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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13546
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 41-1464066
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(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
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 296-6000
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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
--- ---
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APACHE OFFSHORE INVESTMENT PARTNERSHIP
BALANCE SHEET
<TABLE>
March 31, December 31,
1996 1995
----------- - ------------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 104 $ 104
Oil and gas receivables 2,814,468 2,744,988
Receivable from Apache 1,305,358 --
Drilling advances -- 8,570
------------ ------------
4,119,930 2,753,662
------------ ------------
OIL AND GAS PROPERTIES, on the basis
of full cost accounting:
Proved properties 161,840,566 161,821,838
Less - accumulated depreciation,
depletion and amortization (152,393,038) (151,089,712)
------------ ------------
9,447,528 10,732,126
------------ ------------
$ 13,567,458 $ 13,485,788
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accrued expenses $ 559,102 $ 634,352
Payable to Apache -- 69,824
------------ ------------
559,102 704,176
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LONG-TERM DEBT 6,460,000 7,310,000
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PARTNERS' CAPITAL:
Managing Partner 902,780 966,580
Investing Partners
(1,212.3 units outstanding) 5,645,576 4,505,032
------------ ------------
6,548,356 5,471,612
------------ ------------
$ 13,567,458 $ 13,485,788
============ ============
</TABLE>
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF INCOME
(Unaudited)
<TABLE>
For the Three Months
Ended March 31,
---------------------------
1996 1995
------------ -----------
REVENUES:
<S> <C> <C>
Oil and gas sales $ 5,014,238 $ 2,804,885
------------ ------------
EXPENSES:
Depreciation, depletion and amortization 1,303,326 875,627
Lease operating 343,835 236,059
Administrative 133,443 132,499
Financing costs 136,639 160,826
------------ ------------
1,917,243 1,405,011
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NET INCOME $ 3,096,995 $ 1,399,874
============ ============
NET INCOME ALLOCATED TO:
Managing Partner $ 744,130 $ 380,697
Investing Partners 2,352,865 1,019,177
------------ ------------
$ 3,096,995 $ 1,399,874
============ ============
NET INCOME PER WEIGHTED AVERAGE
INVESTING PARTNER UNIT $ 1,941 $ 823
============ ============
WEIGHTED AVERAGE INVESTING PARTNER
UNITS OUTSTANDING 1,212.3 1,238.3
============ ============
</TABLE>
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
For the Three Months
Ended March 31,
---------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,096,995 $ 1,399,874
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 1,303,326 875,627
Amortization of deferred financing costs -- 14,584
Changes in operating assets and liabilities:
(Increase) decrease in oil and gas receivables (69,480) 362,028
Increase (decrease) in accrued expenses 160,054 (13,973)
Change in receivable/payable to Apache (1,375,182) 1,636,906
------------ ------------
Net cash provided by operating activities 3,115,713 4,275,046
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (18,728) (590,984)
Non-cash portion of net oil and
gas property additions (235,304) (161,731)
Decrease (increase) in drilling advances 8,570 (461,497)
------------ ------------
Net cash used by investing activities (245,462) (1,214,212)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Investing Partners (1,212,321) (1,857,520)
Distributions to Managing Partner, net (807,930) (438,314)
Payments on long-term debt (850,000) (765,000)
------------ ------------
Net cash used by financing activities (2,870,251) (3,060,834)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS -- --
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 104 104
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 104 $ 104
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 116,059 $ 154,242
============ ============
</TABLE>
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
Managing Investing
Partner Partners Total
----------- ----------- ------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ 1,026,159 $ 3,148,503 $ 4,174,662
Net income 380,697 1,019,177 1,399,874
Distributions, net (438,314) (1,857,520) (2,295,834)
------------ ------------ ------------
BALANCE, MARCH 31, 1995 $ 968,542 $ 2,310,160 $ 3,278,702
============ ============ ============
BALANCE, DECEMBER 31, 1995 $ 966,580 $ 4,505,032 $ 5,471,612
Net income 744,130 2,352,865 3,096,995
Distributions, net (807,930) (1,212,321) (2,020,251)
------------ ------------ ------------
BALANCE, MARCH 31, 1996 $ 902,780 $ 5,645,576 $ 6,548,356
============ ============ ============
</TABLE>
APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The financial statements included herein have been prepared by the
Apache Offshore Investment Partnership (Partnership), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods, on a basis consistent with the annual audited 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 Partnership 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 Partnership's latest annual report on Form 10-K.
