UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 1
5(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended
March 31, 2011
OR
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 1
5(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period from to
Commission File Number 1-4300
APACHE CORPORATION
(exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
41-0747868
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400
(Address of principal executive offices)
Registrants Telephone Number, Including Area Code: (
713) 296-6000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer
þ
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
|
|
|
|
(Do not check if a smaller reporting company)
|
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
o
No
þ
Number of shares of registrants common stock outstanding as of April 30, 2011 383,446,599
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
|
|
|
ITEM 1 FINANCIAL STATEMENTS
|
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions, except per common share data)
|
|
REVENUES AND OTHER:
|
|
|
|
|
|
|
|
|
Oil and gas production revenues
|
|
$
|
3,878
|
|
|
$
|
2,693
|
|
Other
|
|
|
47
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
3,925
|
|
|
|
2,673
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
936
|
|
|
|
639
|
|
Asset retirement obligation accretion
|
|
|
37
|
|
|
|
24
|
|
Lease operating expenses
|
|
|
623
|
|
|
|
440
|
|
Gathering and transportation
|
|
|
76
|
|
|
|
40
|
|
Taxes other than income
|
|
|
164
|
|
|
|
177
|
|
General and administrative
|
|
|
112
|
|
|
|
87
|
|
Merger, acquisitions & transition
|
|
|
5
|
|
|
|
|
|
Financing costs, net
|
|
|
45
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
1,998
|
|
|
|
1,466
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
1,927
|
|
|
|
1,207
|
|
Current income tax provision
|
|
|
643
|
|
|
|
343
|
|
Deferred income tax provision
|
|
|
150
|
|
|
|
159
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
1,134
|
|
|
|
705
|
|
Preferred stock dividends
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME ATTRIBUTABLE TO COMMON STOCK
|
|
$
|
1,115
|
|
|
$
|
705
|
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.91
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.86
|
|
|
$
|
2.08
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
1
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,134
|
|
|
$
|
705
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
936
|
|
|
|
639
|
|
Asset retirement obligation accretion
|
|
|
37
|
|
|
|
24
|
|
Provision for deferred income taxes
|
|
|
150
|
|
|
|
159
|
|
Other
|
|
|
(14
|
)
|
|
|
42
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(357
|
)
|
|
|
(269
|
)
|
Inventories
|
|
|
(26
|
)
|
|
|
(8
|
)
|
Drilling advances
|
|
|
(18
|
)
|
|
|
4
|
|
Deferred charges and other
|
|
|
104
|
|
|
|
4
|
|
Accounts payable
|
|
|
95
|
|
|
|
116
|
|
Accrued expenses
|
|
|
(65
|
)
|
|
|
(274
|
)
|
Deferred credits and noncurrent liabilities
|
|
|
3
|
|
|
|
12
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
1,979
|
|
|
|
1,154
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Additions to oil and gas property
|
|
|
(1,571
|
)
|
|
|
(959
|
)
|
Additions to gas gathering, transmission and processing facilities
|
|
|
(125
|
)
|
|
|
(115
|
)
|
Other
|
|
|
(53
|
)
|
|
|
26
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(1,749
|
)
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Commercial paper, credit facility and bank notes, net
|
|
|
19
|
|
|
|
(3
|
)
|
Dividends paid
|
|
|
(76
|
)
|
|
|
(50
|
)
|
Common stock activity
|
|
|
26
|
|
|
|
11
|
|
Treasury stock activity, net
|
|
|
4
|
|
|
|
1
|
|
Other
|
|
|
19
|
|
|
|
13
|
|
|
|
|
|
|
|
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
|
(8
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
222
|
|
|
|
78
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
|
|
134
|
|
|
|
2,048
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
356
|
|
|
$
|
2,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW DATA:
|
|
|
|
|
|
|
|
|
Interest paid, net of capitalized interest
|
|
$
|
73
|
|
|
$
|
74
|
|
Income taxes paid, net of refunds
|
|
|
448
|
|
|
|
293
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
356
|
|
|
$
|
134
|
|
Receivables, net of allowance
|
|
|
2,490
|
|
|
|
2,134
|
|
Inventories
|
|
|
593
|
|
|
|
564
|
|
Drilling advances
|
|
|
277
|
|
|
|
259
|
|
Prepaid assets and other
|
|
|
285
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
4,001
|
|
|
|
3,480
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Oil and gas, on the basis of full-cost accounting:
|
|
|
|
|
|
|
|
|
Proved properties
|
|
|
59,397
|
|
|
|
57,904
|
|
Unproved properties and properties under development, not being amortized
|
|
|
5,237
|
|
|
|
5,048
|
|
Gathering, transmission and processing facilities
|
|
|
4,337
|
|
|
|
4,212
|
|
Other
|
|
|
606
|
|
|
|
582
|
|
|
|
|
|
|
|
|
|
|
|
69,577
|
|
|
|
67,746
|
|
Less: Accumulated depreciation, depletion and amortization
|
|
|
(30,531
|
)
|
|
|
(29,595
|
)
|
|
|
|
|
|
|
|
|
|
|
39,046
|
|
|
|
38,151
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
1,032
|
|
|
|
1,032
|
|
Deferred charges and other
|
|
|
787
|
|
|
|
762
|
|
|
|
|
|
|
|
|
|
|
$
|
44,866
|
|
|
$
|
43,425
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
906
|
|
|
$
|
779
|
|
Accrued operating expense
|
|
|
191
|
|
|
|
163
|
|
Accrued exploration and development
|
|
|
1,399
|
|
|
|
1,367
|
|
Accrued compensation and benefits
|
|
|
131
|
|
|
|
231
|
|
Current debt
|
|
|
30
|
|
|
|
46
|
|
Current asset retirement obligation
|
|
|
373
|
|
|
|
407
|
|
Derivative instruments
|
|
|
491
|
|
|
|
194
|
|
Other
|
|
|
436
|
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
3,957
|
|
|
|
3,524
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
8,130
|
|
|
|
8,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
4,265
|
|
|
|
4,249
|
|
Asset retirement obligation
|
|
|
2,482
|
|
|
|
2,465
|
|
Other
|
|
|
834
|
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
7,581
|
|
|
|
7,429
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 7)
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Preferred stock, no par value, 5,000,000 shares authorized, 6% Cumulative Mandatory
Convertible, Series D, $1,000 per share liquidation preference, 1,265,000 shares
issued and outstanding
|
|
|
1,227
|
|
|
|
1,227
|
|
Common stock, $0.625 par, 430,000,000 shares authorized, 384,557,618 and
383,668,297 shares issued, respectively
|
|
|
240
|
|
|
|
240
|
|
Paid-in capital
|
|
|
8,928
|
|
|
|
8,864
|
|
Retained earnings
|
|
|
15,281
|
|
|
|
14,223
|
|
Treasury stock, at cost, 1,179,647 and 1,276,555 shares, respectively
|
|
|
(33
|
)
|
|
|
(36
|
)
|
Accumulated other comprehensive loss
|
|
|
(445
|
)
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
25,198
|
|
|
|
24,377
|
|
|
|
|
|
|
|
|
|
|
$
|
44,866
|
|
|
$
|
43,425
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
Series D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Comprehensive
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
|
Income
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Stock
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
(In millions)
|
|
BALANCE AT DECEMBER 31, 2009
|
|
|
|
|
|
|
$
|
|
|
|
$
|
215
|
|
|
$
|
4,634
|
|
|
$
|
11,437
|
|
|
$
|
(217
|
)
|
|
$
|
(290
|
)
|
|
$
|
15,779
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705
|
|
|
|
|
|
|
|
|
|
|
|
705
|
|
Commodity hedges, net of income tax
expense of $111
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends ($.15 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
Common shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Treasury shares issued, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT MARCH 31, 2010
|
|
|
|
|
|
|
$
|
|
|
|
$
|
215
|
|
|
$
|
4,708
|
|
|
$
|
12,091
|
|
|
$
|
(216
|
)
|
|
$
|
(40
|
)
|
|
$
|
16,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2010
|
|
|
|
|
|
|
$
|
1,227
|
|
|
$
|
240
|
|
|
$
|
8,864
|
|
|
$
|
14,223
|
|
|
$
|
(36
|
)
|
|
$
|
(141
|
)
|
|
$
|
24,377
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,134
|
|
|
|
|
|
|
|
|
|
|
|
1,134
|
|
Commodity hedges, net of income tax
benefit of $131
|
|
|
(304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(304
|
)
|
|
|
(304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
Common ($.15 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
Common shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Treasury shares issued, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
6
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT MARCH 31, 2011
|
|
|
|
|
|
|
$
|
1,227
|
|
|
$
|
240
|
|
|
$
|
8,928
|
|
|
$
|
15,281
|
|
|
$
|
(33
|
)
|
|
$
|
(445
|
)
|
|
$
|
25,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These financial statements have been prepared by Apache Corporation (Apache or the Company)
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair
statement of the results for the interim periods, on a basis consistent with the annual audited
financial statements. All such adjustments are of a normal recurring nature. Certain information,
accounting policies and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been
omitted pursuant to such rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q
should be read along with the Amended Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2010, which contains a summary of the Companys significant accounting policies and
other disclosures. Additionally, the Companys financial statements for prior periods include
reclassifications that were made to conform to the current-period presentation.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of March 31, 2011, Apaches significant accounting policies are consistent with those
discussed in Note 1 of its consolidated financial statements contained in the Amended Annual Report
on Form 10-K/A for the fiscal year ended December 31, 2010.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Significant estimates with
regard to these financial statements include fair value of acquired assets and liabilities, the
estimate of proved oil and gas reserves and related present value estimates of future net cash flow
therefrom, asset retirement obligations and income taxes. Actual results could differ from those
estimates.
2. ACQUISITIONS AND DIVESTITURES
2011 Activity
Kitimat LNG Project
In 2010 Apache Canada Ltd. (Apache Canada) and EOG Resources Canada, Inc. (EOG Canada),
through their subsidiaries, purchased 51-percent and 49-percent interests, respectively, in a
planned liquefied natural gas (LNG) export terminal (Kitimat LNG facility) and 25.5-percent and
24.5-percent interests, respectively, in Pacific Trail Pipelines Limited Partnership (PTP), a
partnership that owns a related proposed pipeline. In February 2011, in order to align ownership
and interests on the planned facility and pipeline development, Apache Canada and EOG Canada agreed
to purchase Pacific Northern Gas Ltd.s (PNG) remaining interest in PTP for $50 million. Following
the close of the acquisition, Apache and EOG owned 51-percent and 49-percent interests,
respectively, in PTP and secured full ownership in the proposed pipeline to transport natural gas
from production areas to the Kitimat LNG facility. Under the terms of the agreement, PNG will
operate and maintain the pipeline under a seven-year agreement with provisions for five-year
renewals.
In March 2011, Apache Canada and EOG Canada announced that Encana Corporation agreed to
purchase a 30-percent working interest ownership in both the Kitimat LNG facility and PTP. Under
the new ownership agreement, Apache retained a 40-percent interest in both the facility and the
related pipeline while EOG retained a 30-percent interest.
2010 Activity
During 2010 Apache completed the following material transactions:
Gulf of Mexico Shelf Acquisition
In June 2010 Apache completed an acquisition of oil and gas assets on the Gulf of Mexico shelf
from Devon Energy Corporation (Devon) for $1.05 billion, subject to normal post-closing
adjustments. The acquisition was effective January 1, 2010 and was funded primarily from existing
cash balances.
5
BP Acquisitions
In July 2010 Apache entered into three definitive purchase and sale agreements to acquire
properties from subsidiaries of BP plc (collectively referred to as BP) for aggregate
consideration of $7.0 billion. The effective date of the transactions was July 1, 2010. The
acquisition of BPs oil and gas operations, related infrastructure and acreage in the Permian Basin
of west Texas and New Mexico was completed on August 10, 2010, for an agreed-upon purchase price of
$3.1 billion. Apache completed the acquisition of substantially all of BPs Western Canadian
upstream natural gas assets on October 8, 2010, for $3.25 billion. On November 4, 2010, the Company
completed the acquisition of BPs interests in four development licenses and one exploration
concession in the Western Desert of Egypt for $650 million. Preferential purchase rights for $658
million of the value of the Permian Basin properties were exercised, and accordingly, the aggregate
purchase price for all three transactions was reduced to approximately $6.4 billion, subject to
normal post-closing adjustments.
The acquisitions were funded by issuing a combination of common stock and mandatory
convertible preferred shares, issuing new term debt and commercial paper, and using existing cash
balances.
Mariner Energy, Inc. Merger
In November 2010 Apache acquired Mariner Energy, Inc. (Mariner), an independent exploration
and production company, in a stock and cash transaction totaling $2.7 billion. The Company also
assumed approximately $1.7 billion of Mariners debt with the merger. Mariners oil and gas
properties are primarily located in the Gulf of Mexico deepwater and shelf, the Permian Basin and
onshore in the Gulf Coast region. The transaction was accounted for using the acquisition method of
accounting, which requires that assets acquired and liabilities assumed be recognized at their fair
values as of the acquisition date. Certain assets and liabilities may be adjusted as additional
information is obtained, but no later than one year from the acquisition date.
Pro Forma Impact of Acquisitions (Unaudited)
The Devon acquisition, BP acquisitions and Mariner merger were completed subsequent to the
first quarter of 2010. The following table presents pro forma information for Apache as if the
acquisitions and merger occurred prior to January 1, 2010:
|
|
|
|
|
|
|
For the Quarter
|
|
|
|
Ended
|
|
|
|
March 31, 2010
|
|
|
|
(In millions,
|
|
|
|
except per share
|
|
|
|
amounts)
|
|
Revenues and Other
|
|
$
|
3,261
|
|
|
|
|
|
Net Income
|
|
$
|
792
|
|
Preferred Stock Dividends
|
|
|
19
|
|
|
|
|
|
Income Attributable to Common Stock
|
|
|
773
|
|
|
|
|
|
Net Income per Common Share Basic
|
|
$
|
2.03
|
|
|
|
|
|
Net Income per Common Share Diluted
|
|
$
|
2.00
|
|
|
|
|
|
Apaches historical financial information was adjusted to give effect to the pro forma events
that were directly attributable to the acquisitions and merger and factually supportable. The
unaudited pro forma consolidated results are not necessarily indicative of what the Companys
consolidated results of operations actually would have been had the acquisitions and merger been
completed prior to January 1, 2010. In addition, the unaudited pro forma consolidated results do
not purport to project the future results of operations of the combined company. Adjustments and
assumptions made for this pro forma calculation are consistent with those used in the Companys
annual pro forma information as more fully described in Note 2 of the financial statements in
Apaches Amended Annual Report on Form 10-K/A for its 2010 fiscal year.
6
3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Strategies
The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of
its worldwide production. Management believes it is prudent to manage the variability in cash flows
by entering into derivative instruments on a portion of its crude oil and natural gas production.
The Company utilizes various types of derivative financial instruments, including swaps and
options, to manage fluctuations in cash flows resulting from changes in commodity prices.
Derivatives entered into are typically designated as cash flow hedges.
Counterparty Risk
The use of derivative instruments exposes the Company to counterparty credit risk, or the risk
that a counterparty will be unable to meet its commitments. To reduce the concentration of exposure
to any individual counterparty, Apache utilizes a diversified group of investment-grade rated
counterparties, primarily financial institutions, for its derivative transactions. As of March 31,
2011, Apache had derivative positions with 20 counterparties. The Company monitors counterparty
creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties
creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in
its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties
not perform, Apache may not realize the benefit of some of its derivative instruments resulting
from lower commodity prices.
The Company executes commodity derivative transactions under master agreements that have
netting provisions that provide for offsetting payables against receivables. In general, if a party
to a derivative transaction incurs a material deterioration in its credit ratings, as defined in
the applicable agreement, the other party has the right to demand the posting of collateral, demand
a transfer or terminate the arrangement.
Derivative Instruments
As of March 31, 2011, Apache had the following open natural gas derivative positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-Price Swaps
|
|
Collars
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted
|
Production
|
|
MMBtu
|
|
GJ
|
|
Average
|
|
MMBtu
|
|
GJ
|
|
Average
|
|
Average
|
Period
|
|
(in 000s)
|
|
(in 000s)
|
|
Fixed Price
(1)
|
|
(in 000s)
|
|
(in 000s)
|
|
Floor Price
(1)
|
|
Ceiling Price
(1)
|
2011
|
|
|
55,699
|
|
|
|
|
|
|
$
|
5.99
|
|
|
|
6,875
|
|
|
|
|
|
|
$
|
5.00
|
|
|
$
|
8.85
|
|
2011
|
|
|
|
|
|
|
38,500
|
|
|
C$
|
6.26
|
|
|
|
|
|
|
|
2,750
|
|
|
C$
|
6.50
|
|
|
C$
|
7.10
|
|
2012
|
|
|
41,554
|
|
|
|
|
|
|
$
|
6.30
|
|
|
|
21,960
|
|
|
|
|
|
|
$
|
5.54
|
|
|
$
|
7.30
|
|
2012
|
|
|
|
|
|
|
43,920
|
|
|
C$
|
6.61
|
|
|
|
|
|
|
|
7,320
|
|
|
C$
|
6.50
|
|
|
C$
|
7.27
|
|
2013
|
|
|
7,665
|
|
|
|
|
|
|
$
|
6.83
|
|
|
|
6,825
|
|
|
|
|
|
|
$
|
5.35
|
|
|
$
|
6.67
|
|
2014
|
|
|
755
|
|
|
|
|
|
|
$
|
7.23
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
(1)
|
|
U.S. natural gas prices represent a weighted average of several contracts
entered into on a per million British thermal units (MMBtu) basis and are settled primarily
against NYMEX Henry Hub and various Inside FERC indices. The Canadian gas contracts are
entered into on a per gigajoule (GJ) basis and are settled against AECO Index. The Canadian
natural gas prices represent a weighted average of AECO Index prices and are shown in
Canadian dollars.
|
As of March 31, 2011, Apache had the following open crude oil derivative positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-Price Swaps
|
|
Collars
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Weighted
|
Production
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Average
|
Period
|
|
Mbbls
|
|
Fixed Price
(1)
|
|
Mbbls
|
|
Floor Price
(1)
|
|
Ceiling Price
(1)
|
2011
|
|
|
4,127
|
|
|
$
|
73.57
|
|
|
|
22,595
|
|
|
$
|
69.15
|
|
|
$
|
96.66
|
|
2012
|
|
|
3,786
|
|
|
|
72.26
|
|
|
|
9,142
|
|
|
|
69.30
|
|
|
|
98.11
|
|
2013
|
|
|
1,860
|
|
|
|
74.38
|
|
|
|
2,416
|
|
|
|
78.02
|
|
|
|
103.06
|
|
2014
|
|
|
76
|
|
|
|
74.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Crude oil prices represent a weighted average of several contracts entered
into on a per barrel basis. Crude oil contracts are primarily settled against NYMEX WTI
Cushing Index. A portion of 2011 contracts are settled against Dated Brent.
|
Apache North Sea Ltd has entered into a physical sales contract to deliver 20,000 barrels
of oil per day in 2011, settled against Dated Brent with a floor price of $70 per barrel and an
average ceiling price of $98.56 per barrel. These sales are in the normal course of business and
are recognized in oil and gas revenues on an accrual basis.
7
Fair Values of Derivative Instruments Recorded in the Consolidated Balance Sheet
The Company accounts for derivative instruments and hedging activity in accordance with
Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging, and all derivative
instruments are reflected as either assets or liabilities at fair value in the consolidated balance
sheet. These fair values are recorded by netting asset and liability positions where counterparty
master netting arrangements contain provisions for net settlement. The fair market value of the
Companys derivative assets and liabilities and their locations on the consolidated balance sheet
are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
Current Assets: Prepaid assets and other
|
|
$
|
144
|
|
|
$
|
167
|
|
Other Assets: Deferred charges and other
|
|
|
108
|
|
|
|
139
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
252
|
|
|
$
|
306
|
|
|
|
|
|
|
|
|
Current Liabilities: Derivative instruments
|
|
$
|
491
|
|
|
$
|
194
|
|
Noncurrent Liabilities: Other
|
|
|
217
|
|
|
|
124
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
708
|
|
|
$
|
318
|
|
|
|
|
|
|
|
|
The methods and assumptions used to estimate the fair values of the Companys commodity
derivative instruments and gross amounts of commodity derivative assets and liabilities are more
fully discussed in Note 9 Fair Value Measurements.
Derivative Activity Recorded in Statement of Consolidated Operations
The following table summarizes the effect of derivative instruments on the Companys statement
of consolidated operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
Gain (Loss) on Derivatives
|
|
March 31,
|
|
|
Recognized In Income
|
|
2011
|
|
2010
|
|
|
|
|
|
|
(In millions)
|
Gain (loss)
reclassified from
accumulated other
comprehensive
income (loss) into
operations (effective portion)
|
|
Oil and Gas Production Revenues
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
Gain (loss) on
derivatives
recognized in
operations
(ineffective
portion and basis)
|
|
Revenues and Other: Other
|
|
$
|
(3
|
)
|
|
$
|
(1
|
)
|
Derivative Activity in Accumulated Other Comprehensive Income (Loss)
A reconciliation of the components of accumulated other comprehensive income (loss) in the
statement of consolidated shareholders equity related to Apaches cash flow hedges is presented in
the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Before
|
|
|
After
|
|
|
Before
|
|
|
After
|
|
|
|
tax
|
|
|
tax
|
|
|
tax
|
|
|
tax
|
|
|
|
(In millions)
|
|
Unrealized gain (loss) on derivatives at beginning of period
|
|
$
|
(54
|
)
|
|
$
|
(19
|
)
|
|
$
|
(267
|
)
|
|
$
|
(170
|
)
|
Realized amounts reclassified into earnings
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
1
|
|
Net change in derivative fair value
|
|
|
(432
|
)
|
|
|
(302
|
)
|
|
|
359
|
|
|
|
249
|
|
Ineffectiveness and basis swaps reclassified into
earnings
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on derivatives at end of period
|
|
$
|
(489
|
)
|
|
$
|
(323
|
)
|
|
$
|
94
|
|
|
$
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains and losses on existing hedges will be realized in future earnings through mid-2014, in
the same period as the related sales of natural gas and crude oil production occur. Included in
accumulated other comprehensive loss as of March 31, 2011, is a net loss of approximately $360
million ($248 million after tax) that applies to the next 12 months; however, estimated and actual
amounts are likely to vary materially as a result of changes in market conditions.
8
4. ASSET RETIREMENT OBLIGATION
The following table describes changes to the Companys asset retirement obligation (ARO)
liability for the quarter ended March 31, 2011:
|
|
|
|
|
|
|
(In millions)
|
|
Asset retirement obligation at December 31, 2010
|
|
$
|
2,872
|
|
Liabilities incurred
|
|
|
98
|
|
Liabilities settled
|
|
|
(152
|
)
|
Accretion expense
|
|
|
37
|
|
|
|
|
|
Asset retirement obligation at March 31, 2011
|
|
|
2,855
|
|
Less current portion
|
|
|
(373
|
)
|
|
|
|
|
Asset retirement obligation, long-term
|
|
$
|
2,482
|
|
|
|
|
|
5. DEBT AND FINANCING COSTS
The following table presents the carrying amounts and estimated fair values of the Companys
outstanding debt at March 31, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Money market lines of credit
|
|
$
|
30
|
|
|
$
|
30
|
|
|
$
|
46
|
|
|
$
|
46
|
|
Commercial paper
|
|
|
947
|
|
|
|
947
|
|
|
|
913
|
|
|
|
913
|
|
Notes and debentures
|
|
|
7,183
|
|
|
|
7,672
|
|
|
|
7,182
|
|
|
|
7,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
$
|
8,160
|
|
|
$
|
8,649
|
|
|
$
|
8,141
|
|
|
$
|
8,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys debt is recorded at the carrying amount on its consolidated balance sheet, net
of unamortized discount. The carrying amount of the Companys money market lines of credit and
commercial paper approximates fair value because the interest rates are variable and reflective of
market rates. Apache uses a market approach to determine the fair value of its notes and debentures
using estimates provided by an independent investment financial data services firm (a Level 2 fair
value measurement). For further discussion on determining fair value, please see Note 9 Fair
Value Measurements.
As of March 31, 2011, the Company had unsecured committed revolving syndicated bank credit
facilities totaling $3.3 billion, of which $1.0 billion matures in August 2011 and $2.3 billion
matures in May 2013. The facilities consist of a $1.0 billion 364-day facility, a $1.5 billion
facility and a $450 million facility in the U.S., a $200 million facility in Australia and a $150
million facility in Canada. As of March 31, 2011, available borrowing capacity under the Companys
credit facilities was $2.4 billion. The U.S. credit facilities are used to support Apaches
commercial paper program.
The Company has available a $2.95 billion commercial paper program, which generally enables
Apache to borrow funds for up to 270 days at competitive interest rates. The commercial paper
program is fully supported by available borrowing capacity under U.S. committed credit facilities,
which expire in 2011 and 2013. As of March 31, 2011, the Company had $947 million in commercial
paper outstanding, compared with $913 million outstanding as of December 31, 2010.
As of March 31, 2011, there was $30 million borrowed on uncommitted overdraft lines in Canada
and Argentina. As of December 31, 2010, there was $46 million drawn on uncommitted overdraft lines
in the U.S. and Argentina.
Financing Costs
Financing costs incurred during the periods noted are composed of the following:
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
Interest expense
|
|
$
|
108
|
|
|
$
|
77
|
|
Amortization of deferred loan costs
|
|
|
1
|
|
|
|
1
|
|
Capitalized interest
|
|
|
(60
|
)
|
|
|
(17
|
)
|
Interest income
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
Financing costs, net
|
|
$
|
45
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
9
6. INCOME TAXES
The Company estimates its annual effective income tax rate in recording its quarterly
provision for income taxes in the various jurisdictions in which the Company operates. Statutory
tax rate changes and other significant or unusual items are recognized as discrete items in the
quarter in which they occur. There were no significant discrete tax events that occurred during the
first quarter of 2011 and 2010.
In March 2011 the U.K. government proposed a 12-percent increase to the supplementary tax rate
applied to North Sea oil and gas profits. The legislation is expected to be enacted in the third
quarter of 2011. Upon enactment, the Company will adjust its outstanding deferred tax liabilities
and will record a non-recurring charge to tax expense in that quarter. The enacted tax rate change
will also increase the provision for income taxes in the Companys consolidated financial
statements for periods the rate is effective. The Company estimates the proposed legislation to
result in additional tax expense in 2011 of $300 to $350 million based on current forecasts.
Apache and its subsidiaries are subject to U.S. federal income tax as well as income or
capital taxes in various state and foreign jurisdictions. The Companys tax reserves are related to
tax years that may be subject to examination by the relevant taxing authority. The Company is in
Administrative Appeals with the United States Internal Revenue Service (IRS) regarding the 2004
through 2007 tax years and under audit for the 2008 tax year. The Company is also under audit in
various states and in most of the Companys foreign jurisdictions as part of its normal course of
business.
7. COMMITMENTS AND CONTINGENCIES
Legal Matters
Apache is party to various legal actions arising in the ordinary course of business, including
litigation and governmental and regulatory controls. The Company has an accrued liability of
approximately $15 million for all legal contingencies that are deemed to be probable of occurring
and can be reasonably estimated. Apaches estimates are based on information known about the
matters and its experience in contesting, litigating and settling similar matters. Although actual
amounts could differ from managements estimate, none of the actions are believed by management to
involve future amounts that would be material to Apaches financial position or results of
operations after consideration of recorded accruals. It is managements opinion that the loss for
any other litigation matters and claims that are reasonably possible to occur will not have a
material adverse effect on the Companys financial position or results of operations.
Argentine Environmental Claims
As more fully described in Note 8 of the financial statements in our Amended Annual Report on
Form 10-K/A for our 2010 fiscal year, in connection with the Pioneer acquisition in 2006, the
Company acquired a subsidiary of Pioneer in Argentina (PNRA) that is involved in various
administrative proceedings with environmental authorities in the Neuquén Province relating to
permits for and discharges from operations in that province. In addition, PNRA was named in a suit
initiated against oil companies operating in the Neuquén basin entitled
Asociación de
Superficiarios de la Patagonia v. YPF S.A., et. al
., originally filed on August 21, 2003, in the
Argentine National Supreme Court of Justice relating to various environmental and remediation
claims. No material change in the status of these matters has occurred since the filing of our most
recent Amended Annual Report on Form 10-K/A, except as follows:
Louisiana Restoration
As more fully described in Note 8 of the financial statements in our Amended Annual Report on
Form 10-K/A for our 2010 fiscal year, numerous surface owners have filed claims or sent demand
letters to various oil and gas companies, including Apache, claiming that, under either expressed
or implied lease terms or Louisiana law, they are liable for damage measured by the cost of
restoration of leased premises to their original condition as well as damages for contamination and
cleanup. No material change in the status of these matters has occurred since the filing of our
most recent Amended Annual Report on Form 10-K/A.
10
Australia Gas Pipeline Force Majeure
As more fully described in Note 8 of the financial statements in our Amended Annual Report on
Form 10-K/A for our 2010 fiscal year, in 2008 Company subsidiaries reported a pipeline explosion
that interrupted deliveries of natural gas in Australia to customers under various long-term
contracts. No material change in the status of these matters has occurred since the filing of our
most recent Amended Annual Report on Form 10-K/A except as follows:
In the first quarter of 2011, Apache Northwest Pty Ltd and Apache Energy Limited were served
with a lawsuit captioned
Alcoa of Australia Limited vs. Apache Energy Limited, Apache Northwest Pty
Ltd, Tap (Harriet) Pty Ltd, and Kufpec Australia Pty Ltd
, Civ. 1481 of 2011, in the Supreme Court
of Western Australia. The lawsuit concerns the pipeline explosion at Varanus Island in Western
Australia on June 3, 2008 that interrupted deliveries of natural gas to Alcoa under two long-term
contracts. Alcoa challenges the declaration of force majeure and the validity of the liquidated
damages provisions in the contracts. Alcoa asserts claims based on breach of contract, statutory
duties, and duty of care. Alcoa seeks approximately $158 million AUD in general damages or,
alternatively, approximately $5.7 million AUD in liquidated damages. Apache Northwest and Apache
Energy do not believe that Alcoas claims have merit and will vigorously pursue their defenses
against such claims.
In reference to the pipeline license described in Note 8 of the financial statements in our
Amended Annual Report on Form 10-K/A for our 2010 fiscal year, the application by Apache Northwest
Pty Ltd, Kufpec Australia Pty Ltd, and Tap (Harriet) Pty Ltd for renewal and variation of the
pipeline license covering the area of the Varanus Island facility was granted on April 19, 2011 by
the Government of Western Australia, Department of Mines and Petroleum. The period of the license
is 21 years commencing April 20, 2011.
Mariner Stockholder Lawsuits
As more fully described in Note 8 of the financial statements in our Amended Annual Report on
Form 10-K/A for our 2010 fiscal year, in connection with the Mariner merger, two shareholder
lawsuits styled as class actions were filed against Mariner and its board of directors. These
lawsuits have been settled and will not have a material impact on Apache. On March 14, 2011, the
Court of Chancery in the State of Delaware certified the settlement class and approved the parties
settlement. An Order and Final Judgment was entered by such Court on March 15, 2011. The plaintiffs
in the related action in the District Court of Harris County, Texas, filed a notice of nonsuit
resulting in the Courts dismissal of the case with prejudice, thus concluding the matter.
Escheat Audits
The State of Delaware, Department of Finance, Division of Revenue (Unclaimed Property), has
notified numerous companies, including Apache Corporation, that the State intends to examine its
books and records and those of its subsidiaries and related entities to determine compliance with
the Delaware Escheat Laws. The review will be conducted by Kelmar Associates on behalf of the
State. At least 30 other states have retained their own consultants and have sent similar
notifications. The scope of each states audit varies. The State of Delaware advises, for example,
that the scope of its examination will be for the period 1981 through the present. It is possible
that one or more of the State audits could extend to all 50 states.
Environmental Matters
As of March 31, 2011, the Company had an undiscounted reserve for environmental remediation of
approximately $135 million. The Company is not aware of any environmental claims existing as of
March 31, 2011, that have not been provided for or would otherwise have a material impact on its
financial position or results of operations. There can be no assurance, however, that current
regulatory requirements will not change or past non-compliance with environmental laws will not be
discovered on the Companys properties.
Apache Canada Ltd. has asserted a claim against BP Canada arising out of the acquisition of
certain Canadian properties under the parties Partnership Interest and Share Purchase and Sale
Agreement dated July 20, 2010. The dispute centers on Apache Canada Ltd.s identification of
Alleged Adverse Conditions, as that term is defined in the parties agreement, and more
specifically the contention that liabilities associated with such conditions were retained by BP
Canada as seller. Apache Canada Ltd. is diligently pursuing this claim.
On March 4, 2011, Mariner Energy, Inc. (MEI) (predecessor in interest to Apache Deepwater LLC)
received notice of a civil penalty assessment in the amount of $460,000 in relation to an Incident
of Noncompliance dated August 5, 2010 at High Island Area Block 116, Platform B, Lease No. OCS-G
06156, in Civil Penalty Case G-2010-023. The civil penalty assessment concerned sustained casing pressure and the basis of the assessment was 30 CFR
250.107(a). The March 4, 2011, notice advised MEI of the initiation of administrative civil penalty
proceedings. Within 30 days from the date of the notice MEI paid the assessment, thus concluding
the matter.
11
8. CAPITAL STOCK
Net Income per Common Share
A reconciliation of the components of basic and diluted net income per common share for the
quarters ended March 31, 2011 and 2010 is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per Share
|
|
|
Income
|
|
|
Shares
|
|
|
Per Share
|
|
|
|
|
|
|
|
(In millions, except per share amounts)
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to common stock
|
|
$
|
1,115
|
|
|
|
383
|
|
|
$
|
2.91
|
|
|
$
|
705
|
|
|
|
337
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandatory Convertible Preferred Stock
|
|
|
19
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and other
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to common stock,
including assumed conversions
|
|
$
|
1,134
|
|
|
|
397
|
|
|
$
|
2.86
|
|
|
$
|
705
|
|
|
|
339
|
|
|
$
|
2.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The diluted earnings per share calculation excludes options and restricted stock units
that were anti-dilutive totaling 1.6 million for each of the quarters ending March 31, 2011 and
2010.
Issuance of Common and Preferred Shares
In July 2010, in conjunction with Apaches acquisition of properties from BP, the
Company issued 26.45 million shares of common stock, as well as 25.3 million depositary shares,
each representing a 1/20
th
interest in a share of Apaches 6.00-percent Mandatory
Convertible Preferred Stock, Series D, or 1.265 million Preferred Shares. Each outstanding
Preferred Share will, on August 1, 2013, automatically convert into a minimum of 9.164 or a maximum
of 11.364 shares of Apache common stock depending on an average underlying price of the common
stock immediately preceding the conversion.
In November 2010, in connection with the Mariner merger, Apache issued 17.3 million shares of
common stock in exchange for Mariner common and restricted stock. For further discussion of the BP
acquisitions and Mariner merger, please see Note 2 Acquisitions and Divestitures.
Common and Preferred Stock Dividends
During the first quarters of 2011 and 2010, Apache paid $57 million and $50 million,
respectively, in dividends on its common stock. In the first quarter of 2011, the Company also paid
a total of $19 million in dividends on its Series D Preferred Stock.
Conditional Restricted Stock Units
To provide long-term incentives for Apache employees to deliver competitive returns to the
Companys stockholders, in January 2010 the Companys Board of Directors approved the 2010
Performance Program, pursuant to the 2007 Omnibus Equity Compensation Plan (the 2007 Plan).
Eligible employees received initial conditional restricted stock unit awards totaling 541,465
units. A total of 503,840 units were outstanding at March 31, 2011, from which a minimum of zero
and a maximum of 1,259,600 units could be awarded based upon measurement of total shareholder
return of Apache common stock as compared to a designated peer group during a three-year
performance period. Should any restricted stock units be awarded at the end of the three-year
performance period, 50 percent of restricted stock units awarded will immediately vest, and an
additional 25 percent will vest on succeeding anniversaries of the end of the performance period.
In January 2011 the Companys Board of Directors approved the 2011 Performance Program,
pursuant to the 2007 Plan, with terms similar to the 2010 Performance Program. Eligible employees
received initial conditional restricted stock unit awards totaling 585,811 units. A total of
570,645 units were outstanding at March 31, 2011, with the ultimate number of restricted stock
units to be awarded ranging from zero to a maximum of 1,426,613 units.
12
9. FAIR VALUE MEASUREMENTS
Certain assets and liabilities are reported at fair value on a recurring basis in Apaches
consolidated balance sheet. The following methods and assumptions were used to estimate the fair
values:
Cash, Cash Equivalents, Short-Term Investments, Accounts Receivable and Accounts Payable
The carrying amounts approximate fair value because of the short-term nature or maturity of
the instruments.
