the estimates of future net cash flows from our
proved reserves and their present value are based upon various assumptions about
future production levels, prices and costs that may prove to be incorrect over
time. Any significant variance from the assumptions could result in the actual
quantity of our reserves and future net cash flows from them being materially
different from the estimates. In addition, our estimated reserves may be subject
to downward or upward revision based upon production history, results of future
exploration and development, prevailing oil and gas prices, operating and
development costs and other factors.
S-11
<PAGE> 12
IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent that we acquire additional
properties containing proved reserves, conduct successful exploration and
development activities, successfully apply new technologies or, through
engineering studies, identify additional behind-pipe zones or secondary recovery
reserves, our proved reserves will decline materially as reserves are produced.
Future oil and gas production is, therefore, highly dependent upon our level of
success in acquiring or finding additional reserves.
THE PENDING OCCIDENTAL TRANSACTIONS MIGHT NOT BE CONSUMMATED AS EXPECTED.
The pending Occidental transactions have received all necessary board
approvals and are not subject to financing. While we expect that the Occidental
transactions will be closed and funded in August 2000, we cannot be sure that
the transactions will be completed.
WE INCUR SUBSTANTIAL COSTS TO COMPLY WITH GOVERNMENT REGULATIONS, ESPECIALLY
REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION, AND COULD INCUR EVEN GREATER
COSTS IN THE FUTURE.
Our exploration, production and marketing operations are regulated
extensively at the federal, state and local levels, as well as by other
countries in which we do business. We have made and will continue to make large
expenditures in our efforts to comply with the requirements of environmental and
other regulations. Further, the oil and gas regulatory environment could change
in ways that might substantially increase these costs.
Hydrocarbon-producing states regulate conservation practices and the
protection of correlative rights. These regulations affect our operations and
limit the quantity of hydrocarbons we may produce and sell. In addition, at the
U.S. federal level, the Federal Energy Regulatory Commission regulates
interstate transportation of natural gas under the Natural Gas Act. Other
regulated matters include marketing, pricing, transportation and valuation of
royalty payments.
As an owner or lessee and operator of oil and gas properties, we are
subject to various federal, state, local and foreign regulations relating to
discharge of materials into, and protection of, the environment. These
regulations may, among other things, impose liability on us for the cost of
pollution clean-up resulting from operations, subject us to liability for
pollution damages, and require suspension or cessation of operations in affected
areas. Changes in or additions to regulations regarding the protection of the
environment could hurt our business.
OUR BUSINESS COULD BE HARMED BY COMPETITION WITH OTHER COMPANIES.
The oil and gas industry is highly competitive, and our business could be
harmed by competition with other companies. Because oil and gas are fungible
commodities, our principal form of competition is price competition. We strive
to maintain the lowest finding and production costs possible to maximize
profits. In addition, as an independent oil and gas company, we frequently
compete for reserve acquisitions, exploration leases, licenses, concessions and
marketing agreements against companies with financial and other resources
substantially larger than we possess. Many of our competitors have established
strategic long-term positions and maintain strong governmental relationships in
countries in which we may seek new entry.
WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY
UNEXPECTED LIABILITIES.
Exploration for and production of oil and natural gas can be hazardous,
involving natural disasters and other unforeseen occurrences such as blowouts,
cratering, fires and loss of well control, which can damage or destroy wells or
production facilities, injure or kill people, and damage property and the
environment. We maintain insurance against many potential losses or liabilities
arising from our operations in accordance
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<PAGE> 13
with customary industry practices and in amounts that we believe to be prudent.
However, our insurance does not protect us against all operational risks.
OUR HEDGING ACTIVITIES MAY PREVENT US FROM BENEFITING FROM PRICE INCREASES AND
MAY EXPOSE US TO OTHER RISKS.
To the extent that we engage in hedging activities, we may be prevented
from realizing the benefits of price increases above the levels of the hedges.
In addition, we are subject to risks associated with differences in prices at
different locations, particularly where transportation constraints restrict our
ability to deliver oil and gas volumes to the delivery point to which the
hedging transaction is indexed.
