-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ejuuma8C8m9VN9+ZsH93m5Qqp4RSLmDX0dT5GVBE6ZMrsJdp/K+SEEjqRg4EqYSw hk7MrZUz43xyRTBID0QQSg== 0000950129-04-000266.txt : 20040126 0000950129-04-000266.hdr.sgml : 20040126 20040126164214 ACCESSION NUMBER: 0000950129-04-000266 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030318 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APACHE CORP CENTRAL INDEX KEY: 0000006769 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 410747868 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04300 FILM NUMBER: 04543770 BUSINESS ADDRESS: STREET 1: 2000 POST OAK BLVD STREET 2: ONE POST OAK CENTER STE 100 CITY: HOUSTON STATE: TX ZIP: 77056-4400 BUSINESS PHONE: 7132966000 MAIL ADDRESS: STREET 1: 2000 POST OAK BLVD STREET 2: STE 100 CITY: HOUSTON STATE: TX ZIP: 77056-4400 FORMER COMPANY: FORMER CONFORMED NAME: APACHE OIL CORP DATE OF NAME CHANGE: 19660830 8-K/A 1 h11896e8vkza.txt APACHE CORPORATION - DATED MARCH 18, 2003 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A (AMENDMENT NO. 2) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): March 18, 2003 APACHE CORPORATION (Exact name of registrant as specified in Charter) DELAWARE 1-4300 41-0747868 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification Number)
2000 POST OAK BOULEVARD SUITE 100 HOUSTON, TEXAS 77056-4400 (Address of Principal Executive Offices) Registrant's telephone number, including area code: (713) 296-6000 ================================================================================ The undersigned registrant, Apache Corporation ("Apache"), hereby amends Item 7. "Financial Statements, Pro Forma Financial Information and Exhibits" of its Current Report on Form 8-K, dated March 18, 2003 and filed on April 17, 2003, as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) FINANCIAL STATEMENT OF BUSINESSES ACQUIRED. ------------------------------------------ Audited Statement of Combined Revenues and Direct Operating Expenses for the Oil and Gas Properties (the "BP Properties") purchased by Apache Corporation from subsidiaries of BP p.l.c. (referred to collectively as "BP") for the year ended December 31, 2002, and the related notes thereto, together with the Report of Independent Auditors of Ernst & Young LLP concerning the Statement and related notes. Copies of such Audited Statement of Combined Revenues and Direct Operating Expenses for the Oil and Gas Properties are attached hereto as Exhibit 99.4. (b) PRO FORMA FINANCIAL INFORMATION. ------------------------------- Unaudited Pro Forma Consolidated Condensed Statement of Operations of Apache Corporation and Subsidiaries, for the quarter ended March 31, 2003, the Unaudited Pro Forma Consolidated Condensed Balance Sheet of Apache Corporation and Subsidiaries, as of March 31, 2003, and the related notes thereto, to show the pro forma effects of Apache's acquisition of the BP Properties. Copies of such financial statements are attached hereto as Exhibit 99.5. The financial statements contained in Exhibit 99.5 incorporate by reference the financial statements of Apache Corporation and Subsidiaries contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2002. (c) EXHIBITS. -------- EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Purchase and Sale Agreement, dated January 11, 2003, by and between Apache Corporation, as Buyer, and BP Exploration & Production Inc., as Seller (incorporated by reference to Apache's Current Report on Form 8-K dated January 11, 2003, filed on January 13, 2003, SEC File No. 1-4300). 2.2 Sale and Purchase Agreement, dated January 11, 2003, by and between Apache North Sea Limited, as Buyer, and BP Exploration Operating Company Limited, as Seller (incorporated by reference to Apache's Current Report on Form 8-K dated January 11, 2003, filed on January 13, 2003, SEC File No. 1-4300). *23.1 Consent of Ernst & Young LLP. **99.1 Press Release, dated March 18, 2003, "Apache Closes Purchase of Gulf of Mexico Assets From BP." 1 **99.2 Press Release, dated April 2, 2003, "Apache Closes UK North Sea Acquisition From BP." 99.3 Final Prospectus Supplement dated January 22, 2003 (incorporated by reference to Apache's filing pursuant to Rule 424(B)(2) on January 17, 2003, Registration Nos. 333-75633 and 333-32580). *99.4 Audited Statement of Combined Revenues and Direct Operating Expenses for the Oil and Gas Properties (the "BP Properties") purchased by Apache Corporation from subsidiaries of BP p.l.c. (referred to collectively as "BP") for the year ended December 31, 2002, and the related notes thereto, together