SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-4300
APACHE CORPORATION
A DELAWARE CORPORATION IRS EMPLOYER NO. 41-0747868 |
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
TELEPHONE NUMBER (713) 296-6000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $1.25 Par Value New York Stock Exchange
Chicago Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
9.25% Notes due 2002 New York Stock Exchange
|
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of registrant as of February 26, 1999...... $1,949,775,431 Number of shares of registrant's common stock outstanding as of February 26, 1999...................................... 97,794,379 |
DOCUMENTS INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
DESCRIPTION
ITEM PAGE
---- ----
PART I
1. BUSINESS.................................................... 1
2. PROPERTIES.................................................. 11
3. LEGAL PROCEEDINGS........................................... 15
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 15
PART II
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 15
6. SELECTED FINANCIAL DATA..................................... 17
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 18
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 28
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 28
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 28
11. EXECUTIVE COMPENSATION...................................... 28
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 28
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 28
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K......................................................... 29
|
All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this report. Quantities of natural gas are expressed in this report in terms of thousand cubic feet (Mcf), million cubic feet (MMcf) or billion cubic feet (Bcf). Oil is quantified in terms of barrels (bbls); thousands of barrels (Mbbls) and millions of barrels (MMbbls). Natural gas is compared to oil in terms of barrels of oil equivalent (boe) or million barrels of oil equivalent (MMboe). Oil and natural gas liquids are compared with natural gas in terms of million cubic feet equivalent (MMcfe) and billion cubic feet equivalent (Bcfe). One barrel of oil is the energy equivalent of six Mcf of natural gas. Daily oil and gas production is expressed in terms of barrels of oil per day (b/d) and thousands of cubic feet of gas per day (Mcf/d) or millions of British thermal units per day (MMBtu/d), respectively. Gas sales volumes may be expressed in terms of one million British thermal units (MMBtu), which is approximately, equal to one Mcf. With respect to information relating to the Company's working interest in wells or acreage, "net" oil and gas wells or acreage is determined by multiplying gross wells or acreage by the Company's working interest therein. Unless otherwise specified, all references to wells and acres are gross.
PART I
ITEM 1. BUSINESS
GENERAL
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. In North America, Apache's exploration and production interests are focused on the Gulf of Mexico, the Anadarko Basin, the Permian Basin, the Gulf Coast and the Western Sedimentary Basin of Canada. Outside of North America, Apache has exploration and production interests offshore Western Australia, in Egypt and offshore the Ivory Coast, and exploration interests in Poland and offshore The People's Republic of China (China). Apache common stock, par value $1.25 per share, has been listed on the New York Stock Exchange since 1969, and on the Chicago Stock Exchange since 1960.
Apache holds interests in many of its U.S., Canadian and international properties through operating subsidiaries, such as Apache Canada Ltd., DEK Energy Company (DEKALB, formerly known as DEKALB Energy Company), Apache Energy Limited (formerly known as Hadson Energy Limited), Apache International, Inc., and Apache Overseas, Inc. Properties referred to in this document may be held by those subsidiaries. Apache treats all operations as one line of business.
1998 RESULTS
In 1998, Apache had a loss attributable to common stock of $131.4 million, or $1.34 per share, on total revenues of $875.7 million. The loss reflected, in large part, the effects of a $158 million after-tax, non-cash charge resulting from a $243 million price-related reduction in Apache's proved oil and gas reserves in the United States. Net cash provided by operating activities during 1998 was $471.5 million.
Apache had its 21st consecutive year of production growth and 11th consecutive year of oil and gas reserves growth in 1998. Apache's average daily production was 75.8 Mbbls of oil and natural gas liquids and 590 MMcf of natural gas for the year. Giving effect to 1998 production, acquisitions, dispositions, revisions and drilling activity, the Company's estimated proved reserves increased by 27.3 MMboe in 1998 over the prior year to 613 MMboe, of which approximately 59 percent was natural gas. Based on 585.7 MMboe reported at year-end 1997, Apache's reserve growth from drilling activity during the year reflects replacement of 236 percent of the Company's 1998 production. Apache's active drilling and production-enhancement program yielded 276 new producing wells out of 383 attempts and involved 590 major North American workover and recompletion projects during the year.
At December 31, 1998, Apache held interests in approximately 4,086 net oil and gas wells and 1,803,932 net developed acres of oil and gas properties worldwide. In addition, the Company had approximately 593,204 net undeveloped acres under North American leases and 22,566,883 net undeveloped acres under international exploration and production rights.
APACHE'S GROWTH STRATEGY
Apache's growth strategy is to increase oil and gas reserves, production, cash flow and earnings through a combination of exploratory drilling, development of its inventory of existing projects and property acquisitions meeting defined financial parameters. The Company's drilling program emphasizes reserve additions through moderate-risk drilling primarily on its North American interests, and exploratory drilling primarily on its international interests. The Company also emphasizes reducing operating costs per unit produced and selling marginal and non-strategic properties in order to enhance its profit margins.
Apache's international investments and exploration activities are an emerging component of its long-term growth strategy. In addition to an active, moderate-risk drilling program in Apache's North American focus areas, higher-risk international exploration offers potential for greater rewards and significant reserve additions. Apache directed its international efforts in 1998 toward development of certain discoveries offshore Western Australia, offshore the Ivory Coast, in Egypt and offshore China, and toward further exploration
efforts in those areas and on its concessions in Poland. Apache believes that reserve additions in these international areas are likely to continue through higher-risk exploration and through improved production practices and recovery techniques.
For Apache, property acquisition is only one phase in a continuing cycle of business growth. Apache's aim is to follow each acquisition with a cycle of reserve enhancement, property consolidation and cash flow acceleration, facilitating asset growth and debt reduction. This approach requires a well planned and carefully executed property development program and, where appropriate, a selective program of property dispositions. It motivates Apache to target acquisitions that have ascertainable additional reserve potential and to apply an active drilling, workover and recompletion program to realize the potential of the acquired undeveloped and partially developed properties. Apache prefers to operate its properties so that it can best influence their development; as a result, the Company operates properties accounting for over 80 percent of its production.
1998 ACQUISITIONS AND DISPOSITIONS
On November 13, 1998, the Company entered into agreements to acquire certain oil and gas interests and companies holding oil and gas interests in the Carnarvon Basin, offshore Western Australia, from subsidiaries of Novus Petroleum Limited (Novus) for approximately $55 million. The interests have estimated proved reserves of approximately 5.8 MMboe and daily production of 2,400 barrels of oil equivalent. They are within the Apache-operated Harriet Joint Venture (which includes production, processing and pipeline infrastructure associated with the Varanus Island hub), the Airlie Joint Venture (in which the Company held a prior interest and became operator) and three other exploration permit areas. The transaction closed in two stages, on December 18, 1998 (approximately $49 million), and on January 29, 1999 (approximately $6 million). Under the terms of an agreement with Novus, the Company may be required to make additional payments to Novus based on proved and probable recoverable oil and condensate reserves, as determined by independent engineers, on a defined geological structure in the Gipsy-Rose-Lee area, offshore Western Australia. If required, such payments would be calculated using $2.50 for each barrel of proved and $1.25 for each barrel of probable oil and condensate reserves. A payment becomes due if and when a decision is made to construct facilities for the production of oil or condensate from the designated area.
On February 1, 1999, the Company acquired oil and gas properties located in the Gulf of Mexico from Petsec Energy Inc. (Petsec) for an adjusted purchase price of approximately $66.7 million. The Petsec transaction included estimated proved reserves of approximately 10.4 MMboe on the effective date.
In several transactions with various buyers, Apache also sold largely marginal properties containing 29.6 MMboe of proved reserves for $131.1 million. Following the Ampolex Group Transaction described in Apache's 1997 Annual Report on Form 10-K, the Company entered into an agreement with Hardy Petroleum Limited (Hardy) pursuant to which Hardy agreed to purchase a 10 percent interest in the company's East Spar field and related production facilities. This transaction closed in January 1998 with a total sales price of approximately $63 million in cash. The Ampolex Group Transaction was recorded net of these interests.
In June 1998, Apache formed a strategic alliance with Cinergy Corp. (Cinergy) to market substantially all the Company's natural gas production from North America and sold its 57 percent interest in Producers Energy Marketing LLC (ProEnergy) for 771,258 shares of Cinergy common stock, subsequently sold for $26.1 million. ProEnergy will continue to market Apache's North American natural gas production for 10 years, with an option to terminate after six years, under an amended and restated gas purchase agreement effective July 1, 1998. During this period, Apache is generally obligated to deliver most of its North American gas production to Cinergy and, under certain circumstances, reimburse Cinergy if certain gas throughput thresholds are not met. Accordingly, Apache recorded a deferred gain of $20 million, subject to adjustment, on the sale of ProEnergy that is being amortized over six years.
EXPLORATION AND PRODUCTION
The Company's North American exploration and production activities are diversified among four operating regions: Gulf, Midcontinent, Western and Canada. Approximately 62 percent of the Company's
proved reserves are located in these North American regions. Egypt and Australia are the Company's most important international regions. The Company's Egyptian operations are headquartered in Cairo, and Apache conducts its Australian exploration and production operations from Perth. Information concerning the amount of revenue, operating income (loss) and total assets attributable to U.S., Canadian and international operations is set forth in Note 12 to the Company's consolidated financial statements under Item 8 below.
Gulf. The Gulf region encompasses the Texas and Louisiana coasts, central Texas and the Company's interests in the Gulf of Mexico, offshore Louisiana and Texas. In 1998, the Gulf region was Apache's leading region for production and production revenues contributing approximately $224 million in revenues from production of 17.9 MMboe for the year. The Company performed 182 workover and recompletion operations during 1998 in the Gulf region and participated in drilling 30 wells, 11 of which were completed as producers. As of December 31, 1998, the region encompassed 482,546 net acres, and accounted for 81.3 MMboe, or 13 percent, of the Company's year-end 1998 total estimated proved reserves.
Midcontinent. Apache's Midcontinent region operates in Oklahoma, eastern and northern Texas, Arkansas and northern Louisiana. The region has focused operations on its sizable position in the Anadarko Basin of western Oklahoma. Apache has drilled and operated in the Anadarko Basin for over four decades, developing an extensive database of geologic information and a substantial acreage position. In 1998, the Midcontinent region had approximately 11.8 MMboe of production generating $144 million in revenue for the Company.
At December 31, 1998, Apache held an interest in 413,690 net acres in the region, which accounted for approximately 101.8 MMboe, or 17 percent, of Apache's total estimated proved reserves. Apache participated in drilling 105 wells in the Midcontinent region during the year, 86 of which were completed as producing wells. The Company performed 45 workover and recompletion operations in the region during 1998.
Western. The Western region includes assets in the Permian Basin of western Texas and New Mexico and the San Juan Basin of New Mexico. In 1998, the Western region produced approximately 9.9 MMboe and generated $114 million in production revenue. At December 31, 1998, the Company held 422,914 net acres in the region, which accounted for 127.8 MMboe or 21 percent, of the Company's total estimated proved reserves. Apache participated in drilling 98 wells in the Western region, 86 of which were productive wells. Apache performed 294 workovers and recompletions in the Western region during the year.
Canada. Exploration and development activity in the Canadian region is concentrated in the Provinces of Alberta and British Columbia. The region produced approximately 7.4 MMboe and generated $64 million in production revenue in 1998. Apache participated in drilling 66 wells in this region during the year, 47 of which were completed as producers. The Company performed 69 workovers and recompletions on operated wells during 1998. At December 31, 1998, the region encompassed approximately 372,720 net acres, and accounted for 67.3 MMboe, or 11 percent, of the Company's year-end 1998 total estimated proved reserves.
Egypt. At year end, Apache held 13,279,201 net acres in Egypt with 87.6 MMboe of estimated proved reserves or 14 percent of Apache's total estimated proved reserves. In 1998, Apache had 10.3 MMboe of production in Egypt, which generated $129 million in production revenues. Apache owns a 75 percent interest in the Qarun Block and a 40 percent interest in the Khalda Block, both in the Western Desert of Egypt. Future production of gas from Khalda is expected to be delivered for sale to the Egyptian General Petroleum Corporation (EGPC) at a point west of Alexandria, Egypt, via a 34-inch gas pipeline, construction of which commenced in 1997 with completion of the pipeline projected to occur in 1999. The costs of building the pipeline will be borne by Apache, the other Khalda participants, and the owners of a neighboring block. Construction costs paid by Apache and the other Khalda participants are recoverable from oil and gas production from the Khalda Block.
Both the Khalda and Qarun Concession Agreements provide that Apache and its partners in the concessions will pay all of the operating and capital costs for developing the concessions, while the production will be split between EGPC and the partners. Up to 40 percent of the oil and gas produced from each of the concessions is available to the Company and its partners to recover operating and capital costs for the applicable concession. To the extent eligible costs exceed 40 percent of the oil and gas produced and sold from
a concession in any given quarter, such excess costs may be carried into future quarters without limit. The remaining 60 percent of all oil and gas produced from the concessions is divided between EGPC and Apache and its partners, with the percentage received by Apache and its partners reducing as the gross daily average of oil and gas produced on a quarterly basis increases. Under the Khalda Agreement, capital costs are amortized over four years, while the Qarun agreement provides for a five-year amortization.
In addition to the Qarun and Khalda Blocks, Apache holds interests in the East Beni Suef and Asyout Blocks to the south of the Qarun Block, and three other blocks in the Western Desert of Egypt, the North East Abu Gharadig Block, the East Bahariya Block, and the West Mediterranean Block No. 1 (partly onshore and partly offshore). Apache also acquired interests in the Ras El Hekma and Ras Kanayes concessions from Repsol Exploracion Egipto S.A. in December 1997, and during 1998, Apache became the operator of the W. Mediterranean and East Beni Suef Blocks. Exploratory drilling on the East Beni Suef Block commenced in 1997 with a significant discovery made on the #1 well. Delineation drilling continued in 1998. Due to conflicting governmental requirements regarding the placement of drilling rigs on the Darag Block, the Company relinquished the Darag concession in the Gulf of Suez and received a refund of a portion of its expenses related to the concession.
Australia. Western Australia became an important region for Apache after
the 1993 acquisition of Hadson Energy Resources Corporation (subsequently known
as Apache Energy Resources Corporation). In 1998, natural gas production in the
region increased by 95 percent from the prior year to approximately 51 MMcf/d.
Apache acts as operator for most of its Western Australia properties through its
wholly-owned subsidiary, Apache Energy Limited (AEL). During 1998, Apache had
6.3 MMboe of production generating $70 million of production revenue. Estimated
proved reserves in Australia increased by 66 percent to 132.7 MMboe, or 22
percent of the Company's year-end total estimated proved reserves. The increase
reflects, among other matters, the acquisition from Novus of three companies
with holdings in the East Spar and Harriet fields. As of December 31, 1998,
Apache held 226,720 net developed acres and 1,421,290 net undeveloped acres
offshore Western Australia. Through AEL and its subsidiaries, Apache also
operates the Harriet Gas Gathering Project, a gas processing and compression
facility with a throughput capacity of 175 MMcf/d, and a 60-mile, 12-inch
offshore pipeline with a throughput capacity of 175 MMcf/d that connects to a
pipeline grid onshore. The Company and the other participants in the East Spar
and Harriet joint ventures are currently building a second 60 mile, 16-inch,
natural gas pipeline from Varanus Island to a connection with the existing
Dampier to Banbury gas pipelines, which is expected to be completed in March
1999. See "1998 Acquisitions and Dispositions" and "Oil and Natural Gas
Marketing."
Other International Operations. Outside of Canada, Egypt and Australia, Apache currently has exploration and production interests offshore the Ivory Coast, and exploration interests in Poland and offshore China.
Apache obtained its first properties in Poland on April 16, 1997 when the Company assumed operatorship and a 50 percent interest in over 5.5 million acres in Poland located near Lublin, southeast of Warsaw, from FX Energy, Inc. (FX Energy). The Company has since acquired additional acreage in Poland, including approximately 1.8 million acres in the Carpathian area near the southern border of Poland and participation in a further 2.275 million acres in the Pomeranian area of northwest Poland, giving Apache interests in 12,038,676 total gross undeveloped acres and 7,494,122 net undeveloped acres as of December 31, 1998. The concessions in Poland include requirements for Apache to drill at least eleven wells and to shoot at least 1,290 miles of seismic data. At year end, two wells were being drilled in Poland, but were abandoned in the first quarter of 1999. Subsequent to year end, Apache and FX Energy entered into an Area of Mutual Interest Agreement, which covers virtually all of Poland, and plan to enter into further exploration and production agreements with the Polish Oil and Gas Company (POGC), the national oil company of Poland. Apache's operations in Poland are headquartered in Warsaw.
Apache is also the operator, with a 50 percent interest, of the Zhao Dong Block in Bohai Bay, offshore China. In 1994 and 1995, discovery wells tested at rates between 1,300 and 4,000 b/d of oil. The Company elected to proceed with the second exploration phase, commencing in May 1996, which involved a commitment to drill two additional exploratory wells. In early 1997, one well tested at rates up to 11,571 b/d
of oil and another tested at rates up to 15,359 b/d. An overall development plan for the C and D Fields in the Zhao Dong Block was submitted to Chinese authorities in late 1997 and is awaiting approval.
In the Ivory Coast, Apache, as operator of the block and holding a 24 percent interest, completed in January 1999 the development of the "Foxtrot" offshore gas field and installed a platform and pipeline to shore. In March 1997, Apache and its partners signed a 10 year take or pay contract to supply approximately 168 Bcf of gas to a power plant in Abidjan at 30 MMcf/d initially, rising to 50 MMcf/d in the third year. Gas deliveries are expected to commence in the second quarter of 1999.
OIL AND NATURAL GAS MARKETING
On October 27, 1995, wholly owned affiliates of each of Apache, Oryx Energy Company and Parker & Parsley Petroleum Company (Parker & Parsley) formed ProEnergy, a Delaware limited liability company. ProEnergy became fully operational on April 1, 1996, and marketed substantially all of its members' domestic natural gas pursuant to member gas purchase agreements having an initial term of 10 years, subject to early termination following specified events. The price of gas purchased by ProEnergy from its members was based upon agreed to published indexes. Effective January 1, 1998, Parker & Parsley withdrew from ProEnergy. As more fully described in "1998 Acquisitions and Dispositions" above, in June 1998, Apache sold its interest in ProEnergy to Cinergy and formed a strategic alliance with Cinergy to market substantially all the Company's natural gas production from North America. ProEnergy will continue to market Apache's North American natural gas production for 10 years, with an option to terminate after six years, under an amended and restated gas purchase agreement effective July 1, 1998. During this period, Apache is generally obligated to deliver most of its North American gas production to Cinergy and, under certain circumstances, may have to make payments to Cinergy if certain gas throughput thresholds are not met.
Separate from its arrangements with Cinergy, Apache is also delivering natural gas under several long-term supply agreements with terms greater than one year. In 1998, Apache delivered an average of 35 MMcf/d under such contracts at an average price of $2.63 per Mcf.
Apache assumed its own U.S. crude oil marketing operations in 1992. Most of Apache's U.S. crude oil production is sold through lease-level marketing to refiners, traders and transporters, generally under 30 day contracts that renew automatically until canceled. Oil produced from Canadian properties is sold to crude oil purchasers or refiners at market prices, which depend on worldwide crude prices adjusted for transportation and crude quality. Natural gas produced from Canadian properties is sold to major aggregators of natural gas, gas marketers and direct users under long-term and short-term contracts. The oil and gas contracts provide for sales at specified prices, or at prices that are subject to change due to market conditions.
The Company diversifies the markets for its Canadian gas production not presently committed to Cinergy by selling directly or indirectly to customers through aggregators and brokers in the United States and Canada. Apache transports natural gas via the Company's firm transportation contracts to California (12 MMcf/d) and to the Province of Ontario, Canada (four MMcf/d) through end-users' firm transportation contracts. Pursuant to an agreement entered into in 1994, the Company is also selling five MMcf/d of natural gas to the Hermiston Cogeneration Project, located in the Pacific Northwest of the United States. In 1996, the Company entered into an agreement with Westcoast Gas Services, Inc. for the sale of 5,000 MMBtu/d for delivery in the United States for a 10 year term.
In Australia, the Company entered into several gas sales contracts during 1998, bringing its total to 16 contracts, with terms of four to 12 years, to deliver 311 Bcf of AEL's gas from its Harriet and East Spar fields for mining, power generation, nickel refining, ammonia production and other industrial and domestic uses. Under these contacts AEL is required to deliver its gas at contract rates of approximately 60 MMcf/day increasing to 92 MMcf/day by the year 2000, with take or pay provisions, net to AEL, of approximately 20 Bcf/year increasing to 23 Bcf/year by the year 2000. Apache operates both the Harriet and the East Spar Joint Ventures, holding a 60 percent interest in Harriet and a 45 percent interest in East Spar.
AEL marketed all oil and natural gas liquids produced from its interests in the Harriet and East Spar fields during 1998 through a contract with Mitsui Oil (Asia) Pty. Ltd. Pricing under the contract in 1998
represented a fixed premium to the quoted market prices of Tapis crude oil, with payment made in U.S. dollars. In 1998, the weighted average realized price based on regional production was $13.07 per barrel. In January 1999, the Mitsui contract terminated and was replaced by a similar contract with Marubeni International Petroleum Company.
In Egypt, oil from the Qarun Block is delivered by pipeline to tanks owned by the Company and its partners in the Qarun Concession at the Dashour pumping station northeast of the Qarun Block or by truck to the Tebbin refinery south of Alexandria, Egypt. At the discretion of the operator of the pipelines, oil from the Qarun Block is put into the two 42-inch diameter SUMED pipelines, which transport significant quantities of Egyptian and other crude oil from the Gulf of Suez to Sidi Kherir, west of Alexandria, Egypt, on the Mediterranean Coast. All Qarun and Khalda crude oil is currently sold to EGPC. In 1996, the Company and its partners in the Khalda Block entered into a take or pay contract with EGPC, which obligates EGPC to pay for 75 percent of 200 MMcf/d of future production of gas from the Khalda Block. Sales of gas under the contract are expected to begin in May 1999 upon completion of a gas pipeline from the Khalda Block. In late 1997, the same sellers entered into a supplement to the contract with EGPC to sell an additional 50 MMcf/d through a southern gas line being constructed by the Company and its partners from the Khalda Block to a point near the Qarun Block to tie into an existing gas pipeline.
OIL AND NATURAL GAS PRICES
Natural gas prices remained volatile during 1998, with Apache's realized prices ranging from $2.08 per Mcf in July to $1.73 per Mcf in September. Fluctuations are largely due to market perceptions about natural gas supply and demand. Apache's average realized gas price of $1.92 per Mcf for 1998 was down 16 percent from the prior-year average of $2.28 per Mcf, and its 1997 average realized natural gas price was 13 percent higher than the 1996 average price of $2.02 per Mcf.
As a result of minimum price contracts which escalate at an average of 80 percent of the Australian consumer price index, AEL's natural gas production in Western Australia is not subject to the same degree of price volatility as Apache's U.S. and Canadian gas production; however, natural gas sales under such Australian minimum price contracts represent less than two percent of the Company's total natural gas sales at the end of 1998. Total Australian gas sales in 1998, including long-term contracts and spot sales averaged $1.51 per Mcf, down 15 percent from the 1997 average of $1.78 per Mcf due to devaluation of the Australian dollar.
In Egypt, all oil production from the Khalda and Qarun Blocks is currently sold to EGPC on a spot basis at a "Western Desert" price, which is applied to virtually all production from the area and is announced periodically by EGPC. In 1998, the average price was $12.57 per barrel. Discussions with EGPC regarding the possibility of exporting Qarun oil production are continuing. Once gas sales from the Khalda Block commence, the gas is expected to be sold for a price which, on a Btu basis, is equivalent to 85 percent of the price of Suez Blend crude oil, FOB Mediterranean.
Oil prices remained subject to unpredictable political and economic forces during 1998 and experienced fluctuations similar to those seen in natural gas prices for the year, but showing a general downward trend. Apache believes that oil prices will continue to fluctuate in response to changes in the policies of the Organization of Petroleum Exporting Countries (OPEC), demand from Asian countries, events in the Middle East and other factors associated with the world political and economic environment. As a result of the many uncertainties associated with levels of production maintained by OPEC and other oil producing countries, the availabilities of worldwide energy supplies and the competitive relationships and consumer perceptions of various energy sources, the Company is unable to predict what changes will occur in crude oil and natural gas prices.
In 1998, Apache's realized worldwide crude oil price ranged from $15.11 per
barrel in January to $9.42 per barrel in December. The average crude oil price
of $12.66 per barrel in 1998 was down 34 percent from the average price of
$19.20 per barrel in 1997, and 39 percent lower than the average price of $20.84
per barrel in 1996. The Company's average crude oil price for its Australian
production was $13.07 per barrel in 1998, 36 percent less than the average price
in 1997.
From time to time, Apache buys or sells contracts to hedge a limited portion of its future oil and gas production against exposure to spot market price changes. See Note 9 to the Company's consolidated financial statements under Item 8 below.
The Company's business has been and will continue to be affected by future worldwide changes in oil and gas prices and the relationship between the prices of oil and gas. No assurance can be given as to the trend in, or level of, future oil and gas prices.
FULL COST CEILING TEST
Under the full cost accounting rules of the Securities and Exchange Commission (SEC), the Company reviews the carrying value of its proved oil and gas properties each quarter on a country-by-country basis. Under these rules, capitalized costs of proved oil and gas properties, net of accumulated depreciation, depletion and amortization and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent, plus the lower of cost or fair value of unproved properties included in the costs being amortized, net of related tax effects. These rules generally require pricing future oil and gas production at the unescalated oil and gas prices in effect at the end of each fiscal quarter and require a write-down if the "ceiling" is exceeded, even if prices declined for only a short period of time. The Company recorded a $243.2 million pre-tax ($158.1 million net of tax) non-cash write-down of the carrying value of the Company's U.S. proved oil and gas properties as of December 31, 1998, due to these ceiling test limitations. If oil and gas prices deteriorate from the Company's year-end realized prices, it is likely that additional write-downs will occur in 1999. Write-downs required by these rules do not impact cash flow from operating activities.
EFFECT OF VOLATILE PRICES
The Company continually analyzes forecasts and updates its estimates of energy prices for its internal use in planning, budgeting, and estimating and valuing reserves. The Company's future financial condition and results of operations will depend upon the prices received for the Company's oil and natural gas production and the costs of acquiring, finding, developing and producing reserves. Prices for oil and natural gas are subject to fluctuations in response to relatively minor changes in supply, market uncertainty and a variety of additional factors that are beyond the control of the Company. These factors include worldwide political instability (especially in the Middle East and other oil-producing regions), the foreign supply of oil and gas, the price of foreign imports, the level of drilling activity, the level of consumer product demand, government regulations and taxes, the price and availability of alternative fuels and the overall economic environment. A substantial or extended decline in oil and gas prices would have a material adverse effect on the Company's financial position, results of operations, quantities of oil and gas that may be economically produced and access to capital. In addition, the sale of the Company's oil and gas production depends on a number of factors beyond the Company's control, including the availability and capacity of transportation and processing facilities. Oil and natural gas prices have historically been and are likely to continue to be volatile. Such volatility makes it difficult to estimate with precision the value of producing properties in acquisitions and to budget and project the return on exploration and development projects involving the Company's oil and gas properties. In addition, unusually volatile prices often disrupt the market for oil and gas properties, as buyers and sellers have more difficulty agreeing on the purchase price of properties.
RESERVES; RATES OF PRODUCTION; DEVELOPMENT EXPENDITURES; CASH FLOW
There are numerous uncertainties inherent in estimating quantities of oil
and natural gas reserves of any category and in projecting future rates of
production and timing of development expenditures, which underlie such reserve
estimates, including many factors beyond the control of the Company. Reserve
data represents only estimates. In addition, the estimates of future net cash
flows from proved reserves of the Company and the present value thereof are
based upon various assumptions about future production levels, prices and costs
that may prove to be incorrect over time (see below). Any significant variance
from the assumptions could result in the actual quantity of the Company's
reserves and future net cash flows therefrom being materially different from the
estimates. In addition, the Company's estimated reserves may be subject to
downward or
upward revision based upon production history, results of future exploration and development, prevailing oil and gas prices, operating and development costs, and other factors. The rate of production from oil and gas properties declines as reserves are depleted. Except to the extent that the Company acquires additional properties containing proved reserves, conducts successful exploration and development activities or, through engineering studies, identifies additional behind-pipe zones or secondary recovery reserves, the proved reserves of the Company will decline materially as reserves are produced. Future oil and gas production is, therefore, highly dependent upon the Company's level of success in acquiring or finding additional reserves.
GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY
The Company's exploration, production and marketing operations are regulated extensively at the federal, state and local levels, as well as by other countries in which the Company does business. Oil and gas exploration, development and production activities are subject to various laws and regulations governing a wide variety of matters. For example, hydrocarbon-producing states have statutes or regulations addressing conservation practices and the protection of correlative rights, and such regulations may affect Apache's operations and limit the quantity of hydrocarbons Apache may produce and sell. Other regulated matters include marketing, pricing, transportation, and valuation of royalty payments.
At the U.S. federal level, the Federal Energy Regulatory Commission (FERC) regulates interstate transportation of natural gas under the Natural Gas Act. Effective January 1, 1993, the Natural Gas Wellhead Decontrol Act deregulated natural gas prices for all "first sales" of natural gas, which includes all sales by Apache of its own production. As a result, all sales of the Company's natural gas produced in the U.S. may be sold at market prices, unless otherwise committed by contract.
Apache's gas sales are affected by regulation of intrastate and interstate gas transportation. In an attempt to promote competition, the FERC has issued a series of orders, which have altered significantly the marketing and transportation of natural gas. The effect of these orders has been to enable the Company to market its natural gas production to purchasers other than the interstate pipelines located in the vicinity of its producing properties. The Company believes that these changes have generally improved the Company's access to transportation. To date, Apache has not experienced any material adverse effect on its gas marketing activities as a result of these FERC orders; however, the Company cannot predict what new regulations may be adopted by the FERC and other regulatory authorities, or what effect subsequent regulations may have on its future gas marketing activities.
ENVIRONMENTAL MATTERS
Apache, as an owner or lessee and operator of oil and gas properties, is subject to various federal, provincial, state, local and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations, subject the lessee to liability for pollution damages, and require suspension or cessation of operations in affected areas.
Apache maintains insurance coverage, which it believes is customary in the industry, although it is not fully insured against all environmental risks. The Company is not aware of any environmental claims existing as of December 31, 1998, which would have a material impact upon the Company's financial position or results of operations.
Apache has made and will continue to make expenditures in its efforts to comply with these requirements, which it believes are necessary business costs in the oil and gas industry. The Company has established policies for continuing compliance with environmental laws and regulations, including regulations applicable to its operations in Canada, Australia and other countries. Apache also has established operational procedures and training programs designed to minimize the environmental impact of its field facilities. The costs incurred by these policies and procedures are inextricably connected to normal operating expenses such that the Company is unable to separate the expenses related to environmental matters; however, the Company does not believe any such additional expenses are material to its financial position or results of operations.
Although environmental requirements have a substantial impact upon the energy industry, generally these requirements do not appear to affect Apache any differently, or to any greater or lesser extent, than other companies in the industry. Apache does not believe that compliance with federal, state, local or foreign country provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, will have a material adverse effect upon the capital expenditures, earnings or competitive position of the Company or its subsidiaries; however, there is no assurance that changes in or additions to laws or regulations regarding the protection of the environment will not have such an impact.
COMPETITION
The oil and gas industry is highly competitive. Because oil and gas are fungible commodities, the principal form of competition with respect to product sales is price competition. Apache strives to maintain the lowest finding and production costs possible to maximize profits.
As an independent oil and gas company, Apache frequently competes for reserve acquisitions, exploration leases, licenses, concessions and marketing agreements against companies with financial and other resources substantially larger than Apache possesses. Moreover, many competitors have established strategic long-term positions and maintain strong governmental relationships in countries in which the Company may seek new entry. Apache expects this high degree of competition to continue.
INSURANCE
Exploration for and production of oil and natural gas can be hazardous, involving unforeseen occurrences such as blowouts, cratering, fires and loss of well control, which can result in damage to or destruction of wells or production facilities, injury to persons, loss of life, or damage to property or the environment. The Company maintains insurance against certain losses or liabilities arising from its operations in accordance with customary industry practices and in amounts that management believes to be prudent; however, insurance is not available to the Company against all operational risks.
HEDGING
To the extent that the Company engages in hedging activities, it may be prevented from realizing the benefits of price increases above the levels of the hedges. In addition, the Company is subject to basis risk when it engages in hedging transactions, particularly where transportation constraints restrict the Company's ability to deliver oil and gas volumes to the delivery point to which the hedging transaction is indexed.
ACQUISITION RISKS
The Company from time to time acquires oil and gas properties. Although the Company performs a review of the acquired properties that it believes is consistent with industry practices, such reviews are inherently incomplete. It generally is not feasible to review in depth every individual property involved in each acquisition. Ordinarily the Company will focus its review efforts on the higher-value properties and will sample the remainder. However, even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as ground water contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the Company often assumes certain environmental and other risks and liabilities in connection with acquired properties. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and actual future production rates and associated costs with respect to acquired properties, and actual results may vary substantially from those assumed in the estimates (see above). In addition, there can be no assurance that acquisitions will not have an adverse effect upon the Company's operating results, particularly during the periods in which the operations of acquired businesses are being integrated into the Company's ongoing operations.
GENERAL ECONOMIC CONDITIONS
Virtually all of the Company's operations are subject to the risks and uncertainties of adverse changes in general economic conditions (domestically, in specific regions of the United States and Canada, and internationally), the outcome of pending and/or potential legal or regulatory proceedings, changes in environmental, tax, labor and other laws and regulations to which the Company is subject, and the condition of the capital markets utilized by the Company to finance its operations.
RISKS OF NON-U.S. OPERATIONS
The Company's non-U.S. oil and natural gas exploration, development and production activities are subject to political and economic uncertainties (including but not limited to changes, sometimes frequent or marked, in governmental energy policies or the personnel administering them), expropriation of property, cancellation or modification of contract rights, foreign exchange restrictions, currency fluctuations, royalty and tax increases and other risks arising out of foreign governmental sovereignty over the areas in which the Company's operations are conducted, as well as risks of loss due to civil strife, acts of war, guerrilla activities and insurrection. These risks may be higher in the developing countries in which the Company conducts such activities. Consequently, the company's non-U.S. exploration, development and production activities may be substantially affected by factors beyond the Company's control, any of which could materially adversely affect the Company's financial position or results of operations. Furthermore, in the event of a dispute arising from non-U.S. operations, the Company may be subject to the exclusive jurisdiction of courts outside the U.S. or may not be successful in subjecting non-U.S. persons to the jurisdiction of the courts in the U.S., which could adversely affect the outcome of such dispute.
EMPLOYEES
On December 31, 1998, Apache had 1,281 employees.
OFFICES
Apache's principal executive offices are located at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. At year-end 1998, the Company maintained regional exploration and production offices in Tulsa, Oklahoma; Houston, Texas; Calgary, Alberta; Cairo, Egypt; Perth, Western Australia; Beijing, China; Abidjan, Cote d' Ivoire; and Warsaw, Poland.
ITEM 2. PROPERTIES
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
Acreage
The undeveloped and developed acreage including both domestic leases and international production and exploration rights that Apache held as of December 31, 1998, are as follows:
UNDEVELOPED ACREAGE DEVELOPED ACREAGE
----------------------- ---------------------
GROSS NET GROSS NET
ACRES ACRES ACRES ACRES
---------- ---------- --------- ---------
GULF
Louisiana.............................. 180,047 102,800 267,808 142,541
Texas.................................. 145,529 64,313 322,799 172,892
---------- ---------- --------- ---------
Total........................ 325,576 167,113 590,607 315,433
---------- ---------- --------- ---------
MIDCONTINENT
Arkansas............................... 3,983 3,046 4,625 3,354
Kansas................................. 200 93 -- --
Louisiana.............................. 11,809 9,535 48,820 33,823
Michigan............................... 5,052 4,022 -- --
Oklahoma............................... 138,613 51,650 492,790 192,515
Pennsylvania........................... -- -- 796 38
Texas.................................. 70,821 44,906 136,998 70,708
---------- ---------- --------- ---------
Total........................ 230,478 113,252 684,029 300,438
---------- ---------- --------- ---------
WESTERN
Alaska................................. 14,262 -- -- --
Colorado............................... 13,974 12,228 10,979 10,715
Illinois............................... 140 56 -- --
New Mexico............................. 89,746 47,905 101,780 53,475
Ohio................................... 21 11 -- --
Texas.................................. 131,081 62,099 253,626 183,116
Utah................................... 140 35 60 15
Wyoming................................ 60,040 52,968 1,160 291
---------- ---------- --------- ---------
Total........................ 309,404 175,302 367,605 247,612
---------- ---------- --------- ---------
Total United States.......... 865,458 455,667 1,642,241 863,483
---------- ---------- --------- ---------
INTERNATIONAL
Australia.............................. 3,269,200 1,421,290 425,280 226,720
Canada................................. 190,632 137,537 303,016 235,183
China.................................. 1,554,930 777,510 5,911 1,448
Egypt.................................. 26,197,294 12,811,058 842,863 468,143
Ivory Coast............................ 157,258 62,903 37,312 8,955
Poland................................. 12,038,676 7,494,122 -- --
---------- ---------- --------- ---------
Total International.......... 43,407,990 22,704,420 1,614,382 940,449
---------- ---------- --------- ---------
Total Company................ 44,273,448 23,160,087 3,256,623 1,803,932
========== ========== ========= =========
|
Productive Oil and Gas Wells
The number of productive oil and gas wells, operated and non-operated, in which Apache had an interest as of December 31, 1998, is set forth below.
GAS OIL
------------- -------------
GROSS NET GROSS NET
----- ----- ----- -----
Midcontinent................................................ 1,745 644 515 141
Western..................................................... 260 143 3,635 1,855
Gulf........................................................ 405 260 560 394
Canada...................................................... 680 425 367 130
Egypt....................................................... 21 8 137 71
Australia................................................... 7 4 20 11
----- ----- ----- -----
Total............................................. 3,118 1,484 5,234 2,602
===== ===== ===== =====
|
Gross Wells Drilled
The following table sets forth the number of gross exploratory and gross development wells drilled in the last three fiscal years in which the Company participated. The number of wells drilled refers to the number of wells commenced at any time during the respective fiscal year. "Productive" wells are either producing wells or wells capable of commercial production. At December 31, 1998, the Company was participating in 14 wells in the U.S., 14 Canadian wells, 14 Egyptian wells, three Australian wells and two Polish wells in the process of drilling.
EXPLORATORY DEVELOPMENTAL
------------------------ ------------------------
PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
---------- --- ----- ---------- --- -----
1998
United States.................................. 20 16 36 163 34 197
Canada......................................... 17 12 29 30 7 37
Egypt.......................................... 11 24 35 27 5 32
Australia...................................... 7 8 15 -- -- --
Other International............................ -- 1 1 1 -- 1
-- --- --- --- -- ---
Total................................ 55 61 116 221 46 267
== === === === == ===
1997
United States.................................. 27 25 52 234 32 266
Canada......................................... 19 14 33 41 7 48
Egypt.......................................... 7 19 26 23 4 27
Australia...................................... 3 6 9 6 1 7
Other International............................ 1 2 3 1 -- 1
-- --- --- --- -- ---
Total................................ 57 66 123 305 44 349
== === === === == ===
1996
United States.................................. 28 33 61 201 31 232
Canada......................................... 23 25 48 27 2 29
Egypt.......................................... 7 4 11 12 -- 12
Australia...................................... 4 6 10 1 1 2
Other International............................ -- 1 1 -- -- --
-- --- --- --- -- ---
Total................................ 62 69 131 241 34 275
== === === === == ===
|
Net Wells Drilled
The following table sets forth, for each of the last three fiscal years, the number of net exploratory and net developmental wells drilled by Apache.
EXPLORATORY DEVELOPMENTAL
------------------------- -------------------------
PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
---------- ---- ----- ---------- ---- -----
1998
United States................................ 9.9 11.1 21.0 64.0 18.8 82.8
Canada....................................... 16.2 11.0 27.2 28.3 6.1 34.4
Egypt........................................ 5.6 13.5 19.1 11.9 2.8 14.7
Australia.................................... 3.5 3.4 6.9 -- -- --
Other International.......................... -- .2 .2 .2 -- .2
---- ---- ---- ----- ---- -----
Total.............................. 35.2 39.2 74.4 104.4 27.7 132.1
==== ==== ==== ===== ==== =====
1997
United States................................ 11.5 11.9 23.4 107.5 19.0 126.5
Canada....................................... 14.5 10.1 24.6 29.0 6.0 35.0
Egypt........................................ 3.7 12.3 16.0 14.4 2.0 16.4
Australia.................................... 1.0 1.0 2.0 1.8 .2 2.0
Other International.......................... .5 1.4 1.9 .5 -- .5
---- ---- ---- ----- ---- -----
Total.............................. 31.2 36.7 67.9 153.2 27.2 180.4
==== ==== ==== ===== ==== =====
1996
United States................................ 17.2 22.8 40.0 77.9 19.1 97.0
Canada....................................... 18.8 21.5 40.3 24.1 1.4 25.5
Egypt........................................ 3.2 3.0 6.2 9.0 -- 9.0
Australia.................................... 1.1 1.5 2.6 .2 .1 .3
Other International.......................... -- .4 .4 -- -- --
---- ---- ---- ----- ---- -----
Total.............................. 40.3 49.2 89.5 111.2 20.6 131.8
==== ==== ==== ===== ==== =====
|
Production and Pricing Data
The following table describes, for each of the last three fiscal years, oil, natural gas liquids (NGL) and gas production for the Company, average production costs (excluding severance taxes) and average sales prices.
PRODUCTION AVERAGE SALES PRICE
--------------------------- AVERAGE ---------------------------------
OIL NGL GAS PRODUCTION OIL NGL GAS
YEAR ENDED DECEMBER 31, (MBBLS) (MBBLS) (MMCF) COST PER BOE (PER BBL) (PER BBL) (PER MCF)
----------------------- ------- ------- ------- ------------ --------- --------- ---------
1998........................ 26,611 1,052 215,389 $2.88 $12.66 $ 7.94 $1.92
1997........................ 24,291 843 222,237 3.07 19.20 14.08 2.28
1996........................ 19,465 713 205,305 3.43 20.84 16.41 2.02
|
Estimated Reserves and Reserve Value Information
The following information relating to estimated reserve quantities, reserve values and discounted future net revenues is derived from, and qualified in its entirety by reference to, the more complete reserve and revenue information and assumptions included in the Company's Supplemental Oil and Gas Disclosures under Item 8 below. The Company's estimates of proved reserve quantities of its U.S., Canadian and international properties have been subject to review by Ryder Scott Company Petroleum Engineers. In 1996, the proved reserve quantities of certain of the Company's Egyptian properties were reviewed by Netherland, Sewell & Associates, Inc. There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve information represents estimates only and should not be construed as being exact.
The following table sets forth the Company's estimated proved developed and undeveloped reserves as of December 31, 1998, 1997 and 1996:
OIL, NGL
NATURAL AND
GAS CONDENSATE
(BCF) (MMBBLS)
------- ----------
1998
Developed................................................... 1,450.1 178.0
Undeveloped................................................. 722.1 73.0
------- -----
Total............................................. 2,172.2 251.0
======= =====
1997
Developed................................................... 1,554.3 203.1
Undeveloped................................................. 317.5 70.7
------- -----
Total............................................. 1,871.8 273.8
======= =====
1996
Developed................................................... 1,435.3 183.2
Undeveloped................................................. 190.0 52.1
------- -----
Total............................................. 1,625.3 235.3
======= =====
|
The following table sets forth the estimated future value of all the Company's proved reserves, and proved developed reserves, as of December 31, 1998, 1997 and 1996. Future reserve values are based on year-end prices except in those instances where the sale of gas and oil is covered by contract terms providing for determinable escalations. Operating costs, production and ad valorem taxes, and future development costs are based on current costs with no escalations.
