0000950129-95-001215.txt : 19950920
0000950129-95-001215.hdr.sgml : 19950920
ACCESSION NUMBER: 0000950129-95-001215
CONFORMED SUBMISSION TYPE: S-3/A
PUBLIC DOCUMENT COUNT: 4
FILED AS OF DATE: 19950919
SROS: CSE
SROS: NYSE
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: S-3/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-62177
FILM NUMBER: 95574856
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
S-3/A
1
APACHE CORPORATION FORM S-3, AMENDMENT #2
1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1995.
REGISTRATION NO. 33-62177
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
APACHE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or
organization)
ONE POST OAK CENTRAL
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
(713) 296-6000
NO. 41-0747868
(I.R.S. Employer
Identification No.)
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Z. S. KOBIASHVILI
VICE PRESIDENT AND GENERAL COUNSEL
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
(713) 296-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
WILLIAM N. FINNEGAN, IV R. JOEL SWANSON
ANDREWS & KURTH L.L.P. BAKER & BOTTS, L.L.P.
TEXAS COMMERCE TOWER ONE SHELL PLAZA, 910 LOUISIANA
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002-4995
(713) 220-4200 (713) 229-1234
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
CALCULATION OF ADDITIONAL REGISTRATION FEE
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PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
ADDITIONAL PROPOSED MAXIMUM PRICE OF ADDITIONAL
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER ADDITIONAL REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1)(4) SHARE(2) SHARES(2) FEE(4)
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Common Stock, par value
$1.25 per share(3)............ 747,500 Shares $28.125 $21,023,438 $7,250
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(1) Includes 97,500 additional shares subject to the over-allotment option
granted to the Underwriters.
(2) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee based on the average of the high and low reported sales
prices for September 18, 1995, as reported on The New York Stock Exchange,
Inc. Composite Transactions Reporting System.
(3) Including associated common stock purchase rights.
(4) Registration fee of $72,133 was previously paid with respect to 7,820,000
shares included in the Registration Statement as previously filed.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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2
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 19, 1995
PROSPECTUS
7,450,000 SHARES
[LOGO]
COMMON STOCK
------------------------
All 7,450,000 shares of Common Stock, par value $1.25 per share (the
"Common Stock"), offered hereby (the "Shares") are being sold by Apache
Corporation ("Apache" or the "Company"). The Common Stock is listed on the New
York Stock Exchange (the "NYSE") under the trading symbol "APA." On September
18, 1995, the last reported sale price of the Common Stock as reported on the
NYSE was $28 1/4 per share. See "Price Range of Common Stock and Dividends."
SEE "RISK FACTORS" AT PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Caption>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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Per Share......................... $ $ $
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Total(3).......................... $ $ $
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(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company has granted the several Underwriters a 30-day option to purchase
up to an additional 1,117,500 shares to cover over-allotments, if any. If
all such shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company would be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The Shares are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of certificates
for the Shares will be made in New York, New York on or about ,
1995.
------------------------
MERRILL LYNCH & CO. DEAN WITTER REYNOLDS INC.
------------------------
The date of this Prospectus is , 1995.
3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
CHICAGO STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (Commission File No. 1-4300) are
incorporated in and made a part of this Prospectus:
(i) Annual Report on Form 10-K/A for the fiscal year ended December 31,
1994, filed August 2, 1995.
(ii) Quarterly Report on Form 10-Q/A for the quarter ended March 31,
1995, filed August 4, 1995.
(iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
filed August 14, 1995.
(iv) Current Report on Form 8-K dated March 1, 1995, amended by Amendment
No. 1 on Form 8-K/A, filed March 22, 1995.
(v) Current Report on Form 8-K/A dated May 17, 1995, filed July 17, 1995.
(vi) Current Report on Form 8-K dated June 30, 1995, filed July 24, 1995.
(vii) Current Report on Form 8-K dated August 28, 1995, filed September 6,
1995.
(viii) Registration Statement on Form 8-A dated January 21, 1986, for the
Common Stock purchase rights issued under the Company's Rights
Agreement dated January 10, 1986.
All documents which the Company files pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering described herein (the "Offering") shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such reports and documents. Any statement contained in a
document incorporated by reference, or deemed to be incorporated by reference,
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document or in any accompanying prospectus supplement modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all
documents described above (other than exhibits thereto, unless such exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates by reference). Requests should be addressed to Apache Corporation,
One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas
77056-4400, Attention: Corporate Secretary (telephone (713) 296-6000).
2
4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the financial statements (including the notes thereto)
appearing elsewhere in this Prospectus or incorporated by reference in this
Prospectus. Unless otherwise indicated, information in this Prospectus assumes
that the Underwriters' over-allotment option will not be exercised. See
"Underwriting." Unless otherwise indicated, the information in this Prospectus
includes the effects of (i) the acquisition on March 1, 1995 of certain U.S. oil
and gas properties from Texaco Exploration and Production Inc. ("Texaco") from
and after the acquisition date, and (ii) the restatement of the Company's
financial, operating and reserve information to include DEKALB Energy Company
("DEKALB") on a combined basis effective for all periods as a result of the
Company's May 17, 1995 acquisition of DEKALB, which was accounted for as a
pooling of interests. Investors should carefully consider the information set
forth under the heading "Risk Factors."
THE COMPANY
OVERVIEW
Apache Corporation, a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops, produces, gathers,
processes and markets crude oil and natural gas. In North America, Apache's
exploration and production interests are focused on the Gulf of Mexico, the
Anadarko Basin, the Permian Basin, the Gulf Coast, the Rocky Mountains and the
Western Sedimentary Basin of Canada. Outside of North America, Apache has
exploration and production interests offshore Western Australia and exploration
interests in Egypt and Indonesia and offshore China and the Ivory Coast.
Apache's Common Stock has been listed on the NYSE since 1969 and on the Chicago
Stock Exchange (the "CSE") since 1960.
As of December 31, 1994, on a pro forma basis giving effect to the
completed Texaco and DEKALB transactions and the pending Aquila acquisition
(discussed below), and net of completed and pending property dispositions in
1995, the Company's estimated proved reserves were 420 MMboe, of which
approximately 62% was natural gas.
Apache's growth strategy is to increase reserves, production and cash flow
through a combination of acquisitions, moderate-risk drilling and development of
its inventory of existing projects. The Company emphasizes reducing operating
costs and selling marginal and non-strategic properties. An emerging aspect of
Apache's strategy is its exploration and development activity in the
international arena in pursuit of larger reserve targets than are generally
available domestically. Several recent international discoveries have created an
inventory of development projects to be drilled in the next several years.
Property acquisition is only one phase in a continuing cycle of Apache's
business growth. Apache's objective is to follow each material acquisition with
a cycle of reserve enhancement, property consolidation and cash flow
acceleration, facilitating asset growth and debt reduction. This approach
requires well-planned and carefully executed property development and a
commitment to a selective program of ongoing property dispositions. Apache
targets acquisitions that have ascertainable additional reserve potential to
which it applies an active drilling, workover and recompletion program to
realize the potential of the undeveloped and partially developed properties. In
1994, the Company replaced over 114% of U.S. production through its drilling,
workover and recompletion program. Apache prefers to operate its properties so
that it can more efficiently influence their development and currently operates
properties accounting for over 75% of its current production.
3
5
RECENT DEVELOPMENTS
On August 28, 1995, the Company entered into a purchase and sale agreement
with Aquila Energy Resources Corporation ("Aquila"), a wholly owned, indirect
subsidiary of UtiliCorp United Inc. ("UtiliCorp"), to acquire substantially all
the assets of Aquila (the "Aquila Assets") for approximately $198 million,
subject to certain adjustments. The oil and gas properties included in the
Aquila Assets are located primarily in the Anadarko Basin, the Gulf Coast, the
Gulf of Mexico and the Permian Basin, in many cases in close proximity to
existing Apache properties. These properties are concentrated, with the largest
seven fields representing approximately three quarters of proved reserves and
the largest 15 fields representing more than 90% of proved reserves. Five of the
largest seven fields are operated by Aquila. Based on information provided to
the Company by Aquila, the Aquila Assets represented estimated proved reserves
of approximately 26 MMboe at December 31, 1994. The composition of the estimated
proved reserves included in the Aquila Assets was approximately 77% gas at
December 31, 1994. The Aquila Assets also include a favorable long-term gas
sales contract at escalating prices, with an allocated value under the purchase
agreement of $28.7 million. The Company intends to finance the acquisition of
the Aquila Assets with a portion of the net proceeds of the Offering and a
transaction involving a deferred tax-free, like-kind exchange of properties.
The Company has consummated two other significant acquisitions in 1995. On
March 1, 1995, the Company purchased certain U.S. oil and gas properties from
Texaco for an adjusted purchase price of $564 million. The Texaco properties
comprised estimated proved reserves at the effective date of 105 MMboe (after
adjustment for the exercise of preferential rights and properties excluded
following due diligence, and using unescalated prices), of which approximately
70% was oil. Prior to the time of purchase, the average daily production of the
acquired properties was approximately 20 Mbbls of oil and 85 MMcf of gas. On May
17, 1995, Apache acquired DEKALB, an oil and gas company engaged in the
exploration for, and the development of, crude oil and natural gas in Canada,
pursuant to a merger agreement under which Apache issued 8.4 million shares of
Common Stock in exchange for all outstanding DEKALB capital stock and DEKALB
employee stock options outstanding at the time of the merger and tendered to
Apache. At year-end 1994, DEKALB's estimated proved reserves, located almost
entirely in Canada, were 300 Bcf of natural gas and 11 MMbbls of hydrocarbon
liquids, or a total of 61 MMboe.
During the first half of 1995, Apache received approximately $73 million
from completed dispositions of oil and gas properties as part of its previously
announced plans to sell lower-margin and non-strategic properties. On September
1, 1995, Apache disposed of certain of its Rocky Mountain properties to Citation
1994 Investment Limited Partnership ("Citation") for consideration of
approximately $151 million (approximately $143 million net to Apache), subject
to adjustment. These assets include Apache's interest in 138 fields with
approximately 1,600 active wells located in Colorado, Montana, North Dakota,
South Dakota, Utah and Wyoming, with average daily production of approximately 9
Mbbls of oil and 9 MMcf of natural gas. Estimated proved reserves attributable
to completed and pending property dispositions in 1995 were 41 MMboe at December
31, 1994.
4
6
SUMMARY PRO FORMA OIL AND GAS RESERVE INFORMATION
The following table sets forth summary pro forma information with respect
to the Company's estimated proved oil and gas reserves as of December 31, 1994,
giving effect to the completed DEKALB and Texaco transactions, the pending
Aquila acquisition and certain completed and pending dispositions of
non-strategic properties in 1995. The reserve information below is based on
estimates calculated as of December 31, 1994 and does not reflect production and
revisions since December 31, 1994 or changes in oil and gas prices, changes in
expectations of developing and producing proved undeveloped reserves (including
offshore), changes in marketing expectations and access to markets or changes in
estimates of recoverable reserves resulting from price changes. The reserves
attributable to the completed DEKALB and Texaco acquisitions and the pending
Aquila acquisition were not owned by the Company on such date. The Company has
made other acquisitions and dispositions of property interests during 1995 which
in the aggregate are not material. All estimates of oil and gas reserves are
subject to significant uncertainty. See "Risk Factors."
APACHE AND 1995 TOTAL
DEKALB(1) TEXACO(2) AQUILA(3) DISPOSITIONS(4) PROVED
---------- --------- --------- --------------- ----------
Oil and natural gas liquids (Mbbls).... 110,624 73,597 6,035 29,166 161,090
Natural gas (MMcf)..................... 1,316,155 186,495 120,857 68,351 1,555,156
Equivalent reserves (Mboe)............. 329,983 104,680 26,178 40,558 420,283
Present value of estimated future net
cash flows, before income taxes,
discounted at 10% (in thousands)..... $1,600,927 $ 368,518 $ 110,120 $ 149,650 $1,929,915
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(1) On May 17, 1995, the Company acquired DEKALB through a merger that was
accounted for under the pooling of interests method.
(2) On March 1, 1995, the Company acquired certain properties from Texaco.
(3) The Company proposes to acquire certain properties from Aquila effective
concurrently with and conditioned on the consummation of the Offering.
Netherland, Sewell & Associates, Inc. ("Netherland, Sewell") estimated
reserves owned by Aquila as of December 31, 1994. Since that time, Aquila
has acquired additional property interests included in the amounts set forth
above. Netherland, Sewell has estimated total proved reserves of Aquila as
of December 31, 1994 in the approximate amounts of 2,781 Mbbls of oil and
106,535 MMcf of gas (totaling 20,537 Mboe), and $92 million of present value
of estimated future net cash flows, before income taxes, discounted at 10%
(which amounts exclude the properties acquired by Aquila in 1995).
(4) The reserves shown give effect to the September 1, 1995 disposition of
certain Rocky Mountain properties valued at approximately $151 million, the
sale of $20 million in properties on April 1, 1995, the sale of $31 million
in properties on May 1, 1995, and other smaller sales.