with the Report of Independent Auditors of Ernst & Young LLP concerning the Statement and related notes. *99.5 Unaudited Pro Forma Consolidated Condensed Statement of Operations of Apache Corporation and Subsidiaries, for the quarter ended March 31, 2003, the Unaudited Pro Forma Consolidated Condensed Balance Sheet of Apache Corporation and Subsidiaries, as of March 31, 2003, and the related notes thereto, to show the pro forma effects of Apache's acquisition of the BP Properties. The financial statements contained herein incorporate by reference the financial statements of Apache Corporation and Subsidiaries contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2002. - ---------- * filed herewith ** previously filed 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. APACHE CORPORATION Date: January 23, 2004 /s/ Eric L. Harry ---------------------------------------- Eric L. Harry Vice President and Associate General Counsel 3 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Purchase and Sale Agreement, dated January 11, 2003, by and between Apache Corporation, as Buyer, and BP Exploration & Production Inc., as Seller (incorporated by reference to Apache's Current Report on Form 8-K dated January 11, 2003, filed on January 13, 2003, SEC File No. 1-4300). 2.2 Sale and Purchase Agreement, dated January 11, 2003, by and between Apache North Sea Limited, as Buyer, and BP Exploration Operating Company Limited, as Seller (incorporated by reference to Apache's Current Report on Form 8-K dated January 11, 2003, filed on January 13, 2003, SEC File No. 1-4300). *23.1 Consent of Ernst & Young LLP. **99.1 Press Release, dated March 18, 2003, "Apache Closes Purchase of Gulf of Mexico Assets From BP." **99.2 Press Release, dated April 2, 2003, "Apache Closes UK North Sea Acquisition From BP." 99.3 Final Prospectus Supplement dated January 22, 2003 (incorporated by reference to Apache's filing pursuant to Rule 424(B)(2) on January 17, 2003, Registration Nos. 333-75633 and 333-32580). *99.4 Audited Statement of Combined Revenues and Direct Operating Expenses for the Oil and Gas Properties (the "BP Properties") purchased by Apache Corporation from subsidiaries of BP p.l.c. (referred to collectively as "BP") for the year ended December 31, 2002, and the related notes thereto, together with the Report of Independent Auditors of Ernst & Young LLP concerning the Statement and related notes. *99.5 Unaudited Pro Forma Consolidated Condensed Statement of Operations of Apache Corporation and Subsidiaries, for the quarter ended March 31, 2003, the Unaudited Pro Forma Consolidated Condensed Balance Sheet of Apache Corporation and Subsidiaries, as of March 31, 2003, and the related notes thereto, to show the pro forma effects of Apache's acquisition of the BP Properties. The financial statements contained herein incorporate by reference the financial statements of Apache Corporation and Subsidiaries contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2002. - ---------- * filed herewith ** previously filed EX-23.1 3 h11896exv23w1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Current Report on Form 8-K of our report dated March 14, 2003 with respect to the financial statements of Apache Corporation and subsidiaries included in the Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP ERNST & YOUNG LLP Houston, Texas June 13, 2003 EX-99.4 4 h11896exv99w4.txt AUDITED STATEMENT OF COMBINED REVENUES EXHIBIT 99.4 REPORT OF INDEPENDENT AUDITORS To the Shareholders of Apache Corporation: We have audited the accompanying statement of combined revenues and direct operating expenses of the oil and gas properties purchased by Apache Corporation from BP p.l.c. for the year ended December 31, 2002. This financial statement is the responsibility of Apache Corporation's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards, generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Apache Corporation's Form 8-K/A and is not intended to be a complete financial presentation of the properties described above. In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined revenues and direct operating expenses of the oil and gas properties purchased by Apache Corporation from BP p.l.c. for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Houston, Texas June 13, 2003 A-1 STATEMENT OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES OF THE OIL AND GAS PROPERTIES PURCHASED BY APACHE CORPORATION FROM BP p.l.c. (IN THOUSANDS)
