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UNITED STATES
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, 2000
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 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 77056-4400
2000 Post Oak Boulevard, Houston, TX ---------------
---------------------------------------- (Zip Code)
(Address of Principal Executive Offices)
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 X
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas production revenues $3,315,497 $2,067,810 $8,858,213 $5,789,695
Interest income 42,477 38,702 108,944 74,508
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3,357,974 2,106,512 8,967,157 5,864,203
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EXPENSES:
Depreciation, depletion and amortization 805,759 788,292 2,223,823 2,287,411
Lease operating expense 110,258 176,035 374,071 529,023
Administrative 134,973 135,000 405,000 405,000
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1,050,990 1,099,327 3,002,894 3,221,434
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NET INCOME $2,306,984 $1,007,185 $5,964,263 $2,642,769
========== ========== ========== ==========
NET INCOME ALLOCATED TO:
Managing Partner $ 571,244 $ 338,507 $1,497,173 $ 866,543
Investing Partners 1,735,740 668,678 4,467,090 1,776,226
---------- ---------- ---------- ----------
$2,306,984 $1,007,185 $5,964,263 $2,642,769
========== ========== ========== ==========
NET INCOME PER INVESTING PARTNER UNIT $ 1,537 $ 588 $ 3,948 $ 1,559
========== ========== ========== ==========
WEIGHTED AVERAGE INVESTING PARTNER
UNITS OUTSTANDING 1,129.5 1,136.7 1,131.4 1,139.5
========== ========== ========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,964,263 $ 2,642,769
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 2,223,823 2,287,411
Changes in operating assets and liabilities:
(Increase) decrease in accrued revenues receivable (129,164) 509,151
Decrease in accrued operating expenses payable (56,344) (35,809)
Increase in payable to Apache Corporation 177,651 43,855
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Net cash provided by operating activities 8,180,229 5,447,377
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (2,778,436) (1,112,072)
Non-cash portion of oil and gas property additions (202,851) 286,390
Proceeds from sales of oil and gas properties -- 140,620
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Net cash used in investing activities (2,981,287) (685,062)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Partnership Units (28,047) (45,512)
Distributions to Investing Partners (2,264,978) (855,728)
Distributions to Managing Partner, net (1,477,889) (1,122,295)
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Net cash used in financing activities (3,770,914) (2,023,535)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 1,428,028 2,738,780
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,748,812 1,324,949
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,176,840 $ 4,063,729
=========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
2
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,176,840 $ 2,748,812
Accrued revenues receivable 764,990 635,826
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4,941,830 3,384,638
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OIL AND GAS PROPERTIES, on the basis of full cost accounting:
Proved properties 172,274,782 169,496,346
Less - Accumulated depreciation, depletion and amortization (166,382,391) (164,158,568)
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5,892,391 5,337,778
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$ 10,834,221 $ 8,722,416
============= =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Distribution payable $ 3,670,786 $ --
Accrued exploration and development 394,000 596,851
Accrued operating expenses payable and other 115,727 172,071
Payable to Apache Corporation 376,282 198,631
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4,556,795 967,553
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PARTNERS' CAPITAL:
Managing Partner 257,363 238,079
Investing Partners (1,129.5 and 1,132.5 units
outstanding, respectively) 6,020,063 7,516,784
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6,277,426 7,754,863
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$ 10,834,221 $ 8,722,416
============= =============
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements included herein have been prepared by the Apache
Offshore Investment Partnership (the 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 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 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.
1. RECEIVABLE FROM/PAYABLE TO APACHE
Payable to Apache Corporation, the Partnership's managing partner (Apache
or the Managing Partner), represents the net result of the Investing Partners'
revenue and expenditure transactions in the current month. Generally, cash in
this amount will be transferred to Apache in the month after the Partnership's
transactions are processed and the net results of operations are determined.
2. RIGHT OF PRESENTMENT
As provided in the Partnership Agreement, as amended (the Amended
Partnership Agreement), a first right of presentment offer for 2000 of $8,874
per Unit, plus interest to the date of the payment, was made to Investing
Partners based on a valuation date of December 31, 1999. As a result, the
Partnership purchased 3.0 Units in June 2000 for a total of $28,047 in cash. A
second right of presentment offer for 2000 of $6,431 per Unit, plus interest to
the date of payment, was made to the Investing Partners on October 10, 2000,
based on a valuation date of June 30, 2000. The Unit holders have until the
close of business on November 10, 2000 to present their Units for repurchase by
the Partnership. The Partnership will determine by November 30, 2000, whether to
accept (or reject) each Unit offered during this election period.