WHEN WE ACQUIRE OIL AND GAS PROPERTIES, OUR FAILURE TO FULLY IDENTIFY AND
CORRECTLY EVALUATE POTENTIAL PROBLEMS, TO PROPERLY ESTIMATE RESERVES OR
PRODUCTION RATES OR COSTS, OR TO EFFECTIVELY INTEGRATE THE ACQUIRED OPERATIONS
COULD SERIOUSLY HARM US.
We are actively engaged in acquiring oil and gas properties. When we
acquire properties, our failure to fully identify potential problems, to
properly estimate reserves or production rates or costs, or to effectively
integrate the acquired operations could seriously harm us.
Although we perform reviews of acquired properties and applicable records
and contracts that we believe are consistent with industry practices, we do not
review in depth every individual property involved in each acquisition.
Ordinarily we focus on higher-value properties and sample the remainder.
However, even a detailed review of properties and applicable records and
contracts may not necessarily reveal existing or potential problems, nor will it
permit us to become sufficiently familiar with the properties to assess fully
their deficiencies and potential. Inspections may not always be performed on
every well, and environmental problems, such as ground water contamination, are
not necessarily observable even when an inspection is undertaken. Our review may
not sufficiently identify or evaluate applicable contracts under which third
parties may assert preferential rights to purchase some of the properties that
we believe we have acquired, rights to change or contest the operatorship of
acquired properties, or rights with respect to acquired properties under
agreements providing for areas of mutual interest. Even when we identify such
third party rights, we may not correctly evaluate their applicability or
potential consequences because of uncertain legal standards and for other
reasons.
Even when problems are identified, we often assume environmental and other
risks and liabilities in connection with acquired properties. There are numerous
uncertainties inherent in estimating quantities of proved oil and gas reserves
and actual future production rates and associated costs with respect to acquired
properties. Actual results may vary substantially from those assumed in the
estimates. In addition, acquisitions may have adverse effects on our operating
results, particularly during the periods in which the operations of acquired
businesses are being integrated into our ongoing operations.
OUR NON-U.S. OPERATIONS, ESPECIALLY IN DEVELOPING COUNTRIES, ARE SUBJECT TO
INCREASED RISKS AND UNCERTAINTIES.
Our non-U.S. oil and natural gas exploration, development and production
activities are subject to:
- political and economic uncertainties, including, among others, changes,
sometimes frequent or marked, in governmental energy policies or the
personnel administering them;
- expropriation of property;
- cancellation or modification of contract rights;
- foreign exchange restrictions;
- currency fluctuations;
- risks of loss due to civil strife, acts of war, guerrilla activities and
insurrection;
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<PAGE> 14
- royalty and tax increases; and
- other risks arising out of foreign governmental sovereignty over the
areas in which our operations are conducted.
These risks may be higher in the developing countries in which we conduct these
activities. Consequently, our non-U.S. exploration, development and production
activities may be substantially affected by factors beyond our control, any of
which could materially adversely affect our financial position or results of
operations. Furthermore, in the event of a dispute arising from non-U.S.
operations, we may be subject to the exclusive jurisdiction of courts outside
the United States or may not be successful in subjecting non-U.S. persons to the
jurisdiction of the courts in the United States, which could adversely affect
the outcome of the dispute.
A DECLINE IN THE CONDITION OF OUR CAPITAL MARKETS OR A SUBSTANTIAL RISE IN
INTEREST RATES COULD HARM US.
If the condition of the capital markets utilized by us to finance our
operations materially declines, we might not be able to finance our operations
on terms we consider acceptable. In addition, a substantial rise in interest
rates would decrease our net cash flows.
ADVERSE CHANGES IN THE EXCHANGE RATES WITH SOME FOREIGN CURRENCIES COULD HARM
US.
Our cash flow stream relating to certain international operations is based
on the U.S. dollar equivalent of cash flows measured in foreign currencies.
Australian gas production is sold under fixed-price Australian dollar contracts
and over half the costs incurred are paid in Australian dollars. Revenue and
disbursement transactions denominated in Australian dollars are converted to
U.S. dollar equivalents based on the exchange rate on the transaction date.