FOR THE FOR THE THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, --------------------- 2002 2002 2003 -------- -------- -------- (UNAUDITED) Revenues .............................................. $930,616 $203,724 $193,144 Direct operating expenses ............................. 397,174 101,895 93,825 -------- -------- -------- Excess of revenues over direct operating expenses ..... $533,442 $101,829 $ 99,319 ======== ======== ========
The accompanying notes are an integral part of this financial statement. A-2 NOTES TO STATEMENT OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES OF THE OIL AND GAS PROPERTIES PURCHASED BY APACHE CORPORATION FROM BP p.l.c. (1) THE PROPERTIES On January 13, 2003, Apache Corporation (Apache) entered into an agreement to purchase producing properties in the U.K. North Sea and the Gulf of Mexico, with estimated proved reserves of 233.2 MMboe, from BP p.l.c. (BP), for $1.3 billion, subject to normal closing adjustments, with an effective date of January 1, 2003. The Gulf of Mexico segment of the transaction closed March 13, 2003 and the North Sea segment closed April 2, 2003. (2) BASIS FOR PRESENTATION During the periods presented, the BP properties were not accounted for or operated as a separate division by BP. Certain costs, such as depreciation, depletion and amortization, interest, accretion, general and administrative expenses, and corporate income taxes were not allocated to the individual properties. Accordingly, full separate financial statements prepared in accordance with generally accepted accounting principles do not exist and are not practicable to obtain in these circumstances. Revenues and direct operating expenses included in the accompanying statement represent Apache's net working interest in the properties acquired for the periods prior to the respective closing dates and are presented on the accrual basis of accounting. Direct operating expenses include all costs associated with lifting, field processing and transportation, and associated marketing costs, including cost to sell and direct overhead. No costs for general corporate activities have been included. Omitted expenses include DD&A, interest expense, accretion, G&A and income taxes. The Company is unable to quantify the omitted expenses for the following reasons: DD&A is dependent upon historical information that is not available to the Company including BP's historical cost and prior depletion rates. No separate calculation of depletion on a well-by-well basis comprising the acquired properties was performed by BP. Similarly, interest expense, G&A and income taxes are dependent on BP's costs, financing structure and general overhead burdens. Quantifying a portion of the omitted expenses would require allocations not previously performed by BP in an effort to determine the direct charges for these properties. The Company, however, has estimated these amounts based on its own cost and financing structures, the purchase price paid and full-cost accounting. The financial statements presented are not necessarily indicative of the results of operations of the acquired properties going forward for the following reasons. Historical costs such as DD&A, interest expense, accretion, G&A, and income taxes have not been presented and would not have been reflective of costs going forward. These allocations and calculations in the future will be based on the purchase price paid for the acquired properties and are also closely tied to the Company's financing choices, overhead structure, future capital development and the full-cost accounting method. A-3 NOTES TO STATEMENT OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES OF THE OIL AND GAS PROPERTIES PURCHASED BY APACHE CORPORATION FROM BP p.l.c. (3) COMMITMENTS AND CONTINGENCIES Pursuant to the terms of the Asset Purchase Agreement between BP and Apache, any claims, litigation or disputes pending as of the effective date (January 1, 2003) or any matters arising in connection with ownership of the properties prior to the effective date are retained by BP. Notwithstanding this indemnification, Apache is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the statement of combined revenues and direct operating expenses. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) OIL AND GAS RESERVE INFORMATION Proved oil and gas reserve quantities are based on estimates prepared by the Company's engineers and from information provided by BP p.l.c., in accordance with guidelines established by the Securities and Exchange Commission (SEC). There are numerous uncertainties inherent in estimating 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.
