-----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, RmkU8mRZOm6gGfcm/VDuIlAci4ycq15NVoqs/F2wYc/FSIeJecDTNzBybYyrCiXx oLfarOusUFoNo5Xcbg/V+w== 0000950129-05-007961.txt : 20050809 0000950129-05-007961.hdr.sgml : 20050809 20050809122646 ACCESSION NUMBER: 0000950129-05-007961 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050809 DATE AS OF CHANGE: 20050809 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04300 FILM NUMBER: 051008426 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 10-Q 1 h27174e10vq.txt APACHE CORPORATION - JUNE 30, 2005 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 June 30, 2005 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 1-4300 APACHE CORPORATION ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Delaware 41-0747868 - ------------------------------- ---------------------- (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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ] Number of shares of Registrant's common stock, outstanding as of June 30, 2005_______ 328,847,018 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS APACHE CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)
FOR THE QUARTER FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- (In thousands, except per common share data) REVENUES AND OTHER: Oil and gas production revenues...................... $1,774,535 $1,247,412 $3,401,184 $2,400,166 Other................................................ (15,304) (6,679) 20,335 (9,494) ---------- ---------- ---------- ---------- 1,759,231 1,240,733 3,421,519 2,390,672 ---------- ---------- ---------- ---------- OPERATING EXPENSES: Depreciation, depletion and amortization............. 359,011 295,737 698,424 581,965 Asset retirement obligation accretion................ 13,330 10,891 26,489 21,652 Lease operating costs................................ 255,430 199,779 488,601 408,015 Gathering and transportation costs................... 26,178 20,162 49,958 39,796 Severance and other taxes............................ 86,593 21,595 158,779 30,543 General and administrative........................... 52,002 39,181 102,413 85,238 China litigation..................................... - 71,216 - 71,216 Financing costs: Interest expense.................................. 44,807 40,193 90,073 80,742 Amortization of deferred loan costs............... 2,047 595 2,705 1,162 Capitalized interest.............................. (14,254) (12,708) (27,663) (26,358) Interest income................................... (875) (513) (1,802) (833) ---------- ---------- ---------- ---------- 824,269 686,128 1,587,977 1,293,138 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES............................... 934,962 554,605 1,833,542 1,097,534 Provision for income taxes........................... 346,932 171,079 685,029 367,683 ---------- ---------- ---------- ---------- NET INCOME............................................... 588,030 383,526 1,148,513 729,851 Preferred stock dividends............................ 1,420 1,420 2,840 2,840 ---------- ---------- ---------- ---------- INCOME ATTRIBUTABLE TO COMMON STOCK...................... $ 586,610 $ 382,106 $1,145,673 $ 727,011 ========== ========== ========== ========== NET INCOME PER COMMON SHARE: Basic................................................ $ 1.79 $ 1.17 $ 3.49 $ 2.23 ========== ========== ========== ========== Diluted.............................................. $ 1.76 $ 1.16 $ 3.44 $ 2.21 ========== ========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part of this statement. 1 APACHE CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------ 2005 2004 ----------- ----------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income..................................................................... $ 1,148,513 $ 729,851 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization................................. 698,424 581,965 Asset retirement obligation accretion.................................... 26,489 21,652 Provision for deferred income taxes...................................... 227,417 103,675 Other.................................................................... 27,873 20,553 Changes in operating assets and liabilities: (Increase) decrease in receivables....................................... (199,634) (174,184) (Increase) decrease in drilling advances and other....................... (21,631) (20,548) (Increase) decrease in inventories....................................... 9,020 4,426 (Increase) decrease in deferred charges and other........................ (13,368) (19,637) Increase (decrease) in accounts payable.................................. 2,063 105,697 Increase (decrease) in accrued expenses.................................. (57,335) (21,467) Increase (decrease) in advances from gas purchasers...................... (10,883) (9,072) Increase (decrease) in deferred credits and noncurrent liabilities....... (7,767) (23,859) ----------- ----------- Net cash provided by operating activities............................ 1,829,181 1,299,052 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment............................................ (1,760,690) (1,058,149) Other, net..................................................................... 24,439 (19,188) ----------- ----------- Net cash used in investing activities................................ (1,736,251) (1,077,337) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings........................................................... 84,025 404 Payments on long-term debt..................................................... (193,530) (135,300) Dividends paid................................................................. (55,307) (41,838) Common stock activity.......................................................... 19,894 13,383 Treasury stock activity, net................................................... 8,409 7,663 Cost of debt and equity transactions........................................... (722) (2,050) Other.......................................................................... 12,466 - ----------- ----------- Net cash provided by (used in) financing activities.................. (124,765) (157,738) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. (31,835) 63,977 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................................... 111,093 33,503 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD........................................ $ 79,258 $ 97,480 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of this statement. 2 APACHE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, DECEMBER 31, 2005 2004 ----------- ------------ (In thousands) ASSETS CURRENT ASSETS: Cash and cash equivalents............................................. $ 79,258 $ 111,093 Receivables, net of allowance......................................... 1,138,781 939,736 Inventories........................................................... 186,946 157,293 Drilling advances..................................................... 91,377 82,889 Prepaid assets and other.............................................. 86,913 57,771 ----------- ------------ 1,583,275 1,348,782 ----------- ------------ PROPERTY AND EQUIPMENT: Oil and gas, on the basis of full cost accounting: Proved properties.................................................. 21,442,652 19,933,041 Unproved properties and properties under development, not being amortized................................ 881,377 777,690 Gas gathering, transmission and processing facilities................. 1,174,199 966,605 Other................................................................. 292,141 284,069 ----------- ------------ 23,790,369 21,961,405 Less: Accumulated depreciation, depletion and amortization........... (8,797,051) (8,101,046) ----------- ------------ 14,993,318 13,860,359 ----------- ------------ OTHER ASSETS: Goodwill, net......................................................... 189,252 189,252 Deferred charges and other............................................ 114,735 104,087 ----------- ------------ $16,880,580 $ 15,502,480 =========== ============
The accompanying notes to consolidated financial statements are an integral part of this statement. 3 APACHE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, DECEMBER 31, 2005 2004 ----------- ------------ (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable..................................................... $ 595,290 $ 542,074 Accrued operating expense............................................ 63,865 80,741 Accrued exploration and development.................................. 436,588 341,063 Accrued compensation and benefits.................................... 93,243 83,636 Accrued interest..................................................... 32,516 32,575 Accrued income taxes................................................. 9,930 78,042 Current debt......................................................... 287,274 - Derivative instruments............................................... 122,280 21,273 Other................................................................ 178,241 103,487 ----------- ------------ 1,819,227 1,282,891 ----------- ------------ LONG-TERM DEBT.......................................................... 2,191,611 2,588,390 ----------- ------------ DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: Income taxes......................................................... 2,267,881 2,146,637 Advances from gas purchasers......................................... 79,993 90,876 Asset retirement obligation.......................................... 958,431 932,004 Derivative instruments............................................... 149,199 31,417 Other................................................................ 217,610 225,844 ----------- ------------ 3,673,114 3,426,778 ----------- ------------ SHAREHOLDERS' EQUITY: Preferred stock, no par value, 5,000,000 shares authorized - Series B, 5.68% Cumulative Preferred Stock, 100,000 shares issued and outstanding.......................... 98,387 98,387 Common stock, $0.625 par, 430,000,000 shares authorized, 335,867,018 and 334,912,505 shares issued, respectively........... 209,917 209,320 Paid-in capital...................................................... 4,143,799 4,106,182 Retained earnings.................................................... 5,110,451 4,017,339 Treasury stock, at cost, 7,020,000 and 7,455,002 shares, respectively...................................................... (91,647) (97,325) Accumulated other comprehensive loss................................. (274,279) (129,482) ----------- ------------ 9,196,628 8,204,421 ----------- ------------ $16,880,580 $ 15,502,480 =========== ============
The accompanying notes to consolidated financial statements are an integral part of this statement. 4 APACHE CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)
ACCUMULATED SERIES B OTHER COMPREHENSIVE PREFERRED COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE (In thousands, except per share) INCOME STOCK STOCK CAPITAL EARNINGS STOCK INCOME (LOSS) ------------- ---------- -------- ---------- ---------- --------- -------------- BALANCE AT DECEMBER 31, 2003.............. $ 98,387 $207,818 $4,038,007 $2,445,698 $(105,169) $ (151,943) Comprehensive income (loss): Net income........................... $ 729,851 - - - 729,851 - - Commodity hedges, net of income tax benefit of $648.................... (1,061) - - - - - (1,061) ------------- Comprehensive income................... $ 728,790 ============= Dividends: Preferred............................ - - - (2,840) - - Common ($.12 per share).............. - - - (39,067) - - Common shares issued................... - 726 49,201 - - - Treasury shares issued, net............ - - 4,738 - 5,067 - Other.................................. - - 2,405 - - ---------- -------- ---------- ---------- --------- -------------- BALANCE AT JUNE 30, 2004.................. $ 98,387 $208,544 $4,094,351 $3,133,642 $(100,102) $ (153,004) ========== ======== ========== ========== ========= ============== BALANCE AT DECEMBER 31, 2004.............. $ 98,387 $209,320 $4,106,182 $4,017,339 $ (97,325) $ (129,482) Comprehensive income (loss): Net income........................... $ 1,148,513 - - - 1,148,513 - - Commodity hedges, net of income tax benefit of $86,960................. (144,797) - - - - - (144,797) ------------- Comprehensive income................... $ 1,003,716 ============= Dividends: Preferred............................ - - - (2,840) - - Common ($.16 per share).............. - - - (52,561) - - Common shares issued................... - 597 35,475 - - - Treasury shares issued, net............ - - 2,043 - 5,678 - Other.................................. - - 99 - - - ---------- -------- ---------- ---------- --------- -------------- BALANCE AT JUNE 30, 2005.................. $ 98,387 $209,917 $4,143,799 $5,110,451 $ (91,647) $ (274,279) ========== ======== ========== ========== ========= ============== TOTAL SHAREHOLDERS' (In thousands, except per share) EQUITY ------------- BALANCE AT DECEMBER 31, 2003.............. $ 6,532,798 Comprehensive income (loss): Net income........................... 729,851 Commodity hedges, net of income tax benefit of $648.................... (1,061) Comprehensive income................... Dividends: Preferred............................ (2,840) Common ($.12 per share).............. (39,067) Common shares issued................... 49,927 Treasury shares issued, net............ 9,805 Other.................................. 2,405 ------------- BALANCE AT JUNE 30, 2004.................. $ 7,281,818 ============= BALANCE AT DECEMBER 31, 2004.............. $ 8,204,421 Comprehensive income (loss): Net income........................... 1,148,513 Commodity hedges, net of income tax benefit of $86,960................. (144,797) Comprehensive income................... Dividends: Preferred............................ (2,840) Common ($.16 per share).............. (52,561) Common shares issued................... 36,072 Treasury shares issued, net............ 7,721 Other.................................. 99 ------------- BALANCE AT JUNE 30, 2005.................. $ 9,196,628 =============
The accompanying notes to consolidated financial statements are an integral part of this statement. 5 APACHE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) These financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), 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 accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company 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 included in the Company's most recent annual report on Form 10-K. Reclassifications and Restatements The financial statement amounts applicable to the three-month and six-month periods ending June 30, 2004 presented in this Form 10-Q will not agree to the amounts originally reported in the Company's Form 10-Q filed August 9, 2004, because they have been restated to reflect early adoption of Statement of Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment" (SFAS No. 123-R) (see Note 6, Stock-Based Compensation). This restatement did not materially impact our results of operations. Certain other prior period amounts have also been reclassified to conform with current year presentations. 1. ACQUISITIONS 2005 ACQUISITIONS There were no material acquisitions during the six-month period ending June 30, 2005. 2004 ACQUISITIONS ANADARKO In August 2004, Apache signed a definitive agreement to acquire all of Anadarko Petroleum Corporation's (Anadarko) Gulf of Mexico Outer Continental Shelf properties (excluding certain deepwater properties) for $537 million, subject to normal post-closing adjustments, including preferential rights. The transaction was effective as of October 1, 2004, and included interests in 74 fields covering 232 offshore blocks (approximately 664,000 acres) and 104 platforms. Eighty-nine of the blocks were undeveloped at the time of the acquisition. Apache operates 49 of the fields comprising approximately 70 percent of the production. Prior to Apache's purchase from Anadarko, Morgan Stanley Capital Group, Inc. paid Anadarko $646 million to acquire an overriding royalty interest in these properties. For a complete discussion of this transaction, please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Results of Operations, Acquisitions and Divestitures" and Note 2, Acquisitions and Divestitures of Item 15 in the Company's 2004 Form 10-K. EXXONMOBIL During the third quarter of 2004, Apache entered into separate arrangements with Exxon Mobil Corporation and its affiliates (ExxonMobil) that provided for property transfers and joint operating and exploration activity across a broad range of prospective and mature properties in (1) Western Canada, (2) West Texas and New Mexico, and (3) onshore Louisiana and the Gulf of Mexico-Outer Continental Shelf. Apache's participation included cash payments of approximately $347 million, subject to normal post-closing adjustments. For a complete discussion of these transactions, please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Results of Operations, Acquisitions and Divestitures" and Note 2, Acquisitions and Divestitures of Item 15 in the Company's 2004 Form 10-K. 6 2. HEDGING AND DERIVATIVE INSTRUMENTS Apache uses a variety of strategies to manage its exposure to fluctuations in crude oil and natural gas commodity prices. As established by the Company's hedging policy, Apache occasionally enters into cash flow hedges in connection with selected acquisitions to protect against commodity price volatility. The success of these acquisitions is significantly influenced by Apache's ability to achieve targeted production at forecasted prices over the long-term. These hedges effectively reduce price risk on a portion of the production from the acquisitions. Apache entered into, and designated as cash flow hedges, various fixed-price swaps, option collars and puts in conjunction with the ExxonMobil and Anadarko property acquisitions completed in 2004. These positions were entered into in accordance with the Company's hedging policy and involved counterparties which are rated A+ or better. As of June 30, 2005, the outstanding positions of our natural gas and crude oil cash flow hedges were as follows:
PRODUCTION TOTAL VOLUMES WEIGHTED AVERAGE FAIR VALUE ASSET/ PERIOD INSTRUMENT TYPE (MMBTU/BBL) FLOOR/CEILING (LIABILITY) - ---------- -------------------- ------------- ---------------- ----------------- (In thousands) 2005 Gas Collars 12,880,000 $ 6.00 / 6.78 $ (9,343) Gas Fixed-Price Swap 3,468,000 6.21 (3,729) Oil Collars 1,803,200 33.51 / 41.72 (30,031) Oil Fixed-Price Swap 171,000 41.13 (2,927) Oil Put Option 772,800 28.00 - 2006 Gas Collars 32,850,000 5.50 / 6.66 (49,660) Gas Fixed-Price Swap 4,404,000 5.87 (9,169) Oil Collars 4,307,000 32.07 / 40.66 (78,100) Oil Fixed-Price Swap 224,000 38.50 (4,399) Oil Put Option 1,533,000 28.00 57 2007 Gas Collars 24,570,000 5.25 / 6.20 (41,577) Gas Fixed-Price Swap 1,761,000 5.57 (3,698) Oil Collars 1,911,000 33.00 / 39.25 (34,600) Oil Fixed-Price Swap 78,000 36.89 (1,525)
The natural gas and crude oil prices shown in the above table are based on the NYMEX index and have been valued using actively quoted prices and quotes obtained from reputable third-party financial institutions. The above prices represent a weighted average of several contracts entered into and are on a per million British thermal units (MMBtu) or per barrel (Bbl) basis for gas and oil derivatives, respectively. In November 2004, Apache hedged a portion of its 2005 foreign currency exchange risk associated with its forecasted Canadian, Australian and North Sea lease operating expenditures by entering into forward purchase contracts. The Company purchased a total of 144 million Canadian dollars at an average exchange rate of .840, 22 million Australian dollars at an average exchange rate of .763 and 42 million British pounds at an average exchange rate of 1.853. The remaining forward contracts mature from July 2005 through December 2005. The fair market value of these contracts as of June 30, 2005 was a loss of $3 million ($2 million after tax). Future changes in market value are recorded in other comprehensive income (loss) and the fair values of the foreign exchange contracts are based on quotes from either third-party financial institutions or published indices. A reconciliation of the components of accumulated other comprehensive income (loss) in the statement of consolidated shareholders' equity related to Apache's commodity and foreign currency derivative activities is presented in the table below:
GROSS AFTER TAX --------- --------- (In thousands) Unrealized loss on derivatives at December 31, 2004.... $ (33,113) $ (20,732) Net losses realized into earnings...................... 26,131 16,357 Net change in derivative fair value.................... (257,888) (161,154) --------- --------- Unrealized loss on derivatives at June 30, 2005........ $(264,870) $(165,529) ========= =========
7 Based on current market prices as of June 30, 2005, the Company recorded an unrealized loss in other comprehensive income (loss) of $265 million ($166 million after tax), primarily representing commodity derivative hedges. Gains and losses on the commodity hedges will be realized in future earnings contemporaneously with the related sales of natural gas and crude oil production applicable to specific hedges. Gains and losses on the foreign exchange contracts will be realized in future earnings as the forecasted lease operating expenditures are incurred. Of the $265 million unrealized loss on derivatives at June 30, 2005, approximately $117 million ($73 million after tax) applies to the next 12 months; however, these amounts are likely to vary materially as a result of changes in market conditions. The contracts designated as hedges qualified and continue to qualify for hedge accounting in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, as amended. 3. DEBT On May 12, 2005, the Company entered into a new $450 million revolving bank credit facility for the U.S., a $150 million revolving bank credit facility for Australia and a $150 million revolving bank credit facility for Canada, which replaced the Company's existing credit facilities in the same amounts which were scheduled to mature in June 2007. The new facilities are scheduled to mature on May 12, 2010. There were no changes to the Company's $750 million U.S. credit facility which matures in May 2009. As of June 30, 2005, $287 million of debt was reclassified to current debt because the Company now anticipates repaying those funds within the year. The financial covenants of the Company's revolving bank credit facilities require the Company to maintain a debt-to-capitalization ratio of not greater than 60 percent at the end of any fiscal quarter. The negative covenants include restrictions on the Company's ability to create liens and security interests on our assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens and liens arising as a matter of law, such as tax and mechanics liens. The Company may incur liens on assets located in the U.S., Canada and Australia of up to five percent of the Company's consolidated assets, which would approximate $844 million as of June 30, 2005. There are no restrictions on incurring liens in countries other than the U.S., Canada and Australia. There are also restrictions on Apache's ability to merge with another entity, unless the Company is the surviving entity, and a restriction on our ability to guarantee debt of entities not within our consolidated group. There are no clauses in the facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes (MAC clauses). The credit facility agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payments and terminate lending commitments if Apache Corporation, or any of its U.S., Canadian or Australian subsidiaries, defaults on any direct payment obligation in excess of $100 million or has any unpaid, non-appealable judgment against it in excess of $100 million. The Company was in compliance with the terms of the credit facilities as of June 30, 2005. The Company's debt-to-capitalization ratio as of June 30, 2005 was 21.2 percent. At the Company's option, the interest rate for the facilities is based on (i) the greater of (a) The JP Morgan Chase Bank prime rate or (b) the federal funds rate plus one-half of one percent or (ii) the London Interbank Offered Rate (LIBOR) plus a margin determined by the Company's senior long-term debt rating. The $750 million and the $450 million credit facilities (U.S. credit facilities) also allow the Company to borrow under competitive auctions. At June 30, 2005, the margin over LIBOR for committed loans under the new facilities was .23 percent. If the total amount of the loans borrowed under all three facilities equals or exceeds 50 percent of the total facility commitments, then an additional .10 percent will be added to the margins over LIBOR. The Company also pays quarterly facility fees of .07 percent on the total amount of the three facilities. The facility fees vary based upon the Company's senior long-term debt rating. 4. CAPITAL STOCK During the second quarter of 2005 and 2004, Apache paid $26 million and $19 million, respectively, in dividends on its Common Stock. The increase in the second-quarter 2005 common stock dividends from the amount paid for the same period last year, reflects both a higher common stock dividend rate and an increase in common shares outstanding. On September 16, 2004, the Company announced that its Board of Directors voted to increase the quarterly cash dividend on its common stock to eight cents per share from six cents per share, effective with the November 2004 payment. In addition, in both periods, Apache paid a total of $1.4 million in dividends on its Series B Preferred Stock issued in August 1998. 8 5. NET INCOME PER COMMON SHARE A reconciliation of the components of basic and diluted net income per common share is presented in the table below:
FOR THE QUARTER ENDED JUNE 30, ----------------------------------------------------------- 2005 2004 ----------------------------- ---------------------------- INCOME SHARES PER SHARE INCOME SHARES PER SHARE --------- ------- --------- -------- ------- --------- (In thousands, except per share amounts) BASIC: Income attributable to common stock. $ 586,610 328,578 $ 1.79 $382,106 325,668 $ 1.17 ========= ========= EFFECT OF DILUTIVE SECURITIES: Stock options and other ............. - 4,890 - 3,695 --------- ------- -------- ------- DILUTED: Income attributable to common stock, including assumed conversions ...... $ 586,610 333,468 $ 1.76 $382,106 329,363 $ 1.16 ========= ======= ========= ======== ======= =========
FOR THE SIX MONTHS ENDED JUNE 30, ----------------------------------------------------------- 2005 2004 ----------------------------- ---------------------------- INCOME SHARES PER SHARE INCOME SHARES PER SHARE --------- ------- --------- -------- ------- --------- (In thousands, except per share amounts) BASIC: Income attributable to common stock.. $1,145,673 328,309 $ 3.49 $727,011 325,335 $ 2.23 ======== ========= EFFECT OF DILUTIVE SECURITIES: Stock options and other.............. - 4,958 - 3,718 ---------- ------- -------- ------- DILUTED: Income attributable to common stock, including assumed conversions....... $1,145,673 333,267 $ 3.44 $727,011 329,053 $ 2.21 ========== ======= ======== ======== ======= =========
6. STOCK-BASED COMPENSATION During the fourth quarter of 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123-R, which requires all companies to expense stock-based compensation. While the pronouncement is effective for the first fiscal year that begins after June 15, 2005, Apache elected to early adopt SFAS No. 123-R under the "Modified Retrospective Approach." Under this approach, the Company is required to expense all options and other stock-based compensation that vest during the year based on the fair value determined at the date of grant. On May 5, 2005, the Company's stockholders approved a new stock option plan and 1.7 million options were subsequently awarded to substantially all employees. The estimated fair value per share determined on the date of grant was $20.25. The terms and underlying valuation assumptions of the grant are consistent with prior-year awards and are expensed on a straight-line basis over the four-year vesting term. Also in May 2005, the Company's stockholders approved a new targeted stock plan that provides incentives for employees to double Apache's share price to $108 by the end of 2008, with an interim goal of $81 to be achieved by the end of 2007. To achieve the trigger price, the Company's stock price must close at or above the stated threshold for 10 days out of any 30 consecutive trading days by the end of the stated period. Under the plan, if the first threshold is achieved, approximately 1.3 million shares would be awarded for an intrinsic cost of $106 million. Achieving the second threshold would result in approximately 2.0 million shares awarded for an intrinsic cost of $213 million. Shares ultimately issued would be reduced for any minimum tax withholding requirements. Under the terms of the new targeted stock plan, awards are payable in four equal installments, beginning with the date the trigger stock price is met and on each succeeding anniversary date. Current accounting practices dictate that, regardless of whether these thresholds are ultimately achieved, the Company will recognize the fair value cost at the grant date based on numerous assumptions, including an estimate of the likelihood that Apache's stock price will achieve these thresholds and the expected forfeiture rate. As a result, the Company will recognize expense and capitalized costs of approximately $68 million over the expected service 9 life of the plan. The weighted average fair value, based on the Monte Carlo Simulation Model, was $23.67 per share. Total stock-based compensation cost (net of amounts capitalized) is presented in the table below. The related stock-based compensation cost capitalized as part of oil and gas properties was $8 million and $18 million for the three-month and six-month periods ended June 30, 2005, respectively, and $4 million and $8 million for the three-month and six-month periods ended June 30, 2004, respectively.
2005 2004 ---------------- ---------------- GROSS AFTER TAX GROSS AFTER TAX ----- --------- ----- --------- (In millions) Stock-based compensation cost: For the quarter ended June 30............ $ 19 $ 12 $ 9 $ 5 For the six months ended June 30......... 38 24 18 11
7. SUPPLEMENTAL CASH FLOW INFORMATION The following table provides supplemental disclosure of cash flow information:
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------ 2005 2004 ---- ---- (In thousands) Cash paid during the period for: Interest (net of amounts capitalized)..... $ 56,649 $ 49,584 Income taxes (net of refunds)............. $ 546,341 $ 246,879
8. PENSION AND POSTRETIREMENT BENEFITS Apache has a non-contributory defined benefit pension plan that provides retirement benefits for certain North Sea employees meeting established age and service requirements. The pension plan is closed to new employees. Apache also has a postretirement benefit plan which provides benefits for substantially all of its U.S. employees. The postretirement benefit plan provides medical benefits up until the age of 65 and is contributory. NET PERIODIC COST The following table presents the plans' net periodic benefit cost for the three and six month periods ended June 30, 2005 and 2004.
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS ---------------------------------- ---------------------------------- QUARTER ENDED SIX MONTHS ENDED QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, ---------------- ---------------- ---------------- ---------------- 2005 2004 2005 2004 2005 2004 2005 2004 ------- ------- ------- ------- ------- ------- ------- ------- (In thousands) Components of net periodic benefit cost: Service cost........................... $ 1,600 $ 1,341 $ 3,238 $ 2,727 $ 424 $ 234 $ 699 $ 484 Interest cost.......................... 1,136 892 2,299 1,813 231 164 406 314 Expected return on plan assets......... (1,227) (882) (2,483) (1,793) - - - - Amortization of transition obligation.. - - - - 9 22 22 22 Amortization of actuarial (gain)/loss.. - - - - 104 50 166 125 ------- ------- ------- ------- ------- ------- ------- ------- Net periodic benefit cost........... $ 1,509 $ 1,351 $ 3,054 $ 2,747 $ 768 $ 470 $ 1,293 $ 945 ======= ======= ======= ======= ======= ======= ======= =======
EMPLOYER CONTRIBUTIONS As previously disclosed in our financial statements for the year ended December 31, 2004, we expect to contribute $5 million to the pension plan and $318,000 to the postretirement benefit plan in 2005. As of June 30, 2005, approximately $2.6 million of contributions have been made to the plans. 10 9. BUSINESS SEGMENT INFORMATION Apache has interests in seven countries: the United States, Canada, Egypt, Australia, the United Kingdom, China and Argentina. Our reportable segments are the United States, Canada, Egypt, Australia, North Sea, and Other International. The Company evaluates segment performance based on oil and gas sales and lease-level expenses. Apache's reportable segments are managed separately because of their geographic locations. Financial information by reportable segment is presented below:
UNITED OTHER STATES CANADA EGYPT AUSTRALIA NORTH SEA INTERNATIONAL TOTAL ---------- ---------- ---------- ---------- ---------- ------------- ----------- (IN THOUSANDS) FOR THE SIX MONTHS ENDED JUNE 30, 2005 Oil and Gas Production Revenues..... $1,393,754 $ 586,878 $ 606,258 $ 177,585 $ 553,924 $ 82,785 $ 3,401,184 ========== ========== ========== ========== ========== ========= =========== Operating Income (1)................ $ 782,706 $ 331,573 $ 445,428 $ 90,570 $ 287,570 $ 41,086 $ 1,978,933 ========== ========== ========== ========== ========== ========= Other Income (Expense): Other............................ 20,335 General and administrative....... (102,413) Financing costs, net............. (63,313) ----------- Income Before Income Taxes.......... $ 1,833,542 =========== Total Assets........................ $7,661,550 $4,157,435 $2,240,374 $1,156,628 $1,501,898 $ 162,695 $16,880,580 ========== ========== ========== ========== ========== ========= =========== FOR THE SIX MONTHS ENDED JUNE 30, 2004 Oil and Gas Production Revenues..... $1,100,335 $ 469,937 $ 412,662 $ 189,649 $ 186,129 $ 41,454 $ 2,400,166 ========== ========== ========== ========== ========== ========= =========== Operating Income (1)................ $ 600,293 $ 259,427 $ 277,795 $ 89,777 $ 74,714 $ 16,189 $ 1,318,195 ========== ========== ========== ========== ========== ========= Other Income (Expense): Other............................ (9,494) General and administrative....... (85,238) China litigation................. (71,216) Financing costs, net............. (54,713) ----------- Income Before Income Taxes.......... $ 1,097,534 =========== Total Assets........................ $5,868,356 $3,243,373 $1,890,102 $1,018,298 $1,041,801 $ 188,021 $13,249,951 ========== ========== ========== ========== ========== ========= ===========
(1) Operating Income consists of oil and gas production revenues less depreciation, depletion and amortization, asset retirement obligation accretion, lease operating costs, gathering and transportation costs, and severance and other taxes. 10. ASSET RETIREMENT OBLIGATIONS The following table describes changes to the Company's asset retirement obligation (ARO) liability for the six months ended June 30, 2005 (in thousands): Asset retirement obligation as of December 31, 2004....... $ 932,004 Liabilities incurred...................................... 37,289 Liabilities settled....................................... (37,351) Accretion expense......................................... 26,489 --------- Asset retirement obligation as of June 30, 2005........... $ 958,431 =========
Liabilities incurred primarily relate to abandonment obligations assumed in connection with current drilling activity and various small acquisitions closed during the period. Liabilities settled during the period primarily relate to individually immaterial properties plugged and abandoned or sold during the period. 11. LITIGATION TEXACO CHINA B.V. Apache recorded a reserve in the second quarter of 2004 to fully reflect a pre-tax $71 million international arbitration award to Texaco China B.V. (Texaco China). The arbitration award was subject to interest at nine percent until May 6, 2005, the date following the federal district court ruling discussed below. On May 6, 2005, the interest rate dropped to 3.33 percent. Apache accrued $3.2 million of interest expense in 2004 and an additional $2.6 million of interest expense in the first six months of 2005. In September 2001, Texaco China initiated an 11 arbitration proceeding against Apache China Corporation LDC (Apache China), later adding Apache Bohai Corporation LDC (Apache Bohai) to the arbitration. In the arbitration Texaco China claimed damages, plus interest, arising from Apache Bohai's alleged failure to drill three wells, prior to re-assignment of the interest to Texaco China. Apache believes that the finding of the arbitrator is unsupported by the facts and the law, and Apache filed an application to vacate the award in federal court. Texaco China filed an application to confirm the award in the same court. On May 5, 2005, the federal district court ruled in favor of Texaco China. The Company has appealed that decision to the circuit court of appeals. In January 2005, while awaiting the decision of the U.S. federal courts, Texaco China also filed a proceeding against Apache China and Apache Bohai in the People's Republic of China to recognize the award, apparently seeking the same relief as sought in U.S. federal court. Apache China has been served. Apache Bohai has not been served. EGYPT TAX AUTHORITY As of the end of 2004, the Egyptian Tax Authority (ETA) had issued claims for back taxes against various Apache subsidiaries in Egypt totaling approximately $106 million (at current exchange rates) relating to periods as far back as 1994. At the beginning of July 2005, the ETA made a new claim for approximately $85 million of additional taxes for the 1994-99 tax years. While an adverse judgment against Apache is possible, Egyptian Concession agreements clearly provide that the Egyptian General Petroleum Corporation is responsible for the payment of all taxes related to the operation of the concessions. Apache believes that the claims of the ETA are unsupported by either the facts or the language of the concession agreements, which have the force of law in Egypt. Apache's subsidiaries have, therefore, contested liability with respect to the original claims by filing actions in Egyptian civil court, and will pursue all appropriate appeals and actions to challenge the new tax claims as well. Apache plans to vigorously pursue its remedies with respect to these claims. A civil court ruling with respect to the initial tax claims is expected sometime in the latter half of 2005. 12. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2005, the FASB ratified the consensus in Emerging Issue Task Force (EITF) Issue Number 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (Issue 04-5). EITF Issue 04-5 states that the general partner in a limited partnership is presumed to control the partnership and must consolidate the entity on its financial statements. The presumption of control and consolidation requirement may be overcome if the limited partners have substantive participating rights or have the ability to effectively liquidate the partnership. Apache participates in limited partnerships where the Company is the sole general partner. Management is currently determining the ultimate impact of applying this statement, but does not believe application of Issue 04-5 will have a material impact on the Company's consolidated financial statements. The effective date for applying the guidance in Issue 04-5 to existing limited partnerships is for the first reporting period in fiscal years beginning after December 15, 2005. 13. SUPPLEMENTAL GUARANTOR INFORMATION Apache Finance Pty Ltd. (Apache Finance Australia) and Apache Finance Canada Corporation (Apache Finance Canada) are subsidiaries of Apache that have issuances of publicly traded securities and require the following condensed consolidating financial statements be provided as an alternative to filing separate financial statements. Each of the companies presented in the condensed consolidating financial statements have been fully consolidated in Apache's consolidated financial statements. As such, the condensed consolidating financial statements should be read in conjunction with the financial statements of Apache Corporation and Subsidiaries and notes. 12 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2005
ALL OTHER APACHE APACHE SUBSIDIARIES APACHE APACHE FINANCE FINANCE OF APACHE CORPORATION NORTH AMERICA AUSTRALIA CANADA CORPORATION ----------- ------------- --------- -------------- ------------ (IN THOUSANDS) REVENUES AND OTHER: Oil and gas production revenues................. $ 720,379 $ - $ - $ - $ 1,138,796 Equity in net income (loss) of affiliates....... 365,752 2,639 5,642 59,600 (12,364) Other........................................... 6,261 - - - (21,565) ----------- ------------- --------- -------- ------------ 1,092,392 2,639 5,642 59,600 1,104,867 ----------- ------------- --------- -------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ 158,667 - - - 200,344 Asset retirement obligation accretion........... 7,873 - - - 5,457 Lease operating costs........................... 119,141 - - - 220,929 Gathering and transportation costs.............. 7,617 - - - 18,561 Severance and other taxes....................... 23,539 - - 1 63,053 General and administrative...................... 44,975 - - - 7,027 Financing costs, net............................ 20,309 - 4,513 14,110 (7,207) ----------- ------------- --------- -------- ------------ 382,121 - 4,513 14,111 508,164 ----------- ------------- --------- -------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. 710,271 2,639 1,129 45,489 596,703 Provision (benefit) for income taxes............ 122,241 - (1,510) (4,750) 230,951 ----------- ------------- --------- -------- ------------ NET INCOME......................................... 588,030 2,639 2,639 50,239 365,752 Preferred stock dividends....................... 1,420 - - - - ----------- ------------- --------- -------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ 586,610 $ 2,639 $ 2,639 $ 50,239 $ 365,752 =========== ============= ========= ======== ============ RECLASSIFICATIONS & ELIMINATIONS CONSOLIDATED ----------------- ------------ REVENUES AND OTHER: Oil and gas production revenues................. $ (84,640) $ 1,774,535 Equity in net income (loss) of affiliates....... (421,269) - Other........................................... - (15,304) ------------ ------------ (505,909) 1,759,231 ------------ ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ - 359,011 Asset retirement obligation accretion........... - 13,330 Lease operating costs........................... (84,640) 255,430 Gathering and transportation costs.............. - 26,178 Severance and other taxes....................... - 86,593 General and administrative...................... - 52,002 Financing costs, net............................ - 31,725 ------------ ------------ (84,640) 824,269 ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. (421,269) 934,962 Provision (benefit) for income taxes............ - 346,932 ------------ ------------ NET INCOME......................................... (421,269) 588,030 Preferred stock dividends....................... - 1,420 ------------ ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ (421,269) $ 586,610 ============ ============
13 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2004
ALL OTHER APACHE APACHE SUBSIDIARIES APACHE APACHE FINANCE FINANCE OF APACHE CORPORATION NORTH AMERICA AUSTRALIA CANADA CORPORATION ----------- ------------- --------- -------------- ------------ (IN THOUSANDS) REVENUES AND OTHER: Oil and gas production revenues................. $ 568,421 $ - $ - $ - $ 756,030 Equity in net income (loss) of affiliates....... 226,150 10,420 13,488 53,454 (9,724) Other........................................... (1,148) - - - (5,531) ----------- ------------- --------- --------- ------------ 793,423 10,420 13,488 53,454 740,775 ----------- ------------- --------- --------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ 137,844 - - - 157,893 Asset retirement obligation accretion........... 5,805 - - - 5,086 Lease operating costs........................... 87,303 - - - 189,515 Gathering and transportation costs.............. 7,891 - - - 12,271 Severance and other taxes....................... 15,416 - - - 6,179 General and administrative...................... 30,889 - - - 8,292 China litigation................................ - - - - 71,216 Financing costs, net............................ 20,253 - 4,510 9,936 (7,132) ----------- ------------- --------- --------- ------------ 305,401 - 4,510 9,936 443,320 ----------- ------------- --------- --------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. 488,022 10,420 8,978 43,518 297,455 Provision (benefit) for income taxes............ 104,496 - (1,442) (3,280) 71,305 ----------- ------------- --------- --------- ------------ NET INCOME......................................... 383,526 10,420 10,420 46,798 226,150 Preferred stock dividends....................... 1,420 - - - - ----------- ------------- --------- --------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ 382,106 $ 10,420 $ 10,420 $ 46,798 $ 226,150 =========== ============= ========= ========= ============ RECLASSIFICATIONS & ELIMINATIONS CONSOLIDATED ----------------- ------------ REVENUES AND OTHER: Oil and gas production revenues................. $ (77,039) $ 1,247,412 Equity in net income (loss) of affiliates....... (293,788) - Other........................................... - (6,679) ---------- ------------ (370,827) 1,240,733 ---------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ - 295,737 Asset retirement obligation accretion........... - 10,891 Lease operating costs........................... (77,039) 199,779 Gathering and transportation costs.............. - 20,162 Severance and other taxes....................... - 21,595 General and administrative...................... - 39,181 China litigation................................ - 71,216 Financing costs, net............................ - 27,567 ---------- ------------ (77,039) 686,128 ---------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. (293,788) 554,605 Provision (benefit) for income taxes............ - 171,079 ---------- ------------ NET INCOME......................................... (293,788) 383,526 Preferred stock dividends....................... - 1,420 ---------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ (293,788) $ 382,106 ========== ============
14 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005
ALL OTHER APACHE APACHE SUBSIDIARIES APACHE APACHE FINANCE FINANCE OF APACHE CORPORATION NORTH AMERICA AUSTRALIA CANADA CORPORATION ----------- ------------- --------- -------------- ------------ (IN THOUSANDS) REVENUES AND OTHER: Oil and gas production revenues................. $ 1,371,285 $ - $ - $ - $ 2,185,410 Equity in net income (loss) of affiliates....... 710,831 12,124 18,104 109,860 (24,716) Other........................................... 36,446 - - - (16,111) ----------- -------- -------- -------- ------------ 2,118,562 12,124 18,104 109,860 2,144,583 ----------- -------- -------- -------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ 308,051 - - - 390,373 Asset retirement obligation accretion........... 15,707 - - - 10,782 Lease operating costs........................... 224,096 - - - 420,016 Gathering and transportation costs.............. 15,566 - - - 34,392 Severance and other taxes....................... 43,616 - - 1 115,162 General and administrative...................... 85,292 - - - 17,121 Financing costs, net............................ 40,228 - 9,025 28,220 (14,160) ----------- -------- -------- -------- ------------ 732,556 - 9,025 28,221 973,686 ----------- -------- -------- -------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. 1,386,006 12,124 9,079 81,639 1,170,897 Provision (benefit) for income taxes............ 237,493 - (3,045) (9,485) 460,066 ----------- -------- -------- -------- ------------ NET INCOME......................................... 1,148,513 12,124 12,124 91,124 710,831 Preferred stock dividends....................... 2,840 - - - - ----------- -------- -------- -------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ 1,145,673 $ 12,124 $ 12,124 $ 91,124 $ 710,831 =========== ======== ========= ======== ============ RECLASSIFICATIONS & ELIMINATIONS CONSOLIDATED ----------------- ------------ REVENUES AND OTHER: Oil and gas production revenues................. $ (155,511) $ 3,401,184 Equity in net income (loss) of affiliates....... (826,203) - Other........................................... - 20,335 ---------- ------------ (981,714) 3,421,519 ---------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ - 698,424 Asset retirement obligation accretion........... - 26,489 Lease operating costs........................... (155,511) 488,601 Gathering and transportation costs.............. - 49,958 Severance and other taxes....................... - 158,779 General and administrative...................... - 102,413 Financing costs, net............................ - 63,313 ---------- ------------ (155,511) 1,587,977 ---------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. (826,203) 1,833,542 Provision (benefit) for income taxes............ - 685,029 ---------- ------------ NET INCOME......................................... (826,203) 1,148,513 Preferred stock dividends....................... - 2,840 ---------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ (826,203) $ 1,145,673 ========== ============
15 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004
ALL OTHER APACHE APACHE SUBSIDIARIES APACHE APACHE FINANCE FINANCE OF APACHE CORPORATION NORTH AMERICA AUSTRALIA CANADA CORPORATION ----------- ------------- --------- -------------- ------------ (IN THOUSANDS) REVENUES AND OTHER: Oil and gas production revenues................. $ 1,097,459 $ - $ - $ - $ 1,457,921 Equity in net income (loss) of affiliates....... 418,857 18,682 24,716 91,399 (19,310) Other........................................... (1,911) - - - (7,583) ----------- ------- --------- -------- ------------ 1,514,405 18,682 24,716 91,399 1,431,028 ----------- ------- --------- -------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ 269,054 - - - 312,911 Asset retirement obligation accretion........... 11,600 - - - 10,052 Lease operating costs........................... 172,687 - - - 390,542 Gathering and transportation costs.............. 15,223 - - - 24,573 Severance and other taxes....................... 28,796 - - 18 1,729 General and administrative...................... 67,828 - - - 17,410 China litigation................................ - - - - 71,216 Financing costs, net............................ 42,016 - 9,022 20,043 (16,368) ----------- ------- --------- -------- ------------ 607,204 - 9,022 20,061 812,065 ----------- ------- --------- -------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. 907,201 18,682 15,694 71,338 618,963 Provision (benefit) for income taxes............ 177,350 - (2,988) (6,785) 200,106 ----------- ------- --------- -------- ------------ NET INCOME......................................... 729,851 18,682 18,682 78,123 418,857 Preferred stock dividends....................... 2,840 - - - - ----------- ------- --------- -------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $ 727,011 $18,682 $ 18,682 $ 78,123 $ 418,857 =========== ======= ========= ======== ============ RECLASSIFICATIONS & ELIMINATIONS CONSOLIDATED ----------------- ------------ REVENUES AND OTHER: Oil and gas production revenues................. $(155,214) $ 2,400,166 Equity in net income (loss) of affiliates....... (534,344) - Other........................................... - (9,494) --------- ------------ (689,558) 2,390,672 --------- ------------ OPERATING EXPENSES: Depreciation, depletion and amortization........ - 581,965 Asset retirement obligation accretion........... - 21,652 Lease operating costs........................... (155,214) 408,015 Gathering and transportation costs.............. - 39,796 Severance and other taxes....................... - 30,543 General and administrative...................... - 85,238 China litigation................................ - 71,216 Financing costs, net............................ - 54,713 --------- ------------ (155,214) 1,293,138 --------- ------------ INCOME (LOSS) BEFORE INCOME TAXES.................. (534,344) 1,097,534 Provision (benefit) for income taxes............ - 367,683 --------- ------------ NET INCOME......................................... (534,344) 729,851 Preferred stock dividends....................... - 2,840 --------- ------------ INCOME ATTRIBUTABLE TO COMMON STOCK................ $(534,344) $ 727,011 ========= ============
16 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2005
ALL OTHER APACHE APACHE SUBSIDIARIES APACHE APACHE FINANCE FINANCE OF APACHE CORPORATION NORTH AMERICA AUSTRALIA CANADA CORPORATION ----------- ------------- --------- -------------- ------------ (IN THOUSANDS) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES....................................... $ 679,969 $ - $ (10,105) $(19,728) $ 1,179,045 ----------- ------- --------- -------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment.............. (489,626) - - - (1,271,064) Investment in subsidiaries, net.................. (108,782) (9,025) - - (29,705) Other, net....................................... 65,358 - - - (40,919) ----------- ------- --------- -------- ------------ NET CASH USED IN INVESTING ACTIVITIES.............. (533,050) (9,025) - - (1,341,688) ----------- ------- --------- -------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings............................. 83,887 - 1,080 445 98,527 Payments on long-term debt....................... (192,700) - - - (830) Dividends paid................................... (55,307) - - - - Common stock activity............................ 19,894 9,025 9,025 19,281 10,267 Treasury stock activity, net..................... 8,409 - - - - Cost of debt and equity transactions............. (722) - - - - Other............................................ 12,466 - - - - ----------- ------- --------- -------- ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES.......... (124,073) 9,025 10,105 19,726 107,964 ----------- ------- --------- -------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. 22,846 - - (2) (54,679) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................ 597 - 2 3 110,491 ----------- ------- --------- -------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................... $ 23,443 $ - $ 2 $ 1 $ 55,812 =========== ======= ========= ======== ============ RECLASSIFICATIONS & ELIMINATIONS CONSOLIDATED ----------------- ------------ CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES....................................... $ - $ 1,829,181 --------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment.............. - (1,760,690) Investment in subsidiaries, net.................. 147,512 - Other, net....................................... - 24,439 --------- ------------ NET CASH USED IN INVESTING ACTIVITIES.............. 147,512 (1,736,251) --------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings............................. (99,914) 84,025 Payments on long-term debt....................... - (193,530) Dividends paid................................... - (55,307) Common stock activity............................ (47,598) 19,894 Treasury stock activity, net..................... - 8,409 Cost of debt and equity transactions............. - (722) Other............................................ - 12,466 --------- ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES.......... (147,512) (124,765) --------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. - (31,835) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................ - 111,093 --------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................... $ - $ 79,258 ========= ===========