Commodity Derivative Instruments
Apaches commodity derivative instruments consist of variable-to-fixed price commodity swaps
and options. The Company uses a market approach to estimate the fair values of its derivative
instruments. A market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities. The Companys derivatives are
not actively quoted in the open market but are valued utilizing commodity futures price strips for
the underlying commodities, which are provided by a reputable third-party. For further information
regarding Apaches derivative instruments and hedging activities, please see Note 3 Derivative
Instruments and Hedging Activities of this Form 10-Q.
The following table presents the Companys derivative assets and liabilities measured at fair
value on a recurring basis for each hierarchy level:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price in
|
|
Significant
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
Other
|
|
Unobservable
|
|
Total
|
|
|
|
|
|
|
|
|
Markets
|
|
Inputs
|
|
Inputs
|
|
Fair
|
|
|
|
|
|
Carrying
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Value
|
|
Netting
(1)
|
|
Amount
|
|
|
(In millions)
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
$
|
|
|
|
$
|
404
|
|
|
$
|
|
|
|
$
|
404
|
|
|
$
|
(152
|
)
|
|
$
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
|
|
|
|
|
860
|
|
|
|
|
|
|
|
860
|
|
|
|
(152
|
)
|
|
|
708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
$
|
|
|
|
$
|
454
|
|
|
$
|
|
|
|
$
|
454
|
|
|
$
|
(148
|
)
|
|
$
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivative Instruments
|
|
|
|
|
|
|
466
|
|
|
|
|
|
|
|
466
|
|
|
|
(148
|
)
|
|
|
318
|
|
|
|
|
(1)
|
|
The derivative fair values above are based on analysis of each contract on a
gross basis, even where the legal right of offset exits, as required by ASC Topic 820. The
carrying amounts of derivative assets and liabilities reported on the consolidated balance
sheet are determined by netting asset and liability positions where counterparty master
netting arrangements contain provisions for net settlement. See Note 3 Derivative
Instruments and Hedging Activities of this Form 10-Q for a discussion of amounts recorded
on the consolidated balance sheet at March 31, 2011 and December 31, 2010.
|
13
10. BUSINESS SEGMENT INFORMATION
Apache is engaged in a single line of business. Both domestically and internationally, the
Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. At
March 31, 2011, the Company had exploration and production interests in seven countries: the
United States, Canada, Egypt, Australia, offshore the United Kingdom (U.K.) in the North Sea,
Argentina and Chile. Financial information for each country is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K.
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
States
|
|
|
Canada
|
|
|
Egypt
|
|
|
Australia
|
|
|
North Sea
|
|
|
Argentina
|
|
|
International
|
|
|
Total
|
|
|
|
(In millions)
|
|
For the Quarter Ended
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production Revenues
|
|
$
|
1,377
|
|
|
$
|
402
|
|
|
$
|
1,199
|
|
|
$
|
372
|
|
|
$
|
430
|
|
|
$
|
98
|
|
|
$
|
|
|
|
$
|
3,878
|
|
|
|
|
Operating Income (1)
|
|
$
|
629
|
|
|
$
|
78
|
|
|
$
|
893
|
|
|
$
|
226
|
|
|
$
|
206
|
|
|
$
|
10
|
|
|
$
|
|
|
|
$
|
2,042
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(112
|
)
|
Merger, acquisitions & transition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
21,683
|
|
|
$
|
8,635
|
|
|
$
|
6,266
|
|
|
$
|
4,016
|
|
|
$
|
2,609
|
|
|
$
|
1,598
|
|
|
$
|
59
|
|
|
$
|
44,866
|
|
|
|
|
For the Quarter Ended
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas Production Revenues
|
|
$
|
993
|
|
|
$
|
252
|
|
|
$
|
741
|
|
|
$
|
224
|
|
|
$
|
391
|
|
|
$
|
92
|
|
|
$
|
|
|
|
$
|
2,693
|
|
|
|
|
Operating Income (1)
|
|
$
|
511
|
|
|
$
|
95
|
|
|
$
|
493
|
|
|
$
|
100
|
|
|
$
|
149
|
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
1,373
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87
|
)
|
Financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
11,943
|
|
|
$
|
4,115
|
|
|
$
|
5,809
|
|
|
$
|
3,515
|
|
|
$
|
2,335
|
|
|
$
|
1,459
|
|
|
$
|
52
|
|
|
$
|
29,228
|
|
|
|
|
|
|
|
(1)
|
|
Operating Income consists of oil and gas production revenues less depreciation,
depletion and amortization, asset retirement obligation accretion, lease operating expenses,
gathering and transportation costs, and taxes other than income.
|
11. SUPPLEMENTAL GUARANTOR INFORMATION
Apache Finance Canada Corporation (Apache Finance Canada) is a wholly-owned subsidiary of
Apache and issued approximately $300 million of publicly-traded notes due in 2029 and an additional
$350 million of publicly-traded notes due in 2015 that are fully and unconditionally guaranteed by
Apache. The following condensed consolidating financial statements are provided as an alternative
to filing separate financial statements.
Apache Finance Canada has been fully consolidated in Apaches consolidated financial
statements. As such, these condensed consolidating financial statements should be read in
conjunction with the financial statements of Apache Corporation and subsidiaries and notes thereto,
of which this note is an integral part.
14
APACHE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Finance
|
|
|
of Apache
|
|
|
Reclassifications
|
|
|
|
|
|
|
Corporation
|
|
|
Canada
|
|
|
Corporation
|
|
|
& Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
REVENUES AND OTHER:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues
|
|
$
|
1,006
|
|
|
$
|
|
|
|
$
|
2,872
|
|
|
$
|
|
|
|
$
|
3,878
|
|
Equity in net income (loss) of affiliates
|
|
|
894
|
|
|
|
(14
|
)
|
|
|
(28
|
)
|
|
|
(852
|
)
|
|
|
|
|
Other
|
|
|
1
|
|
|
|
(20
|
)
|
|
|
67
|
|
|
|
(1
|
)
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,901
|
|
|
|
(34
|
)
|
|
|
2,911
|
|
|
|
(853
|
)
|
|
|
3,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
300
|
|
|
|
|
|
|
|
636
|
|
|
|
|
|
|
|
936
|
|
Asset retirement obligation accretion
|
|
|
17
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
37
|
|
Lease operating expenses
|
|
|
191
|
|
|
|
|
|
|
|
432
|
|
|
|
|
|
|
|
623
|
|
Gathering and transportation
|
|
|
12
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
76
|
|
Taxes other than income
|
|
|
41
|
|
|
|
|
|
|
|
123
|
|
|
|
|
|
|
|
164
|
|
General and administrative
|
|
|
89
|
|
|
|
|
|
|
|
24
|
|
|
|
(1
|
)
|
|
|
112
|
|
Merger, acquisitions & transition
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Financing costs, net
|
|
|
37
|
|
|
|
14
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692
|
|
|
|
14
|
|
|
|
1,293
|
|
|
|
(1
|
)
|
|
|
1,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
1,209
|
|
|
|
(48
|
)
|
|
|
1,618
|
|
|
|
(852
|
)
|
|
|
1,927
|
|
Provision (benefit) for income taxes
|
|
|
75
|
|
|
|
(6
|
)
|
|
|
724
|
|
|
|
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
|
1,134
|
|
|
|
(42
|
)
|
|
|
894
|
|
|
|
(852
|
)
|
|
|
1,134
|
|
Preferred stock dividends
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
|
|
$
|
1,115
|
|
|
$
|
(42
|
)
|
|
$
|
894
|
|
|
$
|
(852
|
)
|
|
$
|
1,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
APACHE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Finance
|
|
|
of Apache
|
|
|
Reclassifications
|
|
|
|
|
|
|
Corporation
|
|
|
Canada
|
|
|
Corporation
|
|
|
& Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
REVENUES AND OTHER:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas production revenues
|
|
$
|
898
|
|
|
$
|
|
|
|
$
|
1,795
|
|
|
$
|
|
|
|
$
|
2,693
|
|
Equity in net income (loss) of affiliates
|
|
|
458
|
|
|
|
24
|
|
|
|
(5
|
)
|
|
|
(477
|
)
|
|
|
|
|
Other
|
|
|
1
|
|
|
|
14
|
|
|
|
(34
|
)
|
|
|
(1
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,357
|
|
|
|
38
|
|
|
|
1,756
|
|
|
|
(478
|
)
|
|
|
2,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
217
|
|
|
|
|
|
|
|
422
|
|
|
|
|
|
|
|
639
|
|
Asset retirement obligation accretion
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
24
|
|
Lease operating expenses
|
|
|
168
|
|
|
|
|
|
|
|
272
|
|
|
|
|
|
|
|
440
|
|
Gathering and transportation
|
|
|
10
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
40
|
|
Taxes other than income
|
|
|
36
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
177
|
|
General and administrative
|
|
|
72
|
|
|
|
|
|
|
|
16
|
|
|
|
(1
|
)
|
|
|
87
|
|
Financing costs, net
|
|
|
53
|
|
|
|
14
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
568
|
|
|
|
14
|
|
|
|
885
|
|
|
|
(1
|
)
|
|
|
1,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
789
|
|
|
|
24
|
|
|
|
871
|
|
|
|
(477
|
)
|
|
|
1,207
|
|
Provision for income taxes
|
|
|
84
|
|
|
|
6
|
|
|
|
412
|
|
|
|
|
|
|
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME ATTRIBUTABLE TO COMMON STOCK
|
|
$
|
705
|
|
|
$
|
18
|
|
|
$
|
459
|
|
|
$
|
(477
|
)
|
|
$
|
705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
APACHE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Quarter Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Finance
|
|
|
of Apache
|
|
|
Reclassifications
|
|
|
|
|
|
|
Corporation
|
|
|
Canada
|
|
|
Corporation
|
|
|
& Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
|
|
$
|
392
|
|
|
$
|
(5
|
)
|
|
$
|
1,592
|
|
|
$
|
|
|
|
$
|
1,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas property
|
|
|
(469
|
)
|
|
|
|
|
|
|
(1,102
|
)
|
|
|
|
|
|
|
(1,571
|
)
|
Additions to gas gathering, transmission and
processing facilities
|
|
|
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
(125
|
)
|
Investment in subsidiaries, net
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
Other
|
|
|
(17
|
)
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(391
|
)
|
|
|
|
|
|
|
(1,263
|
)
|
|
|
(95
|
)
|
|
|
(1,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, credit facility and bank notes, net
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Intercompany borrowings
|
|
|
|
|
|
|
1
|
|
|
|
(96
|
)
|
|
|
95
|
|
|
|
|
|
Dividends paid
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
Common stock activity
|
|
|
26
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
26
|
|
Treasury stock activity, net
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Other
|
|
|
27
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
|
|
|
|
|
|
|
5
|
|
|
|
(108
|
)
|
|
|
95
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
|
|
|
1
|
|
|
|
|
|
|
|
221
|
|
|
|
|
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
|
|
|
6
|
|
|
|
|
|
|
|
128
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
END OF PERIOD
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
349
|
|
|
$
|
|
|
|
$
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
APACHE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Quarter Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Finance
|
|
|
of Apache
|
|
|
Reclassifications
|
|
|
|
|
|
|
Corporation
|
|
|
Canada
|
|
|
Corporation
|
|
|
& Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
|
|
$
|
599
|
|
|
$
|
(10
|
)
|
|
$
|
565
|
|
|
$
|
|
|
|
$
|
1,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas property
|
|
|
(240
|
)
|
|
|
|
|
|
|
(719
|
)
|
|
|
|
|
|
|
(959
|
)
|
Additions to gas gathering, transmission and
processing facilities
|
|
|
|
|
|
|
|
|
|
|
(115
|
)
|
|
|
|
|
|
|
(115
|
)
|
Investment in subsidiaries, net
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
Other
|
|
|
(29
|
)
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(289
|
)
|
|
|
|
|
|
|
(779
|
)
|
|
|
20
|
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, credit facility and bank notes, net
|
|
|
|
|
|
|
2
|
|
|
|
13
|
|
|
|
(18
|
)
|
|
|
(3
|
)
|
Dividends paid
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
Common stock activity
|
|
|
11
|
|
|
|
6
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
11
|
|
Treasury stock activity, net
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Cost of debt and equity transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
|
|
|
(25
|
)
|
|
|
8
|
|
|
|
9
|
|
|
|
(20
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
|
|
|
285
|
|
|
|
(2
|
)
|
|
|
(205
|
)
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
|
|
|
647
|
|
|
|
2
|
|
|
|
1,399
|
|
|
|
|
|
|
|
2,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
END OF PERIOD
|
|
$
|
932
|
|
|
$
|
|
|
|
$
|
1,194
|
|
|
$
|
|
|
|
$
|
2,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
APACHE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Finance
|
|
|
of Apache
|
|
|
Reclassifications
|
|
|
|
|
|
|
Corporation
|
|
|
Canada
|
|
|
Corporation
|
|
|
& Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
349
|
|
|
$
|
|
|
|
$
|
356
|
|
Receivables, net of allowance
|
|
|
746
|
|
|
|
|
|
|
|
1,744
|
|
|
|
|
|
|
|
2,490
|
|
Inventories
|
|
|
62
|
|
|
|
|
|
|
|
531
|
|
|
|
|
|
|
|
593
|
|
Drilling advances
|
|
|
14
|
|
|
|
2
|
|
|
|
261
|
|
|
|
|
|
|
|
277
|
|
Prepaid assets and other
|
|
|
3,226
|
|
|
|
|
|
|
|
(2,941
|
)
|
|
|
|
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,055
|
|
|
|
2
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
4,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
11,598
|
|
|
|
|
|
|
|
27,448
|
|
|
|
|
|
|
|
39,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable, net
|
|
|
4,601
|
|
|
|
|
|
|
|
(3,088
|
)
|
|
|
(1,513
|
)
|
|
|
|
|
Equity in affiliates
|
|
|
17,456
|
|
|
|
1,295
|
|
|
|
87
|
|
|
|
(18,838
|
)
|
|
|
|
|
Goodwill, net
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
|
|
|
|
|
|
1,032
|
|
Deferred charges and other
|
|
|
169
|
|
|
|
1,003
|
|
|
|
615
|
|
|
|
(1,000
|
)
|
|
|
787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,879
|
|
|
$
|
2,300
|
|
|
$
|
26,038
|
|
|
$
|
(21,351
|
)
|
|
$
|
44,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
498
|
|
|
$
|
3
|
|
|
$
|
1,918
|
|
|
$
|
(1,513
|
)
|
|
$
|
906
|
|
Accrued exploration and development
|
|
|
293
|
|
|
|
|
|
|
|
1,106
|
|
|
|
|
|
|
|
1,399
|
|
Current debt
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
Current asset retirement obligation
|
|
|
317
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
373
|
|
Derivative instruments
|
|
|
376
|
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
491
|
|
Other accrued expenses
|
|
|
307
|
|
|
|
13
|
|
|
|
438
|
|
|
|
|
|
|
|
758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,791
|
|
|
|
16
|
|
|
|
3,663
|
|
|
|
(1,513
|
)
|
|
|
3,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
7,482
|
|
|
|
647
|
|
|
|
1
|
|
|
|
|
|
|
|
8,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
1,659
|
|
|
|
5
|
|
|
|
2,601
|
|
|
|
|
|
|
|
4,265
|
|
Asset retirement obligation
|
|
|
1,008
|
|
|
|
|
|
|
|
1,474
|
|
|
|
|
|
|
|
2,482
|
|
Other
|
|
|
741
|
|
|
|
250
|
|
|
|
843
|
|
|
|
(1,000
|
)
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,408
|
|
|
|
255
|
|
|
|
4,918
|
|
|
|
(1,000
|
)
|
|
|
7,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
25,198
|
|
|
|
1,382
|
|
|
|
17,456
|
|
|
|
(18,838
|
)
|
|
|
25,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,879
|
|
|
$
|
2,300
|
|
|
$
|
26,038
|
|
|
$
|
(21,351
|
)
|
|
$
|
44,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
APACHE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
Apache
|
|
|
Apache
|
|
|
of Apache
|
|
|
Reclassifications
|
|
|
|
|
|
|
Corporation
|
|
|
Finance Canada
|
|
|
Corporation
|
|
|
& Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
128
|
|
|
$
|
|
|
|
$
|
134
|
|
Receivables, net of allowance
|
|
|
691
|
|
|
|
|
|
|
|
1,443
|
|
|
|
|
|
|
|
2,134
|
|
Inventories
|
|
|
55
|
|
|
|
|
|
|
|
509
|
|
|
|
|
|
|
|
564
|
|
Drilling advances
|
|
|
10
|
|
|
|
2
|
|
|
|
247
|
|
|
|
|
|
|
|
259
|
|
Prepaid assets and other
|
|
|
3,313
|
|
|
|
|
|
|
|
(2,924
|
)
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,075
|
|
|
|
2
|
|
|
|
(597
|
)
|
|
|
|
|
|
|
3,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
11,314
|
|
|
|
|
|
|
|
26,837
|
|
|
|
|
|
|
|
38,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable, net
|
|
|
4,695
|
|
|
|
|
|
|
|
(3,149
|
)
|
|
|
(1,546
|
)
|
|
|
|
|
Equity in affiliates
|
|
|
16,649
|
|
|
|
1,275
|
|
|
|
98
|
|
|
|
(18,022
|
)
|
|
|
|
|
Goodwill, net
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
|
|
|
|
|
|
1,032
|
|
Deferred charges and other
|
|
|
178
|
|
|
|
1,003
|
|
|
|
581
|
|
|
|
(1,000
|
)
|
|
|
762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,911
|
|
|
$
|
2,280
|
|
|
$
|
24,802
|
|
|
$
|
(20,568
|
)
|
|
$
|
43,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
480
|
|
|
$
|
2
|
|
|
$
|
1,843
|
|
|
$
|
(1,546
|
)
|
|
$
|
779
|
|
Accrued exploration and development
|
|
|
274
|
|
|
|
|
|
|
|
1,093
|
|
|
|
|
|
|
|
1,367
|
|
Current debt
|
|
|
16
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
46
|
|
Current asset retirement obligation
|
|
|
317
|
|
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
407
|
|
Derivative instruments
|
|
|
153
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
194
|
|
Other accrued expenses
|
|
|
400
|
|
|
|
3
|
|
|
|
328
|
|
|
|
|
|
|
|
731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,640
|
|
|
|
5
|
|
|
|
3,425
|
|
|
|
(1,546
|
)
|
|
|
3,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
7,447
|
|
|
|
647
|
|
|
|
1
|
|
|
|
|
|
|
|
8,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED CREDITS AND OTHER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
1,803
|
|
|
|
5
|
|
|
|
2,441
|
|
|
|
|
|
|
|
4,249
|
|
Asset retirement obligation
|
|
|
1,001
|
|
|
|
|
|
|
|
1,464
|
|
|
|
|
|
|
|
2,465
|
|
Other
|
|
|
643
|
|
|
|
250
|
|
|
|
822
|
|
|
|
(1,000
|
)
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,447
|
|
|
|
255
|
|
|
|
4,727
|
|
|
|
(1,000
|
)
|
|
|
7,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
24,377
|
|
|
|
1,373
|
|
|
|
16,649
|
|
|
|
(18,022
|
)
|
|
|
24,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,911
|
|
|
$
|
2,280
|
|
|
$
|
24,802
|
|
|
$
|
(20,568
|
)
|
|
$
|
43,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Apache Corporation (Apache or the Company), a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops and produces natural gas, crude oil and
natural gas liquids. We currently have exploration and production interests in seven countries: the
U.S., Canada, Egypt, Australia, offshore the United Kingdom in the North Sea (North Sea), Argentina
and Chile.
This discussion relates to Apache Corporation and its consolidated subsidiaries and should be
read in conjunction with our consolidated financial statements and accompanying notes included
under Part I, Item 1, of this Quarterly Report on Form 10-Q, as well as our consolidated financial
statements, accompanying notes and Managements Discussion and Analysis of Financial Condition and
Results of Operations included in our most recent Amended Annual Report on Form 10-K/A.
Financial Overview
Apaches strategy of maintaining a balanced portfolio of assets, a conservative capital
structure and a focus on rate of return has served us well for many years. Our business model
continued to deliver during the first quarter of 2011 with earnings of $1.1 billion, or $2.86 per
diluted common share, up from the comparable year-ago earnings of $705 million, or $2.08 per
diluted common share. The current period reflects the first full quarter of results from our three
major acquisitions completed in 2010 and benefited from substantially higher oil price
realizations. Complemented with prior-year acquisition activity, average first-quarter 2011
production of 732 thousand barrels of oil equivalent per day (Mboe/d) set a new record for the
Company and represents an increase of 25 percent from first quarter 2010.
Our performance during the period highlights the benefit of having geological and geographical
diversity as well as maintaining a balanced product mix. Oil and liquids provided 49 percent of our
total production and, with oil prices continuing to rise during the quarter, represented 77 percent
of our $3.9 billion in oil and gas revenues. In addition, approximately 60 percent of our
first-quarter crude oil sales came from our international regions (outside of North America) where
we receive prices indexed to Dated Brent for the majority of our oil sales. Dated Brent premiums
were higher during the quarter than they historically have been relative to West Texas
Intermediate-based prices (WTI). Similarly, both Heavy and Light Louisiana Sweet (HLS and LLS)
crude sold at a higher than historical premium to WTI, positively impacting the majority of our
production offshore in the Gulf of Mexico. Higher Dated Brent, HLS and LLS realizations relative to
WTI have continued into the second quarter of 2011 and are enhancing our results despite North
American natural gas prices that continue to languish.
Key measures of our performance for the first quarter 2011 compared to prior year periods are
summarized below:
|
|
|
Net cash provided by operating activities (operating cash flows or cash flows) totaled
$2.0 billion, up 71 percent from $1.2 billion in the prior-year period;
|
|
|
|
|
Oil and gas production revenues increased 44 percent to $3.9 billion from the prior-year
quarter;
|
|
|
|
|
Average realized oil prices increased 31 percent to $97.83 per barrel, heavily
influenced by international oil prices, which increased nearly 40 percent to $103.21 per
barrel;
|
|
|
|
|
Pre-tax margin of $29.25 per boe was up 28 percent from the 2010 period margin,
calculated as income before income taxes divided by barrels-equivalent production;
|
|
|
|
|
Oil and gas capital expenditures totaled $1.8 billion in the first quarter of 2011, up
from $1.1 billion in the first quarter of 2010; and
|
|
|
|
|
Debt-to-capitalization ratio at the end of the first quarter decreased slightly to 24.5
percent from year-end 2010.
|
21
Operating Highlights
During the first quarter of 2011, we had broad-based drillbit success with multiple
new field discoveries and continued to advance several large projects despite operational
challenges that included unexpected political events, mechanical downtime and weather-related
interruptions. Notable highlights include:
Egypt
|
|
|
Egypts operations achieved a new quarterly record for gross production of 357 Mboe/d,
up two percent from the fourth quarter of 2010 and 18 percent from the first quarter of
2010. Although the Company continues to monitor the recent political unrest and changes in
Egypt, our production and drilling activity continued basically uninterrupted.
|
|
|
|
|
Apache operated 22 rigs during the quarter, drilling 33 wells, including the first
Paleozoic discovery in the Western Desert at Tayim West, which test-flowed at 3,600 barrels
of oil per day (b/d). This Paleozoic discovery opens a new play deeper than previous
discoveries in the Western Desert.
|
|
|
|
|
Apache made the first field discovery in the Siwa Concession, our westernmost concession
in Egypt, with the Siwa D-1X well flowing 4,490 b/d and 8 million cubic feet of natural gas
per day (MMcf/d). We plan to drill two follow-up prospects during 2011.
|
Australia
|
|
|
On April 4, 2011, the Company announced its Zola-1 natural gas discovery offshore
Western Australia that is on trend with the Gorgon gas field 16 miles to the north and near
both existing and developing gas infrastructure. The well logged 410 feet of net pay, with
the quality and thickness of the reservoir being better than anticipated. The Company plans
to acquire new seismic and drill appraisal wells to further assess the discovery. Apache
owns a 30.25-percent working interest in the well.
|
|
|
|
|
Ongoing exploration activity at Apaches Julimar and Brunello complex resulted in the
discovery of a deeper Mungaroo gas pool encountering 362 feet of net pay. The Balnaves Deep
well is associated with continuing field development efforts and augments previous
discoveries. Apache operates the Julimar and Brunello field with a 65-percent working
interest.
|
|
|
|
|
Both the Reindeer and Halyard field developments remain on target for first production
in 2011, despite numerous cyclones and tropical storms that curtailed the regions
production and slowed operations.
|
North Sea
|
|
|
During the quarter, the Company drilled five successful oil development wells, including
the Charlie 2-2 well, which tested at 11,800 b/d. Apache expects to drill a total of 16
wells in the Forties field in 2011.
|
|
|
|
|
Development activity continues on target for first production from the Bacchus field in
late third-quarter 2011 and for the Forties Alpha satellite platform installation, which
provides 18 new drilling slots, in the third quarter of 2012.
|
United States
|
|
|
During the quarter, the Central region drilled 23 wells, of which 20 were horizontals,
and completed the first dual lateral in the Granite Wash. Apache continued to target
numerous sands in the Granite Wash, including the Hogshooter segment where six wells have
been drilled to date with each testing in excess of 1,000 b/d and 2 MMcf/d.
|
|
|
|
|
Apache operated 24 rigs in the Permian Basin during the quarter and drilled 110 wells,
of which 15 were horizontal, as the Company continues to ramp up activity on our BP and
Mariner acquired assets.
|
|
|
|
|
In the Gulf of Mexico deepwater, Apache achieved first production from two projects
during the first quarter, representing 10 Mboe/d of combined initial gross production.
These were tied back into existing facilities and did not require new well drilling
permits. Apache has a 50-percent working interest in both projects.
|
|
|
|
|
On March 16, 2011, Apache announced our participation in the Marine Well Containment
Company (MWCC), an independent organization committed to responding to well control
incidents in the deepwater Gulf of Mexico. MWCC will support equipment mobilization and
provide access to a containment system to help facilitate our future deepwater operations.
We will be a member of the MWCC Executive Committee.
|
22
Results of Operations
Oil and Gas Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
$ Value
|
|
|
% Contribution
|
|
|
$ Value
|
|
|
% Contribution
|
|
|
|
(In millions)
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Oil Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
918
|
|
|
|
32
|
%
|
|
$
|
594
|
|
|
|
31
|
%
|
Canada
|
|
|
115
|
|
|
|
4
|
%
|
|
|
97
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
1,033
|
|
|
|
36
|
%
|
|
|
691
|
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
1,050
|
|
|
|
36
|
%
|
|
|
625
|
|
|
|
32
|
%
|
Australia
|
|
|
331
|
|
|
|
11
|
%
|
|
|
183
|
|
|
|
9
|
%
|
North Sea
|
|
|
426
|
|
|
|
15
|
%
|
|
|
387
|
|
|
|
20
|
%
|
Argentina
|
|
|
52
|
|
|
|
2
|
%
|
|
|
51
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
1,859
|
|
|
|
64
|
%
|
|
|
1,246
|
|
|
|
64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(1)
|
|
$
|
2,892
|
|
|
|
100
|
%
|
|
$
|
1,937
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
381
|
|
|
|
44
|
%
|
|
$
|
367
|
|
|
|
52
|
%
|
Canada
|
|
|
263
|
|
|
|
30
|
%
|
|
|
149
|
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
644
|
|
|
|
74
|
%
|
|
|
516
|
|
|
|
73
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
148
|
|
|
|
17
|
%
|
|
|
116
|
|
|
|
16
|
%
|
Australia
|
|
|
41
|
|
|
|
5
|
%
|
|
|
41
|
|
|
|
6
|
%
|
North Sea
|
|
|
4
|
|
|
|
0
|
%
|
|
|
4
|
|
|
|
1
|
%
|
Argentina
|
|
|
37
|
|
|
|
4
|
%
|
|
|
31
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
230
|
|
|
|
26
|
%
|
|
|
192
|
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(2)
|
|
$
|
874
|
|
|
|
100
|
%
|
|
$
|
708
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Liquids (NGL)
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
78
|
|
|
|
70
|
%
|
|
$
|
32
|
|
|
|
66
|
%
|
Canada
|
|
|
24
|
|
|
|
21
|
%
|
|
|
6
|
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
102
|
|
|
|
91
|
%
|
|
|
38
|
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
1
|
|
|
|
1
|
%
|
|
|
|
|
|
|
0
|
%
|
Argentina
|
|
|
9
|
|
|
|
8
|
%
|
|
|
10
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
10
|
|
|
|
9
|
%
|
|
|
10
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
112
|
|
|
|
100
|
%
|
|
$
|
48
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oil and Gas Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,377
|
|
|
|
36
|
%
|
|
$
|
993
|
|
|
|
37
|
%
|
Canada
|
|
|
402
|
|
|
|
10
|
%
|
|
|
252
|
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
1,779
|
|
|
|
46
|
%
|
|
|
1,245
|
|
|
|
46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
1,199
|
|
|
|
31
|
%
|
|
|
741
|
|
|
|
28
|
%
|
Australia
|
|
|
372
|
|
|
|
10
|
%
|
|
|
224
|
|
|
|
8
|
%
|
North Sea
|
|
|
430
|
|
|
|
11
|
%
|
|
|
391
|
|
|
|
15
|
%
|
Argentina
|
|
|
98
|
|
|
|
2
|
%
|
|
|
92
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
2,099
|
|
|
|
54
|
%
|
|
|
1,448
|
|
|
|
54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,878
|
|
|
|
100
|
%
|
|
$
|
2,693
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Financial derivative hedging activities and the North Sea fixed-price sales
contract decreased oil revenues for the quarters ending March 31, 2011 and 2010 by $71 million
and $14 million, respectively.
|
|
(2)
|
|
Financial derivative hedging activities increased natural gas revenues for the
quarters ending March 31, 2011 and 2010 by $64 million and $13 million, respectively.
|
23
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
|
|
|
Increase
|
|
|
|
|
2011
|
|
(Decrease)
|
|
2010
|
Oil Volume b/d:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
113,723
|
|
|
|
+28
|
%
|
|
|
88,755
|
|
Canada
|
|
|
14,704
|
|
|
|
+3
|
%
|
|
|
14,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
128,427
|
|
|
|
+25
|
%
|
|
|
103,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
108,876
|
|
|
|
+20
|
%
|
|
|
90,746
|
|
Australia
|
|
|
34,720
|
|
|
|
+28
|
%
|
|
|
27,090
|
|
North Sea
|
|
|
46,968
|
|
|
|
-19
|
%
|
|
|
57,847
|
|
Argentina
|
|
|
9,617
|
|
|
|
-3
|
%
|
|
|
9,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
200,181
|
|
|
|
+8
|
%
|
|
|
185,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(1)
|
|
|
328,608
|
|
|
|
+14
|
%
|
|
|
288,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Volume Mcf/d:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
858,146
|
|
|
|
+28
|
%
|
|
|
671,819
|
|
Canada
|
|
|
642,729
|
|
|
|
+105
|
%
|
|
|
313,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
1,500,875
|
|
|
|
+52
|
%
|
|
|
985,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
371,514
|
|
|
|
+3
|
%
|
|
|
361,986
|
|
Australia
|
|
|
182,922
|
|
|
|
-12
|
%
|
|
|
207,294
|
|
North Sea
|
|
|
1,901
|
|
|
|
-26
|
%
|
|
|
2,563
|
|
Argentina
|
|
|
188,092
|
|
|
|
+22
|
%
|
|
|
154,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
744,429
|
|
|
|
+2
|
%
|
|
|
726,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(2)
|
|
|
2,245,304
|
|
|
|
+31
|
%
|
|
|
1,711,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL Volume b/d:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
19,252
|
|
|
|
+181
|
%
|
|
|
6,843
|
|
Canada
|
|
|
6,545
|
|
|
|
+277
|
%
|
|
|
1,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
25,797
|
|
|
|
+201
|
%
|
|
|
8,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
228
|
|
|
|
N/A
|
|
|
|
|
|
Argentina
|
|
|
3,055
|
|
|
|
-7
|
%
|
|
|
3,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
3,283
|
|
|
|
0
|
%
|
|
|
3,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
29,080
|
|
|
|
+145
|
%
|
|
|
11,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOE per day
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
275,999
|
|
|
|
+33
|
%
|
|
|
207,567
|
|
Canada
|
|
|
128,370
|
|
|
|
+88
|
%
|
|
|
68,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
404,369
|
|
|
|
+47
|
%
|
|
|
275,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
171,023
|
|
|
|
+13
|
%
|
|
|
151,077
|
|
Australia
|
|
|
65,207
|
|
|
|
+6
|
%
|
|
|
61,639
|
|
North Sea
|
|
|
47,285
|
|
|
|
-19
|
%
|
|
|
58,275
|
|
Argentina
|
|
|
44,021
|
|
|
|
+13
|
%
|
|
|
38,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
327,536
|
|
|
|
+6
|
%
|
|
|
309,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
731,905
|
|
|
|
+25
|
%
|
|
|
585,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Approximately 30 percent of first-quarter 2011 oil production was subject to
financial derivative hedges, compared to 12 percent in 2010.
|
|
(2)
|
|
Approximately 16 percent of first-quarter 2011 gas production was subject to
financial derivative hedges, compared to 25 percent in 2010.
|
|
(3)
|
|
The table shows reserves on a boe basis in which natural gas is converted to an
equivalent barrel of oil based on a 6:1 energy equivalent ratio. This ratio is not reflective
of the current price ratio between the two products.
|
24
Pricing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
|
|
|
Increase
|
|
|
|
|
2011
|
|
(Decrease)
|
|
2010
|
Average Oil price Per barrel:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
89.72
|
|
|
|
+21
|
%
|
|
$
|
74.33
|
|
Canada
|
|
|
87.21
|
|
|
|
+16
|
%
|
|
|
75.39
|
|
North America
|
|
|
89.43
|
|
|
|
+20
|
%
|
|
|
74.47
|
|
Egypt
|
|
|
107.14
|
|
|
|
+40
|
%
|
|
|
76.49
|
|
Australia
|
|
|
105.89
|
|
|
|
+41
|
%
|
|
|
74.94
|
|
North Sea
|
|
|
100.89
|
|
|
|
+36
|
%
|
|
|
74.34
|
|
Argentina
|
|
|
60.36
|
|
|
|
+4
|
%
|
|
|
57.81
|
|
International
|
|
|
103.21
|
|
|
|
+38
|
%
|
|
|
74.60
|
|
Total
(1)
|
|
|
97.83
|
|
|
|
+31
|
%
|
|
|
74.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Natural Gas price Per Mcf:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
4.94
|
|
|
|
-18
|
%
|
|
$
|
6.06
|
|
Canada
|
|
|
4.54
|
|
|
|
-14
|
%
|
|
|
5.29
|
|
North America
|
|
|
4.77
|
|
|
|
-18
|
%
|
|
|
5.82
|
|
Egypt
|
|
|
4.44
|
|
|
|
+24
|
%
|
|
|
3.57
|
|
Australia
|
|
|
2.50
|
|
|
|
+13
|
%
|
|
|
2.22
|
|
North Sea
|
|
|
20.34
|
|
|
|
+11
|
%
|
|
|
18.31
|
|
Argentina
|
|
|
2.18
|
|
|
|
0
|
%
|
|
|
2.17
|
|
International
|
|
|
3.43
|
|
|
|
+17
|
%
|
|
|
2.94
|
|
Total
(2)
|
|
|
4.32
|
|
|
|
-6
|
%
|
|
|
4.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average NGL Price Per barrel:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
44.99
|
|
|
|
-13
|
%
|
|
$
|
51.91
|
|
Canada
|
|
|
40.12
|
|
|
|
-1
|
%
|
|
|
40.54
|
|
North America
|
|
|
43.76
|
|
|
|
-12
|
%
|
|
|
49.61
|
|
Egypt
|
|
|
63.35
|
|
|
|
N/A
|
|
|
|
|
|
Argentina
|
|
|
30.51
|
|
|
|
-12
|
%
|
|
|
34.60
|
|
International
|
|
|
32.79
|
|
|
|
-5
|
%
|
|
|
34.60
|
|
Total
|
|
|
42.52
|
|
|
|
-6
|
%
|
|
|
45.45
|
|
|
|
|
(1)
|
|
Reflects per-barrel decrease of $2.41 in first-quarter 2011 and $.56 in 2010 from
financial derivative hedging activities and the North Sea fixed-price sales contract.
|
|
(2)
|
|
Reflects per-Mcf increase of $.32 in first-quarter 2011 and $.09 in 2010 from
financial derivative hedging activities.
|
First-Quarter 2011 Compared to First-Quarter 2010
Crude Oil Revenues
Crude oil revenues for the first quarter of 2011 totaled $2.9 billion,
nearly $1 billion higher than the comparative 2010 quarter, the result of a 31-percent increase in
average realized prices and a 14-percent increase in worldwide production. Crude oil accounted for
75 percent of oil and gas production revenues and 45 percent of worldwide production in the first
quarter of 2011, compared with 72 percent and 49 percent, respectively, in the first quarter of
2010. Higher realized prices added $605 million to the increase in first-quarter 2011 revenues
compared to the prior quarter, while higher production volumes contributed an additional $351
million.