5
7
THE OFFERING
Shares of Common Stock offered............... 7,450,000 shares
Shares of Common Stock to be outstanding
after the Offering(1)...................... 77,364,519 shares
Use of Proceeds.............................. To provide a portion of the funds to acquire
the Aquila Assets and certain additional oil
and gas properties and to reduce amounts
outstanding under the Company's principal
revolving credit facility. The Company may
subsequently reborrow under the facility to
finance future acquisitions of additional oil
and gas properties or for other corporate
purposes. See "Use of Proceeds" and
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations."
NYSE Symbol.................................. APA
---------------
(1) Based on shares outstanding as of June 30, 1995. Does not include the
following shares of Common Stock reserved for issuance (subject to
adjustment): 2,777,778 shares issuable on conversion of the 3.93%
convertible notes at $27.00 per share; 5,622,555 shares issuable on
conversion of the 6% Convertible Subordinated Debentures due 2002 at $30.68
per share; 122,606 shares reserved for the dividend reinvestment plan with
respect to the Common Stock; 400,000 shares reserved for the
retirement/401(k) savings plan; and 3,411,200 shares reserved under
existing employee stock option plans, including 911,197 shares issuable on
the exercise of employee stock options outstanding as of June 30, 1995 and
361,600 shares issuable on the exercise of employee stock options granted
August 23, 1995. Does not include 1,350,000 shares of Common Stock issuable
from time to time in connection with the Company's private merger program.
The Company currently has a policy of reserving one share of Common Stock
for each share outstanding or otherwise reserved to provide for any
issuances under the Company's Rights Agreement.
Quantities of natural gas are expressed in terms of thousand cubic feet
("Mcf"), million cubic feet ("MMcf") or billion cubic feet ("Bcf"). Oil (which
includes condensate) is quantified in terms of barrels ("bbls"), thousands of
barrels ("Mbbls") or millions of barrels ("MMbbls"). One barrel of oil is the
energy equivalent of six Mcf of natural gas, expressed as a barrel of oil
equivalent ("boe"). Natural gas is compared to oil in terms of thousand barrels
of oil equivalents ("Mboe") and in million barrels of oil equivalents ("MMboe").
Oil and natural gas liquids are compared with natural gas in terms of million
cubic feet equivalent ("MMcfe") and billion cubic feet equivalent ("Bcfe").
Daily oil and gas production is expressed in terms of barrels of oil per day
("bopd") and thousands of cubic feet per day ("Mcfd"), respectively. The
Company's "net" working interest in wells or acreage is determined by
multiplying gross wells or acreage by the Company's working interest therein.
Unless otherwise specified, all references to wells and acres are gross.
6
8
SUMMARY CONSOLIDATED FINANCIAL, OPERATING AND RESERVE DATA
The following table sets forth certain information regarding Apache's
consolidated results of operations, financial position and operating and reserve
data as of and for the periods indicated. On May 17, 1995, Apache acquired
DEKALB through a merger which was accounted for under the pooling of interests
method. As a result, the financial, operating and reserve data presented below
has been restated to present Apache and DEKALB on a combined basis, including
certain conforming adjustments to depreciation, depletion and amortization and
income taxes. The data presented below should be read in conjunction with the
Company's consolidated financial statements and the notes thereto incorporated
by reference in this Prospectus. The following financial information is not
necessarily indicative of future results of the Company. See also "Selected
Consolidated Financial, Operating and Reserve Data."
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992(1)
---------- ---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AND PER UNIT AMOUNTS)
INCOME STATEMENT DATA:
Oil and gas production revenues...................... $ 538,389 $ 481,848 $ 453,835
Consolidated revenues................................ 592,626 512,632 517,403
Net income (loss).................................... 45,583 46,755 (15,682)
Net income (loss) per common share................... .65 .75 (.28)
Cash dividends per common share(2)................... .28 .28 .28
CASH FLOW DATA:
Net income (loss) from continuing operations......... $ 45,583 $ 41,421 $ (14,632)
Depreciation, depletion and amortization............. 257,821 198,320 179,876
Impairments.......................................... 7,300 23,200 65,320
Amortization of deferred loan costs.................. 3,987 3,896 3,888
Provision for deferred income taxes.................. 24,385 20,539 (998)
Gain on sale of investment in affiliate.............. -- -- (30,259)
Change in working capital and other.................. 18,693 (31,385) 19,758
---------- ---------- ----------
Net cash provided by operating activities....... $ 357,769 $ 255,991 $ 222,953
========= ========= =========
BALANCE SHEET DATA (period end):
Working capital (deficit)............................ $ (3,203) $ (55,538) $ (32,775)
Total assets......................................... 2,036,627 1,759,203 1,774,767
Long-term debt....................................... 719,033 504,334 524,098
Shareholders' equity................................. 891,087 868,596 554,524
PRODUCTION DATA:
Oil (Mbbls).......................................... 13,815 13,036 13,465
Natural gas (MMcf)................................... 176,397 131,591 119,962
Natural gas liquids (Mbbls).......................... 724 733 885
Equivalent production (Mboe)......................... 43,939 35,701 34,344
AVERAGE SALES PRICE:
Oil (per bbl)........................................ $ 15.65 $ 16.74 $ 18.11
Natural gas (per Mcf)................................ 1.78 1.94 1.66
Natural gas liquids (per bbl)........................ 11.28 11.55 11.79
RESERVE DATA -- PROVED (period end):
Oil and natural gas liquids (Mbbls).................. 110,624 102,957 94,643
Natural gas (MMcf)................................... 1,316,155 1,125,630 919,642
Equivalent reserves (Mboe)........................... 329,983 290,562 247,917
Present value of estimated future net cash flows,
before income taxes, discounted at 10%............ $1,600,927 $1,626,096 $1,272,952
---------------
(See notes on following page)
7
9
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ ------------------------
1995(3)(4) 1994 1995(3)(4) 1994
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT
AMOUNTS)
INCOME STATEMENT DATA:
Oil and gas production revenues............ $ 174,519 $ 134,440 $ 317,708 $ 259,418
Consolidated revenues...................... 206,052 147,054 373,770 279,775
Net income................................. 537 12,907 4,620 21,132
Net income per common share................ .01 .19 .07 .30
Cash dividends per common share(2)......... .07 .07 .14 .14
CASH FLOW DATA:
Net income from continuing operations...... $ 537 $ 12,907 $ 4,620 $ 21,132
Depreciation, depletion and amortization
........................................ 78,830 61,969 148,625 122,226
Impairments................................ -- 2,800 -- 6,300
Amortization of deferred loan costs........ 1,150 965 2,373 1,744
Provision for deferred income taxes........ 17,358 7,721 19,773 12,252
Change in working capital and other........ (21,165) (6,587) (34,152) (22,964)
---------- ---------- ---------- ----------
Net cash provided by operating
activities......................... $ 76,710 $ 79,775 $ 141,239 $ 140,690
========= ========= ========= =========
BALANCE SHEET DATA (period end):
Working capital (deficit).................. $ 21,511 $ (19,685) $ 21,511 $ (19,685)
Total assets............................... 2,554,557 1,823,797 2,554,557 1,823,797
Long-term debt............................. 1,207,913 578,181 1,207,913 578,181
Shareholders' equity....................... 890,542 876,978 890,542 876,978
PRODUCTION DATA:
Oil (Mbbls)................................ 5,122 3,381 9,152 6,690
Natural gas (MMcf)......................... 54,361 41,830 104,159 81,321
Natural gas liquids (Mbbls)................ 174 186 365 364
Equivalent production (Mboe)............... 14,356 10,539 26,878 20,607
AVERAGE SALES PRICE:
Oil (per bbl).............................. $ 17.48 $ 15.98 $ 17.20 $ 14.42
Natural gas (per Mcf)...................... 1.52 1.87 1.50 1.96
Natural gas liquids (per bbl).............. 12.19 11.09 12.14 10.61
---------------
(1) Includes a $40.6 million after-tax writedown of DEKALB's oil and gas
properties and a $25.6 million after-tax loss from the sale of
substantially all of DEKALB's U.S. assets. Also includes a $19.8 million
after-tax gain resulting from the sale by the Company of its 36.67%
interest in Natural Gas Clearinghouse.
(2) No cash dividends were paid on outstanding DEKALB common stock in 1995,
1994, 1993 or 1992.
(3) The three months and six months ended June 30, 1995 include the effect of
the acquisition of properties from Texaco on March 1, 1995.
(4) Includes nonrecurring transaction costs totaling $8.7 million after tax
relating to the DEKALB merger.
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RISK FACTORS
Prospective investors should carefully review the following factors
together with the other information contained in this Prospectus prior to making
an investment decision.
EFFECT OF VOLATILE PRODUCT PRICES
The Company's future financial condition and results of operations will
depend upon the prices received for the Company's oil and natural gas production
and the costs of acquiring, finding, developing and producing reserves. Prices
for oil and natural gas are subject to fluctuations in response to relatively
minor changes in supply, market uncertainty and a variety of additional factors
that are beyond the control of the Company. These factors include worldwide
political instability (especially in the Middle East and other oil-producing
regions), the foreign supply of oil and gas, the price of foreign imports, the
level of consumer product demand, government regulations and taxes, the price
and availability of alternative fuels and the overall economic environment. A
substantial or extended decline in oil and gas prices would have a material
adverse effect on the Company's financial position, results of operations,
quantities of oil and gas that may be economically produced and access to
capital. In addition, the sale of the Company's production depends upon a number
of factors beyond the Company's control, including the availability and capacity
of transportation and processing facilities.
Oil and natural gas prices have historically been volatile and are likely
to continue to be volatile in the future. Such volatility makes it difficult to
estimate the value of producing properties for acquisition and to budget and
project the return on exploration and development projects involving the
Company's producing properties. In addition, unusually volatile prices often
disrupt the market for oil and gas properties, as buyers and sellers have more
difficulty agreeing on the purchase price of properties.
The Company engages in hedging activities with respect to some of its
projected oil and gas production through a variety of financial arrangements
designed to protect against price declines, including swaps, collars and futures
agreements. To the extent that Apache engages in such activities, it may be
prevented from realizing the benefits of price increases above the levels of the
hedges. Because the Company's reserve base was approximately 66% natural gas on
an energy equivalent basis as of December 31, 1994, it is more sensitive to
fluctuations in the price of natural gas than to fluctuations in the price of
oil.
The Company periodically reviews the carrying value of its oil and gas
properties under the full-cost accounting rules of the Commission. Under the
full-cost accounting rules, capitalized costs of oil and gas properties on a
country-by-country basis may not exceed the present value of estimated future
net cash flows from proved reserves, discounted at 10%, plus the lower of cost
or fair market value of unproved properties as adjusted for related tax effects.
The test is applied at the unescalated prices in effect at the applicable time
and results in a write-down if the "ceiling" is exceeded, even if prices
declined for only a short period of time. Many full-cost companies, including
Apache, are concerned about the impact of prolonged unfavorable gas prices on
their ceiling test calculations. A further deterioration of oil or gas prices
from current levels could result in the Company recording a noncash charge to
earnings related to its oil and gas properties in 1995. The Commission's rules
permit the exclusion of capitalized costs and present value of recently acquired
properties in performing ceiling test calculations. Pursuant to these rules,
Apache has requested waivers and the Commission has granted one-year waivers
with respect to the properties acquired from Texaco and certain properties
acquired from Crystal Oil Company ("Crystal"). If the ceiling is exceeded on all
U.S. properties, Apache is permitted to perform an additional ceiling test
excluding the capitalized costs and present value of the properties acquired
from Texaco and Crystal and required to record a write-down of carrying value if
the ceiling is still exceeded. If a write-down is required, it would result in a
one-time charge to earnings and would not impact net cash flow from operating
activities.
RELIANCE ON ESTIMATES OF PROVED RESERVES AND FUTURE NET CASH FLOWS; DEPLETION OF
RESERVES
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. The reserve data set forth in this Prospectus or incorporated by
reference herein represent
9
11
only estimates. In addition, the estimates of future net cash flows from proved
reserves of the Company and the present value thereof are based upon various
assumptions about future production levels, prices and costs that may prove to
be incorrect over time. Any significant variance from the assumptions could
result in the actual quantity of the Company's reserves and future net cash
flows therefrom being materially different from the estimates set forth in this
Prospectus or incorporated by reference herein. In addition, the Company's
estimated reserves may be subject to downward or upward revision based upon
production history, results of future exploration and development, prevailing
oil and gas prices, operating and development costs and other factors.
The rate of production from oil and gas properties declines as reserves are
depleted. Except to the extent that the Company acquires additional properties
containing proved reserves, conducts successful exploration and development
activities or, through engineering studies, identifies additional behind-pipe
zones or secondary recovery reserves, the proved reserves of the Company will
decline as reserves are produced. Future oil and gas production is, therefore,
highly dependent upon the Company's level of success in acquiring or finding
additional reserves.