PRESENT VALUE OF ESTIMATED
FUTURE NET REVENUES
ESTIMATED FUTURE BEFORE INCOME TAXES
NET REVENUES (DISCOUNTED AT 10 PERCENT)
----------------------- ---------------------------
PROVED PROVED
DECEMBER 31, PROVED DEVELOPED PROVED DEVELOPED
------------ ---------- ---------- ------------ ------------
(IN THOUSANDS)
1998................................. $3,994,612 $2,793,698 $2,395,888 $1,764,887
1997................................. 5,347,892 4,301,768 3,272,618 2,728,747
1996................................. 7,936,924 6,713,252 4,568,475 4,041,065
|
At December 31, 1998, estimated future net revenues expected to be received from all the Company's proved reserves and proved developed reserves were as follows:
PROVED
DECEMBER 31, PROVED DEVELOPED
------------ ---------- ----------
(IN THOUSANDS)
1999........................................................ $ 394,777 $ 441,946
2000........................................................ 431,644 400,389
2001........................................................ 446,532 305,005
Thereafter.................................................. 2,721,659 1,646,358
---------- ----------
Total............................................. $3,994,612 $2,793,698
========== ==========
|
The Company believes that no major discovery or other favorable or adverse event has occurred since December 31, 1998, which would cause a significant change in the estimated proved reserves reported herein. The estimates above are based on year-end pricing in accordance with the SEC guidelines and do not reflect current prices. Since January 1, 1999, no oil or gas reserve information has been filed with, or included in any report to, any U.S. authority or agency other than the SEC and the Energy Information Administration
(EIA). The basis of reporting reserves to the EIA for the Company's reserves is identical to that set forth in the foregoing table.
Title to Interests
The Company believes that its title to the various interests set forth above is satisfactory and consistent with the standards generally accepted in the oil and gas industry, subject only to immaterial exceptions which do not detract substantially from the value of the interests or materially interfere with their use in the Company's operations. The interests owned by the Company may be subject to one or more royalty, overriding royalty and other outstanding interests customary in the industry. The interests may additionally be subject to obligations or duties under applicable laws, ordinances, rules, regulations and orders of arbitral or governmental authorities. In addition, the interests may be subject to burdens such as net profits interests, liens incident to operating agreements and current taxes, development obligations under oil and gas leases and other encumbrances, easements and restrictions, none of which detract substantially from the value of the interests or materially interfere with their use in the Company's operations.
ITEM 3. LEGAL PROCEEDINGS
The information set forth under the caption "Litigation" in Note 10 to the Company's financial statements under Item 8 below is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of security holders during the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Apache's common stock, par value $1.25 per share, is traded on the New York Stock Exchange and the Chicago Stock Exchange under the symbol APA. The table below provides certain information regarding Apache common stock for 1998 and 1997. Prices shown are from the New York Stock Exchange Composite Transactions Reporting System.
1998 1997
-------------------------- --------------------------
PRICE RANGE PRICE RANGE
-------------- DIVIDENDS -------------- DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
------ ----- --------- ------ ----- ---------
First Quarter.............................. $38 3/4 $31 3/16 $.07 $39 3/8 $31 1/4 $.07
Second Quarter............................. 38 1/8 30 3/8 $.07 35 5/8 30 1/8 $.07
Third Quarter.............................. 32 3/8 22 1/2 $.07 42 7/8 32 1/16 $.07
Fourth Quarter............................. 29 5/16 21 3/8 $.07 45 1/16 32 11/16 $.07
|
The closing price per share of Apache common stock, as reported on the New York Stock Exchange Composite Transactions Reporting System for February 26, 1999, was $19.9375. At December 31, 1998, there were 97,769,122 shares of Apache common stock outstanding, held by approximately 10,000 shareholders of record and 45,000 beneficial owners.
The Company has paid cash dividends on its common stock for 128 consecutive quarters through December 31, 1998, and expects to continue the payment of dividends at current levels, although future dividend payments will depend upon the Company's level of earnings, financial requirements and other relevant factors.
In December 1995, the Company declared a dividend of one right (a Right) for each share of Apache common stock outstanding on January 31, 1996. Each Right entitles the registered holder to purchase from the Company one ten-thousandth (1/10,000) of a share of Series A Preferred Stock at a price of $100 per one ten-thousandth of a share, subject to adjustment. The Rights are exercisable 10 calendar days following a
public announcement that certain persons or groups have acquired 20 percent or more of the outstanding shares of Apache common stock or 10 business days following commencement of an offer for 30 percent or more of the outstanding shares of Apache common stock. In addition, if the Company engages in certain business combinations or a 20 percent shareholder engages in certain transactions with the Company, the Rights become exercisable for Apache common stock or common stock of the corporation acquiring the Company (as the case may be) at 50 percent of the then-market price. Any Rights that are or were beneficially owned by a person who has acquired 20 percent or more of the outstanding shares of Apache common stock and who engages in certain transactions or realizes the benefits of certain transactions with the Company will become void. The Company may redeem the Rights at $.01 per Right at any time until 10 business days after public announcement that a person has acquired 20 percent or more of the outstanding shares of Apache common stock. The Rights will expire on January 31, 2006, unless earlier redeemed by the Company. Unless the Rights have been previously redeemed, all shares of Apache common stock issued by the Company after January 31, 1996 will include Rights. Unless and until the Rights become exercisable, they will be transferred with and only with the shares of Apache common stock.
In August 1998, the Company issued 100,000 shares of 5.68 percent Series B Cumulative Preferred Stock (the Series B Preferred Stock) in the form of one million depositary shares, each representing one-tenth (1/10) of a share of Series B Preferred Stock. Neither the shares of Series B Preferred Stock nor the depositary shares are traded on any stock exchange. These shares are not convertible into common equity.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and its consolidated subsidiaries for each of the years in the five-year period ended December 31, 1998, which information has been derived from the Company's audited financial statements. Apache's previously reported data for 1994 has been restated to reflect the merger with DEKALB in May 1995 under the pooling of interests method of accounting. This information should be read in connection with, and is qualified in its entirety by, the more detailed information in the Company's financial statements under Item 8 below.
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998(1) 1997(2) 1996(3) 1995(4) 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Total revenues................... $ 875,715 $1,176,273 $ 977,151 $ 750,702 $ 592,626
Net income (loss)................ (129,387) 154,896 121,427 20,207 45,583
Income (loss) attributable to
common stock................... (131,391) 154,896 121,427 20,207 45,583
Net income (loss) per common
share
Basic.......................... (1.34) 1.71 1.42 .28 .65
Diluted........................ (1.34) 1.65 1.38 .28 .65
Cash dividends per common
share(5)....................... .28 .28 .28 .28 .28
BALANCE SHEET DATA
Working capital (deficit)........ $ (78,804) $ 4,546 $ (41,501) $ (22,013) $ (3,203)
Total assets..................... 3,996,062 4,138,633 3,432,430 2,681,450 2,036,627
Long-term debt................... 1,343,258 1,501,380 1,235,706 1,072,076 719,033
Shareholders' equity............. 1,801,833 1,729,177 1,518,516 1,091,805 891,087
Common shares outstanding at end
of year........................ 97,769 93,305 90,059 77,379 69,666
|
For a discussion of significant acquisitions, reference is made to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and to Note 2 to the Company's consolidated financial statements under Item 8 below.
(1) Includes the results of the acquisitions of certain subsidiaries and oil and gas properties from Novus after December 18, 1998.
(2) Includes financial data after November 20, 1997, relating to the acquisition from Mobil of three companies owning interests in certain oil and gas properties and production facilities offshore Western Australia (the Ampolex Group Transaction.)
(3) Includes financial data after May 20, 1996, for Apache PHN Company, Inc.
(Phoenix, formerly known as The Phoenix Resource Companies, Inc.)
(4) Includes the results of the acquisitions of certain oil and gas properties from Texaco Exploration and Production, Inc. (Texaco) and Aquila Energy Resources Corporation (Aquila) after March 1, 1995 and September 1995, respectively, and the sale of a substantial portion of the Company's Rocky Mountain properties in September 1995.
(5) No cash dividends were paid on outstanding DEKALB common stock in 1995 and 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In anticipation of lower commodity prices, Apache entered 1998 with a primary objective being to strengthen its balance sheet in order to take advantage of lower cost drilling and acquisition opportunities that accompany cyclical downturns in product prices. To accomplish this, high cost properties were sold, drilling capital was curtailed, subordinated debentures were converted into common equity, and non-convertible preferred stock and public debt were issued. As a result of these efforts during 1998, Apache reduced debt by $160 million, from 47 percent to 43 percent of capitalization; the ratio would have been reduced to 41 percent absent the non-cash, full-cost ceiling write-down. Debt maturities were also lengthened to an average of 26 years with approximately three percent of Apache's total debt due over the next three years. As a result, Apache is in its strongest financial position ever to take advantage of opportunities brought about by the current industry downturn.
Apache's results of operations and financial position for 1998 were also significantly impacted by the following factors:
Additional Depreciation, Depletion and Amortization (DD&A) Expense -- Low oil and gas prices resulted in a non-cash full-cost ceiling write-down of $158.1 million after-tax ($243.2 million pre-tax). There were no such charges in 1997 and 1996.
Commodity Prices -- Apache's average realized oil price decreased $6.54 per barrel from $19.20 per barrel in 1997 to $12.66 per barrel in 1998, reducing revenues by $158.9 million. The average realized price for natural gas decreased $.36 per Mcf from $2.28 per Mcf in 1997 to $1.92 per Mcf in 1998, negatively impacting revenues by $78.6 million.
RESULTS OF OPERATIONS
Apache reported a 1998 loss attributable to common stock of $131.4 million as opposed to 1997 income attributable to common stock of $154.9 million. The 1998 loss resulted from a full-cost ceiling write-down at year end. Results for 1998 were further hampered by sharp declines in oil and gas prices. Basic net income (loss) per common share was $(1.34) for 1998, as compared to $1.71 in 1997. Income attributable to common stock increased $33.5 million in 1997 from $121.4 million in 1996. Basic net income per common share increased 20 percent in 1997 from $1.42 in 1996. Diluted net income per common share was $1.65 for 1997, 20 percent above 1996. The increase from 1996 to 1997 was primarily due to higher oil and gas production, higher natural gas prices and lower operating costs per unit of production.
Revenues declined $300.6 million in 1998, driven by a 23 percent decrease in oil and gas production revenues. The decrease in oil and gas production revenues resulted from a 34 percent decrease in the average realized oil price, a 16 percent decrease in the average realized price for natural gas and a three percent decrease in gas production. Crude oil, including natural gas liquids, contributed 45 percent and natural gas contributed 55 percent of oil and gas production revenues during 1998. Revenues increased 20 percent in 1997 to $1.2 billion from $977.2 million in 1996. In 1997, crude oil and natural gas liquids contributed 49 percent and natural gas contributed 51 percent of oil and gas production revenues.
The table below presents, for the years indicated, the revenues, production and average prices received from sales of natural gas, oil and natural gas liquids.
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
Revenues (in thousands):
Natural gas............................................... $413,870 $505,604 $415,736
Oil....................................................... 336,813 466,291 405,724
Natural gas liquids....................................... 8,355 11,878 11,704
-------- -------- --------
Total............................................. $759,038 $983,773 $833,164
======== ======== ========
Natural Gas Volume -- Mcf per day:
United States............................................. 432,059 492,594 472,171
Canada.................................................... 105,871 89,699 74,598
Egypt..................................................... 1,554 563 302
Australia................................................. 50,624 26,016 13,869
-------- -------- --------
Total............................................. 590,108 608,872 560,940
======== ======== ========
Average Natural Gas price -- Per Mcf:
United States............................................. $ 2.11 $ 2.47 $ 2.17
Canada.................................................... 1.36 1.33 1.09
Egypt..................................................... 1.91 2.94 3.21
Australia................................................. 1.51 1.78 1.96
Total............................................. 1.92 2.28 2.02
Oil Volume -- Barrels per day:
United States............................................. 34,067 40,638 40,600
Canada.................................................... 2,090 2,120 1,969
Egypt..................................................... 27,911 19,372 8,295
Australia................................................. 8,838 4,417 2,318
-------- -------- --------
Total............................................. 72,906 66,547 53,182
======== ======== ========
Average Oil Price -- Per barrel:
United States............................................. $ 12.63 $ 19.31 $ 20.67
Canada.................................................... 12.55 19.27 20.84
Egypt..................................................... 12.57 18.65 21.29
Australia................................................. 13.07 20.51 22.33
Total............................................. 12.66 19.20 20.84
NGL Volume -- Barrels per day:
United States............................................. 2,267 1,684 1,308
Canada.................................................... 616 627 641
-------- -------- --------
Total............................................. 2,883 2,311 1,949
======== ======== ========
Average NGL Price -- Per barrel:
United States............................................. $ 8.38 $ 14.50 $ 17.23
Canada.................................................... 6.32 12.98 14.73
Total............................................. 7.94 14.08 16.41
|
Natural gas revenues decreased by 18 percent from 1997 to 1998 due to lower natural gas prices and production. The average realized gas price received in 1998 was $1.92 per Mcf, 16 percent lower than 1997, negatively affecting revenue by $78.6 million. The Company periodically engages in hedging activities, including fixed-price physical contracts and financial contracts. Apache realized gains from open hedging positions favorably impacting the gas price by $.01 per Mcf in 1998. Gains under long-term fixed-price physical contracts increased the gas price by $.05 per Mcf in 1998. Prices declined in the United States due to
unfavorable market conditions. Natural gas prices in Australia declined 15 percent from 1997 resulting from the devaluation of the Australian dollar.
Natural gas production for the United States decreased 12 percent from 1997 to 1998 due to the impact of property sales in the Gulf and Midcontinent regions, tropical storms in the Gulf of Mexico and natural depletion. In Australia, natural gas production increased 95 percent driven by a full year of incremental production from properties acquired in the year-end 1997 Ampolex Group Transaction. The 18 percent uplift in Canadian production resulted from development activity and Alberta royalty recoupments received for 1998. Alberta allows reduction in royalty for costs to build processing and transportation facilities.
Natural gas revenues increased 22 percent from 1996 to 1997. Average natural gas prices were $.26 per Mcf, or 13 percent, higher in 1997 than 1996. The Company's net hedging activity, including fixed-price physical contracts and financial contracts, had no impact on gas prices in 1997 and reduced prices by $.09 per Mcf in 1996. Natural gas production increased nine percent from 1996 to 1997 from acquisitions and drilling activity.
The Company's crude oil sales totaled $336.8 million in 1998, a 28 percent decrease from 1997 due to lower average realized oil prices, which were partially offset by production increases. On a worldwide basis, average oil prices decreased 34 percent to $12.66 per barrel negatively impacting oil sales by $158.9 million. Oil production increased 6,359 barrels per day (approximately 10 percent), in 1998 due to increases in Egypt and Australia. Australian oil production increased 4,421 barrels per day over 1997 with additional production from the Ampolex Group Transaction and initial sales from the Stag field. Egyptian oil production increased 8,539 barrels per day, or 44 percent, as a result of the price-driven dynamics of certain production sharing contracts and to a lesser extent, drilling and development activity. U.S. oil production decreased by 6,571 barrels per day, or 16 percent, primarily due to marginal property sales in the first half of 1998 and natural reservoir depletion of mature fields.
Oil revenues increased 15 percent from 1996 to 1997. Egyptian oil production more than doubled in 1997 due to development activity and the first full year of production from the Company's Egyptian properties acquired in 1996. Australian oil production increased 90 percent from 1996 to 1997 primarily due to first production at the Agincourt field. These production increases were partially offset by an eight percent decrease in average oil prices received during 1997.
Natural gas liquid revenues decreased 30 percent from 1997. Natural gas liquid production increased 572 barrels per day, or 25 percent, while natural gas liquid prices declined by $6.14 per barrel, or 44 percent due to deteriorating market conditions. Natural gas liquid revenues were slightly higher in 1997 than in 1996. Natural gas liquid production increased 19 percent from 1996 to 1997, which was offset by a 14 percent decrease in average prices.
Other Revenues and Operating Expenses
Gas gathering, processing and marketing revenues decreased 40 percent to $117.4 million in 1998 from 1997. Lower gas prices in 1998 contributed to the decrease. Gas gathering, processing and marketing costs decreased by 41 percent to $114.5 million resulting in a slight increase to 1998 margins. During 1997, gas gathering, processing and marketing revenues increased 38 percent to $197.0 million. Lower margins were realized in 1997 as compared to 1996.
Equity in loss of affiliates represents Apache's share of ProEnergy losses. Equity in loss of affiliates was $1.6 million, $1.7 million and $.3 million in 1998, 1997 and 1996, respectively. Apache sold its 57 percent interest in ProEnergy in June 1998.
Recurring DD&A expense increased marginally to $382.8 million in 1998 from $381.4 million in 1997. On an equivalent barrel basis, recurring full cost DD&A expense decreased $.11 per boe, from $5.77 per boe in 1997 to $5.66 per boe in 1998. The Company's recurring DD&A expense increased to $381.4 million in 1997 from $315.1 million in 1996. On an equivalent barrel basis, recurring full cost DD&A expense increased $.33 per boe, from $5.44 per boe in 1996 to $5.77 per boe in 1997. Reserve revisions due to price declines and an increased cost environment in North America negatively impacted the 1997 rates.
Apache limits, on a country-by-country basis, the capitalized cost of proved oil and gas properties, net of accumulated DD&A and deferred income taxes, to estimated future net cash flows from proved oil and gas reserves discounted at 10 percent, net of related tax effects, plus the lower of cost or fair value of unproved properties included in the costs being amortized. As a result of low oil and gas prices at December 31, 1998, Apache's capitalized costs of U.S. oil and gas properties exceeded the ceiling limitation and the Company reported a $243.2 million pre-tax ($158.1 million net of tax) non-cash write-down. No additional DD&A was recorded during 1997 or 1996. If oil and gas prices deteriorate from the Company's year-end realized prices, it is likely that additional write-downs will occur in 1999. Write-downs required by these rules do not impact cash flow from operating activities.
Apache's operating costs decreased nine percent in 1998 to $211.6 million from $231.4 million in 1997. Lease operating expense (LOE), excluding severance taxes, decreased from $190.8 million in 1997 to $182.9 million in 1998. On an equivalent barrel basis, LOE for 1998 averaged $2.88 per boe, a $.19 decline from $3.07 per boe in 1997. Domestic per unit costs were significantly reduced by the sale of marginal North American properties, and by lower Western and Gulf region repairs and maintenance costs. Operating costs increased three percent to $231.4 million in 1997 from $225.5 million in 1996. LOE, excluding severance taxes, increased from $186.4 million in 1996 to $190.8 million in 1997. LOE increased as a result of Egyptian oil production enhancements and North American gas production gains. On an equivalent barrel basis, LOE for 1997 averaged $3.07 per boe, a $.36 decline from $3.43 per boe in 1996.
Administrative, selling and other costs (G&A) increased $2.5 million, or seven percent from 1997 to 1998. On an equivalent barrel basis, G&A expense increased to $.64 per boe in 1998 compared to $.62 per boe in 1997. The increase in G&A expense was primarily the result of employee separation payments associated with the sale of marginal North American properties. G&A expense increased $2.3 million, or six percent, from 1996 to 1997. A new bonus plan initiated in 1997, under which Apache provided incentive compensation to all employees based on the achievement of targeted performance, was the primary reason for the increase. On an equivalent barrel basis, G&A expense declined from $.66 per boe in 1996 to $.62 per boe in 1997. Production increases were not met with rising administrative costs.
Net financing costs for 1998 decreased $1.8 million, or two percent, from 1997 primarily due to higher capitalized interest. Gross interest expense increased $14.6 million due to a slightly higher interest rate on average outstanding debt in 1998 compared to 1997 and higher imputed interest on advances from gas purchasers. This was offset by an increase in capitalized interest, interest income and lower amortization of deferred loan costs. The Company's weighted average interest rate on outstanding debt was approximately 7.2 percent at December 31, 1998 compared to 7.1 percent at December 31, 1997. The capitalized interest increase is associated with Egyptian pipeline projects under construction. The increase in interest income was due to a higher average cash balance during 1998. Net financing costs for 1997 increased $10.7 million, or 17 percent, over 1996. Gross interest expense increased by $15.3 million due to higher average aggregate debt outstanding at higher average interest rates, which resulted from the extension of Apache's debt maturities. In 1997, Apache wrote off $1.2 million in deferred loan costs related to the Company's election to cancel two secured credit facilities with the International Finance Corporation (IFC). Additional capitalized interest of $5.8 million in 1997 mitigated these increases. Capitalized interest associated with higher international unevaluated costs caused the increase in 1997.
MARKET RISK
Commodity Risk
The Company's major market risk exposure is in the pricing applicable to its oil and gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to its United States and Canadian natural gas production. Historically, prices received for oil and gas production have been volatile and unpredictable. Pricing volatility is expected to continue. Oil price realizations ranged from a low of $9.42 per barrel to a high of $15.11 per barrel during 1998. Gas price realizations ranged from a monthly low of $1.73 per Mcf to a monthly high of $2.08 per Mcf during the same period.
The Company periodically enters into hedging activities on a portion of its 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 its exposure to oil and gas price fluctuations. Apache may use futures contracts, swaps, options and fixed-price physical contracts to hedge its commodity prices. Realized gains or losses from the Company's 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. In 1998, Apache recognized a net gain of $11.5 million from hedging activities that increased oil and gas production revenues. The net gain in 1998 includes $1.3 million in derivative income and $10.2 million in gains from fixed-price physical gas contracts. Gains or losses on natural gas derivative contracts are expected to be offset by sales at the spot market price or to preserve the margin on existing physical contracts. A 10 percent improvement in year-end spot market prices would increase the fair value of derivative contracts in effect at December 31, 1998 by $21.4 million, while a 10 percent drop in spot prices would decrease the fair value of these instruments by $21.4 million.
Interest Rate Risk
The Company considers its interest rate risk exposure to be minimal as a result of fixing interest rates on over three-fourths of the Company's debt. Total debt at December 31, 1998, included about $337.3 million of floating-rate debt. As a result, Apache's annual interest costs in 1999 will fluctuate based on short-term interest rates on approximately 25 percent of its total debt outstanding at December 31, 1998. The impact on annual cash flow of a 10 percent change in the floating rate (approximately 57 basis points) would be $1.9 million.
Foreign Currency Risk
The Company's cash flow stream relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. Australian gas production is sold under fixed-price Australian dollar contracts and over half the costs incurred are paid in Australian dollars. Revenue and disbursement transactions denominated in Australian dollars are converted to U.S. dollar equivalents based on the exchange rate on the transaction date. Reported cash flow relating to Canadian operations is based on cash flows measured in Canadian dollars converted to the U.S. dollar equivalent based on the average of the Canadian and U.S. dollar exchange rates for the period reported. Substantially all of the Company's international transactions, outside of Canada and Australia, are denominated in U.S. dollars.
The Company's Canadian and Australian subsidiaries have net financial obligations that are denominated in a currency other than the functional reporting currency of the subsidiaries. A decrease in value of 10 percent in the Australian and Canadian dollars relative to the U.S. dollar from the year-end exchange rates would result in a foreign currency loss of approximately $.4 million, based on December 31, 1998 amounts. The Company considers its current risk exposure to exchange rate movements, based on net cash flows, to be immaterial. The Company did not have any open derivative contracts relating to foreign currencies at December 31, 1998.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Capital Commitments
Apache's primary needs for cash are for exploration, development and acquisition of oil and gas properties, repayment of principal and interest on outstanding debt, payment of dividends, and capital obligations for affiliated ventures. The Company funds its exploration and development activities primarily through internally generated cash flows. Apache budgets capital expenditures based upon projected cash flows. The Company routinely adjusts its capital expenditures in response to changes in oil and natural gas prices and cash flow. The Company cannot accurately predict future product prices.
Capital Expenditures -- Apache's oil and gas capital expenditures over the last three years are summarized below:
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
Exploration and Development:
United States...................................... $238,140 $375,015 $302,494
Canada............................................. 71,467 57,669 58,768
Egypt.............................................. 124,657 152,564 63,597
Australia.......................................... 86,453 70,802 46,838
Ivory Coast........................................ 24,356 1,077 7,914
Other International................................ 45,626 28,293 14,084
-------- -------- --------
Total...................................... $590,699 $685,420 $493,695
======== ======== ========
Acquisitions of Oil and Gas Properties............... $ 58,402 $225,934 $446,205
======== ======== ========
|
Expenditures for exploration and development totaled $590.7 million in 1998
compared to $685.4 million in 1997. Apache's drilling program in 1998 added
105.6 MMboe of proved reserves (including revisions) and replaced 166 percent of
production. In the United States, Apache completed 183 gross wells as producers
out of 233 gross wells drilled during the year, compared with 261 gross
producers out of 318 gross wells drilled in 1997. In Canada, Apache completed 47
gross wells as producers out of 66 gross wells drilled during the year, compared
with 60 gross producers out of 81 gross wells drilled in 1997.
Internationally, the Company completed 46 gross producers out of 84 gross wells drilled in 1998, compared to 41 gross producers out of 73 gross wells in 1997. Successful international wells drilled in 1998 included 38 in Egypt, seven in Australia and one in China.
The total capital expenditures budget for 1999 is $270.0 million, including $122.8 million for North America. Estimated U.S. exploration and development expenditures for 1999 are $89.1 million, which includes $37.3 million in the Gulf region, $36.2 million in the Midcontinent region and $15.6 million in the Western region. Apache expects to spend $33.7 million in Canada in 1999. The Company expects its other international exploration and development expenditures in 1999, exclusive of facilities, to total approximately $109.9 million. Capital expenditures will be reviewed and possibly adjusted throughout the year in light of changing industry conditions.
On November 13, 1998, the Company entered into agreements to acquire certain oil and gas interests and companies holding oil and gas interests in the Carnarvon Basin, Western Australia, from subsidiaries of Novus for approximately $55 million. The interests have proved reserves of approximately 5.8 MMboe and daily production of 2,400 barrels of oil equivalent. They are within the Apache-operated Harriet Joint Venture (which includes production, processing and pipeline infrastructure associated with the Varanus Island hub), the Airlie Joint Venture (in which the Company held a prior interest and became operator) and three other exploration permit areas. The transaction closed in two stages, on December 18, 1998 for approximately $49 million and on January 29, 1999 for approximately $6 million. Under the terms of an agreement with Novus, the Company may be required to make additional payments to Novus based on proved and probable recoverable oil and condensate reserves, as determined by independent engineers, on a defined geological structure in the Gipsy-Rose-Lee area, offshore Western Australia. If required, such payments would be calculated using $2.50 for each barrel of proved and $1.25 for each barrel of probable oil and condensate reserves. A payment becomes due if and when a decision is made to construct facilities for the production of oil or condensate from the designated area.
In 1998, the Company also completed tactical regional acquisitions for cash consideration totaling $19.4 million. These acquisitions added approximately 9.1 MMboe to the Company's reserves.
On November 20, 1997, the Company acquired, in the Ampolex Group Transaction, all the capital stock of three companies owning interests in certain oil and gas properties (including 31.9 MMboe of proved oil and natural gas reserves) and production facilities offshore Western Australia for approximately $300 million
pursuant to three agreements with subsidiaries of Mobil. Funds for the Ampolex Group Transaction were obtained principally from borrowings under the Company's global credit facility.
The Ampolex Group Transaction acquisition, net of the sale of certain properties to Hardy, increased the Company's interest to 47.5 percent from 22.5 percent in the Carnarvon Basin's Harriet area, which included the Varanus Island pipeline, processing and production complex and eight existing oil and gas fields. In addition, the Company's interest in the East Spar field, which produces through the Varanus Island facilities, increased to 45 percent from 20 percent. Apache operates both the Harriet and East Spar properties.
In conjunction with the closing of the Ampolex Group Transaction on December 9, 1997, the Company entered into an agreement under which Hardy agreed to purchase a 10 percent interest in the Company's East Spar gas field and related production facilities in Western Australia. The transaction closed on January 28, 1998 with a total sales price of approximately $63 million in cash.
In 1997, the Company also completed 45 tactical regional acquisitions for cash consideration totaling $33.6 million. These acquisitions added approximately 6.6 MMboe to the Company's proved reserves.
Expenditures for acquisitions of proved oil and gas properties during 1996 totaled $446.2 million. The Company added 52 MMboe of proved oil and gas reserves through purchases in 1996. The most significant transaction completed in 1996 was the merger with Phoenix. Apache acquired oil and gas properties totaling $331.2 million from Phoenix. Apache also acquired $115.0 million of other oil and gas properties located primarily in the Company's existing focus areas. This amount included the purchase of certain oil and gas properties from Hall-Houston Oil Company for $46 million in cash. Funds for the acquisitions were obtained principally from borrowings under the Company's revolving bank credit facility.
Debt and Interest Commitments -- At December 31, 1998, Apache had outstanding debt of $153.0 million under its global credit facility and an aggregate of $1.2 billion of other debt. This other debt included notes and debentures maturing in the years 2000 through 2096. Debt outstanding at December 31, 1998 of $1.4 billion was comparable to the $1.5 billion outstanding at December 31, 1997. The Company's debt-to-capitalization ratio improved from 46.8 percent at December 31, 1997 to 43.0 percent at December 31, 1998. Interest payments on the Company's debt for 1999 are projected to be $129.0 million (using weighted average balances for floating rate obligations). Scheduled principal payments for 1999 total $15.5 million.
Dividend Payments -- Apache paid $1.0 million in dividends during 1998 on its Series B Preferred Stock issued in August 1998. Common dividends paid during 1998 totaled $27.2 million, up 8 percent from 1997, due to the increased number of common shares outstanding. The Company has paid cash dividends on its common stock for 128 consecutive quarters through December 31, 1998, and expects to continue payment of dividends at current levels. Future dividend payments will depend on the Company's level of earnings, financial requirements and other relevant factors.
Capital Resources and Liquidity
The Company's primary capital resources are net cash provided by operating activities, proceeds from financing activities and proceeds from sales of non-strategic assets.
Net Cash Provided by Operating Activities -- Apache's net cash provided by operating activities during 1998 totaled $471.5 million, a decrease of 35 percent from the $723.8 million provided in 1997. This decrease was due primarily to lower oil and gas prices and lower gas production in 1998, offset by the receipt of $71.8 million from a purchaser as an advance. The advance was for future natural gas deliveries over a ten-year period commencing August 1998. Net cash provided by operating activities in 1997 rose $233.3 million from 1996 primarily due to higher product prices. The receipt of $115.2 million from a purchaser as an advance also impacted 1997 net cash provided by operating activities. This advance was for future natural gas deliveries of 20,000 MMBtu per day over a ten-year period commencing September 1997.
Long-Term Borrowings -- In February 1998, Apache issued $150 million principal amount, $148.2 million net of discount, of senior unsecured 7-percent notes maturing on February 1, 2018. The notes are not
redeemable prior to maturity. Net proceeds from the sale were used to reduce existing short-term obligations and for general corporate purposes.
In March 1999, Apache Finance Pty Ltd, the Company's Australian finance subsidiary, issued $100 million principal amount, $99.3 million net of discount, of senior unsecured 7.0-percent notes due March 15, 2009. The notes are irrevocably and unconditionally guaranteed by Apache. The Company has the right to redeem the notes prior to maturity, under certain conditions related to changes in relevant tax laws.
Stock Transactions -- In January 1998, approximately 90 percent, or $155.6 million, of the Company's 6-percent debentures were converted into 5.1 million shares of Apache common stock at a conversion price of $30.68 per share. The remaining $16.9 million principal amount was redeemed for $17.4 million in cash, plus accrued and unpaid interest. The Company recorded a $.8 million loss on the early extinguishment of debt in January 1998.
Preferred Stock Issuance -- In August 1998, Apache issued $100 million of Series B Preferred Stock. The net proceeds of approximately $98.4 million were used to repay debt outstanding under money market lines of credit and to reduce outstanding borrowings under the Canadian portion of the Company's global credit facility. The Series B Preferred Stock has no stated maturity, is not subject to a sinking fund and is not convertible into Apache common stock or any other securities of the Company. Apache has the option to redeem the Series B Preferred Stock at $1,000 per share on or after August 25, 2008.
Asset Sales -- Apache received $131.1 million in 1998 and $30.1 million in 1997 from the sale of non-strategic oil and gas properties in a number of separate transactions. An additional $63 million was received in 1998 for a 10 percent interest in Apache's East Spar field and related production facilities. These assets were reported as assets held for resale at December 31, 1997. The proceeds were used to reduce debt.
Liquidity -- The Company had $14.5 million in cash and cash equivalents on hand at December 31, 1998, up from $9.7 million at December 31, 1997. Apache's ratio of current assets to current liabilities decreased from 1.01:1 at December 31, 1997, to .74:1 at December 31, 1998.
Management believes that cash on hand, net cash generated from operations and unused committed borrowing capacity under its global credit facility will be adequate to satisfy the Company's financial obligations to meet future liquidity needs for at least the next two fiscal years. As of December 31, 1998, Apache's available borrowing capacity under its global credit facility was $788 million.
IMPACT OF THE YEAR 2000 ISSUE
The inability of some computer programs and embedded computer chips to distinguish between the year 1900 and the year 2000 (the Year 2000 issue) poses a serious threat of business disruption to any organization that utilizes computer technology and computer chip technology in their business systems or equipment. Apache has formed a Year 2000 Task Force with representation from major business units to inventory and assess the risk associated with hardware, software, telecommunications systems, office equipment, embedded chip controls and systems, process control systems, facility control systems and dependencies on external trading partners. The project phases, expected completion dates and percentage complete as of March 1999 are as follows:
PERCENT
PHASE COMPLETION DATE COMPLETE
----- --------------- --------
Organization.............................................. July 1998 100%
Assessment................................................ November 1998 100%
Desktop Computers
Network Hardware
Software
Embedded Systems
External Trading Partners
Building/Infrastructure Systems
Telecommunications Systems
Implementation/Replacement................................ September 1999 75%
Computer Hardware
Core Business Software
Desktop Software
Embedded Systems
Building Systems
Contact External Trading Partners......................... March 1999 100%
Contingency Planning...................................... April 1999 70%
|
To date, the Company is not aware of any significant Year 2000 issues that would cause problems in the area of safety, environmental or business interruption. The Company will assess the risks associated with hardware, software, infrastructure, embedded chips and external trading partners that are not Year 2000 compliant. While Apache is confident that Year 2000 remediation efforts will succeed in minimizing exposure to business disruption, plans are being developed that will allow continuation of business in all but the worst case scenarios. All remediation and replacement efforts and contingency planning are expected to be complete by September 1999. All critical external trading partners have been contacted to determine Year 2000 readiness and contingency plans will be developed where assurance of Year 2000 compliance is not received by March 31, 1999.
In 1997, the Company initiated a project to replace existing business software as it relates to Apache's production, land, marketing, accounting and financial systems to more effectively and efficiently meet its business needs. Replacement computer systems selected by the Company from SAP America, Inc., PricewaterhouseCoopers LLP, Innovative Business Solutions and Landmark Graphics will properly recognize dates beyond December 31, 1999. The Company plans to implement the replacement software by March 31, 1999. The business system replacement project is 90 percent complete and the Company believes that the March 31, 1999 deadline is attainable.
The Company expects the cost to achieve Year 2000 compliance will not exceed $4 million excluding the cost of implementing business replacement systems.
The Company presently believes that with conversions to new software and completion of efforts planned by the Year 2000 Task Force, the risk associated with Year 2000 will be significantly reduced. However, the Company is unable to assure that the consequences of Year 2000 failures of systems maintained by the Company or by third parties will not materially adversely impact the Company's results of operations, liquidity or financial condition.
FUTURE TRENDS
Apache's strategy is to increase its oil and gas reserves, production, cash flow and earnings by continuing to explore on and develop its inventory of existing projects and making carefully targeted acquisitions of new assets. Crude oil prices have fallen to the lowest level in over a decade. Drilling costs and acquisition prices have also declined. As one of few companies to have reduced debt in 1998, Apache is well positioned to execute the second phase of its long-term strategy, which is to complete a meaningful acquisition in 1999 that builds shareholder value. Accordingly, Apache's 1999 plans include:
1. Controlling G&A and LOE expense;
2. Curtailing drilling costs; and
3. Pursuing opportunities to acquire properties.
Although no specific opportunity has as yet been identified as likely, the Company believes that the number of quality acquisition, merger and joint venture opportunities has increased dramatically.
Apache's international properties should continue to grow in importance with respect to Apache's financial results and future growth prospects. Apache's international efforts remain focused on development of its discoveries in Egypt, offshore Western Australia, China and the Ivory Coast, and exploration efforts on the Company's concessions in Egypt and in Poland. While international exploration is recognized as higher risk than Apache's North American activities, the Company believes it offers potential for greater rewards and significant reserve additions. Apache also believes that reserve additions in these international areas may be made through higher risk exploration and through improved production practices and recovery techniques.
Under the full cost accounting rules of the SEC, the Company reviews the carrying value of its proved oil and gas properties each quarter on a country-by-country basis. Under these rules, capitalized costs of proved oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent, plus the lower of cost or fair value of unproved properties included in the costs being amortized, net of related tax effects. These rules generally require pricing future oil and gas production at the unescalated oil and gas prices in effect at the end of each fiscal quarter and require a write-down if the "ceiling" is exceeded, even if prices declined for only a short period of time. The Company recorded a $243.2 million pre-tax ($158.1 million net of tax) non-cash write-down of the carrying value of the Company's U.S. proved oil and gas properties as of December 31, 1998, due to these ceiling test limitations. If oil and gas prices deteriorate from the Company's year-end realized prices, it is likely that additional write-downs will occur in 1999. Write-downs required by these rules do not impact cash flow from operating activities.
FORWARD-LOOKING STATEMENTS AND RISK
Certain statements in this report, including statements of the future plans, objectives, and expected performance of the Company, are forward-looking statements that are dependent upon certain events, risks and uncertainties that may be outside the Company's control, and which could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, the market prices of oil and gas, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, political and economic uncertainties of foreign governments, future business decisions, and other uncertainties, all of which are difficult to predict.
There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and the timing of development expenditures. The total amount or timing
of actual future production may vary significantly from reserves and production estimates. The drilling of exploratory wells can involve significant risks, including those related to timing, success rates and cost overruns. Lease and rig availability, complex geology and other factors can affect these risks. Although Apache makes use of futures contracts, swaps, options and fixed-price physical contracts to mitigate risk, fluctuations in oil and gas prices, or a prolonged continuation of the current low price of crude oil, may substantially adversely affect the Company's financial position, results of operations and cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information required to be filed under this item are presented on pages F-1 through F-35 of this Form 10-K, and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Nominees for Election as Directors," "Continuing Directors," "Executive Officers of the Company," and "Voting Securities and Principal Holders" in the proxy statement relating to the Company's 1999 annual meeting of stockholders (the Proxy Statement) is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table," "Option/SAR Grants Table," "Option/SAR Exercises and Year-End Value Table," "Employment Contracts and Termination of Employment and Change-in-Control Arrangements," and "Director Compensation" in the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and Principal Holders" in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Business Relationships and Transactions" in the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents included in this report:
1. Financial Statements
Report of independent public accountants.................... F-1 Report of management........................................ F-2 Statement of consolidated operations for each of the three years in the period ended December 31, 1998............... F-3 Statement of consolidated cash flows for each of the three years in the period ended December 31, 1998............... F-4 Consolidated balance sheet as of December 31, 1998 and 1997...................................................... F-5 Statement of consolidated shareholders' equity for each of the three years in the period ended December 31, 1998..... F-6 Notes to consolidated financial statements.................. F-7 Supplemental oil and gas disclosures........................ F-29 Supplemental quarterly financial data....................... F-35 |
2. Financial Statement Schedules
Financial statement schedules have been omitted because they are either not required, not applicable or the information required to be presented is included in the Company's financial statements and related notes.
3. Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 -- Stock Purchase Agreement, dated July 1, 1991, between
Registrant and Amoco Production Company (incorporated by
reference to Exhibit 10.1 to Registrant's Current Report
on Form 8-K, dated July 1, 1991, SEC File No. 1-4300).
2.2 -- Form of Acquisition Agreement between Registrant, HERC
Acquisition Corporation and Hadson Energy Resources
Corporation, dated August 26, 1993, and amended September
28, 1993 (incorporated by reference to Exhibit 2.1 to
Registrant's Registration Statement on Form S-4,
Registration No. 33-67954, filed September 29, 1993).
2.3 -- Purchase and Sale Agreement by and between Texaco
Exploration and Production Inc., as seller, and
Registrant, as buyer, dated December 22, 1994
(incorporated by reference to Exhibit 99.3 to
Registrant's Current Report on Form 8-K, dated November
29, 1994, SEC File No. 1-4300).
2.4 -- Amended and Restated Agreement and Plan of Merger among
Registrant, XPX Acquisitions, Inc and DEKALB Energy
Company, dated December 21, 1994 (incorporated by
reference to Exhibit 2.1 to Amendment No. 3 to
Registrant's Registration Statement on Form S-4,
Registration No. 33-57321, filed April 14, 1995).
2.5 -- Agreement and Plan of Merger among Registrant, YPY
Acquisitions, Inc. and The Phoenix Resource Companies,
Inc., dated March 27, 1996 (incorporated by reference to
Exhibit 2.1 to Registrant's Registration Statement on
Form S-4, Registration No. 333-02305, filed April 5,
1996).
|
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 -- Restated Certificate of Incorporation of Registrant,
dated December 1, 1993, as filed with the Secretary of
State of Delaware on December 16, 1993 (incorporated by
reference to Exhibit 3.1 to Registrant's Annual Report on
Form 10-K for year ended December 31, 1993, SEC File No.
1-4300).
3.2 -- Certificate of Ownership and Merger Merging Apache Energy
Resources Corporation into Registrant, effective December
31, 1995, as filed with the Secretary of State of
Delaware on December 21, 1995 (incorporated by reference
to Exhibit 3.2 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1995, SEC File No. 1-4300).
3.3 -- Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock of
Registrant, effective January 31, 1996, as filed with the
Secretary of State of Delaware on January 22, 1996
(incorporated by reference to Exhibit 3.3 to Registrant's
Annual Report on Form 10-K for year ended December 31,
1995, SEC File No. 1-4300).
*3.4 -- Certificate of Ownership and Merger merging Apache PHN
Company, Inc. into Registrant, effective July 1, 1998, as
filed with the Secretary of State of Delaware on July 1,
1998.
*3.5 -- Agreement and Plan of Merger merging MWJR Petroleum
Corporation into Registrant, effective September 1, 1998,
as filed with the Secretary of State of Delaware on
August 19, 1998.
*3.6 -- Certificate of Ownership and Merger merging MW Petroleum
Corporation into Registrant, effective September 1, 1998,
as filed with the Secretary of State of Delaware on
August 19, 1998.
*3.7 -- Certificate of Designations, Preferences and Rights of
5.68% Cumulative Preferred Stock, Series B, of
Registrant, as filed with the Secretary of State of
Delaware on August 21, 1998.
*3.8 -- Certificate of Correction to Certificate of Designations,
Preferences and Rights of 5.68% Cumulative Preferred
Stock, Series B, of Registrant, as filed with the
Secretary of State of Delaware on August 24, 1998.
3.9 -- Bylaws of Registrant, as amended September 17, 1998
(incorporated by reference to Exhibit 3.2 to Registrant's
Quarterly Report on Form 10-Q for quarter ended September
30, 1998, SEC File No. 1-4300).
4.1 -- Form of Certificate for Registrant's Common Stock
(incorporated by reference to Exhibit 4.1 to Registrant's
Annual Report on Form 10-K for year ended December 31,
1995, SEC File No. 1-4300).
4.2 -- Form of Certificate for Registrant's 5.68% Cumulative
Preferred Stock, Series B (incorporated by reference to
Exhibit 4.2 to Amendment No. 2 on Form 8-K/A to
Registrant's Current Report on Form 8-K, dated August 18,
1998, SEC File No. 1-4300).
4.3 -- Rights Agreement, dated January 31, 1996, between
Registrant and Norwest Bank Minnesota, N.A., rights
agent, relating to the declaration of a rights dividend
to Registrant's common shareholders of record on January
31, 1996 (incorporated by reference to Exhibit (a) to
Registrant's Registration Statement on Form 8-A, dated
January 24, 1996, SEC File No. 1-4300).
|
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 -- Credit Agreement, dated June 12, 1997, among the
Registrant, the lenders named therein, Morgan Guaranty
Trust Company, as Global Documentation Agent and U.S.