ACCRUED EXPENSES
Accrued expenses payable at March 31, 1996, primarily represents
operating and capital expenditures accrued in February and March that will
be paid in April.
PAYABLE/RECEIVABLE FROM APACHE
The receivable from/payable to Apache Corporation (Apache) represents
the net result of the investing partners' revenue and expenditure
transactions in the current month. Cash in this amount will normally be
transferred from/to Apache in the following month after the Partnership's
transactions are processed and the net results of operations are
determined.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Income and Revenue
The Partnership reported 1996 first quarter net income of $3.1 million,
or $1,941 per Investing Partner unit. The 1996 first quarter income was
121-percent higher than the $1.4 million, or $823 per Investing Partner
unit, reported in the first quarter of 1995. This increase was primarily
attributable to higher product prices and production, partially offset by
higher operating costs.
Oil and gas sales of $5.0 million in the first quarter of 1996
increased by $2.2 million, or 79 percent, when compared to the first
quarter of 1995. This increase was the result of higher production and
higher realized product prices. On an energy equivalent basis, using one
barrel of oil as the equivalent of six thousand cubic feet (Mcf) of natural
gas, natural gas production represented 82 percent and 84 percent of
production for the first quarter of 1996 and 1995, respectively.
Volume and price information concerning the Partnership's 1996 and 1995
first quarter oil and gas production is summarized in the following table:
<TABLE>
For the Quarter
Ended March 31, Increase
1996 1995 (Decrease)
------ ------ ---------
<S> <C> <C> <C>
Gas Volume - Mcf per day 17,420 15,943 9%
Average Gas Price - per Mcf $2.51 $1.41 78%
Oil Volume - Barrels per day 618 516 20%
Average Oil Price - per barrel $18.49 $16.86 10%
</TABLE>
A $1.10 per Mcf, or 78-percent, increase in the Partnership's average
realized gas price and a 10-percent increase in crude oil prices increased
revenues by $1,739,000 and $93,000, respectively. While oil and gas prices
are currently higher than amounts realized a year ago, the Partnership is
not in a position to predict future prices.
In the first quarter of 1996, crude oil and natural gas production
increased 20 percent and nine percent, respectively, over the first quarter
of 1995 levels. These increases are primarily attributable to the capital
expenditures made during 1995. The Partnership incurred $3.2 million
during 1995 to drill the East Cameron A-5 well and to recomplete several
wells at South Timbalier 295 and Ship Shoal 259. Given the few number of
producing wells owned by the Partnership, and the fact that offshore wells
tend to decline on a steeper curve than onshore wells, the Partnership's
future production will be subject to more volatility than those entities
with greater reserves and longer-lived properties.
Depreciation, depletion and amortization (DD&A) expense of $1.3 million
increased 49 percent from a year ago. Though increasing in absolute terms,
the DD&A rate, as a percentage of sales, decreased from 31 percent in 1995
to 26 percent in 1996. This improvement resulted from increased future
gross revenue, upon which the rate is based, reflecting both higher natural
gas and crude oil prices.
First quarter 1996 lease operating expense of $344,000 increased by
$108,000, or 46 percent, from last year due primarily to workover expenses
recorded on South Timbalier 295.
Administrative expense in the first quarter of 1996 of $133,000
remained relatively flat, increasing less than one percent when compared to
the first quarter of 1995.
Financing costs of $137,000 in the first quarter of 1996 declined
$24,000, or 15 percent, compared to the same period in 1995. This decrease
was primarily a result of a reduction in the average debt outstanding from
$8.7 million during the first quarter of 1995 to $7.0 million over the same
period of 1996.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Liquidity
The Partnership's primary capital resources are net cash provided by
operating activities and proceeds from financing activities.
Net cash provided by operating activities, before changes in working
capital accounts, was $4.4 million in the first quarter of 1996, up 92
percent from a year ago. This increase primarily resulted from higher
realized natural gas prices, which accounted for approximately 71-percent
of the improvement in cash flow. Future cash flows will be influenced by
product prices and production constraints and are not presently
ascertainable. Net cash provided by operating activities was less than a
year ago due primarily to changes in the receivable/payable account with
Apache.