17 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2004
APACHE APACHE APACHE FINANCE CORPORATION NORTH AMERICA AUSTRALIA ----------- ------------- --------- (IN THOUSANDS) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES................... $ 678,621 $ - $ (8,219) ----------- ------------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment............................ (311,910) - - Investment in subsidiaries, net................................ (182,525) (9,025) - Other, net..................................................... (8,957) - - ----------- ------------- --------- NET CASH USED IN INVESTING ACTIVITIES............................. (503,392) (9,025) - ----------- ------------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings........................................... 274 - (806) Payments on long-term debt..................................... (135,300) - - Dividends paid................................................. (41,838) - - Common stock activity.......................................... 13,383 9,025 9,025 Treasury stock activity, net................................... 7,663 - - Cost of debt and equity transactions........................... (2,050) - - ----------- ------------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES......................... (157,868) 9,025 8,219 ----------- ------------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. 17,361 - - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................... - - 2 ----------- ------------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD........................ $ 17,361 $ - $ 2 =========== ============= ========= ALL OTHER APACHE SUBSIDIARIES FINANCE OF APACHE RECLASSIFICATIONS CANADA CORPORATION & ELIMINATIONS CONSOLIDATED --------- ------------ ----------------- ------------ (IN THOUSANDS) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES................... $ (19,521) $ 648,171 $ - $ 1,299,052 --------- ------------ ----------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment............................ - (746,239) - (1,058,149) Investment in subsidiaries, net................................ - (26,792) 218,342 - Other, net..................................................... - (10,231) - (19,188) --------- ------------ ----------------- ------------ NET CASH USED IN INVESTING ACTIVITIES............................. - (783,262) 218,342 (1,077,337) --------- ------------ ----------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings........................................... 242 165,023 (164,329) 404 Payments on long-term debt..................................... - - - (135,300) Dividends paid................................................. - - - (41,838) Common stock activity.......................................... 19,281 16,682 (54,013) 13,383 Treasury stock activity, net................................... - - - 7,663 Cost of debt and equity transactions........................... - - - (2,050) --------- ------------ ----------------- ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES......................... 19,523 181,705 (218,342) (157,738) --------- ------------ ----------------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. 2 46,614 - 63,977 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................... 1 33,500 - 33,503 --------- ------------ ----------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD........................ $ 3 $ 80,114 $ - $ 97,480 ========= ============ ================= ============
18 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2005
APACHE APACHE APACHE FINANCE CORPORATION NORTH AMERICA AUSTRALIA ----------- ------------- --------- (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents...................................... $ 23,443 $ - $ 2 Receivables, net of allowance.................................. 407,617 - - Inventories.................................................... 22,371 - - Drilling advances and other.................................... 89,915 - - ----------- ------------- --------- 543,346 - 2 ----------- ------------- --------- PROPERTY AND EQUIPMENT, NET....................................... 6,889,673 - - ----------- ------------- --------- OTHER ASSETS: Intercompany receivable, net................................... 1,205,813 - (2,177) Goodwill, net.................................................. - - - Equity in affiliates........................................... 4,892,764 281,377 526,809 Deferred charges and other..................................... 43,306 - - ----------- ------------- --------- 13,574,902 281,377 524,634 =========== ============= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................... 314,437 - - Other accrued expenses......................................... 435,199 - (321) Current debt................................................... 287,000 - - ----------- ------------- --------- 1,036,636 - (321) ----------- ------------- --------- LONG-TERM DEBT.................................................... 1,271,231 - 269,300 ----------- ------------- --------- DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: Income taxes................................................... 1,089,412 - (25,722) Advances from gas purchasers................................... 79,993 - - Asset retirement obligation.................................... 579,750 - - Oil and gas derivative instruments............................. 149,199 - - Other.......................................................... 172,053 - - ----------- ------------- --------- 2,070,407 - (25,722) ----------- ------------- --------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY.............................................. 9,196,628 281,377 281,377 ----------- ------------- --------- $13,574,902 $ 281,377 $ 524,634 =========== ============= ========= ALL OTHER APACHE SUBSIDIARIES FINANCE OF APACHE RECLASSIFICATIONS CANADA CORPORATION & ELIMINATIONS CONSOLIDATED ---------- ------------ ----------------- ------------ (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents...................................... $ 1 $ 55,812 $ - $ 79,258 Receivables, net of allowance.................................. - 731,164 - 1,138,781 Inventories.................................................... - 164,575 - 186,946 Drilling advances and other.................................... - 88,375 - 178,290 ---------- ------------ ----------------- ------------ 1 1,039,926 - 1,583,275 ---------- ------------ ----------------- ------------ PROPERTY AND EQUIPMENT, NET....................................... - 8,103,645 - 14,993,318 ---------- ------------ ----------------- ------------ OTHER ASSETS: Intercompany receivable, net................................... (254,139) (949,497) - - Goodwill, net.................................................. - 189,252 - 189,252 Equity in affiliates........................................... 1,376,500 (1,184,899) (5,892,551) - Deferred charges and other..................................... 4,459 66,970 - 114,735 ---------- ------------ ----------------- ------------ 1,126,821 7,265,397 (5,892,551) 16,880,580 ========== ============ ================= ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................... - 280,853 - 595,290 Other accrued expenses......................................... 38,620 463,165 - 936,663 Current debt................................................... - 274 - 287,274 ---------- ------------ ----------------- ------------ 38,620 744,292 - 1,819,227 ---------- ------------ ----------------- ------------ LONG-TERM DEBT.................................................... 646,828 4,252 - 2,191,611 ---------- ------------ ----------------- ------------ DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: Income taxes................................................... 4,340 1,199,851 - 2,267,881 Advances from gas purchasers................................... - - - 79,993 Asset retirement obligation.................................... - 378,681 - 958,431 Oil and gas derivative instruments............................. - - - 149,199 Other.......................................................... - 45,557 - 217,610 ---------- ------------ ----------------- ------------ 4,340 1,624,089 - 3,673,114 ---------- ------------ ----------------- ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY.............................................. 437,033 4,892,764 (5,892,551) 9,196,628 ---------- ------------ ----------------- ------------ $1,126,821 $ 7,265,397 $ (5,892,551) $ 16,880,580 ========== ============ ================= ============
19 APACHE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2004
APACHE APACHE APACHE FINANCE CORPORATION NORTH AMERICA AUSTRALIA ----------- ------------- --------- (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents...................................... $ 597 $ - $ 2 Receivables, net of allowance.................................. 367,359 - - Inventories.................................................... 28,000 - - Drilling advances and other.................................... 82,837 - - ----------- ------------- --------- 478,793 - 2 ----------- ------------- --------- PROPERTY AND EQUIPMENT, NET....................................... 6,683,499 - - ----------- ------------- --------- OTHER ASSETS: Intercompany receivable, net................................... 1,107,286 - (1,205) Goodwill, net.................................................. - - - Equity in affiliates........................................... 4,173,788 258,437 506,806 Deferred charges and other..................................... 43,460 - - ----------- ------------- --------- $12,486,826 $ 258,437 $ 505,603 =========== ============= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................... $ 280,754 $ - $ - Other accrued expenses......................................... 306,511 - 3,335 ----------- ------------- --------- 587,265 - 3,335 ----------- ------------- --------- LONG-TERM DEBT.................................................... 1,667,044 - 269,192 ----------- ------------- --------- DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: Income taxes................................................... 1,132,618 - (25,361) Advances from gas purchasers................................... 90,876 - - Asset retirement obligation.................................... 568,862 - - Oil and gas derivative instruments............................. 31,417 - - Other.......................................................... 204,323 - - ----------- ------------- --------- 2,028,096 - (25,361) ----------- ------------- --------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY.............................................. 8,204,421 258,437 258,437 ----------- ------------- --------- $12,486,826 $ 258,437 $ 505,603 =========== ============= ========= ALL OTHER APACHE SUBSIDIARIES FINANCE OF APACHE RECLASSIFICATIONS CANADA CORPORATION & ELIMINATIONS CONSOLIDATED ---------- ------------ ----------------- ------------ (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents...................................... $ 3 $ 110,491 $ - $ 111,093 Receivables, net of allowance.................................. - 572,377 - 939,736 Inventories.................................................... - 129,293 - 157,293 Drilling advances and other.................................... - 57,823 - 140,660 ---------- ------------ ----------------- ------------ 3 869,984 - 1,348,782 ---------- ------------ ----------------- ------------ PROPERTY AND EQUIPMENT, NET....................................... - 7,176,860 - 13,860,359 ---------- ------------ ----------------- ------------ OTHER ASSETS: Intercompany receivable, net................................... (253,724) (852,357) - - Goodwill, net.................................................. - 189,252 - 189,252 Equity in affiliates........................................... 1,250,590 (1,178,450) (5,011,171) - Deferred charges and other..................................... 4,617 56,010 - 104,087 ---------- ------------ ----------------- ------------ $1,001,486 $ 6,261,299 $ (5,011,171) $ 15,502,480 ========== ============ ================= ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................... $ - $ 261,320 $ - $ 542,074 Other accrued expenses......................................... 29,946 401,025 - 740,817 ---------- ------------ ----------------- ------------ 29,946 662,345 - 1,282,891 ---------- ------------ ----------------- ------------ LONG-TERM DEBT.................................................... 646,798 5,356 - 2,588,390 ---------- ------------ ----------------- ------------ DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: Income taxes................................................... 4,233 1,035,147 - 2,146,637 Advances from gas purchasers................................... - - - 90,876 Asset retirement obligation.................................... - 363,142 - 932,004 Oil and gas derivative instruments............................. - - - 31,417 Other.......................................................... - 21,521 - 225,844 ---------- ------------ ----------------- ------------ 4,233 1,419,810 - 3,426,778 ---------- ------------ ----------------- ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY.............................................. 320,509 4,173,788 (5,011,171) 8,204,421 ---------- ------------ ----------------- ------------ $1,001,486 $ 6,261,299 $ (5,011,171) $ 15,502,480 ========== ============ ================= ============
20 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Apache Corporation (Apache or the Company) reported record second-quarter 2005 earnings of $587 million, up 54 percent from the $382 million reported in the second quarter of 2004. The improvement in earnings was driven by higher crude oil and natural gas price realizations and record daily production. Second-quarter crude oil price realizations of $48.55 per barrel were 47 percent higher than the 2004 comparable period, while natural gas realizations were up 18 percent to $5.71 per thousand cubic feet (Mcf). Production rose to a record 469,617 barrels of oil equivalent per day (boe/d). Earnings and net cash provided by operating activities for the six-month period totaled $1.1 billion and $1.8 billion, respectively. While higher commodity prices and increased demand continued to drive up operating costs, their impact on earnings was more than offset by the additional revenues generated from higher crude oil and natural gas prices, and production growth. These financial statements should be read in conjunction with Management's Discussion and Analysis and financial statements, and the summary of significant accounting policies and notes included in the Company's 2004 Form 10-K. Second-quarter and year-to-date operating results include: - Record quarterly and year-to-date oil and gas production revenues of $1.8 billion and $3.4 billion, respectively, with second-quarter crude oil revenues exceeding $1 billion. - Crude oil production increased eight percent to 242,189 barrels of oil per day (b/d) in the second quarter compared to prior-year quarter. - Record natural gas production of 1,297 million cubic feet per day (MMcf/d) in the second quarter compared to prior-year quarter. - Australia's 2005 second-quarter daily oil production decreased 39 percent, or 8,713 b/d, compared to the second quarter of 2004. - The North Sea's 2005 second-quarter daily equivalent production increased 18,072 b/d (38 percent) compared to the second quarter of 2004. Capital expenditures for exploration and production activity, including gathering, marketing and processing facilities, totaled $1.8 billion for the first six months of 2005, $727 million higher than the comparable period last year, an increase of 67 percent. Eighty-nine percent of the world-wide spending was directly related to exploration and development (E&D) activities. From a reportable segment standpoint, nearly two-thirds of the Company's E&D capital was spent in the U.S. and Canada, consistent with the prior year period and North America's overall contribution to the Company. Noteworthy recent discoveries and development wells include: - On April 5, 2005, we announced two discoveries in Egypt. The Syrah 1X wildcat, on the Company's 100 percent-contractor-interest Khalda Concession, tested 46.5 MMcf/d of natural gas. The Tanzanite 1X located onshore on Apache's West Mediterranean Concession tested 5,296 b/d and 7.4 MMcf/d of gas. Additional wells are planned for the Syrah structure, with initial production expected during the third quarter of 2005, upon approval of a development plan by the Egyptian General Petroleum Corporation (EGPC). - On June 15, 2005, Apache announced the development of its Rose gas/condensate field in Australia with the completion of the Rose 4 development well which is producing approximately 60 MMcf/d of natural gas and 1,700 b/d of condensate. - On July 5, 2005, the Company announced that the Tanzanite-2 well on Egypt's West Mediterranean Onshore Concession tested 2,846 b/d and 640 thousand cubic feet per day (Mcf/d) of gas from the Cretaceous-age Alamein Dolomite formation in the Tanzanite Field. - On July 5, 2005, Apache also announced a new field oil discovery, the El Diyur-2X, on the Apache-operated El Diyur Concession southwest of Egypt's Western Desert. A test of the lower Bahariya formation flowed at a rate of 1,177 b/d. - On July 28, 2005, Apache announced that it initiated production from the Mohave-1H discovery in the Carnarvon Basin offshore Western Australia. The initial gross production rate was 10,690 b/d from the Flag Sandstone zone, a prolific but traditionally often smaller reservoir. Apache owns a 68.5 percent interest in the field. 21 On May 5, 2005, Apache signed a farm-in agreement with Exxon Mobil Corporation (ExxonMobil) covering approximately 650,000 acres of undeveloped properties in the Western Canadian province of Alberta. Under the agreement, Apache is to drill and operate 145 new wells over a 36-month period with upside potential for further drilling. ExxonMobil will retain a 37.5 percent royalty on fee lands and 35 percent of its working interest on leasehold acreage. The agreement also allows Apache to test additional horizons on approximately 140,000 acres of property covered in the 2004 farm-in agreement with ExxonMobil. 22 RESULTS OF OPERATIONS REVENUES The table below presents oil and gas production revenues, production and average prices received from sales of oil, natural gas and natural gas liquids.
FOR THE QUARTER ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30, ----------------------------------- ------------------------------------ INCREASE INCREASE 2005 2004 (DECREASE) 2005 2004 (DECREASE) ----------- ---------- ---------- ----------- ----------- ---------- Revenues (in thousands): Oil........................................... $ 1,069,913 $ 675,654 58% $ 2,066,910 $ 1,278,289 62% Natural gas................................... 673,592 550,509 22% 1,274,542 1,077,363 18% Natural gas liquids........................... 31,030 21,249 46% 59,732 44,514 34% ----------- ---------- ----------- ----------- Total..................................... $ 1,774,535 1,247,412 42% $ 3,401,184 $ 2,400,166 42% =========== ========== =========== =========== Oil Volume - Barrels per day: United States................................. 77,140 69,080 12% 75,395 68,167 11% Canada........................................ 21,442 26,226 (18%) 22,354 25,746 (13%) Egypt......................................... 53,019 53,410 (1%) 53,795 51,254 5% Australia..................................... 13,487 22,200 (39%) 14,725 22,928 (36%) North Sea..................................... 65,251 47,179 38% 63,570 45,739 39% China......................................... 10,677 5,966 79% 10,592 6,703 58% Argentina..................................... 1,173 541 117% 940 547 72% ----------- ---------- ----------- ----------- Total..................................... 242,189 224,602 8% 241,371 221,084 9% =========== ========== =========== =========== Average Oil price - Per barrel: United States................................. $ 46.02 $ 37.00 24% $ 45.04 $ 34.71 30% Canada........................................ 48.61 35.91 35% 47.85 34.48 39% Egypt......................................... 50.49 34.24 47% 49.62 32.85 51% Australia..................................... 53.52 39.03 37% 53.24 36.88 44% North Sea..................................... 49.65 21.70 129% 47.93 22.19 116% China......................................... 45.35 31.73 43% 39.71 30.84 29% Argentina..................................... 36.19 35.10 3% 35.36 34.26 3% Total..................................... 48.55 33.06 47% 47.31 31.77 49% Natural Gas Volume - Mcf per day: United States................................. 653,805 665,167 (2%) 645,848 654,815 (1%) Canada........................................ 380,564 327,537 16% 363,747 320,800 13% Egypt......................................... 146,724 137,329 7% 151,002 132,997 14% Australia..................................... 110,005 115,824 (5%) 111,859 117,323 (5%) North Sea..................................... 2,297 1,661 38% 2,238 1,631 37% China - - - - - - Argentina..................................... 3,248 3,334 (3%) 3,360 4,247 (21%) ----------- ---------- ----------- ----------- Total..................................... 1,296,643 1,250,852 4% 1,278,054 1,231,813 4% =========== ========== =========== =========== Average Natural Gas price - Per Mcf: United States................................. $ 6.43 $ 5.31 21% $ 6.24 $ 5.33 17% Canada........................................ 6.03 5.11 18% 5.82 5.10 14% Egypt......................................... 4.71 4.66 1% 4.50 4.39 3% Australia..................................... 1.71 1.65 4% 1.76 1.67 5% North Sea..................................... 6.74 5.05 33% 6.04 4.70 29% China - - - - - - Argentina..................................... 1.22 .67 82% 1.06 .55 93% Total..................................... 5.71 4.84 18% 5.51 4.81 15% Natural Gas Liquids (NGL) Volume - Barrels per day: United States................................ 9,408 7,585 24% 9,257 7,856 18% Canada....................................... 1,913 2,601 (26%) 2,165 2,600 (17%) ----------- ---------- ----------- ----------- Total..................................... 11,321 10,186 11% 11,422 10,456 9% =========== ========== =========== =========== Average NGL Price - Per barrel: United States................................ $ 31.19 $ 22.48 39% $ 29.76 $ 23.92 24% Canada....................................... 24.88 24.23 3% 25.20 21.78 16% Total..................................... 30.12 22.92 31% 28.89 23.39 24%
23 The following table presents each reportable segment's oil revenues and gas revenues as a percentage of total oil revenues and gas revenues, respectively.
FOR THE QUARTER ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30, ------------------------------- ---------------------------------- OIL REVENUES GAS REVENUES OIL REVENUES GAS REVENUES ------------ ------------ ------------ ------------- 2005 2004 2005 2004 2005 2004 2005 2004 ---- ------ ---- ------ ---- ----- ---- ------ United States.................. 30% 34% 57% 58% 30% 34% 57% 59% Canada......................... 9 13 31 28 9 13 30 28 Egypt.......................... 23 25 9 11 23 24 10 10 Australia...................... 6 12 3 3 7 12 3 3 North Sea...................... 28 14 - - 27 14 - - Other International............ 4 2 - - 4 3 - - --- --- --- --- --- --- --- --- Total........................ 100% 100% 100% 100% 100% 100% 100% 100% === === === === === === === ===
Crude Oil Contribution Apache saw an appreciable change in the mix of its second-quarter and six-month crude oil contributions in 2005 relative to 2004. While the U.S. remains the largest contributor, its contribution fell four percent from the 2004 comparable quarter to 30 percent of second-quarter 2005 consolidated crude oil revenues. The North Sea's contribution doubled to 28 percent on strong production growth and significantly higher price realizations, as realizations in the comparable 2004 quarter were impacted by a lower fixed-price physical contract (discussed below) that expired December 31, 2004. The change in the North Sea's revenue generators, price and volume, far outpaced those of other regions on a comparative basis. Both Egypt and Canada saw their contributions drop even though their second-quarter crude oil revenues were up from the second quarter of 2004. Australia's contribution fell by half to six percent of consolidated crude oil revenues and it was the lone region in which revenues declined period over period. Similar changes in the mix were also evident for the six-month period. Crude Oil Revenues Second-quarter crude oil revenues increased $394 million from the comparable 2004 quarter with a $15.49 per barrel increase in oil price generating an additional $317 million of revenue and an eight percent increase in production adding another $77 million of revenues. All segments reported a significant increase in realized oil price, with the North Sea, the U.S. and China also benefiting from production growth quarter over quarter. For the 2005 six-month period, crude oil revenues increased $789 million from the comparable 2004 period with a $15.54 per barrel increase in oil price and a nine percent increase in production. The North Sea's second-quarter 2005 crude oil revenues were $202 million higher than the second-quarter of 2004 on significantly higher price realizations and a 38 percent increase in production. The higher price realizations generated an additional $120 million of revenues when compared to the same 2004 quarter. Second-quarter 2004 revenues were impacted by a lower fixed-price physical contract entered into in conjunction with our 2003 property acquisition from BP p.l.c. (BP). The 38 percent production growth reflects successful drilling since second quarter 2004 and increased platform operating efficiencies following completion of a number of major facility upgrades. An unexpected temporary shutdown of the BP operated sales pipeline system in June 2005 cost the Company approximately 2,000 b/d of quarterly production. U.S. oil revenues increased $90 million in the second quarter from the same period last year resulting from a 12 percent increase in production and a 24 percent increase in price. Our average realized price includes an unfavorable $1.56 per barrel hedge loss on a portion of production acquired from ExxonMobil and Anadarko Petroleum Corporation (Anadarko). (See Note 2, Hedging and Derivative Instruments of this Form 10-Q.) Production was up 8,060 b/d, increasing revenues $34 million in the U.S. The ExxonMobil and Anadarko property acquisitions executed during the latter part of 2004 and successful drilling and recompletion efforts more than offset natural production declines and approximately 2,500 b/d shut-in during the quarter because of Hurricane Ivan, a 2004 event. We plan to have the remaining 700 b/d still shut-in at quarter's end online by the end of the third quarter of 2005. Egypt added approximately $77 million of revenues from a 47 percent increase in crude oil price realizations partially offset by a 391 b/d decrease in production. Production increases at Khalda and East Bahariya were offset by lower production at South Umbarka. 24 Canada's revenues increased $9 million. A 35 percent increase in price from the comparable period was mostly offset by an 18 percent, or 4,784 b/d, decrease in oil production. Canada production was impacted by increasing water cut from wells in the Zama, Midale, Snipe Lake, House Mountain and Karr Simonette areas. Also impacting production were pressure and gas/oil ratio limitations imposed on the Virginia Hills development area. China's second-quarter 2005 revenues were $27 million higher than the second quarter of 2004 on a 4,711 b/d increase in production and a 43 percent increase in price. Production was still ramping up during the second quarter of 2004. Australia's crude oil revenues decreased $13 million or 17 percent from second quarter 2004. This decrease reflects a 39 percent decline in production partially offset by a 37 percent increase in price. The decline in daily oil production resulted from natural decline, particularly the Legendre field, cessation of production at East Spar, and other natural declines. These declines were partially offset by the impact of new wells brought online during the period. Approximately six percent of our worldwide crude oil production was subject to financial derivative hedging for the second quarter of 2005. None of our oil production was subject to financial derivative hedging during the second quarter of 2004. For the first six-months of 2005, approximately six percent of our worldwide crude oil production was subject to financial derivative hedging compared to four percent in the 2004 period. (See Note 2, Hedging and Derivative Instruments of this Form 10-Q for a summary of the current derivative positions and terms.) These derivative financial instruments reduced our second-quarter 2005 realized price $.50 per barrel. Our average realized prices for the first six-month periods of 2005 and 2004 were reduced $.42 and $.29 per barrel, respectively, by hedges. Natural Gas Contribution Our North America operations continue to contribute a significant portion of our consolidated natural gas revenues. In the second quarter of 2005, 88 percent of Apache's natural gas revenues came from North America, up slightly from the comparable prior-year quarter. The U.S. contributed 57 percent of our consolidated natural gas revenues, reflecting a 21 percent price increase partially offset by two percent lower volumes. Canada's contribution to second-quarter 2005 consolidated natural gas revenues increased three percent to 31 percent on an 18 percent increase in price and a 16 percent increase in production. Egypt's contribution to second-quarter 2005 natural gas revenues fell two percent to nine percent when compared to the prior-year quarter. Egypt's production was up seven percent, while price increased one percent. Australia's contribution to Apache's total gas revenues remained flat at three percent. Contributions for the six-month period were similar, although Egypt's contribution remained flat year over year at 10 percent, while Canada's contribution increased two percent to 30 percent of consolidated natural gas revenues. Natural Gas Revenues Our second-quarter 2005 natural gas revenues increased 22 percent or $123 million from the prior-year quarter as an $.87 per Mcf increase in our average natural gas price realization generated an additional $99 million of revenues. Higher production added the remaining $24 million. While all of our reportable segments reported an increase in realized natural gas prices, $95 million or 96 percent of the additional revenues attributed to price came from the U.S. and Canada. The revenue gains related to production were primarily attributed to Canada, with smaller contributions from Egypt and the North Sea. Natural gas revenues increased $197 million from the 2004 six-month period with $179 million of the increase attributable to our North American regions. Worldwide realized gas prices were up $.70 per Mcf while production was up four percent overall. Higher second-quarter prices in the U.S. added $68 million to consolidated natural gas revenues, while an 11.4 MMcf/d decline in U.S. production lowered revenues $7 million. The lower U.S. production was focused in the Gulf Coast region where natural decline in mature fields, downtime and the lingering impact of Hurricane Ivan negatively impacted results. Offsetting these impacts were production increases from drilling and our 2004 property acquisitions from Anadarko and ExxonMobil. While Hurricane Ivan cost the Company approximately 11 MMcf/d during the second quarter of 2005, only 2 MMcf/d remained shut-in at the end of the quarter. Canada's second-quarter 2005 natural gas revenues increased $57 million, with contributions from higher prices and production growth relatively equal. Production increased 53 MMcf/d, as a result of successful drilling efforts at 25 Nevis, Zama, the Exxon Grant Lands and other areas, and royalty relief associated with gas cost allowance wells. Natural decline in the Ladyfern, Hawkeye and other areas partially offset the production gains. Egypt added $5 million to second-quarter 2005 consolidated natural gas revenues compared to the prior-year period on a 9.4 MMcf/d increase in production and small improvement in natural gas price realizations. The increase in production was attributable to a full quarter of production from the Khalda concession Imhotep and Atoun wells and first sales from the North East Abu Gharadig concession following the January 2005 completion of pipeline facilities. While Australia's second-quarter 2005 gas production declined five percent compared to the second quarter of 2004, the impact on revenues was minimal given Australia's relatively low natural gas price. The decline in production relates to cessation of production at East Spar. Although a majority of our worldwide gas sales contracts are indexed to prevailing market prices, approximately nine percent of our second-quarter 2005 and 2004 U.S. natural gas production was subject to long-term, fixed-price physical contracts. Approximately 10 percent of our U.S. natural gas production for the first six months of 2005 was subject to long-term, fixed-price physical contracts up from nine percent in the prior year. These fixed-price contracts reduced second-quarter 2005 and 2004 worldwide realized prices $.13 and $.10 per Mcf, respectively and 2005 and 2004 six-month worldwide realized prices $.12 and $.09 per Mcf, respectively. Additionally, nearly all of our Australian natural gas production is subject to long-term, fixed-price supply contracts that are periodically adjusted for changes in Australia's consumer price index. Since these contracts are denominated in Australian dollars, the resulting revenues are impacted by changes in the value of the Australian dollar relative to the U.S. dollar. Approximately 11 percent of our worldwide natural gas production was subject to financial derivative hedges for the second-quarter and six-month periods of 2005, while approximately 15 percent of our worldwide natural gas production was subject to hedges in the comparable 2004 periods. These derivative financial instruments reduced our second-quarter and six-month 2005 realized prices $.07 and $.03 Mcf, respectively. The second-quarter and six-month periods of 2004 realized prices were both reduced $.20 and $.13 per Mcf, respectively, as a result of the derivative financial instruments. Hedges covering 50 MMcf/d, or four percent, of our second-quarter gas production expired June 30, 2005. (See Note 2, Hedging and Derivative Instruments, of this Form 10-Q for a summary of our current derivative positions and terms.) Also during the 2004 quarter, we amortized specific unrealized gains and losses related to derivative positions closed in October and November 2001. This amortization, which terminated in July 2004, had a negligible impact on second-quarter 2004 average realized prices. COSTS The table below presents a comparison of our expenses on an absolute dollar basis and an equivalent unit of production (boe) basis. Our discussion may reference either expenses on a boe basis or expenses on an absolute dollar basis, or both, depending on their relevance. Second-quarter and year-to-date 2005 costs reflect the impact of our ExxonMobil and Anadarko property acquisitions closed in the latter half of 2004.
FOR THE QUARTER ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30, -------------------------------- ----------------------------------- 2005 2004 2005 2004 2005 2004 2005 2004 ---- ------- ------ --------- ------ ------ ------- ---------- (In millions) (Per boe) (In millions) (Per boe) Depreciation, depletion and amortization (DD&A): Oil and gas property and equipment.......... $338 $ 278 $ 7.92 $ 6.88 $ 658 $ 546 $ 7.81 $ 6.87 Other assets................................ 21 18 .48 .45 40 36 .48 .45 Asset retirement obligation accretion.......... 13 11 .31 .27 26 22 .31 .27 Lease operating costs (LOE).................... 255 200 5.98 4.95 489 408 5.80 5.13 Gathering and transportation costs............. 26 20 .61 .50 50 40 .59 .50 Severance and other taxes...................... 87 22 2.03 .54 159 30 1.88 .38 General and administrative expense (G&A)....... 52 39 1.22 .97 102 85 1.21 1.07 China litigation............................... - 71 - 1.77 - 71 - .90 Financing costs, net........................... 32 27 .74 .68 64 55 .75 .69 ---- ------- ------ --------- ------ ------ ------- ---------- Total.................................... $824 $ 686 $19.29 $ 17.01 $1,588 $1,293 $ 18.83 $ 16.26 ==== ======= ====== ========= ====== ====== ======= ==========
26 Depreciation, Depletion and Amortization Full-cost DD&A expense of $338 million is $60 million higher in the second quarter of 2005 than in the comparative quarter of 2004. On a year-to-date basis, full-cost DD&A expense increased $112 million. The increase attributable to volume growth was $19 million (31 percent) and $36 million (32 percent) for the second quarter and six-month periods, respectively. The balance of the additional expense was related to an increase in our full-cost rate period over period. The Company's second-quarter full-cost DD&A rate of $7.92 per boe was $1.04 per boe higher than the comparable 2004 quarter. For the 2005 six-month period our full-cost DD&A averaged $.94 per boe more than the 2004 period. DD&A expense has been trending upward and reflects rising industry-wide drilling and acquisition costs, particularly in the U.S. and Canada. The higher commodity prices seen over the past year led to increased demand for drilling services and thus higher drilling costs and higher estimated future development costs. In addition, the cost of properties acquired from ExxonMobil and Anadarko were higher than our historical cost as the higher commodity prices have increased the value and costs of properties available for acquisition. Lease Operating Costs Second-quarter 2005 LOE increased $56 million, 28 percent, over second-quarter 2004. On a unit of production basis, second-quarter 2005 costs were up $1.03 from 2004 to $5.98 per boe. For the first six months of 2005 LOE totaled $489 million, $81 million higher than 2004. On a boe basis, 2005 six-month LOE averaged $5.80 per boe, $.67 per boe higher than 2004. Service costs have been trending upward over the past year, reflecting higher commodity prices and related demand. Costs were up across the board and primarily reflect increased service costs associated with higher commodity prices and demand. Regionally, second-quarter costs in the U.S. were up $32 million. On a unit of production basis, the U.S. added $.68 per boe to the consolidated rate. The rate increase in the U.S. is attributable to higher contract labor costs, higher workover activity and various other commodity-price driven service costs. Australia, where absolute costs were up marginally, added $.17 per boe to the consolidated rate on lower production. Canada's costs were up $9 million with over half related to Canadian-U.S. dollar exchange rate movements. The balance related to various other costs associated with an increase in activity and higher service costs. Canada added $.18 per boe to the second-quarter 2005 consolidated rate increase. Egypt's costs were up $10 million on additional workover activity and higher cost of diesel fuel, which had previously been subsidized by the Egyptian government. Egypt added $.23 per boe to the consolidated rate increase. The North Sea reduced the consolidated rate $.19 per boe on a 38 percent increase in production. While the North Sea had higher workover activity and repair costs in the second quarter of 2005 compared to 2004, production increases more than offset the impact. Gathering and Transportation Costs Gathering and transportation costs for the second quarter and first six months of 2005 increased 30 percent and 26 percent, respectively, compared to the same periods in 2004. The following table presents gathering and transportation costs paid directly by Apache to third-party carriers for each of the periods presented.
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------- ------------------------ 2005 2004 2005 2004 ------ ------ ------ ------ (In millions) U.S....................................... $ 8 $ 8 $ 16 $ 15 Canada.................................... 8 7 16 15 North Sea................................. 7 5 14 10 Egypt..................................... 3 - 4 - ------ ------ ------ ------ Total Gathering and Transportation........ $ 26 $ 20 $ 50 $ 40 ====== ====== ====== ======
These costs are primarily related to the transportation of natural gas in our North American operations and transportation of oil in the North Sea and Egypt. The increase in costs for both the second-quarter and year-to-date periods were driven by production growth in the North Sea, strengthening of the Canadian dollar relative to the U.S. dollar and costs incurred to transport cargoes of Egyptian crude in 2005. Apache began exporting Egyptian crude in the second half of 2004 and first incurred third-party transportation charges in early 2005. 27 Severance and Other Taxes Second quarter 2005 severance and other taxes totaled $87 million, $65 million greater than the prior-year quarter. For the six-month period, severance and other costs totaled $159 million compared to $31 million in year-earlier period. A detail of these taxes follows:
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------- ------------------------ 2005 2004 2005 2004 ------ ------ ------ ------ (In millions) Severance taxes....................... $ 29 $ 26 $ 59 $ 45 U.K. PRT.............................. 52 (12) 89 (29) Canadian taxes........................ 4 5 9 10 Other................................. 2 3 2 5 ------ ------ ------ ------ Total Severance and Other Taxes....... $ 87 $ 22 $ 159 $ 31 ====== ====== ====== ======
Severance taxes are incurred in the U.S. and Australia. For the second quarter and first six-months of 2005 severance taxes in the U.S. increased $10 million and $16 million, respectively, while Australia's decreased $6 million and $1 million for the same comparative periods. U.S. severance taxes were driven by higher prices and related revenues, while the Australian decrease primarily reflects lower excise tax on Legendre, a result of declining production. North Sea Petroleum Revenue Tax (PRT) is assessed on net profits from subject fields in the United Kingdom (U.K.) North Sea. PRT increased $64 million quarter-over-quarter and $118 million year-to-date. As previously discussed, the North Sea's 2004 second-quarter and six-month period revenues were impacted by a lower fixed-price physical contract resulting in lower net profits and comparative PRT expenses. The 2004 PRT credit reflected qualifying capital spending and lifting costs that exceeded associated revenues. General and Administrative Expense Second-quarter and year-to-date G&A costs increased $13 million and $17 million, respectively, compared to the same periods in 2004. Nearly two-thirds of the increase in second-quarter cost and three-fourths of the increase in year-to-date cost were related to the impact of stock-based compensation programs affected by the rising price of Apache's common stock. The balance of the increase for both 2005 periods was primarily related to the increased cost of insurance and higher health care costs and audit fees. Provision for Income Taxes Second-quarter 2005 income tax expense was $176 million higher than in the second quarter of 2004. For the six-month period, 2005 income tax expense was $317 million above 2004. The additional income tax expense in both periods was driven by higher taxable income related to the increased revenues. Slightly higher effective tax rates also contributed to the higher taxes. The Company's effective tax rates in the 2005 three-month and six-month reporting periods were largely unaffected by foreign currency exchange rate movements, unlike the 2004 periods. CAPITAL RESOURCES AND LIQUIDITY FINANCIAL INDICATORS
JUNE 30, DECEMBER 31, 2005 2004 ---------- ------------ Current ratio......................................... .87 1.05 Total debt (in millions).............................. $ 2,479 $ 2,588 Shareholders' equity (in millions).................... $ 9,197 $ 8,204 Percent of total debt to capitalization............... 21.2% 24.0% Floating-rate debt/total debt......................... 12% 15%
OVERVIEW Apache's primary uses of cash are for exploration, development and acquisition of oil and gas properties, costs and expenses necessary to maintain continued operations, repayment of principal and interest on outstanding debt and payment of dividends. 28 The Company funds its exploration and development activities primarily through net cash provided by operating activities (cash flow) and budgets capital expenditures in light of projected cash flow. Our cash flow, both in the short-term and long-term, is impacted by highly volatile oil and natural gas prices, production levels, industry trends impacting operating expenses and drilling costs and occasional acquisitions. For these reasons, we only forecast cash flow on an annual basis. Longer term cash flow and capital spending projections are not used by management to operate our business. The annual cash flow forecasts are revised monthly in response to changing market conditions and production projections. Apache routinely adjusts capital expenditure budgets in response to the adjusted cash flow forecasts and market trends in drilling and acquisitions costs. The Company has historically utilized internally generated cash flow, committed and uncommitted credit facilities and access to both debt and equity capital markets for all other liquidity and capital resources needs. Apache's ability to access the debt capital market is supported by its investment grade credit ratings. Apache's senior unsecured debt is currently rated investment grade by Moody's, Standard and Poor's and Fitch with ratings of A3, A- and A, respectively. Because of the liquidity and capital resources alternatives available to Apache, including internally generated cash flows, Apache's management believes that its short-term and long-term liquidity will be adequate to fund operations, including its capital spending program, repayment of debt maturities and any amounts that may ultimately be paid in connection with contingencies. The Company's ratio of current assets to current liabilities was .87 on June 30, 2005, compared to 1.05 on December 31, 2004. The decrease in the ratio is the result of an increase in current liabilities of $536 million as of June 30, 2005 as compared to December 31, 2004, which exceeded an increase in current assets of $234 million for the same period. The increase in current liabilities was primarily attributable to current debt expected to be paid within the year, higher accrued exploration and development costs from increased drilling activity, and an increase in the accrued liability for derivative instruments. The increase in current assets was driven by an increase in oil and gas revenue receivables, resulting from higher commodity prices and higher joint owner receivables. NET CASH PROVIDED BY OPERATING ACTIVITIES Apache's net cash provided by operating activities for the first six months of 2005 totaled $1.8 billion, up from $1.3 billion for the same period in 2004. The increase in 2005 cash flow is attributed primarily to the significant increase in commodity prices, which generated additional oil and gas revenues. The Company's average realized crude oil price increased 49 percent, a reflection of higher worldwide prices. The Company also saw a 15 percent increase in natural gas prices. Additional revenues generated from a nine percent increase in crude oil production and a four percent increase in gas production also contributed to the increased cash flows. These increases were partially offset by higher LOE, severance taxes, U.K. PRT and higher income taxes, all of which are generally up because of higher production and higher commodity prices. The Company reviews production costs for each core area on a monthly basis and strives to maintain efficient levels of costs. For a more detailed discussion of commodity prices, production, costs and expenses, refer to the "Results of Operations" of this Management's Discussion and Analysis of Financial Condition and Results of Operations. Historically, fluctuations in commodity prices have been the primary reason for the Company's short-term changes in cash flow from operating activities. Sales volume changes have also impacted cash flow in the short-term, but have not been as volatile as commodity prices have in the past. Apache's long-term net cash provided by operating activities is dependent on commodity prices, reserve replacement and the level of costs and expenses required for continued operations. DEBT During the first six months of 2005, we continued to strengthen our financial flexibility and build on our solid financial position. Our debt-to-capitalization ratio on June 30, 2005, declined to 21.2 percent from 24.0 percent on December 31, 2004, as a result of slightly lower debt and additional equity from earnings. On June 30, 2005, the Company had outstanding debt of $2.5 billion, $110 million less than December 31, 2004. The Company's outstanding debt consisted of $271 million under our commercial paper program, $16 million under uncommitted lines of credit and a total of $2.2 billion of other debt. This other debt included notes and debentures maturing in the years 2006 through 2096. The Company has available a $1.2 billion commercial paper program which enables Apache to borrow funds for up to 270 days at competitive interest rates. The commercial paper balance of $271 million on June 30, 2005 is 29 classified as current debt in the accompanying consolidated balance sheet since the Company now anticipates repaying those funds prior to year-end in light of strong prices and cash flow. If the Company is unable to issue commercial paper following a significant credit downgrade or dislocation in the market, the Company's U.S. credit facilities are available as a 100 percent backstop. The weighted-average interest rate for commercial paper was 2.97 percent and 1.08 percent for the second quarter of 2005 and 2004, respectively. As of June 30, 2005, available borrowing capacity under our credit facilities was $1.2 billion. We had $79 million in cash and cash equivalents on hand on June 30, 2005, down $32 million from the $111 million available at the end of 2004. The Company was in compliance with the terms of its credit facilities as of June 30, 2005. On May 12, 2005, the Company entered into a new $450 million revolving bank credit facility for the U.S., a $150 million revolving bank credit facility for Australia and a $150 million revolving bank credit facility for Canada, which replaced the Company's existing credit facilities in the same amounts which were scheduled to mature in June 2007. These new facilities are scheduled to mature on May 12, 2010. There were no changes to the Company's $750 million U.S. credit facility which matures in May 2009. The financial covenants of the Company's revolving bank credit facilities require the Company to maintain a debt-to-capitalization ratio of not greater than 60 percent at the end of any fiscal quarter. The negative covenants include restrictions on the Company's ability to create liens and security interests on our assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens and liens arising as a matter of law, such as tax and mechanics liens. The Company may incur liens on assets located in the U.S., Canada and Australia of up to five percent of the Company's consolidated assets, which approximated $844 million as of June 30, 2005. There are no restrictions on incurring liens in countries other than the U.S., Canada and Australia. There are also restrictions on Apache's ability to merge with another entity, unless the Company is the surviving entity, and a restriction on our ability to guarantee debt of entities not within our consolidated group. There are no clauses in the facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes (MAC clauses). The credit facility agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payments and terminate lending commitments if Apache Corporation, or any of its U.S., Canadian or Australian subsidiaries, defaults on any direct payment obligation in excess of $100 million or has any unpaid, non-appealable judgment against it in excess of $100 million. The Company's debt-to-capitalization ratio as of June 30, 2005 was 21.2 percent. At the Company's option, the interest rate for the facilities is based on (i) the greater of (a) The JP Morgan Chase Bank prime rate or (b) the federal funds rate plus one-half of one percent or (ii) the London Interbank Offered Rate (LIBOR) plus a margin determined by the Company's senior long-term debt rating. The $750 million and the $450 million credit facilities (U.S. credit facilities) also allow the Company to borrow under competitive auctions. At June 30, 2005, the margin over LIBOR for committed loans under the new facilities was .23 percent. If the total amount of the loans borrowed under all three facilities equals or exceeds 50 percent of the total facility commitments, then an additional .10 percent will be added to the margins over LIBOR. The Company also pays quarterly facility fees of .07 percent on the total amount of the three facilities. The facility fees vary based upon the Company's senior long-term debt rating. STOCK TRANSACTIONS The Company has used access to equity capital markets to fund significant acquisitions. OIL AND GAS CAPITAL EXPENDITURES The Company funded its exploration and production capital expenditures, including gathering, transportation and marketing facilities, of $1.8 billion and $1.1 billion in the first half of 2005 and 2004, respectively, with internally generated net cash provided by operating activities of $1.8 billion and $1.3 billion, respectively, and its lines of credit and commercial paper program. 30 The following table presents a summary of the Company's capital expenditures for each of our reportable segments for the six months ended June 30, 2005 and 2004.