GAS OIL -------- -------- (MMcf) (Mbbl) Total proved reserves: Balance, December 31, 2001 ........................ 337,810 211,507 Production ........................................ (89,205) (26,392) Extensions, discoveries and improved recovery ..... -- -- Revisions of previous estimates ................... -- -- -------- -------- Balance, December 31, 2002 ........................ 248,605 185,115 ======== ========
A-4 SUPPLEMENTAL OIL AND GAS INFORMATION - CONTINUED (UNAUDITED) FUTURE NET CASH FLOWS Future cash inflows are based on year-end oil and gas prices except in those instances where future natural gas or oil sales are covered by physical contract terms providing for higher or lower amounts. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation. The following table sets forth unaudited information concerning future net cash flows for oil and gas reserves, net of income tax expense. Future income tax expense on the BP properties is based on Apache's purchase price allocation. This information does not purport to present the fair market value of the Company's oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.
DECEMBER 31, 2002 ----------------- (IN THOUSANDS) Cash inflows............................................................. $ 6,670,231 Production costs......................................................... (2,833,283) Development costs........................................................ (1,143,920) Income tax expense....................................................... (615,304) ----------- Net cash flows........................................................... 2,077,724 10 percent discount rate................................................. (436,705) ----------- Discounted future net cash flows.................................. $ 1,641,019 ===========
The following table sets forth the principal sources of change in discounted future net cash flows.
FOR THE YEAR ENDED DECEMBER 31, 2002 ----------------- (IN THOUSANDS) Beginning of year.......................................................... $ 883,251 Sales, net of production costs............................................. (533,442) Net change in prices and production costs.................................. 1,658,306 Extensions, discoveries and improved recovery, net of related costs........ - Change in future development costs......................................... - Accretion of discount...................................................... 91,168 Change in income taxes..................................................... (458,264) Revision of quantity estimates............................................. - Change in production rates and other....................................... - ---------- End of year................................................................ $1,641,019 ==========
A-5 EX-99.5 5 h11896exv99w5.txt UNAUDITED PRO FORMA CONSOLIDATED STMT. OF OPS. 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 AND OTHER Oil and gas production revenues ............... $ 2,559,748 $ 930,549 $ -- $ 3,490,297 Other ......................................... 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 -- -- 104,588 Financing costs, net .......................... 112,833 -- 11,211(b) 115,944 (8,100)(c) ----------- ----------- ----------- ----------- 1,644,679 397,174 325,338 2,367,191 ----------- ----------- ----------- ----------- PREFERRED INTERESTS OF SUBSIDIARIES .............. 16,224 -- -- 16,224 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES ....................... 898,970 533,442 (325,338) 1,107,074 Provision (benefit) for income taxes .......... 344,641 -- 75,789(d) 420,430 ----------- ----------- ----------- ----------- NET INCOME ....................................... 554,329 533,442 (401,127) 686,644 Preferred stock dividends ..................... 10,815 -- -- 10,815 ----------- ----------- ----------- ----------- INCOME ATTRIBUTABLE TO COMMON STOCK .............. $ 543,514 $ 533,442 $ (401,127) $ 675,829 =========== =========== =========== =========== NET INCOME PER COMMON SHARE: Basic ......................................... $ 1.83 $ 2.13 Diluted ....................................... $ 1.80 $ 2.10 Average common shares outstanding ................ 297,233 19,802(e) 317,035 Diluted common shares outstanding ................ 304,612 19,802(e) 324,414