Syndication Agent, The First National Bank of Chicago, as
U.S. Documentation Agent, NationsBank of Texas, N.A., as
Co-Agent, Union Bank of Switzerland, Houston Agency, as
Co-Agent, and The Chase Manhattan Bank, as Global
Administrative Agent (incorporated by reference to
Exhibit 10.1 to Registrant's Current Report on Form 8-K,
dated June 13, 1997, SEC File No. 1-4300).
10.2 -- Credit Agreement, dated June 12, 1997, among Apache
Canada Ltd., a wholly-owned subsidiary of the Registrant,
the lenders named therein, Morgan Guaranty Trust Company,
as Global Documentation Agent, Royal Bank of Canada, as
Canadian Documentation Agent, The Chase Manhattan Bank of
Canada, as Canadian Syndication Agent, Bank of Montreal,
as Canadian Administrative Agent, and The Chase Manhattan
Bank, as Global Administrative Agent (incorporated by
reference to Exhibit 10.2 to Registrant's Current Report
on Form 8-K, dated June 13, 1997, SEC File No. 1-4300).
10.3 -- Credit Agreement, dated June 12, 1997, among Apache
Energy Limited and Apache Oil Australia Pty Limited,
wholly-owned subsidiaries of the Registrant, the lenders
named therein, Morgan Guaranty Trust Company, as Global
Documentation Agent, Bank of America National Trust and
Savings Association, Sydney Branch, as Australian
Documentation Agent, The Chase Manhattan Bank, as
Australian Syndication Agent, Citisecurities Limited, as
Australian Administrative Agent, and The Chase Manhattan
Bank, as Global Administrative Agent (incorporated by
reference to Exhibit 10.3 to Registrant's Current Report
on Form 8-K, dated June 13, 1997, SEC File No. 1-4300).
10.4 -- Fiscal Agency Agreement, dated January 4, 1995, between
Registrant and Chemical Bank, as fiscal agent, relating
to Registrant's 6% Convertible Subordinated Debentures
due 2002 (incorporated by reference to Exhibit 99.2 to
Registrant's Current Report on Form 8-K, dated December
6, 1994, SEC File No. 1-4300).
10.5 -- Concession Agreement for Petroleum Exploration and
Exploitation in the Khalda Area in Western Desert of
Egypt by and among Arab Republic of Egypt, the Egyptian
General Petroleum Corporation and Phoenix Resources
Company of Egypt, dated April 6, 1981 (incorporated by
reference to Exhibit 19(g) to Phoenix's Annual Report on
Form 10-K for year ended December 31, 1984, SEC File No.
1-547).
10.6 -- Amendment, dated July 10, 1989, to Concession Agreement
for Petroleum Exploration and Exploitation in the Khalda
Area in Western Desert of Egypt by and among Arab
Republic of Egypt, the Egyptian General Petroleum
Corporation and Phoenix Resources Company of Egypt
(incorporated by reference to Exhibit 10(d)(4) to
Phoenix's Quarterly Report on Form 10-Q for quarter ended
June 30, 1989, SEC File No. 1-547).
10.7 -- Farmout Agreement, dated September 13, 1985 and relating
to the Khalda Area Concession, by and between Phoenix
Resources Company of Egypt and Conoco Khalda
Inc(incorporated by reference to Exhibit 10.1 to
Phoenix's Registration Statement on Form S-1,
Registration No. 33-1069, filed October 23, 1985).
|
EXHIBIT NO. DESCRIPTION
----------- -----------
10.8 -- Amendment, dated March 30, 1989, to Farmout Agreement
relating to the Khalda Area Concession, by and between
Phoenix Resources Company of Egypt and Conoco Khalda
Inc(incorporated by reference to Exhibit 10(d)(5) to
Phoenix's Quarterly Report on Form 10-Q for quarter ended
June 30, 1989, SEC File No. 1-547).
10.9 -- Amendment, dated May 21, 1995, to Concession Agreement
for Petroleum Exploration and Exploitation in the Khalda
Area in Western Desert of Egypt between Arab Republic of
Egypt, the Egyptian General Petroleum Corporation, Repsol
Exploracion Egipto S.A., Phoenix Resources Company of
Egypt and Samsung Corporation (incorporated by reference
to exhibit 10.12 to Registrant's Annual Report on Form
10-K for year ended December 31, 1997, SEC File No.
1-4300).
10.10 -- Concession Agreement for Petroleum Exploration and
Exploitation in the Qarun Area in Western Desert of
Egypt, between Arab Republic of Egypt, the Egyptian
General Petroleum Corporation, Phoenix Resources Company
of Qarun and Apache Oil Egypt, Inc., dated May 17, 1993
(incorporated by reference to Exhibit 10(b) to Phoenix's
Annual Report on Form 10-K for year ended December 31,
1993, SEC File No. 1-547).
10.11 -- Agreement for Amending the Gas Pricing Provisions under
the Concession Agreement for Petroleum Exploration and
Exploitation in the Qarun Area, effective June 16, 1994
(incorporated by reference to Exhibit 10.18 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1996, SEC File No. 1-4300).
+10.12 -- 1982 Employee Stock Option Plan, as updated in January
1987 to conform to the Tax Reform Act of 1986
(incorporated by reference to Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1990, SEC File No. 1-4300).
+*10.13 -- Apache Corporation Corporate Incentive Compensation Plan
A (Senior Officers' Plan), dated July 16, 1998.
+*10.14 -- Apache Corporation Corporate Incentive Compensation Plan
B (Strategic Objectives Format), dated July 16, 1998.
+10.15 -- Apache Corporation 401(k) Savings Plan, dated August 1,
1997, effective January 1, 1997 (incorporated by
reference to Exhibit 10.1 to Registrant's Current Report
on Form 8-K, dated August 8, 1997, SEC File No. 1-4300).
+10.16 -- Apache Corporation Money Purchase Retirement Plan, dated
December 31, 1997, effective January 1, 1997
(incorporated by reference to Exhibit 10.19 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997, SEC File No. 1-4300).
+*10.17 -- Non-Qualified Retirement/Savings Plan of Apache
Corporation, restated as of January 1, 1997, and
amendments effective as of January 1, 1997, January 1,
1998 and January 1, 1999.
+10.18 -- Apache International, Inc. Common Stock Award Plan, dated
February 12, 1990 (incorporated by reference to Exhibit
10.13 to Registrant's Annual Report on Form 10-K for year
ended December 31, 1989, SEC File No. 1-4300).
+*10.19 -- Apache Corporation 1990 Stock Incentive Plan, as amended
and restated December 17, 1998.
+*10.20 -- Apache Corporation 1995 Stock Option Plan, as amended and
restated December 17, 1998.
|
EXHIBIT NO. DESCRIPTION
----------- -----------
+10.21 -- Apache Corporation 1996 share Price Appreciation Plan, as
amended and restated January 14, 1997 (incorporated by
reference to Appendix A to Registrant's definitive 14A
Proxy Statement, SEC File No. 1-4300, filed March 28,
1997).
+10.22 -- Apache Corporation 1996 Performance Stock Option Plan, as
amended and restated January 14, 1997 (incorporated by
reference to Exhibit 10.32 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1996, SEC File
No. 1-4300).
+*10.23 -- Apache Corporation 1998 Stock Option Plan, as amended and
restated December 17, 1998.
+10.24 -- 1990 Employee Stock Option Plan of The Phoenix Resource
Companies, Inc., as amended through September 29, 1995,
effective April 9, 1990 (incorporated by reference to
Exhibit 10.33 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1996, SEC File No. 1-4300).
+10.25 -- Apache Corporation Income Continuance Plan, as amended
and restated February 24, 1988 (incorporated by reference
to Exhibit 10.19 to Registrant's Annual Report on Form
10-K for year ended December 31, 1990, SEC File No.
1-4300).
+*10.26 -- Apache Corporation Non-Employee Directors' Compensation
Plan, as amended and restated December 17, 1998.
+10.27 -- Apache Corporation Outside Directors' Retirement Plan, as
amended and restated September 11, 1997 (incorporated by
reference to Exhibit 10.31 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1997, SEC File
No. 1-4300).
+10.28 -- Apache Corporation Equity Compensation Plan for
Non-Employee Directors, adopted February 9, 1994, and
form of Restricted Stock Award Agreement (incorporated by
reference to Exhibit 10.26 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1993, SEC File
No. 1-4300).
+10.29 -- Amended and Restated Employment Agreement, dated December
5, 1990, between Registrant and Raymond Plank
(incorporated by reference to Exhibit 10.39 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1996, SEC File No. 1-4300).
+10.30 -- First Amendment, dated April 4, 1996, to Restated
Employment Agreement between Registrant and Raymond Plank
(incorporated by reference to Exhibit 10.40 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1996, SEC File No. 1-4300).
+10.31 -- Amended and Restated Employment Agreement, dated December
20, 1990, between Registrant and John A. Kocur
(incorporated by reference to Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1990, SEC File No. 1-4300).
+10.32 -- Employment Agreement, dated June 6, 1988, between
Registrant and G. Steven Farris (incorporated by
reference to Exhibit 10.6 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1989, SEC File
No. 1-4300).
+*10.33 -- Conditional Stock Grant Agreement, dated December 17,
1998, between Registrant and G. Steven Farris.
|
EXHIBIT NO. DESCRIPTION
----------- -----------
10.34 -- Amended and Restated Gas Purchase Agreement, effective
July 1, 1998, by and among Registrant and MW Petroleum
Corporation, as Seller, and Producers Energy Marketing,
LLC, as Buyer (incorporated by reference to Exhibit 10.1
to Registrant's Current Report on Form 8-K, dated June
18, 1998, SEC File No. 1-4300).
12.1 -- Statement of Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends (incorporated
by reference to Exhibit 99.1 to Registrant's Current
Report on Form 8-K, dated March 2, 1999, SEC File No.
1-4300).
*21.1 -- Subsidiaries of Registrant
*23.1 -- Consent of Arthur Andersen LLP
*23.2 -- Consent of Ryder Scott Company Petroleum Engineers
*23.3 -- Consent of Netherland, Sewell & Associates, Inc.
*24.1 -- Power of Attorney (included as a part of the signature
pages to this report)
*27.1 -- Financial Data Schedule
|
* Filed herewith.
+ Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 14 hereof.
Note: Debt instruments of the Registrant defining the rights of long-term debt holders in principal amounts not exceeding 10 percent of the Registrant's consolidated assets have been omitted and will be provided to the Commission upon request.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by Apache during the fiscal quarter ended December 31, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
APACHE CORPORATION
/s/ RAYMOND PLANK
------------------------------------
Raymond Plank
Chairman and Chief Executive Officer
Dated: March 24, 1999
|
POWER OF ATTORNEY
The officers and directors of Apache Corporation, whose signatures appear below, hereby constitute and appoint Raymond Plank, G. Steven Farris, Z. S. Kobiashvili and Roger B. Plank, and each of them (with full power to each of them to act alone), the true and lawful attorney-in-fact to sign and execute, on behalf of the undersigned, any amendment(s) to this report and each of the undersigned does hereby ratify and confirm all that said attorneys shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ RAYMOND PLANK Chairman and Chief Executive March 24, 1999
----------------------------------------------------- Officer (Principal Executive
Raymond Plank Officer)
/s/ ROGER B. PLANK Vice President and Chief Financial March 24, 1999
----------------------------------------------------- Officer (Principal Financial
Roger B. Plank Officer)
/s/ THOMAS L. MITCHELL Vice President and Controller March 24, 1999
----------------------------------------------------- (Principal Accounting Officer)
Thomas L. Mitchell
|
NAME TITLE DATE
---- ----- ----
/s/ FREDERICK M. BOHEN Director March 24, 1999
-----------------------------------------------------
Frederick M. Bohen
/s/ G. STEVEN FARRIS Director March 24, 1999
-----------------------------------------------------
G. Steven Farris
/s/ RANDOLPH M. FERLIC Director March 24, 1999
-----------------------------------------------------
Randolph M. Ferlic
/s/ EUGENE C. FIEDOREK Director March 24, 1999
-----------------------------------------------------
Eugene C. Fiedorek
/s/ A. D. FRAZIER, JR. Director March 24, 1999
-----------------------------------------------------
A. D. Frazier, Jr.
/s/ STANLEY K. HATHAWAY Director March 24, 1999
-----------------------------------------------------
Stanley K. Hathaway
/s/ JOHN A. KOCUR Director March 24, 1999
-----------------------------------------------------
John A. Kocur
/s/ GEORGE D. LAWRENCE JR. Director March 24, 1999
-----------------------------------------------------
George D. Lawrence Jr.
/s/ MARY RALPH LOWE Director March 24, 1999
-----------------------------------------------------
Mary Ralph Lowe
/s/ F. H. MERELLI Director March 24, 1999
-----------------------------------------------------
F. H. Merelli
/s/ JOSEPH A. RICE Director March 24, 1999
-----------------------------------------------------
Joseph A. Rice
|
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Apache Corporation:
We have audited the accompanying consolidated balance sheet of Apache Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Apache Corporation and Subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 5, 1999
REPORT OF MANAGEMENT
The financial statements and related financial information of Apache Corporation and Subsidiaries were prepared by and are the responsibility of management. The statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on management's best estimates and judgments.
Management maintains and places reliance on systems of internal control designed to provide reasonable assurance, weighing the costs with the benefits sought, that all transactions are properly recorded in the Company's books and records, that policies and procedures are adhered to, and that assets are safeguarded. The systems of internal controls are supported by written policies and guidelines, internal audits and the selection and training of qualified personnel.
The consolidated financial statements of Apache Corporation and Subsidiaries have been audited by Arthur Andersen LLP, independent public accountants. Their audits included developing an overall understanding of the Company's accounting systems, procedures and internal controls and conducting tests and other auditing procedures sufficient to support their opinion on the fairness of the consolidated financial statements.
The Apache Corporation Board of Directors exercises its oversight responsibility for the financial statements through its Audit Committee, composed solely of directors who are not current or former employees of Apache. The Audit Committee meets periodically with management, internal auditors and the independent public accountants to ensure that they are successfully completing designated responsibilities. The internal auditors and independent public accountants have open access to the Audit Committee to discuss auditing and financial reporting issues.
Houston, Texas
March 5, 1999
Raymond Plank Chairman of the Board and Chief Executive Officer
Roger B. Plank Vice President and Chief Financial Officer
Thomas L. Mitchell Vice President and Chief Accounting Officer
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996
------------- ------------- -----------
(IN THOUSANDS, EXCEPT PER COMMON SHARE DATA)
REVENUES:
Oil and gas production revenues........................... $ 759,038 $ 983,773 $833,164
Gathering, processing and marketing revenues.............. 117,395 196,951 142,868
Equity in loss of affiliates.............................. (1,558) (1,683) (281)
Other revenues............................................ 840 (2,768) 1,400
---------- ---------- --------
875,715 1,176,273 977,151
---------- ---------- --------
OPERATING EXPENSES:
Depreciation, depletion and amortization:
Recurring.............................................. 382,807 381,416 315,144
Additional............................................. 243,178 -- --
Operating costs........................................... 211,554 231,370 225,527
Gathering, processing and marketing costs................. 114,471 194,279 138,768
Administrative, selling and other......................... 40,731 38,243 35,911
Financing costs:
Interest expense....................................... 119,703 105,148 89,829
Amortization of deferred loan costs.................... 4,496 6,438 5,118
Capitalized interest................................... (49,279) (36,493) (30,712)
Interest income........................................ (4,383) (2,768) (2,629)
---------- ---------- --------
1,063,278 917,633 776,956
---------- ---------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (187,563) 258,640 200,195
Provision (benefit) for income taxes...................... (58,176) 103,744 78,768
---------- ---------- --------
NET INCOME (LOSS)........................................... (129,387) 154,896 121,427
Preferred stock dividends................................. 2,004 -- --
---------- ---------- --------
INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK.................. $ (131,391) $ 154,896 $121,427
========== ========== ========
NET INCOME (LOSS) PER COMMON SHARE:
Basic..................................................... $ (1.34) $ 1.71 $ 1.42
========== ========== ========
Diluted................................................... $ (1.34) $ 1.65 $ 1.38
========== ========== ========
|
The accompanying notes to consolidated financial statements are an integral part of this statement.
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- ----------- ---------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(129,387) $ 154,896 $ 121,427
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization............. 625,985 381,416 315,144
Amortization of deferred loan costs.................. 4,496 6,438 5,118
Provision (benefit) for deferred income taxes........ (81,856) 68,280 61,336
Cash distributions in excess of (less than) earnings of
affiliates............................................. 1,523 1,768 (163)
Loss (gain) on sale of stock held for investment.......... 364 (13) (770)
Changes in operating assets and liabilities, net of
effects of acquisitions:
(Increase) decrease in receivables..................... 65,487 12,556 (55,645)
(Increase) decrease in advances to oil and gas ventures
and other............................................. 3,879 (7,728) 5,737
(Increase) decrease in deferred charges and other...... 13,238 447 (3,321)
Increase (decrease) in payables........................ (65,851) 1,920 35,998
Increase (decrease) in accrued expenses................ (12,161) 9,579 (3,433)
Increase (decrease) in advance from gas purchaser...... 50,922 102,748 (8,540)
Increase (decrease) in deferred credits and noncurrent
liabilities........................................... (5,128) (8,499) 17,616
--------- ----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES....... 471,511 723,808 490,504
--------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (699,509) (771,419) (642,021)
Non-cash portion of net oil and gas property additions.... 38,774 6,208 46,268
Acquisition of Novus, net of cash acquired................ (48,499) -- --
Acquisition of Ampolex Group, net of cash acquired........ -- (299,852) --
Acquisition of Phoenix, net of cash acquired.............. -- -- (43,294)
Proceeds from sales of oil and gas properties............. 131,149 30,134 30,144
Purchase of stock held for investment..................... -- (1,170) --
Proceeds from sale of stock held for investment........... 26,147 1,183 7,193
Proceeds from sale of assets held for resale.............. 62,998 -- --
Other, net................................................ (23,180) (31,309) (16,517)
--------- ----------- ---------
NET CASH USED IN INVESTING ACTIVITIES........... (512,120) (1,066,225) (618,227)
--------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings...................................... 551,897 1,168,201 765,895
Payments on long-term debt................................ (556,141) (812,327) (615,765)
Dividends paid............................................ (28,204) (25,275) (23,420)
Proceeds from issuance of preferred stock................. 98,630 -- --
Proceeds from issuance of common stock.................... 1,240 11,623 8,145
Payments to acquire treasury stock........................ (21,418) (386) (1,698)
Cost of debt and equity transactions...................... (544) (2,894) (5,906)
--------- ----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES....... 45,460 338,942 127,251
--------- ----------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.......................................... 4,851 (3,475) (472)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 9,686 13,161 13,633
--------- ----------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 14,537 $ 9,686 $ 13,161
========= =========== =========
|
The accompanying notes to consolidated financial statements are an integral part of this statement.
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
ASSETS (IN THOUSANDS)
CURRENT ASSETS:
Cash and cash equivalents................................. $ 14,537 $ 9,686
Receivables............................................... 159,806 224,025
Inventories............................................... 40,948 36,041
Advances to oil and gas ventures and other................ 11,679 15,579
Assets held for resale.................................... -- 62,998
----------- -----------
226,970 348,329
----------- -----------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties...................................... 5,901,863 5,530,991
Unproved properties and properties under development,
not being amortized................................... 637,854 532,556
Gas gathering, transmission and processing facilities..... 354,506 246,049
Other..................................................... 88,422 71,067
----------- -----------
6,982,645 6,380,663
Less: Accumulated depreciation, depletion and
amortization........................................... (3,255,104) (2,647,478)
----------- -----------
3,727,541 3,733,185
----------- -----------
OTHER ASSETS:
Deferred charges and other................................ 41,551 57,119
----------- -----------
$ 3,996,062 $ 4,138,633
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 15,500 $ 17,200
Accounts payable.......................................... 115,111 178,361
Accrued operating expense................................. 18,990 20,153
Accrued exploration and development....................... 120,855 82,392
Accrued compensation and benefits......................... 10,692 17,600
Accrued interest.......................................... 19,054 20,598
Other accrued expenses.................................... 5,572 7,479
----------- -----------
305,774 343,783
----------- -----------
LONG-TERM DEBT.............................................. 1,343,258 1,501,380
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes.............................................. 270,493 355,619
Advances from gas purchaser............................... 205,468 154,546
Other..................................................... 69,236 54,128
----------- -----------
545,197 564,293
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares
authorized, 100,000 shares of 5.68% Cumulative Series B
issued and outstanding in 1998......................... 98,387 --
Common stock, $1.25 par, 215,000,000 shares authorized,
99,790,337 and 94,478,788 shares issued,
respectively........................................... 124,738 118,098
Paid-in capital........................................... 1,245,738 1,085,063
Retained earnings......................................... 403,098 561,981
Treasury stock, at cost, 2,021,215 and 1,174,247 shares,
respectively........................................... (36,924) (15,506)
Accumulated other comprehensive income.................... (33,204) (20,459)
----------- -----------
1,801,833 1,729,177
----------- -----------
$ 3,996,062 $ 4,138,633
=========== ===========
|
The accompanying notes to consolidated financial statements are an integral part of this statement.
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE PREFERRED COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE SHAREHOLDERS
INCOME STOCK STOCK CAPITAL EARNINGS STOCK INCOME EQUITY
------------- --------- -------- ---------- --------- -------- ------------- ------------
(IN THOUSANDS)
BALANCE, DECEMBER 31, 1995.. $ -- $ 98,124 $ 687,465 $ 335,470 $(13,478) $(15,776) $1,091,805
Comprehensive income:
Net income.............. $ 121,427 -- -- -- 121,427 -- -- 121,427
Currency translation
adjustments........... 286 -- -- -- -- -- 286 286
---------
Comprehensive income...... $ 121,713
=========
Dividends ($.28 per
common share)........... -- -- -- (24,309) -- -- (24,309)
Common shares issued...... -- 15,906 315,075 -- -- -- 330,981
Treasury shares
purchased, net.......... -- -- -- -- (1,674) -- (1,674)
------- -------- ---------- --------- -------- -------- ----------
BALANCE, DECEMBER 31, 1996.. -- 114,030 1,002,540 432,588 (15,152) (15,490) 1,518,516
Comprehensive income:
Net income.............. $ 154,896 -- -- -- 154,896 -- -- 154,896
Currency translation
adjustments........... (4,969) -- -- -- -- -- (4,969) (4,969)
---------
Comprehensive income...... $ 149,927
=========
Dividends ($.28 per
common share)........... -- -- -- (25,503) -- -- (25,503)
Common shares issued...... -- 4,068 82,523 -- -- -- 86,591
Treasury shares
purchased, net.......... -- -- -- -- (354) -- (354)
------- -------- ---------- --------- -------- --------- ----------
BALANCE, DECEMBER 31, 1997.. -- 118,098 1,085,063 561,981 (15,506) (20,459) 1,729,177
Comprehensive income:
Net loss................ $(129,387) -- -- -- (129,387) -- -- (129,387)
Currency translation
adjustments........... (12,745) -- -- -- -- -- (12,745) (12,745)
---------
Comprehensive loss........ $(142,132)
=========
Dividends:
Preferred............... -- -- -- (2,004) -- -- (2,004)
Common ($.28 per share). -- -- -- (27,492) -- -- (27,492)
Preferred shares issued... 98,387 -- -- -- -- -- 98,387
Common shares issued...... -- 6,640 160,675 -- -- -- 167,315
Treasury shares
purchased, net.......... -- -- -- -- (21,418) -- (21,418)
------- -------- ---------- --------- -------- --------- ----------
BALANCE, DECEMBER 31, 1998.. $98,387 $124,738 $1,245,738 $ 403,098 $(36,924) $(33,204) $1,801,833
======= ======== ========== ========= ======== ========= ==========
|
The accompanying notes to consolidated financial statements are an integral part of this statement.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations -- Apache Corporation (Apache or the Company) is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. The Company's North American exploration and production activities are divided into three U.S. operating regions (Gulf, Midcontinent and Western), plus a Canadian region. Approximately 62 percent of the Company's proved reserves are located in North America. Internationally, Apache has exploration and production interests in Egypt, offshore Western Australia and offshore Ivory Coast, and exploration interests in Poland and offshore The People's Republic of China (China).
The Company's future financial condition and results of operations will depend upon prices received for its oil and natural gas production and the costs of finding, acquiring, developing and producing reserves. A substantial portion of the Company's production is sold under market-sensitive contracts. Prices for oil and natural gas are subject to fluctuations in response to changes in supply, market uncertainty and a variety of other factors beyond the Company's control. These factors include worldwide political instability (especially in the Middle East), the foreign supply of oil and natural gas, the price of foreign imports, the level of consumer demand, and the price and availability of alternative fuels. With natural gas accounting for 56 percent of Apache's 1998 production on an energy equivalent basis, the Company is affected more by fluctuations in natural gas prices than in oil prices.
Principles of Consolidation -- The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company's interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated. Apache's investment in Producers Energy Marketing LLC (ProEnergy) and a pipeline partnership in Western Australia are accounted for using the equity method for the periods of ownership. Certain reclassifications have been made to the 1997 and 1996 financial statements to conform to the classifications used in the current year.
Cash Equivalents -- The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates market.
Inventories -- Inventories consist principally of tubular goods and production equipment, stated at the lower of weighted average cost or market, and oil produced but not sold, stated at current market value net of costs to sell.
Property and Equipment -- The Company uses the full cost method of accounting for its investment in oil and gas properties. Under this method, the Company capitalizes all acquisition, exploration and development costs incurred for the purpose of finding oil and gas reserves, including salaries, benefits and other internal costs directly attributable to these activities. Exclusive of field-level costs, Apache capitalized $12.2 million, $11.9 million and $12.1 million of internal costs in 1998, 1997 and 1996, respectively. Costs associated with production and general corporate activities are expensed in the period incurred. Internal costs attributable to the management of the Company's producing properties, before recoveries from industry partners, totaled $23.1 million, $22.5 million and $17.0 million in 1998, 1997, and 1996, respectively, and are included in operating costs in the Company's statement of consolidated operations. Interest costs related to unproved properties and properties under development are also capitalized to oil and gas properties. Unless a significant portion of the Company's reserve quantities are sold (greater than 25 percent), proceeds from the sale of oil and gas properties are accounted for as reductions to capitalized costs, and gains and losses are not recognized.
Apache computes the provision for recurring depreciation, depletion and
amortization (DD&A) of oil and gas properties on a quarterly basis using the
unit-of-production method based upon production and estimates of proved reserve
quantities. Unevaluated costs and related capitalized interest costs are
excluded
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
from the amortization base until the properties associated with these costs are evaluated. The amortizable base includes estimated future development costs and dismantlement, restoration and abandonment costs, net of estimated salvage values. These future costs are generally estimated by engineers employed by Apache.
Apache limits, on a country-by-country basis, the capitalized costs of proved oil and gas properties, net of accumulated DD&A and deferred income taxes, to the estimated future net cash flows from proved oil and gas reserves discounted at 10 percent, net of related tax effects, plus the lower of cost or fair value of unproved properties included in the costs being amortized. If capitalized costs exceed this limit, the excess is charged to additional DD&A expense. Included in the estimated future net cash flows are Canadian provincial tax credits expected to be realized beyond the date at which the legislation, under its provisions, could be repealed. To date, the Canadian provincial government has not indicated an intention to repeal this legislation.
As a result of low oil and gas prices at December 31, 1998, Apache's capitalized costs of U.S. oil and gas properties exceeded the ceiling limitation and the Company reported a $243.2 million pre-tax ($158.1 million net of tax) non-cash write-down. The write-down is reflected as additional DD&A expense in the accompanying statement of consolidated operations.
The costs of certain unevaluated leasehold acreage and wells being drilled are not being amortized. Costs not being amortized are periodically assessed for possible impairments or reductions in value. If a reduction in value has occurred, costs being amortized are increased or a charge is made against earnings for those international operations where a reserve base is not yet established.
Buildings, equipment and gas gathering, transmission and processing facilities are depreciated on a straight-line basis over the estimated useful lives of the assets, which range from two to 15 years. Accumulated depreciation for these assets totaled $70.0 million and $51.8 million at December 31, 1998 and 1997, respectively.
Accounts Payable -- Included in accounts payable at December 31, 1998 and 1997, are liabilities of approximately $24.0 million and $36.3 million, respectively, representing the amount by which checks issued, but not presented to the Company's banks for collection, exceeded balances in applicable bank accounts.
Revenue Recognition -- Apache uses the sales method of accounting for natural gas revenues. Under this method, revenues are recognized based on actual volumes of gas sold to purchasers. The volumes of gas sold may differ from the volumes to which Apache is entitled based on its interests in the properties. Differences between volumes sold and entitled volumes create gas imbalances which are generally reflected as adjustments to reported proved gas reserves and future cash flows in the Company's supplemental oil and gas disclosures. Adjustments for gas imbalances totaled approximately one percent of Apache's proved gas reserves at December 31, 1998. Revenue is deferred and a liability is recorded for those properties where the estimated remaining reserves will not be sufficient to enable the underproduced owner to recoup its entitled share through production.
Derivative Instruments and Hedging Activities -- Apache periodically enters into commodity derivatives contracts and fixed-price physical contracts to manage its exposure to oil and gas price volatility. Commodity derivatives contracts, which are usually placed with major financial institutions that the Company believes are minimal credit risks, may take the form of futures contracts, swaps or options. The oil and gas reference prices upon which these commodity derivatives contracts are based reflect various market indices that have a high degree of historical correlation with actual prices received by the Company. The Company accounts for its commodity derivatives contracts using the hedge (or deferral) method of accounting. Under this method, realized gains and losses from the Company's price risk management activities are recognized in oil and gas production revenues when the associated production occurs and the resulting cash flows are reported as cash flows from operating activities. Gains and losses on commodity derivatives contracts that are closed before the hedged production occurs are deferred until the production month originally hedged. In the event of a loss of correlation between changes in oil and gas reference prices under a commodity derivatives contract and actual
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
oil and gas prices, a gain or loss is recognized currently to the extent the commodity derivatives contract has not offset changes in actual oil and gas prices.
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value, and requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of consolidated operations, and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting treatment. SFAS No. 133 is required to be adopted on January 1, 2000, although earlier adoption is permitted. The Company is analyzing the effects of SFAS No. 133, but has not yet quantified the impact on its financial statements or determined the timing or method of adoption. Management does not believe that the adoption of SFAS No. 133 will have a material impact on the Company's financial condition or results of operations.
Income Taxes -- The Company follows the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements and (ii) operating loss and tax credit carryforwards for tax purposes. Deferred tax assets are reduced by a valuation allowance when, based upon management's estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period.
Foreign Currency Translation -- The U.S. dollar is considered the functional currency for each of the Company's international operations, except for its Canadian subsidiary whose functional currency is the Canadian dollar. Translation adjustments resulting from translating the Canadian subsidiary's foreign currency financial statements into U.S. dollar equivalents are reported separately and accumulated in other comprehensive income. For other international operations, transaction gains or losses are recognized in net income.
Net Income (Loss) Per Common Share -- Basic and diluted net income (loss) per common share have been computed in accordance with SFAS No. 128, "Earnings per Share." Basic net income (loss) per common share is computed by dividing income (loss) attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted net loss per common share does not reflect dilution from potential common shares, because to do so would have been antidilutive. Calculations of basic and diluted net income (loss) per common share are illustrated in Note 7.
Stock-Based Compensation -- The Company accounts for employee stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Nonemployee stock-based compensation is accounted for using the fair value method in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation."
Comprehensive Income -- In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income," which requires companies to report the components of comprehensive income in a financial statement with the same prominence as other financial statements. The Company has chosen to disclose comprehensive income, which is comprised of net income (loss) and foreign currency translation adjustments, in the accompanying statement of consolidated shareholders' equity. This information is shown for all periods presented.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Segment Information -- In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" which established standards for the way that enterprises report information about operating segments and related information. The Company adopted the disclosure requirements of SFAS No. 131 at year-end 1998 and restated prior-year comparative information.
Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates. Significant estimates with regard to these financial statements include the estimate of proved oil and gas reserve quantities and the related present value of estimated future net cash flows therefrom (see supplemental oil and gas disclosures).
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
On November 13, 1998, the Company entered into agreements to acquire certain oil and gas interests and companies holding oil and gas interests in the Carnarvon Basin, offshore Western Australia, from subsidiaries of Novus Petroleum Limited (Novus) for approximately $55 million. The interests have estimated proved reserves of approximately 5.8 MMboe and daily production of 2,400 barrels of oil equivalent. They are within the Apache-operated Harriet Joint Venture (which includes production, processing and pipeline infrastructure associated with the Varanus Island hub), the Airlie Joint Venture (in which the Company held a prior interest and became operator) and three other exploration permit areas. The transaction closed in two stages, on December 18, 1998 (approximately $49 million) and on January 29, 1999 (approximately $6 million). Under the terms of an agreement with Novus, the Company may be required to make additional payments to Novus based on proved and probable recoverable oil and condensate reserves, as determined by independent engineers, on a defined geological structure in the Gipsy-Rose-Lee area, offshore Western Australia. If required, such payments would be calculated using $2.50 for each barrel of proved and $1.25 for each barrel of probable oil and condensate reserves. A payment becomes due if and when a decision is made to construct facilities for the production of oil or condensate from the designated area.
The purchase price for the portion of the transaction completed in 1998 was allocated to the assets purchased and the liabilities assumed based upon the fair values on the date of acquisition, as follows:
(IN THOUSANDS)
Value of properties acquired, including gathering and
transportation facilities................................. $55,223
Working capital acquired, net............................... 2,658
Deferred income tax liability............................... (9,382)
-------
Cash paid, net of cash acquired............................. $48,499
=======
|
In 1998, the Company also completed tactical regional acquisitions for cash consideration totaling $19.4 million. These acquisitions added approximately 9.1 MMboe to the Company's proved reserves.
In November 1997, the Company acquired all the capital stock of three companies owning interests in certain oil and gas properties (including 31.9 MMboe of proved oil and natural gas reserves) and production facilities offshore Western Australia for approximately $300 million from subsidiaries of Mobil Exploration & Producing Australia Pty Ltd (Ampolex Group Transaction). The Ampolex Group Transaction, net of the subsequent sale of certain properties to Hardy Petroleum Limited (Hardy), increased the Company's interest to 47.5 percent from 22.5 percent in the Carnarvon Basin's Harriet area, which includes the Varanus Island
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
pipeline, processing and production complex and eight existing oil and gas fields. The transaction also increased the Company's interest in the East Spar field, which produces through the Varanus Island facilities, to 45 percent from 20 percent. Apache operates the Harriet and East Spar properties.
The purchase price was allocated to the assets purchased and the liabilities assumed based upon the fair values on the date of acquisition, as follows:
(IN THOUSANDS)
Value of properties acquired, including gathering and
transportation facilities................................. $264,539
Assets held for resale...................................... 63,058
Working capital acquired, net............................... 6,692
Deferred income tax liability............................... (34,437)
--------
Cash paid, net of cash acquired............................. $299,852
========
|
In conjunction with the closing of the Ampolex Group Transaction, the Company entered into an agreement with Hardy on December 9, 1997, under which Hardy agreed to purchase a 10 percent interest in the Company's East Spar field and related production facilities. The transaction closed on January 28, 1998, with a total sales price of approximately $63 million in cash. The assets sold to Hardy were reported as assets held for resale in the accompanying consolidated balance sheet at December 31, 1997.
In 1997, the Company also completed tactical regional acquisitions for cash consideration totaling $33.6 million. These acquisitions added approximately 6.6 MMboe to the Company's proved reserves.
In May 1996, Apache acquired, for approximately $396.3 million, The Phoenix Resource Companies, Inc. (Phoenix, now known as Apache PHN Company, Inc.), an oil and gas company operating primarily in the Arab Republic of Egypt, through a merger (Phoenix Merger) which resulted in Phoenix becoming a wholly owned subsidiary of Apache. Pursuant to the Merger Agreement, shares of Phoenix common stock then outstanding and outstanding Phoenix stock options (which were assumed by Apache) were converted into the right to receive (a) .75 shares of Apache common stock with any fractional shares paid in cash, without interest, and (b) $4.00 in cash. As a result, 12.2 million shares of Apache common stock, valued at $26 per share, were issued and approximately $65 million was paid to former Phoenix shareholders.
In 1996, the Company also completed tactical regional acquisitions for cash
consideration totaling $115.0 million. These acquisitions added approximately
18.9 MMboe to the Company's proved reserves.
Each transaction described above has been accounted for using the purchase method of accounting and has been included in the financial statements of Apache since the date of acquisition.
The following unaudited pro forma financial information shows the effect on the Company's consolidated results of operations as if the Phoenix Merger occurred on January 1, 1996. The pro forma data is based on numerous assumptions and is not necessarily indicative of future results of operations.
FOR THE YEAR ENDED
DECEMBER 31, 1996
-------------------------
AS REPORTED PRO FORMA
------------ ----------
(IN THOUSANDS, EXCEPT PER
(UNAUDITED) COMMON SHARE DATA)
Revenues.................................................... $977,151 $992,077
Net income.................................................. 121,427 125,040
Net income per common share:
Basic..................................................... $ 1.42 $ 1.39
Diluted................................................... 1.38 1.36
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 1, 1999, the Company acquired oil and gas properties located in the Gulf of Mexico from Petsec Energy Inc. (Petsec) for an adjusted purchase price of approximately $66.7 million. The Petsec transaction included estimated proved reserves of approximately 10.4 MMboe on the effective date.
Divestitures
In 1998, Apache sold marginal properties, primarily in North America, containing 29.6 MMboe of proved reserves, for $131.1 million. Apache used the sales proceeds to reduce bank debt.
Apache received $30.1 million in each of 1997 and 1996 from the sale of non-strategic oil and gas properties in a number of separate transactions.
3. INVESTMENTS IN EQUITY SECURITIES
At December 31, 1998 and 1997, Apache had no investments in equity securities.
The Company realized losses from the sale of equity securities totaling approximately $364,000 during 1998, and gains totaling approximately $13,000 and $770,000 during 1997 and 1996, respectively. Apache utilizes the average cost method in computing realized gains or losses, which are included in other revenues in the accompanying statement of consolidated operations.
4. DEBT
Long-Term Debt
DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(IN THOUSANDS)
Apache:
Global credit facility -- U.S............................. $ -- $ --
Money market lines of credit.............................. 15,500 17,200
Commercial paper, expected to be refinanced............... 59,000 50,800
6-percent convertible subordinated debentures due 2002.... -- 172,500
9.25-percent notes due 2002, net of discount.............. 99,842 99,805
7-percent notes due 2018, net of discount................. 148,246 --
7.7-percent notes due 2026, net of discount............... 99,642 99,638
7.95-percent notes due 2026, net of discount.............. 178,544 178,531
7.375-percent debentures due 2047, net of discount........ 147,988 147,984
7.625-percent debentures due 2096, net of discount........ 149,175 149,175
---------- ----------
897,937 915,633
---------- ----------
Subsidiary and other obligations:
Global credit facility -- Australia....................... 148,000 139,000
Global credit facility -- Canada.......................... 5,000 116,000
Revolving credit facility -- Egypt........................ 109,780 150,000
DEKALB 9.875-percent notes due 2000....................... 29,225 29,225
Apache Finance 6.5-percent notes due 2007, net of
discount............................................... 168,816 168,722
---------- ----------
460,821 602,947
---------- ----------
Total debt.................................................. 1,358,758 1,518,580
Less: current maturities.................................... (15,500) (17,200)
---------- ----------
Long-term debt.............................................. $1,343,258 $1,501,380
========== ==========
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, Apache replaced its $1 billion global borrowing-base credit facility with a new $1 billion global corporate credit facility (global credit facility). The global credit facility consists of three separate bank facilities: a $700 million facility in the United States; a $175 million facility in Australia; and a $125 million facility in Canada. The global credit facility enables Apache to draw on the entire $1 billion facility without restrictions tied to periodic revaluation of the Company's oil and gas reserves. As of December 31, 1998, Apache's available borrowing capacity under the global credit facility was $788 million. Under the financial covenants of the global credit facility, the Company must (i) maintain a consolidated tangible net worth, as defined, of at least $1.1 billion as of December 31, 1998, which is adjusted for subsequent earnings, and (ii) maintain a ratio of debt to capitalization of not greater than 60 percent at the end of any fiscal quarter. The Company was in compliance with all financial covenants at December 31, 1998.
The global credit facility is scheduled to mature on June 12, 2002, in the amount of $40 million and the remaining $960 million on June 12, 2003. The agreement provides for perpetual one-year extensions as requested by the Company, subject to the approval of the lenders. At the Company's option, the interest rate is based on (i) the greater of (a) The Chase Manhattan Bank's prime rate or (b) the federal funds rate plus one-half of one percent, (ii) the London Interbank Offered Rate (LIBOR) plus a margin determined by the Company's senior long-term debt rating, or (iii) a margin that is determined by competitive bids from the participating banks. At December 31, 1998, the margin over LIBOR for committed loans was .185 percent. The Company also pays a quarterly facility fee of .09 percent on the total amount of each of the three facilities, which fee varies based upon the Company's senior long-term debt rating.
At December 31, 1998, the Company also had certain uncommitted money market lines of credit which are used from time to time for working capital purposes. As of December 31, 1998, an aggregate of $15.5 million was outstanding under such credit lines.
In January 1997, the Company established a $300 million commercial paper program which enables Apache to borrow funds for up to 270 days at competitive interest rates. In June 1997, Apache expanded its commercial paper program to $700 million from $300 million to provide access to additional low-cost, short- term funds. Since its inception in January 1997, the Company's commercial paper program has been rated A-2, Prime-2 and D-1- (D-One-Minus) by Standard & Poor's, Moody's and Duff and Phelps, respectively. As of December 31, 1998, $59.0 million was outstanding under Apache's commercial paper program. The commercial paper is classified as long-term debt in the accompanying consolidated balance sheet as the Company has the ability and intent to refinance such amounts on a long-term basis through either the rollover of commercial paper or available borrowing capacity under the global credit facility.
In January 1998, approximately 90 percent, or $155.6 million, of the Company's 6-percent convertible subordinated debentures was converted into approximately 5.1 million shares of Apache common stock at a conversion price of $30.68 per share. The remaining $16.9 million of principal amount was redeemed for $17.4 million in cash, plus accrued and unpaid interest. The Company recorded a $.8 million loss on the early extinguishment of debt in January 1998.
The 9.25-percent notes totaling $100 million were issued by Apache in May 1992 and are redeemable at maturity in June 2002.
In February 1998, Apache issued $150 million principal amount, $148.2 million net of discount, of senior unsecured 7-percent notes maturing on February 1, 2018. The notes are not redeemable prior to maturity.
In February 1996, Apache issued $100 million principal amount, $99.6 million net of discount, of senior unsecured 7.7-percent notes due March 15, 2026. In April 1996, the Company issued $180 million principal amount, $178.5 million net of discount, of senior unsecured 7.95-percent notes maturing on April 15, 2026. The notes are not redeemable prior to maturity; however, under certain conditions, Apache has the right to advance maturity of these notes.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1997, Apache issued $150 million principal amount, $148 million net of discount, of senior unsecured 7.375-percent debentures maturing on August 15, 2047. The debentures are not redeemable prior to maturity; however, Apache has the right to advance maturity, under certain conditions.
In November 1996, Apache issued $150 million principal amount, $149.2 million net of discount, of senior unsecured 7.625-percent debentures maturing on November 1, 2096. The debentures are not redeemable prior to maturity; however, under certain conditions, Apache has the right to advance maturity of these debentures.
Upon certain changes in control, the debt instruments described in the preceding five paragraphs are subject to mandatory repurchase.