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------ 2005 2004 ---------- ---------- (In thousands) Exploration and development: United States................................................ $ 532,190 $ 366,470 Canada....................................................... 508,016 336,348 Egypt........................................................ 163,734 140,183 Australia.................................................... 115,918 65,876 North Sea.................................................... 265,152 132,636 Other International.......................................... 20,854 5,002 ---------- ---------- $1,605,864 $1,046,515 ========== ========== Capitalized Interest............................................. $ 27,663 $ 26,358 ========== ========== Gas gathering, transmission and processing facilities............ $ 207,594 $ 40,363 ========== ========== Acquisitions: Oil and gas properties....................................... $ 25,654 $ (1,539) ========== ==========
CASH DIVIDEND PAYMENTS The Company has paid cash dividends on its common stock for 40 consecutive years through 2004. Future dividend payments will depend on the Company's level of earnings, financial requirements and other relevant factors. Common dividends paid during the second quarter of 2005 rose to $26 million, reflecting the increase in common shares outstanding and the higher common stock dividend rate. The Company increased its quarterly cash dividend 33 percent, to eight cents per share from six cents per share, effective with the November 2004 dividend payment. During the second quarter of 2005, Apache paid a total of $1.4 million in dividends on its Series B Preferred Stock issued in August 1998. CONTRACTUAL OBLIGATIONS We are subject to various financial obligations and commitments in the normal course of operations. These contractual obligations represent known future cash payments that we are required to make and relate primarily to long-term debt, operating leases, pipeline transportation commitments and international commitments. The Company expects to fund these contractual obligations with cash generated from operating activities. Apache is also subject to various contingent obligations that become payable only if certain events or rulings were to occur. The inherent uncertainty surrounding the timing of and monetary impact associated with these events or rulings prevents any meaningful accurate measurement, which is necessary to assess any impact on future liquidity. Such obligations include environmental contingencies and potential settlements resulting from litigation. Apache's management believes that it has adequately reserved for its contingent obligations. The Company has approximately $11 million reserved for environmental remediation and approximately $12 million reserved for various legal liabilities. In addition, the Company has an accrued reserve of $71 million, plus accrued interest of $5.8 million for the Texaco China B.V. litigation. The Company's future liquidity could be impacted by a significant downgrade of its credit ratings by Moody's, Standard and Poor's, and Fitch; however, we do not believe that such a sharp downgrade is reasonably likely. The Company's credit facilities do not require the Company to maintain a minimum credit rating. In addition, generally under our commodity hedge agreements, Apache may be required to post margin or terminate outstanding positions if the Company's credit ratings decline significantly. The negative covenants associated with our debt are outlined in greater detail in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Capital Resources and Liquidity, Debt" in the Company's 2004 Form 10-K. 31 OFF-BALANCE SHEET ARRANGEMENTS Apache does not currently utilize any off-balance sheet arrangements with unconsolidated entities to enhance liquidity and capital resource positions. Please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Off-Balance Sheet Arrangements" in the Company's 2004 Form 10-K. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK COMMODITY RISK The major market risk exposure is in the pricing applicable to our oil and gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to our United States and Canadian natural gas production. Prices received for oil and gas production have been and remain volatile and unpredictable. Average monthly oil price realizations, including the impact of fixed-price contracts and hedges, ranged from a low of $42.63 per barrel to a high of $51.79 per barrel during the first six-months of 2005. Average monthly gas price realizations, including the impact of fixed-price contracts and hedges, ranged from a monthly low of $5.16 per Mcf to a monthly high of $5.95 per Mcf during the same period. Based on the Company's worldwide oil production levels, a $1.00 per barrel change in the weighted-average realized price of oil would increase or decrease revenues by approximately $44 million. Based on the Company's worldwide gas production levels, a $.10 per Mcf change in the weighted-average realized price of gas would increase or decrease revenues by approximately $23 million. We periodically enter into hedges in conjunction with selected acquisitions to protect against commodity price volatility. These hedges effectively reduce price risk on a portion of our projected oil and natural gas production from acquisitions. On June 30, 2005, the Company had open natural gas derivative positions with a fair value of $(117) million. A 10 percent increase in natural gas prices would reduce the fair value by approximately $35 million, while a 10 percent decrease in prices would increase the fair value by approximately $33 million. The Company also had open oil derivative positions with a fair value of $(152) million on June 30, 2005. A 10 percent increase in crude oil prices would reduce the fair value by approximately $39 million, while a 10 percent decrease in prices would increase the fair value by approximately $38 million. See Note 2, Hedging and Derivative Instruments of this Form 10-Q, for notional volumes associated with the Company's derivative contracts. INTEREST RATE RISK The Company considers its interest rate risk exposure to be minimal as a result of fixing interest rates on approximately 88 percent of the Company's debt. At June 30, 2005, total debt included $287 million of floating-rate debt. As a result, Apache's annual interest costs in 2005 will fluctuate based on short-term interest rates on approximately 12 percent of its total debt outstanding at June 30, 2005. The impact on cash flow of a 10 percent change in the floating interest rate would be approximately $249,000 per quarter. FOREIGN CURRENCY RISK The Company's cash flow stream relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. In Australia, oil production is sold under U.S. dollar contracts and natural gas production is sold under fixed-price Australian dollar contracts. Over half the costs incurred for Australian operations are paid in Australian dollars. In Canada, the majority of oil and natural gas production is sold under Canadian dollar contracts. The majority of the costs incurred are paid in Canadian dollars. The North Sea oil production is sold under U.S. dollar contracts and the majority of costs incurred are paid in British pounds. In contrast, all oil and natural gas production in Egypt is sold for U.S. dollars and the majority of the costs incurred are denominated in U.S. dollars. Revenue and disbursement transactions denominated in Australian dollars, Canadian dollars and British pounds are converted to U.S. dollar equivalents based on the exchange rate as of the transaction date. A 10 percent strengthening of the Australian and Canadian dollars and the British pound as of June 30, 2005 would result in a foreign currency net loss of approximately $104 million. This is primarily driven from foreign 32 currency effects on the Company's deferred tax liability positions in its international operations. The Company hedged a portion of its foreign exchange risk associated with lease operating expenditures for 2005. For information on open derivative contracts, please see Note 2, Hedging and Derivative Instruments of this Form 10-Q. The information set forth under "Commodity Risk," "Interest Rate Risk" and "Foreign Currency Risk" in Item 7A of our annual report on Form 10-K for the year ended December 31, 2004, is incorporated herein by reference. Information about market risks for the quarter and six months ended June 30, 2005, does not differ materially from the disclosure in our 2004 Form 10-K, except as noted above. FORWARD-LOOKING STATEMENTS AND RISK Certain statements in this report, including statements of the future plans, objectives, and expected performance of the Company, are forward-looking statements that are dependent upon certain events, risks and uncertainties that may be outside the Company's control, and which could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, the market prices of oil and gas, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, political and economic uncertainties of foreign governments, 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 the 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. Although Apache may make use of futures contracts, swaps, options and fixed-price physical contracts to mitigate risk, fluctuations in oil and natural gas prices or a prolonged continuation of low prices, may adversely affect the Company's financial position, results of operations and cash flows. ITEM 4 - CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURES G. Steven Farris, the Company's President, Chief Executive Officer and Chief Operating Officer, and Roger B. Plank, the Company's Executive Vice President and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2005, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company's disclosure controls were effective, providing effective means to insure that information we are required to disclose under applicable laws and regulations is recorded, processed, summarized and reported in a timely manner. We also made no significant changes in internal controls over financial reporting during the quarter ending June 30, 2005, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. We periodically review the design and effectiveness of our disclosure controls, including compliance with various laws and regulations that apply to our operations both inside and outside the United States. We make modifications to improve the design and effectiveness of our disclosure controls, and may take other corrective action, if our reviews identify deficiencies or weaknesses in our controls. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to Report of Management on Internal Control Over Financial Reporting, included on Page F-1 in Item 15 of the Company's 2004 Form 10-K. The independent auditors attestation report called for by Item 308(b) of Regulation S-K is incorporated by reference to Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting, included on Page F-3 in Item 15 of the Company's 2004 Form 10-K. 33 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There was no change in our internal controls over financial reporting during the period covered by this quarterly Report on Form 10-Q that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. 34 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The information set forth in Note 10 to the Consolidated Financial Statements contained in the Company's annual report on Form 10-K for the year ended December 31, 2004 (filed with the SEC on March 16, 2005) is incorporated herein by reference. ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's annual meeting of stockholders was held in Houston, Texas at 10:00 a.m. local time, on Thursday, May 5, 2005. Proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934, as amended. Out of a total of 328,158,822 shares of the Company's common stock outstanding and entitled to vote, 285,636,896 shares were present at the meeting in person or by proxy, representing 87.04 percent of the shares entitled to vote. Matters voted upon at the meeting were as follows: (a) Election of four directors to serve on the Company's board of directors. There was no solicitation in opposition to the nominees for election as directors as listed in the proxy statement, and all nominees were elected. Mr. Farris, Dr. Ferlic, Mr. Frazier, and Mr. Kocur were elected to serve until the annual meeting in 2008. The vote tabulation with respect to each nominee was as follows:
AUTHORITY NOMINEE FOR WITHHELD - ------------------ ----------- ---------- G. Steven Farris 276,241,456 9,395,439 Randolph M. Ferlic 270,187,318 15,449,578 A. D. Frazier, Jr. 280,001,630 5,635,265 John A. Kocur 262,097,526 23,539,369
(b) The Company's 2005 Stock Option Plan was approved by a vote of 214,117,865 shares for and 27,469,395 shares against. (c) The Company's 2005 Share Appreciation Plan was approved by a vote of 233,151,356 shares for and 8,493,613 shares against. (d) The stockholder proposal concerning director election majority vote standard was not presented for a vote, as the stockholder's representative did not appear at the meeting to present the proposal. (e) The stockholder proposal concerning auditor independence was not presented for a vote, as the stockholder's representative appeared at the meeting and withdrew the proposal. 35 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 - Form of Credit Agreement, dated as of May 12, 2005, among Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, J.P. Morgan Securities Inc. and Banc of America Securities, LLC, as Co-Lead Arrangers and Joint Bookrunners, Bank of America, N.A. and Citibank, N.A., as U.S. Co-Syndication Agents, and Calyon New York Branch and Societe Generale, as U.S. Co-Documentation Agents (excluding exhibits and schedules). 10.2 - Form of Credit Agreement, dated as of May 12, 2005, among Apache Canada Ltd, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, RBC Capital Markets and BMO Nesbitt Burns, as Co-Lead Arrangers and Joint Bookrunners, Royal Bank of Canada, as Canadian Administrative Agent, Bank of Montreal and Union Bank of California, N.A., Canada Branch, as Canadian Co-Syndication Agents, and The Toronto-Dominion Bank and BNP Paribas (Canada), as Canadian Co-Documentation Agents (excluding exhibits and schedules). 10.3 - Form of Credit Agreement, dated as of May 12, 2005, among Apache Energy Limited, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., as Co-Lead Arrangers and Joint Bookrunners, Citisecurities Limited, as Australian Administrative Agent, Deutsche Bank AG, Sydney Branch, and JPMorgan Chase Bank, as Australian Co-Syndication Agents, and Bank of America, N.A., Sydney Branch, and UBS AG, Australia Branch, as Australian Co-Documentation Agents (excluding exhibits and schedules). 12.1 - Statement of computation of ratio of earnings to fixed charges and combined fixed charges and preferred stock dividends. 31.1 - Certification of Chief Executive Officer. 31.2 - Certification of Chief Financial Officer. 32.1 - Certification of Chief Executive Officer and Chief Financial Officer. (b) Reports filed on Form 8-K None 36 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 CORPORATION Dated: August 8, 2005 /s/ ROGER B. PLANK --------------------------------------------- Roger B. Plank Executive Vice President and Chief Financial Officer Dated: August 8, 2005 /s/ THOMAS L. MITCHELL --------------------------------------------- Thomas L. Mitchell Vice President and Controller (Chief Accounting Officer) EXHIBIT INDEX
Exhibits Description of Exhibit - -------- -------------------------------------------------------------------------------------- 10.1 - Form of Credit Agreement, dated as of May 12, 2005, among Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, J.P. Morgan Securities Inc. and Banc of America Securities, LLC, as Co-Lead Arrangers and Joint Bookrunners, Bank of America, N.A. and Citibank, N.A., as U.S. Co-Syndication Agents, and Calyon New York Branch and Societe Generale, as U.S. Co-Documentation Agents (excluding exhibits and schedules). 10.2 - Form of Credit Agreement, dated as of May 12, 2005, among Apache Canada Ltd, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, RBC Capital Markets and BMO Nesbitt Burns, as Co-Lead Arrangers and Joint Bookrunners, Royal Bank of Canada, as Canadian Administrative Agent, Bank of Montreal and Union Bank of California, N.A., Canada Branch, as Canadian Co-Syndication Agents, and The Toronto-Dominion Bank and BNP Paribas (Canada), as Canadian Co-Documentation Agents (excluding exhibits and schedules). 10.3 - Form of Credit Agreement, dated as of May 12, 2005, among Apache Energy Limited, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., as Co-Lead Arrangers and Joint Bookrunners, Citisecurities Limited, as Australian Administrative Agent, Deutsche Bank AG, Sydney Branch, and JPMorgan Chase Bank, as Australian Co-Syndication Agents, and Bank of America, N.A., Sydney Branch, and UBS AG, Australia Branch, as Australian Co-Documentation Agents (excluding exhibits and schedules). 12.1 - Statement of computation of ratio of earnings to fixed charges and combined fixed charges and preferred stock dividends. 31.1 - Certification of Chief Executive Officer. 31.2 - Certification of Chief Financial Officer. 32.1 - Certification of Chief Executive Officer and Chief Financial Officer.
EX-10.1 2 h27174exv10w1.txt FORM OF CREDIT AGREEMENT - REGISTRANT Exhibit 10.1 [U.S. CREDIT AGREEMENT] ================================================================================ CREDIT AGREEMENT dated as of May 12, 2005 among APACHE CORPORATION, THE LENDERS PARTY HERETO, JPMORGAN CHASE BANK, N.A., as Global Administrative Agent, BANK OF AMERICA, N.A. and CITIBANK, N.A, as U.S. Co-Syndication Agents, and CALYON NEW YORK BRANCH and SOCIETE GENERALE, as U.S. Co-Documentation Agents ----------------- J.P. MORGAN SECURITIES INC., and BANC OF AMERICA SECURITIES, LLC, as Co-Lead Arrangers and Joint Bookrunners ================================================================================ CONTENTS
CLAUSE PAGE ARTICLE I Definitions...................................................................... 1 SECTION 1.1 Defined Terms................................................................ 1 SECTION 1.2 Classification of Loans and Borrowings....................................... 15 SECTION 1.3 Terms Generally.............................................................. 15 SECTION 1.4 Accounting Terms; GAAP....................................................... 16 ARTICLE II The Credits...................................................................... 16 SECTION 2.1 Commitments.................................................................. 16 SECTION 2.2 Loans and Borrowings......................................................... 16 SECTION 2.3 Requests for Revolving Borrowings............................................ 17 SECTION 2.4 Competitive Bid Procedure.................................................... 18 SECTION 2.5 Funding of Borrowings........................................................ 20 SECTION 2.6 Extension of Maturity Date and of Commitments................................ 20 SECTION 2.7 Interest Elections........................................................... 22 SECTION 2.8 Termination and Reduction of Commitments..................................... 23 SECTION 2.9 Repayment of Loans; Evidence of Debt......................................... 24 SECTION 2.10 Prepayment of Loans.......................................................... 24 SECTION 2.11 Fees......................................................................... 25 SECTION 2.12 Interest..................................................................... 26 SECTION 2.13 Alternate Rate of Interest................................................... 26 SECTION 2.14 Increased Costs.............................................................. 27 SECTION 2.15 Break Funding Payments....................................................... 28 SECTION 2.16 Taxes........................................................................ 29 SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.................. 30 SECTION 2.18 Mitigation Obligations; Replacement of Lenders............................... 31 SECTION 2.19 Currency Conversion and Currency Indemnity................................... 32 SECTION 2.20 Additional Borrowers......................................................... 33 ARTICLE III Representations and Warranties................................................... 34 SECTION 3.1 Organization................................................................. 34 SECTION 3.2 Authorization and Validity................................................... 34 SECTION 3.3 Government Approval and Regulation........................................... 34 SECTION 3.4 Pension and Welfare Plans.................................................... 35 SECTION 3.5 Regulation U................................................................. 35 SECTION 3.6 Taxes........................................................................ 35 SECTION 3.7 Subsidiaries; Restricted Subsidiaries........................................ 35 ARTICLE IV Conditions....................................................................... 35
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CLAUSE PAGE SECTION 4.1 Effectiveness................................................................ 35 SECTION 4.2 All Loans.................................................................... 37 ARTICLE V Affirmative Covenants............................................................ 38 SECTION 5.1 Financial Reporting and Notices.............................................. 38 SECTION 5.2 Compliance with Laws......................................................... 39 SECTION 5.3 Maintenance of Properties.................................................... 39 SECTION 5.4 Insurance.................................................................... 39 SECTION 5.5 Books and Records............................................................ 39 SECTION 5.6 Use of Proceeds.............................................................. 39 ARTICLE VI Financial Covenants.............................................................. 40 SECTION 6.1 Ratio of Total Debt to Capital............................................... 40 ARTICLE VII Negative Covenants............................................................... 40 SECTION 7.1 Liens........................................................................ 40 SECTION 7.2 Mergers...................................................................... 41 SECTION 7.3 Asset Dispositions........................................................... 42 SECTION 7.4 Transactions with Affiliates................................................. 42 SECTION 7.5 Restrictive Agreements....................................................... 42 SECTION 7.6 Guaranties................................................................... 42 ARTICLE VIII Events of Default................................................................ 42 SECTION 8.1 Listing of Events of Default................................................. 42 SECTION 8.2 Action if Bankruptcy......................................................... 44 SECTION 8.3 Action if Other Event of Default............................................. 44 ARTICLE IX Agents........................................................................... 45 ARTICLE X Miscellaneous.................................................................... 47 SECTION 10.1 Notices...................................................................... 47 SECTION 10.2 Waivers; Amendments.......................................................... 48 SECTION 10.3 Expenses; Indemnity; Damage Waiver........................................... 49 SECTION 10.4 Successors and Assigns....................................................... 50 SECTION 10.5 Survival..................................................................... 52 SECTION 10.6 Counterparts; Integration; Effectiveness..................................... 53 SECTION 10.7 Severability................................................................. 53 SECTION 10.8 Right of Setoff.............................................................. 53 SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS................... 54 SECTION 10.10 Headings..................................................................... 54
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CLAUSE PAGE SECTION 10.11 Confidentiality.............................................................. 55 SECTION 10.12 Interest Rate Limitation..................................................... 55 SECTION 10.13 Joint and Several Obligations................................................ 56 SECTION 10.14 USA PATRIOT Act Notice....................................................... 57 SECTION 10.15 NO ORAL AGREEMENTS........................................................... 57
-iii- TABLE OF CONTENTS (continued) SCHEDULES AND EXHIBITS EXHIBITS: Exhibit A Form of Legal Opinion of Thompson & Knight LLP Exhibit B Form of Compliance Certificate Exhibit C Form of Assignment and Acceptance Exhibit D Form of Borrowing/Interest Election Request Exhibit E Form of Competitive Bid Quote Request Exhibit F Form of Notice of Competitive Bid Quote Request Exhibit G Form of Competitive Bid Exhibit H Form of Competitive Bid Accept/Reject Letter Exhibit I Form of Additional Borrower Counterpart SCHEDULES: Schedule 2.1 Commitments Schedule 3.7 Subsidiaries; Restricted Subsidiaries Schedule 7.1 Liens
-iv- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of May 12, 2005, is among APACHE CORPORATION, a Delaware corporation ("Apache" and, together with each other Person that becomes an Additional Borrower pursuant to Section 2.20, the "Borrower"), the LENDERS (as defined below) party hereto, JPMORGAN CHASE BANK, N.A., as Global Administrative Agent, BANK OF AMERICA, N.A. and CITIBANK, N.A., as U.S. Co-Syndication Agents, and CALYON NEW YORK BRANCH and SOCIETE GENERALE, as U.S. Co-Documentation Agents. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.1 Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Accepting Lenders" is defined in Section 2.6(c). "Additional Borrower" means any Person which becomes a Borrower under this Agreement pursuant to Section 2.20. "Additional Borrower Counterpart" is defined in Section 2.20. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Global Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents" means each of the Global Administrative Agent, the U.S. Co-Syndication Agents and the U.S. Co-Documentation Agents. "Agreed Currency" is defined in Section 2.19(a). "Agreement" means this Credit Agreement, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus -1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Apache" is defined in the preamble. "Apache Canada" means Apache Canada Ltd., a corporation organized under the laws of the Province of Alberta, Canada. "Apache Energy Limited" means Apache Energy Limited (ACN 009 301 964), a corporation organized under the laws of the State of Western Australia, Australia. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, (i) with respect to any Eurodollar Loan, the applicable rate per annum set forth below under the caption "Eurodollar Margin" plus the Commitment Utilization Margin, if any, or (ii) with respect to the Facility Fees payable hereunder, the applicable rate per annum set forth below under the caption "Facility Fee", in either case, based upon the ratings by Moody's, S&P and Fitch, respectively, applicable on such date to the Index Debt:
Facility Fee (in basis Eurodollar Margin (in Index Debt Ratings: points) basis points) ------------------- ------- ------------- Category 1: > or = A+/A1 5.50 12.00 Category 2: A/A2 6.00 14.00 Category 3: A-/A3 7.00 23.00 Category 4: BBB+/Baa1 9.00 31.00 Category 5: BBB/Baa2 11.00 39.00 Category 6: BBB-/Baa3 12.50 50.00 Category 7: < BBB-/Baa3 17.50 57.50
For purposes of the foregoing, (i) if either Moody's, S&P or Fitch shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the penultimate sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 7; (ii) if the ratings established or deemed to have been established by Moody's, S&P and Fitch for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the highest two ratings, unless the highest two ratings shall fall within different Categories in which case the Applicable Rate shall be based on the lower of 2 the highest two ratings; and (iii) if the ratings established or deemed to have been established by Moody's, S&P and Fitch for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's, S&P or Fitch), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's, S&P or Fitch shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. Changes in the Applicable Rate will occur automatically without prior notice. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4), and accepted by the Global Administrative Agent, in substantially the form of Exhibit C or any other form approved by the Global Administrative Agent. "Australian Administrative Agent" means Citisecurities Limited (ABN 51 008 489 610) in its capacity as Australian administrative agent for the lenders party to the Australian Credit Agreement and any successor thereto. "Australian Borrower" means Apache Energy Limited and each other Person that becomes a borrower under the Australian Credit Agreement. "Australian Credit Agreement" means that certain Credit Agreement of even date herewith among the Australian Borrower, the Australian Lenders, the Global Administrative Agent, the Australian Administrative Agent, and the other agents party thereto, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Australian Lenders" means the financial institutions listed on the signature pages of the Australian Credit Agreement and their respective successors and assigns. "Australian Loan Documents" means the Australian Credit Agreement, any notes, any guaranties, any assignment agreements, and the agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, financing statements and instruments from time to time executed and delivered pursuant to or in connection with any of the foregoing. "Authorized Officer" means, with respect to Apache, the Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of Apache, and any officer or employee of Apache specified as such to the Global Administrative Agent in writing by any of the aforementioned officers of Apache, and with respect to any Additional Borrower, the Chairman, the Vice Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of such Additional Borrower, and any officer or employee of such Additional Borrower specified as such to the 3 Global Administrative Agent in writing by any of the aforementioned officers of such Additional Borrower. "Availability Period" means, with respect to any Lender, the period from and including the Global Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitment of such Lender; provided, however, that no Commitment of any Lender shall terminate prior to the Maturity Date except as provided in Sections 2.6, 2.8, 4.1, 8.2, 8.3 and 10.4. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Apache Corporation, a Delaware corporation, and each other Person that becomes an Additional Borrower pursuant to Section 2.20. "Borrowing" means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect. "Borrowing Request" means a request by Borrower for a Revolving Borrowing in accordance with Section 2.3, in substantially the form of Exhibit D or any other form approved by the Global Administrative Agent. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Canadian Administrative Agent" means Royal Bank of Canada in its capacity as Canadian administrative agent for the lenders party to the Canadian Credit Agreement and any successor thereto. "Canadian Borrower" means Apache Canada and each other Person that becomes a borrower under the Canadian Credit Agreement. "Canadian Credit Agreement" means that certain Credit Agreement of even date herewith among the Canadian Borrower, the Canadian Lenders, the Global Administrative Agent, the Canadian Administrative Agent, and the other agents party thereto, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Canadian Lenders" means the financial institutions listed on the signature pages of the Canadian Credit Agreement and their respective successors and assigns. "Canadian Loan Documents" means the Canadian Credit Agreement, any notes, any guaranties, any assignment agreements, and the agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, 4 financing statements and instruments from time to time executed and delivered pursuant to or in connection with any of the foregoing. "Capital" means the consolidated shareholder's equity of Borrower and its Subsidiaries plus the consolidated Debt of Borrower and its Subsidiaries. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et. seq., as amended from time to time. "Certificate of Extension" means a certificate of Borrower, executed by an Authorized Officer and delivered to the Global Administrative Agent, in a form acceptable to the Global Administrative Agent, which requests an extension of the then scheduled Maturity Date pursuant to Section 2.6. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.16(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Combined Commitments" means the commitment of each Combined Lender under the Combined Credit Agreements, as such commitment may be reduced, increased or terminated from time to time pursuant to the Combined Loan Documents and, if any such commitments are no longer in effect under any Combined Credit Agreement, the aggregate unpaid principal amount of the outstanding loans for which the applicable commitment is no longer in effect under such Combined Credit Agreement. The initial amount of each Combined Lender's Commitment is set forth on Schedule 2.1 to the applicable Combined Credit Agreement, or in a Assignment and Acceptance (as defined in this Agreement and the Canadian Credit Agreement) or in a Substitution Certificate (as defined in the Australian Credit Agreement) or pursuant to which such Combined Lender shall have assumed its Combined Commitment, as applicable. The initial aggregate amount of the Combined Lenders' Combined Commitments is $750,000,000. "Combined Commitment Utilization" means, for any period, the ratio of (i) the aggregate principal amount of then outstanding Combined Loans (other than any Competitive Loans) to (ii) the then aggregate amount of the Combined Commitments. "Combined Credit Agreements" means this Agreement, the Australian Credit Agreement and the Canadian Credit Agreement. 5 "Combined Lenders" means the Lenders hereunder, the Australian Lenders and the Canadian Lenders. "Combined Loan Documents" means the Loan Documents, the Australian Loan Documents and the Canadian Loan Documents. "Combined Loans" means the loans made by the Combined Lenders to Borrower, Australian Borrower and Canadian Borrower pursuant to the Combined Loan Documents. "Combined Required Lenders" means Combined Lenders having in the aggregate 51% of the aggregate total Combined Commitments under the Combined Loan Documents. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans, as such commitment may be (a) reduced from time to time pursuant to Section 2.8, (b) reduced or increased from time to time pursuant to Section 2.6 or pursuant to assignments by or to such Lender pursuant to Section 10.4 and (c) terminated pursuant to Sections 4.1, 8.2 or 8.3. The amount of the Commitment represents such Lender's maximum Revolving Credit Exposure hereunder. The initial amount of each Lender's Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is $450,000,000. "Commitment Utilization Margin" means, on any date, if the Combined Commitment Utilization is less than 50%, then an amount equal to zero basis points per annum (0.00 bps) and, if the Combined Commitment Utilization is greater than or equal to 50%, then an amount equal to 10.00 basis points per annum. Changes in the Commitment Utilization Margin will occur automatically without prior notice. "Competitive Bid" means an offer by a Lender to make a Competitive Loan in accordance with Section 2.4, in substantially the form of Exhibit G or any other form approved by the Global Administrative Agent. "Competitive Bid Accept/Reject Letter" means a letter in substantially the form of Exhibit H or any other form approved by the Global Administrative Agent. "Competitive Bid Rate" means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by Borrower for Competitive Bids in accordance with Section 2.4, in substantially the form of Exhibit E or any other form approved by the Global Administrative Agent. "Competitive Loan" means a Loan made pursuant to Section 2.4. "Consolidated Assets" means the total assets of the Borrower and its subsidiaries which would be shown as assets on a consolidated balance sheet of Borrower and its subsidiaries prepared in accordance with GAAP. 6 "Consolidated Tangible Net Worth" means (i) the consolidated shareholder's equity of Borrower and its Subsidiaries (determined in accordance with GAAP), less (ii) the amount of consolidated intangible assets of Borrower and its Subsidiaries, plus (iii) the aggregate amount of any non-cash write downs, on a consolidated basis, by Borrower and its Subsidiaries during the term hereof. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with Borrower, are treated as a single employer under Section 414 (b) or 414 (c) of the Internal Revenue Code or Section 4001 of ERISA. "Debt" of any Person means indebtedness, including capital leases, shown as debt on a consolidated balance sheet of such Person prepared in accordance with GAAP. "Declining Lenders" is defined in Section 2.6(c). "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "dollars" or "$" refers to lawful money of the United States of America. "Environmental Laws" means all applicable federal, state or local statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. 7 "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate). "Event of Default" has the meaning assigned to such term in Article VIII. "Excluded Taxes" means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.16(a). "Existing Global Credit Facilities" means (i) that certain Credit Agreement [U.S. Credit Agreement], dated as of June 3, 2002, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto, (ii) that certain Credit Agreement [Australian Credit Agreement], dated as of June 3, 2002, among Apache Energy Limited (ACN 009 301 964), the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto, and (iii) that certain Credit Agreement [Canadian Credit Agreement], dated as of June 3, 2002, among Apache Canada Ltd., the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto. 8 "Facility Fee" is defined in Section 2.11(a). "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Global Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fitch" means Fitch, Inc. and any affiliate or successor thereto that is a nationally recognized rating agency in the United States. "Fixed Rate" means, with respect to any Competitive Loan (other than a Eurodollar Competitive Loan), the fixed rate of interest per annum (expressed as a decimal to no more than four (4) decimal places) specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means any Lender that is not organized under the laws of, or resident, in the United States. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent financial statements of Borrower and its Subsidiaries delivered to the Lenders pursuant hereto. "Global Administrative Agent" means JPMorgan Chase Bank, N.A., in its capacity as global administrative agent for the Combined Lenders. "Global Effective Date" means a date agreed upon by Borrower and the Global Administrative Agent as the date on which the conditions specified in Section 4.1 of each Combined Credit Agreement are satisfied (or waived in accordance with Section 10.2 of each Combined Credit Agreement). "Global Effectiveness Notice" means a notice and certificate of Borrower properly executed by an Authorized Officer of Borrower addressed to the Combined Lenders and delivered to the Global Administrative Agent, in sufficient number of counterparts to provide one for each such lender and each agent under each Combined Credit Agreement, whereby Borrower certifies satisfaction of all the conditions precedent to the effectiveness under Section 4.1 of each Combined Credit Agreement. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising 9 executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Hazardous Material" means (a) any "hazardous substance," as defined by CERCLA; (b) any "hazardous waste," as defined by the Resource Conservation and Recovery Act; or (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law. "Indebtedness" of any Person means all (i) Debt, and (ii) guaranties or other contingent obligations in respect of the Debt of any other Person. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of Borrower that is not guaranteed by any other Person or subject to any other credit enhancement. "Interest Election Request" means a request by Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.7, in substantially the form of Exhibit D or any other form approved by the Global Administrative Agent. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three (3) months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three (3) months' duration after the first day of such Interest Period, and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day, or, with the consent of the Global Administrative Agent, such other day, in the calendar month that is one, two, three or six months (or, with the consent of each Lender, nine or twelve months) thereafter, as Borrower may elect, (b) with respect to any Fixed Rate Borrowing, the period (which shall not be less than seven (7) days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding 10 day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Judgment Currency" is defined in Section 2.19(b). "Lenders" means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as reasonably determined by the Global Administrative Agent and Borrower from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Global Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means any mortgage, pledge, lien, encumbrance, charge, or security interest of any kind, granted or created to secure Indebtedness; provided, however, that, with respect to any prohibitions of Liens on Property, the following transactions shall not be deemed to create a Lien to secure Indebtedness; (i) production payments and (ii) liens required by statute and created in favor of U.S. governmental entities to secure partial, progress, advance, or other payments intended to be used primarily in connection with air or water pollution control. "Loan Document" means this Agreement, any Borrowing Request, any Interest Election Request, any Competitive Bid Quote Request, any Notice of Competitive Bid Quote Request, any Competitive Bid, any Competitive Bid Accept/Reject Letter, any Certificate of Extension, any Assignment and Acceptance, any Additional Borrower Counterpart, any election notice, the agreement with respect to fees described in Section 2.11(b), and each other agreement, document or instrument delivered by Borrower or any other Person in connection with this Agreement, as such may be amended from time to time. "Loans" means the loans made by the Lenders to Borrower pursuant to this Agreement. "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. 11 "Material Adverse Effect" means, as to any matter, that such matter could reasonably be expected to materially and adversely affect the assets, business, properties, condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole. No matter shall be considered to result, or be expected to result, in a Material Adverse Effect unless such matter causes Borrower and its Subsidiaries, on a consolidated basis, to suffer a loss or incur a cost equal to at least ten percent (10%) of Borrower's Consolidated Tangible Net Worth. "Maturity Date" means the Original Maturity Date, or such other later date as may result from any extension requested by Borrower and consented to by some or all of the Lenders pursuant to Section 2.6. "Moody's" means Moody's Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency in the United States. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Notice of Competitive Bid Request" means a notice of request by Borrower for Competitive Bids sent by the Global Administrative Agent to each Lender in accordance with Section 2.4, in substantially the form of Exhibit F or any other form approved by the Global Administrative Agent. "Obligations" means, at any time, the sum of (i) the outstanding principal amount of any Loans plus (ii) all accrued and unpaid interest and Facility Fees plus (iii) all other obligations of Borrower or any Subsidiary to any Lender or any Agent, whether or not contingent, arising under or in connection with any of the Loan Documents. "Original Maturity Date" means May 12, 2010. "Other Currency" is defined in Section 2.19(a). "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Pension Plan" means a "pension plan," as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which a Borrower or any corporation, trade or business that is, along with a Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. 12 "Person" means any natural person, corporation, limited liability company, unlimited liability company, joint venture, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City which rate may not be the lowest rate offered; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Property" means (i) any property owned or leased by Borrower or any Subsidiary, or any interest of Borrower or any Subsidiary in property, which is considered by Borrower to be capable of producing oil, gas, or minerals in commercial quantities, (ii) any interest of Borrower or any Subsidiary in any refinery, processing or manufacturing plant owned or leased by Borrower or any manufacturing plant owned or leased by Borrower or any Subsidiary, (iii) any interest of Borrower or any Subsidiary in all present and future oil, gas, other liquid and gaseous hydrocarbons, and other minerals now or hereafter produced from any other Property or to which Borrower or any Subsidiary may be entitled as a result of its ownership of any Property, and (iv) all real and personal assets owned or leased by Borrower or any Subsidiary used in the drilling, gathering, processing, transportation, or marketing of any oil, gas, and other hydrocarbons or minerals, except (a) any such real or personal assets related thereto employed in transportation, distribution or marketing or (b) any interest of Borrower or any Subsidiary in, any refinery, processing or manufacturing plant, or portion thereof, which property described in clauses (a) or (b), in the opinion of the Board of Directors of Borrower, is not a principal plant or principal facility in relation to the activities of Borrower and its Subsidiaries taken as a whole. "Register" has the meaning set forth in Section 10.4. "Regulation U" means any of Regulations T, U or X of the Board from time to time in effect and shall include any successor or other regulations or official interpretations of said Board or any successor Person relating to the extension of credit for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System or any successor Person. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Replacement Lenders" is defined in Section 2.6(c)(ii). 13 "Required Lenders" means Lenders having in the aggregate 51% of the aggregate total Commitments, or, if the Commitments have been terminated, Lenders holding 51% of the aggregate unpaid principal amount of the outstanding Obligations. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as amended from time to time. "Restricted Subsidiary" means any Subsidiary of Borrower that owns any asset representing or consisting of an entitlement to production from, or other interest in, reserves of oil, gas or other minerals in place located in the United States, Canada or Australia, including, without limitation, Apache Canada and Apache Energy Limited, or is otherwise designated as such by Borrower in writing to the Global Administrative Agent. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans at such time. "Revolving Loan" means a Loan made pursuant to Section 2.3. "S&P" means Standard & Poor's and any successor thereto that is a nationally-recognized rating agency in the United States. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the applicable maximum reserve percentages (including any basic, marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Global Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" means, with respect to any Person, any corporation or other similar entity of which more than 50% of the outstanding capital stock (or other equity) having ordinary voting power to elect a majority of the Board of Directors of such corporation or entity (irrespective of whether or not at the time capital stock or any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person. "Subsidiary" means any subsidiary of Borrower; provided, however, that in all events the following Persons shall not be deemed to be Subsidiaries of Borrower or any of its Subsidiaries: Apache Offshore Investment Partnership, a Delaware general partnership, Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership, Main Pass 151 Pipeline Company, a Texas general partnership, and Apache 681/682 Joint Venture, a Texas joint venture. 14 "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Transactions" means the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate. "United States" or "U.S." means the United States of America, its fifty states and the District of Columbia. "Unrestricted Subsidiary" means any Subsidiary of Borrower that is not a Restricted Subsidiary. "U.S. Co-Documentation Agents" means Calyon New York Branch and Societe Generale, each in its capacity as U.S. co-documentation agent for the Lenders hereunder. "U.S. Syndication Agents" means Bank of America, N.A. and Citibank, N.A., each in its capacity as U.S. co-syndication agent for the Lenders hereunder. "Welfare Plan" means a "welfare plan," as such term is defined in Section 3(1) of ERISA. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.2 Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing"). SECTION 1.3 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to 15 include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.4 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if Borrower notifies the Global Administrative Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Global Administrative Agent notifies Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II The Credits SECTION 2.1 Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans in U.S. Dollars to Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Commitment or (b) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Commitments. Subject to the conditions set forth herein, Borrower may borrow, prepay and reborrow Revolving Loans. Apache and any Additional Borrowers shall be jointly and severally liable for all Obligations. SECTION 2.2 Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.4. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.13, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as Borrower may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurodollar Loans or Fixed Rate Loans as Borrower may request in accordance herewith. Each Lender at its option may make 16 any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation or conversion of existing Revolving Loans made in connection therewith). At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation or conversion of existing Revolving Loans made in connection therewith); provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Eurodollar Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.3 Requests for Revolving Borrowings. To request a Revolving Borrowing, Borrower shall notify the Global Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Global Administrative Agent of a written Borrowing Request in a form approved by the Global Administrative Agent and signed by Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period". If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in 17 accordance with this Section, the Global Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.4 Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period, Borrower may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans at any time shall not exceed the total Commitments. To request Competitive Bids, Borrower shall notify the Global Administrative Agent of such request by telephone, in the case of a Eurodollar Borrowing, not later than noon, New York City time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that Borrower may submit up to (but not more than) five (5) Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the Global Administrative Agent of a written Competitive Bid Request and signed by Borrower. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing; and (iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period". Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Global Administrative Agent shall notify the Lenders of the details thereof by telecopy to each Lender of a Notice of Competitive Bid Quote Request inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Global Administrative Agent and must be received by the Global Administrative Agent by telecopy, in the case of a Eurodollar Competitive Borrowing, not later than noon, New York City time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the 18 Global Administrative Agent may be rejected by the Global Administrative Agent, and the Global Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested by Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Global Administrative Agent shall promptly notify Borrower by telecopy of a summary of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, Borrower may accept or reject any Competitive Bid. Borrower shall notify the Global Administrative Agent by telephone, confirmed by telecopy, in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurodollar Competitive Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:00 a.m., New York City time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by Borrower. A notice given by Borrower pursuant to this paragraph shall be irrevocable. (e) The Global Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. 