ACQUISITION RISKS
The Company intends to continue acquiring oil and gas properties. Although
the Company performs a review of the acquired properties that it believes is
consistent with industry practices, such reviews are inherently incomplete. It
generally is not feasible to review in depth every individual property involved
in each acquisition. Ordinarily, the Company will focus its review efforts on
the higher-value properties and will sample the remainder. However, even a
detailed review of records and properties may not necessarily reveal existing or
potential problems, nor will it permit a buyer to become sufficiently familiar
with the properties to assess fully their deficiencies and potential.
Inspections may not always be performed on every well, and environmental
problems, such as ground water contamination, are not necessarily observable
even when an inspection is undertaken. Even when problems are identified, the
Company often assumes certain environmental and other risks and liabilities in
connection with acquired properties. There are numerous uncertainties inherent
in estimating quantities of proved oil and gas reserves and actual future
production rates and associated costs with respect to acquired properties, and
actual results may vary substantially from those assumed in the estimates. In
addition, there can be no assurance that acquisitions will not have an adverse
effect upon the Company's operating results, particularly during the periods in
which the operations of acquired businesses are being integrated into the
Company's ongoing operations.
OPERATING RISKS; AVAILABILITY OF INSURANCE
Exploration for and production of oil and natural gas can be hazardous,
involving unforeseen occurrences such as blowouts, cratering, fires and loss of
well control, which can result in damage to or destruction of wells or
production facilities, injury to persons, loss of life or damage to property or
the environment. The Company maintains insurance against certain losses or
liabilities arising from its operations in accordance with customary industry
practices and in amounts that management believes to be prudent. However,
insurance is not available to the Company against all operational risks, and the
occurrence of a significant event that is not fully insured could have a
material adverse effect on the Company's financial position.
COMPETITION
The oil and gas industry is highly competitive. As an independent oil and
gas company, the Company frequently competes for reserve acquisitions,
exploration leases, licenses, concessions and marketing agreements against
companies having substantially larger financial and other resources than the
Company possesses.
GOVERNMENT REGULATIONS
The Company's exploration, production and marketing operations are
regulated extensively at the federal, state and local levels, as well as by
other countries in which the Company does business. Oil and gas
10
12
exploration, development and production activities are subject to various laws
and regulations governing a wide variety of matters. For example, most states in
which Apache operates regulate the quantities of natural gas that may be
produced from wells within their borders to prevent waste in the production of
natural gas and to protect the correlative rights of competing interest owners.
It is impossible at this time to determine what changes may occur with respect
to such regulations and what effect, if any, such changes may have on the
Company and the natural gas industry as a whole.
As an owner and operator of oil and gas properties, the Company is also
subject to various federal, state, local and foreign country environmental
regulations, including air and water quality control laws. These laws and
regulations may, among other things, impose liability on the lessee under an oil
and gas lease for the cost of pollution cleanup resulting from operations,
subject the lessee to liability for pollution damages, require suspension or
cessation of operations in affected areas and impose restrictions on the
injection of liquids into subsurface aquifers that may contaminate groundwater.
Although the Company believes that it is in substantial compliance with existing
applicable environmental laws and regulations, there can be no assurance that
substantial costs for compliance will not be incurred in the future. Moreover,
it is possible that other developments, such as stricter environmental laws,
regulations and enforcement policies thereunder, could result in additional,
presently unquantifiable, costs or liabilities to the Company.
11
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USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
7,450,000 shares of Common Stock offered hereby are estimated to be $202 million
($232 million if the over-allotment option is exercised in full), assuming a
price to public of $28 1/4 per share. The Company intends to use approximately
$55 million of the net proceeds of the Offering to finance the pending
acquisition of the Aquila Assets, which are to be acquired for an aggregate
consideration of approximately $198 million, subject to adjustment.
Approximately $143 million of the consideration for the acquisition of the
Aquila Assets will be provided through a deferred tax-free, like-kind exchange
involving properties sold to Citation. In addition, the Company anticipates
using approximately $17 million of the net proceeds of the Offering to acquire
working interests in oil and gas properties operated by the Company pursuant to
purchase agreements expected to be signed in the near future. See "Recent
Developments." As a result, the remainder of the net proceeds of the Offering
will be applied to reduce indebtedness under the Company's principal revolving
credit facility.
On August 25, 1995, the amount outstanding under the revolving credit
facility was $754 million. Based upon the Company's public senior debt rating
and its ratio of debt to total capital on such date, the facility bears interest
at the First National Bank of Chicago's prime rate of interest plus .125%, or at
London Interbank Offered Rates ("LIBOR") plus 1.125%, at the Company's option,
and has a final maturity date of March 1, 2000. Amounts paid under the facility
may subsequently be reborrowed to finance future acquisitions of oil and gas
properties or for other corporate purposes. Advances under the revolving credit
facility during the past year were used primarily for property acquisitions and
working capital. As of August 25, 1995, the Company had $75 million available
for borrowing under the credit facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Subsequent Events."
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the NYSE and the CSE and traded under the
symbol "APA." The following table sets forth, for the periods indicated, (i) the
high and low sale prices of the Common Stock as reported on the NYSE Composite
Transactions Reporting System, and (ii) the dividends paid on the Common Stock.
PRICE RANGE CASH
------------- DIVIDENDS
HIGH LOW PAID(1)
---- ---- --------------
1993:
First Quarter....................................... $26 1/4 $17 5/8 $.07
Second Quarter...................................... 30 1/4 24 3/8 .07
Third Quarter....................................... 33 1/2 26 3/8 .07
Fourth Quarter...................................... 31 1/4 20 3/8 .07
1994:
First Quarter....................................... $26 7/8 $22 1/2 $.07
Second Quarter...................................... 29 1/4 22 1/4 .07
Third Quarter....................................... 29 1/4 23 .07
Fourth Quarter...................................... 28 7/8 23 5/8 .07
1995:
First Quarter....................................... $27 3/8 $22 1/4 $.07
Second Quarter...................................... 30 7/8 25 3/8 .07
Third Quarter (through September 18)................ 30 1/4 25 3/4 .07
---------------
(1) No cash dividends were paid on outstanding DEKALB common stock in 1995, 1994
or 1993.
For a recent closing sale price for the Common Stock, as reported on the
NYSE Composite Transactions Reporting System, see the cover page of this
Prospectus. As of September 18, 1995, there were approximately 12,500 holders of
record of Common Stock. Each share of Common Stock also represents one Common
Stock purchase right that, under certain circumstances, would entitle the holder
to acquire additional shares of Common Stock. See "Description of Capital
Stock." On July 13, 1995, the Company announced a dividend of $.07 per share on
the Common Stock to stockholders of record as of September 29, 1995, payable on
October 31, 1995. The Company has paid cash dividends on its Common Stock for
114 consecutive quarters through July 31, 1995, and intends to continue the
payment of dividends, although future dividend payments will depend upon the
Company's level of earnings, financial requirements and other relevant factors.
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CAPITALIZATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries as of June 30, 1995, and as adjusted to give effect to
the sale of the Common Stock offered hereby and the application of the estimated
net proceeds thereof as described in "Use of Proceeds."
ACTUAL AS ADJUSTED(1)
---------- --------------
(IN THOUSANDS)
Current maturities of long-term debt.............................. $ 7,000 $ 7,000
========== ==========
Long-term debt:
Credit facility(2).............................................. $ 764,000 $ 633,930
9.25% notes, net of discount.................................... 99,727 99,727
3.93% convertible notes......................................... 75,000 75,000
6% convertible subordinated debentures.......................... 172,500 172,500
Other (including subsidiary debt)............................... 96,686 96,686
---------- ----------
Total long-term debt(3).................................... 1,207,913 1,077,843
---------- ----------
Shareholders' equity:
Preferred stock, without par value, 5,000,000 shares authorized,
none outstanding............................................. -- --
Common stock, $1.25 par value per share, 215,000,000 shares
authorized, 71,033,559 and 78,483,559 shares issued,
respectively(4).............................................. 88,792 98,104
Paid-in capital................................................. 501,033 693,791
Retained earnings............................................... 330,715 330,715
Currency translation adjustment................................. (16,544) (16,544)
Treasury stock, at cost, 1,119,040 shares....................... (13,454) (13,454)
---------- ----------
Total shareholders' equity................................. 890,542 1,092,612
---------- ----------
Total capitalization............................................ $2,098,455 $2,170,455
========== ==========
---------------
(1) As adjusted to give effect to the sale of the 7,450,000 shares of Common
Stock offered hereby, at an assumed price to public of $28 1/4 per share
and the application of approximately $55 million of the net proceeds
thereof to finance the pending Aquila acquisition, the application of
approximately $17 million of the net proceeds thereof to purchase certain
oil and gas properties, and the application of the remaining $130 million
of the net proceeds thereof to reduce indebtedness under the Company's
principal revolving credit facility.
(2) Certain information concerning the Company's revolving credit facility is
set forth in Note 3 to the audited consolidated financial statements
incorporated by reference in this Prospectus. As of August 25, 1995, the
outstanding balance under the credit facility was $754 million.
(3) Does not include certain contingent liabilities of the Company. See Note 9
to the audited consolidated financial statements incorporated by reference
in this Prospectus.
(4) Does not include the following shares of Common Stock reserved for issuance
(subject to adjustment): 2,777,778 shares issuable on conversion of the
3.93% convertible notes at $27.00 per share; 5,622,555 shares issuable on
conversion of the 6% Convertible Subordinated Debentures due 2002 at $30.68
per share; 122,606 shares reserved for the dividend reinvestment plan with
respect to the Common Stock; 400,000 shares reserved for the
retirement/401(k) savings plan; and 3,411,200 shares reserved under
existing employee stock option plans, including 911,197 shares issuable on
the exercise of employee stock options outstanding as of June 30, 1995 and
361,600 shares issuable on the exercise of employee stock options granted
August 23, 1995. Does not include 1,350,000 shares of Common Stock issuable
from time to time in connection with the Company's private merger program.
The Company currently has a policy of reserving one share of Common Stock
for each share outstanding or otherwise reserved to provide for any
issuances under the Company's Rights Agreement.
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SELECTED CONSOLIDATED FINANCIAL, OPERATING AND RESERVE DATA
The following table sets forth certain information regarding Apache's
consolidated results of operations, financial position and operating and reserve
data as of and for the periods indicated. On May 17, 1995, Apache acquired
DEKALB through a merger which was accounted for under the pooling of interests
method. As a result, the financial, operating and reserve data presented below
has been restated to present Apache and DEKALB on a combined basis, including
certain conforming adjustments to depreciation, depletion and amortization and
income taxes. The data presented below should be read in conjunction with the
Company's consolidated financial statements and the notes thereto incorporated
by reference in this Prospectus. The following financial information is not
necessarily indicative of future results of the Company.