In October 1997, three of the Company's Egyptian subsidiaries entered into a secured, revolving credit facility with a group of banks. The facility provides for total commitments of $250 million, with availability determined by a borrowing base formula predicated upon those subsidiaries' oil and gas reserve quantities, forecast rates of production, and future oil and gas prices. The borrowing base is $121.8 million at December 31, 1998 and will be redetermined semi-annually. The total amount of commitments under the facility is currently scheduled to be reduced by set increments every six months, beginning two and one-half years after the effective date of the facility. The facility is presently secured solely by assets associated with the Company's Qarun and Khalda concessions and shares of stock of the Company's subsidiaries holding those concessions, with provisions that will permit the inclusion of other of the Company's Egyptian subsidiaries as borrowers with security interests on such subsidiaries' assets and shares of stock. Interest is assessed at LIBOR plus a margin of .375 percent, which is scheduled to increase to .625 percent on the third anniversary of the facility; however, if the facility is extended the rate increase would occur two years from the end of the facility's extended term. A quarterly fee of .375 percent is payable on the available portion of the commitments, while a quarterly fee of .1875 percent is payable on the difference between the borrowing base and the total amount of commitments under the facility. The facility is scheduled to mature on January 3, 2003.
The DEKALB 9.875-percent notes mature on July 15, 2000 and are not redeemable prior to their maturity.
In December 1997, Apache Finance Pty Ltd (Apache Finance), the Company's Australian finance subsidiary, issued $170 million principal amount, $168.7 million net of discount, of senior unsecured 6.5-percent notes due December 15, 2007. In March 1999, Apache Finance issued $100 million principal amount, $99.3 million net of discount, of senior unsecured 7.0-percent notes due March 15, 2009. These notes are irrevocably and unconditionally guaranteed by Apache. The Company has the right to redeem these notes prior to maturity, under certain conditions related to changes in relevant tax laws. Also, upon certain changes in control, these notes are subject to mandatory repurchase.
As of December 31, 1998 and 1997, the Company had approximately $13.4 million and $18.2 million, respectively, of unamortized costs associated with its various debt obligations. These costs are reflected as deferred charges in the accompanying consolidated balance sheet and are being amortized over the life of the related debt.
The indentures for the notes and debentures described above place certain restrictions on the Company, including limits on Apache's ability to incur debt secured by certain liens and its ability to enter into certain sale and leaseback transactions.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate Maturities of Debt
(IN THOUSANDS)
1999........................................................ $ 15,500
2000........................................................ 29,225
2001........................................................ --
2002........................................................ 209,622
2003........................................................ 212,000
Thereafter.................................................. 892,411
----------
$1,358,758
==========
|
5. INCOME TAXES
Income (loss) before income taxes is composed of the following:
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- -------- --------
(IN THOUSANDS)
United States....................................... $(241,861) $171,304 $154,759
International....................................... 54,298 87,336 45,436
--------- -------- --------
Total..................................... $(187,563) $258,640 $200,195
========= ======== ========
|
The total provision (benefit) for income taxes consists of the following:
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
--------- --------- --------
(IN THOUSANDS)
Current taxes:
Federal............................................. $ -- $ 300 $ --
Foreign............................................. 23,680 35,164 17,432
Deferred taxes........................................ (81,856) 68,280 61,336
-------- -------- -------
Total....................................... $(58,176) $103,744 $78,768
======== ======== =======
|
A reconciliation of the federal statutory income tax amounts to the effective amounts is shown below:
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
--------- --------- --------
(IN THOUSANDS)
Statutory income tax.................................. $(65,647) $ 90,524 $70,068
State income tax, less federal benefit................ 38 3,987 4,558
Taxation of foreign operations........................ 8,710 10,842 5,226
All other, net........................................ (1,277) (1,609) (1,084)
-------- -------- -------
$(58,176) $103,744 $78,768
======== ======== =======
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net deferred tax liability is comprised of the following:
DECEMBER 31,
---------------------
1998 1997
--------- ---------
(IN THOUSANDS)
Deferred tax assets:
Deferred income........................................... $ (9,087) $ (2,259)
Federal net operating loss carryforwards.................. (88,411) (79,009)
State net operating loss carryforwards.................... (12,670) (12,562)
Statutory depletion carryforwards......................... (3,720) (3,316)
Alternative minimum tax credits........................... (9,141) (9,141)
Accrued expenses and liabilities.......................... (5,590) (5,452)
Other..................................................... (5,374) (12,090)
--------- ---------
Total deferred tax assets......................... (133,993) (123,829)
Valuation allowance......................................... 1,704 1,704
--------- ---------
Net deferred tax assets........................... (132,289) (122,125)
--------- ---------
Deferred tax liabilities:
Depreciation, depletion and amortization.................. 391,624 471,403
Other..................................................... 11,158 6,341
--------- ---------
Total deferred tax liabilities.................... 402,782 477,744
--------- ---------
Deferred income tax liability............................... $ 270,493 $ 355,619
========= =========
|
U.S. deferred taxes have not been provided on foreign earnings totaling $211.7 million, which are permanently reinvested abroad. Presently, limited foreign tax credits are available to reduce the U.S. taxes on such amounts if repatriated.
At December 31, 1998, the Company had U.S. federal net operating loss carryforwards of $237.0 million that will expire beginning in 1999, and U.S. and foreign statutory depletion carryforwards totaling $9.9 million that can be carried forward indefinitely. The Company has alternative minimum tax (AMT) credit carryforwards of $9.1 million that can be carried forward indefinitely, but which can be used only to reduce regular tax liabilities in excess of AMT liabilities. The Company has investment and other tax credit carryforwards of $1.7 million that will expire beginning in 1999, which have been fully reserved through the valuation allowance.
6. ADVANCES FROM GAS PURCHASERS
In July 1998, Apache received $71.8 million from a purchaser as an advance payment for future natural gas deliveries ranging from 6,726 MMBtu per day to 24,669 MMBtu per day, for a total of 45,330,949 MMBtu, over a ten-year period commencing August 1998. As a condition of the arrangement with the purchaser, Apache entered into three gas price swap contracts with a third party under which Apache became a fixed price payor for identical volumes at prices ranging from $2.34 per MMBtu to $2.56 per MMBtu. In addition, the purchaser pays Apache a monthly fee of $.08 per MMBtu on the contracted volumes. The net result of these related transactions is that gas delivered to the purchaser is reported as revenue at prevailing spot prices with Apache realizing a premium associated with the monthly fee paid by the purchaser.
In August 1997, Apache received $115.2 million from a purchaser as an advance payment for future natural gas deliveries of 20,000 MMBtu per day over a ten-year period commencing September 1997. As a condition of the arrangement with the purchaser, Apache entered into two gas price swap contracts with a third party under which Apache became a fixed price payor for identical volumes at average prices starting at
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$2.19 per MMBtu in 1997 and escalating to $2.59 per MMBtu in 2007. In addition, the purchaser pays Apache a monthly fee of $.07 per MMBtu on the contracted volumes. The net result of these related transactions is that gas delivered to the purchaser is reported as revenue at prevailing spot prices with Apache realizing a premium associated with the monthly fee paid by the purchaser.
In December 1994, Apache received $67.4 million from a purchaser as an advance payment for future natural gas deliveries of 20,000 MMBtu per day over a six-year period commencing January 1995. As a condition of the arrangement with the purchaser, Apache entered into a gas price swap contract with a third party under which Apache became a fixed price payor for identical volumes at prices starting at $1.81 per MMBtu in 1995 and escalating at $.10 per MMBtu per year through the year 2000. The net result of these related transactions is that gas delivered to the purchaser is reported as revenue at prevailing spot prices with Apache realizing a $.05 per MMBtu premium associated with a monthly fee paid by the purchaser.
The Company, through its marketing subsidiaries, may purchase gas from third parties to satisfy gas delivery requirements under these arrangements. Contracted volumes relating to these arrangements are included in the Company's supplemental oil and gas disclosures.
These advance payments have been classified as advances on the balance sheet and are being reduced as gas is delivered to the purchasers under the terms of the contracts. At December 31, 1998 and 1997, advances of $205.5 million and $154.5 million, respectively, were outstanding. Gas volumes delivered to the purchaser are reported as revenue at prices used to calculate the amount advanced, before imputed interest, plus or minus amounts paid or received by Apache applicable to the price swap agreements. Interest expense is recorded based on a rate of 8 percent on the 1998 and 1997 advances, and 9.5 percent on the 1994 advances.
7. CAPITAL STOCK
Common Stock Outstanding
1998 1997 1996
---------- ---------- ----------
Balance, beginning of year............................... 93,304,541 90,058,797 77,378,958
Treasury shares acquired, net............................ (846,968) (9,016) (45,297)
Shares issued for:
Conversion of 6-percent convertible debentures......... 5,070,914 -- --
Acquisition of oil and gas property interests.......... 176,836 -- --
Conversion of 3.93-percent convertible notes........... -- 2,777,777 --
Phoenix merger......................................... -- -- 12,189,918
Dividend reinvestment plan............................. -- 34,249 25,148
401(k) savings plan.................................... 10,477 182,742 183,059
Stock option plans..................................... 53,322 259,992 317,775
Other.................................................. -- -- 9,236
---------- ---------- ----------
Balance, end of year..................................... 97,769,122 93,304,541 90,058,797
========== ========== ==========
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net Income (Loss) Per Common Share -- A reconciliation of the components of basic and diluted net income (loss) per common share for the years ended December 31, 1998, 1997 and 1996 is presented in the table below:
1998 1997 1996
--------------------------- ------------------------- -------------------------
PER PER PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
--------- ------ ------ -------- ------ ----- -------- ------ -----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Basic:
Income (loss) attributable to common
stock................................. $(131,391) 98,066 $(1.34) $154,896 90,677 $1.71 $121,427 85,777 $1.42
====== ===== =====
Effect of Dilutive Securities:
Stock options........................... -- -- -- 519 -- 374
3.93%-convertible notes................. -- -- 1,859 2,435 2,114 2,778
6%-convertible debentures............... -- -- 6,919 5,623 6,916 5,623
--------- ------ -------- ------ -------- ------
Diluted:
Income (loss) attributable to common
stock, including assumed
conversions........................... $(131,391) 98,066 $(1.34) $163,674 99,254 $1.65 $130,457 94,552 $1.38
========= ====== ====== ======== ====== ===== ======== ====== =====
|
The effect of stock options and the 6-percent convertible subordinated debentures were not included in the computation of diluted net income (loss) per common share during 1998, because to do so would have been antidilutive.
Stock Option Plans -- At December 31, 1998, officers and certain key employees had been granted options to purchase the Company's common stock under employee stock option plans adopted in 1990, 1995 and 1998 and under certain predecessor plans (collectively, the Stock Option Plans). Under the Stock Option Plans, the exercise price of each option equals the market price of Apache's common stock on the date of grant. Options generally become exercisable ratably over a four-year period and expire after 10 years. The Company may issue up to 6,489,031 shares of common stock under the Stock Option Plans, of which options to acquire 2,006,350 shares of common stock remained available for grant at December 31, 1998.
On October 31, 1996, the Company established the 1996 Performance Stock Option Plan (the Performance Plan) for substantially all full-time employees, excluding officers and certain key employees. Under the Performance Plan, the exercise price of each option equals the market price of Apache common stock on the date of grant. All options become exercisable after nine and one-half years and expire ten years from the date of grant; however, exercisability will be accelerated if share price goals of $50 and $60 per share are attained before January 1, 2000. Under the terms of the Performance Plan, no grants may be made after December 31, 1998.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the plans described above as of December 31, 1998, 1997, and 1996, and changes during the years then ended, is presented in the table and narrative below (shares in thousands):
1998 1997 1996
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE
------ -------- ------ -------- ------ --------
Outstanding, beginning of year...... 3,629 $32.20 2,885 $30.82 1,218 $23.91
Granted............................. 1,243 32.53 1,228 34.59 2,032 33.26
Exercised........................... (20) 26.68 (145) 23.02 (224) 17.58
Forfeited........................... (431) 33.98 (339) 33.08 (141) 27.30
------ ------ ------
Outstanding, end of year(1)......... 4,421 32.15 3,629 32.20 2,885 30.82
====== ====== ======
Exercisable, end of year............ 1,223 28.86 729 26.96 467 23.88
====== ====== ======
Available for grant, end of year.... 2,006 603 1,503
====== ====== ======
Weighted average fair value of
options granted during the
year(2)........................... $10.87 $11.73 $ 9.80
====== ====== ======
|
The following table summarizes information about stock options covered by the plans described above that are outstanding at December 31, 1998 (shares in thousands):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
NUMBER OF WEIGHTED NUMBER OF
SHARES AVERAGE WEIGHTED SHARES WEIGHTED
UNDER REMAINING AVERAGE UNDER AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
------------------------ ----------- ----------- -------- ----------- --------
$ 2.393 - $19.625........................... 67 2.50 $16.80 67 $16.80
21.000 - 29.875........................... 1,272 7.26 27.22 677 27.03
30.250 - 36.000........................... 2,952 8.37 34.24 457 32.74
36.375 - 42.438........................... 130 8.71 40.66 22 41.00
----- -----
4,421 1,223
===== =====
|
(1) Excludes 449,600, 496,900 and 644,100 shares as of December 31, 1998, 1997 and 1996, respectively, issuable under stock options assumed by Apache in connection with the Phoenix Merger.
(2) The fair value of each option is estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1998, 1997 and 1996, respectively: (i) risk-free interest rates of 5.46, 6.33 and 6.19 percent; (ii) expected lives of five years for the Stock Option Plans, and 2.5 years for the Performance Plan; (iii) expected volatility of 31.17, 31.21 and 30.50 percent, and (iv) expected dividend yields of .88, .82 and .85 percent.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, Apache's shareholders approved the 1996 Share Price Appreciation Plan (the Appreciation Plan) for officers and certain key employees. The Appreciation Plan provides for conditional grants denominated in shares of Apache common stock that vest upon attainment of share price goals of $50 and $60 per share before January 1, 2000. Between 30 and 50 percent of the conditional grants will be paid in cash at the market value of the stock on the date of payment, and the balance (up to a total of 2,000,000 shares in the aggregate) will be issued in Apache common stock. Generally, any vested amounts will be distributed in three installments over the 36-month period following attainment of the share price goals. When and if the share price goals are achieved, the Company will recognize compensation expense over the 36-month period equal to the value of the stock as of the date the share price goal is achieved (i.e., $50 or $60 per share, as appropriate) and the actual amount of cash paid. The shares of Apache common stock contingently issuable under the Appreciation Plan will be excluded from the computation of net income (loss) per common share until the stated share price goals of $50 and $60 per share are achieved. Under the terms of the Appreciation Plan, no conditional grants may be made after December 31, 1998.
A summary of the status of the Appreciation Plan as of December 31, 1998 and 1997, and changes during the years then ended, is presented in the table and narrative below (shares in thousands):
SHARES SUBJECT TO
CONDITIONAL GRANTS
-------------------
1998 1997
-------- --------
Outstanding, beginning of year.............................. 1,719 --
Granted..................................................... 190 1,965
Forfeited................................................... (200) (246)
------ ------
Outstanding, end of year.................................... 1,709 1,719
====== ======
Exercisable, end of year.................................... -- --
====== ======
Available for grant, end of year............................ -- 281
====== ======
Weighted average fair value of conditional grants(1)........ $ 6.72 $13.50
====== ======
|
(1) The fair value of each conditional grant is estimated as of the date of grant using a Monte Carlo simulation with the following weighted-average assumptions used for grants in 1998 and 1997, respectively: (i) risk-free interest rates of 5.37 and 6.45 percent; (ii) expected volatility of 33.11 and 28.63 percent; and (iii) expected dividend yields of .82 and .84 percent.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for its stock-based compensation plans under APB Opinion No. 25 and related interpretations, under which no compensation cost has been recognized for the Stock Option Plans, the Performance Plan, or the Appreciation Plan. If compensation costs for these plans had been determined in accordance with SFAS No. 123, the Company's net income and net income per common share would approximate the following pro forma amounts:
1998 1997 1996
------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Income (Loss) Attributable to Common Stock:
As reported....................................... $(131,391) $154,896 $121,427
Pro forma......................................... (141,306) 147,152 119,536
Net Income (Loss) per Common Share:
Basic:
As reported.................................... $ (1.34) $ 1.71 $ 1.42
Pro forma...................................... (1.44) 1.62 1.39
Diluted:
As reported.................................... $ (1.34) $ 1.65 $ 1.38
Pro forma...................................... (1.44) 1.55 1.36
|
The pro forma amounts shown above may not be representative of future results, as the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995.
Preferred Stock
The Company has five million shares of no par preferred stock authorized, of which 25,000 shares have been "designated" as Series A Junior Participating Preferred Stock (the Series A Preferred Stock) and 100,000 shares have been designated as the 5.68 percent Series B Cumulative Preferred Stock (the Series B Preferred Stock). The shares of Series A Preferred Stock are authorized for issuance pursuant to certain rights that trade with Apache common stock outstanding and are reserved for issuance upon the exercise of the Rights as defined and discussed below.
Series B Preferred Stock -- In August 1998, Apache issued 100,000 shares of Series B Preferred Stock in the form of one million depositary shares, each representing one-tenth (1/10) of a share of Series B Preferred Stock. The Series B Preferred Stock has no stated maturity, is not subject to a sinking fund and is not convertible into Apache common stock or any other securities of the Company. Apache has the option to redeem the Series B Preferred Stock at $1,000 per share on or after August 25, 2008. Holders of the shares are entitled to receive cumulative cash dividends at an annual rate of $5.68 per depositary share when, and if, declared by Apache's board of directors. The net proceeds of approximately $98.4 million were used to repay debt outstanding under money market lines of credit and to reduce outstanding borrowings under the Canadian portion of the Company's global credit facility.
Rights to Purchase Series A Preferred Stock -- In December 1995, the Company declared a dividend of one right (a Right) for each share of Apache common stock outstanding on January 31, 1996. Each Right entitles the registered holder to purchase from the Company one ten-thousandth (1/10,000) of a share of Series A Preferred Stock at a price of $100 per one ten-thousandth of a share, subject to adjustment. The Rights are exercisable 10 calendar days following a public announcement that certain persons or groups have acquired 20 percent or more of the outstanding shares of Apache common stock or 10 business days following commencement of an offer for 30 percent or more of the outstanding shares of Apache common stock. In addition, if the Company engages in certain business combinations or a 20 percent shareholder engages in certain transactions with the Company, the Rights become exercisable for Apache common stock or common stock of the corporation acquiring the Company (as the case may be) at 50 percent of the then-market price.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Any Rights that are or were beneficially owned by a person who has acquired 20 percent or more of the outstanding shares of Apache common stock and who engages in certain transactions or realizes the benefits of certain transactions with the Company will become void. The Company may redeem the Rights at $.01 per Right at any time until 10 business days after public announcement that a person has acquired 20 percent or more of the outstanding shares of Apache common stock. The Rights will expire on January 31, 2006, unless earlier redeemed by the Company. Unless the Rights have been previously redeemed, all shares of Apache common stock issued by the Company after January 31, 1996 will include Rights. Unless and until the Rights become exercisable, they will be transferred with and only with the shares of Apache common stock.
8. NON-CASH INVESTING AND FINANCING ACTIVITIES
A summary of non-cash investing and financing activities is presented below:
In December 1998, the Company acquired certain oil and gas interests from subsidiaries of Novus for cash and the assumption of certain liabilities. The accompanying financial statements include the amounts detailed in Note 2.
In June 1998, Apache formed a strategic alliance with Cinergy Corp. (Cinergy) and sold its 57 percent interest in ProEnergy for 771,258 shares of Cinergy common stock valued at $26.5 million.
In March 1998, Apache acquired certain oil and gas property interests for approximately 177,000 shares of Apache common stock valued at $6.1 million.
In January 1998, approximately 90 percent, or $155.6 million principal amount, of the Company's 6-percent convertible subordinated debentures was converted into approximately 5.1 million shares of Apache common stock at a conversion price of $30.68 per share.
In November 1997, Apache acquired certain assets through the Ampolex Group Transaction for cash and the assumption of certain liabilities. The accompanying financial statements include the amounts detailed in Note 2.
In November 1997, the Company's $75 million principal amount of 3.93-percent convertible notes were converted into approximately 2.8 million shares of Apache common stock at a conversion price of $27 per share.
In May 1996, Apache acquired Phoenix for cash and shares of Apache common stock, and assumed certain outstanding Phoenix stock options. The accompanying financial statements include the following attributable to the Phoenix Merger:
(IN THOUSANDS)
Value of properties acquired, including gathering
facilities................................................ $ 386,237
Other non-cash assets acquired.............................. 7,901
Common stock issued and options to purchase common stock
assumed (12.2 million and .8 million shares,
respectively)............................................. (322,860)
Liabilities assumed......................................... (27,984)
---------
Cash paid, net of cash acquired............................. $ 43,294
=========
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Supplemental Disclosure of Cash Flow Information:
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
Cash paid during the year for:
Interest, net of amounts capitalized.................. $71,968 $63,633 $53,228
Income and other taxes, net of refunds................ 23,680 35,464 6,241
|
9. FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISK
The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1998 and 1997.
1998 1997
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
Cash and cash equivalents.......................... $ 14,537 $ 14,537 $ 9,686 $ 9,686
Long-term debt:
Bank debt........................................ 262,780 262,780 405,000 405,000
Commercial paper................................. 59,000 59,000 50,800 50,800
7.95-percent notes............................... 178,544 195,624 178,531 203,868
7.625-percent debentures......................... 149,175 147,749 149,175 159,510
7-percent notes.................................. 148,246 148,410 -- --
7.375-percent debentures......................... 147,988 152,055 147,984 159,825
9.25-percent notes............................... 99,842 109,290 99,805 111,210
7.7-percent notes................................ 99,642 105,660 99,638 110,140
6-percent convertible subordinated debentures.... -- -- 172,500 197,944
Money market lines of credit..................... 15,500 15,500 17,200 17,200
Apache Finance 6.5-percent notes................. 168,816 171,530 168,722 169,881
DEKALB 9.875-percent notes....................... 29,225 30,589 29,225 31,598
Hedging financial instruments:
Commodity price swaps
-- Natural gas(1)............................. -- (13,066) -- 3,319
-- Oil........................................ -- 3 -- --
|
(1) The fair value of natural gas price swaps at December 31, 1998 and 1997 reflects fixed-to-floating price swaps where there is an offsetting position with a physical contract. See Commodity Price Hedges.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following methods and assumptions were used to estimate the fair value of the financial instruments summarized in the table above. The carrying values of trade receivables and trade payables included in the accompanying consolidated balance sheet approximated market value at December 31, 1998 and 1997.
Cash and Cash Equivalents -- The carrying amounts approximated fair value due to the short maturity of these instruments.
Long-Term Debt -- The fair values of the 7.95-percent, 7.7-percent, 9.25-percent, 6.5-percent and 7-percent notes and the 7.375-percent debentures are based on the quoted market prices for those issues. The fair values of the 9.875-percent notes and 7.625-percent debentures are, and the 6-percent convertible subordinated debentures were, based upon estimates provided to the Company by independent investment banking firms. The carrying amount of the bank debt, commercial paper and money market lines of credit approximates fair value because the interest rates are variable and reflective of market rates.
Commodity Price Hedges -- Apache periodically enters into commodity derivative contracts and fixed-price physical contracts to manage its exposure to oil and gas price volatility. Commodity derivatives contracts, which are usually placed with major financial institutions that the Company believes are minimal credit risks, may take the form of futures contracts, swaps or options. The derivative contracts call for Apache to receive, or make, payments based upon the differential between a fixed and a variable commodity price as specified in the contract. As a result of these activities, Apache recognized hedging gains of $1.3 million and $14.5 million in 1998 and 1997, respectively, and hedging losses of $23.0 million in 1996. The hedging gains and losses are included in oil and gas production revenues in the statement of consolidated operations.
Apache's consolidated balance sheet includes deferred credits totaling $1.0 million and $2.2 million at December 31, 1998 and 1997, respectively, for gains realized on the early termination of commodity derivative contracts in 1998 and prior years. These gains will be recognized as oil and gas production revenues over periods ranging from one to 12 months as the hedged production occurs.
The following table and note thereto cover the Company's pricing and notional volumes on open natural gas commodity derivative contracts as of December 31, 1998:
1999 2000 2001 2002 2003 THEREAFTER
----- ----- ----- ----- ----- ----------
New York Mercantile Exchange Based Swap
Positions:
Pay fixed price (thousand MMBtu/d)(1)...... 50 50 30 30 30 30
Average swap price, per MMBtu(1)........... $2.22 $2.27 $2.27 $2.31 $2.35 $2.49
|
(1) The Company has various contracts to supply gas at fixed prices. In order to lock in a margin on a portion of the volumes, the Company is a fixed price payor on swap transactions. The average physical contract price ranges from $2.26 in 1999 to $2.56 in 2008. The fair value of these hedges was $(13.1) million at December 31, 1998, all of which is related to the arrangements discussed in Note 6.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
Litigation -- The Company is involved in litigation and is subject to governmental and regulatory controls arising in the ordinary course of business. It is the opinion of the Company's management that all claims and litigation involving the Company are not likely to have a material adverse effect on its financial position or results of operations.
Environmental -- Apache, as an owner and operator of oil and gas properties, is subject to various federal, state, local and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. Apache maintains insurance coverage, which it believes, is customary in the industry, although it is not fully insured against all environmental risks.
As part of the Company's due diligence review for acquisitions, Apache conducts an extensive environmental evaluation of purchased properties. Depending on the extent of an identified environmental problem, the Company may exclude a property from the acquisition, require the seller to remediate the property to Apache's satisfaction, or agree to assume liability for remediation of the property. As of December 31, 1998, Apache had a reserve for environmental remediation of approximately $6.1 million. The Company is not aware of any environmental claims existing as of December 31, 1998, which 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 Company's properties.
International Commitments -- The Company, through its subsidiaries, has acquired or has been conditionally or unconditionally granted exploration rights in Australia, Egypt, China, Poland and the Ivory Coast. In order to comply with the contracts and agreements granting these rights, the Company, through various wholly-owned subsidiaries, is committed to expend approximately $154.5 million through 2002.
Retirement and Deferred Compensation Plans -- The Company provides a 401(k) savings plan for employees which allows participating employees to elect to contribute up to 12 percent of their salaries, with Apache making matching contributions up to a maximum of six percent of each employee's salary. In addition, the Company annually contributes six percent of each participating employee's compensation, as defined, to a money purchase retirement plan. The 401(k) plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions which limit the amount of each employee's contributions.
For certain eligible employees, the Company also provides a non-qualified retirement/savings plan which allows the deferral of up to 50 percent of each such employee's salary, and which accepts employee contributions and the Company's matching contributions in excess of the above-referenced restrictions on the 401(k) savings plan and money purchase retirement plan. Additionally, Apache Energy Limited and Apache Canada Ltd. maintain separate retirement plans, as required under the laws of Australia and Canada, respectively.
Vesting in the Company's contributions to the 401(k) savings plan, the money purchase retirement plan and the non-qualified retirement/savings plan occurs at the rate of 20 percent per year. Total expenses under all plans were $7.3 million, $6.3 million and $6.5 million for 1998, 1997 and 1996, respectively. The unfunded liability for all plans has been accrued in the consolidated balance sheet.
Lease Commitments -- The Company has leases for buildings, facilities and equipment with varying expiration dates through 2007. Net rental expense was $8.1 million, $5.8 million and $6.5 million for 1998, 1997 and 1996, respectively.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998, minimum rental commitments under long-term operating leases, net of sublease rentals, and long-term pipeline transportation commitments, ranging from one to 25 years, are as follows:
NET MINIMUM
COMMITMENTS
--------------
(IN THOUSANDS)
1999........................................................ $ 12,422
2000........................................................ 10,112
2001........................................................ 8,866
2002........................................................ 8,694
2003........................................................ 9,097
Thereafter.................................................. 55,147
--------
$104,338
========
|
Partnership in Western Australia -- Apache is a partner in a partnership formed to construct and operate a 62-mile pipeline from Varanus Island to onshore facilities in Western Australia. Apache has a 50 percent interest in the partnership and has guaranteed 50 percent of the partnership's share of construction costs, and any related debt incurred by the partnership, during the construction phase of the pipeline up to the time pipeline certification is obtained. After certification and the finalization of certain documentation related to the partnership's debt, partnership debt will be non-recourse to Apache. The Company has dedicated the production volumes of six take-or-pay gas sales contracts to the pipeline. Apache will be required to prepay transportation tariffs in the event Apache receives payments under the take-or-pay provisions of these contracts, or in the event the Company fails to deliver the volumes required by the contracts and requested by the purchasers.
11. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS
Strategic Alliance with Cinergy -- In June 1998, Apache formed a strategic alliance with Cinergy to market substantially all the Company's natural gas production from North America and sold its 57 percent interest in ProEnergy for 771,258 shares of Cinergy common stock subsequently sold for $26.1 million. ProEnergy will continue to market Apache's North American natural gas production for 10 years, with an option to terminate after six years, under an amended and restated gas purchase agreement effective July 1, 1998. During this period, Apache is generally obligated to deliver most of its North American gas production to Cinergy and, under certain circumstances, reimburse Cinergy if certain gas throughput thresholds are not met. Accordingly, Apache recorded a deferred gain of $20.0 million, subject to adjustment, on the sale of ProEnergy that is being amortized over six years.
Related Parties -- F.H. Merelli, a member of the Company's board of directors since July 1997, is chairman, president and chief executive officer of Key Production Company, Inc. (Key). In the normal course of business, Key paid to Apache during 1998 approximately $7.7 million for Key's proportionate share of drilling and workover costs, mineral interests and routine expenses relating to 369 oil and gas wells in which Key owns interests and for which Apache is the operator. Key received approximately $5.7 million in 1998 for its proportionate share of revenues from such interests, of which approximately $3.4 million was paid directly to Key by Apache or related entities.
Major Purchasers -- In 1998, purchases by ProEnergy and the Egyptian General Petroleum Corporation (EGPC) accounted for 38 percent and 17 percent of the Company's oil and gas production revenues, respectively. In 1997, purchases by ProEnergy and EGPC accounted for 40 percent and 13 percent of the Company's oil and gas production revenues, respectively. In 1996, purchases by ProEnergy accounted for 35 percent of the Company's oil and gas production revenues.
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk -- The Company's revenues are derived principally from uncollateralized sales to customers in the oil and gas industry; therefore, customers may be similarly affected by changes in economic and other conditions within the industry. Apache has not experienced significant credit losses on such sales. Sales of natural gas by Apache to ProEnergy are similarly uncollateralized.
12. BUSINESS SEGMENT INFORMATION
Apache has five reportable segments which are primarily in the business of natural gas and crude oil exploration and production. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit or loss from oil and gas operations before income and expense items incidental to oil and gas operations and income taxes. Apache's reportable segments are managed separately because of their geographic locations. Financial information by operating segment is presented below:
UNITED OTHER
STATES CANADA EGYPT AUSTRALIA INTERNATIONAL TOTAL
---------- -------- -------- --------- ------------- ----------
(IN THOUSANDS)
1998
Oil and Gas Production Revenues... $ 496,238 $ 63,620 $129,123 $ 70,057 $ -- $ 759,038
Operating Expenses:
Depreciation, depletion and
amortization
Recurring.................. 256,507 30,514 59,825 35,961 -- 382,807
Additional................. 243,178 -- -- -- -- 243,178
Operating costs................. 154,264 17,216 23,436 16,638 -- 211,554
Gathering, processing and
marketing, net............... (2,924) -- -- -- -- (2,924)
---------- -------- -------- -------- -------- ----------
Operating Income (Loss)........... $ (154,787) $ 15,890 $ 45,862 $ 17,458 $ -- (75,577)
========== ======== ======== ======== ========
Other Income (Expense):
Equity in loss of affiliates.... (1,558)
Other revenues.................. 840
Administrative, selling and
other........................ (40,731)
Financing costs, net............ (70,537)
----------
Income (Loss) Before Income
Taxes........................... $ (187,563)
==========
Total Long-Lived Assets........... $1,892,020 $290,341 $809,075 $592,979 $143,126 $3,727,541
========== ======== ======== ======== ======== ==========
Total Assets...................... $2,046,628 $305,238 $853,561 $633,981 $156,654 $3,996,062
========== ======== ======== ======== ======== ==========
Additions to Long-Lived Assets.... $ 274,395 $ 73,327 $219,162 $145,037 $ 70,251 $ 782,172
========== ======== ======== ======== ======== ==========
|
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNITED OTHER
STATES CANADA EGYPT AUSTRALIA INTERNATIONAL TOTAL
---------- -------- -------- --------- ------------- ----------
(IN THOUSANDS)
1997
Oil and Gas Production Revenues... $ 740,037 $ 61,328 $132,493 $ 49,915 $ -- $ 983,773
Operating Expenses:
Depreciation, depletion and
amortization................. 292,531 26,028 43,945 18,912 -- 381,416
Operating costs................. 187,753 16,687 16,212 10,718 -- 231,370
Gathering, processing and
marketing, net............... (2,672) -- -- -- -- (2,672)
---------- -------- -------- -------- -------- ----------
Operating Income.................. $ 262,425 $ 18,613 $ 72,336 $ 20,285 $ -- 373,659
========== ======== ======== ======== ========
Other Income (Expense):
Equity in loss of affiliates.... (1,683)
Other revenues.................. (2,768)
Administrative, selling and
other........................ (38,243)
Financing costs, net............ (72,325)
----------
Income Before Income Taxes........ $ 258,640
==========
Total Long-Lived Assets........... $2,243,489 $270,604 $649,758 $483,817 $ 85,517 $3,733,185
========== ======== ======== ======== ======== ==========
Total Assets...................... $2,492,233 $285,214 $687,784 $582,487 $ 90,915 $4,138,633
========== ======== ======== ======== ======== ==========
Additions to Long-Lived Assets.... $ 409,167 $ 69,881 $205,001 $335,986 $ 29,365 $1,049,400
========== ======== ======== ======== ======== ==========
1996
Oil and Gas Production Revenues... $ 691,065 $ 48,204 $ 64,990 $ 28,905 $ -- $ 833,164
Operating Expenses:
Depreciation, depletion and
amortization................. 265,649 20,882 18,113 10,500 -- 315,144
Operating costs................. 188,367 17,234 11,665 8,261 -- 225,527
Gathering, processing and
marketing, net............... (4,100) -- -- -- -- (4,100)
---------- -------- -------- -------- -------- ----------
Operating Income.................. $ 241,149 $ 10,088 $ 35,212 $ 10,144 $ -- 296,593
========== ======== ======== ======== ========
Other Income (Expense):
Equity in loss of affiliates.... (281)
Other revenues.................. 1,400
Administrative, selling and
other........................ (35,911)
Financing costs, net............ (61,606)
----------
Income Before Income Taxes........ $ 200,195
==========
Total Long-Lived Assets........... $2,145,398 $243,003 $488,703 $166,735 $ 56,222 $3,100,061
========== ======== ======== ======== ======== ==========
Total Assets...................... $2,410,180 $260,818 $512,213 $190,867 $ 58,352 $3,432,430
========== ======== ======== ======== ======== ==========
Additions to Long-Lived Assets.... $ 428,208 $ 61,710 $493,088 $ 46,838 $ 21,998 $1,051,842
========== ======== ======== ======== ======== ==========
|
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
Oil and Gas Operations -- The following table sets forth revenue and direct cost information relating to the Company's oil and gas exploration and production activities. Apache has no long-term agreements to purchase oil or gas production from foreign governments or authorities.
UNITED
STATES CANADA EGYPT AUSTRALIA TOTAL
-------- ------- -------- --------- --------
(IN THOUSANDS)
1998
Oil and gas production revenues........... $496,238 $63,620 $129,123 $70,057 $759,038
-------- ------- -------- ------- --------
Operating costs:
Depreciation, depletion and amortization
Recurring............................ 246,994 29,967 59,825 35,219 372,005
Additional........................... 243,178 -- -- -- 243,178
Lease operating expenses................ 129,585 16,419 23,436 13,472 182,912
Production taxes........................ 21,503 -- -- 3,166 24,669
Income tax (benefit).................... (54,383) 7,686 22,014 6,552 (18,131)
-------- ------- -------- ------- --------
586,877 54,072 105,275 58,409 804,633
-------- ------- -------- ------- --------
Results of operations..................... $(90,639) $ 9,548 $ 23,848 $11,648 $(45,595)
======== ======= ======== ======= ========
Amortization rate per boe(1).............. $ 6.21 $ 4.03 $ 5.22 $ 4.86 $ 5.66
======== ======= ======== ======= ========
1997
Oil and gas production revenues........... $740,037 $61,328 $132,493 $49,915 $983,773
-------- ------- -------- ------- --------
Operating costs:
Depreciation, depletion and
amortization......................... 283,866 25,592 43,945 18,210 371,613
Lease operating expenses................ 151,236 16,122 16,212 7,226 190,796
Production taxes........................ 33,539 -- -- 3,492 37,031
Income tax.............................. 101,774 8,748 34,721 7,555 152,798
-------- ------- -------- ------- --------
570,415 50,462 94,878 36,483 752,238
-------- ------- -------- ------- --------
Results of operations..................... $169,622 $10,866 $ 37,615 $13,432 $231,535
======== ======= ======== ======= ========
Amortization rate per boe(1).............. $ 6.12 $ 3.96 $ 5.47 $ 5.23 $ 5.77
======== ======= ======== ======= ========
1996
Oil and gas production revenues........... $691,065 $48,204 $ 64,990 $28,905 $833,164
-------- ------- -------- ------- --------
Operating costs:
Depreciation, depletion and
amortization......................... 256,243 20,511 17,930 9,146 303,830
Lease operating expenses................ 152,187 16,439 11,665 6,108 186,399
Production taxes........................ 33,571 -- -- 2,153 35,724
Income tax.............................. 94,644 5,022 16,990 4,139 120,795
-------- ------- -------- ------- --------
536,645 41,972 46,585 21,546 646,748
-------- ------- -------- ------- --------
Results of operations..................... $154,420 $ 6,232 $ 18,405 $ 7,359 $186,416
======== ======= ======== ======= ========
Amortization rate per boe(1).............. $ 5.68 $ 3.73 $ 5.17 $ 5.40 $ 5.44
======== ======= ======== ======= ========
|
(1) Amortization rate per boe reflects only depreciation, depletion and amortization (DD&A) of capitalized costs of proved oil and gas properties (and excludes the additional DD&A recorded in 1998).
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Costs Not Being Amortized -- The following table sets forth a summary of oil and gas property costs not being amortized at December 31, 1998, by the year in which such costs were incurred:
1995
TOTAL 1998 1997 1996 AND PRIOR
-------- -------- -------- -------- ---------
(IN THOUSANDS)
Property acquisition costs...... $423,549 $ 65,404 $117,375 $149,970 $ 90,800
Exploration and development..... 214,305 119,765 64,216 -- 30,324
-------- -------- -------- -------- --------
Total................. $637,854 $185,169 $181,591 $149,970 $121,124
======== ======== ======== ======== ========
|
Capitalized Costs Incurred -- The following table sets forth the capitalized costs incurred in oil and gas producing activities:
OTHER
UNITED STATES CANADA EGYPT AUSTRALIA IVORY COAST INTERNATIONAL TOTAL
------------- ------- -------- --------- ----------- ------------- ---------
(IN THOUSANDS)
1998
Acquisition of proved
properties(1)............ $ 13,240 $ 1,034 $ 2,249 $ 41,608 $ 271 $ -- $ 58,402
Acquisition of unproved
properties............... 20,819 5,458 -- -- -- -- 26,277
Exploration................ 27,482 20,054 65,696 39,578 -- 30,563 183,373
Development................ 174,449 44,245 39,735 40,521 23,527 9,293 331,770
Capitalized interest....... 15,390 1,710 19,226 6,354 829 5,770 49,279
Property sales............. (123,861) (4,943) -- -- -- (12,645) (141,449)
--------- ------- -------- -------- ------- -------- ---------
$ 127,519 $67,558 $126,906 $128,061 $24,627 $ 32,981 $ 507,652
========= ======= ======== ======== ======= ======== =========
1997
Acquisition of proved
properties(1)............ $ 21,927 $11,635 $ -- $192,372 $ -- $ -- $ 225,934
Acquisition of unproved
properties............... 34,487 6,061 7,744 7,975 -- 136 56,403
Exploration................ 55,997 21,270 41,910 18,744 67 24,199 162,187
Development................ 268,788 28,932 90,284 41,844 489 -- 430,337
Capitalized interest....... 15,743 1,406 12,626 2,239 521 3,958 36,493
Property sales............. (24,609) (5,525) -- -- -- -- (30,134)
--------- ------- -------- -------- ------- -------- ---------
$ 372,333 $63,779 $152,564 $263,174 $ 1,077 $ 28,293 $ 881,220
========= ======= ======== ======== ======= ======== =========
1996
Acquisition of proved
properties(1)............ $ 109,872 $ 2,499 $333,834 $ -- $ -- $ -- $ 446,205
Acquisition of unproved
properties............... 26,055 5,385 -- -- -- -- 31,440
Exploration................ 48,578 30,153 31,805 11,012 7,674 11,687 140,909
Development................ 211,658 21,970 23,056 33,950 -- -- 290,634
Capitalized interest....... 16,203 1,260 8,736 1,876 240 2,397 30,712
Property sales............. (29,459) (685) -- -- -- -- (30,144)
--------- ------- -------- -------- ------- -------- ---------
$ 382,907 $60,582 $397,431 $ 46,838 $ 7,914 $ 14,084 $ 909,756
========= ======= ======== ======== ======= ======== =========
|
(1) Acquisition of proved properties includes unevaluated costs of $15.7 million, $53.8 million and $203.6 million for transactions completed in 1998, 1997 and 1996, respectively.
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Capitalized Costs -- The following table sets forth the capitalized costs and associated accumulated depreciation, depletion and amortization, including impairments, relating to the Company's oil and gas production, exploration and development activities:
OTHER
UNITED STATES CANADA EGYPT AUSTRALIA IVORY COAST INTERNATIONAL TOTAL
------------- --------- --------- --------- ----------- ------------- -----------
(IN THOUSANDS)
1998
Proved properties..... $ 4,430,504 $ 480,836 $ 454,434 $465,009 $21,409 $ 49,671 $ 5,901,863
Unproved properties... 137,775 21,996 236,568 119,812 13,497 108,206 637,854
----------- --------- --------- -------- ------- -------- -----------
4,568,279 502,832 691,002 584,821 34,906 157,877 6,539,717
Accumulated DD&A...... (2,717,135) (213,615) (108,491) (96,229) -- (49,671) (3,185,141)
----------- --------- --------- -------- ------- -------- -----------
$ 1,851,144 $ 289,217 $ 582,511 $488,592 $34,906 $108,206 $ 3,354,576
=========== ========= ========= ======== ======= ======== ===========
1997
Proved properties..... $ 4,279,089 $ 445,314 $ 379,552 $375,037 $ 2,328 $ 49,671 $ 5,530,991
Unproved properties... 161,671 21,443 184,544 81,723 7,951 75,224 532,556
----------- --------- --------- -------- ------- -------- -----------
4,440,760 466,757 564,096 456,760 10,279 124,895 6,063,547
Accumulated DD&A...... (2,228,575) (197,067) (54,789) (65,605) -- (49,671) (2,595,707)
----------- --------- --------- -------- ------- -------- -----------
$ 2,212,185 $ 269,690 $ 509,307 $391,155 $10,279 $ 75,224 $ 3,467,840
=========== ========= ========= ======== ======= ======== ===========
|
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Oil and Gas Reserve Information -- Proved oil and gas reserve quantities are based on estimates prepared by the Company's engineers in accordance with guidelines established by the Securities and Exchange Commission (SEC). The Company's estimates of proved reserve quantities of its U.S., Canadian and international properties are subject to review by Ryder Scott Company Petroleum Engineers, independent petroleum engineers. In 1996, the proved reserve quantities of certain of the Company's Egyptian properties were subject to review by Netherland, Sewell & Associates, Inc., independent petroleum engineers.
There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve data represents estimates only and should not be construed as being exact.
CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS
--------------------------------------------------------
(THOUSANDS OF BARRELS)
UNITED IVORY
STATES CANADA EGYPT AUSTRALIA COAST TOTAL
------- ------ ------- --------- ----- -------
PROVED DEVELOPED RESERVES:
December 31, 1995........................... 123,726 9,597 -- 4,141 -- 137,464
December 31, 1996........................... 129,551 10,351 38,213 5,106 -- 183,221
December 31, 1997........................... 133,035 11,313 42,714 15,690 393 203,145
December 31, 1998........................... 107,306 10,962 33,705 24,674 1,352 177,999
TOTAL PROVED RESERVES:
Balance December 31, 1995.................... 153,121 9,816 -- 7,392 -- 170,329
Extensions, discoveries
and other additions....................... 9,065 1,123 18,909 14,562 -- 43,659
Purchases of minerals
in-place.................................. 3,547 128 30,706 -- -- 34,381
Revisions of previous
estimates................................. 12,547 320 -- (1,679) -- 11,188
Production.................................. (15,338) (955) (3,036) (849) -- (20,178)
Sales of properties......................... (4,019) (66) -- -- -- (4,085)
------- ------ ------- ------ ----- -------
Balance December 31, 1996.................... 158,923 10,366 46,579 19,426 -- 235,294
Extensions, discoveries
and other additions....................... 32,530 2,677 10,492 12,814 393 58,906
Purchases of minerals
in-place.................................. 1,818 278 -- 9,116 -- 11,212
Revisions of previous
estimates................................. (7,283) (379) 4,696 -- -- (2,966)
Production.................................. (15,448) (1,003) (7,071) (1,612) -- (25,134)
Sales of properties......................... (2,923) (611) -- -- -- (3,534)
------- ------ ------- ------ ----- -------
Balance December 31, 1997.................... 167,617 11,328 54,696 39,744 393 273,778
Extensions, discoveries
and other additions....................... 36,655 1,917 5,906 11,765 930 57,173
Purchases of minerals
in-place.................................. 4,768 59 -- 1,214 -- 6,041
Revisions of previous
estimates................................. (40,868) (155) 4,739 (3,121) 29 (39,376)
Production.................................. (13,262) (988) (10,188) (3,225) -- (27,663)
Sales of properties......................... (18,726) (219) -- -- -- (18,945)
------- ------ ------- ------ ----- -------
Balance December 31, 1998.................... 136,184 11,942 55,153 46,377 1,352 251,008
======= ====== ======= ====== ===== =======
NATURAL GAS
--------------------------------------------------------------
(MILLIONS OF CUBIC FEET)
UNITED IVORY
STATES CANADA EGYPT AUSTRALIA COAST TOTAL
--------- ------- ------- --------- ------ ---------
PROVED DEVELOPED RESERVES:
December 31, 1995........................... 1,003,853 274,306 -- 20,308 -- 1,298,467
December 31, 1996........................... 1,087,694 274,498 6,977 66,174 -- 1,435,343
December 31, 1997........................... 1,009,080 326,237 8,825 183,962 26,208 1,554,312
December 31, 1998........................... 869,464 322,576 4,790 173,764 79,515 1,450,109
TOTAL PROVED RESERVES:
Balance December 31, 1995.................... 1,140,341 288,420 -- 73,159 -- 1,501,920
Extensions, discoveries
and other additions....................... 140,208 44,584 59,329 8,346 -- 252,467
Purchases of minerals
in-place.................................. 88,023 3,039 12,964 -- -- 104,026
Revisions of previous
estimates................................. 35,026 (25,747) -- (5,276) -- 4,003
Production.................................. (172,815) (27,303) (111) (5,076) -- (205,305)
Sales of properties......................... (29,231) (2,576) -- -- -- (31,807)
--------- ------- ------- ------- ------ ---------
Balance December 31, 1996.................... 1,201,552 280,417 72,182 71,153 -- 1,625,304
Extensions, discoveries ....................
and other additions....................... 187,270 68,877 58,685 42,936 26,208 383,976
Purchases of minerals
in-place.................................. 13,295 13,897 -- 136,817 -- 164,009
Revisions of previous
estimates................................. (56,632) 4,257 13,584 -- -- (38,791)
Production.................................. (179,796) (32,740) (205) (9,496) -- (222,237)
Sales of properties......................... (33,940) (6,500) -- -- -- (40,440)
--------- ------- ------- ------- ------ ---------
Balance December 31, 1997.................... 1,131,749 328,208 144,246 241,410 26,208 1,871,821
Extensions, discoveries
and other additions....................... 146,112 60,660 31,201 267,533 50,406 555,912
Purchases of minerals
in-place.................................. 25,188 599 -- 27,373 -- 53,160
Revisions of previous
estimates................................. (43,778) (7,812) 19,550 (76) 2,901 (29,215)
Production.................................. (157,701) (38,643) (567) (18,478) -- (215,389)
Sales of properties......................... (52,995) (11,068) -- -- -- (64,063)
--------- ------- ------- ------- ------ ---------
Balance December 31, 1998.................... 1,048,575 331,944 194,430 517,762 79,515 2,172,226
========= ======= ======= ======= ====== =========
|
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Future Net Cash Flows -- Future cash inflows are based on year-end oil and gas prices except in those instances where future natural gas or oil sales are covered by physical or derivative contract terms providing for higher or lower amounts. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation.
The following table sets forth unaudited information concerning future net cash flows for oil and gas reserves, net of income tax expense. Income tax expense has been computed using expected future tax rates and giving effect to tax deductions and credits available, under current laws, and which relate to oil and gas producing activities. This information does not purport to present the fair market value of the Company's oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.
UNITED IVORY
STATES CANADA(1) EGYPT AUSTRALIA COAST TOTAL
----------- --------- ---------- ---------- -------- -----------
(IN THOUSANDS)
1998
Cash inflows............................... $ 3,523,294 $763,349 $ 877,861 $1,208,235 $129,965 $ 6,502,704
Production and development costs........... (1,496,382) (240,166) (263,199) (479,627) (28,718) (2,508,092)
Income tax expense......................... (327,470) (127,405) (166,751) (156,409) (29,211) (807,246)
----------- --------- ---------- ---------- -------- -----------
Net cash flows............................. 1,699,442 395,778 447,911 572,199 72,036 3,187,366
10 percent discount rate................... (675,035) (165,220) (127,723) (209,448) (45,889) (1,223,315)
----------- --------- ---------- ---------- -------- -----------
Discounted future net cash flows(2)........ $ 1,024,407 $230,558 $ 320,188 $ 362,751 $ 26,147 $ 1,964,051
=========== ========= ========== ========== ======== ===========
1997
Cash inflows............................... $ 5,585,925 $610,359 $1,196,054 $1,108,969 $ 58,589 $ 8,559,896
Production and development costs........... (2,151,076) (186,328) (427,608) (415,282) (31,710) (3,212,004)
Income tax expense......................... (776,649) (89,852) (235,560) (131,017) -- (1,233,078)
----------- --------- ---------- ---------- -------- -----------
Net cash flows............................. 2,658,200 334,179 532,886 562,670 26,879 4,114,814
10 percent discount rate................... (1,049,380) (145,899) (179,290) (157,385) (19,598) (1,551,552)
----------- --------- ---------- ---------- -------- -----------
Discounted future net cash flows(2)........ $ 1,608,820 $188,280 $ 353,596 $ 405,285 $ 7,281 $ 2,563,262
=========== ========= ========== ========== ======== ===========
1996
Cash inflows............................... $ 8,839,819 $761,657 $1,272,104 $ 553,781 $ -- $11,427,361
Production and development costs........... (2,542,757) (204,610) (484,143) (240,451) -- (3,471,961)
Income tax expense......................... (1,751,611) (148,745) (260,598) (83,593) -- (2,244,547)
----------- --------- ---------- ---------- -------- -----------
Net cash flows............................. 4,545,451 408,302 527,363 229,737 -- 5,710,853
10 percent discount rate................... (1,928,723) (182,645) (208,272) (71,696) -- (2,391,336)
----------- --------- ---------- ---------- -------- -----------
Discounted future net cash flows(2)........ $ 2,616,728 $225,657 $ 319,091 $ 158,041 $ -- $ 3,319,517
=========== ========= ========== ========== ======== ===========
|
(1) Included in cash inflows is approximately $27.9 million, $27.3 million and $16.2 million ($9.1 million, $9.3 million and $5.3 million after discount at 10 percent per annum) for 1998, 1997 and 1996, respectively, of Canadian provincial tax credits expected to be realized beyond the date at which the legislation, under its provisions, could be repealed.
(2) Estimated future net cash flows before income tax expense, discounted at 10 percent per annum, totaled approximately $2.4 billion, $3.3 billion and $4.6 billion as of December 31, 1998, 1997 and 1996, respectively.
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
The following table sets forth the principal sources of change in the discounted future net cash flows:
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
----------- ----------- ----------
(IN THOUSANDS)
Sales, net of production costs................. $ (551,457) $ (755,946) $ (611,041)
Net change in prices and production costs...... (1,253,213) (1,904,236) 1,336,340
Discoveries and improved recovery, net of
related costs................................ 620,153 644,652 775,136
Change in future development costs............. 251,638 120,462 54,236
Revision of quantities......................... (149,859) (40,121) 113,819
Purchases of minerals in-place................. 52,785 242,958 522,123
Accretion of discount.......................... 327,262 456,848 234,436
Change in income taxes......................... 277,518 545,424 (779,980)
Sales of properties............................ (132,337) (48,353) (46,056)
Change in production rates and other........... (41,701) (17,943) (149,055)
----------- ----------- ----------
$ (599,211) $ (756,255) $1,449,958
=========== =========== ==========
|
Impact of Pricing -- The estimates of cash flows and reserve quantities shown above are based on year-end oil and gas prices, except in those cases where future natural gas or oil sales are covered by contracts at specified prices. Estimates of future liabilities and receivables applicable to oil and gas commodity hedges are reflected in future cash flows from proved reserves with such estimates based on prices in effect as of the date of the reserve report. Fluctuations are largely due to supply and demand perceptions for natural gas and volatility in oil prices.
Under the full cost accounting rules of the SEC, the Company reviews the carrying value of its proved oil and gas properties each quarter on a country-by-country basis. Under these rules, capitalized costs of proved oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent, plus the lower of cost or fair value of unproved properties included in the costs being amortized, net of related tax effects. These rules generally require pricing future oil and gas production at the unescalated oil and gas prices at the end of each fiscal quarter and require a write-down if the "ceiling" is exceeded, even if prices declined for only a short period of time. The Company recorded a $243.2 million pre-tax ($158.1 million net of tax) non-cash write-down of the carrying value of Apache's U.S. proved oil and gas properties as of December 31, 1998, due to these ceiling test limitations. If oil and gas prices deteriorate from the Company's year-end realized prices, it is likely that additional write-downs will occur in 1999. Write-downs required by these rules do not impact cash flow from operating activities.
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL QUARTERLY FINANCIAL DATA
(UNAUDITED)
FIRST SECOND THIRD FOURTH(2) TOTAL
-------- -------- -------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998
Revenues.............................. $245,941 $220,132 $211,683 $ 197,959 $ 875,715
Expenses, net......................... 228,585 210,896 208,482 357,139 1,005,102
-------- -------- -------- --------- ----------
Net income (loss)..................... $ 17,356 $ 9,236 $ 3,201 $(159,180) $ (129,387)
======== ======== ======== ========= ==========
Income (loss) attributable to common
stock............................... $ 17,356 $ 9,236 $ 2,617 $(160,600) $ (131,391)
======== ======== ======== ========= ==========
Net income (loss) per common share(1)
Basic............................... $ .18 $ .09 $ .03 $ (1.64) $ (1.34)
======== ======== ======== ========= ==========
Diluted............................. $ .18 $ .09 $ .03 $ (1.64) $ (1.34)
======== ======== ======== ========= ==========
1997
Revenues.............................. $321,828 $258,841 $276,748 $ 318,856 $1,176,273
Expenses, net......................... 268,951 233,095 245,963 273,368 1,021,377
-------- -------- -------- --------- ----------
Net income............................ $ 52,877 $ 25,746 $ 30,785 $ 45,488 $ 154,896
======== ======== ======== ========= ==========
Net income per common share(1)
Basic............................... $ .59 $ .29 $ .34 $ .50 $ 1.71
======== ======== ======== ========= ==========
Diluted............................. $ .56 $ .28 $ .33 $ .48 $ 1.65
======== ======== ======== ========= ==========
|
(1) The sum of the individual quarterly net income (loss) per common share amounts may not agree with year-to-date net income (loss) per common share as each quarterly computation is based on the weighted average number of common shares outstanding during that period. In addition, certain potentially dilutive securities were not included in certain of the quarterly computations of diluted net income (loss) per common share because to do so would have been antidilutive.
(2) As a result of low oil and gas prices at December 31, 1998, the carrying value of Apache's U.S. oil and gas properties exceeded the ceiling limitation and the Company reported a $243.2 million pre-tax ($158.1 million net of tax) non-cash write-down in the fourth quarter of 1998.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 -- Stock Purchase Agreement, dated July 1, 1991, between
Registrant and Amoco Production Company (incorporated by
reference to Exhibit 10.1 to Registrant's Current Report
on Form 8-K, dated July 1, 1991, SEC File No. 1-4300).
2.2 -- Form of Acquisition Agreement between Registrant, HERC
Acquisition Corporation and Hadson Energy Resources
Corporation, dated August 26, 1993, and amended September
28, 1993 (incorporated by reference to Exhibit 2.1 to
Registrant's Registration Statement on Form S-4,
Registration No. 33-67954, filed September 29, 1993).
2.3 -- Purchase and Sale Agreement by and between Texaco
Exploration and Production Inc., as seller, and
Registrant, as buyer, dated December 22, 1994
(incorporated by reference to Exhibit 99.3 to
Registrant's Current Report on Form 8-K, dated November
29, 1994, SEC File No. 1-4300).
2.4 -- Amended and Restated Agreement and Plan of Merger among
Registrant, XPX Acquisitions, Inc and DEKALB Energy
Company, dated December 21, 1994 (incorporated by
reference to Exhibit 2.1 to Amendment No. 3 to
Registrant's Registration Statement on Form S-4,
Registration No. 33-57321, filed April 14, 1995).
2.5 -- Agreement and Plan of Merger among Registrant, YPY
Acquisitions, Inc. and The Phoenix Resource Companies,
Inc., dated March 27, 1996 (incorporated by reference to
Exhibit 2.1 to Registrant's Registration Statement on
Form S-4, Registration No. 333-02305, filed April 5,
1996).
3.1 -- Restated Certificate of Incorporation of Registrant,
dated December 1, 1993, as filed with the Secretary of
State of Delaware on December 16, 1993 (incorporated by
reference to Exhibit 3.1 to Registrant's Annual Report on
Form 10-K for year ended December 31, 1993, SEC File No.
1-4300).
3.2 -- Certificate of Ownership and Merger Merging Apache Energy
Resources Corporation into Registrant, effective December
31, 1995, as filed with the Secretary of State of
Delaware on December 21, 1995 (incorporated by reference
to Exhibit 3.2 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1995, SEC File No. 1-4300).
3.3 -- Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock of
Registrant, effective January 31, 1996, as filed with the
Secretary of State of Delaware on January 22, 1996
(incorporated by reference to Exhibit 3.3 to Registrant's
Annual Report on Form 10-K for year ended December 31,
1995, SEC File No. 1-4300).
*3.4 -- Certificate of Ownership and Merger merging Apache PHN
Company, Inc. into Registrant, effective July 1, 1998, as
filed with the Secretary of State of Delaware on July 1,
1998.
*3.5 -- Agreement and Plan of Merger merging MWJR Petroleum
Corporation into Registrant, effective September 1, 1998,
as filed with the Secretary of State of Delaware on
August 19, 1998.
*3.6 -- Certificate of Ownership and Merger merging MW Petroleum
Corporation into Registrant, effective September 1, 1998,
as filed with the Secretary of State of Delaware on
August 19, 1998.
*3.7 -- Certificate of Designations, Preferences and Rights of
5.68% Cumulative Preferred Stock, Series B, of
Registrant, as filed with the Secretary of State of
Delaware on August 21, 1998.
|
EXHIBIT NO. DESCRIPTION
----------- -----------
*3.8 -- Certificate of Correction to Certificate of Designations,
Preferences and Rights of 5.68% Cumulative Preferred
Stock, Series B, of Registrant, as filed with the
Secretary of State of Delaware on August 24, 1998.
3.9 -- Bylaws of Registrant, as amended September 17, 1998
(incorporated by reference to Exhibit 3.2 to Registrant's
Quarterly Report on Form 10-Q for quarter ended September
30, 1998, SEC File No. 1-4300).
4.1 -- Form of Certificate for Registrant's Common Stock
(incorporated by reference to Exhibit 4.1 to Registrant's
Annual Report on Form 10-K for year ended December 31,
1995, SEC File No. 1-4300).
4.2 -- Form of Certificate for Registrant's 5.68% Cumulative
Preferred Stock, Series B (incorporated by reference to
Exhibit 4.2 to Amendment No. 2 on Form 8-K/A to
Registrant's Current Report on Form 8-K, dated August 18,
1998, SEC File No. 1-4300).
4.3 -- Rights Agreement, dated January 31, 1996, between
Registrant and Norwest Bank Minnesota, N.A., rights
agent, relating to the declaration of a rights dividend
to Registrant's common shareholders of record on January
31, 1996 (incorporated by reference to Exhibit (a) to
Registrant's Registration Statement on Form 8-A, dated
January 24, 1996, SEC File No. 1-4300).
10.1 -- Credit Agreement, dated June 12, 1997, among the
Registrant, the lenders named therein, Morgan Guaranty
Trust Company, as Global Documentation Agent and U.S.
Syndication Agent, The First National Bank of Chicago, as
U.S. Documentation Agent, NationsBank of Texas, N.A., as
Co-Agent, Union Bank of Switzerland, Houston Agency, as
Co-Agent, and The Chase Manhattan Bank, as Global
Administrative Agent (incorporated by reference to
Exhibit 10.1 to Registrant's Current Report on Form 8-K,
dated June 13, 1997, SEC File No. 1-4300).
10.2 -- Credit Agreement, dated June 12, 1997, among Apache
Canada Ltd., a wholly-owned subsidiary of the Registrant,
the lenders named therein, Morgan Guaranty Trust Company,
as Global Documentation Agent, Royal Bank of Canada, as
Canadian Documentation Agent, The Chase Manhattan Bank of
Canada, as Canadian Syndication Agent, Bank of Montreal,
as Canadian Administrative Agent, and The Chase Manhattan
Bank, as Global Administrative Agent (incorporated by
reference to Exhibit 10.2 to Registrant's Current Report
on Form 8-K, dated June 13, 1997, SEC File No. 1-4300).
10.3 -- Credit Agreement, dated June 12, 1997, among Apache
Energy Limited and Apache Oil Australia Pty Limited,
wholly-owned subsidiaries of the Registrant, the lenders
named therein, Morgan Guaranty Trust Company, as Global
Documentation Agent, Bank of America National Trust and
Savings Association, Sydney Branch, as Australian
Documentation Agent, The Chase Manhattan Bank, as
Australian Syndication Agent, Citisecurities Limited, as
Australian Administrative Agent, and The Chase Manhattan
Bank, as Global Administrative Agent (incorporated by
reference to Exhibit 10.3 to Registrant's Current Report
on Form 8-K, dated June 13, 1997, SEC File No. 1-4300).
10.4 -- Fiscal Agency Agreement, dated January 4, 1995, between
Registrant and Chemical Bank, as fiscal agent, relating
to Registrant's 6% Convertible Subordinated Debentures
due 2002 (incorporated by reference to Exhibit 99.2 to
Registrant's Current Report on Form 8-K, dated December
6, 1994, SEC File No. 1-4300).
|
EXHIBIT NO. DESCRIPTION
----------- -----------
10.5 -- Concession Agreement for Petroleum Exploration and
Exploitation in the Khalda Area in Western Desert of
Egypt by and among Arab Republic of Egypt, the Egyptian
General Petroleum Corporation and Phoenix Resources
Company of Egypt, dated April 6, 1981 (incorporated by
reference to Exhibit 19(g) to Phoenix's Annual Report on
Form 10-K for year ended December 31, 1984, SEC File No.
1-547).
10.6 -- Amendment, dated July 10, 1989, to Concession Agreement
for Petroleum Exploration and Exploitation in the Khalda
Area in Western Desert of Egypt by and among Arab
Republic of Egypt, the Egyptian General Petroleum
Corporation and Phoenix Resources Company of Egypt
(incorporated by reference to Exhibit 10(d)(4) to
Phoenix's Quarterly Report on Form 10-Q for quarter ended
June 30, 1989, SEC File No. 1-547).
10.7 -- Farmout Agreement, dated September 13, 1985 and relating
to the Khalda Area Concession, by and between Phoenix
Resources Company of Egypt and Conoco Khalda
Inc(incorporated by reference to Exhibit 10.1 to
Phoenix's Registration Statement on Form S-1,
Registration No. 33-1069, filed October 23, 1985).
10.8 -- Amendment, dated March 30, 1989, to Farmout Agreement
relating to the Khalda Area Concession, by and between
Phoenix Resources Company of Egypt and Conoco Khalda
Inc(incorporated by reference to Exhibit 10(d)(5) to
Phoenix's Quarterly Report on Form 10-Q for quarter ended
June 30, 1989, SEC File No. 1-547).
10.9 -- Amendment, dated May 21, 1995, to Concession Agreement
for Petroleum Exploration and Exploitation in the Khalda
Area in Western Desert of Egypt between Arab Republic of
Egypt, the Egyptian General Petroleum Corporation, Repsol
Exploracion Egipto S.A., Phoenix Resources Company of
Egypt and Samsung Corporation (incorporated by reference
to exhibit 10.12 to Registrant's Annual Report on Form
10-K for year ended December 31, 1997, SEC File No.
1-4300).
10.10 -- Concession Agreement for Petroleum Exploration and
Exploitation in the Qarun Area in Western Desert of
Egypt, between Arab Republic of Egypt, the Egyptian
General Petroleum Corporation, Phoenix Resources Company
of Qarun and Apache Oil Egypt, Inc., dated May 17, 1993
(incorporated by reference to Exhibit 10(b) to Phoenix's
Annual Report on Form 10-K for year ended December 31,
1993, SEC File No. 1-547).
10.11 -- Agreement for Amending the Gas Pricing Provisions under
the Concession Agreement for Petroleum Exploration and
Exploitation in the Qarun Area, effective June 16, 1994
(incorporated by reference to Exhibit 10.18 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1996, SEC File No. 1-4300).
+10.12 -- 1982 Employee Stock Option Plan, as updated in January
1987 to conform to the Tax Reform Act of 1986
(incorporated by reference to Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1990, SEC File No. 1-4300).
+*10.13 -- Apache Corporation Corporate Incentive Compensation Plan
A (Senior Officers' Plan), dated July 16, 1998.
+*10.14 -- Apache Corporation Corporate Incentive Compensation Plan
B (Strategic Objectives Format), dated July 16, 1998.
+10.15 -- Apache Corporation 401(k) Savings Plan, dated August 1,
1997, effective January 1, 1997 (incorporated by
reference to Exhibit 10.1 to Registrant's Current Report
on Form 8-K, dated August 8, 1997, SEC File No. 1-4300).
|
EXHIBIT NO. DESCRIPTION
----------- -----------
+10.16 -- Apache Corporation Money Purchase Retirement Plan, dated
December 31, 1997, effective January 1, 1997
(incorporated by reference to Exhibit 10.19 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1997, SEC File No. 1-4300).
+*10.17 -- Non-Qualified Retirement/Savings Plan of Apache
Corporation, restated as of January 1, 1997, and
amendments effective as of January 1, 1997, January 1,
1998 and January 1, 1999.
+10.18 -- Apache International, Inc. Common Stock Award Plan, dated
February 12, 1990 (incorporated by reference to Exhibit
10.13 to Registrant's Annual Report on Form 10-K for year
ended December 31, 1989, SEC File No. 1-4300).
+*10.19 -- Apache Corporation 1990 Stock Incentive Plan, as amended
and restated December 17, 1998.
+*10.20 -- Apache Corporation 1995 Stock Option Plan, as amended and
restated December 17, 1998.
+10.21 -- Apache Corporation 1996 share Price Appreciation Plan, as
amended and restated January 14, 1997 (incorporated by
reference to Appendix A to Registrant's definitive 14A
Proxy Statement, SEC File No. 1-4300, filed March 28,
1997).
+10.22 -- Apache Corporation 1996 Performance Stock Option Plan, as
amended and restated January 14, 1997 (incorporated by
reference to Exhibit 10.32 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1996, SEC File
No. 1-4300).
+*10.23 -- Apache Corporation 1998 Stock Option Plan, as amended and
restated December 17, 1998.
+10.24 -- 1990 Employee Stock Option Plan of The Phoenix Resource
Companies, Inc., as amended through September 29, 1995,
effective April 9, 1990 (incorporated by reference to
Exhibit 10.33 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1996, SEC File No. 1-4300).
+10.25 -- Apache Corporation Income Continuance Plan, as amended
and restated February 24, 1988 (incorporated by reference
to Exhibit 10.19 to Registrant's Annual Report on Form
10-K for year ended December 31, 1990, SEC File No.
1-4300).
+*10.26 -- Apache Corporation Non-Employee Directors' Compensation
Plan, as amended and restated December 17, 1998.
+10.27 -- Apache Corporation Outside Directors' Retirement Plan, as
amended and restated September 11, 1997 (incorporated by
reference to Exhibit 10.31 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1997, SEC File
No. 1-4300).
+10.28 -- Apache Corporation Equity Compensation Plan for
Non-Employee Directors, adopted February 9, 1994, and
form of Restricted Stock Award Agreement (incorporated by
reference to Exhibit 10.26 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1993, SEC File
No. 1-4300).
+10.29 -- Amended and Restated Employment Agreement, dated December
5, 1990, between Registrant and Raymond Plank
(incorporated by reference to Exhibit 10.39 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1996, SEC File No. 1-4300).
|
EXHIBIT NO. DESCRIPTION
----------- -----------
+10.30 -- First Amendment, dated April 4, 1996, to Restated
Employment Agreement between Registrant and Raymond Plank
(incorporated by reference to Exhibit 10.40 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1996, SEC File No. 1-4300).
+10.31 -- Amended and Restated Employment Agreement, dated December
20, 1990, between Registrant and John A. Kocur
(incorporated by reference to Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1990, SEC File No. 1-4300).
+10.32 -- Employment Agreement, dated June 6, 1988, between
Registrant and G. Steven Farris (incorporated by
reference to Exhibit 10.6 to Registrant's Annual Report
on Form 10-K for year ended December 31, 1989, SEC File
No. 1-4300).
+*10.33 -- Conditional Stock Grant Agreement, dated December 17,
1998, between Registrant and G. Steven Farris.
10.34 -- Amended and Restated Gas Purchase Agreement, effective
July 1, 1998, by and among Registrant and MW Petroleum
Corporation, as Seller, and Producers Energy Marketing,
LLC, as Buyer (incorporated by reference to Exhibit 10.1
to Registrant's Current Report on Form 8-K, dated June
18, 1998, SEC File No. 1-4300).
12.1 -- Statement of Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends (incorporated
by reference to Exhibit 99.1 to Registrant's Current
Report on Form 8-K, dated March 2, 1999, SEC File No.
1-4300).
*21.1 -- Subsidiaries of Registrant
*23.1 -- Consent of Arthur Andersen LLP
*23.2 -- Consent of Ryder Scott Company Petroleum Engineers
*23.3 -- Consent of Netherland, Sewell & Associates, Inc.
*24.1 -- Power of Attorney (included as a part of the signature
pages to this report)
*27.1 -- Financial Data Schedule
|
* Filed herewith.
+ Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 14 hereof.
Note: Debt instruments of the Registrant defining the rights of long-term debt holders in principal amounts not exceeding 10 percent of the Registrant's consolidated assets have been omitted and will be provided to the
Commission upon request.
EXHIBIT 3.4
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES:
"APACHE PHN COMPANY, INC.", A DELAWARE CORPORATION,
WITH AND INTO "APACHE CORPORATION" UNDER THE NAME OF" APACHE
CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE
OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE FIRST DAY OF JULY, A.D.
1998, AT 4:30 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel ----------------------------------- Edward J. Freel, Secretary of State |
[SEAL]
0482215 8100M AUTHENTICATION: 9175881
981258093 DATE: 07-02-98
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
APACHE PHN COMPANY, INC.
INTO
APACHE CORPORATION
Apache Corporation, a corporation organized and existing under the laws of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That Apache Corporation was incorporated on the 6th day of December, 1954, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That Apache Corporation owns all of the issued and outstanding shares of the capital stock of Apache PHN Company, Inc., a corporation which was incorporated on the 19th day of May, 1930, pursuant to the General Corporation Law of the State of Delaware.
THIRD: That Apache Corporation, by the following resolutions of its Board of Directors, duly adopted by unanimous written consent dated June 29, 1998, determined to and did merge into itself said Apache PHN Company, Inc.:
RESOLVED that Apache PHN Company, Inc. ("Apache PHN"), a wholly owned subsidiary of Apache Corporation, be merged with and into Apache Corporation ("Apache"), with Apache being the surviving corporation.
FURTHER RESOLVED that the merger shall be effective as of July 1, 1998.
FURTHER RESOLVED that all of the shares of the capital stock of Apache PHN issued and outstanding as of the effective date of the merger shall be cancelled without consideration.
FURTHER RESOLVED that upon the merger taking effect, Apache shall thereupon and thereafter possess all the rights, privileges, immunities, and franchises, of a public as well as a private nature, of each of Apache and Apache PHN; that all property, real, personal, and mixed, and all debts due on whatever account, including subscriptions to shares, and all other chooses in action, and every other interest of or belonging to or due to Apache PHN shall be deemed to be transferred to and vested in Apache without further act or deed; that the title to any real estate, or any interest therein vested in either of Apache or Apache PHN shall not revert or be in any way impaired by reason of the merger; and that such transfer to and vesting in Apache shall be deemed to occur by operation of law, and no consent or approval of any other person shall be required in connection with any such transfer or vesting unless such consent or approval is specifically required in the event of merger by law or by express
provision in any contract, agreement, decree, order, or other instrument to which either of Apache or Apache PHN is a party or by which either is bound.
FURTHER RESOLVED that upon the merger taking effect, Apache shall be responsible and liable for all the liabilities and obligations of Apache PHN; that any claim existing or action or proceeding, whether civil or criminal, pending by or against Apache PHN may be prosecuted as if the merger had not taken place; and that neither the rights of creditors nor any liens upon the property of either of Apache or Apache PHN shall be impaired by such merger.
FURTHER RESOLVED that the proper officers of Apache are hereby authorized and directed, in the name and on behalf of Apache, to prepare and execute a Certificate of Ownership and Merger setting forth a copy of the resolutions authorizing the merger of Apache PHN with and into Apache and the assumption by Apache of the liabilities and obligations of Apache PHN, and the date of adoption thereof, and to cause such Certificate of Ownership and Merger to be filed with the Delaware Secretary of State and a certified copy of same recorded in the office of the Recorder of Deeds of New Castle County.
FURTHER RESOLVED that the proper officers of Apache be, and they hereby are, authorized and directed to take such further action and to execute such certificates and other documents as they, in their discretion, shall deem necessary or advisable to consummate the merger and effect the foregoing resolutions.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding, this merger may be amended or terminated and abandoned by the Board of Directors of Apache Corporation at any time prior to the date of filing the merger with the Delaware Secretary of State.
IN WITNESS WHEREOF, Apache Corporation has caused this Certificate of Ownership and Merger to be executed by its duly authorized officers as of this 29th day of June, 1998.
APACHE CORPORATION
By: /s/ G. STEVEN FARRIS
-------------------------------
G. Steven Farris
President and Chief
Operating Officer
ATTEST:
/s/ CHERI L. PEPER
------------------------------------
Cheri L. Peper
Corporate Secretary
|
STATE OF TEXAS )
)
COUNTY OF HARRIS )
|
The foregoing instrument was acknowledged before me this 29th day of June, 1998, on behalf of Apache Corporation, by G. Steven Farris, President and Chief Operating Officer of Apache Corporation, a Delaware corporation.
[Seal] /s/ SUSAN CHARBA
-----------------------------------
Susan Charba, Notary Public in and
for the State of Texas
My Commission Expires
November 21, 1999
|
EXHIBIT 3.5
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AGREEMENT OF MERGER, WHICH MERGES:
"MWJR PETROLEUM CORPORATION", A DELAWARE CORPORATION,
WITH AND INTO "APACHE CORPORATION" UNDER THE NAME OF" APACHE
CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE
OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE NINETEENTH DAY OF AUGUST,
A.D. 1998, AT 8:30 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE EFFECTIVE DATE OF THE AFORESAID CERTIFICATE OF AGREEMENT OF MERGER IS THE FIRST DAY OF SEPTEMBER, A.D. 1998.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel ----------------------------------------- Edward J. Freel, Secretary of State |
[SEAL]
0482215 8100M AUTHENTICATION: 9260798
981324877 DATE: 08-19-98
|
AGREEMENT AND PLAN OF MERGER
BETWEEN
APACHE CORPORATION
AND
MWJR PETROLEUM CORPORATION
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated this 7th day of August, 1998, pursuant to Section 251 of the General Corporation Law of the State of Delaware, between Apache Corporation, a Delaware corporation, and MWJR Petroleum Corporation, a Delaware corporation (together, the "Constituent Corporations").
WITNESSETH that:
WHEREAS, both of the Constituent Corporations desire to merge into a single corporation; and
NOW THEREFORE, the corporations, parties to this Agreement, in consideration of the mutual covenants, agreements and provisions hereinafter contained do hereby prescribe the terms and conditions of said merger and the mode of carrying the same into effect as follows:
FIRST: MWJR Petroleum Corporation (the "Merged Corporation") at the effective time shall be merged with and into Apache Corporation, which shall be the surviving corporation (the "Surviving Corporation").
SECOND: The Restated Certificate of Incorporation of Apache Corporation, as heretofore amended and as in effect on the date of the merger provided for in this Agreement, shall continue in full force and effect as the Restated Certificate of Incorporation of the Surviving Corporation.
THIRD: The effect on the capital stock of each of the Constituent Corporations shall be as follows:
(a) Each share of capital stock of the Surviving Corporation issued and outstanding on the effective date of the merger shall remain issued and outstanding.
(b) Each share of capital stock of the Merged Corporation issued and outstanding on the effective date of the merger shall be cancelled without consideration, and no shares of the capital stock of the Surviving Corporation shall be issued in respect thereof.
FOURTH: The bylaws of Apache Corporation as they exist on the effective date of the merger shall be and remain the bylaws of the Surviving Corporation until the same shall be altered, amended or repealed as therein provided.
FIFTH: The directors and officers of Apache Corporation on the effective date of the merger shall be the directors and officers of the Surviving Corporation and shall continue in office until the next annual meeting of stockholders and until their successors shall have been elected and qualified.
SIXTH: This merger shall become on September 1, 1998.
SEVENTH: Upon the merger becoming effective, all the property, rights privileges, franchises, patents, trademarks, licenses, registrations and other assets of every kind and description of the Merged Corporation shall, by operation of law, be transferred to, vested in, and devolve upon, the Surviving Corporation without further act or deed, and all property, rights, and every other interest of the Constituent Corporations shall be as effectively the property of the Surviving Corporation as they were of the Surviving Corporation and the Merged Corporation, respectively. The proper officers and directors of the Surviving Corporation are fully authorized in the name of the Merged Corporation or otherwise to take any and all action, from time to time, to execute and deliver or cause to be executed and delivered all such deeds and instruments and to take or cause to be taken such further or other action as the Surviving Corporation may deem necessary or desirable in order to vest in and confirm to the Surviving Corporation title to and possession of any property of the Merged Corporation acquired or to be acquired by reason of or as a result of the merger herein provided for and otherwise to carry out the intent and purposes hereof.
EIGHTH: Anything herein or elsewhere to the contrary notwithstanding, this merger may be amended or terminated and abandoned by the Board of Directors of either of the Constituent Corporations at any time prior to the date of filing this Agreement with the Delaware Secretary of State.
IN WITNESS WHEREOF, the parties to this Agreement, pursuant to the approval and authority duly given by resolutions duly adopted by their respective Boards of Directors, have caused these presents to be executed by the president and attested by the corporate secretary of each party hereto as the respective act, deed and agreement of each of said corporations, on this 7th day of August, 1998.
ATTEST: APACHE CORPORATION /s/ Cheri L. Peper By: /s/ G. Steven Farris ----------------------------------- -------------------------------------- Cheri L. Peper G. Steven Farris Corporate Secretary President and Chief Operating Officer ATTEST: MWJR PETROLEUM CORPORATION /s/ Cheri L. Peper By: /s/ G. Steven Farris ----------------------------------- -------------------------------------- Cheri L. Peper G. Steven Farris Corporate Secretary President |
I, Cheri L. Peper, Corporate Secretary of Apache Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certify that the Agreement and Plan of Merger to which this Certificate is attached, after having been first duly signed on behalf of said Apache Corporation and having been signed on behalf of MWJR Petroleum Corporation, a corporation organized and existing under the laws of the State of Delaware, was duly adopted by action of the Board of Directors of said Apache Corporation and without any vote of its stockholders pursuant to Section 251(f) of the General Corporation Law of Delaware and that the conditions specified in the first sentence of such Section 251(f) have been satisfied.
WITNESS my hand on this 7th day of August, 1998.
/s/ Cheri L. Peper
-----------------------------------------
[Seal] Cheri L. Peper
Corporate Secretary
|
EXHIBIT 3.6
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AGREEMENT OF MERGER, WHICH MERGES:
"MW PETROLEUM CORPORATION", A COLORADO CORPORATION,
WITH AND INTO "APACHE CORPORATION" UNDER THE NAME OF" APACHE
CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE
OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE NINETEENTH DAY OF AUGUST,
A.D. 1998, AT 8:31 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE EFFECTIVE DATE OF THE AFORESAID CERTIFICATE OF AGREEMENT OF MERGER IS THE FIRST DAY OF SEPTEMBER, A.D. 1998.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel ----------------------------------------- Edward J. Freel, Secretary of State |
[SEAL]
0482215 8100M AUTHENTICATION: 9261680
981324886 DATE: 8-19-98
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
MW PETROLEUM CORPORATION
INTO
APACHE CORPORATION
Apache Corporation, a corporation organized and existing under the laws of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That Apache Corporation was incorporated on the 6th day of December, 1954, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That Apache Corporation owns all of the issued and outstanding shares of the capital stock of MW Petroleum Corporation, a corporation formerly known as MW Acquisition Corporation and which was incorporated on the 20th day of December, 1991, pursuant to the Revised Statutes of the State of Colorado.
THIRD: That Apache Corporation, by the following resolutions of its Board of Directors, duly adopted at a meeting held on the 30th day of April, 1998, determined to and did merge into itself said MW Petroleum Corporation:
RESOLVED: That MW Petroleum Corporation ("MW"), a wholly owned subsidiary of Apache Corporation, be merged with and into Apache Corporation ("Apache"), with Apache being the surviving corporation.
FURTHER RESOLVED: That the merger shall be effective on September 1, 1998.
FURTHER RESOLVED: That the Restated Certificate of Incorporation of Apache, as heretofore amended and as in effect on the date of the merger, shall continue in full force and effect as the Restated Certificate of Incorporation of the surviving corporation.
FURTHER RESOLVED: That each share of the capital stock of Apache, the surviving corporation, issued and outstanding on the effective date of the merger shall remain issued and outstanding.
FURTHER RESOLVED: That each share of the capital stock of MW issued and outstanding on the effective date of the merger shall be cancelled without consideration, and no shares of the capital stock of Apache, the surviving corporation, shall be issued in exchange therefore.
FURTHER RESOLVED: That the bylaws of Apache, as they exist on the effective date of the merger, shall be and remain the bylaws of Apache, the surviving corporation, until the same shall be altered, amended or repealed as therein provided.
FURTHER RESOLVED: That the directors and officers of Apache on the effective date of the merger shall be the directors and officers of the surviving corporation and shall continue in office until the next annual meeting of stockholders and until their successors have been elected and qualified.
FURTHER RESOLVED: That, upon the merger taking effect, Apache shall thereupon and thereafter possess all the rights, privileges, immunities, and franchises, of a public as well as a private nature, of each of Apache and MW; that all property, real, personal, and mixed, and all debts due on whatever account, including subscriptions to shares, and all other chooses in action, and every other interest of or belonging to or due to MW shall be deemed to be transferred to and vested in Apache without further act or deed; that the title to any real estate, or any interest therein vested in either of Apache or MW shall not revert or be in any way impaired by reason of the merger; and that such transfer to and vesting in Apache shall be deemed to occur by operation of law, and no consent or approval of any other person shall be required in connection with any such transfer or vesting unless such consent or approval is specifically required in the event of merger by law or by express provision in any contract, agreement, decree, order, or other instrument to which either of Apache or MW is a party or by which either is bound.
FURTHER RESOLVED: That, upon the merger taking effect, Apache shall be responsible and liable for all the liabilities and obligations of MW; that any claim existing or action or proceeding, whether civil or criminal, pending by or against MW may be prosecuted as if the merger had not taken place; and that neither the rights of creditors nor any liens upon the property of either of Apache or MW shall be impaired by such merger.
FURTHER RESOLVED: That the proper officers of Apache are hereby authorized and directed, in the name and on behalf of Apache, to prepare and execute a Certificate of Ownership and Merger setting forth a copy of the resolutions authorizing the merger of MW with and into Apache and the assumption by Apache of the liabilities and obligations of MW, and the date of adoption thereof, and to cause such Certificate of Ownership and Merger to be filed with the Delaware Secretary of State and a certified copy of same recorded in the office of the Recorder of Deeds of New Castle County.
FURTHER RESOLVED: That the proper officers of Apache be, and they hereby are, authorized and directed to take such further action and to execute and file such certificates and other documents as they, in their discretion, shall deem necessary or advisable to consummate the merger and effect the foregoing resolutions including, without limitation, articles of merger or share exchange for filing with the Colorado Secretary of State.
FURTHER RESOLVED: This merger may be amended or terminated and abandoned by the Board of Directors of Apache at any time prior to the date of filing the merger with the Secretary of State of Delaware and of Colorado.
IN WITNESS WHEREOF, Apache Corporation has caused this Certificate of Ownership and Merger to be executed by its duly authorized officers as of this 7th day of August, 1998.
APACHE CORPORATION
By: /s/ G. Steven Farris
-------------------------------------
G. Steven Farris
President and Chief Operating Officer
ATTEST:
/s/ Cheri L. Peper
-----------------------------------
Cheri L. Peper
Corporate Secretary
|
EXHIBIT 3.7
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "APACHE CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF AUGUST, A.D. 1998, AT 1:30 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel -------------------------------------- Edward J. Freel, Secretary of State |
[SEAL]
0482215 8100 AUTHENTICATION: 9265795
981328934 DATE: 08-21-98
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
5.68% CUMULATIVE PREFERRED STOCK, SERIES B
OF
APACHE CORPORATION
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Apache Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Restated Certificate of Incorporation of the Corporation, which authorizes the issuance by the Corporation of up to five million (5,000,000) shares of no par value preferred stock, which authority was delegated by the Board of Directors to a committee of the Board of Directors (the "Committee") pursuant to resolutions adopted by unanimous written consent dated June 18, 1998, the Committee by unanimous written consent dated August 25, 1998, adopted the following resolution creating and providing for the issuance of a series of preferred stock of the Corporation:
RESOLVED: That, pursuant to the authority delegated by the Board of Directors of the Corporation, the Committee hereby creates a series of preferred stock of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof (in addition to the provisions set forth in the Restated Certificate of Incorporation of the Corporation, which are applicable to all series of the Corporation's preferred stock) as follows:
5.68% CUMULATIVE PREFERRED STOCK, SERIES B
1. Number of Shares and Designation. One hundred thousand (100,000) shares of the five million (5,000,000) authorized shares of no par value preferred stock of the Corporation are hereby constituted as a series of preferred stock, no par value per share, designated as "5.68% Cumulative Preferred Stock, Series B" (hereinafter called the "Series B Preferred Stock").
2. Ranking. The Series B Preferred Stock shall rank prior and superior to all of the Common Stock of the Corporation now or hereafter outstanding, and the Series A Junior Participating Preferred Stock of the Corporation as to payment of dividends and distribution of assets upon dissolution, liquidation or winding up of the Corporation.
3. Dividends.
(i) General. Cumulative cash dividends shall be payable on each share of Series B Preferred Stock when, as and if declared by the Board of Directors of the Corporation or a duly authorized committee thereof, out of the assets of the Corporation legally available therefor.