Crude oil prices realized in the first quarter of 2011 averaged $97.83 per barrel, compared
with $74.55 in the comparative prior-year quarter. Our international regions crude oil
realizations averaged $103.21, an increase of 38 percent compared with first-quarter 2010
realizations of $74.60. Our Egypt, Australia and North Sea regions, which comprise approximately 58
percent of our worldwide oil production, are benefitting from strengthening Dated Brent premiums
compared to U.S. WTI-based prices, with first-quarter 2011 oil realizations averaging $105.37
compared with first-quarter 2010 realizations of $75.54.
Worldwide production increased 39.9 thousand barrels of oil per day (Mb/d) from the first
quarter of 2010 to 328.6 Mb/d in the first quarter of 2011, primarily driven by increased
production in the U.S. and Egypt. The 25.0 Mb/d increase in U.S. oil production is primarily a
result of 2010 acquisition activity. The Permian region was up 12.4 Mb/d on properties added from
the BP acquisition and the Mariner merger, offset by weather-related shut-ins. The Gulf of Mexico
(GOM) onshore and offshore regions added 9.9 Mb/d reflecting properties acquired in the Devon
acquisition and the Mariner merger; however, natural decline negatively impacted results, as new
drilling has been impacted by the moratorium in the GOM and the subsequent slowed pace of
permitting. Egypts gross oil production increased 25 percent, while net production was up 20
percent, as higher oil prices impacted our allocated volumes. The 18.1 Mb/d production increase was
a result of additional capacity provided by the Kalabsha oil processing facility, production from
properties added in the BP acquisition and an active drilling program. Australia saw production
increase 7.6 Mb/d with the continued strong performance of the Pyrenees development that began
production during the first quarter of 2010. The gain was tempered by downtime across the region as
a result of tropical cyclones and repairs to the Van Gogh facility. Production decreased 10.9 Mb/d
in the North Sea on natural
decline and downtime related to a shut-in pipeline. An existing pipeline was converted to oil
service for temporary use until the permanent replacement line is completed in September 2011.
25
Natural Gas Revenues
Gas revenues for the first quarter of 2011 totaled $874 million, up 23
percent from the first quarter of 2010. A 31-percent increase in average production added $208
million to natural gas revenues as compared to the prior-year quarter, while a six-percent drop in
average realized prices reduced revenues $42 million between the periods. Natural gas accounted for
23 percent of our oil and gas production revenues and 51 percent of our equivalent production
during the first quarter of 2011, compared to 26 and 49 percent, respectively, for the first
quarter of 2010. All of our international regions, which comprise approximately one-third of total
gas production, benefited from higher realized prices.
Worldwide production grew 533 MMcf/d between the periods on production increases in Canada and
the U.S. Daily production in Canada more than doubled, rising 329 MMcf/d on an active drilling and
completion program in the Horn River basin and additional volumes from properties acquired from BP.
U.S. daily production increased 186 MMcf/d, primarily as a result of acquisition activity in 2010.
Permian region production rose 58 MMcf/d on incremental volumes from properties added from the BP
acquisition and the Mariner merger and on increased drilling activity. Frigid weather during the
quarter tempered production gains. The GOM onshore and offshore regions added 103 MMcf/d from
properties acquired in the Devon acquisition and the Mariner merger, offset by natural decline, as
new drilling has been impacted by the moratorium in the GOM and the subsequent slowed pace of
permitting. Argentinas production was up 33 MMcf/d from new drilling and recompletions and higher
seasonal demand compared to the prior period. Egypts net production grew three percent on a
successful drilling and completion program and production from properties added in the BP
acquisition. Australias daily gas production fell 24 MMcf/d on downtime from tropical cyclones and
lower customer takes under existing contractual arrangements.
Operating Expenses
The table below presents a comparison of our expenses on an absolute dollar basis and an
equivalent unit of production (boe) basis. Our discussion may reference expenses on a boe basis, on
an absolute dollar basis or both, depending on relevance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
For the Quarter Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
(Per boe)
|
|
Depreciation, depletion and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas property and equipment
|
|
$
|
869
|
|
|
$
|
587
|
|
|
$
|
13.19
|
|
|
$
|
11.13
|
|
Other assets
|
|
|
67
|
|
|
|
52
|
|
|
|
1.02
|
|
|
|
.98
|
|
Asset retirement obligation accretion
|
|
|
37
|
|
|
|
24
|
|
|
|
.56
|
|
|
|
.46
|
|
Lease operating expenses
|
|
|
623
|
|
|
|
440
|
|
|
|
9.46
|
|
|
|
8.35
|
|
Gathering and transportation
|
|
|
76
|
|
|
|
40
|
|
|
|
1.16
|
|
|
|
.77
|
|
Taxes other than income
|
|
|
164
|
|
|
|
177
|
|
|
|
2.49
|
|
|
|
3.36
|
|
General and administrative expenses
|
|
|
112
|
|
|
|
87
|
|
|
|
1.70
|
|
|
|
1.65
|
|
Merger, acquisitions & transition
|
|
|
5
|
|
|
|
|
|
|
|
.08
|
|
|
|
|
|
Financing costs, net
|
|
|
45
|
|
|
|
59
|
|
|
|
.68
|
|
|
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,998
|
|
|
$
|
1,466
|
|
|
$
|
30.34
|
|
|
$
|
27.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization (DD&A)
The following table details the changes in
recurring DD&A of oil and gas properties between the first quarter of 2011 and 2010:
|
|
|
|
|
|
|
Recurring DD&A
|
|
|
|
(In millions)
|
|
First-Quarter 2010 DD&A
|
|
$
|
587
|
|
Volume change
|
|
|
127
|
|
Rate change
|
|
|
155
|
|
|
|
|
|
First-Quarter 2011 DD&A
|
|
$
|
869
|
|
|
|
|
|
Full-cost DD&A expense of $869 million increased $282 million on an absolute dollar basis:
$155 million on rate and $127 million from higher volumes. The Companys full-cost DD&A rate
increased $2.06 to $13.19 per boe, reflecting acquisition, drilling and finding costs that exceed
our historical cost basis.
26
Lease operating expenses (LOE)
Our first quarter 2011 LOE increased $183 million from first
quarter 2010. LOE per boe was up 13 percent: 42 percent on higher cost, offset by a 29 percent
decline related to increased production. The rate was impacted between the first quarter of 2011
and 2010 by the items below:
|
|
|
|
|
|
|
Per boe
|
|
First-Quarter 2010 LOE
|
|
$
|
8.35
|
|
Acquisitions, net of associated production
|
|
|
(.16
|
)
|
Repairs and maintenance
|
|
|
.52
|
|
FX impact
|
|
|
.28
|
|
Chemicals
|
|
|
.17
|
|
Materials
|
|
|
.12
|
|
Workover costs
|
|
|
.12
|
|
Power and fuel
|
|
|
.08
|
|
Other
|
|
|
.32
|
|
Other increased production
|
|
|
(.34
|
)
|
|
|
|
|
First-Quarter 2011 LOE
|
|
$
|
9.46
|
|
|
|
|
|
Gathering and transportation
Gathering and transportation costs totaled $76 million in the
first quarter of 2011, up $36 million from the first quarter of 2010. On a per-unit basis,
gathering and transportation costs of $1.16 per boe were up 51 percent from the prior-year quarter.
The following table presents gathering and transportation costs paid by Apache directly to
third-party carriers for each of the periods presented.
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
Canada
|
|
$
|
45
|
|
|
$
|
16
|
|
United States
|
|
|
14
|
|
|
|
11
|
|
Egypt
|
|
|
10
|
|
|
|
6
|
|
North Sea
|
|
|
5
|
|
|
|
6
|
|
Argentina
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
Total Gathering and Transportation
|
|
$
|
76
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
The $29 million increase in Canada resulted from a combination of an increase in gas volumes
of over 100 percent, higher average rates and foreign exchange impacts. Average per-unit costs were
directly influenced by Apaches increased production in the Horn River basin and properties
acquired during 2010, where the associated gathering, processing and transportation contracts had
higher average rates than Apaches legacy properties. The U.S. change from the prior year is
directly related to increased volumes, while Egypts rise was attributable to a higher number of
oil sales cargos and higher vessel freight costs.
Taxes other than income
Taxes other than income totaled $164 million in the first quarter of
2011, a decrease of $13 million from the prior year period. The following table presents a
comparison of these expenses:
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
U.K. PRT
|
|
$
|
82
|
|
|
$
|
122
|
|
Severance taxes
|
|
|
47
|
|
|
|
32
|
|
Ad valorem taxes
|
|
|
27
|
|
|
|
18
|
|
Other
|
|
|
8
|
|
|
|
5
|
|
|
|
|
|
|
|
|
Total Taxes other than income
|
|
$
|
164
|
|
|
$
|
177
|
|
|
|
|
|
|
|
|
The North Sea Petroleum Revenue Tax (PRT) is assessed on net receipts (revenues less
qualifying operating costs and capital spending) from the Forties field in the United Kingdom
(U.K.) North Sea. U.K. PRT was $40 million lower than the 2010 period based on a 32 percent
decrease in net receipts, primarily driven by capital expenditures that were more than double
prior-year levels. Prior-year property acquisitions and higher realized oil and gas prices resulted
in an increase of severance and ad valorem tax expense of $15 million and $9 million, respectively,
when compared to the prior-year period. Severance taxes are incurred primarily on onshore
properties in the U.S. and certain properties in Australia and Argentina. Ad valorem taxes are
assessed on U.S. and Canadian property values and sales.
27
General and administrative expenses
General and administrative expenses (G&A) increased $25
million over the year-ago period. On a per-unit basis G&A increased only three percent as the
impact of increased production mostly offset higher expenses.
Financing costs, net
Financing costs incurred during the periods noted comprised the
following:
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
Interest expense
|
|
$
|
108
|
|
|
$
|
77
|
|
Amortization of deferred loan costs
|
|
|
1
|
|
|
|
1
|
|
Capitalized interest
|
|
|
(60
|
)
|
|
|
(17
|
)
|
Interest income
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
Financing costs, net
|
|
$
|
45
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
Net financing costs were down $14 million in first-quarter 2011 compared to first-quarter
2010. The decrease is primarily related to a $43 million increase in capitalized interest, the
result of additional unproved balances from the BP acquisitions and Mariner merger. This decrease
is partially offset by a $31 million increase in interest expense associated with $2.5 billion of
debt issued in the second half of 2010.
Provision for income taxes
The Company estimates its annual effective income tax rate in
recording its quarterly provision for income taxes in the various jurisdictions in which the
Company operates. Statutory tax rate changes and other significant or unusual items are recognized
as discrete items in the quarter in which they occur. There were no significant discrete tax events
that occurred during the first quarter of 2011 or 2010.
In March 2011 the U.K. government proposed a 12-percent increase to the supplementary tax rate
applied to North Sea oil and gas profits. The legislation is expected to be enacted in the third
quarter of 2011. Upon enactment, the Company will adjust its outstanding deferred tax liabilities
and will record a non-recurring charge to tax expense in that quarter. The enacted tax rate change
will also increase the provision for income taxes in the Companys consolidated financial
statements for periods the rate is effective. The Company estimates the proposed legislation to
result in additional tax expense in 2011 of $300 to $350 million based on current forecasts.
The 2011 first-quarter provision for income taxes increased $291 million to $793 million on a
60 percent increase in income before income taxes. The effective income tax rate in first-quarter
2011 was 41 percent, consistent with an effective rate of 42 percent in first-quarter 2010.
28
Non-GAAP Measures
The Company makes reference to some measures in discussion of its financial and operating
highlights that are not required by or presented in accordance with GAAP. Management uses these
measures in assessing operating results and believes the presentation of these measures provides
information useful in assessing the Companys financial condition and results of operations. These
non-GAAP measures should not be considered as alternatives to GAAP measures and may be calculated
differently from, and therefore may not be comparable to, similarly-titled measures used at other
companies.
Adjusted Earnings
To assess the Companys operating trends and performance, management uses Adjusted Earnings,
which is net income excluding certain items that management believes affect the comparability of
operating results. Management believes this presentation may be useful to investors who follow the
practice of some industry analysts who adjust reported company earnings for items that may obscure
underlying fundamentals and trends. The reconciling items below are the types of items management
excludes and believes are frequently excluded by analysts when evaluating the operating trends and
comparability of the Companys results.
|
|
|
|
|
|
|
|
|
|
|
For the Quarter
|
|
|
|
Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions, except per share data)
|
|
Income Attributable to Common Stock (GAAP)
|
|
$
|
1,115
|
|
|
$
|
705
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Foreign currency fluctuation impact on deferred tax expense
|
|
|
12
|
|
|
|
7
|
|
Merger, acquisitions & transition, net of tax
(1)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings (Non-GAAP)
|
|
$
|
1,131
|
|
|
$
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income per Common Share Diluted (GAAP)
|
|
$
|
2.86
|
|
|
$
|
2.08
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Foreign currency fluctuation impact on deferred tax expense
|
|
|
.03
|
|
|
|
.02
|
|
Merger, acquisitions & transition, net of tax
|
|
|
.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings Per Share Diluted (Non-GAAP)
|
|
$
|
2.90
|
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Merger, acquisitions & transition costs recorded in the first quarter of 2011
totaled $5 million pre-tax, for which a tax benefit of $1 million was recognized. The tax
effect was calculated utilizing the statutory rates in effect in each country where costs
were incurred.
|
Capital Resources and Liquidity
Operating cash flows are the primary source of liquidity. Apaches cash flows, both in the
short-term and the long-term, are impacted by highly volatile oil and natural gas prices.
Significant deterioration in commodity prices negatively impacts revenues, earnings and cash flows,
capital spending and potentially our liquidity if spending does not trend downward as well. Sales
volumes and costs also impact cash flows, but these historically have not been as volatile or as
impactive as commodity prices in the short-term.
Apaches long-term operating cash flows are dependent on reserve replacement and the level of
costs required for ongoing operations. Our business, as with other extractive industries, is a
depleting one in which each barrel produced must be replaced or the Company and its reserves, a
critical source of future liquidity, will shrink. Cash investments are required continuously to
fund exploration and development projects and acquisitions, which are necessary to offset the
inherent declines in production and proven reserves. Future success in maintaining and growing
reserves and production is highly dependent on the success of our exploration and development
activities and our ability to acquire additional reserves at reasonable costs.
We may also elect to utilize available committed borrowing capacity, access to both debt and
equity capital markets, or proceeds from the occasional sale of nonstrategic assets for all other
liquidity and capital resource needs. We believe the liquidity and capital resource alternatives
available to Apache, combined with internally-generated cash flows, will be adequate to fund
short-term and long-term operations, including our capital spending program, repayment of debt
maturities and any amount that may ultimately be paid in connection with contingencies.
29
Apaches primary uses of cash are for exploration, development and acquisition of oil and gas
properties, costs necessary to maintain ongoing operations, repayment of principal and interest on
outstanding debt and payment of dividends. We fund our exploration and development activities
primarily through operating cash flows and budget capital expenditures based on projected cash
flows.
See Part II, Item 1A, Risk Factors of this Form 10-Q and Part I, Items 1 and 2, Business
and Properties, and Item 1A, Risk Factors Related to Our Business and Operations, in our Amended
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2010.
Sources and Uses of Cash
The following table presents the sources and uses of our cash and cash equivalents for the
periods presented.
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
Sources of Cash and Cash Equivalents:
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
1,979
|
|
|
$
|
1,154
|
|
Net commercial paper and bank loan borrowings
|
|
|
19
|
|
|
|
|
|
Common and treasury stock activity
|
|
|
30
|
|
|
|
12
|
|
Other
|
|
|
19
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
2,047
|
|
|
|
1,205
|
|
|
|
|
|
|
|
|
Uses of Cash and Cash Equivalents:
|
|
|
|
|
|
|
|
|
Capital expenditures
(1)
|
|
|
1,696
|
|
|
|
1,074
|
|
Dividends
|
|
|
76
|
|
|
|
50
|
|
Other
|
|
|
53
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
1,825
|
|
|
|
1,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
$
|
222
|
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The table presents capital expenditures on a cash basis; therefore, the
amounts differ from those discussed elsewhere in this document, which include accruals.
|
Net Cash Provided by Operating Activities
Operating cash flows are our primary source of
capital and liquidity and is impacted, both in the short-term and the long-term, by volatile oil
and natural gas prices. The factors in determining operating cash flow are largely the same as
those that affect net earnings, with the exception of non-cash expenses such as DD&A, asset
retirement obligation (ARO) accretion and deferred income tax expense, which affect earnings but do
not affect cash flows.
Net cash provided by operating activities for the first quarter of 2011 totaled $2.0 billion,
up $825 million from the first quarter of 2010. The increase reflects the impact of higher oil and
gas revenues ($1.2 billion) as a result of a 25-percent increase in daily equivalent production
($625 million) and higher commodity prices ($560 million). Also positively impacting operating cash
flows was the change in working capital during first-quarter 2011 compared to first-quarter 2010.
For a detailed discussion of commodity prices, production, costs and expenses, refer to the
Results of Operations of this Item 2. For additional detail of changes in operating assets and
liabilities, see the statement of consolidated cash flows in Item 1, Financial Statements of this
Quarterly Form 10-Q.
Capital Expenditures
We fund exploration and development (E&D) activities primarily through
operating cash flows and budget capital expenditures based on projected cash flows. We remain
determined to not outspend our operating cash flows, and we adjust our capital budget accordingly
on a quarterly basis. In response to higher realized commodity prices, subsequent to the first
quarter of 2011 we reassessed our capital expenditure budget for 2011 and raised our plan of $7.5
billion to $8.1 billion.
30
The following table details capital expenditures incurred for each country in which we do
business.
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
Exploration and Development:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
615
|
|
|
$
|
297
|
|
Canada
|
|
|
266
|
|
|
|
203
|
|
|
|
|
|
|
|
|
North America
|
|
|
881
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
193
|
|
|
|
166
|
|
Australia
|
|
|
162
|
|
|
|
165
|
|
North Sea
|
|
|
210
|
|
|
|
94
|
|
Argentina
|
|
|
69
|
|
|
|
37
|
|
Chile
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
International
|
|
|
634
|
|
|
|
472
|
|
|
|
|
|
|
|
|
Worldwide Exploration and Development Costs
|
|
|
1,515
|
|
|
|
972
|
|
|
|
|
|
|
|
|
|
|
Gathering, Transmission and Processing Facilities (GTP):
|
|
|
|
|
|
|
|
|
Canada
|
|
|
42
|
|
|
|
33
|
|
Egypt
|
|
|
29
|
|
|
|
24
|
|
Australia
|
|
|
51
|
|
|
|
56
|
|
Argentina
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
Total GTP Costs
|
|
|
122
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
Asset Retirement Costs
|
|
|
98
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Capitalized Interest
|
|
|
60
|
|
|
|
17
|
|
|
|
|
|
|
|
|
Capital Expenditures, excluding Acquisitions
|
|
|
1,795
|
|
|
|
1,125
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, including GTP
|
|
|
11
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Expenditures
|
|
$
|
1,806
|
|
|
$
|
1,130
|
|
|
|
|
|
|
|
|
Worldwide E&D expenditures for the first quarter of 2011 totaled $1.5 billion, 56 percent
above first-quarter 2010 levels. E&D spending in North America, which was up 76 percent from the
prior-year quarter, totaled 58 percent of worldwide E&D spending. U.S. E&D expenditures more than
doubled on activity related to our newly-acquired properties, particularly in the Permian region
where we actively pursued opportunities in the Deadwood (Mariner-acquired) area. In addition, the
Central regions active horizontal drilling program in the Granite Wash and Cherokee plays also
contributed to our period-over-period increase in expenditures. E&D spending in Canada increased 31
percent to $266 million on an active drilling program in several plays including the Horn River
basin and several liquids-rich gas opportunities.
E&D expenditures outside of North America increased 34 percent over first-quarter 2010 levels
to $634 million. E&D spending in the North Sea was up $116 million over the comparative period on
construction of the Bacchus subsea tie-back project and on the Forties Alpha satellite platform and
ongoing upgrades to existing platforms. Argentina expenditures were up $32 million, or 86 percent,
on additional drilling and development activity. Egypt was $27 million higher than first-quarter
2010 levels on continued drilling activity across all its major basins.
We invested $122 million in GTP in the first quarter of 2011 compared to $114 million in the
prior-year quarter. Expenditures in Australia consisted of construction activity at the Devil Creek
Gas Plant and the ongoing front-end engineering and design (FEED) study for the Wheatstone LNG
project. Activity in Canada was centered in the Horn River basin, with expenditures for gathering
systems and a gas processing plant. GTP expenditures in Egypt primarily comprised final stages of
construction on the Kalabsha oil processing facility.
Dividends
During the first quarters of 2011 and 2010, Apache paid $57 million and $50
million, respectively, in dividends on its common stock. In the first quarter of 2011, the Company
also paid a total of $19 million in dividends on its Series D Preferred Stock issued in July 2010.
31
Liquidity
The following table presents a summary of our key financial indicators for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2011
|
|
2010
|
|
|
(In millions, except percentages)
|
Cash and cash equivalents
|
|
$
|
356
|
|
|
$
|
134
|
|
Total debt
|
|
|
8,160
|
|
|
|
8,141
|
|
Shareholders equity
|
|
|
25,198
|
|
|
|
24,377
|
|
Available committed borrowing capacity
|
|
|
2,353
|
|
|
|
2,387
|
|
Floating-rate debt/total debt
|
|
|
12
|
%
|
|
|
12
|
%
|
Percent of total debt-to-capitalization
|
|
|
24.5
|
%
|
|
|
25
|
%
|
Cash and Cash Equivalents
We had $356 million in cash and cash equivalents as of March 31,
2011, compared to $134 million at December 31, 2010. Approximately $325 million of the cash was
held by foreign subsidiaries, and approximately $31 million was held by Apache Corporation and U.S.
subsidiaries. The cash held by foreign subsidiaries is subject to additional U.S. income taxes if
repatriated. Almost all of the cash is denominated in U.S. dollars and, at times, is invested in
highly liquid, investment grade securities with maturities of three months or less at the time of
purchase.
Debt
As of March 31, 2011, outstanding debt, which consisted of notes, debentures and
uncommitted bank lines, totaled $8.2 billion. Current debt as of March 31, 2011, includes $30
million borrowed on uncommitted overdraft lines in Canada and Argentina. As of December 31, 2010,
there was $46 million drawn on uncommitted overdraft lines in the U.S. and Argentina.
Available committed borrowing capacity
As of March 31, 2011, the Company had unsecured
committed revolving syndicated bank credit facilities totaling $3.3 billion, of which $1.0 billion
matures in August 2011 and $2.3 billion matures in May 2013. The facilities consist of a $1.0
billion 364-day facility, a $1.5 billion facility and a $450 million facility in the U.S., a $200
million facility in Australia and a $150 million facility in Canada. As of March 31, 2011,
available borrowing capacity under the Companys credit facilities was $2.4 billion. The U.S.
credit facilities are used to support Apaches commercial paper program.
The Company has available a $2.95 billion commercial paper program, which generally enables
Apache to borrow funds for up to 270 days at competitive interest rates. The commercial paper
program is fully supported by available borrowing capacity under U.S. committed credit facilities,
which expire in 2013. As of March 31, 2011, the Company had $947 million in commercial paper
outstanding, compared with $913 million outstanding as of December 31, 2010.
The Company was in compliance with the terms of all credit facilities as of March 31, 2011.
Percent of total debt to capitalization
The Companys March 31, 2011 debt-to-capitalization
ratio was 24.5 percent, down from 25 percent at December 31, 2010.
32
|
|
|
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Commodity Risk
The Companys revenues, earnings, cash flow, capital investments and, ultimately, future rate
of growth are highly dependent on the prices we receive for our crude oil, natural gas and NGLs,
which have historically been very volatile due to unpredictable events such as economic growth or
retraction, weather and climate. Our average monthly crude oil realizations have increased 31
percent to $97.83 per barrel in the first quarter of 2011 from $74.55 per barrel in the comparable
period of 2010. Our average natural gas price realizations have trended downward, decreasing six
percent to $4.32 per Mcf from $4.60 per Mcf in the comparable period of 2010.
We periodically enter into hedging activities on a portion of our projected oil and natural
gas production through a variety of financial and physical arrangements intended to support oil and
natural gas prices at targeted levels and to manage our overall exposure to oil and gas price
fluctuations. Approximately 16 percent of our first-quarter 2011 natural gas and 30 percent of our
crude oil production was subject to financial derivative hedges.
Apache may use futures contracts, swaps and options to hedge its commodity prices. Realized
gains or losses from the Companys price-risk management activities are recognized in oil and gas
production revenues when the associated production occurs. Apache does not hold or issue derivative
instruments for trading purposes.
On March 31, 2011, the Company had open natural gas derivative hedges in an asset position
with a fair value of $403 million. A 10 percent increase in natural gas prices would reduce the
fair value by approximately $90 million, while a 10 percent decrease in prices would increase the
fair value by approximately $89 million. The Company also had open oil derivatives in a liability
position with a fair value of $859 million. A 10 percent increase in oil prices would increase the
liability by approximately $418 million, while a 10 percent decrease in prices would decrease the
liability by approximately $369 million. These fair value changes assume volatility based on
prevailing market parameters at March 31, 2011. See Note 3 Derivative Instruments and Hedging
Activities of the Notes to Consolidated Financial Statements in Item 1 of this quarterly report for
notional volumes and terms associated with the Companys derivative contracts.
Interest Rate Risk
On March 31, 2011, the Companys debt with fixed interest rates represented approximately 88
percent of total debt. As a result, the interest expense on approximately 12 percent of Apaches
debt will fluctuate based on short-term interest rates. A 10 percent change in floating interest
rates on floating debt balances as of March 31, 2011 would change interest expense by approximately
$183,000 per quarter.
Foreign Currency Risk
The Companys cash flow stream relating to certain international operations is based on the
U.S. dollar equivalent of cash flows measured in foreign currencies. In Australia, oil production
is sold under U.S. dollar contracts, and gas production is sold largely under fixed-price
Australian dollar contracts. Approximately half the costs incurred for Australian operations are
paid in U.S. dollars. In Canada, the majority of oil and gas production is sold under Canadian
dollar contracts. The majority of the costs incurred are paid in Canadian dollars. The North Sea
production is sold under U.S. dollar contracts, and the majority of costs incurred are paid in
British pounds. In Egypt, all oil and gas production is sold under U.S. dollar contracts, and the
majority of the costs incurred are denominated in U.S. dollars. Argentine revenues and expenditures
are largely denominated in U.S. dollars but converted into Argentine pesos at the time of payment.
Revenue and disbursement transactions denominated in Australian dollars, Canadian dollars, British
pounds, Egyptian pounds and Argentine pesos are converted to U.S. dollar equivalents based on
average exchange rates during the period.
Foreign currency gains and losses also arise when monetary assets and monetary liabilities
denominated in foreign currencies are translated at the end of each month. Currency gains and
losses are included as either a component of Other under Revenues and Other or, as is the case
when we re-measure our foreign tax liabilities, as a component of the Companys provision for
income tax expense on the Statement of Consolidated Operations. A 10-percent strengthening or
weakening of the Australian dollar, Canadian dollar, British pound, Egyptian pound or Argentine
peso as of March 31, 2011, would result in a foreign currency net loss or gain, respectively, of
approximately $130 million.
33
Forward-Looking Statements and Risk
This report includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical facts included or incorporated by
reference in this report, including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected revenues, projected costs and plans and objectives
of management for future operations, are forward-looking statements. Such forward-looking
statements are based on our examination of historical operating trends, the information that was
used to prepare our estimate of proved reserves as of December 31, 2010, and other data in our
possession or available from third parties. In addition, forward-looking statements generally can
be identified by the use of forward-looking terminology such as may, will, could, expect,
intend, project, estimate, anticipate, plan, believe, or continue or similar
terminology. Although we believe that the expectations reflected in such forward-looking statements
are reasonable, we can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our expectations
include, but are not limited to, our assumptions about:
|
|
|
the market prices of oil, natural gas, NGLs and other products or services;
|
|
|
|
|
our commodity hedging arrangements;
|
|
|
|
|
the integration of Mariner and the BP properties;
|
|
|
|
|
increased scrutiny from regulatory agencies due to the BP acquisition;
|
|
|
|
|
the supply and demand for oil, natural gas, NGLs and other products or services;
|
|
|
|
|
production and reserve levels;
|
|
|
|
|
drilling risks;
|
|
|
|
|
economic and competitive conditions;
|
|
|
|
|
the availability of capital resources;
|
|
|
|
|
capital expenditure and other contractual obligations;
|
|
|
|
|
the significant transaction and acquisition costs related to the Mariner and BP property
acquisitions;
|
|
|
|
|
currency exchange rates;
|
|
|
|
|
weather conditions;
|
|
|
|
|
inflation rates;
|
|
|
|
|
the availability of goods and services;
|
|
|
|
|
legislative or regulatory changes;
|
|
|
|
|
the impact on our operations due to the change in government in Egypt;
|
|
|
|
|
terrorism;
|
|
|
|
|
occurrence of property acquisitions or divestitures;
|
|
|
|
|
the securities or capital markets and related risks such as general credit, liquidity,
market and interest-rate risks; and
|
|
|
|
|
other factors disclosed under Items 1 and 2 Business and Properties Estimated
Proved Reserves and Future Net Cash Flows, Item 1A Risk Factors, Item 7 Managements
Discussion and Analysis of Financial Condition and Results of Operations, Item 7A
Quantitative and Qualitative Disclosures About Market Risk and elsewhere in our most
recently filed Form 10-K/A, other risks and uncertainties in our first-quarter 2011
earnings release, and other filings that we make with the Securities and Exchange
Commission.
|
All subsequent written and oral forward-looking statements attributable to the Company, or
persons acting on its behalf, are expressly qualified in their entirety by the cautionary
statements. We assume no duty to update or revise our forward-looking statements based on changes
in internal estimates or expectations or otherwise.
34
|
|
|
ITEM 4 CONTROLS AND PROCEDURES
|
Disclosure Controls and Procedures
G. Steven Farris, the Companys Chairman and Chief Executive Officer, in his capacity as
principal executive officer, and Thomas P. Chambers, the Companys Executive Vice President and
Chief Financial Officer, in his capacity as principal financial officer, evaluated the
effectiveness of our disclosure controls and procedures as of March 31, 2011, the end of the period
covered by this report. Based on that evaluation and as of the date of that evaluation, these
officers concluded that the Companys disclosure controls and procedures were effective, providing
effective means to ensure that information we are required to disclose under applicable laws and
regulations is recorded, processed, summarized and reported within the time periods specified in
the Commissions rules and forms and communicated to our management, including our principal
executive officer and principal financial officer, to allow timely decisions regarding required
disclosure.
We periodically review the design and effectiveness of our disclosure controls, including
compliance with various laws and regulations that apply to our operations both inside and outside
the United States. We make modifications to improve the design and effectiveness of our disclosure
controls, and may take other corrective action, if our reviews identify deficiencies or weaknesses
in our controls.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting during the period
covered by this quarterly report on Form 10-Q that materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.
PART II OTHER INFORMATION
|
|
|
ITEM 1.
|
|
LEGAL PROCEEDINGS
|
|
|
Please refer to both Part I, Item 3 of the Companys Amended Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2010 (filed with the SEC on April 7, 2011) and
Part I, Item 1 of this Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2011 for a description of material legal proceedings.
|
|
|
During the quarter ending March 31, 2011, there were no material changes from the risk
factors as previously disclosed in the Companys Amended Annual Report on Form 10-K/A for
the year ended December 31, 2010.
|
|
|
|
ITEM 2.
|
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
|
|
ITEM 3.
|
|
DEFAULTS UPON SENIOR SECURITIES
|
|
|
|
ITEM 4.
|
|
[REMOVED AND RESERVED]
|
|
|
|
ITEM 5.
|
|
OTHER INFORMATION
|
35
|
|
|
*10.1
|
|
Apache Corporation 2007 Omnibus Equity Compensation Plan, as amended and restated May 4, 2011.
|
|
|
|
*10.2
|
|
Apache Corporation 1998 Stock Option Plan, as amended and restated May 5, 2011.
|
|
|
|
*10.3
|
|
Apache Corporation 2000 Stock Option Plan, as amended and restated May 5, 2011.
|
|
|
|
*10.4
|
|
Apache Corporation 2005 Stock Option Plan, as amended and restated May 5, 2011.
|
|
|
|
*10.5
|
|
Apache Corporation 2003 Stock Appreciation Rights Plan, as amended and restated May 4, 2011.
|
|
|
|
*10.6
|
|
Apache Corporation Non-Employee
Directors Restricted Stock Units Program Specifications, dated
May 5, 2011, pursuant to Apache Corporation 2011 Omnibus Equity Compensation Plan.
|
|
|
|
*14.1
|
|
Code of Business Conduct.
|
|
|
|
*31.1
|
|
Certification (pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
|
|
|
|
*31.2
|
|
Certification (pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
|
|
|
|
*32.1
|
|
Section 1350 Certification
(pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
|
|
|
|
**101.INS
|
|
XBRL Instance Document.
|
|
|
|
**101.SCH
|
|
XBRL Taxonomy Schema Document.
|
|
|
|
**101.CAL
|
|
XBRL Calculation Linkbase Document.
|
|
|
|
**101.LAB
|
|
XBRL Label Linkbase Document.
|
|
|
|
**101.PRE
|
|
XBRL Presentation Linkbase Document.
|
|
|
|
**101.DEF
|
|
XBRL Definition Linkbase Document.
|
|
|
|
*
|
|
Filed herewith
|
|
|
|
**
|
|
Furnished herewith
|
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
Dated: May 9, 2011
|
|
/s/ THOMAS P. CHAMBERS
|
|
|
|
|
Thomas P. Chambers
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
Dated: May 9, 2011
|
|
/s/ REBECCA A. HOYT
|
|
|
|
|
Rebecca A. Hoyt
|
|
|
|
|
Vice President, Chief Accounting Officer and Controller
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
Exhibit 10.1
APACHE CORPORATION
2007 Omnibus Equity Compensation Plan
As amended and restated effective May 4, 2011
Section 1
Introduction
1.1
Establishment.
Apache Corporation, a Delaware corporation (hereinafter referred
to, together with its Affiliates (as defined below) as the Company except where the context
otherwise requires), hereby establishes the Apache Corporation 2007 Omnibus Equity Compensation
Plan (the Plan).
1.2
Purpose
. The purpose of the Plan is to provide Eligible Persons designated by the
Committee for participation in the Plan with equity-based incentives to: (i) encourage such
individuals to continue in the long-term service of the Company and its Affiliates, (ii) create in
such individuals a more direct interest in the future success of the operations of the Company,
(iii) attract outstanding individuals, and (iv) retain and motivate such individuals. The Plan is
intended to provide eligible individuals with the opportunity to invest in the Company, thereby
relating incentive compensation to increases in stockholder value and more closely aligning the
compensation of such individuals with the interests of the Companys stockholders.
Accordingly, this Plan provides for the granting of Incentive Stock Options, Non-Qualified Stock
Options, Performance Awards, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights or
any combination of the foregoing, as the Committee determines is best suited to the circumstances
of the particular individual as provided herein.
1.3
Effective Date
. The Effective Date of the Plan (the Effective Date) is May 2,
2007. This amendment and restatement is effective as of May 4, 2011.
Section 2
Definitions
2.1
Definitions
. The following terms shall have the meanings set forth below:
(a)
Administrative Agent
means any designee or agent that may be appointed by the
Committee pursuant to subsections 3.1(h) and 3.4 hereof.
(b)
Affiliate
means any entity other than the Company that is affiliated with the
Company through stock or equity ownership or otherwise and is designated as an Affiliate for
purposes of the Plan by the Committee;
provided
,
however
, that, notwithstanding any
other provisions of the Plan to the contrary, for purposes of NQSOs
and SARs, if an individual who
otherwise qualifies as an Eligible Person provides services to such an entity and not to the
Company, such entity may only be designated an Affiliate if the Company qualifies as a service
recipient, within the meaning of Internal Revenue Code Section 409A, with respect to such
individual;
provided
further
that such definition of service recipient shall be
determined by (a) applying Internal Revenue Code Section 1563(a)(1), (2), and (3), for purposes of
determining a controlled group of corporations under Internal Revenue Code Section 414(b), using
the language at least 50 percent instead of at least 80 percent each place it appears in
Internal Revenue Code Section 1563(a)(1), (2), and (3), and by applying Treasury Regulations
Section 1.414(c)-2, for purposes of determining trades or businesses (whether or not incorporated)
that are under common control for purposes of Internal Revenue Code Section 414(c), using the
language at least 50 percent instead of at least 80 percent each place it appears in Treasury
Regulations Section 1.414(c)-2, and (b) where the use of Shares with respect to the grant of an
Option or SAR to such an individual is based upon legitimate business criteria, by applying
Internal Revenue Code Section 1563(a)(1), (2), and (3), for purposes of determining a controlled
group of corporations under Internal Revenue Code Section 414(b), using the language at least 20
percent instead of at least 80 percent at each place it appears in Internal Revenue Code Section
1563(a)(1), (2), and (3), and by applying Treasury Regulations Section 1.414(c)-2, for purposes of
determining trades or businesses (whether or not incorporated) that are under common control for
purposes of Internal Revenue Code Section 414(c), using the language at least 20 percent instead
of at least 80 percent at each place it appears in Treasury Regulations Section 1.414(c)-2;
provided further that for purposes of ISOs, Affiliate shall mean any present or future
corporation which is or would be a subsidiary corporation of the Company as the term is defined
in Section 424(f) of the Internal Revenue Code.