The Partnership is not in a position to predict how many Units will be
presented for repurchase during the fourth quarter of 2000 and cannot, at this
time, determine if the Partnership will have sufficient funds available to
purchase Units. The Partnership has no obligation to purchase any Units
presented to the extent it determines that it has insufficient funds for such
purchases. The Amended Partnership Agreement contains limitations on the number
of Units that the Partnership can repurchase, including a limit of 10 percent of
the outstanding Units on an annual basis.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET INCOME AND REVENUE
The Partnership reported net income of $2.3 million in the third quarter of
2000, versus $1 million in the prior year period. Net income per Investing
Partner Unit increased 161 percent, from $588 per Unit to $1,537 per Unit.
Higher product prices and oil production during 2000 contributed to the
increase.
For the first nine months of 2000, net income of $6 million, or $3,948 per
Investing Partner Unit, increased 126 percent and 153 percent, respectively,
from $2.6 million, or $1,559 per Investing Partner Unit, in the same period last
year. The increases were attributable to higher product prices and oil
production, combined with lower expenses.
Revenues increased 59 percent, from $2.1 million in the third quarter of
1999 to $3.4 million in the third quarter of 2000. For the first nine months of
2000, revenues increased 53 percent to $9 million as higher product prices and
oil production more than offset lower gas production. Natural gas accounted for
69 percent of the Partnership's total revenues during the first nine months of
2000, compared to 77 percent during the comparable period in 1999.
The Partnership's oil and gas production volume and price information is
summarized in the following table (gas volumes presented in thousand cubic feet
(Mcf) per day):
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------------ ---------------------------------------------
INCREASE INCREASE
2000 1999 (DECREASE) 2000 1999 (DECREASE)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gas volume - Mcf per day 6,147 6,903 (11)% 6,678 8,106 (18)%
Average gas price - per Mcf $ 4.26 $ 2.55 67% $ 3.38 $ 2.04 66%
Oil volume - barrels per day 313 248 26% 333 303 10%
Average oil price - per barrel $ 31.50 $ 19.74 60% $ 29.39 $ 15.48 90%
</TABLE>
THIRD QUARTER 2000 COMPARED TO THIRD QUARTER 1999
Natural gas production revenues for the third quarter of 2000 totaled $2.4
million, 49 percent higher than the third quarter of 1999. Natural gas prices
increased 67 percent for the third quarter of 2000 compared to the year-earlier
period, which favorably impacted revenue by $1.1 million. Natural gas volumes
for the quarter declined 11 percent from a year ago primarily due to natural
production declines at Matagorda 681, and the Partnership taking less than its
entitled share of production at Ship Shoal 259 and North Padre Island 969 to
make-up gas imbalances with another working-interest owner. These decreases were
partially offset by production added from a sidetrack well completed at East
Cameron Block 60 in late 1999 and drilling projects completed at South Timbalier
Block 295 during 2000.
The Partnership's crude oil production revenues for the third quarter of
2000 totaled $.9 million, a 101 percent increase from the third quarter of 1999.
The $.5 million increase in oil sales was attributable to a 60 percent increase
in average realized oil price, and a 26 percent increase in oil production. The
increase in crude oil production was largely due to drilling projects completed
at South Timbalier Block 295 during 2000.
YEAR-TO-DATE 2000 COMPARED TO YEAR-TO-DATE 1999
Gas sales for the first nine months of 2000 of $6.2 million increased $1.7
million, or 37 percent, when compared to the same period in 1999. Average
realized gas prices increased $1.34 per Mcf, or 66 percent, when compared with
the first nine months of 1999, positively impacting sales by $3 million. Gas
production for the first nine months of 2000 decreased by 18 percent when
compared to the same period in 1999, negatively impacting revenues by $1.3
million. Production decreases in 2000 were primarily due to natural production
declines at Matagorda 681, and the Partnership taking less than its entitled
share of production at Ship Shoal 259 and North Padre Island 969 to make-up gas
imbalances with another working-interest owner. These decreases were partially
offset by production added from a
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sidetrack well completed at East Cameron Block 60 in late 1999 and drilling
projects completed at South Timbalier Block 295 during 2000.