At March 31, 1996, the available commitment under the Partnership's
reducing revolving credit facility was $12,750,000, of which $6,460,000 was
outstanding. The available commitment reduces by $1,275,000 per quarter,
with the outstanding loan balance to be repaid by July 1998. The
Partnership must comply with certain cash flow and oil and gas reserve
tests under the terms of the credit facility, and failure to comply will
result in mandatory principal payments in amounts sufficient to meet the
tests. The Partnership has met the tests each year since the inception of
the credit facility in 1992. Based on current pricing and its reserve
base, the Partnership anticipates meeting future tests and does not expect
to have an acceleration of principal payments. The Partnership is not
subject to any financial ratio requirements. Apache is contingently liable
for obligations of the Partnership and is subject to certain requirements
under the terms of the credit facility. Apache was in compliance with such
covenants at March 31, 1996. The credit facility had an average interest
rate of 6.271 percent during the first quarter of 1996 which compares to an
average rate of 6.802 percent a year ago. The Partnership will attempt to
maintain availability under its credit facility as cushion for unforeseen
expenditures and contingencies.
It is expected that cash available under the Partnership's credit
facility, Managing Partner contributions, and net cash provided by
operating activities will be sufficient to meet the Partnership's liquidity
needs through the end of 1996. However, in the event short-term operating
cash requirements are greater than the Partnership's financial resources,
the Partnership will seek short-term interest-bearing advances from the
Managing Partner.
Capital Commitments
The Partnership's primary needs for cash are for operating expenses,
repayment of principal and interest on outstanding debt, drilling and
recompletion expenditures, distributions to Investing Partners and the
purchase of Units offered by Investing Partners under the right of
presentment.
An amendment to the Partnership Agreement created a right of
presentment under which all Investing Partners now have a limited and
voluntary right to offer their Units to the Partnership twice each year to
be repurchased for cash. The first right of presentment offer for 1996 of
$10,698 per Unit was made to the Investing Partners on April 29, 1996. The
actual payment will increase by interest calculated from the valuation
date, December 31, 1995, to the date of payment. The Partnership is not in
a position to predict how many Units will be presented for repurchase
during 1996 and cannot, at this time, determine if the partnership will
have sufficient funds available for the purpose of repurchasing all or any
units tendered.
During the first quarter of 1996, the Partnership's oil and gas
property additions totaled $18,728. The Partnership's capital expenditures
for the remainder of 1996 are anticipated to be approximately $1 million
based on information provided by the operators of the properties in which
the Partnership has interests. However, such estimates may change based on
realized product prices, drilling results or other factors.
The Partnership made a distribution of $1,000 per Limited Partner unit
during March 1996, and intends to make another distribution in the second
half of 1996. The amount of this and future distributions will be
dependent on actual and expected production levels, realized and expected
oil and gas prices, debt service requirements and expected drilling and
recompletion expenditures.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 ("PSLRA")
The foregoing discussions contain certain "forward-looking statements"
as defined by the PSLRA including, without limitation, discussions as to
expectations, beliefs, plans, objectives and future financial performance,
and assumptions underlying or concerning matters discussed reflecting
management's current expectations of the manner in which the various
factors discussed therein may affect the Partnership's business in the
future. Any matters that are not historical facts are forward-looking and,
accordingly, involve estimates, assumptions and uncertainties which could
cause actual results or outcomes to differ materially from those expressed
in the forward-looking statements. There is no assurance that the
Partnership's expectations will be realized or that unexpected events will
not have an adverse impact on the Partnership's business.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
27.1 Financial Data Table.
b. Reports filed on Form 8-K - None.
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 thereto duly authorized.
APACHE OFFSHORE INVESTMENT PARTNERSHIP
By: Apache Corporation, General Partner
Dated: May 14, 1996 /s/ Mark A. Jackson
---------------------------------
Mark A. Jackson
Vice President and Chief Financial Officer
Dated: May 14, 1996 /s/ Thomas L. Mitchell
---------------------------------
Thomas L. Mitchell
Controller and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000727538
<NAME> APACHE OFFSHORE INVESTMENT PARTNERSHIP
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-01-1996
<EXCHANGE-RATE> 1
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 4,119,930
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,119,930
<PP&E> 161,840,566
<DEPRECIATION> (152,393,038)
<TOTAL-ASSETS> 13,567,458
<CURRENT-LIABILITIES> 559,102
<BONDS> 6,460,000
0
0
<COMMON> 0
<OTHER-SE> 6,548,356
<TOTAL-LIABILITY-AND-EQUITY> 13,567,458
<SALES> 5,014,238
<TOTAL-REVENUES> 5,014,238
<CGS> 1,647,161
<TOTAL-COSTS> 1,647,161
<OTHER-EXPENSES> 133,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,639
<INCOME-PRETAX> 3,096,995
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,096,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,096,995
<EPS-PRIMARY> 1,941
<EPS-DILUTED> 1,941
</TABLE>