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1994 1993 1992(1) 1991(2)(3) 1990
---------- ----------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)
INCOME STATEMENT DATA:
Oil and gas production revenues........... $ 538,389 $ 481,848 $ 453,835 $ 409,011 $ 335,450
Consolidated revenues..................... 592,626 512,632 517,403 457,872 386,688
Net income (loss)
Continuing operations................... 45,583 41,421 (14,632) (35,216) 53,114
Discontinued operations................. -- -- (1,050) -- 11,633
Cumulative effect of change in
accounting principle.................. -- 5,334 -- -- --
---------- ----------- ---------- ---------- ----------
Net income (loss)..................... $ 45,583 $ 46,755 $ (15,682) $ (35,216) $ 64,747
========== =========== ========== ========== ==========
Net income (loss) per common share
Continuing operations................... $ .65 $ .67 $ (.26) $ (.65) $ .99
Discontinued operations................. -- -- (.02) -- .21
Cumulative effect of change in
accounting principle.................. -- .08 -- -- --
---------- ----------- ---------- ---------- ----------
Net income (loss) per common share.... $ .65 $ .75 $ (.28) $ (.65) $ 1.20
========== =========== ========== ========== ==========
Cash dividends per common share(4)...... $ .28 $ .28 $ .28 $ .28 $ .28
CASH FLOW DATA:
Net income (loss) from continuing
operations............................ $ 45,583 $ 41,421 $ (14,632) $ (35,216) $ 53,114
Depreciation, depletion and
amortization.......................... 257,821 198,320 179,876 188,410 160,693
Impairments............................. 7,300 23,200 65,320 94,241 --
Amortization of deferred loan costs..... 3,987 3,896 3,888 1,988 355
Provision for deferred income taxes..... 24,385 20,539 (998) (27,312) 17,773
Gain on sale of investment in
affiliate............................. -- -- (30,259) -- --
Change in working capital and other..... 18,693 (31,385) 19,758 (21,122) 15,794
---------- ----------- ---------- ---------- ----------
Net cash provided by operating
activities......................... $ 357,769 $ 255,991 $ 222,953 $ 200,989 $ 247,729
========== =========== ========== ========== ==========
BALANCE SHEET DATA (period end):
Working capital (deficit)............... $ (3,203) $ (55,538) $ (32,755) $ (57,593) $ 18,358
Total assets............................ 2,036,627 1,759,203 1,774,767 1,597,633 1,363,337
Long-term debt.......................... 719,033 504,334 524,098 658,395 386,580
Shareholders' equity.................... 891,087 868,596 554,524 601,181 622,489
Common shares outstanding............... 69,666 69,504 55,361 55,305 53,296
PRODUCTION DATA:
Oil (Mbbls)............................. 13,815 13,036 13,465 10,063 5,988
Natural gas (MMcf)...................... 176,397 131,591 119,962 134,162 120,534
Natural gas liquids (Mbbls)............. 724 733 885 1,212 520
Equivalent production (Mboe)............ 43,939 35,701 34,344 33,635 26,597
AVERAGE SALES PRICE:
Oil (per bbl)........................... $ 15.65 $ 16.74 $ 18.11 $ 18.61 $ 21.21
Natural gas (per Mcf)................... 1.78 1.94 1.66 1.55 1.68
Natural gas liquids (per bbl)........... 11.28 11.55 11.79 11.88 11.35
RESERVE DATA -- PROVED (period end):
Oil and natural gas liquids (Mbbls)..... 110,624 102,957 94,643 105,891 52,002
Natural gas (MMcf)...................... 1,316,155 1,125,630 919,642 963,242 889,178
Equivalent reserves (Mboe).............. 329,983 290,562 247,917 266,431 200,198
Present value of estimated future net
cash flows, before income taxes,
discounted at 10%..................... $1,600,927 $ 1,626,096 $1,272,952 $1,334,532 $1,344,063
---------------
(See notes on following page)
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THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ ------------------------
1995(5)(6) 1994 1995(5)(6) 1994
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT
AMOUNTS)
INCOME STATEMENT DATA:
Oil and gas production revenues............ $ 174,519 $ 134,440 $ 317,708 $ 259,418
Consolidated revenues...................... 206,052 147,054 373,770 279,775
Net income................................. 537 12,907 4,620 21,132
Net income per common share................ .01 .19 .07 .30
Cash dividends per common share(4)......... .07 .07 .14 .14
CASH FLOW DATA:
Net income from continuing operations...... $ 537 $ 12,907 $ 4,620 $ 21,132
Depreciation, depletion and amortization... 78,830 61,969 148,625 122,226
Impairments................................ -- 2,800 -- 6,300
Amortization of deferred loan costs........ 1,150 965 2,373 1,744
Provision for deferred income taxes........ 17,358 7,721 19,773 12,252
Change in working capital and other........ (21,165) (6,587) (34,152) (22,964)
---------- ---------- ---------- ----------
Net cash provided by operating
activities............................ $ 76,710 $ 79,775 $ 141,239 $ 140,690
========= ========= ========= =========
BALANCE SHEET DATA (period end):
Working capital (deficit).................. $ 21,511 $ (19,685) $ 21,511 $ (19,685)
Total assets............................... 2,554,557 1,823,797 2,554,557 1,823,797
Long-term debt............................. 1,207,913 578,181 1,207,913 578,181
Shareholders' equity....................... 890,542 876,978 890,542 876,978
PRODUCTION DATA:
Oil (Mbbls)................................ 5,122 3,381 9,152 6,690
Natural gas (MMcf)......................... 54,361 41,830 104,159 81,321
Natural gas liquids (Mbbls)................ 174 186 365 364
Equivalent production (Mboe)............... 14,356 10,539 26,878 20,607
AVERAGE SALES PRICE:
Oil (per bbl).............................. $ 17.48 $ 15.98 $ 17.20 $ 14.42
Natural gas (per Mcf)...................... 1.52 1.87 1.50 1.96
Natural gas liquids (per bbl).............. 12.19 11.09 12.14 10.61
---------------
(1) Includes $40.6 million after-tax writedown of DEKALB's oil and gas
properties and $25.6 million after-tax loss from the sale of substantially
all of DEKALB's U.S. assets. Also includes a $19.8 million after-tax gain
resulting from the sale by the Company of its 36.67% interest in Natural
Gas Clearinghouse.
(2) Includes financial data for MW Petroleum Corporation after June 30, 1991.
(3) Includes a $7.1 million after-tax charge resulting from the relocation of
the Company's headquarters to Houston, Texas and a $66 million after-tax
writedown of DEKALB's oil and gas properties.
(4) No cash dividends were paid on outstanding DEKALB common stock in 1995,
1994, 1993 or 1992. Cash dividends paid on DEKALB common stock totaled $.8
million in 1991 and $2.9 million in 1990.
(5) The three months and six months ended June 30, 1995 include the effect of
the acquisition of properties from Texaco on March 1, 1995.
(6) Includes nonrecurring transaction costs totaling $8.7 million after tax
relating to the DEKALB merger.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company has consummated two acquisitions in 1995. On March 1, 1995, the
Company purchased certain U.S. oil and gas properties from Texaco for an
adjusted purchase price of $564 million, effective January 1, 1995. On May 17,
1995, Apache acquired DEKALB, an oil and gas company engaged in the exploration
for, and the development of, crude oil and natural gas in Canada, pursuant to a
merger agreement under which Apache issued 8.4 million shares of Common Stock in
exchange for all outstanding DEKALB capital stock and DEKALB employee stock
options outstanding at the time of the merger and tendered to Apache. The merger
was accounted for as a pooling of interests for financial accounting purposes.
Accordingly, the following discussion and analysis has been prepared on a
combined basis using the pooling of interests method of accounting. As a result
of the Company's recent acquisitions, the Company's results of operations for
the first two quarters of 1995 are not comparable to its historical results and
are not necessarily indicative of results for the full year or future periods.
Apache's financial performance during the first half of 1995 is best
understood in light of the following factors:
Production Increases; Commodity Prices. The Company's performance during
the first two quarters of 1995 was affected by lower average natural gas prices,
substantially offset by increases in natural gas production. Apache's natural
gas production increased in the first half of 1995 by 28% over the prior year,
attributable principally to acquisitions and favorable drilling results. The
Company's average realized gas price of $1.50 per Mcf during the first half of
1995 was $.46 per Mcf below the price during the same period in the previous
year, negatively impacting sales by $48 million.
In the first half of 1995, Apache's oil production increased by 37% over
the same period in 1994. Oil prices continued to improve from the five-year low
experienced in the fourth quarter of 1993. Oil revenues were positively impacted
by $25.5 million as a result of a $2.78 per barrel increase in average realized
oil prices in the first half of 1995 as compared with the same period in 1994.
Acquisitions. The Company consummated the DEKALB and Texaco acquisitions
during the first half of 1995. The second quarter of 1995 reflects the ownership
of the properties acquired from Texaco. All of the Company's financial
statements have been restated as a result of the DEKALB merger, which was
accounted for as a pooling of interests.
Since the Aquila transaction has not been consummated, the discussion
immediately following does not contemplate the effects of such transaction on
the Company's operations or liquidity. For a discussion of the effects of the
Aquila transaction, see "-- Subsequent Events" and "Recent Developments."
FINANCIAL RESULTS
Apache reported net income of $.5 million, or $.01 per share, for the
second quarter of 1995 compared to $12.9 million, or $.19 per share, for the
same period last year. Current quarter earnings were reduced by a nonrecurring
pre-tax charge of approximately $10 million associated with Apache's acquisition
of DEKALB (now known as DEK Energy Company). The merger costs reduced 1995 net
income by $8.7 million, or $.12 per share. Apache's results of operations for
the quarter were also negatively impacted by a 19% decline in gas prices which
reduced revenues by $19 million and net income by $.17 per share.
Earnings for the first six months of 1995 totaled $4.6 million, or $.07 per
share, compared to $21.1 million, or $.30 per share, during the first half of
1994. Lower gas prices compared to a year ago negatively impacted revenues by
$48 million and partially offset the impact of increased oil and gas production
from acquisitions and drilling.
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RESULTS OF OPERATIONS
Volume and price information for the Company's 1995 and 1994 second quarter
and first six months oil and gas production is summarized in the following
tables:
FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- INCREASE ------------------- INCREASE
1995 1994 (DECREASE) 1995 1994 (DECREASE)
-------- -------- ---------- -------- -------- ----------
Gas Volume -- Mcf per day:
U.S.............................. 519,147 402,765 29% 502,679 392,820 28%
Canada........................... 73,683 53,057 39% 67,458 52,472 29%
Australia........................ 4,542 3,850 18% 5,329 3,994 33%
-------- -------- -------- --------
Total............................ 597,372 459,672 30% 575,466 449,286 28%
======== ======== ======== ========
Average Gas Price -- Per Mcf:
U.S.............................. $ 1.59 $ 1.89 (16%) $ 1.56 $ 1.99 (22%)
Canada........................... 1.02 1.71 (40%) 1.00 1.70 (41%)
Australia........................ 1.87 1.96 (5%) 1.94 1.93 1%
Total............................ 1.52 1.87 (19%) 1.50 1.96 (23%)
Oil Volume -- Barrels per day:
U.S.............................. 50,869 32,461 57% 45,334 32,233 41%
Canada........................... 2,061 1,952 6% 2,014 2,035 (1%)
Australia........................ 3,360 2,741 23% 3,217 2,693 19%
-------- -------- -------- --------
Total............................ 56,290 37,154 52% 50,565 36,961 37%
======== ======== ======== ========
Average Oil Price -- Per barrel:
U.S.............................. $ 17.36 $ 15.82 10% $ 17.07 $ 14.21 20%
Canada........................... 17.81 16.63 7% 17.26 14.36 20%
Australia........................ 19.16 17.42 10% 19.05 16.91 13%
Total............................ 17.48 15.98 9% 17.20 14.42 19%
NGL Volume -- Barrels per day:
U.S.............................. 1,378 1,356 2% 1,470 1,340 10%
Canada........................... 539 687 (22%) 549 669 (18%)
-------- -------- -------- --------
Total............................ 1,917 2,043 (6%) 2,019 2,009 0%
======== ======== ======== ========
Average NGL Price -- Per barrel:
U.S.............................. $ 13.29 $ 12.60 5% $ 13.01 $ 11.83 10%
Canada........................... 9.39 8.10 16% 9.80 8.16 20%
Total............................ 12.19 11.09 10% 12.14 10.61 14%
Oil and gas production revenues for the second quarter and first half of
1995 increased over the prior year by 30% and 22%, respectively, due to the
March 1, 1995 acquisition of properties from Texaco, acquisitions completed by
Apache during the fourth quarter of 1994 and favorable drilling results. The
declines in Apache's second quarter and first half average realized gas price,
reflecting significantly lower spot prices from a year ago, offset further
increases in revenue.
Second quarter gas sales increased to $82.8 million, up six percent from
the same period last year. Apache's second quarter gas production was a record
597.4 MMcfd, an increase of 30% from last year. Of the 137.7 MMcfd increase in
gas production in the second quarter of 1995, 68 MMcfd was a result of the
acquisition of properties from Texaco and 22 MMcfd resulted from the acquisition
of properties from Crystal in December 1994. Apache's average natural gas price
declined 19% from second quarter 1994 to $1.52 per Mcf, negatively impacting
revenues by $19 million.
Gas sales for the first six months of 1995 of $155.8 million declined two
percent compared to the six-month period in 1994 as the impact of lower gas
prices more than offset production gains. Apache's production increased 126.2
MMcfd during the first half of 1995 as compared to the same period in 1994. The
28%
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increase in gas production in the first six months of 1995 resulted largely from
the acquisition of properties from Texaco and Crystal. The volume increase
resulted in additional sales of $44.7 million. The Company's realized gas price
of $1.50 per Mcf during the first half of 1995 was $.46 per Mcf lower than last
year's price of $1.96 per Mcf during the same period. The 23% drop in the
average realized price of gas negatively impacted sales by $48 million.
Oil sales of $89.6 million for the 1995 second quarter were $35.5 million,
or 66%, above the previous year as a result of higher production volumes. The
52% increase in oil production was primarily due to the acquisition of Texaco
properties, which added 17.7 Mbopd to Apache's second quarter sales. The total
increase in production favorably impacted sales by $27.8 million, while a $1.50
per barrel increase in realized oil prices compared to 1994 positively impacted
1995 sales by $7.7 million.
For the first six months of 1995, oil sales increased 63% to $157.4
million, compared to $96.4 million for the same period a year ago. In the first
half of 1995, oil production rose 13.6 Mbopd, or 37%. Oil revenues were
positively impacted by $25.5 million as a result of a $2.78 per barrel increase
in realized oil prices.
Revenues from the sale of natural gas liquids totaled $2.1 million for the
second quarter and $4.4 million for first half of 1995. Higher natural gas
liquids prices contributed to the $.1 million quarter-to-quarter and $.6 million
year-to-year increases in sales as compared to a year ago.