(c)
Award
means any Stock Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Performance Award, Dividend Equivalent or any other stock-based award
granted to a Participant under the Plan.
(d)
Board
means the Board of Directors of the Company.
(e)
Change of Control
shall have the meaning assigned to such term in the Companys
Income Continuance Plan as in effect on the Effective Date.
(f)
Committee
means the Stock Option Plan Committee of the Board or such other
Committee of the Board that is empowered hereunder to administer the Plan. The Committee shall be
constituted at all times so as to permit the Plan to be administered by non-employee directors
(as defined in Rule 16b-3 of the Exchange Act) and outside directors (as defined in Treasury
Regulations Section 1.162-27 (e)(3)) and to satisfy such additional regulatory or listing
requirements as the Board may determine to be applicable or appropriate.
(g)
Deferred Delivery Plan
means the Companys Deferred Delivery Plan, as it has been
or may be amended from time to time, or any successor plan.
2
(h)
Dividend Equivalent
means a right, granted to an Eligible Person to receive cash,
Stock, other Awards or other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(i)
Eligible Persons
means those employees of the Company or of any Affiliates,
members of the Board, and members of the board of directors of any Affiliates who are designated as
Eligible Persons by the Committee. Notwithstanding the foregoing, grants of Incentive Stock
Options may not be granted to anyone who is not an employee of the Company or an Affiliate.
(j)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
(k)
Exercise Date
means the date of exercise determined in accordance with subsection
6.2(g) hereof.
(l)
Fair Market Value
means the per share closing price of the Stock as reported on
The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date or,
if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or
electronic trading system which, on the date in question, reports the largest number of traded
shares of Stock,
provided
,
however
, that if on the date Fair Market Value is to be
determined there are no transactions in the Stock, Fair Market Value shall be determined as of the
immediately preceding date on which there were transactions in the Stock;
provided
further
,
however
, that if the foregoing provisions are not applicable, the fair
market value of a share of the Stock as determined by the Committee by the reasonable application
of such reasonable valuation method, consistently applied, as the Committee deems appropriate;
provided
further
,
however
, that, with respect to ISOs, such Fair Market
Value shall be determined subject to Section 422(c)(7) of the Internal Revenue Code.
(m)
Incentive Stock Option
or
ISO
means any Option intended to be and
designated as an incentive stock option and which satisfies the requirements of Section 422 of the
Internal Revenue Code or any successor provision thereto.
(n)
Internal Revenue Code
means the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference to a section of the Internal
Revenue Code or Treasury Regulation shall be treated as a reference to any successor section.
(o)
Non-Qualified Stock Option
or
NQSO
means any Option that is not
intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code.
(p)
Option
means an option to purchase a number of shares of Stock granted pursuant
to subsection 6.1.
(q)
Option Price
means the price at which shares of Stock subject to an option may be
purchased, determined in accordance with subsection 6.2(b) hereof.
3
(r)
Participant
means an Eligible Person designated by the Committee, from time to
time during the term of the Plan to receive one or more Awards under the Plan.
(s)
Performance Award
is a right to either a number of shares of Stock or SARs
(Performance Shares) determined (in either case) in accordance with subsection 9.1 of this Plan
based on the extent to which the applicable Performance Goals are achieved. A Performance Share
shall be of no value to a Participant unless and until earned in accordance with subsection 9.2
hereof.
(t)
Performance Goals
are the performance conditions, if any, established pursuant to
subsection 9.1 by the Committee in connection with an Award.
(u)
Performance Period
with respect to a Performance Award is a period not less than
one calendar year or one fiscal year of the Company, beginning not earlier than the year in which
such Performance Award is granted, which may be referred to herein and by the Committee by use of
the calendar of fiscal year in which a particular Performance Period commences.
(v)
Prior Plans
means the Companys 2005 Stock Option Plan and the Executive
Restricted Stock Plan.
(w)
Restricted Stock
means Stock granted to an Eligible Person under Section 8
hereof, that is subject to certain restrictions and to a risk of forfeiture.
(x)
Restricted Stock Unit
means a right, granted to an Eligible Person under Section
8 hereof, to receive Stock, cash or a combination thereof at the end of a specified vesting period.
(y)
Restriction Period
shall have the meaning assigned to such term in subsection
8.1.
(z)
Stock
means the $0.625 par value common stock of the Company and or any security
into which such common stock is converted or exchanged upon merger, consolidation, or any capital
restructuring (within the meaning of Section 13) of the Company.
(aa)
Stock Appreciation Right
or
SAR
means a right granted to an Eligible
Person to receive an amount in cash, Stock, or other property equal to the excess of the Fair
Market Value as of the Exercise Date of one share of Stock over the SAR Price times the number of
shares of Stock to which the Stock Appreciation Right relates. Stock Appreciation Rights may be
granted in tandem with Options or other Awards or may be freestanding.
4
(bb)
SAR Price
means the price at which the Stock Appreciation Right was granted,
which shall be determined in the same manner as the Option Price of an Option in accordance with
subsection 6.2 hereof.
(cc) Involuntary Termination means the termination of employment of the Participant by the
Company or its successor for any reason on or after a Change of Control; provided, that the
termination does not result from an act of the Participant that (i) constitutes common-law fraud, a
felony, or a gross malfeasance of duty, or (ii) is materially detrimental to the best interests of
the Company or its successor.
(dd) Voluntary Termination with Cause occurs upon a Participants separation from service of his
own volition and one or more of the following conditions occurs without the Participants consent
on or after a Change of Control:
(i) There is a material diminution in the Participants base compensation,
compared to his rate of base compensation on the date of the Change of Control.
(ii) There is a material diminution in the Participants authority, duties or
responsibilities.
(iii) There is a material diminution in the authority, duties or responsibilities
of the Participants supervisor, such as a requirement that the Participant (or his
supervisor) report to a corporate officer or employee instead of reporting directly
to the board of directors.
(iv) There is a material diminution in the budget over which the Participant
retains authority.
(v) There is a material change in the geographic location at which the Participant
must perform his service, including, for example the assignment of the Participant
to a regular workplace that is more than 50 miles from his regular workplace on the
date of the Change of Control.
The Participant must notify the Company of the existence of one or more adverse conditions
specified in clauses (i) through (v) above within 90 days of the initial existence of the adverse
condition. The notice must be provided in writing to Apache Corporations Senior Vice President,
Human Resources or her delegate. The notice may be provided by personal delivery or it may be sent
by email, inter-office mail, regular mail (whether or not certified), fax, or any similar method.
Apache Corporations Senior Vice President, Human Resources or her delegate shall acknowledge
receipt of the notice within 5 business days; the acknowledgement shall be sent to the Participant
by certified mail. Notwithstanding the foregoing provisions of this definition, if the Company
remedies the adverse condition within 30 days of being notified of the adverse condition, no
Voluntary Termination with Cause shall occur.
5
2.2
Headings; Gender and Number
. The headings contained in the Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except
when otherwise indicated by the context, the masculine gender shall also include the feminine
gender, and the definition of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1
Administration by the Committee.
The Plan shall be administered by the Committee.
In accordance with the provisions of the Plan, the Committee shall, in its sole discretion, adopt
rules and regulations for carrying out the purposes of the Plan, including, without limitation, the
authority to:
|
(a)
|
|
Grant Awards;
|
|
|
(b)
|
|
Select the Eligible Persons and the time or times at which Awards shall be
granted;
|
|
|
(c)
|
|
Determine the type and number of Awards to be granted, the number of shares of Stock
to which an Award may relate and the terms, conditions, restrictions, and Performance
Goals relating to any Award;
|
|
|
(d)
|
|
Determine whether, to what extent, and under what circumstances an Award may be
settled, canceled, forfeited, exchanged, or surrendered;
|
|
|
(e)
|
|
Construe and interpret the Plan and any Award;
|
|
|
(f)
|
|
Prescribe, amend, and rescind rules and procedures relating to the Plan;
|
|
|
(g)
|
|
Determine the terms and provisions of agreements;
|
|
|
(h)
|
|
Appoint designees or agents (who need not be members of the Committee or employees of
the Company) to assist the Committee with the administration of the Plan; and
|
|
|
(i)
|
|
Make all other determinations deemed necessary or advisable for the administration of
the Plan.
|
3.2 The Committee shall, in its absolute discretion, and without amendment to the Plan, have
the power to accelerate, waive or modify, at any time, any term or condition of an Award that is
not mandatory under this Plan; provided, however, that the Committee shall not have any discretion
to accelerate, waive or modify any term or condition of an
6
Award that is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code if
such discretion would cause the Award to not so qualify. In the event of a Change of Control, the
provisions of Section 12 hereof shall be mandatory and shall govern the vesting and exercisability
schedule of any Award granted hereunder.
3.3 No member of the Committee shall be liable for any action, omission, or determination made
in good faith. The Company shall indemnify (to the extent permitted under Delaware law) and hold
harmless each member of the Committee and each other director or employee of the Company to whom
any duty or power relating to the administration or interpretation of the Plan has been delegated
against any cost or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action, omission or determination
was taken or made by such member, director or employee in bad faith and without reasonable belief
that it was in the best interests of the Company. The determination, interpretations and other
actions of the Committee pursuant to the provisions of the Plan shall be binding and conclusive for
all purposes and on all persons.
3.4 The Committee may from time to time adopt such rules and regulations for carrying out the
purposes of the Plan as it may deem proper and in the best interests of the Company. The Committee
may appoint an Administrative Agent, who need not be a member of the Committee or an employee of
the Company, to assist the Committee in administration of the Plan and to whom it may delegate such
powers as the Committee deems appropriate, except that the Committee shall determine any dispute.
The Committee may correct any defect, supply any omission or reconcile any inconsistency in the
Plan, or in any agreement entered into hereunder, in the manner and to the extent it shall deem
expedient, and it shall be the sole and final judge of such inconsistency.
3.5
Compliance with Section 162(m).
Except as expressly otherwise stated in any
resolution of the Committee, the Plan is intended to comply with the requirements of Section 162(m)
or any successor section(s) of the Internal Revenue Code (Section 162(m)) as to any covered
employee as defined in Section 162(m), and shall be administered, interpreted, and construed
consistently therewith. The Committee is authorized to take such additional action, if any, that
may be required to ensure that the Plan and any Award under the Plan satisfy the requirements of
Section 162(m), taking into account any regulations or other guidance issued by the Internal
Revenue Service.
7
Section 4
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustments pursuant to Section 4.4 hereof, up to 15,000,000
shares of Stock, plus any shares of Stock available for issuance under the Prior Plans but not
underlying outstanding stock options or other awards under the Prior Plans or which shares are
allocable to any outstanding stock options or other awards under the Prior Plans to the extent such
stock options or other awards expire, are forfeited or otherwise terminate unexercised, are
authorized for issuance under the Plan in accordance with the Plans terms and subject to such
restrictions or other provisions as the Committee may from time to time deem necessary. Of such
total number of shares of Stock so authorized, not more than 10,000,000 may be designated for
Restricted Stock, Restricted Stock Units, and Performance Awards. During the duration of the Plan,
no Eligible Person may be granted Options which in the aggregate cover in excess of 10 percent of
the total shares of Stock authorized under the Plan. No Award may be granted under the Plan on or
after the 10-year anniversary of the Effective Date. The foregoing to the contrary
notwithstanding, the total number of shares of Stock that may be issued pursuant to ISOs granted
under the Plan shall be equal to 5,000,000, subject to adjustments pursuant to Section 4.4 hereof.
4.2
Availability of Shares Not Issued under Awards.
If shares of Stock which may be
issued pursuant to the terms of the Plan awarded hereunder are forfeited, cancelled, exchanged or
surrendered or if an Award otherwise terminates or expires without a distribution of shares to the
holder of such Award, the shares of Stock with respect to such Award shall, to the extent of any
such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available
for Awards under the Plan.
4.3
Stock Offered.
The Company shall at all times during the term of the Plan retain
as authorized and unissued Stock and/or Stock in the Companys treasury, at least the number of
shares from time to time required under the provisions of the Plan, or otherwise assure itself of
its ability to perform its obligations hereunder.
4.4
Adjustments for Stock Split, Stock Dividend, Etc
. If the Company shall at any time
increase or decrease the number of its outstanding shares of Stock or change in any way the rights
and privileges of such shares by means of the payment of a Stock dividend or any other
distribution upon such shares payable in Stock or rights to acquire Stock, or through a Stock
split, reverse Stock split, subdivision, consolidation, combination, reclassification or
recapitalization involving the Stock (any of the foregoing being herein called a capital
restructuring), then in relation to the Stock that is affected by one or more of the above events,
the numbers, rights, and privileges of the following shall be, in each case, equitably and
proportionally adjusted to take into account the occurrence of any of the above events, (i) the
number and kind of shares of Stock or other property (including cash) that may thereafter be issued
pursuant to subsections 4.1 and 4.10, (ii) the number and kind of shares of Stock or other property
(including cash) issued or issuable in respect of outstanding Awards; and (iii) the exercise price,
grant price, or
8
purchase price relating to any Award; provided that, with respect to Incentive
Stock Options, such adjustment shall be made in accordance with Section 424(h) of the Internal
Revenue Code; (iv) the Performance Goals, and (v) the individual limitations applicable to Awards.
4.5
Other Changes in Stock
. In the event there shall be any change, other than as
specified in subsections 4.4 hereof, in the number or kind of outstanding shares of Stock or of any
stock or other securities into which the Stock shall be changed or for which it shall have been
exchanged, and if the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares subject to outstanding Awards or which have
been reserved for issuance pursuant to the Plan but are not then subject to an Award, then such
adjustments shall be made by the Committee and shall be effective for all purposes of the Plan and
on each outstanding Award that involves the particular type of stock for which a change was
effected.
4.6
Rights to Subscribe
. If the Company shall at any time grant to the holders of its
Stock rights to subscribe pro rata for additional shares thereof or for any other securities of the
Company or of any other corporation, there shall be reserved with respect to the shares then under
an outstanding Award to any Participant of the particular class of Stock involved the Stock or
other securities which the Participant would have been entitled to subscribe for if immediately
prior to such grant the Participant had exercised his entire Option. If, upon exercise of any such
Option, the Participant subscribes for the additional shares or other securities, the aggregate
Option Price shall be increased by the amount of the price that is payable by the Participant for
such additional shares or other securities as if the Participant had exercised his entire Option
immediately prior to the grant of such additional shares or other securities.
4.7
General Adjustment Rules
. No adjustment or substitution provided for in this
Section 4 shall require the Company to sell a fractional share of Stock under any Option, or
otherwise issue a fractional share of Stock, and the total substitution or adjustment with respect
to each Option shall be limited by deleting any fractional share. In the case of any such
substitution or adjustment, the aggregate Option Price for the shares of Stock then subject to the
Option shall remain unchanged but the Option Price per share under each such Option shall be
equitably adjusted by the Committee to reflect the greater or lesser number of shares of Stock or
other securities into which the Stock subject to the Option may have been changed.
4.8
Determination by the Committee, Etc
. Adjustments under this Section 4 shall be
made by the Committee, whose determinations with regard thereto shall be final and binding upon all
parties.
4.9
Code Section 409A
. For any Award that is not subject to Internal Revenue Code
Section 409A before the adjustments identified in the preceding sections of this Section 4, no
adjustment shall be made that would cause the Award to become subject to Internal Revenue Code
Section 409A. For an Award that is subject to Internal Revenue Code Section 409A before the
adjustments identified in the preceding sections of this Section
9
4, no adjustment shall cause the
Award to violate Internal Revenue Code Section 409A, without the prior written consent of both the
Participant and the Committee.
4.10
Award Limits
. The following limits shall apply to grants of all Awards under
the Plan:
(a)
Options
: The maximum aggregate number of shares of Stock that may be
subject to Options granted in any calendar year to any one Participant shall be 250,000
shares.
(b)
SARs
: The maximum aggregate number of shares that may be subject to Stock
Appreciation Rights granted in any calendar year to any one Participant shall be 250,000
shares. Any shares covered by Options which include tandem SARs granted to one Participant
in any calendar year shall reduce this limit on the number of shares subject to SARs that
can be granted to such Participant in such calendar year.
(c)
Restricted Stock or Restricted Stock Units
: The maximum aggregate number
of shares of Stock that may be subject to Awards of Restricted Stock or Restricted Stock
Units granted in any calendar year to any one Participant shall be 250,000 shares.
(d)
Performance Awards
: The maximum aggregate grant with respect to
Performance Awards granted in any calendar year to any one Participant shall be 250,000
shares (or SARs based on the value of such number of shares).
To the extent required by Section 162(m) of the Code, shares subject to Options or SARs which are
canceled shall continue to be counted against the limits set forth in paragraphs (a) and (b)
immediately preceding.
Section 5
Granting of Awards to Participants
5.1
Participation.
Participants in the Plan shall be those Eligible Persons who, in the
judgment of the Committee, are performing, or during the term of their incentive arrangement will
perform, vital services in the management, operation, and development of the Company or an
Affiliate, and significantly contribute, or are expected to significantly contribute, to the
achievement of the Companys long-term corporate economic objectives. Participants may be granted
from time to time one or more Awards; provided, however, that the grant of each such Award shall be
separately approved by the Committee, and receipt of one such Award shall not result in automatic
receipt of any other Award. Upon determination by the Committee that an Award is to be granted to
a Participant, as soon as practicable, written notice shall be given to such person, specifying the
terms, conditions, rights and duties related thereto. Each Participant shall, if required by the
Committee, enter into an agreement with the
10
Company, in such form as the Committee shall determine
and which is consistent with the provisions of the Plan, specifying such terms, conditions, rights,
and duties. Awards shall be deemed to be granted as of the date specified in the grant resolution
of the Committee, which date shall be the date of any related agreement with the Participant. In
the event of any inconsistency between the provisions of the Plan and any such agreement entered
into hereunder, the provisions of the Plan shall govern.
Awards granted to members of the Board shall be recommended to the full Board by the Management
Development and Compensation Committee and approved by the full Board.
5.2
Notification to Participants and Delivery of Documents.
As soon as practicable
after such determinations have been made, each Participant shall be notified of (a) his/her
designation as a Participant, (b) the date of grant, (c) the number and type of Awards granted to
the Participant, (d) in the case of Performance Awards, the Performance Period and Performance
Goals, (e) in the case of Restricted Stock or Restricted Stock Units, the Restriction Period (as
defined in subsection 8.1), and (f) any other terms or conditions imposed by the Committee with
respect to the Award.
5.3
Delivery of Award Agreement
. This requirement for delivery of a written Award
agreement is satisfied by electronic delivery of such agreement provided that evidence of the
Participants receipt of such electronic delivery is available to the Company and such delivery is
not prohibited by applicable laws and regulations.
Section 6
Stock Options
6.1
Grant of Stock Options
. Coincident with or following designation for participation
in the Plan, an Eligible Person may be granted one or more Options. Grants of Options under the
Plan shall be made by the Committee. In no event shall the exercise of one Option affect the right
to exercise any other Option or affect the number of shares of Stock for which any other Option may
be exercised, except as provided in subsection 6.2(j) hereof.
6.2
Stock Option Agreements
. Each Option granted under the Plan shall be identified as
either an Incentive Stock Option or a Non-Qualified Stock Option (or, if no such identification is
made, then it shall be a Non-Qualified Stock Option) and evidenced by a written agreement which
shall be entered into by the Company and the Participant to whom the Option is granted, and which
shall contain the following terms and conditions set out in this subsection 6.2, as well as such
other terms and conditions, not inconsistent therewith, as the Committee may consider appropriate.
11
(a)
Number of Shares
. Each Stock Option agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.
(b)
Price.
The price at which each share of Stock covered by an Option may be
purchased, the Option Price, shall be determined in each case by the Committee and set forth in the
Stock Option agreement. The price may vary according to a formula specified in the Stock Option
agreement, but in no event shall the Option Price ever be less than the Fair Market Value of the
Stock on the date the Option is granted.
(c)
No Backdating
. There shall be no backdating of Options, and each Option shall
be dated the actual date that the Committee adopts the resolution awarding the grant of such
Option.
(d)
Limitations on Incentive Stock Options
. No Incentive Stock Option may be
granted to an individual if, at the time of the proposed grant, such individual owns (or is
attributed to own by virtue of the Internal Revenue Code) Stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or any Affiliate unless (i)
the exercise price of such Incentive Stock Option is at least 110 percent of the Fair Market Value
of a share of Stock at the time such Incentive Stock Option is granted and (ii) such Incentive
Stock Option is not exercisable after the expiration of five years from the date such Incentive
Stock Option is granted.
To the extent that the aggregate Fair Market Value of Stock of the Company with respect to
which Incentive Stock Options are exercisable for the first time by a Participant during any
calendar year under the Plan and any other option plan of the Company (or any Affiliate) shall
exceed $100,000, such Options shall be treated as Non-Qualified Stock Options. Such Fair Market
Value shall be determined as of the date on which each such Incentive Stock Option is granted.
(e)
Duration of Options
. Each Stock Option agreement shall state the period of
time, determined by the Committee, within which the Option may be exercised by the Participant (the
Option Period). The Option Period must end, in all cases, not more than ten years from the date
an Option is granted.
(f)
Termination of Options
. During the lifetime of a Participant to whom a Stock
Option is granted, the Stock Option may be exercised only by such Participant or, in the case of
disability (as determined pursuant to the Companys Long-Term Disability Plan or any successor
plan) by the Participants designated legal representative, except to the extent such exercise
would cause any Award intended to qualify as an ISO not to so qualify. Once a
Participant to whom a Stock Option was granted dies, the Stock Option may be exercised only by the
personal representative of the Participants estate or, with respect to Stock Options that are not
Incentive Stock Options, as otherwise provided in Section 14.2. Unless the Stock Option agreement
shall specify a longer or shorter period, at the discretion of the Committee, then the Participant
(or representative, or, if applicable pursuant to Section 14.2, designated beneficiary) may
exercise the Stock
12
Option for a period of up to three months after such Participant terminates
employment or ceases to be a member of the Board.
(g)
Exercise, Payments, Etc
.
(i) Each Stock Option agreement shall provide that the method for exercising the Option
granted therein shall be by delivery to the Office of the Secretary of the Company or to the
Administrative Agent of written notice specifying the number of shares of Stock with respect to
which such Option is exercised and payment to the Company of the aggregate Option Price. Such
notice shall be in a form satisfactory to the Committee and shall specify the particular Options
(or portions thereof) which are being exercised and the number of shares of Stock with respect to
which the Options are being exercised. The Participants obligation to deliver written notice of
exercise is satisfied by electronic delivery of such notice through means satisfactory to the
Committee and prescribed by the Company. The exercise of the Option shall be deemed effective on
the date such notice is received by the Office of the Secretary or by the Administrative Agent and
payment is made to the Company of the aggregate Option Price (the Exercise Date); however, if
payment of the aggregate Option Price is made pursuant to a sale of shares of Stock as contemplated
by subsection 6.2(g)(iv)(E) below, the Exercise Date shall be deemed to be the date of such sale.
If requested by the Company, such notice shall contain the Participants representation that he or
she is purchasing the Stock for investment purposes only and his or her agreement not to sell any
Stock so purchased in any manner that is in violation of the Exchange Act or any applicable state
law, and such restriction, or notice thereof, shall be placed on the certificates representing the
Stock so purchased. The purchase of such Stock shall take place upon delivery of such notice to
the Office of the Secretary of the Company or to the Administrative Agent, at which time the
aggregate Option Price shall be paid in full to the Company by any of the methods or any
combination of the methods set forth in subsection 6.2(g)(iv) below.
(ii) The shares of Stock to which the Participant is entitled as a result of the exercise of
the Option shall be issued by the Company and either (A) delivered by electronic means to an
account designated by the Participant or (B) delivered to the Participant in the form of a properly
executed certificate or certificates representing such shares of Stock. If shares of Stock are
used to pay all or part of the aggregate Option Price, the Company shall issue and deliver to the
Participant the additional shares of Stock, in excess of the aggregate Option Price or portion
thereof paid using shares of Stock, to which the Participant is entitled as a result of the Option
exercise.
(iii) The Companys obligation to deliver the shares of Stock to which the Participant is
entitled as a result of the exercise of the Option shall be subject to the payment in full to the
Company of the aggregate Option Price and the required tax withholding.
(iv) The aggregate Option Price shall be paid by any of the following methods or any
combination of the following methods:
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(A) in cash, including the wire transfer of funds in U.S. dollars to one of the Companys
bank accounts located in the United States, with such bank account to be designated from time to
time by the Company;
(B) by personal, certified or cashiers check payable in U.S. dollars to the order of the
Company;
(C) by delivery to the Company or the Administrative Agent of certificates representing a
number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which
(as of the Exercise Date) is equal to the aggregate Option Price of the Option being exercised,
properly endorsed for transfer to the Company, provided that the shares of Stock used for this
purpose must have been owned by the Participant for a period of at least six months;
D) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate
Fair Market Value of which (as of the Exercise Date) is not greater than the aggregate Option Price
of the Option being exercised, provided that the shares of Stock used for this purpose have been
owned by the Participant for a period of at least six months; or
(E) by delivery to the Company or the Administrative Agent of a properly executed notice of
exercise together with irrevocable instructions to a broker to promptly deliver to the Company, by
wire transfer or check as noted in subsection 6.2(g)(iv)(A) and (B) above, the amount of the
proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the
Participant necessary to pay the aggregate Option Price.
(h)
Tax Withholding
. Each Stock Option agreement shall provide that, upon
exercise of the Option, the Participant shall make appropriate arrangements with the Company to
provide for not less than the minimum amount of tax withholding required by law, including without
limitation Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and
applicable state and local income and other tax laws, by payment of such taxes in cash (including
wire transfer), by check, or as provided in Section 11 hereof.
(i)
Repricing Prohibited
. Subject to Sections 4, 6, 12, 13, and 16, outstanding
Stock Options granted under this Plan shall not be repriced without approval by the Companys
stockholders. In particular, neither the Board nor the Committee may take any action: (1) to
amend the terms of an outstanding Option or SAR to reduce the Option Price or grant price thereof,
cancel an Option or SAR and replace it with a new Option or SAR with a lower Option Price or grant
price, or that has an economic effect that is the same as any such reduction or cancellation or (2)
to cancel an outstanding Option or SAR having an Option Price or grant price above the then-current
Fair Market Value of the Stock in exchange for the grant of another type of Award, without, in each
such case, first obtaining approval of the stockholders of the Company of such action.
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(j)
Stockholder Privileges
. No Participant shall have any rights as a stockholder
with respect to any shares of Stock covered by an Option until the Participant becomes the holder
of record of such Stock. Except as provided in Section 4 hereof, no adjustments shall be made for
dividends or other distributions or other rights as to which there is a record date preceding the
date on which such Participant becomes the holder of record of such Stock.
(k)
Section 409A Avoidance
. Once granted, no Stock Option shall be modified,
extended, or renewed in any way that would cause the Stock Option to be subject to Internal Revenue
Code Section 409A. The Option Period shall not be extended to any date that would cause the Stock
Option to become subject to Internal Revenue Code Section 409A. The Option Price shall not be
adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the
date the Stock Option is exercised; however, the right to one or more dividends declared and paid
on the Stock between the date of grant and the date the Option is exercised may be set forth in a
separate arrangement.
Section 7
7.1
Stock Appreciation Rights
. The Committee is authorized to grant SARs to
Participants either alone (freestanding) or in tandem with other Awards, including Performance
Awards, Options, and Restricted Stock. Stock Appreciation Rights granted in tandem with any Award
must be granted at the same time as the Award is granted. Stock Appreciation Rights granted in
tandem with Options shall terminate and no longer be exercisable upon the termination or exercise
of the related Stock Options Options granted in tandem with Stock Appreciation Rights shall
terminate and no longer be exercisable upon the termination or exercise of the related Stock
Appreciation Rights. The Committee shall establish the terms and conditions applicable to any
Stock Appreciation Rights, which terms and conditions need not be uniform but may not be
inconsistent with the terms of the Plan. Freestanding Stock Appreciation Rights shall generally be
subject to terms and conditions substantially similar to those described in Section 4 and
subsection 6.2 for Options, including, but not limited to, the requirements of subsections 6.2(b),
(d), and (i) and subsection 4.7 regarding general adjustment rules, minimum price, duration, and
prohibition on repricing.
7.2
Section 409A Avoidance
. The SAR Price may be fixed on the date it is granted or
the SAR Price may vary according to an objective formula specified by the Committee at the time of
grant. However, the SAR Price can never be less than the Fair Market Value of the Stock on the
date of grant. The SAR grant must specify the number of shares to which it applies, which must be
fixed at the date of grant (subject to adjustment pursuant to Sections 4, 6, and 11). Once
granted, no SAR shall be modified, extended, or renewed in any way that would cause the SAR to be
subject to Internal Revenue Code Section 409A. The period during which the SAR may be exercised
shall not be extended to any date that would cause the SAR to become subject to Internal Revenue
Code Section 409A. The value of the SAR shall not be adjusted to reflect any dividends
15
declared
and paid on the Stock between the date of grant and the date the SAR is exercised; however, the
right to one or more dividends declared and paid on the Stock between the date of grant and the
date the SAR is exercised may be set forth in a separate arrangement.
Section 8
Restricted Stock and Restricted Stock Units
8.1
Restriction Period
. At the time an Award of Restricted Stock or Restricted Stock
Units is made, the Committee shall establish the terms and conditions applicable to such Award,
including the period of time (the Restriction Period) and attainment of performance goals during
which certain restrictions established by the Committee shall apply to the Award. Each such Award,
and designated portions of the same Award, may have a different Restriction Period, at the
discretion of the Committee. Except as permitted or pursuant to Sections 12 and 13 hereof, the
Restriction Period applicable to a particular Award shall not be changed. Restricted Stock or
Restricted Stock Units may or may not be subject to Internal Revenue Code Section 409A. If they
are subject to Internal Revenue Code Section 409A, the grant of the Restricted Stock or Restricted
Stock Units must contain the provisions needed to comply with the requirements of Internal Revenue
Code Section 409A, including but not limited to (i) the timing of any election to defer receipt of
the Restricted Stock or Restricted Stock Units beyond the date of vesting, (ii) the timing of any
payout election, and (iii) the timing of the settlement of Restricted Stock or a Restricted Stock
Unit. Restricted Stock or Restricted Stock Units that are subject to Internal Revenue Code Section
409A may be adjusted to reflect any dividends declared and paid on the Stock between the date of
grant and the date the Restricted Stock or Restricted Stock Unit vests, but only to the extent
permitted in IRS guidance of general applicability.
8.2
Certificates for Stock
. Restricted Stock shall be evidenced in such manner as the
Committee shall determine. If certificates representing Restricted Stock are registered in the
name of the Participant, the Committee may require that such certificates bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock,
that the Company retain physical possession of the certificates, and that the Participant deliver a
stock power to the Company, endorsed in blank, relating to the Restricted Stock represented by a
stock certificate registered in the name of the Participant.
8.3
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Restricted Stock Terms and Conditions
. Participants shall have the right to enjoy
all shareholder rights during the Restriction Period except that:
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(a)
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The Participant shall not be entitled to delivery of the Stock certificate until the
Restriction Period shall have expired.
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(b)
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The Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise
dispose of the Stock during the Restriction Period.
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(c)
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A breach of the terms and conditions established by the Committee with respect to the
Restricted Stock shall cause a forfeiture of the Restricted Stock and any dividends
withheld thereon.
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(d)
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Dividends and Splits. As a condition to the grant of an Award of Restricted Stock,
the Committee may specify whether any cash dividends paid on a share of Restricted Stock
be automatically reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under this Plan. Unless otherwise determined by the
Committee, Stock distributed in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which such Stock or
other property has been distributed.
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8.4
Restricted Stock Units
. The Committee is authorized to grant Restricted Stock
Units to Participants, which are rights to receive Stock at the end of a specified deferral period,
subject to the following terms and conditions:
Award and Restrictions. Settlement of an Award of Restricted Stock Units shall occur upon
expiration of the deferral period specified for such Restricted Stock Unit by the Committee
(or, if permitted by the Committee, as elected by the Participant). In addition, Restricted
Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as
the Committee may impose, if any, which restrictions may lapse at the expiration of the
deferral period or at earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in combination, in installments or
otherwise, as the Committee may determine. Restricted Stock Units shall be satisfied by the
delivery of cash or Stock in the amount equal to the Fair Market Value of the specified number
of shares of Stock covered by the Restricted Stock Units, or a combination thereof, as
determined by the Committee at the date of grant or thereafter.
8.5
Deferral of Receipt of Restricted Stock Units.
With the consent of the Committee,
a Participant who has been granted a Restricted Stock Unit may by compliance with the then
applicable procedures under the Plan irrevocably elect in writing to defer receipt of all or any
part of any distribution associated with that Restricted Stock Unit Award in accordance with either
the terms and conditions of the Deferred Delivery Plan or the terms and conditions specified under
the grant agreement and related documents. The terms and conditions of any such deferral,
including, but not limited to, the period of time for, and form of, election; the manner and method
of payout; and the use and form of Dividend Equivalents in respect of stock-based units resulting
from such deferral, shall be as determined by the Committee. The Committee may, at any time and
from time to time, but prospectively only except as hereinafter provided, amend, modify, change,
suspend, or cancel any and all of the rights, procedures, mechanics, and timing parameters relating
to such deferrals. In addition, the Committee may, in its sole discretion, accelerate the pay out
of such deferrals (and any earnings thereon), or any portion thereof, either in a lump sum or in a
series of payments,
17
but only to the extent that the payment or the change in timing of the payment
will not cause a violation of Internal Revenue Code Section 409A.
8.6
Bonus Stock and Awards in Lieu of Obligations
. The Committee is authorized to
grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations to pay cash or
deliver other property under this Plan or under plans or compensatory arrangements, provided that,
in the case of Participants subject to Section 16 of the Exchange Act, the amount of such grants
remains within the discretion of the Committee to the extent necessary to ensure that acquisitions
of Stock or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Stock
or Awards granted hereunder shall be subject to such other terms as shall be determined by the
Committee. In the case of any grant of Stock to an officer of the Company or an Affiliate in lieu
of salary or other cash compensation, the number of shares granted in place of such compensation
shall be reasonable, as determined by the Committee.
8.7
Dividend Equivalents
. The Committee is authorized to grant Dividend Equivalents to
a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property
equal in value to dividends paid with respect to a specified number of shares of Stock, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award. The Committee may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or
other investment vehicles, and subject to risk of forfeiture, as the Committee may specify.
Section 9
Performance Awards
9.1
Establishment of Performance Goals for Company
. Performance Goals applicable to a
Performance Award shall be established by the Committee in its absolute discretion on or before the
date of grant and within the time period prescribed by, and shall otherwise comply with the
requirements of, Code Section 162(m)(4)(C), or any successor provision thereto, and the regulations
thereunder, for performance-based compensation. Such Performance Goals may include or be based
upon any of the following criteria, either in absolute amount, per share, or per barrel of oil
equivalent (boe): pretax income or after tax income, operating profit, return on equity, capital
or investment, earnings, book value, increase in cash flow return, sales or revenues, operating
expenses (including, but not limited to, lease operating expenses, severance taxes and other
production taxes, gathering and transportation, general and administrative costs, and other
components of operating expenses), stock price appreciation, implementation or completion of
critical projects or processes, production growth, reserve growth, and/or corporate acquisition
goals based on value of assets acquired or similar objective measures.
18
Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of
a particular criteria or attaining a percentage increase or decrease in a particular criteria, and
may be applied relative to internal goals or levels attained in prior years or related to other
companies or indices or as ratios expressing relationship between Performance Goals, or any
combination thereof, as determined by the Committee.
The Performance Goals may include a threshold level of performance below which no vesting will
occur, levels of performance at which specified vesting will occur, and a maximum level of
performance at which full vesting will occur.
The Committee may in its discretion classify Participants into as many groups as it determines, and
as to any Participant relate his/her Performance Goals partially, or entirely, to the measured
performance, either absolutely or relatively, of an identified subsidiary, division, operating
company, test strategy, or new venture of the Company and/or its Affiliates.
Notwithstanding any other provision of the Plan, payment or vesting of any Performance Award shall
not be made until the applicable Performance Goals have been satisfied and any other material terms
of such Award were in fact satisfied. The Committee shall certify in writing the attainment of
each Performance Goal. Notwithstanding any provision of the Plan to the contrary, with respect to
any Performance Award, (a) the Committee may not adjust, downwards or upwards, any amount payable,
or other benefits granted, issued, retained, and/or vested pursuant to such an Award on account of
satisfaction of the applicable Performance Goals and (b) the Committee may not waive the
achievement of the applicable Performance Goals, except in the case of the Participants death or
disability, or a Change of Control.