Reported cash flow relating to Canadian operations is based on cash flows
measured in Canadian dollars converted to the U.S. dollar equivalent based on
the average of the Canadian and U.S. dollar exchange rates for the period
reported. Substantially all of our international transactions, outside of Canada
and Australia, are denominated in U.S. dollars.
Our Polish and Australian subsidiaries have net financial assets that are
denominated in a currency other than the functional reporting currency of the
subsidiaries. A decrease in value of 10% in the Australian dollar and Polish
zloty relative to the U.S. dollar from the March 31, 2000 exchange rates would
result in a foreign currency loss of approximately $0.8 million, based on March
31, 2000 amounts.
USE OF PROCEEDS
We expect the net proceeds from this offering of common stock to be
approximately $ , after deducting discounts to the underwriter and
estimated expenses of the offering that we will pay. We will add the net
proceeds to working capital and use them for general corporate purposes. In
particular, we expect to use the net proceeds from this offering to fund the
cash requirements of the pending Occidental transactions.
If we do not complete the Occidental transactions, the net proceeds of this
offering would be used for general corporate purposes, which could include
repaying indebtedness under commercial paper facilities in the ordinary course
of our business. As of July 20, 2000, we had $470 million in principal amount of
commercial paper bearing interest at an average weighted rate of 6.60% per
annum.
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<PAGE> 15
CAPITALIZATION
The following table sets forth as of March 31, 2000:
- our actual capitalization;
- our pro forma capitalization giving effect to the completed acquisitions
described above under the heading "Prospectus Supplement
Summary -- Recent Developments -- Completed Acquisitions";
- our pro forma as-adjusted capitalization giving effect to the completed
acquisitions and our receipt of the estimated net proceeds from the sale
of the shares we are selling in the offerings; and
- our pro forma as-adjusted capitalization including the pending Occidental
transactions giving effect to:
- the completed acquisitions;
- our receipt of the estimated net proceeds from the sale of the shares
we are selling in the offerings; and
- our payment of an estimated $341 million to complete the pending
Occidental transactions.
Both of the pro forma as-adjusted capitalization amounts assume that the
over-allotment options are not exercised.
<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------------------------------------
PRO FORMA
AS ADJUSTED
PRO FORMA INCLUDING
ACTUAL PRO FORMA AS ADJUSTED OCCIDENTAL
---------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
TOTAL DEBT:
Apache:
7.95% notes due 2026......................... $ 178,564 $ 178,564 $178,564 $178,564
7.625% debentures due 2096................... 149,175 149,175 149,175 149,175
7.625% notes due 2019........................ 149,069 149,069 149,069 149,069
7.375% debentures due 2047................... 147,993 147,993 147,993 147,993
9.25% notes due 2002......................... 99,892 99,892 99,892 99,892
7.7% notes due 2026.......................... 99,647 99,647 99,647 99,647
7.0% notes due 2018.......................... 148,303 148,303 148,303 148,303
Money market lines of credit and commercial
paper..................................... 114,900 431,744
Subsidiary and other obligations:
Global credit facility -- Australia.......... 116,500 116,500 116,500 116,500
Apache Finance Australia 6.5% notes due
2007...................................... 168,942 168,942 168,942 168,942
Apache Finance Australia 7.0% notes due
2009...................................... 99,388 99,388 99,388 99,388
Apache Finance Canada 7.75% notes due 2029... 296,939 296,939 296,939 296,939
Revolving credit facility -- Egypt........... 157,400 157,400 157,400 157,400
DEKALB 9.875% notes due 2000................. 29,225 29,225 29,225 29,225
---------- ---------- -------- --------
Total debt........................... 1,955,937 2,272,781
---------- ---------- -------- --------
SHAREHOLDERS' EQUITY:
Series B preferred stock....................... 98,387 98,387 98,387 98,387
Series C conversion preferred stock............ 208,207 208,207 208,207 208,207
Common stock................................... 145,734 145,734
Paid-in capital................................ 1,723,084 1,723,084
Retained earnings.............................. 661,800 661,800 661,800 661,800
Treasury stock................................. (69,684) (69,684) (69,684) (69,684)
Accumulated other comprehensive income......... (13,314) (13,314) (13,314) (13,314)
---------- ---------- -------- --------
Total shareholders' equity........... 2,754,214 2,754,214
---------- ---------- -------- --------
TOTAL CAPITALIZATION................. $4,710,151 $5,026,995 $ $
========== ========== ======== ========
</TABLE>
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PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange and the Chicago
Stock Exchange under the symbol "APA." The table below provides information
regarding Apache common stock for 1998 and 1999 and through July 21, 2000.