19 (f) If the Global Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Global Administrative Agent pursuant to paragraph (b) of this Section. SECTION 2.5 Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Global Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Global Administrative Agent will make such Loans available to Borrower by promptly crediting the amounts so received, in like funds, to an account of Borrower designated by Borrower from time to time in a written notice to the Global Administrative Agent executed by two Authorized Officers of Apache and two Authorized Officers of any Additional Borrower. (b) Unless the Global Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to the Global Administrative Agent such Lender's share of such Borrowing, the Global Administrative Agent may assume that such Lender has made such share available on the requested date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Global Administrative Agent, then the applicable Lender and Borrower severally agree to pay to the Global Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to the Global Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate or a rate determined by the Global Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of Borrower, the interest rate applicable to Loans made in such Borrowing. If such Lender pays such amount to the Global Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.6 Extension of Maturity Date and of Commitments. (a) Subject to the other provisions of this Agreement and provided that no Event of Default has occurred and is continuing, the total Commitments shall be effective for an initial period from the Global Effective Date to the Original Maturity Date; provided that the Maturity Date, and concomitantly the total Commitments, may be extended for successive one year periods expiring on the date which is one (1) year from the then scheduled Maturity Date. If Borrower shall request in a Certificate of Extension delivered to the Global Administrative Agent at least 45 days prior to a date which is an anniversary of the Global Effective Date that the Maturity Date be extended for one year from the then scheduled Maturity Date, then the Global Administrative Agent shall promptly notify each Lender of such request and each Lender shall notify the Global Administrative Agent, no later than 30 days prior to such anniversary of the Global Effective Date, whether such Lender, in the exercise of its sole discretion, will extend the Maturity Date for such one year period. Any Lender which shall not timely notify the Global 20 Administrative Agent whether it will extend the Maturity Date shall be deemed to not have agreed to extend the Maturity Date. No Lender shall have any obligation whatsoever to agree to extend the Maturity Date. Any agreement to extend the Maturity Date by any Lender shall be irrevocable, except as provided in Section 2.6(c). (b) If all Lenders notify the Global Administrative Agent pursuant to clause (a) of this Section 2.6 of their agreement to extend the Maturity Date, then the Global Administrative Agent shall so notify each Lender and Borrower, and such extension shall be effective without other or further action by any party hereto for such additional one year period. (c) If Lenders constituting at least the Required Lenders approve the extension of the then scheduled Maturity Date (such Lenders agreeing to extend the Maturity Date herein called the "Accepting Lenders") and if one or more Lenders shall notify, or be deemed to notify, the Global Administrative Agent pursuant to clause (a) of this Section 2.6 that they will not extend the then scheduled Maturity Date (such Lenders herein called the "Declining Lenders"), then (A) the Global Administrative Agent shall promptly so notify Borrower and the Accepting Lenders, (B) the Accepting Lenders shall, upon Borrower's election to extend the then scheduled Maturity Date in accordance with clause (i) or (ii) below, extend the then scheduled Maturity Date and (C) Borrower shall, pursuant to a notice delivered to the Global Administrative Agent, the Accepting Lenders and the Declining Lenders, no later than the tenth (10th) day following the date by which each Lender is required, pursuant to Section 2.6(a), to approve or disapprove the requested extension of the total Commitments, either: (i) elect to extend the Maturity Date and direct the Declining Lenders to terminate their Commitments, which termination shall become effective on the date which would have been the Maturity Date except for the operation of this Section. On the date which would have been the Maturity Date except for the operation of this Section, (x) Borrower shall deliver a notice of the effectiveness of such termination to the Declining Lenders with a copy to the Global Administrative Agent and (y) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to the Declining Lenders, including any amounts required pursuant to Section 2.15, and (z) upon the occurrence of the events set forth in clauses (x) and (y), the Declining Lenders shall each cease to be a Lender hereunder for all purposes, other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3, and shall cease to have any obligations or any Commitment hereunder, other than to the Agents pursuant to Article IX, and the Global Administrative Agent shall promptly notify the Accepting Lenders and Borrower of the new Commitments; or (ii) elect to extend the Maturity Date and, prior to or no later than the then scheduled Maturity Date, (A) to replace one or more of the Declining Lenders with another lender or lenders reasonably acceptable to the Global Administrative Agent (such lenders herein called the "Replacement Lenders") and (B) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to any Declining Lenders which are not being replaced, as provided in clause (i) above; provided that (x) any Replacement Lender shall purchase, and any Declining Lender shall sell, such Declining Lender's rights and obligations hereunder without recourse or expense to, or warranty by, such Declining Lender being replaced for a purchase price equal to the aggregate 21 outstanding principal amount of the Obligations payable to such Declining Lender plus any accrued but unpaid interest on such Obligations and accrued but unpaid fees or other amounts owing in respect of such Declining Lender's Loans and Commitments hereunder, and (y) upon the payment of such amounts referred to in clause (x) and the execution of an Assignment and Acceptance by such Replacement Lender and such Declining Lender, such Replacement Lender shall constitute a Lender hereunder and such Declining Lender being so replaced shall no longer constitute a Lender (other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3), and shall no longer have any obligations hereunder, other than to the Agents pursuant to Article IX; or (iii) elect to revoke and cancel the extension request in such Certificate of Extension by giving notice of such revocation and cancellation to the Global Administrative Agent (which shall promptly notify the Lenders thereof) no later than the tenth (10th) day following the date by which each Lender is required, pursuant to clause (a) of this Section, to approve or disapprove the requested extension of the Maturity Date, and concomitantly the total Commitments. If Borrower fails to timely provide the election notice referred to in this clause (c), Borrower shall be deemed to have revoked and cancelled the extension request in the Certificate of Extension and to have elected not to extend the Maturity Date. SECTION 2.7 Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request (or an ABR Borrowing if no Type is specified) and, in the case of a Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request (or one month if no Interest Period is specified). Thereafter, Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. Borrower may, subject to the requirements of Section 2.2(c), elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, Borrower shall notify the Global Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Global Administrative Agent of a written Interest Election Request signed by Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2: 22 (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Global Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Global Administrative Agent, at the request of the Required Lenders, so notifies Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid and provided the Indebtedness has not been accelerated pursuant to Section 8.3, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.8 Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the sum of the Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans would exceed the total Commitments. 23 (c) Borrower shall notify the Global Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least two Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Global Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrower (by notice to the Global Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.9 Repayment of Loans; Evidence of Debt. (a) Borrower hereby unconditionally promises to pay (i) to the Global Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date or, if earlier, the date on which the Commitment of such Lender relating to such Revolving Loan is terminated (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)), and (ii) to the Global Administrative Agent for the account of each Lender the then unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Global Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) the amount of any sum received by the Global Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Global Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by one or more promissory notes. In such event, Borrower shall prepare, execute and deliver to such Lender promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns and in a form approved by the Global Administrative Agent). Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by one or more promissory 24 notes in such form payable to the order of the payee named therein (or, if any such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10 Prepayment of Loans. (a) Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section; provided that Borrower shall not have the right to prepay any Competitive Loan without the prior consent of the Lender thereof and compensation for break funding, to the extent required by Section 2.15. (b) Borrower shall notify the Global Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.8, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.8. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Global Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.2. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and compensation for break funding, to the extent required by Section 2.15. SECTION 2.11 Fees. (a) Borrower agrees to pay to the Global Administrative Agent for the account of each Lender a facility fee (the "Facility Fee"), which shall accrue at the Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the Global Effective Date to but excluding the earlier to occur of (i) the date on which such Commitment terminates (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)) or (ii) the Maturity Date; provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitment terminates, then such Facility Fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued Facility Fees shall be payable in arrears on the first day of April, July and October and the second day of January of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any Facility Fees accruing after the date on which the Commitments terminate shall be payable on demand. All Facility Fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). 25 (b) Borrower agrees to pay to the Global Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between Borrower and the Global Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Global Administrative Agent for distribution, in the case of Facility Fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.12 Interest. (a) The Loans comprising each ABR Borrowing shall bear interest on the daily amount outstanding at the Alternate Base Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest on the daily amount outstanding (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurodollar Competitive Loan, at the LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Loan. (c) Each Fixed Rate Loan shall bear interest on the daily amount outstanding at the Fixed Rate applicable to such Loan. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans on the Maturity Date; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion, and (iv) with respect to any Declining Lender, accrued interest shall be paid upon the termination of the Commitment of such Lender. (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to (i) the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate and (ii) the Fixed Rate, shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Global Administrative Agent, and such determination shall be conclusive absent demonstrable error. 26 SECTION 2.13 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (i) the Global Administrative Agent determines (which determination shall be conclusive absent demonstrable error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or (ii) the Global Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Global Administrative Agent shall give notice thereof to Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Global Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any request by Borrower for a Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by Borrower for Eurodollar Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. SECTION 2.14 Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital 27 or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section (together with the calculation thereof) shall be delivered to Borrower and shall be conclusive absent demonstrable error. Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. (e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.15 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(b) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to either Section 2.6, or Section 2.18 then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which 28 such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive, together with the calculation thereof, pursuant to this Section shall be delivered to Borrower and to the Global Administrative Agent and shall be conclusive absent demonstrable error. Borrower shall pay to the Global Administrative Agent for the account of such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.16 Taxes. (a) Any and all payments by or on account of any obligation of Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Global Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Borrower shall pay the Global Administrative Agent and each Lender, within 10 days after written demand therefor, the full amount of any Indemnified Taxes or Other Taxes paid by the Global Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than any such penalties or interest arising through the failure of the Global Administrative Agent or Lender to act as a reasonably prudent agent or lender, respectively), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender, or by the Global Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent demonstrable error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to the Global Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Global Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower (with a copy to the Global Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable 29 law or reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 1:00 p.m., New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. All such payments shall be made to the Global Administrative Agent, c/o Loan & Agency Services Group, 1111 Fannin Street, 10th Floor, Houston, Texas 77002-8069, Attention: Rose Salvacion, telephone no.: 713-750-2501, facsimile no.: 713-427-6307, except that payments pursuant to Sections 2.14, 2.16 and 10.3 shall be made directly to the Persons entitled thereto. The Global Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Global Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. If insufficient funds are received due to Borrower's entitlement to withhold amounts on account of Excluded Taxes in relation to a particular Lender, such insufficiency shall not be subject to this Section 2.17(b) but shall be withheld from and shall only affect payments made to such Lender. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the 30 foregoing arrangements may exercise against Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation. (d) Unless the Global Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Global Administrative Agent for the account of the Lenders hereunder that Borrower will not make such payment, the Global Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Global Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Global Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Global Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.17(d), then the Global Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Global Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Section until all such unsatisfied obligations are fully paid. SECTION 2.18 Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then Borrower may upon notice to such Lender and the Global Administrative Agent, require such Lender to assign and delegate, without recourse or expense to, or warranty by, such Lender (in accordance with and subject to the restrictions contained in Section 10.4), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee designated by Borrower which meets the requirements of Section 10.4(b) that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) Borrower shall have received the prior written consent of the Global Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to 31 the outstanding principal of its Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts), (iii) the assignee and assignor shall have entered into an Assignment and Acceptance, and (iv) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. SECTION 2.19 Currency Conversion and Currency Indemnity. (a) Payments in Agreed Currency. Borrower shall make payment relative to any Obligation in the currency (the "Agreed Currency") in which the Obligation was effected. If any payment is received on account of any Obligation in any currency (the "Other Currency") other than the Agreed Currency (whether voluntarily or pursuant to an order or judgment or the enforcement thereof or the realization of any security or the liquidation of Borrower or otherwise howsoever), such payment shall constitute a discharge of the liability of Borrower hereunder and under the other Loan Documents in respect of such obligation only to the extent of the amount of the Agreed Currency which the relevant Lender or Agent, as the case may be, is able to purchase with the amount of the Other Currency received by it on the Business Day next following such receipt in accordance with its normal procedures and after deducting any premium and costs of exchange. (b) Conversion of Agreed Currency into Judgment Currency. If, for the purpose of obtaining or enforcing judgment in any court in any jurisdiction, it becomes necessary to convert into a particular currency (the "Judgment Currency") any amount due in the Agreed Currency then the conversion shall be made on the basis of the rate of exchange prevailing on the next Business Day following the date such judgment is given and in any event Borrower shall be obligated to pay the Agents and the Lenders any deficiency in accordance with Section 2.19(c). For the foregoing purposes "rate of exchange" means the rate at which the relevant Lender or Agent, as applicable, in accordance with its normal banking procedures is able on the relevant date to purchase the Agreed Currency with the Judgment Currency after deducting any premium and costs of exchange. (c) Circumstances Giving Rise to Indemnity. If (i) any Lender or any Agent receives any payment or payments on account of the liability of Borrower hereunder pursuant to any judgment or order in any Other Currency, and (ii) the amount of the Agreed Currency which the relevant Lender or Agent, as applicable, is able to purchase on the Business Day next following such receipt with the proceeds of such payment or payments in accordance with its normal procedures and after deducting any premiums and costs of exchange is less than the amount of the Agreed Currency due in respect of such obligations immediately prior to such judgment or order, then Borrower on demand shall, and Borrower hereby agrees to, indemnify and save the Lenders and the Agents harmless from and against any loss, cost or expense arising out of or in connection with such deficiency. (d) Indemnity Separate Obligation. The agreement of indemnity provided for in Section 2.19(c) shall constitute an obligation separate and independent from all other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall 32 apply irrespective of any indulgence granted by the Lenders or Agents or any of them from time to time, and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order. SECTION 2.20 Additional Borrowers. (a) A Person which is a Restricted Subsidiary which is a resident of, and domiciled in, the United States may become an Additional Borrower with respect hereto, and shall be bound by and entitled to the benefits and obligations of this Agreement as a Borrower hereunder to the same extent as any other Borrower, upon the fulfillment of the following conditions: (i) Resolutions and Officers' Certificates. Such Person shall deliver all the items identified in Section 4.1(a) with respect to such Person. (ii) Certificate. An Authorized Officer of each Borrower shall have delivered to the Global Administrative Agent a certificate stating that such Person is a Restricted Subsidiary of the Parent which is resident of, and domiciled in, the United States. (iii) No Default. No Default or Event of Default shall have occurred and be continuing. (iv) Representations and Warranties. The representations and warranties in Article III hereto are true and correct with respect to such Person, mutatis mutandis, as of the date such Person executes the Additional Borrower Counterpart described in clause (v) below. (v) Additional Borrower Counterpart. Such Person shall execute an Additional Borrower Counterpart to this Agreement, substantially in the form of Exhibit I (the "Additional Borrower Counterpart") or such other agreement in form and substance satisfactory to the Global Administrative Agent. (vi) Opinions of Counsel. The Global Administrative Agent shall have received legal opinions, dated as of the date such Person executes the Additional Borrower Counterpart described above, addressed to the Agents and the Lenders, having substantially the same coverage as those opinions attached hereto as Exhibit A and in form and substance acceptable to the Global Administrative Agent, in its reasonable discretion. (vii) Approval. The Global Administrative Agent shall have approved the addition of such Person as an Additional Borrower, such approval not to be unreasonably withheld. (viii) USA Patriot Act Requirements and other Identification Requirements. Such Person shall provide information and documentation necessary to comply with Section 326 of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), and such other evidence as is reasonably requested by the Global Administrative Agent, on behalf of itself or any Lender, to comply with all necessary "know your customer" or other similar checks under all applicable laws and regulations. 33 (ix) Notice. The Global Administrative Agent and each Lender shall have received prior written notice from an Authorized Officer of each then current Borrower of an Additional Borrower becoming party to this Agreement at least five (5) Business Days prior to the date selected for such Additional Borrower to become party to this Agreement. (b) Upon fulfillment of the conditions in this Section 2.20(a), the Global Administrative Agent will promptly notify each Lender of the date that such Person becomes an Additional Borrower hereunder. ARTICLE III Representations and Warranties In order to induce the Lenders and the Agents to enter into this Agreement and the Lenders to make Loans hereunder, Borrower represents and warrants unto the Agents and each Lender as set forth in this Article III. SECTION 3.1 Organization. Apache is a corporation, and each of its Subsidiaries is a corporation or other legal entity, in either case duly incorporated or otherwise properly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority, permits and approvals, and is in good standing to conduct its business in each jurisdiction in which its business is conducted where the failure to so qualify would have a Material Adverse Effect. SECTION 3.2 Authorization and Validity. The execution, delivery and performance by Borrower of this Agreement and each other Loan Document executed or to be executed by it, are within Borrower's corporate or partnership powers, as applicable, have been duly authorized by all necessary corporate or partnership action on behalf of it, and do not (a) contravene Borrower's articles of incorporation or other organizational documents, as the case may be; (b) contravene any material contractual restriction, law or governmental regulation or court decree or order binding on or affecting Borrower or any Subsidiary; or (c) result in, or require the creation or imposition of, any Lien, not permitted by Section 7.1, on any of Borrower's or any Subsidiary's properties. This Agreement constitutes, and each other Loan Document executed by Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor rights generally and to general principles of equity. SECTION 3.3 Government Approval and Regulation. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by Borrower of this Agreement or any other Loan Document. Neither Borrower nor any of its Subsidiaries is an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" 34 or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 3.4 Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which would result in the incurrence by Borrower or any member of the Controlled Group of any liability, fine or penalty in excess of $100,000,000. Neither Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 3.5 Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, Regulation U. Terms for which meanings are provided in Regulations U are used in this Section with such meanings. SECTION 3.6 Taxes. Borrower and each of its Subsidiaries has to the best knowledge of Borrower after due investigation filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books or which the failure to file or pay could not reasonably be expected to have a Material Adverse Effect. SECTION 3.7 Subsidiaries; Restricted Subsidiaries. Schedule 3.7 hereto contains an accurate list of all of the presently existing Subsidiaries, including, without limitation, Restricted Subsidiaries, of Borrower as of the date of this Agreement, setting forth their respective jurisdictions of incorporation or organization and the percentage of their respective capital stock or, the revenue share attributable to the general and limited partnership interests, as the case may be, owned by Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries which are corporations have been duly authorized and issued and are fully paid and non-assessable. ARTICLE IV Conditions SECTION 4.1 Effectiveness. This Agreement shall become effective upon the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 4.1. (a) Resolutions and Officers Certificates. The Global Administrative Agent shall have received from Borrower a certificate, dated the Global Effective Date, of the Secretary or Assistant Secretary of Borrower as to (i) resolutions of its governing 35 board, then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document to be executed by it; (ii) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document executed by it; and (iii) its articles of incorporation and bylaws; upon which certificates each Lender may conclusively rely until it shall have received a further certificate of an authorized officer of Borrower canceling or amending such prior certificate. (b) Existing Facilities. The Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that either (i) Borrower or its Subsidiaries have repaid in full and terminated the Existing Global Credit Facilities concurrently with the effectiveness of the Combined Credit Agreements or (ii) the Existing Global Credit Facilities have been terminated in full prior to the effectiveness of the Combined Credit Agreements. (c) Opinions of Counsel. The Global Administrative Agent shall have received opinions, dated the Global Effective Date, addressed to the Global Administrative Agent, the other Agents and all Lenders, from Thompson & Knight LLP, counsel to Borrower, in substantially the form attached hereto as Exhibit A. (d) Closing Fees and Expenses. The Global Administrative Agent shall have received for its own account, or for the account of each Lender and other Agent, as the case may be, all fees, costs and expenses due and payable pursuant hereto. (e) Financial Statements. The Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that the audited consolidated financial statements of Borrower and its Subsidiaries for fiscal year 2004 (the "2004 Financials") fairly present Borrower's financial condition and results of operations and that prior to the Global Effective Date no material adverse change in the condition or operations of Borrower and its Subsidiaries, taken as a whole, from that reflected in the 2004 Financials has occurred and is continuing. (f) Environmental Warranties. In the ordinary course of its business, Borrower conducts an ongoing review of the effect of existing Environmental Laws on the business, operations and properties of Borrower and its Subsidiaries, in the course of which it attempts to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating 36 that after such review Borrower has reasonably concluded that existing Environmental Laws are unlikely to have a Material Adverse Effect, or that Borrower has established adequate reserves in respect of any required clean-up. (g) Global Effectiveness Notice. The Global Administrative Agent shall have received the Global Effectiveness Notice. (h) Other Combined Credit Agreements. The Global Administrative Agent shall have received copies of the executed (i) Australian Credit Agreement and the other Australian Loan Documents and (ii) Canadian Credit Agreement and the other Canadian Loan Documents. (i) Litigation. The Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that no litigation, arbitration, governmental proceeding, Tax claim, dispute or administrative or other proceeding shall be pending or, to the knowledge of Borrower, threatened against Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document. (j) Other Documents. The Global Administrative Agent shall have received such other instruments and documents as any of the Agents or their counsel may have reasonably requested. The Global Administrative Agent shall notify Borrower, the other Agents and the Lenders of the Global Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or prior to 3:00 p.m., New York City time, on May 31, 2005 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.2 All Loans. The obligation of each Lender to fund any Loan which results in an increase in the aggregate outstanding principal amount of Loans under this Agreement on the occasion of any Borrowing shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2. (a) Compliance with Warranties and No Default. Both before and after giving effect to any Borrowing, the following statements shall be true and correct: (1) the representations and warranties set forth in Article III shall be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and (b) no Default or Event of Default shall have then occurred and be continuing. (b) Borrowings. The Global Administrative Agent shall have received a Borrowing Request for any Revolving Borrowing, or a Competitive Borrowing Request and a Competitive Bid Accept/Reject Letter for any Competitive Borrowing. 37 ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 5.1 Financial Reporting and Notices. Apache will furnish, or will cause to be furnished, to each Lender and the Global Administrative Agent copies of the following financial statements, reports, notices and information: (a) within 90 days after the end of each Fiscal Year of Apache, a copy of the audited annual report for such fiscal year for Apache and its Subsidiaries, including therein consolidated balance sheets of Apache and its Subsidiaries as of the end of such fiscal year and consolidated statements of earnings and cash flow of Apache and its Subsidiaries for such fiscal year, in each case certified (without qualification) by independent public accountants of nationally recognized standing selected by Apache; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Apache commencing with the fiscal quarter ending June 30, 2005, unaudited consolidated balance sheets of Apache and its Subsidiaries as of the end of such fiscal quarter and consolidated statements of earnings and cash flow of Apache and its Subsidiaries for such fiscal quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, certified by an Authorized Officer of Apache; (c) together with the financial statements described in (a) and (b), above a compliance certificate, in substantially the form of Exhibit B or any other form approved by the Global Administrative Agent, executed by an Authorized Officer of Apache; (d) within five (5) days after the occurrence of each Default, a statement of an Authorized Officer of Apache setting forth details of such Default and the action which Borrower has taken and proposes to take with respect thereto; (e) promptly after the sending or filing thereof, copies of all material public filings, reports and communications from Borrower, and all reports and registration statements which Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; (f) immediately upon becoming aware of the institution of any steps by Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which would reasonably be expected to result in the requirement 38 that Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which would reasonably be expected to result in the incurrence by Borrower of any liability, fine or penalty in excess of $100,000,000, or any material increase in the contingent liability of Borrower with respect to any postretirement Welfare Plan benefit, notice thereof; and (g) such other information respecting the financial condition or operations of Borrower or any of its Subsidiaries as any Lender through the Global Administrative Agent may from time to time reasonably request. SECTION 5.2 Compliance with Laws. Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders where noncompliance therewith may reasonably be expected to have a Material Adverse Effect, except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.3 Maintenance of Properties. Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep valid title to, or valid leasehold interest in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.1 and except for imperfections and other burdens of title thereto as do not in the aggregate materially detract from the value thereof or for the use thereof in their businesses (taken as a whole). SECTION 5.4 Insurance. Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies (subject to self-insured retentions) insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses. SECTION 5.5 Books and Records. Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Global Administrative Agent and the other Agents and each Lender through the Global Administrative Agent or any of their respective authorized representatives, during normal business hours and at reasonable intervals, to visit all of its offices, to discuss its financial matters with its officers and to examine (and, at the expense of the Global Administrative Agent or such other Agent or Lender or, if a Default or Event of Default has occurred and is continuing, at the expense of Borrower, photocopy extracts from) any of its books or other records. SECTION 5.6 Use of Proceeds. Borrower will, and will cause each Subsidiary to, use the proceeds of the Loans (i) to refinance existing Indebtedness of Borrower and its Subsidiaries, (ii) for Borrower's and its Subsidiaries' general corporate or partnership purposes, including any non-hostile acquisitions, or (iii) to backup Apache's commercial paper facilities. 39 ARTICLE VI Financial Covenants Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 6.1 Ratio of Total Debt to Capital. Apache will not permit its ratio (expressed as a percentage) of (i) the consolidated Debt of Apache and its Subsidiaries to (ii) Capital to be greater than 60% at the end of any fiscal quarter beginning with the fiscal quarter ending June 30, 2005. ARTICLE VII Negative Covenants Until the Commitments have expired or terminated and all Obligations have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 7.1 Liens. Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the stock, assets, or indebtedness of Borrower or any of its Subsidiaries to secure Indebtedness of Borrower or any other Person except: (i) Liens on any property or assets owned or leased by Borrower or any Subsidiary existing at the time such property or asset was acquired (or at the time such Person became a Subsidiary); provided that in the case of the acquisition of a Subsidiary such Lien only encumbers property or assets immediately prior to, or at the time of, the acquisition by Borrower of such Subsidiary; (ii) purchase money Liens so long as such Liens only encumber property or assets acquired with the proceeds of the purchase money indebtedness incurred in connection with such Lien; (iii) Liens granted by an Unrestricted Subsidiary on its assets to secure Indebtedness incurred by such Unrestricted Subsidiary; (iv) Liens on assets of a Restricted Subsidiary securing Indebtedness of a Restricted Subsidiary owing to Borrower or to another Restricted Subsidiary or Liens on assets of an Unrestricted Subsidiary securing Indebtedness of an Unrestricted Subsidiary owing to Borrower, to a Restricted Subsidiary or to another Unrestricted Subsidiary; (v) Liens existing on the Global Effective Date set forth on Schedule 7.1; (vi) Liens arising under operating agreements; 40 (vii) Liens reserved in oil, gas and/or mineral leases for bonus rental payments and for compliance with the terms of such leases; (viii) Liens pursuant to partnership agreements, oil, gas and/or mineral leases, farm-out agreements, division orders, contracts for the sale, delivery, purchase, exchange, or processing of oil, gas and/or other hydrocarbons, unitization and pooling declarations and agreements, operating agreements, development agreements, area of mutual interest agreements, forward sales of oil, natural gas and natural gas liquids, and other agreements which are customary in the oil, gas and other mineral exploration, development and production business and in the business of processing of gas and gas condensate production for the extraction of products therefrom; (ix) Liens on the stock or other ownership interests of or in any Unrestricted Subsidiary; (x) Liens for taxes, assessments or similar charges, incurred in the ordinary course of business, that are not yet due and payable or that are being contested as set forth in Section 3.6; (xi) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, old-age pensions or other social security programs; (xii) Liens imposed by mandatory provisions of law such as for mechanics', materialmen's, warehousemen's, carriers', or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable; (xiii) Liens in renewal or extension of any of the foregoing permitted Liens, so long as limited to the property or assets encumbered and the amount of Indebtedness secured immediately prior to such renewal or extension; and (xiv) in addition to Liens permitted by clauses (i) through (xiii) above, Liens on property or assets of the Borrower and its Subsidiaries if the aggregate Indebtedness of all such Persons secured thereby does not exceed five percent (5%) of Borrower's Consolidated Assets; provided that nothing in this definition shall in and of itself constitute or be deemed to constitute an agreement or acknowledgment by the Global Administrative Agent or any Lender that the Indebtedness subject to or secured by any such Lien ranks (apart from the effect of any Lien included in or inherent in any such Liens) in priority to the Obligations. SECTION 7.2 Mergers. Apache will not liquidate or dissolve, consolidate with, or merge into or with, any other Person, or sell, lease or otherwise transfer all or substantially all 41 of its assets unless (a) Apache is the survivor of such merger or consolidation, and (b) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto. SECTION 7.3 Asset Dispositions. Borrower will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to all or substantially all of its assets. Notwithstanding the foregoing, nothing herein shall prohibit any transfer of any assets from any Borrower to any Subsidiary of such Borrower, from any Subsidiary of a Borrower to such Borrower or from a Subsidiary of a Borrower to another Subsidiary of such Borrower. SECTION 7.4 Transactions with Affiliates. Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract or group of arrangements or contracts, as the case may be, are conducted on an arms-length basis; provided, however, that this Section shall not apply to Apache Offshore Investment Partnership, a Delaware general partnership, Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership, Main Pass 151 Pipeline Company, a Texas general partnership, and Apache 681/682 Joint Venture, a Texas joint venture. SECTION 7.5 Restrictive Agreements. Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement, or any other Loan Document) limiting the ability of Borrower to amend or otherwise modify this Agreement or any other Loan Document. Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement which restricts or prohibits the ability of any Restricted Subsidiary to make any payments, directly or indirectly, to Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Restricted Subsidiary to make any payment, directly or indirectly, to Borrower. SECTION 7.6 Guaranties. Borrower will not, and will not permit any of its Restricted Subsidiaries to, guaranty any Indebtedness not included in the consolidated Debt of Borrower and its Subsidiaries in an aggregate outstanding principal amount at any time exceeding $100,000,000. ARTICLE VIII Events of Default SECTION 8.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default": (a) Non-Payment of Obligations. Borrower shall default in the payment or prepayment when due of any principal of any Loan, or Borrower shall default (and such default shall continue unremedied for a period of five (5) Business Days) in the payment when due of any interest, fee or of any other obligation hereunder. 42 (b) Breach of Warranty. Any representation or warranty of Borrower made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of Borrower to the Global Administrative Agent, any other Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document is or shall be false or misleading when made in any material respect. (c) Non-Performance of Covenants and Obligations. Borrower shall default in the due performance and observance of any of its obligations under Section 7.2 or under Article VI. (d) Non-Performance of Other Covenants and Obligations. Borrower shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to Borrower by the Global Administrative Agent or the Required Lenders. (e) Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any direct payment obligation of Borrower or any of its Restricted Subsidiaries in any amount in excess of $100,000,000. (f) Pension Plans. Any of the following events shall occur with respect to any Pension Plan: (a) the termination of a Pension Plan if, as a result of such termination, Borrower or any member of its Controlled Group could be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $100,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA with respect to a liability or obligation in excess of $100,000,000. (g) Bankruptcy and Insolvency. Borrower or any of its Restricted Subsidiaries shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to generally pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Global Administrative Agent, each other Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case 43 or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of Borrower or any of its Restricted Subsidiaries, and, if any such case or proceeding is not commenced by Borrower or such Restricted Subsidiary, such case or proceeding shall be consented to or acquiesced in by Borrower or such Restricted Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Global Administrative Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any corporate or partnership action authorizing, or in furtherance of, any of the foregoing. (h) Judgments. Any judgment or order for the payment of money in an amount of $100,000,000 or more in excess of valid and collectible insurance in respect thereof or in excess of an indemnity with respect thereto reasonably acceptable to the Required Lenders shall be rendered against Borrower or any of its Restricted Subsidiaries and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (b) such judgment shall have become final and non-appealable and shall have remained outstanding for a period of 60 consecutive days. (i) Change in Control. Any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act) shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act) of 33 1/3% or more of the outstanding shares of common stock of Borrower. (j) Event of Default under other Combined Loan Documents. Any "Event of Default" as defined in the Australian Loan Documents or the Canadian Loan Documents shall occur; provided that the occurrence of a "Default" as defined in the Australian Loan Documents or the Canadian Loan Documents shall constitute a Default under this Agreement; provided further that if such "Default" is cured or waived under the Australian Loan Documents or the Canadian Loan Documents, as applicable, then such "Default" shall no longer constitute a Default under this Agreement. SECTION 8.2 Action if Bankruptcy. If any Event of Default described in Section 8.1(g) shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 8.2) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Global Administrative Agent, upon the direction of the Required Lenders, shall by notice to Borrower declare all of the outstanding principal amount of 44 the Loans and all other obligations hereunder to be due and payable and the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other obligations shall be and become immediately due and payable, without further notice, demand or presentment, and the Commitments shall terminate. ARTICLE IX Agents Each of the Lenders hereby irrevocably appoints JPMorgan Chase Bank, N.A. as Global Administrative Agent, Bank of America, N.A. and Citibank, N.A. as U.S. Co-Syndication Agents, and Calyon New York Branch and Societe Generale as U.S. Co-Documentation Agents, and authorizes each such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) each Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth herein, each Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. Each Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. Each Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower or a Lender, and such Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent. None of the Persons identified on the facing page of this Agreement as the "Co-Lead Arrangers and Joint Bookrunners" (the "Arrangers"), the Co-Documentation Agents or the 45 Co-Syndication Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any other Combined Loan Document other than, except in the case of the Arrangers, those applicable to all Lenders as such. The Global Administrative Agent and the other Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Global Administrative Agent and the other Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Global Administrative Agent and the other Agents may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Any Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Any Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as an Agent. Subject to the appointment and acceptance of a successor Global Administrative Agent as provided in this paragraph, the Global Administrative Agent may resign at any time by notifying the Lenders and Borrower. Upon any such resignation, Borrower shall have the right, in consultation with the Combined Required Lenders, to appoint one of the Lenders as a successor. If no successor shall have been so appointed by Borrower and shall have accepted such appointment within 30 days after the retiring Global Administrative Agent gives notice of its resignation, then the retiring Global Administrative Agent may, on behalf of the Lenders, appoint a successor Global Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Global Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Global Administrative Agent, and the retiring Global Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Global Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Global Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.3 shall continue in effect for the benefit of such retiring Global Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Global Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other 46 Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE X Miscellaneous SECTION 10.1 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to Borrower, to: Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Attention: Matthew W. Dundrea Vice President and Treasurer Telephone: (713) 296-6640 Facsimile: (713) 296-6458 with a copy to: Assistant Treasurer Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Telephone: (713) 296-6642 Facsimile: (713) 296-6477 and with copy to: Vice President and General Counsel Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Telephone: (713) 296-6204 Facsimile: (713) 296-6458 47 (b) if to the Global Administrative Agent, to: JPMorgan Chase Bank, N.A. Loan & Agency Services Group 1111 Fannin Street, 10th Floor Houston, Texas 77002-8069 Attention: Rose Salvacion Telephone: (713) 750-2501 Facsimile: (713) 427-6307 with a copy to: JPMorgan Chase Bank, N.A. 600 Travis, 20 CTH 86 Houston, Texas 77002 Attention: Peter Licalzi Telephone: (713) 216-8870 Facsimile: (713) 216-4117 (c) if to any other Lender, to it at its address (or telecopy number) provided to the Global Administrative Agent and Borrower or as set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.2 Waivers; Amendments. (a) No failure or delay by the Global Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Global Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Global Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Any of the Combined Loan Documents or any provision thereof may be waived, amended or modified pursuant to an agreement or agreements in writing entered into by Borrower and the Combined Required Lenders or by Borrower and the Global Administrative Agent with the consent of the Combined Required Lenders; provided that the same waiver, 48 amendment or modification is requested by Borrower in connection with each of the Combined Credit Agreements; and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of (i) the Lenders described in the first proviso of Section 10.2(c) without the prior written consent of each Lender affected thereby and (ii) the Global Administrative Agent without the prior written consent of the Global Administrative Agent. (c) Except as provided for in Section 10.2(b) above, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Borrower and the Required Lenders or by Borrower and the Global Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender or the Commitments without the written consent of such Lender or each Lender, respectively, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of "Required Lenders", "Combined Required Lenders" or any other provision hereof or thereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or thereunder or make any determination or grant any consent hereunder or thereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Global Administrative Agent hereunder or thereunder without the prior written consent of the Global Administrative Agent. SECTION 10.3 Expenses; Indemnity; Damage Waiver. (a) Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Agents or any Lender, including the fees, charges and disbursements of any counsel for the Agents or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or this Agreement. (b) Borrower shall indemnify the Agents and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee"), WHETHER OR NOT RELATED TO ANY NEGLIGENCE OF THE INDEMNITEE, against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, 49 incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the actual or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether brought by a third party or by the Borrower and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (i) resulted from the gross negligence or willful misconduct of such Indemnitee or (ii) arise in connection with any issue in litigation commenced by Borrower or any of its Subsidiaries against any Indemnitee for which a final judgment is entered in favor of Borrower or any of its Subsidiaries against such Indemnitee. (c) To the extent that Borrower fails to pay any amount required to be paid by it to the Global Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Global Administrative Agent, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Global Administrative Agent. (d) To the extent permitted by applicable law, Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions or any Loan or the use of the proceeds thereof, except for any such claim arising from such Indemnitee's gross negligence or willful misconduct. (e) All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor. SECTION 10.4 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Global Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. 50 (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of Apache and the Global Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Global Administrative Agent) shall be in increments of $1,000,000 and not less than $10,000,000 unless each of Borrower and the Global Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not apply to rights in respect of outstanding Competitive Loans, (iv) the parties to each assignment shall execute and deliver to the Global Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Global Administrative Agent an Administrative Questionnaire; and provided further that any consent of Apache otherwise required under this paragraph shall not be required if an Event of Default under Section 8.1 has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Global Administrative Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and Borrower, the Global Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee 51 referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Global Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register and will provide prompt written notice to Borrower of the effectiveness of such Assignment. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of Borrower or the Global Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, the Global Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (iv) if such Participant is not a Lender or an Affiliate of a Lender, such Lender shall have given notice to Borrower of the name of the Participant and the amount of such participation. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.2(c) that affects such Participant. Subject to paragraph (f) of this Section, Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.8 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless Borrower shall expressly agree otherwise in writing. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.16(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender to a Federal Reserve Bank or, in the case of a Lender organized in a jurisdiction outside of the United States, a comparable Person, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 10.5 Survival. All covenants, agreements, representations and warranties made by Borrower herein and in the certificates or other instruments delivered in 52 connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Global Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.6 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Global Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Global Administrative Agent and when the Global Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.7 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.8 Right of Setoff. If an Event of Default shall have occurred and be continuing and the Obligations of Borrower shall have been accelerated, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of each Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. 53 SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. (b) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN THE FIRST SENTENCE OF PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SECTION 10.10 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. 54 SECTION 10.11 Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of Borrower or (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section by any Person or (B) becomes available to any Agent or any Lender on a non-confidential basis from a source other than Borrower or any Person obligated to maintain the confidentiality of such Information. Prior to disclosing any Information under clause (c) above, the Agent or Lender required or asked to make such disclosure shall make a good faith effort to give Borrower prior notice of such proposed disclosure to permit Borrower to attempt to obtain a protective order or other appropriate injunctive relief. For the purposes of this Section, "Information" means all information received from Borrower relating to Borrower or its business, other than any publicly available information and such information that is available to any Agent or any Lender on a non-confidential basis prior to disclosure by Borrower; provided that, in the case of information received from Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 10.12 Interest Rate Limitation. It is the intention of the parties hereto to conform strictly to applicable interest, usury and criminal laws and, anything herein to the contrary notwithstanding, the obligations of Borrower to a Lender or any Agent under this Agreement shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to such Lender or Agent limiting rates of interest which may be charged or collected by such Lender or Agent. Accordingly, if the transactions contemplated hereby would be illegal, unenforceable, usurious or criminal under laws applicable to a Lender or Agent (including the laws of any jurisdiction whose laws may be mandatorily applicable to such Lender or Agent notwithstanding anything to the contrary in this Agreement or any other Loan Document but subject to Section 2.12 hereof) then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document, it is agreed as follows: (i) the provisions of this Section shall govern and control; (ii) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under this Agreement, or under any of the other aforesaid agreements or otherwise in connection 55 with this Agreement by such Lender or Agent shall under no circumstances exceed the maximum amount of interest allowed by applicable law (such maximum lawful interest rate, if any, with respect to each Lender and the Agent herein called the "Highest Lawful Rate"), and any excess shall be cancelled automatically and if theretofore paid shall be credited to Borrower by such Lender or Agent (or, if such consideration shall have been paid in full, such excess refunded to Borrower); (iii) all sums paid, or agreed to be paid, to such Lender or Agent for the use, forbearance and detention of the indebtedness of Borrower to such Lender or Agent hereunder or under any Loan Document shall, to the extent permitted by laws applicable to such Lender or Agent, as the case may be, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof; (iv) if at any time the interest provided pursuant to this Section or any other clause of this Agreement or any other Loan Document, together with any other fees or compensation payable pursuant to this Agreement or any other Loan Document and deemed interest under laws applicable to such Lender or Agent, exceeds that amount which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees or compensation to accrue to such Lender or Agent pursuant to this Agreement shall be limited, notwithstanding anything to the contrary in this Agreement or any other Loan Document, to that amount which would have accrued at the Highest Lawful Rate, but any subsequent reductions, as applicable, shall not reduce the interest to accrue to such Lender or Agent pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest accrued pursuant to this Agreement or such other Loan Document, as the case may be, and such fees or compensation deemed to be interest equals the amount of interest which would have accrued to such Lender or Agent if a varying rate per annum equal to the interest provided pursuant to any other relevant Section hereof (other than this Section), as applicable, had at all times been in effect, plus the amount of fees which would have been received but for the effect of this Section; and (v) with the intent that the rate of interest herein shall at all times be lawful, and if the receipt of any funds owing hereunder or under any other agreement related hereto (including any of the other Loan Documents) by such Lender or Agent would cause such Lender to charge Borrower a criminal rate of interest, the Lenders and the Agents agree that they will not require the payment or receipt thereof or a portion thereof which would cause a criminal rate of interest to be charged by such Lender or Agent, as applicable, and if received such affected Lender or Agent will return such funds to Borrower so that the rate of interest paid by Borrower shall not exceed a criminal rate of interest from the date this Agreement was entered into. SECTION 10.13 Joint and Several Obligations. Each Borrower has determined that it is in its best interest and in pursuance of its legitimate business purposes to induce the Lenders to extend credit to the Borrowers pursuant to this Agreement. Each Borrower acknowledges and represents that the availability of the Commitments to each of the Borrowers benefits each Borrower individually and that the Loans made will be for and inure to the benefit of each of the Borrowers individually and as a group. Accordingly, each Borrower shall be jointly and 56 severally liable (as a principal and not as a surety, guarantor or other accommodation party) for each and every representation, warranty, covenant and obligation to be performed by the Borrowers under this Agreement and the other Loan Documents, and each Borrower acknowledges that in extending the credit provided herein the Agent and the Lenders are relying upon the fact that the Obligations of each Borrower hereunder are the joint and several obligations of a principal. The invalidity, unenforceability or illegality of this Agreement or any other Loan Document as to one Borrower or the release by the Agent or the Lenders of a Borrower hereunder or thereunder shall not affect the Obligations of the other Borrowers under this Agreement or the other Loan Documents, all of which shall otherwise remain valid and legally binding obligations of the other Borrowers. SECTION 10.14 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Global Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender or the Global Administrative Agent, as applicable, to identify each Borrower in accordance with the Act. SECTION 10.15 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. [SIGNATURES BEGIN ON FOLLOWING PAGE] 57 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. APACHE CORPORATION By: ________________________________________ Name: Matthew W. Dundrea Title: Vice President and Treasurer JPMORGAN CHASE BANK, N.A., as Global Administrative Agent and as Lender By: ________________________________________ Name: Title: BANK OF AMERICA, N.A., as a U.S. Co- Syndication Agent and as Lender By: ________________________________________ Name: Title: CITIBANK, N.A., as a U.S. Co-Syndication Agent and as Lender By: ________________________________________ Name: Title: CALYON NEW YORK BRANCH, as a U.S. Co- Documentation Agent and as Lender By: ________________________________________ Name: Title: By: ________________________________________ Name: Title: [SIGNATURE PAGE TO U.S. CREDIT AGREEMENT] S - 1 SOCIETE GENERALE, as a U.S. Co- Documentation Agent and as Lender By: ________________________________________ Name: Title: MORGAN STANLEY BANK, as Lender By: ________________________________________ Name: Title: CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch, as Lender By: ________________________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender By: ________________________________________ Name: Title: SUMITOMO MITSUI BANKING CORPORATION, as Lender By: ________________________________________ Name: Title: [SIGNATURE PAGE TO U.S. CREDIT AGREEMENT] S - 2 THE ROYAL BANK OF SCOTLAND PLC, as Lender By: ________________________________________ Name: Title: BAYERISCHE LANDESBANK - CAYMAN ISLANDS BRANCH, as Lender By: ________________________________________ Name: Title: By: ________________________________________ Name: Title: ABN AMRO BANK N.V., as Lender By: ________________________________________ Name: Title: By: ________________________________________ Name: Title: ING CAPITAL LLC, as Lender By: ________________________________________ Name: Title: [SIGNATURE PAGE TO U.S. CREDIT AGREEMENT] S - 3 WILLIAM STREET COMMITMENT CORPORATION, as Lender By: ________________________________________ Name: Title: WELLS FARGO BANK, NA, as Lender By: ________________________________________ Name: Title: THE BANK OF NEW YORK, as Lender By: ________________________________________ Name: Title: AMEGY BANK NATIONAL ASSOCIATION, as Lender By: ________________________________________ Name: Title: MIZUHO CORPORATE BANK, LTD., as Lender By: ________________________________________ Name: Title: ROYAL BANK OF CANADA, as Lender By: ________________________________________ Name: Title: [SIGNATURE PAGE TO U.S. CREDIT AGREEMENT] S - 4 DEUTSCHE BANK AG NEW YORK BRANCH, as Lender By: ________________________________________ Name: Title: By: ________________________________________ Name: Title: HARRIS NESBITT FINANCING, INC., as Lender By: ________________________________________ Name: Title: UNION BANK OF CALIFORNIA, N.A., as Lender By: ________________________________________ Name: Title: BNP PARIBAS, as Lender By: ________________________________________ Name: Title: By: ________________________________________ Name: Title: [SIGNATURE PAGE TO U.S. CREDIT AGREEMENT] S - 5 EX-10.2 3 h27174exv10w2.txt FORM OF CREDIT AGREEMENT - APACHE CANADA LTD. Exhibit 10.2 [CANADIAN CREDIT AGREEMENT] - -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of May 12, 2005 among APACHE CANADA LTD., THE LENDERS PARTY HERETO, JPMORGAN CHASE BANK, N.A., as Global Administrative Agent, ROYAL BANK OF CANADA, as Canadian Administrative Agent, BANK OF MONTREAL and UNION BANK OF CALIFORNIA, N.A., CANADA BRANCH, as Canadian Co-Syndication Agents, and THE TORONTO-DOMINION BANK and BNP PARIBAS (CANADA), as Canadian Co-Documentation Agents, ------------------- RBC CAPITAL MARKETS and BMO NESBITT BURNS, as Co-Lead Arrangers and Joint Bookrunners - -------------------------------------------------------------------------------- CONTENTS