9.2
Levels of Performance Required to Earn Performance Awards
. At or about the same
time that Performance Goals are established for a specific period, the Committee shall in its
absolute discretion establish the percentage of the Performance Awards granted for such Performance
Period which shall be earned by the Participant for various levels of performance measured in
relation to achievement of Performance Goals for such Performance Period.
9.3
Other Restrictions
. The Committee shall determine the terms and conditions
applicable to any Performance Award, which may include restrictions on the delivery of Stock
payable in connection with the Performance Award and restrictions that could result in the future
forfeiture of all or part of any Stock earned. The Committee may provide that shares of Stock
issued in connection with a Performance Award be held in escrow and/or legended. Performance
Awards may or may not be subject to Internal Revenue Code Section 409A. If a Performance Award is
subject to Internal Revenue Code Section 409A, the Performance Award grant agreement shall contain
the terms and conditions needed to comply with the requirements of Internal Revenue Code Section
409A, including but not limited to (i) the timing of any election to defer receipt of the
Performance Award, (ii) the timing of any payout election, and (iii) the timing of the actual
payment of the Performance Award. Performance Awards that are subject to
19
Internal Revenue Code
Section 409A may be adjusted to reflect any dividends declared and paid on the Stock between the
date of grant and the date the Performance Award is paid, but only to the extent permitted in IRS
guidance of general applicability.
9.4
Notification to Participants
. Promptly after the Committee has established the
Performance Goals with respect to a Performance Award, the Participant shall be provided with
written notice of the Performance Goals so established.
9.5
Measurement of Performance against Performance Goals
. The Committee shall, as soon
as practicable after the close of a Performance Period, determine (a) the extent to which the
Performance Goals for such Performance Period have been achieved and (b) the percentage of the
Performance Awards earned as a result.
These determinations shall be absolute and final as to the facts and conclusions therein made and
be binding on all parties. Promptly after the Committee has made the foregoing determination, each
Participant who has earned Performance Awards shall be notified. For all purposes of this Plan,
notice shall be deemed to have been given the date action is taken by the Committee making the
determination. Participants may not sell, transfer, pledge, exchange, hypothecate, or otherwise
dispose of all or any portion of their Performance Awards during the Performance Period.
9.6
Treatment of Performance Awards Earned
. Upon the Committees determination that a
percentage of any Performance Award has been earned for a Performance Period, Participants to whom
such earned Performance Awards have been granted and who have been in the employ of the Company or
Affiliates continuously from the date of grant until the end of the Performance Period, subject to
the exceptions set forth in the Performance Award agreement and in Sections 10 and 12 hereof, shall
be entitled, subject to the other conditions of this Plan, to payment in accordance with the terms
and conditions of the Performance Awards. Performance Awards shall under no circumstances become
earned or have any value whatsoever for any Participant who is not in the employ of the Company or
its Affiliates continuously during the entire Performance Period for which such Performance Award
was granted, except as provided in Sections 10 and 12.
9.7
Subsequent Performance Award Grants
. Following the grant of Performance Awards
with respect to a Performance Period, additional Participants may be designated by the Committee
for grant of Performance Awards for such Performance Period subject to the same terms and
conditions set forth for the initial grants, except that the Committee, in its sole discretion, may
reduce the value of the amounts to which subsequent Participants may become entitled, prorated
according to reduced time spent during the Performance Period, and the applicable Performance Award
agreement shall be modified to reflect such reduction.
9.8
Stockholder Privileges
. No Participant shall have any rights as a stockholder with
respect to any shares of Stock covered by a Performance Award until the Participant becomes the
holder of record of such Stock.
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Section 10
Termination of Employment, Death, Disability, etc.
10.1
Termination of Employment
. Except as provided herein, the treatment of an Award
upon a termination of employment or any other service relationship by and between a Participant and
the Company or an Affiliate shall be specified in the agreement controlling such Award.
10.2
Termination for Cause
. If the employment of the Participant by the Company is
terminated for cause, as determined by the Committee, all Awards to such Participant shall
thereafter be void for all purposes. As used in subsections 9.1, 10.2, and 10.3 hereof, cause
shall mean a gross violation, as determined by the Committee, of the Companys established policies
and procedures, provided that the effect of this subsection 10.2 shall be limited to determining
the consequences of a termination and that nothing in this subsection 10.2 shall restrict or
otherwise interfere with the Companys discretion with respect to the termination of any employee.
10.3
Performance Awards.
Except as set forth below, each Performance Award shall state
that each such Award shall be subject to the condition that the Participant has remained an
Eligible Person from the date of grant until the applicable vesting date as follows:
(a) If the Participant voluntarily leaves the employment of the Company or an Affiliates,
or if the employment of the Participant is terminated by the Company for cause or otherwise, any
Performance Award to such Participant not previously vested shall thereafter be void and forfeited
for all purposes.
(b) A Participant shall become vested in all Performance Awards that have met the
Performance Goals within the Performance Period on the date the Participant retires from employment
with the Company on or after attaining retirement age (which for all purposes of this Plan is
determined to be age 65, unless otherwise designated by the Committee at the time the Award is
granted), on the date the Participant dies while employed by the Company, or on the date the
Participant terminates service with the Company and the Affiliates due to permanent disability (as
determined pursuant to the Companys Long-Term Disability Plan or any successor plan, unless the
Performance award is subject to Internal Revenue Code Section 409A, in which case permanent
disability must also fall within the meaning specified in Internal Revenue Code Section
409A(a)(2)(C) or a more restrictive meaning established by the Committee) while employed by the
Company. Such Participant shall not become entitled to any payment which may arise due to the
occurrence of a Performance Goal after the Participant dies, terminates service due to permanent
disability, or retires. Payment shall occur as soon as administratively convenient following the
date the Participant dies, terminates service due to permanent disability, or retires, but in no
event shall the payment occur later than March 15 in the calendar year immediately following the
calendar year in which the
21
Participant died, so terminates service, or retired. If the Participant
dies before receiving payment, the payment shall be made to those entitled pursuant to Section 14.2
of this Plan.
10.4
Forfeiture Provisions
. Subject to Sections 12 and 14, in the event a Participant
terminates employment during a Restriction Period for the Participants Restricted Stock or
Restricted Stock Units, such Awards will be forfeited; provided, however, that the Committee may
provide for proration or full payout in the event of (a) death, (b) permanent disability, or (c)
any other circumstances the Committee may determine.
Section 11
Tax Withholding
11.1
Withholding Requirement
. The Company and any Affiliate is authorized to withhold
from any Award granted, or any payment relating to an Award under this Plan, including from a
distribution of Stock, amounts of withholding and other taxes or social security payments due or
potentially payable in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and Participants to satisfy
obligations for the payment of withholding taxes and other tax or social security obligations
relating to any Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof, in satisfaction of a Participants tax
obligations, either on a mandatory or elective basis at the discretion of the Committee.
11.2
Withholding Requirement Stock Options and SARs
. The Companys obligations to
deliver shares of Stock upon the exercise of an Option or SAR shall be subject to the Participants
satisfaction of all applicable federal, state, and local income and other tax and social security
withholding requirements.
At the time the Committee grants an Option, it may, in its sole discretion, grant the Participant
an election to pay all such amounts of required tax withholding, or any part thereof:
(a) by the delivery to the Company or the Administrative Agent of a number of shares of
Stock then owned by the Participant, the aggregate Fair Market Value of which (as of the
Exercise Date) is not greater than the amount required to be withheld, provided that such shares have been held by the Participant for a period of at least six months;
(b) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock, the
aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the
amount required to be withheld, provided that such shares of Stock have been owned by the
Participant for a period of at least six months; or
22
(c) by the Company or the Administrative Agent withholding from the shares of Stock
otherwise issuable to the Participant upon exercise of the Option, a number of shares of
Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater
than the amount required to be withheld. Any such elections by Participants to have shares
of Stock withheld for this purpose will be subject to the following restrictions:
(i) all elections shall be made on or prior to the Exercise Date; and
(ii) all elections shall be irrevocable.
11.3
Section 16 Requirements
. If the Participant is an officer or director of the
Company within the meaning of Section 16 or any successor section(s) of the Exchange Act (Section
16), the Participant must satisfy the requirements of Section 16 and any applicable rules and
regulations thereunder with respect to the use of shares of Stock to satisfy such tax withholding
obligation.
11.4
Restricted Stock and Performance Award Payment and Tax Withholding
. Each
Restricted Stock and Performance Award agreement shall provide that, upon payment of any
entitlement under such an Award, the Participant shall make appropriate arrangements with the
Company to provide for the amount of minimum tax and social security withholding required by law,
including without limitation Sections 3102 and 3402 or any successor section(s) of the Internal
Revenue Code and applicable state and local income and other tax and social security laws. The
withholding may be deducted from the Award. Any payment under such an Award shall be made in a
proportion of cash and shares of Stock, determined by the Committee, such that the cash portion
shall be sufficient to cover the withholding amount required by this Section. The cash portion of
any payment shall be based on the Fair Market Value of the shares of Stock on the applicable date
of vesting to which such tax withholding relates. Such cash portion shall be withheld by the
Company to satisfy applicable tax and social security withholding requirements.
Section 12
Change of Control
12.1
In General
. In the event of the occurrence of a Change of Control of the Company:
(a) Without further action by the Committee or the Board,
(i) all outstanding Options granted on or prior to December 31, 2009 shall
automatically vest so as to make all such Options fully vested and exercisable as
of the date of such Change of Control;
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(ii) all outstanding Options granted on or after January 1, 2010 shall fully
vest upon the Participants Involuntary Termination or Voluntary Termination with
Cause occurring on or after a Change of Control. Such newly vested Options shall
be fully exercisable as of the date of the Involuntary Termination or Voluntary
Termination with Cause on or after a Change of Control occurs.
(b) Without further action by the Committee or the Board,
(i) all unvested Restricted Stock Awards and Restricted Stock Units granted on or
prior to December 31, 2009 shall automatically vest. Such newly vested Restricted
Stock Units shall be converted to Stock and the Participant shall be issued the
requisite number of shares, after any withholding under Section 11, as soon as
administratively practicable after the Change of Control occurs, unless the
Participant had elected to defer Restricted Stock Units to the Deferred Delivery
Plan in which case the Participants account in the Deferred Delivery Plan shall be
credited with deferred Restricted Stock Units as of the date of the Change of
Control;
(ii) all unvested Restricted Stock Awards and Restricted Stock Units granted on or
after January 1, 2010 shall fully vest upon the Participants Involuntary
Termination or Voluntary Termination with Cause occurring on or after a Change of
Control. Such newly vested Restricted Stock Units shall be converted to Stock and
the Participant shall be issued the requisite number of shares, after any
withholding under Section 11, as soon as administratively practicable after the
Involuntary Termination or Voluntary Termination with Cause on or after a Change of
Control occurs, unless the Participant had elected to defer Restricted Stock Units
to the Deferred Delivery Plan in which case the Participants account in the
Deferred Delivery Plan shall be credited with deferred Restricted Stock Units as of
the date of the Involuntary Termination or Voluntary Termination with Cause on or
after the Change of Control occurs.
(c) Assuming the achievement of a Performance Goal, the entitlement to receive cash and
Stock under any outstanding Performance Award grants shall vest automatically, without
further action by the Committee or the Board, and shall become payable as follows:
(i) For Performance Awards granted on or prior to December 31, 2009, if such
Change of Control occurs subsequent to the achievement of a Performance Goal, any
remainder of such payout amount shall vest as of the date of such Change of Control
and shall be paid by the Company to the Participant within thirty (30) days of the
date of such Change of Control in the manner set out in subsection 12.1 hereof.
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(ii) For Performance Awards granted on or prior to December 31, 2009, if the
achievement of a Performance Goal occurs subsequent to the date of a Change of
Control, the applicable payout amount shall vest in full for which the Performance
Period has not yet ended and shall be paid by the Company to the Participant within
thirty (30) days after the Performance Goal is reached. The payment will occur
only if the Participant is employed at the time that the Performance Goal is
reached or if the Performance Goal is reached after the Participant was terminated
for any reason (or without reason) after the Change of Control.
(iii) For Performance Awards granted on or after January 1, 2010, if such Change of
Control occurs subsequent to the achievement of a Performance Goal, any remainder
of such payout amount shall vest as of the date of the Participants Involuntary
Termination or Voluntary Termination with Cause occurring on or after the date of
such Change of Control and shall be paid by the Company to the Participant within
thirty (30) days of the date of such Involuntary Termination or Voluntary
Termination with Cause which occurs on or after the date of the Change of Control
in the manner set out in subsection 12.1 hereof.
(iv) For Performance Awards granted on or after January 1, 2010, if the
achievement of a Performance Goal occurs subsequent to the date of a Change of
Control, the applicable payout amount shall vest in full for which the Performance
Period has not yet ended as of the date of the Participants Involuntary
Termination or Voluntary Termination with Cause occurring on or after such Change
of Control and shall be paid by the Company to the Participant within thirty (30)
days after the later of (1) the date of the Participants Involuntary Termination
or Voluntary Termination with Cause or (2) the date that the Performance Goal is
reached. The payment will occur only if the Participant is employed at the time
that the Performance Goal is reached or if the Performance Goal is reached after
the Participants Involuntary Termination or Voluntary Termination with Cause
occurring on or after the Change of Control.
(d) To the extent that any Award is subject to Internal Revenue Code Section 409A, the
Award shall contain appropriate provisions to comply with Internal Revenue Code Section
409A, which shall supersede the provisions of subsections (a), (b), and (c).
Section 13
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another corporation and the Company is
not the surviving corporation, or if all or substantially all of the assets or more than 20 percent
of the outstanding voting stock of the Company is acquired by any
25
other corporation, business
entity or person, or in case of a reorganization (other than a reorganization under the United
States Bankruptcy Code) or liquidation of the Company, then the Committee, or the board of
directors of any corporation assuming the obligations of the Company, shall, as to the Plan and
outstanding Awards make appropriate provision for the adoption and continuation of the Plan by the
acquiring or successor corporation and for the protection of any holders of such outstanding Awards
by the substitution on an equitable basis of appropriate stock of the Company or of the merged,
consolidated, or otherwise reorganized corporation which will be issuable with respect to the
Stock. Additionally, upon the occurrence of such an event and provided that a Performance Goal has
occurred, upon written notice to the Participants, the Committee may accelerate the vesting and
payment dates of the entitlement to receive cash and Stock under outstanding Awards so that all
such existing entitlements are paid prior to any such event. If a Performance Goal has not yet
been attained, the Committee in its discretion may make equitable payment or adjustment.
In its discretion, and on such terms and conditions as it deems appropriate, the Committee may
provide, either by the terms of an agreement applicable to any Award or by resolution adopted prior
to the occurrence of a Change of Control or an event described in this Section 13, that any
outstanding Award (or portion thereof) shall be converted into a right to receive cash, on or as
soon as practicable following the closing date or expiration date of the transaction resulting in
the Change of Control or such event in an amount equal to the highest value of the consideration to
be received in connection with such transaction for one share of Stock, or, if higher, the highest
Fair Market Value of a share of Stock during the thirty (30) consecutive business days immediately
prior to the closing date or expiration date of such transaction, less the per-share Option Price
or grant price of SARs, as applicable to the Award, multiplied by the number of shares subject to
such Award, or the applicable portion thereof.
Section 14
Rights of Employees and Participants
14.1
Employment
. Neither anything contained in the Plan or any agreement nor the
granting of any Award under the Plan shall confer upon any Participant any right with respect to
the continuation of his or her employment by the Company or any Affiliate, or interfere in any way
with the right of the Company or any Affiliate, at any time, to terminate such employment or to
increase or decrease the level of the Participants compensation from the level in existence at the
time of the Award.
An Eligible Person who has been granted an Award in one year shall not necessarily be entitled to
be granted Awards in subsequent years.
14.2
Non-transferability
. Except as otherwise determined at any time by the Committee
as to any Awards other than ISOs, no right or interest of any Participant in an Award granted
pursuant to the Plan shall be assignable or transferable during the lifetime
26
of the Participant,
either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation
of law, or otherwise, including execution, levy, garnishment, attachment, pledge, bankruptcy, or
court order;
provided
that the Committee may permit further transferability of Awards other
than ISOs, on a general or a specific basis, and may impose conditions and limitations on any
permitted transferability, subject to any applicable Restriction Period;
provided
further
,
however
, that no Award may be transferred for value or other consideration
without first obtaining approval thereof by the stockholders of the Company. In the event of a
Participants death, a Participants rights and interests in any Award as set forth in an Award
agreement, shall be transferable by testamentary will or the laws of descent and distribution, or
with respect to Awards other than Incentive Stock Options, a beneficiary designation that is in a
form approved by the Committee and in compliance with the provisions of this Plan, applicable law,
and the applicable Award agreement, and payment of any entitlements due under the Plan shall be
made to the Participants designated beneficiary, legal representatives, heirs, or legatees, as
applicable. If in the opinion of the Committee a person entitled to payments or to exercise rights
with respect to the Plan is disabled from caring for his or her affairs because of mental
condition, physical condition, or age, payment due such person may be made to, and such rights
shall be exercised by, such persons guardian, conservator, or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee of such status. If any
individual entitled to payment or to exercise rights with respect to the Plan is a minor, the
Committee shall cause the payment to be made to (or the right to be exercised by) the custodian or
representative who, under the state law of the minors domicile, is authorized to act on behalf of
the minor or is authorized to receive funds on behalf of the minor. With respect to those Awards,
if any, that are permitted to be transferred to another individual, references in the Plan to
exercise or payment related to such Awards by or to the Participant shall be deemed to include, as
determined by the Committee, the Participants permitted transferee. A Participants unexercised
Option or SAR, or amounts due but remaining unpaid to such Participant, at the Participants death,
shall be exercised or paid as designated by the Participant by will or by the laws of descent and
distribution, or, with respect to any unexercised Option or SAR other than an Incentive Stock
Option, in accordance with the Participants beneficiary designation in a form approved by the
Committee and in compliance with the provisions of this Plan, applicable law and the applicable
Award agreement. In the event any Award is exercised by or otherwise paid to the executors,
administrators, heirs or distributees of the estate of a deceased Participant, or the transferee of
an Award, in any such case, pursuant to the terms and conditions of the Plan and the applicable
Award agreement and in accordance with such terms and conditions as may be specified from time to
time by the Committee, the Company shall be under no obligation to issue shares of Stock thereunder
unless and until the Company is satisfied, as determined in the discretion of the Committee, that
the person or persons exercising such Award, or to receive such payment, are the duly appointed
legal representative of the deceased Participants estate or the proper legatees or distributees
thereof, or the valid transferee or designated beneficiary of such Award, as applicable. Any
purported assignment, transfer or encumbrance of an Award that does not comply with this Section
14.2 shall be void and unenforceable against the Company.
27
14.3
Noncompliance with Internal Revenue Code Section 409A
. If an Award is subject to
the requirements of Internal Revenue Code Section 409A, to the extent that the Company or an
Affiliate takes any action that causes a violation of Internal Revenue Code Section 409A or fails
to take reasonable actions required to comply with Internal Revenue Code Section 409A, in each case
as determined by the Committee, the Company shall pay an additional amount to the Participant (or
beneficiary) equal to the additional income tax imposed pursuant to Internal Revenue Code Section
409A on the Participant as a result of such violation, plus any taxes imposed on this additional
payment.
Section 15
Other Employee Benefits
The amount of any income deemed to be received by a Participant as a result of the payment under an
Award or exercise shall not constitute earnings or compensation with respect to which any other
employee benefits of such Participant are determined, including without limitation benefits under
any pension, profit sharing, life insurance, or salary continuation plan.
Section 16
Amendment, Modification, and Termination
The Committee or the Board may at any time terminate, and from time to time may amend or modify the
Plan, and the Committee or the Board may, to the extent permitted by the Plan, from time to time
amend or modify the terms of any Award theretofore granted, including any Award agreement, in each
case, retroactively or prospectively;
provided
,
however
, that no amendment or
modification of the Plan may become effective without approval of the amendment or modification by
the Companys stockholders if stockholder approval is required to enable the Plan to satisfy an
applicable statutory or regulatory requirements, unless the Company, on the advice of outside
counsel, determines that stockholder approval is not necessary.
Notwithstanding any other provision of this Plan, no amendment, modification, or termination of the
Plan or any Award shall adversely affect the previously accrued material rights or benefits of a
Participant under any outstanding Award theretofore awarded under the Plan, without the consent of
such Participant holding such Award, except to the extent necessary to avoid a violation of
Internal Revenue Code Section 409A or the Board or the Committee determines, on advice of outside
counsel or the Companys independent accountants, that such amendment or modification is required
for the Company, the Plan, or the Award to satisfy, comply with, or meet the requirements of any
law, regulation, listing rule, or accounting standard applicable to the Company.
28
The Committee shall have the authority to adopt (without the necessity for further stockholder
approval) such modifications, procedures, and subplans as may be necessary or desirable to comply
with the provisions of the laws (including, but not limited to, tax laws and regulations) of
countries other than the United States in which the Company may operate, so as to assure the
viability of the benefits of the Plan to Participants employed in such countries.
Section 17
Requirements of Law
17.1
Requirements of Law
. The issuance of Stock and the payment of cash pursuant to
the Plan shall be subject to all applicable laws, rules, and regulations, including applicable
federal and state securities laws. The Company may require a Participant, as a condition of
receiving payment under an Award, to give written assurances in substance and form satisfactory to
the Company and its counsel to such effect as the Company deems necessary or appropriate in order
to comply with federal and applicable state securities laws.
17.2
Section 16 Requirements
. If a Participant is an officer or director of the
Company within the meaning of Section 16 of the Exchange Act, Awards granted hereunder shall be
subject to all conditions required under Rule 16b-3, or any successor rule(s) promulgated under the
Exchange Act, to qualify the Award for any exemption from the provisions of Section 16 available
under such Rule. Such conditions are hereby incorporated herein by reference and shall be set
forth in the agreement with the Participant, which describes the Award.
17.3
Governing Law
. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Texas.
29
Section 18
Duration of the Plan
The Plan shall terminate on the ten year anniversary of the Effective Date. No grants shall be
awarded after such termination; however, the terms of the Plan shall continue to apply to all
Awards outstanding when the Plan terminates.
Dated: May 4, 2011.
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APACHE CORPORATION
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ATTEST:
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/s/ Cheri L. Peper
Cheri L. Peper
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By:
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/s/ Margery M. Harris
Margery M. Harris
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Corporate Secretary
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Senior Vice President,
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Human Resources
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30
Exhibit 10.2
APACHE CORPORATION
1998 STOCK OPTION PLAN
(Amended and Restated effective May 5, 2011)
Section 1
Introduction
1.1
Establishment
. Apache Corporation, a Delaware corporation (hereinafter referred to,
together with its Affiliated Corporations (as defined in Section 2.1 hereof) as the Company
except where the context otherwise requires), hereby establishes the Apache Corporation 1998 Stock
Option Plan (the Plan) for Eligible Employees (as defined in Section 2.1 hereof). The Plan
permits the grant of stock options to Eligible Employees selected by the Committee (as defined in
Section 2.1 hereof).
1.2
Purposes
. The purposes of the Plan are to provide the Eligible Employees designated by
the Committee for participation in the Plan with added incentives to continue in the long-term
service of the Company and to create in such employees a more direct interest in the future success
of the operations of the Company by relating incentive compensation to increases in stockholder
value, so that the income of those employees is more closely aligned with the interests of the
Companys stockholders. The Plan is also designed to attract outstanding individuals and to retain
and motivate Eligible Employees by providing an opportunity for investment in the Company.
1.3
Effective Date
. The Effective Date of the Plan (the Effective Date) is February 6,
1998. This Plan and each option granted hereunder is conditioned on and shall be of no force or
effect until approval of the Plan by the holders of the shares of voting stock of the Company
unless the Company, on the advice of counsel, determines that stockholder approval is not
necessary. The Committee may grant options the exercise of which shall be expressly subject to the
condition that the Plan shall have been approved by the stockholders of the Company.
Section 2
Definitions
2.1
Definitions
. The following terms shall have the meanings set forth below:
(a)
Administrative Agent
means any designee or agent that may be appointed by the
Committee pursuant to Section 3.1(b) hereof.
1
(b)
Affiliated Corporation
means any corporation or other entity (including but not
limited to a partnership) which is affiliated with Apache Corporation through stock ownership or
otherwise and is treated as a common employer under the provisions of Sections 414(b) and (c) or
any successor section(s) of the Internal Revenue Code.
(c)
Board
means the Board of Directors of the Company.
(d)
Committee
means the Stock Option Plan Committee of the Board, which is empowered
hereunder to take actions in the administration of the Plan. The Committee shall be constituted at
all times as to permit the Plan to comply with: (i) Rule 16b-3 or any successor rule(s)
promulgated under the Securities Exchange Act of 1934, as amended (the 1934 Act), and (ii)
Section 162(m) or any successor sections(s) of the Internal Revenue Code and the regulations
promulgated thereunder.
(e)
Deferred Delivery Plan
means the Companys Deferred Delivery Plan, effective as
of February 10, 2000 and as it may be amended from time to time, or any successor plan.
(f)
Depositary Shares
means the Depositary shares representing the Companys
preferred stock convertible into Stock.
(g)
Eligible Employees
means full-time employees (including, without limitation,
officers and directors who are also employees), and certain part-time employees, of the Company or
any division thereof.
(h)
Fair Market Value
means the per share closing price of the Stock as reported on
The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date or,
if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or
electronic trading system which, on the date in question, reports the largest number of traded
shares of Stock,
provided
,
however
, that if on the date Fair Market Value is to be
determined there are no transactions in the Stock, Fair Market Value shall be determined as of the
immediately preceding date on which there were transactions in the Stock;
provided
further
,
however
, that if the foregoing provisions are not applicable, the fair
market value of a share of the Stock as determined by the Committee by the reasonable application
of such reasonable valuation method, consistently applied, as the Committee deems appropriate.
(i)
Internal Revenue Code
means the Internal Revenue Code of 1986, as it may be
amended from time to time.
2
(j)
Option
means a right to purchase shares of Stock at a stated price for a
specified period of time. All Options granted under the Plan shall be Options which are not
incentive stock options as described in Section 422 or any successor section(s) of the Internal
Revenue Code.
(k)
Option Price
means the price at which shares of Stock subject to an Option may
be purchased, determined in accordance with subsection 7.2(b) hereof.
(l)
Participant
means an Eligible Employee designated by the Committee from time to
time during the term of the Plan to receive one or more Options under the Plan.
(m)
Stock
means the $0.625 par value Common Stock of the Company.
(n)
Stock Units
means investment units under the Deferred Delivery Plan, each of
which is deemed to be equivalent to one share of Stock.
2.2
Headings; Gender and Number
. The headings contained in the Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except
when otherwise indicated by the context, the masculine gender shall also include the feminine
gender, and the definition of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1
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Administration by the Committee
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(a) The Plan shall be administered by the Committee. In accordance with the provisions of the
Plan, the Committee shall, in its sole discretion, select the Participants from among the Eligible
Employees, determine the Options to be granted pursuant to the Plan, the number of shares of Stock
to be issued thereunder, the time at which such Options are to be granted, fix the Option Price,
and establish such other terms and requirements as the Committee may deem necessary or desirable
and consistent with the terms of the Plan. The Committee shall determine the form or forms of the
agreements with Participants which shall evidence the particular provisions, terms, conditions,
rights and duties of the Company and the Participants with respect to Options granted pursuant to
the Plan, which provisions need not be identical except as may be provided herein.
3
(b) The Committee may from time to time adopt such rules and regulations for carrying out the
purposes of the Plan as it may deem proper and
in the best interests of the Company. The Committee may appoint an Administrative Agent, who need
not be a member of the Committee or an employee of the Company, to assist the Committee in
administration of the Plan and to whom it may delegate such powers as the Committee deems
appropriate, except that the Committee shall determine any dispute. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan, or in any agreement entered
into hereunder, in the manner and to the extent it shall deem expedient and it shall be the sole
and final judge of such expediency. No member of the Committee shall be liable for any action or
determination made in good faith. The determination, interpretations and other actions of the
Committee pursuant to the provisions of the Plan shall be binding and conclusive for all purposes
and on all persons.
3.2
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Compliance with Section 162(m)
.
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The Plan is intended to comply with the requirements of Section 162(m) or any successor section(s)
of the Internal Revenue Code (Section 162(m)) as to any covered employee as defined in Section
162(m), and shall be administered, interpreted and construed consistently therewith. In accordance
with this intent, the amount of income a Participant may receive from Options granted under the
Plan shall be based solely on an increase in the value of the Stock after the date of the grant of
the Option, or such other bases as may be permitted by applicable law. The Committee is authorized
to take such additional action, if any, that may be required to ensure that the Plan satisfies the
requirements of Section 162(m) and the regulations promulgated or revenue rulings published
thereunder.
Section 4
Stock Subject to the Plan
4.1
Number of Shares
. Subject to Section 7.1 and to adjustment pursuant to Section 4.3
hereof, 2,500,000 shares of Stock (adjusted to 5,775,000 shares of Stock for (i) the Companys
ten-percent stock dividend, record date December 31, 2001, paid January 21, 2002, (ii) the
Companys five-percent stock dividend, record date March 12, 2003, paid April 2, 2003, and (iii)
the Companys two-for-one stock split, record date December 31, 2003, distributed January 14, 2004)
are authorized for issuance under the Plan in accordance with the provisions of the Plan and
subject to such restrictions or other provisions as the Committee may from time to time deem
necessary. This authorization may be increased from time to time by approval of the Board and the
stockholders of the Company if, on the advice of counsel for the Company, such stockholder approval
is required. Shares of Stock which may be issued upon exercise of Options shall be applied to
reduce the maximum number of shares of Stock remaining available for use under the Plan. The
Company shall at all times
4
during the term of the Plan and while any Options are outstanding retain as authorized and unissued
Stock, or as Stock in the Companys treasury, at least the number of shares from time to time
required under the provisions of the Plan, or otherwise assure itself of its ability to perform its
obligations hereunder.
4.2
Other Shares of Stock
. Any shares of Stock that are subject to an Option which
expires, is forfeited, is cancelled, or for any reason is terminated unexercised, and any shares of
Stock that for any other reason are not issued to a Participant or are forfeited shall
automatically become available for use under the Plan.
4.3
Adjustments for Stock Split, Stock Dividend, etc.
If the Company shall at any time
increase or decrease the number of its outstanding shares of Stock or change in any way the rights
and privileges of such shares by means of the payment of a Stock dividend or any other
distribution upon such shares payable in Stock, or through a Stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving the Stock then in
relation to the Stock that is affected by one or more of the above events, the numbers, rights and
privileges of the following shall be, in each case, equitably and proportionally adjusted to take
into account the occurrence of any of the above events, (i) the shares of Stock as to which Options
may be granted under the Plan; (ii) the shares of Stock then included in each outstanding Option
granted hereunder; and (iii) the Option Price for each outstanding Option granted hereunder.
4.4
Dividend Payable in Stock of Another Corporation, Etc
. If the Company shall at any
time pay or make any dividend or other distribution upon the Stock payable in securities or other
property (except money or Stock), a proportionate part of such securities or other property shall
be set aside and delivered to any Participant then holding an Option for the particular type of
Stock for which the dividend or other distribution was made, upon exercise thereof. Prior to the
time that any such securities or other property are delivered to a Participant in accordance with
the foregoing, the Company shall be the owner of such securities or other property and shall have
the right to vote the securities, receive any dividends payable on such securities, and in all
other respects shall be treated as the owner. If securities or other property which have been set
aside by the Company in accordance with this Section are not delivered to a Participant because an
Option is not exercised, then such securities or other property shall remain the property of the
Company and shall be dealt with by the Company as it shall determine in its sole discretion.
4.5
Other Changes in Stock
. In the event there shall be any change, other than as
specified in Sections 4.3 and 4.4 hereof, in the number or kind of outstanding shares of Stock or
of any stock or other securities into which the Stock shall be changed or for which it shall have
been exchanged, and if the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares subject to outstanding Options or
5
which have been reserved for issuance pursuant to the Plan but are not then subject to an Option,
then such adjustments shall be made by the Committee and shall be effective for all purposes of the
Plan and on each outstanding Option that involves the particular type of stock for which a change
was effected.
4.6
Rights to Subscribe
. If the Company shall at any time grant to the holders of its
Stock rights to subscribe
pro
rata
for additional shares thereof or for any other
securities of the Company or of any other corporation, there shall be reserved with respect to the
shares then under Option to any Participant of the particular class of Stock involved the Stock or
other securities which the Participant would have been entitled to subscribe for if immediately
prior to such grant the Participant had exercised his entire Option. If, upon exercise of any such
Option, the Participant subscribes for the additional shares or other securities, the aggregate
Option Price shall be increased by the amount of the price that is payable by the Participant for
such additional shares or other securities.
4.7
General Adjustment Rules
. No adjustment or substitution provided for in this Section 4
shall require the Company to sell a fractional share of Stock under any Option, or otherwise issue
a fractional share of Stock, and the total substitution or adjustment with respect to each Option
shall be limited by deleting any fractional share. In the case of any such substitution or
adjustment, the aggregate Option Price for the shares of Stock then subject to the Option shall
remain unchanged but the Option Price per share under each such Option shall be equitably adjusted
by the Committee to reflect the greater or lesser number of shares of Stock or other securities
into which the Stock subject to the Option may have been changed.
4.8
Determination by the Committee, Etc
. Adjustments under this Section 4 shall be made by
the Committee, whose determinations with regard thereto shall be final and binding upon all
parties.
Section 5
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another corporation and the Company is
not the surviving corporation, or if all or substantially all of the assets or more than 20 percent
of the outstanding voting stock of the Company is acquired by any other corporation, business
entity or person, or in case of a reorganization (other than a reorganization under the United
States Bankruptcy Code) or liquidation of the Company, and if the provisions of Section 8 hereof do
not apply, the Committee, or the board of directors of any corporation assuming the obligations of
the Company, shall, as to the Plan and outstanding Options either (i) make appropriate provision
for the
6
adoption and continuation of the Plan by the acquiring or successor corporation and for the
protection of any such outstanding Options by the substitution on an equitable basis of appropriate
stock of the Company or of the merged, consolidated or otherwise reorganized corporation which will
be issuable with respect to the Stock, provided that no additional benefits shall be conferred upon the Participants
holding such Options as a result of such substitution, and the excess of the aggregate Fair Market
Value of the shares subject to the Options immediately after such substitution over the aggregate
Option Price thereof is not more than the excess of the aggregate Fair Market Value of the shares
subject to such Options immediately before such substitution over the aggregate Option Price
thereof, or (ii) upon written notice to the Participants, provide that all unexercised Options
shall be exercised within a specified number of days of the date of such notice or such Options
will be terminated. In the latter event, the Committee shall accelerate the vesting dates of
outstanding Options so that all Options become fully vested and exercisable prior to any such
event.
Section 6
Participation
Participants in the Plan shall be those Eligible Employees who, in the judgment of the Committee,
are performing, or during the term of their incentive arrangement will perform, vital services in
the management, operation and development of the Company or an Affiliated Corporation, and
significantly contribute, or are expected to significantly contribute, to the achievement of the
Companys long-term corporate economic objectives. Participants may be granted from time to time
one or more Options; provided, however, that the grant of each such Option shall be separately
approved by the Committee, and receipt of one such Option shall not result in automatic receipt of
any other Option. Upon determination by the Committee that an Option is to be granted to a
Participant, written notice shall be given to such person, specifying the terms, conditions, rights
and duties related thereto. Each Participant shall, if required by the Committee, enter into an
agreement with the Company, in such form as the Committee shall determine and which is consistent
with the provisions of the Plan, specifying such terms, conditions, rights and duties. Options
shall be deemed to be granted as of the date specified in the grant resolution of the Committee,
which date shall be the date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such agreement entered into hereunder, the
provisions of the Plan shall govern.
7
Section 7
Stock Options
7.1
Grant of Stock Options
. Coincident with or following designation for participation
in the Plan, an Eligible Employee may be granted one or more Options. Grants of Options under the
Plan shall be made by the Committee. In no event shall the exercise of one Option affect the right
to exercise any other Option or affect the number of shares of Stock for which any other Option may
be exercised, except as provided in subsection 7.2(j) hereof. During the life of the Plan, no
Eligible Employee may be granted Options which in the aggregate pertain to in excess of 25 percent
of the total shares of Stock authorized under the Plan.
7.2
Stock Option Agreements
. Each Option granted under the Plan shall be evidenced by
a written stock option agreement which shall be entered into by the Company and the Participant to
whom the Option is granted (the Stock Option Agreement), and which shall contain the following
terms and conditions, as well as such other terms and conditions, not inconsistent therewith, as
the Committee may consider appropriate in each case.
(a)
Number of Shares
. Each Stock Option Agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.
(b)
Price
. The price at which each share of Stock covered by an Option may be
purchased shall be determined in each case by the Committee and set forth in the Stock Option
Agreement, but in no event shall the price be less than the Fair Market Value of the Stock on the
date the Option is granted.