For the nine months ended September 30, 2000, oil sales increased 109
percent to $2.7 million when compared to the same period last year. The
Partnership's oil sales revenues were favorably impacted by a 90 percent
increase in realized prices and a 10 percent increase in oil production. The
increase in oil production was largely attributable to drilling projects
completed at South Timbalier Block 295 during 2000.
OPERATING EXPENSES
The Partnership's depreciation, depletion and amortization (DD&A) rate,
expressed as a percentage of oil and gas production revenues, was approximately
24 percent during the third quarter of 2000 compared to 38 percent during the
same period in 1999. For the first nine months, the Partnership's DD&A rate
decreased from 40 percent in 1999 to 25 percent in 2000. The decrease in the
DD&A rates was a result of higher natural gas prices and crude oil prices in
2000, and upward reserve revisions recognized at the end of 1999.
Lease operating expense (LOE) in the third quarter of 2000 declined from
the third quarter of 1999 due to lower repair and maintenance costs. For the
first nine months of 2000, LOE of $.4 million was down 29 percent from a year
ago due to lower repair and maintenance costs and the receipt of an audit
exception refund from an outside operator in 2000.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's primary capital resource is net cash provided by
operating activities, which was $8.2 million for the first nine months of 2000.
Net cash provided by operating activities in 2000 was up 50 percent from a year
ago due to higher oil and gas prices and lower LOE costs during the first nine
months of 2000. Future cash flows will be influenced similarly by fluctuations
in product prices, production levels and operating costs.
CAPITAL COMMITMENTS
The Partnership's primary needs for cash are for operating expenses,
drilling and recompletion expenditures, distributions to Investing Partners, and
the purchase of Units offered by Investing Partners under the right of
presentment.
During the first nine months of 2000, the Partnership's oil and gas
property additions totaled $2.8 million. These additions primarily related to
drilling and recompletion projects at South Timbalier Block 295 and a compressor
upgrade at Matagorda Block 681/682. During the first nine months of 2000, the
Partnership completed one development well and two sidetrack wells at South
Timbalier Block 295, all as producing wells. At Matagorda Blocks 681/682, a
compressor on the platform was modified to increase the recoverable reserves
from the field. The Partnership anticipates capital expenditures of
approximately $.3 million for the remainder of 2000 for one sidetrack well at
South Timbalier Block 295. Such estimates may change based on realized prices,
drilling results or changes by the operator to the development plan.
The Partnership made distributions to Investing Partners of $2,000 per Unit
on March 1, 2000, and $3,250 per Unit on October 4, 2000. The amount of future
distributions will be dependent on actual and expected production levels,
realized and expected oil and gas prices, expected drilling and recompletion
expenditures, and prudent cash reserves for future dismantlement and abandonment
costs that will be incurred after the Partnership's reserves are depleted.
As provided in the Amended Partnership Agreement, a first right of
presentment offer for 2000 of $8,874 per Unit, plus interest to the date of
payment, was made to Investing Partners, based on a valuation date of December
31, 1999. As a result, the Partnership purchased 3.0 Units in June 2000 for a
total of $28,047 in cash. A second right of presentment offer for 2000 of $6,431
per Unit, plus interest to the date of payment, was made to Investing Partners
in early October 2000, based on a valuation date of June 30, 2000. The
Partnership is not in a position to predict how many Units will be presented for
repurchase during the fourth quarter and cannot, at this time, determine if the
Partnership will have sufficient funds available to repurchase Units. The
Partnership has no
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obligation to purchase any Units presented to the extent it determines that it
has insufficient funds for such purchases. The Amended Partnership Agreement
contains limitations on the number of Units that the Partnership can repurchase,
including a limit of 10 percent of the outstanding Units on an annual basis.
FORWARD-LOOKING STATEMENTS AND RISK
Certain statements in this report, including statements of the future
plans, objectives, and expected performance of the Partnership, are
forward-looking statements that are dependent on certain events, risks and
uncertainties that may be outside the Partnership'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.
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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 Schedule.
b. Reports on Form 8-K - None.
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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 OFFSHORE INVESTMENT PARTNERSHIP
By: Apache Corporation, General Partner
Dated: November 10, 2000 /s/ Roger B. Plank
---------------------------------------
Roger B. Plank
Executive Vice President and Chief
Financial Officer
Dated: November 10, 2000 /s/ Thomas L. Mitchell
---------------------------------------
Thomas L. Mitchell
Vice President and Controller
(Chief Accounting Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
28.1 - Financial Data Schedule.
</TABLE>
