EX-99.5 5 h06784a1exv99w5.txt UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STMT EXHIBIT 99.5 APACHE CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements and related notes are presented to show the pro forma effects of the acquisition of oil and gas producing properties from BP p.l.c. (BP) during the first and second quarter of 2003. The pro forma condensed consolidated statements of operations are presented to show income from continuing operations as if the BP transaction occurred as of the beginning of each period presented. The pro forma condensed consolidated balance sheet is based on the assumption that the BP transaction occurred effective March 31, 2003. Pro forma data are based on assumptions and include adjustments as explained in the notes to the unaudited pro forma condensed consolidated financial statements. The pro forma data are not necessarily indicative of the financial results that would have been attained had the BP transaction occurred on the dates referenced above, and should not be viewed as indicative of operations in future periods. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the notes thereto, Apache's Annual Report on Form 10-K for the year ended December 31, 2002 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and the Statement of Combined Revenues and Direct Operating Expenses included herein. B-1 APACHE CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002 (In thousands, except per share amounts)
APACHE BP PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA --------------- --------------- --------------- --------------- REVENUES Oil and gas production revenues ........... $ 2,559,748 $ 930,549 $ -- $ 3,490,297 Other revenues (losses) ................... 125 67 -- 192 --------------- --------------- --------------- --------------- 2,559,873 930,616 -- 3,490,489 --------------- --------------- --------------- --------------- OPERATING EXPENSES Depreciation, depletion and amortization .. 843,879 -- 322,227 (a) 1,166,106 International impairments ................. 19,600 -- -- 19,600 Operating costs ........................... 563,779 397,174 -- 960,953 General and administrative ................ 104,588 -- 4,140 (b) 108,728 Financing costs, net ...................... 112,833 -- 11,211 (c) 115,944 (8,100)(d) --------------- --------------- --------------- --------------- 1,644,679 397,174 329,478 2,371,331 --------------- --------------- --------------- --------------- PREFERRED INTERESTS OF SUBSIDIARIES .......... 16,224 -- -- 16,224 --------------- --------------- --------------- --------------- INCOME BEFORE INCOME TAXES ................... 898,970 533,442 (329,478) 1,102,934 Provision (benefit) for income taxes ...... 344,641 -- 74,052 (e) 418,693 --------------- --------------- --------------- --------------- NET INCOME ................................... 554,329 533,442 (403,530) 684,241 Preferred stock dividends ................. 10,815 -- -- 10,815 --------------- --------------- --------------- --------------- INCOME ATTRIBUTABLE TO COMMON STOCK .......... $ 543,514 $ 533,442 $ (403,530) $ 673,426 =============== =============== =============== =============== NET INCOME PER COMMON SHARE: Basic ..................................... $ 3.66 $ 4.25 Diluted ................................... $ 3.60 $ 4.18 Average common shares outstanding ............ 148,617 9,901 (f) 158,518 Diluted common shares outstanding ............ 152,306 9,901 (f) 162,207
The accompanying notes to unaudited pro forma condensed consolidated financial statements are an integral part of these statements. B-2 APACHE CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 (In thousands, except per share amounts)
APACHE BP PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ------------- ------------- ------------- ------------- REVENUES Oil and gas production revenues ....................... $ 975,162 $ 193,141 $ -- $ 1,168,303 Other revenues (losses) ............................... (8,553) 3 -- (8,550) ------------- ------------- ------------- ------------- 966,609 193,144 -- 1,159,753 ------------- ------------- ------------- ------------- OPERATING EXPENSES Depreciation, depletion and amortization .............. 214,349 -- 49,157 (a) 263,506 Asset retirement obligation accretion ................. 5,313 -- 4,715 (g) 10,028 Operating costs ....................................... 170,550 93,825 -- 264,375 General and administrative ............................ 27,831 -- 1,035 (b) 28,866 Financing costs, net .................................. 25,921 -- 2,351 (c) 26,070 (2,202)(d) ------------- ------------- ------------- ------------- 443,964 93,825 55,056 592,845 ------------- ------------- ------------- ------------- PREFERRED INTERESTS OF SUBSIDIARIES ...................... 3,362 -- -- 3,362 ------------- ------------- ------------- ------------- INCOME BEFORE INCOME TAXES ............................... 519,283 99,319 (55,056) 563,546 Provision for income taxes ............................ 206,986 (14,552) 15,350 (e) 207,784 ------------- ------------- ------------- ------------- INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE ............. 312,297 113,871 (70,406) 355,762 Cumulative effect of change in accounting principle, net of income tax ........................ 26,632 -- -- 26,632 ------------- ------------- ------------- ------------- NET INCOME (LOSS) ........................................ 338,929 113,871 (70,406) 382,394 Preferred stock dividends ............................. 1,420 -- -- 1,420 ------------- ------------- ------------- ------------- INCOME ATTRIBUTABLE TO COMMON STOCK ...................... $ 337,509 $ 113,871 $ (70,406) $ 380,974 ============= ============= ============= ============= BASIC NET INCOME PER COMMON SHARE: Before change in accounting principle ................. $ 1.95 $ 2.19 Cumulative effect of change in accounting principle ... 0.17 0.17 ------------- ------------- $ 2.12 $ 2.36 ============= ============= DILUTED NET INCOME PER COMMON SHARE: Before change in accounting principle ................. $ 1.94 $ 2.18 Cumulative effect of change in accounting principle ... 0.16 0.16 ------------- ------------- $ 2.10 $ 2.34 ============= ============= Average common shares outstanding ........................ 159,255 2,200 (h) 161,455 Diluted common shares outstanding ........................ 160,580 2,200 (h) 162,780