(c)
Duration of Options; Employment Required For Exercise
. Each Stock Option
Agreement shall state the period of time, determined by the Committee, within which the Option may
be exercised by the Participant (the Option Period). The Option Period must end, in all cases,
not more than ten years from the date an Option is granted. Except as otherwise provided in
Sections 5 and 8 and subsection 7.2(d)(iv) hereof, each Option granted under the Plan shall become
exercisable in increments such that 25 percent of the Option will become exercisable on each of the
four subsequent one-year anniversaries of the date the Option is granted, but each such additional
25-percent increment shall become exercisable only if the Participant has been continuously
employed by the Company from the date the Option is granted through the date on which each such
additional 25-percent increment becomes exercisable.
8
(d)
Termination of Employment, Death, Disability, Etc
. Each Stock Option
Agreement shall provide as follows with respect to the exercise of the Option upon termination of
the employment or the death of the Participant:
(i) If the employment of the Participant by the Company is terminated within the Option
Period for cause, as determined by the Company, the Option shall thereafter be void for all
purposes. As used in this subsection 7.2(d), cause shall mean a gross violation, as determined
by the Company, of the Companys established policies and procedures, provided that the effect of
this subsection 7.2(d) shall be limited to determining the consequences of a termination and that
nothing in this subsection 7.2(d) shall restrict or otherwise interfere with the Companys
discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company on or after attaining age 60,
the Option may be exercised by the Participant within 36 months following his or her retirement
(provided that such exercise must occur within the Option Period), but not thereafter. In the
event of the Participants death during such 36-month period, each Option may be exercised by those
entitled to do so in the manner referred to in (iv) below. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on or before the date
of the Participants retirement.
(iii) If the Participant becomes disabled (as determined pursuant to the Companys Long-Term
Disability Plan or any successor plan), during the Option Period while still employed, or within
the three-month period referred to in (v) below, or within the 36-month period referred to in (ii)
above, the Option may be exercised by the Participant or by his or her guardian or legal
representative, within twelve months following the Participants disability, or within the 36-month
period referred to in (ii) above if applicable and if longer (provided that such exercise must
occur within the Option Period), but not thereafter. In the event of the Participants death
during such twelve-month period, each Option may be exercised by those entitled to do so in the
manner referred to in (iv) below. In any such case, the Option may be exercised only as to the
shares of Stock as to which the Option had become exercisable on or before the date of the
Participants disability.
(iv) In the event of the Participants death while still employed by the Company, each Option
of the deceased Participant may be exercised by those entitled to do so under the Participants
will or under the laws of descent and distribution or as otherwise provided in Section 9.2 within
twelve months following the Participants death (provided that in any event such exercise must
occur within the Option Period), but not thereafter, as to all shares of Stock which are subject to
such Option, including each 25-percent increment of the Option, if any, which has not yet become
exercisable at the time of the Participants death.
9
In the event of the Participants death within
the 36-month period referred to in (ii) above or within the twelve-month period referred to in
(iii) above, each Option of the deceased Participant that is exercisable at the time of death may
be exercised by those entitled to do so under the Participants will or under the laws of descent
and distribution or as otherwise provided in Section 9.2 within twelve months following the
Participants death or within the 36-month period referred to in (ii) above, if applicable and if
longer (provided that in any event such exercise must occur within the Option Period). The
provisions of this paragraph (iv) of subsection 7.2(d) shall be applicable to each Stock Option
Agreement as if set forth therein word for word. Each Stock Option Agreement executed by the
Company prior to the adoption of this provision shall be deemed amended to include the provisions
of this paragraph and all Options granted pursuant to such Stock Option Agreements shall be
exercisable as provided herein.
(v) If the employment of the Participant by the Company is terminated (which for this purpose
means that the Participant is no longer employed by the Company or by an Affiliated Corporation)
within the Option Period for any reason other than cause, the Participants retirement on or after
attaining age 60, or the Participants disability or death, the Option may be exercised by the
Participant within three months following the date of such termination (provided that such exercise
must occur within the Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on or before the date
of termination of the Participants employment.
(e)
Transferability
. Each Stock Option Agreement shall provide that the Option
granted therein is not transferable by the Participant except by will or pursuant to the laws of
descent and distribution or as otherwise provided in Section 9.2, and that such Option is
exercisable during the Participants lifetime only by him or her, or in the event of the
Participants disability or incapacity, by his or her guardian or legal representative.
(f)
Agreement to Continue in Employment
. Each Stock Option Agreement shall
contain the Participants agreement to remain in the employment of the Company, at the pleasure of
the Company, for a continuous period of at least one year after the date of such Stock Option
Agreement, at the salary rate in effect on the date of such agreement or at such changed rate as
may be fixed, from time to time, by the Company.
(g)
Exercise, Payments, Etc
.
(i) Each Stock Option Agreement shall provide that the method for exercising the Option
granted therein shall be by delivery to the Office of the Secretary of the Company or to the
Administrative Agent of written notice specifying the number of shares of Stock with respect to
which such Option is
10
exercised and payment to the Company of the aggregate Option Price. Such
notice shall be in a form satisfactory to the Committee and shall specify the particular Options
(or portions thereof) which are being exercised and the number of shares of Stock with respect to
which the Options are being exercised. The exercise of the Option shall be deemed effective on the
date such notice is received by the Office of the Secretary or by the Administrative Agent and
payment is made to the Company of the aggregate Option Price (the Exercise Date); however, if
payment of the aggregate Option Price is made pursuant to a sale of shares of Stock as contemplated
by subsection 7.2(g)(iii)(F) below, the Exercise Date shall be deemed to be the date of such sale.
If requested by the Company, such notice shall contain the Participants representation that he or
she is purchasing the Stock for investment purposes only and his or her agreement not to sell any
Stock so purchased in any manner that is in violation of the Securities Act of 1933, as amended, or
any applicable state law, and such restriction, or notice thereof, shall be placed on the
certificates representing the Stock so purchased. The purchase of such Stock shall take place upon
delivery of such notice to the Office of the Secretary or to the Administrative Agent, at which
time the aggregate Option Price shall be paid in full to the Company by any of the methods or any
combination of the methods set forth in 7.2(g)(iii) below.
(ii) Except as referenced below in connection with the Deferred Delivery Plan, the shares of Stock
to which the Participant is entitled as a result of the exercise of the Option shall be issued by
the Company and (A) delivered by electronic means to an account designated by the Participant, or
(B) delivered to the Participant in the form of a properly executed certificate or certificates
representing such shares of Stock. If shares of Stock and/or Depositary Shares are used to pay all
or part of the aggregate Option Price, the Company shall issue and deliver to the Participant the
additional shares of Stock, in excess of the aggregate Option Price or portion thereof paid using
shares of Stock or Depositary Shares, to which the Participant is entitled as a result of the
Option exercise. If the Participant exercising an Option (x) is eligible for participation in the
Deferred Delivery Plan, (y) pays the aggregate Option Price pursuant to 7.2(g)(iii)(A), (B), (C),
(D) or (E) below, and (z) has made an irrevocable election at least six months prior to the
Exercise Date as required under the Deferred Delivery Plan, the income resulting from the Option
exercise shall be deferred into the Participants Deferred Delivery Plan account and no additional
shares of Stock shall be delivered to the Participant. The income resulting from the Option
exercise may not be deferred into the Participants Deferred Delivery Plan account except to the
extent that the Option was vested by December 31, 2004, the deferral election was made by
December 31, 2004, and the deferral into the Deferred Delivery Plan occurs before January 1, 2006.
(iii) the aggregate Option Price shall be paid by any of the following methods or any
combination of the following methods:
11
(A) in cash, including the wire transfer of funds in U.S. dollars to one of the Companys
bank accounts located in the United States, with such bank account to be designated from time to
time by the Company;
(B) by personal, certified or cashiers check payable in U.S. dollars to the order of the
Company;
(C) by delivery to the Company or the Administrative Agent of certificates representing a
number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which
(as of the Exercise Date) is not greater than the aggregate Option Price of the Option being
exercised, properly endorsed for transfer to the Company; provided that the shares of Stock used
for this purpose must have been owned by the Participant for a period of at least six months;
(D) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock and/or Depositary
Shares, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the
aggregate Option Price of the Option being exercised, provided that the shares of Stock and/or
Depositary Shares used for this purpose have been owned by the Participant for a period of at least
six months;
(E) if the income resulting from the Option Exercise is to be deferred into the
Participants
Deferred Delivery Plan account, by certification or attestation to the Company or the
Administrative Agent of the Participants ownership (as of the Exercise Date) of a number of vested
Stock Units held in the Participants Deferred Delivery Plan account, the equivalent aggregate Fair
Market Value of which (as of the Exercise Date) is not greater than the aggregate Option Price of
the Option being exercised, provided that the Stock Units used for this purpose were vested as of
the Exercise Date; or
(F) by delivery to the Company or the Administrative Agent of a properly executed notice of
exercise together with irrevocable instructions to a broker to promptly deliver to the Company, by
wire transfer or check as noted in (A) and (B) above, the amount of the proceeds of the sale of all
or a portion of the Stock or of a loan from the broker to the Participant necessary to pay the
aggregate Option Price.
(iv) For purposes of the Plan, the income resulting from an Option exercise shall be based on
the Fair Market Value of the Stock for the Exercise Date; however, if payment of the aggregate
Option Price is made pursuant to a sale of shares of Stock as contemplated by subsection
7.2(g)(iii)(F) hereof, the
12
Fair Market Value shall be deemed to be the per share sale price and the
Exercise Date shall be deemed to be the date of such sale.
(h)
Date of Grant
. An Option shall be considered as having been granted on the
date specified in the grant resolution of the Committee.
(i)
Tax Withholding
. Each Stock Option Agreement shall provide that, upon
exercise of the Option, the Participant shall make appropriate arrangements with the Company to
provide for the amount of tax withholding required by Sections 3102 and 3402 or any successor
section(s) of the Internal Revenue Code and applicable state and local income tax laws, including
payment of such taxes in cash, by check, or as provided in Section 13.2 hereof.
(j)
Adjustment of Options
. Subject to the provisions of Sections 4, 5, 7, 8 and
12 hereof, the Committee may make any adjustment in the number of shares of Stock covered by, or
the terms of an outstanding Option and a subsequent granting of an Option, by amendment or by
substitution for an outstanding Option; however, except as provided in Sections 4, 5, 8 and 12
hereof, the Committee may not adjust the Option Price of any outstanding Option. Such amendment or
substitution may result in terms and conditions (including the number of shares of Stock covered,
vesting schedule or Option Period) that differ from the terms and conditions of the original
Option. The Committee may not, however, adversely affect the rights of any Participant to
previously granted Options without the consent of such Participant. If such action is effected by
amendment, the effective date of such amendment will be the date of grant of the original Option.
7.3
Stockholder Privileges
. No Participant shall have any rights as a stockholder with
respect to any shares of Stock covered by an Option until the Participant becomes the holder of
record of such Stock. Except as provided in Section 4 hereof, no adjustments shall be made for
dividends or other distributions or other rights as to which there is a record date preceding the
date on which such Participant becomes the holder of record of such Stock.
Section 8
Change of Control
8.1
In General
. In the event of the occurrence of a change of control of the Company
as defined in Section 8.3 hereof, all outstanding Options shall become automatically vested,
without further action by the Committee or the Board, so as to make all such Options fully vested
and exercisable as of the date of such change of control.
8.2
Limitation on Payments
. If the provisions of this Section 8 would result in the
receipt by any Participant of a payment within the meaning of Section 280G
13
or any successor
section(s) of the Internal Revenue Code, and the regulations promulgated thereunder, and if the
receipt of such payment by any Participant would, in the opinion of independent tax counsel of
recognized standing selected by the Company, result in the payment by such Participant of any
excise tax provided for in Sections 280G and 4999 or any successor section(s) of the Internal
Revenue Code, then the amount of such payment shall be reduced to the extent required, in the
opinion of independent tax counsel, to prevent the imposition of such excise tax; provided,
however, that the Committee, in its sole discretion, may authorize the payment of all or any
portion of the amount of such reduction to the Participant.
8.3
Definition
. For purposes of the Plan, a change of control shall mean any of the
events specified in the Companys Income Continuance Plan or any successor plan which constitute a
change of control within the meaning of such plan.
Section 9
Rights of Employees, Participants
9.1
Employment
. Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Participant any right with respect to the continuation of his or her
employment by the Company or any Affiliated Corporation, or interfere in any way with the right of
the Company or any Affiliated Corporation, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to increase or decrease the
level of the Participants compensation from the level in existence at the time of the grant of an
Option. Whether an authorized leave of absence, or absence in military or government service,
shall constitute a termination of employment shall be determined by the Committee at the time.
9.2
Nontransferability
. No right or interest of any Participant in an Option granted
pursuant to the Plan shall be assignable or transferable during the lifetime of the Participant,
either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation
of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. In
the event of a Participants death, a Participants rights and interests in Options shall, to the
extent provided in Section 7 hereof, be transferable by testamentary will or the laws of descent
and distribution, or a beneficiary designation that is in a form approved by the Committee and in
compliance with the provisions of this Plan, applicable law, and the applicable Option, and payment
of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the
Participants designated beneficiary, legal representatives, heirs or legatees, as applicable. If,
in the opinion of the Committee, a person entitled to payments or to exercise rights with respect
to the Plan is disabled from caring for his or her
14
affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights shall be exercised by,
such persons guardian, conservator or other legal personal representative upon furnishing the
Committee with evidence of such status satisfactory to the Committee.
15
Section 10
General Restrictions
10.1
Investment Representations
. The Company may require a Participant, as a condition
of exercising an Option, to give written assurances in substance and form satisfactory to the
Company and its counsel to the effect that such person is acquiring the Stock subject to the Option
for his own account for investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary or appropriate in
order to comply with federal and applicable state securities laws.
10.2
Compliance with Securities Laws
. Each Option shall be subject to the requirement
that, if at any time counsel to the Company shall determine that the listing, registration or
qualification of the shares of Stock subject to such Option upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or purchase of shares of Stock
thereunder, such Option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or obtained on conditions
acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration, qualification, consent or approval.
Section 11
Other Employee Benefits
The amount of any income deemed to be received by a Participant as a result of an Option exercise
shall not constitute earnings or compensation with respect to which any other employee benefits
of such Participant are determined including, without limitation benefits under any pension, profit
sharing, life insurance or salary continuation plan.
16
Section 12
Plan Amendment, Modification and Termination
The Board may at any time terminate, and from time to time may amend or modify the Plan provided,
however, that no amendment or modification may become effective without approval of the amendment
or modification by the Companys stockholders if stockholder approval is required to enable the
Plan to satisfy any applicable statutory or regulatory requirements unless the Company, on the
advice of counsel, determines that stockholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner adversely affect any
Option theretofore granted under the Plan, without the consent of the Participant holding such
Option.
The Committee shall have the authority to adopt such modifications, procedures and subplans as may
be necessary or desirable to comply with the provisions of the laws (including, but not limited to,
tax laws and regulations) of countries other than the United States in which the Company may
operate, so as to assure the viability of the benefits of the Plan to Participants employed in such
countries.
Section 13
Withholding
13.1
Withholding Requirement
. The Companys obligations to deliver shares of Stock
upon the exercise of an Option, or to defer income resulting from an Option exercise into the
Deferred Delivery Plan, shall be subject to the Participants satisfaction of all applicable
federal, state and local income and other tax withholding requirements.
13.2
Satisfaction of Required Withholding
. At the time the Committee grants an Option,
it may, in its sole discretion, grant the Participant an election to pay all such amounts of
required tax withholding, or any part thereof:
(a) by the delivery to the Company or the Administrative Agent of a number of shares of Stock
then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date)
is not greater than the amount required to be withheld, provided that such shares have been held by
the Participant for a period of at least six months;
(b) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock and/or Depositary
Shares, the aggregate Fair Market Value of
17
which (as of the Exercise Date) is not greater than the
amount required to be withheld, provided that such shares of Stock and/or Depositary Shares have
been owned by the Participant for a period of at least six months;
(c) if the income resulting from the Option exercise is to be deferred into the Participants
Deferred Delivery Plan account, by certification or attestation to the Company or the
Administrative Agent of the Participants ownership (as of the Exercise Date) of a number of vested
Stock Units held in the Participants Deferred Delivery Plan account, the equivalent aggregate Fair
Market Value of which (as of the Exercise Date) is not greater than the amount required to be
withheld, provided that such Stock Units were vested as of the Exercise Date; or
(d) by the Company or the Administrative Agent withholding from the shares of Stock otherwise
issuable to the Participant upon exercise of the Option, a number of shares of Stock, the aggregate
Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be
withheld. Any such elections by Participants to have shares of Stock withheld for this purpose
will be subject to the following restrictions:
(i) all elections shall be made on or prior to the Exercise Date; and
(ii) all elections shall be irrevocable.
13.3
Excess Withholding
. At the time the Committee grants an Option, it may, in its
sole discretion, grant the Participant an election to pay additional or excess amounts of tax
withholding, beyond the required amounts and up to the Participants marginal tax rate:
(a) by delivery to the Company or the Administrative Agent of a number of Shares of Stock
then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date)
is not greater than such excess withholding amount, provided that such shares of Stock have been
owned by the Participant for a period of at least six months; or
(b) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock and/or Depositary
Shares, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than such
excess withholding amount, provided that such shares of Stock and/or Depositary Shares have been
owned by the Participant for a period of at least six months.
13.4
Section 16 Requirements
. If the Participant is an officer or director of the
Company within the meaning of Section 16 or any successor section(s) of the 1934 Act (Section
16), the Participant must satisfy the requirements of such Section 16 and any applicable rules and
regulations thereunder with respect to
18
the use of shares of Stock, Depositary Shares and/or Stock
Units to satisfy such tax withholding obligation.
Section 14
Requirements of Law
14.1
Requirements of Law
. The issuance of Stock and the payment of cash pursuant to
the Plan shall be subject to all applicable laws, rules and regulations.
14.2
Federal Securities Laws Requirements
. If a Participant is an officer or director
of the Company within the meaning of Section 16, Options granted hereunder shall be subject to all
conditions required under Rule 16b-3, or any successor rule(s) promulgated under the 1934 Act, to
qualify the Option for any exception from the provisions of Section 16 available under such Rule.
Such conditions are hereby incorporated herein by reference and shall be set forth in the Stock
Option Agreement with the Participant which describes the Option.
14.3
Governing Law
. The Plan and all Stock Option Agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Texas.
Section 15
Duration of the Plan
The Plan shall terminate at such time as may be determined by the Board, and no Option shall be
granted after such termination. If not sooner terminated under the preceding sentence, the Plan
shall fully cease and expire at midnight on February 6, 2003. Options outstanding at the time of
the Plan termination shall continue to be exercisable in accordance with the Stock Option Agreement
pertaining to each such Option, as such Stock Option Agreement may be modified pursuant to Section
12.
Dated: May 5, 2011
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APACHE CORPORATION
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ATTEST:
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/s/ Cheri L. Peper
Cheri L. Peper
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By:
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/s/ Margery M. Harris
Margery M. Harris
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Corporate Secretary
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Senior Vice President,
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Human Resources
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19
Exhibit 10.3
APACHE CORPORATION
2000 STOCK OPTION PLAN
(Amended and Restated effective May 5, 2011)
Section 1
Introduction
1.1
Establishment
. Apache Corporation, a Delaware corporation (hereinafter referred
to, together with its Affiliated Corporations (as defined in Section 2.1 hereof) as the Company
except where the context otherwise requires), hereby establishes the Apache Corporation 2000 Stock
Option Plan (the Plan) for Eligible Employees (as defined in Section 2.1 hereof). The Plan
permits the grant of stock options to Eligible Employees selected by the Committee (as defined in
Section 2.1 hereof).
1.2
Purposes
. The purposes of the Plan are to provide the Eligible Employees
designated by the Committee for participation in the Plan with added incentives to continue in the
long-term service of the Company and to create in such employees a more direct interest in the
future success of the operations of the Company by relating incentive compensation to increases in
stockholder value, so that the income of those employees is more closely aligned with the
interests of the Companys stockholders. The Plan is also designed to attract outstanding
individuals and to retain and motivate Eligible Employees by providing an opportunity for
investment in the Company.
1.3
Effective Date
. The Effective Date of the Plan (the Effective Date) is February
10, 2000.
Section 2
Definitions
2.1
Definitions
. The following terms shall have the meanings set forth below:
(a)
Administrative Agent
means any designee or agent that may be appointed by
the Committee pursuant to Section 3.1(b) hereof.
(b)
Affiliated Corporation
means any corporation or other entity (including but
not limited to a partnership) which is affiliated with Apache Corporation through stock ownership
or otherwise and is treated as a common employer under the provisions of Sections 414(b) and (c) or
any successor section(s) of the Internal Revenue Code.
1
(c)
Board
means the Board of Directors of the Company.
(d)
Committee
means the Stock Option Plan Committee of the Board, which is
empowered hereunder to take actions in the administration of the Plan. The Committee shall be
constituted at all times as to permit the Plan to comply with Rule 16b-3 or any successor rule(s)
promulgated under the Securities Exchange Act of 1934, as amended (the 1934 Act).
(e)
Deferred Delivery Plan
means the Companys Deferred Delivery Plan, effective
as of February 10, 2000, as it may be amended from time to time, or any successor plan.
(f)
Depositary Shares
means the Depositary shares representing the Companys
preferred stock convertible into Stock.
(g)
Eligible Employees
means full-time employees (including, without limitation,
officers and directors who are also employees), and certain part-time employees, of the Company or
any division thereof.
(h)
Expiration Date
means the date on which the Option Period (as defined in
subsection 7.2(c) hereof) ends.
(i)
Fair Market Value
means the per share closing price of the Stock as reported
on The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date
or, if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or
electronic trading system which, on the date in question, reports the largest number of traded
shares of Stock,
provided
,
however
, that if on the date Fair Market Value is to be
determined there are no transactions in the Stock, Fair Market Value shall be determined as of the
immediately preceding date on which there were transactions in the Stock;
provided
further
,
however
, that if the foregoing provisions are not applicable, the fair
market value of a share of the Stock as determined by the Committee by the reasonable application
of such reasonable valuation method, consistently applied, as the Committee deems appropriate.
(j)
Internal Revenue Code
means the Internal Revenue Code of 1986, as it may be
amended from time to time.
(k)
Option
means a right to purchase shares of Stock at a stated price for a
specified period of time. All Options granted under the Plan shall be Options which are not
incentive stock options as described in Section 422 or any successor section(s) of the Internal
Revenue Code.
2
(l)
Option Price
means the price at which shares of Stock subject to an Option
may be purchased, determined in accordance with subsection 7.2(b) hereof.
(m)
Participant
means an Eligible Employee designated by the Committee from time
to time during the term of the Plan to receive one or more Options under the Plan.
(n)
Reload Option
has the meaning set forth in subsection 7.4 hereof.
(o)
Stock
means the U.S. $0.625 par value Common Stock of the Company.
(p)
Stock Units
means investment units under the Deferred Delivery Plan, each of
which is deemed to be equivalent to one share of Stock.
2.2
Headings; Gender and Number
. The headings contained in the Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except
when otherwise indicated by the context, the masculine gender shall also include the feminine
gender, and the definition of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1
Administration by the Committee
.
(a) The Plan shall be administered by the Committee. In accordance with the provisions of
the Plan, the Committee shall, in its sole discretion, select the Participants from among the
Eligible Employees, determine the Options to be granted pursuant to the Plan, the number of shares
of Stock to be issued thereunder, the time at which such Options are to be granted, fix the Option
Price, and establish such other terms and requirements as the Committee may deem necessary or
desirable and consistent with the terms of the Plan. The Committee shall determine the form or
forms of the agreements with Participants which shall evidence the particular provisions, terms,
conditions, rights and duties of the Company and the Participants with respect to Options granted
pursuant to the Plan, which provisions need not be identical except as may be provided herein.
(b) The Committee may from time to time adopt such rules and regulations for carrying out
the purposes of the Plan as it may deem proper and
3
in the best interests of the Company. The
Committee may appoint an Administrative Agent, who need not be a member of the Committee or an
employee of the Company, to assist the Committee in administration of the Plan and to whom it may
delegate such powers as the Committee deems appropriate, except that the Committee shall determine
any dispute. The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan, or in any agreement entered into hereunder, in the manner and to the
extent it shall deem expedient and it shall be the sole and final judge of such expediency. No
member of the Committee shall be liable for any action or determination made in good faith. The
determination, interpretations and other actions of the Committee pursuant to the provisions of the
Plan shall be binding and conclusive for all purposes and on all persons.
Section 4
Stock Subject to the Plan
4.1
Number of Shares
. Subject to Sections 7.1 and 7.4 hereof and to adjustment
pursuant to Section 4.3 hereof, 3,000,000 shares of Stock (adjusted to 6,300,000 shares of Stock
for (i) the Companys ten-percent stock dividend, record date December 31, 2001, paid January 21,
2002, (ii) the Companys five-percent stock dividend, record date March 12, 2003, paid April 2,
2003, and (iii) the Companys two-for-one stock split, record date December 31, 2003, distributed
January 14, 2004) are authorized for issuance under the Plan in accordance with the provisions of
the Plan and subject to such restrictions or other provisions as the Committee may from time to
time deem necessary. This authorization may be increased from time to time by approval of the
Board and the stockholders of the Company if, on the advice of counsel for the Company, such
stockholder approval is required. Shares of Stock which may be issued upon exercise of Options
shall be applied to reduce the maximum number of shares of Stock remaining available for use under
the Plan. The Company shall at all times during the term of the Plan and while any Options are
outstanding retain as authorized and unissued Stock, or as Stock in the Companys treasury, at
least the number of shares from time to time required under the provisions of the Plan, or
otherwise assure itself of its ability to perform its obligations hereunder.
4.2
Other Shares of Stock
. Any shares of Stock that are subject to an Option which
expires, is forfeited, is cancelled, or for any reason is terminated unexercised, and any shares of
Stock that for any other reason are not issued to a Participant or are forfeited shall
automatically become available for use under the Plan.
4
4.3
Adjustments for Stock Split, Stock Dividend, etc.
If the Company shall at any time
increase or decrease the number of its outstanding shares of Stock or change in any way the rights
and privileges of such shares by means of the payment of a Stock dividend or any other
distribution upon such shares payable in Stock, or through a Stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving the Stock then in
relation to the Stock that is affected by one or more of the above events, the numbers, rights and
privileges of the following shall be, in each case, equitably and proportionally adjusted to take
into account the occurrence of any of the above events, (i) the shares of Stock as to which Options
may be granted under the Plan; (ii) the shares of Stock then included in each outstanding Option
granted hereunder; and (iii) the Option Price for each outstanding Option granted hereunder.
4.4
Dividend Payable in Stock of Another Corporation, Etc
. If the Company shall at any
time pay or make any dividend or other distribution upon the Stock payable in securities or other
property (except money or Stock), a proportionate part of such securities or other property shall
be set aside and delivered to any Participant then holding an Option for the particular type of
Stock for which the dividend or other distribution was made, upon exercise thereof. Prior to the
time that any such securities or other property are delivered to a Participant in accordance with
the foregoing, the Company shall be the owner of such securities or other property and shall have
the right to vote the securities, receive any dividends payable on such securities, and in all
other respects shall be treated as the owner. If securities or other property which have been set
aside by the Company in accordance with this Section are not delivered to a Participant because an
Option is not exercised, then such securities or other property shall remain the property of the
Company and shall be dealt with by the Company as it shall determine in its sole discretion.
4.5
Other Changes in Stock
. In the event there shall be any change, other than as
specified in Sections 4.3 and 4.4 hereof, in the number or kind of outstanding shares of Stock or
of any stock or other securities into which the Stock shall be changed or for which it shall have
been exchanged, and if the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares subject to outstanding Options or which have
been reserved for issuance pursuant to the Plan but are not then subject to an Option, then such
adjustments shall be made by the Committee and shall be effective for all purposes of the Plan and
on each outstanding Option that involves the particular type of stock for which a change was
effected.
5
4.6
Rights to Subscribe
. If the Company shall at any time grant to the holders of its
Stock rights to subscribe
pro
rata
for additional shares thereof or for any other
securities of the Company or of any other corporation, there shall be reserved with respect to the
shares then under Option to any Participant of the particular class of Stock involved the Stock or
other securities which the Participant would have been entitled to subscribe for if immediately
prior to such grant the Participant had exercised his entire Option. If, upon exercise of any such
Option, the Participant subscribes for the additional shares or other securities, the aggregate
Option Price shall be increased by the amount of the price that is payable by the Participant for
such additional shares or other securities.
4.7
General Adjustment Rules
. No adjustment or substitution provided for in this
Section 4 shall require the Company to sell a fractional share of Stock under any Option, or
otherwise issue a fractional share of Stock, and the total substitution or adjustment with respect
to each Option shall be limited by deleting any fractional share. In the case of any such
substitution or adjustment, the aggregate Option Price for the shares of Stock then subject to the
Option shall remain unchanged but the Option Price per share under each such Option shall be
equitably adjusted by the Committee to reflect the greater or lesser number of shares of Stock or
other securities into which the Stock subject to the Option may have been changed.
4.8
Determination by the Committee, Etc
. Adjustments under this Section 4 shall be
made by the Committee, whose determinations with regard thereto shall be final and binding upon all
parties.
Section 5
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another corporation and the Company is
not the surviving corporation, or if all or substantially all of the assets or more than 20 percent
of the outstanding voting stock of the Company is acquired by any other corporation, business
entity or person, or in case of a reorganization (other than a reorganization under the United
States Bankruptcy Code) or liquidation of the Company, and if the provisions of Section 8 hereof do
not apply, the Committee, or the board of directors of any corporation assuming the obligations of
the Company, shall, as to the Plan and outstanding Options either (i) make appropriate provision
for the adoption and continuation of the Plan by the acquiring or successor corporation and for the
protection of any such outstanding Options by the substitution on an equitable basis of appropriate
stock of the Company or of the merged, consolidated or otherwise reorganized corporation which will
be issuable with
6
respect to the Stock, provided that no additional benefits shall be conferred upon
the Participants holding such Options as a result of such substitution, and the excess of the
aggregate Fair Market Value of the shares subject to the Options immediately after such
substitution over the aggregate Option Price thereof is not more than the excess of the aggregate
Fair Market Value of the shares subject to such Options immediately before such substitution over
the aggregate Option Price thereof, or (ii) upon written notice to the Participants, provide that
all unexercised Options shall be exercised within a specified number of days of the date of such
notice or such Options will be terminated. In the latter event, the Committee shall accelerate the
vesting dates of outstanding Options so that all Options become fully vested and exercisable prior
to any such event.
Section 6
Participation
Participants in the Plan shall be those Eligible Employees who, in the judgment of the Committee,
are performing, or during the term of their incentive arrangement will perform, vital services in
the management, operation and development of the Company or an Affiliated Corporation, and
significantly contribute, or are expected to significantly contribute, to the achievement of the
Companys long-term corporate economic objectives. Participants may be granted from time to time
one or more Options; provided, however, that the grant of each such Option shall be separately
approved by the Committee, and receipt of one such Option shall not result in automatic receipt of
any other Option. Upon determination by the Committee that an Option is to be granted to a
Participant, written notice shall be given to such person, specifying the terms, conditions, rights
and duties related thereto. Each Participant shall, if required by the Committee, enter into an
agreement with the Company, in such form as the Committee shall determine and which is consistent
with the provisions of the Plan, specifying such terms, conditions, rights and duties. Options
shall be deemed to be granted as of the date specified in the grant resolution of the Committee,
which date shall be the date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such agreement entered into hereunder, the
provisions of the Plan shall govern.
7
Section 7
Stock Options
7.1
Grant of Stock Options
. Coincident with or following designation for participation in
the Plan, an Eligible Employee may be granted one or more Options. Grants of Options under the
Plan shall be made by the Committee. In no event shall the exercise of one Option affect the right
to exercise any other Option or affect the number of shares of Stock for which any other Option may
be exercised, except as provided in subsection 7.2(j) hereof. During the duration of the Plan, no
Eligible Employee may be granted Options which in the aggregate cover in excess of 25 percent of
the total shares of Stock authorized under the Plan.
7.2
Stock Option Agreements
. Each Option granted under the Plan shall be evidenced by a
written stock option agreement which shall be entered into by the Company and the Participant to
whom the Option is granted (the Stock Option Agreement), and which shall contain the following
terms and conditions, as well as such other terms and conditions, not inconsistent therewith, as
the Committee may consider appropriate in each case:
(a)
Number of Shares
. Each Stock Option Agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.
(b)
Price
. The price at which each share of Stock covered by an Option may be
purchased shall be determined in each case by the Committee and set forth in the Stock Option
Agreement, but in no event shall the price be less than the Fair Market Value of the Stock on the
date the Option is granted.
(c)
Duration of Options; Employment Required For Exercise
. Each Stock Option
Agreement shall state the period of time, determined by the Committee, within which the Option may
be exercised by the Participant (the Option Period). The Option Period must end, in all cases,
not more than ten years from the date an Option is granted. Except as otherwise provided in
Sections 5 and 8 and subsections 7.2(d)(iv) and 7.4(a) hereof, each Option granted under the Plan
shall become exercisable in increments such that 25 percent of the Option becomes exercisable on
each of the four subsequent one-year anniversaries of the date the Option is granted, provided that
each such additional 25-percent increment shall become exercisable only if the Participant has been
continuously employed by the Company from the date the Option is granted through the date on which
each such additional 25-percent increment becomes exercisable.
8
(d)
Termination of Employment, Death, Disability, Etc
. Each Stock Option Agreement
shall provide as follows with respect to the exercise of the Option upon termination of the
employment or the death of the Participant:
(i) If the employment of the Participant by the Company is terminated within the Option
Period for cause, as determined by the Company, the Option shall thereafter be void for all
purposes. As used in this subsection 7.2(d), cause shall mean a gross violation, as determined
by the Company, of the Companys established policies and procedures, provided that the effect of
this subsection 7.2(d) shall be limited to determining the consequences of a termination and that
nothing in this subsection 7.2(d) shall restrict or otherwise interfere with the Companys
discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company on or after attaining age 60,
the Option may be exercised by the Participant within 36 months following his or her retirement
(provided that such exercise must occur within the Option Period), but not thereafter. In the
event of the Participants death during such 36-month period, each Option may be exercised by those
entitled to do so in the manner referred to in (iv) below. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on or before the date
of the Participants retirement.
(iii) If the Participant becomes disabled (as determined pursuant to the Companys Long-Term
Disability Plan or any successor plan), during the Option Period while still employed, or within
the three-month period referred to in subsection 7.2(d)(v) below, or within the 36-month period
referred to in subsection 7.2(d)(ii) above, the Option may be exercised by the Participant or by
his or her guardian or legal representative, within twelve months following the Participants
disability, or within the 36-month period referred to in subsection 7.2(d)(ii) above if applicable
and if longer (provided that such exercise must occur within the Option Period), but not
thereafter. In the event of the Participants death during such twelve-month period, each Option
may be exercised by those entitled to do so in the manner referred to in subsection 7.2(d)(iv)
below. In any such case, the Option may be exercised only as to the shares of Stock as to which
the Option had become exercisable on or before the date of the Participants disability.
(iv) In the event of the Participants death while still employed by the Company, each Option
of the deceased Participant may be exercised by those entitled to do so under the Participants
will or under the laws of descent and distribution or as otherwise provided in Section 9.2 within
twelve months following the Participants death (provided that in any event such exercise must
occur within the Option Period), but not thereafter, as to all shares of Stock which are subject to
such Option, including each 25-percent increment of the Option, if
9
any,which has not yet become exercisable at the time of the Participants death. In the event of the
Participants death within the 36-month period referred to in subsection 7.2(d)(ii) above or within
the twelve-month period referred to in subsection 7.2(d)(iii) above, each Option of the deceased
Participant that is exercisable at the time of death may be exercised by those entitled to do so
under the Participants will or under the laws of descent and distribution or as otherwise provided
in Section 9.2 within twelve months following the Participants death or within the 36-month period
referred to in subsection 7.2(d)(ii) above, if applicable and if longer (provided that in any event
such exercise must occur within the Option Period). The provisions of this paragraph (iv) of
subsection 7.2(d) shall be applicable to each Stock Option Agreement as if set forth therein word
for word. Each Stock Option Agreement executed by the Company prior to the adoption of this
provision shall be deemed amended to include the provisions of this paragraph and all Options
granted pursuant to such Stock Option Agreements shall be exercisable as provided herein.
(v) If the employment of the Participant by the Company is terminated (which for this purpose
means that the Participant is no longer employed by the Company or by an Affiliated Corporation)
within the Option Period for any reason other than cause, the Participants retirement on or after
attaining age 60, or the Participants disability or death, the Option may be exercised by the
Participant within three months following the date of such termination (provided that such exercise
must occur within the Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on or before the date
of termination of the Participants employment.
(e)
Transferability
. Each Stock Option Agreement shall provide that the Option
granted therein is not transferable by the Participant except by will or pursuant to the laws of
descent and distribution or as otherwise provided in Section 9.2, and that such Option is
exercisable during the Participants lifetime only by him or her, or in the event of the
Participants disability or incapacity, by his or her guardian or legal representative.