CLAUSE PAGE ARTICLE I Definitions.......................................................... 1 SECTION 1.1 Defined Terms.................................................... 1 SECTION 1.2 Classification of Loans and Borrowings........................... 13 SECTION 1.3 Terms Generally.................................................. 13 SECTION 1.4 Accounting Terms; GAAP........................................... 13 ARTICLE II The Credits.......................................................... 14 SECTION 2.1 Commitments...................................................... 14 SECTION 2.2 Loans and Borrowings............................................. 14 SECTION 2.3 Requests for Borrowings.......................................... 15 SECTION 2.4 [Intentionally omitted].......................................... 15 SECTION 2.5 Funding of Borrowings............................................ 15 SECTION 2.6 Extension of Maturity Date and of Commitments.................... 16 SECTION 2.7 Interest Elections............................................... 18 SECTION 2.8 Termination and Reduction of Commitments......................... 19 SECTION 2.9 Repayment of Loans; Evidence of Debt............................. 19 SECTION 2.10 Prepayment of Loans.............................................. 20 SECTION 2.11 Fees............................................................. 21 SECTION 2.12 Interest......................................................... 21 SECTION 2.13 Alternate Rate of Interest....................................... 22 SECTION 2.14 Increased Costs.................................................. 23 SECTION 2.15 Break Funding Payments........................................... 24 SECTION 2.16 Taxes............................................................ 24 SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs...... 25 SECTION 2.18 Mitigation Obligations; Replacement of Lenders................... 27 SECTION 2.19 Currency Conversion and Currency Indemnity....................... 27 SECTION 2.20 Additional Borrowers............................................. 28 ARTICLE III Representations and Warranties....................................... 29 SECTION 3.1 Organization..................................................... 30 SECTION 3.2 Authorization and Validity....................................... 30 SECTION 3.3 Government Approval and Regulation............................... 30 SECTION 3.4 Unfunded Pension Liabilities..................................... 30 SECTION 3.5 Regulation U..................................................... 30 SECTION 3.6 Taxes............................................................ 30 SECTION 3.7 Subsidiaries; Restricted Subsidiaries............................ 31 ARTICLE IV Conditions........................................................... 31
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CLAUSE PAGE SECTION 4.1 Effectiveness.................................................... 31 SECTION 4.2 All Loans........................................................ 33 ARTICLE V Affirmative Covenants................................................ 33 SECTION 5.1 Financial Reporting and Notices.................................. 33 SECTION 5.2 Compliance with Laws............................................. 34 SECTION 5.3 Maintenance of Properties........................................ 35 SECTION 5.4 Insurance........................................................ 35 SECTION 5.5 Books and Records................................................ 35 SECTION 5.6 [Intentionally omitted].......................................... 35 SECTION 5.7 Use of Proceeds.................................................. 35 ARTICLE VI Financial Covenants.................................................. 35 SECTION 6.1 Ratio of Total Debt to Capital................................... 35 ARTICLE VII Negative Covenants................................................... 36 SECTION 7.1 Liens............................................................ 36 SECTION 7.2 Mergers.......................................................... 38 SECTION 7.3 Asset Dispositions............................................... 38 SECTION 7.4 Transactions with Affiliates..................................... 38 SECTION 7.5 Restrictive Agreements........................................... 38 SECTION 7.6 Guaranties....................................................... 38 ARTICLE VIII Events of Default.................................................... 38 SECTION 8.1 Listing of Events of Default..................................... 38 SECTION 8.2 Action if Bankruptcy............................................. 40 SECTION 8.3 Action if Other Event of Default................................. 41 ARTICLE IX Agents............................................................... 41 ARTICLE X Miscellaneous........................................................ 43 SECTION 10.1 Notices.......................................................... 43 SECTION 10.2 Waivers; Amendments.............................................. 45 SECTION 10.3 Expenses; Indemnity; Damage Waiver............................... 46 SECTION 10.4 Successors and Assigns........................................... 47 SECTION 10.5 Survival......................................................... 49 SECTION 10.6 Counterparts; Integration; Effectiveness......................... 49 SECTION 10.7 Severability..................................................... 50 SECTION 10.8 Right of Setoff.................................................. 50 SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS....... 50
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CLAUSE PAGE SECTION 10.10 Headings......................................................... 51 SECTION 10.11 Confidentiality.................................................. 51 SECTION 10.12 Interest Rate Limitation......................................... 52 SECTION 10.13 Joint and Several Obligations.................................... 53 SECTION 10.14 NO ORAL AGREEMENTS............................................... 53
-iii- Table of Contents (continued) EXHIBITS: Exhibit A Form of Legal Opinion of Bennett Jones LLP Exhibit B Form of Legal Opinion of Thompson & Knight LLP Exhibit C Form of Compliance Certificate Exhibit D Form of Assignment and Acceptance Exhibit E Form of Borrowing/Interest Election Request Exhibit F Form of Guaranty Exhibit G Form of Additional Borrower Counterpart SCHEDULES: Schedule 2.1 Commitments Schedule 3.7 Subsidiaries; Restricted Subsidiaries Schedule 7.1 Liens -iv- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of May 12, 2005, is among APACHE CANADA LTD., a corporation organized under the laws of the Province of Alberta, Canada ("Apache Canada" and together with each other Person that becomes an Additional Borrower pursuant to Section 2.20, the "Borrower"), the LENDERS (as defined below) party hereto, JPMORGAN CHASE BANK, N.A., as Global Administrative Agent, ROYAL BANK OF CANADA, as Canadian Administrative Agent, BANK OF MONTREAL and UNION BANK OF CALIFORNIA, N.A., CANADA BRANCH, as Canadian Co-Syndication Agents, and THE TORONTO-DOMINION BANK and BNP PARIBAS (CANADA), as Canadian Co-Documentation Agents. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.1 Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Accepting Lenders" is defined in Section 2.6(c). "Additional Borrower" means any Person which becomes a Borrower under this Agreement pursuant to Section 2.20. "Additional Borrower Counterpart" is defined in Section 2.20. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Global Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents" means each of the Global Administrative Agent, the Canadian Administrative Agent, the Canadian Co-Syndication Agents and the Canadian Co-Documentation Agents. "Agreed Currency" is defined in Section 2.19(a). "Agreement" means this Credit Agreement, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the U.S. Base Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus -1/2 of 1%. Any change in the Alternate Base Rate due to a change in the U.S. Base Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the U.S. Base Rate or the Federal Funds Effective Rate, respectively. "Apache Energy Limited" means Apache Energy Limited (ACN 009 301 964), a corporation organized under the laws of the State of Western Australia, Australia. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, (i) with respect to any Eurodollar Loan, the applicable rate per annum set forth below under the caption "Eurodollar Margin" plus the Commitment Utilization Margin, if any, or (ii) with respect to the Facility Fees payable hereunder, the applicable rate per annum set forth below under the caption "Facility Fee", in either case, based upon the ratings by Moody's, S&P and Fitch, respectively, applicable on such date to the Index Debt:
Facility Fee (in basis Eurodollar Margin (in basis Index Debt Ratings: points) points) - ----------------------------- ---------------------- --------------------------- Category 1: > or = A+/A1 5.50 12.00 Category 2: A/A2 6.00 14.00 Category 3: A-/A3 7.00 23.00 Category 4: BBB+/Baa1 9.00 31.00 Category 5: BBB/Baa2 11.00 39.00 Category 6: BBB-/Baa3 12.50 50.00 Category 7: < BBB-/Baa3 17.50 57.50
For purposes of the foregoing, (i) if either Moody's, S&P or Fitch shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the penultimate sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 7; (ii) if the ratings established or deemed to have been established by Moody's, S&P and Fitch for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the highest two ratings, unless the highest two ratings shall fall within different Categories in which case the Applicable Rate shall be based on the lower of the highest two ratings; and (iii) if the ratings established or deemed to have been established by 2 Moody's, S&P and Fitch for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's, S&P or Fitch), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's, S&P or Fitch shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. Changes in the Applicable Rate will occur automatically without prior notice. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4), and accepted by the Canadian Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Canadian Administrative Agent. "Australian Administrative Agent" means Citisecurities Limited (ABN 51 008 489 610) in its capacity as Australian administrative agent for the lenders party to the Australian Credit Agreement and any successor thereto. "Australian Borrower" means Apache Energy Limited and each other Person that becomes a borrower under the Australian Credit Agreement. "Australian Credit Agreement" means that certain Credit Agreement of even date herewith among the Australian Borrower, the Australian Lenders, the Global Administrative Agent, the Australian Administrative Agent and the other agents party thereto, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Australian Lenders" means the financial institutions listed on the signature pages of the Australian Credit Agreement and their respective successors and assigns. "Australian Loan Documents" means the Australian Credit Agreement, any notes, any guaranties, any assignment agreements, and the agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, financing statements and instruments from time to time executed and delivered pursuant to or in connection with any of the foregoing. "Authorized Officer" means, with respect to any Borrower, the Chairman, the Vice Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of such Borrower, and any officer or employee of such Borrower specified as such to the Canadian Administrative Agent and the Global Administrative Agent in writing by any of the aforementioned officers of such Borrower, or, with respect to Parent, the Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of Parent, and any officer or employee of Parent specified as such to the 3 Canadian Administrative Agent and the Global Administrative Agent in writing by any of the aforementioned officers of Parent. "Availability Period" means, with respect to any Lender, the period from and including the Global Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitment of such Lender; provided, however, that no Commitment of any Lender shall terminate prior to the Maturity Date except as provided in Sections 2.6, 2.8, 4.1, 8.2, 8.3 and 10.4. "Borrower" means Apache Canada Ltd., a corporation organized under the laws of the Province of Alberta, Canada and each other Person that becomes an Additional Borrower pursuant to Section 2.20. "Borrowing" means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by Borrower for a Borrowing in accordance with Section 2.3, in substantially the form of Exhibit E or any other form approved by the Canadian Administrative Agent and the Global Administrative Agent. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in Calgary, Alberta, Toronto, Ontario and New York, New York are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Canadian Administrative Agent" means Royal Bank of Canada in its capacity as Canadian Administrative Agent for the lenders party to the Canadian Credit Agreement and any successor thereto. "Canadian Co-Documentation Agents" means The Toronto-Dominion Bank and BNP Paribas (Canada), each in its capacity as Canadian co-documentation agent for the Lenders hereunder. "Canadian Co-Syndication Agents" means Bank of Montreal and Union Bank of California, N.A., Canada Branch, each in its capacity as Canadian co-syndication agent for the Lenders hereunder. "Capital" means the consolidated shareholder's equity of Parent and its Subsidiaries plus the consolidated Debt of Parent and its Subsidiaries. "Capitalized Lease" means, with any respect to a Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et. seq., as amended from time to time. 4 "Certificate of Extension" means a certificate of Parent and Borrower, executed by an Authorized Officer and delivered to the Global Administrative Agent and the Canadian Administrative Agent, in a form acceptable to the Global Administrative Agent and the Canadian Administrative Agent, which requests an extension of the then scheduled Maturity Date pursuant to Section 2.6. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.16(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Combined Commitments" means the commitment of each Combined Lender under the Combined Credit Agreements, as such commitment may be reduced, increased or terminated from time to time pursuant to the Combined Loan Documents and, if any such commitments are no longer in effect under any Combined Credit Agreement, the aggregate unpaid principal amount of the outstanding loans for which the applicable commitment is no longer in effect under such Combined Credit Agreement. The initial amount of each Combined Lender's Commitment is set forth on Schedule 2.1 to the applicable Combined Credit Agreement, or in a Assignment and Acceptance (as defined in this Agreement and the U.S. Credit Agreement) or in a Substitution Certificate (as defined in the Australian Credit Agreement) or pursuant to which such Combined Lender shall have assumed its Combined Commitment, as applicable. The initial aggregate amount of the Combined Lenders' Combined Commitments is $750,000,000. "Combined Commitment Utilization" means, for any period, the ratio of (i) the aggregate principal amount of then outstanding Combined Loans (other than any Competitive Loans (as defined in the U.S. Credit Agreement)) to (ii) the then aggregate amount of the Combined Commitments. "Combined Credit Agreements" means this Agreement, the Australian Credit Agreement and the U.S. Credit Agreement. "Combined Lenders" means the Lenders hereunder, the Australian Lenders and the U.S. Lenders. "Combined Loan Documents" means the Loan Documents, the Australian Loan Documents and the U.S. Loan Documents. "Combined Loans" means the loans made by the Combined Lenders to Borrower, U.S. Borrower and Australian Borrower pursuant to the Combined Loan Documents. "Combined Required Lenders" means Combined Lenders having in the aggregate 51% of the aggregate total Combined Commitments under the Combined Loan Documents. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Loans, as such commitment may be (a) reduced from time to time pursuant to Section 2.8, 5 (b) reduced or increased from time to time pursuant to Section 2.6 or pursuant to assignments by or to such Lender pursuant to Section 10.4 and (c) terminated pursuant to Sections 4.1, 8.2 or 8.3. The amount of the Commitment represents such Lender's maximum Credit Exposure hereunder. The initial amount of each Lender's Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is $150,000,000. "Commitment Utilization Margin" means, on any date, if the Combined Commitment Utilization is less than 50%, then an amount equal to zero basis points per annum (0.00 bps) and, if the Combined Commitment Utilization is greater than or equal to 50%, then an amount equal to 10.00 basis points per annum. Changes in the Commitment Utilization Margin will occur automatically without prior notice. "Competitive Loan" shall have the meaning set forth in the U.S. Credit Agreement. "Consolidated Assets" means the total assets of the Parent and its subsidiaries which would be shown as assets on a consolidated balance sheet of Parent and its subsidiaries prepared in accordance with GAAP. "Consolidated Tangible Net Worth" means (i) the consolidated shareholder's equity of Parent and its Subsidiaries (determined in accordance with GAAP), less (ii) the amount of consolidated intangible assets of Parent and its Subsidiaries, plus (iii) the aggregate amount of any non-cash write downs, on a consolidated basis, by Parent and its Subsidiaries during the term hereof. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Loans at such time. "Debt" of any Person means indebtedness, including capital leases, shown as debt on a consolidated balance sheet of such Person prepared in accordance with GAAP. "Declining Lenders" is defined in Section 2.6(c). "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "dollars" or "$" refers to lawful money of the United States of America. "Environmental Laws" means all applicable federal, state, provincial, territorial or local statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to public health and safety and protection of the environment 6 (including, for example and without limitation, the Environmental Protection and Enhancement Act (Alberta) and the Canadian Environmental Protection Act). "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate. "Event of Default" has the meaning assigned to such term in Article VIII. "Excluded Taxes" means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the federal, or any provincial or territorial, government of Canada, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the federal, or any provincial or territorial, government of Canada or any similar tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.16(a). "Existing Global Credit Facilities" means (i) that certain Credit Agreement [U.S. Credit Agreement], dated as of June 3, 2002, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto, (ii) that certain Credit Agreement [Australian Credit Agreement], dated as of June 3, 2002, among Apache Energy Limited (ACN 009 301 964), the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto, and (iii) that certain Credit Agreement [Canadian Credit Agreement], dated as of June 3, 2002, among Apache Canada Ltd., the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto. "Facility Fee" is defined in Section 2.11(a). 7 "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Global Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fitch" means Fitch, Inc. and any affiliate or successor thereto that is a nationally recognized rating agency in the United States. "Foreign Lender" means any Lender that is a non-resident of Canada for purposes of the Income Tax Act (Canada). For purposes of this definition, Canada and each province and territory thereof shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent financial statements of Parent, Borrower and their Subsidiaries delivered to the Lenders pursuant to the Combined Loan Documents. "Global Administrative Agent" means JPMorgan Chase Bank, N.A., in its capacity as global administrative agent for the Combined Lenders. "Global Effective Date" means a date agreed upon by Parent, Borrower, the Canadian Administrative Agent and the Global Administrative Agent as the date on which the conditions specified in Section 4.1 of each Combined Credit Agreement are satisfied (or waived in accordance with Section 10.2 of each Combined Credit Agreement). "Global Effectiveness Notice" means a notice and certificate of Parent and Borrower properly executed by an Authorized Officer of Parent and Borrower, respectively, addressed to the Combined Lenders and delivered to the Global Administrative Agent and the Canadian Administrative Agent, in sufficient number of counterparts to provide one for each such lender and each agent under each Combined Credit Agreement, whereby Parent certifies satisfaction of all the conditions precedent to the effectiveness under Section 4.1 of each Combined Credit Agreement. "Governmental Authority" means the government of Canada, any other nation or any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guaranty" means that certain Guaranty, dated as of May 12, 2005, by Parent in favor of the Lenders and the other Lender Parties (as defined therein), in substantially the form of Exhibit F or any other form approved by the Global Administrative Agent and the Canadian Administrative Agent, as such Guaranty may from time to time be amended, supplemented, restated, reaffirmed or otherwise modified. 8 "Hazardous Material" means (a) any "hazardous substance," as defined by CERCLA; (b) any "hazardous waste," as defined by the Resource Conservation and Recovery Act; or (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law. "Indebtedness" of any Person means all (i) Debt, and (ii) guaranties or other contingent obligations in respect of the Debt of any other Person. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of Parent that is not guaranteed by any other Person or subject to any other credit enhancement. "Interest Election Request" means a request by Borrower to convert or continue a Borrowing in accordance with Section 2.7, in substantially the form of Exhibit E or any other form approved by the Global Administrative Agent and the Canadian Administrative Agent. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three (3) months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three (3) months' duration after the first day of such Interest Period. "Interest Period" means the period commencing on the date of any Eurodollar Borrowing and ending on the numerically corresponding day, or, with the consent of the Canadian Administrative Agent, such other day, in the calendar month that is one, two, three or six months (or, with the consent of each Lender, nine or twelve months) thereafter, as Borrower may elect, provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Judgment Currency" is defined in Section 2.19(b). "Lenders" means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations 9 comparable to those currently provided on such page of such Service, as reasonably determined by the Global Administrative Agent, the Canadian Administrative Agent and Borrower from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Global Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means any mortgage, pledge, lien, encumbrance, charge, or security interest of any kind, granted or created to secure Indebtedness; provided, however, that, with respect to any prohibitions of Liens on Property, the following transactions shall not be deemed to create a Lien to secure Indebtedness; (i) production payments and (ii) liens provided by statute and created in favor of Canadian governmental entities to secure partial, progress, advance, or other payments intended to be used primarily in connection with air or water pollution control. "Loan Document" means this Agreement, the Guaranty, any Borrowing Request, any Interest Election Request, any Certificate of Extension, any Assignment and Acceptance, any Additional Borrower Counterpart, any election notice, the agreement with respect to fees described in Section 2.11(b), and each other agreement, document or instrument delivered by Borrower or any other Person in connection with this Agreement, as such may be amended from time to time. "Loans" means the loans made by the Lenders to Borrower pursuant to this Agreement. "Material Adverse Effect" means, as to any matter, that such matter could reasonably be expected to materially and adversely affect the assets, business, properties, condition (financial or otherwise) of Parent and its Subsidiaries taken as a whole. No matter shall be considered to result, or be expected to result, in a Material Adverse Effect unless such matter causes Parent and its Subsidiaries, on a consolidated basis, to suffer a loss or incur a cost equal to at least ten percent (10%) of Parent's Consolidated Tangible Net Worth. "Maturity Date" means the Original Maturity Date, or such other later date as may result from any extension requested by Borrower and Parent and consented to by some or all of the Lenders pursuant to Section 2.6. "Moody's" means Moody's Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency in the United States. "Obligations" means, at any time, the sum of (i) the outstanding principal amount of any Loans plus (ii) all accrued and unpaid interest and Facility Fees plus (iii) all other obligations of Borrower or any Subsidiary to any Lender or any Agent, whether or not contingent, arising under or in connection with any of the Loan Documents. 10 "Original Maturity Date" means May 12, 2010. "Other Currency" is defined in Section 2.19(a). "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Parent" means Apache Corporation, a corporation organized under the laws of the State of Delaware. "Person" means any natural person, corporation, limited liability company, unlimited liability company, joint venture, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Property" means (i) any property owned or leased by Borrower or any Subsidiary, or any interest of Borrower or any Subsidiary in property, which is considered by Borrower to be capable of producing oil, gas, or minerals in commercial quantities, (ii) any interest of Borrower or any Subsidiary in any refinery, processing or manufacturing plant owned or leased by Borrower or any manufacturing plant owned or leased by Borrower or any Subsidiary, (iii) any interest of Borrower or any Subsidiary in all present and future oil, gas, other liquid and gaseous hydrocarbons, and other minerals now or hereafter produced from any other Property or to which Borrower or any Subsidiary may be entitled as a result of its ownership of any Property, and (iv) all real and personal assets owned or leased by Borrower or any Subsidiary used in the drilling, gathering, processing, transportation, or marketing of any oil, gas, and other hydrocarbons or minerals, except (a) any such real or personal assets related thereto employed in transportation, distribution or marketing or (b) any interest of Borrower or any Subsidiary in, any refinery, processing or manufacturing plant, or portion thereof, which property described in clauses (a) or (b), in the opinion of the Board of Directors of Borrower, is not a principal plant or principal facility in relation to the activities of Borrower and its Subsidiaries taken as a whole. "Register" has the meaning set forth in Section 10.4. "Regulation U" means any of Regulations T, U or X of the Board of Governors of the Federal Reserve System of the United States from time to time in effect and shall include any successor or other regulations or official interpretations of said Board or any successor Person relating to the extension of credit for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System or any successor Person. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Replacement Lenders" is defined in Section 2.6(c)(ii). 11 "Required Lenders" means Lenders having in the aggregate 51% of the aggregate total Commitments, or, if the Commitments have been terminated, Lenders holding 51% of the aggregate unpaid principal amount of the outstanding Obligations. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as amended from time to time. "Restricted Subsidiary" means any Subsidiary of Borrower or Parent that owns any asset representing or consisting of an entitlement to production from, or other interest in, reserves of oil, gas or other minerals in place located in the United States, Canada or Australia, including, without limitation, with respect to the Parent, the Borrower and the Australian Borrower, or is otherwise designated as such by Parent in writing to the Global Administrative Agent. "S&P" means Standard & Poor's and any successor thereto that is a nationally-recognized rating agency in the United States. "subsidiary" means, with respect to any Person, any corporation or other similar entity of which more than 50% of the outstanding capital stock (or other equity) having ordinary voting power to elect a majority of the Board of Directors of such corporation or entity (irrespective of whether or not at the time capital stock or any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person. "Subsidiary" means any subsidiary of Borrower or Parent; provided, however, that in all events the following Persons shall not be deemed to be Subsidiaries of the Parent or any of its Subsidiaries: Apache Offshore Investment Partnership, a Delaware general partnership, Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership, Main Pass 151 Pipeline Company, a Texas general partnership, and Apache 681/682 Joint Venture, a Texas joint venture. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Transactions" means the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the LIBO Rate or the Alternate Base Rate. "United States" or "U.S." means the United States of America, its fifty states and the District of Columbia. "Unrestricted Subsidiary" means any Subsidiary of Borrower that is not a Restricted Subsidiary. 12 "U.S. Base Rate" means the rate of interest per annum announced from time to time by the Canadian Administrative Agent as the reference rate used by it for determining interest rates charged on U.S. Dollar commercial loans made in Canada; each change in the U.S. Base Rate shall be effective from and including the date such change is announced as being effective. "U.S. Borrower" means Apache Corporation, a Delaware corporation, and each other Person that becomes a borrower under the U.S. Credit Agreement. "U.S. Credit Agreement" means that certain Credit Agreement of even date herewith among the U.S. Borrower, the U.S. Lenders, the Global Administrative Agent, and the other agents party thereto, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "U.S. Lenders" means the financial institutions listed on the signature pages of the U.S. Credit Agreement and their respective successors and assigns. "U.S. Loan Documents" means the U.S. Credit Agreement, any notes, any assignment agreements, and the agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, financing statements and instruments from time to time executed and delivered pursuant to or in connection with any of the foregoing. SECTION 1.2 Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a "Eurodollar Loan"). Borrowings also may be classified and referred to by Type (e.g., a "Eurodollar Borrowing"). SECTION 1.3 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.4 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if Borrower notifies the Canadian 13 Administrative Agent and the Global Administrative Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Canadian Administrative Agent and the Global Administrative Agent notify Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II The Credits SECTION 2.1 Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans in U.S. Dollars to Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender's Credit Exposure exceeding such Lender's Commitment or (b) the Credit Exposures exceeding the total Commitments. Subject to the conditions set forth herein, Borrower may borrow, prepay and reborrow Loans. Apache Canada and any Additional Borrowers shall be jointly and severally liable for all Obligations. SECTION 2.2 Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.13, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation or conversion of existing Loans made in connection therewith). At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation or conversion of existing Loans made in connection therewith); provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Eurodollar Borrowings outstanding. 14 (d) Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.3 Requests for Borrowings. To request a Borrowing, Borrower shall notify the Canadian Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., Toronto time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than noon, Toronto time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Canadian Administrative Agent of a written Borrowing Request in a form approved by the Canadian Administrative Agent and signed by Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period". If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Canadian Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.4 [Intentionally omitted]. SECTION 2.5 Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Toronto time, to the account of the Canadian Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Canadian Administrative Agent will make such Loans available to Borrower by promptly crediting the amounts so received, in like funds, to an account of Borrower designated by Borrower from time to time in a written notice to the Canadian Administrative Agent executed by two Authorized Officers of Apache Canada and two Authorized Officers of any Additional Borrower. (b) Unless the Canadian Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to the Canadian 15 Administrative Agent such Lender's share of such Borrowing, the Canadian Administrative Agent may assume that such Lender has made such share available on the requested date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Canadian Administrative Agent, then the applicable Lender and Borrower severally agree to pay to the Canadian Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to the Canadian Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate or a rate determined by the Canadian Administrative Agent in accordance with banking industry rules in Canada on interbank compensation or (ii) in the case of Borrower, the interest rate applicable to Loans made in such Borrowing. If such Lender pays such amount to the Canadian Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.6 Extension of Maturity Date and of Commitments. (a) Subject to the other provisions of this Agreement and provided that no Event of Default has occurred and is continuing, the total Commitments shall be effective for an initial period from the Global Effective Date to the Original Maturity Date; provided that the Maturity Date, and concomitantly the total Commitments, may be extended for successive one year periods expiring on the date which is one (1) year from the then scheduled Maturity Date. If Parent and Borrower shall request in a Certificate of Extension delivered to the Canadian Administrative Agent and the Global Administrative Agent at least 45 days prior to a date which is an anniversary of the Global Effective Date that the Maturity Date be extended for one year from the then scheduled Maturity Date, then the Canadian Administrative Agent shall promptly notify each Lender of such request and each Lender shall notify the Canadian Administrative Agent, no later than 30 days prior to such anniversary of the Global Effective Date, whether such Lender, in the exercise of its sole discretion, will extend the Maturity Date for such one year period. Any Lender which shall not timely notify the Canadian Administrative Agent whether it will extend the Maturity Date shall be deemed to not have agreed to extend the Maturity Date. No Lender shall have any obligation whatsoever to agree to extend the Maturity Date. Any agreement to extend the Maturity Date by any Lender shall be irrevocable, except as provided in Section 2.6(c). (b) If all Lenders notify the Canadian Administrative Agent pursuant to clause (a) of this Section 2.6 of their agreement to extend the Maturity Date, then the Canadian Administrative Agent shall so notify the Global Administrative Agent, each Lender and Borrower, and such extension shall be effective without other or further action by any party hereto for such additional one year period. (c) If Lenders constituting at least the Required Lenders approve the extension of the then scheduled Maturity Date (such Lenders agreeing to extend the Maturity Date herein called the "Accepting Lenders") and if one or more Lenders shall notify, or be deemed to notify, the Canadian Administrative Agent pursuant to clause (a) of this Section 2.6 that they will not extend the then scheduled Maturity Date (such Lenders herein called the "Declining Lenders"), then (A) the Canadian Administrative Agent shall promptly so notify Borrower and the Accepting Lenders, (B) the Accepting Lenders shall, upon Borrower's election to extend the then 16 scheduled Maturity Date in accordance with clause (i) or (ii) below, extend the then scheduled Maturity Date and (C) Borrower shall, pursuant to a notice delivered to the Canadian Administrative Agent, the Accepting Lenders and the Declining Lenders, no later than the tenth (10th) day following the date by which each Lender is required, pursuant to Section 2.6(a), to approve or disapprove the requested extension of the total Commitments, either: (i) elect to extend the Maturity Date and direct the Declining Lenders to terminate their Commitments, which termination shall become effective on the date which would have been the Maturity Date except for the operation of this Section. On the date which would have been the Maturity Date except for the operation of this Section, (x) Borrower shall deliver a notice of the effectiveness of such termination to the Declining Lenders with a copy to the Canadian Administrative Agent and (y) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to the Declining Lenders, including any amounts required pursuant to Section 2.15, and (z) upon the occurrence of the events set forth in clauses (x) and (y), the Declining Lenders shall each cease to be a Lender hereunder for all purposes, other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3, and shall cease to have any obligations or any Commitment hereunder, other than to the Agents pursuant to Article IX, and the Canadian Administrative Agent shall promptly notify the Accepting Lenders and Borrower of the new Commitments; or (ii) elect to extend the Maturity Date and, prior to or no later than the then scheduled Maturity Date, (A) to replace one or more of the Declining Lenders with another lender or lenders reasonably acceptable to the Canadian Administrative Agent (such lenders herein called the "Replacement Lenders") and (B) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to any Declining Lenders which are not being replaced, as provided in clause (i) above; provided that (x) any Replacement Lender shall purchase, and any Declining Lender shall sell, such Declining Lender's rights and obligations hereunder without recourse or expense to, or warranty by, such Declining Lender being replaced for a purchase price equal to the aggregate outstanding principal amount of the Obligations payable to such Declining Lender plus any accrued but unpaid interest on such Obligations and accrued but unpaid fees or other amounts owing in respect of such Declining Lender's Loans and Commitments hereunder, and (y) upon the payment of such amounts referred to in clause (x) and the execution of an Assignment and Acceptance by such Replacement Lender and such Declining Lender, such Replacement Lender shall constitute a Lender hereunder and such Declining Lender being so replaced shall no longer constitute a Lender (other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3), and shall no longer have any obligations hereunder, other than to the Agents pursuant to Article IX; or (iii) elect to revoke and cancel the extension request in such Certificate of Extension by giving notice of such revocation and cancellation to the Canadian Administrative Agent and the Global Administrative Agent (which shall promptly notify the Lenders thereof) no later than the tenth (10th) day following the date by which each Lender is required, pursuant to clause (a) of this Section, to approve or disapprove the requested extension of the Maturity Date, and concomitantly the total Commitments. 17 If Borrower fails to timely provide the election notice referred to in this clause (c), Borrower shall be deemed to have revoked and cancelled the extension request in the Certificate of Extension and to have elected not to extend the Maturity Date. SECTION 2.7 Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request (or an ABR Borrowing if no Type is specified) and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request (or one month if no Interest Period is specified). Thereafter, Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. Borrower may, subject to the requirements of Section 2.2(c), elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, Borrower shall notify the Canadian Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Canadian Administrative Agent of a written Interest Election Request signed by Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month's duration. 18 (d) Promptly following receipt of an Interest Election Request, the Canadian Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Canadian Administrative Agent, at the request of the Required Lenders, so notifies Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid and provided the Indebtedness has not been accelerated pursuant to Section 8.3, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.8 Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the Credit Exposures would exceed the total Commitments. (c) Borrower shall notify the Canadian Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least two Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Canadian Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrower (by notice to the Canadian Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.9 Repayment of Loans; Evidence of Debt. (a) Borrower hereby unconditionally promises to pay to the Canadian Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date or, if earlier, the date on which the Commitment of such Lender relating to such Loan is terminated (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)). 19 (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Canadian Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) the amount of any sum received by the Canadian Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Canadian Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by one or more promissory notes. In such event, Borrower shall prepare, execute and deliver to such Lender promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns and in a form approved by the Canadian Administrative Agent and the Global Administrative Agent). Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if any such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10 Prepayment of Loans. (a) Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section. (b) Borrower shall notify the Canadian Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 1:00 p.m., Toronto time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than noon, Toronto time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.8, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.8. Promptly following receipt of any such notice, the Canadian Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.2. Each prepayment of a Borrowing shall be applied ratably to the 20 Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and compensation for break funding, to the extent required by Section 2.15. SECTION 2.11 Fees. (a) Borrower agrees to pay to the Canadian Administrative Agent for the account of each Lender a facility fee (the "Facility Fee"), which shall accrue at the Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the Global Effective Date to but excluding the earlier to occur of (i) the date on which such Commitment terminates (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)) or (ii) the Maturity Date; provided that, if such Lender continues to have any Credit Exposure after its Commitment terminates, then such Facility Fee shall continue to accrue on the daily amount of such Lender's Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Credit Exposure. Accrued Facility Fees shall be payable in arrears on the first day of April, July and October and the second day of January of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any Facility Fees accruing after the date on which the Commitments terminate shall be payable on demand. All Facility Fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) Borrower agrees to pay to the Canadian Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between Borrower and the Canadian Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Canadian Administrative Agent for distribution, in the case of Facility Fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.12 Interest. (a) The Loans comprising each ABR Borrowing shall bear interest on the daily amount outstanding at the Alternate Base Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest on the daily amount outstanding at the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. 21 (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and on the Maturity Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion, and (iv) with respect to any Declining Lender, accrued interest shall be paid upon the termination of the Commitment of such Lender. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or LIBO Rate shall be determined by the Canadian Administrative Agent, and such determination shall be conclusive absent demonstrable error. (f) Interest Act Waiver. To the extent permitted by applicable law, any provision of the Interest Act (Canada) or the Judgment Interest Act (Alberta) which restricts any rate of interest set forth herein shall be inapplicable to this Agreement and is hereby waived by Borrower. (g) Nominal Rate. The theory of deemed reinvestment shall not apply to the calculation of interest or payment of fees or other amounts hereunder, notwithstanding anything contained in this Agreement, acceptance or other evidence of indebtedness or in any other Loan Document now or hereafter taken by any Agent or any Lender for the obligations of Borrower under this Agreement, or any other instrument referred to herein, and all interest and fees payable by Borrower to the Lenders, shall accrue from day to day, computed as described herein in accordance with the "nominal rate" method of interest calculation. (h) Interest Act. Where, in this Agreement, a rate of interest or fees is to be calculated on the basis of a 360-day year, such rate is, for the purpose of the Interest Act (Canada), equivalent to the said rate (i) multiplied by the actual number of days in the one year period beginning on the first day of the period of calculation and (ii) divided by 360. SECTION 2.13 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (i) the Canadian Administrative Agent determines (which determination shall be conclusive absent demonstrable error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or (ii) the Canadian Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; 22 then the Canadian Administrative Agent shall give notice thereof to Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Canadian Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. SECTION 2.14 Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender; or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section (together with the calculation thereof) shall be delivered to Borrower and shall be conclusive absent demonstrable error. Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of 23 such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.15 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(b) and is revoked in accordance therewith) or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to either Section 2.6 or Section 2.18 then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive, together with the calculation thereof, pursuant to this Section shall be delivered to Borrower and to the Canadian Administrative Agent and shall be conclusive absent demonstrable error. Borrower shall pay to the Canadian Administrative Agent for the account of such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.16 Taxes. (a) Any and all payments by or on account of any obligation of Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Canadian Administrative Agent, the Global Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Borrower shall pay the Canadian Administrative Agent, the Global Administrative Agent and each Lender, within 10 days after written demand therefor, the full 24 amount of any Indemnified Taxes or Other Taxes paid by the Canadian Administrative Agent, the Global Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than any such penalties or interest arising through the failure of the Canadian Administrative Agent, the Global Administrative Agent or Lender to act as a reasonably prudent agent or lender, respectively), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender, or by either the Canadian Administrative Agent or the Global Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent demonstrable error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to the Canadian Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Canadian Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower (with a copy to the Canadian Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 1:00 p.m., Toronto time, on the date when due, in immediately available funds, without set-off or counterclaim. All such payments shall be made to the Canadian Administrative Agent, 200 Bay Street, 12th floor, South Tower, Toronto, Ontario, M5J 2W7, attention: Agency Services Group, telephone (416) 842-3901, facsimile: (416) 842-4023, except that payments pursuant to Sections 2.14, 2.16 and 10.3 shall be made directly to the Persons entitled thereto. The Canadian Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Canadian Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees 25 then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. If insufficient funds are received due to Borrower's entitlement to withhold amounts on account of Excluded Taxes in relation to a particular Lender, such insufficiency shall not be subject to this Section 2.17(b) but shall be withheld from and shall only affect payments made to such Lender. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation. (d) Unless the Canadian Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Canadian Administrative Agent for the account of the Lenders hereunder that Borrower will not make such payment, the Canadian Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Canadian Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Canadian Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Canadian Administrative Agent in accordance with banking industry rules in Canada on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.17(d), then the Canadian Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Canadian Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Section until all such unsatisfied obligations are fully paid. 26 SECTION 2.18 Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then Borrower may upon notice to such Lender and the Canadian Administrative Agent and the Global Administrative Agent, require such Lender to assign and delegate, without recourse or expense to, or warranty by, such Lender (in accordance with and subject to the restrictions contained in Section 10.4), all its interests, rights and obligations under this Agreement to an assignee designated by Borrower and which meets the requirements of Section 10.4(b) that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) Borrower shall have received the prior written consent of the Canadian Administrative Agent and the Global Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts), (iii) the assignee and assignor shall have entered into an Assignment and Acceptance, and (iv) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. SECTION 2.19 Currency Conversion and Currency Indemnity. (a) Payments in Agreed Currency. Borrower shall make payment relative to any Obligation in the currency (the "Agreed Currency") in which the Obligation was effected. If any payment is received on account of any Obligation in any currency (the "Other Currency") other than the Agreed Currency (whether voluntarily or pursuant to an order or judgment or the enforcement thereof or the realization of any security or the liquidation of Borrower or otherwise howsoever), such payment shall constitute a discharge of the liability of Borrower hereunder and under the other Loan Documents in respect of such obligation only to the extent of the amount of the Agreed Currency which the relevant Lender or Agent, as the case may be, is able to purchase with the amount of the Other Currency received by it on the Business Day next following such receipt in accordance with its normal procedures and after deducting any premium and costs of exchange. 27 (b) Conversion of Agreed Currency into Judgment Currency. If, for the purpose of obtaining or enforcing judgment in any court in any jurisdiction, it becomes necessary to convert into a particular currency (the "Judgment Currency") any amount due in the Agreed Currency then the conversion shall be made on the basis of the rate of exchange prevailing on the next Business Day following the date such judgment is given and in any event Borrower shall be obligated to pay the Agents and the Lenders any deficiency in accordance with Section 2.19(c). For the foregoing purposes "rate of exchange" means the rate at which the relevant Lender or Agent, as applicable, in accordance with its normal banking procedures is able on the relevant date to purchase the Agreed Currency with the Judgment Currency after deducting any premium and costs of exchange. (c) Circumstances Giving Rise to Indemnity. If (i) any Lender or any Agent receives any payment or payments on account of the liability of Borrower hereunder pursuant to any judgment or order in any Other Currency, and (ii) the amount of the Agreed Currency which the relevant Lender or Agent, as applicable, is able to purchase on the Business Day next following such receipt with the proceeds of such payment or payments in accordance with its normal procedures and after deducting any premiums and costs of exchange is less than the amount of the Agreed Currency due in respect of such obligations immediately prior to such judgment or order, then Borrower on demand shall, and Borrower hereby agrees to, indemnify and save the Lenders and the Agents harmless from and against any loss, cost or expense arising out of or in connection with such deficiency. (d) Indemnity Separate Obligation. The agreement of indemnity provided for in Section 2.19(c) shall constitute an obligation separate and independent from all other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Lenders or Agents or any of them from time to time, and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order. SECTION 2.20 Additional Borrowers. (a) A Person which is a Restricted Subsidiary which is not a non-resident of Canada for purposes of the Income Tax Act (Canada) and which is domiciled in Canada may become an Additional Borrower with respect hereto, and shall be bound by and entitled to the benefits and obligations of this Agreement as a Borrower hereunder to the same extent as any other Borrower, upon the fulfillment of the following conditions: (i) Resolutions and Officers' Certificates. Such Person shall deliver all the items identified in Section 4.1(a) with respect to such Person. (ii) Certificate. An Authorized Officer of each Borrower shall have delivered to the Global Administrative Agent and the Canadian Administrative Agent a certificate stating that such Person is a Restricted Subsidiary of the Parent which is not a non-resident of Canada for purposes of the Income Tax Act (Canada) and which is domiciled in Canada. 28 (iii) No Default. No Default or Event of Default shall have occurred and be continuing. (iv) Representations and Warranties. The representations and warranties in Article III hereto are true and correct with respect to such Person, mutatis mutandis, as of the date such Person executes the Additional Borrower Counterpart described in clause (v) below. (v) Additional Borrower Counterpart. Such Person shall execute an Additional Borrower Counterpart to this Agreement, substantially in the form of Exhibit G (the "Additional Borrower Counterpart") or such other agreement in form and substance satisfactory to the Global Administrative Agent and the Canadian Administrative Agent. (vi) Opinions of Counsel. The Global Administrative Agent and the Canadian Administrative Agent shall have received legal opinions, dated as of the date such Person executes the Additional Borrower Counterpart described above, addressed to the Agents and the Lenders, having substantially the same coverage as those opinions attached hereto as Exhibits A and B and in form and substance acceptable to the Global Administrative Agent and the Canadian Administrative Agent, in their reasonable discretion. (vii) Approval. The Global Administrative Agent and the Canadian Administrative Agent shall have approved the addition of such Person as an Additional Borrower, such approval not to be unreasonably withheld. (viii) Identification Requirements. Such Person shall provide such evidence as is reasonably requested by either Global Administrative Agent or the Canadian Administrative Agent, on behalf of itself or any Lender, to comply with all necessary "know your customer" or other similar checks under all applicable laws and regulations. (ix) Notice. The Global Administrative Agent, the Canadian Administrative Agent and each Lender shall have received prior written notice from an Authorized Officer of each then current Borrower of an Additional Borrower becoming party to this Agreement at least five (5) Business Days prior to the date selected for such Additional Borrower to become party to this Agreement. (b) Upon fulfillment of the conditions in this Section 2.20(a), the Global Administrative Agent will promptly notify each Lender of the date that such Person becomes an Additional Borrower hereunder. ARTICLE III Representations and Warranties In order to induce the Lenders and the Agents to enter into this Agreement and the Lenders to make Loans hereunder, Borrower represents and warrants unto the Agents and each Lender as set forth in this Article III. 29 SECTION 3.1 Organization. Borrower and each of its Subsidiaries is a corporation or other legal entity, in either case duly incorporated or otherwise properly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority, permits and approvals, and is in good standing to conduct its business in each jurisdiction in which its business is conducted where the failure to so qualify would have a Material Adverse Effect. SECTION 3.2 Authorization and Validity. The execution, delivery and performance by Borrower of this Agreement and each other Loan Document executed or to be executed by it, are within Borrower's corporate or partnership powers, as applicable, have been duly authorized by all necessary corporate or partnership action on behalf of it, and do not (a) contravene Borrower's articles of incorporation or other organizational documents, as the case may be; (b) contravene any material contractual restriction, law or governmental regulation or court decree or order binding on or affecting Borrower or any Subsidiary; or (c) result in, or require the creation or imposition of, any Lien, not permitted by Section 7.1, on any of Borrower's or any Subsidiary's properties. This Agreement constitutes, and each other Loan Document executed by Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor rights generally and to general principles of equity. SECTION 3.3 Government Approval and Regulation. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by Borrower of this Agreement or any other Loan Document. Neither Parent or Borrower nor any of their Subsidiaries is an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 3.4 Unfunded Pension Liabilities. The unfunded pension or similar liabilities of Parent, Borrower and their Subsidiaries do not in the aggregate exceed $100,000,000. SECTION 3.5 Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, Regulation U. Terms for which meanings are provided in Regulations U are used in this Section with such meanings. SECTION 3.6 Taxes. Borrower and each of its Subsidiaries has to the best knowledge of Borrower after due investigation filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside 30 on its books or which the failure to file or pay could not reasonably be expected to have a Material Adverse Effect. SECTION 3.7 Subsidiaries; Restricted Subsidiaries. Schedule 3.7 hereto contains an accurate list of all of the presently existing Subsidiaries, including, without limitation, Restricted Subsidiaries, of Borrower as of the date of this Agreement, setting forth their respective jurisdictions of incorporation or organization and the percentage of their respective capital stock or, the revenue share attributable to the general and limited partnership interests, as the case may be, owned by Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries which are corporations have been duly authorized and issued and are fully paid and non-assessable. ARTICLE IV Conditions SECTION 4.1 Effectiveness. This Agreement shall become effective upon the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 4.1. (a) Resolutions and Officers Certificates. The Canadian Administrative Agent and the Global Administrative Agent shall have received from Borrower a certificate, dated the Global Effective Date, of the Secretary or Assistant Secretary of Borrower as to (i) resolutions of its governing board, then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document to be executed by it; (ii) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document executed by it; and (iii) its articles of incorporation and bylaws; upon which certificates each Lender may conclusively rely until it shall have received a further certificate of an authorized officer of Borrower canceling or amending such prior certificate. (b) Existing Facilities. The Canadian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Parent and Borrower, stating that either (i) Parent or its Subsidiaries have repaid in full and terminated the Existing Global Credit Facilities concurrently with the effectiveness of the Combined Credit Agreements or (ii) the Existing Global Credit Facilities have been terminated in full prior to the effectiveness of the Combined Credit Agreements . (c) Opinions of Counsel. The Global Administrative Agent shall have received opinions, dated the Global Effective Date, addressed to the Canadian Administrative Agent and the Global Administrative Agent, the other Agents and all Lenders, from (i) Bennett Jones LLP, counsel to Borrower, in substantially the form attached hereto as Exhibit A, and (ii) Thompson & Knight LLP, U.S. counsel to Borrower, in substantially the form attached hereto as Exhibit B. 31 (d) Closing Fees and Expenses. The Canadian Administrative Agent shall have received for its own account, or for the account of each Lender and other Agent, as the case may be, all fees, costs and expenses due and payable pursuant hereto. (e) Financial Statements. The Canadian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that (i) the audited consolidated financial statements of Parent and its Subsidiaries for fiscal year 2004 and (ii) the report and accompanying financial statements of Parent, Borrower and its Subsidiaries for fiscal year 2004 (collectively, the "2004 Financials") fairly present Parent's and Borrower's consolidated financial condition and results of operations and that prior to the Global Effective Date no material adverse change in the condition or operations of Parent or Borrower and its Subsidiaries, taken as a whole, from that reflected in the 2004 Financials has occurred and is continuing. (f) Environmental Warranties. In the ordinary course of its business, Borrower conducts an ongoing review of the effect of existing Environmental Laws on the business, operations and properties of Borrower and its Subsidiaries, in the course of which it attempts to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Canadian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that after such review Borrower has reasonably concluded that existing Environmental Laws are unlikely to have a Material Adverse Effect, or that Borrower has established adequate reserves in respect of any required clean-up. (g) Global Effectiveness Notice. The Canadian Administrative Agent and the Global Administrative Agent shall have received the Global Effectiveness Notice. (h) Other Combined Credit Agreements. The Canadian Administrative Agent shall have received copies of the executed (i) U.S. Credit Agreement and the other U.S. Loan Documents and (ii) Australian Credit Agreement and the other Australian Loan Documents. (i) Guaranty. The Canadian Administrative Agent and the Global Administrative Agent shall have received an executed Guaranty for Borrower. (j) Litigation. The Canadian Administrative Agent and Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Parent, 32 stating that no litigation, arbitration, governmental proceeding, Tax claim dispute or administrative or other proceeding shall be pending or, to the knowledge of Parent, threatened against Parent or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document. (k) Other Documents. The Canadian Administrative Agent and the Global Administrative Agent shall have received such other instruments and documents as any of the Agents or their counsel may have reasonably requested. The Canadian Administrative Agent shall notify Borrower, the other Agents and the Lenders of the Global Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or prior to 3:00 p.m., Toronto time, on May 31, 2005 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.2 All Loans. The obligation of each Lender to fund any Loan which results in an increase in the aggregate outstanding principal amount of Loans under this Agreement on the occasion of any Borrowing shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2. (a) Compliance with Warranties and No Default. Both before and after giving effect to any Borrowing, the following statements shall be true and correct: (1) the representations and warranties set forth in Article III shall be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and (b) no Default or Event of Default shall have then occurred and be continuing. (b) Borrowings. The Canadian Administrative Agent shall have received a Borrowing Request for any Borrowing. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 5.1 Financial Reporting and Notices. Borrower will furnish, will cause to be furnished or will assist Parent in furnishing, to each Lender, the Canadian Administrative Agent and the Global Administrative Agent copies of the following financial statements, reports, notices and information: 33 (a) within 90 days after the end of each Fiscal Year of Borrower, a copy of the financial statements for Borrower and its Subsidiaries for such fiscal year, including therein consolidated balance sheets of Borrower and its Subsidiaries as of the end of such fiscal year and consolidated statements of earnings and cash flow of Borrower and its Subsidiaries for such fiscal year, all prepared in accordance with GAAP in each case certified by an Authorized Officer of Borrower, such signature deemed to be a certification that such financial statements present fairly in accordance with GAAP the financial position of Borrower and its Subsidiaries; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Borrower commencing with the fiscal quarter ending June 30, 2005, unaudited consolidated balance sheets of Borrower and its Subsidiaries as of the end of such fiscal quarter and consolidated statements of earnings and cash flow of Borrower and its Subsidiaries for such fiscal quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, all prepared in accordance with GAAP certified by an Authorized Officer of Borrower, such signature deemed to be a certification that such financial statements present fairly in accordance with GAAP the financial position of Borrower and its Subsidiaries; (c) together with the financial statements described in (a) and (b) above, a compliance certificate, in substantially the form of Exhibit C or any other form approved by the Canadian Administrative Agent and the Global Administrative Agent, executed by an Authorized Officer of Parent, an Authorized Officer of Apache Canada and an Authorized Officer of any Additional Borrower; (d) within five (5) days after the occurrence of each Default, a statement of an Authorized Officer of Parent and an Authorized Officer of Borrower setting forth details of such Default and the action which Parent and Borrower have taken and propose to take with respect thereto; (e) promptly after the sending or filing thereof, copies of all material public filings, reports and communications from Parent or Borrower, and all reports and registration statements which Parent or Borrower or any of their Subsidiaries files with the Securities and Exchange Commission, any national securities exchange or any federal or provincial securities regulatory body in Canada; (f) such other information respecting the financial condition or operations of Borrower or any of its Subsidiaries as any Lender through the Canadian Administrative Agent may from time to time reasonably request. SECTION 5.2 Compliance with Laws. Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders where noncompliance therewith may reasonably be expected to have a Material Adverse Effect, except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. 34 SECTION 5.3 Maintenance of Properties. Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep valid title to, or valid leasehold interest in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.1 and except for imperfections and other burdens of title thereto as do not in the aggregate materially detract from the value thereof or for the use thereof in their businesses (taken as a whole). SECTION 5.4 Insurance. Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies (subject to self-insured retentions) insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses. SECTION 5.5 Books and Records. Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Canadian Administrative Agent or the Global Administrative Agent and the other Agents and each Lender through the Canadian Administrative Agent or the Global Administrative Agent or any of their respective authorized representatives, during normal business hours and at reasonable intervals, to visit all of its offices, to discuss its financial matters with its officers and to examine (and, at the expense of the Canadian Administrative Agent, the Global Administrative Agent or such other Agent or Lender or, if a Default or Event of Default has occurred and is continuing, at the expense of Borrower, photocopy extracts from) any of its books or other records. SECTION 5.6 [Intentionally omitted]. SECTION 5.7 Use of Proceeds. Borrower will, and will cause each Subsidiary to, use the proceeds of the Loans (i) to refinance existing Indebtedness of Borrower and its Subsidiaries or (ii) for Borrower's and its Subsidiaries' general corporate or partnership purposes, including any non-hostile acquisitions. ARTICLE VI Financial Covenants Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 6.1 Ratio of Total Debt to Capital. Parent will not permit its ratio (expressed as a percentage) of (i) the consolidated Debt of Parent and its Subsidiaries to (ii) Capital to be greater than 60% at the end of any fiscal quarter beginning with the fiscal quarter ending June 30, 2005. 35 ARTICLE VII Negative Covenants Until the Commitments have expired or terminated and all Obligations have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 7.1 Liens. Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the stock, assets, or indebtedness of Borrower or any of its Subsidiaries to secure Indebtedness of Borrower or any other Person except: (i) Liens on any property or assets owned or leased by Borrower or any Subsidiary existing at the time such property or asset was acquired (or at the time such Person became a Subsidiary); provided that in the case of the acquisition of a Subsidiary such Lien only encumbers property or assets immediately prior to, or at the time of, the acquisition by Borrower of such Subsidiary; (ii) purchase money Liens so long as such Liens only encumber property or assets acquired with the proceeds of the purchase money indebtedness incurred in connection with such Lien; (iii) Liens granted by an Unrestricted Subsidiary on its assets to secure Indebtedness incurred by such Unrestricted Subsidiary; (iv) Liens on assets of a Restricted Subsidiary securing Indebtedness of a Restricted Subsidiary owing to Borrower, to Parent or to another Restricted Subsidiary or Liens on assets of an Unrestricted Subsidiary securing Indebtedness of an Unrestricted Subsidiary owing to Borrower, to Parent, to a Restricted Subsidiary or to another Unrestricted Subsidiary; (v) Liens existing on the Global Effective Date set forth on Schedule 7.1; (vi) Liens arising under operating agreements; (vii) Liens reserved in oil, gas and/or mineral leases for bonus rental payments and for compliance with the terms of such leases; (viii) Liens pursuant to partnership agreements, oil, gas and/or mineral leases, farm-out agreements, division orders, contracts for the sale, delivery, purchase, exchange, or processing of oil, gas and/or other hydrocarbons, unitization and pooling declarations and agreements, operating agreements, development agreements, area of mutual interest agreements, forward sales of oil, natural gas and natural gas liquids, and other agreements which are customary in the oil, gas and other mineral exploration, development and production business and in the business of processing of gas and gas condensate production for the extraction of products therefrom; 36 (ix) Liens on the stock or other ownership interests of or in any Unrestricted Subsidiary; (x) Liens for taxes, assessments or similar charges, incurred in the ordinary course of business, that are not yet due and payable or that are being contested as set forth in Section 3.6; (xi) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, old-age pensions or other social security programs; (xii) Liens imposed by mandatory provisions of law such as for mechanics', materialmen's, warehousemen's, carriers', or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable; (xiii) Liens in renewal or extension of any of the foregoing permitted Liens, so long as limited to the property or assets encumbered and the amount of Indebtedness secured immediately prior to such renewal or extension; (xiv) Liens or any rights of distress reserved in or exercisable under any lease or sublease to which it is a lessee which secure the payment of rent or compliance with the terms of such lease or sublease, provided that such rent is not then overdue and it is then in compliance in all material respects with such terms; (xv) Liens in favor of a government or public authority within Canada resulting from the deposit of cash or bonds as security for the performance of any of its obligations (other than for the payment of money) made in the ordinary course of its business, provided that such security is required or requested pursuant to any applicable law, and the obligations secured thereby are not overdue (or if overdue are being contested by it diligently and in good faith by appropriate proceedings); (xvi) Liens to secure its performance in connection with bids or tenders submitted by it, or contracts (other than contracts for the payment of money) or leases of real property (other than Capitalized Leases) or licenses to which it is a party, all such Liens being granted in the ordinary course of its business, provided that such performance obligations are not overdue (or if overdue are being contested by it diligently and in good faith by appropriate proceedings); and (xvii) in addition to Liens permitted by clauses (i) through (xvi) above, Liens on property or assets of Parent, Borrower and any of their Subsidiaries if the aggregate Indebtedness of all such Persons secured thereby does not exceed five percent (5%) of Parent's Consolidated Assets; provided that nothing in this definition shall in and of itself constitute or be deemed to constitute an agreement or acknowledgment by the Global Administrative Agent, the Canadian Administrative Agent or any Lender that the Indebtedness subject to or secured by 37 any such Lien ranks (apart from the effect of any Lien included in or inherent in any such Liens) in priority to the Obligations. SECTION 7.2 Mergers. Borrower will not liquidate or dissolve, amalgamate with, consolidate with, or merge into or with, any other Person, or sell, lease or otherwise transfer all or substantially all of its assets unless (a) Borrower is the survivor of such amalgamation, merger or consolidation, and (b) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto. SECTION 7.3 Asset Dispositions. Borrower will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to all or substantially all of its assets. Notwithstanding the foregoing, nothing herein shall prohibit any transfer of any assets from any Borrower to any Subsidiary of such Borrower, from any Subsidiary of a Borrower to such Borrower or from a Subsidiary of a Borrower to another Subsidiary of such Borrower. SECTION 7.4 Transactions with Affiliates. Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract or group of arrangements or contracts, as the case may be, are conducted on an arms-length basis. SECTION 7.5 Restrictive Agreements. Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement or any other Loan Document) limiting the ability of Borrower to amend or otherwise modify this Agreement or any other Loan Document. Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement which restricts or prohibits the ability of any Restricted Subsidiary to make any payments, directly or indirectly, to Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Restricted Subsidiary to make any payment, directly or indirectly, to Borrower. SECTION 7.6 Guaranties. Parent and Borrower will not, and will not permit any of their Restricted Subsidiaries to, guaranty any Indebtedness not included in the consolidated Debt of Parent and its Subsidiaries in an aggregate outstanding principal amount at any time exceeding $100,000,000. ARTICLE VIII Events of Default SECTION 8.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default": (a) Non-Payment of Obligations. Borrower shall default in the payment or prepayment when due of any principal of any Loan, or Borrower shall default (and such default shall continue unremedied for a period of five (5) Business 38 Days) in the payment when due of any interest, fee or of any other obligation hereunder. (b) Breach of Warranty. Any representation or warranty of Borrower made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of Borrower to the Global Administrative Agent, the Canadian Administrative Agent, any other Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document is or shall be false or misleading when made in any material respect. (c) Non-Performance of Covenants and Obligations. Borrower or Parent shall default in the due performance and observance of any of its obligations under Section 7.2 or under Article VI. (d) Non-Performance of Other Covenants and Obligations. Borrower or Parent shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to Borrower by the Global Administrative Agent, the Canadian Administrative Agent, or the Required Lenders. (e) Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any direct payment obligation of Parent, Borrower or any of their Restricted Subsidiaries in any amount in excess of $100,000,000. (f) [Intentionally omitted]. (g) Bankruptcy and Insolvency. Borrower or any of its Restricted Subsidiaries shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to generally pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, receiver and manager, sequestrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, receiver and manager, sequestrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or for a substantial part of the property of any thereof, and such trustee, receiver, receiver and manager, sequestrator or other custodian shall not be discharged within 60 days, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Global Administrative Agent, the Canadian Administrative Agent, each other Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, insolvency, reorganization, debt arrangement or other case or proceeding under any 39 bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of Borrower or any of its Restricted Subsidiaries, and, if any such case or proceeding is not commenced by Borrower or such Restricted Subsidiary, such case or proceeding shall be consented to or acquiesced in by Borrower or such Restricted Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Global Administrative Agent, the Canadian Administrative Agent, and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any corporate or partnership action authorizing, or in furtherance of, any of the foregoing. Notwithstanding parts (c) and (d) of this Section 8.1(g), during the 60 day periods referred to therein, and for the sole purposes of (i) voting at any meeting of creditors of Borrower which may take place during such 60 day period or (ii) having standing and participating in proceedings or matters arising out of (c) or (d) above where any Agent or Lender is acting to preserve, protect or defend its rights under the Loan Documents, the Lenders, at their sole option, shall be deemed to have accelerated repayment pursuant to Section 8.3 and the Indebtedness of Borrower hereunder shall be deemed to have become due and payable, but such deeming shall not of itself be considered a Default hereunder. (h) Judgments. Any judgment or order for the payment of money in an amount of $100,000,000 or more in excess of valid and collectible insurance in respect thereof or in excess of an indemnity with respect thereto reasonably acceptable to the Required Lenders shall be rendered against Parent, Borrower or any of their Restricted Subsidiaries and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (b) such judgment shall have become final and non-appealable and shall have remained outstanding for a period of 60 consecutive days. (i) Change in Control. Parent shall fail to own or control, directly or indirectly, all of the outstanding shares of common stock of Borrower. (j) Event of Default under other Combined Loan Documents. Any "Event of Default" as defined in the U.S. Loan Documents or the Australian Loan Documents shall occur; provided that the occurrence of a "Default" as defined in the U.S. Loan Documents or the Australian Loan Documents shall constitute a Default under this Agreement; provided further that if such "Default" is cured or waived under the U.S. Loan Documents or the Australian Loan Documents, as applicable, then such "Default" shall no longer constitute a Default under this Agreement. SECTION 8.2 Action if Bankruptcy. If any Event of Default described in Section 8.1(g) shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand. 40 SECTION 8.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 8.2) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Canadian Administrative Agent, upon the direction of the Required Lenders, shall by notice to Borrower declare all of the outstanding principal amount of the Loans and all other obligations hereunder to be due and payable and the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other obligations shall be and become immediately due and payable, without further notice, demand or presentment, and the Commitments shall terminate. ARTICLE IX Agents Each of the Lenders hereby irrevocably appoints JPMorgan Chase Bank as Global Administrative Agent, Royal Bank of Canada as Canadian Administrative Agent, Bank of Montreal and Union Bank of California, N.A., Canada Branch, as Canadian Co-Syndication Agents, and The Toronto-Dominion Bank and BNP Paribas (Canada) as Canadian Co-Documentation Agents, and authorizes each such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) each Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth herein, each Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. Each Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. Each Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower or a Lender, and such Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, 41 enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent. None of the Persons identified on the facing page of this Agreement as the "Co-Lead Arrangers and Joint Bookrunners" (the "Arrangers"), the Canadian Co-Documentation Agents or the Canadian Co-Syndication Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any other Combined Loan Document other than, except in the case of the Arrangers, those applicable to all Lenders as such. The Canadian Administrative Agent, the Global Administrative Agent and the other Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Canadian Administrative Agent, the Global Administrative Agent and the other Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Canadian Administrative Agent, the Global Administrative Agent and the other Agents may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Any Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Any Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as an Agent. Subject to the appointment and acceptance of a successor Global Administrative Agent or Canadian Administrative Agent as provided in this paragraph, the Global Administrative Agent or the Canadian Administrative Agent may resign at any time by notifying the Lenders and Borrower. Upon any such resignation, Borrower shall have the right, in consultation with the Combined Required Lenders, to appoint one of the Lenders as a successor. If no successor shall have been so appointed by Borrower and shall have accepted such appointment within 30 days after the retiring Global Administrative Agent or Canadian Administrative Agent gives notice of its resignation, then the retiring Global Administrative Agent or Canadian Administrative Agent may, on behalf of the Lenders, appoint a successor Global Administrative Agent or Canadian Administrative Agent which shall be a bank with an office in New York, New York, or Toronto, Canada, respectively, or an Affiliate of any such bank. Upon the acceptance of its appointment as Global Administrative Agent or Canadian Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Global Administrative Agent or Canadian Administrative Agent, and the retiring Global Administrative Agent or Canadian Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Global Administrative Agent or Canadian Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Global 42 Administrative Agent's or Canadian Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.3 shall continue in effect for the benefit of such retiring Global Administrative Agent or Canadian Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Global Administrative Agent or Canadian Administrative Agent, respectively. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE X Miscellaneous SECTION 10.1 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to Borrower, to: Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Attention: Matthew W. Dundrea Vice President and Treasurer Telephone: (713) 296-6640 Facsimile: (713) 296-6458 with a copy to: Assistant Treasurer Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Telephone: (713) 296-6642 Facsimile: (713) 296-6477 and with copy to: Vice President and General Counsel Apache Corporation 2000 Post Oak Boulevard, Suite 100 43 Houston, Texas 77056-4400 Telephone: (713) 296-6204 Facsimile: (713) 296-6458 (b) if to the Global Administrative Agent, to: JPMorgan Chase Bank, N.A. Loan & Agency Services Group 1111 Fannin Street, 10th Floor Houston, Texas 77002-8069 Attention: Rose Salvacion Telephone: (713) 750-2501 Facsimile: (713) 427-6307 with a copy to: JPMorgan Chase Bank, N.A. 600 Travis, 20 CTH 86 Houston, Texas 77002 Attention: Peter Licalzi Telephone: (713) 216-8870 Facsimile: (713) 216-4117 (c) if to the Canadian Administrative Agent, to: Royal Bank of Canada 200 Bay Street 12th floor, South Tower Toronto, Ontario, M5J 2W7 Canada Attention: Agency Services Group Telephone: (416) 842-3901 Facsimile: (416) 842-4023 with a copy to: Royal Bank of Canada 2800 Post Oak Blvd., Suite 5700 Houston, Texas 77056 USA Attention: Linda Stephens Telephone: (713) 403-5669 Facsimile: (713) 403-5624 (d) if to any other Lender, to it at its address (or telecopy number) provided to the Global Administrative Agent, the Canadian Administrative Agent and Borrower or as set forth in its Administrative Questionnaire. 44 Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.2 Waivers; Amendments. (a) No failure or delay by the Global Administrative Agent, the Canadian Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Global Administrative Agent, the Canadian Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Global Administrative Agent, the Canadian Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Any of the Combined Loan Documents or any provision thereof may be waived, amended or modified pursuant to an agreement or agreements in writing entered into by Borrower and the Combined Required Lenders or by Borrower and the Global Administrative Agent and the Canadian Administrative Agent with the consent of the Combined Required Lenders; provided that the same waiver, amendment or modification is requested by Parent in connection with each of the Combined Credit Agreements; and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of (i) the Lenders described in the first proviso of Section 10.2(c) without the prior written consent of each Lender affected thereby and (ii) the Global Administrative Agent or the Canadian Administrative Agent without the prior written consent of the Global Administrative Agent or the Canadian Administrative Agent, respectively. (c) Except as provided for in Section 10.2(b) above, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Borrower and the Required Lenders or by Borrower and the Global Administrative Agent and the Canadian Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender or the Commitments without the written consent of such Lender or each Lender, respectively, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments 45 required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of "Required Lenders", "Combined Required Lenders" or any other provision hereof or thereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or thereunder or make any determination or grant any consent hereunder or thereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Global Administrative Agent or the Canadian Administrative Agent hereunder or thereunder without the prior written consent of the Global Administrative Agent or the Canadian Administrative Agent, respectively. SECTION 10.3 Expenses; Indemnity; Damage Waiver. (a) Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents (on a solicitor and his own client basis), in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Agents or any Lender, including the fees, charges and disbursements of any counsel (on a solicitor and his own client basis) for the Agents or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or this Agreement. (b) Borrower shall indemnify the Agents and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee"), WHETHER OR NOT RELATED TO ANY NEGLIGENCE OF THE INDEMNITEE, against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel (or a solicitor and his own client basis) for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the actual or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether brought by a third party or by the Borrower and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (i) resulted from the gross negligence or willful misconduct of such Indemnitee or (ii) arise in connection with any issue in litigation commenced by Borrower or any of its Subsidiaries against any Indemnitee for which a final judgment is entered in favor of Borrower or any of its Subsidiaries against such Indemnitee. 46 (c) To the extent that Borrower fails to pay any amount required to be paid by it to the Global Administrative Agent or the Canadian Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Global Administrative Agent or the Canadian Administrative Agent, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Global Administrative Agent or the Canadian Administrative Agent, respectively. (d) To the extent permitted by applicable law, Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions or any Loan or the use of the proceeds thereof, except for any such claim arising from such Indemnitee's gross negligence or willful misconduct. (e) All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor. SECTION 10.4 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Global Administrative Agent, the Canadian Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees which are not non-residents of Canada for purposes of the Income Tax Act (Canada) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of Borrower, the Canadian Administrative Agent and the Global Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Canadian Administrative Agent and the Global Administrative Agent) shall be in increments of $1,000,000 and not less than $10,000,000 unless each of Borrower, the Canadian Administrative Agent and the Global Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, (iv) the parties to each assignment shall execute and 47 deliver to the Canadian Administrative Agent and the Global Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 to the Canadian Administrative Agent, and (v) the assignee, if it shall not be a Lender, shall deliver to the Canadian Administrative Agent and the Global Administrative Agent an Administrative Questionnaire; and provided further that any consent of Borrower otherwise required under this paragraph shall not be required if an Event of Default under Section 8.1 has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Canadian Administrative Agent and the Global Administrative Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices in Toronto, Canada, and The City of New York, respectively, a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and Borrower, the Canadian Administrative Agent, the Global Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Canadian Administrative Agent and the Global Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register and will provide prompt written notice to Borrower of the effectiveness of such Assignment. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of Borrower, the Canadian Administrative Agent or the Global Administrative Agent, sell participations to one or more banks or other entities which are not non-residents of Canada for purposes of the Income Tax Act (Canada) (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain 48 solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, the Canadian Administrative Agent, the Global Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (iv) if such Participant is not a Lender or an Affiliate of a Lender, such Lender shall have given notice to Borrower of the name of the Participant and the amount of such participation. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.2(c) that affects such Participant. Subject to paragraph (f) of this Section, Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.8 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless Borrower shall expressly agree otherwise in writing. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.16(e) as though it were a Lender. SECTION 10.5 Survival. All covenants, agreements, representations and warranties made by Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Canadian Administrative Agent, the Global Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.6 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Canadian Administrative Agent constitute the entire contract among the parties relating to the 49 subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Canadian Administrative Agent and the Global Administrative Agent and when the Canadian Administrative Agent and the Global Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.7 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.8 Right of Setoff. If an Event of Default shall have occurred and be continuing and the Obligations of Borrower shall have been accelerated, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of each Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE PROVINCE OF ALBERTA AND OF CANADA APPLICABLE THEREIN. (b) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE PROVINCE OF ALBERTA, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURTS OF THE PROVINCE OF ALBERTA. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE 50 CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN THE FIRST SENTENCE OF PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE PROVINCE OF ALBERTA. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SECTION 10.10 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.11 Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of Borrower or (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section by any Person or (B) becomes available to any Agent or any Lender on a non-confidential basis from a source other than Borrower or any Person obligated to maintain the confidentiality of such Information. Prior to disclosing any Information under clause (c) above, the Agent or Lender required or asked to make such disclosure shall make a good faith effort to give Borrower prior notice of such proposed disclosure to permit Borrower to attempt to obtain a protective order or other appropriate injunctive relief. For the purposes of this Section, "Information" means all 51 information received from Borrower relating to Borrower or its business, other than any publicly available information and such information that is available to any Agent or any Lender on a non-confidential basis prior to disclosure by Borrower; provided that, in the case of information received from Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 10.12 Interest Rate Limitation. It is the intention of the parties hereto to conform strictly to applicable interest, usury and criminal laws and, anything herein to the contrary notwithstanding, the obligations of Borrower to a Lender or any Agent under this Agreement shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to such Lender or Agent limiting rates of interest which may be charged or collected by such Lender or Agent. Accordingly, if the transactions contemplated hereby would be illegal, unenforceable, usurious or criminal under laws applicable to a Lender or Agent (including the laws of any jurisdiction whose laws may be mandatorily applicable to such Lender or Agent notwithstanding anything to the contrary in this Agreement or any other Loan Document but subject to Section 2.12 hereof) then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document, it is agreed as follows: (i) the provisions of this Section shall govern and control; (ii) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under this Agreement, or under any of the other aforesaid agreements or otherwise in connection with this Agreement by such Lender or Agent shall under no circumstances exceed the maximum amount of interest allowed by applicable law (such maximum lawful interest rate, if any, with respect to each Lender and the Agent herein called the "Highest Lawful Rate"), and any excess shall be cancelled automatically and if theretofore paid shall be credited to Borrower by such Lender or Agent (or, if such consideration shall have been paid in full, such excess refunded to Borrower); (iii) all sums paid, or agreed to be paid, to such Lender or Agent for the use, forbearance and detention of the indebtedness of Borrower to such Lender or Agent hereunder or under any Loan Document shall, to the extent permitted by laws applicable to such Lender or Agent, as the case may be, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof; (iv) if at any time the interest provided pursuant to this Section or any other clause of this Agreement or any other Loan Document, together with any other fees or compensation payable pursuant to this Agreement or any other Loan Document and deemed interest under laws applicable to such Lender or Agent, exceeds that amount which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees or compensation to accrue to such Lender or Agent pursuant to this Agreement 52 shall be limited, notwithstanding anything to the contrary in this Agreement or any other Loan Document, to that amount which would have accrued at the Highest Lawful Rate, but any subsequent reductions, as applicable, shall not reduce the interest to accrue to such Lender or Agent pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest accrued pursuant to this Agreement or such other Loan Document, as the case may be, and such fees or compensation deemed to be interest equals the amount of interest which would have accrued to such Lender or Agent if a varying rate per annum equal to the interest provided pursuant to any other relevant Section hereof (other than this Section), as applicable, had at all times been in effect, plus the amount of fees which would have been received but for the effect of this Section; and (v) with the intent that the rate of interest herein shall at all times be lawful, and if the receipt of any funds owing hereunder or under any other agreement related hereto (including any of the other Loan Documents) by such Lender or Agent would cause such Lender to charge Borrower a criminal rate of interest, the Lenders and the Agents agree that they will not require the payment or receipt thereof or a portion thereof which would cause a criminal rate of interest to be charged by such Lender or Agent, as applicable, and if received such affected Lender or Agent will return such funds to Borrower so that the rate of interest paid by Borrower shall not exceed a criminal rate of interest from the date this Agreement was entered into. SECTION 10.13 Joint and Several Obligations. Each Borrower has determined that it is in its best interest and in pursuance of its legitimate business purposes to induce the Lenders to extend credit to the Borrowers pursuant to this Agreement. Each Borrower acknowledges and represents that the availability of the Commitments to each of the Borrowers benefits each Borrower individually and that the Loans made will be for and inure to the benefit of each of the Borrowers individually and as a group. Accordingly, each Borrower shall be jointly and severally liable (as a principal and not as a surety, guarantor or other accommodation party) for each and every representation, warranty, covenant and obligation to be performed by the Borrowers under this Agreement and the other Loan Documents, and each Borrower acknowledges that in extending the credit provided herein the Agent and the Lenders are relying upon the fact that the Obligations of each Borrower hereunder are the joint and several obligations of a principal. The invalidity, unenforceability or illegality of this Agreement or any other Loan Document as to one Borrower or the release by the Agent or the Lenders of a Borrower hereunder or thereunder shall not affect the Obligations of the other Borrowers under this Agreement or the other Loan Documents, all of which shall otherwise remain valid and legally binding obligations of the other Borrowers. SECTION 10.14 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. [SIGNATURES BEGIN ON FOLLOWING PAGE] 53 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. APACHE CANADA LTD. By: ---------------------------------- Name: Matthew W. Dundrea Title: Vice President and Treasurer JPMORGAN CHASE BANK, N.A., as Global Administrative Agent By:___________________________________ Name: Title: ROYAL BANK OF CANADA, as Canadian Administrative Agent By:___________________________________ Name: Title: ROYAL BANK OF CANADA, as Lender By:___________________________________ Name: Title: BANK OF MONTREAL, as a Canadian Co- Syndication Agent and as Lender By:___________________________________ Name: Title: [SIGNATURE PAGE TO CANADIAN CREDIT AGREEMENT] S - 1 UNION BANK OF CALIFORNIA, N.A., CANADA BRANCH, as a Canadian Co- Syndication Agent and as Lender By:_________________________________________ Name: Title: THE TORONTO-DOMINION BANK, as a Canadian Co- Documentation Agent and as Lender By:_________________________________________ Name: Title: BNP PARIBAS (CANADA), as a Canadian Co- Documentation Agent and as Lender By:_________________________________________ Name: Title: By:_________________________________________ Name: Title: JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Lender By:_________________________________________ Name: Title: [SIGNATURE PAGE TO CANADIAN CREDIT AGREEMENT] S - 2 EX-10.3 4 h27174exv10w3.txt FORM OF CREDIT AGREEMENT - APACHE ENERGY LIMITED Exhibit 10.3 [AUSTRALIAN CREDIT AGREEMENT] ================================================================================ CREDIT AGREEMENT dated as of May 12, 2005 among APACHE ENERGY LIMITED, THE LENDERS PARTY HERETO, JPMORGAN CHASE BANK, N.A., as Global Administrative Agent, CITISECURITIES LIMITED, as Australian Administrative Agent, DEUTSCHE BANK AG, SYDNEY BRANCH and JPMORGAN CHASE BANK, as Australian Co-Syndication Agents, and BANK OF AMERICA, N.A., SYDNEY BRANCH and UBS AG, AUSTRALIA BRANCH, as Australian Co-Documentation Agents, ------------ CITIGROUP GLOBAL MARKETS INC. and DEUTSCHE BANK SECURITIES INC., as Co-Lead Arrangers and Joint Bookrunners ================================================================================ CONTENTS
CLAUSE PAGE ARTICLE I. Definitions............................................................................... 1 SECTION 1.1 Defined Terms............................................................... 1 SECTION 1.2 [Intentionally omitted]..................................................... 12 SECTION 1.3 Terms Generally............................................................. 12 SECTION 1.4 Accounting Terms; GAAP...................................................... 13 ARTICLE II. The Credits............................................................................... 13 SECTION 2.1 Commitments................................................................. 13 SECTION 2.2 Loans and Borrowings........................................................ 13 SECTION 2.3 Requests for Borrowings..................................................... 14 SECTION 2.4 [Intentionally omitted]..................................................... 14 SECTION 2.5 Funding of Borrowings....................................................... 14 SECTION 2.6 Extension of Maturity Date and of Commitments............................... 15 SECTION 2.7 Interest Elections.......................................................... 17 SECTION 2.8 Termination and Reduction of Commitments.................................... 18 SECTION 2.9 Repayment of Loans; Evidence of Debt........................................ 18 SECTION 2.10 Prepayment of Loans......................................................... 19 SECTION 2.11 Fees........................................................................ 19 SECTION 2.12 Interest.................................................................... 20 SECTION 2.13 Alternate Rate of Interest.................................................. 21 SECTION 2.14 Increased Costs............................................................. 21 SECTION 2.15 Break Funding Payments...................................................... 22 SECTION 2.16 Taxes....................................................................... 23 SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.................................................................... 24 SECTION 2.18 Mitigation Obligations; Replacement of Lenders.............................. 25 SECTION 2.19 Currency Conversion and Currency Indemnity.................................. 26 SECTION 2.20 Additional Borrowers........................................................ 27 ARTICLE III. Representations and Warranties............................................................ 28 SECTION 3.1 Organization................................................................ 28 SECTION 3.2 Authorization and Validity.................................................. 28 SECTION 3.3 Government Approval and Regulation.......................................... 28 SECTION 3.4 Superannuation Scheme....................................................... 29 SECTION 3.5 Regulation U................................................................ 29 SECTION 3.6 Taxes....................................................................... 29 SECTION 3.7 Subsidiaries; Restricted Subsidiaries....................................... 29 ARTICLE IV. Conditions................................................................................ 29 SECTION 4.1 Effectiveness............................................................... 29