Prices shown are from the New York Stock Exchange Composite Transactions
Reporting System.
<TABLE>
<CAPTION>
1998 1999 2000
--------------- --------------- ---------------
PRICE RANGE PRICE RANGE PRICE RANGE
--------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter................................... $38 3/4 $31 3/16 $28 9/16 $17 5/8 $51 1/2 $32 1/8
Second Quarter.................................. 38 1/8 30 3/8 39 7/8 25 1/16 61 1/2 44
Third Quarter (through July 20 for 2000)........ 32 3/8 22 1/2 49 15/16 37 59 13/16 48 1/4
Fourth Quarter.................................. 29 5/16 21 3/8 44 30
</TABLE>
At June 30, 2000, there were 114,132,738 shares of Apache common stock
outstanding, held by approximately 10,000 shareholders of record and 45,000
beneficial owners.
DIVIDEND POLICY
We paid cash dividends on Apache common stock for 132 consecutive quarters
through December 31, 1999. Since January 1983, we have paid an annual common
stock dividend of $.28 per share. We expect to continue the payment of dividends
at that level. During 2000, the Company will implement a change in the payment
dates for the dividends of its common stock from a quarterly basis to an annual
basis. Future dividend payments will depend upon our level of earnings,
financial requirements and other relevant factors.
In December 1995, we declared a dividend of one preferred stock purchase
right for each share of Apache common stock outstanding on January 31, 1996 or
issued after that date. These rights are more fully described on pages 11 and 12
of the accompanying prospectus.
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
The following is a summary of material U.S. federal income and estate tax
consequences expected to result under current law from the purchase, ownership
and taxable disposition of common stock by non-U.S. holders of common stock. A
"non-U.S. holder" is any person or entity other than:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any state thereof;
- an estate, the income of which is includable in gross income for U.S.
federal income tax purposes regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more U.S. persons who have the
authority to control all substantial decisions of the trust.
This summary does not address all of the U.S. federal income and estate tax
considerations that may be relevant to non-U.S. holders in light of their
particular circumstances, such as a valid election to be treated as a U.S.
person, or to non-U.S. holders that may be subject to special treatment under
United States federal income tax laws. This summary does not discuss any aspect
of state, local or foreign taxation. This summary is based on current provisions
of the Internal Revenue Code of 1986, as amended, Treasury regulations, judicial
opinions, published positions of the U.S. Internal Revenue Service and other
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applicable authorities, all of which are subject to change, possibly with
retroactive effect. In this prospectus supplement, the Internal Revenue Code of
1986, as amended, is called the "Code." Prospective purchasers of common stock
are advised to consult their tax advisors regarding the U.S. federal, state and
local, and non-U.S. income and other tax consequences of acquiring, holding and
disposing of common stock.
DIVIDENDS
Apache pays cash dividends on its common stock. Any dividends paid to a
non-U.S. holder on shares of common stock will be subject to withholding of U.S.
federal income tax at a rate of 30%, unless a lower rate is prescribed under an
applicable tax treaty. U.S. federal income tax withholding will not be required,
however, if the dividends are effectively connected with the conduct of a trade
or business of the non-U.S. holder within the United States or, in the case of
an applicable tax treaty, are attributable to a U.S. permanent establishment
maintained by the non-U.S. holder. Dividends that are effectively connected with
the conduct of a trade or business within the United States, or are attributable
to a U.S. permanent establishment will be subject to U.S. federal income tax on
a net income basis which is not collected by withholding provided the non-U.S.
holder files the appropriate certification with Apache or its agent. Any
dividends received by a foreign corporation that are effectively connected with
the conduct of a trade or business within the United States may also be subject
to a "branch profits tax" at a rate of 30% or such lower rate as may be
specified by an applicable tax treaty.