(f)
Agreement to Continue in Employment
. Each Stock Option Agreement shall contain
the Participants agreement to remain in the employment of the Company, at the pleasure of the
Company, for a continuous period of at least one year after the date of such Stock Option
Agreement, at the salary rate in effect on the date of such agreement or at such changed rate as
may be fixed, from time to time, by the Company.
10
(g)
Exercise, Payments, Etc
.
(i) Each Stock Option Agreement shall provide that the method for exercising the Option
granted therein shall be by delivery to the Office of the Secretary of the Company or to the
Administrative Agent of written notice specifying the number of shares of Stock with respect to
which such Option is exercised and payment to the Company of the aggregate Option Price. Such
notice shall be in a form satisfactory to the Committee and shall specify the particular Options
(or portions thereof) which are being exercised and the number of shares of Stock with respect to
which the Options are being exercised. The exercise of the Option shall be deemed effective on the
date such notice is received by the Office of the Secretary or by the Administrative Agent and
payment is made to the Company of the aggregate Option Price (the Exercise Date); however, if
payment of the aggregate Option Price is made pursuant to a sale of shares of Stock as contemplated
by subsection 7.2(g)(iii)(F) below, the Exercise Date shall be deemed to be the date of such sale.
If requested by the Company, such notice shall contain the Participants representation that he or
she is purchasing the Stock for investment purposes only and his or her agreement not to sell any
Stock so purchased in any manner that is in violation of the Securities Act of 1933, as amended, or
any applicable state law, and such restriction, or notice thereof, shall be placed on the
certificates representing the Stock so purchased. The purchase of such Stock shall take place upon
delivery of such notice to the Office of the Secretary of the Company or to the Administrative
Agent, at which time the aggregate Option Price shall be paid in full to the Company by any of the
methods or any combination of the methods set forth in subsection 7.2(g)(iii) below.
(ii) Except as referenced below in connection with the Deferred Delivery Plan, the shares of
Stock to which the Participant is entitled as a result of the exercise of the Option shall be
issued by the Company and (A) delivered by electronic means to an account designated by the
Participant, or (B) delivered to the Participant in the form of a properly executed certificate or
certificates representing such shares of Stock. If shares of Stock and/or Depositary Shares are
used to pay all or part of the aggregate Option Price, the Company shall issue and deliver to the
Participant the additional shares of Stock, in excess of the aggregate Option Price or portion
thereof paid using shares of Stock or Depositary Shares, to which the Participant is entitled as a
result of the Option exercise. If the Participant exercising an Option (x) is eligible for
participation in the Deferred Delivery Plan, (y) pays the aggregate Option Price pursuant to
subsection 7.2(g)(iii)(A), (B), (C), (D) or (E) below, and (z) has made an irrevocable election at
least six months prior to the Exercise Date as required under the Deferred Delivery Plan, the
income resulting from the Option exercise shall be deferred into the Participants Deferred
Delivery Plan account and no additional shares of Stock shall be delivered to the Participant. The
income resulting from the Option exercise may not be deferred into the Participants
11
Deferred Delivery Plan account except to the extent that the Option was vested by December 31,
2004, the deferral election was made by December 31, 2004, and the deferral into the Deferred
Delivery Plan occurs before January 1, 2006.
(iii) the aggregate Option Price shall be paid by any of the following methods or any
combination of the following methods:
(A) in cash, including the wire transfer of funds in U.S. dollars to one of the Companys
bank accounts located in the United States, with such bank account to be designated from time to
time by the Company;
(B) by personal, certified or cashiers check payable in U.S. dollars to the order of the
Company;
(C) by delivery to the Company or the Administrative Agent of certificates representing a
number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which
(as of the Exercise Date) is not greater than the aggregate Option Price of the Option being
exercised, properly endorsed for transfer to the Company, provided that the shares of Stock used
for this purpose must have been owned by the Participant for a period of at least six months;
(D) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock and/or Depositary
Shares, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the
aggregate Option Price of the Option being exercised, provided that the shares of Stock and/or
Depositary Shares used for this purpose have been owned by the Participant for a period of at least
six months;
(E) if the income resulting from the Option exercise is to be deferred into the Participants
Deferred Delivery Plan account, by certification or attestation to the Company or the
Administrative Agent of the Participants ownership (as of the Exercise Date) of a number of vested
Stock Units held in the Participants Deferred Delivery Plan account, the equivalent aggregate Fair
Market Value of which (as of the Exercise Date) is not greater than the aggregate Option Price of
the Option being exercised, provided that the Stock Units used for this purpose were vested as of
the Exercise Date; or
(F) by delivery to the Company or the Administrative Agent of a properly executed notice of
exercise together with irrevocable instructions to a broker to promptly deliver to the Company, by
wire transfer or check as noted in subsection 7.2(g)(iii)(A) and (B) above, the amount of the
proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the
Participant necessary to pay the aggregate Option Price.
12
(iv) For purposes of the Plan, the income resulting from an Option exercise shall be based on
the Fair Market Value of the Stock for the Exercise Date; however, if payment of the aggregate
Option Price is made pursuant to a sale of shares of Stock as contemplated by subsection
7.2(g)(iii)(F) hereof, the Fair Market Value shall be deemed to be the per share sale price and the
Exercise Date shall be deemed to be the date of such sale.
(h)
Date of Grant
. An Option shall be considered as having been granted on the date
specified in the grant resolution of the Committee.
(i)
Tax Withholding
. Each Stock Option Agreement shall provide that, upon exercise of
the Option, the Participant shall make appropriate arrangements with the Company to provide for the
amount of tax withholding required by Sections 3102 and 3402 or any successor section(s) of the
Internal Revenue Code and applicable state and local income and other tax laws, including payment
of such taxes in cash, by check, or as provided in Section 13.2 hereof.
(j)
Adjustment of Options
. Subject to the provisions of Sections 4, 5, 7, 8 and 12
hereof, the Committee may make any adjustment in the number of shares of Stock covered by, or the
terms of an outstanding Option and a subsequent granting of an Option, by amendment or by
substitution for an outstanding Option; however, except as provided in Sections 4, 5, 8 and 12
hereof, the Committee may not adjust the Option Price of any outstanding Option. Such amendment or
substitution may result in terms and conditions (including the number of shares of Stock covered,
vesting schedule or Option Period) that differ from the terms and conditions of the original
Option. The Committee may not, however, adversely affect the rights of any Participant to
previously granted Options without the consent of such Participant. If such action is effected by
amendment, the effective date of such amendment will be the date of grant of the original Option.
7.3
Stockholder Privileges
. No Participant shall have any rights as a stockholder with
respect to any shares of Stock covered by an Option until the Participant becomes the holder of
record of such Stock. Except as provided in Section 4 hereof, no adjustments shall be made for
dividends or other distributions or other rights as to which there is a record date preceding the
date on which such Participant becomes the holder of record of such Stock.
(a) The Committee shall have the authority, but not an obligation, to include as a part of any
Stock Option Agreement provisions under which the Participant shall be granted a further option (a
Reload Option) when the
13
Participant exercises all or part of the Option represented by such Stock
Option
Agreement on or before February 10, 2005, and pays all or part of the aggregate Option Price
and/or required or excess tax withholding pursuant to subsections 7.2(g)(iii)(C) (D) or (E), and/or
subsections 13.2(a), (b) or (c), and/or subsections 13.3(a) or (b) hereof. Any Option including
such reload provisions shall become exercisable in increments such that 25 percent of the Option
becomes exercisable on the dates six months, 12 months, 18 months and 24 months following the date
the Option is granted, provided that each such additional 25-percent increment shall become
exercisable only if the Participant has been continuously employed by the Company from the date the
Option is granted through the date on which such additional 25-percent increment becomes
exercisable.
(b) Any shares of Stock issued to a Participant as a result of an Option exercise which
resulted in the grant of a Reload Option, may not be sold or otherwise disposed of until the term
of the original Option has expired or the Participant is no longer employed by the Company or by an
Affiliated Corporation. Any Stock Units acquired by a Participant as a result of the deferral of
income (pursuant to subsection 7.2(g)(ii) hereof) in connection with an Option exercise which
resulted in the grant of a Reload Option, may not be sold or otherwise disposed of until the shares
of Stock relating to such Stock Units are distributed under the terms of the Deferred Delivery
Plan.
(c) A Reload Option shall be granted, without further action of the Committee or the
Participant, if one or more of the payment provisions referenced in subsection 7.4(a) above are
used and if all of the following are satisfied as of the date of exercise of the underlying Option:
(i) the Participant has not previously been granted a Reload Option or there has been a period
of more than six months since the Participant was last granted a Reload Option;
(ii) no shares of Stock have been sold or otherwise disposed of in breach of the provisions of
subsection 7.4(b) above;
(iii) the Fair Market Value of the shares of Stock covered by the original Option being
exercised is at least ten percent greater than the Option Price for such shares;
(iv) the underlying Option is exercised on or before February 10, 2005; and
(v) there is a period of more than six months remaining in the term of the original Option.
14
(d) Each Reload Option:
(i) shall cover that certain number of shares of Stock equal to the shares or equivalent
shares of Stock actually or constructively delivered to the Company as referenced in subsection
7.4(a) above;
(ii) shall be deemed to be granted as of the date on which the original Option is exercised
and shall have an Option Price of 100 percent of Fair Market Value on such date;
(iii) shall become exercisable six months after the date of grant and shall have the same
Expiration Date as the original Option; and
(iv) except as set forth in subsections 7.4(d)(i), (ii) and (iii) above, and 7.4(e) below,
shall have the same terms and conditions as those of the original Option.
(e) The Participant may not defer the income from the exercise of a Reload Option into the
Participants Deferred Delivery Plan account except to the extent that (i) the Reload Option was
vested by December 31, 2004; (ii) the deferral election was made by December 31, 2004; and (iii)
the deferral into the Deferred Delivery Plan occurs before January 1, 2006.
Section 8
Change of Control
8.1
In General
. In the event of the occurrence of a change of control of the Company, as
defined in Section 8.3 hereof, all outstanding Options shall become automatically vested, without
further action by the Committee or the Board, so as to make all such Options fully vested and
exercisable as of the date of such change of control.
8.2
Limitation on Payments
. If the provisions of this Section 8 would result in the
receipt by any Participant of a payment within the meaning of Section 280G or any successor
section(s) of the Internal Revenue Code, and the regulations promulgated thereunder, and if the
receipt of such payment by any Participant would, in the opinion of independent tax counsel of
recognized standing selected by the Company, result in the payment by such Participant of any
excise tax provided for in Sections 280G and 4999 or any successor section(s) of the Internal
Revenue Code, then the amount of such payment shall be reduced to the extent required, in the
opinion of independent tax counsel, to prevent the
15
imposition of such excise tax; provided, however, that the Committee, in its sole discretion, may
authorize the payment of all or any portion of the amount of such reduction to the Participant.
8.3
Definition
. For purposes of the Plan, a change of control shall mean any of the
events specified in the Companys Income Continuance Plan or any successor plan which constitute a
change of control within the meaning of such plan.
Section 9
Rights of Employees, Participants
9.1
Employment
. Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Participant any right with respect to the continuation of his or her
employment by the Company or any Affiliated Corporation, or interfere in any way with the right of
the Company or any Affiliated Corporation, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to increase or decrease the
level of the Participants compensation from the level in existence at the time of the grant of an
Option. Whether an authorized leave of absence, or absence in military or government service,
shall constitute a termination of employment shall be determined by the Committee at the time.
9.2
Nontransferability
. No right or interest of any Participant in an Option granted
pursuant to the Plan shall be assignable or transferable during the lifetime of the Participant,
either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation
of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. In
the event of a Participants death, a Participants rights and interests in Options shall, to the
extent provided in Section 7 hereof, be transferable by testamentary will or the laws of descent
and distribution, or a beneficiary designation that is in a form approved by the Committee and in
compliance with the provisions of this Plan, applicable law, and the applicable Option, and payment
of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the
Participants designated beneficiary, legal representatives, heirs or legatees, as applicable. If,
in the opinion of the Committee, a person entitled to payments or to exercise rights with respect
to the Plan is disabled from caring for his or her affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights shall be exercised by,
such persons guardian, conservator or other legal personal representative upon furnishing the
Committee with evidence of such status satisfactory to the Committee.
16
Section 10
General Restrictions
10.1
Investment Representations
. The Company may require a Participant, as a condition of
exercising an Option, to give written assurances in substance and form satisfactory to the Company
and its counsel to the effect that such person is acquiring the Stock subject to the Option for his
own account for investment and not with any present intention of selling or otherwise distributing
the same, and to such other effects as the Company deems necessary or appropriate in order to
comply with federal and applicable state securities laws.
10.2
Compliance with Securities Laws
. Each Option shall be subject to the requirement
that, if at any time counsel to the Company shall determine that the listing, registration or
qualification of the shares of Stock subject to such Option upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or purchase of shares of Stock
thereunder, such Option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or obtained on conditions
acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration, qualification, consent or approval.
Section 11
Other Employee Benefits
The amount of any income deemed to be received by a Participant as a result of an Option exercise
shall not constitute earnings or compensation with respect to which any other employee benefits
of such Participant are determined including, without limitation, benefits under any pension,
profit sharing, life insurance or salary continuation plan.
Section 12
Plan Amendment, Modification and Termination
The Board may at any time terminate, and from time to time may amend or modify the Plan provided,
however, that no amendment or modification may become effective without approval of the amendment
or modification by the Companys stockholders if stockholder approval is required to enable the
Plan to satisfy any applicable statutory or regulatory requirements unless the Company,
17
on the advice of counsel, determines that stockholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner adversely affect any
Option theretofore granted under the Plan, without the consent of the Participant holding such
Option.
The Committee shall have the authority to adopt such modifications, procedures and subplans as may
be necessary or desirable to comply with the provisions of the laws (including, but not limited to,
tax laws and regulations) of countries other than the United States in which the Company may
operate, so as to assure the viability of the benefits of the Plan to Participants employed in such
countries.
Section 13
Withholding
13.1
Withholding Requirement
. The Companys obligations to deliver shares of Stock upon
the exercise of an Option, or to defer income resulting from an Option exercise into the Deferred
Delivery Plan, shall be subject to the Participants satisfaction of all applicable federal, state
and local income and other tax withholding requirements.
13.2
Satisfaction of Required Withholding
. At the time the Committee grants an Option, it
may, in its sole discretion, grant the Participant an election to pay all such amounts of required
tax withholding, or any part thereof:
(a) by the delivery to the Company or the Administrative Agent of a number of shares of Stock
then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date)
is not greater than the amount required to be withheld, provided that such shares have been held by
the Participant for a period of at least six months;
(b) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock and/or Depositary
Shares, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the
amount required to be withheld, provided that such shares of Stock and/or Depositary Shares have
been owned by the Participant for a period of at least six months;
(c) if the income resulting from the Option exercise is to be deferred into the Participants
Deferred Delivery Plan account, by certification or attestation to the Company or the
Administrative Agent of the Participants ownership (as of the Exercise Date) of a number of vested
Stock Units held in the Participants
18
Deferred Delivery Plan account, the equivalent aggregate Fair Market Value of which (as of the
Exercise Date) is not greater than the amount required to be withheld, provided that such Stock
Units were vested as of the Exercise Date; or
(d) by the Company or the Administrative Agent withholding from the shares of Stock otherwise
issuable to the Participant upon exercise of the Option, a number of shares of Stock, the aggregate
Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be
withheld. Any such elections by Participants to have shares of Stock withheld for this purpose
will be subject to the following restrictions:
(i) all elections shall be made on or prior to the Exercise Date; and
(ii) all elections shall be irrevocable.
13.3
Excess Withholding
. At the time the Committee grants an Option, it may, in its sole
discretion, grant the Participant an election to pay additional or excess amounts of tax
withholding, beyond the required amounts and up to the Participants marginal tax rate:
(a) by delivery to the Company or the Administrative Agent of a number of Shares of Stock
then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date)
is not greater than such excess withholding amount, provided that such shares of Stock have been
owned by the Participant for a period of at least six months; or
(b) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock and/or Depositary
Shares, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than such
excess withholding amount, provided that such shares of Stock and/or Depositary Shares have been
owned by the Participant for a period of at least six months.
13.4
Section 16 Requirements
. If the Participant is an officer or director of the Company
within the meaning of Section 16 or any successor section(s) of the 1934 Act (Section 16), the
Participant must satisfy the requirements of such Section 16 and any applicable rules and
regulations thereunder with respect to the use of shares of Stock, Depositary Shares and/or Stock
Units to satisfy such tax withholding obligation.
19
Section 14
Requirements of Law
14.1
Requirements of Law
. The issuance of Stock and the payment of cash pursuant to the
Plan shall be subject to all applicable laws, rules and regulations.
14.2
Federal Securities Laws Requirements
. If a Participant is an officer or director of
the Company within the meaning of Section 16, Options granted hereunder shall be subject to all
conditions required under Rule 16b-3, or any successor rule(s) promulgated under the 1934 Act, to
qualify the Option for any exception from the provisions of Section 16 available under such Rule.
Such conditions are hereby incorporated herein by reference and shall be set forth in the Stock
Option Agreement with the Participant which describes the Option.
14.3
Governing Law
. The Plan and all Stock Option Agreements hereunder shall be construed
in accordance with and governed by the laws of the State of Texas.
Section 15
Duration of the Plan
The Plan shall terminate at such time as may be determined by the Board, and no Option shall be
granted after such termination. If not sooner terminated under the preceding sentence, the Plan
shall fully cease and expire at midnight on February 10, 2005. Any Options outstanding at the time
of the Plan termination shall continue to be exercisable in accordance with the Stock Option
Agreement pertaining to each such Option, as such Stock Option Agreement may be modified pursuant
to Section 12.
Dated: May 5, 2011
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APACHE CORPORATION
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ATTEST:
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/s/ Cheri L. Peper
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By:
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/s/ Margery M. Harris
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Cheri L. Peper
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Margery M. Harris
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Corporate Secretary
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Senior Vice President,
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Human Resources
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20
Exhibit 10.4
APACHE CORPORATION
2005 STOCK OPTION PLAN
(Amended and Restated effective May 5, 2011)
Section 1
Introduction
1.1
Establishment
. Apache Corporation, a Delaware corporation (hereinafter referred to,
together with its Affiliated Corporations (as defined in Section 2.1 hereof) as the Company
except where the context otherwise requires), hereby establishes the Apache Corporation 2005 Stock
Option Plan (the Plan) for Eligible Employees (as defined in Section 2.1 hereof). The Plan
permits the grant of stock options to Eligible Employees selected by the Committee (as defined in
Section 2.1 hereof).
1.2
Purposes
. The purposes of the Plan are to provide the Eligible Employees designated by
the Committee for participation in the Plan with added incentives to continue in the long-term
service of the Company and to create in such employees a more direct interest in the future success
of the operations of the Company by relating incentive compensation to increases in stockholder
value, so that the income of those employees is more closely aligned with the interests of the
Companys stockholders. The Plan is also designed to attract outstanding individuals and to retain
and motivate Eligible Employees by providing an opportunity for investment in the Company.
1.3
Effective Date
. The Effective Date of the Plan (the Effective Date) is February 3,
2005. This Plan and each Option (as defined in Section 2.1 hereof) granted hereunder is
conditioned on and shall be of no force or effect until the Plan is approved by the stockholders of
the Company. The Committee may grant Options, the exercise of which shall be expressly subject to
the condition that the Plan shall have been approved by the stockholders of the Company.
Section 2
Definitions
2.1
Definitions
. The following terms shall have the meanings set forth below:
(a)
Administrative Agent
means any designee or agent that may be appointed by the
Committee pursuant to Section 3.1(b) hereof.
1
(b)
Affiliated Corporation
means any corporation or other entity (including but not
limited to a partnership) which is affiliated with Apache
Corporation through stock ownership or otherwise and is treated as a common employer under the
provisions of Sections 414(b) and (c) or any successor section(s) of the Internal Revenue Code.
(c)
Board
means the Board of Directors of the Company.
(d)
Committee
means the Stock Option Plan Committee of the Board, which is empowered
hereunder to take actions in the administration of the Plan. The Committee shall be constituted at
all times as to permit the Plan to comply with Rule 16b-3 or any successor rule(s) promulgated
under the Securities Exchange Act of 1934, as amended (the 1934 Act).
(e)
Eligible Employees
means full-time employees (including, without limitation,
officers and directors who are also employees), and certain part-time employees, of the Company or
any division thereof.
(f)
Expiration Date
means the date on which the Option Period (as defined in
subsection 7.2(c) hereof) ends.
(g)
Fair Market Value
means the per share closing price of the Stock as reported on
The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date or,
if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or
electronic trading system which, on the date in question, reports the largest number of traded
shares of Stock,
provided
,
however
, that if on the date Fair Market Value is to be
determined there are no transactions in the Stock, Fair Market Value shall be determined as of the
immediately preceding date on which there were transactions in the Stock;
provided
further
,
however
, that if the foregoing provisions are not applicable, the fair
market value of a share of the Stock as determined by the Committee by the reasonable application
of such reasonable valuation method, consistently applied, as the Committee deems appropriate.
(h)
Internal Revenue Code
means the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto.
(i)
Option
means a right to purchase shares of Stock at a stated price for a
specified period of time. All Options granted under the Plan shall be Options which are not
incentive stock options as described in Section 422 or any successor section(s) of the Internal
Revenue Code.
(j)
Option Price
means the price at which shares of Stock subject to an Option may
be purchased, determined in accordance with subsection 7.2(b) hereof.
2
(k)
Participant
means an Eligible Employee designated by the Committee from time to
time during the term of the Plan to receive one or more Options under the Plan.
(l)
Stock
means the U.S. $0.625 par value Common Stock of the Company or any
security into which such Common Stock is converted or exchanged upon merger, consolidation, or any
capital restructuring (within the meaning of Section 4.3) of the Company.
2.2
Headings; Gender and Number
. The headings contained in the Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except
when otherwise indicated by the context, the masculine gender shall also include the feminine
gender, and the definition of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1
Administration by the Committee
.
(a) The Plan shall be administered by the Committee. In accordance with the provisions of the
Plan, the Committee shall, in its sole discretion, select the Participants from among the Eligible
Employees, determine the Options to be granted pursuant to the Plan, the number of shares of Stock
to be issued thereunder, the time at which such Options are to be granted, fix the Option Price,
and establish such other terms and requirements as the Committee may deem necessary or desirable
and consistent with the terms of the Plan. The Committee shall determine the form or forms of the
agreements with Participants which shall evidence the particular provisions, terms, conditions,
rights and duties of the Company and the Participants with respect to Options granted pursuant to
the Plan, which provisions need not be identical except as may be provided herein.
(b) The Committee may from time to time adopt such rules and regulations for carrying out the
purposes of the Plan as it may deem proper and in the best interests of the Company. The Committee
may appoint an Administrative Agent, who need not be a member of the Committee or an employee of
the Company, to assist the Committee in administration of the Plan and to whom it may delegate such
powers as the Committee deems appropriate, except that the Committee shall determine any dispute.
The Committee may correct any defect, supply any omission or reconcile any inconsistency in the
Plan, or in any agreement entered into hereunder, in the manner and to the extent it shall deem
expedient and it shall be the sole and final judge of such expediency. No member of the Committee
shall be liable for any action or determination made in good faith. The determination,
interpretations and other
3
actions of the Committee pursuant to the provisions of the Plan shall be
binding and conclusive for all purposes and on all persons.
3.2
Compliance with Section 162(m)
. The Plan is intended to comply with the requirements
of Section 162(m) or any successor section(s) of the Internal Revenue Code (Section 162(m)) as to
any covered employee as defined in Section 162(m), and shall be administered, interpreted and
construed
consistently therewith. In accordance with this intent, the amount of income a Participant may
receive from Options granted under the Plan shall be based solely on an increase in the value of
the Stock after the date of the grant of the Option, or such other bases as may be permitted by
applicable law. The Committee is authorized to take such additional action, if any, that may be
required to ensure that the Plan and any Option granted under the Plan satisfy the requirements of
Section 162(m), taking into account any regulations or other guidance issued by the Internal
Revenue Service.
Section 4
Stock Subject to the Plan
4.1
Number of Shares
. Subject to Section 7.1 hereof and to adjustment pursuant to Section
4.3 hereof, five million (5,000,000) shares of Stock are authorized for issuance under the Plan in
accordance with the provisions of the Plan and subject to such restrictions or other provisions as
the Committee may from time to time deem necessary. This authorization may be increased from time
to time by approval of the Board and the stockholders of the Company if, on the advice of counsel
for the Company, such stockholder approval is required. Shares of Stock which may be issued upon
exercise of Options shall be applied to reduce the maximum number of shares of Stock remaining
available for use under the Plan. The Company shall at all times during the term of the Plan and
while any Options are outstanding retain as authorized and unissued Stock, or as Stock in the
Companys treasury, at least the number of shares from time to time required under the provisions
of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
4.2
Other Shares of Stock
. Any shares of Stock that are subject to an Option which
expires, is forfeited, is cancelled, or for any reason is terminated unexercised, and any shares of
Stock that for any other reason are not issued to a Participant or are forfeited shall
automatically become available for use under the Plan.
4
4.3
Adjustments for Stock Split, Stock Dividend, Etc.
If the Company shall at any time
increase or decrease the number of its outstanding shares of Stock or change in any way the rights
and privileges of such shares by means of the payment of a Stock dividend or any other
distribution upon such shares payable in Stock, or through a Stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving the Stock (any of the
foregoing being herein called a capital restructuring), then in relation to the Stock that is
affected by one or more of the above events, the numbers, rights and privileges of the following
shall be, in each case, equitably and proportionally adjusted to take into account the occurrence
of any of the above events, (i) the shares of Stock as to which Options may be granted under the
Plan; (ii) the shares of Stock then included in each outstanding Option granted hereunder; and
(iii) the Option Price for each outstanding Option granted hereunder.
4.4
Dividend Payable in Stock of Another Corporation, Etc
. If the Company shall at any
time pay or make any dividend or other distribution upon the Stock payable in securities or other
property (except money or Stock), a proportionate part of such securities or other property shall
be set aside and delivered to any Participant then holding an Option for the particular type of
Stock for which the dividend or other distribution was made, upon exercise thereof. Prior to the
time that any such securities or other property are delivered to a Participant in accordance with
the foregoing, the Company shall be the owner of such securities or other property and shall have
the right to vote the securities, receive any dividends payable on such securities, and in all
other respects shall be treated as the owner. If securities or other property which have been set
aside by the Company in accordance with this Section are not delivered to a Participant because an
Option is not exercised, then such securities or other property shall remain the property of the
Company and shall be dealt with by the Company as it shall determine in its sole discretion.
4.5
Other Changes in Stock
. In the event there shall be any change, other than as
specified in Sections 4.3 and 4.4 hereof, in the number or kind of outstanding shares of Stock or
of any stock or other securities into which the Stock shall be changed or for which it shall have
been exchanged, and if the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares subject to outstanding Options or which have
been reserved for issuance pursuant to the Plan but are not then subject to an Option, then such
adjustments shall be made by the Committee and shall be effective for all purposes of the Plan and
on each outstanding Option that involves the particular type of stock for which a change was
effected.
5
4.6
Rights to Subscribe
. If the Company shall at any time grant to the holders of its
Stock rights to subscribe
pro
rata
for additional shares thereof or for any other
securities of the Company or of any other corporation, there shall be reserved with respect to the
shares then under Option to any Participant of the particular class of Stock involved the Stock or
other securities which the Participant would have been entitled to subscribe for if immediately
prior to such grant the Participant had exercised his entire Option. If, upon exercise of any such
Option, the Participant subscribes for the additional shares or other securities, the aggregate
Option Price shall be increased by the amount of the price that is payable by the Participant for
such additional shares or other securities.
4.7
General Adjustment Rules
. No adjustment or substitution provided for in this Section 4
shall require the Company to sell a fractional share of Stock under any Option, or otherwise issue
a fractional share of Stock, and the total substitution or adjustment with respect to each Option
shall be limited by deleting any fractional share. In the case of any such substitution or
adjustment, the aggregate Option Price for the shares of Stock then subject to the Option shall
remain unchanged but the Option Price per share under each such Option shall be equitably adjusted
by the Committee to reflect the greater or lesser number of shares of Stock or other securities
into which the Stock subject to the Option may have been changed.
4.8
Determination by the Committee, Etc
. Adjustments under this Section 4 shall be made by
the Committee, whose determinations with regard thereto shall be final and binding upon all
parties.
Section 5
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another corporation and the Company is
not the surviving corporation, or if all or substantially all of the assets or more than 20 percent
of the outstanding voting stock of the Company is acquired by any other corporation, business
entity or person, or in case of a reorganization (other than a reorganization under the United
States Bankruptcy Code) or liquidation of the Company, and if the provisions of Section 8 hereof do
not apply, the Committee, or the board of directors of any corporation assuming the obligations of
the Company, shall, as to the Plan and outstanding Options make appropriate provision for the
adoption and continuation of the Plan by the acquiring or successor corporation and for the
protection of any such outstanding Options by the substitution on an equitable basis of appropriate
stock of the Company or of the merged, consolidated or otherwise reorganized corporation which will
be issuable with
6
respect to the Stock, provided that no additional benefits shall be conferred upon
the Participants holding such Options as a result of such substitution, and the excess of the
aggregate Fair Market Value of the shares subject to the Options immediately after such
substitution over the aggregate Option Price thereof is not more than the excess of the aggregate
Fair Market Value of the shares subject to such Options immediately before such substitution over
the aggregate Option Price thereof. Additionally, upon the occurrence of such an event and upon
written notice to the Participants, the Committee may provide that all unexercised Options shall be
exercised within a specified number of days of the date of such notice or such Options will be
terminated. In the latter event, the Committee shall accelerate the vesting dates of outstanding
Options so that all Options become fully vested and exercisable prior to any such event.
Section 6
Participation
Participants in the Plan shall be those Eligible Employees who, in the judgment of the Committee,
are performing, or during the term of their incentive arrangement will perform, vital services in
the management, operation and development of the
Company or an Affiliated Corporation, and significantly contribute, or are expected to
significantly contribute, to the achievement of the Companys long-term corporate economic
objectives. Participants may be granted from time to time one or more Options; provided, however,
that the grant of each such Option shall be separately approved by the Committee, and receipt of
one such Option shall not result in automatic receipt of any other Option. Upon determination by
the Committee that an Option is to be granted to a Participant, written notice shall be given to
such person, specifying the terms, conditions, rights and duties related thereto. Each Participant
shall, if required by the Committee, enter into an agreement with the Company, in such form as the
Committee shall determine and which is consistent with the provisions of the Plan, specifying such
terms, conditions, rights and duties. Options shall be deemed to be granted as of the date
specified in the grant resolution of the Committee, which date shall be the date of any related
agreement with the Participant. In the event of any inconsistency between the provisions of the
Plan and any such agreement entered into hereunder, the provisions of the Plan shall govern.
7
Section 7
Stock Options
7.1
Grant of Stock Options
. Coincident with or following designation for participation in
the Plan, an Eligible Employee may be granted one or more Options. Grants of Options under the
Plan shall be made by the Committee. In no event shall the exercise of one Option affect the right
to exercise any other Option or affect the number of shares of Stock for which any other Option may
be exercised, except as provided in subsection 7.2(j) hereof. During the duration of the Plan, no
Eligible Employee may be granted Options which in the aggregate cover in excess of 25 percent of
the total shares of Stock authorized under the Plan.
7.2
Stock Option Agreements
. Each Option granted under the Plan shall be evidenced by a
written stock option agreement which shall be entered into by the Company and the Participant to
whom the Option is granted (the Stock Option Agreement), and which shall contain the following
terms and conditions set out in this Section 7.2, as well as such other terms and conditions, not
inconsistent therewith, as the Committee may consider appropriate. This requirement for delivery of
a written Stock Option Agreement is satisfied by electronic delivery of such agreement provided
that evidence of the Participants receipt of such electronic delivery is available to the Company
and all applicable laws and regulations permit such delivery.
(a)
Number of Shares
. Each Stock Option Agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.
(b)
Price
. The price at which each share of Stock covered by an Option may be
purchased shall be determined in each case by the Committee and set forth in the Stock Option
Agreement, but in no event shall the price be less than the Fair Market Value of the Stock on the
date the Option is granted.
(c)
Duration of Options; Employment Required For Exercise
. Each Stock Option
Agreement shall state the period of time, determined by the Committee, within which the Option may
be exercised by the Participant (the Option Period). The Option Period must end, in all cases,
not more than ten years from the date an Option is granted. Except as otherwise provided in
Sections 5 and 8 and subsection 7.2(d)(iv) hereof, each Option granted under the Plan shall become
exercisable in increments such that 25 percent of the Option becomes exercisable on each of the
four subsequent one-year anniversaries of the date the Option is granted, provided that each such
additional 25-percent increment shall become exercisable only if the Participant has been
continuously employed by the Company from the date the Option is granted through the date on which
each such additional 25-percent increment becomes exercisable.
8
(d)
Termination of Employment, Death, Disability, Etc
. Each Stock Option Agreement
shall provide as follows with respect to the exercise of the Option upon termination of the
employment or the death or disability of the Participant:
(i) If the employment of the Participant by the Company is terminated within the Option
Period for cause, as determined by the Company, the Option shall thereafter be void for all
purposes. As used in this subsection 7.2(d), cause shall mean a gross violation, as determined
by the Company, of the Companys established policies and procedures, provided that the effect of
this subsection 7.2(d) shall be limited to determining the consequences of a termination and that
nothing in this subsection 7.2(d) shall restrict or otherwise interfere with the Companys
discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company on or after attaining age 60,
the Option may be exercised by the Participant within 36 months following his or her retirement
(provided that such exercise must occur within the Option Period), but not thereafter. In the
event of the Participants death during such 36-month period, each Option may be exercised by those
entitled to do so in the manner referred to in (iv) below. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on or before the date
of the Participants retirement.
(iii) If the Participant becomes disabled (as determined pursuant to the Companys Long-Term
Disability Plan or any successor plan), during the Option Period while still employed, or within
the three-month period referred to in subsection 7.2(d)(v) below, or within the 36-month period
referred to in subsection 7.2(d)(ii) above, the Option may be exercised by the Participant or by
his or her guardian or legal representative, within twelve months following the Participants
disability, or within the 36-month period referred to in subsection 7.2(d)(ii) above if applicable
and if longer (provided that such exercise must occur within the Option Period), but not
thereafter. In the event of the Participants death during such twelve-month period, each Option
may be exercised by those entitled to do so in the manner referred to in subsection 7.2(d)(iv)
below. In any such case, the Option may be exercised only as to the shares of Stock as to which
the Option had become exercisable on or before the date of the Participants disability.
9
(iv) In the event of the Participants death while still employed by the Company, each Option
of the deceased Participant may be exercised by those entitled to do so under the Participants
will or under the laws of descent and distribution or as otherwise provided in Section 9.2 within
twelve months following the Participants death (provided that in any event such exercise must
occur within the Option Period), but not thereafter, as to all shares of Stock which are subject to
such Option, including each 25-percent increment of the Option, if any, which has not yet become
exercisable at the time of the Participants death. In the event of the Participants death within
the 36-month period referred to in subsection 7.2(d)(ii) above or within the twelve-month period
referred to in subsection 7.2(d)(iii) above, each Option of the deceased Participant that is
exercisable at the time of death may be exercised by those entitled to do so under the
Participants will or under the laws of descent and distribution or as otherwise provided in
Section 9.2 within twelve months following the Participants death or within the 36-month period
referred to in subsection 7.2(d)(ii) above, if applicable and if longer (provided that in any event
such exercise must occur within the Option Period). The provisions of this paragraph (iv) of
subsection 7.2(d) shall be applicable to each Stock Option Agreement as if set forth therein word
for word. Each Stock Option Agreement executed by the Company prior to the adoption of this
provision shall be deemed amended to include the provisions of this paragraph and all Options
granted pursuant to such Stock Option Agreements shall be exercisable as provided herein.
(v) If the employment of the Participant by the Company is terminated (which for this purpose
means that the Participant is no longer employed by the Company or by an Affiliated Corporation)
within the Option Period for any reason other than cause, the Participants retirement on or after
attaining age 60, or the Participants disability or death, the Option may be exercised by the
Participant within three months following the date of such termination (provided that such exercise
must occur within the Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on or before the date
of termination of the Participants employment.
(e)
Transferability
. Each Stock Option Agreement shall provide that the Option
granted therein is not transferable by the Participant except by will or pursuant to the laws of
descent and distribution or as otherwise provided in Section 9.2, and that such Option is
exercisable during the Participants lifetime only by him or her, or in the event of the
Participants disability or incapacity, by his or her guardian or legal representative.
10
(f)
Agreement to Continue in Employment
. Each Stock Option Agreement shall contain
the Participants agreement to remain in the employment of the Company, at the pleasure of the
Company, for a continuous period of at least one year after the date of such Stock Option
Agreement, at the salary rate in effect on the date of such agreement or at such changed rate as
may be fixed, from time to time, by the Company. Termination of the Stock Option Agreement and all
unvested Options granted under such Stock Option Agreement shall be the Companys sole and
exclusive remedy for an employees breach of this Section 7.2(f).