Gathering, processing and marketing revenues of $28.4 million for the
second quarter and $51.2 million for the first half of 1995 were 169% and 196%,
respectively, higher than last year's revenues. Operating margins increased $.3
million from the second quarter of 1994 and $.6 million from the first six
months of 1994, respectively. The activity reflects increased volumes of
purchase and resale transactions by Apache's oil and gas marketing subsidiaries.
These transactions generally carry a low margin.
Depreciation, depletion and amortization expense of $78.8 million for the
second quarter of 1995 and $148.6 million for the first half of the year
increased 27% and 22%, respectively, over the comparable 1994 periods due to
increased oil and gas production. Apache's domestic depreciation, depletion and
amortization rate for the second quarter declined from $5.73 per boe in 1994 to
$5.55 per boe in 1995 due to the impact of the Texaco acquisition.
Operating costs rose $20 million, or 56%, to $55.5 million for the quarter
and $29.3 million, or 41%, to $100.5 million year-to-date from the comparable
periods last year due primarily to the impact of Apache's acquisitions.
Operating costs include lifting costs, workover expense, production taxes and
severance taxes. Based on an equivalent unit of production, operating costs
increased 15% in the second quarter of 1995 to $3.87 per boe and eight percent
in the first half period to $3.74 per boe, respectively. The increase in unit
cost reflects the high percentage of oil properties included in the Texaco
transaction, as oil properties typically have a higher per unit expense than gas
properties.
Administrative, selling and other costs in the second quarter of 1995 rose
$.2 million, or two percent, from a year ago, while costs for the first half
increased $.6 million, or three percent, due to costs of integrating the Texaco
properties. On a boe basis, costs for the quarter and first six months dropped
25% and 21%, respectively, due to increased production from acquisitions and
drilling. In connection with the DEKALB merger, nonrecurring transaction costs
totaling approximately $10 million were charged to expense in the second quarter
of 1995.
Net financing costs increased 149% for the second quarter of 1995 to $20.3
million, and 132% for the first half of the year to $35.6 million. The increase
in financing costs reflects an increase in debt outstanding and higher interest
rates as compared to last year. Debt increased $496 million since December 31,
1994 and $696 million since December 31, 1993, as a result of increased
borrowings to fund acquisitions. The increase in interest rates primarily
reflects higher market rates.
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CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Capital Commitments.
Apache's primary needs for cash are for exploration, development and
acquisition of oil and gas properties, repayment of principal and interest on
outstanding debt and payment of dividends. The Company generally funds its
exploration and development activities through internally generated cash flows.
Apache budgets its capital expenditures based upon projected cash flows and
routinely adjusts its capital expenditures in response to changes in oil and gas
prices and corresponding changes in cash flow.
Expenditures for exploration and development totaled $142.1 million during
the first half of 1995 compared to $162.8 million during the same period last
year. In the first six months of 1995, Apache completed 68 of 102 gross wells as
producers, while the Company completed 149 of 183 gross wells as producers in
the first half of 1994. While the Company reduced its exploration and
development expenditures from a year ago so that additional cash from operating
activities could be applied to reduce debt, Apache continued to drill in the
Mid-Continent, Permian Basin and Gulf of Mexico regions of the United States.
Internationally, the Company continued developmental drilling on the Harriet
prospect in Australia and appraisal drilling on the Zhao Dong prospect in the
Bohai Bay, People's Republic of China. Further evaluation is necessary to
determine the commercial potential of the discovery offshore China. In Egypt, an
appraisal well further delineated a discovery made on the Qarun prospect. This
well confirmed the results of one of two earlier discoveries, which established
the development potential of this area of the Qarun Concession. International
exploration and development expenditures totaled $36.3 million in the first half
of 1995 compared to $36.7 million in 1994. Apache's annual expenditures for
exploration and development are expected to total approximately $275 million for
1995, not taking into account any capital expenditures associated with the
properties to be acquired in the Aquila transaction.
Acquisitions for cash during the first half of 1995 totaled $573.9 million
as compared to $27 million for the same period of 1994. On March 1, 1995, Apache
purchased certain oil and gas assets from Texaco for an adjusted purchase price
of $564 million. In addition to the properties acquired for cash during the
first six months of 1995, Apache issued 8.4 million shares of Common Stock to
acquire DEKALB in a transaction accounted for as a pooling of interests. See
"Acquisitions" in the Notes to the audited Consolidated Financial Statements
incorporated herein by reference.
Capital Resources and Liquidity.
Apache's primary capital resources are net cash provided by operating
activities, unused borrowing capacity under the Company's revolving bank credit
facility and proceeds from the sale of non-strategic assets. Net cash provided
by operating activities totaled $141 million for the first half of 1995 and
1994.
On January 4, 1995, Apache completed the issuance of $172.5 million
principal amount of its 6% Convertible Subordinated Debentures due 2002, which
are convertible into Common Stock at a conversion price of $30.68 per share. The
Company anticipates filing a registration statement on Form S-3 in September
1995 with respect to resales of underlying shares of Common Stock. Net proceeds
were used to reduce bank debt, to provide funds for acquisitions and for general
corporate purposes. The 6% debentures have not been registered under the
Securities Act of 1933, as amended ("Securities Act"), and may not be offered or
sold in the United States absent registration or an applicable exemption from
such registration requirements. Costs associated with the issue of the 6%
debentures totaled $4.1 million.
On March 1, 1995, the Company's revolving bank credit facility was amended
and restated, increasing it from $700 million to $1 billion. The facility
matures on March 1, 2000, and may be extended in one-year increments with the
lenders' consent. Based on the Company's ratio of debt to total capital, the
interest rate margin over LIBOR at June 30, 1995 was 1.125%. The Company also
pays a facility fee based on its ratio of debt to total capital. The facility
fee at June 30, 1995 was .375% of the available portion of the commitment and
.1875% of the unavailable portion of the commitment. As of June 30, 1995, the
available portion of the commitment was $831 million, of which $764 million was
outstanding. Costs associated with the amendment of the credit facility totaled
$7.2 million. At June 30, 1995, Apache had a total of $1.2 billion in long-term
debt outstanding, up $496 million from the end of 1994.
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During the first half of 1995, Apache received $73.2 million from the
disposition of oil and gas properties as part of its previously announced plans
to sell lower-margin and non-strategic properties. On September 1, 1995, Apache
disposed of certain of its Rocky Mountain properties to Citation for
consideration of approximately $151 million, subject to adjustment. These assets
include Apache's interest in 138 fields with approximately 1,600 active wells
located in Colorado, Montana, North Dakota, South Dakota, Utah and Wyoming.
The Company had $17.3 million in cash equivalents on hand at June 30, 1995,
down from $30 million at the end of 1994. The Company's ratio of current assets
to current liabilities at quarter-end 1995 of 1.1:1 was improved from year-end
1994 when the ratio was 1.0:1.
Management believes that cash on hand, net cash provided by operating
activities and unused available borrowing capacity under the revolving bank
credit facility will be adequate to meet future liquidity needs for the next two
fiscal years, including satisfaction of the Company's financial obligations and
funding of exploration and development operations and routine acquisitions.
Future Trends.
The Company plans to continue with implementation of several strategic
initiatives designed to accelerate the integration of acquired properties,
streamline operations and strengthen its balance sheet. As previously announced,
Apache plans to accelerate the disposition of non-strategic assets and to close
the Denver, Colorado office in 1995. In general, the proceeds from property
dispositions will be used for debt reductions.
Apache has continually followed a practice of expanding and upgrading its
reserves through a combination of exploratory and development drilling,
workovers and recompletions and upgrading its production base by disposing of
lower-margin and non-strategic properties. Apache will continue to review
acquisition opportunities which are additive to earnings and cash flow, and to
review its capital structure to maximize shareholders' return and maintain
financial flexibility.
SUBSEQUENT EVENTS
The Company intends to use approximately $55 million of the net proceeds of
the Offering to finance in part the pending acquisition of the Aquila Assets and
approximately $17 million of the net proceeds to finance the acquisition of
certain additional oil and gas properties from private sellers. The oil and gas
properties included in the Aquila Assets are concentrated, with the largest
seven fields representing approximately three quarters of proved reserves, and
many of the Aquila properties are located in close proximity to existing Apache
properties. Accordingly, the Company believes that economies of scale will
result from elimination of duplicative administrative and other expenses and the
consolidation of nearby operations following the closing of the Aquila
transaction. In the Gulf of Mexico, the Company expects to operate certain
currently manned Aquila platforms as unmanned platforms, using the facilities
and personnel located at nearby Apache platforms. In addition, the high
percentage of gas properties included in the Aquila Assets can be expected to
reduce operating costs on an equivalent unit of production basis, as gas
properties typically have a lower per unit expense than oil properties.
A significant portion of the net proceeds of the Offering will be applied
to reduce indebtedness under the Company's principal revolving credit facility.
See "Use of Proceeds." After giving effect to such repayment of debt, as of June
30, 1995, the Company would have a ratio of debt to total capitalization of
approximately 50%. As of August 25, 1995, the Company had $75 million available
for borrowing under the credit facility. The credit facility provides for
periodic redeterminations of the borrowing base to reflect the Company's
estimated proved reserves, and, depending upon the outcome of such
redetermination following the Offering (taking into account the Citation and
Aquila transactions), the Company expects to be able to reborrow all or a
portion of the amount of outstanding indebtedness repaid with proceeds of the
Offering. The Company is currently evaluating alternatives to refinance a
portion of its outstanding debt.
In connection with its ongoing private merger program, the Company has
filed an acquisition shelf registration statement on Form S-4. The Company
intends to sell up to 1,350,000 shares of Common Stock to be offered from time
to time in connection with the acquisition of privately held interests in oil
and gas properties and related assets or in entities that hold such interests or
assets.
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THE COMPANY
OVERVIEW
Apache Corporation, a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops, produces, gathers,
processes and markets crude oil and natural gas. In North America, Apache's
exploration and production interests are focused on the Gulf of Mexico, the
Anadarko Basin, the Permian Basin, the Gulf Coast, the Rocky Mountains and the
Western Sedimentary Basin of Canada. Outside of North America, Apache has
exploration and production interests offshore Western Australia and exploration
interests in Egypt and Indonesia and offshore China and the Ivory Coast.
Apache's Common Stock has been listed on the NYSE since 1969 and on the CSE
since 1960.
As of December 31, 1994, on a pro forma basis giving effect to the
completed Texaco and DEKALB transactions and the pending Aquila acquisition, and
net of completed and pending property dispositions in 1995, the Company's
estimated proved reserves were 420 MMboe, of which approximately 62% was natural
gas.
As of December 31, 1994, Apache (including DEKALB) had approximately 4,085
net oil and gas wells and 1,032,982 net developed acres of oil and gas
properties. In addition, the Company had interests in 760,270 net undeveloped
acres under U.S. and Canadian leases and 4,239,290 net undeveloped acres under
international exploration and production rights. The Company completed 296 of
367 North American wells during 1994 as producers, and completed 415 workover
and recompletion projects. For the second quarter of 1995, which included
results from the Texaco and DEKALB transactions, the Company's daily average oil
and gas production was approximately 56 Mbbls and 597 MMcf, respectively.
The Company holds interests in many of its U.S., Canadian and international
properties through operating subsidiaries, such as MW Petroleum Corporation
("MW"), DEK Energy Company (formerly known as DEKALB), Apache Energy Resources
Corporation ("AERC," formerly known as Hadson Energy Resources Corporation),
Apache Energy Limited ("AEL," formerly known as Hadson Energy Limited), Apache
International, Inc. and Apache Overseas, Inc. Properties referred to in this
Prospectus may be held by those subsidiaries. The Company treats all operations
as one segment of business.
On March 1, 1995, the Company acquired certain oil and gas properties from
Texaco for an adjusted purchase price of $564 million, effective January 1,
1995. On May 17, 1995, Apache acquired DEKALB, an oil and gas company engaged in
the exploration for, and the development of, crude oil and natural gas in
Canada, through a merger which resulted in DEKALB's becoming a wholly owned
subsidiary of Apache. The merger was accounted for as a pooling of interests for
financial accounting purposes. As a result, Apache's financial information has
been restated to include DEKALB on a combined basis. See "Recent Developments."
The Company is a Delaware corporation with its principal executive offices
at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas
77056-4400. The Company's telephone number is (713) 296-6000.
STRATEGY
Apache's growth strategy is to increase oil and gas reserves, production
and cash flow through a combination of acquisitions, moderate-risk drilling and
development of its inventory of existing projects. Apache also emphasizes
reducing operating costs per unit produced and selling marginal and
non-strategic properties in order to increase its profit margins. An emerging
aspect of Apache's strategy is its exploration and development activity in the
international arena in pursuit of larger reserve targets than are generally
available domestically. Several recent international discoveries have created an
inventory of development projects to be drilled in the next several years.
Because production of oil and gas results in depletion of reserves, future
oil and gas production is highly dependent upon Apache's level of success in
adding reserves. Apache adds reserves by acquisition, active exploration and
development, and identification, through engineering studies, of additional
behind-pipe zones or secondary recovery reserves.