For purposes of the withholding tax rules discussed above and for purposes
of determining the applicability of a tax treaty rate under current U.S.
Treasury Regulations, dividends paid to an address outside the United States
will be presumed to be paid to a resident of the country of address, unless the
payor has knowledge to the contrary. Under recently issued U.S. Treasury
Regulations (referred to as "final regulations") that are effective for payments
made after December 31, 1999, a non-U.S. holder of common stock who wishes to
claim the benefit of a tax treaty rate would be required to satisfy applicable
certification and other requirements. In addition, under the final regulations,
in the case of common stock held by a foreign partnership:
- the certification requirement generally would be applied to the partners
of the partnership; and
- the partnership would be required to provide certain information,
including a U.S. taxpayer identification number.
A non-U.S. holder of common stock that is eligible for a reduced rate of
U.S. federal income tax withholding pursuant to a tax treaty may obtain a refund
of any excess amounts currently withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
SALE OR DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of any gain recognized on the sale or other taxable disposition of
common stock so long as:
- the gain is not effectively connected with the conduct of a trade or
business of the non-U.S. holder within the United States nor under an
applicable tax treaty, is attributable to a U.S. permanent establishment
maintained by the non-U.S. holder;
- in the case of a non-U.S. holder who is an individual and holds the
common stock as a capital asset, either:
-- such holder is not present in the United States for 183 or more days
during the taxable year of the disposition; or
-- such holder does not have a "tax home" in the United States for U.S.
federal income tax purposes nor does such holder maintain an office or
other fixed place of business in the United States to which such gain is
attributable;
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<PAGE> 18
- such non-U.S. holder is not subject to tax pursuant to the provisions of
U.S. federal income tax law applicable to certain U.S. expatriates; and
- the common stock continues to be "regularly traded on an established
securities market" for U.S. federal income tax purposes and the non-U.S.
holder has not held, directly or indirectly, at any time during the
five-year period ending on the date of disposition (or, if shorter, the
non-U.S. holder's holding period) more than five percent of the
outstanding common stock.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Apache must report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to, and the tax withheld with
respect to, each non-U.S. holder. These reporting requirements apply regardless
of whether withholding was reduced by an applicable tax treaty. Copies of these
information returns may also be made available under the provisions of a treaty
or information exchange agreement with the tax authorities in the country in
which the non-U.S. holder resides or is established. Under current law, U.S.
backup withholding tax, which is a withholding tax currently imposed at the rate
of 31% on certain payments to persons who fail to furnish the information
required under U.S. information reporting requirements, generally will not apply
to dividends paid on common stock to a non-U.S. holder at an address outside the
United States unless the payor has knowledge that the payee is a U.S. person.
However, under the final regulations, dividends paid on common stock after
December 31, 1999 may be subject to backup withholding unless applicable
certification requirements are satisfied.
Payment of the proceeds from a sale of common stock to or through a U.S.
office of a broker will be subject to information reporting and backup
withholding unless the owner certifies as to its status as a non-U.S. holder
under penalties of perjury or otherwise establishes an exemption. Payment of the
proceeds from a sale of common stock to or through a non-U.S. office of a broker
generally will not be subject to information reporting or backup withholding.
However, if such broker is a U.S. person, a "controlled foreign corporation" or
a foreign person that derives 50% or more of its gross income from the conduct
of a trade or business in the United States, such payment will be subject to
information reporting, but currently not backup withholding, unless such broker
has documentary evidence in its records that the owner is a non-U.S. holder and
certain other conditions are met or the owner otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be credited
against the non-U.S. holder's federal income tax liability, if any, or refunded,
provided the required information is furnished to the Internal Revenue Service.
ESTATE TAX
The fair market value of common stock owned, or treated as owned, by an
individual at the time of his death will be includable in his gross estate for
U.S. federal estate tax purposes and thus may be subject to U.S. estate tax,
even though the individual at the time of death is neither a citizen of nor
domiciled in the United States, unless an applicable estate tax treaty provides
otherwise.
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<PAGE> 19
UNDERWRITING
We intend to offer the shares outside the U.S. and Canada through the
international managers and in the U.S. and Canada through the U.S. underwriters.