The initial dividend for the dividend period commencing on August 25, 1998, to but excluding October 30, 1998, will be $10.26 per share and shall be payable on October 30, 1998. Thereafter, dividends on the Series B Preferred Stock shall be payable quarterly, when, as and if declared by the Board of Directors of the Corporation or a duly authorized committee thereof on the last business day of January, April, July and October of each year (each a "Dividend Payment Date") at the annual rate of 5.68% or $56.80 per share. The amount of dividends payable on each share of Series B Preferred Stock for each full quarterly period shall be computed by dividing the annual dividend rate by four. The amount of dividends payable for any other period that is shorter or longer than a full quarterly dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months.
If a Dividend Payment Date is not a business day, dividends (if declared) on the Series B Preferred Stock shall be paid on the next business day, without interest. As used herein, the term "business day" means any day other than a Saturday or Sunday or any other day on which banks in The City of New York are authorized or required by law or executive order to close. A dividend period with respect to a Dividend Payment Date is the period commencing on the preceding Dividend Payment Date and ending on the day immediately prior to the next Dividend Payment Date. Dividends payable, if declared, on a Dividend Payment Date shall be payable to holders of record as they appear on the stock books of the Corporation on the record date, which shall be the fifteenth day of the calendar month in which the applicable Dividend Payment Date falls (each, a "Dividend Record Date").
Dividends on the Series B Preferred Stock shall be cumulative if the Corporation fails to declare one or more dividends on the Series B Preferred Stock in any amount, whether or not the earnings or financial condition of the Corporation were sufficient to pay such dividends in whole or in part.
Holders of shares of Series B Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full dividends (including accrued dividends, if any) on shares of Series B Preferred Stock. No interest or sum of money in lieu of interest shall be payable in respect of any dividend or payment which may be in arrears.
Dividends in arrears on the Series B Preferred Stock payable, if declared, but not declared for payment or paid on any Dividend Payment Date may be declared by the Board of Directors of the Corporation or a duly authorized committee thereof and paid on any date fixed by the
Board of Directors of the Corporation or a duly authorized committee thereof, whether or not a Dividend Payment Date, to the holders of record of the shares of Series B Preferred Stock, as they appear on the stock register of the Corporation on such record date, which shall be not less than ten nor more than 30 days prior to the payment date therefor, as shall be fixed by the Board of Directors of the Corporation or a duly authorized committee thereof.
(ii) Changes in the Dividends Received Percentage. If, prior to 18 months after the date of the original issuance of the Series B Preferred Stock, one or more amendments to the U. S. Internal Revenue Code of 1986, as amended (the "Code"), are enacted which change the percentage of the dividends received deduction as specified in Section 243(a)(1) of the Code or any successor provision (the "Dividends Received Percentage"), the amount of each dividend on each share of the Series B Preferred Stock for dividend payments made on or after the date of enactment of such change shall be adjusted by multiplying the amount of the dividend payable determined as described above (before adjustment) by a factor, which shall be the number determined in accordance with the following formula (the "DRD Formula"), and rounding the result to the nearest cent (with one-half cent and above rounded up):
For the purposes of the DRD Formula, "DRP" means the Dividends Received Percentage applicable to the dividend in question; provided however, that if the Dividends Received Percentage applicable to the dividend in question shall be less than 50%, then the DRP shall equal .50. No amendment to the Code, other than a change in the percentage of the dividends received deduction set forth in Section 243(a)(1) of the Code or any successor provision, shall give rise to such an adjustment. Notwithstanding the foregoing provisions, in the event that, with respect to any such amendment, the Corporation receives either an unqualified opinion from a nationally recognized independent tax counsel selected by the Corporation or a private letter ruling or similar form of authorization from the U.S. Internal Revenue Service ("IRS") to the effect that such an amendment does not apply to dividends payable on the Series B Preferred Stock, then any such amendment shall not result in the adjustment provided for pursuant to the DRD Formula. The opinion referenced in the previous sentence shall be based upon a specific exception in the legislation amending the DRP or upon a published pronouncement of the IRS addressing such legislation. Unless the context otherwise requires, references to dividends herein shall mean dividends as adjusted by the DRD Formula. The Corporation's calculation of the dividends payable as so adjusted, and as certified accurate as to calculation and reasonable as to method by the independent certified public accountants then regularly engaged by the Corporation, shall be final and not subject to review.
If any amendment to the Code which reduces the Dividends Received Percentage is enacted after a Dividend Record Date and before the next Dividend Payment Date, the amount of dividend payable on such Dividend Payment Date shall not be increased; but instead, an amount equal to the excess of (x) the product of the dividends paid by the Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the greater of the Dividends Received Percentage applicable to the dividend in question and .50) over (y) the dividends paid by the Corporation on such Dividend Payment Date, shall be payable (if declared) to holders of record on the next succeeding Dividend Payment Date in addition to any other amounts payable on such date.
In addition, if any such amendment to the Code is enacted that
reduces the Dividends Received Percentage and such reduction retroactively
applies to a Dividend Payment Date as to which the Corporation previously paid
dividends on the Series B Preferred Stock (each an "Affected Dividend Payment
Date"), the Corporation shall pay (if declared) additional dividends (the
"Additional Dividends") on the next succeeding Dividend Payment Date (or if such
amendment is enacted after the dividend payable on such Dividend Payment Date
has been declared, on the second succeeding Dividend Payment Date following the
date of enactment) to holders of record on such succeeding Dividend Payment Date
in an amount equal to the excess of (x) the product of the dividends paid by the
Corporation on each Affected Dividend Payment Date and the DRD Formula (where
the DRP used in the DRD Formula would be equal to the greater of the Dividends
Received Percentage and .50 applied to each Affected Dividend Payment Date) over
(y) the dividends paid by the Corporation on each Affected Dividend Payment
Date.
Notwithstanding the foregoing, Additional Dividends shall not be paid as a result of the enactment of any amendment to the Code 18 months or more after the date of original issuance of the Series B Preferred Stock which retroactively reduces the Dividends Received Percentage, or if such amendment would not result in an adjustment due to the Corporation having received either an opinion of counsel or tax ruling referred to in the third preceding paragraph. The Corporation shall make only one payment of Additional Dividends.
In the event that the amount of dividend payable per share of the Series B Preferred Stock shall be adjusted pursuant to the DRD Formula and/or Additional Dividends are to be paid, the Corporation will cause notice of each adjustment and, if applicable, any Additional Dividends, to be sent to the holders of the Series B Preferred Stock with the payment of dividends on the next Dividend Payment Date after the date of such adjustment.
In the event that, prior to 18 months after the date of the original issuance of the Series B Preferred Stock, the Dividends Received Percentage is reduced to 50% or less, the Corporation may, at its option, redeem the Series B Preferred Stock in whole, but not in part, as described below.
(iii) Payment Restrictions. The Corporation may not declare or pay any dividend or make any distribution of assets (other than dividends paid or other distributions made in stock of the Corporation ranking junior to the Series B Preferred Stock as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up) on, or redeem, purchase or otherwise acquire (except upon conversion or exchange for stock of the Corporation ranking junior to the Series B Preferred Stock as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up), shares of Common Stock, of Series A Preferred Stock or of any other stock of the Corporation ranking junior to the Series B Preferred Stock as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, unless all accrued and unpaid dividends on the Series B Preferred Stock for all prior dividend periods have been or contemporaneously are declared and paid and the full quarterly dividend on the Series B Preferred Stock for the current dividend period has been or contemporaneously is declared and set apart for payment.
Whenever all accrued dividends on the Series B Preferred Stock
are not paid in full, the Corporation may not declare or pay dividends or make
any distribution of assets (other than dividends paid or other distributions
made in stock of the Corporation ranking junior to the Series B Preferred Stock
as to the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up) on any other stock of the Corporation ranking on a
parity with the Series B Preferred Stock as to the payment of dividends unless
(i) all accrued and unpaid dividends on the Series B Preferred Stock for all
prior dividend periods are contemporaneously declared and paid or (ii) all
dividends declared and paid or set apart for payment or other distributions made
on the Series B Preferred Stock and any other stock of the Corporation ranking
on a parity with the Series B Preferred Stock as to the payment of dividends are
declared and paid or set apart for payment or made pro rata so that the amount
of dividends declared and paid or set apart for payment or other distributions
made per share on the Series B Preferred Stock and such other stock of the
Corporation will bear the same ratio that accrued and unpaid dividends per share
on the Series B Preferred Stock and such other stock of the Corporation bear to
each other.
Whenever all accrued dividends on the Series B Preferred Stock are not paid in full, the Corporation may not redeem, purchase or otherwise acquire (except upon conversion or exchange for stock of the Corporation ranking junior to the Series B Preferred Stock as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up) other stock of the Corporation ranking on a parity with the Series B Preferred Stock as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up unless (i) all outstanding shares of the Series B Preferred Stock are contemporaneously redeemed or (ii) a pro rata redemption is made of shares of Series B Preferred Stock and such other stock of the Corporation, with the amount allocable to each series of such stock determined on the basis of the aggregate liquidation preference of the outstanding shares of each series and the shares of each series being redeemed only on a pro rata basis.
4. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series B Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any distribution of assets is made on the Common Stock of the Corporation or any other class or series of stock of the Corporation ranking junior to the Series B Preferred Stock, upon liquidation, a liquidating distribution in the amount of $1,000 per share, plus an amount equal to the sum of all accrued and unpaid dividends including any increase in dividends payable due to changes in the Dividends Received Percentage and Additional Dividends (whether or not earned or declared) for the then-current dividend period and all dividend periods prior thereto.
Neither the sale of all or substantially all of the property or business of the Corporation, nor the merger, conversion or consolidation of the Corporation into or with any other corporation, nor the merger, conversion or consolidation of any other corporation into or with the Corporation shall constitute a liquidation, dissolution or winding up, voluntary or involuntary, for the purposes of the foregoing paragraph. After the payment to the holders of the shares of Series B Preferred Stock of the full preferential amounts provided for above, the holders of the shares of Series B Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.
In the event the assets of the Corporation available for distribution to the holders of the shares of Series B Preferred Stock upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled as provided above, no such distribution shall be made on account of any other stock of the Corporation ranking on a parity with the Preferred Stock as to the distribution of assets upon such liquidation, dissolution or winding up unless a pro rata distribution is made on the Series B Preferred Stock and such other stock of the Corporation, with the amount allocable to each series of such stock determined on the basis of the aggregate liquidation preference of the outstanding shares of each series and distributions to the shares of each series being made on a pro rata basis.
5. Voting Rights.
(i) The holders of shares of Series B Preferred Stock will not be entitled to vote, except as set forth below or as expressly required by applicable law. In exercising any such vote, each outstanding share of Series B Preferred Stock shall be entitled to one vote.
(ii) If the equivalent of six quarterly dividends payable on the Series B Preferred Stock or any other class or series of preferred stock ranking on a parity with the Series B Preferred Stock as to the payment of dividends have not been paid, the Corporation has resolved to increase the number of directors of the Corporation by two (without duplication of any increase made pursuant to the terms of any other series of preferred stock of the Corporation), and the holders of the Series B Preferred Stock, voting as a single class with the holders of shares of any other class of the preferred stock of the Corporation ranking on a parity with the Series B Preferred Stock either as to dividends or distribution of assets and upon which like voting rights have been conferred and are exercisable, will be entitled to elect two directors at any meeting of stockholders of the Corporation at which directors are to be elected held during the period such dividends remain in arrears. Each class or series of preferred stock entitled to vote for the additional directors shall have a number of votes proportionate to the aggregate liquidation preference of its outstanding shares. Such voting right shall continue until full cumulative dividends for all past dividend periods on all such preferred stock of the Corporation, including any shares of the Series B Preferred Stock, have been paid or declared and set apart for payment. Any such elected directors shall serve until the Corporation's next annual meeting of stockholders (notwithstanding that prior to the end of such term the right to elect directors shall cease to exist) or until their respective successors shall be elected and qualify.
(iii) Whenever such right shall vest, it may be exercised initially either at a special meeting of holders of Series B Preferred Stock or at any annual stockholders' meeting, but thereafter it shall be exercised only at annual stockholders' meetings. Any director who shall have been elected by the holders of Series B Preferred Stock as a class pursuant to this subparagraph (iii) may be removed at any time, either for or without cause by, and only by, the affirmative votes of the holders of record of a majority of the outstanding shares of Series B Preferred Stock given at a special meeting of such stockholders called for such purpose, and any vacancy created by such removal may also be filled at such meeting. Any vacancy
caused by the death or resignation of a director who shall have been elected by the holders of Series B Preferred Stock as a class pursuant to this subparagraph (iii) may be filled only by the holders of all outstanding Series B Preferred Stock at a meeting called for such purpose.
Any meeting of the holders of all outstanding Series B Preferred Stock entitled to vote as a class for the election or removal of directors shall be held at the place at which the last annual meeting of stockholders was held. At such meeting, the presence in person or by proxy of the holders of a majority of the outstanding shares of all outstanding Series B Preferred Stock shall be required to constitute a quorum; in the absence of a quorum, a majority of the holders present in person or by proxy shall have the power to adjourn the meeting from time to time without notice, other than announcement at the meeting, until a quorum shall be present.
(iv) So long as any Series B Preferred Stock is outstanding, the affirmative vote or consent of the holders of at least 80% of the outstanding shares of the Series B Preferred Stock will be required for any amendment of the Restated Certificate of Incorporation of the Corporation (or any certificate supplemental thereto) which will adversely affect the powers, preferences, privileges or rights of the Series B Preferred Stock. The affirmative vote or consent of the holders of at least 80% of the outstanding shares of the Series B Preferred Stock and any other series of the preferred stock of the Corporation ranking on a parity with the Series B Preferred Stock either as to dividends or upon liquidation, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or issue or authorize any obligation or security convertible into or evidencing a right to purchase, any additional class or series of stock ranking prior to the Series B Preferred Stock as to dividends or upon liquidation, or to reclassify any authorized stock of the Corporation into such prior shares, but such vote will not be required for the Corporation to take any such actions with respect to any stock ranking on a parity with or junior to the Series B Preferred Stock.
The affirmative vote or consent of the holders of a majority of all the outstanding shares of Series B Preferred Stock, voting or consenting separately as a class, shall be required to approve any merger, conversion, consolidation or compulsory share exchange to which the Corporation is a party, unless (i) the terms of such merger, conversion, consolidation or compulsory share exchange do not provide for a change in the terms of the Series B Preferred Stock and (ii) the Series B Preferred Stock is on a parity with or prior to (in respect of the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up) any other class or series of capital stock authorized by the surviving corporation, other than any class or series of stock of the Corporation ranking senior as to the Series B Preferred Stock either as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation and previously authorized with the consent of holders of Series B Preferred Stock as described herein (or other than any capital stock into which such prior stock is converted as a result of such merger, consolidation or compulsory share exchange).
In addition, if the holders of the shares of the Series B Preferred Stock are entitled to vote upon or consent to a merger, consolidation, conversion or compulsory share exchange of the Corporation, and if the Corporation offers to purchase all of the outstanding shares of the Series B Preferred Stock (the "Offer"), then each holder of the Series B Preferred Stock who does not sell its shares of Series B Preferred Stock pursuant to the Offer shall be deemed irrevocably to have voted or consented all shares of Series B Preferred Stock owned by such holder in favor of the merger or consolidation of the Corporation without any further action by the holder. The Offer shall be at a price
of $1,000 per share, together with accrued and unpaid dividends (whether or not declared) to the date fixed for repurchase including any increase in dividends payable due to changes in the Dividends Received Percentage and Additional Dividends. The Offer shall remain open for acceptance for a period of at least 30 days.
6. Redemption. Prior to August 25, 2008, the Series B Preferred Stock is not redeemable, except as set forth herein. On or after such date, each share of Series B Preferred Stock shall be redeemable, in whole or in part, at the option of the Corporation, at any time and from time to time, out of funds legally available therefor, at a redemption price of $1,000 per share, plus accrued and unpaid dividends (whether or not declared) to the date fixed for redemption, including any increase in dividends payable due to changes in the Dividends Received Percentage and Additional Dividends. If fewer than all the outstanding shares of Series B Preferred Stock are to be redeemed, the Corporation will select those to be redeemed by lot or pro rata or by any other method as may be determined by the Board of Directors to be equitable.
If, prior to 18 months after the date of the original issuance of the Series B Preferred Stock, one or more amendments to the Code are enacted which result in a reduction of the Dividend Received Percentage to 50% or less, the Corporation, at its option may redeem all, but not less than all, of the outstanding shares of Series B Preferred Stock provided that, within 60 days of the date on which an amendment to the Code is enacted which changes the Dividend Received Percentage to 50% or less, the Corporation sends notice to holders of the Series B Preferred Stock of such redemption. Any redemption of the Series B Preferred Stock pursuant to this paragraph will take place on the date specified in the notice, which date shall not be less than 30 or more than 60 days from the date such notice is sent to holders of the Series B Preferred Stock. Any redemption of the Series B Preferred Stock in accordance with this paragraph shall be at a redemption price equal to the greater of (i) $1,000 per share of the Series B Preferred Stock (the "Liquidation Value") to be redeemed or (ii) the sum of the present values of the Remaining Scheduled Dividends prior to August 25, 2028 and the Liquidation Value assuming payment on August 25, 2028, discounted to the redemption date on a quarterly basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus zero basis points, excluding any increase in dividends payable due to changes in the Dividend Received Deduction Percentage, if any, plus in the case of (i) or (ii) accrued and unpaid dividends (whether or not declared) to the date fixed for redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Rate for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity of August 25, 2028 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities maturing on or about August 25, 2028. "Independent Investment Banker" means Smith Barney Inc. or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Corporation.
"Comparable Treasury Rate" means, as of any date of determination, the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second business day preceding such date of determination on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for
actively traded U.S. Treasury securities having a 30-year maturity as of such date of determination, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second business day preceding the date of determination in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a 30-year constant maturity as of such date of determination.
"Remaining Scheduled Dividends" means cumulative cash dividends at a rate of 5.68% of the Liquidation Value per share of Series B Preferred Stock equivalent to $56.80 per annum per share of Series B Preferred Stock from the date specified in the notice until August 25, 2028.
Not more than 60 nor less than 30 days prior to the redemption date, notice by first class mail, postage prepaid, shall be given to the holders of record of the Series B Preferred Stock to be redeemed, addressed to such stockholders at their last addresses as shown on the books of the Corporation. Each such notice of redemption shall specify the date fixed for redemption, the redemption price, the place or places of payment, that payment will be made upon presentation and surrender of the shares of Series B Preferred Stock and that on and after the redemption date, dividends will cease to accumulate on such shares.
Any notice which is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of Series B Preferred Stock receives such notice; and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption any other shares of Series B Preferred Stock. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price. If less than all the shares represented by any such surrendered certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, the dividends with respect to the shares so called shall cease to accumulate after the date fixed for redemption, the shares shall no longer be deemed outstanding, the holders thereof shall cease to be stockholders with respect to such shares, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the redemption price without interest upon surrender of their certificates therefor) shall terminate.
The Series B Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provisions.
7. Outstanding Shares. For purposes of this Certificate of Designations, all shares of Series B Preferred Stock shall be deemed outstanding, except (i) from the date fixed for redemption pursuant to Section 6 hereof, all shares of Series B Preferred Stock that have been so called for redemption under Section 6; and (ii) from the date of registration of transfer, all shares of Series B Preferred Stock held of record by the Corporation or any subsidiary of the Corporation.
8. Preemptive Rights. The Series B Preferred Stock is not entitled to any preemptive or subscription rights in respect of any securities of the Corporation.
9. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.
10. Fractional Shares. The Series B Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of Series B Preferred Stock.
11. Reversion to Corporation. Subject to applicable escheat laws, any monies set aside by the Corporation in respect of any payment with respect to shares of the Series B Preferred Stock, or dividends thereon, and unclaimed at the end of two years from the date upon which such payment is due and payable shall revert to the general funds of the Corporation, after which reversion the holders of such shares shall look only to the general funds of the Company for the payment thereof. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time.
This Certificate shall be effective as of August 21, 1998.
IN WITNESS WHEREOF, said Apache Corporation has caused this Certificate to be signed by Raymond Plank, its Chairman and Chief Executive Officer, and attested by Cheri L. Peper, its Corporate Secretary, this 20th day of August, 1998.
ATTEST: APACHE CORPORATION
/s/ Cheri L. Peper /s/ Raymond Plank
-------------------------------- --------------------------------
Name: Cheri L. Peper Name: Raymond Plank
Title: Corporate Secretary Title: Chairman and Chief
Executive Officer
|
EXHIBIT 3.8
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION OF "APACHE CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-FOURTH DAY OF AUGUST, A.D. 1998, AT 1:00 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ EDWARD J. FREEL ---------------------------------- Edward J. Freel, Secretary of State |
[SEAL]
0482215 8100 AUTHENTICATION: 9267715
981330420 DATE: 08-24-98
|
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR
IN
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
5.68% CUMULATIVE PREFERRED STOCK, SERIES B
OF
APACHE CORPORATION
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE
ON AUGUST 21, 1998
Apache Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Apache Corporation.
2. That a Certificate of Designations, Preferences and Rights was filed with the Secretary of State of Delaware on August 21, 1998, and that said Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is as follows: In the preamble of said Certificate, the date of the unanimous written consent of the Committee of the Board of Directors adopting the resolutions that created the 5.68% Cumulative Preferred Stock, Series B of Apache Corporation, is stated as being August 25, 1998. The correct date of such written consent of the Committee is August 20, 1998.
4. As corrected the preamble of said Certificate reads as follows:
"Apache Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Restated Certificate of Incorporation of the Corporation, which authorizes the issuance by the Corporation of up to five million (5,000,000) shares of no par value preferred stock, which authority was delegated by the Board of Directors to a committee of the Board of Directors (the "Committee") pursuant to resolutions adopted by unanimous written consent dated June 18, 1998, the Committee by unanimous written consent dated August 20, 1998, adopted the following resolution creating and providing for the issuance of a series of preferred stock of the Corporation:"
IN WITNESS WHEREOF, said Apache Corporation has caused this Certificate of Correction to be signed by Cheri L. Peper, its Corporate Secretary, this 24th day of August, 1998.
APACHE CORPORATION
By: /s/ CHERI L. PEPER
---------------------------------
Cheri L. Peper
Corporate Secretary
|
EXHIBIT 10.13
CORPORATE INCENTIVE COMPENSATION PLAN "A"
(SENIOR OFFICERS' PLAN)
1. Purpose of the Plan
Apache Corporation (the "Company") adopts this Corporate Incentive Compensation Plan "A" (the "Plan") effective January 1, 1998. The purpose of this Plan is to provide incentive to certain senior officers of the Company to achieve certain financial and operational objectives of the financial plan of the Company. Senior Officers are in a unique position to shape the company's strategic direction and to put in place the tools -incentives, capital, etc., to support it's development or endorse the company's long range strategy, and have the power and authority to allocate resources and measure and reward goal achievement. The Corporate IC Plan "A" is intended to incentivize results that will:
o Enhance shareholder value,
o Enhance the Company's financial position, and
o Create interaction and involvement through the management of the Corporate IC Plan "B".
2. Administration
The Plan shall be administered by the Company's Board of Directors (the "Board"), except to the extent that the Plan delegates authority to the Management Development and Compensation Committee (the "Committee") of the Board, and except to the extent that the Board otherwise delegates or provides.
The Committee shall administer the Plan and make recommendations to the Board concerning selection of employees eligible to participate in the Plan (the "Participants") and the funding of the Plan.
All actions, decisions, and determinations of the Committee concerning the Plan and its administration shall be subject only to review by the Board to the extent the Board deems review appropriate, and shall otherwise be final, conclusive and binding upon the Company, its shareholders, subsidiaries, affiliates, employees and officers, and upon all Participants and all other affected persons.
3. Eligible Participants
The Committee will designate certain senior officers of the Company as Participants, but will include the Chairman/CEO and COO/President.
4. Assessment
Assessment of the performance of the Participants and subsequent
recommendations for payment of incentive compensation will rest with
the Committee. The recommendation will be made to the Board for final
approval.
The Committee's assessment will include the following areas:
1. Comparison of company's performance for one year against that of a defined peer group of "tier one independents." (Attachment I)
2. Assessment of Participant's strategic management as evidenced by selection of and achievement of the tasks identified as the annual component of the strategic plan.
3. Other factors, such as participant's individual objectives which are deemed by the committee and the Board to bear on the annual incentive opportunity for the Participants.
Comprehensive comparative information on defined peer group to be made available to the Committee by Management.
5. Distribution
Awards under the Plan shall be determined as follows:
a) Eligible salary equal to 50% of base compensation,
b) Up to 75% of eligible salary be recommended by achievement as reviewed and approved by the Committee, and
c) Up to 25% of eligible percent of salary be recommended by achievement of personal objectives.
Distribution of a Participant's award, if any, shall be made on or before 90 days after the end of the Plan year (the "Distribution Date".) A portion(s) of the award may be deferred to future years dependent upon the payout/funding mechanism as recommended annually by the Committee.
6. Miscellaneous Provisions
Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company or interfere in any way with the right of the Company to determine a Participant's compensation or any other terms of employment.
A Participant's rights and interests under this Plan may not be assigned, transferred, attached, pledged, mortgaged or hypothecated.
The Company has the right to offset from a Participant's award any amounts due from the Participant to the Company.
A Participant shall be entitled to an award under the Plan only if the Participant is employed by the Company or an affiliated company on the Distribution Date for the applicable Plan year. If a Participant dies, retires, or suffers a disability after receiving an award allocation, but prior to the Distribution Date, special provisions may be granted for that Participant by the Committee.
This Plan, in combination with the Corporate Incentive Plan "B", supercedes and replaces the Company's Corporate Administrative Group Incentive Plan, as amended effective January 1, 1990.
7. Amendment and Termination
The Board, upon recommendation by the Committee, may at any time suspend, amend, modify or terminate the Plan; provided that no suspension, amendment, modification, or termination shall alter or impair any rights or obligations to any award distributed previously under the Plan. If this Plan is terminated during any incentive period for which Participants have been selected to participate, the Board may, in its sole discretion, make provision for payment of awards as it deems appropriate.
8. Governing Law
The Plan shall be construed in accordance with and governed by the laws of the State of Texas.
Dated this 16th day of July, 1998.
Attest:
/s/ Cheri L. Peper /s/ Raymond Plank
----------------------------------- -----------------------------------------
CORPORATE SECRETARY RAYMOND PLANK
CHAIRMAN & CHIEF EXECUTIVE OFFICER
/s/ Cheri L. Peper /s/ G. Steven Farris
----------------------------------- -----------------------------------------
CORPORATE SECRETARY G. STEVEN FARRIS
PRESIDENT & CHIEF OPERATING OFFICER
/s/ Cheri L. Peper /s/ Daniel L. Schaeffer
----------------------------------- -----------------------------------------
CORPORATE SECRETARY DANIEL L. SCHAEFFER
VICE PRESIDENT, HUMAN RESOURCES
|
ATTACHMENT "I"
LISTING OF PEER COMPANIES FOR
COMPARATIVE ASSESSMENT
NOBLE AFFILIATES, INC.
VASTAR RESOURCES, INC.
ANADARKO PETROLEUM CORPORATION
ENRON OIL & GAS COMPANY
BURLINGTON RESOURCES, INC.
ORYX ENERGY COMPANY
PENNZOIL COMPANY
UNION PACIFIC RESOURCES GROUP, INC.
EXHIBIT 10.14
CORPORATE INCENTIVE COMPENSATION PLAN "B"
(Strategic Objectives Format)
1. PURPOSE OF THE PLAN
Apache Corporation (the "Company") adopts this Corporate Incentive Compensation Plan "B" (the "Plan") effective January 1, 1998. The purpose of this Plan is to provide incentive to certain officers, directors, managers and key personnel to achieve specified strategic objectives. The Corporate Incentive Compensation Plan "B" is intended to incentivize the accomplishment of specified strategic objectives that will:
o Enhance the Company's financial position,
o Create greater interaction and involvement by management, and
o Encourage and develop a longer term strategic perspective.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors (the "Board"), except to the extent that the Plan delegates authority to the Management Development and Compensation Committee (the "Committee") of the Board, and except to the extent that the Board otherwise delegates or provides.
The Committee shall administer the Plan and make recommendations to the Board concerning selection of employees eligible to participate in the Plan (the "Participants") and the funding of the Plan.
Senior management as designated by the Committee ("Senior Management") shall be responsible for the management of the Plan including the development and on-going monitoring of the strategic objectives. The Committee will review the status of the objectives at their regular meetings as appropriate. The Committee's assessment of achievement of the objectives shall be made at their first regular meeting of each calendar year based on a review by Senior Management.
All actions, decisions, and determinations of the Committee concerning the Plan and its administration shall be subject only to review by the Board to the extent the Board deems review appropriate, and shall otherwise be final, conclusive and binding upon the Company, its shareholders, subsidiaries, affiliates, employees and officers, and upon all Participants and all other affected persons.
3. ELIGIBLE DEPARTMENTS
The Committee upon recommendation of the Chairman and/or the President/COO will designate Participants in the Plan from the following listing of departments of the Company (the "Departments"). The Committee may, as appropriate, add individual departments to or remove individual departments from the listing.
Accounting Gas Flow Legal Administrative Services Human Resources Public & Int'l. Affairs Business Development Information Technology Reservoir Engineering Corporate Planning Internal Audit Technical Services Crude Oil Marketing Investor Relations Treasury Environmental Health Land Administration Officers (as specified) & Safety |
4. PARTICIPATION
The Vice President of each Department will recommend the employees of that Department eligible to be Participants in the Plan and the maximum percent of each Participant's salary that may be awarded if the Plan is funded for that year. The Chairman and/or President/COO shall review the Department recommendations and submit the final list of Participants and salary allocations to the Committee.
5. CORPORATE AND PERSONAL OBJECTIVES
-CORPORATE OBJECTIVES-
Senior Management shall be responsible for the development and administration of the objective listing, although all eligible personnel are expected to contribute to the listing and completion of the objectives. The listing of the objectives shall be dynamic and responsive to changing business conditions. The Company's officers shall meet regularly to assess the completeness and appropriateness of the current listing and recommend to Senior Management additions, deletions or modifications to the listing of objectives.
The objectives shall be annualized for incentive purposes, but be broad enough to have potential impact beyond the current year. Each objective shall have written, defined, measurable outcomes, timeframes for achievement and assigned responsibility. Additionally, objectives shall be weighted numerically to designate overall importance and impact in corporate achievement.
Each objective shall have a corresponding percent of total weighting, based on a maximum percent total equal to 133% (100% goal attainment equals maximum 133% pool funding). As the number of objectives and numerical weighting totals change during the year, the corresponding percent, based on weighting will change.
-PERSONAL GOALS-
Each of the Company's executive officers will establish personal goals relating to cost reduction, operational improvements, program or project enhancements or other objectively determinable goals that support the strategic and financial goals of the Company. Personal goals will be approved by the officer's superior.
All non-officer Participants will establish personal objectives each year by March 1. All objectives must be agreed upon and approved by the Participant, his immediate supervisor and the Department Vice President.
6. DISTRIBUTION
Awards under the Plan shall be determined as follows:
Officers as designated by the Committee who are Participants in this Plan shall have:
a) eligible salary equal to 50% of base compensation,
b) up to 75% of eligible salary be recommended by achievement of corporate objectives as reviewed and approved by the Committee,
c) up to 25% of eligible percent of salary be recommended by achievement of personal objectives, and
d) when a Participant demonstrates extraordinary performance contributing directly to the substantial achievement of a corporate objective, the CEO and/or the President/COO may recommend that the Committee approve an award greater than the Participant's allotted maximum.
All non-officer participants shall have:
a) eligible salary from 10 to 40% of base compensation as recommended by the Department Vice President and approved by the Chairman and/or the President/COO and the Committee (Eligible salary shall be determined by position level in the Company),
b) up to 50% of eligible percent of salary as recommended by achievement of corporate objectives, as reviewed and approved by the Committee,
c) up to 50% of eligible percent of salary as recommended by achievement of personal objectives, and
d) when a Participant demonstrates extraordinary performance contributing directly to the substantial achievement of a corporate objective, the CEO and/or the President/COO may recommend that the Committee approve an award greater than the Participant's allotted maximum.
Recommendations concerning achievement of personal goals shall be made by the Vice President of the Participant's Department after the review with the Participant and shall be approved by the Chairman and/or the President/COO within 45 days of the end of the Plan year.
Distribution of a Participant's award, if any, shall be made on or before 90 days after the end of the Plan year (the "Distribution Date"). A portion(s) of the award may be deferred to future years, dependent upon the payout/funding mechanism as recommended annually by the Committee.
7. MISCELLANEOUS PROVISIONS
Neither this Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company or interfere in any way with the right of the Company to determine a Participant's compensation or any other terms of employment.
A Participant's rights and interests under this Plan may not be assigned, transferred, attached, pledged, mortgaged or hypothecated.
The Company has the right to offset from a Participant's award any amounts due from the Participant to the Company.
A Participant shall be entitled to an award under the Plan only if the Participant is employed by the Company or an affiliated company on the Distribution Date for the applicable Plan year. If a Participant dies, retires, or suffers a disability after receiving an award allocation, but prior to the Distribution Date, special provisions may be granted for that Participant by the Committee.
This Plan, in combination with the Corporate Incentive Plan "A", supercedes and replaces the Company's Corporate Administrative Group Incentive Plan, as amended effective January 1, 1990.
8. AMENDMENT AND TERMINATION
The Board, upon recommendation by the Committee, may at any time suspend, amend, modify or terminate the Plan; provided that no suspension, amendment, modification, or termination shall alter or impair any rights or obligations to any award distributed previously under the Plan. If this Plan is terminated during any incentive period for which Participants have been selected to participate, the Board may, in its sole discretion, make provision for payment of awards as it deems appropriate.
9. GOVERNING LAW
The Plan shall be construed in accordance with and governed by the laws of the State of Texas.
Dated this 16th day of July, 1998.
Attest:
/s/ CHERI L. PEPER /s/ RAYMOND PLANK
------------------------------- -----------------------------------
Corporate Secretary Raymond Plank
Chairman & Chief Executive Officer
/s/ CHERI L. PEPER /s/ G. STEVEN FARRIS
------------------------------- -----------------------------------
Corporate Secretary G. Steven Farris
President & Chief Operating Officer
/s/ CHERI L. PEPER /s/ DANIEL L. SCHAEFFER
------------------------------- -----------------------------------
Corporate Secretary Daniel L. Schaeffer
Vice President, Human Resources
|
EXHIBIT 10.17
NON-QUALIFIED RETIREMENT/SAVINGS PLAN
OF
APACHE CORPORATION
As restated as of January 1, 1997
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.............................................................................................1 1.01 Account......................................................................................................1 1.02 Affiliated Entity............................................................................................1 1.03 Committee....................................................................................................2 1.04 Company......................................................................................................2 1.05 Company Deferrals............................................................................................2 1.06 Compensation.................................................................................................2 1.07 Deferred Contributions.......................................................................................3 1.08 Enrollment Agreement.........................................................................................3 1.09 Participant..................................................................................................3 1.10 Plan Year....................................................................................................4 1.11 Trust........................................................................................................4 1.12 Trust Agreement..............................................................................................4 1.13 Trustee......................................................................................................4 1.14 Valuation Date...............................................................................................4 ARTICLE II ELIGIBILITY AND PARTICIPATION..........................................................................4 2.01 Eligibility and Participation................................................................................4 2.02 Enrollment...................................................................................................4 2.03 Failure of Eligibility.......................................................................................5 ARTICLE III CONTRIBUTION DEFERRALS................................................................................5 3.01 Participant Deferrals........................................................................................5 3.02 Company Deferrals............................................................................................6 ARTICLE IV INVESTMENT OF DEFERRALS AND ACCOUNTING.................................................................8 4.01 Investments..................................................................................................8 ARTICLE V DISTRIBUTIONS...........................................................................................8 5.01 Vesting......................................................................................................8 5.02 Distribution After Termination of Employment................................................................10 5.03 Distributions After Participant's Death.....................................................................11 5.04 Hardship Distributions......................................................................................12 5.05 Withholding.................................................................................................13 ARTICLE VI ADMINISTRATION........................................................................................13 6.01 The Committee -- Plan Administrator.........................................................................13 6.02 Committee to Administer and Interpret Plan..................................................................13 6.03 Organization of Committee...................................................................................13 6.04 Indemnification.............................................................................................13 6.05 Agent for Process...........................................................................................14 6.06 Determination of Committee Final............................................................................14 |
ARTICLE VI TRUST.................................................................................................14 7.01 Trust Agreement.............................................................................................14 7.02 Expenses of Trust...........................................................................................14 ARTICLE VIII AMENDMENT AND TERMINATION...........................................................................14 8.01 Termination of Plan.........................................................................................14 8.02 Amendment...................................................................................................14 ARTICLE IX MISCELLANEOUS.........................................................................................15 9.01 Funding of Benefits -- No Fiduciary Relationship............................................................15 9.02 Right to Terminate Employment...............................................................................15 9.03 Inalienability of Benefits..................................................................................15 9.04 Claims Procedure............................................................................................15 9.05 Disposition of Unclaimed Distributions......................................................................16 9.06 Distributions Due Infants or Incompetents...................................................................16 9.07 Use and Form of Words.......................................................................................17 9.08 Headings....................................................................................................17 9.09 Governing Law...............................................................................................17 |
NON-QUALIFIED RETIREMENT/SAVINGS PLAN
OF
APACHE CORPORATION
Apache Corporation ("Apache") established the Non-Qualified Retirement/Savings Plan of Apache Corporation (the "Plan") effective as of November 16, 1989. Apache is now restating the Plan in its entirety as of January 1, 1997.
Apache has also established the Apache Corporation 401(k) Savings Plan (the "Savings Plan"), a profit sharing plan that satisfies the qualification requirements of section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and which contains a cash or deferred arrangement that satisfies the requirements of Code section 401(k). Apache has also established the Apache Corporation Money Purchase Retirement Plan (the "Retirement Plan"), a money purchase pension plan that satisfies the qualification requirements of Code section 401(a).
Apache intends for this Plan to provide a select group of management or
highly compensated employees of the Company (as that term is defined in Article
I) with deferred retirement benefits, in addition to the retirement benefits
provided under the Retirement Plan and the Savings Plan, in consideration of the
valuable services provided by such employees to the Company and to induce such
employees to remain in the employ of the Company. The Company intends that the
Plan shall not be treated as a "funded" plan for purposes of either the Code or
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
ARTICLE I
DEFINITIONS
Defined terms used in this Plan shall have the meanings set forth below or the same meanings as in the Retirement Plan or the Savings Plan, as the case may be:
1.01 Account
"Account" means the account maintained for each Participant to which
shall be credited all Deferred Contributions made by a Participant, all
Company Deferrals on behalf of a Participant, and all adjustments
thereto.
1.02 Affiliated Entity
"Affiliated Entity" means any legal entity that is treated as a single
employer with Apache pursuant to Code section 414(b), 414(c), 414(m),
or 414(o).
|
1.03 Committee
"Committee" means the administrative committee provided for in Section
6.01.
1.04 Company
"Company" means (i) Apache, and (ii) any Affiliated Entity that, with
approval of the Board of Directors of Apache, has adopted the Plan.
1.05 Company Deferrals
"Company Deferrals" means the allocations to a Participant's Account
made pursuant to Section 3.02.
1.06 Compensation
"Compensation" shall generally mean regular compensation paid by the
Company.
|
(a) Specifically, Compensation shall include:
(i) regular salary or wages,
(ii) overtime pay,
(iii) bonuses,
(iv) salary reductions pursuant to the Savings Plan,
(v) salary reductions that are excludable from an Employee's gross income pursuant to Code section 125, and
(vi) amounts contributed as salary deferrals to this Plan.
(b) Compensation shall exclude:
(i) commissions,
(ii) severance pay,
(iii) moving expenses,
(iv) any gross-up of moving expenses to account for increased income taxes,
(v) foreign service premiums paid as an inducement to work outside of the United States,
(vi) Company contributions under the Retirement Plan
(vii) Company contributions under the Savings Plan,
(viii) other contingent compensation,
(ix) contributions to any other fringe benefit plan
(including, but not limited to, overriding royalty
payments or any other exploration-related payments),
(x) any amounts relating to the granting of a stock
option by the Company or an Affiliated Entity, the
exercise of such a stock option, or the sale or
deemed sale of any shares thereby acquired,
(x) bonuses paid as an inducement to enter the employment
of the Company, and
(xi) Any amount paid in cash or Company Stock pursuant to
the Apache Corporation 1996 Share Price Appreciation
Plan.
Compensation shall include only those amounts paid while the employee
is a Participant in the Plan, except for the purpose of determining the
size of the Participant's retirement-6 allocation under Section
3.02(b), in which case Compensation shall include all amounts paid to
the Participant during the entire Plan Year.
1.07 Deferred Contributions
"Deferred Contributions" means the amounts of a Participant's
Compensation which he elects to defer and have allocated to his Account
pursuant to Section 3.01.
1.08 Enrollment Agreement
"Enrollment Agreement" means an application for participation in the
Plan, execution of which by an eligible employee is required under
Article II for the employee to make Deferred Contributions.
1.09 Participant
"Participant" means any eligible employee selected to participate in
this Plan.
|
1.10 Plan Year
"Plan Year" means the period during which the Plan records are kept.
The Plan Year shall be the calendar year.
1.11 Trust
"Trust" means the trust or trusts, if any, created by the Company to
provide funding for the distribution of benefits in accordance with the
provisions of the Plan. The assets of any such Trust shall remain
subject to the claims of the Company's general creditors in the event
of the Company's insolvency.
1.12 Trust Agreement
"Trust Agreement" means the written instrument pursuant to which each
separate Trust is created.
1.13 Trustee
"Trustee" means one or more banks, trust companies or insurance
companies designated by the Company to hold and invest the Trust Fund
and to pay benefits and expenses as authorized by the Committee in
accordance with the terms and provisions of the Trust Agreement.
1.14 Valuation Date
"Valuation Date" means the last day of the Plan Year or any other date
specified by the Committee for the valuation of the Participants'
Accounts.
|
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 Eligibility and Participation
The Committee shall from time to time in its sole discretion select
those employees of the Company who are eligible to participate in the
Plan from those employees who are among a select group of management or
highly compensated employees.
2.02 Enrollment
Employees who have been selected by the Committee to participate in the
Plan shall complete the enrollment procedure specified by the
Committee. The enrollment procedure may include form(s) for the
employee to (a) designate his beneficiary (pursuant to Section
|
5.03), (b) provide instructions regarding the investment of his Account
(pursuant to Section 4.01), (c) make Deferred Contributions by entering
into an Enrollment Agreement with the Company (pursuant to Section
3.01), (d) select a payment option for the eventual distribution of his
Account (pursuant to Section 5.02), and (e) provide such other
information as the Committee may reasonably require.
2.03 Failure of Eligibility
The Committee shall have the authority to determine that a Participant
is no longer eligible to participate in the Plan. No Company Deferrals
shall be accrued, nor any Deferred Contributions withheld from an
employee's Compensation after the Participant ceases to be eligible to
participate in the Plan. The determination of the Committee with
respect to the termination of participation in the Plan shall be final
and binding on all parties affected thereby. Any benefits accrued
hereunder, however, at the time the Participant becomes ineligible to
continue participation, shall be distributable in accordance with the
provisions of the Plan.
ARTICLE III
CONTRIBUTION DEFERRALS
3.01 Participant Deferrals
(a) General. A Participant may elect to defer a portion of his
Compensation by filing the appropriate Enrollment Agreement
with the Committee. Deferred Contributions shall be deducted
through payroll withholding from the Participant's cash
Compensation payable by the Company. Deferred Contributions
shall be credited to the Participant's Account on or about the
date the amount is withheld from the Participant's
Compensation.
(b) Initial Enrollment. When an employee first becomes eligible to
participate in the Plan, pursuant to Section 2.01, the
Committee shall provide him with an enrollment form, which,
when properly completed and timely returned to the Committee
shall constitute an Enrollment Agreement. To be effective, the
Enrollment Agreement must be completed and returned to the
Committee before the 31st day after the employee becomes
eligible to participate in the Plan. The employee may elect to
defer up to 50% of each pay period's Compensation (excluding
bonuses) to this Plan (in addition to his salary deferrals to
the Savings Plan). The Enrollment Agreement shall be effective
on the first day of the payroll period after the Committee
receives the completed Enrollment Agreement. The Enrollment
Agreement shall be irrevocable for the remainder of the Plan
Year, except as provided in Subsections 3.01(e) through
3.01(g).