(g)
Exercise, Payments, Etc
.
(i) Each Stock Option Agreement shall provide that the method for exercising the Option
granted therein shall be by delivery to the Office of the Secretary of the Company or to the
Administrative Agent of written notice specifying the number of shares of Stock with respect to
which such Option is exercised and payment to the Company of the aggregate Option Price. Such
notice shall be in a form satisfactory to the Committee and shall specify the particular Options
(or portions thereof) which are being exercised and the number of shares of Stock with respect to
which the Options are being exercised. The Participants obligation to deliver written notice of
exercise is satisfied by electronic delivery of such notice through means satisfactory to the
Committee and prescribed by the Company. The exercise of the Option shall be deemed effective on
the date such notice is received by the Office of the Secretary or by the Administrative Agent and
payment is made to the Company of the aggregate Option Price (the Exercise Date); however, if
payment of the aggregate Option Price is made pursuant to a sale of shares of Stock as contemplated
by subsection 7.2(g)(iii)(E) below, the Exercise Date shall be deemed to be the date of such sale.
If requested by the Company, such notice shall contain the Participants representation that he or
she is purchasing the Stock for investment purposes only and his or her agreement not to sell any
Stock so purchased in any manner that is in violation of the Securities Act of 1933, as amended, or
any applicable state law, and such restriction, or notice thereof, shall be placed on the
certificates representing the Stock so purchased. The purchase of such Stock shall take place upon
delivery of such notice to the Office of the Secretary of the Company or to the Administrative
Agent, at which time the aggregate Option Price shall be paid in full to the Company by any of the
methods or any combination of the methods set forth in subsection 7.2(g)(iii) below.
(ii) The shares of Stock to which the Participant is entitled as a result of the exercise of
the Option shall be issued by the Company and (A) delivered by electronic means to an account
designated by the Participant, or (B) delivered to the Participant in the form of a properly
executed certificate or certificates representing such shares of Stock. If shares of Stock are
used to pay all or part of the aggregate Option Price, the Company shall issue and deliver to the
Participant the additional shares of Stock, in excess of the aggregate Option
11
Price or portion
thereof paid using shares of Stock, to which the Participant is entitled
as a result of the Option exercise. The Companys obligation to deliver the shares of Stock
to which the Participant is entitled as a result of the exercise of the Option shall be subject to
the payment in full to the Company of the aggregate Option Price and the required tax withholding.
(iii) The aggregate Option Price shall be paid by any of the following methods or any
combination of the following methods:
(A) in cash, including the wire transfer of funds in U.S. dollars to one of the Companys
bank accounts located in the United States, with such bank account to be designated from time to
time by the Company;
(B) by personal, certified or cashiers check payable in U.S. dollars to the order of the
Company;
(C) by delivery to the Company or the Administrative Agent of certificates representing a
number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which
(as of the Exercise Date) is not greater than the aggregate Option Price of the Option being
exercised, properly endorsed for transfer to the Company, provided that the shares of Stock used
for this purpose must have been owned by the Participant for a period of at least six months;
(D) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate
Fair Market Value of which (as of the Exercise Date) is not greater than the aggregate Option Price
of the Option being exercised, provided that the shares of Stock used for this purpose have been
owned by the Participant for a period of at least six months; or
(E) by delivery to the Company or the Administrative Agent of a properly executed notice of
exercise together with irrevocable instructions to a broker to promptly deliver to the Company, by
wire transfer or check as noted in subsection 7.2(g)(iii)(A) and (B) above, the amount of the
proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the
Participant necessary to pay the aggregate Option Price.
(iv) For purposes of the Plan, the income resulting from an Option exercise shall be based on
the Fair Market Value of the Stock for the Exercise Date; however, if payment of the aggregate
Option Price is made pursuant to a sale of shares of Stock as contemplated by subsection
7.2(g)(iii)(E) hereof, the Fair Market Value shall be deemed to be the per share sale price and the
Exercise Date shall be deemed to be the date of such sale.
(h)
Date of Grant
. An Option shall be considered as having been granted on the date
specified in the grant resolution of the Committee.
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(i)
Tax Withholding
. Each Stock Option Agreement shall provide that, upon exercise of
the Option, the Participant shall make appropriate arrangements with the Company to provide for the
minimum amount of tax withholding required by law, including without limitation Sections 3102 and
3402 or any successor section(s) of the Internal Revenue Code and applicable state and local income
and other tax laws, by payment of such taxes in cash (including wire transfer), by check, or as
provided in Section 13.2 hereof.
(j)
Adjustment of Options
. Subject to the provisions of Sections 4, 5, 7, 8 and 12
hereof, the Committee may make any adjustment in the number of shares of Stock covered by, or the
terms of an outstanding Option and a subsequent granting of an Option, by amendment or by
substitution for an outstanding Option; however, except as provided in Sections 4, 5, 8 and 12
hereof, the Committee may not adjust the Option Price of any outstanding Option. Such amendment or
substitution may result in terms and conditions (including the number of shares of Stock covered,
vesting schedule or Option Period) that differ from the terms and conditions of the original
Option. The Committee may not, however, adversely affect the rights of any Participant to
previously granted Options without the consent of such Participant. If such action is effected by
amendment, the effective date of such amendment will be the date of grant of the original Option.
7.3
Stockholder Privileges
. No Participant shall have any rights as a stockholder with
respect to any shares of Stock covered by an Option until the Participant becomes the holder of
record of such Stock. Except as provided in Section 4 hereof, no adjustments shall be made for
dividends or other distributions or other rights as to which there is a record date preceding the
date on which such Participant becomes the holder of record of such Stock.
Section 8
Change of Control
8.1
In General
. In the event of the occurrence of a change of control of the Company, as
defined in Section 8.3 hereof, all outstanding Options shall become automatically vested, without
further action by the Committee or the Board, so as to make all such Options fully vested and
exercisable as of the date of such change of control.
8.2
Limitation on Payments
. If the provisions of this Section 8 would result in the
receipt by any Participant of a payment within the meaning of Section 280G or any successor
section(s) of the Internal Revenue Code, and the regulations promulgated thereunder, and if the
receipt of such accelerated vesting or
13
payment by any Participant would, in the opinion of
independent tax counsel of recognized standing selected by the Company, result in the payment by
such
Participant of any excise tax provided for in Sections 280G and 4999 or any successor section(s) of
the Internal Revenue Code, then the amount of such accelerated vesting or payment shall be reduced
to the extent required, in the opinion of independent tax counsel, to prevent the imposition of
such excise tax; provided, however, that any payment or vesting of any Options shall occur as
otherwise provided herein to the fullest extent possible without triggering such excise tax.
8.3
Definition
. For purposes of the Plan, a change of control shall mean any of the
events specified in the Companys Income Continuance Plan or any successor plan which constitute a
change of control within the meaning of such plan.
Section 9
Rights of Employees, Participants
9.1
Employment
. Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Participant any right with respect to the continuation of his or her
employment by the Company or any Affiliated Corporation, or interfere in any way with the right of
the Company or any Affiliated Corporation, subject to the terms of any separate employment
agreement to the contrary, at any time, to terminate such employment or to increase or decrease the
level of the Participants compensation from the level in existence at the time of the grant of an
Option. Whether an authorized leave of absence, or absence in military or government service,
shall constitute a termination of employment shall be determined by the Committee at the time.
9.2
Nontransferability
. No right or interest of any Participant in an Option granted
pursuant to the Plan shall be assignable or transferable during the lifetime of the Participant,
either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation
of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. In
the event of a Participants death, a Participants rights and interests in Options shall, to the
extent provided in Section 7 hereof, be transferable by testamentary will or the laws of descent
and distribution, or a beneficiary designation that is in a form approved by the Committee and in
compliance with the provisions of the Plan, applicable law, and the applicable Option, and payment
of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the
Participants designated beneficiary, legal representatives, heirs or legatees, as applicable. If,
in the opinion of the Committee, a person entitled to payments or to exercise rights with respect
to the Plan is disabled from caring for his or her
14
affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights shall be exercised by,
such persons
guardian, conservator or other legal personal representative upon furnishing the Committee with
evidence of such status satisfactory to the Committee.
Section 10
General Restrictions
10.1
Investment Representations
. The Company may require a Participant, as a condition of
exercising an Option, to give written assurances in substance and form satisfactory to the Company
and its counsel to the effect that such person is acquiring the Stock subject to the Option for his
own account for investment and not with any present intention of selling or otherwise distributing
the same, and to such other effects as the Company deems necessary or appropriate in order to
comply with federal and applicable state securities laws.
10.2
Compliance with Securities Laws
. Each Option shall be subject to the requirement
that, if at any time counsel to the Company shall determine that the listing, registration or
qualification of the shares of Stock subject to such Option upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or purchase of shares of Stock
thereunder, such Option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or obtained on conditions
acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration, qualification, consent or approval.
Section 11
Other Employee Benefits
The amount of any income deemed to be received by a Participant as a result of an Option exercise
shall not constitute earnings or compensation with respect to which any other employee benefits
of such Participant are determined including, without limitation, benefits under any pension,
profit sharing, life insurance or salary continuation plan.
Section 12
Plan Amendment, Modification and Termination
The Board may at any time terminate, and from time to time may amend or
15
modify the Plan provided,
however, that no amendment or modification may become effective without approval of the amendment
or modification by the Companys stockholders if stockholder approval is required to enable the
Plan to
satisfy any applicable statutory or regulatory requirements unless the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner adversely affect any
Option theretofore granted under the Plan, without the consent of the Participant holding such
Option.
The Committee shall have the authority to adopt such modifications, procedures and subplans as may
be necessary or desirable to comply with the provisions of the laws (including, but not limited to,
tax laws and regulations) of countries other than the United States in which the Company may
operate, so as to assure the viability of the benefits of the Plan to Participants employed in such
countries.
Section 13
Withholding
13.1
Withholding Requirement
. The Companys obligations to deliver shares of Stock upon
the exercise of an Option shall be subject to the Participants satisfaction of all applicable
federal, state and local income and other tax withholding requirements.
13.2
Satisfaction of Required Withholding
. At the time the Committee grants an Option, it
may, in its sole discretion, grant the Participant an election to pay all such amounts of required
tax withholding, or any part thereof:
(a) by the delivery to the Company or the Administrative Agent of a number of shares of Stock
then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date)
is not greater than the amount required to be withheld, provided that such shares have been held by
the Participant for a period of at least six months;
16
(b) by certification or attestation to the Company or the Administrative Agent of the
Participants ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate
Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be
withheld, provided that such shares of Stock have been owned by the Participant for a period of at
least six months; or
(c) by the Company or the Administrative Agent withholding from the shares of Stock otherwise
issuable to the Participant upon exercise of the Option, a number of shares of Stock, the aggregate
Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be
withheld. Any such elections by Participants to have shares of Stock withheld for this purpose
will be subject to the following restrictions:
(i) all elections shall be made on or prior to the Exercise Date; and
(ii) all elections shall be irrevocable.
13.3
Section 16 Requirements
. If the Participant is an officer or director of the Company
within the meaning of Section 16 or any successor section(s) of the 1934 Act (Section 16), the
Participant must satisfy the requirements of such Section 16 and any applicable rules and
regulations thereunder with respect to the use of shares of Stock to satisfy such tax withholding
obligation.
Section 14
Requirements of Law
14.1
Requirements of Law
. The issuance of Stock and the payment of cash pursuant to the
Plan shall be subject to all applicable laws, rules and regulations.
14.2
Federal Securities Laws Requirements
. If a Participant is an officer or director of
the Company within the meaning of Section 16, Options granted hereunder shall be subject to all
conditions required under Rule 16b-3, or any successor rule(s) promulgated under the 1934 Act, to
qualify the Option for any exception from the provisions of Section 16 available under such Rule.
Such conditions are hereby incorporated herein by reference and shall be set forth in the Stock
Option Agreement with the Participant which describes the Option.
14.3
Governing Law
. The Plan and all Stock Option Agreements hereunder shall be construed
in accordance with and governed by the laws of the State of Texas.
17
Section 15
Duration of the Plan
The Plan shall terminate effective as of May 2, 2007, and no Option shall be granted on or after
termination date. Any Options outstanding at the time of the Plan termination shall continue to be
exercisable in accordance with the Stock Option Agreement pertaining to each such Option.
Dated: May 5, 2011
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APACHE CORPORATION
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ATTEST:
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/s/ Cheri L. Peper
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By:
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/s/ Margery M. Harris
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Cheri L. Peper
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Margery M. Harris
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Corporate Secretary
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Senior Vice President,
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Human Resources
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18
Exhibit 10.5
APACHE CORPORATION
2003 Stock Appreciation Rights Plan
(Amended and Restated effective May 4, 2011)
Section 1
Introduction
1.1
Establishment
. Apache Corporation, a Delaware corporation (hereinafter referred to,
together with its Affiliated Corporations (as defined in Section 2.1 hereof) as the Company
except where the context otherwise requires), hereby establishes the Apache Corporation 2003 Stock
Appreciation Rights Plan (the Plan) for Eligible Employees (as defined in Section 2.1 hereof).
The Plan permits the grant of stock appreciation rights to Eligible Employees selected by the
Committee (as defined in Section 2.1 hereof).
1.2
Purposes
. The purposes of the Plan are to provide the Eligible Employees designated by
the Committee for participation in the Plan with added incentives to continue in the long-term
service of the Company and to create in such employees a more direct interest in the future success
of the operations of the Company by relating incentive compensation to increases in stockholder
value, so that the income of those employees is more closely aligned with the interests of the
Companys stockholders. The Plan is also designed to retain and motivate Eligible Employees and
attract talented personnel in a competitive environment.
1.3
Effective Date
. The effective date of the Plan (the Effective Date) is May 1, 2003.
Section 2
Definitions
2.1
Definitions
. The following terms shall have the meanings set forth below:
(a)
Administrative Agent
means any designee or agent that may be appointed by the
Committee pursuant to Section 3.1(b) hereof.
(b)
Affiliated Corporation
means any corporation or other entity (including but not
limited to a partnership) which is affiliated with Apache Corporation through stock ownership or
otherwise and is treated as a common employer under the provisions of Sections 414(b) and (c) or
any successor section(s) of the Internal Revenue Code.
(c)
Board
means the Board of Directors of the Company.
(d)
Committee
means the Stock Option Plan Committee of the Board, which is empowered
hereunder to take actions in the administration of the Plan. The Committee shall be constituted at
all times as to permit the Plan to comply with Rule 16b-3 or any successor rule(s) promulgated
under the Securities Exchange Act of 1934, as amended (the 1934 Act).
(e)
Eligible Employees
means full-time employees (including, without limitation,
officers and directors who are also employees), and certain part-time employees, of the Company or
any division thereof.
(f)
Exercise Date
means the date of exercise determined in accordance with
subsection 7.2(g) hereof.
(g)
Expiration Date
means the date on which the Stock Appreciation Right Period (as
defined in subsection 7.2(c) hereof) ends.
(h)
Fair Market Value
means the per share closing price of the Stock as reported on
The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date or,
if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or
electronic trading system which, on the date in question, reports the largest number of traded
shares of Stock,
provided
,
however
, that if on the date Fair Market Value is to be
determined there are no transactions in the Stock, Fair Market Value shall be determined as of the
immediately preceding date on which there were transactions in the Stock;
provided
further
,
however
, that if the foregoing provisions are not applicable, the fair
market value of a share of the Stock as determined by the Committee by the reasonable application
of such reasonable valuation method, consistently applied, as the Committee deems appropriate.
(i)
Grant Date
means the date of grant determined in accordance with subsection
7.2(h) hereof.
(j)
Internal Revenue Code
means the Internal Revenue Code of 1986, as it may be
amended from time to time.
(k)
Participant
means an Eligible Employee designated by the Committee from time to
time during the term of the Plan to receive one or more Stock Appreciation Rights under the Plan.
(l)
Stock Appreciation Right
means to receive an amount equal to the excess of the
Fair Market Value as of the Exercise Date of one share of Stock over the SAR Price times the number
of shares of Stock to which the Stock Appreciation Right relates.
(m)
SAR Price
means the price at which the Stock Appreciation Right was granted
determined in accordance with subsection 7.2(b) hereof.
(n)
Stock
means the U.S. $0.625 par value Common Stock of the Company.
2
2.2
Headings; Gender and Number
. The headings contained in the Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except
when otherwise indicated by the context, the masculine gender shall also include the feminine
gender, and the definition of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1
Administration by the Committee
.
(a) The Plan shall be administered by the Committee. In accordance with the provisions of the
Plan, the Committee shall, in its sole discretion, select the Participants from among the Eligible
Employees, determine the Stock Appreciation Rights to be granted pursuant to the Plan, the number
of shares of Stock to which each Stock Appreciation Right relates, the time at which such Stock
Appreciation Rights are to be granted, fix the SAR Price, and establish such other terms and
requirements as the Committee may deem necessary or desirable and consistent with the terms of the
Plan. The Committee shall determine the form or forms of the agreements with Participants which
shall evidence the particular provisions, terms, conditions, rights and duties of the Company and
the Participants with respect to Stock Appreciation Rights granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein.
(b) The Committee may from time to time adopt such rules and regulations for carrying out the
purposes of the Plan as it may deem proper and in the best interests of the Company. The Committee
may appoint an Administrative Agent, who need not be a member of the Committee or an employee of
the Company, to assist the Committee in administration of the Plan and to whom it may delegate such
powers as the Committee deems appropriate, except that the Committee shall determine any dispute.
The Committee may correct any defect, supply any omission or reconcile any inconsistency in the
Plan, or in any agreement entered into hereunder, in the manner and to the extent it shall deem
expedient and it shall be the sole and final judge of such expediency. No member of the Committee
shall be liable for any action or determination made in good faith. The determination,
interpretations and other actions of the Committee pursuant to the provisions of the Plan shall be
binding and conclusive for all purposes and on all persons.
3
Section 4
Adjustments to or Other Changes in Stock
4.1
Adjustments for Stock Split, Stock Dividend, etc.
If the Company shall at any time
increase or decrease the number of its outstanding shares of Stock or change in any way the rights
and privileges of such shares by means of the payment of a Stock dividend or any other
distribution upon such shares payable in Stock, or through a Stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving the Stock then in
relation to the Stock that is affected by one or more of the above events, the numbers, rights and
privileges of the following shall be, in each case, equitably and proportionally adjusted to take
into account the occurrence of any of the above events, (i) the shares of Stock to which each
outstanding Stock Appreciation Right relates; and (ii) the SAR Price for each outstanding Stock
Appreciation Right granted hereunder.
4.2
Other Changes in Stock
. In the event there shall be any change, other than as
specified in Section 4.1 hereof, in the number or kind of outstanding shares of Stock or of any
stock or other securities into which the Stock shall be changed or for which it shall have been
exchanged, and if the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of shares to which outstanding Stock Appreciation
Rights relate, then such adjustments shall be made by the Committee and shall be effective for all
purposes of the Plan and for each outstanding Stock Appreciation Right that involves the particular
type of stock for which a change was effected.
4.3
Determination by the Committee, Etc
. Adjustments under this Section 4 shall be made by
the Committee, whose determinations with regard thereto shall be final and binding upon all
parties.
Section 5
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another corporation and the Company is
not the surviving corporation, or if all or substantially all of the assets or more than 20 percent
of the outstanding voting stock of the Company is acquired by any other corporation, business
entity or person, or in case of a reorganization (other than a reorganization under the United
States Bankruptcy Code) or liquidation of the Company, and if the provisions of Section 8 hereof do
not apply, the Committee, or the board of directors of any corporation assuming the obligations of
the Company, shall, as to the Plan and outstanding Stock Appreciation Rights either (i) make
appropriate provision for the adoption and continuation of the Plan by the acquiring or successor
corporation and for the protection of any such outstanding Stock Appreciation Rights by the
substitution on an equitable basis of appropriate stock of the Company or of the merged,
consolidated or otherwise reorganized corporation which will be issuable with respect to
4
the Stock,
provided that no additional benefits shall be conferred upon the
Participants holding such Stock Appreciation Rights as a result of such substitution, and the
excess of the aggregate Fair Market Value of the shares of Stock to which the Stock Appreciation
Rights relate immediately after such substitution over the aggregate SAR Price thereof is not more
than the excess of the aggregate Fair Market Value of the shares of Stock to which such Stock
Appreciation Rights relate immediately before such substitution over the aggregate Unit Price
thereof, or (ii) upon written notice to the Participants, provide that all unexercised Stock
Appreciation Rights shall be exercised within a specified number of days of the date of such notice
or such Stock Appreciation Rights will be terminated. In the latter event, the Committee shall
accelerate the vesting dates of outstanding Stock Appreciation Rights so that all Stock
Appreciation Rights become fully vested and exercisable prior to any such event.
Section 6
Participation
Participants in the Plan shall be those Eligible Employees who, in the judgment of the Committee,
are performing, or during the term of their incentive arrangement will perform, vital services in
the management, operation and development of the Company or an Affiliated Corporation, and
significantly contribute, or are expected to significantly contribute, to the achievement of the
Companys long-term corporate economic objectives. Participants may be granted from time to time
one or more Stock Appreciation Rights; provided, however, that the grant of each such Stock
Appreciation Right shall be separately approved by the Committee, and receipt of one such Stock
Appreciation Right shall not result in automatic receipt of any other Stock Appreciation Right.
Upon determination by the Committee that a Stock Appreciation Right is to be granted to a
Participant, written notice shall be given to such person, specifying the terms, conditions, rights
and duties related thereto. Each Participant shall, if required by the Committee, enter into an
agreement with the Company, in such form as the Committee shall determine and which is consistent
with the provisions of the Plan, specifying such terms, conditions, rights and duties. Stock
Appreciation Rights shall be deemed to be granted as of the date specified in the grant resolution
of the Committee, which date shall be the date of any related agreement with the Participant. In
the event of any inconsistency between the provisions of the Plan and any such agreement entered
into hereunder, the provisions of the Plan shall govern.
Section 7
Stock Appreciation Rights
7.1
Grant of Stock Appreciation Rights
. Coincident with or following designation for
participation in the Plan, an Eligible Employee may be granted one or more Stock Appreciation
Rights. Grants of Stock Appreciation Rights under the Plan shall be made by the Committee. In no
event shall the exercise of one Stock Appreciation Right affect the right to exercise any other
Stock Appreciation Right or affect the number of shares
5
of Stock to which any other Share
Appreciation Right relates, except as provided in subsection 7.2(j) hereof.
7.2
Stock Appreciation Right Agreements
. Each Stock Appreciation Right granted under the
Plan shall be evidenced by a written agreement which shall be entered into by the Company and the
Participant to whom the Stock Appreciation Right is granted (the Stock Appreciation Right
Agreement), and which shall contain the following terms and conditions, as well as such other
terms and conditions, not inconsistent therewith, as the Committee may consider appropriate in each
case:
(a)
Number of Shares
. Each Stock Appreciation Right Agreement shall state that it
relates to a specified number of shares of Stock, as determined by the Committee.
(b)
SAR Price
. The price shall be determined in each case by the Committee at the
time of grant and set forth in the Stock Appreciation Right Agreement, but in no event shall the
SAR Price be less than the Fair Market Value of the Stock on the Grant Date.
(c)
Duration of Stock Appreciation Rights; Employment Required For Exercise
. Each
Stock Appreciation Right Agreement shall state the period of time, determined by the Committee,
within which the Stock Appreciation Right may be exercised by the Participant (the Stock
Appreciation Right Period). The Stock Appreciation Right Period must end, in all cases, not more
than ten years from the Grant Date. Except as otherwise provided in Sections 5 and 8 and subsection
7.2(d)(iv) hereof, each Stock Appreciation Right granted under the Plan shall become exercisable in
increments such that 25 percent of the Share Appreciation Right becomes exercisable on each of the
four subsequent one-year anniversaries of the date the Stock Appreciation Right is granted,
provided that each such additional 25-percent increment shall become exercisable only if the
Participant has been continuously employed by the Company from the date the Stock Appreciation
Right is granted through the date on which each such additional 25-percent increment becomes
exercisable.
(d)
Termination of Employment, Death, Disability, Etc
. Each Stock Appreciation Right
Agreement shall provide as follows with respect to the exercise of the Stock Appreciation Right
upon termination of the employment or the death of the Participant:
(i) If the employment of the Participant by the Company is terminated within the Stock
Appreciation Right Period for cause, as determined by the Company, the Stock Appreciation Right
shall thereafter be void for all purposes. As used in this subsection 7.2(d), cause shall mean a
gross violation, as determined by the Company, of the Companys established policies and
procedures, provided that the effect of this subsection 7.2(d) shall be limited to determining the
consequences of a termination and that nothing in this subsection 7.2(d) shall restrict or
otherwise interfere with the Companys discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company on or after attaining age 60,
the Stock Appreciation Right may be exercised by the Participant
6
within 36 months following his or
her retirement (provided that such exercise must occur
within the Stock Appreciation Right Period), but not thereafter. In the event of the Participants
death during such 36-month period, each Stock Appreciation Right may be exercised by those entitled
to do so in the manner referred to in (iv) below. In any such case, the Stock Appreciation Right
may be exercised only as to the increment(s) of the Stock Appreciation Right that have become
exercisable on or before the date of the Participants retirement.
(iii) If the Participant becomes disabled (as determined pursuant to the Companys Long-Term
Disability Plan or any successor plan), during the Stock Appreciation Right Period while still
employed, or within the three-month period referred to in subsection 7.2(d)(v) below, or within the
36-month period referred to in subsection 7.2(d)(ii) above, the Stock Appreciation Right may be
exercised by the Participant or by his or her guardian or legal representative, within twelve
months following the Participants disability, or within the 36-month period referred to in
subsection 7.2(d)(ii) above if applicable and if longer (provided that such exercise must occur
within the Stock Appreciation Right Period), but not thereafter. In the event of the Participants
death during such twelve-month period, each Stock Appreciation Right may be exercised by those
entitled to do so in the manner referred to in subsection 7.2(d)(iv) below. In any such case, the
Stock Appreciation Right may be exercised only as to the increment(s) of the Stock Appreciation
Right that have become exercisable on or before the date of the Participants disability.
(iv) In the event of the Participants death while still employed by the Company, each Stock
Appreciation Right of the deceased Participant may be exercised by those entitled to do so under
the Participants will or under the laws of descent and distribution or as otherwise provided in
Section 9.2 within twelve months following the Participants death (provided that in any event such
exercise must occur within the Stock Appreciation Right Period), but not thereafter, as to all
increments of each Stock Appreciation Right, including each 25-percent increment of the Stock
Appreciation Right, if any, which has not yet become exercisable at the time of the Participants
death. In the event of the Participants death within the 36-month period referred to in
subsection 7.2(d)(ii) above, the increment(s) of or within the twelve-month period referred to in
subsection 7.2(d)(iii) above, the increment(s) of each Stock Appreciation Right of the deceased
Participant that are exercisable at the time of death may be exercised by those entitled to do so
under the Participants will or under the laws of descent and distribution or as otherwise provided
in Section 9.2 within twelve months following the Participants death or within the 36-month period
referred to in subsection 7.2(d)(ii) above, if applicable and if longer (provided that in any event
such exercise must occur within the Stock Appreciation Right Period).
(v) If the employment of the Participant by the Company is terminated (which for this purpose
means that the Participant is no longer employed by the Company or by an Affiliated Corporation)
within the Stock Appreciation Right Period for any reason other than cause, the Participants
retirement on or after attaining age 60, or the Participants disability or death, the Stock
Appreciation Right may be exercised by the Participant within three months following the date of
such termination (provided that such exercise must occur within the Stock Appreciation Right
Period), but not thereafter. In any such case, the Stock Appreciation Right may be exercised only
as to the
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increment(s) of the Stock Appreciation Right that have become exercisable on or before the date of
termination of the Participants employment.
(e)
Transferability
. Each Stock Appreciation Right Agreement shall provide that the
Stock Appreciation Right granted therein is not transferable by the Participant except by will or
pursuant to the laws of descent and distribution or as otherwise provided in Section 9.2, and that
such Stock Appreciation Right is exercisable during the Participants lifetime only by him or her,
or in the event of the Participants disability or incapacity, by his or her guardian or legal
representative.
(f)
Agreement to Continue in Employment
. Each Stock Appreciation Right Agreement
shall contain the Participants agreement to remain in the employment of the Company, at the
pleasure of the Company, for a continuous period of at least one year after the date of such Stock
Appreciation Right Agreement, at the salary rate in effect on the date of such agreement or at such
changed rate as may be fixed, from time to time, by the Company.
(g)
Exercise, Payments, Etc
.
(i) Each Stock Appreciation Right Agreement shall provide that the method for exercising the
Stock Appreciation Right granted therein shall be by delivery to the Administrative Agent or to the
Office of the Secretary of the Company of written notice specifying the number of shares of Stock
that relate to the Stock Appreciation Right being exercised. Such notice shall be in a form
satisfactory to the Committee and shall specify the particular Stock Appreciation Rights (or
portions thereof) which are being exercised and the number of shares of Stock that relate to the
Stock Appreciation Rights being exercised. The exercise of the Stock Appreciation Right shall be
deemed effective on the date such notice is received by the Administrative Agent or by the Office
of the Secretary (the Exercise Date).
(ii) Subject to subsection 7.2(i) and Section 12.1 hereof, the amount to which the
Participant is entitled as a result of the exercise of the Stock Appreciation Right shall be paid
through the Companys payroll system, as part of the payroll cycle next following the Exercise
Date, or through the Administrative Agent.
(iii) For purposes of the Plan, the income resulting from a Stock Appreciation Right exercise
shall be based on the Fair Market Value of the Stock for the Exercise Date.
(h)
Grant Date.
A Stock Appreciation Right shall be considered as having been granted
on the date specified in the grant resolution of the Committee.
(i)
Tax Withholding
. Each Stock Appreciation Right Agreement shall provide that, upon
exercise of a Stock Appreciation Right, minimum tax withholding required by Sections 3102 and 3402
or any successor section(s) of the Internal Revenue Code and applicable state and local income and
other tax laws shall be deducted from the amount payable to the Participant.
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(j)
Adjustment of Stock Appreciation Rights
. Subject to the provisions of Sections 4,
5, 7, 8 and 11 hereof, the Committee may make any adjustment in the number of shares of Stock to
which an outstanding Stock Appreciation Right relates, or the terms of an outstanding Stock
Appreciation Right and a subsequent granting of a Stock Appreciation Right, by amendment or by
substitution for an outstanding Stock Appreciation Right; however, except as provided in Sections
4, 5, 8 and 11 hereof, the Committee may not adjust the SAR Price of any outstanding Stock
Appreciation Right. Such amendment or substitution may result in terms and conditions (including
the number of shares of Stock to which the Stock Appreciation Right relates, vesting schedule or
Stock Appreciation Right Period) that differ from the terms and conditions of the original Stock
Appreciation Right. The Committee may not, however, adversely affect the rights of any Participant
to previously granted Stock Appreciation Rights without the consent of such Participant. If such
action is effected by amendment, the effective date of such amendment will be the date of grant of
the original Stock Appreciation Right.
7.3
Stockholder Privileges
. No Participant shall have any rights as a stockholder with
respect to any shares of Stock to which a Stock Appreciation Right relates.
Section 8
Change of Control
8.1
In General
. In the event of the occurrence of a change of control of the Company, as
defined in Section 8.3 hereof, all outstanding Stock Appreciation Rights shall become automatically
vested, without further action by the Committee or the Board, so as to make all such Stock
Appreciation Rights fully vested and exercisable as of the date of such change of control.
8.2
Limitation on Payments
. If the provisions of this Section 8 would result in the
receipt by any Participant of a payment within the meaning of Section 280G or any successor
section(s) of the Internal Revenue Code, and the regulations promulgated thereunder, and if the
receipt of such payment by any Participant would, in the opinion of independent tax counsel of
recognized standing selected by the Company, result in the payment by such Participant of any
excise tax provided for in Sections 280G and 4999 or any successor section(s) of the Internal
Revenue Code, then the amount of such payment shall be reduced to the extent required, in the
opinion of independent tax counsel, to prevent the imposition of such excise tax; provided,
however, that the Committee, in its sole discretion, may authorize the payment of all or any
portion of the amount of such reduction to the Participant.
8.3
Definition
. For purposes of the Plan, a change of control shall mean any of the
events specified in the Companys Income Continuance Plan or any successor plan which constitute a
change of control within the meaning of such plan.
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Section 9
Rights of Employees, Participants
9.1
Employment
. Nothing contained in the Plan or in any Stock Appreciation Right granted
under the Plan shall confer upon any Participant any right with respect to the continuation of his
or her employment by the Company or any Affiliated Corporation, or interfere in any way with the
right of the Company or any Affiliated Corporation, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to increase or decrease the
level of the Participants compensation from the level in existence at the time of the grant of an
Stock Appreciation Right. Whether an authorized leave of absence, or absence in military or
government service, shall constitute a termination of employment shall be determined by the
Committee at the time.
9.2
Nontransferability
. No right or interest of any Participant in any Stock Appreciation
Right granted pursuant to the Plan shall be assignable or transferable during the lifetime of the
Participant, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly,
by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of a Participants death, a Participants rights and interests in any
Stock Appreciation Right shall, to the extent provided in Section 7 hereof, be transferable by
testamentary will or the laws of descent and distribution, or a beneficiary designation that is in
a form approved by the Committee and in compliance with the provisions of this Plan, applicable
law, and the applicable Stock Appreciation Right, and payment of any amounts due under the Plan
shall be made to, and exercise of any Stock Appreciation Right may be made by, the Participants
designated beneficiary, legal representatives, heirs or legatees, as applicable. If, in the
opinion of the Committee, a person entitled to payments or to exercise rights with respect to the
Plan is disabled from caring for his or her affairs because of mental condition, physical condition
or age, payment due such person may be made to, and such rights shall be exercised by, such
persons guardian, conservator or other legal personal representative upon furnishing the Committee
with evidence of such status satisfactory to the Committee.
Section 10
Other Employee Benefits
The amount of any income deemed to be received by a Participant as a result of a Stock Appreciation
Right exercise shall not constitute earnings or compensation with respect to which any other
employee benefits of such Participant are determined including, without limitation, benefits under
any pension, profit sharing, life insurance or salary continuation plan.
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Section 11
Plan Amendment, Modification and Termination
The Committee or the Board may at any time terminate, and from time to time may amend or modify the
Plan provided, however, that no amendment or modification may become effective without approval of
the amendment or modification by the Companys stockholders if stockholder approval is required to
enable the Plan to satisfy any applicable statutory or regulatory requirements unless the Company,
on the advice of counsel, determines that stockholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner adversely affect any
Stock Appreciation Right theretofore granted under the Plan, without the consent of the Participant
holding such Stock Appreciation Right.
The Committee shall have the authority to adopt such modifications, procedures and subplans as may
be necessary or desirable to comply with the provisions of the laws (including, but not limited to,
tax laws and regulations) of countries other than the United States in which the Company may
operate, so as to assure the viability of the benefits of the Plan to Participants employed in such
countries.
Section 12
Withholding
12.1
Withholding Requirement
. The Companys obligations to deliver the amounts payable to
the Participant for the exercise of a Stock Appreciation Right, shall be subject to the
Participants satisfaction of all applicable federal, state and local income and other tax
withholding requirements.
12.2
Excess Withholding
. At the time the Committee grants a Stock Appreciation Right, it
may, in its sole discretion, grant the Participant an election to pay additional or excess amounts
of tax withholding, beyond the required amounts and up to the Participants marginal tax rate.
Such election must be specified in the written notice of exercise given in accordance with
subsection 7.2(g) hereof.
Section 13
Requirements of Law
13.1
Requirements of Law
. The payment of amounts pursuant to the Plan shall be subject to
all applicable laws, rules and regulations.
13.2
Federal Securities Laws Requirements
. If a Participant is an officer or director of
the Company within the meaning of Section 16 of the 1934 Act, Stock Appreciation Rights granted
hereunder shall be subject to all conditions required under Rule 16b-3,
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or any successor rule(s)
promulgated under the 1934 Act, to qualify the Stock
Appreciation Right for any exception from the provisions of Section 16 available under such rule.
Such conditions are hereby incorporated herein by reference and shall be set forth in the Stock
Appreciation Right Agreement with the Participant which describes the Stock Appreciation Right.
13.3
Governing Law
. The Plan and all Stock Appreciation Right Agreements hereunder shall
be construed in accordance with and governed by the laws of the State of Texas.
Section 14
Duration of the Plan
The Plan shall terminate effective as of May 2, 2007, and no Stock Appreciation Right shall be
granted on or after such termination date. Any Stock Appreciation Rights outstanding at the time
of the Plan termination shall continue to be exercisable in accordance with the Stock Appreciation
Right Agreement pertaining to each such Stock Appreciation Right.
Dated: May 4, 2011
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APACHE CORPORATION
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ATTEST:
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/s/ Cheri L. Peper
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By:
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/s/ Margery M. Harris
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Cheri L. Peper
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Margery M. Harris
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Corporate Secretary
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Senior Vice President,
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Human Resources
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