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 AND OTHER Oil and gas production revenues......................... $ 975,162 $ 193,141 $ -- $ 1,168,303 Other .................................................. (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(f) 10,028 Operating costs ........................................ 170,550 93,825 -- 264,375 General and administrative ............................. 27,831 -- -- 27,831 Financing costs, net ................................... 25,921 -- 2,351(b) 26,070 (2,202)(c) ----------- ----------- ----------- ----------- 443,964 93,825 54,021 591,810 ----------- ----------- ----------- ----------- PREFERRED INTERESTS OF SUBSIDIARIES ....................... 3,362 -- -- 3,362 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES ................................ 519,283 99,319 (54,021) 564,581 Provision for income taxes ............................. 206,986 (14,552) 15,785(d) 208,219 ----------- ----------- ----------- ----------- INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE .............. 312,297 113,871 (69,806) 356,362 Cumulative effect of change in accounting principle, net of income tax ......................... 26,632 -- -- 26,632 ----------- ----------- ----------- ----------- NET INCOME (LOSS) ......................................... 338,929 113,871 (69,806) 382,994 Preferred stock dividends .............................. 1,420 -- -- 1,420 ----------- ----------- ----------- ----------- INCOME ATTRIBUTABLE TO COMMON STOCK........................ $ 337,509 $ 113,871 $ (69,806) $ 381,574 =========== =========== =========== =========== BASIC NET INCOME PER COMMON SHARE: Before change in accounting principle................... $ .98 $ 1.10 Cumulative effect of change in accounting principle .... $ .08 $ 0.08 ----------- ----------- $ 1.06 $ 1.18 =========== =========== DILUTED NET INCOME PER COMMON SHARE: Before change in accounting principle................... $ .97 $ 1.09 Cumulative effect of change in accounting principle .... .08 .08 ----------- ----------- $ 1.05 $ 1.17 =========== =========== Average common shares outstanding ......................... 318,509 4,400(g) 322,909 Diluted common shares outstanding ......................... 321,159 4,400(g) 325,559
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. Direct operating expenses include all costs associated with lifting, field processing and transportation, and associated marketing costs, including cost to sell and direct overhead. Both the Gulf of Mexico and North Sea assets acquired from BP were funded on March 13 and April 2, 2003, respectively, with net proceeds of approximately $554 million from the issuance of 19.8 million shares of common stock, adjusted for the two-for-one common stock split, in January 2003, and proceeds from additional debt of approximately $604 million borrowed under existing lines of credit and commercial paper. The purchase price allocation on the date of closing the BP transaction is preliminary pending actualization of estimated revenues and costs between the effective and closing dates. These revenues and expenses were estimated on the accrual basis for purposes of closing, and the purchase and sale agreements require a post-closing period to permit actual cash receipts and cash payments to replace estimated balances. There have been no material adjustments to date, and we do not anticipate that any remaining adjustments will be material.
U.S. - U.K. - IN THOUSANDS GULF OF MEXICO NORTH SEA TOTAL* ----------------------------- -------------- ----------- ----------- Proved Property $ 539,110 $ 854,835 $ 1,393,945 Unproved Property 57,500 65,000 122,500 Working Capital acquired, net -- 10,957 10,957 Asset Retirement Obligation (69,000) (250,887) (319,887) Deferred Tax Liability -- (50,381) (50,381) ----------- ----------- ----------- Cash consideration $ 527,610 $ 629,524 $ 1,157,134 =========== =========== ===========
* Property balance includes $12 million of transaction costs (U.S. - $4 million; North Sea - $8 million). B-5 APACHE CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 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 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. The rate of interest varies daily and is market driven. A 1/8th percent increase or decrease in the interest rate would increase or decrease interest expense by approximately $775,000 in 2002 and $189,000 in the first three months of 2003. c. 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. d. Record a pro forma income tax provision, reflecting statutory income tax rates in effect for the periods shown; a 35 percent rate for the Gulf of Mexico portion and a blended 43 percent for the North Sea portion. e. Record the issuance of 19.8 million shares of Apache common stock, adjusted for the two-for-one common stock split, to finance the acquisition. f. Record asset retirement obligation on properties acquired from BP. g. Record adjustment to reflect issuance of 19.8 million shares, adjusted for the two-for-one common stock split, as of January 1, 2003. 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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