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CLAUSE PAGE SECTION 4.2 All Loans................................................................... 31 ARTICLE V. Affirmative Covenants..................................................................... 32 SECTION 5.1 Financial Reporting and Notices............................................. 32 SECTION 5.2 Compliance with Laws........................................................ 33 SECTION 5.3 Maintenance of Properties................................................... 33 SECTION 5.4 Insurance................................................................... 33 SECTION 5.5 Books and Records........................................................... 33 SECTION 5.6 Use of Proceeds............................................................. 34 SECTION 5.7 Borrowing Request........................................................... 34 ARTICLE VI. Financial Covenants....................................................................... 34 SECTION 6.1 Ratio of Total Debt to Capital.............................................. 34 ARTICLE VII. Negative Covenants........................................................................ 34 SECTION 7.1 Liens....................................................................... 34 SECTION 7.2 Mergers..................................................................... 36 SECTION 7.3 Asset Dispositions.......................................................... 36 SECTION 7.4 Transactions with Affiliates................................................ 36 SECTION 7.5 Restrictive Agreements...................................................... 36 SECTION 7.6 Guaranties.................................................................. 36 ARTICLE VIII. Events of Default......................................................................... 37 SECTION 8.1 Listing of Events of Default................................................ 37 SECTION 8.2 Action if Administration, Winding Up, Arrangements and Insolvency.................................................................. 39 SECTION 8.3 Action if Other Event of Default............................................ 39 ARTICLE IX. Agents.................................................................................... 39 ARTICLE X. Miscellaneous............................................................................. 41 SECTION 10.1 Notices..................................................................... 41 SECTION 10.2 Waivers; Amendments......................................................... 43 SECTION 10.3 Expenses; Indemnity; Damage Waiver.......................................... 44 SECTION 10.4 Successors and Transferees.................................................. 46 SECTION 10.5 Survival.................................................................... 48 SECTION 10.6 Counterparts; Integration; Effectiveness.................................... 48 SECTION 10.7 Severability................................................................ 48 SECTION 10.8 Right of Setoff............................................................. 48 SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS..................................................................... 49 SECTION 10.10 Headings.................................................................... 50 SECTION 10.11 Confidentiality............................................................. 50
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CLAUSE PAGE SECTION 10.12 Interest Rate Limitation.................................................... 50 SECTION 10.13 Joint and Several Obligations............................................... 52 SECTION 10.14 NO ORAL AGREEMENTS.......................................................... 52
SCHEDULES AND EXHIBITS EXHIBITS: Exhibit A Form of Legal Opinion of Allens Arthur Robinson Exhibit B Form of Legal Opinion of Thompson & Knight LLP Exhibit C Form of Compliance Certificate Exhibit D Form of Substitution Certificate Exhibit E Form of Borrowing/Interest Election Request Exhibit F Form of Guaranty Exhibit G Form of Additional Borrower Counterpart SCHEDULES: Schedule 2.1 Commitments Schedule 3.7 Subsidiaries; Restricted Subsidiaries Schedule 7.1 Liens -iii- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of May 12, 2005, is among APACHE ENERGY LIMITED (ACN 009 301 964), a corporation organized under the laws of the State of Western Australia, Australia ("Apache Energy Limited" and together with each other Person that becomes an Additional Borrower pursuant to Section 2.20, the "Borrower"), the LENDERS (as defined below) party hereto, JPMORGAN CHASE BANK, N.A., as Global Administrative Agent, CITISECURITIES LIMITED (ABN 51 008 489 610), as Australian Administrative Agent, DEUTSCHE BANK AG, SYDNEY BRANCH (ABN 13 064 165 162) and JPMORGAN CHASE BANK (ARBN 074 112 011), as Australian Co-Syndication Agents, and BANK OF AMERICA, N.A., SYDNEY BRANCH (ARBN 064 874 531) and UBS AG, AUSTRALIA BRANCH (ABN 47 088 129 613), as Australian Co-Documentation Agents. The parties hereto agree as follows: ARTICLE I. Definitions SECTION 1.1 Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "Accepting Lenders" is defined in Section 2.6(c). "Additional Borrower" means any Person which becomes a Borrower under this Agreement pursuant to Section 2.20. "Additional Borrower Counterpart" is defined in Section 2.20. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Global Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents" means each of the Global Administrative Agent, the Australian Administrative Agent, the Australian Co-Syndication Agents and the Australian Co-Documentation Agents. "Agreed Currency" is defined in Section 2.19(a). "Agreement" means this Credit Agreement, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Apache Energy Limited" means Apache Energy Limited (ACN 009 301 964), a corporation organized under the laws of the State of Western Australia, Australia. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, (i) with respect to any Loan, the applicable rate per annum set forth below under the caption "Eurodollar Margin" plus the Commitment Utilization Margin, if any, or (ii) with respect to the Facility Fees payable hereunder, the applicable rate per annum set forth below under the caption "Facility Fee", in either case, based upon the ratings by Moody's, S&P and Fitch, respectively, applicable on such date to the Index Debt:
Facility Fee (in basis Eurodollar Margin (in basis Index Debt Ratings: points) points) ------------------- ---------------------- --------------------------- Category 1: > or = A+/A1 5.50 12.00 Category 2: A/A2 6.00 14.00 Category 3: A-/A3 7.00 23.00 Category 4: BBB+/Baa1 9.00 31.00 Category 5: BBB/Baa2 11.00 39.00 Category 6: BBB-/Baa3 12.50 50.00 Category 7: < BBB-/Baa3 17.50 57.50
For purposes of the foregoing, (i) if either Moody's, S&P or Fitch shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the penultimate sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 7; (ii) if the ratings established or deemed to have been established by Moody's, S&P and Fitch for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the highest two ratings, unless the highest two ratings shall fall within different Categories in which case the Applicable Rate shall be based on the lower of the highest two ratings; and (iii) if the ratings established or deemed to have been established by Moody's, S&P and Fitch for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's, S&P or Fitch), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's, S&P or Fitch shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. Changes in the Applicable Rate will occur automatically without prior notice. 2 "Australian Administrative Agent" means Citisecurities Limited (ABN 51 008 489 610) in its capacity as Australian administrative agent for the lenders party to the Australian Credit Agreement and any successor thereto. "Australian Co-Documentation Agents" means Bank of America, N.A., Sydney Branch (ARBN 064 874 531) and UBS AG, Australia Branch (ABN 47 088 129 613), each in its capacity as Australian Co-Documentation Agent for the Lenders hereunder. "Australian Co-Syndication Agents" means Deutsche Bank AG, Sydney Branch (ABN 13 064 165 162) and JPMorgan Chase Bank (ARBN 074 112 011), each in its capacity as Australian Co-Syndication Agent for the Lenders hereunder. "Authorized Officer" means, with respect to any Borrower, the Chairman, the Vice Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of such Borrower, and any officer or employee of such Borrower specified as such to the Australian Administrative Agent and the Global Administrative Agent in writing by any of the aforementioned officers of such Borrower, or, with respect to Parent, the Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of Parent, and any officer or employee of Parent specified as such to the Australian Administrative Agent and the Global Administrative Agent in writing by any of the aforementioned officers of Parent. "Availability Period" means, with respect to any Lender, the period from and including the Global Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitment of such Lender; provided, however, that no Commitment of any Lender shall terminate prior to the Maturity Date except as provided in Sections 2.6, 2.8, 4.1, 8.2, 8.3 and 10.4. "Borrower" means Apache Energy Limited and each other Person that becomes an Additional Borrower pursuant to Section 2.20. "Borrowing" means Loans made or continued on the same date and as to which a single Interest Period is in effect. "Borrowing Request" means a request by Borrower for a Borrowing in accordance with Section 2.3, in substantially the form of Exhibit E or any other form approved by the Australian Administrative Agent and the Global Administrative Agent. "Business Day" means a weekday on which (a) (for the purpose of determining the LIBO Rate under the second sentence of the definition of "LIBO Rate") the relevant financial markets are open in London; (b) (except for the purpose stated in paragraph (a)) banks are open for business in Sydney and Melbourne; and (c) in the case where a payment is to be made, banks are open for business in New York, New York, Sydney and Melbourne. "Canadian Administrative Agent" means Royal Bank of Canada in its capacity as Canadian administrative agent for the lenders party to the Canadian Credit Agreement and any successor thereto. 3 "Canadian Borrower" means Apache Canada Ltd., a corporation organized under the laws of the Province of Alberta, Canada, and each other Person that becomes a borrower under the Canadian Credit Agreement. "Canadian Credit Agreement" means that certain Credit Agreement of even date herewith among the Canadian Borrower, the Canadian Lenders, the Global Administrative Agent, the Canadian Administrative Agent and the other agents party thereto, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "Canadian Lenders" means the financial institutions listed on the signature pages of the Canadian Credit Agreement and their respective successors and assigns. "Canadian Loan Documents" means the Canadian Credit Agreement, any notes, any guaranties, any assignment agreements, and the agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, financing statements and instruments from time to time executed and delivered pursuant to or in connection with any of the foregoing. "Capital" means the consolidated shareholder's equity of Parent and its Subsidiaries plus the consolidated Debt of Parent and its Subsidiaries. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et. seq., as amended from time to time. "Certificate of Extension" means a certificate of Parent and Borrower, executed by an Authorized Officer and delivered to the Global Administrative Agent and the Australian Administrative Agent, in a form acceptable to the Global Administrative Agent and the Australian Administrative Agent, which requests an extension of the then scheduled Maturity Date pursuant to Section 2.6. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.16(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Combined Commitments" means the commitment of each Combined Lender under the Combined Credit Agreements, as such commitment may be reduced, increased or terminated from time to time pursuant to the Combined Loan Documents and, if any such commitments are no longer in effect under any Combined Credit Agreement, the aggregate unpaid principal amount of the outstanding loans for which the applicable commitment is no longer in effect under such Combined Credit Agreement. The initial amount of each Combined Lender's Commitment is set forth on Schedule 2.1 to the applicable Combined Credit Agreement, or in a Assignment and Acceptance (as defined in the U.S. Credit Agreement and the Canadian Credit Agreement) or in a Substitution Certificate or pursuant to which such Combined Lender shall 4 have assumed its Combined Commitment, as applicable. The initial aggregate amount of the Combined Lenders' Combined Commitments is $750,000,000. "Combined Commitment Utilization" means, for any period, the ratio of (i) the aggregate principal amount of then outstanding Combined Loans (other than any Competitive Loans) to (ii) the then aggregate amount of the Combined Commitments. "Combined Credit Agreements" means this Agreement, the U.S. Credit Agreement and the Canadian Credit Agreement. "Combined Lenders" means the Lenders hereunder, the U.S. Lenders and the Canadian Lenders. "Combined Loan Documents" means the Loan Documents, the U.S. Loan Documents and the Canadian Loan Documents. "Combined Loans" means the loans made by the Combined Lenders to Borrower, U.S. Borrower and Canadian Borrower pursuant to the Combined Loan Documents. "Combined Required Lenders" means Combined Lenders having in the aggregate 51% of the aggregate total Combined Commitments under the Combined Loan Documents. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Loans as such commitment may be (a) reduced from time to time pursuant to Section 2.8, (b) reduced or increased from time to time pursuant to Section 2.6 or pursuant to assignments by or to such Lender pursuant to Section 10.4 and (c) terminated pursuant to Sections 4.1, 8.2 or 8.3. The amount of the Commitment represents such Lender's maximum Credit Exposure hereunder. The initial amount of each Lender's Commitment is set forth on Schedule 2.1, or in the Substitution Certificate pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is $150,000,000. "Commitment Utilization Margin" means, on any date, if the Combined Commitment Utilization is less than 50%, then an amount equal to zero basis points per annum (0.00 bps) and, if the Combined Commitment Utilization is greater than or equal to 50%, then an amount equal to 10.00 basis points per annum. Changes in the Commitment Utilization Margin will occur automatically without prior notice. "Competitive Loan" shall have the meaning set forth in the U.S. Credit Agreement. "Consolidated Assets" means the total assets of the Parent and its subsidiaries which would be shown as assets on a consolidated balance sheet of Parent and its subsidiaries prepared in accordance with GAAP. "Consolidated Tangible Net Worth" means (i) the consolidated shareholder's equity of Parent and its Subsidiaries (determined in accordance with GAAP), less (ii) the amount of consolidated intangible assets of Parent and its Subsidiaries, plus (iii) the aggregate amount of any non-cash write downs, on a consolidated basis, by Parent and its Subsidiaries during the term hereof. 5 "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Loans at such time. "Debt" of any Person means indebtedness, including capital leases, shown as debt on a consolidated balance sheet of such Person prepared in accordance with GAAP. "Declining Lenders" is defined in Section 2.6(c). "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "dollars" or "$" refers to lawful money of the United States of America. "Environmental Laws" means all applicable federal, state, provincial, territorial or local statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to public health and safety, protection of the environment and planning (including, for example and without limitation, the Environmental Protection Act 1986 (WA), Explosives & Dangerous Goods Act 1961 (WA), Mining Act (WA), Protection of the Environment Operations Act 1997 (NSW), Dangerous Goods Act 1975 (NSW), Environmentally Hazardous Chemicals Act 1985 (NSW), Waste Avoidance and Resource Recovery Act 2001 (NSW), Environmental Planning & Assessment Act 1979 (NSW), and Environmental Reform (Consequential Provisions) Act 1999 (Cth). "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Event of Default" has the meaning assigned to such term in Article VIII. "Excluded Taxes" means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by Australia, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by Australia or any similar tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this 6 Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.16(a). "Existing Global Credit Facilities" means (i) that certain Credit Agreement [U.S. Credit Agreement], dated as of June 3, 2002, among Apache Corporation, the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto, (ii) that certain Credit Agreement [Australian Credit Agreement], dated as of June 3, 2002, among Apache Energy Limited (ACN 009 301 964), the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto, and (iii) that certain Credit Agreement [Canadian Credit Agreement], dated as of June 3, 2002, among Apache Canada Ltd., the lenders party thereto, JPMorgan Chase Bank, as global administrative agent, and the other agents party thereto. "Facility Fee" is defined in Section 2.11(a). "Fitch" means Fitch, Inc. and any affiliate or successor thereto that is a nationally recognized rating agency in the United States. "Foreign Lender" means any Lender that is not a resident in Australia for purposes of, the Income Tax Assessment Act 1936 (Cth). For purposes of this definition, Australia and each state thereof shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent financial statements of Parent, Borrower and their Subsidiaries delivered to the Lenders pursuant to the Combined Loan Documents. "Global Administrative Agent" means JPMorgan Chase Bank, N.A., in its capacity as global administrative agent for the Combined Lenders. "Global Effective Date" means a date agreed upon by Parent, Borrower, the Australian Administrative Agent and the Global Administrative Agent as the date on which the conditions specified in Section 4.1 of each Combined Credit Agreement are satisfied (or waived in accordance with Section 10.2 of each Combined Credit Agreement). "Global Effectiveness Notice" means a notice and certificate of Parent and Borrower properly executed by an Authorized Officer of Parent and Borrower, respectively, addressed to the Combined Lenders and delivered to the Global Administrative Agent and the Australian Administrative Agent, in sufficient number of counterparts to provide one for each such lender and each agent under each Combined Credit Agreement, whereby Parent certifies satisfaction of all the conditions precedent to the effectiveness under Section 4.1 of each Combined Credit Agreement. "Governmental Authority" means the government of Australia, any other nation or any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising 7 executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guaranty" means that certain Deed of Guaranty, dated as of May 12, 2005, by Parent in favor of the Lenders and the other Lender Parties (as defined therein), in substantially the form of Exhibit F or any other form approved by the Global Administrative Agent and the Australian Administrative Agent, as such Guaranty may from time to time be amended, supplemented, restated, reaffirmed or otherwise modified. "Hazardous Material" means (a) any "hazardous substance," as defined by CERCLA; (b) any "hazardous waste," as defined by the Resource Conservation and Recovery Act; or (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law. "Indebtedness" of any Person means all (i) Debt, and (ii) guaranties or other contingent obligations in respect of the Debt of any other Person. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of Parent that is not guaranteed by any other Person or subject to any other credit enhancement. "Interest Election Request" means a request by Borrower to convert or continue a Borrowing in accordance with Section 2.7, in substantially the form of Exhibit E or any other form approved by the Global Administrative Agent and the Australian Administrative Agent. "Interest Payment Date" means, with respect to any Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Borrowing with an Interest Period of more than three (3) months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three (3) months' duration after the first day of such Interest Period. "Interest Period" means the period commencing on the date of any Borrowing and ending on the numerically corresponding day, or, with the consent of the Australian Administrative Agent, such other day, in the calendar month that is one, two, three or six months (or, with the consent of each Lender, nine or twelve months) thereafter, as Borrower may elect, provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Judgment Currency" is defined in Section 2.19(b). 8 "Lenders" means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to Section 10.4 (including any commercial lending institution becoming a party hereto pursuant to a Substitution Certificate) or otherwise by operation of law, other than any such Person that ceases to be a party hereto pursuant to a Substitution Certificate. "LIBO Rate" means, with respect to any Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as reasonably determined by the Global Administrative Agent, the Australian Administrative Agent and Borrower from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Global Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means any mortgage, pledge, lien, encumbrance, charge, or security interest of any kind, granted or created to secure Indebtedness; provided, however, that, with respect to any prohibitions of Liens on Property, the following transactions shall not be deemed to create a Lien to secure Indebtedness; (i) production payments (as such term is used in the United States) and (ii) liens required by statute and created in favor of Australian governmental entities to secure partial, progress, advance, or other payments intended to be used primarily in connection with air or water pollution control. "Loan Document" means this Agreement, the Guaranty, any Borrowing Request, any Interest Election Request, any Certificate of Extension, any Substitution Certificate, any Additional Borrower Counterpart, any election notice, the agreement with respect to fees described in Section 2.11(b) and each other agreement, document or instrument delivered by Borrower or any other Person in connection with this Agreement, as such may be amended from time to time. "Loans" means the loans made by the Lenders to Borrower pursuant to this Agreement which bear interest at a rate determined by reference to the LIBO Rate. "Material Adverse Effect" means, as to any matter, that such matter could reasonably be expected to materially and adversely affect the assets, business, properties, condition (financial or otherwise) of Parent and its Subsidiaries taken as a whole. No matter shall be considered to result, or be expected to result, in a Material Adverse Effect unless such matter causes Parent and its Subsidiaries, on a consolidated basis, to suffer a loss or incur a cost equal to at least ten percent (10%) of Parent's Consolidated Tangible Net Worth. 9 "Maturity Date" means the Original Maturity Date, or such other later date as may result from any extension requested by Borrower and Parent and consented to by some or all of the Lenders pursuant to Section 2.6. "Moody's" means Moody's Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency in the United States. "Obligations" means, at any time, the sum of (i) the outstanding principal amount of any Loans plus (ii) all accrued and unpaid interest and Facility Fees plus (iii) all other obligations of Borrower or any Subsidiary to any Lender or any Agent, whether or not contingent, arising under or in connection with any of the Loan Documents. "Original Maturity Date" means May 12, 2010. "Other Currency" is defined in Section 2.19(a). "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Parent" means Apache Corporation, a corporation organized under the laws of the State of Delaware. "Person" means any natural person, corporation, limited liability company, unlimited liability company, joint venture, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Property" means (i) any property owned or leased by Borrower or any Subsidiary, or any interest of Borrower or any Subsidiary in property, which is considered by Borrower to be capable of producing oil, gas, or minerals in commercial quantities, (ii) any interest of Borrower or any Subsidiary in any refinery, processing or manufacturing plant owned or leased by Borrower or any manufacturing plant owned or leased by Borrower or any Subsidiary, (iii) any interest of Borrower or any Subsidiary in all present and future oil, gas, other liquid and gaseous hydrocarbons, and other minerals now or hereafter produced from any other Property or to which Borrower or any Subsidiary may be entitled as a result of its ownership of any Property, and (iv) all real and personal assets owned or leased by Borrower or any Subsidiary used in the drilling, gathering, processing, transportation, or marketing of any oil, gas, and other hydrocarbons or minerals, except (a) any such real or personal assets related thereto employed in transportation, distribution or marketing or (b) any interest of Borrower or any Subsidiary in, any refinery, processing or manufacturing plant, or portion thereof, which property described in clauses (a) or (b), in the opinion of the Board of Directors of Borrower, is not a principal plant or principal facility in relation to the activities of Borrower and its Subsidiaries taken as a whole. "Register" has the meaning set forth in Section 10.4. "Regulation U" means any of Regulations T, U or X of the Board of Governors of the Federal Reserve System of the United States from time to time in effect and shall include any 10 successor or other regulations or official interpretations of said Board or any successor Person relating to the extension of credit for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System or any successor Person. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Replacement Lenders" is defined in Section 2.6(c)(ii). "Required Lenders" means Lenders having in the aggregate 51% of the aggregate total Commitments, or, if the Commitments have been terminated, Lenders holding 51% of the aggregate unpaid principal amount of the outstanding Obligations. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as amended from time to time. "Restricted Subsidiary" means any Subsidiary of Borrower or Parent that owns any asset representing or consisting of an entitlement to production from, or other interest in, reserves of oil, gas or other minerals in place located in the United States, Canada or Australia, including, without limitation, with respect to the Parent, the Borrower and the Canadian Borrower, or is otherwise designated as such by Parent in writing to the Global Administrative Agent. "S&P" means Standard & Poor's and any successor thereto that is a nationally-recognized rating agency in the United States. "subsidiary" means, with respect to any Person, any corporation or other similar entity of which more than 50% of the outstanding capital stock (or other equity) having ordinary voting power to elect a majority of the Board of Directors of such corporation or entity (irrespective of whether or not at the time capital stock or any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person. "Subsidiary" means any subsidiary of Borrower or Parent; provided, however, that in all events the following Persons shall not be deemed to be Subsidiaries of the Parent or any of its Subsidiaries: Apache Offshore Investment Partnership, a Delaware general partnership, Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership, Main Pass 151 Pipeline Company, a Texas general partnership, and Apache 681/682 Joint Venture, a Texas joint venture. "Substitution Certificate" means a substitution certificate entered into by a Lender and a transferee (with the consent of any party whose consent is required by Section 10.4), and accepted by the Australian Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Australian Administrative Agent. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. 11 "Transactions" means the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof. "United States" or "U.S." means the United States of America, its fifty states and the District of Columbia. "Unrestricted Subsidiary" means any Subsidiary of Borrower that is not a Restricted Subsidiary. "U.S. Borrower" means Apache Corporation, a Delaware corporation, and each other Person that becomes a borrower under the U.S. Credit Agreement. "U.S. Credit Agreement" means that certain Credit Agreement of even date herewith among the U.S. Borrower, the U.S. Lenders, the Global Administrative Agent, and the other agents party thereto, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time. "U.S. Lenders" means the financial institutions listed on the signature pages of the U.S. Credit Agreement and their respective successors and assigns. "U.S. Loan Documents" means the U.S. Credit Agreement, any notes, any assignment agreements, and the agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, financing statements and instruments from time to time executed and delivered pursuant to or in connection with any of the foregoing. SECTION 1.2 [Intentionally omitted]. SECTION 1.3 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. 12 SECTION 1.4 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if Borrower notifies the Australian Administrative Agent and the Global Administrative Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Australian Administrative Agent and the Global Administrative Agent notify Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II. The Credits SECTION 2.1 Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans in U.S. Dollars to Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender's Credit Exposure exceeding such Lender's Commitment or (b) the Credit Exposures exceeding the total Commitments. Subject to the conditions set forth herein, Borrower may borrow, prepay and reborrow Loans. Apache Energy Limited and any Additional Borrowers shall be jointly and severally liable for all Obligations. SECTION 2.2 Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.13, each Borrowing shall be comprised entirely of Loans as Borrower may request in accordance herewith. Each Lender at its option may make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation of existing Loans made in connection therewith); provided that a Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. There shall not at any time be more than a total of ten (10) Borrowings outstanding. 13 (d) Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.3 Requests for Borrowings. To request a Borrowing, Borrower shall notify the Australian Administrative Agent of such request by telephone not later than 1:00 p.m., New York time, three Business Days before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Australian Administrative Agent of a written Borrowing Request in a form approved by the Australian Administrative Agent and signed by Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (iv) an account or accounts in New South Wales, Australia, Australian Capital Territory, Australia or outside of Australia for payment of the Borrowing previously designated to the Australian Administrative Agent by a written notice executed by two Authorized Officers of Apache Energy Limited and, if applicable, two Authorized Officers of any Additional Borrower. If no Interest Period is specified with respect to any requested Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Australian Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.4 [Intentionally omitted]. SECTION 2.5 Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York time, to the account of the Australian Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Australian Administrative Agent will make such Loans available to Borrower by promptly crediting the amounts so received, in like funds, to an account of Borrower maintained in New South Wales, Australia, Australian Capital Territory, Australia or outside of Australia and designated by Borrower from time to time in a written notice to the Australian Administrative Agent executed by two Authorized Officers of Apache Energy Limited and two Authorized Officers of any Additional Borrower. (b) Unless the Australian Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to 14 the Australian Administrative Agent such Lender's share of such Borrowing, the Australian Administrative Agent may assume that such Lender has made such share available on the requested date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, but is under no obligation to, make available to Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Australian Administrative Agent, then the applicable Lender and Borrower severally agree to pay to the Australian Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to the Australian Administrative Agent, at (i) in the case of such Lender, at a rate reasonably determined by the Australian Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of Borrower, the interest rate applicable to Loans made in such Borrowing. If such Lender pays such amount to the Australian Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.6 Extension of Maturity Date and of Commitments. (a) Subject to the other provisions of this Agreement and provided that no Event of Default has occurred and is continuing, the total Commitments shall be effective for an initial period from the Global Effective Date to the Original Maturity Date; provided that the Maturity Date, and concomitantly the total Commitments, may be extended for successive one year periods expiring on the date which is one (1) year from the then scheduled Maturity Date. If Parent and Borrower shall request in a Certificate of Extension delivered to the Australian Administrative Agent and the Global Administrative Agent at least 45 days prior to a date which is an anniversary of the Global Effective Date that the Maturity Date be extended for one year from the then scheduled Maturity Date, then the Australian Administrative Agent shall promptly notify each Lender of such request and each Lender shall notify the Australian Administrative Agent, no later than 30 days prior to such anniversary of the Global Effective Date, whether such Lender, in the exercise of its sole discretion, will extend the Maturity Date for such one year period. Any Lender which shall not timely notify the Australian Administrative Agent whether it will extend the Maturity Date shall be deemed to not have agreed to extend the Maturity Date. No Lender shall have any obligation whatsoever to agree to extend the Maturity Date. Any agreement to extend the Maturity Date by any Lender shall be irrevocable, except as provided in Section 2.6(c). (b) If all Lenders notify the Australian Administrative Agent pursuant to clause (a) of this Section 2.6 of their agreement to extend the Maturity Date, then the Australian Administrative Agent shall so notify the Global Administrative Agent, each Lender and Borrower, and such extension shall be effective without other or further action by any party hereto for such additional one year period. (c) If Lenders constituting at least the Required Lenders approve the extension of the then scheduled Maturity Date (such Lenders agreeing to extend the Maturity Date herein called the "Accepting Lenders") and if one or more Lenders shall notify, or be deemed to notify, the Australian Administrative Agent pursuant to clause (a) of this Section 2.6 that they will not extend the then scheduled Maturity Date (such Lenders herein called the "Declining Lenders"), then (A) the Australian Administrative Agent shall promptly so notify Borrower and the 15 Accepting Lenders, (B) the Accepting Lenders shall, upon Borrower's election to extend the then scheduled Maturity Date in accordance with clause (i) or (ii) below, extend the then scheduled Maturity Date and (C) Borrower shall, pursuant to a notice delivered to the Australian Administrative Agent, the Accepting Lenders and the Declining Lenders, no later than the tenth (10th) day following the date by which each Lender is required, pursuant to Section 2.6(a), to approve or disapprove the requested extension of the total Commitments, either: (i) elect to extend the Maturity Date and direct the Declining Lenders to terminate their Commitments, which termination shall become effective on the date which would have been the Maturity Date except for the operation of this Section. On the date which would have been the Maturity Date except for the operation of this Section, (x) Borrower shall deliver a notice of the effectiveness of such termination to the Declining Lenders with a copy to the Australian Administrative Agent and (y) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to the Declining Lenders, including any amounts required pursuant to Section 2.15, and (z) upon the occurrence of the events set forth in clauses (x) and (y), the Declining Lenders shall each cease to be a Lender hereunder for all purposes, other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3, and shall cease to have any obligations or any Commitment hereunder, other than to the Agents pursuant to Article IX, and the Australian Administrative Agent shall promptly notify the Accepting Lenders and Borrower of the new Commitments; or (ii) elect to extend the Maturity Date and, prior to or no later than the then scheduled Maturity Date, (A) to replace one or more of the Declining Lenders with another lender or lenders reasonably acceptable to the Australian Administrative Agent (such lenders herein called the "Replacement Lenders") and (B) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to any Declining Lenders which are not being replaced, as provided in clause (i) above; provided that (x) any Replacement Lender shall purchase, and any Declining Lender shall sell, such Declining Lender's rights and obligations hereunder without recourse or expense to, or warranty by, such Declining Lender being replaced for a purchase price equal to the aggregate outstanding principal amount of the Obligations payable to such Declining Lender plus any accrued but unpaid interest on such Obligations and accrued but unpaid fees or other amounts owing in respect of such Declining Lender's Loans and Commitments hereunder, and (y) upon the payment of such amounts referred to in clause (x) and the execution of a Substitution Certificate by such Replacement Lender and such Declining Lender, such Replacement Lender shall each constitute a Lender hereunder and such Declining Lender being so replaced shall no longer constitute a Lender (other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3), and shall no longer have any obligations hereunder, other than to the Agents pursuant to Article IX; or (iii) elect to revoke and cancel the extension request in such Certificate of Extension by giving notice of such revocation and cancellation to the Australian Administrative Agent and the Global Administrative Agent (which shall promptly notify the Lenders thereof) no later than the tenth (10th) day following the date by which 16 each Lender is required, pursuant to clause (a) of this Section, to approve or disapprove the requested extension of the Maturity Date, and concomitantly the total Commitments. If Borrower fails to timely provide the election notice referred to in this clause (c), Borrower shall be deemed to have revoked and cancelled the extension request in the Certificate of Extension and to have elected not to extend the Maturity Date. SECTION 2.7 Interest Elections. (a) Each Borrowing shall have an initial Interest Period as specified in the applicable Borrowing Request (or one month if no Interest Period is specified). Thereafter, Borrower may elect to continue such Borrowing and may elect Interest Periods therefor, all as provided in this Section. Borrower may, subject to the requirements of Section 2.2(c), elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, Borrower shall notify the Australian Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if Borrower were requesting a Borrowing resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Australian Administrative Agent of a written Interest Election Request signed by Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clause (iii) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; and (iii) the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Australian Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. 17 (e) If Borrower fails to deliver a timely Interest Election Request with respect to a Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as a Borrowing with an Interest Period of one month. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Australian Administrative Agent, at the request of the Required Lenders, so notifies Borrower, then, so long as an Event of Default is continuing, unless repaid and provided the Indebtedness has not been accelerated pursuant to Section 8.3, each Borrowing shall be continued as a Borrowing with an Interest Period of one month at the end of the Interest Period applicable thereto. SECTION 2.8 Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the Credit Exposures would exceed the total Commitments. (c) Borrower shall notify the Australian Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least two Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Australian Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrower (by notice to the Australian Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.9 Repayment of Loans; Evidence of Debt. (a) Borrower hereby unconditionally promises to pay to the Australian Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date or, if earlier, the date on which the Commitment of such Lender relating to such Loan is terminated (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)). (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. 18 (c) The Australian Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) the amount of any sum received by the Australian Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Australian Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by one or more promissory notes. In such event, Borrower shall prepare, execute and deliver to such Lender promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns and in a form approved by the Australian Administrative Agent and the Global Administrative Agent). Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if any such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10 Prepayment of Loans. (a) Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section. (b) Borrower shall notify the Australian Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder not later than 1:00 p.m., New York time, three Business Days before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.8, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.8. Promptly following receipt of any such notice, the Australian Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing as provided in Section 2.2. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and compensation for break funding, to the extent required by Section 2.15. SECTION 2.11 Fees. (a) Borrower agrees to pay to the Australian Administrative Agent for the account of each Lender a facility fee (the "Facility Fee"), which shall accrue at the Applicable Rate on the 19 daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the Global Effective Date to but excluding the earlier to occur of (i) the date on which such Commitment terminates (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)) or (ii) the Maturity Date; provided that, if such Lender continues to have any Credit Exposure after its Commitment terminates, then such Facility Fee shall continue to accrue on the daily amount of such Lender's Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Credit Exposure. Accrued Facility Fees shall be payable in arrears on the first day of April, July and October and the second day of January of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any Facility Fees accruing after the date on which the Commitments terminate shall be payable on demand. All Facility Fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) Borrower agrees to pay to the Australian Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between Borrower and the Australian Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Australian Administrative Agent for distribution, in the case of Facility Fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.12 Interest. (a) [Intentionally omitted]. (b) The Loans comprising each Borrowing shall bear interest on the daily amount outstanding at the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraph of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to Borrowings with an Interest Period equal to one month as of the date of determination. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and on the Maturity Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion, and (iv) with respect to 20 any Declining Lender, accrued interest shall be paid upon the termination of the Commitment of such Lender. (e) All interest hereunder shall be computed on the basis of a year of 360 days, and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable LIBO Rate shall be determined by the Australian Administrative Agent, and such determination shall be conclusive absent demonstrable error. SECTION 2.13 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Borrowing: (i) the Australian Administrative Agent determines (which determination shall be conclusive absent demonstrable error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or (ii) the Australian Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Australian Administrative Agent shall give notice thereof to Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Australian Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Loans from such Lender then outstanding shall bear interest at such Lender's cost of funds plus the Applicable Rate for the remainder of the Interest Period applicable to such Loan and (ii) until such time as such situation is no longer the case, any Loan made thereafter shall consist of a Loan which bears interest at such Lender's cost of funds plus the Applicable Margin made by such Lender(s) and Loans made by each other Lender; provided that if the circumstances giving rise to such notice do not affect all Interest Periods, then Borrowings with respect to the unaffected Interest Periods shall be permitted. SECTION 2.14 Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender; or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. 21 (b) If any Lender reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section (together with the calculation thereof) shall be delivered to Borrower and shall be conclusive absent demonstrable error. Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.15 Break Funding Payments. In the event of (a) the payment of any principal of any Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(b) and is revoked in accordance therewith) or (d) the assignment of any Loan other than on the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to either Section 2.6 or Section 2.18, then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive, together with the calculation thereof, pursuant to this Section shall be delivered to Borrower and to the Australian Administrative Agent and shall be conclusive absent demonstrable error. Borrower shall pay to the Australian 22 Administrative Agent for the account of such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.16 Taxes. (a) Any and all payments by or on account of any obligation of Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Australian Administrative Agent, the Global Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Borrower shall pay the Australian Administrative Agent, the Global Administrative Agent and each Lender, within 10 days after written demand therefor, the full amount of any Indemnified Taxes or Other Taxes paid by the Australian Administrative Agent, the Global Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than any such penalties or interest arising through the failure of the Australian Administrative Agent, the Global Administrative Agent or Lender to act as a reasonably prudent agent or lender, respectively), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender, or by either the Australian Administrative Agent or the Global Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent demonstrable error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to the Australian Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Australian Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower (with a copy to the Australian Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate. 23 (f) The Borrower shall (i) pay any stamp duty arising in connection with any Loan Document and (ii) reimburse any Lender for any goods and services tax that it is liable to pay on a supply made in connection with any Loan Document. SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 1:00 p.m., New York time, on the date when due, in immediately available funds, without set-off or counterclaim. All such payments shall be made to the Australian Administrative Agent, c/o Citibank N.A., 399 Park Avenue, New York, NY USA 10043, for account Citibank N.A., Hong Kong (A/C No. 10990845), SWIFT Code: CITIUS33 Attention: Agency Department, Reference: Apache, except that payments pursuant to Sections 2.14, 2.16 and 10.3 shall be made directly to the Persons entitled thereto. The Australian Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Australian Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. If insufficient funds are received due to Borrower's entitlement to withhold amounts on account of Excluded Taxes in relation to a particular Lender, such insufficiency shall not be subject to this Section 2.17(b) but shall be withheld from and shall only affect payments made to such Lender. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). 24 Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation. (d) Unless the Australian Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Australian Administrative Agent for the account of the Lenders hereunder that Borrower will not make such payment, the Australian Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, but is under no obligation to, distribute to the Lenders the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Australian Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Australian Administrative Agent, at a rate reasonably determined by the Australian Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.17(d), then the Australian Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Australian Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Section until all such unsatisfied obligations are fully paid. SECTION 2.18 Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to transfer its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or transfer (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or transfer. (b) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then Borrower may, upon notice to such Lender and the Australian Administrative Agent and the Global Administrative Agent, require such Lender to transfer and delegate, without recourse or expense to, or warranty by, such Lender (in accordance with and subject to the restrictions contained in Section 10.4), all its interests, rights and obligations under this Agreement to a transferee designated by Borrower and which meets the requirements of Section 10.4(b) that shall assume such obligations (which transferee may be another Lender, if a 25 Lender accepts such transfer); provided that (i) Borrower shall have received the prior written consent of the Australian Administrative Agent and the Global Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the transferee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts), (iii) the transferee and transferor shall have entered into a Substitution Certificate, and (iv) in the case of any such transfer resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such transfer will result in a reduction in such compensation or payments. SECTION 2.19 Currency Conversion and Currency Indemnity. (a) Payments in Agreed Currency. Borrower shall make payment relative to any Obligation in the currency (the "Agreed Currency") in which the Obligation was effected. If any payment is received on account of any Obligation in any currency (the "Other Currency") other than the Agreed Currency (whether voluntarily or pursuant to an order or judgment or the enforcement thereof or the realization of any security or the liquidation of Borrower or otherwise howsoever), such payment shall constitute a discharge of the liability of Borrower hereunder and under the other Loan Documents in respect of such obligation only to the extent of the amount of the Agreed Currency which the relevant Lender or Agent, as the case may be, is able to purchase with the amount of the Other Currency received by it on the Business Day next following such receipt in accordance with its normal procedures and after deducting any premium and costs of exchange. (b) Conversion of Agreed Currency into Judgment Currency. If, for the purpose of obtaining or enforcing judgment in any court in any jurisdiction, it becomes necessary to convert into a particular currency (the "Judgment Currency") any amount due in the Agreed Currency then the conversion shall be made on the basis of the rate of exchange prevailing on the next Business Day following the date such judgment is given and in any event Borrower shall be obligated to pay the Agents and the Lenders any deficiency in accordance with Section 2.19(c). For the foregoing purposes "rate of exchange" means the rate at which the relevant Lender or Agent, as applicable, in accordance with its normal banking procedures is able on the relevant date to purchase the Agreed Currency with the Judgment Currency after deducting any premium and costs of exchange. (c) Circumstances Giving Rise to Indemnity. If (i) any Lender or any Agent receives any payment or payments on account of the liability of Borrower hereunder pursuant to any judgment or order in any Other Currency, and (ii) the amount of the Agreed Currency which the relevant Lender or Agent, as applicable, is able to purchase on the Business Day next following such receipt with the proceeds of such payment or payments in accordance with its normal procedures and after deducting any premiums and costs of exchange is less than the amount of the Agreed Currency due in respect of such obligations immediately prior to such judgment or order, then Borrower on demand shall, and Borrower hereby agrees to, indemnify and save the Lenders and the Agents harmless from and against any loss, cost or expense arising out of or in connection with such deficiency. 26 (d) Indemnity Separate Obligation. The agreement of indemnity provided for in Section 2.19(c) shall constitute an obligation separate and independent from all other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Lenders or Agents or any of them from time to time, and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order. SECTION 2.20 Additional Borrowers. (a) A Person which is a Restricted Subsidiary which is a resident of, and domiciled in, Australia may become an Additional Borrower with respect hereto, and shall be bound by and entitled to the benefits and obligations of this Agreement as a Borrower hereunder to the same extent as any other Borrower, upon the fulfillment of the following conditions: (i) Resolutions and Officers' Certificates. Such Person shall deliver all the items identified in Section 4.1(a) with respect to such Person. (ii) Certificate. An Authorized Officer of each Borrower shall have delivered to the Global Administrative Agent and the Australian Administrative Agent a certificate stating that such Person is a Restricted Subsidiary of the Parent which is resident of, and domiciled in, Australia. (iii) No Default. No Default or Event of Default shall have occurred and be continuing. (iv) Representations and Warranties. The representations and warranties in Article III hereto are true and correct with respect to such Person, mutatis mutandis, as of the date such Person executes the Additional Borrower Counterpart described in clause (v) below. (v) Additional Borrower Counterpart. Such Person shall execute an Additional Borrower Counterpart to this Agreement, substantially in the form of Exhibit G (the "Additional Borrower Counterpart") or such other agreement in form and substance satisfactory to the Global Administrative Agent and the Australian Administrative Agent. (vi) Opinions of Counsel. The Global Administrative Agent and the Australian Administrative Agent shall have received legal opinions, dated as of the date such Person executes the Additional Borrower Counterpart described above, addressed to the Agents and the Lenders, having substantially the same coverage as those opinions attached hereto as Exhibits A and B and in form and substance acceptable to the Global Administrative Agent and the Australian Administrative Agent, in their reasonable discretion. (vii) Approval. The Global Administrative Agent and the Australian Administrative Agent shall have approved the addition of such Person as an Additional Borrower, such approval not to be unreasonably withheld. 