The accompanying notes to unaudited pro forma condensed consolidated financial statements are an integral part of these statements. B-3 APACHE CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2003 (In thousands)
APACHE PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA --------------- ----------------- ----------------- ASSETS Current assets..................................... $ 998,166 $ (25,255)(1,3) $ 972,911 Net property and equipment......................... 9,642,951 919,835 (1,4) 10,569,007 6,221 (2) Other assets....................................... 231,165 16,181 (4) 247,346 --------------- ----------------- ----------------- $ 10,872,282 $ 916,982 $ 11,789,264 =============== ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities................................ $ 728,605 $ 11,365 (3) $ 739,970 Long-term debt..................................... 1,943,364 604,349 (1) 2,547,713 Deferred credits and other noncurrent liabilities.. 1,960,125 301,268 (4) 2,261,393 Preferred interests of subsidiaries................ 437,088 -- 437,088 --------------- ----------------- ----------------- Total Liabilities............................... 5,069,182 916,982 5,986,164 Shareholders' equity............................... 5,803,100 -- 5,803,100 --------------- ----------------- ----------------- $ 10,872,282 $ 916,982 $ 11,789,264 =============== ================= =================
The accompanying notes to unaudited pro forma condensed consolidated financial statements are an integral part of these statements. B-4 APACHE CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The unaudited pro forma statement of operations for the year ended December 31, 2002, is based on the audited financial statements of Apache for the year ended December 31, 2002, the audited statement of combined revenues and direct operating expenses for the BP properties for the year ended December 31, 2002, and the adjustments and assumptions described below. The unaudited pro forma statement of operations for the three months ended March 31, 2003, and the unaudited pro forma balance sheet as of March 31, 2003, are based on the unaudited financial statements of Apache as of and for the three months ended March 31, 2003, the unaudited statement of combined revenues and direct operating expenses for the BP properties for the three months ended March 31, 2003, and the adjustments and assumptions described below. PRO FORMA ADJUSTMENTS THE UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS REFLECT THE FOLLOWING ADJUSTMENTS: a. Record incremental depreciation, depletion and amortization expense, using the units-of-production method, resulting from the purchase of the BP properties. b. Record assumed increase in general and administrative expense as a result of the purchase of the BP properties. c. Record interest expense associated with debt of approximately $604 million incurred under Apache's global credit facility to fund a portion of the purchase price before consideration of purchase price adjustments. Applicable interest rates on the facility were 1.9 percent for 2002 and 1.3 percent for the quarter ended March 31, 2003. d. Record capitalized interest, assuming $123 million of the purchase price is allocated to unproved oil and gas properties with the balance of the purchase price allocated to proved properties. Capitalized interest relating to unproved properties reflects a rate of 6.6 percent for 2002 and 7.1 percent for the quarter ended March 31, 2003. e. Record a pro forma income tax provision, assuming a 35 percent rate for the Gulf of Mexico portion and 43 percent for the North Sea portion. f. Record the issuance of 9.9 million shares of Apache common stock to finance the acquisition. g. Record asset retirement obligation on properties acquired from BP. h. Record adjustment to reflect issuance of 9.9 million shares as of January 1, 2003. B-5 APACHE CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) THE UNAUDITED PRO FORMA BALANCE SHEET REFLECTS THE FOLLOWING ADJUSTMENTS ASSOCIATED WITH THE BP ACQUISITION ACTIVITY SUBSEQUENT TO MARCH 31, 2003: 1. Record the purchase price for the BP properties, net of estimated purchase price adjustments totaling $95 million, funded with: o Cash and proceeds from additional borrowings of approximately $604 million. o Purchase price adjustments are subject to further review and audit. 2. Record transaction costs, which are primarily investment banking fees. 3. Record acquired working capital items. 4. Record asset retirement obligation, additional deferred tax liabilities and other miscellaneous long-term assets and liabilities. B-6 APACHE CORPORATION AND SUBSIDIARIES PRO FORMA SUPPLEMENTAL OIL AND GAS DISCLOSURES (UNAUDITED) The following table sets forth certain unaudited pro forma information concerning Apache's proved oil and gas reserves at December 31, 2002, giving effect to the BP transaction as if it had occurred on January 1, 2002. There are numerous uncertainties inherent in estimating the quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve data represents estimates only and should not be construed as being exact. PROVED OIL AND NATURAL GAS RESERVES