Merrill Lynch International, Goldman Sachs International, Credit Suisse First
Boston (Europe) Limited and Salomon Brothers International Limited are acting as
lead managers for the international managers named below. Subject to the terms
and conditions described in an international purchase agreement among us and the
international managers, and concurrently with the sale of 5,600,000 shares to
the U.S. underwriters, we have agreed to sell to the international managers, and
the international managers severally have agreed to purchase from us, the number
of shares listed opposite their names below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGER SHARES
--------------------- ---------
<S> <C>
Merrill Lynch International.................................
Goldman Sachs International ................................
Credit Suisse First Boston (Europe) Limited.................
Salomon Brothers International Limited......................
---------
Total.......................................... 1,400,000
=========
</TABLE>
We have also entered into a U.S. purchase agreement with the U.S.
underwriters for sale of the shares in the U.S. and Canada for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Credit Suisse
First Boston Corporation and Salomon Smith Barney Inc. are acting as U.S.
representatives. Subject to the terms and conditions in the U.S. purchase
agreement, and concurrently with the sale of 1,400,000 shares to the
international managers pursuant to the international purchase agreement, we have
agreed to sell to the U.S. underwriters, and the U.S. underwriters severally
have agreed to purchase 5,600,000 shares from us. The initial public offering
price per share and the total underwriting discount per share are identical
under the international purchase agreement and the U.S. purchase agreement.
The international managers and the U.S. underwriters have agreed to
purchase all of the shares sold under the international and U.S. purchase
agreements if any of these shares are purchased. If an underwriter defaults, the
international and U.S. purchase agreements provide that the purchase commitments
of the nondefaulting underwriters may be increased or the purchase agreements
may be terminated. The closings for the sale of shares to be purchased by the
international managers and the U.S. underwriters are conditioned on one another.
We have agreed to indemnify the international managers and the U.S.
underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the international managers and the
U.S. underwriters may be required to make in respect of those liabilities.
The underwriters are offering shares, subject to prior sale, when, as and
if issued to and accepted by them, subject to approval of legal matters by their
counsel, including the validity of the shares and other conditions contained in
the purchase agreements, such as the receipt by the underwriters of officer's
certificates and legal opinions. The underwriters reserve the right to withdraw,
cancel or modify offers to the public and to reject orders in whole or in part.
Schroder is a trademark of Schroder Holdings plc and is used under license
by Salomon Brothers International Limited.
COMMISSIONS AND DISCOUNTS
The lead managers have advised us that the international managers propose
initially to offer the shares to the public at the initial public offering price
on the cover page of this prospectus supplement and to dealers at that price
less a concession not in excess of $ per share. The international managers
may
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<PAGE> 20
allow, and the dealers may reallow, a discount not in excess of $ per share
to other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The following table shows public offering price, underwriting discount and
proceeds before expenses to Apache. This information assumes either no exercise
or full exercise by the international managers and the U.S. underwriters of
their over-allotment options.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
$ $ $
Public offering price........................... $ $ $
Underwriting discount........................... $ $ $
Proceeds, before expenses, to Apache............ $ $ $
</TABLE>
The expenses of this offering, not including the underwriting discount, are
estimated at $ and are payable by Apache.
OVER-ALLOTMENT OPTION
We have granted options to the international managers to purchase up to
210,000 additional shares at the public offering price less the underwriting
discount. The international managers may exercise these options for 30 days from
the date of this prospectus supplement solely to cover any over-allotments. If
the international managers exercise these options, each international manager
will be obligated, subject to conditions contained in the purchase agreements,
to purchase a number of additional shares proportionate to that international
manager's initial amount reflected in the above table.
We have also granted options to the U.S. underwriters, exercisable for 30
days from the date of this prospectus supplement, to purchase up to 840,000
additional shares to cover any over-allotments on terms similar to those granted
to the international managers.
INTERSYNDICATE AGREEMENT
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their activities.
Under the intersyndicate agreement, the international managers and the U.S.
underwriters may sell shares to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the intersyndicate agreement, the international managers and any dealer to
whom they sell shares will not offer to sell or sell shares to U.S. or Canadian
persons or to persons they believe intend to resell to U.S. or Canadian persons,
except in the case of transactions under the intersyndicate agreement.