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In conjunction with Apache's ongoing property acquisitions, the Company has
recently initiated the Apache private merger program to acquire privately held
interests in oil and gas properties. The primary focus of this program will be
to acquire interests in properties in areas where the Company operates. To
enable the Company to use Common Stock as well as cash in such acquisitions, the
Company has filed a Common Stock acquisition shelf registration statement on
Form S-4 pursuant to which the Company intends to sell up to 1,350,000 shares of
Common Stock.
Property acquisition is only one phase in a continuing cycle of Apache's
business growth. Apache's objective is to follow each material acquisition with
a cycle of reserve enhancement, property consolidation and cash flow
acceleration, facilitating asset growth and debt reduction. This approach
requires well-planned and carefully executed property development and a
commitment to a selective program of ongoing property dispositions. Apache
targets acquisitions that have ascertainable additional reserve potential to
which it applies an active drilling, workover and recompletion program to
realize the potential of undeveloped and partially developed properties. In
1994, the Company replaced over 114% of U.S. production through its drilling,
workover and recompletion program. Apache prefers to operate its properties so
that it can more efficiently influence their development and currently operates
properties accounting for over 75% of its production.
NORTH AMERICAN OPERATIONS
The Company's North American exploration and production activities are
divided into four U.S. operating regions, the Gulf of Mexico, Mid-Continent,
Western and Gulf Coast regions, and a Canadian region. At December 31, 1994,
approximately 97% of the Company's total estimated proved reserves (prior to any
dispositions in 1995) was located in the four U.S. regions and Canada.
Gulf of Mexico. As a result of Apache's acquisition of Matagorda Island
Blocks 681 and 682 in late 1992 and the Hall-Houston transactions in 1993, the
Gulf of Mexico became Apache's largest producing region. The Gulf of Mexico
region encompasses all of Apache's interests in properties offshore Texas,
Louisiana and Alabama. By year-end 1994, Apache increased its production in the
Gulf of Mexico to approximately 203 MMcf of gas per day. At December 31, 1994,
the Gulf of Mexico region encompassed 282,302 net acres, located in both state
and federal waters, and accounted for 48 MMboe, or 15%, of Apache's total
estimated proved reserves.
Mid-Continent. Apache's Mid-Continent region is known for its sizable
position in the Anadarko Basin. Apache has drilled and operated in the Anadarko
Basin for over three decades, developing an extensive database of geologic
information and a substantial acreage position. In 1993, Apache enhanced its
position through the acquisition of AERC with its significant acreage and
producing interests in the Anadarko Basin. At December 31, 1994, Apache held an
interest in 271,770 net acres in the region, which accounted for approximately
76 MMboe, or 23%, of Apache's total estimated proved reserves.
Western. On September 1, 1995, Apache disposed of a substantial portion of
its Rocky Mountain properties in connection with its property rationalization
program. In connection with this disposition, the Company is closing its Rocky
Mountain regional office, located in Denver, Colorado, and redeploying those
employees to provide support for its Gulf Coast, Permian Basin and Canadian
operations. The Rocky Mountain properties to be exchanged by Apache comprise
interests in 138 fields and approximately 1,600 active wells in six states with
daily production of approximately 9 Mbbls of oil and 9 MMcf of natural gas. At
December 31, 1994, such Rocky Mountain properties accounted for estimated proved
reserves of 28 MMboe, which includes certain reserves acquired in the Texaco
transaction.
Apache will retain its assets in the Green River Basin of Colorado and
Wyoming and in the San Juan Basin of New Mexico, and will operate those
properties through its former Permian Basin region, which has been renamed the
Western region to reflect the integration of the remaining Rocky Mountain
properties. The other properties comprising the Western region are located in
the Permian Basin of West Texas and New Mexico and have been important producers
for Apache, generating 16% of the Company's production revenues during 1994. As
of December 31, 1994, the properties that comprise the Western region, after
giving
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effect to completed and pending dispositions in 1995, accounted for 70 MMboe, or
21%, of the Company's total estimated proved reserves.
Gulf Coast. Apache's Gulf Coast region encompasses the Texas and Louisiana
coasts, central Texas, Mississippi and Alabama. At year-end 1994, the region
encompassed approximately 194,107 net acres, and accounted for 43 MMboe, or 13%,
of the Company's total estimated proved reserves.
Canada. The Canadian region concentrates its exploration and development
activity in the Provinces of Alberta and British Columbia. The region generated
eight percent of the Company's revenues in 1994. At December 31, 1994, the
region encompassed approximately 408,114 net acres, and accounted for 61 MMboe,
or 18%, of the Company's total estimated proved reserves.
AUSTRALIAN AND INDONESIAN OPERATIONS
Australia. The state of Western Australia has become an important region
for Apache following the completion of the AERC acquisition. In the fourth
quarter of 1993, Apache consolidated the operations of its Australian properties
with AERC's Australian subsidiary, AEL, headquartered in Perth, Western
Australia. Average production in the region was approximately 3,500 bopd during
June 1995.
At December 31, 1994, Apache held 3,373,150 net developed and undeveloped
acres in Western Australia. Australian reserves accounted for 11 MMboe, or 3%,
of the Company's total proved reserves at year-end 1994. Apache also owns a
22.5% interest in and operates the Harriet Gas Gathering Project, a gas
processing and compression facility with a throughput capacity of 80 MMcfd, and
a 60-mile, 12-inch offshore pipeline with a throughput capacity of 175 MMcfd.
The facilities are located in close proximity to AEL's producing properties
offshore in the Carnarvon Basin. During 1994, AEL produced and sold 2.9 Bcf of
natural gas.
Indonesia. In early 1993, Apache took over as operator and increased its
interest in the Java Sea IV Block, offshore Indonesia, and the Padang Panjang
Block on the island of Sumatra, Indonesia. In early 1994, operations for
Indonesia were consolidated under the direction of AEL out of its offices in
Perth, Western Australia. In 1994, two exploratory wells were drilled in
Indonesia, one of which was a discovery that is currently being appraised for
commerciality.
OTHER INTERNATIONAL OPERATIONS
Egypt. Apache and its partners are developing two adjacent fields in the
Western Desert of Egypt. Apache holds a 25% interest in the two-million acre
Qarun Concession in the Western Desert of Egypt which is operated by Phoenix
Resource Companies of Qarun. In February 1995, Apache and its partners announced
a discovery in the Qarun Concession that tested at rates up to 1,370 bopd. In
May 1995, Apache and its partners announced a second discovery in the Qarun
Concession in which the discovery well tested at cumulative rates of up to
11,957 bopd. Development of the Qarun Concession is currently underway, and oil
sales are expected to commence as early as the fourth quarter of 1995.
China. Apache and its partner are evaluating a discovery in the Bohai Bay,
offshore the People's Republic of China. Apache has a 50% interest in, and acts
as operator of, a concession containing approximately 48,677 undeveloped acres
(24,339 acres net to Apache) in the Zhao Dong Block of the Bohai Bay, offshore
the People's Republic of China. In 1994, the initial discovery well tested at a
rate of over 2,000 bopd and was confirmed by an appraisal well which tested at
over 3,500 bopd. An appraisal drilling program is currently being conducted to
evaluate field development of the block.
Other. The Company has an interest in the Foxtrot Concession offshore the
Ivory Coast and is currently seeking a market for any gas that may be produced
from such concession.
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RECENT DEVELOPMENTS
ACQUISITION OF AQUILA PROPERTIES
On August 28, 1995, the Company entered into an agreement with Aquila, a
wholly owned, indirect subsidiary of UtiliCorp, to acquire substantially all the
assets of Aquila for approximately $198 million, subject to certain post-closing
adjustments. The Aquila Assets include estimated proved reserves of 26 MMboe at
year-end 1994 and a favorable long-term gas sales contract at escalating prices,
with an allocated value under the purchase agreement of $28.7 million. Aquila
will receive a 7.5% net profits interest in the Aquila Assets, effective after
Apache has recovered an amount equivalent to the purchase price, costs incurred
in connection with the Aquila Assets and fees and other transaction costs not to
exceed $7 million in connection with the Offering and the Aquila transaction.
The closing of the Offering is conditioned upon and is expected to occur
concurrently with the closing of the Aquila transaction.
The Aquila Assets are concentrated, with the largest seven fields
representing approximately three quarters of proved reserves and the largest 15
fields representing more than 90% of proved reserves. Five of the largest seven
fields are operated by Aquila. Based on information provided to the Company by
Aquila, the Aquila Assets represented estimated proved reserves of approximately
26 MMboe at December 31, 1994, of which approximately 77% was gas.
The Aquila Assets consist of interests in 63 fields (including 45 producing
areas and fields) located on 250,000 gross acres in the Anadarko Basin, the Gulf
Coast, the Gulf of Mexico and the Permian Basin. In addition, the Aquila Assets
include nonoperated minority interests in four gas plants in Oklahoma. The
Aquila properties are in many cases located in close proximity to existing
Apache properties. Accordingly, the Company believes that the acquisition of the
Aquila properties will result in certain economies of scale for Apache. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Subsequent Events."
The long-term gas sales contract included in the Aquila Assets provides
that Aquila's affiliate will agree to purchase approximately 43 Bcf of gas to be
delivered by the Company over a period of five years and four months at a
specified price commencing at $2.00 per MMBtu in 1995 and increasing to $2.70 in
1996, $2.80 in 1997, $2.90 in 1998, $3.10 in 1999 and $3.20 in 2000.
The agreement provides that the Company and its wholly owned subsidiaries,
MW and AERC, may effect a deferred tax-free exchange of like-kind properties of
qualifying use for certain of the Aquila Assets. The like-kind properties to be
exchanged by the Company primarily include lower margin and non-strategic
properties located in the Rocky Mountains (including the properties sold to
Citation) which were previously selected for sale by the Company in connection
with its ongoing program of selective property dispositions.
OTHER RECENT ACQUISITIONS
On March 1, 1995, Apache purchased certain U.S. oil and gas properties from
Texaco for an adjusted purchase price of $564 million. The Texaco properties
comprised estimated proved reserves at the effective date of approximately 105
MMboe (after adjustment for the exercise of preferential rights and properties
excluded following due diligence and using unescalated prices), of which
approximately 70% was oil. Prior to the time of purchase, the daily production
of the acquired properties was approximately 20 Mbbls of oil and 85 MMcf of
natural gas.
The Texaco properties are concentrated, with approximately two-thirds of
the reserves located in 54 fields, and are in producing regions where Apache has
existing operations -- the Permian Basin, the Gulf Coast of Texas and Louisiana,
western Oklahoma, eastern Texas and the Gulf of Mexico. Apache operates
approximately two-thirds of the production and holds an average working interest
of 70% in the operated properties. The Texaco transaction included approximately
500,000 net mineral acres, as well as a substantial quantity of seismic data.
On May 17, 1995, Apache acquired DEKALB, an oil and gas company engaged in
the exploration for, and the development of, crude oil and natural gas in
Canada, through a merger which resulted in DEKALB's becoming a wholly owned
subsidiary of Apache. Pursuant to the merger agreement, Apache issued 8.4
million
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shares of its common stock in exchange for all outstanding DEKALB capital stock
and DEKALB employee stock options outstanding at the time of the merger and
tendered to Apache. The merger was accounted for as a pooling of interests for
financial accounting purposes.
At year-end 1994, DEKALB's estimated proved reserves, located almost
entirely in Canada, were estimated to be approximately 300 Bcf of natural gas
and 11 MMbbls of oil and natural gas liquids, or a total of 61 MMboe. The DEKALB
acquisition provides Apache with a substantial presence in North America's
largest natural gas basin and the infrastructure, including skilled
professionals, to conduct Canadian operations. Apache believes that the DEKALB
properties have significant potential for both exploration and further
development.
DISPOSITIONS
In early 1995, Apache announced plans to accelerate the disposition of
certain properties, including the sale of a substantial portion of its Rocky
Mountain properties and lower margin and non-strategic properties. During the
first half of 1995, Apache received approximately $73 million from completed
sales of such properties. On September 1, 1995, the Company disposed of certain
Rocky Mountain properties for approximately $151 million (approximately $143
million net to Apache), subject to adjustment. These properties had 28 MMboe of
estimated proved reserves at December 31, 1994.
SUMMARY PRO FORMA OIL AND GAS RESERVE INFORMATION
The following table sets forth summary pro forma information with respect
to the Company's estimated proved oil and gas reserves as of December 31, 1994,
giving effect to the completed DEKALB and Texaco transactions, the pending
Aquila acquisition and certain completed and pending dispositions of
non-strategic properties in 1995. The reserve information below is based on
estimates calculated as of December 31, 1994 and does not reflect production and
revisions since December 31, 1994 or changes in oil and gas prices, changes in
expectations of developing and producing proved undeveloped reserves (including
offshore), changes in marketing expectations and access to markets or changes in
estimates of recoverable reserves resulting from price changes. The reserves
attributable to the completed DEKALB and Texaco acquisitions and the pending
Aquila acquisition were not owned by the Company on such date. The Company has
made other acquisitions and dispositions of property interests during 1995 which
in the aggregate are not material. All estimates of oil and gas reserves are
subject to significant uncertainty. See "Risk Factors."