(c) Continuing Enrollment. An eligible employee may enter into a
new Enrollment Agreement for each Plan Year. To be effective,
the Enrollment Agreement must be completed and returned to the
Committee by the deadline established by the
|
Committee. The deadline must be before the first day of the
Plan Year. The employee may elect to defer up to 50% of each
pay period's Compensation (excluding bonuses) to this Plan (in
addition to his salary deferrals to the Savings Plan). The
Participant may also elect to defer an additional amount equal
to any corrective distribution made to him during the Plan
Year by the Retirement Plan or the Savings Plan, pursuant to
the terms of Article III of either plan. The Enrollment
Agreement shall be irrevocable for the Plan Year, except as
provided in Subsections 3.01(e) through 3.01(g). If a
Participant fails to timely complete a new Enrollment
Agreement for the following Plan Year, the Participant's old
Enrollment Agreement shall be extended for another Plan Year.
(d) Deferrals from Bonuses. In addition to the Deferred
Contributions that are provided for in Subsections 3.01(b) and
3.01(c) above, a Participant may also elect to defer up to 75%
of any performance bonus by filing an Enrollment Agreement
with the Committee. The Committee must receive the
Participant's signed Agreement by the date specified by the
Committee, which date shall be no later than the day before
the size of the bonus is determined.
(e) Suspension of Deferred Contributions Following a Hardship
Withdrawal. A Participant's Deferred Contributions shall be
suspended as specified in Section 5.04 following a hardship
withdrawal from this Plan and shall also be suspended, for the
number of months required by Section 7.1 of the Savings Plan,
following a hardship withdrawal from that plan. If the
suspension extends beyond the end of the Plan Year, the
Participant may enter into an Enrollment Agreement for the
remainder of the following Plan Year, provided that he
completes the Enrollment Agreement and returns it to the
Committee before his suspension has ended. If he does not
timely complete a new Enrollment Agreement, his prior
Enrollment Agreement shall be reinstated for the remainder of
the new Plan Year.
(f) Participant Becomes Ineligible. A Participant's Enrollment
Agreement shall be canceled immediately when he becomes
ineligible to participate in the Plan.
(g) Committee-Initiated Changes in Enrollment Agreement. The
Committee may adjust any Participant's Enrollment Agreement
for the remainder of any Plan Year by reducing the amount of
the Participant's future Deferred Contributions, provided that
the Committee believes that such reduction will assist either
the Retirement Plan or the Savings Plan in satisfying any
legal requirement.
3.02 Company Deferrals
The Company shall credit to a Participant's Account a matching
contribution for each payroll period and a retirement-6 contribution
for the Plan Year. The matching contributions shall be credited on the
last day of each pay period. The retirement-6 contribution shall be
credited on the last day of the Plan Year. Company Deferrals shall
begin to share in the investment earnings (or losses) at the time
specified in Article IV.
|
(a) Matching Contribution.
(i) Through October 31, 1997. This Paragraph applies through October 31, 1997. The matching contribution for this Plan shall be calculated each pay period, after the Savings Plan's matching contribution is calculated. The "total match" each pay period shall be equal to the "applicable percentage" multiplied by the Participant's "total deferrals" for the pay period; the maximum total match for a pay period is 6% of the pay period's Compensation.
(ii) November 1, 1997 and Thereafter. This Paragraph applies after October 31, 1997. The matching contribution for this Plan shall be calculated each pay period, after the Savings Plan's matching contribution is calculated. The "total match" each pay period shall be equal to the Participant's "total deferrals" for the pay period, up to a maximum total match for a pay period of 6% of the pay period's Compensation.
(iii) Definitions.
The "total match" is equal to the matching contribution to the Participant's Account in this Plan plus the Company Matching Contribution allocated to the Participant's accounts in the Savings Plan.
The "applicable percentage" is equal to that pay period's matching percentage in the Savings Plan, as determined under subparagraph 3.1(b)(i)(A) of that plan.
The "total deferrals" for a pay period are equal to
(i) the Participant's Deferred Contributions for the
pay period, including any Deferred Contributions from
a bonus paid during the pay period, plus (ii) the
Participant's salary deferrals to the Savings Plan
for the pay period.
(b) Retirement-6. In order to receive an allocation of the retirement-6 contribution, an employee must be eligible to participate in the Plan on the last day of the Plan Year. The retirement-6 contribution shall be calculated each Plan Year after the Company Mandatory Contribution is calculated in the Retirement Plan for the Plan Year. The sum of the Participant's retirement-6 contribution in this Plan and his Company Mandatory Contribution in the Retirement Plan shall be equal to 6% of the Participant's Compensation for the Plan Year.
ARTICLE IV
INVESTMENT OF DEFERRALS AND ACCOUNTING
4.01 Investments
All amounts credited to a Participant's Account, together with the
earnings thereon, shall be credited with income and loss as if invested
in one or more investment alternatives selected by the Committee. At
such times and under such procedures as the Committee shall designate,
each Participant shall have the right to elect among investment
alternatives made available by the Committee, including without
limitation the right to transfer all or a portion of the funds in the
Participant's Account among such available investment alternatives. The
Committee shall give written notice to the Participants of the
investment alternatives, if any, available to them for election. The
Committee may change, add to or subtract from the investment
alternatives available at any time. Nothing contained in this Section
shall be construed to give any Participant any power or control to make
investment directions or otherwise influence in any manner the
investment and reinvestment of assets contained within any investment
alternative, such control being at all times retained in the full
discretion of the Committee. Nothing contained in this Section shall be
construed to require the Committee to make investment choices available
to Participants, and in lieu thereof the investment alternative may be
selected by the Committee. Company Deferrals and Deferred Contributions
may be deemed to remain uninvested for a reasonable period of time
following payroll withdrawal, as determined from time to time by the
Committee, without interest. Nothing contained in this Section shall be
construed to require the Company or the Committee to fund any
Participant's Account, and the investment alternatives discussed herein
may be used solely as a means to establish income and loss without the
actual funding of the Participants' Accounts.
|
ARTICLE V
DISTRIBUTIONS
5.01 Vesting
(a) A Participant shall be fully vested in the portion of his Plan
Account that is attributable to his Deferred Contributions.
(b) A Participant shall vest in the portion of his Plan Account
that is attributable to Company Deferrals according to the
following schedule, unless Subsection 5.01(c) provides for
|
faster vesting:
Years of Completed Service Vested Portion
-------------------------- --------------
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
|
(c) A Participant shall be fully vested in the portion of his Plan Account that is attributable to Company Deferrals in the following circumstances.
(i) The Participant shall be fully vested if he attains age 65 while employed by the Company or an Affiliated Entity.
(ii) The Participant shall be fully vested if he is hired by the Company after attaining age 65.
(iii) The Participant shall be fully vested if he incurs a Disability while employed by the Company or an Affiliated Entity.
(iv) The Participant shall be fully vested if he dies while employed by the Company or an Affiliated Entity.
(v) All Participants shall be fully vested if a "Change in Control" occurs. A "Change of Control" occurs when an individual or legal entity, together with all individuals and legal entities acting in concert with such individual or legal entity, or any or all of them, acquires more than 20% of Apache's outstanding voting securities; except that a Change of Control does not occur if, prior to the acquisition of more than 20% of the voting securities, Apache's Board of Directors by majority vote designates the individual or legal entity as an approved acquiror and resolves that a Change of Control will not have occurred for purposes of this Plan.
(vi) All Participants in the Plan who were employed by the Company on July 1, 1992 became 100% vested with respect to all Company Deferrals made to the Plan prior to or as of July 1, 1992. If a Participant was not previously 100% vested, then the amount that becomes 100% vested pursuant to this paragraph shall be allocated to a special account and a new account shall be established for all Company Deferrals made with respect to such Participant subsequent to July 1, 1992. Once any Participant becomes 100% vested in both such accounts, the two separate accounts shall be merged into one account.
(vii) All Participants who were transferred to Producers
Energy Marketing LLC prior to April 1, 1996 became
fully vested. This special vesting rule applies only
to the Participant's Account at the time of his
transfer. If such a Participant was not previously
fully vested, returns to employment with the Company,
and recommences participation in the Plan, then the
amount that became 100% vested pursuant to this
paragraph shall be allocated to a special account and
a new account shall be established for all Company
Deferrals made with respect to such Participant after
his reemployment. Once a Participant becomes 100%
vested in both such accounts, the two separate
accounts shall be merged into one account.
(d) When a Participant terminates employment, the portion of his
Account that is not then vested shall be forfeited
immediately.
5.02 Distribution After Termination of Employment
While a Participant is employed by the Company or an Affiliated Entity,
the only available distribution is a hardship withdrawal pursuant to
Section 5.04. Distributions after the Participant's death are discussed
in Section 5.03. All other distributions are discussed in this Section.
(a) Timing. The Participant's vested Account shall be distributed
after the Participant terminates employment with the Company
and all Affiliated Entities. If the Participant terminates
employment before July 1, distribution shall commence in the
Plan Year of employment termination, as soon as
administratively convenient after the termination of
employment. If the Participant terminates employment on or
after July 1, distribution shall commence in the Plan Year
after the termination of employment, as soon as
administratively convenient.
(b) Form of Distribution. The Participant's entire vested Account
shall be paid in one payment if (i) the vested Account is less
than $100,000 when the Participant terminated employment, or
(ii) the Participant terminates employment in 1996 or 1997.
Otherwise, the distribution shall be paid in one to ten annual
installments, as elected by the Participant subject to the
following restrictions. The Participant shall make his
distribution election when he initially enrolls in the Plan,
except that Participants prior to January 1, 1997 shall make
their election no later than December 31, 1996. Regardless of
the Participant's election, the minimum annual installment
payment shall be $100,000, or, if less, the Participant's
remaining Account balance. Each installment will be equal to
the greater of (i) the minimum installment, or (ii) the vested
Account balance at the beginning of the Plan Year divided by
the number of remaining annual installments, except for the
final installment, which will be equal to the remaining
Account balance. Installments will be paid as soon as
administratively convenient during the Plan Year.
|
For example, if the Participant had chosen 5 annual installments, and terminates employment in February of 1999, the unvested account balance shall be forfeited immediately; his 1999 installment will be one-fifth of his January 1, 1999 vested Account balance; his 2000 installment will be one-fourth of his January 1, 2000 Account balance; his 2001 installment will be one-third of his January 1, 2001 Account balance; his 2002 installment will be one-half of his January 1, 2002 Account balance; and his final installment in 2003 will be the remainder of his Account balance.
(c) Reemployment. If a Participant is reemployed by the Company or an Affiliated Entity before he is paid his entire vested Account balance, his payments from the Plan shall be suspended. Payments will resume after he again terminates employment. The number of remaining payments shall be the number of annual payments originally chosen, less the number of payments received before he was reemployed. If the Participant dies before receiving all installments, Section 5.03 shall apply.
5.03 Distributions After Participant's Death
(a) Each Participant shall designate one or more persons, trusts or other entities as his beneficiary (the "Beneficiary") to receive any amounts distributable hereunder at the time of the Participant's death. In the absence of an effective beneficiary designation as to part or all of a Participant's interest in the Plan, such amount shall be distributed to the Participant's surviving spouse, if any, otherwise to the personal representative of the Participant's estate.
(b) A beneficiary designation may be changed by the Participant at any time and without the consent of any previously designated Beneficiary. However, if the Participant is married, his spouse shall be his Beneficiary unless such spouse has consented to the designation of a different beneficiary. To be effective, the spouse's consent must be in writing, witnessed by a notary public, and filed with the Committee. If a Participant has designated his spouse as a Beneficiary or as a contingent beneficiary, and the Participant and that spouse subsequently divorce, then the beneficiary designation shall be void and of no effect with respect to such spouse on the day such divorce is final.
(c) When a Participant dies, his remaining vested Account balance shall be distributed to his Beneficiary as soon as administratively possible after his death, regardless of the payment schedule the Participant elected, and regardless of whether installment payments had begun.
5.04 Hardship Distributions
A Participant may request, and the Committee may approve or disapprove
in its sole discretion, a withdrawal of part or all of the vested
portion of the Participant's Account, subject to the following:
(a) The Participant must file a written request for withdrawal
with the Committee, along with such information as the
Committee may request for this purpose. The Committee shall
review the information filed as soon as practicable after it
is received and shall promptly inform the Participant of the
results of the Committee's determination.
(b) Such withdrawal may be made only for the purpose of meeting an
unforeseeable emergency, which shall be defined as a severe
financial hardship to the Participant resulting from a sudden
and unexpected illness or accident of the Participant or of a
dependent (as defined in Section 152 of the Code) of the
Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control
of the Participant, and only if and to the extent other
resources which could alleviate such need are not reasonably
available to the Participant.
(c) An unforeseeable emergency shall be determined to exist by the
Committee based on all relevant facts and circumstances.
(d) If the Committee determines that a hardship exists, the
Participant must represent to the Committee by written
certification that the need cannot be relieved through
reimbursement or compensation by insurance or otherwise; by
liquidation of the Participant's assets, to the extent that
liquidation of such assets would not itself cause severe
financial hardship; or by cessation of deferrals under the
Plan and any other plans maintained by the Company.
(e) If the Committee is satisfied that the foregoing requirements
are satisfied and determines, in its sole discretion, to
permit a hardship withdrawal, it will determine the amount of
hardship withdrawal necessary to satisfy the need of the
Participant and will distribute such amount to the
Participant.
(f) The Participant's Deferred Contributions shall be suspended
for six months following the date of his hardship withdrawal
from this Plan. If a Participant makes a hardship withdrawal
from this Plan and also makes a hardship withdrawal from the
Savings Plan, the suspension period under this Plan shall run
concurrently with the suspension period under the Savings
Plan, if any, and the suspension period under this Plan shall
be the longer of the suspension period provided under the
Savings Plan or the six-month suspension provided by this
Plan.
|
5.05 Withholding
The Plan shall withhold any taxes or other amounts that it is required
to withhold pursuant to any applicable law. The Committee may direct
the Plan to withhold additional amounts from any payment, either
because the Participant so requested or to repay the Participant's debt
or obligation to the Company or Affiliated Entities.
|
ARTICLE VI
ADMINISTRATION
6.01 The Committee -- Plan Administrator
The Committee members for the Plan shall be the same committee members
as for the Savings Plan.
6.02 Committee to Administer and Interpret Plan
The Committee shall administer the Plan and shall have all discretion
and powers necessary for that purpose, including, but not by way of
limitation, full discretion and power to interpret the Plan, to
determine the eligibility, status and rights of all persons under the
Plan and, in general, to decide any dispute. The Committee shall direct
the Company, the Trustee, or both, as the case may be, concerning
distributions in accordance with the provisions of the Plan. The
Committee shall maintain all Plan records except records of any Trust.
6.03 Organization of Committee
The Committee shall adopt such rules as it deems desirable for the
conduct of its affairs and for the administration of the Plan. It may
appoint agents (who need not be members of the Committee) to whom it
may delegate such powers as it deems appropriate, except that any
dispute shall be determined by the Committee. The Committee may make
its determinations with or without meetings. It may authorize one or
more of its members or agents to sign instructions, notices and
determinations on its behalf. The action of a majority of the Committee
shall constitute the action of the Committee.
6.04 Indemnification
The Committee and all of the agents and representatives of the
Committee shall be indemnified and saved harmless by the Company
against any claims, and the expenses of defending against such claims,
resulting from any action or conduct relating to the administration of
the Plan, except claims judicially determined to be attributable to
gross negligence or willful misconduct.
|
6.05 Agent for Process
The Committee shall appoint an agent of the Plan for service of all
process.
6.06 Determination of Committee Final
The decisions made by the Committee shall be final and conclusive on
all persons.
|
ARTICLE VII
TRUST
7.01 Trust Agreement
The Company may, but shall not be required to, adopt a separate Trust
Agreement for the holding, investment and administration of the funds
contributed to Accounts under the Plan. The Trustee shall maintain and
allocate assets to a separate account for each Participant under the
Plan. The assets of any such Trust shall remain subject to the claims
of the Company's general creditors in the event of the Company's
insolvency.
7.02 Expenses of Trust
The parties expect that any Trust created pursuant to Section 7.01 will
be treated as a "grantor" trust for federal and state income tax
purposes and that, as a consequence, such Trust will not be subject to
income tax with respect to its income. However, if the Trust should be
taxable, the Trustee shall pay all such taxes out of the Trust. All
expenses of administering any such Trust shall be a charge against and
shall be paid from the assets of such Trust.
|
ARTICLE VIII
AMENDMENT AND TERMINATION
8.01 Termination of Plan
The Company expects to continue the Plan indefinitely, but each Company
may terminate its participation in the Plan at any time, and Apache may
terminate the entire Plan at any time.
8.02 Amendment
Apache may amend the Plan at any time and from time to time,
retroactively or otherwise, on behalf of all Companies, but no
amendment shall reduce any vested benefit that has accrued on the
effective date of the amendment.
|
Each amendment shall be in writing. Each amendment shall be approved by Apache's Board of Directors or by an officer of Apache Corporation who is authorized by Apache's Board of Directors to amend the Plan. Each amendment shall be executed by an officer of Apache to whom Apache's Board of Directors has delegated the authority to execute the amendment.
ARTICLE IX
MISCELLANEOUS
9.01 Funding of Benefits -- No Fiduciary Relationship
All benefits payable under the Plan shall be distributed in cash or in
kind, in the discretion of the Committee. Benefits shall be paid either
out of the Trust or, if no Trust is in existence or if the assets in
the Trust are insufficient to provide fully for such benefits, then
such benefits shall be distributed by the Company out of its general
assets. Nothing contained in the Plan shall be deemed to create any
fiduciary relationship between the Company and the Participants.
Notwithstanding anything herein to the contrary, to the extent that any
person acquires a right to receive benefits under the Plan, such right
shall be no greater than the right of any unsecured general creditor of
the Company, except to the extent provided in the Trust Agreement, if
any.
9.02 Right to Terminate Employment
The Company may terminate the employment of any Participant as freely
and with the same effect as if the Plan were not in existence.
9.03 Inalienability of Benefits
No Participant shall have the right to assign, transfer, hypothecate,
encumber or anticipate his interest in any benefits under the Plan, nor
shall the benefits under the Plan be subject to any legal process to
levy upon or attach the benefits for payment for any claim against the
Participant or his spouse. If, notwithstanding the foregoing provision,
any Participant's benefits are garnished or attached by the order of
any court, the Company may bring an action for declaratory judgment in
a court of competent jurisdiction to determine the proper recipient of
the benefits to be distributed pursuant to the Plan. During the
pendency of the action, any benefits that become distributable shall be
paid into the court as they become distributable, to be distributed by
the court to the recipient it deems proper at the conclusion of the
action.
9.04 Claims Procedure
(a) All claims shall be filed in writing by the Participant, his
spouse or the authorized representative of the claimant, by
completing such procedures as the Committee
|
shall require. Such procedures shall be reasonable and may
include the completion of forms and the submission of
documents and additional information.
(b) If a claim is denied, notice of denial shall be furnished by
the Committee to the claimant within 90 days after the receipt
of the claim by the Committee, unless special circumstances
require an extension of time for processing the claim, in
which event notification of the extension shall be provided to
the Participant or beneficiary and the extension shall not
exceed 90 days.
(c) The Committee shall provide adequate notice, in writing, to
any claimant whose claim as been denied, setting forth the
specific reasons for such denial, specific reference to
pertinent Plan provisions, a description of any additional
material or information necessary for the claimant to perfect
his claims and an explanation of why such material or
information is necessary, all written in a manner calculated
to be understood by the claimant. Such notice shall include
appropriate information as to the steps to be taken if the
claimant wishes to submit his claim for review. The claimant
or the claimant's authorized representative may request such
review within the reasonable period of time prescribed by the
Committee. In no event shall such a period of time be less
than 60 days. A decision on review shall be made not later
than 60 days after the Committee's receipt of the request for
review. If special circumstances require a further extension
of time for processing, a decision shall be rendered not later
than 120 days following the Committee's receipt of the request
for review. If such an extension of time for review is
required, written notice of the extension shall be furnished
to the claimant prior to the commencement of the extension.
The decision on review shall be furnished to the claimant.
Such decision shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be
understood by the claimant, as well as specific references to
the pertinent Plan provisions on which the decision is based.
9.05 Disposition of Unclaimed Distributions
Each Participant must file with the Company from time to time in
writing his post office address and each change of post office address.
Any communication, statement or notice addressed to a Participant at
his last post office address on file with the Company, or if no address
is filed with the Company, then at his last post office address as
shown on the Company's records, will be binding on the Participant and
his spouse for all purposes of the Plan. The Company shall not be
required to search for or locate a Participant or his spouse.
9.06 Distributions Due Infants or Incompetents
If any person entitled to a distribution under the Plan is an infant,
or if the Committee determines that any such person is incompetent by
reason of physical or mental disability, whether or not legally
adjudicated an incompetent, the Committee shall have the power to
|
cause the distributions becoming due to such person to be made to
another for his or her benefit, without responsibility of the Committee
to see to the application of such distributions. Distributions made
pursuant to such power shall operate as a complete discharge of the
Company, the Trustee, if any, and the Committee.
9.07 Use and Form of Words
When any words are used herein in the masculine gender, they shall be
construed as though they were also used in the feminine gender in all
cases where they would so apply, and vice versa. Whenever any words are
used herein in the singular form, they shall be construed as though
they were also used in the plural form in all cases where they would so
apply, and vice versa.
9.08 Headings
Headings of Articles and Sections are inserted solely for convenience
and reference, and constitute no part of the Plan.
9.09 Governing Law
The Plan shall be construed in accordance with ERISA, the Code, and, to
the extent applicable, the laws of the State of Texas excluding any
conflicts-of-law provisions.
|
APACHE CORPORATION
/s/ Daniel L. Schaeffer
----------------------------------------
Daniel L. Schaeffer
Vice President, Human Resources
Date: 12/15/97
-------------------
|
AMENDMENT
TO
NON-QUALIFIED RETIREMENT/SAVINGS PLAN OF
APACHE CORPORATION
Apache Corporation ("Apache") maintains the Non-Qualified Retirement/Savings Plan of Apache Corporation (the "Plan"). Pursuant to section 8.02 of the Plan, Apache has retained the right to amend the Plan. Apache hereby exercises that right, effective as of January 1, 1997, by adding the following paragraph 3.02(a)(iv) to the Plan.
(iv) Exception. Notwithstanding paragraphs (i) and (ii) above, the matching contribution for a Participant shall be $0 for any Plan Year in which the Participant fails to make the maximum possible salary deferral to the Savings Plan for that Plan Year. If a matching contribution is made to the Participant's Account in this Plan before he makes the maximum possible salary deferral to the Savings Plan for the Plan Year, and the Participant fails to contribute the maximum possible salary deferral to the Savings Plan for the Plan Year, then the Participant shall forfeit any matching contribution (adjusted to reflect any investment gains or losses thereon) made to the Participant's Accounts for the Plan Year.
IN WITNESS WHEREOF, this Amendment has been executed the date set forth below.
APACHE CORPORATION
By: /s/ D. L. Schaeffer
---------------------------------------
Date: December 22, 1998 Title: Vice President, Human Resources
------------------ ------------------------------------
|
AMENDMENT
TO
NON-QUALIFIED RETIREMENT/SAVINGS PLAN OF
APACHE CORPORATION
Apache Corporation ("Apache") maintains the Non-Qualified Retirement/Savings Plan of Apache Corporation (the "Plan"). Pursuant to section 8.02 of the Plan, Apache has retained the right to amend the Plan. Apache hereby exercises that right, effective as of January 1, 1998, as follows.
1. The following paragraph 3.02(a)(iv) shall be added to the Plan.
(iv) Additional Match. If a Participant's match in the Savings Plan is reduced to comply with any requirement of federal law (such as the ACP or multiple-use test of Code section 401(m) or the limits imposed by Code section 415 or 401(a)(17)) after the match for this Plan has been calculated, then the Participant's match for this Plan shall be increased by the amount of the reduction in the match in the Savings Plan.
2. The existing paragraph 3.02(a)(iv) shall be renumbered paragraph 3.02(a)(v).
3. The phrase "Notwithstanding paragraphs (i) and (ii) above," in the newly renumbered paragraph 3.02(a)(v) shall be replaced with the phrase "Notwithstanding paragraphs (i), (ii), and (iv) above."
4. The following sentence shall be added to the end of subsection 3.02(b).
If a Participant's Company Mandatory Contribution in the Retirement Plan is reduced to comply with any requirement of federal law after the retirement-6 contribution for this Plan has been calculated, then the Participant's retirement-6 contribution for this Plan shall be increased by the amount of the reduction in the Company Mandatory Contribution in the Retirement Plan.
IN WITNESS WHEREOF, this Amendment has been executed the date set forth below.
APACHE CORPORATION
By: /s/ D. L. Schaeffer
------------------------------------
Date: December 22, 1998 Title: Vice president, Human Resources
----------------- ---------------------------------
|
AMENDMENT
TO
NON-QUALIFIED RETIREMENT/SAVINGS PLAN OF
APACHE CORPORATION
Apache Corporation ("Apache") maintains the Non-Qualified Retirement/Savings Plan of Apache Corporation (the "Plan"). Pursuant to section 8.02 of the Plan, Apache has retained the right to amend the Plan. Apache hereby exercises that right, effective as of January 1, 1999, as follows.
1. The introductory paragraph in Section 5.02 shall be replaced by the following.
While a Participant is employed by the Company or an Affiliated Entity,
the only available distributions are a hardship withdrawal pursuant to
Section 5.04 and an age-70-and-older distribution pursuant to Section
5.05. Distributions after the Participant's death are discussed in
Section 5.03. This Section contains the rules that apply to all other
distributions.
2. Subsection 5.02(c) shall be replaced by the following.
(c) Reemployment. If a Participant is reemployed by the Company or
an Affiliated Entity before he is paid his entire vested
Account balance, his payments from the Plan pursuant to this
Section shall be suspended. If the reemployed Participant
receives a payment pursuant to Section 5.05 (regarding
payments to those age 70 and older), his payments after he
eventually terminates employment shall be determined pursuant
to Section 5.05. If the Participant does not receive a payment
pursuant to Section 5.05, payments under this Section will
resume after the Participant again terminates employment, with
the number of remaining payments equal to the number of annual
payments originally chosen, less the number of payments
received before he was reemployed. If the Participant dies
before receiving all installments, Section 5.03 shall apply.
3. Section 5.05 shall be re-numbered as Section 5.06, and the following
Section 5.05 shall be added to the Plan. For an employee who attained
age 70 on or before the end of the Plan Year preceding the effective
date of this amendment, the first distribution pursuant to this new
Section 5.05 will occur as soon as administratively convenient after
the effective date of this amendment.
5.05 Age-70-and-Older Distributions.
(a) General. A Participant who is employed by the Company or an Affiliated Entity after attaining age 70 shall receive annual payments from the Plan. The first payment shall be paid in the Plan Year after the Plan Year in which the Participant attains age 70. Payments shall be made as early in the Plan Year as is administratively convenient. Each payment shall be equal to the Participant's
Account balance at the end of the prior Plan Year, including all amounts credited to the Participant's Account as of any date in the prior Plan Year, and adjusted pursuant to Article IV to reflect investment experience until the date the payment is made. A payment shall not include any amount credited to the Participant's Account as of any date within the current Plan Year.
(b) Termination Before First Payment. If the Participant dies or otherwise terminates employment before the first payment under this Section is made, then this Section will not apply, and Sections 5.02 and 5.03 will apply instead.
(c) Termination of Employment. When a Participant who has received one or more payments pursuant to this Section terminates employment, his remaining Account balance shall be paid as soon as administratively convenient after his termination of employment, but only after all Company Deferrals have been credited to his Account.
IN WITNESS WHEREOF, this Amendment has been executed the date set forth below.
APACHE CORPORATION
By: /s/ D. L. Schaeffer
--------------------------------------
Date: December 22, 1998 Title: Vice President, Human Resources
----------------- -----------------------------------
|
EXHIBIT 10.19
APACHE CORPORATION
1990 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED DECEMBER 17, 1998)
TABLE OF CONTENTS
PAGE
----
Section 1 - Introduction.................................................................................1
1.1 Establishment..........................................................................1
1.2 Purposes...............................................................................1
1.3 Effective Date.........................................................................1
Section 2 - Definitions..................................................................................1
2.1 Definitions............................................................................1
2.2 Gender and Number......................................................................2
Section 3 - Plan Administration..........................................................................3
Section 4 - Stock Subject to the Plan....................................................................3
4.1 Number of Shares.......................................................................3
4.2 Other Shares of Stock..................................................................3
4.3 Adjustments for Stock Split, Stock Dividend, Etc.......................................4
4.4 Dividend Payable in Stock of Another Corporation, Etc..................................4
4.5 Other Changes in Stock.................................................................4
4.6 Rights to Subscribe....................................................................4
4.7 General Adjustment Rules...............................................................5
4.8 Determination by the Committee, Etc....................................................5
Section 5 - Reorganization or Liquidation................................................................5
Section 6 - Participation................................................................................6
Section 7 - Stock Options................................................................................6
7.1 Grant of Stock Options.................................................................6
7.2 Stock Option Agreements................................................................6
7.3 Shareholder Privileges................................................................11
Section 8 - Change in Control...........................................................................11
8.1 In General............................................................................11
8.2 Limitation on Payments................................................................11
8.3 Definition............................................................................11
|
Section 9 - Rights of Employees; Participants...........................................................12
9.1 Employment............................................................................12
9.2 Nontransferability....................................................................12
Section 10 - General Restrictions.......................................................................12
10.1 Investment Representations............................................................12
10.2 Compliance with Securities Laws.......................................................13
Section 11 - Other Employee Benefits....................................................................13
Section 12 - Plan Amendment, Modification and Termination...............................................13
Section 13 - Withholding................................................................................13
13.1 Withholding Requirement...............................................................13
13.2 Withholding With Stock................................................................14
Section 14 - Requirements of Law........................................................................14
14.1 Requirements of Law...................................................................14
14.2 Federal Securities Law Requirements...................................................14
14.3 Governing Law.........................................................................14
Section 15 - Duration of the Plan.......................................................................15
|
APACHE CORPORATION
1990 STOCK INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 Establishment. Apache Corporation, a Delaware corporation (hereinafter referred to, together with its Affiliated Corporations (as defined in subsection 2.1(a)) as the "Company" except where the context otherwise requires), hereby establishes the Apache Corporation 1990 Stock Incentive Plan (the "Plan") for certain key employees of the Company. The Plan permits the grant of stock options to certain key employees of the Company.
1.2 Purposes. The purposes of the Plan are to provide the key management employees selected 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 shareholder value, so that the income of the key management employees is more closely aligned with the income of the Company's shareholders. The Plan is also designed to attract key employees and to retain and motivate participating employees by providing an opportunity for investment in the Company.
1.3 Effective Date. The Effective Date of the Plan (the "Effective Date") shall be September 19, 1990. 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 shareholder approval is not necessary.
SECTION 2
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) "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) of the Internal Revenue Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means a committee consisting of members of the Board who are 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 promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). Members of the Committee shall be appointed from time to time by the Board, shall serve at the pleasure of the Board and may resign at any time upon written notice to the Board.
(d) "Effective Date" means the effective date of the Plan, September 19, 1990.
(e) "Eligible Employees" means those full-time key employees
(including, without limitation, officers and directors who are also employees)
of the Company or any division thereof, upon whose judgment, initiative and
efforts the Company is, or will become, largely dependent for the successful
conduct of its business.
(f) "Fair Market Value" means the closing price of the Stock on the composite tape on a particular date. If there are no Stock transactions on such date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Stock transactions.
(g) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it may be amended from time to time.
(h) "Option" means a right to purchase 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 422A of the Internal Revenue Code.
(i) "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).
(j) "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.
(k) "Stock" means the $1.25 par value Common Stock of the Company.
2.2 Gender and Number. 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
The Plan shall also 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 and 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. 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 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. Two Million Fifty Thousand (2,050,000) 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 by the shareholders of the Company if, in the opinion of counsel for the Company, such shareholder 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 treasury Stock, 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 or for any reason is terminated unexercised, and any shares of Stock that for any
other reason are not issued to an Eligible Employee 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 increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid in nonassessable at the time of such occurrence: (i) the shares of Stock as to which Options may be granted under the Plan; and (ii) the shares of the Stock then included in 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, 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.
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 of other securities, the Option Price shall be increased by the amount of the price that is payable by the Participant for such Stock 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 total 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 thereto.
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% 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 9 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 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 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 Option Price thereof, or (ii) upon written
notice to the Participants, provide that all unexercised Options must be
exercised within a
specified number of days of the date of such notice or they will be terminated. In the latter event, the Committee shall accelerate the exercise dates of outstanding Options so that all Options become fully vested 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 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.
SECTION 7
STOCK OPTIONS
7.1 Grant of Stock Options. Coincident with or following designation for participation in the Plan, a Participant may be granted one or more Options. 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).
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 "Option Holder"), 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 the 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 Option Holder (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% 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% increment shall become exercisable only if the Option Holder has been continuously employed by the Company from the date the Option is granted through the date on which each such additional 25% increment becomes exercisable.
(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 Option Holder:
(i) If the employment of the Option Holder 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 Company's established policies and procedures, provided that the effect of this subsection 7.2(d) (i) shall be limited to determining the consequences of a termination and that nothing in this subsection 7.2(d) (i) shall restrict or otherwise interfere with the Company's discretion with respect to the termination of any employee.
(ii) If the Option Holder retires from employment by the Company or its affiliates on or after attaining age 65, the Option may be exercised by the Option Holder 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 Option Holder's 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 Option Holder's retirement.
(iii) If the Option Holder becomes disabled (as determined pursuant to the Company's Long-Term Disability 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 Option Holder or by his or her guardian or legal representative, within twelve months following the Option Holder's disability, or within the 36-month period referred to in (ii) if applicable and if longer (provided that such exercise must occur within the Option Period), but not thereafter. In the event of the Option Holder's 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 as to which the Option had become exercisable on or before the date of the Option Holder's disability.
(iv) In the event of the Option Holder's death while still
employed by the Company, each Option of the deceased Option Holder may be
exercised by those entitled to do so under the Option Holder's will or under the
laws of descent and distribution within twelve months following the Option
Holder's 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% increment of the Option, if any, which has
not yet become exercisable at the time of the Option Holder's death. In the
event of the Option Holder's 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 Option Holder that is exercisable at the time of death
may be exercised by those entitled to do so under the Option Holder's will or
under the laws of descent and distribution within twelve months following the
Option Holder's death or within the 36-month period referred to in (ii), 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 Option Holder by the Company is terminated (which for this purpose means that the Option Holder is no longer employed by the Company or by an Affiliated Corporation) within the Option Period for any reason other than cause, retirement on or after attaining age 65, disability or the Option Holder's death, the Option may be exercised by the Option Holder 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 employment.
(e) Transferability. Each stock option agreement shall provide that the Option granted therein is not transferable by the Option Holder except by will or pursuant to the laws of descent and distribution, and that such Option is exercisable during the Option Holder's lifetime only by him or her, or in the event of disability or incapacity, by his or her guardian or legal representative.
(f) Agreement to Continue in Employment. Each stock option agreement shall contain the Option Holder's 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 Corporate Secretary of the Company of written notice specifying the number of shares with respect to which such Option is exercised and payment of the Option Price. Such notice shall be in a form satisfactory to the Committee and shall specify the particular Option (or portion thereof) which is being exercised and the number of shares with respect to which the Option is being exercised. The exercise of the Stock Option shall be deemed effective upon receipt of such notice by the Corporate Secretary and payment to the Company. If requested by the Company, such notice shall contain the Option Holder's 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. Such restriction, or notice thereof, shall be placed on the certificates representing the Stock so purchased. The purchase of such Stock shall take place at the principal offices of the Company upon delivery of such notice, at which time the purchase price of the Stock shall be paid in full by any of the methods or any combination of the methods set forth in (ii) below. A properly executed certificate or certificates representing the Stock shall be issued by the Company and delivered to the Option Holder. If certificates representing Stock are used to pay all or part of the exercise price, separate certificates for the same number of shares of Stock shall be issued by the Company and delivered to the Option Holder representing each certificate used to pay the Option Price, and an additional certificate shall be issued by the Company and delivered to the Option Holder representing the additional shares, in excess of the Option Price, to which the Option Holder is entitled as a result of the exercise of the Option.
(ii) the exercise price shall be paid by any of the following methods or any combination of the following methods:
(A) in cash;
(B) by certified or cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing the number of shares then owned by the Option Holder, the Fair Market Value of which equals the purchase price of the Stock purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that shares of Stock used for this purpose must have been held by the Option Holder for such minimum period of time as may be established from time to time by the Committee; for purposes of this Plan, the Fair Market Value of any shares of Stock delivered in payment of the purchase price upon exercise of the Option shall be the Fair Market Value as of the exercise date; the exercise date shall be the day of delivery of the certificates for the Stock used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver to the Company promptly 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 Option Holder necessary to pay the exercise price.
(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) Withholding. Each stock option agreement shall provide that, upon exercise of the Option, the Option Holder shall make appropriate arrangements with the Company to provide for the Amount of additional withholding required by Sections 3102 and 3402 of the Internal Revenue Code and applicable state income tax laws, including payment of such taxes through delivery of shares of Stock or by withholding Stock to be issued under the Option, as provided in Section 13.
(j) Adjustment of Options. Subject to the provisions of Sections 4, 5, 7, 8 and 12, the Committee may make any adjustment in the number of shares covered by, or the terms of an outstanding Option and a subsequent granting of an Option, by amendment or by substitution of an outstanding Option; however, except as provided in Sections 4, 5, 8 and 12 hereof, the Committee may not adjust the exercise price of any outstanding Option. Such amendment or substitution may result in terms and conditions (including the number of shares covered, vesting schedule or exercise 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 the original grant.
7.3 Shareholder Privileges. No Option Holder shall have any rights as a shareholder with respect to any shares of Stock covered by an Option until the Option Holder becomes the holder of record of such Stock, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date such Option Holder becomes the holder of record of such Stock, except as provided in Section 4.
SECTION 8
CHANGE IN CONTROL
8.1 In General. In the event of a change in control of the Company as defined in Section 8.3, then the Committee may, in its sole discretion, without obtaining shareholder approval, to the extent permitted in Section 12, take any or all of the following actions: (a) accelerate the exercise dates of any outstanding Options or make all such Options fully vested and exercisable; (b) grant a cash bonus award to any Option Holder in an amount necessary to pay the exercise price of all or any portion of the Options then held by such Option Holder; (c) pay cash to any or all Option Holders in exchange for the cancellation of their outstanding Options in an amount equal to the difference between the exercise price of such Options and the greater of the tender offer price for the underlying Stock or the Fair Market Value of the Stock on the date of the cancellation of the Options; and (d) make any other adjustments or amendments to the outstanding Options.
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 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 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 in control" shall mean any of the events specified in the Company's Income Continuance Plan which constitute a change in control within the meaning of that 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 compensation of the Participant from the rate 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 Participant's death, a Participant's rights and interests in Options shall, to the extent provided in Section 7, be transferable by testamentary will or the laws of descent and distribution, and payment of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the Participant's legal representatives, heirs or legatees. 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 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 person's guardian, conservator or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status.
SECTION 10
GENERAL RESTRICTIONS
10.1 Investment Representations. The Company may require any person to whom an Option is granted, as a condition of exercising such 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 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 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 or qualification.
SECTION 11
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a result of the exercise of an Option shall not constitute "earnings" with respect to which any other employee benefits of such employee 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 shareholders if shareholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, or if the Company, on the advice of counsel, determines that shareholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner adversely affect any Options theretofore granted under the Plan, without the consent of the Participant holding such Options.
SECTION 13
WITHHOLDING
13.1 Withholding Requirement. The Company's obligations to deliver shares of Stock upon the exercise of an Option shall be subject to the Participant's satisfaction of all applicable federal, state and local income and other tax withholding requirements.
13.2 Withholding With Stock. 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 tax withholding, or any part thereof, by electing to transfer to the Company, or to have the Company withhold from shares otherwise issuable to the Participant, shares of Stock having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant. All elections shall be subject to the approval or disapproval of the Committee. The value of shares of Stock to be withheld shall be based on the Fair Market Value of the Stock on the date that the amount of tax to be withheld is to be determined (the "Tax Date"). Any such elections by Participants to have shares of Stock withheld for this purpose will be subject to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the Company within the meaning of Section 16 of the 1934 Act ("Section 16"), the Participant must satisfy the requirements of such Section 16 and any applicable Rules thereunder with respect to the use 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 Law 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 promulgated under the 1934 Act, to qualify the Option for any exception from the provisions of Section 16(b) of the 1934 Act available under that Rule. Such conditions are hereby incorporated herein by reference and shall be set forth in the agreement with the Participant which describes the Option.
14.3 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Colorado.
SECTION 15
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the Board of Directors, 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 September 18, 1995. Options outstanding at the time of the Plan termination may continue to be exercised in accordance with their terms.
Dated: December 17, 1998
APACHE CORPORATION
ATTEST:
/s/ Cheri L. Peper By: /s/ Daniel L. Schaeffer ----------------------------------- ----------------------------------- Cheri L. Peper Daniel L. Schaeffer Corporate Secretary Vice President |
EXHIBIT 10.20
APACHE CORPORATION
1995 STOCK OPTION PLAN
(AS AMENDED AND RESTATED DECEMBER 17, 1998)
TABLE OF CONTENTS
PAGE
Section 1 - Introduction................................................................................ 1
1.1 Establishment......................................................................... 1
1.2 Purposes.............................................................................. 1
1.3 Effective Date........................................................................ 1
Section 2 - Definitions................................................................................. 1
2.1 Definitions........................................................................... 1
2.2 Headings; Gender and Number........................................................... 2
Section 3 - Plan Administration......................................................................... 3
Section 4 - Stock Subject to the Plan................................................................... 3
4.1 Number of Shares...................................................................... 3
4.2 Other Shares of Stock................................................................. 4
4.3 Adjustments for Stock Split, Stock Dividend, Etc...................................... 4
4.4 Dividend Payable in Stock of Another Corporation, Etc................................. 4
4.5 Other Changes in Stock................................................................ 4
4.6 Rights to Subscribe................................................................... 5
4.7 General Adjustment Rules.............................................................. 5
4.8 Determination by the Committee, Etc................................................... 5
Section 5 - Reorganization or Liquidation............................................................... 5
Section 6 - Participation............................................................................... 6
Section 7 - Stock Options............................................................................... 6
7.1 Grant of Stock Options................................................................ 6
7.2 Stock Option Agreements............................................................... 7
7.3 Stockholder Privileges................................................................11
Section 8 - Change in Control...........................................................................11
8.1 In General............................................................................11
8.2 Limitation on Payments................................................................11
8.3 Definition............................................................................12
|
Section 9 - Rights of Employees; Participants...........................................................12
9.1 Employment............................................................................12
9.2 Nontransferability....................................................................12
Section 10 - General Restrictions.......................................................................12
10.1 Investment Representations............................................................12
10.2 Compliance with Securities Laws.......................................................13
Section 11 - Other Employee Benefits....................................................................13
Section 12 - Plan Amendment, Modification and Termination...............................................13
Section 13 - Withholding................................................................................14
13.1 Withholding Requirement...............................................................14
13.2 Withholding With Stock................................................................14
Section 14 - Requirements of Law........................................................................14
14.1 Requirements of Law...................................................................14
14.2 Federal Securities Laws Requirements..................................................14
14.3 Governing Law.........................................................................15
Section 15 - Duration of the Plan.......................................................................15
|
APACHE CORPORATION
1995 STOCK OPTION PLAN
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 1995 Stock Option Plan (the "Plan") for certain key employees of the Company. The Plan permits the grant of stock options to certain key employees of the Company.
1.2. Purposes. The purposes of the Plan are to provide the key management employees selected 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 the key management employees is more closely aligned with the interests of the Company's stockholders. The Plan is also designed to attract key employees and to retain and motivate participating employees by providing an opportunity for investment in the Company.
1.3. Effective Date. The Effective Date of the Plan (the "Effective Date") shall be May 4, 1995. 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 (as defined in Section 2.1 hereof) 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) "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.
(b) "Board" means the Board of Directors of the Company.
(c) "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 section(s) of the Internal Revenue Code and the regulations promulgated thereunder.