Similarly, the U.S. underwriters and any dealer to whom they sell shares will
not offer to sell or sell shares to persons who are non-U.S. persons or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, except in the case of transactions under
the intersyndicate agreement.
NO SALES OF SIMILAR SECURITIES
We and our executive officers and directors have agreed, with exceptions,
not to sell or transfer any common stock for 90 days after the date of this
prospectus supplement without first obtaining the written consent of Merrill
Lynch. Specifically, we and these other individuals have agreed not to directly
or indirectly
- offer, pledge, sell or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
- grant any option, right or warrant for the sale of any common stock,
- lend or otherwise dispose of or transfer any common stock,
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<PAGE> 21
- request or demand that we file a registration statement related to the
common stock, or
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the
agreement or for which the person executing the agreement later acquires the
power of disposition.
NEW YORK STOCK EXCHANGE AND CHICAGO STOCK EXCHANGE LISTING
The shares are listed on the New York Stock Exchange and the Chicago Stock
Exchange under the symbol "APA."
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of the common shares is completed, the SEC rules may
limit the underwriters from bidding for or purchasing our common shares.
However, the representatives may engage in transactions that stabilize the price
of the common shares, such as bids or purchases that peg, fix or maintain that
price.
The underwriters may purchase and sell the common shares in the open
market. These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the
sale by the underwriters of a greater number of shares than they are required to
purchase in the offering. "Covered" short sales are sales made in an amount not
greater than the underwriters' option to purchase additional shares from the
issuer in the offering. The underwriters may close out any covered short
position by either exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. "Naked" short sales are any sales in excess of such
option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the common shares in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist
of various bids for or purchases of common shares made by the underwriters in
the open market prior to the completion of the offering.
Similar to other purchase transactions, the underwriters' purchases to
cover the syndicate short sales may have the effect of raising or maintaining
the market price of the common shares or preventing or retarding a decline in
the market price of the common shares. As a result, the price of the common
shares may be higher than the price that might otherwise exist in the open
market.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common shares. In addition, neither
we nor any of the representatives make any representation that the
representatives will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
UK SELLING RESTRICTIONS
Each international manager has agreed that
- it has not offered or sold and will not offer or sell any shares of
common stock to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses
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or otherwise in circumstances which do not constitute an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the common stock in, from or otherwise involving the United
Kingdom; and
- it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issuance of common stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 as amended by the Financial
Services Act 1986 (Investment Advertisements)(Exemptions) Order 1997 or
is a person to whom such document may otherwise lawfully be issued or
passed on.
NO PUBLIC OFFERING OUTSIDE THE UNITED STATES
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of common
stock, or the possession, circulation or distribution of this prospectus
supplement and accompanying prospectus or any other material relating to our
company or shares of our common stock in any jurisdiction where action for that
purpose is required. Accordingly, the shares of our common stock may not be
offered or sold, directly or indirectly, and neither this prospectus supplement
and accompanying prospectus nor any other offering material or advertisements in
connection with the shares of common stock may be distributed or published, in
or from any country or jurisdiction except in compliance with any applicable
rules and regulations of any such country or jurisdiction.
Purchasers of the shares offered by this prospectus supplement and
accompanying prospectus may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase in addition to
the offering price on the cover page of this prospectus supplement.
INTERNET DISTRIBUTION OF PROSPECTUS
Merrill Lynch will be facilitating Internet distribution for this offering
to certain of its Internet subscription customers. Merrill Lynch intends to
allocate a limited number of shares for sale to its online brokerage customers.
An electronic prospectus is available on the Website maintained by Merrill
Lynch. Other than the prospectus in electronic format, the information on the
Merrill Lynch Website relating to this offering is not a part of this
prospectus.
OTHER RELATIONSHIPS
Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions. Salomon Smith Barney Inc. acted as arranger
on the $500 million, 364-day revolving credit agreement that we entered into on
July 14, 2000.
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7,000,000 SHARES
[APACHE CORPORATION LOGO]
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
SCHRODER SALOMON SMITH BARNEY
, 2000
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