27 (viii) Identification Requirements. Such Person shall provide such evidence as is reasonably requested by either Global Administrative Agent or the Australian Administrative Agent, on behalf of itself or any Lender, to comply with all necessary "know your customer" or other similar checks under all applicable laws and regulations. (ix) Notice. The Global Administrative Agent, the Australian Administrative Agent and each Lender shall have received prior written notice from an Authorized Officer of each then current Borrower of an Additional Borrower becoming party to this Agreement at least five (5) Business Days prior to the date selected for such Additional Borrower to become party to this Agreement. (b) Upon fulfillment of the conditions in this Section 2.20(a), the Global Administrative Agent will promptly notify each Lender of the date that such Person becomes an Additional Borrower hereunder. ARTICLE III. Representations and Warranties In order to induce the Lenders and the Agents to enter into this Agreement and the Lenders to make Loans hereunder, Borrower represents and warrants unto the Agents and each Lender as set forth in this Article III. SECTION 3.1 Organization. Borrower and each of its Subsidiaries is a corporation or other legal entity, in either case duly incorporated or otherwise properly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority, permits and approvals, and is in good standing to conduct its business in each jurisdiction in which its business is conducted where the failure to so qualify would have a Material Adverse Effect. SECTION 3.2 Authorization and Validity. The execution, delivery and performance by Borrower of this Agreement and each other Loan Document executed or to be executed by it, are within the corporate or partnership powers, as applicable, of Borrower, have been duly authorized by all necessary corporate or partnership action on behalf of it, and do not (a) contravene the certificate or articles of incorporation or memorandum or other organizational documents of Borrower; (b) contravene any material contractual restriction, law or governmental regulation or court decree or order binding on or affecting Borrower or any Subsidiary; or (c) result in, or require the creation or imposition of, any Lien, not permitted by Section 7.1, on any of properties of Borrower or any of its Subsidiaries. This Agreement constitutes, and each other Loan Document executed by Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor rights generally and to general principles of equity. SECTION 3.3 Government Approval and Regulation. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or 28 regulatory body or other Person is required for the due execution, delivery or performance by Borrower of this Agreement or any other Loan Document. Neither Parent or Borrower nor any of their Subsidiaries is an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 3.4 Superannuation Scheme. Borrower administers a defined benefit superannuation fund (as described in the Superannuation Industry (Supervision) Act 1993 (the "SIS Act") and Parent, Borrower and their Subsidiaries liabilities under such fund do not in the aggregate exceed $100,000,000. SECTION 3.5 Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, Regulation U. Terms for which meanings are provided in Regulations U are used in this Section with such meanings. SECTION 3.6 Taxes. Borrower and each of its Subsidiaries has to the best knowledge of Borrower after due investigation filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books or which the failure to file or pay could not reasonably be expected to have a Material Adverse Effect. SECTION 3.7 Subsidiaries; Restricted Subsidiaries. Schedule 3.7 hereto contains an accurate list of all of the presently existing Subsidiaries, including, without limitation, Restricted Subsidiaries, of Borrower as of the date of this Agreement, setting forth their respective jurisdictions of incorporation or organization and the percentage of their respective capital stock or, the revenue share attributable to the general and limited partnership interests, as the case may be, owned by Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries which are corporations have been duly authorized and issued and are fully paid and non-assessable. ARTICLE IV. Conditions SECTION 4.1 Effectiveness. This Agreement shall become effective upon the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 4.1. (a) Resolutions and Officers Certificates. The Australian Administrative Agent and the Global Administrative Agent shall have received from Borrower a certificate, dated the Global Effective Date, of the Secretary or Assistant Secretary of Borrower as to (i) resolutions of its governing board, then in full force and effect 29 authorizing the execution, delivery and performance of this Agreement and each other Loan Document to be executed by it; (ii) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document executed by it; and (iii) its articles of incorporation and bylaws; upon which certificates each Lender may conclusively rely until it shall have received a further certificate of an authorized officer of Borrower canceling or amending such prior certificate. (b) Existing Facilities. The Australian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Parent and each Borrower, stating that either (i) Parent or its Subsidiaries have repaid in full and terminated the Existing Global Credit Facilities concurrently with the effectiveness of the Combined Credit Agreements or (ii) the Existing Global Credit Facilities have been terminated in full prior to the effectiveness of the Combined Credit Agreements. (c) Opinions of Counsel. The Global Administrative Agent shall have received opinions, dated the Global Effective Date, addressed to the Australian Administrative Agent and the Global Administrative Agent, the other Agents and all Lenders, from (i) Allens Arthur Robinson, counsel to Borrower, in substantially the form attached hereto as Exhibit A, and (ii) Thompson & Knight LLP, U.S. counsel to Borrower, in substantially the form attached hereto as Exhibit B. (d) Closing Fees and Expenses. The Australian Administrative Agent shall have received for its own account, or for the account of each Lender and other Agent, as the case may be, all fees, costs and expenses due and payable pursuant hereto. (e) Financial Statements. The Australian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that (i) the audited consolidated financial statements of Parent and its Subsidiaries for fiscal year 2004 and (ii) the report and accompanying financial statements of Parent, Borrower and its Subsidiaries for fiscal year 2004 (collectively, the "2004 Financials") fairly present Parent's and Borrower's consolidated financial condition and results of operations and that prior to the Global Effective Date no material adverse change in the condition or operations of Parent or Borrower and its Subsidiaries, taken as a whole, from that reflected in the 2004 Financials has occurred and is continuing. (f) Environmental Warranties. In the ordinary course of its business, each Borrower conducts an ongoing review of the effect of existing Environmental Laws on the business, operations and properties of each Borrower and their Subsidiaries, in the course of which it attempts to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any 30 license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Australian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of each Borrower, stating that after such review each Borrower has reasonably concluded that existing Environmental Laws are unlikely to have a Material Adverse Effect, or that each Borrower has established adequate reserves in respect of any required clean-up. (g) Global Effectiveness Notice. The Australian Administrative Agent and the Global Administrative Agent shall have received the Global Effectiveness Notice. (h) Other Combined Credit Agreements. The Australian Administrative Agent shall have received copies of the executed (i) U.S. Credit Agreement and the other U.S. Loan Documents and (ii) Canadian Credit Agreement and the other Canadian Loan Documents. (i) Guaranty. The Australian Administrative Agent and the Global Administrative Agent shall have received an executed Guaranty for Borrower. (j) Litigation. The Australian Administrative Agent and the Global Administrative Agent shall have received a certificate, signed by an Authorized Officer of Parent, stating that no litigation, arbitration, governmental proceeding, Tax claim, dispute or administrative or other proceeding shall be pending or, to the knowledge of Parent, threatened against Parent or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document. (k) Other Documents. The Australian Administrative Agent and the Global Administrative Agent shall have received such other instruments and documents as any of the Agents or their counsel may have reasonably requested. The Australian Administrative Agent shall notify Borrower, the other Agents and the Lenders of the Global Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or prior to 3:00 p.m., New York, New York time, on May 31, 2005 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.2 All Loans. The obligation of each Lender to fund any Loan which results in an increase in the aggregate outstanding principal amount of Loans under this Agreement on the occasion of any Borrowing shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2. 31 (a) Compliance with Warranties and No Default. Both before and after giving effect to any Borrowing, the following statements shall be true and correct: (1) the representations and warranties set forth in Article III shall be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and (b) no Default or Event of Default shall have then occurred and be continuing. (b) Borrowings. The Australian Administrative Agent shall have received a Borrowing Request for any Borrowing. ARTICLE V. Affirmative Covenants Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 5.1 Financial Reporting and Notices. Borrower will furnish, will cause to be furnished or will assist Parent in furnishing, to each Lender, the Australian Administrative Agent and the Global Administrative Agent copies of the following financial statements, reports, notices and information: (a) within 90 days after the end of each Fiscal Year of Borrower, a copy of the financial statements for Borrower and its Subsidiaries for such fiscal year, including therein consolidated balance sheets of Borrower and its Subsidiaries as of the end of such fiscal year and consolidated statements of earnings and cash flow of Borrower and its Subsidiaries for such fiscal year, all prepared in accordance with GAAP in each case certified by an Authorized Officer of Borrower, such signature deemed to be a certification that such financial statements present fairly in accordance with GAAP the financial position of Borrower and its Subsidiaries; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Borrower commencing with the fiscal quarter ending June 30, 2005, unaudited consolidated balance sheets of Borrower and its Subsidiaries as of the end of such fiscal quarter and consolidated statements of earnings and cash flow of Borrower and its Subsidiaries for such fiscal quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, all prepared in accordance with GAAP certified by an Authorized Officer of Borrower, such signature deemed to be a certification that such financial statements present fairly in accordance with GAAP the financial position of Borrower and its Subsidiaries; (c) together with the financial statements described in (a) and (b) above, a compliance certificate, in substantially the form of Exhibit C or any other form 32 approved by the Australian Administrative Agent and the Global Administrative Agent, executed by an Authorized Officer of Parent, an Authorized Officer of Apache Energy Limited and an Authorized Officer of any Additional Borrower; (d) within five (5) days after the occurrence of each Default, a statement of an Authorized Officer of Parent and an Authorized Officer of Borrower setting forth details of such Default and the action which Parent and Borrower have taken and propose to take with respect thereto; (e) promptly after the sending or filing thereof, copies of all material public filings, reports and communications from Parent or Borrower, and all reports and registration statements which Parent or Borrower or any of their Subsidiaries files with the Securities and Exchange Commission, any national securities exchange or any federal securities regulatory body in Australia; (f) such other information respecting the financial condition or operations of Borrower or any of its Subsidiaries as any Lender through the Australian Administrative Agent may from time to time reasonably request. SECTION 5.2 Compliance with Laws. Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders where noncompliance therewith may reasonably be expected to have a Material Adverse Effect, except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.3 Maintenance of Properties. Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep valid title to, or valid leasehold interest in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.1 and except for imperfections and other burdens of title thereto as do not in the aggregate materially detract from the value thereof or for the use thereof in their businesses (taken as a whole). SECTION 5.4 Insurance. Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies (subject to self-insured retentions) insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses. SECTION 5.5 Books and Records. Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Australian Administrative Agent or the Global Administrative Agent and the other Agents and each Lender through the Australian Administrative Agent or the Global Administrative Agent or any of their respective authorized representatives, during normal business hours and at reasonable intervals, to visit all of its offices, to discuss its financial matters with its officers and to examine (and, at the expense of the Australian Administrative 33 Agent, the Global Administrative Agent or such other Agent or Lender or, if a Default or Event of Default has occurred and is continuing, at the expense of Borrower, photocopy extracts from) any of its books or other records. SECTION 5.6 Use of Proceeds. Borrower will, and will cause each Subsidiary to, use the proceeds of the Loans (i) to refinance existing Indebtedness of Borrower and its Subsidiaries or (ii) for Borrower's and its Subsidiaries' general corporate or partnership purposes, including any non-hostile acquisitions. SECTION 5.7 Borrowing Request. It is a condition precedent to the operation of this Article V that Borrower has submitted a Borrowing Request to the Australian Administrative Agent. ARTICLE VI. Financial Covenants Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 6.1 Ratio of Total Debt to Capital. Parent will not permit its ratio (expressed as a percentage) of (i) the consolidated Debt of Parent and its Subsidiaries to (ii) Capital to be greater than 60% at the end of any fiscal quarter beginning with the fiscal quarter ending June 30, 2005. ARTICLE VII. Negative Covenants Until the Commitments have expired or terminated and all Obligations have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that: SECTION 7.1 Liens. Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the stock, assets, or indebtedness of Borrower or any of its Subsidiaries to secure Indebtedness of Borrower or any other Person except: (i) Liens on any property or assets owned or leased by Borrower or any Subsidiary existing at the time such property or asset was acquired (or at the time such Person became a Subsidiary); provided that in the case of the acquisition of a Subsidiary such Lien only encumbers property or assets immediately prior to, or at the time of, the acquisition by Borrower of such Subsidiary; (ii) purchase money Liens so long as such Liens only encumber property or assets acquired with the proceeds of the purchase money indebtedness incurred in connection with such Lien; 34 (iii) Liens granted by an Unrestricted Subsidiary on its assets to secure Indebtedness incurred by such Unrestricted Subsidiary; (iv) Liens on assets of a Restricted Subsidiary securing Indebtedness of a Restricted Subsidiary owing to Borrower, to Parent or to another Restricted Subsidiary or Liens on assets of an Unrestricted Subsidiary securing Indebtedness of an Unrestricted Subsidiary owing to Borrower, to Parent, to a Restricted Subsidiary or to another Unrestricted Subsidiary; (v) Liens existing on the Global Effective Date set forth on Schedule 7.1; (vi) Liens arising under operating agreements; (vii) Liens reserved in oil, gas and/or mineral leases for bonus rental payments and for compliance with the terms of such leases; (viii) Liens pursuant to partnership agreements, oil, gas and/or mineral leases, farm-out agreements, division orders, contracts for the sale, delivery, purchase, exchange, or processing of oil, gas and/or other hydrocarbons, unitization and pooling declarations and agreements, operating agreements, development agreements, area of mutual interest agreements, forward sales of oil, natural gas and natural gas liquids, and other agreements which are customary in the oil, gas and other mineral exploration, development and production business and in the business of processing of gas and gas condensate production for the extraction of products therefrom; (ix) Liens on the stock or other ownership interests of or in any Unrestricted Subsidiary; (x) Liens for taxes, assessments or similar charges, incurred in the ordinary course of business, that are not yet due and payable or that are being contested as set forth in Section 3.6; (xi) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, old-age pensions or other social security programs; (xii) Liens imposed by mandatory provisions of law such as for mechanics', materialmen's, warehousemen's, carriers', or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable; (xiii) Liens in renewal or extension of any of the foregoing permitted Liens, so long as limited to the property or assets encumbered and the amount of Indebtedness secured immediately prior to such renewal or extension; and 35 (xiv) in addition to Liens permitted by clauses (i) through (xiii) above, Liens on property or assets of Parent, Borrower and any of their Subsidiaries if the aggregate Indebtedness of all such Persons secured thereby does not exceed five percent (5%) of Parent's Consolidated Assets; provided that nothing in this definition shall in and of itself constitute or be deemed to constitute an agreement or acknowledgment by the Global Administrative Agent, the Australian Administrative Agent or any Lender that the Indebtedness subject to or secured by any such Lien ranks (apart from the effect of any Lien included in or inherent in any such Liens) in priority to the Obligations. SECTION 7.2 Mergers. Borrower will not liquidate or dissolve, amalgamate with, consolidate with, or merge into or with, any other Person, or sell, lease or otherwise transfer all or substantially all of its assets unless (a) Borrower is the survivor of such amalgamation, merger or consolidation, and (b) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto. SECTION 7.3 Asset Dispositions. Borrower will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to all or substantially all of its assets. Notwithstanding the foregoing, nothing herein shall prohibit any transfer of any assets from any Borrower to any Subsidiary of such Borrower, from any Subsidiary of a Borrower to such Borrower or from a Subsidiary of a Borrower to another Subsidiary of such Borrower. SECTION 7.4 Transactions with Affiliates. Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract or group of arrangements or contracts, as the case may be, are conducted on an arms-length basis. SECTION 7.5 Restrictive Agreements. Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement or any other Loan Document) limiting the ability of Borrower to amend or otherwise modify this Agreement or any other Loan Document. Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement which restricts or prohibits the ability of any Restricted Subsidiary to make any payments, directly or indirectly, to Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Restricted Subsidiary to make any payment, directly or indirectly, to Borrower. SECTION 7.6 Guaranties. Parent and Borrower will not, and will not permit any of their Restricted Subsidiaries to, guaranty any Indebtedness not included in the consolidated Debt of Parent and its Subsidiaries in an aggregate outstanding principal amount at any time exceeding $100,000,000. 36 ARTICLE VIII. Events of Default SECTION 8.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default": (a) Non-Payment of Obligations. Borrower shall default in the payment or prepayment when due of any principal of any Loan, or Borrower shall default (and such default shall continue unremedied for a period of five (5) Business Days) in the payment when due of any interest, fee or of any other obligation hereunder. (b) Breach of Warranty. Any representation or warranty of Borrower made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of Borrower to the Global Administrative Agent, the Australian Administrative Agent, any other Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document is or shall be false or misleading when made in any material respect. (c) Non-Performance of Covenants and Obligations. Borrower or Parent shall default in the due performance and observance of any of its obligations under Section 7.2 or under Article VI. (d) Non-Performance of Other Covenants and Obligations. Borrower or Parent shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to Borrower by the Global Administrative Agent, the Australian Administrative Agent, or the Required Lenders. (e) Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any direct payment obligation of Parent, Borrower or any of their Restricted Subsidiaries in any amount in excess of $100,000,000. (f) [Intentionally omitted]. (g) Administration, Winding Up, Arrangements and Insolvency. Borrower or any of its Restricted Subsidiaries shall (a) become or under legislation is presumed or taken to be insolvent or generally fail to pay, or admit in writing its inability or unwillingness to generally pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, receiver and manager sequestrator, liquidator, provisional liquidator, administrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to 37 exist the appointment of an administrator, trustee, receiver, receiver and manager, sequestrator, liquidator, provisional liquidator, administrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or for a substantial part of the property of any thereof, and such administrator, trustee, receiver, receiver and manager sequestrator, liquidator, provisional liquidator, administrator or other custodian shall not be discharged within 60 days, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Global Administrative Agent, the Australian Administrative Agent, each other Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, insolvency, reorganization, debt arrangement, compromise or composition with or assignment for the benefit of its creditors or a class of them, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up, administration or liquidation proceeding, in respect of Borrower or any of its Restricted Subsidiaries, and, if any such case or proceeding is not commenced by Borrower or such Restricted Subsidiary, such case or proceeding shall be consented to or acquiesced in by Borrower or such Restricted Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed or an investigation into all or part of the affairs of Borrower under companies legislation, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Global Administrative Agent, the Australian Administrative Agent, and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any corporate or partnership action authorizing, or in furtherance of, any of the foregoing. (h) Judgments. Any judgment or order for the payment of money in an amount of $100,000,000 or more in excess of valid and collectible insurance in respect thereof or in excess of an indemnity with respect thereto reasonably acceptable to the Required Lenders shall be rendered against Parent, Borrower or any of their Restricted Subsidiaries and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (b) such judgment shall have become final and non-appealable and shall have remained outstanding for a period of 60 consecutive days. (i) Change in Control. Parent fails to own or control, directly or indirectly, all of the voting shares of Borrower. (j) Event of Default under other Combined Loan Documents. Any "Event of Default" as defined in the U.S. Loan Documents or the Canadian Loan Documents shall occur; provided that the occurrence of a "Default" as defined in the U.S. Loan Documents or the Canadian Loan Documents shall constitute a Default under this Agreement; provided further that if such "Default" is cured or waived under the U.S. Loan Documents or the Canadian Loan Documents, as applicable, then such "Default" shall no longer constitute a Default under this Agreement. 38 (k) Enforcement Against Assets. A receiver, receiver and manager or similar officer is appointed to, Liens are enforced over or distresses, attachments or other executions are levied or enforced over all or any of the assets and undertaking of Borrower in excess of $100,000,000 in the aggregate. SECTION 8.2 Action if Administration, Winding Up, Arrangements and Insolvency. If any Event of Default described in Section 8.1(g) shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 8.2) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Australian Administrative Agent, upon the direction of the Required Lenders, shall by notice to Borrower declare all of the outstanding principal amount of the Loans and all other obligations hereunder to be due and payable and the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other obligations shall be and become immediately due and payable, without further notice, demand or presentment, and the Commitments shall terminate. ARTICLE IX. Agents Each of the Lenders hereby irrevocably appoints JPMorgan Chase Bank, N.A. as Global Administrative Agent, Citisecurities Limited (ABN 51 008 489 610) as Australian Administrative Agent, Deutsche Bank AG, Sydney Branch (ABN 13 064 165 162) and JPMorgan Chase Bank (ARBN 074 112 011) as Australian Co-Syndication Agents, and Bank of America, N.A., Sydney Branch (ARBN 064 874 531) and UBS AG, Australia Branch (ABN 47 088 129 613) as Australian Co-Documentation Agents, and authorizes each such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) each Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth herein, each Agent shall not have any duty to 39 disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. Each Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. Each Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower or a Lender, and such Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent. None of the Persons identified on the facing page of this Agreement as the "Co-Lead Arrangers and Joint Bookrunners" (the "Arrangers"), the Australian Co-Documentation Agents or the Australian Co-Syndication Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any other Combined Loan Document other than, except in the case of the Arrangers, those applicable to all Lenders as such. The Australian Administrative Agent, the Global Administrative Agent and the other Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Australian Administrative Agent, the Global Administrative Agent and the other Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Australian Administrative Agent, the Global Administrative Agent and the other Agents may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Any Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Any Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as an Agent. Subject to the appointment and acceptance of a successor Global Administrative Agent or Australian Administrative Agent as provided in this paragraph, the Global Administrative Agent or the Australian Administrative Agent may resign at any time by notifying the Lenders and Borrower. Upon any such resignation, Borrower shall have the right, in consultation with the Combined Required Lenders, to appoint one of the Lenders as a successor. If no successor shall have been so appointed by Borrower and shall have accepted such appointment within 30 days 40 after the retiring Global Administrative Agent or Australian Administrative Agent gives notice of its resignation, then the retiring Global Administrative Agent or Australian Administrative Agent may, on behalf of the Lenders, appoint a successor Global Administrative Agent or Australian Administrative Agent which shall be a bank with an office in New York, New York, or Sydney, Australia, respectively, or an Affiliate of any such bank. Upon the acceptance of its appointment as Global Administrative Agent or Australian Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Global Administrative Agent or Australian Administrative Agent, and the retiring Global Administrative Agent or Australian Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Global Administrative Agent or Australian Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Global Administrative Agent's or Australian Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.3 shall continue in effect for the benefit of such retiring Global Administrative Agent or Australian Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Global Administrative Agent or Australian Administrative Agent, respectively. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE X. Miscellaneous SECTION 10.1 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to Borrower, to: Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Attention: Matthew W. Dundrea Vice President and Treasurer Telephone: (713) 296-6640 Facsimile: (713) 296-6458 41 with a copy to: Assistant Treasurer Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Telephone: (713) 296-6642 Facsimile: (713) 296-6477 and with copy to: Vice President and General Counsel Apache Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Telephone: (713) 296-6204 Facsimile: (713) 296-6458 (b) if to the Global Administrative Agent, to: JPMorgan Chase Bank, N.A. Loan & Agency Services Group 1111 Fannin Street, 10th Floor Houston, Texas 77002-8069 Attention: Rose Salvacion Telephone: (713) 750-2501 Facsimile: (713) 427-6307] with a copy to: JPMorgan Chase Bank, N.A. 600 Travis, 20 CTH 86 Houston, Texas 77002 Attention: Peter Licalzi Telephone: (713) 216-8870 Facsimile: (713) 216-4117 (c) if to the Australian Administrative Agent, to: Citisecurities Limited (ABN 51 008 489 610) Level 23, 2 Park Street Sydney N.S.W. 2000 Australia Attention: Agency/Maria Mills/Trevor Dutton E-mail: maria.mills@citigroup.com E-mail: trevor.dutton@citigroup.com Telephone: 61 2 8225 2066/2455 (direct lines) 42 Switch No: 61 2 8225 1000 Facsimile: 61 2 8225 5244 with a copy to: Citicorp International Limited 13/F., Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong Attention: Dixon Koon/Maggie Tai E-mail: dixon.koon@citigroup.com E-mail: tai.maggie@citigroup.com Telephone: +852 2306 6644/42 Facsimile: +852 2621 3183/4 (d) if to any other Lender, to it at its address (or telecopy number) provided to the Global Administrative Agent, the Australian Administrative Agent and Borrower or as set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. All of the parties hereto agree that the Australian Administrative Agent may communicate ordinary course notices and communications to the Lenders and other parties hereto by e-mail or other similar electronic means if the Australian Administrative Agent, in its reasonable discretion, believes that such communication method would be the most efficient method of distribution. SECTION 10.2 Waivers; Amendments. (a) No failure or delay by the Global Administrative Agent, the Australian Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Global Administrative Agent, the Australian Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Global Administrative Agent, the Australian Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. 43 (b) Any of the Combined Loan Documents or any provision thereof may be waived, amended or modified pursuant to an agreement or agreements in writing entered into by Borrower and the Combined Required Lenders or by Borrower and the Global Administrative Agent and the Australian Administrative Agent with the consent of the Combined Required Lenders; provided that the same waiver, amendment or modification is requested by Parent in connection with each of the Combined Credit Agreements; and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of (i) the Lenders described in the first proviso of Section 10.2(c) without the prior written consent of each Lender affected thereby and (ii) the Global Administrative Agent or the Australian Administrative Agent without the prior written consent of the Global Administrative Agent or the Australian Administrative Agent, respectively. (c) Except as provided for in Section 10.2(b) above, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Borrower and the Required Lenders or by Borrower and the Global Administrative Agent and the Australian Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender or the Commitments without the written consent of such Lender or each Lender, respectively, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of "Required Lenders", "Combined Required Lenders" or any other provision hereof or thereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or thereunder or make any determination or grant any consent hereunder or thereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Global Administrative Agent or the Australian Administrative Agent hereunder or thereunder without the prior written consent of the Global Administrative Agent or the Australian Administrative Agent, respectively. SECTION 10.3 Expenses; Indemnity; Damage Waiver. (a) Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Agents or any Lender, including the fees, charges and disbursements of any counsel for the Agents or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made 44 hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or this Agreement. (b) Borrower shall indemnify the Agents and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee"), WHETHER OR NOT RELATED TO ANY NEGLIGENCE OF THE INDEMNITEE, against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel (or a solicitor and his own client basis) for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the actual or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether brought by a third party or by the Borrower and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (i) resulted from the gross negligence or willful misconduct of such Indemnitee or (ii) arise in connection with any issue in litigation commenced by Borrower or any of its Subsidiaries against any Indemnitee for which a final judgment is entered in favor of Borrower or any of its Subsidiaries against such Indemnitee. (c) To the extent that Borrower fails to pay any amount required to be paid by it to the Global Administrative Agent or the Australian Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Global Administrative Agent or the Australian Administrative Agent, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Global Administrative Agent or the Australian Administrative Agent, respectively. (d) To the extent permitted by applicable law, Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions or any Loan or the use of the proceeds thereof, except for any such claim arising from such Indemnitee's gross negligence or willful misconduct. (e) All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor. 45 SECTION 10.4 Successors and Transferees. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and transferees permitted hereby, except that Borrower may not transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted transfer by Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and transferees permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Global Administrative Agent, the Australian Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may transfer to one or more bank or other entities which are residents in Australia for purposes of the Income Tax Assessment Act 1936 (Cth) ("Substituting Lender") all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of a transfer to a Lender or an Affiliate of a Lender, each of Borrower, the Australian Administrative Agent and the Global Administrative Agent must give their prior written consent to such transfer (which consent shall not be unreasonably withheld), (ii) except in the case of a transfer to a Lender or an Affiliate of a Lender or a transfer of the entire remaining amount of the transferring Lender's Commitment, the amount of the Commitment of the transferring Lender subject to each such transfer (determined as of the date the Substitution Certificate with respect to such transfer is delivered to the Australian Administrative Agent and the Global Administrative Agent) shall be in increments of $1,000,000 and not less than $10,000,000 unless each of Borrower, the Australian Administrative Agent and the Global Administrative Agent otherwise consent, (iii) each partial transfer shall be made as a transfer of a proportionate part of all the transferring Lender's rights and obligations under this Agreement, (iv) the parties to each transfer shall execute and deliver to the Australian Administrative Agent and the Global Administrative Agent a Substitution Certificate, together with a processing and recordation fee of $3,500 to the Australian Administrative Agent, and (v) the Substituting Lender, if it shall not be a Lender, shall deliver to the Australian Administrative Agent and the Global Administrative Agent an Administrative Questionnaire; and provided further that any consent of Borrower otherwise required under this paragraph shall not be required if an Event of Default under Section 8.1 has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Substitution Certificate the Substituting Lender thereunder shall be a party hereto and, to the extent of the interest transferred by such Substitution Certificate, have the rights and obligations of a Lender under this Agreement, and the transferring Lender thereunder shall, to the extent of the interest transferred by such Substitution Certificate, be released from its obligations under this Agreement (and, in the case of a Substitution Certificate covering all of the transferring Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3). Any transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. 46 (c) The Australian Administrative Agent and the Global Administrative Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices in Sydney, Australia, and The City of New York, respectively, a copy of each Substitution Certificate delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and Borrower, the Australian Administrative Agent, the Global Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Substitution Certificate executed by an transferring Lender and a Substituting Lender, the Substituting Lender's completed Administrative Questionnaire (unless the Substituting Lender shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such transfer required by paragraph (b) of this Section, the Australian Administrative Agent and the Global Administrative Agent shall accept such Substitution Certificate and record the information contained therein in the Register and will provide prompt written notice to Borrower of the effectiveness of such Substitution Certificate. No transfer shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of Borrower, the Australian Administrative Agent or the Global Administrative Agent, sell participations to one or more banks or other entities which are resident in Australia for purposes of the Income Tax Assessment Act 1936 (Cth) (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, the Australian Administrative Agent, the Global Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (iv) if such Participant is not a Lender or an Affiliate of a Lender, such Lender shall have given notice to Borrower of the name of the Participant and the amount of such participation. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.2(c) that affects such Participant. Subject to paragraph (f) of this Section, Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by transfer pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.8 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(c) as though it were a Lender. Any stamp duty payable on or in respect of such a sale which does not occur during the continuation of a Default shall be paid by the Participant. 47 (f) A Participant shall not be entitled to receive any greater payment under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless Borrower shall expressly agree otherwise in writing. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.16(e) as though it were a Lender. SECTION 10.5 Survival. All covenants, agreements, representations and warranties made by Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Australian Administrative Agent, the Global Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.6 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Australian Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Australian Administrative Agent and the Global Administrative Agent and when the Australian Administrative Agent and the Global Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.7 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.8 Right of Setoff. If an Event of Default shall have occurred and be continuing and the Obligations of Borrower shall have been accelerated, each Lender and each of 48 its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of each Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW SOUTH WALES AND OF AUSTRALIA APPLICABLE THEREIN. (b) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW SOUTH WALES, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURTS OF THE STATE OF NEW SOUTH WALES. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN THE FIRST SENTENCE OF PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. 49 (d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW SOUTH WALES. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SECTION 10.10 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.11 Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of Borrower or (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section by any Person or (B) becomes available to any Agent or any Lender on a non-confidential basis from a source other than Borrower or any Person obligated to maintain the confidentiality of such Information. Prior to disclosing any Information under clause (c) above, the Agent or Lender required or asked to make such disclosure shall make a good faith effort to give Borrower prior notice of such proposed disclosure to permit Borrower to attempt to obtain a protective order or other appropriate injunctive relief. For the purposes of this Section, "Information" means all information received from Borrower relating to Borrower or its business, other than any publicly available information and such information that is available to any Agent or any Lender on a non-confidential basis prior to disclosure by Borrower; provided that, in the case of information received from Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 10.12 Interest Rate Limitation. It is the intention of the parties hereto to conform strictly to applicable interest, usury and criminal laws and, anything herein to the contrary notwithstanding, the obligations of Borrower to a Lender or any Agent under this Agreement shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to such Lender or Agent limiting rates of interest which may be charged or collected by such Lender or Agent. Accordingly, if the transactions contemplated hereby would be illegal, unenforceable, usurious or criminal under laws applicable to a Lender or Agent (including the laws of any jurisdiction 50 whose laws may be mandatorily applicable to such Lender or Agent notwithstanding anything to the contrary in this Agreement or any other Loan Document but subject to Section 2.12 hereof) then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document, it is agreed as follows: (i) the provisions of this Section shall govern and control; (ii) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under this Agreement, or under any of the other aforesaid agreements or otherwise in connection with this Agreement by such Lender or Agent shall under no circumstances exceed the maximum amount of interest allowed by applicable law (such maximum lawful interest rate, if any, with respect to each Lender and the Agent herein called the "Highest Lawful Rate"), and any excess shall be cancelled automatically and if theretofore paid shall be credited to Borrower by such Lender or Agent (or, if such consideration shall have been paid in full, such excess refunded to Borrower); (iii) all sums paid, or agreed to be paid, to such Lender or Agent for the use, forbearance and detention of the indebtedness of Borrower to such Lender or Agent hereunder or under any Loan Document shall, to the extent permitted by laws applicable to such Lender or Agent, as the case may be, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof; (iv) if at any time the interest provided pursuant to this Section or any other clause of this Agreement or any other Loan Document, together with any other fees or compensation payable pursuant to this Agreement or any other Loan Document and deemed interest under laws applicable to such Lender or Agent, exceeds that amount which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees or compensation to accrue to such Lender or Agent pursuant to this Agreement shall be limited, notwithstanding anything to the contrary in this Agreement or any other Loan Document, to that amount which would have accrued at the Highest Lawful Rate, but any subsequent reductions, as applicable, shall not reduce the interest to accrue to such Lender or Agent pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest accrued pursuant to this Agreement or such other Loan Document, as the case may be, and such fees or compensation deemed to be interest equals the amount of interest which would have accrued to such Lender or Agent if a varying rate per annum equal to the interest provided pursuant to any other relevant Section hereof (other than this Section), as applicable, had at all times been in effect, plus the amount of fees which would have been received but for the effect of this Section; and (v) with the intent that the rate of interest herein shall at all times be lawful, and if the receipt of any funds owing hereunder or under any other agreement related hereto (including any of the other Loan Documents) by such Lender or Agent would cause such Lender to charge Borrower a criminal rate of interest, the Lenders and the Agents agree that they will not require the payment or receipt thereof or a portion thereof which would cause a criminal rate of interest to be charged by such Lender or Agent, as 51 applicable, and if received such affected Lender or Agent will return such funds to Borrower so that the rate of interest paid by Borrower shall not exceed a criminal rate of interest from the date this Agreement was entered into. SECTION 10.13 Joint and Several Obligations. Each Borrower has determined that it is in its best interest and in pursuance of its legitimate business purposes to induce the Lenders to extend credit to the Borrowers pursuant to this Agreement. Each Borrower acknowledges and represents that the availability of the Commitments to each of the Borrowers benefits each Borrower individually and that the Loans made will be for and inure to the benefit of each of the Borrowers individually and as a group. Accordingly, each Borrower shall be jointly and severally liable (as a principal and not as a surety, guarantor or other accommodation party) for each and every representation, warranty, covenant and obligation to be performed by the Borrowers under this Agreement and the other Loan Documents, and each Borrower acknowledges that in extending the credit provided herein the Agent and the Lenders are relying upon the fact that the Obligations of each Borrower hereunder are the joint and several obligations of a principal. The invalidity, unenforceability or illegality of this Agreement or any other Loan Document as to one Borrower or the release by the Agent or the Lenders of a Borrower hereunder or thereunder shall not affect the Obligations of the other Borrowers under this Agreement or the other Loan Documents, all of which shall otherwise remain valid and legally binding obligations of the other Borrowers. SECTION 10.14 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. [SIGNATURES BEGIN ON FOLLOWING PAGE] 52 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. APACHE ENERGY LIMITED (ACN 009 301 964) By: _____________________________________ Name: Matthew W. Dundrea Title: Vice President and Treasurer JPMORGAN CHASE BANK, N.A., as Global Administrative Agent By: _____________________________________ Name: Title: CITISECURITIES LIMITED (ABN 51 008 489 610), as Australian Administrative Agent By: _____________________________________ Name: Title: DEUTSCHE BANK AG, SYDNEY BRANCH (ABN 13 064 165 162), as an Australian Co-Syndication Agent and as Lender By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: [SIGNATURE PAGE TO AUSTRALIAN CREDIT AGREEMENT] S-1 JPMORGAN CHASE BANK (ARBN 074 112 011), as an Australian Co-Syndication Agent and as Lender By: _____________________________________ Name: Title: BANK OF AMERICA, N.A., SYDNEY BRANCH (ARBN 064 874 531), as an Australian Co-Documentation Agent and as Lender By: _____________________________________ Name: Title: UBS AG, AUSTRALIA BRANCH (ABN 47 088 129 613), as an Australian Co-Documentation Agent and as Lender By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: CITIBANK, N.A. (ARBN 072 814 058)], as Lender By: _____________________________________ Name: Title: [SIGNATURE PAGE TO AUSTRALIAN CREDIT AGREEMENT] S-2 BARCLAYS BANK PLC, AUSTRALIAN BRANCH (ABN 86062 449 585), as Lender By: _____________________________________ Name: Title: [SIGNATURE PAGE TO AUSTRALIAN CREDIT AGREEMENT] S-3 EX-12.1 5 h27174exv12w1.txt STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 APACHE CORPORATION STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ---------------------- 2005 2004 2004 2003 ---------- ---------- ---------- ---------- EARNINGS Pretax income from continuing operations before preferred interests of subsidiaries............................................................ $1,833,542 $1,097,534 $2,663,083 $1,930,925 Add: Fixed charges excluding capitalized interest and preferred interest requirements of consolidated subsidiaries.................................. 73,122 62,901 134,797 132,820 ---------- ---------- ---------- ---------- Adjusted Earnings............................................................ $1,906,664 $1,160,435 $2,797,880 $2,063,745 ========== ========== ========== ========== FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Interest expense including capitalized interest (1).......................... $ 90,073 $ 80,742 $ 168,090 $ 173,045 Amortization of debt expense................................................. 2,705 1,162 2,471 2,163 Interest component of lease rental expenditures (2).......................... 8,007 7,355 14,984 14,458 Preferred interest requirements of consolidated subsidiaries (3)............. - - - 11,805 ---------- ---------- ---------- ---------- Fixed charges................................................................ 100,785 89,259 185,545 201,471 Preferred stock dividend requirements (4).................................... 4,534 4,271 9,058 9,968 ---------- ---------- ---------- ---------- Combined Fixed Charges and Preferred Stock Dividends......................... $ 105,319 $ 93,530 $ 194,603 $ 211,439 ========== ========== ========== ========== Ratio of Earnings to Fixed Charges.............................................. 18.92 13.00 15.08 10.24 ========== ========== ========== ========== Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends....... 18.10 12.41 14.38 9.76 ========== ========== ========== ========== 2002 2001 2000 ---------- ---------- ---------- EARNINGS Pretax income from continuing operations before preferred interests of subsidiaries............................................................ $ 915,194 $1,206,863 $1,203,681 Add: Fixed charges excluding capitalized interest and preferred interest requirements of consolidated subsidiaries.................................. 128,730 134,484 116,190 ---------- ---------- ---------- Adjusted Earnings............................................................ $1,043,924 $1,341,347 $1,319,871 ========== ========== ========== FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Interest expense including capitalized interest (1).......................... $ 155,667 $ 178,915 $ 168,121 Amortization of debt expense................................................. 1,859 2,460 2,726 Interest component of lease rental expenditures (2).......................... 11,895 9,858 7,343 Preferred interest requirements of consolidated subsidiaries (3)............. 19,581 8,608 - ---------- ---------- ---------- Fixed charges................................................................ 189,002 199,841 178,190 Preferred stock dividend requirements (4).................................... 17,540 32,495 33,386 ---------- ---------- ---------- Combined Fixed Charges and Preferred Stock Dividends......................... $ 206,542 $ 232,336 $ 211,576 ========== ========== ========== Ratio of Earnings to Fixed Charges.............................................. 5.52 6.71 7.41 ========== ========== ========== Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends....... 5.05 5.77 6.24 ========== ========== ==========
(1) The Company did not receive a tax benefit for $5 million of transaction costs written off to interest expense when the Company retired its preferred interests of subsidiaries in September 2003. Given the non-deductibility of the charge, $9 million of pre-tax income was required to cover the $5 million write-off. Accordingly, interest expense for the 2003 period was grossed up by $4 million. (2) Represents the portion of rental expense assumed to be attributable to interest factors of related rental obligations determined at interest rates appropriate for the period during which the rental obligations were incurred. Approximately 32 to 34 percent applies to rental payments for all periods presented. (3) The Company did not receive a tax benefit for a portion of its preferred interests of consolidated subsidiaries. This amount represents the pre-tax earnings that would be required to cover preferred interests requirements of consolidated subsidiaries. In September 2003, the Company retired its preferred interests of subsidiaries. (4) The Company does not receive a tax benefit for its preferred stock dividends. This amount represents the pre-tax earnings that would be required to cover its preferred stock dividends. EX-31.1 6 h27174exv31w1.txt CERTIFICATION OF CEO EXHIBIT 31.1 CERTIFICATIONS I, G. Steven Farris, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Apache Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information ; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ G. Steven Farris - ---------------------------------------- G. Steven Farris President, Chief Executive Officer and Chief Operating Officer Date: August 8, 2005 EX-31.2 7 h27174exv31w2.txt CERTIFICATION OF CFO EXHIBIT 31.2 CERTIFICATIONS I, Roger B. Plank, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Apache Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Roger B. Plank - ----------------------------------------------------- Roger B. Plank Executive Vice President and Chief Financial Officer Date: August 8, 2005 EX-32.1 8 h27174exv32w1.txt CERTIFICATION OF CEO AND CFO EXHIBIT 32.1 APACHE CORPORATION CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER I, G. Steven Farris, certify that the Quarterly Report of Apache Corporation on Form 10-Q for the quarterly period ending June 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or Section 78o (d)) and that information contained in such report fairly represents, in all material respects, the financial condition and results of operations of Apache Corporation. /s/ G. Steven Farris - ------------------------------------------ By: G. Steven Farris Title: President, Chief Executive Officer and Chief Operating Officer I, Roger B. Plank, certify that the Quarterly Report of Apache Corporation on Form 10-Q for the quarterly period ending June 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or Section 78o (d)) and that information contained in such report fairly represents, in all material respects, the financial condition and results of operations of Apache Corporation. /s/ Roger B. Plank - ---------------------------------- By: Roger B. Plank Title: Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----