APACHE AND 1995 TOTAL
DEKALB(1) TEXACO(2) AQUILA(3) DISPOSITIONS(4) PROVED
---------- --------- --------- --------------- ----------
Oil and natural gas liquids (Mbbls).... 110,624 73,597 6,035 29,166 161,090
Natural gas (MMcf)..................... 1,316,155 186,495 120,857 68,351 1,555,156
Equivalent reserves (Mboe)............. 329,983 104,680 26,178 40,558 420,283
Present value of estimated future net
cash flows, before income taxes,
discounted at 10% (in thousands)..... $1,600,927 $ 368,518 $ 110,120 $ 149,650 $1,929,915
---------------
(1) On May 17, 1995, the Company acquired DEKALB through a merger that was
accounted for under the pooling of interests method.
(2) On March 1, 1995, the Company acquired certain properties from Texaco.
(3) The Company proposes to acquire certain properties from Aquila effective
concurrently with and conditioned on the consummation of the Offering.
Netherland, Sewell estimated reserves owned by Aquila as of December 31,
1994. Since that time, Aquila has acquired additional property interests
included in the amounts set forth above. Netherland, Sewell has estimated
total proved reserves of Aquila as of December 31, 1994 in the approximate
amounts of 2,781 Mbbls of oil and 106,535 MMcf of gas (totaling 20,537
Mboe), and $92 million of present value of estimated future net cash flows,
before income taxes, discounted at 10% (which amounts exclude the properties
acquired by Aquila in 1995).
(4) The reserves shown give effect to the September 1, 1995 disposition of
certain Rocky Mountain properties valued at approximately $151 million, the
sale of $20 million in properties on April 1, 1995, the sale of $31 million
in properties on May 1, 1995, and other smaller sales.
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NATURAL GAS MARKETING
During 1994, Apache sold approximately 89% of its U.S. natural gas on the
spot market through NGC Corporation (formerly Natural Gas Clearinghouse) ("NGC")
or through market responsive contracts with other parties; the remaining 11% was
sold through long-term, premium-priced contracts. Sales to NGC accounted for
approximately 37% of the Company's oil and gas revenues in 1994. Apache has
notified NGC that it does not intend to continue its arrangement with NGC beyond
its current term, which expires in September 1995. The Company believes that
such termination will not have a material adverse effect on the Company due to
the existence of alternative marketing arrangements and purchasers. The Company
is exploring alternative means to market its gas following termination of such
arrangement.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 5,000,000 shares of
preferred stock, none of which was outstanding as of June 30, 1995, and
215,000,000 shares of Common Stock, of which 69,914,519 shares were outstanding
as of June 30, 1995.
The descriptions set forth below of the Common Stock and preferred stock
constitute brief summaries of certain provisions of the Company's Restated
Certificate of Incorporation and Bylaws and are qualified in their entirety by
reference to the relevant provisions of such documents, both of which are listed
as exhibits to the Registration Statement of which this Prospectus is a part and
are incorporated herein by reference.
COMMON STOCK
All outstanding shares of Common Stock are fully paid and nonassessable.
All holders of Common Stock have full voting rights and are entitled to one vote
for each share held of record on all matters submitted to a vote of the
stockholders. The Board of Directors of the Company is classified into three
groups of approximately equal size, one-third elected each year. Stockholders do
not have the right to cumulate votes in the election of directors and have no
preemptive or subscription rights. The Common Stock is neither redeemable nor
convertible, and there are no sinking fund provisions relating to such stock.
Subject to preferences that may be applicable to any shares of preferred
stock outstanding at the time, holders of Common Stock are entitled to dividends
when, as and if declared by the Board of Directors from funds legally available
therefor and are entitled, in the event of liquidation, to share ratably in all
assets remaining after payment of liabilities.
The Company's current policy is to reserve one share of Common Stock for
each share issued in order to provide for possible exercises of Common Stock
purchase rights under the Company's existing Rights Agreement.
The Common Stock and the Common Stock purchase rights are listed on the
NYSE and the CSE. Norwest Bank Minnesota, National Association is the transfer
agent and registrar for the Common Stock.
The Company typically mails its annual report to stockholders within 120
days after the end of its fiscal year. Notices of stockholder meetings are
mailed to record holders of Common Stock at their addresses shown on the books
of the transfer agent and registrar.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law ("DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the time such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
26
28
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the corporation and by employee stock
plans that do not provide participants with the rights to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) following the transaction in which such
person became an interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder. The provisions of Section 203 may have the effect of delaying,
deferring or preventing a change of control of the Company.
RIGHTS
On January 10, 1986, the Board of Directors declared a dividend of one
right to purchase one share of Common Stock at $50 per share (subject to
adjustment) on each outstanding share of Common Stock (the "Rights"). The Rights
are exercisable only after a person (other than the Company or its employee
benefit plans), together with all persons acting in concert with it, has
acquired 20% or more of the Common Stock, or has commenced a tender offer for
30% or more of the Common Stock. If the Company engages in certain business
combinations or a 20% shareholder engages in certain transactions with the
Company, the Rights become exercisable for the Common Stock or common stock of
the corporation acquiring the Company (as the case may be) at 50% of the then
market price. Any Rights that are or were beneficially owned by a person who has
acquired 20% or more of the Common Stock and who engages in certain transactions
or realizes the benefits of certain transactions with the Company will become
void. The Company may redeem the Rights at a specified price at any time until
ten business days after public announcement that a person has acquired 20% or
more of the outstanding shares of Common Stock. The Rights will expire on
January 31, 1996, unless earlier redeemed by the Company. The Company is
considering successor arrangements. Unless the Rights have been previously
redeemed, all shares of Common Stock issued by the Company will include Rights,
including the Common Stock offered hereby.
PREFERRED STOCK
No preferred stock is outstanding. Shares of preferred stock may be issued
by the Board of Directors with such voting powers and in such classes and
series, and with such designations, preferences, and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, as may be stated and expressed in the resolution or resolutions
providing for the issue of such stock. The Company has no current plans to issue
any preferred stock.
CHANGE OF CONTROL
The Company's Restated Certificate of Incorporation includes provisions
designed to prevent the use of certain tactics in connection with a potential
takeover of the Company. Article Twelve of the Restated Certificate of
Incorporation generally stipulates that the affirmative vote of 80% of the
Company's voting shares is required to adopt any agreement for the merger or
consolidation of the Company with or into any other corporation which is the
beneficial owner of more than 5% of the Company's voting shares. Article Twelve
further provides that such an 80% approval is necessary to authorize any sale or
lease of assets between the Company and any beneficial holder of 5% or more of
the Company's voting shares. Article Fourteen of the Restated Certificate of
Incorporation contains a "fair price" provision which requires that any tender
offer made by a beneficial owner of more than 5% of the outstanding voting stock
of the Company in connection with any plan of merger, consolidation or
reorganization, any sale or lease of substantially all of the Company's assets,
or any issuance of equity securities of the Company to the 5% stockholder must
provide at least as favorable terms to each holder of Common Stock other than
the stockholder making the tender offer. Article Fifteen of the Restated
Certificate of Incorporation contains an "anti-greenmail" mechanism which
prohibits the Company from acquiring any voting stock from the beneficial owner
of more than 5% of the outstanding voting stock of the Company, except for
acquisitions pursuant to a tender offer to all holders of voting stock on the
same price, terms and conditions, acquisitions in compliance with Rule 10b-18 of
the Exchange Act and acquisitions at a price not exceeding the market value per
share. Article Sixteen of the
27
29
Restated Certificate of Incorporation prohibits the stockholders of the Company
from acting by written consent in lieu of a meeting.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Purchase Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Dean Witter Reynolds Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase the
shares set forth opposite its name below. In the Purchase Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all the shares offered hereby if any of the shares are purchased. In
the event of default by an Underwriter, the Purchase Agreement provides that, in
certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased or the Purchase Agreement may be terminated.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Dean Witter Reynolds Inc..........................................
---------
Total................................................ 7,450,000
=========
The Representatives of the Underwriters have advised the Company that they
propose initially to offer the shares of Common Stock to the public at the
public offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a discount not
in excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Company has granted to the Underwriters an option exercisable for 30
days after the date hereof to purchase up to 1,117,500 additional shares of
Common Stock to cover over-allotments, if any, at the initial public offering
price, less the underwriting discount. If the Underwriters exercise this option,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the foregoing
table is of the 7,450,000 shares of Common Stock initially offered hereby.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.
The Company has agreed not to sell or otherwise dispose of any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock for a period of 90 days after the date of this Prospectus in a
public offering or, subject to certain conditions, in a private offering,
without the prior written consent of the Representatives, except for certain
sales in connection with acquisitions of interests in oil and gas properties,
issuances pursuant to the Company's employee benefit plans or issuances upon the
conversion, exchange or exercise of outstanding securities convertible into or
exchangeable or exercisable for Common Stock. If any such consent is given, it
would not necessarily be preceded or followed by a public announcement thereof.
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30
LEGAL MATTERS
Certain legal matters regarding the Shares of Common Stock offered hereby
under laws other than federal or state securities laws have been passed upon for
the Company by its Vice President and General Counsel, Z. S. Kobiashvili. As of
the date of this Prospectus, Mr. Kobiashvili owns 541 shares of Common Stock
through the Company's retirement/401(k) savings plan and holds employee stock
options to purchase 18,000 shares of Common Stock, of which 2,500 options are
currently exercisable. Certain legal matters in connection with the Offering
will also be passed upon for the Company by Andrews & Kurth L.L.P., Houston,
Texas, and for the Underwriters by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The audited consolidated financial statements of the Company and the
audited statement of Combined Revenues and Direct Operating Expenses for the Oil
and Gas Properties of Texaco Exploration and Production Inc. Sold to Apache
Corporation, each incorporated by reference into this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto. In its report on the consolidated financial
statements of the Company, that firm states that with respect to DEKALB its
opinion is based on the report of other independent public accountants, namely
Coopers & Lybrand. The financial statements referred to above have been
incorporated by reference or included herein in reliance upon the authority of
those firms as experts in accounting and auditing in giving said reports.
The audited consolidated financial statements of DEKALB incorporated by
reference in this Registration Statement have been audited by Coopers & Lybrand,
Chartered Accountants, as indicated in their report with respect thereto, and
are incorporated herein in reliance upon the authority of said firm as experts
in accounting and auditing in giving said report.
The information included and incorporated by reference herein regarding the
total proved reserves of the Company was prepared by the Company and reviewed by
Ryder Scott Company Petroleum Engineers ("Ryder Scott"), as stated in their
letter reports with respect thereto, and is so included and so incorporated by
reference in reliance upon the authority of said firm as experts in such
matters. The information included and incorporated by reference herein regarding
the total estimated proved reserves acquired from Texaco was prepared by the
Company and reviewed by Ryder Scott, as stated in their letter report with
respect thereto, and is so included and so incorporated by reference in reliance
upon the authority of said firm as experts in such matters. The information
included and incorporated by reference herein regarding the total proved
reserves of DEKALB was prepared by DEKALB and for the four years ended December
31, 1994 was reviewed by Ryder Scott, as stated in their letter reports with
respect thereto, and is so included and so incorporated by reference in reliance
upon the authority of said firm as experts in such matters. The reserve review
letters of Ryder Scott as of December 31, 1994, are filed as exhibits to the
Registration Statement of which this Prospectus is a part, in reliance upon the
authority of said firm as experts with respect to the matters covered by their
reports and the giving of their reports.
A portion of the information included herein regarding the total proved
reserves of Aquila proposed to be acquired by the Company was prepared by
Netherland, Sewell & Associates, Inc. as of December 31, 1994, as stated in
their letter report with respect thereto. Netherland, Sewell has not reviewed
any of the reserves of Aquila acquired during 1995, including those set forth in
this Prospectus on a pro forma basis as of December 31, 1994. The reserve review
letter of Netherland, Sewell is filed as an exhibit to the Registration
Statement of which this Prospectus is a part in reliance upon the authority of
said firm as experts with respect to the matters covered by their report and the
giving of their report.
29
31
AVAILABLE INFORMATION
Apache is subject to the informational requirements of the Exchange Act,
and in accordance therewith, files periodic reports, proxy statements and other
information with the Commission. The Company's filings may be inspected and
copied or obtained by mail upon payment of the Commission's prescribed rates at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and CitiCorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Common Stock and associated Rights are
listed on the NYSE and the CSE. Although the Shares of Common Stock offered
hereby are not currently admitted for trading on either exchange, applications
have been made to list the Shares on both the NYSE and the CSE. The Company's
9.25% Notes due June 1, 2002 are listed on the NYSE. The Company's reports,
proxy statements and other filings with the Commission are also available for
inspection at the offices of the NYSE located at 20 Broad Street, New York, New
York 10005 and the CSE, 440 S. LaSalle St., Chicago, Illinois 60605.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and in the amendments, exhibits and schedules thereto.