NATURAL GAS ----------------------------------------------------- APACHE BP PRO FORMA --------------- --------------- --------------- (MILLION CUBIC FEET) December 31, 2001 ................................ 4,005,331 337,810 4,343,141 Extension, discoveries and other additions ....... 210,537 -- 210,537 Purchase of minerals in-place .................... 220,572 -- 220,572 Revisions of previous estimates .................. 21,423 -- 21,423 Production ....................................... (394,341) (89,205) (483,546) Sales of properties .............................. (8,886) -- (8,886) --------------- --------------- --------------- December 31, 2002 ................................ 4,054,636 248,605 4,303,241 =============== =============== =============== Proved developed reserves December 31, 2001 ............................ 3,203,817 337,810 3,455,265 =============== =============== =============== December 31, 2002 ............................ 3,206,533 248,605 3,455,138 =============== =============== ===============
OIL, CONDENSATE AND NATURAL GAS LIQUIDS ----------------------------------------------------- APACHE BP PRO FORMA --------------- --------------- --------------- (THOUSANDS OF BARRELS) December 31, 2001 ................................ 599,388 211,507 810,895 Extension, discoveries and other additions ....... 85,689 -- 85,689 Purchase of minerals in-place .................... 12,164 -- 12,164 Revisions of previous estimates .................. (1,205) -- (1,205) Production ....................................... (58,920) (26,392) (85,312) Sales of properties .............................. (351) -- (351) --------------- --------------- --------------- December 31, 2002 ................................ 636,765 185,115 821,880 =============== =============== =============== Proved developed reserves December 31, 2001 ............................ 411,782 211,507 623,289 =============== =============== =============== December 31, 2002 ............................ 414,375 185,115 599,490 =============== =============== ===============
B-7 APACHE CORPORATION AND SUBSIDIARIES PRO FORMA SUPPLEMENTAL OIL AND GAS DISCLOSURES - (CONTINUED) (UNAUDITED) The following table sets forth unaudited pro forma information concerning the discounted future net cash flows from proved oil and gas reserves of Apache as of December 31, 2002, net of income tax expense, and giving effect to the acquisition of the BP properties as if it had occurred on January 1, 2002. Income tax expense has been computed using assumptions relating to the future tax rates and the permanent differences and credits under the tax laws relating to oil and gas activities at December 31, 2002. Cash flows relating to the BP properties are based on Apache's evaluation of reserves and on information provided by BP. Future income tax expense on the BP properties is based on Apache's purchase price allocation. The information should be viewed only as a form of standardized disclosure concerning possible future cash flows that would result under the assumptions used, but should not be viewed as indicative of fair market value. Reference is made to Apache's financial statements for the fiscal year ended December 31, 2002, and the Statement of Combined Revenues and Direct Operating Expenses included herein, for a discussion of the assumptions used in preparing the information presented.
FUTURE NET CASH FLOWS APACHE BP PRO FORMA --------------------- --------------- --------------- --------------- (IN THOUSANDS) Cash inflows ..................................... $ 33,806,360 $ 6,670,231 $ 40,476,591 Production and development costs ................. (9,075,565) (3,977,203) (13,052,768) Income tax expense ............................... (7,669,504) (615,304) (8,284,808) --------------- --------------- --------------- Net cash flows ................................... 17,061,291 2,077,724 19,139,015 10% discount rate ................................ (7,909,671) (436,705) (8,346,376) --------------- --------------- --------------- Discounted future net cash flows ................. $ 9,151,620 $ 1,641,019 $ 10,792,639 =============== =============== ===============
The following table sets forth the principal sources of change in discounted future net cash flows:
APACHE BP PRO FORMA --------------- --------------- --------------- (IN THOUSANDS) Sales, net of production costs ................... $ (1,994,631) $ (533,442) $ (2,528,073) Net change in prices and production costs ........ 4,767,785 1,658,306 6,426,091 Discoveries and improved recovery, net of related costs .................................. 1,885,266 -- 1,885,266 Change in future development costs ............... 222,160 -- 222,160 Revisions of quantities .......................... (15,400) -- (15,400) Purchases of minerals in-place ................... 603,608 -- 603,608 Accretion of discount ............................ 737,112 91,168 828,280 Change in income taxes ........................... (2,200,925) (458,264) (2,659,189) Sales of properties .............................. (14,502) -- (14,502) Change in production rates and other ............. (382,314) -- (382,314) --------------- --------------- --------------- $ 3,608,159 $ 757,768 $ 4,365,927 =============== =============== ===============
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