(d) "Eligible Employees" means those full-time key employees
(including, without limitation, officers and directors who are also employees)
of the Company or any division thereof, upon whose judgment, initiative and
efforts the Company is, or will become, largely dependent for the successful
conduct of its business.
(e) "Fair Market Value" means the closing price of the Stock as reported on the New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date. If there are no Stock transactions on such date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Stock transactions.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it may be amended from time to time.
(g) "Option" means a right to purchase 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.
(h) "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.
(i) "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.
(j) "Stock" means the $1.25 par value Common Stock 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
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. 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 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.
The Plan is intended to comply with the requirements of Section 162 or any successor section(s) of the Internal Revenue Code ("Section 162") as to any "covered employee" as defined in Section 162, and shall be administered, interpreted and construed consistently therewith. In accordance with this intent, the amount of compensation 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 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, two million five hundred thousand (2,500,000) 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, in the opinion 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 Company's 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 increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the shares of Stock as to which Options may be granted under the Plan; and (ii) the shares of the Stock then included in 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.
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 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 total 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 thereto.
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 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 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 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 exercise dates of outstanding Options so that all Options become fully vested 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 Company's 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.
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.
(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 Company's 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 Company's discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company on or after attaining age 65, 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 Participant's 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 Participant's retirement.
(iii) If the Participant becomes disabled (as determined pursuant to the Company's 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 Participant's disability, or within the 36-month period referred to in (ii) if applicable and if longer (provided that such exercise must occur within the Option Period), but not thereafter. In the event of the Participant's 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 Participant's disability.
(iv) In the event of the Participant's death while still
employed by the Company, each Option of the deceased Participant may be
exercised by those entitled to do so under the Participant's will or under the
laws of descent and distribution within twelve months following the
Participant's 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 Participant's
death. In the event of the Participant's 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 Participant's
will or under the laws of descent and distribution within twelve months
following the Participant's death or within the 36-month period referred to in
(ii), 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 Participant's retirement on or after attaining age 65, the Participant's 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 Participant's 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, and that such Option is exercisable during the Participant's lifetime only by him or her, or in the event of the Participant's disability or incapacity, by his or her guardian or legal representative.
(f) Agreement to Continue in Employment. Each Stock Option Agreement shall contain the Participant's 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 of written notice specifying the number of shares of Stock with respect to which such Option is exercised and payment of the 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 and payment is made to the Company of the Option Price (the "Exercise Date"). If requested by the Company, such notice shall contain the Participant's 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. Such restriction, or notice thereof, shall be placed on the certificates representing the Stock so purchased. The purchase of such Stock shall take place at the principal offices of the Company upon delivery of such notice, at which time the Option Price shall be paid in full by any of the methods or any combination of the methods set forth in (ii) below. A properly executed certificate or certificates representing the Stock shall be issued by the Company and delivered to the Participant. If certificates representing Stock are used to pay all or part of the Option Price, separate certificates for the same number of shares of Stock shall be issued by the Company and
delivered to the Participant representing each certificate used to pay the Option Price, and an additional certificate shall be issued by the Company and delivered to Participant representing the additional shares of Stock, in excess of the Option Price, to which the Participant is entitled as a result of the exercise of the Option.
(ii) the Option Price shall be paid by any of the following methods or any combination of the following methods:
(A) in cash;
(B) by personal, certified or cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing a number of shares of Stock then owned by the Participant, the Fair Market Value of which equals the Option Price of the Stock purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that shares of Stock used for this purpose must have been held by the Participant for such minimum period of time as may be established from time to time by the Committee; for purposes of this Plan, the Fair Market Value of any shares of Stock delivered in payment of the Option Price upon exercise of the Option shall be the Fair Market Value as of the Exercise Date; the Exercise Date shall be the day of delivery of the certificates for the Stock used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver to the Company promptly 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 Option Price.
(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 additional tax withholding required by Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and applicable state income tax laws, including payment of such taxes through delivery of shares of Stock or by withholding Stock to be issued under the Option, as provided in Section 13 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 grant 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 IN CONTROL
8.1 In General. In the event of a change in control of the Company as defined in
Section 8.3 hereof, then the Committee may, in its sole discretion, without
obtaining stockholder approval, to the extent permitted in Section 12 hereof,
take any or all of the following actions: (a) accelerate the dates on which any
outstanding Options become exercisable or make all such Options fully vested and
exercisable; (b) grant a cash bonus award to any Participant in an amount
necessary to pay the Option Price of all or any portion of the Options then held
by such Participant; (c) pay cash to any or all Participants in exchange for the
cancellation of their outstanding Options in an amount equal to the difference
between the Option Price of such Options and the greater of the tender offer
price for the underlying Stock or the Fair Market Value of the Stock on the date
of the cancellation of the Options; and (d) make any other adjustments or
amendments to the outstanding Options.
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 in control" shall mean any of the events specified in the Company's Income Continuance Plan or any successor plan which constitute a change in 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 Participant's 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 Participant's death, a Participant's 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, and payment of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the Participant's legal representatives, heirs or legatees. 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 person's guardian, conservator or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status.
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 compensation deemed to be received by a Participant as a result of the exercise of an Option shall not constitute "earnings" 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 Company's stockholders if stockholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, or if 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.
SECTION 13
WITHHOLDING
13.1 Withholding Requirement. The Company's obligations to deliver shares of Stock upon the exercise of an Option shall be subject to the Participant's satisfaction of all applicable federal, state and local income and other tax withholding requirements.
13.2 Withholding With Stock. 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 tax withholding, or any part thereof, by the transfer to the Company, or to have the Company withhold from shares of Stock otherwise issuable to the Participant upon the exercise of an Option, shares of Stock having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant. All such elections shall be subject to the approval or disapproval of the Committee. The value of shares of Stock to be withheld shall be based on the Fair Market Value of the Stock on the Exercise Date. Any such elections by Participants to have shares of Stock withheld for this purpose will be subject to the following restrictions:
(a) All elections shall be made on or prior to the Exercise Date.
(b) All elections shall be irrevocable.
(c) 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 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 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 May 4, 2000. Options outstanding at the time of the Plan termination shall continue to be exercisable in accordance with the Stock Option Agreement pertaining to such Option.
Dated: December 17, 1998
APACHE CORPORATION
ATTEST:
/s/ CHERI L. PEPER By: /s/ DANIEL L. SCHAEFFER --------------------------------- -------------------------------- Cheri L. Peper Daniel L. Schaeffer Corporate Secretary Vice President |
EXHIBIT 10.23
APACHE CORPORATION
1998 STOCK OPTION PLAN
(AS AMENDED AND RESTATED
DECEMBER 17, 1998)
TABLE OF CONTENTS
PAGE
----
Section 1 - Introduction.................................................................................1
1.1 Establishment..........................................................................1
1.2 Purposes...............................................................................1
1.3 Effective Date.........................................................................1
Section 2 - Definitions..................................................................................1
2.1 Definitions............................................................................1
2.2 Headings; Gender and Number............................................................3
Section 3 - Plan Administration..........................................................................3
Section 4 - Stock Subject to the Plan....................................................................4
4.1 Number of Shares.......................................................................4
4.2 Other Shares of Stock..................................................................4
4.3 Adjustments for Stock Split, Stock Dividend, Etc.......................................4
4.4 Dividend Payable in Stock of Another Corporation, Etc..................................4
4.5 Other Changes in Stock.................................................................5
4.6 Rights to Subscribe....................................................................5
4.7 General Adjustment Rules...............................................................5
4.8 Determination by the Committee, Etc....................................................5
Section 5 - Reorganization or Liquidation................................................................6
Section 6 - Participation................................................................................6
Section 7 - Stock Options................................................................................7
7.1 Grant of Stock Options.................................................................7
7.2 Stock Option Agreements................................................................7
7.3 Stockholder Privileges................................................................11
Section 8 - Change in Control...........................................................................12
8.1 In General............................................................................12
8.2 Limitation on Payments................................................................12
8.3 Definition............................................................................12
|
Section 9 - Rights of Employees, Participants...........................................................12
9.1 Employment............................................................................12
9.2 Nontransferability....................................................................13
Section 10 - General Restrictions.......................................................................13
10.1 Investment Representations............................................................13
10.2 Compliance with Securities Laws.......................................................13
Section 11 - Other Employee Benefits....................................................................14
Section 12 - Plan Amendment, Modification and Termination...............................................14
Section 13 - Withholding................................................................................14
13.1 Withholding Requirement...............................................................14
13.2 Withholding With Stock................................................................15
Section 14 - Requirements of Law........................................................................15
14.1 Requirements of Law...................................................................15
14.2 Federal Securities Laws Requirements..................................................15
14.3 Governing Law.........................................................................15
Section 15 - Duration of the Plan.......................................................................16
|
APACHE CORPORATION
1998 STOCK OPTION PLAN
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 Company's 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") shall be 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) "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.
(b) "Board" means the Board of Directors of the Company.
(c) "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 section(s) of the Internal Revenue Code and the regulations promulgated thereunder.
(d) "Eligible Employees" means full-time employees (including, without limitation, officers and directors who are also employees) of the Company or any division thereof.
(e) "Fair Market Value" means the closing price of the Stock as reported on the New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date. If there are no Stock transactions on such date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Stock transactions.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it may be amended from time to time.
(g) "Option" means a right to purchase 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.
(h) "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.
(i) "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.
(j) "Stock" means the $1.25 par value Common Stock 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
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. 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 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.
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 compensation 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, two million five hundred thousand (2,500,000) 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, in the opinion 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 Company's 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 increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the shares of Stock as to which Options may be granted under the Plan; and (ii) the shares of the Stock then included in 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.
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 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 total 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 thereto.
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 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 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 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 exercise dates of outstanding Options so that all Options
become fully vested 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 Company's 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.
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.
(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 Company's 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 Company's discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company on or after attaining age 65, 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 Participant's 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 Participant's retirement.
(iii) If the Participant becomes disabled (as determined pursuant to the Company's 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 Participant's 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 Participant's 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 Participant's disability.
(iv) In the event of the Participant's death while still employed by the Company, each Option of the deceased Participant may be exercised by those entitled to
do so under the Participant's will or under the laws of descent and distribution within twelve months following the Participant's 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 Participant's death. In the event of the Participant's 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 Participant's will or under the laws of descent and distribution within twelve months following the Participant's 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 Participant's retirement on or after attaining age 65, the Participant's 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 Participant's 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, and that such Option is exercisable during the Participant's lifetime only by him or her, or in the event of the Participant's disability or incapacity, by his or her guardian or legal representative.
(f) Agreement to Continue in Employment. Each Stock Option Agreement shall contain the Participant's 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 of written notice specifying the number of shares of Stock with respect to which such Option is exercised and payment of the 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 and payment is made to the Company of the Option Price (the "Exercise Date"). If requested by the Company, such notice shall contain the Participant's 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. Such restriction, or notice thereof, shall be placed on the certificates representing the Stock so purchased. The purchase of such Stock shall take place at the principal offices of the Company upon delivery of such notice, at which time the Option Price shall be paid in full by any of the methods or any combination of the methods set forth in (ii) below. A properly executed certificate or certificates representing the Stock shall be issued by the Company and delivered to the Participant. If certificates representing Stock are used to pay all or part of the Option Price, separate certificates for the same number of shares of Stock shall be issued by the Company and delivered to the Participant representing each certificate used to pay the Option Price, and an additional certificate shall be issued by the Company and delivered to Participant representing the additional shares of Stock, in excess of the Option Price, to which the Participant is entitled as a result of the exercise of the Option.
(ii) the Option Price shall be paid by any of the following methods or any combination of the following methods:
(A) in cash;
(B) by personal, certified or cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing a number of shares of Stock then owned by the Participant, the Fair Market Value of which equals the Option Price of the Stock purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that shares of Stock used for this purpose must have been held by the Participant for such minimum period of time as may be established from time to time by the Committee; for purposes of this Plan, the Fair Market Value of any shares of Stock delivered in payment of the Option Price upon
exercise of the Option shall be the Fair Market Value as of the Exercise Date; the Exercise Date shall be the day of delivery of the certificates for the Stock used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver to the Company promptly 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 Option Price.
(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 additional tax withholding required by Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and applicable state income tax laws, including payment of such taxes through delivery of shares of Stock or by withholding Stock to be issued under the Option, as provided in Section 13 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 grant 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 IN CONTROL
8.1 In General. In the event of a change in control of the Company as defined in
Section 8.3 hereof, then the Committee may, in its sole discretion, without
obtaining stockholder approval, to the extent permitted in Section 12 hereof,
take any or all of the following actions: (a) accelerate the dates on which any
outstanding Options become exercisable or make all such Options fully vested and
exercisable; (b) grant a cash bonus award to any Participant in an amount
necessary to pay the Option Price of all or any portion of the Options then held
by such Participant; (c) pay cash to any or all Participants in exchange for the
cancellation of their outstanding Options in an amount equal to the difference
between the Option Price of such Options and the greater of the tender offer
price for the underlying Stock or the Fair Market Value of the Stock on the date
of the cancellation of the Options; and (d) make any other adjustments or
amendments to the outstanding Options.
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 in control" shall mean any of the events specified in the Company's Income Continuance Plan or any successor plan which constitute a change in 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 Participant's 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 Participant's death, a Participant's 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, and payment of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the Participant's legal representatives, heirs or legatees. 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 person's guardian, conservator or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status.
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 compensation deemed to be received by a Participant as a result of the exercise of an Option shall not constitute "earnings" 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 Company's stockholders if stockholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, or if 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.
SECTION 13
WITHHOLDING
13.1 Withholding Requirement. The Company's obligations to deliver shares of Stock upon the exercise of an Option shall be subject to the Participant's satisfaction of all applicable federal, state and local income and other tax withholding requirements.
13.2 Withholding With Stock. 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 tax withholding, or any part thereof, by the transfer to the Company, or to have the Company withhold from shares of Stock otherwise issuable to the Participant upon the exercise of an Option, shares of Stock having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant. All such elections shall be subject to the approval or disapproval of the Committee. The value of shares of Stock to be withheld shall be based on the Fair Market Value of the Stock on the Exercise Date. Any such elections by Participants to have shares of Stock withheld for this purpose will be subject to the following restrictions:
(a) All elections shall be made on or prior to the Exercise Date.
(b) All elections shall be irrevocable.
(c) 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 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 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 such Option.
Dated: December 17, 1998
APACHE CORPORATION
ATTEST:
/s/ Cheri L. Peper By: /s/ Daniel L. Schaeffer -------------------------------- -------------------------------- Cheri L. Peper Daniel L. Schaeffer Corporate Secretary Vice President |
EXHIBIT 10.26
APACHE CORPORATION
NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN
As Amended and Restated December 17, 1998
PURPOSE
The purpose of the Non-Employee Directors' Compensation Plan (the "PLAN") is to set forth certain of the compensation arrangements for members of the board of directors (the "BOARD") of Apache Corporation ("APACHE") who are not also employees of Apache ("NON-EMPLOYEE DIRECTORS"). The Plan supersedes the Directors' Deferred Compensation Plan; however, all elections previously made thereunder, until terminated or modified, shall remain in effect in respect of the Plan. The Plan does not supersede or amend in any way any other arrangements relating to Non-Employee Directors including specifically, without limitation, the Equity Compensation Plan for Non-Employee Directors, the Outside Directors' Retirement Plan, indemnification provisions of Apache's charter or bylaws, or policies with respect to reimbursement of expenses.
PLAN PROVISIONS
1. BOARD RETAINER. Each Non-Employee Director shall be paid, as soon as practicable following accrual, the Board retainer fees set forth below:
(a) $5,000.00 shall be paid to each Non-Employee Director at the end of each calendar quarter during which such Non-Employee Director served as a member of Apache's Board ("CASH RETAINER Fee");
(b) $2,500.00 in value of Apache common stock, par value $1.25 per share ("STOCK"), shall be paid from Apache's treasury shares to each Non-Employee Director at the end of each calendar quarter during which such Non-Employee Director served as a member of Apache's Board ("STOCK RETAINER FEE"). The number of shares of Stock shall be determined by dividing $2,500.00 by the per share closing price of the Stock as reported on The New York Stock Exchange, Inc. Composite Transactions Reporting System (the "Composite Tape") as of the trading day prior to the last trading day of the relevant calendar quarter, with any fractional shares to be paid to the director in cash; and
(c) In the event that a Non-Employee Director serves as a member of Apache's Board for less than an entire calendar quarter, the fees payable pursuant to Sections 1 (a) and (b) hereof shall be prorated on the basis of the number of weeks served during such calendar quarter.
2. COMMITTEE RETAINERS. Each Non-Employee Director serving on any committee of Apache's Board shall be paid, as soon as practicable, the committee retainer fee ("COMMITTEE RETAINER FEE") set forth below:
(a) $500.00 shall be paid to each Non-Employee Director at the end of each calendar quarter in respect of each committee on which such Non-Employee Director served during such quarter;
(b) $1,000.00 shall be paid to each Non-Employee Director at the end of each calendar quarter in respect of each committee on which such Non-Employee Director served as chairperson during such quarter; and
(c) In the event that a Non-Employee Director serves on any committee of Apache's Board and/or as chairperson of any committee of Apache's board for less than an entire calendar quarter, the fees payable pursuant to Sections 2 (a) and (b) hereof shall be prorated on the basis of number of weeks served during such calendar quarter.
3. ATTENDANCE FEES. Each Non-Employee Director shall receive an attendance fee ("ATTENDANCE FEE") of $1,000.00 for each meeting of the Board and of any committee thereof attended, such fee to be paid at each such meeting or as soon thereafter as practicable.
4. OPTIONAL DEFERRAL OF FEES.
(a) DEFERRABLE FEES. A Non-Employee Director may defer all or any portion of any unpaid Cash Retainer Fee, Stock Retainer Fee, Committee Retainer Fee, and Attendance Fee, all of which are paid to Non-Employee Directors with respect to their services performed as a director on the Board ("DEFERRABLE FEES"). No other payments to Non-Employee Directors may be deferred including, without limitation, any expense reimbursement, any award under Apache's Equity Compensation Plan for Non-Employee Directors or benefits payable under Outside Directors' Retirement Plan.
(b) FORM OF DEFERRAL. Any Cash Retainer Fees and Committee Retainer Fees may be deferred in the form of cash or in the form of Stock. Any Stock Retainer Fees may be deferred only in the form of Stock. Any Attendance Fees may be deferred only in the form of cash, except as set forth in Section 4(e) hereof. Any Cash Retainer Fees, Stock Retainer Fees and/or Committee Retainer Fees which are deferred in the form of Stock by a Non-Employee Director shall not be issued until such deferral is terminated; however, Apache shall at all times have reserved from its treasury shares for issuance pursuant hereto to deferring Non-Employee Directors a number of shares at least equal to the number of shares of Stock issuable pursuant to the terms of the Plan.
(c) NUMBER OF SHARES. For any Cash Retainer Fees, Stock Retainer Fees and/or Committee Retainer Fees deferred in the form of Stock, the number of shares of Stock shall be determined by dividing the amount of such fees by the per share closing price of the Stock as reported on the Composite Tape as of the trading day prior to the last trading day of the relevant calendar quarter, with any fractional shares to be deferred in the form of cash.
(d) ELECTION TO DEFER. A Non-Employee Director's election to defer ("ELECTION") all or any portion of Deferrable Fees shall be effected by execution of a Directors' Deferred Compensation Agreement between the participating director and Apache ("AGREEMENT"), a copy of the form of which is attached hereto as Exhibit A. An Agreement must be executed by the deferring Non-Employee Director and provided to Apache's Corporate Secretary on or before December 31 of the year prior to the year for which deferral is elected. Once executed, an Agreement shall be irrevocable with respect to the year made, the form of deferral, and the Deferrable Fees designated for deferral (the "DEFERRED Compensation"), and shall remain in effect with respect to all subsequent years until the Agreement is terminated or amended. All elections to defer Deferrable Fees previously made in respect of the Directors' Deferred Compensation Plan shall constitute valid Elections in respect of the Plan. Upon full or partial termination of deferral by a Non-Employee Director, the cash and/or Stock shall be paid and/or issued to such Non-Employee Director pursuant to the terms of such Non-Employee Director's Agreement.
(e) ELECTION TO SWITCH FORM OF DEFERRED COMPENSATION.
(i) With respect to the year-end balance of Deferred Compensation in the form of cash ("Year-End Cash Balance") in his or her Memorandum Account (as defined below), a Non-Employee Director may make an annual election to switch all or any portion of his or her Year-End Cash Balance to the form of Stock, effective as of the first business day of the following year. Such election shall be made by executing a new Agreement and providing it to Apache's Corporate Secretary on or before December 31 of the year prior to the year for which the election is to be effective. Once executed, an Agreement shall be irrevocable with respect to the portion of the Non-Employee Director's Year-End Cash Balance to be switched. Such election shall pertain only to the Year-End Cash Balance for the year stated in the new Agreement. To make such an election for any subsequent Year-End Cash Balance, the Non-Employee Director shall execute another new Agreement as set forth above.
(ii) The number of shares of Stock shall be determined by dividing the portion of the Non-Employee Director's Year-End Cash Balance to be switched by the per share closing price of the Stock as reported on the Composite Tape for the first trading day of the year for which the election is effective, with any fractional shares remaining in the form of cash. Such shares of Stock shall be maintained in the Non-Employee Director's Memorandum account and shall accrue dividends pursuant to Section 4(g) hereof.
(iii) Non-Employee Directors may not switch Deferred Compensation in the form of Stock to the form of cash.
(f) TERMINATION OR MODIFICATION OF ELECTION. Any termination of an Election shall be made in writing and provided to Apache's Corporate Secretary on or before December 31 of the year prior to the year for which the termination is to be effective. Any modification or amendment of an Election shall be made by executing a new Agreement which shall supersede any previous Agreement. Such new Agreement must be executed by the deferring Non-Employee Director and provided to Apache's Corporate Secretary on or before December 31 of the year prior to the year for which the amended Election is to be effective. Upon termination or modification of an Election, all Deferred Compensation payable to the Non-Employee
Director terminating or modifying the Election shall be paid in accordance with the provisions of such Non-Employee Director's then effective Agreement, as modified or amended.
(g) DIVIDENDS AND INTEREST; NO VOTING. All Deferrable Fees deferred by a Non-Employee Director in the form of and payable in Stock, and any portion of a Non-Employee Director's Year-End Cash Balance switched to the form of Stock, shall accrue dividends denominated in the cash value thereof as if such Stock were issued and outstanding as and when dividends are payable in respect of such Stock. All Deferrable Fees deferred by a Non-Employee Director in the form of and payable in cash, plus all previously accrued dividends and interest, shall accrue interest at the end of each calendar quarter or as of and through the date of payment of Deferred Compensation, as appropriate. The rate of interest per annum shall equal (i) the annual rate of interest earned by Apache's short-term marketable securities portfolio, or (ii) an equivalent index or market rate for similar investments in short-term marketable securities, divided by the number of days elapsed in the relevant period. Non-Employee Directors shall have no right to vote any Stock which constitutes Deferred Compensation prior to the date on which share certificates representing such Stock are issued.
(h) MEMORANDUM ACCOUNT. Apache will maintain a separate Deferred Compensation memorandum account ("MEMORANDUM ACCOUNT") for each deferring Non-Employee Director. All Deferred Compensation and accrued dividends and interest accumulated in each Memorandum Account will be classified in the same category as other unsecured creditors and accounts payable of Apache, and neither the deferring Non-Employee Director nor his or her beneficiary or estate shall have any property interest whatsoever in any specific assets of Apache. All distributions from a Memorandum Account of Deferred Compensation deferred in the form of cash, and of accrued interest and dividends, shall be paid in cash. All distributions from a Memorandum Account of Deferred Compensation deferred in the form of Stock, and any portion of a Non-Employee Director's Year-End Cash Balance switched to the form of Stock, shall be made by issuance of shares of Stock.
(i) TERMINATION OF DIRECTORSHIP. Upon retirement or other termination of a Non-Employee Director's directorship with Apache, or on a date specifically designated in a Non-Employee Director's Agreement, any balance in such Non-Employee Director's Memorandum Account shall be paid in cash and/or Stock, as applicable, (a) in a lump sum, or (b) in annual installments over a ten-year period (or over such shorter period as designated in the deferring Non-Employee Director's Agreement) beginning with the first business day of the calendar year immediately following retirement or other termination of such Non-Employee Director's directorship.
(j) ASSIGNMENT AND TRANSFER. The right of the deferring Non-Employee Director or any other person to receive payments under the Plan shall not be assigned, transferred, pledged or encumbered, except by will or by the laws of descent and distribution. Upon the death of a deferring Non-Employee Director, any balance remaining in such Non-Employee Director's Memorandum Account at the time of death shall be paid in cash and/or Stock, as applicable, in a lump sum to his or her designated beneficiary or, if there is no designated beneficiary, to his or her estate as soon as practicable after such Non-Employee Director's death.
(k) ADJUSTMENTS IN STOCK. In the event of any merger, consolidation, liquidation, dissolution, recapitalization or reorganization of Apache, split, subdivision or consolidation of shares of Stock, the payment of a stock dividend, or any other material change in Apache's capital structure, the number of shares of Stock shown in each deferring Non-Employee Director's Memorandum Account shall be adjusted to reflect that number of shares of Stock or such cash, securities or other property to which such Non-Employee Director would have been entitled if, immediately prior thereto, such Non-Employee Director had been the holder of record of the number of shares of Stock shown in the Memorandum Account. Notwithstanding the foregoing, the issuance by Apache of Stock, rights, options or warrants to acquire Stock, or securities convertible or exchangeable into Stock in consideration of cash, property, labor or services, whether or not for fair value, shall not result in an adjustment pursuant to this paragraph.
5. AMENDMENT OF PLAN. The Plan may be amended from time to time or terminated by vote of the Board. Upon such amendment or termination, Non-Employee Directors shall not be entitled to receive pursuant to the Plan any compensation or other rights or benefits not accrued hereunder prior to the time of amendment or termination hereof; provided, however, that no such Plan amendment or termination shall impair any rights of Non-Employee Directors to amounts previously accrued pursuant to the Plan or accumulated in such Non-Employee Director's Memorandum Account.
6. SUCCESSORS AND ASSIGNS. The Plan is binding upon Apache and its successors and assigns. The Plan shall continue in effect from year to year unless and until revoked by the Board. Any such revocation shall operate only prospectively and shall not affect the rights and obligations under elections previously made.
7. DEFINED TERMS. Except when otherwise indicated by the context, the definition of any term herein in the singular shall also include the plural, and the masculine gender shall also include the feminine gender.
8. GOVERNING LAW. The Plan and all Agreements hereunder shall be construed in accordance with and governed by the laws of the State of Texas.
December 17, 1998 ATTEST: APACHE CORPORATION /s/ Cheri L. Peper /s/ Daniel L. Schaeffer ----------------------------- ---------------------------------- Cheri L. Peper Daniel L. Schaeffer Corporate Secretary Vice President, Human Resources |
EXHIBIT 10.33
APACHE CORPORATION
CONDITIONAL STOCK GRANT AGREEMENT
THIS AGREEMENT is made as of December 17, 1998 between APACHE
CORPORATION, a Delaware corporation (the "Company"), and G. Steven Farris
("Grantee")
1. GRANT. Subject to the terms of this Agreement, the Company hereby grants to Grantee a conditional stock award of up to 100,000 shares (the "Award") of the Company's common stock, par value $1.25 per share (the "Common Stock").
2. RESTRICTIONS. The Award granted hereunder is subject to the following terms, conditions, restrictions and risks of forfeiture:
(a) Shares of Common Stock to be issued pursuant to this Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of by Grantee until vested and paid in accordance with paragraph 2(b) and not otherwise forfeited in accordance with the terms hereof.
(b) Subject to the other provisions of this Agreement, the Award shall be payable to Grantee in periodic installments ( each an "Installment"), on the fifth anniversary of each commencement date (each a "Commencement Date") as set out below for each applicable Installment (each a "Vesting Date"):
INSTALLMENT COMMENCEMENT DATE VESTING DATE
----------- ----------------- ------------
(in shares of Common Stock)
6,667 January 1, 1999 January 1, 2004
13,333 January 1, 2000 January 1, 2005
20,000 January, 1, 2001 January 1, 2006
26,667 January 1, 2002 January 1, 2007
33,333 January 1, 2003 January 1, 2008
|
Each Installment shall be paid to Grantee within five (5) business days of the applicable Vesting Date for such Installment as follows: 60% of the value of the Installment shall be in the form of shares of Common Stock and 40% of the value of the Installment (inclusive of withholding of any required income tax withholding) shall be in the form of cash. The value of each applicable Installment shall be the product of (i) the number of shares for such Installment as set out in the above table, and (ii) the closing price of the shares of Common Stock on The New York Stock Exchange, Inc. Composite Transactions Reporting System ("NYSE") on the Vesting Date or, if the Vesting Date is not a day on which the NYSE is open for trading, the last business day preceding the
Vesting Date when the NYSE is open for trading. Except as otherwise provided in subparagraph (d) through (e) below, Grantee shall not be entitled to any payment with respect to any Installment unless Grantee is employed by the Company on the applicable Vesting Date.
(c) If, prior to any Vesting Date, Grantee elects to discontinue his employment with the Company, or his employment with the Company is terminated for cause, as defined in that certain Employment Agreement between Grantee and the Company dated June 6, 1988, then Grantee shall forfeit all Installments of the Award for which a Vesting Date has not occurred as of the date of termination as provided above.
(d) If, prior to any Vesting Date, the Company elects to terminate Grantee's employment with the Company other than for cause as defined in subparagraph (c) above, or Grantee dies or becomes totally disabled, then Grantee (or his beneficiary, as stated below in the case of death) shall be entitled to receive payment, as provided in this subparagraph (d), for the value of all Installments for which a Commencement Date has occurred on or prior to the date of termination, death or total disability, as applicable. The payment for the value of such Installment(s) shall be made to Grantee within thirty (30) days of the date of termination, death or disability, as applicable, shall be solely in cash, with the value of such Installment(s) being the product of (i) the number of shares for such Installment or Installments as set out in the above table, and (ii) the closing price of the shares of Common Stock on the NYSE on the date of termination, death or disability, as applicable, or, if such date is not a day on which the NYSE is open for trading, the last business day preceding such date when the NYSE is open for trading. Grantee may name a beneficiary or beneficiaries to receive any payment which he would otherwise be entitled to hereunder in the event of his death while in the employ of the Company. Such designation shall be made on a form to be provided by and filed with the Corporate Secretary of the Company. If Grantee fails to designate a beneficiary or no designated beneficiary survives Grantee, such payment shall be made to the legal representative of Grantee's estate. Grantee shall not be entitled to receive payment under this subparagraph (d) for any Installment for which a Commencement Date has not occurred as of the date of termination, death or disability, as applicable.
(e) If, prior to any Vesting Date, an individual other than Grantee or the current Chief Executive Officer of the Company, becomes the Chief Executive Officer of the Company (which, for purposes of this subparagraph, shall include any entity which comes to control the Company), then Grantee, upon written request to the Company, is entitled to receive payment, as provided in this subparagraph (e), for the value of all Installments for which a Commencement Date has occurred on or prior to the date of the written request The payment for such Installment(s) shall be made to Grantee within thirty (30) days of receipt of Grantee's notice, shall be solely in cash, with the value of such Installment(s) being the product of (i) the number of shares for such Installment or Installments as set out in the above table, and (ii) the closing price of the shares of Common Stock on the NYSE on the date of such written request or if such date is not a day on which the NYSE is open for trading, the last business day preceding such date when the NYSE is open for trading.
(f) The shares of Common Stock issuable in accordance with this Agreement have not be registered under the Securities Act of 1933, as amended (the "Act"), and are subject to the restrictions contained in paragraph 8 of this Agreement.
3. ENFORCEMENT OF RESTRICTIONS.
(a) Each stock certificate issued in the name of Grantee pursuant to this Agreement shall bear the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS CONTAINED IN A CONDITIONAL STOCK GRANT AGREEMENT DATED AS OF DECEMBER 17, 1998, BY AND BETWEEN APACHE CORPORATION AND G. STEVEN FARRIS, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF THE COMPANY.
(b) Grantee shall not be entitled to delivery of the stock certificate for the share portion of any Installment of the Award until such Installment has vested in Grantee and been paid by the Company in accordance with paragraph 2(a). Prior to the Vesting Date for any Installment, all stock certificates shall be held by the Corporate Secretary and Grantee hereby agrees to execute a blank stock power with respect to the stock certificate representing the share portion of any Installment.
4. PRIVILEGES OF A STOCKHOLDER. Upon the occurrence of a Commencement Date and subject to the restrictions of paragraph 2, Grantee shall have all voting, dividend and liquidation rights of a stockholder of the Company with respect to the shares of Common Stock subject to the applicable Installment, notwithstanding that such Installment is unvested.
5. ADMINISTRATION. This Agreement shall be administered by the Board of Directors of Apache Corporation (the "Board of Directors") or any committee thereof as may be empowered by the Board of Directors. Any action taken or decision made by the Company, the Board of Directors, or its delegates arising out of or in connection with the construction, interpretation or effect of this Agreement shall lie within its sole and absolute discretion, and shall be final, conclusive and binding on Grantee and all persons claiming under or through Grantee. By accepting this Agreement, Grantee and all persons claiming under or through Grantee shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under this Agreement by the Company, the Board of Directors, or its delegates.
6. ADJUSTMENTS.
(a) If the Company shall at any time increase or decrease the number of its outstanding shares of Common Stock or change in any way the rights and privileges of such shares by means of a stock dividend or any other distribution upon such shares payable in shares of Common Stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the outstanding shares of Common Stock (hereinafter a "capital restructuring"), then upon the occurrence of a capital restructuring, the number of shares of Common Stock of each unvested Installment shall be appropriately increased, decreased or changed in like manner as if the number of shares of Common Stock of each unvested Installment had been issued, outstanding, fully paid and non-assessable at the record date for the capital restructuring.
(b) 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 50 percent of the outstanding shares of Common 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 subparagraph (c) hereof do not apply, the Board of Directors, or the board of directors of any corporation assuming the obligations of the Company, shall either (i) make appropriate provision for the adoption and continuation of this Agreement by the acquiring or successor corporation and for the protection of Grantee 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 any outstanding Installment, provided that no additional benefits shall be conferred upon Grantee as a result of such substitution, or (ii) upon written notice to Grantee, the Board of Directors, in its sole discretion, if it so elects, may accelerate the vesting of any unvested Installment so that all unvested Installments are fully vested and payable prior to any such event.
(c) In the event of a change in control of the Company as defined below, then the Board of Directors may, in its sole discretion, if it so elects, take any of the following actions: (i) accelerate the vesting of the unvested Installments so that the unvested Installments become fully vested and payable, which acceleration may be conditional upon the occurrence of subsequent events including, without limitation, a change in control, and may be made irrevocable, either conditionally or unconditionally; and (ii) make any other adjustments or amendments to the unvested Installments as the Board of Directors deems appropriate.
(d) For purposes of this Agreement, a "change in control" shall mean any of the events specified in the Company's Income Continuance Plan or any successor plan which constitute a change in control within the meaning of such plan.
(e) Any adjustments under this paragraph shall be made by the Board of Directors whose determination with regard thereto shall be final and binding on all parties.
7. WITHHOLDING OF TAX. The Grantee hereby agrees that the Company is entitled to make any required income tax withholding from any payments made under paragraph 2.
8. INVESTMENT REPRESENTATION. Grantee hereby acknowledges that any shares of Common Stock issued pursuant to this Agreement are acquired for investment without a view to distribution, within the meaning of the Act, and shall not be sold, transferred, assigned, pledged or hypothecated in the absence of an effective registration statement under the Act or an applicable exemption from the registration requirements of the Act and any applicable state securities laws and the following legend shall be imprinted on any stock certificate.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OFFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE SECURITIES LAWS OR AN OPINION FROM COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH REGISTRATION IS NOT REQUIRED.
9. LISTING AND REGISTRATION OF COMMON STOCK. This Agreement 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 Common Stock issued pursuant to this Agreement 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 of the shares hereunder, this Agreement may not be accepted in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification.
10. NO RIGHT TO CONTINUE AS DIRECTOR OR EMPLOYEE. Nothing contained in this Agreement shall interfere with or limit in any way the right of the stockholders of the Company to remove Grantee from the Board of Directors pursuant to the Bylaws or the
Restated Certificate of Incorporation of the Company, nor confer upon Grantee any right to continue in the employment of the Company.
11. NOTICES. Any notice hereunder to the Company shall be addressed to:
Apache Corporation, One Post Oak Central, 2000 Post Oak Boulevard, Suite 100,
Houston, Texas 77056-4400, Attention: Corporate Secretary, and any notice to
Grantee shall be addressed to Grantee at Grantee's last address on the records
of the Company, subject to the right of either party to designate at any time
hereafter in writing some other address. Any notice shall be deemed to have been
duly given when delivered personally or enclosed in a properly sealed envelope,
addressed as set forth above, and deposited (with first class postage prepaid)
with the United States Postal Service.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under or through Grantee.
13. GOVERNING LAW. The validity, construction, interpretation, administration and effect of this Agreement, shall be governed by the substantive laws, but not the choice of law rules, of the State of Texas.
IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement as of the date first written above.
APACHE CORPORATION
/s/ Daniel L. Schaeffer
------------------------------------------
By: Daniel L. Schaeffer
---------------------------------------
Its: Vice President
--------------------------------------
|
GRANTEE
/s/ G. Steven Farris ------------------------------------------ G. Steven Farris ------------------------------------------ Printed Name |
EXHIBIT 21.1
APACHE CORPORATION - LISTING OF SUBSIDIARIES
AS OF FEBRUARY 28, 1999
EXACT NAME OF SUBSIDIARY AND NAME JURISDICTION OF
UNDER WHICH SUBSIDIARY DOES BUSINESS INCORPORATION OR ORGANIZATION
------------------------------------------------- -------------------------------------
Apache Corporation (New Jersey) New Jersey
Apache Foundation Minnesota
Apache Gathering Company Delaware
Apache Holdings, Inc. Delaware
Apache International, Inc. Delaware
Apache Cote d'Ivoire, Inc. Delaware
Apache Qarun Corporation LDC Cayman Islands
Apache Overseas, Inc. Delaware
Apache Abu Gharadig Corporation LDC Cayman Islands
Apache Asyout Corporation LDC Cayman Islands
Apache Bohai Corporation LDC Cayman Islands
Apache China Corporation LDC Cayman Islands
Apache Cote d'Ivoire Petroleum LDC Cayman Islands
Apache Darag Corporation LDC Cayman Islands
Apache East Bahariya Corporation LDC Cayman Islands
Apache Faiyum Corporation LDC Cayman Islands
Apache Matruh Corporation LDC Cayman Islands
Apache Mediterranean Corporation LDC Cayman Islands
Apache Poland Holding Company Delaware
Apache Eastern Europe B.V. Netherlands
Apache Poland Sp. z o.o. Poland
Nagasco, Inc. Delaware
Apache Marketing, Inc. Delaware
Apache Transmission Corporation - Texas Texas
Apache Crude Oil Marketing, Inc. Delaware
Nagasco Marketing, Inc. Delaware
Apache Oil Corporation Texas
Burns Manufacturing Company Minnesota
Apache Energy Limited Western Australia
Apache Northwest Pty Ltd. Western Australia
Apache Carnarvon Pty Ltd. Western Australia
Apache Dampier Pty Ltd. Western Australia
Apache East Spar Pty Limited Western Australia
Apache Finance Pty Ltd Australian Capital Territory
Apache Harriet Pty Limited Victoria, Australia
Apache Oil Australia Pty Limited New South Wales, Australia
Apache Airlie Pty Limited New South Wales, Australia
Apache Varanus Pty Limited Queensland, Australia
Apache Pipeline Pty Ltd Western Australia
Apache West Australia Holdings Limited Island of Guernsey
Apache UK Limited England and Wales
Apache Lowendal Pty Limited Victoria, Australia
|
EXHIBIT 21.1
APACHE CORPORATION - LISTING OF SUBSIDIARIES
AS OF FEBRUARY 28, 1999
EXACT NAME OF SUBSIDIARY AND NAME JURISDICTION OF
UNDER WHICH SUBSIDIARY DOES BUSINESS INCORPORATION OR ORGANIZATION
------------------------------------------------- -------------------------------------
DEK Energy Company Delaware
DEK Energy Texas, Inc. Delaware
DEK Exploration Inc. Delaware
DEK Petroleum Corporation Illinois
Apache Canada Ltd. Alberta, Canada
DEPCO, Inc. Texas
Heinold Holdings, Inc. Delaware
Phoenix Exploration Resources, Ltd. Delaware
TEI Arctic Petroleum (1984) Ltd. Alberta, Canada
Texas International Company Delaware
Apache Khalda Corporation LDC Cayman Islands
Apache Khalda, Inc. Delaware
Apache Qarun Exploration Company LDC Cayman Islands
Phoenix Resources Company of Qarun Delaware
Apache North America, Inc. Delaware
|
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by reference of our report included in this Form 10-K into Apache Corporation's previously filed Registration Statements on Form S-3 (Nos. 33-53129, 333-39973, 333-44731 and 333-57785), Form S-4 (No. 33-61669), and Form S-8 (Nos. 33-31407, 33-37402, 33-53442, 33-59721, 33-59723, 33-63817, 333-04059, 333-25201, 333-26255, 333-32557, 333-36131 and 333-53961).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Houston, Texas
March 22, 1999
|
EXHIBIT 23.2
[Letterhead of Ryder Scott Company]
As independent petroleum engineers, we hereby consent to the incorporation by reference in this Form 10-K of Apache Corporation to our Firm's name and our Firm's review of the proved oil and gas reserve quantities of Apache Corporation as of January 1, 1999, and to the incorporation by reference of our Firm's name and review into Apache Corporation's previously filed Registration Statements on Form S-3 (Nos. 33-53129, 333-39973, 333-44731 and 333-57785), on Form S-4 (No. 33-61669), and on Form S-8 (Nos. 33-31407, 33-37402, 33-53442, 33-59721, 33-59723, 33-63817, 333-04059, 333-25201, 333-26255, 333-32557, 333-36131 and 333-53961).
/s/ Ryder Scott Company
/s/ Petroleum Engineers
Ryder Scott Company
Petroleum Engineers
Houston, Texas
March 15, 1999
|
EXHIBIT 23.3
[Letterhead of Netherland, Sewell & Associates, Inc.]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As independent petroleum engineers, we hereby consent to the reference in this Form 10-K of Apache Corporation to our Firm's name and our Firm's review of the proved oil and gas reserve quantities as of January 1, 1997 for certain of Apache Corporation's interests located in The Arab Republic of Egypt, and to the incorporation by reference of our Firm's name and review into Apache Corporation's previously filed Registration Statements on Form S-3 (Nos. 33-53129, 333-39973, 333-44731 and 333-57785), on Form S-4 (No. 33-61669), and on Form S-8 (Nos. 33-31407, 33-37402, 33-53442, 33-59721, 33-59723, 33-63817, 333-04059, 333-25201, 333-26255, 333-32557, 333-36131 and 333-53961).
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Clarence M. Netherland
Clarence M. Netherland
Chairman
Houston, Texas
March 15, 1999
|
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1998 |
| PERIOD END | DEC 31 1998 |
| CASH | 14,537 |
| SECURITIES | 0 |
| RECEIVABLES | 159,806 |
| ALLOWANCES | 0 |
| INVENTORY | 40,948 |
| CURRENT ASSETS | 226,970 |
| PP&E | 6,982,645 |
| DEPRECIATION | 3,255,104 |
| TOTAL ASSETS | 3,996,062 |
| CURRENT LIABILITIES | 305,774 |
| BONDS | 1,343,258 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 98,387 |
| COMMON | 124,738 |
| OTHER SE | 1,578,708 |
| TOTAL LIABILITY AND EQUITY | 3,996,062 |
| SALES | 876,443 |
| TOTAL REVENUES | 875,715 |
| CGS | 952,010 |
| TOTAL COSTS | 952,010 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 70,537 |
| INCOME PRETAX | (187,563) |
| INCOME TAX | (58,176) |
| INCOME CONTINUING | (129,387) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (129,387) |
| EPS PRIMARY | (1.34) |
| EPS DILUTED | (1.34) |