For further information with respect to the Company and the Common Stock,
reference is made to the Registration Statement, and to the exhibits and
schedules filed therewith. All of these documents may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies
thereof may be obtained from the Commission at the prescribed rates or may be
examined without charge at the public reference facilities of the Commission.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement shall be qualified in
its entirety by such reference.
30
32
===============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
PAGE
Information Incorporated by
Reference............................ 2
Prospectus Summary..................... 3
Risk Factors........................... 9
Use of Proceeds........................ 12
Price Range of Common Stock and
Dividends............................ 12
Capitalization......................... 13
Selected Consolidated Financial,
Operating and Reserve Data........... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 16
The Company............................ 21
Recent Developments.................... 24
Description of Capital Stock........... 26
Underwriting........................... 28
Legal Matters.......................... 29
Experts................................ 29
Available Information.................. 30
===============================================================================
===============================================================================
7,450,000 SHARES
[APACHE CORPORATION LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
, 1995
================================================================================
33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration fee................................................................ $ 79,383
NYSE additional listing fee..................................................... 27,370*
Printing expenses............................................................... 150,000*
Blue Sky fees and expenses...................................................... 10,000*
Legal fees and expenses......................................................... 75,000*
Accounting fees and expenses.................................................... 125,000*
Transfer agent and registrar fees............................................... 1,000*
Miscellaneous fees and expenses................................................. 32,247*
--------
Total................................................................. $500,000
========
---------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, inter alia, authorizes
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the corporation) because
such person is or was a director, officer, employee or agent of the corporation
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reason to believe his conduct was
unlawful. Similar indemnity is authorized for such persons against expenses
(including attorneys' fees) actually and reasonably incurred in defense or
settlement of any such pending, completed or threatened action or suit by or in
the right of the corporation if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and provided further that (unless a court of competent jurisdiction
otherwise provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnity has met the
applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him. The Company maintains policies
insuring its and its subsidiaries' officers and directors against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act.
Article VII of the Company's Bylaws provides, in substance, that directors,
officers, employees and agents of the Company shall be indemnified to the extent
permitted by Section 145 of the Delaware General Corporation Law. Additionally,
Article Seventeen of the Company's Restated Certificate of Incorporation
eliminates in certain circumstances the monetary liability of directors of the
Company for a breach of their fiduciary duty as directors. These provisions do
not eliminate the liability of a director (i) for a breach of the director's
duty of loyalty to the Company or its stockholders; (ii) for acts or omissions
by the director not in good faith; (iii) for acts or omissions by a director
involving intentional misconduct or a knowing violation of the law; (iv) under
Section 174 of the Delaware General Corporation Law (relating to the declaration
of dividends and purchase or redemption of shares in violation of the Delaware
General Corporation Law); and (v) for transactions from which the director
derived an improper personal benefit.
II-1
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 -- Form of Purchase Agreement between Apache Corporation and the
Underwriters named therein.(1)
2.1 -- Purchase and Sale Agreement by and between Aquila Energy Resources
Corporation and Apache Corporation dated August 28, 1995.(1)
4.1 -- Restated Certificate of Incorporation of Apache Corporation
(incorporated by reference to Exhibit 3.1 to Apache's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993, Commission
File No. 1-4300).
4.2 -- Bylaws of Apache Corporation as of July 31, 1995 (incorporated by
reference to Exhibit 4.2 of Apache's Registration Statement on Form
S-4, Registration No. 33-61669, filed with the Commission on August
8, 1995).
4.3 -- Form of common stock certificate (incorporated by reference to
Exhibit 4.4 to Amendment No. 1 to Apache's Registration Statement on
Form S-3, Registration No. 33-5097, filed with the Commission on May
16, 1986).
4.4 -- Rights Agreement dated as of January 10, 1986 between the Company and
First Trust Company, Inc., rights agent, relating to the declaration
of Rights to the Company's common stockholders of record on January
24, 1986 (incorporated by reference to Exhibit 4.9 of Apache's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985,
Commission File No. 1-4300).
5.1 -- Opinion of legal counsel regarding legality of securities being
registered.(2)
23.1 -- Consent of Arthur Andersen LLP.(2)
23.2 -- Consent of Coopers & Lybrand, Chartered Accountants.(2)
23.3 -- Consent of Ryder Scott Company Petroleum Engineers ("Ryder
Scott").(1)
23.4 -- Consent of Netherland, Sewell & Associates, Inc.(1)
23.5 -- Consent of legal counsel (included in Exhibit 5.1).(2)
24.1 -- Power of Attorney (included in Part II as a part of the signature
pages of the Registration Statement).(1)
99.1 -- Reports of Ryder Scott dated January 20 and January 23, 1995.(1)
99.2 -- Report of Ryder Scott dated February 6, 1995.(1)
99.3 -- Report of Ryder Scott dated August 21, 1995.(1)
99.4 -- Report of Netherland, Sewell & Associates, Inc., dated January 19,
1995.(1)
---------------
(1) Previously filed.
(2) Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or
II-2
35
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Houston, State of Texas.
APACHE CORPORATION
Date: September 19, 1995 By: /s/ Z. S. KOBIASHVILI
-------------------------------
Z. S. Kobiashvili
Vice President and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities and on the dates indicated. (Apache Corporation does not have a
Principal Financial Officer.)
SIGNATURE TITLE DATE
--------- ----- ----
RAYMOND PLANK* Chairman and Chief September 19, 1995
--------------------------------------------- Executive Officer
(Raymond Plank) (Principal Executive
Officer)
MARK A. JACKSON* Vice President, Finance September 19, 1995
---------------------------------------------
(Mark A. Jackson)
R. KENT SAMUEL* Controller and Chief September 19, 1995
--------------------------------------------- Accounting Officer
(R. Kent Samuel) (Principal Accounting
Officer)
II-4
37
SIGNATURE TITLE DATE
--------- ------ ----
FREDERICK M. BOHEN* Director September 19, 1995
---------------------------------------------
(Frederick M. Bohen)
VIRGIL B. DAY* Director September 19, 1995
---------------------------------------------
(Virgil B. Day)
G. STEVEN FARRIS* Director September 19, 1995
---------------------------------------------
(G. Steven Farris)
RANDOLPH M. FERLIC* Director September 19, 1995
---------------------------------------------
(Randolph M. Ferlic)
EUGENE C. FIEDOREK* Director September 19, 1995
---------------------------------------------
(Eugene C. Fiedorek)
W. BROOKS FIELDS* Director September 19, 1995
---------------------------------------------
(W. Brooks Fields)
ROBERT V. GISSELBECK* Director September 19, 1995
---------------------------------------------
(Robert V. Gisselbeck)
STANLEY K. HATHAWAY* Director September 19, 1995
---------------------------------------------
(Stanley K. Hathaway)
JOHN A. KOCUR* Director September 19, 1995
---------------------------------------------
(John A. Kocur)
JOSEPH A. RICE* Director September 19, 1995
---------------------------------------------
(Joseph A. Rice)
* /s/ Z. S. KOBIASHVILI
---------------------------------------------
Attorney-in-Fact
II-5
38
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
------- -----------------------
1.1 -- Form of Purchase Agreement between Apache Corporation and the
Underwriters named therein.(1)
2.1 -- Purchase and Sale Agreement by and between Aquila Energy Resources
Corporation and Apache Corporation dated August 28, 1995.(1)
4.1 -- Restated Certificate of Incorporation of Apache Corporation
(incorporated by reference to Exhibit 3.1 to Apache's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, Commission File
No. 1-4300).
4.2 -- Bylaws of Apache Corporation as of July 31, 1995 (incorporated by
reference to Exhibit 4.2 of Apache's Registration Statement on Form
S-4, Registration No. 33-61669, filed with the Commission on August 8,
1995).
4.3 -- Form of common stock certificate (incorporated by reference to Exhibit
4.4 to Amendment No. 1 to Apache's Registration Statement on Form S-3,
Registration No. 33-5097, filed with the Commission on May 16, 1986).
4.4 -- Rights Agreement dated as of January 10, 1986 between the Company and
First Trust Company, Inc., rights agent, relating to the declaration
of Rights to the Company's common stockholders of record on January
24, 1986 (incorporated by reference to Exhibit 4.9 of Apache's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985,
Commission File No. 1-4300).
5.1 -- Opinion of legal counsel regarding legality of securities being
registered.(2)
23.1 -- Consent of Arthur Andersen LLP.(2)
23.2 -- Consent of Coopers & Lybrand, Chartered Accountants.(2)
23.3 -- Consent of Ryder Scott Company Petroleum Engineers ("Ryder Scott").(1)
23.4 -- Consent of Netherland, Sewell & Associates, Inc.(1)
23.5 -- Consent of legal counsel (included in Exhibit 5.1).(2)
24.1 -- Power of Attorney (included in Part II as a part of the signature
pages of the Registration Statement).(1)
99.1 -- Reports of Ryder Scott dated January 20 and January 23, 1995.(1)
99.2 -- Report of Ryder Scott dated February 6, 1995.(1)
99.3 -- Report of Ryder Scott dated August 21, 1995.(1)
99.4 -- Report of Netherland, Sewell & Associates, Inc., dated January 19,
1995.(1)
---------------
(1) Previously filed.
(2) Filed herewith.
EX-5.1
2
OPINION OF LEGAL COUNSEL
1
EXHIBIT 5.1
[APACHE LETTERHEAD]
September 19, 1995
Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Ladies and Gentlemen:
I am General Counsel to Apache Corporation, a Delaware corporation (the
"Company"), and am rendering this opinion in my capacity as such in connection
with the registration under the Securities Act of 1933, as amended, of an
aggregate of 8,567,500 shares of the Company's common stock, $1.25 par value
("Common Stock"), to be offered upon the terms and subject to the conditions
set forth in a proposed Purchase Agreement by and between the Company and
Merrill Lynch, Pierce Fenner & Smith Incorporated and Dean Witter Reynolds Inc.
as representatives of the several underwriters (the "Purchase Agreement").
In connection therewith, I have examined the Registration Statement on
Form S-3 (the "Registration Statement") covering the shares to be registered to
be filed with the Securities and Exchange Commission, originals or copies
certified or otherwise identified to my satisfaction of the Restated Certificate
of Incorporation of the Company and the Bylaws of the Company, each as amended
to date, the corporate proceedings with respect to the offering of shares and
such other documents and instruments as I have deemed necessary or appropriate
for the expression of the opinions contained herein.
I have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to me as originals, the conformity
to original documents of all records, certificates and other instruments
submitted to me as copies, the authenticity and completeness of originals of
those records, certificates and other instruments submitted to me as copies and
the correctness of all statements of fact contained in all records, certificates
and other instruments that I have examined.
Based on the foregoing, and having regard for such legal considerations
as I have deemed relevant, I am of the opinion that the 8,567,500 shares of
Common Stock proposed to be issued have been duly and validy authorized for
issuance and, when issued and paid for in accordance with the terms of the
Purchase Agreement, which is to be filed as an exhibit to the Registration
Statement, will be duly and validly issued, fully paid and nonassessable.
2
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus included as part of the Registration Statement.
Very truly yours,
/s/ Z. S. KOBIASHVILI
----------------------
Z. S. Kobiashvili
EX-23.1
3
CONSENT OF ARTHUR ANDERSEN LLP
1
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 14, 1995
on the audited Statement of Combined Revenues and Direct Operating Expenses for
the Oil and Gas Properties of Texaco Exploration and Production Inc. Sold to
Apache Corporation and to the incorporation by reference in this registration
statement of our report dated May 17, 1995 on the audited restated consolidated
financial statements of Apache Corporation and subsidiaries included in Apache
Corporation's Annual Report on Form 10-K/A for the year ended December 31, 1994,
and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
-------------------------------------
ARTHUR ANDERSEN LLP
Houston, Texas
September 1, 1995
EX-23.2
4
CONSENT OF COOPERS & LYBRAND, CHARTERED ACCOUNTANT
1
EXHIBIT 23.2
[LETTERHEAD OF COOPERS & LYBRAND]
CONSENT OF COOPERS & LYBRAND
We consent to the incorporation by reference in Amendment No. 2 to the
registration statement of Apache Corporation on Form S-3 (Registration No.
33-62177) of our report dated February 13, 1995 on our audits of the
consolidated financial statements of DEKALB Energy Company as of December 31,
1994 and 1993 and for the years ended December 31, 1994, 1993 and 1992 and our
report dated February 13, 1995 on our audit of the associated financial
statement schedule of DEKALB Energy Company, which reports are incorporated by
reference herein. We also consent to all references to our firm included in
Amendment No. 2 to the registration statement of Apache Corporation on
Form S-3 (Registration No. 33-62177).
/s/ COOPERS & LYBRAND
--------------------------------------
Coopers & Lybrand
Chartered Accountants
Calgary, Alberta, Canada
September 18, 1995